<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON
FEBRUARY 26, 1999
REGISTRATION NO. 33-1576
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Post-Effective Amendment No. 21
to
Form S-6
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FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933 OF
SECURITIES OF UNIT INVESTMENT TRUSTS REGISTERED ON
FORM N-8B-2
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AMERITAS VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT V
(EXACT NAME OF REGISTRANT)
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AMERITAS VARIABLE LIFE INSURANCE COMPANY
(Depositor)
5900 "O" Street
Lincoln, Nebraska 68510
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NORMAN M. KRIVOSHA
Secretary and General Counsel
Ameritas Variable Life Insurance Company
5900 "O" Street
Lincoln, Nebraska 68510
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TITLE OF SECURITIES BEING REGISTERED: Securities of Unit Investment Trust
-----------------------------------
Approximate Date of Proposed Public Offering: As soon as practicable after
effective date.
It is proposed that this filing will become effective:
[ ] immediate upon filing pursuant to paragraph b
[X] on May 1, 1999 pursuant to paragraph a of Rule 485
[ ] on ________________ pursuant to paragraph b of Rule
485
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RECONCILIATION AND TIE BETWEEN ITEMS IN FORM N-8B-2
AND THE PROSPECTUS
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ITEM NO. OF
FORM N-8B-2 CAPTION IN PROSPECTUS
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1 Cover Page
2 Cover Page
3 Not Applicable
4 Ameritas Variable Life Insurance Company; Distribution of
the Policies
5 The Separate Account
6 The Separate Account
7 Not Required
8 Not Required
9 Legal Proceedings
10 Summary; Addition, Deletion or Substitution of Investments;
Policy Benefits; Policy Rights; Payment and Allocation of
Premiums; General Provisions; Voting Rights
11 Summary; The Funds
12 Summary; The Funds
13 Summary; The Funds; Charges and Deductions
14 Summary; Payment and Allocation of Premiums
15 Summary; Payment and Allocation of Premiums
16 Summary; The Funds; Variable Insurance Products Fund,
Variable Insurance Products Fund II, Alger American Fund,
MFS Variable Insurance Trust, Morgan Stanley Dean Witter
Universal Funds, Inc.
17 Summary, Policy Rights
18 The Funds; Variable Insurance Products Fund, Variable
Insurance Products Fund II, Alger American Fund, MFS
Variable Insurance Trust, Morgan Stanley Dean Witter
Universal Funds, Inc.
19 General Provisions; Voting Rights
20 Not Applicable
21 Summary; Policy Rights; General Provisions
22 Not Applicable
23 Safekeeping of the Separate Account's Assets
24 General Provisions
25 Ameritas Variable Life Insurance Company
26 Not Applicable
27 Ameritas Variable Life Insurance Company
28 Executive Officers and Directors of AVLIC; Ameritas Variable
Life Insurance Company
29 Ameritas Variable Life Insurance Company
30 Not Applicable
31 Not Applicable
32 Not Applicable
33 Not Applicable
34 Not Applicable
35 Not Applicable
36 Not Required
37 Not Applicable
38 Distribution of the Policies
39 Distribution of the Policies
40 Distribution of the Policies
41 Distribution of the Policies
42 Not Applicable
43 Not Applicable
44 Cash Value, Payment and Allocation of Premiums
45 Not Applicable
</TABLE>
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<TABLE>
<CAPTION>
ITEM NO. OF
FORM N-8B-2 CAPTION IN PROSPECTUS
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<C> <S>
46 The Funds; Cash Value
47 The Funds
48 State Regulation
49 Not Applicable
50 The Separate Account
51 Cover Page; Summary; Policy Benefits; Payment and of
Allocation of Premiums; Charges and Deductions
52 Addition, Deletion or Substitution of Investments
53 Summary; Federal Tax Matters
54 Not Applicable
55 Not Applicable
56 Not Required
57 Not Required
58 Not Required
59 Financial Statements
</TABLE>
<PAGE> 4
[LOGO]
PROSPECTUS
5900 "O" Street
VARIABLE UNIVERSAL LIFE POLICY P.O. Box 82550/Lincoln, Nebraska 68501
This prospectus describes a flexible premium variable life insurance Policy
("Policy") offered by Ameritas Variable Life Insurance Company ("AVLIC"). Like
traditional life insurance policies, the Policy provides Death Benefits to
Beneficiaries and gives you, the Policy Owner, the opportunity to increase the
Policy's Cash Value. The Policy is designed as a single premium Policy,but
allows additional premium payments. It also lets you change the level of Death
Benefits. This flexibility lets you provide for your changing insurance needs
under a single insurance Policy.
The Policy is different from traditional life insurance policies because you
select how Policy premiumswill be invested. Although each Policy Owner is
guaranteed a Death Benefit, the Cash Value of the Policy, as well as the actual
Death Benefit, will vary with the performance of investments you select.
The Investment Options available through the Policy include investment
portfolios managed by Fidelity Management, Fred Alger Management, Massachusetts
Financial Services and Morgan Stanley Dean Witter Investment Management. Each of
these portfolios has its own investment objective and policies. These are
described in the prospectuses for each investment portfolio which must accompany
this prospectus. You may also choose to allocate premium payments to the Fixed
Account managed by AVLIC.
A Policy will be issued after AVLIC accepts a prospective Policy Owner's
application. The minimum premium required to purchase a Policy is $10,000,
except, for Insureds age 0 to 15 at their nearest birthday, the minimum premium
is $5,000. The Policy is available only to insure individuals who are age 80 or
less at their nearest birthday when the Policy is purchased. A Policy, once
purchased, may generally be canceled within 10 days after you receive it.
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.
This prospectus is designed to assist you in understanding the opportunity and
risks associated with the purchase of a Policy. Prospective Policy Owners are
urged to read the prospectus carefully and retain it for future reference.
This prospectus includes a summary of the most important features of the Policy,
information about AVLIC, a list of the investment portfolios to which you may
allocate payments, as well as a detailed description of the Policy. The appendix
to the prospectus includes tables designed to illustrate how Cash Values and
Death Benefits may change with the investment experience of the Investment
Options.
This prospectus must be accompanied by a prospectus for each of the investment
portfolios available through the Policy.
Although the Policy is designed to provide life insurance, it is considered to
be a security. It is not a deposit with, an obligation of, or guaranteed or
endorsed by any banking institution, nor is it insured by the Federal Deposit
Insurance Corporation, the Federal Reserve Board, or any other agency. The
purchase of a Policy involves investment risk, including the possible loss of
principal. The Policy Owner bears the entire investment risk for monies placed
in Separate Account V under this Policy. For this reason, the Policy may not be
suitable for all individuals. It may not be advantageous to purchase a Policy as
a replacement for another type of life insurance or as a way to obtain
additional insurance protection if the purchaser already owns another variable
universal life insurance policy.
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.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
REGULATORY AUTHORITY HAS APPROVED THESE SECURITIES, OR DETERMINED THAT THIS
PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
May 1, 1999
LIFE 1
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TABLE OF CONTENTS
<TABLE>
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PAGE
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DEFINITIONS................................................. 5
SUMMARY..................................................... 7
YEAR 2000................................................... 12
AVLIC AND THE SEPARATE ACCOUNT.............................. 12
Ameritas Variable Life Insurance Company.................. 12
The Separate Account...................................... 13
The Funds................................................. 14
Investment Objectives and Policies of the Funds'
Portfolios............................................. 15
Addition, Deletion or Substitution of Investments......... 20
Fixed Account............................................. 20
POLICY BENEFITS............................................. 22
Purposes of the Policy.................................... 22
Death Benefit Proceeds.................................... 22
Death Benefit Options..................................... 22
Cash Value................................................ 24
Benefits at Maturity...................................... 24
Payment of Policy Benefits................................ 24
POLICY RIGHTS............................................... 25
Loan Benefits............................................. 25
Surrenders................................................ 26
Transfers................................................. 26
Systematic Programs....................................... 27
Refund Privilege.......................................... 27
Exchange Privilege........................................ 27
PAYMENT AND ALLOCATION OF PREMIUMS.......................... 28
Issuance of a Policy...................................... 28
Premiums.................................................. 28
Allocation of Premiums and Cash Value..................... 29
Policy Lapse and Reinstatement............................ 29
CHARGES AND DEDUCTIONS...................................... 30
Premium Charge............................................ 30
Monthly Deduction......................................... 30
Daily Charges Against the Separate Account................ 31
Fund Expense Summary...................................... 31
Cash Surrender Charge..................................... 33
Transfer Charge........................................... 33
Partial Withdrawal Charge................................. 33
GENERAL PROVISIONS.......................................... 33
DISTRIBUTION OF THE POLICIES................................ 35
FEDERAL TAX MATTERS......................................... 35
SAFEKEEPING OF THE SEPARATE ACCOUNT'S ASSETS................ 37
THIRD PARTY SERVICES........................................ 37
VOTING RIGHTS............................................... 38
STATE REGULATION OF AVLIC................................... 38
EXECUTIVE OFFICERS AND DIRECTORS OF AVLIC................... 38
LEGAL MATTERS............................................... 40
</TABLE>
2 LIFE
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<TABLE>
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PAGE
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LEGAL PROCEEDINGS........................................... 41
EXPERTS..................................................... 41
ADDITIONAL INFORMATION...................................... 41
FINANCIAL STATEMENTS........................................ 41
Ameritas Variable Life Insurance Company Separate Account
V...................................................... 42
Ameritas Variable Life Insurance Company.................. 62
APPENDICES.................................................. 77
</TABLE>
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, SALESPERSON, 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.
LIFE 3
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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 ("WE, US, OUR") -- Ameritas Variable Life Insurance Company, a Nebraska
stock company.
BENEFICIARY -- The Beneficiary is designated by the Policy Owner 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 Policy
Owner or the Policy Owner's estate will be the Beneficiary. The interest of any
Beneficiary is subject to that of any assignee.
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.
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 Separate Account V and
the Fixed Account, and the cash value held in the General Account which secures
Policy loans.
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.
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 Dean
Witter Universal Funds, Inc. ("MSDW Universal Funds" or "MSDW"). The Funds have
one or more portfolios each. There is a portfolio that corresponds to each of
the Subaccounts of Separate Account V.
GENERAL ACCOUNT -- The General Account of AVLIC includes all of AVLIC's assets
except those assets segregated into separate accounts, such as Separate Account
V.
GRACE PERIOD -- A 61 day period from the date written notice of lapse is mailed
to the Policy Owner's last known address.
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 the
guaranteed cost of insurance rates, charges, and premium loads.
INSURED -- The person upon whose life the Policy is issued.
4 LIFE
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INVESTMENT OPTIONS -- Refers to the Subaccounts and/or the Fixed Account offered
under this Policy.
ISSUE AGE -- The age at the Insured's nearest birthday on the Policy Date.
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 Policy Owner is not required to select a scheduled premium.
The Policy Owner 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.
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 the section on Issuance of a Policy).
POLICY OWNER ("YOU, YOUR") -- 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 Policy Owner. A collateral assignee is not the
Policy Owner.
POLICY YEAR -- The period from one Policy anniversary date until the next Policy
anniversary date.
SEPARATE ACCOUNT V -- 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 Policy Owner to Separate
Account V.
SPECIFIED AMOUNT -- The minimum Death Benefit under the Policy so long as the
Policy remains in force.
SUBACCOUNT -- A subdivision of Separate Account V. Each Subaccount invests
exclusively in the shares of a specified portfolio of the Funds.
SURRENDER -- The termination of the Policy before the Maturity Date during the
Insured's life for the Cash Surrender Value.
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.
LIFE 5
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SUMMARY
This summary is intended to highlight the most important features of the Policy
that you, as a prospective Policy Owner, should consider. You will find more
detailed information in the main portion of the prospectus; cross-references are
provided for your convenience. As you review this summary, take note of the
terms that appear in italics. Each italicized term is defined in the Definitions
section of this prospectus. This summary and all other parts of this prospectus
are qualified in their entirety by the terms of the Policy, which is available
upon request from AVLIC. Unless stated otherwise, this prospectus assumes that
the Policy is in force and that there is no Outstanding Policy Debt.
WHO IS THE ISSUER OF THE POLICY?
AVLIC is the issuer of each Policy. AVLIC enjoys a rating of A (Excellent) for
financial strength and operating performance from A.M. Best Company, a firm that
analyzes insurance carriers. This is the third highest of Best's 15 categories.
AVLIC is rated AA (Very Strong) for financial insurance strength from Standard &
Poor's. This is the third highest of Standard & Poor's 21 ratings. A stock life
insurance company organized in Nebraska, AVLIC is a wholly owned subsidiary of
AMAL Corporation which is, in turn, owned by Ameritas Life Insurance Corp.
("Ameritas Life") and AmerUs Life Insurance Company ("AmerUs Life"). Ameritas
Life, AmerUs Life and AMAL Corporation guarantee the obligations of AVLIC,
including the obligations of AVLIC under each Policy; taken together, these
companies have aggregate assets of over $14.5 billion as of December 31, 1998.
(See the section on Ameritas Variable Life Insurance Company.)
WHY SHOULD I CONSIDER PURCHASING THE POLICY?
The primary purpose of the Policy is to provide life insurance protection on the
Insured named in the Policy. This means that, so long as the Policy is in force,
it will provide for:
- - payment of a Death Benefit, which will never be less than the Specified Amount
the Policy Owner selects (See the section on Death Benefit Options.)
- - Policy loan, Surrender and withdrawal features (See the section on Policy
Rights.)
- - the payment of benefits to the Policy Owner, if living, on the Maturity
Date(See the section on Benefits at Maturity.)
The Policy also includes an investment component. This means that, so long as
the Policy is in force, you will be responsible for selecting the manner in
which Net Premium will be invested. Thus, the value of a Policy will reflect
your investment choices over the life of the Policy.
WHAT PREMIUM MUST BE PAID TO KEEP A POLICY IN FORCE?
This Policy differs from a conventional life insurance policy in two important
ways. 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 the section on Payment and Allocation of Premiums.) The Policy
will lapse when its Cash Surrender Value is not sufficient 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, where 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 at least $10,000, except for Insureds age 0 to 15 at their nearest
birthday, the Minimum First Year Premium is at least $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 Policy Owner may
establish a schedule of premium payments ("Planned Periodic Premiums"), subject
to federal tax law limits on total premiums paid. (See the section on Premiums.)
HOW ARE PREMIUMS PAID, PROCESSED AND CREDITED TO ME?
Your Policy will be issued after a completed application is accepted, and the
initial premium payment is received, by AVLIC at its Home Office. AVLIC's Home
Office is located at 5900 "O" Street, P.O. Box
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<PAGE> 10
82550, Lincoln, NE 68501. Your initial premium will be allocated to the Money
Market Subaccount for 13 days following the Issue Date, and then will be
allocated to the Subaccounts and/or the Fixed Account, according to selections
you made in your application. You have the right to examine your Policy and
return it for a refund for a limited time, even after the Issue Date. (See the
section on Issuance of a Policy.)
You may make subsequent premium payments according to your Planned Periodic
Premium schedule; although you are not required to do so. AVLIC will send
premium payment notices to you according to any schedule you select. When AVLIC
receives your premium payment at its Home Office, any applicable Accrued Expense
Charges will be deducted and the Net Premium will be allocated to the
Subaccounts and/or the Fixed Account according to your selections. (See the
sections on Premiums and Allocation of Premiums and Cash Value.)
