Registration No. 33-3243
811-4602
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 19
TO
FORM S-6
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
LBVIP VARIABLE INSURANCE ACCOUNT
(Exact Name of Unit Investment Trust)
LUTHERAN BROTHERHOOD VARIABLE INSURANCE PRODUCTS COMPANY
(Name of Depositor)
625 Fourth Avenue South, Minneapolis, Minnesota 55415
(Complete Address of Depositor's Principal Executive Offices)
David J. Larson
Vice President and Secretary
Lutheran Brotherhood Variable Insurance Products Company
625 Fourth Avenue South
Minneapolis, Minnesota 55415
(612) 340-7215
(Name and Complete Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[X] on May 1, 1996 pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a)(i) of Rule 485
[ ] on (date) pursuant to paragraph (a)(i) of Rule 485
[ ] 75 days after filing pursuant to paragraph (a)(ii) of Rule 485
[ ] on (date) pursuant to paragraph (a)(ii) of Rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
==============================================================================
Registrant has filed with the Securities and Exchange Commission a declaration
pursuant to Rule 24f-2 under the Investment Company Act of 1940, and:
[X] filed the Notice required by that Rule on February 22, 1996; or
[ ] intends to file the Notice required by that Rule on or about (date); or
[ ] during the most recent fiscal year did not sell any securities
pursuant to Rule 24f-2 under the Investment Company Act of 1940, and,
pursuant to Rule 24f-2(b)(2), need not file the Notice.
==============================================================================
LBVIP-VL\S-6\1996\cover
<PAGE>
LBVIP VARIABLE INSURANCE ACCOUNT
CROSS REFERENCE SHEET
(Reconciliation and Tie Sheet)
Item Number of
Form N-8B-2 Heading in the Prospectus
- -------------- -------------------------
1 Cover Page
2 Cover Page
3 Not Applicable
4 Sales and Other Agreements
5 The Variable Account
6 The Variable Account
7 Not Applicable
8 Not Applicable
9 Legal Proceedings
10 Summary; Contract Benefits; Payment and
Allocation of Premiums; Death Benefit
Guarantee; Contract Rights; General
Provisions; Voting Rights
11 Summary; LB Series Fund, Inc.
12 LB Series Fund, Inc.; Sales and Other
Agreements
13 Summary; Charges and Deductions; LB Series
Fund, Inc.
14 LBVIP, Lutheran Brotherhood and the Variable
Account; Issuance of a Contract; General
Provisions
15 Payment and Allocation of Premiums
16 LBVIP, Lutheran Brotherhood and the Variable
Account; Payment and Allocation of Premiums
17 Summary; LB Series Fund, Inc.; Contract
Benefits; Charges and Deductions; Contract
Rights; General Provisions
18 LBVIP, Lutheran Brotherhood and the Variable
Account; Contract Benefits; Payment and
Allocation of Premiums; Contract Rights;
Safekeeping of the Variable Account's Assets
19 General Provisions; Voting Rights
20 Not Applicable
21 Loan Privileges
22 Not Applicable
23 Safekeeping of the Variable Account's
Assets; Sales and Other Agreements
24 Definitions; General Provisions
25 LBVIP, Lutheran Brotherhood and the Variable
Account
26 Not Applicable
27 LBVIP, Lutheran Brotherhood and the Variable
Account
28 LBVIP, Lutheran Brotherhood and the Variable
Account; Directors and Officers of LBVIP
29 LBVIP, Lutheran Brotherhood and the Variable Account
30 Not Applicable
31 Not Applicable
32 Not Applicable
33 Not Applicable
34 Not Applicable
35 Sales and Other Agreements
36 Not Applicable
37 Not Applicable
38 Summary; Sales and Other Agreements
39 Summary; Sales and Other Agreements
40 Not Applicable
41 Summary; Sales and Other Agreements
42 Not Applicable
43 Not Applicable
44 Summary; LBVIP, Lutheran Brotherhood and the Variable
Account; Accumulated Value and Cash Surrender
Value; Payment and Allocation of Premiums; Charges
and Deductions; Employment-Related Benefit Plans
45 Not Applicable
46 Summary; LB Series Fund, Inc.; Charges and Deductions
47 LBVIP, Lutheran Brotherhood and the Variable Account;
Payment and Allocation of Premiums
48 Not Applicable
49 Not Applicable
50 LBVIP, Lutheran Brotherhood and the Variable Account
51 Cover Page; Summary; LBVIP and Lutheran
Brotherhood; Contract Benefits; Payment and
Allocation of Premiums; Charges and Deductions;
Contract Rights; General Provisions
52 Addition, Deletion or Substitution of Investments
53 Federal Tax Matters
54 Not Applicable
55 Not Applicable
56 Not Applicable
57 Not Applicable
58 Not Applicable
59 Financial Statements
LBVIP-VL\S-6\1996\CrossRef
<PAGE>
Prospectus
----------------------------------
Flexible Premium
Variable Life Insurance Contract
Issued By
Lutheran Brotherhood Variable
Insurance Products Company
625 Fourth Avenue South * Minneapolis, Minnesota 55415 * (612) 340-7210
----------------------------------
This Prospectus describes a flexible premium variable life insurance contract
(the "Contract") being offered by Lutheran Brotherhood Variable Insurance
Products Company ("LBVIP"), a stock life insurance company that is an indirect
subsidiary of Lutheran Brotherhood. LBVIP is offering the Contract only to
persons who are eligible for membership in Lutheran Brotherhood, unless
otherwise required by state law. This Contract is designed to provide
insurance protection until the Insured's Attained Age 96. It is also designed
to provide maximum flexibility in connection with premium payments and death
benefits by giving the Contract owner the opportunity to allocate net premiums
among investment alternatives with different investment objectives. A Contract
owner may, subject to certain restrictions, including limitations on premium
payments, vary the frequency and amount of premium payments and increase or
decrease the level of death benefits payable under the Contract. This
flexibility allows a Contract owner to provide for changing insurance needs
under a single insurance contract.
The Contract provides for a death benefit payable at the Insured's death. As
long as the Contract remains in force, the death benefit will never be less
than the current Face Amount of the Contract (although the amount of any
Contract Debt and any due and unpaid Contract charges will be deducted from
the death benefit proceeds). The Contract's minimum Face Amount at issue is
$50,000 for Insureds with an Attained Age of 20 through 50, and $25,000 for
all other Insureds. After issuance of the Contract, the minimum Face Amount at
issue continues to apply to the Contract, except that if a Contract has a
minimum Face Amount of $50,000 the minimum Face Amount will be reduced to
$25,000 after the Insured reaches Attained Age 51. Subject to certain
limitations, the Face Amount may be increased provided that the increase is
for not less than $10,000. The Contract is available only on Insureds who have
an Attained Age 80 or less at issue. A Contract will be issued only after
payment of the Minimum Contract Issuance Premium described in the Prospectus
(see the section entitled "PAYMENT AND ALLOCATION OF PREMIUMS--Issuance of a
Contract" in the Prospectus).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THE PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------------------------
This Prospectus should be read and kept for future reference. It is valid
only when accompanied or preceded by the current prospectus of LB Series Fund,
Inc.
----------------------------------
The date of this Prospectus is May 1, 1996.
Generally, the Contract will remain in force as long as (a) the Cash Surrender
Value (that is, the Accumulated Value of the Contract, less any Contract Debt,
and any charges that would be imposed upon surrender or lapse), is sufficient
to pay certain monthly charges imposed in connection with the Contract
(including the cost of insurance and additional insurance benefits and various
administrative charges) and (b) Contract Debt does not exceed the Accumulated
Value less any charges that would be imposed upon surrender or lapse. (The
"Accumulated Value" is the total amount of value held under the Contract at
any time). The Contract will remain in force, however, if sufficient premium
payments have been made on the Contract to maintain the Death Benefit
Guarantee (see the section entitled "DEATH BENEFIT GUARANTEE" in the
Prospectus). This additional protection against lapse, which is called the
"Death Benefit Guarantee", will apply until the specified Attained Age of the
Insured shown in the Contract, which Attained Age will be the later of (a) the
Insured's Attained Age 71 and (b) the Attained Age of the Insured at the end
of a period ranging from 6 to 31 years (varying with the Insured's Attained
Age at issue) from the Date of Issue. Partial surrenders and the Contract Loan
Amount will, subject to certain exceptions, be deducted from cumulative
premium payments for the purpose of determining whether sufficient premium
payments have been made to maintain this protection. The Death Benefit
Guarantee terminates immediately when these cumulative premium requirements
are not satisfied, subject to a very limited right of reinstatement. Each
premium payment under the Contract is subject to the deduction of a percent-
of-premium charge of 5% of each premium payment (a 3% sales charge and a 2%
premium tax charge), as well as a premium processing charge currently equal to
$1.00 per premium payment ($.50 for automatic payment plans). The amount of
the Contract's death benefit may, and the Contract's Accumulated Value will,
reflect the investment performance of the Subaccount(s) of the Variable
Account selected by the Contract owner, as well as the frequency and amount of
premiums paid, any partial surrenders, and the charges and deductions assessed
in connection with the Contract. The Contract owner bears the entire
investment risk for all amounts allocated to the Variable Account; no minimum
Accumulated Value is guaranteed.
In general, net premiums will be allocated to one or more of the Subaccounts
of the Variable Account according to the Contract owner's instructions.
However, until the Contract Date (see the section entitled "DEFINITIONS" in
the Prospectus), premiums paid under the Contract will be allocated to LBVIP's
General Account (see "PAYMENT AND ALLOCATION OF PREMIUMS--Issuance of a
Contract"), and then on the Contract Date the net premiums, plus any interest
credited on premiums held in the General Account, will be transferred to the
Variable Account and allocated among the Subaccount(s) pursuant to the
Contract owner's instructions.
The assets of each Subaccount will be invested solely in a corresponding
Portfolio of LB Series Fund, Inc. (the "Fund"), which is a diversified, open-
end management investment company (commonly known as a "mutual fund"). The
accompanying Prospectus for the Fund describes the investment objectives and
attendant risks of the six Portfolios of the Fund, the Growth Portfolio, the
High Yield Portfolio, the Income Portfolio, the Opportunity Growth Portfolio,
the World Growth Portfolio, and the Money Market Portfolio. Additional
Subaccounts (together with the related additional Portfolios of the Fund) may
be added in the future.
A Contract owner will have two options with respect to the death benefit under
the Contract. Under Option A, the death benefit is the greater of (a) the Face
Amount of the Contract plus the Accumulated Value and (b) a specified
percentage of Accumulated Value. Under Option B, the death benefit is the
greater of (a) the Face Amount of the Contract and (b) a specified percentage
of Accumulated Value. Under either option, the amount payable on death is
reduced by any outstanding Contract Debt and any due and unpaid charges. A
Contract owner has the right to change the death benefit option, subject to
certain conditions.
In addition to the charges deducted from the premium payments, certain fees
and charges will be deducted from the Contract's Accumulated Value. A
mortality and expense risk charge currently equal to .60% (guaranteed never to
exceed .75%) of the net asset value on an annual basis will be deducted to
compensate LBVIP for the risk that mortality experience or expenses will
exceed those anticipated. Each month, a charge will be made (the "Monthly
Deduction") including a basic monthly administration charge of $4.00; a charge
for the cost of insurance and any additional benefits added by rider; and for
the first 120 Monthly Deductions, an initial monthly administrative charge
(the "Initial Monthly Administrative Charge"). Also, a deferred charge (the
"Decrease Charge") consisting of a contingent deferred sales charge (the
"Contingent Deferred Sales Charge") and a deferred administrative charge (the
"Deferred Administrative Charge") will be imposed if the Contract is
surrendered or lapses, or if the Contract owner requests a decrease in Face
Amount, in each case at any time before 120 Monthly Deductions have been made.
The amounts of the Initial Monthly Administrative Charge, the Contingent
Deferred Sales Charge, and the Deferred Administrative Charge will vary
depending upon a number of factors (including, as to one or more of the
charges, the amount of premium payments and the Face Amount of the Contract).
See "CHARGES AND DEDUCTIONS--Accumulated Value Charges--Decrease Charge--
Monthly Deduction."
Because the charges imposed upon early surrender or lapse may be significant,
you should purchase a Contract only if you have the financial capability to
keep it in force for a substantial period of time. Also, charges imposed upon
surrender or lapse of the Contract will usually exceed the Accumulated Value
of the Contract during the early Contract years, which means that payments
sufficient to maintain the Death Benefit Guarantee will usually be required to
avoid lapse during this period of time. Moreover, because additional charges
may be imposed upon surrender or lapse after a requested increase in Face
Amount, the Death Benefit Guarantee may be required to avoid lapse after a
requested increase whenever the Accumulated Value is not sufficient to cover
these additional charges. See "PAYMENT AND ALLOCATION OF PREMIUMS--Amount and
Timing of Premiums--Contract Lapse and Reinstatement", "DEATH BENEFIT
GUARANTEE", and "CHARGES AND DEDUCTIONS--Accumulated Value Charges--Decrease
Charge".
Replacing existing insurance with a Contract described in this Prospectus may
not be to your advantage. In addition, it may not be to your advantage to
purchase this Contract to obtain additional insurance protection if you
already own another life insurance contract.
This Prospectus does not constitute an offering or solicitation in any
jurisdiction in which such offering or solicitation may not be lawfully made.
No person is authorized to give any information or to make any representations
in connection with this offering other than those contained in this Prospectus
or the accompanying Fund prospectus and, if given or made, such information or
representations must not be relied upon as having been authorized.
This entire Prospectus should be read to completely understand the Contract
being offered.
The primary purpose of the Contract is to provide insurance protection for the
beneficiary named in the Contract. No claim is made that the Contract is in
any way similar or comparable to a systematic investment plan of a mutual
fund.
TABLE OF CONTENTS
Page
DEFINITIONS
SUMMARY
The Contract
Subaccounts of the Variable Account; Portfolios of the Fund
Death Proceeds and Death Benefit Options
Additional Insurance Benefits
Amount of Accumulated Value and Cash Surrender Value
Flexibility to Adjust Amount of Death Benefit
Contract Issuance
Allocation of Net Premiums
Contract Lapse and Reinstatement
Death Benefit Guarantee Protection
Charges Assessed in Connection with the Contract
Free Look Privileges
Loan Privileges
Exchange Privileges
Surrender of the Contract
Tax Treatment of Accumulated Value
Tax Treatment of Death Benefits Received by the Beneficiary
Employment-Related Benefit Plans
LBVIP, LUTHERAN BROTHERHOOD AND THE VARIABLE ACCOUNT
LBVIP and Lutheran Brotherhood
The Variable Account
LB Series Fund, Inc.
Performance Information
Addition, Deletion or Substitution of Investments
CONTRACT BENEFITS
Death Benefits
Accumulated Value and Cash Surrender Value
Benefits at Maturity
Payment of Contract Benefits
PAYMENT AND ALLOCATION OF PREMIUMS
Issuance of a Contract
Amount and Timing of Premiums
Allocation of Premiums and Accumulated Value
CHARGES AND DEDUCTIONS
Premium Expense Charges
Accumulated Value Charges
Decrease Charge
Monthly Deduction
Partial Surrender Charge
Charges Against the Variable Account
DEATH BENEFIT GUARANTEE
CONTRACT RIGHTS
Loan Privileges
Surrender Privileges
Free Look Privileges
Exchange Privileges
GENERAL PROVISIONS
Postponement of Payments
Date of Receipt
The Contract
Suicide
Incontestability
Change of Owner or Beneficiary
Assignment as Collateral
Misstatement of Age or Sex
Due Proof of Death
Reports to Contract Owners
Additional Insurance Benefits
Accelerated Benefits Rider
Reservation of Certain Rights
FEDERAL TAX MATTERS
Contract Proceeds
Taxation of the Company
EMPLOYMENT-RELATED BENEFIT PLANS
VOTING RIGHTS
DIRECTORS AND OFFICERS OF LBVIP
Directors
Executive Officers
SALES AND OTHER AGREEMENTS
LEGAL PROCEEDINGS
LEGAL MATTERS
EXPERTS
FURTHER INFORMATION
FINANCIAL STATEMENTS
APPENDIX A - Illustrations of Death Benefits, Accumulated Values
and Cash Surrender Values A-1
APPENDIX B - Deferred Administrative Charges Per $1,000 of Face Amount B-1
APPENDIX C - Initial Monthly Administrative Charges Per $1,000 of
Face Amount C-1
DEFINITIONS
Accumulated Value. The total amount of value held under a Contract at any
time (which equals the sum of the amounts held in the Loan Account and
Variable Account). A Contract's Accumulated Value will reflect the investment
performance of the chosen Subaccounts of the Variable Account, any Net
Premiums paid, any partial surrenders, any loans, any loan repayments, any
loan interest paid or credited, and any charges assessed in connection with
the Contract (see detailed formula under "CONTRACT BENEFITS--Accumulated Value
and Cash Surrender Value"). The Accumulated Value is relevant to the
continuation of the Contract, to Cash Surrender Value (which determines
various other rights under the Contract), to determining the amount available
for Contract loans, and for computation of cost of insurance charges, and may
be relevant to the computation of Death Benefits. The Accumulated Value
should be distinguished from the Cash Surrender Value. The Accumulated Value,
unlike the Cash Surrender Value, is not reduced by any Decrease Charge or
Contract Debt. See definition of "Cash Surrender Value" below.
Attained Age. On any day during the first Contract Year, the age of the
Insured on the Date of Issue, and then, on any day during each succeeding
Contract Year, the age of the Insured on the Contract Anniversary on or
immediately prior to that day.
Beneficiary. The Beneficiary designated by the applicant in the application.
If changed, the Beneficiary is as shown in the latest change filed with LBVIP.
If no Beneficiary survives and unless otherwise provided, the Insured's estate
will be the Beneficiary.
Cash Surrender Value. The Accumulated Value less any Contract Debt and any
Decrease Charge. The Cash Surrender Value is relevant to continuation of the
Contract and to determining the amount available upon partial or total
surrender. The Cash Surrender Value should be distinguished from the
Accumulated Value. See definition of "Accumulated Value" above.
CDSC Premium. An annual premium amount determined by LBVIP and used solely
for the purpose of calculating the maximum Contingent Deferred Sales Charge.
See definition of "Contingent Deferred Sales Charge" below. The CDSC Premium
is an annual premium amount determined by LBVIP on the same basis as the Death
Benefit Guarantee Premium (see definition of "Death Benefit Guarantee Premium"
below), except that the CDSC Premium, unlike the Death Benefit Guarantee
Premium, will not take into account any additional charge for an Insured in a
substandard premium class, any charge for additional insurance benefits added
by rider, the basic monthly administrative charge of $4.00 per month, or any
premium processing charge. The maximum Contingent Deferred Sales Charge based
on the applicable CDSC Premium (which will initially be 25% of the CDSC
Premium and will then reduce as described under the definition of "Contingent
Deferred Sales Charge" below) will be shown in the Contract. A separate CDSC
Premium, calculated in a similar manner, will apply for any increase in Face
Amount. Even though the Death Benefit Guarantee Premium may change after
issuance of the Contract, once the CDSC Premium is determined for purposes of
calculating the Contingent Deferred Sales Charge on the initial Face Amount or
on any increase, as the case may be, the CDSC Premium will not change.
Contingent Deferred Sales Charge. A contingent deferred sales charge to
compensate LBVIP for the cost of selling the Contract, including sales
commissions, the printing of prospectuses and sales literature, and
advertising. The Contingent Deferred Sales Charge will be imposed if the
Contract is surrendered or lapses, or will be imposed in part if the Contract
Owner requests a decrease in Face Amount, in each case at any time before 120
Monthly Deductions have been made. Subject to an additional limitation keyed
to actual premium payments (described below), the maximum Contingent Deferred
Sales Charge will be determined at Contract issuance and will equal 25% of the
CDSC Premium (see definition of "CDSC Premium" above). The maximum Contingent
Deferred Sales Charge based upon the CDSC Premium will be shown in the
Contract. The maximum Contingent Deferred Sales Charge determined in this
manner will remain level until the fifth Contract Anniversary and will then be
reduced on each Monthly Anniversary commencing on the fifth Contract
Anniversary. After the 60th Monthly Deduction following the fifth Contract
Anniversary the Contingent Deferred Sales Charge will be zero. The actual
Contingent Deferred Sales Charge will, however, never exceed 25% of premiums
paid (before deducting the Premium Expense charges) during the first Contract
Year. A separate Contingent Deferred Sales Charge will also be calculated,
and then reduced over a 10-year period, in a similar manner upon a requested
increase in Face Amount. The sum of the Contingent Deferred Sales Charge and
the Deferred Administrative Charge equals the Decrease Charge. See "CHARGES
AND DEDUCTIONS--Accumulated Value Charges--Decrease Charge" at page __.
Contract. The flexible premium variable life insurance contract offered by
LBVIP and described in this Prospectus.
Contract Anniversary. The same date in each succeeding year as the Date of
Issue.
Contract Date. The latest of (i) the Date of Issue; (ii) the date LBVIP
receives the first premium payment on the Contract at its Home Office; and
(iii) any other date mutually agreed upon by LBVIP and the Contract Owner.
The Contract Date is the date on which the initial Net Premium payment(s) will
be allocated to the Variable Account.
Contract Month. The period from one Monthly Anniversary to the next. The
first Contract Month will be the period beginning on the Date of Issue and
ending on the first Monthly Anniversary.
Contract Owner. The Insured, unless otherwise designated in the application.
If a Contract has been absolutely assigned, the assignee becomes the Contract
Owner. A collateral assignee is not the Contract Owner.
Contract Year. The period from one Contract Anniversary to the next. The
first Contract Year will be the period beginning on the Date of Issue and
ending on the first Contract Anniversary.
Date of Issue. The date shown on page 3 of the Contract that is used to
determine Contract Anniversaries, Monthly Anniversaries, Contract Years and
Contract Months, each of which is measured from the Date of Issue. Contract
Years will be calculated differently for Contracts that lapse and are
reinstated (see "PAYMENT AND ALLOCATION OF PREMIUMS--Contract Lapse and
Reinstatement").
Death Benefit. The amount calculated under the applicable Death Benefit
Option (Option A or Option B). The Death Benefit should be distinguished from
the cash proceeds payable on the Insured's death, which will be the Death
Benefit less Contract Debt and any unpaid Monthly Deductions. See "CONTRACT
BENEFITS--Death Benefits" at page __.
Death Benefit Guarantee. A feature of the Contract guaranteeing that the
Contract will not lapse if on each Monthly Anniversary the total cumulative
premiums paid under the Contract, less any partial surrenders and Contract
Loan Amount, equal or exceed the sum of the Death Benefit Guarantee Premiums
in effect for each Monthly Anniversary since the issuance of the Contract. If
the Death Benefit Guarantee requirement is not met on a Monthly Anniversary
but the Cash Surrender Value less any unearned prepaid loan interest is
greater than or equal to the sum of Death Benefit Guarantee Premiums from the
Date of Issue through the Monthly Anniversary, then the sum of premiums paid
as used above will be deemed to increase to the amount necessary to meet the
Death Benefit Guarantee requirement. In addition, a portion of any partial
surrender or Contract Loan Amount may be excluded when determining if the
Death Benefit Guarantee requirement is met. The Death Benefit Guarantee
applies until the specified Attained Age of the Insured shown in the Contract,
which Attained Age will be the later of (a) the Insured's Attained Age 71 and
(b) the Attained Age of the Insured at the end of a period ranging from 6 to
31 years (varying with the Insured's Attained Age at issue) from the Date of
Issue. The Death Benefit Guarantee terminates immediately when these
cumulative premium requirements are not satisfied, subject to a very limited
right of reinstatement that extends until 31 days after notice of termination
is sent by LBVIP. As long as the Death Benefit Guarantee applies, the
Contract will not lapse. The Death Benefit Guarantee provides significant
protection against lapse due to poor investment performance or due to
insufficient Cash Surrender Value during the early Contract Years. See "DEATH
BENEFIT GUARANTEE" at page __ and "PAYMENT AND ALLOCATION OF PREMIUMS--
Contract Lapse and Reinstatement" at page __.
Death Benefit Guarantee Premium. A monthly premium amount specified in the
Contract. The Death Benefit Guarantee Premium is determined by LBVIP based
upon a formula taking into account the applicable cost of insurance charge for
the Insured, using the Insured's actual premium class (see "CHARGES AND
DEDUCTIONS--Monthly Deduction--Cost of Insurance"); a percentage of assumed
monthly Death Benefit Guarantee Premium payment together with an assumed
premium processing charge; the applicable Initial Monthly Administrative
Charge (see "CHARGES AND DEDUCTIONS--Monthly Deduction--Initial Monthly
Administrative Charge"); the charge for any additional insurance benefits
added by rider (see "GENERAL PROVISIONS--Additional Insurance Benefits"); and
the basic monthly administrative charge of $4.00 per month (see "CHARGES AND
DEDUCTIONS--Monthly Deduction--Basic Monthly Administrative Charge"). The
Death Benefit Guarantee Premium determines the payments required to maintain
the Death Benefit Guarantee. The Death Benefit Guarantee Premium may change
as the result of Contract changes. See "DEATH BENEFIT GUARANTEE" at page __.
Death Benefit Option. Either of two death benefit options available under the
Contract (Option A and Option B). See "CONTRACT BENEFITS--Death Benefits" at
page __.
Death Benefit Option A, or Option A. One of two Death Benefit Options
available under the Contract. Under this option, the Death Benefit is the
greater of (a) the Face Amount plus the Accumulated Value and (b) the
applicable percentage of Accumulated Value (with the Accumulated Value in each
case being determined on the Valuation Date on or next following the date of
the Insured's death). See "CONTRACT BENEFITS--Death Benefits" at page __.
Death Benefit Option B, or Option B. One of two Death Benefit Options
available under the Contract. Under this option, the Death Benefit is the
greater of (a) the Face Amount and (b) the applicable percentage of
Accumulated Value on the Valuation Date on or next following the date of the
Insured's death. See "CONTRACT BENEFITS--Death Benefits" at page __.
Debt. The sum of all unpaid Contract loans (including any unpaid loan
interest added to the loan balance) outstanding on a relevant date, less any
unearned prepaid loan interest. Contract Debt should be distinguished from
the Loan Amount (see definition of "Loan Amount" below), in that the Loan
Amount includes any unearned prepaid loan interest. See "CONTRACT RIGHTS--
Loan Privileges" at page __.
Decrease Charge. A deferred Contract charge consisting of the Contingent
Deferred Sales Charge and the Deferred Administrative Charge. The Decrease
Charge is deducted from the Subaccounts of the Variable Account and paid to
LBVIP upon full lapse or surrender of the Contract, or in part upon a
requested decrease in Face Amount. The term "Decrease Charge" is used to
describe this charge because, during the applicable 10-year period, the charge
is imposed in connection with a decrease in the Face Amount, either as the
result of a requested decrease in Face Amount or as the result of lapse or
full surrender of the Contract (which can be viewed as a decrease in the Face
Amount to zero). A separate amount of Decrease Charge is determined for the
initial Face Amount and for each requested increase in Face Amount. The
Decrease Charge applies until 120 Monthly Deductions have been made (that is,
approximately ten years) following Contract issuance or a requested increase
in Face Amount. See "CHARGES AND DEDUCTIONS--Accumulated Value Charges--
Decrease Charge" at page __. Even though the Decrease Charge is deducted from
the Subaccounts of the Variable Account and paid to LBVIP only upon full lapse
or surrender of the Contract, or in part upon a requested decrease in Face
Amount, the Decrease Charge will be taken into account in determining the Cash
Surrender Value (that is, the Accumulated Value less any Contract Debt and any
Decrease Charge), which determines various other rights under the Contract.
See definition of "Cash Surrender Value" above.
Deferred Administrative Charge. A deferred administrative charge to reimburse
LBVIP for administrative expenses incurred in issuing the Contract. The
Deferred Administrative Charge will be imposed if the Contract is surrendered
or lapses, or will be imposed in part if the Contract Owner requests a
decrease in the Face Amount, in each case at any time before 120 Monthly
Deductions have been made. The maximum amount of the Deferred Administrative
Charge is determined at Contract issuance. This maximum charge is then
reduced on the Date of Issue and on each subsequent Monthly Anniversary so
that it reaches zero when 120 Monthly Deductions have been made. In general,
the maximum Deferred Administrative Charge will equal an amount per $1,000 of
Face Amount (determined from Appendix B) based upon the initial Face Amount,
the Insured's Attained Age at Contract issuance, and, except for Insureds with
an Attained Age at Contract issuance under 20, upon whether the Insured is a
smoker or nonsmoker. As shown in Appendix B, the Deferred Administrative
Charge will be lower for Contracts having a Face Amount at issuance that
equals or exceeds $250,000. The Deferred Administrative Charge is, in effect,
an acceleration of the Initial Monthly Administrative Charge. A separate
Deferred Administrative Charge will also be calculated, and then reduced over
a 10-year period, in a similar manner upon a requested increase in Face
Amount. The sum of the Deferred Administrative Charge and the Contingent
Deferred Sales Charge equals the Decrease Charge. See "CHARGES AND
DEDUCTIONS--Accumulated Value Charges--Decrease Charge" at page __.
Face Amount. The minimum Death Benefit under the Contract as long as the
Contract remains in force. The Face Amount will be specified in the Contract.
See "CONTRACT BENEFITS--Death Benefits" at page __.
Free Look Period. A period which follows the application for the Contract and
its issuance to the Contract Owner (the "initial Free Look Period") and which
also follows any application for and approval of an increase in Face Amount.
The period runs to the latest of (a) 45 days after Part I of the application
for the Contract is signed, (b) 10 days after the Contract Owner receives the
Contract, or a Contract supplement showing an increase in Face Amount, as the
case may be, and (c) 10 days after LBVIP mails or personally delivers a notice
of withdrawal right to the Contract Owner. During the initial Free Look
Period, the Contract Owner may cancel the Contract and receive a refund.
During a Free Look Period that applies following a requested increase in Face
Amount, the Contract Owner has a right to cancel the increase in Face Amount
and, in effect, receive a credit or refund of charges and deductions
attributable to such increase. See "CONTRACT RIGHTS--Free Look Privileges" at
page __.
Fund. LB Series Fund, Inc., which is described in the accompanying
Prospectus.
General Account. The assets of LBVIP other than those allocated to the
Variable Account or any other separate account.
Home Office. LBVIP's office at 625 Fourth Avenue South, Minneapolis,
Minnesota 55415 or such other office as LBVIP shall specify in a notice to the
Contract Owner.
Initial Monthly Administrative Charge. An initial monthly administrative
charge to reimburse LBVIP for administrative expenses incurred in issuing the
Contract. The Initial Monthly Administrative Charge will be deducted as part
of the first 120 Monthly Deductions. The amount of the Initial Monthly
Administrative Charge is determined at Contract issuance. In general, the
Initial Monthly Administrative Charge will equal an amount per $1,000 of Face
Amount (determined from Appendix C) based upon the initial Face Amount, the
Insured's Attained Age at Contract issuance, and, except for Insureds with an
Attained Age at Contract issuance under 20, upon whether the Insured is a
smoker or nonsmoker. As shown in Appendix C, the Initial Monthly
Administrative Charge will be lower for Contracts having a Face Amount at
issuance that equals or exceeds $250,000. A separate Initial Monthly
Administrative Charge will also be calculated in a similar manner upon a
requested increase in Face Amount or the issuance of a rider providing
additional insurance benefits on the Insured's spouse. In general, the
Deferred Administrative Charge included in the Decrease Charge, which is
imposed upon a surrender or lapse of the Contract or in part upon a requested
decrease in Face Amount, is, in effect, an acceleration of the Initial Monthly
Administrative Charge. See "CHARGES AND DEDUCTIONS--Accumulated Value
Charges--Monthly Deduction--Initial Monthly Administrative Charge" at page __.
Insured. The person upon whose life the Contract is issued.
LBVIP. Lutheran Brotherhood Variable Insurance Products Company, which is an
indirect subsidiary of Lutheran Brotherhood.
LBVIP Representative. A person who is licensed by state insurance officials
to sell the Contracts and who is also a registered representative of Lutheran
Brotherhood Securities Corp.
Loan Account. The funds transferred from the Subaccount(s) of the Variable
Account to LBVIP's General Account as security for Contract loans. See
"CONTRACT RIGHTS--Loan Privileges" at page __.
Loan Amount. The sum of all unpaid Contract loans (including any unpaid loan
interest added to the loan balance) outstanding on a relevant date. Interest
on Contract loans is payable in advance (for the rest of the Contract Year)
and at the beginning of each Contract Year thereafter (for that entire
Contract Year). If interest is not paid when due, it will be added to the
then outstanding Loan Amount. The Loan Amount should be distinguished from
Contract Debt (see definition of "Debt" above), in that Contract Debt excludes
any unearned prepaid loan interest. See "CONTRACT RIGHTS--Loan Privileges" at
page __.
Lutheran Brotherhood ("LB"). Lutheran Brotherhood, a fraternal benefit
society organized under the laws of the State of Minnesota and owned by and
operated for its members, and which acts as investment adviser to the Fund.
Maturity Date. The Contract Anniversary on or next following the Insured's
96th birthday.
Minimum Face Amount. The minimum Face Amount for a Contract at issuance and
after any requested decrease in Face Amount. The Minimum Face Amount at issue
is currently $50,000 for Insureds with an Attained Age of 20 through 50, and
$25,000 for all other Insureds. After issuance of the Contract, the Minimum
Face Amount at issue continues to apply to the Contract, except that if a
Contract has a Minimum Face Amount of $50,000 the Minimum Face Amount will be
reduced to $25,000 after the Insured reaches Attained Age 51. LBVIP reserves
the right to specify a different Minimum Face Amount for Contracts issued in
the future.
Minimum Conditional Insurance Premium. The premium required to put temporary
insurance coverage into effect on a conditional basis. The Minimum
Conditional Insurance Premium will equal three initial Death Benefit Guarantee
Premiums, or, in the case of automatic monthly payment plans, two initial
Death Benefit Guarantee Premiums. See "PAYMENT AND ALLOCATION OF PREMIUMS--
Issuance of a Contract" at page __.
Minimum Contract Issuance Premium. The minimum premium required for issuance
of the Contract. The Minimum Contract Issuance Premium will generally equal
the initial Scheduled Premium selected by the Contract Owner (e.g., the
quarterly, semi-annual or annual premium payment selected by the Contract
Owner) or, in the case of automatic monthly payment plans, the greater of the
Minimum Conditional Insurance Premium or the initial Scheduled Premium. If
the Date of Issue precedes the Contract Date and the Minimum Contract Issuance
Premium otherwise required would not provide a premium payment sufficient to
cover the next Contract Month, additional Scheduled Premium payment(s)
sufficient to cover through the next Contract Month will be required. See
"PAYMENT AND ALLOCATION OF PREMIUMS--Issuance of a Contract" at page __.
Monthly Anniversary. The same date in each succeeding month as the Date of
Issue.
Monthly Deduction. Monthly charges deducted from the Accumulated Value of the
Contract. These charges include the cost of insurance charge; a basic monthly
administrative charge ($4.00 per month); the Initial Monthly Administrative
Charge; and charges for additional insurance benefits. See "CHARGES AND
DEDUCTIONS--Accumulated Value Charges--Monthly Deduction" at page __. The
definition of "Monthly Deduction" in the Contract also includes any Decrease
Charge being deducted for a requested decrease in Face Amount during the
preceding Contract Month.
Net Premium. The premium paid less the Premium Expense Charges. See "CHARGES
AND DEDUCTIONS--Premium Expense Charges" at page __.
Planned Annual Premium. The initial Scheduled Premium under the Contract on
an annualized basis as selected by the Contract Owner at the time of issue.
The Planned Annual Premium will be shown in the Contract. See "PAYMENT AND
ALLOCATION OF PREMIUMS--Amount and Timing of Premiums" at page __.
Portfolio. A Portfolio of the Fund. Each Subaccount invests exclusively in
the shares of a corresponding Portfolio of the Fund.
Premium Expense Charges. An amount deducted from each premium payment, which
consists of a percent-of-premium charge of 5% of each premium payment (a 3%
sales charge and a 2% premium tax charge) and a premium processing charge of
$1.00 per premium payment ($.50 for automatic payment plans). LBVIP reserves
the right to increase the premium processing charge in the future to an amount
not exceeding $2.00 per premium payment ($1.00 for automatic payment plans).
See "CHARGES AND DEDUCTIONS--Premium Expense Charges" at page __.
Scheduled Premium(s). The scheduled periodic premium payments selected by the
Contract Owner. This premium payment can be changed by the Contract Owner at
any time. Scheduled Premiums are relevant only in determining how much a
Contract Owner will be billed periodically and determining the Minimum
Contract Issuance Premium. See "PAYMENT AND ALLOCATION OF PREMIUMS--Amount
and Timing of Premiums" at page __.
Subaccount. A subdivision of the Variable Account. Each Subaccount invests
exclusively in the shares of a corresponding Portfolio of the Fund.
Currently, there are six Subaccounts: the Growth Subaccount (which invests
exclusively in the Growth Portfolio); the High Yield Subaccount (which invests
exclusively in the High Yield Portfolio); the Income Subaccount (which invests
exclusively in the Income Portfolio); the Opportunity Growth Subaccount (which
invests exclusively in the Opportunity Growth Portfolio); the World Growth
Subaccount (which invests exclusively in the World Growth Portfolio); and the
Money Market Subaccount (which invests exclusively in the Money Market
Portfolio).
Unit. The measure by which the value of the Contract's interest in each
Subaccount is determined. See "CONTRACT BENEFITS--Accumulated Value and Cash
Surrender Value" at page __.
Unit Value. The value of each Unit representing the Contract's interest in
each Subaccount, determined as described in "CONTRACT BENEFITS--Accumulated
Value and Cash Surrender Value" at page __.
Valuation Date. Each day the New York Stock Exchange is open for trading and
any other day on which there is sufficient trading in the securities of a
Portfolio of the Fund to affect materially the Unit Value in the corresponding
Subaccount of the Variable Account, in each case excluding July 5, the day
after Thanksgiving, and the day before Christmas.
Valuation Period. The period commencing at the close of business of a
Valuation Date and ending at the close of business of the next Valuation Date.
Variable Account. LBVIP Variable Insurance Account, which is a separate
account of LBVIP. The Subaccounts are subdivisions of the Variable Account.
Written Notice. A written request signed by the Contract Owner and received
by LBVIP at its Home Office.
SUMMARY
The Contract
This flexible premium variable life insurance contract (the "Contract") issued
by Lutheran Brotherhood Variable Insurance Products Company ("LBVIP") allows
the Contract Owner, subject to certain limitations, to make premium payments
in any amount and at any frequency. As long as the Contract remains in force,
it will provide for (1) life insurance coverage on the named Insured up to the
Insured's Attained Age 96; (2) Accumulated Value; (3) surrender rights and
Contract loan privileges; and (4) a variety of additional insurance benefits.
The Contract described in this Prospectus is being offered by LBVIP to provide
protection against economic loss when the Insured dies, and not primarily as
an investment.
The Contract is called "flexible premium" because, unlike many other insurance
contracts, there is no fixed schedule for premium payments, even though each
Contract Owner may establish a schedule of periodic premium payments
("Scheduled Premiums") which may be changed by the Contract Owner at any time.
See "PAYMENT AND ALLOCATION OF PREMIUMS--Amount and Timing of Premiums". The
Contract is called "variable" because, unlike a conventional fixed-benefit
whole life insurance contract, the Death Benefit under the Contract may, and
the Accumulated Value and the Cash Surrender Value will, vary to reflect the
investment performance of the selected Subaccounts of the Variable Account, as
well as other factors. See "CONTRACT BENEFITS".
The failure to pay Scheduled Premiums will not itself cause the Contract to
lapse. Conversely, the payment of premiums in any amount of frequency
(including Scheduled Premiums) will not necessarily guarantee that the
Contract will remain in force, except to the extent these premium payments are
sufficient to maintain the Death Benefit Guarantee. See "DEATH BENEFIT
GUARANTEE". In general, subject to the Death Benefit Guarantee, the Contract
will lapse when (a) Cash Surrender Value is insufficient to pay the Monthly
Deduction (for insurance and administration charges) or (b) Contract Debt
exceeds Accumulated Value less any Decrease Charge, and in either case if a
grace period expires without sufficient additional payments. See "PAYMENT AND
ALLOCATION OF PREMIUMS--Contract Lapse and Reinstatement".
