<PAGE>
Registration No. 33-3243
811-4602
============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 21
TO
FORM S-6
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
LBVIP VARIABLE INSURANCE ACCOUNT
(Exact Name of Unit Investment Trust)
LUTHERAN BROTHERHOOD VARIABLE INSURANCE PRODUCTS COMPANY
(Name of Depositor)
625 Fourth Avenue South, Minneapolis, Minnesota 55415
(Complete Address of Depositor's Principal Executive Offices)
David J. Larson
Vice President and Secretary
Lutheran Brotherhood Variable Insurance Products Company
625 Fourth Avenue South
Minneapolis, Minnesota 55415
(612) 340-7215
(Name and Complete Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate
box)
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[X] on May 1, 1997 pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a)(i) of Rule 485
[ ] on (date) pursuant to paragraph (a)(i) of Rule 485
[ ] 75 days after filing pursuant to paragraph (a)(ii) of Rule 485
[ ] on (date) pursuant to paragraph (a)(ii) of Rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
============================================================================
Registrant has filed with the Securities and Exchange Commission a
declaration pursuant to Rule 24f-2 under the Investment Company Act of 1940,
and:
[X] filed the Notice required by that Rule on February 25, 1997; or
[ ] intends to file the Notice required by that Rule on or about (date);
or
[ ] during the most recent fiscal year did not sell any securities
pursuant to Rule 24f-2 under the Investment Company Act of 1940, and,
pursuant to Rule 24f-2(b)(2), need not file the Notice.
============================================================================
<PAGE>
LBVIP VARIABLE INSURANCE ACCOUNT
CROSS REFERENCE SHEET
(Reconciliation and Tie Sheet)
Item Number of
Form N-8B-2 Heading in the Prospectus
- -------------- -------------------------
1 Cover Page
2 Cover Page
3 Not Applicable
4 Sales and Other Agreements
5 The Variable Account
6 The Variable Account
7 Not Applicable
8 Not Applicable
9 Legal Proceedings
10 Summary; Contract Benefits; Payment and
Allocation of Premiums; Death Benefit
Guarantee; Contract Rights; General
Provisions; Voting Rights
11 Summary; LB Series Fund, Inc.
12 LB Series Fund, Inc.; Sales and Other
Agreements
13 Summary; Charges and Deductions; LB Series
Fund, Inc.
14 LBVIP, Lutheran Brotherhood and the Variable
Account; Issuance of a Contract; General
Provisions
15 Payment and Allocation of Premiums
16 LBVIP, Lutheran Brotherhood and the Variable
Account; Payment and Allocation of Premiums
17 Summary; LB Series Fund, Inc.; Contract
Benefits; Charges and Deductions; Contract
Rights; General Provisions
18 LBVIP, Lutheran Brotherhood and the Variable
Account; Contract Benefits; Payment and
Allocation of Premiums; Contract Rights;
Safekeeping of the Variable Account's Assets
19 General Provisions; Voting Rights
20 Not Applicable
21 Loan Privileges
22 Not Applicable
23 Safekeeping of the Variable Account's
Assets; Sales and Other Agreements
24 Definitions; General Provisions
25 LBVIP, Lutheran Brotherhood and the Variable
Account
26 Not Applicable
27 LBVIP, Lutheran Brotherhood and the Variable
Account
28 LBVIP, Lutheran Brotherhood and the Variable
Account; Directors and Officers of LBVIP
29 LBVIP, Lutheran Brotherhood and the Variable
Account
30 Not Applicable
31 Not Applicable
32 Not Applicable
33 Not Applicable
34 Not Applicable
35 Sales and Other Agreements
36 Not Applicable
37 Not Applicable
38 Summary; Sales and Other Agreements
39 Summary; Sales and Other Agreements
40 Not Applicable
41 Summary; Sales and Other Agreements
42 Not Applicable
43 Not Applicable
44 Summary; LBVIP, Lutheran Brotherhood and the
Variable Account; Accumulated Value and Cash
Surrender Value; Payment and Allocation of
Premiums; Charges and Deductions; Employment-
Related Benefit Plans
45 Not Applicable
46 Summary; LB Series Fund, Inc.; Charges and
Deductions
47 LBVIP, Lutheran Brotherhood and the Variable
Account; Payment and Allocation of Premiums
48 Not Applicable
49 Not Applicable
50 LBVIP, Lutheran Brotherhood and the Variable
Account
51 Cover Page; Summary; LBVIP and Lutheran
Brotherhood; Contract Benefits; Payment and
Allocation of Premiums; Charges and Deductions;
Contract Rights; General Provisions
52 Addition, Deletion or Substitution of Investments
53 Federal Tax Matters
54 Not Applicable
55 Not Applicable
56 Not Applicable
57 Not Applicable
58 Not Applicable
59 Financial Statements
<PAGE>
Prospectus
----------------------------------
Flexible Premium
Variable Life Insurance Contract
Issued By
Lutheran Brotherhood Variable
Insurance Products Company
625 Fourth Avenue South * Minneapolis, Minnesota 55415 *
(800) 423-7056 * (612) 340-7210
----------------------------------
This Prospectus describes a flexible premium variable life insurance
contract (the "Contract") being offered by Lutheran Brotherhood Variable
Insurance Products Company ("LBVIP"), a stock life insurance company that is
an indirect subsidiary of Lutheran Brotherhood. LBVIP is offering the
Contract only to persons who are eligible for membership in Lutheran
Brotherhood, unless otherwise required by state law.
This Contract is designed to provide 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.
Prior to May 1, 1997, LBVIP issued a class of flexible premium variable
contract ("prior contract" or "VUL 1" contracts), which will no longer be
issued as various states approve the Contract. The VUL 1 contracts were
sold from January 1987 until at least May 1, 1997, and until various states
approve the Contract. Your LBVIP representative will be able to inform you
whether the Contract has become available after May 1, 1997. Even though
the VUL 1 contracts will no longer be issued, premium payments are still
made under the VUL 1 contracts. This prospectus principally describes the
Contract but also describes the VUL 1 contracts. The principal differences
between the Contract and the VUL 1 contracts relate to the charges made by
LBVIP, different premium classes, issue ages and maturity ages, and
different ranges of face amounts. See the section entitled "APPENDIX D -
PRIOR CONTRACTS" in the Prospectus.
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. The
assets of each Subaccount will be invested solely in a corresponding
Portfolio of LB Series Fund, Inc. (the "Fund"), which is a diversified,
open-end management investment company (commonly known as a "mutual fund").
The accompanying Prospectus for the Fund describes the investment objectives
and attendant risks of the six Portfolios of the Fund, the Growth Portfolio,
the High Yield Portfolio, the Income Portfolio, the Opportunity Growth
Portfolio, the World Growth Portfolio, and the Money Market Portfolio. The
Contract owner bears the entire investment risk for all amounts allocated to
the Variable Account; no minimum Accumulated Value is guaranteed.
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.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THE PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------------------------
This Prospectus should be read and kept for future reference. It is valid
only when accompanied or preceded by the current prospectus of LB Series
Fund, Inc.
----------------------------------
The date of this Prospectus is May 1, 1997.
TABLE OF CONTENTS
Page
DEFINITIONS
SUMMARY
The Contract
Subaccounts of the Variable Account; Portfolios of the Fund
Death Proceeds and Death Benefit Options
Additional Insurance Benefits
Amount of Accumulated Value and Cash Surrender Value
Flexibility to Adjust Amount of Death Benefit
Contract Issuance
Allocation of Net Premiums
Contract Lapse and Reinstatement
Death Benefit Guarantee Protection
Charges Assessed in Connection with the Contract
Free Look Privileges
Loan Privileges
Exchange Privileges
Surrender of the Contract
Tax Treatment of Accumulated Value
Tax Treatment of Death Benefits Received by the Beneficiary
Employment-Related Benefit Plans
LBVIP, LUTHERAN BROTHERHOOD AND THE VARIABLE ACCOUNT
LBVIP and Lutheran Brotherhood
The Variable Account
LB Series Fund, Inc.
Performance Information
Addition, Deletion or Substitution of Investments
CONTRACT BENEFITS
Death Benefits
Accumulated Value and Cash Surrender Value
Payment of Contract Benefits
PAYMENT AND ALLOCATION OF PREMIUMS
Issuance of a Contract
Amount and Timing of Premiums
Allocation of Premiums and Accumulated Value
CHARGES AND DEDUCTIONS
Premium Expense Charges
Accumulated Value Charges
Decrease Charge
Monthly Deduction
Partial Surrender Charge
Charges Against the Variable Account
DEATH BENEFIT GUARANTEE
CONTRACT RIGHTS
Loan Privileges
Surrender Privileges
Free Look Privileges
Exchange Privileges
GENERAL PROVISIONS
Postponement of Payments
Date of Receipt
The Contract
Suicide
Incontestability
Change of Owner or Beneficiary
Assignment as Collateral
Misstatement of Age or Gender
Due Proof of Death
Reports to Contract Owners
Additional Insurance Benefits
Charitability for Life
Accelerated Benefits Rider
Reservation of Certain Rights
FEDERAL TAX MATTERS
Contract Proceeds
Taxation of the Company
EMPLOYMENT-RELATED BENEFIT PLANS
VOTING RIGHTS
DIRECTORS AND OFFICERS OF LBVIP
Directors
Executive Officers
SALES AND OTHER AGREEMENTS
LEGAL PROCEEDINGS
LEGAL MATTERS
EXPERTS
FURTHER INFORMATION
FINANCIAL STATEMENTS
APPENDIX A - Illustrations of Death Benefits, Accumulated Values
and Cash Surrender Values
APPENDIX B - Deferred Administrative Charges Per $1,000 of Face Amount
APPENDIX C - Initial Monthly Administrative Charges Per $1,000 of
Face Amount
APPENDIX D - PRIOR CONTRACTS
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.
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). 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.
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.
CDSC Premium. An annual premium amount determined by LBVIP and used solely
for the purpose of calculating the maximum Contingent Deferred Sales Charge.
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 180 Monthly Deductions have been made. A separate Contingent Deferred
Sales Charge will also be calculated, and then reduced over a 15-year
period, in a similar manner upon a requested increase in Face Amount.
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.
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.
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.
Death Benefit Guarantee Premium. A monthly premium amount specified in the
Contract. The Death Benefit Guarantee Premium determines the payments
required to maintain the Death Benefit Guarantee.
Death Benefit Option. Either of two death benefit options available under
the Contract (Option A and Option B).
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).
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.
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.
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. A separate amount of Decrease Charge is
determined for the initial Face Amount and for each requested increase in
Face Amount.
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 180 Monthly Deductions have been made. The maximum amount of
the Deferred Administrative Charge is determined at Contract issuance. A
separate Deferred Administrative Charge will also be calculated, and then
reduced over a 15-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 34.
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.
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. 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.
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 Charge. An initial monthly charge to reimburse LBVIP for
administrative expenses incurred in issuing the Contract. The Initial
Monthly Charge will be deducted as part of the first 180 Monthly Deductions.
A separate Initial Monthly Charge for Increases 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.
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.
Loan Amount. The sum of all unpaid Contract loans (including any unpaid
loan interest added to the loan balance) outstanding on a relevant date. The
Loan Amount should be distinguished from Contract Debt (see definition of
"Debt" above), in that Contract Debt excludes any unearned prepaid loan
interest.
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.
Minimum Conditional Insurance Premium. The premium required to put
temporary insurance coverage into effect on a conditional basis.
Minimum Contract Issuance Premium. The minimum premium required for
issuance of the Contract.
Minimum Face Amount. The minimum Face Amount for a Contract at issuance and
after any requested decrease in Face Amount.
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 ($10.00 per month); the Initial Monthly
Charge; and charges for additional insurance benefits. 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.
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.
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).
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.
Subaccount. A subdivision of the Variable Account. Each Subaccount invests
exclusively in the shares of a corresponding Portfolio of the Fund.
Unit. The measure by which the value of the Contract's interest in each
Subaccount is determined.
Unit Value. The value of each Unit representing the Contract's interest in
each Subaccount.
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.
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 up to the Insured's Attained Age 100 and at any
frequency. As long as the Contract remains in force, it will provide for
(1) life insurance coverage on the named Insured; (2) Accumulated Value; (3)
surrender rights and Contract loan privileges; and (4) a variety of
additional insurance benefits. The Contract described in this Prospectus is
being offered by LBVIP to provide protection against economic loss when the
Insured dies, and not primarily as an investment.
The Contract is called "flexible premium" because, unlike many other
insurance contracts, there is no fixed schedule for premium payments, even
though each Contract Owner may establish a schedule of periodic premium
payments ("Scheduled Premiums") which may be changed by the Contract Owner
at any time. See "PAYMENT AND ALLOCATION OF PREMIUMS--Amount and Timing of
Premiums". The Contract is called "variable" because, unlike a conventional
fixed-benefit whole life insurance contract, the Death Benefit under the
Contract may, and the Accumulated Value and the Cash Surrender Value will,
vary to reflect the investment performance of the selected Subaccounts of
the Variable Account, as well as other factors. See "CONTRACT BENEFITS".
The failure to pay Scheduled Premiums will not itself cause the Contract to
lapse. Conversely, the payment of premiums in any amount of frequency
(including Scheduled Premiums) will not necessarily guarantee that the
Contract will remain in force, except to the extent these premium payments
are sufficient to maintain the Death Benefit Guarantee. See "DEATH BENEFIT
GUARANTEE". In general, subject to the Death Benefit Guarantee, the
Contract will lapse when (a) Cash Surrender Value is insufficient to pay the
Monthly Deduction (for insurance and administration charges) or (b) Contract
Debt exceeds Accumulated Value less any Decrease Charge, and in either case
if a grace period expires without sufficient additional payments. See
"PAYMENT AND ALLOCATION OF PREMIUMS--Contract Lapse and Reinstatement".
LBVIP will require satisfactory evidence of insurability before issuing any
Contract.
LBVIP is offering the Contract only to Insureds who are eligible for
membership in Lutheran Brotherhood (of which LBVIP is an indirect
subsidiary), unless otherwise required by state law.
Subaccounts of the Variable Account;
Portfolios of the Fund
Each Contract Owner allocates the Net Premium payments made under such
owner's Contract to one or more of the six Subaccounts of the Variable
Account--the Growth Subaccount, the High Yield Subaccount, the Income
Subaccount, the Opportunity Growth Subaccount, the World Growth Subaccount,
and the Money Market Subaccount. The assets of each such Subaccount will be
invested in the corresponding Portfolio (the Growth Portfolio, the High
Yield Portfolio, the Income Portfolio, the Opportunity Growth Portfolio, the
World Growth Portfolio, or the Money Market Portfolio) of the Fund. Subject
to certain restrictions, the Contract Owner may transfer amounts among the
Subaccounts of the Variable Account (see "PAYMENT AND ALLOCATION OF
PREMIUMS--Allocation of Premiums and Accumulated Value").
The investment objectives of the Portfolios of the Fund (individually a
"Portfolio" and collectively the "Portfolios") are:
Growth Portfolio. To achieve long-term growth of capital through investment
primarily in common stocks of established corporations that appear to offer
attractive prospects of a high total return from dividends and capital
appreciation.
High Yield Portfolio. To achieve a higher level of income through a
diversified portfolio of high yield securities ("junk bonds") which involve
greater risks than higher quality investments, while also considering growth
of capital as a secondary objective.
Income Portfolio. To achieve a high level of income over the longer term
while providing reasonable safety of capital through investment primarily in
readily marketable intermediate and long-term fixed income securities.
Opportunity Growth Portfolio. To achieve long-term growth of capital by
investing primarily in a professionally managed diversified portfolio of
smaller capitalization common stocks.
World Growth Portfolio. To achieve long-term growth of capital by investing
primarily in a professionally managed diversified portfolio of common stocks
of established, non-U.S. companies.
Money Market Portfolio. To achieve the maximum current income that is
consistent with stability of capital and maintenance of liquidity through
investment in high-quality, short-term debt obligations.
No assurance can be given that the Portfolios of the Fund will achieve their
respective investment objectives.
The Fund is a diversified, open-end management investment company (commonly
called a "mutual fund"), for which Lutheran Brotherhood acts as investment
adviser. The investment adviser is paid a daily fee by the Fund for its
investment management services equal to an annual rate of .40% of the
aggregate average daily net assets of the Money Market, Income, High Yield,
Growth and Opportunity Growth Portfolios. The investment adviser also
receives a daily investment advisory fee from the Fund equal to .85% of the
aggregate average daily net assets of the World Growth Portfolio, as
described in the accompanying current prospectus for the Fund. See "LBVIP,
LUTHERAN BROTHERHOOD AND THE VARIABLE ACCOUNT--LB Series Fund, Inc." 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. If the Insured dies before age 100, 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. If the Insured dies at
or after age 100, the amount payable will be the Cash Surrender Value on the
date of death. 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 Valuation Date on or next following the
Insured's date of death). 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.
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".
Charitability for Life (SM) is a benefit that enables Contract Owners to
increase their charitable gifts to Lutheran charitable organizations and
congregations. Charitability for Life is available for no additional premium
whenever a Contract Owner has designated a Lutheran charitable organization
or congregation as a beneficiary for at least $1,000 of Death Benefit on his
or her Contract. See "GENERAL PROVISIONS -- Charitability for Life."
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. 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 $25,000 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 18 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 premium payment;
otherwise, it will be considered a loan repayment.
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. 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 8 to 34 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 Monthly Deduction to be made would result in a Cash Surrender
Value less than zero, 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 gender, 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". The monthly administration charges will
include (1) a basic monthly administrative charge equal to $10.00 per month
and (2) the Initial Monthly Charge, which applies until 180 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 18, upon the Insured's gender,
and whether the Insured is a tobacco user or not). If the Face Amount is
increased, a separate Initial Monthly Charge for Increases will be deducted
from Accumulated Value as part of the first 180 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 Charge per
$1,000 of Face Amount will be lower for Contracts having a Face Amount at
issuance or after requested increases that equal or exceed the following
amounts: $500,000-$999,999; and $1,000,000. Montana has enacted legislation
that requires that cost of insurance rates and other charges applicable to
Contracts purchased in Montana cannot vary on the basis of the Insured's
gender, and so, in Montana, this charge will not be based on the gender of
the Insured.
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 180 Monthly Deductions have been
made (that is, approximately 15 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 15-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 the 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
120th 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 18,
the Insured's gender and whether the Insured is a tobacco user or not. (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 180 Monthly Deductions have been made. See "CHARGES AND
DEDUCTIONS--Accumulated Value Charges--Decrease Charge". Montana has enacted
legislation that requires that cost of insurance rates and other charges
applicable to Contracts purchased in Montana cannot vary on the basis of the
Insured's gender, and so, in Montana, this charge will not be based on the
gender of the Insured.
A separate Decrease Charge will also be calculated, and then reduced over a
15-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 surrender
amount requested, 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 an amount 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. 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 the 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 premium payment;
otherwise, it will be considered a loan repayment.
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 partial
surrender charge of $25 or 2% of the surrender amount requested, whichever
is less, the Contract Owner may also partially surrender the Contract and
withdraw part of the Contract's Accumulated Value at any time while the
Insured is living. 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 gender, 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 under the
Contract 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
1996 had total assets of nearly $11.8 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. As investment
adviser to the Fund, LB charges the Fund a daily investment advisory fee
equal to an annual rate of .40% of the aggregate average daily net assets of
the Money Market, Income, High Yield, Growth, and Opportunity Growth
Portfolios. LB also charges the Fund an annual investment advisory fee
equal to .85% of the aggregate average daily net assets of the World Growth
Portfolio.
LB has engaged Rowe Price-Fleming International, Inc., ("Price-Fleming") as
investment sub-adviser for the World Growth Portfolio. Price-Fleming was
founded in 1979 as a joint venture between T. Rowe Price Associates, Inc.
and Robert Fleming Holdings Limited. Price-Fleming is one of the world's
largest international mutual fund asset managers with approximately $29.2
billion under management as of December 31, 1996 in its offices in
Baltimore, London, Tokyo and Hong Kong. Price-Fleming has an investment
advisory group that has day-to-day responsibility for managing the World
Growth Portfolio and developing and executing the Portfolio's investment
program. LB pays the Sub-adviser for the World Growth Portfolio an annual
sub-advisory fee for the performance of sub-advisory services. The formula
for determining the sub-advisory fee is described fully in the prospectus
for the Fund.
The investment objectives of the current Portfolios available to Contract
Owners through corresponding Subaccounts of the Variable Account are set
forth in the accompanying prospectus for the Fund. There is no assurance
that these objectives will be met.
Each Contract Owner should periodically consider the allocation among the
Subaccounts in light of current market conditions and the investment risks
attendant to investing in the Fund's various Portfolios. A full description
of the Fund, its investment objectives, policies and restrictions, its
expenses, the risks attendant to investing in the Fund's Portfolios and
other aspects of its operation is contained in the accompanying prospectus
for the Fund, which should be read together with this Prospectus.
Performance Information
Performance information for the Variable Account and the Fund may appear in
advertisements, sales literature, or reports to Contract Owners.
Performance information for the Fund will appear only when accompanied by
performance information for the Variable Account. Performance information
for the Variable Account will reflect the deduction of applicable charges to
the Contract. Quotations of performance information for the Fund will not
take into account charges or deductions against the Variable Account to
which Fund shares are sold or deductions against the Contract. Performance
information reflects only the performance of a hypothetical investment
during a particular time period on which the calculations are based.
Performance information should be considered in light of the investment
objectives and policies, characteristics and quality of the Portfolios of
the Fund in which the Variable Account invests, and the market conditions
during the given period of time, and should not be considered as a
representation of what may be achieved in the future.
