A Message to Variable Life Policyowners
We are now in the third year of significant increases in the U.S. Stock
Markets, as measured by the Dow Jones Industrial Average and the Standard &
Poor's 500 Index. Propelled by a second quarter increase of 17.1%, the Dow's
increase for the six months ended June 30, 1997 was 20.1%. The S&P increased
17.5% in the first quarter, and 20.6% for the first half of 1997. Both the
Dow Jones Industrial Average and the S&P 500 are unmanaged indices.
The yield on the 30 year Treasury Bond has decreased recently, so that at the
middle of July, 1997 it was approximately 6.5%. Short term rates, as measured
by the 3 month Treasury Bill, are approximately 5%, which is slightly lower
than a year ago.
The U.S. Gross Domestic Product for the second quarter of 1997 increased
approximately 2.2% while inflation remains low with the Consumer Price Index
increasing by 2.3% year-over-year on June 30, 1997.
The Variable Life Insurance Policies which are the subject of this report are
distributed by Washington Square Securities, Inc. ("WSSI"), 20 Washington
Avenue South, Minneapolis, Minnesota 55401, (612) 372-5507. WSSI, a
registered broker-dealer, is an affiliated company of ReliaStar United
Services Life Insurance Company, the issuer of your insurance policy.
The Stock Account. At June 30, 1997, the invested assets were allocated 96.0%
to 56 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, 1997, this portfolio held 20 different
issues of the highest quality commercial paper with maturities ranging from 1
week to 2 months.
The Investment Grade Bond Account. Bonds represented 84.9% of the investable
funds on June 30, 1997 with the remainder in a high quality money market fund.
The portfolio was comprised of 22 bond issues, with scheduled maturities
ranging from 15 months to 52 years.
The Asset Allocation Account. At June 30, 1997 invested assets were allocated
52.2% to common stocks. 42.0% to bonds with the remainder in a high quality
money market fund. There were 56 different common stock issues in the
portfolio and 46 different bond positions.
The Outlook. For the balance of 1997, we expect economic growth to continue
near the trend rate 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 business expansion has been
underway for almost 7 years, it is likely to be sustained throughout 1997.
Nevertheless, profits are expected to grow albeit at a slower rate than in
the past few years.
ReliaStar United Services is part of a group of companies owned by ReliaStar
Financial Corp.
Respectfully,
James G. Cochran
Executive Vice President & Chief Operating Officer
ReliaStar United Services Life Insurance Company
<PAGE>
<TABLE>
ReliaStar United Services Variable Life Separate Account I
Statement of Assets and Liabilities
June 30, 1997
(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) $ 13,687,502 $ 905,418 $ 1,599,073 $ 9,713,815 $ 25,905,808
Policy loans 1,428,149 35,954 77,757 1,080,070 2,621,930
------------ ------------ ------------ ------------ ------------
Total assets 15,115,651 941,372 1,676,830 10,793,885 28,527,738
------------ ------------ ------------ ------------ ------------
Liabilities:
Net accrued for policy related
transactions due to ReliaStar United Serv 173,062 9,056 28,825 260,475 471,418
Amounts payable to ReliaStar United Services 500,000 500,000 1,000,000 1,000,000 3,000,000
------------ ------------ ------------ ------------ ------------
Total liabilities 673,062 509,056 1,028,825 1,260,475 3,471,418
------------ ------------ ------------ ------------ ------------
Net assets - for variable life
insurance policies $ 14,442,589 $ 432,316 $ 648,005 $ 9,533,410 $ 25,056,320
============ ============ ============ ============ ============
Investments basis data:
Shares Owned 918,700 905,418 160,700 772,894
Cost $ 10,719,090 $ 905,418 $ 1,619,076 $ 8,484,214
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
ReliaStar United Services Variable Life Separate Account I
Statement of Operations and Changes in Net Assets
For the Six Months Ended June 30, 1997
(Unaudited)
Sub-accounts
Common Money Asset Total
Stock Market Bond Allocation Sub-accounts
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Investment income:
Income:
Reinvested dividends $ 118,871 $ 21,165 $ 48,469 $ 179,051 $ 367,556
Expenses:
Mortality and expense risk charges 31,095 2,222 3,879 22,867 60,063
------------ ------------ ------------ ------------ ------------
Net investment income 87,776 18,943 44,590 156,184 307,493
Net unrealized gains (losses) on investments 1,491,367 - (12,339) 530,229 2,009,257