As already noted, the Policy provides you considerable flexibility in
determining the frequency and amount of premium payments. This flexibility is
not, however, unlimited. You should keep certain factors in mind in determining
the payment schedule that is best suited to your needs. These include maximum
premium limits established under the federal tax laws and the impact that
reduced premium payments may have on the Cash Surrender Value of your Policy.
(See the section on Premiums.)
HOW DOES THE INVESTMENT COMPONENT OF MY POLICY WORK?
AVLIC has established Separate Account V, which is separate from all other
assets of AVLIC, as a vehicle to receive and invest premiums received from
Policy Owners and owners of certain other variable universal life products
offered by AVLIC. Separate Account is divided into separate Subaccounts. Each
Subaccount invests exclusively in shares of one of the investment portfolios
available through the Policy. You may allocate Net Premiums to one or more
Subaccounts, or to AVLIC's Fixed Account in your initial application. These
allocations may be changed by notifying AVLIC's Home Office. (If you make more
than 15 transfers in a Policy Year, a transfer fee of $10 may be deducted from
each additional transfer.) You may make transfers from the Subaccounts to the
Fixed Account. One hundred percent of the amount deposited, plus interest, may
be transferred out of the Fixed Account during the 30 day period following each
Policy anniversary date. The aggregate value of your interests in the
Subaccounts and the Fixed Account will represent the Cash Value of your Policy.
(See the section on Cash Value.)
The Policy's Cash Value in Separate Account V 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 Policy
Owner. AVLIC does not guarantee a minimum cash value in Separate Account V.
WHAT INVESTMENT OPTIONS ARE AVAILABLE THROUGH THE POLICY?
The Investment Options available through the Policy include 26 investment
portfolios, each of which is a separate series of a mutual fund managed by
Fidelity Management & Research Company, Fred Alger Management, Inc.,
Massachusetts Financial Services Company, or Morgan Stanley Dean Witter
Investment Management Inc. These portfolios are:
- - FIDELITY MANAGEMENT & RESEARCH COMPANY:
VIP Money Market
VIP Equity-Income
VIP Growth
VIP High Income
VIP Overseas
VIP II Asset Manager
VIP II Investment Grade Bond
VIP II Asset Manager: Growth
VIP II Index 500
VIP II Contrafund
LIFE 7
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- - FRED ALGER MANAGEMENT, INC.:
Growth
Income and Growth
Small Capitalization
Balanced
MidCap Growth
Leveraged AllCap
- - MASSACHUSETTS FINANCIAL SERVICES COMPANY:
Emerging Growth
Utilities
Global Governments
Research
Growth With Income
- - MORGAN STANLEY DEAN WITTER INVESTMENT MANAGEMENT INC.:
Emerging Markets Equity
Global Equity
International Magnum
Asian Equity
U.S. Real Estate
Details about the investment objectives and policies of each of the available
investment portfolios, including management fees and expenses, appear in the
section on Investment Objectives and Policies of the Funds' Portfolios. In
addition to the listed portfolios, you may also elect to allocate Net Premiums
to AVLIC's Fixed Account. (See the section on Fixed Account.)
HOW DOES THE LIFE INSURANCE COMPONENT OF A POLICY WORK?
A Policy provides for the payment of a minimum Death Benefit upon the death of
the Insured. The amount of the minimum Death Benefit -- sometimes referred to as
the Specified Amount of your Policy -- is chosen by you at the time your Policy
is established. However, Death Benefit Proceeds -- the actual amount that will
be paid after AVLIC receives Due Proof of Death of the Insured -- will vary over
the life of your Policy, depending on which of the two available coverage
options you select.
If you choose Option A, Death Benefit Proceeds payable under your Policy will be
the Specified Amount of your Policy or the applicable percentage of its Cash
Value, whichever is greater. If you choose Option B, Death Benefit Proceeds
payable under your Policy will be the Specified Amount of your Policy PLUS the
Cash Value of your Policy, or if it is higher, the applicable percentage of the
Cash Value on the date of death. In either case, the applicable percentage is
established based on the age of the Insured at the date of death. (See the
section on Death Benefit Options.)
If the Extended Maturity Rider is in effect, the Death Benefit will be the Cash
Value.
ARE THERE ANY RISKS INVOLVED IN OWNING A POLICY?
Yes. Over the life of your Policy, the Subaccounts to which you allocate your
premiums will fluctuate with changes in the stock market and overall economic
factors. These fluctuations will be reflected in the Cash Value of your Policy
and may result in loss of principal. For this reason, the purchase of a Policy
may not be suitable for all individuals. It may not be advantageous to purchase
a Policy to replace or augment your existing insurance arrangements. Appendix A
includes tables illustrating the impact that hypothetical market returns would
have on Cash Values under a Policy.
IS THE CASH VALUE OF MY POLICY AVAILABLE BEFORE THE MATURITY DATE WITHOUT
SURRENDER?
Yes. You may access the value of your Policy in one of two ways. First, you may
obtain a loan, secured by the Policy. The maximum amount you may borrow is 85%
of the Cash Value, less the cash Surrender charge and
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<PAGE> 12
any accrued expenses (Texas and Virginia Policy Owners may borrow 100% of the
Cash Surrender Value after deducting interest and Policy charges for the Policy
Year.) The minimum amount of any loan request is $1,000. The available loan
amount at any time is the maximum loan amount less any Outstanding Policy Debt.
The maximum interest rate on a loan is 8% annually. The current interest rates
are 6% annually on the portion of a loan that exceeds the Earnings Loan Value
and 4.5% on the portion of the loan that is less than the Earnings Loan Value.
(See the section on Loan Benefits.) 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 Separate Account V 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 Separate Account V 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. 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 the section
on Federal Tax Matters.)
You may also access the value of your Policy by making a partial withdrawal. A
partial withdrawal may not exceed the Cash Surrender Value, and the Cash
Surrender Value after a partial withdrawal must be at least $1000. Partial
withdrawals will reduce both the Cash Value and the Death Benefit payable under
the Policy. AVLIC may deduct a charge from each partial withdrawal. (See the
section on Surrenders -- Partial Withdrawals.)
WHAT ARE THE CHARGES ASSOCIATED WITH OWNERSHIP OF A POLICY?
PREMIUM CHARGES. AVLIC will not deduct premium charges from premium payments
made during the first year. 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: (1) a charge for the cost of insurance for the current Policy month, plus,
(2) one-twelfth of any flat extra rating charge. (See the sections on Monthly
Deduction and Rate Class.)
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 the
section on Daily Charges Against the Separate Account.)
No charges are currently made against Separate Account V 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 Separate Account V to pay those
taxes. (See the section on Federal Tax Matters.)
Policy Owners who choose to allocate Net Premiums to one or more of the
Subaccounts will also bear a pro rata share of the management fees and expenses
paid by each of the investment portfolios in which the various Subaccounts
invest. No such management fees are assessed against Net Premiums allocated to
the Fixed Account. (See the section on The 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
premiums actually paid during the first Policy Year, limited as shown in the
Policy schedule pages. Subject to other considerations, the Policy Owner 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.
The maximum cash surrender charge is 11.5% during the first year grading off to
0% during the next seven years. The maximum charge is based on a 9% deferred
sales cost and a 2.5% charge for premium tax. AVLIC
LIFE 9
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<PAGE> 13
has voluntarily lowered its maximum cash surrender charge to 9%, which would
affect the charge for the first three years. Because the cash surrender charge
may be significant upon early Surrender, prospective Policy Owners should
purchase a Policy only if they do not intend to surrender the Policy for a
substantial period. (See the section on Cash Surrender Charge.)
TRANSFER CHARGE. The first 15 transfers per Policy Year are free of charge.
Then, 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. (See the section on Transfer Charge.)
PARTIAL WITHDRAWAL CHARGE. AVLIC may deduct a charge, not to exceed the lesser
of $50 or 2% of the amount withdrawn, 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 the section on
Partial Withdrawal Charge.)
CAN I ADJUST DEATH BENEFITS?
Yes. After the first Policy anniversary, you may adjust the Death Benefit by
changing the Death Benefit option. After the second Policy Year you may 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 limits. 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; after that, 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 the sections on Change in Death Benefit Option and Change in
Specified Amount.)
WHAT IS THE 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 seven 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 seven level annual premiums. Because the Policy is designed
to operate as a single premium contract, the initial premium exceeds the amounts
allowed in the 7-pay test. Partial withdrawals 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 Policy
Owner reaching age 59 1/2. The 10% penalty tax does not apply if the Policy
Owner 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 Policy Owner or the joint lives
of the Policy Owner and Beneficiary. (See the section on Federal Tax Matters.)
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 the section on Federal Tax Matters.)
MAY I RETURN THE POLICY FOR A REFUND OR EXCHANGE IT FOR ANOTHER POLICY?
REFUND PRIVILEGE. You have period of time (a "free look period") to examine a
Policy and return it for a refund. You may cancel the Policy within 45 days
after Part I of the application is signed, within 10 days after you receive 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 the section on Refund
Privilege.)
EXCHANGE PRIVILEGE. During the first 24 months after the Policy Date of the
Policy, subject to certain restrictions, you 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 the section on Exchange
Privilege.)
10 LIFE
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<PAGE> 14
WHEN DOES MY POLICY TERMINATE?
You may terminate your Policy by Surrendering the Policy during the lifetime of
the Insured for its Cash Surrender Value. As noted above, your Policy will
terminate if you fail to maintain sufficient Cash Surrender Value to cover
Policy charges.
Finally, your Policy will terminate on its Maturity Date if the named Insured is
living on that date, unless you have elected the extended maturity rider. (See
the section on General Provisions -- Additional Insurance Benefits (Riders).)
The Maturity Date is the policy anniversary nearest to the Insured's 95th
birthday. On the Maturity Date, AVLIC will pay you an amount equal to the Cash
Value of your Policy, less any Outstanding Policy Debt.
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. This issue arose because both mainframe and PC-based
computer hardware and software have traditionally used two digits to identify
the year. For example, the year 1998 is input, stored and calculated as "98."
Similarly, the year 2000 would be input, stored and calculated as "00." If
computers assume this means 1900, it could cause errors in calculations,
comparisons, and other computing functions.
Like all insurance companies, AVLIC makes extensive use of dates and date
calculations. We began a corporate-wide Year 2000 (Y2K) project in mid-1996. Our
goal is to ensure that Our computer systems continue to operate smoothly with no
service disruptions before, during or after the year 2000.
As of December 31, 1998, all of Our computer application and operating systems
had been updated for the year 2000. Continuous testing and monitoring throughout
1999 will help AVLIC continue to meet Our contractual and service obligations to
Our customers. In addition to Our internal efforts, AVLIC is working closely
with vendors and other business partners to confirm that they too are addressing
Y2K issues on a timely basis. We believe that we are Y2K-compliant; however, in
the event We or Our service providers, vendors, financial institutions or others
with which We conduct business, fail to be Y2K-compliant, there would be a
materially adverse effect on Us.
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), a Nebraska stock life insurance company, 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, 1998 of over
$4.1 billion. AmerUs Life had total assets as of December 31, 1998 of over $10.4
billion.
LIFE 11
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<PAGE> 15
AVLIC has a rating of A (Excellent) for financial strength and operating
performance from A.M. Best Company, a firm that analyzes insurance carriers.
This is the third highest of Best's 15 categories. AVLIC is rated AA (Very
Strong) for financial insurance strength from Standard & Poor's. This is the
third highest of Standard & Poor's 21 ratings. Ameritas Life enjoys a long
standing A+ (Superior) rating from A.M. Best, the second highest of Best's
ratings.
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 which has a
financial rating by a national rating agency equal to or greater than Ameritas
Life and which agrees to assume the guarantee. AmerUs Life will be relieved of
its obligations under the guarantee if it sells its interest in AMAL Corporation
to another insurance company which has a financial rating by a national rating
agency equal to or greater than that of AmerUs Life, and the purchaser assumes
the guarantee.
Ameritas Investment Corp. ("AIC"), the principal underwriter of the Policies,
may publish in advertisements and reports to Policy Owners, the ratings and
other information assigned to Ameritas Life and AVLIC by one or more independent
rating services. Published material may also include charts and other
information concerning dollar cost averaging, portfolio rebalancing, earnings
sweep, tax-deference, asset allocation, diversification, long term market
trends, index performance, and other investment methods and programs. The
purpose of the ratings is to reflect the financial strength of AVLIC. The
ratings do not relate to the performance of Separate Account V.
THE SEPARATE ACCOUNT
Ameritas Variable Life Insurance Company Separate Account V ("Separate Account
V") was established under Nebraska law on August 28, 1985.
The assets of Separate Account V 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 Separate
Account V are credited without regard to the other income, gains, or losses of
AVLIC. Although the assets maintained in Separate Account V 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
Separate Account V of a total market value at least equal to the reserve and
other contract liabilities of Separate Account V. Separate Account V will at all
times contain assets equal to or greater than account values invested in
Separate Account V. Nevertheless, to the extent assets in Separate Account V
exceed AVLIC's liabilities in Separate Account V, 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.
Separate Account V 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
Separate Account V. For state law purposes, Separate Account V is treated as a
Division of AVLIC.
PERFORMANCE INFORMATION
Performance information for the Subaccounts of Separate Account V and the Funds
available for investment by Separate Account V 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 V 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.
12 LIFE
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<PAGE> 16
THE FUNDS
There are currently twenty-six Subaccounts within Separate Account V available
to Policy Owners for new allocations. Each Subaccount of Separate Account V 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 Dean Witter Universal
Funds, Inc. (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 MSDW Universal Funds. 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 MSDW Universal Funds. 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 MSDW Universal Funds.
Investments acquired by the U.S. Real Estate Portfolio of the MSDW Universal
Funds 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.
The investments in the Funds may be managed by Fund managers which manage one or
more other mutual funds that have similar names, investment objectives, and
investment styles as the Funds. You should be aware that the Funds are likely to
differ from the other mutual funds in size, cash flow pattern, and tax matters.
Thus, the holdings and performance of the Funds can be expected to vary from
those of the other mutual Funds.
Each Policy Owner 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.
Separate Account V 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 Cash Surrender Values, partial withdrawals, and make
Policy loans or to transfer assets among Investment Options as requested by
Policy Owners. Any dividend or capital gain distribution received is
automatically reinvested in the corresponding Subaccount.
LIFE 13
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<PAGE> 17
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 Separate Account V 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.
INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS' PORTFOLIOS
<TABLE>
<CAPTION>
PORTFOLIO INVESTMENT POLICIES OBJECTIVE
--------- ------------------- ---------
<S> <C> <C>
FIDELITY FUNDS
VIP Money Market Investing in U.S. dollar-denominated money Seeks as high a level of current income as
market securities, including U.S. is consistent with the preservation of
Government securities and repurchase capital and liquidity.
agreements, and entering into reverse
repurchase agreements.
VIP Equity-Income Investing at least 65% in income-producing Seeks reasonable income. Will also
equity securities, which tends to lead to consider the potential for capital
investments in large cap "value" stocks. appreciation. Seeks a yield which exceeds
the composite yield on the securities
comprising the Standard & Poor's 500.
FIDELITY FUNDS
VIP Growth Investing primarily in common stocks. Seeks capital appreciation.
Investing in companies that it believes
have above-average growth potential (stocks
of these companies are often called
"growth" stocks. Investing in domestic and
foreign issuers.
VIP High Income Investing at least 65% of total assets in Seeks a high level of current income while
income-producing debt securities, preferred also considering growth of capital.
stocks and convertible securities, with an
emphasis on lower-quality debt securities.
