<PAGE>
REGISTRATION NO. 333-30329
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
POST-EFFECTIVE AMENDMENT NO. 19
TO
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUST
REGISTERED ON FORM N-8B-2
A. Exact name of Trust: Separate Account SL
B. Name of depositor: SAFECO Life Insurance Company
C. Complete address of depositor's principal executive offices:
5069 154th Place N.E.
Redmond, WA 98052
D. Name and address of agent for service:
William E. Crawford, Esq.
SAFECO Life Insurance Company
5069 154th Place N.E.
Redmond, Washington 98052
E. Title and amount of securities being registered:
Individual Flexible Premium Variable Life Insurance Policies
Approximate Date of Proposed Public Offering:
As soon as is possible after Effective Date.
It is proposed that this filing will become effective (check
appropriate box):
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485.
[X] on April 28, 2000 pursuant to paragraph (b) of Rule 485.
[ ] 60 days after filing pursuant to paragraph (a)(i) of Rule 485.
[ ] on (date) pursuant to paragraph (a)(i) of Rule 485.
[ ] 75 days after filing pursuant to paragraph (a)(i)
[ ] on (date) pursuant to paragraph (a)(i) of Rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective
date for a previously filed post-effective amendment.
Registrant has registered an indefinite amount of securities
under the Securities Act of 1933 pursuant to Rule 24f-2.
Registrant filed the Rule 24f-2 Notice for the most recent
fiscal year on or about March 7, 2000.
<PAGE>
CROSS REFERENCE TO ITEMS REQUIRED
BY FORM N-8B-2
N-8B-2 Items Caption in Prospectus
------------ ---------------------
1. SAFECO, The Separate Account
2. SAFECO
3. Not Applicable
4. Distribution of the Policies
5. The Separate Account
6.(a) Not Applicable
6.(b) Not Applicable
9. Legal Proceedings
10. The Policy
11. Variable Insurance Products Funds
12. Variable Insurance Products Funds
13. Charges and Deductions
14. The Policy
15. The Separate Account
16. Variable Insurance Products Funds
17. Policy Benefits and Rights
18. The Policy
19. Not Applicable
20. Not Applicable
21. Not Applicable
22. Not Applicable
23. Not Applicable
24. Not Applicable
25. SAFECO
26. SAFECO
27. SAFECO
28. SAFECO
29. SAFECO
30. SAFECO
31. Not Applicable
32. Not Applicable
33. Not Applicable
34. Not Applicable
35. Not Applicable
36. SAFECO
37. Not Applicable
38. Distribution of the Policies
39. Distribution of the Policies
40. Not Applicable
41.(a) Distribution of the Policies
42. Not Applicable
43. Not Applicable
44. The Policy
45. Not Applicable
46. Policy Benefits and Rights
47. Not Applicable
48. Not Applicable
49. Not Applicable
50. Not Applicable
51. SAFECO, The Policy
52. Variable Insurance Products Funds
53. Tax Status
54. Financial Statements
55. Not Applicable
<PAGE>
REPRESENTATIONS
1. Registrant represents that Section (b)(13)(iii)(F) of Rule 6e-3(T) is
being relied on.
2. Registrant represents that the level of the risk charge is reasonable in
relation to the risks assumed by the life insurer under the Policies.
3. Registrant represents that it has analyzed the risk charge taking into
consideration such facts as current charge levels, potential adverse
mortality, the manner in which charges are imposed, the markets in which
the Policy will be offered and anticipated sales and lapse rates.
Registrant also represents that a memorandum has been prepared in
connection with the analysis of the risk charge as set forth above.
Registrant undertakes to keep and make available to the Commission on
request the memorandum.
4. Registrant represents that the Company has concluded that there is a
reasonable likelihood that the distribution financing arrangement of the
Separate Account will benefit the Separate Account and policyholders and
will keep and make available to the Commission on request a memorandum
setting forth the basis for this representation.
5. Registrant represents that the Separate Account will invest only in
management investment companies which have undertaken to have a Board of
Directors, a majority of whom are not interested persons of the Company,
formulate and approve any plan under Rule 12b-1 to finance distribution
expenses.
<PAGE>
PREMIER
ACCUMULATION LIFE-REGISTERED TRADEMARK-
INDIVIDUAL FLEXIBLE
PREMIUM VARIABLE LIFE
INSURANCE POLICY
issued by
SAFECO SEPARATE
ACCOUNT SL
and
SAFECO LIFE INSURANCE
COMPANY
This prospectus describes the PREMIER Accumulation Life Individual Flexible
Premium Variable Life Insurance Policy and contains important information.
Please read it before investing and keep it on file for future reference.
This prospectus is not valid unless given with current prospectuses for the
portfolios available under the policy. This prospectus does not constitute an
offering in any jurisdiction in which the contract may not lawfully be sold.
This prospectus has been filed with the Securities and Exchange Commission
(SEC). The SEC maintains a website (http:\\www.sec.gov) that contains material
incorporated by reference, and other information regarding registrants that file
electronically with the SEC. Copies of the complete registration and other
documents are available for review at the SEC Public Reference Room located at
SEC Headquarters Office, 450 5th Street NW, Room 1024, Washington DC 20549.
(202) 942-8090
You may request a free paper copy of this prospectus if you have received it in
an electronic format, by calling us at
1-877-472-3326 or writing us at:
PO Box 34690 Seattle, WA 98124-1690.
Dated: May 1, 2000
SAFECO RESOURCE SERIES TRUST
Managed by SAFECO Asset Management Company
- RST Equity Portfolio
- RST Growth Opportunities Portfolio
- RST Northwest Portfolio
- RST Bond Portfolio
- RST Small Company Value Portfolio
AIM VARIABLE INSURANCE FUNDS, INC.
Managed by AIM Management Group
- AIM V.I. Aggressive Growth Fund
- AIM V.I. Growth Fund
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
Managed by American Century Investment Management, Inc.
- VP Balanced
- VP International
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.
Managed by the Dreyfus Corporation
- The Dreyfus Socially Responsible Growth Fund, Inc.
DREYFUS INVESTMENT PORFOLIOS ("DREYFUS IP")
Managed by the Dreyfus Corporation
- Dreyfus IP MidCap Stock Portfolio
- Dreyfus IP Technology Growth Portfolio
DREYFUS VARIABLE INVESTMENT FUND ("DREYFUS VIF")
Managed by the Dreyfus Corporation
- Dreyfus VIF Appreciation Portfolio
- Dreyfus VIF Quality Bond Portfolio
FEDERATED INSURANCE SERIES
Managed by Federated Investment Management Company
- Federated High Income Bond Fund II
- Federated Utility Fund II
VARIABLE INSURANCE PRODUCTS FUND ("VIP")
Managed by Fidelity Management & Research Company
- VIP Money Market Portfolio
- VIP High Income Portfolio
- VIP Equity-Income Portfolio
- VIP Growth Portfolio
- VIP Overseas Portfolio
VARIABLE INSURANCE PRODUCTS FUND II ("VIP II")
Managed by Fidelity Management & Research Company
- VIP II Investment Grade Bond Portfolio
- VIP II Asset Manager Portfolio
- VIP II Index 500 Portfolio
- VIP II Asset Manager: Growth Portfolio
- VIP II Contrafund-Registered Trademark- Portfolio
VARIABLE INSURANCE PRODUCTS FUND III ("VIP III")
Managed by Fidelity Management & Research Company
- VIP III Growth Opportunities Portfolio
- VIP III Growth & Income Portfolio
- VIP III Balanced Portfolio
<PAGE>
INVESTMENT IN A VARIABLE LIFE INSURANCE POLICY IS SUBJECT TO RISKS, INCLUDING
THE POSSIBLE LOSS OF PRINCIPAL. THE POLICIES ARE NOT DEPOSITS OR OBLIGATIONS OF,
OR GUARANTEED OR ENDORSED BY, ANY FINANCIAL INSTITUTION AND ARE NOT FEDERALLY
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD,
OR ANY OTHER AGENCY.
NEITHER THE SEC OR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED
OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Managed by Franklin Advisors, Inc.
- Franklin Small Cap Fund -- Class 2
- Franklin U.S. Government Fund -- Class 2
Managed by Templeton Asset Management, Ltd.
- Templeton Developing Markets Securities Fund -- Class 2
INVESCO VARIABLE INVESTMENT FUNDS, INC.
Managed by INVESCO Funds Group, Inc.
- VIF-Real Estate Opportunity Fund
J.P. MORGAN SERIES TRUST II
Managed by J.P. Morgan Investment Management Inc.
- J.P. Morgan U.S. Disciplined Equity Portfolio
LEXINGTON NATURAL RESOURCES TRUST
Managed by Lexington Management Corporation
- Lexington Natural Resources Trust
LEXINGTON EMERGING MARKETS FUND, INC.
Managed by Lexington Management Corporation
- Lexington Emerging Markets Fund, Inc.
SCUDDER VARIABLE LIFE INVESTMENT FUND ("VLIF")
Managed by Scudder Kemper Investment, Inc.
- Scudder VLIF Balanced Portfolio
- Scudder VLIF International Portfolio
WANGER ADVISORS TRUST
Managed by Wanger Asset Management, L.P.
- Wanger U.S. Small Cap Portfolio
<PAGE>
<TABLE>
<CAPTION>
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<S> <C> <C>
TABLE OF CONTENTS PAGE
<CAPTION>
- --------------------------------------------------------
<S> <C> <C>
SUMMARY 1
FEE TABLE 4
PART I 6
1. THE POLICY 6
Owner 6
Insured 6
Beneficiary 6
Assignment 6
2. PREMIUMS 6
Allocation of Premium and Cash Value 6
Accumulation Units 6
Policy Lapse and Grace Period 7
Reinstatement 7
Right to Examine 7
3. INVESTMENT OPTIONS 7
Variable Investment Options 7
Fixed Account 8
Transfers 8
Scheduled Transfers 8
4. EXPENSES 9
Insurance Charge 9
Monthly Charges 9
Surrender Charge 9
Premium Tax Charge 10
Income or Other Taxes 10
Portfolio Expenses 10
5. INSURANCE BENEFITS 10
Changes in the Face Amount of Insurance 10
and/or the Death Benefit Options
Guaranteed Death Benefit Endorsement 10
Extended Maturity Benefit Endorsement 11
6. TAXES 11
Life Insurance In General 11
Diversification 11
Tax Withholding 11
7. ACCESS TO YOUR MONEY 11
Loans 12
Withdrawals 12
SMART-TM- Distributions 13
Surrender 13
Maturity Date 13
Minimum Value 13
8. OTHER INFORMATION 13
SAFECO Life 13
Separate Account 13
General Account 13
Distribution (Principal Underwriter) 13
Legal Proceedings 14
Right to Suspend Payments, Transfers, 14
Loans, or Withdrawals
Voting Rights 14
Disregard of Voting Instructions 14
Reduction of Charges or Additional 14
Amounts Credited
Reports to Policy Owners 14
Internet Information 14
Experts 15
Financial Statements 15
PART II
Executive Officers and Directors of SAFECO 16
Life
Misstatement of Age or Sex 16
SAFECO Life's Right to Contest 16
Federal Tax Status 16
Advertising 18
Appendix A -- Financial Statements A-1
Appendix B -- Hypothetical Illustrations B-1
Appendix C -- Illustrations C-1
Appendix D -- Policy Diagram D-1
</TABLE>
<PAGE>
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SUMMARY
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This Prospectus is divided into three parts, the Summary, Part I and Part II.
The topics in this Summary correspond to sections in Part I of the Prospectus
which discuss the topics in detail. Other important information is contained in
Part II.
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THE POLICY
- ----------------------------------------------
The life insurance policy is an agreement between you, the owner, and SAFECO
Life Insurance Company, ("SAFECO Life", "we" and "us"). In the policy we promise
to pay a death benefit to the named beneficiary when the insured dies. The
insured is the person covered under the policy. The owner can, but does not have
to be, the same as the insured.
The policy can be used for insurance protection and estate planning, as well as
to save for retirement and other long term financial goals. You should consider
the policy in conjunction with other insurance you own. The policy is not
suitable as a short-term investment.
You can choose among the variable investment portfolios and a fixed account. At
any one time you can have money in 17 of these portfolios and the fixed account.
The value of the portfolios can fluctuate up or down based on the performance of
the underlying investments. Your investment in the portfolios is not guaranteed
and you may lose money. The fixed account offers an interest rate guaranteed by
SAFECO Life. Your choices for the various investment options are found in
Section 3.
Your earnings are based on the investment performance of the portfolios you
select and/or the interest rate credited to the fixed account. Your earnings are
generally not taxed unless you take them out.
The amount of money you are able to accumulate in your policy value determines
the amount available for policy charges, loans, withdrawal or surrender, and may
affect the death benefit.
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PREMIUMS
- ----------------------------------------------
Premiums are the monies you give us to buy your policy. A medical examination
and other information may be required before we accept premium. The initial
premium is due before or when you receive your policy. You may vary the amount
and the frequency of subsequent premiums as long as total premiums received do
not disqualify the policy as life insurance under federal tax law.
You must pay enough premium or have sufficient money in your policy account to
cover all policy charges or your policy will lapse.
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INVESTMENT OPTIONS
- ----------------------------------------------
Not all portfolios listed below may be available for all policies. You can have
money in up to 17 of available portfolios and the fixed account under the policy
at any one time. Each portfolio is fully described in its accompanying
prospectus.
MANAGED BY SAFECO ASSET MANAGEMENT COMPANY
- RST Equity Portfolio
- RST Growth Opportunities Portfolio
- RST Northwest Portfolio
- RST Bond Portfolio
- RST Small Company Value Portfolio
MANAGED BY AIM MANAGEMENT GROUP
- AIM V.I. Aggressive Growth Fund
- AIM V.I. Growth Fund
MANAGED BY AMERICAN CENTURY INVESTMENT MANAGEMENT, INC.
- VP Balanced
- VP International
MANAGED BY THE DREYFUS CORPORATION
- The Dreyfus Socially Responsible Growth Fund, Inc.
- Dreyfus IP MidCap Stock Portfolio
- Dreyfus IP Technology Growth Portfolio
- Dreyfus VIF Appreciation Portfolio
- Dreyfus VIF Quality Bond Portfolio
MANAGED BY FEDERATED INVESTMENT MANAGEMENT COMPANY
- Federated High Income Bond Fund II
- Federated Utility Fund II
MANAGED BY FIDELITY MANAGEMENT & RESEARCH COMPANY
- VIP Money Market Portfolio
- VIP High Income Portfolio
- VIP Equity-Income Portfolio
- VIP Growth Portfolio
- VIP Overseas Portfolio
- VIP II Investment Grade Bond Portfolio
- VIP II Asset Manager Portfolio
- VIP II Index 500 Portfolio
- VIP II Asset Manager: Growth Portfolio
- VIP II Contrafund Portfolio
- VIP III Growth Opportunities Portfolio
- VIP III Growth & Income Portfolio
- VIP III Balanced Portfolio
MANAGED BY FRANKLIN ADVISERS, INC.
- Franklin Small Cap Fund -- Class 2
- Franklin U.S. Government Securities Fund -- Class 2
1
<PAGE>
MANAGED BY INVESCO FUNDS GROUP, INC.
- VIF -- Real Estate Opportunity Fund
MANAGED BY J.P. MORGAN INVESTMENT MANAGEMENT INC.
- J.P. Morgan U.S. Disciplined Equity Portfolio
MANAGED BY LEXINGTON MANAGEMENT CORPORATION
- Lexington Natural Resources Trust
- Lexington Emerging Markets Fund, Inc.
MANAGED BY SCUDDER KEMPER INVESTMENTS, INC.
- Scudder VLIF Balanced Portfolio
- Scudder VLIF International Portfolio
MANAGED BY TEMPLETON ASSET MANAGEMENT, LTD.
- Templeton Developing Markets Securities Fund -- Class 2
MANAGED BY WANGER ASSET MANAGEMENT, L.P.
- Wanger U.S. Small Cap Portfolio
Depending upon market conditions, you can make or lose money in any of these
portfolios. You may also allocate money to the fixed account, which credits
guaranteed interest.
- ---------------------------------------------------
EXPENSES
- ----------------------------------------------
The policy has insurance features and investment features, and there are costs
related to each.
We deduct a Mortality and Expense Risk charge which equals .70% annually of the
average daily value of the portion of your policy allocated to the portfolios.
This is not charged on money allocated to the fixed account.
Each policy month we deduct an administration charge. During the first policy
year the monthly administration charge is $25. After the first policy year, the
charge drops to $5 per month.
Each policy month we deduct a cost of insurance charge from the policy value.
This charge depends on the sex, age and risk classification of the insured, the
amount of insurance coverage, and the cost of any additional benefits provided
by riders to the policy.
If you surrender your policy or reduce the amount of insurance specified in your
policy ("face amount") during the first ten policy years, we will deduct a
surrender charge. The surrender charge will be the lesser of 50% for the first 6
years of the annual level premium required to keep the face amount of insurance
in force, decreasing by 10% each year until it reaches 0% for years 11 and after
or; 30% of the actual premium paid in the first year up to the annual level
premium described above, plus 9% of all other premiums. If you request a
reduction in face amount, the surrender charge applies on a pro rata basis.
We deduct a premium tax of up to 3.5% depending on the state.
There are also annual portfolio charges that vary depending upon the portfolios
you select. In 1999, these expenses ranged from 0.27% to 1.97%.
Your policy could lapse if your surrender value is insufficient to cover any
charges due. See Section 4 -- Expenses for a complete discussion of charges.
- ---------------------------------------------------
INSURANCE BENEFITS
- ----------------------------------------------
The policy has a face amount of insurance. The actual amount paid to the
beneficiary at the insured's death depends on the death benefit option you
select, either face amount or face amount plus policy value, and if there are
any outstanding loans or charges. Withdrawals reduce the face amount of
insurance by the amount of the withdrawal.
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TAXES
- ----------------------------------------------
Your policy is designed to qualify as life insurance under applicable tax law.
The death benefit is paid to the beneficiary free of federal income tax. Estate
and other taxes may apply. Investment earnings are not taxed unless you take
them out. Generally, you're allowed to withdraw your investment in the policy
before withdrawing taxable earnings. If your policy is a modified endowment
contract (MEC), loans and withdrawals are treated as distributions of taxable
earnings first. A 10% tax penalty may also apply unless you're over age 59 1/2
or disabled. There are several ways your policy can become a MEC. We monitor the
status of your policy and will advise you when you are about to perform a
transaction that may cause it to become a MEC. You should consult your tax
advisor to determine the impact MEC status will have on you before going forward
with such a transaction.
Other events such as a policy lapse, surrender or reaching the maturity date
during the life of the insured may also cause unintended tax consequences. This
is only a summary. Tax laws are complex and subject to change. You are
encouraged to seek advice from a competent tax advisor prior to purchasing this
policy and periodically throughout your ownership of it.
- ---------------------------------------------------
ACCESS TO YOUR MONEY
- ----------------------------------------------
You may surrender your policy at any time and receive the surrender value.
During the first ten policy years, you will be charged a surrender charge.
You may take some of your policy value as preferred loans, non-preferred loans,
or, after the first policy year, withdrawals. Non-preferred loans are charged
loan interest during the first ten policy years. Withdrawals and loans affect
the policy value, investment performance, and the death benefit.
2
<PAGE>
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OTHER INFORMATION
- ----------------------------------------------
RIGHT TO EXAMINE. You may examine the policy and if for any reason you are not
satisfied, you may cancel the policy by returning it to us with a written
request for cancellation by the later of: (a) the 30th day after receipt; or
(b) the 45th day after Part I of the application was signed. If you cancel the
policy, SAFECO Life will refund an amount equal to the premium payments made
under the policy.
TRANSACTIONS. You can initiate transfers or withdrawals as needed or schedule
them in advance under the following strategies:
- Dollar Cost Averaging: You may elect to automatically transfer a set amount
from any investment option to any other investment options on a regular
basis. This feature attempts to achieve a lower average cost per unit over
time.
- Portfolio Rebalancing: You may elect to have each portfolio rebalanced on a
regular basis to maintain your specified allocation percentages.
- SMART-TM- Distributions: After the second policy year, you may elect to take
systematic withdrawals, loans, or a combination of both so that you receive
a level stream of income over a time period you select. There may be tax
consequences.
- ---------------------------------------------------
INQUIRIES
- ----------------------------------------------
If you need more information, please contact us at:
SAFECO LIFE INSURANCE COMPANY
5069 154TH PLACE NE
REDMOND, WA 98052-9661
1-877-472-3326
HTTP:\\WWW.SAFECO.COM
3
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SAFECO SEPARATE ACCOUNT SL FEE TABLE
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The purpose of the Fee Table is to show you the various expenses you will incur
directly and indirectly by investing in the policy. The Fee Table reflects the
expenses of the Separate Account as well as the portfolios.
ADMINISTRATION CHARGE
$25.00 each month for the first policy year.
$5.00 each month thereafter.
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COST OF INSURANCE CHARGE
This charge is based on the insured's sex, age and risk classification.
The guaranteed maximum insurance cost rates for standard risks are based
on the 1980 Commissioner's Standard Ordinary Mortality Table.
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SURRENDER CHARGE
This charge is assessed if the policy is surrendered in the first 10
policy years. It will be the lesser of:
- 50% of the required annual level premium for years 1 through 6,
decreasing by 10% per year for years 7 through 10;
or
- 30% of the actual premium paid in the first year, up to the annual
level premium, plus 9% of all other premiums.
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<TABLE>
<S> <C>
SEPARATE ACCOUNT ANNUAL EXPENSES Mortality and Expense Risk Charge .70%
(as a percentage of average
account value)
</TABLE>
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<TABLE>
<CAPTION>
PORTFOLIO EXPENSES Distribution Other Expenses
(as a percentage of average net assets) and (after expense
Management Service (12b-1) reimbursement for Total Annual
Fees Fees certain Portfolios) Portfolio Expenses
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Managed by SAFECO Asset Management Company
(a)
RST Equity Portfolio 0.74% None 0.02% 0.76%
RST Growth OpportunitiesPortfolio 0.74% None 0.04% 0.78%
RST Northwest Portfolio 0.74% None 0.10% 0.84%
RST Bond Portfolio 0.74% None 0.17% 0.91%
RST Small Company Value Portfolio 0.85% None 0.10% 0.95%
Managed by AIM Management Group (a)
AIM V.I. Aggressive Growth Fund 0.80% None 0.36% 1.16%
AIM V.I. Growth Fund 0.64% None 0.08% 0.72%
Managed by American Century Investment
Management, Inc. (a)
VP Balanced 0.90% None 0.00% 0.90%
VP International 1.34% None 0.00% 1.34%
Managed by the Dreyfus Corporation (a)
The Dreyfus Socially Responsible
Growth Fund, Inc. 0.75% None 0.04% 0.79%
Dreyfus IP MidCap Stock Portfolio 0.75% None 0.22% 0.97%
Dreyfus IP Technology Growth
Portfolio 0.75% None 0.32% 1.07%
Dreyfus VIF Appreciation Portfolio 0.75% None 0.03% 0.78%
Dreyfus VIF Quality Bond Portfolio 0.65% None 0.09% 0.74%
Managed by Federated Investment Management
Company (a)
Federated High Income Bond Fund II 0.60% None 0.19% 0.79%
Federated Utility Fund II 0.75% None 0.19% 0.94%
Managed by Fidelity Management & Research
Company (a)
(Initial Class shares only)
VIP Money Market Portfolio 0.18% None 0.09% 0.27%
VIP High Income Portfolio 0.58% None 0.11% 0.69%
VIP Equity-Income Portfolio (b) 0.48% None 0.08% 0.56%
VIP Growth Portfolio (b) 0.58% None 0.07% 0.65%
VIP Overseas Portfolio (b) 0.73% None 0.14% 0.87%
VIP II Investment Grade Bond
Portfolio 0.43% None 0.11% 0.54%
VIP II Asset Manager Portfolio (b) 0.53% None 0.09% 0.62%
VIP II Index 500 Portfolio 0.24% None 0.04% 0.28%
VIP II Asset Manager: Growth
Portfolio (b) 0.58% None 0.12% 0.70%
VIP II Contrafund Portfolio (b) 0.58% None 0.07% 0.65%
VIP III Growth Opportunities
Portfolio (b) 0.58% None 0.10% 0.68%
VIP III Growth & Income Portfolio
(b) 0.48% None 0.11% 0.59%
VIP III Balanced Portfolio (b) 0.43% None 0.12% 0.55%
Managed by Franklin Advisors, Inc. (a)
Franklin Small Cap Fund -- Class 2 0.55% 0.25% 0.27% 1.07%
Franklin U.S. Government Fund --
Class 2 0.49% 0.25% 0.02% 0.76%
Managed by INVESCO Funds Group, Inc. (a)
VIF -- Real Estate Opportunity Fund 0.90% None 1.07% 1.97%
Managed by J.P. Morgan Investment
Management Inc. (a)
J.P. Morgan U.S. Disciplined Equity
Portfolio 0.35% None 0.50% 0.85%
Managed by Lexington Management Corporation
(a)
Lexington Natural Resources Trust 1.00% None 0.33% 1.33%
Lexington Emerging Markets
Fund, Inc. 0.85% None 0.85% 1.70%
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO EXPENSES Distribution Other Expenses
(as a percentage of average net assets) and (after expense
Management Service (12b-1) reimbursement for Total Annual
Fees Fees certain Portfolios) Portfolio Expenses
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Managed by Scudder Kemper
Investments, Inc. (a)
Scudder VLIF Balanced Portfolio 0.475% None 0.08% 0.55%
Scudder VLIF International
Portfolio 0.853% None 0.18% 1.03%
Managed by Templeton Asset Management, Ltd.
(a)
Templeton Developing Markets
Securities Fund -- Class 2 1.25% 0.25% 0.31% 1.81%
Managed by Wanger Asset Management,
L.P. (a)
Wanger U.S. Small Cap Portfolio 0.95% None 0.07% 1.02%
</TABLE>
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(a) In some cases the fund advisers or other parties agree to waive or reimburse
all or a portion of the portfolio expenses. For those portfolios where such an
agreement exists, the expenses absent waiver or reimbursement would have been
1.22% for the RST Small Company Value Portfolio; 4.62% for the AIM V.I.
Aggressive Growth Fund; 1.46% for the Dreyfus IP MidCap Stock Portfolio; 1.34%
for the Dreyfus IP Technology Portfolio; 1.71% for the Federated International
Equity Fund II; .34% for the VIP II Index 500 Portfolio; 9.77% for the VIF-Real
Estate Opportunity Fund; .87% for the J.P. Morgan U.S. Disciplined Equity
Portfolio. See the portfolio prospectuses for more detailed information. To the
extent it performs services for the fund, SAFECO Life may receive an asset based
administrative fee from the fund's advisor or distributor. In addition, we have
Fund Participation Agreements with each of the non-SAFECO fund managers that
describe the administrative practices and responsibilities of the parties.
(b) A portion of the brokerage commissions that certain funds pay was used to
reduce fund expenses. In addition, through arrangements with certain funds', of
FMR on behalf of certain funds', custodian, credits realizes as a result of
uninvested cash balances were used to reduce a portion of each applicable fund's
expenses. Without these reductions, the total operating expenses presented in
the table would have been .57% for the VIP Equity-Income Portfolio; .66% for the
VIP Growth Portfolio; .91% for VIP Overseas Portfolio; .63% for the VIP II Asset
Manager Portfolio; .71% for the VIP II Asset Manager: Growth Portfolio; .67% for
the VIP II Contrafund Portfolio; .69% for the VIP III Growth Opportunities
Portfolio; .60% for the VIP III Growth & Income Portfolio; .57% for the VIP III
Balanced Portfolio.
The above portfolio expenses were provided by the portfolios. We have not
independently verified the accuracy of the information.
5
<PAGE>
- ---------------------------------------------------
1. THE POLICY
- ----------------------------------------------
The Flexible Premium Variable Life Insurance Policy described in this prospectus
is a contract between you, the owner, and SAFECO Life Insurance Company,
("SAFECO Life", "we" and "us"). While the policy is in force, we promise to pay
a death benefit to the named beneficiary when the insured dies.
The policy is called "flexible" because you can vary the amount and frequency of
premiums, choose between death benefit options, and increase or decrease the
face amount of insurance.
The policy is called "variable" because you can choose among the available
variable investment portfolios in which you can make or lose money depending
upon market conditions. The investment performance of the portfolio(s) you
choose affects the value of your policy.
The policy also has a fixed account. Your money earns interest at a rate we set.
The annual effective interest rate will never be less than 4% and is guaranteed
for at least 12 months.
The policy benefits from tax deferral. While the insured is living, you pay no
tax on policy earnings unless you take money out. When the insured dies, the
death benefit is paid to your named beneficiary free from federal income tax.
OWNER
The owner of the policy is as shown on the policy application unless changed.
You, as owner, may exercise all ownership rights under the policy.
INSURED
The insured is the person whose life is covered under the policy. The owner can,
but does not have to be, the same as the insured.
BENEFICIARY
The beneficiary is the person or entity you choose to receive the death benefit
when the insured dies.
ASSIGNMENT
You may assign the policy. The assignment will become effective when we receive
written notification. Your rights and those of any other person under the policy
are subject to the assignment. We are not responsible for the validity of any
assignments. An absolute assignment will be considered a change of ownership.
- ---------------------------------------------------
2. PREMIUMS
- ----------------------------------------------
You may purchase the policy by delivering a check for the full initial premium
made out to SAFECO Life to us directly or to your registered representative. The
initial premium must be sufficient to cover all policy charges for a period of
at least two months. Upon payment of the initial premium, we may provide
temporary insurance, subject to a maximum amount. The effective date of
permanent insurance coverage is dependent upon the completion of all
underwriting requirements, payment of the initial premium, and delivery of the
policy while the insured is still living.