Performance for the Variable Account and/or the Fund as reported from time
to time in advertisements and sale literature may be compared with that of
other insurance company separate accounts or mutual funds included in the
generally accepted indices, analyses or rankings prepared by Lipper
Analytical Service, Inc., Standard & Poor's Corporation Morningstar, Inc.,
VARDS, Dow Jones or similar independent rating or statistical investment
services that monitor the performance of insurance company separate accounts
or mutual funds. Performance of the Variable Account may be quoted or
compared to rankings, yields or returns as published or prepared by
independent rating or statistical services or publishers or publications
such as THE BANK RATE MONITOR NATIONAL INDEX, BARRON'S, BUSINESS WEEK,
DONOGHUE'S MONEY MARKET FUND REPORT, FINANCIAL SERVICES WEEK, FINANCIAL
TIMES, FINANCIAL WORLD, FORBES, FORTUNE, GLOBAL INVESTOR, INSTITUTIONAL
INVESTOR, INVESTOR'S DAILY, KIPLINGER'S PERSONAL FINANCE, LIPPER ANALYTICAL
SERVICES, MONEY, MUTUAL FUND FORECASTER, NEWSWEEK, THE NEW YORK TIMES,
PERSONAL INVESTOR, STANGER REPORT, SYLVIA PORTER'S PERSONAL FINANCE, USA
TODAY, U.S. NEWS AND WORLD REPORT, THE WALL STREET JOURNAL and WIESENBERGER
INVESTMENT COMPANIES SERVICE.
Addition, Deletion or Substitution of Investments
LBVIP reserves the right, subject to applicable law, to make additions to,
deletions from, or substitutions for the shares that are held in the
Variable Account or that the Variable Account may purchase. If the shares
of a Portfolio of the Fund are no longer available for investment or if in
LBVIP's judgment further investment in any Portfolio should become
inappropriate in view of the purposes of the Variable Account, LBVIP may
redeem the shares, if any, of that Portfolio and substitute shares of
another registered open-end management company. LBVIP will not substitute
any shares attributable to a Contract interest in a Subaccount of the
Variable Account without notice and prior approval of the SEC and state
insurance authorities, to the extent required by applicable law. The
Variable Account may to the extent permitted by law purchase other
securities for other contracts or permit a conversion between contracts upon
request by the Contract Owners.
LBVIP also reserves the right to establish additional Subaccounts of the
Variable Account, each of which would invest in shares corresponding to a
new Portfolio of the Fund or in shares of another investment company having
a specified investment objective. Subject to applicable law and any
required SEC approval, LBVIP may, in its sole discretion, establish new
Subaccounts or eliminate one or more Subaccounts if marketing needs tax
considerations or investment conditions warrant. Any new Subaccounts may be
made available to existing Contract Owners on a basis to be determined by
LBVIP.
If any of these substitutions or changes are made, LBVIP may by appropriate
endorsement change the Contract to reflect the substitution or change. If
LBVIP deems it to be in the best interest of Contract Owners, and subject to
any approvals that may be required under applicable law, the Variable
Account may be operated as a management company under the 1940 Act, it may
be deregistered under that Act if registration is no longer required, or it
may be combined with other LBVIP separate accounts.
CONTRACT BENEFITS
Death Benefits
General. As long as the Contract remains in force (see "PAYMENT AND
ALLOCATION OF PREMIUMS--Contract Lapse and Reinstatement"), the death
proceeds of the Contract will, upon due proof of the Insured's death, be
paid to the named Beneficiary in accordance with the designated Death
Benefit Option. The proceeds may be paid in cash or under one of the
settlement options set forth in the Contract. See "CONTRACT BENEFITS--
Payment of Contract Benefits". The amount payable under the designated
Death Benefit Option will be reduced by any outstanding Contract Debt and
any due and unpaid Monthly Deduction(s), and will be increased by any
additional insurance benefits on the Insured's life provided for in the
Contract.
If the Insured dies at or after age 100, the amount payable will be the Cash
Surrender Value on the date of death.
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 to 99 100
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 ($100,000 +
$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 before the Insured's Attained Age 100, 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 Charge included in
the first 180 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 Charge".
See Appendix D for information about differences in charges on VUL 1
contracts.
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 Charge for Increases
(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 $25,000.
The Contract Owner may not increase the Face Amount after the Insured's
Attained Age 85. 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").
See Appendix D for information about changes in face amounts for VUL 1
contracts.
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 before the Monthly Deduction must be equal to or greater
than the amount of 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
before the Monthly Deduction may be less than the Monthly Deduction then
due, even though the Death Benefit Guarantee Premium will be increased as a
result of any requested increase in Face Amount (see "DEATH BENEFIT
GUARANTEE--Death Benefit Guarantee Premium").
Insurance Protection. A Contract Owner may increase or decrease the pure
insurance protection provided by the Contract (that is, the net amount at
risk, which is, in general, the difference between the Death Benefit and the
Accumulated Value) in one of several ways as insurance needs change. These
ways include increasing or decreasing the Face Amount, changing the level of
premium payments, and, to a lesser extent, making a partial surrender under
the Contract. Although the consequences of each of these methods will
depend upon the individual circumstances, they may be generally summarized
as follows:
(a) A decrease in the Face Amount will, subject to the applicable
percentage limitations (see "CONTRACT BENEFITS--Death Benefits--Death
Benefit Options"), decrease the pure insurance protection without reducing
the Accumulated Value (except for the deduction of any Decrease Charge
applicable to the decrease). If the Face Amount is decreased, the Monthly
Deduction generally will decrease as well, but any Decrease Charge then
applicable will be imposed in part upon a requested decrease in Face Amount
(see "Charges and Deductions--Decrease Charge--Monthly Deduction").
(b) An increase in the Face Amount (which may require satisfactory evidence
of insurability--see "Increases--Additional Considerations" above) will
likely increase the amount of pure insurance protection, depending on the
amount of Accumulated Value and the resultant applicable percentage
limitation. If the insurance protection is increased, the Monthly Deduction
will increase as well.
(c) Under Death Benefit Option A, until the applicable percentage of
Accumulated Value exceeds the Face Amount plus the Accumulated Value, the
level of premium payments will not affect the amount of pure insurance
protection.
(d) Under Death Benefit Option B, until the applicable percentage of
Accumulated Value exceeds the Face Amount, an increased level of premium
payments will generally reduce the amount of pure insurance protection.
(e) Under either Death Benefit Option, if the Death Benefit is the
applicable percentage of Accumulated Value, then an increased level of
premium payments will increase the amount of pure insurance protection.
(f) A partial surrender will reduce the Death Benefit. See "CONTRACT
RIGHTS--Surrender Privileges". However, it has a limited effect on the pure
insurance protection and charges under the Contract, because the partial
surrender will affect the net amount at risk only when the Death Benefit is
based on the applicable percentage of Accumulated Values (see "CONTRACT
RIGHTS--Surrender Privileges--Partial Surrender"). The primary use of a
partial surrender is to withdraw Accumulated Value. Furthermore, it results
in a reduced amount of Accumulated Value and increases the possibility that
the Contract will lapse.
THE TECHNIQUES DESCRIBED IN THIS SECTION FOR CHANGING THE AMOUNT OF PURE
INSURANCE PROTECTION UNDER THE CONTRACT (FOR EXAMPLE, CHANGING THE FACE
AMOUNT, MAKING A PARTIAL SURRENDER, AND CHANGING THE AMOUNT OF PREMIUM
PAYMENTS) MUST BE CONSIDERED TOGETHER WITH THE OTHER RESTRICTIONS AND
CONSIDERATIONS DESCRIBED ELSEWHERE IN THIS PROSPECTUS.
How the Duration of the Contract May Vary. Subject to the Death Benefit
Guarantee (which depends upon the level of premium payments, partial
surrenders and the Contract Loan Amount--see "DEATH BENEFIT GUARANTEE"), the
duration of the Contract depends upon the Cash Surrender Value (that is, the
Accumulated Value less any Contract Debt and any Decrease Charge). The
Contract will remain in force as long as (a) the Cash Surrender Value of the
Contract is sufficient to pay the Monthly Deduction and (b) Contract Debt
does not exceed Accumulated Value less any Decrease Charge. In general,
however, when Cash Surrender Value is insufficient to pay the Monthly
Deduction or when Contract Debt exceeds Accumulated Value less any Decrease
Charge, and a grace period expires without an adequate payment by the
Contract Owner, the Contract will lapse and terminate without value. The
Contract Owner has certain rights to reinstate the Contract. See "PAYMENT
AND ALLOCATION OF PREMIUMS--Contract Lapse and Reinstatement".
Accumulated Value and Cash Surrender Value
The Accumulated Value of the Contract is the total amount of value held
under the Contract at any time. The Accumulated Value is used in
determining the Cash Surrender Value (the Accumulated Value less any
Contract Debt and any Decrease Charge). See "CONTRACT RIGHTS--Surrender
Privileges". There is no guaranteed minimum Accumulated Value, and because
a Contract's Accumulated Value on any future date depends upon a number of
variables, it cannot be predetermined.
A Contract's Accumulated Value and Cash Surrender Value will reflect the
investment performance of the chosen Subaccounts of the Variable Account,
any Net Premiums paid, any partial surrenders, any loans, any loan
repayments, any loan interest paid or credited, and any charges assessed in
connection with the Contract (including any Decrease Charge previously
imposed on a requested decrease in Face Amount).
Calculation of Accumulated Value. The Accumulated Value of the Contract is
determined first on the Contract Date and thereafter on each Valuation Date.
On the Contract Date, the Accumulated Value will be the New Premiums
received, plus any interest earned during the period when premiums are held
in LBVIP's General Account (before being transferred to the Variable
Account) (see "PAYMENT AND ALLOCATION OF PREMIUMS--Issuance of a Contract"),
less any Monthly Deductions due on the Contract Date. On each Valuation
Date after the Contract Date, the Contract's Accumulated Value will be:
(1) the aggregate of the values attributable to the Contract in each of the
Subaccounts on the Valuation Date, determined for each Subaccount by
multiplying the Subaccount's Unit Value on the date by the number of
Subaccount Units allocated to the Contract; plus
(2) the value attributable to the Contract in the Loan Account (see
"CONTRACT RIGHTS--Loan Privileges") on the Valuation Date.
Determination of Number of Units. Any amounts allocated to the Subaccounts
will be converted into Units of the Subaccount. The number of Units to be
credited to the Contract is determined by dividing the dollar amount being
allocated by the Unit Value as of the end of the Valuation Period during
which the amount was allocated. The number of Subaccount Units in any
Subaccount will be increased by: (i) any Net Premiums allocated to the
Subaccount during the current Valuation Period; (ii) any Accumulated Value
transferred to the Subaccount from the General Account or another Subaccount
during the current Valuation Period; (iii) any repayments of the Contract
Debt during the current Valuation Period; and (iv) any interest earned on
the amount in the Loan Account and transferred to the Variable Account
during the current Valuation Period. The number of Subaccount Units in any
Subaccount will be decreased by: (i) any Monthly Deduction allocated to the
Subaccount during the current Valuation Period to cover the Contract Month
following a Monthly Anniversary; (ii) any Accumulated Value transferred from
the Subaccount to another Subaccount or the General Account; (iii) the
amount of any partial surrender (including the partial surrender charge)
during the current Valuation Period; and (iv) any Contract loans allocated
to the Subaccount and transferred to the Loan Account during the current
Valuation Period.
In computing the Contract's Accumulated Value the number of Subaccount Units
allocated to the Contract is determined before any Contract transactions on
the Valuation Date that would affect the number of Subaccount Units (see
immediately preceding paragraph). If the Contract's Accumulated Value in
the Variable Account is to be calculated for a day that is not a Valuation
Date, the next following Valuation Date will be used.
Determination of Unit Value. The Unit Value for a Subaccount is calculated
on each Valuation Date by dividing (1) by (2):
Where:
(1) is the net result of:
(a) the net asset value of the corresponding Portfolio of the Subaccount at
the end of the current Valuation Period, plus
(b) the amount of any dividend or capital gain distribution by the
Portfolio if the "ex-dividend" date occurs during the Valuation Period, plus
or minus
(c) a charge or credit or any taxes reserved which LBVIP determines a
result of the investment operation of the Portfolio, minus
(d) the Mortality and Expense Risk Charge (see "CHARGES and DEDUCTIONS--
Charges Against the Variable Account--Mortality and Expense Risk Charge")
for each day during the current Valuation Period (a current charge of
.001644%, but never to exceed .002055%, of the net assets for each day
during the current Valuation Period), and
(2) is the number of Units for the Subaccount attributable to all
Contracts.
Payment of Contract Benefits
If the Insured dies before age 100, 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. If the Insured dies at
or after age 100, the amount payable will be the Cash Surrender Value on the
date of death.
See Appendix D for information about benefits at maturity date on VUL 1
contracts, which is the Contract Anniversary on or next following the
Insured's 96th birthday.
Death proceeds under a Contract will ordinarily be paid within seven days
after LBVIP receives due proof of death. 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. 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 $50 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 18
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 85 or less and who
provide satisfactory evidence of insurability to LBVIP. Acceptance is
subject to LBVIP's underwriting rules. LBVIP reserves the right to reject
an application for any reason permitted by law.
At the time an application for a Contract is accepted, subject to LBVIP's
underwriting rules, an applicant can obtain temporary insurance protection
pending issuance of the Contract by submitting payment of the Minimum
Conditional Insurance Premium. The Minimum Conditional Insurance Premium
will equal three initial Death Benefit Guarantee Premiums, or, in the case
of automatic monthly payment plans, two initial Death Benefit Guarantee
Premiums. If LBVIP subsequently determines that the proposed Insured is not
an acceptable risk under LBVIP's underwriting standards and rules, even if
the Minimum Conditional Insurance Premium has been paid, no temporary
insurance coverage will have been provided and any premium paid will be
refunded (without interest).
Upon delivery of the Contract, the balance (if any) of the Minimum Contract
Issuance Premium must be paid. The Minimum Contract Issuance Premium will
equal the initial Scheduled Premium selected by the Contract Owner (see
"Amount and Timing of Premiums" below), or, in the case of automatic monthly
payment plans, the greater of the Minimum Conditional Insurance Premium or
the initial Scheduled Premium. If the Date of Issue precedes the Contract
Date and the Minimum Contract Issuance Premium otherwise required would not
provide a premium payment sufficient to cover the next Contract Month,
additional Scheduled Premium payment(s) sufficient to cover through the next
Contract Month will be required.
The Date of Issue is the date used to determine Contract Months, Contract
Years, Monthly Anniversaries and Contract Anniversaries and will be shown on
page 3 of the Contract. The Contract Date is the date on which the initial
Net Premium(s) will be allocated to the Variable Account. The Contract Date
will be the latest of (i) the Date of Issue; (ii) the date LBVIP receives
the first premium payment on the Contract at its Home Office; and (iii) any
other date mutually agreed upon by LBVIP and the Contract Owner.
Until the Contract Date, premium payments will be held in LBVIP's General
Account. If a Contract is issued, interest will be credited on premium
payments held in LBVIP's General Account at a rate of interest determined by
LBVIP; no interest will be credited on these premium payments if no Contract
is issued (but the full amount of any premiums paid, without deduction of
any Contract charges, will be refunded). Any interest on these premium
payments will be credited to the Contract on the Contract Date in the same
manner as a premium payment, except without deduction of any Premium Expense
Charge. On the Contract Date, the Premium Expense Charges attributable to
the premiums paid will be deducted and the balance of the amount held in the
General Account (on which no Premium Expense Charges will be imposed) will
be transferred from the General Account and allocated to the Variable
Account and allocated among the Subaccount(s) pursuant to the Contract
Owner's instructions.
Amount and Timing of Premiums
A Contract Owner has considerable flexibility in determining the frequency
and amount of premiums.
Scheduled Premiums. Each Contract Owner will select a periodic premium
payment schedule (based on a periodic billing mode of annual, semi-annual,
or quarterly payment) which provides for the billing of a level premium at
the specified interval. Also, under several automatic payment plans, the
Contract Owner can select a monthly payment schedule pursuant to which
premium payments will be automatically deducted from a bank account or other
payment source rather than being billed. The periodic payment selected by
the Contract Owner is called the "Scheduled Premium". The initial Scheduled
Premium on an annualized basis will be shown in the Contract as the "Planned
Annual Premium". The Contract Owner is not, however, required to pay
Scheduled Premiums in accordance with the specified schedule. The Contract
Owner has the flexibility to alter the amount, frequency and time period
over which the premiums are paid. Payment of Scheduled Premiums will not,
however, guarantee that the Contract will remain in force. Instead, the
duration of the Contract depends upon the Contract's Accumulated Value and
Cash Surrender Value and upon whether the Death Benefit Guarantee is in
effect. See "CONTRACT BENEFITS--Death Benefits" and "DEATH BENEFIT
GUARANTEE". Thus, even if Scheduled Premiums are paid by the Contract Owner,
unless the Death Benefit Guarantee is in effect, the Contract will lapse
whenever (a) Cash Surrender Value is insufficient to pay the Monthly
Deduction or (b) Contract Debt exceeds Accumulated Value less any Decrease
Charge, and in either case if a grace period expires without an adequate
payment by the Contract Owner. See "Contract Lapse and Reinstatement"
below.
Minimum Conditional Insurance Premium. The Minimum Conditional Insurance
Premium is the minimum premium required to provide temporary insurance
protection pending issuance of the Contract. See "Issuance of a Contract"
above.
Minimum Contract Issuance Premium. The Minimum Contract Issuance Premium is
the minimum premium required upon delivery of the Contract. See "Issuance
of a Contract" above.
Death Benefit Guarantee Premium. The Death Benefit Guarantee Premium is a
monthly premium amount specified in the Contract and determined by LBVIP.
The Death Benefit Guarantee Premium may change as the result of Contract
changes. The Death Benefit Guarantee Premium determines the payments
required to maintain the Death Benefit Guarantee. See "DEATH BENEFIT
GUARANTEE".
Premium Flexibility. Unlike some insurance contracts, the Contract frees
the owner from the requirement that premiums be paid in accordance with a
fixed premium schedule. Although each Contract Owner determines a Scheduled
Premium (initially, on an annualized basis, this premium will be called the
Planned Annual Premium), a Contract Owner need not make premium payments in
accordance with this schedule and the failure to make such payments will not
in itself cause the Contract to lapse. See "Contract Lapse and
Reinstatement" below. Moreover, subject to the requirements described above
regarding the Minimum Conditional Insurance Premium and the Minimum Contract
Issuance Premium (see "Issuance of a Contract" above), and to the minimum
and maximum premium limitations described below, a Contract Owner may make
premium payments at any time before age 100 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 premium payment;
otherwise, it will be considered a loan repayment.
Transfers. Accumulated Value may be transferred among the Subaccounts of
the Variable Account upon receipt of Written Notice or by telephone (if the
Contract Owner has completed the Telephone Transaction Authorization Form).
The total amount transferred each time must be at least $500 (unless the
total cash value in a Subaccount is less than $500, in which case the entire
amount may be transferred). No fees are currently charged for transfers.
Transfers may be postponed in certain circumstances. See "GENERAL
PROVISIONS--Postponement of Payments". Under present law, transfers are not
taxable transactions.
The provisions described above can be illustrated as follows. If a Contract
Owner wishes to transfer a total of $500 or more, any amount can be
transferred from the various Subaccounts (for example, $300 from the Money
Market Subaccount and $200 from the Income Subaccount, or any other
combination that totals $500 or more). A Contract Owner may transfer a
total of less than $500 only if the amount transferred from each Subaccount
equals the total Accumulated Value in that Subaccount (for example, a $300
total transfer taken totally from the Money Market Subaccount when $300
represents the total Accumulated Value in that Subaccount, or a $300 total
transfer taken $200 from the Money Market Subaccount and $100 from the
Income Subaccount when these amounts represent the total Accumulated Value
in these Subaccounts).
Telephone Transfers. Telephone transfers are available when the Contract
Owner completes the Telephone Transaction Authorization Form. If the
Contract Owner elects to complete the Telephone Transaction Authorization
Form, the Contract Owner thereby agrees that LBVIP, its agents and employees
will not be liable for any loss, liability cost or expense when LBVIP, its
agents and employees act in accordance with the telephone transfer
instructions that have been properly received and recorded on voice
recording equipment. If a telephone authorization or instruction, processed
after the Contract Owner has completed the Telephone Transaction
Authorization Form, is later determined not to have been made by the
Contract Owner or was made without the Contract Owner's authorization, and a
loss results from such unauthorized instruction, the Contract Owner bears
the risk of this loss. LBVIP will employ reasonable procedures to confirm
that instructions communicated by telephone are genuine. In the event LBVIP
does not employ such procedures, LBVIP may be liable for any losses due to
unauthorized or fraudulent instructions. Such procedures may include, among
others, requiring forms of personal identification prior to acting upon
telephone instructions, providing written confirmation of such instructions
and/or tape recording telephone instructions.
Contract Owners should periodically review their allocations of Accumulated
Value in light of market conditions and the Contract Owner's overall
financial objectives.
Special Transfer Service--Dollar Cost Averaging. LBVIP administers a dollar
cost averaging program which enables a Contract Owner to pre-authorize a
periodic exercise of the transfer rights described above. A Contract Owner
entering into a dollar cost averaging agreement will instruct LBVIP to
periodically transfer predetermined dollar amounts from the Money Market
Subaccount to as many of the three other Subaccounts as specified by the
Contract Owner until the amount in the Money Market Subaccount is exhausted
or the agreement is terminated by the Contract Owner. The dollar cost
averaging program is generally suitable for Contract Owners making a
substantial deposit to the Contract and who wish to use the other
Subaccounts investment option, but desire to control the risk of investing
at the top of a market cycle. The dollar cost averaging program allows such
investments to be made in equal installments over time in an effort to
reduce such risk. Dollar cost averaging does not guarantee that the Variable
Account will gain in value, nor will it protect against a decline in value
if market prices fall. However, if a Contract Owner can continue to invest
regularly throughout changing market conditions, it can be an effective
strategy to help meet long-term goals. Contract Owners interested in the
dollar cost averaging program may obtain an application and full information
concerning the program and its restrictions from LBVIP.
