As filed with the Securities and Exchange Commission on April 29, 1999
Registration No. 2-98410
811-4328
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Post-Effective Amendment No. 20 [ X ]
To
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF A UNIT INVESTMENT TRUST
REGISTERED ON FORM N-8B-2
PURSUANT TO THE INVESTMENT
COMPANY ACT OF 1940
FIRST INVESTORS LIFE LEVEL PREMIUM
VARIABLE LIFE INSURANCE
(SEPARATE ACCOUNT B)
(Name of Trust)
FIRST INVESTORS LIFE INSURANCE COMPANY
(Name of Depositor)
95 Wall Street, 22nd Floor
New York, New York 10005
(Complete address of depositor's principal
executive offices)
Richard H. Gaebler
President
First Investors Life Insurance Company
95 Wall Street, 22nd Floor
New York, New York 10005
(Name and complete address of agent for service)
Copies of all communications to:
Freedman, Levy, Kroll & Simonds
1050 Connecticut Avenue
Washington, D.C. 20036-5366
Attn: Gary O. Cohen, Esq.
<PAGE>
It is proposed that this filing will become effective on (check the appropriate
box):
/ / immediately upon filing pursuant to paragraph (b)
/X/ on April 30, 1999 pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(1)
/ / on (date) pursuant to paragraph (a)(1) of Rule 485
/ / this post-effective amendment designates a new effective date for
a previously filed post-effective amendment
Title and Amount of Securities Being Registered: An indefinite amount of units
of interest in First Investors Life Level Premium Variable Life Insurance
(Separate Account B) under variable life insurance policies.
Approximate Date of Proposed Public Offering: Continuous
<PAGE>
FIRST INVESTORS
LIFE LEVEL PREMIUM
VARIABLE LIFE INSURANCE
Reconciliation and Tie
----------------------
N-8B-2
Item No. Location
-------- --------
1-8 Organization and General Front Cover; Overview, The Policy,
Information Who We Are; Other Information,
Relevance of Financial Statements
9 Material Litigation Not Applicable
10 General Information Concerning Overview, Who We Are; The Policy in
the Securities of the Trust and Detail; Other Information
the Rights of Holders
11-12 Information Concerning the Overview, Who We Are; The Policy in
Securities Underlying the Detail; Other Information
Trust's Securities
13 Information Concerning Loads, Overview, The Charges and Expenses;
Fees, Charges and Expenses The Policy in Detail, Optional
Insurance Riders
14-24 Information Concerning the Overview, Who We Are; The Policy in
Operations of the Trust Detail, Allocation of Your Net
Premium to Investment Options;
Federal Income Tax Information;
Other Information
25-27 Organization and Operations of Overview, Who We Are; Our Officers
Depositor and Directors; Other Information
28 Officials and Affiliated Persons Overview, Who We Are; Our Officers
of Depositor and Directors
30 Controlling Persons Overview, Who We Are
<PAGE>
31-34 Compensation of Officers and Overview, Who We Are; Our Officers
Directors of Depositor and Directors; Other Information
35-38 Distribution of Securities Overview, Who We Are; Other
Information, Distribution of
Policies
39-43 Information Concerning Principal Overview, Who We Are; Other
Underwriter Information, Distribution of
Policies
44-45 Offering Price or Acquisition Overview, The Charges and Expenses,
Valuation of Securities of the Who We Are; Pertinent Provisions of
Trust the Prospectus of First Investors
Life Series Fund (File No. 2-98409)
incorporated herein by reference
46 Redemption Valuation of Overview, The Charges and Expenses,
Securities of the Trust Who We Are; Pertinent Provisions of
the Prospectus of First Investors
Life Series Fund (File No. 2-09409)
incorporated herein by reference
47 Purchase and Sale of Interests Overview, The Charges and Expenses,
in Underlying Securities from Who We Are; The Policy in Detail;
and to Security Holders Other Information
48-50 Information Concerning the Other Information
Trustee or Custodian
51 Information Concerning Insurance Overview; The Policy in Detail
of Holders of Securities
52 Policy of Registrant Overview; The Policy in Detail;
Other Information
53 Regulated Investment Company Federal Income Tax Information
54-59 Financial and Statistical Overview, The Charges and Expenses;
Information The Policy in Detail; Illustrations
of Death Benefits, Cash Values and
Accumulated Premiums; Other
Information, Relevance of Financial
Statements, Experts
<PAGE>
PART II
CONTENTS OF REGISTRATION STATEMENT
----------------------------------
(INFORMATION NOT REQUIRED TO BE FILED IN A PROSPECTUS)
Undertaking To File Reports
---------------------------
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned Registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
Undertaking Pursuant to Rule 484(b)(1)
--------------------------------------
under the Securities Act of 1933
--------------------------------
Article XIV of the By-Laws of First Investors Life Insurance Company
provides as follows:
"To the full extent authorized by law and by the Charter, the Corporation
shall and hereby does indemnify any person who shall at any time be made,
or threatened to be made, a party in any civil or criminal action or
proceeding by reason of the fact that he, his testator or his intestate is
or was a director or officer of the Corporation or served another
corporation in any capacity at the request of the Corporation, provided,
that the notice required by Section 62-a of the Insurance Law of the State
of New York, as now in effect or as amended from time to time, be filed
with the Superintendent of Insurance."
Reference is hereby made to the New York Business Corporation Law,
Sections 721 through 725.
The general effect of this Indemnification will be to indemnify any person
made, or threatened to be made, a party to an action by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that the
person, or that person's testator or intestate, is or was a director or officer
of the corporation, or is or was serving at the request of the corporation as a
director or officer of any other corporation of any type or kind, domestic or
foreign, of any partnership, joint venture, trust, employee benefit plan or
other enterprise, against amounts paid in settlement and reasonable expenses,
including attorney's fees, actually and necessarily incurred in connection with
the defense or settlement of such action, or in connection with an appeal
therein if such director or officer acted in good faith, for a purpose
reasonably believed by that person to be in, and not opposed to, the best
interests of the corporation and not otherwise knowingly unlawful.
A directors and officers liability policy in the amount of $3,000,000
covering First Investors Life's directors and officers has been issued by the
Great American Insurance Companies.
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
First Investors Life Level Premium Variable Life Insurance (Separate Account B)
pursuant to the foregoing provisions, or otherwise, the First Investors Life
Level Premium Variable Life Insurance (Separate Account B) has been advised that
in the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the First Investors Life Level Premium Variable Life
Insurance (Separate Account B) of expenses incurred or paid by a director,
officer or controlling person of the First Investors Life Level Premium Variable
Life Insurance (Separate Account B) 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 First Life Level Premium
Variable Life Insurance (Separate Account B) 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 policy as expressed in the Act and will be governed by the final
adjudication of such issue.
<PAGE>
Representation Regarding Reasonableness of
Aggregate Policy Fees and Charges
Pursuant to Section 26(a)(e)(2)(A) of the
Investment Company Act of 1940
First Investors Life represents that the fees and charges deducted under
the Policies described in this Registration Statement, in the aggregate, are
reasonable in relation to the services rendered, the expenses expected to be
incurred, and the risks assumed by First Investors Life under the Policies.
First Investors Life bases its representation on its assessment of all of the
facts and circumstances, including such relevant factors as: the nature and
extent of such services, expenses and risks; the need for First Investors Life
to earn a profit; and the regulatory standards for exemptive relief under the
Investment Company Act of 1940 under prior to October 1996, including the range
of industry practice. This representation applies to all Policies sold pursuant
to this Registration Statement, including those sold on terms specifically
described in the prospectus contained herein, or any variations therein, based
on supplements, endorsements, or riders to any Policies or prospectus, or
otherwise.
<PAGE>
This Registration Statement for First Investors Life Level Premium Variable Life
Insurance comprises the following papers and documents.
The facing page.
Reconciliation and Tie.
Prospectus, consisting of 30 pages. The undertaking to file reports.
Undertaking pursuant to Rule 484 (b)(1) under the Securities Act of 1933.
Representation Regarding Reasonableness of Fees and Charges.
The signatures.
Written consents of the following persons:
Tait, Weller & Baker. (Filed herewith.)
The following Exhibits:
1. (A - Form N-8B-2)
1. Resolution of Board of Directors Creating
Separate Account./1/
2. Not Applicable.
3(a). Underwriting Agreement./1/
3(b). Specimen Associate's Agreement./1/
3(c). Commission schedule./1/
4. Not Applicable.
5. Specimen Variable Life Insurance Policy./1/
6. Certificate of Incorporation, as amended, and
By-Laws, as amended, of First Investors Life
Insurance Company./1/
7. See (5) above.
8. Not Applicable.
9. Not Applicable.
10. Specimen form of application used with Variable
Life Insurance Policy provided in response to 5
above. /2/
2. Opinion of Counsel. /2/
Opinion of Actuary. /2/
3. Not Applicable.
4. Not Applicable.
5. Financial Data Schedule. (see Exhibit 27 below.)
6. Consent of Independent Public Accountants. (Filed herewith.)
7. Powers of Attorney. /1/
27. Financial Data Schedule. (Inapplicable, because, notwithstanding
Instruction 5 as to Exhibits, the Commission staff has advised that no
such Schedule is required.)
- ----------------
/1/ Previously filed in Post-Effective Amendment No. 17 to Registrant's
Registration Statement (File No.2-98410) filed on May 19, 1997.
/2/ Previously filed in Post-Effective Amendment No. 18 to Registrant's
Registration Statement (File No.2-98410) filed on April 28, 1998.
<PAGE>
THE INSURED SERIES PLAN
LEVEL PREMIUM VARIABLE LIFE INSURANCE POLICIES
ISSUED BY
FIRST INVESTORS LIFE INSURANCE COMPANY
95 Wall Street, New York, New York 10005/(212) 858-8200
PLEASE READ THIS PROSPECTUS AND KEEP IT FOR FUTURE REFERENCE. IT CONTAINS
IMPORTANT INFORMATION THAT YOU SHOULD KNOW BEFORE BUYING OR TAKING ACTION UNDER
A POLICY. THIS PROSPECTUS IS VALID ONLY WHEN ATTACHED TO THE CURRENT PROSPECTUS
FOR FIRST INVESTORS LIFE SERIES FUND.
THE SECURITIES AND EXCHANGE COMMISSION (SEC) HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is April 30, 1999
<PAGE>
OVERVIEW
THE POLICY
This Prospectus describes a Level Premium Variable Life Insurance Policy
(the "Policy") that is offered by First Investors Life Insurance Company
(referred to hereafter as "First Investors Life," "we," "us" or "our") through
our Separate Account B. The Policy provides you with life insurance coverage and
the opportunity to invest your net premiums (i.e., premiums less certain fees
and charges) in one or more investment options ("Subaccounts") of Separate
Account B. For marketing purposes, we call the Policy our Insured Series Plan.
You are required to pay premiums for only 12 years. After 12 years, you
never have to make another premium payment. The Policy stays in force for the
life of the insured unless you decide to surrender it. The premiums are level.
You decide how much you want to pay each year. Once this amount is set, you pay
the same amount each year. This amount can never be increased by us.
The Policy is "variable." This means that the amount of the insurance
coverage, the cash value and the loan value of your Policy may increase or
decrease depending on the investment performance of the Subaccount(s) that you
select. You bear the entire investment risk with respect to the Policy's cash
value, which could decline to zero. However, the death benefit will never be
less than the Guaranteed Insurance Amount (adjusted for loans and partial
surrenders), if you pay all your premiums.
We offer nine Subaccounts, from which you may select up to five. Each
Subaccount invests in shares of a corresponding "Fund" of First Investors Life
Series Fund ("Life Series Fund"), as shown below.
SEPARATE ACCOUNT CORRESPONDING
B SUBACCOUNT FUND
---------------- -------------
Blue Chip Subaccount Blue Chip Fund
Cash Management Subaccount Cash Management Fund
Discovery Subaccount Discovery Fund
Government Subaccount Government Fund
Growth Subaccount Growth Fund
High Yield Subaccount High Yield Fund
International Securities Subaccount International Securities Fund
Investment Grade Subaccount Investment Grade Fund
Utilities Income Subaccount Utilities Income Fund
For information on the investment objectives, investment strategies, and
investment risks of each Fund, see the Life Series Fund prospectus, which is
attached at the end of this prospectus.
You may also choose to add riders your Policy to increase the death benefit
and protect against the risk that you will not be able to make the premium
payments due to your own death or disability. These optional riders are
described in the section called "Optional Insurance Riders."
To help you understand how the values of a hypothetical Policy would change
over time, we have included some hypothetical illustrations based on certain
assumptions we have made. Because your circumstances may vary considerably from
our assumptions, your registered representative will also provide you with a
similar hypothetical illustration that is more tailored to your own
circumstances and wishes. You should keep in mind that replacing existing
insurance with the Policy may not benefit you because of, among other things,
the cost of the Policy during the first few years.
If you are not satisfied with your Policy, you may be able to cancel and
return it to us for a full refund of any premiums that you have paid. For more
details, see the section entitled "Cancellation Rights" in this prospectus.
2
<PAGE>
THE CHARGES AND EXPENSES
We describe below the fees and charges that you may be required to pay to
purchase and maintain the Policy. Immediately thereafter, we describe the fees
and expenses of each of the underlying mutual funds that are available as
investment options. We guarantee that once you have purchased your policy, we
will not increase the amount of your premium payments, the charges that we
deduct from your premiums, or the charges that we deduct from your Subaccount(s)
for mortality and expense risks.
Deductions from Premium Payments
--------------------------------
We deduct from your premiums for the Policy the fees and charges listed
below. We allocate the balance of your premium payments to the Subaccount(s)
that you have selected.
Annual Administrative Charge. We impose a $30 charge on your premium payment
each Policy year. The charge is for our annual administrative expenses,
including expenses for (1) premium billing and collection, (2) recordkeeping,
(3) processing death benefit claims, (4) cash surrenders, (5) Policy changes,
and (6) reporting and other communications to Policyowners.
Additional First Year Charge. We impose an additional charge in the first
Policy year at the rate of $5 per $1,000 of initial face amount of insurance.
The charge is for our administrative expenses in issuing the Policy, including
expenses for (1) medical examinations, (2) insurance underwriting costs, and (3)
processing applications and establishing permanent Policy records.
Sales Load. We impose a sales charge in issuing a Policy. The charge in any
year does not specifically correspond to our sales expenses for that year. The
charge will not exceed the following percentages of the annual premium:
YEARS MAXIMUM PERCENTAGES
----- -------------------
1..............................30%
2-4.............................10%
5 and later......................... 6%
Premiums For Optional Insurance Riders. We will deduct from your premiums
any premiums for any optional insurance riders that you have chosen.
State Premium Tax Charge. This charge varies from state to state. We expect
that the average state premium tax rate on premiums for the Policies will be 2%.
Risk Charge. We impose a maximum risk charge of 1.5% of the premium. The
charge insures that the death benefit will always at least equal the guaranteed
minimum death benefit.
Other Charges. We may also deduct two other charges from your premium: (1)
an extra premium if you are rated as having a high mortality risk, and (2) an
additional charge for premiums if you pay premiums on other than on an annual
basis.
We begin to accrue and deduct all of the above charges on a Policy's issue
date. For the fiscal year ended December 31, 1998, we received a total of
$5,461,000 for these charges.
Deductions from the Value of Your Policy
----------------------------------------
Mortality And Expense Risks Charges. We deduct from the value of your Policy
a daily charge for the mortality and expense risks that we assume. We compute
the charge at an effective annual rate of .50% of the value of Subaccount assets
attributable to your Policy.
3
<PAGE>
The mortality risk that we assume is that the person named as the insured
under the Policy will live for a shorter time than we have estimated. In that
case, we will not receive enough premium to compensate us for the death benefit
we must pay. The expense risk we assume is that the expenses we incur in issuing
and administering the Policies will be greater than we have estimated.
Cost Of Insurance Protection. We deduct a charge for the cost of insurance
protection. This amount is determined by the insurance rates applicable to your
Policy based upon your age, sex, and other factors as well as the net amount of
insurance that is at risk (see "Cost of Insurance Protection").
