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SPINNAKER PLUS File Nos. 33-69600/811-4716
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / /
Pre-Effective Amendment No. / /
Post-Effective Amendment No. 3 /X/
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / /
Amendment No. 19 /X/
(Check appropriate box or boxes.)
SAFECO RESOURCE VARIABLE ACCOUNT B
(Exact Name of Registrant)
SAFECO Life Insurance Company
(Name of Depositor)
15411 N.E. 51st Street, Redmond, Washington 98052
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code (206) 867-8000
Name and Address of Agent for Service
WILLIAM E. CRAWFORD
15411 N.E. 51st Street
Redmond, Washington 98052
(206) 867-8257
Copies to:
JOAN E. BOROS, ESQ.
Katten Muchin & Zavis
1025 Thomas Jefferson Street, N.W.
Suite 700 East
Washington, DC 20007
(202) 625-3500
Approximate date of Proposed Public Offering . . . . . . As Soon as Practicable
after Effective Date
It is proposed that this filing will become effective:
X immediately upon filing pursuant to paragraph (b) of Rule 485
---
on ________, 1995 pursuant to paragraph (b) of Rule 485
---
60 days after filing pursuant to paragraph (a)(1) of Rule 485
---
on (date) pursuant to paragraph (a)(1) of Rule 485
---
If appropriate, check the following:
this post-effective amendment designates a new effective date for a
--- previously filed post-effective amendment.
Registrant has declared that it has registered an indefinite number or amount of
securities under the Securities Act of 1933 pursuant to Rule 24f-2 under the
Investment Company Act of 1940. Registrant filed a Rule 24f-2 Notice for the
fiscal year ending December 31, 1994 on or about February 28, 1995.
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SAFECO RESOURCE VARIABLE ACCOUNT B
REGISTRATION STATEMENT ON FORM N-4
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
Item No. Location
- -------- --------
PART A
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Item 1. Cover Page...................................... Cover Page
Item 2. Definitions..................................... Definitions
Item 3. Synopsis or Highlights.......................... Expense Table; Highlights
Item 4. Condensed Financial Information................. Schedule of Accumulation
Unit Values & Accumulation
Units Outstanding;
Performance Information
Item 5. General Description of Registrant,
Depositor, and Portfolio Companies.............. SAFECO; The
Separate Account;
SAFECO Resource
Series Trust; Insurance
Management Series;
Lexington Emerging
Markets Fund, Inc.;
Lexington Natural
Resources Trust; Scudder
Variable Life Investment
Fund;
Item 6. Deductions and Expenses......................... Charges and
Deductions; Expense
Table
Item 7. General Description of Variable
Annuity Contracts............................... Cover Page; Rights
under the Contract;
Purchasing a Contract
Item 8. Annuity Period.................................. Annuity and Death Benefit
Provisions
Item 9. Distribution Requirements....................... Annuity and Death B nefit
Provisions
Item 10. Purchases and Contract Value.................... Purchasing a Contract
Item 11. Redemptions..................................... Withdrawals and Transfers
Item 12. Taxes........................................... Tax Status
Item 13. Legal Proceedings............................... Legal Proceedings
Item 14. Table of Contents of the Statement of
Additional Information.......................... Table of Contents
of Statement of
Additional Information
</TABLE>
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<TABLE>
<CAPTION>
Item No. Location
- -------- --------
PART B
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Item 15. Cover Page...................................... Cover Page
Item 16. Table of Contents............................... Table of Contents
Item 17. General Information and History................. General Information
Item 18. Services........................................ Not Applicable
Item 19. Purchase of Securities Being Offered............ Not Applicable
Item 20. Underwriters.................................... General Information/
Distributor
Item 21. Calculation of Performance Data................. Additional Performance
Information
Item 22. Annuity Payments................................ Annuity Provisions
Item 23. Financial Statements............................ Financial Statements
</TABLE>
PART C
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Information required to be included in Part C is set forth under the appropriate
Item, so numbered, in Part C to this Registration Statement.
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PART A
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PROSPECTUS
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December 29, 1995 SAFECO LIFE INSURANCE COMPANY
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INDIVIDUAL SINGLE PURCHASE PAYMENT DEFERRED
VARIABLE ANNUITY CONTRACTS
issued by
SAFECO RESOURCE VARIABLE ACCOUNT B
and
SAFECO LIFE INSURANCE COMPANY
Home Office: Annuity Service Office:
SAFECO Life Insurance Company SAFECO Life Insurance Company
Pension Department Pension Department
15411 N.E. 51st Street P.O. Box 34690
Redmond, WA 98052 Seattle, WA 98124-1690
Telephone: 1-800-426-7649
Fax: 206-867-8793
The Individual Single Purchase Payment Deferred Variable Annuity Contracts (the
Contracts) described in this Prospectus provide for accumulation of Contract
Values and payment of monthly annuity payments on a fixed and variable basis.
The Contracts are designed for use by individuals in conjunction with retirement
plans on a Qualified or Non-Qualified basis. Some of the Portfolios listed below
may not be immediately available in states that have not yet approved the
corresponding Contract endorsements.
At the Owner's direction, Purchase Payments for the Contracts will be allocated
to a segregated investment account of SAFECO Life Insurance Company (SAFECO)
which has been designated SAFECO Resource Variable Account B (the Separate
Account) or to SAFECO's Fixed Account. Under certain circumstances, however,
Purchase Payments may initially be allocated to the SAFECO Resource Money Market
Sub-Account of the Separate Account. (See "Highlights.") The Separate Account
invests in shares of SAFECO Resource Series Trust (see "SAFECO Resource Series
Trust"), Insurance Management Series (see "Insurance Management Series"),
Lexington Emerging Markets Fund, Inc. (see "Lexington Emerging Markets Fund,
Inc."), Lexington Natural Resources Trust (see "Lexington Natural Resources
Trust"), and Scudder Variable Life Investment Fund (see "Scudder Variable Life
Investment Fund"). SAFECO Resource Series Trust currently consists of the SAFECO
Resource Equity, Growth, Northwest, Bond and Money Market Portfolios. Insurance
Management Series consists of six Portfolios, three of which are offered
hereunder; the Corporate Bond Fund ("Federated Corporate Bond Portfolio"), the
International Stock Fund ("Federated International Stock Portfolio") and the
Utility Fund ("Federated Utility Portfolio"). Lexington Emerging Markets Fund,
Inc. ("Lexington Emerging Markets Fund") and Lexington Natural Resources Trust
each currently consist of only one Portfolio which are offered hereunder; the
Lexington Emerging Markets Portfolio and the Lexington Natural Resources
Portfolio, respectively. Scudder Variable Life Investment Fund ("Scudder Fund")
consists of five Portfolios, two of which are offered hereunder;the Scudder
Balanced Portfolio and the Scudder International Portfolio. See "Highlights" and
"Tax Status - Diversification" for a discussion of owner control of the
underlying investments in a variable annuity contract.
This Prospectus concisely sets forth the information a prospective investor
should know before investing. Additional information about the Contracts is
contained in the Statement of Additional Information which is available at no
charge. The Table of Contents of the Statement of Additional Information can be
found on page 38 of this Prospectus. Some of the discussions contained in this
Prospectus will refer to the more detailed description contained in the
Statement of Additional Information which is incorporated by reference in this
Prospectus. For the Statement of Additional Information, call l-800-426-7649 or
write to the Annuity Service Office address above.
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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 THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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THIS PROSPECTUS SHOULD BE RETAINED FOR FUTURE REFERENCE.
This prospectus and the Statement of Additional Information are dated December
29, 1995.
INQUIRIES: Any inquiries should be made by telephone to the number listed on the
cover page of the Prospectus or the representative from whom this Prospectus was
obtained. All other questions should be directed to the annuity Service Office,
1-800-426-7649 listed on the cover page of this Prospectus.
TABLE OF CONTENTS
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Page
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Definitions............................................................... 5
Highlights................................................................ 6
Expense Table............................................................. 8
Schedule of Accumulation Unit Values and
Accumulation Unit Values Outstanding................................... 14
Financial Statements...................................................... 15
Performance Information................................................... 15
All Sub-Accounts (Other than SAFECO Resource Money Market Sub-Account). 15
SAFECO Resource Money Market Sub-Account............................... 15
Rankings............................................................... 16
SAFECO.................................................................... 16
The Separate Account...................................................... 16
SAFECO Resource Equity Sub-Account..................................... 17
SAFECO Resource Growth Sub-Account..................................... 17
SAFECO Resource Northwest Sub-Account.................................. 17
SAFECO Resource Bond Sub-Account....................................... 17
SAFECO Resource Money Market Sub-Account............................... 17
Federated Corporate Bond Sub-Account................................... 18
Federated International Stock Sub-Account.............................. 18
Federated Utility Sub-Account.......................................... 18
Lexington Emerging Markets Sub-Account................................. 18
Lexington Natural Resources Sub-Account................................ 19
Scudder Balanced Sub-Account........................................... 19
Scudder International Sub-Account...................................... 20
SAFECO Resource Series Trust.............................................. 20
Insurance Management Series............................................... 20
Lexington Emerging Markets Fund, Inc...................................... 20
</TABLE>
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<TABLE>
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Lexington Natural Resources Trust......................................... 20
Scudder Variable Life Investment Fund..................................... 20
Voting Rights............................................................. 21
Substitution of Securities................................................ 21
Purchasing a Contract..................................................... 21
Purchase Payments...................................................... 21
Allocation of Purchase Payments........................................ 22
Accumulation Unit...................................................... 22
Principal Underwriter.................................................. 23
Charges and Deductions.................................................... 23
Deduction for Premium and Other Taxes.................................. 23
Deduction for Mortality and Expense Risk Charge........................ 23
Deduction for Contingent Deferred Sales Charge......................... 24
Reduction or Elimination of the Contingent Deferred Sales Charge....... 24
Deduction for Withdrawal Charge........................................ 25
Deduction for Transfer Charge.......................................... 25
Other Expenses......................................................... 25
Rights Under the Contract................................................. 25
Owner, Annuitant and Beneficiary....................................... 25
Misstatement of Age.................................................... 26
Evidence of Survival................................................... 26
Contract Settlement.................................................... 26
Substitute Payee....................................................... 26
Non-Assignment......................................................... 26
Modification of the Contracts.......................................... 26
Termination of Contract................................................ 26
Annuity and Death Benefit Provisions...................................... 26
Selection and Change of Settlement Options............................. 26
Payment of Benefits.................................................... 27
Frequency and Amount of Annuity Payments............................... 27
Death of Owner Prior to Annuity Date................................... 27
Death of Annuitant..................................................... 28
Death of Owner After Annuity Date...................................... 28
Settlement Options..................................................... 28
Mortality and Expense Guarantee........................................ 29
Withdrawals and Transfers................................................. 29
Withdrawals............................................................ 29
Transfers.............................................................. 30
Transfers by Written Request........................................ 30
Transfers by Telephone.............................................. 30
Suspension of Payments or Transfers.................................... 31
Other Services............................................................ 31
The Programs........................................................... 31
Dollar Cost Averaging Program.......................................... 31
Automatic Transfer Program............................................. 32
Appreciation or Interest Sweep Program................................. 32
</TABLE>
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<TABLE>
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Sub-Account Rebalancing Program........................................ 32
Systematic Investment Program.......................................... 33
Periodic Withdrawal Program............................................ 33
Tax Status................................................................ 33
Note................................................................... 33
General................................................................ 34
Diversification........................................................ 34
Multiple Contracts..................................................... 35
Tax Treatment of Assignments........................................... 35
Income Tax Withholding................................................. 35
Tax Treatment of Withdrawals - Non-Qualified Contracts................. 36
Qualified Plans........................................................ 36
Tax Treatment of Withdrawals - Qualified Contracts..................... 37
Tax-Sheltered Annuities - Withdrawal Limitations....................... 37
Legal Proceedings......................................................... 38
Table of Contents of the Statement of Additional Information.............. 38
</TABLE>
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DEFINITIONS
ACCUMULATION UNIT - An accounting unit of measure used to calculate the value of
a Sub-Account prior to the Annuity Date.
ANNUITANT - The natural person on whose life Annuity payments are payable. The
Contract will not be issued if the Annuitant is 76 years of age or older on the
Contract Date.
ANNUITY - Any series of payments starting on the Annuity Date.
ANNUITY DATE - The date selected by the Owner for commencing Annuity payments
under the Contract. The day of the month on which the payments will be made will
be determined by SAFECO. The Annuity Date cannot be later than the date the
Annuitant attains age 85.
ANNUITY UNIT - An accounting unit of measure used to calculate Annuity payments
after the Annuity Date.
BENEFICIARY - The person or persons entitled to receive benefits under the
Contract upon the death of the Owner.
CONTRACT ANNIVERSARY - Any anniversary of the Contract Date.
CONTRACT DATE - The earlier of the date on which the initial Purchase Payment is
allocated to the Separate Account or the Fixed Account.
CONTRACT VALUE - The sum of the Owner's interest in the Sub-Accounts of the
Separate Account and the Fixed Account.
CONTRACT YEAR - The twelve month period which commences on the Contract Date and
each succeeding twelve month period thereafter.
ELIGIBLE INVESTMENT(S) - An investment entity in which a Sub-Account invests as
an underlying investment of the Contract.
FIXED ACCOUNT - SAFECO's General Account, referred to in the Contract as the
"Fixed Account," consists of the total Purchase Payments received by SAFECO
under a fixed annuity rider to the Contract and not previously withdrawn, plus
interest on each such Purchase Payment, less any applicable charges and
deductions. Purchase Payments allocated to the Fixed Account will become part of
the general corporate fund of SAFECO to be so used and invested consistent with
state insurance laws and will not be segregated from SAFECO's other assets.
FUNDS - The funding vehicles for the Separate Account, other than the Trust:
Certain portfolios of Insurance Management Series; Lexington Emerging Markets
Fund, Inc.; Lexington Natural Resources Trust; and Scudder Variable Life
Investment Fund.
NET PURCHASE PAYMENT - Purchase Payment less premium taxes.
NON-QUALIFIED CONTRACTS - Contracts issued under Non-Qualified Plans which do
not receive favorable tax treatment under Sections 403(b) or 408 of the Internal
Revenue Code.
OWNER - The person(s) or entity named in the Application who/which has all
rights under the Contract. Joint Owners are allowed only if the joint Owners are
spouses. Each joint Owner shall have equal ownership rights and must jointly
exercise those rights.
PORTFOLIO - A segment of an Eligible Investment which constitutes a separate and
distinct class of shares.
PURCHASE PAYMENTS - Payments made to purchase Accumulation Units or which are
allocated to the Fixed Account.
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QUALIFIED CONTRACTS - Contracts issued under Qualified Plans which receive
favorable tax treatment under Sections 403(b) or 408 of the Internal Revenue
Code.
SAFECO - SAFECO Life Insurance Company at its Annuity Service Office shown on
the cover page of this Prospectus.
SEPARATE ACCOUNT - A separate investment account of SAFECO, designated as SAFECO
Resource Variable Account B, into which Purchase Payments or Contract Values may
be allocated. The Separate Account is divided into Sub-Accounts.
TRUST - SAFECO Resource Series Trust, one of the Eligible Investments for the
Separate Account.
VALUATION DATE - Each day that the New York Stock Exchange is open for business,
which is Monday through Friday, except for New Year's Day, President's Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.
VALUATION PERIOD - The period commencing at the close of business on each
Valuation Date and ending at the close of business for the next succeeding
Valuation Date.
WITHDRAWAL - Any payment, including Contract charges and deductions, from the
Contracts.
HIGHLIGHTS
The Contracts described in this Prospectus provide for accumulation of Contract
Values and payment of monthly annuity payments on a fixed and variable basis.
At the Owner's direction, Purchase Payments for the Contracts are allocated to a
segregated investment account of SAFECO, which account has been designated
SAFECO Resource Variable Account B, or to the Fixed Account. (See "Definitions -
Fixed Account.") Under certain circumstances, however, Purchase Payments may
initially be allocated to the SAFECO Resource Money Market Sub-Account of the
Separate Account (see below). The assets of the Separate Account are the
property of SAFECO and obligations arising under the Contracts are SAFECO's
general corporate obligations.
The Separate Account is divided into Sub-Accounts, with the assets of each
Sub-Account invested in one Portfolio of the Trust or the Funds. The Trust and
the Funds are open-end, diversified, management investment companies. There are
currently five Portfolios available to the Separate Account under the Trust: the
SAFECO Resource Equity, Growth, Northwest, Bond and Money Market Portfolios.
There are currently three Portfolios available to the Separate Account under the
Insurance Management Series: the Federated Corporate Bond Portfolio, the
Federated International Stock Portfolio and the Federated Utility Portfolio. The
Lexington Emerging Markets Portfolio is currently the only Portfolio of the
Emerging Markets Fund available to the Separate Account. The Lexington Natural
Resources Portfolio is currently the only Portfolio of the Lexington Natural
Resources Trust available to the Separate Account. There are currently two
Portfolios available to the Separate Account under the Scudder Fund: the Scudder
Balanced Portfolio and the Scudder International Portfolio. Each Portfolio of
the Trust and the Funds has different investment objectives. Owners bear the
investment risk for all amounts allocated to the Separate Account. For more
information on the Trust and each of the Funds and their respective Portfolios,
please see "SAFECO Resource Series Trust," "Insurance Management Series,"
"Lexington Emerging Markets Fund, Inc." "Lexington Natural Resources Trust," and
"Scudder Variable Life Investment Fund," and the Prospectuses for the Trust and
the Funds which accompany and should be read with this Prospectus.
Within ten (10) days of the date of receipt of the Contract by the Owner, or a
longer period as may be required by the state of issuance, it may be returned by
delivering or mailing it to SAFECO at its Annuity Service Office or to the agent
through whom it was purchased. When the Contract is received by SAFECO, it will
be voided as if it had never been in force and SAFECO will refund the Contract
Value (which may be more or less than the
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Purchase Payments) computed at the end of the Valuation Period during which the
Contract is received by SAFECO. However, in states where required and in the
case of Contracts purchased pursuant to an Individual Retirement Annuity, SAFECO
will refund the Purchase Payments rather than the Contract Value. Initial
Purchase Payments are allocated to the appropriate Sub-Account(s) in accordance
with the election made by the Owner in the Application. SAFECO reserves the
right, however, to allocate all initial Purchase Payments to the SAFECO Resource
Money Market Sub-Account until the expiration of fifteen (15) days from the date
the first Purchase Payment is received (except for any Purchase Payment to be
allocated to the Fixed Account as elected by the Owner). If SAFECO chooses to
automatically allocate Purchase Payments to the SAFECO Resource Money Market
Sub-Account, SAFECO will refund the greater of Purchase Payments or the Contract
Value. Upon the expiration of the fifteen day period, the Sub-Account Value of
the SAFECO Resource Money Market Sub-Account will be allocated to the
appropriate Sub-Account(s) in accordance with the election made by the Owner in
the Application. Various charges and deductions from Purchase Payments and the
Separate Account are described below.
A Contingent Deferred Sales Charge (sales load) may be deducted in the event of
a Withdrawal of all or a portion of the Contract Value. The Contingent Deferred
Sales Charge is imposed on Withdrawals made in the first eight (8) Contract
Years and is assessed as a percentage of the amount withdrawn. The maximum
Contingent Deferred Sales Charge is 8% of the amount withdrawn. An Owner may
make Withdrawals in any Contract Year of up to 10% of the Contract Value free
from the Contingent Deferred Sales Charge. There are certain other additional
instances in which this Charge is not applied. (See "Charges and Deductions -
Deduction for Contingent Deferred Sales Charge.") SAFECO deducts a Withdrawal
Charge which is equal to the lesser of $25 or 2% of the amount withdrawn for
each Withdrawal after the first in any Contract Year. (See "Charges and
Deductions - Deduction for Withdrawal Charge.")
There is a deduction made for the Mortality and Expense Risk Charge computed on
a daily basis which is equal, on an annual basis, to 1.25% of the average daily
net asset value of the Separate Account. This Charge compensates SAFECO for
assuming the mortality and expense risks under the Contracts. (See "Charges and
Deductions - Deduction for Mortality and Expense Risk Charge.")
Under certain circumstances, a Transfer Charge may be assessed when an Owner
transfers Contract Values from one Sub-Account to another Sub-Account or to or
from the Fixed Account. (See "Charges and Deductions - Deduction for Transfer
Charge.")
Premium taxes or other taxes payable to a state or other governmental entity
will be charged against the Contract Values with respect to Non-Qualified
Contracts. SAFECO reserves the right to deduct these taxes from Contract Values
with respect to Qualified Contracts. (See "Charges and Deductions - Deduction
for Premium and Other Taxes.")
There are deductions from and expenses paid out of the assets of the Trust and
the Funds. See the accompanying Trust and Funds Prospectuses.
There is a ten percent (10%) federal income tax penalty applied to the income
portion of any premature distribution from Non-Qualified Contracts. However, the
penalty is not imposed on amounts received: (a) after the taxpayer reaches age
59 1/2; (b) after the death of the Owner; (c) if the taxpayer is totally
disabled (for this purpose disability is as defined in Section 72(m)(7) of the
Internal Revenue Code of 1986, as amended (the "Code")); (d) in a series of
substantially equal periodic payments made not less frequently than annually for
the life (or life expectancy) of the taxpayer or for the joint lives (or joint
life expectancies) of the taxpayer and his or her Beneficiary; (e) under an
immediate annuity; or (f) which are allocable to purchase payments made prior to
August 14, 1982. For federal income tax purposes, withdrawals are deemed to be
on a last-in, first-out basis. Separate tax withdrawal penalties and
restrictions apply to Qualified Contracts. (See "Tax Status - Tax Treatment of
Withdrawals - Qualified Contracts.") For a further discussion of the taxation of
the Contracts see "Tax Status."
Withdrawals of amounts attributable to contributions made pursuant to a salary
reduction agreement (as defined in Section 403(b)(11) of the Code) are limited
to circumstances only when the Owner attains age 59 1/2, separates from service,
dies, becomes disabled (within the meaning of Section 72(m)(7) of the Code) or
in the case of hardship. Withdrawals for hardship are restricted to the portion
of the Owner's Contract Value which represents
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contributions made by the Owner and does not include any investment results. The
limitations on withdrawals became effective on January 1, 1989, and apply only
to: (1) salary reduction contributions made after December 31, 1988; (2) income
attributable to such contributions; and (3) income attributable to amounts held
as of December 31, 1988. The limitations on withdrawals do not affect rollovers
or transfers between certain Qualified Plans. Tax penalties may also apply. (See
"Tax Status - Tax Treatment of Withdrawals - Qualified Contracts.") Owners
should consult their own tax counsel or other tax adviser regarding any
distributions. (See "Tax Status - Tax-Sheltered Annuities - Withdrawal
Limitations.")
The Treasury Department has indicated that guidelines may be forthcoming under
which a variable annuity contract will not be treated as an annuity contract for
tax purposes if the owner of the contract has excessive control over the
investments underlying the contract. The issuance of such guidelines may require
SAFECO to impose limitations on an Owner's right to control the investment. It
is not known whether any such guidelines would have a retroactive effect (See
"Tax Status - Diversification").
Because of certain exemptive and exclusionary provisions, interests in the Fixed
Account are not registered under the Securities Act of 1933 and the Fixed
Account is not registered as an investment company under the Investment Company
Act of 1940, as amended. Accordingly, neither the Fixed Account nor any
interests therein are subject to the provisions of these Acts, and SAFECO has
been advised that the staff of the Securities and Exchange Commission has not
reviewed the disclosures in the Prospectus relating to the Fixed Account.
Disclosures regarding the Fixed Account may, however, be subject to certain
generally applicable provisions of the federal securities laws relating to the
accuracy and completeness of statements made in prospectuses.
E X P E N S E T A B L E +
SAFECO RESOURCE VARIABLE ACCOUNT B
+ The information in this Expense Table set forth below with respect to the
Portfolios was provided to the Separate Account by the Portfolios and such
information was not independently verified by the Separate Account.
CONTRACT OWNER TRANSACTION EXPENSES:
DEFERRED SALES Contingent Deferred Sales Charge (as a percentage of amount
withdrawn)*: This charge applies to Withdrawals in any Contract
Year which exceed 10% of the Owner's Contract Value:
Contract Year 1 8% of amount withdrawn
Contract Year 2 7% of amount withdrawn
Contract Year 3 6% of amount withdrawn
Contract Year 4 5% of amount withdrawn
Contract Year 5 4% of amount withdrawn
Contract Year 6 3% of amount withdrawn
Contract Year 7 2% of amount withdrawn
Contract Year 8 1% of amount withdrawn
After Contract Year 8 0% of amount withdrawn
* While the Contingent Deferred Sales Charge assesses a percentage of the amount
withdrawn according to the stated schedule, total Contingent Deferred Sales
Charges collected by SAFECO will not exceed 8.5% of the Purchase Payments made
under the Contract.
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SURRENDER FEES: Equal to the lesser of $25 or 2% of the amount
withdrawn for each Withdrawal after the first in any
Contract Year. Not deducted where the Owner is participating
in the Systematic Withdrawal program or is exercising a
Settlement Option.
EXCHANGE FEE: First 12 Transfers in a Contract Year are free.
Thereafter, SAFECO reserves the right to assess a Transfer
Charge which will be equal to the lesser of $10 or 2% of the
amount transferred. The charge is not imposed under the
Programs, subject to certain requirements.
SEPARATE ACCOUNT ANNUAL EXPENSES:
(AS A PERCENTAGE OF AVERAGE ACCOUNT VALUE)
<TABLE>
<S> <C>
Mortality and Expense Risk Fees 1.25%
----
Total Separate Account Annual Expenses 1.25%
SAFECO RESOURCE SERIES TRUST ANNUAL EXPENSES:
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees
SAFECO Resource Equity Portfolio .74%
SAFECO Resource Growth Portfolio .74%
SAFECO Resource Northwest Portfolio .74%
SAFECO Resource Bond Portfolio .74%
SAFECO Resource Money Market Portfolio .65%
Other Expenses*
SAFECO Resource Equity Portfolio .06%
SAFECO Resource Growth Portfolio .16%
SAFECO Resource Northwest Portfolio .00%
SAFECO Resource Bond Portfolio .00%
SAFECO Resource Money Market Portfolio .00%
Total Trust Annual Expenses
SAFECO Resource Equity Portfolio .80%
SAFECO Resource Growth Portfolio .90%
SAFECO Resource Northwest Portfolio .74%
SAFECO Resource Bond Portfolio .74%
SAFECO Resource Money Market Portfolio .65%
INSURANCE MANAGEMENT SERIES ANNUAL EXPENSES:
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees
Federated Corporate Bond Portfolio .00%
Federated International Stock Portfolio .52%
Federated Utility Portfolio .00%
Other Expenses**
Federated Corporate Bond Portfolio .80%
Federated International Stock Portfolio .73%
Federated Utility Portfolio .85%
</TABLE>
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<TABLE>
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Total Fund Annual Expenses**
Federated Corporate Bond Portfolio .80%
Federated International Stock Portfolio 1.25%
Federated Utility Portfolio .85%
LEXINGTON EMERGING MARKETS FUND, INC. ANNUAL EXPENSES:
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees .85%
Other Expenses*** .45%
Total Fund Annual Expenses*** 1.30%
LEXINGTON NATURAL RESOURCES TRUST ANNUAL EXPENSES:
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees 1.00%
Other Expenses**** .55%
Total Fund Annual Expenses**** 1.55%
SCUDDER VARIABLE LIFE INVESTMENT FUND ANNUAL EXPENSES:
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees
Scudder Balanced Portfolio .475%
Scudder International Portfolio .875%
Other Expenses*****
Scudder Balanced Portfolio .275%
Scudder International Portfolio .205%
Total Fund Annual Expenses*****
Scudder Balanced Portfolio .75%
Scudder International Portfolio 1.08%
</TABLE>
* Prior to May 5, 1994 SAFECO paid all other expenses of SAFECO Resource
Series Trust. Beginning on May 5, 1994 SAFECO will pay all other expenses
of the SAFECO Resource Portfolios of the Trust until a SAFECO Resource
Portfolio's assets reach $20 million. Once a SAFECO Resource Portfolio's
assets reach $20 million, the other expenses of the SAFECO Resource
Portfolio will be paid by such SAFECO Resource Portfolio. The SAFECO
Resource Equity Portfolio currently has assets in excess of $20 million. In
1994, other expenses incurred by the SAFECO Resource Equity Portfolio
equaled .04%. In 1995, it is anticipated that the SAFECO Resource Growth
Portfolio will also have assets in excess of $20 million. The Other
Expenses above and the Examples below of the SAFECO Resource Equity and
Growth Portfolios reflect expenses expected to be incurred in 1995. They
are only estimates. Other expenses actually incurred by the SAFECO Resource
Equity and Growth Portfolios in 1995 may vary.
** SAFECO has entered into a Participation Agreement with the Insurance
Management Series in connection with the Separate Account's investment in
the shares of the Insurance Management Series. Other Participating
Insurance Companies have entered into similar Participation Agreements with
the Insurance Management Series. For the six months ended June 30, 1995,
the adviser voluntarily waived or reimbursed
-10-
<PAGE> 15
expenses, as follows: Federated Corporate Bond Fund $116,027, absent
reimbursement $127,025; Federated Utility Fund $123,561, absent
reimbursement $144,557.
*** SAFECO has entered into a Participation Agreement with the Lexington
Emerging Markets Fund in connection with the Separate Account's investment
in the shares of the Lexington Emerging Markets Fund. Other Participating
Insurance Companies have entered into similar Participation Agreements with
the Lexington Emerging Markets Fund. For the six months ended June 30,
1995, the adviser voluntarily waived or reimbursed expenses, as follows:
Lexington Emerging Markets Fund $70,426, absent reimbursement $105,813.
**** SAFECO has entered into a Participation Agreement with the Lexington
Natural Resources Trust in connection with the Separate Account's
investment in the shares of the Lexington Natural Resources Trust. Other
Participating Insurance Companies have entered into similar Participation
Agreements with the Lexington Natural Resources Trust.
*****SAFECO has entered into a Participation Agreement with the Scudder Fund in
connection with the Separate Account's investment in the shares of the
Scudder Fund. Other insurance companies (together, with SAFECO,
collectively referred to herein as "Participating Insurance Companies")
have entered into similar Participation Agreements with the Scudder Fund.
For a period of five years from the date of execution of a Participation
Agreement with the Scudder Fund, and from year to year thereafter if agreed
to by the Participating Insurance Company and the Scudder Fund, each
Participating Insurance Company (including SAFECO) has agreed to reimburse
the Scudder Fund to the extent that annual operating expenses of the
Scudder Balanced Portfolio of the Scudder Fund exceed 0.75% of such
Portfolio's average annual net assets and to the extent that the annual
operating expenses of the Scudder International Portfolio of the Scudder
Fund exceed 1.50% of such Portfolio's average annual net assets. Under
these arrangements, no reimbursement of expenses of either of these
Portfolios was required of SAFECO for the year ended December 31, 1994.
For the year ended December 31, 1994, Scudder Investor Services, Inc. did
not impose a portion of its administrative fee due with respect to the
Scudder Balanced Portfolio. If such fee had been imposed, the percentages
shown for "Other Expenses" and for "Total Fund Annual Expenses" would have
been .305% and 0.78%, respectively, for the Scudder Balanced Portfolio.
<TABLE>
<CAPTION>
Examples for SAFECO Resource
- ----------------------------
Equity Sub-Account Year 1 Year 3 Year 5 Year 10
- ------------------ ------ ------ ------ -------
<S> <C> <C> <C> <C>
Assuming a 5% return on assets, you would pay
the following expenses on a $l,000 investment:
Assuming withdrawal at end of period .......... $ 95 $123 $151 $236
Assuming annuitization at end of period ....... $ 21 $ 64 $109 $236
Assuming no withdrawal ........................ $ 21 $ 64 $109 $236
<CAPTION>
Examples for SAFECO Resource
- ----------------------------
Bond Sub-Account Year 1 Year 3 Year 5 Year 10
- ---------------- ------ ------ ------ -------
<S> <C> <C> <C> <C>
Assuming a 5% return on assets, you would pay
the following expenses on a $l,000 investment:
Assuming withdrawal at end of period .......... $ 94 $121 $149 $232
Assuming annuitization at end of period ....... $ 20 $ 62 $107 $232
Assuming no withdrawal ........................ $ 20 $ 62 $107 $232
</TABLE>
-11-
<PAGE> 16
<TABLE>
<CAPTION>
Examples for SAFECO Resource
Money Market Sub-Account Year 1 Year 3 Year 5 Year 10
- ------------------------ ------ ------ ------ -------
<S> <C> <C> <C> <C>
Assuming a 5% return on assets, you would pay
the following expenses on a $1,000 investment:
Assuming withdrawal at end of period ........ $ 94 $119 $145 $222
Assuming annuitization at end of period ..... $ 19 $ 60 $103 $222
Assuming no withdrawal ...................... $ 19 $ 60 $103 $222
<CAPTION>
Examples for SAFECO Resource
Growth Sub-Account Year 1 Year 3 Year 5 Year 10
- ------------------ ------ ------ ------ -------
<S> <C> <C> <C> <C>
Assuming a 5% return on assets, you would pay
the following expenses on a $1,000 investment:
Assuming withdrawal at end of period ........ $ 96 $126 $157 $248
Assuming annuitization at end of period ..... $ 22 $ 67 $115 $248
Assuming no withdrawal ...................... $ 22 $ 67 $115 $248
<CAPTION>
Examples for SAFECO Resource
Northwest Sub-Account Year 1 Year 3 Year 5 Year 10
- --------------------- ------ ------ ------ -------
<S> <C> <C> <C> <C>
Assuming a 5% return on assets, you would
pay the following expenses on a
$1,000 investment:
Assuming withdrawal at end of period ........ $ 94 $121 $149 $232
Assuming annuitization at end of period ..... $ 20 $ 62 $107 $232
Assuming no withdrawal ...................... $ 20 $ 62 $107 $232
<CAPTION>
Examples for Federated Corporate Bond Sub-Account Year 1 Year 3 Year 5 Year 10
- ------------------------------------------------- ------ ------ ------ -------
<S> <C> <C> <C> <C>
Assuming a 5% return on assets, you would pay
the following expenses on a $1,000 investment:
Assuming withdrawal at end of period ........ $ 95 $123 $152 $238
Assuming annuitization at end of period ..... $ 21 $ 64 $110 $238
Assuming no withdrawal ...................... $ 21 $ 64 $110 $238
<CAPTION>
Examples for
Federated International Stock Sub-Account Year 1 Year 3 Year 5 Year 10
- ----------------------------------------- ------ ------ ------ -------
<S> <C> <C> <C> <C>
Assuming a 5% return on assets, you would pay
the following expenses on a $1,000 investment:
Assuming withdrawal at end of period ........ $ 99 $136 $174 $284
Assuming annuitization at end of period ..... $ 25 $ 78 $133 $284
Assuming no withdrawal ...................... $ 25 $ 78 $133 $284
<CAPTION>
Examples for Federated Utility Sub-Account Year 1 Year 3 Year 5 Year 10
- ------------------------------------------ ------ ------ ------ -------
<S> <C> <C> <C> <C>
Assuming a 5% return on assets, you would pay
the following expenses on a $1,000 investment:
Assuming withdrawal at end of period ........ $ 95 $125 $154 $243
Assuming annuitization at end of period ..... $ 21 $ 66 $113 $243
Assuming no withdrawal ...................... $ 21 $ 66 $113 $243
<CAPTION>
Examples for
Lexington Emerging Markets Sub-Account Year 1 Year 3 Year 5 Year 10
- -------------------------------------- ------ ------ ------ -------
<S> <C> <C> <C> <C>
Assuming a 5% return on assets, you would pay
the following expenses on a $1,000 investment:
Assuming withdrawal at end of period ........ $100 $137 $176 $289
Assuming annuitization at end of period ..... $ 26 $ 79 $136 $289
Assuming no withdrawal ...................... $ 26 $ 79 $136 $289
</TABLE>
-12-
<PAGE> 17
<TABLE>
<CAPTION>
Examples for
Lexington Natural Resources Sub-Account Year 1 Year 3 Year 5 Year 10
- --------------------------------------- ------ ------ ------ -------
<S> <C> <C> <C> <C>
Assuming a 5% return on assets, you would pay
the following expenses on a $1,000 investment:
Assuming withdrawal at end of period ........ $102 $144 $188 $313
Assuming annuitization at end of period ..... $ 28 $ 87 $148 $313
Assuming no withdrawal ...................... $ 28 $ 87 $148 $313
<CAPTION>
Examples for Scudder Balanced Sub-Account Year 1 Year 3 Year 5 Year 10
- ----------------------------------------- ------ ------ ------ -------
<S> <C> <C> <C> <C>
Assuming a 5% return on assets, you would pay
the following expenses on a $1,000 investment:
Assuming withdrawal at end of period ........ $ 94 $122 $150 $233
Assuming annuitization at end of period ..... $ 20 $ 63 $108 $233
Assuming no withdrawal ...................... $ 20 $ 63 $108 $233
<CAPTION>
Examples for Scudder International Sub-Account Year 1 Year 3 Year 5 Year 10
- ---------------------------------------------- ------ ------ ------ -------
<S> <C> <C> <C> <C>
Assuming a 5% return on assets, you would pay
the following expenses on a $1,000 investment:
Assuming withdrawal at end of period ........ $ 98 $131 $166 $267
Assuming annuitization at end of period ..... $ 24 $ 73 $125 $267
Assuming no withdrawal ...................... $ 24 $ 73 $125 $267
</TABLE>
The information in the "Examples" is estimated and provided to assist the Owner
in understanding the various costs and expenses charged to an Owner's Contract
Value either directly or indirectly and reflects expenses of the Separate
Account, the Trust and the Fund. The Examples do not reflect premium taxes which
may be applicable. Contingent Deferred Sales Charges may be waived in certain
circumstances. For additional information, see "Charges and Deductions" in this
Prospectus for the Separate Account, "Management of the Trust" in the Prospectus
for the Trust, "Insurance Management Series Information" in the Prospectus for
the Insurance Management Series, "Management of the Fund" in the Prospectus for
the Lexington Emerging Markets Fund, and "Investment Adviser, Sub-Adviser and
Distributor" in the Prospectus for the Lexington Natural Resources Trust, and
"Investment Adviser" in the Prospectus for the Scudder Fund.
THE INFORMATION ABOVE IS NOT INTENDED TO BE REPRESENTATIVE OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
-13-
<PAGE> 18
SCHEDULE OF ACCUMULATION UNIT VALUES AND ACCUMULATION UNITS OUTSTANDING
SAFECO RESOURCE VARIABLE ACCOUNT B
The financial information on this page has been audited by Ernst & Young LLP,
independent auditors, whose report thereon appears in the Separate Account's
Statement of Additional Information. (See "Accumulation Unit" for more
information about the calculation of unit values.) Such information is not
included for the Federated Corporate Bond Sub-Account, Federated International
Stock Sub-Account, Federated Utility Sub-Account, Lexington Emerging Markets
Sub-Account and Lexington Natural Resources Sub-Account as these are new
Sub-Accounts.
