A MESSAGE TO VARIABLE LIFE POLICYOWNERS
The Stock Markets witnessed significant increases
during 1995, with the S&P 500 achieving a total return of
37.6% for the year, compared to a total return of
1.2% for 1994. At the same time long term interest
rates have significantly declined since the beginning of
the year. At December 31, 1994, the 30 year treasury
bond yielded 7.9%, compared to a yield of 5.9% at
December 31, 1995.
Short term rates are somewhat lower than a year ago,
with the 3 month Treasury Bill ending the year at 5.1%
compared to 5.7% at the beginning of the year.
The U.S. Gross Domestic Product for 1995 increased by
nearly 3%. Inflation remained low with the Consumer
Price Index increasing by approximately 2.6% this year, a
slight reduction from 1994.
THE STOCK ACCOUNT. At December 31, 1995, the assets were
allocated 97% to 70 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 December 31, 1995, this
portfolio held 25 different issues of the highest quality
commercial paper with maturities ranging from 1 to 33
days.
THE INVESTMENT GRADE BOND ACCOUNT. Bonds represented 97%
of investable funds on December 31, with the remainder in
a high quality money market fund. The portfolio was
comprised of 21 bond issues, with maturities ranging from
3 years to 25 years.
THE ASSET ALLOCATION ACCOUNT. At December 31, assets were
allocated 49% to common stocks, 48% to bonds with the
remainder in a high quality money market fund. There were
69 different common stock issues in the portfolio and 44
different bond positions.
THE OUTLOOK. For 1996, we expect moderate economic growth
and continuing low 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.
Beginning on page 8, there appears a report of the USLICO
Series Fund whose portfolios support the separate account
assets. Total return charts for the Fund's Portfolios are
presented at page 8, 9 and 10.
Respectfully,
David H. Roe
President
United Services Life Insurance Company
<PAGE>
<TABLE>
United Services Variable Life Separate Account I
Statement of Assets and Liabilities
December 31, 1995
Sub-accounts
Common Money Asset Total
Stock Market Bond Allocation Sub-accounts
------------- ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
Assets:
Investments:
USLICO Series Fund-Common Stock Portfolio
(800,814 shares; cost $8,924,499) $ 10,107,171 $ 10,107,171
USLICO Series Fund-Money Market Portfolio
(855,955 shares; cost $855,955) $ 855,955 855,955
USLICO Series Fund-Bond Portfolio
(166,597 shares; cost $1,678,321) $ 1,729,468 1,729,468
USLICO Series Fund-Asset Allocation Portfolio
(714,335 shares; cost $7,681,174) $ 8,443,609 8,443,609
Policy loans 779,211 32,952 48,486 763,555 1,624,204
------------- ----------- ----------- ------------- -------------
Total assets 10,886,382 888,907 1,777,954 9,207,164 22,760,407
------------- ----------- ----------- ------------- -------------
Liabilities:
Net accrued for policy related transactions payable
to United Services 496,652 38,714 210,053 569,399 1,314,818
Amounts payable to United Services 500,000 500,000 1,000,000 1,000,000 3,000,000
------------- ----------- ----------- ------------- -------------
Total liabilities 996,652 538,714 1,210,053 1,569,399 4,314,818
------------- ----------- ----------- ------------- -------------
Net assets - for variable life
insurance policies $ 9,889,730 $ 350,193 $ 567,901 $ 7,637,765 $ 18,445,589
============= =========== =========== ============= =============
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 Year Ended December 31, 1995
Sub-accounts
Common Money Asset Total
Stock Market Bond Allocation Sub-accounts
------------ ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Investment income:
Income:
Reinvested dividends $ 773,916 $ 44,333 $ 113,147 $ 601,962 $ 1,533,358
Expenses:
Mortality and expense risk charges 42,408 4,107 7,774 37,042 91,331
------------ ----------- ----------- ------------ ------------
Net investment income 731,508 40,226 105,373 564,920 1,442,027
Net unrealized gains on investments 1,525,750 - 143,843 1,041,894 2,711,487
------------ ----------- ----------- ------------ ------------
Net increase in net assets
resulting from operations 2,257,258 40,226 249,216 1,606,814 4,153,514
From policy related transactions:
Transfers in for net premiums 2,416,679 80,799 134,182 1,611,417 4,243,077
Transfers between sub-accounts 45,432 765 (4,381) (41,816) -
Transfers for withdrawal/surrender (673,087) (18,794) (50,148) (456,120) (1,198,149)
Transfer of investment and operating
results to United Services (707,369) (42,571) (204,522) (664,682) (1,619,144)
------------ ----------- ----------- ------------ ------------
Net increase in net assets 3,338,913 60,425 124,347 2,055,613 5,579,298
Net assets, beginning of year 6,550,817 289,768 443,554 5,582,152 12,866,291
------------ ----------- ----------- ------------ ------------
Net assets, end of year $ 9,889,730 $ 350,193 $ 567,901 $ 7,637,765 $ 18,445,589
============ =========== =========== ============ ============
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 Year Ended December 31, 1994
Sub-accounts
Common Money Asset Total
Stock Market Bond Allocation Sub-accounts
------------ ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Investment income:
Income:
Reinvested dividends $ 647,551 $ 27,856 $ 96,078 $ 508,504 $ 1,279,989
Expenses:
Mortality and expense risk charges 27,595 3,905 6,811 29,072 67,383
------------ ----------- ----------- ------------ ------------
