PROSPECTUS AMERITAS VARIABLE LIFE INSURANCE COMPANY LOGO
5900 "O" Street
VARIABLE UNIVERSAL LIFE POLICY P.O. Box 82550/Lincoln, Nebraska 68501
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This Prospectus describes a flexible premium variable life insurance policy
("Policy") offered by Ameritas Variable Life Insurance Company ("AVLIC"), a
stock life insurance company. The Policy is designed to operate generally as a
single premium policy but provides the flexibility to make additional premium
payments. The Policy also provides the flexibility to change the level of death
benefits payable under the Policy. This flexibility allows a Policyowner to
provide for changing insurance needs under a single insurance policy.
The minimum required premium is $10,000, except for Insureds who have an age
nearest birthday of 0 to 15, for which the minimum premium is $5,000. The Policy
is available only to persons who have an age nearest birthday of 80 or less at
the time the Policy is purchased.
The Policy guarantees a death benefit payable at the Insured's death for as long
as the Policy remains in force. The Policyowner may choose either death benefit
Option A (generally, a level benefit that equals the Specified Amount of the
Policy) or Option B (a variable benefit that generally equals the Specified
Amount plus the Policy's cash value). The minimum Specified Amount for a Policy
is the amount that a premium of $10,000 ($5,000 for ages 0-15) will purchase.
The Policy provides for a cash surrender value that can be obtained by partial
withdrawals, completely surrendering the Policy, or by policy loans. There is no
minimum guaranteed cash value. However, the Policy could be a modified endowment
contract. Policy loans, partial withdrawals or a surrender prior to age 59 1/2
may result in adverse tax consequences and or penalties.
The Policyowner may allocate net premiums to one or more of the Subaccounts of
Ameritas Variable Life Insurance Company Separate Account V ("Separate
Account"). The initial premium payment will be allocated to the Money Market
Subaccount, as of the issue date, for 13 days. After the expiration of the 13
day period (see page 21) the accumulation value will be allocated to the
Subaccounts or the Fixed Account as selected by the Policyowner. The amount of
the Policy's cash value, the duration of the death benefit and, if Option B is
selected, the amount of the death benefit above the Specified Amount, will vary
with the investment experience of the selected Subaccounts or the Fixed Account.
In addition, the cash value will also be adjusted for other factors, including
the amount of charges imposed and the premium payments made. The Policy will
continue in force so long as the cash surrender value is sufficient to pay
certain monthly charges imposed in connection with the Policy.
The assets of each Subaccount are invested in shares of a corresponding
portfolio of one of the following mutual funds (collectively, the "Funds"):
Variable Insurance Products Fund and the Variable Insurance Products Fund II,
(respectively, "VIP" and "VIP II"; collectively "Fidelity Funds"); The Alger
American Fund ("Alger American Fund"); MFS Variable Insurance Trust ("MFS
Trust"); and Morgan Stanley Universal Funds, Inc. ("Morgan Stanley Fund"). VIP,
which is managed by Fidelity Management & Research Company ("Fidelity"), offers
the following portfolios: Money Market, Equity-Income, Growth, High Income and
Overseas Portfolios. VIP II, also managed by Fidelity, offers the following
portfolios: Asset Manager, Investment Grade Bond, Asset Manager: Growth, Index
500, and Contrafund Portfolios. The Alger American Fund, which is managed by
Fred Alger Management, Inc. ("Alger Management"), offers the following
portfolios: Alger American Growth ("Growth"), Alger American Income and Growth
("Income and Growth"), Alger American Small Capitalization ("Small
Capitalization"), Alger American Balanced ("Balanced"), Alger American MidCap
Growth ("MidCap Growth"), and Alger American Leveraged AllCap ("Leveraged
AllCap") Portfolios. The MFS Trust, managed by Massachusetts Financial Services
Company ("MFS Co."), offers the following portfolios or series in connection
with this Policy: MFS Emerging Growth, MFS Utilities, MFS World Governments, MFS
Research and MFS Growth With Income. The Morgan Stanley Fund offers the
following portfolios in connection with the Policy, all of which are managed by
Morgan Stanley Asset Management Inc. ("MSAM"): Emerging Markets Equity, Global
Equity, International Magnum, Asian Equity and U.S. Real Estate Portfolios. This
prospectus must be accompanied by prospectuses for each of the Funds, which
describe the investment objectives, policies and risk considerations relating to
the respective portfolios. The investment gains or losses of the monies placed
in the various portfolio Subaccounts will be experienced by the policyowner.
You have the right to examine the Policy and return it for a refund for a
limited time.
Replacing existing insurance with a Policy or purchasing a Policy as a means to
obtain additional insurance protection if the purchaser already owns another
flexible premium variable life insurance policy may not be advantageous.
This Prospectus Must Be Accompanied Or Preceded By The Current Prospectuses for
Variable Insurance Products Fund, Variable Insurance Products Fund II, Alger
American Fund, MFS Variable Insurance Trust and Morgan Stanley Universal Funds,
Inc.
These securities are not deposits with, or obligations of, or guaranteed or
endorsed by, any financial institution; and the securities are not insured by
the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any
other agency. These securities involve investment risk, including the possible
loss of principal.
The Securities and Exchange Commission maintains a web site (http://www.sec.gov)
that contains other information regarding registrants that file electronically
with the Securities and Exchange Commission.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR BY STATE SECURITIES REGULATORY AUTHORITIES, NOR HAS THE
COMMISSION OR STATE REGULATORY AUTHORITIES PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Please Read This Prospectus Carefully And Retain It For Future Reference.
The Date of This Prospectus is May 1, 1998, as revised May 1, 1998.
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LIFE 1
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TABLE OF CONTENTS
PAGE
Definitions................................................................ 3
Summary.................................................................... 4
AVLIC and the Separate Account............................................. 8
Ameritas Variable Life Insurance Company............................... 8
Ameritas Variable Life Insurance Company Separate Account V............ 9
The Funds.............................................................. 10
Investment Objectives and Policies of the Funds' Portfolios............ 11
Fixed Account.......................................................... 15
Addition, Deletion or Substitution of Investments...................... 16
Policy Benefits............................................................ 16
Purposes of the Policy................................................. 16
Death Benefit Proceeds................................................. 17
Death Benefit Options.................................................. 17
Cash Value............................................................. 18
Benefits at Maturity................................................... 19
Payment of Policy Benefits............................................. 19
Policy Rights.............................................................. 20
Loan Benefits.......................................................... 20
Surrenders............................................................. 21
Transfers.............................................................. 21
Systematic Programs .................................................. 22
Refund Privilege....................................................... 22
Exchange Privilege..................................................... 22
Payment and Allocation of Premiums......................................... 23
Issuance of a Policy................................................... 23
Premiums............................................................... 23
Allocation of Premiums and Cash Value.................................. 24
Policy Lapse and Reinstatement......................................... 25
Charges and Deductions..................................................... 25
Premium Charge......................................................... 25
Monthly Deduction...................................................... 26
Daily Charges Against the Separate Account............................. 26
Fund Investment Advisory Fee and Expenses.............................. 27
Cash Surrender Charge.................................................. 27
Transfer Charge........................................................ 28
Partial Withdrawal Charge.............................................. 28
General Provisions......................................................... 28
Distribution of the Policies............................................... 30
Federal Tax Matters........................................................ 31
Safekeeping of the Separate Account's Assets............................... 33
Third Party Services....................................................... 33
Voting Rights.............................................................. 33
State Regulation of AVLIC.................................................. 34
Executive Officers and Directors of AVLIC.................................. 34
Legal Matters.............................................................. 36
Legal Proceedings.......................................................... 36
Experts.................................................................... 36
Additional Information..................................................... 37
Financial Statements....................................................... 37
Ameritas Variable Life Insurance Company Separate Account V............ 39
Ameritas Variable Life Insurance Company............................... 61
Appendices................................................................. 77
The Policy, certain funds and/or certain riders are not available in all states.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT BE LAWFULLY MADE. NO DEALER, SALESMAN, OR OTHER PERSON IS
AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS IN CONNECTION
WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON.
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2 LIFE
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DEFINITIONS
ACCRUED EXPENSE CHARGES - The sum of any monthly deductions that are due and
unpaid.
ATTAINED AGE - The Issue Age of the Insured plus the number of complete policy
years that the Policy has been in force.
AVLIC - Ameritas Variable Life Insurance Company, a Nebraska stock company.
BENEFICIARY - The beneficiary is designated by the Policyowner in the
application. If changed, the beneficiary is as shown in the latest change filed
and recorded with AVLIC. If no beneficiary survives the Insured, the Policyowner
or the Policyowner's estate will be the beneficiary. The interest of any
beneficiary is subject to that of any assignee.
CASH VALUE - The total amount that a Policy provides for investment at any time.
It is equal to the total of the cash value held in the Separate Account and the
Fixed Account, and the cash value held in the general account which secures
policy loans.
CASH SURRENDER VALUE - The Policy cash value on the date of surrender, less any
outstanding policy debt, any cash surrender charge, and any accrued expense
charges.
DEATH BENEFIT - The amount of insurance coverage provided under the Policy.
DEATH BENEFIT PROCEEDS - The proceeds payable to the beneficiary upon receipt by
AVLIC of the proof of the death of the Insured while the Policy is in force
equal to: (l) the death benefit; minus (2) any outstanding policy debt; minus
(3) any monthly deduction that may apply to that period, including the deduction
for the month of death.
DECLARED RATES - AVLIC guarantees that it will credit interest in the Fixed
Account at an effective annual rate of at least 4.5%. AVLIC may, at its sole
discretion, declare higher interest rates for amounts allocated or transferred
to the Fixed Account.
DUE PROOF OF DEATH - All of the following must be submitted:
(1) A certified copy of the death certificate;
(2) A Claimant Statement;
(3) The Policy; and
(4) Any other information that AVLIC may reasonably require to establish the
validity of the contract.
EARNINGS LOAN VALUE - The amount of cash value equaling the difference between
the cash value and the total premium paid.
FIXED ACCOUNT - An account that is a part of AVLIC's general account to which
all or a portion of premium payments may be allocated for accumulation at fixed
rates of interest.
FUNDS - The Funds available on the policy date or as later changed by AVLIC. The
Funds available as of the date of this Prospectus are the Variable Insurance
Products Fund ("VIP"), Variable Insurance Products Fund II ("VIP II")
("collectively the "Fidelity Funds"), the Alger American Fund ("Alger American
Fund"), the MFS Variable Insurance Trust ("MFS Trust"), and Morgan Stanley
Universal Funds, Inc. ("Morgan Stanley Fund"). The Funds have one or more
portfolios each. There is a portfolio that corresponds to each of the
Subaccounts of the Separate Account.
GUIDELINE SINGLE PREMIUM - The "Guideline Single Premium" as defined in Section
7702 of the Internal Revenue Code of 1986. It is based on the single premium
that would be required to provide the future benefits under the Policy, computed
using certain assumptions, including an assumed interest rate of 6% and standard
guaranteed cost of insurance rates and charges and the premium loads.
INSURED - The person upon whose life the Policy is issued.
ISSUE AGE - The age at the Insured's nearest birthday on the policy date.
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LIFE 3
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ISSUE DATE - The date that all financial, contractual and administrative
requirements have been met and processed for the Policy.
MATURITY DATE - The policy anniversary nearest the Insured's 95th birthday, if
living, unless the maturity has been extended by election of the Extended
Maturity Rider.
MINIMUM FIRST YEAR PREMIUM - The premium that must be paid on or before the date
the Policy is delivered to pay for insurance coverage under the selected death
benefit option.
MONTHLY ACTIVITY DATE - The same date in each succeeding month as the policy
date except that whenever the monthly activity date falls on a date other than a
valuation date, the monthly activity date will be deemed the next valuation
date.
NET PREMIUM - The premium paid less any charge for premium taxes.
OUTSTANDING POLICY DEBT - The sum of all unpaid policy loans and accrued
interest on policy loans.
PLANNED PERIODIC PREMIUMS - A selected scheduled premium of a level amount at a
fixed interval. The Policyowner is not required to select a scheduled premium.
The Policyowner is also not required to follow this schedule, if selected, and
following this schedule does not necessarily ensure that the Policy will remain
in force.
POLICY - The flexible premium variable life insurance Policy offered by AVLIC
and described in this Prospectus.
POLICYOWNER - The owner of the Policy, as designated in the application or as
subsequently changed. If a Policy has been absolutely assigned, the assignee is
the Policyowner. A collateral assignee is not the Policyowner.
POLICY DATE - The date set forth in the Policy that is the effective date of
coverage for all coverage provided in the original application and that is used
to determine policy anniversary dates, policy years and monthly activity dates.
Policy anniversaries are measured from the policy date. The policy date and the
issue date will be the same unless: 1) an earlier policy date is specifically
requested, or 2) when additional premiums or application amendments are needed
at the time of delivery (See Issuance of a Policy, page 23).
POLICY YEAR - The period from one policy anniversary date until the next policy
anniversary date.
SEPARATE ACCOUNT - Ameritas Variable Life Insurance Company Separate Account V,
a separate investment account established by AVLIC to receive and invest the net
premiums paid under the Policy and allocated by the Policyowner to the Separate
Account.
SPECIFIED AMOUNT - The minimum death benefit under the Policy so long as the
Policy remains in force.
SUBACCOUNT - A subdivision of the Separate Account. Each Subaccount invests
exclusively in the shares of a specified portfolio of the Funds.
VALUATION DATE - A valuation date is each day on which the New York Stock
Exchange is open for trading.
VALUATION PERIOD - The period between two successive valuation dates, commencing
at the close of the New York Stock Exchange ("NYSE") on one valuation date and
ending at the close of the NYSE on the next succeeding valuation date.
SUMMARY
The following summary of Prospectus information should be read in conjunction
with the detailed information appearing elsewhere in this Prospectus. Unless
otherwise indicated, the description of the Policy contained in this Prospectus
assumes that the Policy is in effect and that there is no outstanding
indebtedness.
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4 LIFE
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THE POLICY
This flexible premium variable life insurance policy ("Policy") allows the
Policyowner, within certain limitations, to choose: (a) the amount and frequency
of premium payments; (b) the manner in which the Policyowner's accumulation
values are invested; and (c) a choice of two benefit options.
So long as the Policy remains in force, it will provide for: (1) life insurance
coverage on the named Insured up to age 95; (2) cash value; (3) surrender rights
(including partial withdrawals and total surrenders) and policy loan privileges;
and (4) accelerated death benefits under certain circumstances in the instance
of terminal illness (SEE Accelerated Benefit Rider for Terminal Illness, page
29).
PREMIUMS
This Policy differs in two important respects from a conventional life insurance
policy. The failure to pay a planned periodic premium will not in itself cause
the policy to lapse and a policy can lapse even if planned periodic premiums
have been paid. (See Payment and Allocation of Premiums, page 23). The Policy
will lapse when its cash surrender value is insufficient to pay the monthly
deduction for insurance charges and administrative charges and the grace period
expires. The Policy is designed so that it may be used as a single premium
policy, whereby a single, large premium payment may be made. The Policy will not
be placed in force if the minimum first year premium has not been paid on or
before the date the Policy is delivered. The minimum first year premium for the
Policy is no less than $10,000, except for Insureds who have an age nearest
birthday of 0 to 15 for whom the minimum first year premium is no less than
$5,000. The minimum first year premium generally approximates 80% of the
Guideline Single Premium for the coverage amount selected as defined for federal
tax purposes. If the initial premium is less than 100% of the Guideline Single
Premium, the Policyowner may establish a schedule of premium payments ("planned
periodic premiums"), subject to the limitations set by federal tax law on total
premiums paid. (See Premiums, page 23).
The Policyowner may select the manner in which new premiums are allocated
between one or more of the Subaccounts or the Fixed Account. (See Fixed Account,
page 15). The assets of each Subaccount are invested in a corresponding
portfolio of the Variable Insurance Products Fund, the Variable Insurance
Products Fund II, the Alger American Fund, the MFS Variable Insurance Trust, or
the Morgan Stanley Universal Funds, Inc., which are mutual fund companies with
separate investment portfolios, each intended to pursue different investment
objectives. (See The Funds, page 10).
ALLOCATION OF PREMIUMS
On the issue date of the Policy, premiums paid are allocated to the Money Market
Subaccount. Premium payments received by AVLIC prior to the issue date are held
in the general account until the issue date. Should the policyowner elect a
policy date prior to the issue date the amounts held in the general account will
be credited with interest at a rate determined by AVLIC for the period from the
later of the policy date or the date the payment has been converted into Federal
Funds (monies of member banks within the Federal Reserve System which are held
on deposit at a Federal Reserve Bank) that are available to AVLIC until the
amounts are transferred to the Money Market Subaccount. As of thirteen days from
the issue date of the Policy, the Policy's cash value will be reallocated to the
Subaccounts or the Fixed Account as selected by the Policyowner. Thereafter, net
premiums are allocated to the Subaccounts or the Fixed Account according to the
latest Policyowner instructions. After the first policy year, all premiums are
subject to a premium charge (see below) and then, the net premium is allocated.
The Policyowner may change the allocation instructions for future premium
payments at any time. The Policyowner may also make a special designation for
unscheduled premiums. Subject to certain restrictions, a Policyowner may
transfer amounts among the Subaccounts. (See Allocation of Premiums and Cash
Value, page 24).
CHARGES
PREMIUM CHARGES. No premium charges will be deducted from premium payments made
during the first year. However, a charge of 2 1/2% of the premiums will be
deducted from premium payments made after the first year to reimburse AVLIC for
premium taxes.
MONTHLY DEDUCTIONS FROM THE CASH VALUE. On each monthly activity date, the cash
value will be reduced by the monthly deduction. The monthly deduction is equal
to: (a) a charge for the cost of insurance for the current policy month, plus,
(b) one-twelfth of any flat extra rating charge (See Monthly Deduction, page 26
and Rate Class, page 26).
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LIFE 5
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DAILY CHARGES AGAINST THE SEPARATE ACCOUNT. A Daily Charge will be imposed at an
annual rate of 1.20% of the average daily net assets of each Subaccount, but not
the Fixed Account, to compensate AVLIC for certain mortality and expense risks
and administrative costs incurred in connection with the Policy. (See Daily
Charges Against the Separate Account, page 26).
No charges are currently made against the Separate Account for federal, state or
local taxes (in addition to state premium taxes). If there is a material change
from the expected treatment of AVLIC under federal, state or local tax laws,
AVLIC may determine to make deductions from the Separate Account to pay those
taxes. (See Federal Tax Matters, page 31).
In addition, because the Separate Account purchases shares of the Funds, the
value of the units in each Subaccount will reflect the net asset value of shares
of the various Funds held therein, and therefore, the management fee and other
expenses incurred by the Funds. (See The Funds, page 10).
CASH SURRENDER CHARGE. If a Policy is surrendered prior to the 7th policy
anniversary, AVLIC will assess a cash surrender charge based upon percentages of
premiums actually paid during the first policy year, limited as shown in the
policy schedule pages. Subject to other considerations, the Policyowner may
decide to minimize the cash surrender charge by paying only the minimum amount
required during the first policy year. However, the amount paid will affect the
values and costs under the Policy and the duration of the Policy.
AVLIC has voluntarily lowered its maximum surrender charge to 9%. This would
affect the surrender charge for the first 3 years. The Policy provides that
should the Policyowner surrender during the first seven policy years AVLIC may
assess a cash surrender charge beginning with 11.5% during the first year
grading off to 0% during the next seven years. The maximum charge allowed by the
Policy is based on a 9% deferred sales cost and a 2.5% charge for premium tax.
Because the cash surrender charge may be significant upon early surrender,
prospective Policyowners should purchase a Policy only if they do not intend to
surrender the Policy for a substantial period. (See Cash Surrender Charge, page
27).
TRANSFER CHARGE. The first 15 transfers per policy year will be allowed free of
charge. Thereafter a transfer charge of $10 may be assessed for each transfer of
cash value among Subaccounts, or the Fixed Account, to compensate AVLIC for
administrative costs in handling the transfer. The transfer charge will be
deducted from the amount transferred. Transfers may be made from the Subaccounts
to the Fixed Account. One hundred percent of the amount deposited, plus interest
thereon, may be transferred out of the Fixed Account during the 30 day period
following the yearly anniversary date of the Policy. (See Transfer Charge, page
28).
PARTIAL WITHDRAWAL CHARGE. A maximum charge, not to exceed the lesser of $50 or
2% of the amount withdrawn may be deducted for each partial withdrawal.
Currently the charge is the lesser of $25 or 2% of the amount withdrawn. The
charge will be deducted from the amount paid as a result of the withdrawal and
will compensate AVLIC for the administrative costs of partial withdrawals. (See
Partial Withdrawal Charge, page 28).
THE ISSUER
The Policy is issued by AVLIC, which is a Nebraska stock life insurance company.
A separate account of AVLIC, Ameritas Variable Life Insurance Company Separate
Account V ("Separate Account"), has been established to hold the assets
supporting the Policy. The Separate Account has twenty-six Subaccounts that
support the Policies which correspond to, and invest in, the portfolios of the
Funds. For more detailed information about AVLIC and the Separate Account, see
AVLIC and the Separate Account, page 8. The financial statements for AVLIC and
the Separate Account can be found beginning on page 39.
POLICY BENEFITS
DEATH BENEFIT PROCEEDS AND DEATH BENEFIT OPTIONS. So long as the Policy remains
in force, AVLIC will pay the proceeds under the Policy upon receipt of due proof
of death of the Insured. These proceeds will be the Policy's death benefit,
reduced by any outstanding policy debt and any accrued expenses. The proceeds
may be paid in a lump sum or in accordance with an optional payment plan.
The Policy provides for two death benefit options unless the Extended Maturity
Rider is in effect. Under either option, so long as the Policy remains in force,
the death benefit will not be less than the current Specified Amount of the
Policy. The death benefit may, however, exceed the Specified Amount, depending
upon the investment experience of the Policy. Death
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6 LIFE
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Benefit Option A provides for a level benefit equal to the current Specified
Amount of the Policy, unless the cash value of the Policy on the date of the
Insured's death multiplied by the applicable percentage set forth in the Policy
is greater, in which case the death benefit is equal to that larger amount.
Death Benefit Option B provides for a variable benefit equal to the current
Specified Amount of the Policy plus the Policy's cash value on the date of the
Insured's death, or if greater, the cash value of the Policy on the date of the
Insured's death multiplied by the applicable percentage set forth in the Policy.
(See Death Benefit Proceeds, page 17).
If the Extended Maturity Rider is in effect, the Death Benefit will be the Cash
Value.
BENEFITS AT MATURITY. On the maturity date of the Policy, if the Insured is
still living, the Policyowner will be paid the cash value of the Policy less any
outstanding policy debt.
CASH VALUE BENEFITS. The Policy's cash value in the Separate Account will
reflect the amount and frequency of premium payments, the investment experience
of the chosen Subaccounts, policy loans, any partial withdrawals, and any
charges imposed in connection with the Policy. The entire investment risk is
borne by the Policyowner. AVLIC does not guarantee a minimum cash value in the
Separate Account. (See Cash Value, page 18).
The Policyowner may at any time surrender the Policy and receive its cash
surrender value, which is the cash value less any outstanding policy debt, cash
surrender charge and accrued expense charges. (See Surrenders page 21). Subject
to certain limitations, the Policyowner may also make a partial withdrawal from
the Policy and obtain a portion of the cash surrender value at any time prior to
the maturity date. Partial withdrawals will reduce both the cash value and the
death benefit payable under the Policy. (See Partial Withdrawals, page 21). A
charge will be deducted from the amount paid upon partial withdrawal. (See
Partial Withdrawal Charge, page 28).
POLICY LOANS. The Policyowner may exercise certain loan privileges under a
Policy. THIS POLICY MAY BE A MODIFIED ENDOWMENT CONTRACT. THERE ARE ADVERSE TAX
CONSEQUENCES FOR MODIFIED ENDOWMENT CONTRACTS, INCLUDING WHEN A POLICY LOAN
PROVISION IS EXERCISED. (See Tax Treatment of the Policy, page 8, Modified
Endowment Contract and Tax Penalty on Early Withdrawals, page 32).
The maximum loan amount, which is the amount that may be borrowed, is 85% of the
cash value less any cash surrender charge and accrued expenses. Texas and
Virginia Policyowners may borrow 100% of the cash value subject to certain
deductions. The minimum loan that may be requested is $1000. The available loan
amount at any time is the maximum loan amount less any outstanding policy debt.
Loans currently will accrue interest on a daily basis at the rate of 4 1/2% per
year on that portion of the outstanding policy debt not exceeding the Earnings
Loan Value and 6% per year on the remainder of the outstanding policy debt.
AVLIC may increase these rates to a maximum of 8%. The amount of any loans
outstanding plus any accrued interest equals the outstanding policy debt.
Interest is due on each policy anniversary and if not paid when due, will be
added to the outstanding loan. When the loan is made or when interest is not
paid when due, an amount sufficient to secure the policy debt is transferred out
of the Separate Account and into AVLIC's general account as security for the
loan and will earn interest at the annual rate of 4.5%, credited on the policy
anniversary. Upon partial or full loan repayment, the portion of the cash value
in the general account securing the repaid portion of the policy loan will be
transferred to the Separate Account or the Fixed Account. Any loan transaction
will permanently affect the values of the Policy. If the outstanding policy debt
exceeds the Policy's cash value less any cash surrender charge and accrued
expenses, the excess must be repaid within the specified time period or the
Policy will terminate without value. Should the policy lapse while loans are
outstanding the portion of the loans attributable to earnings will become
taxable distributions. (See Loan Benefits, page 20).
FLEXIBILITY TO ADJUST DEATH BENEFITS
After the first policy anniversary, the Policyowner has flexibility to adjust
the death benefit by changing the death benefit option. After the second policy
year the Policyowner has flexibility to adjust the death benefit by decreasing
the Specified Amount of the Policy. A change in the Specified Amount and a
change in the death benefit option may only be made once per year, and are
subject to certain limitations. No change will be allowed if the resulting
Specified Amount is less than the minimum allowed. The minimum Specified Amount
during the first three policy years is the amount that a premium of $10,000
($5,000 for ages 0-15) will purchase; thereafter, the minimum is $15,000. A
change in the death benefit option from Option A to Option B will require
satisfactory evidence of insurability. Finally, no decrease will be allowed if
the Specified Amount is less than $15,000 in the first three policy years. (See
Change in Death Benefit Option, page 17, and Change in Specified Amount, page
18).
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LIFE 7
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TAX TREATMENT OF THE POLICY
The Internal Revenue Code ("the Code") defines a modified endowment insurance
contract as one where the accumulated amount paid under the contract at any time
during the first 7 contract years exceeds the sum of the net level premiums
which would have been paid on or before that time if the Policy was paid up
after the payment of 7 level annual premiums. Because this is designed to
operate as a single premium contract, the initial premium exceeds the amounts
allowed in the seven pay test. Partial or full surrenders, assignments, policy
pledges, and loans (including loans to pay loan interest) under the Policy will
be taxable to the extent of any gain under the Policy. A 10% penalty tax also
applies to the taxable portion of any distribution prior to the Policyowner
reaching age 59 1/2. The 10% penalty tax does not apply if the Policyowner is
disabled as defined under the Code or if the distribution is paid out in the
form of a life annuity on the life of the Policyowner or the joint lives of the
Policyowner and beneficiary. (See Federal Tax Matters, page 31).
Like death benefits payable under conventional life insurance policies, life
insurance proceeds payable under a Policy should be completely excludable from
the gross income of the beneficiary. As a result, the beneficiary generally will
not be taxed on these proceeds. (See Federal Tax Matters, page 31).
REFUND PRIVILEGE
The Policyowner is granted a period of time (a "free look period") to examine a
Policy and return it for a refund. The Policyowner may cancel the Policy within
45 days after Part I of the application is signed, within 10 days after the
Policyowner receives the Policy, or 10 days after AVLIC delivers a cancellation
notice, whichever is later. The amount of the refund is the greater of the
premium paid or the premium paid adjusted by investment gains or losses. (See
Refund Privilege, page 22).
EXCHANGE PRIVILEGE
During the first 24 months after the Policy date of the Policy, subject to
certain restrictions, the Policyowner may exchange the Policy for a non-variable
life insurance policy issued by AVLIC or an affiliate. The Policy provisions and
applicable charges for the new Policy will be based on the same policy date and
issue age as under the Policy. (See Exchange Privilege, page 22).
YEAR 2000
Like other insurance companies and their separate accounts, AVLIC and the
Separate Account could be adversely affected if the computer systems they rely
upon do not properly process date-related information and data involving the
years 2000 and after. AVLIC has taken steps it believes are reasonable to timely
address this issue in its own computer system, and to obtain assurances that its
major service providers are taking comparable steps. At this time, however,
there can be no assurance that these steps will be sufficient to avoid any
adverse impact on AVLIC and the Separate Account.
AVLIC AND THE SEPARATE ACCOUNT
AMERITAS VARIABLE LIFE INSURANCE COMPANY
Ameritas Variable Life Insurance Company ("AVLIC") is a stock life insurance
company organized in the State of Nebraska. AVLIC was incorporated on June 22,
1983 and commenced business December 29, 1983. AVLIC is currently licensed to
sell life insurance in 46 states and the District of Columbia. AVLIC's financial
statements may be found at page 61.
AVLIC is a wholly owned subsidiary of AMAL Corporation, a Nebraska stock
company. AMAL Corporation is a joint venture of Ameritas Life Insurance Corp.
(Ameritas Life), which owns a majority interest in AMAL Corporation; and AmerUs
Life Insurance Company ("AmerUs Life"), an Iowa stock life insurance company,
which owns a minority interest in AMAL Corporation. The Home Offices of both
AVLIC and Ameritas Life are at 5900 "O" Street, P.O. Box 82550, Lincoln,
Nebraska 68501.
On April 1, 1996 Ameritas Life consummated an agreement with AmerUs Life whereby
AVLIC became a wholly owned subsidiary of a newly formed holding company, AMAL
Corporation. Under terms of the agreement the AMAL Corporation is 66% owned by
Ameritas Life and 34% owned by AmerUs Life. AmerUs Life has options to purchase
an additional interest in AMAL Corporation if certain conditions are met. There
are no other owners of 5% or more of the outstanding voting securities of AVLIC.