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990 1989 1988 1987
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SAFECO RESOURCE EQUITY SUB-ACCOUNT
July 21 value
(initial public offering) $ 12.101
December 31 value $ 25.424 $ 23.630 $ 18.704 $ 17.520 $ 13.987 $ 14.937 $ 11.901 $ 9.588
December 31 units 2,125,903 1,402,021 920,315 611,236 362,309 266,682 223,680 205,352
SAFECO RESOURCE BOND SUB-ACCOUNT
July 21 value
(initial public offering) $ 10.126
December 31 value $ 15.559 $ 16.253 $ 14.882 $ 14.107 $ 12.532 $ 11.909 $ 10.835 $ 10.250
December 31 units 479,731 446,935 310,293 255,098 219,928 211,685 200,405 200,017
SAFECO RESOURCE MONEY MARKET SUB-ACCOUNT
July 21 value
(initial public offering) $ 10.083
December 31 value $ 13.837 $ 13.516 $ 13.335 $ 13.074 $ 12.527 $ 11.754 $ 10.923 $ 10.318
December 31 units 341,722 273,511 307,262 231,643 224,216 210,094 209,593 203,233
SAFECO RESOURCE GROWTH SUB-ACCOUNT
January 7 value
(initial public offering) $ 10.000
December 31 value $ 14.897 $ 13.480
December 31 units 421,837 56,074
SAFECO RESOURCE NORTHWEST SUB-ACCOUNT
January 7 value
(initial public offering) $ 10.000
December 31 value $ 10.156 $ 9.923
December 31 units 108,875 37,710
SCUDDER BALANCED SUB-ACCOUNT
August 3 value
(initial public offering) $ 9.886
December 31 value $ 10.066 $ 10.346
December 31 units 122,456 10,168
SCUDDER INTERNATIONAL SUB-ACCOUNT
August 3 value
(initial public offering) $ 9.335
December 31 value $ 10.519 $ 10.743
December 31 units 466,212 68,405
</TABLE>
-14-
<PAGE> 19
FINANCIAL STATEMENTS
The financial statements for the Separate Account and SAFECO are contained in
the Statement of Additional Information which is available at no charge by
calling 1-800-426-7649 or writing to the Annuity Service Office address on the
cover.
PERFORMANCE INFORMATION
In advertisements, the "yield," "effective yield," "total return" and "average
annual total return" of the Sub- Accounts may be quoted.
ALL SUB-ACCOUNTS (OTHER THAN SAFECO RESOURCE MONEY MARKET SUB-ACCOUNT)
"Yield" is the annualization on a 360-day basis of net income per unit over a
30-day period divided by the accumulation unit value on the last day of the
period. Yield figures are calculated by determining the income generated by an
investment in the Sub-Account over a 30-day period. The income is then
annualized by assuming that the income generated during the 30-day period
continues to be generated each month for a 12-month period and is shown as a
percentage of the investment. Yield figures will not include any applicable
Contingent Deferred Sales Charge.
"Total return" is the total percentage change in the unit value of an investment
over a stated period of time. "Average annual total return" is the annual
percentage change in the unit value of an investment over a stated period of
time. Both total return and average annual total return assume the reinvestment
of dividend and capital gains distributions.
Standardized total return figures which appear in advertisements or sales
literature will be calculated for required time periods based on a set initial
investment amount and include the Contingent Deferred Sales Charge. From time to
time, non-standardized total return figures may accompany the standardized
figures. Non-standardized total return figures may be calculated in a variety of
ways including but not necessarily limited to different time periods, different
initial investment amounts, additions of periodic payments, use of time weighted
average annual returns which take into consideration the length of time each
investment has been on deposit, and with or without the Contingent Deferred
Sales Charge. Non-standardized figures may cause the performance of the
Sub-Accounts to appear higher than performance calculated using standard
parameters.
SAFECO RESOURCE MONEY MARKET SUB-ACCOUNT
"Yield" is the annualization on a 365-day basis of the SAFECO Resource Money
Market Sub-Account's net income over a 7-day period. Yield figures are
calculated by determining the income generated by an investment in the Sub-
Account over a 7-day period. The income is then annualized by assuming that the
income generated during the 7-day period continues to be generated each week
for a 52-week period and is shown as a percentage of the investment.
"Effective yield" is the annualization, on a 365-day basis, of the Sub-Account's
net income over a 7-day period with dividends reinvested. The effective yield
will be slightly higher than the yield because of the compounding effect of this
assumed reinvestment.
As explained above, yield figures will not include any applicable Contingent
Deferred Sales Charge.
For the SAFECO Resource Money Market Portfolio, total return and average annual
total return are nonstandardized performance figures which may accompany the
standardized yield and effective yield. "Total return" is the total percentage
change in the unit value of an investment over a stated period of time and
"average annual total return" is the annual percentage change in the unit value
of an investment over a stated period of time. Nonstandardized total return and
average annual total return figures for the SAFECO Resource Money Market
Portfolio may be calculated in a variety of ways, as described above.
-15-
<PAGE> 20
RANKINGS
In addition to these performance figures, the Sub-Accounts may advertise
rankings as provided by the Lipper Variable Insurance Products Performance
Analysis Service published by Lipper Analytical Services, Inc. which monitors
separate account performance for variable annuity products such as the
Contracts, the VARDS Report which is a monthly variable annuity industry
analysis compiled by Variable Annuity Research & Data Service of Roswell,
Georgia and published by Financial Planning Resources, Inc. or the Variable
Annuity Performance Report published by Morningstar, Inc. which is also a
monthly analysis of variable annuity performance. Rankings provided by these
sources may or may not include all applicable charges.
Performance figures and quoted rankings are indicative only of past performance
and are not intended to represent future investment results.
SAFECO
SAFECO is a stock life insurance company which was organized under the laws of
the state of Washington on January 23, 1957. SAFECO writes individual and group
life, accident and health insurance and annuities. SAFECO is licensed to do
business in the District of Columbia and all states except New York. SAFECO is a
wholly-owned subsidiary of SAFECO Corporation which is a holding company whose
subsidiaries are engaged primarily in insurance and financial service
businesses. The home office of SAFECO is located at 15411 N.E. 51st Street,
Redmond, Washington 98052.
THE SEPARATE ACCOUNT
The Board of Directors of SAFECO adopted a resolution to establish a segregated
asset account pursuant to Washington insurance law on February 6, 1986. This
segregated asset account has been designated SAFECO Resource Variable Account B.
SAFECO has caused the Separate Account to be registered with the Securities and
Exchange Commission as a unit investment trust pursuant to the provisions of the
Investment Company Act of 1940. The Separate Account meets the definition of a
"separate account" under the federal securities laws.
The assets of the Separate Account are the property of SAFECO. However, the
assets of the Separate Account, equal to the reserves and other contract
liabilities with respect to the Separate Account, are not chargeable with
liabilities arising out of any other business SAFECO may conduct. Income, gains
and losses, whether or not realized, are in accordance with the Contracts
credited to or charged against the Separate Account without regard to other
income, gains or losses of SAFECO. SAFECO's obligations arising under the
Contracts are general corporate obligations. The investments of the Separate
Account will be valued at their fair market value in accordance with the
procedures approved by the Board of Directors of SAFECO and the Separate Account
committee.
The Separate Account is divided into Sub-Accounts, with the assets of each
Sub-Account invested in one of the Portfolio(s) of the Trust or the Funds.
Currently there are five SAFECO Resource Portfolios available under the Trust:
the SAFECO Resource Equity Portfolio, SAFECO Resource Growth Portfolio, SAFECO
Resource Northwest Portfolio, SAFECO Resource Bond Portfolio and SAFECO Resource
Money Market Portfolio. Currently there are three Portfolios available under the
Insurance Management Series: the Federated Corporate Bond Portfolio, the
Federated International Stock Portfolio and the Federated Utility Portfolio. The
Lexington Emerging Markets Portfolio is currently the only Portfolio of the
Emerging Markets Fund available to the Separate Account. The Lexington Natural
Resources Portfolio is currently the only Portfolio of the Lexington Natural
Resources Trust available to the Separate Account. There are two Portfolios
available under the Scudder Fund: the Scudder Balanced Portfolio and Scudder
International Portfolio. There is no assurance that the investment objective of
any of the Portfolios will be met. Owners bear the complete investment risk for
Purchase Payments allocated to a Sub-Account. Contract Values will fluctuate in
accordance with the investment performance of the Sub-Account(s) to which
Purchase Payments are allocated, and in accordance with the imposition of the
fees and charges assessed under the Contracts.
-16-
<PAGE> 21
SAFECO RESOURCE EQUITY SUB-ACCOUNT
The investment objective of the SAFECO Resource Equity Sub-Account is to seek
long-term growth of capital and reasonable current income.
The SAFECO Resource Equity Sub-Account invests in the SAFECO Resource Equity
Portfolio. To pursue its investment objective, the SAFECO Resource Equity
Portfolio ordinarily invests principally in common stocks or securities
convertible into common stocks. Fixed-Income securities may be purchased in
accordance with business and financial conditions.
SAFECO RESOURCE GROWTH SUB-ACCOUNT
The investment objective of the SAFECO Resource Growth Sub-Account is to seek
growth of capital and the increased income that ordinarily follows from such
growth.
The SAFECO Resource Growth Sub-Account invests in the SAFECO Resource Growth
Portfolio. To pursue its investment objective, the SAFECO Resource Growth
Portfolio will ordinarily invest a preponderance of its assets in common stocks
selected primarily for potential appreciation. To determine those common stocks
which have the potential for long-term growth, SAFECO Asset Management Company,
the Trust's investment adviser, will evaluate the issuer's financial strength,
quality of management and earnings power.
SAFECO RESOURCE NORTHWEST SUB-ACCOUNT
The investment objective of the SAFECO Resource Northwest Sub-Account is to seek
long-term growth of capital through investing primarily in Northwest companies.
The SAFECO Resource Northwest Sub-Account invests in the SAFECO Resource
Northwest Portfolio. To pursue its investment objective, the SAFECO Resource
Northwest Portfolio will invest at least 65% of its total assets in securities
issued by companies with their principal executive offices located in
Washington, Alaska, Idaho, Oregon or Montana.
The SAFECO Resource Northwest Portfolio will ordinarily invest its assets in
shares of common stock selected primarily for potential long-term appreciation.
The SAFECO Resource Northwest Portfolio may also occasionally invest in
securities convertible into common stock.
SAFECO RESOURCE BOND SUB-ACCOUNT
The investment objective of the SAFECO Resource Bond Sub-Account is to seek as
high a level of current income as is consistent with the relative stability of
capital.
The SAFECO Resource Bond Sub-Account invests in the SAFECO Resource Bond
Portfolio. To pursue its investment objective, the SAFECO Resource Bond
Portfolio invests primarily in medium-term debt securities. Although the SAFECO
Resource Bond Portfolio does not intend to purchase below investment grade bonds
during the coming year, it may hold up to 20% of total assets in bonds which are
downgraded after purchase to below investment grade quality by Standard & Poor's
Corporation or Moody's Investors Service, Inc. Below investment grade bonds are
commonly referred to as high-yield or "junk" bonds and have special risks
associated with them. See the Trust's Prospectus and Statement of Additional
Information for more information.
SAFECO RESOURCE MONEY MARKET SUB-ACCOUNT
The investment objective of the SAFECO Resource Money Market Sub-Account is to
seek as high a level of current income as is consistent with the preservation of
capital and liquidity through investments in high-quality money market
investments maturing in thirteen months or less.
-17-
<PAGE> 22
The SAFECO Resource Money Market Sub-Account invests in the SAFECO Resource
Money Market Portfolio which seeks to maintain a net asset value per share of
$1.00. SHARES OF THE SAFECO RESOURCE MONEY MARKET PORTFOLIO ARE NEITHER INSURED,
NOR GUARANTEED, BY THE U.S. GOVERNMENT. THERE IS NO ASSURANCE THAT THE SAFECO
RESOURCE MONEY MARKET PORTFOLIO WILL MAINTAIN A STABLE NET ASSET VALUE OF $1.00
PER SHARE.
FEDERATED CORPORATE BOND SUB-ACCOUNT
The investment objective of the Federated Corporate Bond Sub-Account is to seek
high current income.
The Federated Corporate Bond Sub-Account invests in the Federated Corporate Bond
Portfolio. To pursue its investment objective, the Federated Corporate Bond
Portfolio invests primarily in a diversified portfolio of professionally managed
fixed-income securities. The fixed-income securities in which the Federated
Corporate Bond Portfolio intends to invest are lower-rated corporate debt
obligations, which are commonly referred to as "junk bonds." Some of these
fixed-income securities may involve equity features. Capital growth will be
considered, but only when consistent with the investment objective of high
current income.
FEDERATED INTERNATIONAL STOCK SUB-ACCOUNT
The investment objective of the Federated International Stock Sub-Account is to
seek to obtain a total return on its assets.
The Federated International Stock Sub-Account invests in the Federated
International Stock Portfolio. To pursue its investment objective, the Federated
International Stock Portfolio invests in a diversified portfolio of equity
securities issued by non-U.S. issuers. The Federated International Stock
Portfolio will invest at least 65% of its total assets, and under normal market
conditions substantially all of its assets, in equity securities of issuers
located in at least three different countries outside of the United States. The
equity securities will be selected primarily for superior growth potential and
to reduce portfolio volatility. The Federated International Stock Portfolio may
purchase sponsored or unsponsored American Depository Receipts, Global
Depository Receipts, and European Depository Receipts; corporate and government
fixed income securities of issuers outside of the United States; convertible
securities; and options and financial futures contracts. While the Federated
International Stock Portfolio primarily invests in dividend-paying equity
securities of established companies that appear to have growth potential, it may
as a temporary defensive position, shift its emphasis to such other securities
if such investments appear to offer potential higher return.
FEDERATED UTILITY SUB-ACCOUNT
The investment objective of the Federated Utility Sub-Account is to seek high
current income and moderate capital appreciation.
The Federated Utility Sub-Account invests in the Federated Utility Portfolio. To
pursue its investment objective, the Federated Utility Portfolio invests
primarily in a professionally managed and diversified portfolio of equity and
debt securities of utility companies that produce, transmit, or distribute gas
and electric energy as well as those companies that provide communications
facilities, such as telephone and telegraph companies. Under normal market
conditions, the Federated Utility Portfolio invests at least 65% of its total
assets in securities of utility companies.
LEXINGTON EMERGING MARKETS SUB-ACCOUNT
The investment objective of the Lexington Emerging Markets Sub-Account is to
seek long-term growth of capital primarily through investment in equity
securities and equivalents of companies domiciled in, or doing business in,
emerging countries and emerging markets.
The Lexington Emerging Markets Sub-Account invests in the Lexington Emerging
Markets Portfolio. To pursue its investment objective, the Lexington Emerging
Markets Portfolio invests primarily in emerging country and emerging market
equity securities of all types of common stocks and equivalents (the following
constitute equivalents: convertible debt securities and warrants), although the
Portfolio also may invest in preferred stocks,
-18-
<PAGE> 23
bonds, and money market instruments of foreign and domestic companies, the U.S.
government, and its agencies. The Lexington Emerging Markets Portfolio, under
normal conditions, will invest at least 65% of its total assets in emerging
country and emerging market equity securities in at least three countries
outside of the U.S. and at all times will invest in a minimum of three countries
outside of the U.S. Investments in emerging country equity securities are not
subject to a maximum limit, and it is the intention of the Lexington Emerging
Markets Portfolio's adviser to invest substantially all of the Portfolio's
assets in such securities. For purposes of its investment objective, the
Lexington Emerging Markets Portfolio considers emerging country equity
securities to be any country whose economy and market the World Bank or United
Nations considers to be emerging or developing, and the Portfolio also may
invest in equity securities and equivalents, traded in any market, of companies
that derive 50% or more of their total revenue from either goods or services
produced in such emerging countries and emerging markets or sales made in such
countries.
LEXINGTON NATURAL RESOURCES SUB-ACCOUNT
The investment objective of the Lexington Natural Resources Sub-Account is to
seek long-term growth of capital through investing primarily in common stocks of
companies that own or develop natural resources and other basic commodities, or
supply goods and services to such companies.
The Lexington Natural Resources Sub-Account invests in the Lexington Natural
Resources Portfolio. To pursue its investment objective, the Lexington Natural
Resources Portfolio seeks to identify securities of companies that, in its
management's opinion, are undervalued relative to the value of natural resource
holdings of such companies in light of current and anticipated economic or
financial conditions. The Lexington Natural Resources Portfolio will consider a
company to have substantial natural resource assets when, in its management's
opinion, the company's holdings of the assets are of such magnitude, when
compared to the capitalization, revenues or operating profits of the company,
that changes in the economic value of the assets will affect the market price of
the equity securities of such company, which, generally, is when at least 50% of
the non-current assets, capitalization, gross revenues or operating profits of
the company in the most recent or current fiscal year are involved in or result
from, directly or indirectly through subsidiaries, exploring, mining, refining,
processing, fabricating, dealing in or owning natural resource assets. Up to 25%
of the Lexington Natural Resources Portfolio's total assets may be invested in
securities principally traded in markets outside the U.S.
SCUDDER BALANCED SUB-ACCOUNT
The investment objective of the Scudder Balanced Sub-Account is to seek a
balance of growth and income from a diversified portfolio of equity and fixed
income securities. The Scudder Balanced Sub-Account also seeks long-term
preservation of capital through a quality-oriented investment approach that is
designed to reduce risk.
The Scudder Balanced Sub-Account invests in the Scudder Balanced Portfolio. In
seeking its objectives of a balance of growth and income, as well as long-term
preservation of capital, the Scudder Balanced Portfolio invests in a diversified
portfolio of equity and fixed income securities. The Scudder Balanced Portfolio
invests, under normal circumstances, at least 50%, but no more than 75%, of its
net assets in common stocks and other equity investments. The Scudder Balanced
Portfolio's equity investments consist of common stocks, preferred stocks,
warrants and securities convertible into common stocks, of companies that, in
the investment adviser's judgment, are of above-average financial quality and
offer the prospect for above-average growth in earnings, cash flow, or assets
relative to the overall market as defined by the Standard and Poor's 500
Composite Stock Price Index. To enhance income and stability, the Scudder
Balanced Portfolio's remaining assets are allocated to bonds and other fixed
income securities, including cash reserves. The Scudder Balanced Portfolio will
normally invest 25% to 50% of its net assets in fixed income securities.
However, at least 25% of the Scudder Balanced Portfolio's net assets must always
be invested in fixed income securities.
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SCUDDER INTERNATIONAL SUB-ACCOUNT
The investment objective of the Scudder International Sub-Account is to seek
long-term growth of capital primarily through diversified holdings of marketable
foreign equity investments.
The Scudder International Sub-Account invests in the Scudder International
Portfolio. The Scudder International Portfolio invests in companies, wherever
organized, which do business primarily outside the United States. The Scudder
International Portfolio intends to diversify investments among several countries
and to have represented in its holdings business activities in not less than
three different countries. The Scudder International Portfolio invests primarily
in equity securities of established companies listed on foreign exchanges. It
may also invest in fixed income securities of foreign governments and companies.
SAFECO RESOURCE SERIES TRUST
The Trust has been established to act as one of the funding vehicles for the
Contracts offered. The investment adviser to the Trust is SAFECO Asset
Management Company, SAFECO Plaza, Seattle, Washington. The Trust is an open-end,
diversified, management investment company.
INSURANCE MANAGEMENT SERIES
The Insurance Management Series is one of the funding vehicles for the Contracts
offered. The investment adviser to the Insurance Management Series is Federated
Advisers, Federated Investors Tower, Pittsburgh, Pennsylvania. The Insurance
Management Series is an open-end, diversified management investment company.
LEXINGTON EMERGING MARKETS FUND, INC.
The Lexington Emerging Markets Fund is one of the funding vehicles for the
Contracts offered. The investment adviser to the Lexington Emerging Markets Fund
is Lexington Management Corporation, P.O. Box 1515/Park 80 West Plaza Two,
Saddle Brook, New Jersey. The Lexington Emerging Markets Fund is an open-end,
diversified management investment company.
LEXINGTON NATURAL RESOURCES TRUST
The Lexington Natural Resources Trust is one of the funding vehicles for the
Contracts offered. The investment adviser to the Lexington Natural Resources
Trust is Lexington Management Corporation, P.O. Box 1515/Park 80 West Plaza Two,
Saddle Brook, New Jersey. The Lexington Natural Resources Trust is an open-end,
diversified management investment company.
SCUDDER VARIABLE LIFE INVESTMENT FUND
The Scudder Fund is one of the funding vehicles for the Contracts offered. The
investment adviser to the Scudder Fund is Scudder, Stevens & Clark, Inc., Two
International Place, Boston, Massachusetts. The Scudder Fund is an open-end,
diversified management investment company.
WHILE A BRIEF SUMMARY OF THE INVESTMENT OBJECTIVES OF EACH PORTFOLIO IS SET
FORTH ABOVE, MORE COMPREHENSIVE INFORMATION IS FOUND IN THE CURRENT RESPECTIVE
TRUST OR FUND PROSPECTUS. THE TRUST AND FUNDS' PROSPECTUSES ARE ATTACHED AND
ACCOMPANY THIS PROSPECTUS. ALL DOCUMENTS SHOULD BE READ TOGETHER AND CAREFULLY
BEFORE INVESTING. AN ADDITIONAL PROSPECTUS AND THE STATEMENT OF ADDITIONAL
INFORMATION FOR THE TRUST AND ANY OF THE FUNDS CAN BE OBTAINED BY CALLING THE
NUMBER ON THE COVER PAGE OF THIS PROSPECTUS OR WRITING TO THE ADDRESS OF THE
ANNUITY SERVICE OFFICE LISTED THERE. ADDITIONAL PORTFOLIOS MAY BE ESTABLISHED BY
THE TRUST AND
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<PAGE> 25
THE FUNDS FROM TIME TO TIME AND MAY BE MADE AVAILABLE TO OWNERS. IN ADDITION,
CERTAIN EXISTING PORTFOLIOS OF THE FUNDS, WHICH ARE NOT CURRENTLY BEING MADE
AVAILABLE, MAY BE MADE AVAILABLE TO OWNERS IN THE FUTURE. SOME OF THE PORTFOLIOS
LISTED BELOW MAY NOT BE IMMEDIATELY AVAILABLE IN STATES THAT HAVE NOT YET
APPROVED THE CORRESPONDING CONTRACT ENDORSEMENT.
VOTING RIGHTS
In accordance with its view of present applicable law, SAFECO will vote the
shares of the Trust and the Funds held in the Separate Account at special
meetings of the shareholders in accordance with instructions received from
persons having the voting interest in the Separate Account. SAFECO will vote
shares it owns for which it has not received instructions, as well as shares
attributable to it, in the same proportion as it votes shares for which it has
received instructions. Neither the Trust nor the Funds hold regular meetings of
shareholders.
The number of shares which a person has a right to vote will be determined as of
a date to be chosen by SAFECO not more than sixty (60) days prior to the meeting
of the Trust or the Funds. Voting instructions will be solicited by written
communication at least fourteen (14) days prior to such meeting with respect to
the Trust and at least ten (10) days prior to such meeting with respect to the
Funds.
The Funds are intended to be the funding vehicle for variable annuity contracts
and variable life insurance policies to be offered by the separate accounts of
certain life insurance companies which may or may not be affiliated and in
compliance with certain regulatory requirements. The Funds currently do not
foresee any disadvantages to the Owners arising from the fact that the interests
of the holders of the variable annuity contracts and the variable life insurance
policies may differ. Nevertheless, the Funds' Directors and Trustees intend to
monitor events in order to identify any material irreconcilable conflicts which
may possibly arise and to determine what action, if any, should be taken in
response thereto.
SUBSTITUTION OF SECURITIES
If the shares of the Trust or the Funds (or any Portfolio within the Trust or
the Funds) should no longer be available for investment by the Separate Account
or, if in the judgment of SAFECO, further investment in such shares should
become inappropriate in view of the purpose of the Contracts, SAFECO may
substitute shares of another mutual fund (or Portfolio within the Trust or the
Funds) for fund shares already purchased or to be purchased in the future by
Purchase Payments under the Contracts. No substitution of securities may take
place without prior approval of the Securities and Exchange Commission and under
such requirements as it may impose.
PURCHASING A CONTRACT
PURCHASE PAYMENTS
The Contracts are purchased under a single purchase payment plan. The initial
Purchase Payment is due on the Contract Date. Subsequent Purchase Payments may
only be made within the first six (6) months after the Contract Date. The
minimum initial Purchase Payment is $50,000 and the minimum subsequent Purchase
Payment is $250. Subject to these minimums, the Owner may increase or decrease
or change the frequency of subsequent Purchase Payments. SAFECO reserves the
right to reject any Application or Purchase Payment.
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<PAGE> 26
ALLOCATION OF PURCHASE PAYMENTS
The allocation of the initial Purchase Payment is elected by the Owner in the
Application. Unless the Owner elects otherwise, subsequent Purchase Payments are
allocated in the same manner as the initial Purchase Payment. Allocation of the
Purchase Payments is subject to the terms and conditions imposed by SAFECO.
Under certain circumstances, Purchase Payments which have been designated by
prospective purchasers to be allocated to Sub-Accounts other than the SAFECO
Resource Money Market Sub-Account, may be initially allocated to the SAFECO
Resource Money Market Sub-Account. (See "Highlights.") For each Sub-Account,
Purchase Payments are converted into Accumulation Units. The number of
Accumulation Units in a Sub-Account credited to the Contract is determined by
dividing each Net Purchase Payment by the value of an Accumulation Unit for that
Sub-Account. Purchase Payments allocated to the Fixed Account are credited in
dollars.
If the Application for a Contract is in good order, SAFECO will apply the
Purchase Payment to the Separate Account and credit the Contract with
Accumulation Units and/or to the Fixed Account and credit the Contract with
dollars within two business days of receipt. If the Application for a Contract
is not in good order, SAFECO will attempt to get it in good order or SAFECO will
return the Application and the Purchase Payment within five (5) business days.
SAFECO will not retain a Purchase Payment for more than five (5) business days
while processing an incomplete Application unless it has been so authorized by
the purchaser. For subsequent Purchase Payments in good order, SAFECO will apply
the Net Purchase Payment to the Separate Account and credit the Owner's Contract
with Accumulation Units during the next Valuation Period after the Purchase
Payment was received.
ACCUMULATION UNIT
Purchase Payments allocated to the Separate Account and amounts transferred to
or within the Separate Account are converted into Accumulation Units. This is
done by dividing each Net Purchase Payment by the value of an Accumulation Unit
for the Valuation Period during which the Purchase Payment is allocated to the
Sub-Account or the transfer is made. Accumulation Units for each Sub-Account are
valued separately. The Accumulation Unit value for each Sub-Account was
arbitrarily set at $10 when the Sub-Account was established. The Accumulation
Unit value for any later Valuation Period is determined by multiplying the
Accumulation Unit value for the Sub-Account, as of the immediately preceding
Valuation Period, by the Net Investment Factor for the current Valuation Period.
The Net Investment Factor for any Sub-Account for any Valuation Period is
determined by dividing (a) by (b) and subtracting (c) from the result, where:
(a) is the net result of:
(i) The net asset value per share of the Portfolio, determined as of
the current Valuation Period, plus
(ii) The per share amount of any dividend or capital-gain distribution
made by the Portfolio if the "ex-dividend" date occurs during
the current Valuation Period, plus or minus
(iii) A per share credit or charge, which is determined by SAFECO, for
changes in tax reserves resulting from investment operations of
the Sub-Account.
(b) is the net result of:
(i) The net asset value per share of the Portfolio determined as of
the immediately preceding Valuation Period, plus or minus
(ii) The per share credit or charge for any changes in tax reserves
for the immediately preceding Valuation Period.
(c) is the percentage factor equal to the Mortality and Expense Risk
Charge. Such factor is equal on an annual basis to a percentage of the
average daily net asset value of the Sub-Account.
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<PAGE> 27
The Net Investment Factor may be greater or less than one. Therefore, the
Accumulation Unit value may increase or decrease.
PRINCIPAL UNDERWRITER
Currently, SAFECO Securities, Inc. (SSI) acts as the principal underwriter of
the Contracts. SSI has its business address at SAFECO Plaza, Seattle, Washington
98185. Prior to April 29, 1994, PNMR Securities, Inc. (PNMR), 15411 N.E. 51st
Street, Redmond, Washington, acted as the principal underwriter of the
Contracts. SSI and PNMR are wholly-owned subsidiaries of SAFECO Corporation and
therefore are affiliates of SAFECO. The Contracts are offered on a continuous
basis.
CHARGES AND DEDUCTIONS
Various charges and deductions are made from Purchase Payments, Contract Values,
the Separate Account and the Fixed Account. These charges and deductions are:
DEDUCTION FOR PREMIUM AND OTHER TAXES
Any premium taxes or other taxes levied by any governmental entity which SAFECO,
in its sole discretion, determines have resulted from the establishment or
maintenance of the Contract or any portion of the Contract, or from the
investment experience of the Separate Account, or from the receipt by SAFECO of
Purchase Payments or from the commencement of annuity payments will be deducted
from the Contract Value with respect to Non-Qualified Contracts. SAFECO
reserves the right to deduct these taxes from Contract Values with respect to
Qualified Contracts. Premium taxes currently imposed by certain states on the
type of Contracts offered hereby range from 0% to 4%. Some states assess their
premium taxes at the time Purchase Payments are made; others assess their
premium taxes at the time annuity payments commence. Premium taxes are subject
to change or amendment by state legislatures, administrative interpretations or
judicial acts. Such premium taxes will depend on, among other things, the
classification of the Contract by the states, the status of SAFECO within such
state and the insurance tax laws of such state. These taxes are deducted first
from the SAFECO Resource Money Market Sub-Account. In the event there are no
Accumulation Units in the SAFECO Resource Money Market Sub-Account or not enough
in value to pay for these taxes, the balance of deductions necessary is then
taken from the SAFECO Resource Bond Sub-Account, the Federated Utility
Sub-Account, the Federated Corporate Bond Sub-Account, the Scudder Balanced
Sub-Account, the Lexington Natural Resources Sub-Account, the Scudder
International Sub-Account, the Federated International Stock Sub-Account, the
Lexington Emerging Markets Sub-Account, the SAFECO Resource Equity Sub-Account,
the SAFECO Resource Northwest Sub-Account, the SAFECO Resource Growth
Sub-Account, and finally from the Fixed Account.
DEDUCTION FOR MORTALITY AND EXPENSE RISK CHARGE
SAFECO deducts on each Valuation Date a Mortality and Expense Risk Charge which
is equal on an annual basis to 1.25% of the average daily net asset value of the
Separate Account. The mortality risks assumed by SAFECO arise from its
contractual obligation to make annuity payments after the Annuity Date for the
life of the Owner, to waive Contingent Deferred Sales Charges in the event of
the death of the Owner and to guarantee the payment of the greater of Purchase
Payments made or Contract Value upon death of the Owner.
If the Mortality and Expense Risk Charge is insufficient to cover the actual
costs, the loss will be borne by SAFECO. Conversely, if the amount deducted
proves more than sufficient, the excess will be profit to SAFECO.
SAFECO expects a profit from this charge.
The Mortality and Expense Risk Charge is guaranteed by SAFECO and cannot be
increased.
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<PAGE> 28
DEDUCTION FOR CONTINGENT DEFERRED SALES CHARGE
In the event that an Owner withdraws all or a portion of his or her Contract
Value, a Contingent Deferred Sales Charge (sales load) is deducted from the
Withdrawal. This charge reimburses SAFECO for expenses incurred in connection
with the promotion, sale and distribution of the Contracts. The Contingent
Deferred Sales Charge is imposed on Withdrawals made in the first eight (8)
Contract Years. The Contract provides for the deduction of a Contingent Deferred
Sales Charge for withdrawals of some or all of an Owner's Contract Value other
than those made (i) on Transfers between Sub-Accounts, (ii) on the sum of
Withdrawals taken in any Contact Year which does not exceed 10% of the Contract
Value, (iii) on Withdrawals made under a Settlement Option, (iv) on Systematic
Withdrawals over the life expectancy of the Owner or the joint life expectancy
of the Owner and Beneficiary under the Systematic Withdrawal Income Plan(TM),
(v) on Withdrawals made pursuant to the death of the Owner, or (vi) on Transfers
from a Sub-Account to the Fixed Account or on certain Transfers from the Fixed
Account to a Sub-Account. (See "Withdrawals and Transfers" and "The Programs.")
The amount of the Contingent Deferred Sales Charge will be based on the
following:
<TABLE>
<CAPTION>
Contingent Deferred Sales Charge
Contract Year as a Percentage of Amount Withdrawn
------------- -----------------------------------
<S> <C>
1 8% of amount withdrawn
2 7% of amount withdrawn
3 6% of amount withdrawn
4 5% of amount withdrawn
5 4% of amount withdrawn
6 3% of amount withdrawn
7 2% of amount withdrawn
8 1% of amount withdrawn
After Contract Year 8 0% of amount withdrawn
</TABLE>
The Contingent Deferred Sales Charge assesses a percentage of the amount
withdrawn according to the stated schedule. However, total Contingent Deferred
Sales Charges collected by SAFECO will not exceed 8.5% of the Purchase Payments
made under a Contract.
The commissions paid to registered representatives on the sale of Contracts are
not more than 5.8% of the Purchase Payments. In addition, commissions, overrides
and bonuses may be paid to SSI's registered representatives and/or other
distributors of the Contracts. A bonus dependent upon persistency of funds under
the Contracts is one type of bonus that may be paid. Noncash compensation may
include accrual of conference travel credits and prizes. To the extent that the
Contingent Deferred Sales Charge is insufficient to cover the actual cost of
distribution, SAFECO may use any of its corporate assets, including potential
profit which may arise from the Mortality and Expense Risk Premium, to make up
any difference.
REDUCTION OR ELIMINATION OF THE CONTINGENT DEFERRED SALES CHARGE
The amount of the Contingent Deferred Sales Charge on the Contracts may be
reduced or eliminated when sales of the Contracts are made to individuals in a
manner that results in savings of sales expenses. The entitlement to reduction
of the Contingent Deferred Sales Charge will be determined by SAFECO after
examination of all the relevant factors such as:
1. The total amount of Purchase Payments to be received. Per Contract sales
expenses are likely to be less on larger Purchase Payments than on
smaller ones.
2. Any prior or existing relationship with SAFECO. Per Contract sales
expenses are likely to be less when there is a prior existing
relationship because of the likelihood of implementing the Contract with
fewer sales contacts.
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<PAGE> 29
3. There may be other circumstances, of which SAFECO is not presently
aware, which could result in reduced sales expenses.
If, after consideration of the foregoing factors, SAFECO determines that there
will be a reduction in sales expenses, SAFECO may provide for a reduction or
elimination of the Contingent Deferred Sales Charge.
The Contingent Deferred Sales Charge may be eliminated when the Contracts are
issued to an officer, director or employee of SAFECO or any of its affiliates.
In no event will reductions or elimination of the Contingent Deferred Sales
Charge be permitted where reductions or elimination will be unfairly
discriminatory to any person.
DEDUCTION FOR WITHDRAWAL CHARGE
SAFECO deducts a Withdrawal Charge which is equal to the lesser of $25 or 2% of
the amount withdrawn for each Withdrawal (whether it be a partial Withdrawal or
a complete Withdrawal) after the first in any Contract Year. No Withdrawal
Charge is deducted where the Owner is participating in the Systematic Withdrawal
Income Plan(TM) or the Periodic Withdrawal Program subject to certain
limitations (see "The Programs") or is exercising a Settlement Option.
DEDUCTION FOR TRANSFER CHARGE
An Owner may make up to twelve (12) Transfers annually without the imposition of
any fee or charge. If more than twelve (12) Transfers have been made in a
Contract Year, SAFECO reserves the right to assess a Transfer Charge which will
be equal to the lesser of $10 or 2% of the amount transferred. Specific
requirements may apply to transfers under the Programs. (See "The Programs.")
OTHER EXPENSES
There are other deductions from and expenses paid out of the assets of the Trust
and the Funds which are described in the accompanying Trust and Funds
Prospectuses. SAFECO may receive compensation from the investment advisers or
administrators of the Available Funds consistent with the administrative
services rendered to such entities.
RIGHTS UNDER THE CONTRACT
OWNER, ANNUITANT AND BENEFICIARY
The Owner has all rights and may receive all benefits under the Contract. Prior
to the Annuity Date, the Owner is the person designated in the Application,
unless changed. On and after the Annuity Date, the Annuitant is the Owner. The
Annuitant is the person on whose life Annuity payments are based and is the
person designated in the Application, unless changed.
The Owner may designate a Beneficiary in the Application to receive any proceeds
payable due to the death of the Owner. Unless the Owner provides otherwise, the
death benefit will be paid in equal shares to all surviving primary
Beneficiaries. If the Owner has not provided otherwise and there are no
surviving primary Beneficiaries, the death benefit will be paid in equal shares
to all surviving contingent Beneficiaries. If the Owner has not provided
otherwise and there are no surviving primary or contingent Beneficiaries, the
death benefit will be paid to the estate of the Owner.
If the Owner has made an irrevocable Beneficiary designation, no change of
Beneficiary is permitted. If the Owner has not made an irrevocable Beneficiary
designation, the Owner may file a signed request with SAFECO to change the
Beneficiary designation. The change of Beneficiary will be effective upon
recording by SAFECO at its Home Office. SAFECO shall not be liable for any
payments made or other action taken by SAFECO before the change in Beneficiary
was recorded by SAFECO at its Home Office. A recorded change of Beneficiary will
revoke any prior Beneficiary designations. SAFECO will pay any death proceeds to
the most recently recorded Beneficiary.
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<PAGE> 30
MISSTATEMENT OF AGE
SAFECO may require proof of the age of the Annuitant before making any Life
Annuity payment provided for by the Contract. If the age of the Annuitant has
been misstated, the amount payable will be the amount that the Contract Value
would have provided at the correct age. Once Annuity payments have begun, any
underpayments will be made up in one sum with the next Annuity payment. Any
overpayment will be deducted from future Annuity payments until the total is
repaid.
EVIDENCE OF SURVIVAL
If any benefits under the Contracts are contingent upon the Annuitant being
alive on a given date, SAFECO may require evidence satisfactory to SAFECO that
such condition continues to be met.
CONTRACT SETTLEMENT
Unless otherwise designated in writing by SAFECO, all sums payable under the
Contracts are payable at SAFECO's Home Office. The Contract must be returned to
SAFECO upon any settlement.
SUBSTITUTE PAYEE
If SAFECO determines that any person is incapable of personally receiving and
giving a valid receipt for any payment due under the Contracts and no claim has
been made by a duly appointed guardian, SAFECO may make such payment to any
person or institution that SAFECO determines has assumed the care and support of
such person. Such payment shall completely discharge the liability of SAFECO
with respect to the amount so paid.
NON-ASSIGNMENT
To the extent permitted by law, the Contracts and the benefits or payments under
the Contracts are not assignable or otherwise transferable. The Contract may be
assigned for purposes of an Internal Revenue Code Section 1035 exchange.
MODIFICATION OF THE CONTRACTS
The terms and conditions of the Contracts may be amended by written agreement
between SAFECO and the Owner by written endorsement or amendment. All agreements
made by SAFECO will be signed by the President or one of the Vice Presidents. No
other person has power on behalf of SAFECO to amend or modify the Contract,
extend any due date, or waive any proof required by the Contract. SAFECO may
unilaterally amend the provisions of the Contract as required to conform to any
state or federal law which affects the Contract.
TERMINATION OF CONTRACT
All benefit provisions under the Contract continue in force until the Contract
Value is completely Withdrawn. Discontinuance of Purchase Payments will not
result in termination of the Contract.
