As filed with the Securities and Exchange Commission
on April 22, 1999
Registration No. 33-19718
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 19
TO
FORM S-6
CUNA MUTUAL LIFE VARIABLE ACCOUNT
(Exact Name of Trust)
CUNA MUTUAL LIFE INSURANCE COMPANY
2000 Heritage Way
Waverly, Iowa 50677
(319) 352-4090, ext. 2157
(Name, Address and Telephone Number of Depositor)
Name and complete address of agent for
service:
Barbara L. Secor, Esq.
CUNA Mutual Life Insurance Company
2000 Heritage Way
Waverly, IA 50677
It is proposed that this filing will become effective (check appropriate box)
|_| immediately upon filing pursuant to paragraph (b) of Rule 485
|X| on May 1, 1999 pursuant to paragraph (b) of Rule 485
|_| 60 days after filing pursuant to paragraph (a)(i) of Rule 485
|_| on pursuant to paragraph (a)(i) of Rule 485
|_| 75 days after filing pursuant to paragraph (a)(ii)
|_| on pursuant to paragraph (a)(ii) of Rule 485
Title of Securities: Interest in the Seperate Account issued through Variable
Life Insurance Policies.
The index to attached exhibits is found following the signature pages and
consents after page II-4.
<PAGE>
CROSS REFERENCE TO ITEMS REQUIRED
BY FORM N-8B-2
N-8B-2 Item Caption in Prospectus
1 . . . . . . . . .. The Company Separate Account
2 . . . . . . . . . The Company
3 . . . . . . . . . The Company
4 . . . . . . . . . Distribution of Policies
5 . . . . . . . . . The Separate Account
6(a) . . . . . . . . Not Applicable
(b) . . . . . . . . Not Applicable
9 . . . . . . . . . Legal Proceedings
10 . . . . . . . . . The Policy
11 . . . . . . . . . Ultra Series Fund
12 . . . . . . . . . Ultra Series Fund
13 . . . . . . . . . Charges and Deductions
14 . . . . . . . . . The Policy
15 . . . . . . . . . The Separate Account
16 . . . . . . . . . Policy Values
17 . . . . . . . . . Other Policy Benefits and Provisions
18 . . . . . . . . . The Policy
19 . . . . . . . . . Not Applicable
20 . . . . . . . . . Not Applicable
21 . . . . . . . . . Not Applicable
22 . . . . . . . . . Not Applicable
23 . . . . . . . . . Not Applicable
24 . . . . . . . . . Not Applicable
25 . . . . . . . . . The Company
26 . . . . . . . . . Charges and Deductions
27 . . . . . . . . . The Company
28 . . . . . . . . . The Company, CUNA Mutual Life Insurance Company
Directors and Executive Officers
29 . . . . . . . . . The Company
30 . . . . . . . . . The Company
31 . . . . . . . . . Not Applicable
32 . . . . . . . . . Not Applicable
33 . . . . . . . . . Not Applicable
34 . . . . . . . . . Not Applicable
35 . . . . . . . . . Not Applicable
37 . . . . . . . . . Not Applicable
38 . . . . . . . . . Distribution of Policies
39 . . . . . . . . . Distribution of Policies
40 . . . . . . . . . Not Applicable
41(a) . . . . . . . . Distribution of Policies
42. . . . . . . . . .Not Applicable
43 . . . . . . . . . Not Applicable
44 . . . . . . . . . The Policy
45 . . . . . . . . . Not Applicable
46 . . . . . . . . . Other Policy Benefits and Provisions
47 . . . . . . . . . Not Applicable
48 . . . . . . . . . The Company
49 . . . . . . . . . The Company
50 . . . . . . . . . Not Applicable
51 . . . . . . . . . The Company, The Policy
52 . . . . . . . . . Ultra Series Fund
53 . . . . . . . . . Federal Income Tax Considerations
54 . . . . . . . . . Financial Statements
55 . . . . . . . . . Not Applicable
<PAGE>
CUNA MUTUAL LIFE INSURANCE COMPANY PROSPECTUS
2000 Heritage Way, Waverly, Iowa 50677-9202
(319) 352-4090 (800) 798-5500 MAY 1, 1999
- --------------------------------------------------------------------------------
This Prospectus describes the MEMBERS(R) Variable Universal Life Policy
("Policy") an individual flexible premium variable universal life insurance
policy issued by CUNA Mutual Life Variable Account ("Separate Account") and CUNA
Mutual Life Insurance Company ("Company").
The Company designed the Policy to provide insurance for the entire life of the
insured as well as an investment element. The Policy's flexibility allows you to
provide for changing insurance needs under a single insurance policy. You, as
the owner of a Policy, may make the following choices:
(1) The amount of insurance you desire.
(2) The size and frequency of premium payments.
(3) How you want your premiums allocated. You may allocate premiums to one or
more of the Subaccounts of the Separate Account which in turn invest in
one or more of the following Funds:
o Ultra Series Fund
o Capital Appreciation Stock Fund
o Growth and Income Stock Fund
o Balanced Fund
o Bond Fund
o Money Market Fund
o Treasury 2000 Fund
o T. Rowe Price International Series, Inc.
o International Stock Portfolio
o MFS(R) Variable Insurance TrustSM ("MFS Variable Insurance
Trust")
o MFS(R) Global Governments SeriesSM ("MFS Global
Governments Series")
o MFS(R) Emerging Growth SeriesSM ("MFS Emerging Growth
Series")
You may also choose to allocate all or a portion of premium to the Interest
Bearing Account, an account held in the general account of the Company. The
Company guarantees the principal held within the Interest Bearing Account and
will pay interest of at least 4% annually. At its discretion, the Company may
pay a higher rate.
(4) Which death benefit you desire:
Option 1 is equal to the Specified Amount (or Face Amount) of your Policy
Option 2 is equal to the Specified Amount plus the Accumulated Value of
your Policy
It may not be advantageous to replace existing insurance with the Policy
described in this Prospectus. In addition, a person who currently owns a
flexible premium life insurance policy should compare the benefit and cost of
purchasing additional life insurance under the existing policy with the benefits
and cost of purchasing the Policy described in this Prospectus. Since the
charges imposed upon surrender or Lapse during the first nine policy years will
be significant, purchase a Policy only if you have the financial capability to
keep it In Force for a substantial period.
Please read this prospectus carefully and keep it for future reference. A
current prospectus for the Funds must accompany this prospectus.
Unlike credit union and bank accounts, policy value invested in the Separate
Account is not insured. Investment in the Separate Account involves certain
risks including loss of purchase payment (principal). Your money will not be
deposited in or guaranteed by any credit union or bank and is not guaranteed by
any government agency.
These securities have not been approved or disapproved by the Securities and
Exchange Commission nor has the Commission passed upon the accuracy or adequacy
of this prospectus. Any representation to the contrary is a criminal offense.
<PAGE>
TABLE OF CONTENTS
PAGE
SUMMARY OF THE POLICY..........................................................1
Other..........................................................................2
Expenses.......................................................................2
INDEX OF TERMS.................................................................3
THE POLICY.....................................................................5
PREMIUMS....................................................................5
Applying for a Policy.....................................................5
Flexibility of Premiums...................................................5
Minimum Death Benefit Guarantee...........................................5
Target Premium............................................................5
Net Premiums..............................................................5
PREMIUMS TO PREVENT LAPSE...................................................5
Grace Period..............................................................5
Lapse.....................................................................5
No-Lapse Guarantee........................................................5
Reinstatement.............................................................6
ALLOCATION OF NET PREMIUMS..................................................6
Dollar Cost Averaging.....................................................6
ULTRA SERIES FUND...........................................................7
T. ROWE PRICE INTERNATIONAL SERIES, INC.....................................7
MFS VARIABLE INSURANCE TRUST................................................8
RESOLVING MATERIAL CONFLICTS................................................8
INTEREST BEARING ACCOUNT....................................................9
CHARGES AND DEDUCTIONS......................................................9
Fund Changes..............................................................9
State Premium Taxes.......................................................9
Monthly Deduction.........................................................9
Mortality and Expense Risk Charge........................................10
Contingent Deferred Sales and Administrative Charges.....................10
Transfer Fee.............................................................12
Federal and State Income Taxes...........................................12
Duplicate Policy Charge..................................................12
Change of Specified Amount Charge........................................12
POLICY VALUES..............................................................12
Accumulated Value........................................................12
Cash Value...............................................................13
Net Cash Value...........................................................13
Unit Value Guarantee.....................................................13
POLICY BENEFITS............................................................13
Death Proceeds...........................................................13
Minimum Death Benefit Guarantee..........................................14
Surrender Proceeds.......................................................14
Maturity Proceeds........................................................15
Payment of Proceeds/Settlement Options...................................15
OTHER POLICY BENEFITS AND PROVISIONS.......................................16
Conditions for Policy Issue..............................................16
Issue Date...............................................................16
Owner, Beneficiary.......................................................16
Incontestability.........................................................17
Right-to-Examine Period..................................................17
Policy Loans.............................................................18
Transfer of Values.......................................................18
Change of Allocations....................................................19
Change of Death Benefit Option...........................................19
Change of Specified Amount...............................................20
Conversion/Exchange of Policy............................................20
Transfer of Ownership....................................................21
Collateral Assignments...................................................21
Effect of Misstatement of Age or Sex.....................................21
Suicide..................................................................21
Dividends................................................................21
Suspension of Payments...................................................22
Accelerated Benefit Option...............................................22
RIDERS.....................................................................23
Children's Insurance.....................................................23
Guaranteed Insurability..................................................23
Accidental Death Benefit.................................................23
Automatic Increase.......................................................23
Other Insured............................................................23
Term Insurance...........................................................23
Disability Waiver of Monthly Deductions..................................23
Waiver of Premium and Monthly Deduction Disability Benefit...............23
Executive Benefits Plan Endorsement......................................24
THE COMPANY...................................................................24
THE SEPARATE ACCOUNT..........................................................24
FEDERAL INCOME TAX CONSIDERATIONS.............................................25
TAX STATUS OF THE POLICY...................................................25
TAX TREATMENT OF POLICY BENEFITS...........................................26
SPECIAL RULES FOR PENSION AND PROFIT-SHARING PLANS.........................27
BUSINESS USES OF THE POLICY................................................27
POSSIBLE TAX LAW CHANGES...................................................27
THE COMPANY'S TAXES........................................................27
CUNA MUTUAL LIFE INSURANCE COMPANY DIRECTORS AND EXECUTIVE OFFICERS...........27
ADDITIONAL INFORMATION........................................................29
STATE REGULATION...........................................................29
LEGAL PROCEEDINGS..........................................................29
INDEPENDENT AUDITORS.......................................................30
ACTUARIAL MATTERS..........................................................30
REGISTRATION STATEMENT.....................................................30
PREPARING FOR YEAR 2000....................................................30
DISTRIBUTION OF POLICIES...................................................30
UNISEX POLICIES............................................................30
FINANCIAL STATEMENTS..........................................................31
APPENDIX A ILLUSTRATIONS OF POLICY VALUES AND DEATH BENEFITS..................69
APPENDIX B FIRST YEAR CONTINGENT DEFERRED CHARGES PER $1,000 OF
SPECIFIED AMOUNT............................................................79
APPENDIX C FIRST YEAR CONTINGENT DEFERRED CHARGES PER $1,000 OF
SPECIFIED AMOUNT UNISEX.....................................................81
APPENDIX D DEATH BENEFIT RATIO................................................82
<PAGE>
SUMMARY OF THE POLICY
You should read the following summary of the Policy in conjunction with the
detailed information appearing elsewhere in this prospectus. Unless otherwise
indicated, the description of the Policy in this prospectus assumes that the
Insured is alive, the Policy is In Force, and there is no outstanding Policy
loan.
The Owner has flexibility, within limitations, to determine the frequency and
amount of premiums. (See Premiums - Flexibility of Premiums). The Policy does
not require the Owner to follow a fixed premium payment schedule. The Company
does not guarantee the amount and/or duration of the life insurance coverage and
value of the Policy, and the value may increase or decrease to reflect the
investment performance of the applicable Subaccounts. Accordingly, the Owner
bears the investment risk of any decrease, but reaps the benefit of any increase
in the value of the underlying assets.
As long as the Policy remains In Force, the Policy will provide for death
proceeds payable to the Beneficiary upon the Insured's death, Accumulated Value,
surrender rights, and Policy loan privileges. The Policy will remain In Force so
long as Net Cash Value is sufficient to pay certain monthly charges imposed in
connection with the Policy, otherwise, after a grace period, the Policy will
Lapse without value. (See Premiums to Prevent Lapse, Grace Period, Lapse,
No-Lapse Guarantee, and Reinstatement). However, the Company guarantees that the
Policy will remain In Force during the first three Policy Years as long as you
meet certain requirements related to the required minimum premium during those
years. If a Policy Lapses while loans are outstanding, certain amounts may
become subject to income tax and a 10% penalty tax. (See Tax Status of the
Policy). The minimum Specified Amount for which the Company normally will issue
a Policy is $50,000 ($10,000 for Issue Ages 65 and over).
Purpose of the Policy. The Policy is designed to provide lifetime insurance
benefits and long-term investment of Accumulated Value. A prospective Owner
should evaluate the Policy in conjunction with other insurance coverage that he
or she may have, as well as his or her needs for insurance and the Policy's
long-term investment potential. It may not be advantageous to replace existing
insurance coverage with the Policy. In particular, replacement should be
carefully considered if the decision to replace existing coverage is based
solely on a comparison of Policy illustrations.
Cancellation Privilege. For a limited time after the Policy is issued, the Owner
may cancel the Policy and receive a refund. This refund will equal Accumulated
Value on the date the Company receives the returned Policy, plus any charges the
Company deducted, minus any Policy Indebtedness. A refund will equal the exact
amount of premiums paid if required by applicable state law. (See Other Policy
Benefits and Provisions - Right-to-Examine Period).
Premiums. The policy requires an initial premium. After the initial premium, the
Owner may select an annual premium plan, and pay premiums in accordance with a
schedule. The Owner may vary the amount and frequency and skip planned annual
payments. (See Premiums - Flexibility of Premiums).
The initial premium and the minimum premium depend on the Insured's age, sex,
and risk class, Specified Amount selected, and any supplemental riders. You may
pay premiums after the initial premium at any time while the Policy is In Force,
within limits. (See Premiums - Flexibility of Premiums). You may then allocate
your Net Premiums to the Subaccounts and the Interest Bearing Account.
Charges and Expenses
State Taxes. The Company deducts a charge from premium payments to cover state
taxes. The charge deducted is equal to the actual amount of Premium Tax (or tax
in lieu of Premium Tax) in the Owner's state of residence. (See Charges and
Deductions - State Premium Taxes).
Monthly Deductions. The Monthly Deductions are deducted from Net Cash Value (or,
in limited circumstances, the Deferred Charges Account) on each Monthly Day. The
Monthly Deductions equal the sum of
(1) a cost of insurance charge,
(2) the cost of additional insurance riders and benefits, if any,
(3) a policy fee of $3 per month for Policies with Issue Ages 0-19 and
$6 per month for all remaining Policies, and
(4) an administrative fee which equals $.45 per thousand dollars of
Specified Amount per year.
The administrative fee is assessed only during the first 10 Policy years, or on
an increase in Specified Amount, during the first 10 years after the increase.
(See Charges and Deductions - Monthly Deduction).
Daily Charges. The Company assesses mortality and expense risk charges against
net assets (whether held in the Subaccounts and/or Interest Bearing Account)
equal on an annual basis, to .9% of the average daily net assets. (See Charges
and Deductions Mortality and Expense Risk Charge).
Fund Expenses. The Fund prospectuses describe the Fund expenses in detail. The
table below summarizes the annual Fund expenses (as a percentage of average net
assets) for the year ended December 31, 1998.
<TABLE>
<CAPTION>
Management Other Total Annual Fund
Fees Expenses Expenses
----------------------------------------- ---------------------- ---------------------- --------------------
<S> <C> <C> <C>
Capital Appreciation Stock Fund 0.80% 0.01% 0.81%
----------------------------------------- ---------------------- ---------------------- --------------------
Growth and Income Stock Fund 0.60% 0.01% 0.61%
----------------------------------------- ---------------------- ---------------------- --------------------
Balanced Fund 0.70% 0.01% 0.71%
----------------------------------------- ---------------------- ---------------------- --------------------
Bond Fund 0.55% 0.01% 0.56%
----------------------------------------- ---------------------- ---------------------- --------------------
Money Market Fund 0.45% 0.01% 0.46%
----------------------------------------- ---------------------- ---------------------- --------------------
Treasury 2000 0.45% 0.00% 0.45%
----------------------------------------- ---------------------- ---------------------- --------------------
International Stock Portfolio(1) 1.05% 0.00% 1.05%
----------------------------------------- ---------------------- ---------------------- --------------------
MFS Global Governments Series 0.75% 0.36%(2)(3) 1.11%
----------------------------------------- ---------------------- ---------------------- --------------------
MFS Emerging Growth Series 0.75% 0.10%(2) 0.85%
----------------------------------------- ---------------------- ---------------------- --------------------
<FN>
(1) Management fees include operating expenses.
(2) These Funds have an expense offset arrangement which reduces the
Funds' custodian fee based upon the amount of cash maintained by
the Funds with its custodian and dividend disbursing agent and may
enter into other such arrangements and directed brokerage
arrangements (which would also have the effect of reducing the
Funds' expenses). Expenses do not take into account these expense
reductions, and are therefore higher than the actual expenses of
the Fund.
(3) The annual expenses listed for the MFS Global Governments Series
are gross of certain reimbursements by its investment adviser. The
investment adviser has agreed to bear, subject to reimbursement,
until December 31, 2004, expenses of the Global Governments Series
such that the Series' aggregate operating expenses do not exceed
1.00%, on an annualized basis, of its average daily net assets.
See "Information Concerning Shares of The Series - Expenses" in
the prospectus of the MFS Global Governments Series.
</FN>
</TABLE>
Partial Surrender Charge. On each partial surrender, the Company assesses a
charge equal to the lesser of $25 or 2% of the amount surrendered.
Contingent Deferred Charges. The Company assesses contingent deferred sales and
administrative charges upon full surrender of Policy during the first 10 Policy
years. The charges vary by the age of Insured at issue, sex, and smoking status.
In no instance will the charges exceed 30% of the lesser of premiums paid or the
guideline annual premium of the Policy. (See Charges and Deductions - Contingent
Deferred Sales and Administrative Charges; and Appendix B).
Transfer Fee. After the fourth transfer in a Policy year, an Owner is charged
$20 per transfer for Accumulated Value transferred between and among the
Subaccounts and the Interest Bearing Account. (See Charges and Deductions -
Transfer Fee).
Change of Specified Amount Charge. The Company will assess a $50 charge for each
change of Specified Amount after the first request in a Policy year. (See Other
Policy Benefits and Provisions - Change of Specified Amount).
Policy Benefits. Two death benefit options are available under the Policy: a
level death benefit ("Option 1") and a death benefit that may increase or
decrease ("Option 2"). (See Death Benefit Options page 13). The Owner may change
the death benefit option and the Specified Amount. Death Proceeds are available
as a lump sum or under a variety of settlement options. (See Policy Benefits -
Death Proceeds). Supplemental benefits and/or riders are available. (See Other
Policy Benefits and Provisions).
The Owner may surrender the Policy in full at any time. Declining contingent
deferred sales and administrative charges are deducted from the proceeds in the
event of a full surrender during the first ten Policy years. (See Surrender
Proceeds - Policy Surrender).
Within limits, the Owner may also make a partial surrender from the Policy and
obtain a Policy loan. The Owner may make a partial surrender so long as the
Specified Amount remaining is not less than $40,000 ($8,000 if Issue Age is 65
and over). The Company will assess a charge on each partial surrender. (See
Surrender Proceeds - Partial Surrender). Loans may be taken from amounts up to
80% (90% for Virginia residents) of Cash Value, at an 8% interest rate
compounded annually. (See Other Policy Benefits and Provisions - Policy Loans).
Transfer of Values. The Owner may transfer Accumulated Value between and among
the Subaccounts and the Interest Bearing Account. The Owner may make four
transfers a year without charge. (See Other Policy Benefits and Provisions -
Transfer of Values).
The Separate Account. The Separate Account consists of nine Subaccounts. Each
Subaccount invests in the corresponding portfolio or series of Ultra Series
Fund, T. Rowe Price International Series, Inc., and the MFS Variable Insurance
Trust.
The Interest Bearing Account. As an alternative to the Separate Account, the
Owner may allocate or transfer all or a portion of the Accumulated Value to the
Interest Bearing Account, which guarantees a specified minimum rate of return.
(See Interest Bearing Account).
Illustrations. Illustrations in this prospectus or used in connection with the
purchase of a Policy are based on hypothetical rates of return. These rates are
not guaranteed. They are illustrative only and should not be considered a
representation of past or future performance. Actual rates of return may be
higher or lower than those reflected in Policy illustrations, and therefore,
actual Policy values will be different from those illustrated.
Tax Considerations. The Company intends for the Policy to satisfy the definition
of a life insurance contract under Section 7702 of the Internal Revenue Code. A
Policy may be a "modified endowment contract" under federal tax law depending
upon the amount of premiums made in relation to the Death Benefit provided under
the Policy. The Company will monitor Policies and will attempt to notify you on
a timely basis if your Policy is in jeopardy of becoming a modified endowment
contract. For further discussion of the tax status of a Policy and the tax
consequences of being treated as a life insurance contract or a modified
endowment contract, see "Federal Income Tax Considerations."
Conversion/Exchange Right. At any time within 24 months after the Issue Date,
the Owner may exchange the Policy for a policy of permanent fixed benefit
insurance or for any other policy that the Company may agree to issue on the
life of the Insured. The Owner also may transfer without charge on the exchange
date, any portion of the Net Cash Value of the original Policy as premium to the
new policy. (See Other Policy Benefits and Provisions - Conversions/Exchange
Privilege).
Owner Inquiries. If you have questions, you may write or call the Company at
2000 Heritage Way, Waverly, Iowa 50677-9202, 1-800-798-5500.
INDEX OF TERMS
We have tried to use simple, clear language as much as possible in this
prospectus. However, the very nature of the contract requires certain technical
words or terms. We have described those terms throughout the prospectus. In
addition, the following is a brief explanation of some of the terms used in the
Policy.
Accumulated Value. The total of the values attributable to a Policy in all
Subaccounts and the Interest Bearing Account plus the values attributable to it,
if any, in the Loan Account and Deferred Charges Account.
Age. The number of completed years from the Insured's date of birth.
Attained Age. Age of the Insured on the most recent Policy Anniversary.
Beneficiary. Person or entity named to receive all or part of the Death
Proceeds.
Cash Value. Accumulated Value minus Deferred Charges, but not less than zero.
CUNA Mutual Group. CUNA Mutual Insurance Society, its subsidiaries and
affiliates, including the Company.
Death Benefit Ratio. The ratio of Face Amount to Accumulated Value required by
the Internal Revenue Code for treatment of the Policy as a life insurance
Policy. The Death Benefit Ratio varies by the Attained Age.
Death Proceeds. Amount to be paid if the Insured dies while the Policy is In
Force.
Face Amount. Under death benefit option 1, the Face Amount is the greater of the
Specified Amount, or the Accumulated Value on the date of death multiplied by
the Death Benefit Ratio. Under death benefit option 2, the Face Amount is the
greater of the Specified Amount plus the Accumulated Value on the date of death,
or the Accumulated Value on the date of death multiplied by the Death Benefit
Ratio.
Fund. An investment portfolio (sometimes called a Series) of the Ultra Series
Fund, the T. Rowe Price International Series, Inc. or the MFS Variable Insurance
Trust.
Home Office. The Company's principal office at 2000 Heritage Way, Waverly, Iowa
50677-9202
In Force. Condition under which the Policy is active and the Insured's life
remains insured and sufficient Net Cash Value exists from premium payment or
otherwise to pay the Monthly Deductions on a Monthly Day.
Indebtedness. Policy loans plus accrued interest on the loans.
Insured. Person whose life is insured under the Policy.
Issue Age. Age of Insured at the time the Policy was issued.
Issue Date. The date from which Policy Anniversaries, Policy years, and Policy
months are determined.
Lapse. Condition when the Insured's life is no longer insured under the Policy.
Loan Account. A portion of the Company's general account into which amounts are
transferred from the Separate Account as collateral for Policy loans.
Monthly Day. Same day as the Issue Date for each month the Policy remains In
Force. The Monthly Day is the first day of the Policy month. If there is no
Monthly Day in a calendar month, the Monthly Day will be the first day of the
next calendar month.
Net Asset Value. The total current value of portfolio securities, cash,
receivables, and other assets minus liabilities.
Net Premiums. Premiums paid less any charges for Premium Tax (or tax in lieu of
Premium Tax).
Owner (you, your). The Owner as named in the application. The Owner may be other
than the Insured.
Policy Anniversary. Same day and month as the Issue Date for each year the
Policy remains In Force.
Portfolio Maturity. Day upon which the Stripped Treasury Securities in a
Treasury Series become payable.
Premium Tax. An amount deducted from premium payments to cover Premium Tax (and
tax in lieu of Premium Tax) currently charged by the Owner's state of residence
(except in Pennsylvania and Texas). State of residence is determined by the
Owner's mailing address as shown in the Company's records. The term "in lieu of
Premium Tax" means any income and any franchise tax assessed by a state as a
substitute for Premium Tax.
Record Date. The date the Company records the Policy on its books as an In Force
Policy.
Separate Account. CUNA Mutual Life Variable Account, a segregated investment
account of CUNA Mutual Life Insurance Company into which Net Premiums may be
allocated. The Owner bears the investment risk for amounts allocated to Separate
Account Subaccounts.
Specified Amount. The amount chosen by the Owner which is used to determine the
Face Amount.
Target Premium. The Target Premium is shown on the specifications page of the
Policy. It is determined by dividing the minimum premium by .60.
Unit Value. The value determined by dividing Net Asset Value by the number of
Subaccount units outstanding at the time of calculation.
Valuation Day. Any day the New York Stock Exchange is open for business, except
the following Company holidays: (1) Thanksgiving Day; (2) Christmas Day; (3) New
Year's Day; and (4) Independence Day, the day itself if those days fall Monday
through Friday, the day immediately preceding if those days fall on a Saturday,
and the day immediately following if those days fall on a Sunday; and (5) any
day that a Subaccount's corresponding Fund does not value its shares. Federal
securities regulations will be followed in case of an emergency which makes
valuation extremely difficult, for example, fire, blizzard or tornado.
Valuation Period. The period commencing at the close of the New York Stock
Exchange (currently 3:00 p.m. Central Standard Time) of one Valuation Day and
continuing to 3:00 p.m. Central Standard Time or the close of the New York Stock
Exchange, whichever is earlier, of the next succeeding Valuation Day.
THE POLICY
Premiums
Applying for a Policy. To purchase a Policy, you must complete an application
and submit it to an authorized representative. You must also pay an initial
premium as further described below. You must pay the Initial Premium during the
lifetime of the Insured, on or before the Issue Date. All premiums after the
Initial Premium must be paid to the Home Office.
Flexibility of Premiums. The Policy provides for a planned annual premium
determined by the Owner. The Owner is not required to pay premiums in accordance
with the planned schedule. Premiums are generally flexible both as to timing and
amount. Premiums must be large enough to keep the Policy In Force. You may pay
premiums after the initial premium at any time while the Policy is In Force.
The initial premium must be at least equal to one-twelfth (1/12th) of the
minimum premium.
The minimum premium is the minimum annual amount that, if paid each year for the
first three Policy years, will keep the no-lapse guarantee in effect for that
time. The specifications page of the Policy will indicate the minimum premium.
The Company reserves the right to refuse any premium payment that is less than
$25.
The total of all premiums paid may never exceed the maximum premium limitation
determined by the Internal Revenue Code for treatment of the Policy as a life
insurance policy. If at any time a premium is paid which would result in total
premiums exceeding the maximum premium limitation, the Company will only accept
that portion of the premium which would make total premiums equal the maximum.
The Company will return any excess amount and will not accept further premiums
until the maximum premium limitation increases.
The Company reserves the right to refuse any premium or part of a premium which
would increase the Face Amount of the Policy by more than the amount of the
premium.
Minimum Death Benefit Guarantee. If the Target Premium is paid until the later
of Attained Age 65 or 10 years from the Issue Date, the Policy will not Lapse
during those years. (See Policy Benefits - Minimum Death Benefit Guarantee.)
Target Premium. The Target Premium will be shown on each Policy. Generally, it
is determined by dividing the minimum premium by .60, and is stated on the
specifications page of the Policy.
Net Premiums. Net Premiums are premiums paid less any charge for state Premium
Taxes (or taxes in lieu of Premium Taxes). The amount of this deduction varies
by amount of premium and by state of residence of the Owner. (See Charges And
Deductions - State Premium Taxes.)
Premiums to Prevent Lapse
Grace Period. If the Net Cash Value on any Monthly Day is less than the amount
needed to pay the Monthly Deduction, and the no-lapse guarantee or minimum death
benefit guarantee is not in effect, the Company will mail a notice of
termination to the Owner. A grace period of 61 days will begin on the date the
notice is mailed. To avoid the Policy lapsing at the end of the grace period,
the Owner must: (1) pay sufficient premium to increase the Net Cash Value to
zero by the end of the grace period, or (2) if prior to the third Policy
Anniversary, and no requested increase in Specified Amount was made, either the
above amount or the amount needed to qualify for the no-lapse guarantee. In
addition to allowing the Policy to remain In Force, payment of the latter amount
will reinstate the no-lapse guarantee.
Lapse. If the premium due is not paid during the grace period, the Policy will
Lapse without value. If the Insured dies during the grace period, the overdue
charges will be deducted from the Death Proceeds.
No-Lapse Guarantee. If at all times during the first three Policy years the sum
of the premiums received to date, less all partial surrenders and Indebtedness,
is at least equal to the monthly minimum premium multiplied by the number of
months (plus one month) the Policy has been In Force, the Policy will not Lapse.
The monthly minimum premium is the minimum premium (the minimum annual amount
needed each year during the first three Policy years to keep the no-lapse
guarantee in effect) divided by 12. If any requested increase in Specified
Amount is made during the first three Policy years, the no-lapse guarantee is
voided.
In cases where the no-lapse guarantee is in effect and there is insufficient Net
Cash Value to pay the Monthly Deduction, Accumulated Value from the Deferred
Charges Account, will be used to pay the Monthly Deduction. (See Charges And
Deductions - Contingent Deferred Sales and Administrative Charges.) Deferred
Charges are collected only if the Policy is surrendered during the first nine
Policy years after the Issue Date or the first nine years after an increase in
Specified Amount, whichever is applicable. The Company will waive any Monthly
Deduction remaining after the Deferred Charges have been exhausted. (See Charges
And Deductions - Monthly Deduction.)
Reinstatement. The Owner may ask to have a Lapsed Policy reinstated. The Company
will make reinstatement based upon the original terms of the Policy if the
following conditions are met:
o the Owner requests the Company to reinstate the Policy within five
years after the end of the grace period;
o the request is in writing;
o satisfactory evidence of insurability is provided to the Company (the
Cost of Insurance rates following reinstatement will be based upon the
risk classification of the reinstated Policy);
o payment of an amount sufficient to increase the Net Cash Value to zero
by the end of the grace period, assuming no investment gains or
losses,
o the Owner pays the amount of the Monthly Deductions due on the first
three Monthly Days after the reinstatement is effective; and
o if Lapse occurs during the twelve months following the Issue or an
Increase, the Owner pays an amount equal to the difference between
Deferred Charges on the date of Lapse and Deferred Charges on date of
reinstatement computed as if the Lapse had not occurred
The reinstatement will become effective immediately upon the Company's approval
of the reinstatement. The Company will reinstate Accumulated Value to the
Deferred Charges Account in an amount equal to the lesser of the Deferred
Charges on date of Lapse or Deferred Charges on date of reinstatement, computed
as if the Policy had not Lapsed. After reinstatement, the Deferred Charges will
be handled as if the Lapse had not occurred.
Allocation of Net Premiums
All Net Premiums are allocated among the Subaccounts and the Interest Bearing
Account. The Owner determines what percentages of the Net Premiums are allocated
to each Subaccount and the Interest Bearing Account. Any allocation to a
Subaccount or the Interest Bearing Account must be at least 5% of amount applied
and only whole percentages are permitted.
Allocation of initial premium payments will be handled as follows:
If the initial premium is received before the Record Date, it is held in the
Company's general account. If a Policy is subsequently issued, interest is
credited on the net initial premium (initial premium less charge for State
Premium Tax) at a rate of at least 4% compounded annually. The Company may, at
its sole discretion, credit interest at a rate in excess of 4%. On the first
Valuation Day following the Record Date, this Net Premium plus interest from the
Issue Date, and less Monthly Deductions and amounts held in the Deferred Charges
Account are allocated to the Subaccounts of the Separate Account and the
Interest Bearing Account in the percentages established by the Owner and
recorded on the application for the Policy. (See Charges And Deductions Monthly
Deduction and Contingent Deferred Sales and Administrative Charges.) These
allocation percentages apply to future Net Premiums until the allocation is
changed by the Owner. (See Other Policy Benefits and Provisions - Change of
Allocations.)
Dollar Cost Averaging. Through the dollar cost averaging program, an Owner may
purchase units of the Subaccounts at regular intervals in fixed dollar amounts.
The fixed dollar amount will purchase more units when the value of a Subaccount
is low and fewer units when the value of a Subaccount is high. Over time, the
cost per unit averages out to be not as high as if all purchases had been made
at the highest cost and not as low as if all purchases had been made at the
lowest cost. Dollar cost averaging reduces the risk of making purchases only
when prices are high. It does not assure profit or protect against loss in
declining markets. Owners interested in the dollar cost averaging program should
consider their ability to maintain steady purchases at times when prices are
low.
The dollar cost averaging request form permits an Owner to make transfers each
month from the Money Market Subaccount to any other Subaccount and to the
Interest Bearing Account. The minimum transfer is $200 per month. The amount
transferred to a Subaccount must be at least 5% of the amount transferred and
must be in whole percentages. The transfer is made on the 20th day of each month
if that day is a Valuation Day. If the 20th is not a Valuation Day, the transfer
will be made on the next Valuation Day. Once elected, dollar cost averaging
remains in effect until the earliest of: (1) the Money Market Subaccount is
depleted to zero; (2) the Owner cancels the election (by written notice or by
telephone or fax if the Company has the Owner's telephone and fax authorization
form on file); or (3) for three successive months, the amount in the Money
Market Subaccount has been insufficient to implement the dollar cost averaging
instructions the Owner has given to the Company. The Company will notify the
Owner when dollar cost averaging is no longer in effect. There is no additional
charge for using dollar cost averaging. The Company reserves the right to
discontinue offering the dollar cost averaging facility at any time and for any
reason.
The Separate Account invests in shares of open-end management investment
companies of the series type with one or more investment portfolios or series.