Contract Lapse and Reinstatement
Lapse. The failure to make a Scheduled Premium payment will not itself
cause a Contract to lapse. Subject to the Death Benefit Guarantee (see
"DEATH BENEFIT GUARANTEE"), lapse will only occur when (a) the Cash
Surrender Value is insufficient to cover the Monthly Deduction or (b)
Contract Debt exceeds the Accumulated Value less any Decrease Charge, and in
either case if a grace period expires without a sufficient payment. Even if
the Cash Surrender Value is insufficient to cover the Monthly Deduction, the
Contract will not lapse if the Death Benefit Guarantee is in effect.
Because unearned prepaid loan interest will not be included in Contract Debt
(see definition of "Contract Debt" in section entitled "DEFINITIONS"), the
Cash Surrender Value (which is Accumulated Value less any Contract Debt and
any Decrease Charge) will always include any unearned prepaid loan interest.
This means that, in effect, unearned prepaid loan interest will be applied
to keep the Contract in force because this amount will be available to pay
the Monthly Deduction and because the grace period for the Contract does not
commence until the Cash Surrender Value is insufficient to cover the Monthly
Deduction. Any payment made by the Contract Owner after unearned prepaid
loan interest has been applied in this manner will first be used to replace
unearned prepaid loan interest so applied.
The Contract provides for a 61-day grace period that is measured from the
date on which notice is sent by LBVIP. Thus, the Contract does not lapse,
and the insurance coverage continues, until the expiration of this grace
period. This notice will be sent by LBVIP on or after the Monthly
Anniversary on which (a) Cash Surrender Value is insufficient to pay the
Monthly Deduction chargeable on the Monthly Anniversary or (b) Contract Debt
exceeds the Accumulated Value less any Decrease Charge.
In order to prevent lapse, the Contract Owner must during the grace period
make a premium payment or make a loan repayment sufficient to (a) increase
the Cash Surrender Value (that is, Accumulated Value less any Contract Debt
and any Decrease Charge) to an amount sufficient to cover any unpaid Monthly
Deductions or (b) reduce Contract Debt to an amount equal to or less than
the Accumulated Value less any Decrease Charge.
When the Contract enters the grace period, LBVIP will notify the Contract
Owner. The Contract Owner will then have 61 days, measured from the date
notice is mailed to the Contract Owner, to make sufficient payments. The
notice will specify the payment required to keep the Contract in force and
the length of the grace period. Failure to make a sufficient payment within
the grace period will result in lapse of the Contract without value.
At the commencement of the grace period, LBVIP will transfer the Contract's
Accumulated Value attributable to the Variable Account (that is, Accumulated
Value in excess of the amount held in the Loan Account) into LBVIP's General
Account. If sufficient payments are made during the grace period to avoid
lapse of the Contract, then any Accumulated Value in excess of the amount to
be held in the Loan Account will be reallocated to the Variable Account upon
receipt of such payments. The amount reallocated to the Variable Account
will be reduced by the amount of any Monthly Deductions not paid during the
grace period. The amount allocated to the Variable Account will be
allocated among the Subaccount(s) in the same proportion as the Accumulated
Value was transferred to the General Account from the Subaccount(s) at the
commencement of the grace period.
If a sufficient payment is made during the grace period, Net Premiums will
be allocated among the Subaccount(s) according to the current Net Premium
allocation and then any amount required to pay unpaid Contract charges will
be deducted. See "Allocations of Premiums and Accumulated Value" above.
If the Insured dies during the grace period, the proceeds under the Contract
will equal the amount of the Death Benefit and any additional life insurance
benefits on the Insured provided by rider as of the Monthly Anniversary on
or immediately preceding the commencement of the grace period, reduced by
any Contract Debt and any unpaid Monthly Deductions.
If a sufficient payment is not made during the grace period, the Contract
will lapse without value and insurance coverage will end as of the
expiration of the grace period. The Contract will have no Accumulated Value
or Cash Surrender Value upon termination of the Contract.
On any Monthly Anniversary when the Death Benefit Guarantee is in effect,
the Contract will not lapse. See "DEATH BENEFIT GUARANTEE".
Reinstatement. A Contract that lapses without value may be reinstated at
any time within 5 years after the expiration of the grace period 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 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 15-year-time periods for the Decrease Charge and the Initial Monthly
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.
See Appendix D for information about differences in the Decrease Charge and
the Deferred Administrative Charge on VUL 1 contracts.
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
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).
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 180 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 15-
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 120 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 .83% (10% 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 7 Contract
Years, 60% of the maximum after approximately 9 Contract Years, 40% of the
maximum after approximately 11 Contract Years, 20% of the maximum after
approximately 13 Contract Years, and zero after approximately 15 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
$10.00 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.
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 made during the 12 Contract Months after the effective date of 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" made during the 12
Contract Months after the effective date of the increase.
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.83% (10% 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 120 Monthly Deductions have been taken on and after the
fifth anniversary of the increase. Thus, after the 120th 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, the Insured's
gender and whether the Insured is a tobacco user or not. For Insureds with
an Attained Age under 18, 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
equal or exceed the following amounts: $500,000-$999,999; and $1,000,000.
Montana has enacted legislation that requires that cost of insurance rates
and other charges applicable to Contracts purchased in Montana cannot vary
on the basis of the Insured's gender, and so, in Montana, this charge will
not be based on the gender of the Insured.
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 180 Monthly
Deductions have been made, this Deferred Administrative Charge determined at
Contract issuance will be reduced in level amounts equal to approximately
.55% of the maximum Deferred Administrative Charge (or a 6 2/3% 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 180th 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 .55% of the maximum Deferred Administrative Charge (or a 6 2/3%
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 180 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 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 Charge) or through the Decrease
Charge (which covers these charges through the Deferred Administrative
Charge). Each of these charges applies until 180 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 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 15-year period
through the Initial Monthly Charge included in the Monthly Deduction. If
the Deferred Charge is imposed in part due to a requested decrease in Face
Amount, the amount of the Initial Monthly Charge will be reduced accordingly
(see "CHARGES AND DEDUCTIONS--Monthly Deduction--Initial Monthly 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 Charge applicable to any spouse rider providing
insurance benefits on the Insured's spouse. An Initial Monthly Charge for
Increases 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 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".
See Appendix D for information about differences in the Decrease Charge and
the Deferred Administrative Charge on VUL 1 contracts.
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 prior to the Insured's Attained Age 100. (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 equal or exceed the
following amounts: $500,000-$999,999; and $1,000,000.
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 Face
Amount and the gender, issue age, 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 be based on the Initial Face
Amount and any requested increases in Face Amount, and will apply to all
Insureds of the same premium class, gender , issue age and Attained Age. 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 equal or
exceed the following amounts: $500,000-$999,999; and $1,000,000. 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 gender, and so, for Contracts issued in the state of Montana, the
cost of insurance rate will not be based on the basis of gender. 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 rated 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: tobacco users and non-tobacco users. Non-
tobacco user Insureds will generally incur lower cost of insurance rates
than Insureds who are classified as tobacco users. In addition, certain
Insureds over Attained Age 18 and less than Attained Age 75 who are non-
tobacco users and who meet special underwriting requirements may be
classified as preferred. An Insured in a preferred premium class will have
a lower cost of insurance than an Insured in a standard or rated premium
class.
Any Insured with an Attained Age at issuance under 18 will not be classified
initially as a tobacco user or a non-tobacco user and then will be
classified as a tobacco user at Attained Age 18 unless the Insured provides
satisfactory evidence that the Insured is a non-tobacco user. (LBVIP will
provide notice to the Contract Owner of the opportunity for the Insured to
be classified as a non-tobacco user when the Insured reaches Attained Age
18.)
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 charge that is deducted as part of the
first 180 Monthly Deductions (the "Initial Monthly Charge") following
Contract issuance and following any requested increase in Face Amount.
Basic Monthly Administrative Charge. A basic monthly administrative charge
of $10.00 will be deducted from Accumulated Value on the Contract Date and
each Monthly Anniversary prior to the Insured's Attained Age 100 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 Charge. The Initial Monthly Charge will be deducted from
Accumulated Value as part of the first 180 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 18, the
Insured's gender and upon whether the Insured is a tobacco user or not. The
Initial Monthly Charge per $1,000 of Face Amount will be determined from
Appendix C. As shown in Appendix C, the Initial Monthly Charge will be less
for Contracts having a Face Amount at issuance that equal or exceed the
following amounts: $500,000-$999,999; and $1,000,000.
If the Face Amount is increased, a separate Initial Monthly Charge for
increases will be deducted from Accumulated Value as part of the first 180
Monthly Deductions after the increase beginning with the Monthly Anniversary
on which the increase becomes effective. This separate Initial Monthly
Charge for Increases 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 Charge will be deducted from
Accumulated Value as part of the first 180 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
Charge will be determined in the same manner as for the initial Face Amount,
except that the spouse's Attained Age and tobacco user status and gender on
the effective date of the rider will be used.
Montana has enacted legislation that requires that cost of insurance rates
and other charges applicable to Contracts purchased in Montana cannot vary
on the basis of the Insured's gender, and so, in Montana, this charge will
not be based on the gender of the Insured.
The Initial Monthly 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 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 15-year period when the Initial
Monthly Charge applies, or if a requested decrease in Face Amount occurs
during the 15-year period when the Initial Monthly Charge generally applies,
the Initial Monthly 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 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 15-year period when the Initial Monthly Charge
applies so that the Decrease Charge is imposed, the Initial Monthly Charge
will not be collected. If the Face Amount is decreased at the Contract
Owner's request during this 15-year period so that the Decrease Charge
(including the Deferred Administrative Charge) is imposed in part, the
Initial Monthly Charge will be reduced because of the Deferred
Administrative Charge imposed (being applied to reduce proportionately or
eliminate the Initial Monthly 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 Charge will
be reinstated until a total of 180 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 Charge will be
calculated for spouse riders. As a result, the Initial Monthly 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 15-year period when an Initial Monthly Charge
applies for a spouse rider, the charge will not be collected. If a
requested decrease on a spouse rider occurs during this 15-year period, the
Initial Monthly 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".
See Appendix D for information about differences in the Monthly Deduction,
including the cost of insurance rates, basic monthly administrative charge,
and the Initial Monthly Charge on VUL 1 contracts.
Partial Surrender Charge
A partial surrender charge of $25 or 2% of the surrender amount requested,
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.
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. As investment adviser to the
Fund, LB charges the Fund a daily investment advisory fee equal to an annual
rate of .40% of the aggregate average daily net assets of the Money Market,
Income, High Yield, Growth, and Opportunity Growth Portfolios. LB also
charges the Fund an annual investment advisory fee equal to .85% of the
aggregate average daily net assets of the World Growth Portfolio. 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 Monthly Deduction to be made would result in a Cash Surrender
Value less than zero, 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 15 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 8 to 34 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".
See Appendix D for information about differences in the Death Benefit
Guarantee on VUL 1 contracts.
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 Charge (see "CHARGES AND DEDUCTIONS--Monthly Deduction--Initial
Monthly Charge"); the charge for any additional insurance benefits added by
rider (see "GENERAL PROVISIONS--Additional Insurance Benefits"); and the
basic monthly administrative charge of $10.00 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 gender, 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 an amount 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.
See Appendix D for information about differences in Loan Privileges on VUL 1
contracts.
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"), 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, 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 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 premium payment;
otherwise, it will be considered a loan repayment.
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 death of the Insured, 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, including any surrender charge,
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). A surrender charge of $25 or 2% of
the surrender amount requested, 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 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 Charge for Increases (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 Gender
If the age or gender 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 gender.
Due Proof of Death
LBVIP will accept as due proof of death of the Insured a completed
claimant's statement, which will be furnished by LBVIP, together with either
a certified death certificate or an attending physician's statement. In
some circumstances, LBVIP may require an attending physician's statement
even though a death certificate is furnished.
Reports to Contract Owners
LBVIP will mail to Contract Owners, at their last known address of record,
within 30 days after each Contract Anniversary, annual reports confirming
the status of each Contract's values and benefits. These reports will show
the following as of the beginning and end of the Contract Year: the Face
Amount; the Death Benefit; the Accumulated Value; any outstanding Decrease
Charge; any Contract Debt; and Cash Surrender Value. The annual reports
will show how future Net Premiums will be allocated among the Subaccount(s)
pursuant to the Contract Owner's current allocation instructions. In
addition, LBVIP will mail to Contract Owners quarterly reports that will
show all Contract transactions since the last Contract Anniversary,
including, but not limited to, the amount and dates of premium payments
(including those paid under an automatic payment plan offered by LBVIP or
those paid prior to the initial transfer to the Subaccount(s) on the
Contract Date), monthly charges deducted, loans (as well as the loan
interest that became due, interest credited from the General Account and
loan repayments), partial surrenders, transfers, exchanges or an exercise of
a free look privilege.
Within seven days of the following transactions, LBVIP will mail a
confirmation statement or letter to the Contract Owner confirming such
transactions, in addition to showing them in the quarterly and annual
reports: any premium payment (other than those paid under an automatic
payment plan offered by LBVIP or those paid prior to the initial transfer to
the Subaccount(s) on the Contract Date, which will be confirmed by LBVIP in
the annual report), any Contract loan, interest payment or loan repayment,
any change in instructions for allocation of Net Premiums or other Contract
transactions, any transfer of amounts among Subaccount(s) (including the
initial transfer on the Contract Date), any partial surrender, any decrease
in Face Amount that results in a reduction of the Decrease Charge and thus
the assets attributable to the Contract in the Subaccount(s), any
restoration to Accumulated Value following an exercise of a free-look
privilege for an increase in the Face Amount and the manner in which such
amount is allocated among the Subaccount(s), any exercise of the free-look
privilege for an increase in the Face Amount when a refund is made, any
exercise of the free look privilege for the Contract, any exchange of the
Contract, any full surrender of the Contract, payment of a Death Benefit and
payment at Maturity Date. Upon request, any Contract Owner will be sent a
receipt for any premium payment.
LBVIP will maintain all records relating to the Variable Account. LBVIP
will mail to Contract Owners, at their last known address of record, any
reports required by any applicable law or regulation. Each Contract Owner
will also be sent an annual and a semi-annual report for the Fund as
required by the Investment Company Act of 1940.
Additional Insurance Benefits
Subject to certain requirements, one or more of the following additional
insurance benefits may be added to the Contract at the option of the
Contract Owner by rider at the time the Contract is applied for or at a
later date. At present, these options include: waiver of Monthly
Deductions in the event of total disability, additional insurance coverage
for accidental death, waiver of selected amount in the event of total
disability, term insurance on the Insured's spouse, term insurance on the
Insured's children, a right to increase the Face Amount of the Contract on
certain specified dates or life events without proof of insurability, and a
cost of living insurance adjustment without proof of insurability. LBVIP
may offer additional optional benefits in the future. The cost of any
additional insurance benefits will be deducted as part of the Monthly
Deduction. See "CHARGES AND DEDUCTIONS--Accumulated Value Charges--Monthly
Deduction". The amounts of these benefits do not vary with the investment
experience of the Variable Account. Certain restrictions apply and are
clearly described in the applicable rider. Any LBVIP Representative
authorized to sell the Contract can explain these extra benefits further.
Samples of the provisions are available from LBVIP upon written request.
Any additional insurance benefits purchased will be described in a rider
attached to the Contract. The charge for additional insurance benefits
added by rider will be specified in the Contract or in a supplement to the
Contract. An additional charge will apply for any insurance benefits added
by rider at any time after issuance of the Contract. Cost of insurance
rates for additional term insurance benefits added by spouse rider for
Contracts issued in the state of Montana will be based on unisex rates.
The issuance of a rider providing insurance coverage on the Insured's spouse
will result in an additional Initial Monthly Charge. See "CHARGES AND
DEDUCTIONS--Accumulated Value Charges--Monthly Deduction--Initial Monthly
Charge".
Adding insurance benefits may have Federal income tax consequences. See
"FEDERAL TAX MATTERS--Contract Proceeds."
Charitability for Life
Charitability for Life (SM) is a benefit that enables Contract Owners to
increase their charitable gifts to Lutheran charitable organizations and
congregations. Charitability for Life is available for no additional premium
whenever a Contract Owner has designated a Lutheran charitable organization
or congregation as a beneficiary for at least $1,000 of Death Benefit on his
or her Contract.
Upon the death of the Insured, the Lutheran charitable organization or
congregation will receive the Death Benefit proceeds as designated, and
LBVIP will contribute an additional 10% of that amount to the charitable
organization or congregation, up to $25,000 per insured. Any legally
incorporated nonprofit Lutheran organization that qualifies under Internal
Revenue Code Section 170(c) is eligible to receive Charitability for Life
benefits. The benefit may vary state-by-state and an LBVIP representative
should be consulted as to whether and to what extent the benefit is
available in a particular state and on any particular Contract.
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 due to a condition which usually requires continuous
confinement, for at least 6 consecutive 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 at least
$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 10, 1988
and makes certain changes to the income tax treatment of distributions from
Contracts classified as "modified endowment contracts" under the Code. A
modified endowment contract is any Contract that fails a special premium
limitation test set forth in the Code. This test requires that the
cumulative amount paid during the first seven years since the Date of Issue
(or date of certain increases in coverage) not exceed the cumulative amount
of the level annual premium which, in theory, would provide a paid-up
Contract after seven years. If this test is ever violated, LBVIP will
notify the Contract Owner, who may then take certain timely steps to return
the Contract to non-modified endowment contract status. This premium
limitation test does not supersede the premium limitations previously
established by the Code as discussed under "Premium Limitations" at page 30
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. If certain requirements are satisfied,
however, accelerated death benefits paid under the Accelerated Benefits
Rider to a terminally or chronically ill insured individual, as defined in
the Code, may not be subject to 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". The Code contains a safe harbor provision
which provides that annuity contracts such as the Contract meet the
diversification requirements if, as of the end of each quarter, no more than
fifty-five percent (55%) of the total assets underlying the Variable Account
consist of cash, cash items, U.S. government securities and securities of
other regulated investment companies.
On March 1, 1989, the Treasury Department adopted regulations (Treas. Reg.
1.817-5) which established diversification requirements for the investments
underlying variable contracts such as the Contract. The regulations amplify
the diversification requirements for variable contracts set forth in the
Code and provide an alternative to the safe harbor provision described
above. Under the regulations, the Variable Account will be deemed
adequately diversified if: (1) no more than 55% of the value of the total
assets of the account is represented by any one investment; (2) no more than
70% of the value of the total assets of the account is represented by any
two investments; (3) no more than 80% of the value of the total assets of
the account is represented by any three investments; and (4) no more than
90% of the value of the total assets of the account is represented by any
four investments.
The assets of the Fund are expected to meet the diversification
requirements. LB 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 gender. 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
gender. Any unisex rates to be provided by LBVIP will apply for tax-
qualified plans and those plans where an employer believes that the NORRIS
decision applies. Contracts issued in connection with employment-related
insurance benefit plans may also be subject to different limitations with
respect to the Minimum Face Amount, increases in Face Amount, additional
insurance benefits, and issues ages.
Employers and employee organizations should consider, in consultation with
legal counsel, the impact of NORRIS, and Title VII generally, and any
comparable state laws that may be applicable, on any employment-related
insurance or benefit plan for which a Contract may be purchased.
VOTING RIGHTS
General. As stated above, all of the assets held in the Subaccounts of the
Variable Account will be invested in shares of the corresponding Portfolios
of the Fund. LBVIP is the legal owner of those shares and as such has the
right to vote to elect the Board of Directors of the Fund, to vote upon
certain matters that are required by the 1940 Act to be approved or ratified
by the shareholders of a mutual fund and to vote upon at a shareholders'
meeting. However, LBVIP will, as required by law, vote the shares of the
Fund at regular and special meetings of the shareholders of the Fund in
accordance with instructions received from Contract Owners. If, however,
the 1940 Act or any regulation thereunder should be amended or if the
present interpretation thereof should change, and as a result LBVIP
determines that it is permitted to vote the Fund shares in its own right, it
may elect to do so. The Fund's Bylaws provided that regular meetings of the
shareholders of the Fund may be held on an annual or less frequent basis as
determined by the Board of Directors of the Fund. For a more complete
discussion, see the accompanying prospectus for the Fund.
The number of votes which a Contract Owner has the right to instruct will be
calculated separately for each Subaccount. The number of votes which each
Contract Owner has right to instruct will be determined by dividing a
Contract's Accumulated Value in a Subaccount by the net asset value per
share of the corresponding Portfolio in which the subaccount invests.
Fractional shares will be counted. The number of votes of the Portfolio
which the Contract Owner has right to instruct will be determined as of the
date coincident with the date established by that Portfolio for determining
shareholders eligible to vote at the meeting of the Fund. Voting
instructions will be solicited by written communications prior to such
meeting in accordance with procedures established by the Fund.
Any Portfolio shares held in the Variable Account for which LBVIP does not
receive timely voting instructions, or which are not attributable to
Contract Owners, will be voted by LBVIP in proportion to the instructions
received from all Contract Owners. Any Portfolio shares held by LBVIP or
its affiliates in general accounts will, for voting purposes, be allocated
to all separate accounts of LBVIP and its affiliates having a voting
interest in that Portfolio in proportion to each such separate account's
voting interest in that Portfolio, and will be voted in the same manner as
are such separate account's votes. Voting instructions to abstain on any
item to be voted upon will be applied on a pro rata basis to reduce the
votes eligible to be cast.
Each person having a voting interest in a Subaccount will receive proxy
materials, reports and other materials relating to the appropriate
Portfolio.
