As Filed with the Securities and Exchange Commission on April 27, 2000
Registration No. 333-81499
811-03915
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
POST -EFFECTIVE AMENDMENT NO. 1
TO
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS
REGISTERED ON FORM N-8B-2
CUNA Mutual Life Variable Account
(Exact name of trust)
CUNA Mutual Life Insurance Company
(Name of depositor)
2000 Heritage Way
Waverly, Iowa 50677
(Complete address of depositor's principal executive offices)
Kevin S. Thompson, Esq.
CUNA Mutual Life Insurance Company
5910 Mineral Point Road
Madison, WI 53705
(Name and complete address of agent for service)
Copy to:
David Goldstein, Esq.
Sutherland, Asbill & Brennan LLP
1275 Pennsylvania Avenue, N.W.
Washington, DC 20004-2404
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, 2000 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>
PROSPECTUS May 1, 2000
Flexible Premium Variable Life Insurance Policy
issued by
CUNA Mutual Life Insurance Company
Through
CUNA Mutual Life Variable Account
2000 Heritage Way
Waverly, Iowa 50677-9202
(800) 798-5500
This prospectus describes the MEMBERS Variable Universal Life II flexible
premium variable life insurance policy ("Policy") issued by CUNA Mutual Life
Insurance Company through CUNA Mutual Life Variable Account ("Separate
Account"). The Policy is designed as a long-term investment that attempts to
provide significant life insurance benefits for the entire life of the insured.
This prospectus provides information that a prospective owner should know before
investing. You should keep this prospectus for future reference as you consider
the Policy in conjunction with other insurance you own.
With this Policy, you can allocate net premium and Policy Values to:
- Subaccounts of the Separate Account, each of which invests in one of
the mutual funds listed on this page; or
- a Fixed Account, which credits a specified rate of interest.
A prospectus for each of the mutual funds available through the Separate Account
must accompany this prospectus. Please read these documents before investing and
save them for future reference.
The mutual funds available include:
- - Ultra Series Fund
Money Market Fund
Bond Fund
Balanced Fund
Growth and Income Stock Fund
Capital Appreciation Stock Fund
Mid-Cap Stock Fund
- - T. Rowe Price International Series, Inc.
T. Rowe Price International Stock Portfolio
- - MFS(R) Variable Insurance Trust(SM)
MFS Global Governments Series
MFS Emerging Growth Series
- - Templeton Variable Insurance Products Trust
Templeton Developing Markets Securities Fund - Class 2
- - Oppenheimer Variable Account Funds
Oppenheimer High Income Fund/VA
An investment in the Separate Account is not a bank or credit union deposit, and
the Policy is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency. Investment in the Separate Account
involves certain risks including loss of premium (principal).
Please refer to the "Risk Summary" section of this prospectus which describes
certain risks associated with investing in a Policy.
The Securities and Exchange Commission has not approved or disapproved this
Policy or determined that this prospectus is accurate or complete. Any
representation to the contrary is a criminal offense.
<PAGE>
Table of Contents
Glossary...................................................1
Policy Summary.............................................4
Risk Summary...............................................8
CUNA Mutual Life Insurance Company........................10
CUNA Mutual Life Insurance Company...................10
The Fixed Account....................................11
The Separate Account and the Funds........................12
Ultra Series Fund....................................12
T. Rowe Price International Series, Inc..............13
MFS Variable Insurance Trust.........................13
Oppenheimer Variable Account Funds...................13
Templeton Variable Insurance Products Trust..........13
More Information About the Funds.....................14
The Policy................................................15
Applying for a Policy................................15
Conditions for Policy Issue..........................15
Policy Issue Date....................................15
Temporary Insurance Agreement........................15
Right-to-Examine Period..............................15
Flexibility of Premiums..............................16
Allocation of Net Premiums...........................16
Lapse................................................17
Reinstatement........................................17
Premiums to Prevent Lapse............................17
Basic Guarantee......................................17
Extended Guarantee...................................17
Death Benefit Proceeds...............................18
Change of Death Benefit Option.......................18
Change of Specified Amount...........................19
Policy Values.............................................20
Policy Value.........................................20
Transfer of Values...................................20
Dollar Cost Averaging................................21
Automatic Personal Portfolio Rebalancing Service.....21
Other Types of Automatic Transfers...................22
Surrender and Partial Withdrawals....................22
Maturity.............................................23
Payment of Benefits/Settlement Options...............23
Policy Loans.........................................23
Charges and Deductions....................................24
Fund Charges.........................................24
Premium Expense Charge...............................25
Insurance Charges....................................25
Mortality and Expense Risk Charge....................26
Surrender Charges....................................26
Transfer Fee.........................................26
Federal and State Income Taxes.......................26
Duplicate Policy Charge..............................26
Change of Specified Amount Charge....................26
Other Policy Benefits and Provisions......................27
Owner, Beneficiary...................................27
Our Right to Contest the Policy......................27
Right to Convert.....................................27
Transfer of Ownership................................27
Collateral Assignments...............................28
Effect of Misstatement of Age or Gender..............28
Suicide Exclusion....................................28
Dividends............................................29
Suspension of Payments...............................29
Accelerated Benefit Option...........................29
Riders and Endorsements...................................30
Children's Insurance.................................30
Guaranteed Insurability..............................31
Accidental Death Benefit.............................31
Other Insured........................................31
Waiver of Premium Disability.........................31
Executive Benefits Plan Endorsement..................31
Federal Income Tax Considerations.........................32
CUNA Mutual Life Insurance Company Directors and
Executive Officers...................................35
Additional Information....................................38
Addition, Deletion Or Substitution Of Investments....38
State Regulation.....................................38
Legal Proceedings....................................38
Independent Accountants..............................39
Actuarial Matters....................................39
Registration Statement...............................39
Preparing For Year 2000..............................38
Distribution Of Policies.............................38
Financial Statements......................................39
Appendix A - Illustrations of Policy Values and
Death Benefits.......................................55
Appendix B - First Year Surrender Charges per $1,000
of Specified Amount..................................95
Appendix C - Death Benefit Percentage Factor..............97
<PAGE>
Glossary
================================================================================
Accumulation Unit
A unit of measurement used to calculate Subaccount Value.
Attained Age
The insured's age on the most recent Policy Anniversary.
Basic Guarantee
Our guarantee that the Policy will not Lapse prior to the later of (1) the tenth
Policy Anniversary, or (2) the Insured's Attained Age 65.
Basic Guarantee Premium
The amount of premium each Policy Year necessary to keep the Basic Guarantee in
effect.
Beneficiary
The person(s) you select to receive the Death Benefit Proceeds under this
Policy. You may designate primary, contingent and irrevocable Beneficiaries.
Cash Value
The Policy Value minus any applicable surrender charge.
Company (we, us, our)
CUNA Mutual Life Insurance Company.
Contingent Beneficiary
The person(s) you select to receive the Death Benefit Proceeds upon the death of
the Insured if the primary Beneficiary is not living.
Death Benefit
The amount we pay to the Beneficiary under a Death Benefit Option before
adjustments if the Insured dies while the Policy is In Force before the Maturity
Date.
Death Benefit Option
One of two options that you may select for computation of the Death Benefit.
Death Benefit Proceeds
The amount we pay to the Beneficiary when we receive proof of the insured's
death. It equals the Death Benefit on the date of the insured's death less the
following adjustments: (1) any premium received after the date of death, (2) the
amount of any Partial Withdrawals made after the date of death, (3) unpaid
Monthly Deduction if death occurred during the Grace Period, and (4) any Loan
Amount.
Extended Guarantee
Our guarantee that the Policy will not Lapse prior to the Insured's Attained Age
95.
Extended Guarantee Premium
The amount of premium each Policy Year necessary to keep the Extended Guarantee
in effect.
Fixed Account
Part of the Company's General Account to which Net Premium may be allocated or
Policy Value transferred.
Fixed Account Value
Policy Value in the Fixed Account.
Fund
Each investment portfolio of Ultra Series Fund or any other open-end management
investment company or unit investment trust in which a Subaccount invests.
General Account
The assets of the Company other than those
allocated to the Separate Account or another separate account of the Company.
Grace Period
The 61-day period during which you may pay Premiums to cover overdue (and other
specified) Monthly Deductions and thereby prevent the Policy from Lapsing.
<PAGE>
Home Office
The Company's office at 2000 Heritage Way, Waverly, Iowa 50677-9202.
In Force
Status of the Policy after the Policy Issue Date and prior to its termination by
Lapse, Surrender or Maturity.
Initial Required Premium
The minimum premium that you must pay before insurance coverage begins under
this Policy. The Initial Required Premium is shown on your Policy's data page.
Insured
The person whose life is insured by this Policy.
Irrevocable Beneficiary
A Beneficiary who has certain rights that you can change only with his or her
consent.
Lapse
Termination of the Policy at the expiration of the Grace Period while the
Insured is still living before the Maturity Date.
Loan Account
A portion of the Company's General Account to which Variable Account Value or
Fixed Account Value is transferred to provide collateral for any loan taken
under the Policy.
Loan Account Value
Policy Value in the Loan Account.
Loan Amount
At any time other than a Policy Anniversary, the Loan Account Value plus any
interest charges accrued on the Loan Account Value up to that time. On a Policy
Anniversary, the Loan Amount equals the Loan Account.
Maturity Date
The Policy Anniversary when the insured reaches Attained Age 95 (unless
extended). This Policy terminates and life insurance coverage ends on the
Maturity Date.
Monthly Deduction
The amount we deduct from the Policy Value each month. It includes the cost of
insurance charge, the monthly administration charge, the monthly policy fee, and
the cost of any riders.
Monthly Processing Day
The day each month as of which we determine the Monthly Deduction and deduct it
from Policy Value. It is the same date each month as the Policy Issue Date. If
the Monthly Processing Day is not a Valuation Day, then it is the next Valuation
Day.
Net Amount At Risk
As of any Monthly Processing Day, the Death Benefit (discounted for the upcoming
month) less the Policy Value (after deduction of the Monthly Deduction).
Net Premium
Any Premium less the premium expense charge.
Owner (You, Your)
The person entitled to exercise all rights as Owner of the Policy.
Planned Premium
The Premium payment selected by the Owner as a level amount that he or she plans
to pay on a monthly, quarterly, semi-annual or annual basis over the life of the
Policy.
Policy Anniversary
The same date in each Policy Year as the Policy Issue Date.
Policy Issue Date
The date as of which the Policy is issued and coverage takes effect. We measure
Policy months, Policy years, and Policy anniversaries from the Policy Issue
Date.
Policy Value
The sum of the Variable Account Value, the Fixed Account Value and the Loan
Account Value.
Policy Year
A twelve month period beginning on the Policy Issue Date or on a Policy
Anniversary.
Premium
Any payment you make under the Policy other than a loan repayment.
Right to Examine Period
The period when you may return the Policy and receive a refund. The length of
the period varies by state. Your Policy's cover page shows the Right to Examine
period.
<PAGE>
Separate Account
CUNA Mutual Life Variable Account. It is a separate investment account that is
divided into Subaccounts, each of which invests in a corresponding portfolio of
a designated mutual fund.
Specified Amount
The dollar amount selected by the Owner and shown on the Policy data page that
is used to determine the Death Benefit.
Subaccount
A subdivision of the Separate Account, the assets of which are invested in a
corresponding Fund.
Subaccount Value
The Policy Value in a Subaccount.
Surrender Value
The Cash Value less any Loan Amount.
Valuation Day
For each Subaccount, each day that the New York Stock Exchange is open for
business except for days that the Subaccount's corresponding Fund does not value
its shares.
Valuation Period
The period beginning at the close of regular trading on the New York Stock
Exchange on any Valuation Day and ending at the close of regular trading on the
next succeeding Valuation Day.
Variable Account Value
The sum of all Subaccount Values.
Written Request
A written notice or request in a form satisfactory to the Company and received
at the Home Office. A written request includes a telephone or fax request made
pursuant to the terms of an executed telephone or fax authorization on file at
the Home Office.
You (Your)
The Owner.
<PAGE>
Policy Summary
================================================================================
This summary describes important features of the Policy and corresponds to
sections in this prospectus which discuss the topics in more detail, including
variations by state. Please refer to the Glossary for definitions of certain
terms.
Premiums And Lapse
- - The amount of your Policy's Specified Amount determines the amount of your
Initial Required Premium. After you make the Initial Required Premium, you
can pay subsequent premiums (minimum $50) at any time.
- - You can elect to pay Planned Premiums but you are not required to pay
premiums according to the plan. You can vary the frequency and amount of
premiums, and can skip premiums. We do not accept any premiums after the
Insured reaches Attained Age 95.
- - We deduct a premium expense charge from each premium and credit the
resulting amount to the Policy Value.
- - Paying the Initial Required Premium will not necessarily keep your Policy
In Force. Unless the Basic Guarantee or the Extended Guarantee is in
effect, your Policy will enter a 61-day Grace Period if the Surrender
Value is zero on a Monthly Processing day. Your Policy will terminate
without value unless you pay sufficient Net Premium during the Grace
Period. See Risk of Lapse; and Policy Lapse and Reinstatement.
- - As long as your cumulative premiums less aggregate partial withdrawals and
any Loan Amount equal or exceed the Accumulated Extended Guarantee
Premiums, your Policy will not enter the Grace Period until the Insured's
Attained Age 95. As long as your cumulative premiums less aggregate
partial withdrawals and any Loan Amount equal or exceed the Accumulated
Basic Guarantee Premiums, your Policy will not enter the Grace Period
before the later of (1) the tenth Policy Anniversary, or (2) the Insured's
Attained Age 65.
- - Once we issue your Policy, the Right-to-Examine begins. You may return the
Policy during this period and receive a refund. See Right-to-Examine
Period.
Investment Options
Fixed Account:
- You may place money in the Fixed Account where it earns interest at an
annual rate of at least 4%. We may declare higher rates of interest,
but are not obligated to do so. The Fixed Account may not be available
in all states.
<PAGE>
Separate Account:
- - You may allocate Net Premiums or transfer Policy Value to any of the 11
Subaccounts of the variable account. We do not guarantee any money you
place in the Subaccounts. The value of each Subaccount will increase or
decrease, depending on the investment performance of the corresponding
fund. You could lose some or all of your money.
- - Each Subaccount invests exclusively in one investment portfolio of a
mutual fund (a "Fund"). The following Funds are available:
- - Ultra Series Fund
Money Market Fund
Bond Fund
Balanced Fund
Growth and Income Stock Fund
Capital Appreciation Stock Fund
Mid-Cap Stock Fund
- - T. Rowe Price International Series, Inc.
T. Rowe Price International Stock Portfolio
- - MFS Variable Insurance Trust
MFS Global Governments Series
MFS Emerging Growth Series
- - Templeton Variable Insurance Products Trust
Templeton Developing Markets Securities Fund (Class 2 Shares)
- - Oppenheimer Variable Account Funds
Oppenheimer High Income Fund/VA
Policy Value
- - Policy Value is the sum of your amounts in the Subaccounts and the Fixed
Account. Policy Value also includes amounts we hold in our General Account
to secure any outstanding loans.
- - Policy Value varies from Valuation Day to Valuation Day, depending on the
investment experience of the Subaccounts you choose, the interest we
credit to the Fixed Account, the charges we deduct, and any other
transactions (such as transfers, partial withdrawals, and loans.)
- - Policy Value is the starting point for calculating important values under
the Policy, such as the Cash Value, the Surrender Value and the Death
Benefit.
- - We do not guarantee a minimum Policy Value. Your Policy may Lapse if you
do not have sufficient Policy Value (minus any loan and accrued loan
interest) to pay the Monthly Deduction on a Monthly Processing Day.
Death Benefit Options
- - You must choose between two Death Benefit Options under the Policy. You may
change Death Benefit Options at any time:
- Option 1 is a level Death Benefit through attained age 95 that is the
greater of:
- the Specified Amount on the date of death; or
- the Policy Value on the date of death multiplied by the applicable
Death Benefit percentage.
- Option 2 is a variable Death Benefit that is the greater of:
- the Specified Amount plus the Policy Value on the date of death; or
- the Policy Value on the date of death multiplied by the applicable
Death Benefit percentage.
- - You may select the Specified Amount which must be at least $50,000 ($25,000
for Insureds age 65 or over on the Policy Issue Date). You also may
increase or decrease the Specified Amount, but you may not decrease it
below $40,000 ($20,000 for Insureds age 65 or over.)
<PAGE>
Charges and Deductions
- - Premium Expense Charge: We may deduct up to 3.5% of each premium payment
and credit the remaining net premium to your Policy Value.
- - Monthly Deduction: Each month we deduct:
- a cost of insurance charge for the Policy (varies by age, gender and
other underwriting factors)
- charges for any riders
- a monthly Policy Fee of $6.00
- a monthly administration charge of $0.0375 per month per $1,000 of
Specified Amount during the first 10 Policy Years
- Surrender and Partial Withdrawal Charges:
- surrender: We deduct a surrender charge if the Policy is surrendered
during the first 9 Policy Years or during the 9 year period following
an increase in Specified Amount. This charge varies by age, gender,
rating class and number of years you held the Policy.
- partial withdrawal: We may deduct a processing fee equal to the lesser
of $25 or 2% of the amount withdrawn. We currently waive this fee.
- - Mortality and Expense Risk Charge: We deduct a charge equal to 0.90% on an
annual basis of the average daily net assets of the Separate Account.
- - Fund Expenses: The Funds deduct investment advisory fees and other expenses
from the amounts the Subaccounts invest in the Fund. These charges vary by
Fund and range from 0.46% to 1.79% per year.
- - Other charges that the Company reserves the right to collect:
- A $30 fee for a duplicate copy of your Policy.
- A charge of $100 for each increase in Specified Amount after the first
increase in a Policy Year.
- Transfer charge: a $10 fee for the 13th and each additional transfer
in a Policy Year may be charged. We are currently waiving this fee.
Portfolio Expense Table
The following table shows the fees and expenses incurred by the Funds. The
purpose of the table is to assist you in understanding the various costs and
expenses that you will bear directly and indirectly. The table reflects charges
and expenses of the Funds for the fiscal year ended December 31, 1999. Future
expenses of the Funds may be higher or lower than those shown. For more
information on the fees and expenses described in this table, see the Funds'
prospectuses which accompany this prospectus.
<PAGE>
Annual Fund Operating Expenses (as a percentage of average net assets before fee
waivers and expense reimbursements).
<TABLE>
<CAPTION>
Portfolio Management 12b-1 Other Expenses Total Annual
Fees Fees Expenses
<S> <C> <C> <C>
Ultra Money Market Fund 0.45% None 0.01% 0.46%
Ultra Bond Fund 0.55% None 0.01% 0.56%
Ultra Balanced Fund 0.70% None 0.01% 0.71%
Ultra Growth and Income Stock Fund 0.60% None 0.01% 0.61%
Ultra Capital Appreciation Stock Fund 0.80% None 0.01% 0.81%
Ultra Mid-Cap Stock Fund 1.00% None 0.01% 1.01%
T. Rowe Price International Stock Portfolio(1) 1.05% None 0.00% 1.05%
MFS Global Governments Series 0.75% None 0.30%(2)(3) 1.05%
MFS Emerging Growth Series 0.75% None 0.09%(2) 0.84%
Oppenheimer High Income Fund/VA 0.74% None 0.01% 0.75%
Templeton Developing Markets Securities Fund - 1.25% 0.31% 0.25%(5) 1.81%
Class 2(4)
</TABLE>
(1) Management fees include operating expenses.
(2) Each series has an expense offset arrangement which reduces the series'
custodian fee based upon the amount of cash maintained by the series with
its custodian and dividend disbursing agent. Each series may enter into
other such arrangements and directed brokerage arrangements, which would
also have the effect of reducing the series' expenses. "Other Expenses" do
not take into account these expense reductions, and are therefore higher
than the actual expenses of the series. Had these fee reductions been taken
into account, "Net Expenses" would be lower for certain series and would
equal 0.83% for Emerging Growth Series and 0.90% for Global Governments
Series.
(3) MFS has contractually agreed, subject to reimbursement, to bear expenses
for these series such that each such series' "Other Expenses" (after taking
into account the expense offset arrangement described above), do not exceed
the following percentages of the average daily net assets of the series
during the current fiscal year: 0.15% for the Global Government Series.
(4) On 2/8/00, shareholders approved a merger and reorganization that combined
the fund with the Templeton Developing Markets Equity Fund, Effective
5/1/00. The shareholders of that fund had approved new management fees,
which apply to the combined fund effective 5/1/00. The table shows restated
total expenses based on the new fees and the assets of the fund as of
12/31/99, and not the assets of the combined fund. However, if the table
reflected both the new fees and the combined assets, the fund's expenses
after 5/1/00 would be estimated as: Management Fees 1.25%, Distribution and
Service Fees 0.25%, Other Expenses 0.29%, and Total Fund Operating Expenses
1.79%.
(5) The fund's class 2 distribution plan or "rule 12b-1 plan" is described in
the fund's prospectus. While the maximum amount payable under the fund's
class 2 rule 12b-1 plan is 0.35% per year of the fund's average daily net
assets, the Board of Trustees of Franklin Templeton Variable Insurance
Products Trust has set the current rate at 0.25% per year.
Surrenders and Partial Withdrawals
- - Full Surrender: At any time while the Insured is alive and the Policy is In
Force, you may make a Written Request to surrender your Policy for its
Surrender Value.
<PAGE>
- Federal income taxes and a penalty tax apply to surrenders
- - Partial Withdrawals: You may make Written Requests to withdraw part of the
Surrender Value, subject to the following rules.
- Federal income taxes and a penalty tax may apply to Partial
Withdrawals;
- A Partial Withdrawal reduces the Death Benefit by at least the amount
withdrawn;
- If Death Benefit Option 1 is in effect, Specified Amount is reduced by
the dollar amount of a Partial Withdrawal. Surrender charges apply to
a reduction in Specified Amount resulting from a Partial Withdrawal;
and
- We may deduct a processing fee for each Partial Withdrawal. We
currently to waive this fee.
Transfers
- - Each Policy Year, you may make:
- an unlimited number of transfers from the Subaccounts; and
- one transfer from the Fixed Account.
- - A transfer from the Fixed Account may be limited to 25% of Fixed Account
Value. We currently waive this restriction.
- - We may charge $10 for the 13th and each additional transfer during a Policy
Year. We currently waive this fee.
Loans
- - You may borrow money from us using the Surrender Value of Your Policy as
collateral. Loans may have tax consequences.
- - To secure the loan, we transfer an amount of your Policy Value equal to the
loan from the Separate Account and Fixed Account to the Loan Account.
- - Policy Value in the Loan Account earns interest at the guaranteed minimum
rate of 4% per year.
- - We charge you a maximum interest rate of 6% per year on amounts that you
borrow. Interest is accrued throughout the year and is payable at the end
of each Policy year. Unpaid interest is added to the Loan Amount (becomes
part of the outstanding loan) if it is not paid at the end of the Policy
Year.
- - You may repay all or part of your outstanding loans at any time. Loan
repayments must be clearly marked as loan repayments or we will treat them
as premiums.
- - Outstanding loans and accrued interest are deducted from the Death Benefit
to arrive at the Death Benefit Proceeds (the amount payable to the
Beneficiary upon the Insured's death).
Risk Summary
================================================================================
Investment Risk
If you instruct us to invest your Policy Value in one or more Subaccounts, you
will be subject to the risk that investment performance will be unfavorable and
that your Policy Value will decrease. If you allocate Net Premiums or transfer
Policy Value to the Fixed Account, we credit your Policy Value with a declared
rate of interest, but you assume the risk that the rate may decrease, although
it will never be lower than a guaranteed minimum annual effective rate of 4.0%.
Because we continue to deduct charges from Policy Value, if investment results
are not sufficiently favorable, or if interest rates are too low, or if you do
not make additional premium payments, then your Policy's Surrender Value may
fall to zero. In that case, the Policy may Lapse. However, if investment
experience is sufficiently favorable and you have kept the Policy In Force for a
substantial time, you may be able to draw upon Policy Value, through Partial
Withdrawals and loans.
<PAGE>
Risk of Lapse
Certain circumstances will cause your Policy to enter a Grace Period during
which you must make a sufficient premium payment to keep your Policy In Force:
- If your Policy's Surrender Value on a Monthly Processing Day is too
low to cover the Monthly Deduction, and the Basic Guarantee and
Extended Guarantee are not in effect, then the Policy will enter a
61-day Grace Period.
- Notwithstanding the foregoing, the Policy will not enter a Grace
Period if, prior to the later of (1) the 10th Policy Anniversary or,
(2) the Insured's Attained Age 65, premiums less partial withdrawals
and loans equal to the accumulated Basic Guarantee Premium for the
period ending on that Monthly Processing Day have been paid.
- Notwithstanding the foregoing, the Policy will not enter a Grace
Period if, prior to the Insured's Attained Age 95, premiums less
Partial Withdrawals and loans equal to the accumulated Extended
Guarantee Premium for the period ending on that Monthly Processing Day
have been paid.
Whenever your Policy enters a Grace Period if you do not make a sufficient
premium payment before the Grace Period ends, your Policy will Lapse (terminate
without value), and insurance coverage and other benefits under your Policy will
cease. The premium payment required to keep your Policy In Force beyond the
Grace Period is the amount sufficient to result in enough Net Premiums to cover
unpaid Monthly Deduction plus two months of additional Monthly Deductions.
If your Policy Lapses, however, you may reinstate the Policy within five years
from the date of Lapse, provided that you meet insurability requirements at that
time and pay any additional required premiums.
Tax Risks
We anticipate that the Policy will be considered a life insurance contract under
federal income tax law, so that the Death Benefit Proceeds paid to the
Beneficiary will not be subject to federal income tax. However, due to lack of
guidance from tax authorities, it is uncertain whether Policies issued on a
substandard basis would be considered life insurance contracts for this purpose.
Depending on the total amount of premiums that you pay, your Policy may be
treated as a modified endowment contract ("MEC") under federal tax laws. If a
Policy is treated as a MEC, then Partial Withdrawals, surrenders and loans under
it are taxable as ordinary income to the extent such amounts represent earnings
under the Policy. For this purpose, any Partial Withdrawals, surrenders and
loans are considered first a distribution of earnings under the Policy, and when
earnings are fully distributed, a distribution of the Owner's investment in the
Policy. In addition, a 10% penalty tax may be imposed on Partial Withdrawals,
surrenders and loans taken before you reach age 59 1/2. You should consult a
qualified tax adviser for assistance in all tax matters involving your Policy.