Each investment company is registered with the Securities and Exchange
Commission ("SEC").
The Separate Account invests in Class Z shares of the Ultra Series Fund. The
Separate Account, CUNA Mutual Group qualified retirement plans, and two other
separate accounts of the Company are shareholders of the Ultra Series Fund.
Other Separate Accounts of the Company or separate accounts of other affiliated
and unaffiliated life insurance companies and qualified retirement plans may
also invest in the Ultra Series Fund. The Separate Account also invests in
shares of the MFS Variable Insurance Trust and the T. Rowe Price International
Series, Inc. (See The Separate Account.)
The paragraphs below summarize the investment objectives and policies of each
Fund. There is no assurance that any Fund will achieve its stated objectives.
More detailed information, including a description of risks and expenses, may be
found in the prospectuses for the Ultra Series Fund, the T. Rowe Price
International Series, Inc. and the MFS Variable Insurance Trust which follow
this prospectus. Please read these prospectuses carefully and retain them for
future reference.
Ultra Series Fund
The Ultra Series Fund is a fund with two classes of shares within each of seven
investment portfolios. Class C shares are offered to unaffiliated insurance
company separate accounts and unaffiliated qualified retirement plans. Class Z
shares are offered to CUNA Mutual Group affiliates separate accounts and
qualified retirement plans. CIMCO Inc. serves as investment adviser to the Ultra
Series Fund and manages assets in accordance with general policies and
guidelines established by the board of trustees of the Ultra Series Fund.
Currently, the Ultra Series Fund offers six Funds as investment options under
the Policies.
Capital Appreciation Stock Fund. This Fund seeks a long-term growth of capital.
It pursues this objective by investing in common stocks, including those of
smaller companies and of companies undergoing significant change.
Growth and Income Stock Fund. This Fund seeks long-term growth of capital with
income as a secondary consideration. It pursues this objective by investing in
common stocks of companies with financial and market strengths and long-term
records of performance.
Balanced Fund. This Fund seeks a high total return through the combination of
income and capital growth. It pursues this objective by investing in the types
of common stocks owned by the Capital Appreciation Stock and Growth and Income
Stock Funds, the type of bonds owned by the Bond Fund, and the type of money
market instruments owned by the Money Market Fund.
Bond Fund. This Fund seeks a high level of current income, consistent with the
prudent limitation of investment risk, through investment in a diversified
portfolio of fixed-income securities with maturities of up to 30 years. It
principally invests in securities of intermediate term maturities.
Money Market Fund. This Fund seeks high current income from money market
instruments consistent with preservation of capital and liquidity. An investment
in the Money Market Fund is neither insured nor guaranteed by the U.S.
Government. There can be no assurance that the Money Market Fund will be able to
maintain a stable Net Asset Value of $1.00 per share.
Treasury 2000 Fund. The investment objective of this Fund is to provide safety
of capital and a relatively predictable payout upon Portfolio Maturity,
primarily by investing in Stripped Treasury Securities. The Stripped Treasury
Securities held by this Fund mature November 15, 2000.
T. Rowe Price International Series, Inc.
T. Rowe Price International Stock Portfolio. This Fund seeks long-term growth of
capital through investments primarily in common stocks of established, non-U.S.
companies.
Rowe Price-Fleming International, Inc. ("RPFI") serves as the investment adviser
to the International Stock Portfolio and manages its assets in accordance with
general policies and guidelines established by the board of directors of the T.
Rowe Price International Series, Inc. RPFI was founded in 1979 as a joint
venture between T. Rowe Price Associates, Inc. and Robert Fleming Holdings
Limited.
MFS Variable Insurance Trust
MFS Global Governments Series. This Fund seeks to provide income and capital
appreciation through investments primarily in debt obligations and also
corporate bonds and mortgage-backed and assets-backed securities.
MFS Emerging Growth Series. This Fund seeks long-term growth of capital through
investments primarily in common stocks and related securities of emerging growth
companies.
Massachusetts Financial Services Company ("MFS") serves as the investment
adviser to the MFS Global Governments Series and MFS Emerging Growth Series and
manages its assets in accordance with general policies and guidelines
established by the board of trustees of the MFS Variable Insurance Trust. MFS is
a subsidiary of Sun Life Assurance Company of Canada (U.S.) Financial Services
Holdings, Inc. which, in turn, is a wholly owned subsidiary of Sun Life
Assurance Company of Canada.
Availability of the Funds. The Separate Account purchases shares of T. Rowe
Price International Stock Portfolio, MFS Global Governments Series, and MFS
Emerging Growth Series in accordance with separate participation agreements
between the Company and T. Rowe Price International Series, Inc. and MFS
Variable Insurance Trust, as appropriate. The agreements contain varying
termination provisions. If a participation agreement terminates, the Separate
Account may not be able to purchase additional shares of the Fund(s) covered by
that agreement. Likewise, in certain circumstances, it is possible that shares
of a Fund may not be available to the Separate Account even if the participation
agreement relating to that Fund has not been terminated. In either event, Owners
will no longer be able to allocate purchase payments or transfer Policy value to
the Subaccount investing in that Fund.
Resolving Material Conflicts
Shares of the Funds, other than Ultra Series Fund, are sold to separate accounts
of insurance companies that are not affiliated with the Company or each other, a
practice known as"shared funding." They are also sold to separate accounts to
serve as the underlying investment for both variable annuity contracts and
variable life insurance contracts, a practice known as "mixed funding." As a
result, there is a possibility that a material conflict may arise between the
interests of Owners, whose Contract Values are allocated to the Variable
Account, and of owners of other contracts whose contract values are allocated to
one or more other separate accounts investing in any one of the Funds. Shares of
some of the Funds may also be sold directly to certain qualified pension and
retirement plans qualifying under Section 401 of the Code. As a result, there is
a possibility that a material conflict may arise between the interests of Owners
or owners of other contracts (including contracts issued by other companies),
and such retirement plans or participants in such retirement plans. In the event
of any such material conflicts, the Company will consider what action may be
appropriate, including removing the Fund from the Variable Account or replacing
the Fund with another Fund. There are certain risks associated with mixed and
shared funding and with sale of shares to qualified pension and retirement
plans, as disclosed in the Fund's prospectus.
As with other Funds, Ultra Series Fund sells shares in "mixed funding"
arrangements. In addition, it sells shares directly to qualified pension and
retirement plans sponsored by CUNA Mutual Group. In the future, it is possible
that Ultra Series Fund may sell shares in "shared funding" arrangements. As with
other funds, in the event of material conflicts, the Company will consider what
action may be appropriate, including removing an Ultra Series Fund Portfolio
from the Variable Account or replacing it with another Portfolio or Fund.
Certain risks associated with mixed funding and with the sale of shares to CUNA
Mutual Group plans are disclosed in the Ultra Series Fund Statement of
Additional Information.
Addition, Deletion or Substitution of Investments. The Company reserves the
right, subject to applicable law, to make additions to, deletions from, or
substitutions for the shares of a Fund that are held in the Separate Account or
that the Separate Account may purchase. If the shares of a Fund are no longer
available for investment or if, in the Company's judgment, further investment in
any Fund should become inappropriate, the Company may redeem the shares, if any,
of that Fund and substitute shares of another Fund. To the extent required by
the Investment Company Act of 1940 ("1940 Act") or other applicable law, the
Company will not substitute any shares attributable to a Policy's interest in a
Subaccount without notice and prior approval of the SEC and state insurance
authorities.
The Company also reserves the right to establish additional Subaccounts of the
Separate Account, each of which would invest in shares of a new corresponding
Fund having a specified investment objective. The Company may, in its sole
discretion, establish new Subaccounts or eliminate or combine one or more
Subaccounts if marketing needs, tax considerations or investment conditions
warrant. Any new Subaccounts may be made available to existing Owners on a basis
to be determined by the Company. Subject to obtaining any approvals or consents
required by applicable law, the assets of one or more Subaccounts may be
transferred to any other Subaccount if, in the sole discretion of the Company,
marketing, tax, or investment conditions warrant.
In the event of any such substitution or change, the Company (by appropriate
endorsement, if necessary) may change the Policy to reflect the substitution or
change. Affected Owners will be notified of such a material substitution or
change. If an Owner objects to the change, the Owner may exchange the Policy for
a fixed benefit whole life insurance policy then issued by the Company. The new
policy will be subject to normal underwriting rules and other conditions
determined by the Company. No evidence of insurability will be necessary. The
option to exchange must be exercised within sixty (60) days of notification to
the Owner of the investment policy change. The Owner may also Surrender the
Policy. (See Policy Benefits - Surrender Proceeds.)
If the Company considers it to be in the best interest of Owners, and subject to
any approvals that may be required under applicable law, the Separate Account
may be operated as a management investment company under the 1940 Act, it may be
deregistered under the 1940 Act if registration is no longer required, it may be
combined with other Company separate accounts, or its assets may be transferred
to another separate account of the Company. In addition, the Company may, when
permitted by law, restrict or eliminate any voting rights of Owners or other
persons who have such rights under the Policies.
Interest Bearing Account
The Interest Bearing Account is an investment option under the Policy. Under
this option, premiums may be allocated and values transferred to the general
account of the Company. Assets attributable to the Interest Bearing Account are
subject to the claims of the Company's general creditors. Net premiums allocated
and values transferred to the Interest Bearing Account will earn interest at a
rate of no less than 4% annually, with the Company crediting a higher rate
solely at its discretion. (See Other Policy Benefits and Provisions - Transfer
of Values.)
Charges and Deductions
Fund Charges. Charges made by the Funds are discussed in the Funds' prospectuses
and in their statements of additional information available from the address
shown on the first page of this prospectus. Charges and deductions for state
Premium Taxes and charges against the Separate Account and the Interest Bearing
Account are described below.
State Premium Taxes. The Company makes a deduction from premiums for Premium
Taxes (or taxes in lieu of Premium Taxes) charged by the Owner's state of
residence. The Company determines the Owner's state of residence by his mailing
address as shown on Company records. The initial percentage of reduction for
state taxes is shown on the specifications page of the Policy.
Monthly Deduction. The Monthly Deduction due on each Monthly Day will be the sum
of:
o the Cost of Insurance for that month; plus
o the monthly Policy fee; plus
o the monthly administrative fee; plus
o the cost of any additional benefits provided by rider, if any.
The Monthly Deduction is made by redeeming the number of units (or fraction of
units) in Subaccounts (and/or withdrawing values from the Interest Bearing
Account) in an amount equal to the amount of the Monthly Deduction, except
during the second through ninth Policy years, in which case the amount in the
Deferred Charges Account in excess of the Deferred Charges will be first applied
to the Monthly Deduction. The excess amount will include interest earned in the
account and, when the Monthly Day falls on a Policy Anniversary, the amount
released from the Deferred Charges Account.
On any Monthly Day when there is insufficient Net Cash Value to pay the Monthly
Deduction and the no-lapse guarantee or minimum death benefit guarantee is in
effect, the Monthly Deduction remaining after the Net Cash Value is exhausted
will be made from the Deferred Charges Account. If the Deferred Charges Account
balance is insufficient to pay the Monthly Deduction, the Company will waive any
Monthly Deduction remaining after the amount in the Deferred Charges Account has
been exhausted.
In the 10th Policy year and beyond, any Monthly Deduction in excess of the Net
Cash Value will be waived by the Company if the minimum death benefit guarantee
is still in effect.
The Owner may specify what percentages of the Monthly Deduction will be
withdrawn from each Subaccount and the Interest Bearing Account. Each withdrawal
from a Subaccount or the Interest Bearing Account must be at least 5% of the
total Monthly Deduction. Only whole percentages are permitted. If a
specification is not made, the withdrawals will be made in the same percentages
as premiums are currently allocated among the Subaccounts and the Interest
Bearing Account.
Cost of Insurance. The Company will determine a Cost of Insurance rate to be
used on each Monthly Day. The Cost of Insurance rate for the Policy will be
determined by the Insured's Attained Age, sex, smoker status, and rating class.
(For factors used in unisex Policies, see the Section entitled Unisex Policies.)
Attained Age means Age on the most recent Policy Anniversary. Cost of Insurance
rate charges will depend on the Company's expectations as to future mortality
experience. The monthly Cost of Insurance rate will not exceed the rates shown
in Table I - Guaranteed Maximum Insurance Rates contained in the Policy.
However, the Company may charge less than these rates. While not guaranteeing to
do so, the Company intends to charge less than the guaranteed maximum insurance
rates after the 10th Policy year. The guaranteed maximum insurance rates are
based on the 1980 CSO Mortality Tables, Age last birthday.
The Cost of Insurance is determined by multiplying the Cost of Insurance rate by
the net amount at risk for a Policy. Under death benefit option 2, the net
amount at risk is always the Specified Amount. Under death benefit option 1, the
net amount at risk is the Specified Amount less the Accumulated Value. For a
Policy where there has been an increase in Specified Amount, the Cost of
Insurance rate applicable to the initial Specified Amount is usually different
from that for the increase. Likewise, there is a net amount at risk associated
with the initial Specified Amount and the increase. The net amount at risk for
the initial Specified Amount is multiplied by the Cost of Insurance rate for the
initial Specified Amount to determine the Cost of Insurance charge for the
initial Specified Amount and the net amount at risk for the increase is
multiplied by the Cost of Insurance rate for the increase to determine the Cost
of Insurance for the increase. To compute the net amounts at risk after an
increase for a Policy with an option 1 death benefit, Accumulated Value is first
used to offset the initial Specified Amount, and any Accumulated Value in excess
of the initial Specified Amount is then used to offset the increase in Specified
Amount.
Monthly Policy Fee. The monthly Policy fee is a fee the Company charges to
compensate it for some of the administrative expenses associated with the
Policy. The fee cannot be increased. It is equal to $3 per month for Policies
with Issue Ages of 0-19 and $6 per month for all other Policies. It is not based
on the Specified Amount.
Monthly Administrative Fee. The Company assesses an administrative fee of $.45
per thousand dollars of Specified Amount per year on a monthly basis to
reimburse the Company for some of the administrative expenses associated with
the Policy. On a monthly basis, the administrative fee amounts to $.0375 per
thousand dollars of Specified Amount. The fee is based on the Specified Amount
and cannot be increased unless the Specified Amount is changed. The fee will not
be decreased in the event of a Specified Amount decrease. This fee is charged
only during the first 10 Policy years of the Policy or, on an increase in
Specified Amount, during the first 10 Policy years after the increase.
The monthly administrative fee, together with the monthly Policy fee, is
designed to equitably distribute the administrative costs among all Policies.
Cost of Additional Benefits. The cost of additional benefits will include
charges for any additional insurance benefits added to the Policy by rider.
These charges are for insurance protection, and the amounts will be specified in
the Policy.
Mortality and Expense Risk Charge. The Company daily deducts a mortality and
expense risk charge of .00002466% of the Policy's Net Asset Value in the
Separate Account (and the Policy's Accumulated Value in the Interest Bearing
Account), which is equal on an annual basis to 0.9% of the daily value of the
net assets of the Separate Account (and the value in the general account
attributable to the Interest Bearing Account). The mortality risk assumed is
that the Insured may not live as long as expected. The expense risk assumed by
the Company is that the actual expense will be greater than that expected by the
Company. The Company has primary responsibility for all administration for the
Policy, the Separate Account and the Interest Bearing Account. Such
administration includes, among other things, Policy issuance, underwriting,
maintenance of Policy records, Policy service, and all accounting, reserves
calculations, regulatory and reporting requirements, and audit of the Separate
Account. If proceeds from this charge are not needed to cover mortality and
expense risks, the Company may use proceeds to finance distribution of the
Policies or for any other lawful purpose.
Contingent Deferred Sales and Administrative Charges. To reimburse the Company
for sales expenses and Policy issue expenses, the Company deducts contingent
deferred sales and administrative charges ("Deferred Charges") from the proceeds
in the event of a complete surrender of the Policy during the first ten years. A
chart showing the percentage of Deferred Charges remaining at the beginning of
Policy years 2 through 9 is shown below. The contingent deferred sales charge
will be used to offset the expenses that were incurred in the distribution of
the Policy, including but not limited to representatives' commissions,
advertising, sales materials, training allowances, and preparation of
prospectuses. In no instance will the charge exceed 30% of the lesser of
premiums paid or the "guideline annual premium" The "guideline annual premium"
is approximately equal to the amount of premium that would be required on an
annual basis to keep the Policy In Force if the Policy had a mandatory fixed
premium schedule assuming (among other things) a 5% net investment return. If
you would like to obtain the guideline annual premim specific to your contract,
please contact the Company.
The Deferred Charges vary by the Age of Insured , sex, and smoking status. For a
35-year-old male nonsmoker, the charges would be $7.71 per $1,000 of the
Specified Amount. For a 50-year-old male nonsmoker, the charges would be $15.91
per $1,000 of Specified Amount. For a chart showing how the charges vary, see
Appendix B.
The Company will use the contingent deferred administrative charge to recover
the first-year costs of underwriting and issuing the Policy. They are contingent
in that they will not be collected unless the Policy is surrendered during the
first nine Policy years. The Company will not deduct any Deferred Charges from
the proceeds in the event of a partial surrender of the Policy.
The Deferred Charges generally build up monthly during the first Policy year in
twelve equal increments to the total Deferred Charges. Then the Deferred Charges
decrease annually after the first year. The percentage of the Deferred Charges
remaining in each Policy year is:
Beginning Percentage of
Policy Year Deferred Charges Remaining
----------- --------------------------
2 95%
3 90%
4 85%
5 75%
6 65%
7 50%
8 35%
9 20%
10+ 0%
At the time the Policy is issued, the first month's portion of the Deferred
Charges is placed in a non-segregated portion of the general account of the
Company, which is referred to as the Deferred Charges Account. This amount will
earn interest at a minimum rate of 4% per annum with the Company crediting
additional interest, at its option, from time to time. At the next Monthly Day,
taking into account the interest earned, the Company will transfer from the
Separate Account and/or the Interest Bearing Account to the Deferred Charges
Account the amount necessary to equal the current Deferred Charges. This
withdrawal will be made in the same percentages as premiums are currently
allocated among the Subaccounts and the Interest Bearing Account.
The Company will do the same for each month of the first Policy year. If the
Owner has not paid sufficient premium to build up the Deferred Charges to the
appropriate level in the first Policy year, additional amounts will be
transferred out of the Separate Account and/or Interest Bearing Account in
subsequent years. The transfers will continue until the Deferred Charges equal
premiums required in the first year to completely fund the Deferred Charges, and
the corresponding deductions had taken place every year, as scheduled.
The Company will release on the first Monthly Day of the second Policy year the
amount in the Deferred Charges Account in excess of 95% of the first Policy year
Deferred Charges, taking into account the interest earned. This process
continues each Policy year until the 10th Policy year or until the Policy is
surrendered.
The amount in the Deferred Charges Account is included in calculating the
Accumulated Value of the Policy. The Company will withdraw Deferred Charges from
the Deferred Charges Account only in the following instances:
o to pay surrender charges upon full surrender of the Policy;
o to release amounts back to the Separate Account and/or
Interest Bearing Account on the second through ninth Policy
Anniversaries; and
o to pay the Monthly Deduction when there is insufficient Net
Cash Value and the no-lapse guarantee or minimum death benefit
guarantee is in effect.
In the latter two situations, allocations will be made in the same percentages
as premiums are currently allocated among the Subaccounts and the Interest
Bearing Account.
Net Premiums paid following the payment of the Monthly Deduction with Deferred
Charges will first be transferred from the Subaccounts and/or Interest Bearing
Account to the Deferred Charges Account on the day the premiums are received, to
the extent necessary to bring the Deferred Charges Account to the same level as
if no Deferred Charges had been used to pay the Monthly Deduction, and if on a
Policy Anniversary, the reduction in Deferred Charges had taken place as
scheduled. If the premium is paid on a Monthly Day during the first Policy year,
additional amounts will be transferred to the Deferred Charges Account. This
process of using Deferred Charges to pay the Monthly Deduction will continue
every Monthly Day that: (1) there is insufficient Net Cash Value to pay the
Monthly Deduction; and (2) the no-lapse guarantee or minimum death benefit
guarantee are in effect; and (3) the Policy is not beyond the ninth Policy year.
Partial Surrender. If a Partial Surrender is made, the Company will not deduct
any Contingent Deferred Sales or Administrative Charges, but will make a service
charge equal to the lesser of $25 or 2% of the amount surrendered for each
partial surrender.
Transfer Fee. An Owner may transfer a Policy's Accumulated Value among one or
more of the Subaccounts and the Interest Bearing Account. Currently, the Company
allows four transfers in each Policy year without charge. After four transfers
in any given Policy year, the Company will deduct $20 per transfer from the
amount transferred. (See Other Policy Benefits and Provisions Transfer of
Values.)
Federal and State Income Taxes. Other than Premium Taxes (and taxes in lieu of
Premium Taxes), no charges are currently made against the Separate Account
and/or Interest Bearing Account for federal or state income taxes. In the event
the Company should determine that any such taxes will be imposed, the Company
may make deductions from the Separate Account and/or Interest Bearing Account to
pay such taxes.
Duplicate Policy Charge. You can obtain a certification of your policy at no
charge. There will be a $30 charge for a duplicate policy.
Change of Specified Amount Charge. The Company will assess a $50 charge for each
change in Specified Amount after the first in a Policy year.
Policy Values
Accumulated Value. The Accumulated Value of the Policy is the sum of the values
attributable to the Policy in the Loan Account, Deferred Charges Account, each
Subaccount, and Interest Bearing Account. Accumulated Value is determined as of
the end of each Valuation Period. The Loan Account is part of the Company's
general account into which is transferred an amount equal to any Policy loans.
(See Other Policy Benefits and Provisions - Policy Loans.) The Deferred Charges
Account is part of the Company's general account in which Policy values are held
in support of the deferred sales and administrative charges. (See Charges And
Deductions - Contingent Deferred Sales and Administrative Charges.)
Accumulated Value will increase whenever there is:
o an investment gain in any Subaccount;
o interest credited to the Policy for amounts held in the
Deferred Charges Account and/or Interest Bearing Account;
o interest credited to the Policy for any loan amounts held in
the Loan Account;
o additional premium paid; or
o Policy dividends paid into the Subaccounts.
Accumulated Value will decrease whenever there is:
o an investment loss in any Subaccount;
o a Monthly Deduction;
o a partial surrender; or
o a charge made for reallocating Net Cash Value between the
Subaccounts or between the Interest Bearing Account and
Subaccounts. The amount reallocated would be reduced by the
amount of the transfer charge.
Accumulated Value will neither increase nor decrease when:
o a Policy loan is either disbursed or repaid; or
o amounts are transferred between any Subaccount and either the
Deferred Charges Account or the Loan Account, or when amounts
are transferred among the Subaccounts and the Interest Bearing
Account (exclusive of any transfer charge).
The Owner may, at any time, surrender or partially surrender the Policy for some
or all of its Net Cash Value (Accumulated Value less Deferred Charges and
Indebtedness). In addition, the Owner can borrow at any time up to 80% (90% for
Virginia residents) of the Policy's Cash Value (Accumulated Value less current
Deferred Charges). The written consent of all assignees and Irrevocable
Beneficiaries, if any, must be furnished before the Company will release either
loan or surrender proceeds.
The value in a Subaccount attributable to a Policy is equal to the number of
units that the Policy has in each Subaccount, multiplied by the Unit Value of
that Subaccount. Because the Separate Account purchases shares of the Fund, the
value of the Subaccounts will reflect the investment advisory or
advisory/administrative fee and other expenses incurred by the Fund.
The Unit Value of each Subaccount (other than the Treasury 2000 Subaccount) was
set at $10 for the first Valuation Period. The Unit Value of the Treasury 2000
Subaccount was originally set at $3.62 per unit. The Unit Value may increase or
decrease from one Valuation Period to the next. The Unit Value will vary between
Subaccounts.
Cash Value. The Cash Value at any time is equal to the Accumulated Value less
any Deferred Charges which would be applicable if the Policy were surrendered at
that time. (See Charges And Deductions - Contingent Deferred Sales and
Administrative Charges.)
Net Cash Value. The Net Cash Value at any time is equal to the Cash Value less
any Policy Indebtedness. (See Other Policy Benefits and Provisions - Policy
Loans.) This value is equal to the value attributable to the Policy in each
Subaccount and the Interest Bearing Account and represents the amount an Owner
would receive upon full surrender of the Policy (see Policy Benefits Surrender
Proceeds) or when the Policy matures (see Policy Benefits - Maturity Proceeds).
Unit Value Guarantee. The Company guarantees the payment of at least $10 per
unit of a Subaccount which invests in a treasury series if the units are held to
Portfolio Maturity. The Stripped Treasury Securities held by the Treasury 2000
Series become payable on (have a Portfolio Maturity date of) November 15, 2000.
The Company does not guarantee the Unit Value of any units redeemed prior to
Portfolio Maturity. Any such unit will be redeemed at a price based on the then
current Net Asset Value, which may be more or less than the purchase price or
the price at Portfolio Maturity. Taking a Monthly Deduction and transferring
value from a Subaccount investing in a treasury series will force a redemption
and thus void the Unit Value Guarantee on those units. The Company reserves the
right to discontinue offering units of a Subaccount investing in a treasury
series if shares from that series become unavailable prior to the maturity of
the Stripped Treasury Securities in that series or, if in the judgment of the
Company's Board of Directors, further investment in such units is no longer
deemed to be in the best interest of policies generally within the class
represented by the Policy. When the Treasury 2000 Series portfolio matures, the
Company will give written notice to current Owners of units of the Treasury 2000
Subaccount. Owners may transfer Treasury Unit Values to any other Subaccount or
to the Interest Bearing Account. In the absence of a selection by the Owner upon
maturity, value in the Treasury 2000 Subaccount will be transferred to the Money
Market Subaccount.
Policy Benefits
Death Proceeds
Payment of Death Proceeds. When the Company receives proof of the Insured's
death in writing on a form satisfactory to the Company, the Company will pay the
Death Proceeds to the Beneficiary. If no Beneficiary survives the Insured, The
Company will pay the Death Proceeds to the Owner, if living, or to the Owner's
estate.
The Company will pay Death Proceeds payable to an estate in one sum. The Company
will pay Death Proceeds payable to other beneficiaries in one sum unless another
settlement option is selected. If the Owner, Beneficiary, or payee is not a
natural person, any Death Proceeds due will be applied only under settlement
options consented to by the Company.
Interest will accumulate from the Insured's date of death until a lump sum
payment is made or until a settlement option is effective. Each year the Company
determines the interest rate. The rate will not be less than 3.5% per year.
During the Insured's lifetime, the Owner may direct that the Company pay the
Death Proceeds under one of the settlement options. The Company must receive the
written consent of all Irrevocable Beneficiaries prior to the selection. After
the Insured's death, if the Owner did not select a settlement option, any
Beneficiary entitled to receive the proceeds in one sum may select a settlement
option. (See Other Policy Benefits and Provisions - Payment of
Proceeds/Settlement Options.)
An accelerated payment of a portion of the eligible death benefit may be elected
if the Insured is terminally ill. (See Other Policy Provisions, Definitions -
Accelerated Benefit Option.)
Death Benefit Options 1 and 2. The Owner may select one of two death benefit
options. The Owner's selection will affect the Face Amount, the Monthly
Deduction, and the Cash Value. Under either option, Death Proceeds are equal to:
o the Face Amount on the date of death; plus
o any premiums received after date of death; minus
o Policy Indebtedness.
The Face Amount, however, differs under the two death benefit options.
Under Death Benefit Option 1, the Face Amount is the greater of:
o The Specified Amount, or
o The Accumulated Value on the date of death multiplied by the Death
Benefit Ratio.
Under Death Benefit Option 2, the Face Amount is the greater of:
o The Specified Amount plus the Accumulated Value on the date of death, or
o The Accumulated Value on the date of death multiplied by the Death
Benefit Ratio.
The Death Benefit Ratio is the ratio of Face Amount to Accumulated Value
required by the Internal Revenue Code for treatment of the Policy as a life
insurance Policy. The Death Benefit Ratio varies by Attained Age as shown in
Appendix D. The death benefit factor decreases from year to year as the Attained
Age of the Insured increases.
The illustrations in Appendix A show how the death benefit option affects Policy
values. Illustrations 1, 2, 5 and 6 assume death benefit option 1 is in effect.
Illustrations 3, 4, 7, and 8 assume death benefit option 2 is in effect.
The Owner may change from one death benefit option to the other. (See Other
Policy Benefits and Provisions - Change of Death Benefit Option.)
Minimum Death Benefit Guarantee
The minimum death benefit guarantee provides that the Company will pay a minimum
amount of death benefit if, at all times, the sum of the premiums received to
date, less all partial surrenders and Policy loans, is at least equal to the
monthly target premium multiplied by the number of months (plus one month) the
Policy has been In Force. The Target Premium is stated on the specifications
page of the Policy and is generally determined by dividing the minimum premium
by 0.60. Thus, if the Owner pays a premium at least equal to the Target Premium
each year, the Policy will remain In Force and the minimum death benefit will be
paid even if the Net Cash Value is insufficient to pay Monthly Deductions on a
Monthly Day and the Policy would otherwise Lapse. The monthly target premium is
the Target Premium divided by twelve. The minimum death benefit guarantee
expires at the later of Attained Age 65 or 10 years from the Issue Date.
The Target Premium will be increased or decreased, as appropriate, when the
Owner requests the following: increase or decrease in the Specified Amount,
change in the death benefit option, or adds or deletes riders.
If the premiums required to maintain the minimum death benefit guarantee are not
paid, the minimum death benefit guarantee will be lost. Notice of this loss will
be mailed to the Owner, after which the Owner has 60 days to reinstate the
minimum death benefit guarantee by paying premiums sufficient to raise the total
premiums to the required amount. If the necessary premiums are not paid within
the 60-day grace period, the minimum death benefit guarantee cannot be
reinstated.
Where the minimum death benefit guarantee is in effect and there is insufficient
Net Cash Value to pay the Monthly Deduction, Deferred Charges will be used to
pay the Monthly Deduction during the first nine Policy years. (See Charges and
Deductions Contingent Deferred Sales and Administrative Charges.) During those
years, any Monthly Deduction remaining after amounts in the Deferred Charges
Account have been exhausted will be waived. In the 10th Policy year and beyond,
any Monthly Deduction in excess of the Net Cash Value will be waived. (See
Charges and Deductions - Monthly Deduction.)
Surrender Proceeds
Policy Surrender. The Owner may Surrender the Policy for its Net Cash Value. The
Owner must obtain the written consent of all assignees or Irrevocable
Beneficiaries prior to any partial or total surrender. The Company may require
the return of the Policy.
The surrender date of the Policy is the date the Company receives a written
request for surrender at the Home Office in a form satisfactory to the Company
and containing all necessary signatures. The Company will determine the Net Cash
Value as of the end of the Valuation Period during which the surrender date
occurs. The Policy and all insurance will terminate as of the surrender date.
To reimburse the Company for sales expenses and Policy expenses incurred at
issue, contingent deferred sales and administrative charges will be deducted
from the proceeds in the event of a complete surrender of the Policy during the
first nine Policy years. (See Charges and Deductions - Contingent Deferred Sales
and Administrative Charges.)
Partial Surrender. The Owner may also surrender a portion of the Policy for an
amount less than the full Net Cash Value. The effective date of such partial
surrender will be the date the partial surrender request is received at the Home
Office. The Company will not deduct any contingent deferred sales or
administrative charges in the case of a partial surrender, but will make a
service charge equal to the lesser of $25 or 2% of the amount surrendered for
each partial surrender. The Owner may specify the allocation percentages among
the Subaccount(s) and Interest Bearing Account from which the surrender is to be
made. If no specification is made, the Company will withdraw the surrendered
amount from the Subaccounts and Interest Bearing Account in the same percentages
as Monthly Deductions are withdrawn from the Subaccounts and Interest Bearing
Account. If there are insufficient values to follow these percentages, the
partial surrender amount will be withdrawn on a pro rata basis based on values
in the Subaccounts and Interest Bearing Account. The partial surrender fee will
be deducted from amounts withdrawn from the Subaccounts and the Interest Bearing
Account on the same pro rata basis unless otherwise directed by the Owner. No
partial surrender will be allowed if the Specified Amount remaining would be
less than $40,000 ($8,000 if Issue Age is 65 and over). (For limits applicable
to Policies sold to employee benefit plans, see Unisex Policies.)
Unless the Face Amount derived from application of the Death Benefit Ratio
applies, under either death benefit option 1 or option 2, a partial surrender
will reduce both the Accumulated Value and Face Amount by the amount surrendered
but will not affect the Cost of Insurance. Under death benefit option 1, the
Specified Amount is also reduced by the same amount, but the Specified Amount is
not changed by a partial surrender under death benefit option 2.
If the Face Amount derived from application of the Death Benefit Ratio applies,
the effect on the monthly Cost of Insurance and Face Amount is somewhat
different. The Face Amount is then decreased by more than the amount
surrendered, and the monthly Cost of Insurance is less than it would have been
without the surrender.
Payment will be made within seven days of the surrender or partial surrender
date unless a suspension of payments is in effect. (See Other Policy Benefits
and Provisions - Suspension of Payments.) For information on possible tax
effects of partial surrenders (see Tax Treatment Of Policy Proceeds).
Maturity Proceeds
The Policy matures on the Policy Anniversary following the Insured's 95th
birthday. Coverage under the Policy ceases on that date, and the Owner will
receive maturity proceeds equal to the Net Cash Value as of that date.
Payment of Proceeds/Settlement Options
Settlement options other than lump sum payments are available for Death
Proceeds, surrender proceeds, and maturity proceeds, payable to natural persons,
subject to certain restrictions on Death Proceeds. (See Policy Benefits - Death
Proceeds and Payment of Proceeds/Settlement Options.) Proceeds payable to other
than a natural person will be applied only under settlement options agreed to by
the Company. The four available settlement options are as follows:
1) Interest Option. The Policy proceeds may be left at interest with
the Company during the lifetime of the payee. The interest rate is
determined each year by the Company. It is guaranteed to be not less
than the settlement option rate of interest shown on the specifications
page contained in the Policy.
The payee may choose to receive interest payments either once a year or once a
month unless the amount of interest to be paid monthly is less than $25 per
month, then interest will be paid annually. The payee may withdraw any remaining
proceeds, if this right was given at the time the option was selected.
2) Installment Option. The proceeds may be left with the Company to
provide equal monthly installments for a specified period. No period
can be greater than 30 years. The interest the Company guarantees to
pay is set forth in the Policy. Additional interest, if any, will be
payable as determined by the Company.
The payee may withdraw the present value of any remaining guaranteed
installments, but only if this right was given at the time the option was
selected.
3) Life Income - Guaranteed Period Certain. The proceeds may be left
with the Company to provide monthly installments for as long as the
original payee lives. A guaranteed period may be selected. Payments
will cease when the original payee dies or at the end of the guaranteed
period, whichever is later. If the original payee dies during the
guaranteed period, the remaining guaranteed payments will be paid to
the successor payee.