LBVIP will require satisfactory evidence of insurability before issuing any
Contract.
LBVIP is offering the Contract only to Insureds who are eligible for
membership in Lutheran Brotherhood (of which LBVIP is an indirect subsidiary),
unless otherwise required by state law.
Subaccounts of the Variable Account;
Portfolios of the Fund
Each Contract Owner allocates the Net Premium payments made under such owner's
Contract to one or more of the six Subaccounts of the Variable Account--the
Growth Subaccount, the High Yield Subaccount, the Income Subaccount, the
Opportunity Growth Subaccount, the World Growth Subaccount, and the Money
Market Subaccount. The assets of each such Subaccount will be invested in the
corresponding Portfolio (the Growth Portfolio, the High Yield Portfolio, the
Income Portfolio, the Opportunity Growth Portfolio, the World Growth
Portfolio, or the Money Market Portfolio) of the Fund. Subject to certain
restrictions, the Contract Owner may transfer amounts among the Subaccounts of
the Variable Account (see "PAYMENT AND ALLOCATION OF PREMIUMS--Allocation of
Premiums and Accumulated Value").
The investment objectives of the Portfolios of the Fund (individually a
"Portfolio" and collectively the "Portfolios") are:
Growth Portfolio. To achieve long-term growth of capital through investment
primarily in common stocks of established corporations that appear to offer
attractive prospects of a high total return from dividends and capital
appreciation.
High Yield Portfolio. To achieve a higher level of income through a
diversified portfolio of high yield securities ("junk bonds") which involve
greater risks than higher quality investments, while also considering growth
of capital as a secondary objective.
Income Portfolio. To achieve a high level of income over the longer term
while providing reasonable safety of capital through investment primarily in
readily marketable intermediate and long-term fixed income securities.
Opportunity Growth Portfolio. To achieve long-term growth of capital by
investing primarily in a professionally managed diversified portfolio of
smaller capitalization common stocks.
World Growth Portfolio. To achieve long-term growth of capital by investing
primarily in a professionally managed diversified portfolio of common stocks
of established, non-U.S. companies.
Money Market Portfolio. To achieve the maximum current income that is
consistent with stability of capital and maintenance of liquidity through
investment in high-quality, short-term debt obligations.
No assurance can be given that the Portfolios of the Fund will achieve their
respective investment objectives.
Shares of the Fund purchased by each Subaccount of the Variable Account will
be held by LBVIP as custodian for the Variable Account.
The Fund is a diversified, open-end management investment company (commonly
called a "mutual fund"), for which Lutheran Brotherhood acts as investment
adviser. The investment adviser is paid a daily fee by the Fund for its
investment management services equal to an annual rate of .40% of the
aggregate average daily net assets of the Money Market, Income, High Yield,
Growth and Opportunity Growth Portfolios. The investment adviser also
receives a daily investment advisory fee from the Fund equal to .85% of the
aggregate average daily net assets of the World Growth Portfolio, as described
in the accompanying current prospectus for the Fund. See "LBVIP, LUTHERAN
BROTHERHOOD AND THE VARIABLE ACCOUNT--LB Series Fund, Inc."
State Street Bank and Trust Company, Boston, Massachusetts, acts as custodian
for the securities and cash of the Fund and as transfer agent for the Fund.
The accompanying prospectus of the Fund contains detailed information about
the Fund, its Portfolios, the investment advisory arrangement, and other
matters relating to the Fund and its investment objectives and policies.
Death Proceeds and Death Benefit Options
As long as the Contract remains in force, LBVIP will pay the proceeds from the
Contract to the Beneficiary upon receipt of due proof of death of the Insured.
The proceeds from the Contract will consist of the Contract's Death Benefit,
plus any insurance proceeds provided by additional insurance benefits on the
Insured's life, less any outstanding Debt and any unpaid Monthly Deductions.
See "CONTRACT BENEFITS--Death Benefits" and "GENERAL PROVISIONS--Additional
Insurance Benefits".
There are two Death Benefit Options. Death Benefit Option A provides for the
greater of (a) the Face Amount plus the Accumulated Value and (b) the
applicable percentage of Accumulated Value (with Accumulated Value in each
case being determined on the day Written Notice is received by LBVIP, or if
there is not a Valuation Date, the next following Valuation Date). Death
Benefit Option B provides for the greater of (a) the Face Amount and (b) the
applicable percentage of Accumulated Value on the Valuation Date on or next
following the date of the Insured's death. As long as the Contract remains in
force, the Death Benefit will not be less that the Contract's Face Amount in
force.
Under certain circumstances, an Accelerated Benefits Rider allows a Contract
Owner to receive benefits from the Contract that would be otherwise payable
upon the death of the Insured. An LBVIP representative should be consulted as
to whether and to what extent the rider is available in a particular state and
on any particular Contract. See "GENERAL PROVISIONS--Accelerated Benefits
Rider". The tax treatment of benefits paid under the Accelerated Benefits
Rider is currently uncertain. See "FEDERAL TAX MATTERS--Contract Proceeds--
Benefits Paid under the Accelerated Benefits Rider".
Additional Insurance Benefits
Additional insurance benefits offered under the Contract include: waiver of
Monthly Deductions in the event of total disability; waiver of selected amount
in the event of total disability; additional insurance coverage for accidental
death; term insurance on the Insured's spouse; term insurance on the Insured's
children; a right to increase the Face Amount of the Contract on certain
specified dates or life events without proof of insurability; and a cost of
living insurance adjustment without proof of insurability. See "GENERAL
PROVISIONS--Additional Insurance Benefits". The cost of these additional
insurance benefits will be deducted from the Accumulated Value as part of the
Monthly Deduction. See "CHARGES AND DEDUCTIONS--Accumulated Value Charges--
Monthly Deduction".
Under certain circumstances, an Accelerated Benefits Rider allows a Contract
Owner residing in a state that has approved such rider to receive benefits
from the Contract that would be otherwise payable upon the death of the
Insured. Generally, the benefits paid under the Accelerated Benefits Rider
are available if the Insured has a life expectancy of 12 months or less, or
has been confined in a nursing home for at least 6 months and confinement is
expected to continue for the lifetime of the Insured. If a benefit is paid
under the Accelerated Benefit Rider, the amount of insurance and Accumulated
Value of the Contract will be reduced or eliminated. An LBVIP representative
should be consulted as to whether and to what extent the rider is available in
a particular state and on any particular Contract. See "GENERAL PROVISIONS--
Accelerated Benefits Rider". The tax treatment of benefits paid under the
Accelerated Benefits Rider is currently uncertain. See "FEDERAL TAX MATTERS--
Contract Proceeds--Benefits Paid under the Accelerated Benefits Rider".
Amount of Accumulated Value and Cash Surrender Value
The Accumulated Value of the Contract is the total amount of the value held
under the Contract at any time (which equals the sum of the amounts held in
the Loan Account and the Variable Account). The Contract's Accumulated Value
in the Variable Account will reflect the investment performance of the chosen
Subaccounts of the Variable Account, any Net Premiums paid, any partial
surrenders, any loans, any loan repayments, any loan interest paid or
credited, and any charges assessed in connection with the Contract (including
any Decrease Charge previously imposed upon a requested decrease in Face
Amount). The Contract Owner bears the entire investment risk for amounts
allocated to the Variable Account. LBVIP does not guarantee a minimum
Accumulated Value. See "CONTRACT BENEFITS--Accumulated Value and Cash
Surrender Value". The Accumulated Value is relevant to continuation of the
Contract, to Cash Surrender Value (which determines various other rights under
the Contract), to determining the amount available for Contract loans, and to
computation of cost of insurance charges, and may be relevant to the
computation of Death Benefits.
The Contract's Cash Surrender Value will be the Accumulated Value less any
Contract Debt and any Decrease Charge. The Cash Surrender Value is relevant
to continuation of the Contract and to determining the amount available upon
partial or total surrender of the Contract.
Flexibility to Adjust Amount of Death Benefit
The Contract Owner has significant flexibility to adjust the Death Benefit by
increasing or decreasing the Face Amount of the Contract. Any change in the
Face Amount may affect the charges under the Contract. Any increase in the
Face Amount will result in an increase in the Monthly Deduction, and any
requested increase in Face Amount will also increase the Decrease Charge,
which is imposed upon lapse or surrender of the Contract or in part upon a
requested decrease in Face Amount. For any requested decrease in Face Amount,
that part of the Decrease Charge reflecting the decrease will reduce the
Accumulated Value attributable to the Contract, and the Decrease Charge will
be reduced by this amount. See "CONTRACT BENEFITS--Death Benefits--Changes in
Face Amount".
The minimum requested increase in Face Amount is $10,000 and any requested
increase may require additional evidence of insurability. See "CONTRACT
BENEFITS--Death Benefits--Changes in Face Amount". Any requested increase in
Face Amount is subject to a limited "free look" privilege (see "CONTRACT
RIGHTS--Free Look Privileges"), and, during the first 24 months following the
increase, to an exchange privilege (see "CONTRACT RIGHTS--Exchange
Privileges").
Any requested decrease in Face Amount cannot result in a Face Amount less than
the Minimum Face Amount. The minimum Face Amount ("Minimum Face Amount") at
issue for a Contract is $50,000 for Insureds with an Attained Age of 20
through 50, and $25,000 for all other Insureds. After issuance of the
Contract, the Minimum Face Amount at issue continues to apply to the Contract,
except that if a Contract has a Minimum Face Amount of $50,000 the Minimum
Face Amount will be reduced to $25,000 after an Insured reaches Attained Age
51. LBVIP reserves the right to establish a different Minimum Face Amount for
Contracts issued in the future.
To the extent that a requested decrease in Face Amount would result in
cumulative premiums exceeding the maximum premium limitations applicable under
the Internal Revenue Code for life insurance, LBVIP will not effect the
decrease. See "PAYMENT AND ALLOCATION OF PREMIUMS--Amount and Timing of
Premiums--Premium Limitations".
Contract Issuance
If the applicant desires to have temporary insurance pending Contract
issuance, LBVIP will require a premium payment (the "Minimum Conditional
Insurance Premium") equal to three initial Death Benefit Guarantee Premiums,
or, in the case of automatic monthly payment plans, two initial Death Benefit
Guarantee Premiums. If LBVIP subsequently determines that the proposed
Insured is not an acceptable risk under LBVIP's underwriting standards and
rules, even if the Minimum Conditional Insurance Premium has been paid, no
temporary insurance coverage will have been provided and any premium paid will
be refunded (without interest). Upon delivery of the Contract, the balance
(if any) of the premium required before issuance of the Contract (the "Minimum
Contract Issuance Premium") must be paid. The Minimum Contract Issuance
Premium will equal the initial Scheduled Premium selected by the Contract
Owner (e.g., the quarterly, semi-annual or annual premium payment selected by
the Contract Owner), or, in the case of automatic monthly payment plans, the
greater of the Minimum Conditional Insurance Premium or the initial Scheduled
Premium. If the Date of Issue precedes the Contract Date and the Minimum
Contract Issuance Premium otherwise required would not provide a premium
payment sufficient to cover the next Contract Month, additional Scheduled
Premium payment(s) sufficient to cover through the next Contract Month will be
required. See "PAYMENT AND ALLOCATION OF PREMIUMS--Amount and Timing of
Premiums".
Until the Contract Date, premium payments will be held in LBVIP's General
Account. If a Contract is issued, interest will be credited on premium
payments held in the General Account at a rate of interest determined by
LBVIP; no interest will be credited on these premium payments if no Contract
is issued (but the full amount of any premiums paid, without deduction of any
Contract charges, would be refunded). On the Contract Date, the Premium
Expense Charges attributable to the premiums paid will be deducted and the
balance of the amount of such premiums held in the General Account, together
with any interest credited on premiums held in the General Account (on which
no Premium Expense Charges will be imposed), will be transferred from the
General Account and allocated to the Variable Account among the Subaccount(s)
pursuant to the Contract Owner's instructions. See "PAYMENT AND ALLOCATION OF
PREMIUMS--Issuance of a Contract".
Allocation of Net Premiums
Net Premiums are the premiums paid less the Premium Expense Charges. See
"CHARGES AND DEDUCTIONS--Premium Expense Charges". Net Premiums will
generally be allocated to the Subaccount(s) of the Variable Account in
accordance with the Contract Owner's instructions (as specified in the
Application for the Contract or as subsequently changed). Each Subaccount
invests in a corresponding Portfolio of the Fund. The Contract Owner will
bear the investment risk of Net Premiums allocated to the Subaccount(s).
Subject to certain restrictions, a Contract Owner may transfer amounts among
the Subaccounts of the Variable Account. See "PAYMENT AND ALLOCATION OF
PREMIUMS--Allocation of Premiums and Accumulated Value".
The Contract Owner must notify LBVIP if payment is a loan repayment;
otherwise, it will be considered a premium payment.
Contract Lapse and Reinstatement
The failure to make a Scheduled Premium payment will not itself cause a
Contract to lapse. Subject to the Death Benefit Guarantee (see "DEATH BENEFIT
GUARANTEE"), lapse will only occur when (a) the Cash Surrender Value (that is,
the Accumulated Value less any Contract Debt and any Decrease Charge) is
insufficient to cover the Monthly Deduction or (b) Contract Debt exceeds the
Accumulated Value less any Decrease Charge, and in either case if a 61-day
grace period expires without a sufficient payment. See "PAYMENT AND
ALLOCATION OF PREMIUMS--Contract Lapse and Reinstatement".
Subject to certain conditions (including evidence of insurability satisfactory
to LBVIP and the payment of a sufficient premium), a Contract may be
reinstated at any time within 5 years after the expiration of the grace period
and before the Maturity Date. See "PAYMENT AND ALLOCATION OF PREMIUMS--
Contract Lapse and Reinstatement".
Death Benefit Guarantee Protection
The Contract will not lapse if sufficient premium payments have been made to
maintain the Death Benefit Guarantee. In general, in order to maintain the
Death Benefit Guarantee, as of each Monthly Anniversary the total cumulative
premiums paid under the Contract, less any partial surrenders and Contract
Loan Amount must equal or exceed the sum of the Death Benefit Guarantee
Premiums in effect for each Monthly Anniversary since the issuance of the
Contract. If the Death Benefit Guarantee requirement is not met on a Monthly
Anniversary but the Cash Surrender Value less any unearned prepaid loan
interest is greater than or equal to the sum of Death Benefit Guarantee
Premiums from the Date of Issue through that Monthly Anniversary, then the sum
of premiums paid as used above will be deemed to increase through that date to
the amount necessary to meet the Death Benefit Guarantee requirement. In
addition, a portion of any partial surrender or Contract Loan Amount may be
excluded when determining if the Death Benefit Guarantee requirement is met.
The Death Benefit Guarantee applies until the specified Attained Age of the
Insured shown in the Contract, which Attained Age will be the later of (a) the
Insured's Attained Age 71 and (b) the Attained Age of the Insured at the end
of a period ranging from 6 to 31 years (varying with the Insured's Attained
Age at issue) from the Date of Issue. The Death Benefit Guarantee terminates
immediately as of any Monthly Anniversary when these cumulative premium
requirements are not satisfied. LBVIP will send written notice to the
Contract Owner indicating that the Death Benefit Guarantee has terminated, and
the Contract Owner will have 31 days from the date such notice is sent by
LBVIP to reinstate the Death Benefit Guarantee, after which the Death Benefit
Guarantee can never be reinstated. During this 31 day reinstatement period,
the Contract Owner will not have the protection of the Death Benefit
Guarantee. The written notice of termination from LBVIP to the Contract Owner
will indicate the premium payment required to reinstate the Death Benefit
Guarantee. See "DEATH BENEFIT GUARANTEE".
Whenever the Cash Surrender Value is less than the Monthly Deduction then due,
any excess of Accumulated Value over Contract Debt will be used to pay the
Monthly Deduction. If available Accumulated Value is less than the Monthly
Deduction then due and the Death Benefit Guarantee is in effect, LBVIP will
pay the deficiency.
The Death Benefit Guarantee provides significant protection against lapse of
the Contract. First, the Death Benefit Guarantee can prevent lapse of the
Contract due to a decrease in Cash Surrender Value resulting from poor
investment performance. Also, the Death Benefit Guarantee will probably be
necessary to avoid lapse of the Contract during the early Contract Years
because the Cash Surrender Value will probably not be sufficient to cover the
Monthly Deduction. Finally, because the Decrease Charge will increase after a
requested increase in Face Amount, thereby reducing the Cash Surrender Value,
the Death Benefit Guarantee may also be necessary to avoid lapse after a
requested increase in Face Amount. See "DEATH BENEFIT GUARANTEE".
Charges Assessed in Connection with the Contract
Premium Expense Charges. Certain charges (the "Premium Expense Charges") will
be deducted from each premium payment. The Premium Expense Charges will
consist of a percent-of-premium charge of 5% of each premium payment (a 3%
sales charge and a 2% premium tax charge) and a premium processing charge of
$1.00 per premium payment ($.50 for automatic payment plans). LBVIP reserves
the right to increase the premium processing charge in the future to an amount
not exceeding $2.00 per premium payment ($1.00 for automatic payment plans).
Monthly Deduction. On the Contract Date and on each Monthly Anniversary
thereafter, the Accumulated Value will be reduced by a Monthly Deduction equal
to the sum of the monthly cost of insurance charge, monthly administration
charges, and a charge for any additional insurance benefits added by rider.
The monthly cost of insurance charge will be determined by multiplying the net
amount at risk (that is, in general, the Death Benefit less Accumulated Value)
by the applicable cost of insurance rate(s), which will depend upon the sex,
Attained Age and premium class of the Insured and upon LBVIP's expectation as
to future mortality experience, but which will not exceed the guaranteed cost
of insurance rates set forth in the Contract based on the Insured's Attained
Age and the 1980 Commissioners Standard Ordinary Mortality Table. See
"CHARGES AND DEDUCTIONS--Accumulated Value Charges--Monthly Deduction".
Montana has enacted legislation that requires that cost of insurance rates
applicable to Contracts purchased in Montana cannot vary on the basis of the
Insured's sex, and so, in Montana, this charge will not be based on the sex of
the Insured. The monthly administration charges will include (1) a basic
monthly administrative charge equal to $4.00 per month and (2) the Initial
Monthly Administrative Charge, which applies until 120 Monthly Deductions have
been made following Contract issuance or a requested increase in Face Amount
and which will be computed as a charge per $1,000 of Face Amount (with the
amount of this charge depending upon the initial Face Amount and the Insured's
Attained Age at issue and, except for Insureds with an Attained Age at
Contract issuance under 20, upon whether the Insured is a smoker or
nonsmoker). If the Face Amount is increased, a separate Initial Monthly
Administrative Charge will be deducted from Accumulated Value as part of the
first 120 Monthly Deductions after the increase. See "CHARGES AND DEDUCTIONS-
- -Accumulated Value Charges--Monthly Deduction--Monthly Administration Charge".
The charge for additional insurance benefits added by rider will be specified
in the Contract or in a supplement to the Contract. See "GENERAL PROVISIONS--
Additional Insurance Benefits". The cost of insurance rate and the Initial
Monthly Administrative Charge per $1,000 of Face Amount will be lower for
Contracts having a Face Amount at issuance or after requested increases that
equals or exceeds $250,000.
Decrease Charge. A deferred charge (the "Decrease Charge") will be deducted
upon Contract lapse or surrender, or in part upon a requested decrease in Face
Amount, if these events occur before 120 Monthly Deductions have been made
(that is, approximately ten years) following Contract issuance or a requested
increase in Face Amount. The Decrease Charge consists of a contingent
deferred sales charge (the "Contingent Deferred Sales Charge") and a deferred
administrative charge (the "Deferred Administrative Charge"). The term
"Decrease Charge" is used to describe this charge because, during the
applicable 10-year period, the charge is imposed in connection with a decrease
in the Face Amount, either as the result of a requested decrease in Face
Amount or as the result of lapse or full surrender of the Contract (which can
be viewed as a decrease in the Face Amount to zero).
The Decrease Charge will be deducted from Accumulated Value in determining the
Contract's Cash Surrender Value (which is the Accumulated Value less any
Contract Debt and any Decrease Charge). The Cash Surrender Value determines
various rights under the Contract (including how long the Contract remains in
effect). See "CONTRACT BENEFITS--Accumulated Value and Cash Surrender Value".
Subject to an additional limitation keyed to actual premium payments
(described below), the maximum Contingent Deferred Sales Charge will be
determined at issuance of the Contract and will equal 25% of an annual premium
amount used solely for the purpose of calculating the Contingent Deferred
Sales Charge (the "CDSC Premium"). The maximum Contingent Deferred Sales
Charge based upon the CDSC Premium will be shown in the Contract. (For
further information concerning the determination of the CDSC Premium and the
calculation of the Contingent Deferred Sales Charge, see "CHARGES AND
DEDUCTIONS--Accumulated Value Charges--Decrease Charge".) The maximum
Contingent Deferred Sales Charge calculated in this manner will remain level
until the fifth Contract Anniversary and will then be reduced on each Monthly
Anniversary commencing on the fifth Contract Anniversary. After the 60th
Monthly Deduction following the fifth Contract Anniversary, the Contingent
Deferred Sales Charge will be zero. The actual Contingent Deferred Sales
Charge will, however, never exceed 25% of premiums paid (before deducting the
Premium Expense Charges) during the first Contract Year.
The maximum Deferred Administrative Charge will be determined at issuance of
the Contract and will equal an amount per $1,000 of Face Amount based upon the
initial Face Amount, the Insured's Attained Age at Contract issuance, and,
except for Insureds with an Attained Age at Contract issuance under 20,
whether the Insured is a smoker or nonsmoker. (For further information
concerning the calculation of the Deferred Administrative Charge, see "CHARGES
AND DEDUCTIONS--Accumulated Value Charges--Decrease Charge.") The Deferred
Administrative Charge is reduced on the Date of Issue and on each subsequent
Monthly Anniversary so that it reaches zero when 120 Monthly Deductions have
been made. See "CHARGES AND DEDUCTIONS--Accumulated Value Charges--Decrease
Charge".
A separate Decrease Charge will also be calculated, and then reduced over a
10-year period, in a similar manner upon a requested increase in Face Amount.
See "CHARGES AND DEDUCTIONS--Accumulated Value Charges--Decrease Charge".
Partial Surrender Charge. A charge equal to $25 or 2% of the amount
withdrawn, whichever is less, will be deducted by LBVIP from the amount
withdrawn to compensate it for costs upon partial surrenders--that is, partial
Accumulated Value withdrawals--by the Contract Owner. See "CHARGES AND
DEDUCTIONS--Accumulated Value Charges--Partial Surrender Charge".
Daily Charges Against the Variable Account. A daily charge for LBVIP's
assumption of certain mortality and expense risks incurred in connection with
the Contract will be imposed. LBVIP has determined that a Mortality and
Expense Risk Charge (see "CHARGES AND DEDUCTIONS--Charges Against the Variable
Account") at an annual rate of .75% of the average daily net assets of each
Subaccount of the Variable Account is reasonable in relation to the mortality
and expense risks assumed by LBVIP under the Contract. LBVIP will, however,
initially impose the Mortality and Expense Risk Charge at an annual rate of
.60% of the average daily net assets of each Subaccount of the Variable
Account. See "CHARGES AND DEDUCTIONS--Charges Against the Variable Account".
No charges are currently made against the Variable Account for Federal or
state income taxes. Should LBVIP determine that such taxes may be imposed,
deductions from the Variable Account to pay these taxes may be made. See
"FEDERAL TAX MATTERS".
In addition, because the Variable Account purchases shares of the Fund, the
value of Units in the Subaccount(s) of the Variable Account will reflect the
net asset value of the shares of the Fund held therein, and therefore the
investment advisory fee incurred by the Fund. See "LBVIP, LUTHERAN
BROTHERHOOD AND THE VARIABLE ACCOUNT--LB Series Fund, Inc." and "CONTRACT
BENEFITS--Accumulated Value and Cash Surrender Value".
Free Look Privileges
The Contract provides for an initial Free Look Period. The Contract Owner may
cancel the Contract until the latest of (a) 45 days after Part I of the
application for the Contract is signed, (b) 10 days after the Contract Owner
receives the Contract, and (c) 10 days after LBVIP mails or personally
delivers a notice of withdrawal right to the Contract Owner. Upon returning
the Contract, the Contract Owner will receive a refund equal to the sum of (i)
the Accumulated Value (as of the date the returned Contract is received by
LBVIP at its Home Office or by the LBVIP Representative from whom the Contract
was purchased), without any deduction of the Decrease Charge, plus (ii) the
amount of any Premium Expense Charges, plus (iii) any Monthly Deductions
charged against the Contract's Accumulated Value, plus (iv) any Mortality and
Expense Risk Charges deducted from the value of the net assets or the Variable
Account attributable to the Contract, plus (v) the advisory fees charged by
the Fund against net asset value in the Fund Portfolios attributable to the
Contract's value in the corresponding Subaccount(s) of the Variable Account.
See "CONTRACT RIGHTS--Free Look Privileges". When state law requires a
minimum refund equal to gross premiums paid, the refund will instead equal the
gross premiums paid on the Contract and will not reflect the investment
experience of the Variable Account.
Similar free look privileges apply after a requested increase in Face Amount.
See "CONTRACT RIGHTS--Free Look Privileges".
Loan Privileges
The Contract Owner may at any time after the Contract Date obtain Contract
loans in a minimum amount of $100 but not exceeding in the aggregate 90% of
the excess of Accumulated Value over any Decrease Charge on the date of any
loan. See "CONTRACT RIGHTS--Loan Privileges".
Contract loans will bear interest at a fixed rate of 8.0% per year, which is
7.4% per year when paid in advance. Loan interest is calculated on a prepaid
basis, and is payable in advance at the time any Contract loan is made (for
the rest of the Contract Year) and at the beginning of each Contract Year
thereafter (for that entire Contract Year). If interest is not paid when due,
it will be added to the loan balance. Contract loans may be repaid at any
time prior to the Maturity Date. Each repayment must be at least $25. When
Contract loans are repaid, any prepaid interest attributable to the repaid
amount will be credited to the Subaccount(s) in the same manner as the
repayment.
Contract loans are allocated against the Subaccounts of the Variable Account
in proportion to the Accumulated Value in the respective Subaccounts or, with
LBVIP's approval, in accordance with the Contract Owner's instructions. The
loan amount is, in effect, treated as part of the Contract's Accumulated
Value, but then proceeds payable under the Contract will be reduced by the
Debt. Accumulated Value equal to the Contract loan will be transferred from
the appropriate Subaccount(s) to LBVIP's General Account (such amounts being
herein called the "Loan Account"). This amount in the Loan Account will earn
interest for the Contract Owner at an effective annual rate of 6%. This
interest will be credited monthly to the Contract's Accumulated Value held in
the Subaccount(s).
The Contract Owner must notify LBVIP if a payment is a loan repayment;
otherwise, it will be considered a premium payment.
Any partial or full repayment of Debt by the Contract Owner, as well as any
interest credited from the Loan Account, will be allocated to the
Subaccount(s) in proportion to the Accumulated Value in the respective
Subaccounts. Subject to LBVIP's approval, a Contract Owner may choose a
different allocation. A loan taken from a Contract may have Federal income
tax consequences. See "CONTRACT RIGHTS--Loan Privileges".
Exchange Privileges
During the first 24 Contract Months after the Date of Issue, subject to
certain restrictions, the Contract Owner may exchange the Contract for a fixed
benefit permanent life insurance contract issued by Lutheran Brotherhood, of
which LBVIP is an indirect subsidiary. The new contract will have the same
Date of Issue and issue age as the Contract. The new contract will also have,
at the option of the Contract Owner, either a death benefit equal to the Death
Benefit under the Contract on the effective date of the exchange or a net
amount at risk equaling the net amount at risk under the Contract on the
effective date of the exchange. An additional premium payment may be
required. See "CONTRACT RIGHTS--Exchange Privileges". An exchange may have
tax consequences. See "FEDERAL TAX MATTERS--Contract Proceeds".
Surrender of the Contract
The Contract Owner may at any time fully surrender the Contract and receive in
cash the Cash Surrender Value, if any. The Cash Surrender Value will equal
the Accumulated Value of the Contract, less any Contract Debt and any Decrease
Charge. The Cash Surrender Value will include any unearned prepaid loan
interest. As unearned prepaid loan interest is earned, the Cash Surrender
Value will decrease. See "CONTRACT RIGHTS--Surrender Privileges".
Subject to certain restrictions (including a minimum surrender amount of $500
and a remaining Cash Surrender Value of at least $500 and a limit of one
partial surrender per Contract Month), and a partial surrender charge of $25
or 2% of the amount withdrawn, whichever is less, the Contract Owner may also
partially surrender the Contract and withdraw part of the Contract's
Accumulated Value at any time prior to the Maturity Date. If Death Benefit
Option B is in effect, a partial surrender may result in a reduction in the
Face Amount in force. Under either Death Benefit Option, a partial surrender
will reduce the Death Benefit. A surrender taken from a Contract may have
federal income tax consequences. See "CONTRACT RIGHTS--Surrender Privileges".
Tax Treatment of Accumulated Value
Under current tax law, Accumulated Value under a Contract should be subject to
the same Federal income tax treatment as cash value in a conventional fixed-
premium, fixed-benefit whole life insurance contract. A change of Contract
Owners or a partial or total surrender may have tax consequences depending on
the circumstances. See "FEDERAL TAX MATTERS--Contract Proceeds".
Tax Treatment of Death Benefits Received by the Beneficiary
Under current tax law, like death benefits payable under conventional life
insurance contracts, Death Benefit proceeds payable under the Contract should
ordinarily be completely excludable from the gross income of the Beneficiary.
As a result, the Beneficiary will generally not be taxed on the proceeds. See
"FEDERAL TAX MATTERS--Contract Proceeds".
Employment-Related Benefit Plans
The cost of insurance rates applicable to Contracts purchased under
employment-related insurance or benefit programs may in some cases not vary
depending on the Insured's sex, as is the case generally (except for Contracts
issued in the state of Montana) under the Contracts. In addition, different
limitations with respect to the minimum Face Amount, increases in Face Amount,
additional insurance benefits, and issue ages may apply to Contracts issued in
connection with employment-related insurance or benefit programs. SEE
"EMPLOYMENT-RELATED BENEFIT PLANS".
--------------------------------
For further information, please read the following detailed description.
Illustrations of how investment performance of the Variable Account may cause
Death Benefits, Accumulated Values and Cash Surrender Values to vary are
included in Appendix A commencing on page A-1.
Each Contract Owner should retain a copy of the Contract. The document,
together with the application attached to the Contract and any supplemental
applications and any Contract supplements, constitutes the entire agreement
between the Contract Owner and LBVIP.
LBVIP, LUTHERAN BROTHERHOOD AND THE VARIABLE ACCOUNT
LBVIP and Lutheran Brotherhood
The Contracts are issued by LBVIP. LBVIP, organized in 1982, is a stock life
insurance company incorporated under the laws of the State of Minnesota.
LBVIP is currently licensed to transact life insurance business in 42 states
and the District of Columbia.
LBVIP is an indirect subsidiary of Lutheran Brotherhood, a fraternal benefit
society owned by and operated for its members. Lutheran Brotherhood was
founded in 1917 under the laws of the State of Minnesota, and at the end of
1995 had total assets of approximately $10.9 billion.
Lutheran Brotherhood has invested approximately $120.8 million in LBVIP, to
help LBVIP meet capitalization requirements of various states, and may invest
additional amounts in LBVIP in the future (although it is not currently
legally obligated to do so). The assets of Lutheran Brotherhood do not
support the benefits payable under the Contracts described in this Prospectus.
LBVIP is subject to regulation by the Insurance Division of the State of
Minnesota as well as by the insurance departments of all the other states and
jurisdictions in which it does business. LBVIP submits annual reports on its
operations and finances to insurance officials in such states and
jurisdictions. The forms of Contracts described in the Prospectus are filed
with and (where required) approved by insurance officials in each state and
jurisdiction in which Contracts are sold. LBVIP is also subject to certain
Federal securities laws and regulations.
Financial Statements of LBVIP are included elsewhere in this Prospectus.
The Variable Account
The Variable Account is a separate account of LBVIP, established by the Board
of Directors of LBVIP in 1984 pursuant to the laws of the State of Minnesota.
The Variable Account meets the definition of a "separate account" under the
federal securities laws. LBVIP has caused the Variable Account to be
registered with the Securities and Exchange Commission (the "SEC") as a unit
investment trust under the Investment Company Act of 1940 (the "1940 Act").
Such registration does not involve supervision by the SEC of the management or
investment policies or practices of the Variable Account.
The assets of the Variable Account are owned by LBVIP, and LBVIP is not a
trustee with respect to such assets. However, the Minnesota laws under which
the Variable Account was established provide that the Variable Account shall
not be chargeable with liabilities arising out of any other business LBVIP may
conduct. LBVIP may transfer to its General Account assets of the Variable
Account which exceed the reserves and other liabilities of the Variable
Account.
Income and realized and unrealized gains and losses from each Subaccount of
the Variable Account are credited to or charged against that Subaccount
without regard to any of LBVIP's other income, gains or losses. LBVIP may
accumulate in the Variable Account the charge for expense and mortality risks,
mortality gains and losses and investment results applicable to those assets
that are in excess of net assets supporting the Contracts.
LB Series Fund, Inc.
Each Subaccount of the Variable Account will invest only in the shares of a
corresponding Portfolio of the Fund. The Fund is registered with the SEC
under the 1940 Act as a diversified, open-end management investment company.
This registration does not involve supervision by the SEC of the management or
investment practices or policies of the Fund. The Fund is designed to provide
an investment vehicle for variable life insurance and variable annuity
contracts. Shares of the Fund are sold to other insurance company separate
accounts of LBVIP and its indirect parent, Lutheran Brotherhood ("LB"), and
the Fund may in the future create new Portfolios. It is conceivable that in
the future it may be disadvantageous for both variable insurance separate
accounts and variable annuity separate accounts, and for LBVIP and LB to
invest simultaneously in the Fund, although LBVIP does not foresee any such
disadvantages to either variable life insurance or variable annuity contract
owners. The management of the Fund intends to monitor events in order to
identify any material conflicts between such contract owners and to determine
what action, if any, should be taken in response. Such action could include
the sale of Fund shares by one or more of the separate accounts, which could
have adverse consequences. Material conflicts could result from, for example,
(1) changes in state insurance laws, (2) changes in Federal income tax law,
(3) changes in the investment management of the Fund, or (4) differences in
voting instructions between those given by the contract owners from the
different separate accounts. In addition, if LBVIP believes the Fund's
response to any of those events or conflicts insufficiently protects Contract
Owners, it will take appropriate action on its own.
The Variable Account will purchase and redeem shares from the Fund at net
asset value. Shares will be redeemed to the extent necessary for LBVIP to
collect charges under the Contracts, to pay Cash Surrender Value upon full
surrenders of the Contracts, to pay partial surrenders, to make Contract
loans, to provide benefits under the Contracts, or to transfer assets from one
Subaccount to another as requested by Contract Owners. Any dividend or
capital gain distribution received from a Portfolio of the Fund will be
reinvested immediately at net asset value in shares of that Portfolio and
retained as assets of the corresponding Subaccount.
The Fund receives investment advice with respect to each of its Portfolios
from LB, which acts as investment adviser to the Fund. LB is a registered
investment adviser under the Investment Advisers Act of 1940. Lutheran
Brotherhood Research Corp. ("LBRC"), an indirect subsidiary of Lutheran
Brotherhood, acted as investment adviser to the Fund until January 1994, when
it was replaced by LB. LBRC provided investment advisory services to the Fund
using personnel and services provided by LB. As investment adviser to the
Fund, LB charges the Fund a daily investment advisory fee equal to an annual
rate of .40% of the aggregate average daily net assets of the Money Market,
Income, High Yield, Growth, and Opportunity Growth Portfolios. LB also
charges the Fund an annual investment advisory fee equal to .85% of the
aggregate average daily net assets of the World Growth Portfolio.
The Fund has entered into an Investment Advisory Agreement with LB under which
LB will, subject to the direction of the Board of Directors of the Fund, carry
on the day-to-day management of the Fund, and provide advice and
recommendations with respect to investments and the purchase and sale of
securities in accordance with the Fund's investment objectives, policies and
restrictions. LB also furnishes at its own expenses all necessary
administrative services, office space, equipment and clerical personnel for
servicing the investments of the Fund and maintaining its organization, and
investment advisory facilities and executive and supervisory personnel for
managing the investments and effecting the portfolio transactions of the Fund.
The Investment Advisory Agreement provides that the Fund will pay, or provide
for the payment of, all of its own expenses, including, without limitation,
the compensation of the directors who are not affiliated with LB or its
affiliates, governmental fees, interest charges, taxes, membership dues in the
Investment Company Institute allocable to the Fund, fees and expenses of the
independent auditors, of legal counsel and of any transfer agent, registrar
and dividend disbursing agent of the Fund, expenses of preparing, printing and
mailing prospectuses, shareholders' reports, notices, proxy statements and
reports to governmental officers and commissions, expenses connected with the
execution, recording and settlement of portfolio security transactions,
insurance premiums, fees and expenses of the Fund's custodian for all services
to the Fund, including safekeeping of funds and securities and keeping of
books and calculating the net asset value of the shares of the Portfolios of
the Fund, expenses of shareholders' meetings and expenses relating to the
issuance, registration and qualification of shares of the Fund. LB and LBVIP
have agreed with the Fund to pay, or to reimburse the Fund for the payment of,
all of the foregoing expenses and all other expense associated with operating
the Fund pursuant to a separate written agreement (the "Expense Reimbursement
Agreement"). The Expense Reimbursement Agreement could be terminated at any
time by the mutual agreement of the Fund, LB and LBVIP, but the Fund and LB
and LBVIP currently contemplate that the Expense Reimbursement Agreement will
continue so long as the Fund remains in existence. If the Expense
Reimbursement Agreement were terminated, the Fund would be required to pay
those operating expenses, which would reduce the net investment return on the
shares of the Fund held by the Subaccounts of the Variable Account.
LB has engaged Rowe Price-Fleming International, Inc., ("Price-Fleming") as
investment sub-adviser for the World Growth Portfolio. Price-Fleming was
founded in 1979 as a joint venture between T. Rowe Price Associates, Inc. and
Robert Fleming Holdings Limited. Price-Fleming is one of the world's largest
international mutual fund asset managers with approximately $20 billion under
management as of December 31, 1995 in its offices in Baltimore, London, Tokyo
and Hong Kong. Price-Fleming has an investment advisory group that has day-
to-day responsibility for managing the World Growth Portfolio and developing
and executing the Portfolio's investment program.
LB pays the Sub-adviser for the World Growth Portfolio an annual sub-advisory
fee for the performance of sub-advisory services. The fee payable is equal to
a percentage of that Portfolio's average daily net assets. The percentage
varies with the size of the Portfolio's net assets, decreasing as the
Portfolio's assets increase. The formula for determining the sub-advisory fee
is described fully in the prospectus for the Fund.
The investment objectives of the current Portfolios available to Contract
Owners through corresponding Subaccounts of the Variable Account are set forth
in the accompanying prospectus for the Fund. There is no assurance that these
objectives will be met.
Each Contract Owner should periodically consider the allocation among the
Subaccounts in light of current market conditions and the investment risks
attendant to investing in the Fund's various Portfolios. A full description
of the Fund, its investment objectives, policies and restrictions, its
expenses, the risks attendant to investing in the Fund's Portfolios and other
aspects of its operation is contained in the accompanying prospectus for the
Fund, which should be read together with this Prospectus.