Ameritas Life and its subsidiaries had total assets at December 31, 1997 of over
$3.4 billion. AmerUs Life had total assets as of December 31, 1997 of over $10.3
billion.
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8 LIFE The Date of this Prospectus Supplement is May 1, 1998
<PAGE>
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AVLIC has a rating of A (Excellent) from A.M. Best Company, a firm that analyzes
insurance carriers, and a rating of AA ("Excellent") from Standard & Poor's for
claims-paying ability. Ameritas Life enjoys a long standing A+ (Superior) rating
from A.M. Best.
Ameritas Life, AmerUs Life and AMAL Corporation guarantee the obligations of
AVLIC. This guarantee will continue until AVLIC is recognized by a National
Rating Agency as having a financial rating equal to or greater than Ameritas
Life, or until AVLIC is acquired by another insurance company who has a
financial rating by a National Rating Agency equal to or greater than Ameritas
Life and who agrees to assume the guarantee; provided that if AmerUs Life sells
its interest in AMAL Corporation to another insurance company who has a
financial rating by a National Rating Agency equal to or greater than that of
AmerUs Life, and the purchaser assumes the guarantee, AmerUs Life will be
relieved of its obligations under the Guarantee.
AVLIC may publish in advertisements and reports to Policyowners, the ratings and
other information assigned it by one or more independent rating services. The
purpose of the ratings is to reflect the financial strength and/or claims-paying
ability of AVLIC. The ratings do not relate to the performance of the Separate
Account. Further AVLIC may publish charts and other information concerning asset
allocation, dollar cost averaging, portfolio rebalancing, earnings sweep,
tax-deference, diversification, long term market trends, index performance, and
other investment methods.
AMERITAS VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT V
Ameritas Variable Life Insurance Company Separate Account V ("the Separate
Account") was established under Nebraska law on August 28, 1985.
The assets of the Separate Account are held by AVLIC segregated from all of
AVLIC's other assets, are not chargeable with liabilities arising out of any
other business which AVLIC may conduct, and income, gains, or losses of the
Separate Account are credited without regard to the other income, gains, or
losses of AVLIC. Although the assets maintained in the Separate Account will not
be charged with any liabilities arising out of AVLIC's other business, all
obligations arising under the policies are liabilities of AVLIC who will
maintain assets in the Separate Account of a total market value at least equal
to the reserve and other contract liabilities of the Separate Account. The
Separate Account will at all times contain assets equal to or greater than
account values invested in the Separate Account. Nevertheless, to the extent
assets in the Separate Account exceed AVLIC's liabilities in the Separate
Account, the assets are available to cover the liabilities of AVLIC's General
Account. AVLIC may, from time to time, withdraw assets available to cover the
General Account obligations.
The Separate Account is registered with the Securities and Exchange Commission
("SEC") under the Investment Company Act of 1940 ("1940 Act") as a unit
investment trust, which is a type of investment company. This does not involve
any SEC supervision of the management or investment policies or practices of the
Separate Account. For state law purposes, the Separate Account is treated as a
Division of AVLIC.
PERFORMANCE INFORMATION
Performance information for the Subaccounts of the Separate Account and the
funds available for investment by the Separate Account may appear in
advertisements, sales literature, or reports to Policyowners or prospective
purchasers. We may also provide a hypothetical illustration of Cash Value, Cash
Surrender Value and Death Benefit based on historical investment returns of the
Funds for a sample insured based on assumptions as to age, sex, and other policy
specific assumptions.
We may also provide individualized hypothetical illustrations of Cash Value,
Cash Surrender Value and Death Benefit based on historical investment returns of
the Funds. These illustrations will reflect deductions for fund expenses and
Policy and Separate Account charges, including the Monthly Deduction, Premium
Charge and Cash Surrender Charge. These hypothetical illustrations will be based
on the actual historical experience of the funds as if the Subaccounts had been
in existence and a Policy issued for the same periods as those indicated for the
funds.
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LIFE 9
<PAGE>
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THE FUNDS
There are currently twenty-six Subaccounts within the Separate Account available
to Policyowners for new allocations. Each Subaccount of the Separate Account
will invest only in the shares of a corresponding portfolio of the VIP, VIP II,
The Alger American Fund, the MFS Fund and the Morgan Stanley Universal Fund
(collectively the "Funds".) Each Fund is registered with the SEC under the
Investment Company Act of 1940 as an open-end management investment company.
The assets of each portfolio of the Funds are held separate from the assets of
the other portfolios. Thus, each portfolio operates as a separate investment
portfolio, and the income or losses of one portfolio generally have no effect on
the investment performance of any other portfolio.
The investment objectives and policies of each portfolio are summarized below.
There is no assurance that any of the portfolios will achieve their stated
objectives. More detailed information, including a description of investment
objectives, policies, restrictions, expenses and risks, is in the prospectuses
for each of the Funds, which must accompany or precede this Prospectus. All
underlying fund information, including Fund prospectuses, has been provided to
AVLIC by the underlying Funds. AVLIC has not independently verified this
information. One or more of the Portfolios may employ investment techniques that
involve certain risks, including investing in non-investment grade, high risk
debt securities, entering into repurchase agreements and reverse repurchase
agreements, lending portfolio securities, engaging in "short sales against the
box," investing in instruments issued by foreign banks, entering into firm
commitment agreements and investing in warrants and restricted securities. In
addition, certain of the portfolios may invest in securities of foreign issuers.
The Leveraged AllCap Portfolio may borrow money to increase its portfolio of
securities, and may purchase or sell options and enter into futures contracts on
securities indexes to increase gain or to hedge the value of the Portfolio.
Certain of the portfolios are permitted to invest a portion of their assets in
non-investment grade, high risk debt securities; these portfolios include the
VIP High Income, VIP Equity-Income, VIP II Asset Manager: Growth, VIP II Asset
Manager Portfolios of the Fidelity Funds, and the Research Portfolio of the MFS
Fund. Certain portfolios are designed to invest a substantial portion of their
assets overseas, such as the VIP Overseas Portfolio and the International Magnum
Portfolio of the Morgan Stanley Fund. Other portfolios invest primarily in the
securities markets of emerging nations. Investments of this type involve
different risks than investments in more established economies, and will be
affected by greater volatility of currency exchange rates and overall economic
and political factors. Such portfolios include the Emerging Markets Equity and
Asian Equity Portfolios of the Morgan Stanley Fund. The Emerging Markets Equity
Portfolio may also invest in non-investment grade, high risk debt securities
(also known as "junk bonds") and securities of Russian companies. Investment in
Russian companies may involve risks associated with that nation's system of
share registration and custody. Securities of non-U.S. issuers (including
issuers in emerging nations) may also be purchased by each of the portfolios of
the MFS Trust and the Global Equity Portfolio of the Morgan Stanley Fund.
Investments acquired by the U.S. Real Estate Portfolio of the Morgan Stanley
Fund may be subject to the risks associated with the direct ownership of real
estate and direct investments in real estate investment trusts. Further
information about the risks associated with investments in each of the Funds and
their respective portfolios is contained in the prospectus relating to that
Fund. These prospectuses, together with this Prospectus, should be read
carefully and retained.
Each Policyowner should periodically consider the allocation among the
Subaccounts in light of current market conditions and the investment risks
attendant to investing in the Funds' various portfolios.
The Separate Account will purchase and redeem shares from the Portfolios at the
net asset value. Shares will be redeemed to the extent necessary for AVLIC to
collect charges, pay the Surrender Values, partial withdrawals, and make policy
loans or to transfer assets among Investment Options as requested by
Policyowners. Any dividend or capital gain distribution received is
automatically reinvested in the corresponding Subaccount.
Since each of the Funds is designed to provide investment vehicles for variable
annuity and variable life insurance contracts of various insurance companies and
will be sold to separate accounts of other insurance companies as investment
vehicles for various types of variable life insurance policies and variable
annuity contracts, there is a possibility that a material conflict may arise
between the interests of the Separate Account and one or more of the separate
accounts of another participating insurance company. In the event of a material
conflict, the affected insurance companies agree to take any necessary steps,
including removing its separate accounts from the Funds, to resolve the matter.
The risks of such mixed and shared funding are described further in the
prospectuses of the Funds.
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10 LIFE The Date of this Prospectus Supplement is May 1, 1998
<PAGE>
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<TABLE>
<CAPTION>
FIDELITY FUNDS
PORTFOLIO INVESTMENT POLICIES OBJECTIVE
<S> <C> <C>
VIP Money Market High-quality U.S. dollar denominated money market Seeks to obtain as high a level of current
instruments of domestic and foreign Issuers. income as is consistent with preserving
(Commercial Paper, Certificate of Deposit.) capital and providing liquidity.
VIP Equity-Income At least 65% in income producing common or preferred Seeks reasonable income by investing primarily
stock. The remainder will normally be invested in in income producing equity securities. The goal
convertible and non-convertible debt obligations. is to achieve a yield in excess of the composite
yield of the Standard & Poor's 500 Composite
Stock Price Index.
VIP Growth Portfolio purchases normally will be common stocks of Seeks to achieve capital appreciation by
both well-known established companies and smaller, investing primarily in common stocks.
less-known companies, although the investments are
not restricted to any one type of security.
Dividend income will only be considered if it might
have an effect on stock values.
VIP High Income At least 65% in income producing debt Seeks to obtain a high level of current income
securities and preferred stocks, up to 20% in common by investing in high income producing lower-
stocks and other equity securities, and up to 15% rated debt securities (sometimes called "junk
in securities subject to restriction on resale. bonds"), preferred stocks including covertible
securities and restricted securities.
VIP Overseas At least 65% invested in securities of issuers Seeks long-term growth of capital primarily
outside of North America. Most issuers will be through investments in foreign securities.
located in developed countries in the Americas, the
Far East and Pacific Basin, Scandinavia and
Western Europe. While the primary purchases will be
common stocks, all types of securities may be
purchased.
VIP II Asset Manager Equities (Growth, High Dividends, Utility), bonds Seeks to obtain high total return with reduced
(Government, Agency, Mortgage backed, Convertible risk over the long term by allocating its assets
and Zero Coupon) and money market instruments. among domestic and foreign stocks, bonds, and
short-term fixed-income securities.
VIP II Investment A portfolio of investment grade fixed-income Seeks as high a level of current income as is
Grade Bond securities with a dollar weighted average maturity consistent with the preservation of capital.
of less than ten years.
VIP II Asset Manager: Focuses on stocks for high potential returns but also Seeks to maximize total return by allocating its
Growth purchases bonds and short-term instruments. assets among foreign and domestic stocks, bonds,
short-term instruments and other investments.
VIP II Index 500 At least 80% (65% if fund assets are below Seeks investment results that correspond to the
$20 million) in equity securities of companies that total return of common stocks of companies that
compose the Standard & Poor's 500. Also purchases compose the Standard & Poor's 500.
short-term debt securities for cash management
purposes and uses various investment techniques, such
as futures contracts, to adjust its exposure to the
Standard & Poor's 500.
VIP II Contrafund Portfolio purchases will normally be common stock or Seeks long-term capital appreciation.
securities convertible into common stock of companies
believed to be undervalued due to an overly
pessimistic appraisal by the public.
</TABLE>
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LIFE 11
<PAGE>
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<TABLE>
<CAPTION>
ALGER
AMERICAN FUND
PORTFOLIO INVESTMENT POLICIES OBJECTIVE
<S> <C> <C>
Growth The Portfolio will invest its assets in companies Seeks long-term capital appreciation.
whose securities are traded on domestic stock
exchanges or in the over-the-counter market. Except
during temporary defensive periods, the Portfolio will
invest at least 65% of its total assets in the
securities of companies that have a total market
capitalization of $1 billion or greater.
Income and The Portfolio attempts to invest 100% of its Seeks to provide a high level of dividend
Growth assets, and except during temporary defensive periods, income to the extent consistent with prudent
it is a fundamental policy of the Portfolio to investment management. Capital appreciation
invest, at least 65% of its total assets in dividend is a secondary objective of the Portfolio.
paying equity securities.
Small Capitalization Except during temporary defensive periods, the Seeks long-term capital appreciation.
Portfolio invest at least 65% of its total assets in
equity securities of companies that, at the time of
purchase of the securities, have total market
capitalization within the range of companies
included in the Russell 2000 Growth Index or the S&P
SmallCap 600 Index, updated quarterly. The Portfolio
may invest up to 35% of its total assets in equity
securities of companies that, at the time of
purchase, have total market capitalization outside
the range of companies included in those Indexes and
in excess of that amount (up to 100% of its assets)
during temporary defensive periods.
Balanced The Portfolio will invest its assets in common stocks Seeks current income and long-term capital
and investment grade preferred stock and debt appreciation by investment in common stocks
securities as well as securities convertible and fixed income and convertible securities,
into common stocks. Except during defensive periods, with emphasis on income producing securities
it is anticipated that 25% of the portfolio assets which appear to have potential for capital
will be invested in fixed income senior securities. appreciation.
MidCap Growth Except during temporary defensive periods, the Seeks long-term capital appreciation.
Portfolio invests at least 65% of its total assets in
equity securities of companies that, at the time of
purchase of the securities, have total market
capitalization within the range of companies included
in the S&P MidCap 400 Index, updated quarterly.
The S&P MidCap 400 Index is designed to track the
performance of medium capitalization companies. The
Portfolio may invest up to 35% of its total assets
in securities that, at the time of purchase, have
total market capitalization outside the range of
companies included in the S&P MidCap 400 Index and in
excess of that amount (up to 100% of its assets)
during temporary defensive periods.
Leveraged AllCap Invests at least 85% of net assets in equity Seeks long-term capital appreciation.
securities of companies of any size, except during
defensive periods. May purchase put and call
options and sell covered options to increase gain
and to hedge. May enter into futures contracts and
purchase and sell options on these futures
contracts. May also borrow money for purchase of
additional securities.
</TABLE>
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12 LIFE
<PAGE>
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<TABLE>
<CAPTION>
MFS FUNDS
PORTFOLIO INVESTMENT POLICIES OBJECTIVE
<S> <C> <C>
Emerging Growth Series At least 80% normally will be invested in equity Seeks to provide long-term capital growth;
securities of emerging growth companies. Up to 25% dividend and interest income is incidental.
may be invested in foreign securities not including
ADRs.
Utilities Series At least 65%, but up to 100% normally will be Seeks capital growth and current income (above
invested in equity and debt securities of both that available from a portfolio invested
domestic and foreign companies in the utilities entirely in equity securities).
industry. Normally, not more than 35% will be
invested in equity and debt securities of
issuers in other industries, including foreign
securities, emerging market securities and non-dollar
denominated securities.
World Governments Series At least 80% normally will be invested in debt Seeks to provide long-term growth of capital and
securities. May invest up to 100% of assets in future income.
foreign securities, including emerging market
securities.
Research Series Invests in common stocks or securities convertible Seeks to provide long-term growth of capital
into common stocks of companies believed to possess and future income.
better than average prospects for long-term growth.
Up to 10% may be invested in non-investment
grade debt; up to 20% may be invested in foreign
securities (including emerging market issues.)
Growth With Income At least 65% will normally be invested in common Seeks to provide reasonable current income and
Series stocks or securities convertible into common stocks long-term growth of capital and income.
of companies believed to have long-term prospects
for growth and income. Expects to invest not more
than 15% in foreign securities (including emerging
market issues.)
</TABLE>
<TABLE>
<CAPTION>
MORGAN STANLEY
FUNDS
PORTFOLIO INVESTMENT POLICIES OBJECTIVE
<S> <C> <C>
Emerging Markets Equity Invests primarily in equity securities of emerging Long-term capital appreciation.
market country issuers with a focus on those countries
whose economies the portfolio's adviser believes to
be developing strongly and in which markets are
becoming more sophisticated.
Global Equity Invests primarily in equity securities of Long-term capital appreciation.
issuers throughout the world, including U.S.
issuers and emerging market countries, using an
approach that is oriented to the selection of
individual stocks that the portfolio's adviser
believes are undervalued.
International Magnum Invests primarily in equity securities of Long-term capital appreciation.
non-U.S. issuers, generally in accordance with
weightings determined by the portfolio's adviser, in
countries comprising the Morgan Stanley Capital
International Europe, Australia, Far East Index,
commonly known as the "EAFE Index."
Asian Equity Invests primarily in equity securities of Long-term capital appreciation.
Asian issuers, excluding Japan, using an
approach that is oriented to the selection of
individual stocks believed by the portfolio's
adviser to be undervalued.
U.S. Real Estate Invests primarily in equity securities of companies Above-average current income and long
primarily engaged in the U.S. real estate industry, term capital appreciation.
including real estate investment trusts.
</TABLE>
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LIFE 13
<PAGE>
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FUND EXPENSE SUMMARY
The information shown below relating to the Funds was provided to AVLIC by the
Funds and AVLIC has not independently verified such information. Each of the
Funds is managed by an investment advisory organization that is not affiliated
with AVLIC. Each such organization is entitled to receive a fee for its services
based on the value of the relevant portfolio's net assets. The amount of
expenses, including the asset based advisory fee referred to above, borne by
each portfolio for the fiscal year ended December 31, 1997, was as follows:
<TABLE>
<CAPTION>
PORTFOLIO INVESTMENT ADVISORY AND OTHER EXPENSES TOTAL
MANAGEMENT
FIGURES PRESENTED MAY REFLECT FIGURES PRESENTED MAY REFLECT FIGURES PRESENTED
EXPENSE REIMBURSEMENT EXPENSE REIMBURSEMENT MAY REFLECT EXPENSE
REIMBURSEMENT
FIDELITY
<S> <C> <C> <C>
VIP Money Market .21% .10% .31%
VIP Equity-Income .50% .07% .57%(1)
VIP Growth .60% .07% .67%(1)
VIP High Income .59% .12% .71%
VIP Overseas .75% .15% .90%(1)
VIP II Asset Manager .55% .09% .64%(1)
VIP II Investment Grade Bond .44% .14% .58%
VIP II Asset Manager: Growth .60% .16% .76%(1)
VIP II Index 500 .24% .04% .28%(2)
VIP II Contrafund .60% .08% .68%(1)
ALGER AMERICAN (3)
Growth .75% .04% .79%
Income and Growth .625% .115% .74%
Small Capitalization .85% .04% .89%
Balanced .75% .26% 1.01%
MidCap Growth .80% .04% .84%
Leveraged AllCap .85% .15% 1.00%
MFS
Emerging Growth .75% .12%(4) .87%(5)
Utilities .75% .25%(4) 1.00%(5)
World Governments .75% .25%(4) 1.00%(5)
Research .75% .13%(4) .88%(5)
Growth With Income .75% .25%(4) 1.00%(5)
MORGAN STANLEY
Emerging Markets Equity(6) 0% 1.75% 1.75%
Global Equity(7) 0% 1.15% 1.15%
International Magnum(7) 0% 1.15% 1.15%
Asian Equity(7) 0% 1.20% 1.20%
U.S. Real Estate(7) 0% 1.10% 1.10%
</TABLE>
(1) A portion of the brokerage commissions that certain funds pay was used
to reduce funds expenses. In addition, certain funds have entered into
arrangements with their custodian and transfer agent whereby interest
earned on uninvested cash balances was used to reduce custodian and
transfer agent expenses. Without these reductions, the total operating
expenses presented in the table would have been .58% for Equity-Income
Portfolio, .69% for Growth Portfolio, .92% for Overseas Portfolio, .65%
for Asset Manager Portfolio, .71% for Contrafund Portfolio, and .77%
for Asset Manager: Growth Portfolio.
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14 LIFE
<PAGE>
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(2) Fidelity agreed to reimburse a portion of Index 500 Portfolio's
expenses during the period. Without this reimbursement, the fund's
management fee, other expenses and total expenses would have been .27%,
.13% and .40% respectively, on an annualized basis.
(3) Fred Alger Management, Inc. ("Alger Management") has agreed to
reimburse the portfolios to the extent that the aggregate annual
expenses (excluding interest, taxes, fees for brokerage services and
extraordinary expenses) exceed respectively: Alger American Income and
Growth, and Alger American Balanced, 1.25%; Alger American Small
Capitalization, Alger American MidCap Growth, Alger American Leveraged
All Cap, and the Alger American Growth, 1.50%. As long as the expense
limitations continue for a portfolio, if a reimbursement occurs, it has
the effect of lowering the portfolio's expense ratio and increasing its
total return. Included in "Other Expenses" of Leveraged AllCap is .04%
of interest expense.
(4) MFS has agreed to bear expenses for each series, subject to
reimbursement by each series, such that each series "Other Expenses"
shall not exceed .25% of the average daily net assets of the series
during the current fiscal year. Absent this expense arrangement, "Other
Expenses" and "Total" expenses would be .45% and 1.20%, respectively,
for the Utilities Series; .40% and 1.15%, respectively, for the World
Governments Series; and .35% and 1.10%, respectively, for the Growth
With Income Series.
(5) Each series has an expense offset arrangement which reduces the series'
custodian fee based upon the amount of cash maintained by the series
with its custodian and dividend disbursing agent, and may enter into
other such arrangements and directed brokerage arrangements (which
would also have the effect of reducing the series' expenses). Any such
fee reductions are not reflected under "Other Expenses."
(6) For the fiscal year ended December 31, 1997 fund's expenses were
voluntarily reduced by the fund's investment adviser. Absent
reimbursement the management fee, other expenses and total expenses
would have been 1.25%, 2.87% and 4.12%, respectively.
(7) The fund's expenses were voluntarily reduced by the fund's investment
adviser. Absent reimbursement the management fee, other expenses and
total expenses would have been as follows based on the annualized
period January 2, 1997 through December 31, 1997 for Global Equity and
International Magnum portfolios. The U.S. Real Estate and Asian Equity
portfolios were based on the annualized period March 3, 1997 through
December 31, 1997. Global Equity: .80%; 1.63%; and 2.43%. International
Magnum: .80%; 1.98%; and 2.78%. U.S. Real Estate: .80%; 1.52%; and
2.32%. Asian Equity: .80%; 2.30%; and 3.10%.
Expense reimbursement agreements are expected to continue in future years but
may be terminated at any time. As long as the expense limitations continue for a
portfolio, if a reimbursement occurs, it has the effect of lowering the
portfolio's expense ratio and increasing its total return.
- -----------------------
FIXED ACCOUNT
Owners may elect to allocate all or a portion of their premium payments to the
Fixed Account, and they may also transfer monies from the Separate Account to
the Fixed Account or from the Fixed Account to the Separate Account. (See
Transfers, page 21). Amounts in the Fixed Account earn a fixed rate of interest
guaranteed by AVLIC never to be less than 4.5%.
Amounts allocated to the Fixed Account receive an interest rate declared
effective for the month of issue. The declared interest rate is guaranteed for
the remainder of the Policy Year. During subsequent Policy Years, all amounts in
the Fixed Account will earn the interest rate that was declared in the month of
the last Policy anniversary. Declared interest rates may be lower or higher than
the previous period.
Payments allocated to the Fixed Account and transfers from the Separate Account
to the Fixed Account are placed in the general account of AVLIC, which supports
insurance and annuity obligations. The general account includes all of AVLIC's
assets, except those assets segregated in the separate accounts. AVLIC has the
sole discretion to invest the assets of the general account, subject to
applicable law. AVLIC bears an investment risk for all amounts allocated or
transferred to the Fixed Account and interest credited thereto, less any
deduction for charges and expenses, whereas the owner bears the investment risk
after the expiration of a contract year. Because of exemptive and exclusionary
provisions, interests in the general account have not been registered under the
Securities Act of 1933 (the "1933 Act") nor is the general account registered as
an investment company under the 1940 Act. Accordingly, neither the general
account nor any interest therein is generally subject to the provisions of the
1933 or 1940 Act. We understand that the staff of the SEC has not reviewed the
disclosures in this Prospectus relating to the Fixed Account portion of the
Contract; however, disclosures regarding the Fixed
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LIFE 15
<PAGE>
- --------------------------------------------------------------------------------
Account portion of the Contract may be subject to generally applicable
provisions of the federal securities laws regarding the accuracy and
completeness of statements made in prospectuses.
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS
Generally AVLIC reserves the right, subject to applicable law, and, if
necessary, after notice and prior approval from the SEC and/or state insurance
authorities, to make additions to, deletions from, or substitutions for the
shares that are held in the Separate Account or that the Separate Account may
purchase. The Separate Account may, to the extent permitted by law, purchase
other securities for other contracts or permit a conversion between contracts
upon request by the Policyowners.
AVLIC may, in its sole discretion, also establish additional Subaccounts of the
Separate Account, which would invest in shares corresponding to a new portfolio
of the Fund or in shares of another investment company or eliminate one or more
Subaccounts if marketing needs, tax considerations or investment conditions
warrant. Any new Subaccounts may be made available to existing Policyowners on a
basis to be determined by AVLIC.
If any of these substitutions or changes are made, AVLIC may by appropriate
endorsement change the Policy to reflect the substitution or change. If AVLIC
deems it to be in the best interest of Policyowners, and subject to any
approvals that may be required under applicable law, the Separate Account may be
operated as a management company under the 1940 Act, it may be deregistered
under that Act if registration is no longer required, or it may be combined with
other AVLIC separate accounts. To the extent permitted by applicable law, AVLIC
may also transfer the assets of the Separate Account associated with the
Policies to another separate account. In addition, AVLIC may, when permitted by
law, restrict or eliminate any voting rights of Policyowners or other persons
who have voting rights as to the Separate Account.
The Policyowner will be notified of any material change in the investment policy
of any portfolio in which the owner has an interest.
POLICY BENEFITS
The rights and benefits under the Policy are summarized in this prospectus. The
Policy itself is what controls the rights and benefits. A copy of the Policy is
available upon request from AVLIC.
PURPOSES OF THE POLICY
The Policy is designed to provide the Policyowner with both lifetime insurance
protection to the policy anniversary nearest the Insured's 95th birthday and
flexibility in connection with the amount and frequency of premium payments and
the level of life insurance proceeds payable under the Policy. Unlike
traditional life insurance, other than the minimum first year premium, the
Policyowner is not required to pay scheduled premiums to keep a Policy in force.
The Policy is designed so that a single premium payment may be made, or the
Policyowner has the flexibility to vary subsequent premium payments.
Moreover, the Policy allows a Policyowner to adjust the level of death benefits
payable under the Policy without having to purchase a new Policy by decreasing
the Specified Amount or changing the death benefit option. Thus, as insurance
needs or financial conditions change, the Policyowner has the flexibility to
adjust life insurance benefits and vary premium payments.
The death benefit may, and the cash value will, vary with the investment
experience of the chosen Subaccounts of the Separate Account. The Policyowner
reaps the benefit of any appreciation in value of the underlying assets, but
bears the investment risk of any depreciation in value. As a result, whether or
not a Policy continues in force may depend in part upon the investment
experience of the chosen Subaccounts. The failure to pay a planned periodic
premium will not necessarily cause the Policy to lapse, but the Policy could
lapse even if planned periodic premiums have been paid, depending upon the
investment experience of the Separate Account.
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DEATH BENEFIT PROCEEDS
As long as the Policy remains in force, AVLIC will, upon due proof of the
Insured's death, pay the death benefit proceeds of a Policy in accordance with
the death benefit option in effect at the time of the Insured's death. The
amount of the death benefits payable will be determined at the end of the
valuation period during which the Insured's death occurred. The death benefit
proceeds may be paid in a lump sum or under one or more of the payment options
set forth in the Policy. (See Payment Options, page 19).
DEATH BENEFIT OPTIONS
The Policy provides two death benefit options, unless the Extended Maturity
Rider is in effect, and the Policyowner selects one of the options in the
application. The death benefit under either option will never be less than the
current Specified Amount of the Policy as long as the Policy remains in force.
(See Policy Lapse and Reinstatement, page 25). The minimum Specified Amount
currently is the amount that a premium of $10,000 ($5,000 for ages 0-15) will
purchase.
OPTION A. Under Option A, the death benefit is the current Specified Amount of
the Policy or, if greater, the applicable percentage of cash value on the date
of death. The applicable percentage is 250% for Insureds with an attained age 40
or younger on the policy anniversary prior to the date of death. For Insureds
with an attained age over 40 on that policy anniversary, the percentage
declines. For example, the percentage at age 40 is 250%, at age 50 is 185%, at
age 60 is 130%, at age 70 is 115%, at age 80 is 108%, and at age 90 is 100%.
Accordingly, under Option A the death benefit will remain level at the Specified
Amount unless the applicable percentage of cash value exceeds the current
Specified Amount, in which case the amount of the death benefit will vary as the
cash value varies. Policyowners who prefer to have favorable investment
performance reflected in higher cash value, rather than increased insurance
coverage, generally should select Option A.
OPTION B. Under Option B, the death benefit is equal to the current Specified
Amount plus the cash value of the Policy or, if greater, the applicable
percentage of the cash value on the date of death. The applicable percentage is
the same as under Option A: 250% for Insureds with an attained age 40 or younger
on the policy anniversary prior to the date of death, and for Insureds with an
attained age over 40 on that policy anniversary the percentage declines as in
Option A. Accordingly, under Option B the amount of the death benefit will
always vary as the cash value varies (but will never be less than the Specified
Amount). Policyowners who prefer to have favorable investment performance
reflected in increased insurance coverage, rather than higher cash values,
generally should select Option B.
EXTENDED MATURITY
If the Extended Maturity Rider is in effect, the Death Benefit will be the Cash
Value.
CHANGE IN DEATH BENEFIT OPTION. Generally, the death benefit option in effect
may be changed once per year any time after the first policy year by sending
AVLIC a written request for change. AVLIC will require evidence of insurability
before making a change in the death benefit option from Option A to Option B.
The effective date of such a change will be the monthly activity date on or
following the date the change is approved by AVLIC.
If the death benefit option is changed from Option A to Option B, the death
benefit after the change will equal the Specified Amount before the change plus
the cash value on the effective date of the change. If the death benefit option
is changed from Option B to Option A, the death benefit after the change will
equal the death benefit before the change minus the cash value on the effective
date of change.