Additional premium payments may be made at any time while the policy is in
force. We reserve the right to require satisfactory evidence of insurability
before accepting any premium payment that would result in an increase in the net
amount of coverage at risk. We will refund any portion of any premium payment we
determine to be in excess of the premium limit established by law to qualify the
policy as life insurance. We may also require any existing policy loans be
repaid prior to accepting any additional premium payments. See "Loans" in
Section 7 -- Access to Your Money. Additional premium payments or other changes
to the policy can jeopardize a policy's non-modified endowment status. We will
monitor premiums paid and other policy transactions and will notify you when the
non-modified endowment contract status is in jeopardy. See Section 6 -- Taxes.
ALLOCATION OF PREMIUM AND CASH VALUE
You designate how your premiums are to be allocated when you apply for a policy.
You may change the way future premiums are allocated by giving written notice to
us. All percentage allocations must be in whole numbers, and must be at least
1%. The sum of the allocations must equal 100%. At the time a policy is issued,
its cash value will be determined as if the policy had been issued and the
initial premium was invested on the date we received it.
On the date your policy is effective, premiums are invested in the money market
portfolio for 25 days. On the 26th day your money is allocated to the portfolios
and/or the fixed account in accordance with your instructions. Any amounts
allocated to the portfolios are effective and valued as of the next close of the
New York Stock Exchange ("NYSE"). This is usually 4:00 p.m. eastern time. If for
any reason the NYSE has closed for the day prior to our receipt of your money it
will be valued as of the close of the NYSE on its next regular business day.
ACCUMULATION UNITS
The value of the variable portion of your policy will go up or down depending
upon the investment performance of the portfolio(s) you choose. In order to keep
track of this we use a unit of measure called an accumulation unit, which works
like a share of a mutual fund.
We calculate the value of an accumulation unit, for each portfolio, after the
NYSE closes each day by:
1. determining the total value of the particular portfolio;
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<PAGE>
2. subtracting from that amount insurance and other charges; and
3. dividing this amount by the number of outstanding accumulation units of
the particular portfolio.
The value of an accumulation unit may go up or down from day to day.
When you make premium payments or transfers into a portfolio, we credit your
contract with accumulation units. Conversely, when you request a withdrawal or a
transfer of money from a portfolio, accumulation units are liquidated. In either
case, the increase or decrease in the number of your accumulation units is
determined by taking the amount of the premium payment, transfer or withdrawal
and dividing it by the value of an accumulation unit on the date the transaction
occurs.
EXAMPLE: On Monday we receive a $1,000 premium payment from you before the
NYSE closes. You have told us you want this to go to the RST Growth
Opportunities Portfolio. When the NYSE closes on that Monday, we determine
that the value of an accumulation unit for the RST Growth Opportunities
Portfolio is $34.12. We then divide $1,000 by $34.12 and credit your policy
on Monday night with 29.31 accumulation units for the RST Growth
Opportunities Portfolio.
POLICY LAPSE AND GRACE PERIOD
You must have enough money in your policy to cover the monthly deductions and
any surrender charges. These are described in Section 4 -- Expenses. If you
don't have enough money to cover these charges, we will send written notice to
you and any assignee of record. A grace period of 61 days has begun as of the
date notice was sent. We will tell you how much money (either a loan repayment
or a premium payment) you need to send us to keep your policy in force. The
amount will be enough to cover all the policy charges for three months.
If we don't receive this amount before the end of the grace period, we will send
written notice to you and any assignee of record that your policy ended without
value ("lapsed"). If the insured dies during the grace period, we will pay the
death benefit to the beneficiary. The grace period provisions don't apply if the
Guaranteed Death Benefit Endorsement is in effect. See Section 5 -- Insurance
Benefits.
REINSTATEMENT
If your policy lapses, you have five years from the end of the grace period and
while the insured is living, to request reinstatement of your policy.
Reinstatement allows you to keep your original policy anniversary date and may
or may not result in lower policy charges than you would incur under a new
policy. To reinstate your policy you must:
- provide us satisfactory evidence of insurability;
- pay enough premium to cover policy charges for three months after the
reinstatement date;
- pay any indebtedness that existed at the end of the grace period; and
- pay enough premium to cover the monthly deductions that were due during the
grace period.
Unlike many companies, we do not ask you to pay premium for the period after the
policy lapsed and before reinstatement, nor is there insurance coverage for this
period. Coverage will be effective on the first policy monthly anniversary to
occur on or after the date we approve your reinstatement application.
You may not reinstate a policy that you surrendered for policy value.
RIGHT TO EXAMINE
You may examine the policy and if for any reason you are not satisfied, you may
cancel the policy by returning it to us with a written request for cancellation
by the later of: (a) the 30th day after receipt; or (b) the 45th day after Part
I of the application was signed. If you cancel the policy, SAFECO Life will
refund an amount equal to the premium payments made under the policy.
- ---------------------------------------------------
3. INVESTMENT OPTIONS
- ----------------------------------------------
VARIABLE INVESTMENT OPTIONS
The portfolios are not offered directly to the public but are available to life
insurance companies as investment options for variable annuity and variable life
insurance policies. The performance of the portfolios may differ substantially
from publicly traded mutual funds with similar names and objectives.
Each portfolio has its own investment objective. You should read the
prospectuses for the portfolios carefully before investing. Copies of these
prospectuses accompany this prospectus and may include information on other
portfolios not available under this policy. Not all portfolios listed below may
be available for all policies. You can have money in up to 17 available
portfolios and the fixed account at any one time.
MANAGED BY SAFECO ASSET MANAGEMENT COMPANY
- RST Equity Portfolio
- RST Growth Opportunities Portfolio
- RST Northwest Portfolio
- RST Bond Portfolio
- RST Small Company Value Portfolio
MANAGED BY AIM MANAGEMENT GROUP
- AIM V.I. Aggressive Growth Fund
- AIM V.I. Growth Fund
MANAGED BY AMERICAN CENTURY INVESTMENT MANAGEMENT, INC.
- VP Balanced
- VP International
7
<PAGE>
MANAGED BY THE DREYFUS CORPORATION
- The Dreyfus Socially Responsible Growth Fund, Inc.
- Dreyfus IP MidCap Stock Portfolio
- Dreyfus IP Technology Growth Portfolio
- Dreyfus VIF Appreciation Portfolio
- Dreyfus VIF Quality Bond Portfolio
MANAGED BY FEDERATED INVESTMENT MANAGEMENT COMPANY
- Federated High Income Bond Fund II
- Federated Utility Fund II
MANAGED BY FIDELITY MANAGEMENT & RESEARCH COMPANY
- VIP Money Market Portfolio
- VIP High Income Portfolio*
- VIP Equity-Income Portfolio*
- VIP Growth Portfolio
- VIP Overseas Portfolio*
- VIP II Investment Grade Bond Portfolio*
- VIP II Asset Manager Portfolio*
- VIP II Index 500 Portfolio*
- VIP II Asset Manager: Growth Portfolio*
- VIP II Contrafund Portfolio*
- VIP III Growth Opportunities Portfolio
- VIP III Growth & Income Portfolio
- VIP III Balanced Portfolio*
MANAGED BY FRANKLIN ADVISORS, INC.
- Franklin Small Cap Fund -- Class 2
- Franklin U.S. Government Securities Fund -- Class 2
MANAGED BY INVESCO FUNDS GROUP, INC.
- VIF -- Realty Fund
MANAGED BY J.P. MORGAN INVESTMENT MANAGEMENT INC.
- J.P. Morgan U.S. Disciplined Equity Portfolio
MANAGED BY LEXINGTON MANAGEMENT CORPORATION
- Lexington Natural Resources Trust*
- Lexington Emerging Markets Fund, Inc.*
MANAGED BY SCUDDER KEMPER INVESTMENTS, INC.
- Scudder VLIF Balanced Portfolio
- Scudder VLIF International Portfolio
MANAGED BY TEMPLETON ASSET MANAGEMENT, LTD.
- Templeton Developing Markets Securities Fund -- Class 2
MANAGED BY WANGER ASSET MANAGEMENT, L.P.
- Wanger U.S. Small Cap Portfolio*
*THESE PORTFOLIOS ARE AVAILABLE ONLY IF YOU HAVE BEEN CONTINUOUSLY INVESTED IN
THEM SINCE APRIL 30, 2000.
We reserve the right to add, combine, restrict or remove any portfolio available
as an investment option under your policy. If any shares of the portfolios are
no longer available, or if in our view no longer meet the purpose of the policy,
it may be necessary to substitute shares of another portfolio. We will seek
prior approval of the SEC and give you notice before doing this.
FIXED ACCOUNT
The policy also offers a fixed account with interest rates that are set and
guaranteed by SAFECO Life for at least 12 months. Annual effective guaranteed
interest rates will never be less than 4%.
TRANSFERS
You can transfer money among any of the available portfolios and the fixed
account. You can have money in a maximum of 17 portfolios at any one time.
Transfers to or from the portfolios will take effect on the next close of the
NYSE after we receive the request. Amounts equal to loans and loan interest are
not available for transfer.
We will accept transfers by signed written request or by telephone. Each
transfer must identify:
- your policy;
- the amount of the transfer; and
- which investment options are affected.
Transfers by telephone will be accepted if we have properly signed authorization
on record. You may authorize someone else to make transfers by telephone on your
behalf. We will use reasonable procedures to confirm that instructions given to
us by telephone are genuine. If we do not use such procedures, we may be liable
for any losses due to unauthorized or fraudulent instructions. We tape record
all telephone instructions.
We reserve the right to limit transfers from the fixed account in the following
manner:
- postpone the transfer for 30 days;
- reduce the amount of the transfer to not more than 25% of the amount
available for transfer in the fixed account; and
- limit the total number of transfers to one per policy year. If limited, the
transfer will be effective on the policy anniversary after the date we
receive it.
We reserve the right to modify, suspend or terminate transfer privileges at any
time.
SCHEDULED TRANSFERS
You can initiate the following scheduled transfers among your investment options
free of charge. Once started, these scheduled transfers will continue until you
instruct us to stop or all money has been transferred out of the "source"
investment option.
DOLLAR COST AVERAGING. This strategy is designed to achieve a lower average
cost per unit over time. It does not assure a profit nor protect against a loss.
Investing should continue at a consistent level in both market ups and downs.
You can systematically transfer set amounts each month or quarter from any
portfolio or the fixed account to any of the other portfolios.
PORTFOLIO REBALANCING. After your money has been invested, the performance of
the portfolios may cause the percentage in each portfolio to change from your
original allocations. You can instruct us to adjust your investment
8
<PAGE>
in the portfolios to maintain a predetermined mix on a quarterly, semi-annual or
annual basis. Portfolio Rebalancing can be used with Dollar Cost Averaging.
- ---------------------------------------------------
4. EXPENSES
- ----------------------------------------------
There are charges and other expenses associated with the policy that reduce the
return on your investment in the policy. These charges and expenses are:
INSURANCE CHARGE
We make a daily deduction for the mortality and expense risk charge. This is
done as a part of our calculation of accumulation unit value. This charge is
equal, on an annual basis, to .70% of the average daily net asset value of each
portfolio. This charge helps pay for insurance benefits (the death benefit) and
for the risk (expense risk) that the current charges will not be sufficient in
the future to cover the cost of administering the policy. If the charges under
the policy are not sufficient, then we will bear the loss. If the charges are
more than sufficient, we will retain the excess. The rate of the mortality and
expense risk charge will not be increased.
MONTHLY CHARGES
We deduct the following charges from your policy value monthly:
- the monthly cost of insurance;
- the monthly cost of additional benefits provided by riders; plus
- the monthly administration charge.
MONTHLY COST OF INSURANCE. The monthly cost of insurance charge varies from
policy to policy and from month to month. We determine the charge by multiplying
the monthly cost of insurance rate times the amount of the death benefit that is
covered by insurance. The monthly cost of insurance rate is based on:
- the insured's age;
- gender, if permitted by law;
- risk classification; and
- the policy's duration.
Monthly cost of insurance rates will not exceed those guaranteed in the policy
and will not be increased more than once in any 12-month period. The guaranteed
maximum insurance cost rates for standard risks are based on the Commissioner's
Standard Ordinary Mortality Table.
The risk class of an insured, including age and gender, may affect the cost of
insurance rate. A preferred risk class is available to smokers and non-smokers
who we determine have a better than average mortality.
For a better understanding of how the cost of insurance and other charges affect
policy values, you should request a personalized illustration from your
registered representative.
MONTHLY COST OF ADDITIONAL BENEFITS. The monthly cost of any additional
benefits provided by riders under this policy is shown in the policy.
MONTHLY ADMINISTRATION CHARGE. During the first policy year the administration
charge is $25 per month. For policy years after the first, the charge drops to a
current charge of $5 per month. The maximum administrative charge will not
exceed $8.00 per month. We do not expect to profit from this charge.
SURRENDER CHARGE
Unlike many other life insurance policies, there is no charge on withdrawals
while this policy remains in force. There is a surrender charge during the first
ten policy years if you:
- request a reduction in the face amount of insurance;
- surrender the policy for value; or
- allow the policy to lapse.
If you increase your face amount, a new surrender charge and a new ten-year
period will apply to the amount of the increase. If you request a reduction in
face amount, we will deduct a pro rata surrender charge from your policy value.
The surrender charge will be the lesser of:
a) 50% during the first six policy years of an amount equal to one annual
premium (calculated as if you paid level premiums until the insured age 95
and assuming an annual effective return of 5%), decreasing by 10% each year
until there is no surrender charge for years eleven and later;
b) 30% of actual premiums received during the first policy year up to an amount
equal to the annual level premium described above, plus 9% of all other
premium paid and less the amount of any pro rata surrender charge previously
made under the policy.
A table of the surrender charge amount you would pay under the method described
in (a) above, is shown in the "Table of Surrender Charges" in the policy. Your
surrender charge would be less than this amount if the surrender charge
calculated under the method described in (b) were less. In some cases you can
minimize the amount of the surrender charge by limiting the amount of premium
you pay in the first year. However, this could affect the death benefit, reduce
policy values, and increase you risk of lapse. Your registered representative
can provide you with a hypothetical illustration of policy values based on
planned premiums which includes the surrender charge.
The surrender charge is for expenses incurred in connection with the promotion,
sale and distribution of the policies. If the surrender charge is insufficient,
excess amounts resulting from the mortality and expense risk charge may be used
to recover these expenses. We may reduce or eliminate the amount of the
surrender charge
9
<PAGE>
when the policy is sold under circumstances that reduce our sales expense. See
Section 8 -- Other Information.
PREMIUM TAX CHARGE
States and other governmental entities (e.g., municipalities) may charge premium
taxes ranging from 0% to 3.5%. These taxes vary by state and are subject to
change. Based on your state of residence, we deduct the applicable tax from your
premium before allocating amounts to the portfolios or to the fixed account in
accordance with your instructions. Generally, references to allocations of
premiums in this prospectus reflect the deductions made to cover this tax or
other taxes imposed by the state.
INCOME OR OTHER TAXES
Currently we do not pay income or other taxes on earnings attributable to your
policy. However, if we ever incur such taxes, we reserve the right to deduct
them from your policy.
PORTFOLIO EXPENSES
There are deductions from and expenses paid out of the assets of the various
portfolios. These expenses are summarized in the Fee Table of this prospectus.
For more detailed information, you should refer to the enclosed portfolio
prospectuses.
- ---------------------------------------------------
5. INSURANCE BENEFITS
- ----------------------------------------------
The primary purpose of the policy is to provide death benefit protection on the
life of the insured. You select the face amount of insurance and death benefit
option "A" or "B" on your policy application. Face amount of insurance is the
fixed portion of a death benefit that you want the beneficiary to receive. Under
option "A" the death benefit equals the face amount on your insurance policy.
Gains in your policy value reduce the amount of insurance coverage you pay for
without changing the amount of the death benefit. Under option "B" the death
benefit equals the face amount on your insurance policy, plus your policy value.
The amount of insurance coverage you pay for stays the same, but the death
benefit may be greater than the face amount, depending on performance.
Upon receipt of proof that the insured died while the policy was in force, we
will pay the death proceeds to the beneficiary in a lump sum or under an
optional method of payment provided by the policy and that you or the
beneficiary select. The death proceeds equal:
- the death benefit under the policy; plus
- any benefits due from riders; less
- any loans and loan interest; and less
- any overdue charges if the insured dies during the grace period.
Whether you choose the death benefit under "A" or "B", we guarantee that the
death benefit under the option you select will never be less than the applicable
percentage of your policy value. Sample ages and percentages are shown in the
table below.
<TABLE>
<CAPTION>
Insured's Age at
the beginning of
the policy year in Percentage of
which insured policy value as of
dies. the date of death.
<S> <C>
-----------------------------------------
-----------------------------------------
40 and under 250%
-----------------------------------------
45 215%
-----------------------------------------
50 185%
-----------------------------------------
55 150%
-----------------------------------------
60 130%
-----------------------------------------
65 120%
-----------------------------------------
70 115%
-----------------------------------------
75-90 105%
-----------------------------------------
95 100%
-----------------------------------------
</TABLE>
CHANGES IN THE FACE AMOUNT OF INSURANCE AND/OR THE DEATH BENEFIT OPTIONS
After the first policy year you can request changes in the face amount of
insurance or the death benefit option by writing to us. Increases in the face
amount of insurance must be at least $10,000. The insured must be under age 80
and provide proof of insurability. Decreases in the face amount of insurance
during the first ten policy years have a surrender charge. See Section 4 --
Expenses. Changes take effect on the first monthly anniversary on or after we
approve the change. We may decline to make a change that would decrease your
face amount of insurance to less than the minimum amount that we would issue on
a new policy or if it would disqualify your policy as life insurance under tax
law. See Section 6 -- Taxes.
GUARANTEED DEATH BENEFIT ENDORSEMENT
You receive a Guaranteed Death Benefit Endorsement with your policy if:
- the endorsement is approved by your state;
- your policy is issued with standard or preferred rates; and
- your policy does not have an increasing premium additional term rider.
The endorsement guarantees that your policy will not lapse prior to the end of
the policy year that the insured turns age 80, as long as premium requirements
are met. This protects your insurance coverage if your policy value drops below
the amount normally required to keep your policy in force. There is no charge
for this endorsement, but a minimum level of monthly premium is required to keep
the endorsement in force. This minimum is shown in your policy and will not
change unless your policy changes.
The endorsement will lapse if the total premiums paid, less any withdrawals,
loan, and loan interest, is less than the sum of monthly guaranteed death
benefit premiums
10
<PAGE>
required since policy issue. You will then have 61 days to pay the required
premium or the endorsement will terminate and cannot be reinstated.
If you choose not to pay the minimum required premium and the endorsement
terminates, your policy will continue in force as long as you have enough money
in the policy to cover the monthly deduction and any surrender charges. See
"Policy Lapse and Grace Period" in Section 2 -- Premiums.
EXTENDED MATURITY BENEFIT ENDORSEMENT
The policy matures on the policy anniversary following the insured's 95th
birthday. See Section 7 -- Access to Your Money for a discussion of the Maturity
Date. You can extend the maturity date of your policy until the death of the
insured if the Extended Maturity Benefit Endorsement was approved for use in
your state at the time your policy was issued. There is no charge for this
endorsement. The endorsement is not effective unless we receive your irrevocable
election to use the benefit in writing and prior to the maturity date.
Under the endorsement and as of the maturity date:
- we transfer money in the portfolios to the fixed account as of the next
close of the NYSE;
- all riders on the policy terminate; and
- cost of insurance charges are no longer deducted.
On the death of the insured, the death benefit under the endorsement is equal to
the policy value less existing loans, and loan interest. The tax consequences of
extending the maturity date past age 95 are unclear. You should consult your
personal tax advisor before extending the policy maturity date.
- ---------------------------------------------------
6. TAXES
- ----------------------------------------------
This section discusses how federal income tax applies to life insurance policies
in general. This information is not complete and is not intended as tax advice.
Tax laws and their interpretations are complex and subject to change. No attempt
is made to discuss state or other tax laws. SAFECO Life does not guarantee the
tax treatment of any policy or any transaction involving a policy. You should
consult a competent tax adviser about your individual circumstances.
LIFE INSURANCE IN GENERAL
If your policy meets certain tests under the Internal Revenue Code of 1986, as
amended ("Code"), it will be treated as life insurance for federal tax purposes.
Death proceeds payable under a life insurance policy when the insured dies are
not taxed to the beneficiary. We will monitor compliance of your policy with
these tests.
If your life insurance policy is also a modified endowment contract (you have a
higher ratio of cash value to insurance protection), amounts you take out while
the insured is living, including loans and collateral assignments, may be
subject to income tax. There may be a 10% tax penalty on the taxable amount
taken before age 59 1/2 unless you are disabled as defined by the Code or
another exception applies.
A surrender or termination of the policy by lapse may have tax consequences if
the surrender value plus outstanding loans and loan interest is greater than
premiums paid into the policy. If the insured is alive on the maturity date and
you have not elected the extended maturity option in writing, you may have to
pay federal income tax on the policy value (including outstanding loan amounts)
that are attributable to earnings in the portfolios or interest in the fixed
account.
Ownership of a life insurance policy or receipt of policy proceeds before or
after the death of the insured, may result in federal taxes such as income,
estate, gift, or generation -- skipping transfer tax, as well as state and local
taxes such as inheritance or income tax. Tax consequences depend on your or your
beneficiary's individual circumstances. You should consult your personal tax
advisor regarding the tax treatment of a life insurance policy that you own.
Changes in federal and state tax law or in the interpretation of current tax law
could adversely affect the tax treatment of your policy and policy proceeds.
DIVERSIFICATION
Variable life insurance policies receive tax deferral while the insured is
living as long as investment in the portfolios meet diversification standards
set by Treasury Regulations. This favorable tax treatment allows you to select
and make transfers among portfolios without paying income tax unless you take
money out.
We believe the portfolios offered under this policy are being managed to comply
with existing standards. To date, neither Treasury Regulations nor the Code give
specific guidance as to the circumstances under which your policy might lose its
tax favored status as life insurance because of the number and type of
portfolios you can select from, and the extent to which you can make transfers.
If issued, such guidance could be applied either prospectively or retroactively.
Due to the uncertainty in this area, we reserve the right to modify the policy
in an attempt to maintain favorable tax treatment.
TAX WITHHOLDING
Generally, while the insured is living, federal income tax is withheld from the
taxable portion of proceeds at a rate of 10%. Typically, you may elect not to
have income taxes withheld or to have withholding done at a different rate.
- ---------------------------------------------------
7. ACCESS TO YOUR MONEY
- ----------------------------------------------
You can access money in your policy in the following ways:
- by taking loans against your policy value;
11
<PAGE>
- by requesting withdrawals after the first policy year;
- by taking SMART-TM- distributions (beginning after the second policy year);
- by surrendering your policy for value;
- by receiving the surrender value if the insured is alive on the maturity
date; or
- when a death benefit is paid to your beneficiary. See Section 5 -- Insurance
Benefits.
LOANS
You may take loans in any amount up to 90% (or other maximum required by your
state), of your policy surrender value by writing to us. Loaned amounts do not
participate in earnings from the portfolios or receive higher interest rate
guarantees in the fixed account. For this reason loans, whether or not repaid,
have a permanent affect on the amount of money you are able to accumulate in
your policy. Unless you tell us differently, we will deduct loan amounts from
the portfolios and the fixed account in the same proportion as we take monthly
deductions. If this is not possible, we deduct loan amounts on a pro rata basis
from the investment options. Once we receive your request, the loan will be
effective as of the next close of the NYSE. Loan amounts are not available for
withdrawal or surrender.
Loan amounts are credited with interest at a minimum annual effective rate of
4%. Loan amounts are also charged interest. The interest rate charged on new and
existing loans is set each policy anniversary, subject to a maximum rate that is
the greater of:
- Moody's Corporate Bond Yield Average for the calendar month that ends two
months before your policy anniversary date; or
- 5%.
The cost of a loan is equal to the difference, if any, between the interest rate
we credit and the interest rate we charge on the loan amount. Loans that are
credited and charged at the same interest rate have no cost. There is no cost to
you on new and existing loans that do not exceed the total investment gain in
you policy, less policy charges and existing loan amounts, or on any new or
existing loans after the tenth policy year. During the first ten policy years,
we call these no-cost loans "preferred". To determine what loan amount is
currently available to you on a preferred basis, add the amount of any
withdrawals you have taken to your current policy value and then subtract all
premiums paid.
The current loan interest rate charged on non-preferred loans under the policy
is an annual effective rate of 6%. The annual effective interest rate credited
on the loan amount is 4%. This results in an annualized cost to you of 2% for
non-preferred loans. Changes in the loan interest rate we charge will never be
less than 0.5% up or down. We will notify you in advance of any change in the
cost of your loan.
Loan interest is payable in advance on the date of the loan and on each
subsequent policy anniversary until the loan is repaid. Loan interest that is
not paid on the date due increases your loan amount and is charged loan
interest. During the first ten policy years, loans will be reallocated as
preferred or non-preferred once a year on the policy anniversary. If the
unloaned portion of your policy value experienced gains during the 12-month
period prior to your policy anniversary, a greater portion of existing loan
amounts may be preferred during the next policy year. If your policy value
experienced losses during this period, a greater portion of existing loans may
be non-preferred and result in a cost to you if you do not repay the loan.
Loan payments of $50 or more may be made at anytime while the insured is living
and the policy is in force. When a loan is outstanding, we consider any money
you give us, other than by electronic funds transfer, to be a loan payment
unless clearly marked otherwise. Unless you tell us differently, loan payments
are allocated to the portfolios and/or the fixed account in accordance with your
current premium allocations on file. Non-preferred loans are repaid first. Loan
payments are not considered additional premium under the policy.
Loans allow you to access money in your policy at little or no cost and are
tax-free, unless your policy is a modified endowment contract. See
Section 6 -- Taxes. However, loans reduce the number of accumulation units in
the portfolios and/or the value in the fixed account. Loans increase your risk
that:
- you will not accumulate enough policy value to meet your future financial
needs;
- your policy will lapse;
- the Guaranteed Death Benefit Endorsement will terminate;
- your beneficiary will receive less money.
WITHDRAWALS
After the first policy year, you can take money out by writing to us. There is
no minimum withdrawal amount. The maximum withdrawal amount is equal to your
policy surrender value less policy charges for three months.
Unless you tell us differently, we will take withdrawals from the portfolios and
the fixed account in the same proportion as we take monthly deductions or, if
this is not possible, on a pro rata basis from the investment options. Once we
receive your request, withdrawals from the portfolios will be effective as of
the next close of the NYSE.
Unlike many other policies, there is no charge on withdrawals as long as your
policy remains in force. However, withdrawals reduce the number of accumulation
units in the portfolios and/or the value of the fixed account and
12
<PAGE>
may have tax consequences. See Section 6 -- Taxes. Withdrawals lower the face
amount of insurance on your policy dollar for dollar and increase the risk that:
- you will not accumulate enough policy value to meet your future financial
needs;
- your policy will lose its current tax status;
- your policy will lapse;
- the Guaranteed Death Benefit Endorsement will terminate;
- your beneficiary will receive less money.
We may refuse any withdrawal request that reduces the face amount below the
minimum we require for policy issue or that would disqualify the policy as life
insurance under tax law.
SMART-TM- DISTRIBUTIONS
After the second policy year, you can take money out electronically through
systematic withdrawals, loans or a combination of both so that you receive a
level stream of income over a period of time you select. The distributions must
satisfy applicable requirements for taking withdrawals or loans and may be
modified to ensure that insurance coverage remains in force. These distributions
have the same risks as random loans and withdrawals. All or some of these
distributions may be subject to current tax and tax penalties. See
Section 6 -- Taxes.
SURRENDER
You may end the insurance coverage under this policy and receive the surrender
value at any time by sending written instruction and the policy to us while the
insured is living. A surrender charge will apply during the first ten policy
years. See Section 4 -- Expenses. The surrender value may be subject to current
tax and tax penalties. See Section 6 -- Taxes.
MATURITY DATE
The policy matures on the policy anniversary following the insured's 95th
birthday. If the insured is alive on the maturity date, the policy terminates
and you receive the policy surrender value in a lump sum or alternate payment
option provided by your policy and that you select. Current tax may apply. Under
some circumstances the maturity date may be extended until the death of the
insured. See Section 5 -- Insurance Benefits for a discussion of the Extended
Maturity Benefit Endorsement.
MINIMUM VALUE
If the surrender value of your policy (policy value less surrender charges and
outstanding loan amounts), is too low to pay the monthly policy charges or loan
interest that is due, insurance coverage will end and your policy will lapse
without value. See Section 2 -- Premiums for information on policy lapse and
reinstatement.
- ---------------------------------------------------
8. OTHER INFORMATION
- ----------------------------------------------
SAFECO LIFE
SAFECO Life was incorporated as a stock life insurance company under Washington
law on January 23, 1957. We provide individual and group life, accident and
health insurance, and annuity products and are licensed to do business in the
District of Columbia and all states except New York. We are a wholly owned
subsidiary of SAFECO Corporation which is a holding company whose subsidiaries
are primarily engaged in insurance and financial service businesses.
SEPARATE ACCOUNT
We adopted a Board Resolution to establish SAFECO Separate Account SL ("Separate
Account") under Washington law on November 6, 1986. The Separate Account holds
the assets that underlie policy values invested in the portfolios. The Separate
Account is registered with the SEC as a unit investment trust under the
Investment Company Act of 1940, as amended.
Under Washington law, the assets in the Separate Account are the property of
SAFECO Life. However, assets in the Separate Account that are attributable to
policies are not chargeable with liabilities arising out of any other business
we may conduct. Income, gains and losses (realized and unrealized), resulting
from assets in the Separate Account are credited to or charged against the
Separate Account without regard to other income, gains or losses of SAFECO Life.
Promises we make in the policy are general obligations of SAFECO Life and are
not dependent on assets in the Separate Account.
We reserve the right to combine the Separate Account with one or more of our
other separate accounts or to deregister the Separate Account under the 1940
Act, if such registration is no longer required.
GENERAL ACCOUNT
If you put your money into the fixed account, it goes into SAFECO Life's general
account. The general account is made up of all of SAFECO Life's assets other
than those attributable to separate accounts. All of the assets of the general
account are chargeable with the claims of any of our policy owners as well as
our creditors. The general account invests its assets in accordance with state
insurance law.