Disregard of Voting Instructions. LBVIP may, when required by state
insurance regulatory authorities, disregard voting instructions if the
instructions require that the shares be voted so as to cause a change in the
subclassification or investment objective of the Fund or one or more of its
Portfolios or to approve or disapprove an investment advisory contract for a
Portfolio of the Fund. In addition, LBVIP itself may disregard voting
instructions in favor of changes initiated by a Contract Owner in the
investment policy or the investment adviser of a Portfolio of the Fund if
LBVIP reasonably disapproves of such changes. A change would be disapproved
only if the proposed change is contrary to state law or prohibited by state
regulatory authorities or LBVIP determined that the change would have an
adverse effect on its General Account in that the proposed investment policy
for a Portfolio may result in overly speculative or unsound investments. In
the event LBVIP does disregard voting instructions, a summary of that action
and the reasons for such action will be included in the next annual report
of the Fund to Contract Owners.
<TABLE>
<CAPTION>
DIRECTORS AND OFFICERS OF LBVIP
<S> <C>
Directors
Name Principal Occupation
Robert P. Gandrud President and Chief Executive Officer of Lutheran Brotherhood
Bruce J. Nicholson Executive Vice President and Chief Financial Officer of Lutheran Brotherhood
Rolf F. Bjelland Executive Vice President of Lutheran Brotherhood
Paul R. Ramseth Executive Vice President of Lutheran Brotherhood
William H. Reichwald Executive Vice President of Lutheran Brotherhood
Executive Officers
Robert P. Gandrud President, Chairman and Chief Executive Officer
Bruce J. Nicholson Chief Financial Officer
Rolf F. Bjelland Vice President--Investments
William H. Reichwald Vice President--Marketing (Executive Vice President of Lutheran Brotherhood)
Anita J.T. Young Treasurer (Vice President and Treasurer of Lutheran Brotherhood)
David J. Larson Vice President and Secretary (Senior Vice President,
Secretary and General Counsel of Lutheran Brotherhood)
David J. Christianson Vice President--Insurance Services (Vice President of Lutheran
Brotherhood)
Otis F. Hilbert Vice President and Assistant Secretary (Vice President
and Associate General Counsel of Lutheran Brotherhood)
James R. Olson Vice President (Vice President of Lutheran Brotherhood)
Jerald E. Sourdiff Vice President and Controller (Senior Vice President of Lutheran Brotherhood)
James M. Walline Vice President--Investments (Vice President of Lutheran Brotherhood)
</TABLE>
All of the foregoing directors and executive officers have been employees or
officers of Lutheran Brotherhood for the past five years.
SALES AND OTHER AGREEMENTS
Lutheran Brotherhood Securities Corp., 625 Fourth Avenue South, Minneapolis,
Minnesota 55415 an indirect subsidiary of Lutheran Brotherhood, acts as the
principal underwriter of the Contracts pursuant to a Distribution Agreement to
which LBVIP and the Variable Account are also parties.
Lutheran Brotherhood Securities Corp. is registered with the SEC as a broker-
dealer under the Securities Exchange Act of 1934 and is a member of the
National Association of Securities Dealers, Inc. Lutheran Brotherhood
Securities Corp. is also named as distributor of the stock of The Lutheran
Brotherhood Family of Funds, consisting of the following series: Lutheran
Brotherhood Money Market Fund, Lutheran Brotherhood Opportunity Growth Fund,
Lutheran Brotherhood Fund, Lutheran Brotherhood Income Fund, Lutheran
Brotherhood High Yield Fund, and Lutheran Brotherhood Municipal Bond Fund, all
of which are diversified open-end investment companies.
The Contracts are sold through LBVIP Representatives who are licensed by state
insurance officials to sell the Contracts. These LBVIP Representatives are
also registered representatives of Lutheran Brotherhood Securities Corp. The
Contracts are offered in all states where LBVIP is authorized to sell variable
life insurance.
When an application for a Contract is completed, it is submitted to LBVIP.
Under a service agreement between LBVIP and Lutheran Brotherhood (described
below), Lutheran Brotherhood performs insurance underwriting reviews and
determines whether to accept or reject the application for the Contract and
determines the Insured's premium class.
Under the Distribution Agreement, Lutheran Brotherhood Securities Corp. will
perform suitability review.
Under the Distribution Agreement, LBVIP Representatives receive commissions
and service fees from Lutheran Brotherhood Securities Corp. for selling and
servicing the Contracts. LBVIP reimburses Lutheran Brotherhood Securities
Corp. for such compensation. LBVIP also reimburses Lutheran Brotherhood
Securities Corp. for other expenses incurred in marketing and selling the
Contracts. These include general agent compensation, LBVIP Representatives'
training allowances and agency expense allowances.
Compensation of LBVIP Representatives. LBVIP Representatives selling the
Contracts will receive a 3% service fee of all premiums paid on the Contract.
In addition to the service fee, commissions will be paid to the LBVIP
Representatives based on a commission schedule summarized below. Further,
LBVIP Representatives may be eligible to receive certain benefits based on the
account of earned commissions.
During the first Contract Year, commissions will be not more than 52% 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 52% 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 $500,000
but less than $1,000,000, during the first Contract Year after issue or
following an increase in Face Amount, the commissions will be not more than
42% of the applicable Death Benefit Guarantee Premium. For Contracts with an
initial Face Amount greater than or equal to $1,000,000, during the first
Contract Year after issue or following an increase in Face Amount, the
commissions will be not more than 32% 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 rider or an increase in
the Face Amount of a spouse rider, the commission will be not more than 52% of
the Death Benefit Guarantee Premium for the rider or the increase. In the
second and third year following the addition of a spouse rider or an increase,
commissions will equal, in general, 7% of the Death Benefit Guarantee Premium
for the rider or the increase.
For a spouse rider with an initial Face Amount greater than or equal to
$500,000 but less than $1,000,000, during the first Contract Year after issue
or following an increase in Face Amount, the commissions will be not more than
42% of the applicable Death Benefit Guarantee Premium. For spouse rider with
an initial Face Amount greater than or equal to $1,000,000, during the first
Contract Year after issue or following an increase in Face Amount, the
commissions will be not more than 32% 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 child rider, the commission
will be not more than 52% of the Death Benefit Guarantee Premium for the
increase in Face Amount of the rider. In the second and third year following
the increase, commissions will equal, in general, 7% of the Death Benefit
Guarantee Premium for the rider.
Service Agreement. Lutheran Brotherhood performs certain investment and
administrative duties for LBVIP pursuant to a written agreement. The
agreement is automatically renewed each year, unless either party terminates
it. Under this agreement, LBVIP pays Lutheran Brotherhood for salary costs
and other services and an amount for indirect costs incurred through LBVIP's
use of Lutheran Brotherhood's personnel and facilities.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Variable Account is a party or to
which the assets of the Variable Account are subject. Neither LBVIP nor LBSC
are involved in any litigation that is of material importance in relation to
their total assets or that relates to the Variable Account.
LEGAL MATTERS
All matters of applicable state law pertaining to the Contracts, including
LBVIP's right to issue the Contracts thereunder, have been passed upon by
James M. Odland, counsel for LBVIP.
EXPERTS
The financial statements of the Variable Account and LBVIP included in this
Prospectus have been so included in reliance on the report 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 Kenneth A.
Dahlberg, 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.
<PAGE>
3100 Multifoods Tower
33 South Sixth Street
Minneapolis, MN 55402-3795
Price Waterhouse LLP
[LOGO OMITTED]
Report of Independent Accountants
To Lutheran Brotherhood Variable Insurance
Products Company and Contract Owners of
LBVIP Variable Insurance Account
In our opinion, the accompanying statements 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 the
Opportunity Growth, World Growth, Growth, High Yield, Income, and Money
Market subaccounts of LBVIP Variable Insurance Account at December 31,
1996, the results of each of their operations for the year or period
then ended and the changes in each of their net assets for the periods
indicated, 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
February 5, 1997
<PAGE>
LBVIP Variable Insurance Account
Opportunity Growth Subaccount
Financial Statements
Statement of Assets and Liabilities
December 31, 1996
ASSETS:
Investment in LB Series Fund, Inc. 633,202
shares at net asset value of $11.50 per share
(cost $7,396,725) $ 7,284,718
Receivable from LBVIP for units issued 30,581
-------------
Total assets 7,315,299
-------------
LIABILITIES:
Payable to LBVIP for mortality and expense
risk charge 3,834
-------------
NET ASSETS $ 7,311,465
=============
Number of units outstanding 617,020
=============
Unit Value (net assets divided by units outstanding) $11.85
======
<PAGE>
Statement of Operations
For the period from January 18, 1996
(effective date) to December 31, 1996
INVESTMENT INCOME:
Dividend Income $ 10,217
Mortality and expense risk charge (25,254)
-------------
Net investment loss (15,037)
-------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain on investments 330,441
Net change in unrealized depreciation
of investments (112,007)
-------------
Net gain on investments 218,434
-------------
Net increase in net assets resulting
from operations $ 203,397
=============
Statement of Changes in Net Assets
For the period from
January 18, 1996
(effective date) to
December 31, 1996
------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS --
Net investment loss $ (15,037)
Net realized gain on investments 330,441
Net change in unrealized appreciation or
depreciation of investments (112,007)
-------------
Net increase in net assets resulting from operations 203,397
-------------
UNIT TRANSACTIONS --
Proceeds from units issued 3,072,084
Net asset value of units redeemed (1,101,486)
Transfers from other subaccounts 5,704,090
Transfers to other subaccounts (566,620)
-------------
Net increase in net assets from unit transactions 7,108,068
-------------
Net increase in net assets 7,311,465
NET ASSETS:
Beginning of period --
-------------
End of period $ 7,311,465
=============
The accompanying notes are an integral part of the financial statements.
<PAGE>
LBVIP Variable Insurance Account
World Growth Subaccount
Financial Statements
Statement of Assets and Liabilities
December 31, 1996
ASSETS:
Investment in LB Series Fund, Inc. 423,930
shares at net asset value of $10.95 per share
(cost $4,354,037) $ 4,641,942
Receivable from LBVIP for units issued 28,850
-------------
Total assets 4,670,792
-------------
LIABILITIES:
Payable to LBVIP for mortality and expense
risk charge 2,485
-------------
NET ASSETS $ 4,668,307
=============
Number of units outstanding 425,244
=============
Unit Value (net assets divided by units outstanding) $10.98
======
Statement of Operations
For the period from January 18, 1996
(effective date) to December 31, 1996
INVESTMENT INCOME:
Dividend Income $ 38,201
Mortality and expense risk charge (16,415)
-------------
Net investment income 21,786
-------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain on investments 13,138
Net change in unrealized appreciation
of investments 287,905
-------------
Net gain on investments 301,043
-------------
Net increase in net assets resulting
from operations $ 322,829
=============
Statement of Changes in Net Assets
For the period from
January 18, 1996
(effective date) to
December 31, 1996
------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS --
Net investment income $ 21,786
Net realized gain on investments 13,138
Net change in unrealized appreciation or
depreciation of investments 287,905
-------------
Net increase in net assets resulting from
operations 322,829
-------------
UNIT TRANSACTIONS --
Proceeds from units issued 2,066,890
Net asset value of units redeemed (827,171)
Transfers from other subaccounts 3,362,618
Transfers to other subaccounts (256,859)
-------------
Net increase in net assets from unit transactions 4,345,478
-------------
Net increase in net assets 4,668,307
NET ASSETS:
Beginning of period --
-------------
End of period $4,668,307
=============
The accompanying notes are an integral part of the financial statements.
<PAGE>
LBVIP Variable Insurance Account
Growth Subaccount
Financial Statements
Statement of Assets and Liabilities
December 31, 1996
ASSETS:
Investment in LB Series Fund, Inc. 3,658,976
shares at net asset value of $19.32 per share
(cost $53,817,794) $ 70,704,132
Receivable from LBVIP for units issued 30,440
-------------
Total assets 70,734,572
-------------
LIABILITIES:
Payable to LBVIP for mortality and expense
risk charge 39,640
-------------
NET ASSETS $ 70,694,932
=============
Number of units outstanding 2,248,092
=============
Unit Value (net assets divided by units outstanding) $31.45
======
<PAGE>
Statement of Operations
Year Ended December 31, 1996
INVESTMENT INCOME:
Dividend Income $ 875,031
Mortality and expense risk charge (377,780)
-------------
Net investment income 497,251
-------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain on investments 8,265,078
Net change in unrealized appreciation
of investments 3,663,632
-------------
Net gain on investments 11,928,710
-------------
Net increase in net assets resulting
from operations $ 12,425,961
=============
Statement of Changes in Net Assets
Years Ended December 31, 1996 and 1995
1996 1995
------- -------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS --
Net investment income $ 497,251 $ 428,728
Net realized gain on investments 8,265,078 194,507
Net change in unrealized appreciation
or depreciation of investments 3,663,632 13,265,262
------------- -------------
Net increase in net assets resulting
from operations 12,425,961 13,888,497
------------- -------------
UNIT TRANSACTIONS --
Proceeds from units issued 13,357,943 12,883,198
Net asset value of units redeemed (6,997,719) (5,939,936)
Transfers from other subaccounts 3,910,699 2,029,943
Transfers to other subaccounts (8,867,897) (1,653,365)
------------- -------------
Net increase in net assets from unit
transactions 1,403,026 7,319,840
------------- -------------
Net increase in net assets 13,828,987 21,208,337
NET ASSETS:
Beginning of period 56,865,945 35,657,608
------------- -------------
End of period $ 70,694,932 $56,865,945
============= =============
The accompanying notes are an integral part of the financial statements.
<PAGE>
LBVIP Variable Insurance Account
High Yield Subaccount
Financial Statements
Statement of Assets and Liabilities
December 31, 1996
ASSETS:
Investment in LB Series Fund, Inc. 3,031,263
shares at net asset value of $10.06 per share
(cost $30,324,446) $ 30,480,587
Receivable from LBVIP for units issued 2,042
------------
Total assets 30,482,629
------------
LIABILITIES:
Payable to LBVIP for mortality and expense
risk charge 16,818
------------
NET ASSETS $ 30,465,811
============
Number of units outstanding 1,097,040
============
Unit Value (net assets divided by units outstanding) $27.77
======
Statement of Operations
Year Ended December 31, 1996
INVESTMENT INCOME:
Dividend Income $ 2,803,994
Mortality and expense risk charge (171,834)
------------
Net investment income 2,632,160
------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain on investments 12,638
Net change in unrealized appreciation
of investments 326,982
------------
Net gain on investments 339,620
------------
Net increase in net assets resulting
from operations $ 2,971,780
============
Statement of Changes in Net Assets
Years Ended December 31, 1996 and 1995
1996 1995
------- -------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS --
Net investment income $ 2,632,160 $ 2,215,581
Net realized gain (loss) on investments 12,638 (35,895)
Net change in unrealized appreciation
or depreciation of investments 326,982 1,855,415
------------ ------------
Net increase in net assets resulting
from operations 2,971,780 4,035,101
------------ ------------
UNIT TRANSACTIONS --
Proceeds from units issued 5,637,311 5,870,513
Net asset value of units redeemed (3,111,396) (3,001,072)
Transfers from other subaccounts 1,914,400 961,670
Transfers to other subaccounts (3,900,814) (1,121,153)
------------ ------------
Net increase in net assets from
unit transactions 539,501 2,709,958
------------ ------------
Net increase in net assets 3,511,281 6,745,059
NET ASSETS:
Beginning of period 26,954,530 20,209,471
------------ ------------
End of period $ 30,465,811 $ 26,954,530
============ ============
The accompanying notes are an integral part of the financial statements.
<PAGE>
LBVIP Variable Insurance Account
Income Subaccount
Financial Statements
Statement of Assets and Liabilities
December 31, 1996
ASSETS:
Investment in LB Series Fund, Inc. 1,582,923
shares at net asset value of $9.75 per share
(cost $15,562,875) $ 15,432,428
------------
LIABILITIES:
Payable to LBVIP for units redeemed 3,403
Payable to LBVIP for mortality and expense
risk charge 8,638
------------
Total liabilities 12,041
------------
NET ASSETS $ 15,420,387
============
Number of units outstanding 727,197
============
Unit Value (net assets divided by units outstanding) $21.21
======
Statement of Operations
Year Ended December 31, 1996
INVESTMENT INCOME:
Dividend Income $ 999,882
Mortality and expense risk charge (91,903)
------------
Net investment income 907,979
------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized loss on investments (32,608)
Net change in unrealized depreciation
of investments (488,846)
------------
Net loss on investments (521,454)
------------
Net increase in net assets resulting
from operations $ 386,525
============
<PAGE>
Statement of Changes in Net Assets
Years Ended December 31, 1996 and 1995
1996 1995
------- -------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS --
Net investment income $ 907,979 $ 881,591
Net realized loss on investments (32,608) (28,562)
Net change in unrealized appreciation
or depreciationof investments (488,846) 1,556,511
------------ -----------
Net increase in net assets resulting
from operations 386,525 2,409,540
------------ -----------
UNIT TRANSACTIONS --
Proceeds from units issued 2,689,600 2,965,163
Net asset value of units redeemed (1,656,820) (1,859,848)
Transfers from other subaccounts 548,400 340,287
Transfers to other subaccounts (2,358,320) (746,287)
------------ -----------
Net change in net assets from unit
transactions (777,140) 699,315
------------ -----------
Net change in net assets (390,615) 3,108,855
NET ASSETS:
Beginning of period 15,811,002 12,702,147
------------ -----------
End of period $ 15,420,387 $15,811,002
============ ===========
The accompanying notes are an integral part of the financial statements.
<PAGE>
LBVIP Variable Insurance Account
Money Market Subaccount
Financial Statements
Statement of Assets and Liabilities
December 31, 1996
ASSETS:
Investment in LB Series Fund, Inc. 2,305,621
shares at net asset value of $1.00 per share
(cost $2,305,621) $ 2,305,621
Receivable from LBVIP for units issued 1,612
------------
Total assets 2,307,233
------------
LIABILITIES:
Payable to LBVIP for mortality and expense
risk charge 1,320
------------
NET ASSETS $ 2,305,913
============
Number of units outstanding 1,389,007
============
Unit Value (net assets divided by units outstanding) $ 1.66
======
Statement of Operations
Year Ended December 31, 1996
INVESTMENT INCOME:
Dividend Income $ 112,119
Mortality and expense risk charge (13,313)
------------
Net investment income $ 98,806
============
Statement of Changes in Net Assets
Years Ended December 31, 1996 and 1995
1996 1995
------- -------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS --
Net investment income $ 98,806 $ 84,942
------------ ------------
UNIT TRANSACTIONS --
Proceeds from units issued 876,398 771,778
Net asset value of units redeemed (973,280) (710,056)
Transfers from other subaccounts 1,762,829 1,112,971
Transfers to other subaccounts (1,252,526) (924,066)
------------ ------------
Net increase in net assets from unit
transactions 413,421 250,627
------------ ------------
Net increase in net assets 512,227 335,569
NET ASSETS:
Beginning of period 1,793,686 1,458,117
------------ ------------
End of period $2,305,913 $1,793,686
============ ============
The accompanying notes are an integral part of the financial statements.
<PAGE>
LBVIP Variable Insurance Account
Notes to Financial Statements
December 31, 1996
(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 six subaccounts--Opportunity
Growth, World Growth, 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.
The Opportunity Growth and World Growth Subaccount's registration was
declared effective by the Securities Exchange Commission and began
operations as separate subaccounts of the Variable Account on January
18, 1996. On January 18, 1996, LBVIP invested $500,000 in each of the
Opportunity Growth and World Growth Subaccounts and acquired 50,000
units in each subaccount.
(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 $1,471,047 and $1,242,875 in 1996 and 1995, 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 $7,790,993 and $6,896,936 in 1996
and 1995, 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 $696,499 and $515,776 were
deducted in 1996 and 1995, 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 $415,474 and $409,685 were deducted in 1996 and
1995, respectively.
<PAGE>
<TABLE>
<CAPTION>
(4) UNIT ACTIVITY
Transactions in units (including transfers among subaccounts) were as follows:
Subaccounts
-------------------------------------------------------------------------------
Opportunity World High Money
Growth Growth Growth Yield Income Market
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Units outstanding at
December 31, 1994 N/A N/A 1,883,077 960,109 729,752 965,173
Units issued N/A N/A 710,227 323,486 189,825 1,133,300
Units redeemed. N/A N/A (392,715) (206,661) (154,120) (968,628)
----------- ----------- ----------- ----------- ----------- -----------
Units outstanding at
December 31, 1995 N/A N/A 2,200,589 1,076,934 765,457 1,129,845
Units issued 715,879 489,251 667,271 311,345 172,194 1,575,569
Units redeemed. (98,859) (64,007) (619,768) (291,239) (210,454) (1,316,407)
----------- ----------- ----------- ----------- ----------- -----------
Units outstanding at
December 31, 1996 617,020 425,244 2,248,092 1,097,040 727,197 1,389,007
=========== =========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
(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
-------------------------------------------------------------------------------
Opportunity World High Money
Growth Growth Growth Yield Income Market
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
For the year ended
December 31, 1995
Purchases N/A N/A $8,994,515 $5,805,846 $2,474,794 $1,357,387
Sales N/A N/A 1,343,120 974,314 899,536 1,024,921
For the year ended
December 31, 1996
Purchases $8,014,007 $4,900,553 13,926,976 5,454,122 1,916,472 1,845,655
Sales 705,723 559,655 4,541,768 2,165,707 1,756,895 1,330,800
</TABLE>
<PAGE>
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.