No charges will be imposed upon a change in death benefit option, nor will such
a change in and of itself result in an immediate change in the amount of a
Policy's cash value. However, a change in the death benefit option may affect
the monthly cost of insurance charge since this charge varies with the net
amount at risk, which is the amount by which the death benefit that would be
payable on a monthly activity date exceeds the cash value on that date. Changing
from Option B to Option A will generally decrease the net amount at risk, and
therefore cost of insurance charges. Changing from Option A to Option B will
generally result in a net amount at risk that remains level. Such a change,
however, will result in an increase in the cost of insurance charges over time,
since the cost of insurance rates increase with the Insured's age. If, however,
the change was from Option A to Option B, the cost of insurance rate may be
different for the increased death benefit. (See Charges and Deductions - Cost of
Insurance, page 26).
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LIFE 17
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CHANGE IN SPECIFIED AMOUNT. Subject to certain limitations, after the second
policy year a Policyowner may decrease the Specified Amount of a Policy. A
decrease in Specified Amount may affect the cost of insurance rate and the net
amount at risk, both of which may affect a Policyowner's cost of insurance
charge. (See Charges and Deductions - Cost of Insurance, page 26).
Any decrease in the Specified Amount will become effective on the monthly
activity date on or following the date a written request is approved by AVLIC.
The Specified Amount of a Policy may be changed only once per year, and AVLIC
may limit the size of a change in a policy year.
The Specified Amount remaining in force after any requested decrease may not be
less than the amount a minimum first year premium of $10,000 ($5,000 for ages
0-15) would have purchased during the first 3 Policy years and $15,000
thereafter. Further, no decrease will be allowed if the Specified Amount is less
than $15,000 in the first three Policy years. In addition, if following the
decrease in Specified Amount, the Policy would not comply with the maximum
premium limitations required by federal tax law (see Premium Limitations, page
24), the decrease may be limited or cash value may be returned to the
Policyowner at the Policyowner's election, to the extent necessary to meet these
requirements.
METHODS OF AFFECTING INSURANCE PROTECTION. A Policyowner may increase or
decrease the pure insurance protection provided by a Policy - the difference
between the death benefit and the cash value - in several ways as insurance
needs change. These ways include decreasing the Specified Amount of insurance,
changing the level of premium payments, and, to a lesser extent, making a
partial withdrawal of the Policy's cash value. The consequences of each of these
methods will depend upon the individual circumstances.
DURATION OF THE POLICY. The Policy will not be placed in force if the minimum
first year premium has not been paid on or before the date the Policy is
delivered. The Policy will remain in force so long as the cash surrender value
is sufficient to pay the monthly deduction. (See Monthly Deduction, page 26).
Where, however, the cash surrender value is insufficient to pay the monthly
deduction and the grace period expires without an adequate payment by the
Policyowner, the Policy will lapse and terminate without value. (See Policy
Lapse and Reinstatement, page 25).
CASH VALUE
The Policy's cash value in the Separate Account will reflect the investment
performance of the chosen Subaccounts of the Separate Account, the net premiums
paid, any partial withdrawals, and the charges assessed in connection with the
Policy. A Policyowner may at any time surrender the Policy and receive the
Policy's cash surrender value. (See Surrenders, page 21). There is no guaranteed
minimum cash value.
DETERMINATION OF CASH VALUE. Cash value is determined on each valuation date. On
the policy issue date, the cash value in a Subaccount will equal the portion of
any premium allocated to the Subaccount, reduced by the portion of the first
monthly deduction allocated to that Subaccount. (See Allocation of Premiums and
Cash Value, page 24). Thereafter, on each valuation date, the cash value of a
Policy will equal:
(1) The aggregate of the values attributable to the Policy in each of the
Subaccounts on the valuation date, determined for each Subaccount by
multiplying the Subaccount's unit value by the number of Subaccount units
allocated to the Policy; plus
(2) The value of the Fixed Account; plus
(3) Any cash value impaired by policy debt held in the general account; plus
(4) Any net premiums received on that valuation date; less
(5) Any partial withdrawal, and its charge, made on that valuation date; less
(6) Any monthly deduction to be made on that valuation date; less
(7) Any federal or state income taxes charged against the cash value.
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18 LIFE
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In computing the Policy's cash value, the number of Subaccount units allocated
to the Policy is determined after any transfers among Subaccounts, or the Fixed
Account, (and deduction of transfer charges) but before any other Policy
transactions, such as receipt of net premiums and partial withdrawals, on the
valuation date. Because the cash value is dependent upon a number of variables,
a Policy's cash value cannot be predetermined.
THE UNIT VALUE. The unit value of each Subaccount reflects the investment
performance of that Subaccount. The unit value of each Subaccount shall be
calculated by (i) multiplying the per share net asset value of the corresponding
Fund portfolio on the valuation date times the number of shares held by the
Subaccount, before the purchase or redemption of any shares on that date; minus
(ii) a Daily Charge not exceeding an annual rate of 1.20% for mortality and
expense risk (.90%) and administrative costs (.30%); and (iii) dividing the
result by the total number of units held in the Subaccount on the valuation
date, before the purchase or redemption of any units on that date. (See Daily
Charges Against the Separate Account, page 26).
VALUATION DATE AND VALUATION PERIOD. A valuation date is each day on which the
New York Stock Exchange ("NYSE") is open for trading. A valuation period is the
period between two successive valuation dates, commencing at the close of the
NYSE on each valuation date and ending at the close of the NYSE on the next
succeeding valuation date.
BENEFITS AT MATURITY
If the Insured is living, AVLIC will pay the cash value of the Policy, less
outstanding policy debt, on the maturity date. The Policy will mature on the
policy anniversary nearest the Insured's 95th birthday, if living, unless the
maturity has been extended by election of the Extended Maturity Rider.
PAYMENT OF POLICY BENEFITS
Death benefit proceeds under the Policy will usually be paid within seven days
after AVLIC receives due proof of death. Cash value benefits will ordinarily be
paid within seven days of receipt of a written request. Payments may be
postponed in certain circumstances. (See Postponement of Payments, page 29). The
Policyowner may decide the form in which the benefits will be paid. During the
Insured's lifetime, the Policyowner may arrange for the death benefit proceeds
to be paid in a lump sum or under one or more of the optional methods of payment
described below. These choices are also available if the Policy is surrendered
or matures. If no election is made, AVLIC will pay the benefits in a lump sum.
When death benefits are payable in a lump sum and no election for an optional
method of payment is in force at the death of the Insured, the beneficiary may
select one or more of the optional methods of payment.
An election or change of method of payment must be in writing. A change in
beneficiary revokes any previous settlement election. Further, if the Policy is
assigned, any amounts due to the assignee will first be paid in one sum. The
balance, if any, may be applied under any payment option. Once payments have
begun, the payment option may not be changed.
PAYMENT OPTIONS. The minimum amount of each payment is $25. If a payment would
be less than $25, AVLIC has the right to make payments less often so that the
amount of each payment is at least $25. Once a payment option is in effect, the
proceeds will be transferred to AVLIC's general account. AVLIC may make other
payment options available in the future. For additional information concerning
these options, see the Policy itself. The following payment options are
currently available:
Option ai- INTEREST PAYMENT OPTION. AVLIC will hold any amount applied under
this option. Interest on the unpaid balance will be paid or credited each month
at a rate determined by AVLIC.
Option aii- FIXED AMOUNT PAYABLE OPTION. Each payment will be for an agreed
fixed amount. Payments continue until the amount AVLIC holds runs out.
Option b- FIXED PERIOD PAYMENT OPTION. Equal payments will be made for any
period selected up to 20 years.
Option c- LIFETIME PAYMENT OPTION. Equal monthly payments are based on the life
of a named person. Payments will continue for the lifetime of that person.
Variations provide for guaranteed payments for a period of time.
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LIFE 19
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Option d- JOINT LIFETIME PAYMENT OPTION. Equal monthly payments are based on the
lives of two named persons. While both are living, one payment will be made each
month. When one dies, the same payment will continue for the lifetime of the
other.
As an alternative to the above payment options, the proceeds may be paid in any
other manner approved by AVLIC. Further, one of AVLIC's affiliates may make
payments under the above payment options. If an affiliate makes the payment, it
will do so according to the rules set out above.
POLICY RIGHTS
LOAN BENEFITS
LOAN PRIVILEGES. AVLIC will permit the Policyowner to borrow money from it using
the Policy as the only security for the loan. The maximum amount that may be
borrowed is 85% of the cash value less the cash surrender charge and any accrued
expenses as of the date of the policy loan. The minimum amount of any loan
request is $1,000. The loan may be completely or partially repaid at any time
while the Insured is living, prior to the maturity date. Loans usually are paid
within 7 days after receipt of a written request. Texas and Virginia
Policyowners may borrow 100% of the surrender value after deducting interest and
policy charges for the remainder of the policy year. LOANS MAY HAVE ADVERSE TAX
CONSEQUENCES. (See Tax Treatment of Policy Proceeds, page 32).
INTEREST. The interest rate charged on the portion of the outstanding policy
debt not exceeding the Earnings Loan Value is 4.5% per year. Outstanding policy
debt in excess of the Earnings Loan Value is charged 6% interest per year. The
determination of whether the outstanding policy debt exceeds the Earnings Loan
Value will be made each time a loan is taken. AVLIC may increase either of these
rates to a maximum of 8%. Interest accrues daily and is due on each policy
anniversary date. If unpaid when due, interest will be added to the amount of
the loan and bear interest at the same rate.
EFFECT OF POLICY LOANS. When a loan is made, cash value equal to the amount of
the loan will be transferred from the cash value in the Separate Account to the
general account of AVLIC as security for the indebtedness. The cash value
transferred out of the Separate Account will be allocated among the Subaccounts,
or the Fixed Account, in accordance with the instructions given when the loan is
requested. The minimum amount which can remain in a Subaccount as a result of a
loan is $100. If no instructions are given, the amount will be withdrawn in
proportion to the various deposits in the Subaccount or Fixed Account. If loan
interest is not paid when due in any policy year, on the policy anniversary
thereafter, AVLIC will loan the interest and allocate the amount transferred to
secure the excess indebtedness among the Subaccounts and the Fixed Account as
set out just above. No charge will be imposed for these transfers. A policy loan
will permanently affect the cash value of a Policy, and may permanently affect
the amount of the death benefit, even if the loan is repaid. Should the policy
lapse while policy loans are outstanding the portion of the loans attributable
to earnings will become taxable.
Cash value in the general account held to secure indebtedness will be credited
with interest at a rate of 4.5% per year. Currently, the net cost to borrow to
the Policyowner ranges from 0% interest per annum (on the amount not exceeding
the Earnings Loan Value) to 1.5% per annum. However, the Policy permits a
maximum net cost to borrow of 3.5%. Interest earned on amounts held in the
general account will be allocated to the Subaccounts and the Fixed Account on
each policy anniversary in the same proportion that net premiums are being
allocated to those Subaccounts and the Fixed Account at the time. Upon repayment
of indebtedness, the portion of the repayment allocated to a Subaccount in
accordance with the repayment of indebtedness provision (see below) will be
transferred to the Subaccount and increase the cash value in that Subaccount or
the Fixed Account.
OUTSTANDING POLICY DEBT. The outstanding policy debt equals the total of all
policy loans and accrued interest on policy loans. If the policy debt exceeds
the cash value less any cash surrender charge and any accrued expenses, the
Policyowner must pay the excess. AVLIC will send a notice of the amount which
must be paid. If the Policyowner does not make the required payment within the
61 days after AVLIC sends the notice, the Policy will terminate without value. A
lapsed Policy may later be reinstated. (See Policy Lapse and Reinstatement, page
25).
REPAYMENT OF INDEBTEDNESS. Unscheduled premiums paid while a policy loan is
outstanding are treated as repayment of indebtedness only if the Policyowner so
requests. As indebtedness is repaid, the cash value in the general account
securing the indebtedness repaid will be allocated among the Subaccounts and the
Fixed Account in the same proportion that net premiums are being allocated to
those Subaccounts at the time of repayment.
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SURRENDERS
At any time during the lifetime of the Insured and prior to the maturity date,
the Policyowner may totally surrender the Policy by sending a written request to
AVLIC. Certain partial withdrawals may also be made. Surrenders from the
Separate Account will generally be paid within seven days of receipt of the
written request. (See Postponement of Payments, page 29). SURRENDERS AND PARTIAL
WITHDRAWALS MAY HAVE ADVERSE TAX CONSEQUENCES. (See Modified Endowment Contract;
Tax Penalty on Early Withdrawals, page 32).
TOTAL SURRENDERS. If the Policy is being totally surrendered, the Policy itself
must be returned to AVLIC along with the request. AVLIC will pay an amount equal
to the cash surrender value at the end of the valuation period during which the
surrender request is received at AVLIC's Home Office. Coverage under the Policy
will terminate as of the date of a total surrender. A Policyowner may elect to
have the amount paid in a lump sum or under a payment option. (See Payment
Options, page 19).
PARTIAL WITHDRAWALS. Partial withdrawals are irrevocable. The amount of a
partial withdrawal may not exceed the cash surrender value on the date the
request is received and in policy years one through seven, may not exceed 10% of
the minimum first year premium. The cash surrender value after a partial
withdrawal must be at least $1,000. The amount paid will be deducted from the
Policy's cash value at the end of the valuation period during which the request
is received. The amount will be deducted from the Subaccounts according to the
instructions of the Policyowner when the withdrawal is requested, provided that
the minimum amount remaining in a Subaccount as a result of the allocation is
$100. If no instructions are given, the amount will be withdrawn in proportion
to the various deposits in the Subaccount and/or Fixed Account.
The Death Benefit may be reduced by the amount of any partial withdrawal and may
affect the way in which the cost of insurance charge is calculated and the
amount of pure insurance protection under the Policy. (See Monthly Deduction -
Cost of Insurance, page 26; Death Benefit Options - Methods of Affecting
Insurance Protection, page 18). If Option B is in effect, the Specified Amount
will not change, but the cash value will be reduced.
The Specified Amount remaining in force after a partial withdrawal, during the
first three policy years, may not be less than the amount a premium of $10,000
would purchase ($5,000 for ages 0-15) and thereafter may not be less than
$15,000. Also, no partial withdrawal will be allowed if the Specified Amount is
less than $15,000 in the first three years. Any request for a partial withdrawal
that would reduce the Specified Amount below this amount will not be
implemented. A fee not to exceed the lesser of $50.00 or 2% of the amount
withdrawn is deducted from each partial withdrawal amount paid. Currently the
charge is the lesser of $25 or 2% of the amount withdrawn. (See Partial
Withdrawal Charge, page 28).
TRANSFERS
Cash value may be transferred among the Subaccounts of the Separate Account. The
total amount transferred each time must be at least $250, or the balance of the
Subaccount, if less. The minimum amount that may remain in a Subaccount after a
transfer is $100. AVLIC will effectuate transfers and determine all values in
connection with transfers on the later of the date designated in the request or
at the end of the valuation period during which the transfer request is
received. Cash value on the date of a transfer will not be affected except to
the extent of any transfer charge. Transfers may also be made from the
subaccounts to the Fixed Account. One hundred percent of the amount deposited,
plus interest thereon, may be transferred out of the Fixed Account during the
30-day period following the yearly anniversary of the date of the Policy.
An unlimited number of transfers may be made, with the first fifteen transfers
per policy year permitted free of charge. A transfer charge may be imposed each
additional time amounts are transferred. This charge will be deducted pro rata
from each Subaccount (and, if applicable, the Fixed Account) in which the
Policyowner is invested. The charge is $10 per transfer. (See Transfer Charge,
page 28). Transfers resulting from policy loans or exercise of the exchange
privilege will not be subject to a transfer charge. In addition, such transfers
will not be counted for purposes of the limitation on the number of transfers
allowed in each year. AVLIC may at any time revoke or modify the transfer
privilege, including the minimum amount transferable. (See also Tax Status of
the Policy, page 32).
The privilege to initiate transactions by telephone will be made available to
Policyowners automatically. AVLIC will employ reasonable procedures to confirm
that instructions communicated by telephone are genuine, and if it does not,
AVLIC may be liable for any losses due to unauthorized or fraudulent
instructions. The procedures AVLIC follows for transactions initiated by
telephone include, but are not limited to, requiring the Policyowner to provide
the policy number at the time of
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LIFE 21
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giving transfer instructions; AVLIC's tape recording of all telephone transfer
instructions; and the provision, by AVLIC, of written confirmation of telephone
transactions.
Transfers may be subject to additional restrictions at the fund level.
Specifically, fund managers may have the right to refuse sales, or suspend or
terminate the offering of portfolio shares, if they determine that such action
is necessary in the best interests of the portfolio's shareholders. If a fund
manager refuses a transfer for any reason, the transfer will not be
allowed.AVLIC will not be able to process the transfer if the fund manager
refuses.
SYSTEMATIC PROGRAMS
AVLIC may offer systematic programs as discussed below. Transfers of
Accumulation Value made pursuant to these programs will be counted in
determining whether the transfer fee applies. Lower minimum amounts may be
allowed to transfer as part of a systematic program. There is no separate charge
for participation in these programs at this time. All other normal transfer
restrictions, as described above, apply. The Fixed Account can not be used in
any systematic program.
PORTFOLIO REBALANCING. Under the Portfolio Rebalancing program, the Owner can
instruct AVLIC to allocate Accumulation Value among the Subaccounts of the
Separate Account on a systematic basis, in accordance with allocation
instructions specified by the Owner.
DOLLAR COST AVERAGING. Under the Dollar Cost Averaging program, the Owner can
instruct AVLIC to automatically transfer, on a systematic basis, a predetermined
amount or percentage specified by the Owner from any one Subaccount to any
Subaccount(s) of the Separate Account.
EARNINGS SWEEP. Permits systematic redistribution of earnings among Subaccounts.
The Owner can request participation in the available programs when purchasing
the Policy or at a later date. The Owner can change the allocation percentage or
discontinue any program by sending written notice or calling the Home Office.
Other scheduled programs may be made available. AVLIC reserves the right to
modify, suspend or terminate such programs at any time. Use of Systematic
Programs may not be advantageous, and does not guarantee success.
REFUND PRIVILEGE
The Policyowner may cancel the Policy within the later of 10 days after the
Policyowner receives it, within 10 days after AVLIC mails a cancellation notice,
or within 45 days of completing Part I of the application. If a Policy is
cancelled within this time period, a refund will be paid. The refund will be the
greater of the premium paid or the premium paid adjusted by investment gains or
losses.
To cancel the Policy, the Policyowner should mail or deliver it to the selling
agent, or to AVLIC at the Home Office. A refund of premiums paid by check may be
delayed until the check has cleared the Policyowner's bank. (See Postponement of
Payments, page 29).
EXCHANGE PRIVILEGE
During the first 24 policy months after the policy date of the Policy, the
Policyowner may exchange the Policy for a non-variable life insurance policy
issued by AVLIC or an affiliate. No new evidence of insurability will be
required.
The policy date, issue age and risk classification for the Insured will be the
same under the new Policy as under the old. In addition, the policy provisions
and applicable charges for the new Policy and its riders will be based on the
same policy date and issue age as under the Policy. Cash values for the exchange
and payments will be established after making adjustments for investment gains
or losses and after recognizing variance, if any, between payment or charges,
dividends or cash values under the flexible contract and under the new Policy.
The Policyowner may elect either the same Specified Amount or the same net
amount at risk for the new Policy as under the old.
To make the change, the Policy, a completed application for exchange and any
required payment must be received by AVLIC. The exchange will be effective on
the valuation date when all financial and contractual arrangements for the new
Policy have been completed.
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PAYMENT AND ALLOCATION OF PREMIUMS
ISSUANCE OF A POLICY
Individuals wishing to purchase a Policy must complete an application and submit
it to AVLIC's Home Office (5900 "O" Street, P.O. Box 82550, Lincoln, Nebraska
68501). A Policy will generally be issued only to individuals 80 years of age on
their nearest birthday or less who supply satisfactory evidence of insurability
to AVLIC. AVLIC may, at its sole discretion, issue a Policy to an individual
above the age of 80. Acceptance is subject to AVLIC's underwriting rules, and
AVLIC reserves the right to reject an application for any reason.
The policy date is the effective date of coverage for all coverage applied for
in the original application. The policy date is used to determine policy
anniversary dates, policy years and policy months. The policy date and the issue
date will be the same unless: 1) an earlier policy date is specifically
requested, or 2) when additional premiums or application amendments are needed.
When there are additional requirements before issue (see below) the policy date
will be when it is sent for delivery and the issue date will be the date the
requirements are met.
The issue date is the date that all financial, contractual and administrative
requirements have been met and processed for the Policy. When all required
premiums and application amendments have been received by AVLIC in its Home
Office, the issue date will be the date the Policy is mailed to the Policyowner
or sent to the agent for delivery to the Policyowner. When application
amendments or additional premiums need to be obtained upon delivery of the
Policy, the issue date will be when the policy receipt and Federal funds are
received; and the application amendments are received and reviewed in AVLIC's
Home Office. On the issue date, the premium paid (plus any interest credited on
premiums paid before the issue date less any cost of insurance charge for the
period between the policy date and the issue date) is allocated to the Money
Market Subaccount. After the expiration of the refund period, the accumulation
value will be allocated to the subaccounts or the Fixed Account as selected by
the Policyowner.
Subject to approval, a Policy may be backdated, but the Policy Date may not be
more than six months prior to the date of the application. Backdating can be
advantageous if the Insured's lower Issue Age results in lower cost of insurance
rates. If a Policy is backdated, the minimum initial premium required will
include sufficient premium to cover the backdating period. Monthly deductions
will be made for the period the Policy Date is backdated.
Interim conditional insurance coverage may be issued prior to the policy date,
provided that certain conditions are met, upon the completion of an application
and the payment of a specified amount at the time of the application. The amount
of the interim coverage is limited to the smaller of the amount of insurance
applied for, $100,000, or $25,000 if the proposed Insured is under age 10 or
over age 60 at his nearest birthday.
PREMIUMS
The minimum first year premium must be paid on or before the date the Policy is
delivered. No insurance will take effect before the minimum first year premium
is received in AVLIC's home office in Federal Funds. No other premiums are
required. The amounts and frequency of the planned periodic premiums are shown
in the Schedule of Premiums in the Policy. However, subject to certain
limitations, a Policyowner has flexibility in determining the frequency and
amount of premiums since the planned periodic premium schedule is not binding on
the Policyowner. The timing and amount of premium payments will have an effect
on the values under, and the duration of, the Policy, including the cash
surrender charge, the cost of insurance charge, the premium tax charges and the
cash value under the Policy.
MINIMUM FIRST YEAR PREMIUM. The minimum first year premium is equal to the
amount designated in the Policy. The minimum first year premium will be no less
than $10,000, except on Insureds who have an age nearest birthday of 0 to 15,
for which the minimum premium will be no less than $5,000. The minimum first
year premium generally approximates 80% of the Guideline Single Premium, as
defined for federal tax purposes, for the initial Specified Amount. The
Guideline Single Premium is based on the single premium that would be required
to provide the future benefits under the Policy, computed using certain
assumptions, including an assumed interest rate of 6% and standard guaranteed
cost of insurance rates and charges and the premium loads. There is no
representation that the Policy will not lapse if the minimum first year premium
is paid, nor is there a guarantee that the Policy will not lapse even if planned
periodic premiums are paid.
PREMIUM FLEXIBILITY. A Policyowner may make a single premium payment, make
unscheduled premium payments at any time in any amount, or skip planned periodic
premium payments, subject to the premium limitations described below.
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Therefore, unlike conventional insurance policies, this Policy does not obligate
the Policyowner to pay premiums in accordance with a rigid and inflexible
premium schedule.
The level of premium payments does, however, affect the nature of the Policy,
including the amount of pure insurance coverage and the charge for that
coverage. Comparing two Policies that are identical in all respects other than
the amount of the initial premium paid, the Policy with the larger initial
premium will have a greater cash value and, therefore, will provide less pure
insurance protection (a lower net amount at risk) and have a smaller monthly
cost of insurance charge. AVLIC does reserve the right to limit the number and
amount of additional or unscheduled premium payments.
PLANNED PERIODIC PREMIUMS. At the time the Policy is issued, if the initial
premium is less than 100% of the Guideline Single Premium, the Policyowner may
determine a planned periodic premium schedule that provides for the payment of
level premiums at selected intervals; subject, however, to a minimum planned
periodic premium schedule of $1,200 on an annual basis and a maximum schedule of
no greater than the limitation on total premiums established by federal tax law.
The Policyowner is not required to pay premiums in accordance with this
schedule. The Policyowner has considerable flexibility to alter the amount and
frequency of premiums paid.
Policyowners can also change the frequency and amount of planned periodic
premiums by sending a written request to the Home Office, although AVLIC
reserves the right to limit any increase. Premium payment notices will be sent
annually, semi-annually or quarterly depending upon the frequency of the planned
periodic premiums. Payment of the planned periodic premiums does not guarantee
that the Policy remains in force. Instead, the duration of the Policy depends
upon the Policy's cash surrender value. (See Duration of the Policy, page 18).
Thus, even if planned periodic premiums are paid by the Policyowner, the Policy
will nonetheless lapse any time cash surrender value is insufficient to pay
certain monthly charges, and a grace period expires without a sufficient
payment. (See Policy Lapse and Reinstatement, page 25).
Any premium received in an amount different from the planned periodic premium
will be considered an unscheduled premium.
PREMIUM LIMITATIONS. In no event may the total of all premiums paid, both
planned and unscheduled, exceed the current maximum premium limitations
established by federal tax laws. If at any time a premium is paid which would
result in total premiums exceeding the current maximum premium limitation, AVLIC
will only accept that portion of the premium which will make total premiums
equal the maximum. Any part of the premium in excess of that amount will be
returned or applied as otherwise agreed and no further premiums will be accepted
until allowed by the current maximum premium limitations prescribed by law.
AVLIC may also establish a minimum acceptable premium amount.
ALLOCATION OF PREMIUMS AND CASH VALUE
ALLOCATION OF PREMIUMS. In the application for a Policy, the Policyowner
allocates premiums to one or more Subaccounts of the Separate Account and/or to
the Fixed Account. Allocations must be whole number percentages and must total
100%. The allocation for future premiums may be changed without charge at any
time by providing proper notification to the Home Office.
The initial premium is allocated as of the issue date of the Policy to the Money
Market Subaccount for 13 days. Thereafter, the accumulation value will be
allocated to the Subaccounts or the Fixed Account as selected by the
Policyowner. Premium payments received by AVLIC prior to the issue date are held
in the general account and are credited with interest at a rate determined by
AVLIC for the period from the date the payment has been converted into Federal
Funds that are available to AVLIC until the date the amounts are transferred to
the Money Market Subaccount, but in no event will interest be credited prior to
the policy date. After the first policy year, all premiums are subject to a
premium charge, and thus the net premium is allocated to the selected Subaccount
or the Fixed Account. If there is any outstanding policy debt at the time of
payment, AVLIC will treat it as a premium payment unless otherwise instructed in
proper written notice.
The value of amounts allocated to Subaccounts of the Separate Account will vary
with the investment performance of these Subaccounts, and the Policyowner bears
the entire investment risk. This will affect the Policy's cash value, and may
affect the death benefit as well. Policyowners should periodically review their
allocations of premiums and values in light of market conditions and overall
financial planning requirements.
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POLICY LAPSE AND REINSTATEMENT
LAPSE. Unlike conventional life insurance policies, the failure to make a
planned periodic premium payment will not itself cause the Policy to lapse.
Lapse will occur when the cash surrender value is insufficient to cover the
monthly deduction, and a grace period expires without a sufficient payment. The
grace period is 61 days from the date AVLIC mails a notice that the grace period
has begun. AVLIC will notify the Policyowner at the beginning of the grace
period by mail addressed to the last known address on file with AVLIC. The
notice will specify the premium required to keep the Policy in force. Failure to
pay the required amount within the grace period will result in lapse of the
Policy. If the Insured dies during the grace period, any overdue monthly
deductions and outstanding policy debt will be deducted from the proceeds.
If the cash surrender value is insufficient to cover the monthly deduction, the
Policyowner must pay a premium during the grace period sufficient to cover the
monthly deduction. (See Charges and Deductions, page 25).
REINSTATEMENT. A lapsed Policy may be reinstated any time within 2 years after
the end of the grace period (or if required by state law, longer periods), but
before the maturity date. Reinstatement will be affected based on the Insured's
underwriting classification at the time of the reinstatement. Reinstatement is
subject to the following:
1. Evidence of insurability of the Insured satisfactory to AVLIC;
2. Payment of a premium equal to the greater of $1,000 or an amount that, after
the deduction of premium charges, is large enough to cover the monthly
deductions for at least the three policy months commencing with the effective
date of reinstatement; and
3. Any policy debt will be reinstated with interest due and accrued.
4. The Policy cannot be reinstated if it has been surrendered for its full cash
surrender value.
The amount of cash value on the date of reinstatement will be equal to the
amount of the cash value on the date of lapse, increased by the premium paid at
reinstatement, less the premium charges and the amounts stated above, plus that
part of the deferred sales load (i.e., cash surrender charge) which would apply
if the Policy were surrendered on the date of reinstatement. The last addition
to the cash value is designed to avoid duplicate cash surrender charges. The
original policy date will be used for purposes of calculating the cash surrender
charge. If any policy debt was reinstated, that debt will be held in AVLIC's
general account. Cash value calculations will then proceed as described under
"Determination Of Cash Value" on page 18.
The effective date of reinstatement will be the first monthly activity date on
or next following the date of approval by AVLIC of the application for
reinstatement.
CHARGES AND DEDUCTIONS
Charges will be deducted in connection with the Policy to compensate AVLIC for:
(1) providing the insurance benefits set forth in the Policy and any optional
insurance benefits added by rider; (2) administering the Policy; (3) assuming
certain risks in connection with the Policy; and (4) incurring expenses in
distributing the Policy. The nature and amount of these charges are described
more fully below.