ANNUITY AND DEATH BENEFIT PROVISIONS
SELECTION AND CHANGE OF SETTLEMENT OPTIONS
The Owner may select or change the Settlement Option or Annuity Date by written
notification to SAFECO at its Home Office. In order to be effective, the written
notification must be received by SAFECO prior to any Annuity Date previously
selected.
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<PAGE> 31
PAYMENT OF BENEFITS
SAFECO will, upon the written direction of the Owner, issue an Annuity or make a
cash distribution to any person who is entitled to such benefits. SAFECO may
rely on the written direction of the Owner and shall not be liable because of
any failure to question or challenge such direction regarding the issuance of an
Annuity or payment of a cash distribution.
FREQUENCY AND AMOUNT OF ANNUITY PAYMENTS
Annuity payments will be paid as monthly installments, except as described
below. If the net amount available to apply under any Settlement Option is less
than $5,000, SAFECO shall have the right to pay such amount in a lump sum cash
distribution. If Annuity payments would be or become less than $250, SAFECO
shall have the right to change the frequency of payments to such intervals as
will result in payments of at least $250.
DEATH OF OWNER PRIOR TO ANNUITY DATE
The Contract provides for a minimum guaranteed death benefit, provided that
SAFECO receives due proof of death in a satisfactory form and election of a
Settlement Option prior to six months from the date of the Owner's death. If the
due proof of death or the election of a Settlement Option is received later than
six months after the date of death of the Owner, SAFECO provides a death benefit
that is subject to change based upon investment experience, as discussed below.
On the Valuation Date following receipt at the Home Office of the due proof of
death and election of a Settlement Option before the Annuity Date and while the
Contract was in force, SAFECO generally will pay to the designated Beneficiary a
minimum guaranteed death benefit that is the greater of: (i) the Contract Value
on the later of the date of receipt of due proof of death or the election of a
Settlement Option; or (ii) the last determined minimum guaranteed death benefit.
The initial minimum guaranteed death benefit is equal to the initial Net
Purchase Payment. In those states where approved, the minimum guaranteed death
benefit is reset at each eighth Contract Anniversary ("Eight Year Contract
Anniversary") to equal the greater of (i) the then current Contract Value or
(ii) the current minimum guaranteed death benefit. The greater of the two values
becomes the new minimum guaranteed death benefit. The minimum guaranteed death
benefit is fixed for the remaining duration of the Contract as of the last Eight
Year Contract Anniversary preceding the Owner's 76th birthday.
If the Contract is owned by joint Owners, the minimum guaranteed death benefit,
or any other applicable death benefit, is payable only on the death of the elder
Owner. Moreover, following the death of the elder Owner, if the joint Owner
elects to continue the Contract, there is no minimum guaranteed death benefit.
The death benefit will be the Contract Value, which reflects Net Purchase
Payments and withdrawals. Contract Value is subject to change as a result of
investment experience.
Each form of minimum guaranteed death benefit is adjusted to reflect Net
Purchase Payments and withdrawals. If an Owner makes withdrawals, the minimum
guaranteed death benefit is reset to equal the previous minimum guaranteed death
benefit multiplied by the ratio of the Contract Value after the withdrawal to
the Contract Value before the withdrawal. The recomputed minimum guaranteed
death benefit will be used in determining the new minimum guaranteed death
benefit at the next Eight Year Contract Anniversary. This method of adjusting
the guaranteed minimum death benefit will be applied if the Owner is
participating in the Systematic Withdrawal Income Plan(TM) at the time of death.
After the Owner's death, the minimum guaranteed death benefit will be reduced
dollar for dollar by any withdrawals by the Beneficiary. The Beneficiary may
only make withdrawals at the time of or prior to the election of a Settlement
Option.
If due proof of death or the election of a payment option (a Settlement Option
or lump sum payment) are made later than six months following the date of the
Owner's death, the value as of the six month anniversary of the date of death
will apply. Thus, for example, if notification of death is not received until
nine (9) months after the date of death, the death benefit under (i) will be
calculated as follows:
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<PAGE> 32
Upon notification of death, SAFECO will determine what the Contract Value was on
the six-month anniversary of the date of death. Assuming that Contract Value was
$90,000 on that date and the last determined minimum guaranteed death benefit
was $100,000, SAFECO will contribute $10,000 to Contract Value as of that date
and will guarantee the portion of the Contract Value attributable to SAFECO's
contribution and pay interest thereon at the then prevailing money market rate
until the date of election of a payment option. SAFECO will then calculate the
effects of investment experience on the portion of the Contract Value existing
on the six-month anniversary of the date of death, and hence, the death benefit
will consist of the combined value of the guaranteed and nonguaranteed portions
of the Contract Value from that six-month anniversary date to the date of
election of a payment option. If on the six-month anniversary of the date of
death the Contract Value exceeds the last determined minimum guaranteed death
benefit, the entire Contract Value will be subject to market risk from that date
to the date of election of a payment option and no portion of the Contract Value
will be guaranteed. Any withdrawals made by the Beneficiary prior to electing a
payment option will be deducted from the death benefit. The Beneficiary bears
the risk and enjoys the rewards of negative or positive investment experience on
any nonguaranteed portion of the Contract Value during the period from the
six-month anniversary of the date of death and the date of election of a payment
option. Beneficiaries should be encouraged to promptly notify SAFECO of the
Owner's death.
In all cases, SAFECO will pay the Beneficiary a lump sum payment of the death
benefit if the election of the Settlement Option is not made within sixty (60)
days of the receipt of due proof of death.
With respect to non-qualified Contracts if the Owner dies on or after the
Annuity Date and before the entire value of the Contract has been distributed,
any remaining value must be distributed at least as rapidly as the method of
distribution in effect at the time of the Owner's death. If the Owner dies
before the Annuity Date, generally the entire value under the Contract must be
distributed within five years after the date of the Owner's death or must be
distributed over the designated Beneficiary's life or over a period not
extending beyond the Beneficiary's life expectancy, in equal or substantially
equal payments, with payments beginning within one year of the Owner's death.
DEATH OF ANNUITANT
In the event of the Annuitant's death prior to the Annuity Date, the Owner must
designate a new Annuitant. If no designation is made within thirty (30) days of
notification to SAFECO of the death of the Annuitant, the Owner will become the
Annuitant. The election of a Settlement Option must be made by the Beneficiary
during the sixty (60) day period commencing with the date of SAFECO's receipt of
notice of the Owner's death. If no election is made within the sixty (60) day
period, then a single lump sum payment will be made to the Beneficiary. In the
event that the Beneficiary is a surviving spouse, the Contract can be continued.
Upon the death of a co-Owner, the surviving Owner becomes the designated
Beneficiary. Any other named Beneficiary will be a contingent Beneficiary. If
the Contract is owned by a non-natural person, the death of the Annuitant will
be treated as the death of the Owner.
DEATH OF OWNER AFTER ANNUITY DATE
If the Owner dies on or after a Settlement Option has commenced, payments must
continue at least as rapidly as under the method of distribution in effect prior
to the Owner's death.
SETTLEMENT OPTIONS
An Annuity may be issued in any of the forms described below, or such other
forms which SAFECO agrees to issue under the Contract. Options (a), (b), and (c)
are irrevocable once they have begun. Option (d) is irrevocable for the first
eight Contract Years, and then may be changed.
(a) Variable Life Annuity: Monthly payments are made to the Annuitant
commencing on the Annuity Date, if he or she is then living, and the
last payment is that payment due immediately on or before the
Annuitant's death. No death benefit is payable under this option.
(b) Variable Life Annuity with 120 or 240 Monthly Payments Guaranteed:
Monthly payments are made to the Annuitant commencing on the Annuity
Date. If at the death of the Annuitant the guaranteed number
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of payments has not been received by the Annuitant, payments will be
made to the Beneficiary for the remainder of the guarantee period. The
Beneficiary may elect to have the present value of the guaranteed
Annuity remaining as of the date the notice of death is received by
SAFECO commuted at the assumed investment rate of 4% and paid in a
single payment.
(c) Variable Joint and Survivor Life Annuity: Monthly payments are made to
the Annuitant commencing on the Annuity Date. After the death of the
Annuitant, payments will be continued to the co-annuitant for as long as
he or she lives. The written request for this option must specify the
percentage value of monthly payments to continue to the co-annuitant.
(d) Systematic Withdrawal Income Plan(TM): A specified number of whole or
partial Accumulation Units are liquidated for payment to the Annuitant
on a monthly, quarterly, or annual basis. The number to be liquidated
during a given year shall be a sufficient number so as to be expected to
deplete the Contract over the life expectancy of the Annuitant or the
joint life expectancy of the Annuitant and the Beneficiary, with at
least 50% of the payments expected to be made during the Annuitant's
life. Systematic Withdrawal Income Plan is a trademark of SAFECO Life
Insurance Company.
If, as of the Annuity Date, a Settlement Option has not been selected, SAFECO
will make payments under Option (d) above.
Similar fixed annuity Settlement Options are available with respect to the
monies held in the Fixed Account.
MORTALITY AND EXPENSE GUARANTEE
SAFECO guarantees that the dollar amount of each Variable Annuity payment made
after the first payment will not be affected by variations in mortality
experience or expenses.
WITHDRAWALS AND TRANSFERS
WITHDRAWALS
SAFECO, upon written request to it by the Owner, will allow the Withdrawal of
all or a portion of the Contract Value. Withdrawals will result in the
cancellation of Accumulation Units from each applicable Sub-Account of the
Separate Account or a reduction in the Fixed Account Value in the ratio that the
Sub-Account Value and/or the Fixed Account Value bears to the total Contract
Value. The Owner must specify in writing in advance which units are to be
canceled or values are to be reduced if other than the above-mentioned method of
cancellation is desired. SAFECO will pay the amount of any Withdrawal within
seven (7) days of receipt of a request, unless the "Suspension of Payments or
Transfers" provision is in effect (see "Suspension of Payments or Transfers"
below). SAFECO retains the right to defer the payment of Withdrawals from the
Fixed Account for a period of six (6) months after receiving a Withdrawal
request. (See also "The Programs.")
The minimum Withdrawal allowed is the lesser of $250 or the Contract Value. If
any Withdrawal reduces the remaining balance in a Sub-Account or the Fixed
Account to less than $500 ($1,000 in Maine, South Carolina and Texas), the
remaining balance will also be withdrawn.
Upon a Withdrawal, the number of Accumulation Units remaining under the Contract
will be reduced by the number of such units equal to the total of the
Withdrawal, including applicable charges and taxes, including income taxes
withheld.
Certain tax withdrawal penalties and restrictions may apply to withdrawals from
Contracts. (See "Tax Status.") For Contracts purchased in connection with 403(b)
plans, the Code limits the withdrawal of amounts attributable to contributions
made pursuant to a salary reduction agreement (as defined in Section 403(b)(11)
of the Code) to circumstances only when the Owner: (1) attains age 59 1/2; (2)
separates from service; (3) dies; (4) becomes disabled (within the meaning of
Section 72(m)(7) of the Code); or (5) in the case of hardship.
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However, withdrawals for hardship are restricted to the portion of the Owner's
Contract Value which represents contributions made by the Owner and does not
include any investment results. The limitations on withdrawals became effective
on January 1, 1989 and apply only to salary reduction contributions made after
December 31, 1988, to income attributable to such contributions and to income
attributable to amounts held as of December 31, 1988. The limitations on
withdrawals do not affect rollovers or transfers between certain Qualified
Plans. Owners should consult their own tax counsel or other tax adviser
regarding any distributions.
TRANSFERS
An Owner may transfer Contract Values among Sub-Accounts up to twelve (12) times
annually without the imposition of any fee or charge. If more than twelve (12)
Transfers have been made in a Contract Year, SAFECO reserves the right to assess
a Transfer Charge which will be equal to the lesser of $10 or 2% of the amount
transferred. The minimum Transfer from a Sub-Account must be at least $500,
except in the case of Automatic Transfers (described below). If the Sub-Account
from which the Transfer is being made contains less than $500, or is reduced to
less than $500 after a Transfer, the Owner's entire interest in the Sub-Account
will be transferred. The minimum Transfer into a Sub-Account must be at least
$50.
Upon a Transfer from a Sub-Account, the number of Accumulation Units remaining
under that Sub-Account will be reduced by the number of such units equal to the
total of the requested Transfer, including applicable charges and taxes.
Transfers will be effected during the Valuation Period next following receipt by
SAFECO of a written transfer request (or by telephone, if authorized) containing
all required information. (See "Transfers by Written Request" and "Transfers by
Telephone," below.)
Transfers also may be effected under certain of the Programs and certain
specific limitations on transfers may apply under the Programs.
TRANSFERS BY WRITTEN REQUEST
Contract Values may be transferred by writing SAFECO at the address on the
cover page of this Prospectus and specifying the Contract number, the amount
to be transferred, and the Sub-Accounts to be effected. The request must be
signed by the Owner or a third party to whom the Owner has given appropriate
authority. SAFECO must have a copy of the document granting such authority.
Transfers will be effected during the Valuation Period next following
receipt by SAFECO of the written transfer request.
TRANSFERS BY TELEPHONE
If the Owner has previously elected in writing the privilege of making
transfers by telephone, SAFECO will accept transfer instructions by
telephone from the Owner or a third party to whom the Owner has given
appropriate authority. SAFECO must have a copy of the document granting such
authority. Withdrawals will not be processed by telephone.
SAFECO will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine, including tape recording all
telephone instructions, requiring some form of personal identification prior
to acting upon instructions received by telephone and confirming in writing
all such transactions. If SAFECO fails to take such reasonable procedures,
it may be liable for any losses due to unauthorized or fraudulent
instructions.
SAFECO reserves the right to refuse telephone transfers when it is unable to
confirm to its satisfaction that a caller is the Owner or a preauthorized
third party. SAFECO is not responsible for the authenticity of telephone
instructions or for acting on the telephone instructions of persons who
falsely identify themselves as Owners or preauthorized third parties.
To transfer by telephone, call 1-800-899-5280. Transfer directions must
specify the Contract number, the amount to be transferred and the
Sub-Accounts which are to be effected. (See also "The Programs," below.)
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SUSPENSION OF PAYMENTS OR TRANSFERS
SAFECO reserves the right to suspend or postpone payments for a Withdrawal or
Transfer for any period when:
(i) The New York Stock Exchange is closed (other than customary weekend
and holiday closings);
(ii) Trading on the New York Stock Exchange is restricted, as determined by
the rules and regulations of the Securities and Exchange Commission;
(iii) An emergency exists as a result of which disposal of securities held
in the Separate Account is not reasonably practicable or it is not
reasonably practicable to determine the value of the Separate
Account's net assets, as determined by the rules and regulations of
the Securities and Exchange Commission; or
(iv) During any other period when the Securities and Exchange Commission,
by order, so permits for the protection of Owners provided that
applicable rules and regulations of the Securities and Exchange
Commission will govern as to whether the conditions described in (ii)
and (iii) exist.
OTHER SERVICES
THE PROGRAMS
SAFECO offers several investment related programs which are available only prior
to the Annuity Date: Dollar Cost Averaging; Automatic Transfers; Appreciation or
Interest Sweeps; Sub-Account Rebalancing; Systematic Investment; and Periodic
Withdrawal Programs. Certain of the Programs are alternatives with respect to
any one Sub-Account; other Programs may be combined. Thus, the Dollar Cost
Averaging Program, the Automatic Transfer Program and the Appreciation or
Interest Sweep Program are alternatives with respect to the selected
Sub-Account, and in all cases with respect to the Fixed Account. However, the
Sub-Account Rebalancing Program may be combined with each of the other Programs,
but it is not available with respect to the Fixed Account. Under each Program,
the related transfers between and among Sub-Accounts and the Fixed Account are
not counted as one of the twelve free transfers. However, if an Owner executes
an unrelated voluntary transfer from the Sub-Account participating in a Program,
other than the Sub-Account Rebalancing Program, the Program will be terminated
for the remainder of the Contract Year. In addition, if a Program is terminated
before six Program transfers have occurred, the six Program transfers are
counted as part of the twelve free transfers. If the balance in a Sub-Account
would be less than $500 as a result of a transfer pursuant to one of these
Programs, other than the Appreciation or Interest Sweep and Sub-Account
Rebalancing Programs, then the entire balance in that Sub-Account will also be
transferred. Each of the Programs has its own requirements, as discussed below.
Some of the Programs described herein may not be immediately available in states
that have not yet approved the corresponding Contract endorsements.
If the Owner has submitted the required telephone authorization form, certain
changes may be made by telephone. For those programs involving transfers, Owners
may change instructions by telephone with regard to which Sub-Accounts or the
Fixed Account Contract Value may be transferred. If SAFECO does not employ
reasonable verification procedures to confirm that instructions communicated by
telephone are genuine, it may be liable for any losses arising out of any action
on its part or any failure or omission to act as a result of its own negligence,
lack of good faith, or willful misconduct.
DOLLAR COST AVERAGING PROGRAM
SAFECO offers a Dollar Cost Averaging Program during the Accumulation Period
whereby an Owner may predesignate a portion of any Sub-Account's Contract Value
or the Fixed Account's Contract Value to be automatically transferred on a
monthly or quarterly basis to one or more of the other Sub-Accounts or to the
Fixed Account. The amount to be transferred may be expressed as a set dollar
amount or as a percentage of the Contract Value in the selected Sub-Account or
the Fixed Account. Transfers from the Fixed Account are subject to a maximum of
1.33% monthly or 4% quarterly of the Contract Value in the Fixed Account at the
time of the initial
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transfer. Upon election of the Dollar Cost Averaging Program the limitations on
transfers from the Fixed Account will be calculated. The resultant limitations
will apply for the entire duration of participation in this Program. Each Dollar
Cost Averaging transfer is subject to a minimum transfer of fifty dollars ($50).
The Dollar Cost Averaging Program is available for Purchase Payments and for
Contract Value transferred into any Sub-Account. An Owner may enroll in this
Program at the time the Contract is issued or anytime thereafter by properly
completing the Dollar Cost Averaging enrollment form and returning it to SAFECO
at its Home Office at least ten (10) business days prior to the first business
day of the month, which is the date that all Program transfers will be made
("Transfer Date"). This Program must be elected for at least a six (6) month
period.
If the Contract Value in the participating Sub-Account or the Fixed Account does
not equal or exceed the amount designated to be transferred on each Transfer
Date, Dollar Cost Averaging will cease automatically and the remaining amount
will be transferred.
Dollar Cost Averaging will terminate when (i) the designated monthly or
quarterly amounts of transfers have been completed, (ii) the Owner requests
termination in writing and such writing is received at the Home Office at least
ten (10) business days prior to the next Transfer Date in order to cancel the
transfer scheduled to take effect on such date, (iii) the Owner effects any
other transfer from the participating Sub-Account or the Fixed Account while the
Dollar Cost Averaging Program is in effect, or (iv) the Contract is surrendered.
In addition, if any transfer or withdrawal has been made from the Fixed Account
during the Contract Year, the Dollar Cost Averaging Program may not be
established through the Fixed Account for that Contract Year.
An Owner may initiate, reinstate or change the Dollar Cost Averaging terms by
properly completing a new enrollment form and returning it to the Home Office at
least ten (10) business days prior to the next Transfer Date such transfer is to
be made.
When utilizing Dollar Cost Averaging an Owner may be invested in either a
Sub-Account or the Fixed Account and may be invested in any other Sub-Accounts
or the Fixed Account at any given time.
AUTOMATIC TRANSFER PROGRAM
The Automatic Transfer Program is identical to the Dollar Cost Averaging Program
in all respects other than with regard to the limitations on transfers from the
Fixed Account. The limitations on transfers from the Fixed Account are
recalculated annually. Transfers from the Fixed Account are limited to 1.5%
monthly and 4.5% quarterly.
APPRECIATION OR INTEREST SWEEP PROGRAM
An Owner may enroll in the Appreciation or Interest Sweep Program through either
or both the SAFECO Resource Money Market Sub-Account or the Fixed Account.
Enrollment is limited to Owners whose total Contract Value is greater than
$10,000. Under the Program, if appreciation on Contract Value in the SAFECO
Resource Money Market Sub-Account or credited interest earned on Contract Value
in the Fixed Account ("Earnings") is greater than 10%, the Earnings up to 10% of
the Contract Value in the Fixed Account or the SAFECO Resource Money Market
Sub-Account, respectively, will be transferred to any of the Sub-Accounts, other
than the SAFECO Resource Money Market Sub-Account. Earnings in the SAFECO
Resource Money Market Sub-Account may not be transferred to the Fixed Account.
In no event may the total Contract Value transferred from the Fixed Account in
each Contract Year exceed a total of 10% of the Contract Value for each such
Contract Year in the Fixed Account computed at the time of the transfer.
Moreover, the Program may not be instituted for the Fixed Account in any
Contract Year during which transfers or withdrawals have been made from the
Fixed Account. Transfers under this Program will be processed monthly or
quarterly on the Transfer Date.
SUB-ACCOUNT REBALANCING PROGRAM
In accordance with the Owner's election of the relative purchase payments
percentage allocations, SAFECO will automatically rebalance the Contract Value
of each Sub-Account either quarterly, semi-annually, or annually. SAFECO will
automatically rebalance the Contract Value in each of the Sub-Accounts to match
the current purchase
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payments percentage allocations as of the first Transfer Date during the period
selected. Enrollment is limited to Owners whose total Contract Value is greater
than $10,000 at the time the Program is selected. The Program may be terminated
at any time and the percentages may be altered by written authorization. The
requested change must be received at the Home Office ten (10) days prior to the
Transfer Date. If the Owner terminates the Program, a new Program may not be
instituted until the next Contract Year.
SYSTEMATIC INVESTMENT PROGRAM
Purchase Payments may be made by monthly draft against the bank account of any
Owner that has completed and returned to SAFECO a Systematic Investment Program
application and authorization form. The application and authorization form may
be obtained from SAFECO or from the sales representative. Each Systematic
Investment Program Purchase Payment is subject to a minimum of one hundred
dollars ($100).
PERIODIC WITHDRAWAL PROGRAM
SAFECO will make monthly, quarterly or annual distributions of a predetermined
dollar amount to an Owner that has enrolled in the Periodic Withdrawal Program.
The Periodic Withdrawal Program is to be distinguished from the Systematic
Withdrawal Income Plan(TM). (See "Settlement Options.") Under the Program, all
distributions will be made directly to the Owner and will be treated for federal
tax purposes as any other withdrawal or distribution of Contract Value. (See
"Tax Status.") An Owner may specify the amount of each withdrawal, subject to a
minimum of $250. In each Contract Year, up to 10% of Contract Value may be
withdrawn without the imposition of any Contingent Deferred Sales Charge. If
withdrawals pursuant to the Program are greater than 10% of Contract Value in
any Contract Year, the amount of the withdrawals greater than 10% will be
subject to the applicable Contingent Deferred Sales Charge. Any ad hoc
withdrawals an Owner makes during a Contract Year will be aggregated with
withdrawals pursuant to the Program to determine the applicability of any
Contingent Deferred Sales Charge. If the frequency of withdrawals under the
Program is greater than annually, SAFECO will charge an annual fee of $25 to
compensate it for the added administrative costs.
Unless the Owner specifies the Sub-Account or Sub-Accounts or the Fixed Account
from which withdrawals of Contract Value shall be made or if the amount in a
specified Sub-Account is less than the predetermined amount, SAFECO will make
withdrawals under the Program from the Sub-Accounts and the Fixed Account in
amounts proportionate to the amounts in the Sub-Accounts and the Fixed Account.
Withdrawals are subject to the applicable minimum Sub-Account balances. All
withdrawals under the Program will be effected by canceling the number of
Accumulation Units equal in value to the amount to be distributed to the Owner
and any applicable Contingent Deferred Sales Charge.
The Program may be combined with all other Programs except those entailing
transfers or withdrawals from the Fixed Account. However, the Owner may
terminate such other program and may begin participation in the Program on the
first day of the next Contract Year.
It may not be advisable to participate in the Program and incur a Contingent
Deferred Sales Charge when making additional Purchase Payments under the
Contract.
TAX STATUS
NOTE: The following description is based upon SAFECO's understanding of current
federal income tax law applicable to annuities in general. SAFECO cannot predict
the probability that any changes in such laws will be made. Purchasers are
cautioned to seek competent tax advice regarding the possibility of such
changes. SAFECO does not guarantee the tax status of the Contracts. Purchasers
bear the complete risk that the Contracts may not be treated as "annuity
contracts" under federal income tax laws. 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.
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GENERAL
Section 72 of the Code governs taxation of annuities in general. An Owner is not
taxed on increases in the value of a Contract until distribution occurs, either
in the form of a lump sum payment, a withdrawal or as annuity payments under the
Settlement Option elected. For a lump sum payment received as a total surrender
(total redemption), the recipient is taxed on the portion of the payment that
exceeds the cost basis of the Contract. For Non-Qualified Contracts, this cost
basis is generally the Purchase Payments, while for Qualified Contracts there
may be no cost basis.
For annuity payments, a portion of each payment in excess of an exclusion amount
is includable in taxable income. The exclusion amount for payments based on a
fixed annuity is determined by multiplying the payment by the ratio that the
cost basis of the Contract (adjusted for any period certain or refund feature)
bears to the expected return under the Contract. The exclusion amount for
payments based on a variable annuity is determined by dividing the cost basis of
the Contract (adjusted for any period certain or refund guarantee) by the number
of years over which the annuity is expected to be paid. Payments received after
the investment in the Contract has been recovered (i.e. when the total of the
excludable amounts equals the investment in the Contract) are fully taxable. The
taxable portion is taxed at ordinary income tax rates. For certain types of
Qualified Plans there may be no cost basis in the Contract within the meaning of
Section 72 of the Code resulting in the annuity payments being fully includable
in taxable income. Owners, Annuitants and Beneficiaries under the Contracts
should seek competent financial advice about the tax consequences of any
distributions.
SAFECO is taxed as a life insurance company under the Code. For federal income
tax purposes, the Separate Account is not a separate entity from SAFECO and its
operations form a part of SAFECO.
DIVERSIFICATION
Section 817(h) of the Code imposes certain diversification standards on the
underlying assets of variable annuity contracts. The Code provides that a
variable annuity contract will not be treated as an annuity contract for any
period (and any subsequent period) for which the investments are not, in
accordance with regulations prescribed by the United States Treasury Department
("Treasury Department"), adequately diversified. Disqualification of the
Contract as an annuity contract would result in imposition of federal income tax
to the Owner with respect to earnings allocable to the Contract prior to the
receipt of payments under the Contract. The Code contains a safe harbor
provision which provides that annuity contracts such as the Contracts meet the
diversification requirements if, as of the end of each quarter, the underlying
assets meet the diversification standards for a regulated investment company and
no more than fifty-five percent (55%) of the total assets consist of cash, cash
items, U.S. Government securities and securities of other regulated investment
companies.
On March 2, 1989, the Treasury Department issued Regulations (Treas. Reg.
1.817-5), which established diversification requirements for the investment
portfolios underlying variable contracts such as the Contracts. 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, an investment portfolio will be deemed adequately
diversified if: (1) no more than 55% of the value of the total assets of the
portfolio is represented by any one investment; (2) no more than 70% of the
value of the total assets of the portfolio is represented by any two
investments; (3) no more than 80% of the value of the total assets of the
portfolio is represented by any three investments; and (4) no more than 90% of
the value of the total assets of the portfolio is represented by any four
investments.
The Code provides that, for purposes of determining whether or not the
diversification standards imposed on the underlying assets of variable contracts
by Section 817(h) of the Code have been met, "each United States government
agency or instrumentality shall be treated as a separate issuer."
SAFECO intends that all Portfolios of the Trust and the Funds underlying the
Contracts will be managed in such a manner as to comply with these
diversification requirements.
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The Treasury Department has indicated that the diversification Regulations do
not provide guidance regarding the circumstances in which Owner control of the
investments of the Separate Account will cause the Owner to be treated as the
owner of the assets of the Separate Account, thereby resulting in the loss of
favorable tax treatment for the Contract. At this time it cannot be determined
whether additional guidance will be provided and what standards may be contained
in such guidance.
The amount of Owner control which may be exercised under the Contract is
different in some respects from the situations addressed in published rulings
issued by the Internal Revenue Service in which it was held that the policy
owner was not the owner of the assets of separate account. It is unknown whether
these differences, such as the Owner's ability to transfer among investment
choices or the number and type of investment choices available, would cause the
Owner to be considered as the owner of the assets of the Separate Account
resulting in the imposition of federal income tax to the Owner with respect to
earnings allocable to the Contract prior to receipt of payments under the
Contract.
In the event any forthcoming guidance or ruling is considered to set forth a new
position, such guidance or ruling will generally be applied only prospectively.
However, if such ruling or guidance was not considered to set forth a new
position, it may be applied retroactively resulting in the Owner being
retroactively determined to be the owner of the assets of the Separate Account.
Due to the uncertainty in this area, SAFECO reserves the right to modify the
Contract in an attempt to maintain favorable tax treatment.
MULTIPLE CONTRACTS
The Code provides that multiple non-qualified annuity contracts which are issued
within a calendar year to the same contract owner by one company or its
affiliates are treated as one annuity contract for purposes of determining the
tax consequences of any distribution. Such treatment may result in adverse tax
consequences including more rapid taxation of the distributed amounts from such
combination of contracts. Owners should consult a tax adviser prior to
purchasing more than one non-qualified annuity contract in any calendar year.
TAX TREATMENT OF ASSIGNMENTS
An assignment or pledge of a Contract may be a taxable event. Owners should
therefore consult competent tax advisers should they wish to assign or pledge
their Contracts.
INCOME TAX WITHHOLDING
All distributions or any portion(s) thereof which are includable in the gross
income of the Owner are subject to Federal income tax withholding. Generally,
amounts are withheld from periodic payments at the same rate as wages and at the
rate of 10% from non-periodic payments. However, the Owner, in most cases, may
elect not to have taxes withheld or to have withholding done at a different
rate.
Effective January 1, 1993, certain distributions from retirement plans qualified
under Section 401 or Section 403(b) of the Code, which are not directly rolled
over to another eligible retirement plan or individual retirement account or
individual retirement annuity, are subject to a mandatory 20% withholding for
Federal income tax. The 20% withholding requirement does not apply to: a)
distributions for the life or life expectancy of the participant or joint and
last survivor expectancy of the participant and a designated beneficiary; or b)
distributions for a specified period of 10 years or more; or c) distributions
which are required minimum distributions. Participants should consult their own
tax counsel or other tax advisor regarding withholding.
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TAX TREATMENT OF WITHDRAWALS - NON-QUALIFIED CONTRACTS
Section 72 of the Code governs treatment of distributions from annuity
contracts. It provides that if the Contract Value exceeds the aggregate purchase
payments made, any amount withdrawn will be treated as coming first from the
earnings and then, only after the income portion is exhausted, as coming from
the principal. Withdrawn earnings are includable in gross income. It further
provides that a ten percent (10%) penalty will apply to the income portion of
any premature distribution. However, the penalty is not imposed on amounts
received: (a) after the taxpayer reaches age 59 1/2; (b) after the death of the
Owner; (c) if the taxpayer is totally disabled (for this purpose disability is
as defined in Section 72(m)(7) of the Code); (d) in a series of substantially
equal periodic payments made not less frequently than annually for the life (or
life expectancy) of the taxpayer or for the joint lives (or joint life
expectancies) of the taxpayer and his or her Beneficiary; (e) under an immediate
annuity; or (f) which are allocable to purchase payments made prior to August
14, 1982.
The above information does not apply to Qualified Contracts. However, separate
tax withdrawal penalties and restrictions may apply to such Qualified Contracts.
(See "Tax Treatment of Withdrawals - Qualified Contracts" below.)
QUALIFIED PLANS
The Contracts offered by this Prospectus are designed to be suitable for use
under various types of Qualified Plans. Taxation of participants in each
Qualified Plan varies with the type of plan and terms and conditions of each
specific plan. Owners, Annuitants and Beneficiaries are cautioned that benefits
under a Qualified Plan may be subject to the terms and conditions of the plan
regardless of the terms and conditions of the Contracts issued pursuant to the
plan. Following are general descriptions of the types of Qualified Plans with
which the Contracts may be used. Such descriptions are not exhaustive and are
for general informational purposes only. The tax rules regarding Qualified Plans
are very complex and will have differing applications depending on individual
facts and circumstances. Each purchaser should obtain competent tax advice prior
to purchasing a Contract issued under a Qualified Plan.
Contracts issued pursuant to Qualified Plans include special provisions
restricting Contract provisions that may otherwise be available as described in
this Prospectus. Generally, Contracts issued pursuant to Qualified Plans are not
transferable except upon surrender or annuitization. Various penalty and excise
taxes may apply to contributions or distributions made in violation of
applicable limitations. Furthermore, certain withdrawal penalties and
restrictions may apply to surrenders from Qualified Contracts. (See "Tax
Treatment of Withdrawals - Qualified Contracts", below.)
On July 6, 1983, the Supreme Court decided 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. The Contracts sold by SAFECO in connection with
Qualified Plans will utilize annuity tables which do not differentiate on the
basis of sex. Such annuity tables will also be available for use in connection
with certain non-qualified deferred compensation plans.
a. Tax-Sheltered Annuities
Section 403(b) of the Code permits the purchase of "tax-sheltered annuities"
by public schools and certain charitable, educational and scientific
organizations described in Section 501(c)(3) of the Code. These qualifying
employers may make contributions to the Contracts for the benefit of their
employees. Such contributions are not includable in the gross income of the
employees until the employees receive distributions from the Contracts. The
amount of contributions to the tax-sheltered annuity is limited to certain
maximums imposed by the Code. Furthermore, the Code sets forth additional
restrictions governing such items as transferability, distributions,
nondiscrimination and withdrawals. (See "Tax Treatment of Withdrawals -
Qualified Contracts" below.) Any employee should obtain competent tax advice
as to the tax treatment and suitability of such an investment.
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b. Individual Retirement Annuities
Section 408(b) of the Code permits eligible individuals to contribute to an
individual retirement program known as an "Individual Retirement Annuity"
("IRA"). Under applicable limitations, certain amounts may be contributed to
an IRA which will be deductible from the individual's gross income. These
IRAs are subject to limitations on eligibility, contributions,
transferability and distributions. (See "Tax Treatment of Withdrawals -
Qualified Contracts" below.) Under certain conditions, distributions from
other IRAs and other Qualified Plans may be rolled over or transferred on a
tax-deferred basis into an IRA. Sales of Contracts for use with IRAs are
subject to special requirements imposed by the Code, including the
requirement that certain informational disclosure be given to persons
desiring to establish an IRA. Purchasers of Contracts to be qualified as
Individual Retirement Annuities should obtain competent tax advice as to the
tax treatment and suitability of such an investment.
TAX TREATMENT OF WITHDRAWALS - QUALIFIED CONTRACTS
Section 72(t) of the Code imposes a 10% penalty tax on the taxable portion of
any distribution from qualified retirement plans, including Contracts issued and
qualified under Code Sections 403(b) (Tax-Sheltered Annuities) and 408(b)
(Individual Retirement Annuities). To the extent amounts are not includable in
gross income because they have been rolled over to an IRA or to another eligible
Qualified Plan, no tax penalty will be imposed. The tax penalty will not apply
to the following distributions: (a) if distribution is made on or after the date
on which the Owner or Annuitant (as applicable) reaches age 59 1/2; (b)
distributions following the death or disability of the Owner or Annuitant (as
applicable) (for this purpose disability is as defined in Section 72(m)(7) of
the Code); (c) after separation from service, distributions that are part of
substantially equal periodic payments made not less frequently than annually for
the life (or life expectancy) of the Owner or Annuitant (as applicable) or the
joint lives (or joint life expectancies) of such Owner or Annuitant (as
applicable) and his or her designated Beneficiary; (d) distributions to an Owner
or Annuitant (as applicable) who has separated from service after he has
attained age 55; (e) distributions made to the Owner or Annuitant (as
applicable) to the extent such distributions do not exceed the amount allowable
as a deduction under Code Section 213 to the Owner or Annuitant (as applicable)
for amounts paid during the taxable year for medical care; and (f) distributions
made to an alternate payee pursuant to a qualified domestic relations order. The
exceptions stated in (d), (e) and (f) above do not apply in the case of an
Individual Retirement Annuity. The exception stated in (c) above applies to an
Individual Retirement Annuity without the requirement that there be a separation
from service.
Generally, distributions from a Qualified Plan must commence no later than April
1 of the calendar year, following the year in which the employee attains age 70
1/2. Required distributions must be over a period not exceeding the life
expectancy of the individual or the joint lives or life expectancies of the
individual and his or her designated beneficiary. If the required maximum
distributions are not made, a 50% penalty tax is imposed as to the amount not
distributed. In addition, distributions in excess of $150,000 per year in the
case of periodic distributions and in excess of $750,000 in the case of lump sum
distributions may be subject to an additional 15% excise tax unless an exemption
applies.
TAX-SHELTERED ANNUITIES - WITHDRAWAL LIMITATIONS
The Code limits the withdrawal of amounts attributable to contributions made
pursuant to a salary reduction agreement (as defined in Section 403(b)(11) of
the Code) to circumstances only when the Owner: (1) attains age 59 1/2; (2)
separates from service; (3) dies; (4) becomes disabled (within the meaning of
Section 72(m)(7) of the Code); or (5) in the case of hardship. However,
withdrawals for hardship are restricted to the portion of the Owner's Contract
Value which represents contributions made by the Owner and does not include any
investment results. The limitations on withdrawals became effective on January
1, 1989 and apply only to salary reduction contributions made after December 31,
1988, to income attributable to such contributions and to income attributable to
amounts held as of December 31, 1988. The limitations on withdrawals do not
affect rollovers or transfers between certain Qualified Plans. Owners should
consult their own tax counsel or other tax adviser regarding any distributions.
-37-
<PAGE> 42
LEGAL PROCEEDINGS
There are no legal proceedings to which the Separate Account, SSI or PNMR is a
party. On January 9, 1995 a class action seeking actual and punitive damages was
brought by an owner of a qualified pension annuity contract. DeVoy v. SAFECO
Life Insurance Company, Case No. 684407 pending in the Superior Court of
California, County of San Diego. With respect to such contracts plaintiffs
challenge both the representations as to interest rates and the calculation of
interest. The Company is defending against the action. SAFECO is also engaged in
various kinds of litigation which, in the opinion of SAFECO, is not of material
importance in relation to the total capital and surplus of SAFECO.
TABLE OF CONTENTS OF THE
STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
Page
----
<S> <C>
ANNUITY PROVISIONS........................................................ 3
General................................................................ 3
Annuity Unit........................................................... 3
Assumed Investment Factor.............................................. 3
Variable Annuity Payment Calculation................................... 3
ADDITIONAL PERFORMANCE INFORMATION........................................ 3
SAFECO Resource Bond Sub-Account....................................... 3
SAFECO Resource Equity, SAFECO Resource Bond,
SAFECO Resource Growth, SAFECO Resource Northwest,
Scudder Balanced and Scudder International Sub-Accounts............. 4
Standardized Total Return Figures................................. 4
Non-Standardized Total Return Figures............................. 4
SAFECO Resource Money Market Sub-Account............................... 7
Yield and Effective Yield........................................... 7
Non-Standardized Total Return Figures............................... 7
FINANCIAL STATEMENTS...................................................... 9
SAFECO Resource Variable Account B..................................... 10
SAFECO Life Insurance Company and Subsidiaries......................... 19
</TABLE>
-38-
<PAGE> 43
PART B
<PAGE> 44
STATEMENT OF ADDITIONAL INFORMATION
SAFECO LIFE INSURANCE COMPANY
GENERAL INFORMATION
SAFECO
SAFECO Life Insurance Company (SAFECO) is a wholly-owned subsidiary of SAFECO
Corporation which is a holding company whose subsidiaries are engaged primarily
in insurance and financial services businesses.