Charges For Income Taxes. We do not currently charge for our corporate
Federal income taxes that may be attributable to Separate Account B. However, we
may impose such a charge in the future. We may also impose charges for other
applicable taxes attributable to Separate Account B (see "FEDERAL INCOME TAX
INFORMATION").
Expenses Paid by the Funds
--------------------------
The Funds of Life Series Fund (singularly, "Fund," and collectively,
"Funds") bear the cost of investment advisory and subadvisory fees, brokerage
commissions, transfer taxes and other fees related to securities transactions.
While you will not be required to pay any such expenses directly, they are
indirectly passed on to you. They are reflected in the net asset value of each
Fund's shares.
The following table shows the fees and expenses for each Fund that is available
to you:
FUND ANNUAL EXPENSES
(AS A PERCENTAGE OF FUND AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
TOTAL FUND FEE WAIVERS
MANAGEMENT OTHER OPERATING AND/OR EXPENSE NET
FEES(1) EXPENSES(2) EXPENSES(3) ASSUMPTION(1),(2) EXPENSES(3)
<S> <C> <C> <C> <C> <C>
Blue Chip Fund 0.75% 0.07% 0.82% N/A N/A
Cash Management Fund 0.75 0.24 0.99 0.29% 0.70
Discovery Fund 0.75 0.08 0.83 N/A N/A
Government Fund 0.75 0.12 0.87 0.15 0.72
Growth Fund 0.75 0.07 0.82 N/A N/A
High Yield Fund 0.75 0.08 0.83 N/A N/A
International Securities Fund 0.75 0.40 1.15 N/A N/A
Investment Grade Fund 0.75 0.10 0.85 0.15 0.70
Utilities Income Fund 0.75 0.13 0.88 0.15 0.73
</TABLE>
(1) For the fiscal year ended December 31, 1998, the Adviser waived Management
Fees in excess of 0.60% for Cash Management Fund, in excess of 0.60% for
Government Fund, in excess of 0.60% for Investment Grade Fund, and in
excess of 0.60% for Utilities Income Fund. The Adviser has contractually
agreed with Life Series Fund to waive Management Fees in excess of 0.60%
for Cash Management Fund, in excess of 0.60% for Government Fund, in
excess of 0.60% for Investment Grade Fund, in excess of 0.60% for
Utilities Income Fund for a period of twelve months commencing on May 1,
1999.
(2) For the fiscal year ended December 31, 1998, the Adviser assumed certain
Other Expenses in excess of 0.10% for Cash Management, in excess of 0.10%
for Government Fund, and in excess of 0.10% for Investment Grade Fund. The
Adviser has contractually agreed with Life Series Fund to assume Other
Expenses in excess of 0.10% for Cash Management Fund for a period of
twelve months commencing on May 1, 1999.
(3) Each Fund, other than International Securities Fund, has an expense offset
arrangement that may reduce the Fund's custodian fee based on the amount
4
<PAGE>
of cash maintained by the Fund with its custodian. Any such fee reductions
are not reflected under Total Fund Operating Expenses or Net Expenses.
WHO WE ARE
First Investors Life
--------------------
First Investors Life, 95 Wall Street, New York, New York 10005 , is a stock
life insurance company incorporated under the laws of the State of New York in
1962. We write life insurance, annuities, and accident and health insurance. We
assume all of the insurance risks under the Policy, and our assets support the
Policy's benefits. At December 31, 1998, we had over $1.017 billion of assets
and over $3.310 billion of life insurance in force. (See First Investors Life's
financial statements under "Financial Statements.")
First Investors Consolidated Corporation ("FICC") owns all of the
outstanding stock of First Investors Life, First Investors Corporation ("FIC"),
the underwriter of the policies sold by First Investors Life, and Administrative
Data Management Corp., the transfer agent for Life Series Fund ("Transfer
Agent"). FICC also owns all of the voting common stock of First Investors
Management Company, Inc. ("FIMCO"), the adviser of the Life Series Fund. Mr.
Glenn O. Head controls FICC and, therefore, controls First Investors Life and
the other companies which are owned by FICC.
We segregate the assets of Separate Account B from our other assets. The
assets fall into two categories: (1) assets equal to our reserves and other
liabilities under the Policies and (2) additional assets derived from expenses
that we charge to Separate Account B. The assets equal to our Policy reserves
and liabilities support the Policy. We cannot use these assets to satisfy any of
our other liabilities. The assets derived from our charges do not support the
Policy, and we can transfer these assets in cash to our General Account. Before
making a transfer, we will consider any possible adverse impact that the
transfer may have on Separate Account B.
Separate Account B
------------------
We established Separate Account B on June 4, 1985 under the provisions of
the New York Insurance Law. Separate Account B is a separate investment account.
Separate Account B has registered with the SEC as a unit investment trust under
the 1940 Act.
We allocate assets to Separate Account B to support the benefits under the
Policy. The assets are in turn invested by each Subaccount of Separate Account B
into a corresponding Fund at net asset value. Each Subaccount reinvests any
distributions it receives from a Fund by purchasing additional shares of the
distributing Fund at net asset value. Accordingly, we do not expect to pay you
any capital distributions from the Policies. We value shares of the Funds that
the Subaccounts hold at their net asset values.
Life Series Fund
----------------
Life Series Fund is a diversified open-end management investment company
registered under the 1940 Act. Life Series Fund consists of 11 separate Funds,
nine of which are available to Policyowners of Separate Account B. Target
Maturity 2007 Fund and Target Maturity 2010 Fund are the two Funds of Life
Series Fund that are not available to Policyowners of Separate Account B. The
Life Series Fund offers its shares only through the purchase of a Policy or a
variable annuity contract. It does not offer its shares directly to the general
public.
FIMCO is the investment adviser of each Fund. The Adviser is a New York
Corporation located at 95 Wall Street, New York, New York 10005. FIMCO and Life
Series Fund have retained Wellington Management Company, 75 State Street,
Boston, Massachusetts 02109 to serve as subadviser ("Subadviser") of the
International Securities Fund and the Growth Fund. See the Life Series Fund
Prospectus for more information about the Adviser and Subadviser.
5
<PAGE>
RISK AND REWARD CONSIDERATIONS
The Policy offers you not only insurance protection but also the opportunity
to accumulate assets on a tax deferred basis by investing in the underlying
investment options. However, there are several important factors that you should
consider before making a decision to purchase a Policy.
1. The Policy involves a long-term commitment on your part. Because most
of the fees and charges are paid during the early years, you will generally lose
money if you fail to make all premium payments required during the 12 year
period. This is illustrated in the hypotheticals that appear at the end of this
prospectus. Therefore, you should have the intention and financial ability to
complete the program.
2. With investment opportunity comes investment risk. Each Subaccount will
fluctuate in value on a daily basis. The investment objectives, primary
investment strategies, and primary risks of the underlying Funds are described
in the attached Life Series prospectus.
3. If you decide to take policy loans, you should be aware that they can
have adverse consequences. Among other things, they reduce the death benefit and
cash value of your Policy; they may undermine the growth potential of the cash
value of your Policy; and they may result in taxable distributions to you if
they exceed the cash value of a Policy as a result of a decline in the market
value of the underlying investments or for any other reason (see the discussion
on Policy Loans).
4. A surrender of your Policy prior to maturity may have tax implications.
You should carefully review the section on "FEDERAL INCOME TAX INFORMATION."
5. The ability of FIL and its affiliates to process policy-related requests,
and render other services could be adversely affected if the computers or other
systems on which they rely are not properly programmed to operate after January
1, 2000. (See "OTHER INFORMATION--Year 2000" for more information.) Additional
information on the risks of the Year 2000 may be found in the Life Series Fund
prospectus, which is attached at the end of this prospectus.
THE POLICY IN DETAIL
The following discussion summarizes important provisions of the Policy
offered by this Prospectus. The discussion generally assumes that premiums have
been duly paid and there have been no Policy loans. The death benefit and cash
value are affected if premiums are not duly paid or if a Policy loan is made.
YOUR PREMIUMS
The Amount of Your Premiums
---------------------------
Subject to our $600 minimum annual premium requirement (which does not
include additional premiums for any riders that you may select other than Waiver
of Premium), you decide how much you wish to pay in premiums. Once you have
decided how much you wish to pay, the premium remains level for all 12 years
that you are required to make premium payments. We can never increase the
amount. We allocate assets to our General Account to accumulate as a reserve for
the contingency that the insured will die when the Guaranteed Insurance Amount
exceeds the death benefit payable without such guarantee. In setting premium
rates, we took into consideration actuarial estimates of projected death and
surrender benefit payments, lapses, expenses, investment returns, and a
contribution to our surplus.
6
<PAGE>
The Frequency Of Payment
- ------------------------
You pay premiums under the Policy for only 12 years. You may choose to pay
these premiums on an annual, semi-annual, quarterly or monthly due date measured
from the date of issue of the Policy. Premium payments are due on or before the
due dates at our Home Office. If you pay early, we will place your premium
payment in our General Account and, on the day that it is due, we will allocate
the premium to the Subaccount(s) that you selected.
You will pay the lowest premium by paying annually. When you pay premiums on
other than an annual basis, the aggregate premium amounts for a Policy year are
higher, reflecting charges for loss of interest and additional billing and
collection expenses. The following table illustrates these premium amounts. We
deduct the additional charge from these premiums when we receive them.
PREMIUMS ON INSTALLMENT BASIS
(AS A PERCENTAGE OF AN ANNUAL PREMIUM)
AGGREGATE PREMIUMS
FREQUENCY EACH PREMIUM FOR POLICY YEAR
--------- ------------ ---------------
Annual................... 100.00% 100.00%
Semiannual............... 51.00 102.00
Quarterly................ 26.00 104.00
Pre-authorized Monthly... 8.83 105.96
Under the pre-authorized monthly plan ("Lifeline"), your bank automatically
makes an electronic funds transfer to us from your bank account to pay your
premiums.
Automatic Premium Loans to Pay Premiums
---------------------------------------
Under the Automatic Premium Loan provision, you pay any premium not paid
before the end of the grace period (see definition in "Other Provisions") by an
automatic loan against the Policy. The Automatic Premium Loan provision is
available only if:
. you elect the Automatic Premium Loan provision in your application for
the Policy or in a written request that we receive at our Home Office at
any time when no premium is in default, and
. the resulting Policy loan and loan interest to the next premium due date
do not exceed the maximum loan value of your Policy (see "Policy
Loans").
You may revoke the Automatic Premium Loan Provision at any time by written
request that we receive at our Home Office.
ALLOCATION OF YOUR NET PREMIUMS TO INVESTMENT OPTIONS
When you purchase a Policy, you select the allocation of the net premium
(premium less deductions) (see "The Charges And Expenses--Deductions from
Premium Payments") to not more than five of the Subaccounts of Separate Account
B. You must allocate at least 10% of the net premium to each Subaccount you
select. The actual allocation of net premium occurs on the Policy's issue date
and at the beginning of each Policy year after that.
We offer nine Subaccounts, from which you may select up to five. Each
Subaccount in turn invests in the corresponding Fund of Life Series Fund. For
information on the investment objectives, investment strategies, and investment
risks of the Funds, see the Life Series Fund prospectus which is attached at the
end of this prospectus.
7
<PAGE>
While your premium will never increase, the net amount which is invested in
the subaccounts you select will increase over time, as charges and expenses
decline. Thus, as time goes by, more of your premium will be invested. As an
example, based on the Policies illustrated on page 25 through 27, we would
allocate to the selected Subaccount(s) the following amounts for each Policy
year:
MALE ISSUE MALE ISSUE MALE ISSUE
AGE 10 AGE 25 AGE 40
BEGINNING $600 ANNUAL $1,200 ANNUAL $1,800 ANNUAL
OF POLICY PREMIUM FOR PREMIUM FOR PREMIUM FOR
YEAR STANDARD RISK STANDARD RISK STANDARD RISK
- --------- -------------- ------------- -------------
1....................... $170.81 $ 508.46 $ 927.23
2-4..................... 489.00 1,008.00 1,527.00
5 and later............. 513.00 1,056.00 1,599.00
THE DEATH BENEFIT
The death benefit is the amount we pay to your named beneficiary at the
death of the person whom you name as the insured. It is the sum of the
Guaranteed Insurance Amount (face amount of the Policy) plus, if positive, a
Variable Insurance Amount that is based upon the performance of the Subaccounts
that you have selected. We increase the death benefit to reflect (1) any
insurance on the life of the insured that you may have added by rider and (2)
any premium you have paid that applies to a period of time after the Insured's
death. We reduce the death benefit to reflect (1) any Policy loan and loan
interest and (2) any unpaid premium that applies to a period before the
insured's death.
Generally, we pay the death benefit within seven days after we receive all
claim requirements at our Home Office located at 95 Wall Street, New York, NY
10005. We pay interest on death benefit proceeds from the date of death until we
pay the death benefit. We pay this interest at the same annual rate that we pay
on death benefit proceeds you leave on deposit with us under a Settlement
Option. We may pay interest at a higher rate if the law requires.
The Guaranteed Insurance Amount
-------------------------------
We guarantee that the death benefit on your policy will never be less than
the Policy's face amount, which is the Guaranteed Insurance Amount. The Policy's
face amount is constant throughout the life of the Policy. During the first
Policy year, the death benefit is equal to the Guaranteed Insurance Amount.
Thereafter, we determine the death benefit on each Policy anniversary by adding
the Variable Insurance Amount, if positive, to the Guaranteed Insurance Amount.
The death benefit then remains level during the following Policy year. The death
benefit payable, therefore, depends on the Policy year in which the Insured
dies.
The Variable Insurance Amount
-----------------------------
The Variable Insurance Amount is based upon the investment results of the
Subaccounts that you have selected. During the first Policy year, the Variable
Insurance Amount is zero. On the first Policy anniversary, and on each
anniversary thereafter, we determine your Variable Insurance Amount by comparing
the Actual Rate of Return (the gross rate of return less all fees and charges)
on your Subaccounts with an assumed rate of return of 4%, which we call the
"Base Rate of Return."
Your Variable Insurance Amount does not change if the Actual Rate of Return
on all of your Subaccounts is exactly equal to the Base Rate of Return. Your
Variable Insurance Amount increases if the Actual Rate of Return is greater than
the Base Rate of Return. The Variable Insurance Amount decreases if the Actual
Rate of Return is less than the Base Rate of Return. The difference between
these rates of return, if any, is called the Differential Rate of Return. We set
the Variable Insurance Amount on each Policy anniversary and do not change it
until the next Policy anniversary.
8
<PAGE>
The amount by which your Variable Insurance Amount will increase or decrease
during any policy year is determined by dividing the Differential Investment
Return (the Differential Rate of Return times the Investment Base) for a policy
year by the applicable net single premium rate that is specified in your Policy.
Your policy includes a table of the applicable net single premium rates per
$1.00 from ages 0 to 99. The net single premium increases as the Insured grows
older, meaning that the insured will receive less Variable Insurance per dollar
of Differential Investment Return as the insured grows older. The net single
premium does not depend upon the risk classification of a Policy or any changes
in the insured's health after issue of a Policy. The net single premium will be
lower for a Policy that we issue to a female than for a Policy that we issue to
a male of the same age.
The Variable Insurance Amount is calculated on a cumulative basis. This
means that the amount reflects the accumulation of increases and decreases from
past Policy years. The cumulative amount may be positive or negative, depending
on the investment performance, while the Policy is in force, of the Subaccounts
that you have selected. If the Variable Insurance Amount is negative, the death
benefit is the Guaranteed Insurance Amount. In other words, the death benefit is
never less than the Guaranteed Insurance Amount.
