----------------------------------
6 Boxes Centered Here
----------------------------------
VARIABLE UNIVERSAL LIFE
----------------------------------
and LB SERIES FUND, INC.
----------------------------------
Cover Logo Centers Here
Prospectuses
April 28, 1995
LUTHERAN BROTHERHOOD
VARIABLE INSURANCE
PRODUCTS COMPANY
LOGO CENTERS HERE
Variable Universal Life Insurance:
Insurance with investment choice
Lutheran Brotherhood Variable Insurance Products Company's (LBVIP)
Variable Universal Life insurance, also known as Flexible Premium
Variable Life, represents a unique blend of insurance and investment
options. Advantages include:
* Permanent and adjustable life insurance protection. The death benefit
provided by the plan may be increased (subject to insurability) or
decreased to meet your changing insurance needs.
* Access to accumulated value. As you accumulate money, you can withdraw
or borrow from the plan to meet other financial needs. Your money is
available for paying off your mortgage early or education funding. You
can also use your contract's accumulated value to fund early retirement
or purchase a second home. Such withdrawals will reduce your death
benefit and accumulated values.*
* Tax advantages. Under current law, your contract's cash value
accumulates tax deferred. Upon death, proceeds are paid to the
beneficiary income tax free.
* Investment choice. Variable Universal Life is different from
traditional life insurance in that you decide the investment mix of your
contract's accumulated value. You select from a variety of investment
choices based on your objectives, and if your objectives change, you
have the flexibility and control to redirect your investments.
LBVIP's Variable Universal Life offers life insurance protection, tax
advantages and investment options in a single insurance product.
*Withdrawals and loans are subject to certain limitations. Withdrawals
are subject to a $25 surrender charge, or 2% of the amount withdrawn, if
less. Income tax and possible penalty tax may apply to withdrawals and
loans, depending on how you structure the plan.
Four investment options to help meet your financial needs
LBVIP's Variable Universal Life offers four subaccounts that invest in
corresponding portfolios of LB Series Fund, Inc.:
Growth Subaccount. This subaccount invests in the Growth Portfolio. Its
objective is to seek long-term growth of capital by investing primarily
in common stocks of established corporations.
High Yield Subaccount. This subaccount invests in the High Yield
Portfolio. Its objective is to seek high current income and growth of
capital by investing primarily in high-yielding (junk) corporate bonds.
Income Subaccount. This subaccount invests in the Income Portfolio. Its
objective is to seek a high level of income while preserving principal
by investing primarily in intermediate- to long-term bonds.
Money Market Subaccount. This subaccount invests in the Money Market
Portfolio.** Its objective is to seek current income with stability of
principal by investing in high-quality, short-term debt securities.
**Investments in this portfolio are not insured or guaranteed by the
U.S. government. There are no assurances the portfolio will maintain a
stable net asset value of $1.
The Importance of the Prospectus
The purpose of the prospectus is to provide meaningful information about
LBVIP's Variable Universal Life. A prospectus must be given before you
can invest, and updated prospectuses are sent to all existing contract
owners on an annual basis.
Please refer to the Table of Contents for more information about this
booklet. You're encouraged to review this prospectus and file it for
future reference.
This page does not constitute part of the prospectuses.
6 Solid Boxes Centered Here
Prospectus
----------------------------------
Flexible Premium
Variable Life Insurance Contract
Issued By
Lutheran Brotherhood Variable
Insurance Products Company
625 Fourth Avenue South * Minneapolis, Minnesota 55415 * (612) 339-8091
----------------------------------
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 April 28, 1995.
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 four Portfolios of the
Fund, the Growth Portfolio, the High Yield Portfolio, the Income
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>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
DEFINITIONS 6
SUMMARY 12
The Contract 12
Subaccounts of the Variable Account; Portfolios of the Fund 12
Death Proceeds and Death Benefit Options 13
Additional Insurance Benefits 14
Amount of Accumulated Value and Cash Surrender Value 14
Flexibility to Adjust Amount of Death Benefit 14
Contract Issuance 15
Allocation of Net Premiums 15
Contract Lapse and Reinstatement 16
Death Benefit Guarantee Protection 16
Charges Assessed in Connection with the Contract 17
Free Look Privileges 19
Loan Privileges 19
Exchange Privileges 19
Surrender of the Contract 20
Tax Treatment of Accumulated Value 20
Tax Treatment of Death Benefits Received by the Beneficiary 20
Employment-Related Benefit Plans 20
LBVIP, LUTHERAN BROTHERHOOD AND THE VARIABLE ACCOUNT 21
LBVIP and Lutheran Brotherhood 21
The Variable Account 21
LB Series Fund, Inc. 21
Performance Information 23
Addition, Deletion or Substitution of Investments 23
CONTRACT BENEFITS 24
Death Benefits 24
Accumulated Value and Cash Surrender Value 29
Benefits at Maturity 30
Payment of Contract Benefits 31
PAYMENT AND ALLOCATION OF PREMIUMS 32
Issuance of a Contract 32
Amount and Timing of Premiums 32
Allocation of Premiums and Accumulated Value 34
CHARGES AND DEDUCTIONS 37
Premium Expense Charges 37
Accumulated Value Charges 38
Decrease Charge 38
Monthly Deduction 42
Partial Surrender Charge 45
Charges Against the Variable Account 46
DEATH BENEFIT GUARANTEE 46
CONTRACT RIGHTS 49
Loan Privileges 49
Surrender Privileges 50
Free Look Privileges 53
Exchange Privileges 54
GENERAL PROVISIONS 54
Postponement of Payments 54
Date of Receipt 54
The Contract 55
Suicide 55
Incontestability 55
Change of Owner or Beneficiary 55
Assignment as Collateral 55
Misstatement of Age or Sex 55
Due Proof of Death 55
Reports to Contract Owners 55
Additional Insurance Benefits 56
Accelerated Benefits Rider 57
Reservation of Certain Rights 57
FEDERAL TAX MATTERS 58
Contract Proceeds 58
Taxation of the Company 60
EMPLOYMENT-RELATED BENEFIT PLANS 61
SAFEKEEPING OF THE VARIABLE ACCOUNT'S ASSETS 61
VOTING RIGHTS 61
DIRECTORS AND OFFICERS OF LBVIP 62
Directors 62
Executive Officers 62
SALES AND OTHER AGREEMENTS 63
LEGAL PROCEEDINGS 64
LEGAL MATTERS 64
EXPERTS 64
FURTHER INFORMATION 64
FINANCIAL STATEMENTS 65
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
</TABLE>
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 38.
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 24.
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 46 and "PAYMENT AND ALLOCATION OF PREMIUMS--
Contract Lapse and Reinstatement" at page 35.
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 46.
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 24.
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 24.
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
24.
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 48.
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 38. 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 38.
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 24.
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 52.
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 44.
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 48.
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 48.
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 32.
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 32.
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 42. 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 37.
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 32.
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 37.
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 32.
Subaccount. A subdivision of the Variable Account. Each Subaccount
invests exclusively in the shares of a corresponding Portfolio of the
Fund. Currently, there are four 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);
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 29.
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 29.
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 3 and the day after Thanksgiving.
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 four Subaccounts of the Variable
Account--the Growth Subaccount, the High Yield Subaccount, the Income
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 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.