PREMIUM CHARGE
No premium charges will be deducted from premium payments made during the first
policy year prior to their allocation to the selected Subaccounts or the Fixed
Account. However, a charge equal to 2.5% of the premium will be deducted from
each payment made after the first policy year prior to allocation among the
selected Subaccounts to reimburse AVLIC for premium taxes. Various states and
their subdivisions impose a tax on premiums received by insurance companies.
Premium taxes vary from state to state.
Although no deduction for premium taxes is made from premiums paid during the
first policy year, upon surrender, a portion of the cash surrender charge
includes a charge for state premium taxes of no greater than 2.5% of the
premiums paid. (See "Cash Surrender Charge," page 27). The charges for premium
taxes represent an amount AVLIC considers necessary to pay all premium taxes
imposed by the states and their subdivisions.
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MONTHLY DEDUCTION
Charges will be deducted on each monthly activity date from the cash value of
the Policy to compensate AVLIC for insurance provided. The monthly deduction
includes: (a) the cost of insurance for the current policy month, plus (b)
one-twelfth of any flat extra rating charge. The monthly deduction will be
deducted as of the policy date and on each monthly activity date thereafter. It
will be allocated among the Subaccounts or the Fixed Account on a pro rata
basis. Each of these charges is described in more detail below.
COST OF INSURANCE. Because the cost of insurance depends upon several variables,
the cost for each policy month can vary from month to month. AVLIC will
determine the monthly cost of insurance charges by multiplying the applicable
cost of insurance rate by the net amount at risk for each policy month. The net
amount at risk on any monthly activity date is the amount by which the death
benefit which would have been payable on that monthly activity date exceeds the
cash value on that date.
COST OF INSURANCE RATE. The annual cost of insurance rate is based on the
Insured's sex, attained age, policy duration and risk class. The rate will vary
if the Insured is a smoker or non-smoker or is considered a substandard risk
classification and rated with a tabular extra rating. For the initial Specified
Amount, the cost of insurance rate will not exceed those shown in the Schedule
of Guaranteed Annual Cost of Insurance Rates shown in the schedule pages of the
Policy. These guaranteed rates are based on the Insured's age nearest birthday,
risk class, and the 1980 Commissioners Standard Ordinary Smoker and Non-Smoker,
Male and Female Mortality Tables. The cost of insurance rate, surrender charges
and payment options for policies issued in Massachusetts, Montana and certain
other states are on a sex neutral (unisex) basis. Any change in the cost of
insurance rates will apply to all persons of the same age, sex and risk class
and whose policies have been in effect for the same length of time.
If the underwriting class for any increase in death benefit resulting from a
change in death benefit option from A to B is not the same as the underwriting
class at issue, the cost of insurance rate used after such increase will be a
composite rate based upon a weighted average of the rates of the different
underwriting classes. Decreases will also be reflected in the cost of insurance
rate as discussed earlier. The actual charges made during the Policy year will
be shown in the annual report delivered to Policyowners.
RATE CLASS. The rate class of an Insured may affect the cost of insurance rate.
AVLIC currently places Insureds into both standard rate classes and substandard
classes that involve a higher mortality risk. In an otherwise identical Policy,
an Insured in the standard rate class will have a lower cost of insurance than
an Insured in a rate class with higher mortality risks. If a Policy is rated at
issue with a tabular extra rating, the guaranteed rate is a multiple of the
guaranteed rate for a standard issue. This multiple factor is shown in the
Schedule of Benefits in the Policy.
Insureds may also be assigned a flat extra rating to reflect certain additional
risks. The flat extra rating will not impact the cost of insurance rate, but
1/12 of any flat extra cost will be deducted as part of the monthly deduction on
each monthly activity date.
DAILY CHARGES AGAINST THE SEPARATE ACCOUNT
A Daily Charge will be deducted from the value of the net assets of the Separate
Account to compensate AVLIC for mortality and expense risks assumed and the
administrative costs incurred in connection with the Policy. This daily charge
from the Separate Account will be at the rate of 0.003288 percent (equivalent to
an annual rate of 1.20 percent of the average daily net assets of the Separate
Account). The daily charge will be deducted from the net asset value of the
Separate Account, and therefore the Subaccounts, on each valuation date. Where
the previous day or days was not a valuation date, the deduction on the
valuation date will be 0.003288 percent multiplied by the number of days since
the last valuation date. No mortality and expense charges will be deducted from
the amounts in the Fixed Account.
Of this Daily Charge, .002466 percent (equivalent to an annual rate of 0.90
percent of the average daily net assets of the Separate Account) is deducted to
compensate AVLIC for the mortality and expense risk assumed under the Policies.
AVLIC believes that this level of charge is reasonable in relation to the risks
assumed by AVLIC under the Policies. The mortality
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risk assumed by AVLIC is that Insureds' may live for a shorter time than
assumed, and that an aggregate amount of death benefits greater than that
assumed accordingly will be paid. The expense risk assumed is that expenses
incurred in issuing and administering the policies will exceed the
administrative charges provided in the Policies.
AVLIC also deducts .000822 percent (equivalent to an annual rate of 0.30 percent
of the average daily net assets of the Separate Account) on a daily basis to
compensate it for administrative costs in connection with the Policy. AVLIC has
primary responsibility for the administration of the Policy and the Separate
Account. AVLIC intends to administer the Policy itself through an arrangement
whereby AVLIC may purchase some administrative services from Ameritas Life. The
services in connection with the Policy involve issuance of the Policy, ordinary
ongoing maintenance of the Policy, and future changes in the Policy initiated by
the Policyowner. Administrative expenses in connection with the issuance of the
Policy are medical exams, review of applications for insurance underwriting
decisions, and processing of the applications and establishing policy records.
Ongoing ordinary administrative expenses expected to be incurred in connection
with a Policy include premium billing; recordkeeping; processing death benefit
claims, cash surrenders, and policy changes; preparing and mailing reports; and
overhead costs. Future changes in the Policy initiated by the Policyowner
include changes in the death benefit option. Administrative costs for changing
the death benefit option include the cost of processing applications and
changing and establishing policy records. The Daily Charge is assessed
throughout the life of the Policy. AVLIC does not expect to make a profit on the
portion of the charge levied to cover administrative expenses.
TAXES. Currently, no charge will be made against the Separate Account for
federal, state or local income taxes. AVLIC may, however, make such a charge in
the future if income or gains within the Separate Account will incur any
federal, or any significant state or local income tax liability, or if the
federal, state or local tax treatment of AVLIC changes. Charges for such taxes,
if any, would be deducted from the Separate Account as a portion of the Daily
Charge. (See Federal Tax Matters, page 31).
FUND INVESTMENT ADVISORY FEE AND EXPENSES
Because the Separate Account purchases shares of the Funds, the net assets of
the Separate Account will reflect the investment advisory fees and other
expenses incurred by the Funds. The investment advisers to the Funds will
receive compensation with respect to the Funds' portfolios that they advise at a
rate which varies by portfolio and the size of that portfolio. (See The Funds,
page 10).
AVLIC may receive administrative fees from the investment advisers of certain
funds.
CASH SURRENDER CHARGE
If a Policy is surrendered prior to the 7th policy anniversary, AVLIC will
assess a cash surrender charge based upon percentages of the premiums actually
paid during the first policy year, limited as shown in the policy schedule
pages. Paying less premium in the first year generally will have the effect of
reducing the cash surrender charge. However, depending upon the investment
experience, if the Policyowner chooses to pay less premium in the first year,
the cost of insurance charge may increase, the premium tax charge may be
greater, the Policy Values may be reduced and there is an increased risk that
the Policy will lapse. A portion of the cash surrender charge includes a charge
to cover state premium taxes. The remainder of the charge is deducted to
compensate AVLIC for the cost of distributing the Policy. The cost includes
agents' commissions, the printing of Prospectuses and sales literature, and
advertising.
The sales load portion of the cash surrender charge in any policy year is not
necessarily related to actual distribution expenses incurred in that year.
Instead, AVLIC expects to incur the majority of distribution expenses in the
early policy years and to recover amounts to pay such expenses over the life of
the Policy. AVLIC anticipates that funds generated by the sales loads will not
be sufficient to cover distribution expenses. To the extent that sales and
distribution expenses exceed sales loads in any year, AVLIC will pay them from
its other assets or surplus in its general account, which include amounts
derived from mortality and expense risk charges and other charges made under the
Policy. AVLIC believes that this distribution financing arrangement will benefit
the Separate Account and the Policyowners.
AVLIC has voluntarily lowered its maximum surrender charge to 9%, which amount
will be charged on surrenders during policy years one, two and three. The Policy
provides that surrender charges may equal, respectively, 11.5%, 10.5% and 9.5%
for the first three years. Thereafter, the cash surrender charge grades to 8.5%
in year four, 7% in year five, 5% in year six, 2% in year seven and 0% after the
seventh year. The charge allowed by the Policy is based on a 9% sales load and a
2.5% charge for premium tax. The sales load and premium tax components of the
cash surrender charge grade down
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LIFE 27
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proportionately. There is no cash surrender charge assessed upon decreases in
the Specified Amount of the Policy or partial withdrawals of cash value. There
is no additional cash surrender charge attributable to payments made after the
first policy year. Because the cash surrender charge may be significant upon
early surrender, prospective Policyowners should purchase a Policy only if they
do not intend to surrender the Policy for a substantial period.
TRANSFER CHARGE
A transfer charge of $10.00 may be imposed for each additional transfer among
the Subaccounts or the Fixed Account after fifteen per policy year to compensate
AVLIC for the costs of effecting the transfer. Since the charge reimburses AVLIC
for the cost of effecting the transfer only, it does not expect to make any
profit from the transfer charge. This charge will be deducted pro rata from each
Subaccount (and, if applicable, the Fixed Account) in which the Policyowner is
invested. The transfer charge will not be imposed on transfers that occur as a
result of policy loans or the exercise of exchange rights. The amount of the
transfer charge is guaranteed not to be increased.
PARTIAL WITHDRAWAL CHARGE
A charge will be imposed for each partial withdrawal to compensate AVLIC for the
administrative costs in effecting the requested payment and in making necessary
calculations for any reductions in Specified Amount which may be required by
reason of the partial withdrawal. The charge will be deducted from the amount of
the withdrawal. The current charge made will be the lesser of 2% of the amount
withdrawn or $25. This charge is guaranteed not to be more than the lesser of
$50 or 2% of the amount withdrawn. AVLIC does not expect to make any profit from
the partial withdrawal charge.
GENERAL PROVISIONS
THE CONTRACT
The Policy, the application, any supplemental applications, and any amendments
or endorsements make up the entire contract. Only the President, Vice President,
Secretary or Assistant Secretary can modify the Policy. Any changes must be made
in writing and approved by AVLIC. No agent has the authority to alter or modify
any of the terms, conditions or agreements of the Policy or to waive any of its
provisions. The rights and benefits under the Policy are summarized in this
prospectus. The Policy itself is what controls the rights and benefits. A copy
of the Policy is available upon request from AVLIC.
CONTROL OF POLICY
The Policyowner is as shown in the application or subsequent written
endorsement. Subject to the rights of any irrevocable beneficiary and any
assignee of record, all rights, options, and privileges belong to the
Policyowner, if living; otherwise to any successor-owner or owners, if living;
otherwise to the estate of the last owner to die.
BENEFICIARY
The Policyowner may name both primary and contingent beneficiaries in the
application. Payments will be shared equally among beneficiaries of the same
class unless otherwise stated. If a beneficiary dies before the Insured,
payments will be made to any surviving beneficiaries of the same class;
otherwise to any beneficiary(ies) of the next class; otherwise to the owner;
otherwise to the estate of the owner.
CHANGE OF BENEFICIARY
The Policyowner may change the beneficiary by written request at any time during
the Insured's lifetime unless otherwise provided in the previous designation of
beneficiary. The change will take effect as of the date the change is recorded
at the Home Office. AVLIC will not be liable for any payment made or action
taken before the change is recorded.
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CHANGE IN OWNER OR ASSIGNMENT
In order to change the owner of the Policy or assign policy rights, an
assignment of the Policy must be made in writing and filed with AVLIC at its
Home Office. The change will take effect as of the date the change is recorded
at the Home Office, and AVLIC will not be liable for any payment made or action
taken before the change is recorded. Payment of proceeds is subject to the
rights of any assignee of record. A collateral assignment is not a change of
ownership.
PAYMENT OF PROCEEDS
The proceeds are subject first to any indebtedness to AVLIC and then to the
interest of any assignee of record. The balance of any death benefit proceeds
shall be paid in one sum to the designated beneficiary unless an optional method
of payment is selected. If no beneficiary survives the Insured, the proceeds
shall be paid in one sum to the Policyowner, if living; otherwise to any
successor-owner, if living; otherwise to the owner's estate. Any proceeds
payable on the Maturity Date or upon full surrender shall be paid in one sum
unless an optional method of payment is elected.
INCONTESTABILITY
The Policy is incontestable after it has been in force for two years from the
policy date during the lifetime of the Insured. However, this two year provision
shall not apply to riders that provide disability or accidental death benefits.
Any reinstatement of a Policy shall be incontestable only after having been in
force during the lifetime of the Insured for two years after the effective date
of the reinstatement.
MISSTATEMENT OF AGE, SEX, OR SMOKING
If the age, sex, or smoking habits of the Insured have been misstated, the
amount of the death benefit and cash values under the Policy will be adjusted.
The death benefit will be adjusted in proportion to the correct and incorrect
cost of insurance rates. The adjustment in the cash value will be the difference
between the cost of insurance deductions that were made and those that should
have been made.
SUICIDE
Suicide within two years of the policy date is not covered by the Policy, unless
otherwise provided by state law. If the Insured, while sane or insane, commits
suicide within two years after the policy date, AVLIC will pay only the premiums
received, less any partial withdrawals and any outstanding policy debt. The laws
of Missouri provide that death by suicide at any time is covered by the Policy,
and further, that suicide by an insane person is not a defense to the payment of
Accidental Death Benefits unless the insane person intended suicide when the
Insured applied for the Policy.
POSTPONEMENT OF PAYMENTS
Payment of any amount upon complete surrender, partial withdrawal, policy loans,
benefits payable at death or maturity, and transfers may be postponed whenever:
(i) the New York Stock Exchange is closed other than customary week-end and
holiday closings, or trading on the New York Stock Exchange is restricted as
determined by the Securities and Exchange Commission; (ii) the Commission by
order permits postponement for the protection of Policyowners; (iii) an
emergency exists, as determined by the Commission, as a result of which disposal
of securities is not reasonably practicable or it is not reasonably practicable
to determine the value of the Separate Account's net assets; or, (iv) surrenders
or partial withdrawals from the Fixed Account may be deferred for up to 6 months
from the date of written request.
Payments under the Policy of any amounts derived from premiums paid by check may
be delayed until such time as the check has cleared the Policyowner's bank.
ACCELERATED BENEFIT RIDER FOR TERMINAL ILLNESS (LIVING BENEFIT RIDER)
Upon satisfactory proof of terminal illness and after the two-year contestable
period (no waiting period in certain states), AVLIC will accelerate the payment
of up to 50% of the lowest scheduled death benefit as provided by eligible
coverage,
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LIFE 29
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less an amount up to two guideline level premiums. Future premium
allocations after the payment of the benefit must be allocated to the Fixed
Account. Payment will not be made for amounts less than $4,000 or more than
$250,000 on all policies issued by AVLIC or its affiliates.
AVLIC may charge the lesser of 2% of the benefit or $50 as a withdrawal charge
to cover the costs of administration.
Satisfactory proof of terminal illness must include a written statement from a
licensed physician who is not related to the insured or the Policyowner stating
that the insured has a non-correctable medical condition that, with a reasonable
degree of medical certainty, will result in the death of the insured in less
than 12 months (6 months in certain states) from the physician's statement.
Further, the condition must first be diagnosed while the policy was in force.
The accelerated benefit first will be used to repay any outstanding policy loans
and unpaid loan interest, and will also affect future loans, partial
withdrawals, and surrenders. The accelerated benefit will be treated as a lien
against the death benefit policy value and will thus reduce the proceeds payable
on the death of the insured.
There is no extra premium for this rider. This rider is not available in all
states.
EXTENDED MATURITY RIDER - This rider may be elected by submitting a written
request to AVLIC during the 90 days prior to Maturity Date. If elected, as long
as the Cash Surrender Value is greater than zero, the policy may remain in force
for purposes of providing a benefit at the time of the Insured's death. Once
this rider becomes effective, no further premium payments will be accepted, and
no monthly charges will be made for cost of insurance, riders or flat extra
rating. All other policy provisions not specifically noted herein will remain in
effect while the policy continues in force. Interest on policy loans will
continue to accrue and become part of the policy debt. This rider does not
extend the original Maturity Date for purposes of determining benefits under any
other riders. Death Benefit Proceeds are payable to the beneficiary.
There is no extra premium for this rider. This rider is not available in all
states.
The Internal Revenue Service has not issued a ruling regarding the tax
consequences of this rider.
REPORTS AND RECORDS
AVLIC will maintain all records relating to the Separate Account and will mail
to the Policyowner, at the last known address of record, within 30 days after
each policy anniversary, an annual report which shows the current cash value,
cash surrender value, death benefit, premiums paid, outstanding policy debt and
other information. Quarterly statements are also mailed detailing Policy
activity during the calendar quarter. Instead of receiving an immediate
confirmation of transactions made pursuant to some types of periodic payment
plan (such as a dollar cost averaging program, or payment made by automatic bank
draft or salary reduction arrangement), the Policyowner may receive confirmation
of such transactions in their quarterly statements. The Policyowner should
review the information in these statements carefully. All errors or corrections
must be reported to AVLIC immediately to assure proper crediting to the Policy.
AVLIC will assume all transactions are accurately reported on quarterly
statements unless AVLIC is otherwise notified within 30 days after receipt of
the statement. The Policyowner will also be sent a periodic report for the Funds
and a list of the portfolio securities held in each portfolio of the Funds.
DISTRIBUTION OF THE POLICIES
Ameritas Investment Corp. ("AIC"), a wholly owned subsidiary of AMAL Corporation
and an affiliated company of AVLIC, will act as the principal underwriter of the
Policies, pursuant to an Underwriting Agreement between itself and AVLIC. AIC
was organized under the laws of the State of Nebraska on December 29, 1983, and
is a registered broker/dealer pursuant to the Securities Exchange Act of 1934
and a member of the National Association of Securities Dealers. In 1997, AIC
received gross variable universal life compensation of $11,639,404, and retained
$438,745 in underwriting fees, and $2,975 in brokerage commissions on AVLIC's
variable universal life policies. AIC offers its clients a wide variety of
financial products and services and has the ability to execute stock and bond
transactions on a number of national exchanges. It also has executed selling
agreements with a variety of mutual funds, unit investment trusts and direct
participation programs.
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The Policies are sold by individuals who are Registered Representatives of AIC
and who are licensed as life insurance agents for AVLIC. In addition, AIC has
entered into agreements with other registered broker/dealers to permit their
Registered Representatives to sell the Policies subject to applicable law.
Registered Representatives who sell the Policy will receive commissions based
upon a commission schedule. After issuance of the Policy, commissions will
equal, at most, 5% of premiums paid in the first policy year. Further,
Registered Representatives who meet certain production standards may receive
additional compensation and managers receive override commission with respect to
the policies.
FEDERAL TAX MATTERS
The following discussion provides a general description of the federal income
tax considerations associated with the Policy. This discussion is not intended
as tax advice. Any person concerned about these tax implications should consult
a competent tax advisor. This discussion is based upon AVLIC's understanding of
the present federal income tax laws as they are currently interpreted by the
Internal Revenue Service (the 'Service'). The following summary does not purport
to be complete or to cover all situations.
Special rules not described in this Prospectus may be applicable in certain
situations. Specifically, this discussion does not address tax provisions that
may be applicable if the Policyowner is a corporation. Moreover, no attempt has
been made to consider in detail any applicable state or other tax (except
premium taxes, see discussion "Premium Charge," page 25) laws.
Counsel and other competent advisors should be consulted for more complete
information before a Policy is purchased. AVLIC makes no representation as to
the likelihood of the continuation of present federal income tax laws nor of the
interpretations by the Internal Revenue Service. Federal tax laws are subject to
change and thus tax consequences to the Insured, Policyowner or Beneficiary may
be altered.
(a) TAXATION OF AVLIC. AVLIC is taxed as a life insurance company under Part
I of Subchapter L of the Internal Revenue Code of 1986 (the "Code"). At
this time, since the Separate Account is not an entity separate from
AVLIC, and its operations form a part of AVLIC, it will not be taxed
separately as a 'regulated investment company' under Subchapter M of the
Code.
Net investment income and realized net capital gains on the assets of
the Separate Account are reinvested and are taken into account in
determining the death benefit and cash value of the Policy. As a result,
such net investment income and realized net capital gains are
automatically retained as part of the reserves under the Policy. AVLIC
believes that Separate Account net investment income and realized net
capital gains will not be taxable to the extent that such income and
gains are retained as reserves under the Policy.
AVLIC does not currently expect to incur any federal income tax
liability attributable to the Separate Account with respect to the sale
of the Policies. Accordingly, no charge is being made currently to the
Separate Account for federal income taxes. If, however, AVLIC
determines that it may incur such taxes attributable to the Separate
Account, it may assess a charge for such taxes against the Separate
Account.
AVLIC may also incur state and local taxes (in addition to premium taxes
for which a deduction from premiums is currently made) in various
states. At present, these taxes are not significant. If there is a
material change in state or local tax laws, charges for such taxes
attributable to the Separate Account, if any, may be assessed against
the Separate Account.
(b) MODIFIED ENDOWMENT CONTRACT. The Code (Section 7702A) states that a
Policy becomes a "modified endowment contract" if it does not meet a
7-pay premium test described in the section. Because this Policy is
designed to operate generally as a single premium contract, it does not
meet that test. While gains remaining in the Policy continue to be tax
deferred, distributions such as partial or full surrenders, assignments,
policy pledges, and loans (including loans to pay loan interest) under
the Policy will be taxable to the extent of any gain under the Policy.
All modified endowment policies issued by AVLIC to the same Policyowner
in any 12 month period are treated as one modified endowment contract
for purposes of determining taxable gain under Section 72(e) of the
Code. Any life insurance policy received in exchange for a modified
endowment contract will also be treated as a modified endowment
contract.
- --------------------------------------------------------------------------------
LIFE 31
<PAGE>
- --------------------------------------------------------------------------------
(c) TAX PENALTY ON EARLY WITHDRAWALS. A 10% penalty tax also applies to the
taxable portion of any distribution such as prior to the Policyowner
reaching age 59 1/2. The 10% penalty tax does not apply if the
Policyowner is disabled as defined under the code or if the distribution
is paid out in the form of a life annuity on the life of the Policyowner
or the joint lives of the Policyowner and beneficiary.
(d) TAX STATUS OF THE POLICY. The Code (Section 7702) also includes a
definition of a life insurance contract for federal tax purposes, which
places limitations on the amount of premiums that may be paid for the
Policy and the relationship of the cash value to the death benefit.
AVLIC believes that the Policy meets the statutory definition of a life
insurance contract. If the death benefit of a Policy is changed, the
applicable definitional limitations may change. In the case of a
decrease in the death benefit, a partial surrender, a change in death
benefit option, or any other such change that reduces future benefits
under the Policy during the first 15 years after a Policy is issued and
that results in a cash distribution to the Policyowners in order for the
Policy to continue complying with the Section 7702 definitional
limitations on premiums and cash values, the Policyowner must include in
ordinary income (to the extent of any gain in the Policy) certain
amounts prescribed in Section 7702 which are so distributed.
The Code (Section 817(h)) also authorizes the Secretary of the Treasury
(the "Treasury") to set standards by regulation or otherwise for the
investments of the Separate Account to be 'adequately diversified' in
order for the Policy to be treated as a life insurance contract for
federal tax purposes. The Separate Account, through the Funds, intends
to comply with the diversification requirements prescribed by the
Treasury in regulations published in the Federal Register on March 2,
1989, which affect how the Funds' assets may be invested.
AVLIC does not have control over the Funds or their investments.
However, AVLIC believes that the Funds will be operated in compliance
with the diversification requirements of the Internal Revenue Code.
Thus, AVLIC believes that the Policy will be treated as a life insurance
contract for federal tax purposes.
In connection with the issuance of regulations relating to the
diversification requirements, the Treasury announced that such
regulations do not provide guidance concerning the extent to which
owners may direct their investments to particular divisions of a
separate account. Regulations in this regard may be issued in the
future. It is not clear what these regulations will provide nor whether
they will be prospective only. It is possible that when regulations are
issued, the Policy may need to be modified to comply with such
regulations. For these reasons, the Company reserves the right to modify
the Policy as necessary to prevent the Owner from being considered the
owner of the assets of the Separate Account or otherwise to qualify the
Policy for favorable tax treatment.
The following discussion assumes that the Policy will qualify as a life
insurance contract for federal tax purposes.
(e) TAX TREATMENT OF POLICY PROCEEDS. AVLIC believes that the Policy will be
treated in a manner consistent with a fixed benefit life insurance
policy for federal income tax purposes. Thus, AVLIC believes that the
death benefit payable prior to the original maturity date under either
death benefit option under the Policy will generally be excludable from
the gross income of the beneficiary under Section 101(a)(1) of the Code,
and the Policyowner will not be deemed to be in constructive receipt of
the cash value under the Policy until its actual surrender. However, in
the event of certain cash distributions under the Policy resulting
from any change which reduces future benefits under the Policy, the
distribution will be taxed in whole or in part as ordinary income (to
the extent of gain in the Policy). See discussion page 32, "Tax Status
of the Policy."
Loans received from a modified endowment contract will be considered
distributions to the extent of any gain under the Policy. Generally,
interest paid on any loan under a Policy owned by an individual will not
be tax deductible. Except for Policies with respect to a limited number
of key persons of an employer (both as defined in the Internal Revenue
Code), and subject to applicable interest rate caps, the Health
Insurance Portability and Accountability Act of 1996 (the "Health
Insurance Act") generally repealed the deduction for interest paid or
accrued after October 13, 1995 on loans from corporate owned life
insurance Policies on the lives of individuals who are or were officers,
employees or persons financially interested in the taxpayer's trade or
business. Certain transitional rules for existing indebtedness are
included in the Health Insurance Act. The transitional rules include a
phase-out of the deduction for indebtedness incurred (1) before January
1, 1996, or (2) before January 1, 1997, for Policies entered into in
1994 or 1995. The phase-out of the interest expense deduction occurs
over a transition period between October 13, 1995 and January 1, 1999.
There is also a special rule for pre-June 21, 1986 Policies. The
Taxpayer Relief Act of 1997 ("TRA '97"), further expanded the interest
deduction disallowance for businesses by providing, with respect to
policies issued after June 8, 1997, that no deduction is allowed for
interest paid or accrued on any indebtedness with respect to life
insurance covering the life of any individual (except as noted above
under pre-'97 law with respect
- --------------------------------------------------------------------------------
32 LIFE
<PAGE>
- --------------------------------------------------------------------------------
to key persons and pre-June 21, 1986 policies). TRA '97 also
provides that no deduction is permissible for premiums paid on a life
insurance policy if the taxpayer is directly or indirectly a
beneficiary under the policy. Also under TRA '97 and subject to
certain exceptions, for contracts issued after June 8, 1997, no
deduction is allowed for that portion of a taxpayer's interest
expense that's allocable to unborrowed policy cash values. This
disallowance generally does not apply to policies owned by natural
persons. Also, as a general rule, no deduction is allowed for any amount
paid or accrued on indebtedness incurred or continued to purchase or
carry a business owned single premium life insurance policy.
Policyowners should consult a competent tax advisor concerning the tax
implications of these changes for their Policies.
The right to exchange the Policy for a non-variable life insurance
policy (see Exchange Privilege, page 22), may have tax consequences and,
the right to change owners (see General Provisions, page 28), and the
provision for partial withdrawals (see Surrenders, page 21) will have
tax consequences. Upon complete surrender or when maturity benefits are
paid, if the amount received plus any outstanding policy debt exceeds
the total premiums paid that are not treated as previously withdrawn by
the Policyowner, the excess generally will be taxed as ordinary income.
Federal estate and state and local estate, inheritance, and other tax
consequences of ownership or receipt of Policy proceeds depend on
applicable law and the circumstances of each Policyowner or beneficiary.
In addition, if the Policy is used in connection with tax-qualified
retirement plans, certain limitations prescribed by the Internal Revenue
Service on, and rules with respect to the taxation of, life insurance
protection provided through such plans may apply. The advise of
competent tax counsel should be sought in connection with the use of
life insurance in a qualified plan.
SAFEKEEPING OF THE SEPARATE ACCOUNT'S ASSETS
AVLIC holds the assets of the Separate Account. The assets are kept physically
segregated and held separate and apart from the general account assets. AVLIC
maintains records of all purchases and redemptions of Fund shares by each of the
Subaccounts.
THIRD PARTY SERVICES
AVLIC is aware that certain third parties are offering investment advisory,
asset allocation, money management and timing services in connection with the
contracts. AVLIC does not engage any such third parties to offer such services
of any type. In certain cases, AVLIC has agreed to honor transfer instructions
from such services where it has received powers of attorney, in a form
acceptable to it, from the contract owners participating in the service. Firms
or persons offering such services do so independently from any agency
relationship they may have with AVLIC for the sale of contracts. AVLIC takes
no responsibility for the investment allocations and transfers transacted on a
contract owner's behalf by such third parties or any investment allocation
recommendations made by such parties. Contract owners should be aware that fees
paid for such services are separate and in addition to fees paid under the
contracts.
VOTING RIGHTS
All of the assets held in the Subaccounts of the Separate Account will be
invested in shares of the corresponding portfolios of the Funds. AVLIC is the
legal holder of those shares and as such has the right to vote to elect the
Board of Directors of the Funds, to vote upon certain matters that are required
by the 1940 Act to be approved or ratified by the shareholders of a mutual fund,
and to vote upon any other matter that may be voted upon at a shareholders'
meeting. To the extent required by law, AVLIC will vote all shares of the Funds
held in the Separate Account at regular and special shareholder meetings of the
Funds in accordance with instructions received from Policyowners. The number of
votes for which each Policyowner has the right to provide instructions will be
determined as of the record date selected by the Board of Directors of the
Funds. AVLIC will furnish Policyowners with the proper forms, materials and
reports to enable them to give it these instructions.