We are not required to register the fixed account or any interests therein, with
the SEC. For this reason, SEC staff has not reviewed disclosure relating to the
fixed account. However, such disclosure may be subject to general provisions in
federal securities laws that relate to accuracy and completeness of statements
made in the prospectus.
DISTRIBUTION (PRINCIPAL UNDERWRITER)
The policies are underwritten by SAFECO Securities, Inc. ("SSI"). They are sold
by individuals who, in addition to being licensed to sell variable life
insurance for SAFECO
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<PAGE>
Life, are also registered representatives of broker-dealers who have a current
sales agreement with SSI. SSI is an affiliate of SAFECO Life and is located at
10865 Willows Road NE, Redmond, Washington 98052. It is registered as a
broker-dealer with the SEC under the Securities Act of 1934 and is a member of
the National Association of Securities Dealers, Inc. No amounts are retained by
SSI for acting as principal underwriter for SAFECO Life policies.
The commissions paid to registered representatives on the sale of policies are
not more than 90% of premiums paid during the first year nor more than 2% during
years after the first. In addition, commissions, allowances and bonuses may be
paid to registered representatives and/or other distributors of the policies. A
bonus dependent upon persistency is one type of bonus that may be paid.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Separate Account or SSI is a party.
SAFECO Life is engaged in various kinds of litigation which, in the opinion of
SAFECO Life, are not of material importance in relation to the total capital and
surplus of SAFECO Life.
RIGHT TO SUSPEND TRANSFERS, LOANS,
WITHDRAWAL, OR SURRENDER
We may be required to suspend or postpone payment of transfers, loans,
withdrawals or surrender from the portfolios for any period of time when:
- the NYSE is closed (other than customary weekend or holiday closings);
- trading on the NYSE is restricted;
- an emergency exists such that disposal of or determination of the value of
the portfolio shares is not reasonably practicable; or
- the SEC, by order, so permits for your protection.
Additionally, we reserve the right to defer payment of transfers, loans,
withdrawals, or surrender from the fixed account for the period permitted by
law, but not for more than six months.
VOTING RIGHTS
SAFECO Life is the legal owner of the portfolios' shares. However, when a
portfolio solicits proxies in connection with a shareholder vote, we are
required to ask you for instructions as to how to vote those shares. All shares
are voted in the same proportion as the instructions we received. Should we
determine that we are no longer required to comply with the above, we will vote
the shares in our own right. You have no voting rights with respect to values in
the fixed account.
DISREGARD OF VOTING INSTRUCTIONS
SAFECO Life may, when required to do so by state insurance authorities, vote
shares of the funds without regard to instructions from owners if such
instructions would require the shares to be voted to cause any portfolio to make
(or refrain from making), investments which would result in changes in the
sub-classification or investment objectives of the portfolio. SAFECO Life may
also disapprove changes in the investment policy initiated by the owners or
trustees of the funds, if such disapproval is reasonable and is based on a good
faith determination by SAFECO Life that the change would violate state or
federal law or the change would not be consistent with the investment objectives
of the portfolios or which varies from the general quality and nature of
investments and investment techniques used by other funds with similar
investment objectives underlying other variable policies offered by SAFECO Life
or of an affiliated life insurance company. In the event that SAFECO Life does
disregard voting instructions, a summary of this action and the reasons for such
action will be included in the next semi-annual report to owners.
REDUCTION OF CHARGES OR ADDITIONAL AMOUNTS CREDITED
Under some circumstances we may expect to experience lower costs or higher
revenues associated with issuing and administering certain policies. For
example, sales expenses are expected to be less when policies are sold to a
large group of individuals. Under such circumstances we may pass a portion of
these anticipated savings on to you by reducing certain policy charges
(including the surrender charge) or crediting additional fixed account interest.
We may also take such action in connection with policies sold to our officers,
directors, and employees and their family members, employees of our affiliates
and their family members, and registered representatives and employees of
broker-dealers that have a current selling agreement with us. In each
circumstance such actions will be reasonably related to the savings or revenues
anticipated and will be applied in a non-discriminatory manner. These actions
may be withdrawn or modified by us at any time.
REPORTS TO POLICY OWNERS
We send you semi-annual and annual reports of the portfolios. We also send you
quarterly statements about your policy which, taken together, provide you with
an annual report of your policy each policy year. Statements include information
about:
- the death benefit;
- policy values including surrender value;
- policy charges;
- loan amounts including loan interest;
- premiums paid during the year; and
- investment performance.
INTERNET INFORMATION
You can find more information about the PREMIER Accumulation Life Flexible
Premium Variable Life Insurance Policy as well as other products and financial
services offered by SAFECO companies on the Internet at http://www.SAFECO.com.
This website is frequently
14
<PAGE>
updated with new information and can help you locate a representative near you.
If you already own a PREMIER Accumulation Life policy you can obtain specific
information about your policy and additional online services.
The SEC also maintains a website at http://www.sec.gov, which contains a copy of
the Separate Account's most recent registration statement and general consumer
information.
EXPERTS
The financial statements of SAFECO Separate Account SL and SAFECO Life Insurance
Company and Subsidiaries, appearing in this prospectus have been audited by
Ernst and Young LLP, independent auditors, as set forth in their reports
thereon, appearing elsewhere herein, and are included in reliance upon such
reports given upon the authority of such firm as experts in accounting and
auditing.
FINANCIAL STATEMENTS
The financial statements of SAFECO Separate Account SL and SAFECO Life Insurance
Company and Subsidiaries, should be considered only as bearing upon out ability
to meet our obligations under the policy. They should not be considered as
bearing upon the investment experience of the portfolios.
15
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PART II
MORE INFORMATION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
EXECUTIVE OFFICERS AND DIRECTORS OF SAFECO LIFE
<TABLE>
<S> <C>
OFFICERS:
Roger H. Eigsti Chairman of the Board
Randall H. Talbot President
Leslie J. Brandli Controller and Assistant
Secretary
Roger F. Harbin Executive Vice President
and Actuary
Michael J. Kinzer Vice President and Chief
Actuary
Rod A. Pierson Senior Vice President and
Secretary
George. C. Pagos Associate General
Counsel, Vice President
and Assistant Secretary
DIRECTORS:
Donald S. Chapman Director
Boh A. Dickey Director
Roger H. Eigsti Director
Rod A. Pierson Director
James W. Ruddy Director
Robert L. Spaulding Director
Randall H. Talbot Director
W. Randall Stoddard Director
Dale E. Lauer Director
</TABLE>
*The business address for Messrs. Talbot, Harbin, Kinzer, Pagos and Ms. Brandli
is 5069 154th Pl., Redmond, Washington 98052. The business address for Messr.
Spaulding in 601 Union Street, Suite 2500, Seattle, WA 98101. The business
address for Messr. Lauer is 500 N. Meridian Street, Indianapolis, IN 46204. The
business address for all other individuals listed is SAFECO Plaza, Seattle,
Washington 98185.
All of the officers and directors listed above have acted in the capacities
shown above for at least the last five years except Messer's Talbot, Harbin and
Lauer and Ms. Brandli. Mr. Talbot was president and chief executive officer of
Talbot Financial Corporation from 1994 until accepting his current position.
Talbot Financial Corporation, an affiliate of SAFECO Life, is a holding company
for insurance agencies marketing insurance products and other financial
services. Mr. Harbin previously held the positions of senior vice president for
SAFECO Life's annuities division since 1992 and has been executive vice
president of SAFECO Life's broker dealer since 1998. Mr. Lauer has held the
position of vice president of commercial lines underwriting for SAFECO Property
and Casualty Companies since 1992 and senior vice president since 1997.
Ms. Brandli joined SAFECO Life in 1999 and previously held the position of
Controller for PEMCO Financial Services since 1999.
MISSTATEMENT OF AGE OR SEX
If the age or sex of the insured has been incorrectly stated, the death benefit
and any benefits provided by riders will be adjusted to reflect the death
benefit that would have been purchased at the correct age or sex using the cost
of insurance rate in effect when the policy was issued.
SAFECO LIFE'S RIGHT TO CONTEST
SAFECO Life cannot contest the validity of the policy except in the case of
fraud after it has been in effect during the insured's lifetime for two years
from the policy date or, with regard to an increase in insurance coverage, two
years from the effective date of that increase. If the policy is reinstated, the
two-year period is measured from the date of reinstatement. If the insured
commits suicide within two years of the policy date, or such period as specified
in state law, the benefit is limited to a return of premiums adjusted for loans,
withdrawals, and investment experience, gain or loss, in the portfolios.
FEDERAL TAX STATUS
NOTE. The following description is based upon SAFECO Life's understanding of
current federal income tax law applicable to life insurance in general. SAFECO
Life 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. Section 7702 of the Internal Revenue Code of 1986, as amended
(the "Code"), defines the term "life insurance contract" for purposes of the
Code. SAFECO Life believes that the policies to be issued will qualify as "life
insurance contracts" under Section 7702. SAFECO Life does not guarantee the tax
status of the policies. Purchasers bear the complete risk that the policies may
not be treated as "life insurance" under federal income tax laws. Purchasers
should consult their own tax advisers. 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.
INTRODUCTION. The discussion contained herein is general in nature and is not
intended as tax advice. Each person concerned should consult a competent tax
adviser. No attempt is made to consider any applicable state or other tax laws.
Moreover, the discussion herein is based upon SAFECO Life's understanding of
current federal income tax laws as they are currently interpreted. No
representation is made regarding the likelihood of continuation of those current
federal income tax laws or
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<PAGE>
of the current interpretations by the Internal Revenue Service.
SAFECO Life 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
Life and its operations form a part of SAFECO Life.
DIVERSIFICATION. Section 817(h) of the Code imposes certain diversification
standards on the underlying assets of variable life insurance policies. The Code
provides that a variable life insurance policy will not be treated as life
insurance 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 policy as a life insurance contract would result in imposition of federal
income tax on the owner with respect to earnings allocable to the policy prior
to the receipt of payments under the policy. The Code contains a safe harbor
provision which provides that life insurance policies such as the policies meet
the diversification requirements if, as of the close of each quarter, the
underlying assets meet the diversification standards for a regulated investment
company and no more than fifty-five (55%) percent of the total assets consist of
cash, cash items, U.S. Government securities and securities of other regulated
investment companies. There is an exception for securities issued by the U.S.
Treasury in connection with variable life insurance policies.
On March 2, 1989, the Treasury Department issued Regulations (Treas. Reg.
Section 1.817-5), which establish diversification requirements for the
investment portfolios underlying variable contracts such as the policies. 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: (i) no more than 55% of the value of the total assets
of the portfolio is represented by any one investment; (ii) no more than 70% of
the value of the total assets of the portfolio is represented by any two
investments; (iii) no more than 80% of the value of the total assets of the
portfolio is represented by any three investments; and (iv) no more than 90% of
the value of the total assets of the portfolio is represented by any four
investments. For purposes of these Regulations, all securities of the same
issuer are treated as a single investment.
The Technical and Miscellaneous Revenue Act of 1988 ("TAMRA") 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 Life intends that each investment portfolio underlying the policies will
be managed by the managers in such a manner as to comply with these
diversification requirements.
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 policy. 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 policy 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 the 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.
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 Life reserves the right to modify
the policy in an attempt to maintain favorable tax treatment.
TAX TREATMENT OF THE POLICY. The policy has been designed to comply with the
definition of life insurance contained in Section 7702 of the Code. Although
some interim guidance has been provided and proposed regulations have been
issued, final regulations have not been adopted. Section 7702 of the Code
requires the use of reasonable mortality and other expense charges. In
establishing these charges, SAFECO Life has relied on the interim guidance
provided in IRS Notice 88-128 and proposed regulations issued on July 5, 1991.
Currently, there is even less guidance as to a policy issued on a substandard
risk basis and thus it is even less clear whether a policy issued on such basis
would meet the requirements of Section 7702 of the Code.
While SAFECO Life has attempted to comply with Section 7702, the law in this
area is very complex and unclear. There is a risk, therefore, that the Internal
Revenue Service will not concur with SAFECO Life's interpretations of Section
7702 that were made in determining such compliance. In the event the policy is
determined not to so comply, it would not qualify for the favorable tax
treatment usually accorded life insurance policies. Owners should consult their
tax advisers with respect to the tax consequences of purchasing the policy.
POLICY PROCEEDS. The tax treatment accorded to loan proceeds and/or withdrawals
or surrenders from the
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<PAGE>
policies will depend on whether the policy is considered to be a modified
endowment contract. Otherwise, SAFECO Life believes that the policy should
receive the same federal income tax treatment as any other type of life
insurance. As such, the death benefit thereunder is excludable from the gross
income of the beneficiary under Section 101(a) of the Code. Also, the owner is
not deemed to be in constructive receipt of the policy Account or Net Cash
Surrender Value, including increments thereon, under a policy until there is a
distribution of such amounts.
Federal, state and local estate, inheritance and other tax consequences of
ownership, or receipt of policy proceeds, depend on the circumstances of each
owner or beneficiary.
TAX TREATMENT OF LOANS, WITHDRAWALS, AND SURRENDERS. Section 7702A of the Code
sets forth the rules for determining when a life insurance policy will be deemed
to be a Modified Endowment Contract. A modified endowment contract is a contract
which is entered into or materially changed on or after June 21, 1988 and fails
to meet the 7-pay test. A policy fails to meet the 7-pay test when the
cumulative amount paid under the policy at any time during the first seven
policy years exceeds the sum of the net level premiums which would have been
paid on or before such time if the policy provided for paid-up future benefits
after the payment of seven level annual premiums. A material change would
include any increase in the future benefits or addition of qualified additional
benefits provided under a policy unless the increase is attributable to:
(1) the payment of premiums necessary to fund the lowest death benefit and
qualified additional benefits payable in the first seven policy years; or
(2) the crediting of interest or other earnings (including policyholder
dividends) with respect to such premiums.
Furthermore, any policy received in exchange for a policy classified as a
modified endowment contract will be treated as a modified endowment contract
regardless of whether it meets the 7-pay test. The status of an exchange of a
contract issued before June 21, 1988 is unclear; however, the Internal Revenue
Service has taken the position in a Private Letter Ruling that a contract
received in an exchange on or after June 21, 1988 will be considered as entered
into as of the date of the exchange and therefore subject to Section 7702A. Due
to the flexible premium nature of the policy, the determination of whether it
qualifies for treatment as a modified endowment contract depends on the
individual circumstances of each policy.
If the policy is classified as a modified endowment contract, then withdrawals
and surrenders and/or loan proceeds are taxable to the extent of income in the
policy. Such distributions are deemed to be on a last-in, first-out basis, which
means the taxable income is distributed first. Loan proceeds and/or surrender
payments may also be subject to an additional 10% federal income tax penalty
applied to the income portion of such distribution. The penalty shall not apply,
however, to any distributions: (1) made on or after the date on which the
taxpayer reaches age 59 1/2; (2) which is attributable to the taxpayer becoming
disabled within the meaning of Section 72(m)(7) of the Code); or (3) which is
part of a series of substantially equal periodic payments made not less
frequently than annually for the life or life expectancy of the taxpayer or the
joint lives or joint life expectancies of such taxpayer and his beneficiary.
If a policy is not classified as a modified endowment contract, then any
withdrawals will be treated first as a recovery of the investment in the policy,
which would not be received as taxable income. However, if a distribution is the
result of a reduction in benefits under the policy within the first fifteen
years after the policy is issued in order to comply with Section 7702, such
distribution will, under rules set forth in Section 7702, be taxed as ordinary
income to the extent of income in the policy.
Any loans from a policy which is not classified as a modified endowment
contract, will be treated as indebtedness of the owner and not a distribution.
Personal interest payable on a loan under a policy owned by an individual is
generally not deductible. Furthermore, no deduction will be allowed for interest
on loans under policies covering the life of any employee or officer of the
taxpayer or any person financially interested in the business carried on by the
taxpayer to the extent the indebtedness for such employee, officer or
financially interested person exceeds $50,000. The deductibility of interest
payable on policy loans may be subject to further rules and limitations under
Sections 163 and 264 of the Code.
Policy owners should seek competent tax advice on the tax consequences of taking
loans, withdrawals or surrendering any policy.
QUALIFIED PLANS. The policies may be used in conjunction with certain qualified
plans. Because the rules governing such use are complex, a purchaser should not
do so until he has consulted a competent qualified plans consultant.
ADVERTISING
SAFECO Life is ranked and rated by independent financial rating services,
including Moody's, Standard and Poor's and A.M. Best Company. The purpose of
these ratings is to reflect the financial strength or claims-paying ability of
SAFECO Life. The ratings are not intended to reflect the investment experience
or financial strength of the Separate Account. From time to time we may
advertise the rating of SAFECO Life and may include a comparison of currently
taxable and tax deferred investments, based on selected tax brackets, or
discussions of alternative investment vehicles and general economic conditions.
18
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ANNUAL REPORT
DECEMBER 31, 1999
SAFECO SEPARATE ACCOUNT SL
<PAGE>
SAFECO Separate Account SL
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
AS OF DECEMBER 31, 1999
<TABLE>
<CAPTION>
SUB-ACCOUNTS
--------------------------------------------------------------------
SAFECO
(IN THOUSANDS, EXCEPT PER-SHARE AND SAFECO SAFECO SAFECO SAFECO SMALL
PER-UNIT AMOUNTS) EQUTIY GROWTH NORTHWEST BOND COMPANY
<S> <C> <C> <C> <C> <C>
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ASSETS:
Investments in underlying Portfolios:
Investments, at cost $ 7,693 $ 8,509 $ 567 $ 221 $ 131
============ ============ ============ ============ ============
SHARES OWNED 251 387 31 20 12
NET ASSET VALUE PER SHARE $ 31.02 $ 22.50 $ 22.68 $ 10.33 $ 11.39
------------ ------------ ------------ ------------ ------------
Investments, at value 7,780 8,713 694 208 136
Dividends receivable 436 - 45 12 -
------------ ------------ ------------ ------------ ------------
Total assets 8,216 8,713 739 220 136
LIABILITIES:
Mortality and expense risk charge payable 5 5 - - -
------------ ------------ ------------ ------------ ------------
NET ASSETS $ 8,211 $ 8,708 $ 739 $ 220 $ 136
============ ============ ============ ============ ============
ENHANCED VARIABLE UNIVERSAL LIFE
NET ASSETS $ 4,237 $ 5,065 $ 411 $ 167 $ N/A
ACCUMULATION UNITS OUTSTANDING 22 29 2 2 N/A
------------ ------------ ------------ ------------ ------------
ACCUMULATION UNIT VALUE *
(Net assets divided by accumulation units
outstanding) $ 195.416 $ 174.410 $ 201.394 $ 111.052 $ N/A
============ ============ ============ ============ ============
PREMIER VARIABLE UNIVERSAL LIFE
NET ASSETS $ 3,974 $ 3,643 $ 328 $ 53 $ 136
============ ============ ============ ============ ============
ACCUMULATION UNITS OUTSTANDING 277 321 20 5 15
------------ ------------ ------------ ------------ ------------
ACCUMULATION UNIT VALUE *
(Net assets divided by accumulation units
outstanding) $ 14.329 $ 11.341 $ 16.483 $ 10.464 $ 9.136
============ ============ ============ ============ ============
</TABLE>
* The redemption price per unit is the accumulation unit value.
A-1
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
SAFECO Separate Account SL
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
AS OF DECEMBER 31, 1999
<TABLE>
<CAPTION>
SUB-ACCOUNTS
-------------------------------------------------------
AMERICAN AMERICAN LEXINGTON LEXINGTON
(IN THOUSANDS, EXCEPT PER-SHARE AND CENTURY CENTURY NATURAL EMERGING
PER-UNIT AMOUNTS) BALANCED INTERNATIONAL RESOURCES MARKETS
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
ASSETS:
Investments in underlying Portfolios:
Investments, at cost $ 120 $ 986 $ 317 $ 667
============ ============= ============ ============
SHARES OWNED 16 120 24 84
NET ASSET VALUE PER SHARE $ 7.79 $ 12.50 $ 12.51 $ 12.81
------------ ------------- ------------ ------------
Investments, at value 121 1,497 306 1,074
Dividends receivable - - - -
------------ ------------- ------------ ------------
Total assets 121 1,497 306 1,074
LIABILITIES:
Mortality and expense risk charge payable - 1 - 1
------------ ------------- ------------ ------------
NET ASSETS $ 121 $ 1,498 $ 306 $ 1,073
============ ============= ============ ============
ENHANCED VARIABLE UNIVERSAL LIFE
NET ASSETS $ N/A $ N/A $ 276 $ 947
ACCUMULATION UNITS OUTSTANDING N/A N/A 3 7
------------ ------------- ------------ ------------
ACCUMULATION UNIT VALUE *
(Net assets divided by accumulation units
outstanding) $ N/A $ N/A $ 110.109 $ 133.217
============ ============= ============ ============
PREMIER VARIABLE UNIVERSAL LIFE
NET ASSETS $ 121 $ 1,498 $ 30 $ 126
============ ============= ============ ============
ACCUMULATION UNITS OUTSTANDING 9 75 4 8
------------ ------------- ------------ ------------
ACCUMULATION UNIT VALUE *
(Net assets divided by accumulation units
outstanding) $ 12.874 $ 19.997 $ 8.417 $ 15.854
============ ============= ============ ============
</TABLE>
* The redemption price per unit is the accumulation unit value.
A-2
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
SAFECO Separate Account SL
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
AS OF DECEMBER 31, 1999
<TABLE>
<CAPTION>
SUB-ACCOUNTS
---------------------------------------------------------------------
FIDELITY FIDELITY
(IN THOUSANDS, EXCEPT PER-SHARE AND FIDELITY ASSET ASSET MGR: FIDELITY FIDELITY
PER-UNIT AMOUNTS) INDEX 500 MANAGER GROWTH BALANCED CONTRAFUND
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
ASSETS:
Investments in underlying Portfolios:
Investments, at cost $ 10,835 $ 9,860 $ 1,824 $ 176 $ 6,600
============ ============ ============ ============= ============
SHARES OWNED 89 613 112 11 324
NET ASSET VALUE PER SHARE $ 167.41 $ 18.67 $ 18.38 $ 16.00 $ 29.15
------------ ------------ ------------ ------------- ------------
Investments, at value 14,920 11,453 2,067 180 9,447
Dividends receivable - - - - -
------------ ------------ ------------ ------------- ------------
Total assets 14,920 11,453 2,067 180 9,447
LIABILITIES:
Mortality and expense risk charge payable 10 8 1 - 7
------------ ------------ ------------ ------------- ------------
NET ASSETS $ 14,910 $ 11,445 $ 2,066 $ 180 $ 9,440
============ ============ ============ ============= ============
ENHANCED VARIABLE UNIVERSAL LIFE
NET ASSETS $ 10,330 $ 10,864 $ 1,434 $ N/A $ 7,959
ACCUMULATION UNITS OUTSTANDING 30 43 6 N/A 28
------------ ------------ ------------ ------------- ------------
ACCUMULATION UNIT VALUE *
(Net assets divided by accumulation units
outstanding) $ 347.896 $ 253.966 $ 226.400 $ N/A $ 280.289
============ ============ ============ ============= ============
PREMIER VARIABLE UNIVERSAL LIFE
NET ASSETS $ 4,580 $ 581 $ 632 $ 180 $ 1,481
============ ============ ============ ============= ============
ACCUMULATION UNITS OUTSTANDING 279 44 45 14 91
------------ ------------ ------------ ------------- ------------
ACCUMULATION UNIT VALUE *
(Net assets divided by accumulation units
outstanding) $ 16.423 $ 13.173 $ 14.101 $ 12.827 $ 16.359
============ ============ ============ ============= ============
</TABLE>
* The redemption price per unit is the accumulation unit value.
A-3
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
SAFECO Separate Account SL
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
AS OF DECEMBER 31, 1999
<TABLE>
<CAPTION>
SUB-ACCOUNTS
------------------------------------------------------------------------
FIDELITY FIDELITY FIDELITY
(IN THOUSANDS, EXCEPT PER-SHARE AND EQUITY- GROWTH & GROWTH FIDELITY FIDELITY
PER-UNIT AMOUNTS) INCOME INCOME OPPORTUNITIES GROWTH HIGH INCOME
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
ASSETS:
Investments in underlying Portfolios:
Investments, at cost $ 10,253 $ 345 $ 382 $ 23,785 $ 2,742
============ ============= ============ ============= =============
SHARES OWNED 461 22 17 655 234
NET ASSET VALUE PER SHARE $ 25.71 $ 17.30 $ 23.15 $ 54.93 $ 11.31
------------ ------------- ------------ ------------- -------------
Investments, at value 11,858 372 402 36,006 2,650
Dividends receivable - - - - -
------------ ------------- ------------ ------------- -------------
Total assets 11,858 372 402 36,006 2,650
LIABILITIES:
Mortality and expense risk charge payable 9 - - 26 2
------------ ------------- ------------ ------------- -------------
NET ASSETS $ 11,849 $ 372 $ 402 $ 35,980 $ 2,648
============ ============= ============ ============= =============
ENHANCED VARIABLE UNIVERSAL LIFE
NET ASSETS $ 10,642 $ N/A $ N/A $ 32,287 $ 2,416
ACCUMULATION UNITS OUTSTANDING 31 N/A N/A 66 14
------------ ------------- ------------ ------------- -------------
ACCUMULATION UNIT VALUE *
(Net assets divided by accumulation units
outstanding) $ 345.628 $ N/A $ N/A $ 487.329 $ 168.804
============ ============= ============ ============= =============
PREMIER VARIABLE UNIVERSAL LIFE
NET ASSETS $ 1,207 $ 372 $ 402 $ 3,693 $ 232
============ ============= ============ ============= =============
ACCUMULATION UNITS OUTSTANDING 96 25 29 186 22
------------ ------------- ------------ ------------- -------------
ACCUMULATION UNIT VALUE *
(Net assets divided by accumulation units
outstanding) $ 12.509 $ 14.698 $ 13.793 $ 19.835 $ 10.398
============ ============= ============ ============= =============
</TABLE>
* The redemption price per unit is the accumulation unit value.
A-4
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
SAFECO Separate Account SL
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
AS OF DECEMBER 31, 1999
<TABLE>
<CAPTION>
SUB-ACCOUNTS
-------------------------------------------------------
FIDELITY WANGER
(IN THOUSANDS, EXCEPT PER-SHARE AND INVESTMENT FIDELITY FIDELITY US
PER-UNIT AMOUNTS) GRADE BOND MONEY MARKET OVERSEAS SMALL CAP
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
ASSETS:
Investments in underlying Portfolios:
Investments, at cost $ 923 $ 6,319 $ 5,607 $ 1,214
============ ============= ============ ============
SHARES OWNED 74 6,319 292 55
NET ASSET VALUE PER SHARE $ 12.16 $ 1.00 $ 27.44 $ 24.88
------------ ------------- ------------ ------------
Investments, at value 903 6,319 8,014 1,358
Dividends receivable - 30 - -
------------ ------------- ------------ ------------
Total assets 903 6,349 8,014 1,358
LIABILITIES:
Mortality and expense risk charge payable - 4 5 1
------------ ------------- ------------ ------------
NET ASSETS $ 903 $ 6,345 $ 8,009 $ 1,357
============ ============= ============ ============
ENHANCED VARIABLE UNIVERSAL LIFE
NET ASSETS $ 859 $ 4,041 $ 7,363 $ N/A
ACCUMULATION UNITS OUTSTANDING 6 30 28 N/A
------------ ------------- ------------ ------------
ACCUMULATION UNIT VALUE *
(Net assets divided by accumulation units
outstanding) $ 150.602 $ 136.106 $ 263.079 $ N/A
============ ============= ============ ============
PREMIER VARIABLE UNIVERSAL LIFE
NET ASSETS $ 44 $ 2,303 $ 646 $ 1,357
============ ============= ============ ============
ACCUMULATION UNITS OUTSTANDING 4 209 40 100
------------ ------------- ------------ ------------
ACCUMULATION UNIT VALUE *
(Net assets divided by accumulation units
outstanding) $ 10.772 $ 11.026 $ 15.941 $ 13.525
============ ============= ============ ============
</TABLE>
* The redemption price per unit is the accumulation unit value.