During the establishment of the Separate Account, SAFECO contributed capital to
the Separate Account which was immediately invested in the SAFECO Resource
Series Trust (Trust). At December 31, 1994, SAFECO's contribution represented
41.7% and 58.5% of the value of the SAFECO Resource Bond and SAFECO Resource
Money Market Sub-Accounts, respectively. SAFECO has no present intention of
withdrawing these amounts from the respective Sub-Accounts.
SAFEKEEPING OF THE ASSETS OF THE SEPARATE ACCOUNT
SAFECO holds the assets of the Separate Account. The assets are kept segregated
and held separate and apart from the general account assets of SAFECO. SAFECO
maintains records of all Separate Account purchases and redemptions of the
shares of each Portfolio of SAFECO Resource Series Trust (Trust), Insurance
Management Series, Lexington Emerging Markets Fund, Inc., the Lexington Natural
Resources Trust, and Scudder Variable Life Investment Fund.
INDEPENDENT AUDITORS
Ernst & Young LLP, 999 Third Avenue, Suite 3500, Seattle, Washington 98104, is
the independent auditor of the financial statements of SAFECO and the Separate
Account.
DISTRIBUTOR
Currently, SAFECO Securities, Inc. (SSI), acts as the principal underwriter for
the Contracts. The offering is on a continuous basis. Prior to April 29, 1994,
PNMR Securities, Inc. (PNMR) acted as the principal underwriter for the
Contracts. SSI and PNMR are both wholly-owned subsidiaries and affiliates of
SAFECO. For the years ended 1992, 1993 and 1994, PNMR, through SSI, received
$306,787, $568,136 and $1,640,855 in commissions for the distribution of certain
annuity contracts sold in connection with the Separate Account of which no
payments were retained.
This Statement of Additional Information is not a prospectus and should be
read in conjunction with the Prospectus for the Individual Single Purchase
Payment Deferred Variable Annuity Contracts.
The Prospectus concisely sets forth information that a prospective investor
should know before investing. For a copy of the Prospectus, call
1-800-426-7649 or write to SAFECO Life Insurance Company, Annuity Service
Office, Pension Department, P.O. Box 34690, Seattle, Washington 98124-1690.
This Statement of Additional Information and the Prospectus are both dated
December 29, 1995.
B-1
<PAGE> 45
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ANNUITY PROVISIONS........................................................ 3
General................................................................ 3
Annuity Unit........................................................... 3
Assumed Investment Factor.............................................. 3
Variable Annuity Payment Calculation................................... 3
ADDITIONAL PERFORMANCE INFORMATION........................................ 3
SAFECO Resource Bond Sub-Account....................................... 3
SAFECO Resource Equity, SAFECO Resource Bond,
SAFECO Resource Growth, SAFECO Resource Northwest,
Scudder Balanced and Scudder International Sub-Accounts............. 4
Standardized Total Return Figures................................. 4
Non-Standardized Total Return Figures............................. 4
SAFECO Resource Money Market Sub-Account............................... 7
Yield and Effective Yield........................................... 7
Non-Standardized Total Return Figures............................... 7
FINANCIAL STATEMENTS...................................................... 9
SAFECO Resource Variable Account B..................................... 10
SAFECO Life Insurance Company and Subsidiaries......................... 19
</TABLE>
B-2
<PAGE> 46
ANNUITY PROVISIONS
GENERAL
The Settlement Options and related provisions are described in the Prospectus.
ANNUITY UNIT
The value of an Annuity Unit for each Sub-Account was arbitrarily set at $10
when each Sub-Account was established. The value of the Annuity Unit for any
subsequent Valuation Period is determined by multiplying the value of the
Annuity Unit for the immediately preceding Valuation Period by the Net
Investment Factor for the Valuation Period for which the value is being
calculated, and dividing the result by the Assumed Investment Factor for such
Valuation Period.
ASSUMED INVESTMENT FACTOR
The Assumed Investment Factor for a one day Valuation Period is 1.00010746. This
factor neutralizes the assumed investment return of 4% in the Variable Annuity
purchase rate table in the Contract.
VARIABLE ANNUITY PAYMENT CALCULATION
A Variable Annuity is an Annuity with payments which are not predetermined as to
dollar amount. Payments will vary in accordance with the net investment results
of the Separate Account. The dollar amount of the first monthly Variable Annuity
payment under Settlement Options (a), (b) or (c), will be determined by applying
the Contract Value (after deduction for premium taxes, if applicable), as of the
15th day of the preceding month, to the Variable Annuity purchase rate table in
the Contract. The number of Annuity Units to be credited to the Annuitant will
be determined by dividing the first monthly payment by the Annuity Unit value
calculated as of the 15th day of the preceding month. This number of Annuity
Units remains fixed during the Annuity payment period. The dollar amount of each
Variable Annuity payment after the first shall be determined by multiplying the
number of Annuity Units credited to the Annuitant by the Annuity Unit value as
of the 15th day of the preceding month.
ADDITIONAL PERFORMANCE INFORMATION
SAFECO RESOURCE BOND SUB-ACCOUNT
YIELD
The yield for the SAFECO Resource Bond Sub-Account of the Separate Account for
the 30-day period ended December 31, 1994 is 5.60%.
Yield is computed using the following formula:
6
Yield = 2 [ (a - b + 1) - 1]
-----
cd
Where: a= net investment income earned during the period by the portfolio
company attributable to shares owned by the Sub-Account
b= expenses accrued for the period (net of reimbursements and
including a proportional amount of the annual administration
charge deducted from Participants' accounts during a 30-day
period)
c= the average daily number of accumulation units outstanding during
the period
d= the maximum offering price per accumulation unit on the last day
of the period
B-3
<PAGE> 47
SAFECO RESOURCE EQUITY, SAFECO RESOURCE BOND, SAFECO RESOURCE GROWTH,
SAFECO RESOURCE NORTHWEST, SCUDDER BALANCED AND SCUDDER INTERNATIONAL
SUB-ACCOUNTS
STANDARDIZED TOTAL RETURN FIGURES
The "standardized" total return and average annual total return figures quoted
below are calculated for required time periods based on a set initial investment
amount, include the deduction of an annual Administration Charge assessed, if
any, to each Participant's Accumulation Account, include any applicable
Contingent Deferred Sales Charge and assume the reinvestment of dividend and
capital gains distributions. The amount of the Contingent Deferred Sales Charge
ranges from 8% to 1% of withdrawal depending on the Certificate Year in which
the withdrawal occurs.
FISCAL PERIODS ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
PERIOD
FROM INITIAL
YEAR ENDED PUBLIC
TOTAL RETURN 12/31/94 5 YEAR OFFERING DATE
<S> <C> <C> <C>
SAFECO Resource Equity Sub-Account -.15% 64.08% 108.21%*
SAFECO Resource Bond Sub-Account -11.16% 25.95% 52.27%*
SAFECO Resource Growth Sub-Account 2.56% 40.47%**
SAFECO Resource Northwest Sub-Account -5.02% -4.84%**
Scudder Balanced Sub-Account -9.71% -4.59%***
Scudder International Sub-Account -9.13% 5.58%***
</TABLE>
<TABLE>
<CAPTION>
PERIOD
FROM INITIAL
YEAR ENDED PUBLIC
AVERAGE ANNUAL TOTAL RETURN 12/31/94 5 YEAR OFFERING DATE
<S> <C> <C> <C>
SAFECO Resource Equity Sub-Account -.15% 10.41% 10.35%*
SAFECO Resource Bond Sub-Account -11.16% 4.72% 5.81%*
SAFECO Resource Growth Sub-Account 2.56% 18.69%**
SAFECO Resource Northwest Sub-Account -5.02% -2.47%**
Scudder Balanced Sub-Account -9.71% -3.28%***
Scudder International Sub-Account -9.13% 3.93%***
</TABLE>
*Represents an 89 month period (from July 21, 1987 to December 31, 1994.)
**Represents a 23 month period (from January 7, 1993 to December 31, 1994)
***Represents a 16 month period (from August 3, 1993 to December 31, 1994)
NON-STANDARDIZED TOTAL RETURN FIGURES
Following are several examples of "non-standardized" total return and average
annual total return figures which can be calculated in a variety of ways
including non-standard time periods, different initial investment amounts,
additions of periodic payments, use of time-weighted average annual total
returns, deducting or not deducting the Administration Charge and deducting or
not deducting the Contingent Deferred Sales Charge. The net change in unit value
is the percentage change from the ending unit value to the beginning unit value
and is not affected by specific investment amounts.
B-4
<PAGE> 48
NET CHANGE IN UNIT VALUE BASED ON ANY SINGLE SUM INVESTMENT
ADMINISTRATION CHARGE NOT DEDUCTED
CONTINGENT DEFERRED SALES CHARGE NOT DEDUCTED
<TABLE>
<CAPTION>
PERIOD
FROM INITIAL
YEAR TO DATE YEAR ENDED PUBLIC
TOTAL RETURN 12/31/94 12/31/94 5 YEAR OFFERING DATE
<S> <C> <C> <C> <C>
SAFECO Resource Equity Sub-Account 7.59% 7.59% 70.21% 110.10%*
SAFECO Resource Bond Sub-Account -4.27% -4.27% 30.65% 53.65%*
SAFECO Resource Growth Sub-Account 10.51% 10.51% 48.97%**
SAFECO Resource Northwest Sub-Account 2.35% 2.35% 1.56%**
Scudder Balanced Sub-Account -2.71% -2.71% 1.82%***
Scudder International Sub-Account -2.09% -2.09% 12.68%***
</TABLE>
<TABLE>
<CAPTION>
PERIOD
FROM INITIAL
AVERAGE ANNUAL YEAR TO DATE YEAR ENDED PUBLIC
TOTAL RETURN 12/31/94 12/31/94 5 YEAR OFFERING DATE
<S> <C> <C> <C> <C>
SAFECO Resource Equity Sub-Account 7.59% 7.59% 11.22% 10.49%*
SAFECO Resource Bond Sub-Account -4.27% -4.27% 5.49% 5.94%*
SAFECO Resource Growth Sub-Account 10.51% 10.51% 48.97%**
SAFECO Resource Northwest Sub-Account 2.35% 2.35% 1.56%**
Scudder Balanced Sub-Account -2.71% -2.71% 1.82%***
Scudder International Sub-Account -2.09% -2.09 12.68%***
</TABLE>
*Represents an 89 month period (from July 21, 1987 to December 31, 1994)
**Represents a 23 month period (from January 7, 1993 to December 31, 1994)
***Represents a 16 month period (from August 3, 1993 to December 31, 1994)
NET CHANGE IN UNIT VALUE
BASED ON UNIFORM INITIAL AND MONTHLY INVESTMENT
ADMINISTRATION CHARGE NOT DEDUCTED
CONTINGENT DEFERRED SALES CHARGE NOT DEDUCTED
<TABLE>
<CAPTION>
PERIOD
FROM INITIAL
YEAR TO DATE YEAR ENDED PUBLIC
TOTAL RETURN 12/31/94 12/31/94 5 YEAR OFFERING DATE
<S> <C> <C> <C> <C>
SAFECO Resource Equity Sub-Account 3.10% 3.10% 42.23% 65.44%*
SAFECO Resource Bond Sub-Account -1.29% -1.29% 10.67% 21.72%*
SAFECO Resource Growth Sub-Account 5.71% 5.71% 19.31%**
SAFECO Resource Northwest Sub-Account -.18% -.18% 2.41%**
Scudder Balanced Sub-Account -.93% -.93% -1.02%***
Scudder International Sub-Account -3.65% -3.65% -1.01%***
</TABLE>
B-5
<PAGE> 49
<TABLE>
<CAPTION>
PERIOD
AVERAGE ANNUAL FROM INITIAL
TOTAL RETURN YEAR TO DATE YEAR ENDED PUBLIC
(TIME WEIGHTED) 12/31/94 12/31/94 5 YEAR OFFERING DATE
<S> <C> <C> <C> <C>
SAFECO Resource Equity Sub-Account 5.78% 5.78% 14.06% 13.29%*
SAFECO Resource Bond Sub-Account -2.37% -2.37% 4.00% 5.22%*
SAFECO Resource Growth Sub-Account 10.71% 10.71% 18.71%**
SAFECO Resource Northwest Sub-Account -.34% -.34% 2.39%**
Scudder Balanced Sub-Account -1.71% -1.71% -1.43%***
Scudder International Sub-Account -6.66% -6.66% -1.41%***
</TABLE>
*Represents an 89 month period (from July 21, 1987 to December 31, 1994)
**Represents a 23 month period (from January 7, 1993 to December 31, 1994)
***Represents a 16 month period (from August 3, 1993 to December 31, 1994)
The formulas used to calculate "standardized" total return and average annual
total return are set forth below. For "non-standardized" total return and
average annual total return, the "CDSC" component is removed to calculate
figures which do not contain the Contingent Deferred Sales Charge, the "AF" is
removed to calculate figures which do not contain the Administration Charge, the
"P" component will vary depending on the initial investment amount and the "N"
component will vary depending on the time period selected. Time-weighted average
annual total return figures take into account the length of time an investment
has been on deposit. Non-standardized figures may cause the performance of the
Sub-Accounts to appear higher.
Total return is computed using the following formula:
n
P(1 + T) = ERV
Where: P = a hypothetical investment of $1,000
T = total return
n = number of years
ERV = ending redeemable value of a hypothetical $1000
payment made at the beginning of the 1, 5, or 10 year
periods at the end of the 1, 5, or 10 year periods (or
fractional portion thereof).
B-6
<PAGE> 50
SAFECO RESOURCE MONEY MARKET SUB-ACCOUNT
YIELD AND EFFECTIVE YIELD
The yield and effective yield for the SAFECO Resource Money Market Sub-Account
of the Separate Account for the 7-day period ended December 31, 1994, were 3.85%
and 3.92%, respectively.
Yield is computed using the following formula:
Yield = [(X - Y) - Z - AF] = Base Period Return x 365/7
----------------
Y
365/7
Effective Yield = [ (Base Period Return + 1) ] - 1
Where: X = value of one Accumulation Unit at the end of a 7-day
period.
Y = value of one Accumulation Unit at the beginning of a 7-day
period.
Z = capital changes during the 7-day period, if any.
AF = proportional amount of annual Administration Charge
deducted from Participant's account during a 7-day period.
The computation of yield and effective yield described in this section does not
include any Contingent Deferred Sales Charge that may be applicable if all or a
portion of the Accumulation Account is withdrawn within the first eight
Certificate Years. The amount of the Contingent Deferred Sales Charge ranges
from 8% to 1% depending upon the Certificate Year in which the withdrawal
occurs. See "Deduction for Contingent Deferred Sales Charge" in the Prospectus
for more information.
NONSTANDARDIZED TOTAL RETURN
Following are several examples of "non-standardized" total return and average
annual total return figures for the SAFECO Resource Money Market Portfolio which
can be calculated in a variety of ways including non-standard time periods,
different initial investment amounts, additions of periodic payments, use of
time-weighted average annual total returns and deducting or not deducting the
Administration Charge and deducting or not deducting the Contingent Deferred
Sales Charge. The net change in unit value is the percentage change from the
ending unit value to the beginning unit value and is not affected by investment
amount.
NET CHANGE IN UNIT VALUE BASED ON ANY SINGLE SUM INVESTMENT
ADMINISTRATION CHARGE NOT DEDUCTED
CONTINGENT DEFERRED SALES CHARGE NOT DEDUCTED
<TABLE>
<CAPTION>
PERIOD
FROM INITIAL
YEAR TO DATE YEAR ENDED PUBLIC
TOTAL RETURN 12/31/94 12/31/94 5 YEAR OFFERING DATE
<S> <C> <C> <C> <C>
SAFECO Resource Money Market 2.37% 2.37% 17.72% 37.23%
Sub-Account
</TABLE>
<TABLE>
<CAPTION>
PERIOD
FROM INITIAL
AVERAGE ANNUAL YEAR TO DATE YEAR ENDED PUBLIC
TOTAL RETURN 12/31/94 12/31/94 5 YEAR OFFERING DATE
<S> <C> <C> <C> <C>
SAFECO Resource Money Market 2.37% 2.37% 3.32% 4.34%
Sub-Account
</TABLE>
B-7
<PAGE> 51
NET CHANGE IN UNIT VALUE BASED ON ANY UNIFORM INITIAL AND MONTHLY INVESTMENT
ADMINISTRATION CHARGE NOT DEDUCTED
CONTINGENT DEFERRED SALES CHARGE NOT DEDUCTED
<TABLE>
<CAPTION>
PERIOD
FROM INITIAL
YEAR TO DATE YEAR ENDED PUBLIC
12/31/94 12/31/94 5 YEAR OFFERING DATE
TOTAL RETURN
<S> <C> <C> <C> <C>
SAFECO Resource Money Market 1.50% 1.50% 6.37% 13.50%
Sub-Account
</TABLE>
<TABLE>
<CAPTION>
PERIOD
AVERAGE ANNUAL FROM INITIAL
TOTAL RETURN YEAR TO DATE YEAR ENDED PUBLIC
(TIME WEIGHTED) 12/31/94 12/31/94 5 YEAR OFFERING DATE
<S> <C> <C> <C> <C>
SAFECO Resource Money Market 2.77% 2.77% 2.43% 3.36%
Sub-Account
</TABLE>
For "non-standardized" total return and average annual total return, the "CDSC"
component is removed to calculate figures which do not contain the Contingent
Deferred Sales Charge, the "AF" is removed to calculate figures which do not
contain the Administration Charge, the "P" component will vary depending on the
initial investment amount and the "N" component will vary depending on the time
period selected. Time-weighted average annual total return figures take into
consideration the length of time each investment has been on deposit.
Total return is computed using the following formula:
[ (AU - AF) x AUV] - (CDSC x P) - P
----------------------------------- x 100
T = P
Average annual total return is computed using the following formula:
A = ((the Nth root of { [ (AU - AF) x AUV ] - (CDSC x P) } /P) - 1) x 100
Where: T = total return
A = average annual total return
N = number of years
AU = number of Accumulation Units purchased at the
beginning of the period
AF = number of Accumulation Units redeemed from
Participant's account to pay annual Administration
Charge
AUV = Accumulation Unit value at the end of the period.
CDSC = Contingent Deferred Sales Charge, which may be
applicable if all or a portion of the Accumulation
Account is withdrawn within the first eight
Certificate Years. The amount of the Contingent
Deferred Sales Charge ranges from 8% to 1%
depending upon the Certificate Year in which the
withdrawal occurs.
P = a hypothetical investment of $1,000
B-8
<PAGE> 52
FINANCIAL STATEMENTS
The consolidated financial statements of SAFECO included herein should be
considered only as bearing upon the ability of SAFECO to meet its obligations
under the Contracts.
B-9
<PAGE> 53
FINANCIAL STATEMENTS
SAFECO RESOURCE VARIABLE ACCOUNT B
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Report of Ernst & Young LLP, Independent Auditors.......................... 11
Statements of Assets and Liabilities as of December 31, 1994............... 12
Statements of Operations for the year ended December 31, 1994.............. 13
Statements of Changes in Net Assets for the years ended
December 31, 1994 and 1993............................................... 14
Notes to Financial Statements (including accumulation unit data)........... 16
</TABLE>
10
<PAGE> 54
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Board of Directors of SAFECO Life Insurance Company and
Participants of SAFECO Resource Variable Account B:
We have audited the accompanying statement of assets and liabilities of SAFECO
Resource Variable Account B (comprising, respectively, the Equity, Growth,
Northwest, Bond, Money Market, International, and Balanced Sub-Accounts), as of
December 31, 1994. For the Equity, Bond, and Money Market Sub-Accounts, we have
audited the statement of operations for the year ended December 31, 1994, the
statement of changes in net assets for each of the two years in the period then
ended, and the accumulation unit data for each of the five years in the period
then ended. For the Growth, Northwest, International and Balanced Sub-Accounts,
we have audited the statement of operations, the statement of changes in net
assets and the accumulation unit data for the year ended December 31, 1994 and
for the period from the commencement of operations (January 7, 1993 for the
Growth and Northwest Sub-Accounts and March 12, 1993 for the Balanced and
International Sub-Accounts) to December 31, 1993. These financial statements and
accumulation unit data are the responsibility of the SAFECO Resource Variable
Account B's management. Our responsibility is to express an opinion on these
financial statements and accumulation unit data based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and accumulation
unit data are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1994, by correspondence with SAFECO Resource Series Trust and
Scudder Variable Life Investment Fund. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and accumulation unit data referred to
above present fairly, in all material respects, the financial position of each
of the respective Sub-Accounts constituting SAFECO Resource Variable Account B
at December 31, 1994, the results of their operations, the changes in their net
assets, and the accumulation unit data for the periods referred to above, in
conformity with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
Seattle, Washington
January 27, 1995
-11-
<PAGE> 55
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
SUB-ACCOUNTS
----------------------------------------------------------------
AS OF DECEMBER 31, 1994 EQUITY GROWTH NW BOND MMKT INT'L BAL
- -----------------------------------------------------------------------------------------------------------------------------------
-- (In Thousands, Except Per-Unit Amounts) --
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments, at value:
SAFECO Resource Series Trust - Equity Portfolio
3,215,061 shares at net asset value of $16.83 per share
(identified cost $52,866) $54,102
SAFECO Resource Series Trust - Growth Portfolio
484,769 shares at net asset value of $12.98 per share
(identified cost $6,232) $ 6,290
SAFECO Resource Series Trust - Northwest Portfolio
108,100 shares at net asset value of $10.24 per share
(identified cost $1,102) $ 1,107
SAFECO Resource Series Trust - Bond Portfolio
732,723 shares at net asset value of $10.20 per share
(identified cost $8,190) $ 7,472
SAFECO Resource Series Trust - Money Market Portfolio
4,733,044 shares at net asset value of $1.00 per share
(identified cost $4,733) $ 4,733
Scudder Variable Life Investment Fund - International Portfolio
459,233 shares at net asset value of $10.69 per share
(identified cost $5,045) $ 4,909
Scudder Variable Life Investment Fund - Balanced Portfolio
137,557 shares at net asset value of $8.97 per share
(identified cost $1,248) $ 1,234
Cash 8 -- -- 1 -- -- --
------- ------- ------- ------- ------- ------- -------
Total assets 54,110 6,290 1,107 7,473 4,733 4,909 1,234
------- ------- ------- ------- ------- ------- -------
LIABILITIES:
Mortality and expense risk charge payable 54 6 1 8 5 5 1
Fees payable 8 -- -- 1 -- -- --
------- ------- ------- ------- ------- ------- -------
Total liabilities 62 6 1 9 5 5 1
------- ------- ------- ------- ------- ------- -------
NET ASSETS $54,048 $ 6,284 $ 1,106 $ 7,464 $ 4,728 $ 4,904 $ 1,233
======= ======= ======= ======= ======= ======= =======
ACCUMULATION UNITS OUTSTANDING (Note 4) 2,126 422 109 480 342 466 122
======= ======= ======= ======= ======= ======= =======
ACCUMULATION UNIT VALUE AND REDEMPTION
PRICE PER UNIT (Note 2)
(Net assets divided by accumulation units outstanding)( ( 8 8 $25.424 $14.897 $10.156 $15.559 $13.837 $10.519 $10.066
======= ======= ======= ======= ======= ======= =======
</TABLE>
See Notes to Financial Statements
-12-
<PAGE> 56
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
SUB-ACCOUNTS
----------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1994
EQUITY GROWTH NW BOND MMKT INT'L BAL
----------------------------------------------------------------
-- ($ In Thousands) --
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Income dividends and capital gain
distributions $ 4,986 $290 $ 7 $ 411 $146 $ 8 $ 30
EXPENSES:
Mortality and expense risk charge (Note 3) 543 39 9 99 51 36 8
------- ---- --- ----- ---- ----- ----
NET INVESTMENT INCOME 4,443 251 (2) 312 95 (28) 22
------- ---- --- ----- ---- ----- ----
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss) on
investment transactions 1,691 (6) 13 67 -- 34 (15)
Net change in unrealized
appreciation (depreciation) (3,071) 109 (4) (699) -- (166) (15)
------- ---- --- ----- ---- ----- ----
NET GAIN (LOSS) ON INVESTMENTS (1,380) 103 9 (632) -- (132) (30)
------- ---- --- ----- ---- ----- ----
NET CHANGE IN NET ASSETS RESULTING
FROM OPERATIONS $ 3,063 $354 $ 7 $(320) $ 95 $(160) $ (8)
======= ==== === ===== ==== ===== ====
</TABLE>
See Notes to Financial Statements
-13-
<PAGE> 57
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SUB-ACCOUNTS
----------------------------------------------------------------------------
EQUITY GROWTH NW
----------------------------------------------------------------------------
FOR THE YEAR OR PERIOD ENDED DECEMBER 31
1994 1993 1994 1993* 1994 1993*
----------------------------------------------------------------------------
-- ($ in Thousands) --
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income $ 4,443 $ 1,795 $ 251 $ 78 $ (2) $ 1
Net realized gain (loss) on investment transactions 1,691 714 (6) 36 13 --
Net change in unrealized appreciation (depreciation) (3,071) 3,079 109 (51) (4) 9
------- ------- ------ ----- ------ ----
Net change in net assets resulting from operations 3,063 5,588 354 63 7 10
NET ACCUMULATION UNIT TRANSACTIONS (Note 4) 17,856 10,328 5,174 693 725 364
------- ------- ------ ----- ------ ----
TOTAL CHANGE IN NET ASSETS 20,919 15,916 5,528 756 732 374
NET ASSETS AT BEGINNING OF PERIOD 33,129 17,213 756 -- 374 --
------- ------- ------ ----- ------ ----
NET ASSETS AT END OF PERIOD $54,048 $33,129 $6,284 $ 756 $1,106 $374
======= ======= ====== ===== ====== ====
</TABLE>
* Commencement of Operations was January 7, 1993.
See Notes to Financial Statements
-14-
<PAGE> 58
STATEMENT OF CHANGES IN NET ASSETS
(Continued)
<TABLE>
<CAPTION>
SUB-ACCOUNTS
------------------------------------------------------------------------
BOND MMKT INT'L BAL
------------------------------------------------------------------------
FOR THE YEAR OR PERIOD ENDED DECEMBER 31
1994 1993 1994 1993 1994 1993* 1994 1993*
------------------------------------------------------------------------
-- ($ in Thousands) --
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income $ 312 $ 439 $ 95 $ 53 $ (28) $ -- $ 22 $ --
Net realized gain (loss) on investment
transactions 67 71 -- -- 34 -- (15) --
Net change in unrealized appreciation
(depreciation) (699) (74) -- -- (166) 30 (15) 1
------ ------ ------ ------ ------ ---- ------ ----
Net change in net assets resulting from
operations (320) 436 95 53 (160) 30 (8) 1
NET ACCUMULATION UNIT TRANSACTIONS (Note 4) 520 2,210 936 (453) 4,329 705 1,136 104
------ ------ ------ ------ ------ ---- ------ ----
TOTAL CHANGE IN NET ASSETS 200 2,646 1,031 (400) 4,169 735 1,128 105
NET ASSETS AT BEGINNING OF PERIOD 7,264 4,618 3,697 4,097 735 -- 105 --
------ ------ ------ ------ ------ ---- ------ ----
NET ASSETS AT END OF PERIOD $7,464 $7,264 $4,728 $3,697 $4,904 $735 $1,233 $105
====== ====== ====== ====== ====== ==== ====== ====
</TABLE>
* Commencement of Operations was March 12, 1993.
See Notes to Financial Statements
-15-
<PAGE> 59
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
SAFECO Resource Variable Account B (Variable Account B) is registered under
the Investment Company Act of 1940, as amended, as a segregated unit
investment account of SAFECO Life Insurance Company (SAFECO), a wholly-owned
subsidiary of SAFECO Corporation.
Variable Account B is divided into sub-accounts which are invested in shares
of a designated portfolio of either SAFECO Resource Series Trust or Scudder
Variable Life Investment Fund.
The five portfolios of SAFECO Resource Series Trust are available to
unitholders -- the Equity, Growth, Northwest (NW), Bond, and Money Market
(MMKT) portfolios. Two portfolios of Scudder Variable Life Investment Funds
are also available to unitholders - the International (INT'L) and Balanced
(BAL) portfolios.
The assets of Variable Account B are the property of SAFECO and are not
commingled with liabilities arising out of any other business of SAFECO.
2. SIGNIFICANT ACCOUNTING POLICIES
SECURITY VALUATION -- Investments in mutual fund securities are carried in
the statement of assets and liabilities at net asset value as reported by
the Fund. Realized gains or losses on securities transactions are determined
using the First-In First-Out (FIFO) cost method. Security transactions are
recorded on the trade date.
DISTRIBUTIONS -- The net investment income and realized capital gains of
Variable Account B are not distributed, but are retained and reinvested for
the benefit of accumulation unit owners.
FEDERAL INCOME TAX -- Operations of Variable Account B are included in the
federal income tax return of SAFECO, which is taxed as a "life insurance
company" under the Internal Revenue Code. Under current federal income tax
law, no income taxes are payable with respect to operations of Variable
Account B.
UNIT VALUE CALCULATION -- For financial reporting purposes, amounts have
been rounded to the nearest thousand dollars, except for per unit amounts,
which may result in minor rounding differences. Per unit amounts are
calculated based on precise amounts.
3. EXPENSES
A mortality and expense risk charge is deducted by SAFECO from Variable
Account B on a daily basis which is equal, on an annual basis, to 1.25% of
the average daily net asset value of Variable Account B. The mortality risks
assumed by SAFECO arise from its contractual obligation to make annuity
payments after the annuity date for the life of the participant and to waive
withdrawal charges in the event of the death of a participant. The expense
risk assumed by SAFECO is that the costs of administering the contracts and
Variable Account B will exceed the amount received from the administration
charge. The mortality and expense risk charge is guaranteed by SAFECO and
cannot be increased.
The following expenses may be deducted from a contractholder's account by
SAFECO and not directly from Variable Account B. As a fee for expenses
associated with the administration of the contract owner's account, an
annual charge of $30 may be deducted by SAFECO from the accumulated value of
each contract on the date the initial purchase payment is invested and on
each certificate anniversary. SAFECO has the right to increase this fee to
$35. In the event that a participant withdraws all or a portion of the
participant's accumulation account, i kontingent deferred sales kharge is
imposed on withdrawals of purchase payments in the first eight certificate
years. Any premium tax levied by a state or government entity with respect
to the Variable Account B contract will be charged against the contract.
Fees and charges may vary by product. See the Prospectus "Expense Table" for
further information.
-16-
<PAGE> 60
NOTES TO FINANCIAL STATEMENTS
(Continued)
4. ACCUMULATION UNITS
<TABLE>
<CAPTION>
SUB-ACCOUNTS
--------------------------------------------------------------------
EQUITY GROWTH NW
--------------------------------------------------------------------
FOR THE YEAR OR PERIOD ENDED DECEMBER 31
1994 1993 1994 1993* 1994 1993*
--------------------------------------------------------------------
-- (In Thousands) --
<S> <C> <C> <C> <C> <C> <C>
UNITS:
Sales 920 591 427 73 82 39
Redemptions (196) (109) (61) (17) (11) (1)
------- ------- ------- ----- ------ ----
Net change 724 482 366 56 71 38
======= ======= ====== ===== ====== ====
AMOUNTS:
Sales $22,661 $12,675 $6,036 $ 922 $ 839 $372
Redemptions (4,805) (2,347) (862) (229) (114) (8)
------- ------- ------ ----- ------ ----
Net change $17,856 $10,328 $5,174 $ 693 $ 725 $364
======= ======= ====== ===== ====== ====
DECEMBER 31, 1994:
Paid in capital $41,855 $5,867 $1,089
Par value per unit None None None
Accumulation units authorized Unlimited Unlimited Unlimited
Accumulation units owned by SAFECO 200 -- --
</TABLE>
* Commencement of Operations was January 7, 1993.
-17-
<PAGE> 61
NOTES TO FINANCIAL STATEMENTS
(Continued)
4. ACCUMULATION UNITS
<TABLE>
<CAPTION>
SUB-ACCOUNTS
--------------------------------------------------------------------------------
BOND MMKT INT'L BAL
--------------------------------------------------------------------------------
FOR THE YEAR OR PERIOD ENDED DECEMBER 31
1994 1993 1994 1993 1994 1993* 1994 1993*
--------------------------------------------------------------------------------
-- (In Thousands) --
<S> <C> <C> <C> <C> <C> <C> <C> <C>
UNITS:
Sales 106 165 523 121 479 68 118 10
Redemptions (73) (28) (455) (155) (81) -- (6) --
------- ------ ------- ------- ------- ---- ------ ----
Net change 33 137 68 (34) 398 68 112 10
======= ====== ======= ======= ======= ==== ====== ====
AMOUNTS:
Sales $ 1,672 $2,675 $ 7,141 $ 1,638 $ 5,218 $705 $1,193 $104
Redemptions (1,152) (465) (6,205) (2,091) (889) -- (57) --
------- ------ ------- ------- ------- ---- ------ ----
Net change $ 520 $2,210 $ 936 $ (453) $ 4,329 $705 $1,136 $104
======= ====== ======= ======= ======= ==== ====== ====
DECEMBER 31, 1994:
Paid in capital $ 6,187 $ 3,852 $ 5,034 $1,240
Par value per unit None None None None
Accumulation units authorized Unlimited Unlimited Unlimited Unlimited
Accumulation units owned by 200 200 -- --
SAFECO
</TABLE>
* Commencement of Operations was March 12, 1993.
5. INVESTMENT TRANSACTIONS
<TABLE>
<CAPTION>
SUB-ACCOUNTS
-----------------------------------------------------------
EQUITY GROWTH NW BOND MMKT INT'L BAL
-----------------------------------------------------------
-- ($ in Thousands) --
<S> <C> <C> <C> <C> <C> <C> <C>
Purchases for the year ended
December 31, 1994 $ 28,388 $ 6,534 $ 941 $ 2,241 $9,580 $5,804 $ 1,316
======== ======= ====== ======= ====== ====== =======
Sales for the year ended
December 31, 1994 $ 6,068 $ 1,104 $ 217 $ 1,408 $8,548 $1,498 $ 157
======== ======= ====== ======= ====== ====== =======
</TABLE>
6. ACCUMULATION UNIT DATA
<TABLE>
<CAPTION>
SUB-ACCOUNTS
-----------------------------------------------------------------
EQUITY GROWTH NW BOND MMKT INT'L BAL
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
December 31, 1990 $13.987 -- -- $12.532 $12.527 -- --
December 31, 1991 17.520 -- -- 14.107 13.074 -- --
December 31, 1992 18.704 -- -- 14.882 13.335 -- --
January 7, 1993 -- $10.000 $10.000 -- -- -- --
March 12, 1993 -- -- -- -- -- $ 8.250 $10.060
December 31, 1993 23.630 13.480 9.923 16.253 13.516 10.743 10.346
December 31, 1994 25.424 14.897 10.156 15.559 13.837 10.519 10.066
</TABLE>
-18-
<PAGE> 62
Audited Consolidated Financial Statements
SAFECO Life Insurance Company
and Subsidiaries
For the Year Ended December 31, 1994
<PAGE> 63
SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . . . 1
Consolidated Financial Statements
Consolidated Balance Sheet . . . . . . . . . . . . . . . . . . . . . 2
Statement of Consolidated Income . . . . . . . . . . . . . . . . . . 3
Statement of Changes in Stockholder's Equity . . . . . . . . . . . . 4
Statement of Consolidated Cash Flows . . . . . . . . . . . . . . . . 5
Notes to Consolidated Financial Statements. . . . . . . . . . . . . . 7
</TABLE>
<PAGE> 64
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Board of Directors
SAFECO Life Insurance Company
We have audited the accompanying consolidated balance sheet of SAFECO Life
Insurance Company and subsidiaries as of December 31, 1994 and 1993, and the
related statements of consolidated income, changes in stockholder's equity, and
cash flows for each of the three years in the period ended December 31, 1994.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of SAFECO Life
Insurance Company and subsidiaries at December 31, 1994 and 1993, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1994, in conformity with generally
accepted accounting principles.
As described in Note 1 to the Consolidated Financial Statements, SAFECO Life
Insurance Company and subsidiaries adopted certain new accounting standards in
1994 and 1993 as required by the Financial Accounting Standards Board.