VIP Overseas Investing at least 65% of total assets in Seeks long-term growth of capital.
foreign securities. Investing primarily in
common stocks.
VIP II Asset Manager Allocating the Fund's assets among stocks, Seeks high total return with reduced risk
bonds, and short-term and money market over the long term by allocating its
instruments. Maintaining a neutral mix over assets among stocks, bonds, and short-term
time of 50% of assets in stocks, 40% of instruments.
assets in bonds, and 10% of assets in
short-term and money market instruments.
VIP II Investment Grade Investing in U.S. dollar-denominated Seeks as high a level of current income as
Bond investment- grade bonds. is consistent with the preservation of
capital.
VIP II Asset Manager: Allocating the Fund's assets among stocks, Seeks to maximize total return by
Growth bonds, and short-term and money market allocating its assets among stocks, bonds,
instruments. Maintaining a neutral mix over short-term instruments and other
time of 70% of assets in stocks, 25% of investments.
assets in bonds, and 5% of assets in
short-term and money market instruments.
VIP II Index 500 Investing at least 80% of assets in common Seeks investment results that correspond
stocks included in the Standard & Poor's to the total return of common stocks
500. Lending securities to earn income for publicly traded in the United States, as
the fund. represented by the Standard & Poor's 500.
VIP II Contrafund Investing primarily in common stocks. Seeks long-term capital appreciation.
Investing in securities of companies whose
value it believes is not fully recognized
by the public.
ALGER AMERICAN FUND
Growth The portfolio will invest its assets in Seeks long-term capital appreciation.
companies 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.
</TABLE>
14 LIFE
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<TABLE>
<CAPTION>
PORTFOLIO INVESTMENT POLICIES OBJECTIVE
--------- ------------------- ---------
<S> <C> <C>
Income and Growth Except during temporary defensive periods, Seeks to provide a high level of dividend
it is a fundamental policy of the portfolio income to the extent consistent with
to invest at least 65% of its total assets prudent investment management. Capital
in dividend paying equity securities. appreciation is a secondary objective of
the portfolio.
Small Capitalization Except during temporary defensive periods, Seeks long-term capital appreciation.
the 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 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 Except during temporary defensive periods, Seeks current income and long-term capital
the portfolio will invest its assets in appreciation by investment in common
common stocks and investment grade stocks and fixed income and convertible
preferred stock and debt securities as well securities, with emphasis on income
as securities convertible into common producing securities which appear to have
stocks and it is anticipated that 25% of potential for capital appreciation.
the portfolio assets will be invested in
fixed income senior securities.
MidCap Growth Except during temporary defensive periods, Seeks long-term capital appreciation.
the 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 Except during temporary defensive periods, Seeks long-term capital appreciation.
invests at least 85% of net assets in
equity 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.
MFS FUNDS
Emerging Growth Series At least 80% normally will be invested in Seeks to provide long-term capital growth;
equity securities of emerging growth dividend and interest income is
companies. Up to 25% may be invested in incidental.
foreign securities not including ADRs.
Utilities Series At least 65%, but up to 100% normally will Seeks capital growth and current income
be invested in equity and debt securities (above that available from a portfolio
of both domestic and foreign companies in invested entirely in equity securities).
the utilities 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.
</TABLE>
LIFE 15
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<PAGE> 19
<TABLE>
<CAPTION>
PORTFOLIO INVESTMENT POLICIES OBJECTIVE
--------- ------------------- ---------
<S> <C> <C>
Global Governments Invests in investment grade and lower rated Seeks to provide income and capital
Series corporate bonds, U.S. government appreciation.
securities, foreign government securities,
and mortgage and asset backed securities.
Research Series Invests in common stocks or securities Seeks to provide long-term growth of
convertible into common stocks of companies capital and future income.
believed to possess 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 Seeks to provide reasonable current income
Series common stocks or securities convertible and long-term growth of capital and
into common stocks of companies believed to income.
have long-term prospects for growth and
income. Expects to invest not more than 15%
in foreign securities (including emerging
market issues.)
MSDW UNIVERSAL FUNDS
Emerging Markets Equity Invests primarily in equity securities of Long-term capital appreciation.
emerging market country issuers with a
focus on those issuers with attractive
growth characteristics, reasonable
valuations, and management teams that focus
on shareholder value.
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, Australiasia 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 a
disciplined, value-oriented approach to
security selection.
U.S. Real Estate Invests primarily in equity securities of Above-average current income and long-term
companies primarily engaged in the U.S. capital appreciation.
real estate industry, including real estate
investment trusts.
</TABLE>
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS
AVLIC reserves the right, subject to applicable law, to add, delete, combine, or
substitute investments in Separate Account V if, in our judgment, marketing
needs, tax considerations, or investment conditions warrant. This may happen due
to a change in law or a change in a Fund's objectives or restrictions, or for
some other reason. AVLIC may operate Separate Account V 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. AVLIC
may also transfer the assets of Separate Account V to another separate account.
If necessary, we will notify the SEC and/or state insurance authorities and will
obtain any required approvals before making these changes.
If any changes are made, AVLIC may, by appropriate endorsement, change the
Policy to reflect the changes. In addition, AVLIC may, when permitted by law,
restrict or eliminate any voting rights of Policy Owners or other persons who
have voting rights as to Separate Account V. AVLIC will determine the basis for
making any new Subaccounts available to existing Policy Owners.
You will be notified of any material change in the investment policy of any Fund
in which you have an interest.
16 LIFE
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<PAGE> 20
FIXED ACCOUNT
You may elect to allocate all or a portion of your premium payments to the Fixed
Account, and you may also transfer monies between Separate Account V and the
Fixed Account. (See the section on Transfers.) AVLIC guarantees that it will
credit interest at a declared rate of at least 4.5%.
Each month, AVLIC will establish the declared rate for the Policies with a
Policy Date or Policy anniversary date in that month. Interest will be credited
on the amounts transferred or allocated to the Fixed Account at the declared
rate effective for the month of issue. The declared rate is guaranteed for the
remainder of the Policy Year. During the later Policy Years, all amounts in the
Fixed Account will earn interest at the declared rate in effect in the month of
the last Policy anniversary. Declared interest rates may increase or decrease
from previous periods.
Payments allocated to the Fixed Account and transferred from Separate Account V
to the Fixed Account are placed in AVLIC's General Account. The General Account
includes all of AVLIC's assets, except those assets segregated in AVLIC's
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. The Policy Owner bears the
investment risk after the expiration of a contract year. Because of exemptions
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 in it 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 Policy; however, these disclosures may be subject to generally
applicable provisions of the federal securities laws regarding the accuracy and
completeness of statements made in prospectuses.
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 you with both (1) lifetime insurance
protection to the Policy anniversary nearest the Insured's 95th birthday and (2)
flexibility in 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, you are not required to
pay scheduled premiums to keep your Policy in force. The Policy is designed so
that a single premium payment may be made or you have the flexibility to vary
subsequent premium payments.
Moreover, the Policy lets you adjust the level of Death Benefits payable under
the Policy without having to purchase a new Policy. You can accomplish this by
decreasing the Specified Amount or changing the Death Benefit option. Thus, as
your insurance needs or financial conditions change, you have the flexibility to
adjust your 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 Separate Account V. Thus the Policy
Owner benefits from 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 Separate Account V.
DEATH BENEFIT PROCEEDS
As long as the Policy remains in force, AVLIC will pay the Death Benefit
Proceeds of the Policy upon Due Proof of Death, according to the Death Benefit
option in effect at the time of the Insured's death. The amount
LIFE 17
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<PAGE> 21
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 the section on Payment Options.)
DEATH BENEFIT OPTIONS
The Policy provides two Death Benefit options, unless the Extended Maturity
Rider is in effect. If the Extended Maturity Rider is in effect, the Death
Benefit will be the same as the Cash Value. Extension of the Maturity Date may
result in adverse tax consequences. (See the sections on Benefits at Maturity
and General Provisions -- Extended Maturity Rider.) The Policy Owner 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 the section on Policy Lapse and Reinstatement.)
The minimum Specified Amount currently is the amount that a premium of $10,000
($5,000 for ages 0-15) will purchase.
OPTION A.
(OMITTED GRAPH ILLUSTRATES PAYOUT UNDER DEATH BENEFIT OPTION A, SPECIFICALLY BY
SHOWING THE RELATIONSHIPS OVER TIME, BETWEEN THE SPECIFIED AMOUNT AND THE CASH
VALUE.)
[CHART]
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 Attained Age 40 is 250%, at Attained Age 50 is 185%,
at Attained Age 60 is 130%, at Attained Age 70 is 115%, at Attained Age 80 is
108%, and at Attained 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. Policy Owners
who prefer to have favorable investment performance reflected in higher Cash
Value, rather than increased insurance coverage, generally should select Option
A.
OPTION B.
(OMITTED GRAPH ILLUSTRATES PAYOUT UNDER DEATH BENEFIT OPTION B, SPECIFICALLY BY
SHOWING THE RELATIONSHIPS OVER TIME, BETWEEN THE SPECIFIED AMOUNT AND THE CASH
VALUE.)
[CHART]
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. 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). Policy
Owners who prefer to have favorable investment performance reflected in
increased insurance coverage, rather than higher Cash Values, generally should
select Option B.
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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 generally will decrease the net amount at risk, and
therefore cost of insurance charges. Changing from Option A to Option B
generally will 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 the section on Charges and
Deductions -- Cost of Insurance.)
CHANGE IN SPECIFIED AMOUNT. Subject to certain limitations, after the second
Policy Year a Policy Owner 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 Policy Owner's cost of insurance
charge. (See the section on Charges and Deductions -- Cost of Insurance.)
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 three 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 the section on Premium
Limitations), the decrease may be limited or cash value may be returned to the
Policy Owner at the Policy Owner's election, to the extent necessary to meet
these requirements.
METHODS OF AFFECTING INSURANCE PROTECTION. A Policy Owner 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 the section on Monthly
Deduction.) Where, however, the Cash Surrender Value is insufficient to pay the
monthly deduction and the Grace Period expires without an adequate payment by
the Policy Owner, the Policy will lapse and terminate without value. (See the
section on Policy Lapse and Reinstatement.)
CASH VALUE
The Policy's Cash Value in Separate Account V will reflect the investment
performance of the chosen Subaccounts of Separate Account V, the Net Premiums
paid, any partial withdrawals, and the charges assessed in connection with the
Policy. A Policy Owner may at any time Surrender the Policy and receive the
Policy's Cash Surrender Value. (See the section on Surrenders.) There is no
guaranteed minimum cash value.
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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 the section on Allocation
of Premiums and Cash Value.) 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.
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 (1) 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
(2) a Daily Charge not exceeding an annual rate of 1.20% for mortality and
expense risk (.90%) and administrative costs (.30%); and (3) 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 the section on
Daily Charges Against the Separate Account.)
VALUATION DATE AND VALUATION PERIOD. A Valuation Date is each day on which the
New York Stock Exchange ("NYSE") is open for trading. The net asset value for
each Fund portfolio is determined as of the close of regular trading on the
NYSE. The net investment return for each Subaccount and all transactions and
calculations with respect to the Policies as of any Valuation Date are
determined as of that time. 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. The
Policy may be subject to certain adverse tax consequences when continued beyond
the original scheduled Maturity Date. (See the section on General
Provisions -- 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 the section on Postponement of
Payments.) The Policy Owner may decide the form in which the benefits will be
paid. During the Insured's lifetime, the Policy Owner 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.
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<PAGE> 24
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.
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 Policy Owner 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 seven days after receipt of a written request. Texas and Virginia
Policy Owners may borrow 100% of the Cash Surrender Value after deducting
interest and Policy charges for the remainder of the Policy Year. LOANS MAY HAVE
ADVERSE TAX CONSEQUENCES. (See the section on Tax Treatment of Policy Proceeds.)
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 Separate Account V to the
General Account of AVLIC as security for the indebtedness. The cash value
transferred out of Separate Account V 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
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<PAGE> 25
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 Policy Owner 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 Outstanding Policy
Debt exceeds the Cash Value less any cash surrender charge and any accrued
expenses, the Policy Owner must pay the excess. AVLIC will send a notice of the
amount which must be paid. If the Policy Owner 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 the
section on Policy Lapse and Reinstatement.)
REPAYMENT OF LOAN. Unscheduled premiums paid while a Policy loan is outstanding
are treated as repayment of the loans only if the Policy Owner so requests. As a
loan is repaid, the Cash Value in the General Account securing the repaid loan
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.
SURRENDERS
At any time during the lifetime of the Insured and prior to the Maturity Date,
the Policy Owner may totally Surrender the Policy by sending a written request
to AVLIC. Certain partial withdrawals may also be made. Surrenders from Separate
Account V will generally be paid within seven days of receipt of the written
request. (See the section on Postponement of Payments.) SURRENDERS AND PARTIAL
WITHDRAWALS MAY HAVE ADVERSE TAX CONSEQUENCES. (See the Federal Tax Matters
subsections on Modified Endowment Contract and Tax Penalty on Early
Withdrawals.)
TOTAL SURRENDERS. If the Policy is being totally Surrendered, the Policy 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 Policy Owner may elect to
have the amount paid in a lump sum or under a payment option. (See the section
on Payment Options.)
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 Policy Owner 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 the section on
Monthly Deduction -- Cost of Insurance, Death Benefit Options -- Methods of
Affecting Insurance Protection.) If Option B is in effect, the Specified Amount
will not change, but the cash value will be reduced.
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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 the section on
Partial Withdrawal Charge.)
TRANSFERS
Cash Value may be transferred among the Subaccounts of Separate Account V. 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 Policy
Owner is invested. The charge is $10 per transfer. (See the section on Transfer
Charge.) 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 the section on Tax
Status of the Policy.)
The privilege to initiate transactions by telephone will be made available to
Policy Owners 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 Policy Owner to provide
the Policy number at the time of 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 Cash 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.
You can request participation in the available programs when purchasing the
Policy or at a later date. You 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. Participation in any
systematic program will automatically terminate upon death of the Insured. Use
of systematic programs may not be advantageous, and does not guarantee success.
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PORTFOLIO REBALANCING. Under the Portfolio Rebalancing program, you can instruct
AVLIC to allocate Cash Value among the Subaccounts of Separate Account V on a
systematic basis, according to allocation instructions you specified.
DOLLAR COST AVERAGING. Under the Dollar Cost Averaging program you can instruct
AVLIC to automatically transfer, on a systematic basis, a predetermined amount
or percentage you specify from any one Subaccount to any Subaccount(s) of
Separate Account V.
EARNINGS SWEEP. Permits systematic redistribution of earnings among Subaccounts.
You can request participation in the available programs when purchasing the
Policy or at a later date. You 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
You may cancel the Policy within the later of 10 days after you receive 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, you 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 Policy Owner's bank. (See the section on
Postponement of Payments.)
EXCHANGE PRIVILEGE
During the first 24 Policy months after the Policy Date, you 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.
You 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.
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
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<PAGE> 28
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 Policy Owner
or sent to the agent for delivery to the Policy Owner. 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 Cash Value
will be allocated to the Subaccounts or the Fixed Account as selected by the
Policy Owner.
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 (1) the amount of insurance
applied for, (2) $100,000, or (3) $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 Policy Owner has flexibility in determining the frequency and
amount of premiums since the planned periodic premium schedule is not binding on
the Policy Owner. 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 First Year 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.
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 Policy Owner 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. Therefore,
unlike conventional insurance policies, this Policy does not obligate the Policy
Owner 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 Policy Owner may
determine a planned periodic premium schedule that
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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 Policy Owner is not required to pay premiums
in accordance with this schedule. The Policy Owner has considerable flexibility
to alter the amount and frequency of premiums paid.