Performance Information
Performance information for the Variable Account and the Fund may appear in
advertisements, sales literature, or reports to Contract Owners. Performance
information for the Fund will appear only when accompanied by performance
information for the Variable Account. Performance information for the
Variable Account will reflect the deduction of applicable charges to the
Contract. Quotations of performance information for the Fund will not take
into account charges or deductions against the Variable Account to which Fund
shares are sold or deductions against the Contract. Performance information
reflects only the performance of a hypothetical investment during a particular
time period on which the calculations are based. Performance information
should be considered in light of the investment objectives and policies,
characteristics and quality of the Portfolios of the Fund in which the
Variable Account invests, and the market conditions during the given period of
time, and should not be considered as a representation of what may be achieved
in the future.
Performance for the Variable Account and/or the Fund as reported from time to
time in advertisements and sale literature may be compared with that of other
insurance company separate accounts or mutual funds included in the generally
accepted indices, analyses or rankings prepared by Lipper Analytical Service,
Inc., Standard & Poor's Corporation Morningstar, Inc., VARDS, Dow Jones or
similar independent rating or statistical investment services that monitor the
performance of insurance company separate accounts or mutual funds.
Performance of the Variable Account may be quoted or compared to rankings,
yields or returns as published or prepared by independent rating or
statistical services or publishers or publications such as THE BANK RATE
MONITOR NATIONAL INDEX, BARRON'S, BUSINESS WEEK, DONOGHUE'S MONEY MARKET FUND
REPORT, FINANCIAL SERVICES WEEK, FINANCIAL TIMES, FINANCIAL WORLD, FORBES,
FORTUNE, GLOBAL INVESTOR, INSTITUTIONAL INVESTOR, INVESTOR'S DAILY,
KIPLINGER'S PERSONAL FINANCE, LIPPER ANALYTICAL SERVICES, MONEY, MUTUAL FUND
FORECASTER, NEWSWEEK, THE NEW YORK TIMES, PERSONAL INVESTOR, STANGER REPORT,
SYLVIA PORTER'S PERSONAL FINANCE, USA TODAY, U.S. NEWS AND WORLD REPORT, THE
WALL STREET JOURNAL and WIESENBERGER INVESTMENT COMPANIES SERVICE.
Addition, Deletion or Substitution of Investments
LBVIP reserves the right, subject to applicable law, to make additions to,
deletions from, or substitutions for the shares that are held in the Variable
Account or that the Variable Account may purchase. If the shares of a
Portfolio of the Fund are no longer available for investment or if in LBVIP's
judgment further investment in any Portfolio should become inappropriate in
view of the purposes of the Variable Account, LBVIP may redeem the shares, if
any, of that Portfolio and substitute shares of another registered open-end
management company. LBVIP will not substitute any shares attributable to a
Contract interest in a Subaccount of the Variable Account without notice and
prior approval of the SEC and state insurance authorities, to the extent
required by applicable law. The Variable Account may to the extent permitted
by law purchase other securities for other contracts or permit a conversion
between contracts upon request by the Contract Owners.
LBVIP also reserves the right to establish additional Subaccounts of the
Variable Account, each of which would invest in shares corresponding to a new
Portfolio of the Fund or in shares of another investment company having a
specified investment objective. Subject to applicable law and any required
SEC approval, LBVIP may, in its sole discretion, establish new Subaccounts or
eliminate one or more Subaccounts if marketing needs tax considerations or
investment conditions warrant. Any new Subaccounts may be made available to
existing Contract Owners on a basis to be determined by LBVIP.
If any of these substitutions or changes are made, LBVIP may by appropriate
endorsement change the Contract to reflect the substitution or change. If
LBVIP deems it to be in the best interest of Contract Owners, and subject to
any approvals that may be required under applicable law, the Variable Account
may be operated as a management company under the 1940 Act, it may be
deregistered under that Act if registration is no longer required, or it may
be combined with other LBVIP separate accounts.
CONTRACT BENEFITS
Death Benefits
General. As long as the Contract remains in force (see "PAYMENT AND
ALLOCATION OF PREMIUMS--Contract Lapse and Reinstatement"), the death proceeds
of the Contract will, upon due proof of the Insured's death, be paid to the
named Beneficiary in accordance with the designated Death Benefit Option. The
proceeds may be paid in cash or under one of the settlement options set forth
in the Contract. See "CONTRACT BENEFITS--Payment of Contract Benefits". The
amount payable under the designated Death Benefit Option will be reduced by
any outstanding Contract Debt and any due and unpaid Monthly Deduction(s), and
will be increased by any additional insurance benefits on the Insured's life
provided for in the Contract.
Death Benefit Options. The Contract provides two Death Benefit Options:
Option A and Option B. The Contract Owner designates the Death Benefit Option
in the application.
Option A. The Death Benefit is equal to the greater of (a) the Face Amount of
the Contract plus the Accumulated Value of the Contract and (b) the
Accumulated Value multiplied by the specified percentage shown in the
following table (with the Accumulated Value in each case being determined on
the Valuation Date on or next following the Insured's date of death):
Specified Specified
Attained Age Percentage Attained Age Percentage
40 or less 250% 61 128%
41 243 62 126
42 236 63 124
43 229 64 122
44 222 65 120
45 215 66 119
46 209 67 118
47 203 68 117
48 197 69 116
49 191 70 115
50 185 71 113
51 178 72 111
52 171 73 109
53 164 74 107
54 157 75 to 90 105
55 150 91 104
56 146 92 103
57 142 93 102
58 138 94 101
59 134 95 100
60 130
Illustration of Option A. For purposes of this illustration, assume that the
Insured is under the age of 40 and that there is no Contract Debt. (The
specified percentage is 250% for an Insured aged 40 or below on the Contract
Anniversary prior to the date of death.)
Under Option A, a Contract with a Face Amount of $50,000 will generally pay a
Death Benefit of $50,000 plus Accumulated Value. Thus, for example, a
Contract with an Accumulated Value of $5,000 will have a Death Benefit of
$55,000 ($50,000 + $5,000); an Accumulated Value of $10,000 will yield a Death
Benefit of $60,000 ($50,000 + $10,000); and an Accumulated Value of $25,000
will yield a Death Benefit of $75,000 ($50,000 + $25,000). The Death Benefit,
however, will be at least 2.50 times the Accumulated Value. As a result, if
the Accumulated Value of the Contract exceeds $33,333, the Death Benefit will
be greater than the Face Amount plus Accumulated Value. Each additional
dollar added to Accumulated Value above $33,333 will increase the Death
Benefit by $2.50. An Insured with an Accumulated Value of $35,000 will
therefore have a Death Benefit of $87,500 (2.50 X $35,000); an Accumulated
Value of $40,000 will yield a Death Benefit of $100,000 (2.50 X $40,000); and
an Accumulated Value of $50,000 will yield a Death Benefit of $125,000 (2.50 X
$50,000).
Similarly, any time Accumulated Value exceeds $33,333 each dollar taken out of
Accumulated Value will reduce the Death Benefit by $2.50. If at any time,
however, Accumulated Value multiplied by the specified percentage is less than
the Face Amount plus the Accumulated Value of the Contract, the Death Benefit
will be the Face Amount plus the Accumulated Value.
Option B. The Death Benefit is the greater of (a) the Face Amount of the
Contract and (b) the Accumulated Value on the Valuation Date on or next
following the Insured's date of death multiplied by the specific percentage
shown in the table above.
Illustration of Option B. For purposes of this illustration, assume that the
Insured is under the age of 40 and that there is no Contract Debt.
Under Option B, a Contract with a Face Amount of $50,000 will generally pay a
Death Benefit of $50,000. However, because the Death Benefit must be equal to
or be greater than 2.50 times the Accumulated Value, any time the Accumulated
Value of the Contract exceeds $20,000, the Death Benefit will exceed the Face
Amount. Each additional dollar added to Accumulated Value above $20,000 will
increase the Death Benefit by $2.50. Thus, a 40-year-old Insured with an
Accumulated Value of $25,000 will have a Death Benefit of $62,500 (2.50 X
$25,000); an Accumulated Value of $30,000 will yield a Death Benefit of
$75,000 (2.50 X $30,000); and an Accumulated Value of $40,000 will yield a
Death Benefit of $100,000 (2.50 X $40,000).
Similarly, any time Accumulated Value exceeds $20,000 each dollar taken out of
Accumulated Value will reduce the Death Benefit by $2.50. If at any time,
however, the Accumulated Value multiplied by the specified percentage is less
than the Face Amount, the Death Benefit will be the Face Amount of the
Contract.
Which Death Benefit Option to Choose. If a Contract Owner prefers to have
premium payments and favorable investment performance reflected partly in the
form of an increasing Death Benefit, the Contract Owner should choose Option
A. If the Contract Owner is satisfied with the amount of the Insured's
existing insurance coverage and prefers to have premium payments and favorable
investment performances reflected to the maximum extent in the Accumulated
Value, the Contract Owner should select Option B.
Change in Death Benefit Option. At any time when the Death Benefit would be
the Face Amount plus the Accumulated Value (if Option A is in effect) or the
Face Amount (if Option B is in effect), the Death Benefit Option in effect may
be changed by sending LBVIP a Written Notice of change. No charges will be
imposed to make a change in Death Benefit Option. The effective date of any
such change will be the Monthly Anniversary on or next following the date
LBVIP receives the Written Notice.
If the Death Benefit Option is changed from Option A to Option B, the Face
Amount will not change and the Death Benefit will be decreased by the
Accumulated Value of the Contract on the effective date of the change. These
changes will generally have the effect of decreasing the net amount at risk
under the Contract. In addition, if a Contract Owner changed from Option A to
Option B, and then back to Option A from Option B, the resulting Face Amount
and net amount at risk under Option A would generally be lower as a result of
the intervening change to Option B.
If the Death Benefit Option is changed from Option B to Option A, the Death
Benefit will not change and the Face Amount will be decreased by the
Accumulated Value of the Contract on the effective date of the change;
however, this change may not be made if it would reduce the Face Amount to
less than $5,000.
The effects of these Death Benefit Option changes on the Face Amount, Death
Benefit and net amount at risk (that is, the difference between the Death
Benefit and Accumulated Value) can be illustrated as follows. Assume that a
Contract under Option A has a Face Amount of $100,000 and an Accumulated Value
of $10,000, and therefore a Death Benefit of $110,000 ($110,000 + $10,000) and
a net amount at risk of $100,000 ($110,000 - $10,000). If the Death Benefit
Option is changed from Option A to Option B, the Face Amount would remain the
same, the Death Benefit (which equals the Face Amount under Option B) would be
reduced from $110,000 to $100,000, and the net amount at risk would be reduced
from $100,000 to $90,000 ($100,000 - $10,000). If the Death Benefit Option
were then changed back to Option A, the Death Benefit would remain the same,
the Face Amount would be reduced from $100,000 to $90,000 (that is, reduced by
the amount of the Accumulated Value), and the net amount at risk would remain
the same ($100,000 - $10,000 = $90,000). The overall effect of changing from
Option A to Option B and then back to Option A would be to have reduced the
Face Amount from $100,000 to $90,000, to have reduced the Death Benefit from
$110,000 to $100,000, and to have reduced the net amount at risk from $100,000
to $90,000.
If a change in Death Benefit Option would result in cumulative premiums
exceeding the maximum premium limitations under the Internal Revenue Code for
life insurance, LBVIP will not effect the change in Death Benefit Option. See
"PAYMENT AND ALLOCATION OF PREMIUMS--Amount and Timing of Premiums--Premium
Limitations".
A change in Death Benefit Option may affect the monthly cost of insurance
charge because this charge varies with the net amount at risk--that is, in
general, the Death Benefit less the Accumulated Value. See "CHARGES AND
DEDUCTIONS--Accumulated Value Charges--Monthly Deduction". Changing from
Option A to Option B will generally decrease the net amount at risk, thereby
reducing the cost of insurance charges. Changing from Option B to Option A
will generally result in a net amount at risk that remains level. Such a
change from Option B to Option A, however, will result in an increase in the
cost of insurance charges over time because the net amount at risk will
(unless the Death Benefit is based on the applicable percentage of Accumulated
Value) remain level rather than decreasing as the Accumulated Value increases.
How Death Benefits May Vary in Amount. The Death Benefit may vary with the
Contract's Accumulated Value. The Death Benefit under Option A will always
vary with the Accumulated Value because the Death Benefit equals the greater
of (a) the Face Amount plus the Accumulated Value and (b) the Accumulated
Value multiplied by the specified percentage shown in the foregoing table.
Under Option B, the Death Benefit will only vary with the Contract's
Accumulated Value whenever the specified percentage of Accumulated Value
exceeds the Face Amount of the Contract.
Ability to Change Face Amount. Subject to certain limitations (see
"Decreases" and "Increases" below), generally a Contract Owner may, at any
time, increase or decrease the Contract's Face Amount in force by submitting a
written application to LBVIP. The effective date of the increase or decrease
will be the Monthly Anniversary on or next following approval of the request.
An increase in Face Amount may have tax consequences. See "TAX MATTERS--
Contract Proceeds". The effect of changes in Face Amount on Contract charges,
as well as certain additional considerations, are described below:
Decreases. A decrease in the Face Amount may affect the total net amount at
risk and the portion of the net amount at risk covered by various premium
classes, both of which may affect a Contract Owner's monthly insurance
charges. See "CHARGES AND DEDUCTIONS--Accumulated Value Charges--Monthly
Deduction".
A decrease in the Face Amount will result in the partial imposition of the
Decrease Charge as of the Monthly Anniversary on which the decrease becomes
effective. See "CHARGES AND DEDUCTIONS--Accumulated Value Charges--Decrease
Charge". Whenever the Decrease Charge is imposed in part in connection with a
requested decrease in Face Amount, the Initial Monthly Administrative Charge
included in the first 120 Monthly Deductions will be reduced proportionately
to take into account the amount of the Deferred Administrative Charge included
in the Decrease Charge then imposed. See "CHARGES AND DEDUCTIONS--Accumulated
Value Charges--Monthly Deduction--Initial Monthly Administrative Charge".
If the Death Benefit Guarantee is in force, then on the effective date of any
requested decrease in Face Amount the Accumulated Value less any Contract Debt
must be sufficient to cover the Decrease Charge imposed in connection with the
requested decrease and the Monthly Deduction due on that date. If the Death
Benefit Guarantee is not in force, then the Cash Surrender Value must be
sufficient to cover the Monthly Deduction due on that date. If these
requirements are not satisfied, then the requested decrease in Face Amount
will not be effected.
The Face Amount in force after any requested decrease may not be less than the
Minimum Face Amount. Also, to the extent a decrease in Face Amount would
result in cumulative premiums exceeding the maximum premium limitations
applicable under the Internal Revenue Code for life insurance, LBVIP will not
effect the decrease (see "PAYMENT AND ALLOCATION OF PREMIUMS--Amount and
Timing of Premiums--Premium Limitations"). As discussed previously (see
"CONTRACT BENEFITS--Death Benefit--Change in Death Benefit Option"), if the
Death Benefit Option is changed from Option B to Option A, the Death Benefit
will not change and the Face Amount will be decreased by the Accumulated Value
of the Contract on the effective date of the change; however, this change may
not be made if it would reduce the Face Amount to less than $5,000.
A request for partial surrender will not be implemented if or to the extent
the requested partial surrender would reduce the Face Amount below $5,000.
Also, if a partial surrender would decrease the Face Amount, to the extent
that the partial surrender would result in cumulative premiums exceeding the
maximum premium limitations applicable under the Internal Revenue Code for
life insurance, LBVIP will not effect such partial withdrawal. See "PAYMENT
AND ALLOCATION OF PREMIUMS--Amount and Timing of Premiums--Premium
Limitations".
For purposes of determining the cost of insurance charge, any decrease in the
Face Amount will reduce the Face Amount in force in the following order: (a)
the Face Amount provided by the most recent increase; (b) the next most recent
increases successively; and (c) the initial Face Amount. See "CHARGES AND
DEDUCTIONS--Accumulated Value Charges--Monthly Deduction". If the Contract
Owner requests a decrease in Face Amount, that part of any Decrease Charge
applicable to the decrease will reduce the Accumulated Value attributable to
the Contract and the Decrease Charge will be reduced by this amount. See
"CHARGES AND DEDUCTIONS--Accumulated Value Charges--Decrease Charge".
Increases. An increase in the Face Amount will generally affect the total net
amount at risk and may affect the portion of the net amount at risk covered by
various premium classes (if multiple premium classes apply), both of which may
affect a Contract Owner's monthly insurance charges. See "CHARGES AND
DEDUCTIONS--Accumulated Value Charges--Monthly Deduction".
An increase in the Face Amount will also increase the Decrease Charge and will
result in the imposition of a new Initial Monthly Administrative Charge (which
is included in the monthly Deduction) as of the Monthly Anniversary when the
increase becomes effective. See "CHARGES AND DEDUCTIONS--Accumulated Value
Charges--Decrease Charge--Monthly Deduction".
A request for an increase in Face Amount may not be for less than $10,000.
The Contract Owner may not increase the Face Amount after the Insured's
Attained Age 80. To obtain the increase, the Contract Owner must submit an
application for the increase. LBVIP may require that additional evidence of
insurability be submitted with any request for an increase. An increase need
not be accompanied by an additional premium, but LBVIP will continue to deduct
the Premium Expense Charges from any premiums paid and will deduct other
charges associated with the increase from Accumulated Value. After increasing
the Face Amount, the Contract Owner will have the right (i) during a Free Look
Period, to have the increase cancelled and receive a credit or refund (see
"CONTRACT RIGHTS--Free Look Privileges"), and (ii) during the first 24 months
following the increase to exchange the increase in Face Amount for a fixed
benefit permanent life insurance contract issued by Lutheran Brotherhood,
subject to the same conditions and principles as apply to an exchange of the
entire Contract for such a new contract (see "CONTRACT RIGHTS--Exchange
Privileges").
Unless the Death Benefit Guarantee is in effect, on the effective date of an
increase the Accumulated Value must be sufficient to cover any Contract Debt
and any Decrease Charge (including the additional Decrease Charge arising from
the requested increase) and the Monthly Deduction due on that date--in other
words, on that date, and taking the increase into account, the Cash Surrender
Value must be equal to or greater than the Monthly Deduction then due. If the
existing Accumulated Value at the time of a requested increase does not result
in a sufficient Cash Surrender Value after the increase, a Contract Owner may
have to make additional premium payments to increase the Accumulated Value and
thereby increase the Cash Surrender Value sufficiently. If the Death Benefit
Guarantee is in effect, the Cash Surrender Value after the increase may be
less than the Monthly Deduction then due, even though the Death Benefit
Guarantee Premium will be increased as a result of any requested increase in
Face Amount (see "DEATH BENEFIT GUARANTEE--Death Benefit Guarantee Premium").
Insurance Protection. A Contract Owner may increase or decrease the pure
insurance protection provided by the Contract (that is, the net amount at
risk, which is, in general, the difference between the Death Benefit and the
Accumulated Value) in one of several ways as insurance needs change. These
ways include increasing or decreasing the Face Amount, changing the level of
premium payments, and, to a lesser extent, making a partial surrender under
the Contract. Although the consequences of each of these methods will depend
upon the individual circumstances, they may be generally summarized as
follows:
(a) A decrease in the Face Amount will, subject to the applicable percentage
limitations (see "CONTRACT BENEFITS--Death Benefits--Death Benefit Options"),
decrease the pure insurance protection without reducing the Accumulated Value
(except for the deduction of any Decrease Charge applicable to the decrease).
If the Face Amount is decreased, the Monthly Deduction generally will decrease
as well, but any Decrease Charge then applicable will be imposed in part upon
a requested decrease in Face Amount (see "Charges and Deductions--Decrease
Charge--Monthly Deduction").
(b) An increase in the Face Amount (which may require satisfactory evidence
of insurability--see "Increases--Additional Considerations" above) will likely
increase the amount of pure insurance protection, depending on the amount of
Accumulated Value and the resultant applicable percentage limitation. If the
insurance protection is increased, the Monthly Deduction will increase as
well.
(c) Under Death Benefit Option A, until the applicable percentage of
Accumulated Value exceeds the Face Amount plus the Accumulated Value, the
level of premium payments will not affect the amount of pure insurance
protection.
(d) Under Death Benefit Option B, until the applicable percentage of
Accumulated Value exceeds the Face Amount, an increased level of premium
payments will generally reduce the amount of pure insurance protection.
(e) Under either Death Benefit Option, if the Death Benefit is the applicable
percentage of Accumulated Value, then an increased level of premium payments
will increase the amount of pure insurance protection.
(f) A partial surrender will reduce the Death Benefit. See "CONTRACT RIGHTS-
- -Surrender Privileges". However, it has a limited effect on the pure
insurance protection and charges under the Contract, because the partial
surrender will affect the net amount at risk only when the Death Benefit is
based on the applicable percentage of Accumulated Values (see "CONTRACT
RIGHTS--Surrender Privileges--Partial Surrender"). The primary use of a
partial surrender is to withdraw Accumulated Value. Furthermore, it results
in a reduced amount of Accumulated Value and increases the possibility that
the Contract will lapse.
The techniques described in this section for changing the amount of pure
insurance protection under the contract (for example, changing the face
amount, making a partial surrender, and changing the amount of premium
payments) must be considered together with the other restrictions and
considerations described elsewhere in this prospectus.
How the Duration of the Contract May Vary. Subject to the Death Benefit
Guarantee (which depends upon the level of premium payments, partial
surrenders and the Contract Loan Amount--see "DEATH BENEFIT GUARANTEE"), the
duration of the Contract depends upon the Cash Surrender Value (that is, the
Accumulated Value less any Contract Debt and any Decrease Charge). The
Contract will remain in force as long as (a) the Cash Surrender Value of the
Contract is sufficient to pay the Monthly Deduction and (b) Contract Debt does
not exceed Accumulated Value less any Decrease Charge. In general, however,
when Cash Surrender Value is insufficient to pay the Monthly Deduction or when
Contract Debt exceeds Accumulated Value less any Decrease Charge, and a grace
period expires without an adequate payment by the Contract Owner, the Contract
will lapse and terminate without value. The Contract Owner has certain rights
to reinstate the Contract. See "PAYMENT AND ALLOCATION OF PREMIUMS--Contract
Lapse and Reinstatement".
Accumulated Value and Cash Surrender Value
The Accumulated Value of the Contract is the total amount of value held under
the Contract at any time. The Accumulated Value is used in determining the
Cash Surrender Value (the Accumulated Value less any Contract Debt and any
Decrease Charge). See "CONTRACT RIGHTS--Surrender Privileges". There is no
guaranteed minimum Accumulated Value, and because a Contract's Accumulated
Value on any future date depends upon a number of variables, it cannot be
predetermined.
A Contract's Accumulated Value and Cash Surrender Value will reflect the
investment performance of the chosen Subaccounts of the Variable Account, any
Net Premiums paid, any partial surrenders, any loans, any loan repayments, any
loan interest paid or credited, and any charges assessed in connection with
the Contract (including any Decrease Charge previously imposed on a requested
decrease in Face Amount).
Calculation of Accumulated Value. The Accumulated Value of the Contract is
determined first on the Contract Date and thereafter on each Valuation Date.
On the Contract Date, the Accumulated Value will be the New Premiums received,
plus any interest earned during the period when premiums are held in LBVIP's
General Account (before being transferred to the Variable Account) (see
"PAYMENT AND ALLOCATION OF PREMIUMS--Issuance of a Contract"), less any
Monthly Deductions due on the Contract Date. On each Valuation Date after the
Contract Date, the Contract's Accumulated Value will be:
(1) the aggregate of the values attributable to the Contract in each of the
Subaccounts on the Valuation Date, determined for each Subaccount by
multiplying the Subaccount's Unit Value on the date by the number of
Subaccount Units allocated to the Contract; plus
(2) the value attributable to the Contract in the Loan Account (see "CONTRACT
RIGHTS--Loan Privileges") on the Valuation Date.
Determination of Number of Units. Any amounts allocated to the Subaccounts
will be converted into Units of the Subaccount. The number of Units to be
credited to the Contract is determined by dividing the dollar amount being
allocated by the Unit Value as of the end of the Valuation Period during which
the amount was allocated. The number of Subaccount Units in any Subaccount
will be increased by: (i) any Net Premiums allocated to the Subaccount during
the current Valuation Period; (ii) any Accumulated Value transferred to the
Subaccount from the General Account or another Subaccount during the current
Valuation Period; (iii) any repayments of the Contract Debt during the current
Valuation Period; and (iv) any interest earned on the amount in the Loan
Account and transferred to the Variable Account during the current Valuation
Period. The number of Subaccount Units in any Subaccount will be decreased
by: (i) any Monthly Deduction allocated to the Subaccount during the current
Valuation Period to cover the Contract Month following a Monthly Anniversary;
(ii) any Accumulated Value transferred from the Subaccount to another
Subaccount or the General Account; (iii) the amount of any partial surrender
(including the partial surrender charge) during the current Valuation Period;
and (iv) any Contract loans allocated to the Subaccount and transferred to the
Loan Account during the current Valuation Period.
In computing the Contract's Accumulated Value the number of Subaccount Units
allocated to the Contract is determined before any Contract transactions on
the Valuation Date that would affect the number of Subaccount Units (see
immediately preceding paragraph). If the Contract's Accumulated Value in the
Variable Account is to be calculated for a day that is not a Valuation Date,
the next following Valuation Date will be used.
Determination of Unit Value. The Unit Value for a Subaccount is calculated on
each Valuation Date by dividing (1) by (2):
Where:
(1) is the net result of:
(a) the net asset value of the corresponding Portfolio of the Subaccount at
the end of the current Valuation Period, plus
(b) the amount of any dividend or capital gain distribution by the Portfolio
if the "ex-dividend" date occurs during the Valuation Period, plus or minus
(c) a charge or credit or any taxes reserved which LBVIP determines a result
of the investment operation of the Portfolio, minus
(d) the Mortality and Expense Risk Charge (see "CHARGES and DEDUCTIONS--
Charges Against the Variable Account--Mortality and Expense Risk Charge") for
each day during the current Valuation Period (a current charge of .001644%,
but never to exceed .002055%, of the net assets for each day during the
current Valuation Period), and
(2) is the number of Units for the Subaccount attributable to all Contracts.
Benefits at Maturity
If the Insured is living on the Maturity Date of the Contract, LBVIP will pay
the Accumulated Value for the Contract on the Maturity Date, reduced by any
Contract Debt and any unpaid Monthly Deductions. The Maturity Date will be
shown in the Contract and will be the Contract Anniversary on or next
following the Insured's 96th birthday.
Payment of Contract Benefits
Death proceeds under a Contract will ordinarily be paid within seven days
after LBVIP receives due proof of death. Maturity proceeds will ordinarily be
paid within seven days of the Maturity Date. The Cash Surrender Value
(Accumulated Value less any Contract Debt and any Decrease Charge), partial
surrenders and Contract loans will ordinarily be paid within seven days of
receipt of a Written Notice. Payments may be postponed in certain
circumstances. See "GENERAL PROVISIONS--Postponement of Payments". The
Contract Owner may decide the form in which the proceeds will be paid. During
the Insured's lifetime, the Contract Owner may arrange for the death proceeds
to be paid in a lump sum or under one of the settlement options described
below. These choices are also available if the Contract is surrendered or
matures. If no election is made, the proceeds will be paid in a lump sum.
For an option to be used, the proceeds to be applied must be at least $2,000.
Election of an option is also subject to the conditions that (a) payments must
not be less than $25 each and (b) payments must be made only at annual, semi-
annual, quarterly or monthly intervals.
Settlement options currently offered under a Contract are as follows:
Option 1--Interest Income. The proceeds may be left on deposit. Interest
will be paid at a rate of not less than 3% per year. These proceeds may be
withdrawn upon request.
Option 2--Income of a Fixed Amount. Income of a fixed amount will be paid at
agreed upon intervals. This income is subject to the conditions that (a)
income per year must not be less than 6% of the proceeds, and (b) income is
paid until the proceeds, with interest credited at the rate of 3 1/2% per year
on the unpaid balance, are paid in full (this income may be increased by the
crediting of additional interest).
Option 3--Income for a Fixed Period. Income for a fixed number of years will
be paid, not to exceed 30 (the income will not be less than the amounts set
forth in a table in the Contract relating to this option).
Option 4--Life Income with Guaranteed Period. Income for the lifetime of the
payee will be paid. If the payee dies during the guaranteed period, payments
will be continued to the payee's named beneficiary to the end of that period.
A period of 10 or 20 years may be elected (the income will not be less than
the amounts set forth in tables in the Contract relating to this option).
After the first payment is made, this option may not be revoked or changed.
Option 5--Other Options. The proceeds may be paid under any other settlement
option agreeable to LBVIP.
A Contract Owner may elect an option by Written Notice to LBVIP during the
Insured's lifetime. The option must be elected before proceeds become
payable. Assignees and third-party owners may elect an option only with
LBVIP's consent. Election of Option 4 may be made only if the payee is a
natural person who is the Insured or a Beneficiary.
If it is the death proceeds under a Contract that are payable, the Beneficiary
may elect a settlement option within one year from the Insured's date of death
provided that (a) the manner of settlement has not been restricted before the
Insured's death, and (b) the death proceeds have not been paid.
Under certain circumstances, an Accelerated Benefits Rider allows a Contract
Owner to receive benefits from the Contract that would be otherwise payable
upon the death of the Insured. An LBVIP representative should be consulted as
to whether and to what extent the rider is available in a particular state and
on any particular Contract. See "GENERAL PROVISIONS--Accelerated Benefits
Rider". The tax treatment of benefits paid under the Accelerated Benefits
Rider is currently uncertain. See "FEDERAL TAX MATTERS--Contract Proceeds--
Benefits Paid under the Accelerated Benefits Rider".
PAYMENT AND ALLOCATION OF PREMIUMS
Issuance of a Contract
In order to purchase a Contract, an individual must make application to LBVIP
through a licensed LBVIP Representative, who is also a registered
representative of Lutheran Brotherhood Securities Corp. LBVIP is offering
Contracts only to Insureds who are eligible for membership in Lutheran
Brotherhood (of which LBVIP is an indirect subsidiary), unless otherwise
required by state law. At issue the Minimum Face Amount of a Contract under
LBVIP's rules is currently $50,000 for Insureds with an Attained Age of 20
through 50, and $25,000 for all other Insureds. LBVIP reserves the right to
revise its rules from time to time to specify a different Minimum Face Amount
at issue for subsequently issued Contracts. A Contract will be issued only on
Insureds who have an Attained Age of 80 or less and who provide satisfactory
evidence of insurability to LBVIP. Acceptance is subject to LBVIP's
underwriting rules. LBVIP reserves the right to reject an application for any
reason permitted by law.
At the time an application for a Contract is accepted, subject to LBVIP's
underwriting rules, an applicant can obtain temporary insurance protection
pending issuance of the Contract by submitting payment of the Minimum
Conditional Insurance Premium. The Minimum Conditional Insurance Premium will
equal three initial Death Benefit Guarantee Premiums, or, in the case of
automatic monthly payment plans, two initial Death Benefit Guarantee Premiums.
If LBVIP subsequently determines that the proposed Insured is not an
acceptable risk under LBVIP's underwriting standards and rules, even if the
Minimum Conditional Insurance Premium has been paid, no temporary insurance
coverage will have been provided and any premium paid will be refunded
(without interest).
Upon delivery of the Contract, the balance (if any) of the Minimum Contract
Issuance Premium must be paid. The Minimum Contract Issuance Premium will
equal the initial Scheduled Premium selected by the Contract Owner (see
"Amount and Timing of Premiums" below), or, in the case of automatic monthly
payment plans, the greater of the Minimum Conditional Insurance Premium or the
initial Scheduled Premium. If the Date of Issue precedes the Contract Date
and the Minimum Contract Issuance Premium otherwise required would not provide
a premium payment sufficient to cover the next Contract Month, additional
Scheduled Premium payment(s) sufficient to cover through the next Contract
Month will be required.
The Date of Issue is the date used to determine Contract Months, Contract
Years, Monthly Anniversaries and Contract Anniversaries and will be shown on
page 3 of the Contract. The Contract Date is the date on which the initial
Net Premium(s) will be allocated to the Variable Account. The Contract Date
will be the latest of (i) the Date of Issue; (ii) the date LBVIP receives the
first premium payment on the Contract at its Home Office; and (iii) any other
date mutually agreed upon by LBVIP and the Contract Owner.
Until the Contract Date, premium payments will be held in LBVIP's General
Account. If a Contract is issued, interest will be credited on premium
payments held in LBVIP's General Account at a rate of interest determined by
LBVIP; no interest will be credited on these premium payments if no Contract
is issued (but the full amount of any premiums paid, without deduction of any
Contract charges, will be refunded). Any interest on these premium payments
will be credited to the Contract on the Contract Date in the same manner as a
premium payment, except without deduction of any Premium Expense Charge. On
the Contract Date, the Premium Expense Charges attributable to the premiums
paid will be deducted and the balance of the amount held in the General
Account (on which no Premium Expense Charges will be imposed) will be
transferred from the General Account and allocated to the Variable Account and
allocated among the Subaccount(s) pursuant to the Contract Owner's
instructions.
Amount and Timing of Premiums
A Contract Owner has considerable flexibility in determining the frequency and
amount of premiums.
Scheduled Premiums. Each Contract Owner will select a periodic premium
payment schedule (based on a periodic billing mode of annual, semi-annual, or
quarterly payment) which provides for the billing of a level premium at the
specified interval. Also, under several automatic payment plans, the Contract
Owner can select a monthly payment schedule pursuant to which premium payments
will be automatically deducted from a bank account or other payment source
rather than being billed. The periodic payment selected by the Contract Owner
is called the "Scheduled Premium". The initial Scheduled Premium on an
annualized basis will be shown in the Contract as the "Planned Annual
Premium". The Contract Owner is not, however, required to pay Scheduled
Premiums in accordance with the specified schedule. The Contract Owner has
the flexibility to alter the amount, frequency and time period over which the
premiums are paid. Payment of Scheduled Premiums will not, however, guarantee
that the Contract will remain in force. Instead, the duration of the Contract
depends upon the Contract's Accumulated Value and Cash Surrender Value and
upon whether the Death Benefit Guarantee is in effect. See "CONTRACT
BENEFITS--Death Benefits" and "DEATH BENEFIT GUARANTEE". Thus, even if
Scheduled Premiums are paid by the Contract Owner, unless the Death Benefit
Guarantee is in effect, the Contract will lapse whenever (a) Cash Surrender
Value is insufficient to pay the Monthly Deduction or (b) Contract Debt
exceeds Accumulated Value less any Decrease Charge, and in either case if a
grace period expires without an adequate payment by the Contract Owner. See
"Contract Lapse and Reinstatement" below.
Minimum Conditional Insurance Premium. The Minimum Conditional Insurance
Premium is the minimum premium required to provide temporary insurance
protection pending issuance of the Contract. See "Issuance of a Contract"
above.
Minimum Contract Issuance Premium. The Minimum Contract Issuance Premium is
the minimum premium required upon delivery of the Contract. See "Issuance of
a Contract" above.
Death Benefit Guarantee Premium. The Death Benefit Guarantee Premium is a
monthly premium amount specified in the Contract and determined by LBVIP. The
Death Benefit Guarantee Premium may change as the result of Contract changes.
The Death Benefit Guarantee Premium determines the payments required to
maintain the Death Benefit Guarantee. See "DEATH BENEFIT GUARANTEE".
Premium Flexibility. Unlike some insurance contracts, the Contract frees the
owner from the requirement that premiums be paid in accordance with a fixed
premium schedule. Although each Contract Owner determines a Scheduled Premium
(initially, on an annualized basis, this premium will be called the Planned
Annual Premium), a Contract Owner need not make premium payments in accordance
with this schedule and the failure to make such payments will not in itself
cause the Contract to lapse. See "Contract Lapse and Reinstatement" below.
Moreover, subject to the requirements described above regarding the Minimum
Conditional Insurance Premium and the Minimum Contract Issuance Premium (see
"Issuance of a Contract" above), and to the minimum and maximum premium
limitations described below, a Contract Owner may make premium payments at any
time before the Maturity Date in any amount. The Contract, therefore,
provides the owner with the flexibility to vary the frequency and amount of
premium payments.
Premium Limitations. The Internal Revenue Code provides for exclusion of the
Death Benefit from gross income if total premium payments do not exceed
certain stated limits. In no event can the total of all premiums paid under a
Contract exceed such limits. If at any time a premium is paid which would
result in total premiums exceeding such limits, LBVIP will only accept that
portion of the premium which will make total premiums equal that amount. Any
part of the premium in excess of that amount will be refunded, and no further
premiums will be accepted until allowed by the current maximum premium
limitations set forth in the Internal Revenue Code.
The maximum premium limitations set forth in the Internal Revenue Code depend
in part upon the amount of the Death Benefit at any time. As a result,
Contract changes that affect the amount of the Death Benefit may affect
whether cumulative premiums paid under the Contract exceed these maximum
premium limitations. For example, a decrease in Face Amount made at the
Contract Owner's request (see "CONTRACT BENEFITS--Death Benefits--Ability to
Change Face Amount") or made as a result of a partial surrender (see "CONTRACT
RIGHTS--Surrender Privileges--Partial Surrender"), or a change in the Death
Benefit Option (see "CONTRACT RIGHTS--Death Benefits--Change in Death Benefit
Option"), could result in cumulative premiums paid exceeding these maximum
premium limitations. To the extent that any such Contract change would result
in cumulative premiums exceeding these maximum premium limitations, LBVIP will
not effect such change.
Allocation of Premiums and Accumulated Value
Net Premiums. The Net Premium equals the premium paid less the Premium
Expense Charges. See "CHARGES AND DEDUCTIONS--Premium Expense Charges".
Allocation of Net Premiums. The Contract Owner will, in the application for
the Contract, indicate how Net Premiums should be allocated to the
Subaccount(s) of the Variable Account. Until the Contract Date, premium
payments will be allocated to LBVIP's General Account. If a Contract is
issued, interest will be credited on premium payments held in the General
Account at a rate of interest determined by LBVIP; no interest will be
credited on these premium payments if no Contract is issued (but the full
amount of any premiums paid will be refunded). On the Contract Date, Net
Premiums, together with any interest credited on premiums held in the General
Account, will be transferred from LBVIP's General Account and allocated to the
Variable Account among the Subaccount(s) of the Variable Account chosen by the
Contract Owner. Any Net Premiums received after the Contract Date will be
allocated to the Subaccount(s) chosen by the Contract Owner.
The percentages of each Net Premium that may be allocated to any Subaccount of
the Variable Account must be in whole numbers and the sum of the allocation
percentages must be 100%. LBVIP reserves the right to adjust allocation
percentages to eliminate fractional percentages. The allocation for future
Net Premiums may be changed without charge at any time by providing LBVIP with
Written Notice or by telephone (if the Contract Owner has completed the
Telephone Transaction Authorization Form).
The values of the Subaccount(s) of the Variable Account will vary with the
investment experience of the Subaccount(s) and the Contract Owner bears the
entire investment risk. Contract Owners should periodically review their
allocations of premiums in light of market conditions and the Contract Owner's
overall financial objectives.
The Contract Owner must notify LBVIP if a payment is a loan repayment;
otherwise, it will be considered a premium payment.
Transfers. Accumulated Value may be transferred among the Subaccounts of the
Variable Account upon receipt of Written Notice or by telephone (if the
Contract Owner has completed the Telephone Transaction Authorization Form).
The total amount transferred each time must be at least $500 (unless the total
cash value in a Subaccount is less than $500, in which case the entire amount
may be transferred). No fees are currently charged for transfers. Transfers
may be postponed in certain circumstances. See "GENERAL PROVISIONS--
Postponement of Payments". Under present law, transfers are not taxable
transactions.
The provisions described above can be illustrated as follows. If a Contract
Owner wishes to transfer a total of $500 or more, any amount can be
transferred from the various Subaccounts (for example, $300 from the Money
Market Subaccount and $200 from the Income Subaccount, or any other
combination that totals $500 or more). A Contract Owner may transfer a total
of less than $500 only if the amount transferred from each Subaccount equals
the total Accumulated Value in that Subaccount (for example, a $300 total
transfer taken totally from the Money Market Subaccount when $300 represents
the total Accumulated Value in that Subaccount, or a $300 total transfer taken
$200 from the Money Market Subaccount and $100 from the Income Subaccount when
these amounts represent the total Accumulated Value in these Subaccounts).