Partial Withdrawal Limits
The Policy permits you to take only two Partial Withdrawals in any Policy Year.
A Partial Withdrawal reduces the Policy Value and Surrender Value, so it will
increase the risk that the Policy will Lapse. It also increases the likelihood
that either the Basic Guarantee or the Extended Guarantee will not remain in
effect. A Partial Withdrawal also may have adverse tax consequences.
A Partial Withdrawal reduces the Death Benefit. If you selected the level Death
Benefit (Option 1), then when you make a Partial Withdrawal, the Specified
Amount is reduced by the amount of the Partial Withdrawal. If you selected the
variable Death Benefit (Option 2), then when you make a Partial Withdrawal, the
Death Benefit is reduced because the Policy Value is reduced.
<PAGE>
Loan Risks
A policy loan, whether or not repaid, will affect Policy Value over time because
we transfer an amount equal to the amount of the loan from the Subaccounts and
Fixed Account to the Loan Account as collateral. We then credit a fixed interest
rate of at least 4.0% to the loan collateral. As a result, the loan collateral
does not participate in the investment results of the Subaccounts nor does it
receive current interest rates in excess of 4.0% that we may, from time to time,
credit to the Fixed Account. The longer the loan is outstanding, the greater the
likely effect of not participating in the Subaccounts or the Fixed Account.
Depending on the investment results of the Subaccounts and the interest rate
credited to the Fixed Account, the effect could be favorable or unfavorable. We
also charge you interest on the amount that you borrow at a rate ranging from
4.0% to 6.0%.
A policy loan reduces the Death Benefit Proceeds and Surrender Value by the Loan
Amount (the amount of the loan(s), plus any interest you owe on the loan(s)). As
with Partial Withdrawals, loans reduce the Surrender Value of your Policy and
therefore increase the likelihood that the Policy would Lapse or that the Basic
Guarantee or the Extended Guarantee would not remain in effect.
Effects of Surrender Charges
The surrender charges under this Policy are significant, especially in the early
Policy years. It is likely that you will receive no Surrender Value if you
surrender your Policy in the first few Policy Years. You should purchase this
Policy only if you have the financial ability to keep it In Force at the initial
Specified Amount for a substantial period of time.
Even if you do not surrender your Policy, surrender charges play a role in
determining whether your Policy will Lapse. Surrender Value (that is, Policy
Value minus any surrender charges and outstanding Loan Amount) is one measure we
use to determine whether your Policy will enter a Grace Period, and possibly
Lapse.
Comparison with Other Insurance Policies
Like fixed benefit life insurance, the Policy offers a minimum death benefit and
provides a Policy Value, loan privileges and a value on surrender. However, the
Policy differs from a fixed benefit policy because it allows you to allocate
your Net Premiums or transfer Policy Value to the Subaccounts. The amount and
duration of life insurance protection and of the Policy Value varies with the
investment performance of the amounts you place in the Subaccounts. In addition,
the Surrender Value always varies with the investment results of your selected
Subaccounts.
As you consider purchasing this Policy, keep in mind that it may not be to your
advantage to replace existing insurance with the Policy.
CUNA Mutual Life Insurance Company
================================================================================
CUNA Mutual Life Insurance 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, we changed our name to "Century Life of America." On
January 1, 1997, we changed our name to "CUNA Mutual Life Insurance Company."
<PAGE>
On July 1, 1990, we 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 our directors are
also directors of CUNA Mutual and many of our senior executive officers 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, 1999, we had more than $4 billion in assets and $12 billion
of life insurance In Force. Effective June 1999 and through the date of this
Prospectus, A.M. Best rated us A (Excellent). Effective March 1999 and through
the date of this Prospectus, Duff & Phelps rated us 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 us 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. They 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 our principal lines of business, our competitive position, our management
capability, our relationship with our affiliates and our asset and liability
management practices.
The Company and CUNA Mutual Insurance Society are members of the Insurance
Marketplace Standards Association (IMSA). IMSA is an 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 of individual life insurance
and annuity products.
CUNA Mutual owns CUNA Mutual Investment Corporation. CUNA Mutual Investment
Corporation also owns CUNA Brokerage Services, Inc. The Company and CUNA Mutual
Investment Corporation each own a one-half interest in CIMCO Inc. (the
investment adviser to the Ultra Series Fund).
The Fixed Account
The Fixed Account is part of the Company's General Account. We use General
Account assets to support our insurance and annuity obligations other than those
funded by various separate accounts. Subject to applicable law, we have sole
discretion over investment of the Fixed Account's assets. We bear the full
investment risk for all assets contributed to the Fixed Account. The Company
guarantees that all Policy Value allocated to the Fixed Account is credited
interest daily at a net effective interest rate of at least 4%. We will
determine any interest rate credited in excess of the guaranteed rate at our
sole discretion.
The Fixed Account is not registered with the Securities and Exchange Commission
and the staff of the Securities and Exchange Commission has not reviewed the
disclosure in this prospectus relating to the Fixed Account.
<PAGE>
The Separate Account and the Funds
================================================================================
We established the Separate Account on August 16, 1983. Although the assets in
the Separate Account are our property, the assets attributable to the Policies
are not chargeable with liabilities arising out of any other business which we
may conduct. The assets of the Separate Account are available to cover our
general liabilities 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. We have the right to transfer to the General Account any
assets of the Separate Account which are in excess of reserves and other
contract liabilities. Periodically, the Separate Account makes payments to us
for Mortality and Expense Charges.
The Separate Account is divided into Subaccounts. 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 Securities and Exchange
Commission ("SEC") as a unit investment trust under the Investment Company Act
of 1940 ("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.
We do not guarantee the investment performance of the Separate Account or of any
Subaccount. Policy Value will vary daily with the value of the assets under the
Separate Account. The Death Benefit Proceeds may also vary with the value of the
assets in the Subaccounts selected by the Owner. To the extent that the Death
Benefit Proceeds payable upon the death of the Insured exceed the Policy Value,
such amounts are our general obligations and payable out of our general account.
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 Policy.
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.
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.
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.
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.
<PAGE>
Capital Appreciation Stock Fund. This Fund seeks 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.
Mid-Cap Stock Fund. This Fund seeks long-term capital appreciation by investing
in mid-size and small companies. It pursues this objective by purchasing the
common stock of generally smaller, less-developed issuers with valuations,
fundamentals and/or prospects that are attractive to the investment adviser.
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 T. Rowe Price 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.
MFS Emerging Growth Series. This Fund seeks long-term growth of capital through
investments primarily in common stocks of emerging growth companies.
MFS Investment Management(R) ("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.
Oppenheimer Variable Account Funds
Oppenheimer High Income Fund/VA. This Fund seeks a high level of current income
from investments in high yield fixed-income securities. High Income Fund's
investments include unrated securities or high risk securities in the lower
rating categories, commonly known as "junk bonds," which are subject to a
greater risk of loss of principal and nonpayment of interest than higher-rated
securities.
OppenheimerFunds, Inc. serves as the investment adviser to the Oppenheimer High
Income Fund/VA and manages its assets in accordance with general policies and
guidelines established by the board of trustees of the Oppenheimer Variable
Account Funds. The Manager is owned by Oppenheimer Acquisition Corp., a holding
company that is owned in part by senior officers of the Manager and controlled
by Massachusetts Mutual Life Insurance Company.
Templeton Variable Insurance Products Trust
The Templeton Variable Insurance Products Trust is only available as an
underlying investment of the Separate Account in which this Contract invests.
Templeton Developing Markets Securities Fund. This Fund seeks long-term capital
appreciation by investing primarily in emerging markets equity securities.
Templeton Asset Management Ltd. serves as the investment adviser to the
Templeton Developing Markets Securities Fund and manages its assets and makes
its investment decisions. Templeton Asset Management Ltd. is a Singapore
corporation wholly owned by Franklin Resources, Inc., a publicly owned U.S.
company. Franklin Resources' principal shareholders are Charles B. Johnson and
Rupert H. Johnson Jr.
<PAGE>
More Information About the Funds
Availability of the Funds. The Separate Account purchases shares of the Funds in
accordance with separate participation agreements. 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.
The Company has entered into agreements with the investment managers or advisers
of several of the Funds under which the investment manager or adviser pays the
Company a servicing fee based upon an annual percentage of the average daily net
assets invested by the Variable Account (and other separate accounts of the
Company) in the Funds managed by that manager or adviser. These fees are in
consideration for administration services provided to the Funds by the Company.
Payments of fees under these agreements by managers or advisers do not increase
the fees or expenses paid by the Funds or their shareholders.
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 Separate 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 Separate 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 Separate 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.
Related Fund Performance. These mutual fund portfolios are not available for
purchase directly by the general public, and are not the same as other mutual
fund portfolios with very similar or nearly identical names that are sold
directly to the public. However, the investment objectives and policies of
certain portfolios available under the policy may be very similar to the
investment objectives and policies of other portfolios that are managed by the
same investment adviser or manager. Nevertheless, the investment performance and
results of the portfolios available under the policy may be lower, or higher,
than the investment results of such other (publicly available) portfolios. There
can be no assurance, and no representation is made, that the investment results
of any of the portfolios available under the policy will be comparable to the
investment results of any other mutual fund portfolio, even if the other
portfolio has the same investment adviser or manager and the same investment
objectives and policies, and a very similar name.
<PAGE>
The Policy
================================================================================
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 Required Premium as
further described below. You must pay the Initial Required Premium during the
lifetime of the Insured, on or before the Policy Issue Date. All premiums after
the Initial Required Premium must be paid to the Home Office.
Conditions for Policy Issue
The minimum Specified Amount for this Policy is $50,000 ($25,000 for Issue Ages
65 and over). The Policy may be issued on individuals up to 75 years of Age. We
require evidence of insurability satisfactory to us before issuing a Policy. In
some cases, this evidence will include a medical examination.
Policy Issue Date
Full Insurance coverage under the Policy begins as of the Policy Issue Date. The
Policy Issue Date is also used to determine Policy Anniversaries and Monthly
Processing Days. If the Initial Required Premium is paid with the application,
and, after underwriting is complete, the Policy is approved for issue at the
Specified Amount applied for, then the Policy Issue Date is the Valuation Day as
of which the Policy is approved. If the Initial Required Premium does not
accompany the application or if the Policy is approved for issue at a Specified
Amount other than that requested in the application, then the Policy Issue Date
is approximately ten days after the Valuation Day as of which the Policy is
approved.
Temporary Insurance Agreement
If the Initial Required Premium is paid with the application, the proposed
Insured will be covered prior to the Policy Issue Date under a Temporary
Insurance Agreement. For the period beginning on the Valuation Day that we
receive the Initial Required Premium until all information necessary to complete
underwriting is received, the coverage is 50% of the Specified Amount requested
in the application up to $150,000. After that period, and until the Policy Issue
Date, coverage under a Temporary Insurance Agreement is the Specified Amount
requested in the application up to $300,000. No temporary insurance is available
in connection with coverage that is normally available through riders to a
Policy. The details of the Temporary Insurance Agreement are found in the
Agreement which accompanies the Policy.
Right-to-Examine Period
You may cancel the Policy before the latest of the following three events:
- 45 days after the date of the application.
- 10 days after we have personally delivered or have sent the Policy and
a Notice of Right of Withdrawal to you by first class mail. (20 days
if the policy is a replacement for an existing policy, or longer if
required by state law.)
- 10 days after you receive the Policy. (20 days if the policy is a
replacement for an existing policy, or longer if required by state
law.)
To cancel the Policy, you must mail or deliver the Policy to the representative
who sold it or to us at our Home Office. If you return the Policy, we will treat
it as if it had not been issued. You will receive a refund equal to the premiums
paid, unless state law requires a different result.
<PAGE>
If there is an increase in Specified Amount and the increase is not the result
of a change in death benefit option, you will be granted a right-to-examine
period, with respect to the increase. You may request a cancellation of the
increase during the right-to-examine period. You will then receive a refund (if
actual payment was received) or a credit. A credit will be made to the Policy
Value allocated among the Subaccounts and Fixed Account as if it were Net
Premium, equal to all Insurance Charges 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 we receive the request for
cancellation on the appropriate form containing all necessary signatures. Net
Premiums paid upon application of an increase in Specified Amount will be
allocated to the Subaccounts and/or the Fixed 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.
Flexibility of Premiums
The Policy provides for a planned annual premium determined by you. You are not
required, however, 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
Required Premium at any time while the Policy is In Force.
The Initial Required Premium is at least one-sixth (1/6) of the Basic Guarantee
Premium. This is the minimum premium that must be paid before we will issue a
Policy. The Basic Guarantee Premium is the sum of the expected first year
charges plus the first year Surrender Charge and provides certain protections
against Lapse.
A higher level of premium, the Extended Guarantee Premium, will fund the Policy
at the Extended Guarantee Level which provides protection against Lapse. The
Extended Guarantee Premium equals the current guideline level premium as
determined by the current Internal Revenue Code.
The Initial Required Premium, the Planned Premium, the Extended Guarantee
Premium, and the Basic Guarantee Premium are shown on the data page of the
Policy. We reserve the right to refuse any premium payment that is less than
$50.
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, we will only accept that
portion of the premium which would make total premiums equal the maximum. We
will return any excess amount and will not accept further premiums until the
maximum premium limitation increases.
We reserve the right to refuse any premium or part of a premium which would
increase the Death Benefit of the Policy by more than the amount of the premium.
Allocation of Net Premiums
You determine what percentages of the Net Premiums are allocated to each
Subaccount and the Fixed Account. Any allocation to a Subaccount or the Fixed
Account must be at least 5% of amount applied and only whole percentages are
permitted.
Initial Required Premiums are allocated as follows:
If the Initial Required Premium is received before we issue the Policy, it is
held in the company's general account until the Policy Issue Date. On the Policy
Issue Date, the Net Premium is allocated to the Subaccounts and the Fixed
Account. Allocations are made by the Owner and recorded on the application for
the Policy. These allocations apply to future Net Premiums until the allocation
is changed by the Owner.
<PAGE>
Lapse
If your Surrender Value on any Monthly Processing Day is insufficient to pay the
Monthly Deduction, then we will mail you a written notice informing you that a
Grace Period has begun under the Policy. If sufficient Net Premium is not paid
during the Grace Period, the Policy will Lapse without value. The Net Premium
required to terminate the Grace Period is that which is sufficient to pay
overdue Monthly Deductions plus the anticipated amount of the next two Monthly
Deductions. If the Insured dies during the Grace Period, unpaid Monthly
Deduction are deducted from the Death Benefit Proceeds.
Reinstatement
You may ask to have a Lapsed Policy reinstated. We will reinstate a Policy based
upon the original terms of the Policy if all of the following conditions are
met:
- You make a Written Request to reinstate the Policy within five years
after the Lapse.
- You provide satisfactory evidence of insurability (the Cost of
Insurance rates following reinstatement will be based upon the risk
classification of the reinstated Policy).
- You pay Net Premiums in an amount sufficient to cover unpaid Monthly
Deduction due prior to the end of the Grace Period plus the
anticipated amount of two Monthly Deductions.
- You pay the amount of or reinstate any loan outstanding as of the date
of Lapse.
The reinstatement will become effective immediately upon our approval of the
reinstatement.
Premiums to Prevent Lapse
If your Policy meets the premium requirements of one of the guarantees described
below, your Policy will continue In Force for the duration of the guarantee
provided you meet the requirements of that guarantee. The guarantees described
may vary by state.
a. Basic Guarantee: The Basic Guarantee is in effect if the total of your
premiums on each Monthly Processing Day following your Policy Issue
Date, less the total of any Partial Withdrawals (including cash
dividends) and loans taken to date, is at least equal to the Basic
Guarantee Premium. The Basic Guarantee Premium requirement is equal to
the total of all Basic Guarantee Premiums accumulated as of that
Monthly Processing Day. This Basic Guarantee will remain in effect as
long as you meet the premium requirements, and will continue until the
later of: 1.) the Insured's Attained Age 65; or 2.) 10 years after the
Policy Issue Date. The Basic Guarantee Premium as of the Policy Issue
Date is shown on the data page of the Policy. If you make a change to
your Policy benefits or change how you fund your Policy, this amount
will change and will affect the premium required for the Basic
Guarantee. The Basic Guarantee only applies for the first five policy
years in some states, including Massachusetts.
b. Extended Guarantee: The Extended Guarantee is in effect if the total
of your premiums on each Monthly Processing Day following your Policy
Issue Date, less the total of any Partial Withdrawals (including cash
dividends) and loans taken to date, is at least equal to the Extended
Guarantee Premium requirement. The Extended Guarantee Premium
requirement is equal to the total amount of all Extended Guarantee
Premiums accumulated as of that Monthly Processing Day. This Extended
Guarantee will remain in effect as long as you meet the premium
requirements, and will continue until the Insured's Attained Age 95.
The Extended Guarantee Premium as of the Policy Issue Date is shown on
the data page of the Policy. If you make a change to your Policy
benefits or change how you fund your Policy, this amount will change
and will affect the premium required for the Extended Guarantee. The
Extended Guarantee may not be available in all states. It is currently
not available in Massachusetts.
<PAGE>
You will be notified if the total of your net premiums are no longer sufficient
to keep the Basic Guarantee or Extended Guarantee in effect. If the Basic or
Extended Guarantee were previously in effect, you will have 61 days to pay us
sufficient premium in order to keep the guarantee in effect.
During the guarantee period, Monthly Deduction will continue to be deducted and
may result in a Surrender Value of less than zero at the end of the period. If
your Surrender Value is equal to or less than zero at the end of the guarantee
period, we will mail a notice of impending termination to you at your last post
office address known to us and your Grace Period will begin.
Death Benefit Proceeds
Payment of Death Benefit Proceeds. When we receive satisfactory, written proof
of the Insured's death, we will pay the Death Benefit Proceeds to the
Beneficiary. If no Beneficiary survives the Insured, we will pay the Death
Benefits Proceeds to you, if living, or to your estate.
We will pay Death Benefit Proceeds payable to your estate in one sum. We will
pay Death Benefit Proceeds payable to you or to other beneficiaries in one sum
unless another settlement option is selected. If the Beneficiary is not a
natural person, Death Benefit Proceeds due may only be applied under settlement
options we consent to.
We will pay interest on single sum Death Benefit Proceeds from the date we
receive proof of death (or from the date of the insured's death, if required by
law), until the date of payment. Interest will be paid at an annual rate that we
determine.
During the Insured's lifetime, you may direct that the Death Benefit Proceeds be
paid under one of the settlement options. We must receive the written consent of
all Irrevocable Beneficiaries and assignees before the selection. After the
Insured's death, if you did not select a settlement option, any Beneficiary
entitled to receive the proceeds in one sum may select a settlement option.
Death Benefit Options 1 and 2. You may select one of two death benefit options.
Your selection will affect the Death Benefit, the Monthly Deduction, and the
Policy Value. Under either option, Death Benefit Proceeds are equal to:
- The Death Benefit on the date of death; plus
- Any premiums received after date of death; minus
- Any Partial Withdrawals taken after the date of death; minus
- Any insurance charges due if the insured dies during a Grace Period;
minus
- Any Loan Amount.
The Death Benefit, however, differs under the two options.
Under Option 1, the Death Benefit is the greater of:
- The Specified Amount.
- The Policy Value on the insured's date of death multiplied by the
Death Benefit Percentage Factor.
Under Option 2, the Death Benefit is the greater of:
- The Specified Amount plus the Policy Value on the date of death.
- The Policy Value on the insured's date of death multiplied by the
Death Benefit Percentage Factor.
The Death Benefit Percentage Factor is the ratio of Death Benefit to Policy
Value required by the Internal Revenue Code for treatment of the Policy as a
life insurance Policy. The Death Benefit Percentage Factor varies by Attained
Age as shown in Appendix C. The Death Benefit Percentage Factor decreases from
year to year as the Age of the Insured increases.
<PAGE>
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.
Change of Death Benefit Option
You may change the death benefit option. The change will become effective as of
the first Monthly Processing Day after a Written Request. We reserve the right
to require evidence of insurability.
If option 1 is changed to option 2, the Specified Amount is reduced by the
amount of the Policy Value on the effective date of the change. This change does
not alter the amount of the Policy's death benefit at the time of the change,
but does affect how the death benefit is determined from that point on. The
death benefit will vary with Policy Value from that point on, unless the death
benefit derived from application of the Death Benefit Percentage Factor applies.
No change from death benefit option 1 to death benefit option 2 is allowed if
the resulting Specified Amount would be less than $40,000 ($20,000 if Issue Age
is 65 and over).
If option 2 is changed to option 1, the Specified Amount is increased by the
amount of the Policy Value on the effective date of the change. This change does
not alter the amount of the Policy's Death Benefit at the time of the change,
but does affect the determination of the Death Benefit from that point on. The
Death Benefit as of the date of the change becomes the new Specified Amount and
will remain at that level, unless the Death Benefit derived from application of
the Death Benefit Percentage Factor applies.
Your insurance goals should determine the appropriate death benefit option. If
you prefer to have favorable investment results and additional premiums
reflected in the form of an increased death benefit, you should choose death
benefit option 2. If you are satisfied with the amount of insurance coverage and
wish to have favorable investment results and additional premiums reflected to
the maximum extent in increasing Cash Values, you 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 Processing Day is
equal to the Net Amount At Risk, multiplied by the Cost of Insurance rate. The
Cost of Insurance rate is the same under both options, but the difference
between Death Benefit and Policy Value varies inversely with Policy Value under
option 1, but is constant under option 2, unless the Death Benefit derived from
application of the Death Benefit Percentage Factor applies.
Change of Specified Amount
You may change the Specified Amount at any time after the first Policy year. If
more than one increase is requested per Policy year, we may charge $100 for each
increase after the first request. Changes must be requested in writing and are
subject to the following conditions.
Decreases. After the decrease, the Specified Amount must be at least $40,000
($20,000 for Issue Ages 65 and over). The decrease is effective as of the
Monthly Processing Day coincident with or the next following day the request is
received at the Home Office. For purposes of determining the Cost of Insurance,
any decrease is applied to the initial Specified Amount and to increases in the
Specified Amount in reverse order in which they become effective. A decrease
does not result in reduced Surrender Charges.
Increases. A supplemental application containing evidence of insurability
satisfactory to us is required. The effective date of the increase will be shown
on an endorsement to the Policy.
Because the Surrender Charge is a function of Specified Amount, an increase in
Specified Amount results in an increase in the applicable Surrender Charge.
However, no additional Surrender Charges will accrue for increases in Specified
Amount due to a change from death benefit option 2 to death benefit option 1.
Likewise, because the Administrative Charge is a function of Specified Amount,
an increase in Specified Amount results in an increase in the ongoing
Administrative Charge. As with the Surrender Charge, an increase resulting from
a change in Death Benefit Option 2 to Option 1, does not result in an increase
in the Administrative Charge.
<PAGE>
We reserve the right to require the payment of additional premiums in an amount
equal to the Initial Required 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.
The rating class assigned to an increase in Specified Amount may result in the
use of a Cost of Insurance rate different than the Cost of Insurance rate
charged on the original Specified Amount.
Policy Values
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Policy Value. The Policy Value is the sum of the Variable Account Value (itself
the sum of the Subaccount Values), the Fixed Account Value and the Loan Account
Value. Policy Value is determined as of the end of each Valuation Period. As a
result, Policy Value increases whenever:
- Investment gains occur in any Subaccount.
- Interest is credited to the Policy for amounts held in the Fixed
Account.
- Interest is credited to the Policy for any Loan Amounts held in the
Loan Account.
- Additional premiums are paid.
- Policy dividends are paid into the Subaccounts or Fixed Account.
Policy Value decreases whenever:
- Investment losses occur in any Subaccount.
- Monthly Deduction or service fees are paid.
- A Partial Withdrawal occurs.
Policy Value remains constant when:
- A Policy loan is either disbursed or repaid.
- Amounts are transferred between any Subaccount or Fixed Account and
the Loan Account, or when amounts are transferred among the
Subaccounts and the Fixed Account (exclusive of any transfer charge).
The Subaccount Value attributable to a Subaccount is equal to the number of
Accumulation Units that the Policy has in each Subaccount, multiplied by the
Accumulation Unit Value of that Subaccount. The Accumulation Unit Value of each
Subaccount was set at $10 for the first Valuation Period. The Accumulation Unit
Value may increase or decrease from one Valuation Period to the next. The
Accumulation Unit Value will vary between Subaccounts.
Transfer of Values
You may make the following transfers of Policy Value: 1) between Subaccounts at
anytime 2) from a Subaccount to the Fixed Account at any time except for the six
month period after a transfer out of the Fixed Account and 3) from the Fixed
Account into the Subaccounts only during the 30 day period beginning on and
immediately following the Policy Anniversary. Only one transfer of up to 25% of
the Fixed Account Value is allowed each Policy year. However, we currently waive
these restrictions on transfers from the Fixed Account.
A transfer may be requested in writing or by an authorized telephone
transaction. A written transfer request must be made on a form satisfactory to
us and contain your original signature. The Written Request will take effect as
of the day it is received at the Home Office. You also may make transfers by
telephone if we have a signed telephone transfer authorization form from you. We
cannot, however, guarantee that telephone transfer privileges will be available
at all times. We will exercise reasonable care to prevent unauthorized telephone
transactions. For example, we will:
<PAGE>
- Record calls requesting transfers.
- Ask the caller questions in an attempt to determine if you are the
caller.
- Transfer funds only to other Subaccounts and to the Fixed Account.
- Send a written confirmation of each transfer.
We also permit transfer requests by facsimile provided that we have an original
signed fax authorization from you. We reserve the right to discontinue allowing
telephone and fax transfers at any time and for any reason. In the event we
discontinue this privilege, we 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 us.
If we use reasonable procedures and believe the instructions to be genuine, you
are at risk of loss if someone gives unauthorized or fraudulent information to
us.
The first twelve transfers in a Policy year are free. We may charge $10 for the
thirteenth and each additional transfer in a Policy year. We are currently
waiving this fee.
A request to transfer Subaccount Values to other Subaccounts and/or the Fixed
Account or from the Fixed Account to one or more Subaccounts which is received
before 3:00 p.m. Central Standard Time will take effect as of the day it is
received. Transfer requests received after that time are processed as of the
following Valuation Day. All transfers requested on the same Valuation Day are
considered one transfer for purposes of the transfer fee.
We further reserve the right to restrict the ability to transfer Policy Value
among Subaccounts and/or the Fixed Account if we believe such action is
necessary to maintain the tax status of the Policies.