The following example illustrates how the Variable Insurance Amount is
calculated. For this example, we use the Policy illustration on page 26 for a
male age 25, and assume an 8% hypothetical gross annual investment return
(equivalent to an Actual Rate of Return of approximately .064399). The
calculations are for policy years 6 and 12:
CALCULATION OF CHANGE IN
VARIABLE INSURANCE
AMOUNT AT END OF POLICY YEAR
6 12
----------------------------
(1) Cash Value at End of Prior Year..... $4,972.00 $14,529.00
(2) Net Premium......................... 1,056.00 1,056.00
(3) Investment Base at Beginning of
Current Policy Year: (1)+(2)........ 6,028.00 15,585.00
(4) Differential Rate of Return
(.064399 - .04)..................... .024399 .024399
(5) Differential Investment Return:
(3)x(4)............................. $147.08 $380.25
(6) Net Single Premium at
End of Current Year................. 0.22416 0.27338
(7) Change in Variable Insurance
Amount (to nearest dollar):
(5) divided by (6).................. $ 656 $ 1,391
If the hypothetical gross annual investment return in the year illustrated
had been 0% (equivalent to an Actual Rate of Return of approximately -1.445%),
the results in the calculation above would have been as follows: the death
benefit would have decreased by $1,464, and the death benefit for the end of
Policy year 6 would have been $51,934.
YOUR CASH VALUE
Determining Your Cash Value
---------------------------
The cash value you have in your Policy will vary daily depending on the
investment experience of the Subaccounts you have selected. (See "Valuation of
Assets.") The cash value on any day within the policy year equals the cash value
as of the end of the prior Policy year, plus the premiums that you have paid
since the Policy's last anniversary, adjusted to reflect the Actual Rates of
Return of the Subaccounts you have selected, less the cost of insurance
protection.
9
<PAGE>
Assuming no partial surrenders or Policy Loans have been taken, the
following example illustrates how the cash value of a Policy at the end of any
year is calculated. For this example, we use the Policy illustration for a male
issue age 25 on Page 26, and we assume an 8% hypothetical gross annual
investment return (equivalent to an Actual Rate of Return of approximately
6.4399%). The "Investment Base" is the value of your investments on all
Subaccounts you have selected. In this case, the cash value we show for the end
of Policy year 5 increases to the amount we show for the end of Policy year 6
for the Policy, as follows:
(1) Cash Value at End of Prior Year.................................. $4,972
(2) Net Premium Paid by You.......................................... 1,056
(3) Investment Base at Beginning of Current Policy Year 6: (1)+(2)... 6,028
(4) Actual Rate of Return............................................ .064399
(5) Investment Return: (3)x(4)....................................... 388
(6) Benefit Base at End of Policy Year 6: (3)+(5).................... 6,416
(7) Cost of Insurance Protection During Policy Year 6................ (84)
(8) Cash Value at End of Policy Year 6: (6)-(7)...................... 6,332
We do not guarantee that you will have any cash value in your Policy. The
Policy offers the possibility of increased cash value resulting from good
investment performance. However, there is no assurance that any increase will
occur. It is also possible, due to poor investment performance, for the cash
value to decline to the point of having no value or, in fact, a negative value.
In that case, we would credit subsequent net premium payments and investment
returns against the negative cash value. You bear all the investment risk.
Deduction of Cost of Insurance Protection from Cash Value
---------------------------------------------------------
Your cash value is reduced by an annual charge for the cost of insurance
protection. We issue variable life insurance policies to (1) persons with
standard mortality risks and (2) persons with higher mortality risks, as our
underwriting rules permit. We charge a higher gross premium for the person with
the higher mortality risk.
We use the 1980 Commissioners' Standard Ordinary Mortality Table to compute
the cost of insurance protection for each Policy, with one exception. For
mortality rates for extended term insurance, we use the Commissioners' 1980
Extended Term Table.
In all cases, we base the cost of insurance protection on the net amount of
insurance at risk (the Policy's face amount, plus the Variable Insurance Amount,
minus the cash value) and the person's sex and attained age. The amount that we
deduct each year is different, because the probability of death generally
increases as a person's age increases. The net amount of insurance at risk may
decrease or increase each year depending on the investment experience of the
Subaccount(s) that you have selected.
Accessing Your Cash Value
-------------------------
FULL OR PARTIAL SURRENDERS. You may surrender the Policy for its cash
value at any time while the Insured is living. The amount payable will be the
cash value that we next compute after we receive the surrender request at our
Home Office. Surrender will be effective on the date that we receive both the
Policy and a written request in a form acceptable to us.
On any Policy anniversary, you may also make a partial surrender of the
Policy by reducing the premium amount. We permit a partial surrender only if you
(1) have no outstanding policy loan and (2) have paid the new premium due on the
Policy anniversary.
10
<PAGE>
We must receive all requirements for a partial surrender at our Home Office
on or before the Policy anniversary. The partial surrender will be effective on
the Policy anniversary. The amounts of the Guaranteed Insurance Amount (face
amount of the Policy), death benefit, and cash value for the reduced Policy will
be the same as they would have been had you paid the reduced premium from
inception. We will pay the portion of the cash value of the original Policy that
exceeds the cash value of the reduced Policy to you as a partial surrender. We
will allocate the cash value of the reduced Policy among the Subaccounts in the
same proportion as the allocation of the cash value of the original Policy.
We will usually pay the surrender value within seven days. However, we may
delay payment for the following reasons:
. a recent payment that you made by check has not yet cleared the bank,
. we are not able to determine the amount of the payment because the New
York Stock Exchange is closed for trading or the Commission determines
that a state of emergency exists, or
. for such other periods as the Commission may by order permit for the
protection of security holders.
We will pay interest if we delay payment of the surrender value beyond seven
days. Under Federal tax laws, we may deduct withholding taxes from the surrender
value.
POLICY LOANS. You may borrow up to 75% of the cash value during the first
three Policy years, or 90% of the cash value after the first three Policy years,
if you assign your Policy to us as sole security. We charge interest daily at an
effective annual rate of 6% compounded on each Policy anniversary. In general,
we send the loan amount within seven days of receipt of the request. We will not
permit a new loan unless it is at least $100, or unless you use it to pay
premiums. You may repay all or a portion of any loan and accrued interest while
the Insured is living and the Policy is in force.
When you take out a loan, we transfer a portion of the cash value equal to
the loan from the Subaccount(s) that you have selected to our General Account.
We charge the loan to each Subaccount in the proportion which the value of each
Subaccount bears to the cash value of the Policy as of the date of the loan. A
Policy loan does not affect the amount of the premiums due. A Policy loan does,
however, reduce the death benefit and cash value by the amount of the loan. A
Policy loan may also permanently affect the death benefit above the Guaranteed
Insurance Amount and the cash value, whether or not you repay the loan in whole
or in part. This occurs because we will not credit Net Investment Return that
the Subaccount(s) earn to the amount that we maintain in the General Account
during the period that the loan is outstanding. Instead, we credit the amount in
the General Account at the assumed interest rate of 4%, in accordance with the
tabular cash value calculations that we have filed with the state insurance
departments.
A Policy loan will have a negative impact on the growth of the cash value
during periods when the actual rates of return of the Subaccounts you have
selected exceed the assumed rate of 4%. Recall that the death benefit is made up
of two parts: the Guaranteed Insurance Amount and, if positive, the Variable
Insurance Amount (see "The Guaranteed Insurance Amount" and "The Variable
Insurance Amount"). The cash value and the Variable Insurance Amount, if any,
depend on the Actual Rate of Return of the Subaccount(s). Thus, during periods
of favorable investment return (an Actual Rate of Return greater than 4%), an
outstanding Policy loan results in lower investment return than would have
otherwise resulted in the absence of any indebtedness.
For example, use the Policy for a male issue age 25 illustrated on Page 26,
and assume a hypothetical 8% gross annual investment return and that you made a
$3,000 Policy loan at the end of Policy year 9. For the end of Policy year 10,
the death benefit and cash value would be $57,612 and $12,612, respectively. The
differences between these amounts and the $57,898 death benefit and $12,685 cash
11
<PAGE>
value that appear on Page 26 for Policy year 10 result because the portion of
the cash value equal to the indebtedness does not reflect the Subaccount(s)'
Actual Rate of Return of approximately 6.4399%.
Conversely, outstanding indebtedness will diminish the adverse effect on
cash value during a period of unfavorable investment return (an Actual Rate of
Return less than 4%). This is because the portion of the cash value that we
transfer from the Subaccount(s) to the General Account will grow at the assumed
rate of 4% even if Actual Rates of Return are below 4%. Thus, a Policy loan will
tend to protect the cash value and Variable Insurance Amount from decreasing if
the Actual Rate of Return is less than 4%.
If you do not pay loan interest when it is due, we increase your loan by the
amount of any unpaid interest, and we transfer an equivalent amount of cash
value from the Subaccount(s) to the General Account. We credit loan repayments
to each Subaccount in proportion to your allocation to each Subaccount as of the
date of repayment.
We subtract the amount of any outstanding loan plus interest from any death
benefit or any surrender value that we pay. If your outstanding loan with
accrued interest ever equals or exceeds the cash value, we will mail notice of
such event to you and any assignee at the assignee's last known address. The
Policy terminates 31 days after we mail such notice. The Policy does not
terminate if you make a repayment within that 31-day period.
Generally, on a Policy's termination or surrender, you pay income tax on the
following:
. the surrender value, plus
. any outstanding Policy loan plus interest, if applicable, minus
. the total premiums that you paid on the Policy.
Consult with your representative or tax adviser before taking Policy loans.
Transferring Your Cash Value Among Investment Options
-----------------------------------------------------
Twice each Policy year, you may transfer part or all of your cash value from
each Subaccount that you have selected to any other Subaccount or Subaccounts.
You may make these transfers only if
. you allocate the cash value to no more than five of the Subaccounts, and
. the allocation to any one Subaccount is not less than 10% of the cash
value.
SETTLEMENT OPTIONS
You or your named beneficiary may receive a single sum payment of Policy
proceeds on the death of the Insured or surrender of the Policy. Alternately,
you or your beneficiary may elect to apply all or a portion of the proceeds
under any one of the fixed benefit settlement options that the Policy provides.
Tax consequences may vary depending on the settlement option that the recipient
chooses. The options are as follows:
PROCEEDS LEFT AT INTEREST - Proceeds left on deposit with us to accumulate,
with interest payable at a rate of 2 1/2% per year, which may be increased by
additional interest.
PAYMENT OF A DESIGNATED AMOUNT - Payments in installments until proceeds
applied under the option and interest on unpaid balance at a rate of 2 1/2% per
year and any additional interest are exhausted.
12
<PAGE>
PAYMENT FOR A DESIGNATED NUMBER OF YEARS - Payments in installments for up
to 25 years, including interest at a rate of 2 1/2% per year. Payments may
increase by additional interest, which we would pay at the end of each
installment year.
LIFE INCOME, GUARANTEED PERIOD - Payments guaranteed for 10 or 20 years, as
you elect, and for life thereafter. During the guaranteed period of 10 or 20
years, the payments may be increased by additional interest, which we would pay
at the end of each installment year.
LIFE INCOME, GUARANTEED RETURN - The sum of the payments made and any
payments due at the death of the person on whom the payments are based, never to
be less than the proceeds applied.
LIFE INCOME ONLY - Payments made only while the person on whom the payments
are based is alive.
OPTIONAL INSURANCE RIDERS
The following optional provisions may be included in a Policy, in States
where available, subject to the payment of an additional premium, certain age
and insurance underwriting requirements, and the restrictions and limitations
that apply to the Policy, as described above.
Accidental Death Benefit
------------------------
You may elect to obtain an Accidental Death Benefit rider if the Insured's
age is 0 to 60. The rider provides for an additional fixed amount of death
benefit in the event the Insured dies from accidental bodily injury while the
Policy is in force and before the Policy anniversary when the Insured attains
age 70. The premium is $1.75 per $1,000 of benefit and is payable for 12 years.
The amount of the benefit is equal to the face amount of the Policy, but cannot
exceed an amount equal to $200,000 minus the sum of the Insured's Accidental
Death Benefit coverage in all companies.
12 Year Level Term Rider
------------------------
You may elect to obtain a 12 Year Level Term Insurance rider where the
Insured is age 18 to 58 for an amount equal to (1) the Policy face amount or (2)
two times the Policy face amount. The rider is convertible, without evidence of
insurability, to a new Policy or other permanent plan of insurance. The amount
of the insurance under the new Policy may be any amount up to the face amount of
the rider. The conversion may occur at any time during the 12 years of rider
coverage, but not later than the Policy anniversary when the Insured reaches age
65.
Waiver Of Premium
-----------------
You can choose to obtain a Waiver of Premium rider where the Insured is age
15 to 55. Under the rider, the Company will waive all premiums falling due after
the date of commencement of the disability and for as long as the disability
continues. Disability, for this purpose, means the Insured's total disability
(1) commencing before the Policy anniversary when the Insured reaches age 60 and
(2) continuing for six months.
Payor Benefit
-------------
You can also choose to obtain a Payor Benefit rider where the Insured is age
0 to 14 and you are age 18 to 55. It provides insurance on the life of the
person who is responsible for paying the premiums. If you die or become disabled
before reaching age 60 and before the Insured is age 21, the Company waives all
premiums that become due before the Insured's age 21.
13
<PAGE>
OTHER PROVISIONS
Age And Sex
-----------
If you have misstated the age or sex of the Insured, the benefits available
under the Policy are those that the premiums paid would have purchased for the
correct age and sex.
Assignment
----------
You may transfer ownership of your Policy from yourself to someone else.
However, the assignment is not binding on us, unless it is in writing and filed
with us at our Home Office. We assume no responsibility for the validity or
sufficiency of any assignment. Unless otherwise provided in the assignment, the
interest of any revocable beneficiary is subordinate to the interest of any
assignee, regardless of when you made the assignment. The assignee receives any
sum payable to the extent of his or her interest.
Beneficiary
-----------
This is the person you designate in the Policy to receive death benefits
upon the death of the Insured. You may change this designation, during the
Insured's lifetime, by filing a written request with our Home Office in a form
acceptable to us.
Cancellation Rights
-------------------
You have a limited right to cancel and return the Policy to us, or our
representative through whom you bought the Policy. You must submit a written
request for cancellation. You may examine and return the Policy within ten days
after you receive the Policy or notice of right of withdrawal. You may also
return the Policy within 45 days after completion of Part I of the application
for the Policy. In either case, you obtain a full refund of the premiums that
you paid.
Default And Options On Lapse
----------------------------
A premium is in default if you do not pay it on or before its due date. The
insurance continues in force during the 31-day grace period (see "Grace Period"
below). However, if the Insured dies during the grace period, we deduct from the
death benefit the portion of the premium applicable to the period from the
premium due date to the end of the Policy month in which death occurs.
We apply the Policy's cash value minus any loan and interest to purchase
continued insurance, if you do not surrender a Policy within 60 days after the
date of default. You may choose either reduced paid-up whole life insurance or
extended term insurance for the continued insurance. Under the Policy, you
automatically have the extended term insurance if you make no choice. However,
that option is available only in standard risk cases. If we rated the Policy for
extra mortality risks, the paid-up insurance is the automatic option. Both
options are for fixed life insurance, and neither option requires the further
payment of premiums.
The reduced paid-up whole life insurance option provides a fixed and level
amount of paid-up whole life insurance. The amount of coverage is the amount
that the surrender value purchases on the date the option becomes effective. The
extended term insurance option provides a fixed and level amount of term
insurance equal to the death benefit (minus any indebtedness) as of the date the
option becomes effective. The insurance coverage under this option continues for
as long a period as the surrender value on such date purchases.
For example, use the Policy for a male issue age 25 illustrated on Page 26
and assume the 0% and 8% hypothetical gross annual investment returns. If an
option became effective at the end of Policy year 5, the fixed insurance
coverage under these Policies would be as follows:
14
<PAGE>
0% 8%
-------- --------
Cash Value........................... $ 3,992 $ 4,972
Reduced Paid-up Insurance............ 18,406 22,925
for life for life
Extended Term Insurance.............. 51,908 53,398
for 25 years for 28 years
You may surrender a Policy continued under either option for its cash value
while the Insured is living. You may make a loan under the reduced paid-up whole
life insurance option, but not under the extended term insurance option.
Exchange Privilege
------------------
The exchange privilege allows you to exchange the Policy for a permanent
fixed life insurance policy on the Insured's life. The exchange privilege is
available:
. within the first 24 months after the issue Policy's date, if you have
duly paid all premiums, or
. if any Fund changes its investment adviser or makes a material change in
its investment objectives or restrictions.