Telephone Transfers. Telephone transfers are available when the Contract
Owner completes the Telephone Transaction Authorization Form. If the Contract
Owner elects to complete the Telephone Transaction Authorization Form, the
Contract Owner thereby agrees that LBVIP, its agents and employees will not be
liable for any loss, liability cost or expense when LBVIP, its agents and
employees act in accordance with the telephone transfer instructions that have
been properly received and recorded on voice recording equipment. If a
telephone authorization or instruction, processed after the Contract Owner has
completed the Telephone Transaction Authorization Form, is later determined
not to have been made by the Contract Owner or was made without the Contract
Owner's authorization, and a loss results from such unauthorized instruction,
the Contract Owner bears the risk of this loss. LBVIP will employ reasonable
procedures to confirm that instructions communicated by telephone are genuine.
In the event LBVIP does not employ such procedures, LBVIP may be liable for
any losses due to unauthorized or fraudulent instructions. Such procedures may
include, among others, requiring forms of personal identification prior to
acting upon telephone instructions, providing written confirmation of such
instructions and/or tape recording telephone instructions.
Contract Owners should periodically review their allocations of Accumulated
Value in light of market conditions and the Contract Owner's overall financial
objectives.
Special Transfer Service--Dollar Cost Averaging. LBVIP administers a dollar
cost averaging program which enables a Contract Owner to pre-authorize a
periodic exercise of the transfer rights described above. A Contract Owner
entering into a dollar cost averaging agreement will instruct LBVIP to
periodically transfer predetermined dollar amounts from the Money Market
Subaccount to as many of the three other Subaccounts as specified by the
Contract Owner until the amount in the Money Market Subaccount is exhausted or
the agreement is terminated by the Contract Owner. The dollar cost averaging
program is generally suitable for Contract Owners making a substantial deposit
to the Contract and who wish to use the other Subaccounts investment option,
but desire to control the risk of investing at the top of a market cycle. The
dollar cost averaging program allows such investments to be made in equal
installments over time in an effort to reduce such risk. Dollar cost averaging
does not guarantee that the Variable Account will gain in value, nor will it
protect against a decline in value if market prices fall. However, if a
Contract Owner can continue to invest regularly throughout changing market
conditions, it can be an effective strategy to help meet long-term goals.
Contract Owners interested in the dollar cost averaging program may obtain an
application and full information concerning the program and its restrictions
from LBVIP.
Contract Lapse and Reinstatement
Lapse. The failure to make a Scheduled Premium payment will not itself cause
a Contract to lapse. Subject to the Death Benefit Guarantee (see "DEATH
BENEFIT GUARANTEE"), lapse will only occur when (a) the Cash Surrender Value
is insufficient to cover the Monthly Deduction or (b) Contract Debt exceeds
the Accumulated Value less any Decrease Charge, and in either case if a grace
period expires without a sufficient payment. Even if the Cash Surrender Value
is insufficient to cover the Monthly Deduction, the Contract will not lapse if
the Death Benefit Guarantee is in effect.
Because unearned prepaid loan interest will not be included in Contract Debt
(see definition of "Contract Debt" in section entitled "DEFINITIONS"), the
Cash Surrender Value (which is Accumulated Value less any Contract Debt and
any Decrease Charge) will always include any unearned prepaid loan interest.
This means that, in effect, unearned prepaid loan interest will be applied to
keep the Contract in force because this amount will be available to pay the
Monthly Deduction and because the grace period for the Contract does not
commence until the Cash Surrender Value is insufficient to cover the Monthly
Deduction. Any payment made by the Contract Owner after unearned prepaid loan
interest has been applied in this manner will first be used to replace
unearned prepaid loan interest so applied.
The Contract provides for a 61-day grace period that is measured from the date
on which notice is sent by LBVIP. Thus, the Contract does not lapse, and the
insurance coverage continues, until the expiration of this grace period. This
notice will be sent by LBVIP on or after the Monthly Anniversary on which (a)
Cash Surrender Value is insufficient to pay the Monthly Deduction chargeable
on the Monthly Anniversary or (b) Contract Debt exceeds the Accumulated Value
less any Decrease Charge.
In order to prevent lapse, the Contract Owner must during the grace period
make a premium payment or make a loan repayment sufficient to (a) increase the
Cash Surrender Value (that is, Accumulated Value less any Contract Debt and
any Decrease Charge) to an amount sufficient to cover any unpaid Monthly
Deductions or (b) reduce Contract Debt to an amount equal to or less than the
Accumulated Value less any Decrease Charge.
When the Contract enters the grace period, LBVIP will notify the Contract
Owner. The Contract Owner will then have 61 days, measured from the date
notice is mailed to the Contract Owner, to make sufficient payments. The
notice will specify the payment required to keep the Contract in force and the
length of the grace period. Failure to make a sufficient payment within the
grace period will result in lapse of the Contract without value.
At the commencement of the grace period, LBVIP will transfer the Contract's
Accumulated Value attributable to the Variable Account (that is, Accumulated
Value in excess of the amount held in the Loan Account) into LBVIP's General
Account. If sufficient payments are made during the grace period to avoid
lapse of the Contract, then any Accumulated Value in excess of the amount to
be held in the Loan Account will be reallocated to the Variable Account upon
receipt of such payments. The amount reallocated to the Variable Account will
be reduced by the amount of any Monthly Deductions not paid during the grace
period. The amount allocated to the Variable Account will be allocated among
the Subaccount(s) in the same proportion as the Accumulated Value was
transferred to the General Account from the Subaccount(s) at the commencement
of the grace period.
If a sufficient payment is made during the grace period, Net Premiums will be
allocated among the Subaccount(s) according to the current Net Premium
allocation and then any amount required to pay unpaid Contract charges will be
deducted. See "Allocations of Premiums and Accumulated Value" above.
If the Insured dies during the grace period, the proceeds under the Contract
will equal the amount of the Death Benefit and any additional life insurance
benefits on the Insured provided by rider as of the Monthly Anniversary on or
immediately preceding the commencement of the grace period, reduced by any
Contract Debt and any unpaid Monthly Deductions.
If a sufficient payment is not made during the grace period, the Contract will
lapse without value and insurance coverage will end as of the expiration of
the grace period. The Contract will have no Accumulated Value or Cash
Surrender Value upon termination of the Contract.
On any Monthly Anniversary when the Death Benefit Guarantee is in effect, the
Contract will not lapse. See "DEATH BENEFIT GUARANTEE".
Reinstatement. A Contract that lapses without value may be reinstated at any
time within 5 years after the expiration of the grace period and before the
Maturity Date by submitting the following items to LBVIP:
(1) Written application for reinstatement;
(2) Evidence of insurability satisfactory to LBVIP;
(3) Payment or reinstatement of any Contract Debt (including interest earned
during the grace period) that existed on the date the grace period expired;
(4) A payment that is sufficient to cover: (a) payment of any unpaid Monthly
Deductions for the grace period; and (b) a premium repayment sufficient to
increase Cash Surrender Value (that is, Accumulated Value less any Contract
Debt and any Decrease Charge) to an amount at least equal to the Monthly
Deductions and interest on Contract loans for the next two Contract Months,
based on Unit Values on the date of reinvestment.
The amount of Cash Surrender Value on the date of reinstatement will equal the
Accumulated Value on that date less any reinstated Contract Debt and any
reinstated Decrease Charge (discussed below). The amount of Accumulated Value
on the date of reinstatement will equal: (a) the Accumulated Value as of the
expiration of the grace period before termination of the Contract; plus (b)
any premiums received at the time of reinstatement, reduced by the Premium
Expense Charges; less (c) any Monthly Deductions and any loan interest due for
the grace period; less (d) the Monthly Deduction for the next Contract Month.
Contract charges will, in effect, be calculated and reinstated on a reinstated
Contract as if the Contract had been reinstated effective as of the expiration
of the grace period. Any Decrease Charge and any Initial Monthly
Administrative Charge that applied to the Contract at the expiration of the
grace period will be reinstated. The period of time from Contract lapse until
Contract reinstatement will not be taken into account in determining when the
10-year-time periods for the Decrease Charge and the Initial Monthly
Administrative Charge expire or in determining when the first Contract Year
expires for the purpose of calculating the Contingent Deferred Sales Charge
(see "CHARGES AND DEDUCTIONS--Accumulated Value Charges--Decrease Charge--
Amount of Contingent Deferred Sales Charge"). Moreover, the Monthly
Deductions and any loan interest that would have otherwise been payable during
the grace period must be paid before reinstatement, which is also consistent
with treating a reinstated Contract as if the Contract has been reinstated
effective as of the expiration of the grace period.
The effective date of reinstatement will be the date on which the
reinstatement application was approved.
The Death Benefit Guarantee cannot be reinstated after lapse of the Contract.
See "DEATH BENEFIT GUARANTEE".
CHARGES AND DEDUCTIONS
Charges will be deducted in connection with the Contract to compensate LBVIP
for: (a) providing the insurance benefits set forth in the Contract and any
additional insurance benefits added by rider; (b) administering the Contract;
(c) assuming certain risks in connection with the Contract; and (d) incurring
expenses in distributing the Contract. The nature and amount of these charges
are described more fully below.
Premium Expense Charges
Prior to allocation of Net Premiums among the Subaccounts of the Variable
Account, premiums paid are reduced by Premium Expense Charges, which consist
of a percent-of-premium charge of 5% of each premium payment (a 3% sales
charge and a 2% premium tax charge) and a premium processing charge currently
equal to $1.00 per premium payment ($.50 for automatic payment plans). LBVIP
reserves the right to increase the premium processing charge to an amount not
exceeding $2.00 per premium payment ($1.00 for automatic payment plans).
Sales Charges. Sales charges, generally called "sales load", will be deducted
to compensate LBVIP for the costs of selling the Contract. These costs
include sales commissions, the printing of prospectuses and sales literature,
and advertising. There are two types of sales load under the Contract. The
first, a front-end sales load, will be 3% of each premium payment, and will be
deducted from each premium payment upon receipt prior to allocation of the Net
Premium to the Variable Account. The second, the Contingent Deferred Sales
Charge which is part of the Decrease Charge, will reduce the Accumulated Value
in the Variable Account attributable to the Contract in the event of full
surrender or lapse of the Contract, or in part upon a requested decrease in
the Face Amount. See "Charges Against Accumulated Value--Decrease Charge"
below.
The sales charges in any Contract year are not necessarily related to actual
distribution expenses incurred during that Contract Year. Instead, LBVIP
expects to incur the majority of distribution expenses in the early Contract
Years and to recover any deficiency over the life of the Contract. To the
extent that sales and distribution expenses exceed sales loads (both front-end
and deferred) in any year, LBVIP will pay them from its other assets or
surplus in its General Account, which includes amounts derived from the
Mortality and Expense Risk Charge deducted from the net assets held in the
Variable Account (see "Accumulated Value Charges--Mortality and Expense Risk
Charge" below).
Premium Taxes. Various states and their subdivisions impose a tax on premiums
received by insurance companies. Premium taxes vary from state to state. A
deduction of 2% of the premium will be made from each premium payment. The
deduction represents an amount LBVIP considers necessary to pay all premium
taxes imposed by the states and any subdivisions thereof.
Premium Processing Charge. LBVIP will deduct an amount equal to $1.00 per
premium payment ($.50 for automatic payment plans) to compensate it for the
cost of collecting and processing premiums. This amount will be deducted from
each premium payment prior to allocation of the net proceeds to the Variable
Account. LBVIP reserves the right to increase this charge to an amount not
exceeding $2.00 per premium payment ($1.00 for automatic payment plans).
LBVIP does not expect to make a profit on this charge.
Accumulated Value Charges
Decrease Charge
The Contract provides for the Decrease Charge, which is a deferred charge that
will be imposed if the Contract is surrendered or lapses, or in part if the
Contract Owner requests a decrease in the Face Amount, in each case at any
time before 120 Monthly Deductions have been made after issuance of a Contract
or after a requested increase in Face Amount. The term "Decrease Charge" is
used to describe this charge because, during the applicable 10-year period,
the charge is imposed in connection with a decrease in the Face Amount, either
as a result of a requested decrease in Face Amount or as the result of lapse
or full surrender of the Contract (which can be viewed as a decrease in the
Face Amount to zero). The Decrease Charge consists of the Contingent Deferred
Sales Charge (described below) and the Deferred Administrative Charge
(described below). The Contingent Deferred Sales Charge compensates LBVIP for
the cost of selling the Contracts, including sales commissions, the printing
of prospectuses and sales literature, and advertising. The Deferred
Administrative Charge reimburses LBVIP for administrative expenses in
connection with the issuance of the Contract, including medical exams, review
of applications for insurance underwriting decisions, and processing of the
applications and establishing Contract records. (Similar administrative and
sales expenses are expected in connection with future changes in the Contract
initiated by the Contract Owner which involve "insurability" decisions, such
as applications for increases in Face Amount.)
The following sections describe how the amount of the Contingent Deferred
Sales Charge and the Deferred Administrative Charge will be determined and how
these charges will be deducted from Accumulated Value.
Amount of Contingent Deferred Sales Charge--Initial Face Amount. At Contract
issuance, LBVIP will compute a maximum Contingent Deferred Sales Charge equal
to 25% of the CDSC Premium, which is a premium amount used solely for the
purpose of calculating the Contingent Deferred Sales Charge. As described
below, the Contingent Deferred Sales Charge calculated in this manner will be
reduced beginning on the fifth Contract Anniversary and will be subject to an
additional limitation keyed to actual premiums paid during the First Contract
Year. The Contingent Deferred Sales Charge actually imposed will equal this
maximum Contingent Deferred Sales Charge calculated as 25% of the CDSC Premium
(subject to the scheduled reductions) unless the limitation keyed to 25% of
actual premiums paid applies to the Contract. In other words, the Contingent
Deferred Sales Charge for the initial Face Amount, if imposed, would never
exceed the lesser of (a) 25% of the CDSC Premium and (b) 25% of actual
premiums paid during the First Contract Year.
The maximum Contingent Deferred Sales Charge calculated as described above
(and subject to the additional limitation keyed to 25% of actual premiums
paid), will remain at that level until the fifth Contract Anniversary.
Commencing on the fifth Contract Anniversary, and then on each subsequent
Monthly Anniversary until 60 Monthly Deductions have been made on and after
the fifth Contract Anniversary, this maximum Contingent Deferred Sales Charge
determined during the first Contract Year will be reduced as of each Monthly
Anniversary in level amounts equal to approximately 1.67% (20% on an annual
basis) of the maximum Contingent Deferred Sales Charge, which means that the
actual Contingent Deferred Sales Charge would be reduced to 80% of the maximum
Contingent Deferred Sales Charge after approximately 6 Contract Years, 60% of
the maximum after approximately 7 Contract Years, 40% of the maximum after
approximately 8 Contract Years, 20% of the maximum after approximately 9
Contract Years, and zero after approximately 10 Contract Years.
The CDSC Premium is an annual premium amount determined by LBVIP on the same
basis as the Death Benefit Guarantee Premium (see "DEATH BENEFIT GUARANTEE"),
except that the CDSC Premium, unlike the Death Benefit Guarantee Premium, will
not take into account any additional charge for an Insured in a substandard
premium class, any charge for additional insurance benefits added by rider, or
the basic monthly administrative charge of $4.00 per month, or any premium
processing charge. The maximum Contingent Deferred Sales Charge based on the
applicable CDSC Premium will be shown in the Contract. Even though the Death
Benefit Guarantee Premium may change after issuance of the Contract, once the
CDSC Premium is determined for purposes of calculating the Contingent Deferred
Sales Charge on the initial Face Amount or on any increase, as the case may
be, the CDSC Premium will not change. The CDSC Premium will never exceed the
"guideline annual premium", as that term is defined under SEC Rule 6e-3(T),
for the Contract.
The Contingent Deferred Sales Charge calculated as described above will be
subject to an additional limitation keyed to actual premiums paid. The actual
Contingent Deferred Sales Charge will never exceed 25% of premiums paid
(before deducting Premium Expense Charges) during the first Contract Year.
This additional limitation is imposed to avoid the possibility that the total
sales charge under the Contract might result in "excess sales load" that would
have to be refunded under SEC Rule 6e-3(T).
Amount of Contingent Deferred Sales Charge--Increases in Face Amount. If the
Face Amount is increased, LBVIP will compute a maximum Contingent Deferred
Sales Charge for the increase equal to 25% of the CDSC Premium for the
increase. The Contingent Deferred Sales Charge actually imposed will equal
this maximum Contingent Deferred Sales Charge calculated as 25% of the CDSC
Premium for the increase (subject to the scheduled reductions) unless the
limitation keyed to 25% of the amount of premiums attributable to the increase
applies. Like the similar limitation for the initial Face Amount, the CDSC
Premium for the increase will never exceed the "guideline annual premium", as
that term is defined under SEC Rule 6e-3(T), for the increase. In other
words, the Contingent Deferred Sales Charge for an increase, if imposed, would
never exceed the lesser of (a) 25% of the CDSC Premium for the increase and
(b) 25% of the amount of premiums attributable to the increase.
The maximum Contingent Deferred Sales Charge for an increase calculated as
described above will be subject to an additional limitation keyed to 25% of
"the amount of premiums attributable to the increase". The Contingent
Deferred Sales Charge actually imposed for an increase will never exceed 25%
of the "amount of premiums attributable to the increase". Like the similar
limitation for the initial Face Amount, this limitation avoids the possibility
that the total sales charge for the increase might result in "excess sales
load" that would have to be refunded under SEC Rule 6e-3(T).
A special rule applies to determine "the amount of premiums attributable to
the increase" because additional premium payments are not required to fund a
requested increase in Face Amount. The premiums attributable to the increase
will equal the sum of a proportionate share of the Cash Surrender Value on the
effective date of the increase plus a proportionate share of premium payments
made on the effective date of the increase or during the 12 Contract Months
after the effective date of the increase. This means that, in effect, a
portion of the existing Cash Surrender Value will be deemed to be a premium
payment for the increase, and subsequent premium payments will be prorated.
The proportion of existing Cash Surrender Value and subsequent premium
payments attributable to the increase will equal the ratio of the increase in
Face Amount to the resulting total Face Amount after the increase. For
example, if the Face Amount is increased from $100,000 to $200,000, the ratio
of the increase to the resulting total Face Amount is 1/2 ($100,000/$200,000).
If the Cash Surrender Value on the effective date of the increase is $5,000
and premium payments totaling $3,000 are made during the 12 Contract Months
after the effective date of the increase, the premiums attributable to the
increase would be 1/2 ($5,000) + 1/2 ($3,000), or a total of $4,000.
The part of the Contingent Deferred Sales Charge attributable to the increase
will be charged and reduced in accordance with the same principles as
applicable to the basic Contingent Deferred Sales Charge. It will remain at
the maximum level through approximately five years from the effective date of
the increase in Face Amount. It will then be reduced in level monthly amounts
equal to approximately 1.67% (20% on an annual basis) of the maximum
Contingent Deferred Sales Charge for the increase on the fifth anniversary of
the increase and on each subsequent monthly anniversary of the increase until
60 Monthly Deductions have been taken on and after the fifth anniversary of
the increase. Thus, after the 60th Monthly Deduction following the fifth
anniversary of the increase, the Contingent Deferred Sales Charge on the
increase will be reduced to zero.
Amount of Deferred Administrative Charge. At Contract issuance, LBVIP will
compute a Deferred Administrative Charge. In general, this charge will equal
an amount per $1,000 of Face Amount based upon the initial Face Amount, the
Insured's Attained Age at Contract issuance, and whether the Insured is a
smoker or nonsmoker. For Insureds with an Attained Age under 20, the Deferred
Administrative Charge will equal an amount per $1,000 of Face Amount based
upon the initial Face Amount and the Insured's Age at Contract issuance. The
maximum Deferred Administrative Charge per $1,000 of Face Amount will be
determined from Appendix B. As shown in Appendix B, the Deferred
Administrative Charge per $1,000 of Face Amount will be less for Contracts
having a Face Amount at issuance that equals or exceeds $250,000. LBVIP does
not expect to make a profit on the Deferred Administrative Charge.
The maximum Deferred Administrative Charge, as determined at Contract
issuance, will be reduced as Monthly Deductions are made. Beginning on the
Date of Issue, and continuing on each Monthly Anniversary until 120 Monthly
Deductions have been made, this Deferred Administrative Charge determined at
Contract issuance will be reduced in level amounts equal to approximately .83%
of the maximum Deferred Administrative Charge (or a 10% reduction of the
maximum Deferred Administrative Charge on an annual basis). In this way, the
Deferred Administrative Charge will be reduced to zero as of the Monthly
Anniversary when the 120th Monthly Deduction is made.
If the Face Amount is increased, a separate Deferred Administrative Charge
will be calculated for the increase in an amount determined in the same manner
as for the initial Face Amount (except that the Insured's Attained Age on the
effective date of the increase will be used and the charge per $1,000 of Face
Amount to be applied to the increase will be based on the amount of the entire
new Face Amount after giving effect to the increase). The part of the
Deferred Administrative Charge attributable to the increase will be charged
and reduced in accordance with the same principles as applicable to the basic
Deferred Administrative Charge. The maximum Deferred Administrative Charge
for an increase will be determined on the effective date of the increase and
will then be reduced in level amounts equal to .83% of the maximum Deferred
Administrative Charge (or a 10% reduction of the maximum Deferred
Administrative Charge on an annual basis) as Monthly Deductions are taken on
the effective date of the increase and as of each succeeding Monthly
Anniversary until 120 Monthly Deductions have been made after the effective
date of the increase, when the Deferred Administrative Charge on the increase
will be reduced to zero.
The administrative expenses covered by the Deferred Administrative Charge are
the same expenses covered by the Initial Monthly Administrative Charge
included in the Monthly Deduction. See "Accumulated Value Charges--Monthly
Deduction" below. Even though the same administrative expenses are covered by
both charges, LBVIP will not be reimbursed twice for these issuance expenses.
Except as described below for spouse riders, these two charges have been
calculated so that these administrative expenses related to issuance will
generally be collected either through the Monthly Deduction (which covers
these charges through the Initial Monthly Administrative Charge) or through
the Decrease Charge (which covers these charges through the Deferred
Administrative Charge). Each of these charges applies until 120 Monthly
Deductions have been made, and the scheduled reductions in the Deferred
Administrative Charge described above over this period have been calculated to
take into account the amount of issuance expenses that would have already been
collected through the Initial Monthly Administrative Charge. In effect, the
collection of the Deferred Administrative Charge included in the Decrease
Charge, which would be collected only upon lapse or surrender of the Contract
or in part upon a requested decrease in Face Amount, would be an
"acceleration" of the amounts that otherwise would have been paid during this
10-year period through the Initial Monthly Administrative Charge included in
the Monthly Deduction. If the Deferred Administrative Charge is imposed in
part due to a requested decrease in Face Amount, the amount of the Initial
Monthly Administrative Charge will be reduced accordingly (see "CHARGES AND
DEDUCTIONS--Monthly Deduction--Initial Monthly Administrative Charge").
The discussion in the immediately preceding paragraph does not apply to spouse
riders. The Deferred Administrative Charge is not an "acceleration" of the
Initial Monthly Administrative Charge applicable to any spouse rider providing
insurance benefits on the Insured's spouse. An Initial Monthly Administrative
Charge will arise upon issuance of a spouse rider, but no Deferred
Administrative Charge will be calculated. If the Contract lapses or is
surrendered when the Initial Monthly Administrative Charge applies for a
spouse rider, this charge will not be collected through the Deferred
Administrative Charge or otherwise, unless the Contract is reinstated (see
"PAYMENT AND ALLOCATION OF PREMIUMS--Contract Lapse and Reinstatement").
Method of Deduction and Effect of Decrease Charge. The Decrease Charge will
be treated as a deduction against the Contract Owner's Accumulated Value, and
will compensate LBVIP for sales and issuance expenses described above upon
surrender or lapse of the Contract or in part upon a requested decrease in
Face Amount. Otherwise, the Decrease Charge will not be taken out of the
Accumulated Value held for investment under the Contract, and the Accumulated
Value will continue to reflect the investment experience of the selected
Subaccount(s), though the Decrease Charge will be treated as a deduction for
purposes of determining the Contract's Cash Surrender Value, which will affect
various Contract rights. Deducting the Decrease Charge in determining the
Cash Surrender Value will affect (a) the amount available for Contract loans
(see "CONTRACT RIGHTS--Loan Privileges"), (b) the Cash Surrender Value
available in connection with full or partial surrenders (see "CONTRACT RIGHTS-
- -Surrender Privileges"), and (c) the Cash Surrender Value available to pay
Monthly Deductions, which will, subject to the Death Benefit Guarantee (see
"DEATH BENEFIT GUARANTEE"), determine the Contract's duration and possible
lapse (see "PAYMENT AND ALLOCATION OF PREMIUMS--Contract Lapse and
Reinstatement").
If the Face Amount is decreased at the Contract Owner's request, that part of
any existing Decrease Charge amount attributable to the decrease will reduce
the Accumulated Value attributable to the Contract, and the Decrease Charge
will be reduced by this amount. The amount by which the Decrease Charge is
reduced will be allocated against the Subaccount(s) of the Variable Account in
the same manner that Monthly Deductions are allocated against the
Subaccount(s). See "Charges Against Accumulated Value--Monthly Deductions"
below. If the Cash Surrender Value is not sufficient to cover the Decrease
Charge imposed in connection with the requested decrease, the requested
decrease will not be made.
The Decrease Charge imposed for a requested decrease in Face Amount will be
determined by using the Decrease Charge then applicable to various parts of
the current Face Amount in the following order: (a) the Decrease Charge for
the most recent increase; (b) the Decrease Charge for the next most recent
increases successively; and (c) the Decrease Charge for the initial Face
Amount.
The calculation of the Decrease Charge for requested decreases can be
illustrated as follows. Assume that a Contract has an initial Face Amount of
$100,000, and the Face Amount is first increased by $20,000, and then
increased by $30,000, and then the Face Amount is decreased by $40,000. The
Decrease Charge imposed for the $40,000 decrease would be determined by using
the Decrease Charge for the most recent increase in Face Amount ($30,000) and
then adding a proportionate part of the Decrease Charge for the next most
recent increase ($10,000/$20,000, or one-half of the Decrease Charge for that
increase). If, instead, the requested decrease was $60,000, the Decrease
Charge imposed for the $60,000 decrease would be determined by using the
Decrease Charge for the two increases (which were $30,000 and $20,000,
respectively) and then adding a proportionate part of the Decrease Charge for
the initial Face Amount ($10,000/$100,000, or one-tenth of the Decrease Charge
for the initial Face Amount).
If, alternatively, it is assumed that a Contract has an initial Face Amount of
$100,000, and the Face Amount is first decreased by $20,000, then increased by
$50,000, and then decreased by $30,000, the Decrease Charge on the requested
decreases would be as follows. The Decrease Charge imposed for the first
decrease ($20,000) would be determined by using a proportionate part of the
Decrease Charge for the initial Face Amount ($20,000/$100,000, or one-fifth of
the Decrease Charge for the initial Face Amount). The Decrease Charge imposed
for the second decrease ($30,000), would be determined by using a
proportionate part of the Decrease Charge for the most recent increase
($30,000/$50,000, or six-tenths of the Decrease Charge for that increase.
Reinstatement of Decrease Charge. If a Contract lapses and is then
reinstated, any Decrease Charge applicable at the time of lapse will also be
reinstated. See "PAYMENT AND ALLOCATION OF PREMIUMS--Contract Lapse and
Reinstatement".
Monthly Deduction
Charges will be deducted on the Contract Date and each Monthly Anniversary
from the Accumulated Value of the Contract (the "Monthly Deduction") to
compensate LBVIP for administrative expenses and the insurance provided by the
Contract. The Monthly Deduction consists of three components--(a) the cost of
insurance, (b) insurance underwriting and expenses in connection with issuing
the Contract or any increase in Face Amount, and the costs of ordinary
administration of the Contract, and (c) the cost of any additional benefits
added by rider. Because portions of the Monthly Deduction, such as the cost
of insurance, can vary from month to month, the Monthly Deduction itself will
vary in amount from month to month.
The Monthly Deduction will be deducted on the Contract Date and on each
subsequent Monthly Anniversary. (On the Contract Date, a Monthly Deduction
covering the period of time from the Date of Issue until the first Monthly
Anniversary will be deducted and, if any Monthly Anniversary occurs prior to
the Contract Date, the Monthly Deduction(s) for such Monthly Anniversaries
will also be made on the Contract Date.) The Monthly Deduction will be
deducted from the Accumulated Value of the Contract by redeeming units from
the Subaccounts of the Variable Account and will be allocated against each
Subaccount of the Variable Account in the same proportion that the Contract's
Accumulated Value in each Subaccount bears to the total Accumulated Value of
the Contract, less Accumulated Value in the Loan Account, at the Monthly
Anniversary. Subject to LBVIP's approval, the Contract Owner may specify a
different allocation for the Monthly Deduction.
Cost of Insurance. Because the cost of insurance depends upon several
variables, the cost for each Contract Month can vary from month to month.
LBVIP will determine the monthly cost of insurance charge by multiplying the
applicable cost of insurance rate or rates by the net amount at risk for each
Contract Month. The net amount at risk on any Monthly Anniversary is the
amount by which the Death Benefit which would have been payable on that
Monthly Anniversary exceeds the Accumulated Value on that Monthly Anniversary.
For the purposes of this calculation, the Death Benefit will be divided by
1.0040741, which reduces the net amount at risk by taking into account assumed
monthly earnings at an annual rate of 5%. In general, the actual cost of
insurance rate will be lower for Contracts having a Face Amount at issuance or
after a requested increase that equals or exceeds $250,000.
The monthly cost of insurance will be determined separately for each component
of the net amount at risk, using the cost of insurance rate applicable to the
component, in the following order: (1) the initial Face Amount; (2)
successively, each increase in Face Amount up to the Face Amount in force, in
the order in which the increase took effect; and (3) any Death Benefit that
would be payable by reason of Accumulated Value calculations (that is,
whenever the Death Benefit is based on the applicable percentage of
Accumulated Value) over the Face Amount in force. For example, when a
Contract Owner has elected to make an increase in the Face Amount, the monthly
cost of insurance would be computed separately on the initial Face Amount
using the cost of insurance rate for the premium class determined upon
Contract issuance, and to each increase in Face Amount using the cost of
insurance rate for the premium class determined for such increase as specified
in the supplement to the Contract evidencing that increase.
Because the monthly cost of insurance must be determined separately for each
component of the net amount at risk described above, the Accumulated Value
must be allocated to each component. For purposes of determining the net
amounts at risk for each component if Option B is in effect, Accumulated Value
will first be considered a part of the initial Face Amount, and then each
successive increase in the Face Amount. If the Accumulated Value is greater
than the initial Face Amount, it will be considered a part of each increase in
order, starting with the first increase. When Option A is in effect, the
Accumulated Value is not included within the Face Amount. Accordingly, the
cost of insurance rates applicable will be the rate(s) applicable to the Face
Amount (and any increases in Face Amount). The cost of insurance rate
applicable to the remaining Death Benefit, if any, that would be payable by
reason of Accumulated Value calculations (which is the remainder of the net
amount at risk) will be that applicable to the initial Face Amount.
Any change in the net amount at risk will affect the total cost of insurance
paid by the Contract Owner. For example, because generally the net amount at
risk equals the excess of the Death Benefit over the Accumulated Value, the
net amount at risk may be affected by changes in the Accumulated Value, in the
Face Amount, or in the Death Benefit Option in effect. See "CONTRACT
BENEFITS--Death Benefits--Accumulated Value and Cash Surrender Value".
Cost of Insurance Rate. Cost of insurance rates will be based on the initial
Face Amount and the sex, Attained Age and premium class of the Insured. The
actual monthly cost of insurance rates will be based on LBVIP's expectations
as to future mortality experience. They will not, however, be greater than
the guaranteed cost of insurance rates set forth in the Contract. These
guaranteed rates are based on the Insured's Attained Age and the 1980
Commissioners Standard Ordinary Mortality Table. Any change in the cost of
insurance rates will generally apply to all persons of the same Attained Age,
sex and premium class. In general, the actual cost of insurance rate will be
lower for Contracts having a Face Amount at issuance or after a requested
increase that equals or exceeds $250,000. Montana has enacted legislation
that requires that cost of insurance rates applicable to Contracts purchased
in Montana cannot vary on the basis of the Insured's sex, and so, for
Contracts issued in the state of Montana, the cost of insurance rate will not
be based on the basis of sex. In connection with certain employment-related
plans, cost of insurance rates may in some circumstances not distinguish
between men and women. See "EMPLOYMENT-RELATED BENEFIT PLANS".
Premium Class. The premium class of an Insured will affect the cost of
insurance rates. LBVIP currently places Insureds into standard premium
classes and into substandard premium classes, which involve a higher mortality
risk. In an otherwise identical Contract, an Insured in the standard premium
class will have a lower cost of insurance than an Insured in a premium class
with higher mortality risks. The premium classes are also divided into two
categories: smokers and nonsmokers. Nonsmoking Insureds will generally incur
lower cost of insurance rates than Insureds who are classified as smokers.
Any Insured with an Attained Age at issuance under 20 will not be classified
initially as a smoker or nonsmoker and then will be classified as a smoker at
Attained Age 20 unless the Insured provides satisfactory evidence that the
Insured is a nonsmoker. (LBVIP will provide notice to the Contract Owner of
the opportunity for the Insured to be classified as a nonsmoker when the
Insured reaches Attained Age 20.)
Monthly Administration Charge. LBVIP has primary responsibility for the
administration of the Contract and the Variable Account. As a result, LBVIP
expects to incur certain ordinary administrative expenses and certain issuance
expenses. A monthly administration charge included in the Monthly Deduction
will be used to reimburse LBVIP for these expenses, except to the extent that
these expenses are reimbursed through the collection of the Deferred
Administrative Charge included in the Decrease Charge, which is, in effect, an
"acceleration" of the initial administrative charge described below.
There are two administrative charges included in the monthly administration
charge--a basic monthly administrative charge that is collected every Contract
Month and an initial monthly administrative charge that is deducted as part of
the first 120 Monthly Deductions (the "Initial Monthly Administrative Charge")
following Contract issuance and following any requested increase in Face
Amount. LBVIP does not expect to make a profit on either of these charges.
Basic Monthly Administrative Charge. A basic monthly administrative charge of
$4.00 will be deducted from Accumulated Value on the Contract Date and each
Monthly Anniversary as part of the Monthly Deduction. This charge is intended
to reimburse LBVIP for ordinary administrative expenses expected to be
incurred, including record keeping, processing Death Benefit claims, certain
Contract changes, preparing and mailing reports, and overhead costs.
Initial Monthly Administrative Charge. The Initial Monthly Administrative
Charge will be deducted from Accumulated Value as part of the first 120
Monthly Deductions following Contract issuance, commencing with the Monthly
Deduction(s) collected on the Contract Date. This monthly charge will equal
an amount per $1,000 of Face Amount based upon the Insured's Attained Age at
Contract issuance and, except for Insureds with an Attained Age at Contract
issuance under 20, upon whether the Insured is a smoker or a nonsmoker. The
Initial Monthly Administrative Charge per $1,000 of Face Amount will be
determined from Appendix C. As shown in Appendix C, the Initial Monthly
Administrative Charge will be less for Contracts having a Face Amount at
issuance that equals or exceeds $250,000.
If the Face Amount is increased, a separate Initial Monthly Administrative
Charge will be deducted from Accumulated Value as part of the first 120
Monthly Deductions after the increase beginning with the Monthly Anniversary
on which the increase becomes effective. This separate Initial Monthly
Administrative Charge will be determined in the same manner as for the initial
Face Amount, except that the Insured's Attained Age on the effective date of
the increase will be used and the charge per $1,000 of Face Amount to be
applied to the increase will be based on the amount of the entire new Face
Amount after giving effect to the increase.
If a spouse rider providing additional insurance benefits on the Insured's
spouse is added, a separate Initial Monthly Administrative Charge will be
deducted from Accumulated Value as part of the first 120 Monthly Deductions
after the issuance of the spouse rider, beginning with the Monthly Anniversary
on which the spouse rider becomes effective. This additional Initial Monthly
Administrative Charge will be determined in the same manner as for the initial
Face Amount, except that the spouse's Attained Age and smoker or nonsmoker
status on the effective date of the rider will be used.
The Initial Monthly Administrative Charge is intended to reimburse LBVIP for
administrative expenses in connection with the issuance of the Contract,
including medical exams, review of applications for insurance underwriting
decisions, and processing of the applications and establishing Contract
records. Similar expenses are expected in connection with future changes in
the Contract initiated by the Contract Owner which involve "insurability"
decisions, such as applications for increases in Face Amount and the issuance
of spouse riders.
The issuance expenses covered by the Initial Monthly Administrative Charge are
the same expenses covered by the Deferred Administrative Charge included in
the Decrease Charge. See "CHARGES AND DEDUCTIONS--Accumulated Value Charges--
Decrease Charge" above. LBVIP will not, however, be reimbursed twice for
these expenses. As described above (see "CHARGES AND DEDUCTIONS--Accumulated
Value Charge--Decrease Charge"), and except in the case of charges
attributable to spouse riders (see discussion below), if a Contract lapses or
is totally surrendered during the 10-year period when the Initial Monthly
Administrative Charge applies, or if a requested decrease in Face Amount
occurs during the 10-year period when the Initial Monthly Administrative
Charge generally applies, the Initial Monthly Administrative Charge will, in
effect, generally be "accelerated" and collected in the form of the Deferred
Administrative Charge included in the Decrease Charge.
Because the Deferred Administrative Charge included in the Decrease Charge is
in effect an "acceleration" of the Initial Monthly Administrative Charge, the
imposition of the Deferred Administrative Charge will generally eliminate or
reduce the Initial Monthly Administrative Charge. If the Contract lapses or
is totally surrendered during the 10-year period when the Initial Monthly
Administrative Charge applies so that the Decrease Charge is imposed, the
Initial Monthly Administrative Charge will not be collected. If the Face
Amount is decreased at the Contract Owner's request during this 10-year period
so that the Decrease Charge (including the Deferred Administrative Charge) is
imposed in part, the Initial Monthly Administrative Charge will be reduced
because of the Deferred Administrative Charge imposed (being applied to reduce
proportionately or eliminate the Initial Monthly Administrative Charge
attributable to that portion of the Face Amount covered by the Decrease
Charge).
If a Contract lapses and is then reinstated, the Initial Monthly
Administrative Charge will be reinstated until a total of 120 Monthly
Deductions have been taken. See "PAYMENT AND ALLOCATION OF PREMIUMS--
Contract Lapse and Reinstatement".
No Deferred Administrative Charge will be calculated for the issuance of a
spouse rider, even though a separate Initial Monthly Administrative Charge
will be calculated for spouse riders. As a result, the Initial Monthly
Administrative Charge attributable to a spouse rider will not be "accelerated"
and collected in the form of the Deferred Administrative Charge included in
the Decrease Charge upon surrender or lapse or upon a requested decrease in
Face Amount. If a lapse or total surrender of the Contract or a cancellation
of the spouse rider occurs during the 10-year period when an Initial Monthly
Administrative Charge applies for a spouse rider, the charge will not be
collected. If a requested decrease on a spouse rider occurs during this 10-
year period, the Initial Monthly Administrative Charge attributable to the
spouse rider will be reduced proportionately.
Additional Insurance Benefits Charges. The Monthly Deduction will include
charges for any additional insurance benefits added to the Contract by rider.
These charges are for insurance protection, and the monthly amounts will be
specified in the Contract. See "GENERAL PROVISIONS--Additional Insurance
Benefits".
Partial Surrender Charge
A partial surrender charge of $25 or 2% of the amount withdrawn, whichever is
less, will be deducted from the amount withdrawn for each partial surrender to
compensate LBVIP for the administrative costs in effecting the requested
payment and in making necessary calculations for any reductions in Face Amount
which may be required by reason of the partial surrender. This charge is
guaranteed not to increase. LBVIP does not expect to make a profit from this
charge. Only one partial surrender can be made in any Contract Month.