The number of Fund shares in a Subaccount for which instructions may be given by
a Policyowner is determined by dividing the Policy's cash value held in that
Subaccount by the net asset value of one share in the corresponding portfolio of
the Fund.
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LIFE 33
<PAGE>
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Fractional shares will be counted. Fund shares held in each Subaccount for which
no timely instructions from Policyowners are received and Fund shares held in
each Subaccount which do not support Policyowner interests will be voted by
AVLIC in the same proportion as those shares in that Subaccount for which timely
instructions are received. Voting instructions to abstain on any item to be
voted will be applied on a pro rata basis to reduce the votes eligible to be
cast. Should applicable federal securities laws or regulations permit, AVLIC may
elect to vote shares of the Funds in its own right.
Matters on which Policyowners may give voting instructions include the
following: (1) election of the Board of Directors of the Fund; (2) ratification
of the independent accountant of the Fund; (3) approval of the Investment
Advisory Agreement for the Portfolio(s) of the Fund corresponding to the
Policyowner's selected Subaccount; and (4) any change in the fundamental
investment policies of the Portfolio(s) corresponding to the Policyowner's
selected Subaccount(s).
DISREGARD OF VOTING INSTRUCTION. AVLIC may, if required by state insurance
officials, disregard voting instructions if those instructions would require
shares to be voted to cause a change in the subclassification or investment
objectives or policies of one or more of the Funds' portfolios, or to approve or
disapprove an investment adviser or principal underwriter for the Funds. In
addition, AVLIC itself may disregard voting instructions that would require
changes in the investment objectives or policies of any portfolio or in an
investment adviser or principal underwriter for a Fund, if AVLIC reasonably
disapproves those changes in accordance with applicable federal regulations. If
AVLIC does disregard voting instructions, it will advise Policyowners of that
action and its reasons for the action in the next annual report or proxy
statement to Policyowners.
STATE REGULATION OF AVLIC
AVLIC, a stock life insurance company organized under the laws of Nebraska, is
subject to regulation by the Nebraska Department of Insurance. On or before
March 1 of each year an NAIC convention blank covering the operations and
reporting on the financial condition of AVLIC and the Separate Account as of
December 31 of the preceding year must be filed with the Nebraska Department of
Insurance. Periodically, the Nebraska Department of Insurance examines the
liabilities and reserves of AVLIC and the Separate Account.
In addition, AVLIC is subject to the insurance laws and regulations of other
states within which it is licensed or may become licensed to operate. The
policies offered by the prospectus are available in the various states as
approved. Generally, the Insurance Department of any other state applies the
laws of the state of domicile in determining permissible investments.
EXECUTIVE OFFICERS AND DIRECTORS OF AVLIC
Shows name and position(s) with AVLIC followed by the principal occupations for
the last five years.***
LAWRENCE J. ARTH, DIRECTOR, CHAIRMAN OF THE BOARD, AND CHIEF EXECUTIVE OFFICER*
Director, Chairman of the Board, and Chief Executive Officer: ALIC**; also
serves as officer and/or director of other subsidiaries and/or affiliates of
ALIC.
WILLIAM J. ATHERTON, DIRECTOR, PRESIDENT, AND CHIEF OPERATING OFFICER*
Director: AMAL Corporation; President: North American Security Life Insurance
Company; also served as officer and/or director of other subsidiaries and/or
affiliates of North American.
KENNETH C. LOUIS, DIRECTOR, EXECUTIVE VICE PRESIDENT*
Director, President and Chief Operating Officer: ALIC; also serves as officer
and/or director of other subsidiaries and/or affiliates of ALIC.
GARY R. MCPHAIL, DIRECTOR, EXECUTIVE VICE PRESIDENT****
Director, President, and Chief Executive Officer: AmerUs Life Insurance Company;
also serves as officer and/or director of other subsidiaries and/or affiliates
of AmerUs Life Insurance Company; Executive Vice President - Marketing and
Individual Operations: New York Life Insurance Company; President: Lincoln
National Sales Corporation.
ROBERT W. BUSH, DIRECTOR, SENIOR VICE PRESIDENT VARIABLE OPERATIONS AND
ADMINISTRATION*
Executive Vice President-Individual Insurance: ALIC; also serves as officer
and/or director of other subsidiaries and/or affiliates of ALIC; Senior Vice
President, CUNA Mutual Insurance Group; also served as officer and/or director
of other subsidiaries and/or affiliates of CUNA.
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34 LIFE
<PAGE>
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WAYNE E. BREWSTER, SENIOR VICE PRESIDENT-VARIABLE SALES*
Vice President-Variable Sales: ALIC.
ASHOK CHAWLA, VICE PRESIDENT-FIXED ANNUITY INVESTMENTS****
Senior Vice President - Fixed Income Group: AmerUs Life Insurance Company
(f.k.a. American Mutual Life Insurance Company); Director-Risk Management:
Providian Corp.; Assistant Vice President: Lincoln National Corp.
BRIAN J. CLARK, VICE PRESIDENT-FIXED ANUITY PRODUCT DEVELOPMENT****
Senior Vice President - Product Management: AmerUs Life Insurance Company.
THOMAS C. GODLASKY, DIRECTOR, SENIOR VICE PRESIDENT AND CHIEF INVESTMENT
OFFICER****
Executive Vice President and Chief Investment Officer: AmerUs Life Holdings,
Inc.; Executive Vice President and Chief Investment Officer: AmerUs Life
Insurance Company (f.k.a. American Mutual Life Insurance Company); Manager-Fixed
Income and Derivatives Department: Providian Corporation; also serves as
director of an affiliate of AVLIC; also serves as officer and/or director of
other affiliates of AmerUs Life Insurance Company.
JOSEPH K. HAGGERTY, ASSISTANT GENERAL COUNSEL****
Senior Vice President and General Counsel: AmerUs Life Holdings, Inc.; Senior
Vice President and General Counsel: AmerUs Life Insurance Company (f.k.a.
American Mutual Life Insurance Company f.k.a. Central Life Assurance
Company*****); Senior Vice President, Deputy General Counsel: I.C.H.
Corporation; also serves as an officer to an affiliate of AVLIC, and served as
officer and/or director of other subsidiaries and/or affiliates of I.C.H.
Corporation; also serves as officer of other affiliates of AmerUs Life Insurance
Company.
JON C. HEADRICK, TREASURER*
Executive Vice President-Investments and Treasurer: ALIC; also serves as officer
and/or director of other subsidiaries and/or affiliates of ALIC.
SANDRA K. HOLMES, VICE PRESIDENT-FIXED ANNUITY CUSTOMER SERVICE****
Senior Vice President: AmerUs Life Insurance Company (f.k.a. American Mutual
Life Insurance Company, f.k.a. Central Life Assurance Company*****).
KENNETH R. JONES, VICE PRESIDENT-CORPORATE COMPLIANCE AND ASSISTANT SECRETARY*
Vice President, Corporate Compliance & Assistant Secretary: ALIC; also serves as
officer of other subsidiaries and/or affiliates of ALIC.
NORMAN M. KRIVOSHA, SECRETARY AND GENERAL COUNSEL*
Executive Vice President, Secretary & Corporate General Counsel: ALIC; also
serves as officer and/or director of other subsidiaries and/or affiliates of
ALIC.
CYNTHIA J. LAVELLE, VICE PRESIDENT-OPERATIONS AND SUPPORT*
Assistant Vice President - Variable Operations: ALIC.
JOANN M. MARTIN, CONTROLLER*
Senior Vice President-Controller and Chief Financial Officer: ALIC; also serves
as officer and/or director of other subsidiaries and/or affiliates of ALIC.
SHEILA SANDY, ASSISTANT SECRETARY****
Manager Annuity Services: AmerUs Life Insurance Company (f.k.a. American Mutual
Life Insurance Company).
MICHAEL E. SPROULE, DIRECTOR****
Executive Vice President and Chief Financial Officer: AmerUs Life Holdings,
Inc.; Executive Vice President and Chief Financial Officer: AmerUs Life
Insurance Company (f.k.a. American Mutual Life Insurance Company, f.k.a. Central
Life Assurance Company*****); I.C.H. Corporation; also serves as director of an
affiliate of AVLIC; also serves as officer and/or director of other affiliates
of AmerUs Life Insurance Company.
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LIFE 35
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KEVIN WAGONER, ASSISTANT TREASURER****
Director Investment Accounting: AmerUs Life Insurance Company (f.k.a. American
Mutual Life Insurance Company, f.k.a. Central Life Assurance Company*****);
Senior Financial Analyst: Target Stores.
*Principal business address: Ameritas Variable Life Insurance Company
5900 "O" Street, P.O. Box 82550
Lincoln, Nebraska 68501
**Ameritas Life Insurance Corp.
***Where an individual has held more than one position with an organization
during the last 5-year period, the last position held has been given.
**** Principal business address: AmerUs Life Insurance Company
611 Fifth Avenue
Des Moines, Iowa 50309
***** Central Life Assurance Company merged with American Mutual Life
Insurance Company on December 31, 1994. Central Life Assurance Company was
the survivor of the merger. Contemporaneous with the merger, Central Life
Assurance Company changed its name to American Mutual Life Insurance Company.
(American Mutual Life Insurance Company changed its name to AmerUs Life
Insurance Company on July 1, 1996.)
LEGAL MATTERS
All matters of Nebraska law pertaining to the Policy, including the validity of
the Policy and AVLIC's right to issue the Policy under Nebraska Insurance Law,
have been passed upon by Norman M. Krivosha, Secretary and General Counsel of
AVLIC.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Separate Account is a party or to
which the assets of the Separate Account are subject. AVLIC is not involved in
any litigation that is of material importance in relation to its total assets or
that relates to the Separate Account. AIC is not involved in any litigation that
is of material importance in relation to its ability to perform under its
underwriting agreement.
EXPERTS
The financial statements of AVLIC as of December 31, 1997 and 1996, and for each
of the three years in the period ended December 31, 1997, and the financial
statements of Separate Account V as of December 31, 1997, and for each of the
three years in the period then ended, included in this Prospectus have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
reports appearing herein, and are included in reliance upon the reports of such
firm given upon their authority as experts in accounting and auditing.
Actuarial matters included in this Prospectus have been examined by Thomas P.
McArdle, Assistant Vice President Associate Actuary of Ameritas Life Insurance
Corp., as stated in the opinion filed as an exhibit to the registration
statement.
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36 LIFE
<PAGE>
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ADDITIONAL INFORMATION
A registration statement has been filed with the Securities and Exchange
Commission, under the Securities Act of 1933, as amended, with respect to the
Policy offered hereby. This Prospectus does not contain all the information set
forth in the registration statement and the amendments and exhibits to the
registration statement, to all of which reference is made for further
information concerning the Separate Account, AVLIC and the Policy offered
hereby. Statements contained in this Prospectus as to the contents of the Policy
and other legal instruments are summaries. For a complete statement of the terms
thereof reference is made to such instruments as filed.
FINANCIAL STATEMENTS
The financial statements of AVLIC which are included in this Prospectus should
be considered only as bearing on the ability of AVLIC to meet its obligations
under the Policies. They should not be considered as bearing on the investment
performance of the assets held in the Separate Account.
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38 LIFE
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INDEPENDENT AUDITORS' REPORT
Board of Directors
Ameritas Variable Life Insurance Company
Lincoln, Nebraska
We have audited the accompanying statement of net assets of Ameritas
Variable Life Insurance Company Separate Account V as of December 31, 1997, and
the related statements of operations and changes in net assets for each of the
three years in the period then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1997. 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, such financial statements present fairly, in all material
respects, the financial position of Ameritas Variable Life Insurance Company
Separate Account V as of December 31, 1997, and the results of its operations
and changes in its net assets for each of the three years in the period then
ended, in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Lincoln, Nebraska
February 2, 1998
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LIFE 39
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<TABLE>
<CAPTION>
AMERITAS VARIABLE LIFE INSURANCE COMPANY
----------------------------------------
SEPARATE ACCOUNT V
------------------
STATEMENT OF NET ASSETS
-----------------------
DECEMBER 31, 1997
-----------------
ASSETS
INVESTMENTS AT NET ASSET VALUE:
<S> <C>
Variable Insurance Products Fund:
---------------------------------
Money Market Portfolio - 7,552,485.910 shares at
$1.00 per share (cost $7,552,486) $ 7,552,486
Equity-Income Portfolio - 1,018,225.148 shares at
$24.28 per share (cost $17,057,993) 24,722,507
Growth Portfolio - 872,066.612 shares at
$37.10 per share (cost $19,311,493) 32,353,671
High Income Portfolio - 598,367.840 shares at
$13.58 per share (cost $6,613.479) 8,125,835
Overseas Portfolio - 695,077.235 shares at
$19.20 per share (cost $10,900,272) 13,345,483
Variable Insurance Products Fund II:
------------------------------------
Asset Manager Portfolio - 1,531,564.418 shares at
$18.01 per share (cost $21,257,550) 27,583,475
Investment Grade Bond Portfolio - 237,050.443 shares at
$12.56 per share (cost $2,804,441) 2,977,354
Contrafund Portfolio - 389,113.666 shares at
$19.94 per share (cost $6,496,810) 7,758,926
Index 500 Portfolio - 94,728.864 shares at
$114.39 per share (cost $8,735,694) 10,836,035
Asset Manager: Growth Portfolio - 140,054.018 shares at
$16.36 per share (cost $1,950,189) 2,291,284
Alger American Fund:
--------------------
Small Capitalization Portfolio - 403,465.664 shares at
$43.75 per share (cost $13,707,354) 17,651,623
Growth Portfolio - 300,282.630 shares at
$42.76 per share (cost $9,099,665) 12,840,085
Income and Growth Portfolio - 381,241.041 shares at
$10.99 per share (cost $3,864,736) 4,189,839
Midcap Growth Portfolio - 312,259.570 shares at
$24.18 per share (cost $5,997,773) 7,550,436
Balanced Portfolio - 125,291.131 shares at
$10.76 per share (cost $1,308,301) 1,348,133
Leveraged Allcap Portfolio - 104,973.976 shares at
$23.17 per share (cost $2,114,624) 2,432,247
The accompanying notes are an integral part of these financial statements.
</TABLE>
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40 LIFE
<PAGE>
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<TABLE>
<CAPTION>
AMERITAS VARIABLE LIFE INSURANCE COMPANY
----------------------------------------
SEPARATE ACCOUNT V
------------------
STATEMENT OF NET ASSETS
-----------------------
DECEMBER 31, 1997
-----------------
ASSETS, CONTINUED
<S> <C>
MFS Variable Insurance Trust:
-----------------------------
Emerging Growth Series Portfolio - 415,653.648 shares at
$16.14 per share (cost $5,739,754) 6,708,650
World Governments Series Portfolio - 21,729.618 shares at
$10.21 per share (cost $221,949) 221,859
Utilities Series Portfolio - 94,348.503 shares at
$17.99 per share (cost $1,433,157) 1,697,330
Research Series Portfolio - 61,452.261 shares at
$15.79 per share (cost $952,090) 970,331
Growth with Income Series Portfolio - 99,317.062 shares at
$16.44 per share (cost $1,629,259) 1,632,772
Morgan Stanley Universal Funds:
-------------------------------
Asian Equity Portfolio - 33,225.337 shares at 187,391
$5.64 per share (cost $238,689)
Emerging Markets Equity Portfolio - 78,194.995 shares at 737,379
$9.43 per share (cost $881,793)
Global Equity Portfolio - 72,507.289 shares at 851,236
$11.74 per share (cost $849,086)
International Magnum Portfolio - 51,120.253 shares at 530,628
$10.38 per share (cost $575,396)
U.S. Real Estate Portfolio - 55,401.749 shares at 632,134
$11.41 per share (cost $613,044)
---------------
NET ASSETS REPRESENTING EQUITY OF POLICYOWNERS $ 197,729,129
===============
The accompanying notes are an integral part of these financial statements.
</TABLE>
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LIFE 41
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<TABLE>
<CAPTION>
AMERITAS VARIABLE LIFE INSURANCE COMPANY
----------------------------------------
SEPARATE ACCOUNT V
------------------
STATEMENTS OF OPERATIONS
------------------------
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
----------------------------------------------------
VARIABLE INSURANCE PRODUCTS FUND
--------------------------------------------------
MONEY EQUITY
MARKET INCOME GROWTH
TOTAL PORTFOLIO PORTFOLIO PORTFOLIO
---------------- ---------------- ---------------- ---------------
1997
----
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividend distributions received $ 2,670,710 $ 463,675 $ 290,414 $ 177,070
Mortality and expense risk charge (1,574,558) (84,611) (201,066) (278,073)
---------------- ---------------- ---------------- ---------------
NET INVESTMENT INCOME(LOSS) 1,096,152 379,064 89,348 (101,003)
---------------- ---------------- ---------------- ---------------
REALIZED AND UNREALIZED GAIN(LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments 6,045,040 ---- 1,460,138 792,600
Net change in unrealized appreciation (depreciation) 21,418,187 ---- 3,371,385 5,089,744
---------------- ---------------- --------------------------------
NET GAIN(LOSS) ON INVESTMENTS 27,463,227 ---- 4,831,523 5,882,344
---------------- ---------------- ---------------- ---------------
NET INCREASE(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 28,559,379 $ 379,064 $ 4,920,871 $ 5,781,341
================ ================ ================ ===============
1996
----
INVESTMENT INCOME:
Dividend distributions received $ 1,837,028 $ 383,333 $ 19,764 $ 56,401
Mortality and expense risk charge (1,085,616) (71,053) (141,453) (223,387)
---------------- ---------------- ---------------- ---------------
NET INVESTMENT INCOME(LOSS) 751,412 312,280 (121,689) (166,986)
---------------- ---------------- ---------------- ---------------
REALIZED AND UNREALIZED GAIN(LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments 4,152,296 ---- 566,577 1,424,128
Net change in unrealized appreciation (depreciation) 7,185,902 ---- 1,388,228 1,591,342
---------------- ---------------- --------------------------------
NET GAIN(LOSS) ON INVESTMENTS 11,338,198 ---- 1,954,805 3,015,470
---------------- ---------------- ---------------- ---------------
NET INCREASE(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 12,089,610 $ 312,280 $ 1,833,116 $ 2,848,484
================ ================ ================ ===============
1995
----
INVESTMENT INCOME:
Dividend distributions received $ 1,293,935 $ 330,031 $ 223,698 $ 71,777
Mortality and expense risk charge (723,000) (57,621) (89,161) (160,505)
---------------- ---------------- ---------------- ---------------
NET INVESTMENT INCOME(LOSS) 570,935 272,410 134,537 (88,728)
---------------- ---------------- ---------------- ---------------
REALIZED AND UNREALIZED GAIN(LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments 403,845 ---- 334,949 ----
Net change in unrealized appreciation (depreciation) 14,755,373 ---- 2,148,654 4,664,368
---------------- ---------------- --------------------------------
NET GAIN(LOSS) ON INVESTMENTS 15,159,218 ---- 2,483,603 4,664,368
---------------- ---------------- ---------------- ---------------
NET INCREASE(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 15,730,153 $ 272,410 $ 2,618,140 $ 4,575,640
================ ================ ================ ===============
(1) Commenced business 09/05/95
(2) Commenced business 10/17/95
(3) Commenced business 09/13/95
The accompanying notes are an integral part of these financial statements.
</TABLE>
- --------------------------------------------------------------------------------
42 LIFE
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(CONTINUED)
VARIABLE INSURANCE PRODUCTS FUND VARIABLE INSURANCE PRODUCTS FUND II
------------------------------------- ------------------------------------------------------------------------------------------
INVESTMENT ASSET MANAGER
HIGH INCOME OVERSEAS ASSET MANAGER GRADE CONTRAFUND INDEX 500 GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO BOND PORTFOLIO PORTFOLIO (1) PORTFOLIO (2) PORTFOLIO (3)
------------------ ----------------- ----------------- ------------------ --------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
$ 456,382 $ 183,138 $ 782,791 $ 138,030 $ 28,971 $ 32,977 $ ----
(65,009) (115,217) (232,839) (25,608) (50,896) (71,508) (14,685)
------------------ ----------------- ----------------- ------------------ --------------- ---------------- ---------------
391,373 67,921 549,952 112,422 (21,925) (38,531) (14,685)
------------------ ----------------- ----------------- ------------------ --------------- ---------------- ---------------
56,407 727,004 1,963,611 ---- 76,565 66,916 1,179
585,776 646,688 1,992,988 89,590 991,738 1,946,609 322,064
------------------ ----------------- ----------------- ------------------ --------------- ---------------- ---------------
642,183 1,373,692 3,956,599 89,590 1,068,303 2,013,525 323,243
------------------ ----------------- ----------------- ------------------ --------------- ---------------- ---------------
$ 1,033,556 $ 1,441,613 $ 4,506,551 $ 202,012 $ 1,046,378 $ 1,974,994 $ 308,558
================== ================= ================= ================== =============== ================ ===============
$ 346,977 $ 95,857 $ 701,929 $ 110,640 $ ---- $ 523 $ 8,340
(52,366) (87,506) (192,161) (22,366) (12,082) (6,403) (2,489)
------------------ ----------------- ----------------- ------------------ --------------- ---------------- ---------------
294,611 8,351 509,768 88,274 (12,082) (5,880) 5,851
------------------ ----------------- ----------------- ------------------ --------------- ---------------- ---------------
67,887 105,443 578,783 ---- 1,845 1,346 14,028
303,796 931,213 1,567,972 (39,903) 270,650 153,497 19,517
------------------ ----------------- ----------------- ------------------ --------------- ---------------- ---------------
371,683 1,036,656 2,146,755 (39,903) 272,495 154,843 33,545
------------------ ----------------- ----------------- ------------------ --------------- ---------------- ---------------
$ 666,294 $ 1,045,007 $ 2,656,523 $ 48,371 $ 260,413 $ 148,963 $ 39,396
================== ================= ================= ================== =============== ================ ===============
$ 214,996 $ 19,894 $ 346,679 $ 34,269 $ 428 $ ---- $ 117
(40,007) (60,098) (164,848) (13,893) (119) (7) (25)
------------------ ----------------- ----------------- ------------------ --------------- ---------------- ---------------
174,989 (40,204) 181,831 20,376 309 (7) 92
------------------ ----------------- ----------------- ------------------ --------------- ---------------- ---------------
---- 19,894 ---- ---- 856 ---- 447
542,261 616,308 2,471,611 183,723 (273) 236 (486)
------------------ ----------------- ----------------- ------------------ --------------- ---------------- ---------------
542,261 636,202 2,471,611 183,723 583 236 (39)
------------------ ----------------- ----------------- ------------------ --------------- ---------------- ---------------
$ 717,250 $ 595,998 $ 2,653,442 $ 204,099 $ 892 $ 229 $ 53
================== ================= ================= ================== =============== ================ ===============
</TABLE>
- --------------------------------------------------------------------------------
LIFE 43
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERITAS VARIABLE LIFE INSURANCE COMPANY
----------------------------------------
SEPARATE ACCOUNT V
------------------
STATEMENTS OF OPERATIONS
------------------------
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
----------------------------------------------------
ALGER AMERICAN FUND
--------------------------------------------------------------------
SMALL INCOME AND MIDCAP
CAPITALIZATION GROWTH GROWTH GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------------- --------------- ---------------- ---------------
1997
----
INVESTMENT INCOME:
<S> <C> <C> <C> <C>
Dividend distributions received $ ---- $ 32,883 $ 12,791 $ 3,623
Mortality and expense risk charge (142,416) (98,937) (28,862) (62,763)
---------------- --------------- ---------------- ---------------
NET INVESTMENT INCOME(LOSS) (142,416) (66,054) (16,071) (59,140)
---------------- --------------- ---------------- ---------------
REALIZED AND UNREALIZED GAIN(LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments 550,941 59,552 105,818 88,340
Net change in unrealized appreciation (depreciation) 1,210,960 2,142,136 755,171 768,190
---------------- --------------- ---------------- ---------------
NET GAIN(LOSS) ON INVESTMENTS 1,761,901 2,201,688 860,989 856,530
---------------- --------------- ---------------- ---------------
NET INCREASE(DECREASE)IN NET ASSETS RESULTING FROM OPERATIONS $ 1,619,485 $ 2,135,634 $ 844,918 $ 797,390
================ =============== ================ ===============
1996
----
INVESTMENT INCOME:
Dividend distributions received $ ---- $ 3,908 $ 24,326 $ ----
Mortality and expense risk charge (118,508) (58,005) (13,912) (38,781)
---------------- --------------- ---------------- ---------------
NET INVESTMENT INCOME(LOSS) (118,508) (54,097) 10,414 (38,781)
---------------- --------------- ---------------- ---------------
REALIZED AND UNREALIZED GAIN(LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments 51,224 165,191 813,188 74,978
Net change in unrealized appreciation (depreciation) 368,251 592,282 (557,847) 330,732
---------------- --------------- ---------------- ---------------
NET GAIN(LOSS) ON INVESTMENTS 419,475 757,473 255,341 405,710
---------------- --------------- ---------------- ---------------
NET INCREASE(DECREASE)IN NET ASSETS RESULTING FROM OPERATIONS $ 300,967 $ 703,376 $ 265,755 $ 366,929
================ =============== ================ ===============
1995
----
INVESTMENT INCOME:
Dividend distributions received $ ---- $ 7,679 $ 5,186 $ 142
Mortality and expense risk charge (67,150) (32,981) (5,765) (14,362)
---------------- --------------- ---------------- ---------------
NET INVESTMENT INCOME(LOSS) (67,150) (25,302) (579) (14,220)
---------------- --------------- ---------------- ---------------
REALIZED AND UNREALIZED GAIN(LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments ---- 27,206 ---- ----
Net change in unrealized appreciation (depreciation) 2,184,006 924,176 146,805 430,138
---------------- --------------- ---------------- ---------------
NET GAIN(LOSS) ON INVESTMENTS 2,184,006 951,382 146,805 430,138
---------------- --------------- ---------------- ---------------
NET INCREASE(DECREASE)IN NET ASSETS RESULTING FROM OPERATIONS $ 2,116,856 $ 926,080 $ 146,226 $ 415,918
================ =============== ================ ===============
(1) Commenced business 09/13/95 (4) Commenced business 10/18/95
(2) Commenced business 09/12/95 (5) Commenced business 04/08/97
(3) Commenced business 09/13/95 (6) Commenced business 04/03/97
The accompanying notes are an integral part of these financial statements.
</TABLE>
- --------------------------------------------------------------------------------
44 LIFE
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(CONTINUED)
ALGER AMERICAN FUND MFS VARIABLE INSURANCE TRUST
---------------------------------- ---------------------------------------------------------------------------------------------
LEVERAGED EMERGING WORLD UTILITIES RESEARCH GROWTH WITH
BALANCED ALLCAP GROWTH SERIES GOVERNMENTS SERIES SERIES INCOME SERIES
PORTFOLIO PORTFOLIO (1) PORTFOLIO (2) SERIES PORTFOLIO (3) PORTFOLIO (4) PORTFOLIO (5) PORTFOLIO (6)
---------------- ---------------- ---------------- ----------------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
$ 12,338 $ ---- $ ---- $ 3,537 $ ---- $ ---- $ 6,744
(10,092) (17,451) (44,359) (1,978) (7,542) (2,824) (2,761)
---------------- ---------------- ---------------- ----------------------- --------------- ---------------- ---------------
2,246 (17,451) (44,359) 1,559 (7,542) (2,824) 3,983
---------------- ---------------- ---------------- ----------------------- --------------- ---------------- ---------------
16,729 ---- ---- 1,603 ---- ---- 31,548
162,920 298,847 937,800 (6,568) 255,610 18,241 3,513
---------------- ---------------- ---------------- ----------------------- --------------- ---------------- ---------------
179,649 298,847 937,800 (4,965) 255,610 18,241 35,061
---------------- ---------------- ---------------- ----------------------- --------------- ---------------- ---------------
$ 181,895 $ 281,396 $ 893,441 $ (3,406)$ 248,068 $ 15,417 $ 39,044
================ ================ ================ ======================= =============== ================ ===============
$ 29,838 $ ---- $ ---- $ ---- $ 9,070 $ ---- $ ----
(6,215) (5,432) (9,549) (913) (1,520) ---- ----
---------------- ---------------- ---------------- ----------------------- --------------- ---------------- ---------------
23,623 (5,432) (9,549) (913) 7,550 ---- ----
---------------- ---------------- ---------------- ----------------------- --------------- ---------------- ---------------
199,719 4,125 21,561 ---- 23,532 ---- ----
(168,250) 17,914 32,735 7,363 9,810 ---- ----
---------------- ---------------- ---------------- ----------------------- --------------- ---------------- ---------------
31,469 22,039 54,296 7,363 33,342 ---- ----
---------------- ---------------- ---------------- ----------------------- --------------- ---------------- ---------------
$ 55,092 $ 16,607 $ 44,747 $ 6,450 $ 40,892 $ ---- $ ----
================ ================ ================ ======================= =============== ================ ===============
$ 3,039 $ ---- $ 48 $ 1,440 $ 518 $ ---- $ ----
(2,251) (57) (118) (37) (10) ---- ----
---------------- ---------------- ---------------- ----------------------- --------------- ---------------- ---------------
788 (57) (70) 1,403 508 ---- ----
---------------- ---------------- ---------------- ----------------------- --------------- ---------------- ---------------
---- ---- 2,586 ---- 1,227 ---- ----
45,544 863 (1,638) (885) (1,246) ---- ----
---------------- ---------------- ---------------- ----------------------- --------------- ---------------- ---------------
45,544 863 948 (885) (19) ---- ----
---------------- ---------------- ---------------- ----------------------- --------------- ---------------- ---------------
$ 46,332 $ 806 $ 878 $ 518 $ 489 $ ---- $ ----
================ ================ ================ ======================= =============== ================ ===============
</TABLE>
- --------------------------------------------------------------------------------
LIFE 45
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERITAS VARIABLE LIFE INSURANCE COMPANY
----------------------------------------
SEPARATE ACCOUNT V
------------------
STATEMENTS OF OPERATIONS
------------------------
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
----------------------------------------------------
MORGAN STANLEY UNIVERSAL FUNDS
-----------------------------------------------------
EMERGING GLOBAL
ASIAN EQUITY MARKETS EQUITY EQUITY
PORTFOLIO (1) PORTFOLIO (2) PORTFOLIO (3)
---------------- ------------------ ----------------
1997
----
INVESTMENT INCOME:
<S> <C> <C> <C>
Dividend distributions received $ 232 $ 4,896 $ 5,533
Mortality and expense risk charge (495) (3,435) (2,294)
---------------- ------------------ ----------------
NET INVESTMENT INCOME(LOSS) (263) 1,461 3,239
---------------- ------------------ ----------------
REALIZED AND UNREALIZED GAIN(LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments ---- 21,661 11,816
Net change in unrealized appreciation (depreciation) (51,298) (144,415) 2,150
---------------- ------------------ ----------------
NET GAIN(LOSS) ON INVESTMENTS (51,298) (122,754) 13,966
---------------- ------------------ ----------------
NET INCREASE(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (51,561)$ (121,293)$ 17,205
================ ================== ================
1996
----
INVESTMENT INCOME:
Dividend distributions received $ ---- $ ---- $ ----
Mortality and expense risk charge ---- ---- ----
---------------- ------------------ ----------------
NET INVESTMENT INCOME(LOSS) ---- ---- ----
---------------- ------------------ ----------------
REALIZED AND UNREALIZED GAIN(LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments ---- ---- ----
Net change in unrealized appreciation (depreciation) ---- ---- ----
---------------- ------------------ ----------------
NET GAIN(LOSS) ON INVESTMENTS ---- ---- ----
---------------- ------------------ ----------------
NET INCREASE(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ ---- $ ---- $ ----
================ ================== ================
1995
----
INVESTMENT INCOME:
Dividend distributions received $ ---- $ ---- $ ----
Mortality and expense risk charge ---- ---- ----
---------------- ------------------ ----------------
NET INVESTMENT INCOME(LOSS) ---- ---- ----
---------------- ------------------ ----------------
REALIZED AND UNREALIZED GAIN(LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments ---- ---- ----
Net change in unrealized appreciation (depreciation) ---- ---- ----
---------------- ------------------ ----------------
NET GAIN(LOSS) ON INVESTMENTS ---- ---- ----
---------------- ------------------ ----------------
NET INCREASE(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ ---- $ ---- $ ----
================ ================== ================
(1) Commenced business 04/22/97 (4) Commenced business 04/07/97
(2) Commenced business 04/08/97 (5) Commenced business 04/28/97
(3) Commenced business 04/17/97
The accompanying notes are an integral part of these financial statements.
