A Message to Variable Life Policyowners
After significant increases in the Stock Markets in
1995, the first half of 1996 witnessed increases which
were more in line with long term historical results.
As of this writing, the Dow Jones Industrial Average
increased approximately 5% in value from the beginning
of the year, even after contending with a correction
of about 7% from its high point. The S&P 500 has
increased since the beginning of 1996 by a smaller
amount of approximately 3%.
While the Stock Markets increased by relatively
small amounts, and are struggling to hold on to these
gains, the yield on the 30 year Treasury Bond
increased fairly significantly from 5.9% at the
beginning of the year, to approximately 7%. Short
term rates, as measured by the 3 month Treasury Bill,
are yielding 5.1% now, which is about the same as the
beginning of the year.
The U.S. Gross Domestic Product for the first
quarter of 1996 increased 2.2% and for the second
quarter the increase is expected to be near 4.0%.
Inflation remains low with the Consumer Price Index
running at 2.8% this year after last year's 2.5%.
David H. Roe, President
The Stock Account. At June 30, 1996, the assets were allocated 99%
to 58 different stock positions with the remainder in a high quality
money market fund. Our emphasis within the stock portfolio continues to
be in issues which we believe will perform well in the current
environment and tend to hold their values during market weakness.
The Money Market Account. On June 30, 1996, this portfolio held 23
different issues of the highest quality commercial paper with maturities
ranging from 2 to 87 days.
The Investment Grade Bond Account. Bonds represented 97% of
investable funds on June 30, with the remainder in a high quality money
market fund. The portfolio was comprised of 21 bond issues, with
maturities ranging from 4 years to 30 years.
The Asset Allocation Account. At June 30, assets were allocated 51%
to common stocks, 46% to bonds with the remainder in a high quality
money market fund. There were 57 different common stock issues in the
portfolio and 46 different bond positions.
The Outlook. For the balance of 1996, we expect solid economic
growth and continuing moderate inflation with interest rates remaining
near current levels. At the time of this report, macroeconomic
indicators are showing mixed signs. While the expansion is slowing,
business profits are expected to continue to improve, albeit at a slower
rate than in 1995.
Respectfully,
David H. Roe
President
ReliaStar Bankers Security Life Insurance Company
<PAGE>
<TABLE>
United Services Variable Life Separate Account I
Statement of Assets and Liabilities
June 30, 1996
(Unaudited)
Sub-accounts
Common Money Asset Total
Stock Market Bond Allocation Sub-accounts
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Assets:
Investments in USLICO Series
Fund Portfolios (see below) $ 10,985,117 $ 875,464 $ 1,495,505 $ 8,465,084 $ 21,821,170
Policy loans 908,179 34,351 49,982 881,556 1,874,068
------------ ------------ ------------ ------------ ------------
Total assets 11,893,296 909,815 1,545,487 9,346,640 23,695,238
------------ ------------ ------------ ------------ ------------
Liabilities:
Net accrued for policy related
transactions due to (from) USL 298,052 17,554 (20,394) 259,689 554,901
Amounts payable to USL 500,000 500,000 1,000,000 1,000,000 3,000,000
------------ ------------ ------------ ------------ ------------
Total liabilities 798,052 517,554 979,606 1,259,689 3,554,901
------------ ------------ ------------ ------------ ------------
Net assets - for variable life
insurance policies $ 11,095,244 $ 392,261 $ 565,881 $ 8,086,951 $ 20,140,337
============ ============ ============ ============ ============
Investments basis data:
Shares Owned 801,434 875,464 153,041 706,897
Cost $ 8,956,402 $ 875,464 $ 1,541,692 $ 7,622,075
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
United Services Variable Life Separate Account I
Statement of Operations and Changes in Net Assets
For the Six Months Ended June 30, 1996
(Unaudited)
Sub-accounts
Common Money Asset Total
Stock Market Bond Allocation Sub-accounts
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Investment income:
Income:
Reinvested dividends $ 137,897 $ 20,454 $ 54,071 $ 189,245 $ 401,667
Expenses:
Mortality and expense risk charges 26,465 2,146 4,213 21,335 54,159
------------ ------------ ------------ ------------ ------------
Net investment income 111,432 18,308 49,858 167,910 347,508
Net unrealized gains (losses) on investments 846,043 - (97,334) 80,574 829,283
Net realized gains (losses) on investments 24,719 - (2,780) 31,574 53,513
------------ ------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations 982,194 18,308 (50,256) 280,058 1,230,304
From policy related transactions:
Transfers in for net premiums 1,073,826 41,710 56,371 741,442 1,913,349
Transfers between sub-accounts 37,299 21,540 (5,283) (53,556) -
Transfers for withdrawal/surrender (550,880) (18,814) (21,982) (288,151) (879,827)
Transfer of investment and operating
results from (to) United Services (336,925) (20,676) 19,130 (230,607) (569,078)