You do not need to provide evidence of insurability to exercise this
privilege. The new policy has a level face amount equal to the face amount of
the Policy. It also has the same benefit riders, issue dates, and risk
classification for the Insured as the Policy does. We base premiums for the new
policy on the premium rates for the new policy that were in effect on the Policy
date. You may elect either a continuous-premium policy or a limited-payment
policy for your exchanged policy.
In some cases, we may adjust the cash on exchange. The adjustment equals the
Policy's surrender value minus the new policy's tabular cash value. If the
result is positive, we pay that amount to you. If the result is negative, you
pay that amount to us. We will determine the amount of a cash adjustment as of
the date we receive the Policy and written request at our Home Office.
If we do not issue a Policy for any reason, we refund to the applicant the
amount of the premium without interest.
Grace Period
------------
With the exception of the first premium, we allow a Grace Period of 31 days
for payment of each premium after it is due. The Policy continues in force
during the Grace Period unless you surrender it.
Incontestability
----------------
Except for nonpayment of premiums, we do not contest the validity of the
Policy and its riders after it has been in force during the lifetime of the
Insured for two years from the Date of Issue.
Payment and Deferment
---------------------
We will usually pay the death benefit, surrender value, or loan proceeds
within seven days after we receive all documents required for such payments.
However, we may delay payment if (1) a recent payment by check has not yet
cleared the bank, (2) we cannot determine the amount because the New York Stock
Exchange is closed for trading, or (3) the Commission determines that a state of
emergency exists.
15
<PAGE>
Under a Policy continued as paid-up or extended term insurance, we may defer
the payment of the surrender value or loan proceeds for up to six months. If we
postpone the payment more than 30 days, we will pay interest at a rate of not
less than 3% per year on the Surrender Value. We will pay the interest from the
date of surrender to the date we make payment.
Payment of Dividends
--------------------
The Policies do not provide for dividend payments. Therefore, they are
"non-participating" in the earnings of First Investors Life.
Policy Years and Anniversaries
------------------------------
We measure Policy years and anniversaries from the Date of Issue of the
Policy which will generally be the date on which we approve the application. The
Date of Issue may be backdated on your request to save age. However, the Date of
Issue cannot be earlier than either (1) the date you sign the application or (2)
a date 15 days before the date on which we approve the application. Each Policy
year will commence on the anniversary of the Date of Issue.
Reinstatement
-------------
You may reinstate a Policy that you did not surrender for its cash value
within five years from the date of default, in accordance with the Policy. To
reinstate, you must present evidence of insurability acceptable to us, and you
must pay to us the greater of:
(1) (a) all premiums from the date of default with interest to the date of
reinstatement, plus (b) any Policy debt (plus interest to the date of
reinstatement) in effect when you continued the Policy as paid up insurance
or extended term insurance; or
(2) 110% of the increase in cash value resulting from reinstatement.
To reinstate, you must also pay us any Policy debt that arose after the
continuation of the Policy as paid up insurance. We calculate interest on any
such debt at the rate of 6% per year compounded annually.
Suicide
-------
If the Insured commits suicide within two years from the Policy's date of
issue, our liability under the Policy is limited to all premiums paid less any
indebtedness.
Valuation Of Assets
-------------------
We determine the value of the assets of each Subaccount as of the close of
business on each business day. We value shares of the underlying Fund at the net
asset value per share as determined by the Fund. The Fund determines the net
asset value of a Fund's share as described in Life Series Fund's Prospectus.
FEDERAL INCOME TAX INFORMATION
We base this discussion on current federal income tax law and
interpretations. It assumes that the policyowner is a natural person who is a
U.S. citizen and U.S. resident. The tax effect on a corporate taxpayers,
non-U.S. citizens, and non-U.S. residents may be different. The law and
interpretations could change, possibly retroactively. The discussion is general
in nature. We do not intend it as tax advice, for which you should consult a
qualified tax adviser.
We believe that the Policy qualifies as a life insurance contract for
federal income tax purposes because the Policy meets the definition of life
16
<PAGE>
insurance in Section 7702(a) of the Internal Revenue Code of 1986, as amended
(the "Code") and the investments of the Subaccounts satisfy the investment
diversification requirements of Section 817(h) of the Code. Consequently:
. the death benefit will not be subject to federal income tax;
. you will generally not be taxed on the growth of the cash value of the
Policy, if any, that is attributable to the investments in the
underlying investment portfolios (this is known as the "inside
build-up"), unless or until there is a full or partial surrender of the
Policy; and
. transfers among the investment subaccounts will not be subject to
federal income tax, unless or until there is a full or partial surrender
of the Policy.
Qualification as a life insurance contract for Federal income tax purposes
depends, in part, upon the satisfaction by the Subaccounts of Separate Account B
of certain investment diversification requirements in Section 817(h) of the
Code. We expect that the Adviser will continue to manage the assets of the Funds
in a manner that complies with these diversification requirements. A Policy that
invests in a Fund that fails to meet diversification requirements will not
receive tax treatment as a life insurance contract for the period of such
diversification failure, and any subsequent period.
The Treasury Department has stated that it may issue guidelines that limit a
Policyowner's control of investments underlying a variable life insurance
policy. If a Policy failed to meet those guidelines, you would be taxed on the
Policy's current income. The Treasury Department has said informally that those
guidelines may limit the number of investment funds and the frequency of
transfers among those funds. The issuance of such guidelines may require us to
limit your right to control the investment. The guidelines may apply only
prospectively, although they could apply retroactively if they do not reflect a
new Treasury Department position.
We do not believe that any Policy will be a "modified endowment contract" at
issuance, within the meaning of Section 7702A of the Code. A modified endowment
contract is a life insurance policy under which the total premiums paid, at any
time during the first seven years of the policy, exceed the premiums that would
have been paid by that time under a similar fixed-benefit life insurance policy
designed to provide for paid-up future benefits after the payment of seven equal
annual premiums. This is called the "seven-pay" test.
Whenever there is a "material change" under a Policy, the Policy is
generally subject to a new seven-pay test during the next seven years to
determine whether it is a modified endowment contract. A material change for
these purposes could occur because of a change in death benefit, and because of
certain other changes.
If your Policy's benefits are reduced during its first seven years (or
within seven years after issuance or a material change), we will redetermine the
seven-pay test based on the reduced level of benefits and apply the new test to
all prior premium payments. Such a reduction in benefits could include a
decrease in face amount, a partial surrender, or a termination of additional
benefits under a rider. If the premiums that you previously paid are at any time
greater than the recalculated limit under the seven-pay test, we will treat the
Policy as a modified endowment contract from that time forward.
A Policy that you receive in exchange for a modified endowment contract will
also be a modified endowment contract.
Any distribution from a Policy that is a modified endowment contract will be
taxed on an "income-first" basis. A distribution, for this purpose, includes a
loan or surrender. "Income first" means that the distribution is taxed to the
extent that your cash value exceeds your basis in the Policy (premiums paid less
previous distributions that were not taxable). Premiums paid, for this purpose,
include loans that have been taxable as income because of the Policy's modified
17
<PAGE>
endowment contract status. An additional 10% tax will also be imposed on any
amount so taxed, subject to certain exceptions for distributions:
. before you reach age 59-1/2,
. in case of disability as defined in the Code, or
. received as part of a series of substantially equal periodic payments
for the life (or life expectancy) of the taxpayer or the joint lives (or
joint life expectancies) of the taxpayer and his or her beneficiary.
All modified endowment contracts that we (or our affiliates) issue to you
during any calendar year generally will be treated as one Policy under the
modified endowment contract rules. You should consult your tax adviser if you
have questions regarding the possible impact of the modified endowment contract
rules on your Policy.
If a Policy is not a modified endowment contract, Policy loans will be
treated as indebtedness, and no part of such loans will be subject to current
federal income tax. In addition, the interest on such loans generally will not
be deductible. If you surrender your Policy while a loan is outstanding, the
amount of the loan will be treated as a partial surrender. You should be aware
that if the cash value of your Policy falls below the aggregate amount of loans
outstanding, as the result of the fluctuation in the value of the underlying
portfolios or otherwise, the entire Policy may terminate. In that case, all
loans will be taxable to the extent they exceed premiums paid.
If you make a partial surrender after the first 15 Policy years, the
distribution will not be subject to federal income tax except to the extent that
it exceeds your basis in the Policy. During the first 15 Policy years, however,
the proceeds from a partial withdrawal could be subject to federal income tax,
under a complex formula, to the extent that your cash value exceeds your basis.
Upon surrender of a Policy, taxation of the Surrender Value depends on the
Payment Option that you have selected. If payment is in one sum, you are taxed
on the income in the Policy at the time payment is made. If payment is in
installments, you may be taxed:
. on all or a portion of each installment until the income in the Policy
has been paid,
. only after all your basis in the Policy has been paid, or
. on a portion of each payment.
You should consult your tax adviser if you have questions about the taxation
of a Policy surrender.
Under the Code, we must generally withhold income tax from the taxable
portion of the distribution that we pay upon surrender of a Policy. We will not
withhold, if you so request in writing, before the payment date. Failure to
withhold or withholding of an insufficient amount may subject you to taxation.
In addition, insufficient withholding and insufficient estimated tax payments
may subject you to penalties.
The Life Series Fund sells its shares to more than one separate account
funding variable annuity contracts or variable life insurance policies.
Consequently, violation of the Federal tax laws by another separate account
investing in Life Series Fund could cause the Policies funded through Separate
Account B to lose their tax-deferred status. Such a result might cause us to
take remedial action.
We are taxed as a "life insurance company" under Subchapter L of the Code.
Under the applicable provisions of the Code, we include our variable life
insurance operations in our Federal income tax return. Currently, we do not make
18
<PAGE>
any charge against the Subaccount(s) for our Federal income taxes attributable
to the Subaccount(s). However, we may make such charges in the future. Any such
charges against a Subaccount would reduce its Net Investment Return.
Under current laws, we may incur state and local taxes (in addition to
premium taxes) in several states. At present, these taxes are not significant.
If we make any tax charges in the future, we will accumulate them daily and
transfer them from the Subaccount(s) to our General Account. We will retain any
investment earnings on tax charges accumulated in the Subaccount(s).
OUR OFFICERS AND DIRECTORS
NAME OFFICE PRINCIPAL OCCUPATION FOR LAST FIVE YEARS
- ---- ------ ----------------------------------------
Dori Allen Associate Associate Counsel, First Investors Life since
Counsel May 1998; Staff Attorney since February 1997;
and Staff Supervisor, Toxic Tort Unit, Claims
Attorney Administration Corporation, New York, prior
thereto.
Jay G. Baris Director Partner, Kramer, Levin, Naftalis & Frankel,
LLP, New York, Attorneys; Secretary and
Counsel, First Financial Savings Bank, S.L.A.,
New Jersey.
Glenn T. Dallas Director Retired since April 1996; Division President
and Senior Vice President, ADT Security
Systems, Parsippany, New Jersey, prior
thereto.
William H. First Vice First Vice President and Chief Actuary, First
Drinkwater President Investors Life.
and Chief
Actuary
Lawrence M. Senior Senior Vice President and Comptroller, First
Falcon Vice Investors Life.
President
and
Comptroller
Richard H. President President, First Investors Life.
Gaebler and
Director
George V. Ganter Director Vice President, First Investors Asset
Management Company, Inc., Portfolio Manager,
FIMCO.
Robert J. Grosso Director Director of Compliance, FIC since April 1997;
Assistant Counsel since January 1995; Business
Consultant from August 1994 to January 1995;
Assistant Vice President and Assistant General
Counsel, Alliance Fund Distributors, Inc. from
September 1993 to August 1994.
Glenn O. Head Chairman Chairman and Director, FICC, FIMCO and FIC.
and
Director
19
<PAGE>
OUR OFFICERS AND DIRECTORS
NAME OFFICE PRINCIPAL OCCUPATION FOR LAST FIVE YEARS
- ---- ------ ----------------------------------------
Kathryn S. Head Director President and Director, FICC and FIMCO; Vice
President and Director, FIC; Chairman,
President and Director, First Financial
Savings Bank, S.L.A.
Scott Hodes Director Partner, Ross & Hardies, Chicago, Illinois,
Attorneys.
Carol Lerner Secretary Assistant Secretary, FIC; Secretary, FIMCO and
Brown FICC.
William M. Vice Chief Financial Officer, FIC since December
Lipkus President 1997, FICC since June 1997; Vice President,
and Chief First Investors Life since May 1996; Chief
Financial Financial Officer since May 1998; Chief
Officer Accounting Officer since June 1992.
Jackson Ream Director Retired since January 1999; Senior Vice
President, NationsBank, NA , Dallas, Texas
prior hereto.
Nelson Schaenen Director Partner, Weiss, Peck & Greer, New York,
Jr. Investment Managers.
Martin A. Smith Vice Vice President, First Investors Life since
President February 1998; Vice President, The United
States Life Insurance Company, New York, prior
thereto.
Ada M. Suchow Vice Vice President, First Investors Life.
President
John T. Sullivan Director Director, FIMCO and FIC; Of Counsel to
Hawkins, Delafield & Wood, New York,
Attorneys.
Gulf Insurance Company has issued a fidelity bond for $5,000,000 covering
our officers and employees. Great American Insurance Companies has issued a
directors and officers liability policy for $3,000,000 covering our directors
and officers.
In addition to Separate Account B, First Investors Life also maintains First
Investors Life Variable Annuity Fund A, First Investors Life Variable Annuity
Fund C and First Investors Life Variable Annuity Fund D. We offer variable
annuity contracts supported by Variable Annuity Fund A through its own
prospectus and by Variable Annuity Funds C and D through a combined prospectus.
OTHER INFORMATION
VOTING RIGHTS
Because the Life Series Fund is not required to have annual shareholder
meetings, policyowners generally will not have an occasion to vote on matters
that pertain to the Life Series Fund. In certain circumstances, the Fund may be
required to hold a shareholders meeting or may choose to hold one voluntarily.
For example, a Fund may not change fundamental investment objectives or
investment policies without the approval of a majority vote of that Fund's
20
<PAGE>
shareholders in accordance with the 1940 Act. Thus, if the Fund sought to change
a fundamental investment objective or policy, policyowners would have an
opportunity to provide voting instructions for shares of a Fund held by a
Subaccount in which their Policy invests.
We will vote the shares of any Fund held in a corresponding Subaccount or
directly, at any Fund shareholders meeting as follows:
. shares attributable to Policyowners for which we have received
instructions, in accordance with the instructions;
. shares attributable to Policyowners for which we have not received
instructions, in the same proportion that we voted shares held in the
Subaccount for which we received instructions; and
. shares not attributable to Policyowners, in the same proportion that we
have voted shares held in the Subaccount attributable to Policyowners
for which we have received instructions.
We will vote Fund shares that we hold directly in the same proportion that
we vote shares held in any corresponding Subaccounts that are attributable to
Policyowners and for which we receive instructions. However, we will vote our
own shares as we deem appropriate where there are no shares held in any
Subaccount. We will present all the shares of any Fund that we hold through a
Subaccount or directly at any Fund shareholders meeting for purposes of
determining a quorum.
We will determine the number of Fund shares held in a corresponding
Subaccount that is attributable to each Policyowner by dividing the value of the
Subaccount by the net asset value of one Fund share. We will determine the
number of votes that a Policyowner has the right to cast as of the record date
established by Life Series Fund.
We will solicit instructions by written communication before the date of the
meeting at which votes will be cast. We will send meeting and other materials
relating to the Fund to each Policyowner having a voting interest in a
Subaccount.
The voting rights that we describe in this Prospectus are created under
applicable laws. If the laws eliminate the necessity to submit such matters for
approval by persons having voting rights in separate accounts of insurance
companies or restrict such voting rights, we reserve the right to proceed in
accordance with any such changed laws or regulations. We specifically reserve
the right to vote shares of any Fund in our own right, to the extent permitted
by law.