</TABLE>
- --------------------------------------------------------------------------------
46 LIFE
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(CONTINUED)
MORGAN STANLEY UNIVERSAL FUNDS DREYFUS
- ---------------------------------------- ----------------
INTERNATIONAL US REAL
MAGNUM ESTATE STOCK INDEX
PORTFOLIO (4) PORTFOLIO (5) PORTFOLIO
------------------ ----------------- ----------------
<S> <C> <C>
$ 15,852 $ 9,641 $ 9,192
(1,903) (1,584) (5,350)
------------------ ----------------- ----------------
13,949 8,057 3,842
------------------ ----------------- ----------------
1,056 11,556 ----
(44,768) 19,091 54,025
------------------ ----------------- ----------------
(43,712) 30,647 54,025
------------------ ----------------- ----------------
$ (29,763)$ 38,704 $ 57,867
================== ================= ================
$ ---- $ ---- $ 46,122
---- ---- (21,515)
------------------ ----------------- ----------------
---- ---- 24,607
------------------ ----------------- ----------------
---- ---- 38,741
---- ---- 366,600
------------------ ----------------- ----------------
---- ---- 405,341
------------------ ----------------- ----------------
$ ---- $ ---- $ 429,948
================== ================= ================
$ ---- $ ---- $ 33,994
---- ---- (13,985)
------------------ ----------------- ----------------
---- ---- 20,009
------------------ ----------------- ----------------
---- ---- 16,680
---- ---- 401,208
------------------ ----------------- ----------------
---- ---- 417,888
------------------ ----------------- ----------------
$ ---- $ ---- $ 437,897
================== ================= ================
</TABLE>
- --------------------------------------------------------------------------------
LIFE 47
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERITAS VARIABLE LIFE INSURANCE COMPANY
----------------------------------------
SEPARATE ACCOUNT V
------------------
STATEMENTS OF CHANGES IN NET ASSETS
-----------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
----------------------------------------------------
VARIABLE INSURANCE PRODUCTS FUND
--------------------------------------------------
MONEY EQUITY
MARKET INCOME GROWTH
TOTAL PORTFOLIO PORTFOLIO PORTFOLIO
---------------- ---------------- ------------------------------
1997
----
INCREASE(DECREASE) IN NET ASSETS FROM OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income(loss) $ 1,096,152 $ 379,064 $ 89,348 $ (101,003)
Net realized gain(loss) on investments 6,045,040 ---- 1,460,138 792,600
Net change in unrealized appreciation(depreciation) 21,418,187 ---- 3,371,385 5,089,744
---------------- ---------------- --------------- -------------
NET INCREASE(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 28,559,379 379,064 4,920,871 5,781,341
NET INCREASE(DECREASE) FROM POLICYHOLDER TRANSACTIONS 33,090,017 (464,346) 2,617,832 382,227
---------------- ---------------- --------------- -------------
TOTAL INCREASE(DECREASE) IN NET ASSETS 61,649,396 (85,282) 7,538,703 6,163,568
NET ASSETS AT JANUARY 1, 1997 136,079,733 7,637,768 17,183,804 26,190,103
---------------- ---------------- --------------- -------------
NET ASSETS AT DECEMBER 31, 1997 $ 197,729,129 $ 7,552,486 $ 24,722,507 $ 32,353,671
================ ================ =============== =============
1996
----
INCREASE(DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income(loss) $ 751,412 $ 312,280 $ (121,689)$ (166,986)
Net realized gain(loss) on investments 4,152,296 ---- 566,577 1,424,128
Net change in unrealized appreciation(depreciation) 7,185,902 ---- 1,388,228 1,591,342
---------------- ---------------- --------------- -------------
NET INCREASE(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 12,089,610 312,280 1,833,116 2,848,484
NET INCREASE(DECREASE) FROM POLICYHOLDER TRANSACTIONS 30,380,460 1,711,961 2,778,194 2,837,486
---------------- ---------------- --------------- -------------
TOTAL INCREASE(DECREASE) IN NET ASSETS 42,470,070 2,024,241 4,611,310 5,685,970
NET ASSETS AT JANUARY 1, 1996 93,609,663 5,613,527 12,572,494 20,504,133
---------------- ---------------- --------------- -------------
NET ASSETS AT DECEMBER 31, 1996 $ 136,079,733 $ 7,637,768 $ 17,183,804 $ 26,190,103
================ ================ =============== =============
1995
----
INCREASE(DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income(loss) $ 570,935 $ 272,410 $ 134,537 $ (88,728)
Net realized gain(loss) on investments 403,845 ---- 334,949 ----
Net change in unrealized appreciation(depreciation) 14,755,373 ---- 2,148,654 4,664,368
---------------- ---------------- --------------- -------------
NET INCREASE(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 15,730,153 272,410 2,618,140 4,575,640
NET INCREASE(DECREASE) FROM POLICYHOLDER TRANSACTIONS 19,763,147 (906,545) 3,658,409 3,565,603
---------------- ---------------- --------------- -------------
TOTAL INCREASE(DECREASE) IN NET ASSETS 35,493,300 (634,135) 6,276,549 8,141,243
NET ASSETS AT JANUARY 1, 1995 58,116,363 6,247,662 6,295,945 12,362,890
---------------- ---------------- --------------- -------------
NET ASSETS AT DECEMBER 31, 1995 $ 93,609,663 $ 5,613,527 $ 12,572,494 $ 20,504,133
================ ================ =============== =============
(1) Commenced business 09/05/95
(2) Commenced business 10/17/95
(3) Commenced business 09/13/95
The accompanying notes are an integral part of these financial statements.
</TABLE>
- --------------------------------------------------------------------------------
48 LIFE
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(CONTINUED)
VARIABLE INSURANCE PRODUCTS FUND VARIABLE INSURANCE PRODUCTS FUND II
- ---------------------------------------- ------------------------------------------------------------------------------------------
INVESTMENT ASSET MANAGER
HIGH INCOME OVERSEAS ASSET MANAGER GRADE CONTRAFUND INDEX 500 GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO BOND PORTFOLIO PORTFOLIO (1) PORTFOLIO (2) PORTFOLIO (3)
------------------ ----------------- ----------------- ------------------ --------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
$ 391,373 $ 67,921 $ 549,952 $ 112,422 $ (21,925)$ (38,531)$ (14,685)
56,407 727,004 1,963,611 ---- 76,565 66,916 1,179
585,776 646,688 1,992,988 89,590 991,738 1,946,609 322,064
------------------ ----------------- ----------------- ------------------ --------------- ---------------- ----------------
1,033,556 1,441,613 4,506,551 202,012 1,046,378 1,974,994 308,558
104,745 1,242,175 614,816 422,976 3,787,942 6,930,829 1,426,686
------------------ ----------------- ----------------- ------------------ --------------- ---------------- ----------------
1,138,301 2,683,788 5,121,367 624,988 4,834,320 8,905,823 1,735,244
6,987,534 10,661,695 22,462,108 2,352,366 2,924,606 1,930,212 556,040
------------------ ----------------- ----------------- ------------------ --------------- ---------------- ----------------
$ 8,125,835 $ 13,345,483 $ 27,583,475 $ 2,977,354 $ 7,758,926 $ 10,836,035 $ 2,291,284
================== ================= ================= ================== =============== ================ ================
$ 294,611 $ 8,351 $ 509,768 $ 88,274 $ (12,082)$ (5,880)$ 5,851
67,887 105,443 578,783 ---- 1,845 1,346 14,028
303,796 931,213 1,567,972 (39,903) 270,650 153,497 19,517
------------------ ----------------- ----------------- ------------------ --------------- ---------------- ----------------
666,294 1,045,007 2,656,523 48,371 260,413 148,963 39,396
1,995,433 2,133,197 518,914 167,556 2,534,900 1,776,610 503,059
------------------ ----------------- ----------------- ------------------ --------------- ---------------- ----------------
2,661,727 3,178,204 3,175,437 215,927 2,795,313 1,925,573 542,455
4,325,807 7,483,491 19,286,671 2,136,439 129,293 4,639 13,585
------------------ ----------------- ----------------- ------------------ --------------- ---------------- ----------------
$ 6,987,534 $ 10,661,695 $ 22,462,108 $ 2,352,366 $ 2,924,606 $ 1,930,212 $ 556,040
================== ================= ================= ================== =============== ================ ================
$ 174,989 $ (40,204)$ 181,831 $ 20,376 $ 309 $ (7)$ 92
---- 19,894 ---- ---- 856 ---- 447
542,261 616,308 2,471,611 183,723 (273) 236 (486)
------------------ ----------------- ----------------- ------------------ --------------- ---------------- ----------------
717,250 595,998 2,653,442 204,099 892 229 53
638,346 1,932,843 475,170 1,025,181 128,401 4,410 13,532
------------------ ----------------- ----------------- ------------------ --------------- ---------------- ----------------
1,355,596 2,528,841 3,128,612 1,229,280 129,293 4,639 13,585
2,970,211 4,954,650 16,158,059 907,159 ---- ---- ----
------------------ ----------------- ----------------- ------------------ --------------- ---------------- ----------------
$ 4,325,807 $ 7,483,491 $ 19,286,671 $ 2,136,439 $ 129,293 $ 4,639 $ 13,585
================== ================= ================= ================== =============== ================ ================
</TABLE>
- --------------------------------------------------------------------------------
LIFE 49
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERITAS VARIABLE LIFE INSURANCE COMPANY
----------------------------------------
SEPARATE ACCOUNT V
------------------
STATEMENTS OF CHANGES IN NET ASSETS
-----------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
----------------------------------------------------
ALGER AMERICAN FUND
-------------------------------------------------------------------
SMALL INCOME AND MIDCAP
CAPITALIZATION GROWTH GROWTH GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------------- ---------------- --------------- -------------
1997
----
INCREASE(DECREASE) IN NET ASSETS FROM OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income(loss) $ (142,416)$ (66,054)$ (16,071)$ (59,140)
Net realized gain(loss) on investments 550,941 59,552 105,818 88,340
Net change in unrealized appreciation(depreciation) 1,210,960 2,142,136 755,171 768,190
---------------- ---------------- --------------- -------------
NET INCREASE(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 1,619,485 2,135,634 844,918 797,390
NET INCREASE(DECREASE) FROM POLICYHOLDER TRANSACTIONS 1,904,475 2,704,106 1,369,132 1,117,517
---------------- ---------------- --------------- -------------
TOTAL INCREASE(DECREASE) IN NET ASSETS 3,523,960 4,839,740 2,214,050 1,914,907
NET ASSETS AT JANUARY 1, 1997 14,127,663 8,000,345 1,975,789 5,635,529
---------------- ---------------- --------------- -------------
NET ASSETS AT DECEMBER 31, 1997 $ 17,651,623 $ 12,840,085 $ 4,189,839 $ 7,550,436
================ ================ =============== =============
1996
----
INCREASE(DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income(loss) $ (118,508)$ (54,097)$ 10,414 $ (38,781)
Net realized gain(loss) on investments 51,224 165,191 813,188 74,978
Net change in unrealized appreciation(depreciation) 368,251 592,282 (557,847) 330,732
---------------- ---------------- --------------- -------------
NET INCREASE(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 300,967 703,376 265,755 366,929
NET INCREASE(DECREASE) FROM POLICYHOLDER TRANSACTIONS 3,449,194 2,618,412 791,272 2,585,782
---------------- ---------------- --------------- -------------
TOTAL INCREASE(DECREASE) IN NET ASSETS 3,750,161 3,321,788 1,057,027 2,952,711
NET ASSETS AT JANUARY 1, 1996 10,377,502 4,678,557 918,762 2,682,818
---------------- ---------------- --------------- -------------
NET ASSETS AT DECEMBER 31, 1996 $ 14,127,663 $ 8,000,345 $ 1,975,789 $ 5,635,529
================ ================ =============== =============
1995
----
INCREASE(DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income(loss) $ (67,150)$ (25,302)$ (579)$ (14,220)
Net realized gain(loss) on investments ---- 27,206 ---- ----
Net change in unrealized appreciation(depreciation) 2,184,006 924,176 146,805 430,138
---------------- ---------------- --------------- -------------
NET INCREASE(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 2,116,856 926,080 146,226 415,918
NET INCREASE(DECREASE) FROM POLICYHOLDER TRANSACTIONS 3,996,279 1,739,906 465,186 1,721,013
---------------- ---------------- --------------- --------------
TOTAL INCREASE(DECREASE) IN NET ASSETS 6,113,135 2,665,986 611,412 2,136,931
NET ASSETS AT JANUARY 1, 1995 4,264,367 2,012,571 307,350 545,887
---------------- ---------------- --------------- -------------
NET ASSETS AT DECEMBER 31, 1995 $ 10,377,502 $ 4,678,557 $ 918,762 $ 2,682,818
================ ================ =============== =============
(1) Commenced business 09/13/95 (4) Commenced business 10/18/95
(2) Commenced business 09/12/95 (5) Commenced business 04/08/97
(3) Commenced business 09/13/95 (6) Commenced business 04/03/97
The accompanying notes are an integral part of these financial statements.
</TABLE>
- --------------------------------------------------------------------------------
50 LIFE
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(CONTINUED)
ALGER AMERICAN FUND MFS VARIABLE INSURANCE TRUST
- ------------------------------------- ---------------------------------------------------------------------------------------------
LEVERAGED EMERGING WORLD UTILITIES RESEARCH GROWTH WITH
BALANCED ALLCAP GROWTH SERIES GOVERNMENTS SERIES SERIES INCOME SERIES
PORTFOLIO PORTFOLIO (1) PORTFOLIO (2) SERIES PORTFOLIO (3) PORTFOLIO (4) PORTFOLIO(5) PORTFOLIO (6)
---------------- ---------------- ---------------- ----------------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
$ 2,246 $ (17,451)$ (44,359)$ 1,559 $ (7,542)$ (2,824)$ 3,983
16,729 ---- ---- 1,603 ---- ---- 31,548
162,920 298,847 937,800 (6,568) 255,610 18,241 3,513
---------------- ---------------- ---------------- ----------------------- --------------- ---------------- ---------------
181,895 281,396 893,441 (3,406) 248,068 15,417 39,044
253,322 962,301 3,250,610 41,843 1,057,600 954,914 1,593,728
---------------- ---------------- ---------------- ----------------------- --------------- ---------------- ---------------
435,217 1,243,697 4,144,051 38,437 1,305,668 970,331 1,632,772
912,916 1,188,550 2,564,599 183,422 391,662 ---- ----
---------------- ---------------- ---------------- ----------------------- --------------- ---------------- ---------------
$ 1,348,133 $ 2,432,247 $ 6,708,650 $ 221,859 $ 1,697,330 $ 970,331 $ 1,632,772
================ ================ ================ ======================= =============== ================ ===============
$ 23,623 $ (5,432)$ (9,549)$ (913)$ 7,550 $ ---- $ ----
199,719 4,125 21,561 ---- 23,532 ---- ----
(168,250) 17,914 32,735 7,363 9,810 ---- ----
---------------- ---------------- ---------------- ----------------------- --------------- ---------------- ---------------
55,092 16,607 44,747 6,450 40,892 ---- ----
421,333 1,071,187 2,401,694 161,157 332,223 ---- ----
---------------- ---------------- ---------------- ----------------------- --------------- ---------------- ---------------
476,425 1,087,794 2,446,441 167,607 373,115 ---- ----
436,491 100,756 118,158 15,815 18,547 ---- ----
---------------- ---------------- ---------------- ----------------------- --------------- ---------------- ---------------
$ 912,916 $ 1,188,550 $ 2,564,599 $ 183,422 $ 391,662 $ ---- $ ----
================ ================ ================ ======================= =============== ================ ===============
$ 788 $ (57)$ (70)$ 1,403 $ 508 $ ---- $ ----
---- ---- 2,586 ---- 1,227 ---- ----
45,544 863 (1,638) (885) (1,246) ---- ----
---------------- ---------------- ---------------- ----------------------- --------------- ---------------- ---------------
46,332 806 878 518 489 ---- ----
263,981 99,950 117,280 15,297 18,058 ---- ----
---------------- ---------------- ---------------- ----------------------- --------------- ---------------- ---------------
310,313 100,756 118,158 15,815 18,547 ---- ----
126,178 ---- ---- ---- ---- ---- ----
---------------- ---------------- ---------------- ----------------------- --------------- ---------------- ---------------
$ 436,491 $ 100,756 $ 118,158 $ 15,815 $ 18,547 $ ---- $ ----
================ ================ ================ ======================= =============== ================ ===============
</TABLE>
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LIFE 51
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERITAS VARIABLE LIFE INSURANCE COMPANY
----------------------------------------
SEPARATE ACCOUNT V
------------------
STATEMENTS OF CHANGES IN NET ASSETS
-----------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
----------------------------------------------------
MORGAN STANLEY UNIVERSAL FUNDS
------------------------------------------------------
EMERGING GLOBAL
ASIAN EQUITY MARKETS EQUITY EQUITY
PORTFOLIO (1) PORTFOLIO (2) PORTFOLIO (3)
---------------- ------------------ ---------------
1997
----
INCREASE(DECREASE) IN NET ASSETS FROM OPERATIONS:
<S> <C> <C> <C>
Net investment income(loss) $ (263)$ 1,461 $ 3,239
Net realized gain(loss) on investments ---- 21,661 11,816
Net change in unrealized appreciation(depreciation) (51,298) (144,415) 2,150
---------------- -----------------------------------
NET INCREASE(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (51,561) (121,293) 17,205
NET INCREASE(DECREASE) FROM POLICYHOLDER TRANSACTIONS 238,952 858,672 834,031
---------------- ------------------ ---------------
TOTAL INCREASE(DECREASE) IN NET ASSETS 187,391 737,379 851,236
NET ASSETS AT JANUARY 1, 1997 ---- ---- ----
---------------- ------------------ ---------------
NET ASSETS AT DECEMBER 31, 1997 $ 187,391 $ 737,379 $ 851,236
================ ================== ===============
1996
----
INCREASE(DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income(loss) $ ---- $ ---- $ ----
Net realized gain(loss) on investments ---- ---- ----
Net change in unrealized appreciation(depreciation) ---- ---- ----
---------------- ------------------ ---------------
NET INCREASE(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ---- ---- ----
NET INCREASE(DECREASE) FROM POLICYHOLDER TRANSACTIONS ---- ---- ----
---------------- ------------------ ---------------
TOTAL INCREASE(DECREASE) IN NET ASSETS ---- ---- ----
NET ASSETS AT JANUARY 1, 1996 ---- ---- ----
---------------- ------------------ ---------------
NET ASSETS AT DECEMBER 31, 1996 $ ---- $ ---- $ ----
================ ================== ===============
1995
----
INCREASE(DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income(loss) $ ---- $ ---- $ ----
Net realized gain(loss) on investments ---- ---- ----
Net change in unrealized appreciation(depreciation) ---- ---- ----
---------------- ------------------ ---------------
NET INCREASE(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ---- ---- ----
NET INCREASE(DECREASE) FROM POLICYHOLDER TRANSACTIONS ---- ---- ----
---------------- ------------------ ---------------
TOTAL INCREASE(DECREASE) IN NET ASSETS ---- ---- ----
NET ASSETS AT JANUARY 1, 1995 ---- ---- ----
---------------- ------------------ ---------------
NET ASSETS AT DECEMBER 31, 1995 $ ---- $ ---- $ ----
================ ================== ===============
(1) Commenced business 04/22/97 (4) Commenced business 04/07/97
(2) Commenced business 04/08/97 (5) Commenced business 04/28/97
(3) Commenced business 04/17/97
The accompanying notes are an integral part of these financial statements.
</TABLE>
- --------------------------------------------------------------------------------
52 LIFE
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(CONTINUED)
MORGAN STANLEY UNIVERSAL FUNDS DREYFUS
- ---------------------------------------- -----------------
INTERNATIONAL US REAL
MAGNUM ESTATE STOCK INDEX
PORTFOLIO (4) PORTFOLIO (5) PORTFOLIO
------------------ ----------------- -----------------
<S> <C> <C>
$ 13,949 $ 8,057 $ 3,842
1,056 11,556 ----
(44,768) 19,091 54,025
------------------ ----------------- -----------------
(29,763) 38,704 57,867
560,391 593,430 (2,270,889)
------------------ ----------------- -----------------
530,628 632,134 (2,213,022)
---- ---- 2,213,022
------------------ ----------------- -----------------
$ 530,628 $ 632,134 $ ----
================== ================= =================
$ ---- $ ---- $ 24,607
---- ---- 38,741
---- ---- 366,600
------------------ ----------------- -----------------
---- ---- 429,948
---- ---- (409,104)
------------------ ----------------- -----------------
---- ---- 20,844
---- ---- 2,192,178
================== ================= =================
$ ---- $ ---- $ 2,213,022
================== ================= =================
$ ---- $ ---- $ 20,009
---- ---- 16,680
---- ---- 401,208
------------------ ----------------- -----------------
---- ---- 437,897
---- ---- 790,847
------------------ ----------------- -----------------
---- ---- 1,228,744
---- ---- 963,434
================== ================= =================
$ ---- $ ---- $ 2,192,178
================== ================= =================
</TABLE>
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LIFE 53
<PAGE>
- --------------------------------------------------------------------------------
This page left blank intentionally.
- --------------------------------------------------------------------------------
54 LIFE
<PAGE>
- --------------------------------------------------------------------------------
AMERITAS VARIABLE LIFE INSURANCE COMPANY
----------------------------------------
SEPARATE ACCOUNT V
------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
1. ORGANIZATION AND ACCOUNTING POLICIES
- -------------------------------------------
Ameritas Variable Life Insurance Company Separate Account V (the Account)
was established on August 28, 1985, under Nebraska law by Ameritas Variable
Life Insurance Company (AVLIC), a wholly-owned subsidiary of AMAL
Corporation, a holding company 66% owned by Ameritas Life Insurance Corp
(ALIC) and 34% owned by AmerUs Life Insurance Company (AmerUs). The assets
of the Account are segregated from AVLIC's other assets and are used only
to support variable life products issued by AVLIC.
The Account is registered under the Investment Company Act of 1940, as
amended, as a unit investment trust. At December 31, 1997, there are
twenty-six subaccounts within the Account. Five of the subaccounts invest
only in a corresponding Portfolio of Variable Insurance Products Fund and
five invest only in a corresponding Portfolio of Variable Insurance
Products Fund II. Both funds are diversified open-end management investment
companies and are managed by Fidelity Management and Research Company. Six
of the subaccounts invest only in a corresponding Portfolio of Alger
American Fund which is a diversified open-end management investment company
managed by Fred Alger Management, Inc. Five of the subaccounts invest only
in a corresponding Portfolio of MFS Variable Insurance Trust which is a
diversified open-end management investment company managed by Massachusetts
Financial Services Company. Five of the subaccounts invest only in a
corresponding Portfolio of Morgan Stanley Universal Funds, Inc. which is a
diversified open-end management investment company managed by Morgan
Stanley Asset Management, Inc. All five funds are registered under the
Investment Company Act of 1940, as amended. Each Portfolio is registered
under the Investment Company Act of 1940, as amended. Each Portfolio pays
the manager a monthly fee for managing its investments and business
affairs. The assets of the Account are carried at the net asset value of
the underlying Portfolios of the Funds.
Pursuant to an order of the SEC allowing for the substitution, all
policyowner funds invested in a Portfolio of Dreyfus Stock Index Fund were
transferred to the Index 500 subaccount of the Fidelity Variable Insurance
Products Fund II as of March 31, 1997.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
VALUATION OF INVESTMENTS
The assets of the Account are carried at the net asset value of the
underlying Portfolios of the Funds. The value of the policyowners' units
corresponds to the Account's investment in the underlying subaccounts. The
availability of investment portfolio and subaccount options may vary
between products. Share transactions and security transactions are
accounted for on a trade date basis.
FEDERAL AND STATE TAXES
The operations of the Account are included in the federal income tax return
of AVLIC, which is taxed as a life insurance company under the Internal
Revenue Code. AVLIC has the right to charge the Account any federal income
taxes, or provision for federal income taxes, attributable to the
operations of the Account or to the policies funded in the Account.
Currently, AVLIC does not make a charge for income or other taxes. Charges
for state and local taxes, if any, attributable to the Account may also be
made.
2. POLICYOWNER CHARGES
- -------------------------
AVLIC charges the Account for mortality and expense risks assumed. A daily
charge is made on the average daily value of the net assets representing
equity of policyowners held in each subaccount per each product's current
policy provisions. Additional charges are made at intervals and in amounts
per each product's current policy provisions. These charges are prorated
against the balance in each investment option of the policyowner, including
the Fixed Account option which is not reflected in this separate account.