------------ ------------ ------------ ------------ ------------
Net increase (decrease) in net assets 1,205,514 42,068 (2,020) 449,186 1,694,748
Net assets, beginning of period 9,889,730 350,193 567,901 7,637,765 18,445,589
------------ ------------ ------------ ------------ ------------
Net assets, end of period $ 11,095,244 $ 392,261 $ 565,881 $ 8,086,951 $ 20,140,337
============ ============ ============ ============ ============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
United Services Variable Life Separate Account I
Statement of Operations and Changes in Net Assets
For the Six Months Ended June 30, 1995
(Unaudited)
Sub-accounts
Common Money Asset Total
Stock Market Bond Allocation Sub-accounts
----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Investment income:
Income:
Reinvested dividends $ 123,893 $ 22,467 $ 50,171 $ 175,835 $ 372,366
Expenses:
Mortality and expense risk charges 19,027 2,009 3,654 17,229 41,919
----------- ----------- ----------- ----------- ------------
Net investment income 104,866 20,458 46,517 158,606 330,447
Net unrealized gains on investments 1,077,416 - 110,033 759,707 1,947,156
----------- ----------- ----------- ----------- ------------
Net increase in net assets
resulting from operations 1,182,282 20,458 156,550 918,313 2,277,603
From policy related transactions:
Transfers in for net premiums 1,183,719 53,557 63,158 791,710 2,092,144
Transfers between sub-accounts 33,027 10,405 (4,384) (39,048) -
Transfers for withdrawal/surrender (370,917) (13,216) (20,150) (206,157) (610,440)
Transfer of investment and operating
results to United Services (337,943) (21,666) (125,448) (357,972) (843,029)
----------- ----------- ----------- ----------- ------------
Net increase in net assets 1,690,168 49,538 69,726 1,106,846 2,916,278
Net assets, beginning of period 6,550,817 289,768 443,554 5,582,152 12,866,291
----------- ----------- ----------- ----------- ------------
Net assets, end of period $ 8,240,985 $ 339,306 $ 513,280 $ 6,688,998 $ 15,782,569
=========== =========== =========== =========== ============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
United Services Variable Life Separate Account I
Statement of Operations and Changes in Net Assets
For the Six Months Ended June 30, 1994
(Unaudited)
Sub-accounts
Common Money Asset Total
Stock Market Bond Allocation Sub-accounts
----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Investment income:
Income:
Reinvested dividends $ 73,475 $ 10,897 $ 43,198 $ 133,030 $ 260,600
Expenses:
Mortality and expense risk charges 11,909 1,913 3,419 13,547 30,788
----------- ----------- ----------- ----------- ------------
Net investment income 61,566 8,984 39,779 119,483 229,812
Net unrealized losses on investments (132,495) - (87,624) (285,220) (505,339)
----------- ----------- ----------- ----------- ------------
Net increase(decrease) in net assets
resulting from operations (70,929) 8,984 (47,845) (165,737) (275,527)
From policy related transactions:
Transfers in for net premiums 1,128,166 37,594 79,164 851,580 2,096,504
Transfers between sub-accounts 11,767 (850) (423) (10,494) -
Transfers for withdrawal/surrender (277,574) (19,546) (14,476) (148,767) (460,363)
Transfer of investment and operating
results from(to) United Services (242,711) (14,445) 21,975 (182,370) (417,551)
----------- ----------- ----------- ----------- ------------
Net increase in net assets 548,719 11,737 38,395 344,212 943,063
Net assets, beginning of period 4,753,797 245,691 353,802 4,717,335 10,070,625
----------- ----------- ----------- ----------- ------------
Net assets, end of period $ 5,302,516 $ 257,428 $ 392,197 $ 5,061,547 $ 11,013,688
=========== =========== =========== =========== ============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
United Services Variable Life Separate Account I - Notes to Financial
Statements - June 30, 1996
(1) Organization - United Services Variable Life Separate Account I
("Separate Account I") was established by United Services Life Insurance
Company ("United Services") in 1986 under the insurance laws of the
Commonwealth of Virginia. Separate Account I operates as a unit
investment trust under the Investment Company Act of 1940 and is used to
fund certain benefits for variable life insurance policies issued by
United Services. The assets of Separate Account I and its sub-accounts
are the property of United Services. The portion of Separate Account I
assets applicable to the variable life policies will not be charged with
liabilities arising out of any other business United Services may
conduct. The net assets maintained in the sub-accounts provide the
basis for the periodic determination of the amount of increased or
decreased benefits under the policies. The net assets may not be less
than the amount required under the state insurance law to provide for
death benefits (without regard to the minimum death benefit guarantee)
and other policy benefits. Additional assets are held in United
Services' general account to cover the contingency that the guaranteed
minimum death benefit might exceed the death benefit which would have
been payable in the absence of such guarantee.