Dollar Cost Averaging
If elected at the time of the application or at any other time by Written
Request, you may systematically or automatically transfer (on a monthly,
quarterly, semi-annual or annual basis) specified dollar amounts from the Money
Market Subaccount to other Subaccounts. The fixed dollar amount will purchase
more Accumulation Units of a Subaccount when their value is lower and fewer
units when their value is higher. Over time, the cost per Accumulation Unit
averages out to be less than if all purchases had been made at the highest value
and greater than if all purchases had been made at the lowest value. The
dollar-cost averaging method of investment reduces the risk of making purchases
only when the price of Accumulation Units is high. It does not assure a profit
or protect against a loss in declining markets.
The minimum transfer amount for dollar-cost averaging is the equivalent of $100
per month. If less than $100 remains in the Money Market Subaccount, the entire
amount will be transferred. The amount transferred to a Subaccount must be at
least 5% of the amount transferred and must be stated in whole percentages.
Once elected, dollar-cost averaging remains in effect until the earliest of: (1)
the Policy Value in the Money Market Subaccount is depleted to zero; (2) you
cancel the election by Written request; or (3) for three successive months, the
Policy Value in the Money Market Subaccount has been insufficient to implement
the dollar-cost averaging instructions you have given to us. We will notify you
when dollar-cost averaging is no longer in effect. There is no additional charge
for using dollar-cost averaging. Dollar-cost averaging transfers do not count
against the twelve free transfers in a Policy Year. We reserve the right to
discontinue offering dollar-cost averaging at any time and for any reason.
Automatic Personal Portfolio Rebalancing Service
If elected at the time of the application or requested at any time by Written
Request, you may instruct us to automatically transfer (on a monthly, quarterly,
semi-annual or annual basis) Policy Value between and among specified
Subaccounts in order to achieve a particular percentage allocation of Policy
Value among the Subaccounts. The percentage allocations must be in whole
percentages and must be at least 5% per allocation. You may start and
<PAGE>
stop automatic Policy Value rebalancing at any time and may specify any
percentage allocation of Policy Value between or among as many Subaccounts as
are available at the time the rebalancing is elected. (If you elect automatic
Policy Value rebalancing without specifying percentage allocation(s), we will
allocate Policy Value in accordance with your currently effective premium
payment allocation schedule.) There is no additional charge for using Policy
Value rebalancing.
Other Types of Automatic Transfers
If elected at the time of the application or at any other time by Written
Request, you may systematically or automatically transfer (on a monthly,
quarterly, semi-annual or annual basis) Policy Value from one Subaccount to
another. Such automatic transfer amounts may be requested on the following
basis: (1) as a specified dollar amount; (2) as a specified number of
accumulation units; (3) as a specified percent of Policy Value in a particular
Subaccount, or (4) in an amount equal to the excess of a Specified Amount of
Policy Value in a particular Subaccount.
The minimum automatic transfer amount is the equivalent of $100 per month. If
less than $100 remains in the Subaccount from which transfers are being made,
the entire amount will be transferred. The amount transferred to a Subaccount
must be at least 5% of the amount transferred and must be stated in whole
percentages. Once elected, automatic transfers remain in effect until the
earliest of: (1) the Policy Value in the Subaccount from which the transfers are
being made is depleted to zero; (2) you cancel the election by Written Request;
or (3) for three successive months, the Policy Value in the Subaccount from
which transfers are being made has been insufficient to implement the automatic
transfer instructions you have given us. We will notify you when automatic
transfer instructions are no longer in effect. There is no additional charge for
using automatic transfers. We reserve the right to discontinue offering
automatic transfers at any time and for any reason.
Surrender and Partial Withdrawals
Policy Surrender. You may Surrender the Policy for its Surrender Value. You must
obtain the written consent of all assignees or Irrevocable Beneficiaries before
a surrender. We may require the return of the Policy.
Surrender of the Policy is effective as of the date we receive a Written Request
for surrender. The Policy and all insurance terminate upon surrender.
Partial Withdrawal. You may make Partial Withdrawals by Written Request. Written
consent of all assignees or irrevocable beneficiaries must be obtained prior to
any Partial Withdrawal. An amount up to the Policy Surrender Value, less two
months of insurance charges, may be taken as a Partial Withdrawal. Partial
Withdrawals will be effective as of the date we receive your Written Request. A
Partial Withdrawal request for the full Surrender Value will be considered a
full surrender of the Policy.
You may specify the accounts from which the Partial Withdrawal, including the
service fee, will be deducted. If any account value is insufficient, or if you
do not specify the accounts, the amount will be deducted pro rata from the
remaining accounts.
If death benefit Option 1 is in effect at the time of a Partial Withdrawal, the
Specified Amount will be reduced by the amount of the Partial Withdrawal,
including the amount of the service fee. If death benefit Option 2 is in effect
at the time of a Partial Withdrawal, Specified Amount will not change. We
reserve the right to decline a Partial Withdrawal request if the remaining
Specified Amount would be below the minimum Specified Amount necessary to issue
a new Policy. If the Death Benefit derived from application of the Death Benefit
Percentage Factor applies, the effect of a Partial Withdrawal on the monthly
Cost of Insurance and Death Benefit is somewhat different. The Death Benefit 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.
Cash dividend payments are included as Partial Withdrawals when determining
whether the Basic and Extended Premium Guarantees are in effect.
Payment is generally made within seven days of the surrender or Partial
Withdrawal date.
<PAGE>
Maturity
The Policy matures on the Policy Anniversary following the Insured's 95th
birthday. Coverage under the Policy ceases on that date, and you will receive
maturity proceeds equal to the Surrender Value as of that date, unless the
maturity date has been extended, as allowed by state law. The tax consequences
associated with continuing the Policy beyond the Insured's 100th birthday are
uncertain and a tax advisor should be consulted.
Payment of Benefits/Settlement Options
Settlement options other than lump sum payments are, in our discretion,
available for Death Benefit Proceeds, surrender proceeds, and maturity proceeds,
payable to natural persons, subject to certain restrictions on Death Benefit
Proceeds. Proceeds payable to a non-natural person are available only under
settlement options we agree to. The four available settlement options are as
follows:
1) Interest Option. The proceeds may be left with us to collect
interest during the lifetime of the payee. We determine the interest
rate each year. It is guaranteed to be not less than the settlement
option rate of interest shown on the data page of the Policy. The payee
may choose to receive interest payments either once a year or once a
month (may not be available in all states) unless the amount of
interest to be paid monthly is less than $25 per month, or the total
amount deposited is less than $2,500, 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 us to provide
equal monthly installments for a specified period not less than 5 or
more than 30 years. If the original payee dies before payments have
been made for the chosen number of years; a.) payments will be
continued for the remainder of the period to the successor payee; or
b.) the present value of the remaining payments, computed at the
interest rate used to create the Option 2 rates, will be paid to the
successor payee or to the last surviving payee's estate, if there is no
successor payee. The interest we guarantee to pay is set forth in the
Policy. Additional interest, if any, will be payable as determined by
us. (This option may not be available in all states.)
3) Life Income - Guaranteed Period Certain. The proceeds may be left
with us to provide monthly installments for as long as the original
payee lives. A guaranteed period of 10 or 20 years 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 or the successor payee may receive the
present value of the remaining payments computed at the interest rate
for this option.
4) Joint and Survivor Life. The proceeds may be left with us 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 minimum amount that can be applied under settlement options 2, 3 and 4 is
$2,500 or that amount which will provide an initial monthly installment of at
least $25.
We may, at our option, provide for additional settlement options or cease
offering any of the settlement options described above.
Policy Loans
General. At any time prior to the Maturity Date while the Insured is still
living and the Policy is In Force, you may, by Written Request, borrow money
from us using the Policy as the security for the loan. The maximum amount that
you may borrow is 90% of the Cash Value of the Policy as of the date of the
loan.
Interest. We charge interest on amounts that you borrow. The interest rate
charged is 6% and is an effective annual rate compounded annually on the Policy
Anniversary. Interest is charged in arrears from the date of the loan and is
<PAGE>
due from you on each Policy Anniversary for the prior Policy Year. If you do not
pay the interest when due, the amount of the interest is added to the
outstanding Loan Amount. Thus, unpaid interest is charged interest during the
ensuing Policy Year. For Policies in the 11th Policy Year or later, we charge a
preferred effective annual interest rate up to 4.5% on amounts borrowed. We may
charge interest at lower rates from time to time.
We credit Loan Account Value with interest at an effective annual rate of 4%. On
each Policy Anniversary, interest earned on Loan Account Value since the
preceding Anniversary is transferred to the Subaccounts and the Fixed Account.
Unless you specify otherwise, such transfers are allocated in the same manner as
transfers of collateral to the Loan Account.
Loan Collateral. When we make a loan to you, we transfer an amount of Policy
Value sufficient to secure the loan out of the Subaccounts and the Fixed Account
and into the Loan Account. You may specify how this transferred Policy Value is
allocated from among the Subaccount Values and the Fixed Account Value. If you
do not specify the allocation, we make the allocation based on the proportion
that each Subaccount Value and the Fixed Account Value bear to the Policy Value
as of the date that the transfer is made. If unpaid interest is due from you on
a Policy Anniversary it is added to the Loan Amount. Policy Value in the amount
of the interest also is transferred to the Loan Account as of that Anniversary.
The Policy Value transferred in connection with unpaid interest is allocated on
the same basis as other Policy Value transferred to the Loan Account.
Loan Account Value is recalculated when interest is added to the Loan Amount, a
loan repayment is made, or a new loan is made under Policy.
Non-Payment Of Policy Loans. If Loan Account Value exceeds Cash Value, then you
must make either a loan repayment or a Net Premium payment sufficient to raise
the Cash Value or lower the Loan Account Value so that Cash Value exceeds the
Loan Account Value. We will send you and any assignee of record a notice
indicating the amount that must be paid. If payment is not received at the Home
Office within 30 days of the notice being mailed, the Grace Period will begin.
(See "Lapse") If the Grace Period expires without the payment being made, then
the Policy Lapses.
Loan Repayment. You may repay a loan or repay any part of a loan at any time
while the Insured is still living and the Policy is In Force prior to the
Maturity Date. Upon repayment of any part of a loan, Loan Account Value in an
amount equal to the payment is transferred to the Subaccounts and the Fixed
Account as of the date that the payment is received by us. Unless you specify
otherwise, the amount transferred is allocated among or between the Subaccounts
and the Fixed Account in accordance with your allocation instructions for Net
Premium Payments in effect at that time.
Effect of a Policy Loan. A loan, whether or not repaid, has a permanent effect
on the Death Benefit and Policy Values because the investment results of the
Subaccounts and current interest rates credited on Fixed Account Value do not
apply to Policy Value in the Loan Account. The larger the loan and longer the
loan is outstanding, the greater will be the effect of Policy Value being held
as collateral in the Loan Account. Depending on the investment results of the
Subaccounts or credited interest rates for the Fixed Account while the loan is
outstanding, the effect could be favorable or unfavorable. Policy loans also may
increase the potential for Lapse if investment results of the Subaccounts to
which Surrender Value is allocated is unfavorable. If a Policy Lapses with loans
outstanding, certain amounts may be subject to income tax and a 10% penalty tax.
See "Federal Income Tax Considerations," for a discussion of the tax treatment
of Policy loans. In addition, if a Policy is a "modified endowment contract,"
loans may be currently taxable and subject to a 10% penalty tax.
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.
<PAGE>
Premium Expense Charge. We make a deduction from premiums for Premium Expense
Charges charged by your state of residence. We determine your state of residence
by the mailing address as shown on our records. The initial percentage of
reduction for state charges is shown on the data page of the Policy.
Monthly Deduction. The Monthly Deduction due on each Monthly Processing Day will
be the sum of:
- The Cost of Insurance for that month; plus
- The Policy Fee; plus
- The Administrative Fee; plus
- The cost of any additional benefits provided by rider, if any.
The Monthly Deduction is collected by redeeming the number of Accumulation Units
(or fraction of Accumulation Units) in Subaccounts (and/or withdrawing values
from the Fixed Account) in an amount equal to the Monthly Deduction.
Cost of Insurance. The Cost of Insurance rate for the Policy will be determined
by the Insured's Attained Age, gender, tobacco status, and rating class. Cost of
Insurance rate charges will depend on our expectations as to future mortality
experience. Tobacco User rates are determined based on Age, gender, and
duration. Higher rates are charged if we determine that for some reason the
Insured is a higher mortality risk. The Tobacco User and Non-Tobacco User rates
are further classified as either preferred or standard based on underwriting
guidelines and principles. The monthly Cost of Insurance rate will not exceed
the rates shown in Table I - Guaranteed Maximum Insurance Rates contained in the
Policy. However, we may charge less than these rates. While not guaranteeing to
do so, we intend 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.
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 Policy 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, Policy Value is first used
to offset the initial Specified Amount, and any Policy Value in excess of the
initial Specified Amount is then used to offset the increase in Specified
Amount.
Policy Fee. The Policy Fee is $6 per month. It is a fee we charge to compensate
for some of the administrative expenses associated with the Policy. The fee
cannot be increased.
Administrative Charge. We assess an administrative charge of $.45 per thousand
dollars of Specified Amount per year on a monthly basis to reimburse us for some
of the administrative expenses associated with the Policy. The charge increases
if the Specified Amount increases, in proportion to the amount of increase. The
charge does not decrease in the event of a Specified Amount decrease. This
charge is only charged 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 Administrative Charge, together with the Policy Fee, is designed to
equitably distribute the administrative costs among all Policies.
<PAGE>
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. We daily deduct a mortality and expense risk
charge of .00002466% of the Policy's Variable Account Value, which is equal on
an annual basis to 0.9%. The mortality risk assumed is that the Insured may not
live as long as expected. The expense risk assumed by us is that the actual
expense will be greater than what we expected. We have primary responsibility
for all administration for the Policy, the Separate Account and the Fixed
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, we may use proceeds to finance distribution of the Policies
or for any other lawful purpose.
Surrender Charges. To reimburse us for sales expenses and Policy issue expenses,
including but not limited to representatives' commissions, advertising, sales
materials, training allowances, and preparation of prospectuses, we deduct
Surrender Charges from the proceeds in the event of a complete surrender of the
Policy during the first nine years. If the Policy is not surrendered in the
first nine years there is no charge. A chart showing the percentage of Surrender
Charges remaining at the beginning of Policy years 2 through 9 is shown below.
The Surrender Charges vary by the Age of Insured, gender, and rating class. For
a 35-year-old male Non-Tobacco User, the charges would be $7.71 per $1,000 of
the Specified Amount. For a 50-year-old male Non-Tobacco User, the charges would
be $15.91 per $1,000 of Specified Amount. For a chart showing how the charges
vary, see Appendix B.
The Surrender Charges decrease annually after the first year. The percentage of
the Surrender Charges remaining in each Policy year is:
Beginning Percentage of
Policy Year Surrender Charges Remaining
----------- ---------------------------
2 95%
3 90%
4 85%
5 75%
6 65%
7 50%
8 35%
9 20%
10+ 0%
Transfer Fee. Currently, we allow an unlimited number of transfers in each
Policy year without charge. After twelve transfers in any given Policy year, we
may deduct $10 per transfer from the amount transferred.
Federal and State Income Taxes. Other than Premium Expense no charges are
currently made against the Separate Account and/or Fixed Account for federal or
state income taxes. In the event we determine that any such taxes will be
imposed, we may make deductions from the Separate Account and/or Fixed 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.
Increase of Specified Amount Charge. We may assess a $100 charge for each
increase in Specified Amount after the first in a Policy year.
<PAGE>
We currently intend to waive certain fees as stated above. We, however, reserve
the right to reinstate the fees and charges in the future.
Other Policy Benefits and Provisions
================================================================================
Owner, Beneficiary
You are the person who purchases the Policy and is named in the application. You
may be other than the Insured.
You may name one or more Beneficiaries 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
Benefit 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 you direct otherwise. If no
Beneficiary survives the Insured, the Death Benefit Proceeds will be paid to
you, if living, or to your estate.
You may change the Beneficiary while the Insured is living. The written consent
of all Assignees and Irrevocable Beneficiaries must be obtained before a change.
To make a change, you must provide us with a Written Request satisfactory to us.
The request will not be effective until we record it. After the request is
recorded, it will take effect as of the date you signed the request. We will not
be responsible for any payment or other action taken before the request is
recorded. We may require the Policy be returned for endorsement of the
Beneficiary change.
Our Right to Contest the Policy
We have the right to contest the validity of the Policy or to resist a claim
under it on the basis of any material misrepresentation of a fact stated in the
application or any supplemental application. We also have the right to contest
the validity of any increase of Specified Amount or other change to the Policy
on the basis of any material misrepresentation of a fact stated in the
application (or supplemental application) for such increase in coverage or
change. In issuing this Policy, we rely on all statements made by or for the
Insured in the application or in a supplemental application. In the absence of
fraud, we consider statements made in the application(s) to be representations
and not warranties.
In the absence of fraud, we cannot bring any legal action to contest the
validity of the Policy after it has been In Force during the lifetime of the
Insured for two years from the Policy Issue Date, or if reinstated, for two
years from the date of reinstatement. Likewise, we cannot contest any increase
in coverage effective after the Policy Issue Date, or any reinstatement thereof,
after such increase or reinstatement has been In Force for two years from its
effective date.
Right to Convert
You may convert this Policy to a fixed policy during the first 24 months after
the Policy Issue Date. It may be converted to a fixed policy by transferring,
without charge, the value in the Subaccounts to the Fixed Account unless state
law requires or allows otherwise. If you do so, future payments will be
allocated to the Fixed Account, unless you specify otherwise. The conversion
will become effective when we receive your Written Request.
Transfer of Ownership
You may transfer ownership of the Policy. The written consent of all assignees
and Irrevocable Beneficiaries must be obtained before the transfer. The request
to transfer must be in writing and filed at the Home Office. The transfer will
take effect as of the date the notice was signed. We may require that the Policy
be sent in for endorsement to show the transfer of ownership.
<PAGE>
We are not responsible for the validity or effect of any transfer of ownership.
We will not be responsible for any payment or other action we have taken before
receiving the Written Request for transfer.
Collateral Assignments
You may assign the Policy as collateral security. The written consent of all
Irrevocable Beneficiaries must be obtained before an assignment. The assignment
must be in writing and filed at the Home Office. The assignment will then take
effect as of the date the Written Request was signed.
We are not responsible for the validity or effect of any collateral assignment.
We will not be responsible for any payment or other action we have taken before
receiving 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 whom you give some, but not all ownership rights under the Policy. A
collateral assignment is not a transfer of ownership.
Effect of Misstatement of Age or Gender
For a Policy based on male or female cost of insurance rates (see data page for
basis), if the insured's age or gender has been misstated, an adjustment will be
made to reflect the correct age and gender as follows (unless a different result
is required by state law):
a. If the misstatement is discovered at death, the death benefit
amount will be adjusted based on what the cost of insurance rate as
of the most recent Monthly Processing Day would have been at the
insured's correct age and gender.
b. If the misstatement is discovered prior to death, the cost of
insurance rate will be adjusted based on the insured's correct age
and gender beginning on the next Monthly Processing Day.
For a Policy based on blended cost of insurance rates (see data page for basis),
a misstatement of gender will not result in an adjustment. However, if the
insured's age has been misstated, an adjustment will be made to reflect the
correct age as follows (unless a different result is required by state law):
a. If the misstatement is discovered at death, the death benefit
amount will be adjusted based on what the cost of insurance rate as
of the most recent Monthly Processing Day would have been at the
insured's correct age.
b. If the misstatement is discovered prior to death, the cost of
insurance rate will be adjusted based on the insured's correct age
beginning on the next Monthly Processing Day.
Suicide Exclusion
If the Insured commits suicide, while sane or insane, within two years of the
Policy Issue Date, our liability is limited to an amount equal to the Policy
Value less any Loan Amount. We will pay this amount to the Beneficiary in one
sum.
If the Insured commits suicide, while sane or insane, within two years from the
effective date of any increase in Specified Amount, our liability with respect
to that increase is limited to an amount equal to the cost of insurance
attributable to the increase from the effective date of the increase to the date
of death.
<PAGE>
Dividends
While the Policy is In Force, it will share in our divisible surplus. We
determine the Policy's share annually. It is payable annually on the Policy
Anniversary. You may select to have dividends paid into the Subaccounts and the
Fixed 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 Fixed Account as
Net Premiums. We currently do not expect to pay dividends during the first 10
Policy Years. For each of Policy years 11-20, we project annual dividends equal
to 0.70% of the Policy Value at the end of the Policy year. For each Policy year
21 and after we project annual dividends equal to 1.10% of the Policy Value at
the end of the Policy year. 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, we may suspend or postpone the
right to transfer among Subaccounts, make a surrender or Partial Withdrawal, or
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.
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 Fixed Account, the payment of full or
Partial Withdrawal proceeds or loan proceeds may be deferred for up to six (6)
months from the date of the surrender or loan request, unless state law requires
exception to the period of deferment. Death Benefit Proceeds may be deferred for
up to 60 days from the date we receive proof of death.
Accelerated Benefit Option
We will advance up to 50% of a Policy's eligible death benefit, subject to a
$250,000 maximum per Insured, if we receive satisfactory proof that the Insured
is terminally ill and if you elect to receive an accelerated payment of the
death benefit. Terminal illness is a non-correctable medical condition in which
the Insured's life expectancy is no more than twelve months. Policy Value is
excluded from the calculation of the eligible death benefit. If you elect to
receive an accelerated benefit, we 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 you receive 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.
Reports To Owners. We will confirm any of the following within seven days:
- The receipt of any Net Premium (except premiums received before Policy
Issue Date or by preauthorized check).
- The receipt of any instructions to change allocation of Net Premiums.
- Any transfer between Subaccounts; any loan, interest repayment, or
loan repayment; any Partial Withdrawal; any return of premium
necessary to comply with applicable maximum premium limitations.
- Any restoration to Policy Value following exercise of the
right-to-examine privilege for an increase in Specified Amount.
<PAGE>
- Exercise of the right-to-examine privilege.
- An exchange of the Policy or increase in Specified Amount.
- Full surrender of the Policy.
- Payment of Death Benefit Proceeds.
We will also mail to you, at your 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 and any credit to the Separate Account of interest on
amounts held in the Loan Account.
Voting Rights. We 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. We 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 we vote 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 we otherwise determine that it is allowed to vote the shares in its
own right, it may elect to do so.
You have the voting interest under a Policy. The number of votes you have a
right to instruct will be calculated separately for each Subaccount. You have
the right to instruct one vote for each $1 of Policy Value in the Subaccount
with fractional votes allocated for amounts less than $1. The number of votes
you have available 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.
We 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, we 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, we may vote against a change if we in good faith determine
that the proposed change is contrary to state or federal law or we determine
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 our other Separate Accounts.
Riders and Endorsements
================================================================================
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. We reserve the right to stop offering the riders
mentioned below and to offer additional riders.
Children's Insurance. The rider provides level term insurance to Children of the
Insured up to the earlier of Age 23 of the child or Age 65 for the Insured. 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 before termination of
this rider, the coverage on each child becomes paid-up term insurance to Age 23.
This rider may be converted to a new Policy without evidence of insurability on
each Insured child's 23rd birthday or at Age 65 of the person insured under the
Policy to which the rider is attached, if sooner.
<PAGE>
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 or preferred
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.
Other Insured. This rider provides additional level term insurance. The "other
Insured" could be the Insured (except in states where it is not allowed by law)
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.
Waiver of Premium Disability. This rider provides that, during the Insured's
total disability, we will waive Monthly Deduction for administrative and life
insurance costs or Basic Guarantee Premium, if greater. 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.
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
Surrender 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 Policy is owned by a business or trust.
3. The new Policy is owned by the same entity.
4. The insured under the 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 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 where allowed by state law. This fee will not
exceed $150. The Executive Benefits Plan Endorsement may not be available in all
states.
<PAGE>
Federal Income Tax Considerations
================================================================================
Introduction
The following summary provides a general description of the federal income tax
considerations associated with the Policy and does not purport 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 our 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, we believe 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 you pay 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 universal 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 Policy Value and the narrow investment objective of certain
Funds, have not been explicitly addressed in published rulings. While we believe
that the Policies do not give you investment control over Separate Account
assets, we reserve the right to modify the Policies as necessary to prevent you
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. We believe 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, you will not be deemed to be in constructive receipt of the Policy
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."
<PAGE>
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 Partial Withdrawals, are treated
first as distributions of gain taxable as ordinary income and as tax-free
recovery of your 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
Partial Withdrawals.
A 10 percent additional income tax is imposed on the amount subject to tax
except where the distribution or loan is made when you have Attained Age 59 1/2
or are disabled, or where the distribution is part of a series of substantially
equal periodic payments for your life (or life expectancy) or the joint lives
(or joint life expectancies) of the your and your beneficiary or designated
beneficiary.
If a Policy becomes a modified endowment contract, distributions that occur
during the policy year will be taxed as distributions from a modified endowment
contract In addition, distributions from a Policy within two years before it
becomes a modified endowment contract will be taxed in this manner. This means
that a distribution made from a Policy that is not a modified endowment contract
could later become taxable as a distribution from a modified endowment contract.
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 your 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 10th Policy Anniversary 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. Your investment in the Policy is generally the
aggregate premium payments. When a distribution is taken from the Policy, your
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, you should consult a tax advisor as to the tax
consequences. If a loan from a Policy is outstanding when the Policy is canceled
or lapses, then the amount of the outstanding indebtedness will be added to the
amount treated as a distribution from the Policy and will be taxed accordingly.
Policy Changes, Transfers and Exchanges. Changes to a Policy's death benefit
option or face amount, the conversion or exchange of a policy, and transfer or
assignment of ownership of a Policy may have adverse tax consequences. You
should consult a tax adviser if you are considering any such transaction.
<PAGE>
Multiple Policies. All Modified Endowment Contracts that are issued by us (or
our affiliates) to the same owner during any calendar year are treated as one
Modified Endowment Contract for purposes of determining the amount includible in
your income when a taxable distribution occurs.
Accelerated Death Benefit Rider. The federal income tax consequences associated
with the Accelerated Benefit Option Endorsement are uncertain. You should
consult a qualified tax advisor about the consequences of requesting payment
under this Endorsement. (See page 29 for 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. We report 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 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 you are purchasing the
Policy for any arrangement the value of which depends in part on its tax
consequences, you 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, we are not taxed on the Separate Account's
operations. Thus, currently we do not deduct charges from the Separate Account
for its federal income taxes. We reserve the right to charge the Separate
Account for any future federal income taxes that it may incur.