A-5
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
SAFECO Separate Account SL
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31
<TABLE>
<CAPTION>
SUB-ACCOUNTS
----------------------------------------------------------------------
SAFECO SAFECO SAFECO
EQUITY GROWTH NORTHWEST
- --------------------------------------------------------------------------------------------------------------------------
---------------------- ---------------------- ----------------------
(IN THOUSANDS) 1999 1998 1999 1998 1999 1998
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Dividend income $ 436 $ 267 $ - $ 1,007 $ 45 $ -
Mortality and expense risk charge (58) (36) (69) (66) (2) (2)
---------- ---------- ---------- ---------- ---------- ----------
Net Income (loss) 378 231 (69) 941 43 (2)
Net realized gain (loss) on investments 300 274 (1,163) (37) 10 (2)
Net change in unrealized appreciation
(depreciation) (185) 317 1,495 (1,287) 120 12
---------- ---------- ---------- ---------- ---------- ----------
NET CHANGE IN NET ASSETS RESULTING FROM OPERATIONS 493 822 263 (383) 173 8
UNIT TRANSACTIONS:
Purchases 6,706 3,962 6,748 8,466 389 199
Redemptions (4,657) (1,622) (7,972) (3,202) (81) (121)
---------- ---------- ---------- ---------- ---------- ----------
NET CHANGE IN NET ASSETS RESULTING FROM UNIT
TRANSACTIONS 2,049 2,340 (1,224) 5,264 308 78
---------- ---------- ---------- ---------- ---------- ----------
TOTAL CHANGE IN NET ASSETS 2,542 3,162 (961) 4,881 481 86
NET ASSETS AT BEGINNING OF YEAR 5,669 2,507 9,669 4,788 258 172
---------- ---------- ---------- ---------- ---------- ----------
NET ASSETS AT END OF YEAR $ 8,211 $ 5,669 $ 8,708 $ 9,669 $ 739 $ 258
========== ========== ========== ========== ========== ==========
<CAPTION>
SUB-ACCOUNTS
----------------------
SAFECO
BOND
- -------------------------------------------------- ----------------------
----------------------
(IN THOUSANDS) 1999 1998
<S> <C> <C>
- --------------------------------------------------
OPERATIONS:
Dividend income $ 13 $ 10
Mortality and expense risk charge (2) (2)
---------- ----------
Net Income (loss) 11 8
Net realized gain (loss) on investments (17) 10
Net change in unrealized appreciation
(depreciation) (4) (4)
---------- ----------
NET CHANGE IN NET ASSETS RESULTING FROM OPERATIONS (10) 14
UNIT TRANSACTIONS:
Purchases 2,563 51
Redemptions (2,536) (49)
---------- ----------
NET CHANGE IN NET ASSETS RESULTING FROM UNIT
TRANSACTIONS 27 2
---------- ----------
TOTAL CHANGE IN NET ASSETS 17 16
NET ASSETS AT BEGINNING OF YEAR 203 187
---------- ----------
NET ASSETS AT END OF YEAR $ 220 $ 203
========== ==========
</TABLE>
A-6
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
SAFECO Separate Account SL
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31
<TABLE>
<CAPTION>
SUB-ACCOUNTS
----------------------------------------------------------------------
SAFECO AMERICAN AMERICAN
SMALL CENTURY CENTURY
COMPANY BALANCED INTERNATIONAL
- --------------------------------------------------------------------------------------------------------------------------
---------------------- ---------------------- ----------------------
(IN THOUSANDS) 1999 1998 1999 1998 1999 1998
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Dividend income $ - $ - $ 14 $ 1 $ - $ 4
Mortality and expense risk charge (1) (3) (1) - (7) (2)
---------- ---------- ---------- ---------- ---------- ----------
Net Income (loss) (1) (3) 13 1 (7) 2
Net realized gain (loss) on investments (81) (60) (1) (1) 112 (11)
Net change in unrealized appreciation
(depreciation) 87 (83) (2) 3 472 40
---------- ---------- ---------- ---------- ---------- ----------
NET CHANGE IN NET ASSETS RESULTING FROM OPERATIONS 5 (146) 10 3 577 31
UNIT TRANSACTIONS:
Purchases 88 704 88 59 1,318 796
Redemptions (332) (186) (30) (9) (1,174) (55)
---------- ---------- ---------- ---------- ---------- ----------
NET CHANGE IN NET ASSETS RESULTING FROM UNIT
TRANSACTIONS (244) 518 58 50 144 741
---------- ---------- ---------- ---------- ---------- ----------
TOTAL CHANGE IN NET ASSETS (239) 372 68 53 721 772
NET ASSETS AT BEGINNING OF YEAR 375 3 53 - 777 5
---------- ---------- ---------- ---------- ---------- ----------
NET ASSETS AT END OF YEAR $ 136 $ 375 $ 121 $ 53 $ 1,498 $ 777
========== ========== ========== ========== ========== ==========
</TABLE>
A-7
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
SAFECO Separate Account SL
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31
<TABLE>
<CAPTION>
SUB-ACCOUNTS
----------------------------------------------------------------------
LEXINGTON LEXINGTON
NATURAL EMERGING FIDELITY
RESOURCES MARKETS INDEX 500
- --------------------------------------------------------------------------------------------------------------------------
---------------------- ---------------------- ----------------------
(IN THOUSANDS) 1999 1998 1999 1998 1999 1998
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Dividend income $ 2 $ 46 $ 3 $ 43 $ 164 $ 230
Mortality and expense risk charge (3) (7) (6) (5) (102) (65)
---------- ---------- ---------- ---------- ---------- ----------
Net Income (loss) (1) 39 (3) 38 62 165
Net realized gain (loss) on investments (44) (121) (36) (114) 427 502
Net change in unrealized appreciation
(depreciation) 85 (109) 635 (103) 1,715 1,174
---------- ---------- ---------- ---------- ---------- ----------
NET CHANGE IN NET ASSETS RESULTING FROM OPERATIONS 40 (191) 596 (179) 2,204 1,841
UNIT TRANSACTIONS:
Purchases 201 567 339 244 5,796 3,018
Redemptions (342) (993) (320) (227) (2,648) (1,035)
---------- ---------- ---------- ---------- ---------- ----------
NET CHANGE IN NET ASSETS RESULTING FROM UNIT
TRANSACTIONS (141) (426) 19 17 3,148 1,984
---------- ---------- ---------- ---------- ---------- ----------
TOTAL CHANGE IN NET ASSETS (101) (617) 615 (162) 5,352 3,825
NET ASSETS AT BEGINNING OF YEAR 407 1,024 458 620 9,558 5,733
---------- ---------- ---------- ---------- ---------- ----------
NET ASSETS AT END OF YEAR $ 306 $ 407 $ 1,073 $ 458 $ 14,910 $ 9,558
========== ========== ========== ========== ========== ==========
</TABLE>
A-8
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
SAFECO Separate Account SL
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31
<TABLE>
<CAPTION>
SUB-ACCOUNTS
----------------------------------------------------------------------
FIDELITY FIDELITY
ASSET ASSET MGR: FIDELITY
MANAGER GROWTH BALANCED
- --------------------------------------------------------------------------------------------------------------------------
---------------------- ---------------------- ----------------------
(IN THOUSANDS) 1999 1998 1999 1998 1999 1998
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Dividend income $ 802 $ 1,214 $ 115 $ 185 $ 3 $ -
Mortality and expense risk charge (98) (89) (16) (15) - -
---------- ---------- ---------- ---------- ---------- ----------
Net Income (loss) 704 1,125 99 170 3 -
Net realized gain (loss) on investments 176 303 54 146 - (1)
Net change in unrealized appreciation
(depreciation) 182 (118) 103 (46) 1 3
---------- ---------- ---------- ---------- ---------- ----------
NET CHANGE IN NET ASSETS RESULTING FROM OPERATIONS 1,062 1,310 256 270 4 2
UNIT TRANSACTIONS:
Purchases 2,178 1,688 1,365 1,017 158 42
Redemptions (2,506) (1,788) (1,358) (1,006) (22) (4)
---------- ---------- ---------- ---------- ---------- ----------
NET CHANGE IN NET ASSETS RESULTING FROM UNIT
TRANSACTIONS (328) (100) 7 11 136 38
---------- ---------- ---------- ---------- ---------- ----------
TOTAL CHANGE IN NET ASSETS 734 1,210 263 281 140 40
NET ASSETS AT BEGINNING OF YEAR 10,711 9,501 1,803 1,522 40 -
---------- ---------- ---------- ---------- ---------- ----------
NET ASSETS AT END OF YEAR $ 11,445 $ 10,711 $ 2,066 $ 1,803 $ 180 $ 40
========== ========== ========== ========== ========== ==========
</TABLE>
A-9
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
SAFECO Separate Account SL
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31
<TABLE>
<CAPTION>
SUB-ACCOUNTS
----------------------------------------------------------------------
FIDELITY FIDELITY
FIDELITY EQUITY- GROWTH &
CONTRAFUND INCOME INCOME
- --------------------------------------------------------------------------------------------------------------------------
---------------------- ---------------------- ----------------------
(IN THOUSANDS) 1999 1998 1999 1998 1999 1998
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Dividend income $ 286 $ 299 $ 544 $ 647 $ 4 $ -
Mortality and expense risk charge (69) (51) (107) (96) (2) -
---------- ---------- ---------- ---------- ---------- ----------
Net Income (loss) 217 248 437 551 2 -
Net realized gain (loss) on investments 407 447 402 704 12 3
Net change in unrealized appreciation
(depreciation) 1,089 816 (239) (189) 12 15
---------- ---------- ---------- ---------- ---------- ----------
NET CHANGE IN NET ASSETS RESULTING FROM OPERATIONS 1,713 1,511 600 1,066 26 18
UNIT TRANSACTIONS:
Purchases 4,089 1,667 3,192 2,182 375 173
Redemptions (3,318) (1,507) (3,408) (1,744) (208) (12)
---------- ---------- ---------- ---------- ---------- ----------
NET CHANGE IN NET ASSETS RESULTING FROM UNIT
TRANSACTIONS 771 160 (216) 438 167 161
---------- ---------- ---------- ---------- ---------- ----------
TOTAL CHANGE IN NET ASSETS 2,484 1,671 384 1,504 193 179
NET ASSETS AT BEGINNING OF YEAR 6,956 5,285 11,465 9,961 179 -
---------- ---------- ---------- ---------- ---------- ----------
NET ASSETS AT END OF YEAR $ 9,440 $ 6,956 $ 11,849 $ 11,465 $ 372 $ 179
========== ========== ========== ========== ========== ==========
</TABLE>
A-10
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
SAFECO Separate Account SL
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31
<TABLE>
<CAPTION>
SUB-ACCOUNTS
----------------------------------------------------------------------
FIDELITY
GROWTH FIDELITY FIDELITY
OPPORTUNITIES GROWTH HIGH INCOME
- --------------------------------------------------------------------------------------------------------------------------
---------------------- ---------------------- ----------------------
(IN THOUSANDS) 1999 1998 1999 1998 1999 1998
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Dividend income $ 6 $ - $ 2,926 $ 2,486 $ 212 $ 233
Mortality and expense risk charge (2) (1) (256) (181) (21) (18)
---------- ---------- ---------- ---------- ---------- ----------
Net Income (loss) 4 (1) 2,670 2,305 191 215
Net realized gain (loss) on investments 11 - 1,641 1,049 (99) (4)
Net change in unrealized appreciation
(depreciation) (2) 23 5,050 3,547 67 (276)
---------- ---------- ---------- ---------- ---------- ----------
NET CHANGE IN NET ASSETS RESULTING FROM OPERATIONS 13 22 9,361 6,901 159 (65)
UNIT TRANSACTIONS:
Purchases 353 212 9,967 3,484 1,468 977
Redemptions (161) (37) (8,838) (2,747) (1,290) (290)
---------- ---------- ---------- ---------- ---------- ----------
NET CHANGE IN NET ASSETS RESULTING FROM UNIT
TRANSACTIONS 192 175 1,129 737 178 687
---------- ---------- ---------- ---------- ---------- ----------
TOTAL CHANGE IN NET ASSETS 205 197 10,490 7,638 337 622
NET ASSETS AT BEGINNING OF YEAR 197 - 25,490 17,852 2,311 1,689
---------- ---------- ---------- ---------- ---------- ----------
NET ASSETS AT END OF YEAR $ 402 $ 197 $ 35,980 $ 25,490 $ 2,648 $ 2,311
========== ========== ========== ========== ========== ==========
</TABLE>
A-11
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
SAFECO Separate Account SL
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31
<TABLE>
<CAPTION>
SUB-ACCOUNTS
----------------------------------------------------------------------
FIDELITY
INVESTMENT FIDELITY FIDELITY
GRADE BOND MONEY MARKET OVERSEAS
- --------------------------------------------------------------------------------------------------------------------------
---------------------- ---------------------- ----------------------
(IN THOUSANDS) 1999 1998 1999 1998 1999 1998
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Dividend income $ 53 $ 46 $ 309 $ 194 $ 226 $ 402
Mortality and expense risk charge (8) (8) (50) (31) (55) (47)
---------- ---------- ---------- ---------- ---------- ----------
Net Income (loss) 45 38 259 163 171 355
Net realized gain (loss) on investments (8) 50 - - 185 205
Net change in unrealized appreciation
(depreciation) (56) (15) - - 1,974 23
---------- ---------- ---------- ---------- ---------- ----------
NET CHANGE IN NET ASSETS RESULTING FROM OPERATIONS (19) 73 259 163 2,330 583
UNIT TRANSACTIONS:
Purchases 374 291 23,733 13,391 1,993 855
Redemptions (436) (252) (22,833) (10,528) (1,802) (1,142)
---------- ---------- ---------- ---------- ---------- ----------
NET CHANGE IN NET ASSETS RESULTING FROM UNIT
TRANSACTIONS (62) 39 900 2,863 191 (287)
---------- ---------- ---------- ---------- ---------- ----------
TOTAL CHANGE IN NET ASSETS (81) 112 1,159 3,026 2,521 296
NET ASSETS AT BEGINNING OF YEAR 984 872 5,186 2,160 5,488 5,192
---------- ---------- ---------- ---------- ---------- ----------
NET ASSETS AT END OF YEAR $ 903 $ 984 $ 6,345 $ 5,186 $ 8,009 $ 5,488
========== ========== ========== ========== ========== ==========
<CAPTION>
SUB-ACCOUNTS
----------------------
WANGER
US
SMALL CAP
- -------------------------------------------------- ----------------------
----------------------
(IN THOUSANDS) 1999 1998
<S> <C> <C>
- --------------------------------------------------
OPERATIONS:
Dividend income $ 50 $ 19
Mortality and expense risk charge (5) (3)
---------- ----------
Net Income (loss) 45 16
Net realized gain (loss) on investments (16) (31)
Net change in unrealized appreciation
(depreciation) 150 (7)
---------- ----------
NET CHANGE IN NET ASSETS RESULTING FROM OPERATIONS 179 (22)
UNIT TRANSACTIONS:
Purchases 1,206 868
Redemptions (555) (322)
---------- ----------
NET CHANGE IN NET ASSETS RESULTING FROM UNIT
TRANSACTIONS 651 546
---------- ----------
TOTAL CHANGE IN NET ASSETS 830 524
NET ASSETS AT BEGINNING OF YEAR 527 3
---------- ----------
NET ASSETS AT END OF YEAR $ 1,357 $ 527
========== ==========
</TABLE>
A-12
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
SAFECO Separate Account SL
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
SAFECO Separate Account SL (the Separate Account) is registered under the
Investment Company Act of 1940, as amended, as a segregated unit investment
trust of SAFECO Life Insurance Company (SAFECO Life), a wholly-owned
subsidiary of SAFECO Corporation. Purchasers of various SAFECO Life
variable life insurance products direct their investment to one or more of
the sub-accounts of the Separate Account. Each sub-account invests in
shares of a designated portfolio as indicated below. Not all sub-accounts
are available in all SAFECO Life variable life insurance products. The
performance of the underlying portfolios may differ substantially from
publicly traded mutual funds with similar names and objectives.
<TABLE>
<CAPTION>
Sub-Accounts Underlying Portfolios
<S> <C>
-----------------------------------------------------------------------------------------------------------------
SAFECO Resource Series Trust
SAFECO RST Equity (SAFECO Equity) Equity Portfolio
SAFECO RST Growth (SAFECO Growth) Growth Portfolio
SAFECO RST Northwest (SAFECO Northwest) Northwest Portfolio
SAFECO RST Bond (SAFECO Bond) Bond Portfolio
SAFECO RST Small Company Stock (SAFECO Small Company) Small Company Stock Portfolio
Lexington Natural Resources Trust
Lexington Natural Resources Natural Resources Portfolio
Lexington Emerging Markets Fund
Lexington Emerging Markets Emerging Markets Portfolio
American Century Variable Portfolios, Inc.
American Century Balanced VP Balanced
American Century International VP International
Wanger Advisors Trust
Wanger US Small Cap US Small Cap Portfolio
Variable Insurance Products Fund (VIP)
Fidelity Equity-Income VIP Equity-Income Portfolio
Fidelity Growth VIP Growth Portfolio
Fidelity High Income VIP High Income Portfolio
Fidelity Money Market VIP Money Market Portfolio
Fidelity Overseas VIP Overseas Portfolio
Variable Insurance Products Fund II (VIP II)
Fidelity Index 500 VIP II Index 500 Portfolio
VIP II Asset Manager: Growth
Fidelity Asset Manager: Growth (Fidelity Asset Mgr: Growth) Portfolio
Fidelity Asset Manager VIP II Asset Manager Portfolio
Fidelity Contrafund VIP II Contrafund Portfolio
Fidelity Investment Grade Bond VIP II Investment Bond Portfolio
Variable Insurance Products Fund III (VIP III)
Fidelity Balanced VIP III Balanced Portfolio
Fidelity Growth & Income VIP III Growth & Income Portfolio
VIP III Growth Opportunities
Fidelity Growth Opportunities Portfolio
</TABLE>
A-13
<PAGE>
SAFECO Separate Account SL
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Separate Account in the preparation of its financial
statements. The policies are in conformity with generally accepted
accounting principles.
ESTIMATES -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amount of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of income and expenses
during the reporting period. Actual results could differ from those
estimates.
SECURITY VALUATION -- Investments in portfolio shares are carried in the
statement of assets and liabilities at net asset value as reported by the
underlying portfolio.
SECURITY TRANSACTIONS -- Security transactions are recorded on the trade
date. Effective January 1, 1999, realized gains and losses on security
transactions are determined using the average cost method. Prior to 1999,
the First-In First-Out cost methond was used. This change in accounting
method has no net impact on the results of operations or on net assets.
DISTRIBUTIONS -- The net investment income and realized capital gains of
the Separate Account are not distributed, but are retained and reinvested
for the benefit of accumulation unit owners.
FEDERAL INCOME TAX -- Operations of the Separate Account are included in
the federal income tax return of SAFECO Life, 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
the Separate Account.
3. EXPENSES
SAFECO Life assumes mortality and expense risks related to the operations
of the Separate Account. SAFECO Life deducts a daily charge from the assets
of the Separate Account to cover these costs. This charge for the Enhanced
Variable Universal Life Product is, on an annual basis, equal to a rate of
0.90% of the average daily net assets of the product. The daily charge for
the PREMIER Variable Accumulation Life product is, on an annual basis,
equal to 0.70% of the average daily net assets of the product.
There may be fees deducted by SAFECO Life from a contractholder's account
and not directly from the Separate Account. These fees may vary by product.
A-14
<PAGE>
SAFECO Separate Account SL
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
4. INVESTMENT TRANSACTIONS
Purchase and sales activity in underlying portfolio shares for the year
ending December 31, 1999 was as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
SUB-ACCOUNT PURCHASES SALES
<S> <C> <C>
----------------------------------------------------------------------------
SAFECO Equity $ 5,410 $ 4,267
SAFECO Growth 4,465 5,941
SAFECO Northwest 358 56
SAFECO Bond 2,583 2,541
SAFECO Small Company 125 371
American Century Balanced 100 27
American Century International 877 741
Lexington Natural Resources 164 269
Lexington Emerging Markets 176 225
Fidelity Index 500 3,970 1,610
Fidelity Asset Manager 1,288 1,548
Fidelity Asset Manager: Growth 919 784
Fidelity Balanced 162 24
Fidelity Contrafund 2,091 1,520
Fidelity Equity-Income 2,113 2,052
Fidelity Growth & Income 387 217
Fidelity Growth Opportunities 402 206
Fidelity Growth 5,924 4,901
Fidelity High Income 710 415
Fidelity Investment Grade Bond 198 183
Fidelity Money Market 17,020 14,300
Fidelity Overseas 1,066 978
Wanger US Small Cap 1,185 489
</TABLE>
A-15
<PAGE>
SAFECO Separate Account SL
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
5. HISTORICAL ACCUMULATION UNIT VALUES
The following are unit values attributable to unitholders as of the date
indicated:
<TABLE>
<CAPTION>
DECEMBER 31
----------------------------------------------------
ENHANCED ACCUMULATION LIFE SUB-ACCOUNTS: 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------
SAFECO RST Equity # $195.416 $180.395 $145.745 $117.794 $ -
SAFECO RST Growth # 174.410 166.591 165.079 115.231 -
SAFECO RST Northwest # 201.394 131.402 128.860 99.237 -
SAFECO RST Bond # 111.052 116.708 108.135 100.648 -
Lexington Natural Resources # 110.109 97.384 122.254 115.129 -
Lexington Emerging Markets # 133.217 59.164 82.854 94.523 -
Fidelity VIP II Index 500 347.896 291.281 229.037 174.160 143.089
Fidelity VIP II Asset Manager 253.966 230.667 202.303 169.192 148.977
Fidelity VIP II Asset Manager: Growth 226.400 198.197 170.101 137.235 115.467
Fidelity VIP II Contrafund 280.289 227.549 176.648 143.581 119.439
Fidelity VIP Equity-Income 345.628 327.998 296.489 233.528 206.203
Fidelity VIP Growth 487.329 357.747 258.785 211.469 186.039
Fidelity VIP High Income 168.804 157.485 166.098 142.436 126.046
Fidelity VIP II Investment Grade Bond 150.602 153.575 142.369 131.721 128.816
Fidelity VIP Money Market 136.106 130.583 124.936 119.360 114.270
Fidelity VIP Overseas 263.079 186.091 166.539 150.638 134.264
</TABLE>
# Unit value on the inception date (April 30, 1996) of the Lexington and
SAFECO divisions was $100.00.
<TABLE>
<CAPTION>
DECEMBER 31
------------------------------
PREMIER ACCUMULATION LIFE SUB-ACCOUNTS: 1999 1998 1997
<S> <C> <C> <C> <C>
---------------------------------------------------------------------------------------
SAFECO RST Equity* $14.329 $13.200 $10.643
SAFECO RST Growth* 11.341 10.812 10.693
SAFECO RST Northwest* 16.483 10.733 10.504
SAFECO RST Bond* 10.464 10.975 10.134
SAFECO RST Small Company Stock* 9.136 7.973 10.031
American Century VP Balanced* 12.874 11.779 10.236
American Century VP International* 19.997 12.273 10.406
Lexington Natural Resources* 8.417 7.429 9.316
Lexington Emerging Markets* 15.854 7.002 9.820
Fidelity VIP II Index 500* 16.423 13.719 10.764
Fidelity VIP II Asset Manager* 13.173 11.936 10.443
Fidelity VIP II Asset Manager: Growth* 14.101 12.317 10.554
Fidelity VIP III Balanced* 12.827 12.355 10.512
Fidelity VIP II Contrafund* 16.359 13.257 10.274
Fidelity VIP Equity-Income* 12.509 11.845 10.688
Fidelity VIP III Growth & Income* 14.698 13.555 10.494
Fidelity VIP III Growth Opportunities* 13.793 13.320 10.765
Fidelity VIP Growth* 19.835 14.531 10.474
Fidelity VIP High Income* 10.398 9.681 10.191
Fidelity VIP II Investment Grade Bond* 10.772 10.963 10.129
Fidelity VIP Money Market* 11.026 10.560 10.083
Fidelity VIP Overseas* 15.941 11.253 10.049
Wanger U.S. Small Cap* 13.525 10.889 10.089
</TABLE>
* Unit value on the inception date (October 31, 1997) of all PREMIER
Accumulation Life divisions was $10.00.
A-16
<PAGE>
SAFECO Life Separate Account SL
- --------------------------------------------------------------------------------
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Board of Directors of SAFECO Life Insurance Company and Participants of
SAFECO Life Separate Account SL
We have audited the accompanying statements of assets and liabilities of SAFECO
Separate Account SL (comprising SAFECO RST Equity, SAFECO RST Growth, SAFECO RST
Northwest, SAFECO RST Bond, SAFECO RST Small Company Stock, American Century
Balanced, American Century International, Lexington Natural Resources, Lexington
Emerging Markets, Fidelity Index 500, Fidelity Asset Manager, Fidelity Asset
Manager Growth, Fidelity Balanced, Fidelity Contrafund, Fidelity Equity-Income,
Fidelity Growth & Income, Fidelity Growth Opportunities, Fidelity Growth,
Fidelity High Income, Fidelity Investment Grade Bond, Fidelity Money Market,
Fidelity Overseas, and Wanger U.S. Small Cap Advisor sub accounts) as of
December 31, 1999, and the related statements of operations and changes in net
assets, and the historical accumulation unit values for each of the periods
indicated therein. These financial statements and the historical accumulation
unit values are the responsibility of the SAFECO Life Separate Account SL's
management. Our responsibility is to express an opinion on these financial
statements and historical accumulation unit values based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
historical accumulation unit values are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements and the historical accumulation unit
values. Our procedures included confirmation of portfolio shares owned as of
December 31, 1999, by correspondence with the manager of the underlying
portfolio of each sub-account. 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 historical accumulation unit values
referred to above present fairly, in all material respects, the financial
position of each of the respective sub-accounts of SAFECO Life Separate Account
SL at December 31, 1999, the results of their operations, the changes in their
net assets, and their historical accumulation unit values for each of the
periods indicated therein, in conformity with accounting principles generally
accepted in the United States.
<TABLE>
<S> <C>
/s/ Ernst & Young LLP
Seattle, Washington
February 22, 2000
</TABLE>
A-17
<PAGE>
SAFECO Separate Account SL
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
YEAR 2000 READINESS (UNAUDITED)
All Year 2000 readiness work was completed prior to December 31, 1999. The
Sub-Accounts have experienced no disruption in their operations or service
levels, and do not expect to incur any future disruptions or expense in
connection with the Year 2000 issue.
A-18
<PAGE>
Audited Consolidated Financial Statements
SAFECO LIFE INSURANCE COMPANY
AND SUBSIDIARIES
YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
WITH REPORT OF INDEPENDENT AUDITORS
<PAGE>
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 Sheets................................................ 2
Statements of Consolidated Income.......................................... 4
Consolidated Statements of Changes in Shareholder's Equity................. 5
Statements of Consolidated Comprehensive Income (Loss)..................... 5
Statements of Consolidated Cash Flows...................................... 6
Notes to Consolidated Financial Statements................................. 8
</TABLE>
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Board of Directors
SAFECO Life Insurance Company
We have audited the accompanying consolidated balance sheets of SAFECO Life
Insurance Company and subsidiaries (the Company) as of December 31, 1999 and
1998, and the related statements of consolidated income, changes in
shareholder's equity, comprehensive income (loss), and cash flows for each of
the three years in the period ended December 31, 1999. 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 auditing standards generally accepted
in the United States. 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 SAFECO Life Insurance Company
and subsidiaries at December 31, 1999 and 1998, and the consolidated results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1999, in conformity with accounting principles generally
accepted in the United States.