Charges Against the Variable Account
Mortality and Expense Risk Charge. A daily charge (the "Mortality and Expense
Risk Charge") will be deducted from the value of the net assets of the
Variable Account to compensate LBVIP for mortality and expense risks assumed
in connection with the Contract. LBVIP has determined that a Mortality and
Expense Risk Charge at an annual rate of .75% of the average daily net assets
of each Subaccount of the Variable Account would be reasonable in relation to
the mortality and expense risks assumed by LBVIP under the Contract. LBVIP
will, however, initially impose a Mortality and Expense Risk Charge at an
annual rate of .60% (or a daily rate of .001644%) of the average daily net
assets of each Subaccount of the Variable Account. The Mortality and Expense
Risk Charge is guaranteed not to increase above an annual rate exceeding .75%.
The daily charge will be deducted from the new asset value of the Variable
Account, and therefore the Subaccounts, on each Valuation Date. When the
previous day or days was not a Valuation Date, the deduction on the Valuation
Date will be .001644% multiplied by the number of days since the last
Valuation Date.
The mortality risk assumed by LBVIP is that Insureds may live for a shorter
time than projected because of inaccuracies in the projections, and that an
aggregate amount of Death Benefits greater than that projected accordingly
will be payable. The expense risk assumed is that expenses incurred in
issuing and administering the Contracts will exceed the administrative charges
provided in the Contracts.
Taxes. Currently, no charge will be made against the Variable Account for
Federal income taxes. LBVIP may, however, make such a charge in the future if
income or gains within the Variable Account will incur any Federal income tax
liability. Charges for other taxes, if any, attributable to the Variable
Account may also be made. See "FEDERAL TAX MATTERS".
Investment Advisory Fee of the Fund. Because the Variable Account purchases
shares of the Fund, the net assets of the Variable Account will reflect the
investment advisory fee incurred by the Fund. See "LBVIP, LUTHERAN
BROTHERHOOD AND THE VARIABLE ACCOUNT--LB Series Fund, Inc.", and the
accompanying current prospectus for the Fund.
DEATH BENEFIT GUARANTEE
General. If a Contract Owner meets the requirement described below for the
Death Benefit Guarantee, LBVIP guarantees that the Contract will not lapse.
Whenever the Cash Surrender Value is less than the Monthly Deduction then due,
any excess of Accumulated Value over Contract Debt will be used to pay the
Monthly Deduction. If available Accumulated Value is less than the Monthly
Deduction then due and the Death Benefit Guarantee is in effect, LBVIP will
pay the deficiency.
If the Death Benefit Guarantee terminates, the Contract will not necessarily
lapse. For a discussion of the circumstances under which the Contract may
lapse, see "PAYMENT AND ALLOCATION OF PREMIUMS--Contract Lapse and
Reinstatement". The Death Benefit Guarantee does, however, provide additional
protection against the possibility of lapse.
The Death Benefit Guarantee provides significant protection against lapse of
the Contract. First, to the extent Cash Surrender Value declines due to poor
investment performance, the Death Benefit Guarantee may be necessary to avoid
lapse of the Contract. Second, during the early Contract Years, the Cash
Surrender Value will generally not be sufficient to cover the Monthly
Deduction, so that the Death Benefit Guarantee will be necessary to avoid
lapse of the Contract. This occurs because the Decrease Charge usually
exceeds the Accumulated Value in these years. In this regard, a Contract
Owner should consider that if an increase in Face Amount is requested, an
additional Decrease Charge would apply for the ten years following the
increase, which could create a similar possibility of lapse as exists during
the early Contract Years. THUS, EVEN THOUGH THE CONTRACT PERMITS PREMIUM
PAYMENTS LESS THAN THE PAYMENTS REQUIRED TO MAINTAIN THE DEATH BENEFIT
GUARANTEE, THE CONTRACT OWNER WILL LOSE THE SIGNIFICANT PROTECTION PROVIDED BY
THE DEATH BENEFIT GUARANTEE BY PAYING LESS THAN THE PREMIUMS REQUIRED TO
MAINTAIN THE GUARANTEE.
WHEN CONSIDERING CONTRACT LOANS (see "CONTRACT RIGHTS--Loan Privileges") OR
PARTIAL SURRENDERS (see "CONTRACT RIGHTS--Surrender Privileges"), A CONTRACT
OWNER SHOULD KEEP IN MIND THAT A CONTRACT LOAN OR PARTIAL SURRENDER COULD
CAUSE TERMINATION OF THE DEATH BENEFIT GUARANTEE BECAUSE THE AMOUNT OF ANY
PARTIAL SURRENDER OR CONTRACT LOAN AMOUNT WILL, SUBJECT TO CERTAIN EXCEPTIONS,
BE DEDUCTED FROM CUMULATIVE PREMIUM PAYMENTS IN DETERMINING WHETHER THE
REQUIREMENTS FOR THE DEATH BENEFIT GUARANTEE HAVE BEEN MET.
Death Benefit Guarantee Requirement. The Death Benefit Guarantee applies if
the total cumulative premiums paid (before deduction of the Premium Expense
Charges) under the Contract, less any partial surrenders and the Loan Amount,
equals or exceeds the sum of the Death Benefit Guarantee Premiums (described
below) on each Monthly Anniversary since the issuance of the Contract.
However, if the Death Benefit Guarantee requirement is not met on a Monthly
Anniversary but the Cash Surrender Value less any unearned interest is greater
than or equal to the sum of Death Benefit Guarantee Premiums from the Date of
Issue through that Monthly Anniversary, then the sum of premiums paid as used
above will be deemed to increase through that date to the amount necessary to
meet the Death Benefit Guarantee requirement.
In addition, a portion of any partial surrender or Contract Loan Amount may be
excluded when determining if the Death Benefit Guarantee requirement is met.
The amount excluded is calculated on the date of the partial surrender or
Contract loan and is equal to the lesser of:
1) The amount of the partial surrender or unpaid Contract loan; and
2) The excess, if any, of the Cash Surrender Value less unearned prepaid loan
interest over the greater of (a) and (b) where:
a) Is the sum of premiums paid less the amount of any partial surrenders and
Contract loans not previously excluded when determining if the Death Benefit
Guarantee requirement was met; and
b) Is the sum of Death Benefit Guarantee Premiums from the Date of Issue
through the Monthly Anniversary on or next after the date of the partial
surrender or Contract loan.
These calculations for Death Benefit Guarantee compliance are intended to
provide the Contract Owner with the flexibility to take advantage of certain
increases in Cash Surrender Value without losing the benefit of the Death
Benefit Guarantee. First, by "deeming" the sum of premiums paid to be
increased under the circumstances described above for purposes of the Death
Benefit Guarantee, the Contract Owner can take advantage of increases in Cash
Surrender Value by reducing or suspending actual premium payments so long as
Cash Surrender Value, less any unearned prepaid loan interest, remains at a
sufficient level to maintain the Death Benefit Guarantee under the formula
described above. Second, by excluding part of a partial surrender or a
Contract loan under the circumstances described above for purposes of the
Death Benefit Guarantee, the Contract Owner can take advantage of increases in
Cash Surrender Value by withdrawing a part of such increases by means of a
partial surrender or Contract loan, provided that on the date of such
surrender or loan the Cash Surrender Value, less any unearned prepaid loan
interest, is at a sufficient level under the formula described above. Of
course, any such actions by a Contract Owner will have the effect (directly or
indirectly) of reducing Cash Surrender Value, which may mean that less Cash
Surrender Value will be available for future Contract charges and for
determining future compliance with the requirements for the Death Benefit
Guarantee. A Contract Owner should also consider the other effects of varying
the amount and frequency of premium payments (see "PAYMENT AND ALLOCATION OF
PREMIUMS") and of partial surrenders and Contract loans (see "CONTRACT RIGHTS-
- -Loan Privileges" and "CONTRACT RIGHTS--Surrender Privileges").
If sufficient premium payments have been made, the Death Benefit Guarantee
will apply until the specified Attained Age of the Insured shown in the
Contract, which Attained Age will be the later of (a) the Insured's Attained
Age 71 and (b) the Attained Age of the Insured at the end of a period ranging
from 6 to 31 years (varying with the Insured's Attained Age at issue) from the
Date of Issue.
LBVIP will determine on each Monthly Anniversary whether the requirements for
the Death Benefit Guarantee have been satisfied, but premiums need not be paid
on a monthly basis. If, as of any Monthly Anniversary, the Contract Owner has
not made sufficient premium payments to maintain the Death Benefit Guarantee,
the Death Benefit Guarantee will terminate immediately, subject to only a
limited right of reinstatement, as described below under "Reinstatement".
Reinstatement. After termination of the Death Benefit Guarantee, LBVIP will
send written notice to the Contract Owner that the Death Benefit Guarantee has
terminated and the Contract Owner will have 31 days from the date such notice
is sent by LBVIP to reinstate the Death Benefit Guarantee. The written notice
of termination from LBVIP to the Contract Owner will indicate the premium
payment required to reinstate the Death Benefit Guarantee. If LBVIP does not
receive this required premium payment within 31 days after this written notice
is sent to the Contract Owner by LBVIP, the Death Benefit Guarantee will
remain terminated and can never be reinstated. During this 31 day
reinstatement period, the Contract Owner will not have the protection of the
Death Benefit Guarantee.
WHEN DETERMINING THE AMOUNT AND FREQUENCY OF PREMIUM PAYMENTS, A CONTRACT
OWNER SHOULD CAREFULLY CONSIDER THAT THE DEATH BENEFIT GUARANTEE TERMINATES
IMMEDIATELY WHEN THE REQUIREMENTS DESCRIBED ABOVE ARE NOT SATISFIED, AND THE
ABILITY TO REINSTATE THE DEATH BENEFIT GUARANTEE PERMANENTLY EXPIRES ON THE
FOLLOWING MONTHLY ANNIVERSARY OF THE CONTRACT 31 DAYS AFTER LBVIP SENDS
WRITTEN NOTICE OF TERMINATION.
Death Benefit Guarantee Premium. A monthly premium amount required to
maintain the Death Benefit Guarantee (the "Death Benefit Guarantee Premium")
will be set forth in the Contract. The Death Benefit Guarantee Premium is
determined by LBVIP based upon a formula taking into account the applicable
cost of insurance charge for the Insured, using the Insured's actual premium
class (see "CHARGES AND DEDUCTIONS--Monthly Deduction--Cost of Insurance"); a
percentage of assumed monthly Death Benefit Guarantee Premium payment together
with an assumed premium processing charge; the applicable Initial Monthly
Administrative Charge (see "CHARGES AND DEDUCTIONS--Monthly Deduction--Initial
Monthly Administrative Charge"); the charge for any additional insurance
benefits added by rider (see "GENERAL PROVISIONS--Additional Insurance
Benefits"); and the basic monthly administrative charge of $4.00 per month
(see "CHARGES AND DEDUCTIONS--Monthly Deduction--Basic Monthly Administrative
Charge"). Due to the factors considered in calculating these charges, the
Death Benefit Guarantee Premium will vary depending upon, among other things,
the Insured's sex, the Insured's Attained Age, the Insured's premium class,
the Face Amount, the Death Benefit Option, and which additional insurance
benefits, if any, are added by rider. The Death Benefit Guarantee Premium
will change as the result of certain Contract changes, including an increase
or decrease in Face Amount; a change in Death Benefit Option; a change in
premium class; and an increase, decrease, addition or deletion of additional
insurance benefits. Whenever the Death Benefit Guarantee Premium changes, the
Contract Owner will be notified promptly of the new Death Benefit Guarantee
Premium.
CONTRACT RIGHTS
Loan Privileges
General. The Contract Owner may at any time after the Contract Date borrow
money from LBVIP using the Contract as the only security for the loan. The
Contract Owner may at any time after the Contract Date obtain Contract loans
in a minimum amount of $100 but not exceeding in the aggregate 90% of the
excess of Accumulated Value over any Decrease Charge on the date of any loan.
Loans have priority over the claims of any assignee or other person. The loan
may be repaid in full or in part at any time while the Insured is living.
As used in this Prospectus, the term "Loan Amount" means the sum of all unpaid
Contract loans (including any prepaid loan interest added to the then
outstanding Loan Amount), and the term "Debt" means the sum of all unpaid
Contract loans less any unearned prepaid loan interest). The Loan Amount is
used in calculating whether the requirement for the Death Benefit Guarantee
has been satisfied (see "DEATH BENEFIT GUARANTEE"). Contract Debt is used in
calculating the Contract's Cash Surrender Value (see "CONTRACT BENEFITS--
Accumulated Value and Cash Surrender Value") the amount of Death Benefit
proceeds payable to the beneficiary (see "CONTRACT BENEFITS--Death Benefits"),
the amount of benefit proceeds at Maturity Date (see "CONTRACT BENEFITS--
Benefits at Maturity") and (in some cases) in determining whether the Contract
will lapse (see "PAYMENT AND ALLOCATION OF PREMIUMS--Contract Lapse and
Reinstatement).
Allocation of Contract Loan. LBVIP will allocate a Contract loan among the
Subaccounts of the Variable Account in the same proportion that the Contract's
Accumulated Value in each Subaccount bears to the Contract's total Accumulated
Value in the Variable Account, as of the day on which the request is received
or, if that is not a Valuation Date, on the next following Valuation Date.
With LBVIP's approval, the Contract Owner can select a different allocation.
Loans will normally be paid within seven days after receipt of Written Notice.
Postponement of loans may take place under certain circumstances. See
"GENERAL PROVISIONS--Postponement of Payments".
Interest. The interest rate charged on Contract loans accrues daily at an
annual rate of 7.4%, payable in advance, which is equivalent to a fixed rate
of 8% per year. Loan interest is calculated on a prepaid basis, and is
payable in advance at the time any Contract loan is made (for the rest of the
Contract Year) and at the beginning of each Contract Year thereafter (for that
entire Contract Year). If interest is not paid when due, it will be added to
the loan balance and will bear interest at the same rate. If death or full
surrender occurs before the next Contract Anniversary, unearned interest will
be added to the proceeds payable.
Effect of Contract Loans. Accumulated Value equal to the portion of the
Contract loan allocated to each Subaccount will be transferred from the
Subaccount to the Loan Account, thereby reducing the Contract's Accumulated
Value in that Subaccount.
As long as the Contract is in force, Accumulated Value in the Loan Account
will be credited with interest at an effective annual rate of 6%. NO
ADDITIONAL INTEREST WILL BE CREDITED TO THESE ASSETS. The interest earned
during a Contract Month will be credited at the end of the Contract Month.
Any interest credited will be allocated to the Subaccount(s) in proportion to
the Accumulated Value in the respective Subaccounts. See "PAYMENT AND
ALLOCATION OF PREMIUMS--Allocation of Premiums and Accumulated Value".
Although Contract loans may be repaid at any time before the Maturity Date,
Contract loans will permanently affect the Contract's potential Accumulated
Value and Cash Surrender Value and may permanently affect the Death Benefit
under the Contract. The effect on Accumulated Value and Death Benefit could
be favorable or unfavorable depending on whether the investment performance of
the Accumulated Value in the Subaccount(s) is less than or greater than the
interest being credited on the assets in the Loan Account while the loan is
outstanding. Compared to a Contract under which no loan is made, values under
the Contract will be lower when such interest credited is less than the
investment performances of assets held in the Subaccount(s). In addition, the
Death Benefit proceeds will be reduced by the amount of any outstanding
Contract Debt.
THE AMOUNT OF ANY CONTRACT LOAN WILL, SUBJECT TO CERTAIN EXCEPTIONS, BE
DEDUCTED FROM CUMULATIVE PREMIUM PAYMENTS IN DETERMINING WHETHER THE
REQUIREMENTS FOR THE DEATH BENEFIT GUARANTEE HAVE BEEN SATISFIED. AS A
RESULT, A CONTRACT LOAN COULD RESULT IN TERMINATION OF THE DEATH BENEFIT
GUARANTEE. See "DEATH BENEFIT GUARANTEE".
Repayment of Contract Debt. Debt may be repaid any time before the Maturity
Date while the Insured is living. Each repayment must be at least $25. If
not repaid, LBVIP will deduct Debt from any proceeds payable under the
Contract. As Debt is repaid, the Contract's Accumulated Value held in the
Subaccount(s) of the Variable Account will be restored and any prepaid
interest attributable to the repaid amount will likewise be allocated to the
Subaccount(s) in the same proportion as Debt repayments will be allocated.
LBVIP will allocate the amount of such repayment (as well as any prepaid loan
interest that was unearned by LBVIP at the time of repayment) to the
Subaccount(s) of the Variable Account in the same proportion that the
Contract's Accumulated Value in a Subaccount bears to the Contract's total
Accumulated Value in the Variable Account (the Contract Owner may select a
different allocation basis with LBVIP's approval). See "PAYMENT AND
ALLOCATION OF PREMIUMS--Allocation of Premiums and Accumulated Value". When
the entire Debt is repaid, interest that would be credited upon the assets
held in the Loan Account during the period from the last Monthly Anniversary
to the date of repayment will also be allocated to the Subaccount(s) in the
same proportion as Debt repayments will be allocated. LBVIP will allocate the
repayment of Debt as of the date on which the repayment is received or, if
that is not a Valuation Date, on the next following Valuation Date.
The Contract Owner must notify LBVIP if a payment is a loan repayment;
otherwise, it will be considered a premium payment.
Tax Considerations. Under the Technical and Miscellaneous Revenue Act of
1988, any loans taken from a "modified endowment contract" will be treated as
a taxable distribution. In addition, with certain exceptions, a ten percent
(10%) additional income tax penalty would be imposed on the portion of any
loan that is included in income. See "FEDERAL TAX MATTERS--Contract
Proceeds".
Surrender Privileges
At any time before the earlier of the death of the Insured and the Maturity
Date, the Contract Owner may partially or totally surrender the Contract by
sending Written Notice to LBVIP. The Cash Surrender Value will equal the
Accumulated Value less any Contract Debt and any Decrease Charge. A Contract
Owner may elect to have the amount paid in cash or under a settlement option.
See "CONTRACT BENEFITS--Payment of Contract Benefits".
Full Surrender. If the Contract is fully surrendered, the Contract Owner will
be paid the Cash Surrender Value of the Contract determined as of the date a
Written Notice requesting surrender is received by LBVIP (or as of such later
date as the Contract Owner shall specify in the Written Notice), or, if this
date is not a Valuation Date, the next following Valuation Date. To surrender
the Contract fully, the Contract must be delivered to LBVIP along with the
Written Notice requesting surrender.
Partial Surrender. The Contract may be surrendered in part for any amount, as
long as the amount of the partial surrender is at least $500 and as long as
the remaining Cash Surrender Value is not less than $500 (in each case with
the Cash Surrender Value being determined on the day Written Notice is
received by LBVIP, or if this is not a Valuation Date, the next following
Valuation Date). The amount surrendered will be deducted from the
Subaccount(s) of the Variable Account in the same proportion that the Contract
Owner's Accumulated Value in the respective Subaccount(s) bears to the
Contract's total Accumulated Value in the Subaccount(s) at that time (the
Contract Owner may select a different allocation basis with LBVIP's approval).
Only one partial surrender can be made in any Contract Month. A surrender
charge of $25 or 2% of the amount withdrawn, whichever is less, will be
deducted by LBVIP from the amount withdrawn. For a discussion of certain
limitations and considerations applicable to partial surrenders, see "Partial
Surrenders--Certain Other Considerations" below.
Effect of Partial Surrenders on Face Amount and Death Benefit. A partial
surrender will always decrease the Death Benefit and may also decrease the
Face Amount. As described below, the effect of a partial surrender on the
Death Benefit and the Face Amount may vary depending upon the Death Benefit
Option in effect and whether the Death Benefit is based on the applicable
percentage of Accumulated Value.
Option A--Effect of Partial Surrenders. The effect of a partial surrender on
the Face Amount and Death Benefit under Option A can be described as follows.
The Face Amount will never be decreased by a partial surrender. A partial
surrender will, however, always decrease the Death Benefit under Option A by
one of the following amounts:
(bullet) If the Death Benefit equals the Face Amount plus the Accumulated
Value, a partial surrender will reduce the Accumulated Value by the amount of
the partial surrender and thus the Death Benefit will also be reduced by the
amount of the partial surrender.
Illustration. For the purpose of this illustration (and any following
illustrations of partial surrenders), assume that the Attained Age of the
Insured is under 40, and there is no Contract Debt. (The applicable
percentage is 250% for an Insured with an Attained Age of 40 or below. See
"CONTRACT BENEFITS--Death Benefits".)
Under Option A, a Contract with a Face Amount of $100,000 and an Accumulated
Value of $60,000 will have a Death Benefit of $160,000 ($100,000 + $60,000).
Assume that the Contract Owner wishes to take a partial surrender of $20,000.
Because the Death Benefit equals the Face Amount plus the Accumulated Value,
the partial surrender will reduce the Accumulated Value to $40,000 ($60,000 -
$20,000 = $40,000) and the Death Benefit to $140,000 ($100,000 + $40,000).
The Face Amount is not changed.
(bullet) If the Death Benefit immediately prior to the partial surrender is
based on the applicable percentage of Accumulated Value, the Death Benefit
will be reduced to equal, the greater of (a) the Face Amount plus Accumulated
Value after deducting the partial surrender and (b) the Death Benefit based on
the applicable percentage of Accumulated Value after deducting the partial
surrender.
Illustration. Under Option A, a Contract with a Face Amount of $100,000 and
an Accumulated Value of $80,000 will have a Death Benefit of $200,000 ($80,000
X 2.5). Assume that the Contract Owner wishes to take a partial surrender of
$20,000. Because the Death Benefit is based on the applicable percentage of
Accumulated Value, the partial surrender will reduce the Accumulated Value to
$60,000 ($80,000 - $20,000) and the Death Benefit to the greater of (a) the
Face Amount plus the Accumulated Value ($100,000 + $60,000 = $160,000), and
(b) the Death Benefit based on the applicable percentage of Accumulated Value
($60,000 X 2.5 = $150,000). Therefore, the Death Benefit will be $160,000.
The Face Amount is not changed.
Option B--Effect of Partial Surrenders. The effect of a partial surrender on
the Face Amount and Death Benefit under Option B can be described as follows:
(bullet) If the Death Benefit equals the Face Amount, a partial surrender
will reduce the Face Amount and the Death Benefit by the amount of the partial
surrender.
Illustration. Under Option B, a Contract with a Face Amount of $100,000 and
an Accumulated Value of $30,000 will have a Death Benefit of $100,000 (that
is, the Face Amount). Assume that the Contract Owner wishes to take a partial
surrender of $10,000. The partial surrender will reduce the Accumulated Value
to $20,000 ($30,000 - $10,000) and the Death Benefit and Face Amount to
$90,000 ($100,000 - $10,000).
(bullet) If the Death Benefit is based on the applicable percentage of
Accumulated Value and the amount of the partial surrender multiplied by the
applicable percentage is less than the Death Benefit immediately prior to the
partial surrender minus the Face Amount at that time, the Face Amount will not
be reduced and the Death Benefit will be reduced by the amount of the partial
surrender multiplied by the applicable percentage.
Illustration. Under Option B, a Contract with a Face Amount of $100,000 and
an Accumulated Value of $60,000 will have a Death Benefit of $150,000 ($60,000
X 2.5). Assume that the Contract Owner wishes to take a partial surrender of
$10,000. The amount of the partial surrender multiplied by the applicable
percentage ($10,000 X 2.5 = $25,000) is less than the Death Benefit minus the
Face Amount prior to the partial surrender ($150,000 - $100,000 = $50,000).
Because the Death Benefit is based on the applicable percentage of Accumulated
Value and the amount of the partial surrender multiplied by the applicable
percentage is less than the Death Benefit minus the Face Amount, the Face
Amount will not be reduced and the Death Benefit will be reduced by the amount
of the partial surrender multiplied by the applicable percentage ($150,000 -
($10,000 X 2.5) = $125,000). This is also the Death Benefit based on the
applicable percentage of Accumulated Value after the partial surrender
(($60,000 - $10,000) X 2.5 = $125,000).
(bullet) If the Death Benefit immediately prior to the partial surrender is
based on the applicable percentage of Accumulated Value and the amount of the
partial surrender multiplied by the applicable percentage exceeds the Death
Benefit immediately prior to the partial surrender minus the Face Amount at
that time, the Face Amount will be reduced by an amount equal to (a) the
amount of the partial surrender, less (b) the result obtained by dividing (i)
the difference between the Death Benefit and the Face Amount immediately prior
to the partial surrender by (ii) the applicable percentage. The Death Benefit
will be reduced to equal the Face Amount after the partial surrender.
Illustration. Under Option B, a Contract with a Face Amount of $100,000 and
an Accumulated Value of $60,000 will have a Death Benefit of $150,000 ($60,000
X 2.5). Assume that the Contract Owner wishes to take a partial surrender of
$30,000. The amount of the partial surrender multiplied by the applicable
percentage ($30,000 X 2.5 = $75,000) exceeds the Death Benefit minus the Face
Amount prior to the partial surrender ($150,000 - $100,000 = $50,000).
Because the Death Benefit is based on the applicable percentage of Accumulated
Value and the amount of the partial surrender multiplied by the applicable
percentage exceeds the Death Benefit minus the Face Amount, the Face Amount
will be reduced by an amount equal to (1) the amount of the partial surrender,
less (2) the result obtained by dividing (A) the difference between the Death
Benefit and the Face Amount prior to the partial surrender by (B) the
specified percentage ($30,000 - (($150,000 - $100,000) (divided by) 2.5)) =
$10,000). The Face Amount after the partial surrender will be $90,000
($100,000 - $10,000) and the Death Benefit will be $90,000.
Partial Surrenders--Certain Other Considerations. THE AMOUNT OF ANY PARTIAL
SURRENDER WILL, SUBJECT TO CERTAIN EXCEPTIONS, BE DEDUCTED FROM CUMULATIVE
PREMIUM PAYMENTS IN DETERMINING WHETHER THE REQUIREMENTS FOR THE DEATH BENEFIT
GUARANTEE HAVE BEEN SATISFIED. AS A RESULT, A PARTIAL SURRENDER COULD RESULT
IN TERMINATION OF THE DEATH BENEFIT GUARANTEE. See "DEATH BENEFIT GUARANTEE".
Because a partial surrender can affect the Face Amount and the Death Benefit
(as described above), a partial surrender may also affect the net amount at
risk under a Contract. The net amount at risk is, in general, the difference
between the Death Benefit and the Accumulated Value and will be used in
calculating the cost of insurance protection provided under the Contract. See
"CHARGES AND DEDUCTIONS--Accumulated Value Charges--Monthly Deduction--Cost of
Insurance".
A request for partial surrender will not be implemented if or to the extent
the requested partial surrender would reduce the Face Amount below $5,000.
Also, if a partial surrender would decrease the Face Amount, to the extent
that the partial surrender would result in cumulative premiums exceeding the
maximum premium limitations applicable under the Internal Revenue Code for
life insurance, LBVIP will not effect such partial withdrawal. See "PAYMENT
AND ALLOCATION OF PREMIUMS--Amount and Timing of Premiums--Premium
Limitations".
Tax Considerations. Under the Technical and Miscellaneous Revenue Act of
1988, any surrender of a "modified endowment contract" will be treated as a
taxable distribution. In addition, with certain exceptions, a ten percent
(10%) additional income tax penalty would be imposed on the portion of any
loan that is included in income. See "FEDERAL TAX MATTERS--Contract
Proceeds".
Free Look Privileges
The Contract provides for two types of "free look" privileges, one after the
application and issuance of the Contract and the other after any increase in
Face Amount.
Free Look for Contract. The Contract provides for an initial Free Look
Period. The Contract Owner may cancel the Contract until the latest of (a) 45
days after Part I of the application for the Contract is signed, (b) 10 days
after the Contract Owner receives the Contract, and (c) 10 days after LBVIP
mails or personally delivers a notice of withdrawal right to the Contract
Owner. Upon giving notice of cancellation and returning the Contract (if it
has been delivered), the Contract Owner will receive a refund equal to the sum
of (i) the Accumulated Value (as of the date the returned Contract is received
by LBVIP at its Home Office or by the LBVIP representative from whom the
Contract was purchased), without any deduction of the Decrease Charge, plus
(ii) the amount of any Premium Expense Charges, plus (iii) any Monthly
Deductions charged against the Contract's Accumulated Value, plus (iv) any
Mortality and Expense Risk Charges deducted from the value of the net assets
of the Variable Account attributable to the Contract, plus (v) the advisory
fees charged by the Fund against net asset value in the Fund Portfolios
attributable to the Contract's value in the corresponding Subaccount(s) of the
Variable Account. When state law requires a minimum refund equal to gross
premiums paid, the refund will instead equal the gross premiums paid on the
Contract and will not reflect the investment experience of the Variable
Account. The notice of withdrawal right for the Contract will include a
statement of the Decrease Charge and of the Initial Monthly Administrative
Charge (included in the Monthly Deduction--see "CHARGES AND DEDUCTIONS--
Accumulated Value Charges--Monthly Deduction") attributable to the Contract,
as well as a form for requesting cancellation of the Contract during the Free
Look Period.
Free Look for Increase in Face Amount. Any requested increase in Face Amount
is also subject to a "free look" privilege. The Contract Owner may cancel a
requested increase in Face Amount until the latest of (a) 45 days after Part I
of the application for increase is signed, (b) 10 days after the Contract
Owner receives a Contract supplement for the increase in Face Amount, and (c)
10 days after LBVIP mails or personally delivers a notice of withdrawal right
to the Contract Owner. Upon requesting cancellation of the increase, the
Contract Owner will receive a refund, if he or she so requests, or otherwise a
restoration of the Contract's Accumulated Value allocated among the
Subaccount(s) of the Variable Account as if it were a Net Premium, equal to
all Monthly Deductions attributable to the increase in Face Amount (including
rider costs arising from the increase). This refund or credit will be made
within seven days after LBVIP receives the request for cancellation on the
appropriate form. In addition, the Decrease Charge will be adjusted, if
necessary, so that it will be as though no increase in Face Amount had
occurred. The notice of withdrawal right upon an increase in Face Amount will
include a statement of the increase in the Decrease Charge and of the Initial
Monthly Administrative Charge (included in the Monthly Deduction--see "CHARGES
AND DEDUCTIONS--Accumulated Value Charges--Monthly Deduction") attributable to
the increase in Face Amount, as well as a form for requesting cancellation of
the increase during the Free Look Period.
Net Premiums paid after an increase in Face Amount will be allocated to the
Subaccount(s) of the Variable Account and will not be refunded following
cancellation of the increase. Contract Owners who request an increase in Face
Amount should consider this in deciding whether to make any premium payments
during the Free Look Period for the increase.
Exchange Privileges
Exchange of the Contract. During the first 24 months following the Date of
Issue, the Contract Owner may on one occasion, without evidence of
insurability, exchange any Contract still in force for a fixed benefit
permanent life insurance contract issued by Lutheran Brotherhood, of which
LBVIP is an indirect subsidiary. This new contract will not be dependent upon
future investment results of the Variable Account or any separate account of
Lutheran Brotherhood. In order to make this exchange for such a contract, the
Contract Owner must surrender the Contract to LBVIP at its Home Office, the
Insured must be living on the exchange date, and any assignee must agree in
writing to the exchange. In addition, any Debt under the Contract must be
repaid and any amount required to pay the first premium on the new contract
must be paid.
The new contract will have the same issue age, and premium class as the
Contract. The exchange will become effective on the date (the "exchange
date") that LBVIP receives the exchange request and the Contract at its Home
Office. The Contract will end at the end of the day before the exchange date,
and the new contract will become effective on the exchange date. On the
exchange date, the new contract will have, at the option of the Contract
Owner, either a death benefit equaling the Death Benefit under the Contract on
the effective date of the exchange or a net amount at risk equaling the net
amount at risk under the Contract on the effective date of the exchange. (An
additional premium payment may be required.) The Accumulated Value of the new
contract on the exchange date will vary depending upon the type of contract
for which the Contract is being exchanged. The conversion will be subject to
an equitable adjustment in payments and Contract values to reflect variances,
if any, in the payments and Contract values under the existing Contract and
the new contract. The new contract's provisions and charges will be those
that would have been applicable under Lutheran Brotherhood's standard
practices if the fixed benefit permanent life insurance contract had been
issued on the Date of Issue. See "FEDERAL TAX MATTERS" for a discussion of
the Federal income tax consequences of an exchange.
Exchange of Increase in Face Amount. During the first 24 months following an
increase in Face Amount, the Contract Owner may on one occasion, without
evidence of insurability, exchange the amount of the increase in Face Amount
for a fixed benefit permanent life insurance contract. Premiums under this
new contract will be based on the same issue age and premium class of the
Insured as were applied on the effective date of the increase in the Face
Amount of the Contract. The conditions and principles applicable to an
exchange of the entire Contract for such a contract which are described
immediately above will be equally applicable to this exchange of an increase
in Face Amount for such a new contract. See "FEDERAL TAX MATTERS" for a
discussion of the Federal income tax consequences of an exchange.
GENERAL PROVISIONS
Postponement of Payments
General. LBVIP may defer payment of maturity proceeds, any loan or surrender
and any portion of the death proceeds in excess of the Face Amount if (a) 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 SEC, or (b) an emergency exists, as determined by the SEC,
as a result of which disposal of securities is not reasonably practicable or
it is not reasonably practicable to determine the value of the Variable
Account's net assets. Transfers and allocations of Accumulated Value to and
against the Subaccounts of the Variable Account may also be postponed under
these circumstances.
Payment by Check. Payments under the Contract of any amounts derived from
premiums paid by check may be delayed until such time as the check has cleared
the Contract Owner's bank.
Date of Receipt
Except as otherwise stated herein, the date of receipt by LBVIP of any Written
Notice, premium payment, telephonic instructions or other communication is the
actual date it is received at LBVIP's Home Office in proper form unless
received (1) after the close of the New York Stock Exchange, or (2) on a date
which is not a Valuation Date. In either of these two cases, the date of
receipt will be deemed to be the next Valuation Date.
The Contract
The Contract and attached copy of the Application and any supplemental
Applications are the entire contract. Only statements in the Application and
any supplemental Applications can be used to void the Contract or defend a
claim. The statements are considered representations and not warranties. Any
change to the Contract must be in writing and signed by the President and the
Secretary of LBVIP. Pursuant to various applicable state laws, certain of the
provisions of the Contract may vary from state to state.
Suicide
If the Insured dies by suicide within two years (or such shorter period
provided by applicable state law) from the Date of Issue, LBVIP will pay an
amount equal to premiums paid, less any partial surrenders (and partial
surrender charges) and Contract Debt. If the Insured commits suicide within
two years after the effective date of any increase in Face Amount requiring
evidence of insurability (or such shorter period required by applicable state
law), the amount LBVIP will pay with respect to the increase will be only an
amount equal to the Monthly Deductions previously made for the increase.
Incontestability
LBVIP cannot contest the validity of a Contract after it has been in force
during the Insured's lifetime for two years from its Date of Issue, except for
any provisions granting benefits in the event of total disability. Similar
incontestability will apply to an increase in Face Amount or any reinstatement
after it has been in force during the Insured's lifetime for two years from
its effective date.
Change of Owner or Beneficiary
As long as the Contract is in force, the Contract Owner or Beneficiary may be
changed by Written Notice to LBVIP. The Contract need not be returned unless
requested by LBVIP. The change will take effect as of the date the request is
signed, whether or not the Insured is living when the request is received by
LBVIP. LBVIP will not, however, be liable for any payment made or action
taken before receipt of the Written Notice.
Assignment as Collateral
The Contract may be assigned as collateral. LBVIP will not be bound by the
assignment until a copy has been received at its Home Office, and LBVIP
assumes no responsibility for determining whether an assignment is valid or
the extent of the assignee's interest. All assignments will be subject to any
Contract Debt. The interest of any Beneficiary or other person will be
subordinate to any assignment.
Misstatement of Age or Sex
If the age or sex of the Insured has been misstated, the Accumulated Value
and/or Death Benefit will be adjusted, using the most recent cost of insurance
rates, to the amounts that would have been provided based on the correct age
and sex.
Due Proof of Death
LBVIP will accept as due proof of death of the Insured a completed claimant's
statement, which will be furnished by LBVIP, together with either a certified
death certificate or an attending physician's statement. In some
circumstances, LBVIP may require an attending physician's statement even
though a death certificate is furnished.
Reports to Contract Owners
LBVIP will mail to Contract Owners, at their last known address of record,
within 30 days after each Contract Anniversary, annual reports confirming the
status of each Contract's values and benefits. These reports will show the
following as of the beginning and end of the Contract Year: the Face Amount;
the Death Benefit; the Accumulated Value; any outstanding Decrease Charge; any
Contract Debt; and Cash Surrender Value. The annual reports will show how
future Net Premiums will be allocated among the Subaccount(s) pursuant to the
Contract Owner's current allocation instructions. In addition, LBVIP will
mail to Contract Owners quarterly reports that will show all Contract
transactions since the last Contract Anniversary, including, but not limited
to, the amount and dates of premium payments (including those paid under an
automatic payment plan offered by LBVIP or those paid prior to the initial
transfer to the Subaccount(s) on the Contract Date), monthly charges deducted,
loans (as well as the loan interest that became due, interest credited from
the General Account and loan repayments), partial surrenders, transfers,
exchanges or an exercise of a free look privilege.
Within seven days of the following transactions, LBVIP will mail a
confirmation statement or letter to the Contract Owner confirming such
transactions, in addition to showing them in the quarterly and annual reports:
any premium payment (other than those paid under an automatic payment plan
offered by LBVIP or those paid prior to the initial transfer to the
Subaccount(s) on the Contract Date, which will be confirmed by LBVIP in the
annual report), any Contract loan, interest payment or loan repayment, any
change in instructions for allocation of Net Premiums or other Contract
transactions, any transfer of amounts among Subaccount(s) (including the
initial transfer on the Contract Date), any partial surrender, any decrease in
Face Amount that results in a reduction of the Decrease Charge and thus the
assets attributable to the Contract in the Subaccount(s), any restoration to
Accumulated Value following an exercise of a free-look privilege for an
increase in the Face Amount and the manner in which such amount is allocated
among the Subaccount(s), any exercise of the free-look privilege for an
increase in the Face Amount when a refund is made, any exercise of the free
look privilege for the Contract, any exchange of the Contract, any full
surrender of the Contract, payment of a Death Benefit and payment at Maturity
Date. Upon request, any Contract Owner will be sent a receipt for any premium
payment.
LBVIP will maintain all records relating to the Variable Account. LBVIP will
mail to Contract Owners, at their last known address of record, any reports
required by any applicable law or regulation. Each Contract Owner will also
be sent an annual and a semi-annual report for the Fund as required by the
Investment Company Act of 1940.
Additional Insurance Benefits
Subject to certain requirements, one or more of the following additional
insurance benefits may be added to the Contract at the option of the Contract
Owner by rider at the time the Contract is applied for or at a later date. At
present, these options include: waiver of Monthly Deductions in the event of
total disability, additional insurance coverage for accidental death, waiver
of selected amount in the event of total disability, term insurance on the
Insured's spouse, term insurance on the Insured's children, a right to
increase the Face Amount of the Contract on certain specified dates or life
events without proof of insurability, and a cost of living insurance
adjustment without proof of insurability. LBVIP may offer additional optional
benefits in the future. The cost of any additional insurance benefits will be
deducted as part of the Monthly Deduction. See "CHARGES AND DEDUCTIONS--
Accumulated Value Charges--Monthly Deduction". The amounts of these benefits
do not vary with the investment experience of the Variable Account. Certain
restrictions apply and are clearly described in the applicable rider. Any
LBVIP Representative authorized to sell the Contract can explain these extra
benefits further. Samples of the provisions are available from LBVIP upon
written request. Any additional insurance benefits purchased will be
described in a rider attached to the Contract. The charge for additional
insurance benefits added by rider will be specified in the Contract or in a
supplement to the Contract. An additional charge will apply for any insurance
benefits added by rider at any time after issuance of the Contract. Cost of
insurance rates for additional term insurance benefits added by spouse rider
for Contracts issued in the state of Montana will be based on rates applicable
to females in other states.