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 charge by
the Fund for its investment management services equal to an annual rate
of .40% of the aggregate average daily net assets of the Fund, 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 1994 had total assets of approximately $9.4
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. The identical personnel that performed the investment
advisory services for LBRC are performing the same investment advisory
services for 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 Fund, as described in the
accompanying current prospectus for the Fund.
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.
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 after 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.
The Unit Value for each Unit of the Income Subaccount, the Growth
Subaccount and the High Yield Subaccount was arbitrarily set initially
at $10 and for each Unit of the Money Market Subaccount was arbitrarily
set initially at $1.
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.
For a limited time beginning May 1995 through December 1995, persons who
have purchased a life insurance contract or disability insurance
contract from LB or LBVIP between January 1, 1990 and December 31, 1994,
will be able to purchase the Contract without being subject to Home
Office normal age and amount of insurance underwriting requirements.
Those proposed insureds will also be offered a premium credit of $1 for
each $1,000 Face Amount of the Contract purchased. This premium credit
will be added to the first premium payment for the contract.
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
Authoriztion 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
fradulent 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 transer 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 contiues, 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
Variable Account and a list of the securities held in each Portfolio of
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 supercede the premium limitations previously established by the
Code as discussed under "Premium Limitations" at page 33 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.
Safekeeping of the Variable Account's Assets
LBVIP holds the assets of the Variable Account. The assets are kept
physically segregated and held separate and apart from the General
Account of LBVIP. LBVIP maintains records of all purchases and
redemptions of Fund shares by each of the Subaccounts. Additional
protection for the assets of the Variable Account is afforded by a
blanket fidelity bond providing $10,000,000 coverage for officers and
employees and $750,000 coverage for general agents and LBVIP
Representatives, both subject to a $100,000 deductible.
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)
Richard J. Johnson Vice President--Product Development (Vice President of Lutheran
Brotherhood)
James R. Olson Vice President (Vice President of Lutheran Brotherhood)
Bruce M. Piltingsrud Vice President--Marketing (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. Prior to being elected as an officer of Lutheran
Brotherhood in 1990, Mr. Nicholson was an actuarial consultant and
principal of the Bloomington, Minnesota office of Towers, Perrin,
Forster & Crosby.
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.
Bonding Arrangement. An insurance company blanket bond is maintained
providing $10,000,000 coverage for officers and employees of Lutheran
Brotherhood, LBVIP and Lutheran Brotherhood Securities Corp., and
$750,000 coverage for their general agents and LBVIP Representatives,
both subject to a $100,000 deductible.
Legal Proceedings
LBVIP is not involved in any legal proceedings.
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.
(This page intentionally left blank)
3100 Multifoods Tower
33 South Sixth Street
Minneapolis, MN 55402-3795
- -----------------------------------------------------------------------
Price Waterhouse llp Logo goes here
REPORT OF INDEPENDENT ACCOUNTANTS
February 3, 1995
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, 1994, and 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.
/s/Price Waterhouse LLP
<TABLE>
<CAPTION>
LBVIP Variable Insurance Account
Statement of Assets and Liabilities
December 31, 1994
Subaccounts
----------------------------------------------------------
High Money
Growth Yield Income Market
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
ASSETS:
Investments in LB Series Fund, Inc. --
Growth Portfolio, 2,638,928 shares at net asset value
of $13.51 per share (cost $35,690,153) $35,647,597
High Yield Portfolio, 2,200,624 shares at net asset value
of $ 9.18 per share (cost $22,227,755) $20,201,499
Income Portfolio, 1,403,941 shares at net asset value
of $9.04 per share (cost $13,889,210) $12,691,098
Money Market Portfolio, 1,458,300 shares at net
asset value of $1.00 per share (cost $1,458,300) $1,458,300
------------ ------------ ------------ ------------
35,647,597 20,201,499 12,691,098 1,458,300
Receivable from LBVIP for units issued 27,826 12,965 15,123 305
Dividends receivable from LB Series Fund, Inc. -- 5,170 2,380 219
------------ ------------ ------------ ------------
Total assets 35,675,423 20,219,634 12,708,601 1,458,824
------------ ------------ ------------ ------------
LIABILITIES:
Payable to LBVIP for mortality and expense risk charge 17,815 10,163 6,454 707
------------ ------------ ------------ ------------
NET ASSETS $35,657,608 $20,209,471 $12,702,147 $1,458,117
============ ============ ============ ============
Number of units outstanding 1,883,077 960,109 729,752 965,173
============ ============ ============ ============
Unit value (net assets divided by units outstanding) $18.94 $21.05 $17.41 $1.51
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------------------
Statement of Operations
Year Ended December 31, 1994
Subaccounts
----------------------------------------------------------
High Money
Growth Yield Income Market
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividend income $ 479,070 $1,755,402 $ 802,946 $51,722
Mortality and expense risk charge (188,079) (107,946) (70,910) (7,817)
------------ ------------ ------------ ------------
Net investment income 290,991 1,647,456 732,036 43,905
------------ ------------ ------------ ------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments 745,295 262,414 193,140 --
Net change in unrealized depreciation of investments (2,657,265) (2,896,305) (1,539,057) --
------------ ------------ ------------ ------------
Net loss on investments (1,911,970) (2,633,891) (1,345,917) --
------------ ------------ ------------ ------------
Net change in net assets resulting from operations $(1,620,979) $ (986,435) $(613,881) $43,905
============ ============ ============ ============
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, 1994 and 1993
Growth High Yield
Subaccount Subaccount
--------------------------- ---------------------------
1994 1993 1994 1993
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS --
Net investment income $ 290,991 $ 284,198 $ 1,647,456 $ 759,986
Net realized gain on investments 745,295 277,106 262,414 30,183
Net change in unrealized appreciation or depreciation
of investments (2,657,265) 1,048,922 (2,896,305) 840,534
------------ ------------ ------------ ------------
Net change in net assets resulting from operations (1,620,979) 1,610,226 (986,435) 1,630,703
------------ ------------ ------------ ------------
UNIT TRANSACTIONS --
Proceeds from units issued 15,634,665 13,314,057 9,313,296 7,790,478
Net asset value of units redeemed (4,272,923) (2,647,929) (2,266,396) (1,005,507)
Transfers from other subaccounts 1,637,267 1,074,967 1,366,428 977,342
Transfers to other subaccounts (1,428,818) (942,676) (1,087,148) (547,994)
------------ ------------ ------------ ------------
Net increase in net assets from unit transactions 11,570,191 10,798,419 7,326,180 7,214,319
------------ ------------ ------------ ------------
Net increase net assets 9,949,212 12,408,645 6,339,745 8,845,022
NET ASSETS:
Beginning of period 25,708,396 13,299,751 13,869,726 5,024,704
------------ ------------ ------------ ------------
End of period $35,657,608 $25,708,396 $20,209,471 $13,869,726
============ ============ ============ ============
Statement of Changes in Net Assets (Continued)
Income Money Market
Subaccount Subaccount
--------------------------- ---------------------------
1994 1993 1994 1993
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS --
Net investment income $ 732,036 $ 408,603 $ 43,905 $ 23,758
Net realized gain on investments 193,140 21,001 -- --
Net change in unrealized appreciation or depreciation
of investments (1,539,057) 267,768 -- --
------------ ------------ ------------ ------------
Net change in net assets resulting from operations (613,881) 697,372 43,905 23,758
------------ ------------ ------------ ------------
UNIT TRANSACTIONS --
Proceeds from units issued 5,157,608 5,292,496 756,910 1,169,624
Net asset value of units redeemed (1,491,607) (921,232) (566,912) (595,017)
Transfers from other subaccounts 235,045 535,023 803,402 536,661
Transfers to other subaccounts (771,155) (717,974) (755,021) (915,349)
------------ ------------ ------------ ------------
Net increase in net assets from unit transactions 3,129,891 4,188,313 238,379 195,919
------------ ------------ ------------ ------------
Net increase net assets 2,516,010 4,885,685 282,284 219,677
NET ASSETS:
Beginning of period 10,186,137 5,300,452 1,175,833 956,156
------------ ------------ ------------ ------------
End of period $12,702,147 $10,186,137 $1,458,117 $1,175,833
============ ============ ============ ============
The accompanying notes are an integral part of the financial statements.