Guaranteed periods which may be selected are:
o 10 years.
o 20 years.
o A period of years such that the total installments during the period
will be at least equal to the proceeds applied under the option.
It is also possible to take the life income without a guaranteed period. In such
case, the monthly installment amount will depend on the Age and sex of the
original payee on the date of the first payment.
Dividends, if any, will be payable as determined by the Company.
4) Joint and Survivor Life. The proceeds may be left with the Company
to provide monthly installments for two payees for a guaranteed period
of 10 years. After the 10-year period is over, payments will continue
as long as either of the original payees is living. The monthly
installment amount will depend on the Age and sex of both payees at the
date of the first payment.
The minimum amount that can be applied under settlement options 2, 3 and 4 is
that amount which will provide monthly installments of at least $25.
Additional monthly income may be purchased under settlement options 2 and 3. The
amount of additional annuity which can be purchased with new money is 95% of the
amount which can be purchased with the net Policy Death Proceeds under those
options. The additional annuity amount may not exceed twice that which the
application of proceeds under the selected option would provide.
The selection of an additional annuity purchase must be in writing and on file
at the Home Office. Selection must be within 30 days of settlement under this
Policy and is available only if the settlement is on or after the later of the
10th Policy Anniversary or the annuitant's 55th birthday.
The Company may, at its option, provide for additional settlement options or
delete any of the settlement options described above. Monthly installment
amounts for settlement options selected for use in conjunction with unisex
Policies will not be based on the sex of the Insured.
OTHER POLICY BENEFITS AND PROVISIONS
Conditions for Policy Issue
The minimum Specified Amount for this Policy is $50,000 ($10,000 for Issue Ages
65 and over). The Policy may be issued on individuals up to 75 years of Age. The
Company requires evidence of insurability satisfactory to it before issuing a
Policy. In some cases, this evidence will include a medical examination. Smoker
rates are determined based on Age, sex, and duration. Higher rates are charged
if the Company determines that for some reason the Insured is a higher mortality
risk. Nonsmoker rates are charged for nonsmokers over the Age of 19 who have
completed and returned to the Company a Nonsmoker Statement, and when required
by underwriting guidelines, a Part 2 Health Statement. (For limits on Specified
Amount and factors considered in determining the Cost of Insurance rate for
Policies sold to employee benefit plans, see Unisex Policies.)
Issue Date
The Issue Date is the date used to determine Policy Anniversaries and Monthly
Days. If a premium is paid with the application, the Issue Date will be no
earlier than the date the application is received and no later than the Record
Date. Insurance coverage will begin as of the Issue Date provided the applicant
subsequently is deemed to have been insurable. If a premium is not paid with the
application, the Issue Date will ordinarily be approximately 10 days after
underwriting approval. Insurance coverage will begin on the later of the Issue
Date or the date the premium is received.
Owner, Beneficiary
The Owner is named in the application. The Owner may be other than the Insured.
One or more Beneficiaries may be named in the application. Beneficiaries may be
classified as primary or contingent. If no primary Beneficiary survives the
Insured, payment will be made to contingent Beneficiaries. Beneficiaries in the
same class will receive equal payments unless otherwise directed. A Beneficiary
must survive the Insured in order to receive his or her share of the Death
Proceeds. If a Beneficiary dies before the Insured dies, his or her unpaid share
is divided among the Beneficiaries who survive the Insured. The unpaid share
will be divided equally unless the Owner directs otherwise. If no Beneficiary
survives the Insured, the Death Proceeds will be paid to the Owner, if living,
or to the Owner's estate.
The Owner may change the Beneficiary while the Insured is living. The written
consent of all Irrevocable Beneficiaries must be obtained prior to such change.
To make a change, the Owner must provide the Company with a written request
satisfactory to the Company. The request will not be effective until the Company
records it. After the request is recorded, it will take effect as of the date
the Owner signed the request. The Company will not be responsible for any
payment or other action it takes before it records the request. The Company may
require the Policy be returned for endorsement of the Beneficiary change.
Incontestability
The incontestability provision in the Policy, which prevents the Company from
denying coverage for misrepresentation after the Policy has been In Force for
two years, applies only to the initial Specified Amount designated in the
application. The incontestability period for any amount over and above the
initial Specified Amount is governed by its own two-year incontestability period
to which such additional amount is attributable.
While the Policy is contestable, the Company may rescind the policy (to treat
the Policy as though it had never been issued) or defend a claim only on the
basis of a material misrepresentation in the application. A misrepresentation is
material if, on the basis of correct and complete information in the
application, the Company would have:
o declined the application;
o issued the Policy at a higher premium; or,
o issued the Policy on some other basis than applied for.
If a Policy is reinstated, it is incontestable after it has been In Force during
the Insured's lifetime for two years from the date of reinstatement. This
contestable period applies only to statements made in the application for
reinstatement.
If the Policy is rescinded pursuant to the incontestability or suicide
provisions of the Policy, rescission proceeds payable to the Owner shall be
equal to:
o charges deducted for state Premium Taxes (or taxes in lieu of
Premium Taxes); plus
o the total amount of Monthly Deductions and any other charges
deducted from Accumulated Value; plus
o the Accumulated Value on the date the refund is calculated;
minus
o Indebtedness.
Right-to-Examine Period
The Owner may cancel the Policy before the latest of the following three events:
o 45 days after the date of the application;
o 20 days after the Company has personally delivered or has sent
the Policy and a Notice of Right of Withdrawal to the Owner by
first class mail; or,
o 20 days after the Owner receives the Policy.
To cancel the Policy, the Owner must mail or deliver the Policy to the
representative who sold it or to the Company at its Home Office. Unless
prohibited by state law the refund will include:
o All charges for state taxes deducted from premiums; plus
o Total amount of Monthly Deductions; plus
o Any other charges taken from the accumulated value; plus
o The Accumulated Value on the date the Company received the
returned Policy; minus
o Any Policy indebtedness.
If required by state law, the refund amount will be equal to the total of all
premiums paid for the policy.
If there is an increase in Specified Amount and such increase is not the result
of the Automatic Increase Rider or change in death benefit option, the Owner
will be granted a right-to-examine period, with respect to the increase. The
Owner may request a cancellation of the increase during the right-to-examine
period. The Owner will than receive a refund (if actual payment was received) or
a credit. A credit will be made to the Policy's Accumulated Value allocated
among the Subaccounts and Interest Bearing Account as if it were Net Premium,
equal to all Monthly Deductions attributable to the increase in Specified
Amount, including rider costs arising from the increase. The refund or credit
will be made within seven days after the Company receives the request for
cancellation on the appropriate form containing all necessary signatures. Net
Premiums paid upon application of and after an increase in Specified Amount will
be allocated to the Subaccounts and/or the Interest Bearing Account and will not
be refunded following cancellation of the increase. Owners who request an
increase in Specified Amount should take this into consideration in deciding
whether to make any premium payments during the right-to-examine period for the
increase. (See Other Policy Benefits and Provisions - Change of Specified
Amount.)
Policy Loans
Application For Loan. The Owner can borrow up to 80% (90% for Virginia
residents) of the Policy's Cash Value. The Owner must obtain the written consent
of all assignees and Irrevocable Beneficiaries before the loan is made. The
Policy will be the sole security for the Policy loan.
The loan date is the date a written loan request containing the necessary
signatures is received at the Home Office. The loan value will be determined as
of the loan date. Payment will be made within seven days of the loan date unless
a suspension of payment is in effect. (See Other Policy Provisions - Suspension
of Payments.)
An amount equal to the loan will be withdrawn from the Subaccounts and/or
Interest Bearing Account and transferred to the Loan Account until the loan is
repaid. The Subaccounts and/or Interest Bearing Account subject to the
withdrawal may be specified by the Owner. If no specification is made, the loan
amount will be withdrawn in the same percentages as Monthly Deductions are
withdrawn from the Subaccounts and Interest Bearing Account. If the Owner makes
a specification but there are insufficient values in one or more of the
Subaccounts and the Interest Bearing Account for withdrawal as the Owner
specified, the loan amount will be withdrawn from all Subaccounts and the
Interest Bearing Account on a pro rata basis based on values in the Subaccounts
and Interest Bearing Account.
Policy Loan Interest. Interest is payable on Policy loans at 8% compounded
annually. This rate is subject to change by the Company.
Interest accrues on a daily basis from the loan date. Interest is due and
payable at the end of each Policy year. If interest is not paid when due, an
amount equal to the interest due less interest earned on the Loan Account will
be transferred from the Subaccounts and Interest Bearing Account to the Loan
Account. The amount of loan interest billed will increase the loan principal and
be charged the same rate of interest as the loan.
Policy values transferred to the Loan Account to secure Policy loans earn
interest at the rate of 6% compounded annually.
Repayment of Policy Loans. Any Indebtedness may be repaid while the Policy is In
Force before the death of the Insured or before surrender. As the loan is
repaid, the amount repaid will be transferred from the Loan Account to the
Subaccounts and Interest Bearing Account in the same manner as premiums are
allocated.
Transfer of Values
The Owner may transfer Accumulated Value from certain Subaccounts to other
Subaccounts and to the Interest Bearing Account. A transfer may be requested in
writing or by an authorized telephone transaction. A written request to transfer
amounts must be made on a form satisfactory to the Company and contain the
original signature of the Owner. The written request will take effect on the day
the written notice is received at the Home Office.
Transfers from a Subaccount to another Subaccount or to the Interest Bearing
Account may be made at any time. The amount transferred to a Subaccount must be
at least 5% of the amount transferred and must be in whole percentages.
An Owner may make transfers from the Interest Bearing Account into the
Subaccounts only during the 30 day period beginning on and immediately following
the Policy Anniversary.
The first four transfers in a Policy year are free. The Company charges $20 for
the fifth and each additional transfer in a Policy year.
An Owner's telephone or fax request to transfer amounts will be honored if the
Owner has a valid telephone and fax authorization on file at the Home Office. An
Owner may change the telephone and fax authorization or may request that it be
terminated. The change or termination is effective when received in the Home
Office.
The Company will exercise reasonable care to prevent unauthorized telephone
transactions. For example, the Company will:
o record calls requesting transfers;
o ask the caller questions in an attempt to determine if the caller is
the Owner;
o transfer funds only to other Subaccounts and to the Interest Bearing
Account; and
o send a written confirmation of each transfer.
If the Company uses reasonable procedures and believes the instructions to be
genuine, the Owner is at risk of loss if someone gives unauthorized or
fraudulent information to the Company.
A request to transfer amounts from one or more Subaccounts to other Subaccounts
and/or the Interest Bearing Account or from the Interest Bearing Account to one
or more Subaccounts which is received prior to 3:00 p.m. Central Standard Time
or the close of the New York Stock Exchange, whichever is earlier, will take
effect on the day the request is received. Transfer requests received after that
time will be processed the following Valuation Day. All transfers requested on
the same Valuation Day are considered one transfer for purposes of the transfer
fee.
An Owner who is unable to contact the Company by telephone must submit the
transfer request in writing. An Owner is more likely to experience difficulty in
contacting the Company by telephone during periods of unusual economic or market
changes.
The Company reserves the right to discontinue allowing telephone and fax
transfers at any time and for any reason. In the event the Company discontinues
this privilege, it will send written notice to all Owners who have currently
valid telephone and fax authorizations on file. Such discontinuance will become
effective on the fifth Valuation Day following mailing of the notice by the
Company.
The Company further reserves the right to restrict the ability to transfer
amounts among Subaccounts and/or the Interest Bearing Account if the Company
feels such action is necessary to prevent the Owner from being considered the
Owner of the assets of the Separate Account.
Change of Allocations
The owner may request a change in the allocation of future Net Premiums in
writing or by telephone. (See Allocation of Net Premiums.) The Owner may also
change the percentages of Monthly Deductions withdrawn from each Subaccount and
Interest Bearing Account in writing or by telephone. (See Charges And Deductions
- - Monthly Deduction.) Any allocation to, or withdrawal from, a Subaccount or
Interest Bearing Account must be at least 5% of Net Premiums and only whole
percentages are allowed.
Allocation changes requested by telephone or fax will be followed only if the
Owner has a telephone or fax authorization on file at the Home Office. (See
Other Policy Benefits and Provisions - Transfer of Values.)
A telephone or fax request to change allocation of premiums will be effective
for the first premium payment on or following the date the request for change is
received at the Home Office. A request to change the allocation of withdrawal of
Monthly Deductions will be effective on the first Monthly Day on or following
the date the request is received at the Home Office.
Change of Death Benefit Option
The Owner may change the death benefit option. The change will become effective
on the first Monthly Day after a written request satisfactory to the Company is
received at the Home Office. The Company reserves the right to require evidence
of insurability as a condition to change the death benefit option.
If the change is from death benefit option 1 to death benefit option 2, the
Specified Amount will be reduced by the amount of the Accumulated Value on the
effective date of the change. This change will not alter the amount of the
Policy's death benefit at the time of the change, but will affect how the death
benefit is determined from that point on. The death benefit will vary with
Accumulated Value from that point on, unless the death benefit derived from
application of the Death Benefit Ratio applies. (See Policy Benefits - Death
Proceeds.) No change from death benefit option 1 to death benefit option 2 will
be allowed if the resulting Specified Amount would be less than $40,000 ($8,000
if Issue Age is 65 and over). (For limits applicable to Policies sold to
employee benefit plans, see Unisex Policies.)
If the change is from death benefit option 2 to death benefit option 1, the
Specified Amount will be increased by the amount of the Accumulated Value on the
effective date of the change. This change does not alter the amount of the
Policy's Face Amount at the time of the change, but will affect the
determination of the Face Amount from that point on. The Face Amount as of the
date of the change becomes the new Specified Amount and will remain at that
level, unless the Face Amount derived from application of the Death Benefit
Ratio applies.
The insurance goals of the Owner determine the appropriate death benefit option.
Owners who prefer to have favorable investment results and greater than
scheduled premiums show up partly in the form of an increased death benefit
should choose death benefit option 2. Owners who are satisfied with the amount
of their insurance coverage and wish to have favorable investment results and
additional premiums reflected to the maximum extent in increasing Cash Values
should choose death benefit option 1.
A change of death benefit option will also change the Cost of Insurance for the
duration of the Policy. The Cost of Insurance on any Monthly Day is equal to the
Face Amount minus the Accumulated Value, multiplied by the Cost of Insurance
rate. The Cost of Insurance rate is the same under both options, but the
difference between Face Amount and Accumulated Value varies inversely with
Accumulated Value under option 1, but is constant under option 2, unless the
Face Amount derived from application of the Death Benefit Ratio applies.
Change of Specified Amount
The Specified Amount may be changed at any time after the first Policy year. If
more than one change is requested per policy year, the Company will charge $50
for each request after the first request. Changes must be requested in writing
and are subject to the conditions below:
Decreases. After the decrease, the Specified Amount must be at least $50,000
($10,000 for Issue Ages 65 and over). (For limits applicable to Policies sold to
employee benefit plans, see Unisex Policies.) The decrease will become effective
on the some Monthly Day or the following day the request is received at the Home
Office. For purposes of determining the Cost of Insurance, the decrease will be
applied to the initial Specified Amount and to increases in the Specified Amount
in reverse order in which they become effective. Such a decrease does not result
in reduced Deferred Charges.
Increases. A supplemental application must be filed, and you must provide the
evidence of insurability satisfactory to the Company. The effective date of the
increase will be shown on an endorsement to the Policy. The incontestable and
suicide provisions apply to the increase as if a new Policy had been issued for
the amount of the increase. These provisions are described on page 17.
When an increase in Specified Amount occurs, the Owner will be given a
right-to-examine and conversion/exchange right on the increase. In the event of
exercise of the exchange right with respect to an increase in Specified Amount
(See Other Policy Benefits and Provisions - Conversion/Exchange of Policy), the
amount of Cash Value transferable to the new Policy shall be limited to the
amount allocated to the increase in the Specified Amount.
The Net Cash Value of the original Policy, as well as any premiums paid at the
time of the increase, and any premiums paid after the increase will be allocated
between the original Specified Amount and the increased Specified Amount
according to the ratios of their respective guideline annual premiums (as
defined under the 1940 Act).
If the Specified Amount is increased after the Issue Date, additional Deferred
Charges will be incurred and released as though a new Policy had been issued for
the amount of the increase. In no instance, however, will the additional
deferred sales charge exceed the lesser of 30% of the guideline annual premium
for the increase or of the Cash Value and premiums paid which are allocable to
the increase. No additional Deferred Charges will accrue for increases in
Specified Amount due to the Automatic Increase Rider or a change from death
benefit option 2 to death benefit option 1.
If the Specified Amount is increased upon request of an Owner, a separate
monthly administrative fee will be assessed. This separate monthly
administrative expense charge will be calculated in the same manner as for the
initial Specified Amount. No additional monthly administrative fee will be
assessed due to an increase in Specified Amount as a result of the Automatic
Increase Rider.
The Company reserves the right to require the payment of additional premiums in
an amount equal to the minimum premium which would be charged based on Attained
Age and rating class for a newly-issued Policy with a Specified Amount equal to
the amount of increase, as a condition of allowing an increase where the Cash
Value allocated to the increase is insufficient to support the increase. (See
Charges And Deductions - Contingent Deferred Sales and Administrative Charges.)
The rating class assigned to an increase in Specified Amount may result in the
use of Cost of Insurance charges different than the Cost of Insurance rate
charged on the original Specified Amount.
Conversion/Exchange of Policy
The Policy may be exchanged any time within 24 months after the Issue Date for a
policy of permanent fixed benefit insurance, or for any other policy which the
Company may agree to issue on the life of the Insured. "Fixed benefit insurance"
means any permanent plan of insurance providing benefits which do not depend on
the investment experience of a Separate Account. No evidence of insurability is
required. All Indebtedness must be repaid before the change is made.
The exchange will be effective when the Company receives:
o written request for the Policy exchange or change signed by the Owner;
o surrender of the Policy; and
o payment of any required costs.
The new policy will have the same Issue Date, Issue Age, and risk classification
as the Policy. The new policy will have either the same death benefit or the
same net amount at risk as the Policy on the exchange date. The exchange will be
subject to an equitable adjustment in payments and Cash Values to reflect
differences, if any, between the Policy and the new policy. It will be subject
to normal underwriting rules and other conditions determined by the Company. If
there is an increase in Specified Amount and such increase is not the result of
a change in death benefit option or Automatic Increase Rider, the Owner will be
granted an exchange privilege with respect to the increase, subject to the
conditions and principles applicable to an exchange of the entire policy. The
Owner will also have the option to transfer without charge on the exchange date,
any portion of the Net Cash Value of the original Policy as premium to the new
Policy. (See Other Policy Benefits and Provisions - Change of Specified Amount.)
Transfer of Ownership
The Owner may transfer ownership of the Policy. The written consent of all
Irrevocable Beneficiaries must be obtained prior to such transfer. The notice of
transfer must be in writing and filed at the Home Office. The transfer will take
effect as of the date the notice was signed. The Company may require that the
Policy be sent in for endorsement to show the transfer of ownership.
The Company is not responsible for the validity or effect of any transfer of
ownership. The Company will not be responsible for any payment or other action
the Company has taken before having received written notice of the transfer.
Collateral Assignments
The Owner may assign the Policy as collateral security. The written consent of
all Irrevocable Beneficiaries must be obtained prior to such assignment. The
assignment must be in writing and filed at the Home Office. The assignment will
then take effect as of the date the notice was signed.
The Company is not responsible for the validity or effect of any collateral
assignment. The Company will not be responsible for any payment or other action
the Company has taken before having received the written collateral assignment.
A collateral assignment takes precedence over the interest of a Beneficiary. Any
Policy proceeds payable to an assignee will be paid in one sum. Any remaining
proceeds will be paid to the designated Beneficiary or Beneficiaries.
A collateral assignee is not an Owner. A collateral assignee is a person or
entity to who the Owner gives some, but not all ownership rights under the
Policy. A collateral assignment is not a transfer of ownership.
Effect of Misstatement of Age or Sex
If the Insured's Age or sex has been misstated, the amount payable and other
benefits will be adjusted without regard to the two-year contestability period.
The death benefits payable will be adjusted based on what the Cost of Insurance
charge for the most recent Monthly Day would have purchased based on the current
Age and sex.
Suicide
Suicide of the Insured, while sane or insane, within two years of the Issue
Date, is not covered by the Policy. If the Insured does commit suicide, the
amount payable will be calculated as described in the Policy's incontestability
section describing rescission proceeds.
Dividends
While the Policy is In Force, it will share in the divisible surplus of the
Company. The Policy's share is determined annually by the Company. It is payable
annually on the Policy Anniversary. The Owner may select to have dividends paid
into the Subaccounts and the Interest Bearing Account as Net Premiums or to have
dividends paid in cash. If no option is selected, the dividends will be paid
into Subaccounts and/or Interest Bearing Account as Net Premiums. The Company
currently does not expect to pay dividends during the first 10 Policy Years. For
each of Policy years 11-20, the Company projects annual dividends equal to 0.61%
of the Accumulated Value at the end of the policy year, plus $39 per Policy. For
each Policy year 21 and after the Company project annual dividend equal to 1.01%
of the Accumulated Value at the end of the policy year plus $39 per Policy. For
Issue Ages 0-19, the projected dividends are the same as those for Ages 20 and
above, except the per Policy dividend is $3 in years 11 and above, instead of
$39. These dividends are not guaranteed. They are reflected in Illustrations 1,
3, 5 and 7 of Appendix A.
Suspension of Payments
For amounts allocated to the Separate Account, the Company may suspend or
postpone the right to transfer among Subaccounts, make a surrender or partial
surrender, and take a Policy loan when:
1) the New York Stock Exchange is closed other than for customary
weekend and holiday closings;
2) during periods when trading on the Exchange is restricted as
determined by the SEC;
3) during any emergency as determined by the SEC which makes it
impractical for the Separate Account to dispose of its securities
or value its assets; or,
4) during any other period permitted or required by order of the SEC
for the protection of investors.
To the extent values are allocated to the Interest Bearing Account, the payment
of full or partial surrender proceeds or loan proceeds may be deferred for up to
six (6) months from the date of the surrender or loan request. Death proceeds
may be deferred for up to 60 days from the date the Company receives proof of
death.
Accelerated Benefit Option
The Company will advance up to 50% of a Policy's eligible death benefit, subject
to a $250,000 maximum per Insured, if the Company receives satisfactory proof
that the Insured is terminally ill and if the Owner elects to receive an
accelerated payment of the death benefit. The Accelerated Benefit Option
Endorsement (Endorsement) refers to terminal illness as a non-correctable
medical condition in which the Insured's life expectancy is no more than twelve
months. Accumulated Value is excluded from the calculation of the eligible death
benefit. If an Owner elects to receive an accelerated benefit, the Company will
assess an administrative charge (of no more than $300) and will deduct interest
on the amount being accelerated. As a result, the amount payable to the
Beneficiary at death is reduced by an amount greater than the amount received by
the Owner as an accelerated benefit. The accelerated benefit is available only
in states which have approved the Endorsement and may vary from state to state.
The tax consequences of accelerated benefits is uncertain and a tax advisor
should be consulted. (See Tax Treatment of Policy Proceeds.)
Reports To Owners. The Company will confirm any of the following within seven
days:
o the receipt of any Net Premium (except premiums received before Record Date
or by preauthorized check); any change of allocation of Net Premiums or
Monthly Deduction;
o any transfer between Subaccounts; any loan, interest repayment, or loan
repayment; any partial surrender; any return of premium necessary to comply
with applicable maximum premium limitations; and,
o any restoration to Cash Value following exercise of the right-to-examine
privilege for an increase in Specified Amount. Upon request, an Owner shall
be entitled to a receipt of any premium payment including those made by
preauthorized check.
The Company will also mail to the Owner, at the last known address of record, a
report containing such information as may be required by any applicable law or
regulation, and a statement for the Policy year showing all transactions
previously confirmed, all Monthly Deductions and transfers into and out of the
Deferred Charges Account, and any credit to the Separate Account of interest on
amounts held in the Loan Account or Deferred Charges Account.
The Company will send to the Owner a confirmation within seven days of any of
the following:
o exercise of the right-to-examine privilege,
o an exchange of the Policy or increase in Specified Amount,
o full surrender of the Policy, and
o payment of Death Proceeds.
Voting Rights. The Company will vote Fund shares held in the Separate Account at
regular and special shareholder meetings of the underlying funds in accordance
with instructions received from persons having voting interests in the
corresponding Subaccounts. The Company will vote shares for which it has not
received timely instructions and shares attributable to Policies sold to
employee benefit plans not registered pursuant to an exemption from the
registration provisions of the Securities Act of 1933, in the same proportion as
the Company votes shares for which it has received instructions. If, however,
the 1940 Act or any regulation thereunder should be amended, or if the present
interpretation thereof should change, or the Company otherwise determines that
it is allowed to vote the shares in its own right, it may elect to do so.
The Owner shall have the voting interest under a Policy. The number of votes the
Owner has a right to instruct will be calculated separately for each Subaccount.
The Owner shall have the right to instruct one vote for each $1 of Accumulated
Value in the Subaccount with fractional votes allocated for amounts less than
$1. The number of votes available to an Owner will coincide with the date
established by the fund for determining shareholders eligible to vote at the
relevant meeting of the Fund's shareholders. Voting instructions will be
solicited by written communication before such meeting in accordance with
procedures established by the funds. Each Owner having a voting interest in a
Subaccount will receive proxy materials and reports relating to any meeting of
shareholders of the fund in which that Subaccount invests.
The Company may, when required by state insurance regulatory authorities, vote
shares of a fund without regard to voting instructions from Owners, if the
instructions would require that the shares be voted so as to cause a change in
the sub-classification of a fund, or investment objectives of a fund, or to
approve or disapprove an investment advisory contract for a fund. In addition,
the Company itself may, under certain circumstances, vote shares of a fund
without regard to voting instructions from Owners in favor of changes initiated
by Owners in the investment policy, or the investment adviser or the principal
underwriter of a Fund. For example, the Company may vote against a change if the
Company in good faith determines that the proposed change is contrary to state
or federal law or the Company determines that the change would not be consistent
with the investment objectives of a fund and would result in the purchase of
securities for the Separate Account which vary from the general quality and
nature of investments and investment techniques used by other Separate Accounts
of the Company.
Riders
A rider attached to a Policy adds additional insurance and benefits. The rider
explains the coverage it offers. A rider is available only in states which have
approved the rider. A rider may vary from state to state. Some riders are not
available to Policies sold to employee benefit plans. The cost for riders is
deducted as a part of the Monthly Deduction. Riders are subject to normal
underwriting requirements. The Company reserves the right to stop offering the
riders mentioned below and to offer additional riders.
Children's Insurance. The rider provides level term insurance to Age 23 of the
child or Age 65 of the parent, if sooner, on the children of the Owner. The
death benefit will be payable to the Beneficiary stated in the rider upon the
death of any Insured child. If the Insured parent dies prior to the termination
of this rider, the coverage on each child becomes paid-up term insurance to Age
23. This rider may be converted without evidence of insurability on each Insured
child's 23rd birthday or at Age 65 of the owner, if sooner.
Guaranteed Insurability. The rider provides that additional insurance may be
purchased on the life of the Insured on specific future dates at standard rates
without evidence of insurability. It is issued only to standard risks. It may be
issued until the Policy Anniversary following the Insured's 37th birthday.
Accidental Death Benefit. The rider provides for the payment of an additional
death benefit on the life of the Insured should death occur due to accidental
bodily injury occurring before Age 70. The premium for the Accidental Death
Benefit is payable to Age 70.
Automatic Increase. The rider provides for automatic increases in the Policy's
Specified Amount on each Policy Anniversary without evidence of insurability.
This rider may be issued until the earlier of the 15th Policy Anniversary or the
Policy Anniversary following the Insured's 55th birthday.
Other Insured. This rider provides level term insurance. The "other Insured"
could be the Insured or could be another person within the immediate family of
the Insured. The death benefit expires on the "other Insured's" 95th birthday or
upon termination of the Policy, whichever comes first. Evidence of insurability
is required for issuance of the rider or to increase the amount of the death
benefit. The rider may be issued until the Policy Anniversary following the
Insured's 65th birthday.
Term Insurance. This rider is available only on Policies with a face value of at
least $250,000. It is available only on the primary Insured. The rider is
convertible to Age 75. The death benefit expires on the Insured's 95th birthday
or upon termination of the Policy. This rider is not available to UltraVers-ALL
LIFESM Policies.
Disability Waiver of Monthly Deductions. This rider provides that, during the
Insured's total disability, the Company will waive Monthly Deductions for
administrative and life insurance costs. The rider may be issued until the
Policy Anniversary following the Insured's 55th birthday. It may be renewed
until the Policy Anniversary following the Insured's 65th birthday.
Waiver of Premium and Monthly Deduction Disability Benefit. Like the rider just
described, this rider provides that, during the Insured's total disability, the
Company will waive the Monthly Deduction for administrative and life insurance
costs. In addition, this rider provides that the Company will contribute
additional premium. The amount of additional premium the Company will contribute
will be shown on the specifications page for the rider. The maximum amount the
Company will contribute is $12,000 on an annual basis. The rider may be issued
until the Policy Anniversary following the Insured's 55th birthday. It may be
renewed until the Policy Anniversary following the Insured's 65th birthday at
which time the rider terminates. This rider is not available to UltraVers-ALL
LIFESM Policies.
Executive Benefits Plan Endorsement. This endorsement is available on policies
issued in conjunction with certain types of deferred compensation and/or
employee benefits plans. The executive benefits plan endorsement waives the
deferred charges on the policy to which it is attached subject to the following
conditions:
1. the policy is surrendered and the proceeds are used to fund a new
policy provided through CUNA Mutual Life Insurance Company or an
affiliate;
2. the contract (policy) is owned by a business or trust;
3. the new contract (policy) is owned by the same entity;
4. the annuitant (insured) under the contract (policy) is a selected
manager or a highly compensated employee (as those terms are defined
by Title 1 of the Employee Retirement Income Security Act, as
amended);
5. the annuitant (insured) under the new contract is also a selected
manager or highly compensated employee;
6. we receive an application for the new contract (and have evidence of
insurability satisfactory to us).
There is no charge for this benefit. However, if you exercise this benefit
during the first two contract (policy) years, we reserve the right to charge a
fee to offset expenses incurred. This fee will not exceed $150. The Executive
Benefits Plan Endorsement may not be available in all states.
THE COMPANY
CUNA Mutual Life Insurance Company is a mutual life insurance company organized
under the laws of Iowa in 1879 and incorporated on June 21, 1882. The Home
Office is located at 2000 Heritage Way, Waverly, Iowa 50677-9202. The Company,
organized as a fraternal benefit society with the name "Mutual Aid Society of
the Evangelical Lutheran Synod of Iowa and Other States," changed its name to
"Lutheran Mutual Aid Society" in 1911, and reorganized as a mutual life
insurance company called "Lutheran Mutual Life Insurance Company" on January 1,
1938. On December 28, 1984, the Company changed its name to "Century Life of
America." On January 1, 1997, the Company changed its name to "CUNA Mutual Life
Insurance Company."
On July 1, 1990, the Company entered into a permanent affiliation with CUNA
Mutual Insurance Society ("CUNA Mutual"), 5910 Mineral Point Road, Madison WI
53705-4456. The terms of an Agreement of Permanent Affiliation provide for
extensive financial sharing between the Company and CUNA Mutual of individual
life insurance business through reinsurance arrangements, the joint development
of business plans and distribution systems for individual insurance and other
financial service products within the credit union movement, and the sharing of
certain resources and facilities. At the current time, all of the directors of
the Company are also directors of CUNA Mutual and many of the senior executive
officers of the Company hold similar positions with CUNA Mutual. The
affiliation, however, is not a merger or consolidation. Both companies remain
separate corporate entities and their respective Owners retain their voting
rights. CUNA Mutual and its subsidiaries and affiliates, including the Company
are referred to herein as "CUNA Mutual Group."
As of December 31, 1998, the Company had more than $4 billion in assets and $11
billion of life insurance In Force. Effective June 1998 and through the date of
this Prospectus, A.M. Best rated the Company A (Excellent). Effective March 1998
and through the date of this Prospectus, Duff & Phelps rated the Company AA.
These are the most recent ratings available as of the date of this Prospectus.
Periodically, the rating agencies review our ratings. To obtain our current
ratings, contact the Company at the address and telephone number shown on the
first page of this Prospectus.
The objective of A.M. Best's rating system is to evaluate the factors affecting
overall performance of an insurance company. Then provide an opinion of a
company's financial strength and ability to meet its contractual obligations
relative to other companies in the industry. The evaluation includes both
quantitative and qualitative analysis of a company's financial and operating
performance.
Duff & Phelps Credit Rating Co. rates insurance companies on their claims paying
abilities. It bases these ratings on its assessment of the economic fundamentals
of the company's principal lines of business, the company's competitive
position, the company's management capability, the relationship of the company
to its affiliates and the company's asset and liability management practices.
The Company and CUNA Mutual are members of the Insurance Marketplace Standards
Association (IMSA). IMSA is a newly formed independent industry organization
dedicated to the practice of high ethical standards in the sale of
individually-sold life insurance and annuity products. IMSA members have adopted
policies and procedures that demonstrate a commitment to honesty, fairness and
integrity in all customer contacts involving sales and service of individual
life insurance and annuity products.
The Company and CUNA Mutual Investment Corporation each own a one-half interest
in CIMCO Inc. (the investment adviser to the Ultra Series Fund). CUNA Mutual
owns CUNA Mutual Investment Corporation. CUNA Mutual Investment Corporation owns
CUNA Brokerage Services, Inc.
THE SEPARATE ACCOUNT
The Company established the Separate Account on August 16, 1983. Its IRS
Employer Identification number is 42-0388260. The Separate Account will receive
and invest Net Premium payments made under the Policy. In addition, the Separate
Account may receive and invest purchase payments for other variable life
insurance policies issued now or in the future by the Company.
Although the assets in the Separate Account are the property of the Company, the
assets in the Separate Account attributable to the Policies are not chargeable
with liabilities arising out of any other business which the Company may
conduct. The assets of the Separate Account are available to cover the general
liabilities of the Company only to the extent that the Separate Account's assets
exceed its liabilities arising under the Policies and any other policies
supported by the Separate Account. The Company has the right to transfer to the
general account any assets of the Separate Account which are in excess of
reserves and other contract liabilities. The Company has placed seed money in
the Treasury 2000 Separate Account and reserves the right to withdraw it.
Periodically, the Separate Account makes payments to the Company for mortality
and expense charges.
The Separate Account is divided into Subaccounts. In the future, additional
Subaccounts may be added. Each Subaccount invests exclusively in shares of a
single corresponding Fund. The income, gains and losses, realized or unrealized,
from the assets allocated to each Subaccount are credited to or charged against
that Subaccount without regard to income, gains or losses from any other
Subaccount.