Under current laws in several states, we may incur state and local taxes (in
addition to Premium Expense Charges). These taxes are not now significant and we
are not currently charging for them. If they increase, we may deduct charges for
such taxes.
<PAGE>
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 2000-present Retired
1991-2000 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
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
<PAGE>
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
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
Larry H. Blanchard 1996-Present CUNA Mutual Life Insurance Company
Senior Vice President - Communications and Public Relations
Gerald T. Conklin 1999-Present CUNA Mutual Life Insurance Company
Senior Vice President - International Enterprise
Michael S. Daubs 1973-Present CUNA Mutual Life Insurance Company*
Chief Officer - Investments
CIMCO Inc.
President
James M. Greaney 1998-Present CUNA Mutual Life Insurance Company*
Chief Officer - Corporate Services
Jeffrey D. Holley 1999-Present CUNA Mutual Insurance Society
Chief Financial Officer
Steven Haroldson 1999-Present CUNA Mutual Insurance Company
Chief Technology Officer
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
<PAGE>
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/Lending Serives
Faye A. Patzner 1999-Present CUNA Mutual Life Insurance Company
Senior Vice President and General Counsel
Keith A. Williams 1999-Present CUNA Mutual Life Insurance Company
Senior Vice President - Human Resources
</TABLE>
[FN]
*We 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>
<PAGE>
Additional Information
================================================================================
Addition, Deletion Or Substitution Of Investments
We reserve the right, 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 our judgment, further investment in any Fund should become
inappropriate, we may redeem the shares, if any, of that Fund and substitute
shares of another Fund. To the extent required by the 1940 Act or other
applicable law, we 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.
We also reserve 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. We 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 us. 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 our
sole discretion, marketing, tax, or investment conditions warrant.
In the event of any such substitution or change, we (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
you object to the change, you may exchange the Policy for a fixed benefit whole
life insurance policy then issued by us. The new Policy will be subject to
normal underwriting rules and other conditions determined by us. No evidence of
insurability will be necessary. The option to exchange must be exercised within
sixty (60) days of notification to you of the investment Policy change. You may
also Surrender the Policy.
If we consider 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 ours. In addition, we may, when permitted by law,
restrict or eliminate any voting rights of Owners or other persons who have such
rights under the Policies.
State Regulation
We are 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 our operations
for the preceding year and our financial condition as of the end of such year.
Regulation by the Insurance Department includes periodic examination to
determine our liabilities and reserves so that the Insurance Department may
certify the items are correct. Our 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, we are subject to
regulation under the insurance laws of other jurisdictions in which it may
operate.
Legal Proceedings
We, 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, we believe 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.
<PAGE>
Independent Accountants
The financial statements for 1999 included herein and elsewhere in the
Registration Statement have been included in reliance upon the reports of
PricewaterhouseCoopers LLP, Milwaukee, Wisconsin, independent accountants, and
upon the authority of said firm as experts in accounting and auditing. The
financial statements for fiscal years ended December 31, 1998 and prior have
been audited by KPMG LLP.
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.
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 39-1437257. 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.
We 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. We
may also pay other distribution expenses such as agents' insurance and pension
benefits, agency expense allowances, and overhead attributable to distribution.
In addition, we 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.
Financial Statements
================================================================================
Our financial statements are immediately following the financial statements of
the Separate Account. Our financial statements should be considered only as
bearing upon our ability to meet our 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, 1999
(with Independent Auditor's Report)
<PAGE>
<TABLE>
<CAPTION>
CUNA MUTUAL LIFE VARIABLE ACCOUNT
Statements of Assets and Liabilities
December 31, 1999
Money Treasury Growth and Appreciation
Market 2000 Bond Balanced Income Stock Stock
Assets: Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount
---------- ---------- ---------- ---------- ---------- ----------
Investments in Ultra Series Fund:
(note 2)
<S> <C> <C> <C> <C> <C> <C>
Money Market Fund,
4,415,709 shares at net asset value of
$1.00 per share (cost $4,415,709) $4,415,709 $ -- $ -- $ -- $ -- $ --
Treasury 2000 Fund,
185,786 shares at net asset value
of $10.23 per share (cost $1,730,401) -- 1,901,140 -- -- -- --
Bond Fund,
386,266 shares at net asset value
of $10.05 per share (cost $4,031,809) -- -- 3,880,772 -- -- --
Balanced Fund,
3,856,328 shares at net asset value
of $20.44 per share (cost $57,606,958) -- -- -- 78,807,130 -- --
Growth and Income Stock Fund,
3,049,577 shares at net asset value
of $33.58 per share (cost $64,521,628) -- -- -- -- 102,397,680
Capital Appreciation Stock Fund,
1,650,768 shares at net asset value of
$25.59 per share (cost $26,563,974) -- -- -- -- -- 42,243,240
----------- ----------- ----------- ---------- ----------- ----------
Total assets 4,415,709 1,901,140 3,880,772 78,807,130 102,397,680 42,243,240
----------- ----------- ----------- ---------- ----------- ----------
Liabilities:
Accrued adverse mortality and
expense charges 3,512 795 2,983 59,572 76,580 31,271
----------- ----------- ----------- ---------- ----------- ----------
Total liabilities 3,512 795 2,983 59,572 76,580 31,271
----------- ----------- ----------- ---------- ----------- ----------
Net assets $4,412,197 $1,900,345 $3,877,789 $78,747,558 $102,321,100 $42,211,969
=========== =========== =========== ========== =========== ==========
Policyowners Equity:
Net Assets: Type 1 $4,412,197 $1,900,345 $3,876,719 $78,664,114 $102,280,992 $42,196,596
Outstanding units: Type 1 (note 5) 220,755 204,654 139,585 1,593,968 1,246,783 1,333,827
Net asset value per unit: Type 1 $19.99 $9.29 $27.77 $49.35 $82.04 $31.64
=========== =========== =========== ========== =========== ==========
Net Assets: Type 2 -- -- $1,070 $83,444 $40,108 $15,373
Outstanding units: Type 2 (note 5) -- -- 107 8,270 3,979 1,481
Net asset value per unit: Type 2 -- -- $10.00 $10.09 $10.08 $10.38
=========== =========== =========== ========== =========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
CUNA MUTUAL LIFE VARIABLE ACCOUNT
Statements of Assets and Liabilities, continued
December 31, 1999
Mid-Cap International Global Emerging High Developing
Stock Stock Governments Growth Income Markets
Assets: Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount
---------- ---------- ---------- ---------- ---------- ----------
Investments in Ultra Series Fund:
(note 2)
<S> <C> <C> <C> <C> <C> <C>
Mid-Cap Stock Fund,
409 shares at net asset value of
$11.15 per share (cost $4,449) $4,562 $ -- $ -- $ -- $ -- $ --
Investments in T. Rowe Price
International Fund, Inc.:
International Stock Portfolio,
439,418 shares at net asset value of
$19.04 per share (cost $5,697,317) -- 8,366,511 -- -- -- --
Investments in MFS(R) Variable Insurance Trust(SM):
Global Governments Series,
61,767 shares at net asset value of
$10.03 per share (cost $633,127) -- -- 619,522 -- -- --
Investments in MFS(R) Variable Insurance Trust(SM):
Emerging Growth Series,
402,628 shares at net asset value of
$37.94 per share (cost $7,237,010) -- -- -- 15,275,690 -- --
Investments in Oppenheimer
Variable Account Funds:
High Income Series,
100 shares at net asset value of
$10.72 per share (cost $1,073) -- -- -- -- 1,076 --
Investments in Templeton
Variable Products Series Fund:
Developing Markets Series,
160 shares at net asset value of
$7.74 per share (cost $1,183) -- -- -- -- -- 1,238
---------- ---------- ---------- ---------- --------- ---------
Total assets 4,562 8,366,511 619,522 15,275,690 1,076 1,238
---------- ---------- ---------- ---------- --------- ---------
Liabilities:
Accrued adverse mortality and
expense charges 1 6,007 482 10,132 -- --
---------- ---------- ---------- ---------- --------- ---------
Total liabilities 1 6,007 482 10,132 -- --
---------- ---------- ---------- ---------- --------- ---------
Net assets $4,561 $8,360,504 $619,040 $15,265,558 $1,076 $1,238
========== ========== ========== ========== ========= =========
Policyowners Equity:
Net Assets: Type 1 -- $8,354,873 $617,980 $15,259,897 -- --
Outstanding units: Type 1 (note 5) -- 446,501 51,976 536,259 -- --
Net asset value per unit: Type 1 -- $18.71 $11.89 $28.46 -- --
========== ========== ========== ========== ========= =========
Net Assets: Type 2 $4,561 $5,631 $1,060 $5,661 $1,076 $1,238
Outstanding units: Type 2 (note 5) 439 497 106 454 107 118
Net asset value per unit: Type 2 $10.39 $11.33 $10.00 $12.47 $10.03 $10.53
========== ========== ========== ========== ========= =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
CUNA MUTUAL LIFE VARIABLE ACCOUNT
Statements of Operations
Years ended December 31, 1999, 1998 and 1997
MONEY MARKET SUBACCOUNT TREASURY 2000 SUBACCOUNT
Investment income (loss): 1999 1998 1997 1999 1998 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Dividend income $156,541 $123,985 $85,594 $105,875 $106,291 $106,851
Adverse mortality and expense charges
(note 3) (29,935) (22,312) (15,448) (16,680) (15,826) (14,583)
--------- --------- --------- ---------- ---------- ---------
Net investment income (loss) 126,606 101,673 70,146 89,195 90,465 92,268
--------- --------- --------- ---------- ---------- ---------
Realized and unrealized gain (loss)
on investments:
Realized gain (loss) on security
transactions:
Capital gain distributions -- -- -- -- -- --
Proceeds from sale of securities (4,009,628 2,979,908 4,634,860 -- -- --
Cost of securities sold (4,009,628) (2,979,908) (4,634,860) -- -- --
--------- --------- --------- ---------- ---------- ---------
Net realized gain (loss) on security
transactions -- -- -- -- -- --
Net change in unrealized appreciation
or depreciation on investments -- -- -- (49,994) 21,682 1,846
--------- --------- --------- ---------- ---------- ---------
Net gain (loss) on investments -- -- -- (49,994) 21,682 1,846
--------- --------- --------- ---------- ---------- ---------
Net increase (decrease) in net assets
resulting from operations $126,606 $101,673 $70,146 $39,201 $112,147 $94,114
========= ========= ========= ========== ========== =========
BOND SUBACCOUNT BALANCED SUBACCOUNT
Investment income (loss): 1999 1998 1997 1999 1998 1997
---- ---- ---- ---- ---- ----
Dividend income $223,032 $196,337 $136,739 $1,995,000 $1,934,712 $2,062,026
Adverse mortality and expense charges
(note 3) (34,792) (30,006) (23,285) (675,563) (577,128) (509,762)
--------- --------- --------- --------- --------- ---------
Net investment income (loss) 188,240 166,331 113,454 1,319,437 1,357,584 1,552,264
--------- --------- --------- --------- --------- ---------
Realized and unrealized gain (loss)
on investments:
Realized gain (loss) on security
transactions:
Capital gain distributions 57 2,477 379 1,743,848 3,744 758,320
Proceeds from sale of securities 585,790 441,318 402,615 6,404,678 4,012,722 4,525,247
Cost of securities sold (583,986) (426,398) (394,979) (4,654,847) (3,159,159) (3,785,014)
--------- --------- --------- --------- --------- ---------
Net realized gain (loss) on security
transactions 1,861 17,397 8,015 3,493,679 857,307 1,498,553
Net change in unrealized appreciation
or depreciation on investments (197,060) (14,556) 41,691 4,544,788 5,340,950 5,202,066
--------- --------- --------- --------- --------- ---------
Net gain (loss) on investments (195,199) 2,841 49,706 8,038,467 6,198,257 6,700,619
--------- --------- --------- --------- --------- ---------
Net increase (decrease) in net assets
resulting from operations ($6,959) $169,172 $163,160 $9,357,904 $7,555,841 $8,252,883
========= ========= ========= ========= ========= =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
CUNA MUTUAL LIFE VARIABLE ACCOUNT
Statements of Operations, continued
Years ended December 31, 1999, 1998 and 1997
GROWTH AND INCOME STOCK SUBACCOUNT CAPITAL APPRECIATION STOCK SUBACCOUNT
Investment income (loss): 1999 1998 1997 1999 1998 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Dividend income $916,870 $869,525 $778,858 $33,412 $88,433 $119,794
Adverse mortality and expense charges
(note 3) (870,409) (691,564) (527,025) (328,898) (259,874) (182,627)
-------- --------- --------- --------- -------- --------
Net investment income (loss) 46,461 177,961 251,833 (295,486) (171,441) (62,833)
-------- --------- --------- --------- -------- --------
Realized and unrealized gain (loss) on investments: Realized gain (loss) on
security transactions:
Capital gain distributions 6,072,033 3,106,051 1,145,587 3,266,215 769,968 317,275
Proceeds from sale of securities 4,764,654 3,497,748 3,033,581 2,779,984 1,770,807 1,795,596
Cost of securities sold (2,809,713) (2,160,207) (2,103,099) (1,731,081) (1,192,638) (1,354,057)
--------- --------- --------- --------- --------- ---------
Net realized gain (loss) on security
transactions 8,026,974 4,443,592 2,076,069 4,315,118 1,348,137 758,814
Net change in unrealized appreciation
or depreciation on investments 6,432,344 7,377,335 12,852,455 4,111,612 4,151,868 4,563,309
---------- ---------- ---------- --------- --------- ---------
Net gain (loss) on investments 14,459,318 11,820,927 14,928,524 8,426,730 5,500,005 5,322,123
---------- ---------- ---------- --------- --------- ---------
Net increase (decrease) in net assets
resulting from operations $14,505,779 $11,998,888 $15,180,357 $8,131,244 $5,328,564 $5,259,290
========== ========== ========== ========= ========= =========
MID-CAP STOCK SUBACCOUNT INTERNATIONAL STOCK SUBACCOUNT
Investment income (loss): 1999* 1999 1998 1997
----- ---- ---- ----
Dividend income $1 $30,258 $90,596 $99,113
Adverse mortality and expense
charges (note 3) (1) (58,716) (47,908) (32,130)
------- --------- -------- -------
Net investment income (loss) -- (28,458) 42,688 66,983
------- --------- -------- -------
Realized and unrealized gain (loss) on investments: Realized gain (loss) on
security transactions:
Capital gain distributions 78 95,097 -- --
Proceeds from sale of securities 14 648,203 491,409 235,721
Cost of securities sold (14) (619,493) (442,671) (211,895)
------- --------- -------- -------
Net realized gain (loss) on security
transactions 78 123,807 48,738 23,826
Net change in unrealized appreciation
or depreciation on investments 113 1,926,801 608,851 (62,452)
------- --------- -------- -------
Net gain (loss) on investments 191 2,050,608 657,589 (38,626)
------- --------- -------- -------
Net increase (decrease) in net assets
resulting from operations $191 $2,022,150 $700,277 $28,357
======= ========= ======== =======
</TABLE>
See accompanying notes to financial statements.
*The data is for the period beginning November 8, 1999 (date of initial
activity).
<PAGE>
<TABLE>
<CAPTION>
CUNA MUTUAL LIFE VARIABLE ACCOUNT
Statements of Operations, continued
Years ended December 31, 1999, 1998 and 1997
GLOBAL GOVERNMENTS SUBACCOUNT EMERGING GROWTH SUBACCOUNT
Investment income (loss): 1999 1998 1997 1999 1998 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Dividend income $35,810 $8,821 $7,143 $ -- $45,309 $ --
Adverse mortality and expense charges
(note 3) (6,651) (6,487) (3,401) (81,732) (48,583) (21,660)
-------- -------- ------- --------- -------- -------
Net investment income (loss) 29,159 2,334 3,742 (81,732) (3,274) (21,660)
-------- -------- ------- --------- -------- -------
Realized and unrealized gain (loss) on investments: Realized gain (loss) on
security transactions:
Capital gain distributions -- -- -- -- -- --
Proceeds from sale of securities 289,685 92,387 65,919 841,070 448,520 234,899
Cost of securities sold (289,946) (90,661) (66,515) (590,062) (373,845) (222,640)
-------- -------- ------- --------- -------- -------
Net realized gain (loss) on security
transactions (261) 1,726 (596) 251,008 74,675 12,259
Net change in unrealized appreciation
or depreciation on investments (57,288) 44,633 (5,796) 6,126,859 1,524,641 384,388
-------- -------- ------- --------- --------
Net gain (loss) on investments (57,549) 46,359 (6,392) 6,377,867 1,599,316 396,647
-------- -------- ------- --------- --------- --------
Net increase (decrease) in net assets
resulting from operations ($28,390) $48,693 ($2,650) $6,296,135 $1,596,042 $374,987
======== ======== ======= ========= ========= ========
HIGH INCOME SUBACCOUNT DEVELOPING MARKETS SUBACCOUNT
Investment income (loss): 1999* 1999*
----- -----
Dividend income $ -- $ --
Adverse mortality and expense
charges (note 3) -- --
------- -------
Net investment income (loss) -- --
------- -------
Realized and unrealized gain (loss) on investments: Realized gain (loss) on
security transactions:
Capital gain distributions -- --
Proceeds from sale of securities -- --
Cost of securities sold -- --
------- -------
Net realized gain (loss) on security
transactions -- --
Net change in unrealized appreciation
or depreciation on investments 3 55
------- -------
Net gain (loss) on investments 3 55
------- -------
Net increase (decrease) in net assets
resulting from operations $3 $55
======= =======
</TABLE>
See accompanying notes to financial statements.
*The data is for the period beginning November 8, 1999 (date of initial
activity).
<PAGE>
<TABLE>
<CAPTION>
CUNA MUTUAL LIFE VARIABLE ACCOUNT
Statements of Changes in Net Assets
Years ended December 31, 1999, 1998 and 1997
MONEY MARKET SUBACCOUNT TREASURY 2000 SUBACCOUNT
Operations: 1999 1998 1997 1999 1998 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net investment income (loss) $126,606 $101,673 $70,146 $89,195 $90,465 $92,268
Net realized gain (loss) on
security transactions -- -- -- -- -- --
Net change in unrealized appreciation
or depreciation on investments -- -- -- (49,994) 21,682 1,846
---------- ---------- ---------- ---------- ---------- ----------
Change in net assets from
operations 126,606 101,673 70,146 39,201 112,147 94,114
---------- ---------- ---------- ---------- ---------- ----------
Capital unit transactions (note 5):
Proceeds from sale of units 5,200,600 4,485,112 6,190,640 371,536 447,349 621,004
Cost of units repurchased (4,530,276) (3,592,636) (5,367,244) (344,910) (424,204) (599,303)
---------- ---------- ---------- ---------- ---------- ----------
Change in net assets from capital
unit transactions 670,324 892,476 823,396 26,626 23,145 21,701
---------- ---------- ---------- ---------- ---------- ----------
Increase (decrease) in net assets 796,930 994,149 893,542 65,827 135,292 115,815
Net assets:
Beginning of period 3,615,267 2,621,118 1,727,576 1,834,518 1,699,226 1,583,411
---------- ---------- ---------- ---------- ---------- ----------
End of period $4,412,197 $3,615,267 $2,621,118 $1,900,345 $1,834,518 $1,699,226
========== ========== ========== ========== ========== ==========
BOND SUBACCOUNT BALANCED SUBACCOUNT
Operations: 1999 1998 1997 1999 1998 1997
---- ---- ---- ---- ---- ----
Net investment income (loss) $188,240 $166,331 $113,454 $1,319,437 $1,357,584 $1,552,264
Net realized gain (loss) on
security transactions 1,861 17,397 8,015 3,493,679 857,307 1,498,553
Net change in unrealized appreciation
or depreciation on investments (197,060) (14,556) 41,691 4,544,788 5,340,950 5,202,066
---------- ---------- ---------- ---------- ---------- ----------
Change in net assets from
operations (6,959) 169,172 163,160 9,357,904 7,555,841 8,252,883
---------- ---------- ---------- ---------- ---------- ----------
Capital unit transactions (note 5):
Proceeds from sale of units 1,186,455 1,182,649 1,162,322 14,839,213 10,811,007 10,763,242
Cost of units repurchased (918,722) (772,448) (705,363) (14,209,808) (10,309,524) (10,663,916)
---------- ---------- ---------- ---------- ---------- ----------
Change in net assets from capital
unit transactions 267,733 410,201 456,959 629,405 501,483 99,326
---------- ---------- ---------- ---------- ---------- ----------
Increase (decrease) in net assets 260,774 579,373 620,119 9,987,309 8,057,324 8,352,209
Net assets:
Beginning of period 3,617,015 3,037,642 2,417,523 68,760,249 60,702,925 52,350,716
---------- ---------- ---------- ---------- ---------- ----------
End of period $3,877,789 $3,617,015 $3,037,642 $78,747,558 $68,760,249 $60,702,925
========== ========== ========== ========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
CUNA MUTUAL LIFE VARIABLE ACCOUNT
Statements of Changes in Net Assets, continued
Years ended December 31, 1999, 1998 and 1997
GROWTH AND INCOME STOCK SUBACCOUNT CAPITAL APPRECIATION SUBACCOUNT
Operations: 1999 1998 1997 1999 1998 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net investment income (loss) $46,461 $177,961 $251,833 ($295,486) ($171,441) ($62,833)
Net realized gain (loss) on
security transactions 8,026,974 4,443,592 2,076,069 4,315,118 1,348,137 758,814
Net change in unrealized appreciation
or depreciation on investments 6,432,344 7,377,335 12,852,455 4,111,612 4,151,868 4,563,309
----------- ---------- ---------- ---------- ---------- ----------
Change in net assets from
operations 14,505,779 11,998,888 15,180,357 8,131,244 5,328,564 5,259,290
----------- ---------- ---------- ---------- ---------- ----------
Capital unit transactions (note 5):
Proceeds from sale of units 17,312,510 15,135,142 16,677,681 7,912,873 7,807,048 9,240,958
Cost of units repurchased (14,188,868) (11,770,989) (10,282,732) (6,897,886) (5,420,620) (4,699,419)
----------- ---------- ---------- ---------- ---------- ----------
Change in net assets from capital
unit transactions 3,123,642 3,364,153 6,394,949 1,014,987 2,386,428 4,541,539
----------- ---------- ---------- ---------- ---------- ----------
Increase (decrease) in net assets 17,629,421 15,363,041 21,575,306 9,146,231 7,714,992 9,800,829
Net assets:
Beginning of period 84,691,679 69,328,638 47,753,332 33,065,738 25,350,746 15,549,917
----------- ---------- ---------- ---------- ---------- ----------
End of period $102,321,100 $84,691,679 $69,328,638 $42,211,969 $33,065,738 $25,350,746
=========== ========== ========== ========== ========== ==========
MID-CAP STOCK SUBACCOUNT INTERNATIONAL STOCK SUBACCOUNT
Operations: 1999* 1999 1998 1997
----- ---- ---- ----
Net investment income (loss) $ -- ($28,458) $42,688 $66,983
Net realized gain (loss) on
security transactions 78 123,807 48,738 23,826
Net change in unrealized appreciation
or depreciation on investments 113 1,926,801 608,851 (62,452)
-------- --------- --------- ---------
Change in net assets from
operations 191 2,022,150 700,277 28,357
-------- --------- --------- ---------
Capital unit transactions (note 5):
Proceeds from sale of units 4,450 1,876,821 1,897,345 2,721,533
Cost of units repurchased (80) (1,361,528) (1,227,692) (904,022)
-------- --------- --------- ---------
Change in net assets from capital
unit transactions 4,370 515,293 669,653 1,817,511
-------- --------- --------- ---------
Increase (decrease) in net assets 4,561 2,537,443 1,369,930 1,845,868
Net assets:
Beginning of period -- 5,823,061 4,453,131 2,607,263
-------- --------- --------- ---------
End of period $4,561 $8,360,504 $5,823,061 $4,453,131
======== ========= ========= =========
</TABLE>
See accompanying notes to financial statements.
*The data is for the period beginning November 8, 1999 (date of initial
activity).
<PAGE>
<TABLE>
<CAPTION>
CUNA MUTUAL LIFE VARIABLE ACCOUNT
Statements of Changes in Net Assets, continued
Years ended December 31, 1999, 1998 and 1997
GLOBAL GOVERNMENTS SUBACCOUNT EMERGING GROWTH SUBACCOUNT
Operations: 1999 1998 1997 1999 1998 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net investment income (loss) $29,159 $2,334 $3,742 ($81,732) ($3,274) ($21,660)
Net realized gain (loss) on
security transactions (261) 1,726 (596) 251,008 74,675 12,259
Net change in unrealized appreciation
or depreciation on investments (57,288) 44,633 (5,796) 6,126,859 1,524,641 384,388
--------- --------- --------- ---------- --------- ---------
Change in net assets from
operations (28,390) 48,693 (2,650) 6,296,135 1,596,042 374,987
--------- --------- --------- ---------- --------- ---------
Capital unit transactions (note 5):
Proceeds from sale of units 222,897 85,855 530,877 3,957,172 2,707,434 3,238,087
Cost of units repurchased (312,920) (118,224) (95,423) (2,023,998) (1,321,467) (749,413)
--------- --------- --------- ---------- --------- ---------
Change in net assets from capital
unit transactions (90,023) (32,369) 435,454 1,933,174 1,385,967 2,488,674
--------- --------- --------- ---------- --------- ---------
Increase (decrease) in net assets (118,413) 16,324 432,804 8,229,309 2,982,009 2,863,661
Net assets:
Beginning of period 737,453 721,129 288,325 7,036,249 4,054,240 1,190,579
--------- -------- --------- ---------- --------- ---------
End of period $619,040 $737,453 $721,129 $15,265,558 $7,036,249 $4,054,240
========= ========= ========= ========== ========= =========
HIGH INCOME SUBACCOUNT DEVELOPING MARKETS SUBACCOUNT
Operations: 1999* 1999*
----- -----
Net investment income (loss) $ -- $ --
Net realized gain (loss) on
security transactions -- --
Net change in unrealized appreciation
or depreciation on investments 3 55
-------- ---------
Change in net assets from
operations 3 55
-------- ---------
Capital unit transactions (note 5):
Proceeds from sale of units 1,075 1,189
Cost of units repurchased (2) (6)
-------- ---------
Change in net assets from capital
unit transactions 1,073 1,183
-------- ---------
Increase (decrease) in net assets 1,076 1,238
Net assets:
Beginning of period -- --
-------- ---------
End of period $1,076 $1,238
======== =========
</TABLE>
See accompanying notes to financial statements.