</TABLE>
LBVIP Variable Insurance Account
Notes to Financial Statements
December 31, 1994
(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. LBVIP
anticipates no tax liability resulting from the operations of the
Variable Account. Consequently, no provision for income taxes has been
charged 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 $1,675,014 and $1,482,198 in 1994 and 1993, 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 $6,008,058 and $3,540,482 in 1994
and 1993, 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 $374,752 and $214,443 were
deducted in 1994 and 1993, 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 $276,601 and $122,155 were deducted in 1994 and
1993, 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, 1992 728,173 277,280 320,278 669,024
Units issued 815,676 461,798 356,468 1,092,580
Units redeemed (257,111) (112,658) (122,324) (957,015)
--------- ---------- ---------- ----------
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
========== ========== ========== ==========
(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, 1993
Purchases $11,731,481 $8,249,965 $5,001,606 $1,206,505
Sales 537,841 304,944 443,786 809,188
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
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.
(This page intentionally left blank)
3100 Multifoods Tower
33 South Sixth Street
Minneapolis, MN 55402-3795
- -----------------------------------------------------------------------
Price Waterhouse llp Logo goes here
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, 1994 and 1993,
and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 1994, in conformity with
generally accepted accounting principles. 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.
/s/Price Waterhouse LLP
February 24, 1995
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD VARIABLE INSURANCE PRODUCTS COMPANY
STATEMENT OF FINANCIAL POSITION
DECEMBER 31,
------------------------------------
1994 1993
-------------- --------------
<S> <C> <C>
ASSETS
Bonds
U.S. Government $ 79,246,211 $ 22,181,398
Mortgage-backed securities 2,076,133 2,788,028
Corporate and other 3,957,150 4,930,946
-------------- --------------
85,279,494 29,900,372
Other invested assets
Loans on insurance contracts 1,759,123 1,050,310
Cash and short-term investments 20,718,038 30,170,115
-------------- --------------
Total invested assets 107,756,655 61,120,797
Investment income due and accrued 1,947,439 716,914
Receivables from affiliate -- 1,801,734
Assets held in separate accounts 1,816,515,729 1,570,791,116
-------------- --------------
Total assets $1,926,219,823 $1,634,430,561
============== ==============
LIABILITIES AND STOCKHOLDER'S EQUITY
Contract reserves $ 125,062,664 $ 42,541,816
Benefits in process of payment 3,474,062 1,679,660
Accounts payable 2,443,519 1,666,400
Premiums in process 860,655 7,232,514
Payable to affiliate 884,246 24,545
Liabilities related to separate accounts 1,747,790,054 1,513,881,796
Interest maintenance reserve 266,388 310,013
Asset valuation reserve 113,480 347,073
-------------- --------------
Total liabilities and asset reserves 1,880,895,068 1,567,683,817
============== ==============
Stockholder's equity
Common stock, $1 par value, 2,000,000 shares authorized,
issued and outstanding 2,000,000 2,000,000
Additional paid-in capital 118,800,000 118,800,000
Accumulated deficit (75,475,245) (54,053,256)
-------------- --------------
Total stockholder's equity 45,324,755 66,746,744
-------------- --------------
Total liabilities, asset reserves and
stockholder's equity $1,926,219,823 $1,634,430,561
============== ==============
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,
----------------------------------------------------------------
1994 1993 1992
------------------ ------------------ ------------------
<S> <C> <C> <C>
Income:
Annuity considerations $458,760,196 $799,776,841 $367,772,947
Insurance premiums 34,544,641 29,898,874 14,380,677
Net investment income 3,519,526 2,613,507 1,929,747
Income from charges to
separate accounts 19,403,382 11,811,871 4,865,367
Commission income 91,819 100,619 146,811
------------------ ------------------ ------------------
Total income 516,319,564 844,201,712 389,095,549
------------------ ------------------ ------------------
Deductions:
Net transfer to separate accounts 336,875,934 746,415,577 337,695,282
Net additions to contract reserves 82,520,849 15,810,307 15,018,228
Benefits to contractholders 68,951,095 30,515,181 13,153,171
Commissions 20,590,135 34,797,085 16,893,102
Operating expenses charged
by affiliates 22,984,000 24,370,643 13,442,206
Operating expenses 6,037,209 7,771,063 3,872,049
------------------ ------------------ ------------------
Total deductions 537,959,222 859,679,856 400,074,038
------------------ ------------------ ------------------
Net loss from operations before net
realized capital gains (losses) (21,639,658) (15,478,144) (10,978,489)
Net realized capital gains (losses) (1,201) (55) 113,651
------------------ ------------------ ------------------
Net loss from operations (21,640,859) (15,478,199) (10,864,838)
Other transactions affecting
accumulated deficit:
Net unrealized capital gains -- -- 79,459
(Increase) decrease in asset
valuation reserve 233,593 (173,485) (59,720)
Increase in non-admitted assets (14,723) (60,938) (92,437)
------------------ ------------------ ------------------
Total other transactions 218,870 (234,423) (72,698)
------------------ ------------------ ------------------
Net increase in accumulated deficit (21,421,989) (15,712,622) (10,937,536)
Accumulated deficit, beginning of year (54,053,256) (38,340,634) (27,403,098)
------------------ ------------------ ------------------
Accumulated deficit, end of year ($75,475,245) ($54,053,256) ($38,340,634)
================== ================== ==================
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD VARIABLE INSURANCE PRODUCTS COMPANY
STATEMENT OF STOCKHOLDER'S EQUITY
THREE YEARS ENDED DECEMBER 31, 1994
Additional
Common Paid-In Accumulated
Stock Capital Deficit
-------------- -------------- ----------------
<S> <C> <C> <C>
Balance at December 31, 1991 $ 2,000,000 $ 36,800,000 $(27,403,098)
Capital contributions 28,000,000
Net loss (10,864,838)
Other surplus changes (72,698)
------------ ------------ ------------
Balance at December 31, 1992 $ 2,000,000 $ 64,800,000 $(38,340,634)
Capital contributions 54,000,000
Net loss (15,478,199)
Other surplus changes (234,423)
------------ ------------ ------------
Balance at December 31, 1993 $ 2,000,000 $118,800,000 $(54,053,256)
Net loss (21,640,859)
Other surplus changes 218,870
------------ ------------ ------------
Balance at December 31, 1994 $ 2,000,000 $118,800,000 $(75,475,245)
============ ============ ============
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,
----------------------------------------------------------
1994 1993 1992
---------------- ---------------- ----------------
<S> <C> <C> <C>
Cash flows from operating activities:
Insurance premiums and annuities
considerations $493,285,142 $829,676,676 $382,156,180
Income from charges to separate
accounts 19,349,588 11,811,871 4,552,645
Net investment income 2,511,900 2,843,130 1,324,591
Insurance benefits paid (67,156,683) (30,134,551) (12,169,248)
Commissions and operating
expenses paid (49,681,425) (66,900,814) (32,957,324)
Net transfer to separate accounts (347,721,585) (786,940,643) (362,745,734)
Net loans on insurance contracts (709,248) (397,094) (233,929)
Other operating items, net (3,684,117) 2,805,305 10,901,839
---------------- ---------------- ----------------
Net cash provided by (used in)
operating activities 46,193,572 (37,236,120) (9,170,980)
---------------- ---------------- ----------------
Cash flows from investing activities:
Proceeds from bonds sold,
matured or repaid 4,103,203 155,534 6,835,709
Withdrawal of seed money
from separate accounts 8,562,223
Cost of bonds purchased (59,748,852) -- (24,109,893)
---------------- ---------------- ----------------
Net cash provided by (used in)
investing activities (55,645,649) 155,534 (8,711,961)
---------------- ---------------- ----------------
Cash flows from financing activities:
Capital contributions -- 54,000,000 28,000,000
---------------- ---------------- ----------------
Net change in cash and
short-term investments (9,452,077) 16,919,414 10,117,059
Cash and short-term investments,
beginning of year 30,170,115 13,250,701 3,133,642
---------------- ---------------- ----------------
Cash and short-term investments,
end of year $ 20,718,038 $ 30,170,115 $ 13,250,701
================ ================ ================
The accompanying notes are an integral part of the financial statements.