<PAGE>
3100 Multifoods Tower Telephone 612 332 7000
33 South Sixth Street Facsimile 612 332 6711
Minneapolis, MN 55402-3795
Price Waterhouse LLP [LOGO]
REPORT OF INDEPENDENT ACCOUNTANTS
March 14, 1997
To The Board of Directors and Stockholder
of Lutheran Brotherhood Variable
Insurance Products Company
In our opinion, the accompanying balance sheet and the related statements of
income, 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) and its subsidiaries at December
31, 1996 and 1995, and the results of their operations and their cash flows
for each of the three years in the period ended December 31, 1996 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
Price Waterhouse
<PAGE>
LUTHERAN BROTHERHOOD VARIALE INSURANCE PRODUCTS COMPANY
BALANCE SHEET
DECEMBER 31, 1996 AND 1995
(in thousands)
ASSETS 1996 1995
------ ---- ----
Investments:
Fixed income securities available for sale,
at fair value $ 170,500 $ 146,256
Loans to contract holders 4,322 2,689
--------- ---------
Total investments 174,822 148,945
Cash and cash equivalents 18,535 25,362
Deferred policy acquisition costs 144,493 122,605
Investment income due and accrued 2,001 2,536
Other assets 4,881 6,052
Separate account assets 2,903,551 2,348,212
---------- ----------
Total assets $3,248,283 $2,653,712
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
------------------------------------
Liabilities:
Contract reserves $ 180,092 $ 163,785
Benefits in the process of payment 5,166 3,621
Other liabilities 14,972 6,257
Separate account liabilities 2,903,551 2,348,212
---------- ----------
Total liabilities 3,103,781 2,521,875
========== ==========
Stockholder's equity:
2,000,000 shares authorized,
issued and outstanding 2,000 2,000
Additional paid-in capital 118,800 118,800
Net unrealized gains 292 1,955
Retained earnings 23,410 9,08
---------- ----------
Total stockholder's equity 144,502 131,837
---------- ----------
Total liabilities and
stockholder's equity $3,248,283 $2,653,712
========== ==========
The accompanying notes are an
integral part of these financial statements.
<PAGE>
LUTHERAN BROTHERHOOD VARIABLE INSURANCE PRODUCTS COMPANY
STATEMENT OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(in thousands)
1996 1995 1994
---- ---- ----
Revenues:
Net investment income $11,402 $10,666 $ 3,467
Net realized investment gains 2,751 49 7
Contract charges 39,326 32,664 28,585
Other income 2,374 1,106 195
------- ------- -------
Total revenues 55,853 44,485 32,254
Benefits and other deductions:
Net additions to contract reserves 2,567 275 1,262
Contractholder benefits 11,763 10,241 4,363
Commissions 16,960 11,395 21,323
Operating expenses 18,513 15,310 28,167
Increase in deferred policy
acquisition costs (15,757) (13,599) (22,274)
------- ------- -------
Total benefits and other
deductions 34,046 23,622 32,841
------- ------- -------
Income (loss) from operations before
income taxes 21,807 20,863 (587)
Provision for income taxes 7,479 3,722 -
------- ------- -------
Net income (loss) $14,328 $17,141 $ (587)
======= ======= =======
The accompanying notes are an
integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD VARIABLE INSURANCE PRODUCTS COMPANY
STATEMENT OF STOCKHOLDER'S EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(in thousands)
Additional Unrealized Retained Total
Common Paid-in Gains Earnings Stockholder's
Stock Capital (Losses) (Deficit) Equity
------ ---------- ---------- --------- -------------
<S> <C> <C> <C> <C> <C>
Statutory unassigned surplus
December 31, 1993 $ 64,747
Cumulative effect of change in
accounting principles 49,008
Balance at January 1, 1994 $2,000 $118,800 $ 427 $(7,472) 113,755
1994 transactions:
Net loss (587) (587)
Unrealized losses (460) (460)
------ -------- ------- ------- --------
Balance at December 31, 1994 2,000 118,800 (33) (8,059) 112,708
1995 transactions:
Net income 17,141 17,141
Unrealized gains 1,988 1,988
------ -------- ------- ------- --------
Balance at December 31, 1995 2,000 118,800 1,955 9,082 131,837
1996 transactions:
Net income 14,328 14,328
Unrealized losses (1,663) (1,663)
------ -------- ------- ------- --------
Balance at December 31, 1996 $2,000 $118,800 $ 292 $23,410 $144,502
====== ======== ======= ======= ========
</TABLE>
The accompanying notes are an
integral part of these financial statements.
<PAGE>
LUTHERAN BROTHERHOOD VARIABLE INSURANCE PRODUCTS COMPANY
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(in thousands)
1996 1995 1994
---- ---- ----
Cash flows from operating activities:
Net income (loss) $ 14,328 $ 17,141 $ (587)
Adjustments to reconcile net
income to net cash provided
by operating activities:
Deferred policy acquisition costs (15,757) (13,599) (22,274)
Realized net investment gains (2,751) (49) (7)
Change in operating assets and
liabilities:
Loans to contract holders (1,633) (1,009) (684)
Other assets 1,705 (4,321) 65
Contract reserves 16,307 55,765 77,790
Other liabilities 9,572 2,047 (10,178)
Increase in benefits in process
of payment 1,545 147 1,794
Bond amortization 59 22 275
------- ------- -------
Net cash provided by operating
activities 23,375 56,144 46,194
------- ------- -------
Cash flows from investing activities:
Proceeds from sale of fixed income
securities available for sale 63,535 2,911 4,103
Purchase of fixed income securities
available for sale (93,737) (54,411) (59,749)
------ ------ ------
Net cash (used in) investing
activities (30,202) (51,500) (55,646)
------ ------ ------
Net (decrease) increase in cash and
cash equivalents (6,827) 4,644 (9,452)
Cash and cash equivalents, beginning
of year 25,362 20,718 30,170
------- ------- -------
Cash and cash equivalents, end of year $18,535 $25,362 $20,718
======= ======= =======
The accompanying notes are an
integral part of these financial statements.
<PAGE>
LUTHERAN BROTHERHOOD VARIABLE INSURANCE PRODUCTS COMPANY
NOTES TO FINANCIAL STATEMENTS
(in millions unless otherwise stated)
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.
Basis of Presentation - New Accounting Pronouncements
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 new definition of generally accepted accounting principles
("GAAP") for mutual and fraternal life insurers. Under the interpretation,
financial statements 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.
Accordingly, as a wholly owned stock subsidiary of a fraternal life insurer,
the Company has adopted the accounting changes required in order to continue
to present its financial statements in conformity with generally accepted
accounting principles. The effect of the changes is reported retroactively
through restatement of all previously issued financial statements beginning
with the 1994 amounts. The effect on the December 31, 1993 financial
position is included in Stockholder's Equity at January 1, 1994.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ---------------------------------------------------
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain estimates
and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, money market instruments and
other debt issues with an original maturity of 90 days or less.
Investments
See disclosures regarding the determination of fair value of financial
instruments at Note 10.
Carrying value of investments is determined as follows:
Fixed income securities Fair value
Loans to contractholders Amortized cost
Fixed income securities which may be sold prior to maturity are classified
as available for sale.
Realized investment gains and losses on sales of securities are determined
on a first in, first out method for fixed income securities and are reported
in the Statement of Income. Unrealized investment gains and losses on fixed
income securities classified as available for sale, net of the impact of
unrealized investment gains and losses on deferred policy acquisitions
costs, are excluded from net income and reported in a separate component of
stockholder's equity.
Deferred Policy Acquisition Costs
Those costs of acquiring new business, which vary with and are primarily
related to the production of new business, have been deferred to the extent
that such costs are deemed recoverable from future profits. Such costs
include commissions, certain costs of contract issuance and underwriting,
and certain variable agency expenses.
For universal life-type and investment-type contracts, deferred acquisition
costs are amortized in proportion to estimated gross profits from mortality,
investment, and expense margins. The effects of revisions to experience on
previous amortization of deferred acquisition costs are reflected in
earnings and change in unrealized investment gains (losses) in the period
estimated gross profits are revised.
Separate Accounts
Separate account assets include segregated funds invested by the Company for
the benefit of variable life insurance and variable annuity contract owners.
The assets (principally investments) and liabilities (principally to
contractholders) of each account are clearly identifiable and
distinguishable from other assets and liabilities of the Company. Assets
are valued at market. The investment income, gains and losses of these
accounts generally accrue to the contractholders, and, therefore, are not
included in the Company's consolidated net income.
Future Contract Benefits
Liabilities for future contract and contract benefits on universal life-type
and investment-type contracts are based on the contract account balance.
Premium Revenue and Benefits to Contractholders
Recognition of Universal Life-Type Contracts Revenue and Benefits to
Contractholders
Universal life-type contracts are insurance contracts with terms that are
not fixed and guaranteed. The terms that may be changed could include one
or more of the amounts assessed the contractholder, premiums paid by the
contractholder or interest accrued to contractholder balances. Amounts
received as payments for such contracts are not reported as premium
revenues.
Revenues for universal-type contracts consist of investment income, charges
assessed against contract account values for deferred contract loading, the
cost of insurance and contract administration. Contract benefits and claims
that are charged to expense include interest credited to contracts and
benefit claims incurred in the period in excess of related contract account
balances.
Recognition of Investment Contract Revenue and Benefits to Contractholders
Contracts that do not subject the Company to risks arising from
contractholder mortality or morbidity are referred to as investment
contracts. Certain deferred annuities are considered investment contracts.
Amounts received as payments for such contracts are not reported as premium
revenues.
Revenues for investment products consist of investment income and contract
administration charges. Contract benefits that are charged to expense
include benefit claims incurred in the period in excess of related contract
balances, and interest credited to contract balances.
NOTE 3 - 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. Federal income taxes are charged or credited to operations based on
amounts estimated to be payable or recoverable as a result of taxable
operations for the current year. Deferred income tax assets and liabilities
are recognized based on the temporary differences between financial
statement carrying amounts and income tax bases of assets and liabilities
using enacted income tax rates and laws.
The 1996 and 1995 provisions for income taxes reflected on the Statement of
Income consisted entirely of deferred federal and state income tax expense.
Net deferred income tax liabilities are included on the balance sheet in
"Other Liabilities" and consist of the following:
1996 1995
---- ----
Deferred policy acquisition costs $ (43.6) $ (36.1)
Reserves for future benefits 26.9 25.2
Net operating loss carryforwards 9.4 14.1
Other (3.7) (7.2)
--------- ---------
Net deferred income tax liability $ (11.0) $ (4.0)
========= =========
During 1996, the Company utilized $14.5 million of its net operating loss
carryforward and $13.0 million of its alternative minimum tax net operating
loss carryforward. The Company has net operating loss carryforwards for tax
purposes of approximately $26.9 million at December 31, 1996, which expire
between 2005 and 2009. For alternative minimum tax calculation purposes,
the Company has net operating loss carryforwards of $27.9 million at
December 31, 1996, which expire between 2005 and 2009.
NOTE 4 - INVESTMENTS
- --------------------
Fixed Income Securities
Investments in fixed income securities are primarily intended to back long-
term liabilities; therefore, care should be exercised in drawing any
conclusions from market value information.
Investments in fixed income securities at December 31, 1996 and 1995 follow:
Available for Sale (Carried at Fair Value)
December 31, 1996
------------------------------------------
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- -----
Fixed income securities:
U.S. government $ 96,080 $ 2,128 $ 715 $ 97,493
Mortgage-backed securities 29,718 - 292 29,426
All other corporate bonds 43,909 53 381 43,581
-------- -------- ------- --------
Total available for sale $169,707 $ 2,181 $ 1,388 $170,500
======== ======== ======= ========
Available for Sale (Carried at Fair Value)
December 31, 1995
------------------------------------------
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- -----
Fixed income securities:
U.S. government $123,962 $ 8,595 $ - $132,557
Mortgage-backed securities 1,251 13 - 1,264
All other corporate bonds 11,598 837 - 12,435
-------- -------- ------- --------
Total available for sale $136,811 $ 9,445 $ - $146,256
======== ======== ======= ========
Contractual Maturity of Fixed Income Securities
The amortized cost and fair value of fixed income securities available for
sale as of December 31, 1996 are shown below by contractual maturity.
Actual maturities may differ from contractual maturities because securities
may be restructured, called or prepaid.
Amortized Fair
Due to Maturity Cost Value
- --------------- --------- ---------
One year or less $ 11,959 $ 12,041
After one year through five years 53,924 55,655
After five years through ten years 46,378 45,744
After ten years 27,728 27,634
Mortgage-backed securities 29,718 29,426
-------- --------
Total available for sale $169,707 $170,500
======== ========
NOTE 5 - INVESTMENT INCOME AND REALIZED GAINS AND LOSSES
- --------------------------------------------------------
Investment income summarized by type of investment was as follows:
1996 1995 1994
---- ---- ----
Fixed income securities $ 9,061 $ 8,582 $ 2,322
Contract loans 267 165 100
Cash and cash equivalents 2,093 1,940 1,054
------- ------- -------
Gross investment income 11,421 10,687 3,476
Investment expenses 19 21 9
------- ------- -------
Net investment income $11,402 $10,666 $ 3,467
======= ======= =======
Gross realized investment gains and losses on sales of all types of
investments are as follows:
Year Ended December 31,
-------------------------
1996 1995 1994
---- ---- ----
Fixed income securities:
Realized gains $2,913 $ 57 $ 9
Realized losses 160 2 -
Other investments:
Realized gains 1 - -
Realized losses 3 6 2
------ ------ -------
Total net realized investment gains $2,751 $ 49 $ 7
====== ====== =======
NOTE 6 - STATUTORY DEPOSIT
- --------------------------
Bonds with a carrying value of $2.2 million and $2.1 million and a market
value of $2.3 million and $2.2 million at December 31, 1996 and 1995,
respectively, are on deposit with various state insurance departments as
required by law.
NOTE 7 - 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, 1996 and 1995 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 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:
1996 1995 1994
Rate Charges Charges Charges
---- ------- ------- -------
Variable Insurance Account .06% $ 696 $ 516 $ 375
Variable Insurance Account II 2.3% 52 48 45
Variable Annuity Account I 1.1% 27,568 21,891 18,983
------- ------- -------
$28,316 $22,455 $19,403
======= ======= =======
Income from these charges is included in the Statement of Income.
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:
1996 1995 1994
---- ---- ----
Variable Insurance Account $8,206 $7,307 $6,284
Variable Insurance Account II - - 20
Variable Annuity Account I 1,569 1,861 1,438
------ ------ ------
$9,775 $9,168 $7,742
====== ====== ======
NOTE 8 - RELATED PARTY TRANSACTIONS
- -----------------------------------
Lutheran Brotherhood provides administrative services to and collects
premiums for the Company. The net payable at December 31, 1996 represents
the unpaid balance of these administrative services net of the premiums
collected but not transferred to the Company.
Lutheran Brotherhood allocated approximately $12.8 million, $13.6 million
and $22.6 million of operating expenses to the Company in 1996, 1995 and
1994, 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 capital requirements, if
necessary.
Payables to affiliates includes the following:
1996 1995
---- ----
Lutheran Brotherhood:
Operating expenses payable $ 1,523 $ -
Premium income (1,264) -
Lutheran Brotherhood Securities Corp.:
Operating expenses payable 11 39
------- ------
$ 270 $ 39
======= ======
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, 1996 and 1995.
LBSC allocated $0.3 million, $0.4 million and 0.4 million of operating
expenses to the Company in 1996, 1995 and 1994, respectively, which includes
the costs for various administrative and operating functions. In addition,
LBSC, as principal underwriter of the Company's variable products, received
commission income from the Company of approximately $16.9 million
$11.5 million and $20.6 million in 1996, 1995 and 1994, respectively.
NOTE 9 - COMMITMENTS AND CONTINGENCIES
- --------------------------------------
IRS Audit
The consolidated federal income tax returns of LBFC and subsidiaries (the
Company is included in the return) for the years 1993 through 1995 are under
examination by the Internal Revenue Service. Discussions are being held
with the Service regarding several proposed adjustments relating to the
examination of returns for the years 1990 through 1992. Management is
unable to estimate the impact of the resolution of the examinations to the
Company; however, the impact is not anticipated to have a material effect on
stockholder's equity or net income.
NOTE 10 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
- ---------------------------------------------------------------
The following methods and assumptions were used in estimating fair value
disclosures for financial instruments. In cases where quoted market prices
are not available, fair values are based on estimates using present value or
other valuation techniques. Those techniques are significantly affected by
the assumptions used, including the discount rate and estimates of future
cash flows. In that regard, the derived fair value estimates cannot be
substantiated by comparison to independent markets and, in many cases, could
not be realized in immediate settlement of the instrument.
The following methods and assumptions were used in estimating its fair value
disclosures for financial instruments.
Fixed Income Securities: Fair values for fixed income securities are based
on quoted market prices, where available. For fixed maturities not actively
traded in the market, fair values are estimated using market quotes from
brokers or internally developed pricing methods.
Loans on Insurance Contracts: The carrying amount reported in the balance
sheet approximates fair value since loans on insurance contracts reduce the
amount payable at death or at surrender of the contract.
Cash and Cash Equivalents: The carrying amounts for these assets
approximate the assets' fair values.
Other Financial Instruments Reported as Assets: The carrying amounts for
these financial instruments (primarily premiums and other accounts
receivable and accrued investment income), approximate those assets' fair
values.
Investment Contract Liabilities: The fair value for deferred annuities was
estimated to be the amount payable on demand at the reporting date as those
investment contracts have no defined maturity and are similar to a deposit
liability. The amount payable at the reporting date was calculated as the
account balance less applicable surrender charges.
The fair values for supplementary contracts without life contingencies and
immediate annuities were estimated using discounted cash flow analyses using
similar maturities or by using cash surrender value.
The carrying amounts and estimated fair values of the Company's financial
instruments are as follows:
<TABLE>
<CAPTION>
1996 1995
----------------------- -----------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- ----- -------- -----
<S> <C> <C> <C> <C>
Financial instruments recorded as assets:
Fixed income securities $ 170,500 $ 170,500 $ 146,256 $ 146,256
Contract loans 4,322 4,322 2,689 2,689
Cash and cash equivalents 18,535 18,535 25,362 25,362
Other financial instruments recorded
as assets 6,882 6,882 8,588 8,588
Financial instruments recorded as liabilities:
Investment contracts:
Deferred annuities 2,876,818 2,804,151 2,371,539 2,295,805
Supplementary contracts and
immediate annuities 22,258 22,258 8,405 8,405
</TABLE>
NOTE 11 - STATUTORY FINANCIAL INFORMATION
- -----------------------------------------
Accounting practices used to prepare statutory financial statements for
regulatory filing of fraternal life insurance companies differ from GAAP.
The following reconciles the Company's statutory net change in surplus and
statutory surplus determined in accordance with accounting practices
prescribed or permitted by the Insurance Department of the State of
Minnesota with net income and stockholder's equity on a GAAP basis.
Year Ended
December 31,
--------------
1996 1995
---- ----
Net change in statutory surplus $ 13,316 $ 18,300
Change in asset valuation reserves 176 10
-------- --------
Net change in statutory surplus and asset
valuation reserves 13,492 18,310
Adjustments:
Future contract benefits and contractholders'
account balances (4,232) (10,298)
Deferred policy acquisition costs 15,756 13,599
Investment losses 2,465 (19)
Other, net (13,153) (4,451)
-------- --------
Net income $ 14,328 $ 17,141
======== ========
Year Ended
December 31,
------------
1996 1995
---- ----
Statutory surplus $ 76,941 $ 63,625
Asset valuation reserves 299 123
-------- --------
Statutory surplus and asset valuation reserves 77,240 63,748
Adjustments:
Future contract benefits and contractholders'
account balances (65,798) (59,218)
Deferred policy acquisition costs 144,843 129,861
Interest maintenance reserves 2,714 248
Valuation of investments 792 9,444
Unearned revenue liability (3,801) (2,940)
Tax adjustment (11,351) (4,729)
Other, net (137) (4,577)
-------- --------
Stockholder's equity $144,502 $131,837
======== ========
<PAGE>
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 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-8 illustrate a Contract issued to a male age 35, in the non-
tobacco preferred 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 tobacco user 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 shows the Accumulated Value of the premiums
paid at a 5% interest rate. The third and sixth columns illustrate the Death
Benefit of a Contract over the designated period. The fourth and seventh
columns illustrate the Accumulated Value of the Contract over the designated
period. (The Accumulated Value is the total amount held under a Contract at
any time.) The fifth and eighth columns illustrate the Cash Surrender Value
of a Contract over the designated period. (The Cash Surrender Value is equal
to the Accumulated Value less any Decrease Charge, Contract Debt (assumed to
be 0 in these illustrations) and unpaid Monthly Deductions (also assumed to
be 0 in these illustrations).) The sixth through the eighth columns assume
that throughout the life of the Contract, the monthly charge for the cost of
insurance is based on the current cost of insurance rates and the current
Mortality and Expense Risk Charge. The third through the fifth columns
assume that the Mortality and Expense Risk Charge and also that the monthly
charge for the cost of insurance are based on the maximum level permitted
under the Contract. These maximum allowable cost of insurance rates are
based on the 1980 Commissioners Standard Ordinary Mortality Table.
Because the Death Benefit values vary depending on the Death Benefit Option
in effect, Option A and Option B are illustrated separately. (Option A
provides for a Death Benefit equal to the greater of (a) the Face Amount
plus the Accumulated Value and (b) the applicable percentage of Accumulated
Value and Option B provides for a Death Benefit equal to the greater of (a)
the Face Amount and (b) the applicable percentage of Accumulated Value.)
Any amounts held in the Loan Account would not participate in the investment
experience illustrated in these tables. Instead, such amounts will be
credited with interest as described in the Prospectus in the section
entitled, "CONTRACT RIGHTS--Loan Privileges".