Seattle, Washington /s/ Ernst & Young LLP
February 11, 2000
1
<PAGE>
SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands Except Share Amounts)
<TABLE>
<CAPTION>
December 31
-----------
1999 1998
---------------- -------------
ASSETS
Investments:
<S> <C> <C>
Fixed Maturities Available-for-Sale, at Market Value
(Amortized Cost: $10,634,736; $9,718,627) .............................$ 10,322,572 $ 10,281,711
Fixed Maturities Held-to-Maturity, at Amortized Cost
(Market Value: $2,772,099; $3,259,194) ................................ 2,733,290 2,720,883
Marketable Equity Securities, at Market Value
(Cost: $10,572; $14,665) .............................................. 15,205 18,737
First Mortgage Loans on Real Estate:
Nonaffiliates (At cost, less allowance for losses: $10,781; $11,173) . 746,232 503,734
Affiliates ............................................................ 74,583 160,693
Real Estate ............................................................. 3,829 2,942
Policy Loans ............................................................ 64,478 62,359
Short-Term Investments (At cost which approximates market) .............. 378,656 54,164
Other Invested Assets ................................................... 259 5,211
---------------- -------------
Total Investments .................................................... 14,339,104 13,810,434
Cash ....................................................................... 20,969 8,321
Accrued Investment Income .................................................. 210,207 190,887
Accounts and Notes Receivable (At cost, less allowance for doubtful
accounts: $168; $107) ................................................... 84,923 110,850
Reinsurance Recoverables ................................................... 37,762 32,354
Deferred Policy Acquisition Costs (Net of valuation allowance:
$225; $45,108) .......................................................... 265,830 213,022
Present Value of Future Profits ............................................ 11,741 12,362
Other Assets ............................................................... 70,351 61,510
Current Income Taxes Recoverable ........................................... -- 17,169
Deferred Income Taxes Recoverable (Includes tax benefit on
unrealized depreciation of investment securities: $107,714) ............ 106,453 --
Assets Held in Separate Accounts ........................................... 1,403,248 1,201,135
---------------- -------------
Total Assets ............................................................$ 16,550,588 $ 15,658,044
---------------- -------------
---------------- -------------
</TABLE>
See Notes to Consolidated Financial Statements
2
<PAGE>
<TABLE>
<CAPTION>
December 31
-----------
1999 1998
---------------- -------------
LIABILITIES AND SHAREHOLDER'S EQUITY
Liabilities:
<S> <C> <C>
Policy and Contract Liabilities:
Future Policy Benefits ................................................$ 164,475 $ 158,949
Policy and Contract Claims ............................................ 34,355 38,391
Premiums Paid in Advance .............................................. 8,054 8,161
Funds Held Under Deposit Contracts .................................... 13,402,480 12,364,937
Other Policyholders' Funds ............................................ 362,565 61,029
---------------- -------------
Total Policy and Contract Liabilities ............................... 13,971,929 12,631,467
Other Liabilities ....................................................... 130,623 149,684
Federal Income Taxes:
Current ............................................................... 11,678 --
Deferred (Includes tax on unrealized appreciation of
investment securities: $182,717) ..................................... -- 199,744
Liabilities Related to Separate Accounts ................................ 1,403,248 1,201,135
---------------- -------------
Total Liabilities .................................................... 15,517,478 14,182,030
---------------- -------------
Commitments and Contingencies
Shareholder's Equity:
Common Stock, $250 Par Value;
20,000 Shares Authorized, Issued and Outstanding ...................... 5,000 5,000
Additional Paid-In Capital .............................................. 85,000 85,000
Retained Earnings ....................................................... 1,143,041 1,046,572
Accumulated Other Comprehensive Income (Loss) ........................... (199,931) 339,442
---------------- -------------
Total Shareholder's Equity ........................................... 1,033,110 1,476,014
---------------- -------------
Total Liabilities and Shareholder's Equity.........................$ 16,550,588 $ 15,658,044
---------------- -------------
---------------- -------------
</TABLE>
See Notes to Consolidated Financial Statements
3
<PAGE>
SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
(In Thousands)
<TABLE>
<CAPTION>
Year Ended December 31
----------------------
1999 1998 1997
---------------- ------------- -------------
Revenues:
<S> <C> <C> <C>
Premiums ................................................................$ 256,742 $ 254,410 $ 240,595
Investment Income:
Interest on Fixed Maturities .......................................... 994,603 925,827 830,837
Interest on Mortgage Loans ............................................ 62,090 56,313 56,232
Interest on Short-Term Investments .................................... 3,827 4,898 3,419
Dividends from Marketable Equity Securities ........................... 416 693 1,044
Dividends from Redeemable Preferred Stock ............................. 17,990 17,088 16,026
Other Investment Income ............................................... 9,617 4,446 3,843
---------------- ------------- -------------
Total .............................................................. 1,088,543 1,009,265 911,401
Less Investment Expenses .............................................. 4,177 3,804 3,485
---------------- ------------- -------------
Net Investment Income ................................................... 1,084,366 1,005,461 907,916
---------------- ------------- -------------
Other Revenue ........................................................... 36,185 28,069 21,751
Realized Investment Gain (Loss) ......................................... (4,683) 13,612 6,807
---------------- ------------- -------------
Total .............................................................. 1,372,610 1,301,552 1,177,069
---------------- ------------- -------------
Benefits and Expenses:
Policy Benefits ......................................................... 1,025,233 994,081 844,926
Commissions ............................................................. 75,555 95,250 93,681
Personnel Costs ......................................................... 59,781 53,814 48,503
Taxes Other Than Payroll and Income Taxes ............................... 22,797 12,980 11,817
Other Operating Expenses ................................................ 47,074 54,815 46,639
Amortization of Deferred Policy Acquisition Costs ....................... 34,030 39,076 36,946
Write-off of Deferred Policy Acquisition Costs
and Other Write-offs .................................................. 12,993 46,800 --
Deferral of Policy Acquisition Costs .................................... (52,998) (65,944) (53,068)
Amortization of Present Value of Future Profits ......................... 803 3,790 --
---------------- ------------- -------------
Total .............................................................. 1,225,268 1,234,662 1,029,444
---------------- ------------- -------------
Income before Federal Income Taxes ......................................... 147,342 66,890 147,625
---------------- ------------- -------------
Provision (Benefit) for Federal Income Taxes:
Current ................................................................. 66,639 24,725 54,705
Deferred ................................................................ (15,766) (1,359) (4,689)
---------------- ------------- -------------
Total .............................................................. 50,873 23,366 50,016
---------------- ------------- -------------
Net Income .................................................................$ 96,469 $ 43,524 $ 97,609
---------------- ------------- -------------
---------------- ------------- -------------
</TABLE>
See Notes to Consolidated Financial Statements
4
<PAGE>
SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY
(In Thousands)
<TABLE>
<CAPTION>
Year Ended December 31
----------------------
1999 1998 1997
---------------- ------------- -------------
<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 ...................................... 1,046,572 1,093,048 1,011,439
Net Income ............................................................ 96,469 43,524 97,609
Dividends to Parent ................................................... -- (90,000) (16,000)
---------------- ------------- -------------
Balance at the End of Year ............................................ 1,143,041 1,046,572 1,093,048
---------------- ------------- -------------
Accumulated Other Comprehensive Income (Loss):
Unrealized Appreciation (Depreciation) of Investment
Securities, Net of Tax:
Balance at the Beginning of Year ..................................... 339,442 305,517 160,045
Change in Unrealized Appreciation (Depreciation),
Net of Deferred Policy Acquisition Costs Valuation
Allowance .......................................................... (539,373) 33,925 145,472
---------------- ------------- -------------
Balance at the End of Year ........................................... (199,931) 339,442 305,517
---------------- ------------- -------------
Shareholder's Equity ..............................................$ 1,033,110 $ 1,476,014 $ 1,488,565
---------------- ------------- -------------
---------------- ------------- -------------
</TABLE>
STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME (LOSS)
(In Thousands)
<TABLE>
<CAPTION>
Year Ended December 31
----------------------
1999 1998 1997
---------------- ------------- -------------
<S> <C> <C> <C>
Net Income .................................................................$ 96,469 $ 43,524 $ 97,609
---------------- ------------- -------------
Other Comprehensive Income (Loss), Net of Tax:
Unrealized Appreciation (Depreciation) of Investment
Securities Arising During the Year (Net of tax:
$(289,865); $21,842; $81,029) ........................................ (538,321) 40,563 150,482
Less: Reclassification Adjustment for Realized Gains
Included in Net Income (Net of tax: $566; $3,574;
$2,697) .............................................................. (1,052) (6,638) (5,010)
---------------- ------------- -------------
Other Comprehensive Income (Loss) ..................................... (539,373) 33,925 145,472
---------------- ------------- -------------
Comprehensive Income (Loss) ................................................$ (442,904) $ 77,449 $ 243,081
---------------- ------------- -------------
---------------- ------------- -------------
</TABLE>
See Notes to Consolidated Financial Statements
5
<PAGE>
SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
(In Thousands)
<TABLE>
<CAPTION>
Year Ended December 31
----------------------
1999 1998 1997
---------------- ------------- -------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Insurance Premiums Received ........................................... $ 218,429 $ 224,293 $ 216,089
Dividends and Interest Received ....................................... 980,630 919,236 819,433
Other Operating Receipts .............................................. 35,972 27,498 19,299
Insurance Claims and Policy Benefits Paid ............................. (382,039) (402,118) (353,227)
Underwriting, Acquisition and Insurance
Operating Costs Paid ................................................ (194,743) (221,294) (202,077)
Income Taxes Paid ..................................................... (37,791) (61,086) (36,140)
---------------- ------------- -------------
Net Cash Provided by Operating Activities ........................ 620,458 486,529 463,377
---------------- ------------- -------------
INVESTING ACTIVITIES:
Purchases of:
Fixed Maturities Available-for-Sale ................................. (2,496,571) (2,117,938) (1,891,778)
Fixed Maturities Held-to-Maturity .................................. (901) (1,691) (199,589)
Purchase of Subsidiary, Net of Cash Acquired ........................ (2,000) -- 116,122
Other Investments ................................................... (493) (7,345) (5,788)
Policy and Nonaffiliated Mortgage Loans ............................. (251,144) (103,602) (96,019)
Affiliated Mortgage Loans ........................................... -- -- (40,000)
Options and Futures ................................................. (159,369) (168,554) (13,977)
Maturities of Fixed Maturities Available-for-Sale ..................... 914,839 732,377 435,788
Maturities of Fixed Maturities Held-to-Maturity ....................... 13,336 7,280 8,907
Sales of:
Fixed Maturities Available-for-Sale ................................. 683,225 643,539 869,091
Fixed Maturities Held-to-Maturity ................................... 6,296 18,235 --
Other Investments ................................................... 6,203 7,522 13,824
Policy and Nonaffiliated Mortgage Loans ............................. 98,366 65,797 61,159
Affiliated Mortgage Loans ........................................... 2,024 14,491 5,560
Options and Futures ................................................. 179,503 141,302 --
Net (Increase) Decrease in Short-Term Investments ..................... (323,152) 2,013 11,519
Other ................................................................. (12,081) (1,163) (36,164)
---------------- ------------- -------------
Net Cash Used in Investing Activities ............................ (1,341,919) (767,737) (761,345)
---------------- ------------- -------------
FINANCING ACTIVITIES:
Funds Received Under Deposit Contracts ................................ 1,809,340 1,198,147 1,392,517
Return of Funds Held Under Deposit Contracts .......................... (1,050,947) (1,091,965) (861,221)
Dividends to Parent ................................................... -- (94,000) (13,000)
Net Proceeds from (Repayment of) Short-Term Borrowings ................ (24,284) 32,835 5,048
---------------- ------------- -------------
Net Cash Provided by Financing Activities 734,109 45,017 523,344
---------------- ------------- -------------
Net Increase (Decrease) in Cash .......................................... 12,648 (236,191) 225,376
Cash at Beginning of Year ................................................ 8,321 244,512 19,136
---------------- ------------- -------------
Cash at End of Year $ 20,969 $ 8,321 $ 244,512
---------------- ------------- -------------
---------------- ------------- -------------
</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
6
<PAGE>
SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS -
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES
(In Thousands)
<TABLE>
<CAPTION>
Year Ended December 31
1999 1998 1997
---------- --------- ----------
<S> <C> <C> <C>
Net Income ............................................... $ 96,469 $ 43,524 $ 97,609
---------- --------- ----------
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Realized Investment (Gain) Loss ..................... 4,683 (13,612) (6,807)
Amortization of Fixed Maturity Investments .......... (37,141) (26,774) (24,929)
Deferred Federal Income Tax Benefit ................. (15,766) (1,359) (4,689)
Interest Expense on Deposit Contracts ............... 628,392 633,437 501,230
Mortality and Expense Charges and Administrative Fees (38,825) (29,753) (27,379)
Other ............................................... 265 5,535 (7,877)
Changes in:
Future Policy Benefits ............................. 5,526 7,274 1,855
Policy and Contract Claims ......................... (4,036) 703 2,830
Premiums Paid in Advance ........................... (107) (984) 299
Deferred Policy Acquisition Costs .................. (7,925) 17,062 (15,688)
Accrued Investment Income .......................... (19,320) (9,130) (11,451)
Accrued Interest on Accrual Bonds .................. (45,311) (50,440) (48,354)
Other Receivables .................................. 4,164 (9,979) (5,467)
Current Federal Income Taxes ....................... 28,847 (36,361) 18,565
Other Assets and Liabilities ....................... 25,027 (42,225) (2,350)
Other Policyholders' Funds ......................... (4,484) (389) (4,020)
---------- --------- ----------
Total Adjustments ................................ 523,989 443,005 365,768
---------- --------- ----------
Net Cash Provided by Operating Activities ................ $ 620,458 $ 486,529 $ 463,377
---------- --------- ----------
---------- --------- ----------
</TABLE>
See Notes to Consolidated Financial Statements
7
<PAGE>
SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All dollar amounts in thousands, unless otherwise stated)
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS. SAFECO Life Insurance Company (the Company) is a
stock life insurance company organized under the laws of the state of
Washington. The Company and its subsidiaries offer individual and group
insurance products, pension plans and annuity products, marketed through
professional agents in all states and the District of Columbia. The Company
is a wholly-owned subsidiary of SAFECO Corporation which is a Washington
corporation whose subsidiaries engage primarily in insurance and financial
service businesses. The Company owns five subsidiaries, SAFECO National
Life Insurance Company, First SAFECO National Life Insurance Company of New
York, Empire Life Insurance Company, D.W. Van Dyke & Co., Inc. and Medical
Risk Managers, Inc.
In December 1999, the Company acquired D.W. Van Dyke & Co., Inc. and
Medical Risk Managers, Inc., both of which are Delaware corporations doing
business as insurance services providers. The Company acquired WM Life
Insurance Company and Empire Life Insurance Company in December 1997. WM
Life Insurance Company was merged into the Company on July 1, 1998.
BASIS OF REPORTING. The consolidated financial statements have been
prepared in accordance with generally accepted accounting principles and
include amounts based on the best estimates and judgments of management.
The financial statements include the Company and its subsidiaries.
All significant intercompany transactions have been eliminated in the
consolidated financial statements. Certain reclassifications have been made
to prior year financial information to conform to the 1999 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 life and health policies. Funds received under pension
deposit contracts, annuity contracts 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. Fixed maturity investments (i.e., bonds and redeemable
preferred stocks) that the Company has the 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 shareholder's equity (comprehensive income), 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 shareholder's equity (comprehensive income), 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 reduce realized investment
gains in the Statements of Consolidated Income.
8
<PAGE>
SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All dollar amounts in thousands, unless otherwise stated)
Note 1 (continued)
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. Writedowns reduce realized investment gains in
the Statements of Consolidated Income.
DEFERRED POLICY ACQUISITION COSTS. Life and health 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 pension deposit contracts, deferred annuity contracts
and universal life policies are amortized over the lives of the contracts
or 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; such adjustments would be included in current operations. In
1999, a $13 million write-off of deferred acquisition costs was charged to
current operations. This charge was related to the equity-indexed annuity
product. In 1998, a $46.8 million write-off of deferred acquisition costs
was charged to current operations. This charge was primarily tied to two
blocks of annuity business, the equity-indexed product and a declared rate
fixed annuity product, and to the universal life business, all of which had
been adversely affected by market conditions. Approximately $28 million of
the write-off was related to the equity-indexed annuity product. The cost
of the options purchased to fund the obligation under these contracts
increased significantly, adversely affecting the projected recoverability
of deferred acquisition costs. There were no significant adjustments made
in 1997.
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. Acquisition costs for group life and health policies are
amortized over the lives of the policies in proportion to premium received.
PRESENT VALUE OF FUTURE PROFITS. The present value of future profits
represents the actuarially determined present value of anticipated profits
to be realized from annuity and life insurance business purchased. The
present value was determined using a discount rate of 12.5%. For annuity
contracts, amortization of the present value of future profits is in
relation to the present value of the expected gross profits on the
contracts, discounted using the interest rate credited to the underlying
policies. The change in the present value of future profits is comprised of
amortization and an adjustment to amortization for realized gains or losses
on investment securities of $(182) and $626 for the years ended December
31, 1999, and 1998, respectively. The present value of future profits is
reviewed periodically to determine that the unamortized portion does not
exceed expected recoverable amounts. No impairment adjustments were
recorded in 1999 or 1998. Present value of future profits is amortized
using a model approach that results in volatile amortization patterns. Our
best estimate is that, over the next five years, four to seven percent of
the balance will be amortized each year.
9
<PAGE>
SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All dollar amounts in thousands, unless otherwise stated)
Note 1 (continued)
OTHER ASSETS. Call options on the S&P 500 index are purchased by the
Company to hedge the growth in interest credited on equity indexed
annuities sold. Premiums paid to purchase these call options are
capitalized and included in other assets. Call options are recorded at
market value with unrealized gains and losses recorded in income. Realized
gains and losses on these instruments are recognized upon termination.
In December 1997, the Company acquired Washington Mutual, Inc.'s life
insurance subsidiaries, WM Life Insurance Company and Empire Life Insurance
Company, and Washington Mutual, Inc. agreed to distribute the Company's
annuity products through the Washington Mutual, Inc. multistate banking
network. The portion of this transaction relating to the distribution
agreement was valued at $35,000 and is being amortized on a straight-line
basis over 15 years. The unamortized balance of $30,333 is included in
other assets.
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 4.5% to 8.75%.
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 actual experience
modified to provide for adverse deviation. Interest assumptions range from
8.0% graded to 3.25%.
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
variable annuity and variable universal life 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 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 Accounts are not reflected in the Statements 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, except for Empire
Life Insurance Company, are included in a consolidated federal income tax
return filed by 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.
10
<PAGE>
SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All dollar amounts in thousands, unless otherwise stated)
Note 1 (continued)
NEW ACCOUNTING STANDARD. The Financial Accounting Standards Board (FASB)
issued Statement 133, "Accounting for Derivative Instruments and Hedging
Activities," in June 1998. The FASB also issued Statement 137 in June 1999,
which deferred the effective date of Statement 133 to fiscal years
beginning after June 15, 2000. The Company will adopt Statement 133 no
later than the first quarter of 2001. Statement 133 amends or supersedes
several previous FASB statements and requires recognizing all derivatives
as either assets or liabilities in the statement of financial position and
measuring those instruments at fair value. The impact of Statement 133 is
currently being studied. Because of continuing emerging implementation
guidelines from the FASB, the effect of Statement 133 on the financial
statements has not yet been determined.
2. ACQUISITIONS AND AGREEMENTS
In December 1999, the Company acquired D.W. Van Dyke & Co., Inc. and
Medical Risk Managers, Inc. for $2,000. The acquisition has been treated as
a purchase for accounting purposes. The transaction was financed through
internal sources. As part of the agreement, the Company also agreed to pay
$11,941 and assume $20,309 in net liabilities for the right to reinsure the
policies of Medical Risk Solutions, a division of ING North America
Insurance Corporation, until the policy anniversary date. At the
anniversary date, the Company will offer its policy as a replacement. The
$32,250 total price was capitalized in other assets and will be amortized
beginning January 1, 2000, over 15 years.
In December 1999, the Company entered into an asset acquisition agreement
with Sound Benefits Administrators of Wisconsin, Inc., a third party
administrator. The agreement allows for the purchase of various assets
including, intellectual property, owned personal property, contract rights,
accounts receivable and the books and records used in the business. The
purchase price is based on the Company's profits from the Select Benefits
product and will be adjusted at various dates based on results. The initial
payment of $3,800, less the amount attributable to the personal property,
will be amortized over 5 years. The value of the personal property is yet
to be determined.
11
<PAGE>
SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All dollar amounts in thousands, unless otherwise stated)
3. INVESTMENTS
A summary of fixed maturities and marketable equity securities classified
as available-for-sale at December 31, 1999 follows:
<TABLE>
<CAPTION>
Gross Gross Net Estimated
Amortized Unrealized Unrealized Unrealized Market
Cost Gains Losses Gain (Loss) Value
------------- ------------ ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
United States government and
government agencies and authorities .............. $ 555,847 $ 25,921 $ (8,065) $ 17,856 $ 573,703
States, municipalities and political subdivisions ... 132,977 7,336 (3,969) 3,367 136,344
Foreign governments ................................. 90,852 2,826 (591) 2,235 93,087
Public utilities .................................... 1,413,426 10,474 (45,092) (34,618) 1,378,808
All other corporate bonds ........................... 5,528,543 35,946 (293,473) (257,527) 5,271,016
Mortgage-backed securities .......................... 2,913,091 31,406 (74,883) (43,477) 2,869,614
------------- ------------ ------------- ------------ -------------
Total fixed maturities classified as
available-for-sale ............................... 10,634,736 113,909 (426,073) (312,164) 10,322,572
Marketable equity securities ........................ 10,572 4,672 (39) 4,633 15,205
------------- ------------ ------------- ------------ -------------
Total investment securities classified as
available-for-sale ............................... $ 10,645,308 $ 118,581 $ (426,112) (307,531) $ 10,337,777
------------- ------------ ------------- -------------
------------- ------------ ------------- -------------
Deferred policy acquisition costs valuation allowance ............................................ (225)
Applicable federal income tax .............................................................. 107,825
------------
Unrealized depreciation of investment securities,
net of tax, included in shareholder's equity (accumulated other comprehensive
income (loss)) ......................................................................... $ (199,931)
------------
------------
</TABLE>
A summary of fixed maturities classified as held-to-maturity at December
31, 1999 follows:
<TABLE>
<CAPTION>
Gross Gross Net Estimated
Amortized Unrealized Unrealized Unrealized Market
Cost Gains Losses Gain (Loss) Value
------------ ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
United States government and
government agencies and authorities .......... $ 282,465 $ 27,580 $ (743) $ 26,837 $ 309,302
States, municipalities and political subdivisions 140,269 1,684 (6,000) (4,316) 135,953
Foreign governments ............................. 150,268 19,040 -- 19,040 169,308
Public utilities ................................ 415,715 17,957 (13,731) 4,226 419,941
All other corporate bonds ....................... 1,424,007 43,903 (55,647) (11,744) 1,412,263
Mortgage-backed securities ...................... 320,566 10,961 (6,195) 4,766 325,332
------------ ----------- ----------- ----------- ------------
Total fixed maturities classified as
held-to-maturity ............................. $ 2,733,290 $ 121,125 (82,316) $ 38,809 $ 2,772,099
------------ ----------- ----------- ----------- ------------
------------ ----------- ----------- ----------- ------------
</TABLE>
12
<PAGE>
SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All dollar amounts in thousands, unless otherwise stated)
Note 3 (continued)
A summary of fixed maturities and marketable equity securities classified
as available-for-sale at December 31, 1998 follows:
<TABLE>
<CAPTION>
Gross Gross Net Estimated
Amortized Unrealized Unrealized Unrealized Market
Cost Gains Losses Gain Value
----------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
United States government and
government agencies and authorities .......... $ 592,137 $ 85,453 $ (6) $ 85,447 $ 677,584
States, municipalities and political subdivisions 126,136 16,784 (3,191) 13,593 139,729
Foreign governments ............................. 101,106 9,730 -- 9,730 110,836
Public utilities ................................ 1,509,636 113,446 (1,957) 111,489 1,621,125
All other corporate bonds ....................... 4,504,120 225,765 (21,633) 204,132 4,708,252
Mortgage-backed securities ...................... 2,885,492 142,633 (3,940) 138,693 3,024,185
----------- ----------- ---------- ---------- ----------
Total fixed maturities classified as
available-for-sale ........................... 9,718,627 593,811 (30,727) 563,084 10,281,711
Marketable equity securities .................... 14,665 4,166 (94) 4,072 18,737
----------- ----------- ---------- ---------- ----------
Total investment securities classified as
available-for-sale ........................... 9,733,292 $ 597,977 (30,821) 567,156 $10,300,448
----------- ----------- ---------- ----------
----------- ----------- ---------- ----------
Deferred policy acquisition costs valuation allowance ................................ (45,108)
Applicable federal income tax ........................................................ (182,606)
----------
Unrealized appreciation of investment securities,
net of tax, included in shareholder's equity (accumulated other
comprehensive income) ............................................................. $ 339,442
----------
----------
</TABLE>
A summary of fixed maturities classified as held-to-maturity at December
31, 1998 follows:
<TABLE>
<CAPTION>
Gross Gross Net Estimated
Amortized Unrealized Unrealized Unrealized Market
Cost Gains Losses Gain Value
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
United States government and
government agencies and authorities .......... $ 272,104 $ 102,409 $ -- $ 102,409 $ 374,513
States, municipalities and political subdivisions 127,180 26,403 -- 26,403 153,583
Foreign governments ............................. 149,558 48,523 -- 48,523 198,081
Public utilities ................................ 416,495 81,036 (239) 80,797 497,292
All other corporate bonds ....................... 1,447,436 243,657 (4,159) 239,498 1,686,934
Mortgage-backed securities ...................... 308,110 40,682 (1) 40,681 348,791
---------- ---------- ---------- ---------- ----------
Total fixed maturities classified as
held-to-maturity ............................. $2,720,883 $ 542,710 $ (4,399) $ 538,311 $3,259,194
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
</TABLE>
13
<PAGE>
SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All dollar amounts in thousands, unless otherwise stated)
Note 3 (continued)
The amortized cost and estimated market value of fixed maturities at
December 31, 1999, 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>
Available-for-Sale Held-to-Maturity
--------------------------- ---------------------------
Estimated Estimated
Amortized Market Amortized Market
Cost Value Cost Value
------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
Due in one year or less ........................................ $ 341,063 $ 343,174 $ -- $ --
Due after one year through five years .......................... 2,581,703 2,554,963 3 3
Due after five years through ten years ......................... 1,206,699 1,163,379 54,473 57,617
Due after ten years ............................................ 3,592,180 3,391,442 2,358,248 2,389,147
Mortgage-backed securities ..................................... 2,913,091 2,869,614 320,566 325,332
------------- ------------ ------------- ------------
Total .................................................... $ 10,634,736 $ 10,322,572 $ 2,733,290 $ 2,772,099
------------- ------------ ------------- ------------
------------- ------------ ------------- ------------
</TABLE>
At December 31, 1999 and 1998, the Company held below investment grade
fixed maturities of $559 million and $438 million at amortized cost,
respectively. The respective market values of these investments were
approximately $515 million and $444 million. These holdings amounted to
3.9% and 3.3% of the Company's investments in fixed maturities at market
value at December 31, 1999 and 1998, respectively.
Certain fixed maturity securities with an amortized cost of $7,644 and
$7,596 at December 31, 1999 and 1998, respectively, were on deposit with
various regulatory authorities to meet requirements of insurance and
financial codes.
At December 31, 1999 and 1998, mortgage loans constituted approximately
5.0% and 4.2% 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 34% of the total
in California. Individual loans generally do not exceed $10 million.
The carrying value of investments in fixed maturities and mortgage loans
that did not produce income during the year ended December 31, 1999 is less
than one percent of the total of such investments.
14
<PAGE>
SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All dollar amounts in thousands, unless otherwise stated)
Note 3 (continued)
The proceeds from sales of investment securities and related gains and
losses for 1999 are as follows:
<TABLE>
<CAPTION>
Year Ended December 31, 1999
-------------------------------------------------------
Fixed Maturities Fixed Maturities Marketable
Available-for-Sale Held-to-Maturity Equity Securiities
------------------ ---------------- -------------------
<S> <C> <C> <C>
Proceeds from sales ....................................... $ 683,225 $ 6,296 $ 5,534
------------ ------------ ------------
------------ ------------ ------------
Gross realized gains on sales ............................. $ 13,358 $ -- $ 947
Gross realized losses on sales ............................ (14,559) (6,266) --
------------ ------------ ------------
Realized gains (losses) on sales .................... (1,201) (6,266) 947
Other (Including net gain or loss on calls and redemptions) 2,472 (52) --
Writedowns (Including writedowns on
securities subsequently sold) ......................... (600) -- --
------------ ------------ ------------
Total realized gain (loss) ................................ $ 671 $ (6,318) $ 947
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
One fixed maturity security, classified as held-to-maturity, was sold
during 1999 due to evidence of a significant deterioration in credit
quality. The amortized cost of this security was $12,562, and the loss
realized on this sale was $6,266.
The proceeds from sales of investment securities and related gains and
losses for 1998 are as follows:
<TABLE>
<CAPTION>
Year Ended December 31, 1998
------------------------------------------------------
Fixed Maturities Fixed Maturities Marketable
Available-for-Sale Held-to-Maturity Equity Securiities
---------------- ---------------- -----------------
<S> <C> <C> <C>
Proceeds from sales............................................. $ 643,539 $ 18,235 $ 665
-------------- -------------- --------------
-------------- -------------- --------------
Gross realized gains on sales .................................. $ 12,350 $ 3,384 $ 335
Gross realized losses on sales ................................. (480) -- (3)
-------------- -------------- --------------
Realized gains on sales ................................... 11,870 3,384 332
Other (Including net gain or loss on calls and redemptions)..... (1,557) -- --
Writedowns (Including writedowns on
securities subsequently sold) .............................. (433) -- --
-------------- -------------- --------------
Total realized gain ............................................ $ 9,880 $ 3,384 $ 332
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
15
<PAGE>
SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All dollar amounts in thousands, unless otherwise stated)
Note 3 (continued)
One fixed maturity security, classified as held-to-maturity, was sold
during 1998 due to restructuring by the bond issuer and the expected
significant downgrade resulting from it. This transaction meets the
"allowable sale" criteria of FASB Statement 115. The amortized cost of
this security was $14,851, and the gain realized on this sale was $3,384.
The proceeds from sales of investment securities and related gains and
losses for 1997 are as follows:
<TABLE>
<CAPTION>
Year Ended December 31, 1997
------------------------------------------------------
Fixed Maturities Fixed Maturities Marketable
Available-for-Sale Held-to-Maturity Equity Securiities
----------------- ---------------- ----------------
<S> <C> <C> <C>
Proceeds from sales ............................... $ 869,091 $ -- $ 11,185
-------------- -------------- --------------
-------------- -------------- --------------
Gross realized gains on sales ..................... $ 5,805 $ -- $ 6,832
Gross realized losses on sales .................... (9,410) -- (397)
-------------- -------------- --------------
Realized gains (losses) on sales ............. (3,605) -- 6,435
Other (Including net gain on calls and redemptions) 5,074 -- --
Writedowns (Including writedowns on
securities subsequently sold) ................. (197) -- --
-------------- -------------- --------------
Total realized gain ............................... $ 1,272 $ -- $ 6,435
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
The following summarizes the realized gain before federal income taxes and
the net change in unrealized appreciation:
<TABLE>
<CAPTION>
Year Ended December 31
------------------------------------------
1999 1998 1997
------------- ------------ ------------
<S> <C> <C> <C>
Realized gains (losses):
Fixed maturities ......................................... $ (5,647) $ 13,264 $ 1,272
Marketable equity securities ............................. 947 332 6,435
First mortgage loans on real estate ...................... -- -- (900)
Real estate .............................................. 17 16 --
------------- ------------ ------------
Realized gain (loss) before federal income taxes ....... $ (4,683) $ 13,612 $ 6,807
------------- ------------ ------------
------------- ------------ ------------
<CAPTION>
Year Ended December 31
------------------------------------------
1999 1998 1997
------------- ------------ ------------
<S> <C> <C> <C>
Increase (decrease) in unrealized appreciation/depreciation of:
Fixed maturities classified as available-for-sale ........ $ (875,248) $ 62,781 $ 244,483
Marketable equity securities ............................. 561 (829) (4,372)
Deferred policy acquisition costs valuation allowance .... 44,883 (9,759) (16,309)
Applicable federal income tax ............................ 290,431 (18,268) (78,330)
------------- ------------ ------------
Net change in unrealized appreciation/depreciation ....... $ (539,373) $ 33,925 $ 145,472
------------- ------------ ------------
------------- ------------ ------------
</TABLE>
16
<PAGE>
SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All dollar amounts in thousands, unless otherwise stated)
Note 3 (continued)
The following table summarizes the Company's allowance for credit losses on
non-affiliated mortgage loans:
<TABLE>
<CAPTION>
Year Ended December 31
-----------------------------------------------
1999 1998 1997
------------ ------------ -------------
<S> <C> <C> <C>
Allowance at beginning of year ........... $ 11,173 $ 11,609 $ 10,943
Provision for credit losses .............. -- -- 900
Loans charged off as uncollectible ....... (392) (436) (234)
------------ ------------ -------------
Allowance at end of year ................. $ 10,781 $ 11,173 $ 11,609
------------ ------------ -------------
------------ ------------ -------------
</TABLE>
The allowance includes specific reserves, as well as general reserve
amounts. The total investment in impaired loans before any reserve for
losses is $589 and $2,496 at December 31, 1999 and 1998, respectively. A
specific loan loss reserve has been established for each impaired loan, the
total of which is $59 and $250 and is included in the overall allowance of
$10,781 and $11,173 at December 31, 1999 and 1998, respectively.