- --------------------------------------------------------------------------------
LIFE 55
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERITAS VARIABLE LIFE INSURANCE COMPANY
----------------------------------------
SEPARATE ACCOUNT V
------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
3. SHARES OWNED
- -----------------
The Account invests in shares of mutual funds. Share activity and total
shares were as follows:
VARIABLE INSURANCE PRODUCTS FUND
--------------------------------------------------------------------------------------
MONEY EQUITY
MARKET INCOME GROWTH HIGH INCOME OVERSEAS
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------------- ---------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Shares owned at January 1, 1997 7,637,767.850 817,109.096 841,043.772 558,109.727 565,907.403
Shares acquired 57,423,437.350 511,389.228 339,254.481 1,118,068.428 1,175,596.501
Shares disposed of (57,508,719.290) (310,273.176) (308,231.641) (1,077,810.315) (1,046,426.669)
---------------- ---------------- ---------------- --------------- ----------------
Shares owned at December 31, 1997 7,552,485.910 1,018,225.148 872,066.612 598,367.840 695,077.235
================ ================ ================ =============== ================
Shares owned at January 1, 1996 5,613,527.070 652,438.732 702,196.341 358,988.159 438,914.420
Shares acquired 47,496,829.850 398,549.753 641,337.814 1,195,240.651 726,524.452
Shares disposed of (45,472,589.070) (233,879.389) (502,490.383) (996,119.083) (599,531.469)
---------------- ---------------- ---------------- --------------- ----------------
Shares owned at December 31, 1996 7,637,767.850 817,109.096 841,043.772 558,109.727 565,907.403
================ ================ ================ =============== ================
Shares owned at January 1, 1995 6,247,661.970 410,159.302 569,981.087 276,041.963 316,186.952
Shares acquired 26,559,606.700 404,272.920 482,583.089 659,794.740 535,442.497
Shares disposed of (27,193,741.600) (161,993.490) (350,367.835) (576,848.544) (412,715.029)
---------------- ---------------- ---------------- --------------- ----------------
Shares owned at December 31, 1995 5,613,527.070 652,438.732 702,196.341 358,988.159 438,914.420
================ ================ ================ =============== ================
(1) Commenced business 09/05/95
(2) Commenced business 10/17/95
(3) Commenced business 09/13/95
</TABLE>
- --------------------------------------------------------------------------------
56 LIFE
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(CONTINUED)
VARIABLE INSURANCE PRODUCTS FUND II ALGER AMERICAN FUND
- ---------------------------------------------------------------------------------------- ----------------------------------
ASSET INVESTMENT ASSET MANAGER SMALL
MANAGER GRADE CONTRAFUND INDEX 500 GROWTH CAPITALIZATION GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO (1) PORTFOLIO (2) PORTFOLIO (3) PORTFOLIO PORTFOLIO
- ----------------- ---------------- --------------- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
1,326,763.623 192,186.776 176,606.628 21,656.138 42,445.800 345,335.196 233,042.387
598,138.814 120,594.995 358,431.197 129,171.432 137,282.584 311,521.638 204,589.158
(393,338.019) (75,731.328) (145,924.159) (56,098.706) (39,674.366) (253,391.170) (137,348.915)
- ----------------- ---------------- --------------- ---------------- ---------------- ---------------- ----------------
1,531,564.418 237,050.443 389,113.666 94,728.864 140,054.018 403,465.664 300,282.630
================= ================ =============== ================ ================ ================ ================
1,221,448.421 171,179.054 9,382.665 61.274 1,153.239 263,321.551 150,146.226
469,994.138 113,295.550 299,411.174 26,095.586 53,791.445 280,059.510 162,856.038
(364,678.936) (92,297.828) (132,187.211) (4,500.722) (12,498.884) (198,045.865) (79,959.877)
- ----------------- ---------------- --------------- ---------------- ---------------- ---------------- ----------------
1,326,763.623 192,176.776 176,606.628 21,656.138 42,445.800 345,335.196 233,042.387
================= ================ =============== ================ ================ ================ ================
1,171,722.945 82,319.293 ---- ---- ---- 156,146.723 87,011.270
546,123.126 128,355.920 10,842.924 292.067 1,233.249 194,345.591 128,233.290
(496,397.650) (39,486.159) (1,460.259) (230.793) (80.010) (87,170.763) (65,098.334)
- ----------------- ---------------- --------------- ---------------- ---------------- ---------------- ----------------
1,221,448.421 171,189.054 9,382.665 61.274 1,153.239 263,321.551 150,146.226
================= ================ =============== ================ ================ ================ ================
</TABLE>
- --------------------------------------------------------------------------------
LIFE 57
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERITAS VARIABLE LIFE INSURANCE COMPANY
----------------------------------------
SEPARATE ACCOUNT V
------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
3. SHARES OWNED, CONTINUED
- --------------------------------
The Account invests in shares of mutual funds. Share activity and total
shares were as follows:
ALGER AMERICAN FUND
--------------------------------------------------------------------
INCOME AND MIDCAP LEVERAGED
GROWTH GROWTH BALANCED ALLCAP
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO (1)
--------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Shares owned at January 1, 1997 234,654.249 263,959.188 98,800.487 61,392.043
Shares acquired 389,297.914 245,052.311 64,650.229 108,499.936
Shares disposed of (242,711.122) (196,751.929) (38,159.585) (64,918.003)
--------------- ---------------- ---------------- ----------------
Shares owned at December 31, 1997 381,241.041 312,259.570 125,291.131 104,973.976
=============== ================ ================ ================
Shares owned at January 1, 1996 51,644.863 138,005.038 32,000.820 5,780.602
Shares acquired 238,851.986 257,678.903 91,879.454 94,532.096
Shares disposed of (55,842.600) (131,724.753) (25,079.787) (38,920.655)
--------------- ---------------- ---------------- ----------------
Shares owned at December 31, 1996 234,654.249 263,959.188 98,800.487 61,392.043
=============== ================ ================ ================
Shares owned at January 1, 1995 23,109.060 40,556.228 11,683.157 ----
Shares acquired 39,660.929 132,196.564 36,086.453 6,369.357
Shares disposed of (11,125.126) (34,747.754) (15,768.790) (588.755)
--------------- ---------------- ---------------- ----------------
Shares owned at December 31, 1995 51,644.863 138,005.038 32,000.820 5,780.602
=============== ================ ================ ================
(1) Commenced business 09/13/95 (5) Commenced business 04/08/97
(2) Commenced business 09/12/95 (6) Commenced business 04/03/97
(3) Commenced business 09/13/95 (7) Commenced business 04/22/97
(4) Commenced business 10/18/95 (8) Commenced business 04/08/97
</TABLE>
- --------------------------------------------------------------------------------
58 LIFE
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(CONTINUED)
MFS VARIABLE INSURANCE TRUST MORGAN STANLEY UNIVERSAL FUNDS
- -----------------------------------------------------------------------------------------------------------------------------------
EMERGING WORLD UTILITIES RESEARCH GROWTH WITH ASIAN EMERGING
GROWTH SERIES GOVERNMENTS SERIES SERIES INCOME SERIES EQUITY MARKETS EQUITY
PORTFOLIO (2) SERIES PORTFOLIO (3) PORTFOLIO (4) PORTFOLIO (5) PORTFOLIO (6) PORTFOLIO (7) PORTFOLIO (8)
- ----------------- --------------------- ---------------- ---------------- ---------------- --------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
193,700.823 17,336.705 28,672.191 ---- ---- ---- ----
457,734.629 37,542.368 107,581.620 72,826.540 110,180.302 51,430.390 140,386.479
(235,781.804) (33,149.455) (41,905.308) (11,374.279) (10,863.240) (18,205.053) (62,191.484)
- ----------------- --------------------- ---------------- ---------------- ---------------- --------------- -------------------
415,653.648 21,729.618 94,348.503 61,452.261 99,317.062 33,225.337 78,194.995
================= ===================== ================ ================ ================ =============== ===================
10,355.688 1,555.043 1,475.513 ---- ---- ---- ----
232,976.138 34,612.233 35,187.917 ---- ---- ---- ----
(49,631.003) (18,830.571) (7,991.239) ---- ---- ---- ----
- ----------------- --------------------- ---------------- ---------------- ---------------- --------------- -------------------
193,700.823 17,336.705 28,672.191 ---- ---- ---- ----
================= ===================== ================ ================ ================ =============== ===================
---- ---- ---- ---- ---- ---- ----
18,376.079 1,625.023 2,867.141 ---- ---- ---- ----
(8,020.391) (69.980) (1,391.628) ---- ---- ---- ----
- ----------------- --------------------- ---------------- ---------------- ---------------- --------------- -------------------
10,355.688 1,555.043 1,475.513 ---- ---- ---- ----
================= ===================== ================ ================ ================ =============== ===================
</TABLE>
- --------------------------------------------------------------------------------
LIFE 59
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERITAS VARIABLE LIFE INSURANCE COMPANY
----------------------------------------
SEPARATE ACCOUNT V
------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
3. SHARES OWNED, CONTINUED
- --------------------------------
The Account invests in shares of mutual funds. Share activity and total
shares were as follows:
MORGAN STANLEY UNIVERSAL FUNDS DREYFUS
-------------------------------------------------------- -----------------
GLOBAL INTERNATIONAL US REAL
EQUITY MAGNUM ESTATE STOCK INDEX
PORTFOLIO (1) PORTFOLIO (2) PORTFOLIO (3) FUND PORTFOLIO
----------------- ------------------ ------------------ -----------------
<S> <C> <C> <C> <C>
Shares owned at January 1, 1997 ---- ---- ---- 109,123.387
Shares acquired 93,896.403 77,530.448 97,640.967 2,530.208
Shares disposed of (21,389.114) (26,410.195) (42,239.218) (111,653.595)
----------------- ------------------ ------------------ -----------------
Shares owned at December 31, 1997 72,507.289 51,120.253 55,401.749 0.000
================= ================== ================== =================
Shares owned at January 1, 1996 ---- ---- ---- 127,452.178
Shares acquired ---- ---- ---- 33,926.076
Shares disposed of ---- ---- ---- (52,254.867)
----------------- ------------------ ------------------ -----------------
Shares owned at December 31, 1996 ---- ---- ---- 109,123.387
================= ================== ================== =================
Shares owned at January 1, 1995 ---- ---- ---- 74,453.907
Shares acquired ---- ---- ---- 77,163.184
Shares disposed of ---- ---- ---- (24,164.913)
----------------- ------------------ ------------------ -----------------
Shares owned at December 31, 1995 ---- ---- ---- 127,452.178
================= ================== ================== =================
(1) Commenced business 04/17/97
(2) Commenced business 04/07/97
(3) Commenced business 04/28/97
</TABLE>
- --------------------------------------------------------------------------------
60 LIFE
<PAGE>
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
Board of Directors
Ameritas Variable Life Insurance Company
Lincoln, Nebraska
We have audited the accompanying balance sheets of Ameritas Variable Life
Insurance Company as of December 31, 1997 and 1996, and the related statements
of operations, changes in stockholder's equity, and cash flows for each of the
three years in the period ended December 31, 1997. 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, such financial statements present fairly, in all material
respects, the financial position of Ameritas Variable Life Insurance Company as
of December 31, 1997 and 1996, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1997, in
conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Lincoln, Nebraska
February 2, 1998
- --------------------------------------------------------------------------------
LIFE 61
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERITAS VARIABLE LIFE INSURANCE COMPANY
----------------------------------------
BALANCE SHEETS
--------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
-------------------------------------
DECEMBER 31,
---------------------------------------------
1997 1996
--------------------- ------------------
ASSETS
------
<S> <C> <C>
Investments:
Fixed maturity securities, available for sale (amortized cost
$113,158 - 1997 and $62,048 - 1996) $ 115,955 $ 62,621
Equity securities, available for sale (amortized cost
$4,061 - 1997) 4,135 -
Loans on insurance policies 7,482 4,309
Other invested assets 2,206 -
---------------------- --------------------
Total investments 129,778 66,930
Cash and cash equivalents 13,711 10,684
Accrued investment income 1,801 1,096
Reinsurance recoverable-affiliates 514 9
Prepaid reinsurance premium-affiliates 2,298 2,156
Deferred policy acquisition costs 98,746 79,272
Other 199 483
Separate Accounts 1,265,348 947,580
---------------------- -------------------
$ 1,512,395 $ 1,108,210
====================== ===================
LIABILITIES AND STOCKHOLDER'S EQUITY
------------------------------------
LIABILITIES:
Policy and contract reserves $ 941 $ 749
Policy and contract claims 925 106
Accumulated contract values 154,281 77,560
Unearned policy charges 1,498 1,243
Unearned reinsurance ceded allowance 3,268 3,139
Federal income taxes--
Current 1,466 875
Deferred 9,326 9,921
Other 10,200 8,028
Separate Accounts 1,265,348 947,580
---------------------- -------------------
Total Liabilities 1,447,253 1,049,201
---------------------- -------------------
STOCKHOLDER'S EQUITY:
Common stock, par value $100 per share;
authorized 50,000 shares, issued and
outstanding 40,000 shares 4,000 4,000
Additional paid-in capital 40,370 40,370
Retained earnings 20,180 14,510
Net unrealized investment gain 592 129
---------------------- -----------------
Total Stockholder's Equity 65,142 59,009
---------------------- -----------------
$ 1,512,395 $ 1,108,210
====================== =================
The accompanying notes are an integral part of these financial statements.
</TABLE>
- --------------------------------------------------------------------------------
62 LIFE
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERITAS VARIABLE LIFE INSURANCE COMPANY
----------------------------------------
STATEMENTS OF OPERATIONS
------------------------
(IN THOUSANDS)
--------------
YEARS ENDED DECEMBER 31,
---------------------------------------------------------------
1997 1996 1995
--------------------- ------------------- ---------------
INCOME:
Insurance revenues:
<S> <C> <C> <C>
Contract charges $ 33,717 $ 26,345 $ 18,350
Premium-reinsurance ceded (6,840) (5,895) (4,289)
Reinsurance ceded allowance 2,752 2,235 1,859
Investment revenues:
Investment income, net 8,277 3,603 3,492
Realized gains, net 368 19 28
Other 980 567 261
------------------- -------------------- ---------------
39,254 26,874 19,701
BENEFITS AND EXPENSES: ------------------- -------------------- ---------------
Policy benefits:
Death benefits 1,356 716 268
Interest credited 7,258 2,736 1,995
Increase in policy and contract reserves 192 140 183
Other 92 52 32
Sales and operating expenses 11,641 10,041 6,815
Amortization of deferred policy acquisition costs 9,584 5,531 3,057
------------------- -------------------- ---------------
30,123 19,216 12,350
------------------- -------------------- ---------------
INCOME BEFORE FEDERAL INCOME TAXES 9,131 7,658 7,351
------------------- -------------------- ---------------
Income taxes - current 4,305 3,819 1,685
Income taxes - deferred (844) (811) 902
------------------- -------------------- ---------------
Total income taxes 3,461 3,008 2,587
------------------- -------------------- ---------------
NET INCOME $ 5,670 $ 4,650 $ 4,764
=================== ==================== ===============
The accompanying notes are an integral part of these financial statements.
</TABLE>
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LIFE 63
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERITAS VARIABLE LIFE INSURANCE COMPANY
----------------------------------------
STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
---------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
---------------------------------------------------
(IN THOUSANDS, EXCEPT SHARES)
-----------------------------
NET
COMMON STOCK ADDITIONAL UNREALIZED
-------------------- PAID - IN RETAINED INVESTMENT
SHARES AMOUNT CAPITAL EARNINGS GAIN (LOSS) TOTAL
------- --------- ------------ ------------ ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, January 1, 1995 40,000 $ 4,000 $ 29,700 $ 5,096 $ (173) $ 38,623
Net unrealized investment gain, net - - - - 609 609
Net income - - - 4,764 - 4,764
------- ---------- ------------- ------------ ------------ -----------
BALANCE, December 31, 1995 40,000 4,000 29,700 9,860 436 43,996
Return of capital - - (15,000) - - (15,000)
Capital contribution from
AMAL Corporation - - 25,670 - - 25,670
Net unrealized investment loss, net - - - - (307) (307)
Net income - - - 4,650 - 4,650
-------- ------------ -------------- ------------ ------------- -----------
BALANCE, December 31, 1996 40,000 4,000 40,370 14,510 129 59,009
Net unrealized investment gain, net - - - - 463 463
Net income - - - 5,670 - 5,670
-------- ------------ -------------- ----------- ------------- -----------
BALANCE, December 31, 1997 40,000 $ 4,000 $ 40,370 $ 20,180 $ 592 $ 65,142
======== ============ ============== =========== ============= ===========
The accompanying notes are an integral part of these financial statements.
</TABLE>
- --------------------------------------------------------------------------------
64 LIFE
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERITAS VARIABLE LIFE INSURANCE COMPANY
----------------------------------------
STATEMENTS OF CASH FLOWS
------------------------
(IN THOUSANDS)
--------------
YEARS ENDED DECEMBER 31,
----------------------------------------------
1997 1996 1995
------------- ----------- -------
OPERATING ACTIVITIES
--------------------
<S> <C> <C> <C>
Net Income $ 5,670 $ 4,650 $ 4,764
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization of deferred policy acquisition costs 9,584 5,531 3,057
Policy acquisition costs deferred (30,642) (26,596) (16,020)
Interest credited to contract values 7,258 2,736 1,995
Amortization of discounts or premiums (40) (83) (70)
Change in fair value of other invested assets (631) - -
Net realized gains on investment transactions (368) (19) (28)
Deferred income taxes (844) (811) 902
Change in assets and liabilities:
Accrued investment income (705) (306) (15)
Reinsurance recoverable-affiliates (505) 48 412
Prepaid reinsurance premium-affiliates (142) (650) (487)
Other assets 284 (377) (18)
Policy and contract reserves 192 140 183
Policy and contract claims 819 106 (57)
Unearned policy charges 255 279 234
Federal income tax payable-current 591 (310) 698
Unearned reinsurance ceded allowance 129 860 610
Other liabilities 2,172 3,762 1,996
------------ ----------------- ------------
Net cash used in operating activities (6,923) (11,040) (1,844)
------------ ----------------- -----------
INVESTING ACTIVITIES
--------------------
Purchase of fixed maturity securities available for sale (92,291) (31,514) (7,760)
Purchase of equity securities available for sale (4,311) - -
Purchase of other invested assets (1,611) - -
Proceeds from maturities or repayment of fixed maturity securities
available for sale 25,168 5,307 3,738
Proceeds from sales of fixed maturity securities available for sale 16,419 3,014 -
Proceeds from the sale of equity securities available for sale 252 - -
Proceeds from the sale of other invested assets 35 - -
Net change in loans on insurance policies (3,173) (1,670) (1,042)
----------- ---------------- -----------
Net cash used in investing activities (59,512) (24,863) (5,064)
----------- ---------------- -----------
The accompanying notes are an integral part of these financial statements.
</TABLE>
- --------------------------------------------------------------------------------
LIFE 65
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERITAS VARIABLE LIFE INSURANCE COMPANY
----------------------------------------
STATEMENTS OF CASH FLOWS
------------------------
(IN THOUSANDS)
--------------
YEARS ENDED DECEMBER 31,
----------------------------------------------------
1997 1996 1995
---------------- ---------------- --------------
FINANCING ACTIVITIES
--------------------
<S> <C> <C> <C>
Return of capital - (15,000) -
Capital contribution - 25,670 -
Net change in accumulated contract values 69,462 30,257 4,448
------------- ------------- -------------
Net cash from financing activities 69,462 40,927 4,448
------------- ------------- -------------
INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS 3,027 5,024 (2,460)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 10,684 5,660 8,120
------------- -------------- --------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 13,711 $ 10,684 $ 5,660
============= ============== ==============
SUPPLEMENTAL CASH FLOW INFORMATION:
-----------------------------------
Cash paid for income taxes $ 3,714 $ 4,129 $ 987
The accompanying notes are an integral part of these financial statements.
</TABLE>
- --------------------------------------------------------------------------------
66 LIFE
<PAGE>
- --------------------------------------------------------------------------------
AMERITAS VARIABLE LIFE INSURANCE COMPANY
----------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
----------------------------------------------------
(IN THOUSANDS)
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------------------------------------
Ameritas Variable Life Insurance Company (the Company), a stock life
insurance company domiciled in the State of Nebraska, was a wholly-owned
subsidiary of Ameritas Life Insurance Corp. (ALIC), until April of 1996 when
it became a wholly-owned subsidiary of AMAL Corporation, a holding company
66% owned by ALIC and 34% owned by AmerUs Life Insurance Company (AmerUs).
The company began issuing variable life insurance and variable annuity
policies in 1987, fixed premium annuities in 1996 and equity indexed
annuities in 1997. The variable life, variable annuity, fixed premium
annuity and equity indexed annuity policies are not participating with
respect to dividends.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
The principal accounting and reporting practices followed are:
INVESTMENTS
The Company classifies its securities into categories based upon the
Company's intent relative to the eventual disposition of the securities. The
first category, held to maturity securities, is comprised of fixed maturity
securities which the Company has the positive intent and ability to hold to
maturity. These securities are carried at amortized cost. The second
category, available for sale securities, may be sold to address the
liquidity and other needs of the Company. Securities classified as available
for sale are carried at fair value on the balance sheet with unrealized
gains and losses excluded from income and reported as a separate component
of stockholder's equity, net of related deferred acquisition costs and
income tax effects. The third category, trading securities, is for debt and
equity securities acquired for the purpose of selling them in the near
term. The Company has classified all of its securities as available for
sale. Realized investment gains and losses on sales of securities are
determined on the specific identification method.
Other Invested Assets consist of exchange and privately traded options tied
to the Standard and Poor's Index and are valued at fair value with changes
in the fair value of these investments included in net investment income.
The Company records write-offs or allowances for its investments based upon
a evaluation of specific problem investments. The Company reviews, on a
continual basis, all invested assets to identify investments where the
Company may have credit concerns. Investments with credit concerns include
those the Company has identified as experiencing a deterioration in
financial condition. The Company has no write-offs or allowances recorded as
of December 31, 1997, 1996 and 1995.
CASH EQUIVALENTS
The Company considers all highly liquid debt securities purchased with
remaining maturity of less than three months to be cash equivalents.
SEPARATE ACCOUNTS
The Company operates separate accounts on which the earnings or losses
accrue exclusively to contractholders. The assets (mutual fund investments)
and liabilities of each account are clearly identifiable and distinguishable
from other assets and liabilities of the Company. Assets are reported at
fair value.
LIFE 67
<PAGE>
- --------------------------------------------------------------------------------
AMERITAS VARIABLE LIFE INSURANCE COMPANY
----------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
----------------------------------------------------
(IN THOUSANDS)
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
-----------------------------------------------------------------------
(CONTINUED)
-----------
PREMIUM REVENUE AND BENEFITS TO POLICYOWNERS
RECOGNITION OF UNIVERSAL LIFE-TYPE CONTRACTS REVENUE AND BENEFITS TO
POLICYOWNERS
Universal life-type policies are insurance contracts with terms that are
not fixed and guaranteed. The terms that may be changed could include one or
more of the amounts assessed the policyowner, premiums paid by the
policyowner or interest accrued to policyowners balances. Amounts received
as payments for such contracts are reflected as deposits and are not
reported as premium revenues.
Revenues for universal life-type policies consist of charges assessed
against policy account values for deferred policy loading, mortality risk
expense, the cost of insurance and policy administration. Policy benefits
and claims that are charged to expense include interest credited to
contracts under the fixed account investment option and benefit claims
incurred in the period in excess of related policy account balances.
RECOGNITION OF INVESTMENT CONTRACT REVENUE AND BENEFITS TO POLICYOWNERS
Contracts that do not subject the Company to risks arising from policyowner
mortality or morbidity are referred to as investment contracts. Certain
deferred annuities are considered investment contracts. Amounts received as
payments for such contracts are reflected as deposits and are not reported
as premium revenues.
Revenues for investment products consist of investment income and policy
administration charges. Contract benefits that are charged to expense
include benefit claims incurred in the period in excess of related contract
balances, and interest credited to contract balances.
POLICY ACQUISITION COSTS
Those costs of acquiring new business, which vary with and are directly
related to the production of new business, have been deferred to the extent
that such costs are deemed recoverable from future premiums. Such costs
include commissions, certain costs of policy issuance and underwriting, and
certain variable distribution expenses.
Costs deferred related to universal life-type policies and investment-type
contracts are amortized generally over the lives of the policies, in
relation to the present value of estimated gross profits from mortality,
investment and expense margins. The estimated gross profits are reviewed
periodically based on actual experience and changes in assumptions.
A roll-forward of the amounts reflected in the balance sheets as deferred
acquisition costs is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------
1997 1996 1995
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Beginning balance $ 79,272 $ 57,664 $ 45,940
Acquisition costs deferred 30,642 26,596 16,020
Amortization of deferred policy acquisition costs (9,584) (5,531) (3,057)
Adjustment for unrealized investment (gain)/loss (1,584) 543 (1,239)
-------------------------------------------------------------------------------------------------------------------------
Ending balance $ 98,746 $ 79,272 $ 57,664
-------------------------------------------------------------------------------------------------------------------------
To the extent that unrealized gains or losses on available for sale
securities would result in an adjustment of deferred policy acquisition
costs had those gains or losses actually been realized, the related
unamortized deferred policy acquisition costs are recorded as an adjustment
of the unrealized investment gains or losses included in stockholder's
equity.
</TABLE>
- --------------------------------------------------------------------------------
68 LIFE
<PAGE>
- --------------------------------------------------------------------------------
AMERITAS VARIABLE LIFE INSURANCE COMPANY
----------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
----------------------------------------------------
(IN THOUSANDS)
--------------
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
-----------------------------------------------------------------------
(CONTINUED)
-----------
FUTURE POLICY AND CONTRACT BENEFITS
Liabilities for future policy and contract benefits left with the Company
on variable universal life and annuity-type contracts are based on the
policy account balance, and are shown as accumulated contract values. In
addition the Company carries as future policy benefits a liability for
additional coverages offered under policy riders.
INCOME TAXES
The provision for income taxes includes amounts currently payable and
deferred income taxes resulting from the cumulative differences in assets
and liabilities determined on a tax return and financial statement basis at
the current enacted tax rates.
RECLASSIFICATIONS
Certain items on the prior year financial statements have been restated to
conform to current year presentation.
2. INVESTMENTS
---------------
Investment income summarized by type of investment was as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
---------------------------------------------
1997 1996 1995
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fixed maturity securities available for sale $ 6,622 $ 3,308 $ 2,819
Equity Securities available for sale 156 - -
Loans on insurance policies 370 214 128
Cash equivalents 643 618 597
Other invested assets 630 - -
------------------------------------------------------------------------------------------------------------------------
Gross investment income 8,421 4,140 3,544
Investment expenses 144 537 52
------------------------------------------------------------------------------------------------------------------------
Net investment income $ 8,277 $ 3,603 $ 3,492
------------------------------------------------------------------------------------------------------------------------
Net pretax realized investment gains (losses) were as follows:
YEARS ENDED DECEMBER 31
---------------------------------------------
1997 1996 1995
------------------------------------------------------------------------------------------------------------------------
Net gains on disposals of fixed maturity securities
available for sale $ 365 $ 19 $ 28
Net gains on disposal of equity securities available for sale 3 - -
------------------------------------------------------------------------------------------------------------------------
Net gains on disposal of securities available for sale $ 368 $ 19 $ 28
------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
LIFE 69
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERITAS VARIABLE LIFE INSURANCE COMPANY
----------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
----------------------------------------------------
(IN THOUSANDS)
2. INVESTMENTS (CONTINUED)
---------------------------
Proceeds from sales of securities available for sale and gross gains and
losses realized on those sales were as follows:
YEAR ENDED DECEMBER 31, 1997
------------------------------------------------
PROCEEDS GAINS LOSSES
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fixed maturity securities available for sale $ 16,419 $ 161 $ 8
Equity securities available for sale 252 2 -
-----------------------------------------------------------------------------------------------------------------------------
Total securities available for sale $ 16,671 $ 163 $ 8
-----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1996
------------------------------------------------
PROCEEDS GAINS LOSSES
-----------------------------------------------------------------------------------------------------------------------------
Fixed maturity securities available for sale $ 3,014 $ 30 $ -
-----------------------------------------------------------------------------------------------------------------------------
There were no disposals of fixed maturity securities available for sale
during 1995 other than calls or maturities.
The amortized cost and fair value of investments in securities by type of
investment were as follows:
DECEMBER 31, 1997
----------------------------------------------------------
AMORTIZED GROSS UNREALIZED FAIR
----------------
COST GAINS LOSSES VALUE
---------------------------------------------------------------------------------------------------------------------
U. S. Corporate $ 75,705 $ 2,024 $ 16 $ 77,713
Mortgage-backed 25,518 592 - 26,110
U.S. Treasury securities and obligations of
U.S. government agencies 11,935 221 24 12,132
---------------------------------------------------------------------------------------------------------------------
Total fixed maturity securities available for sale 113,158 2,837 40 115,955
---------------------------------------------------------------------------------------------------------------------
Equity securities available for sale 4,061 74 - 4,135
---------------------------------------------------------------------------------------------------------------------
Total securities available for sale $ 117,219 $ 2,911 $ 40 $ 120,090
---------------------------------------------------------------------------------------------------------------------
The December 31, 1997 balance of stockholder's equity was increased by $463
(comprised of an increase in the carrying value of the securities of $2,298,
reduced by $1,584 of related adjustments to deferred acquisition costs and
$251 in deferred income taxes) to reflect the net unrealized gain on
securities classified as available for sale.
</TABLE>
- --------------------------------------------------------------------------------
70 LIFE
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERITAS VARIABLE LIFE INSURANCE COMPANY
----------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
----------------------------------------------------
(IN THOUSANDS)
2. INVESTMENTS (CONTINUED)
---------------------------
DECEMBER 31, 1996
-----------------------------------------------------------
GROSS UNREALIZED
AMORTIZED ------------------ FAIR
COST GAINS LOSSES VALUE
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
U. S. Corporate $ 33,690 $ 437 $ 114 $ 34,013
Mortgage-backed 13,407 209 22 13,594
U.S. Treasury securities and obligations of
U.S. government agencies 14,951 158 95 15,014
----------------------------------------------------------------------------------------------------------------------
Total fixed maturity securities available for sale $ 62,048 $ 804 $ 231 $ 62,621
----------------------------------------------------------------------------------------------------------------------
The December 31, 1996 balance of stockholder's equity was decreased by $307
(comprised of a decrease in the carrying value of the securities of $1,017,
reduced by $545 of related adjustments to deferred acquisition costs and
$165 in deferred income taxes) to reflect the net unrealized gain on
securities classified as available for sale.
The amortized cost and fair value of fixed maturity securities available for
sale by contractual maturity at December 31, 1997 are shown below. Expected
maturities may differ from contractual maturities because borrowers may have
the right to call or prepay obligations with or without call or prepayment
penalties.
AMORTIZED FAIR
COST VALUE
-------------------------------------------------------------------------------------------------------------------------
Due in one year or less $ 7,376 $ 7,427
Due after one year through five years 21,509 21,841
Due after five years through ten years 42,116 43,252
Due after ten years 16,639 17,325
Mortgage-backed securities 25,518 26,110
-------------------------------------------------------------------------------------------------------------------------
Total $ 113,158 $ 115,955
-------------------------------------------------------------------------------------------------------------------------
The Company purchases exchange and privately traded options to support
certain equity index annuity policyowner liabilities. These derivatives,
reflected as other invested assets, are used to manage fluctuations in the
equity market risk granted to the policyowners of the equity advantage
annuities. These derivatives involve, to varying degrees, elements of credit
risk and market risk. Credit risk is the risk of loss from a private party
failing to perform according to the terms of the contract. Market risk is the
possibility that future changes in market prices may make the derivative
less valuable, which offset guarantees granted to policyowners.
The options value on the balance sheet reflects the risk of potential loss to the
entity.