*The data is for the period beginning November 8, 1999 (date of initial
activity).
<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 twelve 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
(Class Z shares), T. Rowe Price International Fund, Inc., MFS(R) Variable
Insurance Trust(SM), Oppenheimer Variable Account Funds, Templeton Variable
Products Series Fund, 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 Fund, Inc., MFS(R) Variable Insurance Trust(SM), Oppenheimer
Variable Account Funds, and Templeton Variable Products Series Fund. 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 seven funds available as investment options
under the policies. T. Rowe Price International Fund, Inc., Oppenheimer
Variable Account Funds and Templeton Variable Products Series Fund have one
fund available as an investment option and MFS(R) Variable Insurance
Trust(SM) has two funds available as an investment option. MFS(R) Variable
Insurance Trust(SM), Oppenheimer Variable Account Funds and Templeton
Variable Products Series Fund also have 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 adviser 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 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 Fund, Inc.
Massachusetts Financial Services Company (MFS) serves as the investment
adviser to the MFS Global Governments Series (formerly known as the MFS
World Governments Series) and Emerging Growth Series and manages their
assets in accordance with general policies and guidelines established by
the board of trustees of MFS(R) Variable Insurance Trust(SM).
OppenheimerFunds, Inc. (the Manager) serves as the investment adviser to
the Oppenheimer High Income Fund and manages its assets in accordance with
general policies and guidelines established by the board of trustees of the
Oppenheimer Variable Account Funds.
<PAGE>
Templeton Asset Management Ltd. serves as the investment adviser to the
Templeton Developing Markets Securities Fund Class 2 and manages its assets
and makes its investments decisions.
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
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 0.90% 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.
<PAGE>
(4) Investment Transactions
The cost of shares purchased, including reinvestment of dividend
distributions, during the year ended December 31, 1999, was as follows:
Money Market Fund............................................ $4,809,236
Treasury 2000 Fund........................................... 9,355
Bond Fund.................................................... 1,043,913
Balanced Fund................................................ 10,140,150
Growth and Income Stock Fund................................. 14,062,665
Capital Appreciation Stock Fund.............................. 6,789,057
Mid-Cap Stock Fund........................................... 4,463
International Stock Portfolio................................ 1,234,716
Global Governments Series.................................... 229,122
Emerging Growth Series....................................... 2,700,937
High Income Fund............................................. 1,073
Developing Markets Fund...................................... 1,183
(5) Unit Activity from Contract Transactions
Transactions in units of each subaccount of the Account for the years ended
December 31, 1999, 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
Money Treasury
Market 2000 Bond Balanced
Subaccount Subaccount Subaccount Subaccount
------------------- ------------------- ------------------- -------------------
Type 1 Type 2 Type 1 Type 2* Type 1 Type 2 Type 1 Type 2
<S> <C> <C> <C> <C> <C>
Outstanding at
December 31, 1996 97,454 -- 196,670 97,412 -- 1,567,551 --
Sold 342,456 -- 77,604 45,022 -- 297,548 --
Repurchased (298,002) -- (75,054) (27,507) -- (296,125) --
-------- -------- ------- ------- ------- -------- -------
Outstanding at
December 31, 1997 141,908 -- 199,220 114,927 -- 1,568,974 --
Sold 236,364 -- 52,984 43,507 -- 266,148 --
Repurchased (190,395) -- (50,435) (28,421) -- (254,086) --
-------- -------- ------- ------- ------- -------- -------
Outstanding at
December 31, 1998 187,877 -- 201,769 130,013 -- 1,581,036 --
Sold 263,945 -- 43,509 42,671 107 318,708 8,386
Repurchased (231,067) -- (40,624) (33,099) -- (305,776) (116)
-------- -------- ------- ------- ------- -------- -------
Outstanding at
December 31, 1999 220,755 -- 204,654 139,585 107 1,593,968 8,270
======== ======== ======= ======= ======= ======== =======
Capital
Growth and Appreciation Mid-Cap International
Stock Stock Stock Stock
Subaccount Subaccount Subaccount Subaccount
------------------- ------------------- ------------------- -------------------
Type 1 Type 2 Type 1 Type 2 Type 1* Type 2 Type 1 Type 2
Outstanding at
December 31, 1996 1,036,605 -- 953,534 -- -- 216,089 --
Sold 313,426 -- 490,480 -- -- 216,687 --
Repurchased (194,852) -- (252,149) -- -- (71,570) --
-------- -------- -------- ------- ------- ------- -------
Outstanding at
December 31, 1997 1,155,179 -- 1,191,865 -- -- 361,206 --
Sold 233,645 -- 340,862 -- -- 141,913 --
Repurchased (181,819) -- (235,746) -- -- (91,869) --
-------- -------- -------- ------- ------- ------- -------
Outstanding at
December 31, 1998 1,207,005 -- 1,296,981 -- -- 411,250 --
Sold 221,525 4,044 287,074 1,509 447 125,998 504
Repurchased (181,747) (65) (250,228) (28) (8) (90,747) (7)
-------- -------- -------- ------- ------- ------- -------
Outstanding at
December 31, 1999 1,246,783 3,979 1,333,827 1,481 439 446,501 497
======== ======== ======== ======= ======= ======= =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Global Emerging High Developing
Governments Growth Income Markets
Subaccount Subaccount Subaccount Subaccount
------------------- ------------------- ------------------- -------------------
Type 1 Type 2 Type 1 Type 2 Type 1* Type 2 Type 1* Type 2
<S> <C> <C> <C> <C> <C>
Outstanding at
December 31, 1996 24,554 -- 117,771 -- -- --
Sold 46,412 -- 280,804 -- -- --
Repurchased (8,295) -- (66,642) -- -- --
-------- -------- ------- ------- ------- -------
Outstanding at
December 31, 1997 62,671 -- 331,933 -- -- --
Sold 7,299 -- 197,716 -- -- --
Repurchased (10,044) -- (96,508) -- -- --
-------- -------- ------- ------- ------- -------
Outstanding at
December 31, 1998 59,926 -- 433,141 -- -- --
Sold 18,188 106 214,540 466 107 118
Repurchased (26,138) -- (111,422) (12) -- --
-------- -------- ------- ------- ------- -------
Outstanding at
December 31, 1999 51,976 106 536,259 454 107 118
======== ======== ======= ======= ======= =======
</TABLE>
*This fund not available in this product type.
(6) Condensed Financial Information
The table below gives per unit information about the financial history of
each subaccount for each period.
<TABLE>
<CAPTION>
MONEY MARKET SUBACCOUNT TREASURY 2000 SUBACCOUNT
1999 1998 1997 1996 1995 1999 1998 1997 1996 1995
--------------- ---- ---- ---- ---- ---------------- ---- ---- ---- ----
Net asset value: Type 1 Type 2** Type 1 Type 2*
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Beginning of period $19.24 $10.00 $18.47 $17.73 $17.05 $16.33 $9.09 $8.53 $8.05 $7.95 $6.63
End of period 19.99 10.00 19.24 18.47 17.73 17.05 9.29 9.09 8.53 8.05 7.95
Percentage increase
(decrease) in unit
value during period 3.9% 0.0% 4.2% 4.1% 4.0% 4.4% 2.2% 6.6% 6.0% 1.3% 19.9%
Number of units
outstanding at
end of period 220,755 -- 187,877 141,908 97,454 125,112 204,654 201,769 199,220 196,670 194,133
BOND SUBACCOUNT BALANCED SUBACCOUNT
1999 1998 1997 1996 1995 1999 1998 1997 1996 1995
---------------- ---- ---- ---- ---- ---------------- ---- ---- ---- ----
Net asset value: Type 1 Type 2** Type 1 Type 2**
Beginning of period $27.82 $10.00 $26.43 $24.82 $24.35 $21.11 $43.49 $10.00 $38.69 $33.40 $30.41 $25.09
End of period 27.77 10.00 27.82 26.43 24.82 24.35 49.35 10.09 43.49 38.69 33.40 30.41
Percentage increase
(decrease) in unit
value during period (0.2%) 0.0%*** 5.3% 6.5% 1.9% 15.4% 13.5% 0.9%*** 12.4% 15.8% 9.8% 21.2%
Number of units
outstanding at
end of period 139,585 107 130,013 114,927 97,411 155,381 1,593,968 8,270 1,581,036 1,568,974 1,567,551 1,522,893
</TABLE>
<TABLE>
<CAPTION>
GROWTH AND INCOME STOCK SUBACCOUNT CAPITAL APPRECIATION STOCK SUBACCOUNT
1999 1998 1997 1996 1995 1999 1998 1997 1996 1995
---------------- ---- ---- ---- ---- ---------------- ---- ---- ---- ----
Net asset value: Type 1 Type 2** Type 1 Type 2**
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Beginning of period $70.17 $10.00 $60.02 $46.07 $38.09 $29.16 $25.49 $10.00 $21.27 $16.31 $13.55 $10.45
End of period 82.04 10.08 70.17 60.02 46.07 38.09 31.64 10.38 25.49 21.27 16.31 13.55
Percentage increase
(decrease) in unit
value during period 16.9% 0.8%*** 16.9% 30.3% 21.0% 30.6% 24.1% 3.8%*** 19.9% 30.4% 20.4% 29.7%
Number of units
outstanding at
end of period 1,246,783 3,979 1,207,005 1,155,179 1,036,605 907,821 1,333,827 1,481 1,296,981 1,191,865 953,534 663,269
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MID-CAP STOCK SUBACCOUNT INTERNATIONAL STOCK SUBACCOUNT
1999 1998** 1997** 1996** 1995** 1999 1998 1997 1996 1995
---------------- ------ ------ ------ ------ ---------------- ---- ---- ---- ----
Net asset value: Type 1* Type 2** Type 1 Type 2**
<S> <C> <C> <C> <C> <C> <C> <C>
Beginning of period $10.00 $14.16 $10.00 $12.33 $12.07 $10.61 $10.00
End of period 10.39 18.71 11.33 14.16 12.33 12.07 10.61
Percentage increase
(decrease) in unit
value during period 3.9%*** 32.1% 13.3%*** 14.8% 2.2% 13.7% 6.1%
Number of units
outstanding at
end of period 439 446,501 497 411,250 361,206 216,089 70,876
</TABLE>
<TABLE>
<CAPTION>
GLOBAL GOVERNMENTS SUBACCOUNT EMERGING GROWTH SUBACCOUNT
1999 1998 1997 1996 1995 1999 1998 1997 1996
---------------- ---- ---- ---- ---- ---------------- ---- ---- ----
Net asset value: Type 1 Type 2** Type 1 Type 2**
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Beginning of period $12.31 $10.00 $11.51 $11.74 $11.39 $10.00 $16.24 $10.00 $12.21 $10.11 $10.00
End of period 11.89 10.00 12.31 11.51 11.74 11.39 28.46 12.47 16.24 12.21 10.11
Percentage increase
(decrease) in unit
value during period* (3.4%) 0.0% 6.9% (2.0%) 3.1% 13.9% 75.2% 24.7%*** 33.0% 20.8% 1.1%
Number of units
outstanding at
end of period 51,976 106 59,926 62,671 24,554 19,219 536,259 454 433,141 331,933 117,711
</TABLE>
<TABLE>
<CAPTION>
HIGH INCOME SUBACCOUNT DEVELOPING MARKETS SUBACCOUNT
1999 1998** 1997** 1996** 1995** 1999 1998** 1997** 1996** 1995**
---------------- ------ ------ ------ ------ ---------------- ------ ------ ------ ------
Net asset value: Type 1* Type 2** Type 1* Type 2**
<S> <C> <C>
Beginning of period $10.00 $10.00
End of period 10.03 10.53
Percentage increase
(decrease) in unit
value during period 0.3%*** 5.3%***
Number of units
outstanding at
end of period 107 118
</TABLE>
*This fund not available in this product type.
**The VULII product inception date was November 8, 1999, with all subaccounts
starting with a $10.00 unit price.
***Not annualized.
<PAGE>
CUNA MUTUAL LIFE VARIABLE ACCOUNT
Report of Independent Accountants
To the Board of Directors of CUNA Mutual Life Insurance Company and
Contract Owners of CUNA Mutual Life Variable Account
In our opinion, the accompanying statements of assets and liabilities and the
related statements of operations and of changes in net assets present fairly, in
all material respects, the financial position of the CUNA Mutual Life Variable
Account (comprising, respectively, the Money Market, Treasury 2000, Bond,
Balanced, Growth and Income Stock, Capital Appreciation Stock, Mid-Cap Stock,
International Stock, Global Governments, Emerging Growth, High Income and the
Developing Markets Subaccounts) as of December 31, 1999, the results of each of
their operations and the changes in each of their net assets for the year or the
period then ended in conformity with accounting principles generally accepted in
the United States. These financial statements are the responsibility of The CUNA
Mutual Life Insurance Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included direct confirmation of the number of
shares owned at December 31, 1999 with Ultra Series Fund, T. Rowe Price
International Series, Inc., MFS Variable Insurance Trust, Oppenheimer High
Income Fund and Templeton Developing Markets Securities Fund, provide a
reasonable basis for the opinion expressed above. The financial statements of
the CUNA Mutual Life Variable Account as of December 31, 1998 and for each of
the two years then ended were audited by other independent accountants whose
report dated February 5, 1999 expressed an unqualified opinion on those
statements.
PricewaterhouseCoopers LLP
Milwaukee, Wisconsin
February 11, 2000
<PAGE>
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 operations and changes in net assets of
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
Emerging Growth Subaccount of CUNA Mutual Life Variable Account for each of the
years in the two-year period ended December 31, 1998, and the condensed
financial information for each of the years in the four-year (two years and
eight months for Emerging Growth Subaccount) period ended December 31, 1998.
These financial statements and condensed financial information are the
responsibility of the Accounts' 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. 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 results of
operations and changes in net assets of 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 Emerging Growth Subaccount of CUNA Mutual Life
Variable Account for each of the years in the two-year period ended December 31,
1998, and the condensed financial information for each of the years in the
four-year (two years and eight months for Emerging Growth Subaccount) period
ended December 31, 1998, in conformity with generally accepted accounting
principles.
KPMG LLP
Des Moines, Iowa
February 5, 1999
<PAGE>
CUNA Mutual Life Insurance Company
Report on Audits of Financial Statements -
Statutory Basis
For the Years Ended December 31, 1999, 1998 and 1997
<PAGE>
Report of Independent Accountants
The Board of Directors
CUNA Mutual Life Insurance Company:
We have audited the accompanying statutory statement of admitted assets,
liabilities and surplus of CUNA Mutual Life Insurance Company (the "Company") as
of December 31, 1999, and the related statutory statements of operations,
changes in surplus and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit. The statutory financial statements of the Company as of December 31,
1998, and for each of the two years in the period then ended were audited by
other independent accountants whose report dated March 19, 1999, expressed an
unqualified opinion on those statements as to conformity with the basis of
accounting described in Note 2. The other independent accountants also expressed
an adverse opinion with regard to accounting principles generally accepted in
the United States, as a result of the material differences between the basis of
accounting described in Note 2 and accounting principles generally accepted in
the United States.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
As described in Note 2 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
accounting principles generally accepted in the United States. The effects on
the 1998 and 1997 financial statements of the variances between the statutory
basis of accounting and generally accepted accounting principles are also
described in Note 2. The effects of such variances on the 1999 financial
statements, although not reasonably determinable as of this date, are presumed
to be material.
In our opinion, because of the effects of the matter discussed in the preceding
paragraph, the financial statements referred to above do not present fairly, in
conformity with accounting principles generally accepted in the United States,
the financial position of the Company as of December 31, 1999, or the results of
its operations or its cash flows for the year then ended.
In our opinion, the 1999 financial statements referred to above present fairly,
in all material respects, the admitted assets, liabilities and surplus of the
Company as of December 31, 1999, and the results of its operations and its cash
flows for the year then ended, on the basis of accounting described in Note 2.
Our audit was conducted for the purpose of forming an opinion on the basic
statutory financial statements taken as a whole. The accompanying Supplemental
Schedule of Assets and Liabilities of the Company as of December 31, 1999, and
for the year then ended, is presented for purposes of additional analysis and is
not a required part of the basic statutory financial statements. Such
information has been subjected to the auditing procedures applied in the audit
of the basic statutory financial statements and, in our opinion, is fairly
stated in all material respects in relation to the basic statutory financial
statements taken as a whole.
March 31, 2000
<PAGE>
<TABLE>
<CAPTION>
CUNA MUTUAL LIFE INSURANCE COMPANY
Statutory Statements of Admitted Assets, Liabilities and Capital and Surplus
December 31, 1999 and 1998
(in thousands)
Admitted Assets 1999 1998
- --------------- ---- ----
<S> <C> <C>
Investments:
Bonds and notes 1,509,325 $1,517,147
Stocks
Preferred 41 71
Common 82,086 77,036
Mortgage loans on real estate 325,603 306,037
Real estate 58,746 62,345
Policy loans 101,830 101,569
Other invested assets 18,311 16,799
Receivable for securities 7,250 19,886
Cash and short-term investments 87,518 74,740
---------------------------------------------------------------------------------------------
Total cash and investments 2,190,710 2,175,630
Premiums receivable 16,274 15,147
Accrued investment income 26,680 28,005
Electronic data processing equipment
at cost, less accumulated depreciation 1,610 2,230
(1999 - 7,070; 1998 - 6,744)
Receivable from affiliates 12,169 8,121
Other assets 1,685 2,295
Separate accounts 2,611,459 1,830,012
- -----------------------------------------------------------------------------------------------
Total admitted assets $4,860,587 $4,061,440
- -----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Liabilities and Surplus 1999 1998
----------------------- ---- ----
<S> <C> <C>
Liabilities:
Policy reserves:
Life insurance and annuity contracts $1,649,573 $1,672,272
Accident and health insurance 14,106 12,611
Supplementary contracts without life contingencies 80,747 76,131
Policyholders' dividend accumulation 157,858 156,216
Policy and contract claims 10,373 9,850
Other policyholders' funds
Dividends payable to policyholders 25,190 24,450
Premiums and other deposit funds 3,573 4,194
Interest maintenance reserve 3,482 5,694
Payable to affiliates 17,959 13,525
Amounts held for others 18,952 18,923
Commissions, expenses, taxes, licenses and fees accrued 17,728 14,594
Asset valuation reserve 56,762 48,395
Loss contingency reserve for investments 5,800 5,800
Federal income taxes due and accrued 15,906 5,025
Note payable 1,300 1,300
Payable for securities 2,887 2,031
Other liabilities 577 83
Separate accounts 2,555,312 1,784,589
----------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CUNA MUTUAL LIFE INSURANCE COMPANY
Statutory Statements of Admitted Assets,
Liabilities and Capital and Surplus
December 31, 1999 and 1998 (continued)
(in thousands)
Liabilities and Surplus 1999 1998
----------------------- ---- ----
<S> <C> <C>
Total liabilities 4,638,085 3,855,683
- -----------------------------------------------------------------------------------------------
Surplus:
Unassigned surplus 222,502 205,757
- -----------------------------------------------------------------------------------------------
Total surplus 222,502 205,757
Total liabilities and surplus $4,860,587 $4,061,440
- -----------------------------------------------------------------------------------------------
See accompanying notes to statutory financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CUNA MUTUAL LIFE INSURANCE COMPANY
Statutory Statements of Operations
Years Ended December 31, 1999, 1998 and 1997
(in thousands)
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Income:
Premiums and other considerations:
Life and annuity contracts $515,917 $466,203 $414,724
Accident and health 21,892 18,292 14,886
Supplementary contracts and dividend accumulations 38,294 43,547 44,194
Other deposit funds 254,015 159,786 114,825
Net investment income 148,915 148,998 168,192
Reinsurance commissions 8,661 7,871 9,601
Separate accounts income and fees 22,723 15,892 9,907
Other income 6,362 5,760 5,840
-----------------------------------------------------------------------------------------------------------
Total income 1,016,779 866,349 782,169
- -------------------------------------------------------------------------------------------------------------
Benefits and Expenses:
Death and annuity benefits 224,978 123,982 86,525
Surrender benefits 207,924 189,343 176,291
Payments on supplementary contracts without life
contingencies and dividend accumulations 41,862 47,431 44,747
Other benefits to policyholders and beneficiaries 20,494 18,244 17,509
Decrease in policy reserves - life and annuity
contracts and accident and health insurance (21,204) (76,839) (78,148)
Increase in liabilities for supplementary contracts
without life contingencies and policyholders' dividend
accumulations 6,271 5,687 6,954
Decrease in group annuity reserves (523) (225) (2)
Increase in benefit fund 902 870 3,975
General insurance expenses, including cost of collection
in excess of loading on due and deferred premiums and
other expenses 64,451 60,126 60,722
Insurance taxes, licenses, fees and commissions 59,186 49,305 43,956
Net transfers to separate accounts 367,835 408,384 369,788
-----------------------------------------------------------------------------------------------------------
Total benefits and expenses 972,176 826,308 732,317
- -------------------------------------------------------------------------------------------------------------
Income before dividends to policyholders, federal
income taxes, and net realized capital gains 44,603 40,041 49,852
Dividends to policyholders 25,107 24,441 23,670
- -------------------------------------------------------------------------------------------------------------
Income before federal income taxes and
net realized capital gains 19,496 15,600 26,182
Federal income taxes 7,802 4,436 12,208
- -------------------------------------------------------------------------------------------------------------
Income before net realized capital gains 11,694 11,164 13,974
Net realized capital gains (losses), less federal income
taxes and transfers to the interest maintenance reserve 7,099 (317) 3,885
- -------------------------------------------------------------------------------------------------------------
Net income $18,793 $10,847 $17,859
- -------------------------------------------------------------------------------------------------------------
See accompanying notes to statutory financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CUNA MUTUAL LIFE INSURANCE COMPANY
Statutory Statements of Changes in Capital and Surplus
Years Ended December 31, 1999, 1998 and 1997
(in thousands)
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Balance at beginning of year $205,757 $190,681 $163,304
- -------------------------------------------------------------------------------------------------------------
Additions (deductions):
Net income 18,793 10,847 17,859
Change in net unrealized gains 5,569 10,070 6,752
Change in asset valuation reserve (8,367) (6,639) 257
Change in nonadmitted assets 749 543 285
Change in surplus of separate accounts 76 (64) 209
Change in separate account seed money (77) 64 (189)
Change in loss contingency reserve for investments -- 250 2,200
Other miscellaneous changes 2 5 4
- -------------------------------------------------------------------------------------------------------------
Net additions 16,745 15,076 27,377
- -------------------------------------------------------------------------------------------------------------
Balance at end of year $222,502 $205,757 $190,681
- -------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to statutory financial statements.
<PAGE>
<TABLE>
<CAPTION>
CUNA MUTUAL LIFE INSURANCE COMPANY
Statutory Statements of Cash Flow
Years Ended December 31, 1999, 1998 and 1997
(in thousands)
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Cash from operations:
Premiums and other considerations:
Life and annuity contracts $513,927 $463,537 $412,840
Accident and health 22,298 17,903 14,754
Supplementary contracts and dividend accumulations 38,294 43,546 44,194
Other deposit funds 254,015 159,786 114,826
Net investment income received 154,266 160,304 177,984
Reinsurance commissions 8,661 7,871 8,425
Separate accounts income and fees 22,712 15,858 9,885
Other income 5,282 4,786 4,931
- ---------------------------------------------------------------------------------------------
Total provided from operations 1,019,455 873,591 787,839
---------------------------------------------------------------------------------------------
Life and accident and health claims paid 50,226 46,128 42,004
Surrender benefits 207,924 189,343 176,291
Other benefits to policyholders paid 236,415 140,575 105,505
Commissions, other expenses and taxes paid, excluding
federal income taxes 119,767 107,589 105,834
Dividends to policyholders paid 24,380 23,756 23,161
Federal income taxes 1,194 (181) 14,558
Net transfers to separate accounts 378,471 419,156 383,942
Interest paid on defined benefit plans 902 1,338 3,507
Other 77 -- 189
-------------------------------------------------------------------------------------------
Total used in operations 1,019,356 927,704 854,991
- ---------------------------------------------------------------------------------------------
Net cash provided from (used in) operations 99 (54,113) (67,152)
- ----------------------------------------------------------------------------------------------
Cash from investments:
Proceeds from investments sold, matured or repaid:
Bonds and notes 826,675 296,732 285,135
Stocks 37,955 17,412 17,223
Mortgage loans on real estate 29,034 77,980 47,892
Other invested assets 1,091 562 969
Investment real estate 6,427 3,950 17,701
- ---------------------------------------------------------------------------------------------
Total investment proceeds 901,182 396,636 368,920
- ---------------------------------------------------------------------------------------------
Cost of investments acquired:
Bonds and notes 819,514 243,804 200,692
Stocks 26,969 24,923 29,724
Mortgage loans on real estate 48,571 17,956 4,704
Investment real estate 5,471 5,222 10,929
Other invested assets -- 10,461 --
Other cash used 3,165 109 4,098
-----------------------------------------------------------------------------------------
Total investments acquired 903,690 302,475 250,147
Increase (decrease) in policy loans and premium notes 262 500 (475)
- ----------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CUNA MUTUAL LIFE INSURANCE COMPANY
Statutory Statements of Cash Flow (continued)
Years Ended December 31, 1999, 1998 and 1997
(in thousands)
1999 1998 1997
<S> <C> <C> <C>
Net cash (used in) provided from investments (2,770) 93,661 119,248
- ---------------------------------------------------------------------------------------------
Cash from financing and miscellaneous sources -
Transfer of defined benefit pension plan assets -- -- (42,247)
Other cash provided (applied), net 15,449 7,932 (15,879)
-----------------------------------------------------------------------------------------
Net change in cash and short-term investments 12,778 47,480 (6,030)
Cash and short-term investments at beginning of year 74,740 27,260 33,290
- ---------------------------------------------------------------------------------------------
Cash and short-term investments at end of year $87,518 $74,740 $27,260
- ---------------------------------------------------------------------------------------------
See accompanying notes to statutory financial statements.
</TABLE>
<PAGE>
CUNA MUTUAL LIFE INSURANCE COMPANY
Notes to Statutory Financial Statements
(1) Nature of Business
CUNA Mutual Life Insurance Company (the Company), a mutual life insurer
domiciled in Iowa, 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. The Company owns 50% of CIMCO, Inc., a
registered investment advisor.