The amounts shown for Death Benefits, Accumulated Values and Cash Surrender
Values reflect the fact that the net investment return of the Subaccounts of
the Variable Account is lower than the gross, after-tax return on the assets
held in the Fund as a result of the advisory fee paid by the Fund and
charges made against the Subaccounts. The values shown take into account the
following fees and charges: the daily investment advisory fee paid by the
Fund, which is assumed to be equivalent to an annual rate of .48% of the
aggregate average daily net assets of the Fund, based on the following fees:
Growth (0.40%); High Yield (0.40%); Income (0.40%); Money Market (0.40%);
Opportunity Growth (0.40%); and World Growth (0.85%); and the daily charge
to each Subaccount for assuming mortality and expense risks, which is
equivalent to a charge at an annual current rate of .60% of the average
assets of the Subaccounts and which is guaranteed never to exceed an annual
rate of .75%. After deduction of these amounts, the illustrated gross annual
investment rates of return 0%, 6% and 12% correspond to (a) net annual rates
of -1.23%, 4.77% and 10.77%, respectively, assuming an advisory fee of .48%
and a Mortality and Expense Risk Charge of .75% and (b) net annual rates of
- -1.08%, 4.92% and 10.92%, respectively, assuming an advisory fee of .48% and
a Mortality and Expense Risk Charge of .60%.
The amounts shown for Death Benefits, Accumulated Values and Cash Surrender
Values do not reflect a deduction for operating expenses of the Fund, other
than the investment advisory fee, because LBVIP and LB have agreed to
reimburse the Fund for these operating expenses pursuant to a separate
written agreement (the "Expense Reimbursement Agreement"). For the fiscal
year of the Fund ended December 31, 1996, the Fund was reimbursed
approximately $2,589,413 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.
Upon request, LBVIP will provide a comparable illustration based upon the
proposed Insured's age, gender (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 gender.
See Appendix D for Illustrations of Death Benefits, Accumulated Values and
Cash Surrender Values on VUL 1 contracts.
<PAGE>
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD VARIABLE INSURANCE PRODUCTS COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Male Issue Age: 35; Preferred, $ 1,000.00 Annual Premium, $100,000 Face Amount
Option A--Varying Death Benefit Option
Assumed Hypothetical Gross Annual Investment Rate of Return: 0%
[1] [2] [3] [4] [5] [6] [7] [8]
Premiums Assuming Guaranteed Costs (1)(2) Assuming Current Costs (1)(2)
Accumul. -------------------------------- --------------------------------
End of at 5% Cash Cash
Cont. Interest Death Accumulated Surrender Death Accumulated Surrender
Year Per Year Benefit Value Value Benefit Value Value
------ -------- ------- ----------- --------- ------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 1,050 100,605 605 0 * 100,629 629 0 *
2 2,152 101,192 1,192 241 101,251 1,251 300
3 3,310 101,760 1,760 870 101,855 1,855 964
4 4,525 102,311 2,311 1,481 102,452 2,452 1,621
5 5,801 102,844 2,245 2,074 103,031 3,031 2,260
6 7,142 103,359 3,359 2,666 103,603 3,603 2,910
7 8,549 103,845 3,845 3,229 104,170 4,170 3,553
8 10,026 104,314 4,314 3,775 104,718 4,718 4,179
9 11,577 104,754 4,754 4,292 105,261 5,261 4,799
10 13,206 105,166 5,166 4,780 105,786 5,786 5,400
11 14,917 105,537 5,537 5,229 106,293 6,293 5,985
12 16,712 105,869 5,869 5,638 106,771 6,771 6,650
13 18,598 106,173 6,173 6,019 107,220 7,220 7,066
14 20,578 106,439 6,439 6,362 107,641 7,641 7,564
15 22,657 106,666 6,666 6,666 108,033 8,033 8,033
16 24,840 106,914 6,914 6,914 108,457 8,457 8,457
17 27,132 107,113 7,113 7,113 108,829 8,829 8,829
18 29,539 107,250 7,250 7,250 109,149 9,149 9,149
19 32,065 107,326 7,326 7,326 109,418 9,418 9,418
20 34,719 107,330 7,330 7,330 109,649 9,649 9,649
Age
60 50,113 106,106 6,106 6,106 110,087 10,087 10,087
65 69,760 101,824 1,824 1,824 108,894 8,894 5,060
70 94,836 100,000 0 0 * 105,060 0 0 *
75 126,839 100,000 0 0 * 100,000 0 0 *
</TABLE>
(1) Assumes a $1,000.00 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 $1,000.00 premium illustrated is
greater than the Death Benefit Guarantee Premium for this Contract.
The hypothetical investment results are illustrative only, and should not be
deemed a representation of past or future investment results. Actual
investment results may be more or less than those shown, and will depend on a
number of factors, including the investment allocations by a Contract Owner,
and the different investment returns for the Fund. The Death Benefit,
Accumulated Value and Cash Surrender Value for a Contract would be different
from those shown above if the actual investment results applicable to the
Contract average 0% over a period of years, but also fluctuated above or below
the average for individual Contract Years. No representation can be made by
us or by the Fund that these hypothetical returns can be achieved for any one
year, or sustained over any one year, or sustained over any period of time.
<PAGE>
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD VARIABLE INSURANCE PRODUCTS COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Male Issue Age: 35; Preferred, $1,000.00 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 1,050 100,000 606 0 * 100,000 630 0 *
2 2,152 100,000 1,195 245 100,000 1,254 303
3 3,310 100,000 1,767 877 100,000 1,860 970
4 4,525 100,000 2,323 1,492 100,000 2,461 1,631
5 5,801 100,000 2,862 2,091 100,000 3,045 2,275
6 7,142 100,000 3,385 2,691 100,000 3,623 2,930
7 8,549 100,000 3,880 3,264 100,000 4,196 3,580
8 10,026 100,000 4,360 3,821 100,000 4,753 4,213
9 11,577 100,000 4,813 4,351 100,000 5,304 4,842
10 13,206 100,000 5,240 4,855 100,000 5,839 5,454
11 14,917 100,000 5,631 5,323 100,000 6,359 6,050
12 16,712 100,000 5,985 5,753 100,000 6,851 6,620
13 18,598 100,000 6,314 6,160 100,000 7,317 7,163
14 20,578 100,000 6,608 6,531 100,000 7,758 7,681
15 22,657 100,000 6,866 6,866 100,000 8,173 8,173
16 24,840 100,000 7,150 7,150 100,000 8,623 8,623
17 27,132 100,000 7,388 7,388 100,000 9,026 9,026
18 29,539 100,000 7,571 7,571 100,000 9,383 9,383
19 32,065 100,000 7,697 7,697 100,000 9,695 9,695
20 34,719 100,000 7,758 7,758 100,000 9,973 9,973
Age
60 50,113 100,000 6,899 6,899 100,000 10,730 10,730
65 69,760 100,000 3,025 3,205 100,000 10,017 10,017
70 94,836 100,000 0 0 * 100,000 6,794 6,794
75 126,839 100,000 0 0 * 100,000 0 0 *
</TABLE>
(1) Assumes a $1,000.00 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 $1,000.00 premium illustrated is greater
than the Death Benefit Guarantee Premium for this Contract.
The hypothetical investment results are illustrative only, and should not be
deemed a representation of past or future investment results. Actual
investment results may be more or less than those shown, and will depend on a
number of factors, including the investment allocations by a Contract Owner,
and the different investment returns for the Fund. The Death Benefit,
Accumulated Value and Cash Surrender Value for a Contract would be different
from those shown above if the actual investment results applicable to the
Contract average 0% over a period of years, but also fluctuated above or below
the average for individual Contract Years. No representation can be made by
us or by the Fund that these hypothetical returns can be achieved for any one
year, or sustained over any one year, or sustained over any period of time.
<PAGE>
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD VARIABLE INSURANCE PRODUCTS COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Male Issue Age: 35; Preferred, $1,000.00 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 1,050 100,651 651 0 * 100,676 676 0 *
2 2,152 101,322 1,322 372 101,385 1,385 434
3 3,310 102,014 2,014 1,124 102,117 2,117 1,226
4 4,525 102,728 2,728 1,898 102,885 2,885 2,054
5 5,801 103,465 3,465 2,694 103,678 3,678 2,907
6 7,142 104,225 4,225 3,532 104,511 4,511 3,817
7 8,549 104,999 4,999 4,383 105,384 5,384 4,768
8 10,026 105,798 5,798 5,259 106,288 6,288 5,749
9 11,577 106,612 6,612 6,150 107,237 7,237 6,774
10 13,206 107,442 7,442 7,057 108,220 8,220 7,835
11 14,917 108,276 8,276 7,968 109,239 9,239 8,931
12 16,712 109,114 9,114 8,883 110,284 10,284 10,053
13 18,598 109,969 9,969 9,815 111,356 11,356 11,201
14 20,578 110,829 10,829 10,752 112,455 12,455 12,378
15 22,657 111,694 11,694 11,694 113,585 13,585 13,585
16 24,840 112,627 12,627 12,627 114,807 14,807 14,807
17 27,132 113,557 13,557 13,557 116,040 16,040 16,040
18 29,539 114,471 14,471 14,471 117,285 17,285 17,285
19 32,065 115,369 15,369 15,369 118,542 18,542 18,542
20 34,719 116,238 16,238 16,238 119,825 19,825 19,825
Age
60 50,113 119,884 19,884 19,884 126,488 26,488 26,488
65 69,760 120,937 20,937 20,937 133,119 33,119 33,119
70 94,836 116,172 16,172 16,172 138,445 38,445 38,445
75 126,839 100,011 11 11 139,809 39,809 39,809
</TABLE>
(1) Assumes a $1,000.00 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 $1,000.00 premium illustrated is
greater than the Death Benefit Guarantee Premium for this Contract.
The hypothetical investment results are illustrative only, and should not be
deemed a representation of past or future investment results. Actual
investment results may be more or less than those shown, and will depend on a
number of factors, including the investment allocations by a Contract Owner,
and the different investment returns for the Fund. The Death Benefit,
Accumulated Value and Cash Surrender Value for a Contract would be different
from those shown above if the actual investment results applicable to the
Contract average 6% over a period of years, but also fluctuated above or below
the average for individual Contract Years. No representation can be made by
us or by the Fund that these hypothetical returns can be achieved for any one
year, or sustained over any one year, or sustained over any period of time.
<PAGE>
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD VARIABLE INSURANCE PRODUCTS COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Male Issue Age: 35; Preferred, $1,000.00 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 1,050 100,000 652 0 * 100,000 677 0 *
2 2,152 100,000 1,326 376 100,000 1,388 437
3 3,310 100,000 2,022 1,132 100,000 2,123 1,233
4 4,525 100,000 2,742 1,912 100,000 2,896 2,065
5 5,801 100,000 3,487 2,716 100,000 3,696 2,925
6 7,142 100,000 4,258 3,565 100,000 4,536 3,843
7 8,549 100,000 5,046 4,429 100,000 5,420 4,803
8 10,026 100,000 5,863 5,323 100,000 6,337 5,797
9 11,577 100,000 6,699 6,237 100,000 7,300 6,838
10 13,206 100,000 7,556 7,171 100,000 8,302 7,916
11 14,917 100,000 8,425 8,117 100,000 9,343 9,035
12 16,712 100,000 9,306 9,074 100,000 10,416 10,184
13 18,598 100,000 10,211 10,057 100,000 11,522 11,368
14 20,578 100,000 11,132 11,055 100,000 12,664 12,587
15 22,657 100,000 12,070 12,070 100,000 13,844 13,844
16 24,840 100,000 13,089 13,089 100,000 15,126 15,126
17 27,132 100,000 14,121 14,121 100,000 16,435 16,435
18 29,539 100,000 15,157 15,157 100,000 17,773 17,773
19 32,065 100,000 16,200 16,200 100,000 19,142 19,142
20 34,719 100,000 17,240 17,240 100,000 20,556 20,556
Age
60 50,113 100,000 22,295 22,295 100,000 28,296 28,296
65 69,760 100,000 26,295 26,295 100,000 37,207 37,207
70 94,836 100,000 27,210 27,210 100,000 47,273 47,273
75 126,839 100,000 20,464 20,464 100,000 58,465 58,465
</TABLE>
(1) Assumes a $1,000.00 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 $1,000.00 premium illustrated is greater
than the Death Benefit Guarantee Premium for this Contract.
The hypothetical investment results are illustrative only, and should not be
deemed a representation of past or future investment results. Actual
investment results may be more or less than those shown, and will depend on a
number of factors, including the investment allocations by a Contract Owner,
and the different investment returns for the Fund. The Death Benefit,
Accumulated Value and Cash Surrender Value for a Contract would be different
from those shown above if the actual investment results applicable to the
Contract average 6% over a period of years, but also fluctuated above or below
the average for individual Contract Years. No representation can be made by us
or by the Fund that these hypothetical returns can be achieved for any one
year, or sustained over any one year, or sustained over any period of time.
<PAGE>
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD VARIABLE INSURANCE PRODUCTS COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Male Issue Age: 35; Preferred, $1,000.00 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 1,050 100,697 697 0 * 100,723 723 0 *
2 2,152 101,459 1,459 508 101,525 1,525 574
3 3,310 102,290 2,290 1,400 102,402 2,402 1,511
4 4,525 103,200 3,200 2,370 103,374 3,374 2,544
5 5,801 104,197 4,197 3,426 104,441 4,441 3,670
6 7,142 105,290 5,290 4,596 105,623 5,623 4,930
7 8,549 106,477 6,477 5,861 106,935 6,935 6,319
8 10,026 107,781 7,781 7,242 108,378 8,378 7,839
9 11,577 109,202 9,202 8,740 109,978 9,978 9,516
10 13,206 110,753 10,753 10,368 111,740 11,740 11,355
11 14,917 112,436 12,436 12,127 113,682 13,682 13,374
12 16,712 114,264 14,264 14,033 115,811 15,811 15,580
13 18,598 116,267 16,267 16,113 118,147 18,147 17,993
14 20,578 118,450 18,450 18,373 120,713 20,713 20,636
15 22,657 120,834 20,834 20,834 123,534 23,534 23,534
16 24,840 123,505 23,505 23,505 126,701 26,701 26,701
17 27,132 126,416 26,416 26,416 130,163 30,163 30,163
18 29,539 129,582 29,582 29,582 133,953 33,953 33,953
19 32,065 133,031 33,031 33,031 138,107 38,107 38,107
20 34,719 136,780 36,780 36,780 142,676 42,676 42,676
Age
60 50,113 161,109 61,109 61,109 173,345 73,345 73,345
65 69,760 197,863 97,863 97,863 222,740 122,740 122,740
70 94,836 252,601 152,601 152,601 302,138 202,138 202,138
75 126,839 333,061 233,061 233,061 429,327 329,327 329,327
</TABLE>
(1) Assumes a $1,000.00 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 $1,000.00 premium illustrated is greater
than the Death Benefit Guarantee Premium for this Contract.
The hypothetical investment results are illustrative only, and should not be
deemed a representation of past or future investment results. Actual
investment results may be more or less than those shown, and will depend on a
number of factors, including the investment allocations by a Contract Owner,
and the different investment returns for the Fund. The Death Benefit,
Accumulated Value and Cash Surrender Value for a Contract would be different
from those shown above if the actual investment results applicable to the
Contract average 12% over a period of years, but also fluctuated above or
below the average for individual Contract Years. No representation can be made
by us or by the Fund that these hypothetical returns can be achieved for any
one year, or sustained over any one year, or sustained over any period of
time.
<PAGE>
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD VARIABLE INSURANCE PRODUCTS COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Male Issue Age: 35; Preferred, $1,000.00 Annual Premium, $100,000 Face Amount
Option B--Level Death Benefit Option
Assumed Hypothetical Gross Annual Investment Rate of Return: 12%
[1] [2] [3] [4] [5] [6] [7] [8]
Premiums Assuming Guaranteed Costs (1)(2) Assuming Current Costs (1)(2)
Accumul. -------------------------------- ---------------------------------
End of at 5% Cash Cash
Cont. Interest Death Accumulated Surrender Death Accumulated Surrender
Year Per Year Benefit Value Value Benefit Value Value
------ -------- ------- ----------- --------- ------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 1,050 100,000 699 0 * 100,000 724 0 *
2 2,152 100,000 1,463 512 100,000 1,528 577
3 3,310 100,000 2,299 1,409 100,000 2,409 1,518
4 4,525 100,000 3,217 2,386 100,000 3,388 2,557
5 5,801 100,000 4,224 3,454 100,000 4,463 3,692
6 7,142 100,000 5,332 4,639 100,000 5,657 4,963
7 8,549 100,000 6,540 5,924 100,000 6,983 6,367
8 10,026 100,000 7,871 7,332 100,000 8,446 7,906
9 11,577 100,000 9,328 8,866 100,000 10,070 9,608
10 13,206 100,000 10,927 10,541 100,000 11,864 11,479
11 14,917 100,000 12,671 12,363 100,000 13,846 13,538
12 16,712 100,000 14,580 14,349 100,000 16,028 15,797
13 18,598 100,000 16,684 16,530 100,000 18,432 18,278
14 20,578 100,000 18,997 18,920 100,000 21,085 21,008
15 22,657 100,000 21,542 21,542 100,000 24,016 24,016
16 24,840 100,000 24,413 24,413 100,000 27,321 27,321
17 27,132 100,000 27,577 27,577 100,000 30,963 30,963
18 29,539 100,000 31,061 31.061 100,000 34,984 34,984
19 32,065 100,000 34,907 34,907 100,000 39,430 39,430
20 34,719 100,000 39,154 39,154 100,000 44,362 44,362
Age
60 50,113 100,000 68,474 68,474 105,325 78,601 78,601
65 69,760 144,189 118,188 118,188 166,043 136,101 136,101
70 94,836 231,387 199,471 199,471 268,234 231,236 231,236
75 126,893 356,296 332,987 332,987 416,324 389,088 389,088
</TABLE>
(1) Assumes a $1,000.00 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 $1,000.00 premium illustrated is greater
than the Death Benefit Guarantee Premium for this Contract.
The hypothetical investment results are illustrative only, and should not be
deemed a representation of past or future investment results. Actual
investment results may be more or less than those shown, and will depend on a
number of factors, including the investment allocations by a Contract Owner,
and the different investment returns for the Fund. The Death Benefit,
Accumulated Value and Cash Surrender Value for a Contract would be different
from those shown above if the actual investment results applicable to the
Contract average 12% over a period of years, but also fluctuated above or
below the average for individual Contract Years. No representation can be made
by us or by the Fund that these hypothetical returns can be achieved for any
one year, or sustained over any one year, or sustained over any period of
time.
<PAGE>
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 18, the Insured's gender and whether the Insured is a tobacco user or
not. For an Insured with an Attained Age under 18, reference should be made
to the column entitled "Standard" in each table, rather than to the columns
entitled "Tobacco User" or "Non-Tobacco User".
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 a Contract with a Face Amount of $500,000 or more, but
less than a 1,000,000. The lower maximum charges shown in Table 3 apply to
a Contract with a Face Amount of $1,000,000 ore more. Subsequent requested
increases in Face Amount result in a total Face Amount that equals or
exceeds the next range of Face Amount will qualify for the lower maximum
charges shown in Tables 2 or 3.
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.
<PAGE>
<TABLE>
TABLE 1
FACE AMOUNTS LESS THAN $500,000
Maximum Deferred
Administrative Charges Per $1,000 of Face Amount
<CAPTION>
Standard
(Attained Age
Attained Age under 18) Tobacco User Non Tobacco User
------------ ------------- ------------ ----------------
Male Female Male Female Male Female
---- ------ ---- ------ ---- ------
<S> <C> <C> <C> <C> <C> <C>
0-4 $7.20 $7.20
5-9 $7.20 $7.20
10-14 $7.20 $7.20
15-17 $7.20 $7.20
18-24 $ 9.00 $5.40 $ 9.00 $ 5.40
25-29 $ 9.00 $5.40 $ 9.00 $ 5.40
30-34 $10.80 $7.20 $10.80 $ 5.40
35-39 $12.60 $9.00 $10.80 $ 5.40
40-44 $14.40 $10.80 $12.60 $ 7.20
45-49 $16.20 $12.60 $12.60 $ 7.20
50-54 $18.00 $14.40 $14.40 $ 9.00
55-59 $18.00 $14.40 $14.40 $10.80
60-64 $18.00 $14.40 $14.40 $10.80
65-69 $18.00 $14.40 $14.40 $10.80
70-74 $18.00 $14.40 $14.40 $10.80
75- 79 $18.00 $14.40 $14.40 $10.80
80-85 $18.00 $14.40 $14.40 $10.80
</TABLE>
<PAGE>
<TABLE>
TABLE 2
FACE AMOUNTS OF $500,000 OR MORE, BUT LESS THAN $1,000,000
Maximum Deferred
Administrative Charges Per $1,000 of Face Amount
<CAPTION>
Standard
(Attained Age
Attained Age under 18) Tobacco User Non Tobacco User
------------ ------------- ------------ ----------------
Male Female Male Female Male Female
---- ------ ---- ------ ---- ------
<S> <C> <C> <C> <C> <C> <C>
0-4 $1.80 $1.80
5-9 $1.80 $1.80
10-14 $1.80 $1.80
15-17 $1.80 $1.80
18-24 $ 3.60 $3.60 $ 1.80 $1.80
25-29 $ 3.60 $3.60 $ 1.80 $1.80
30-34 $ 5.40 $5.40 $ 3.60 $1.80
35-39 $ 7.20 $5.40 $ 3.60 $1.80
40-44 $ 9.00 $7.20 $ 5.40 $3.60
45-49 $10.80 $7.20 $ 7.20 $3.60
50-54 $12.60 $9.00 $10.80 $5.40
55-59 $14.40 $9.00 $12.60 $5.40
60-64 $16.20 $9.00 $14.40 $5.40
65-69 $16.20 $9.00 $14.40 $5.40
70-74 $16.20 $9.00 $14.40 $5.40
75-79 $16.20 $9.00 $14.40 $5.40
80-85 16.20 9.00 $14.40 $5.40
</TABLE>
<PAGE>
<TABLE>
TABLE 3
FACE AMOUNTS OF $1,000,000 OR MORE
Maximum Deferred
Administrative Charges Per $1,000 of Face Amount
<CAPTION>
Standard
(Attained Age
under 18) Tobacco User Non Tobacco User
Attained Age Male Female Male Female Male Female
----------- ---- ------ ---- ------ ---- ------
<S> <C> <C> <C> <C> <C> <C>
0-4 $1.80 $1.80
5-9 $1.80 $1.80
10-14 $1.80 $1.80
15-17 $1.80 $1.80
18-24 $1.80 $1.80 $1.80 $1.80
25-29 $1.80 $1.80 $1.80 $1.80
30-34 $3.60 $3.60 $1.80 $1.80
35-39 $3.60 $3.60 $1.80 $1.80
40-44 $5.40 $3.60 $3.60 $1.80
45-49 $7.20 $3.60 $3.60 $1.80
50-54 $9.00 $5.40 $5.40 $1.80
55-59 $9.00 $5.40 $5.40 $1.80
60-64 $9.00 $5.40 $5.40 $1.80
65-69 $9.00 $5.40 $5.40 $1.80
70-74 $9.00 $5.40 $5.40 $1.80
75-79 $9.00 $5.40 $5.40 $1.80
80-85 $9.00 $5.40 $5.40 $1.80
</TABLE>
<PAGE>
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 18
the Insured's gender and whether the Insured is a tobacco user or not. For
an Insured with an Attained Age under 18, 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 maxmimum charges shown
in Table 2 apply to a Contract with a Face Amount of $500,000 or more, but
less than a 1,000,000. The lower maximum charges shown in Table 3 apply to
a Contract with a Face Amount of $1,000,000 ore more. Subsequent requested
increases in Face Amount that result in a total Face Amount that equals or
exceeds the next range of Face Amount, will qualify for the lower charges
shown in Tables 2 or 3.