4. 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 $2,485 at December 31, 1999.
At December 31, 1999, unfunded mortgage loan commitments approximate
$18,699. The Company has no other material commitments or contingencies at
December 31, 1999.
5. 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.
17
<PAGE>
SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All dollar amounts in thousands, unless otherwise stated)
Note 5 (continued)
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.
Estimated fair values of financial instruments at December 31 are as
follows:
<TABLE>
<CAPTION>
1999 1998
----------------------------- -----------------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
Financial assets:
Fixed maturities available-for-sale ...... $ 10,322,572 $ 10,322,572 $ 10,281,711 $ 10,281,711
Fixed maturities held-to-maturity ........ 2,733,290 2,772,099 2,720,883 3,259,194
Marketable equity securities ............. 15,205 15,205 18,737 18,737
Mortgage loans ........................... 820,815 749,000 664,427 692,000
Financial liabilities:
Funds held under deposit contracts ....... 13,402,480 13,136,000 12,364,937 12,874,000
</TABLE>
Other insurance-related financial instruments are exempt from fair value
disclosure requirements.
DERIVATIVE FINANCIAL INSTRUMENTS. The Company's investments in
mortgage-backed securities of $3.2 billion and $3.4 billion, at market
values, at December 31, 1999 and 1998, respectively, are primarily
residential collateralized mortgage obligations (CMOs), pass-throughs and
commercial loan-backed mortgage obligations (CMBS). CMOs and CMBS, while
technically defined as derivative instruments, are exempt from derivative
disclosure requirements. The Company's investment in CMOs and CMBS
comprised of the riskier, more volatile type (e.g., principal only, inverse
floaters, etc.) has been intentionally limited to only a small amount,
approximately 1% of total mortgage-backed securities at both December 31,
1999 and 1998.
In 1997, the Company introduced an equity-indexed annuity product that
credits the policyholder based on a percentage of the gain in the S&P 500
index. Sales of this product were suspended in the fourth quarter of 1998.
A hedging program with the objective to hedge the exposure to changes in
the S&P 500 market risk has been established. The program consists of
buying and writing S&P 500 options, buying Treasury interest rate futures
and trading S&P 500 futures.
Realized gains and losses on both options and futures are recognized upon
termination of the options and future contracts. The Company records
futures and options at market value with unrealized gains and losses
recorded in policy benefits in current income.
The balance in other assets for call options purchased was $2,023 and
$23,985 at December 31, 1999 and 1998, respectively. The balance of futures
contracts at December 31, 1999 and 1998, respectively, was $8,287 and
$4,961. At December 31, 1999, the Company had a $5,819 liability for
written S&P 500 call options included in other liabilities.
18
<PAGE>
SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All dollar amounts in thousands, unless otherwise stated)
Note 5 (continued)
The Company does not enter into financial instruments for speculative
purposes. The Company's involvement in other investment-type derivatives is
also, intentionally, of a very limited nature. Such derivatives include
interest rate swaps on bond investments, 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.
6. REINSURANCE
The Company protects itself from excessive losses by ceding reinsurance to
other companies, using automatic and facultative treaties. The availability
and cost of reinsurance are subject to prevailing market conditions, both
in terms of price and available capacity. Although the reinsurer is liable
to the Company to the extent of the reinsurance ceded, the Company remains
primarily liable to the policyholder as the direct insurer on all risks
reinsured. The Company evaluates the financial condition of its reinsurers
to minimize its exposure to losses from reinsurer insolvencies. To the
Company's knowledge, none of its reinsurers is experiencing financial
difficulties.
Reinsurance Recoverables are comprised of the following amounts:
<TABLE>
<CAPTION>
December 31
---------------------------
1999 1998
------------ -------------
<S> <C> <C>
Unpaid losses and adjustment expense ............. $ 767 $ 248
Paid claims ...................................... 1,179 1,347
Life policy liabilities .......................... 35,695 30,677
Other reinsurance recoverables ................... 121 82
------------ -------------
Total reinsurance recoverables $ 37,762 $ 32,354
------------ -------------
------------ -------------
</TABLE>
The effects of reinsurance on the premium and policy benefit amounts in the
Statements of Consolidated Income are as follows:
<TABLE>
<CAPTION>
Year Ended December 31
------------------------------------------
1999 1998 1997
------------ ------------ -------------
<S> <C> <C> <C>
Reinsurance Ceded:
Premiums ................................ $ (21,216) $ (16,479) $ (13,305)
------------- -------------- --------------
------------- -------------- --------------
Policy benefits ......................... $ (9,347) $ (7,162) $ (7,853)
------------- -------------- --------------
------------- -------------- --------------
Reinsurance Assumed:
Premiums ................................ $ 697 $ 876 $ 180
------------- -------------- --------------
------------- -------------- --------------
Policy benefits ......................... $ 2,464 $ 3,487 $ 2,902
------------- -------------- --------------
------------- -------------- --------------
</TABLE>
19
<PAGE>
SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All dollar amounts in thousands, unless otherwise stated)
7. 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 not so 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. The net income reported in the Statements of
Consolidated Income for the year ended December 31, 1997, does not include
the net income of either WM Life Insurance Company or Empire Life Insurance
Company, as their acquisition was effective December 31, 1997.
Statutory net income and capital and surplus, by company, are as follows:
<TABLE>
<CAPTION>
Year Ended December 31
-----------------------------------------
1999 1998 1997
------------ ------------- ------------
<S> <C> <C> <C>
Statutory Net Income:
SAFECO Life Insurance Company ................................ $ 91,666 $ 64,599 $ 95,012
SAFECO National Life Insurance Company ....................... 1,121 1,012 1,322
First SAFECO National Life Insurance Company of New York ..... 751 576 314
Empire Life Insurance Company ................................ 596 1,799 --
------------ ------------- ------------
Total ................................................... $ 94,134 $ 67,986 $ 96,648
------------ ------------- ------------
------------ ------------- ------------
<CAPTION>
December 31
-----------------------------------------
1999 1998 1997
------------ ------------- ------------
Statutory Capital and Surplus:
<S> <C> <C> <C>
SAFECO Life Insurance Company and Subsidiaries ............... $ 637,522 $ 576,791 $ 672,230
------------ ------------- ------------
------------ ------------- ------------
</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, 1999.
8. 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. Under insurance regulations of the state of Washington,
the 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
$73,428 at December 31, 1999.
20
<PAGE>
SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All dollar amounts in thousands, unless otherwise stated)
9. EMPLOYEE BENEFIT PLANS
SAFECO Corporation and subsidiary companies (the Companies) sponsor defined
contribution, defined benefit and profit sharing bonus plans covering
substantially all employees. The defined contribution plans include profit
sharing retirement plans and a 401(k) savings plan. A cash balance defined
benefit plan covering substantially all employees provides benefits 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 $2,479, $6,070 and $7,531 for the years
ended December 31, 1999, 1998 and 1997, 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. Net periodic other postretirement benefit costs for the
Company were $1,091, $510 and $392 in 1999, 1998 and 1997, respectively.
The accrued postretirement benefit cost recorded in the balance sheet was
$6,634 and $5,544 at December 1999 and 1998, respectively.
10. INCOME TAXES
The Company uses the liability method of accounting for income taxes under
which 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% to income before income taxes and the provision for federal
income taxes are not material.
21
<PAGE>
SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All dollar amounts in thousands, unless otherwise stated)
Note 10 (continued)
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
---------------------------
1999 1998
------------ ------------
<S> <C> <C>
Deferred tax assets:
Discounting of loss and adjustment expense reserves ............................. $ 463 $ 340
Uncollected premium adjustment .................................................. 3,303 2,963
Adjustment to life policy liabilities ........................................... 50,646 37,821
Capitalization of policy acquisition costs ...................................... 61,087 46,046
Postretirement benefits ......................................................... 2,322 1,940
Realized capital losses ......................................................... 3,114 3,461
Guarantee fund assessments ...................................................... 1,681 2,696
Intercompany sale of securities ................................................. 1,009 --
Unrealized depreciation of investment securities (Net of deferred policy
acquisition costs valuation allowance: $79) .............................. 107,714 --
Other ........................................................................... 1,610 3,105
------------ ------------
Total deferred tax assets .................................................. 232,949 98,372
------------ ------------
Deferred tax liabilities:
Deferred policy acquisition costs .............................................. 93,119 90,346
Present value of future profits ................................................ 4,109 4,327
Bond discount accrual .......................................................... 17,180 19,587
Right to Reinsure .............................................................. 11,039 --
Unrealized appreciation of investment securities (Net of deferred policy
acquisition costs valuation allowance: $15,788) ......................... -- 182,717
Other .......................................................................... 1,049 1,139
------------ ------------
Total deferred tax liabilities ............................................. 126,496 298,116
------------ ------------
Net deferred tax (asset) liability ......................................... $ (106,453) $ 199,744
------------ ------------
------------ ------------
</TABLE>
The following table reconciles the deferred tax benefit in the Statements
of Consolidated Income to the change in the deferred tax liability in the
balance sheet for the year ended December 31:
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Deferred tax benefit ............................................... $ (15,766) $ (1,359) $ (4,689)
Net deferred tax liability acquired in acquisitions ................ -- 3,539 2,008
Deferred tax changes reported in shareholder's equity:
Increase (decrease) in liability related to unrealized
appreciation or depreciation of investment securities .... (306,140) 21,684 84,037
(Increase) decrease in liability related to deferred
policy acquisition costs valuation allowance ............. 15,709 (3,416) (5,708)
------------ ------------ ------------
Increase (decrease) in net deferred tax liability .................. $ (306,197) $ 20,448 $ 75,648
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
22
<PAGE>
SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All dollar amounts in thousands, unless otherwise stated)
11. SEGMENT DATA
The Company's reportable business segments are strategic business units
that offer distinctive products marketed through independent agents in
various distribution channels.
The Company has five reportable segments: Individual, Retirement Services,
Settlement Annuities, Group and Corporate. Individual issues traditional,
term and universal life insurance policies. Retirement Services issues
fixed and variable deferred annuity products. Settlement Annuities issues
immediate annuities for structured pay out situations. Group issues excess
loss health insurance to companies that have self-insured medical plans.
The Corporate segment is used to retain profits from the four product lines
and pay dividends to the parent company, SAFECO Corporation.
The accounting policies of the segments are the same as those described in
the summary of significant accounting policies. Company management
evaluates performance based on operating profit or loss before income
taxes.
<TABLE>
<CAPTION>
Year Ended December 31, 1999
------------------------------------------------------------------------
Retirement Settlement
Individual Services Annuities Group Corporate Total
-------- ----------- ----------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenue
Premiums ................. $62,409 $ 536 $ -- $ 193,797 $ -- $ 256,742
Net Investment Income .... 113,830 410,908 486,561 1,845 71,222 1,084,366
Other Revenue ............ 3,808 32,348 29 -- -- 36,185
-------- ----------- ----------- ---------- --------- ---------
Total Revenue ......... 180,047 443,792 486,590 195,642 71,222 1,377,293
Expenses
Policy Benefits .......... 134,700 310,495 422,925 157,113 -- 1,025,233
Commissions .............. 10,237 24,255 11,764 29,149 150 75,555
Amortization of Deferred
Policy Acquisition Costs
and Present Value of
Future Profits ........ 5,447 24,979 -- 4,407 -- 34,833
Write-off of Deferred Policy
Acquisition Costs ...... -- 12,993 -- -- -- 12,993
Deferral of Policy Acquisition
Costs ................. (25,698) (18,932) -- (8,368) -- (52,998)
Other Expenses ........... 47,378 37,452 9,640 32,849 2,333 129,652
-------- ----------- ----------- ---------- --------- ---------
Total Expenses and
Policy Benefits .... 172,064 391,242 444,329 215,150 2,483 1,225,268
-------- ----------- ----------- ---------- --------- ---------
Income (Loss) From
Insurance Operations ....... 7,983 52,550 42,261 (19,508) 68,739 152,025
Realized Investment Gain (Loss) 325 (1,031) (5,927) 295 1,655 (4,683)
-------- ----------- ----------- ---------- --------- ---------
Income (Loss) before Federal
Income Taxes ............... $ 8,308 $ 51,519 $ 36,334 $ (19,213) $ 70,394 $ 147,342
-------- ----------- ----------- ---------- --------- ---------
-------- ----------- ----------- ---------- --------- ---------
<CAPTION>
December 31, 1999
--------------------------------------------------------------------------------
Retirement Settlement
Individual Services Annuities Group Corporate Total
----------- ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Assets
Total Investments ............ $ 1,946,604 $ 5,624,219 $ 5,879,843 $ 14,534 $ 873,904 $ 14,339,104
Assets Held in
Separate Accounts .......... 126,908 1,276,340 -- -- -- 1,403,248
Total Assets ................. 2,308,863 7,204,831 6,010,669 104,749 921,476 16,550,588
</TABLE>
23
<PAGE>
SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All dollar amounts in thousands, unless otherwise stated)
Note 11 (continued)
<TABLE>
<CAPTION>
Year Ended December 31, 1998
---------------------------------------------------------------------------
Retirement Settlement
Individual Services Annuities Group Corporate Total
----------- ----------- ------------- ---------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenue
Premiums ..................... $ 50,563 $ 698 $ -- $ 203,149 $ -- $ 254,410
Net Investment Income ........ 69,267 411,661 449,313 2,695 72,525 1,005,461
Other Revenue ................ 3,509 24,483 77 -- -- 28,069
------------ ----------- ------------ ----------- ------------ -----------
Total Revenue ............. 123,339 436,842 449,390 205,844 72,525 1,287,940
Expenses
Policy Benefits .............. 84,004 349,834 399,130 161,113 -- 994,081
Commissions .................. 10,864 46,236 12,211 25,639 300 95,250
Amortization of Deferred
Policy Acquisition Costs
and Present Value of
Future Profits ............ 8,438 30,576 -- 3,852 -- 42,866
Write-off of Deferred Policy
Acquisition Costs and
Other Write-offs ........... 11,500 32,300 -- -- 3,000 46,800
Deferral of Policy Acquisition
Costs ..................... (18,610) (42,788) -- (4,546) -- (65,944)
Other Expenses ............... 37,782 40,177 7,398 33,919 2,333 121,609
------------ ----------- ------------ ----------- ------------ -----------
Total Expenses and
Policy Benefits ........ 133,978 456,335 418,739 219,977 5,633 1,234,662
------------ ----------- ------------ ----------- ------------ -----------
Income (Loss) From
Insurance Operations ........... (10,639) (19,493) 30,651 (14,133) 66,892 53,278
Realized Investment Gain ......... 828 4,304 -- -- 8,480 13,612
------------ ----------- ------------ ----------- ------------ -----------
Income (Loss) before
Federal Income Taxes ........... $ (9,811) $ (15,189) $ 30,651 $ (14,133) $ 75,372 $ 66,890
------------ ----------- ------------ ----------- ------------ -----------
------------ ----------- ------------ ----------- ------------ -----------
</TABLE>
<TABLE>
<CAPTION>
December 31, 1998
--------------------------------------------------------------------------------
Retirement Settlement
Individual Services Annuities Group Corporate Total
------------ ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Assets
Total Investments ..................... $ 1,075,256 $ 5,761,722 $ 5,877,496 $ 39,918 $ 1,056,042 $ 13,810,434
Assets Held in
Separate Accounts ................... 98,715 1,102,420 -- -- -- 1,201,135
Total Assets .......................... 1,307,561 7,195,140 5,971,534 90,125 1,093,684 15,658,044
</TABLE>
24
<PAGE>
SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All dollar amounts in thousands, unless otherwise stated)
Note 11 (continued)
<TABLE>
<CAPTION>
Year Ended December 31, 1997
--------------------------------------------------------------------------------
Retirement Settlement
Individual Services Annuities Group Corporate Total
------------ ----------- ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Revenue
Premiums ..................... $ 46,873 $ -- $ -- $ 193,722 $ -- $ 240,595
Net Investment Income ........ 55,431 355,550 420,095 2,737 74,103 907,916
Other Revenue ................ 3,531 18,102 117 1 -- 21,751
---------- ----------- ---------- ------------ ------------- -------------
Total Revenue ............. 105,835 373,652 420,212 196,460 74,103 1,170,262
Expenses
Policy Benefits .............. 69,611 278,525 368,854 127,936 -- 844,926
Commissions .................. 9,979 38,337 20,060 24,855 450 93,681
Amortization of Deferred
Policy Acquisition Costs
and Present Value of
Future Profits ............ 6,615 26,613 -- 3,718 -- 36,946
Deferral of Policy Acquisition
Costs ..................... (15,275) (33,452) -- (4,341) -- (53,068)
Other Expenses ............... 32,494 36,677 5,803 31,985 -- 106,959
---------- ----------- ---------- ------------ ------------- -------------
Total Expenses and
Policy Benefits ........ 103,424 346,700 394,717 184,153 450 1,029,444
---------- ----------- ---------- ------------ ------------- -------------
Income From
Insurance Operations ........... 2,411 26,952 25,495 12,307 73,653 140,818
Realized Investment Gain (Loss) .. (472) 1,601 -- -- 5,678 6,807
---------- ----------- ---------- ------------ ------------- -------------
Income before Federal
Income Taxes ................... $ 1,939 $ 28,553 $ 25,495 $ 12,307 $ 79,331 $ 147,625
---------- ----------- ---------- ------------ ------------- -------------
---------- ----------- ---------- ------------ ------------- -------------
</TABLE>
<TABLE>
<CAPTION>
December 31, 1997
--------------------------------------------------------------------------------
Retirement Settlement
Individual Services Annuities Group Corporate Total
------------ ----------- ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Assets
Total Investments ................. $ 903,487 $ 5,503,066 $ 5,516,799 $ 38,107 $ 935,967 $ 12,897,426
Assets Held in
Separate Accounts ............... 69,071 836,346 -- -- -- 905,417
Total Assets ...................... 1,110,541 6,833,146 5,610,901 83,293 984,576 14,622,457
</TABLE>
25
<PAGE>
SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All dollar amounts in thousands, unless otherwise stated)
12. IMPACT OF YEAR 2000 (Unaudited)
The Companies believe that their program to address Year 2000 issues is
comprehensive and on schedule, and as of February 11, 2000, the Companies
have not experienced any material Year 2000 complications. The Companies,
like most other companies, have been concerned that some of their computer
programs have or had time sensitive logic that typically recognizes a date
using "00" as the year 1900 rather than the year 2000. The Companies are
highly dependent on automated systems and systems applications that use
computer programs to conduct ongoing operations. Such systems are used to
process claims, bill and collect premiums from customers, manage
investments and many other activities. If these systems were unable to
process data accurately because of Year 2000-related failures, these
activities would be interrupted and could have a material adverse effect on
the Companies' results of operations.
The Companies completed various assessments of Year 2000 issues in
connection with their computer systems and the technology embedded in the
equipment they use, prior to December 31, 1999. The Companies began
modifying and replacing portions of their systems in 1995 so that the
system modified or replaced would be suitable for use before, during and
after the year 2000 with no significant operational problems related to its
ability to process dates correctly ("Year 2000 ready"). In addition, the
Companies engaged in a regular program of testing and running the systems
once Year 2000 programming changes were made. This testing included trials
at the Companies' hot site, a location provided and maintained by a third
party separate from any of the Companies' facilities.
The total Year 2000 readiness cost for the Companies approximated $18
million, and as of February 11, 2000, the Companies had incurred all of
this amount. These amounts have included both modification costs, which
were expensed as incurred, and certain replacement systems costs, some of
which were capitalized and amortized. All of the Companies' existing
systems were internally verified as being Year 2000 ready as of December
31, 1999, and the program of testing and running the systems after Year
2000 programming changes have been made has been completed.
The Companies have worked with their third-party partners and vendors,
e.g., their independent insurance agents, local and long distance telephone
companies, banks and securities trading firms, to assure that they were on
schedule to detect and fix any Year 2000 problems which might affect the
Companies' systems or business processes. The Companies have assessed and
attempted to mitigate risks with respect to the failure of any mission
critical third-party partners and vendors to be Year 2000 ready. Where
applicable, this effort included physically testing their common
interfaces. Failure of such parties to be Year 2000 ready could have a
material adverse effect on the Companies' results of operations. As of
February 11, 2000, the Companies are not aware of any of their third party
partners or vendors experiencing any Year 2000 problems that would
materially impact the Companies' systems or business processes.
26
<PAGE>
HYPOTHETICAL ILLUSTRATIONS
OF DEATH BENEFITS, POLICY ACCOUNT, CASH SURRENDER VALUES, AND ACCUMULATED
PREMIUMS
The Death Benefit, Policy Account Value and Cash Surrender value of a policy may
change with the investment experience of the portfolios. The following tables
show how these amounts might vary over time if the gross annual rate of return
on the investments in each portfolio is 0%, 6% or 12%. The Death Benefit, Policy
Account Value and Cash Surrender Value would be different from those shown if
the gross annual investment returns averaged 0%, 6% and 12% over a period of
years, but fluctuated above and below those averages for individual policy
years. Results will also differ from what is shown in the tables depending on
premium allocations and actual rates of return and actual expenses for the
portfolios you selected.
Daily charges are made against the assets of the portfolios for assuming
mortality and expense risks. The mortality and expense risk charge under the
policy is equivalent to an annual effective rate of .70% of the daily net asset
value of the portfolios in the Separate Account. This rate is guaranteed in the
policy and will not increase. The net investment returns in these tables also
reflect a deduction based on an average for the investment management and other
expenses charged to all the portfolios in the prior year. In 1999, average
expenses were equivalent to an annual effective rate of .71% for investment
management fees and .20% for costs and expenses borne by the portfolios.
Considering the mortality and expense risk charge and average portfolio expenses
in 1999, gross annual rates of return on 0%, 6% and 12%, correspond to net
investment experience at constant annual rates of -1.61%, 4.39% and 10.39%
respectively.
Actual portfolio expenses may vary from year to year and may be reduced or
partially reimbursed under agreements with portfolio advisers. These agreements
may be contractual or voluntary. If voluntary, the reimbursement could be
discontinued at any time. This may result in higher expenses, which in turn
adversely affects net investment performance and policy values. (See Separate
Account SL Fee Table in this prospectus and the prospectuses for the
portfolios.)
In addition to expense charges, the tables reflect deductions for cost of
insurance and the monthly administrative charge at both the current rates and
the maximum rates guaranteed in the policies. The tables are for preferred and
standard risk, male non-smokers, age 45. Results would be lower if the insured
were in a substandard risk classification or did not qualify for the non-smoker
rate. Current tables assume that the monthly administrative charge remains
constant at $5.00. Guaranteed tables use the maximum guaranteed monthly
administrative charge of $8.00. The tables also assume deduction of premium tax
based on 2.1% of premiums. Actual premium tax may be higher or lower depending
on your state. The tables assume that planned premium payments are paid at the
beginning of each policy year, no loans or withdrawals have been made, and that
the policy owner has not requested an increase or decrease in the face amount.
The difference between the Policy Account Value and Cash Surrender Value in the
first ten years reflects the surrender charge.
SAFECO Life does not currently make any charge for federal taxes. If SAFECO Life
charged for those taxes, it would take a higher gross rate of return to produce
net investment returns of 0%, 6% or 12%.
The second column of each table shows what would happen if an amount equal to
the planned premiums were invested outside of the policy at 5% annualized
interest. This assumed rate is neither guaranteed nor a current rate for any
particular investment. These tables show that the cost of surrendering a policy
in the early years is relatively high.
INDIVIDUAL ILLUSTRATIONS. You may request a comparable illustration based on
the proposed insured's age, sex, smoking classification and underwriting
classification for a requested face amount of insurance and planned premiums. An
individual illustration is also provided for any policy you may purchase.
ILLUSTRATIONS FOR POLICY PURCHASES AFTER MAY 1, 2000 WILL ONLY INCLUDE THE
AVERAGE ANNUAL EXPENSES AND FEES FOR THE PORTFOLIOS AVAILABLE AFTER THIS DATE.
B-1
<PAGE>
VARIABLE UNIVERSAL LIFE
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
MALE
PREFERRED NON-SMOKER
<TABLE>
<S> <C> <C> <C>
Initial Face Amount: $ 250,000 Annual Planned Premium(1): $ 400,000
Death Benefit Option: A Issue Age: 45
Death Benefits Payable to
Age: 95 Premiums Payable to Age: 95
</TABLE>
- --------------------------------------------------------------------------------
RESULTS ASSUMING CURRENT CHARGES(2)
Assuming Hypothetical Gross Annual Investment Return of:
<TABLE>
<CAPTION>
END OF ACCUM POLICY CASH POLICY CASH POLICY
POLICY PREMIUM DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT
YEAR (5% INT) BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE
0.00% 6.00% 12.00%
-------------------------------- -------------------------------- -------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 4,200 250,000 2,899 1,699 250,000 3,103 1,903 250,000 3,307
2 8,610 250,000 5,895 4,335 250,000 6,492 4,932 250,000 7,114
3 13,241 250,000 8,778 6,858 250,000 9,964 8,044 250,000 11,250
4 18,103 250,000 11,575 9,430 250,000 13,551 11,406 250,000 15,782
5 23,208 250,000 14,310 12,165 250,000 17,281 15,136 250,000 20,773
6 28,568 250,000 16,989 14,844 250,000 21,167 19,022 250,000 26,280
7 34,196 250,000 19,591 17,875 250,000 25,194 23,478 250,000 32,339
8 40,106 250,000 22,120 20,833 250,000 29,375 28,088 250,000 39,014
9 46,312 250,000 24,582 23,724 250,000 33,720 32,862 250,000 46,376
10 52,827 250,000 26,981 26,552 250,000 38,242 37,813 250,000 54,507
11 59,669 250,000 29,247 29,247 250,000 42,882 42,882 250,000 63,428
12 66,852 250,000 31,363 31,363 250,000 47,630 47,630 250,000 73,214
13 74,395 250,000 33,323 33,323 250,000 52,487 52,487 250,000 83,967
14 82,314 250,000 35,113 35,113 250,000 57,449 57,449 250,000 95,791
15 90,630 250,000 36,719 36,719 250,000 62,512 62,512 250,000 108,812
16 99,361 250,000 38,128 38,128 250,000 67,673 67,673 250,000 123,174
17 108,530 250,000 39,335 39,335 250,000 72,939 72,939 250,000 139,050
18 118,156 250,000 40,329 40,329 250,000 78,313 78,313 250,000 156,637
19 128,264 250,000 41,095 41,095 250,000 83,797 83,797 250,000 176,162
20 138,877 250,000 41,615 41,615 250,000 89,393 89,393 250,000 197,889
Age 75 297,195 250,000 17,958 17,958 250,000 157,315 157,315 678,887 646,559
<CAPTION>
END OF CASH
POLICY SURRENDER
YEAR VALUE
12.00%
----------
<S> <C>
1 2,107
2 5,554
3 9,330
4 13,637
5 18,628
6 24,135
7 30,623
8 37,727
9 45,518
10 54,078
11 63,428
12 73,214
13 83,967
14 95,791
15 108,812
16 123,174
17 139,050
18 156,637
19 176,162
20 197,889
Age 75 646,559
</TABLE>
- --------------------------------------------------------------------------------
(1) Assumes the premium shown is paid at the beginning of each policy year.
Values would be different if premiums are paid with a different frequency
or in different amounts.
(2) Assumes that no policy loans or withdrawals have been made. Zero values
indicate laps in the absence of an additional premium payment.
THE HYPOTHITICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT RATES OF RETURN MAY
BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS,
INCLUDING THE INVESTMENT ALLOCATIONS BY THE OWNER AND DIFFERENT INVESTMEMT RATES
OF RETURN FOR THE FUNDS' PORTFOLIOS. THE DEATH BENEFIT AND CASH VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RATES OF
RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD OF YEARS, BUT FLUCTUATED
ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN
BE MADE BY SAFECO OR THE FUNDS THAT THIS ASSUMED INVESTMTNE RATE OF RETURN CAN
BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
B-2
<PAGE>
VARIABLE UNIVERSAL LIFE
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
MALE
PREFERRED NON-SMOKER
<TABLE>
<S> <C> <C> <C>
Initial Face Amount: $ 250,000 Annual Planned Premium(1): $ 400,000
Death Benefit Option: A Issue Age: 45
Death Benefits Payable to
Age: 95 Premiums Payable to Age: 95
</TABLE>
- --------------------------------------------------------------------------------
RESULTS ASSUMING GURANTEED CHARGES(2)
Assuming Hypothetical Gross Annual Investment Return of:
<TABLE>
<CAPTION>
END OF ACCUM POLICY CASH POLICY CASH POLICY
POLICY PREMIUM DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT
YEAR (5% INT) BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE
0.00% 6.00% 12.00%
-------------------------------- -------------------------------- -------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 4,200 250,000 2,675 1,475 250,000 2,872 1,672 250,000 3,069
2 8,610 250,000 5,490 3,930 250,000 6,060 4,500 250,000 6,655
3 13,241 250,000 8,198 6,278 250,000 9,327 7,407 250,000 10,552
4 18,103 250,000 10,792 8,647 250,000 12,666 10,521 250,000 14,785
5 23,208 250,000 13,270 11,125 250,000 16,081 13,936 250,000 19,390
6 28,568 250,000 15,622 13,477 250,000 19,563 17,418 250,000 24,397
7 34,196 250,000 17,841 16,125 250,000 23,109 21,393 250,000 29,843
8 40,106 250,000 19,914 18,627 250,000 26,707 25,420 250,000 35,766
9 46,312 250,000 21,825 20,967 250,000 30,346 29,488 250,000 42,206
10 52,827 250,000 23,562 23,133 250,000 34,015 33,586 250,000 49,215
11 59,669 250,000 25,110 25,110 250,000 37,705 37,705 250,000 56,849
12 66,852 250,000 26,460 26,460 250,000 41,409 41,409 250,000 65,179
13 74,395 250,000 27,603 27,603 250,000 45,121 45,121 250,000 74,288
14 82,314 250,000 28,524 28,524 250,000 48,832 48,832 250,000 84,268
15 90,630 250,000 29,190 29,190 250,000 52,517 52,517 250,000 95,215
16 99,361 250,000 29,583 29,583 250,000 56,161 56,161 250,000 107,251
17 108,530 250,000 29,671 29,671 250,000 59,745 59,745 250,000 120,517
18 118,156 250,000 29,405 29,405 250,000 63,230 63,230 250,000 135,172
19 128,264 250,000 28,739 28,739 250,000 66,581 66,581 250,000 151,409
20 138,877 250,000 27,629 27,629 250,000 69,769 69,769 250,000 169,473
Age 75 297,195 250,000 250,000 77,527 77,527 579,333 551,746
<CAPTION>
END OF CASH
POLICY SURRENDER
YEAR VALUE
12.00%
----------
<S> <C>
1 1,869
2 5,095
3 8,632
4 12,640
5 17,245
6 22,252
7 28,127
8 34,479
9 41,348
10 48,786
11 56,849
12 65,179
13 74,288
14 84,268
15 95,215
16 107,251
17 120,517
18 135,172
19 151,409
20 169,473
Age 75 551,746
</TABLE>
- --------------------------------------------------------------------------------
(1) Assumes the premium shown is paid at the beginning of each policy year.