(2) Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation
The accompanying statutory financial statements have been prepared in
conformity with statutory accounting practices prescribed or permitted by
the Iowa Department of Commerce, Insurance Division (Insurance Department),
which differ in some respects from generally accepted accounting principles
in the United States (GAAP). The Company currently does not apply any
significant permitted accounting practices. The following summary
identifies the significant differences from GAAP:
-Acquisition costs such as commissions, premium taxes, and other items
are expensed in the year incurred, rather than deferred and amortized
over the periods benefited;
-Bonds are generally recorded at amortized cost rather than fair
value, and are not classified as either held to maturity securities,
trading securities, or available for sale securities;
-Majority owned subsidiaries are not consolidated, and are carried at
their underlying statutory book value;
-Policy reserves are based on statutory mortality and interest
requirements, without consideration for withdrawals, which may differ
from reserves established for GAAP based on reasonably conservative
estimates of mortality, interest and withdrawals;
-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;
-Tax expense is recorded for amounts currently due or recoverable, and
deferred federal income taxes are not provided for unrealized gains or
losses and the temporary differences between the statutory book basis
and tax basis of assets and liabilities;
-"Nonadmitted assets" (principally, an airplane, prepaid expenses,
furniture, equipment and certain receivables) are excluded from the
statutory statements of admitted assets, liabilities and surplus
through a direct charge to unassigned surplus;
<PAGE>
-The asset valuation reserve (AVR), a statutory reserve established
for the purpose of stabilizing the surplus of the Company against
fluctuations in the market value of assets, is recorded as a liability
by a direct charge to unassigned surplus;
-The interest maintenance reserve (IMR) 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 versus immediate recognition;
-Reserves established for potential bond and mortgage loan defaults or
real estate impairments are recorded as liabilities by direct charges
to unassigned surplus;
-Pension cost is equal to the amount to be funded in accordance with
accepted actuarial cost methods rather than recognizing pension cost
over the period participants render service to the Company and
recording a liability currently for all unfunded costs;
-Certain postretirement benefits are accrued when employees become
vested for benefits rather than over the vesting period;
-Amounts due from reinsurers for their share of ceded reserves are
netted against liabilities rather than shown as assets; and
-Deposits, surrenders, and benefits on annuity contracts are recorded
as revenue and expense in the statutory statements of operations.
Under GAAP, amounts collected are credited directly to policyholder
account balances, and benefits and claims that are charged to expense
include benefits incurred in the period that are in excess of related
policyholder account balances.
<PAGE>
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
(000s omitted):
<TABLE>
<CAPTION>
=================================================== ===================== ====================
1998 1997
--------------------------------------------------- --------------------- --------------------
As Restated
Net income
<S> <C> <C>
Statutory net income $ 10,847 $ 17,859
Adjustments:
Federal income taxes (7,623) 1,982
Deferred policy acquisition costs 20,322 18,593
Insurance reserves (9,478) (10,765)
Investments 2,885 (414)
Pension benefits 1,135 1,175
Other 2,998 (1,983)
--------- ----------
GAAP net income $ 21,086 $ 26,447
========= =========
Surplus
Statutory surplus $205,756 $190,681
Adjustments:
Federal income taxes (22,119) 9,411
Deferred policy acquisition costs 158,795 142,710
Insurance reserves (84,984) (75,506)
Investments 76,853 37,409
Employee benefits (19,183) (20,072)
Dividends payable to policyholders 12,225 11,890
Other 8,590 3,723
--------------------------------------------------- --------------------- --------------------
GAAP surplus $335,933 $300,246
=================================================== ===================== ====================
</TABLE>
The effects of these variances on net income and surplus at December 31,
1999, although not determined as of this date, are presumed to be material.
Investments
Investments are valued as prescribed by the National Association of
Insurance Commissioners (NAIC). Bonds and notes and short-term investments
are generally carried at amortized cost, preferred stocks are stated at
cost, common stocks of unaffiliated companies at market value, and mortgage
loans at the unpaid balance, adjusted for unamortized premium or discount.
Bonds 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.
Prepayment assumptions for loan-backed bonds and structured securities were
obtained from industry survey values or internal estimates. These
assumptions are consistent with the current interest rate environment. The
retrospective adjustment method is used to value all such securities.
<PAGE>
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. The Company depreciates the cost of electronic data
processing equipment and operating software on a straight-line basis over
no more than three years.
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% to 5.0%. The
1980 C.S.O. table is used with interest rate assumptions ranging from 3.5%
to 5.5%. With respect to older policies, the mortality table and interest
assumptions vary from the American Experience table with 2.5% to 4%
interest to the 1941 C.S.O. table with 2.5% interest. Approximately 24% of
the life reserves are calculated on a net level reserve basis and 76% 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 the continuous Commissioners' Annuity Reserve
Valuation Method (CARVM) with interest assumptions ranging from 2.5% to
7.5%.
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% of ordinary life
insurance in force and premiums received during 1999.
Statutory Valuation Reserves
The 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 sold. The
AVR provides a reserve for fluctuations in the values of invested assets.
Changes in the AVR are charged or credited directly to unassigned surplus.
<PAGE>
Revenue Recognition
Term life and whole life insurance premiums are recognized as premium
income when due. Modal payment dates on the underlying term and whole life
policies can be monthly, quarterly, semi-annually or annually. Annuity and
other fund deposits are credited to revenue when received. Health insurance
premiums and premiums for employee benefit coverages are recognized as
income when due.
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.
Benefit Plans
The Company provides medical and life insurance benefits for its retirees.
Retirees become eligible to participate in the medical and life coverage
based upon age and years of service. Retirees pay a portion of the medical
coverage premium based upon age. Retirees can utilize sick leave balances
to reduce required premium payments. There is no retiree premium for life
coverage. The Company records an accrual for the estimated costs of retiree
medical and life benefits over the period during which employees render the
service that qualifies them for benefits. Benefits are generally funded on
a pay-as-you-go basis.
Derivative Financial Instruments
The Company enters into derivative contracts, such as 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.
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.
Reinsurance
Reinsurance premiums, commission expense reimbursements, and reserves
related to reinsured business ceded are accounted for on a basis consistent
with those used in accounting for the original policies issued and the
terms of the reinsurance contracts. Premiums and benefits ceded to other
companies have been reported as reductions of premium income and benefits
in the accompanying statements of operations.
<PAGE>
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.
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 statutory statements of admitted assets,
liabilities and surplus and operations for the reporting period. Actual
results could differ from those estimates. Investment valuations and
insurance reserves are most affected by the use of estimates and
assumptions.
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 also uses derivative financial instruments at December 31, 1999
and 1998, to manage interest rate exposures.
The Company is subject to the risk that issuers of securities or mortgages
owned by the Company will default, or other parties, including reinsurers
or mortgagors who owe the Company money, will not pay. The Company
minimizes this risk by adhering to a conservative investment strategy and
by maintaining sound 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 statutory 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 and loss adjusting practices
that identify and minimize the potential adverse impact of this risk.
The Company is also contingently liable for guaranty fund assessments
related to the insolvencies of unaffiliated insurance companies. Estimated
accruals of $1,300,000 for such assessments have been included in the
accompanying statutory financial statements for both 1999 and 1998.
<PAGE>
Statutory Accounting Practices
The NAIC has developed a codification of Statements of Statutory Accounting
Principles (SSAPs) which, in accordance with the rules adopted by the
Insurance Department, will take effect January 1, 2001. The effect of
adopting the SSAPs will be reported as an adjustment to unassigned surplus
on the effective date. Although generally consistent with current statutory
practices, there are differences which could have a material impact on the
Company. The ultimate impact on unassigned surplus has not been determined.
(3) Disclosures About Fair Value of Financial Instruments
Statement of Financial Accounting Standards (SFAS) No. 107, Disclosures
About Fair Value of FinancialInstruments, requires disclosure of fair value
information about certain on and off-balance sheet financial instruments.
In cases where quoted market prices are not readily 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 rates 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 related to the
realization of unrealized gains and losses can have a significant effect on
fair value estimates and have not been taken into consideration.
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for significant financial
instruments:
Cash, Short-term Investments and Accrued Investment Income
The carrying amounts reported in the statutory statements of admitted
assets, liabilities and surplus for these instruments approximate their
fair values.
Bonds and Stocks
Fair values for bonds and notes are based on quoted market prices, where
available. For bonds and notes 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 of
preferred and unaffiliated common stocks are based on quoted market prices.
The carrying values and fair value for these instruments is disclosed in
Note 4.
Derivative Financial Instruments
The carrying value and fair value of the derivative financial instruments
are disclosed in Note 4.
Mortgage Loans on Real Estate
The fair value for mortgage loans is estimated using discounted cash flow
analysis with 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 4.
<PAGE>
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-type Contracts
The fair values of the Company's liabilities under investment-type
insurance contracts such as annuities are estimated using the cash
surrender value of the contracts. The carrying value and estimated fair
value of these liabilities were $1,048,621,000 and $1,044,371,000 for 1999
and $1,100,994,000 and $1,096,826,000 for 1998, respectively.
<PAGE>
(4) Investments
Bonds and Notes
The statement value, which principally represents amortized cost, gross
unrealized gains and losses and the estimated fair value of investments in
bonds and notes as of December 31, 1999 and 1998 are as follows (000s
omitted):
<TABLE>
<CAPTION>
======================================= =============== =============================== ===============
Statement Gross Unrealized Estimated
December 31, 1999 Value Gains Losses Fair Value
--------------------------------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
United States governments
and agencies $ 98,891 325 (970) 98,246
Foreign government securities 18,425 352 (35) 18,742
Corporate securities 763,184 8,962 (15,533) 756,613
Mortgage-backed and other
structured securities 581,009 1,088 (24,074) 558,023
Other debt securities 47,816 495 (772) 47,539
--------------------------------------- --------------- --------------- --------------- ---------------
Total bonds and notes $ 1,509,325 $11,222 $(41,384) $1,479,163
======================================= =============== =============================== ===============
Statement Gross Unrealized Estimated
December 31, 1998 Value Gains Losses Fair Value
--------------------------------------- --------------- --------------- --------------- ---------------
United States governments
and agencies $ 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 and other
structured securities 524,821 9,794 (3,703) 530,912
Other debt securities 33,987 1,963 - 35,950
--------------------------------------- --------------- --------------- --------------- ---------------
Total bonds and notes $1,517,147 $68,771 $(5,332) $1,580,586
======================================= =============== =============== =============== ===============
</TABLE>
Cumulative unrealized losses of $158,000 and $409,000 at December 31, 1999
and 1998, respectively, have been recorded for bonds and notes that have
been determined by the NAIC to have an impairment in value. In addition to
the AVR provision, a loss contingency reserve of $1,700,000 has been
established at December 31, 1999 and 1998, for projected bond losses.
The statement value and estimated fair value of bonds and notes at December
31, 1999, by contractual maturity, are shown below. Expected maturities may
differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties.
Because most mortgage-backed and other structured securities provide for
periodic payments throughout their lives, they are listed below in a
separate category.
<PAGE>
<TABLE>
<CAPTION>
=================================================== ====================== ======================
Statement Estimated
(000's omitted) Value Fair Value
--------------------------------------------------- ---------------------- ----------------------
<S> <C> <C>
Due in one year or less $ 44,936 $ 44,815
Due after one year through five years 559,458 557,268
Due after five years through ten years 228,070 225,330
Due after ten years 95,852 93,727
--------------------------------------------------- ---------------------- ----------------------
Total bonds 928,316 921,140
Mortgage-backed and other structured securities 581,009 558,023
--------------------------------------------------- ---------------------- ----------------------
Total bonds and notes $1,509,325 $1,479,163
=================================================== ====================== ======================
</TABLE>
Proceeds from sales of bonds and notes were $574,495,000, $66,335,000, and
$43,061,000 during 1999, 1998 and 1997, respectively. Gross gains of
$4,163,000, $1,735,000, and $589,000 and gross losses of $6,240,000,
$1,886,000, and $137,000 were realized on those sales in 1999, 1998 and
1997, respectively.
Stocks
The cost, gross unrealized gains and losses, and estimated fair value on
unaffiliated stocks are as follows (000s omitted):
<TABLE>
<CAPTION>
====================================== =============== =============================== ===============
Gross Unrealized Estimated
December 31, 1999 Cost Gains Losses Fair Value
-------------------------------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Common stock $ 55,959 $22,887 $(2,567) $76,279
Preferred stock 41 - (7) 34
====================================== =============== =============== =============== ===============
====================================== =============== =============================== ===============
Gross Unrealized Estimated
December 31, 1998 Cost Gains Losses Fair Value
-------------------------------------- --------------- --------------- --------------- ---------------
Common stock $55,551 $20,297 $(2,090) $73,758
Preferred stock 71 - (4) 67
====================================== =============== =============== =============== ===============
</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% (the largest State is Illinois with 14%) of the aggregate
mortgage loan portfolio balance and loans of no more than 2% of the
aggregate mortgage loan balance are made to any one borrower. In addition
to the AVR, a loss contingency reserve of $2,000,000 has been provided for
mortgage loans on real estate as of December 31, 1999 and 1998.
The carrying value and estimated fair value of the mortgage loan portfolio
at December 31, 1999 and 1998 are as follows (000s omitted):
<PAGE>
<TABLE>
<CAPTION>
=============== ====================== ======================
Carrying Estimated
Value Fair Value
--------------- ---------------------- ----------------------
<S> <C> <C>
1999 $ 325,603 $ 320,393
1998 306,037 328,591
=============== ====================== ======================
</TABLE>
Assets Designated
The statement value of assets designated for regulatory authorities and
held on deposit accordingly as of December 31 are as follows (000s
omitted):
<TABLE>
<CAPTION>
============================================= ====================== ======================
1999 1998
--------------------------------------------- ---------------------- ----------------------
<S> <C> <C>
Bonds and notes and short-term investments $ 1,454,904 $1,527,512
Mortgage loans on real estate 325,603 306,037
Policy loans 101,831 101,569
--------------------------------------------- ---------------------- ----------------------
Total assets designated $ 1,882,338 $1,935,118
============================================= ====================== ======================
</TABLE>
Net Investment Income
Components of net investment income for the years ended December 31 are as
follows (000s omitted):
<TABLE>
<CAPTION>
====================================== =================== =================== ===================
1999 1998 1997
-------------------------------------- ------------------- ------------------- -------------------
<S> <C> <C> <C>
Bonds and notes $112,788 $114,421 $123,395
Stocks 1,431 1,198 458
Mortgage loans on real estate 27,133 29,057 34,372
Investment real estate 9,486 9,244 10,158
Policy loans 6,609 6,664 6,571
Other invested assets 2,060 (2,244) 4,711
Short-term investments 4,604 2,175 2,689
Derivative financial instruments (3,190) (1,835) (1,445)
Other 328 2,911 11
-------------------------------------- ------------------- ------------------- -------------------
Gross investment income 161,249 161,591 180,920
Less investment expenses 12,334 12,593 12,728
-------------------------------------- ------------------- ------------------- -------------------
Net investment income $148,998 $168,192 $148,915
====================================== =================== =================== ===================
</TABLE>
The Company incurs expense in managing its investment portfolio and
producing investment income. These expenses, which include salaries,
brokerage fees, securities custodial fees, and real estate expenses are
deducted from investment income to determine the net investment income
reported in the financial statements.
Realized Gains and Losses
Net realized investment gains and losses for the years ended December 31
are summarized as follows (000s omitted):
<PAGE>
<TABLE>
<CAPTION>
============================================= ================= ================= =================
1999 1998 1997
--------------------------------------------- ----------------- ----------------- -----------------
<S> <C> <C> <C>
Bonds and notes $(1,730) $(1,645) $1,843
Stocks 10,872 3,832 2,853
Mortgage loans on real estate 5 2,965 1,030
Investment real estate 1,172 413 3,056
Derivative financial instruments - (108) -
Short-term investments and other
invested assets - - 12
--------------------------------------------- ----------------- ----------------- -----------------
10,319 5,457 8,794
Less:
Capital gains tax 4,273 2,566 3,057
Transfer to interest maintenance reserve (1,053) 3,208 1,852
--------------------------------------------- ----------------- ----------------- -----------------
Net realized investment gains (losses) $ 7,099 $ (317) $3,885
============================================= ================= ================= =================
</TABLE>
Derivative Financial Instruments
As of December 31, 1999, 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 5.95% as of
December 31, 1999, and pays interest on the same notional amount at a fixed
rate, which was 6.96%. 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 2000. As of
December 31, 1999 and 1998, the fair value of the interest rate swap
agreement was ($386,000) and ($3,420,000), respectively. This negative fair
value represents the estimated amount the Company would have to pay to
cancel the contract or transfer it to another party.
The Company had three interest rate cap agreements with two major financial
institutions which terminated in 1999. The Company paid $2,280,000 for
these agreements. The agreements entitled 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 was amortized over the term of the
agreements.
The Company had a one-year total return swap agreement which terminated in
1999. The purpose was to increase exposure to the high yield bond market,
consistent with the Company's strategic asset allocation. The Company paid
interest on a notional amount of $25 million based on the one-month LIBOR
interest rate and received the total return of a high yield bond index on
the same notional amount. Net settlements were made quarterly. The position
was further hedged by ownership of a $25 million one-year bond that paid a
floating rate that was also based upon LIBOR. The net effect was 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. The Company recognized ($930,000) and
$511,000 of income in 1999 and 1998, respectively, relating to this
derivative investment.
During 1999, the Company invested in short Municipal Bond Index futures
with a face amount of approximately $14.1 million. The purpose of the
investment is to help reduce overall general account duration, consistent
with the Company's strategic asset allocation.
<PAGE>
The Company is exposed to credit losses in the event of nonperformance by
the counter-party to its swap agreement. The Company anticipates, however,
that the counter-party will be able to fully satisfy its obligation under
the contract. The Company monitors the credit standing of the
counter-party. The futures contracts are traded on an exchange and have no
counter-party risk.
Real Estate
A summary of real estate held as of December 31 is as follows (000s
omitted):
<TABLE>
<CAPTION>
=================================== ================== ====================
1999 1998
----------------------------------- ------------------ --------------------
Cost:
<S> <C> <C>
Investment real estate $74,713 $83,537
Home office 16,390 16,064
----------------------------------- ------------------ --------------------
91,103 99,601
Less accumulated depreciation 32,357 37,256
----------------------------------- ------------------ --------------------
Total real estate $58,746 $62,345
=================================== ================== ====================
</TABLE>
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 AVR provision, a loss contingency reserve of $2,100,000 at
December 31, 1999 and 1998, has been provided for potential impairments of
investment real estate.
Self-occupancy Rent
Under statutory accounting practices, the Company is required to include in
investment income and general insurance expense an amount representing
rental income for occupancy of its own buildings. Investment income
includes self-occupancy rental income of $1,077,181, $1,113,977 and
$1,092,600 in 1999, 1998 and 1997, respectively.
(5) Note Payable
As of December 31, 1999 and 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% 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.
(6) Related Party Transactions
The Company has entered into an agreement of permanent affiliation with
CUNA Mutual Insurance Society (CMIS), a mutual life 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
<PAGE>
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.
CMLIC allocated expenses of $31,048,000 in 1999, $30,586,000 in 1998 and
$25,278,000 in 1997 to CMIS and its affiliates. CMIS allocated expenses to
the Company of $41,864,000 in 1999, $37,818,000 in 1998 and $34,096,000 in
1997.
Equity security investments on December 31, 1999 and 1998, include the
Company's wholly owned subsidiary, CMIA Wisconsin, Inc. and the 50%
ownership of CIMCO Inc. (CIMCO), a registered investment advisor. A wholly
owned subsidiary, Red Fox Motor Hotel Corporation, was dissolved in 1999
and the Company realized a gain of $213,000. The carrying value of the
subsidiary investments was $5,806,000 and $3,278,000 at December 31, 1999
and 1998, respectively.
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), a wholly owned subsidiary of CMIS, with a stated maturity date of
January 15, 2011. The effective yield on the date of the agreement in 1995
was 10.62%. 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 statement value of the note was
$3.4 million and $5.1 million at 1999 and 1998, respectively, and is
included in other invested assets. The Company recognized interest income
of $33,000 in 1999, $676,000 in 1998 and $1,074,000 in 1997 relating to
this note.
The Company is party to an agreement with CIMCO for investment advisory
services. CIMCO 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 $2,350,000, $2,172,000,
and $2,115,000 for 1999, 1998, and 1997, 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 $12,533,000 and
$20,332,000 at 1999 and 1998, respectively, and is included with common
stocks.
<PAGE>
(7) 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 ten subaccounts, which invest exclusively
in shares of a single corresponding fund. Nine of the funds - 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 are offered as investment
options for the first generation of the Company's variable universal life
product. The tenth fund, Mid-Cap Stock, is offered as an investment option
for a second generation of the variable universal life product, while the
Treasury 2000 is not available for this generation. 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 and Mid-Cap
Stock, plus High Income and Developing Markets subaccounts. The third
component is used for the investment of premiums received on variable
annuity contracts and has 11 subaccounts, which invest in all but the
Treasury 2000 fund, plus High Income and Developing Markets subaccounts.
(8) Annuity Reserves and Deposit Liabilities
The withdrawal characteristics of the Company's annuity contracts and
deposit liabilities as of December 31 are as follows (000s omitted):
<TABLE>
<CAPTION>
========================================================= ================== ===================
1999 1998
--------------------------------------------------------- ------------------ -------------------
<S> <C> <C>
Subject to discretionary withdrawal:
With market value adjustment $ 923,751 $ 724,535
At book value less surrender charge of 5% or more 244,875 298,044
At market value 1,706,174 1,181,132
At book value, with minimal or no charge adjustment 699,544 714,170
Not subject to discretionary withdrawal 46,948 41,091
--------------------------------------------------------- ------------------ -------------------
3,621,292 2,958,972
Reinsurance ceded 378,290 395,706
--------------------------------------------------------- ------------------ -------------------
Total annuity reserves $3,243,002 $2,563,266
========================================================= ================== ===================
</TABLE>
(9) 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 remains contingently liable in the event
that a reinsurer is unable to meet the obligations assumed under the
reinsurance agreements.
The effects of reinsurance on premium income and on claims benefit expenses
incurred are as follows (000s omitted):
<PAGE>
<TABLE>
<CAPTION>
======================================== ================= ================= =================
1999 1998 1997
---------------------------------------- ----------------- ----------------- -----------------
<S> <C> <C> <C>
Premium income:
Direct $506,538 $458,408 $423,146
Assumed from affiliates 56,846 48,355 39,644
Ceded to affiliates 20,875 18,369 30,118
Ceded to non-affiliates 4,700 3,899 3,062
---------------------------------------- ----------------- ----------------- -----------------
Premium income, net of reinsurance $537,809 $484,495 $429,610
---------------------------------------- ----------------- ----------------- -----------------
Benefit expenses:
Direct $233,737 $136,727 $100,413
Assumed from affiliates 17,591 13,875 11,266
Ceded to affiliates 10,857 12,278 11,141
Ceded to non-affiliates 677 1,389 1,360
---------------------------------------- ----------------- ----------------- -----------------
Benefit expenses, net of reinsurance $239,794 $136,935 $ 99,178
======================================== ================= ================= =================
</TABLE>
Policy reserves and claim liabilities are net of reinsurance balances of
(000s omitted) $453,448 and $464,940 at December 31, 1999 and 1998,
respectively.
(10) Liability for Claim Reserves
Activity in the liability for accident and health claim reserves, which is
included in the liabilities for policy reserves and policy and contract
claims in the accompanying statutory statements of admitted assets,
liabilities and surplus, is summarized as follows (000s omitted):
<TABLE>
<CAPTION>
================================================= ================== ==================
1999 1998
------------------------------------------------- ------------------ ------------------
<S> <C> <C>
Balance as of January 1, net of reinsurance
recoverables of $820 and $679 $6,820 $5,589
Incurred related to:
Current year 9,238 5,960
Prior year (1,809) (464)
------------------------------------------------- ------------------ ------------------
Total incurred 7,429 5,496
------------------------------------------------- ------------------ ------------------
Paid related to:
Current year 3,543 2,766
Prior years 1,971 1,499
------------------------------------------------- ------------------ ------------------
Total paid 5,514 4,265
------------------------------------------------- ------------------ ------------------
Balance as of December 31, net of reinsurance
recoverables of $1,043 and $820 $8,735 $6,820
================================================= ================== ==================
</TABLE>
The liability for accident and health claim reserves for prior years
decreased by $1,809,000 in 1999 and $464,000 in 1998 due to experience
improvements as determined by the actuarial analyses of claim reserves.
(11) Federal Income Taxes
The Company files a consolidated life/nonlife federal income tax return
with its subsidiaries. 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 (000s omitted):
<PAGE>
<TABLE>
<CAPTION>
========================= ====================== ======================
1999 1998
------------------------- ---------------------- ----------------------
<S> <C> <C>
Due from subsidiaries $ - $ -
Due (to)/from IRS (15,906) (5,025)
-------- --------
$(15,906) $(5,025)
========================= ====================== ======================
</TABLE>
The actual federal income tax expense differs from "expected" tax expense
computed by applying the statutory federal income tax rate of 35% to the
earnings before federal income taxes and net realized capital gains
(losses) for the following reasons (000s omitted):
<TABLE>
<CAPTION>
================================ ======================== ========================= ========================
1999 1998 1997
Amount Percent Amount Percent Amount Percent
-------------------------------- ------------ ----------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Tax expense
computed at federal
corporate tax rate $6,824 35.0% $5,460 35.0% $9,164 35.0%
Nontaxable
investment income (2,959) (15.2) (2,587) (16.6) (1,419) (5.4)
Mutual life insurance
company differential
earnings tax 3,276 16.8 3,450 22.1 4,200 16.0
Deferred acquisition costs 870 4.5 681 4.4 1,465 5.6
Book and tax reserve
change (527) (2.7) (1,569) (10.1) (670) (2.6)
Prior-year over/under
accrual (979) (5.0) (72) (0.5) (200) (.8)
General and
administrative expenses 1,208 6.2 (543) (3.5)
Other, net (170) (0.9) (619) (3.9) 857 3.3
Accrued policyholder
dividends 259 1.3 235 1.5 (1,189) (4.5)
-------------------------------- ------------ ----------- ------------ ------------ ----------- ------------
Total federal income
tax expense $7,802 40.0% $4,436 28.4% $12,208 46.6%
================================ ============ =========== ============ ============ =========== ============
</TABLE>
The Company's consolidated federal income tax return has been examined by
the IRS through the year ending December 31, 1996. No material adjustments
resulted from the examination.