Policy Owners 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 the section on Duration of the
Policy.) Thus, even if Planned Periodic Premiums are paid by the Policy Owner,
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 the section on Policy Lapse and Reinstatement.)
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 Policy Owner
allocates premiums to one or more Subaccounts of Separate Account V 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 Cash Value will be allocated to
the Subaccounts or the Fixed Account as selected by the Policy Owner. 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 Separate Account V will vary
with the investment performance of these Subaccounts, and the Policy Owner bears
the entire investment risk. This will affect the Policy's cash value, and may
affect the Death Benefit as well. Policy Owners should periodically review their
allocations of premiums and values in light of market conditions and overall
financial planning requirements.
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 Policy Owner 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.
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If the Cash Surrender Value is insufficient to cover the monthly deduction, the
Policy Owner must pay a premium during the Grace Period sufficient to cover the
monthly deduction. (See the section on Charges and Deductions.)
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. We will reinstate your Policy 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 in the
section on Determination Of Cash Value.
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 the section on Cash Surrender Charge.) The charges for
premium taxes represent an amount AVLIC considers necessary to pay all premium
taxes imposed by the states and their subdivisions.
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: (1) the cost of insurance for the current Policy month, plus (2)
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.
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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. 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 Policy Owners.
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 Separate
Account V to compensate AVLIC for mortality and expense risks assumed and the
administrative costs incurred in connection with the Policy. This daily charge
from Separate Account V 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 Separate
Account V). The daily charge will be deducted from the net asset value of
Separate Account V, 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 Separate Account V) 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 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 Separate Account V) 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 Separate Account
V. 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
Policy Owner. Administrative expenses in connection with the issuance of the
Policy are medical exams, review of
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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 Policy Owner 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 Separate Account V for federal,
state or local income taxes. AVLIC may, however, make such a charge in the
future if income or gains within Separate Account V 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 Separate Account V as a portion of the Daily Charge. (See the
section on Federal Tax Matters.)
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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, 1998, was as follows:
<TABLE>
<CAPTION>
INVESTMENT
ADVISORY AND
PORTFOLIO MANAGEMENT OTHER EXPENSES TOTAL TOTAL
--------- ------------ -------------- ----- ------------------
(Reflecting
reimbursements,
if any)
------------------
<S> <C> <C> <C> <C>
FIDELITY FUNDS
VIP Money Market.......................... .20% .10% .30% .30%
VIP Equity-Income......................... .49% .09% .58% .57%(1)
VIP Growth................................ .59% .09% .68% .66%(1)
VIP High Income........................... .58% .12% .70% .70%
VIP Overseas.............................. .74% .17% .91% .89%(1)
VIP II Asset Manager...................... .54% .10% .64% .63%(1)
VIP II Investment Grade Bond.............. .43% .14% .57% .57%
VIP II Asset Manager: Growth.............. .59% .14% .73% .72%(1)
VIP II Index 500.......................... .24% .11% .35% .28%(1)
VIP II Contrafund......................... .59% .11% .70% .66%(1)
ALGER AMERICAN FUND(2)
Growth.................................... .75% .04% .79% .70%
Income and Growth......................... .625% .075% .70% .70%
Small Capitalization...................... .85% .04% .89% .89%
Balanced.................................. .75% .17% .92% .92%
MidCap Growth............................. .80% .04% .84% .84%
Leveraged AllCap.......................... .85% .11% .96% .94%
MFS TRUST
Emerging Growth........................... .75% .10%(3) .85% .85%
Utilities................................. .75% .25%(3) 1.00% 1.00%
Global
Governments............................... .75% .36%(3) 1.11% 1.01%(4)
Research.................................. .75% .11%(3) .86% .86%
Growth With Income........................ .75% .13%(3) .88% .88%
MSDW UNIVERSAL FUNDS
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>
- - A portion of the brokerage commissions that certain Funds pay was used to
reduce Funds expenses. In addition, certain Funds, or Fidelity on behalf of
certain Funds, have entered into arrangements with their custodian whereby
credits realized as a result of uninvested cash balances were used to reduce
custodian and transfer agent expenses. Including these reductions, the total
operating expenses, after reimbursement for Index 500 Portfolio are presented
in the table.
- - 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%;
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Alger American Small Capitalization, Alger American MidCap Growth, Alger
American Leveraged AllCap, 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 .03% of
interest expense.
- - 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). Expenses do not take into account
these expense reductions and are therefore higher than the actual expense of
the series.
- - 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.
- - 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.
- - 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 LS 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.
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 Policy Owner 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
Separate Account V and the Policy Owners.
AVLIC has voluntarily lowered its maximum cash Surrender charge to 9%, which
amount will be charged on Surrenders during Policy Years one, two and three. The
Policy provides that cash 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 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.
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Because the cash Surrender charge may be significant upon early Surrender,
prospective Policy Owners 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 Policy Owner 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 Policy Owner 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 Policy
Owner, if living; otherwise to any successor-owner or owners, if living;
otherwise to the estate of the last Policy Owner to die.
BENEFICIARY. The Policy Owner 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 Policy
Owner; otherwise to the estate of the owner.
CHANGE OF BENEFICIARY. The Policy Owner 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.
CHANGE IN POLICY 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 Policy Owner, if living;
otherwise to any successor-
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<PAGE> 36
owner, if living; otherwise to the Policy 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: (1) 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;
(2) the Commission by order permits postponement for the protection of Policy
Owners; (3) 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 Separate Account V's net
assets; or, (4) 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 Policy Owner's bank.
REPORTS AND RECORDS. AVLIC will maintain all records relating to Separate
Account V and will mail to the Policy Owner, 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 Policy Owner
may receive confirmation of such transactions in their quarterly statements. The
Policy Owner 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 Policy Owner will also be sent a
periodic report for the Funds and a list of the portfolio securities held in
each portfolio of the Funds.
ADDITIONAL INSURANCE BENEFITS (RIDERS). Subject to certain requirements, one or
more of the following additional insurance benefits may be added to a Policy by
rider. All riders are not available in all states.
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, 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.
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Satisfactory proof of terminal illness must include a written
statement from a licensed physician who is not related to the Insured or
the Policy Owner 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 Outstanding 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. The Policy may be subject to certain adverse
tax consequences when continued beyond the Maturity Date. Due to the lack
of specific guidance by the Internal Revenue Service on this issue, the
result is not certain. If the Policy is not treated as a life insurance
contract for federal income tax purposes after the original scheduled
Maturity Date, among other things, the Death Benefit may be taxable to the
recipient. The Policy Owner should consult a qualified tax advisor
regarding the possible adverse tax consequences resulting from extension of
the original scheduled Maturity Date.
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 1998, AIC
received gross variable universal life compensation of $12,564,917 and retained
$394,171 in underwriting fees, and $3,514 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. AIC also serves as principal underwriter for AVLIC's variable
annuities, and for Ameritas Life's variable life and variable annuities. It also
has executed selling agreements with a variety of mutual funds, unit investment
trusts and direct participation programs.
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 paid by
AVLIC to broker-dealers may vary, but are not expected to exceed 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.
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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 Policy Owner 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, Policy Owner or Beneficiary may
be altered.
(1) 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 Separate Account V 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
Separate Account V 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 V 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 Separate Account V with respect to the sale of the
Policies. Accordingly, no charge is being made currently to Separate
Account V for federal income taxes. If, however, AVLIC determines that it
may incur such taxes attributable to Separate Account V, it may assess a
charge for such taxes against Separate Account V.
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
Separate Account V, if any, may be assessed against Separate Account V.
(2) 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 Policy Owner 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.
(3) TAX PENALTY ON EARLY WITHDRAWALS. A 10% penalty tax also applies to the
taxable portion of any distribution made prior to the taxpayer's age
59 1/2. The 10% penalty tax does not apply if the distribution is made
because the taxpayer 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
taxpayer or the joint lives of the taxpayer and Beneficiary.
(4) 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
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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 Policy Owners in order for the
Policy to continue complying with the Section 7702 definitional
limitations on premiums and cash values, the Policy Owner 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 Separate Account V to be "adequately diversified" in order
for the Policy to be treated as a life insurance contract for federal tax
purposes. Separate Account V, 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 policy 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 Policy Owner from being considered the owner of the assets of Separate
Account V 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.
(5) 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 Policy Owner 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 the section on discussion and Tax Status of the
Policy.)
AVLIC also believes that loans received under a Policy will be treated as
debt of the Policy Owner and that part of any loan under a Policy will
constitute income to the Policy Owner so long as the Policy remains in
force, unless the Policy becomes a modified endowment contract. (See
previous discussion on MODIFIED ENDOWMENT CONTRACT.) Should the Policy
lapse while Policy loans are outstanding the portion of the loans
attributable to earnings will become taxable.
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 then
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existing debt are included in the Health Insurance Act. The transitional
rules include a phase-out of the deduction for debt 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 debt with respect to life insurance covering the life of
any individual (except as noted above under pre-'97 law with respect 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 is 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. Policy
Owners 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 the section on Exchange Privilege), the right to change Policy Owners
(see the section on General Provisions) and the provision for partial
withdrawals (see the section on Surrenders) may have tax consequences
depending on the circumstances of such exchange, change, or withdrawal.
Upon complete Surrender or when benefits are paid at maturity, if the
amount received plus any Outstanding Policy Debt exceeds the total
premiums paid that are not treated as previously withdrawn by the Policy
Owner, 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 Policy Owner 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 advice 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 Separate Account V. 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 Policy 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
Policy Owner's behalf by such third parties or any investment allocation
recommendations made by such parties. Policy Owners should be aware that fees
paid for such services are separate and in addition to fees paid under the
contracts.
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VOTING RIGHTS
All of the assets held in the Subaccounts of Separate Account V 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 shareholder meeting. To
the extent required by law, AVLIC will vote all shares of the Funds held in
Separate Account V at regular and special shareholder meetings of the Funds in
accordance with instructions received from Policy Owners. The number of votes
for which each Policy Owner 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 Policy Owners 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 Policy Owner 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. Fractional shares will be counted. Fund shares held in each Subaccount
for which no timely instructions from Policy Owners are received and Fund shares
held in each Subaccount which do not support Policy Owner 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 Policy Owners 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 Policy
Owner's selected Subaccount; and (4) any change in the fundamental investment
policies of the Portfolio(s) corresponding to the Policy Owner'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 Policy Owners of that
action and its reasons for the action in the next annual report or proxy
statement to Policy Owners.
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 Separate Account V 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 Separate Account V.
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.
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EXECUTIVE OFFICERS AND DIRECTORS OF AVLIC
This list shows name and position(s) with AVLIC followed by the principal
occupations for the last five years. 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.
LAWRENCE J. ARTH, DIRECTOR, CHAIRMAN OF THE BOARD, AND CHIEF EXECUTIVE OFFICER*
Director, Chairman of the Board, and Chief Executive Officer: Ameritas Life;
also serves as officer and/or director of other subsidiaries and/or affiliates
of Ameritas Life.
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: Ameritas Life; also serves as
officer and/or director of other subsidiaries and/or affiliates of Ameritas
Life.
GARY R. MCPHAIL, DIRECTOR, EXECUTIVE VICE PRESIDENT**
Director, President, and Chief Executive Officer: AmerUs Life; also serves as
officer and/or director of other subsidiaries and/or affiliates of AmerUs Life;
Executive Vice President -- Marketing and Individual Operations: New York Life
Insurance Company; President: Lincoln National Sales Corporation.
CHARLES J. CAVANAUGH, SENIOR VICE PRESIDENT, NATIONAL SALES MANAGER*
Director, Product Manufacturing and Supply: Merrill Lynch Insurance Group;
Director of Marketing: ITT Hartford Life Insurance Companies.
ASHOK CHAWLA, VICE PRESIDENT -- FIXED ANNUITY INVESTMENTS**
Senior Vice President -- Fixed Income Group: AmerUs Life (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 ANNUITY PRODUCT DEVELOPMENT**
Senior Vice President -- Product Management: AmerUs Life.
MICHAEL G. FRAIZER, DIRECTOR**
Controller: AmerUs Life; also serves as director of an affiliate of AVLIC.
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 (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.
JOSEPH K. HAGGERTY, ASSISTANT GENERAL COUNSEL**
Senior Vice President and General Counsel: AmerUs Life Holdings, Inc.; Senior
Vice President and General Counsel: AmerUs Life (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.
JON C. HEADRICK, TREASURER*
Executive Vice President -- Investments and Treasurer: Ameritas Life; also
serves as officer and/or director of other subsidiaries and/or affiliates of
Ameritas Life.
SANDRA K. HOLMES, VICE PRESIDENT -- FIXED ANNUITY CUSTOMER SERVICE**
Senior Vice President: AmerUs Life (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: Ameritas Life; also
serves as officer of other subsidiaries and/or affiliates of Ameritas Life.
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NORMAN M. KRIVOSHA, SECRETARY AND GENERAL COUNSEL*
Executive Vice President -- Legal and Government Affairs: Ameritas Life; also
serves as officer and/or director of other subsidiaries and/or affiliates of
Ameritas Life.
CYNTHIA J. LAVELLE, VICE PRESIDENT -- PRODUCT, OPERATIONS AND TECHNOLOGY*
Assistant Vice President -- Variable Operations: Ameritas Life.
WILLIAM W. LESTER, VICE PRESIDENT, INVESTMENT MARKETING -- AVLIC*
Vice President -- Securities: Ameritas Life; also serves as officer of an
affiliate of AVLIC.
JOANN M. MARTIN, CONTROLLER*
Senior Vice President and Chief Financial Officer: Ameritas Life; also serves as
officer and/or director of other subsidiaries and/or affiliates of Ameritas
Life.
SHIELA SANDY, ASSISTANT SECRETARY**
Manager Annuity Services: AmerUs Life (f.k.a. American Mutual Life Insurance
Company).
KEVIN WAGONER, ASSISTANT TREASURER**
Director Investment Accounting: AmerUs Life (f.k.a. American Mutual Life
Insurance Company, f.k.a. Central Life Assurance Company***); Senior Financial
Analyst: Target Stores.
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* Principal business address: Ameritas Variable Life Insurance Company, 5900
"O" Street, P.O. Box 82550, Lincoln, Nebraska 68501
** 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 Separate Account V is a party or to
which the assets of Separate Account V are subject. AVLIC is not involved in any
litigation that is of material importance in relation to its total assets or
that relates to Separate Account V. AIC is not involved in any litigation that
is of material importance in relation to its ability to perform under its
underwriting agreement.
EXPERTS
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.
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 Separate Account V, 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.
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<PAGE> 44
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 Separate Account V.