Net investment income 619,956 23,951 89,267 479,432 1,212,606
Net unrealized losses on investments (567,185) - (148,552) (613,343) (1,329,080)
Net realized losses on investments - - (1,102) - (1,102)
------------ ----------- ----------- ------------ ------------
Net increase(decrease) in net assets
resulting from operations 52,771 23,951 (60,387) (133,911) (117,576)
From policy related transactions:
Transfers in for net premiums 2,726,193 81,620 179,120 1,807,099 4,794,032
Transfers between sub-accounts 35,026 (2,071) (7,924) (25,031) -
Transfers for withdrawal/surrender (500,524) (25,040) (33,843) (383,399) (942,806)
Transfer of investment and operating
results from(to) United Services (516,446) (34,383) 12,786 (399,941) (937,984)
------------ ----------- ----------- ------------ ------------
Net increase in net assets 1,797,020 44,077 89,752 864,817 2,795,666
Net assets, beginning of year 4,753,797 245,691 353,802 4,717,335 10,070,625
------------ ----------- ----------- ------------ ------------
Net assets, end of year $ 6,550,817 $ 289,768 $ 443,554 $ 5,582,152 $ 12,866,291
============ =========== =========== ============ ============
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 Year Ended December 31, 1993
Sub-accounts
Common Money Asset Total
Stock Market Bond Allocation Sub-accounts
------------ ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Investment income:
Income:
Reinvested dividends $ 127,667 $ 18,354 $ 103,528 $ 278,210 $ 527,759
Expenses:
Mortality and expense risk charges 21,233 3,774 6,821 25,541 57,369
------------ ----------- ----------- ------------ ------------
Net investment income 106,434 14,580 96,707 252,669 470,390
Net unrealized gains on investments 299,192 - 28,917 232,839 560,948
Net realized gains on investments - - 2,916 3,487 6,403
------------ ----------- ----------- ------------ ------------
Net increase in net assets resulting
from operations 405,626 14,580 128,540 488,995 1,037,741
From policy related transactions:
Transfers in for net premiums 2,093,461 71,064 152,394 1,667,074 3,983,993
Transfers between sub-accounts (4,548) (18,579) 2,196 20,931 -
Transfers for withdrawal/surrender (307,800) (27,585) (40,819) (421,276) (797,480)
Transfer of investment and operating
results to United Services (511,619) (30,486) (145,856) (557,075) (1,245,036)
------------ ----------- ----------- ------------ ------------
Net increase in net assets 1,675,120 8,994 96,455 1,198,649 2,979,218
Net assets, beginning of year 3,078,677 236,697 257,347 3,518,686 7,091,407
------------ ----------- ----------- ------------ ------------
Net assets, end of year $ 4,753,797 $ 245,691 $ 353,802 $ 4,717,335 $ 10,070,625
============ =========== =========== ============ ============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
UNITED SERVICES VARIABLE LIFE SEPARATE ACCOUNT I - NOTES TO FINANCIAL
STATEMENTS - DECEMBER 31, 1995
(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 year ended December 31,
1995, were:
Cost of Shares Proceeds from
Sub-account Acquired Shares Sold
Common Stock $ 1,538,856 $ -
Money Market 59,579 -
Bond 195,930 -
Asset Allocation 933,967 -
--------- --------
Total $ 2,728,332 $ -
(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 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. Also included in this transfer are cost of
insurance charges totalling $963,600 for all sub-accounts for 1995.
(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.
USLICO Securities Corporation ("USLICO Securities") acts as principal
underwriter (as defined in the Investment Company Act of 1940) of
Separate Account I's policies. In conjunction with the merger noted
above, USLICO Securities became a wholly-owned subsidiary of Washington
Square Securities, Inc. which is wholly-owned by ReliaStar. On April 1,
1995, Bankers Centennial Management Corp. ("BCMC") was replaced as
investment advisor to the Series Fund by Washington Square Capital,
Inc., an indirect wholly-owned ReliaStar subsidiary. Newbold's Asset
Management, Inc. continues to serve as investment advisor-equity
holdings to the Series Fund in the same capacity as before the merger.
Certain officers and directors of ReliaStar and United Services are also
officers and directors of USLICO Securities, the Series Fund and
Washington Square Capital, Inc.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To United Services Life Insurance Company
and United Services Variable Life Separate Account I Policyowners:
We have audited the accompanying statement of assets and liabilities of
United Services Variable Life Separate Account I as of December 31,
1995, and the related statement of operations and changes in net assets
for the year then ended. These financial statements are the
responsibility of the management of United Services Life Insurance
Company. Our responsibility is to express an opinion on these financial
statements based on our audits. The statements of operations and
changes in net assets for the years ended December 31, 1994 and 1993
were audited by other auditors whose report dated February 2, 1995
expressed an unqualified opinion on those statements.
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 financial position of the United
Services Variable Life Separate Account I as of December 31, 1995, and
the results of its operations and changes in net assets for the year
then ended, in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Minneapolis, MN
January 26, 1996