(12) Benefit Plans
Post Retirement Benefit
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 $43,871,000 for the defined benefit pension
plans. Plan assets are now invested primarily in the Ultra Series Funds, an
affiliated investment, which serves as the investment vehicle for the
Company's variable insurance, annuity and pension products. The total
pension expense for 1999, 1998 and 1997 was $1,812,000, $2,614,000, and
$2,674,000, respectively.
<PAGE>
The Company also 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.
Financial information related to the plans is shown below (000s omitted):
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
1999 1998 1999 1998
----------------- ----------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Benefit obligation at December 31 $ (53,672) $ (47,912) $(8,738) $(8,616)
Fair value of plan assets at
December 31 62,312 54,074 - -
----------------- ----------------- ---------------- ---------------
Funded status 8,640 6,162 (8,738) (8,616)
Unrecognized prior service cost - - 20 32
Unrecognized net (gain) loss (15,541) (14,444) 749 1,704
Unrecognized net transition
(asset) liability (1,232) - 1,467 1,599
----------------- ----------------- ---------------- ---------------
(Accrued) prepaid benefit cost $ (8,133) $ (8,282) $(6,502) $(5,281)
================= ================= ================ ===============
Benefit cost $ 1,187 $ 744 $ 1,506 $ 1,577
================= ================= ================ ===============
Pension Benefits Other Benefits
1999 1998 1999 1998
------------------ ---------------- ---------------- ---------------
Discount rate 7.0% 7.0% 7.5% 7.5%
Expected return on plan assets 7.0% 7.0% 8.0% 8.0%
Rate of compensation increase 5.0% 5.0% 5.0% 5.0%
</TABLE>
For measurement purposes, an 8.5% annual rate of increase in the per capita
cost of covered health care benefits was assumed for 1999. The rate was
assumed to decrease gradually to 5.0%.
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% of the employees' contributions, up to a maximum of 3%
of the employees' salaries. The Company contributions were approximately
$1,379,000, $1,212,000 and $998,000 for the years ended December 31, 1999,
1998 and 1997, respectively.
<PAGE>
Nonqualified Pension Plans
In addition to the defined benefit and defined contribution plans mentioned
above, the Company has a variety of deferred compensation and supplemental
benefit plans available to qualifying employees. Liabilities of these plans
totaled $2,079,000 and $1,929,000 as of December 31, 1999 and 1998,
respectively.
(13) Statutory Financial Data
Iowa has adopted Risk Based Capital (RBC) requirements for U. S. life
insurers. If prescribed levels of RBC are not maintained, certain actions
may be required on the part of the Company or its regulators. At December
31, 1999, the Total Adjusted Capital and Authorized Control Level - Risk
Based Capital for the Company were $291,858,000 and $49,642,000,
respectively. At this level of total adjusted capital, no action is
required.
(14) Commitments and Contingencies
The Company participates in a securities lending program. The Company's
policy requires that a minimum of 102% of the fair value of the loaned
securities must be fully collateralized with cash, U.S. Government
securities or irrevocable bank letters of credit. The security custodian
monitors the collateral position on a daily basis. At December 31, 1999 and
1998, the amortized cost of securities loaned by the Company totaled
$54,420,000 and $9,935,000 respectively.
The Company is liable for guaranty fund assessments related to certain
unaffiliated insurance companies that have become insolvent during 1999 and
prior. The Company includes a provision for all known assessments that will
be levied as well as an estimate of amounts (net of estimated future
premium tax recoveries) that it believes will be assessed in the future for
which the life insurance industry has estimated the cost to cover losses to
policyholders. The Company is also contingently liable for any future
guaranty fund assessments related to insolvencies of unaffiliated insurance
companies for which the life insurance industry has been unable to estimate
the cost to cover losses to policyholders.
The Company is a defendant in various legal actions arising out of the
conduct of its business. In the opinion of management, 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 of Selected Financial Data
Year Ended December 31, 1999
(in thousands)
The following is a summary of certain financial data included in other exhibits
and schedules subjected to audit procedures by independent auditors and utilized
by actuaries in the determination of reserves.
<TABLE>
<CAPTION>
Investment income earned
<S> <C>
Government bonds 4,578
Other bonds (unaffiliated) 108,210
Bonds of affiliates --
Preferred stocks (unaffiliated) 4
Preferred stocks of affiliates --
Common stocks (unaffiliated) 1,427
Common stocks of affiliates --
Mortgage loans on real estate 27,133
Real estate 9,486
Premium notes, policy loans and liens 6,609
Collateral loans --
Cash on hand and on deposit 96
Short-term investments 4,604
Other invested assets 2,060
Derivative financial instruments (3,190)
Aggregate write-in for investment income 232
----
Gross investment income $161,249
========
Real estate owned - book value less encumbrances $ 58,746
=========
Mortgage loans - book value:
Farm mortgages $ --
Residential mortgages --
Commercial mortgages 325,603
--------
Total mortgage loans $ 325,603
=========
Mortgage loans by standing - book value:
Good standing $ 311,656
Good standing with restructured terms 8,057
Interest overdue more than three months,
not in foreclosure 5,890
Foreclosure in process --
Other long-term assets - statement value $ 14,962
Collateral loans --
Bonds and stocks of parents, subsidiaries and
affiliates - book value
Bonds --
Preferred stocks --
Common stocks 266
Bonds and short-term investments by class and maturity:
Bonds by maturity - statement value
Due within one year or less 219,908
Over 1 year through 5 years 793,294
Over 5 years through 10 years 479,631
Over 10 years through 20 years 79,800
Over 20 years 19,162
-------
Total by maturity $1,591,795
==========
<PAGE>
Bonds by class - statement value
Class 1 1,150,780
Class 2 333,423
Class 3 72,830
Class 4 25,792
Class 5 7,924
Class 6 1,046
------
Total by class $1,591,795
==========
Total bonds publicly traded $1,217,533
Total bonds privately placed 374,262
Preferred stocks - statement value 41
Common stocks - market value 82,086
Short-term investments - book value 82,470
Financial options owned - statement value 1,184
Financial options written and in force - statement value --
Financial futures contracts open - current price --
Cash on deposit 5,049
Life insurance in force:
Industrial $ --
Ordinary 11,701,626
Credit life --
Group life 2,809,157
Amount of accidental death insurance in force under
ordinary policies 446,238
Life insurance policies with disability provisions in force:
Industrial --
Ordinary 5,221,971
Credit life --
Group life 40
Supplementary contracts in force:
Ordinary - not involving life contingencies
Amount on deposit 52,856
Income payable 7,877
Ordinary - involving life contingencies
Income payable 4,144
Group - not involving life contingencies
Amount of deposit --
Income payable --
Group - involving life contingencies
Income payable --
Annuities:
Ordinary
Immediate - amount of income payable 2,095
Deferred - fully paid - account balance 532,497
Deferred - not fully paid - account balance 1,905,531
<PAGE>
Group
Immediate - amount of income payable --
Fully paid account payable --
Not fully paid - account balance --
Accident and health insurance - premiums in force:
Ordinary $ 2,767
Group 22,518
Credit --
Deposit funds and dividend accumulations:
Deposit funds - account balance 1,149
Dividend accumulations - account balance 158,377
Claim payments 1999:
Group accident and health - year ended December 31
1999 3,186
1998 1,385
1997 55
1996 30
1995 11
Prior 74
Other accident and health
1999 357
1998 164
1997 54
1996 54
1995 53
Prior 92
Other coverages that use developmental methods
To calculate claims reserves
1999 --
1998 --
1997 --
1996 --
1995 --
Prior --
See accompanying independent auditors' report.
</TABLE>
<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. At your request, we 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 us 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:
- The Insured is a Standard Non Tobacco User.
- The Specified Amount of coverage is $100,000.
- Planned premiums are paid on the first day of the Policy year for 30
years.
- No loans are taken.
- No Partial Withdrawals are made.
- All Net Premium is allocated to the Separate Account and invested
equally in each Fund.
- No changes are made to the Specified Amount.
- No transfer fees are incurred.
- The Policy has no riders.
- The charge for state Premium Expense Charge is 2%.
- 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 -1.79%, 4.21% and 10.21%, 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.
<PAGE>
The table below shows for each Subaccount the total of the mortality and expense
fee and the underlying series level fees.
<TABLE>
<CAPTION>
Mortality & Expense Fund Fees* Total
<S> <C> <C> <C>
Money Market 0.90 0.46 1.36
Bond 0.90 0.56 1.46
Balanced 0.90 0.71 1.61
Growth and Income Stock 0.90 0.61 1.51
Capital Appreciation Stock 0.90 0.81 1.71
Mid-Cap Stock 0.90 1.01 1.91
T. Rowe Price International Stock 0.90 1.05 1.95
MFS Global Governments 0.90 0.91 1.81
MFS Emerging Growth 0.90 0.84 1.74
Oppenheimer High Income/VA 0.90 0.75 1.65
Templeton Developing Markets Securities
Fund - Class 2 0.90 1.79 2.69
Average 0.90 0.86 1.76
</TABLE>
* The illustrations on the following pages are computed using the average 1.79
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, or a different risk classification. 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 we did not pay the dividends it has
projected but not guaranteed. (Dividends are expected to be paid beginning in
policy year 11 and are projected at 0.70% of policy value during policy years
11-20 and 1.10% of policy value during policy years 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>
<TABLE>
<CAPTION>
ILLUSTRATION OF POLICY VALUES
MEMBERS(R) Variable Universal Life II
ISSUED BY CUNA MUTUAL LIFE INSURANCE COMPANY
NUMBER 1
Male Standard Non Tobacco User 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 Withdrawal: None Projected Dividends: Included
Hypothetical Gross Rates of Return: 0%, 6%, and 12% Death Benefit: Option 1*
===============================================================================================================================
Premiums
Accum at
End of 5% 0.00% GROSS 6.00% GROSS 12.00% GROSS
Year Interest (-1.76% NET) (4.24% NET) (10.24% NET)
per year
---------------------------------------------------------------------------------------------------------
Death Accum Surrender Death Accum Surrender Death Accum Surrender
Benefit Value Value Benefit Value Value Benefit Value Value
===============================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,260 100,000 870 99 100,000 932 161 100,000 993 222
2 2,583 100,000 1,719 986 100,000 1,896 1,163 100,000 2,081 1,348
3 3,972 100,000 2,540 1,847 100,000 2,889 2,196 100,000 3,269 2,576
4 5,431 100,000 3,338 2,683 100,000 3,916 3,261 100,000 4,569 3,914
5 6,962 100,000 4,110 3,532 100,000 4,974 4,396 100,000 5,991 5,413
6 8,570 100,000 4,855 4,354 100,000 6,064 5,563 100,000 7,546 7,045
7 10,259 100,000 5,571 5,185 100,000 7,186 6,800 100,000 9,248 8,862
8 12,032 100,000 6,257 5,988 100,000 8,338 8,069 100,000 11,108 10,839
9 13,893 100,000 6,916 6,762 100,000 9,526 9,372 100,000 13,148 12,994
10 15,848 100,000 7,544 7,544 100,000 10,746 10,746 100,000 15,382 15,382
15 27,189 100,000 11,369 11,369 100,000 18,849 18,849 100,000 32,209 32,209
20 41,663 100,000 14,598 14,598 100,000 28,852 28,852 100,000 60,492 60,492
25 60,136 100,000 17,127 17,127 100,000 41,773 41,773 147,285 109,914 109,914
30 83,713 100,000 18,120 18,120 100,000 57,965 57,965 236,024 193,462 193,462
===============================================================================================================================
</TABLE>
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 your 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.
*Under Option 1 the death benefit is the greater of (1) the Specified Amount or
(2) the Policy Value on the date of death multiplied by the Death Benefit
Percentage Factor described in the section of the prospectus titled The Policy -
Death Benefit Proceeds.
<PAGE>
<TABLE>
<CAPTION>
ILLUSTRATION OF POLICY VALUES
MEMBERS(R) Variable Universal Life II
ISSUED BY CUNA MUTUAL LIFE INSURANCE COMPANY
NUMBER 2
Male Standard Non Tobacco User 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 Withdrawal: None Projected Dividends: Not Included
Hypothetical Gross Rates of Return: 0%, 6%, and 12% Death Benefit: Option 1*
===============================================================================================================================
Premiums
Accum at
End of 5% 0.00% GROSS 6.00% GROSS 12.00% GROSS
Year Interest (-1.61% NET) (4.39% NET) (10.39% NET)
per year
---------------------------------------------------------------------------------------------------------
Death Accum Surrender Death Accum Surrender Death Accum Surrender
Benefit Value Value Benefit Value Value Benefit Value Value
===============================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,260 100,000 870 99 100,000 932 161 100,000 993 222
2 2,583 100,000 1,719 986 100,000 1,896 1,163 100,000 2,081 1,348
3 3,972 100,000 2,540 1,847 100,000 2,889 2,196 100,000 3,269 2,576
4 5,431 100,000 3,338 2,683 100,000 3,916 3,261 100,000 4,569 3,914
5 6,962 100,000 4,110 3,532 100,000 4,974 4,396 100,000 5,991 5,413
6 8,570 100,000 4,855 4,354 100,000 6,064 5,563 100,000 7,546 7,045
7 10,259 100,000 5,571 5,185 100,000 7,186 6,800 100,000 9,248 8,862
8 12,032 100,000 6,257 5,988 100,000 8,338 8,069 100,000 11,108 10,839
9 13,893 100,000 6,916 6,762 100,000 9,526 9,372 100,000 13,148 12,994
10 15,848 100,000 7,544 7,544 100,000 10,746 10,746 100,000 15,382 15,382
15 27,189 100,000 10,386 10,386 100,000 17,591 17,591 100,000 30,543 30,543
20 41,663 100,000 12,124 12,124 100,000 25,257 25,257 100,000 54,942 54,942
25 60,136 100,000 12,147 12,147 100,000 33,495 33,495 127,053 94,815 94,815
30 83,713 100,000 9,387 9,387 100,000 41,935 41,935 193,483 158,592 158,592
===============================================================================================================================
</TABLE>
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 your 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.
*Under Option 1 the death benefit is the greater of (1) the Specified Amount or
(2) the Policy Value on the date of death multiplied by the Death Benefit
Percentage Factor described in the section of the prospectus titled The Policy -
Death Benefit Proceeds.
<PAGE>
<TABLE>
<CAPTION>
ILLUSTRATION OF POLICY VALUES
MEMBERS(R) Variable Universal Life II
ISSUED BY CUNA MUTUAL LIFE INSURANCE COMPANY
NUMBER 3
Male Standard Non Tobacco User 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 Withdrawal: None Projected Dividends: Included
Hypothetical Gross Rates of Return: 0%, 6%, and 12% Death Benefit: Option 2*
===============================================================================================================================
Premiums
Accum at
End of 5% 0.00% GROSS 6.00% GROSS 12.00% GROSS
Year Interest (-1.61% NET) (4.39% NET) (10.39% NET)
per year
---------------------------------------------------------------------------------------------------------
Death Accum Surrender Death Accum Surrender Death Accum Surrender
Benefit Value Value Benefit Value Value Benefit Value Value
===============================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,260 100,869 869 98 100,930 930 159 100,991 991 220
2 2,583 101,713 1,713 981 101,890 1,890 1,157 102,074 2,074 1,342
3 3,972 102,531 2,531 1,837 102,878 2,878 2,185 103,256 3,256 2,562
4 5,431 103,321 3,321 2,666 103,896 3,896 3,240 104,545 4,545 3,889
5 6,962 104,084 4,084 3,506 104,942 4,942 4,364 105,951 5,951 5,373
6 8,570 104,817 4,817 4,316 106,015 6,015 5,514 107,483 7,483 6,982
7 10,259 105,519 5,519 5,133 107,115 7,115 6,730 109,154 9,154 8,768
8 12,032 106,190 6,190 5,920 108,243 8,243 7,973 110,975 10,975 10,705
9 13,893 106,828 6,828 6,674 109,397 9,397 9,243 112,961 12,961 12,807
10 15,848 107,432 7,432 7,432 110,576 10,576 10,576 115,126 15,126 15,126
15 27,189 111,135 11,135 11,135 118,412 18,412 18,412 131,387 31,387 31,387
20 41,663 114,131 14,131 14,131 127,796 27,796 27,796 158,047 58,047 58,047
25 60,136 116,194 16,194 16,194 139,213 39,213 39,213 203,238 103,238 103,238
30 83,713 116,343 16,343 16,343 151,900 51,900 51,900 278,139 178,139 178,139
===============================================================================================================================
</TABLE>
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 your 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.
*Under Option 2 the death benefit is the greater of (1) the Specified Amount
plus the Policy Value on date of death, or (2) the Policy Value on the date of
death multiplied by the Death Benefit Percentage Factor described in the section
of the prospectus titled The Policy - Death Benefit Proceeds.
<PAGE>
<TABLE>
<CAPTION>
ILLUSTRATION OF POLICY VALUES
MEMBERS(R) Variable Universal Life II
ISSUED BY CUNA MUTUAL LIFE INSURANCE COMPANY
NUMBER 4
Male Standard Non Tobacco User 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 Withdrawal: None Projected Dividends: Not Included
Hypothetical Gross Rates of Return: 0%, 6%, and 12% Death Benefit: Option 2*
===============================================================================================================================
Premiums
Accum at
End of 5% 0.00% GROSS 6.00% GROSS 12.00% GROSS
Year Interest (-1.61% NET) (4.39% NET) (10.39% NET)
per year
---------------------------------------------------------------------------------------------------------
Death Accum Surrender Death Accum Surrender Death Accum Surrender
Benefit Value Value Benefit Value Value Benefit Value Value
===============================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,260 100,869 869 98 100,930 930 159 100,991 991 220
2 2,583 101,713 1,713 981 101,890 1,890 1,157 102,074 2,074 1,342
3 3,972 102,531 2,531 1,837 102,878 2,878 2,185 103,256 3,256 2,562
4 5,431 103,321 3,321 2,666 103,896 3,896 3,240 104,545 4,545 3,889
5 6,962 104,084 4,084 3,506 104,942 4,942 4,364 105,951 5,951 5,373
6 8,570 104,817 4,817 4,316 106,015 6,015 5,514 107,483 7,483 6,982
7 10,259 105,519 5,519 5,133 107,115 7,115 6,730 109,154 9,154 8,768
8 12,032 106,190 6,190 5,920 108,243 8,243 7,973 110,975 10,975 10,705
9 13,893 106,828 6,828 6,674 109,397 9,397 9,243 112,961 12,961 12,807
10 15,848 107,432 7,432 7,432 110,576 10,576 10,576 115,126 15,126 15,126
15 27,189 110,095 10,095 10,095 117,052 17,052 17,052 129,539 29,539 29,539
20 41,663 111,499 11,499 11,499 123,838 23,838 23,838 151,650 51,650 51,650
25 60,136 110,954 10,954 10,954 130,085 30,085 30,085 185,237 85,237 85,237
30 83,713 107,382 7,382 7,382 134,249 34,249 34,249 235,895 135,895 135,895
===============================================================================================================================
</TABLE>
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 your 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.
*Under Option 2 the death benefit is the greater of (1) the Specified Amount
plus the Policy Value on date of death, or (2) the Policy Value on the date of
death multiplied by the Death Benefit Percentage Factor described in the section
of the prospectus titled The Policy - Death Benefit Proceeds.
<PAGE>
<TABLE>
<CAPTION>
ILLUSTRATION OF POLICY VALUES
MEMBERS(R) Variable Universal Life II
ISSUED BY CUNA MUTUAL LIFE INSURANCE COMPANY
NUMBER 5
Male Standard Non Tobacco User 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 Withdrawal: None Projected Dividends: Included
Hypothetical Gross Rates of Return: 0%, 6%, and 12% Death Benefit: Option 1*
===============================================================================================================================
Premiums
Accum at
End of 5% 0.00% GROSS 6.00% GROSS 12.00% GROSS
Year Interest (-1.61% NET) (4.39% NET) (10.39% NET)
per year
---------------------------------------------------------------------------------------------------------
Death Accum Surrender Death Accum Surrender Death Accum Surrender
Benefit Value Value Benefit Value Value Benefit Value Value
===============================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 2,625 100,000 1,795 204 100,000 1,923 332 100,000 2,050 459
2 5,381 100,000 3,534 2,023 100,000 3,902 2,391 100,000 4,286 2,775
3 8,275 100,000 5,214 3,782 100,000 5,938 4,506 100,000 6,725 5,293
4 11,314 100,000 6,837 5,484 100,000 8,035 6,682 100,000 9,390 8,037
5 14,505 100,000 8,402 7,209 100,000 10,195 9,002 100,000 12,307 11,114
6 17,855 100,000 9,915 8,881 100,000 12,426 11,392 100,000 15,509 14,475
7 21,373 100,000 11,354 10,559 100,000 14,710 13,915 100,000 19,007 18,212
8 25,066 100,000 12,721 12,165 100,000 17,053 16,497 100,000 22,838 22,282
9 28,945 100,000 14,013 13,695 100,000 19,456 19,138 100,000 27,040 26,722
10 33,017 100,000 15,227 15,227 100,000 21,920 21,920 100,000 31,656 31,656
15 56,644 100,000 22,223 22,223 100,000 37,968 37,968 100,000 66,442 66,442
20 86,798 100,000 26,765 26,765 100,000 57,493 57,493 146,206 126,039 126,039
25 125,284 100,000 27,734 27,734 100,000 84,058 84,058 245,083 229,050 229,050
30 174,402 100,000 21,098 21,098 127,337 121,273 121,273 436,862 404,034 404,034
===============================================================================================================================
</TABLE>
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 your 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.
*Under Option 1 the death benefit is the greater of (1) the Specified Amount or
(2) the Policy Value on the date of death multiplied by the Death Benefit
Percentage Factor described in the section of the prospectus titled The Policy -
Death Benefit Proceeds.
<PAGE>
<TABLE>
<CAPTION>
ILLUSTRATION OF POLICY VALUES
MEMBERS(R) Variable Universal Life II
ISSUED BY CUNA MUTUAL LIFE INSURANCE COMPANY
NUMBER 6
Male Standard Non Tobacco User 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 Withdrawal: None Projected Dividends: Not Included
Hypothetical Gross Rates of Return: 0%, 6%, and 12% Death Benefit: Option 1*
===============================================================================================================================
Premiums
Accum at
End of 5% 0.00% GROSS 6.00% GROSS 12.00% GROSS
Year Interest (-1.61% NET) (4.39% NET) (10.39% NET)
per year
---------------------------------------------------------------------------------------------------------
Death Accum Surrender Death Accum Surrender Death Accum Surrender
Benefit Value Value Benefit Value Value Benefit Value Value
===============================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 2,625 100,000 1,795 204 100,000 1,923 332 100,000 2,050 459
2 5,381 100,000 3,523 2,012 100,000 3,891 2,380 100,000 4,275 2,764
3 8,275 100,000 5,181 3,749 100,000 5,903 4,471 100,000 6,688 5,256
4 11,314 100,000 6,762 5,409 100,000 7,956 6,603 100,000 9,306 7,953
5 14,505 100,000 8,262 7,069 100,000 10,045 8,852 100,000 12,146 10,953
6 17,855 100,000 9,680 8,646 100,000 12,171 11,137 100,000 15,233 14,199
7 21,373 100,000 11,010 10,215 100,000 14,331 13,536 100,000 18,590 17,795
8 25,066 100,000 12,251 11,695 100,000 16,528 15,972 100,000 22,251 21,695
9 28,945 100,000 13,400 13,082 100,000 18,759 18,441 100,000 26,251 25,933
10 33,017 100,000 14,447 14,447 100,000 21,021 21,021 100,000 30,625 30,625
15 56,644 100,000 18,039 18,039 100,000 32,895 32,895 100,000 60,295 60,295
20 86,798 100,000 17,228 17,228 100,000 45,028 45,028 128,140 110,465 110,465
25 125,284 100,000 8,479 8,479 100,000 57,098 57,098 205,008 191,596 191,596
30 174,402 **** **** **** 100,000 69,148 69,148 338,560 322,438 322,438
===============================================================================================================================
</TABLE>
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 your 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.
*Under Option 1 the death benefit is the greater of (1) the Specified Amount or
(2) the Policy Value on the date of death multiplied by the Death Benefit
Percentage Factor described in the section of the prospectus titled The Policy -
Death Benefit Proceeds.
** Policy terminated before year 30.
<PAGE>
<TABLE>
<CAPTION>
ILLUSTRATION OF POLICY VALUES
MEMBERS(R) Variable Universal Life II
ISSUED BY CUNA MUTUAL LIFE INSURANCE COMPANY
NUMBER 7
Male Standard Non Tobacco User 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 Withdrawal: None Projected Dividends: Included
Hypothetical Gross Rates of Return: 0%, 6%, and 12% Death Benefit: Option 2*
==============================================================================================================================
Premiums
Accum at
End of 5% 0.00% GROSS 6.00% GROSS 12.00% GROSS
Year Interest (-1.61% NET) (4.39% NET) (10.39% NET)
per year
---------------------------------------------------------------------------------------------------------
Death Accum Surrender Death Accum Surrender Death Accum Surrender
Benefit Value Value Benefit Value Value Benefit Value Value
===============================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 2,625 101,785 1,785 194 101,911 1,911 320 102,038 2,038 447
2 5,381 103,502 3,502 1,991 103,867 3,867 2,355 104,247 4,247 2,736
3 8,275 105,150 5,150 3,718 105,865 5,865 4,433 106,641 6,641 5,209
4 11,314 106,728 6,728 5,375 107,904 7,904 6,552 109,235 9,235 7,883
5 14,505 108,237 8,237 7,044 109,989 9,989 8,796 112,052 12,052 10,859
6 17,855 109,680 9,680 8,645 112,120 12,120 11,086 115,115 15,115 14,081
7 21,373 111,031 11,031 10,236 114,274 14,274 13,479 118,422 18,422 17,626
8 25,066 112,294 12,294 11,737 116,452 16,452 15,895 121,997 21,997 21,440
9 28,945 113,459 13,459 13,141 118,645 18,645 18,327 125,859 25,859 25,541
10 33,017 114,527 14,527 14,527 120,851 20,851 20,851 130,035 30,035 30,035
15 56,644 120,599 20,599 20,599 134,924 34,924 34,924 160,710 60,710 60,710
20 86,798 123,149 23,149 23,149 149,162 49,162 49,162 208,070 108,070 108,070
25 125,284 120,214 20,214 20,214 161,825 61,825 61,825 283,345 183,345 183,345
30 174,402 107,581 7,581 7,581 167,019 67,019 67,019 399,371 299,371 299,371
===============================================================================================================================
</TABLE>
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 your 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.
