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[SBG LOGO]
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Security Benefit Life Insurance Company 700 SW Harrison St.
Security Benefit Group, Inc. Topeka, Kansas 66636-0001
Security Distributors, Inc. (913) 295-3000
Security Management Company
A LETTER FROM THE PRESIDENT
The key to Security Benefit's record-setting year was our ability to focus
on building value for our policyholders and customers by offering an array of
competitive and innovative products backed by service that we believe is
second-to-none.
We have grown into a diverse financial services organization with $5.7
billion in assets under management and statutory equity exceeding $200 million.
Security Benefit is a leader in the variable annuity and 403(b) market, and
is ranked among the top 25 variable annuity providers in the country, according
to Variable Annuity Research and Data Services (September 30, 1995).
SERVICE, STRENGTH and STABILITY are fundamental to our success, and
distinguish us from our competitors in the financial field.
SERVICE. We use the power of advanced technology to provide our associates
with the necessary tools to deliver fast, accurate, personalized service to our
customers.
STRENGTH. Security Benefit's financial strength is reflected in the
consistently strong ratings we receive from the financial analysts who study our
industry.
STABILITY. Investment strategies have risen and fallen. Products have come
into vogue and gone out just as fast. But we haven't varied from our original
purpose -- to care for and protect others.
In the coming year our focus will continue to be on equity-oriented
products -- variable annuities, mutual funds and variable life insurance. As we
go forward, we will continue to build financial strength and provide service
that exceeds the expectations of our customers.
HOWARD R. FRICKE
Howard R. Fricke
Chairman of the Board,
President and Chief Executive Officer
BOARD OF DIRECTORS
HOWARD R. FRICKE WILLIAM W. HANNA
Chairman of the Board, President President and Chief Operating
and Chief Executive Officer Officer
The Security Benefit Group Koch Industries
of Companies Wichita, Kansas
Topeka, Kansas
JOHN E. HAYES, JR.
THOMAS R. CLEVENGER Chairman of the Board, President
Wichita, Kansas and Chief Executive Officer
Western Resources, Inc.
SISTER LORETTO MARIE COLWELL Topeka, Kansas
President
St. Francis Hospital and LAIRD G. NOLLER
Medical Center President
Topeka, Kansas Noller Enterprises
Topeka, Kansas
JOHN C. DICUS
Chairman of the Board FRANK C. SABATINI
Capitol Federal Savings Chairman of the Board and
& Loan Association President
Topeka, Kansas Capital City Bank
Topeka, Kansas
MELANIE S. FANNIN
President ROBERT C. WHEELER
Kansas - Southwestern President
Bell Telephone Hill's Pet Nutrition, Inc.
Topeka, Kansas Topeka, Kansas
This report is submitted only for the general information of Varilife insurance
policyowners and is not authorized for distribution to the public.
Enclosed are December 1995 financial reports for the variable life insurance
separate account.
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FINANCIAL STATEMENTS
VARILIFE
YEARS ENDED DECEMBER 31, 1995 AND 1994
WITH REPORT OF INDEPENDENT AUDITORS
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VARILIFE
Financial Statements
Years ended December 31, 1995 and 1994
CONTENTS
Report of Independent Auditors............................................... 1
Audited Financial Statements
Balance Sheet................................................................ 2
Statement of Operations and Changes in Net Assets............................ 3
Notes to Financial Statements................................................ 4
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[E&Y Logo] One Kansas City Place Phone: 816 474 5200
1200 Main Street
Kansas City
Missouri 64105-2143
Report of Independent Auditors
The Contract Owners of VARILIFE and
The Board of Directors of Security
Benefit Life Insurance Company
We have audited the accompanying balance sheet of VARILIFE (the Company) as of
December 31, 1995, and the related statements of operations and changes in net
assets for each of the two years in the period 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of investments owned at December 31, 1995, by correspondence with
the custodian. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of VARILIFE at December 31, 1995,
and the results of its operations and changes in its net assets for each of the
two years in the period then ended in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
February 2, 1996
1
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VARILIFE
Balance Sheet
December 31, 1995
ASSETS
Investments:
SBL Fund:
Series A (Growth Series) - 3,619 shares at net asset
value of $21.03 per share (cost, $62,681) $ 76,105
Series B (Growth-Income Series) - 5,283 shares at net
asset value of $33.95 per share (cost, $114,605) 179,374
Series C (Money Market Series) - 3,799 shares at net
asset value of $12.34 per share (cost, $45,999) 46,875
Series D (Worldwide Equity Series) - 6,708 shares at
net asset value of $5.56 per share (cost, $28,621) 37,296
Series E (High Grade Income Series) - 1,501 shares at
net asset value of $12.86 per share (cost, $17,660) 19,303
========
Total assets $358,953
========
NET ASSETS
Net assets are represented by (NOTE 3):
Growth Series:
Accumulation units - 3,327 units at $22.87 per unit $ 76,105
Growth-Income Series:
Accumulation units - 7,513 units at $23.88 per unit 179,374
Money Market Series:
Accumulation units - 3,179 units at $14.74 per unit 46,875
Worldwide Equity Series:
Accumulation units - 3,537 units at $10.54 per unit 37,296
High Grade Income Series:
Accumulation units - 1,021 units at $18.90 per unit 19,303
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Total net assets $358,953
========
SEE ACCOMPANYING NOTES.