/s/ Ernst & Young LLP
----------------------------
Seattle, Washington
February 10, 1995
<PAGE> 65
SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In Thousands Except Share Amounts)
<TABLE>
<Caption)
December 31
--------------------------
1994 1993
---------- ----------
<S> <C> <C>
ASSETS
Investments (Note 2):
Fixed Maturities Available-for-Sale, at Market Value
(Amortized Cost: 1994--$6,116,932) ............................................. $5,915,662 $ --
Fixed Maturities Held-to-Maturity, at Amortized Cost
(Market Value: 1994--$1,948,309; 1993--$8,112,537) ............................. 2,053,132 7,422,664
Marketable Equity Securities, at Market Value
(Cost: 1994--$15,846; 1993--$14,833) ........................................... 22,747 25,166
First Mortgage Loans on Real Estate:
Nonaffiliates (Less allowance for losses: 1994--$9,511; 1993--$7,000) .......... 418,440 400,219
Affiliates ..................................................................... 134,157 86,871
Real Estate (At cost, less accumulated depreciation:
1994--$412; 1993--$331) ........................................................ 5,149 6,453
Policy Loans ..................................................................... 53,329 50,488
Short-Term Investments (At cost which approximates market) ....................... 62,789 74,573
Investment in Limited Partnerships ............................................... 1,219 1,039
---------- ----------
Total investments ............................................................ 8,666,624 8,067,473
Cash ............................................................................. 26,710 19,210
Accured investment income ........................................................ 141,907 128,212
Accounts and Notes Receivable (Less allowance for doubtful accounts:
1994--$160; 1993--$68) ......................................................... 21,189 27,703
Reinsurance Recoverables ......................................................... 15,517 15,166
Deferred Policy Acquisition Costs ................................................ 247,190 234,200
Other Assets ..................................................................... 6,494 7,100
Deferred Income Tax Recoverable (Includes tax on unrealized
depreciation of investment securities: 1994--$68,028) (Note 9) ................. 30,229 --
Assets Held in Separate Accounts ................................................. 158,266 95,321
---------- ----------
Total Assets ................................................................. $9,314,126 $8,594,385
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Policy and Contract Liabilities (Note 5):
Future Policy Benefits ......................................................... $ 155,322 $ 151,488
Policy and Contract Claims ..................................................... 29,050 33,186
Premiums Paid in Advance ....................................................... 8,783 9,957
Funds Held Under Deposit Contracts ............................................. 7,988,456 7,229,439
Other Policyholders' Funds ..................................................... 74,308 71,857
---------- ----------
Total Policy and Contract Liabilities ........................................ 8,255,919 7,495,927
Other Liabilities ................................................................ 89,239 87,797
Federal Income Taxes (Note 9):
Current ........................................................................ 12,464 15,665
Deferred (Includes tax on unrealized appreciation of
investment securities: 1993--$3,617) ......................................... -- 51,570
Liabilities Related to Separate Accounts ......................................... 158,266 95,321
---------- ----------
Total Liabilities ............................................................ 8,515,888 7,746,280
---------- ----------
Stockholder's Equity:
Common Stock, $250 Par Value:
20,000 Shares Authorized, Issued and Outstanding ............................. 5,000 5,000
Additional Paid-In Capital ..................................................... 85,000 85,000
Retained Earnings (Note 7) ..................................................... 834,467 751,277
Unrealized (Depreciation) Appreciation of Investment Securities,
Net of Tax (Note 2) .......................................................... (126,229) 6,828
---------- ----------
Total Stockholder's Equity ................................................. 798,238 848,105
---------- ----------
Total Liabilities and Stockholder's Equity ............................... $9,314,126 $8,594,385
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements
2
<PAGE> 66
SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED INCOME
<TABLE>
<CAPTION>
Year Ended December 31
----------------------------------
1994 1993 1992
-------- ---------- --------
(In Thousands)
<S> <C> <C> <C>
Revenues:
Premiums............................................................ $252,929 $ 279,628 $303,288
Investment income:
Interest on Fixed Maturities....................................... 648,296 612,805 567,458
Interest on Mortgage Loans......................................... 51,135 48,207 48,883
Interest on Short-Term Investments................................. 3,351 3,334 3,112
Dividends from Marketable Equity Securities........................ 1,446 1,817 2,258
Dividends from Redeemable Preferred Stock.......................... 618 -- --
Other Investment Income............................................ 4,375 4,862 4,534
-------- ---------- --------
Total............................................................ 709,221 671,025 626,245
Less Investment Expenses........................................... 3,551 3,303 2,992
-------- ---------- --------
Net Investment Income.............................................. 705,670 667,722 623,253
-------- ---------- --------
Other Revenue...................................................... 9,795 11,850 13,363
Realized Investment Gain........................................... 5,639 53,544 3,377
-------- ---------- --------
Total............................................................ 974,033 1,012,744 943,281
-------- ---------- --------
Benefits and Expenses:
Policy Benefits..................................................... 674,215 675,479 674,139
Commissions......................................................... 84,760 82,262 81,113
Personnel Costs..................................................... 42,439 43,244 42,036
Taxes Other Than Payroll and Income Taxes........................... 7,652 8,477 9,209
Other Operating Expenses............................................ 44,519 40,430 38,447
Amortization of Deferred Policy Acquisition Costs................... 29,407 26,350 18,861
Deferral of Policy Acquisition Costs................................ (43,360) (38,925) (45,257)
-------- ---------- --------
Total............................................................ 839,632 837,317 818,548
-------- ---------- --------
Income before Federal Income Taxes................................... 134,401 175,427 124,733
-------- ---------- --------
Provision (Benefit) for Federal Income Taxes (Note 9):
Current............................................................. 57,365 91,597 71,314
Deferred............................................................ (10,154) (26,135) (22,973)
-------- ---------- --------
Total............................................................ 47,211 65,462 48,341
-------- ---------- --------
Income Before Cumulative Effect of Accounting Changes................ 87,190 109,965 76,392
Cumulative Effect of Accounting Changes (Notes 8 and 9):
Postretirement Benefits (Net of Tax)................................ -- (2,493) --
Income Taxes........................................................ -- 9,092 --
-------- ---------- --------
Net Income........................................................... $ 87,190 $ 116,564 $ 76,392
======== ========== ========
</TABLE>
See Notes to Consolidated Financial Statements
3
<PAGE> 67
SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
Year Ended December 31
--------------------------------
1994 1993 1992
--------- -------- --------
(In Thousands)
<S> <C> <C> <C>
Common Stock............................... $ 5,000 $ 5,000 $ 5,000
--------- -------- --------
Additional Paid-In Capital................. 85,000 85,000 85,000
--------- -------- --------
Retained Earnings:
Balance at the Beginning of Year......... 751,277 638,713 566,321
Net Income............................... 87,190 116,564 76,392
Dividends to Parent...................... (4,000) (4,000) (4,000)
--------- -------- --------
Balance at the End of Year............... 834,467 751,277 638,713
--------- -------- --------
Unrealized Appreciation (Depreciation)
of Investment Securities, Net of Tax
(Note 2):
Balance at the Beginning of Year....... 6,828 5,968 6,124
Net Effect of Adoption of FASB
Statement 115........................ 279,957 - -
Change in Unrealized Appreciation
(Depreciation)....................... (413,014) 860 (156)
--------- -------- --------
Balance at the End of Year............. (126,229) 6,828 5,968
--------- -------- --------
Stockholder's Equity................. $ 798,238 $848,105 $734,681
========= ======== ========
</TABLE>
See Notes to Consolidated Financial Statements
4
<PAGE> 68
SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31
---------------------------------------
1994 1993 1992
----------- ------------ -----------
(In Thousands)
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Insurance Premiums Received........................................ $ 233,129 $ 264,254 $ 289,049
Dividends and Interest Received.................................... 641,234 589,916 538,512
Other Operating Receipts........................................... 11,419 11,814 11,535
Insurance Claims and Policy Benefits Paid.......................... (242,523) (270,702) (283,062)
Underwriting, Acquisition and Insurance Operating Costs Paid....... (177,188) (168,809) (167,400)
Income Taxes Paid.................................................. (60,566) (94,169) (58,082)
----------- ----------- -----------
Net Cash Provided by Operating Activities...................... 405,505 332,304 330,552
----------- ----------- -----------
INVESTING ACTIVITIES:
Purchase of:
Fixed Maturities Available-for-Sale.............................. (1,110,154) - -
Fixed Maturities Held-to-Maturity................................ (358,297) (2,106,558) (2,088,419)
Marketable Equity Securities..................................... (407) (132) (239)
Other Investments................................................ (24,381) (53) (73)
Real Estate...................................................... - - (101)
Policy and Nonaffiliated Mortgage Loans.......................... (68,710) (62,156) (70,176)
Affiliated Mortgage Loans........................................ (54,000) - -
Maturities of Fixed Maturities Available-for-Sale.................. 476,410 - -
Maturities of Fixed Maturities Held-to-Maturity.................... 54,564 644,532 573,602
Sale of:
Fixed Maturities Available-for-Sale.............................. 250,227 - -
Fixed Maturities Held-to-Maturity................................ - 675,044 776,352
Marketable Equity Securities..................................... 65 6,323 2,841
Other Investments................................................ 23,992 - 9,499
Real Estate...................................................... 1,885 115 485
Policy and Nonaffiliated Mortgage Loans.......................... 42,038 43,107 30,008
Affiliated Mortgage Loans........................................ 6,714 2,324 36,375
Net (increase) Decrease in Short-Term Investments.................. 11,793 10,343 (40,174)
Other.............................................................. 947 (1,190) (1,963)
----------- ----------- -----------
Net Cash Used in Investing Activities......................... (747,314) (788,301) (771,983)
----------- ----------- -----------
FINANCING ACTIVITIES:
Funds Received Under Deposit Contracts............................. 1,012,164 1,001,880 954,813
Return of Funds Held Under Deposit Contracts....................... (659,697) (555,429) (506,090)
Dividends to Parent................................................ (4,000) (4,000) (3,000)
Net Proceeds from Short-Term Borrowings............................ 842 15,569 -
----------- ----------- -----------
Net Cash Provided by Financing Activities..................... 349,309 458,020 445,723
----------- ----------- -----------
Net Increase in Cash................................................. 7,500 2,023 4,292
Cash at Beginning of Year............................................ 19,210 17,187 12,895
----------- ----------- -----------
Cash at End of Year.................................................. $ 26,710 $ 19,210 $ 17,187
=========== =========== ===========
</TABLE>
For purposes of reporting cash flows, cash consists of balances on hand
and on deposit in banks and financial institutions.
See Notes to Consolidated Financial Statements
5
<PAGE> 69
SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED CASH FLOWS-
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES
<TABLE>
<CAPTION>
Year Ended December 31
------------------------------------
1994 1993 1992
-------- -------- --------
(In Thousands)
<S> <C> <C> <C>
Net Income.................................................... $ 87,190 $116,564 $ 76,392
-------- -------- --------
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Realized Investment Gain.................................. (5,639) (53,544) (3,377)
Amortization of Fixed Maturity Investments................ (12,247) (10,476) (7,036)
Deferred Federal Income Tax Benefit....................... (10,154) (26,135) (22,973)
Interest Expense on Deposit Contracts..................... 405,536 400,122 375,305
Cumulative Effect of Accounting Changes................... - (6,599) -
Other..................................................... (440) 205 171
Changes in:
Future Policy Benefits.................................. 3,834 1,322 3,521
Policy and Contract Claims.............................. (4,136) (5,577) (4,925)
Premiums Paid in Advance................................ (1,174) (476) (1,510)
Deferred Policy Acquisition Costs....................... (12,990) (12,575) (26,396)
Accrued Investment Income............................... (13,695) (9,185) (9,443)
Accrued Interest on Accrual Bonds....................... (41,285) (56,712) (68,509)
Other Receivables....................................... 5,064 (3,937) 1,244
Current Federal Income Taxes............................ (3,201) (2,572) 13,232
Other Assets and Liabilities............................ 1,820 22,966) 3,762
Other Policyholders' Funds.............................. 7,022 (5,518) 1,094
-------- -------- --------
Total Adjustments..................................... 318,315 231,309 254,160
-------- -------- --------
Net Cash Provided by Operating Activities..................... $405,505 $347,873 $330,552
======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements
6
<PAGE> 70
SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF REPORTING. The consolidated financial statements have been
prepared in accordance with generally accepted accounting principles and
include the accounts of SAFECO Life Insurance Company (the Company) and its
wholly-owned subsidiaries, SAFECO National Life Insurance Company and First
SAFECO National Life Insurance Company of New York. The Company is a
wholly-owned subsidiary of SAFECO Corporation.
All significant intercompany transactions have been eliminated in the
consolidated financial statements. Certain reclassifications have been
made in the 1993 and 1992 financial statements to conform to current
classifications.
ACCOUNTING FOR PREMIUMS. Life and health insurance premiums are reported
as income when collected for traditional individual life policies and when
earned for group and individual health policies. Funds received under
pension deposit contracts, annuities and universal life policies are
recorded as liabilities rather than premium income when received. Revenues
for universal life products consist of front-end loads, mortality charges
and expense charges assessed against individual policyholder account
balances. These loads and charges are recognized as income when earned.
INVESTMENTS. The Company adopted Financial Accounting Standards Board
(FASB) Statement 115, "Accounting for Certain Investments in Debt and
Equity Securities," on January 1, 1994, applying the provisions of the
Statement to Investments held as of, or acquired after that date. See
discussion of new accounting standards on page 9.
Fixed maturity investments (bonds and redeemable preferred stocks) which
the Company has the positive intent and ability to hold to maturity are
classified as held-to-maturity and carried at amortized cost in the balance
sheet. Fixed maturities classified as available-for-sale are carried at
market value, with changes in unrealized gains and losses recorded directly
to stockholder's equity, net of applicable income taxes and deferred policy
acquisition costs valuation allowance. The Company has no fixed maturities
classified as trading.
All marketable equity securities are classified as available-for-sale and
carried at market value, with changes in unrealized gains and losses
recorded directly to stockholder's equity, net of applicable income taxes.
When the collectibility of income on certain investments is considered
doubtful, they are placed on non-accrual status and thereafter interest
income is recognized only when payment is received. Investments that have
declined in market value below cost and for which the decline is judged to
be other than temporary are written down to fair value. Writedowns are
made directly on an individual security basis and are included in realized
investment losses in the Statement of Consolidated Income.
The cost of security investments sold is determined by the "identified
cost" method.
Mortgage loans are carried at outstanding principal balances, less an
allowance for loan losses.
REAL ESTATE AND DEPRECIATION. Income-producing real estate is classified
as an investment. The Company provides straight-line depreciation on its
buildings based upon their estimated useful lives.
Investment real estate that has declined in market value below cost and for
which the decline is judged to be other than temporary is written down to
estimated realizable value. The writedowns are included in realized
investment losses in the Statement of Consolidated Income.
7
<PAGE> 71
SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 (continued)
DEFERRED POLICY ACQUISITION COSTS. Acquisition costs, consisting of
commissions and certain other underwriting expenses, which vary with and
are primarily related to the production of new business, are deferred.
Acquisition costs for annuities and universal life policies are amortized
over the lives of the policies in proportion to the present value of
estimated future gross profits. To the extent actual experience differs
from assumptions, and to the extent estimates of future gross profits
require revision, the unamortized balance of deferred policy acquisition
costs is adjusted accordingly. There were no significant revisions made in
1994, 1993 or 1992.
Acquisition costs for traditional individual life insurance policies are
amortized over the premium payment period of the related policies using
assumptions consistent with those used in computing policy benefit
liabilities.
FUTURE POLICY BENEFITS. Liabilities for universal life insurance policies,
deferred annuity and pension deposit contracts are equal to the accumulated
account value of such policies or contracts as of the valuation date.
Liabilities for structured settlement annuities are based on interest rate
assumptions using market rates at issue, graded downward over 40 years to a
range of 5-1/2% to 8-3/4%.
Liabilities for future policy benefits under traditional individual life
insurance policies have been computed on the level premium method using
interest, mortality and persistency assumptions based on Company experience
modified to provide for adverse deviation. Interest assumptions range from
8-1/2% graded to 3-1/4%.
POLICY AND CONTRACT CLAIMS. The liability for policy and contract claims
is established on the basis of reported losses ("case basis" method).
Provision is also made for claims incurred but not reported, based on
historical experience. The estimates for claims incurred but not reported
are continually reviewed and any necessary adjustments are reflected in
current operations.
SEPARATE ACCOUNTS. The Company administers segregated asset accounts for
pension and other clients. The assets of these Separate Accounts, which
consist of common stocks, are the property of the Company. The liabilities
of these Separate Accounts represent reserves established to meet
withdrawal and future benefit payment provisions of contracts with these
pension and other clients. The assets of the Separate Accounts, equal to
the reserves and other contract liabilities of the Separate Accounts, are
not chargeable with liabilities arising out of any other business the
Company may conduct. Investment risks associated with market value changes
are borne by the clients. Deposits, withdrawals, net investment income and
realized and unrealized capital gains and losses on the assets of the
Separate Account are not reflected in the Statement of Consolidated Income.
Management fees and other charges assessed against the contracts are
included in other revenue.
FEDERAL INCOME TAXES. The Company and its subsidiaries file a consolidated
federal income tax return with SAFECO Corporation. Tax payments (credits)
are made to or received from SAFECO Corporation on a separate tax return
filing basis. The Company provides for federal income taxes based on
financial reporting income and deferred federal income taxes on temporary
differences between financial reporting and taxable income.
8
<PAGE> 72
SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 (continued)
NEW ACCOUNTING STANDARDS. The Company adopted Financial Accounting
Standards Board (FASB) Statements 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," and 109, "Accounting for
Income Taxes," in the first quarter of 1993. See the Statement of
Consolidated Income for the effect on income of adoption of Statements 106
and 109. For additional disclosure relating to Statements 106 and 109, see
Note 8 and Note 9, respectively.
The Company adopted FASB Statement 112, "Employers' Accounting for
Postemployment Benefits," effective January 1, 1994. Adoption had no
effect on net income.
The Company adopted FASB Statement 113, "Accounting and Reporting for
Reinsurance of Short-Duration and Long-Duration Contracts," in the first
quarter of 1993. Adoption had no effect on net income. See Note 5 for
disclosures relating to reinsurance.
In May of 1993, the FASB issued Statement 114, "Accounting by Creditors for
Impairment of a Loan," which provides guidance on valuing impaired loans.
The FASB also issued Statement 118, "Accounting by Creditors for Impairment
of a Loan - Income Recognition and Disclosures," in October of 1994, which
amends Statement 114. Both Statements are effective for 1995. Based on
current analysis, the impact on the Company's net income and financial
condition of adopting these Statements is not expected to be significant.
In May of 1993, the FASB issued Statement 115, "Accounting for Certain
Investments in Debt and Equity Securities," which expands the use of fair
value accounting for debt and equity securities. As of January 1, 1994,
the Company adopted the provisions of this Statement for investments held
as of, or acquired after that date. Statement 115 requires that debt and
equity securities be classified as trading, available-for-sale, or
held-to-maturity. Fixed maturity securities that the Company has the
positive intent and ability to hold to maturity (as narrowly defined by
Statement 115) are classified as held-to-maturity and are reported at
amortized cost. Fixed maturity securities classified as available-for-sale
are carried at market value, with changes in unrealized gains and losses
recorded directly to stockholder's equity, net of applicable income taxes
and deferred policy acquisition costs valuation allowance. Under Statement
115, trading securities are carried at market value with immediate
recognition in income of changes in market value. Since the Company does
not have any securities held for trading, the adoption of this Statement
had no effect on net income. All marketable equity securities are
classified as available-for-sale and continue to be carried at market
value, with changes in unrealized gains and losses recorded directly to
stockholder's equity, net of applicable income taxes. As required by
Statement 115, no restatement of prior period amounts has been made. See
Note 2 for details of the effect on stockholder's equity of the adoption of
Statement 115.
The FASB issued Statement 119, "Disclosure about Derivative Financial
Instruments and Fair Value of Financial Instruments," in October of 1994.
Statement 119 requires the presentation of certain disclosures about
derivative financial instruments and is effective for 1994. The Company
has made the additional required disclosures for 1994 in Note 4.
9
<PAGE> 73
SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. INVESTMENT SUMMARY
A summary of fixed maturities and marketable equity securities classified
as available-for-sale at December 31, 1994 follows:
<TABLE>
<CAPTION>
Gross Gross Net Estimated
Amortized Unrealized Unrealized Unrealized Market
Cost Gains Losses Gain (Loss) Value
---------- ---------- ---------- ----------- ----------
(In Thousands)
<S> <C> <C> <C> <C> <C>
United States government and
government agencies and authorities .................. $ 664,605 $ 704 $ (28,960) $ (28,276) $ 636,529
States, municipalities and political subdivisions ...... 139,415 4,392 (1,723) 2,669 142,084
Foreign governments .................................... 71,599 1,019 (2,522) (1,503) 70,096
Public utilities ....................................... 1,347,080 21,223 (66,446) (45,223) 1,301,857
All other corporate bonds .............................. 2,133,189 26,027 (97,641) (71,614) 2,061,575
Mortgage-backed securities ............................. 1,745,427 30,508 (87,962) (57,454) 1,687,973
Other fixed maturities ................................. 15,417 208 (77) 131 15,548
---------- ------- --------- --------- ----------
Total fixed maturities classified as
available-for-sale ................................... 6,116,932 84,081 (285,351) (201,270) 5,915,662
Marketable equity securities ........................... 15,846 7,577 (676) 6,901 22,747
---------- ------- --------- --------- ----------
Total investment securities classified as
available-for-sale ................................... $6,132,778 $91,658 $(286,027) (194,369) $5,938,409
========== ======= ========= ==========
Deferred policy acquisition costs valuation allowance ....................................... -
Applicable federal income tax ............................................................... 68,140
---------
Unrealized depreciation of investment securities,
net of tax, included in stockholder's equity .............................................. $(126,229)
=========
</TABLE>
A summary of fixed maturities classified as held-to-maturity at December
31, 1994 follows:
<TABLE>
<CAPTION>
Gross Gross Net Estimated
Amortized Unrealized Unrealized Unrealized Market
Cost Gains Losses Gain (Loss) Value
---------- ---------- ---------- ----------- ----------
(In Thousands)
<S> <C> <C> <C> <C> <C>
United States government and
government agencies and authorities .................. $ 124,266 $ 649 $ (10,953) $ (10,304) $ 113,962
States, municipalities and political subdivisions ...... 36,517 2,260 (527) 1,733 38,250
Foreign governments .................................... 139,951 2,651 (2,434) 217 140,168
Public utilities ....................................... 436,145 14,090 (19,454) (5,364) 430,781
All other corporate bonds .............................. 794,824 10,401 (56,808) (46,407) 748,417
Mortgage-backed securities ............................. 521,429 8,374 (53,072) (44,698) 476,731
---------- ------- --------- --------- ----------
Total fixed maturities classified as
held-to-maturity ..................................... $2,053,132 $38,425 $(143,248) $(104,823) $1,948,309
========== ======= ========= ========= ==========
</TABLE>
A summary of all fixed maturities at December 31, 1993 follows:
<TABLE>
<CAPTION>
Gross Gross Net Estimated
Amortized Unrealized Unrealized Unrealized Market
Cost Gains Losses Gain Value
---------- ---------- ---------- ----------- ----------
(In Thousands)
<S> <C> <C> <C> <C> <C>
United States government and
government agencies and authorities .................. $ 684,679 $ 66,049 $ (210) $ 65,839 $ 750,518
States, municipalities and political subdivisions ...... 162,344 25,749 (39) 25,710 188,054
Foreign governments .................................... 219,355 31,586 (157) 31,429 250,784
Public utilities ....................................... 1,625,212 192,918 (2,548) 190,370 1,815,582
All other corporate bonds .............................. 2,532,550 236,054 (14,595) 221,459 2,754,009
Mortgage-backed securities ............................. 2,198,155 169,045 (13,997) 155,048 2,353,203
Other fixed maturities ................................. 369 35 (17) 18 387
---------- -------- -------- -------- ----------
Total fixed maturities ............................... $7,422,664 $721,436 $(31,563) $689,873 $8,112,537
========== ======== ======== ======== ==========
</TABLE>
10
<PAGE> 74
SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2 (continued)
As discussed in Note 1, the Company adopted the provisions of FASB
Statement 115 as of January 1, 1994. The net effect on stockholder's
equity of the adoption of Statement 115 was an increase of $279,957,000 as
of January 1, 1994. The net increase was comprised of the following
amounts: aggregate market value in excess of amortized cost of fixed
maturities classified as available-for-sale of $458,471,000, less deferred
policy acquisition costs valuation allowance of $27,768,000 and deferred
income taxes at 35% of $150,746,000.
The aggregate market value of marketable equity securities was in excess
of cost by $10,333,000 at December 31, 1993. This amount included gross
unrealized gains of $10,354,000 and gross unrealized losses of $21,000.
The amortized cost and estimated market value of fixed maturities at
December 31, 1994, by contractual maturity, are presented below. Expected
maturities may differ from contractual maturities because certain
borrowers have the right to call or prepay obligations with or without
call or prepayment penalties.
<TABLE>
<CAPTION>
Estimated
Amortized Market
Fixed Maturities Classified as Available-for-Sale Cost Value
---------- ----------
(In Thousands)
<S> <C> <C>
Due in one year or less............................. $ 98,510 $ 98,700
Due after one year through five years............... 1,116,030 1,088,664
Due after five years through ten years.............. 1,601,463 1,534,146
Due after ten years................................. 1,555,502 1,506,179
Mortgage-backed securities.......................... 1,745,427 1,687,973
---------- ----------
Total..................................... $6,116,932 $5,915,662
========== ==========
Estimated
Amortized Market
Fixed Maturities Classified as Held-to-Maturity Cost Value
---------- ----------
(In Thousands)
<S> <C> <C>
Due in one year or less............................. $ 113 $ 113
Due after one year through five years............... 5,000 4,600
Due after five years through ten years.............. 3 4
Due after ten years................................. 1,526,587 1,466,861
Mortgage-backed securities.......................... 521,429 476,731
---------- ----------
Total..................................... $2,053,132 $1,948,309
========== ==========
</TABLE>
At December 31, 1994 and 1993, the Company held below investment grade
fixed maturities of $174 million and $152 million at amortized cost,
respectively. The respective market values of these investments were
approximately $156 million and $152 million. These holdings amounted to
2.0% of the Company's investments in fixed maturities at December 31, 1994
and 1993.
The carrying value of investments in fixed maturities and mortgage loans
that did not produce income during the year ended December 31, 1994 is
less than one percent of the total of such investments.
11
<PAGE> 75
SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2 (continued)
Certain bonds amounting to $4,161,000 and $4,066,000 at December 31, 1994
and 1993, respectively, were on deposit with various regulatory
authorities to meet requirements of insurance and financial codes.
At December 31, 1994 and 1993, mortgage loans constituted approximately
5.9% and 5.7% of total assets, respectively, and are secured by first
mortgage liens on income-producing commercial real estate, primarily in
the retail, industrial and office building sectors. The majority of the
properties are located in the western United States, with 43.7% of the
total in California. Individual loans generally do not exceed $5 million.
For each of these years, less than 2% of the loans were non-performing.
The proceeds from sales of investment securities and related gains and
losses for 1994 are as follows:
<TABLE>
<CAPTION>
Year Ended December 31, 1994
---------------------------------------------------------
Fixed Maturities Fixed Maturities Marketable
Available-for-Sale Held-to-Maturity Equity Securities
------------------ ---------------- -----------------
(In Thousands)
<S> <C> <C> <C>
Proceeds from sales........................................... $250,227 $ - $ 65
======== ============ =====
Gross realized gains on sales................................. $ 12,994 $ - $ 115
Gross realized losses on sales................................ (1,533) - (224)
-------- ------------ -----
Realized gains (losses) on sales.................... 11,461 - (109)
Other (including net gain on calls and redemptions)........... 2,475 - -
Writedowns (including writedowns on
securities subsequently sold)............................... (4,804) - -
-------- ------------ -----
Total realized gain (loss).................................... $ 9,132 $ - $(109)
======== ============ =====
</TABLE>
The proceeds from sales of investments in fixed maturities and related
gains and losses for 1993 and 1992 are as follows:
<TABLE>
<CAPTION>
Year Ended December 31
-----------------------
1993 1992
--------- --------
(In Thousands)
<S> <C> <C>
Proceeds from sales................................................................. $675,044 $776,352
======== ========
Gross realized gains on sales....................................................... $ 75,895 $ 40,456
Gross realized losses on sales...................................................... (20,653) (23,189)
-------- --------
Realized gains on sales........................................................ 55,242 17,267
Other (including net gain on calls and redemptions)................................. 12,749 6,593
Writedowns (including writedowns on securities subsequently sold)................... (11,665) (16,592)
-------- --------
Total realized gain................................................................. $ 56,326 $ 7,268
======== ========
</TABLE>
12
<PAGE> 76
SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2 (continued)
The following summarizes the realized gains and losses, the changes in
unrealized gains and losses, and applicable income taxes on all
investments:
<TABLE>
<CAPTION>
Year Ended December 31
----------------------------
1994 1993 1992
------- ------- -------
(In Thousands)
<S> <C> <C> <C>
Realized gains (losses):
Fixed maturities........................................ $ 9,132 $56,326 $ 7,268
Marketable equity securities............................ (109) 2,063 175
First mortgage loans on real estate..................... (3,000) (4,336) (3,555)
Real estate............................................. (184) (509) (511)
Short-term investments.................................. (200) - -
------- ------- -------
Realized gain before federal income taxes....... $ 5,639 $53,544 $ 3,377
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31
----------------------------------
1994 1993 1992
--------- --------- ---------
(In Thousands)
<S> <C> <C> <C>
Increase (decrease) in unrealized appreciation of:
Fixed maturities classified as available-for-sale...... $(201,270) $ - $ -
Marketable equity securities........................... (3,432) 1,291 (236)
Applicable federal income tax (expense) benefit........ 71,645 (431) 80
--------- ------ -----
Net change in unrealized appreciation
(depreciation)............................... $(133,057) $ 860 $(156)
========= ====== =====
</TABLE>
3. COMMITMENTS AND CONTINGENCIES
The Company is obligated under a real estate lease with an affiliate,
General America Corporation, which expires in 2010. The minimum annual
rental commitments under this obligation are $2,211,000. At December 31,
1994, unfunded mortgage loan commitments approximated $9,360,000. The
Company had no other material commitments at December 31, 1994.
In January 1995, a class action seeking actual and punitive damages, DeVoy
v. SAFECO Life Insurance Company, Case No. 684407 in the Superior Court of
California, County of San Diego, was brought against the Company by an
owner of a qualified pension annuity contract. With respect to such
contracts, the plaintiffs have challenged both the representations as to
interest rates and the calculation of interest. The Company is defending
against the action.
13
<PAGE> 77
SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. FINANCIAL INSTRUMENTS
ESTIMATED FAIR VALUES. Fair value amounts have been determined using
available market information and appropriate valuation methodologies.
However, considerable judgment is required in developing the estimates of
fair value. Accordingly, these estimates are not necessarily indicative of
the amount that could be realized in a current market exchange. The use of
different market assumptions and/or estimating methodologies may have a
material effect on the estimated fair value amounts.
Carrying value is a reasonable estimate of fair value for cash, policy
loans, short-term investments, accounts receivable and other liabilities.
Fair value amounts for investments in fixed maturities and marketable
equity securities are the same as market value. Market value generally
represents quoted market prices for securities traded in the public market
place or analytically determined values for securities not publicly traded.
The fair values of mortgage loans have been estimated by discounting the
projected cash flows using the current rate at which loans would be made to
borrowers with similar credit ratings and for the same maturities.
The fair value of investment contracts with defined maturities is estimated
by discounting projected cash flows using rates that would be offered for
similar contracts with the same remaining maturities. For investment
contracts with no defined maturity, fair value is estimated to be the
present surrender value. These investment contracts are included in Funds
Held Under Deposit Contracts.
Other insurance-related financial instruments are exempt from fair value
disclosure requirements.
Estimated fair values of financial instruments at December 31 are as
follows:
<TABLE>
<CAPTION> 1994 1993
-------------------------- ------------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
----------- ----------- ---------- ----------
(In Thousands)
<S> <C> <C> <C> <C>
Financial assets:
Fixed maturities available-for-sale.............. $5,915,662 $5,915,662 $ - $ -
Fixed maturities held-to-maturity................ 2,053,132 1,948,309 7,422,664 8,112,537
Marketable equity securities..................... 22,747 22,747 25,166 25,166
Mortgage loans................................... 552,597 540,000 487,090 529,000
Financial liabilities:
Funds held under deposit contracts............... 7,988,456 7,678,000 7,229,439 7,531,000
</TABLE>
DERIVATIVE FINANCIAL INSTRUMENTS. The Company's investments in
mortgage-backed securities of $2.2 billion are primarily residential
collateralized mortgage obligations and pass-throughs ("CMOs") . CMOs,
while technically defined as derivative instruments, are exempt from FAS
119 disclosure requirements. The Company's investment in CMOs comprised of
the riskier, highly-volatile type (e.g., interest only, inverse floaters,
etc.) has been intentionally limited to only a small amount (i.e., less
than 1% of total CMOs at December 31, 1994).
The Company's involvement in other investment-type derivatives is also,
intentionally, of a very limited nature. Such derivatives include
currency-linked bonds and fixed-rate loan commitments. Individually, and
in the aggregate, these derivatives are not material and thus no additional
disclosures are warranted.
14
<PAGE> 78
SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. POLICY AND CONTRACT LIABILITIES
REINSURANCE. The Company protects itself from excessive losses by ceding
reinsurance to other companies, using automatic and facultative treaties.
Reinsurance contracts do not relieve the Company from its obligations to
policyholders. A continuing liability exists in the event a reinsurance
company is unable to meet its obligations to the Company. The financial
condition of its reinsurers is evaluated by the Company to minimize its
exposure to losses from reinsurer insolvencies.
The balance sheet caption "Reinsurance Recoverables" is comprised of the
following amounts:
<TABLE>
<CAPTION>
December 31
-------------------
1994 1993
------- -------
(In Thousands)
<S> <C> <C>
Unpaid losses and adjustment expense............. $ 646 $ 132
Paid claims...................................... 506 1,037
Life policy liabilities.......................... 14,033 13,821
Other reinsurance recoverable.................... 332 176
------- -------
Total reinsurance recoverables............. $15,517 $15,166
======= =======
</TABLE>
The effects of reinsurance on the premium and policy benefit amounts in the
Statement of Consolidated Income are as follows:
<TABLE>
<CAPTION>
Year Ended December 31
-------------------------------
1994 1993 1992
------- ------- -------
(In Thousands)
<S> <C> <C> <C>
Reinsurance Ceded:
Premiums................................ $(9,060) $(9,576) $(9,192)
======= ======= =======
Policy benefits......................... $(5,588) $(7,441) $(6,463)
======= ======= =======
Reinsurance Assumed:
Premiums................................ $ 327 $ 544 $ 1,936
======= ======= =======
Policy benefits......................... $ 3,421 $ 3,474 $ 4,920
======= ======= =======
</TABLE>
POLICY AND CONTRACT CLAIMS. Loss reserves and health claims, which are
generally incurred and paid in full within a one-year period, amount to
less than 1% of total policy and contract liabilities. Therefore, no
additional disclosures are warranted.
15
<PAGE> 79
SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. STATUTORY BASIS INFORMATION
The Company and its subsidiaries are required to file annual statements
with state regulatory authorities prepared on an accounting basis as
prescribed or permitted by such authorities (statutory basis). Prescribed
statutory accounting practices include state laws, regulations, and general
administrative rules, as well as a variety of publications of the National
Association of Insurance Commissioners (NAIC). Permitted statutory
accounting practices encompass all accounting practices that are not
prescribed.
Statutory net income differs from income reported in accordance with
generally accepted accounting principles primarily because policy
acquisition costs are expensed when incurred, reserves are based on
different assumptions and income tax expense reflects only taxes paid or
currently payable.
Statutory net income and stockholder's equity, by company, are as follows:
<TABLE>
<CAPTION>
Year Ended December 31
----------------------------
1994 1993 1992
-------- ------- -------
(In Thousands)
<S> <C> <C> <C>
Statutory Net income:
SAFECO Life Insurance Company....................... $47,280 $17,724 $29,115
SAFECO National Life Insurance Company.............. 1,242 1,192 1,370
First SAFECO National Life Insurance Company
of New York....................................... 108 225 144
------- ------- -------
Total........................................... $48,630 $19,141 $30,629
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
December 31
------------------------------
1994 1993 1992
-------- -------- --------
(In Thousands)
<S> <C> <C> <C>
Statutory Stockholder's Equity:
SAFECO Life Insurance Company........................ $391,328 $357,081 $339,119
SAFECO National Life Insurance Company............... 15,849 16,228 16,651
First SAFECO National Life Insurance Company
of New York........................................ 9,644 9,569 9,354
-------- -------- --------
Total............................................ $416,821 $382,878 $365,124
======== ======== ========
</TABLE>
The Company has received written approval from the Washington State
Insurance Department to treat certain loans (all made at market rates) to
related SAFECO Corporation subsidiaries as admitted assets. The allowance
of such loans has not materially enhanced surplus at December 31, 1994.
7. DIVIDEND RESTRICTIONS
Insurance companies are restricted by certain states as to the amount of
dividends they may pay within a given calendar year to their parent without
regulatory consent. That restriction is the greater of statutory net gain
from operations for the previous year or 10% of policyholder surplus at the
close of the previous year, subject to a maximum limit equal to statutory
earned surplus. The amount of retained earnings available for the payment
of dividends to SAFECO Corporation without prior regulatory approval was
$51,033,000 at December 31, 1994.
16
<PAGE> 80
SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. EMPLOYEE BENEFIT PLANS
SAFECO Corporation and subsidiary companies (the Companies) administer
defined contribution, defined benefit and profit sharing bonus plans
covering substantially all employees. The defined contribution plans
include profit sharing retirement plans and a savings plan. Benefits are
earned under the defined benefit plan for each year of service after 1988,
based on the employee's compensation level plus a stipulated rate of return
on the benefit balance. It is SAFECO Corporation's policy to fund the
defined benefit plan on a current basis to the full extent deductible under
federal income tax regulations. The cost of these plans to the Company was
$6,329,000, $7,962,000 and $6,519,000 for the years ended December 31,
1994, 1993 and 1992, respectively.
The Companies also provide certain healthcare and life insurance benefits
("other postretirement benefits") for retired employees. Substantially all
employees may become eligible for these benefits if they reach retirement
age while working for the Companies. The cost of these benefits is shared
with the retiree.
Effective January 1, 1993, the Company adopted FASB Statement 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions."
Under Statement 106, the Company now accrues for other postretirement
benefits during the years that employees provide services. Prior to
adoption of Statement 106, other postretirement benefits were accounted for
on a pay-as-you-go (cash) basis. The transition obligation (i.e., the
accumulated postretirement benefit obligation) of $3,777,000 was recorded
as a cumulative effect adjustment in the first quarter of 1993 which, net
of tax, resulted in a reduction of net income of $2,493,000.
Components of the net periodic other postretirement benefit cost are as
follows:
<TABLE>
<CAPTION>
Year Ended December 31
----------------------
1994 1993
--------- --------
(in Thousands)
<S> <C> <C>
Service cost-benefits earned during the period.................... $153 $151
Interest cost on accumulated postretirement benefit
obligation...................................................... 283 318
Actual return on plan assets...................................... 3 (4)
Net amortization and deferral..................................... (7) 4
---- ----
Total....................................................... $432 $469
==== ====
</TABLE>
Under the cash basis of accounting for these other postretirement benefits,
the expense for the year ended December 31, 1992 was $109,000.
17
<PAGE> 81
SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 8 (continued)
The following table summarizes the funded status of the plan:
<TABLE>
<CAPTION>
December 31
--------------------
1994 1993
------ ------
(In Thousands)
<S> <C> <C>
Accumulated postretirement benefit obligation (APBO):
Retirees................................................................. $1,332 $1,578
Fully eligible active plan participants.................................. 496 725
Other active plan participants........................................... 1,245 1,555
------ ------
Total APBO........................................................... 3,073 3,858
Less: plan assets at fair value............................................ 91 66
------ ------
Funded status.............................................................. 2,982 3,792
Unrecognized gain.......................................................... 1,424 301
------ ------
Accrued postretirement benefit cost recorded on the balance sheet.......... $4,406 $4,093
====== ======
</TABLE>
Other postretirement benefit cost is determined using actuarial assumptions
at the beginning of the year. The funded status is determined using
assumptions at the end of the year. The discount rate used was 8-1/2%,
7-1/2% and 8% at December 31, 1994, December 31, 1993 and January 1, 1993,
respectively. The accumulated postretirement benefit obligation at
December 31, 1994 was determined using a healthcare cost trend rate of 12%
for 1995, declining by 1% per year to 6% and remaining at that level
thereafter. The ultimate trend rate of 6% represents a 1% reduction from
the 7% rate used for the prior year's valuation. A one percentage point
increase in the assumed healthcare cost trend rate for each year would
increase the accumulated other postretirement benefit obligation as of
December 31, 1994 by $341,000 and the annual net periodic other
postretirement benefit cost for the year then ended by $71,000.
18
<PAGE> 82
SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. INCOME TAXES
As of January 1, 1993, the Company adopted the liability method of
accounting for income taxes pursuant to FASB Statement 109, "Accounting for
Income Taxes." This accounting change was implemented through a cumulative
effect adjustment which reduced the net deferred tax liability (and
increased net income in the first quarter of 1993) by $9,092,000. Prior
year financial statements and related disclosures which follow the
guidelines provided in APB 11 were not restated. Under the liability
method, deferred tax assets and liabilities are determined based on the
differences between their financial reporting and their tax bases and are
measured using the enacted tax rates.