*Under Option 2 the death benefit is the greater of (1) the Specified Amount
plus the Policy Value on date of death, or (2) the Policy Value on the date of
death multiplied by the Death Benefit Percentage Factor described in the section
of the prospectus titled The Policy - Death Benefit Proceeds.
<PAGE>
<TABLE>
<CAPTION>
ILLUSTRATION OF POLICY VALUES
MEMBERS(R) Variable Universal Life II
ISSUED BY CUNA MUTUAL LIFE INSURANCE COMPANY
NUMBER 8
Male Standard Non Tobacco User Age at Issue: 50
Specified Mount: $100,000 Annual Premium: $2,500
Planned Premium Payable Annually for: 30 years Based on: Guaranteed Mortality Charges
Policy Loans and Withdrawal: None Projected Dividends: Not Included
Hypothetical Gross Rates of Return: 0%, 6%, and 12% Death Benefit: Option 2*
===============================================================================================================================
Premiums
Accum at
End of 5% 0.00% GROSS 6.00% GROSS 12.00% GROSS
Year Interest (-1.61% NET) (4.39% NET) (10.39% NET)
per year
---------------------------------------------------------------------------------------------------------
Death Accum Surrender Death Accum Surrender Death Accum Surrender
Benefit Value Value Benefit Value Value Benefit Value Value
===============================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 2,625 101,785 1,785 194 101,911 1,911 320 102,038 2,038 447
2 5,381 103,491 3,491 1,980 103,856 3,856 2,344 104,236 4,236 2,724
3 8,275 105,115 5,115 3,683 105,828 5,828 4,396 106,602 6,602 5,170
4 11,314 106,649 6,649 5,296 107,820 7,820 6,467 109,145 9,145 7,793
5 14,505 108,087 8,087 6,894 109,826 9,826 8,633 111,876 11,876 10,683
6 17,855 109,425 9,425 8,391 111,839 11,839 10,805 114,806 14,806 13,772
7 21,373 110,656 10,656 9,860 113,852 13,852 13,057 117,948 17,948 17,152
8 25,066 111,777 11,777 11,221 115,860 15,860 15,303 121,318 21,318 20,761
9 28,945 112,782 12,781 12,463 117,852 17,852 17,534 124,929 24,929 24,611
10 33,017 113,659 13,659 13,659 119,816 19,816 19,816 128,794 28,794 28,794
15 56,644 115,900 15,900 15,900 128,835 28,835 28,835 152,589 52,589 52,589
20 86,798 112,735 12,735 12,735 133,932 33,932 33,932 184,439 84,439 84,439
25 125,284 101,153 1,153 1,153 130,247 30,247 30,247 224,923 124,923 124,923
30 174,402 **** **** **** 109,296 9,296 9,296 272,037 172,037 172,037
===============================================================================================================================
</TABLE>
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 your 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.
* Under Option 2 the death benefit is the greater of (1) the Specified Amount
plus the Policy Value on date of death, or (2) the Policy Value on the date
of death multiplied by the Death Benefit Percentage Factor described in the
section of the prospectus titled The Policy - Death Benefit Proceeds.
** Policy terminated before year 30.
<PAGE>
<TABLE>
<CAPTION>
Appendix B - First Year Surrender Charges per $1,000 of Specified Amount
===============================================================================
ISSUE AGE MALE COMPOSITE FEMALE COMPOSITE
- -------------------- ---------------------------- ----------------------------
<S> <C> <C> <C>
0 0.95 0.87
- -------------------- ---------------------------- ----------------------------
1 1.07 0.99
- -------------------- ---------------------------- ----------------------------
2 1.19 1.11
- -------------------- ---------------------------- ----------------------------
3 1.30 1.22
- -------------------- ---------------------------- ----------------------------
4 1.42 1.34
- -------------------- ---------------------------- ----------------------------
5 1.54 1.46
- -------------------- ---------------------------- ----------------------------
6 1.70 1.59
- -------------------- ---------------------------- ----------------------------
7 1.88 1.72
- -------------------- ---------------------------- ----------------------------
8 2.06 1.85
- -------------------- ---------------------------- ----------------------------
9 2.24 1.98
- -------------------- ---------------------------- ----------------------------
10 2.39 2.11
- -------------------- ---------------------------- ----------------------------
11 2.51 2.23
- -------------------- ---------------------------- ----------------------------
12 2.62 2.35
- -------------------- ---------------------------- ----------------------------
13 2.71 2.46
- -------------------- ---------------------------- ----------------------------
14 2.80 2.57
- -------------------- ---------------------------- ----------------------------
15 2.88 2.67
- -------------------- ---------------------------- ----------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------- ------------------------------------------- -------------------------------------------
ISSUE AGE MALE FEMALE
- -------------------- --------------------- --------------------- --------------------- ---------------------
NON TOBACCO TOBACCO NON TOBACCO TOBACCO
- -------------------- --------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C> <C> <C>
16 2.94 2.94 2.74 2.74
- -------------------- --------------------- --------------------- --------------------- ---------------------
17 2.99 2.99 2.80 2.80
- -------------------- --------------------- --------------------- --------------------- ---------------------
18 3.03 3.03 2.85 2.85
- -------------------- --------------------- --------------------- --------------------- ---------------------
19 3.10 3.10 2.92 2.92
- -------------------- --------------------- --------------------- --------------------- ---------------------
20 3.21 3.24 3.03 3.05
- -------------------- --------------------- --------------------- --------------------- ---------------------
21 3.37 3.49 3.18 3.28
- -------------------- --------------------- --------------------- --------------------- ---------------------
22 3.56 3.74 3.37 3.51
- -------------------- --------------------- --------------------- --------------------- ---------------------
23 3.78 4.00 3.57 3.75
- -------------------- --------------------- --------------------- --------------------- ---------------------
24 4.03 4.25 3.79 3.98
- -------------------- --------------------- --------------------- --------------------- ---------------------
25 4.29 4.50 4.02 4.21
- -------------------- --------------------- --------------------- --------------------- ---------------------
26 4.57 4.79 4.26 4.51
- -------------------- --------------------- --------------------- --------------------- ---------------------
27 4.88 5.11 4.51 4.85
- -------------------- --------------------- --------------------- --------------------- ---------------------
28 5.21 5.45 4.77 5.22
- -------------------- --------------------- --------------------- --------------------- ---------------------
29 5.55 5.82 5.05 5.59
- -------------------- --------------------- --------------------- --------------------- ---------------------
30 5.89 6.18 5.33 5.95
- -------------------- --------------------- --------------------- --------------------- ---------------------
31 6.23 6.54 5.63 6.31
- -------------------- --------------------- --------------------- --------------------- ---------------------
32 6.59 6.91 5.93 6.68
- -------------------- --------------------- --------------------- --------------------- ---------------------
33 6.95 7.30 6.25 7.04
- -------------------- --------------------- --------------------- --------------------- ---------------------
34 7.32 7.70 6.57 7.42
- -------------------- --------------------- --------------------- --------------------- ---------------------
35 7.71 8.13 6.90 7.79
- -------------------- --------------------- --------------------- --------------------- ---------------------
</TABLE>
Note: Preferred and Standard Policies use the same Surrender Charge.
<PAGE>
<TABLE>
<CAPTION>
- -------------------- ------------------------------------------- -------------------------------------------
ISSUE AGE MALE FEMALE
- -------------------- --------------------- --------------------- --------------------- ---------------------
NON TOBACCO TOBACCO NON TOBACCO TOBACCO
- -------------------- --------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C> <C> <C>
36 8.11 8.58 7.22 8.17
- -------------------- --------------------- --------------------- --------------------- ---------------------
37 8.53 9.05 7.55 8.55
- -------------------- --------------------- --------------------- --------------------- ---------------------
38 8.95 9.54 7.88 8.94
- -------------------- --------------------- --------------------- --------------------- ---------------------
39 9.40 10.07 8.22 9.32
- -------------------- --------------------- --------------------- --------------------- ---------------------
40 9.87 10.62 8.58 9.70
- -------------------- --------------------- --------------------- --------------------- ---------------------
41 10.36 11.21 8.96 10.06
- -------------------- --------------------- --------------------- --------------------- ---------------------
42 10.86 11.82 9.35 10.41
- -------------------- --------------------- --------------------- --------------------- ---------------------
43 11.39 12.46 9.76 10.76
- -------------------- --------------------- --------------------- --------------------- ---------------------
44 11.94 13.14 10.18 11.12
- -------------------- --------------------- --------------------- --------------------- ---------------------
45 12.53 13.86 10.64 11.52
- -------------------- --------------------- --------------------- --------------------- ---------------------
46 13.14 14.61 11.10 11.92
- -------------------- --------------------- --------------------- --------------------- ---------------------
47 13.76 15.39 11.56 12.30
- -------------------- --------------------- --------------------- --------------------- ---------------------
48 14.41 16.21 12.06 12.73
- -------------------- --------------------- --------------------- --------------------- ---------------------
49 15.12 17.08 12.62 13.25
- -------------------- --------------------- --------------------- --------------------- ---------------------
50 15.91 18.00 13.28 13.91
- -------------------- --------------------- --------------------- --------------------- ---------------------
51 16.79 19.00 14.07 14.77
- -------------------- --------------------- --------------------- --------------------- ---------------------
52 17.74 20.07 14.98 15.79
- -------------------- --------------------- --------------------- --------------------- ---------------------
53 18.74 21.18 15.94 16.89
- -------------------- --------------------- --------------------- --------------------- ---------------------
54 19.78 22.31 16.92 18.00
- -------------------- --------------------- --------------------- --------------------- ---------------------
55 20.83 23.43 17.86 19.04
- -------------------- --------------------- --------------------- --------------------- ---------------------
56 21.85 24.48 18.70 19.96
- -------------------- --------------------- --------------------- --------------------- ---------------------
57 22.84 25.47 19.49 20.80
- -------------------- --------------------- --------------------- --------------------- ---------------------
58 23.88 26.50 20.30 21.65
- -------------------- --------------------- --------------------- --------------------- ---------------------
59 25.04 27.68 21.20 22.59
- -------------------- --------------------- --------------------- --------------------- ---------------------
60 26.39 29.11 22.30 23.71
- -------------------- --------------------- --------------------- --------------------- ---------------------
61 27.01 29.87 23.08 24.53
- -------------------- --------------------- --------------------- --------------------- ---------------------
62 27.42 30.48 23.84 25.32
- -------------------- --------------------- --------------------- --------------------- ---------------------
63 27.73 31.00 24.55 26.06
- -------------------- --------------------- --------------------- --------------------- ---------------------
64 28.04 31.50 25.20 26.71
- -------------------- --------------------- --------------------- --------------------- ---------------------
65 28.45 32.05 25.75 27.25
- -------------------- --------------------- --------------------- --------------------- ---------------------
66 28.96 32.58 26.18 27.60
- -------------------- --------------------- --------------------- --------------------- ---------------------
67 29.50 33.05 26.49 27.78
- -------------------- --------------------- --------------------- --------------------- ---------------------
68 30.07 33.55 26.74 27.91
- -------------------- --------------------- --------------------- --------------------- ---------------------
69 30.70 34.19 27.00 28.07
- -------------------- --------------------- --------------------- --------------------- ---------------------
70 31.39 35.07 27.31 28.39
- -------------------- --------------------- --------------------- --------------------- ---------------------
71 32.25 36.52 27.72 29.01
- -------------------- --------------------- --------------------- --------------------- ---------------------
72 33.12 37.97 28.12 29.64
- -------------------- --------------------- --------------------- --------------------- ---------------------
73 33.98 39.41 28.53 30.26
- -------------------- --------------------- --------------------- --------------------- ---------------------
74 34.85 40.86 28.93 30.89
- -------------------- --------------------- --------------------- --------------------- ---------------------
75 35.71 42.31 29.34 31.51
- -------------------- --------------------- --------------------- --------------------- ---------------------
</TABLE>
Note: Preferred and Standard Policies use the same Surrender Charge.
<PAGE>
Appendix C - Death Benefit Percentage Factor
================================================================================
The Death Benefit Percentage Factor required by the Internal Revenue Code for
treatment of the Policy as a life insurance Policy.
Attained Age | Death Benefit Percentage Factor
-----------------------------------------------------
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. 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.
2. 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.
REPRESENTATION PURSUANT TO SECTION 26(e) OF THE INVESTMENT COMPANY ACT OF 1940
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 106 pages.
Undertakings.
Representation.
The signatures.
Written consent or opinion of the following persons:
PricewaterhouseCoopers LLP
KPMG LLP
Scott Allen - Associate Actuary
The following exhibits:
1. Exhibits required by paragraph A of instructions for Exhibits in Form
N-8B-2:
1. Resolution to Authorize Registration of and Investment in Separate
Accounts. Incorporated herein by reference to Form S-6 initial
registration statement (File No. 333-81499) filed with the Commission
on June 24, 1999.
2. Not Applicable
3. a. Distribution Agreement between CUNA Mutual Life Insurance Company
and CUNA Brokerage Services, Inc. effective January 1, 1996.
Incorporated herein by reference to Form S-6 pre-effective
amendment no. 1 (File No. 333-81499) filed with the Commission on
October 6, 1999.
b. 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 Form S-6 pre-effective amendment no. 1 (File No. 333-81499)
filed with the Commission on October 6, 1999.
4. Not Applicable
5. a. Standard VUL Contract. Incorporated herein by reference to Form S-6
initial registration statement (File No. 333-81499) filed with the
Commission on June 24, 1999.
i. Accelerated Benefit Option Endorsement. Form 1668
Incorporated herein by reference to Form S-6 initial
registration statement (File No. 333-81499) filed with the
Commission on June 24, 1999.
ii. Accidental Death Benefit Rider. 99-ADB-RV1 Incorporated
herein by reference to Form S-6 initial registration
statement (File No. 333-81499) filed with the Commission on
June 24, 1999.
iii. Children's Insurance Rider. 99-CIR-RV1 Incorporated herein
by reference to Form S-6 initial registration statement
(File No. 333-81499) filed with the Commission on June 24,
1999.
iv. Executive Benefit Plan Endorsement. 98-EBP Incorporated
herein by reference to Form S-6 initial registration
statement (File No. 333-81499) filed with the Commission on
June 24, 1999.
v. Guaranteed Insurability Rider. 99-GIR-RV1 Incorporated
herein by reference to Form S-6 initial registration
statement (File No. 333-81499) filed with the Commission on
June 24, 1999.
vi. Term Insurance Rider for Other Insureds. 99-OIR-RV1
Incorporated herein by reference to Form S-6 initial
registration statement (File No. 333-81499) filed with the
Commission on June 24, 1999.
<PAGE>
vii. Waiver of Premium Disability Rider. 99-WVR-RV1 Incorporated
herein by reference to Form S-6 initial registration
statement (File No. 333-81499) filed with the Commission on
June 24, 1999.
6. a. Articles of Incorporation of the Company. Incorporated herein by
reference to Form S-6 initial registration statement (File No.
333-81499) filed with the Commission on June 24, 1999.
b. Bylaws. Incorporated herein by reference to Form S-6 initial
registration statement (File No. 333-81499) filed with the
Commission on June 24, 1999.
7. Not Applicable
8. Servicing Agreement Between CUNA Mutual Life Insurance Company and
CIMCO Inc. dated May 1, 1997. Incorporated herein by reference to Form
S-6 pre-effective amendment no. 1 (File No. 333-81499) filed with the
Commission on October 6, 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 Form S-6 pre-effective amendment no. 1 (File No.
333-81499) filed with the Commission on October 6, 1999.
b. Amendment to Participation Agreement among T. Rowe Price
International Series, Inc., T. Rowe Price Investment Services,
Inc., and CUNA Mutual Life Insurance Company dated September 22,
1999.
c. 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 Form S-6 pre-effective amendment no. 1 (File No. 333-81499)
filed with the Commission on October 6, 1999.
d. Third Amendment to Participation Agreement between MFS Variable
Insurance Trust, CUNA Mutual Life Insurance Company and
Massachusetts Financial Services Company dated September 23, 1999.
e. Participation Agreement between Oppenheimer Variable Account
Funds and the Company dated February 20, 1997. Incorporated
herein by reference to Form S-6 pre-effective amendment no. 1
(File No. 333-81499) filed with the Commission on October 6, 1999.
f. Participation Agreement between Templeton Variable Products
Series Fund and the Company dated March 31, 1997. Incorporated
herein by reference to Form S-6 pre-effective amendment no. 1
(File No. 333-81499) filed with the Commission on October 6, 1999.
10. Application. Incorporated herein by reference to Form S-6 initial
registration statement (File No. 333-81499) filed with the Commission
on June 24, 1999.
2. Opinion of Counsel. Incorporated herein by reference to Form S-6
pre-effective amendment no. 1 (File No. 333-81499) filed with the
Commission on October 6, 1999.
3. Not applicable
4. Not applicable
5. Not applicable
6. Not applicable
7. Issuance, Transfer and Redemption Procedures. Incorporated herein by
reference to Form S-6 pre-effective amendment no. 1 (File No. 333-81499)
filed with the Commission on October 6, 1999.
Powers of Attorney. Incorporated herein by reference to Form S-6 initial
registration statement (File No. 333-81499) filed with the Commission on June
24, 1999.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, 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 24th day of April, 2000.
CUNA Mutual Life Variable Account (Registrant)
By: CUNA Mutual Life Insurance Company
By: /s/Michael B. Kitchen
Michael B. Kitchen
President
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, 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 24th day of April, 2000.
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 04/24/00
- -------------------------------------- -------------------------------------- --------
Joseph N. Cugini, Director Kevin S. Thompson, Attorney-In-Fact
Rudolf J. Hanley *
- --------------------------------------
Rudolf J. Hanley, Director
Jerald R. Hinrichs *
- --------------------------------------
Jerald R. Hinrichs, Director
/s/Michael B. Kitchen 04/24/00
- -------------------------------------- --------
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
</TABLE>
*Pursuant to Powers of Attorney filed herewith
<PAGE>
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 04/24/00
Vice President - Accounting & Financial Systems
/s/Jeffrey D. Holley 04/06/00
Cheif Financial Officer
/s/Michael B. Kitchen 04/24/00
President and Chief Executive Officer
<PAGE>
EXHIBIT INDEX
PricewaterhouseCoopers LLP Consent
KPMG LLP Consent
Associate Actuary Opinion
Item 9.b. Amendment to Participation Agreement among T. Rowe Price International
Series, Inc., T. Rowe Price Investment Services, Inc., and CUNA Mutual Life
Insurance Company dated September 22, 1999.
Item 9.d. Third Amendment to Participation Agreement between MFS Variable
Insurance Trust, CUNA Mutual Life Insurance Company and Massachusetts
Financial Services Company dated September 23, 1999.
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-6 of our
reports dated February 11, 2000, relating to the financial statements and
financial highlights of CUNA Mutual Life Variable Account and March 31, 2000,
relating to the financial statements of CUNA Mutual Life Insurance Company,
which appear in such Registration Statement. We also consent to the reference to
us under the heading "Independent Accountants" in such Registration Statement.
PricewaterhouseCoopers LLP
Milwaukee, Wisconsin
April 18, 2000
<PAGE>
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 Accountants" 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 practice differ from generally accepted accounting principles.
KPMG LLP
Des Moines, Iowa
April 19, 2000
<PAGE>
CUNA MUTUAL LIFE INSURANCE COMPANY
April 19, 2000
Board of Directors
CUNA Mutual Life Insurance Company
2000 Heritage Way
Waverly, IA 50677
RE: CUNA MUTUAL LIFE INSURANCE COMPANY
CUNA MUTUAL LIFE VARIABLE ACCOUNT
FILE NOS. 333-81499/811-03915
Ladies and Gentlemen:
In my capacity as Associate Actuary to CUNA Mutual Life Insurance
Company (the "Company"), I have provided actuarial advice concerning and
participated in the design of the variable life insurance policies (the
"Policies"). I have also provided actuarial advice concerning the preparation of
post-effective amendment number one to the Form S-6 registration statement for
the Policies (File No. 333-81499) and CUNA Mutual Life Variable Account (the
"Account") in connection with the registration of securities in the form of such
Policies with the Securities and Exchange Commission under the Securities Act of
1933, as amended.
It is my professional opinion that the illustrations of policy values,
cash values, death benefits and accumulated premiums in Appendix A of the
prospectus included in the registration statement for the Policies, based on the
assumptions stated in the illustrations, are consistent with the provisions of
the Policies. Further, the rate structure of the Policies has not been designed
so as to make the relationship between premiums and benefits, as shown on the
illustrations, appear correspondingly more favorable to prospective purchasers
of the Policies ages 35 and 50 in the underwriting classes illustrated than to
prospective purchasers of the Policies at other ages and underwriting classes.
I hereby consent to the filing of this opinion as an exhibit to the
Form S-6 registration statement and to the reference to my name in the
prospectus under the caption "Actuarial Matters."
Sincerely,
/s/ Scott Allen
Scott Allen, FSA, MAAA
Associate Actuary
CUNA Mutual Life Insurance Company
<PAGE>
Exhibit 9.b.
AMENDMENT TO PARTICIPATION AGREEMENT
AMONG
T.ROWE PRICE INTERNATIONAL SERIES, INC.,
T.ROWE PRICE INVESTMENT SERVICES, INC.,
AND
CUNA MUTUAL LIFE INSURANCE COMPANY
WHEREAS, CUNA Mutual Life Insurance Company (formerly known as Century Life of
America), T. Rowe Price International Series, Inc., and T. Rowe Price Investment
Services, Inc. entered into a Participation Agreement on April 22, 1994
("Participation Agreement"); and
WHEREAS, the parties desire to amend the Participation Agreement by mutual
written agreement;
NOW THEREFORE, the parties do hereby agree:
1. "Century Life of America" is hereby replaced with "CUNA Mutual Life
Insurance Company."
2. Schedule A and any amendments thereto are hereby replaced with the attached
Schedule A dated September 22, 1999.
All terms and conditions of the Participation Agreement and Schedules thereto
shall continue in full force and affect except as amended herein.
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to the
Participation Agreement to be executed in its name and on its behalf by its duly
authorized representative.
COMPANY: CUNA MUTUAL LIFE INSURANCE COMPANY
By its authorized officer
By: /s/ Michael B. Kitchen
Name: Michael B. Kitchen
Title: President and Chief Executive Officer
Date: September 22, 1999
FUND: T.ROWE PRICE INTERNATIONAL SERIES, INC.
By its authorized officer
By: /s/ Henry H. Hopkins
Name: Henry H. Hopkins
Title: Vice President
Date: September 22, 1999
FUND: T.ROWE PRICE INVESTMENT SERVICES, INC.
By its authorized officer
By: /s/ Darrell N. Braman
Name: Darrell N. Braman
Title: Vice President
Date: September 22, 1999
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE A
Name of Separate Account and Contracts Funded by
Date Established by Board of Directors Separate Account Designated Portfolios
- -------------------------------------- ---------------- ---------------------
<S> <C> <C>
CUNA Mutual Life Variable Annuity Variable Annuity T.Rowe Price International Series, Inc.
Account (formerly known as Century 33-73738 - T. Rowe Price International Stock
Variable Annuity Account) Portfolio
Established December 14, 1993
CUNA Mutual Life Variable Account Variable Universal Life T.Rowe International Series, Inc.
(formerly known as Century Variable 33-19718 - T. Rowe Price International Stock Account)
Established August 16, 1983 Variable Universal Life II Portfolio
333-81499
CUNA Mutual Life Group Variable Annuity Group Variable Annuity T.Rowe International Series, Inc.
Account (formerly known as Century Group Offered Exclusively to - T. Rowe Price
International Stock Variable Annuity Account) Qualified Plans Not Portfolio
Established August 16, 1983 Registered in Reliance on
Qualified Plan Exemption
to Registration
Requirements
</TABLE>
<PAGE>
Exhibit 9.b.
THIRD AMENDMENT TO PARTICIPATION AGREEMENT
Pursuant to the Participation Agreement, made and entered into as of
the 29th day of April 1994, by and among MFS Variable Insurance Trust, CUNA
Mutual Life Insurance Company (formerly Century Life of America) and
Massachusetts Financial Services Company, the parties do hereby agree to an
amended Schedule A as attached hereto.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Amendment to the Participation Agreement to be executed in its name and on its
behalf by its duly authorized representative. The Amendment shall take effect of
September 23, 1999.
CUNA MUTUAL LIFE INSURANCE COMPANY
By its authorized officer,
By: /s/ Michael B. Kitchen
Title: President
MFS VARIABLE INSURANCE TRUST,
on behalf of its Portfolios
By its authorized officer,
By: /s/ Jeffrey L. Shames
Jeffrey L. Shames
Chairman
MASSACHUSETTS FINANCIAL SERVICES
COMPANY
By its authorized officer,
By: /s/ Jeffrey L. Shames
Jeffrey L. Shames
Chairman and Chief Executive Officer
<PAGE>
As of September 23, 1999
<TABLE>
<CAPTION>
SCHEDULE A
ACCOUNTS, POLICIES AND PORTFOLIOS
SUBJECT TO THE PARTICIPATION AGREEMENT
- ---------------------------------------------- -------------------------------------------- ---------------------------------------
Name of Separate
Account and Date Policies Funded Portfolios
Established by Board of By Separate Account Applicable to Policies
Directors
(Date Established)
- ---------------------------------------------- -------------------------------------------- ---------------------------------------
<S> <C> <C>
CUNA Mutual Life Variable Annuity Account Variable Annuity Global Governments Series
F/k/a Century Variable Annuity Account 33-73738 Emerging Growth Series
December 14, 1993
CUNA Mutual Life Variable Account
F/k/a Century Variable Account Variable Universal Life Global Governments Series
August 16, 1983 33-19718 Emerging Growth Series
Variable Universal Life II
333-81499
CUNA Mutual Life Group Variable Annuity
Account Group Variable Annuity Offered Global Governments Series
F/k/a Century Group Variable Annuity Account Exclusively to Qualified Plans Not Emerging Growth Series
August 16, 1983 Registered in Reliance on Qualified
Plan Exemption to Registration
Requirements
- --------------------------------------------- -------------------------------------------- -----------------------------------------
</TABLE>