</TABLE>
LUTHERAN BROTHERHOOD VARIABLE INSURANCE PRODUCTS COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1993
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.
In April 1993, the Financial Accounting Standards Board issued
Interpretation No. 40, "Applicability of Generally Accepted Accounting
Principles to Mutual Life Insurance and Other Enterprises", 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.
Management of the Company has not yet determined the effect on its
December 31, 1994 financial statements of applying the new
Interpretation nor whether it will continue to present its general
purpose financial statements in conformity with the statutory basis of
accounting or adopt the accounting changes required in order to continue
to present its financial statements in conformity with generally
accepted accounting principles. If the Company chooses to adopt the
accounting changes required, the effect of the changes would be reported
retroactively through restatement of all previously issued financial
statements 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 agreements 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 guarantees,
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 $1,797.3 million at December 31, 1994 and consist
of $1,681.1 million in the liabilities related to separate accounts and
$116.2 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.
Investment Reserves
Investment loss reserves are maintained for the purposes of stabilizing
the unassigned surplus against the effects of capital gains and losses
on the value of specific investments. Capital gains and losses on these
investments are reflected in the calculation of these 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.
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 $0.2 million and $0.2 million at December 31, 1994 and
1993, respectively.
Reclassification
Certain prior year financial statement balances have been reclassified
to conform with the current-year presentation.
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 $2.5 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, 1994 and 1993 follow:
<TABLE>
<CAPTION>
December 31, 1994
----------------------
Gross Gross Estimated
Carrying Unrealized Unrealized Market
Bonds Value Gains Losses Value
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
U.S. Government $79,246,211 $ 15,918 $ 755,622 $78,506,507
Mortgage-Backed Securities 2,076,133 -- 23,627 2,052,506
All Other Corporate Bonds 3,957,150 98,538 -- 4,055,688
--------------- --------------- --------------- ---------------
$85,279,494 $ 114,456 $ 779,249 $84,614,701
=============== =============== =============== ===============
</TABLE>
<TABLE>
<CAPTION>
December 31, 1993
----------------------
Gross Gross Estimated
Carrying Unrealized Unrealized Market
Bonds Value Gains Losses Value
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
U.S. Government $22,181,398 $ 1,136,852 $ -- $23,318,250
Mortgage-Backed Securities 2,788,028 80,620 -- 2,868,648
All Other Corporate Bonds 4,930,946 529,054 -- 5,460,000
--------------- --------------- --------------- ---------------
$29,900,372 $ 1,746,526 $ -- $31,646,898
=============== =============== =============== ===============
The carrying value and estimated market value of bonds at December 31, 1994, by contractual maturity, are as follows:
</TABLE>
<TABLE>
<CAPTION>
Estimated
Carrying Market
Value Value
---------------- ----------------
<S> <C> <C>
One year or less -- --
Over 1 year through 5 years $46,897,987 $46,536,178
Over 5 years through 10 years 26,851,757 26,841,816
Over 10 years 11,529,750 11,236,707
---------------- ----------------
$85,279,494 $84,614,701
================ ================
Investment income and realized capital gains and losses
Investment income and gross realized gains and losses for 1994, 1993 and 1992 are as follows:
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31, 1994
----------------------------------------
Gross Gross
Investment Realized Realized
Income Gains Losses
---------- ---------- ----------
<S> <C> <C> <C>
Bonds $2,321,949 $ 8,579 $ --
Short-term investments 1,054,186 -- --
Other 151,975 -- 1,201
---------- ---------- ----------
3,528,110 $ 8,579 $ 1,201
========== ==========
Less investment expenses (8,584)
----------
Net investment income $3,519,526
==========
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31, 1993
----------------------------------------
Gross Gross
Investment Realized Realized
Income Gains Losses
---------- ---------- ----------
<S> <C> <C> <C>
Bonds $2,064,227 $ -- $ --
Short-term investments 436,284 -- --
Other 122,359 -- 55
---------- ---------- ----------
2,622,870 $ -- $ 55
========== ==========
Less investment expenses (9,363)
----------
Net investment income $2,613,507
==========
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31, 1992
----------------------------------------
Gross Gross
Investment Realized Realized
Income Gains Losses
---------- ---------- ----------
<S> <C> <C> <C>
Bonds $1,323,221 $398,083 $ --
Investment in separate accounts 213,561 113,651 --
Short-term investments 329,390 -- --
Other 70,048 -- --
---------- ---------- ----------
1,936,220 $511,734 $ --
========== ==========
Less investment expenses (6,473)
----------
Net investment income $1,929,747
==========
</TABLE>
NOTE 5. STATUTORY DEPOSIT
Bonds with a carrying value of $2.1 million and $2.1 million and a
market value of $2.1 million and $2.3 million at December 31, 1994 and
1993, 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, 1994 and 1993 represents the difference between 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 Accounts' financial statements at the net asset value.
Effective January 22, 1991, a fixed account was added as an investment
option for flexible premium deferred 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:
<TABLE>
<CAPTION>
1994 1993 1992
Rate Charges Charges Charges
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
Variable Insurance Account 0.6% $ 374,752 $ 214,443 $ 128,779
Variable Insurance Account II 2.3% 45,145 45,144 40,513
Variable Annuity Account I 1.1% 18,983,485 11,552,284 4,720,095
------------ ------------ ----------
$19,403,382 $11,811,871 $4,889,387
============ ============ ==========
</TABLE>
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:
<TABLE>
<CAPTION>
1994 1993 1992
----------- ------------ -----------
<S> <C> <C> <C>
Variable Insurance Account $6,284,659 $3,662,637 $1,780,712
Variable Insurance Account II 19,726 -- 1,200
Variable Annuity Account I 1,438,080 576,864 313,761
----------- ------------ -----------
$7,742,465 $4,239,501 $2,095,673
=========== ============ ===========
</TABLE>
These deductions are reflected in "net 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, 1993
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 $24.8 million, $24.2
million and $13.2 million of operating expenses to the Company in 1994,
1993 and 1992, respectively, which includes the costs for corporate
officers, human resources, and other administrative and operating
functions. Lutheran Brotherhood has agreed to provide the Company
with necessary capital requirements and provided additional capital in
the amount of $50.0 million and $28.0 million during 1993 and 1992,
respectively. The Company also received a capital contribution of $4.0
million from its parent, LBFC in 1993.