On January 17, 1995, United Services became an indirect wholly-owned
subsidiary of ReliaStar Financial Corp. ("ReliaStar"), previously The
NWNL Companies, Inc., an insurance holding company based in Minneapolis,
Minnesota. Prior to that time United Services was a wholly-owned
subsidiary of USLICO Corporation. USLICO Series Fund ("Series Fund") is
an open-end diversified management investment company whose shares are
sold only to United Services and other affiliates separate accounts.
(2) Summary of Significant Accounting Policies
(a) Valuation of Investments - Investments in shares of the Series
Fund are valued at the reported net asset value of the respective
portfolios. The aggregate cost of the investments acquired and the
aggregate proceeds of investments sold, for the six months ended June
30, 1996, were:
Cost of Shares Proceeds from
Sub-account Acquired Shares Sold
----------- -------------- -------------
Common Stock $ 137,896 $ 130,712
Money Market 20,454 945
Bond 54,071 187,920
Asset Allocation 189,245 279,918
------- -------
Total $ 401,666 $ 599,495
(b) Security Transactions - Purchases and sales are recorded on the
trade date.
(c) Federal Income Taxes - United Services is taxed as a life
insurance company under the Internal Revenue Code of 1986, as amended
(the "Code"). Since the sub-accounts are not separate entities from
United Services, and their operations form a part of United Services,
they will not be taxed separately as a "regulated investment company"
under Sub-chapter M of the Code. Under existing Federal income tax law,
investment income of the sub-accounts, to the extent that it is applied
to increase reserves under a contract, is not taxed and may be
compounded for reinvestment without additional tax to United Services.
(d) Charges Deducted from Premiums - Transfers to the sub-accounts of
Separate Account I for net premiums represent gross premiums payable for
a policy year, less deductions for sales loads, administrative expenses,
premium taxes, risk charges and additional premiums, if any, for
optional insurance benefits.
(e) Amounts Payable to United Services - The amounts payable to
United Services in each sub-account arises from the amount allocated
from United Services to facilitate commencement of operations.
(f) Dividends - Dividends received on the shares held by the sub-
accounts of Separate Account I are reinvested to purchase additional
shares of the applicable portfolio of the Series Fund.
(g) Transfer of Investment and Operating Results from(to) United
Services - The sub-accounts transfer their investment and operating
results in excess of amounts required to meet policyholder reserve and
liability amounts to United Services. When investment and operating
results are insufficient to meet reserve requirements, United Services
transfers to the sub-accounts amounts sufficient to fund the deficiency.
Also included in this transfer are cost of insurance charges totaling
$525,900 for all sub-accounts for the six months ended June 30, 1996.
(3) Administration and Related Party Transactions - A daily charge is
made by United Services against each sub-account's investments for
mortality and expense risks at an effective annual rate of .50%. The
mortality risk assumed is that insureds may live for a shorter period of
time than estimated and, therefore, a greater amount of death benefits
than expected will be payable in relation to the amount of premiums
received. The expense risk assumed is that expenses incurred in issuing
and administering the policies will be greater than estimated. Other
costs of administering Separate Account I are absorbed by United
Services.
ReliaStar Financial Marketing Corporation, a direct wholly-owned
ReliaStar subsidiary, previously known as USLICO Securities Corporation,
acts as principal underwriter (as defined in the Investment Company Act
of 1940) of Separate Account I's policies. Washington Square Advisers,
Inc., previously known as Washington Square Capital, Inc., also a direct
wholly-owned ReliaStar subsidiary, serves as investment adviser to the
Series Fund with respect to short-term and fixed maturity securities.
Newbold's Asset Management, Inc. serves as investment sub-adviser to the
Series Fund with respect to equity securities.
Certain officers and directors of ReliaStar and United Services are
also officers and directors of ReliaStar Financial Marketing
Corporation, the Series Fund and Washington Square Advisers, Inc.