The Separate Account has been registered with the SEC as a unit investment trust
under the 1940 Act and meets the definition of a Separate Account under the
federal securities laws. Registration with the SEC does not involve supervision
of the management, investment practices, or policies of the Separate Account or
of the Company by the SEC. The Separate Account is also subject to the laws of
the State of Iowa which regulate the operations of insurance companies domiciled
in Iowa. The Separate Account's fiscal year ends on December 31.
The Company does not guarantee the investment performance of the Separate
Account. Accumulated Value of Policies will vary daily with the value of the
assets under the Separate Account and depending upon the death benefit option
chosen. The Death Proceeds may also vary with the value of the assets under the
Separate Account. To the extent that the Death Proceeds payable upon the death
of the Insured exceed the Accumulated Value of the Policy, such amounts are
general obligations of the Company and payable out of the general account of the
Company.
The Company may, from time to time, offer other policies which may be similar to
those offered herein. The Company will act as custodian of the assets of the
Separate Account.
FEDERAL INCOME TAX CONSIDERATIONS
Introduction
The following summary provides a general description of the federal income tax
considerations associated with the Policy and is not intended to be complete or
to cover all tax situations. This discussion is not intended as tax advice.
Counsel or other competent tax advisors should be consulted for more complete
information. This discussion is based upon the Company's understanding of the
present federal income tax laws. No representation is made as to the likelihood
of continuation of the present federal income tax laws or as to how they may be
interpreted by the Internal Revenue Service.
Tax Status of the Policy
In order to qualify as a life insurance contract for federal income tax purposes
and to receive the tax treatment normally accorded life insurance contracts
under federal tax law, a Policy must satisfy certain requirements which are set
forth in the Internal Revenue Code. Guidance as to how these requirements should
be applied is limited. Nevertheless, the Company believes that Policies issued
on a standard premium class basis should satisfy the applicable requirements.
There is less guidance, however, with respect to Policies issued on a
substandard basis, and it is not clear whether such Policies will in all cases
satisfy the applicable requirements, particularly if the Owner pays the full
amount of premiums permitted under the Policy. If it is subsequently determined
that a Policy does not satisfy the applicable requirements, we may take
appropriate steps to bring the Policy into compliance with such requirements and
we reserve the right to restrict Policy transactions in order to do so.
In certain circumstances, owners of variable life insurance contracts have been
considered for federal income tax purposes to be the owners of the assets of the
separate account supporting their contracts due to their ability to exercise
investment control over those assets. Where this is the case, the contract
owners have been currently taxed on income and gains attributable to the
separate account assets. There is little guidance in this area, and some
features of the Policies, such as the flexibility of an Owner to allocate
premium payments and Accumulated Value and the narrow investment objective of
certain Funds (e.g., the Treasury 2000 Fund), have not been explicitly addressed
in published rulings. While the Company believes that the Policies do not give
Owners investment control over Separate Account assets, the Company reserves the
right to modify the Policies as necessary to prevent an Owner from being treated
as the owner of the Separate Account assets supporting the Policy.
In addition, the Code requires that the investments of the Separate Accounts be
"adequately diversified" in order for the Policies to be treated as life
insurance contracts for federal income tax purposes. It is intended that the
Separate Accounts, through the Funds, will satisfy these diversification
requirements.
The following discussion assumes that the Policy will qualify as a life
insurance contract for federal income tax purposes.
Tax Treatment of Policy Benefits
In General. The Company believes that the death benefit under a Policy should be
excludible from the gross income of the beneficiary.
Federal, state and local transfer, estate, inheritance, and other tax
consequences of ownership or receipt of Policy proceeds depend on the
circumstances of each Owner or beneficiary. A tax advisor should be consulted on
these consequences.
Generally, the Owner will not be deemed to be in constructive receipt of the
Policy's Accumulated Value until there is a distribution. When distributions
from a Policy occur, or when loans are taken out from or secured by a Policy,
the tax consequences depend on whether the Policy is classified as a "Modified
Endowment Contract."
Modified Endowment Contracts. Under the Internal Revenue Code, certain life
insurance contracts are classified as "Modified Endowment Contracts," with less
favorable tax treatment than other life insurance contracts. Due to the
flexibility of the Policies as to premiums and benefits, the individual
circumstances of each Policy will determine whether it is classified as a
Modified Endowment Contract. The rules are too complex to be summarized here,
but generally depend on the amount of premiums paid during the first seven
Policy years or seven years following a material change to the Policy. Certain
changes in a Policy after it is issued could also cause it to be classified as a
Modified Endowment Contract. A current or prospective Owner should consult with
a competent advisor to determine whether a Policy transaction will cause the
Policy to be classified as a Modified Endowment Contract.
Distributions Other Than Death Benefits from Modified Endowment Contracts.
Policies classified as Modified Endowment Contracts are subject to the following
tax rules:
All distributions other than death benefits from a Modified Endowment Contract,
including distributions upon surrender and withdrawals, are treated first as
distributions of gain taxable as ordinary income and as tax-free recovery of the
Owner's investment in the Policy only after all gain has been distributed.
Loans taken from or secured by a Policy classified as a Modified Endowment
Contract are treated as distributions and taxed in same manner as surrenders and
withdrawals.
A 10 percent additional income tax is imposed on the amount subject to tax
except where the distribution or loan is made when the Owner has attained age 59
1/2 or is disabled, or where the distribution is part of a series of
substantially equal periodic payments for the life (or life expectancy) of the
Owner or the joint lives (or joint life expectancies) of the Owner and the
Owner's beneficiary or designated beneficiary.
Distributions Other Than Death Benefits from Policies that are not Modified
Endowment Contracts. Distributions other than death benefits from a Policy that
is not classified as a Modified Endowment Contract are generally treated first
as a recovery of the Owner's investment in the Policy and only after the
recovery of all investment in the Policy as taxable income. However, certain
distributions which must be made in order to enable the Policy to continue to
qualify as a life insurance contract for federal income tax purposes if Policy
benefits are reduced during the first 15 Policy years may be treated in whole or
in part as ordinary income subject to tax.
Loans from or secured by a Policy that is not a Modified Endowment Contract are
generally not treated as distributions. However, the tax consequences associated
with Policy loans after the later of the 10th Policy Anniversary or Attained Age
65 is less clear and a tax advisor should be consulted about such loans.
Finally, neither distributions from nor loans from or secured by a Policy that
is not a Modified Endowment Contract are subject to the 10 percent additional
income tax.
Investment in the Policy. The Owner's investment in the Policy is generally the
aggregate premium payments. When a distribution is taken from the Policy, the
Owner's investment in the Policy is reduced by the amount of the distribution
that is tax-free.
Policy Loans. In general, interest on a Policy loan will not be deductible.
Before taking out a Policy loan, an Owner should consult a tax advisor as to the
tax consequences.
Multiple Policies. All Modified Endowment Contracts that are issued by the
Company (or its affiliates) to the same Owner during any calendar year are
treated as one Modified Endowment Contract for purposes of determining the
amount includible in the Owner's income when a taxable distribution occurs.
Accelerated Death Benefit Rider. The federal income tax consequences associated
with the Accelerated Benefit Option Endorsement are uncertain. Owners should
consult a qualified tax advisor about the consequences of requesting payment
under this Endorsement. (See page 22for more information regarding the
Endorsement.)
Special Rules for Pension and Profit-Sharing Plans
If a Policy is purchased by a pension or profit-sharing plan, or similar
deferred compensation arrangement, the federal, state and estate tax
consequences could differ. A competent tax advisor should be consulted in
connection with such a purchase.
The amounts of life insurance that may be purchased on behalf of a participant
in a pension or profit-sharing plan are limited. The current cost of insurance
for the net amount at risk is treated as a "current fringe benefit" and must be
included annually in the plan participant's gross income. The Company reports
this cost (generally referred to as the "P.S. 58" cost) to the participant
annually. If the plan participant dies while covered by the plan and the Policy
proceeds are paid to the participant's beneficiary, then the excess of the death
benefit over the Policy's Accumulated Value is not taxable. However, the cash
value will generally be taxable to the extent it exceeds the participant's cost
basis in the Policy. Policies owned under these types of plans may be subject to
restrictions under the Employee Retirement Income Security Act of 1974
("ERISA"). You should consult a qualified advisor regarding ERISA.
Department of Labor ("DOL") regulations impose requirements for participant
loans under retirement plans covered by ERISA. Plan loans must also satisfy tax
requirements to be treated as nontaxable. Plan loan requirements and provisions
may differ from Policy loan provisions. Failure of plan loans to comply with the
requirements and provisions of the DOL regulations and of tax law may result in
adverse tax consequences and/or adverse consequences under ERISA. Plan
fiduciaries and participants should consult a qualified advisor before
requesting a loan under a Policy held in connection with a retirement plan.
Business Uses of the Policy
Businesses can use the Policy in various arrangements, including nonqualified
deferred compensation or salary continuance plans, split dollar insurance plans,
executive bonus plans, tax exempt and nonexempt welfare benefit plans, retiree
medical benefit plans and others. The tax consequences of such plans may vary
depending on the particular facts and circumstances. If an Owner is purchasing
the Policy for any arrangement the value of which depends in part on its tax
consequences, he or she should consult a qualified tax advisor. In recent years,
moreover, Congress has adopted new rules relating to life insurance owned by
businesses. Any business contemplating the purchase of a new Policy or a change
in an existing Policy should consult a tax advisor.
Possible Tax Law Changes
Although the likelihood of legislative changes is uncertain, there is always the
possibility that the tax treatment of the Policy could change by legislation or
otherwise. Consult a tax advisor with respect to legislative developments and
their effect on the Policy.
The Company's Taxes
Under current federal income tax law, the Company is not taxed on the Separate
Account's operations. Thus, currently the Company does not deduct charges from
the Separate Account for its federal income taxes. The Company reserves the
right to charge the Separate Account for any future federal income taxes that it
may incur.
Under current laws in several states, the Company may incur state and local
taxes (in addition to premium taxes). These taxes are not now significant and we
are not currently charging for them. If they increase, the Company may deduct
charges for such taxes.
CUNA MUTUAL LIFE INSURANCE COMPANY DIRECTORS AND EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
Name Occupation
Directors
<S> <C> <C>
James C. Barbre 1994-Present ACT Technologies, Inc.
President/Chief Operating Officer
1985-1993 Self-employed consultant in carpet
Manufacturing and distribution in Dalton, GA
Robert W. Bream 1991-Present United Airlines Employees Credit Union
President/Chief Executive Officer
Wilfred F. Broxterman 1997-Present Broxterman Group
President/Chief Executive Officer
1989-1997 Hughes Aircraft Employees Federal Credit Union
President/Chief Executive Officer
James L. Bryan 1974-Present Texans Credit Union
President/Chief Executive Officer
Loretta M. Burd 1987-Present Centra Credit Union
President/Chief Executive Officer
Ralph B. Canterbury 1965-Present US Airways Federal Credit Union
President
Joseph N. Cugini 1959-Present Westerly Community Credit Union
President/Chief Executive Officer
Rudolf J. Hanley 1982-Present Orange County Teachers Federal Credit Union
President/Chief Executive Officer
Jerald R. Hinrichs 1990-Present Hinrichs & Associates
Insurance Marketing Consultants
Owner/President
Michael B. Kitchen 1995-Present CUNA Mutual Life Insurance Company*
President and Chief Executive Officer
1992-1995 The CUMIS Group Limited
President/Chief Executive Officer
Robert T. Lynch 1996-Present Retired
1970-1996 Detroit Teachers Credit Union
Treasurer/General Manager
Brian L. McDonnell 1977-Present Navy Federal Credit Union
President/Chief Executive Officer
C. Alan Peppers 1992-Present Denver Public Schools Credit Union
President/Chief Executive Officer
Omer K. Reed 1997-Present Retired
1959-1997 Self-employed dentist
Richard C. Robertson 1959-Present Arizona State Savings & Credit Union
President/General Manager
Rosemarie M. Shultz 1997-Present Retired
1976-1997 North Coast Credit Union
President/Chief Executive Officer
Neil A. Springer 1994-Present Springer & Associates, L.L.C.
Managing Director
1992-1994 Slayton International, Inc.
Senior Vice President
Farouk D.G. Wang 1987-Present University of Hawaii at Manoa
Director of Buildings and Grounds Management
Larry T. Wilson 1974-Present Coastal Federal Credit Union
President/Chief Executive Officer
Executive Officers
Wayne A. Benson 1997 - Present CUNA Mutual Life Insurance Company*
Chief Officer - Sales
Michael S. Daubs 1973-Present CUNA Mutual Life Insurance Company*
Chief Officer - Investments
CIMCO Inc.
President
John A. Gibson 1988-Present CUNA Mutual Life Insurance Company*
Chief Officer - Marketing
James M. Greaney 1998-Present CUNA Mutual Life Insurance Company*
Chief Officer - Corporate Services
Richard J. Keintz 1979-Present CUNA Mutual Life Insurance Company*
Chief Officer - Finance and Information Services
Michael B. Kitchen 1995-Present CUNA Mutual Life Insurance Company*
President and Chief Executive Officer
1992-1995 The CUMIS Group Limited
President and Chief Executive Officer
Reid A. Koenig 1999-Present CUNA Mutual Life Insurance Company
Chief Officer - Operating
1994-Present Vice President - Members Services
Daniel E. Meylink, Sr. 1983-Present CUNA Mutual Life Insurance Company*
Chief Officer - Member Services
Kevin G. Shea 1976-Present CUNA Mutual Life Insurance Company*
Chief Officer - Lending Services
John M. Waggoner 1977-Present CUNA Mutual Life Insurance Company*
Chief Officer - Legal
<FN>
* The Company entered into a permanent affiliation with the CUNA Mutual on
July 1, 1990. Those persons marked with an "*" hold identical titles with
CUNA Mutual. The most recent position has been given for those persons
who have held more than one position with the Company or CUNA Mutual
Insurance Society during the last five year period. Each person has
business addresses at both 2000 Heritage Way, Waverly, Iowa 50677-9202,
and 5910 Mineral Point Road, Madison, Wisconsin 53705-4456.
</FN>
</TABLE>
ADDITIONAL INFORMATION
STATE REGULATION
The Company is subject to the laws of Iowa governing insurance companies and to
regulation by the Iowa Insurance Department. An annual statement in a prescribed
form is filed with the Insurance Department each year covering the operation of
the Company for the preceding year and its financial condition as of the end of
such year. Regulation by the Insurance Department includes periodic examination
to determine the Company's liabilities and reserves so that the Insurance
Department may certify the items are correct. The Company's books and accounts
are subject to review by the Insurance Department at all times and a full
examination of its operations is conducted periodically by the National
Association of Insurance Commissioners. Such regulation does not, however,
involve any supervision of management or investment practices or policies. In
addition, the Company is subject to regulation under the insurance laws of other
jurisdictions in which it may operate.
LEGAL PROCEEDINGS
The Company and its subsidiaries, like other life insurance companies, are
involved in lawsuits, including class action lawsuits. In some class action and
other lawsuits involving insurers, substantial damages have been sought and/or
material settlement payments have been made. Although the outcome of any
litigation cannot be predicted with certainty, the Company believes that at the
present time there are not pending or threatened lawsuits that are reasonably
likely to have a material adverse impact on the Separate Account or the Company.
INDEPENDENT AUDITORS
The financial statements included herein and elsewhere in the Registration
Statement have been included in reliance upon the reports of KPMG Peat Marwick
LLP, Des Moines, Iowa, independent auditors, and upon the authority of said firm
as experts in accounting and auditing.
ACTUARIAL MATTERS
Actuarial matters included in this prospectus have been examined by Scott Allen,
FSA, MAAA Product Manager Variable Products, CUNA Mutual Life Insurance Company,
Waverly, Iowa, as stated in the opinion filed as an exhibit to the Registration
Statement.
REGISTRATION STATEMENT
A Registration Statement under the Securities Act of 1933 relating to this
offering has been filed with the SEC. Certain portions of the Registration
Statement and amendments have been omitted from this prospectus pursuant to the
rules and regulations of the Securities and Exchange Commission. Statements
contained in this prospectus concerning the Policy and other legal documents are
summaries. The complete documents and omitted information may be obtained from
the SEC's principal office in Washington, D.C.
PREPARING FOR YEAR 2000
Like all financial service providers, the Company and its affiliates utilize
systems that may be affected by Year 2000 transition issues, and they rely on
service providers, including administrators and investment managers, that also
may be affected. The Company and its affiliates have developed, and are in the
process of implementing, a Year 2000 readiness plan, and are confirming that its
service providers are also so engaged. The resources that are being devoted to
this effort are substantial. It is difficult to predict with precision whether
the amount of resources ultimately devoted, or the outcome of these efforts will
have a negative impact on the Company or its affiliates. However, as of the date
of this prospectus, it is not anticipated that Owners will experience negative
effects on their investment, or on the services provided in connection
therewith, as a result of Year 2000 readiness implementation. As of the date of
this prospectus, the Company and its affiliates believe that all of their
critical systems are Year 2000 ready, but there can be no assurance that the
Company was successful, or that interaction with other service providers will
not impair the Company's or its affiliates' services at that time. We will be
testing the remainder of our systems through out 1999, and will have continuity
plans in place designed to minimize the impact of any unforeseen failures.
DISTRIBUTION OF POLICIES
Questions regarding the Policy should be directed to CUNA Brokerage Services,
Inc., Office of Supervisory Jurisdiction, 2000 Heritage Way, Waverly, Iowa,
50677-9202, (800) 798-5500, (319) 352-4090. Its IRS employer identification
number is 39-1438257. CUNA Brokerage Services, Inc. is wholly-owned by CUNA
Mutual Investment Corporation which in turn is wholly-owned by CUNA Mutual. CUNA
Brokerage Services, Inc., 5910 Mineral Point Road, Madison, Wisconsin,
53705-4456, the principal underwriter for the Policy is a broker/dealer
registered under the Securities Exchange Act of 1934 and a member of the
National Association of Securities Dealers. CUNA Mutual Life Insurance Company,
the issuer of the Policy, entered into a permanent affiliation with CUNA Mutual
on July 1, 1990. The Policies will be sold through registered representatives
who will be paid first-year and renewal commissions for their services.
The Company may pay sales commissions to broker-dealers up to an amount equal to
8.5% of the total premiums paid under the Policy. These broker-dealers are
expected to compensate sales representatives in varying amounts from these
commissions. The Company also may pay other distribution expenses such as
agents' insurance and pension benefits, agency expense allowances, and overhead
attributable to distribution. In addition, the Company may from time to time pay
or allow additional promotional incentives in the form of cash or other
compensation. These distribution expenses do not result in any additional
charges under the Contracts that are not described under CHARGES AND DEDUCTIONS.
UNISEX POLICIES
The U.S. Supreme Court ruled in the 1983 Norris decision that employer-sponsored
benefit plans (employee benefit plans) are a "privilege of employment" and as
such, males and females must receive equal benefits. Policies sold to employee
benefit plans which must comply with this decision will be governed by all the
provisions described in this prospectus, and by the following provisions.
The Cost of Insurance rates will be determined as previously set forth except
that sex shall not be considered. These unisex monthly Cost of Insurance rates
will not exceed the rates shown in Table I - Guaranteed Maximum Insurance Rates
which is contained in the Policy.
Deferred Charges will vary by Issue Age, Specified Amount, and in the case of
deferred sales charge, smoker status. The Deferred Charges for unisex Policies
(including Policies sold to Owners other than employee benefit plans) are shown
in the table in Appendix C.
The minimum Specified Amount is $25,000 ($10,000 for Issue Ages 65 and over).
Requested reductions in Specified Amount cannot go below these amounts.
Specified Amounts reduced as a result of a partial surrender or a change in
death benefit option cannot go below $20,000 ($8,000 for Issue Ages 65 and
over). The Company may waive this minimum from time to time. In deciding whether
to waive this minimum, the Company will consider the required and minimum
contributions under a qualified plan, the size of the group involved, and the
difference between the proposed Specified Amount and the required minimum, as
well as other factors.
Because unisex mortality tables are used for this Policy, misstatement of sex
cannot result in a material misrepresentation by the Owner. Accordingly, neither
the Policy nor the Death Proceeds will be modified as a result of misstatement
of sex.
Illustrations of Policy values and accumulations based on unisex Cost of
Insurance rates for 35 and 50 year old nonsmokers may be obtained without cost
from the address shown on the first page of this prospectus.
The Accelerated Benefit Option feature is not available to employee benefit
plans. Unisex Policies sold to Owners other than employee benefit plans will be
governed by the terms of this prospectus (other than the provisions in this
section) except that Deferred Charges will not vary by sex, unisex Cost of
Insurance rates will be used, and no correction to or modification of the Policy
or Death Proceeds will be made as a result of misstatement of sex. It is
anticipated that unisex Policies will be sold to Owners other than employee
benefit plans only if required by law or regulation. The Company does not
currently anticipate offering the Policy for sale in states requiring the use of
unisex Cost of Insurance rates.
FINANCIAL STATEMENTS
The financial statements for the Company are immediately following the financial
statements of the Separate Account. The financial statements of the Company
should be considered only as bearing upon the ability of the Company to meet its
obligations under the Policy and should not be considered as bearing on the
investment performance of the Separate Account.
<PAGE>
CUNA MUTUAL LIFE VARIABLE ACCOUNT
Financial Statements
December 31, 1998
(With Independent Auditors' Report)
CUNA MUTUAL LIFE VARIABLE ACCOUNT
Statements of Assets and Liabilities
December 31, 1998
<TABLE>
<CAPTION>
Capital
Appreciation Growth and Money
Stock Income Stock Balanced Bond Market
Assets: Subaccount Subaccount Subaccount Subaccount Subaccount
Investments in Ultra Series Fund:
(note 2)
<S> <C> <C> <C> <C> <C>
Capital Appreciation Stock Fund,
1,490,692 shares at net asset value of
$22.19 per share (cost $21,505,998) $33,073,653 $ -- $ -- $ -- $ --
Growth and Income Stock Fund,
2,772,087 shares at net asset value
of $30.56 per share (cost $53,268,677) -- 84,712,385 -- -- --
Balanced Fund,
3,671,024 shares at net asset value
of $18.74 per share (cost $52,121,655) -- -- 68,777,039 -- --
Bond Fund,
342,306 shares at net asset value
of $10.57 per share (cost $3,571,882) -- -- -- 3,617,904 --
Money Market Fund,
3,616,101 shares at net asset value
of $1.00 per share (cost $3,616,101) -- -- -- -- 3,616,101
----------- ----------- ----------- ----------- -----------
Total assets 33,073,653 84,712,385 68,777,039 3,617,904 3,616,101
----------- ----------- ----------- ----------- -----------
Liabilities:
Accrued adverse mortality and
expense charges 7,915 20,706 16,790 889 834
----------- ----------- ----------- ----------- -----------
Total liabilities 7,915 20,706 16,790 889 834
----------- ----------- ----------- ----------- -----------
Net assets $33,065,738 $84,691,679 $68,760,249 $ 3,617,015 $ 3,615,267
=========== =========== =========== =========== ===========
Units outstanding (note 5) 1,296,981 1,207,005 1,581,036 130,013 187,877
=========== =========== =========== =========== ===========
Net asset value per unit $ 25.49 $ 70.17 $ 43.49 $ 27.82 $ 19.24
=========== =========== =========== =========== ===========
</TABLE>
<PAGE>
CUNA MUTUAL LIFE VARIABLE ACCOUNT
Statements of Assets and Liabilities
December 31, 1998
<TABLE>
<CAPTION>
Treasury International World Emerging
2000 Stock Governments Growth
Assets: Subaccount Subaccount Subaccount Subaccount
Investments in Ultra Series Fund:
(note 2)
<S> <C> <C> <C> <C>
Treasury 2000 Fund, 184,870
shares at net asset value of $9.93
per share (cost $1,615,171) $1,835,904 $ -- $ -- $ --
Investments in T. Rowe Price
International Series, Inc.:
International Stock Portfolio,
401,135 shares at net asset value of
$14.52 per share (cost $5,082,095) -- 5,824,487 -- --
Investments in MFS(R) Variable
Insurance TrustSM:
World Governments Series,
67,797 shares at net asset value of
$10.88 per share (cost $693,951) -- -- 737,634 --
Investments in MFS(R) Variable
Insurance TrustSM:
Emerging Growth Series,
327,804 shares at net asset value of
$21.47 per share (cost $5,126,136) -- -- -- 7,037,957
---------- ---------- ---------- ----------
Total assets 1,835,904 5,824,487 737,634 7,037,957
---------- ---------- ---------- ----------
Liabilities:
Accrued adverse mortality and
expense charges 1,386 1,426 181 1,708
---------- ---------- ---------- ----------
Total liabilities 1,386 1,426 181 1,708
---------- ---------- ---------- ----------
Net assets $1,834,518 $5,823,061 $ 737,453 $7,036,249
========== ========== ========== ==========
Units outstanding (note 5) 201,769 411,250 59,926 433,141
========== ========== ========== ==========
Net asset value per unit $ 9.09 $ 14.16 $ 12.31 $ 16.24
========== ========== ========== ==========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
CUNA MUTUAL LIFE VARIABLE ACCOUNT
Statements of Operations
Years Ended December 31, 1998, 1997, and 1996
<TABLE>
<CAPTION>
CAPITAL APPRECIATION STOCK SUBACCOUNT GROWTH AND INCOME STOCK SUBACCOUNT
Investment income (loss): 1998 1997 1996 1998 1997 1996
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Dividend income $ 88,433 $ 119,794 $ 595,603 $ 869,525 $ 778,858 $ 1,830,435
Adverse mortality and expense charges
(note 3) (259,874) (182,627) (111,426) (691,564) (527,025) (363,607)
------------ ------------ ------------ ------------ ------------ ------------
Net investment income (loss) (171,441) (62,833) 484,177 177,961 251,833 1,466,828
------------ ------------ ------------ ------------ ------------ ------------
Realized and unrealized gain (loss)
on investments:
Realized gain (loss) on security
transactions:
Capital gain distributions 769,968 317,275 -- 3,106,051 1,145,587 --
Proceeds from sale of securities 1,770,807 1,795,596 855,100 3,497,748 3,033,581 2,017,365
Cost of securities sold (1,192,638) (1,354,057) (708,846) (2,160,207) (2,103,099) (1,615,917)
------------ ------------ ------------ ------------ ------------ ------------
Net realized gain (loss) on security
transactions 1,348,137 758,814 146,254 4,443,592 2,076,069 401,448
Net change in unrealized appreciation
or depreciation on investments 4,151,868 4,563,309 1,662,956 7,377,335 12,852,455 6,026,093
------------ ------------ ------------ ------------ ------------ ------------
Net gain (loss) on investments 5,500,005 5,322,123 1,809,210 11,820,927 14,928,524 6,427,541
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations $ 5,328,564 $ 5,259,290 $ 2,293,387 $ 11,998,888 $ 15,180,357 $ 7,894,369
============ ============ ============ ============ ============ ============
BALANCED SUBACCOUNT BOND SUBACCOUNT
Investment income (loss): 1998 1997 1996 1998 1997 1996
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Dividend income $ 1,934,712 $ 2,062,026 $ 2,949,493 $ 196,337 $ 136,739 $ 137,535
Adverse mortality and expense charges
(note 3) (577,128) (509,762) (445,353) (30,006) (23,285) (23,607)
------------ ------------ ------------ ------------ ------------ ------------
Net investment income (loss) 1,357,584 1,552,264 2,504,140 166,331 113,454 113,928
------------ ------------ ------------ ------------ ------------ ------------
Realized and unrealized gain (loss)
on investments:
Realized gain (loss) on security
transactions:
Capital gain distributions 3,744 758,320 -- 2,477 379 --
Proceeds from sale of securities 4,012,722 4,525,247 3,759,491 441,318 402,615 1,799,790
Cost of securities sold (3,159,159) (3,785,014) (3,351,391) (426,398) (394,979) (1,748,647)
------------ ------------ ------------ ------------ ------------ ------------
Net realized gain (loss) on security
transactions 857,307 1,498,553 408,100 17,397 8,015 51,143
Net change in unrealized appreciation
or depreciation on investments 5,340,950 5,202,066 1,724,491 (14,556) 41,691 (127,295)
------------ ------------ ------------ ------------ ------------ ------------
Net gain (loss) on investments 6,198,257 6,700,619 2,132,591 2,841 49,706 (76,152)
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations $ 7,555,841 $ 8,252,883 $ 4,636,731 $ 169,172 $ 163,160 $ 37,776
============ ============ ============ ============ ============ ============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
CUNA MUTUAL LIFE VARIABLE ACCOUNT
Statements of Operations
Years Ended December 31, 1998, 1997, and 1996
<TABLE>
<CAPTION>
MONEY MARKET SUBACCOUNT TREASURY 2000 SUBACCOUNT
Investment income (loss): 1998 1997 1996 1998 1997 1996
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Dividend income $ 123,985 $ 85,594 $ 86,370 $ 106,291 $ 106,851 $ 107,339
Adverse mortality and expense charges
(note 3) (22,312) (15,448) (16,510) (15,826) (14,583) (13,847)
----------- ----------- ----------- ----------- ----------- -----------
Net investment income (loss) 101,673 70,146 69,860 90,465 92,268 93,492
----------- ----------- ----------- ----------- ----------- -----------
Realized and unrealized gain (loss)
on investments:
Realized gain (loss) on security
transactions:
Capital gain distributions -- -- -- -- -- --
Proceeds from sale of securities 2,979,908 4,634,860 4,407,707 -- -- --
Cost of securities sold (2,979,908) (4,634,860) (4,407,707) -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Net realized gain (loss) on security
transactions -- -- -- -- -- --
Net change in unrealized appreciation
or depreciation on investments -- -- -- 21,682 1,846 (74,946)
----------- ----------- ----------- ----------- ----------- -----------
Net gain (loss) on investments -- -- -- 21,682 1,846 (74,946)
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations $ 101,673 $ 70,146 $ 69,860 $ 112,147 $ 94,114 $ 18,546
=========== =========== =========== =========== =========== ===========
INTERNATIONAL STOCK SUBACCOUNT WORLD GOVERNMENTS SUBACCOUNT
Investment income (loss): 1998 1997 1996 1998 1997 1996
----------- ----------- ----------- ----------- ----------- -----------
Dividend income $ 90,596 $ 99,113 $ 39,586 $ 8,821 $ 7,143 $ --
Adverse mortality and expense
charges (note 3) (47,908) (32,130) (14,665) (6,487) (3,401) (2,326)
----------- ----------- ----------- ----------- ----------- -----------
Net investment income (loss) 42,688 66,983 24,921 2,334 3,742 (2,326)
----------- ----------- ----------- ----------- ----------- -----------
Realized and unrealized gain (loss)
on investments:
Realized gain (loss) on security
transactions:
Capital gain distributions -- -- -- -- -- --
Proceeds from sale of securities 491,409 235,721 121,135 92,387 65,919 52,028
Cost of securities sold (442,671) (211,895) (113,341) (90,661) (66,515) (53,136)
----------- ----------- ----------- ----------- ----------- -----------
Net realized gain (loss) on security
transactions 48,738 23,826 7,794 1,726 (596) (1,108)
Net change in unrealized appreciation
or depreciation on investments 608,851 (62,452) 173,915 44,633 (5,796) 12,525
----------- ----------- ----------- ----------- ----------- -----------
Net gain (loss) on investments 657,589 (38,626) 181,709 46,359 (6,392) 11,417
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations $ 700,277 $ 28,357 $ 206,630 $ 48,693 ($ 2,650) $ 9,091
=========== =========== =========== =========== =========== ===========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
CUNA MUTUAL LIFE VARIABLE ACCOUNT
Statements of Operations
Years Ended December 31, 1998, 1997, and 1996
<TABLE>
<CAPTION>
EMERGING GROWTH SUBACCOUNT
Investment income (loss): 1998 1997 1996*
---- ---- -----
<S> <C> <C> <C>
Dividend income $45,309 $ -- $9,859
Adverse mortality and expense charges
(note 3) (48,583) (21,660) (4,378)
--------- -------- -------
Net investment income (loss) (3,274) (21,660) 5,481
--------- -------- -------
Realized and unrealized gain (loss)
on investments:
Realized gain (loss) on security
transactions:
Capital gain distributions -- -- --
Proceeds from sale of securities 448,520 234,899 213,154
Cost of securities sold (373,845) (222,640) (201,866)
--------- -------- -------
Net realized gain (loss) on security
transactions 74,675 12,259 11,288
Net change in unrealized appreciation
or depreciation on investments 1,524,641 384,388 2,792
--------- -------- -------
Net gain (loss) on investments 1,599,316 396,647 14,080
--------- -------- -------
Net increase (decrease) in net assets
resulting from operations $1,596,042 $374,987 $19,561
========= ======== =======
See accompanying notes to financial statements.
<FN>
*The data is for the period beginning May 1, 1996 (date of initial activity).