Payables to affiliates includes the following:
1994 1993
------------ ------------
Lutheran Brotherhood:
Operating expenses payable $ 1,087,303 $ --
Premium income (236,129) --
------------ ------------
Lutheran Brotherhood Securities Corp.:
Operating expenses payable 33,072 24,545
------------ ------------
$ 884,246 $ 24,545
============ ============
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, 1994 and 1993.
LBSC allocated $0.4 million, $0.2 million, and $0.2 million of operating
expenses to the Company in 1994, 1993, and 1992, 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
$20.6 million, $34.8 million, and $16.9 million in 1994, 1993 and 1992,
respectively.
NOTE 8. INCOME TAXES
The Company's tax provision and related balance sheet accounts are
determined in accordance with a tax sharing agreement with its Parent,
which allocates federal income taxes to the Company as if it filed a
separate tax return. The Company has net operating loss carryforwards
for tax purposes of approximately $56.7 million at December 31, 1994.
These net operating loss carryforwards will expire between 1997 and
2009.
The Internal Revenue Service is currently examining the consolidated
income tax returns filed by the Parent for 1990-1992 and has proposed
certain adjustments which are being contested. In the opinion of
management, additional income taxes, if any, which may become due under
the tax sharing agreement will not have a material adverse effect on the
Company's financial position.
[This page intentionally left blank]
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.
The second column of the tables show 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 maximum 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 daily investment advisory fee paid by the
Fund (which is assumed to be equivalent to an annual rate of .40% of the
aggregate average daily net assets of the Fund), 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 -1.15%, 4.85% and 10.85%, respectively, assuming an
advisory fee of .40% and a Mortality and Expense Risk Charge of .75% and
(b) net annual rates of -1.0%, 5.0% and 11%, respectively, assuming an
advisory fee of .40% 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").
The expenses covered by the Expense Reimbursement Agreement include, for
example, the following: compensation of directors not affiliated with
Lutheran Brotherhood; governmental fees; fees and expenses of
independent auditors, of legal counsel and of any transfer agent,
registrar and dividend disbursing agent of the Fund; and expenses of
preparing, printing and mailing prospectuses, shareholders' reports,
notices, proxy statements and reports to governmental officers. For the
fiscal year of the Fund ended December 31, 1994, the Fund was reimbursed
approximately $2,238,502 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.
<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>
1 788 100,464 464 0* 100,490 490 0*
2 1,614 100,923 923 392 100,975 975 444
3 2,483 101,377 1,377 894 101,455 1,455 972
4 3,394 101,814 1,814 1,379 101,919 1,919 1,484
5 4,351 102,246 2,246 1,859 102,378 2,378 1,991
6 5,357 102,661 2,661 2,351 102,832 2,832 2,523
7 6,412 103,059 3,059 2,827 103,270 3,270 3,038
8 7,520 103,440 3,440 3,286 103,692 3,692 3,537
9 8,683 103,806 3,806 3,729 104,098 4,098 4,020
10 9,905 104,155 4,155 4,155 104,487 4,487 4,487
11 11,188 104,537 4,537 4,537 104,909 4,909 4,909
12 12,535 104,890 4,890 4,890 105,315 5,315 5,315
13 13,949 105,227 5,227 5,227 105,704 5,704 5,704
14 15,434 105,536 5,536 5,536 106,078 6,078 6,078
15 16,993 105,819 5,819 5,819 106,436 6,436 6,436
16 18,630 106,074 6,074 6,074 106,767 6,767 6,767
17 20,349 106,291 6,291 6,291 107,071 7,071 7,071
18 22,154 106,481 6,481 6,481 107,348 7,348 7,348
19 24,050 106,634 6,634 6,634 107,598 7,598 7,598
20 26,039 106,749 6,749 6,749 107,811 7,811 7,811
Age
60 52,321 104,571 4,571 4,571 107,054 7,054 7,054
65 71,127 100,000 0 0* 103,719 3,719 3,719
70 95,130 100,000 0 0* 100,000 0 0*
75 125,764 ****** ****** ****** ****** ****** ******
</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.
<TABLE>
<CAPTION>
Lutheran Brotherhood Variable Insurance Products Company
Flexible Premium Variable Life Insurance to Age 96
Male Issue Age: 45; Nonsmoker, $1,500 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 1,575 100,967 967 112 101,041 1,041 186
2 3,229 101,887 1,887 1,092 102,048 2,048 1,253
3 4,965 102,773 2,773 2,038 103,020 3,020 2,285
4 6,788 103,612 3,612 2,937 103,960 3,960 3,285
5 8,703 104,407 4,407 3,792 104,854 4,854 4,239
6 10,713 105,157 5,157 4,665 105,704 5,704 5,212
7 12,824 105,851 5,851 5,482 106,510 6,510 6,141
8 15,040 106,477 6,477 6,231 107,271 7,271 7,025
9 17,367 107,037 7,037 6,914 107,966 7,966 7,843
10 19,810 107,520 7,520 7,520 108,595 8,595 8,595
11 22,376 107,985 7,985 7,985 109,206 9,206 9,206
12 25,069 108,361 8,361 8,361 109,739 9,739 9,739
13 27,898 108,651 8,651 8,651 110,196 10,196 10,196
14 30,868 108,830 8,830 8,830 110,565 10,565 10,565
15 33,986 108,900 8,900 8,900 110,847 10,847 10,847
16 37,261 108,851 8,851 8,851 111,043 11,043 11,043
17 40,699 108,659 8,659 8,659 111,142 11,142 11,142
18 44,309 108,316 8,316 8,316 111,133 11,133 11,133
19 48,099 107,798 7,798 7,798 111,018 11,018 11,018
20 52,079 107,085 7,085 7,085 110,785 10,785 10,785
Age
60 33,986 108,900 8,900 8,900 110,847 10,847 10,847
65 52,079 107,085 7,085 7,085 110,785 10,785 10,785
70 75,170 100,080 80 80 107,341 7,341 7,341
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.