The issuance of a rider providing insurance coverage on the Insured's spouse
will result in an additional Initial Monthly Administrative Charge. See
"CHARGES AND DEDUCTIONS--Accumulated Value Charges--Monthly Deduction--Initial
Monthly Administrative Charge".
Adding insurance benefits may have Federal income tax consequences. See
"FEDERAL TAX MATTERS--Contract Proceeds."
Accelerated Benefits Rider
For newly issued Contracts, entered into on or after May 1, 1992, under
certain circumstances, the Accelerated Benefits Rider allows a Contract Owner
residing in a state that has approved such rider to receive benefits from the
Contract that would be otherwise payable upon the death of the Insured. The
benefit may vary state-by-state and an LBVIP representative should be
consulted as to whether and to what extent the rider is available in a
particular state and on any particular Contract.
The Accelerated Benefits Rider allows the Contract Owner to elect an
accelerated payment of all or part of the Contract's Death Benefit, adjusted
to reflect current value, at a time when certain special needs exist. The
benefits paid under the Accelerated Benefits Rider are available when LBVIP
has received Written Notice request and proof satisfactory (a certification by
a doctor) that the Insured has a life expectancy of 12 months or less (or such
shorter period provided by state law), or has been confined in a nursing home
for at least 6 months and confinement is expected to continue for the lifetime
of the Insured. The amount of the benefit will always be less than the Death
Benefit, but will generally be greater than the Contracts' Accumulated Value.
LBVIP will determine the amount available as an accelerated benefit. All or
part of the eligible amount may be accelerated under the Accelerated Benefits
Rider. The benefit payable for any person must be $10,000, or if smaller,
that person's entire eligible amount. If the entire amount is paid, the
Contract will terminate. If only a portion of the eligible amount is paid,
the Contract will remain in force. The amount of insurance, the Loan Amount
and Accumulated Value of the Contract will be reduced by the same percentage
as the percentage of the eligible amount received under the Accelerated
Benefits Rider. The benefit will be paid in a lump sum, unless otherwise
agreed to by LBVIP. With LBVIP's approval, the Contract Owner may instead
elect to have the benefit paid in equal periodic payments over a fixed period,
and the minimum periodic payment must be at least $500. If the Insured dies
before all periodic payments have been made, LBVIP will pay the beneficiary
the present value of the remaining payments, based on the same interest rate
as that used to determine the periodic payments.
The Accelerated Benefits Rider is available only in states where and to the
extent regulatory approval has been obtained. If desired by a Contract Owner,
the benefit must be requested on the Contract's application. There is no
charge for adding the benefit to the Contract. However, an administrative fee
(not to exceed $150) will be charged at the time the benefit is paid.
LBVIP agrees that unless otherwise required by law, no benefit will be paid if
the Contract Owner is required to elect it in order to meet the claims of
creditors or to obtain a government benefit. In addition, receipt of payment
of the Accelerated Benefits rider may affect eligibility for government
sponsored benefits programs, including Medicaid. LBVIP can furnish details
about the amount of the Accelerated Benefits Rider available to an eligible
Contract Owner under a particular Contract, and the adjusted premium payments
that would be in effect if less than the entire amount eligible for payment is
paid. See "GENERAL PROVISIONS--Accelerated Benefits Rider". The tax
treatment of benefits paid under the Accelerated Benefits Rider is currently
uncertain. See "FEDERAL TAX MATTERS--Contract Proceeds--Benefits Paid under
the Accelerated Benefits Rider".
Reservation of Certain Rights
LBVIP reserves the right, to the extent permitted or required by law
(including SEC rules under the 1940 Act), to eliminate or modify certain
rights provided under the Contract:
(1) the withdrawal rights during the initial Free Look Period (see "CONTRACT
RIGHTS--Free Look Privileges--Free Look for Contract");
(2) the withdrawal rights during any Free Look Period after an increase in
Face Amount (see "CONTRACT RIGHTS--Free Look Privileges--Free Look for
Increase in Face Amount");
(3) the exchange rights during the first 24 months following the Date of Issue
(see "CONTRACT RIGHTS--Exchange Privileges--Exchange of the Contract"); and
(4) the exchange rights during the first 24 months following an increase in
Face Amount (see "CONTRACT RIGHTS--Exchange Privileges--Exchange of Increase
in Face Amount").
LBVIP will provide Contract Owners with written notice if it exercises its
right to eliminate or modify any of these rights.
FEDERAL TAX MATTERS
The following discussion is general and is not intended as tax advice. Any
person concerned about these tax implications should consult a competent tax
adviser. This discussion is based on LBVIP's understanding of the present
Federal income tax laws as they are currently interpreted by the Internal
Revenue Service. No representation is made as to the likelihood of
continuation of these current laws and interpretations. It should be further
understood that the following discussion is not exhaustive and that special
rules not described in this Prospectus may be applicable in certain
situations. Moreover, no attempt has been made to consider any applicable
state or other tax laws. LBVIP does not make any guarantee regarding the tax
status of any Contract.
Contract Proceeds
General. The Contract will qualify as a life insurance contract under Section
7702 of the Internal Revenue Code of 1986, as amended (the "Code"). Section
7702 of the Code provides that the Contract will so qualify if it satisfies a
cash value accumulation test or a guideline premium requirement and falls
within a cash value corridor. The qualification of the Contract under Section
7702 depends in part upon the Death Benefit payable under the Contract at any
time. To the extent a change in the Contract, such as a decrease in Face
Amount or a change in Death Benefit Option, would cause the Contract not to
qualify, LBVIP will not make the change. See "PAYMENT AND ALLOCATION OF
PREMIUMS--Amount and Timing of Premiums--Premium Limitations". Although the
Secretary of the Treasury is authorized to prescribe regulations interpreting
the manner in which these tests are to be applied, such regulations have not
been issued. In addition, the Technical and Miscellaneous Revenue Act of 1988
(the "Act") provides additional requirements under Section 7702 for mortality
and other expense charges of life insurance contracts. Nonetheless, LBVIP
believes that the Contract should meet the statutory definition in Section
7702 of a life insurance contract.
Death Benefits. The Death Benefit proceeds payable under either Option A or
Option B will be excludable from the gross income of the Beneficiary under
Section 101(a) of the Code.
Distributions. The Contract Owner will not be taxed upon the increase in
Accumulated Value of the Contract unless and until there is a taxable
distribution from the Contract. The Act was enacted on November 11, 1988 and
makes certain changes to the income tax treatment of distributions from
Contracts classified as "modified endowment contracts" under the Code. A
modified endowment contract is any Contract that fails a special premium
limitation test set forth in the Code. This test requires that the cumulative
amount paid during the first seven years since the Date of Issue (or date of
certain increases in coverage) not exceed the cumulative amount of the level
annual premium which, in theory, would provide a paid-up Contract after seven
years. If this test is ever violated, LBVIP will notify the Contract Owner,
who may then take certain timely steps to return the Contract to non-modified
endowment contract status. This premium limitation test does not supersede
the premium limitations previously established by the Code as discussed under
"Premium Limitations" at page __ of the Prospectus.
The Act involves complex considerations and unresolved interpretive issues.
It should be understood, however, that if there is material change in the
Contract, the Contract is treated as a new Contract as of the date of the
material change for purposes of determining whether it will be treated as a
modified endowment contract. Such a change will create a modified endowment
contract only if cumulative amounts paid in the seven years following the
change violate the new cumulative premium limitation test. Certain increases
in Contract benefits (including increases in Face Amount and in additional
insured benefits) will trigger the start of a new seven year period from the
date of this change, along with a new level annual premium to be used in the
test. In addition, a reduction in Contract benefits at any time while the
test is applicable could in itself create a modified endowment contract,
depending on certain factors. In this case, the premium limitation test will
be applied as though the Contract were originally issued at the lower benefit
unless the benefits are reinstated in a timely manner.
Tax Treatment of Modified Endowment Contracts. Under the Act, distributions
from a Contract treated as a modified endowment contract are taxable up to the
amount equal to the excess (if any) of the Accumulated Value immediately
before the distribution over the investment in the Contract at such time.
Investment in the Contract is generally defined as the premiums paid for the
Contract (plus or minus any loss or gain, respectively, transferred into the
Contract as a result of a tax-free exchange), minus any non-taxable
distributions (where taxable gain calculations are based on surrender values
net of loans). Loans taken from such a Contract, as well as surrenders and
benefits paid at maturity (other than the Death Benefit), will be treated as
taxable distributions. (The assignment or pledge of a Contract with a maximum
death benefit of $25,000 or less made to secure only burial or prearranged
funeral expenses is not treated as a distribution). A ten percent (10%)
additional income tax will be imposed on the portion of any distribution from
such a Contract that is included in income except where the distribution is
made on or after the date on which the Contract Owner attains age 59 1/2, or
is attributable to the Contract Owner becoming disabled, or is a part of a
series of substantially equal periodic payments for the life or life
expectancy of the Contract Owner or the joint lives or joint life expectancies
of the Contract Owner and Beneficiary.
Any withdrawal or loan proceeds that were paid 24 months prior to such a
Contract becoming a modified endowment contract will also potentially be a
taxable distribution.
Generally, interest on such Contract loans, even if paid, will not be tax
deductible.
Under the Act, all modified endowment contracts, issued by LBVIP (or its
affiliates) to the same Contract Owner during any calendar year are treated as
one modified endowment contract for purposes of determining the amount
includible in the gross income under Section 72(e) of the Code.
Tax Treatment of Contracts that are NOT Modified Endowment Contracts. The Act
does not apply to Contracts entered into prior to June 21, 1988, provided that
the Contract Owner does not request an increase in Contract benefits (although
certain increases in Face Amount are exempted) on or after that date. These
pre-June 21, 1988, Contracts (as well as Contracts entered into after June 20,
1988, that are not modified endowment contracts) remain subject to the
taxation provisions described below.
A full surrender distribution of the Contract will, under Section 72(e)(5) of
the Code, be included in the Contract Owner's gross income to the extent it
exceeds the Contract Owner's investment in the Contract.
A partial surrender distribution from the Contract will be taxed under the
"cost recovery" rule in that, the distribution will be included in the
Contract Owner's gross income to the extent it exceeds the investment in the
Contract. However, certain cash distributions received as a result of certain
Contract benefit changes will be taxed under the "interest-first" rule if the
distribution occurs during the first fifteen years after issue. The amount of
the cash distribution to be included in gross income will be limited to the
minimum of the taxable gain and the applicable recapture ceiling as defined in
Section 7702. No ten percent (10%) additional penalty will apply.
In addition, under Section 72(e)(5) of the Code, loans received under the
Contract will not be included in gross income. (However, loans may or may not
be taxable at the time of a full or partial surrender.) Interest paid to
LBVIP with respect to the loan may or may not be deductible. Due to the
complexity of these factors, a Contract Owner should consult a competent tax
adviser as to the deductibility of interest paid on any Contract loans.
Benefits Paid under the Accelerated Benefits Rider. Adding the Accelerated
Benefits Rider to a newly issued Contract has no adverse consequences;
however, electing to use it could. The tax treatment of benefits paid under
the Accelerated Benefits Rider is currently uncertain. Future legislation or
interpretations may treat all or part of such payments as taxable
distributions from the Contract. Unlike a death benefit received by a
beneficiary after the death of an insured, receiving a benefit paid under the
Accelerated Benefits Rider may give rise to a federal or state income tax. A
competent tax adviser should be consulted for further information.
Withholding. The taxable portion of a distribution to an individual is
subject to Federal income tax withholding unless the taxpayer elects not to
have withholding. LBVIP will provide the Contract Owner with the election
form and further information as to withholding prior to the first
distribution.
Changes in Contract Owners. The right to change Contract Owners may have tax
consequences, depending on a number of factors. Due to the complexity of
these factors, a Contract Owner should consult a competent tax adviser as to
the tax consequences of such a change.
Exchanges. The right to exchange the Contract for a fixed benefit permanent
life insurance contract (see "CONTRACT RIGHTS--Exchange Privileges") will be
treated as a tax-free exchange under Section 1035. A life insurance contract
received in exchange for a modified endowment contract will also be treated as
a modified endowment contract. Also, if a Contract Owner exchanges any life
insurance contract entered into before June 21, 1988, for a Contract described
in this prospectus, then the new provisions regarding modified endowment
contracts described above may apply. Accordingly, a Contract Owner should
consult a tax adviser before effecting an exchange of any life insurance
contract, including the Contract.
Other Taxes. Federal estate taxes and the state and local estate, inheritance
and other taxes may become due depending on applicable law and the
circumstances of each Contract Owner or Beneficiary, if the Contract Owner or
Insured dies. Any person concerned about the estate implications of the
Contract should consult a competent tax adviser.
Diversification Requirements. Flexible premium variable life insurance
policies such as the Contracts will be treated as life insurance contracts
under the Code, among other things, so long as the separate accounts funding
them are "adequately diversified". Section 817(h) of the Code also requires
that investments of the Variable Account meet certain diversification
requirements stated in section 817(h)(2) or as may be prescribed by the
Treasury Department in regulations. The assets of the Fund will meet the
diversification requirements. LBVIP will monitor the Contracts and the
regulations of the Treasury Department to insure that the Contract will
continue to qualify as a life insurance contract under sections 7702 and 817.
Pension and Profit-Sharing Plans. If a Contract is purchased by a trust which
forms part of a pension or profit-sharing plan qualified under Section 401(a)
of the Code for the benefit of participants covered under the plan, the
Federal income tax treatment of such Contracts will be somewhat different from
that described above. A competent tax adviser should be consulted on these
matters.
Taxation of the Company
LBVIP does not initially expect to incur any income tax burden upon the
earnings or the realized capital gains attributable to the Variable Account.
Based on this expectation, no charge is being made currently to the Variable
Account for Federal income taxes which may be attributable to the Account.
If, however, LBVIP determines that it may incur such tax burden, it may assess
a charge for such burden from the Variable Account.
LBVIP may also incur state and local taxes, in addition to premium taxes, in
several states. At present, these taxes are not significant. If there is a
material change in state or local tax laws, charges for such taxes, if any,
attributable to the Variable Account, may be made.
EMPLOYMENT-RELATED BENEFIT PLANS
The Contracts described in this Prospectus (except for Contracts issued in the
state of Montana) contain guaranteed and current cost of insurance rates that
distinguish between men and women. On July 6, 1983, the Supreme Court held in
ARIZONA GOVERNING COMMITTEE V. NORRIS that optional annuity benefits provided
under an employer's deferred compensation plan could not, under Title VII of
the Civil Rights Act of 1964, vary between men and women on the basis of sex.
Because of this decision, the cost of insurance rates applicable to Contracts
purchased under an employment-related insurance or benefit program may in some
cases not vary on the basis of the Insured's sex. Any unisex rates to be
provided by LBVIP will apply for tax-qualified plans and those plans where an
employer believes that the NORRIS decision applies. Contracts issued in
connection with employment-related insurance benefit plans may also be subject
to different limitations with respect to the Minimum Face Amount, increases in
Face Amount, additional insurance benefits, and issues ages.
Employers and employee organizations should consider, in consultation with
legal counsel, the impact of NORRIS, and Title VII generally, and any
comparable state laws that may be applicable, on any employment-related
insurance or benefit plan for which a Contract may be purchased.
VOTING RIGHTS
General. As stated above, all of the assets held in the Subaccounts of the
Variable Account will be invested in shares of the corresponding Portfolios of
the Fund. LBVIP is the legal owner of those shares and as such has the right
to vote to elect the Board of Directors of the Fund, 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 at a shareholders' meeting.
However, LBVIP will, as required by law, vote the shares of the Fund at
regular and special meetings of the shareholders of the Fund in accordance
with instructions received from Contract Owners. If, however, the 1940 Act or
any regulation thereunder should be amended or if the present interpretation
thereof should change, and as a result LBVIP determines that it is permitted
to vote the Fund shares in its own right, it may elect to do so. The Fund's
Bylaws provided that regular meetings of the shareholders of the Fund may be
held on an annual or less frequent basis as determined by the Board of
Directors of the Fund. For a more complete discussion, see the accompanying
prospectus for the Fund.
The number of votes which a Contract Owner has the right to instruct will be
calculated separately for each Subaccount. The number of votes which each
Contract Owner has right to instruct will be determined by dividing a
Contract's Accumulated Value in a Subaccount by the net asset value per share
of the corresponding Portfolio in which the subaccount invests. Fractional
shares will be counted. The number of votes of the Portfolio which the
Contract Owner has right to instruct will be determined as of the date
coincident with the date established by that Portfolio for determining
shareholders eligible to vote at the meeting of the Fund. Voting instructions
will be solicited by written communications prior to such meeting in
accordance with procedures established by the Fund.
Any Portfolio shares held in the Variable Account for which LBVIP does not
receive timely voting instructions, or which are not attributable to Contract
Owners, will be voted by LBVIP in proportion to the instructions received from
all Contract Owners. Any Portfolio shares held by LBVIP or its affiliates in
general accounts will, for voting purposes, be allocated to all separate
accounts of LBVIP and its affiliates having a voting interest in that
Portfolio in proportion to each such separate account's voting interest in
that Portfolio, and will be voted in the same manner as are such separate
account's votes. Voting instructions to abstain on any item to be voted upon
will be applied on a pro rata basis to reduce the votes eligible to be cast.
Each person having a voting interest in a Subaccount will receive proxy
materials, reports and other materials relating to the appropriate Portfolio.
Disregard of Voting Instructions. LBVIP may, when required by state insurance
regulatory authorities, disregard voting instructions if the instructions
require that the shares be voted so as to cause a change in the
subclassification or investment objective of the Fund or one or more of its
Portfolios or to approve or disapprove an investment advisory contract for a
Portfolio of the Fund. In addition, LBVIP itself may disregard voting
instructions in favor of changes initiated by a Contract Owner in the
investment policy or the investment adviser of a Portfolio of the Fund if
LBVIP reasonably disapproves of such changes. A change would be disapproved
only if the proposed change is contrary to state law or prohibited by state
regulatory authorities or LBVIP determined that the change would have an
adverse effect on its General Account in that the proposed investment policy
for a Portfolio may result in overly speculative or unsound investments. In
the event LBVIP does disregard voting instructions, a summary of that action
and the reasons for such action will be included in the next annual report of
the Fund to Contract Owners.
<TABLE>
<CAPTION>
DIRECTORS AND OFFICERS OF LBVIP
<S> <C>
Directors
Name Principal Occupation
Robert P. Gandrud President and Chief Executive Officer of Lutheran Brotherhood
Bruce J. Nicholson Executive Vice President and Chief Financial Officer of Lutheran Brotherhood
Rolf F. Bjelland Executive Vice President of Lutheran Brotherhood
Paul R. Ramseth Executive Vice President of Lutheran Brotherhood
William H. Reichwald Executive Vice President of Lutheran Brotherhood
Executive Officers
Robert P. Gandrud President, Chairman and Chief Executive Officer
Bruce J. Nicholson Chief Financial Officer
Rolf F. Bjelland Vice President--Investments
William H. Reichwald Vice President--Marketing (Executive Vice President of Lutheran Brotherhood)
Anita J.T. Young Treasurer (Vice President and Treasurer of Lutheran Brotherhood)
David J. Larson Vice President and Secretary (Senior Vice President,
Secretary and General Counsel of Lutheran Brotherhood)
David J. Christianson Vice President--Insurance Services (Vice President of Lutheran
Brotherhood)
Otis F. Hilbert Vice President and Assistant Secretary (Vice President
and Associate General Counsel of Lutheran Brotherhood)
James R. Olson Vice President (Vice President of Lutheran Brotherhood)
Jerald E. Sourdiff Vice President and Controller (Senior Vice President of Lutheran Brotherhood)
James M. Walline Vice President--Investments (Vice President of Lutheran Brotherhood)
</TABLE>
All of the foregoing directors and executive officers except Mr. Nicholson
have been employees or officers of Lutheran Brotherhood for the past five
years.
SALES AND OTHER AGREEMENTS
Lutheran Brotherhood Securities Corp., 625 Fourth Avenue South, Minneapolis,
Minnesota 55415 an indirect subsidiary of Lutheran Brotherhood, acts as the
principal underwriter of the Contracts pursuant to a Distribution Agreement to
which LBVIP and the Variable Account are also parties.
Lutheran Brotherhood Securities Corp. is registered with the SEC as a broker-
dealer under the Securities Exchange Act of 1934 and is a member of the
National Association of Securities Dealers, Inc. Lutheran Brotherhood
Securities Corp. is also named as distributor of the stock of The Lutheran
Brotherhood Family of Funds, consisting of the following series: Lutheran
Brotherhood Money Market Fund, Lutheran Brotherhood Opportunity Growth Fund,
Lutheran Brotherhood Fund, Lutheran Brotherhood Income Fund, Lutheran
Brotherhood High Yield Fund, and Lutheran Brotherhood Municipal Bond Fund, all
of which are diversified open-end investment companies.
The Contracts are sold through LBVIP Representatives who are licensed by state
insurance officials to sell the Contracts. These LBVIP Representatives are
also registered representatives of Lutheran Brotherhood Securities Corp. The
Contracts are offered in all states where LBVIP is authorized to sell variable
life insurance.
When an application for a Contract is completed, it is submitted to LBVIP.
Under a service agreement between LBVIP and Lutheran Brotherhood (described
below), Lutheran Brotherhood performs insurance underwriting reviews and
determines whether to accept or reject the application for the Contract and
determines the Insured's premium class.
Under the Distribution Agreement, Lutheran Brotherhood Securities Corp. will
perform suitability review.
Under the Distribution Agreement, LBVIP Representatives receive commissions
and service fees from Lutheran Brotherhood Securities Corp. for selling and
servicing the Contracts. LBVIP reimburses Lutheran Brotherhood Securities
Corp. for such compensation. LBVIP also reimburses Lutheran Brotherhood
Securities Corp. for other expenses incurred in marketing and selling the
Contracts. These include general agent compensation, LBVIP Representatives'
training allowances and agency expense allowances.
Compensation of LBVIP Representatives. LBVIP Representatives selling the
Contracts will receive a 3% service fee of all premiums paid on the Contract.
In addition to the service fee, commissions will be paid to the LBVIP
Representatives based on a commission schedule summarized below. Further,
LBVIP Representatives may be eligible to receive certain benefits based on the
account of earned commissions.
During the first Contract Year, commissions will be not more than 47% of the
Death Benefit Guarantee Premium for the Contract. In the second and third
Contract Years, commissions will equal, in general, 7% of the Death Benefit
Guarantee Premium for the Contract. The Death Benefit Guarantee Premium at
issue will include premiums attributable to riders and supplemental benefits
included in the Contract.
For the first year following an increase in Face Amount, commissions will be
not more than 47% of the Death Benefit Guarantee Premium for the increase. In
the second and third year following an increase, commissions will equal, in
general, 7% of the Death Benefit Guarantee Premium for the increase.
For Contracts with an initial Face Amount greater than or equal to $250,000,
during the first Contract Year after issue or following an increase in Face
Amount, the commissions will be not more than 40% of the applicable Death
Benefit Guarantee Premium. In the second and third year after issue or
following an increase, the commissions will equal, in general, 6% of the
applicable Death Benefit Guarantee Premium.
For the first year following the addition of a spouse or child rider, the
commission will be not more than 47% of the Death Benefit Guarantee Premium
for the rider. In the second and third year following the addition of a
rider, commissions will equal, in general, 7% of the Death Benefit Guarantee
Premium for the rider.
For the first year following an increase in Face Amount of a spouse rider, the
commission will be not more than 47% of the Death Benefit Guarantee Premium
for the increase in Face Amount of the spouse rider. In the second and third
year following the increase, commissions will equal, in general, 7% of the
Death Benefit Guarantee Premium for the increase in the spouse rider.
Service Agreement. Lutheran Brotherhood performs certain investment and
administrative duties for LBVIP pursuant to a written agreement. The
agreement is automatically renewed each year, unless either party terminates
it. Under this agreement, LBVIP pays Lutheran Brotherhood for salary costs
and other services and an amount for indirect costs incurred through LBVIP's
use of Lutheran Brotherhood's personnel and facilities.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Variable Account is a party or to
which the assets of the Variable Account are subject. Neither LBVIP nor LBSC
are involved in any litigation that is of material importance in relation to
their total assets or that relates to the Variable Account.
LEGAL MATTERS
All matters of applicable state law pertaining to the Contracts, including
LBVIP's right to issue the Contracts thereunder, have been passed upon by
James M. Odland, counsel for LBVIP.
EXPERTS
The financial statements of the Variable Account and LBVIP included in this
Prospectus have been so included in reliance of Price Waterhouse LLP,
independent accountants, given on the authority of said firm as experts in
accounting and auditing.
Actuarial matters included in this Prospectus have been examined by Gregory A.
Rogers, FSA, MAAA, Actuary of LBVIP, whose opinion is filed as an exhibit to
the Registration Statement.
FURTHER INFORMATION
A Registration Statement under the Securities Act of 1933 has been filed with
the SEC, with respect to the Contracts described herein. This Prospectus does
not contain all of the information set forth in the Registration Statement and
exhibits thereto, to which reference is hereby made for further information
concerning the Account, LBVIP and the Contracts. The information so omitted
may be obtained from the SEC's principal office in Washington, D.C., upon
payment of the fee pre-scribed by the SEC, or examined there without charge.
Statements contained in this Prospectus as to the provisions of the Contracts
and other legal documents are summaries, and reference is made to the
documents as filed with the SEC for a complete statement of the provisions
thereof.
FINANCIAL STATEMENTS
The audited financial statements of LBVIP which are included in this
Prospectus should be distinguished from the financial statements of the
Variable Account and should be considered only as bearing upon the ability of
LBVIP to meet its obligations under the Contracts. They should not be
considered as bearing on the investment performance of the
assets held in the Variable Account.
3100 Multifoods Tower
33 South Sixth Street
Minneapolis, MN 55402-3795
- -------------------------------------------------------------------
Price Waterhouse LLP
Report of Independent Accountants
To Lutheran Brotherhood Variable Insurance Products Company and
Contract Owners of LBVIP Variable Insurance Account
In our opinion, the accompanying statement of assets and liabilities and
the related statements of operations and of changes in net assets
present fairly, in all material respects, the financial position of
LBVIP Variable Insurance Account and the Growth, High Yield, Income and
Money Market subaccounts thereof at December 31, 1995, the results of
each of their operations for the year then ended and the changes in each
of their net assets for each of the two years in the period then ended,
in conformity with generally accepted accounting principles. These
financial statements are the responsibility of Lutheran Brotherhood
Variable Insurance Products Company's management; our responsibility is
to express an opinion on these financial statements based on our audits.
We conducted our audits of these financial statements in accordance with
generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
[GRAPHIC OMITTED: LOGO OF PRICE WATERHOUSE SIGNATURE]
February 5, 1996
<TABLE>
<CAPTION>
LBVIP Variable Insurance Account
Statement of Assets and Liabilities
December 31, 1995
Subaccounts
------------------------------------------------------------
High Money
Growth Yield Income Market
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
ASSETS:
Investments in LB Series Fund, Inc. --
Growth Portfolio, 3,105,994 shares at net asset value
of $18.27 per share (cost $43,536,056) $56,758,762
High Yield Portfolio, 2,701,973 shares at net asset value
of $9.94 per share (cost $27,023,392) $26,852,551
Income Portfolio, 1,567,172 shares at net asset value
of $10.08 per share (cost $15,435,906) $15,794,305
Money Market Portfolio, 1,790,765 shares at net asset value
of $1.00 per share (cost $1,790,765) $1,790,765
------------ ------------ ------------ ------------
56,758,762 26,852,551 15,794,305 1,790,765
Receivable from LBVIP for units issued 135,683 103,746 19,342 3,347
Dividends receivable from LB Series Fund, Inc. -- 11,747 5,279 530
------------ ------------ ------------ ------------
Total assets 56,894,445 26,968,044 15,818,926 1,794,642
------------ ------------ ------------ ------------
LIABILITIES:
Payable to LBVIP for mortality and expense risk charge 28,500 13,514 7,924 956
NET ASSETS $56,865,945 $26,954,530 $15,811,002 $1,793,686
============ ============ ============ ============
Number of units outstanding 2,200,589 1,076,934 765,457 1,129,845
============ ============ ============ ============
Unit value (net assets divided by units outstanding) $25.84 $25.03 $20.66 $1.59
======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
Year Ended December 31, 1995
Subaccounts
------------------------------------------------------------
High Money
Growth Yield Income Market
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividend income $706,613 $2,358,032 $966,741 $95,232
Mortality and expense risk charge (277,885) (142,451) (85,150) (10,290)
------------ ------------ ------------ ------------
Net investment income 428,728 2,215,581 881,591 84,942
------------ ------------ ------------ ------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments 194,507 (35,895) (28,562) --
Net change in unrealized appreciation or depreciation
of investments 13,265,262 1,855,415 1,556,511 --
------------ ------------ ------------ ------------
Net gain on investments 13,459,769 1,819,520 1,527,949 --
------------ ------------ ------------ ------------
Net increase in net assets resulting from operations $13,888,497 $4,035,101 $2,409,540 $84,942
============ ============ ============ ============
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
LBVIP Variable Insurance Account
Statement of Changes in Net Assets
Years Ended December 31, 1995 and 1994
Growth High Yield
Subaccount Subaccount
------------------------------------------------------------
1995 1994 1995 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS --
Net investment income $428,728 $290,991 $2,215,581 $1,647,456
Net realized gain (loss) on investments 194,507 745,295 (35,895) 262,414
Net change in unrealized appreciation or depreciation
of investments 13,265,262 (2,657,265) 1,855,415 (2,896,305)
------------ ------------ ------------ ------------
Net change in net assets resulting
from operations 13,888,497 (1,620,979) 4,035,101 (986,435)
------------ ------------ ------------ ------------
UNIT TRANSACTIONS -
Proceeds from units issued 12,883,198 15,634,665 5,870,513 9,313,296
Net asset value of units redeemed (5,939,936) (4,272,923) (3,001,072) (2,266,396)
Transfers from other subaccounts 2,029,943 1,637,267 961,670 1,366,428
Transfers to other subaccounts (1,653,365) (1,428,818) (1,121,153) (1,087,148)
------------ ------------ ------------ ------------
Net increase in net assets from unit transactions 7,319,840 11,570,191 2,709,958 7,326,180
------------ ------------ ------------ ------------
Net increase in net assets 21,208,337 9,949,212 6,745,059 6,339,745
NET ASSETS:
Beginning of period 35,657,608 25,708,396 20,209,471 13,869,726
------------ ------------ ------------ ------------
End of period $56,865,945 $35,657,608 $26,954,530 $20,209,471
============ ============ ============ ============
Income Money Market
Subaccount Subaccount
----------------------------------------------------------
1995 1994 1995 1994
------------ ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS --
Net investment income $881,591 $732,036 $84,942 $43,905
Net realized gain (loss) on investments (28,562) 193,140 -- --
Net change in unrealized appreciation or depreciation
of investments 1,556,511 (1,539,057) -- --
------------ ------------ ------------ ------------
Net change in net assets resulting
from operations 2,409,540 (613,881) 84,942 43,905
------------ ------------ ------------ ------------
UNIT TRANSACTIONS --
Proceeds from units issued 2,965,163 5,157,608 771,778 756,910
Net asset value of units redeemed (1,859,848) (1,491,607) (710,056) (566,912)
Transfers from other subaccounts 340,287 235,045 1,112,971 803,402
Transfers to other subaccounts (746,287) (771,155) (924,066) (755,021)
------------ ------------ ------------ ------------
Net increase in net assets from unit transactions 699,315 3,129,891 250,627 238,379
------------ ------------ ------------ ------------
Net increase in net assets 3,108,855 2,516,010 335,569 282,284
NET ASSETS:
Beginning of period 12,702,147 10,186,137 1,458,117 1,175,833
------------ ------------ ------------ ------------
End of period $15,811,002 $12,702,147 $1,793,686 $1,458,117
============ ============ ============ ============
The accompanying notes are an integral part of the financial statements.
</TABLE>
LBVIP Variable Insurance Account
Notes to Financial Statements
December 31, 1995
(1) ORGANIZATION
The LBVIP Variable Insurance Account (the Variable Account), a unit
investment trust registered under the Investment Company Act of 1940,
was established as a separate account of Lutheran Brotherhood Variable
Insurance Products Company (LBVIP) in 1984, pursuant to the laws of the
State of Minnesota. LBVIP offers financial services to Lutherans and
through its parent, Lutheran Brotherhood Financial Corporation, is a
wholly owned subsidiary of Lutheran Brotherhood, a fraternal benefit
society. The Variable Account contains four subaccounts -- Growth, High
Yield, Income and Money Market -- each of which invests only in a
corresponding portfolio of the LB Series Fund, Inc. (the Fund). The Fund
is registered under the Investment Company Act of 1940 as a diversified
open-end investment company.
The Variable Account is used to support only flexible premium variable
life ("Variable Universal Life") insurance contracts issued by LBVIP.
Under applicable insurance law, the assets and liabilities of the
Variable Account are clearly identified and distinguished from the other
assets and liabilities of LBVIP. The assets of the Variable Account will
not be charged with any liabilities arising out of any other business
conducted by LBVIP.
(2) SIGNIFICANT ACCOUNTING POLICIES
Investments
The investments in shares of the Fund are stated at the net asset value
of the Fund. The cost of shares sold and redeemed is determined on the
average cost method. Dividend distributions received from the Fund are
reinvested in additional shares of the Fund and recorded as income by
the Variable Account on the ex-dividend date
.
Federal Income Taxes
LBVIP is taxed as a life insurance company and includes its flexible
premium variable life insurance operations in its tax return. Currently,
no tax liability is charged to the operations of the Variable Account by
LBVIP. Consequently, no provision for income taxes has been made against
the Variable Account.
(3) RELATED PARTY TRANSACTIONS
Proceeds received by the Variable Account from units issued represent
gross contract premiums received by LBVIP less deductions for sales
distribution expenses of 3% and premium taxes of 2% of the gross
contract premium. Total deductions from gross contract premiums received
were $1,242,875 and $1,675,014 in 1995 and 1994, respectively.
A monthly charge is deducted from the cash value of the contract by
LBVIP for the cost of insurance, insurance administration of the
contract and the cost of any optional benefits added by riders. This
charge is deducted by redeeming units of the subaccounts of the Variable
Account. Total monthly charges were $6,896,396 and $6,008,058 in 1995
and 1994, respectively.
A daily charge is deducted from the value of the net assets of the
Variable Account to compensate LBVIP for mortality and expense risks
assumed in connection with the contract and is equivalent to an annual
rate of 0.6% of the average daily net assets of the Variable Account.
Mortality and expense risk charges of $515,776 and $374,752 were
deducted in 1995 and 1994, respectively.
A deferred charge is deducted from the cash value of the contract to
compensate LBVIP for certain selling and administrative expenses if: (1)
within the first ten years a contract is in force, it is surrendered or
lapses, or (2) a contract owner requests a decrease in the face amount
either within the first ten years a contract is in force, or within ten
years after a requested increase in face amount. The deferred charge
remains at a level amount during the first five years of the applicable
ten year period, and then is reduced on a monthly basis by equal amounts
until the deferred charge is zero after ten years. This charge is
deducted by redeeming units of the subaccounts of the Variable Account.
Deferred charges of $409,685 and $276,601 were deducted in 1995 and
1994, respectively.
(4) UNIT ACTIVITY
Transactions in units (including transfers among subaccounts) were as
follows:
Subaccounts
-------------------------------------------------
High Money
Growth Yield Income Market
---------- ---------- ---------- ----------
Units outstanding at
December 31, 1993 1,286,738 626,420 554,422 804,589
Units issued 968,809 525,000 333,635 981,816
Units redeemed (372,470) (191,311) (158,305) (821,232)
---------- ---------- ---------- ----------
Units outstanding at
December 31, 1994 1,883,077 960,109 729,752 965,173
Units issued 710,227 323,486 189,825 1,133,300
Units redeemed (392,715) (206,661) (154,120) (968,628)
---------- ---------- ---------- ----------
Units outstanding at
December 31, 1995 2,200,589 1,076,934 765,457 1,129,845
========== ========== ========== ==========
(5) PURCHASES AND SALES OF INVESTMENTS
The aggregate costs of purchases and proceeds from sales of investments
in the LB Series Fund, Inc. were as follows:
Subaccounts
-------------------------------------------------
High Money
Growth Yield Income Market
---------- ---------- ---------- ----------
For the year ended
December 31, 1994
Purchases $13,087,199 $9,740,798 $4,746,985 $1,067,569
Sales 368,248 455,646 613,314 783,017
For the year ended
December 31, 1995
Purchases 8,994,515 5,805,846 2,474,794 1,357,387
Sales 1,343,120 974,314 899,536 1,024,921
COMMENT ON FINANCIAL STATEMENTS OF LBVIP
The financial statements of LBVIP included in this Prospectus should be
considered as bearing only upon the ability of LBVIP to meet its obligations
under the Contracts. The value of the interests of owners and beneficiaries
under the Contracts are affected primarily by the investment results of the
Subaccounts of the Variable Account.
Report of Independent Accountants
To The Board of Directors of
Lutheran Brotherhood Variable
Insurance Products Company
In our opinion, the accompanying statement of financial position and the
related statements of operations and accumulated deficit, of
stockholder's equity and of cash flows present fairly, in all material
respects, the financial position of Lutheran Brotherhood Variable
Insurance Products Company (the Company) at December 31, 1995 and 1994,
and the results of its operations and its cash flows for the years then
ended in conformity with generally accepted accounting principles
(practices prescribed or permitted by insurance regulatory authorities -
see Note 1). These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on
these financial statements based on our audits. We conducted our audits
of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable
basis for the opinion expressed above.
Price Waterhouse Logo goes here.
February 23, 1996
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD VARIABLE INSURANCE PRODUCTS COMPANY
STATEMENT OF FINANCIAL POSITION
(in thousands)
December 31,
---------------------------
1995 1994
------------ ------------
<S> <C> <C>
ASSETS
Bonds:
U.S. government $123,962 $79,246
Mortgage-backed securities 1,251 2,076
Corporate and other 11,598 3,957
------------ -----------
136,811 85,279
Other invested assets:
Loans on insurance contracts 2,807 1,760
Cash and short-term investments 25,362 20,718
Other investments 408 -
----------- -----------
Total invested assets 165,388 107,757
Investment income due and accrued 2,418 1,947
Receivables from affiliates 1,371 -
Assets held in separate accounts 2,348,212 1,816,516
----------- -----------
Total assets $ 2,517,389 $ 1,926,220
=========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
Contract reserves $171,140 $125,063
Benefits in process of payment 3,621 3,474
Accounts payable 2,913 2,444
Premiums in process 1,489 861
Payable to affiliate 39 884
Liabilities related to separate accounts 2,274,191 1,747,790
Interest maintenance reserve 248 266
Asset valuation reserve 123 113
----------- -----------
Total liabilities and asset reserve 2,453,764 1,880,895
=========== ===========
Stockholder's equity:
Common stock, $1 par value, 2,000,000
shares authorized,
issued and outstanding 2,000 2,000
Additional paid-in capital 118,800 118,800
Accumulated deficit (57,175) (75,475)
----------- -----------
Total stockholder's equity 63,625 45,325
----------- -----------
Total liabilities and stockholder's
equity $ 2,517,389 $ 1,926,220
=========== ===========
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD VARIABLE INSURANCE PRODUCTS COMPANY
STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
For the years ended December 31, 1995 and 1994
(in thousands)
1995 1994
--------- --------
<S> <C> <C>
Income:
Annuity considerations $ 214,697 $ 458,760
Insurance premiums 31,639 34,545
Net investment income 10,739 3,520
Income from charges to separate accounts 22,455 19,403
Commission income 76 92
--------- ---------
Total income 279,606 516,320
--------- ---------
Deductions:
Net transfer to separate accounts 78,001 336,876
Net additions to contract reserves 47,893 82,521
Benefits to contractholders 108,908 68,951
Commissions 11,477 20,590
Operating expenses charged by affiliates 13,964 22,984
Operating expenses 2,994 6,037
--------- ---------
Total deductions 263,237 537,959
--------- ---------
Net income (loss) from operations before net
realized capital losses 16,369 (21,639)
Net realized capital losses (3) (2)
--------- ---------
Net gain (loss) from operations 16,366 (21,641)
Other transactions affecting accumulated deficit:
Net unrealized capital gains (losses) (2) -
(Increase) decrease in asset valuation reserve (10) 234
Decrease (increase) in non-admitted assets 130 (15)
Decrease of death benefit guarant reserve 1,816 -
--------- ---------
Total other transactions 1,934 219
--------- ---------
Net change in accumulated deficit 18,300 (21,422)
Accumulated deficit, beginning of year (75,475) (54,053)
--------- ---------
Accumulated deficit, end of year $ (57,175) $ (75,475)
========= =========
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD VARIABLE INSURANCE PRODUCTS COMPANY
STATEMENT OF STOCKHOLDEROS EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
(in thousands)
Additional
Common Paid-In Accumulated
Stock Capital Deficit
------ -------- --------
<S> <C> <C> <C>
Balance at December 31, 1993 $2,000 $118,800 $(54,053)
Net loss (21,641)
Other surplus changes 219
------ -------- --------
Balance at December 31, 1994 $2,000 $118,800 $(75,475)
Net gain 16,366
Other surplus changes 1,934
------ -------- --------
Balance at December 31, 1995 $2,000 $118,800 $(57,175)
====== ======== ========
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD VARIABLE INSURANCE PRODUCTS COMPANY
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
(in thousands)
1995 1994
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Insurance premiums and annuities considerations $246,335 $493,285
Income from charges to separate accounts 22,370 19,350
Net investment income 9,810 2,512
Insurance benefits paid (108,760) (67,157)
Commissions and operating expenses paid (28,574) (49,681)
Net transfer to separate accounts (82,823) (347,722)
Net loans on insurance contracts (1,050) (709)
Other operating items, net (1,164) (3,684)
-------- --------
Net cash provided by operating activities 56,144 46,194
-------- --------
Cash flows from investing activities:
Proceeds from bonds sold, matured or repaid 2,910 4,103
Cost of bonds purchased (54,410) (59,749)
-------- --------
Net cash used in investing activities (51,500) (55,646)
-------- --------
Net change in cash and short-term investments 4,644 (9,452)
Cash and short-term investments, beginning of year 20,718 30,170
-------- --------
Cash and short-term investments, end of year 25,362 $20,718
The accompanying notes are an integral part of the financial statements.