RESERVATION OF RIGHTS
We also reserve the following rights, subject to compliance with applicable
law, including any required approval of Policyowners:
. to invest the assets of Separate Account B in the shares of any
investment company or series thereof or any investment permitted by law;
. to transfer assets from Separate Account B to another separate account,
with appropriate adjustments to avoid odd lots and fractions;
. to operate Separate Account B as a "management company" under the 1940
Act, or in any other form permitted by law (we or our affiliate would
serve as investment adviser);
. to deregister Separate Account B under the 1940 Act; and
. to operate Separate Account B under the general supervision of a
committee any or all of whose members may be interested persons (as
defined in the 1940 Act) of First Investors Life or an affiliate, or to
discharge the committee.
21
<PAGE>
DISTRIBUTION OF POLICIES
First Investors Life and Separate Account B have entered into an
Underwriting Agreement with their affiliate, FIC, 95 Wall Street, New York, New
York 10005 to sell the policies through FIC's agents. For the fiscal years ended
December 31, 1996, 1997, and 1998, FIC received fees of $5,207,230, $4,487,918
and $5,121,393, respectively, in connection with the distribution of Policies in
a continuous offering. First Investors Life has reserved the right in the
Underwriting Agreement to sell the Policies directly. Insurance agents licensed
to sell variable life insurance policies sell the Policies. These agents are
registered representatives of the Underwriter or of the broker-dealers who have
sales agreements with the Underwriter. We pay these agents a commission of
28.55% of the first year premium payment and 1% of the premium payments for
years 2 through 12.
We offer the Policies for sale in Alabama, Arizona, Arkansas, California,
Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Iowa,
Illinois, Indiana, Kentucky, Louisiana, Massachusetts, Maryland, Michigan,
Minnesota, Missouri, Mississippi, North Carolina, Nebraska, New Jersey, New
Mexico, New York, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South
Carolina, Tennessee, Texas, Utah, Virginia, Washington, West Virginia, Wisconsin
and Wyoming.
CUSTODIAN
Subject to applicable laws and regulations, we are the custodian of the
securities of the Subaccounts. We maintain the records and accounts of Separate
Account B.
REPORTS
At least once each Policy year, we mail a report to the Policyowner within
31 days after the Policy anniversary. We mail the report to the last address
known to us. The report shows (1) the death benefit, (2) the cash value, (3) the
policy debt on the anniversary and (4) any loan interest for the prior year. The
report also shows your allocation among the Subaccounts on that anniversary. We
will not send a report if the Policy is continued as reduced paid-up or extended
term insurance.
STATE REGULATION
We are subject to the laws of the State of New York governing insurance
companies and to regulations of the New York State Insurance Department. We file
an annual statement in a prescribed form with the Department of Insurance each
year covering our operations for the preceding year and our financial condition
as of the end of such year.
Our books and accounts are subject to review by the Insurance Department at
any time. The Department conducts a full examination of our operations
periodically. Such regulation does not, however, involve any supervision of
management or investment practices or policies except to determine compliance
with the requirements of the New York Insurance Law. In addition, we are subject
to regulation under the insurance laws of other jurisdictions in which we may
operate.
EXPERTS
Tait, Weller & Baker, independent certified public accountants have examined
the financial statements included in this Prospectus. We include the financial
statements in reliance upon the authority of said firm as experts in accounting
and auditing.
22
<PAGE>
RELEVANCE OF FINANCIAL STATEMENTS
You should consider our financial statements, which appear in this
Prospectus, only as bearing on our ability to meet our obligations to
Policyowners under the Policies. You should not consider our financial
statements as bearing on the investment performance of the Subaccount(s). Only
the investment results of the Subaccount(s) affect the values of Policyowner
interests under the Policies.
YEAR 2000
On and after January 1, 2000, computer date-related errors could adversely
affect Separate Account B, as they could other separate accounts. These errors
could occur in the computer and other information processing systems used by
First Investors Life, the underlying Funds, the Adviser, Subadviser, Transfer
Agent and other service providers. Typically, these systems use a two-digit
number to represent the year for any date. Consequently, computer systems could
incorrectly identify "00" as 1900, rather than 2000, and make related mistakes
when performing operations. First Investors Life, the Funds, the Adviser,
Subadviser, and Transfer Agent are taking steps that they believe are reasonable
to address the Year 2000 problem for computer and other systems used by them.
They are also obtaining assurances from other service providers that the service
providers are taking comparable steps. However, there can be no assurance that
these steps will avoid any adverse impact on Separate Account B. Nor can
Separate Account B estimate the extent of any adverse impact.
ILLUSTRATIONS OF DEATH BENEFITS,
CASH VALUES AND ACCUMULATED PREMIUMS
The tables on Pages 25 to 30 illustrate the way the Policy operates. They
show how the death benefit and the cash value may vary over an extended period
of years. The tables are based on assumed annual premiums of $600 for a 10 year
old male, $1,200 for a 25 year old male, and $1,800 for a 40 year old male. The
tables assume that premiums are paid in one lump sum promptly at the beginning
of each year. The tables assume a standard risk classification. There are two
sets of illustrations for each age. The first set of tables assumes that each
Subaccount will experience hypothetical rates of investment return (I.E.,
investment income and capital gains and losses, realized or unrealized)
equivalent to constant hypothetical gross annual investment returns of 0%, 4%
and 8%. The second set of tables assumes constant hypothetical gross annual
investment returns of 0%, 6% and 12%.
The death benefit and cash value for the Policy would be different from those
shown:
. if you spread the payment of premiums over the year, or
. if the gross annual rates of return applicable to the Policy average 0%,
4%, 6%, 8% and 12% over a period of years, but nevertheless fluctuate
above or below that average for individual Policy years.
The cash values and death benefits shown in the illustrations assume the
deduction of all fees and charges. When we take all fees and charges into
account, the hypothetical gross annual investment returns of 0%, 4%, 6%, 8%, and
12% correspond to Actual Rates of Return of approximately -1.445%, 2.4975%,
4.4687%, 6.4399%, and 10.3823%, respectively.
For purposes of the illustration, we have assumed:
. a daily charge to the Subaccount(s) for mortality and expense risks
equivalent to an annual charge of 0.50% at the beginning of each year,
. a premium tax of 2.00% on each premium payment,
. an investment advisory fee of 0.75% of each Fund's average daily net
assets, and
23
<PAGE>
. other expenses of 0.20% of each Fund's average daily net assets.
The assumed other expenses of 0.20% exceed the average of the actual other
expenses of all of the Funds combined. Certain of the Funds had actual expenses
greater than 0.20%. As of December 31, 1998, International Securities Fund had
other expenses of 0.40%. Absent reimbursement of a portion of the other expenses
by the Adviser, Cash Management Fund would have had other expenses of 0.24%.
There is no assurance that the Adviser will continue to reimburse other expenses
for Cash Management Fund, or any other Fund, in the future. Without these
reimbursements, the corresponding Actual Rates of Return would be lower.
The tables also reflect that we currently make no charge to the
Subaccount(s) for our corporate Federal income taxes. However, we may make such
charges in the future. If we do, a Policy would need higher hypothetical gross
annual investment returns greater than 0%, 4%, 6%, 8% and 12% to produce, on an
after tax basis, the results shown.
We have included a column captioned "Total Premiums Paid Plus Interest at
5%" in each table to show you the amount that would accumulate if the annual
premium (gross amount) that you allocated to the Subaccounts earned interest,
after taxes, at 5% compounded annually.
----------------------------
We will furnish, upon request, a comparable illustration using the proposed
Insured's age and the face amount or premium amount that you request. The
illustration will assume that you pay premiums on an annual basis and that the
proposed Insured is a standard risk. In addition, we will include a comparable
illustration, reflecting the Insured's risk classification if other than
standard, at the delivery of the Policy, if you make a purchase.
24
<PAGE>
<TABLE>
<CAPTION>
MALE ISSUE AGE 10
$600 ANNUAL PREMIUM FOR STANDARD RISK
$39,638 FACE AMOUNT (GUARANTEED INSURANCE AMOUNT)
TOTAL DEATH BENEFIT CASH VALUES
END OF PREMIUMS ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
POLICY PREMIUM PAID PLUS ANNUAL RATE OF RETURN OF ANNUAL RATE OF RETURN OF
YEAR DUE INTEREST AT 5% 0% 4% 8% 0% 4% 8%
- -------- --------- -------------- ----------------------------------- -----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 $600 $ 630 $39,638 $39,638 $ 39,673 $ 138 $ 145 $ 152
2 600 1,291 39,638 39,638 39,798 586 617 650
3 600 1,986 39,638 39,638 40,014 1,023 1,098 1,176
4 600 2,715 39,638 39,638 40,321 1,450 1,585 1,730
5 600 3,481 39,638 39,638 40,720 1,889 2,104 2,339
6 600 4,285 39,638 39,638 41,213 2,316 2,629 2,981
7 600 5,129 39,638 39,638 41,799 2,734 3,163 3,658
8 600 6,016 39,638 39,638 42,479 3,143 3,707 4,374
9 600 6,947 39,638 39,638 43,253 3,547 4,263 5,132
10 600 7,924 39,638 39,638 44,120 3,946 4,832 5,936
15 0 11,608 39,638 39,638 49,496 4,473 6,382 9,133
20 0 14,816 39,638 39,638 55,625 4,010 6,971 12,064
25 0 18,909 39,638 39,638 62,507 3,610 7,646 15,998
30 0 24,133 39,638 39,638 70,244 3,244 8,369 21,173
Attained Age
65 0 81,723 39,638 39,638 126,226 1,685 11,721 76,980
</TABLE>
The hypothetical gross annual rates of return shown in the illustration and
elsewhere in the prospectus are illustrative only and are not representations of
past or future rates of return. The cash values and death benefits shown in the
illustration assume the deduction of all fees and charges and that no Policy
Loans have been taken. Actual rates may be higher or lower than hypothetical
rates and will depend on a number of factors, including the investment
allocations made by a policy owner, the frequency of premium payments chosen and
the investment experience of the Policy's Subaccounts. The death benefits and
cash values would be different from those shown if the average of the actual
gross annual rates of return over a period of years equaled those shown, but the
rates varied from year to year. They would also be different if any Policy Loan
were made during the period. No representations can be made that those
hypothetical rates of return can be achieved for any one year or sustained over
any period of time.
25
<PAGE>
<TABLE>
<CAPTION>
MALE ISSUE AGE 25
$1,200 ANNUAL PREMIUM FOR STANDARD RISK
$51,908 FACE AMOUNT (GUARANTEED INSURANCE AMOUNT)
TOTAL DEATH BENEFIT CASH VALUES
END OF PREMIUMS ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
POLICY PREMIUM PAID PLUS ANNUAL RATE OF RETURN OF ANNUAL RATE OF RETURN OF
YEAR DUE INTEREST AT 5% 0% 4% 8% 0% 4% 8%
- -------- --------- -------------- ----------------------------------- ------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 $1,200 $ 1,260 $51,908 $51,908 $ 51,973 $ 409 $ 429 $ 449
2 1,200 2,583 51,908 51,908 52,154 1,308 1,385 1,462
3 1,200 3,972 51,908 51,908 52,451 2,197 2,366 2,543
4 1,200 5,431 51,908 51,908 52,864 3,076 3,375 3,695
5 1,200 6,962 51,908 51,908 53,398 3,992 4,459 4,972
6 1,200 8,570 51,908 51,908 54,054 4,897 5,572 6,332
7 1,200 10,259 51,908 51,908 54,832 5,791 6,713 7,778
8 1,200 12,032 51,908 51,908 55,732 6,673 7,882 9,315
9 1,200 13,893 51,908 51,908 56,754 7,544 9,080 10,949
10 1,200 15,848 51,908 51,908 57,898 8,404 10,308 12,685
15 0 23,217 51,908 51,908 64,950 9,524 13,635 19,577
20 0 29,631 51,908 51,908 72,999 8,504 14,836 25,762
25 0 37,818 51,908 51,908 82,058 7,539 16,033 33,680
30 0 48,266 51,908 51,908 92,259 6,628 17,185 43,687
Attained Age
65 0 78,620 51,908 51,908 116,712 4,947 19,096 71,178
</TABLE>
The hypothetical gross annual rates of return shown in the illustration and
elsewhere in the prospectus are illustrative only and are not representations of
past or future rates of return. The cash values and death benefits shown in the
illustration assume the deduction of all fees and charges and that no Policy
Loans have been taken. Actual rates may be higher or lower than hypothetical
rates and will depend on a number of factors, including the investment
allocations made by a policy owner, the frequency of premium payments chosen and
the investment experience of the Policy's Subaccounts. The death benefits and
cash values would be different from those shown if the average of the actual
gross annual rates of return over a period of years equaled those shown, but the
rates varied from year to year. They would also be different if any Policy Loan
were made during the period. No representations can be made that those
hypothetical rates of return can be achieved for any one year or sustained over
any period of time.
26
<PAGE>
<TABLE>
<CAPTION>
MALE ISSUE AGE 40
$1,800 ANNUAL PREMIUM FOR STANDARD RISK
$47,954 FACE AMOUNT (GUARANTEED INSURANCE AMOUNT)
TOTAL DEATH BENEFIT CASH VALUES
END OF PREMIUMS ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
POLICY PREMIUM PAID PLUS ANNUAL RATE OF RETURN OF ANNUAL RATE OF RETURN OF
YEAR DUE INTEREST AT 5% 0% 4% 8% 0% 4% 8%
- -------- --------- -------------- ----------------------------------- -----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 $1,800 $ 1,890 $47,954 $47,954 $48,027 $ 762 $ 799 $ 835
2 1,800 3,874 47,954 47,954 48,206 2,097 2,225 2,355
3 1,800 5,958 47,954 47,954 48,492 3,406 3,678 3,964
4 1,800 8,146 47,954 47,954 48,883 4,689 5,161 5,667
5 1,800 10,443 47,954 47,954 49,386 6,020 6,747 7,549
6 1,800 12,856 47,954 47,954 49,999 7,328 8,367 9,543
7 1,800 15,388 47,954 47,954 50,724 8,615 10,023 11,656
8 1,800 18,048 47,954 47,954 51,560 9,884 11,717 13,898
9 1,800 20,840 47,954 47,954 52,509 11,137 13,450 16,276
10 1,800 23,772 47,954 47,954 53,571 12,375 15,225 18,798
15 0 34,825 47,954 47,954 60,126 13,764 19,765 28,471
20 0 44,447 47,954 47,954 67,618 11,963 20,956 36,545
25 0 56,727 47,954 47,954 76,062 10,274 21,963 46,387
30 0 72,399 47,954 47,954 85,589 8,695 22,699 58,095
Attained Age
65 0 56,727 47,954 47,954 76,062 10,274 21,963 46,387
</TABLE>
The hypothetical gross annual rates of return shown in the illustration and
elsewhere in the prospectus are illustrative only and are not representations of
past or future rates of return. The cash values and death benefits shown in the
illustration assume the deduction of all fees and charges and that no Policy
Loans have been taken. Actual rates may be higher or lower than hypothetical
rates and will depend on a number of factors, including the investment
allocations made by a policy owner, the frequency of premium payments chosen and
the investment experience of the Policy's Subaccounts. The death benefits and
cash values would be different from those shown if the average of the actual
gross annual rates of return over a period of years equaled those shown, but the
rates varied from year to year. They would also be different if any Policy Loan
were made during the period. No representations can be made that those
hypothetical rates of return can be achieved for any one year or sustained over
any period of time.