Values would be different if premiums are paid with a different frequency
or in different amounts.
(2) Assumes that no policy loans or withdrawals have been made. Zero values
indicate laps in the absence of an additional premium payment.
THE HYPOTHITICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT RATES OF RETURN MAY
BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS,
INCLUDING THE INVESTMENT ALLOCATIONS BY THE OWNER AND DIFFERENT INVESTMEMT RATES
OF RETURN FOR THE FUNDS' PORTFOLIOS. THE DEATH BENEFIT AND CASH VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RATES OF
RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD OF YEARS, BUT FLUCTUATED
ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN
BE MADE BY SAFECO OR THE FUNDS THAT THIS ASSUMED INVESTMTNE RATE OF RETURN CAN
BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
B-3
<PAGE>
VARIABLE UNIVERSAL LIFE
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
MALE
STANDARD NON-SMOKER
<TABLE>
<S> <C> <C> <C>
Initial Face Amount: $ 250,000 Annual Planned Premium(1): $ 400,000
Death Benefit Option: A Issue Age: 45
Death Benefits Payable to
Age: 95 Premiums Payable to Age: 95
</TABLE>
- --------------------------------------------------------------------------------
RESULTS ASSUMING CURRENT CHARGES(2)
Assuming Hypothetical Gross Annual Investment Return of:
<TABLE>
<CAPTION>
END OF ACCUM POLICY CASH POLICY CASH POLICY
POLICY PREMIUM DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT
YEAR (5% INT) BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE
0.00% 6.00% 12.00%
-------------------------------- -------------------------------- -------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 4,200 250,000 2,722 1,522 250,000 2,921 1,721 250,000 3,120
2 8,610 250,000 5,573 4,013 250,000 6,148 4,588 250,000 6,749
3 13,241 250,000 8,316 6,396 250,000 9,456 7,536 250,000 10,694
4 18,103 250,000 10,966 8,821 250,000 12,862 10,717 250,000 15,004
5 23,208 250,000 13,565 11,420 250,000 16,413 14,268 250,000 19,762
6 28,568 250,000 16,117 13,972 250,000 20,118 17,973 250,000 25,020
7 34,196 250,000 18,600 16,884 250,000 23,965 22,249 250,000 30,811
8 40,106 250,000 21,022 19,735 250,000 27,966 26,679 250,000 37,200
9 46,312 250,000 23,384 22,526 250,000 32,130 31,272 250,000 44,255
10 52,827 250,000 25,687 25,258 250,000 36,467 36,038 250,000 52,051
11 59,669 250,000 27,862 27,862 250,000 40,916 40,916 250,000 60,605
12 66,852 250,000 29,875 29,875 250,000 45,453 45,453 250,000 69,977
13 74,395 250,000 31,718 31,718 250,000 50,075 50,075 250,000 80,258
14 82,314 250,000 33,379 33,379 250,000 54,778 54,778 250,000 91,553
15 90,630 250,000 34,844 34,844 250,000 59,558 59,558 250,000 103,980
16 99,361 250,000 36,098 36,098 250,000 64,409 64,409 250,000 117,677
17 108,530 250,000 37,138 37,138 250,000 69,340 69,340 250,000 132,812
18 118,156 250,000 37,949 37,949 250,000 74,347 74,347 250,000 149,572
19 128,264 250,000 38,518 38,518 250,000 79,434 79,434 250,000 168,177
20 138,877 250,000 38,826 38,826 250,000 84,599 84,599 250,000 188,882
Age 75 297,195 250,000 11,470 11,470 250,000 144,190 144,190 650,257 619,292
<CAPTION>
END OF CASH
POLICY SURRENDER
YEAR VALUE
12.00%
----------
<S> <C>
1 1,920
2 5,189
3 8,774
4 12,859
5 17,617
6 22,875
7 29,095
8 35,913
9 43,397
10 51,622
11 60,605
12 69,977
13 80,258
14 91,553
15 103,980
16 117,677
17 132,812
18 149,572
19 168,177
20 188,882
Age 75 619,292
</TABLE>
- --------------------------------------------------------------------------------
(1) Assumes the premium shown is paid at the beginning of each policy year.
Values would be different if premiums are paid with a different frequency
or in different amounts.
(2) Assumes that no policy loans or withdrawals have been made. Zero values
indicate laps in the absence of an additional premium payment.
THE HYPOTHITICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT RATES OF RETURN MAY
BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS,
INCLUDING THE INVESTMENT ALLOCATIONS BY THE OWNER AND DIFFERENT INVESTMEMT RATES
OF RETURN FOR THE FUNDS' PORTFOLIOS. THE DEATH BENEFIT AND CASH VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RATES OF
RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD OF YEARS, BUT FLUCTUATED
ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN
BE MADE BY SAFECO OR THE FUNDS THAT THIS ASSUMED INVESTMTNE RATE OF RETURN CAN
BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
B-4
<PAGE>
VARIABLE UNIVERSAL LIFE
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
MALE
STANDARD NON-SMOKER
<TABLE>
<S> <C> <C> <C>
Initial Face Amount: $ 250,000 Annual Planned Premium(1): $ 400,000
Death Benefit Option: A Issue Age: 45
Death Benefits Payable to
Age: 95 Premiums Payable to Age: 95
</TABLE>
- --------------------------------------------------------------------------------
RESULTS ASSUMING GURANTEED CHARGES(2)
Assuming Hypothetical Gross Annual Investment Return of:
<TABLE>
<CAPTION>
END OF ACCUM POLICY CASH POLICY CASH POLICY
POLICY PREMIUM DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT
YEAR (5% INT) BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE
0.00% 6.00% 12.00%
-------------------------------- -------------------------------- -------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 4,200 250,000 2,675 1,475 250,000 2,872 1,672 250,000 3,069
2 8,610 250,000 5,490 3,930 250,000 6,060 4,500 250,000 6,655
3 13,241 250,000 8,198 6,278 250,000 9,327 7,407 250,000 10,552
4 18,103 250,000 10,792 8,647 250,000 12,666 10,521 250,000 14,785
5 23,208 250,000 13,270 11,125 250,000 16,081 13,936 250,000 19,390
6 28,568 250,000 15,622 13,477 250,000 19,563 17,418 250,000 24,397
7 34,196 250,000 17,841 16,125 250,000 23,109 21,393 250,000 29,843
8 40,106 250,000 19,914 18,627 250,000 26,707 25,420 250,000 35,766
9 46,312 250,000 21,825 20,967 250,000 30,346 29,488 250,000 42,206
10 52,827 250,000 23,562 23,133 250,000 34,015 33,586 250,000 49,215
11 59,669 250,000 25,110 25,110 250,000 37,705 37,705 250,000 56,849
12 66,852 250,000 26,460 26,460 250,000 41,409 41,409 250,000 65,179
13 74,395 250,000 27,603 27,603 250,000 45,121 45,121 250,000 74,288
14 82,314 250,000 28,524 28,524 250,000 48,832 48,832 250,000 84,268
15 90,630 250,000 29,190 29,190 250,000 52,517 52,517 250,000 95,215
16 99,361 250,000 29,583 29,583 250,000 56,161 56,161 250,000 107,251
17 108,530 250,000 29,671 29,671 250,000 59,745 59,745 250,000 120,517
18 118,156 250,000 29,405 29,405 250,000 63,230 63,230 250,000 135,172
19 128,264 250,000 28,739 28,739 250,000 66,581 66,581 250,000 151,409
20 138,877 250,000 27,629 27,629 250,000 69,769 69,769 250,000 169,473
Age 75 297,195 250,000 250,000 77,527 77,527 579,333 551,746
<CAPTION>
END OF CASH
POLICY SURRENDER
YEAR VALUE
12.00%
----------
<S> <C>
1 1,869
2 5,095
3 8,632
4 12,640
5 17,245
6 22,252
7 28,127
8 34,479
9 41,348
10 48,786
11 56,849
12 65,179
13 74,288
14 84,268
15 95,215
16 107,251
17 120,517
18 135,172
19 151,409
20 169,473
Age 75 551,746
</TABLE>
- --------------------------------------------------------------------------------
(1) Assumes the premium shown is paid at the beginning of each policy year.
Values would be different if premiums are paid with a different frequency
or in different amounts.
(2) Assumes that no policy loans or withdrawals have been made. Zero values
indicate laps in the absence of an additional premium payment.
THE HYPOTHITICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT RATES OF RETURN MAY
BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS,
INCLUDING THE INVESTMENT ALLOCATIONS BY THE OWNER AND DIFFERENT INVESTMEMT RATES
OF RETURN FOR THE FUNDS' PORTFOLIOS. THE DEATH BENEFIT AND CASH VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RATES OF
RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD OF YEARS, BUT FLUCTUATED
ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN
BE MADE BY SAFECO OR THE FUNDS THAT THIS ASSUMED INVESTMTNE RATE OF RETURN CAN
BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
B-5
<PAGE>
ILLUSTRATIONS
- --------------------------------------------------------------------------------
OF VARIATION IN DEATH BENEFIT, POLICY ACCOUNT AND CASH SURRENDER
VALUES IN RELATION TO THE FUNDS' INVESTMENT EXPERIENCE
In order to demonstrate how actual investment experience of the Funds affected
the Death Benefits, Policy Account and Cash Surrender Values (policy benefits)
of a policy, the following hypothetical illustrations were developed and are
based upon the actual experience of the portfolios of the Funds. These
illustrations assume that the Separate Account acquired an interest in the
portfolios at their inception.
These tables illustrate cost of insurance and expense charges (Policy cost
factors) at both the current rates and the maximum rates guaranteed in the
Policies. The amounts shown at the end of each Policy Year reflect a daily
charge against the portfolios. This charge includes a .70% charge against the
Separate Account for mortality and expense risks, the effect on each portfolios
actual investment experience of the investment management fees and direct
operating expenses. These tables also assume deduction of a premium tax rate
based on 2.1% of premiums. The tables are for preferred risk male non-smoker age
45. Planned premium payments are assumed to be paid at the beginning of each
Policy Year.
C-1
<PAGE>
VARIABLE UNIVERSAL LIFE
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
MALE
PREFERRED NON-SMOKER
<TABLE>
<S> <C> <C> <C>
Initial Face Amount: $250,000 Annual Planned Premium(1): $4,000.00
Death Benefit Option: A Issue Age: 45
Death Benefits Payable to Age: 95 Premiums Payable to Age: 95
</TABLE>
- --------------------------------------------------------------------------------
SAFECO RST BOND PORTFOLIO
<TABLE>
<CAPTION>
POLICY POLICY CASH POLICY CASH
YEAR END DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER
DECEMBER 31ST BENEFIT VALUE VALUE BENEFIT VALUE VALUE
BASED UPON CURRENT CHARGES BASED UPON GUARANTEED CHARGES
<S> <C> <C> <C> <C> <C> <C>
1988 250,000 3,168 1,968 250,000 2,934 1,734
1989 250,000 6,973 5,413 250,000 6,516 4,956
1990 250,000 10,623 8,703 250,000 9,949 8,029
1991 250,000 15,494 13,349 250,000 14,500 12,355
1992 250,000 19,646 17,501 250,000 18,312 16,167
1993 250,000 24,907 23,191 250,000 23,084 21,368
1994 250,000 26,840 25,553 250,000 24,691 23,404
1995 250,000 34,973 34,115 250,000 31,936 31,078
1996 250,000 37,841 37,412 250,000 34,243 33,814
1997 250,000 43,934 43,934 250,000 39,356 39,356
1998 250,000 50,659 50,659 250,000 44,944 44,944
1999 250,000 50,926 50,926 250,000 44,712 44,712
</TABLE>
- --------------------------------------------------------------------------------
SAFECO RST EQUITY PORTFOLIO
<TABLE>
<CAPTION>
POLICY POLICY CASH POLICY CASH
YEAR END DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER
DECEMBER 31ST BENEFIT VALUE VALUE BENEFIT VALUE VALUE
BASED UPON CURRENT CHARGES BASED UPON GUARANTEED CHARGES
<S> <C> <C> <C> <C> <C> <C>
1988 250,000 3,817 2,617 250,000 3,561 2,361
1989 250,000 8,851 7,291 250,000 8,314 6,754
1990 250,000 11,167 9,247 250,000 10,484 8,564
1991 250,000 17,997 15,852 250,000 16,892 14,747
1992 250,000 22,578 20,433 250,000 21,113 18,968
1993 250,000 32,668 30,952 250,000 30,422 28,706
1994 250,000 38,642 37,355 250,000 35,806 34,519
1995 250,000 53,397 52,539 250,000 49,250 48,392
1996 250,000 70,128 69,699 250,000 64,399 63,970
1997 250,000 90,995 90,995 250,000 83,227 83,227
1998 250,000 116,977 116,977 250,000 106,676 106,676
1999 250,000 130,437 130,437 250,000 118,655 118,655
</TABLE>
- --------------------------------------------------------------------------------
(1) Assumes the premium shown is paid at the beginning of each policy year.
Values would be different if premiums are paid with a different frequency
or in different amounts.
THESE ILLUSTRATIONS ARE BASED UPON PAST PERFORMANCE AND ARE NOT INDICATIVE OF
FUTURE RESULTS. FUTURE POLICY BENEFITS WILL FLUCTUATE BASED UPON ACTUAL
INVESTMENT RESULTS WHICH MAY BE MORE OR LESS THAN THOSE ACHIEVED IN THE PAST AND
WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY THE
OWNER. NO REPRESENTATION CAN BE MADE BY SAFECO OR THE FUNDS THAT THESE RESULTS
CAN BE ACHIEVED IN THE FUTURE.
C-2
<PAGE>
VARIABLE UNIVERSAL LIFE
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
MALE
PREFERRED NON-SMOKER
<TABLE>
<S> <C> <C> <C>
Initial Face Amount: $250,000 Annual Planned Premium(1): $4,000.00
Death Benefit Option: A Issue Age: 45
Death Benefits Payable to Age: 95 Premiums Payable to Age: 95
</TABLE>
- --------------------------------------------------------------------------------
SAFECO RST GROWTH OPPORTUNITIES PORTFOLIO
<TABLE>
<CAPTION>
POLICY POLICY CASH POLICY CASH
YEAR END DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER
DECEMBER 31ST BENEFIT VALUE VALUE BENEFIT VALUE VALUE
BASED UPON CURRENT CHARGES BASED UPON GUARANTEED CHARGES
<S> <C> <C> <C> <C> <C> <C>
1994 250,000 3,335 2,135 250,000 3,096 1,896
1995 250,000 9,193 7,633 250,000 8,630 7,070
1996 250,000 16,213 14,293 250,000 15,262 13,342
1997 250,000 27,876 25,731 250,000 26,249 24,104
1998 250,000 31,269 29,124 250,000 29,362 27,217
1999 250,000 35,999 34,283 250,000 33,662 31,946
</TABLE>
- --------------------------------------------------------------------------------
SAFECO RST NORTHWEST PORTFOLIO
<TABLE>
<CAPTION>
POLICY POLICY CASH POLICY CASH
YEAR END DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER
DECEMBER 31ST BENEFIT VALUE VALUE BENEFIT VALUE VALUE
BASED UPON CURRENT CHARGES BASED UPON GUARANTEED CHARGES
<S> <C> <C> <C> <C> <C> <C>
1994 250,000 3,053 1,853 250,000 2,823 1,623
1995 250,000 6,592 5,032 250,000 6,152 4,592
1996 250,000 10,808 8,888 250,000 10,120 8,200
1997 250,000 18,138 15,993 250,000 16,993 14,848
1998 250,000 21,613 19,468 250,000 20,172 18,027
1999 250,000 38,057 36,341 250,000 35,420 33,704
</TABLE>
- --------------------------------------------------------------------------------
(1) Assumes the premium shown is paid at the beginning of each policy year.
Values would be different if premiums are paid with a different frequency
or in different amounts.
THESE ILLUSTRATIONS ARE BASED UPON PAST PERFORMANCE AND ARE NOT INDICATIVE OF
FUTURE RESULTS. FUTURE POLICY BENEFITS WILL FLUCTUATE BASED UPON ACTUAL
INVESTMENT RESULTS WHICH MAY BE MORE OR LESS THAN THOSE ACHIEVED IN THE PAST AND
WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY THE
OWNER. NO REPRESENTATION CAN BE MADE BY SAFECO OR THE FUNDS THAT THESE RESULTS
CAN BE ACHIEVED IN THE FUTURE.
C-3
<PAGE>
VARIABLE UNIVERSAL LIFE
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
MALE
PREFERRED NON-SMOKER
<TABLE>
<S> <C> <C> <C>
Initial Face Amount: $250,000 Annual Planned Premium(1): $4,000.00
Death Benefit Option: A Issue Age: 45
Death Benefits Payable to Age: 95 Premiums Payable to Age: 95
</TABLE>
- --------------------------------------------------------------------------------
SAFECO RST SMALL COMPANY VALUE PORTFOLIO
<TABLE>
<CAPTION>
POLICY POLICY CASH POLICY CASH
YEAR END DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER
DECEMBER 31ST BENEFIT VALUE VALUE BENEFIT VALUE VALUE
BASED UPON CURRENT CHARGES BASED UPON GUARANTEED CHARGES
<S> <C> <C> <C> <C> <C> <C>
1997 250,000 2,929 1,729 250,000 2,704 1,504
1998 250,000 4,707 3,147 250,000 4,361 2,801
1999 250,000 8,928 7,008 250,000 8,333 6,413
</TABLE>
- --------------------------------------------------------------------------------
(1) Assumes the premium shown is paid at the beginning of each policy year.
Values would be different if premiums are paid with a different frequency
or in different amounts.
THESE ILLUSTRATIONS ARE BASED UPON PAST PERFORMANCE AND ARE NOT INDICATIVE OF
FUTURE RESULTS. FUTURE POLICY BENEFITS WILL FLUCTUATE BASED UPON ACTUAL
INVESTMENT RESULTS WHICH MAY BE MORE OR LESS THAN THOSE ACHIEVED IN THE PAST AND
WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY THE
OWNER. NO REPRESENTATION CAN BE MADE BY SAFECO OR THE FUNDS THAT THESE RESULTS
CAN BE ACHIEVED IN THE FUTURE.
C-4
<PAGE>
VARIABLE UNIVERSAL LIFE
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
MALE
PREFERRED NON-SMOKER
<TABLE>
<S> <C> <C> <C>
Initial Face Amount: $250,000 Annual Planned Premium(1): $4,000.00
Death Benefit Option: A Issue Age: 45
Death Benefits Payable to Age: 95 Premiums Payable to Age: 95
</TABLE>
- --------------------------------------------------------------------------------
AIM V.I. AGGRESSIVE GROWTH PORTFOLIO
<TABLE>
<CAPTION>
POLICY POLICY CASH POLICY CASH
YEAR END DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER
DECEMBER 31ST BENEFIT VALUE VALUE BENEFIT VALUE VALUE
BASED UPON CURRENT CHARGES BASED UPON GUARANTEED CHARGES
<S> <C> <C> <C> <C> <C> <C>
1998 250,000 2,854 1,654 250,000 2,631 1,431
1999 250,000 8,731 7,171 250,000 8,182 6,622
</TABLE>
- --------------------------------------------------------------------------------
AIM V.I. GROWTH PORTFOLIO
<TABLE>
<CAPTION>
POLICY POLICY CASH POLICY CASH
YEAR END DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER
DECEMBER 31ST BENEFIT VALUE VALUE BENEFIT VALUE VALUE
BASED UPON CURRENT CHARGES BASED UPON GUARANTEED CHARGES
<S> <C> <C> <C> <C> <C> <C>
1993 250,000 3,485 2,285 250,000 3,240 2,040
1994 250,000 6,329 4,769 250,000 5,910 4,350
1995 250,000 21,197 19,277 250,000 19,943 18,023
1996 250,000 27,138 24,993 250,000 25,514 23,369
1997 250,000 36,668 34,523 250,000 34,411 32,266
1998 250,000 49,447 47,731 250,000 46,285 44,569
1999 250,000 66,965 66,678 250,000 63,467 62,180
</TABLE>
- --------------------------------------------------------------------------------
(1) Assumes the premium shown is paid at the beginning of each policy year.
Values would be different if premiums are paid with a different frequency
or in different amounts.
THESE ILLUSTRATIONS ARE BASED UPON PAST PERFORMANCE AND ARE NOT INDICATIVE OF
FUTURE RESULTS. FUTURE POLICY BENEFITS WILL FLUCTUATE BASED UPON ACTUAL
INVESTMENT RESULTS WHICH MAY BE MORE OR LESS THAN THOSE ACHIEVED IN THE PAST AND
WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY THE
OWNER. NO REPRESENTATION CAN BE MADE BY SAFECO OR THE FUNDS THAT THESE RESULTS
CAN BE ACHIEVED IN THE FUTURE.
C-5
<PAGE>
VARIABLE UNIVERSAL LIFE
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
MALE
PREFERRED NON-SMOKER
<TABLE>
<S> <C> <C> <C>
Initial Face Amount: $250,000 Annual Planned Premium(1): $4,000.00
Death Benefit Option: A Issue Age: 45
Death Benefits Payable to Age: 95 Premiums Payable to Age: 95
</TABLE>
- --------------------------------------------------------------------------------
AMERICAN CENTURY VP INTERNATIONAL PORTFOLIO
<TABLE>
<CAPTION>
POLICY POLICY CASH POLICY CASH
YEAR END DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER
DECEMBER 31ST BENEFIT VALUE VALUE BENEFIT VALUE VALUE
BASED UPON CURRENT CHARGES BASED UPON GUARANTEED CHARGES
<S> <C> <C> <C> <C> <C> <C>
1995 250,000 3,345 2,145 250,000 3,105 1,905
1996 250,000 7,374 5,814 250,000 6,901 5,341
1997 250,000 12,357 10,437 250,000 11,597 9,677
1998 250,000 18,223 16,078 250,000 17,091 14,946
1999 250,000 34,895 32,750 250,000 32,702 30,557
</TABLE>
- --------------------------------------------------------------------------------
AMERICAN CENTURY VP BALANCED PORTFOLIO
<TABLE>
<CAPTION>
POLICY POLICY CASH POLICY CASH
YEAR END DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER
DECEMBER 31ST BENEFIT VALUE VALUE BENEFIT VALUE VALUE
BASED UPON CURRENT CHARGES BASED UPON GUARANTEED CHARGES
<S> <C> <C> <C> <C> <C> <C>
1992 250,000 2,725 1,525 250,000 2,507 1,307
1993 250,000 6,258 4,698 250,000 5,830 4,270
1994 250,000 9,283 7,363 250,000 8,670 6,750
1995 250,000 14,879 12,734 250,000 13,901 11,756
1996 250,000 19,958 17,813 250,000 18,584 16,439
1997 250,000 26,484 24,768 250,000 24,535 22,819
1998 250,000 33,967 32,680 250,000 31,298 30,011
1999 250,000 40,411 39,553 250,000 37,004 36,146
</TABLE>
- --------------------------------------------------------------------------------
(1) Assumes the premium shown is paid at the beginning of each policy year.
Values would be different if premiums are paid with a different frequency
or in different amounts.
THESE ILLUSTRATIONS ARE BASED UPON PAST PERFORMANCE AND ARE NOT INDICATIVE OF
FUTURE RESULTS. FUTURE POLICY BENEFITS WILL FLUCTUATE BASED UPON ACTUAL
INVESTMENT RESULTS WHICH MAY BE MORE OR LESS THAN THOSE ACHIEVED IN THE PAST AND
WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY THE
OWNER. NO REPRESENTATION CAN BE MADE BY SAFECO OR THE FUNDS THAT THESE RESULTS
CAN BE ACHIEVED IN THE FUTURE.
C-6
<PAGE>
VARIABLE UNIVERSAL LIFE
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
MALE
PREFERRED NON-SMOKER
<TABLE>
<S> <C> <C> <C>
Initial Face Amount: $250,000 Annual Planned Premium(1): $4,000.00
Death Benefit Option: A Issue Age: 45
Death Benefits Payable to Age: 95 Premiums Payable to Age: 95
</TABLE>
- --------------------------------------------------------------------------------
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC. PORTFOLIO
<TABLE>
<CAPTION>
POLICY POLICY CASH POLICY CASH
YEAR END DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER
DECEMBER 31ST BENEFIT VALUE VALUE BENEFIT VALUE VALUE
BASED UPON CURRENT CHARGES BASED UPON GUARANTEED CHARGES
<S> <C> <C> <C> <C> <C> <C>
1993 250,000 4,140 2,940 250,000 3,874 2,674
1994 250,000 7,124 5,564 250,000 6,676 5,116
1995 250,000 13,729 11,809 250,000 12,914 10,994
1996 250,000 20,249 18,104 250,000 19,032 16,887
1997 250,000 29,800 27,655 250,000 27,945 25,800
1998 250,000 42,315 40,599 250,000 39,557 37,841
1999 250,000 58,735 57,448 250,000 54,746 53,459
</TABLE>
- --------------------------------------------------------------------------------
DREYFUS IP MIDCAP STOCK PORTFOLIO
<TABLE>
<CAPTION>
POLICY POLICY CASH POLICY CASH
YEAR END DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER
DECEMBER 31ST BENEFIT VALUE VALUE BENEFIT VALUE VALUE
BASED UPON CURRENT CHARGES BASED UPON GUARANTEED CHARGES
<S> <C> <C> <C> <C> <C> <C>
1998 250,000 2,802 1,602 250,000 2,581 1,381
1999 250,000 6,532 4,972 250,000 6,091 4,531
</TABLE>
- --------------------------------------------------------------------------------
DREYFUS IP TECHNOLOGY GROWTH PORTFOLIO
<TABLE>
<CAPTION>
POLICY POLICY CASH POLICY CASH
YEAR END DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER
DECEMBER 31ST BENEFIT VALUE VALUE BENEFIT VALUE VALUE
BASED UPON CURRENT CHARGES BASED UPON GUARANTEED CHARGES
<S> <C> <C> <C> <C> <C> <C>
1999 250,000 12,514 11,314 250,000 12,023 10,823
</TABLE>
- --------------------------------------------------------------------------------
(1) Assumes the premium shown is paid at the beginning of each policy year.
Values would be different if premiums are paid with a different frequency
or in different amounts.
THESE ILLUSTRATIONS ARE BASED UPON PAST PERFORMANCE AND ARE NOT INDICATIVE OF
FUTURE RESULTS. FUTURE POLICY BENEFITS WILL FLUCTUATE BASED UPON ACTUAL
INVESTMENT RESULTS WHICH MAY BE MORE OR LESS THAN THOSE ACHIEVED IN THE PAST AND
WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY THE
OWNER. NO REPRESENTATION CAN BE MADE BY SAFECO OR THE FUNDS THAT THESE RESULTS
CAN BE ACHIEVED IN THE FUTURE.
C-7
<PAGE>
VARIABLE UNIVERSAL LIFE
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
MALE
PREFERRED NON-SMOKER
<TABLE>
<S> <C> <C> <C>
Initial Face Amount: $250,000 Annual Planned Premium(1): $4,000.00
Death Benefit Option: A Issue Age: 45
Death Benefits Payable to Age: 95 Premiums Payable to Age: 95
</TABLE>
- --------------------------------------------------------------------------------
DREYFUS VIF APPRECIATION PORTFOLIO
<TABLE>
<CAPTION>
POLICY POLICY CASH POLICY CASH
YEAR END DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER
DECEMBER 31ST BENEFIT VALUE VALUE BENEFIT VALUE VALUE
BASED UPON CURRENT CHARGES BASED UPON GUARANTEED CHARGES
<S> <C> <C> <C> <C> <C> <C>
1993 250,000 3,241 2,041 250,000 3,005 1,805
1994 250,000 6,497 4,937 250,000 6,064 4,504
1995 250,000 12,784 10,864 250,000 11,996 10,076
1996 250,000 19,807 17,662 250,000 18,582 16,437
1997 250,000 29,143 26,998 250,000 27,284 25,139
1998 250,000 41,739 40,023 250,000 38,957 37,241
1999 250,000 49,605 48,318 250,000 46,129 44,842
</TABLE>
- --------------------------------------------------------------------------------
DREYFUS VIF QUALITY BOND PORTFOLIO
<TABLE>
<CAPTION>
POLICY POLICY CASH POLICY CASH
YEAR END DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER
DECEMBER 31ST BENEFIT VALUE VALUE BENEFIT VALUE VALUE
BASED UPON CURRENT CHARGES BASED UPON GUARANTEED CHARGES
<S> <C> <C> <C> <C> <C> <C>
1990 250,000 3,178 1,978 250,000 2,944 1,744
1991 250,000 7,167 5,607 250,000 6,700 5,140
1992 250,000 10,417 8,497 250,000 9,755 7,835
1993 250,000 13,696 11,551 250,000 12,802 10,657
1994 250,000 17,436 15,291 250,000 16,234 14,089
1995 250,000 24,506 22,790 250,000 22,692 20,976
1996 250,000 28,138 26,851 250,000 25,876 24,589
1997 250,000 33,810 32,952 250,000 30,855 29,997
1998 250,000 38,509 38,080 250,000 34,831 34,402
1999 250,000 41,202 41,202 250,000 36,868 36,868
</TABLE>
- --------------------------------------------------------------------------------
(1) Assumes the premium shown is paid at the beginning of each policy year.