</TABLE>
LUTHERAN BROTHERHOOD VARIABLE INSURANCE PRODUCTS COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION
Lutheran Brotherhood Variable Insurance Products Company (the Company)
offers financial services to Lutherans. The Company, through its parent,
Lutheran Brotherhood Financial Corporation (LBFC or Parent), is a wholly
owned subsidiary of Lutheran Brotherhood, a fraternal benefit
organization.
The accompanying financial statements have been prepared in conformity
with statutory accounting practices prescribed or permitted by the
Department of Commerce of the State of Minnesota. These statutory
practices are considered to be generally accepted accounting principles
for fraternal benefit societies and their insurance subsidiaries. The
preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
In April 1993, the Financial Accounting Standards Board issued
Interpretation No. 40, OApplicability of Generally Accepted Accounting
Principles to Mutual Life Insurance and Other EnterprisesO, which
establishes a different definition of generally accepted accounting
principles for mutual life insurance companies. Under the
Interpretation, financial statements of mutual life insurance companies
for periods beginning after December 15, 1995 which are prepared on the
basis of statutory accounting will no longer be characterized as in
conformity with generally accepted accounting principles.
In order to continue to present financial statements in accordance with
generally accepted accounting principles for general purpose
distribution in 1996, the Company expects to present its financial
statements in accordance with the requirements of the Interpretation.
Management believes that financial statements prepared on this basis
would result in an increase to unassigned surplus. The effects of this
change in accounting basis would be reported retroactively through
restatement beginning with the earliest year presented.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Valuation of Invested Assets
Invested assets are valued according to the method established by the
National Association of Insurance Commissioners (NAIC). Generally, bonds
not backed by other loans are valued at amortized cost using the
interest method. Loan-backed bonds and structured securities are valued
at amortized cost using the interest method including anticipated
prepayments at the date of purchase; significant changes in estimated
cash flows from the original purchase assumptions are accounted for
using the retrospective method. Investment in a money market instrument
is valued at market value. Loans on insurance contracts are valued at
the aggregate unpaid balances.
Cash and Short-Term Investments
Cash and short-term investments include cash, money market shares and
repurchase agr ments collateralized by U.S. government-backed
obligations maturing within one year.
Contract Reserves
Contract reserves are based on statutory mortality and interest
requirements and are designed to be sufficient to provide for all
contractual benefits. Variable life insurance reserves for contracts
issued prior to January 31, 1993 are equal to full account value.
Reserves for all other variable life contracts are determined according
to the Commissioner's Reserve Valuation Method using an interest rate of
4%. Variable annuity reserves for contracts issued prior to January 1,
1992 are equal to full account value. Reserves for all other variable
annuities are determined according to the Commissioner's Annuity Reserve
Valuation Method using interest rates ranging from 5.75% to 6.25%.
Reserves for supplemental benefits, minimum death benefit guarant s,
and other fixed benefits are maintained in the general account and are
determined using statutory mortality/morbidity bases and interest rates
predominantly ranging from 4% to 5.5%.
Annuity reserves total $2,329.7 million at December 31, 1995 and consist
of $2,177.1 million in the liabilities related to separate accounts and
$152.6 million in fixed account reserves. All of these contracts are
subject to a surrender charge upon withdrawal. All annuities have
mortality/morbidity features.
Annuity reserves for contracts in the annuity payment period are
maintained in the annuity separate account. If reserves required for
such contracts are greater than the original estimated reserve amount
held in the separate account, the Company reimburses the separate
account. If the reserves required are less than the original reserve,
the excess is reimbursed to the Company.
Claim liabilities are established in amounts estimated to cover incurred
claims. These liabilities are based on individual case estimates for
reported claims and estimates of unreported claims, based on past
experience.
Use of these actuarial tables and methods involves estimation of future
mortality and morbidity based on past experience. Actual future
experience could differ from these estimates.
Investment Reserves
The Company is required to maintain two reserves. The asset valuation
reserve (AVR) establishes a reserve for invested assets held by the
Company. The interest maintenance reserve (IMR) establishes a reserve
for realized gains and losses resulting from changes in interest rates
on short and long-term fixed income investments. Net realized gains and
losses charged to the IMR are amortized into investment income over the
approximate remaining life of the investment sold using the grouped
method.
Premium Income and Operating Expenses
Premiums are recorded as income over the premium paying period of the
contracts. Operating expenses, including costs of acquiring new
business, are charged to current operations as incurred.
Non-Admitted Assets
Certain assets, (principally miscellaneous receivables) have been
designated by the NAIC as non-admitted assets and are not included in
the Statement of Financial Position. Changes in non-admitted assets are
reflected directly in stockholder's equity. Non-admitted assets
approximated $.04 million and $0.2 million at December 31, 1995 and
1994, respectively.
NOTE 3 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following summarizes the bases used by the Company in estimating its
fair value disclosures for financial instruments:
Bonds - Fair values are estimated using independent pricing services.
For securities not actively traded, fair values are estimated using
market quotes from brokers or internally developed pricing models.
Loans on insurance contracts - The carrying amount reported in the
Statement of Financial Position approximates fair value since loans on
insurance contracts reduce the amount payable at death or at surrender
of the contract.
Cash and short-term investments and investment income due and accrued -
The carrying amounts reported in the Statement of Financial Position
approximate fair value.
Other deposit liabilities - The carrying amount for supplemental
contracts without mortality/morbidity features of $8.4 million
approximates fair value.
NOTE 4 - INVESTMENTS
Bonds
Investments in bonds are intended to be held to maturity; therefore,
care should be exercised in drawing any conclusions from market value
information.
Investments in bonds at December 31, 1995 and 1994 follow (in
thousands):
<TABLE>
<CAPTION>
December 31, 1995
---------------------
Gross Gross Estimated
Carrying Unrealized Unrealized Market
Bonds Value Gains Losses Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
U.S. government $ 123,962 $ 8,595 $ - $ 132,557
Mortgage-backed securities 1,251 12 - 1,263
All other corporate bonds 11,598 837 - 12,435
-------- -------- -------- --------
$ 136,811 $ 9,444 $ - $ 146,255
========== =========== =========== ============
December 31, 1994
---------------------
Gross Gross Estimated
Carrying Unrealized Unrealized Market
Bonds Value Gains Losses Value
---------- ---------- ---------- ----------
U.S. government $ 79,246 $ 16 $ 756 $ 78,506
Mortgage-Backed Securities 2,076 - 24 2,052
All Other Corporate Bonds 3,957 99 - 4,056
-------- ----------- ---------- ----------
$ 85,279 $ 115 $ 780 $ 84,614
=========== =========== =========== ============
The carrying value and estimated market value of bonds at December 31, 1995, by contractual maturity, are as follows (in
thousands):
<CAPTION>
Estimated
Carrying Market
Value Value
------ ------
<S> <C> <C>
One year or less $14,642 $14,670
Over 1 year through 5 years 37,827 39,748
Over 5 years through 10 years 84,069 91,552
Over 10 years 273 285
-------- --------
$136,811 $146,255
========= ========
Investment Income and Realized Capital Gains and Losses
Investment income and gross realized gains and losses for 1995
and 1994 are as follows (in thousands):
<CAPTION>
Year Ended December 31, 1995
-------------------------
Gross Gross
Investment Realized Realized
Income Gains Losses
------- ------- -------
<S> <C> <C> <C>
Bonds $ 8,582 $ 57 $ 2
Short-term investments 1,940 - -
Other 238 - 3
--------- ---------- --------
10,760 $ 57 $ 5
========= =========
Less investment expenses (21)
---------
Net investment income $ 10,739
==========
Year Ended December 31, 1995
-------------------------
Gross Gross
Investment Realized Realized
Income Gains Losses
------- ------- -------
Bonds $ 2,322 $ 8 $ -
Short-term investments 1,054 - -
Other 152 - 1
--------- ---------- --------
3,528 $ 8 $ 1
========= =========
Less investment expenses (8)
---------
Net investment income $ 3,520
==========
NOTE 5 - STATUTORY DEPOSIT
Bonds with a carrying value of $2.1 million and $2.1 million and a
market value of $2.2 million and $2.1 million at December 31, 1995 and
1994, respectively, are on deposit with various state insurance
departments as required by law.
NOTE 6 - SEPARATE ACCOUNT BUSINESS
Separate account assets include segregated funds invested by the Company
for the benefit of variable life insurance and variable annuity contract
owners. A portion of the contract owner's premium payments are invested
by the Company into the LBVIP Variable Insurance Account, the LBVIP
Variable Insurance Account II, or the LBVIP Variable Annuity Account I
(the Variable Accounts). The Company records these payments as assets in
the separate accounts. Separate account liabilities represent reserves
held related to the separate account business.
The excess of separate account assets over separate account liabilities
at December 31, 1995 and 1994 represents the difference betw n the full
account value of annuity contracts and reserves required to be held for
these contracts.
The Variable Accounts are unit investment trusts registered under the
Investment Company Act of 1940. Each Variable Account has four
subaccounts, each of which invests only in a corresponding portfolio of
the LB Series Fund, Inc. (the Fund). The Fund is a diversified, open-end
management investment company. The shares of the Fund are carried in the
Variable AccountsO financial statements at the net asset value.
Effective January 22, 1991, a fixed account was added as an investment
option for variable annuity contract owners. Net premiums allocated to
the fixed account are invested in the assets of the Company.
The assets and liabilities of the Variable Accounts are clearly
identified and distinguished from the other assets and liabilities of
the Company. The assets of the Variable Accounts will not be applied to
the liabilities arising out of any other business conducted by the
Company. Considerations received on variable life insurance and variable
annuity contracts are included in income and correspondingly offset by
transfers to the Variable Accounts.
The Company records premium income and considerations received from the
sale of variable insurance and annuity contracts, and pays death claims
on these contracts. The premiums and considerations received and death
claims paid are included in the Statement of Operations.
The Company assumes the mortality and expense risk associated with these
contracts for which it is compensated by the separate accounts. The
daily charges to the separate accounts are based on the average daily
net assets at the following annual rates:
<CAPTION>
1995 1994
Rate Charges Charges
------ ---------- ----------
<S> <C> <C> <C>
Variable Insurance Account 0.6% $ 516 $ 375
Variable Insurance Account II 2.3% 48 45
Variable Annuity Account I 1.1% 21,891 18,983
---------- ----------
$ 22,455 $ 19,403
=========== ==========
Income from these charges is included in the Statement of Operations.
In addition, the Company deducts certain amounts from the cash value of
the accounts invested in the separate accounts
for surrender charges and annual administrative charges as follows:
1995 1994
------ ------
Variable Insurance Account $ 7,307 $ 6,284
Variable Insurance Account II - 20
Variable Annuity Account I 1,861 1,438
---------- ----------
$ 9,168 $ 7,742
=========== ==========
These deductions are reflected in Onet transfers to separate accounts'
in the Statement of Operations.
NOTE 7 - RELATED PARTY TRANSACTIONS
Lutheran Brotherhood provides administrative services to and collects
premiums for the Company. The net receivable at December 31, 1995
represents the premiums collected but not transferred to the Company and
the unpaid balance of these administrative services. At December 31,
1994, there was a net payable due to Lutheran Brotherhood which is
included in payables to affiliates as shown below.
Lutheran Brotherhood allocated approximately $13.6 million and $22.6
million of operating expenses to the Company in 1995 and 1994,
respectively, which includes the costs for corporate officers, human
resources, and other administrative and operating functions. Lutheran
Brotherhood has agr d to provide the Company with capital requirements,
if necessary.
Payables to affiliates includes the following:
1995 1994
------ ------
Lutheran Brotherhood:
Operating expenses payable $ - $ 1,087
Premium income - (236)
-------- --------
Lutheran Brotherhood Securities Corp.:
Operating expenses payable 39 33
-------- --------
$ 39 $ 884
======== ========
Lutheran Brotherhood Securities Corp. (LBSC) is an affiliate of the
Company. The payable represents operating expenses of the Company paid
by LBSC that have not been reimbursed as of December 31, 1995 and 1994.
LBSC allocated $0.4 million and $0.4 million of operating expenses to
the Company in 1995 and 1994, respectively, which includes the costs for
various administrative and operating functions. In addition, LBSC, as
principal underwriter of the Company's variable products, received
commission income from the Company of approximately $11.5 million and
$20.6 million in 1995 and 1994, respectively.
NOTE 8 - INCOME TAXES
The Company's tax provision and related balance sh t accounts are
determined in accordance with a tax sharing agr ment with its Parent,
which allocates federal income taxes to the Company as if it filed a
separate tax return. During 1995, the Company utilized $15.5 million of
its net operating loss carryforward and $14.0 million of its alternative
minimum tax net operating loss carryforward. The Company has net
operating loss carryforwards for tax purposes of approximately $41.4
million at December 31, 1995, which expire betw n 2005 and 2009. For
alternative minimum tax calculation purposes, the Company has net
operating loss carryforwards of $42.9 million at December 31, 1995,
which expire between 2005 and 2009.
</TABLE>
APPENDIX A
Illustration of Death Benefits,
Accumulated Values and Cash Surrender Values
The following tables illustrate how the Death Benefits, Accumulated Values and
Cash Surrender Values of a Contract may change with the investment experience
of the Variable Account. The tables show how the Death Benefits, Accumulated
Values and Cash Surrender Values of a Contract issued to an Insured of a given
age (who pays a Scheduled Premium of $750 if Age 30 or $1,500 if Age 45) would
vary over time if the investment return on the assets held in each Portfolio
of the Fund were a uniform, gross, after-tax annual rate of 0 percent, 6
percent and 12 percent. The tables on pages A-3 through A-14 illustrate a
Contract issued to either a male age 30 or a male age 45 (as indicated in each
table), in the nonsmoker premium class. The Death Benefits, Accumulated Values
and Cash Surrender Values would be lower if the Insured were in a special
premium class or if the Insured were a smoker because the cost of insurance
would be increased. Also, the Death Benefits, Accumulated Values and Cash
Surrender Values would be different from those shown if the gross annual
investment returns averaged 0 percent, 6 percent and 12 percent over a period
of years, but fluctuated above and below those averages for individual
Contract Years.
<R<
The second column of the tables shows the Accumulated Value of the premiums
paid at a 5% interest rate. The third and sixth columns illustrate the Death
Benefit of a Contract over the designated period. The fourth and seventh
columns illustrate the Accumulated Value of the Contract over the designated
period. (The Accumulated Value is the total amount held under a Contract at
any time.) The fifth and eighth columns illustrate the Cash Surrender Value of
a Contract over the designated period. (The Cash Surrender Value is equal to
the Accumulated Value less any Decrease Charge, Contract Debt (assumed to be 0
in these illustrations) and unpaid Monthly Deductions (also assumed to be 0 in
these illustrations).) The sixth through the eighth columns assume that
throughout the life of the Contract, the monthly charge for the cost of
insurance is based on the current cost of insurance rates and the current
Mortality and Expense Risk Charge. The third through the fifth columns assume
that the Mortality and Expense Risk Charge and also that the monthly charge
for the cost of insurance are based on the maximum level permitted under the
Contract. These maximum allowable cost of insurance rates are based on the
1980 Commissioners Standard Ordinary Mortality Table.
Because the Death Benefit values vary depending on the Death Benefit Option in
effect, Option A and Option B are illustrated separately. (Option A provides
for a Death Benefit equal to the greater of (a) the Face Amount plus the
Accumulated Value and (b) the applicable percentage of Accumulated Value and
Option B provides for a Death Benefit equal to the greater of (a) the Face
Amount and (b) the applicable percentage of Accumulated Value.)
Any amounts held in the Loan Account would not participate in the investment
experience illustrated in these tables. Instead, such amounts will be credited
with interest as described in the Prospectus in the section entitled,
"CONTRACT RIGHTS--Loan Privileges".
The amounts shown for Death Benefits, Accumulated Values and Cash Surrender
Values reflect the fact that the net investment return of the Subaccounts of
the Variable Account is lower than the gross, after-tax return on the assets
held in the Fund as a result of the advisory fee paid by the Fund and charges
made against the Subaccounts. The values shown take into account the following
fees and charges: the daily investment advisory fee paid by the Fund, which is
assumed to be equivalent to an annual rate of .48% of the aggregate average
daily net assets of the Fund, based on the following fees: Growth (0.40%);
High Yield (0.40%); Income (0.40%); Money Market (0.40%); Opportunity Growth
(0.40%); and World Growth (0.85%); and the daily charge to each Subaccount for
assuming mortality and expense risks, which is equivalent to a charge at an
annual current rate of .60% of the average assets of the Subaccounts and which
is guaranteed never to exceed an annual rate of .75%. After deduction of these
amounts, the illustrated gross annual investment rates of return 0%, 6% and
12% correspond to (a) net annual rates of -1.23%, 4.77% and 10.77%,
respectively, assuming an advisory fee of .40% and a Mortality and Expense
Risk Charge of .75% and (b) net annual rates of -1.08%, 4.92% and 10.92%,
respectively, assuming an advisory fee of .48% and a Mortality and Expense
Risk Charge of .60%.
The amounts shown for Death Benefits, Accumulated Values and Cash Surrender
Values do not reflect a deduction for operating expenses of the Fund, other
than the investment advisory fee, because LBVIP and LB have agreed to
reimburse the Fund for these operating expenses pursuant to a separate written
agreement (the "Expense Reimbursement Agreement"). For the fiscal year of the
Fund ended December 31, 1995, the Fund was reimbursed approximately $1,886,225
for such operating expenses. The Expense Reimbursement Agreement could be
terminated at any time by the mutual agreement of the Fund, LB and LBVIP, but
the Fund, LB and LBVIP currently contemplate that the Expense Reimbursement
Agreement will continue so long as the Fund remains in existence. If the
Expense Reimbursement Agreement were terminated, the Fund would be required to
pay these operating expenses, which would reduce the net investment return on
the shares of the Fund held by the Subaccounts of the Variable Account.
The hypothetical values shown in the tables do not reflect any charges for
Federal income taxes attributable to the Variable Account because LBVIP does
not currently make any such charges. However, such charges may be made in the
future and, in that event, the gross annual investment return would have to
exceed 0%, 6% or 12% by an amount sufficient to cover the tax charges in order
to produce the Death Benefits and values illustrated. (See section entitled
"FEDERAL TAX MATTERS" in the Prospectus.)
The tables illustrate the Contract values that would result based upon the
hypothetical investment rates of return if premiums are paid as indicated, if
all Net Premiums are allocated to the Variable Account and if no Contract
loans have been made. The tables are also based on the assumptions that the
Contract Owner has not requested an increase or decrease in the Face Amount,
that no partial surrenders have been made and that no transfers above two have
been made in any Contract Year.
Upon request, LBVIP will provide a comparable illustration based upon the
proposed Insured's age, sex (except for Contracts issued in the state of
Montana) and premium class, the Death Benefit Option, Face Amount, Scheduled
Premium and any available riders requested. Montana has enacted legislation
that requires that cost of insurance rates applicable to Contracts purchased
in Montana cannot vary on the basis of the insured's sex.
The illustrations shown in the Prospectus are applicable for all insureds in
Montana, regardless of sex. (They are based on rates charged to males in other
states.)
Illustrations for additional term insurance benefits added by spouse rider in
the state of Montana will be based on rates applicable to females in other
states.
<PAGE>
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD VARIABLE INSURANCE PRODUCTS COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE TO AGE 96
Male Issue Age: 30; Nonsmoker, $750.00 Annual Premium, $100,000 Face Amount
Option A--Varying Death Benefit Option
Assumed Hypothetical Gross Annual Investment Rate of Return: 0%
[1] [2] [3] [4] [5] [6] [7] [8]
Premiums Assuming Guaranteed Costs (1)(2) Assuming Current Costs (1)(2)
Accumul. -------------------------------- --------------------------------
End of at 5% Cash Cash
Cont. Interest Death Accumulated Surrender Death Accumulated Surrender
Year Per Year Benefit Value Value Benefit Value Value
------ -------- ------- ----------- --------- ------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 787 100,465 465 0 * 100,489 489 0 *
2 1,614 100,924 924 393 100,974 974 443
3 2,482 101,378 1,378 895 101,453 1,453 970
4 3,394 101,814 1,814 1,379 101,915 1,915 1,480
5 4,351 102,245 2,245 1,858 102,372 2,372 1,985
6 5,356 102,659 2,659 2,349 102,824 2,824 2,514
7 6,411 103,056 3,056 2,824 103,260 3,260 3,028
8 7,519 103,436 3,436 3,281 103,679 3,679 3,524
9 8,683 103,800 3,800 3,723 104,081 4,081 4,004
10 9,905 104,148 4,148 4,148 104,467 4,467 4,467
11 11,187 104,527 4,527 4,527 104,885 4,885 4,885
12 12,534 104,878 4,878 4,878 105,287 5,287 5,287
13 13,948 105,213 5,213 5,213 105,672 5,672 5,672
14 15,433 105,519 5,519 5,519 106,041 6,041 6,041
15 16,993 105,799 5,799 5,799 106,395 6,395 6,395
16 18,630 106,051 6,051 6,051 106,721 6,721 6,721
17 20,349 106,265 6,265 6,265 107,019 7,019 7,019
18 22,154 106,452 6,452 6,452 107,291 7,291 7,291
19 24,049 106,601 6,601 6,601 107,535 7,535 7,535
20 26,039 106,713 6,713 6,713 107,742 7,742 7,742
Age
60 52,320 104,507 4,507 4,507 106,930 6,930 6,930
65 71,127 100,000 0 0 * 103,579 3,579 3,579
70 95,129 100,000 0 0 * 100,000 0 0 *
75 125,763 ******* ***** ***** ******* ***** *****
</TABLE>
(1) Assumes a $750.00 premium is paid at the beginning of each Contract Year.
Values will be different if premiums are paid with a different frequency or in
different amounts.
(2) Assumes that no Contract loans or partial surrenders have been made.
Excessive loans or withdrawals may cause the Contract to lapse because of
insufficient Cash Surrender Value.
* Based on (1) and (2) above, the Death Benefit Guarantee is in effect to
Attained Age 71. Therefore, the Contract remains in force even though the
Cash Surrender Value is zero. The $750.00 premium illustrated is greater than
the Death Benefit Guarantee Premium for this Contract.
The hypothetical investment results are illustrative only, and should not be
deemed a representation of past or future investment results. Actual
investment results may be more or less than those shown, and will depend on a
number of factors, including the investment allocations by a Contract Owner,
and the different investment returns for the Fund. The Death Benefit,
Accumulated Value and Cash Surrender Value for a Contract would be different
from those shown above if the actual investment results applicable to the
Contract average 0% over a period of years, but also fluctuated above or below
the average for individual Contract Years. No representation can be made by
us or by the Fund that these hypothetical returns can be achieved for any one
year, or sustained over any one year, or sustained over any period of time.
<PAGE>
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD VARIABLE INSURANCE PRODUCTS COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE AT AGE 96
Male Issue Age: 45; Nonsmoker, $1,500.00 Annual Premium, $100,000 Face Amount
Option A--Varying Death Benefit Option
Assumed Hypothetical Gross Annual Investment Rate of Return: 0%
[1] [2] [3] [4] [5] [6] [7] [8]
Premiums Assuming Guaranteed Costs (1)(2) Assuming Current Costs (1)(2)
Accumul. -------------------------------- ---------------------------------
End of at 5% Cash Cash
Cont. Interest Death Accumulated Surrender Death Accumulated Surrender
Year Per Year Benefit Value Value Benefit Value Value
------ -------- ------- ----------- --------- ------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 1,575 100,966 966 111 101,040 1,040 185
2 3,228 101,886 1,886 1,091 102,045 2,045 1,250
3 4,965 102,771 2,771 2,036 103,015 3,015 2,280
4 6,788 103,609 3,609 2,934 103,951 3,951 3,276
5 8,702 104,402 4,402 3,787 104,842 4,842 4,227
6 10,713 105,149 5,149 4,657 105,687 5,687 5,195
7 12,823 105,840 5,840 5,471 106,487 6,487 6,118
8 15,039 106,463 6,463 6,217 107,243 7,243 6,997
9 17,366 107,019 7,019 6,896 107,932 7,932 7,809
10 19,810 107,497 7,497 7,497 108,554 8,554 8,554
11 22,375 107,958 7,958 7,958 109,158 9,158 9,158
12 25,069 108,330 8,330 8,330 109,683 9,683 9,683
13 27,897 108,614 8,614 8,614 110,132 10,132 10,132
14 30,867 108,789 8,789 8,789 110,493 10,493 10,493
15 33,986 108,854 8,854 8,854 110,767 10,767 10,767
16 37,260 108,800 8,800 8,800 110,955 10,955 10,955
17 40,698 108,604 8,604 8,604 111,046 11,046 11,046
18 44,308 108,256 8,256 8,256 111,029 11,029 11,029
19 48,098 107,734 7,734 7,734 110,905 10,905 10,905
20 52,078 107,017 7,017 7,017 110,664 10,664 10,664
Age
60 33,986 108,854 8,854 8,854 110,767 10,767 10,767
65 52,078 107,017 7,017 7,017 110,664 10,664 10,664
70 75,170 100,006 6 6 107,187 7,187 7,187
75 104,641 ******* ****** ****** ******* ****** ******
</TABLE>
(1) Assumes a $1,500.00 premium is paid at the beginning of each Contract
Year. Values will be different if premiums are paid with a different
frequency or in different amounts.
(2) Assumes that no Contract loans or partial surrenders have been made.
Excessive loans or withdrawals may cause the Contract to lapse because of
insufficient Cash Surrender Value.
* Based on (1) and (2) above, the Death Benefit Guarantee is in effect to
Attained Age 74. Therefore, the Contract remains in force even though the
Cash Surrender Value is zero. The $1,500.00 premium illustrated is greater
than the Death Benefit Guarantee Premium for this Contract.
The hypothetical investment results are illustrative only, and should not be
deemed a representation of past or future investment results. Actual
investment results may be more or less than those shown, and will depend on a
number of factors, including the investment allocations by a Contract Owner,
and the different investment returns for the Fund. The Death Benefit,
Accumulated Value and Cash Surrender Value for a Contract would be different
from those shown above if the actual investment results applicable to the
Contract average 0% over a period of years, but also fluctuated above or below
the average for individual Contract Years. No representation can be made by
us or by the Fund that these hypothetical returns can be achieved for any one
year, or sustained over any one year, or sustained over any period of time.
<PAGE>
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD VARIABLE INSURANCE PRODUCTS COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE TO AGE 96
Male Issue Age: 30; Nonsmoker, $750.00 Annual Premium, $100,000 Face Amount
Option B--Level Death Benefit Option
Assumed Hypothetical Gross Annual Investment Rate of Return: 0%
[1] [2] [3] [4] [5] [6] [7] [8]
Premiums Assuming Guaranteed Costs (1)(2) Assuming Current Costs (1)(2)
Accumul. -------------------------------- ---------------------------------
End of at 5% Cash Cash
Cont. Interest Death Accumulated Surrender Death Accumulated Surrender
Year Per Year Benefit Value Value Benefit Value Value
------ -------- ------- ----------- --------- ------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 787 100,000 465 0 * 100,000 490 0 *
2 1,614 100,000 926 395 100,000 976 445
3 2,482 100,000 1,382 899 100,000 1,457 974
4 3,394 100,000 1,821 1,386 100,000 1,921 1,486
5 4,351 100,000 2,256 1,869 100,000 2,382 1,995
6 5,356 100,000 2,675 2,365 100,000 2,838 2,528
7 6,411 100,000 3,077 2,845 100,000 3,278 3,046
8 7,519 100,000 3,464 3,309 100,000 3,702 3,547
9 8,683 100,000 3,836 3,759 100,000 4,112 4,035
10 9,905 100,000 4,192 4,192 100,000 4,506 4,506
11 11,187 100,000 4,582 4,582 100,000 4,933 4,933
12 12,534 100,000 4,945 4,945 100,000 5,345 5,345
13 13,948 100,000 5,293 5,293 100,000 5,743 5,743
14 15,433 100,000 5,616 5,616 100,000 6,125 6,125
15 16,993 100,000 5,913 5,913 100,000 6,494 6,494
16 18,630 100,000 6,185 6,185 100,000 6,837 6,837
17 20,349 100,000 6,422 6,422 100,000 7,155 7,155
18 22,154 100,000 6,634 6,634 100,000 7,449 7,449
19 24,049 100,000 6,811 6,811 100,000 7,719 7,719
20 26,039 100,000 6,954 6,954 100,000 7,953 7,953
Age
60 52,320 100,000 5,249 5,249 100,000 7,662 7,662
65 71,127 100,000 460 460 100,000 4,686 4,686
70 95,129 100,000 0 0 * 100,000 0 0 *
75 125,763 ******* ***** ***** ******* ***** *****
</TABLE>
(1) Assumes a $750.00 premium is paid at the beginning of each Contract Year.
Values will be different if premiums are paid with a different frequency or in
different amounts.
(2) Assumes that no Contract loans or partial surrenders have been made.
Excessive loans or withdrawals may cause the Contract to lapse because of
insufficient Cash Surrender Value.
* Based on (1) and (2) above, the Death Benefit Guarantee is in effect to
Attained Age 71. Therefore, the Contract remains in force even though the
Cash Surrender Value is zero. The $750.00 premium illustrated is greater than
the Death Benefit Guarantee Premium for this Contract.
The hypothetical investment results are illustrative only, and should not be
deemed a representation of past or future investment results. Actual
investment results may be more or less than those shown, and will depend on a
number of factors, including the investment allocations by a Contract Owner,
and the different investment returns for the Fund. The Death Benefit,
Accumulated Value and Cash Surrender Value for a Contract would be different
from those shown above if the actual investment results applicable to the
Contract average 0% over a period of years, but also fluctuated above or below
the average for individual Contract Years. No representation can be made by
us or by the Fund that these hypothetical returns can be achieved for any one
year, or sustained over any one year, or sustained over any period of time.
<PAGE>
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD VARIABLE INSURANCE PRODUCTS COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE TO AGE 96
Male Issue Age: 45; Nonsmoker, $1,500.00 Annual Premium, $100,000 Face Amount
Option B--Level Death Benefit Option
Assumed Hypothetical Gross Annual Investment Rate of Return: 0%
[1] [2] [3] [4] [5] [6] [7] [8]
Premiums Assuming Guaranteed Costs (1)(2) Assuming Current Costs (1)(2)
Accumul. -------------------------------- ---------------------------------
End of at 5% Cash Cash
Cont. Interest Death Accumulated Surrender Death Accumulated Surrender
Year Per Year Benefit Value Value Benefit Value Value
------ -------- ------- ----------- --------- ------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 1,575 100,000 971 116 100,000 1,043 188
2 3,228 100,000 1,898 1,103 100,000 2,054 1,259
3 4,965 100,000 2,795 2,060 100,000 3,035 2,300
4 6,788 100,000 3,650 2,975 100,000 3,985 3,310
5 8,702 100,000 4,464 3,849 100,000 4,894 4,279
6 10,713 100,000 5,238 4,746 100,000 5,763 5,271
7 12,823 100,000 5,962 5,593 100,000 6,593 6,224
8 15,039 100,000 6,626 6,380 100,000 7,385 7,139
9 17,366 100,000 7,232 7,109 100,000 8,117 7,994
10 19,810 100,000 7,768 7,768 100,000 8,792 8,792
11 22,375 100,000 8,296 8,296 100,000 9,458 9,458
12 25,069 100,000 8,747 8,747 100,000 10,058 10,058
13 27,897 100,000 9,120 9,120 100,000 10,592 10,592
14 30,867 100,000 9,397 9,397 100,000 11,051 11,051
15 33,986 100,000 9,576 9,576 100,000 11,436 11,436
16 37,260 100,000 9,649 9,649 100,000 11,747 11,747
17 40,698 100,000 9,593 9,593 100,000 11,975 11,975
18 44,308 100,000 9,398 9,398 100,000 12,109 12,109
19 48,098 100,000 9,041 9,041 100,000 12,150 12,150
20 52,078 100,000 8,497 8,497 100,000 12,087 12,087
Age
60 33,986 100,000 9,576 9,576 100,000 11,436 11,436
65 52,078 100,000 8,497 8,497 100,000 12,087 12,087
70 75,170 100,000 2,253 2,253 100,000 9,675 9,675
75 104,641 ******* ***** ***** 100,000 1,677 1,677
</TABLE>
(1) Assumes a $1,500.00 premium is paid at the beginning of each Contract
Year. Values will be different if premiums are paid with a different
frequency or in different amounts.
(2) Assumes that no Contract loans or partial surrenders have been made.
Excessive loans or withdrawals may cause the Contract to lapse because of
insufficient Cash Surrender Value.
* Based on (1) and (2) above, the Death Benefit Guarantee is in effect to
Attained Age 74. Therefore, the Contract remains in force even though the
Cash Surrender Value is zero. The $1,500.00 premium illustrated is greater
than the Death Benefit Guarantee Premium for this Contract.
The hypothetical investment results are illustrative only, and should not be
deemed a representation of past or future investment results. Actual
investment results may be more or less than those shown, and will depend on a
number of factors, including the investment allocations by a Contract Owner,
and the different investment returns for the Fund. The Death Benefit,
Accumulated Value and Cash Surrender Value for a Contract would be different
from those shown above if the actual investment results applicable to the
Contract average 0% over a period of years, but also fluctuated above or below
the average for individual Contract Years. No representation can be made by
us or by the Fund that these hypothetical returns can be achieved for any one
year, or sustained over any one year, or sustained over any period of time.
<PAGE>
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD VARIABLE INSURANCE PRODUCTS COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE TO AGE 96
Male Issue Age: 30; Nonsmoker, $750.00 Annual Premium, $100,000 Face Amount
Option A--Varying Death Benefit Option
Assumed Hypothetical Gross Annual Investment Rate of Return: 6%
[1] [2] [3] [4] [5] [6] [7] [8]
Premiums Assuming Guaranteed Costs (1)(2) Assuming Current Costs (1)(2)
Accumul. -------------------------------- ---------------------------------
End of at 5% Cash Cash
Cont. Interest Death Accumulated Surrender Death Accumulated Surrender
Year Per Year Benefit Value Value Benefit Value Value
------ -------- ------- ----------- --------- ------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 787 100,499 499 0 * 100,525 525 0 *
2 1,614 101,023 1,023 492 101,076 1,076 545
3 2,482 101,572 1,572 1,089 101,654 1,654 1,171
4 3,394 102,134 2,134 1,699 102,249 2,249 1,814
5 4,351 102,724 2,724 2,337 102,872 2,872 2,485
6 5,356 103,329 3,329 3,019 103,527 3,527 3,217
7 6,411 103,951 3,951 3,719 104,201 4,201 3,969
8 7,519 104,591 4,591 4,436 104,896 4,896 4,741
9 8,683 105,248 5,248 5,171 105,614 5,614 5,537
10 9,905 105,925 5,925 5,925 106,354 6,354 6,354
11 11,187 106,671 6,671 6,671 107,167 7,167 7,167
12 12,534 107,428 7,428 7,428 108,009 8,009 8,009
13 13,948 108,209 8,209 8,209 108,879 8,879 8,879
14 15,433 109,003 9,003 9,003 109,780 9,780 9,780
15 16,993 109,810 9,810 9,810 110,714 10,714 10,714
16 18,630 110,631 10,631 10,631 111,668 11,668 11,668
17 20,349 111,455 11,455 11,455 112,645 12,645 12,645
18 22,154 112,293 12,293 12,293 113,646 13,646 13,646
19 24,049 113,135 13,135 13,135 114,671 14,671 14,671
20 26,039 113,979 13,979 13,979 115,710 15,710 15,710
Age
60 52,320 121,054 21,054 21,054 126,028 26,028 26,028
65 71,127 121,281 21,281 21,281 129,805 29,805 29,805
70 95,129 115,486 15,486 15,486 130,726 30,726 30,726
75 125,763 ******* ****** ****** 125,455 25,455 25,455
</TABLE>
(1) Assumes a $750.00 premium is paid at the beginning of each Contract Year.
Values will be different if premiums are paid with a different frequency or in
different amounts.
(2) Assumes that no Contract loans or partial surrenders have been made.
Excessive loans or withdrawals may cause the Contract to lapse because of
insufficient Cash Surrender Value.
* Based on (1) and (2) above, the Death Benefit Guarantee is in effect to
Attained Age 71. Therefore, the Contract remains in force even though the
Cash Surrender Value is zero. The $750.00 premium illustrated is greater than
the Death Benefit Guarantee Premium for this Contract.
The hypothetical investment results are illustrative only, and should not be
deemed a representation of past or future investment results. Actual
investment results may be more or less than those shown, and will depend on a
number of factors, including the investment allocations by a Contract Owner,
and the different investment returns for the Fund. The Death Benefit,
Accumulated Value and Cash Surrender Value for a Contract would be different
from those shown above if the actual investment results applicable to the
Contract average 6% over a period of years, but also fluctuated above or below
the average for individual Contract Years. No representation can be made by
us or by the Fund that these hypothetical returns can be achieved for any one
year, or sustained over any one year, or sustained over any period of time.