</FN>
</TABLE>
<PAGE>
CUNA MUTUAL LIFE VARIABLE ACCOUNT
Statements of Changes in Net Assets
Years Ended December 31, 1998, 1997, and 1996
<TABLE>
<CAPTION>
CAPITAL APPRECIATION STOCK SUBACCOUNT GROWTH AND INCOME STOCK SUBACCOUNT
Operations: 1998 1997 1996 1998 1997 1996
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net investment income (loss) ($ 171,441) ($ 62,833) $ 484,177 $ 177,961 $ 251,833 $ 1,466,828
Net realized gain (loss) on
security transactions 1,348,137 758,814 146,254 4,443,592 2,076,069 401,448
Net change in unrealized appreciation
or depreciation on investments 4,151,868 4,563,309 1,662,956 7,377,335 12,852,455 6,026,093
------------ ------------ ------------ ------------ ------------ ------------
Change in net assets from
operations 5,328,564 5,259,290 2,293,387 11,998,888 15,180,357 7,894,369
------------ ------------ ------------ ------------ ------------ ------------
Capital unit transactions (note 5):
Proceeds from sale of units 7,807,048 9,240,958 7,622,148 15,135,142 16,677,681 13,835,588
Cost of units repurchased (5,420,620) (4,699,419) (3,351,383) (11,770,989) (10,282,732) (8,554,478)
------------ ------------ ------------ ------------ ------------ ------------
Change in net assets from capital
unit transactions 2,386,428 4,541,539 4,270,765 3,364,153 6,394,949 5,281,110
------------ ------------ ------------ ------------ ------------ ------------
Increase (decrease) in net assets 7,714,992 9,800,829 6,564,152 15,363,041 21,575,306 13,175,479
Net assets:
Beginning of period 25,350,746 15,549,917 8,985,765 69,328,638 47,753,332 34,577,853
------------ ------------ ------------ ------------ ------------ ------------
End of period $ 33,065,738 $ 25,350,746 $ 15,549,917 $ 84,691,679 $ 69,328,638 $ 47,753,332
============ ============ ============ ============ ============ ============
BALANCED SUBACCOUNT BOND SUBACCOUNT
Operations: 1998 1997 1996 1998 1997 1996
------------ ------------ ------------ ------------ ------------ ------------
Net investment income (loss) $ 1,357,584 $ 1,552,264 $ 2,504,140 $ 166,331 $ 113,454 $ 113,928
Net realized gain (loss) on
security transactions 857,307 1,498,553 408,100 17,397 8,015 51,143
Net change in unrealized appreciation
or depreciation on investments 5,340,950 5,202,066 1,724,491 (14,556) 41,691 (127,295)
------------ ------------ ------------ ------------ ------------ ------------
Change in net assets from
operations 7,555,841 8,252,883 4,636,731 169,172 163,160 37,776
------------ ------------ ------------ ------------ ------------ ------------
Capital unit transactions (note 5):
Proceeds from sale of units 10,811,007 10,763,242 11,796,373 1,182,649 1,162,322 700,575
Cost of units repurchased (10,309,524) (10,663,916) (10,399,963) (772,448) (705,363) (2,103,924)
------------ ------------ ------------ ------------ ------------ ------------
Change in net assets from capital
unit transactions 501,483 99,326 1,396,410 410,201 456,959 (1,403,349)
------------ ------------ ------------ ------------ ------------ ------------
Increase (decrease) in net assets 8,057,324 8,352,209 6,033,141 579,373 620,119 (1,365,573)
Net assets:
Beginning of period 60,702,925 52,350,716 46,317,575 3,037,642 2,417,523 3,783,096
------------ ------------ ------------ ------------ ------------ ------------
End of period $ 68,760,249 $ 60,702,925 $ 52,350,716 $ 3,617,015 $ 3,037,642 $ 2,417,523
============ ============ ============ ============ ============ ============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
CUNA MUTUAL LIFE VARIABLE ACCOUNT
Statements of Changes in Net Assets
Years Ended December 31, 1998, 1997, and 1996
<TABLE>
<CAPTION>
MONEY MARKET SUBACCOUNT TREASURY 2000 SUBACCOUNT
Operations: 1998 1997 1996 1998 1997 1996
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net investment income (loss) $ 101,673 $ 70,146 $ 69,860 $ 90,465 $ 92,268 $ 93,492
Net realized gain (loss) on
security transactions -- -- -- -- -- --
Net change in unrealized appreciation
or depreciation on investments -- -- -- 21,682 1,846 (74,946)
----------- ----------- ----------- ----------- ----------- -----------
Change in net assets from
operations 101,673 70,146 69,860 112,147 94,114 18,546
----------- ----------- ----------- ----------- ----------- -----------
Capital unit transactions (note 5):
Proceeds from sale of units 4,485,112 6,190,640 4,325,194 447,349 621,004 794,517
Cost of units repurchased (3,592,636) (5,367,244) (4,801,186) (424,204) (599,303) (773,892)
----------- ----------- ----------- ----------- ----------- -----------
Change in net assets from capital
unit transactions 892,476 823,396 (475,992) 23,145 21,701 20,625
----------- ----------- ----------- ----------- ----------- -----------
Increase (decrease) in net assets 994,149 893,542 (406,132) 135,292 115,815 39,171
Net assets:
Beginning of period 2,621,118 1,727,576 2,133,708 1,699,226 1,583,411 1,544,240
----------- ----------- ----------- ----------- ----------- -----------
End of period $ 3,615,267 $ 2,621,118 $ 1,727,576 $ 1,834,518 $ 1,699,266 $ 1,583,411
=========== =========== =========== =========== =========== ===========
INTERNATIONAL STOCK SUBACCOUNT WORLD GOVERNMENTS SUBACCOUNT
Operations: 1998 1997 1996 1998 1997 1996
----------- ----------- ----------- ----------- ----------- -----------
Net investment income (loss) $ 42,688 $ 66,983 $ 24,921 $ 2,334 $ 3,742 ($ 2,326)
Net realized gain (loss) on
security transactions 48,738 23,826 7,794 1,726 (596) (1,108)
Net change in unrealized appreciation
or depreciation on investments 608,851 (62,452) 173,915 44,633 (5,796) 12,525
----------- ----------- ----------- ----------- ----------- -----------
Change in net assets from
operations 700,277 28,357 206,630 48,693 (2,650) 9,091
----------- ----------- ----------- ----------- ----------- -----------
Capital unit transactions (note 5):
Proceeds from sale of units 1,897,345 2,721,533 2,207,995 85,855 530,877 144,986
Cost of units repurchased (1,227,692) (904,022) (559,568) (118,224) (95,423) (84,667)
----------- ----------- ----------- ----------- ----------- -----------
Change in net assets from capital
unit transactions 669,653 1,817,511 1,648,427 (32,369) 435,454 60,319
----------- ----------- ----------- ----------- ----------- -----------
Increase (decrease) in net assets 1,369,930 1,845,868 1,855,057 16,234 432,804 69,410
Net assets:
Beginning of period 4,453,131 2,607,263 752,206 721,129 288,325 218,915
----------- ----------- ----------- ----------- ----------- -----------
End of period $ 5,823,061 $ 4,453,131 $ 2,607,263 $ 737,453 $ 721,129 $ 288,325
=========== =========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
CUNA MUTUAL LIFE VARIABLE ACCOUNT
Statements of Changes in Net Assets
Years Ended December 31, 1998, 1997, and 1996
<TABLE>
<CAPTION>
EMERGING GROWTH SUBACCOUNT
Operations: 1998 1997 1996*
---- ---- -----
<S> <C> <C> <C>
Net investment income (loss) ($3,274) ($21,660) $5,481
Net realized gain (loss) on
security transactions 74,675 12,259 11,288
Net change in unrealized appreciation
or depreciation on investments 1,524,641 384,388 2,792
--------- --------- ---------
Change in net assets from
operations 1,596,042 374,987 19,561
--------- --------- ---------
Capital unit transactions (note 5):
Proceeds from sale of units 2,707,434 3,238,087 1,517,927
Cost of units repurchased (1,321,467) (749,413) (346,909)
--------- --------- ---------
Change in net assets from capital
unit transactions 1,385,967 2,488,674 1,171,018
--------- --------- ---------
Increase (decrease) in net assets 2,982,009 2,863,661 1,190,579
Net assets:
Beginning of period 4,054,240 1,190,579 --
--------- -------- ---------
End of period $7,036,249 $4,054,240 $1,190,579
========= ========= =========
See accompanying notes to financial statements.
<FN>
*The data is for the period beginning May 1, 1996 (date of initial activity).
</FN>
</TABLE>
<PAGE>
CUNA MUTUAL LIFE VARIABLE ACCOUNT
Notes to Financial Statements
(1) Organization
The CUNA Mutual Life Variable Account (the Account) is a unit investment
trust registered under the Investment Company Act of 1940 with the
Securities and Exchange Commission (SEC). The Account was established as a
separate investment account within CUNA Mutual Life Insurance Company to
receive and invest net premiums paid under flexible premium variable life
insurance policies.
Although the assets of the Account are the property of CUNA Mutual Life
Insurance Company, those assets attributable to the policies are not
chargeable with liabilities arising out of any other business which CUNA
Mutual Life Insurance Company may conduct.
The net assets maintained in the Account attributable to the policies
provide the base for the periodic determination of the increased or
decreased benefits under the policies. The net assets may not be less than
the amount required under state insurance law to provide certain death
benefits and other policy benefits. Additional assets are held in CUNA
Mutual Life Insurance Company's general account to cover death benefits in
excess of the accumulated value.
(2) Significant Accounting Policies
Investments
The Account currently is divided into nine subaccounts but may, in the
future, include additional subaccounts. Each subaccount invests
exclusively in shares of a single underlying fund. (The term fund is used
to mean an investment portfolio sometimes called a series, i.e., Ultra
Series Fund, T. Rowe Price International Series, Inc., MFS(R) Variable
Insurance TrustSM, or any other open-end management investment company or
unit investment trust in which a subaccount invests.) The income, gains
and losses, realized or unrealized, from the assets allocated to each
subaccount are credited to or charged against that subaccount without
regard to income, gains or losses from any other subaccount.
The Account invests in shares of Ultra Series Fund, T. Rowe Price
International Series, Inc., and MFS(R) Variable Insurance TrustSM. Each is
a management investment company of the series type with one or more funds.
Each is registered with the SEC as an open-end, management investment
company. Such registration does not involve supervision of the management
or investment practices or policies of the companies or their funds by the
SEC.
Ultra Series Fund currently has six funds available as investment options
under the policies while T. Rowe Price International Fund, Inc., has one
and MFS(R) Variable Insurance TrustSM has two funds available as an
investment option. MFS(R) Variable Insurance TrustSM also has other funds
that are not available under the policies. These fund companies may, in
the future, create additional funds that may or may not be available as
investment options under the policies. Each fund has its own investment
objectives and the income, gains, and losses for each fund are determined
separately for that fund.
CIMCO Inc. (CIMCO) serves as the investment advisor to the Ultra Series
Fund and manages its assets in accordance with general policies and
guidelines established by the board of trustees of the Ultra Series Fund.
CUNA Mutual Life Insurance Company owns one half of CIMCO's outstanding
stock and one half is owned indirectly by CUNA Mutual Insurance Society.
Rowe Price-Fleming International, Inc. (RPFI) serves as the Investment
Adviser to the T. Rowe Price International Stock Portfolio and manages its
assets in accordance with general policies and guidelines established by
the board of directors of T. Rowe Price International Series, Inc. RPFI
was founded in 1979 as a joint venture between T. Rowe Price Associates,
Inc. and Robert Fleming Holdings Limited.
Massachusetts Financial Services Company (MFS) serves as the Investment
Advisor to the MFS World Governments Series and Emerging Growth Series and
manages its assets in accordance with general policies and guidelines
established by the board of trustees of MFS(R) Variable Insurance TrustSM.
MFS is a subsidiary of Sun Life Assurance Company of Canada (U.S.) which,
in turn, is a subsidiary of Sun Life Assurance Company of Canada.
The assets of each fund are held separate from the assets of the other
funds, and each fund is offered at a price equal to its respective net
asset value per share, without sales charge. Dividends and capital gain
distributions from each fund are reinvested in that fund. Investments in
shares of the funds are stated at market value which is the net asset
value per share as determined by the funds. Realized gains and losses from
security transactions are reported on an average cost basis. Dividend
income is recorded on the ex-dividend date.
Federal Income Taxes
The operations of the Account form a part of the operations of CUNA Mutual
Life Insurance Company and are not taxed separately. CUNA Mutual Life
Insurance Company does not initially expect to incur any income tax upon
the earnings or the realized capital gains attributable to the Account.
Accordingly, no charge for income tax is currently being made to the
Account. If such taxes are incurred by CUNA Mutual Life Insurance Company
in the future, a charge to the Account may be assessed.
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 and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of increase and decrease in
net assets from operations during the period. Actual results could differ
from those estimates.
(3) Fees and Charges
Organization Costs
CUNA Mutual Life Insurance Company absorbed all organization expenses of
the Account.
Policy Charges
In addition to charges for state taxes, which reduce premiums prior to the
allocation of net premiums to the subaccounts of the Account, the
following charges may be deducted by CUNA Mutual Life Insurance Company by
redeeming an appropriate number of units for each policy.
Administrative Fee: CUNA Mutual Life Insurance Company will have primary
responsibility for the administration of the Account and the policies
issued. As reimbursement for these expenses, CUNA Mutual Life Insurance
Company may assess each policy a monthly administrative fee. For
additional detail, see schedule of expenses and charges in the prospectus.
Deferred Contingent Sales and Administrative Charges: The sales and
administrative expenses incurred when a policy is issued are deferred
(Deferred Charges) until the policy is surrendered. Such charges are not
collected at all if the policy is held for nine years, or if the insured
dies during that period. In no instance will the charge exceed 30 percent
of the lesser of premiums paid or the Guideline Annual Premium (as defined
under the Investment Company Act of 1940) of the policy. The Deferred
Charges are normally built up in twelve equal increments during the first
policy year. Beginning on the second policy anniversary, incremental
amounts are released by allocations back to the subaccounts on each
anniversary until the tenth policy anniversary when all remaining Deferred
Charges are released. All amounts in the Deferred Charges Account are held
and interest credited to the policy at a minimum rate of 4 percent with
CUNA Mutual Life Insurance Company crediting additional amounts at its
discretion.
Policy Fee: CUNA Mutual Life Insurance Company will incur first-year
expenses upon issue of a policy, and will assess each policy a monthly
policy fee to recover these expenses.
Cost of Insurance and Additional Benefits Provided: CUNA Mutual Life
Insurance Company will assume the responsibility for providing the
insurance benefits provided in the policy. The cost of insurance will be
determined each month based upon the applicable cost of insurance rates
and the net amount at risk. The cost of insurance can vary from month to
month since the determination of both the insurance rate and the net
amount at risk depends upon a number of variables as described in the
Account's prospectus.
Variable Account Charges
Mortality and Expense Risk Charge: CUNA Mutual Life Insurance Company will
deduct daily a mortality and expense risk charge from the Account at an
annual rate of .90 percent of the average daily net asset value of the
Account. These charges will be deducted by CUNA Mutual Life Insurance
Company in return for its assumption of risks associated with adverse
mortality experience or excess administrative expenses in connection with
policies issued.
(4) Investment Transactions
The cost of shares purchased, including reinvestment of dividend
distributions, during the year ended December 31, 1998, was as follows:
Capital Appreciation Stock Fund........ $4,760,618
Growth and Income Stock Fund........... 10,158,204
Balanced Fund.......................... 5,884,896
Bond Fund.............................. 1,020,825
Money Market Fund...................... 3,974,568
Treasury 2000 Fund..................... 7,253
International Stock Portfolio.......... 1,204,629
World Governments Series............... 62,445
Emerging Growth........................ 1,823,433
----------
$28,905,871
==========
(5) Unit Activity from Contract Transactions
Transactions in units of each subaccount of the Account for the years
ended December 31, 1998, 1997, and 1996 were as follows:
<TABLE>
<CAPTION>
Capital
Appreciation Growth and Money
Stock Income Stock Balanced Bond Market
Subaccount Subaccount Subaccount Subaccount Subaccount
Units outstanding at
<S> <C> <C> <C> <C> <C>
December 31, 1995 663,269 907,821 1,522,893 155,381 125,112
Units sold 516,098 337,323 375,764 29,061 249,298
Units repurchased (225,833) (208,539) (331,106) (87,030) (276,956)
---------- ---------- ---------- ---------- ----------
Units outstanding at
December 31, 1996 953,534 1,036,605 1,567,551 97,412 97,454
Units sold 490,480 313,426 297,548 45,022 342,456
Units repurchased (252,149) (194,852) (296,125) (27,507) (298,002)
---------- ---------- ---------- ---------- ----------
Units outstanding at
December 31, 1997 1,191,865 1,155,179 1,568,974 114,927 141,908
Units sold 340,862 233,645 266,148 43,507 236,364
Units repurchased (235,746) (181,819) (254,086) (28,421) (190,395)
---------- ---------- ---------- ---------- ----------
Units outstanding at
December 31, 1998 1,296,981 1,207,005 1,581,036 130,013 187,877
========== ========== ========== ========== ==========
Treasury International World Emerging
2000 Stock Governments Growth
Subaccount Subaccount Subaccount Subaccount*
Units outstanding at
December 31, 1995 194,133 70,876 19,219 --
Units sold 102,713 194,181 12,790 151,261
Units repurchased (100,176) (48,968) (7,455) (33,490)
---------- ---------- ---------- ----------
Units outstanding at
December 31, 1996 196,670 216,089 24,554 117,771
Units sold 77,604 216,687 46,412 280,804
Units repurchased (75,054) (71,570) (8,295) (66,642)
---------- ---------- ---------- ----------
Units outstanding at
December 31, 1997 199,220 361,206 62,671 331,933
Units sold 52,984 141,913 7,299 197,716
Units repurchased (50,435) (91,869) (10,044) (96,508)
---------- ---------- ---------- ----------
Units outstanding at
December 31, 1998 201,769 411,250 59,926 433,141
========== ========== ========== ==========
<FN>
*The data is for the period beginning May 1, 1996 (date of initial activity).
</FN>
</TABLE>
(6) Condensed Financial Information
The table below gives per unit information about the financial history of
each subaccount for each period.
<TABLE>
<CAPTION>
CAPITAL APPRECIATION STOCK SUBACCOUNT GROWTH AND INCOME STOCK SUBACCOUNT
1998 1997 1996 1995 1994 1998 1997 1996 1995 1994
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Net asset value:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Beginning of period $21.27 $16.31 $13.55 $10.45 $10.00 $60.02 $46.07 $38.09 $29.16 $29.01
End of period 25.49 21.27 16.31 13.55 10.45 70.17 60.02 46.07 38.09 29.16
Percentage increase
in unit value
during period* 19.9% 30.4% 20.4% 29.7% 4.5% 16.9% 30.3% 21.0% 30.6% 0.5%
Number of units
outstanding at
end of period 1,296,981 1,191,865 953,534 663,269 588,501 1,207,005 1,155,179 1,036,605 907,821 767,867
BALANCED SUBACCOUNT BOND SUBACCOUNT
1998 1997 1996 1995 1994 1998 1997 1996 1995 1994
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Net asset value:
Beginning of period $38.69 $33.40 $30.41 $25.09 $25.44 $26.43 $24.82 $24.35 $21.11 $21.96
End of period 43.49 38.69 33.40 30.41 25.09 27.82 26.43 24.82 24.35 21.11
Percentage increase
in unit value
during period* 12.4% 15.8% 9.8% 21.2% -1.4% 5.3% 6.5% 1.9% 15.4% -3.9%
Number of units
outstanding at
end of period 1,581,036 1,568,974 1,567,551 1,522,893 1,433,037 130,013 114,927 97,411 55,381 160,875
MONEY MARKET SUBACCOUNT TREASURY 2000 SUBACCOUNT
1998 1997 1996 1995 1994 1998 1997 1996 1995 1994
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Net asset value:
Beginning of period $18.47 $17.73 $17.05 $16.33 $15.91 $8.53 $8.05 $7.95 $6.63 $7.20
End of period 19.24 18.47 17.73 17.05 16.33 9.09 8.53 8.05 7.95 6.63
Percentage increase
in unit value
during period* 4.2% 4.1% 4.0% 4.4% 2.6% 6.6% 6.0% 1.3% 19.9% -7.9%
Number of units
outstanding at
end of period 187,877 141,908 97,454 125,112 179,387 201,769 199,220 196,670 194,133 191,747
INTERNATIONAL STOCK SUBACCOUNT WORLD GOVERNMENTS SUBACCOUNT
1998 1997 1996 1995 1998 1997 1996 1995
---- ---- ---- ---- ---- ---- ---- ----
Net asset value:
Beginning of period $12.33 $12.07 $10.61 $10.00 $11.51 $11.74 $11.39 $10.00
End of period 14.16 12.33 12.07 10.61 12.31 11.51 11.74 11.39
Percentage increase
in unit value
during period* 14.8% 2.2% 13.7% 6.1% 6.9% (2.0%) 3.1% 13.9%
Number of units
outstanding at
end of period 411,250 361,206 216,089 70,876 59,926 62,671 24,554 19,219
EMERGING GROWTH SUBACCOUNT**
1998 1997 1996
---- ---- ----
Net asset value:
Beginning of period $12.21 $10.11 $10.00
End of period 16.24 12.21 10.11
Percentage increase
in unit value
during period* 33.0% 20.8% 1.1%
Number of units
outstanding at
end of period 433,141 331,933 117,771
For the Money Market Subaccount, the "seven-day average yield" for the seven
days ended December 31, 1998, was 3.75% and the "effective yield" for that
period was 3.86%.
<FN>
*The amount of premium invested in CUNA Mutual Life Variable Account is the
amount remaining after the policy charges described in footnote 3 have
been deducted. The policy charges have not been taken into account in this
calculation. Inclusion of the policy charges would reduce the percentage
increase in unit value during the period.
**The data is for the period beginning May 1, 1996 (date of initial activity).
</FN>
</TABLE>
<PAGE>
CUNA MUTUAL LIFE VARIABLE ACCOUNT
Independent Auditors' Report
The Board of Directors
CUNA Mutual Life Insurance Company and Contract
Owners of CUNA Mutual Life Variable Account:
We have audited the statements of assets and liabilities of the Capital
Appreciation Stock Subaccount, Growth and Income Stock Subaccount, Balanced
Subaccount, Bond Subaccount, Money Market Subaccount, Treasury 2000 Subaccount,
International Stock Subaccount, World Governments Subaccount, and the Emerging
Growth Subaccount of the CUNA Mutual Life Variable Account as of December 31,
1998; the related statements of operations and changes in net assets for each of
the years in the three-year (two years and eight months for the Emerging Growth
Subaccount) period then ended; and the condensed financial information for each
of the years in the five-year (four years for International Stock Subaccount and
World Governments Subaccount, and two years and eight months for the Emerging
Growth Subaccount) period then ended. These financial statements and condensed
financial information are the responsibility of the Account's management. Our
responsibility is to express an opinion on these financial statements and
condensed financial information 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 and condensed
financial information are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Investments owned at December 31, 1998, were verified
by audit of the statements of assets and liabilities of the underlying funds of
Ultra Series Fund and confirmation with MFS Variable Insurance Trust and T. Rowe
Price. 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 and condensed financial information
referred to above present fairly, in all material respects, the financial
position of the Capital Appreciation Stock Subaccount, Growth and Income Stock
Subaccount, Balanced Subaccount, Bond Subaccount, Money Market Subaccount,
Treasury 2000 Subaccount, International Stock Subaccount, World Governments
Subaccount, and the Emerging Growth Subaccount of the CUNA Mutual Life Variable
Account as of December 31, 1998; the results of their operations and changes in
their net assets for each of the years in the three-year (two years and eight
months for the Emerging Growth Subaccount) period then ended; and the condensed
financial information for each of the years in the five-year (four years for
International Stock Subaccount and World Governments Subaccount, and two years
and eight months for the Emerging Growth Subaccount) period then ended in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Des Moines, Iowa
February 5, 1999
<PAGE>
CUNA MUTUAL LIFE INSURANCE COMPANY
Financial Statements and Supplementary Information
December 31, 1998 and 1997
(With Independent Auditors' Report)
<PAGE>
CUNA MUTUAL LIFE INSURANCE COMPANY
Statutory Statements of Admitted Assets, Liabilities and Surplus
December 31, 1998 and 1997
(in thousands)
<TABLE>
<CAPTION>
Admitted Assets 1998 1997
--------------- ---- ----
Investments:
<S> <C> <C>
Fixed maturities $ 1,517,147 $ 1,570,735
Equity securities:
Preferred stock 71 102
Common stock 77,036 57,292
Mortgage loans on real estate 306,037 362,958
Investment real estate 62,345 64,771
Policy loans 101,569 101,061
Other invested assets 16,799 11,459
Receivable for securities 19,886 14,394
Cash and short-term investments 74,740 27,260
--------- ---------
Total investments 2,175,630 2,210,032
Premiums receivable 15,147 12,534
Accrued investment income 28,005 30,540
Electronic data processing equipment 2,230 2,822
Due from affiliates and related parties 8,121 12,093
Federal income tax recoverable -- 2,158
Other assets 2,295 2,936
Separate accounts 1,830,012 1,198,978
--------- ---------
Total admitted assets $ 4,061,440 $ 3,472,093
========= =========
Liabilities and Surplus
Liabilities:
Policy reserves:
Life insurance and annuity contracts $ 1,672,272 $ 1,749,927
Accident and health insurance 12,611 11,795
Supplementary contracts without life contingencies 76,131 72,664
Policyholders' dividend accumulations 156,151 153,931
Policy and contract claims 9,915 7,232
Other policyholders' funds:
Dividends payable to policyholders 24,450 23,780
Premiums and other deposit funds 4,194 4,693
Interest maintenance reserve 5,694 3,531
Amounts held for others 18,923 20,500
Commissions, expenses, taxes, licenses and fees accrued 14,594 13,133
Asset valuation reserve 48,395 41,756
Loss contingency reserve for investments 5,800 6,050
Federal income taxes due and accrued 5,025 --
Note payable 1,300 1,300
Other liabilities 15,639 6,823
Separate accounts 1,784,589 1,164,297
--------- ---------
Total liabilities 3,855,683 3,281,412
--------- ---------
Surplus:
Unassigned surplus 205,757 190,681
--------- ---------
Total surplus 205,757 190,681
--------- ---------
Total liabilities and surplus $ 4,061,440 $ 3,472,093
========= =========
</TABLE>
See accompanying notes to statutory financial statements.
<PAGE>
CUNA MUTUAL LIFE INSURANCE COMPANY
Statutory Statements of Operations
Years Ended December 31, 1998, 1997 and 1996
(in thousands)
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
Income:
Premiums and other considerations:
<S> <C> <C> <C>
Life and annuity contracts $ 466,203 $ 414,724 $ 346,584
Accident and health 18,292 14,886 12,007
Supplementary contracts and dividend accumulations 43,547 44,194 46,303
Other deposit funds 159,786 114,825 51,322
Net investment income 148,998 168,192 174,573
Reinsurance commissions 7,871 9,601 9,962
Separate accounts income and fees 15,858 9,885 4,883
Other income 5,794 5,862 3,761
------- ------- -------
Total income 866,349 782,169 649,395
------- ------- -------
Benefits and expenses:
Death benefits 41,908 37,430 33,592
Annuity benefits 82,074 49,095 39,086
Surrender benefits 189,343 176,291 143,867
Payments on supplementary contracts without life
contingencies and dividend accumulations 47,431 44,747 48,896
Other benefits to policyholders and beneficiaries 18,244 17,509 12,703
Decrease in policy reserves - life and annuity
contracts and accident and health insurance (76,839) (78,148) (54,954)
Increase in liabilities for supplementary contracts without life
contingencies and policyholders' dividend accumulations 5,687 6,954 8,328
Decrease in group annuity reserves (225) (2) (233)
Increase in benefit funds 870 3,975 4,075
Commissions 43,396 37,017 37,529
General insurance expenses, including cost of
collection in excess of loading on due and deferred
premiums and other expenses 60,126 60,722 51,004
Insurance taxes, licenses, and fees 5,909 6,939 6,199
Net transfers to separate accounts 408,384 369,788 272,028
------- ------- -------
Total benefits and expenses 826,308 732,317 602,120
------- ------- -------
Income before dividends to policyholders, federal
income taxes, and net realized capital (losses) gains 40,041 49,852 47,275
Dividends to policyholders 24,441 23,670 23,286
------- ------- -------
Income before federal income taxes and net
realized capital (losses) gains 15,600 26,182 23,989
Federal income taxes 4,436 12,208 7,713
------- ------- -------
Income before net realized capital (losses) gains 11,164 13,974 16,276
Net realized capital (losses) gains, less federal income taxes
and transfers to the interest maintenance reserve (317) 3,885 171
------- ------- -------
Net income $ 10,847 $ 17,859 $ 16,447
======= ======= =======
</TABLE>
See accompanying notes to statutory financial statements.
<PAGE>
CUNA MUTUAL LIFE INSURANCE COMPANY
Statutory Statements of Changes in Unassigned Surplus
Years Ended December 31, 1998, 1997 and 1996
(in thousands)
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Balance at beginning of year $ 190,681 $ 163,304 $ 154,028
------- ------- -------
Increase (decrease) in unassigned surplus:
Net income 10,847 17,859 16,447
Change in net unrealized gains (losses) 10,070 6,752 (7,135)
Change in asset valuation reserve (6,639) 257 (9,811)
Change in nonadmitted assets 543 285 2,695
Change in surplus of separate accounts (64) 209 (2,071)
Change in separate account seed money 64 (189) 2,232
Subsidiary surplus distribution -- -- 13,858
Change in loss contingency for investments 250 2,200 (6,954)
Other miscellaneous changes 5 4 15
------- ------- -------
Net increase in unassigned surplus 15,076 27,377 9,276
------- ------- -------
Balance at end of year $ 205,757 $ 190,681 $ 163,304
======= ======= =======
</TABLE>
See accompanying notes to statutory financial statements.
<PAGE>
CUNA MUTUAL LIFE INSURANCE COMPANY
Statutory Statements of Cash Flows
Years Ended December 31, 1998, 1997 and 1996
(in thousands)
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
Cash from operations Premiums and other considerations:
<S> <C> <C> <C>
Life and annuity contracts $ 463,537 $ 412,840 $345,095
Accident and health 17,903 14,754 11,911
Supplementary contracts and dividend accumulations 43,546 44,194 46,303
Other deposit funds 159,786 114,826 51,322
Investment income received 160,304 177,984 176,394
Reinsurance commissions 7,871 8,425 13,210
Separate accounts income and fees 15,858 9,885 1,129
Other income 4,786 4,931 57,268
------- ------- -------
Total provided from operations 873,591 787,839 702,632
------- ------- -------
Life and accident and health claims paid 46,128 42,004 38,809
Surrender benefits paid 189,343 176,291 143,867
Other benefits to policyholders paid 140,575 105,505 95,785
Commissions, other expenses and taxes paid,
excluding federal income taxes 107,589 105,834 89,017
Dividends to policyholders paid 23,756 23,161 22,542
Federal income taxes (181) 14,558 15,804
Net transfers to separate accounts 419,156 383,942 281,652
Interest paid on defined benefit plans 1,338 3,507 4,104
Other -- 189 684
------- ------- -------
Total used in operations 927,704 854,991 692,264
------- ------- -------
Net cash (used in) from operations (54,113) (67,152) 10,368
------- ------- -------
Cash from investments
Proceeds from investments sold, matured or repaid:
Fixed maturities 296,732 285,135 226,919
Equity securities 17,412 17,223 29,960
Mortgage loans on real estate 77,980 47,892 52,773
Other invested assets 562 969 831
Investment real estate 3,950 17,701 700
------- ------- -------
Total investment proceeds 396,636 368,920 311,183
------- ------- -------
Cost of investments acquired:
Fixed maturities 243,804 200,692 237,191
Equity securities 24,923 29,724 26,235
Mortgage loans on real estate 17,956 4,704 31,025
Investment real estate 5,222 10,929 10,060
Other invested assets 10,461 -- --
Other cash used 109 4,098 2,148
------- ------- -------
Total investments acquired 302,475 250,147 306,659
Increase (decrease) in policy loans and premium notes 500 (475) 664
------- ------- -------
Net cash from investments 93,661 119,248 3,860
------- ------- -------
Cash from financing and miscellaneous sources
Transfer of defined benefit pension plan assets -- (42,247) --
Other cash provided (applied), net 7,932 (15,879) 3,762
------- ------- -------
Net cash from (used in) financing and
miscellaneous sources 7,932 (58,126) 3,762
------- ------- -------
Reconciliation of cash and short-term investments:
Net change in cash and short-term investments 47,480 (6,030) 17,990
Cash and short-term investments at beginning of year 27,260 33,290 15,300
------- ------- -------
Cash and short-term investments at end of year $ 74,740 $ 27,260 $ 33,290
======= ======= =======
See accompanying notes to statutory financial statements.
</TABLE>
<PAGE>
CUNA MUTUAL LIFE INSURANCE COMPANY
Notes to Statutory Financial Statements
December 31, 1998, 1997 and 1996
(1) Summary of Significant Accounting Policies
Company Operations
CUNA Mutual Life Insurance Company (the Company) offers a full range of
ordinary life and health insurance products through face-to-face and direct
response distribution systems. The Company's operations are conducted in 49
states and the District of Columbia. The Company is subject to regulation by
the Insurance Departments of states in which it is licensed and undergoes
periodic examinations by those departments.
Basis of Presentation
The accompanying statutory financial statements have been prepared in
conformity with accounting practices prescribed or permitted by the Iowa
Department of Commerce, Insurance Division. Prescribed statutory accounting
practices are promulgated by the National Association of Insurance
Commissioners (NAIC), as well as through state laws, regulations, and
general administration rules. Permitted statutory accounting practices
encompass all accounting procedures other than those prescribed. The Company
is currently applying only prescribed accounting practices. Statutory
accounting practices vary in some respects from generally accepted
accounting principles. The more significant of these differences are as
follows:
o The costs related to acquiring business are charged to income in the
year incurred and, thus, are not amortized over the periods benefited,
whereas the premium income is recorded into earnings on a pro rata
basis over the premium-paying periods covered by the policies;
o Adjustments reflecting the revaluation of investments at statement date
and equity in earnings of subsidiary companies are carried to the
statements of changes in unassigned surplus as "net unrealized gains or
losses," without providing for income taxes, or income tax reductions,
with respect to net unrealized gains or losses;
o Majority owned subsidiaries are not consolidated and are carried at
their underlying book value using the equity method of accounting;
o Policy reserves are based on statutory mortality and interest
requirements, without consideration for withdrawals, which may differ
from reserves based on reasonably conservative estimates of mortality,
interest and withdrawals;
o Derivative investment contract hedging fixed income securities are
carried on the statutory financial statements at the amortized cost, if
any, versus at the estimated fair value of the contract;
o Deferred federal income taxes are not provided for unrealized gains or
losses and the temporary differences between the statutory and tax
basis of assets and liabilities;
o "Nonadmitted assets" (principally, the airplane, prepaid insurance and
expenses, furniture, equipment and certain receivables) are excluded
from the balance sheets through a direct charge to surplus;
o The asset valuation reserve is recorded as a liability by a direct
charge to surplus;
o The interest maintenance reserve defers recognition of interest-related
gains and losses from the disposal of investment securities and
amortizes them into income over the remaining lives of those
securities;
o Reserves established for potential bond and mortgage loan defaults or
real estate impairments are recorded as liabilities by direct charges
to surplus;
o Pension expense reflects the amount funded during the year and
disclosures related to the pension plan are in accordance with ERISA
requirements;
o Assets and liabilities are recorded net of ceded reinsurance balances;
and
o Deposits, surrenders and benefits on universal life and annuity
contracts are recorded in the statements of operations.
<PAGE>
CUNA MUTUAL LIFE INSURANCE COMPANY
Notes to Statutory Financial Statements
(1) Summary of Significant Accounting Policies, continued
Basis of Presentation, Continued
A reconciliation of net income and surplus between amounts presented herein
and amounts stated in conformity with GAAP as of December 31 are as follows
(in thousands):
Net Income 1997 1996
Statutory net income $17,859 $16,447
Adjustments:
Federal income taxes 1,555 (9,500)
Deferred policy acquisition costs 18,593 15,566
Insurance reserves (9,651) (2,181)
Investments (414) 8,590
Pension benefits 1,175 (1,457)
Other (1,877) (2,365)
------ ------
GAAP net income $27,240 $25,100
====== ======
Surplus 1997 1996
------- ---- ----
Statutory surplus $190,681 $163,304
Adjustments:
Federal income taxes 7,436 6,576
Deferred policy acquisition costs 142,710 130,655
Insurance reserves (71,352) (61,701)
Investments 37,409 33,231
Employee benefits (20,072) (21,744)
Dividends payable to policyholders 11,890 11,635
Other 5,211 2,955
------- -------
GAAP Surplus $303,913 $264,911
======= =======
The effects of these variances on net income and surplus at December 31,
1998, although not reasonably determinable as of this date, are presumed to
be material.