<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>
1 788 100,000 465 0* 100,000 491 0 *
2 1,614 100,000 926 395 100,000 977 446
3 2,483 100,000 1,382 899 100,000 1,459 976
4 3,394 100,000 1,821 1,386 100,000 1,926 1,491
5 4,351 100,000 2,257 1,870 100,000 2,388 2,001
6 5,357 100,000 2,676 2,367 100,000 2,846 2,536
7 6,412 100,000 3,080 2,848 100,000 3,289 3,056
8 7,520 100,000 3,468 3,314 100,000 3,716 3,561
9 8,683 100,000 3,842 3,764 100,000 4,129 4,051
10 9,905 100,000 4,200 4,200 100,000 4,526 4,526
11 11,188 100,000 4,591 4,591 100,000 4,957 4,957
12 12,535 100,000 4,957 4,957 100,000 5,374 5,374
13 13,949 100,000 5,308 5,308 100,000 5,775 5,775
14 15,434 100,000 5,633 5,633 100,000 6,163 6,163
15 16,993 100,000 5,933 5,933 100,000 6,536 6,536
16 18,630 100,000 6,208 6,208 100,000 6,884 6,884
17 20,349 100,000 6,448 6,448 100,000 7,208 7,208
18 22,154 100,000 6,664 6,664 100,000 7,508 7,508
19 24,050 100,000 6,845 6,845 100,000 7,783 7,783
20 26,039 100,000 6,992 6,992 100,000 8,024 8,024
Age
60 52,321 100,000 5,322 5,322 100,000 7,798 7,798
65 71,127 100,000 541 541 100,000 4,850 4,850
70 95,130 100,000 0 0* 100,000 0 0*
75 125,764 ****** ****** ****** ****** ****** ******
</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.
<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 1,044 189
2 3,229 100,000 1,899 1,104 100,000 2,057 1,262
3 4,965 100,000 2,796 2,061 100,000 3,040 2,305
4 6,786 100,000 3,653 2,978 100,000 3,993 3,318
5 8,703 100,000 4,469 3,854 100,000 4,906 4,291
6 10,713 100,000 5,246 4,754 100,000 5,780 5,288
7 12,824 100,000 5,974 5,605 100,000 6,616 6,247
8 15,040 100,000 6,641 6,395 100,000 7,413 7,167
9 17,367 100,000 7,251 7,128 100,000 8,152 8,029
10 19,810 100,000 7,791 7,791 100,000 8,834 8,834
11 22,376 100,000 8,324 8,324 100,000 9,508 9,508
12 25,069 100,000 8,780 8,780 100,000 10,116 10,116
13 27,898 100,000 9,159 9,159 100,000 10,659 10,659
14 30,868 100,000 9,441 9,441 100,000 11,127 11,127
15 33,986 100,000 9,626 9,626 100,000 11,522 11,522
16 37,261 100,000 9,705 9,705 100,000 11,843 11,843
17 40,699 100,000 9,655 9,655 100,000 12,080 12,080
18 44,309 100,000 9,466 9,466 100,000 12,225 12,225
19 48,099 100,000 9,115 9,115 100,000 12,276 12,276
20 52,079 100,000 8,578 8,578 100,000 12,224 12,224
Age
60 33,986 100,000 9,626 9,626 100,000 11,522 11,522
65 52,079 100,000 8,578 8,578 100,000 12,224 12,224
70 75,170 100,000 2,358 2,358 100,000 9,867 9,867
75 104,641 ****** ****** ****** 100,000 1,920 1,920
</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.
<TABLE>
<CAPTION>
Lutheran Brotherhood Variable Insurance Products Company
Flexible PremiumS 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>
1 788 100,499 499 0* 100,526 526 0*
2 1,614 101,023 1,023 492 101,078 1,078 547
3 2,483 101,572 1,572 1,089 101,658 1,658 1,175
4 3,394 102,135 2,135 1,700 102,254 2,254 1,819
5 4,351 102,726 2,726 2,339 102,880 2,880 2,493
6 5,357 103,333 3,333 3,023 103,538 3,538 3,228
7 6,412 103,957 3,957 3,725 104,216 4,216 3,984
8 7,520 104,599 4,599 4,444 104,916 4,916 4,761
9 8,683 105,260 5,260 5,183 105,638 5,638 5,561
10 9,905 105,941 5,941 5,941 106,384 6,384 6,384
11 11,188 106,692 6,692 6,692 107,205 7,205 7,205
12 12,535 107,455 7,455 7,455 108,055 8,055 8,055
13 13,949 108,242 8,242 8,242 108,934 8,934 8,934
14 15,434 109,043 9,043 9,043 109,846 9,846 9,846
15 16,993 109,859 9,859 9,859 110,790 10,790 10,790
16 18,630 110,690 10,690 10,690 111,758 11,758 11,758
17 20,349 111,524 11,524 11,524 112,749 12,749 12,749
18 22,154 112,374 12,374 12,374 113,765 13,765 13,765
19 24,050 113,229 13,229 13,229 114,808 14,808 14,808
20 26,039 114,088 14,088 14,088 115,866 15,866 15,866
Age
60 52,321 121,390 21,390 21,390 126,487 26,487 26,487
65 71,127 121,794 21,794 21,794 130,513 30,513 30,513
70 95,130 116,215 16,215 16,215 131,762 31,762 31,762
75 125,764 ****** ****** ****** 126,904 26,904 26,904
</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.
<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 1,575 101,038 1,038 183 101,114 1,114 259
2 3,229 102,089 2,089 1,294 102,260 2,260 1,465
3 4,965 103,167 3,167 2,432 103,438 3,438 2,703
4 6,788 104,261 4,261 3,586 104,651 4,651 3,976
5 8,703 105,370 5,370 4,755 105,887 5,887 5,272
6 10,713 106,497 6,497 6,005 107,149 7,149 6,657
7 12,824 107,629 7,629 7,260 108,436 8,436 8,067
8 15,040 108,755 8,755 8,509 109,752 9,752 9,506
9 17,367 109,875 9,875 9,752 111,072 11,072 10,949
10 19,810 110,975 10,975 10,975 112,396 12,396 12,396
11 22,376 112,117 12,117 12,117 113,775 13,775 13,775
12 25,069 113,228 13,228 13,228 115,149 15,149 15,149
13 27,898 114,307 14,307 14,307 116,519 16,519 16,519
14 30,868 115,329 15,329 15,329 117,871 17,871 17,871
15 33,986 116,289 16,289 16,289 119,205 19,205 19,205
16 37,261 117,174 17,174 17,174 120,520 20,520 20,520
17 40,699 117,955 17,955 17,955 121,802 21,802 21,802
18 44,309 118,614 18,614 18,614 123,039 23,039 23,039
19 48,099 119,122 19,122 19,122 124,226 24,226 24,226
20 52,079 119,446 19,446 19,446 125,351 25,351 25,351
Age
60 33,986 116,289 16,289 16,289 119,205 19,205 19,205
65 52,079 119,446 19,446 19,446 125,351 25,351 25,351
70 75,170 117,354 17,354 17,354 129,307 29,307 29,307
75 104,641 104,618 4,618 4,618 127,904 27,904 27,904
</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.