<PAGE>
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD VARIABLE INSURANCE PRODUCTS COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE TO AGE 96
Male Issue Age: 45; Nonsmoker, $1,500.00 Annual Premium, $100,000 Face Amount
Option A--Varying Death Benefit Option
Assumed Hypothetical Gross Annual Investment Rate of Return: 6%
[1] [2] [3] [4] [5] [6] [7] [8]
Premiums Assuming Guaranteed Costs (1)(2) Assuming Current Costs (1)(2)
Accumul. -------------------------------- ---------------------------------
End of at 5% Cash Cash
Cont. Interest Death Accumulated Surrender Death Accumulated Surrender
Year Per Year Benefit Value Value Benefit Value Value
------ -------- ------- ----------- --------- ------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 1,575 101,037 1,037 182 101,113 1,113 258
2 3,228 102,088 2,088 1,293 102,256 2,256 1,461
3 4,965 103,165 3,165 2,430 103,432 3,432 2,697
4 6,788 104,255 4,255 3,580 104,640 4,640 3,965
5 8,702 105,362 5,362 4,747 105,872 5,872 5,257
6 10,713 106,484 6,484 5,992 107,127 7,127 6,635
7 12,823 107,611 7,611 7,242 108,407 8,407 8,038
8 15,039 108,730 8,730 8,484 109,713 9,713 9,467
9 17,366 109,841 9,841 9,718 111,023 11,023 10,900
10 19,810 110,932 10,932 10,932 112,335 12,335 12,335
11 22,375 112,063 12,063 12,063 113,700 13,700 13,700
12 25,069 113,163 13,163 13,163 115,059 15,059 15,059
13 27,897 114,229 14,229 14,229 116,411 16,411 16,411
14 30,867 115,235 15,235 15,235 117,744 17,744 17,744
15 33,986 116,180 16,180 16,180 119,057 19,057 19,057
16 37,260 117,047 17,047 17,047 120,348 20,348 20,348
17 40,698 117,808 17,808 17,808 121,605 21,605 21,605
18 44,308 118,447 18,447 18,447 122,814 22,814 22,814
19 48,098 118,933 18,933 18,933 123,972 23,972 23,972
20 52,078 119,233 19,233 19,233 125,064 25,064 25,064
Age
60 33,986 116,180 16,180 16,180 119,057 19,057 19,057
65 52,078 119,233 19,233 19,233 125,064 25,064 25,064
70 75,170 117,007 17,007 17,007 128,821 28,821 28,821
75 104,641 104,130 4,130 4,130 127,157 27,157 27,157
</TABLE>
(1) Assumes a $1,500.00 premium is paid at the beginning of each Contract
Year. Values will be different if premiums are paid with a different frequency
or in different amounts.
(2) Assumes that no Contract loans or partial surrenders have been made.
Excessive loans or withdrawals may cause the Contract to lapse because of
insufficient Cash Surrender Value.
* Based on (1) and (2) above, the Death Benefit Guarantee is in effect to
Attained Age 74. Therefore, the Contract remains in force even though the Cash
Surrender Value is zero. The $1,500.00 premium illustrated is greater than the
Death Benefit Guarantee Premium for this Contract.
The hypothetical investment results are illustrative only, and should not be
deemed a representation of past or future investment results. Actual
investment results may be more or less than those shown, and will depend on a
number of factors, including the investment allocations by a Contract Owner,
and the different investment returns for the Fund. The Death Benefit,
Accumulated Value and Cash Surrender Value for a Contract would be different
from those shown above if the actual investment results applicable to the
Contract average 6% over a period of years, but also fluctuated above or below
the average for individual Contract Years. No representation can be made by us
or by the Fund that these hypothetical returns can be achieved for any one
year, or sustained over any one year, or sustained over any period of time.
<PAGE>
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD VARIABLE INSURANCE PRODUCTS COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE TO AGE 96
Male Issue Age: 30; Nonsmoker, $750.00 Annual Premium, $100,000 Face Amount
Option B--Level Death Benefit Option
Assumed Hypothetical Gross Annual Investment Rate of Return: 6%
[1] [2] [3] [4] [5] [6] [7] [8]
Premiums Assuming Guaranteed Costs (1)(2) Assuming Current Costs (1)(2)
Accumul. -------------------------------- ---------------------------------
End of at 5% Cash Cash
Cont. Interest Death Accumulated Surrender Death Accumulated Surrender
Year Per Year Benefit Value Value Benefit Value Value
------ -------- ------- ----------- --------- ------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 787 100,000 500 0 * 100,000 526 0 *
2 1,614 100,000 1,026 495 100,000 1,078 547
3 2,482 100,000 1,577 1,094 100,000 1,659 1,176
4 3,394 100,000 2,143 1,708 100,000 2,256 1,821
5 4,351 100,000 2,738 2,351 100,000 2,884 2,497
6 5,356 100,000 3,350 3,040 100,000 3,544 3,234
7 6,411 100,000 3,980 3,748 100,000 4,226 3,994
8 7,519 100,000 4,630 4,475 100,000 4,930 4,775
9 8,683 100,000 5,300 5,223 100,000 5,659 5,582
10 9,905 100,000 5,993 5,993 100,000 6,413 6,413
11 11,187 100,000 6,758 6,758 100,000 7,243 7,243
12 12,534 100,000 7,538 7,538 100,000 8,105 8,105
13 13,948 100,000 8,347 8,347 100,000 9,000 9,000
14 15,433 100,000 9,174 9,174 100,000 9,930 9,930
15 16,993 100,000 10,021 10,021 100,000 10,897 10,897
16 18,630 100,000 10,889 10,889 100,000 11,892 11,892
17 20,349 100,000 11,769 11,769 100,000 12,918 12,918
18 22,154 100,000 12,673 12,673 100,000 13,976 13,976
19 24,049 100,000 13,593 13,593 100,000 15,069 15,069
20 26,039 100,000 14,528 14,528 100,000 16,188 16,188
Age
60 52,320 100,000 23,911 23,911 100,000 28,678 28,678
65 71,127 100,000 27,281 27,281 100,000 35,496 35,496
70 95,129 100,000 27,340 27,340 100,000 42,307 42,307
75 125,763 100,000 19,309 19,309 100,000 48,200 48,200
</TABLE>
(1) Assumes a $750.00 premium is paid at the beginning of each Contract Year.
Values will be different if premiums are paid with a different frequency or in
different amounts.
(2) Assumes that no Contract loans or partial surrenders have been made.
Excessive loans or withdrawals may cause the Contract to lapse because of
insufficient Cash Surrender Value.
* Based on (1) and (2) above, the Death Benefit Guarantee is in effect to
Attained Age 71. Therefore, the Contract remains in force even though the Cash
Surrender Value is zero. The $750.00 premium illustrated is greater than the
Death Benefit Guarantee Premium for this Contract.
The hypothetical investment results are illustrative only, and should not be
deemed a representation of past or future investment results. Actual
investment results may be more or less than those shown, and will depend on a
number of factors, including the investment allocations by a Contract Owner,
and the different investment returns for the Fund. The Death Benefit,
Accumulated Value and Cash Surrender Value for a Contract would be different
from those shown above if the actual investment results applicable to the
Contract average 6% over a period of years, but also fluctuated above or below
the average for individual Contract Years. No representation can be made by us
or by the Fund that these hypothetical returns can be achieved for any one
year, or sustained over any one year, or sustained over any period of time.
<PAGE>
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD VARIABLE INSURANCE PRODUCTS COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE TO AGE 96
Male Issue Age: 45; Nonsmoker, $1,500.00 Annual Premium, $100,000 Face Amount
Option B--Level Death Benefit Option
Assumed Hypothetical Gross Annual Investment Rate of Return: 6%
[1] [2] [3] [4] [5] [6] [7] [8]
Premiums Assuming Guaranteed Costs (1)(2) Assuming Current Costs (1)(2)
Accumul. -------------------------------- ---------------------------------
End of at 5% Cash Cash
Cont. Interest Death Accumulated Surrender Death Accumulated Surrender
Year Per Year Benefit Value Value Benefit Value Value
------ -------- ------- ----------- --------- ------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 1,575 100,000 1,042 187 100,000 1,116 261
2 3,228 100,000 2,101 1,306 100,000 2,267 1,472
3 4,965 100,000 3,192 2,457 100,000 3,454 2,719
4 6,788 100,000 4,304 3,629 100,000 4,681 4,006
5 8,702 100,000 5,439 4,824 100,000 5,937 5,322
6 10,713 100,000 6,600 6,108 100,000 7,226 6,734
7 12,823 100,000 7,777 7,408 100,000 8,550 8,181
8 15,039 100,000 8,960 8,714 100,000 9,912 9,666
9 17,366 100,000 10,153 10,030 100,000 11,293 11,170
10 19,810 100,000 11,346 11,346 100,000 12,697 12,697
11 22,375 100,000 12,603 12,603 100,000 14,177 14,177
12 25,069 100,000 13,856 13,856 100,000 15,678 15,678
13 27,897 100,000 15,108 15,108 100,000 17,204 17,204
14 30,867 100,000 16,340 16,340 100,000 18,748 18,748
15 33,986 100,000 17,554 17,554 100,000 20,313 20,313
16 37,260 100,000 18,741 18,741 100,000 21,905 21,905
17 40,698 100,000 19,883 19,883 100,000 23,517 23,517
18 44,308 100,000 20,971 20,971 100,000 25,145 25,145
19 48,098 100,000 21,985 21,985 100,000 26,794 26,794
20 52,078 100,000 22,906 22,906 100,000 28,460 28,460
Age
60 33,986 100,000 17,554 17,554 100,000 20,313 20,313
65 52,078 100,000 22,906 22,906 100,000 28,460 28,460
70 75,170 100,000 25,503 25,503 100,000 36,835 36,835
75 104,641 100,000 21,177 21,177 100,000 44,639 44,639
</TABLE>
(1) Assumes a $1,500.00 premium is paid at the beginning of each Contract
Year. Values will be different if premiums are paid with a different frequency
or in different amounts.
(2) Assumes that no Contract loans or partial surrenders have been made.
Excessive loans or withdrawals may cause the Contract to lapse because of
insufficient Cash Surrender Value.
* Based on (1) and (2) above, the Death Benefit Guarantee is in effect to
Attained Age 74. Therefore, the Contract remains in force even though the Cash
Surrender Value is zero. The $1,500.00 premium illustrated is greater than the
Death Benefit Guarantee Premium for this Contract.
The hypothetical investment results are illustrative only, and should not be
deemed a representation of past or future investment results. Actual
investment results may be more or less than those shown, and will depend on a
number of factors, including the investment allocations by a Contract Owner,
and the different investment returns for the Fund. The Death Benefit,
Accumulated Value and Cash Surrender Value for a Contract would be different
from those shown above if the actual investment results applicable to the
Contract average 6% over a period of years, but also fluctuated above or below
the average for individual Contract Years. No representation can be made by us
or by the Fund that these hypothetical returns can be achieved for any one
year, or sustained over any one year, or sustained over any period of time.
<PAGE>
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD VARIABLE INSURANCE PRODUCTS COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE TO AGE 96
Male Issue Age: 30; Nonsmoker, $750.00 Annual Premium, $100,000 Face Amount
Option A--Varying Death Benefit Option
Assumed Hypothetical Gross Annual Investment Rate of Return: 12%
[1] [2] [3] [4] [5] [6] [7] [8]
Premiums Assuming Guaranteed Costs (1)(2) Assuming Current Costs (1)(2)
Accumul. -------------------------------- ---------------------------------
End of at 5% Cash Cash
Cont. Interest Death Accumulated Surrender Death Accumulated Surrender
Year Per Year Benefit Value Value Benefit Value Value
------ -------- ------- ----------- --------- ------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 787 100,534 534 0 * 100,561 561 0 *
2 1,614 101,127 1,127 596 101,183 1,183 652
3 2,482 101,783 1,783 1,300 101,873 1,873 1,390
4 3,394 102,498 2,498 2,063 102,627 2,627 2,192
5 4,351 103,289 3,289 2,902 103,462 3,462 3,075
6 5,356 104,153 4,153 3,843 104,389 4,389 4,079
7 6,411 105,098 5,098 4,866 105,404 5,404 5,172
8 7,519 106,131 6,131 5,976 106,517 6,517 6,362
9 8,683 107,263 7,263 7,186 107,740 7,740 7,663
10 9,905 108,505 8,505 8,505 109,083 9,083 9,083
11 11,187 109,918 9,918 9,918 110,611 10,611 10,611
12 12,534 111,459 11,459 11,459 112,293 12,293 12,293
13 13,948 113,152 13,152 13,152 114,147 14,147 14,147
14 15,433 115,003 15,003 15,003 116,190 16,190 16,190
15 16,993 117,028 17,028 17,028 118,443 18,443 18,443
16 18,630 119,246 19,246 19,246 120,918 20,918 20,918
17 20,349 121,664 21,664 21,664 123,637 23,637 23,637
18 22,154 124,318 24,318 24,318 126,628 26,628 26,628
19 24,049 127,220 27,220 27,220 129,921 29,921 29,921
20 26,039 130,397 30,397 30,397 133,535 33,535 33,535
Age
60 52,320 183,787 83,787 83,787 196,243 96,243 96,243
65 71,127 233,855 133,855 133,855 258,003 158,003 158,003
70 95,129 310,424 210,424 210,424 357,295 257,295 257,295
75 125,763 426,765 326,765 326,765 516,760 416,760 416,760
</TABLE>
(1) Assumes a $750.00 premium is paid at the beginning of each Contract Year.
Values will be different if premiums are paid with a different frequency or in
different amounts.
(2) Assumes that no Contract loans or partial surrenders have been made.
Excessive loans or withdrawals may cause the Contract to lapse because of
insufficient Cash Surrender Value.
* Based on (1) and (2) above, the Death Benefit Guarantee is in effect to
Attained Age 71. Therefore, the Contract remains in force even though the Cash
Surrender Value is zero. The $750.00 premium illustrated is greater than the
Death Benefit Guarantee Premium for this Contract.
The hypothetical investment results are illustrative only, and should not be
deemed a representation of past or future investment results. Actual
investment results may be more or less than those shown, and will depend on a
number of factors, including the investment allocations by a Contract Owner,
and the different investment returns for the Fund. The Death Benefit,
Accumulated Value and Cash Surrender Value for a Contract would be different
from those shown above if the actual investment results applicable to the
Contract average 12% over a period of years, but also fluctuated above or
below the average for individual Contract Years. No representation can be made
by us or by the Fund that these hypothetical returns can be achieved for any
one year, or sustained over any one year, or sustained over any period of
time.
<PAGE>
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD VARIABLE INSURANCE PRODUCTS COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE TO AGE 96
Male Issue Age: 45; Nonsmoker, $1,500.00 Annual Premium, $100,000 Face Amount
Option A--Varying Death Benefit Option
Assumed Hypothetical Gross Annual Investment Rate of Return: 12%
[1] [2] [3] [4] [5] [6] [7] [8]
Premiums Assuming Guaranteed Costs (1)(2) Assuming Current Costs (1)(2)
Accumul. -------------------------------- ---------------------------------
End of at 5% Cash Cash
Cont. Interest Death Accumulated Surrender Death Accumulated Surrender
Year Per Year Benefit Value Value Benefit Value Value
------ -------- ------- ----------- --------- ------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 1,575 101,109 1,109 254 101,186 1,186 331
2 3,228 102,300 2,300 1,505 102,478 2,478 1,683
3 4,965 103,594 3,594 2,859 103,885 3,885 3,150
4 6,788 104,989 4,989 4,314 105,420 5,420 4,745
5 8,702 106,497 6,497 5,882 107,086 7,086 6,471
6 10,713 108,129 8,129 7,637 108,895 8,895 8,403
7 12,823 109,887 9,887 9,518 110,864 10,864 10,495
8 15,039 111,770 11,770 11,524 113,010 13,010 12,764
9 17,366 113,794 13,794 13,671 115,327 15,327 15,204
10 19,810 115,960 15,960 15,960 117,834 17,834 17,834
11 22,375 118,347 18,347 18,347 120,602 20,602 20,602
12 25,069 120,902 20,902 20,902 123,597 23,597 23,597
13 27,897 123,645 23,645 23,645 126,844 26,844 26,844
14 30,867 126,569 26,569 26,569 130,357 30,357 30,357
15 33,986 129,695 29,695 29,695 134,165 34,165 34,165
16 37,260 133,031 33,031 33,031 138,300 38,300 38,300
17 40,698 136,576 36,576 36,576 142,787 42,787 42,787
18 44,308 140,339 40,339 40,339 147,650 47,650 47,650
19 48,098 144,317 44,317 44,317 152,930 52,930 52,930
20 52,078 148,511 48,511 48,511 158,662 58,662 58,662
Age
60 33,986 129,695 29,695 29,695 134,165 34,165 34,165
65 52,078 148,511 48,511 48,511 158,662 58,662 58,662
70 75,170 172,914 72,914 72,914 195,349 95,349 95,349
75 104,641 202,127 102,127 102,127 249,599 149,599 149,599
</TABLE>
(1) Assumes a $1,500.00 premium is paid at the beginning of each Contract
Year. Values will be different if premiums are paid with a different frequency
or in different amounts.
(2) Assumes that no Contract loans or partial surrenders have been made.
Excessive loans or withdrawals may cause the Contract to lapse because of
insufficient Cash Surrender Value.
* Based on (1) and (2) above, the Death Benefit Guarantee is in effect to
Attained Age 74. Therefore, the Contract remains in force even though the Cash
Surrender Value is zero. The $1,500.00 premium illustrated is greater than the
Death Benefit Guarantee Premium for this Contract.
The hypothetical investment results are illustrative only, and should not be
deemed a representation of past or future investment results. Actual
investment results may be more or less than those shown, and will depend on a
number of factors, including the investment allocations by a Contract Owner,
and the different investment returns for the Fund. The Death Benefit,
Accumulated Value and Cash Surrender Value for a Contract would be different
from those shown above if the actual investment results applicable to the
Contract average 12% over a period of years, but also fluctuated above or
below the average for individual Contract Years. No representation can be made
by us or by the Fund that these hypothetical returns can be achieved for any
one year, or sustained over any one year, or sustained over any period of
time.
<PAGE>
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD VARIABLE INSURANCE PRODUCTS COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE TO AGE 96
Male Issue Age: 30; Nonsmoker, $750.00 Annual Premium, $100,000 Face Amount
Option B--Level Death Benefit Option
Assumed Hypothetical Gross Annual Investment Rate of Return: 12%
[1] [2] [3] [4] [5] [6] [7] [8]
Premiums Assuming Guaranteed Costs (1)(2) Assuming Current Costs (1)(2)
Accumul. -------------------------------- ---------------------------------
End of at 5% Cash Cash
Cont. Interest Death Accumulated Surrender Death Accumulated Surrender
Year Per Year Benefit Value Value Benefit Value Value
------ -------- ------- ----------- --------- ------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 787 100,000 535 0 * 100,000 561 0 *
2 1,614 100,000 1,130 599 100,000 1,185 654
3 2,482 100,000 1,789 1,306 100,000 1,879 1,396
4 3,394 100,000 2,509 2,074 100,000 2,636 2,201
5 4,351 100,000 3,307 2,920 100,000 3,477 3,090
6 5,356 100,000 4,180 3,870 100,000 4,411 4,101
7 6,411 100,000 5,136 4,904 100,000 5,437 5,205
8 7,519 100,000 6,186 6,031 100,000 6,564 6,409
9 8,683 100,000 7,340 7,263 100,000 7,805 7,728
10 9,905 100,000 8,608 8,608 100,000 9,172 9,172
11 11,187 100,000 10,056 10,056 100,000 10,731 10,731
12 12,534 100,000 11,641 11,641 100,000 12,451 12,451
13 13,948 100,000 13,390 13,390 100,000 14,353 14,353
14 15,433 100,000 15,310 15,310 100,000 16,457 16,457
15 16,993 100,000 17,423 17,423 100,000 18,785 18,785
16 18,630 100,000 19,750 19,750 100,000 21,353 21,353
17 20,349 100,000 22,306 22,306 100,000 24,190 24,190
18 22,154 100,000 25,129 25,129 100,000 27,326 27,326
19 24,049 100,000 28,241 28,241 100,000 30,799 30,799
20 26,039 100,000 31,676 31,676 100,000 34,638 34,638
Age
60 52,320 126,454 94,369 94,369 141,117 105,311 105,311
65 71,127 193,510 158,614 158,614 217,753 178,486 178,486
70 95,129 304,679 262,654 262,654 346,833 298,994 298,994
75 125,763 462,371 432,122 432,122 533,163 498,283 498,283
</TABLE>
(1) Assumes a $750.00 premium is paid at the beginning of each Contract Year.
Values will be different if premiums are paid with a different frequency or in
different amounts.
(2) Assumes that no Contract loans or partial surrenders have been made.
Excessive loans or withdrawals may cause the Contract to lapse because of
insufficient Cash Surrender Value.
* Based on (1) and (2) above, the Death Benefit Guarantee is in effect to
Attained Age 71. Therefore, the Contract remains in force even though the Cash
Surrender Value is zero. The $750.00 premium illustrated is greater than the
Death Benefit Guarantee Premium for this Contract.
The hypothetical investment results are illustrative only, and should not be
deemed a representation of past or future investment results. Actual
investment results may be more or less than those shown, and will depend on a
number of factors, including the investment allocations by a Contract Owner,
and the different investment returns for the Fund. The Death Benefit,
Accumulated Value and Cash Surrender Value for a Contract would be different
from those shown above if the actual investment results applicable to the
Contract average 12% over a period of years, but also fluctuated above or
below the average for individual Contract Years. No representation can be made
by us or by the Fund that these hypothetical returns can be achieved for any
one year, or sustained over any one year, or sustained over any period of
time.
<PAGE>
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD VARIABLE INSURANCE PRODUCTS COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE TO AGE 96
Male Issue Age: 45; Nonsmoker, $1,500.00 Annual Premium, $100,000 Face Amount
Option B--Level Death Benefit Option
Assumed Hypothetical Gross Annual Investment Rate of Return: 12%
[1] [2] [3] [4] [5] [6] [7] [8]
Premiums Assuming Guaranteed Costs (1)(2) Assuming Current Costs (1)(2)
Accumul. -------------------------------- ---------------------------------
End of at 5% Cash Cash
Cont. Interest Death Accumulated Surrender Death Accumulated Surrender
Year Per Year Benefit Value Value Benefit Value Value
------ -------- ------- ----------- --------- ------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 1,575 100,000 1,113 258 100,000 1,190 335
2 3,228 100,000 2,314 1,519 100,000 2,490 1,695
3 4,965 100,000 3,625 2,890 100,000 3,911 3,176
4 6,788 100,000 5,047 4,372 100,000 5,468 4,793
5 8,702 100,000 6,593 5,978 100,000 7,166 6,551
6 10,713 100,000 8,279 7,787 100,000 9,022 8,530
7 12,823 100,000 10,110 9,741 100,000 11,055 10,686
8 15,039 100,000 12,094 11,848 100,000 13,286 13,040
9 17,366 100,000 14,250 14,127 100,000 15,720 15,597
10 19,810 100,000 16,591 16,591 100,000 18,382 18,382
11 22,375 100,000 19,205 19,205 100,000 21,355 21,355
12 25,069 100,000 22,054 22,054 100,000 24,618 24,618
13 27,897 100,000 25,172 25,172 100,000 28,208 28,208
14 30,867 100,000 28,577 28,577 100,000 32,161 32,161
15 33,986 100,000 32,311 32,311 100,000 36,528 36,528
16 37,260 100,000 36,414 36,414 100,000 41,366 41,366
17 40,698 100,000 40,928 40,928 100,000 46,733 46,733
18 44,308 100,000 45,909 45,909 100,000 52,700 52,700
19 48,098 100,000 51,419 51,419 100,000 59,353 59,353
20 52,078 100,000 57,536 57,536 100,000 66,789 66,789
Age
60 33,986 100,000 32,311 32,311 100,000 36,528 36,528
65 52,078 100,000 57,536 57,536 100,000 66,789 66,789
70 75,170 117,255 101,082 101,082 138,164 119,107 119,107
75 104,641 186,066 173,893 173,893 220,521 206,094 206,094
</TABLE>
(1) Assumes a $1,500.00 premium is paid at the beginning of each Contract
Year. Values will be different if premiums are paid with a different frequency
or in different amounts.
(2) Assumes that no Contract loans or partial surrenders have been made.
Excessive loans or withdrawals may cause the Contract to lapse because of
insufficient Cash Surrender Value.
* Based on (1) and (2) above, the Death Benefit Guarantee is in effect to
Attained Age 74. Therefore, the Contract remains in force even though the Cash
Surrender Value is zero. The $1,500.00 premium illustrated is greater than the
Death Benefit Guarantee Premium for this Contract.
The hypothetical investment results are illustrative only, and should not be
deemed a representation of past or future investment results. Actual
investment results may be more or less than those shown, and will depend on a
number of factors, including the investment allocations by a Contract Owner,
and the different investment returns for the Fund. The Death Benefit,
Accumulated Value and Cash Surrender Value for a Contract would be different
from those shown above if the actual investment results applicable to the
Contract average 12% over a period of years, but also fluctuated above or
below the average for individual Contract Years. No representation can be made
by us or by the Fund that these hypothetical returns can be achieved for any
one year, or sustained over any one year, or sustained over any period of
time.
APPENDIX B
DEFERRED ADMINISTRATIVE CHARGES
PER $1,000 OF FACE AMOUNT
The following tables include the maximum Deferred Administrative Charge Per
$1,000 of Face Amount that will apply under a Contract. The specific maximum
charge applicable to a Contract at issuance can be determined from the
attached tables based upon the initial Face Amount, the Insured's Attained Age
at Contract issuance, and, except for Insured's with an Attained Age under 20,
whether the Insured is a smoker or nonsmoker. For an Insured with an Attained
Age under 20, reference should be made to the column entitled "Standard" in
each table, rather than to the columns entitled "Smoker" or "Nonsmoker".
In general, the maximum Deferred Administrative Charge applicable to a
Contract will be determined from Table 1. The lower maximum charges shown in
Table 2 apply to Contracts with a Face Amount that equals or exceeds $250,000
at issuance. Subsequent requested increases in Face Amount result in a total
Face Amount that equals or exceeds $250,000 will qualify for the lower maximum
charges shown in Table 2.
If the Face Amount is increased, an additional Deferred Administrative Charge
will be calculated for the increase in an amount determined in the same manner
as for the initial Face Amount, except that the Insured's Attained Age on the
effective date of the increase and the resulting total Face Amount will be
used.
The Deferred Administrative Charge does not apply to spouse riders.
As described in the Prospectus in the section entitled "CHARGES AND
DEDUCTIONS--Accumulated Value Charges--Decrease Charge", the sum of the
Deferred Administrative Charge and the Contingent Deferred Sales Charge will
equal the Decrease Charge.
TABLE 1
FACE AMOUNTS OF LESS THAN $250,000
Maximum Deferred
Administrative Charges Per $1,000 of Face Amount
Attained Age at Date of Issuance Standard
or Effective Date of Requested (Attained Age
Increase, As Appropriate under 20) Smoker Nonsmoker
-------------------------------- ------------ ------ ---------
0-4 $3.60
5-9 $3.60
10-14 $4.80
15-19 $4.80
20-24 $6.00 $4.80
25-29 $6.00 $4.80
30-34 $7.20 $4.80
35-39 $7.20 $4.80
40-44 $7.20 $6.00
45-49 $8.40 $6.00
50-54 $8.40 $7.20
55-59 $8.40 $7.20
60-64 $8.40 $8.40
65-69 $8.40 $8.40
70-74 $8.40 $8.40
75-80 $8.40 $8.40
TABLE 2
FACE AMOUNTS OF $250,000 OR MORE
Maximum Deferred
Administrative Charges Per $1,000 of Face Amount
Attained Age at Date of Issuance Standard
or Effective Date of Requested (Attained Age
Increase, As Appropriate under 20) Smoker Nonsmoker
-------------------------------- ------------ ------ ---------
0-4 $2.40
5-9 $2.40
10-14 $3.60
15-19 $3.60
20-24 $4.80 $3.60
25-29 $4.80 $3.60
30-34 $6.00 $3.60
35-39 $6.00 $3.60
40-44 $6.00 $4.80
45-49 $6.00 $4.80
50-54 $6.00 $6.00
55-59 $6.00 $6.00
60-64 $6.00 $6.00
65-69 $6.00 $6.00
70-74 $6.00 $6.00
75-80 $6.00 $6.00
APPENDIX C
Initial Monthly Administrative Charges
Per $1,000 of Face Amount
The following tables include the Initial Monthly Administrative Charge for
$1,000 of Face Amount that will apply under a Contract. The specific charge
applicable to a Contract at issuance can be determined from the attached
tables based upon the initial Face Amount, the Insured's Attained Age at
Contract issuance, and, except for Insureds with an Attained Age under 20,
reference should be made to the column entitled "Standard" in each table,
rather than to the columns entitled "Smoker" or "Nonsmoker".
In general, the Initial Monthly Administrative Charge applicable to a Contract
will be determined from Table 1. The lower charges shown in Table 2 apply to
Contracts with a Face Amount that equals or exceeds $250,000 at issuance.
Subsequent increases in Face Amount that result in a total Free Amount that
equals or exceeds $250,000, will qualify for the lower charges shown in Table
2.
If the Face Amount is increased, an additional Initial Monthly Administrative
Charge will be calculated for the increase in an amount determined in the same
manner as for the initial Face Amount, except that the Insured's Attained Age
on the effective date of the increase and the resulting total Face Amount will
be used.
If a spouse rider providing life insurance benefits on the Insured's spouse is
included in the original Contract or added subsequently, an additional Initial
Monthly Administrative Charge will be calculated for the spouse rider in an
amount determined in the same manner as for the initial Face Amount, except
that the spouse's Attained Age and smoker or nonsmoker status on the effective
date of the rider will be used. For a spouse with an Attained Age under 20,
reference should be made to the column entitled "Standard", rather than to the
columns entitled "Smoker" or "Nonsmoker". Spouse riders do not qualify for the
lower rates in Table 2.
TABLE 1
FACE AMOUNTS OF LESS THAN $250,000
Initial Monthly Administrative Charges
Per $1,000 of Face Amount
Attained Age at Date of Issuance Standard
or Effective Date of Requested (Attained Age
Increase, As Appropriate under 20) Smoker Nonsmoker
-------------------------------- ------------ ------ ---------
0-4 $0.03
5-9 $0.03
10-14 $0.04
15-19 $0.04
20-24 $0.05 $0.04
25-29 $0.05 $0.04
30-34 $0.06 $0.05
35-39 $0.06 $0.04
40-44 $0.06 $0.05
45-49 $0.07 $0.05
50-54 $0.07 $0.06
55-59 $0.07 $0.06
60-64 $0.07 $0.07
65-69 $0.07 $0.07
70-74 $0.07 $0.07
75-80 $0.07 $0.07
TABLE 2
FACE AMOUNTS OF $250,000 OR MORE
Initial Monthly Administrative Charges
Per $1,000 of Face Amount
Attained Age at Date of Issuance Standard
or Effective Date of Requested (Attained Age
Increase, As Appropriate under 20) Smoker Nonsmoker
-------------------------------- ------------ ------ ---------
0-4 $0.02
5-9 $0.02
10-14 $0.03
15-19 $0.03
20-24 $0.04 $0.03
25-29 $0.04 $0.03
30-34 $0.05 $0.03
35-39 $0.05 $0.03
40-44 $0.05 $0.04
45-49 $0.05 $0.04
50-54 $0.05 $0.05
55-59 $0.05 $0.05
60-64 $0.05 $0.05
65-69 $0.05 $0.05
70-74 $0.05 $0.05
75-80 $0.05 $0.05
LBVIP-VL\S-6\1996\Pro96-1.doc
<PAGE>
PART II
CONTENTS OF AMENDMENT TO REGISTRATION STATEMENT
This Post-Effective Amendment No. 19 to the Registration Statement comprises
the following papers and documents:
The facing sheet.
The general form of Prospectus, consisting of __ pages.
The signatures (including Powers of Attorney).
Written consents of the following persons:
Actuary - filed as Exhibit 6. (6)
Accountant - filed as Exhibit 10. (6)
Counsel - filed as Exhibit 11. (6)
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:
A. (1) Resolutions of Board of Directors of Lutheran Brotherhood Variable
Insurance Products Company ("LBVIP") establishing the LBVIP
Variable Insurance Account ("the Account"). (1)
(2) Not Applicable.
(3) (a) Sales Agreement between Lutheran Brotherhood Securities Corp.
("LBSC") and LBVIP. (2)
(b) Form of Agreement between LBSC and agents with respect to the
sale of the Contracts. (2)
(c) Schedules of sales commissions. (2)
(4) Service Agreement between Lutheran Brotherhood and LBVIP. (2)
(5) (a) Form of Contract. (3)
(b) Available Contract riders. (3)
(i) Contract Rider for Accelerated Death Benefits.
(6) (a) Articles of Incorporation of LBVIP. (1)
(b) Bylaws of LBVIP. (1)
(7) Not Applicable.
(8) See Exhibit 1.A.(3)(a).
(9) Not Applicable.
(10) Contract Application Form. (2)
2. See Exhibit 1.A.(5)(a).
3. Opinion of Counsel as to the legality of the securities being registered
(including written consent). (5)
4. None.
5. Not Applicable.
6. Actuarial Opinion and Consent. (6)
7. Actuarial basis of cash value adjustment pursuant to Rule 6e-
3(T)(b)(13)(v)(B) under the 1940 Act. (2)
8. Procedures Memorandum pursuant to Rule 6e-3(T)(b)(12)(ii) under the 1940
Act. (2)
9. Pursuant to Rule 6e-3(T)(b)(13)(iii)(F)(3) under the 1940 Act, brief
description of methodology used to support the representation made
regarding the level of the Mortality Risk Charge and the Expense Risk
Charge pursuant to Rule 6e-3(T)(b)(13)(iii)(F)(2) under the 1940 Act. (1)
10. Accountant's Consent. (6)
11. Counsel's Consent. (6)
________________________________
(1) Included in the Registration Statement on Form S-6, Registration No. 33-
3243, filed by the Account pursuant to the Securities Act of 1933, as amended,
on February 11, 1986.
(2) Included in Pre-Effective Amendment No. 1 to the Registration Statement
on Form S-6, Registration No. 33-3243, filed by the Account pursuant to the
Securities Act of 1933, as amended, on September 29, 1986.
(3) Included in Post-Effective Amendment No. 10 to the Registration Statement
on Form S-6, Registration No. 33-3243, filed by the Account pursuant to the
Securities Act of 1933, as amended, on May 3, 1991.
(4) Included in Post-Effective Amendment No. 12 to the Registration Statement
on Form S-6, Registration No. 33-3243, filed by the Account pursuant to the
Securities Act of 1933, as amended, on March 2, 1992.
5) Included in Post-Effective Amendment No. 16 to the Registration Statement
on Form S-6, Registration No. 33-3243, filed by the Account pursuant to the
Securities Act of 1933, as amended, on April 29, 1994.
(6) Filed herewith.
(7) To be filed by subsequent amendment.
LBVIP-VL\S-6\1996\Partii
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it meets all of the requirements for effectiveness of this
amendment to the Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this amendment to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Minneapolis and State of Minnesota on the 29th day
of April 1996.
LBVIP VARIABLE INSURANCE ACCOUNT
(Registrant)
By LUTHERAN BROTHERHOOD VARIABLE
INSURANCE PRODUCTS COMPANY
(Depositor)
By /s/ Robert P. Gandrud
----------------------------
Robert P. Gandrud, President
Pursuant to the requirements of the Securities Act of 1933, the Depositor has
duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Minneapolis and State of Minnesota on the 29th day of April, 1996.
LUTHERAN BROTHERHOOD VARIABLE
INSURANCE PRODUCTS COMPANY
(Depositor)
By /s/ Robert P. Gandrud
----------------------------
Robert P. Gandrud, President
Pursuant to the requirements of the Securities Act of 1933, this Amendment to
the Registration Statement has been signed on the 29th day of April, 1996 by
the following directors and officers of Depositor in the capacities indicated:
/s/ Robert P. Gandrud President, Chairman (Chief Executive
---------------------- Officer)
Robert P. Gandrud
/s/ Bruce J. Nicholson Chief Financial Officer (Principal
---------------------- Financial Officer
Bruce J. Nicholson
/s/ Anita J.T. Young Treasurer (Principal Accounting Officer)
----------------------
Anita J.T. Young
Robert P. Gandrud
Bruce J. Nicholson A Majority of the
Rolf F. Bjelland Board of Directors
Paul R. Ramseth
William H. Reichwald
Otis F. Hilbert, by signing his name hereto, does hereby sign this document on
behalf of each of the above-named directors of Lutheran Brotherhood Variable
Insurance Products Company pursuant to powers of attorney duly executed by
such persons.
/s/ Otis F. Hilbert
---------------------------------
Otis F. Hilbert, Attorney-in-Fact
LBVIP-VL\S-6\1996\sign(b)
<PAGE>
LBVIP VARIABLE INSURANCE ACCOUNT
INDEX TO EXHIBITS
Exhibit Sequential Page
Number Exhibit Number
--------- ------- ---------------
6 Actuarial Opinion and Consent
10 Independent Accountant's Consent
11 Counsel's Consent
27 Financial Data Schedule
LBVIP-VL\S-6\1996\Index
83
{PAGE|2}
625 Fourth Avenue South
Minneapolis, Minnesota 55415
[logo] LUTHERAN BROTHERHOOD
VARIABLE INSURANCE
PRODUCTS COMPANY EXHIBIT 6
April 29, 1996
To Whom It May Concern:
This opinion is furnished in connection with the registration by Lutheran
Brotherhood Variable Insurance Products Company of a flexible premium
variable life insurance contract ("Contract") under the Securities Act of
1933. The prospectus included in Post-effective Amendment Number 19 to
Registration Statement No. 33-3243 on Form S-6 describes the Contract. The
form of the Contract was designed under my supervision, and I am familiar
with the Registration Statement and Exhibits attached thereto.
In my opinion:
The illustration of Death Benefits, Accumulated Values and Cash Surrender
Values included in the section entitled, "Illustration of Death Benefits,
Accumulated Values and Cash Surrender Values" in Appendix A of the
prospectus, based on the assumptions stated on the illustrations, are
consistent with the provisions of the Contract. The pricing of the Contract
was not completed so as to make the relationship between premiums and
benefits, as shown in the illustrations, appear more favorable to a
prospective purchaser of the Contract for a nonsmoker male aged 30 or
nonsmoker male aged 45, than to prospective purchasers of the Contract for
other premium classes, for other ages, or for females.
I hereby consent to the use of this opinion as an exhibit to the
Registration Statement and to the reference to my name under the heading
"EXPERTS" in the Prospectus.
Sincerely,
/s/ Gregory A. Rogers
Gregory A. Rogers
Actuary
JMO:ah\Exh-6
EXHIBIT 10
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Post-Effective Amendment No. 19 to the registration statement on Form S-6
(the "Registration Statement") of our report dated February 5, 1996,
relating to the financial statements of LBVIP Variable Insurance Account
which appears in such Prospectus. We also consent to the reference to us
under the heading "Experts" in such Prospectus.
We also consent to the use in such Prospectus of our report dated February
23, 1996, relating to the financial statements of Lutheran Brotherhood
Variable Insurance Products Company which appear in such Prospectus.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Minneapolis, Minnesota
April 29, 1996
Exh-10.doc
625 Fourth Avenue South
Minneapolis, Minnesota 55415
[logo] LUTHERAN BROTHERHOOD
VARIABLE INSURANCE
PRODUCTS COMPANY EXHIBIT 11
April 29, 1996
Lutheran Brotherhood Variable
Insurance Products Company
625 Fourth Avenue South
Minneapolis, MN 55415
Ladies and Gentlemen:
I consent to the use of my name under the heading "Legal Matters" in the
Prospectuses constituting part of the Registration Statement, on Form S-6
(File No. 33-3243), of LBVIP Variable Insurance Account.
Very truly yours,
/s/ James M. Odland
James M. Odland
Assistant Secretary
(612) 340-5727
JMO:ah\exh-11
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the LBVIP
Variable Insurance Accout Annual Report to Shareholders dated December 31,
1995 and is qualified in its entirety by reference to such Annual Report.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 87,786,119
<INVESTMENTS-AT-VALUE> 101,196,383
<RECEIVABLES> 279,674
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 101,476,057
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 50,894
<TOTAL-LIABILITIES> 50,894
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 101,425,163
<DIVIDEND-INCOME> 4,126,618
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 515,776
<NET-INVESTMENT-INCOME> 3,610,842
<REALIZED-GAINS-CURRENT> 130,050
<APPREC-INCREASE-CURRENT> 16,677,188
<NET-CHANGE-FROM-OPS> 20,418,080
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 14,515,711
<NUMBER-OF-SHARES-REDEEMED> 4,241,891
<SHARES-REINVESTED> 4,116,830
<NET-CHANGE-IN-ASSETS> 31,397,820
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