Valuation of Investments
Investments are valued as prescribed by the National Association of
Insurance Commissioners (NAIC). Fixed maturities and short-term investments
are generally carried at amortized cost, preferred equity securities at
cost, common equity securities of unaffiliated companies at fair value, and
mortgage loans at the amount of outstanding principal adjusted for
unamortized premiums and discounts. Fixed maturities that the NAIC has
determined are impaired in value are carried at the lower of amortized cost
or estimated fair value. Real estate acquired in satisfaction of debt is
valued at the lower of the carrying value of the outstanding mortgage loans
or fair value of the acquired real estate at time of foreclosure. The
adjusted basis is subsequently depreciated. Investments in limited
partnerships are included in other invested assets, and investments in
subsidiaries are carried at the Company's share of the underlying net equity
of the investment. Home office real estate is carried at depreciated cost.
Policy loans are stated at their aggregate unpaid balances.
Realized gains and losses on the sale of investments are reported in income
based upon the first-in, first-out method. The net unrealized gains and
losses attributable to the adjustment from book value to carrying value for
all investments are reflected in surplus.
Provision for Depreciation
The provision for depreciation of real estate is computed on a straight-line
basis using estimated useful lives of the assets ranging from five to fifty
years.
<PAGE>
CUNA MUTUAL LIFE INSURANCE COMPANY
Notes to Statutory Financial Statements
(1) Summary of Significant Accounting Policies, continued
Policy Reserves
During 1988, the Company began using the 1980 Commissioners' Standard
Ordinary (C.S.O.) Mortality Table. Prior to the adoption of the 1980 C.S.O.
table, reserves were recorded using the 1958 C.S.O. table. The 1958 C.S.O.
table is used with interest rate assumptions ranging from 2.5 percent to 5.0
percent. The 1980 C.S.O. table is used with interest rate assumptions
ranging from 3.5 percent to 5.5 percent. With respect to older policies, the
mortality table and interest assumptions vary from the American Experience
table with 2.5 to 4 percent interest to the 1941 C.S.O. table with 2.5
percent interest. Approximately 24 percent of the life reserves are
calculated on a net level reserve basis and 76 percent on a modified reserve
basis. The effect of the use of a modified reserve basis is to partially
offset the effect of immediately expensing acquisition costs by providing a
policy reserve increase in the first policy year which is less than the
reserve increase in renewal years. Fixed deferred annuity reserves are
calculated using continuous Commissioners' Annuity Reserve Valuation Method
(CARVM) with interest assumptions ranging from 2.5 percent to 7.5 percent.
Provision for Participating Policy Dividends
The provision for participating policy dividends is based on the board of
directors' determination and declaration of an equitable current dividend
plus a provision for such dividend expected to be paid in the following
year, rather than being provided for ratably over the premium-paying period
in accordance with dividend scales contemplated at the time the policies
were issued. Participating business comprised 99.9 percent of ordinary life
insurance in force and premiums received during 1998.
Statutory Valuation Reserves
The asset valuation reserve (AVR) provides a reserve for fluctuations in the
values of invested assets, primarily common stocks. Changes in the AVR are
charged or credited directly to surplus.
An interest maintenance reserve (IMR) is maintained as prescribed by the
NAIC for the purpose of stabilizing the surplus of the Company against gains
and losses on sales of fixed income investments that are primarily
attributable to changing interest rates. The interest-related gains and
losses are deferred and amortized into income over the remaining lives of
the securities.
Electronic Data Processing Equipment
Electronic data processing equipment is carried at cost less accumulated
depreciation of $6,744,419 and $6,023,003 at December 31, 1998 and 1997,
respectively. The equipment is being depreciated using the straight-line
method over a five-year period.
Pension Costs
Pension costs relating to the Company's pension plans are computed on the
basis of accepted actuarial methods. The annual contributions are computed
according to the aggregate funding method, which produces an annual normal
cost at each valuation date. Such annual normal cost provides for spreading
the excess of the present value of future benefits over the value of the
assets of the plan as a level percentage of payroll over the remaining
period of service of active employees on the valuation date based upon the
actuarial assumptions adopted. Gains and losses which arise on each
valuation date as the result of differences between the actual experience
and that expected by the actuarial assumptions are spread over the remaining
period of service of active employees. The Company's policy is to fund
pension costs accrued.
Risks and Uncertainties
In preparing the financial statements, management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the balance sheets and revenues and expenses
for the period. Actual results could differ significantly from those
estimates. The following elements of the financial statements are most
affected by the use of estimates and assumptions:
o Investment valuations
o Insurance reserves
<PAGE>
CUNA MUTUAL LIFE INSURANCE COMPANY
Notes to Statutory Financial Statements
(1) Summary of Significant Accounting Policies, continued
Risks and Uncertainties, continued
The Company is subject to the risk that interest rates will change and cause
a decrease in the value of its investments. To the extent that fluctuations
in interest rates cause the duration of assets and liabilities to differ,
the Company may have to sell assets prior to their maturity and realize
losses. Interest rate exposure for the investment portfolio is managed
through asset/liability management techniques that attempt to match the
duration of the assets with the estimated duration of the liabilities. The
Company had derivative financial instruments at December 31, 1998 and 1997,
which are discussed in note 2.
The Company is subject to the risk that issuers of securities or mortgage
loans owned by the Company will default or other parties, including
reinsurers who owe the Company money, will not pay. The Company minimizes
this risk by adhering to a conservative investment strategy and by
maintaining strong reinsurance and credit and collection policies.
The Company is subject to the risk that the legal or regulatory environment
in which the Company operates will change and create additional costs and
expenses not anticipated by the Company in pricing its products. In other
words, regulatory initiatives designed to reduce insurer profits or new
legal theories may create costs for the insurer beyond those recorded in the
financial statements. The Company mitigates this risk by operating in a
geographically diverse area, thus reducing its exposure to any single
jurisdiction; closely monitoring the regulatory environment to anticipate
changes; and by using underwriting practices that identify and minimize the
potential adverse impact of this risk.
Disclosures about Fair Value of Financial Instruments
Statement of Financial Accounting Standards (SFAS) No. 107, "Disclosures
About Fair Value of Financial Instruments," requires disclosure of fair
value information about existing on and off balance sheet financial
instruments. In cases where quoted market prices are not available, fair
values are based on estimates using present value or other valuation
techniques. These techniques are significantly affected by the assumptions
used, including the discount rate and estimates of future cash flows.
Although fair value estimates are calculated using assumptions that
management believes are appropriate, changes in assumptions could cause
these estimates to vary materially. In that regard, the derived fair value
estimates cannot be substantiated by comparison to independent markets and,
in many cases, could not be realized in the immediate settlement of the
instruments. Certain financial instruments and all non-financial instruments
are excluded from disclosure requirements. Accordingly, the aggregate fair
value amounts presented do not represent the underlying value of the
Company. In addition, the tax ramifications of the related unrealized gains
and losses can have a significant effect on fair value estimates and have
not been considered in the estimates.
The following methods and assumptions were used by the Company in estimating
its fair value disclosures for financial instruments:
Cash, short-term investments, accrued investment income and policy loans:
The carrying amounts reported for these instruments approximate their
fair values because of the short-term nature of these instruments.
Fixed maturities and equity securities: Fair values for fixed maturities
are based on quoted market prices where available. For fixed maturities
not actively traded, fair values are estimated using values obtained from
independent pricing services or, in the case of private placements, are
estimated by discounting expected future cash flows using a current
market rate applicable to the yield, credit quality and maturity of the
investments. The fair values for unaffiliated equity securities are based
on quoted market prices. The carrying values and fair value for these
instruments is disclosed in note 2.
Derivative financial instruments: The carrying values and fair value for
these instruments is disclosed in note 2.
Mortgage loans on real estate: The fair values for mortgage loans are
estimated using discounted cash flow analysis, at interest rates
currently being offered for similar loans to borrowers with similar
credit ratings. Loans with similar characteristics are aggregated for
purposes of the calculations. Fair values for mortgages in default are
reported at the estimated fair value of the underlying collateral. The
carrying and fair values for these instruments are disclosed in note 2.
Other invested assets: The fair value of joint ventures and partnership
interests in common stock approximate their carrying values or are
estimated using discounted cash flow analysis. The estimated fair value
for other invested assets for 1998 and 1997 was $16,596,994 and
$10,163,876, respectively.
<PAGE>
CUNA MUTUAL LIFE INSURANCE COMPANY
Notes to Statutory Financial Statements
(1) Summary of Significant Accounting Policies, continued
Disclosures about Fair Value of Financial Instruments, continued
Separate account assets and liabilities: The fair value of assets held in
separate accounts is based on quoted market prices. The fair value of
liabilities related to separate accounts is the amount payable on demand.
The carrying amounts reported in these accounts approximate their fair
values.
Investment contracts: The fair values of the Company's liabilities under
investment type insurance contracts are estimated using the cash
surrender value of the contracts. The carrying value and estimated fair
value of these liabilities were $1,100,993,513 and $1,096,826,483 for
1998 and $1,242,817,910 and $1,233,846,222 for 1997, respectively.
Derivative Financial Instruments
The Company enters into derivatives, primarily interest rate swaps and caps
and stock index futures to reduce interest rate exposure for long-term
assets, to exchange fixed rates for floating interest rates and to increase
or decrease exposure to selected segments of the bond and stock markets.
Hedges of fixed maturity securities are stated at amortized cost, if any,
and hedges of equity securities are stated at market value. See note 2 for
additional information related to these agreements.
Net interest receivable or payable on those contracts that hedge risks
associated with interest rate fluctuations are recognized in the period
incurred as an adjustment to investment income. Realized capital gains and
losses on equity swaps are recognized in the period incurred as an
adjustment to net realized capital gains and losses. Unrealized capital
gains and losses on equity swaps are charged or credited to surplus.
Interest rate cap agreements entitle the Company to receive from the
counter-parties the amounts, if any, by which the selected market interest
rates exceed the strike rates stated in the agreements. The amount paid to
purchase the interest rate caps is included in other invested assets and
amortized over the term of the agreements as an adjustment to investment
income.
Separate Accounts
Separate account assets are funds of separate account contractholders and
the Company, segregated into accounts with specific investment objectives.
The assets are generally carried at fair value. An offsetting liability is
maintained to the extent of contractholders' interests in the assets.
Appreciation or depreciation of the Company's interest in the separate
accounts, including undistributed net investment income, is reflected in
policyholders' surplus. Contractholders' interests in net investment income
and realized and unrealized capital gains and losses on separate account
assets are not reflected in operations.
Statutory Accounting Practices
The NAIC has developed a codification of Statements of Statutory Accounting
Principles (SSAP's) which, pending approval of the Iowa Department of
Commerce, Insurance Division, will take effect January 1, 2001. The effect
of adopting the SSAP's will be reported as an adjustment to unassigned
surplus on the effective date. Although generally consistent with current
accounting practices, there are differences that could have a material
impact on the Company; the ultimate impact on unassigned surplus has not
been determined.
Reclassifications
Certain amounts previously reported in prior years' financial statements
have been reclassified to conform to the current year presentation.
(2) Investments
Fixed Maturities
The carrying value, gross unrealized gains and losses and the estimated fair
value of investments in fixed maturities as of December 31, 1998 and 1997
are as follows (in thousands):
<PAGE>
CUNA MUTUAL LIFE INSURANCE COMPANY
Notes to Statutory Financial Statements
(2) Investments, continued
<TABLE>
<CAPTION>
Fixed Maturities, continued
Gross Gross
Carrying unrealized unrealized Estimated
Description value gains losses fair value
1998:
<S> <C> <C> <C> <C>
United States treasury
and government securities $ 56,037 $ 2,539 $ -- $ 58,576
States and political
subdivisions securities 38 -- -- 38
Foreign government securities 16,433 1,487 -- 17,920
Corporate securities 885,831 52,988 1,629 937,190
Mortgage-backed securities 524,821 9,794 3,703 530,912
Other debt securities 33,987 1,963 -- 35,950
-------- ------ ----- --------
$1,517,147 $68,771 $5,332 $1,580,586
======== ====== ===== ========
1997:
United States treasury
and government securities $ 62,478 $ 1,532 $ 38 $ 63,972
States and political
subdivisions securities 47 -- -- 47
Foreign government securities 16,428 1,154 -- 17,582
Corporate securities 989,245 49,050 2,648 1,035,647
Mortgage-backed securities 464,286 11,203 349 475,140
Other fixed maturities 38,251 1,640 -- 39,891
-------- ------ ----- --------
$1,570,735 $64,579 $3,035 $1,632,279
======== ====== ===== ========
</TABLE>
A provision of $408,937and $361,018 at December 31, 1998 and 1997,
respectively, has been provided for fixed maturities that have been
determined by the NAIC to have an impairment in value. In addition to the
asset valuation reserve provision, a loss contingency reserve of $1,700,000
has been established at December 31, 1998 and 1997, for projected fixed
maturity losses.
The carrying value and estimated fair value of investments in fixed
maturities as of December 31, 1998 are shown below by contractual maturity
(in thousands). 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.
Carrying Estimated
value fair value
Due in 1 year or less $ 307,807 $ 326,471
Due after 1 year through 5 years 392,658 417,246
Due after 5 years through 10 years 270,020 282,911
Due after 10 years 21,841 23,045
-------- --------
992,326 1,049,673
Mortgage-backed securities 524,821 530,913
-------- --------
$1,517,147 $1,580,586
======== ========
The average duration until maturity for the above fixed maturities,
excluding mortgage-backed securities, is 3.51 years.
Proceeds from sales of fixed maturities were $66,334,584, $43,061,083 and
$86,235,854 during 1998, 1997 and 1996, respectively. Gross gains of
$1,734,636, $589,958 and $807,839 and gross losses of $1,885,632, $137,218
and $3,080,341 were realized on those sales in 1998, 1997 and 1996,
respectively. Net realized capital gains (losses), less applicable income
taxes of $3,207,823, $1,852,451 and $974,141 were transferred to the IMR in
1998, 1997 and 1996, respectively.
<PAGE>
CUNA MUTUAL LIFE INSURANCE COMPANY
Notes to Statutory Financial Statements
(2) Investments, continued
Equity Securities
The cost, gross unrealized gains and losses, and estimated fair value on
unaffiliated equity securities are as follows (in thousands):
<TABLE>
<CAPTION>
Gross Gross Estimated
unrealized unrealized fair
Cost gains losses value
---- ----- ------ -----
<S> <C> <C> <C> <C>
December 31, 1998
Common stock $55,551 20,297 (2,090) 73,758
Preferred stock 71 -- (4) 67
December 31, 1997
Common stock $44,298 14,010 (2,323) 55,985
Preferred stock 102 4 -- 106
</TABLE>
Mortgage Loans on Real Estate
The Company's mortgage portfolio consists mainly of commercial mortgage
loans. The Company limits its concentrations of credit risk by diversifying
its mortgage loan portfolio so that loans made in any one state are not
greater than 20 percent (14 percent in Illinois) of the aggregate mortgage
loan portfolio balance and loans of no more than 2 percent of the aggregate
mortgage loan portfolio balance are made to any one borrower. In addition to
the asset valuation reserve provision, a loss contingency reserve of
$2,000,000 has been provided for mortgage loans on real estate as of
December 31, 1998 and 1997.
The carrying value and estimated fair value of mortgage loans as of December
31, 1998 and 1997 are as follows (in thousands):
Carrying Estimated
value fair value
1998 $306,037 $328,591
1997 362,958 385,689
Assets Designated
The carrying values of assets designated for regulatory authorities as of
December 31 are as follows (in thousands):
1998 1997
---- ----
Fixed maturities and
short-term investments $1,527,512 $1,565,951
Mortgage loans on real estate 306,037 362,958
Policy loans 101,569 101,061
-------- --------
$1,935,118 $2,029,970
======== ========
Net Investment Income
Components of net investment income as of December 31 are as follows (in
thousands):
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Fixed maturities $114,421 $123,395 $124,778
Equity securities 1,198 458 1,744
Mortgage loans on real estate 29,057 34,372 37,968
Investment real estate 9,244 10,158 11,456
Policy loans 6,664 6,571 6,513
Other invested assets (2,244) 4,711 4,390
Short-term investments 2,175 2,689 2,222
Derivative financial instruments (1,835) (1,445) (360)
Other 2,911 11 79
------- ------- -------
Gross investment income 161,591 180,920 188,790
Less investment expenses 12,593 12,728 14,217
------- ------- -------
Net investment income $148,998 $168,192 $174,573
======= ======= =======
</TABLE>
<PAGE>
CUNA MUTUAL LIFE INSURANCE COMPANY
Notes to Statutory Financial Statements
(2) Investments, continued
Realized Gains and Losses
Net realized investment gains and losses as of December 31 are summarized as
follows (in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Fixed maturities $(1,645) $1,843 $(3,194)
Equity securities 3,832 2,853 6,466
Mortgage loans on real estate 2,965 1,030 (433)
Investment real estate 413 3,056 428
Derivative financial instruments (108) -- (3,068)
Short-term investments and other
invested assets -- 12 --
---- ---- ----
5,457 8,794 199
Less:
Capital gains tax 2,566 3,057 (946)
Transfer to interest maintenance reserve 3,208 1,852 974
---- ---- ----
Net realized investment gains $ (317) $3,885 $ 171
==== ==== ====
</TABLE>
Investment Expenses
The Company incurs expense in managing its investment portfolio and
producing investment income. These expenses, which include salaries,
brokerage fees, securities custodial fees, real estate expenses and the
like, are deducted from investment income to determine the net investment
income reported in the financial statements.
Derivative Financial Instruments
As of December 31, 1998, the Company had an interest rate swap
agreement with a major financial institution, having a notional amount of
$100 million. Under the agreement, the Company receives interest payments at
a floating rate based on an interest rate index, which was 4.22 percent as
of December 31, 1998, and pays interest on the same notional amount at a
fixed rate, which was 6.96 percent. Amounts exchanged as a part of the
interest rate differential are accounted for as adjustments to investment
income. This interest rate swap agreement is scheduled to terminate in the
year 2000. As of December 31, 1998, the fair value of the interest swap
agreement was ($3,420,000). This negative fair value represents the
estimated amount the Company would have to pay at December 31, 1998, to
cancel the contract or transfer it to another party.
As of December 31, 1998, the Company had three interest rate cap agreements
with two major financial institutions, having a total notional amount of
$500 million. The Company paid $2,280,000 for these agreements which
terminate in 1999. The agreements entitle the Company to receive from the
counter-parties the amounts, if any, by which the selected market interest
rates exceed the strike rates stated in the agreements. The amount paid to
purchase the interest rate caps is included in other invested assets and
amortized over the term of the agreements. The fair value, which was -0- as
of December 31, 1998, represents the estimated amount the Company would
receive if it transferred the agreements to another party. As of December
31, 1998, the carrying value of the caps was $514,860.
In October 1998, the Company entered into a one-year total return swap
agreement. The purpose is to increase exposure to the high yield bond
market, consistent with the Company's strategic asset allocation. The
Company pays interest on a notional amount of $25 million based on the
one-month LIBOR interest rate and receives the total return of a high yield
bond index on the same notional amount. Net settlements are made quarterly.
The position is further hedged by ownership of a $25 million one-year bond
that pays a floating rate that is also based upon LIBOR. The net effect is
the equivalent of a $25 million investment in high yield fixed maturities
without incurring the specific credit risks and transaction costs of
purchasing individual securities. As of December 31, 1998, the Company has
recognized $510,808 of income relating to this derivative investment and its
fair value was $575,000.
During 1998, the Company sold S&P Stock Index futures with a face amount of
approximately $3.9 million. The purpose of the sales was to reduce exposure
to the domestic equity market, consistent with the Company's strategic asset
allocation. The futures positions were closed out prior to the end of the
year with a loss of $108,448 after certain equity investments were sold and
the futures were no longer necessary.
<PAGE>
CUNA MUTUAL LIFE INSURANCE COMPANY
Notes to Statutory Financial Statements
(2) Investments, continued
Derivative Financial Instruments, continued
The Company is exposed to credit losses in the event of nonperformance by
the counter-parties to its swap and cap agreements. The Company anticipates,
however, that the counter-parties will be able to fully satisfy their
obligations under the contracts. The Company monitors the credit standing of
the counter-parties. The futures contracts are traded in an exchange and
have no counter-party risk.
(3) Investment Real Estate
A summary of investment real estate held as of December 31 is as follows (in
thousands):
1998 1997
Cost:
Investment real estate $83,537 $84,297
Home office 16,064 15,615
------ ------
99,601 99,912
Less accumulated depreciation 37,256 35,141
------ ------
$62,345 $64,771
====== ======
Investment real estate and the home office buildings are being depreciated
using the straight-line basis over the useful lives of these assets. In
addition to the asset valuation reserve provision, a loss contingency
reserve of $2,100,000 and $2,350,000 at December 31, 1998 and 1997,
respectively, has been provided for investment real estate.
(4) Note Payable
As of December 31, 1998, the Company has an outstanding liability for
borrowed money in the original amount of $1,300,000 as a result of a
non-recourse interest-free loan and grant made by the Community
Redevelopment Agency of the City of Los Angeles, California. The loan is
secured by real estate property with an appraisal value that exceeds the
loan principal balance. The loan will be amortized on a straight-line basis
over 240 months beginning in September, 2001. The loan agreement includes a
grant provision forgiving 15 percent of the original balance in September,
2001 upon the fulfillment of conditions specified in the loan agreement. It
is the Company's opinion that these conditions have been fully satisfied.
(5) Affiliation and Transactions with Affiliates and Related Parties
The Company has entered into an agreement of permanent affiliation with CUNA
Mutual Insurance Society (CMIS), a mutual multi-line insurer domiciled in
Wisconsin. The agreement is not a merger or consolidation, in that both
companies remain separate corporate entities, and both continue to be
separately owned and ultimately controlled by their respective policyholder
groups, who retain their voting rights without change. The agreement terms
include a provision for reinsurance of each company's individual life and
health business, joint development of business plans and distribution
systems for the sale of individual insurance and financial service products
within the credit union market, and a provision for the sharing of certain
resources and facilities. Expenses relating to shared resources and
facilities are allocated between the companies and their subsidiaries under
a jointly developed cost-sharing agreement. Expenses are allocated based on
specific identification or, if indeterminable, generally on the basis of
usage or benefit derived. These transactions give rise to intercompany
account balances, which are settled at least annually. Subsequent to each
year-end, the expense allocation process is subject to review by each
company. Based on these reviews, allocated expenses to each company may be
adjusted, if determined necessary. The Company's allocated expenses were
increased by $154,672, $975,672 and $736,162, during 1998, 1997 and 1996,
respectively.
On July 1, 1998, the Company formed a non-insurance subsidiary, CMIA
Wisconsin, Inc.. This subsidiary employs representatives who sell property
and casualty insurance coverage on behalf of the CUNA Mutual Group. CMIA
Wisconsin, Inc., is reimbursed for the costs associated with providing these
employment services by CUNA Mutual Insurance Agency, Inc., a non-insurance
affiliate, under terms of a service agreement between the two entities.
Equity security investments on December 31, 1998, include the Company's
wholly owned subsidiaries, Red Fox Motor Hotel Corporation and CMIA
Wisconsin, Inc. and the 50 percent ownership of CIMCO Inc. (CIMCO), a
non-insurance affiliate. The carrying value of the subsidiary investments on
the Company's books amounted to $3,278,009 and $1,306,903 at December 31,
1998 and 1997, respectively. Included in net investment income for 1996 was
dividend income of $1,328,364 from Century Life Insurance Company (a former
wholly owned subsidiary).
<PAGE>
CUNA MUTUAL LIFE INSURANCE COMPANY
Notes to Statutory Financial Statements
(5) Affiliation and Transactions with Affiliates and Related Parties, continued
The Company allocates expenses to its subsidiaries. These expenses, such as
salaries, rents, depreciation, and other operating expenses, represent the
subsidiaries' share of expenses and are allocated based on specific
identification or, if indeterminable, generally on the basis of usage or
benefit derived. These transactions give rise to intercompany account
balances, which are settled monthly.
The Company has a note receivable from CUNA Mutual Investment Corporation
(CMIC) with a stated maturity date of January 15, 2011. The effective yield
on the date of the agreement was 10.62 percent. The yield varies over the
life of the note, as both the yield and the payment stream are determined
based on the pay-down activity of an underlying notional pool of Federal
National Mortgage Association mortgages. The structure of this arrangement
provides a hedge against the Company's fixed maturity holdings, as the
return varies inversely with the return on the fixed maturity portfolio. The
carrying value of the note was $5.1 million and $7.2 million at 1998 and
1997, respectively, and is included in other invested assets.
The Company is party to an agreement with CIMCO for investment advisory
services. CIMCO, 50 percent of which is owned by the Company and 50 percent
owned by CMIC, provides an investment program, which complies with policies,
directives and guidelines established by the Company. For these services,
the Company paid fees to CIMCO totaling $2,172,000, $2,115,000 and
$2,581,800, for 1998, 1997 and 1996, respectively.
CUNA Mutual created its own proprietary mutual funds entitled MEMBERS Mutual
Funds, which became available to the public in 1998. The carrying value of
the Company's investments in the funds was $20,332,202 and $11,000,078 at
1998 and 1997, respectively.
(6) Separate Accounts
The Company has three separate account components. The first component is
used for the investment of premiums on flexible premium variable universal
life insurance policies and has nine subaccounts, which invest exclusively
in shares of a single corresponding fund. The funds consist of the
following: Capital Appreciation Stock, Growth and Income Stock, Balanced
(combination of common stock and bond), Bond, Money Market, Treasury 2000,
International Stock, World Governments, and Emerging Growth. The second
component is used for the investment of group annuity premium deposits and
has 10 subaccounts, which invest in all but the Treasury 2000 fund, plus
High Income and Developing Markets subaccounts. The third component is used
for the investment of premiums received on variable annuity contracts and
has 10 subaccounts, which invest in all but the Treasury 2000 fund, plus
High Income and Developing Markets subaccounts.
(7) Annuity Reserves and Deposit Liabilities
The withdrawal characteristics of the Company's annuity contracts and
deposit funds as of December 31 are as follows (in thousands):
1998 1997
---- ----
Subject to discretionary withdrawal:
With market value adjustments $ 724,535 $ 581,114
At book value, less surrender charge 298,044 431,984
At market value 1,181,132 749,944
At book value, no charge or adjustment 714,170 710,936
-------- --------
2,917,881 2,473,978
Not subject to discretionary withdrawal 41,091 39,800
-------- --------
2,958,972 2,513,778
Reinsurance ceded 395,706 437,765
-------- --------
$2,563,266 $2,076,013
======== ========
(8) Reinsurance
In the ordinary course of doing business, the Company enters into
reinsurance agreements for the purpose of limiting its exposure to loss on
any one single insured or to diversify its risk and limit its overall
financial exposure. The Company would be liable in the event that a
reinsurer is unable to meet the obligations assumed under the reinsurance
agreements.
<PAGE>
CUNA MUTUAL LIFE INSURANCE COMPANY
Notes to Statutory Financial Statements
(8) Reinsurance, continued
The effects of reinsurance on premium income and on benefit expenses
incurred are as follows (in thousands):
1998 1997 1996
---- ---- ----
Premium income:
Direct $458,408 $423,146 $371,031
Assumed 48,355 39,644 30,942
Ceded 22,268 33,180 43,382
------- ------- ------
Premium income, net of reinsurance $484,495 $429,610 $358,591
======= ======= ======
Benefit expenses:
Direct $136,727 $100,413 $84,171
Assumed 13,875 11,266 8,421
Ceded 13,667 12,501 11,328
------- ------ -----
Benefit expenses, net of reinsurance $136,935 $ 99,178 $81,264
======= ====== =====
All assumed business in the above table is assumed from affiliates and the
amounts ceded includes $18,369,127, $30,117,985 and $40,853,178 premiums as
of December 31, 1998, 1997 and 1996, respectively, and $12,278,628,
$11,140,828 and $10,214,240 benefits ceded as of December 31, 1998, 1997 and
1996, respectively, to affiliated companies. Policy reserves and claim
liabilities are net of reinsurance balances of $464,939,512, $501,275,170
and $534,173,135 at December 31, 1998, 1997 and 1996, respectively.
(9) Federal Income Taxes
The Company files a consolidated life/nonlife federal income tax return with
its subsidiaries, Red Fox Motor Hotel Corporation, PLAN AMERICA Program,
Inc., and CMIA of Wisconsin, Inc. The Company's policy is to collect from or
refund to its subsidiaries the amount of taxes applicable to its operations
had it filed a separate return. Net federal income taxes payable or
recoverable reflect balances payable to or due from subsidiaries and the
Internal Revenue Service (IRS) as follows (in thousands):
1998 1997
---- ----
Due from subsidiaries $ -- $ --
Due (to)/from IRS (5,025) 2,158
------ ------
$ (5,025) $ 2,158
------ -----
<PAGE>
CUNA MUTUAL LIFE INSURANCE COMPANY
Notes to Statutory Financial Statements
(9) Federal Income Taxes, continued
The actual federal income tax expense differs from "expected" tax expense
computed by applying the statutory federal income tax rate of 35 percent to
the earnings before federal income taxes and net realized capital gains
(losses) for the following reasons (in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
Amount Percent Amount Percent Amount Percent
<S> <C> <C> <C> <C> <C> <C>
Computed "expected" tax expense $5,460 35.0% $ 9,164 35.0% $8,396 35.0%
Nontaxable investment income (2,587) (16.58) (1,419) (5.4) (4,159) (17.3)
Mutual life insurance company
differential earnings tax 3,450 22.12 4,200 16.0 2,599 10.8
Deferred acquisition costs 681 4.37 1,465 5.6 614 2.6
Book and tax reserve change (1,569) (10.06) (670) (2.6) 1,400 5.8
Prior year over/under accrual (72) (0.46) (200) (.8) (1,500) (6.3)
General & administrative expenses (543) (3.48)
Other, net (619) (3.97) 857 3.3 363 1.6
Accrued policyholder dividends 235 1.51 (1,189) (4.5) -- --
----- ---- ------ ---- ----- ----
Total federal income tax expense $4,436 28.45% $12,208 46.6% $7,713 32.2%
===== ==== ====== ==== ===== ====
</TABLE>
The Company's consolidated federal income tax return has been examined by
the IRS through the year ending December 31, 1994. The Company is currently
under examination for the years ending December 31, 1995 and December 31,
1996. The Company does not expect the examination to result in a material
adjustment.
Income tax expense (benefit) on net realized capital gains (losses) amounted
to $2,565,792, $3,056,961, and ($946,308) for 1998, 1997, and 1996,
respectively. Of these amounts $1,727,293, $997,476, and $524,540, were
transferred to the IMR in 1998, 1997, and 1996, respectively. Net income
taxes paid were $11,000,000, $12,500,000, and $16,000,000 in 1998, 1997, and
1996, respectively.
(10) Benefit Plans
Defined Benefit Pension Plans
The Company has two noncontributory defined benefit pension plans that cover
substantially all employees and agents who meet eligibility requirements.
Until December 12, 1997, the pension plans were funded through a Deposit
Administration contract issued by the Company. On December 12, 1997, the
Company transferred the plan assets from the Deposit Administration contract
to State Street Bank and Trust Company as trustee. The amount transferred
was $43,871,243 for the defined benefit pension plans. Plan assets are now
invested primarily in the Ultra Series Funds, a family of mutual funds,
which serves as the investment vehicle for the Company's variable insurance,
annuity and pension products. The total pension expense for 1998, 1997 and
1996 was $2,614,251, $2,673,924 and $673,542, respectively.
The actuarial present value of accumulated plan benefits and plan net assets
available for benefits for the Company's pension plans as of January 1, 1998
and 1997 are as follows (in thousands):
1998 1997
---- ----
Actuarial present value of accumulated plan benefits
Vested $35,556 $ 32,101
Nonvested 741 1,008
------ ------
$36,297 $ 33,109
====== ======
Net assets available for benefits $54,074 $ 46,944
====== ======
<PAGE>
CUNA MUTUAL LIFE INSURANCE COMPANY
Notes to Statutory Financial Statements
(10) Defined Benefit Pension Plans, continued
The discount rate used in determining the actuarial present value of
accumulated plan benefits on the two plans was 7 percent for 1998 and 1997.
Defined Contribution Pension Plans
The Company has two defined contribution plans (401[k] and thrift) which
cover all regular full-time employees and agents who meet certain
eligibility requirements. Under the plans, the Company contributes an amount
equal to 50 percent of the employees' contributions, up to a maximum of 3
percent of the employees' salaries. The Company contributions were
approximately $1,212,000, $997,500 and $1,141,000 for the years ended
December 31, 1998, 1997 and 1996, respectively.
Nonqualified Pension Plans
In addition to the defined benefit pension plans mentioned above, the
Company has also established three deferred compensation plans and two
supplemental benefit plans. The deferred compensation plans are the CUNA
Mutual Life Insurance Company Deferred Compensation Plan for Agents and
Managers, which had a liability of $759,110 and $651,858 as of December 31,
1998 and 1997, respectively; the CUNA Mutual Life Insurance Company Deferred
Compensation Plan for Home Office Employees, which had a liability of
$328,758 and $347,617 as of December 31, 1998 and 1997, respectively; and
the CUNA Mutual Life Insurance Company Special Deferred Compensation Plan
for Managers, which had a liability of $510,264 and $449,457 as of December
31, 1998 and 1997, respectively.
The supplemental retirement plans include the CUNA Mutual Life Insurance
Company Supplemental Retirement Plan for Agents and Managers, which replaces
the loss of benefits under the regular pension plan which occurs when
deferred compensation is removed from an agent's or manager's earnings base
in order to calculate pension benefits. The balance of the liability for
this plan is $309,590 and $367,199 as of December 31, 1998 and 1997,
respectively. The other plan is the CUNA Mutual Life Insurance Company
Supplemental Retirement Plan for Home Office Employees, which replaces the
loss of benefits under the regular pension plan which occurs when deferred
compensation is removed from a home office employee's earnings base in order
to calculate pension benefits. The balance of the liability for this plan is
$21,662 and $45,052 as of December 31, 1998 and 1997, respectively.
Post-retirement Benefit Plans
The Company provides certain medical and life insurance benefits for
retirees and their beneficiaries and covered dependents. The Company's
medical benefit plan provides subsidized coverage after retirement for
eligible full-time employees and agents, their spouses, and dependents, up
to age 65. Starting at age 65, retirees pay the full cost of their coverage.
Additionally, the Company provides group term life insurance for its
retirees, the face amount of which is based on the individual's salary at
retirement. The cost of post-retirement benefits other than pensions is
recognized by the Company during the employee's active working careers. The
Company adopted this accounting policy as of January 1, 1992, and is
amortizing the related initial impact over twenty years.