27
<PAGE>
<TABLE>
<CAPTION>
MALE ISSUE AGE 10
$600 ANNUAL PREMIUM FOR STANDARD RISK
$39,638 FACE AMOUNT (GUARANTEED INSURANCE AMOUNT)
TOTAL DEATH BENEFIT CASH VALUES
END OF PREMIUMS ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
POLICY PREMIUM PAID PLUS ANNUAL RATES OF RETURN OF ANNUAL RATES OF RETURN OF
YEAR DUE INTEREST AT 5% 0% 6% 12% 0% 6% 12%
- --------- --------- -------------- ----------------------------------- -----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 $600 $ 630 $39,638 $39,645 $ 39,729 $ 138 $ 148 $ 158
2 600 1,291 39,638 39,669 40,061 586 633 682
3 600 1,986 39,638 39,710 40,642 1,023 1,136 1,256
4 600 2,715 39,638 39,767 41,482 1,450 1,656 1,884
5 600 3,481 39,638 39,841 42,599 1,889 2,219 2,597
6 600 4,285 39,638 39,932 44,005 2,316 2,800 3,375
7 600 5,129 39,638 40,039 45,711 2,734 3,402 4,227
8 600 6,016 39,638 40,161 47,732 3,143 4,026 5,160
9 600 6,947 39,638 40,299 50,081 3,547 4,676 6,184
10 600 7,924 39,638 40,453 52,774 3,946 5,354 7,309
15 0 11,608 39,638 41,363 70,965 4,473 7,632 13,094
20 0 14,816 39,638 42,310 95,773 4,010 9,176 20,771
25 0 18,909 39,638 43,278 129,224 3,610 11,076 33,073
30 0 24,133 39,638 44,269 174,378 3,244 13,343 52,561
Attained Age
65 0 81,723 39,638 49,597 785,431 1,685 30,247 479,001
</TABLE>
The hypothetical gross annual rates of return shown in the illustration and
elsewhere in the prospectus are illustrative only and are not representations of
past or future rates of return. The cash values and death benefits shown in the
illustration assume the deduction of all fees and charges and that no Policy
Loans have been taken. Actual rates may be higher or lower than hypothetical
rates and will depend on a number of factors, including the investment
allocations made by a policy owner, the frequency of premium payments chosen and
the investment experience of the Policy's Subaccounts. The death benefits and
cash values would be different from those shown if the average of the actual
gross annual rates of return over a period of years equaled those shown, but the
rates varied from year to year. They would also be different if any Policy Loan
were made during the period. No representations can be made that those
hypothetical rates of return can be achieved for any one year or sustained over
any period of time.
28
<PAGE>
<TABLE>
<CAPTION>
MALE ISSUE AGE 25
$1,200 ANNUAL PREMIUM FOR STANDARD RISK
$51,908 FACE AMOUNT (GUARANTEED INSURANCE AMOUNT)
TOTAL DEATH BENEFIT CASH VALUES
END OF PREMIUMS ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
POLICY PREMIUM PAID PLUS ANNUAL RATES OF RETURN OF ANNUAL RATES OF RETURN OF
YEAR DUE INTEREST AT 5% 0% 6% 12% 0% 6% 12%
- -------- --------- -------------- ------------ -------- ------------- -----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 $1,200 $ 1,260 $51,908 $51,921 $ 52,078 $ 409 $ 439 $ 469
2 1,200 2,583 51,908 51,955 52,558 1,308 1,423 1,542
3 1,200 3,972 51,908 52,011 53,359 2,197 2,454 2,727
4 1,200 5,431 51,908 52,088 54,495 3,076 3,532 4,037
5 1,200 6,962 51,908 52,188 55,994 3,992 4,710 5,535
6 1,200 8,570 51,908 52,308 57,870 4,897 5,941 7,187
7 1,200 10,259 51,908 52,450 60,141 5,791 7,226 9,008
8 1,200 12,032 51,908 52,612 62,823 6,673 8,568 11,014
9 1,200 13,893 51,908 52,794 65,934 7,544 9,969 13,222
10 1,200 15,848 51,908 52,996 69,495 8,404 11,430 15,653
15 0 23,217 51,908 54,188 93,429 9,524 16,333 28,161
20 0 29,631 51,908 55,430 126,119 8,504 19,562 44,508
25 0 37,818 51,908 56,702 170,313 7,539 23,273 69,903
30 0 48,266 51,908 58,005 230,101 6,628 27,467 108,958
Attained Age
65 0 78,620 51,908 60,711 420,822 4,947 37,025 256,641
</TABLE>
The hypothetical gross annual rates of return shown in the illustration and
elsewhere in the prospectus are illustrative only and are not representations of
past or future rates of return. The cash values and death benefits shown in the
illustration assume the deduction of all fees and charges and that no Policy
Loans have been taken. Actual rates may be higher or lower than hypothetical
rates and will depend on a number of factors, including the investment
allocations made by a policy owner, the frequency of premium payments chosen and
the investment experience of the Policy's Subaccounts. The death benefits and
cash values would be different from those shown if the average of the actual
gross annual rates of return over a period of years equaled those shown, but the
rates varied from year to year. They would also be different if any Policy Loan
were made during the period. No representations can be made that those
hypothetical rates of return can be achieved for any one year or sustained over
any period of time.
29
<PAGE>
<TABLE>
<CAPTION>
MALE ISSUE AGE 40
$1,800 ANNUAL PREMIUM FOR STANDARD RISK
$47,954 FACE AMOUNT (GUARANTEED INSURANCE AMOUNT)
TOTAL DEATH BENEFIT CASH VALUES
END OF PREMIUMS ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
POLICY PREMIUM PAID PLUS ANNUAL RATES OF RETURN OF ANNUAL RATES OF RETURN OF
YEAR DUE INTEREST AT 5% 0% 6% 12% 0% 6% 12%
- -------- --------- -------------- --------------------------------------- -----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 $1,800 $ 1,890 $47,954 $47,968 $ 48,144 $ 762 $ 817 $ 872
2 1,800 3,874 47,954 48,002 48,621 2,097 2,289 2,488
3 1,800 5,958 47,954 48,056 49,393 3,406 3,819 4,263
4 1,800 8,146 47,954 48,129 50,473 4,689 5,409 6,211
5 1,800 10,443 47,954 48,222 51,886 6,020 7,138 8,431
6 1,800 12,856 47,954 48,335 53,645 7,328 8,937 10,869
7 1,800 15,388 47,954 48,467 55,766 8,615 10,809 13,548
8 1,800 18,048 47,954 48,617 58,266 9,884 12,760 16,491
9 1,800 20,840 47,954 48,786 61,164 11,137 14,792 19,724
10 1,800 23,772 47,954 48,973 64,480 12,375 16,911 23,276
15 0 34,825 47,954 50,080 86,798 13,764 23,714 41,101
20 0 44,447 47,954 51,233 117,342 11,963 27,690 63,419
25 0 56,727 47,954 52,416 158,741 10,274 31,966 96,809
30 0 72,399 47,954 53,630 214,919 8,695 36,402 145,879
Attained Age
65 0 56,727 47,954 52,416 158,741 10,274 31,966 96,809
</TABLE>
The hypothetical gross annual rates of return shown in the illustration and
elsewhere in the prospectus are illustrative only and are not representations of
past or future rates of return. The cash values and death benefits shown in the
illustration assume the deduction of all fees and charges and that no Policy
Loans have been taken. Actual rates may be higher or lower than hypothetical
rates and will depend on a number of factors, including the investment
allocations made by a policy owner, the frequency of premium payments chosen and
the investment experience of the Policy's Subaccounts. The death benefits and
cash values would be different from those shown if the average of the actual
gross annual rates of return over a period of years equaled those shown, but the
rates varied from year to year. They would also be different if any Policy Loan
were made during the period. No representations can be made that those
hypothetical rates of return can be achieved for any one year or sustained over
any period of time.
30
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
First Investors Life Insurance Company
New York, New York
We have audited the accompanying balance sheets of First Investors Life
Insurance Company as of December 31, 1998 and 1997, and the related statements
of income, stockholder's equity and cash flows for each of the three years in
the period ended December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of First Investors Life
Insurance Company as of December 31, 1998 and 1997, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1998, in conformity with generally accepted accounting principles.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
February 17, 1999
<PAGE>
<TABLE>
<CAPTION>
FIRST INVESTORS LIFE INSURANCE COMPANY
BALANCE SHEET
ASSETS
December 31, 1998 December 31, 1997
----------------- -----------------
<S> <C> <C>
Investments (note 2):
Available-for-sale securities....................................... $131,031,939 $125,380,627
Held-to-maturity securities......................................... 5,491,598 5,529,687
Short term investments.............................................. 3,982,209 3,083,769
Policy loans........................................................ 24,961,708 21,527,810
-------------- ------------
Total investments................................................ 165,467,454 155,521,893
Cash ................................................................. 113,094 1,145,215
Premiums and other receivables, net of allowances of
$30,000 in 1998 and 1997............................................ 6,297,635 4,749,099
Accrued investment income............................................. 3,473,067 3,180,924
Deferred policy acquisition costs (note 6)............................ 20,873,233 18,446,716
Deferred Federal income taxes (note 7) ........................... 473,000 1,039,000
Furniture, fixtures and equipment, at cost, less accumulated
depreciation of $1,110,857 in 1998 and $1,036,604 in 1997........... 102,448 97,379
Other assets.......................................................... 82,822 120,044
Separate account assets............................................... 821,105,059 642,453,414
-------------- ------------
Total assets..................................................... $1,017,987,812 $826,753,684
============== ============
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES:
Policyholder account balances (note 6)................................ $118,786,854 $115,281,318
Claims and other contract liabilities................................. 13,934,636 12,548,096
Accounts payable and accrued liabilities.............................. 3,796,503 4,426,355
Separate account liabilities.......................................... 821,105,059 642,453,314
--------------- ------------
Total liabilities................................................ 957,623,052 774,709,083
--------------- ------------
STOCKHOLDER'S EQUITY:
Common Stock, par value $4.75; authorized,
issued and outstanding 534,350 shares............................... 2,538,163 2,538,163
Additional paid in capital............................................ 6,496,180 6,496,180
Accumulated other comprehensive income (note 2)....................... 2,193,000 1,608,000
Retained earnings .................................................... 49,137,417 41,402,258
--------------- ------------
Total stockholder's equity....................................... 60,364,760 52,044,601
--------------- ------------
Total liabilities and stockholder's equity....................... $1,017,987,812 $826,753,684
=============== ============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
FIRST INVESTORS LIFE INSURANCE COMPANY
STATEMENT OF INCOME
Year Ended Year Ended Year Ended
December 31, 1998 December 31,1997 December 31,1996
----------------- ---------------- ----------------
<S> <C> <C> <C>
REVENUES
Policyholder fees................................... $25,393,372 $24,826,454 $22,955,165
Premiums.............................................. 6,091,731 6,279,137 6,725,329
Investment income (note 2).......................... 10,501,572 10,259,601 9,771,389
Realized gain (loss) on investments................. 914,891 158,874 (221,025)
Other income........................................ 893,181 702,644 704,678
----------- ------------ -----------
Total income..................................... 43,794,747 42,226,710 39,935,536
----------- ------------ -----------
BENEFITS AND EXPENSES
Benefits and increases in contract liabilities...... 13,803,921 14,370,510 12,912,810
Dividends to policyholders.......................... 1,749,579 1,033,663 964,913
Amortization of deferred acquisition costs (note 6). 1,005,483 663,200 1,454,408
Commissions and general expenses.................... 15,553,605 15,445,888 16,287,498
----------- ------------ -----------
Total benefits and expenses...................... 32,112,588 31,513,261 31,619,629
----------- ------------ -----------
Income before Federal income tax ..................... 11,682,159 10,713,449 8,315,907
Federal income tax (note 7):
Current............................................. 3,682,000 4,285,000 3,099,000
Deferred............................................ 265,000 (603,000) (286,000)
----------- ------------ -----------
3,947,000 3,682,000 2,813,000
----------- ------------ -----------
Net Income............................................ $ 7,735,159 $ 7,031,449 $ 5,502,907
=========== ============ ===========
Income per share, based on 534,350 shares outstanding
$14.48 $13.16 $10.30
=========== ============ ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
FIRST INVESTORS LIFE INSURANCE COMPANY
STATEMENT OF STOCKHOLDER'S EQUITY
Year Ended Year Ended Year Ended
December 31,1998 December 31,1997 December 31, 1996
---------------- ---------------- -----------------
<S> <C> <C> <C>
Balance at beginning of year............................. $52,044,601 $ 44,049,152 $ 39,780,245
------------ ------------ ------------
Net income............................................... 7,735,159 7,031,449 5,502,907
Other comprehensive income
Increase (decrease) in unrealized holding gains on
available-for-sale securities.......................... 585,000 964,000 (1,234,000)
------------ ------------- ------------
Comprehensive income..................................... 8,320,159 7,995,449 4,268,907
------------ ------------- ------------
Balance at end of year................................... $ 60,364,760 $ 52,044,601 $ 44,049,152
============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF CASH FLOWS
Year Ended Year Ended Year Ended
December 31, 1998 December 31, 1997 December 31,1996
----------------- ----------------- ----------------
<S> <C> <C> <C>
Increase (decrease) in cash:
Cash flows from operating activities:
Policyholder fees received.......................... $ 25,010,611 $ 24,587,113 $ 22,925,131
Premiums received................................... 5,433,211 6,088,582 6,413,009
Amounts received on policyholder accounts........... 132,528,386 125,818,334 105,489,481
Investment income received.......................... 10,630,564 10,263,095 9,964,169
Other receipts...................................... 91,864 57,287 55,779
Benefits and contract liabilities paid.............. (142,124,914) (138,420,373) (117,321,389)
Commissions and general expenses paid............... (24,138,476) (20,899,476) (20,857,687)
------------ ------------ -------------
Net cash provided by operating activities........... 7,431 246 7,494,562 6,668,493
------------ ------------ ------------
Cash flows from investing activities:
Proceeds from sale of investment securities......... 42,655,632 38,900,851 39,062,702
Purchase of investment securities................... (47,605,879) (44,021,791) (44,134,604)
Purchase of furniture, equipment and other assets... (79,322) (62,170) (34,485)
Net increase in policy loans........................ (3,433,898) (2,662,162) (1,848,956)
Investment in Separate Account ..................... 100 593,945 (200)
------------ ------------ ------------
Net cash used for investing activities.............. (8,463,367) (7,251,327) (6,955,543)
------------ ------------ ------------
Net increase (decrease) in cash..................... (1,032,121) 243,235 (287,050)
Cash
Beginning of year ..................................... 1,145,215 901,980 1,189,030
------------ ------------- ------------
End of year ........................................... $ 113,094 $ 1,145,215 $ 901,980
============ ============ ============
</TABLE>
The Company received a refund of Federal income tax of $79,000 in 1997 and
$102,000 in 1996 and paid Federal income tax of $4,400,000 in 1998, $4,358,000
in 1997 and $3,243,000 in 1996.
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
FIRST INVESTORS LIFE INSURANCE COMPANY
STATEMENT OF CASH FLOWS
Year ended Year Ended Year Ended
December 31, 1998 December 31, 1997 December 31, 1996
----------------- ----------------- -----------------
<S> <C> <C> <C>
Reconciliation of net income to net cash
provided by operating activities:
Net income........................................ $ 7,735,159 $ 7,031,449 $ 5,502,907
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.................. 82,342 117,804 130,924
Amortization of deferred policy acquisition costs 1,005,483 663,200 1,454,408
Realized investment (gains) losses............. (914,891) (158,874) 221,025
Amortization of premiums and discounts on
investments.................................. 421,135 280,852 262,785
Deferred Federal income taxes.................. 265,000 (603,000) (286,000)
Other items not requiring cash - net........... (660) 9,771 6,794
(Increase) decrease in:
Premiums and other receivables, net............ (1,548,536) (750,889) 336,385
Accrued investment income...................... (292,143) (277,358) (70,005)
Deferred policy acquisition costs, exclusive
of amortization.............................. (3,613,000) (1,866,787) (1,275,323)
Other assets................................... 29,133 9,323 (18,574)
Increase (decrease) in:
Policyholder account balances.................. 3,505,536 1,985,844 (78,699)
Claims and other contract liabilities.......... 1,386,540 357,815 901,173
Accounts payable and accrued liabilities....... (629,852) 695,412 (419,307)
------------ ----------- -----------
$ 7,431,246 $ 7,494,562 $ 6,668,493
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
FIRST INVESTORS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
NOTE 1 -- BASIS OF FINANCIAL STATEMENTS
The accompanying financial statements have been prepared in conformity
with generally accepted accounting principles (GAAP). Such basis of presentation
differs from statutory accounting practices permitted or prescribed by insurance
regulatory authorities primarily in that:
(a) policy reserves are computed according to the Company's estimates
of mortality, investment yields, withdrawals and other benefits and
expenses, rather than on the statutory valuation basis;
(b) certain expenditures, principally for furniture and equipment and
agents' debit balances, are recognized as assets rather than being
non-admitted and therefore charged to retained earnings;
(c) commissions and other costs of acquiring new business are
recognized as deferred acquisition costs and are amortized over the premium
paying period of policies and contracts, rather than charged to current
operations when incurred;
(d) income tax effects of temporary differences, relating primarily to
policy reserves and acquisition costs, are provided;
(e) the statutory asset valuation and interest maintenance reserves are
reported as retained earnings rather than as liabilities;
NOTE 2 -- OTHER SIGNIFICANT ACCOUNTING PRACTICES
(a) ACCOUNTING 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 disclosures of contingent assets and liabilities, at the date
of the financial statements and revenues and expenses during the reported
period. Actual results could differ from those estimates.