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AMERITAS VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT V
STATEMENT OF NET ASSETS
DECEMBER 31, 1998
<TABLE>
<S> <C>
ASSETS
INVESTMENTS AT NET ASSET VALUE:
VARIABLE INSURANCE PRODUCTS FUND:
Money Market Portfolio -- 11,105,124.310 shares at
$1.00 per share (cost $11,105,124).................... $ 11,105,124
Equity Income Portfolio -- 1,160,172.618 shares at
$25.42 per share (cost $20,499,629)................... 29,491,589
Growth Portfolio -- 1,030,142.884 shares at $44.87 per
share (cost $24,624,171).............................. 46,222,512
High Income Portfolio -- 716,563.299 shares at $11.53
per share (cost $7,807,467)........................... 8,261,973
Overseas Portfolio -- 729,187.972 shares at $20.05 per
share (cost $11,215,340).............................. 14,620,219
VARIABLE INSURANCE PRODUCTS FUND II:
Asset Manager Portfolio -- 1,752,919.543 shares at
$18.16 per share (cost $24,869,155)................... 31,833,018
Investment Grade Bond Portfolio -- 343,207.716 shares
at $12.96 per share (cost $4,095,562)................. 4,447,972
Contrafund Portfolio -- 562,154.419 shares at $24.44
per share (cost $10,069,000).......................... 13,739,056
Index 500 Portfolio -- 140,383.148 shares at $141.25
per share (cost $14,386,677).......................... 19,829,119
Asset Manager Growth Portfolio -- 194,121.333 shares at
$17.03 per share (cost $2,789,533).................... 3,305,886
ALGER AMERICAN FUND:
Small Capitalization Portfolio -- 506,281.724 shares at
$43.97 per share (cost $17,693,318)................... 22,261,208
Growth Portfolio -- 438,715.956 shares at $53.22 per
share (cost $15,340,061).............................. 23,348,463
Income and Growth Portfolio -- 533,655.926 shares at
$13.12 per share (cost $5,605,420).................... 7,001,566
Midcap Growth Portfolio -- 390,902.572 shares at $28.87
per share (cost $7,966,295)........................... 11,285,358
Balanced Portfolio -- 210,014.615 shares at $12.98 per
share (cost $2,268,208)............................... 2,725,989
Leveraged Allcap Portfolio -- 158,890.232 shares at
$34.90 per share (cost $3,600,937).................... 5,545,268
MFS VARIABLE INSURANCE TRUST:
Emerging Growth Series Portfolio -- 568,954.541 shares
at $21.47 per share (cost $8,532,284)................. 12,215,454
World Governments Series Portfolio -- 51,660.465 shares
at $10.88 per share (cost $532,514)................... 562,066
Utilities Series Portfolio -- 166,350.240 shares at
$19.82 per share (cost $2,770,572).................... 3,297,063
Research Series Portfolio -- 156,106.437 shares at
$19.05 per share (cost $2,571,889).................... 2,973,827
Growth with Income Series Portfolio -- 175,680.697
shares at $20.11 per share (cost $3,038,764).......... 3,532,938
MORGAN STANLEY UNIVERSAL FUNDS:
Asian Equity Portfolio -- 63,862.444 shares at $5.23
per share (cost $388,097)............................. 334,000
Emerging Markets Equity Portfolio -- 115,841.118 shares
at $7.11 per share (cost $1,187,272).................. 823,632
Global Equity Portfolio -- 159,586.755 shares at $13.14
per share (cost $1,951,259)........................... 2,096,971
International Magnum Portfolio -- 83,104.465 shares at
$11.23 per share (cost $938,486)...................... 933,263
U.S. Real Estate Portfolio -- 87,708.290 shares at
$9.80 per share (cost $951,045)....................... 859,540
------------
NET ASSETS REPRESENTING EQUITY OF POLICYOWNERS......... $282,653,074
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
LIFE 45
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 48
AMERITAS VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT V
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
VARIABLE INSURANCE PRODUCTS FUND
------------------------------------
MONEY EQUITY
MARKET INCOME GROWTH
TOTAL PORTFOLIO PORTFOLIO PORTFOLIO
----------- --------- ---------- -----------
<S> <C> <C> <C> <C>
1998
INVESTMENT INCOME:
Dividend distributions received.............. $ 3,349,781 $ 571,068 $ 350,608 $ 167,972
Mortality and expense risk charge............ (2,163,874) (100,578) (257,976) (354,109)
----------- --------- ---------- -----------
NET INVESTMENT INCOME (LOSS)................... 1,185,907 470,490 92,632 (186,137)
----------- --------- ---------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain (loss) on investments...... 17,147,973 -- 1,247,753 4,393,780
Net change in unrealized appreciation
(depreciation)............................ 30,032,940 -- 1,327,445 8,556,162
----------- --------- ---------- -----------
NET GAIN (LOSS) ON INVESTMENTS................. 47,180,913 -- 2,575,198 12,949,942
----------- --------- ---------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS.............................. $48,366,820 $ 470,490 $2,667,830 $12,763,805
=========== ========= ========== ===========
1997
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
=========== ========= ========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
46 LIFE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 49
<TABLE>
<CAPTION>
VARIABLE INSURANCE
PRODUCTS FUND VARIABLE INSURANCE PRODUCTS FUND II
- ------------------------ ---------------------------------------------------------------------
ASSET INVESTMENT ASSET MANAGER
HIGH INCOME OVERSEAS MANAGER GRADE BOND CONTRAFUND INDEX 500 GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ----------- ---------- ---------- -------------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
$ 558,849 $ 271,677 $ 882,316 $146,622 $ 56,896 $ 131,792 $ 49,741
(73,002) (128,820) (271,404) (39,733) (93,506) (135,441) (25,300)
- ----------- ---------- ---------- -------- ---------- ---------- --------
485,847 142,857 610,912 106,889 (36,610) (3,649) 24,441
- ----------- ---------- ---------- -------- ---------- ---------- --------
355,102 800,734 2,646,949 17,396 418,590 305,253 232,615
(1,057,850) 959,668 637,938 179,497 2,407,939 3,342,102 175,258
- ----------- ---------- ---------- -------- ---------- ---------- --------
(702,748) 1,760,402 3,284,887 196,893 2,826,529 3,647,355 407,873
- ----------- ---------- ---------- -------- ---------- ---------- --------
$ (216,901) $1,903,259 $3,895,799 $303,782 $2,789,919 $3,643,706 $432,314
=========== ========== ========== ======== ========== ========== ========
$ 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
=========== ========== ========== ======== ========== ========== ========
</TABLE>
LIFE 47
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 50
AMERITAS VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT V
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
ALGER AMERICAN FUND
--------------------------------------------------------
SMALL INCOME AND MIDCAP
CAPITALIZATION GROWTH GROWTH GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
1998 -------------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividend distributions received............ $ -- $ 41,754 $ 17,735 $ --
Mortality and expense risk charge.......... (169,257) (155,688) (49,041) (81,791)
---------- ---------- ---------- ----------
NET INVESTMENT INCOME (LOSS)................. (169,257) (113,934) (31,306) (81,791)
---------- ---------- ---------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain (loss) on investments.... 2,446,741 2,551,580 490,671 742,049
Net change in unrealized appreciation
(depreciation).......................... 623,620 4,267,982 1,071,043 1,766,399
---------- ---------- ---------- ----------
NET GAIN (LOSS) ON INVESTMENTS............... 3,070,361 6,819,562 1,561,714 2,508,448
---------- ---------- ---------- ----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATION................... $2,901,104 $6,705,628 $1,530,408 $2,426,657
========== ========== ========== ==========
1997
INVESTMENT INCOME:
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
========== ========== ========== ==========
</TABLE>
- ---------------
(1) Commenced business 04/08/97
(2) Commenced business 04/03/97
The accompanying notes are an integral part of these financial statements.
48 LIFE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 51
<TABLE>
<CAPTION>
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 PORTFOLIO SERIES PORTFOLIO PORTFOLIO PORTFOLIO(1) PORTFOLIO(2)
--------- ---------- ------------- ---------------- --------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
$ 24,247 $ -- $ -- $ 3,936 $ 24,469 $ 2,571 $ --
(16,462) (31,317) (83,222) (3,503) (20,971) (17,327) (19,348)
--------- ---------- ---------- ------- -------- -------- --------
7,785 (31,317) (83,222) 433 3,498 (14,756) (19,348)
--------- ---------- ---------- ------- -------- -------- --------
107,704 147,338 76,320 -- 111,249 33,714 --
417,950 1,626,709 2,714,274 29,642 262,317 383,697 490,661
--------- ---------- ---------- ------- -------- -------- --------
525,654 1,774,047 2,790,594 29,642 373,566 417,411 490,661
--------- ---------- ---------- ------- -------- -------- --------
$ 533,439 $1,742,730 $2,707,372 $30,075 $377,064 $402,655 $471,313
========= ========== ========== ======= ======== ======== ========
$ 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 $ -- $ --
========= ========== ========== ======= ======== ======== ========
</TABLE>
LIFE 49
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 52
AMERITAS VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT V
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
MORGAN STANLEY UNIVERSAL FUNDS
----------------------------------------------
EMERGING GLOBAL
ASIAN EQUITY MARKETS EQUITY EQUITY
PORTFOLIO(1) PORTFOLIO(2) PORTFOLIO(3)
------------ -------------- ------------
<S> <C> <C> <C>
1998
INVESTMENT INCOME:
Dividend distributions received........................ $ 2,129 $ 4,381 $ 14,013
Mortality and expense risk charge...................... (2,084) (7,282) (13,265)
-------- --------- ---------
NET INVESTMENT INCOME (LOSS)............................. 45 (2,901) 748
-------- --------- ---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments................ -- -- 12,591
Net change in unrealized appreciation (depreciation)... (2,798) (219,226) 143,561
-------- --------- ---------
NET GAIN (LOSS) ON INVESTMENTS........................... (2,798) (219,226) 156,152
-------- --------- ---------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS............................................. $ (2,753) $(222,127) $ 156,900
======== ========= =========
1997
INVESTMENT INCOME:
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............................................. $ -- $ -- $ --
======== ========= =========
</TABLE>
- ---------------
(1) Commenced business 04/22/97
(2) Commenced business 04/08/97
(3) Commenced business 04/17/97
(4) Commenced business 04/07/97
(5) Commenced business 04/28/97
The accompanying notes are an integral part of these financial statements.
50 LIFE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 53
<TABLE>
<CAPTION>
MORGAN STANLEY UNIVERSAL FUNDS DREYFUS
---------------------------------- -----------
INTERNATIONAL U.S. REAL
MAGNUM ESTATE STOCK INDEX
PORTFOLIO(4) PORTFOLIO(5) PORTFOLIO
------------- ------------ -----------
<S> <C> <C>
$ 2,795 $ 24,210 $ --
(6,689) (6,758) --
-------- --------- --------
(3,894) 17,452 --
-------- --------- --------
3,255 6,589 --
39,545 (110,595) --
-------- --------- --------
42,800 (104,006) --
-------- --------- --------
$ 38,906 $ (86,554) $ --
======== ========= ========
$ 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
======== ========= ========
</TABLE>
LIFE 51
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 54
AMERITAS VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT V
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
VARIABLE INSURANCE PRODUCTS FUND
---------------------------------------
MONEY EQUITY
MARKET INCOME GROWTH
TOTAL PORTFOLIO PORTFOLIO PORTFOLIO
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
1998
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS:
Net investment income (loss).................. $ 1,185,907 $ 470,490 $ 92,632 $ (186,137)
Net realized gain (loss) on investments....... 17,147,973 -- 1,247,753 4,393,780
Net change in unrealized appreciation
(depreciation).............................. 30,032,940 -- 1,327,445 8,556,162
------------ ----------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS............................... 48,366,820 470,490 2,667,830 12,763,805
NET INCREASE (DECREASE) FROM POLICYOWNER
TRANSACTIONS.................................. 36,557,125 3,082,148 2,101,252 1,105,036
------------ ----------- ----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS......... 84,923,945 3,552,638 4,769,082 13,868,841
NET ASSETS AT JANUARY 1, 1998................... 197,729,129 7,552,486 24,722,507 32,353,671
------------ ----------- ----------- -----------
NET ASSETS AT DECEMBER 31, 1998................. $282,653,074 $11,105,124 $29,491,589 $46,222,512
============ =========== =========== ===========
1997
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS:
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 POLICYOWNER
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 POLICYOWNER
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
============ =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
52 LIFE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 55
<TABLE>
<CAPTION>
VARIABLE INSURANCE PRODUCTS FUND VARIABLE INSURANCE PRODUCTS FUND II
--------------------------------- --------------------------------------------------------------------
ASSET INVESTMENT ASSET MANAGER
HIGH INCOME OVERSEAS MANAGER GRADE BOND CONTRAFUND INDEX 500 GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------------- --------------- ----------- ---------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
$ 485,847 $ 142,857 $ 610,912 $ 106,889 $ (36,610) $ (3,649) $ 24,441
355,102 800,734 2,646,949 17,396 418,590 305,253 232,615
(1,057,850) 959,668 637,938 179,497 2,407,939 3,342,102 175,258
----------- ----------- ----------- ---------- ----------- ----------- ----------
(216,901) 1,903,259 3,895,799 303,782 2,789,919 3,643,706 432,314
353,039 (628,523) 353,744 1,166,836 3,190,211 5,349,378 582,288
----------- ----------- ----------- ---------- ----------- ----------- ----------
136,138 1,274,736 4,249,543 1,470,618 5,980,130 8,993,084 1,014,602
8,125,835 13,345,483 27,583,475 2,977,354 7,758,926 10,836,035 2,291,284
----------- ----------- ----------- ---------- ----------- ----------- ----------
$ 8,261,973 $14,620,219 $31,833,018 $4,447,972 $13,739,056 $19,829,119 $3,305,886
=========== =========== =========== ========== =========== =========== ==========
$ 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
=========== =========== =========== ========== =========== =========== ==========
</TABLE>
LIFE 53
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 56
AMERITAS VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT V
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
ALGER AMERICAN FUND
----------------------------------------------------------
SMALL INCOME AND MIDCAP
CAPITALIZATION GROWTH GROWTH GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-------------- --------- ---------- ---------
<S> <C> <C> <C> <C>
1998
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS:
Net investment income (loss)................. $ (169,257) $ (113,934) $ (31,306) $ (81,791)
Net realized gain (loss) on investments...... 2,446,741 2,551,580 490,671 742,049
Net change in unrealized appreciation
(depreciation)............................. 623,620 4,267,982 1,071,043 1,766,399
----------- ----------- ---------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS.............................. 2,901,104 6,705,628 1,530,408 2,426,657
NET INCREASE (DECREASE) FROM POLICYOWNER
TRANSACTIONS................................. 1,708,481 3,802,750 1,281,319 1,308,265
----------- ----------- ---------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS........ 4,609,585 10,508,378 2,811,727 3,734,922
NET ASSETS AT JANUARY 1, 1998.................. 17,651,623 12,840,085 4,189,839 7,550,436
----------- ----------- ---------- -----------
NET ASSETS AT DECEMBER 31, 1998................ $22,261,208 $23,348,463 $7,001,566 $11,285,358
=========== =========== ========== ===========
1997
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS:
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 POLICYOWNER
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 POLICYOWNER
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
=========== =========== ========== ===========
</TABLE>
- ---------------
(1) Commenced business 04/08/97
(2) Commenced business 04/03/97
The accompanying notes are an integral part of these financial statements.