2
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VARILIFE
Statements of Operations and Changes in Net Assets
Years ended December 31, 1995 and 1994
<CAPTION>
1995 1994
---------------------------------------------- ----------------------------------------------
HIGH HIGH
GROWTH- MONEY WORLDWIDE GRADE GROWTH- MONEY WORLDWIDE GRADE
GROWTH INCOME MARKET EQUITY INCOME GROWTH INCOME MARKET EQUITY INCOME
SERIES SERIES SERIES SERIES SERIES SERIES SERIES SERIES SERIES SERIES
---------------------------------------------- ----------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Dividend distributions $ 512 $ 2,825 $ 2,275 $ 6 $ 1,082 $ 979 $ 3,445 $ 1,715 $ 34 $ 906
Expenses (NOTE 2):
Mortality and expense risk fee (703) (1,455) (480) (317) (163) (457) (1,339) (720) (321) (155)
Administrative fee (873) (2,290) (838) (610) (303) (672) (2,746) (1,092) (629) (292)
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Net investment income (loss) (1,064) (920) 957 (921) 616 (150) (640) (97) (916) 459
Capital gains distributions 2,162 - - 388 - 8,235 8,510 - - 810
Realized gain (loss) on investments 4,335 3,246 (1,676) (315) 17 74 2,754 (134) (334) 23
Unrealized appreciation
(depreciation) on investments 17,597 36,030 2,190 3,605 1,969 (10,140) (19,271) 1,332 1,260 (3,010)
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Net realized and unrealized gain
(loss) on investments 24,094 39,276 514 3,678 1,986 (1,831) (8,007) 1,198 926 (2,177)
---------------------------------------------- ----------------------------------------------
Net increase (decrease) in net
assets resulting from operations 23,030 38,356 1,471 2,757 2,602 (1,981) (8,647) 1,101 10 (1,718)
Net assets at beginning of year 49,866 144,825 80,567 34,539 16,701 51,847 153,950 79,466 34,529 18,419
VARILIFE deposits (NOTES 2 AND 3) 34,983 - - - - - 1,517 - - -
Terminations and withdrawals
(NOTES 2 AND 3) (31,774) (3,807) (35,163) - - - (1,995) - - -
---------------------------------------------- ----------------------------------------------
Net assets at end of year $76,105 $179,374 $46,875 $37,296 $19,303 $49,866 $144,825 $80,567 $34,539 $16,701
============================================== ==============================================
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SEE ACCOMPANYING NOTES.
3
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VARILIFE
Notes to Financial Statements
December 31, 1995 and 1994
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
VARILIFE (the Account) is a separate account of Security Benefit Life Insurance
Company (SBL). The Account is registered as a unit investment trust under the
Investment Company Act of 1940, as amended. All deposits received by the Account
have been invested in the SBL Fund, a mutual fund not otherwise available to the
public. As directed by the owners, amounts deposited are invested in shares of
Series A (Growth Series - emphasis on capital appreciation), Series B
(Growth-Income Series - emphasis on capital appreciation with secondary emphasis
on income), Series C (Money Market Series - emphasis on capital preservation
while generating interest income), Series D (Worldwide Equity Series emphasis on
long-term capital growth through investment in foreign and domestic common stock
and equivalents) and Series E (High Grade Income Series - emphasis on current
income with security of principal).
Under the terms of the investment advisory contracts, portfolio investments of
the underlying mutual fund are made by Security Management Company (SMC), a
wholly-owned subsidiary of Security Benefit Group, Inc., a wholly-owned
subsidiary of SBL. SMC has engaged Lexington Management Corporation to provide
sub-advisory services for the Worldwide Equity Series.
INVESTMENT VALUATION
Investments in mutual fund shares are carried in the balance sheet at market
value (net asset value of the underlying mutual fund). The first-in, first-out
cost method is used to determine gains and losses. Security transactions are
accounted for on the trade date.
The cost of investments purchased and proceeds from investments sold were as
follows:
1995 1994
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COST OF PROCEEDS COST OF PROCEEDS
PURCHASES FROM SALES PURCHASES FROM SALES
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Series A $37,657 $33,350 $ 9,213 $1,128
Series B 2,825 7,552 13,472 6,080
Series C 2,275 36,481 1,714 1,811
Series D 394 927 33 949
Series E 1,082 466 1,716 447
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VARILIFE
Notes to Financial Statements (continued)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
REINVESTMENT OF DIVIDENDS
Dividend and capital gains distributions paid by the mutual funds to the Account
are reinvested in additional shares of each respective Series. Dividend income
and capital gains distributions are recorded as income on the ex-dividend date.
FEDERAL INCOME TAXES
Under current law, no federal income taxes are payable with respect to the
Account.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
acounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
2. VARILIFE CONTRACT CHARGES
SBL deducts an administrative fee of $20 per month for the first 12 months and
$5 per month thereafter. A deduction for insurance costs also is made monthly
and is based on the insured's attained age, sex, rating class and policy value.
A surrender charge is assessed against full surrenders of a policy during the
first eight years of the policy, declining from 8% in the first year to 1% in
the eighth year. Mortality and expense risks assumed by SBL are compensated for
by a fee equivalent to an annual rate of 0.9% of the asset value of each
contract.
When applicable, an amount for state premium taxes is deducted as provided by
pertinent state law from each premium.
5
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VARILIFE
Notes to Financial Statements (continued)
3. SUMMARY OF UNIT TRANSACTIONS
UNITS
-------------------
1995 1994
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Growth Series:
VARILIFE deposits 1,941 -
Terminations and withdrawals 1,524 -
Expense charges 45 39
Growth-Income Series:
VARILIFE deposits - 80
Terminations and withdrawals 197 105
Expense charges 109 147
Money Market Series:
VARILIFE deposits - -
Terminations and withdrawals 2,469 -
Expense charges 58 79
Worldwide Equity Series:
Expense charges 62 64
High Grade Income Series:
Expense charges 18 18
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