Differences between income tax computed by applying the U.S. federal income
tax rate of 35% in 1994 and 1993 and 34% in 1992 to income before income
taxes and the provision for federal income taxes are as follows:
<TABLE>
<CAPTION>
Year Ended December 31
---------------------------------------
1994 1993 1992
------- ------- -------
(In Thousands)
<S> <C> <C> <C>
Computed "expected" tax expense ................................ $47,040 $61,399 $42,409
Dividends received deduction ................................... (64) (52) (58)
Tax exempt interest ............................................ (8) (9) (11)
Provision for settlement of prior years' tax obligation ........ - 2,000 6,000
Federal tax rate change ........................................ - 2,040 -
Other .......................................................... 243 84 1
------- ------- -------
Income tax expense ......................................... $47,211 $65,462 $48,341
======= ======= =======
Percent of income tax expense to income before tax ............. 35.1% 37.3% 38.8%
======= ======= =======
</TABLE>
The tax effect of temporary differences which give rise to the deferred tax
assets and deferred tax liabilities are as follows:
<TABLE>
<CAPTION>
December 31
-----------------------
1994 1993
-------- -------
(In Thousands)
<S> <C> <C>
Deferred tax assets:
Discounted loss and adjustment expense reserves .............. $ 1,679 $ 1,026
Unearned premium reserves .................................... 2,012 1,699
Adjustment to life policy liabilities ........................ 20,444 7,838
Capitalization of policy acquisition costs -- 1990 Tax Act ... 18,263 14,105
Postretirement benefits ...................................... 1,542 1,435
Realized capital gains ....................................... 5,422 6,310
Guarantee fund assessment .................................... 3,250 2,282
Unrealized depreciation of investment securities ............. 68,028 -
Other ........................................................ 1,343 1,569
-------- -------
Total deferred tax assets .................................. 121,983 36,264
-------- -------
Deferred tax liabilities:
Deferred policy acquisition costs ............................ 86,798 82,048
Bond discount accrual ........................................ 4,133 2,164
Unrealized appreciation of marketable equity securities ...... - 3,617
Other ........................................................ 823 5
-------- -------
Total deferred tax liabilities ........................... 91,754 87,834
-------- -------
Net deferred tax (asset) liability ....................... $(30,229) $51,570
======== =======
</TABLE>
19
<PAGE> 83
SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 9 (continued)
The deferred tax benefit of $10,154,000 for 1994 represents the decrease in
the net deferred tax liability of $81,799,000 excluding a decrease of
$71,645,000 related to unrealized depreciation of investment securities.
The deferred federal income tax benefit of $26,135,000 for 1993 represents
a decrease in the net deferred federal income tax liability of $25,704,000
excluding an increase of $431,000 related to unrealized appreciation of
marketable equity securities. The tax related to the increase in
appreciation of marketable equity securities approximated $543,000 during
1993. Of that amount, $112,000, which related to the 1% increase in the
federal income tax rate, was charged directly to income with the remainder
charged directly to stockholder's equity.
Deferred federal income taxes for 1992 were provided on the difference
between the Company's taxable income and income for financial reporting
purposes according to the guidelines provided in APB 11. The components of
the deferred federal income tax benefit using these guidelines are as
follows:
<TABLE>
<CAPTION>
Year Ended
December 31,
1992
------------
(In Thousands)
<S> <C>
Increase in deferred policy acquisition costs................ $ 8,975
Capitalization of policy acquisition costs - 1990 Tax Act.... (4,162)
Basis difference on capital gains............................ (280)
Adjustment to policy reserves................................ (27,393)
Accrual of market discount................................... 1,179
Other........................................................ (1,292)
--------
Deferred federal income tax benefit..................... $(22,973)
========
</TABLE>
20
<PAGE> 84
SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. SEGMENT DATA
<TABLE>
<CAPTION>
Year Ended December 31, 1994
------------------------------------
Financial Employee
Services Benefits Total
--------- -------- --------
(in Thousands)
<S> <C> <C> <C>
Revenue:
Premiums and Other (Including $27,955 of financial
services revenue received from affiliates)............... $ 42,805 $219,919 $262,724
Identifiable Investment Income.............................. 395,127 245,909 641,036
Investment Income Allocated................................. 39,909 24,725 64,634
Identifiable Realized Gain from Investments................. 6,744 1,267 8,011
Realized Loss from Investments Allocated.................... (1,463) (909) (2,372)
-------- -------- --------
Total Revenue........................................... $483,122 $490,911 $974,033
======== ======== ========
Income Before Income Taxes.................................... $ 70,200 $ 64,201 $134,401
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
December 31, 1994
--------------------------------------
FinanciaL Employee
Services Benefits Total
--------- -------- ----------
(in Thousands)
<S> <C> <C> <C>
Identifiable Assets:
Deferred Policy Acquisition Costs........................... $ 151,614 $ 95,576 $ 247,190
Policy Loans................................................ 28,467 24,862 53,329
Invested Assets............................................. 4,859,921 2,874,141 7,734,062
Other....................................................... 153,120 248,641 401,761
Invested Assets Allocated..................................... 542,890 336,343 879,233
Other Assets Allocated........................................ (880) (569) (1,449)
---------- ---------- ----------
Total Assets............................................ $5,735,132 $3,578,994 $9,314,126
========== ========== ==========
Amortization of Deferred Policy Acquisition Costs............. $ 9,914 $ 19,493 $ 29,407
========== ========== ==========
</TABLE>
A major portion of investment income, realized gains or losses and
assets is specifically identifiable with an industry segment. The
remainder of these amounts has been allocated in proportion to the
investment income identified with each segment.
21
<PAGE> 85
SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 10 (continued)
<TABLE>
<CAPTION>
Year Ended December 31, 1993
-------------------------------------
Financial Employee
Services Benefits Total
---------- ---------- ----------
(In Thousands)
<S> <C> <C> <C>
Revenue:
Premiums and Other (including $23,195 of financial services revenue
received from affiliates)................................................ $ 40,000 $ 251,478 $ 291,478
Identifiable Investment Income............................................. 352,076 251,740 603,816
Investment Income Allocated................................................ 38,408 25,498 63,906
Identifiable Realized Gain (Loss) from Investments......................... 64,442 (6,567) 57,875
Realized Loss from Investments Allocated................................... (2,956) (1,375) (4,331)
---------- ---------- ----------
Total Revenue............................................... $ 491,970 $ 520,774 $1,012,744
========== ========== ==========
Income Before Income Taxes................................................. $ 117,287 $ 58,140 $ 175,427
========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
December 31, 1993
-------------------------------------
Financial Employee
Services Benefits Total
---------- ---------- ----------
(In Thousands)
<S> <C> <C> <C>
Identifiable Assets:
Deferred Policy Acquisition Cost........................................... $ 137,479 $ 96,721 $ 234,200
Policy Loans............................................................... 26,181 24,307 50,488
Invested Assets............................................................ 4,253,688 2,906,514 7,160,202
Other...................................................................... 98,972 159,396 258,368
Invested Assets Allocated...................................................... 513,921 342,861 856,782
Other Assets Allocated......................................................... 21,160 13,185 34,345
---------- ---------- ----------
Total Assets................................................... $5,051,401 $3,542,984 $8,594,385
========== ========== ==========
Amortization of Deferred Policy Acquisition Costs.............................. $ 7,395 $ 18,955 $ 26,350
========== ========== ==========
</TABLE>
A major portion of investment income, realized gains or losses and
assets is specifically identifiable with an industry segment. The
remainder of these amounts has been allocated in proportion to the
investment income identified with each segment.
22
<PAGE> 86
SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 10 (continued)
<TABLE>
<CAPTION>
Year Ended December 31, 1992
------------------------------------
Financial Employee
Services Benefits Total
---------- ---------- ----------
(In Thousands)
<S> <C> <C> <C>
Revenue:
Premiums and Other (including $20,517 of financial
services revenue received from affiliates)................ $ 39,010 $ 277,641 $ 316,651
Identifiable Investment Income................................. 304,764 250,969 555,733
Investment Income Allocated.................................... 40,158 27,362 67,520
Identifiable Realized Gain (Loss) from Investments............. 11,518 (8,659) 2,859
Realized Gain (Loss) from Investments Allocated................ (237) 755 518
---------- ---------- ----------
Total Revenue............................................ $ 395,213 $ 548,068 $ 943,281
========== ========== ==========
Income Before Income Taxes......................................... $ 66,030 $ 58,703 $ 124,733
========== ========== ==========
December 31, 1992
------------------------------------
Financial Employee
Services Benefits Total
---------- ---------- ----------
(In Thousands)
<S> <C> <C> <C>
Identifiable Assets:
Deferred Policy Acquisition Cost............................... $ 124,459 $ 97,166 $ 221,625
Policy Loans................................................... 26,245 24,210 50,455
Invested Assets................................................ 3,524,626 2,751,097 6,275,723
Other.......................................................... 78,986 118,172 197,158
Invested Assets Allocated.......................................... 481,718 341,961 823,679
Other Assets Allocated............................................. 20,920 12,623 33,543
---------- ---------- ----------
Total Assets............................................ $4,256,954 $3,345,229 $7,602,183
========== ========== ==========
Amortization of Deferred Policy Acquisition Costs.................. $ 4,940 $ 13,921 $ 18,861
========== ========== ==========
</TABLE>
A major portion of investment income, realized gains or losses and assets
is specifically identifiable with an industry segment. The remainder of
these amounts has been allocated in proportion to the investment income
identified with each segment.
23
<PAGE> 87
SAFECO RESOURCE VARIABLE ACCOUNT B
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
a. FINANCIAL STATEMENTS The following audited financial statements of the
Registrant and of SAFECO Life Insurance Company are included in the
Statement of Additional Information of this Registration Statement:
REGISTRANT:
Statements of Assets and Liabilities as of December 31, 1994.
Statements of Operations for the year ended December 31, 1994.
Statements of Changes in Net Assets for the years ended December 31, 1994
and 1993.
Notes to Financial Statements (including accumulation unit data).
SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES:
Consolidated Balance Sheets as of December 31, 1994 and 1993.
Statement of Consolidated Income for the years ended December 31, 1994,
1993 and 1992.
Statement of Changes in Stockholder's Equity for the years ended
December 31, 1994, 1993 and 1992.
Statement of Consolidated Cash Flows for the years ended
December 31, 1994, 1993 and 1992.
Notes to Consolidated Financial Statements.
b. EXHIBITS
Exhibit Number Description of Document
1. Resolution of Board of Directors of SAFECO *
authorizing the establishment of the Separate
Account.
2. Not Applicable
3. (i) Form of Principal Underwriter's Agreement
(ii) Selling Agreement **
4. (i) Individual Single Purchase Payment Deferred
Variable Annuity Contract
(ii) Riders and Endorsements
5. Application for Annuity Contract **
6. (i) Copy of Articles of Incorporation of SAFECO ***
(ii) Copy of the Bylaws of SAFECO ***
7. Not Applicable
8.a.(i) Fund Participation Agreement **
(ii) Reimbursement Agreement **
(iii) Participating Contract and Policy Agreement **
+8.b. Participation Agreement by and among SAFECO Life Insurance
Company, Investment Management Series, on behalf of the Federated
Corporate Bond Fund, Federated Securities Corp. and Federated
Advisers.
C-1
<PAGE> 88
+8.c. Participation Agreement by and among SAFECO Life Insurance Company,
Investment Management Series, on behalf of the Federated Utility Fund,
Federated Securities Corp. and Federated Advisers.
+8.d. Participation Agreement by and among SAFECO Life Insurance Company,
Investment Management Series, on behalf of the Federated International
Stock Fund, Federated Securities Corp. and Federated Advisers.
+8.e. Participation Agreement by and among SAFECO Life Insurance Company,
Lexington Natural Resources Trust, and Lexington Management
Corporation.
+8.f. Participation Agreement by and among SAFECO Life Insurance Company,
Lexington Emerging Markets Fund, Inc., and Lexington Management
Corporation.
9. Opinion and Consent of Counsel
10. Consent of Independent Auditors
11. Not Applicable
12. Agreement Governing Contribution *
+13. Calculation of Performance Information
14. Power of Attorney
15. Representation of Counsel
* Incorporated by reference to Registrant's initial Form N-4 filed with
the SEC on or about June 24, 1986.
** Incorporated by reference to Post-Effective Amendment of SAFECO
Separate Account C filed with the SEC on December 29, 1995 (File No.
33-69712).
*** Incorporated by reference to Registration Statement of SAFECO Separate
Account C filed with the SEC on June 16, 1995 (File No. 33-60331).
+ To be filed by amendment.
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
Set forth below is a list of each director and officer of SAFECO Life Insurance
Company ("SAFECO") who is engaged in activities relating to SAFECO Resource
Variable Account B or the variable annuity contracts offered through SAFECO
Resource Variable Account B. Unless otherwise indicated the principal business
address of all officers or directors listed is 15411 N. E. 51st Street, Redmond,
Washington 98052.
Name Position with SAFECO
---- --------------------
* Roger H. Eigsti Director, Chairman of the Board
Richard E. Zunker Director and President
* Boh A. Dickey Director and Executive Vice President
John P. Fenlason Senior Vice President
Roger F. Harbin Senior Vice President
* Rod A. Pierson Director, Senior Vice President
and Secretary
* Donald S. Chapman Director
C-2
<PAGE> 89
Name Position with SAFECO
---- --------------------
* Dan D. McLean Director
* James W. Ruddy Director
* Robert W. Swegle Director
F. Gregory Clarke Vice President
James T. Flynn Vice President, Controller
and Assistant Secretary
Michael H. Kinzer Vice President and Chief Actuary
* Ron L. Spaulding Director, Vice President
* Michael C. Knebel Vice President and Treasurer
William C. Huff Actuary
George C. Pagos Associate General Counsel, Vice President and
Assistant Secretary
* The principal business address of these officers and directors is SAFECO
Plaza, Seattle, Washington 98185.
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
SAFECO Life Insurance Company ("SAFECO") established SAFECO Resource Variable
Account B ("Registrant") by resolution of its Board of Directors pursuant to
Washington law. SAFECO is a wholly-owned subsidiary of SAFECO Corporation, which
is a publicly-owned company. Both companies were organized under Washington law.
SAFECO Corporation, a Washington corporation, owns 100% of the following
Washington corporations: SAFECO Insurance Company of America, General Insurance
Company of America, First National Insurance Company of America, SAFECO Life
Insurance Company of America, SAFECO Assigned Benefits Service Company, SAFECO
Administrative Services, Inc., SAFECO Properties Inc., SAFECO Credit Company,
Inc., SAFECO Asset Management Company, SAFECO Securities, Inc., SAFECO Services
Corporation, SAFECO Trust Company and General America Corporation. SAFECO
Corporation owns 100% of SAFECO National Insurance Company, a Missouri
corporation, and SAFECO Insurance Company of Illinois, an Illinois corporation.
SAFECO Corporation owns 20% of Agena, Inc., a Washington corporation. SAFECO
Insurance Company of America owns 100% of SAFECO Management Corp., a New York
corporation, and SAFECO Surplus Lines Insurance Company, a Washington
corporation. SAFECO Life Insurance Company owns 100% of SAFECO National Life
Insurance Company, a Washington corporation, and First SAFECO National Life
Insurance Company of New York, a New York corporation. SAFECO Administrative
Services, Inc. owns 100% of Employee Benefit Claims of Wisconsin, Inc. and
Wisconsin Pension and Group Services, Inc., each a Wisconsin corporation.
General America Corporation owns 100% of COMAV Mangers, Inc., an Illinois
corporation, F.B. Beattie & Co., Inc., a Washington corporation, General America
Corp. of Texas, a Texas corporation, Talbot Financial Corporation, a Washington
corporation and Whitehall Insurance Brokers, Inc., a California corporation.
F.B. Beattie & Co., Inc. owns 100% of F.B. Beattie Insurance Services, Inc., a
California corporation. General America Corp. of Texas is Attorney-in-fact for
SAFECO Lloyds Insurance Company, a Texas corporation. Talbot Financial
Corporation owns 100% of PNMR Securities, Inc., a Washington corporation and
Talbot Agency, Inc., New Mexico corporation. SAFECO Properties Inc. owns 100% of
the following, each a Washington corporation: RIA Development, Inc., SAFECARE
Company, Inc. and Winmar Company, Inc. SAFECARE Company, Inc. owns 100% of the
following, each a Washington corporation: S.C. Bellevue, Inc., S.C. Everett,
Inc., S.C. Marysville, Inc., S.C. Simi Valley, Inc. and S.C. Vancouver, Inc.
SAFECARE Company, Inc. owns 50% of Lifeguard Ventures, Inc., a California
corporation. S.C. Simi Valley, Inc. owns 100% of Simi Valley Hospital, Inc., a
Washington corporation. Winmar Company, Inc. owns 100% of C-W Properties, Inc.,
a Washington corporation. Winmar Company, Inc. owns 100% of the following:
Barton Street Corp., Gem State Investors, Inc., Kitsap Mall, Inc. WNY
Development, Inc., Winmar
C-3
<PAGE> 90
Cascade, Inc., Winmar Metro, Inc., Winmar Northwest, Inc., Winmar Redmond, Inc.
and Winmar of Kitsap, Inc., each a Washington corporation, and Capitol Court
Corp., a Wisconsin corporation, SAFECO Properties of Boise, Inc., an Idaho
corporation, SCIT, Inc., a Massachusetts corporation, Valley Fair Shopping
Centers, Inc., a Delaware corporation, WDI Golf Club, Inc., a California
corporation, Winmar Oregon, Inc., an Oregon corporation, Winmar of Texas, Inc.,
a Texas corporation, Winmar of Wisconsin, Inc., a Wisconsin corporation, and
Winmar of the Desert, Inc., a California corporation. Winmar Oregon, Inc. owns
100% of the following, each an Oregon corporation: North Coast Management, Inc.,
Pacific Surfside Corp., Winmar of Jantzen Beach, Inc. and W-P Development, Inc.,
and 100% of the following, each a Washington corporation: Washington Square,
Inc. and Winmar Pacific, Inc.
No person is directly or indirectly controlled by Registrant.
ITEM 27. NUMBER OF CONTRACT OWNERS
As of September 30, 1995, there were 1,119 Contract Owners and 9,013
Certificate-Holders of the Registrant.
ITEM 28. INDEMNIFICATION
Under its Bylaws, SAFECO, to the full extent permitted by the Washington
Business Corporation Act, shall indemnify any person who was or is a party to
any proceeding (whether brought by or in the right of SAFECO or otherwise) by
reason of the fact that he or she is or was a director of SAFECO, or, while a
director of SAFECO, is or was serving at the request of SAFECO as a director,
officer, partner, trustee, employee, or agent of another foreign or domestic
corporation, partnership, joint venture, trust, other enterprise, or employee
benefit plan, against judgments, penalties, fines, settlements and reasonable
expenses actually incurred by him or her in connection with such proceeding.
SAFECO shall extend such indemnification as is provided to directors above to
any person, not a director of SAFECO, who is or was an officer of SAFECO or is
or was serving at the request of SAFECO as a director, officer, partner,
trustee, or agent of another foreign or domestic corporation, partnership, joint
venture, trust, other enterprise, or employee benefit plan. In addition, the
Board of Directors of SAFECO may, by resolution, extend such further
indemnification to an officer or such other person as may to it seem fair and
reasonable in view of all relevant circumstances.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of SAFECO
pursuant to such provisions of the bylaws or statutes or otherwise, SAFECO has
been advised that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in said Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by SAFECO of expenses incurred or paid
by a director, officer or controlling person of SAFECO in the successful defense
of any such action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the Contracts issued by the Separate
Account, SAFECO will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in said Act and will be governed by the final adjudication of such
issue.
ITEM 29. PRINCIPAL UNDERWRITERS
a. SAFECO Securities, Inc., the principal underwriter for the Contracts, also
acts as the principal underwriter for SAFECO's Individual Flexible Premium
Variable Life Insurance Policies and Group Variable Annuity Contracts.
C-4
<PAGE> 91
b. The following information is provided for each officer and director of the
principal underwriter:
Name and Principal Positions and Offices
Business Address* with Underwriter
----------------- ----------------
Boh A. Dickey Director
Ronald Spaulding Director
David F. Hill Director, President and Secretary
Neal A. Fuller Controller, Treasurer,
Financial Principal and
Assistant Secretary
*The business address for all individuals listed is SAFECO Plaza, Seattle,
Washington 98185.
c. During the fiscal year ended December 31, 1994, PNMR Securities, Inc.,
through SAFECO Securities, Inc., received $1,640,855 in commissions for
the distribution of certain annuity contracts sold in connection with
Registrant of which no payments were retained. PNMR did not receive any
other compensation in connection with the sale of Registrant's contracts.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
SAFECO Life Insurance Company at 15411 N.E. 51st Street, Redmond, Washington
98052 and/or SAFECO Asset Management Company at SAFECO Plaza, Seattle,
Washington 98185, maintain physical possession of the accounts, books or
documents of the Separate Account required to be maintained by Section 31(a) of
the Investment Company Act of 1940 and the rules promulgated thereunder.
ITEM 31. MANAGEMENT SERVICES
Not Applicable
ITEM 32. UNDERTAKINGS
Registrant hereby represents that it is relying upon a No-Action Letter issued
to the American Council of Life Insurance dated November 28, 1988 (Commission
ref. IP-6-88) and that the following provisions have been complied with:
a. Include appropriate disclosure regarding the redemption restrictions
imposed by Section 403(b)(11) in each registration statement, including
the prospectus, used in connection with the offer of the contract;
b. Include appropriate disclosure regarding the redemption restrictions
imposed by Section 403(b)(11) in any sales literature used in connection
with the offer of the contract;
c. Instruct sales representatives who solicit participants to purchase the
contract specifically to bring the redemption restrictions imposed by
Section 403(b)(11) to the attention of the potential participants;
d. Obtain from each plan participant who purchases a Section 403(b) annuity
contract, prior to or at the time of such purchase, a signed statement
acknowledging the participant's understanding of (1) the restrictions on
redemption imposed by Section 403(b)(11), and (2) other investment
alternatives available under the employer's Section 403(b) arrangement to
which the participant may elect to transfer his contract value.
C-5
<PAGE> 92
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant certifies that it meets the requirements of Securities Act
Rule 485(b) for effectiveness of this Registration Statement and has caused this
Registration Statement to be signed on its behalf, in the City of Seattle, and
State of Washington on this 21st day of December, 1995.
SAFECO Resource Variable Account B
----------------------------------
Registrant
By: SAFECO Life Insurance Company
----------------------------------
By: /S/ RICHARD E. ZUNKER
----------------------------------
Richard E. Zunker, President
SAFECO Life Insurance Company
----------------------------------
Depositor
By: /S/ RICHARD E. ZUNKER
----------------------------------
Richard E. Zunker, President
As required by the Securities Act of 1933, this Registration Statement has been
signed by the following persons in the capacities and on the date indicated.
Name Title Date
---- ----- ----
DONALD S. CHAPMAN* Director
- -----------------------
Donald S. Chapman
DAN D. McLEAN* Director
- -----------------------
Dan D. McLean
/S/ BOH A. DICKEY Director and
- -----------------------
Boh A. Dickey Executive Vice President
R. H. EIGSTI* Director and Chairman
- -----------------------
R. H. Eigsti
JAMES T. FLYNN* Vice President, Controller and
- -----------------------
James T. Flynn Assistant Secretary (Principal
Accounting Officer)
C-6
<PAGE> 93
RONALD SPAULDING* Director and Vice
- -----------------------
Ronald Spaulding President
ROD A. PIERSON* Director, Senior Vice
- -----------------------
Rod Pierson President and Secretary
JAMES W. RUDDY* Director
- -----------------------
James W. Ruddy
ROBERT SWEGLE* Director
- -----------------------
Robert Swegle
Director and President
/S/ RICHARD E. ZUNKER (Principal Executive
- -----------------------
Richard E. Zunker Officer)
*By:/S/ BOH A. DICKEY
-----------------------
Boh A. Dickey
Attorney-in-Fact
*By:/S/ RICHARD E. ZUNKER
-----------------------
Richard E. Zunker
Attorney-in-Fact
C-7
<PAGE> 94
EXHIBIT INDEX
SEQUENTIALLY
EXHIBIT NUMBERED PAGE*
NUMBER DESCRIPTION
3(i) Form of Principal Underwriter's Agreement
4(i) Individual Single Purchase Payment Deferred Variable
Annuity Contract
4(ii) Riders and Endorsements
9 Opinion and Consent of Counsel
10 Consent of Independent Auditors
13+ Calculation of Performance Information
14 Power of Attorney
15 Representation of Counsel
- ---------------------------------------
* IN MANUALLY-SIGNED ORIGINAL ONLY.
+ To be filed by amendment.
C-8
<PAGE> 1
EXHIBIT 3(i)
PRINCIPAL UNDERWRITER'S AGREEMENT
SAFECO RESOURCE VARIABLE ACCOUNT B
This Agreement is made and entered into as of the 29th day of April,
1994 between SAFECO Life Insurance Company ("SAFECO Life") on behalf of SAFECO
RESOURCE VARIABLE ACCOUNT B ("Separate Account") and SAFECO Securities, Inc., a
corporation registered as a broker-dealer with the Securities and Exchange
Commission and National Association of Securities Dealers, Inc. ("PRINCIPAL
UNDERWRITER").
WHEREAS, SAFECO Life is a life insurance company licensed to sell
various life insurance and annuity contracts (the "Policies"); and
WHEREAS, SAFECO Life proposes to issue and sell the Policies to the
public through PRINCIPAL UNDERWRITER:
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties agree as follows:
1. SAFECO Life is a life insurance company licensed to offer and sell
the Policies. SAFECO Life proposes to issue and sell the Policies to the public
through PRINCIPAL UNDERWRITER. The PRINCIPAL UNDERWRITER agrees to provide sales
service subject to the terms and conditions hereof. The Policies to be sold are
more fully described in the registration statements and the prospectuses
hereinafter mentioned. Such Policies will be issued by SAFECO Life through the
Separate Account.
2. SAFECO Life grants PRINCIPAL UNDERWRITER, the exclusive right,
during the term of this Agreement, subject to registration requirements of the
Securities Act of 1933 and the Investment Company Act of 1940 and the provisions
of the Securities Exchange Act of 1934, to be the principal underwriter of the
Policies issued through the Separate Accounts. PRINCIPAL UNDERWRITER will offer
and sell the Policies under such terms as set by SAFECO Life and will make such
sale to purchasers permitted to buy such Policies as specified in the
prospectuses.
3. PRINCIPAL UNDERWRITER agrees that it shall undertake to
perform all duties and functions which are necessary and proper for the
distribution of the Policies.
4. (a) All sales literature and advertisements relating to SAFECO Life
and the Separate Account used by PRINCIPAL UNDERWRITER shall be subject to
approval by SAFECO Life. SAFECO Life authorizes PRINCIPAL UNDERWRITER, in
connection with the sale or arranging for the sale of the Policies, to provide
only such information and to make only such statements or representations as are
contained in the then-current Prospectus and Statement of
<PAGE> 2
Principal Underwriters Agreement
April 29, 1994
Page 2
Additional Information for the Separate Account or in sales literature or
advertisements approved by SAFECO Life or in such financial and other statements
which are furnished to the PRINCIPAL UNDERWRITER pursuant to the next paragraph.
SAFECO Life shall not be responsible in any way for any information provided or
statements or representations made by PRINCIPAL UNDERWRITER or its
representatives or agents other than the information, statements and
representations described in the preceding sentence. PRINCIPAL UNDERWRITER shall
review all materials submitted to it that describes SAFECO Life or the Policies.
PRINCIPAL UNDERWRITER shall not be responsible for any information provided or
statements or representations made by persons or entities other than PRINCIPAL
UNDERWRITER's representatives or agents.
(b) SAFECO Life shall keep PRINCIPAL UNDERWRITER fully informed
with regard to its affairs, shall furnish PRINCIPAL UNDERWRITER with a copy of
all financial statements and a signed copy of each report prepared by its
independent certified public accountants, and shall cooperate fully in the
efforts of PRINCIPAL UNDERWRITER to sell the Policies and in the performance by
PRINCIPAL UNDERWRITER of all its duties under this Agreement.
5. (a) SAFECO Life will pay or cause to be paid:
(1) registration fees for registering its Separate
Accounts under the Securities Act of 1933 (the
"1933 Act");
(2) the expenses, including counsel fees, of
preparing registration statements and such
other documents as SAFECO Life believes are
necessary for registering the Separate Account
with the Securities and Exchange Commission
(the "SEC") and such states as are deemed
necessary or appropriate;
(3) expenses incident to preparing amendments to
the 1933 Act and Investment Company Act of
1940, as amended (the "1940 Act") registration
statements;
(4) expenses for preparing and setting in type all
prospectuses and the expense of supplying them
to the applicants for the Policies.
(5) expenses incident to the issuance of its
Policies; and
<PAGE> 3
Principal Underwriters Agreement
April 29, 1994
Page 3
(6) expenses incident to the preparation and mailing
of notices, reports and proxy solicitation
material to its Policyholders.
(b) PRINCIPAL UNDERWRITER shall be compensated for its
distribution service in such amount as to meet all of its obligations to selling
broker-dealers with respect to all payments for the Policies accepted by SAFECO
Life on the Policies covered by this Agreement.
6. (a) SAFECO Life shall maintain a currently effective
Registration Statement with respect to the Separate Account and the Policies of
the Separate Account on the appropriate SEC form and shall file with the SEC
such reports and other documents as may be required under the 1933 Act and the
1940 Act or by the rules and regulations of the SEC thereunder.
(b) SAFECO Life represents and warrants that its Registration
Statements, post-effective amendments, Prospectuses and Statements of Additional
Information (excluding statements based upon written information furnished by
PRINCIPAL UNDERWRITER expressly for inclusion therein) shall not contain any
untrue statement of material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein not misleading,
and that all statements or information furnished to PRINCIPAL UNDERWRITER,
pursuant to Section 4(b) hereof, shall be true and correct in all material
respects.
7. It is understood that officers, agents and shareholders of
SAFECO Life are or may be interested in PRINCIPAL UNDERWRITER as directors,
officers, shareholders, or otherwise; that directors, officers, agents and
shareholders of PRINCIPAL UNDERWRITER are or may be interested in SAFECO Life as
officers, shareholders or otherwise; that PRINCIPAL UNDERWRITER may be
interested in SAFECO Life as a shareholder or otherwise; and that the existence
of any such dual interest shall not affect the validity this Agreement or of any
transactions hereunder except as otherwise provided by specific provisions or
applicable law.
8. The parties contemplate PRINCIPAL UNDERWRITER will enter into
dealer agreements with registered and qualified securities dealers for the sale
of the Policies. The form of any such dealer agreement shall be mutually agreed
upon and approved by SAFECO Life and the PRINCIPAL UNDERWRITER.
9. PRINCIPAL UNDERWRITER is an independent contractor and shall be
agent for SAFECO Life only in respect to the sale and redemption of the
Policies.
<PAGE> 4
Principal Underwriters Agreement
April 29, 1994
Page 4
10. The services of PRINCIPAL UNDERWRITER to SAFECO Life under this
Agreement are not to be deemed exclusive, and the PRINCIPAL UNDERWRITER shall be
free to render similar services or other services to others so long as its
services hereunder are not impaired thereby.
11. This Agreement is terminable on not less than 60 days' notice to
the other party and will be terminated upon the mutual written consent of
PRINCIPAL UNDERWRITER and SAFECO Life. This Agreement will also automatically
and immediately terminate in the event of its assignment.
12. In the absence of willful misfeasance, bad faith, gross negligence
or reckless disregard of obligations or duties ("disabling conduct") hereunder
on the part of PRINCIPAL UNDERWRITER (and its officers, directors, agents,
employees, controlling persons and any other person or entity affiliated with
PRINCIPAL UNDERWRITER or retained by it to perform or assist in the performance
of its obligations under this Agreement), PRINCIPAL UNDERWRITER shall not be
subject to liability to SAFECO Life or for any act or omission in the course of,
or connected with, rendering services hereunder, including without limitation,
any error of judgment or mistake of law or for any loss suffered by any of them
in connection with the matters to which this Agreement relates.
13. Any notice, request, instruction or other document to be given
hereunder by either party hereto to the other shall be in writing and delivered
personally or sent by registered or certified mail, postage prepaid, as set
forth below:
If to SAFECO Life: President
SAFECO Life Insuance Company
15411 NE 51st Street
Redmond, WA 98052
If to PRINCIPAL UNDERWRITER: President
SAFECO Securities, Inc.
SAFECO Plaza
Seattle, WA 98115
14. This Agreement embodies the entire Agreement between PRINCIPAL
UNDERWRITER and SAFECO Life with respect to the principal underwriting services
to be provided by PRINCIPAL UNDERWRITER to SAFECO Life and the Separate Account
and supersedes any prior written or oral agreement between the parties. The
parties acknowledge that certain administrative responsibilities and obligations
in connection with the offer and sale of the Policies
<PAGE> 5
Principal Underwriters Agreement
April 29, 1994
Page 5
are stated in the Administrative Services Agreement by and among SAFECO Life,
PRINCIPAL UNDERWRITER, and PNMR Securities, Inc. dated April 29, 1994. In the
event that either party should be required to take legal action in order to
enforce its rights under this Agreement, the prevailing party in any such action
or proceeding shall be entitled to recover from the other party costs and
reasonable attorneys' fees.
15. This Agreement may be executed in counterparts, each of which taken
together shall constitute one and the same instrument. PRINCIPAL UNDERWRITER
acknowledges that the rights and obligations of the Separate Account are
separate and distinct from those of any and all other Separate Accounts.
16. This Agreement shall be construed in accordance with and governed
by the laws of the State of Washington.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be duly executed by their duly authorized officers and under their duly
authorized officers and under their respective seals as of the day and year
first above written.
SAFECO LIFE INSURANCE COMPANY SAFECO SECURITIES, INC.
By /S/ John P. Fenlason By /S/ David F. Hill
-------------------- ------------------
Its Senior Vice President Its President
<PAGE> 1
EXHIBIT 4(i)
[LETTERHEAD SAFECO(R) LIFE INSURANCE]
MAILING ADDRESS: SAFECO LIFE INSURANCE COMPANY, PENSION DEPARTMENT
P.O. BOX 34690, SEATTLE, WASHINGTON 98124-1690
STREET ADDRESS: SAFECO LIFE INSURANCE COMPANY, PENSION DEPARTMENT
15411 N.E. 51ST STREET, REDMOND, WASHINGTON 98052
INDIVIDUAL VARIABLE ANNUITY CONTRACT
SAFECO Life Insurance Company, a stock company with its Home Office in Redmond,
Washington, (hereafter called SAFECO), in consideration of the payment of the
Purchase Payments as provided herein, agrees to provide an Annuity and other
benefits in accordance with the Contract provisions.
10-DAY RIGHT TO EXAMINE CONTRACT
Within 10 days of the date of receipt of this Contract by the Owner, it may be
returned by delivering or mailing it to SAFECO or to the agent through whom it
was purchased. When this Contract is received by SAFECO, it will be voided as
if it had never been in force, and SAFECO will refund the Contract Value. This
may be more or less than Purchase Payments. In states where required SAFECO
will refund the Purchase Payments rather than the Contract Value. SAFECO
reserves the right to allocate all payments to the Money Market Sub-Account
until the expiration of 15 days from the date the first Purchase Payment is
received. If SAFECO so allocates payments, SAFECO will refund the greater of
Purchase Payments or the Contract Value.
Signed for the Company
/s/ R.A. Pierson /s/ R.E. Zunker
- ---------------------------------------------- --------------------------
R.A. Pierson, Sr. Vice President and Secretary R.E. Zunker, President
BRIEF DESCRIPTION
Individual Variable Annuity, Single Premium Deferred Annuity, Non-Participating,
Monthly Income at Annuity Date, Cash Value Payable at Death of Owner before
Annuity Date.
VALUES PROVIDED BY THIS CONTRACT ARE BASED ON THE INVESTMENT EXPERIENCE OF A
SEPARATE ACCOUNT AND ARE, THEREFORE, VARIABLE AND NOT GUARANTEED AS TO DOLLAR
AMOUNT. SEE SECTION D OF YOUR CONTRACT FOR DETAILS REGARDING THE SEPARATE
ACCOUNT PROVISIONS.
(R)Registered trademark of SAFECO Corporation
LPC-417 7/93
<PAGE> 2
INDEX
<TABLE>
<S> <C>
SECTION A: DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . 1
Annuitant . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Annuity Date . . . . . . . . . . . . . . . . . . . . . . . . . 1
Owner . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION B: GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . 1
Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Contract Amendments . . . . . . . . . . . . . . . . . . . . . 1
Communications . . . . . . . . . . . . . . . . . . . . . . . . 2
Annual Report . . . . . . . . . . . . . . . . . . . . . . . . 2
Misstatement of Age . . . . . . . . . . . . . . . . . . . . . 2
Evidence of Survival . . . . . . . . . . . . . . . . . . . . . 2
Beneficiary Designation . . . . . . . . . . . . . . . . . . . 2
Change of Beneficiary . . . . . . . . . . . . . . . . . . . . 2
Non-Assignment . . . . . . . . . . . . . . . . . . . . . . . . 2
Termination of Contract . . . . . . . . . . . . . . . . . . . 2
SECTION C: PURCHASE PAYMENTS . . . . . . . . . . . . . . . . . . . . 3
Place and Form of Payment . . . . . . . . . . . . . . . . . . 3
Purchase Payments . . . . . . . . . . . . . . . . . . . . . . 3
Change in Purchase Payments . . . . . . . . . . . . . . . . . 3
Allocation of Purchase Payments . . . . . . . . . . . . . . . 3
Application of Purchase Payments to Eligible Investments . . . 3
SECTION D: SEPARATE ACCOUNT PROVISIONS . . . . . . . . . . . . . . 3
The Separate Account . . . . . . . . . . . . . . . . . . . . . 3
Non-Participation in Surplus . . . . . . . . . . . . . . . . . 3
Value of Accumulation Units . . . . . . . . . . . . . . . . . 3
Net Investment Factor . . . . . . . . . . . . . . . . . . . . 4
SECTION E: SETTLEMENT OPTIONS AND DEATH BENEFITS . . . . . . . . . . 4
Selection and Change of Settlement Option . . . . . . . . . . 4
Payment of Benefits . . . . . . . . . . . . . . . . . . . . . 4
State Required Minimum Benefits . . . . . . . . . . . . . . . 4
Frequency and Amount of Annuity Payments . . . . . . . . . . . 4
Death of Annuitant . . . . . . . . . . . . . . . . . . . . . . 4
Death of Owner Prior to Annuity Date . . . . . . . . . . . . . 5
Death of Owner After Annuity Date . . . . . . . . . . . . . . 5
Settlement Options . . . . . . . . . . . . . . . . . . . . . . 5
Automatic Option . . . . . . . . . . . . . . . . . . . . . . . 6
Annuity Unit . . . . . . . . . . . . . . . . . . . . . . . . . 6
Variable Annuity Payment Calculation . . . . . . . . . . . . . 6
Mortality and Expense Risk Guarantee . . . . . . . . . . . . . 6
SECTION F: WITHDRAWALS AND TRANSFERS . . . . . . . . . . . . . . . . 6
Minimum Withdrawal . . . . . . . . . . . . . . . . . . . . . . 6
Systematic Withdrawal . . . . . . . . . . . . . . . . . . . . . 6
Automatic Transfers . . . . . . . . . . . . . . . . . . . . . . 7
Minimum Transfer . . . . . . . . . . . . . . . . . . . . . . . 7
Deferral of Withdrawal Payment . . . . . . . . . . . . . . . . 7
SECTION G: CHARGES AND DEDUCTIONS . . . . . . . . . . . . . . . . . 7
Deduction for Annual Administration Maintenance Charge . . . . 7
Deduction for Asset Related Administration Charge . . . . . . . 7
Deduction for Contingent Deferred Sales Charge . . . . . . . . 7
Deduction for Withdrawals . . . . . . . . . . . . . . . . . . 8
Deduction for Transfer Charge . . . . . . . . . . . . . . . . 8
Deduction for Mortality and Expense Risk Charge . . . . . . . 8
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION H: VARIABLE ANNUITY PURCHASE RATE TABLE . . . . . . . . . . 9
Mortality Tables Used . . . . . . . . . . . . . . . . . . . . . 9
Variable Annuity Purchase Rate Table . . . . . . . . . . . . . 9
</TABLE>
(i)
<PAGE> 3
SECTION A: DEFINITIONS
A1 Accumulation Unit: An accounting unit of measure used to calculate the
value of a Sub-Account prior to the Annuity Date.