54 LIFE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 57
<TABLE>
<CAPTION>
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 PORTFOLIO SERIES PORTFOLIO PORTFOLIO PORTFOLIO(1) PORTFOLIO(2)
---------- ---------- ------------- ---------------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
$ 7,785 $ (31,317) $ (83,222) $ 433 $ 3,498 $ (14,756) $ (19,348)
107,704 147,338 76,320 -- 111,249 33,714 --
417,950 1,626,709 2,714,274 29,642 262,317 383,697 490,661
---------- ---------- ----------- -------- ---------- ---------- ----------
533,439 1,742,730 2,707,372 30,075 377,064 402,655 471,313
844,417 1,370,291 2,799,432 310,132 1,222,669 1,600,841 1,428,853
---------- ---------- ----------- -------- ---------- ---------- ----------
1,377,856 3,113,021 5,506,804 340,207 1,599,733 2,003,496 1,900,166
1,348,133 2,432,247 6,708,650 221,859 1,697,330 970,331 1,632,772
---------- ---------- ----------- -------- ---------- ---------- ----------
$2,725,989 $5,545,268 $12,215,454 $562,066 $3,297,063 $2,973,827 $3,532,938
========== ========== =========== ======== ========== ========== ==========
$ 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 $ -- $ --
========== ========== =========== ======== ========== ========== ==========
</TABLE>
LIFE 55
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 58
AMERITAS VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT V
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
MORGAN STANLEY UNIVERSAL FUNDS
----------------------------------------------
EMERGING GLOBAL
ASIAN EQUITY MARKETS EQUITY EQUITY
PORTFOLIO(1) PORTFOLIO(2) PORTFOLIO(3)
1998 ------------ -------------- ------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income (loss).......................... $ 45 $ (2,901) $ 748
Net realized gain (loss) on investments............... -- -- 12,591
Net change in unrealized appreciation(depreciation)... (2,798) (219,226) 143,561
-------- --------- ----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS............................................ (2,753) (222,127) 156,900
NET INCREASE (DECREASE) FROM POLICYOWNER TRANSACTIONS... 149,362 308,380 1,088,835
-------- --------- ----------
TOTAL INCREASE (DECREASE) IN NET ASSETS................. 146,609 86,253 1,245,735
NET ASSETS AT JANUARY 1, 1998........................... 187,391 737,379 851,236
-------- --------- ----------
NET ASSETS AT DECEMBER 31, 1998......................... $334,000 $ 823,632 $2,096,971
======== ========= ==========
1997
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
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 POLICYOWNER 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 POLICYOWNER TRANSACTIONS... -- -- --
-------- --------- ----------
TOTAL INCREASE (DECREASE) IN NET ASSETS................. -- -- --
NET ASSETS AT JANUARY 1, 1996........................... -- -- --
-------- --------- ----------
NET ASSETS AT DECEMBER 31, 1996......................... $ -- $ -- $ --
======== ========= ==========
</TABLE>
- ---------------
(1) Commenced business 04/22/97
(2) Commenced business 04/08/97
(3) Commenced business 04/17/97
(4) Commenced business 04/07/97
(5) Commenced business 04/28/97
The accompanying notes are an integral part of these financial statements.
56 LIFE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 59
<TABLE>
<CAPTION>
MORGAN STANLEY
UNIVERSAL FUNDS DREYFUS
----------------------------- -----------
INTERNATIONAL U.S. REAL
MAGNUM ESTATE STOCK INDEX
PORTFOLIO(4) PORTFOLIO(5) PORTFOLIO
------------- ------------ -----------
<S> <C> <C>
$ (3,894) $ 17,452 $ --
3,255 6,589 --
39,545 (110,595) --
-------- --------- -----------
38,906 (86,554) --
363,729 313,960 --
-------- --------- -----------
402,635 227,406 --
530,628 632,134 --
-------- --------- -----------
$933,263 $ 859,540 $ --
======== ========= ===========
$ 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
======== ========= ===========
</TABLE>
LIFE 57
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 60
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, 1998, 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.
58 LIFE
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<PAGE> 61
THIS PAGE INTENTIONALLY LEFT BLANK
LIFE 59
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 62
AMERITAS VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT V
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
3. SHARES OWNED
The Account invests in shares of mutual funds. Share activity and total
shares were as follows:
<TABLE>
<CAPTION>
VARIABLE INSURANCE PRODUCTS FUND
-------------------------------------------------------------------------------------
MONEY MARKET EQUITY INCOME GROWTH HIGH INCOME OVERSEAS
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------------- ------------- ------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Shares owned at January 1,
1998..................... 7,552,485.910 1,018,225.148 872,066.612 598,367.840 695,077.235
Shares acquired............ 96,112,872.130 590,346.286 801,025.403 2,095,006.665 2,333,977.875
Shares disposed of......... (92,560,233.730) (448,398.816) (642,949.131) (1,976,811.206) (2,299,867.138)
--------------- ------------- ------------- -------------- --------------
Shares owned at December
31, 1998................. 11,105,124.310 1,160,172.618 1,030,142.884 716,563.299 729,187.972
=============== ============= ============= ============== ==============
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
=============== ============= ============= ============== ==============
</TABLE>
60 LIFE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 63
<TABLE>
<CAPTION>
VARIABLE INSURANCE PRODUCTS FUND II ALGER AMERICAN FUND
- ------------------------------------------------------------------------- -----------------------------
INVESTMENT ASSET MANAGER SMALL
ASSET MANAGER GRADE BOND CONTRAFUND INDEX 500 GROWTH CAPITALIZATION GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ------------- ------------ ------------ ----------- ------------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
1,531,564.418 237,050.443 389,113.666 94,728.864 140,054.018 403,465.664 300,282.630
678,058.443 639,413.242 496,047.058 128,107.356 152,783.138 441,926.395 397,157.183
(456,703.318) (533,255.969) (323,006.305) (82,453.072) (98,715.823) (339,110.335) (258,723.857)
- ------------- ------------ ------------ ----------- ----------- ------------ ------------
1,752,919.543 343,207.716 562,154.419 140,383.148 194,121.333 506,281.724 438,715.956
============= ============ ============ =========== =========== ============ ============
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
============= ============ ============ =========== =========== ============ ============
</TABLE>
LIFE 61
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 64
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:
<TABLE>
<CAPTION>
ALGER AMERICAN FUND
-----------------------------------------------------------
INCOME AND MIDCAP LEVERAGED
GROWTH GROWTH BALANCED ALLCAP
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
Shares owned at January 1, 1998........ 381,241.041 312,259.570 125,291.131 104,973.976
Shares acquired........................ 471,468.634 272,665.784 179,874.177 159,683.710
Shares disposed of..................... (319,053.749) (194,022.782) (95,150.693) (105,767.454)
------------ ------------ ----------- ------------
Shares owned at December 31, 1998...... 533,655.926 390,902.572 210,014.615 158,890.232
============ ============ =========== ============
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
============ ============ =========== ============
</TABLE>
- ---------------
(1) Commenced business 04/08/97
(2) Commenced business 04/03/97
(3) Commenced business 04/22/97
(4) Commenced business 04/08/97
62 LIFE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 65
<TABLE>
<CAPTION>
MFS VARIABLE INSURANCE TRUST MORGAN STANLEY UNIVERSAL FUNDS
------------------------------------------------------------------------------ -------------------------------
EMERGING WORLD UTILITIES RESEARCH GROWTH WITH ASIAN EMERGING MARKETS
GROWTH SERIES GOVERNMENTS SERIES SERIES INCOME SERIES EQUITY EQUITY
PORTFOLIO SERIES PORTFOLIO PORTFOLIO PORTFOLIO(1) PORTFOLIO(2) PORTFOLIO(3) PORTFOLIO(4)
------------- ---------------- ------------ ------------ ------------- ------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
415,653.648 21,729.618 94,348.503 61,452.261 99,317.062 33,225.337 78,194.995
513,918.012 88,429.719 186,751.323 173,038.858 226,820.471 99,976.563 334,441.671
(360,617.119) (58,498.872) (114,749.586) (78,384.682) (150,456.836) (69,339.456) (296,795.548)
------------ ----------- ------------ ----------- ------------ ----------- ------------
568,954.541 51,660.465 166,350.240 156,106.437 175,680.697 63,862.444 115,841.118
============ =========== ============ =========== ============ =========== ============
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 -- -- -- --
============ =========== ============ =========== ============ =========== ============
</TABLE>
LIFE 63
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<PAGE> 66
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:
<TABLE>
<CAPTION>
MORGAN STANLEY UNIVERSAL FUNDS DREYFUS
--------------------------------------------- --------------
GLOBAL INTERNATIONAL U.S. REAL
EQUITY MAGNUM ESTATE STOCK INDEX
PORTFOLIO(1) PORTFOLIO(2) PORTFOLIO(3) FUND PORTFOLIO
------------ ------------- ------------ --------------
<S> <C> <C> <C> <C>
Shares owned at January 1, 1998......... 72,507.289 51,120.253 55,401.749 --
Shares acquired......................... 172,405.252 120,740.453 136,182.392 --
Shares disposed of...................... (85,325.786) (88,756.241) (103,875.851) --
----------- ----------- ------------ ------------
Shares owned at December 31, 1998....... 159,586.755 83,104.465 87,708.290 --
=========== =========== ============ ============
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 --
=========== =========== ============ ============
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
=========== =========== ============ ============
</TABLE>
- ---------------
(1) Commenced business 04/17/97
(2) Commenced business 04/07/97
(3) Commenced business 04/28/97
64 LIFE
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<PAGE> 67
AMERITAS VARIABLE LIFE INSURANCE COMPANY
BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31
-----------------------
1998 1997
---------- ----------
<S> <C> <C>
ASSETS
Investments:
Fixed maturity securities, available for sale (amortized
cost $146,650 -- 1998 and $113,158 -- 1997)............ $ 150,462 $ 115,955
Equity securities, available for sale (amortized cost
$2,031 -- 1998 $4,061 -- 1997)......................... 2,020 4,135
Loans on insurance policies............................... 10,949 7,482
Other invested assets..................................... 10,020 2,206
---------- ----------
Total investments................................. 173,451 129,778
Cash and cash equivalents................................... 12,011 13,711
Accrued investment income................................... 2,425 1,801
Reinsurance recoverable -- affiliates....................... 455 514
Prepaid reinsurance premium -- affiliates................... 2,380 2,298
Deferred policy acquisition costs........................... 121,236 98,746
Other....................................................... 1,695 199
Separate Accounts........................................... 1,709,448 1,265,348
---------- ----------
$2,023,101 $1,512,395
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES:
Policy and contract reserves.............................. $ 1,681 $ 941
Policy and contract claims................................ 625 925
Accumulated contract values............................... 213,874 154,281
Unearned policy charges................................... 1,814 1,498
Unearned reinsurance ceded allowance...................... 3,596 3,268
Federal income taxes --
Current................................................ 2,941 1,466
Deferred............................................... 8,348 9,326
Other..................................................... 8,086 10,200
Separate Accounts......................................... 1,709,448 1,265,348
---------- ----------
Total Liabilities................................. 1,950,413 1,447,253
---------- ----------
Commitments and contingencies
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......................................... 27,434 20,180
Accumulated other comprehensive income.................... 884 592
---------- ----------
Total Stockholder's Equity........................ 72,688 65,142
---------- ----------
$2,023,101 $1,512,395
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
66 LIFE
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<PAGE> 68
AMERITAS VARIABLE LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-----------------------------
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
INCOME:
Insurance revenues:
Contract charges.......................................... $42,775 $33,717 $26,345
Premium-reinsurance ceded................................. (7,836) (6,840) (5,895)
Reinsurance ceded allowance............................... 3,169 2,752 2,235
Investment revenues:
Investment income, net.................................... 14,052 8,277 3,603
Realized gains, net....................................... 79 368 19
Other..................................................... 2,269 980 567
------- ------- -------
54,508 39,254 26,874
------- ------- -------
BENEFITS AND EXPENSES:
Policy benefits:
Death benefits............................................ 2,200 1,356 716
Interest credited......................................... 13,400 7,258 2,736
Increase in policy and contract reserves.................. 740 192 140
Other..................................................... 222 92 52
Sales and operating expenses................................ 15,980 11,641 10,041
Amortization of deferred policy acquisition costs........... 11,847 9,584 5,531
------- ------- -------
44,389 30,123 19,216
------- ------- -------
INCOME BEFORE FEDERAL INCOME TAXES.......................... 10,119 9,131 7,658
------- ------- -------
Income taxes -- current..................................... 4,000 4,305 3,819
Income taxes -- deferred.................................... (1,135) (844) (811)
------- ------- -------
Total income taxes................................... 2,865 3,461 3,008
------- ------- -------
NET INCOME.................................................. $ 7,254 $ 5,670 $ 4,650
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
LIFE 67
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<PAGE> 69
AMERITAS VARIABLE LIFE INSURANCE COMPANY
STATEMENTS OF COMPREHENSIVE INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
--------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Net income.................................................. $7,254 $5,670 $4,650
Other comprehensive income, net of tax:
Unrealized gains on securities:
Unrealized holding gains arising during the period (net
of deferred tax of $185, $378, and ($159) for 1998,
1997 and 1996, respectively).......................... 343 702 (295)
Reclassification adjustment for gains included in net
income (net of deferred tax of $28, $129 and $7 for
1998, 1997 and 1996, respectively).................... (51) (239) (12)
------ ------ ------
Other comprehensive income (loss)......................... 292 463 (307)
------ ------ ------
Comprehensive income........................................ $7,546 $6,133 $4,343
====== ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
68 LIFE
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<PAGE> 70
AMERITAS VARIABLE LIFE INSURANCE COMPANY
STATEMENTS OF STOCKHOLDER'S EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(IN THOUSANDS, EXCEPT SHARES)
<TABLE>
<CAPTION>
ACCUMULATED
COMMON STOCK ADDITIONAL OTHER
---------------- PAID-IN RETAINED COMPREHENSIVE
SHARES AMOUNT CAPITAL EARNINGS INCOME TOTAL
------ ------ ---------- -------- ------------- -----
<S> <C> <C> <C> <C> <C> <C>
BALANCE, January 1, 1996................. 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
Net unrealized investment gain, net.... -- -- -- -- 292 292
Net income............................. -- -- -- 7,254 -- 7,254
------ ------ -------- ------- ----------- --------
BALANCE, December 31, 1998............... 40,000 $4,000 $ 40,370 $27,434 $ 884 $ 72,688
====== ====== ======== ======= =========== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
LIFE 69
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<PAGE> 71
AMERITAS VARIABLE LIFE INSURANCE COMPANY
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
--------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net Income.................................................. $ 7,254 $ 5,670 $ 4,650
Adjustments to reconcile net income to net cash provided by
operating activities:
Amortization of deferred policy acquisition costs......... 11,847 9,584 5,531
Policy acquisition costs deferred......................... (34,820) (30,642) (26,596)
Interest credited to contract values...................... 13,400 7,258 2,736
Amortization of discounts or premiums..................... (28) (40) (83)
Net gains on other invested assets........................ (3,732) (631) --
Net realized gains on investment transactions............. (79) (368) (19)
Deferred income taxes..................................... (1,135) (844) (811)
Change in assets and liabilities:
Accrued investment income.............................. (624) (705) (306)
Reinsurance recoverable-affiliates..................... 59 (505) 48
Prepaid reinsurance premium-affiliates................. (82) (142) (650)
Other assets........................................... (1,496) 284 (377)
Policy and contract reserves........................... 740 192 140
Policy and contract claims............................. (300) 819 106
Unearned policy charges................................ 316 255 279
Federal income tax payable-current..................... 1,475 591 (310)
Unearned reinsurance ceded allowance................... 328 129 860
Other liabilities...................................... (2,114) 2,172 3,762
-------- -------- --------
Net cash from operating activities........................ (8,991) (6,923) (11,040)
-------- -------- --------
INVESTING ACTIVITIES
Purchase of fixed maturity securities available for sale.... (70,904) (92,291) (31,514)
Purchase of equity securities available for sale............ -- (4,311) --
Purchase of other invested assets........................... (7,760) (1,611) --
Proceeds from maturities or repayment of fixed maturity
securities available for sale............................. 23,124 25,168 5,307
Proceeds from sales of fixed maturity securities available
for sale.................................................. 14,447 16,419 3,014
Proceeds from the sale of equity securities available for
sale...................................................... 1,979 252 --
Proceeds from the sale of other invested assets............. 3,678 35 --
Net change in loans on insurance policies................... (3,467) (3,173) (1,670)
-------- -------- --------
Net cash from investing activities........................ (38,903) (59,512) (24,863)
-------- -------- --------
FINANCING ACTIVITIES
Return of capital........................................... -- -- (15,000)
Capital contribution........................................ -- -- 25,670
Net change in accumulated contract values................... 46,194 69,462 30,257
-------- -------- --------
Net cash from financing activities........................ 46,194 69,462 40,927
-------- -------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............ (1,700) 3,027 5,024
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............ 13,711 10,684 5,660
-------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 12,011 $ 13,711 $ 10,684
======== ======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for income taxes.................................. $ 2,525 $ 3,714 $ 4,129
</TABLE>
The accompanying notes are an integral part of these financial statements.