(b) DEPRECIATION. Depreciation is computed on the useful service life
of the depreciable asset using the straight line method of depreciation over
three to seven years.
(c) INVESTMENTS. Investments in equity securities that have readily
determinable fair values and all investments in debt securities are classified
in separate categories and accounted for as follows:
HELD-TO-MATURITY SECURITIES
Debt securities in which the Company has the positive intent and
ability to hold to maturity are recorded at amortized cost.
AVAILABLE-FOR-SALE SECURITIES
Debt securities not classified as held to maturity securities and
equity securities are recorded at fair value with unrealized gains
and losses excluded from earnings and reported as "accumulated
other comprehensive income" in stockholder's equity.
Short term investments are reported at market value which approximates
cost.
Gains and losses on sales of investments are determined using the
specific identification method. Investment income for the years indicated
consists of the following:
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
December 31,1998 December 31, 1997 December 31,1996
---------------- ----------------- ----------------
<S> <C> <C> <C>
Interest on fixed maturities............... $ 9,276,036 $ 9,029,979 $ 8,559,429
Interest on short term investments......... 226,544 307,656 410,930
Interest on policy loans................... 1,465,497 1,268,834 1,151,681
Dividends on equity securities............. -- -- 43,756
----------- ------------ -----------
Total investment income............... 10,968,077 10,606,469 10,165,796
Investment expense.................... 466,505 346,868 394,407
----------- ------------ -----------
Net investment income...................... $10,501,572 $ 10,259,601 $ 9,771,389
=========== ============ ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FIRST INVESTORS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (Continued)
The amortized cost and estimated market values of investments at December 31, 1998 and 1997 are as follows:
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------------------------------------------------------------
<S> <C> <C> <C> <C>
Available-For-Sale Securities
December 31, 1998
U.S. Treasury Securities and obligations
of U.S. Government Corporations
and Agencies............................... $ 28,353,391 $ 1,703,441 $ 912 $ 30,055,920
Debt Securities issued by
States of the U.S.......................... 13,964,587 261,109 8,696 14,217,000
Corporate Debt Securities................... 77,938,088 2,148,113 378,682 79,707,519
Other Debt Securities ...................... 6,676,873 374,627 -- 7,051,500
------------ ------------ ------------ ------------
$126,932,939 $ 4,487,290 $ 388,290 $131,031,939
============ ============ ============ ============
December 31,1997
U.S. Treasury Securities and obligations
of U.S. Government Corporations
and Agencies............................... $ 39,532,729 $ 975,819 $ -- $ 40,508,548
Debt Securities issued by
States of the U.S.......................... 7,309,135 92,015 -- 7,401,150
Corporate Debt Securities................... 67,900,325 1,739,318 75,913 69,563,730
Other Debt Securities....................... 7,606,438 300,761 -- 7,907,199
------------ ------------ ----------- ------------
$122,348,627 $ 3,107,913 $ 75,913 $125,380,627
============ ============ =========== ============
At December 31, 1998 and 1997, the Company had "Unrealized Holding Gains on
Available-For-Sale Securities" of $2,193,000 and $1,608,000, net of applicable
deferred income taxes and amortization of deferred acquisition costs. The change
in the Unrealized Holding Gains of $585,000, $964,000 and ($1,234,000) for 1998,
1997 and 1996, respectively is reported as other comprehensive income in
stockholders' equity.
Held-To-Maturity Securities
December 31,1998
U.S. Treasury Securities and obligations
of U.S. Government Corporations
and Agencies*.............................. $ 3,381,598 $ 223,647 $ -- $ 3,605,245
Corporate Debt Securities................... 2,000,000 125,400 -- 2,125,400
Other Debt Securities....................... 110,000 -- -- 110,000
------------ ----------- ----------- -----------
$ 5,491,598 $ 349,047 $ -- $ 5,840,645
============ =========== =========== ===========
December 31,1997
U.S. Treasury Securities and obligations
of U.S. Government Corporations
and Agencies*.............................. $ 3,419,687 $ 90,126 $ 700 $ 3,509,113
Corporate Debt Securities................... 2,000,000 109,000 -- 2,109,000
Other Debt Securities....................... 110,000 -- -- 110,000
-------------- --------- --------- -----------
$ 5,529,687 $ 199,126 $ 700 $ 5,728,113
============ ========= ========= ===========
</TABLE>
*These securities are on deposit for various state insurance departments and are
therefore restricted as to sale.
<PAGE>
FIRST INVESTORS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (Continued)
The amortized cost and estimated market value of debt securities at
December 31, 1998, by contractual maturity, are shown below. Expected maturities
will differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Held to Maturity Available For Sale
-----------------------------------------------------------------
Amortized Estimated Amortized Estimated
Cost Market Value Cost Market Value
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Due in one year or less....................... $ 10,000 $ 10,000 $ 1,255,531 $ 1,256,810
Due after one year through five years......... 2,954,022 3,142,745 33,385,925 34,635,479
Due after five years through ten years........ 527,576 562,500 55,672,616 57,463,964
Due after ten years........................... 2,000,000 2,125,400 36,618,867 37,675,686
---------- ---------- ------------ ------------
$5,491,598 $5,840,645 $126,932,939 $131,031,939
========== ========== ============ ============
</TABLE>
Proceeds from sales of investments in fixed maturities were $42,655,632,
$38,900,851 and $39,046,422 in 1998, 1997 and 1996, respectively. Gross gains of
$977,442 and gross losses of $62,551 were realized on those sales in 1998. Gross
gains of $374,583 and gross losses of $215,709 were realized on those sales in
1997. Gross gains of $185,708 and gross losses of $406,733 were realized on
those sales in 1996.
(d) RECOGNITION OF REVENUE, POLICYHOLDER ACCOUNT BALANCES AND POLICY
BENEFITS
TRADITIONAL ORDINARY LIFE AND HEALTH
Revenues from the traditional life insurance policies represent
premiums that are recognized as earned when due. Health insurance
premiums are recognized as revenue over the time period to which the
premiums relate. Benefits and expenses are associated with earned
premiums so as to result in recognition of profits over the lives of
the contracts. This association is accomplished by means of the
provision for liabilities for future policy benefits and the deferral
and amortization of policy acquisition costs.
UNIVERSAL LIFE AND VARIABLE LIFE
Revenues from universal life and variable life policies
represent amounts assessed against policyholders. Included in such
assessments are mortality charges, surrender charges and policy
service fees.
Policyholder account balances on universal life consist of the
premiums received plus credited interest, less accumulated
policyholder assessments. Amounts included in expense represent
benefits in excess of policyholder account balances. The value of
policyholder accounts on variable life are included in separate
account liabilities as discussed below.
ANNUITIES
Revenues from annuity contracts represent amounts assessed
against contractholders. Such assessments are principally sales
charges, administrative fees, and in the case of variable annuities,
mortality and expense risk charges. The carrying value and fair value
of fixed annuities are equal to the policyholder account balances,
which represent the net premiums received plus accumulated interest.
(e) SEPARATE ACCOUNTS. Separate account assets and the related
liabilities, both of which are valued at market, represent segregated variable
annuity and variable life contracts maintained in accounts with individual
investment objectives. All investment income (gains and losses of these
accounts) accrues directly to the contractholders and therefore does not affect
net income of the Company.
<PAGE>
FIRST INVESTORS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (Continued)
(f) COMPREHENSIVE INCOME. For 1998, the Company adopted Statement of
Financial Accounting Standards No, 130 ("SFAS 130"), "Reporting Comprehensive
Income". SFAS 130 establishes the disclosure requirements for reporting
comprehensive income in an entity's financial statements. Total comprehensive
income includes net income and unrealized gains and losses on available-for-sale
securities. Accumulated other comprehensive income, a component of stockholders'
equity, was formerly reported as unrealized gains and losses on
available-for-sale securities. There was no impact on previously reported net
income from the adoption of SFAS 130.
Note 3 -- FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts for cash, short-term investments and policy loans as
reported in the accompanying balance sheet approximate their fair values. The
fair values for fixed maturity and equity-securities are based upon quoted
market prices, where available or are estimated using values from independent
pricing services.
The carrying amounts for the Company's liabilities under investment - type
contracts approximate their fair values because interest rates credited to
account balances approximate current rates paid on similar investments and are
generally not guaranteed beyond one year. Fair values for the Company's
insurance contracts other than investment - type contracts are not required to
be disclosed. However, the fair values of liabilities for all insurance
contracts are taken into consideration in the overall management of interest
rate risk, which minimizes exposure to changing interest rates.
NOTE 4 -- RETIREMENT PLANS
The Company participates in a non-contributory profit sharing plan for the
benefit of its employees and those of other wholly-owned subsidiaries of its
parent. The Plan provides for retirement benefits based upon earnings. Vesting
of benefits is based upon years of service. For the years ended December 31,
1998, 1997 and 1996, the Company charged operations approximately $79,000,
$70,000 and $100,000 respectively for its portion of the contribution.
The Company also has a non-contributory retirement plan for the benefit of
its sales agents. The plan provides for retirement benefits based upon
commission on first-year premiums and length of service. The plan is unfunded.
Vesting of benefits is based upon graduated percentages dependent upon the
number of allocations made in accordance with the plan by the Company for each
participant. The Company charged to operations pension expenses of approximately
$475,000 in 1998, $419,000 in 1997 and $414,000 in 1996. The accrued liability
of approximately $3,251,000 in 1998 and $2,913,000 in 1997 was sufficient to
cover the value of benefits provided by the plan.
In addition, the Company participates in a 401(k) savings plan covering
all of its eligible employees and those of other wholly-owned subsidiaries of
its parent whereby employees may voluntarily contribute a percentage of their
compensation with the Company matching a portion of the contributions of certain
employees. Contributions to this plan were not material.
NOTE 5 -- COMMITMENTS AND CONTINGENT LIABILITIES
The Company has agreements with affiliates and non-affiliates as follows:
(a) The Company's maximum retention on any one life is $100,000. The
Company reinsures a portion of its risk with other insurance companies and
reserves are reduced by the amount of reserves for such reinsured risks. The
Company is liable for any obligations that any reinsurance company may be unable
to meet. The Company had reinsured approximately 10% of its net life insurance
in force at December 31, 1998, 1997 and 1996. The Company also had assumed
reinsurance amounting to approximately 20%, 20% and 21% of its net life
insurance in force at the respective year ends. None of these transactions had
any material effect on the Company's operating results.
<PAGE>
FIRST INVESTORS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (Continued)
(b) The Company and certain affiliates share office space, data processing
facilities and management personnel. Charges for these services are based upon
the Company's proportionate share of: space occupied, usage of data processing
facilities and time allocated to management. During the years ended December 31,
1998, 1997 and 1996, the Company paid approximately $1,440,000, $1,114,000 and
$1,222,000, respectively, for these services. In addition, the Company
reimbursed an affiliate approximately $10,799,000 in 1998, $9,814,000 in
1997,and $9,709,000 in 1996 for commissions relating to the sale of its
products.
The Company maintains a checking account with a financial
institution, which is also a wholly-owned subsidiary of its parent. The balance
in this account was approximately $387,000 at December 31, 1998 and $332,000 at
December 31, 1997.
(c) The Company is subject to certain claims and lawsuits arising in the
ordinary course of business. In the opinion of management, all such claims
currently pending will not have a material adverse effect on the financial
position of the Company or its results of operations.
NOTE 6 -- ADJUSTMENTS MADE TO STATUTORY ACCOUNTING PRACTICES
Note 1 describes some of the common differences between statutory practices
and generally accepted accounting principles. The effects of these differences
for the years ended December 31, 1998, 1997 and 1996 are shown in the following
table in which net income and capital shares and surplus reported therein on a
statutory basis are adjusted to a GAAP basis.
<TABLE>
<CAPTION>
NET INCOME CAPITAL SHARES AND SURPLUS
YEAR ENDED DECEMBER 31 AT DECEMBER 31
---------------------------------- ---------------------------------
1998 1997 1996 1998 1997 1996
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Reported on a statutory basis.......... $6,191,762 $5,809,629 $5,002,533 $37,991,708 $32,159,721 $26,580,877
---------- ---------- ---------- ----------- ----------- -----------
Adjustments:
Deferred policy acquisition costs (b) 2,607,517 351,239 (179,085) 20,873,233 18,446,716 17,547,129
Future policy benefits (a).......... (1,259,673) 133,848 514,086 (4,260,262) (3,000,589) (2,398,397)
Deferred income taxes............... (265,000) 603,000 286,000 473,000 1,039,000 934,000
Premiums due and deferred (e)....... 85,385 84,291 85,461 (1,189,428) (1,274,816) (1,359,107)
Cost of colletion and other statutory
liabilities....................... (6,185) (924) (12,283) 29,874 36,060 36,984
Non-admitted assets................. -- -- -- 218,959 224,411 298,731
Asset valuation reserve............. -- -- -- 1,691,873 1,325,986 1,136,664
Interest maintenance reserve........ (223,136) (55,019) (48,542) 436,803 56,112 6,271
Gross unrealized holding gains on
available-for-sale securities... -- -- -- 4,099,000 3,032,000 1,266,000
Net realized capital gains (losses). 914,891 158,874 (221,025) -- -- --
Other............................... (310,402) (53,489) 75,762 -- --
---------- ---------- ---------- ----------- ----------- -----------
1,543,397 1,221,820 500,374 22,373,052 19,884,880 17,468,275
---------- ---------- ---------- ---------- ---------- ----------
In accordance with generally accepted
accounting principles............... $7,735,159 $7,031,449 $5,502,907 $60,364,760 $52,044,601 $44,049,152
========== ========== ========== =========== =========== ===========
Per share, based on 534,350 shares
outstanding......................... $14.48 $13.16 $10.30 $112.97 $97.40 $82.44
========== ========== ========== =========== ========== ===========
</TABLE>
<PAGE>
FIRST INVESTORS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (Continued)
The following is a description of the significant policies used to adjust
the net income and capital shares and surplus from a statutory to a GAAP basis.
(a) Liabilities for future policy benefits have been computed primarily by
the net level premium method with assumptions as to anticipated mortality,
withdrawals and investment yields. The composition of the policy liabilities and
the more significant assumptions pertinent thereto are presented below:
<TABLE>
<CAPTION>
DISTRIBUTION OF LIABILITIES* BASIS OF ASSUMPTIONS
- ----------------------------------------------------------------------------------
YEARS
1998 1997 OF ISSUE INTEREST MORTALITY TABLE WITHDRAWAL
---- ---- -------- -------- --------------- ----------
<S> <C> <C> <C> <C> <C>
Non-par:
$1,458,458 $ 1,505,551 1962-1967 4 1/2% 1955-60 Basic Select plus Ultimate Linton B
5,021,949 5,310,394 1968-1988 5 1/2% 1955-60 Basic Select plus Ultimate Linton B
2,403,257 2,433,724 1984-1988 7 1/2% 85% of 1965-70 Basic Select Modified
plus Ultimate Linton B
116,030 101,775 1989-Present 7 1/2% 1975-80 Basic Select plus Ultimate Linton B
63,482 108,985 1989-Present 7 1/2% 1975-80 Basic Select plus Ultimate Actual
26,682 28,971 1989-Present 8% 1975-80 Basic Select plus Ultimate Actual
33,158,902 32,412,007 1985-Present 6% Accumulation of Funds --
Par:
216,096 224,913 1966-1967 4 1/2% 1955-60 Basic Select plus Ultimate Linton A
13,141,191 13,273,949 1968-1988 5 1/2% 1955-60 Basic Select plus Ultimate Linton A
907,950 899,407 1981-1984 7 1/4% 90% of 1965-70 Basic Select
plus Ultimate Linton B
4,791,142 4,699,324 1983-1988 9 1/2% 80% of 1965-70 Basic Select
plus Ultimate Linton B
17,805,284 15,977,808 1990-Present 8% 66% of 1975-80 Basic Select
plus Ultimate Linton B
Annuities:
16,075,327 19,581,382 1976-Present 5 1/2% Accumulation of Funds --
Miscellaneous:
24,418,452 19,604,218 1962-Present 2 1/2%-3 1/2% 1958-CSO None
</TABLE>
* The above amounts are before deduction of deferred premiums of $817,348 in
1998 and $881,090 in 1997.