A2 Annuitant: The natural person on whose life Annuity payments are
payable in accordance with this Contract. This Contract will not be
issued if the Annuitant is 76 years of age or older on the Contract
Date.
A3 Annuity: Any series of payments starting on the Annuity Date, payable
in accordance with this Contract.
A4 Annuity Date: The date selected by the Owner for commencing Annuity
payments under this Contract. The day of the month on which the payments
will be made will be determined by SAFECO. The Annuity Date cannot be
later than the date the Annuitant attains age 85.
A5 Annuity Unit: An accounting unit of measure used to calculate Annuity
payments after the Annuity Date.
A6 Beneficiary: The person or persons entitled to receive benefits under
this Contract upon the death of the Owner.
A7 Contract: This Individual Variable Annuity Contract by and
between SAFECO and the Owner.
A8 Contract Anniversary: Any anniversary of the Contract Date.
A9 Contract Date: The date on which the initial Purchase Payment is
allocated to the Separate Account, as shown on the Contract Data Page.
A10 Contract Value: The sum of the Owner's interest in the Sub-Accounts of
the Separate Account.
A11 Contract Year: The twelve month period which commences on the Contract
Date and each succeeding twelve month period thereafter.
A12 Eligible Investments: An investment entity shown on the Contract Data
Page.
A13 Net Purchase Payment: Purchase Payment less any premium taxes.
A14 Owner: The person or persons named in the Application who has all
rights under this Contract. Joint Owners are allowed only if the joint
Owners are spouses. Each joint Owner shall have equal ownership rights
and must jointly exercise those rights.
A15 Purchase Payments: Payments made to purchase Accumulation Units.
A16 SAFECO: SAFECO Life Insurance Company.
A17 Separate Account: The separate investment account of SAFECO, as shown
on the Contract Data Page.
A18 Sub-Account: A segment of the Separate Account, as shown on the
Contract Data Page.
A19 Withdrawal: Withdrawal is any payment, including Contract charges and
deductions, from the Contract.
SECTION B: GENERAL PROVISIONS
B1 Contract: The entire contract between SAFECO and the Owner consists of
this Contract, any Riders or Endorsements, and the Application, a copy
of which is attached to the Contract.
B2 Contract Amendments: The terms and conditions of this Contract may be
amended by written agreement between SAFECO and the Owner by written
endorsement or amendment. All agreements made by SAFECO will be signed
by the President or one of the Vice Presidents. No other person has
power on behalf of SAFECO to amend or modify this Contract, extend any
due date, or waive any proof required by this Contract.
- 1 -
<PAGE> 4
SAFECO may unilaterally amend the provisions of this Contract as
required to conform to any state or federal law which affects this
Contract. The Owner may reject any such amendment by notifying SAFECO of
such rejection within 10 days after receiving the amendment.
B3 Communications: All communications to SAFECO shall be made to the
office of SAFECO shown on the Contract Data Page.
B4 Essential Data: The Owner shall furnish to SAFECO any information
necessary for the administration of this Contract.
B5 Annual Report: SAFECO will provide the Owner with an annual calendar
year report showing the Contract Value, and any other information
required by law. Reports will be sent to the last known address of the
Owner.
B6 Misstatement of Age: SAFECO may require proof of the age of the
Annuitant before making any Life Annuity payment provided for by this
Contract. If the age of the Annuitant has been misstated, the amount
payable will be the amount that the Contract Value would have provided
at the correct age.
Once Annuity payments have begun, any underpayment will be made up in
one sum with the next Annuity payment. Any overpayment will be deducted
from future Annuity payments until the total is repaid.
B7 Evidence of Survival: If any benefits under this Contract are
contingent upon the Annuitant being alive on a given date, SAFECO may
require evidence satisfactory to SAFECO that such condition continues to
be met.
B8 Beneficiary Designation: The Owner may designate a Beneficiary in the
Application to receive any proceeds payable due to the death of the
Owner. Unless the Owner provides otherwise, the death benefit will be
paid in equal shares to all surviving primary Beneficiaries. If the
Owner has not provided otherwise and there are no surviving primary
Beneficiaries, the death benefit will be paid in equal shares to all
surviving contingent Beneficiaries. If the Owner has not provided
otherwise and there are no surviving primary or contingent
Beneficiaries, the death benefit will be paid to the estate of the
Owner.
B9 Change of Beneficiary: If the Owner has made an irrevocable Beneficiary
designation, no change of Beneficiary is permitted. If the Owner has not
made an irrevocable Beneficiary designation, the Owner may file a signed
request with SAFECO to change the Beneficiary designation. The change of
Beneficiary will be effective upon recording by SAFECO at its Home
Office. SAFECO shall not be liable for any payments made or other action
taken by SAFECO before the change in Beneficiary was recorded by SAFECO
at its Home Office. A recorded change of Beneficiary will revoke any
prior Beneficiary designations. SAFECO will pay any death proceeds to
the most recently recorded Beneficiary.
B10 Contract Settlement: Unless otherwise designated in writing by SAFECO,
all sums payable under this Contract are payable at SAFECO's Home
Office. This Contract must be returned to SAFECO upon any settlement.
B11 Substitute Payee: If SAFECO determines that any person is incapable of
personally receiving and giving a valid receipt for any payment due
under this Contract and no claim has been made by a duly appointed
guardian, SAFECO may make such payment to any person or institution that
SAFECO determines has assumed the care and support of such person. Such
payment shall completely discharge the liability of SAFECO with respect
to the amount so paid.
B12 Non-Assignment: To the extent permitted by law, this Contract and the
benefits or payments under this Contract are not assignable or otherwise
transferable. This Contract may be assigned for purposes of an Internal
Revenue Code Section 1035 exchange.
B13 Termination of Contract: All benefit provisions under this Contract
continue in force until the Contract Value is completely Withdrawn.
Discontinuance of Purchase Payments will not result in termination of
the Contract.
This Contract will terminate and cease to be of any further force or
effect at the close of the first day upon which SAFECO has completed all
of the duties and obligations which have arisen under this Contract.
- 2 -
<PAGE> 5
SECTION C: PURCHASE PAYMENTS
C1 Place and Form of Payments: All payments to SAFECO under this Contract
shall be payable at the office of SAFECO as shown on the Contract Data
Page.
All amounts to be paid under this Contract, whether payable to SAFECO or
by SAFECO, shall be paid in lawful money of the United States of
America.
C2 Purchase Payments: The initial Purchase Payment is due on the Contract
Date. The minimum initial and subsequent Purchase Payments are shown on
the Contract Data Page. Purchase Payments may only be made within six
months of the Contract Date. SAFECO reserves the right to reject any
Application or Purchase Payment.
C3 Change in Purchase Payments: Subject to the minimum shown on the
Contract Data Page, the Owner may increase or decrease or change the
frequency of subsequent Purchase Payments.
C4 Allocation of Purchase Payments: The allocation of the initial Purchase
Payment is elected by the Owner on the Application. Unless the Owner
elects otherwise, subsequent Purchase Payments are allocated in the same
manner as the initial Purchase Payment. Allocation of the Purchase
Payments is subject to the terms and conditions imposed by SAFECO.
C5 Application of Purchase Payments to Eligible Investments: Purchase
Payments applied to the Separate Account are allocated to Sub-Accounts
of the Separate Account.
SECTION D: SEPARATE ACCOUNT PROVISIONS
D1 The Separate Account: SAFECO has established a Separate Account for this
and other similar Contracts. A portion of SAFECO's assets has been
allocated to the Separate Account for this and other similar Contracts.
The assets of the Separate Account are the property of SAFECO and are
not chargeable with liabilities arising out of any other business SAFECO
may conduct. The investments of the Separate Account will be valued at
their fair market value in accordance with the procedures approved by
the Board of Directors of SAFECO and the Separate Account committee.
The Separate Account is divided into Sub-Accounts with the assets of
each Sub-Account invested as set forth on the Contract Data Page.
The assets of the Sub-Accounts are allocated to the Eligible Investments
and the portfolios, if any, within Eligible Investments shown on the
Contract Data Page. SAFECO may, from time to time, add Eligible
Investments or portfolios, or remove Eligible Investments or portfolios.
If the shares of any Eligible Investment or portfolio within an Eligible
Investment become unavailable for investment by the Separate Account, or
SAFECO's Board of Directors deems further investment in these shares
inappropriate, SAFECO may substitute shares of another Eligible
Investment or portfolio for shares already purchased under this
Contract.
D2 Non-Participation in Surplus: The Variable Annuity portion of this
Contract will not share in any distribution of profits, losses, or
surplus of SAFECO.
D3 Valuation Dates and Periods: A Valuation Date is each day the New York
Stock Exchange is open for business. A Valuation Period is the period
commencing at the close of business on each Valuation Date and ending at
the close of business for the next succeeding Valuation Date.
D4 Value of Accumulation Units: Each Purchase Payment is allocated to a
Sub-Account and is converted into Accumulation Units. Accumulation Units
in a Sub-Account credited to this Contract is determined by dividing
each Net Purchase Payment by the value of an Accumulation Unit for that
Sub-Account. Accumulation Units for each Sub-Account are valued
separately. The Accumulation Unit value for each Sub-Account was
arbitrarily set at $10 when the Sub-Account was established. The
Accumulation Unit value for any later Valuation Period is determined by
multiplying the Accumulation Unit value for the Sub-Account, as of the
immediately preceding Valuation Period, by the Net Investment Factor for
the current Valuation Period.
- 3 -
<PAGE> 6
D5 Net Investment Factor: The Net Investment Factor for any Sub-Account
for any Valuation Period is determined by dividing (a) by (b) and
subtracting (c) and (d) from the result, where:
(a) is the net result of:
(i) The net asset value per share of the portfolio set out on the
Contract Data Page as the investment of the Sub-Account,
determined as of the current Valuation Period, plus
(ii) The per share amount of any dividend or capital-gain
distribution made by the portfolio if the "ex-dividend" date
occurs during the current Valuation Period, plus or minus
(iii) A per share credit or charge, which is determined by SAFECO,
for changes in tax reserves resulting from investment
operations of the Sub-Account.
(b) is the net result of:
(i) The net asset value per share of the portfolio determined as
of the immediately preceding Valuation Period, plus or minus
(ii) The per share credit or charge for any changes in tax reserves
for the immediately preceding Valuation Period.
(c) is the percentage factor equal to the Mortality and Expense Risk
Premium. Such factor is equal on an annual basis to a percentage of
the daily net asset value of the Sub-Account, as shown on the
Contract Data Page.
The Net Investment Factor may be greater or less than one.
Therefore, the Accumulation Unit value may increase or decrease.
SECTION E: SETTLEMENT OPTIONS AND DEATH BENEFITS
E1 Selection and Change of Settlement Option: The Owner may select or
change the Settlement Option or Annuity Date by written notification to
SAFECO at its Home Office. In order to be effective, the written
notification must be received by SAFECO prior to any Annuity Date
previously selected.
E2 Payment of Benefits: Subject to the provisions of this Contract, SAFECO
will, upon the written direction of the Owner, issue an Annuity or make
a cash distribution to any person who is entitled to such benefits.
SAFECO shall not be obligated to issue an Annuity or to make a cash
distribution until it receives written direction from the Owner
containing the terms and conditions of the Annuity or cash distribution.
SAFECO may rely on the written direction of the Owner and shall not be
liable because of any failure to question or challenge such direction
regarding the issuance of an Annuity or payment of a cash distribution.
E3 State Required Minimum Benefits: The death benefit, the surrender
value, and the Settlement Options under this Contract will not be less
than the minimum benefits required by any statute of the state in which
this Contract is delivered.
E4 Frequency and Amount of Annuity Payments: Except as described below,
Annuity payments will be paid monthly. If the net amount available to
apply under any Settlement Option is less than $5,000, SAFECO shall have
the right to pay such amount in a lump sum cash distribution. If
Annuity payments would be or become less than $250, SAFECO shall have
the right to change the frequency of payments to such intervals as will
result in payment of at least $250.
E5 Death of Annuitant:
(a) If the Annuitant dies before a Settlement Option has commenced, the
Owner must designate a new Annuitant. If no designation is made
within 30 days of the death of the Annuitant, the Owner will become
the Annuitant.
- 4 -
<PAGE> 7
(b) If the Contract is owned by a non-natural person, the death of the
Annuitant will be treated as the death of the Owner.
E6 Death of Owner Prior to Annuity Date:
(a) Guaranteed Death Benefit: If the Owner dies before a Settlement
Option has commenced, the amount of the death benefit will be the
greater of:
(i) Net Purchase Payments less any prior Withdrawals, including
applicable charges; or
(ii) The Contract Value determined as of the Valuation Period next
following the date both proof of death and an election of
single sum payment or a Settlement Option is received by
SAFECO.
(b) Election Period: The election must be made by the Beneficiary
during the sixty day period commencing with the date of receipt by
SAFECO of notification of death. If no election is made within the
sixty day period, then a single sum payment will be made to the
Beneficiary.
(c) The death benefit must be distributed:
(i) By the fifth anniversary of the Owner's death; or
(ii) Over a designated Beneficiary's life or over a period not
extending beyond the Beneficiary's life expectancy, in equal
or substantially equal payments, with payments beginning
within one year of the death of the Owner.
(d) If the Beneficiary is the spouse of the Owner, the Contract may be
continued by the spouse, and the spouse will become the Owner.
(e) Upon the death of a joint Owner, the surviving Owner will be the
designated Beneficiary. Any other named Beneficiary shall be a
contingent Beneficiary.
E7 Death of Owner After Annuity Date: If the Owner dies on or after a
Settlement Option has commenced, payments must continue at least as
rapidly as under the method of distribution in effect prior to the
Owner's death.
E8 Settlement Options: An Annuity may be issued in any of the forms
described below, or such other forms which SAFECO agrees to issue under
this Contract. Options (a), (b), and (c) are irrevocable once they have
begun. Option (d) is irrevocable for the first eight Contract Years, and
then may be changed. The Annuitant will become the Owner on commencement
of a Settlement Option.
(a) Variable Life Annuity: Monthly payments are made to the Annuitant
commencing on the Annuity Date, if he or she is then living, and
the last payment is that payment due immediately on or before the
Annuitant's death. No death benefit is payable under this option.
(b) Variable Life Annuity with 120 or 240 Monthly Payments Guaranteed:
Monthly payments are made to the Annuitant commencing on the
Annuity Date. If at the death of the Annuitant the guaranteed
number of payments has not been received by the Annuitant, payments
will be made to the Beneficiary for the remainder of the guarantee
period. The Beneficiary may elect to have the present value of the
guaranteed Annuity remaining as of the date the notice of death is
received by SAFECO commuted at the assumed investment rate of 4%
and paid in a single payment.
(c) Variable Joint and Survivor Life Annuity: Monthly payments are made
to the Annuitant commencing on the Annuity Date. After the death of
the Annuitant, payments will be continued to the co-annuitant for
as long as he or she lives. The written request for this option
must specify the percentage value of monthly payments to continue
to the co-annuitant.
(d) Systematic Withdrawal Income Plan: A specified number of whole or
partial Accumulation Units are liquidated for payment to the
Annuitant on a monthly, quarterly, or annual basis. The number to
be liquidated during a given year shall be a sufficient number so
as to be expected to deplete the Contract over the life expectancy
of the Annuitant or the joint life expectancy of the Annuitant and
Beneficiary, with at least 50% of the payments expected to be made
during the Annuitant's life.
- 5 -
<PAGE> 8
E9 Automatic Option: If, as of the Annuity Date, a Settlement Option has
not been selected, SAFECO will make payments under Section E8(d).
E10 Annuity Unit: The value of an Annuity Unit was arbitrarily set at $10
when each Sub-Account was established. The value of the Annuity Unit for
any subsequent Valuation Period is determined by multiplying the value
of the Annuity Unit for the immediately preceding Valuation Period by
the Net Investment Factor for the Valuation Period for which the value
is being calculated (as described in Section D5), and dividing the
result by the Assumed Investment Factor for such Valuation Period (as
described in Section E11).
E11 Assumed Investment Factor: The Assumed Investment Factor for a one day
Valuation Period is 1.00010746. This factor neutralizes the assumed
investment return of 4% in the Variable Annuity Purchase Rate Table in
Section H2.
E12 Variable Annuity Payment Calculation: A Variable Annuity is an Annuity
with payments which are not predetermined as to dollar amount. Payments
will vary in accordance with the net investment results of the Separate
Account. The dollar amount of the first monthly Variable Annuity payment
under Section E8(a), E8(b), or E8(c) will be determined by applying the
Contract Value (after deduction for premium taxes, if applicable), as of
the 15th day of the preceding month, to the Variable Annuity Purchase
Rate Table in Section H2. The number of Annuity Units to be credited to
the Annuitant will be determined by dividing the first monthly payment
by the Annuity Unit value calculated as of the 15th day of the preceding
month. This number of Annuity Units remains fixed during the Annuity
payment period. The dollar amount of each Variable Annuity payment after
the first shall be determined by multiplying the number of Annuity Units
credited to the Annuitant by the Annuity Unit value as of the 15th day
of the preceding month.
E13 Mortality and Expense Risk Guarantee: SAFECO guarantees that the dollar
amount of each Variable Annuity payment made after the first payment
will not be affected by variations in mortality experience or expenses.
SECTION F: WITHDRAWALS AND TRANSFERS
F1 Minimum Withdrawal: The minimum Withdrawal is as shown on the Contract
Data Page, or the Contract Value, if less. Except as otherwise provided
in this Contract, the Owner may, at or prior to the Annuity Date,
withdraw all or part of the Contract Value.
F2 Minimum Balance After Withdrawal: If any Withdrawal reduces the
remaining balance in a Sub-Account to less than $500, the remaining
balance will also be Withdrawn.
F3 Minimum Transfer: The minimum Transfer from a Sub-Account must be at
least $500, except for the Automatic Transfers described in Section F7.
If the Sub-Account from which the Transfer is being made is less than
$500, the entire Sub-Account will be Transferred.
The minimum Transfer into a Sub-Account must be at least $50.
F4 Systematic Withdrawal: The Owner may elect a Systematic Withdrawal
program under which the Owner will receive cash distributions from the
Contract in a predetermined amount on a predetermined frequency.
Payments under this election will be made directly to the Owner by
SAFECO, and will not be made more often than monthly.
F5 Withdrawal of Accumulation Units: Upon a Withdrawal, the number of
Accumulation Units remaining under this Contract will be reduced by the
number of such units equal to the total of the Withdrawal, including
applicable charges and taxes, including income taxes withheld, if
applicable.
F6 Transfer of Accumulation Units: Upon Transfer from a Sub-Account, the
number of Accumulation Units remaining under that Sub-Account will be
reduced by the number of such units equal to the total of the requested
Transfer, including applicable charges, and taxes.
- 6 -
<PAGE> 9
F7 Automatic Transfers: The Owner may elect pre-established automatic
monthly or quarterly Transfers of a single dollar amount of at least
$250 from a Sub-Account. The Automatic Transfers will continue until the
Owner requests discontinuance or there are no funds left in the Sub-
Account to Transfer.
F8 Minimum Balance After Transfer: If any Transfer reduces the remaining
balance in a Sub-Account to less than $500, the remaining balance will
also be Transferred.
F9 Deferral of Withdrawal Payment:
(a) Except as provided in Section F9(b), payments by SAFECO from the
Contract will be made within seven days after receiving a
Withdrawal request.
(b) SAFECO reserves the right to suspend or postpone payments for a
Withdrawal or Transfer for any period when:
(i) The New York Stock Exchange is closed (other than customary
weekend and holiday closings);
(ii) Trading on the New York Stock Exchange is restricted, as
determined by the rules and regulations of the Securities and
Exchange Commission;
(iii) An emergency exists as a result of which disposal of
securities held in the Separate Account is not reasonably
practicable or it is not reasonably practicable to determine
the value of the Separate Account's net assets, as determined
by the rules and regulations of the Securities and Exchange
Commission; or
(iv) During any other period when the Securities and Exchange
Commission, by order, so permits for the protection of Owners.
SECTION G: CHARGES AND DEDUCTIONS
G1 Deduction for Contingent Deferred Sales Charge:
(a) A Contingent Deferred Sales Charge will be assessed against any
Withdrawal or Transfer, based upon the following schedule:
<TABLE>
<CAPTION>
CONTRACT YEAR CHARGE
<S> <C>
1 8% of amount Withdrawn
2 7% of amount Withdrawn
3 6% of amount Withdrawn
4 5% of amount Withdrawn
5 4% of amount Withdrawn
6 3% of amount Withdrawn
7 2% of amount Withdrawn
8 1% of amount Withdrawn
After 8 0% of amount Withdrawn
</TABLE>
(b) A Contingent Deferred Sales Charge will not be deducted:
(i) On Transfers between Sub-Accounts;
(ii) On the sum of Withdrawals taken in any Contract Year which
does not exceed 10% of the Contract Value;
(iii) On Withdrawals made under a Settlement Option;
(iv) On Systematic Withdrawals over the life expectancy of the
Owner or the joint life expectancy of the Owner and
Beneficiary; or
(v) On Withdrawals made pursuant to the death of the Owner.
- 7 -
<PAGE> 10
G2 Deduction for Withdrawal Charge: The first Withdrawal each Contract Year
will have no Withdrawal Charge assessed. All further Withdrawals each
Contract Year will be subject to a Withdrawal Charge as shown on the
Contract Data Page, which will be deducted from the amount being
Withdrawn. Settlement Options and Systematic Withdrawal will have no
Withdrawal Charge assessed.
G3 Deduction for Transfer Charge: SAFECO reserves the right to assess a
Transfer Charge for Transfers in excess of twelve Transfers per calendar
year, as shown on the Contract Data Page. Automatic Transfers that
continue for at least six months will not be counted for purposes of
deduction of the Transfer Charge.
G4 Deduction for Mortality and Expense Risk Premium: SAFECO deducts an
amount computed on a daily basis as compensation for assuming the
mortality and expense risk. The Mortality and Expense Risk Premium shall
be a percentage of the average daily net asset value of the Separate
Account on an annual basis, as shown on the Contract Data Page.
G5 Taxes: Any premium taxes or other taxes levied by any governmental
entity which SAFECO, in its sole discretion, determines have resulted
from the establishment or maintenance of this Contract or any portion of
this Contract, the receipt by SAFECO of Purchase Payments, or the
commencement of Annuity payments, will be deducted from the Contract.
The Sub- Account from which the taxes are deducted is determined by the
hierarchical order of the Sub-Accounts as shown on the Contract Data
Page.
- 8 -
<PAGE> 11
SECTION H: ANNUITY PURCHASE RATE TABLE
H1 Mortality Tables Used: The rates in the Variable Annuity Purchase Rate
Table are based upon the 1983a Mortality Table Projected 20 Years with
Projection Scale G; 50% Male and 50% Female. An age setback of 1 year
will be used if the Annuity payment begins in the year 2000-2009, 2
years if the Annuity payment begins in the year 2010-2019, and an
additional 1 year setback for each additional ten years. The effective
interest rate assumed in the Variable Annuity Purchase Rate table is
4.00%.
H2 Variable Annuity Purchase Rate Table:
CONSIDERATION REQUIRED TO PURCHASE $1 OF MONTHLY ANNUITY*
<TABLE>
<CAPTION>
Life Joint & Survivor Annuity**
Annuity
Age of Life 120-Months 100% 50%
Annuitant Annuity Certain Annuity Annuity
--------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
55 $208.85 $210.55 $233.18 $221.02
56 205.59 207.42 230.40 218.00
57 202.23 204.22 227.53 214.88
58 198.76 200.94 224.55 211.66
59 195.20 197.58 221.47 208.34
60 191.54 194.16 218.29 204.91
61 187.79 190.67 215.00 201.39
62 183.95 187.12 211.61 197.78
63 180.01 183.53 208.11 194.06
64 176.00 179.88 204.51 190.25
65 171.91 176.20 200.80 186.36
66 167.75 172.50 197.00 182.38
67 163.53 168.77 193.09 178.31
68 159.25 165.04 189.08 174.16
69 154.90 161.31 184.98 169.94
70 150.50 157.59 180.77 165.64
71 146.05 153.89 176.48 161.26
72 141.55 150.23 172.10 156.82
73 137.02 146.62 167.63 152.32
74 132.46 143.09 163.09 147.78
75 127.90 139.63 158.49 143.19
</TABLE>
*The consideration shown refers to the net value used to purchase an
Annuity, after premium taxes or other applicable charges are deducted.
**Annuitant and co-annuitant are assumed to be the same age.
Age is to be taken for the exact number of years and completed months.
Values for fractional ages are obtained by simple interpolation.
Consideration for ages or combination of lives not shown will be
furnished by SAFECO upon request.
- 9 -
<PAGE> 12
CONTRACT DATA PAGE
PRODUCT: SPINNAKER PLUS
OWNER: JOHN DOE
321 CAPITOL BLVD
CAPITOL CITY, WA 99999-8888
ANNUITANT: JOHN DOE
CONTRACT NUMBER: LP12345678
CONTRACT DATE: 11/01/1995
ANNUITANT'S AGE ON CONTRACT DATE: 35
ANNUITY DATE: 11/01/2030
DELIVERED IN THE STATE OF WASHINGTON AND GOVERNED BY ITS LAWS.
MINIMUM INITIAL PURCHASE PAYMENT: $50,000.00
MINIMUM SUBSEQUENT PURCHASE PAYMENT: $250.00, accepted within six months of
the Contract Date only
MORTALITY AND EXPENSE RISK CHARGE: Equal on an annual basis to 1.25% of the
average daily net asset value of the Separate Account
TRANSFER CHARGE: The lesser of $10 or 2% of amount transferred, for each
Transfer in excess of twelve per Contract Year
MINIMUM WITHDRAWAL: The lesser of $250 or the Contract Value
CONTINGENT DEFERRED SALES CHARGE:
<TABLE>
<CAPTION>
CONTRACT YEAR CHARGE
<S> <C>
1 8% of amount withdrawn
2 7% of amount withdrawn
3 6% of amount withdrawn
4 5% of amount withdrawn
5 4% of amount withdrawn
6 3% of amount withdrawn
7 2% of amount withdrawn
8 1% of amount withdrawn
After 8 0% of amount withdrawn
</TABLE>
Total Contingent Deferred Sales Charges will not exceed 8.5% of the Purchase
Payments and Deposits made under this Contract
WITHDRAWAL CHARGE: The lesser of $25 or 2% of the amount withdrawn, for each
Withdrawal in excess of one per Contract Year
ELIGIBLE INVESTMENTS:
1. SAFECO Resource Money Market Sub-Account
2. SAFECO Resource Bond Sub-Account
3. Federated Utility Sub-Account
4. Federated Corporate Bond Sub-Account
5. Scudder Variable Life Investment Fund Balanced Sub-Account
6. Lexington Natural Resources Sub-Account
7. Scudder Variable Life Investment Fund International Sub-Account
8. Federated International Stock Sub-Account
9. Lexington Emerging Markets Sub-Account
10. SAFECO Resource Equity Sub-Account
11. SAFECO Resource Northwest Sub-Account
12. SAFECO Resource Growth Sub-Account
13. SAFECO Fixed Account Annuity Rider
SEPARATE ACCOUNT: SAFECO Resource Variable Account B
ANNUITY SERVICE OFFICE:
HOME OFFICE: MAILING ADDRESS:
SAFECO Life Insurance Company SAFECO Life Insurance Company
Pension Department Pension Department
15411 NE 51st Street P.O. Box 34690
Redmond, Washington 98052 Seattle, Washington 98124-1690
Telephone: 1-800-426-7649
Fax: 206-867-8793
LPC-408/EP 9/95
<PAGE> 1
EXHIBIT 4(ii)
FIXED ACCOUNT ANNUITY RIDER
The Rider is a part of the Contract to which it is attached with regard to the
general account of SAFECO, the Fixed Account. This Rider is effective upon
issuance and restates in its entirety any prior Fixed Account Annuity Rider.
SECTION A4, Annuity Date, is amended to read as follows:
Annuity Date: The date selected by the Owner for commencing Annuity
payments under this Contract. Separate dates may be selected by the Owner
for commencing variable Annuity payments and fixed Annuity payments. The
day of the month on which the payments will be made will be determined by
SAFECO. Any Annuity Date selected cannot be later than the date the
Annuitant attains age 85.
SECTION A9, Contract Date, is amended to read as follows:
Contract Date: The earlier of the date on which the initial Net Purchase
Payment is allocated to the Separate Account or the initial Net Purchase
Payment is allocated to the Fixed Account, as shown on the Contract Data
Page.
SECTION A10, Contract Value, is amended to read as follows:
Contract Value: The sum of the Owner's interest in the Sub-Accounts of the
Separate Account and the Fixed Account. Fixed Account Contract Value
refers to that portion of the Contract Value held in the Fixed Account.
SECTION A15, Purchase Payments, is amended to read as follows:
Purchase Payments: Payments made to purchase Accumulation Units or
payments allocated to the Fixed Account as provided in Section I1.
SECTION A18(a), Transfer, is added to the Contract:
The redemption of units from a Sub-Account(s) and the purchase of units of
another Sub-Account(s), and the transfer of Contract Value to or from the
Fixed Account from or to the Sub-Account(s).
SECTION C5, Application of Purchase Payments to Eligible Investments, is
amended to read as follows:
Application of Purchase Payments to Eligible Investments: Purchase
Payments applied to the Separate Account are allocated to Sub-Accounts of
the Separate Account and the Fixed Account as provided in Section I1.
SECTION D2, Non-Participation in Surplus, is amended to read as follows:
The Variable Annuity and Fixed Annuity portions of this Contract will not
share in any distribution of profits, losses, or surplus of SAFECO.
SECTION G1(b), A Contingent Deferred Sales Charge will not be deducted, is
amended to include the following:
(vi) On Transfers from a Sub-Account to the Fixed Account; or
(vii) On Transfers from the Fixed Account under Section I11.
SECTION I: FIXED ACCOUNT, is added to the Contract:
SECTION I1, Fixed Account Allocations, is added to the Contract:
Fixed Account Allocations: The Owner may make payments into the Fixed
Account, subject to acceptance and approval by SAFECO. The Fixed Account
consists of the total Fixed Account Allocations received by SAFECO under
this Rider and not previously withdrawn, plus interest on each such Fixed
Account Allocation, less any applicable charges and deductions. Fixed
Account Allocations will become part of the general account of SAFECO to
be so used and invested and will not be segregated from SAFECO's other
assets.
SECTION I2, Interest Crediting, is added to the Contract:
Interest Crediting:
(a) After receipt of each Fixed Account Allocation, and in accordance
with paragraph (b) below, SAFECO will credit interest to the Fixed
Account Allocation at a rate determined according to SAFECO's
investment year method of assigning interest credits. Under this
method the interest credits will be based on the original period of
receipt of such funds.
(b) Each Fixed Account Allocation will be credited with the Guaranteed
Interest Rate determined for such Fixed Account Allocation commencing
on the date the Fixed Account Allocation is received by SAFECO.
(c) For purposes of crediting interest, the last-in, first-out accounting
method will apply to Withdrawals.
- 1 -
LPC-418 8/95
<PAGE> 2
SECTION I3, Establishment of Interest Rates, is added to the Contract:
Establishment of Interest Rates: Guaranteed Interest Rates for each Fixed
Account Allocation will be determined by SAFECO as soon as practicable
prior to each Initial or Subsequent Interest Guarantee Period.
SECTION I4, Guaranteed Interest Rate, is added to the Contract:
Guaranteed Interest Rate:
(a) SAFECO's Guaranteed Interest Rate on any Fixed Account Allocation
will be effective for the Initial Interest Guarantee Period applicable
to such Fixed Account Allocation. The Initial Interest Guarantee
Period shall be no less than the twelve (12) month period commencing
on the date a Fixed Account Allocation is received by SAFECO.
(b) Upon the expiration of the Initial Interest Guarantee Period
applicable to any Fixed Account Allocation, the Guaranteed Interest
Rate applicable to such a Fixed Account Allocation plus credited
interest will be that rate determined by SAFECO to be effective for
each successive Subsequent Interest Guarantee Period and may or may
not be the same as any interest rate applicable to new Fixed Account
Allocations. The Subsequent Interest Guarantee Period shall be the
period commencing on the expiration of the Initial Guarantee Period
and shall be no less than twelve (12) months. Each successive
Subsequent Interest Guarantee Period shall be the period commencing on
the expiration of the prior Subsequent Interest Guarantee Period and
shall be no less than twelve (12) months.
(c) SAFECO's Guaranteed Interest Rate on any subsequent Fixed Account
Allocation will be that rate in effect at the time of such Fixed
Account Allocation, and may or may not be the same as any interest
rate previously applicable to Fixed Account Allocations or any
interest rate for Subsequent Interest Rate Guarantee Periods.
(d) The Guaranteed Interest Rate credited to monies allocated to the
Fixed Account will never be less than an annual effective interest
rate of 3% for any Contract Year.
SECTION I5, Settlement Options, is added to the Contract:
Settlement Options: On the date upon which SAFECO is to issue an Annuity
under this Rider, SAFECO shall charge the premium for such Annuity against
the Fixed Account. Such premium shall be the premium calculated in
accordance with the Fixed Annuity Purchase Rate Table in Section I8, plus
premium taxes, if required by state law. An Annuity may be issued only in
one of the forms described below, or such other forms which SAFECO agrees
to issue under this Rider. Options (a), (b) and (c) are irrevocable once
they have begun.
(a) Fixed Life Annuity: Monthly payments are made to the Annuitant
commencing on the Annuity Date, if he or she is then living, and the
last payment is that payment due immediately on or before his or her
death. No death benefit is payable under this option.
(b) Fixed Life Annuity with 120 or 240 Monthly Payments Guaranteed:
Monthly payments are made to the Annuitant commencing on the
Annuity Date. If at the death of the Annuitant the guaranteed number
of payments has not been received by the Annuitant, then payments will
be made to the Beneficiary for the remainder of the guaranteed period.
(c) Fixed Joint and Survivor Life Annuity: Monthly payments are made to
the Annuitant commencing on the Annuity Date. After the death of the
Annuitant, payments will be continued to the Annuitant's spouse for as
long as he or she lives.
(d) Systematic Withdrawal Income Plan: A specified amount is withdrawn
for payment to the Annuitant on a monthly, quarterly, or annual basis.
The amount withdrawn shall be the amount calculated to deplete the
Fixed Account over the life expectancy of the Annuitant or the joint
life expectancy of the Annuitant and Beneficiary, with at least 50% of
the payments expected to be made during the Annuitant's life. The
balance remaining in the Fixed Account after any such payment will
continue to earn interest in the same manner as prior to the
Withdrawal.
SECTION I6, Automatic Option, is added to the Contract:
Automatic Option: If, as of the Annuity Date, a Settlement Option has not
been selected under this Rider, SAFECO will make payments under Section
I5(d), if the Beneficiary is a natural person. If, as of the Annuity Date,
a Settlement Option has not been selected and the Beneficiary is a
non-natural person, SAFECO will make payments under Section I5(a).
SECTION I7, Commencement of Annuity Payments, is added to the Contract:
Commencement of Annuity Payments: Subject to the limitations of Sections
A4, E8, and I5, an Owner may elect:
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<PAGE> 3
(a) to have variable Annuity payments commence on the Annuity Date,
pursuant to one of the Settlement Options described in Section E8,
and:
(i) continue to have Net Purchase Payments credited to the Fixed
Account; and
(ii) choose a "second Annuity Date" for the commencement of fixed
Annuity payments; or
(b) to have fixed Annuity payments commence on the Annuity Date, pursuant
to one of the Settlement Options described in Section I5, and:
(i) continue to have Net Purchase Payments credited to a
Sub-Account(s); and
(ii) choose a "second Annuity Date" for the commencement of variable
Annuity payments.
SAFECO must receive any such election and the selected "second Annuity
Date" prior to any Annuity Date. If no such election is made, SAFECO will
commence both variable and fixed Annuity payments on the Annuity Date
pursuant to the applicable Settlement Options. Any Annuity Date selected,
including the "second Annuity Date," cannot be later than the date the
Annuitant attains age 85.
SECTION I8, Mortality Tables Used, is added to the Contract:
Mortality Tables Used: The rates in the Fixed Annuity Purchase Rate Table
are based upon the 1983a Mortality Table Projected 20 years with
Projection Scale G: 50% Male and 50% Female. The effective interest rate
assumed in the Fixed Annuity Purchase Rate Table is 3%.
Fixed Annuity Purchase Rate Table
CONSIDERATION REQUIRED TO PURCHASE $1 OF MONTHLY ANNUITY*
<TABLE>
<CAPTION>
Life Joint & Survivor Annuity**
Annuity
Age of Life 10-Years 100% 50%
Annuitant Annuity Certain Annuity Annuity
--------- -------- -------- ------- -------
<S> <C> <C> <C> <C>
55 $236.33 $238.26 $267.87 $252.10
56 231.98 234.07 263.96 247.97
57 227.55 229.82 259.98 243.77
58 223.04 225.49 255.83 239.44
59 218.43 221.11 251.58 235.01
60 213.73 216.66 247.23 230.48
61 208.95 212.15 242.77 225.88
62 204.08 207.60 238.20 221.14
63 199.13 203.02 233.54 216.33
64 194.11 198.41 228.77 211.44
65 189.04 193.78 223.91 206.47
66 183.90 189.14 218.95 201.43
67 178.71 184.51 213.91 196.31
68 173.48 179.90 208.77 191.12
69 168.20 175.32 203.55 185.87
70 162.88 170.77 198.24 180.56
71 157.59 166.32 192.99 175.29
72 152.29 161.93 187.69 169.99
73 146.98 157.62 182.22 164.60
74 141.67 153.42 176.70 159.19
75 136.38 149.34 171.13 153.75
</TABLE>
* The consideration shown refers to the net value used to purchase
an Annuity, after premium taxes or other applicable charges are
deducted. For example, it would cost $189,040 for an Annuitant
age 65 to receive a Fixed Life Annuity which provides a monthly
income of $1,000.
** Annuitant and spouse are assumed to be the same age.
Age is to be taken for the exact number of years and completed
months. Values for fractional ages are obtained by simple
interpolation.
Consideration for ages or combination of lives not shown will be
furnished by SAFECO upon request.
- 3 -
<PAGE> 4
SECTION I9, Minimum Balance After Withdrawal, is added to the Contract:
Minimum Balance After Withdrawal: If any Withdrawal reduces the remaining
balance in the Fixed Account to less than $500, the remaining balance will
also be Withdrawn.
SECTION I10, Minimum Transfer, is added to the Contract:
Minimum Transfer: All Transfers from the Fixed Account, other than pursuant
to a Program, are subject to a $500 minimum.