70 LIFE
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<PAGE> 72
AMERITAS VARIABLE LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(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 operations
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 and realized gains on 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, 1998, 1997 and 1996.
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 71
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<PAGE> 73
AMERITAS VARIABLE LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 -- (CONTINUED)
(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 in accumulated contract values 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 in accumulated contract values 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
------------------------------
1998 1997 1996
-------- ------- -------
<S> <C> <C> <C>
Beginning balance........................................... $ 98,746 $79,272 $57,664
Acquisition costs deferred.................................. 34,820 30,642 26,596
Amortization of deferred policy acquisition costs........... (11,847) (9,584) (5,531)
Adjustment for unrealized investment (gain)/loss............ (483) (1,584) 543
-------- ------- -------
Ending balance.............................................. $121,236 $98,746 $79,272
======== ======= =======
</TABLE>
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
72 LIFE
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<PAGE> 74
AMERITAS VARIABLE LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 -- (CONTINUED)
(IN THOUSANDS)
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES -- (CONTINUED)
deferred policy acquisition costs are recorded as an adjustment of the
unrealized investment gains or losses included in stockholder's equity.
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.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, entitled "Accounting for Derivative
Instruments and Hedging Activities" (SFAS no. 133). The statement requires that
all derivatives (including certain derivatives embedded in contracts) be
recorded on the balance sheet and measured at fair value. SFAS no. 133 requires
that changes in the fair value of derivatives be recognized currently in
operations unless specific hedge accounting criteria are met. If such criteria
are met, the derivative's gain or loss will offset related results of the hedged
item in the statement of operations. A company must formally document, designate
and assess the effectiveness of transactions to apply hedge accounting
treatment.
SFAS No. 133 is effective for fiscal years beginning after June 15, 1999, with
earlier implementation permitted. The statement must be implemented as of the
beginning of a quarter and retroactive application to financial statements of
prior periods is prohibited. The Company has not determined the financial
statement impact of adopting this statement.
RECLASSIFICATIONS
Certain items on the prior year financial statements have been restated to
conform to current year presentation.
LIFE 73
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<PAGE> 75
AMERITAS VARIABLE LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 -- (CONTINUED)
(IN THOUSANDS)
2. INVESTMENTS
Investment income summarized by type of investment was as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
---------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Fixed maturity securities available for sale................ $ 9,099 $6,622 $3,308
Equity Securities available for sale........................ 179 156 --
Loans on insurance policies................................. 590 370 214
Cash equivalents............................................ 659 642 618
Other invested assets....................................... 3,732 631 --
------- ------ ------
Gross investment income................................... 14,259 8,421 4,140
Investment expenses......................................... 207 144 537
------- ------ ------
Net investment income..................................... $14,052 $8,277 $3,603
======= ====== ======
</TABLE>
Net pretax realized investment gains (losses) were as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Net gains on disposals of fixed maturity securities
available for sale........................................ $131 $365 $19
Net gains (losses) on disposal of equity securities
available for sale........................................ (52) 3 --
---- ---- ---
Net gains on disposal of securities available for sale...... $ 79 $368 $19
==== ==== ===
</TABLE>
Proceeds from sales of securities available for sale and gross gains and losses
realized on those sales were as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998
---------------------------------
PROCEEDS GAINS LOSSES
-------- ----- ------
<S> <C> <C> <C>
Fixed maturity securities available for sale................ $22,282 $433 $302
Equity securities available for sale........................ 1,979 -- $ 52
------- ---- ----
Total securities available for sale....................... $24,261 $433 $354
======= ==== ====
</TABLE>
<TABLE>
<CAPTION>
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
======= ==== ==
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
---------------------------------
PROCEEDS GAINS LOSSES
-------- ----- ------
<S> <C> <C> <C>
Fixed maturity securities available for sale................ $3,014 $30 $--
====== === ===
</TABLE>
74 LIFE
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<PAGE> 76
AMERITAS VARIABLE LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 -- (CONTINUED)
(IN THOUSANDS)
2. INVESTMENTS -- (CONTINUED)
The amortized cost and fair value of investments in securities by type of
investment were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1998
--------------------------------------------------
GROSS UNREALIZED
AMORTIZED ------------------- FAIR
COST GAINS LOSSES VALUE
--------- ------ ------ --------
<S> <C> <C> <C> <C>
U. S. Corporate................................... $ 98,658 $3,146 $159 $101,645
Mortgage-backed................................... 35,314 430 14 35,730
U.S. Treasury securities and obligations of U.S.
government agencies............................. 12,678 409 -- 13,087
-------- ------ ---- --------
Total fixed maturity securities available for
sale......................................... 146,650 3,985 173 150,462
-------- ------ ---- --------
Equity securities available for sale.............. 2,031 -- 11 2,020
-------- ------ ---- --------
Total securities available for sale............. $148,681 $3,985 $184 $152,482
======== ====== ==== ========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1997
---------------------------------------------------
GROSS UNREALIZED
AMORTIZED -------------------- FAIR
COST GAINS LOSSES VALUE
--------- ------ ------ --------
<S> <C> <C> <C> <C>
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
======== ====== === ========
</TABLE>
The amortized cost and fair value of fixed maturity securities available for
sale by contractual maturity at December 31, 1998 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.
<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
--------- --------
<S> <C> <C>
Due in one year or less..................................... $ 3,933 $ 3,964
Due after one year through five years....................... 39,120 40,029
Due after five years through ten years...................... 54,266 56,034
Due after ten years......................................... 14,017 14,705
Mortgage-backed securities.................................. 35,314 35,730
-------- --------
Total..................................................... $146,650 $150,462
======== ========
</TABLE>
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.
LIFE 75
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<PAGE> 77
AMERITAS VARIABLE LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 -- (CONTINUED)
(IN THOUSANDS)
2. INVESTMENTS -- (CONTINUED)
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:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998
---------------------------------
NOTIONAL FAIR
AMOUNT COST VALUE
-------- ---- -----
<S> <C> <C> <C>
Options..................................................... $18,655 $7,096 $10,020
======= ====== =======
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
---------------------------------
NOTIONAL FAIR
AMOUNT COST VALUE
-------- ---- -----
<S> <C> <C> <C>
Options..................................................... $1,340 $1,544 $2,206
====== ====== ======
</TABLE>
3. INCOME TAXES
The items that give rise to deferred tax assets and liabilities relate to the
following:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31
-----------------
1998 1997
---- ----
<S> <C> <C>
Net unrealized investment gains on securities available for
sale...................................................... $ 1,365 $ 1,080
Deferred policy acquisition costs........................... 36,031 29,271
Prepaid expenses............................................ 833 804
------- -------
Gross deferred tax liability................................ 38,229 31,155
------- -------
Future policy and contract benefits......................... 27,810 20,014
Deferred future revenues.................................... 1,894 1,668
Other....................................................... 177 147
------- -------
Gross deferred tax asset.................................... 29,881 21,829
------- -------
Net deferred tax liability................................ $ 8,348 $ 9,326
======= =======
</TABLE>
The difference between the U.S. federal income tax rate and the consolidated tax
provision rate is summarized as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Federal statutory tax rate.................................. 35.0% 35.0% 35.0%
Other....................................................... (6.7) 2.9 4.3
---- ---- ----
Effective tax rate........................................ 28.3% 37.9% 39.3%
==== ==== ====
</TABLE>
The Company's federal income tax returns have been examined by the Internal
Revenue Service (IRS) through 1995. The Company is currently appealing certain
adjustments proposed by the IRS for tax years 1993 through 1995. Management
believes adequate provisions have been made for any additional taxes which may
become due with respect to the adjustments proposed by the IRS.
76 LIFE
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<PAGE> 78
AMERITAS VARIABLE LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 -- (CONTINUED)
(IN THOUSANDS)
4. RELATED PARTY TRANSACTIONS
Affiliates provide technical, financial, legal, marketing and investment
advisory support to the Company under administrative service agreements. The
cost of these services to the Company for years ended December 31, 1998, 1997
and 1996 was $11,737, $12,082 and $10,922, respectively.
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 retention limit. These reinsurance contracts do not
relieve the Company of its obligations to its policyowners. The Company paid
$4,104, $3,810 and $3,301 of net reinsurance premiums to affiliates for the
years ended December 31, 1998, 1997 and 1996, respectively. The Company has
received reinsurance recoveries from affiliates of $3,310, $2,260 and $659 for
the years ended December 31, 1998, 1997 and 1996, 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.
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 and $54 for the years ended December 31, 1997 and 1996,
respectively, from this affiliate to partially defray the costs of materials and
prospectuses. The Company received no recovery to defray these cost for the year
ended December 31, 1998. Policies placed by this affiliate generated commission
expense of $28,353, $23,232 and $20,373 for the years ended December 31, 1998,
1997 and 1996, 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 1, 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 multiple employer noncontributory defined benefit
plan that covers substantially all full-time employees of Ameritas Life
Insurance Corp. and its subsidiaries and AMAL Corporation and its 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 years ended December 31, 1998 and 1997 were $163 and $29,
respectively. The Company had no full time employees during 1996.
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 years ended December 31, 1998 and 1997 were $47 and $24, respectively. The
Company had no full time employees during 1996.
The Company is also included in the postretirement benefit plan providing group
medical coverage to retired employees of AMAL Corporation and its 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
LIFE 77
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<PAGE> 79
AMERITAS VARIABLE LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 -- (CONTINUED)
(IN THOUSANDS)
5. BENEFIT PLANS -- (CONTINUED)
contributions for the years ended December 31, 1998 and 1997 were $12 and $5,
respectively. The Company had no full time employees during 1996.
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.
6. INSURANCE REGULATORY MATTERS
Net income (loss), as determined in accordance with statutory accounting
practices, was $321, $2,048 and $855 for 1998, 1997 and 1996, respectively. The
Company's statutory surplus was $44,589, $45,265 and $44,100 at December 31,
1998, 1997 and 1996, respectively. Effective January 1, 1996 the Company changed
reserving methods used for most existing products resulting in an increase in
statutory surplus of approximately $20,601. 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, 1998 and 1997. 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.
78 LIFE
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<PAGE> 80
AMERITAS VARIABLE LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 -- (CONTINUED)
(IN THOUSANDS)
7. FAIR VALUE OF FINANCIAL INSTRUMENTS -- (CONTINUED)
CASH AND CASH EQUIVALENTS, ACCRUED INVESTMENT INCOME AND REINSURANCE
RECOVERABLE -- The carrying amounts equal fair value.
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.
Estimated fair values are as follows:
<TABLE>
<CAPTION>
DECEMBER 31
------------------------------------------------
1998 1997
---------------------- ----------------------
CARRYING CARRYING
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Financial assets:
Fixed maturity securities, available for sale..... $150,462 $150,462 $115,955 $115,955
Equity securities, available for sale............. 2,020 2,020 4,135 4,135
Loans on insurance policies....................... 10,949 10,286 7,482 6,657
Other invested assets............................. 10,020 10,020 2,206 2,206
Cash and cash equivalents......................... 12,011 12,011 13,711 13,711
Accrued investment income......................... 2,425 2,425 1,801 1,801
Reinsurance recoverable -- affiliates............. 455 455 514 514
Financial liabilities:
Accumulated contract values excluding amounts held
under insurance contracts...................... 199,585 199,585 144,109 144,109
</TABLE>
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 1940, 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:
<TABLE>
<CAPTION>
DECEMBER 31
---------------------------
1998 1997
---------- ----------
<S> <C> <C>
Separate Account V.......................................... $ 282,653 $ 197,729
Separate Account VA-2....................................... 1,426,795 1,067,619
---------- ----------
$1,709,448 $1,265,348
========== ==========
</TABLE>
9. COMMITMENTS AND CONTINGENCIES
The Company has a $15,000 unsecured line of credit entered into in September,
1998. No balance was outstanding at any time during 1998.
LIFE 79
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<PAGE> 81
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
and 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 and 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, Cash Surrender Values and Cash 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 %, %, and %
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 MSDW Emerging Markets
Equity, 1.20% for the MSDW Asian Equity, 1.15% for the MSDW Global Equity and
MSDW International Magnum, 1.10% for the MSDW 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.
80 LIFE
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<PAGE> 82
The hypothetical values shown in the tables do not reflect any charges for
federal income tax burden attributable to Separate Account V, 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 Separate Account V, and if no Policy loans
have been made. The tables are also based on the assumptions that the Policy
Owner 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 81
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<PAGE> 83
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: $10,000
INITIAL SPECIFIED AMOUNT: $55,620
DEATH BENEFIT OPTION: A
USING CURRENT SCHEDULE OF COST OF INSURANCE RATES
<TABLE>
<CAPTION>
CASH VALUE LESS ANY
CASH SURRENDER CHARGE(1)(2) DEATH BENEFIT(1)(2)
---------------------------------------- ----------------------------------------
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
END ACCUMULATED ANNUAL INVESTMENT RATE OF RETURN OF: ANNUAL INVESTMENT RATE OF RETURN OF:
OF PREMIUMS AT ---------------------------------------- ----------------------------------------
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 10,500 8,818 9,416 10,014 55,620 55,620 55,620
2 11,025 8,537 9,741 11,017 55,620 55,620 55,620
3 11,576 8,257 10,075 12,116 55,620 55,620 55,620
4 12,155 8,027 10,467 13,372 55,620 55,620 55,620
5 12,762 7,895 10,966 14,844 55,620 55,620 55,620
6 13,400 7,812 11,524 16,494 55,620 55,620 55,620
7 14,071 7,825 12,189 18,385 55,620 55,620 55,620
8 14,774 7,736 12,761 20,332 55,620 55,620 55,620
9 15,513 7,441 13,140 22,250 55,620 55,620 55,620
10 16,288 7,142 13,525 24,357 55,620 55,620 55,620
15 20,789 5,523 15,532 38,344 55,620 55,620 73,237
20 26,532 3,550 17,588 60,333 55,620 55,620 94,723
Ages
60 33,863 913 19,515 95,118 55,620 55,620 127,458
65 43,219 0* 21,331 150,395 0* 55,620 183,482
70 55,160 0* 22,390 237,505 0* 55,620 275,505
75 70,399 0* 21,397 375,153 0* 55,620 401,413
</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.