If the Face Amount is increased, an additional Initial Monthly 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 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 tobacco user or non-tobacco user status on the
effective date of the rider will be used.
<PAGE>
<TABLE>
TABLE 1
FACE AMOUNTS LESS THAN $500,000
Initial Monthly Administrative Charges
Per $1,000 of Face Amount
<CAPTION>
Standard
(Attained Age
Attained Age under 18) Tobacco User Non Tobacco User
------------ ------------- ------------ ----------------
Male Female Male Female Male Female
---- ------ ---- ------ ---- ------
<S> <C> <C> <C> <C> <C> <C>
0-4 $0.04 $0.04
5-9 $0.04 $0.04
10-14 $0.04 $0.04
15-17 $0.04 $0.04
18-24 $0.05 $0.05 $0.03 $0.03
25-29 $0.05 $0.05 $0.03 $0.03
30-34 $0.06 $0.06 $0.04 $0.03
35-39 $0.07 $0.06 $0.05 $0.03
40-44 $0.08 $0.07 $0.06 $0.04
45-49 $0.09 $0.07 $0.07 $0.04
50-54 $0.10 $0.08 $0.08 $0.05
55-59 $0.10 $0.08 $0.08 $0.06
60-64 $0.10 $0.08 $0.08 $0.06
65-69 $0.10 $0.08 $0.08 $0.06
70-74 $0.10 $0.08 $0.08 $0.06
75-79 $0.10 $0.08 $0.08 $0.06
80-86 $0.10 $0.08 $0.08 $0.06
</TABLE>
<PAGE>
<TABLE>
TABLE 2
FACE AMOUNTS $500,000 OR MORE, BUT LESS THAN $1,000,000
Initial Monthly Administrative Charges
Per $1,000 of Face Amount
<CAPTION>
Standard
(Attained Age
Attained Age under 18) Tobacco User Non Tobacco User
------------ ------------- ------------ ----------------
Male Female Male Female Male Female
---- ------ ---- ------ ---- ------
<S> <C> <C> <C> <C> <C> <C>
0-4 $0.01 $0.01
5-9 $0.01 $0.01
10-14 $0.01 $0.01
15-17 $0.01 $0.01
18-24 $0.02 $0.02 $0.01 $0.01
25-29 $0.02 $0.02 $0.01 $0.01
30-34 $0.03 $0.03 $0.02 $0.01
35-39 $0.04 $0.03 $0.02 $0.01
40-44 $0.05 $0.04 $0.03 $0.02
45-49 $0.06 $0.04 $0.04 $0.02
50-54 $0.07 $0.05 $0.06 $0.03
55-59 $0.08 $0.05 $0.07 $0.03
60-64 $0.09 $0.05 $0.08 $0.03
65-69 $0.09 $0.05 $0.08 $0.03
70-74 $0.09 $0.05 $0.08 $0.03
75-79 $0.09 $0.05 $0.08 $0.03
80-85 $0.09 $0.05 $0.08 $0.03
</TABLE>
<PAGE>
<TABLE>
TABLE 3
FACE AMOUNTS OF $1,000,000 OR MORE
Initial Monthly Charges
Per $1,000 of Face Amount
<CAPTION>
Standard
(Attained Age
under 18) Tobacco User Non Tobacco User
Attained Age Male Female Male Female Male Female
----------- ---- ------ ---- ------ ---- ------
<S> <C> <C> <C> <C> <C> <C>
0-4 $0.01 $0.01
5-9 $0.01 $0.01
10-14 $0.01 $0.01
15-17 $0.01 $0.01
18-24 $0.01 $0.01 $0.01 $0.01
25-29 $0.01 $0.01 $0.01 $0.01
30-34 $0.02 $0.02 $0.01 $0.01
35-39 $0.02 $0.02 $0.01 $0.01
40-44 $0.03 $0.02 $0.02 $0.01
45-49 $0.04 $0.02 $0.02 $0.01
50-54 $0.05 $0.03 $0.03 $0.01
55-59 $0.05 $0.03 $0.03 $0.01
60-64 $0.05 $0.03 $0.03 $0.01
65-69 $0.05 $0.03 $0.03 $0.01
70-74 $0.05 $0.03 $0.03 $0.01
75-79 $0.05 $0.03 $0.03 $0.01
80-85 $0.05 $0.03 $0.03 $0.01
</TABLE>
<PAGE>
APPENDIX D
PRIOR CONTRACTS
Prior to May 1, 1997, LBVIP issued another class of flexible premium
variable life insurance contract ("prior contract" or "VUL 1" contracts),
which will no longer be issued as various states approve the Contract.
However, premium payments may still be made under the VUL 1 contracts.
The principal differences between the Contracts and the VUL 1 contracts
relate to the charges made by LBVIP, issue ages and maturity date, and
different ranges of Face Amounts, and the length of the Death Benefit
Guarantee period.
Charges and Deductions
Generally speaking, the Decrease Charge under VUL 1 contracts is assessed
for 10 years (120 months) as opposed to the Decrease Charge under the
Contract, which is generally assessed for 15 years (180 months). In
addition, the basic monthly administration charge for VUL 1 contracts is
$4.00, as opposed to $10.00 for the Contract. The VUL 1 contracts also use
different premium classes and may have different cost of insurance charges.
The prospectus descriptions of the Decrease Charge, Monthly Administration
Charges, Cost of Insurance Rate and Premium Class are modified by the
following discussion applicable to the VUL 1 contracts.
Decrease Charge
Decrease Charge. A deferred charge (the "Decrease Charge") will be deducted
upon VUL 1 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).
For information concerning the Contingent Deferred Sales Charge, except for
the figures based on a 15, as opposed to 10, year assessment period, see the
discussion under the caption "Decrease Charge", commencing on page 34 of the
Prospectus.
Deferred Administrative Charge. At the time of contract issuance for a VUL 1
contract, 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 the time of VUL 1 contract issuance. The maximum Deferred
Administrative Charge per $1,000 of Face Amount will be determined from
Appendix D-2. As shown in Appendix D-2, the Deferred Administrative Charge
per $1,000 of Face Amount will be less for VUL 1 contracts having a Face
Amount at issuance that equals or exceeds $250,000.
The maximum Deferred Administrative Charge, as determined at the time of the
VUL 1 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 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.
For information concerning the method of deducting the Decrease Charge, see
the discussion under the caption "Method of Deduction and Effect of Decrease
Charge", commencing on page 37 of the Prospectus.
Monthly Deduction
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.
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 D-3. As shown in Appendix D-3, 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.
See the discussion under "Accumulated Value Charges -- Decrease Charge --
Amount of Deferred Administrative Charge" in the Prospectus for application
of the Deferred Administrative Charge to 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. LBVIP will not, however, be reimbursed twice for
these expenses. 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".
Cost of Insurance Rate
Under VUL 1 contracts, cost of insurance rates are be based on the initial
Face Amount and the gender, 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 VUL 1
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, gender and premium class. In general, the actual cost of
insurance rate will be lower for VUL 1 contracts having a Face Amount at
issuance or after a requested increase that equals or exceeds $250,000.
Premium Class
Under VUL 1 contracts, LBVIP places Insureds into standard premium classes
and into substandard premium classes, which involve a higher mortality risk.
In an otherwise identical VUL 1 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.)
Maturity Date
As long as VUL 1 contracts remain in force, VUL 1 contracts provide life
insurance coverage on the named Insured up to the Insured's Attained Age 96.
The Maturity Date under VUL 1 contracts is the Contract Anniversary on or
next following the Insured's 96th birthday. If the Insured is living on the
Maturity Date of the VUL 1 contract, LBVIP will pay the Accumulated Value
for the VUL 1 contract on the Maturity Date, reduced by any Contract Debt
and any unpaid Monthly Deductions and the VUL 1 contract will be terminated.
The Maturity Date is shown in the VUL 1 contract.
Issue Age and Minimum Face Amounts
VUL 1 contracts will be issued only on Insureds who have an Attained Age of
80 or less and who provide satisfactory evidence of insurability. The
Minimum Face Amount of a VUL 1 contract is $50,000 for Insureds with an
Attained Age of 20 through 50, and $25,000 for all other Insureds. The
Minimum Face Amount for a requested increase is $10,000 and a VUL 1 contract
owner may not increase the Face Amount after the Insured's Attained Age 80.
Ranges of Face Amounts
VUL 1 contracts have two ranges of Face Amounts: Face Amounts of less that
$250,000; and Face Amounts of $250,000 or more.
Death Benefit Guarantee Duration
For VUL 1 contracts, if sufficient premium payments have been made, the
Death Benefit Guarantee will apply until the latter of the Insured's
Attained Age 71 and the Attained Age of the Insured at the end of a period
ranging from 6 to 31 years after the Date of Issue.
Other Provisions
Under VUL 1 contracts, a loan request must be made in a minimum amount of
$100.
Sales and Other Agreements
For VUL 1 contracts with an initial Face Amount greater than or equal to
$1,000,000, 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.
<PAGE>
APPENDIX D-1
Illustration of Death Benefits,
Accumulated Values and Cash Surrender Values
For VUL 1 Contracts
The following tables illustrate how the Death Benefits, Accumulated Values
and Cash Surrender Values of a VUL 1 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 VUL 1 contract issued to
an Insured of a given age (who pays a Scheduled Premium of $1,000 ) 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 D-1(a) through D-1(h) illustrate
a VUL 1 contract issued to a male age 35 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 shows the Accumulated Value of the premiums
paid at a 5% interest rate. The third and sixth columns illustrate the Death
Benefit of a VUL 1 contract over the designated period. The fourth and
seventh columns illustrate the Accumulated Value of the VUL 1 contract over
the designated period. (The Accumulated Value is the total amount held under
a VUL 1 contract at any time.) The fifth and eighth columns illustrate the
Cash Surrender Value of a VUL 1 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 VUL 1
contract, the monthly charge for the cost of insurance is based on the
current cost of insurance rates and the current Mortality and Expense Risk
Charge. The third through the fifth columns assume that the Mortality and
Expense Risk Charge and also that the monthly charge for the cost of
insurance are based on the maximum level permitted under the VUL 1 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 for the VUL 1 contract reflect the fact that the net investment
return of the Subaccounts of the Variable Account is lower than the gross,
after-tax return on the assets held in the Fund as a result of the advisory
fee paid by the Fund and charges made against the Subaccounts. The values
shown take into account the following fees and charges: the daily investment
advisory fee paid by the Fund, which is assumed to be equivalent to an
annual rate of .48% of the aggregate average daily net assets of the Fund,
based on the following fees: Growth (0.40%); High Yield (0.40%); Income
(0.40%); Money Market (0.40%); Opportunity Growth (0.40%); and World Growth
(0.85%); and the daily charge to each Subaccount for assuming mortality and
expense risks, which is equivalent to a charge at an annual current rate of
.60% of the average assets of the Subaccounts and which is guaranteed never
to exceed an annual rate of .75%. After deduction of these amounts, the
illustrated gross annual investment rates of return 0%, 6% and 12%
correspond to (a) net annual rates of -1.23%, 4.77% and 10.77%,
respectively, assuming an advisory fee of .48% and a Mortality and Expense
Risk Charge of .75% and (b) net annual rates of -1.08%, 4.92% and 10.92%,
respectively, assuming an advisory fee of .48% and a Mortality and Expense
Risk Charge of .60%.
The amounts shown for Death Benefits, Accumulated Values and Cash Surrender
Values do not reflect a deduction for operating expenses of the Fund, other
than the investment advisory fee, because LB and LBVIP have agreed to
reimburse the Fund for these operating expenses pursuant to a separate
written agreement (the "Expense Reimbursement Agreement"). For the fiscal
year of the Fund ended December 31, 1996, the Fund was reimbursed
approximately $2,589,413 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 VUL 1 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, gender (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.
<PAGE>
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD VARIABLE INSURANCE PRODUCTS COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE TO AGE 96
Male Issue Age: 35; Nonsmoker, $1,000.00 Annual Premium, $100,000 Face Amount
Option A--Varying Death Benefit Option
Assumed Hypothetical Gross Annual Investment Rate of Return: 0%
[1] [2] [3] [4] [5] [6] [7] [8]
Premiums Assuming Guaranteed Costs (1)(2) Assuming Current Costs (1)(2)
Accumul. -------------------------------- --------------------------------
End of at 5% Cash Cash
Cont. Interest Death Accumulated Surrender Death Accumulated Surrender
Year Per Year Benefit Value Value Benefit Value Value
------ -------- ------- ----------- --------- ------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 1,050 100,675 675 63 100,712 712 100
2 2,152 101,331 1,331 767 101,405 1,405 841
3 3.310 101,967 1,967 1,451 102,079 2,079 1,563
4 4,525 102,583 2,583 2,115 102,733 2,733 2,265
5 5,801 103,179 3,179 2,759 103,369 3,660 2,949
6 7,142 103,756 3,756 3,420 103,986 3,986 3,650
7 8,549 104,303 4,303 4,051 104,584 4,584 4,332
8 10,026 104,831 4,831 4,663 105,164 5,164 4,996
9 11,577 105,329 5,329 5,245 105,726 5,726 5,642
10 13,206 105,796 5,796 5,796 106,270 6,270 6,270
11 14,917 106,282 6,282 6,282 106,832 6,832 6,832
12 16,712 106,727 6,727 6,727 107,364 7,364 7,364
13 18,598 107,142 7,142 6,727 107,867 7,867 7,867
14 20,578 107,517 7,517 7,517 108,340 8,340 8,340
15 22,657 107,851 7,851 7,851 108,773 8,773 8,773
16 24,840 108,146 8,146 8,146 109,165 9,165 9,165
17 27,132 108,389 8,389 8,389 109,518 9,518 9,518
18 29,539 108,570 8,570 8,570 109,831 9,831 9,831
19 32,065 108,690 8,690 8,690 110,082 10,082 10,082
20 34,719 108,737 8,737 8,737 110,270 10,270 10,270
Age
60 50,113 107,725 7,725 7,725 110,093 10,093 10,093
65 69,760 103,660 3,660 3,660 107,724 7,724 7,724
70 94,836 100,000 0 0 * 102,102 2,102 2,102
75 126,839 100,000 0 0 * 100,000 0 0
</TABLE>
(1) Assumes a $1,000.00 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 VUL 1 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 VUL 1 contract remains in force even though
the Cash Surrender Value is zero. The $1,000.00 premium illustrated is
greater than the Death Benefit Guarantee Premium for this VUL 1 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 VUL 1 contract would be
different from those shown above if the actual investment results applicable
to the VUL 1 contract average 0% over a period of years, but also fluctuated
above or below the average for individual Contract Years. No representation
can be made by us or by the Fund that these hypothetical returns can be
achieved for any one year, or sustained over any one year, or sustained over
any period of time.
<PAGE>
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD VARIABLE INSURANCE PRODUCTS COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE TO AGE 96
Male Issue Age: 35; Nonsmoker, $1,000.00 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 1,050 100,000 677 65 100,000 713 101
2 2,152 100,000 1,335 771 100,000 1,405 844
3 3,310 100,000 1,975 1,459 100,000 2,086 1,570
4 4,525 100,000 2,596 2,128 100,000 2,745 2,277
5 5,801 100,000 3,200 2,780 100,000 3,387 2,967
6 7,142 100,000 3,786 3,340 100,000 4,011 3,675
7 8,549 100,000 4,343 4,091 100,000 4,619 4,367
8 10,026 100,000 4,884 4,716 100,000 5,210 5,042
9 11,577 100,000 5,397 5,313 100,000 5,785 5,701
10 13,206 100,000 5,883 5,883 100,000 6,344 6,344
11 14,917 100,000 6,390 6,390 100,000 6,924 6,924
12 16,712 100,000 6,859 6,859 100,000 7,477 7,477
13 18,598 100,000 7,302 7,302 100,000 8,004 8,004
14 20,578 100,000 7,709 7,709 100,000 8,505 8,505
15 22,657 100,000 8,080 8,080 100,000 8,970 8,970
16 24,840 100,000 8,415 8,415 100,000 9,399 9,399
17 27,132 100,000 8,705 8,705 100,000 9,794 9,794
18 29,539 100,000 8,939 8,939 100,000 10,154 10,154
19 32,065 100,000 9,118 9,118 100,000 10,458 10,458
20 34,719 100,000 9,231 9,231 100,000 10,708 10,708
Age
60 50,113 100,000 8,653 8,653 100,000 10,967 10,967
65 69,760 100,000 5,136 5,136 100,000 9,219 9,219
70 94,836 100,000 0 0 * 100,000 4,229 4,229
75 126,839 100,000 0 0 * 100,000 0 0 *
</TABLE>
(1) Assumes a $1,000.00 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 VUL 1 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 VUL 1 contract remains in force even though
the Cash Surrender Value is zero. The $1,000.00 premium illustrated is
greater than the Death Benefit Guarantee Premium for this VUL 1 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 VUL 1 contract would be
different from those shown above if the actual investment results applicable
to the VUL 1 contract average 0% over a period of years, but also fluctuated
above or below the average for individual Contract Years. No representation
can be made by us or by the Fund that these hypothetical returns can be
achieved for any one year, or sustained over any one year, or sustained over
any period of time.
<PAGE>
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD VARIABLE INSURANCE PRODUCTS COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE TO AGE 96
Male Issue Age: 35; Nonsmoker, $1,000.00 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 1,050 100,724 724 112 100,762 762 150
2 2,152 101,470 1,470 906 101,549 1,549 985
3 3,310 102,240 2,240 1,724 102,363 2,363 1,847
4 4,525 103,034 3,034 2,566 103,205 3,205 2,737
5 5,801 103,854 3,854 3,434 104,076 4,076 3,656
6 7,142 104,701 4,701 4,365 104,977 4,977 4,641
7 8,549 105,564 5,564 5,312 105,911 5,911 5,659
8 10,026 106,456 6,456 6,288 106,878 6,878 6,710
9 11,577 107,365 7,365 7,281 107,881 7,881 7,797
10 13,206 108,294 8,294 8,294 108,920 8,920 8,920
11 14,917 109,291 9,291 9,291 110,036 10,036 10,026
12 16,712 110,300 10,300 10,300 111,182 11,182 11,182
13 18,598 111,332 11,332 11,332 112,359 12,359 12,359
14 20,578 112,376 12,376 12,376 113,571 13,571 13,571
15 22,657 113,434 13,434 13,343 114,805 14,805 14,805
16 22,840 114,505 14,505 14,505 116,063 16,063 16,063
17 24,840 115,579 15,579 15,579 117,346 17,346 17,346
18 29,529 116,642 16,642 16,642 118,656 18,656 18,656
19 32,065 117,695 17,695 17,695 119,968 19,968 19,968
20 34,719 118,725 18,725 18,725 121,284 21,284 21,284
Age
60 50,113 123,281 23,281 23,281 127,687 27,687 27,687
65 59,760 125,463 25,463 25,463 133,290 33,290 33,290
70 94,836 122,137 22,137 22,137 136,533 36,533 36,533
75 126,839 107,873 7,873 7,873 134,219 34,219 34,219
</TABLE>
(1) Assumes a $1,000.00 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 VUL 1 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 VUL 1 contract remains in force even though
the Cash Surrender Value is zero. The $1,000.00 premium illustrated is
greater than the Death Benefit Guarantee Premium for this VUL 1 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 VUL 1 contract would be
different from those shown above if the actual investment results applicable
to the VUL 1 contract average 0% over a period of years, but also fluctuated
above or below the average for individual Contract Years. No representation
can be made by us or by the Fund that these hypothetical returns can be
achieved for any one year, or sustained over any one year, or sustained over
any period of time.