<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>
1 788 100,000 500 0* 100,000 527 0*
2 1,614 100,000 1,025 494 100,000 1,080 549
3 2,483 100,000 1,577 1,094 100,000 1,662 1,179
4 3,394 100,000 2,144 1,709 100,000 2,262 1,827
5 4,351 100,000 2,739 2,352 100,000 2,892 2,505
6 5,357 100,000 3,353 3,043 100,000 3,555 3,246
7 6,412 100,000 3,985 3,753 100,000 4,240 4,008
8 7,520 100,000 4,638 4,483 100,000 4,949 4,795
9 8,683 100,000 5,312 5,235 100,000 5,683 5,606
10 9,905 100,000 6,009 6,009 100,000 6,444 6,444
11 11,188 100,000 6,779 6,779 100,000 7,281 7,281
12 12,535 100,000 7,565 7,565 100,000 8,152 8,152
13 13,949 100,000 8,381 8,381 100,000 9,056 9,056
14 15,434 100,000 9,216 9,216 100,000 9,996 9,996
15 16,993 100,000 10,071 10,071 100,000 10,975 10,975
16 18,630 100,000 10,950 10,950 100,000 11,984 11,984
17 20,349 100,000 11,841 11,841 100,000 13,024 13,024
18 22,154 100,000 12,758 12,758 100,000 14,099 14,099
19 24,050 100,000 13,691 13,691 100,000 15,209 15,209
20 26,039 100,000 14,642 14,642 100,000 16,349 16,349
Age
60 52,321 100,000 24,291 24,291 100,000 29,183 29,183
65 71,127 100,000 27,915 27,915 100,000 36,327 36,327
70 95,130 100,000 28,384 28,384 100,000 43,655 43,655
75 125,764 100,000 21,084 21,084 100,000 50,426 50,426
</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.
<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 1,118 263
2 3,229 100,000 2,102 1,307 100,000 2,271 1,476
3 4,965 100,000 3,195 2,460 100,000 3,461 2,726
4 6,788 100,000 4,309 3,634 100,000 4,691 4,016
5 8,703 100,000 5,448 4,833 100,000 5,952 5,337
6 10,713 100,000 6,613 6,121 100,000 7,248 6,756
7 12,824 100,000 7,796 7,427 100,000 8,580 8,211
8 15,040 100,000 8,987 8,741 100,000 9,951 9,705
9 17,367 100,000 10,188 10,065 100,000 11,344 11,221
10 19,810 100,000 11,391 11,391 100,000 12,760 12,760
11 22,376 100,000 12,659 12,659 100,000 14,255 14,255
12 25,069 100,000 13,926 13,926 100,000 15,773 15,773
13 27,898 100,000 15,192 15,192 100,000 17,317 17,317
14 30,868 100,000 16,441 16,441 100,000 18,882 18,882
15 33,986 100,000 17,674 17,674 100,000 20,472 20,472
16 37,261 100,000 18,882 18,882 100,000 22,090 22,090
17 40,699 100,000 20,048 20,048 100,000 23,732 23,732
18 44,309 100,000 21,162 21,162 100,000 25,394 25,394
19 48,099 100,000 22,206 22,206 100,000 27,080 27,080
20 52,079 100,000 23,159 23,159 100,000 28,786 28,786
Age
60 33,986 100,000 17,674 17,674 100,000 20,472 20,472
65 52,079 100,000 23,159 23,159 100,000 28,786 28,786
70 75,170 100,000 25,980 25,980 100,000 37,445 37,445
75 104,641 100,000 22,051 22,051 100,000 45,744 45,744
</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.
<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>
1 788 100,534 534 0* 100,562 562 0*
2 1,614 101,127 1,127 596 101,185 1,185 654
3 2,483 101,783 1,783 1,300 101,877 1,877 1,394
4 3,394 102,498 2,498 2,063 102,632 2,632 2,197
5 4,351 103,291 3,291 2,904 103,471 3,471 3,084
6 5,357 104,157 4,157 3,848 104,402 4,402 4,092
7 6,412 105,105 5,105 4,873 105,422 5,422 5,190
8 7,520 106,143 6,143 5,988 106,543 6,543 6,388
9 8,683 107,280 7,280 7,203 107,773 7,773 7,696
10 9,905 108,529 8,529 8,529 109,127 9,127 9,127
11 11,188 109,951 9,951 9,951 110,667 10,667 10,667
12 12,535 111,502 11,502 11,502 112,365 12,365 12,365
13 13,949 113,209 13,209 13,209 114,236 14,236 14,236
14 15,434 115,075 15,075 15,075 116,301 16,301 16,301
15 16,993 117,119 17,119 17,119 118,580 18,580 18,580
16 18,630 119,360 19,360 19,360 121,085 21,085 21,085
17 20,349 121,805 21,805 21,805 123,839 23,839 23,839
18 22,154 124,491 24,491 24,491 126,872 26,872 26,872
19 24,050 127,431 27,431 27,431 130,213 30,213 30,213
20 26,039 130,651 30,651 30,651 133,884 33,884 33,884
Age
60 52,321 185,102 85,102 85,102 197,934 97,934 97,934
65 71,127 236,545 136,545 136,545 261,432 161,432 161,432
70 95,130 315,708 215,708 215,708 364,019 264,019 264,019
75 125,764 436,838 336,838 336,838 529,633 429,633 429,633
</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.
<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 1,109 254 101,188 1,188 333
2 3,229 102,301 2,301 1,506 102,481 2,481 1,686
3 4,965 103,596 3,596 2,861 103,892 3,892 3,157
4 6,788 104,995 4,995 4,320 105,432 5,432 4,757
5 8,703 106,507 6,507 5,892 107,104 7,104 6,489
6 10,713 108,145 8,145 7,653 108,921 8,921 8,429
7 12,824 109,911 9,911 9,542 110,901 10,901 10,532
8 15,040 111,805 11,805 11,559 113,061 13,061 12,815
9 17,367 113,841 13,841 13,718 115,395 15,395 15,272
10 19,810 116,023 16,023 16,023 117,922 17,922 17,922
11 22,376 118,429 18,429 18,429 120,716 20,716 20,716
12 25,069 121,007 21,007 21,007 123,740 23,740 23,740
13 27,898 123,778 23,778 23,778 127,022 27,022 27,022
14 30,868 126,735 26,735 26,735 130,577 30,577 30,577
15 33,986 129,899 29,899 29,899 134,434 34,434 34,434
16 37,261 133,281 33,281 33,281 138,627 38,627 38,627
17 40,699 136,879 36,879 36,879 143,181 43,181 43,181
18 44,309 140,703 40,703 40,703 148,122 48,122 48,122
19 48,099 144,753 44,753 44,753 153,493 53,493 53,493
20 52,079 149,028 49,028 49,028 159,329 59,329 59,329
Age
60 33,986 129,899 29,899 29,899 134,434 34,434 34,434
65 52,079 149,028 49,028 49,028 159,329 59,329 59,329
70 75,170 174,054 74,054 74,054 196,829 96,829 96,829
75 104,641 204,440 104,440 104,440 252,656 152,656 152,656
</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.
<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>
1 788 100,000 535 0* 100,000 562 0*
2 1,614 100,000 1,129 598 100,000 1,187 656
3 2,483 100,000 1,789 1,306 100,000 1,882 1,399
4 3,394 100,000 2,509 2,074 100,000 2,642 2,207
5 4,351 100,000 3,308 2,921 100,000 3,486 3,099
6 5,357 100,000 4,184 3,874 100,000 4,424 4,115
7 6,412 100,000 5,143 4,911 100,000 5,456 5,223
8 7,520 100,000 6,197 6,043 100,000 6,590 6,435
9 8,683 100,000 7,356 7,279 100,000 7,839 7,762
10 9,905 100,000 8,632 8,632 100,000 9,217 9,217
11 11,188 100,000 10,088 10,088 100,000 10,788 10,788
12 12,535 100,000 11,684 11,684 100,000 12,524 12,524
13 13,949 100,000 13,446 13,446 100,000 14,444 14,444
14 15,434 100,000 15,383 15,383 100,000 16,570 16,570
15 16,993 100,000 17,516 17,516 100,000 18,924 18,924
16 18,630 100,000 19,866 19,866 100,000 21,524 21,524
17 20,349 100,000 22,451 22,451 100,000 24,397 24,397
18 22,154 100,000 25,308 25,308 100,000 27,578 27,578
19 24,050 100,000 28,459 28,459 100,000 31,101 31,101
20 26,039 100,000 31,941 31,941 100,000 35,000 35,000
Age
60 52,321 128,361 95,792 95,792 143,507 107,094 107,094
65 71,127 197,039 161,508 161,508 222,139 182,081 182,081
70 95,130 311,248 268,317 268,317 354,982 306,019 306,019
75 125,764 473,930 442,925 442,925 547,539 511,719 511,719
</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.