Net realized gains (losses) on investments 9,412 - (471) 14,725 23,666
------------ ------------ ------------ ------------ ------------
Net increase in net assets resulting
from operations 1,588,555 18,943 31,780 701,138 2,340,416
From policy related transactions:
Transfers in for net premiums 1,017,483 40,269 51,153 664,450 1,773,355
Transfers between sub-accounts 10,113 2,567 (952) (11,728) -
Transfers for withdrawal/surrender (501,733) (9,067) (11,800) (428,291) (950,891)
Transfer of investment and operating
results to ReliaStar United Services (306,576) (19,056) (37,563) (267,258) (630,453)
------------ ------------ ------------ ------------ ------------
Net increase in net assets 1,807,842 33,656 32,618 658,311 2,532,427
Net assets, beginning of period 12,634,747 398,660 615,387 8,875,099 22,523,893
------------ ------------ ------------ ------------ ------------
Net assets, end of period $ 14,442,589 $ 432,316 $ 648,005 $ 9,533,410 $ 25,056,320
============ ============ ============ ============ ============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
ReliaStar 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) ReliaStar 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
============ ============ ============ ============ ============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
ReliaStar 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 ReliaStar 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
=========== =========== =========== =========== ============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
ReliaStar United Services Variable Life Separate Account I - Notes to Financial
Statements - June 30, 1997
(1) Organization - ReliaStar United Services Variable Life Separate Account I
("Separate Account I") was established by ReliaStar United Services Life
Insurance Company ("ReliaStar United Services"), previously United Services
Life Insurance Company, 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 ReliaStar United Services. The
assets of Separate Account I and its sub-accounts are the property of
ReliaStar 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 ReliaStar 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 ReliaStar 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.
In January 1995, ReliaStar United Services became an indirect wholly-owned
subsidiary of ReliaStar Financial Corp. ("ReliaStar"), a financial services
company based in Minneapolis, Minnesota. Prior to that time ReliaStar 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 ReliaStar 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, 1997, were:
Cost of Shares Proceeds from
Sub-account Acquired Shares Sold
----------- -------------- -------------
Common Stock $ 118,871 $ 63,819
Money Market 21,165 12,497
Bond 48,469 20,496
Asset Allocation 179,051 177,518
------- -------
Total $ 367,556 $ 274,330
(b) Security Transactions - Purchases and sales are recorded on the trade
date.
(c) Federal Income Taxes - ReliaStar 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 ReliaStar United
Services, and their operations form a part of ReliaStar 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 ReliaStar 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 ReliaStar United Services - The amounts payable to
ReliaStar United Services in each sub-account arises from the amount allocated
from ReliaStar 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) ReliaStar United
Services - The sub-accounts transfer their investment and operating results
in excess of amounts required to meet policyholder reserve and liability amounts
to ReliaStar United Services. When investment and operating results are
insufficient to meet reserve requirements, ReliaStar United Services transfers
to the sub-accounts amounts sufficient to fund the deficiency. Also included in
this transfer are cost of insurance charges totaling $507,200, $525,900 and
$465,100 for all sub-accounts for the six months ended June 30, 1997, 1996
and 1995, respectively.
(3) Administration and Related Party Transactions - A daily charge is made by
Reliastar 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 the insured 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 ReliaStar United Services.
Washington Square Securities, Inc., a direct wholly-owned ReliaStar subsidiary,
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 ReliaStar United Services are
also officers and directors of Washington Square Securities, Inc., the Series
Fund and Washington Square Advisers, Inc.