82 LIFE
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<PAGE> 84
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: $10,000
INITIAL SPECIFIED AMOUNT: $55,620
DEATH BENEFIT OPTION: A
USING MAXIMUM ALLOWABLE SCHEDULE OF COST OF INSURANCE RATES
<TABLE>
<CAPTION>
CASH VALUE LESS ANY
CASH SURRENDER CHARGE(1)(2) DEATH BENEFIT(1)(2)
------------------------------------------ ------------------------------------------
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
ACCUMULATED ANNUAL INVESTMENT RATE OF RETURN OF: ANNUAL INVESTMENT RATE OF RETURN OF:
END OF PREMIUMS AT ------------------------------------------ ------------------------------------------
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 10,500 8,568 9,166 9,764 55,620 55,620 55,620
2 11,025 8,387 9,591 10,867 55,620 55,620 55,620
3 11,576 8,207 10,025 12,066 55,620 55,620 55,620
4 12,155 8,027 10,467 13,372 55,620 55,620 55,620
5 12,762 7,895 10,966 14,844 55,620 55,620 55,620
6 13,400 7,812 11,524 16,494 55,620 55,620 55,620
7 14,071 7,825 12,189 18,385 55,620 55,620 55,620
8 14,774 7,736 12,761 20,332 55,620 55,620 55,620
9 15,513 7,441 13,140 22,250 55,620 55,620 55,620
10 16,288 7,142 13,525 24,357 55,620 55,620 55,620
15 20,789 5,523 15,532 38,344 55,620 55,620 73,237
20 26,532 3,540 17,580 60,326 55,620 55,620 94,712
Ages
60 33,863 762 19,392 95,001 55,620 55,620 127,301
65 43,219 0* 20,496 149,566 0* 55,620 182,471
70 55,160 0* 19,858 234,728 0* 55,620 272,284
75 70,399 0* 15,231 368,523 0* 55,620 394,320
</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 83
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<PAGE> 85
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: $10,000
INITIAL SPECIFIED AMOUNT: $55,620
DEATH BENEFIT OPTION: B
USING CURRENT SCHEDULE OF COST OF INSURANCE RATES
<TABLE>
<CAPTION>
CASH VALUE LESS ANY
CASH SURRENDER CHARGE(1)(2) DEATH BENEFIT(1)(2)
------------------------------------------ ------------------------------------------
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
ACCUMULATED ANNUAL INVESTMENT RATE OF RETURN OF: ANNUAL INVESTMENT RATE OF RETURN OF:
END OF PREMIUMS AT ------------------------------------------ ------------------------------------------
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 10,500 8,801 9,398 9,995 65,321 65,918 66,515
2 11,025 8,505 9,704 10,975 65,025 66,224 67,495
3 11,576 8,208 10,016 12,046 64,728 66,536 68,566
4 12,155 7,961 10,382 13,266 64,431 66,852 69,736
5 12,762 7,812 10,854 14,695 64,132 67,174 71,015
6 13,400 7,711 11,380 16,291 63,831 67,500 72,411
7 14,071 7,707 12,008 18,117 63,527 67,828 73,937
8 14,774 7,599 12,539 19,983 63,219 68,159 75,603
9 15,513 7,286 12,871 21,802 62,906 68,491 77,422
10 16,288 6,967 13,205 23,791 62,587 68,825 79,411
15 20,789 5,249 14,832 36,844 60,869 70,452 92,464
20 26,532 3,178 16,206 57,122 58,798 71,826 112,742
Ages
60 33,863 483 16,921 88,606 56,103 72,541 144,226
65 43,219 0* 16,819 138,057 0* 72,439 193,677
70 55,160 0* 14,631 215,170 0* 70,251 270,790
75 70,399 0* 8,160 334,761 0* 63,780 390,381
</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.
84 LIFE
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- --------------------------------------------------------------------------------
<PAGE> 86
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: $10,000
INITIAL SPECIFIED AMOUNT: $55,620
DEATH BENEFIT OPTION: B
USING MAXIMUM ALLOWABLE SCHEDULE OF COST OF INSURANCE RATES
<TABLE>
<CAPTION>
CASH VALUE LESS ANY
CASH SURRENDER CHARGE(1)(2) DEATH BENEFIT(1)(2)
------------------------------------------ ------------------------------------------
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
ACCUMULATED ANNUAL INVESTMENT RATE OF RETURN OF: ANNUAL INVESTMENT RATE OF RETURN OF:
END OF PREMIUMS AT ------------------------------------------ ------------------------------------------
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 10,500 8,551 9,148 9,745 65,321 65,918 66,515
2 11,025 8,355 9,554 10,825 65,025 66,224 67,495
3 11,576 8,158 9,966 11,996 64,728 66,536 68,566
4 12,155 7,961 10,382 13,266 64,431 66,852 69,736
5 12,762 7,812 10,854 14,695 64,132 67,174 71,015
6 13,400 7,711 11,380 16,291 63,831 67,500 72,411
7 14,071 7,707 12,008 18,117 63,527 67,828 73,937
8 14,774 7,599 12,539 19,983 63,219 68,159 75,603
9 15,513 7,286 12,871 21,802 62,906 68,491 77,422
10 16,288 6,967 13,205 23,791 62,587 68,825 79,411
15 20,789 5,249 14,832 36,844 60,869 70,452 92,464
20 26,532 3,166 16,194 57,110 58,786 71,814 112,730
Ages
60 33,863 329 16,742 88,398 55,949 72,362 144,018
65 43,219 0* 15,569 136,564 0* 71,189 192,184
70 55,160 0* 10,978 210,340 0* 66,598 265,960
75 70,399 0* 214 323,036 0* 55,834 378,656
</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 85
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- --------------------------------------------------------------------------------
<PAGE> 87
INCORPORATION BY REFERENCE
The Registrant, AVLIC Separate Account V, Registration 33-1576 purchases or will
purchase units from the portfolios of these funds at the direction of its
policyholders. The prospectuses of these funds will be distributed with this
prospectus and are hereby incorporated by reference. The prospectuses
incorporated by reference are as follows:
The Variable Insurance Products Fund
Registration No. 2-75010
The Variable Insurance Products Fund II
Registration No. 33-20773
The Alger American Fund
Registration No. 33-21722
MFS Variable Insurance Trust
Registration No. 33-74668
Morgan Stanley Dean Witter Universal Funds, Inc.
Registration No. 333-3013
86 LIFE
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- --------------------------------------------------------------------------------
<PAGE> 88
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities Exchange
Act of 1934, the undersigned registrant hereby undertakes to file with the
Securities and Exchange Commission such supplementary and periodic information,
documents, and reports as may be prescribed by any rule or regulation of the
Commission heretofore, or hereafter duly adopted pursuant to authority conferred
in that section.
Registrant makes the following representation pursuant to the National
Securities Markets Improvements Act of 1996:
Ameritas Variable Life Insurance Company represents that the fees and charges
deducted under the contract, in the aggregate, are reasonable in relation to the
services rendered, the expenses expected to be incurred, and the risks assumed
by the insurance company.
RULE 484 UNDERTAKING
AVLIC's By-laws provide as follows:
The Company shall indemnify any person who was, or is a party, or is threatened
to be made a party, to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative by reason
of the fact that he is or was a director, officer, or employee of the Company or
is or was serving at the request of the Company as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust, or other
enterprise, against expenses including attorney's fees, judgments, fines and
amounts paid in settlement actually and reasonably incurred in connection with
such action, suit or proceeding to the full extent authorized by the laws of
Nebraska.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers, and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer, or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
REPRESENTATION PURSUANT TO RULE 6E-3(T)
This filing is made pursuant to Rules 6c-3 and 6e-3(T) under the Investment
Company Act of 1940.
LIFE 87
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- --------------------------------------------------------------------------------
<PAGE> 89
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
Ameritas Variable Life Insurance Company Separate Account V, certifies that it
meets all the requirement for effectiveness of this Post-Effective Amendment No.
21 to the Registration Statement pursuant to Rule 485(a) under the Securities
Act of 1933 and has caused this Amendment to the Registration Statement to be
signed on its behalf by the undersigned thereunto duly authorized in the City of
Lincoln, County of Lancaster, State of Nebraska on this 26th day of February,
1999
AMERITAS VARIABLE LIFE INSURANCE
COMPANY SEPARATE ACCOUNT V,
Registrant
AMERITAS VARIABLE LIFE INSURANCE
COMPANY, Depositor
<TABLE>
<S> <C>
Attest: /s/ NORMAN M. KRIVOSHA By: /s/ LAWRENCE J. ARTH
---------------------------------------------- -------------------------------------------------
Secretary Chairman of the Board
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the Directors and Principal Officers of Ameritas
Variable Life Insurance Company on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ LAWRENCE J. ARTH Director, Chairman of the February 26, 1999
- ----------------------------------------------------- Board and Chief Executive
Lawrence J. Arth Officer
/s/ WILLIAM J. ATHERTON Director, President and February 26, 1999
- ----------------------------------------------------- Chief Operating Officer
William J. Atherton
/s/ KENNETH C. LOUIS Director, Executive Vice February 26, 1999
- ----------------------------------------------------- President
Kenneth C. Louis
/s/ GARY R. MCPHAIL Director, Executive Vice February 26, 1999
- ----------------------------------------------------- President
Gary R. McPhail
/s/ MICHAEL G. FRAIZER Director February 26, 1998
- -----------------------------------------------------
Michael G. Fraizer
/s/ THOMAS C. GODLASKY Director, Senior Vice February 26, 1999
- ----------------------------------------------------- President and Chief
Thomas C. Godlasky Investment Officer
/s/ JON C. HEADRICK Treasurer February 26, 1999
- -----------------------------------------------------
Jon C. Headrick
/s/ NORMAN M. KRIVOSHA Secretary and General February 26, 1999
- ----------------------------------------------------- Counsel
Norman M. Krivosha
/s/ JOANN M. MARTIN Controller February 26, 1999
- -----------------------------------------------------
JoAnn M. Martin
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 90
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following Papers and Documents:
The facing sheet.
The prospectus consisting of 47 pages.
The undertaking to file reports.
The undertaking pursuant to Rule 484.
Representations pursuant to Rule 6e-3(T).
The signatures.
Written consents of the following:
(a) Thomas P. McArdle
(b) Norman M. Krivosha
The following exhibits:
1. The following exhibits correspond to those required by paragraph A of the
instructions as to exhibits in Form N-8B-2.
(1) Resolution of the Board of Directors of AVLIC Authorizing Establishment
of the Account.**
(2) Not applicable.
(3) (a) Proposed form of Principal Underwriting Agreement.**
(b) Proposed form of Selling Agreement.**
(c) Commission Schedule.***
(4) Not applicable.
(5) (a) Proposed form of Policy.*
(6) (a) Articles of Incorporation of AVLIC.***
(b) Bylaws of AVLIC.****
(7) Not applicable.
(8) (a) Participation Agreement (Variable Insurance Products Funds).***
(b) Participation Agreement (Alger American Fund).***
(c) Participation Agreement (MFS Variable Insurance Trust).**
(d) Participation Agreement (Morgan Stanley Universal Funds, Inc.).**
(9) Not applicable.
(10) Application for Policy.*
(11) Memorandum describing AVLIC's exchange procedure.*****
(12) Memorandum describing AVLIC's issuance, transfer, and redemption
procedures for the Policy*****
2. (a)(b) Opinion and Consent of Norman M. Krivosha, Secretary.
3. No financial statements are omitted from the Prospectus pursuant to
Instruction 1(b) or (c) of Part I.
4. Not applicable.
5. Not Required.
7. (a)(b) Opinion and Consent of Thomas P. McArdle.
8. Consent of auditors (to be filed).
9. Form of Notice of Withdrawal Right and Refund pursuant to Rule
6e-3(T)(b)(13)(viii) under the Investment Company Act of 1940.
- ---------------
* Incorporated by reference to the Post-Effective Amendment No. 18 for
Ameritas Variable Life Insurance Company Separate Account V, File No.
33-1576, filed on February 29, 1996.
** Incorporated by reference to the initial registration statement for
Ameritas Variable Life Insurance Company Separate Account V, File No.
333-15585, filed on November 5, 1996.
*** Incorporated by reference to the Pre-Effective Amendment to the
registration statement for Ameritas Variable Life Insurance Company
Separate Account V, File No. 333-15585, filed on January 17, 1997.
**** Incorporated by reference to the Pre-Effective Amendment to the
registration statement for Ameritas Variable Life Insurance Company
Separate Account VA-2, File No. 333-36507, filed on February 20, 1998.
***** Incorporated by reference to the Post-Effective Amendment No. 20 for
Ameritas Variable Life Insurance Company Separate Account V, File No.
33-1576, filed April 3, 1998.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 91
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
----------- ----------- ----
<C> <C> <S> <C>
2.(a)(b) -- Opinion and Consent of Norman M. Krivosha
7.(a)(b) -- Opinion and Consent of Thomas P. McArdle
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 1
EXHIBIT 2.(a)(b)
[AMERITAS LOGO]
February 26, 1999
Ameritas Variable Life Insurance Company
5900 "O" Street
P.O. Box 82550
Lincoln, Nebraska 68501
Gentlemen:
With reference to the Post-Effective Amendment No. 21 on Form S-6 filed by
Ameritas Variable Life Insurance Company and Ameritas Variable Life Insurance
Company Separate Account V with the Securities & Exchange Commission covering
flexible premium life insurance policies, I have examined such documents and
such laws as I considered necessary and appropriate, and on the basis of such
examination, it is my opinion that:
1. Ameritas Variable Life Insurance Company is duly organized and validly
existing under the laws of the State of Nebraska and has been duly
authorized by the Insurance Department of the State of Nebraska to
issue variable life policies.
2. Ameritas Variable Life Insurance Company Separate Account V is a duly
authorized and existing separate account established pursuant to the
provisions of Section 44-402.01 of the Statutes of the State of
Nebraska.
3. The flexible premium variable life policies, when issued as
contemplated by said Form S-6 Registration Statement, will constitute
legal, validly issued and binding obligations of Ameritas Variable Life
Insurance Company.
I hereby consent to the filing of this opinion as an exhibit to the
Post-Effective Amendment No. 21 to said Form S-6 Registration Statement and to
the use of my name under the caption "Legal Matters" in the Prospectus contained
in the Registration Statement.
Sincerely,
/s/ Norman Krivosha
Norman Krivosha
Secretary and General Counsel
<PAGE> 1
EXHIBIT 7.(a)(b)
[AMERITAS LOGO]
February 26, 1999
Ameritas Variable Life Insurance Company
5900 "O" Street
P.O. Box 82550
Lincoln, Nebraska 68501
Gentlemen:
This opinion is furnished in connection with the registration by Ameritas
Variable Life Insurance Company of Nebraska of a flexible premium variable life
insurance policy ("Contract") under the Securities Act of 1933. The prospectus
included in Post-Effective Amendment No. 21 to Registration Statement No.
33-1576 on Form S-6 describes the Contract. The form of Contract was prepared
under my direction and I am familiar with the Registration Statement and
Exhibits thereto. This contract was developed and filed under Securities and
Exchange Commission Rule 6E-3(T), as interpreted at this time by the SEC staff.
In my opinion:
The illustrations of death benefits and cash values included in the
section entitled "Illustrations of Death Benefits and Cash Values" in
the Appendix of the prospectus, based on the assumptions stated in the
illustrations, are consistent with the provisions of the Contract. The
rate structure of the Contract has not been designed so as to make the
relationship between premiums and benefits, as shown in the
illustrations, appear more favorable to prospective purchasers of the
Contract for male age 35, than to prospective purchasers of the
Contract for other ages or for females.
I hereby consent to the use of this opinion as an exhibit to the Post-Effective
Amendment 21 to the Registration Statement and to the reference to my name under
the heading "Experts" in the prospectus.
Very truly yours,
/s/ Thomas P. McArdle
Thomas P. McArdle
Assistant Vice President and
Associate Actuary