The minimum Transfer into the Fixed Account must be at least $50.
SECTION I11, Transfers, is added to the Contract:
Transfers: The Owner may elect to participate in only one of the Programs
relating to transfers from the Fixed Account in any Contract Year or elect
to transfer up to a total of 10% of the value of the Fixed Account Contract
Value at the time of the Transfer, in a Contract Year. SAFECO may waive
this limitation upon written notice to the Owner.
SECTION I12, Deferral of Withdrawal Payment, is added to the Contract:
Deferral of Withdrawal Payment: SAFECO retains the right to defer the
payment of Withdrawals from the Fixed Account for a period of six months
after receiving a Withdrawal request. If SAFECO defers payment of
Withdrawals under this Section, SAFECO will pay interest on the deferred
payments at the rate specified by state law at the time of the Withdrawal
request.
All other terms and conditions of the Contract remain unchanged.
SAFECO LIFE INSURANCE COMPANY
/s/ R.A. Pierson
--------------------------------
R.A. Pierson
Sr. Vice President and Secretary
- 4 -
<PAGE> 5
ENDORSEMENT
Tax Sheltered Annuity Endorsement
This Endorsement forms a part of the Contract to which it is attached. This
Endorsement applies to a Contract issued under Section 403(b) of the Internal
Revenue Code. In the case of a conflict with any provision in the Contract or
Rider, the terms of this Endorsement will control. This Endorsement is effective
upon issuance to the Owner and restates in its entirety any prior Tax Sheltered
Annuity Endorsement.
SECTION A14, Owner, is amended to read as follows:
Owner: The person named in the Application who has all rights under this
Contract. The Annuitant shall be the Owner of this Contract.
SECTION B12, Assignment, is amended to read:
Non-Assignment: To the extent permitted by law, this Contract and the
benefits or payments under this Contract are not assignable or otherwise
transferrable. This Contract may be assigned for purposes of an Internal
Revenue Code Section 1035 exchange.
SECTION B14, Exclusive Benefit, is added to the Contract:
Exclusive Benefit: This Contract is established for the exclusive benefit
of the Annuitant and Beneficiaries.
SECTION B15, Nonforfeitable, is added to the Contract:
Nonforfeitable: The interest of the Annuitant in this Contract is
nonforfeitable.
SECTION B16, Nontransferable, is added to the Contract:
Nontransferable: This Contract is nontransferable by the Annuitant.
SECTION C6, Contribution Limit, is added to the Contract:
Contribution Limit: If contributions to this Contract are made under a
salary reduction agreement, the maximum contribution when combined with all
other plans, contracts, or arrangements may not exceed the amount of the
limitation provided for in Section 402(g) of the Internal Revenue Code.
SECTION C7, Plan, is added to the Contract:
Plan: The terms of this Contract are subject to the provisions of any plan
under which this Contract is issued.
SECTION E5, Death of Annuitant, is deleted.
SECTION E5, Minimum Distribution Rules, is added to the Contract:
Minimum Distribution Rules: All Settlement Options and periodic withdrawals
are subject to and shall distribute the Contract Value pursuant to the
Minimum Distribution Rules in Section 403(b)(10) and Section 401(a)(9) of
the Internal Revenue Code, including the minimum distribution incidental
benefit requirement of Section 401(a)(9)(G) of the Internal Revenue Code
and Section 1.401(a)(9)-2 of the Proposed Income Tax Regulations.
(a) Minimum Distribution Rules:
(i) Required Beginning Date: Minimum Distributions must begin by the
Annuitant's Required Beginning Date, defined as April 1 following
the year the Annuitant reaches age 70 1/2.
(I) For an Annuitant who was born prior to July 1, 1917, the
Required Beginning Date is April 1 following the calendar
year in which the annuitant retires.
(II) For an Annuitant who is a participant in a governmental or
church plan, the Required Beginning Date is April 1
following the later of the calendar year in which the
Annuitant reaches age 70 1/2 or retires.
- 1 -
LPC-419 9/95
<PAGE> 6
If the Annuitant has reached age 70 1/2 as of the Contract
Date, the Required Beginning Date is no later than the close
of the taxable year following the taxable year during which
the Contract is issued.
(ii) Minimum Distribution Requirements: The Minimum Distributions must
be in equal or substantially equal amounts, over:
(I) The life of the Annuitant, or the lives of the Annuitant and
the designated Beneficiary; or
(II) A period not extending beyond the life expectancy of the
Annuitant, or the joint and last survivor expectancy of the
Annuitant and the designated Beneficiary.
(iii) Minimum Amounts to be Distributed: If the Annuitant's entire
Contract Value is to be distributed in other than a lump sum,
then the amount to be distributed each year (commencing with the
first calendar year for which distributions are required to begin
and for each calendar year thereafter) must be at least an amount
equal to the quotient obtained by dividing the Contract Value by
the lesser of (1) the applicable life expectancy of the Annuitant
or (2) if the Annuitant's spouse is not the designated
Beneficiary, the applicable divisor determined from the table set
forth in Question and Answer 4 or Question and Answer 5, as
applicable, of Proposed Income Tax Regulation 1.401(a)(9)-2.
Payments must be made in periodic payments of intervals no longer
than one year. In addition, payments must be either
non-increasing or they may increase only as provided in Question
and Answer F-3 of Proposed Income Tax Regulation 1.401(a)(9)-1.
Distributions after the death of the Annuitant shall be
calculated using the applicable life expectancy as the relevant
divisor without regard to Proposed Regulation 1.401(a)(9)-2.
(b) Life Expectancy: The Annuitant and a designated Beneficiary who is the
spouse of a deceased Annuitant may elect whether or not to recalculate
life expectancy. Life expectancy may be recalculated no more frequently
than annually. This election is irrevocable and shall apply to all
subsequent years. It must be made by written notice to SAFECO at its
Home Office no later than the Required Beginning Date. If an election
is not made, life expectancy for the Annuitant and a designated
Beneficiary who is a spouse will be recalculated.
The life expectancy of a non-spouse Beneficiary may not be
recalculated. Life expectancy will be calculated using the attained age
of such Beneficiary during the calendar year in which distributions are
required to begin, and payments for subsequent years shall be
calculated based on such life expectancy reduced by one for each
calendar year which has elapsed since the calendar year life expectancy
was first calculated.
Life expectancy and joint and last survivor expectancy are computed by
use of the expected return multiples contained in Tables V and VI,
Section 1.72-9 of the Income Tax Regulations.
(c) Annuitant's Death Prior to Required Beginning Date: If the Annuitant
dies before distributions are considered to have commenced, the
Contract Value must be distributed according to one of the following
options:
(i) The entire Contract Value remaining must be distributed by
December 31 of the year which contains the fifth anniversary of
the Annuitant's death; or
(ii) Unless the Annuitant or Beneficiary has elected (i), the entire
Contract Value must be distributed over a period not extending
beyond a designated Beneficiary's life or life expectancy in
substantially equal installments.
Under this option a non-spouse Beneficiary must begin
distributions no later than December 31 of the calendar year
immediately following the calendar year of the Annuitant's death.
The Beneficiary may elect at any time to receive greater
payments.
A surviving spouse may elect, no later than the earlier of
December 31 of the calendar year containing the fifth anniversary
of the Annuitant's death or the date distributions are required
to begin, to receive equal or substantially equal payments over
the life or life expectancy of the surviving spouse commencing at
any date prior to the later of (1) December 31 of the calendar
year immediately following the calendar year in which the
Annuitant died and (2) December 31 of the calendar year in
- 2 -
<PAGE> 7
which the Annuitant would have attained age 70 1/2. The
surviving spouse may increase the frequency or amount of such
payments at any time.
A surviving spouse may also elect to treat the Contract as the
spouse's own, and then delay distributions until the 1st of April
following the calendar year in which the spouse reaches age 70
1/2 if that date is later than the Annuitant's death or the date
the Annuitant would have reached age 70 1/2. Such election is
considered made if:
(I) Amounts required to be distributed on the Annuitant's death
have not been distributed from the Contract;
(II) A regular IRA contribution or rollover contribution is made
to the Contract;
(III) A rollover is made from the Contract; or
(IV) The spouse fails to make another election.
(d) Annuitant's Death On or After Required Beginning Date: If the Annuitant
dies on or after the date distributions are considered to have
commenced, payment to the designated Beneficiary must continue at least
as rapidly as the method in effect prior to the Annuitant's death.
SECTION E7, Death of Owner After Annuity Date, is deleted.
SECTION E14, Commencement of Minimum Distributions, is added to the Contract:
Commencement of Minimum Distributions:
(a) Minimum Distributions will commence no later than April 1 following the
year in which the Annuitant attains age 70 1/2, unless the Annuitant
sends written notice to SAFECO that the minimum distributions for this
Contract will be taken from another TSA and requests that distributions
not be taken from this Contract or that distributions are to be
deferred under one of the exceptions described in Section E5(a)(i).
(b) If SAFECO has not received written notice prior to March 1 following
the year in which the Annuitant attains age 70 1/2:
(i) If designated Beneficiary information has been provided to
SAFECO, SAFECO will make the Required Minimum Distributions based
on joint life expectancy with recalculation of life expectancy
under a Systematic Withdrawal program and in accordance with the
Minimum Distribution Rules in Section 401(a)(9) of the Internal
Revenue Code.
(ii) If designated Beneficiary information has not been provided to
SAFECO, SAFECO will make the Required Minimum Distributions based
on single life expectancy with recalculation of life expectancy
under a Systematic Withdrawal program and in accordance with the
Minimum Distribution Rules in Section 401(a)(9) of the Internal
Revenue Code.
SECTION F10, Withdrawal Restrictions, is added to the Contract:
Withdrawal Restrictions:
(a) Withdrawals are restricted under Section 403(b) of the Internal Revenue
Code for:
(i) Salary reduction contributions made after December 31, 1988;
(ii) Income attributable to salary reduction contributions made after
December 31, 1988;
(iii) Income attributable to amounts held as of December 31, 1988; and
(iv) Contracts that contain a full or partial transfer of funds from a
previous Section 403(b)(7) account.
(b) The Withdrawal restrictions under Section 403(b) of the Internal
Revenue Code allow withdrawals only when the Annuitant:
(i) Attains age 59 1/2;
- 3 -
<PAGE> 8
(ii) Separates from service;
(iii) Dies;
(iv) Becomes disabled (as defined in Section 72(m)(7) of the Internal
Revenue Code); or
(v) In the case of hardship. Withdrawals for hardship are restricted
to the portion of the Contract Value which represents
contributions made by the Annuitant and does not include any
income attributable to salary reduction contributions made after
December 31, 1988 or income attributable to amounts held as of
December 31, 1988.
(c) Withdrawal of restricted funds may result in disqualification of the
Contract as a tax qualified plan and subject the Withdrawal to federal
income tax penalties.
SECTION F11, Direct Rollovers is added to the Contract:
Direct rollovers: The Annuitant or Beneficiary may elect to have any
eligible rollover distribution or any portion of an eligible rollover
distribution paid directly to an eligible retirement plan.
SECTION G5, Taxes, is amended to read as follows:
Taxes: SAFECO reserves the right to deduct premium taxes or other taxes
levied by any governmental entity which SAFECO, in its sole discretion,
determines have resulted from the establishment or maintenance of this
Contract or any portion of this Contract, the receipt by SAFECO of Purchase
Payments, or the commencement of Annuity payments. If SAFECO exercises this
right the Sub-Account from which the taxes will be deducted will be
determined by the hierarchical order of the Sub-Accounts as listed on the
Contract Data Page.
SECTION I13, Loans, is added to the Contract:
Loans: Upon the approval of application to SAFECO, an Annuitant may borrow
funds from SAFECO using the Annuitant's interest in the Fixed Account of
the Fixed Annuity Rider as collateral. Any such loan is subject to Section
72(p) of the Internal Revenue Code and the terms of the loan program as
established by SAFECO.
All other terms and conditions of the Contract remain unchanged.
SAFECO LIFE INSURANCE COMPANY
/s/ R.A. PIERSON
--------------------------------
R.A. Pierson
Sr. Vice President and Secretary
- 4 -
<PAGE> 9
ENDORSEMENT
Individual Variable Annuity Contract Endorsement
This Endorsement forms a part of the Contract to which it is attached. In the
case of a conflict with any provision in the Contract or Rider, the terms of
this Endorsement will control. This Endorsement is effective upon issuance to
the Owner.
SECTION A11(a), Eight-Year Contract Anniversary, is added to the Contract:
Eight-Year Contract Anniversary: Each eighth Contract Year.
SECTION A12, Eligible Investments, is amended to read as follows:
Eligible Investments: An investment entity shown on the Contract Data Page,
including the Fixed Account pursuant to any Fixed Account Annuity Rider.
SECTION A14, Owner, is amended to read as follows:
Owner: The person or persons named in the Application who has all rights
under this Contract. Joint Owners are allowed only if the joint Owners are
spouses. Each joint Owner shall have equal ownership rights and must
jointly exercise those rights. On the date the Application is signed, the
Owner must not be older than age 75 (if joint Owners, neither may be older
than 75).
SECTION A15(a), Programs, is added to the Contract:
Programs: Programs are features whereby an Owner may elect to have Purchase
Payments, Contract Value or appreciation under the Contract allocated,
transferred, withdrawn or otherwise designated pursuant to requirements and
procedures described in the then current prospectus or registration
statement for the Contract under the Securities Act of 1933, as amended.
SECTION A18(a), Transfer, is added to the Contract:
Transfer: The redemption of units from a Sub-Account(s) and the purchase of
units of another Sub-Account(s).
SECTION B12, Non-Assignment, is deleted from the Contract.
SECTION B12, Assignment, is added to the Contract:
Assignment: To the extent permitted by law, this Contract and the benefits
or payments under this Contract are assignable or otherwise transferrable.
This Contract may be assigned for purposes of an Internal Revenue Code
Section 1035 exchange.
SECTION E5, Death of Annuitant, is amended to read as follows:
Death of Annuitant:
(a) If the Annuitant dies before a Settlement Option has commenced, the
Owner must designate a new Annuitant. If no designation is made within
30 days of notification to SAFECO of the death of the Annuitant, the
Owner will become the Annuitant.
(b) If the Contract is owned by a non-natural person, the death of the
Annuitant will be treated as the death of the Owner.
SECTION E6, Death of Owner Prior to Annuity Date, is amended to read as follows:
Death of Owner Prior to Annuity Date:
(a) The Minimum Guaranteed Death Benefit: The initial Minimum Guaranteed
Death Benefit shall be equal to the initial Net Purchase Payment.
Additional Net Purchase Payments are added to the Minimum Guaranteed
Death Benefit. The Minimum Guaranteed Death Benefit will be adjusted
after any Withdrawal by multiplying it by the ratio of the Contract
Value after the Withdrawal to the Contract Value before the Withdrawal.
The Minimum Guaranteed Death Benefit shall be redetermined on each
Eight Year Contract Anniversary by taking the greater of the Contract
Value on that Eight Year Contract Anniversary or the previous Minimum
LPC-716 8/95
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<PAGE> 10
Guaranteed Death Benefit After the Owner's death, the Minimum
Guaranteed Death Benefit will be reduced dollar for dollar by any
Withdrawals.
(b) Death Benefit Options: Upon the death of the Owner prior to the annuity
date, the Beneficiary may elect a Settlement Option or to receive a
single lump sum payment.
(c) Death Benefit (Prior to age 72)
If the Owner dies prior to age 72 and before a Settlement Option has
commenced, and provided that the Beneficiary provides due proof of
death in a form satisfactory to SAFECO and has elected a Death Benefit
Option within six (6) months of the date of death, the amount of the
Death Benefit will be the greater of:
(i) the Contract Value on the date of election of a Death Benefit
Option by the Beneficiary; or
(ii) the Minimum Guaranteed Death Benefit.
(d) Death Benefit (After age 71)
If the Owner dies after age 71 and before a Settlement Option has
commenced, and provided that the Beneficiary provides due proof of
death in a form satisfactory to SAFECO and has elected a Death Benefit
Option within six (6) months of the date of death, the amount of the
Death Benefit will be the greater of:
(i) the Contract Value on the date of election of a Death Benefit
Option by the Beneficiary; or
(ii) the Minimum Guaranteed Death Benefit established on the last
Eight Year Contract Anniversary preceding the Owner's 72nd
birthday, adjusted for any Net Purchase Payments received or
Withdrawals taken since that Eight Year Contract Anniversary.
(e) Death Benefit (Death notification or Death Benefit Option election more
than Six Months after Date of Death)
If notification of death or election of a Death Benefit Option occurs
after the six month anniversary of the date of death, the death benefit
will be the Contract Value on the date of election of a Death Benefit
Option determined as follows: the Contract Value calculated as of the
six-month anniversary of the date of death will be compared with the
last calculated Minimum Guaranteed Death Benefit to determine if
additional funds are required to be added by SAFECO to equal such
Minimum Guaranteed Death Benefit. SAFECO will supplement any deficiency
in Contract Value, such that Contract Value will equal the Minimum
Guaranteed Death Benefit. Thereafter, until the date of election of a
Death Benefit Option, the Contract Value attributable to SAFECO's
contribution will be guaranteed and interest paid thereon at prevailing
money market rates; the portion of Contract Value existing on the six
month anniversary of the date of death will be subject to adjustment
reflecting the investment experience for the period from the six-month
anniversary to the date of election of a Death Benefit Option. In
addition, the amount of the death benefit will be reduced dollar for
dollar by any Withdrawal after the Owner's death.
(f) Election Period: The election of a Settlement Option must be made by
the Beneficiary during the 60-day period commencing with the date of
receipt by SAFECO of notification of the Owner's death. If no election
is made within the 60-day period, then a single sum payment will be
made to the Beneficiary.
(g) The death benefit must be distributed:
(i) By the fifth anniversary of the Owner's death; or
(ii) Over a designated Beneficiary's life or over a period not
extending beyond the Beneficiary's life expectancy, in equal or
substantially equal payments, with payments beginning within one
year of the death of the Owner.
(h) If the Beneficiary is the spouse of the Owner, the Contract may be
continued by the spouse, and the spouse will become the Owner.
(i) Joint Owners:
(i) The Minimum Guaranteed Death Benefit will only be payable on the
death of the older joint Owner. Upon the death of the older joint
Owner, if the Contract is continued, no Minimum Guaranteed Death
Benefit applies for the remaining duration of the Contract.
- 2 -
<PAGE> 11
(ii) Upon the death of a joint Owner, the surviving Owner shall be the
designated Beneficiary. Any other named Beneficiary shall be a
contingent Beneficiary.
(iii) Upon the death of a joint Owner, the surviving Owner may elect a
Settlement Option or a lump sum payment, or may elect to continue
the Contract.
SECTION F3, Minimum Transfer, is amended to read as follows:
Minimum Transfer: The minimum Transfer from a Sub-Account must be at least
$500, except for Transfers pursuant to certain Programs. If the Sub-Account
from which the Transfer is being made is less than $500 the entire
Sub-Account will be transferred, including a Transfer pursuant to certain
Programs.
The minimum Transfer into a Sub-Account must be at least $50.
SECTION F4, Systematic Withdrawal, is deleted from the Contract.
SECTION F7, Automatic Transfers, is deleted from the Contract.
SECTION F8, Minimum Balance After Transfer, is amended to read as follows:
Minimum Balance After Transfer: If any Transfer, including a Transfer
pursuant to certain Programs, reduces the remaining balance in a
Sub-Account to less than $500, the remaining balance will also be
transferred.
SECTION G3, Deduction for Transfer Charge, is amended to read as follows:
Deduction for Transfer Charge: SAFECO reserves the right to assess a
Transfer Charge for each Transfer in excess of twelve Transfers per
calendar year, as shown on the Contract Data Page. Transfers pursuant to
any Program offered by SAFECO may or may not be subject to the Transfer
Charge, subject to SAFECO's administrative procedures under the Programs.
All other terms and conditions of the Contract remain unchanged.
SAFECO LIFE INSURANCE COMPANY
/s/ R.A. PIERSON
--------------------------------
R.A. Pierson
Sr. Vice President and Secretary
- 3 -
<PAGE> 12
ENDORSEMENT
Individual Retirement Annuity Endorsement
This Endorsement forms a part of the Contract to which it is attached. This
Endorsement applies to a Contract issued under Section 408 of the Internal
Revenue Code. In the case of a conflict with any provision in the Contract or
Rider, the terms of this Endorsement will control. This Endorsement is effective
upon issuance to the Owner and restates in its entirety any prior Individual
Retirement Annuity Endorsement.
SECTION A14, Owner, is amended to read as follows:
Owner: The person named in the Application who has all rights under this
Contract. The Annuitant shall be the Owner of this Contract.
SECTION B12, Assignment, is amended to read:
Non-Assignment: To the extent permitted by law, this Contract and the
benefits or payments under this Contract are not assignable or otherwise
transferrable. This Contract may be assigned for purposes of an Internal
Revenue Code Section 1035 exchange.
SECTION B14, Exclusive Benefit, is added to the Contract:
Exclusive Benefit: This Contract is established for the exclusive benefit of
the Annuitant and Beneficiaries.
SECTION B15, Nonforfeitable, is added to the Contract:
Nonforfeitable: The interest of the Annuitant in this Contract is
nonforfeitable.
SECTION B16, Nontransferable, is added to the Contract:
Nontransferable: This Contract is nontransferable by the Annuitant.
SECTION B17, Life Insurance Contracts, is added to the Contract:
Life Insurance Contracts: No part of the Contract Value will be invested in
life insurance contracts.
SECTION C6, Transfer or Rollover Contributions, is added to the Contract:
Transfer or Rollover Contributions: This Contract shall be used as a funding
medium for an Individual Retirement Annuity. All Purchase Payments must be
in cash and must be transfers from other Contracts or rollover contributions
under Section 402(c), 403(a)(4), 403(b)(8), or 408(d)(3) of the Internal
Revenue Code.
SECTION E5, Death of Annuitant, is deleted.
SECTION E5, Minimum Distribution Rules, is added to the Contract:
Minimum Distribution Rules: All Settlement Options and periodic withdrawals
are subject to and shall distribute the Contract Value pursuant to the
Minimum Distribution Rules in Section 408(a)(6) or Section 408(b)(3) and
Section 401(a)(9) of the Internal Revenue Code, including the minimum
distribution incidental benefit requirement of Section 401(a)(9)(G) of the
Internal Revenue Code and Section 1.401(a)(9)-2 of the Proposed Income Tax
Regulations.
(a) Minimum Distribution Rules:
(i) Required Beginning Date: Minimum Distributions must begin by the
Annuitant's Required Beginning Date, defined as April 1
following the year the Annuitant reaches age 70 1 /2. If the
Annuitant has reached age 70 1 /2 as of the Contract Date, the
Required Beginning Date is no later than the close of the
taxable year following the taxable year during which the
Contract is issued.
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<PAGE> 13
(ii) Minimum Distribution Requirements: The Minimum Distributions
must be in equal or substantially equal amounts, over:
(I) The life of the Annuitant, or the lives of the Annuitant
and the designated Beneficiary; or
(II) A period not extending beyond the life expectancy of the
Annuitant, or the joint and last survivor expectancy of
the Annuitant and the designated Beneficiary.
(iii) Minimum Amounts to be Distributed: If the Annuitant's entire
Contract Value is to be distributed in other than a lump sum,
then the amount to be distributed each year (commencing with the
first calendar year for which distributions are required to
begin and for each calendar year thereafter) must be at least an
amount equal to the quotient obtained by dividing the Contract
Value by the lesser of (1) the applicable life expectancy of the
Annuitant or (2) if the Annuitant's spouse is not the designated
Beneficiary, the applicable divisor determined from the table
set forth in Question and Answer 4 or Question and Answer 5, as
applicable, of Proposed Income Tax Regulation 1.401(a)(9)-2.
Payments must be made in periodic payments of intervals no
longer than one year. In addition, payments must be either
non-increasing or they may increase only as provided in Question
and Answer F-3 of Proposed Income Tax Regulation 1.401(a)(9)-1.
Distributions after the death of the Annuitant shall be
calculated using the applicable life expectancy as the relevant
divisor without regard to Proposed Regulation 1.401(a)(9)-2.
(b) Life Expectancy: The Annuitant and a designated Beneficiary who is the
spouse of a deceased Annuitant may elect whether or not to recalculate
life expectancy. Life expectancy may be recalculated no more
frequently than annually. This election is irrevocable and shall apply
to all subsequent years. It must be made by written notice to SAFECO
at its Home Office no later than the Required Beginning Date. If an
election is not made, life expectancy for the Annuitant and a
designated Beneficiary who is a spouse will be recalculated.
The life expectancy of a non-spouse Beneficiary may not be
recalculated. Life expectancy will be calculated using the attained
age of such Beneficiary during the calendar year in which
distributions are required to begin, and payments for subsequent years
shall be calculated based on such life expectancy reduced by one for
each calendar year which has elapsed since the calendar year life
expectancy was first calculated.
Life expectancy and joint and last survivor expectancy are computed by
use of the expected return multiples contained in Tables V and VI,
Section 1.72-9 of the Income Tax Regulations.
(c) Annuitant's Death Prior to Required Beginning Date: If the Annuitant
dies before distributions are considered to have commenced, the
Contract Value must be distributed according to one of the following
options:
(i) The entire Contract Value remaining must be distributed by
December 31 of the year which contains the fifth anniversary of
the Annuitant's death; or
(ii) Unless the Annuitant or Beneficiary has elected (i), the entire
Contract Value must be distributed over a period not extending
beyond a designated Beneficiary's life or life expectancy in
substantially equal installments.
Under this option a non-spouse Beneficiary must begin
distributions no later than December 31 of the calendar year
immediately following the calendar year of the Annuitant's
death. The Beneficiary may elect at any time to receive greater
payments.
A surviving spouse may elect, no later than the earlier of
December 31 of the calendar year containing the fifth
anniversary of the Annuitant's death or the date distributions
are required to begin, to receive equal or substantially equal
payments over the life or life expectancy of the surviving
spouse commencing at any date prior to the later of (1) December
31 of the calendar year immediately following the calendar year
in which the Annuitant died and (2) December 31 of the calendar
year in which the Annuitant would have attained age 70 1 /2. The
surviving spouse may increase the frequency or amount of such
payments at any time.
- 2 -
<PAGE> 14
A surviving spouse may also elect to treat the Contract as the
spouse's own, and then delay distributions until the 1st of
April following the calendar year in which the spouse reaches
age 70 1 /2 if that date is later than the Annuitant's death or
the date the Annuitant would have reached age 70 1 /2. Such
election is considered made if:
(I) Amounts required to be distributed on the Annuitant's
death have not been distributed from the Contract;
(II) A regular IRA contribution or rollover contribution is
made to the Contract;
(III) A rollover is made from the Contract; or
(IV) The spouse fails to make another election.
(d) Annuitant's Death On or After Required Beginning Date: If the
Annuitant dies on or after the date distributions are considered to
have commenced, payment to the designated Beneficiary must continue at
least as rapidly as the method in effect prior to the Annuitant's
death.
SECTION E7, Death of Owner After Annuity Date, is deleted.
SECTION E14, Commencement of Minimum Distributions, is added to the Contract:
Commencement of Minimum Distributions:
(a) Minimum Distributions will commence no later than April 1 following
the year in which the Annuitant attains age 70 1 /2, unless the
Annuitant sends written notice to SAFECO that the minimum
distributions for this Contract will be taken from another IRA and
requests that distributions not be taken from this Contract.
An individual may satisfy the minimum distribution requirements under
Sections 408(a)(6) and 408(b)(3) of the Internal Revenue Code by
receiving a distribution from one IRA that is equal to the amount
required to satisfy the minimum distribution requirements for two or
more lRAs. For this purpose, the owner of two or more IRAs may use the
"alternative method" described in Notice 88-38,1988-1 C.B. 524, to
satisfy the minimum distribution requirements described above.
(b) If SAFECO has not received written notice prior to March 1 following
the year in which the Annuitant attains age 70 1 /2:
(i) If designated Beneficiary information has been provided to
SAFECO, SAFECO will make the Required Minimum Distributions
based on joint life expectancy with recalculation of life
expectancy under a Systematic Withdrawal program and in
accordance with the Minimum Distribution Rules in Section
401(a)(9) of the Internal Revenue Code.
(ii) If designated Beneficiary information has not been provided to
SAFECO, SAFECO will make the Required Minimum Distributions
based on single life expectancy with recalculation of life
expectancy under a Systematic Withdrawal program and in
accordance with the Minimum Distribution Rules in Section
401(a)(9) of the Internal Revenue Code.
SECTION G5, Taxes, is amended to read as follows:
Taxes: SAFECO reserves the right to deduct premium taxes or other taxes
levied by any governmental entity which SAFECO, in its sole discretion,
determines have resulted from the establishment or maintenance of this
Contract or any portion of this Contract, the receipt by SAFECO of Purchase
Payments, or the commencement of Annuity payments. If SAFECO exercises this
right the Sub-Account from which the taxes will be deducted will be
determined by the hierarchical order of the Sub-Accounts as listed on the
Contract Data Page.
All other terms and conditions of the Contract remain unchanged.
SAFECO LIFE INSURANCE COMPANY
/s/ R.A. Pierson
--------------------------------
R.A. Pierson
Sr. Vice President and Secretary
- 3 -
<PAGE> 1
EXHIBIT 9
December 29, 1995
Board of Directors
SAFECO Life Insurance Company
SAFECO Plaza
Seattle, WA 98185
Gentlemen:
I have acted as counsel to the Company in connection with the filing with the
Securities and Exchange Commission of the Registration Statement on Form N-4 for
the Individual Single Purchase Payment Deferred Variable Annuity Contracts (the
"Contracts") to be issued by the Company and its separate account, SAFECO
Resource Variable Account B. I have made such examination of the law and have
examined such records and documents as in my judgment are necessary or
appropriate to enable me to render the following opinion:
1. SAFECO Life Insurance Company is a validly existing stock life
insurance company of the state of Washington.
2. SAFECO Resource Variable Account B is a separate investment account of
SAFECO Life Insurance Company created and validly existing pursuant to
the Washington insurance laws and regulations thereunder.
3. All of the prescribed corporate procedures for the issuance of the
Contracts have been followed, and, when such Contracts are issued in
accordance with the prospectus contained in the Registration
Statement, all state requirements relating to such Contracts will have
been complied with.
4. Upon the acceptance of the purchase payments made by a prospective
Contract Owner pursuant to a Contract issued in accordance with the
Prospectus contained in the Registration Statement and upon compliance
with applicable law, such Owner will have a legally-issued, fully
paid, non-assessable contractual interest in such Contract.
You may use this letter, or a copy hereof, as an exhibit to the Registration
Statement.
Very truly yours,
/s/ WILLIAM E. CRAWFORD
- -----------------------
William E. Crawford
Counsel
<PAGE> 1
EXHIBIT 10
Consent of Independent Auditors
We consent to the references to our firm under the captions "Schedule of
Accumulation Unit Values and Accumulation Units Outstanding", "General
Information" and "Financial Statements" and to the use of our reports on the
financial statements of SAFECO Resource Variable Account B, dated January 27,
1995, and on the consolidated financial statements of SAFECO Life Insurance
Company and subsidiaries, dated February 10, 1995, in Post-Effective Amendment
No. 3 to the Registration Statement (Form N-4, No. 33-69600) and related
Prospectus of SAFECO Resource Variable Account B dated December 29, 1995.
/s/ ERNST & YOUNG
Seattle, Washington
Date: December 27, 1995
<PAGE> 1
EXHIBIT 14
POWER OF ATTORNEY
SAFECO Life Insurance Company, a Washington Corporation, (the "Company") and
each of its undersigned officers and directors, hereby nominate and appoint Boh
A. Dickey and Richard E. Zunker (with full power to each of them to act alone)
his true and lawful attorney-in-fact and agent, for him and in his name and
place in any and all capacities, to execute and sign all amendments to the
Registration Statements of SAFECO Separate Account C on Form N-4, SAFECO
Separate Account SL on Form S-6, and SAFECO Resource Variable Account B on Form
N-4 (hereinafter the "Separate Accounts") under the Securities Act of 1933 and
the Investment Company Act of 1940, and to file with the Securities and Exchange
Commission and any other regulatory authority having jurisdiction over the offer
and sale of the variable insurance products issued from the Separate Accounts,
such amendments and any supplements thereto, as well as any and all exhibits and
other documents necessary or desirable to such amendment or supplement process,
granting to such attorneys and each of them, full power and authority to do and
perform each and every act necessary and/or appropriate as fully and with all
intents and purposes as the Company itself and the undersigned officers and
directors themselves might or could do.
IN WITNESS WHEREOF, SAFECO LIFE INSURANCE COMPANY has caused this power of
attorney to be executed in its full name and by its President and attested by
its Secretary and the undersigned officers and directors have each executed such
power of attorney, on this 13th day of January, 1995.
SAFECO LIFE INSURANCE COMPANY
By: /s/ RICHARD E. ZUNKER
-----------------------------
Richard E. Zunker, President
ATTEST:
/s/ ROD A. PIERSON
- -------------------------
Rod A. Pierson, Secretary
(Signatures Continue on Next Page)
<PAGE> 2
<TABLE>
<CAPTION>
NAME TITLE
---- -----
<S> <C>
/s/ RICHARD E. ZUNKER Director and President
- -------------------------------------- (Principal Executive Officer)
Richard E. Zunker
/s/ JAMES T. FLYNN Vice President, Controller and
- -------------------------------------- Assistant Secretary
James T. Flynn (Principal Accounting Officer)
/s/ ROD A PIERSON Director, Senior Vice President
- -------------------------------------- and Secretary
Rod A. Pierson
/s/ R.H. EIGSTI Director and Chairman
- --------------------------------------
R. H. Eigsti
/s/ BOH A. DICKEY Director and Executive Vice President
- --------------------------------------
Boh A. Dickey
/s/ DONALD S. CHAPMAN Director
- --------------------------------------
Donald S. Chapman
/s/ DAN D. McLEAN Director
- --------------------------------------
Dan D. McLean
/s/ JAMES W. RUDDY Director
- --------------------------------------
James W. Ruddy
/s/ ROBERT W. SWEGLE Director
- --------------------------------------
Robert W. Swegle
/s/ RONALD SPAULDING Director and Vice President
- --------------------------------------
Ronald Spaulding
</TABLE>
<PAGE> 1
Exhibit 15
December 29, 1995
VIA EDGAR
- ---------
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: REPRESENTATION OF COUNSEL FOR SAFECO LIFE INSURANCE COMPANY
("SAFECO LIFE") AND ITS SAFECO RESOURCE VARIABLE ACCOUNT B
("SEPARATE ACCOUNT") POST-EFFECTIVE AMENDMENT NO. 3, FORM N-4
FILE NOS. 33-69600 AND 811-4716
Commissioners:
SAFECO and its Separate Account believe that the filing of Post-Effective
Amendment No. 3, is consistent with the purposes and requirements for filing
under Rule 485(b) under the Securities Act of 1933 ("1933 Act"). This
representation is based on the fact that the changes included in this
Post-Effective Amendment No. 3, are consistent with the purposes and
requirements described in the adopting release for the changes to Rule 485
(IC-Rel. 20486). In addition, these changes are substantially identical to
those referred to in the attached copy of our July 11, 1995, request for
authority to file under Rule 485(b), which was subsequently granted orally by
the SEC staff.
Based on the above, the filing of Post-Effective Amendment No. 3, is made
pursuant to Rule 485(b) of the 1933 Act to become automatically effective on
December 29, 1995. The undersigned has prepared and reviewed Post-Effective
Amendment No. 3, and it is his opinion that Post-Effective Amendment No. 3,
does not contain disclosures which would render it ineligible to become
effective pursuant to paragraph (b) of Rule 485.
Sincerely,
/S/ WILLIAM E. CRAWFORD
William E. Crawford, Esq.
Counsel
Attachment: July 11, 1995 Request to File Pursuant to Rule 485(b) under the
1933 Act.
<PAGE> 2
[KATTEN MUCHIN & DAVIS LETTERHEAD]
PLEASE RESPOND TO WRITER'S DIRECT DIAL NUMBER
Joan E. Boros (202) 625-3780
JULY 11, 1995
BY HAND DELIVERY
Division of Investment Management
Securities and Exchange Commission
450 5th Street, N. W.
Washington, D.C. 20549
Attn: Brenda D. Sneed, Esq.
RE: REQUEST TO FILE PURSUANT TO RULE 485(b) UNDER THE
SECURITIES ACT OF 1933 (THE "1933 ACT")
Dear Ms. Sneed:
This is to request on behalf of SAFECO Life Insurance Company
("SAFECO") and certain of its separate accounts, as described more fully below,
(the "Separate Accounts") authority to file certain post-effective amendments
pursuant to Rule 485(b) under the 1933 Act ("Rule 485(b)").
SAFECO and its Separate Account C currently have pending for review a
registration statement (Files No. 33-60331 and 811-8052) regarding a new
variable annuity contract (the "New Contract"). The New Contract contains the
following relevant features: (i) a guaranteed death benefit that is readjusted
on each sixth Contract Anniversary, and (ii) certain programs pursuant to which
the Contract Owner may execute transfers and withdrawals on a regularly
scheduled basis, subject to certain limitations (referred to in the prospectus
and herein as the "Programs").
Separate Account C (File No. 69712) and Resource Variable Account B
(Files No. 33-69600 and 811-4716), another registered separate account of SAFECO
("Resource B"), currently offer certain variable annuity contracts (the
"Existing Contracts"). SAFECO and the Separate Accounts are currently preparing
post-effective amendments to the registration statements for the Existing
Contracts (the "Post-Effective Amendments") to add the above described features
to the Existing Contracts. We note that the guaranteed death benefit feature to
be added to the Existing Contracts differs from that of the New Contract only in
that the death benefit is reset each eighth Contract Anniversary.
SAFECO and the Separate Accounts are requesting authority to file the
Post-Effective Amendments pursuant to Rule 485(b) upon receipt of any comment
from the Commission staff with regard to the registration statement for the New
Contract, and the related changes, if any, to the disclosure regarding the added
features.
<PAGE> 3
KATTEN MUCHIN & ZAVIS
July 11, 1995
Page 2
As a point of information only, SAFECO and Separate Account C are also
preparing another registration statement for an additional contract, the
("Additional Contract") which is substantially similar to the New Contract. At
the time of filing that registration statement SAFECO and Separate Account C
will request expedited review based on the Additional Contract's substantial
similarity to the New Contracts.
SAFECO and its Separate Accounts believe that the above request is
consistent with the purposes and requirements as described in the adopting
release for the changes to Rule 485 (IC-Rel. 20486). The changes to be included
in the Post-Effective Amendments are "substantially identical revisions" as
compared to the registration statement for the New Contract that is currently
under review.
SAFECO and its Separate Accounts are most anxious to expedite the
effectiveness of both the Post-Effective Amendments and the registration
statements for the New and Additional Contracts. SAFECO believes that this
request is consistent with assisting the Commission staff in expeditious review
of its filings. In fact, if the subject request is granted and the subsequent
request for expedited review of the registration statement for the Additional
Contract is granted, the Commission staff will have facilitated the clearance of
four registration statements through the review of one such registration
statement.
The prompt reply by your office will assist SAFECO and the undersigned
in planning and scheduling its various filings. Please call the undersigned, if
you have any question or comment.
Very truly yours,
/s/ JOAN E. BOROS
Joan E. Boros
cc: William J. Crawford