<PAGE>
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD VARIABLE INSURANCE PRODUCTS COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE TO AGE 96
Male Issue Age: 35; Nonsmoker, $1,000.00 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 1,050 100,000 725 113 100,000 763 151
2 2,152 100,000 1,475 911 100,000 1,533 989
3 3,310 100,000 2,249 1,733 100,000 2,371 1,855
4 4,525 100,000 3,051 2,583 100,000 3,218 2,750
5 5,801 100,000 3,880 3,460 100,000 4,098 3,678
6 7,142 100,000 4,739 4,403 100,000 5,010 4,674
7 8,549 100,000 5,618 5,366 100,000 5,958 5,706
8 10,026 100,000 6,530 6,362 100,000 6,942 6,774
9 11,577 100,000 7,465 7,381 100,000 7,967 7,883
10 13,206 100,000 8,425 8,425 100,000 9,032 9,032
11 14,917 100,000 9,462 9,462 100,000 10,181 10,181
12 16,712 100,000 10,518 10,518 100,000 11,367 11,367
13 18,598 100,000 11,607 11,607 100,000 12,593 12,593
14 20,578 100,000 12,720 12,720 100,000 13,863 13,863
15 22,657 100,000 13,860 13,860 100,000 15,168 15,168
16 24,840 100,000 15,028 15,028 100,000 16,512 16,512
17 27,132 100,000 16,218 16,218 100,000 17,898 17,898
18 29,539 100,000 17,420 17,420 100,000 19,328 19,328
19 32,065 100,000 18,636 18,636 100,000 20,787 20,787
20 34,719 100,000 19,861 19,861 100,000 22,278 22,278
Age
60 50,113 100,000 26,024 26,024 100,000 30,181 30,181
65 69,760 100,000 31,622 31,622 100,000 38,967 38,967
70 94,836 100,000 35,118 35,118 100,000 48,643 48,643
75 126,839 100,000 33,220 33,220 100,000 59,142 59,142
</TABLE>
(1) Assumes a $1,000.00 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 VUL 1 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 VUL 1 contract remains in force even though
the Cash Surrender Value is zero. The $1,000.00 premium illustrated is
greater than the Death Benefit Guarantee Premium for this VUL 1 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 VUL 1 contract would be
different from those shown above if the actual investment results applicable
to the VUL 1 contract average 0% over a period of years, but also fluctuated
above or below the average for individual Contract Years. No representation
can be made by us or by the Fund that these hypothetical returns can be
achieved for any one year, or sustained over any one year, or sustained over
any period of time.
<PAGE>
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD VARIABLE INSURANCE PRODUCTS COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE TO AGE 96
Male Issue Age: 35; Nonsmoker, $1,000.00 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 1,050 100,772 772 160 100,811 811 199
2 2,152 101,616 1,616 1,052 101,699 1,699 1,135
3 3,310 102,537 2,537 2,021 102,672 2,672 2,156
4 4,525 103,545 3,545 3,077 103,737 3,737 3,269
5 5,801 104,650 4,650 4,230 104,907 4,907 4,487
6 7,142 105,860 5,860 5,524 106,192 6,192 5,856
7 8,549 107,176 7,176 6,924 107,604 7,604 7,352
8 10,026 108,620 8,620 8,452 109,158 9,158 8,990
9 11,577 110,195 10,195 10,111 110,869 10,869 10,785
10 13,206 111,195 11,195 11,915 112,754 12,754 12,754
11 14,917 113,845 13,845 13,845 112,870 12,870 12,870
12 16,712 115,945 15,945 15,945 114,870 14,870 14,870
13 18,598 118,246 18,246 18,246 117,193 17,193 17,193
14 20,578 120,757 20,757 20,757 119,743 19,743 19,743
15 22,657 123,500 23,500 23,500 122,548 22,548 22,548
16 22,840 126,502 26,502 26,502 125,620 25,620 25,620
17 24,840 129,776 29,776 29,776 128,990 28,990 28,990
18 29,529 133,339 33,339 33,339 132,690 32,690 32,690
19 32,065 137,224 37,224 37,224 141,205 41,205 41,205
20 34,719 141,451 41,451 41,451 146,075 46,075 46,075
Age
60 50,113 168,952 68,952 68,952 178,313 78,312 78,312
65 59,760 210,737 110,737 110,737 229,529 129,529 129,529
70 94,836 273,482 173,482 173,482 311,106 211,106 211,106
75 126,839 366,732 266,732 266,732 440,799 340,799 340,799
</TABLE>
(1) Assumes a $1,000.00 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 VUL 1 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 VUL 1 contract remains in force even though
the Cash Surrender Value is zero. The $1,000.00 premium illustrated is
greater than the Death Benefit Guarantee Premium for this VUL 1 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 VUL 1 contract would be
different from those shown above if the actual investment results applicable
to the VUL 1 contract average 0% over a period of years, but also fluctuated
above or below the average for individual Contract Years. No representation
can be made by us or by the Fund that these hypothetical returns can be
achieved for any one year, or sustained over any one year, or sustained over
any period of time.
<PAGE>
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD VARIABLE INSURANCE PRODUCTS COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE TO AGE 96
Male Issue Age: 35; Nonsmoker, $1,000.00 Annual Premium, $100,000 Face Amount
Option B--Level Death Benefit Option
Assumed Hypothetical Gross Annual Investment Rate of Return: 12%
[1] [2] [3] [4] [5] [6] [7] [8]
Premiums Assuming Guaranteed Costs (1)(2) Assuming Current Costs (1)(2)
Accumul. -------------------------------- ---------------------------------
End of at 5% Cash Cash
Cont. Interest Death Accumulated Surrender Death Accumulated Surrender
Year Per Year Benefit Value Value Benefit Value Value
------ -------- ------- ----------- --------- ------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 1,050 100,000 774 162 100,000 813 201
2 2,152 100,000 1,621 1,057 100,000 1,703 1,139
3 3,310 100,000 2,548 2,032 100,000 2,680 2,164
4 4,525 100,000 3,565 3,097 100,000 3,754 3,286
5 5,801 100,000 4,681 4,261 100,000 4,934 4,514
6 7,142 100,000 5,909 5,573 100,000 6,234 5,898
7 8,549 100,000 7,248 6,996 100,000 7,667 7,415
8 10,026 100,000 8,724 8,556 100,000 9,248 9,080
9 11,577 100,000 10,341 10,257 100,000 10,994 10,910
10 13,206 100,000 12,114 12,114 100,000 12,924 12,924
11 14,917 100,000 14,113 14,113 100,000 15,099 15,099
12 16,712 100,000 16,303 16,303 100,000 17,497 17,497
13 18,598 100,000 18,718 18,718 100,000 20,144 20,144
14 20,578 100,000 21,372 21,372 100,000 23,070 23,070
15 22,657 100,000 24,297 24,297 100,000 26,297 26,297
16 24,840 100,000 27,523 27,523 100,000 29,863 29,863
17 27,132 100,000 31,079 31,079 100,000 33,809 33,809
18 29,539 100,000 34,998 34,998 100,000 38,182 38,182
19 32,065 100,000 39,326 39,326 100,000 43,017 43,017
20 34,719 100,000 44,108 44,108 100,000 48,376 48,376
Age
60 50,113 103,407 77,169 77,169 114,614 85,533 85,533
65 69,760 161,284 132,200 132,200 179,944 147,495 147,495
70 94,836 256,855 221,426 221,416 289,551 249,613 249,613
75 126,839 392,693 367,002 367,002 447,977 418,670 418,670
</TABLE>
(1) Assumes a $1,000.00 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 VUL 1 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 VUL 1 contract remains in force even though
the Cash Surrender Value is zero. The $1,000.00 premium illustrated is
greater than the Death Benefit Guarantee Premium for this VUL 1 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 VUL 1 contract would be
different from those shown above if the actual investment results applicable
to the VUL 1 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.
period of time.
<PAGE>
APPENDIX D-2
DEFERRED ADMINISTRATIVE CHARGES
PER $1,000 OF FACE AMOUNT
VUL 1 CONTRACTS
The following tables include the maximum Deferred Administrative Charge Per
$1,000 of Face Amount that will apply under a VUL 1 contract. The specific
maximum charge applicable to a VUL 1 contract at issuance can be determined
from the attached tables based upon the initial Face Amount, the Insured's
Attained Age at VUL 1 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 VUL 1
contract will be determined from Table 1. The lower maximum charges shown
in Table 2 apply to VUL 1 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.
<PAGE>
TABLE 1
FACE AMOUNTS OF LESS THAN $250,000
Maximum Deferred
Administrative Charges Per $1,000 of Face Amount
Attained Age at Date of Issuance Standard
or Effective Date of Requested (Attained Age
Increase, As Appropriate under 20) Smoker
Nonsmoker
-------------------------------- ------------ ------ --------
- -
0-4 $3.60
5-9 $3.60
10-14 $4.80
15-19 $4.80
20-24 $6.00 $4.80
25-29 $6.00 $4.80
30-34 $7.20 $4.80
35-39 $7.20 $4.80
40-44 $7.20 $6.00
45-49 $8.40 $6.00
50-54 $8.40 $7.20
55-59 $8.40 $7.20
60-64 $8.40 $8.40
65-69 $8.40 $8.40
70-74 $8.40 $8.40
75-80 $8.40 $8.40
<PAGE>
TABLE 2
FACE AMOUNTS OF $250,000 OR MORE
Maximum Deferred
Administrative Charges Per $1,000 of Face Amount
Attained Age at Date of Issuance Standard
or Effective Date of Requested (Attained Age
Increase, As Appropriate under 20) Smoker
Nonsmoker
-------------------------------- ------------ ------ --------
- -
0-4 $2.40
5-9 $2.40
10-14 $3.60
15-19 $3.60
20-24 $4.80 $3.60
25-29 $4.80 $3.60
30-34 $6.00 $3.60
35-39 $6.00 $3.60
40-44 $6.00 $4.80
45-49 $6.00 $4.80
50-54 $6.00 $6.00
55-59 $6.00 $6.00
60-64 $6.00 $6.00
65-69 $6.00 $6.00
70-74 $6.00 $6.00
75-80 $6.00 $6.00
<PAGE
APPENDIX D-3
Initial Monthly Administrative Charges
Per $1,000 of Face Amount
VUL 1 Contracts
The following tables include the Initial Monthly Administrative Charge for
$1,000 of Face Amount that will apply under a VUL 1 contract. The specific
charge applicable to a VUL 1 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, whether the Insured is a smoker or non-smoker. 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 Initial Monthly Administrative Charge applicable to a VUL 1
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.
<PAGE
TABLE 1
FACE AMOUNTS OF LESS THAN $250,000
Initial Monthly Administrative Charges
Per $1,000 of Face Amount
Attained Age at Date of Issuance Standard
or Effective Date of Requested (Attained Age
Increase, As Appropriate under 20) Smoker Nonsmoker
-------------------------------- ------------ ------ ---------
0-4 $0.03
5-9 $0.03
10-14 $0.04
15-19 $0.04
20-24 $0.05 $0.04
25-29 $0.05 $0.04
30-34 $0.06 $0.05
35-39 $0.06 $0.04
40-44 $0.06 $0.05
45-49 $0.07 $0.05
50-54 $0.07 $0.06
55-59 $0.07 $0.06
60-64 $0.07 $0.07
65-69 $0.07 $0.07
70-74 $0.07 $0.07
75-80 $0.07 $0.07
<PAGE>
TABLE 2
FACE AMOUNTS OF $250,000 OR MORE
Initial Monthly Administrative Charges
Per $1,000 of Face Amount
Attained Age at Date of Issuance Standard
or Effective Date of Requested (Attained Age
Increase, As Appropriate under 20) Smoker Nonsmoker
-------------------------------- ------------ ------ ---------
0-4 $0.02
5-9 $0.02
10-14 $0.03
15-19 $0.03
20-24 $0.04 $0.03
25-29 $0.04 $0.03
30-34 $0.05 $0.03
35-39 $0.05 $0.03
40-44 $0.05 $0.04
45-49 $0.05 $0.04
50-54 $0.05 $0.05
55-59 $0.05 $0.05
60-64 $0.05 $0.05
65-69 $0.05 $0.05
70-74 $0.05 $0.05
75-80 $0.05 $0.05
<PAGE>
Part II
UNDERTAKINGS
Undertaking required by Section 26(e)(1) of the Investment Company Act of
1940.
Lutheran Brotherhood Variable Insurance Products Company hereby represents
that, as to the flexible premium variable life contracts that are the
subject of this registration statement, File Number 33-3243, that the fees
and charges deducted under the contracts, in the aggregate, are reasonable
in relation to the services rendered, the expenses expected to be incurred
and the risks assumed by Lutheran Brotherhood Variable Insurance Products
Company.
CONTENTS OF AMENDMENT TO REGISTRATION STATEMENT
This Post-Effective Amendment No. 21 to the Registration Statement comprises
the following papers and documents:
The facing sheet.
The general form of Prospectus, consisting of __ pages.
The signatures (including Powers of Attorney).
Written consents of the following persons:
Actuary - filed as Exhibit 6. (7)
Accountant - filed as Exhibit 10. (7)
Counsel - filed as Exhibit 11. (7)
The following exhibits:
1. The following exhibits correspond to those required by paragraph A of
the instructions as to exhibits in Form N-8B-2:
A. (1) Resolutions of Board of Directors of Lutheran Brotherhood
Variable Insurance Products Company ("LBVIP") establishing the
LBVIP Variable Insurance Account ("the Account"). (1)
(2) Not Applicable.
(3) (a) Sales Agreement between Lutheran Brotherhood Securities
Corp. ("LBSC") and LBVIP. (2)
(b) Form of Agreement between LBSC and agents with respect to
the sale of the Contracts. (2)
(c) Schedules of sales commissions. (2)
(4) Service Agreement between Lutheran Brotherhood and LBVIP. (2)
(5) (a) Form of Contract. (6)(3)
(b) Available Contract Riders. (6)(3)
(6) (a) Articles of Incorporation of LBVIP. (1)
(b) Bylaws of LBVIP. (1)
(7) Not Applicable.
(8) See Exhibit 1.A.(3)(a).
(9) Not Applicable.
(10) Contract Application Form. (2)
2. See Exhibit 1.A.(5)(a).
3. Opinion of Counsel as to the legality of the securities being registered
(including written consent). (5)
4. None.
5. Not Applicable.
6. Actuarial Opinion and Consent. (7)
7. Actuarial basis of cash value adjustment pursuant to Rule 6e-
3(T)(b)(13)(v)(B) under the 1940 Act. (2)
8. Procedures Memorandum pursuant to Rule 6e-3(T)(b)(12)(ii) under the 1940
Act. (2)
9. Pursuant to Rule 6e-3(T)(b)(13)(iii)(F)(3) under the 1940 Act, brief
description of methodology used to support the representation made
regarding the level of the Mortality Risk Charge and the Expense Risk
Charge pursuant to Rule 6e-3(T)(b)(13)(iii)(F)(2) under the 1940 Act.
(1)
10. Accountant's Consent. (7)
11. Counsel's Consent. (7)
________________________________
(1) Included in the Registration Statement on Form S-6, Registration No.
33-3243, filed by the Account pursuant to the Securities Act of 1933, as
amended, on February 11, 1986.
(2) Included in Pre-Effective Amendment No. 1 to the Registration Statement
on Form S-6, Registration No. 33-3243, filed by the Account pursuant to the
Securities Act of 1933, as amended, on September 29, 1986.
(3) Included in Post-Effective Amendment No. 10 to the Registration
Statement on Form S-6, Registration No. 33-3243, filed by the Account
pursuant to the Securities Act of 1933, as amended, on May 3, 1991.
(4) Included in Post-Effective Amendment No. 12 to the Registration
Statement on Form S-6, Registration No. 33-3243, filed by the Account
pursuant to the Securities Act of 1933, as amended, on March 2, 1992.
5) Included in Post-Effective Amendment No. 16 to the Registration
Statement on Form S-6, Registration No. 33-3243, filed by the Account
pursuant to the Securities Act of 1933, as amended, on April 29, 1994.
(6) Included in Post-Effective Amendment No. 20 to the Registration
Statement on Form S-6, Registration No. 33-3243, filed by the Account
pursuant to the Securities Act of 1933, as amended, on February 28, 1997.
(7) Filed herewith.
(8) To be filed by subsequent amendment.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it meets all of the requirements for effectiveness of this
amendment to the Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this amendment to the
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Minneapolis and State of Minnesota
on the 29th day of April 1997.
LBVIP VARIABLE INSURANCE ACCOUNT
(Registrant)
By LUTHERAN BROTHERHOOD VARIABLE
INSURANCE PRODUCTS COMPANY
(Depositor)
By /s/ Robert P. Gandrud
----------------------------
Robert P. Gandrud, President
Pursuant to the requirements of the Securities Act of 1933, the Depositor
has duly caused this Amendment to the Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Minneapolis and State of Minnesota on the 29th day of April, 1997.
LUTHERAN BROTHERHOOD VARIABLE
INSURANCE PRODUCTS COMPANY
(Depositor)
By /s/ Robert P. Gandrud
----------------------------
Robert P. Gandrud, President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed on the 29th day of April, 1997
by the following directors and officers of Depositor in the capacities
indicated:
/s/ Robert P. Gandrud President, Chairman (Chief Executive
---------------------- Officer)
Robert P. Gandrud
/s/ Bruce J. Nicholson Chief Financial Officer (Principal
---------------------- Financial Officer
Bruce J. Nicholson
/s/ Anita J.T. Young Treasurer (Principal Accounting Officer)
----------------------
Anita J.T. Young
Robert P. Gandrud
Bruce J. Nicholson A Majority of the
Rolf F. Bjelland Board of Directors
Paul R. Ramseth
William H. Reichwald
Otis F. Hilbert, by signing his name hereto, does hereby sign this document
on behalf of each of the above-named directors of Lutheran Brotherhood
Variable Insurance Products Company pursuant to powers of attorney duly
executed by such persons.
/s/ Otis F. Hilbert
---------------------------------
Otis F. Hilbert, Attorney-in-Fact
<PAGE>
LBVIP VARIABLE INSURANCE ACCOUNT
INDEX TO EXHIBITS
Exhibit Sequential Page
Number Exhibit Number
--------- ------- ---------------
6 Actuarial Opinion and Consent
10 Independent Accountant's Consent
11 Counsel Consent
625 Fourth Avenue South
Minneapolis, Minnesota 55415
[logo] LUTHERAN BROTHERHOOD
VARIABLE INSURANCE
PRODUCTS COMPANY EXHIBIT 6
April 29, 1997
To Whom It May Concern:
This opinion is furnished in connection with the registration by Lutheran
Brotherhood Variable Insurance Products Company of a flexible premium
variable life insurance contract ("Contract") under the Securities Act of
1933. The prospectus included in Post-effective Amendment Number 21 to
Registration Statement No. 33-3243 on Form S-6 describes the Contract. The
form of the Contract was designed under my supervision, and I am familiar
with the Registration Statement and Exhibits attached thereto.
In my opinion:
The illustration of Death Benefits, Accumulated Values and Cash Surrender
Values included in the section entitled, "Illustration of Death Benefits,
Accumulated Values and Cash Surrender Values" in Appendix A of the
prospectus, based on the assumptions stated on the illustrations, are
consistent with the provisions of the Contract. The pricing of the Contract
was not completed so as to make the relationship between premiums and
benefits, as shown in the illustrations, appear more favorable to a
prospective purchaser of the Contract for a male in the preferred class aged
35, than to prospective purchasers of the Contract for other premium
classes, for other ages, or for females.
The illustration of Death Benefits, Accumulated Values and Cash Surrender
Values included in the section entitled, "Illustration of Death Benefits,
Accumulated Values and Cash Surrender Values" in Appendix D of the
prospectus, based on the assumptions stated on the illustrations, are
consistent with the provisions of the Contract. The pricing of the Contract
was not completed so as to make the relationship between premiums and
benefits, as shown in the illustrations, appear more favorable to a
prospective purchaser of the Contract for a nonsmoker male aged 35, than to
prospective purchasers of the Contract for other premium classes, for other
ages, or for females.
I hereby consent to the use of this opinion as an exhibit to the
Registration Statement and to the reference to my name under the heading
"EXPERTS" in the Prospectus.
Sincerely,
/s/ Kenneth A. Dahlberg
Kenneth A. Dahlberg, FSA, MAAA
Managing Actuary
KAB:JMO\Exh-6-2
<PAGE>
EXHIBIT 10
3100 Multifoods Tower Telephone 612 332 7000
33 South Sixth Street Facsimile 612 332 6711
Minneapolis, MN 55402-3795
Price Waterhouse LLP [LOGO]
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Post-Effective Amendment No. 21 to the registration statement on Form S-6
(the "Registration Statement") of our report dated February 5, 1997,
relating to the financial statements of LBVIP Variable Insurance Account
which appears in such Prospectus. We also consent to the reference to us
under the heading "Experts" in such Prospectus.
We also consent to the use in such Prospectus of our report dated March 14,
1997, relating to the financial statements of Lutheran Brotherhood Variable
Insurance Products Company which appear in such Prospectus.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Minneapolis, Minnesota
April 29, 1997
625 Fourth Avenue South
Minneapolis, Minnesota 55415
[logo] LUTHERAN BROTHERHOOD
VARIABLE INSURANCE
PRODUCTS COMPANY EXHIBIT 11
April 29, 1997
Lutheran Brotherhood Variable
Insurance Products Company
625 Fourth Avenue South
Minneapolis, MN 55415
Ladies and Gentlemen:
I consent to the use of my name under the heading "Legal Matters" in the
Prospectuses constituting part of the Registration Statement, on Form S-6
(File No. 33-3243), of LBVIP Variable Insurance Account.
Very truly yours,
/s/ James M. Odland
James M. Odland
Assistant Secretary
(612) 340-5727
JMO:ah\exh-11
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the LBVIP
Variable Insurance Accout Annual Report to Shareholders dated December 31,
1996 and is qualified in its entirety by reference to such Annual Report.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 113,761,498
<INVESTMENTS-AT-VALUE> 130,849,428
<RECEIVABLES> 93,525
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 130,942,953
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 76,138
<TOTAL-LIABILITIES> 76,138
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 130,866,815
<DIVIDEND-INCOME> 4,839,444
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 696,499
<NET-INVESTMENT-INCOME> 4,142,945
<REALIZED-GAINS-CURRENT> 8,588,687
<APPREC-INCREASE-CURRENT> 3,677,666
<NET-CHANGE-FROM-OPS> 16,409,298
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,931,509
<NUMBER-OF-SHARES-REDEEMED> 2,600,734
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 29,441,652
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