The Company's outstanding positions, which expire over various terms ranging
from 1 to 7 years, shown in notional or contract amounts, along with their
cost and estimated fair values, are summarized as follows:
YEAR ENDED DECEMBER 31, 1997
--------------------------------------------------------------------------------------------------------------------------
NOTIONAL FAIR
AMOUNT COST VALUE
--------------------------------------------------------------------------------------------------------------------------
Options $ 1,340 $ 1,544 $ 2,206
--------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
LIFE 71
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERITAS VARIABLE LIFE INSURANCE COMPANY
----------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
----------------------------------------------------
(IN THOUSANDS)
3. INCOME TAXES
----------------
The items that give rise to deferred tax assets and liabilities relate
to the following:
YEARS ENDED DECEMBER 31
---------------------------
1997 1996
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net unrealized investment gains on securites available for sale $ 1,080 $ 277
Deferred policy acquisition costs 29,271 23,727
Prepaid expenses 804 172
-----------------------------------------------------------------------------------------------------------------------------
Gross deferred tax liability 31,155 24,176
-----------------------------------------------------------------------------------------------------------------------------
Future policy and contract benefits 20,014 12,620
Deferred future revenues 1,668 1,534
Other 147 101
-----------------------------------------------------------------------------------------------------------------------------
Gross deferred tax asset 21,829 14,255
-----------------------------------------------------------------------------------------------------------------------------
Net deferred tax liability $ 9,326 $ 9,921
-----------------------------------------------------------------------------------------------------------------------------
The difference between the U.S. federal income tax rate and the consolidated tax provision rate is summarized as
follows:
YEARS ENDED DECEMBER 31
--------------------------------------
1997 1996 1995
-----------------------------------------------------------------------------------------------------------------------------
Federal statutory tax rate 35.0 % 35.0 % 35.0 %
Other 2.9 4.3 0.2
-----------------------------------------------------------------------------------------------------------------------------
Effective tax rate 37.9 % 39.3 % 35.2 %
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
4. RELATED PARTY TRANSACTIONS
------------------------------
Affiliates provide technical, financial and legal support to the Company
under administrative service agreements. The cost of these services to the
Company for years ended December 3l, 1997, 1996 and l995 was $9,810, $8,907
and $4,858, respectively. The Company also leased office space and furniture
and equipment from affiliates during 1995. The cost of these leases to the
Company for the year ended December 31, 1995 was $37. Under the terms of
investment advisory agreements, the Company paid $144, $73, and $44 for the
years ended December 1997, 1996 and 1995, respectively to Ameritas
Investment Advisors Inc., an indirect wholly-owned subsidiary of Ameritas
Life Insurance Corp.
The Company entered into reinsurance agreements (yearly renewable term)
with affiliates. Under this agreement,these affiliates assume life
insurance risk in excess of the Company's retenton limit. These reinsurance
contracts do not relieve the Company of its obligations to its
policyowners. The Company paid $3,810, $3,301 and $2,280 of net reinsurance
premiums to affiliates for the years ended December 3l, 1997, 1996 and l995
respectively. The Company has received reinsurance recoveries from
affiliates of $2,260, $659 and $1,472 for the years ended December 3l,1997,
1996 and 1995 respectively.
The Company has entered into guarantee agreements with ALIC, AmerUs and
AMAL Corporation whereby, they guarantee the full, complete and absolute
performance of all duties and obligations of the Company.
- --------------------------------------------------------------------------------
72 LIFE
<PAGE>
- --------------------------------------------------------------------------------
AMERITAS VARIABLE LIFE INSURANCE COMPANY
----------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
----------------------------------------------------
(IN THOUSANDS)
4. RELATED PARTY TRANSACTIONS (CONTINUED)
------------------------------------------
The Company's variable life and annuity products are distributed through
Ameritas Investment Corp., a wholly-owned subsidiary of AMAL Corporation.
The Company received $93, $54 and $192 for the years ended December 31,
1997, 1996 and 1995 respectively, from this affiliate to partially defray
the costs of materials and prospectuses. Policies placed by this affiliate
generated commission expense of $23,232, $20,373 and $14,028 for the years
ended December 31, 1997, 1996 and 1995 respectively.
Transactions with related parties are not necessarily indicative of revenues
and expenses which would have occurred had the parties not been related.
5. BENEFIT PLANS
-----------------
The Company provides retirement and postretirement medical benefits to
qualifying employees. Prior to August l, 1997 these benefits were provided
under plans which covered substantially all employees of Ameritas Life
Insurance Corp. and its subsidiaries. Concurrent with the transfer of a
significant number of employees to the Company, effective August 1, 1997,
AMAL Corporation assumed the benefit obligations associated with these
plans.
The Company is included in a multi-employer noncontributory defined benefit
plan that covers substantially all full-time employees of Ameritas Life
Insurance Corp. and its subsidiaries and AMAL Corporation and it's
subsidiaries. Pension costs include current service costs, which are accrued
and funded on a current basis, and post service costs, which are amortized
over the average remaining service life of all employees on the adoption
date. Total Company contributions for the year ended December 31, 1997 were
$29. The Company had no full time employees during 1996 or 1995.
The Company's employees also participate in a defined contribution thrift
plan that covers substantially all full time employees of Ameritas Life
Insurance Corp. and its subsidiaries. Company matching contributions under
the plan range from 1% to 3% of the participant's compensation. Total
Company contributions for the year ended December 31, 1997 were $24. The
Company had no full time employees during 1996 or 1995.
The Company is also included in the postretirement benefit plan providing
group medical coverage to retired employees of AMAL Corporation and it's
subsidiaries. Prior to August 1, 1997 these benefits were provided under a
plan with Ameritas Life Insurance Corp. These benefits are a specified
percentage of premium until age 65 and a flat dollar amount thereafter.
Employees become eligible for these benefits upon the attainment of age 55,
15 years of service and participation in the plan for the immediately
preceding 5 years. Benefit costs include the expected cost of
postretirement benefits for newly eligible employees, interest cost, and
gains and losses arising from differences between actuarial assumptions and
actual experience. Total Company contributions for the year ended December
31, 1997 were $5. The Company had no full time employees during 1996 or
1995.
Expenses for the defined benefit plan and postretirement group medical plan
are allocated to the Company based on the number of associates in AMAL
Corporation and its subsidiaries.
- --------------------------------------------------------------------------------
LIFE 73
<PAGE>
- --------------------------------------------------------------------------------
AMERITAS VARIABLE LIFE INSURANCE COMPANY
----------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
----------------------------------------------------
(IN THOUSANDS)
6. STOCKHOLDER'S EQUITY
------------------------
Net income (loss), as determined in accordance with statutory accounting
practices, was $2,048, $855 and $(19) for 1997, 1996 and 1995 respectively.
The Company's statutory surplus was $45,265, $44,100 and $13,800 at
December 31, 1997, 1996 and 1995 respectively. Effective January 1, 1996
the Company changed reserving methods used for most existing products
resulting in an increase in statutory surplus of approximately $20,60l.
The Company is required to maintain a certain level of surplus to be in
compliance with state laws and regulations. Company surplus is monitored
by state regulators to ensure compliance with risk based capital
requirements.
Under statutes of the Insurance Department of the State of Nebraska, the
Company is limited in the amount of dividends it can pay to its stockholder.
On February 28, 1996 the Board of Directors declared a return of
paid-in-capital of $15,000 payable by way of a note due on or before August
15, 1996. The note was retired on August 15, 1996. This action was approved
by the State of Nebraska Insurance Department and any additional
distributions of capital or surplus will require approval of the Insurance
Department.
7. FAIR VALUE OF FINANCIAL INSTRUMENTS
---------------------------------------
The following disclosures are made regarding fair value information about
certain financial instruments for which it is practicable to estimate that
value. In cases where quoted market prices are not available, fair values
are based on estimates using present value or other valuation techniques.
Those techniques are significantly affected by the assumptions used,
including the discount rate and estimates of future cash flows. In that
regard, the derived fair value estimates, in many cases, may not be realized
in immediate settlement of the instrument. All nonfinancial instruments are
excluded from disclosure requirements. Accordingly, the aggregate fair value
amounts presented do not represent the underlying value of the Company.
The fair value estimates presented herein are based on pertinent information
available to management as of December 31, 1997 and 1996. Although
management is not aware of any factors that would significantly affect the
estimated fair value amounts, such amounts have not been comprehensively
revalued for purposes of these financial statements since that date;
therefore, current estimates of fair value may differ significantly from the
amounts presented herein.
The following methods and assumptions were used by the Company in estimating
its fair value disclosures for each class of financial instrument for which
it is practicable to estimate a value:
FIXED MATURITY SECURITIES AVAILABLE FOR SALE -- For publicly traded
securities, fair value is determined using an independent pricing
source. For securities without a readily ascertainable fair value,
the value has been determined using an interest rate spread matrix
based upon quality, weighted average maturity and Treasury yields.
EQUITY SECURITIES AVAILABLE FOR SALE -- Fair value is determined
using an independent pricing source.
LOANS ON INSURANCE POLICIES -- Fair values for loans on insurance
policies are estimated using a discounted cash flow analysis at
interest rates currently offered for similar loans with similar
remaining terms. Loans on insurance policies with similar
characteristics are aggregated for purposes of the calculations.
OTHER INVESTED ASSETS -- Fair value is determined using an
independent pricing source.
CASH AND CASH EQUIVALENTS, ACCRUED INVESTMENT INCOME AND
REINSURANCE RECOVERABLE -- The carrying amounts equal fair value.
- --------------------------------------------------------------------------------
74 LIFE
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERITAS VARIABLE LIFE INSURANCE COMPANY
----------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
----------------------------------------------------
(IN THOUSANDS)
7. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
--------------------------------------------------
ACCUMULATED CONTRACT VALUES -- Funds on deposit which do not have
fixed maturities are carried at the amount payable on demand at the
reporting date, which approximates fair value.
DECEMBER 31
----------------------------------------------------------------
1997 1996
---------------------------- -------------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Financial assets:
Fixed maturity securities,
available for sale $115,955 $115,955 $ 62,621 $ 62,621
Equity securities, available for sale 4,135 4,135 - -
Loans on insurance policies 7,482 6,657 4,309 3,843
Other invested assets 2,206 2,206 - -
Cash and cash equivalents 13,711 13,711 10,684 10,684
Accrued investment income 1,801 1,801 1,096 1,096
Reinsurance recoverable - affiliates 514 514 9 9
Financial liabilities:
Accumulated contract values excluding amounts
held under insurance contracts 144,109 144,109 70,640 70,640
8. SEPARATE ACCOUNTS
--------------------
The Company is currently marketing variable life and variable annuity
products which have separate accounts as an investment option. Separate
Account V (Account V) was formed to receive and invest premium receipts
from variable life insurance policies issued by the Company. Separate
Account VA-2 (Account VA-2) was formed to receive and invest premium
receipts from variable annuity policies issued by the Company. Both
Separate Accounts are registered under the Investment Company Act of l940,
as amended, as unit investment trusts. Account V and VA-2's assets and
liabilities are segregated from the other assets and liabilities of the
Company.
Amounts in the Separate Accounts are:
DECEMBER 31
-------------------------------
1997 1996
-------------------------------------------------------------------------------------------------------------------------------
Separate Account V $ 197,729 $ 136,079
Separate Account VA-2 1,067,619 811,501
-------------------------------------------------------------------------------------------------------------------------------
$1,265,348 $ 947,580
-------------------------------------------------------------------------------------------------------------------------------
The assets of Account V are invested in shares of the Variable Insurance
Products Fund, the Variable Insurance Products Fund II, Alger American
Fund, Morgan Stanley Universal Funds and MFS Variable Insurance Trust.
Each fund is registered with the SEC under the Investment Company Act of
1940, as amended, as an open-end diversified management investment company.
The Variable Insurance Products Fund and the Variable Insurance Products
Fund II are managed by Fidelity Management and Research Company. The
Variable Insurance Products Fund has five portfolios: the Money Market
Portfolio, the High Income Portfolio, the Equity Income Portfolio, the
Growth Portfolio and the Overseas Portfolio. The Variable Insurance
Fund II has five portfolios: the Investment Grade Bond Portfolio,
Asset Manager Portfolio,
</TABLE>
- --------------------------------------------------------------------------------
LIFE 75
<PAGE>
- --------------------------------------------------------------------------------
AMERITAS VARIABLE LIFE INSURANCE COMPANY
----------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
----------------------------------------------------
(IN THOUSANDS)
8. SEPARATE ACCOUNTS (CONTINUED)
--------------------------------
Contrafund Portfolio (effective August 25, 1995), Asset Manager Growth
Portfolio (effective September 15, 1995) and the Index 500 Portfolio
(effective September 21, 1995). The Alger American Fund is managed by Fred
Alger Management, Inc. and has six portfolios: Income and Growth Portfolio,
Small Capitalization Portfolio, Growth Portfolio, MidCap Growth Portfolio,
Balanced Portfolio and the Leveraged Allcap Portfolio (effective August 30,
1995). The Dreyfus Stock Index Fund is managed by Wells Fargo Nikko
Investment Advisors and has the Stock Index Fund Portfolio. The MFS Variable
Insurance Trust is managed by Massachusetts Financial Services Company. The
MFS Variable Insurance Trust has five portfolios: the Emerging Growth
Portfolio (effective August 25, 1995), World Governments Portfolio
(effective August 24, 1995), Utilities Portfolio (effective September 18,
1995), Growth with Income Portfolio (effective October 9, 1995) and the
Research Portfolio (effective July 26, 1995). The Morgan Stanley Universal
Funds managed by Morgan Stanley Asset Management Inc. and has five
portfolios: the Asian Equity Portfolio (effective March 3, 1997), Global
Equity Portfolio (effective January 2, 1997), International Magnum
Portfolio (effective January 21, 1997), Emerging Markets Portfolio
(effective October 1, 1996) and the U.S. Real Estate Portfolio (effective
March 3, 1997).
Pursuant to an order of the SEC allowing for the substitution, all
policyowner funds invested in a Portfolio of Dreyfus Stock Index Fund were
transferred to the Index 500 Portfolio of the Fidelity Variable Insurance
Products Fund II as of March 31, 1997. The Dreyfus Stock Index Portfolio
was an investment alternative through the date of transfer for policyowners
of Separate Account V and VA-2.
Separate Account VA-2 allows investment in the Variable Insurance Products
Fund, Variable Insurance Products Fund II, Alger American Fund, MFS
Variable Insurance Trust and the Morgan Stanley Universal Funds with the
same portfolios as described above.
- --------------------------------------------------------------------------------
76 LIFE
<PAGE>
- --------------------------------------------------------------------------------
APPENDIX A
ILLUSTRATIONS OF DEATH BENEFITS AND CASH VALUES
The following tables illustrate how the cash values and death benefits of a
Policy may change with the investment experience of the Fund. The tables show
how the cash values and death benefits of a Policy issued to an Insured of a
given age and specified underwriting risk classification who pays the given
premium at issue would vary over time if the investment return on the assets
held in each portfolio of the Funds were a uniform, gross, after-tax annual rate
of 0%, 6%, or 12%. The tables on pages 78 through 81 illustrate a Policy issued
to a male, age 35, under a Preferred rate non-smoker underwriting risk
classification. This policy provides for a standard smoker and non-smoker, and
preferred non-smoker classification and different rates for certain specified
amounts. The cash values and death benefits would be different from those shown
if the gross annual investment rates of return averaged 0%, 6%, and 12% over a
period of years, but fluctuated above and below those averages for individual
policy years, or if the Insured were assigned to a different underwriting risk
classification.
The second column of the tables shows the accumulated value of the premiums paid
at 5%. The following columns show the death benefits and the cash values for
uniform hypothetical rates of return shown in these tables. The tables on pages
78 and 80 are based on the current cost of insurance rates, current expense
deductions and the maximum percent of premium loads. These reflect the basis on
which AVLIC currently sells its Policies. The maximum allowable cost of
insurance rates under the Policy are based upon the 1980 Commissioner's Standard
Ordinary Smoker and Non-Smoker, Male and Female Mortality Tables. Since these
are recent tables and are split to reflect smoking habits and sex, the current
cost of insurance rates used by AVLIC are at this time equal to the maximum cost
of insurance rates for many ages. AVLIC anticipates reflecting future
improvements in actual mortality experience through adjustments in the current
cost of insurance rates actually applied. AVLIC also anticipates reflecting any
future improvements in expenses incurred by applying lower percent of premiums
of loads and other expense deductions. The death benefits and cash values shown
in the tables on pages 79 and 81 are based on the assumption that the maximum
allowable cost of insurance rates as described above and maximum allowable
expense deductions are made throughout the life of the Policy.
The amounts shown for the death benefits, surrender values and accumulation
values reflect the fact that the net investment return of the Subaccounts is
lower than the gross, after-tax return of the assets held in the Funds as a
result of expenses paid by the Fund and charges levied against the Subaccounts.
The values shown take into account an average of the expenses paid by each
portfolio available for investment (the equivalent to an annual rate of .86% of
the aggregate average daily net assets of the Fund), and the daily charge by
AVLIC to each Subaccount for assuming mortality and expense risks and
administrative costs (which is equivalent to a charge at an annual rate of 1.20%
of the average net assets of the Subaccounts). After deduction of these amounts,
the illustrated gross annual investment rates of return of 0%, 6%, and 12%,
correspond to approximate net annual rates of -2.06%, 3.94%, and 9.94%
respectively.
A portion of the brokerage commissions that certain Fidelity Funds pay was used
to reduce funds expenses. In addition, certain Fidelity funds have entered into
arrangements with their custodian and transfer agent whereby interest earned on
uninvested cash balances was used to reduce custodian and transfer agent
expenses. Without these reductions, expenses would have been higher. The
Investment Advisor or other affiliates of the various funds have agreed to
reimburse the portfolios to the extent that the aggregate operating expenses
(certain portfolio's may exclude certain items) were in excess of an annual rate
of .28% for the Index 500 Portfolio, 1.25% for the Alger American Income and
Growth and Alger American Balanced Portfolio; 1.50% for the Alger American Small
Capitalization, Alger American Mid-Cap Growth, Alger American Leveraged AllCap,
and Alger American Growth Portfolios; 1.75% for the Morgan Stanley Emerging
Markets Equity, 1.20% for the Morgan Stanley Asian Equity, 1.15% for the Morgan
Stanley Global Equity and Morgan Stanley International Magnum, 1.10% for the
Morgan Stanley U.S. Real Estate Portfolios of daily net assets. MFS has agreed
to bear expenses for each series, subject to reimbursement by each series, such
that each series "Other Expenses" shall not exceed .25% of the average daily net
assets of the series during the current fiscal year. These agreements are
expected to continue in future years but may be terminated at any time. As long
as this reimbursement continues for a portfolio, if a reimbursement occurs, it
has the effect of lowering the portfolio's expense ratio and increasing its
total return.
The hypothetical values shown in the tables do not reflect any charges for
Federal Income tax burden attributable to the Separate Account, since AVLIC is
not currently making such charges. However, such charges may be made in the
future and, in that event, the gross annual investment rate of return would have
to exceed 0 percent, 6 percent, or 12 percent by an amount sufficient to cover
the tax charges in order to produce the death benefits and values illustrated.
(See Federal Tax Matters, page 31).
The tables illustrate the policy values that would result based upon the
hypothetical investment rates of return if premiums are paid as indicated, if
all net premiums are allocated to the Separate Account, and if no policy loans
have been made. The tables are also based on the assumptions that the
policyowner has not requested an increase or decrease in the initial Specified
Amount, that no partial withdrawals have been made, and that no more than
fifteen transfers have been made in any policy year so that no transfer charges
have been incurred. Illustrated values would be different if the proposed
Insured were female, a smoker, in substandard risk classification, or were
another age, or if a higher or lower premium was illustrated.
Upon request, AVLIC will provide comparable illustration based upon the proposed
Insured's age, sex and underwriting classification, the Specified Amount, the
death benefit option, and planned periodic premium schedule requested, and any
available riders requested. In addition, upon client request, illustrations may
be furnished reflecting allocation of premiums to specified Subaccounts. Such
illustrations will reflect the expenses of the portfolio in which the Subaccount
invests.
- --------------------------------------------------------------------------------
LIFE 77
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ILLUSTRATION OF POLICY VALUES
AMERITAS VARIABLE LIFE INSURANCE COMPANY
ENDOWMENT AT AGE 95
Single Endowment at Age 95
Male Issue Age: 35 Non-Smoker Standard Underwriting Class
MINIMUM FIRST YEAR PREMIUM: $10000
INITIAL SPECIFIED AMOUNT: $55620
DEATH BENEFIT OPTION: A
USING CURRENT SCHEDULE OF COST OF INSURANCE RATES
Cash Value Less Any
Cash Surrender Charge (1)(2) Death Benefit (1)(2)
----------------------------------- -----------------------------------
Accumulated Assuming Hypothetical Gross Assuming Hypothetical Gross
End Of Premiums At Annual Investment Rate of Return Of: Annual Investment Rate of Return Of:
Policy 5% Interest 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
Year Per Year (-2.06% net) ( 3.94% net) ( 9.94% net) (-2.06% net) ( 3.94% net) ( 9.94% net)
---- -------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 10500 8818 9416 10014 55620 55620 55620
2 11025 8537 9741 11017 55620 55620 55620
3 11576 8257 10075 12116 55620 55620 55620
4 12155 8027 10467 13372 55620 55620 55620
5 12762 7895 10966 14844 55620 55620 55620
6 13400 7812 11524 16494 55620 55620 55620
7 14071 7825 12189 18385 55620 55620 55620
8 14774 7736 12761 20332 55620 55620 55620
9 15513 7441 13140 22250 55620 55620 55620
10 16288 7142 13525 24357 55620 55620 55620
15 20789 5523 15532 38344 55620 55620 73237
20 26532 3550 17588 60333 55620 55620 94723
Ages
60 33863 913 19515 95118 55620 55620 127458
65 43219 0* 21331 150395 0* 55620 183482
70 55160 0* 22390 237505 0* 55620 275505
75 70399 0* 21397 375153 0* 55620 401413
</TABLE>
* In the absence of an additional premium the Policy would lapse.
1) Assumes a minimum first year premium of $10000 is paid at issue with no
additional premium payment. Values would be different if premiums are paid with
a different frequency or in different amounts.
2) Assumes that no policy loan has been made. Excessive loans or withdrawals may
cause this policy to lapse because of insufficient cash value. Should a policy
lapse with loans outstanding the portion of the loans attributable to earnings
will become taxable.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, DEATH BENEFIT OPTION SELECTED,
PREVAILING INTEREST RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND CASH
VALUE FOR A CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF
RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL CONTRACT YEARS. NO REPRESENTATIONS
CAN BE MADE BY AVLIC OR THE FUNDS THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
- --------------------------------------------------------------------------------
78 LIFE
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ILLUSTRATION OF POLICY VALUES
AMERITAS VARIABLE LIFE INSURANCE COMPANY
ENDOWMENT AT AGE 95
Single Endowment at Age 95
Male Issue Age: 35 Non-Smoker Standard Underwriting Class
MINIMUM FIRST YEAR PREMIUM: $10000
INITIAL SPECIFIED AMOUNT: $55620
DEATH BENEFIT OPTION: A
USING MAXIMUM ALLOWABLE SCHEDULE OF COST OF INSURANCE RATES
Cash Value Less Any
Cash Surrender Charge (1)(2) Death Benefit (1)(2)
----------------------------------- -----------------------------------
Accumulated Assuming Hypothetical Gross Assuming Hypothetical Gross
End Of Premiums At Annual Investment Rate of Return Of: Annual Investment Rate of Return Of:
Policy 5% Interest 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
Year Per Year (-2.06% net) ( 3.94% net) ( 9.94% net) (-2.06% net) ( 3.94% net) ( 9.94% net)
---- -------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 10500 8568 9166 9764 55620 55620 55620
2 11025 8387 9591 10867 55620 55620 55620
3 11576 8207 10025 12066 55620 55620 55620
4 12155 8027 10467 13372 55620 55620 55620
5 12762 7895 10966 14844 55620 55620 55620
6 13400 7812 11524 16494 55620 55620 55620
7 14071 7825 12189 18385 55620 55620 55620
8 14774 7736 12761 20332 55620 55620 55620
9 15513 7441 13140 22250 55620 55620 55620
10 16288 7142 13525 24357 55620 55620 55620
15 20789 5523 15532 38344 55620 55620 73237
20 26532 3540 17580 60326 55620 55620 94712
Ages
60 33863 762 19392 95001 55620 55620 127301
65 43219 0* 20496 149566 0* 55620 182471
70 55160 0* 19858 234728 0* 55620 272284
75 70399 0* 15231 368523 0* 55620 394320
</TABLE>
* In the absence of an additional premium the Policy would lapse.
1) Assumes a minimum first year premium of $10000 is paid at issue with no
additional premium payment. Values would be different if premiums are paid with
a different frequency or in different amounts.
2) Assumes that no policy loan has been made. Excessive loans or withdrawals may
cause this policy to lapse because of insufficient cash value. Should a policy
lapse with loans outstanding the portion of the loans attributable to earnings
will become taxable.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, DEATH BENEFIT OPTION SELECTED,
PREVAILING INTEREST RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND CASH
VALUE FOR A CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF
RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL CONTRACT YEARS. NO REPRESENTATIONS
CAN BE MADE BY AVLIC OR THE FUNDS THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
- --------------------------------------------------------------------------------
LIFE 79
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ILLUSTRATION OF POLICY VALUES
AMERITAS VARIABLE LIFE INSURANCE COMPANY
ENDOWMENT AT AGE 95
Single Endowment at Age 95
Male Issue Age: 35 Non-Smoker Standard Underwriting Class
MINIMUM FIRST YEAR PREMIUM: $10000
INITIAL SPECIFIED AMOUNT: $55620
DEATH BENEFIT OPTION: B
USING CURRENT SCHEDULE OF COST OF INSURANCE RATES
Cash Value Less Any
Cash Surrender Charge (1)(2) Death Benefit (1)(2)
----------------------------------- -----------------------------------
Accumulated Assuming Hypothetical Gross Assuming Hypothetical Gross
End Of Premiums At Annual Investment Rate of Return Of: Annual Investment Rate of Return Of:
Policy 5% Interest 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
Year Per Year (-2.06% net) ( 3.94% net) ( 9.94% net) (-2.06% net) ( 3.94% net) ( 9.94% net)
---- -------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 10500 8801 9398 9995 65321 65918 66515
2 11025 8505 9704 10975 65025 66224 67495
3 11576 8208 10016 12046 64728 66536 68566
4 12155 7961 10382 13266 64431 66852 69736
5 12762 7812 10854 14695 64132 67174 71015
6 13400 7711 11380 16291 63831 67500 72411
7 14071 7707 12008 18117 63527 67828 73937
8 14774 7599 12539 19983 63219 68159 75603
9 15513 7286 12871 21802 62906 68491 77422
10 16288 6967 13205 23791 62587 68825 79411
15 20789 5249 14832 36844 60869 70452 92464
20 26532 3178 16206 57122 58798 71826 112742
Ages
60 33863 483 16921 88606 56103 72541 144226
65 43219 0* 16819 138057 0* 72439 193677
70 55160 0* 14631 215170 0* 70251 270790
75 70399 0* 8160 334761 0* 63780 390381
</TABLE>
* In the absence of an additional premium the Policy would lapse.
1) Assumes a minimum first year premium of $10000 is paid at issue with no
additional premium payment. Values would be different if premiums are paid with
a different frequency or in different amounts.
2) Assumes that no policy loan has been made. Excessive loans or withdrawals may
cause this policy to lapse because of insufficient cash value. Should a policy
lapse with loans outstanding the portion of the loans attributable to earnings
will become taxable.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, DEATH BENEFIT OPTION SELECTED,
PREVAILING INTEREST RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND CASH
VALUE FOR A CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF
RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL CONTRACT YEARS. NO REPRESENTATIONS
CAN BE MADE BY AVLIC OR THE FUNDS THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
- --------------------------------------------------------------------------------
80 LIFE
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ILLUSTRATION OF POLICY VALUES
AMERITAS VARIABLE LIFE INSURANCE COMPANY
ENDOWMENT AT AGE 95
Single Endowment at Age 95
Male Issue Age: 35 Non-Smoker Standard Underwriting Class
MINIMUM FIRST YEAR PREMIUM: $10000
INITIAL SPECIFIED AMOUNT: $55620
DEATH BENEFIT OPTION: B
USING MAXIMUM ALLOWABLE SCHEDULE OF COST OF INSURANCE RATES
Cash Value Less Any
Cash Surrender Charge (1)(2) Death Benefit (1)(2)
----------------------------------- -----------------------------------
Accumulated Assuming Hypothetical Gross Assuming Hypothetical Gross
End Of Premiums At Annual Investment Rate of Return Of: Annual Investment Rate of Return Of:
Policy 5% Interest 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
Year Per Year (-2.06% net) ( 3.94% net) ( 9.94% net) (-2.06% net) ( 3.94% net) ( 9.94% net)
---- -------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 10500 8551 9148 9745 65321 65918 66515
2 11025 8355 9554 10825 65025 66224 67495
3 11576 8158 9966 11996 64728 66536 68566
4 12155 7961 10382 13266 64431 66852 69736
5 12762 7812 10854 14695 64132 67174 71015
6 13400 7711 11380 16291 63831 67500 72411
7 14071 7707 12008 18117 63527 67828 73937
8 14774 7599 12539 19983 63219 68159 75603
9 15513 7286 12871 21802 62906 68491 77422
10 16288 6967 13205 23791 62587 68825 79411
15 20789 5249 14832 36844 60869 70452 92464
20 26532 3166 16194 57110 58786 71814 112730
Ages
60 33863 329 16742 88398 55949 72362 144018
65 43219 0* 15569 136564 0* 71189 192184
70 55160 0* 10978 210340 0* 66598 265960
75 70399 0* 214 323036 0* 55834 378656
</TABLE>
* In the absence of an additional premium the Policy would lapse.
1) Assumes a minimum first year premium of $10000 is paid at issue with no
additional premium payment. Values would be different if premiums are paid with
a different frequency or in different amounts.
2) Assumes that no policy loan has been made. Excessive loans or withdrawals may
cause this policy to lapse because of insufficient cash value. Should a policy
lapse with loans outstanding the portion of the loans attributable to earnings
will become taxable.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, DEATH BENEFIT OPTION SELECTED,
PREVAILING INTEREST RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND CASH
VALUE FOR A CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF
RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL CONTRACT YEARS. NO REPRESENTATIONS
CAN BE MADE BY AVLIC OR THE FUNDS THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
- --------------------------------------------------------------------------------
LIFE 81