<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--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 1,575 100,000 1,114 259 100,000 1,192 337
2 3,229 100,000 2,315 1,520 100,000 2,493 1,698
3 4,965 100,000 3,628 2,893 100,000 3,918 3,183
4 6,788 100,000 5,053 4,378 100,000 5,480 4,805
5 8,703 100,000 6,603 5,988 100,000 7,184 6,569
6 10,713 100,000 8,295 7,803 100,000 9,049 8,557
7 12,824 100,000 10,135 9,766 100,000 11,093 10,724
8 15,040 100,000 12,129 11,883 100,000 13,339 13,093
9 17,367 100,000 14,299 14,176 100,000 15,790 15,667
10 19,810 100,000 16,656 16,656 100,000 18,473 18,473
11 22,376 100,000 19,291 19,291 100,000 21,473 21,473
12 25,069 100,000 22,166 22,166 100,000 24,767 24,767
13 27,898 100,000 25,314 25,314 100,000 28,396 28,396
14 30,868 100,000 28,756 28,756 100,000 32,395 32,395
15 33,986 100,000 32,534 32,534 100,000 36,817 36,817
16 37,261 100,000 36,691 36,691 100,000 41,720 41,720
17 40,699 100,000 41,268 41,268 100,000 47,165 47,165
18 44,309 100,000 46,325 46,325 100,000 53,224 53,224
19 48,099 100,000 51,925 51,925 100,000 59,986 59,986
20 52,079 100,000 58,150 58,150 100,000 67,551 67,551
Age
60 33,986 100,000 32,534 32,534 100,000 36,817 36,817
65 52,079 100,000 58,150 58,150 100,000 67,551 67,551
70 75,170 118,957 102,550 102,550 140,172 120,838 120,838
75 104,641 189,284 176,901 176,901 224,374 209,695 209,695
</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>
<CAPTION>
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
------------------------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C>
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>
<TABLE>
Table 2
Face Amounts of $250,000 or More
Maximum Deferred
Administrative Charges Per $1,000 of Face Amount
<CAPTION>
Attained Age at Date of Issuance Standard
or Effective Date of Requested (Attained Age
Increase, As Appropriate under 20) Smoker Nonsmoker
------------------------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C>
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
</TABLE>
[This page intentionally left blank]
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>
<CAPTION>
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
------------------------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C>
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>
<TABLE>
<CAPTION>
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
------------------------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C>
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
</TABLE>
Insert 1615 LB Series Fund Here.
ARBITRATION AGREEMENT
Applications for variable life insurance and variable annuity contracts
issued by Lutheran Brotherhood Variable Insurance Products Company
(LBVIP) are subject to an Arbitration Agreement between Contract Owners
and LBVIP and Lutheran Brotherhood Securities Corp. to submit disputes
to arbitration. That agreement reads as follows:
I agree to arbitrate any disputes between Lutheran Brotherhood Variable
Insurance Products Company (LBVIP), Lutheran Brotherhood Securities
Corp. and me. I specifically agree and recognize that all controversies
which may arise between LBVIP, Lutheran Brotherhood Securities Corp.,
its agents, representatives or employees and me, concerning any
transaction, account or the interpretation, performance or breach of
this agreement between LBVIP, Lutheran Brotherhood Securities Corp. and
me will be determined by arbitration to the full extent provided by law.
Such arbitration will be in accordance with the rules then in effect of
the National Association of Securities Dealers, Inc.
I further understand and agree that:
1. Arbitration is final and binding on all parties.
2. I am waiving my right to seek remedies in court, including the right
to a jury trial.
3. Pre-arbitration discovery is generally more limited than and
different from court proceedings.
4. The arbitrators' award is not required to include factual findings or
legal reasoning and any party's right to appeal or seek modification of
rulings by the arbitrators is strictly limited.
5. The panel of arbitrators will typically include a minority of
arbitrators who are affiliated with the securities industry.
(This page is not a part of the prospectuses.)
Diversifying Your Insurance Portfolio Through
Variable Universal Life
Investments in different asset categories react differently to changes
in the economy. The same economic condition that causes one asset to
become more valuable may cause another to become less valuable. By
diversifying your investment dollars among several categories--fixed
income, equities and cash equivalents--you can reduce your overall risk.
In addition, investing for the long term allows your assets to weather
multiple market cycles, allowing more time for capital appreciation.
This reduces the risk of selling the assets for less than your original
investment.
Shown below are samples of three diversified portfolios. Each is
structured with a different objective in mind. As the investor, it is
important for you to determine your primary goals and objectives, and
structure your portfolio accordingly.
Pie Chart goes here
Income 55%
Money Market 15%
Growth 25%
High Yield 5%
CONSERVATIVE
PORTFOLIO
This portfolio has income and preservation of capital as its primary
objectives. The allocation to money market instruments would provide
stability, while income-oriented investments such as high-quality bonds
would provide income. This portfolio should also include growth-oriented
and high-yield (junk) bond investments in order to maintain a hedge
against inflation.
Pie Chart goes here
Growth 50%
Money Market 10%
Income 30%
High Yield 10%
MODERATE
PORTFOLIO
The moderate investment port-folio provides a balance of growth and
income-oriented investments. This portfolio would experience more
volatility than the conservative portfolio due to its higher
concentration in growth-oriented and high-yield (junk) bond investments.
However, it also provides the investor with greater potential earnings
and growth.
Pie Chart goes here
Growth 70%
Money Market 5%
Income 10%
High Yield 15%
AGGRESSIVE
PORTFOLIO
This portfolio has long-term growth as its primary objective. With the
majority of assets invested in growth-oriented investments and high-
yield (junk) bonds, the aggressive investment portfolio would experience
the most volatility of our three examples. However, by including both
money market instruments and fixed income investments, it has an element
of stability that a portfolio invested solely in growth-oriented
investments would not have. Over the long term, this portfolio offers
the greatest potential return.
This page does not constitute part of the prospectuses.
6 Boxes centered here
BULK RATE
U.S. Postage
PAID
Lutheran
Brotherhood
No person has been given the authority to give any information or to
make any representations other than those contained in these
Prospectuses. If given or made, such information or representations must
not be relied upon as having been authorized. These Prospectuses do not
constitute an offer to any person in a state where it is unlawful to
make such as offer.
Distributed by Lutheran Brotherhood Securities Corp.
Logo Centered Here
LUTHERAN BROTHERHOOD
VARIABLE INSURANCE
PRODUCTS COMPANY
625 Fourth Avenue South
Minneapolis, Minnesota 55415
VP 20 (VIP) Soy Ink Logo