The following information is presented on a combined plan basis and sets
forth the accumulated post-retirement benefit obligation, the liability for
such obligations included in the accompanying Company financial statements,
and the post-retirement benefit expense at December 31, 1998 and 1997 (in
thousands):
1998 1997
---- ----
Accumulated post-retirement benefit obligation:
Active plan participants $ 2,746 $ 2,716
Inactive plan participants 5,870 5,224
----- -----
8,616 7,940
Transition obligation (1,599) (1,731)
Unrecognized loss (1,704) (2,061)
Unrecognized prior service cost (32) (44)
----- -----
Accrued post-retirement benefit cost $ 5,281 $ 4,104
===== =====
<PAGE>
CUNA MUTUAL LIFE INSURANCE COMPANY
Notes to Statutory Financial Statements
(9) Benefit Plans, continued
Post-retirement Benefit Plans, continued
Net periodic post-retirement benefit expense for 1998 and 1997, including
the following components (in thousands):
1998 1997
---- ----
Service cost $ 563 $ 889
Interest cost on projected benefit obligation 617 489
Amortization
Prior service cost 12 12
Transition obligation 133 133
Unrecognized loss 252 553
----- -----
Net periodic post-retirement benefit expense $ 1,577 $ 2,076
===== =====
The weighted average discount rate used in determining the post-retirement
benefit obligation at December 31, 1998 and 1997, was 7.5 percent; the
initial health care cost trend rate was 9.0 percent, trending down to an
ultimate rate of 5.0 percent; and the weighted average rate of compensation
increase was 5.0 percent. The health care cost trend rate assumption has a
significant effect on the amounts reported. To illustrate, increasing the
assumed health care cost trend rates by one percentage point in each year
would increase the post-retirement benefit obligation as of December 31,
1998, by $2,322,112 and the estimated eligibility cost and interest cost
components of net periodic post-retirement benefit cost for 1998 by
$373,296.
(11) Commitments and Contingencies
The Company participates in a securities lending program. All securities
loaned are fully collateralized with cash, U.S. government securities, or
irrevocable bank letters of credit. At December 31, 1998, the par value of
securities loaned by the Company totaled $9,935,000.
The Company had no outstanding loan commitments at December 31, 1998.
The Company is a defendant in various legal actions arising out of the
conduct of its business. In the opinion of management and in-house legal
counsel, the ultimate liability, if any, resulting from all such pending
actions will not materially affect the financial position or results of
operations of the Company.
<PAGE>
CUNA MUTUAL LIFE INSURANCE COMPANY
Schedule I - Summary of Investments -
Other than Investments in Related Parties
December 31, 1998
<TABLE>
<CAPTION>
Amount at which
shown in the
Statutory Statement
of Admitted Assets,
Cost Value Liabilities and Surplus
Fixed maturities:
Bonds:
<S> <C> <C> <C>
United States government and government
agencies and authorities $ 53,036,590 58,575,230 56,036,590
States, municipalities and political subdivisions 38,258 38,000 38,258
Foreign governments 16,432,837 17,920,005 16,432,837
Corporate securities 886,239,900 937,190,444 885,830,963
Foreign corporate securities 33,986,628 35,949,852 33,986,628
Mortgage-backed securities 524,821,267 230,912,759 524,821,267
------------ ------------ ------------
Total fixed maturities 1,517,555,480 1,580,586,290 1,517,146,543
============ ============ ============
Equity securities:
Common stocks:
Public utilities 2,066,808 2,001,150 2,001,150
Banks, trust and insurance companies 3,792,264 5,762,058 5,762,055
Industrial, miscellaneous and all other 49,691,636 65,995,304 65,995,304
Non-redeemable preferred stocks 71,222 71,222 71,222
------------ ------------ ------------
Total equity securities 55,621,930 73,829,734 73,829,731
------------ ============ ------------
Mortgage loans on real estate 306,036,561 306,036,561
Investment real estate 14,195,998 14,195,998
Real estate acquired in satisfaction of debt 48,149,533 48,149,533
Policy loans 101,568,838 101,568,838
Other long-term investments 16,799,356 16,799,356
Investment receivable 19,886,019 19,886,019
Short-term investments 74,481,372 74,481,372
------------ ------------
Total investments $2,154,295,087 2,172,093,951
============ ============
</TABLE>
<PAGE>
CUNA MUTUAL LIFE INSURANCE COMPANY
Schedule III - Supplementary Insurance Information
Years Ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
Future
policy Other
benefits, policy
Deferred losses, claims
policy claims and
acquisition and loss Unearned benefits Premium
Segment costs expenses premiums payable revenue
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1998:
Life insurance $ -- 1,764,656,059 -- 9,850,063 687,827,795
========= ============ ======== ========= ===========
Year ended December 31, 1997:
Life insurance $ -- 1,838,556,204 -- 7,181,708 588,628,879
========= ============ ======== ========= ===========
Year ended December 31, 1996:
Life insurance $ -- 1,911,927,116 -- 5,816,767 456,216,468
========= ============ ======== ========= ===========
Benefits Amortization
claims of deferred
Net losses and policy Other
investment settlement acquisition operating Premium
income expenses costs expenses written
Year ended December 31, 1998:
Life insurance $148,998,386 307,608,912 -- 110,315,105 --
=========== =========== ======== ========== ========
Year ended December 31, 1997:
Life insurance $168,191,667 253,871,140 -- 108,657,518 --
=========== =========== ======== ========== ========
Year ended December 31, 1996:
Life insurance $174,573,265 268,333,774 -- 61,758,217 --
=========== =========== ======== ========== ========
</TABLE>
<PAGE>
CUNA MUTUAL LIFE INSURANCE COMPANY
Schedule IV - Reinsurance
Years Ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
Assumed Percentage
Ceded to other from other of amount
Gross amount companies companies Net amount assumed to net
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1998:
Life insurance in force $ 11,220,070,381 2,032,638,000 2,805,647,619 11,993,080,000 23.4%
============== ============ ============ ============= ======
Premiums
Life insurance $ 456,220,390 21,482,248 31,465,273 466,203,415
Accident and health insurance 2,187,481 785,275 16,889,420 18,291,626
-------------- ------------ ------------ -------------
Total premiums $ 458,407,871 22,267,523 48,354,693 484,495,041 10.0%
============== ============ ============ ============= ======
Year ended December 31, 1997:
Life insurance in force $ 11,011,821,402 1,730,140,000 2,358,526,598 11,640,208,000 20.3%
============== ============ ============ ============= ======
Premiums
Life insurance $ 421,255,332 32,540,795 26,009,624 414,724,161
Accident and health insurance 1,891,033 639,302 13,633,904 14,885,635
-------------- ------------ ------------ -------------
Total premiums $ 423,146,365 33,180,097 39,643,528 429,609,796 9.2%
============== ============ ============ ============= ======
Year ended December 31, 1996:
Life insurance in force $ 11,034,287,601 1,593,020,119 1,950,126,518 11,391,394,000 17.1%
============== ============ ============ ============= ======
Premiums
Life insurance $ 369,320,913 42,927,795 20,190,933 346,584,051
Accident and health insurance 1,709,891 454,396 10,751,785 12,007,280
-------------- ------------ ------------ -------------
Total premiums $ 371,030,804 43,382,191 30,942,718 358,591,331 8.6%
============== ============ ============ ============= ======
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
CUNA Mutual Life Insurance Company:
We have audited the accompanying statutory statements of admitted assets,
liabilities, and surplus of CUNA Mutual Life Insurance Company as of December
31, 1998 and 1997, and the related statutory statements of operations, changes
in unassigned surplus, and cash flows for each of the years in the three-year
period ended December 31, 1998. In connection with our audits of the financial
statements, we also have audited the financial statement schedules I, III, and
IV. These financial statements and financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and financial statement schedules based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As described more fully in note 1 to the financial statements, the Company
prepared these financial statements using accounting practices prescribed or
permitted by the Iowa Department of Commerce, Insurance Division, which
practices differ from generally accepted accounting principles. The effects of
the variances between the statutory basis of accounting and generally accepted
accounting principles on the 1997 and 1996 financial statements are also
described in note 1. The effects of such variances on the 1998 financial
statements, although not reasonably determinable as of this date, are presumed
to be material.
In our opinion, because of the effects of the matters discussed in the third
paragraph of this report, the financial statements referred to above do not
present fairly, in conformity with generally accepted accounting principles, the
financial position of CUNA Mutual Life Insurance Company as of December 31, 1998
and 1997, or the results of its operations or its cash flows for each of the
years in the three-year period ended December 31, 1998.
Also, in our opinion, the financial statements referred to above present fairly,
in all material respects, the admitted assets, liabilities and surplus of CUNA
Mutual Life Insurance Company as of December 31, 1998 and 1997, and the results
of its operations and its cash flows for each of the years in the three-year
period ended December 31, 1998, on the basis of accounting described in note 1.
Also, in our opinion, the related financial statement schedules, when considered
in relation to the basic financial statements, taken as a whole, present fairly,
in all material respects, the information set forth therein.
KPMG PEAT MARWICK LLP
Des Moines, Iowa
March 19, 1999
<PAGE>
APPENDIX A
ILLUSTRATIONS OF POLICY VALUES AND DEATH BENEFITS
The following tables have been prepared to help show how values under the Policy
can change with investment performance. Separate tables based on unisex
mortality rates are available from the address shown on the first page of this
prospectus. At your request, the Company will provide an illustration based upon
your Age, planned premium payments and other factors.
The illustrations are based on the following five factors. (The upper right hand
corner of each illustration identifies those factors.)
1. Age at issue - Some show Age 35. Others show Age 50.
2. Planned annual premium - The premium illustrated is $1,200 or $2,500.
3. Cost of Insurance - Some show the mortality rates currently being charged.
Others show the guaranteed rate (the maximum rate the Policy allows the
Company to charge).
4. Projected Dividends - Illustrations based on current mortality rates include
projected dividends. Illustrations based on guaranteed mortality rates do
not.
5. Choice of death benefit option - Some show option 1 and others show option
2.
Factors That Do Not Vary
All the illustrations make the following assumptions:
o The Insured is a non smoker.
o The Specified Amount of coverage is $100,000.
o Planned premiums are paid on the first day of the Policy year for 30 years.
o No loans are taken.
o No partial surrenders are made.
o All Net Premium is allocated to the Separate Account and invested equally in
each Fund.
o No changes are made to the Specified Amount.
o No transfer fees are incurred.
o The Policy has no riders.
o The charge for state Premium Tax is 2%.
o No federal income tax is paid.
Effect of Hypothetical Investment Returns
To show how investment return affects Policy values, the tables illustrate three
different hypothetical rates of return. The tables show gross annual rates of
return of 0%, 6% and 12%, which produce approximate net annual rates of return
of -1.64%, 4.36% and 10.36%, respectively. Net returns are lower than gross
returns due to charges made by the Separate Account and by the underlying funds.
Charges are expressed as a percentage of average daily net assets.
The table below shows for each Subaccount the total of the mortality and expense
fee and the underlying series level fees.
Mortality & Expense Fund Fees* Total
Capital Appreciation Stock .90 .81 1.71
Growth and Income Stock .90 .61 1.51
Balanced .90 .71 1.61
Bond .90 .56 1.46
Money Market .90 .46 1.36
Treasury 2000 .90 .45 1.35
International Stock .90 1.05 1.95
MFS World Governments .90 1.00 1.90
MFS Emerging Growth .90 0.87 1.77
Average .90 .72 1.62
* The illustrations on the following pages are computed using the average
(1.62) total expense across the Subaccounts for last year. The Fund Fees are
the expenses incurred by each Fund during the most recent fiscal year. The
prospectus and statement of additional information for each Fund more fully
discusses its expenses. Certain expenses of the MFS Global Governments Fund
were reimbursed by the Fund's investment adviser during 1998. Pursuant to an
agreement between the Fund and its investment adviser, the reimbursement
will continue past the current fiscal year. Absent the expense
reimbursement, the MFS Global Governments Fund expenses (Fund Fees) would
have been 1.15%.
How Varying a Factor Affects Hypothetical Investment Returns
Changing any factor in the illustrations would change many numbers throughout
the table. For example, illustrated values would be different if the Insured
were a different Age, a different risk classification, or if unisex mortality
rates were used. Policy values would change if premiums were paid at different
times or in different amounts or if investment rates of return fluctuated up and
down. Policy values based on current mortality charges would be lower if the
Company did not pay the dividends it has projected but not guaranteed.
(Dividends are expected to be $39 beginning in Policy year 11, plus .61% of
average Accumulated Value during Policy years 11-20 and 1.01% beginning in
Policy year 21.) Policy values would be lower if more expenses were paid.
Expenses vary by each underlying fund portfolio and each has the right to change
its charge in the future. The illustrations do not show any charges for federal
income taxes. If in the future taxes were due, gross annual rates of return
would have to exceed 0%, 6% and 12% by an amount sufficient to cover the charge
for taxes in order to produce the Policy values shown.
<PAGE>
ILLUSTRATION OF POLICY VALUES
MEMBERSAE Variable Universal Life
ISSUED BY CUNA MUTUAL LIFE INSURANCE COMPANY
NUMBER 1
<TABLE>
<CAPTION>
Male Non Smoker Age at Issue: 35
Specified Amount: $100,000 Annual Premium: $1,200
Planned Premium Payable Annually for: 30 years Based on: Current Mortality Charges
Policy Loans and Withdrawals: None Projected Dividends: Included
Hypothetical Gross Rates of Return: 0%, 6% and 12% Death Benefit: Option 1*
------- ------------- ---------------------------------- ----------------------------------- =====================================
Premiums
End Accum at 5% 0.00% GROSS 6.00% GROSS 12.00% GROSS
of Interest (-1.64% NET) (4.36% NET) (10.36% NET)
Year Per Year
---------------------------------- ----------------------------------- =====================================
Death Accum Net Death Accum Net Death Accum Value Net
Benefit Value Cash Value Benefit Value Cash Value Benefit Cash Value
------- ------------- ------------ --------- ----------- ------------ --------- ------------ ----------- ------------ ============
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,260 100,000 871 100 100,000 932 161 100,000 994 223
2 2,583 100,000 1,721 988 100,000 1,898 1,166 100,000 2,083 1,351
3 3,972 100,000 2,546 1,852 100,000 2,896 2,202 100,000 3,275 2,581
4 5,431 100,000 3,347 2,692 100,000 3,926 3,271 100,000 4,580 3,925
5 6,962 100,000 4,123 3,545 100,000 4,990 4,412 100,000 6,010 5,431
6 8,570 100,000 4,873 4,372 100,000 6,086 5,585 100,000 7,574 7,073
7 10,259 100,000 5,595 5,209 100,000 7,216 6,831 100,000 9,287 8,902
8 12,032 100,000 6,289 6,019 100,000 8,380 8,111 100,000 11,165 10,895
9 13,893 100,000 6,954 6,800 100,000 9,579 9,425 100,000 13,223 13,069
10 15,848 100,000 7,590 7,590 100,000 10,813 10,813 100,000 15,481 15,481
15 27,189 100,000 11,734 11,734 100,000 19,308 19,308 100,000 32,806 32,806
20 41,663 100,000 15,234 15,234 100,000 29,777 29,777 100,000 61,902 61,902
25 60,136 100,000 18,190 18,190 100,000 43,473 43,473 151,177 112,818 112,818
30 83,713 100,000 19,803 19,803 100,000 60,847 60,847 242,899 199,098 199,098
======= ============= ============ ========= =========== ============ ========= ============ =========== ============ ============
IMPORTANT NOTICE: The hypothetical investment rates of return shown are
illustrative only and should not be deemed a representation of past or future
investment rates of return. Actual rates of return may be more or less than
those shown and will depend on a number of factors, including the Owner's choice
of investment allocations and the investment results of each series of each
underlying fund. The death benefits and Policy values would be different from
those shown if the actual rates of return averaged 0%, 6%, and 12% over a period
of years but also fluctuated above or below those averages for individual Policy
years. No representations can be made that these hypothetical rates of return
can be achieved for any one year or sustained over any period of time.
<FN>
*Under Option 1 the death benefit is the greater of (1) the Specified Amount or
(2) the Accumulated Value on the date of death multiplied by the Death Benefit
Ratio described in the section of the prospectus titled POLICY BENEFITS, Death
Proceeds - Death Benefit Options 1 and 2.
</FN>
</TABLE>
<PAGE>
ILLUSTRATION OF POLICY VALUES
MEMBERSAE Variable Universal Life
ISSUED BY CUNA MUTUAL LIFE INSURANCE COMPANY
NUMBER 2
<TABLE>
<CAPTION>
Male Non Smoker Age at Issue: 35
Specified Amount: $100,000 Annual Premium: $1,200
Planned Premium Payable Annually for: 30 years Based on: Guaranteed Mortality Charges
Policy Loans and Withdrawals: None Projected Dividends: Not Included
Hypothetical Gross Rates of Return: 0, 6 and 12% Death Benefit: Option 1*
------- ------------- ---------------------------------- ----------------------------------- =====================================
End Premiums
of Accum at 5% 0.00% GROSS 6.00% GROSS 12.00% GROSS
Year Interest (-1.64% NET) (4.36% NET) (10.36% NET)
Per Year
---------------------------------- ----------------------------------- =====================================
Death Accum Net Death Accum Net Death Accum Net
Benefit Value Cash Value Benefit Value Cash Value Benefit Value Cash Value
------- ------------- ------------ --------- ----------- ------------ --------- ------------ ------------ ---------- =============
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,260 100,000 871 100 100,000 932 161 100,000 994 223
2 2,583 100,000 1,721 988 100,000 1,898 1,166 100,000 2,083 1,351
3 3,972 100,000 2,546 1,852 100,000 2,896 2,202 100,000 3,275 2,581
4 5,431 100,000 3,347 2,692 100,000 3,926 3,271 100,000 4,580 3,925
5 6,962 100,000 4,123 3,545 100,000 4,990 4,412 100,000 6,010 5,431
6 8,570 100,000 4,873 4,372 100,000 6,086 5,585 100,000 7,574 7,073
7 10,259 100,000 5,595 5,209 100,000 7,216 6,831 100,000 9,287 8,902
8 12,032 100,000 6,289 6,019 100,000 8,380 8,111 100,000 11,165 10,895
9 13,893 100,000 6,954 6,800 100,000 9,579 9,425 100,000 13,223 13,069
10 15,848 100,000 7,590 7,590 100,000 10,813 10,813 100,000 15,481 15,481
15 27,189 100,000 10,480 10,480 100,000 17,763 17,763 100,000 30,857 30,857
20 41,663 100,000 12,274 12,274 100,000 25,607 25,607 100,000 55,757 55,757
25 60,136 100,000 12,353 12,353 100,000 34,129 34,129 129,494 96,638 96,638
30 83,713 100,000 9,637 9,637 100,000 43,010 43,010 198,019 162,311 162,311
======= ============= ============ ========= =========== ============ ========= ============ ============ ========== =============
IMPORTANT NOTICE: The hypothetical investment rates of return shown are
illustrative only and should not be deemed a representation of past or future
investment rates of return. Actual rates of return may be more or less than
those shown and will depend on a number of factors, including the Owner's choice
of investment allocations and the investment results of each series of each
underlying fund. The death benefits and Policy values would be different from
those shown if the actual rates of return averaged 0%, 6%, and 12% over a period
of years but also fluctuated above or below those averages for individual Policy
years. No representations can be made that these hypothetical rates of return
can be achieved for any one year or sustained over any period of time.
<FN>
*Under Option 1 the death benefit is the greater of (1) the Specified Amount or
(2) the Accumulated Value on the date of death multiplied by the Death Benefit
Ratio described in the section of the prospectus titled POLICY BENEFITS, Death
Proceeds - Death Benefit Options 1 and 2.
</FN>
</TABLE>
<PAGE>
ILLUSTRATION OF POLICY VALUES
MEMBERSAE Variable Universal Life
ISSUED BY CUNA MUTUAL LIFE INSURANCE COMPANY
NUMBER 3
<TABLE>
<CAPTION>
Male Non Smoker Age at Issue: 35
Specified Amount: $100,000 Annual Premium: $1,200
Planned Premium Payable Annually for: 30 years Based on: Current Mortality Charges
Policy Loans and Withdrawals: None Projected Dividends: Included
Hypothetical Gross Rates of Return: 0%, 6% and 12% Death Benefit: Option 2*
------- ------------- ---------------------------------- ----------------------------------- ====================================
Premiums
End Accum at 5% 0.00% GROSS 6.00% GROSS 12.00% GROSS
of Interest (-1.64% NET) (4.36% NET) (10.36% NET)
Year Per Year
---------------------------------- ----------------------------------- ====================================
Death Accum Net Death Accum Net Death Accum Net
Benefit Value Cash Value Benefit Value Cash Value Benefit Value Cash Value
------- ------------- ------------ --------- ----------- ------------ --------- ------------ ------------ ---------- ============
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,260 100,869 869 98 100,930 930 159 100,992 992 221
2 2,583 101,715 1,715 983 101,892 1,892 1,160 102,077 2,077 1,344
3 3,972 102,536 2,536 1,842 102,884 2,884 2,190 103,262 3,262 2,568
4 5,431 103,330 3,330 2,674 103,905 3,905 3,250 104,556 4,556 3,900
5 6,962 104,097 4,097 3,519 104,957 4,957 4,379 105,969 5,969 5,390
6 8,570 104,835 4,835 4,333 106,037 6,037 5,536 107,510 7,510 7,009
7 10,259 105,542 5,542 5,157 107,146 7,146 6,760 109,192 9,192 8,807
8 12,032 106,220 6,220 5,950 108,283 8,283 8,013 111,029 11,029 10,759
9 13,893 106,865 6,865 6,711 109,449 9,449 9,295 113,034 13,034 12,879
10 15,848 107,477 7,477 7,477 110,642 10,642 10,642 115,222 15,222 15,222
15 27,189 111,508 11,508 11,508 118,886 18,886 18,886 132,013 32,013 32,013
20 41,663 114,779 14,779 14,779 128,752 28,752 28,752 159,533 59,533 59,533
25 60,136 117,287 17,287 17,287 141,014 41,014 41,014 206,497 106,497 106,497
30 83,713 118,080 18,080 18,080 155,065 55,065 55,065 284,813 184,813 184,813
======= ============= ============ ========= =========== ============ ========= ============ ============ ========== ============
IMPORTANT NOTICE: The hypothetical investment rates of return shown are
illustrative only and should not be deemed a representation of past or future
investment rates of return. Actual rates of return may be more or less than
those shown and will depend on a number of factors, including the Owner's choice
of investment allocations and the investment results of each series of each
underlying fund. The death benefits and Policy values would be different from
those shown if the actual rates of return averaged 0%, 6%, and 12% over a period
of years but also fluctuated above or below those averages for individual Policy
years. No representations can be made that these hypothetical rates of return
can be achieved for any one year or sustained over any period of time.
<FN>
*Under Option 2 the death benefit is the greater of (1) the Specified Amount
plus the Accumulated Value on date of death, or (2) the Accumulated Value on the
date of death multiplied by the Death Benefit Ratio described in the section of
the prospectus titled POLICY BENEFITS, Death Proceeds - Death Benefit Options 1
and 2.
</FN>
</TABLE>
<PAGE>
ILLUSTRATION OF POLICY VALUES
MEMBERSAE Variable Universal Life
ISSUED BY CUNA MUTUAL LIFE INSURANCE COMPANY
NUMBER 4
<TABLE>
<CAPTION>
Male Non Smoker Age at Issue: 35
Specified Amount: $100,000 Annual Premium: $1,200
Planned Premium Payable Annually for: 30 years Based on: Guaranteed Mortality Charges
Policy Loans and Withdrawals: None Projected Dividends: Not Included
Hypothetical Gross Rates of Return: 0%, 6% and 12% Death Benefit: Option 2*
------- ------------- ---------------------------------- ----------------------------------- ====================================
Premiums
End Accum at 5% 0.00% GROSS 6.00% GROSS 12.00% GROSS
of Interest (-1.64% NET) (4.36% NET) (10.36 NET)
Year Per Year
---------------------------------- ----------------------------------- ====================================
Death Accum Net Death Accum Net Death Accum Net
Benefit Value Cash Value Benefit Value Cash Value Benefit Value Cash Value
------- ------------- ------------ --------- ----------- ------------ --------- ------------ ------------ ---------- ============
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,260 100,869 869 98 100,930 930 159 100,992 992 221
2 2,583 101,715 1,715 983 101,892 1,892 1,160 102,077 2,077 1,344
3 3,972 102,536 2,536 1,842 102,884 2,884 2,190 103,262 3,262 2,568
4 5,431 103,330 3,330 2,674 103,905 3,905 3,250 104,556 4,556 3,900
5 6,962 104,097 4,097 3,519 104,957 4,957 4,379 105,969 5,969 5,390
6 8,570 104,835 4,835 4,333 106,037 6,037 5,536 107,510 7,510 7,009
7 10,259 105,542 5,542 5,157 107,146 7,146 6,760 109,192 9,192 8,807
8 12,032 106,220 6,220 5,950 108,283 8,283 8,013 111,029 11,029 10,759
9 13,893 106,865 6,865 6,711 109,449 9,449 9,295 113,034 13,034 12,879
10 15,848 107,477 7,477 7,477 110,642 10,642 10,642 115,222 15,222 15,222
15 27,189 110,184 10,184 10,184 117,216 17,216 17,216 129,839 29,839 29,839
20 41,663 111,638 11,638 11,638 124,161 24,161 24,161 152,400 52,400 52,400
25 60,136 111,134 11,134 11,134 130,638 30,638 30,638 186,898 86,898 86,898
30 83,713 107,578 7,578 7,578 135,105 35,105 35,105 239,297 139,297 139,297
======= ============= ============ ========= =========== ============ ========= ============ ============ ========== ============
IMPORTANT NOTICE: The hypothetical investment rates of return shown are
illustrative only and should not be deemed a representation of past or future
investment rates of return. Actual rates of return may be more or less than
those shown and will depend on a number of factors, including the Owner's choice
of investment allocations and the investment results of each series of each
underlying fund. The death benefits and Policy values would be different from
those shown if the actual rates of return averaged 0%, 6%, and 12% over a period
of years but also fluctuated above or below those averages for individual Policy
years. No representations can be made that these hypothetical rates of return
can be achieved for any one year or sustained over any period of time.
<FN>
*Under Option 2 the death benefit is the greater of (1) the Specified Amount
plus the Accumulated Value on date of death, or (2) the Accumulated Value on the
date of death multiplied by the Death Benefit Ratio described in the section of
the prospectus titled POLICY BENEFITS, Death Proceeds - Death Benefit Options 1
and 2.
</FN>
</TABLE>
<PAGE>
ILLUSTRATION OF POLICY VALUES
MEMBERSAE Variable Universal Life
ISSUED BY CUNA MUTUAL LIFE INSURANCE COMPANY
NUMBER 5
<TABLE>
<CAPTION>
Male Non Smoker Age at Issue: 50
Specified Amount: $100,000 Annual Premium: $2,500
Planned Premium Payable Annually for: 30 years Based on: Current Mortality Charges
Policy Loans and Withdrawals: None Projected Dividends: Included
Hypothetical Gross Rates of Return: 0%, 6% and 12% Death Benefit: Option 1*
------- ------------- ---------------------------------- ------------------------------------ ====================================
Premiums
End Accum at 5% 0.00% GROSS 6.00% GROSS 12.00% GROSS
of Interest (-1.64% NET) (4.36% NET) (10.36% NET)
Year Per Year
------------------------------------ ====================================
------------ --------- -----------
Death Accum Net Death Accum Net Death Accum Net
Benefit Value Cash Value Benefit Value Cash Value Benefit Value Cash Value
------- ------------- ------------ --------- ----------- ------------ ----------- ----------- ----------- ---------- =============
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 2,625 100,000 1,796 205 100,000 1,924 333 100,000 2,051 460
2 5,381 100,000 3,538 2,026 100,000 3,906 2,395 100,000 4,290 2,779
3 8,275 100,000 5,223 3,791 100,000 5,948 4,516 100,000 6,735 5,303
4 11,314 100,000 6,851 5,499 100,000 8,051 6,699 100,000 9,409 8,057
5 14,505 100,000 8,426 7,233 100,000 10,223 9,030 100,000 12,341 11,148
6 17,855 100,000 9,949 8,915 100,000 12,468 11,434 100,000 15,561 14,527
7 21,373 100,000 11,399 10,604 100,000 14,770 13,974 100,000 19,083 18,288
8 25,066 100,000 12,780 12,223 100,000 17,133 16,577 100,000 22,946 22,389
9 28,945 100,000 14,085 13,767 100,000 19,559 19,241 100,000 27,186 26,868
10 33,017 100,000 15,315 15,315 100,000 22,051 22,051 100,000 31,850 31,850
15 56,644 100,000 22,906 22,906 100,000 38,790 38,790 100,000 67,450 67,450
20 86,798 100,000 28,359 28,359 100,000 59,427 59,427 148,897 128,360 128,360
25 125,284 100,000 31,201 31,201 100,000 87,916 87,916 250,281 233,908 233,908
30 174,402 100,000 28,707 28,707 133,383 127,031 127,031 434,258 413,579 413,579
======= ============= ============ ========= =========== ============ =========== =========== =========== ========== =============
IMPORTANT NOTICE: The hypothetical investment rates of return shown are
illustrative only and should not be deemed a representation of past or future
investment rates of return. Actual rates of return may be more or less than
those shown and will depend on a number of factors, including the Owner's choice
of investment allocations and the investment results of each series of each
underlying fund. The death benefits and Policy values would be different from
those shown if the actual rates of return averaged 0%, 6%, and 12% over a period
of years but also fluctuated above or below those averages for individual Policy
years. No representations can be made that these hypothetical rates of return
can be achieved for any one year or sustained over any period of time.
<FN>
*Under Option 1 the death benefit is the greater of (1) the Specified Amount or
(2) the Accumulated Value on the date of death multiplied by the Death Benefit
Ratio described in the section of the prospectus titled POLICY BENEFITS, Death
Proceeds - Death Benefit Options 1 and 2.
</FN>
</TABLE>
<PAGE>
ILLUSTRATION OF POLICY VALUES
MEMBERSAE Variable Universal Life
ISSUED BY CUNA MUTUAL LIFE INSURANCE COMPANY
NUMBER 6
<TABLE>
<CAPTION>
Male Non Smoker Age at Issue: 50
Specified Amount: $100,000 Annual Premium: $2,500
Planned Premium Payable Annually for: 30 years Based on: Guaranteed Mortality Charges
Policy Loans and Withdrawals: None Projected Dividends: Not Included
Hypothetical Gross Rates of Return: 0%, 6% and 12% Death Benefit: Option 1*
------- ------------- ---------------------------------- ----------------------------------- =====================================
Premiums
End Accum at 5% 0.00% GROSS 6.00% GROSS 12.00% GROSS
of Interest (-1.64% NET) (4.36% NET) (10.36% NET)
Year Per Year
---------------------------------- ----------------------------------- =====================================
Death Accum Net Death Accum Net Death Accum Net
Benefit Value Cash Value Benefit Value Cash Value Benefit Value Surrender
------- ------------- ------------ --------- ----------- ------------ --------- ------------ ------------ ---------- =============
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 2,625 100,000 1,796 205 100,000 1,924 333 100,000 2,051 460
2 5,381 100,000 3,527 2,016 100,000 3,895 2,384 100,000 4,279 2,768
3 8,275 100,000 5,189 3,757 100,000 5,912 4,480 100,000 6,698 5,266
4 11,314 100,000 6,776 5,424 100,000 7,972 6,619 100,000 9,325 7,973
5 14,505 100,000 8,285 7,092 100,000 10,072 8,879 100,000 12,179 10,986
6 17,855 100,000 9,712 8,678 100,000 12,211 11,177 100,000 15,283 14,249
7 21,373 100,000 11,053 10,258 100,000 14,388 13,593 100,000 18,664 17,869
8 25,066 100,000 12,308 11,751 100,000 16,605 16,048 100,000 22,355 21,799
9 28,945 100,000 13,469 13,151 100,000 18,858 18,540 100,000 26,392 26,073
10 33,017 100,000 14,530 14,530 100,000 21,146 21,146 100,000 30,812 30,812
15 56,644 100,000 18,203 18,203 100,000 33,219 33,219 100,000 60,917 60,917
20 86,798 100,000 17,476 17,476 100,000 45,709 45,709 129,991 112,062 112,062
25 125,284 100,000 8,784 8,784 100,000 58,443 58,443 208,657 195,007 195,007
30 174,402 ** ** ** 100,000 71,907 71,907 345,695 329,233 329,233
======= ============= ============ ========= =========== ============ ========= ============ ============ ========== =============
IMPORTANT NOTICE: The hypothetical investment rates of return shown are
illustrative only and should not be deemed a representation of past or future
investment rates of return. Actual rates of return may be more or less than
those shown and will depend on a number of factors, including the Owner's choice
of investment allocations and the investment results of each series of each
underlying fund. The death benefits and Policy values would be different from
those shown if the actual rates of return averaged 0%, 6%, and 12% over a period
of years but also fluctuated above or below those averages for individual Policy
years. No representations can be made that these hypothetical rates of return
can be achieved for any one year or sustained over any period of time.
<FN>
*Under Option 1 the death benefit is the greater of (1) the Specified Amount or
(2) the Accumulated Value on the date of death multiplied by the Death Benefit
Ratio described in the section of the prospectus titled POLICY BENEFITS, Death
Proceeds - Death Benefit Options 1 and 2.
** Policy terminated prior to year 30.
</FN>
</TABLE>
<PAGE>
ILLUSTRATION OF POLICY VALUES
MEMBERSAE Variable Universal Life
ISSUED BY CUNA MUTUAL LIFE INSURANCE COMPANY
NUMBER 7
<TABLE>
<CAPTION>
Male Non Smoker Age at Issue: 50
Specified Amount: $100,000 Annual Premium: $2,500
Planned Premium Payable Annually for: 30 years Based on: Current Mortality Charges
Policy Loans and Withdrawals: None Projected Dividends: Included
Hypothetical Gross Rates of Return: 0%, 6% and 12% Death Benefit: Option 2*
------- ------------- ---------------------------------- ----------------------------------- =====================================
Premiums
End Accum at 5% 0.00% GROSS 6.00% GROSS 12.00% GROSS
of Interest (-1.64% NET) (4.36% NET) (10.36% NET)
Year Per Year
---------------------------------- ----------------------------------- =====================================
Death Accum Net Death Accum Net Death Accum Net
Benefit Value Cash Value Benefit Value Cash Value Benefit Value Cash Value
------- ------------- ------------ --------- ----------- ------------ --------- ------------ ------------ ---------- =============
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 2,625 101,785 1,785 194 101,912 1,912 321 102,039 2,039 448
2 5,381 103,506 3,506 1,994 103,871 3,871 2,359 104,251 4,251 2,740
3 8,275 105,159 5,159 3,727 105,874 5,874 4,442 106,650 6,650 5,219
4 11,314 106,742 6,742 5,390 107,921 7,921 6,569 109,254 9,254 7,902
5 14,505 108,260 8,260 7,066 110,016 10,016 8,822 112,084 12,084 10,891
6 17,855 109,711 9,711 8,677 112,160 12,160 11,126 115,164 15,164 14,130
7 21,373 111,074 11,074 10,278 114,330 14,330 13,534 118,493 18,493 17,697
8 25,066 112,348 12,348 11,791 116,526 16,526 15,969 122,096 22,096 21,540
9 28,945 113,526 13,526 13,208 118,741 18,741 18,422 125,994 25,994 25,676
10 33,017 114,607 14,607 14,607 120,971 20,971 20,971 130,212 30,212 30,212
15 56,644 121,350 21,350 21,350 135,869 35,869 35,869 161,947 61,947 61,947
20 86,798 124,961 24,961 24,961 151,639 51,639 51,639 211,646 111,646 111,646
25 125,284 124,155 24,155 24,155 167,603 67,603 67,603 292,520 192,520 192,520
30 174,402 115,670 15,670 15,670 179,408 79,408 79,408 420,749 320,749 320,749
======= ============= ============ ========= =========== ============ ========= ============ ============ ========== =============
IMPORTANT NOTICE: The hypothetical investment rates of return shown are
illustrative only and should not be deemed a representation of past or future
investment rates of return. Actual rates of return may be more or less than
those shown and will depend on a number of factors, including the Owner's choice
of investment allocations and the investment results of each series of each
underlying fund. The death benefits and Policy values would be different from
those shown if the actual rates of return averaged 0%, 6%, and 12% over a period
of years but also fluctuated above or below those averages for individual Policy
years. No representations can be made that these hypothetical rates of return
can be achieved for any one year or sustained over any period of time.