(b) The costs of acquiring new business, principally commissions and
related agency expenses, and certain costs of issuing policies, such as medical
examinations and inspection reports, all of which vary with and are primarily
related to the production of new business, have been deferred. Costs deferred on
universal life and variable life are amortized as a level percentage of the
present value of anticipated gross profits resulting from investment yields,
mortality and surrender charges. Costs deferred on traditional ordinary life and
health are amortized over the premium-paying period of the related policies in
proportion to the ratio of the annual premium revenue to the total anticipated
premium revenue. Anticipated premium revenue was estimated using the same
assumptions that were used for computing liabilities for future policy benefits.
Amortization of $1,005,483 in 1998 and $663,200 in 1997, $1,454,408 in 1996 was
charged to operations.
(c) Participating business represented 8.8% and 9.5% of individual life
insurance in force at December 31, 1998 and 1997, respectively.
The Board of Directors annually approves a dividend formula for
calculation of dividends to be distributed to participating policyholders.
The portion of earnings of participating policies that can inure to the
benefit of shareholders is limited to the larger of 10% of such earnings or $.50
per thousand dollars of participating insurance in force. Earnings in excess of
that limit must be excluded from shareholders' equity by a charge against
operations. No such charge has been made, since participating business has
operated at a loss to date on a statutory basis. It is anticipated, however,
that the participating lines will be profitable over the lives of the policies.
(d) New York State insurance law prohibits the payment of dividends to
stockholders from any source other than the statutory unassigned surplus. The
amount of said surplus was $28,207,166, $22,374,879 and $16,796,135 at December
31, 1998, 1997 and 1996, respectively.
(e) Statutory due and deferred premiums are adjusted to conform to the
expected premium revenue used in computing future benefits and deferred policy
acquisition costs. In this regard, the GAAP due premium is recorded as an asset
and the GAAP deferred premium is applied against future policy benefits.
<PAGE>
FIRST INVESTORS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (Continued)
NOTE 7 -- FEDERAL INCOME TAXES
The Company joins with its parent company and other affiliated companies
in filing a consolidated Federal income tax return. The provision for Federal
income taxes is determined on a separate company basis.
Retained earnings at December 31, 1998 included approximately $146,000
which is defined as "policyholders' surplus" and may be subject to Federal
income tax at ordinary corporate rates under certain future conditions,
including distributions to stockholders.
Deferred tax liabilities (assets) are comprised of the following:
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Policyholder dividend provision........................................ $ (448,300) $ (357,200)
Non-qualified agents' pension plan reserve............................. (1,262,900) (1,161,300)
Deferred policy acquisition costs...................................... 2,956,800 2,215,900
Future policy benefits................................................. (2,835,100) (2,575,400)
Bond discount.......................................................... 35,900 39,200
Unrealized holding gains on Available-For-Sale Securities............. 1,130,000 829,000
Other.................................................................. (49,400) (29,200)
------------ --------------
$ (473,000) $ (1,039,000)
============ ==============
</TABLE>
The currently payable Federal Income tax provision of $3,099,000 for 1996
is net of a $75,000 Federal tax benefit resulting from a capital loss carryback
of $221,025.
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
First Investors Life Insurance Company
New York, New York
We have audited the statement of assets and liabilities of First Investors
Life Level Premium Variable Life Insurance (a separate account of First
Investors Life Insurance Company, registered as a unit investment trust under
the Investment Company Act of 1940), as of December 31, 1998, and the related
statement of operations for the year then ended 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. 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 First Investors Life Level
Premium Variable Life Insurance as of December 31, 1998, and the results of its
operations for the year then ended and the changes in its net assets for each of
the two years in the period then ended, in conformity with generally accepted
accounting principles.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
February 17, 1999
<PAGE>
FIRST INVESTORS LIFE
LEVEL PREMIUM VARIABLE LIFE INSURANCE
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
ASSETS
Investments at net asset value (Note 3):
First Investors Life Series Fund.............................$214,155,664
LIABILITIES
Payable to First Investors Life Insurance Company............ 3,141,177
------------
NET ASSETS......................................................$211,014,487
============
Net assets represented by Contracts.............................$211,014,487
============
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
INVESTMENT INCOME
Income:
Dividends....................................................$ 11,381,018
------------
Total income.............................................. 11,381,018
------------
Expenses:
Cost of insurance charges (Note 4)........................... 3,722,098
Mortality and expense risks (Note 4)......................... 953,562
-----------
Total expenses............................................ 4,675,660
-----------
NET INVESTMENT INCOME........................................... 6,705,358
-----------
UNREALIZED APPRECIATION ON INVESTMENTS
Beginning of year.............................................. 48,303,546
End of year.................................................... 62,632,266
Change in unrealized appreciation on investments................ 14,328,720
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............$21,034,078
===========
See accompanying notes to financial statements.
34
<PAGE>
FIRST INVESTORS LIFE
LEVEL PREMIUM VARIABLE LIFE INSURANCE
STATEMENT OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1998 1997
-------------- ----------------
<S> <C> <C>
Increase (Decrease) in Net Assets
From Operations
Net investment income................................................. $ 6,705,358 $ 6,135,321
Change in unrealized appreciation on investments...................... 14,328,720 16,231,615
------------- -------------
Net increase in net assets resulting from operations.................. 21,034,078 22,366,936
-------------- -------------
From Unit Transactions
Net insurance premiums................................................ 32,896,170 30,069,380
Contract payments..................................................... (15,071,523) (13,435,961)
-------------- --------------
Net increase in net assets derived from unit transactions............. 17,824,647 16,633,419
-------------- --------------
Net increase in net assets............................................ 38,858,725 39,000,355
Net Assets
Beginning of year....................................................... 172,155,762 133,155,407
------------- --------------
End of year............................................................. $211,014,487 $172,155,762
============ =============
</TABLE>
See accompanying notes to financial statements.
35
<PAGE>
FIRST INVETORS LIFE
LEVEL PREMIUM VARIABLE LIFE INSURANCE
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 1 -- ORGANIZATION
First Investors Life Level Premium Variable Life Insurance (Separate Account
B), a unit investment trust registered under the Investment Company Act of 1940
(the 1940 Act), is a segregated investment account established by First
Investors Life Insurance Company (FIL). Assets of the Separate Account B have
been used to purchase shares of First Investors Life Series Fund (The Fund), an
open-end diversified management investment company registered under the 1940
Act.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
INVESTMENTS
Shares of the Fund held by Separate Account B are valued at net asset
value per share. All distributions received from the Fund are reinvested to
purchase additional shares of the Fund at net asset value.
NET ASSETS REPRESENTED BY CONTRACTS
The net assets represented by contracts represents the cash value of the
policyholder accounts which is the estimated liability for future policy
benefits. The liability for future policy benefits is computed based upon
assumptions as to anticipated mortality, withdrawals and investment yields.
The mortality assumption is based upon the 1975-80 Basic Select plus
Ultimate mortality table.
FEDERAL INCOME TAXES
Separate Account B is not taxed separately because its operations are
part of the total operations of FIL, which is taxed as a life insurance
company under the Internal Revenue Code. Separate Account B will not be
taxed as a regulated investment company under Subchapter M of the Code.
Under existing Federal income tax law, no taxes are payable on the
investment income or on the capital gains of Separate Account B.
NOTE 3 -- INVESTMENTS
Investments consist of the following:
<TABLE>
<CAPTION>
NET ASSET MARKET
SHARES VALUE VALUE COST
------ --------- ------ ----
<S> <C> <C> <C> <C>
First Investors Life
Series Fund
Cash Management.................................. 1,232,598 $ 1.00 $ 1,232,598 $ 1,232,598
High Yield....................................... 3,076,907 11.70 36,001,354 33,131,839
Growth........................................... 1,401,591 35.78 50,145,861 27,668,428
Discovery........................................ 1,409,785 26.74 37,697,283 29,978,530
Blue Chip........................................ 1,774,663 26.25 46,582,619 27,793,401
International Securities......................... 1,764,647 18.88 33,321,641 24,199,648
Government....................................... 103,688 10.41 1,079,314 1,066,529
Investment Grade................................. 217,715 11.97 2,605,307 2,316,602
Utility Income................................... 346,741 15.83 5,489,687 4,135,823
-------------- --------------
$214,155,664 $151,523,398
============ ============
</TABLE>
The High Yield Series' investments in high yield securities whether rated or
unrated may be considered speculative and subject to greater market fluctuations
and risks of loss of income and principal than lower yielding, higher rated,
fixed income securities.
NOTE 4 -- MORTALITY AND EXPENSE RISKS AND DEDUCTIONS
In consideration for its assumption of the mortality and expense risks
connected with the Variable Life Contracts, FIL deducts an amount equal on an
annual basis to .50% of the daily net asset value of Separate Account B. The
deduction for the year ended December 31, 1998 was $953,562.
A monthly charge is also made to Separate Account B for the cost of
insurance protection. This amount varies with the age and sex of the insured and
the net amount of insurance at risk. For further discussion, see "Cost of
Insurance Protection" in the Prospectus. For the year ended December 31, 1998
cost of insurance charges amounted to $3,722,098.
36
[FIRST INVESTORS LOGO]
INSURED SERIES PLAN
This booklet contains two prospectuses. The first prospectus is for our Level
Premium Variable Life Insurance Policy, which we call our Insured Series Plan
("ISP"). The second prospectus is for the First Investors Life Series Fund,
which serves as the underlying investment options for our variable life
insurance policy.
THE DATE OF THIS PROSPECTUS IS APRIL 30, 1999.
<PAGE>
CONTENTS*
LEVEL PREMIUM VARIABLE LIFE INSURANCE POLICIES PROSPECTUS
OVERVIEW.......................................................2
The Policy..................................................2
The Charges and Expenses....................................3
Who We Are..................................................5
Risk and Reward Considerations..............................6
THE POLICY IN DETAIL...........................................6
Your Premiums...............................................6
Allocation of Your Net Premium to Investment Options........7
The Death Benefit...........................................8
Your Cash Value.............................................9
Settlement Options..........................................12
Optional Insurance Riders...................................13
Other Provisions............................................14
FEDERAL INCOME TAX INFORMATION.................................16
OUR OFFICERS AND DIRECTORS.....................................19
OTHER INFORMATION..............................................20
Voting Rights...............................................20
Reservation of Rights.......................................21
Distribution of Policies....................................22
Custodian...................................................22
Reports.....................................................22
State Regulation............................................22
Experts.....................................................22
Relevance of Financial Statements...........................23
Year 2000...................................................23
ILLUSTRATIONS OF DEATH BENEFITS,
CASH VALUES AND ACCUMULATED PREMIUMS........................23
REPORT OF CERTIFIED PUBLIC ACCOUNTANTS.........................
FINANCIAL STATEMENTS OF FIRST INVESTORS LIFE...................
REPORT OF CERTIFIED PUBLIC ACCOUNTANTS.........................
FINANCIAL STATEMENTS OF SEPARATE ACCOUNT B.....................
- -----------------------------
*A Table of Contents for the Life Series Fund prospectus can be found on page 1
of that prospectus.
i
<PAGE>
[FIRST INVESTORS LOGO]
95 Wall Street
New York, New York 10005
(212) 858-8200
i
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, First Investors Life Level Premium Variable Life Insurance (Separate
Account B), represents that this Amendment meets all the requirements for
effectiveness pursuant to Rule 485(b) under the Securities Act of 1933, and has
duly caused this Amendment to be signed on its behalf by the undersigned,
thereunto duly authorized, and its seal to be hereinafter affixed and attested,
all in the City of New York, and State of New York, on the 20th day of April,
1999.
FIRST INVESTORS LIFE LEVEL
PREMIUM VARIABLE LIFE INSURANCE
(SEPARATE ACCOUNT B)
(Registrant)
[Corporate Seal Affixed]
BY: FIRST INVESTORS LIFE
INSURANCE COMPANY
(Depositor)
(On behalf of the Registrant
and itself)
ATTEST:
/s/ Ada M Suchow By /s/ Richard H. Gaebler
- ------------------------- -----------------------------
Ada M Suchow, Richard H. Gaebler,
Assistant Secretary President
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to Registrant's Registration Statement has been signed below by the
following officers and directors of the Depositor in the capacities and on the
dates indicated:
SIGNATURE TITLE DATE
/s/ Richard H. Gaebler President April 20, 1999
- ---------------------------
Richard H. Gaebler
/s/ William M. Lipkus Vice President and April 20, 1999
- --------------------------- Chief Financial
William M. Lipkus Officer
/s/ Richard H. Gaebler Director April 20, 1999
- ---------------------------
Richard H. Gaebler
<PAGE>
Glenn O. Head* Chairman and Director April 20, 1999
Jay G. Baris* Director April 20, 1999
George V. Ganter* Director April 20, 1999
Robert J. Grosso* Director April 20, 1999
Scott Hodes* Director April 20, 1999
Jackson Ream* Director April 20, 1999
Nelson Schaenen Jr.* Director April 20, 1999
John T. Sullivan* Director April 20, 1999
Kathryn S. Head* Director April 20, 1999
Glenn T. Dallas* Director April 20, 1999
* By:/s/ Richard H. Gaebler
--------------------------
Richard H. Gaebler
Attorney-In-Fact
Pursuant to Powers of
Attorney previously filed
<PAGE>
EXHIBIT INDEX
1. 1. Resolution of Board of Directors Creating
Separate Account./1/
2. Not Applicable.
3(a). Underwriting Agreement./1/
3(b). Specimen Associate's Agreement./1/
3(c). Commission schedule./1/
4. Not Applicable.
5. Specimen Variable Life Insurance Policy./1/
6. Certificate of Incorporation, as amended, and
By-Laws, as amended, of First Investors Life
Insurance Company./1/
7. See (5) above.
8. Not Applicable.
9. Not Applicable.
10. Specimen form of application used with Variable
Life Insurance Policy provided in response to 5
above. /2/
<PAGE>
2. Opinion of Counsel. /2/
Opinion of Actuary. /2/
3. Not Applicable.
4. Not Applicable.
5. Financial Data Schedule. (see Exhibit 27 below.)
6. Consent of Independent Public Accountants. (Filed herewith.)
7. Powers of Attorney. /1/
27. Financial Data Schedule. (Inapplicable, because, notwithstanding
Instruction 5 as to Exhibits, the Commission staff has advised that no
such Schedule is required.)
- ----------------
/1/ Previously filed in Post-Effective Amendment No. 17 to Registrant's
Registration Statement (File No.2-98410) filed on May 19, 1997.
/2/ Previously filed in Post-Effective Amendment No. 18 to Registrant's
Registration Statement (File No.2-98410) filed on April 28, 1998.
EXHIBIT 6
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
First Investors Life Insurance Company
95 Wall Street
New York, NY 10005
We hereby consent to the use in Post-Effective Amendment No. 20 to the
Registration Statement on Form S-6 (File No. 2-98410) of our report dated
February 17, 1999 relating to the December 31, 1998 financial statements of
First Investors Life Level Premium Variable Life Insurance (Separate Account B)
and our report dated February 17, 1999 relating to the December 31, 1998
financial statements of First Investors Life Insurance Company, which are
included in said Registration Statement.
/s/ TAIT, WELLER & BAKER
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
April 14, 1999