<FN>
*Under Option 2 the death benefit is the greater of (1) the Specified Amount
plus the Accumulated Value on date of death, or (2) the Accumulated Value on the
date of death multiplied by the Death Benefit Ratio described in the section of
the prospectus titled POLICY BENEFITS, Death Proceeds - Death Benefit Options 1
and 2.
</FN>
</TABLE>
<PAGE>
ILLUSTRATION OF POLICY VALUES
MEMBERSAE Variable Universal Life
ISSUED BY CUNA MUTUAL LIFE INSURANCE COMPANY
NUMBER 8
<TABLE>
<CAPTION>
Male Non Smoker Age at Issue: 50
Specified Amount: $100,000 Annual Premium: $2,500
Planned Premium Payable Annually for: 30 years Based on: Guaranteed Mortality Charges
Policy Loans and Withdrawals: None Projected Dividends: Not Included
Hypothetical Gross Rates of Return: 0%, 6% and 12% Death Benefit: Option 2*
------- ------------- ---------------------------------- ----------------------------------- =====================================
Premiums
End Accum at 5% 0.00% GROSS 6.00% GROSS 12.00% GROSS
of Interest (-1.64% NET) (4.36% NET) (10.36% NET)
Year Per Year
---------------------------------- ----------------------------------- =====================================
Death Accum Net Death Accum Net Death Accum Net
Benefit Value Cash Value Benefit Value Cash Value Benefit Value Cash Value
------- ------------- ------------ --------- ----------- ------------ --------- ------------ ------------- ---------- ============
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 2,625 101,785 1,785 194 101,912 1,912 321 102,039 2,039 448
2 5,381 103,495 3,495 1,984 103,859 3,859 2,348 104,240 4,240 2,728
3 8,275 105,123 5,123 3,691 105,836 5,836 4,404 106,611 6,611 5,179
4 11,314 106,663 6,663 5,311 107,836 7,836 6,484 109,163 9,163 7,811
5 14,505 108,109 8,109 6,916 109,852 9,852 8,659 111,907 11,907 10,713
6 17,855 109,455 9,455 8,421 111,878 11,878 10,843 114,853 14,853 13,819
7 21,373 110,696 10,696 9,901 113,905 13,905 13,110 118,016 18,016 17,221
8 25,066 111,828 11,828 11,272 115,930 15,930 15,373 121,413 21,413 20,856
9 28,945 112,844 12,844 12,526 117,942 17,942 17,624 125,057 25,057 24,739
10 33,017 113,733 13,733 13,733 119,928 19,928 19,928 128,962 28,962 28,962
15 56,644 116,034 16,034 16,034 129,101 29,101 29,101 153,099 53,099 53,099
20 86,798 112,901 12,901 12,901 134,405 34,405 34,405 185,654 85,654 85,654
25 125,284 101,279 1,279 1,279 130,942 30,942 30,942 227,445 127,445 127,445
30 174,402 ** ** ** 110,136 10,136 10,136 276,810 176,810 176,810
======= ============= ============ ========= =========== ============ ========= ============ ============= ========== ============
IMPORTANT NOTICE: The hypothetical investment rates of return shown are
illustrative only and should not be deemed a representation of past or future
investment rates of return. Actual rates of return may be more or less than
those shown and will depend on a number of factors, including the Owner's choice
of investment allocations and the investment results of each series of each
underlying fund. The death benefits and Policy values would be different from
those shown if the actual rates of return averaged 0%, 6%, and 12% over a period
of years but also fluctuated above or below those averages for individual Policy
years. No representations can be made that these hypothetical rates of return
can be achieved for any one year or sustained over any period of time.
<FN>
*Under Option 2 the death benefit is the greater of (1) the Specified Amount
plus the Accumulated Value on date of death, or (2) the Accumulated Value on the
date of death multiplied by the Death Benefit Ratio described in the section of
the prospectus titled POLICY BENEFITS, Death Proceeds - Death Benefit Options 1
and 2.
** Policy terminated prior to year 30.
</FN>
</TABLE>
<PAGE>
APPENDIX B
FIRST YEAR CONTINGENT DEFERRED CHARGES
PER $1,000 OF SPECIFIED AMOUNT
<TABLE>
<CAPTION>
Issue MALE FEMALE
Age COMPOSITE DAC + DSC = TDC COMPOSITE DAC + DSC = TDC
- --------- -------------------------------------------------- -----------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
0 .75 .20 .95 .75 .12 .87
1 .80 .27 1.07 .80 .19 .99
2 .85 .34 1.19 .85 .26 1.11
3 .90 .40 1.30 .90 .32 1.22
4 .95 .47 1.42 .95 .39 1.34
5 1.00 .54 1.54 1.00 .46 1.46
6 1.06 .64 1.70 1.06 .53 1.59
7 1.12 .76 1.88 1.12 .60 1.72
8 1.18 .88 2.06 1.18 .67 1.85
9 1.25 .99 2.24 1.25 .73 1.98
10 1.31 1.08 2.39 1.31 .80 2.11
11 1.37 1.14 2.51 1.37 .86 2.23
12 1.43 1.19 2.62 1.43 .92 2.35
13 1.49 1.22 2.71 1.49 .97 2.46
14 1.55 1.25 2.80 1.55 1.02 2.57
15 1.60 1.28 2.88 1.60 1.07 2.67
16 1.64 1.30 2.94 1.64 1.10 2.74
17 1.67 1.32 2.99 1.67 1.13 2.80
18 1.69 1.34 3.03 1.69 1.16 2.85
19 1.73 1.37 3.10 1.73 1.19 2.92
Issue MALE FEMALE
Age STANDARD NONSMOKER STANDARD NONSMOKER
DAC + DSC = TDC DAC + DSC = TDC DAC + DSC = TDC DAC + DSC = TDC
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
20 1.80 1.44 3.24 1.80 1.41 3.21 1.80 1.25 3.05 1.80 1.23 3.03
21 1.89 1.60 3.49 1.89 1.48 3.37 1.89 1.39 3.28 1.89 1.29 3.18
22 1.99 1.75 3.74 1.99 1.57 3.56 1.99 1.52 3.51 1.99 1.38 3.37
23 2.12 1.88 4.00 2.12 1.66 3.78 2.12 1.63 3.75 2.12 1.45 3.57
24 2.26 1.99 4.25 2.26 1.77 4.03 2.26 1.72 3.98 2.26 1.53 3.79
25 2.42 2.08 4.50 2.42 1.87 4.29 2.42 1.79 4.21 2.42 1.60 4.02
26 2.61 2.18 4.79 2.61 1.96 4.57 2.61 1.90 4.51 2.61 1.65 4.26
27 2.83 2.28 5.11 2.83 2.05 4.88 2.83 2.02 4.85 2.83 1.68 4.51
28 3.07 2.38 5.45 3.07 2.14 5.21 3.07 2.15 5.22 3.07 1.70 4.77
29 3.31 2.51 5.82 3.31 2.24 5.55 3.31 2.28 5.59 3.31 1.74 5.05
30 3.55 2.63 6.18 3.55 2.34 5.89 3.55 2.40 5.95 3.55 1.78 5.33
31 3.78 2.76 6.54 3.78 2.45 6.23 3.78 2.53 6.31 3.78 1.85 5.63
32 4.02 2.89 6.91 4.02 2.57 6.59 4.02 2.66 6.68 4.02 1.91 5.93
33 4.25 3.05 7.30 4.25 2.70 6.95 4.25 2.79 7.04 4.25 2.00 6.25
34 4.49 3.21 7.70 4.49 2.83 7.32 4.49 2.93 7.42 4.49 2.08 6.57
35 4.74 3.39 8.13 4.74 2.97 7.71 4.74 3.05 7.79 4.74 2.16 6.90
36 4.99 3.59 8.58 4.99 3.12 8.11 4.99 3.18 8.17 4.99 2.23 7.22
37 5.25 3.80 9.05 5.25 3.28 8.53 5.25 3.30 8.55 5.25 2.30 7.55
38 5.51 4.03 9.54 5.51 3.44 8.95 5.51 3.43 8.94 5.51 2.37 7.88
39 5.78 4.29 10.07 5.78 3.62 9.40 5.78 3.54 9.32 5.78 2.44 8.22
- --------- -------- ------- --------- ------- ------- ------- ------ -------- ------- ------- ------- -------
</TABLE>
<PAGE>
APPENDIX B
FIRST YEAR CONTINGENT DEFERRED CHARGES
PER $1,000 OF SPECIFIED AMOUNT
<TABLE>
<CAPTION>
ISSUE MALE FEMALE
AGE STANDARD NONSMOKER STANDARD NONSMOKER
DAC + DSC = TDC DAC + DSC = TDC DAC + DSC = TDC DAC + DSC = TDC
- ---------- ------------------------ ----------------------- ------------------------ -----------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
40 6.06 4.56 10.62 6.06 3.81 9.87 6.06 3.64 9.70 6.06 2.52 8.58
41 6.35 4.86 11.21 6.35 4.01 10.36 6.35 3.71 10.06 6.35 2.61 8.96
42 6.64 5.18 11.82 6.64 4.22 10.86 6.64 3.77 10.41 6.64 2.71 9.35
43 6.95 5.51 12.46 6.95 4.44 11.39 6.95 3.81 10.76 6.95 2.81 9.76
44 7.27 5.87 13.14 7.27 4.67 11.94 7.27 3.85 11.12 7.27 2.91 10.18
45 7.60 6.26 13.86 7.60 4.93 12.53 7.60 3.92 11.52 7.60 3.04 10.64
46 7.94 6.67 14.61 7.94 5.20 13.14 7.94 3.98 11.92 7.94 3.16 11.10
47 8.27 7.12 15.39 8.27 5.49 13.76 8.27 4.03 12.30 8.27 3.29 11.56
48 8.63 7.58 16.21 8.63 5.78 14.41 8.63 4.10 12.73 8.63 3.43 12.06
49 9.02 8.06 17.08 9.02 6.10 15.12 9.02 4.23 13.25 9.02 3.60 12.62
50 9.46 8.54 18.00 9.46 6.45 15.91 9.46 4.45 13.91 9.46 3.82 13.28
51 9.97 9.03 19.00 9.97 6.82 16.79 9.97 4.80 14.77 9.97 4.10 14.07
52 10.54 9.53 20.07 10.54 7.20 17.74 10.54 5.25 15.79 10.54 4.44 14.98
53 11.13 10.05 21.18 11.13 7.61 18.74 11.13 5.76 16.89 11.13 4.81 15.94
54 11.73 10.58 22.31 11.73 8.05 19.78 11.73 6.27 18.00 11.73 5.19 16.92
55 12.31 11.12 23.43 12.31 8.52 20.83 12.31 6.73 19.04 12.31 5.55 17.86
56 12.85 11.63 24.48 12.85 9.00 21.85 12.85 7.11 19.96 12.85 5.85 18.70
57 13.39 12.08 25.47 13.39 9.45 22.84 13.39 7.41 20.80 13.39 6.10 19.49
58 13.92 12.58 26.50 13.92 9.96 23.88 13.92 7.73 21.65 13.92 6.38 20.30
59 14.46 13.22 27.68 14.46 10.58 25.04 14.46 8.13 22.59 14.46 6.74 21.20
60 15.00 14.11 29.11 15.00 11.39 26.39 15.00 8.71 23.71 15.00 7.30 22.30
61 15.00 14.87 29.87 15.00 12.01 27.01 15.00 9.53 24.53 15.00 8.08 23.08
62 15.00 15.48 30.48 15.00 12.42 27.42 15.00 10.32 25.32 15.00 8.84 23.84
63 15.00 16.00 31.00 15.00 12.73 27.73 15.00 11.06 26.06 15.00 9.55 24.55
64 15.00 16.50 31.50 15.00 13.04 28.04 15.00 11.71 26.71 15.00 10.20 25.20
65 15.00 17.05 32.05 15.00 13.45 28.45 15.00 12.25 27.25 15.00 10.75 25.75
66 15.00 17.58 32.58 15.00 13.96 28.96 15.00 12.60 27.60 15.00 11.18 26.18
67 15.00 18.05 33.05 15.00 14.50 29.50 15.00 12.78 27.78 15.00 11.49 26.49
68 15.00 18.55 33.55 15.00 15.07 30.07 15.00 12.91 27.91 15.00 11.74 26.74
69 15.00 19.19 34.19 15.00 15.70 30.70 15.00 13.07 28.07 15.00 12.00 27.00
70 15.00 20.07 35.07 15.00 16.39 31.39 15.00 13.39 28.39 15.00 12.31 27.31
71 15.00 21.52 36.52 15.00 17.25 32.25 15.00 14.01 29.01 15.00 12.72 27.72
72 15.00 22.97 37.97 15.00 18.12 33.12 15.00 14.64 29.64 15.00 13.12 28.12
73 15.00 24.41 39.41 15.00 18.98 33.98 15.00 15.26 30.26 15.00 13.53 28.53
74 15.00 25.86 40.86 15.00 19.85 34.85 15.00 15.89 30.89 15.00 13.93 28.93
75 15.00 27.31 42.31 15.00 20.71 35.71 15.00 16.51 31.51 15.00 14.34 29.34
- ---------- ------- -------- ------- ------- ------- ------- ------- -------- ------- ------- ------- -------
</TABLE>
COLUMN HEADINGS: DAC = First Year Contingent Deferred Administrative Charge
DSC = First Year Contingent Deferred Sales Charge
TDC = Total First Year Deferred Charge
<PAGE>
APPENDIX C
FIRST YEAR CONTINGENT DEFERRED CHARGES
PER $1,000 OF SPECIFIED AMOUNT
UNISEX
<TABLE>
<CAPTION>
Issue COMPOSITE Issue SMOKER NONSMOKER
Age DAC + DSC = TDC Age DAC + DSC = TDC DAC + DSC = TDC
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0 .75 .18 .93 40 6.06 4.38 10.44 6.06 3.55 9.61
1 .80 .25 1.05 41 6.35 4.63 10.98 6.35 3.73 10.08
2 .85 .32 1.17 42 6.64 4.90 11.54 6.64 3.92 10.56
3 .90 .38 1.28 43 6.95 5.17 12.12 6.95 4.11 11.06
4 .95 .45 1.40 44 7.27 5.47 12.74 7.27 4.32 11.59
5 1.00 .52 1.52 45 7.60 5.79 13.39 7.60 4.55 12.15
6 1.06 .62 1.68 46 7.94 6.13 14.07 7.94 4.79 12.73
7 1.12 .73 1.85 47 8.27 6.50 14.77 8.27 5.05 13.32
8 1.18 .84 2.02 48 8.63 6.88 15.51 8.63 5.31 13.94
9 1.25 .94 2.19 49 9.02 7.29 16.31 9.02 5.60 14.62
10 1.31 1.02 2.33 50 9.46 7.72 17.18 9.46 5.92 15.38
11 1.37 1.08 2.45 51 9.97 8.18 18.15 9.97 6.28 16.25
12 1.43 1.14 2.57 52 10.54 8.67 19.21 10.54 6.65 17.19
13 1.49 1.17 2.66 53 11.13 9.19 20.32 11.13 7.05 18.18
14 1.55 1.20 2.75 54 11.73 9.72 21.45 11.73 7.48 19.21
15 1.60 1.24 2.84 55 12.31 10.24 22.55 12.31 7.93 20.24
16 1.64 1.26 2.90 56 12.85 10.73 23.58 12.85 8.37 21.22
17 1.67 1.28 2.95 57 13.39 11.15 24.54 13.39 8.78 22.17
18 1.69 1.30 2.99 58 13.92 11.61 25.53 13.92 9.24 23.16
19 1.73 1.33 3.06 59 14.46 12.20 26.66 14.46 9.81 24.27
<S> <C> <C> <C> <C> <C> <C> <C>
Issue SMOKER NONSMOKER 60 15.00 13.03 28.03 15.00 10.57 25.57
Age DAC + DSC = TDC DAC + DSC = TDC 61 15.00 13.80 28.80 15.00 11.22 26.22
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
20 1.80 1.40 3.20 1.80 1.37 3.17 62 15.00 14.45 29.45 15.00 11.70 26.70
21 1.89 1.56 3.45 1.89 1.44 3.33 63 15.00 15.01 30.01 15.00 12.09 27.09
22 1.99 1.70 3.96 1.99 1.53 3.52 64 15.00 15.54 30.54 15.00 12.47 27.47
23 2.12 1.83 3.95 2.12 1.62 3.74 65 15.00 16.09 31.09 15.00 12.91 27.91
24 2.26 1.94 4.20 2.26 1.72 3.98 66 15.00 16.58 31.58 15.00 13.40 28.40
25 2.42 2.02 4.44 2.42 1.82 4.24 67 15.00 17.00 32.00 15.00 13.90 28.90
26 2.61 2.12 4.73 2.61 1.90 4.51 68 15.00 17.42 32.42 15.00 14.40 29.40
27 2.83 2.23 5.06 2.83 1.98 4.81 69 15.00 17.97 32.97 15.00 14.96 29.96
28 3.07 2.33 5.40 3.07 2.05 5.12 70 15.00 18.73 33.73 15.00 15.57 30.57
29 3.31 2.46 5.77 3.31 2.14 5.45 71 15.00 20.02 35.02 15.00 16.34 31.34
30 3.55 2.58 6.13 3.55 2.23 5.78 72 15.00 21.30 36.30 15.00 17.12 32.12
31 3.78 2.71 6.49 3.78 2.33 6.11 73 15.00 22.58 37.58 15.00 17.89 32.89
32 4.02 2.84 6.86 4.02 2.44 6.46 74 15.00 23.87 38.87 15.00 18.67 33.67
33 4.25 3.00 7.25 4.25 2.56 6.81 75 15.00 25.15 40.15 15.00 19.44 34.44
34 4.49 3.15 7.64 4.49 2.68 7.17
35 4.74 3.32 8.06 4.74 2.81 7.55
36 4.99 3.51 8.50 4.99 2.94 7.93
37 5.25 3.70 8.95 5.25 3.08 8.33
38 5.51 3.91 9.42 5.51 3.23 8.74
39 5.78 4.14 9.92 5.78 3.38 9.16
COLUMN HEADINGS: DAC = First Year Contingent Deferred Administrative Charge
DSC = First Year Contingent Deferred Sales Charge
TDC = Total First Year Deferred Charge
</TABLE>
<PAGE>
APPENDIX D
DEATH BENEFIT RATIO
The Death Benefit Ratio required by the Internal Revenue Code for treatment of
the Policy as a life insurance Policy.
Attained Age | Death Benefit Ratio
-------------------------------------
0-40 | 2.50
41 | 2.43
42 | 2.36
43 | 2.29
44 | 2.22
45 | 2.15
------------------------------
46 | 2.09
47 | 2.03
48 | 1.97
49 | 1.91
50 | 1.85
------------------------------
51 | 1.78
52 | 1.71
53 | 1.64
54 | 1.57
55 | 1.50
------------------------------
56 | 1.46
57 | 1.42
58 | 1.38
59 | 1.34
60 | 1.30
------------------------------
61 | 1.28
62 | 1.26
63 | 1.24
64 | 1.22
65 | 1.20
------------------------------
66 | 1.19
67 | 1.18
68 | 1.17
69 | 1.16
70 | 1.15
------------------------------
71 | 1.13
72 | 1.11
73 | 1.09
74 | 1.07
75-90 | 1.05
------------------------------
91 | 1.04
92 | 1.03
93 | 1.02
94 | 1.01
95 | 1.00
------------------------------
<PAGE>
PART II
UNDERTAKINGS
1. Subject to the terms and conditions of Section 15(d) of the
Securities Exchange Act of 1934, the undersigned registrant hereby
undertakes to file with the Securities and Exchange Commission (the
"SEC") such supplementary and periodic information, documents, and
reports as may be prescribed by any rule or regulation of the SEC
theretofore or hereafter duly adopted pursuant to authority conferred
in that section.
2. Section 11 of the Bylaws of CUNA Mutual Life Insurance Company
provides for indemnification of officers and directors of the Company
against claims and liabilities the officers or directors become
subject to by reason of having served as officer or director of the
Company or any subsidiary or affiliate company. Such indemnification
covers liability for all actions alleged to have been taken, omitted,
or neglected by such person in the line of duty as director or
officer, except liability arising out of the officers' or directors'
willful misconduct.
3. Insofar as indemnification for liability arising under the Securities
Act of 1933 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
SEC such indemnification is against public policy as expressed in the
Securities Act of 1933 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 Securities Act of 1933 and will be governed by the
final adjudication of such issue.
REPRESENTATIONS
CUNA Mutual Life Insurance Company represents that the fees and charges deducted
under the Policies, in the aggregate, are reasonable in relation to the services
rendered, the expenses expected to be incurred, and the risks assumed by CUNA
Mutual Life Insurance Company.
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet.
The Prospectus consisting of 36 pages.
Undertakings.
Representations.
The signatures.
Written consent or opinion of the following persons:
KPMG Peat Marwick LLP
Scott Allen - Associate Actuary
The following exhibits:
1. Exhibits required by paragraph A of instructions for Exhibits in Form N-8B-2:
1. Resolutions of the Board of Directors of CUNA Mutual Life
Insurance Company. Incorporated herein by reference to
post-effective amendment number 14 to this Form S-6
registration statement (File No. 33-19718) filed with the
Commission on April 18, 1996.
2. Not Applicable
3. Distribution Agreement between CUNA Mutual Life Insurance
Company and CUNA Brokerage Services, Inc. effective January
1, 1996. Incorporated herein by reference to post-effective
amendment number 14 to this Form S-6 registration statement
(File No. 33-19718) filed with the Commission on April 18,
1996.
Servicing Agreement related to the Distribution Agreement
between CUNA Mutual Life Insurance Company and CUNA
Brokerage Services, Inc. effective January 1, 1996.
Incorporated herein by reference to post-effective
amendment number 14 to this Form S-6 registration statement
(File No. 33-19718) filed with the Commission on April 18,
1996.
4. a. Termination Agreement dated December 31, 1993
concerning Agreement Governing Contribution dated
September 30, 1983. Incorporated herein by
reference to post-effective amendment number 14
to this Form S-6 registration statement (File No.
33-19718) filed with the Commission on April 18,
1996.
Agreement Governing Contribution. Incorporated
herein by reference to post-effective amendment
number 14 to this Form S-6 registration
statement (File No. 33-19718) filed with the
Commission on April 18, 1996.
b. Termination Agreement dated December 31, 1993
concerning Agreement Governing Contribution dated
May 31, 1988. Incorporated herein by reference to
post-effective amendment number 14 to this Form
S-6 registration statement (File No. 33-19718)
filed with the Commission on April 18, 1996.
Agreement Governing Contribution. Incorporated
herein by reference to post-effective amendment
number 14 to this Form S-6 registration statement
(File No. 33-19718) filed with the Commission on
April 18, 1996.
5. a. Standard VUL Contract Form 5202. Incorporated
herein by reference to post-effective amendment
number 14 to this Form S-6 registration statement
(File No. 33-19718) filed with the Commission on
April 18, 1996.
i. Accelerated Benefit Option
Endorsement, Form 1668. Incorporated
herein by reference to post-effective
amendment number 14 to this Form S-6
registration statement (File No.
33-19718) filed with the Commission on
April 18, 1996.
ii. Accidental Death Benefit Rider, Form
3601. Incorporated herein by reference
to post-effective amendment number 14
to this Form S-6 registration
statement (File No. 33-19718) filed
with the Commission on April 18, 1996.
iii. Guaranteed Insurability Rider, Form
3652. Incorporated herein by reference
to post-effective amendment number 14
to this Form S-6 registration
statement (File No. 33-19718) filed
with the Commission on April 18, 1996.
iv. Waiver of Monthly Deduction, Form
3955. Incorporated herein by reference
to post-effective amendment number 14
to this Form S-6 registration
statement (File No. 33-19718) filed
with the Commission on April 18, 1996.
v. Other Insured Rider, Form 3956.
Incorporated herein by reference to
post-effective amendment number 14 to
this Form S-6 registration statement
(File No. 33-19718) filed with the
Commission on April 18, 1996.
vi. Automatic Increase Rider, Form 3957
1085. Incorporated herein by reference
to post-effective amendment number 14
to this Form S-6 registration
statement (File No. 33-19718) filed
with the Commission on April 18, 1996.
vii. Child Rider, Form 6005. Incorporated
herein by reference to post-effective
amendment number 14 to this Form S-6
registration statement (File No.
33-19718) filed with the Commission on
April 18, 1996.
viii. Juvenile Rider, Form 6012.
Incorporated herein by reference to
post-effective amendment number 14 to
this Form S-6 registration statement
(File No. 33-19718) filed with the
Commission on April 18, 1996.
ix. Level Term Rider (Sex-Distinct), Form
6017. Incorporated herein by reference
to post-effective amendment number 14
to this Form S-6 registration
statement (File No. 33-19718) filed
with the Commission on April 18, 1996.
x. Waiver of Premium and Monthly
Deduction Disability Benefit Rider,
Form 6029 0994. Incorporated herein by
reference to post-effective amendment
number 14 to this Form S-6
registration statement (File No.
33-19718) filed with the Commission on
April 18, 1996.
xi. Executive Benefit Plan Endorsement,
Form EBP. Incorporated herein by
reference to post-effective amendment
number 18 to this Form S-6
registration statement (File No.
33-19718) filed with the Commission on
February 24, 1999.
b. Unisex Version Form 5203. Incorporated herein by
reference to post-effective amendment number 14
to this Form S-6 registration statement (File No.
33-19718) filed with the Commission on April 18,
1996.
i. Level Term Rider (Unisex), Form 6018.
Incorporated herein by reference to
post-effective amendment number 14 to
this Form S-6 registration statement
(File No. 33-19718) filed with the
Commission on April 18, 1996.
ii. 403(B) Endorsement, Form 1608(VUL)
0994 Incorporated herein by reference
to post-effective amendment number17
to this Form S-6 registration
statement (File No. 33-19718) filed
with the Commission on April 17, 1998.
c. State Variation List. Incorporated
herein by reference to post-effective
amendment number 18 to this Form S-6
registration statement (File No.
33-19718) filed with the Commission on
February 24, 1999.
6. a. Articles of Incorporation of the Company.
Incorporated herein by reference to
post-effective amendment number 15 to this Form
S-6 registration statement (File No. 33-19718)
filed with the Commission on April 18, 1997.
b. Bylaws. Incorporated herein by reference to post
effective amendment number 15 to this Form S-6
registration statement (File No. 33-19718) filed
with the Commission on April 18, 1997.
7. Not Applicable
8. Servicing Agreement Between CUNA Mutual Life Insurance
Company and CIMCO Inc. dated May 1, 1997. Incorporated
herein by reference to post-effective amendment number 18
to this Form S-6 registration statement (File No. 33-19718)
filed with the Commission on February 24, 1999.
9. a. Participation Agreement between T. Rowe Price
International Series, Inc. and the Company dated
April 22, 1994. Amendment to Participation
Agreement dated November 1994. Incorporated
herein by reference to post-effective amendment
number 14 to this Form S-6 registration statement
(File No. 33-19718) filed with the Commission on
April 18, 1996.
b. Participation Agreement between MFS Variable
Insurance Trust and the Company dated April 29,
1994. Amendment to Participation Agreement dated
November 1994. Amendment to Participation
Agreement effective May 1, 1996. Incorporated
herein by reference to post-effective amendment
number 14 to this Form S-6 registration statement
(File No. 33-19718) filed with the Commission on
April 18, 1996.
10. Application. Incorporated herein by reference to
post-effective amendment number 14 to this Form S-6
registration statement (File No. 33-19718) filed with the
Commission on April 18, 1996.
2. Opinion of Counsel. Incorporated herein by reference to
post-effective amendment number 14 to this Form S-6 registration
statement (File No. 33-19718) filed with the Commission on April 18,
1996.
3. Not applicable
4. Not applicable
5. Financial Data Schedule
6. Not applicable
Power of Attorney. Incorporated herein by reference to post-effective amendment
number 18 to this Form S-6 registration statement (File No. 33-19718) filed with
the Commission on February 24, 1999.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant, CUNA
Mutual Life Variable Account, certifies that it meets all of the requirements
for effectiveness of this Registration Statement pursuant to rule 485(b) under
the Securities Act of 1933 and has duly caused this Registration Statement to be
signed on its behalf by the undersigned thereunto duly authorized, all in the
City of Madison, and State of Wisconsin, on the day of April, 1999.
CUNA Mutual Life Variable Account (Registrant)
By: /S/ Michael B. Kitchen
Michael B. Kitchen
President
Pursuant to the requirements of the Securities Act of 1933, the depositor, CUNA
Mutual Life Insurance Company, certifies that it meets all of the requirements
for effectiveness of this Registration Statement pursuant to rule 485(b) under
the Securities Act of 1933 and has duly caused this Registration Statement to be
signed on its behalf by the undersigned thereunto duly authorized, all in the
City of Madison, and State of Wisconsin, on the day of April, 1999.
CUNA Mutual Life Insurance Company (Depositor)
By: /s/ Michael B. Kitchen
Michael B. Kitchen
President
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities indicated
and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES AND TITLE DATE SIGNATURES AND TITLE DATE
<S> <C> <C> <C>
James C. Barbre * Omer K. Reed *
James C. Barbre, Director Omer K. Reed, Director
Robert W. Bream * Richard C. Robertson *
Robert W. Bream, Director Richard C. Robertson, Director
Wilfred F. Broxterman * Rosemarie M. Shultz *
Wilfred F. Broxterman, Director Rosemarie M. Shultz, Director
James L. Bryan * Neil A. Springer *
James L. Bryan, Director Neil A. Springer, Director
Loretta M. Burd * Farouk D. G. Wang *
Loretta M. Burd, Director Farouk D. G. Wang, Director
Ralph B. Canterbury * Larry T. Wilson *
Ralph B. Canterbury, Director Larry T. Wilson, Director
Joseph N. Cugini * /s/ Kevin S. Thompson 04/19/99
Joseph N. Cugini, Director Kevin S. Thompsn, Attorney-In-Fact
Rudolf J. Hanley *
Rudolf J. Hanley, Director
Jerald R. Hinrichs *
Jerald R. Hinrichs, Director
/s/ Michael B. Kitchen 04/19/99
Michael B. Kitchen, Director
Robert T. Lynch *
Robert T. Lynch, Director
Brian L. McDonnell *
Brian L. McDonnell, Director
C. Alan Peppers *
C. Alan Peppers, Director
<FN>
*Pursuant to Powers of Attorney filed herewith
</FN>
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following person in the capacity indicated on
the date indicated.
SIGNATURE AND TITLE DATE
/s/ Michael G. Joneson 04/19/99
Michael G. Joneson
Vice President - Accounting & Financial Systems
/s/ Richard J. Keintz 04/19/99
Richard J. Keintz
Chief Officer - Finance & Information Services
/s/ Michael B. Kitchen 04/19/99
Michael B. Kitchen
President and Chief Executive Officer
<PAGE>
KPMG Peat Marwick LLP
2500 Ruan Center
P.O. Box 772
Des Moines, IA 50303
The Board of Directors of CUNA Mutual Life Insurance Company
and Contract Owners of CUNA Mutual Life Variable Account:
We consent to the use of our reports included herein and to the reference to our
Firm under the heading "Independent Auditors" in the Prospectus of the CUNA
Mutual Life Variable Account.
Our report dated March 19, 1999, contains an explanatory paragraph that states
that the Company prepared the financial statements using accounting practices
prescribed or permitted by the Iowa Department of Commerce, Insurance Division,
which practices differ from generally accepted accounting principles.
KPMG Peat Marwick LLP
Des Moines, Iowa
April 19, 1999
<PAGE>
April 15, 1999
CUNA Mutual Life Insurance Company
2000 Heritage Way
Waverly, IA 50677
Ladies and Gentlemen:
As Associate Actuary for CUNA Mutual Life Insurance Company, I have reviewed the
illustrations for a MEMBERS(R) Variable Universal Life Insurance Policy
described in Post-Effective Amendment No. 19 on Form S-6 to Registration
Statement No. 33-19718.
In my opinion, the illustrations of cash values and death benefits included in
Appendix A of the prospectus, based on the assumption stated in the
illustrations, are consistent with the provisions of the form of the policy.
Further, the rate structure of the policy has not been designed so as to make
the relationship between premiums and benefits, as shown on the illustrations,
appear more favorable to a prospective purchaser of a policy at ages 35 or 50
than to prospective purchasers of the policy at other ages.
I hereby consent to the use of this opinion as an exhibit to the Registration
Statement.
Sincerely,
/s/ Scott Allen
Scott Allen, F.S.A., M.A.A.A.
Variable Products Leader -
Associate Actuary
CUNA Mutual Life Insurance Company
<PAGE>
EXHIBIT INDEX
Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 6
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 146,601,606
<INVESTMENTS-AT-VALUE> 209,233,064
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 209,233,064
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 51,835
<TOTAL-LIABILITIES> 51,835
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 5,508,998
<SHARES-COMMON-PRIOR> 5,127,883
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 209,181,229
<DIVIDEND-INCOME> 3,464,009
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 1,699,688
<NET-INVESTMENT-INCOME> 1,764,321
<REALIZED-GAINS-CURRENT> 6,791,572
<APPREC-INCREASE-CURRENT> 19,055,404
<NET-CHANGE-FROM-OPS> 27,611,297
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,520,438
<NUMBER-OF-SHARES-REDEEMED> 1,139,323
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 381,115
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