Values would be different if premiums are paid with a different frequency
or in different amounts.
THESE ILLUSTRATIONS ARE BASED UPON PAST PERFORMANCE AND ARE NOT INDICATIVE OF
FUTURE RESULTS. FUTURE POLICY BENEFITS WILL FLUCTUATE BASED UPON ACTUAL
INVESTMENT RESULTS WHICH MAY BE MORE OR LESS THAN THOSE ACHIEVED IN THE PAST AND
WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY THE
OWNER. NO REPRESENTATION CAN BE MADE BY SAFECO OR THE FUNDS THAT THESE RESULTS
CAN BE ACHIEVED IN THE FUTURE.
C-8
<PAGE>
VARIABLE UNIVERSAL LIFE
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
MALE
PREFERRED NON-SMOKER
<TABLE>
<S> <C> <C> <C>
Initial Face Amount: $250,000 Annual Planned Premium(1): $4,000.00
Death Benefit Option: A Issue Age: 45
Death Benefits Payable to Age: 95 Premiums Payable to Age: 95
</TABLE>
- --------------------------------------------------------------------------------
FEDERATED HIGH INCOME BOND FUND II PORTFOLIO
<TABLE>
<CAPTION>
POLICY POLICY CASH POLICY CASH
YEAR END DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER
DECEMBER 31ST BENEFIT VALUE VALUE BENEFIT VALUE VALUE
BASED UPON CURRENT CHARGES BASED UPON GUARANTEED CHARGES
<S> <C> <C> <C> <C> <C> <C>
1994 250,000 2,784 1,584 250,000 2,564 1,364
1995 250,000 7,109 5,549 250,000 6,639 5,079
1996 250,000 11,577 9,657 250,000 10,845 8,925
1997 250,000 16,544 14,399 250,000 15,487 13,342
1998 250,000 19,936 17,791 250,000 18,586 16,441
1999 250,000 23,294 21,578 250,000 21,579 19,863
</TABLE>
- --------------------------------------------------------------------------------
FEDERATED UTILITY FUND II PORTFOLIO
<TABLE>
<CAPTION>
POLICY POLICY CASH POLICY CASH
YEAR END DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER
DECEMBER 31ST BENEFIT VALUE VALUE BENEFIT VALUE VALUE
BASED UPON CURRENT CHARGES BASED UPON GUARANTEED CHARGES
<S> <C> <C> <C> <C> <C> <C>
1994 250,000 2,802 1,602 250,000 2,582 1,382
1995 250,000 7,370 5,810 250,000 6,887 5,327
1996 250,000 11,578 9,658 250,000 10,848 8,928
1997 250,000 18,460 16,315 250,000 17,298 15,153
1998 250,000 24,349 22,204 250,000 22,749 20,604
1999 250,000 54,951 53,235 250,000 51,283 49,567
</TABLE>
- --------------------------------------------------------------------------------
(1) Assumes the premium shown is paid at the beginning of each policy year.
Values would be different if premiums are paid with a different frequency
or in different amounts.
THESE ILLUSTRATIONS ARE BASED UPON PAST PERFORMANCE AND ARE NOT INDICATIVE OF
FUTURE RESULTS. FUTURE POLICY BENEFITS WILL FLUCTUATE BASED UPON ACTUAL
INVESTMENT RESULTS WHICH MAY BE MORE OR LESS THAN THOSE ACHIEVED IN THE PAST AND
WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY THE
OWNER. NO REPRESENTATION CAN BE MADE BY SAFECO OR THE FUNDS THAT THESE RESULTS
CAN BE ACHIEVED IN THE FUTURE.
C-9
<PAGE>
VARIABLE UNIVERSAL LIFE
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
MALE
PREFERRED NON-SMOKER
<TABLE>
<S> <C> <C> <C>
Initial Face Amount: $250,000 Annual Planned Premium(1): $4,000.00
Death Benefit Option: A Issue Age: 45
Death Benefits Payable to Age: 95 Premiums Payable to Age: 95
</TABLE>
- --------------------------------------------------------------------------------
FIDELITY'S VIP MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
POLICY POLICY CASH POLICY CASH
YEAR END DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER
DECEMBER 31ST BENEFIT VALUE VALUE BENEFIT VALUE VALUE
BASED UPON CURRENT CHARGES BASED UPON GUARANTEED CHARGES
<S> <C> <C> <C> <C> <C> <C>
1983 250,000 3,241 2,041 250,000 3,005 1,805
1984 250,000 6,995 5,435 250,000 6,538 4,978
1985 250,000 10,807 8,887 250,000 10,125 8,205
1986 250,000 14,665 12,520 250,000 13,719 11,574
1987 250,000 18,694 16,549 250,000 17,415 15,270
1988 250,000 23,157 21,441 250,000 21,439 19,723
1989 250,000 28,353 27,066 250,000 26,072 24,785
1990 250,000 33,626 32,768 250,000 30,683 29,825
1991 250,000 38,548 38,119 250,000 34,863 34,434
1992 250,000 42,804 42,804 250,000 38,313 38,313
1993 250,000 46,807 46,807 250,000 41,458 41,458
1994 250,000 51,329 51,329 250,000 44,987 44,987
1995 250,000 56,798 56,798 250,000 49,268 49,268
1996 250,000 62,174 62,174 250,000 53,373 53,373
1997 250,000 67,757 67,757 250,000 57,552 57,552
1998 250,000 73,459 73,459 250,000 61,711 61,711
1999 250,000 79,058 79,058 250,000 65,642 65,642
</TABLE>
- --------------------------------------------------------------------------------
(1) Assumes the premium shown is paid at the beginning of each policy year.
Values would be different if premiums are paid with a different frequency
or in different amounts.
THESE ILLUSTRATIONS ARE BASED UPON PAST PERFORMANCE AND ARE NOT INDICATIVE OF
FUTURE RESULTS. FUTURE POLICY BENEFITS WILL FLUCTUATE BASED UPON ACTUAL
INVESTMENT RESULTS WHICH MAY BE MORE OR LESS THAN THOSE ACHIEVED IN THE PAST AND
WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY THE
OWNER. NO REPRESENTATION CAN BE MADE BY SAFECO OR THE FUNDS THAT THESE RESULTS
CAN BE ACHIEVED IN THE FUTURE.
C-10
<PAGE>
VARIABLE UNIVERSAL LIFE
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
MALE
PREFERRED NON-SMOKER
<TABLE>
<S> <C> <C> <C>
Initial Face Amount: $250,000 Annual Planned Premium(1): $4,000.00
Death Benefit Option: A Issue Age: 45
Death Benefits Payable to Age: 95 Premiums Payable to Age: 95
</TABLE>
- --------------------------------------------------------------------------------
FIDELITY'S VIP HIGH INCOME PORTFOLIO
<TABLE>
<CAPTION>
POLICY POLICY CASH POLICY CASH
YEAR END DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER
DECEMBER 31ST BENEFIT VALUE VALUE BENEFIT VALUE VALUE
BASED UPON CURRENT CHARGES BASED UPON GUARANTEED CHARGES
<S> <C> <C> <C> <C> <C> <C>
1986 250,000 3,532 2,332 250,000 3,286 2,086
1987 250,000 6,669 5,109 250,000 6,233 4,673
1988 250,000 10,813 8,893 250,000 10,135 8,215
1989 250,000 13,122 10,977 250,000 12,266 10,121
1990 250,000 15,620 13,475 250,000 14,521 12,376
1991 250,000 25,150 23,434 250,000 23,270 21,554
1992 250,000 34,545 33,258 250,000 31,800 30,513
1993 250,000 45,001 44,143 250,000 41,205 40,347
1994 250,000 46,840 46,411 250,000 42,591 42,162
1995 250,000 59,870 59,870 250,000 54,056 54,056
1996 250,000 71,241 71,241 250,000 63,921 63,921
1997 250,000 86,811 86,811 250,000 77,479 77,479
1998 250,000 85,126 85,126 250,000 75,541 75,541
1999 250,000 94,437 94,437 250,000 83,316 83,316
</TABLE>
- --------------------------------------------------------------------------------
(1) Assumes the premium shown is paid at the beginning of each policy year.
Values would be different if premiums are paid with a different frequency
or in different amounts.
THESE ILLUSTRATIONS ARE BASED UPON PAST PERFORMANCE AND ARE NOT INDICATIVE OF
FUTURE RESULTS. FUTURE POLICY BENEFITS WILL FLUCTUATE BASED UPON ACTUAL
INVESTMENT RESULTS WHICH MAY BE MORE OR LESS THAN THOSE ACHIEVED IN THE PAST AND
WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY THE
OWNER. NO REPRESENTATION CAN BE MADE BY SAFECO OR THE FUNDS THAT THESE RESULTS
CAN BE ACHIEVED IN THE FUTURE.
C-11
<PAGE>
VARIABLE UNIVERSAL LIFE
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
MALE
PREFERRED NON-SMOKER
<TABLE>
<S> <C> <C> <C>
Initial Face Amount: $250,000 Annual Planned Premium(1): $4,000.00
Death Benefit Option: A Issue Age: 45
Death Benefits Payable to Age: 95 Premiums Payable to Age: 95
</TABLE>
- --------------------------------------------------------------------------------
FIDELITY'S VIP EQUITY-INCOME PORTFOLIO
<TABLE>
<CAPTION>
POLICY POLICY CASH POLICY CASH
YEAR END DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER
DECEMBER 31ST BENEFIT VALUE VALUE BENEFIT VALUE VALUE
BASED UPON CURRENT CHARGES BASED UPON GUARANTEED CHARGES
<S> <C> <C> <C> <C> <C> <C>
1987 250,000 2,891 1,691 250,000 2,667 1,467
1988 250,000 7,395 5,835 250,000 6,912 5,352
1989 250,000 12,241 10,321 250,000 11,478 9,558
1990 250,000 12,742 10,597 250,000 11,904 9,759
1991 250,000 20,704 18,559 250,000 19,295 17,150
1992 250,000 27,607 25,891 250,000 25,602 23,886
1993 250,000 36,049 34,762 250,000 33,261 31,974
1994 250,000 41,537 40,679 250,000 38,093 37,235
1995 250,000 59,989 59,560 250,000 54,723 54,294
1996 250,000 71,630 71,630 250,000 64,987 64,987
1997 250,000 95,230 95,230 250,000 86,038 86,038
1998 250,000 109,053 109,053 250,000 98,178 98,178
1999 250,000 118,371 118,371 250,000 106,207 106,207
</TABLE>
- --------------------------------------------------------------------------------
(1) Assumes the premium shown is paid at the beginning of each policy year.
Values would be different if premiums are paid with a different frequency
or in different amounts.
THESE ILLUSTRATIONS ARE BASED UPON PAST PERFORMANCE AND ARE NOT INDICATIVE OF
FUTURE RESULTS. FUTURE POLICY BENEFITS WILL FLUCTUATE BASED UPON ACTUAL
INVESTMENT RESULTS WHICH MAY BE MORE OR LESS THAN THOSE ACHIEVED IN THE PAST AND
WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY THE
OWNER. NO REPRESENTATION CAN BE MADE BY SAFECO OR THE FUNDS THAT THESE RESULTS
CAN BE ACHIEVED IN THE FUTURE.
C-12
<PAGE>
VARIABLE UNIVERSAL LIFE
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
MALE
PREFERRED NON-SMOKER
<TABLE>
<S> <C> <C> <C>
Initial Face Amount: $250,000 Annual Planned Premium(1): $4,000.00
Death Benefit Option: A Issue Age: 45
Death Benefits Payable to Age: 95 Premiums Payable to Age: 95
</TABLE>
- --------------------------------------------------------------------------------
FIDELITY'S VIP GROWTH PORTFOLIO
<TABLE>
<CAPTION>
POLICY POLICY CASH POLICY CASH
YEAR END DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER
DECEMBER 31ST BENEFIT VALUE VALUE BENEFIT VALUE VALUE
BASED UPON CURRENT CHARGES BASED UPON GUARANTEED CHARGES
<S> <C> <C> <C> <C> <C> <C>
1987 250,000 3,053 1,853 250,000 2,824 1,624
1988 250,000 7,127 5,567 250,000 6,660 5,100
1989 250,000 13,431 11,511 250,000 12,607 10,687
1990 250,000 14,346 12,201 250,000 13,424 11,279
1991 250,000 25,319 23,174 250,000 23,654 21,509
1992 250,000 30,808 29,092 250,000 28,650 26,934
1993 250,000 40,198 38,911 250,000 37,211 35,924
1994 250,000 42,871 42,013 250,000 39,449 38,591
1995 250,000 61,915 61,486 250,000 56,673 56,244
1996 250,000 74,109 74,109 250,000 67,477 67,477
1997 250,000 94,805 94,805 250,000 85,954 85,954
1998 250,000 136,030 136,030 250,000 123,013 123,013
1999 250,000 190,293 190,293 250,000 171,899 171,899
</TABLE>
- --------------------------------------------------------------------------------
(1) Assumes the premium shown is paid at the beginning of each policy year.
Values would be different if premiums are paid with a different frequency
or in different amounts.
THESE ILLUSTRATIONS ARE BASED UPON PAST PERFORMANCE AND ARE NOT INDICATIVE OF
FUTURE RESULTS. FUTURE POLICY BENEFITS WILL FLUCTUATE BASED UPON ACTUAL
INVESTMENT RESULTS WHICH MAY BE MORE OR LESS THAN THOSE ACHIEVED IN THE PAST AND
WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY THE
OWNER. NO REPRESENTATION CAN BE MADE BY SAFECO OR THE FUNDS THAT THESE RESULTS
CAN BE ACHIEVED IN THE FUTURE.
C-13
<PAGE>
VARIABLE UNIVERSAL LIFE
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
MALE
PREFERRED NON-SMOKER
<TABLE>
<S> <C> <C> <C>
Initial Face Amount: $250,000 Annual Planned Premium(1): $4,000.00
Death Benefit Option: A Issue Age: 45
Death Benefits Payable to Age: 95 Premiums Payable to Age: 95
</TABLE>
- --------------------------------------------------------------------------------
FIDELITY'S VIP OVERSEAS PORTFOLIO
<TABLE>
<CAPTION>
POLICY POLICY CASH POLICY CASH
YEAR END DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER
DECEMBER 31ST BENEFIT VALUE VALUE BENEFIT VALUE VALUE
BASED UPON CURRENT CHARGES BASED UPON GUARANTEED CHARGES
<S> <C> <C> <C> <C> <C> <C>
1988 250,000 3,206 2,006 250,000 2,971 1,771
1989 250,000 8,020 6,460 250,000 7,512 5,952
1990 250,000 10,789 8,869 250,000 10,111 8,191
1991 250,000 14,831 12,686 250,000 13,880 11,735
1992 250,000 15,734 13,589 250,000 14,638 12,493
1993 250,000 25,740 24,024 250,000 23,835 22,119
1994 250,000 29,005 27,718 250,000 26,679 25,392
1995 250,000 34,860 34,002 250,000 31,829 30,971
1996 250,000 42,561 42,132 250,000 38,553 38,124
1997 250,000 50,492 50,492 250,000 45,347 45,347
1998 250,000 59,868 59,868 250,000 53,348 53,348
1999 250,000 89,089 89,089 250,000 78,971 78,971
</TABLE>
- --------------------------------------------------------------------------------
(1) Assumes the premium shown is paid at the beginning of each policy year.
Values would be different if premiums are paid with a different frequency
or in different amounts.
THESE ILLUSTRATIONS ARE BASED UPON PAST PERFORMANCE AND ARE NOT INDICATIVE OF
FUTURE RESULTS. FUTURE POLICY BENEFITS WILL FLUCTUATE BASED UPON ACTUAL
INVESTMENT RESULTS WHICH MAY BE MORE OR LESS THAN THOSE ACHIEVED IN THE PAST AND
WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY THE
OWNER. NO REPRESENTATION CAN BE MADE BY SAFECO OR THE FUNDS THAT THESE RESULTS
CAN BE ACHIEVED IN THE FUTURE.
C-14
<PAGE>
VARIABLE UNIVERSAL LIFE
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
MALE
PREFERRED NON-SMOKER
<TABLE>
<S> <C> <C> <C>
Initial Face Amount: $250,000 Annual Planned Premium(1): $4,000.00
Death Benefit Option: A Issue Age: 45
Death Benefits Payable to Age: 95 Premiums Payable to Age: 95
</TABLE>
- --------------------------------------------------------------------------------
FIDELITY'S VIP II INVESTMENT GRADE BOND PORTFOLIO
<TABLE>
<CAPTION>
POLICY POLICY CASH POLICY CASH
YEAR END DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER
DECEMBER 31ST BENEFIT VALUE VALUE BENEFIT VALUE VALUE
BASED UPON CURRENT CHARGES BASED UPON GUARANTEED CHARGES
<S> <C> <C> <C> <C> <C> <C>
1989 250,000 3,278 2,078 250,000 3,041 1,841
1990 250,000 6,751 5,191 250,000 6,307 4,747
1991 250,000 11,389 9,469 250,000 10,676 8,756
1992 250,000 15,277 13,132 250,000 14,299 12,154
1993 250,000 20,190 18,045 250,000 18,827 16,682
1994 250,000 22,123 20,407 250,000 20,488 18,772
1995 250,000 29,325 28,038 250,000 26,983 25,696
1996 250,000 33,083 32,225 250,000 30,201 29,343
1997 250,000 39,059 38,630 250,000 35,344 34,915
1998 250,000 45,439 45,439 250,000 40,719 40,719
1999 250,000 47,435 47,435 250,000 42,074 42,074
</TABLE>
- --------------------------------------------------------------------------------
(1) Assumes the premium shown is paid at the beginning of each policy year.
Values would be different if premiums are paid with a different frequency
or in different amounts.
THESE ILLUSTRATIONS ARE BASED UPON PAST PERFORMANCE AND ARE NOT INDICATIVE OF
FUTURE RESULTS. FUTURE POLICY BENEFITS WILL FLUCTUATE BASED UPON ACTUAL
INVESTMENT RESULTS WHICH MAY BE MORE OR LESS THAN THOSE ACHIEVED IN THE PAST AND
WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY THE
OWNER. NO REPRESENTATION CAN BE MADE BY SAFECO OR THE FUNDS THAT THESE RESULTS
CAN BE ACHIEVED IN THE FUTURE.
C-15
<PAGE>
VARIABLE UNIVERSAL LIFE
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
MALE
PREFERRED NON-SMOKER
<TABLE>
<S> <C> <C> <C>
Initial Face Amount: $250,000 Annual Planned Premium(1): $4,000.00
Death Benefit Option: A Issue Age: 45
Death Benefits Payable to Age: 95 Premiums Payable to Age: 95
</TABLE>
- --------------------------------------------------------------------------------
FIDELITY'S VIP II ASSET MANAGER PORTFOLIO
<TABLE>
<CAPTION>
POLICY POLICY CASH POLICY CASH
YEAR END DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER
DECEMBER 31ST BENEFIT VALUE VALUE BENEFIT VALUE VALUE
BASED UPON CURRENT CHARGES BASED UPON GUARANTEED CHARGES
<S> <C> <C> <C> <C> <C> <C>
1990 250,000 3,158 1,958 250,000 2,924 1,724
1991 250,000 7,712 6,152 250,000 7,218 5,658
1992 250,000 11,982 10,062 250,000 11,239 9,319
1993 250,000 18,160 16,015 250,000 17,027 14,882
1994 250,000 19,520 17,375 250,000 18,215 16,070
1995 250,000 26,241 24,525 250,000 24,356 22,640
1996 250,000 33,339 32,052 250,000 30,767 29,480
1997 250,000 43,644 42,786 250,000 40,047 39,189
1998 250,000 53,378 52,949 250,000 48,679 48,250
1999 250,000 62,254 62,254 250,000 56,398 56,398
</TABLE>
- --------------------------------------------------------------------------------
FIDELITY'S VIP II INDEX 500 PORTFOLIO
<TABLE>
<CAPTION>
POLICY POLICY CASH POLICY CASH
YEAR END DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER
DECEMBER 31ST BENEFIT VALUE VALUE BENEFIT VALUE VALUE
BASED UPON CURRENT CHARGES BASED UPON GUARANTEED CHARGES
<S> <C> <C> <C> <C> <C> <C>
1993 250,000 3,261 2,061 250,000 3,024 1,824
1994 250,000 6,383 4,823 250,000 5,957 4,397
1995 250,000 13,016 11,096 250,000 12,216 10,296
1996 250,000 19,656 17,511 250,000 18,441 16,296
1997 250,000 30,097 27,952 250,000 28,183 26,038
1998 250,000 42,402 40,686 250,000 39,586 37,870
1999 250,000 54,490 53,203 250,000 50,708 49,421
</TABLE>
- --------------------------------------------------------------------------------
(1) Assumes the premium shown is paid at the beginning of each policy year.
Values would be different if premiums are paid with a different frequency
or in different amounts.
THESE ILLUSTRATIONS ARE BASED UPON PAST PERFORMANCE AND ARE NOT INDICATIVE OF
FUTURE RESULTS. FUTURE POLICY BENEFITS WILL FLUCTUATE BASED UPON ACTUAL
INVESTMENT RESULTS WHICH MAY BE MORE OR LESS THAN THOSE ACHIEVED IN THE PAST AND
WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY THE
OWNER. NO REPRESENTATION CAN BE MADE BY SAFECO OR THE FUNDS THAT THESE RESULTS
CAN BE ACHIEVED IN THE FUTURE.
C-16
<PAGE>
VARIABLE UNIVERSAL LIFE
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
MALE
PREFERRED NON-SMOKER
<TABLE>
<S> <C> <C> <C>
Initial Face Amount: $250,000 Annual Planned Premium(1): $4,000.00
Death Benefit Option: A Issue Age: 45
Death Benefits Payable to Age: 95 Premiums Payable to Age: 95
</TABLE>
- --------------------------------------------------------------------------------
FIDELITY'S VIP II ASSET MANAGER: GROWTH PORTFOLIO
<TABLE>
<CAPTION>
POLICY POLICY CASH POLICY CASH
YEAR END DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER
DECEMBER 31ST BENEFIT VALUE VALUE BENEFIT VALUE VALUE
BASED UPON CURRENT CHARGES BASED UPON GUARANTEED CHARGES
<S> <C> <C> <C> <C> <C> <C>
1995 250,000 3,719 2,519 250,000 3,466 2,266
1996 250,000 8,216 6,656 250,000 7,708 6,148
1997 250,000 14,106 12,186 250,000 13,268 11,348
1998 250,000 20,086 17,941 250,000 18,873 16,728
1999 250,000 26,509 24,364 250,000 24,835 22,690
</TABLE>
- --------------------------------------------------------------------------------
FIDELITY'S VIP II CONTRAFUND PORTFOLIO
<TABLE>
<CAPTION>
POLICY POLICY CASH POLICY CASH
YEAR END DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER
DECEMBER 31ST BENEFIT VALUE VALUE BENEFIT VALUE VALUE
BASED UPON CURRENT CHARGES BASED UPON GUARANTEED CHARGES
<S> <C> <C> <C> <C> <C> <C>
1995 250,000 4,286 3,086 250,000 4,015 2,815
1996 250,000 8,986 7,426 250,000 8,452 6,892
1997 250,000 14,952 13,032 250,000 14,088 12,168
1998 250,000 23,367 21,222 250,000 22,005 19,860
1999 250,000 32,675 30,530 250,000 30,699 28,554
</TABLE>
- --------------------------------------------------------------------------------
(1) Assumes the premium shown is paid at the beginning of each policy year.
Values would be different if premiums are paid with a different frequency
or in different amounts.
THESE ILLUSTRATIONS ARE BASED UPON PAST PERFORMANCE AND ARE NOT INDICATIVE OF
FUTURE RESULTS. FUTURE POLICY BENEFITS WILL FLUCTUATE BASED UPON ACTUAL
INVESTMENT RESULTS WHICH MAY BE MORE OR LESS THAN THOSE ACHIEVED IN THE PAST AND
WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY THE
OWNER. NO REPRESENTATION CAN BE MADE BY SAFECO OR THE FUNDS THAT THESE RESULTS
CAN BE ACHIEVED IN THE FUTURE.
C-17
<PAGE>
VARIABLE UNIVERSAL LIFE
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
MALE
PREFERRED NON-SMOKER
<TABLE>
<S> <C> <C> <C>
Initial Face Amount: $250,000 Annual Planned Premium(1): $4,000.00
Death Benefit Option: A Issue Age: 45
Death Benefits Payable to Age: 95 Premiums Payable to Age: 95
</TABLE>
- --------------------------------------------------------------------------------
FIDELITY'S VIP III BALANCED PORTFOLIO
<TABLE>
<CAPTION>
POLICY POLICY CASH POLICY CASH
YEAR END DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER
DECEMBER 31ST BENEFIT VALUE VALUE BENEFIT VALUE VALUE
BASED UPON CURRENT CHARGES BASED UPON GUARANTEED CHARGES
<S> <C> <C> <C> <C> <C> <C>
1995 250,000 3,403 2,203 250,000 3,162 1,962
1996 250,000 7,143 5,583 250,000 6,682 5,122
1997 250,000 12,461 10,541 250,000 11,696 9,776
1998 250,000 18,167 16,022 250,000 17,039 14,894
1999 250,000 21,998 19,853 250,000 20,553 18,408
</TABLE>
- --------------------------------------------------------------------------------
FIDELITY'S VIP III GROWTH OPPORTUNITIES PORTFOLIO
<TABLE>
<CAPTION>
POLICY POLICY CASH POLICY CASH
YEAR END DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER
DECEMBER 31ST BENEFIT VALUE VALUE BENEFIT VALUE VALUE
BASED UPON CURRENT CHARGES BASED UPON GUARANTEED CHARGES
<S> <C> <C> <C> <C> <C> <C>
1995 250,000 4,041 2,841 250,000 3,778 2,578
1996 250,000 8,468 6,908 250,000 6,682 5,122
1997 250,000 15,005 13,085 250,000 14,130 12,210
1998 250,000 22,442 20,297 250,000 21,228 18,973
1999 250,000 26,381 24,236 250,000 24,740 22,595
</TABLE>
- --------------------------------------------------------------------------------
FIDELITY'S VIP III GROWTH & INCOME PORTFOLIO
<TABLE>
<CAPTION>
POLICY POLICY CASH POLICY CASH
YEAR END DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER
DECEMBER 31ST BENEFIT VALUE VALUE BENEFIT VALUE VALUE
BASED UPON CURRENT CHARGES BASED UPON GUARANTEED CHARGES
<S> <C> <C> <C> <C> <C> <C>
1997 250,000 3,958 2,758 250,000 3,697 2,497
1998 250,000 9,215 7,655 250,000 8,664 7,104
1999 250,000 13,329 11,409 250,000 12,540 10,620
</TABLE>
- --------------------------------------------------------------------------------
(1) Assumes the premium shown is paid at the beginning of each policy year.
Values would be different if premiums are paid with a different frequency
or in different amounts.
THESE ILLUSTRATIONS ARE BASED UPON PAST PERFORMANCE AND ARE NOT INDICATIVE OF
FUTURE RESULTS. FUTURE POLICY BENEFITS WILL FLUCTUATE BASED UPON ACTUAL
INVESTMENT RESULTS WHICH MAY BE MORE OR LESS THAN THOSE ACHIEVED IN THE PAST AND
WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY THE
OWNER. NO REPRESENTATION CAN BE MADE BY SAFECO OR THE FUNDS THAT THESE RESULTS
CAN BE ACHIEVED IN THE FUTURE.
C-18
<PAGE>
VARIABLE UNIVERSAL LIFE
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
MALE
PREFERRED NON-SMOKER
<TABLE>
<S> <C> <C> <C>
Initial Face Amount: $250,000 Annual Planned Premium(1): $4,000.00
Death Benefit Option: A Issue Age: 45
Death Benefits Payable to Age: 95 Premiums Payable to Age: 95
</TABLE>
- --------------------------------------------------------------------------------
FRANKLIN SMALL CAP FUND -- CLASS 2 PORTFOLIO
<TABLE>
<CAPTION>
POLICY POLICY CASH POLICY CASH
YEAR END DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER
DECEMBER 31ST BENEFIT VALUE VALUE BENEFIT VALUE VALUE
BASED UPON CURRENT CHARGES BASED UPON GUARANTEED CHARGES
<S> <C> <C> <C> <C> <C> <C>
1995 250,000 4,229 3,029 250,000 3,960 2,760
1996 250,000 9,512 7,952 250,000 8,952 7,392
1997 250,000 14,715 12,795 250,000 13,863 11,943
1998 250,000 17,426 15,281 250,000 16,377 14,232
1999 250,000 40,328 38,183 250,000 37,897 35,752
</TABLE>
- --------------------------------------------------------------------------------
FRANKLIN U.S.GOVERNMENT FUND -- CLASS 2 PORTFOLIO
<TABLE>
<CAPTION>
POLICY POLICY CASH POLICY CASH
YEAR END DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER
DECEMBER 31ST BENEFIT VALUE VALUE BENEFIT VALUE VALUE
BASED UPON CURRENT CHARGES BASED UPON GUARANTEED CHARGES
<S> <C> <C> <C> <C> <C> <C>
1989 250,000 3,159 1,959 250,000 2,925 1,725
1990 250,000 6,800 5,240 250,000 6,352 4,792
1991 250,000 11,324 9,404 250,000 10,612 8,692
1992 250,000 15,431 13,286 250,000 14,442 12,297
1993 250,000 19,256 17,111 250,000 17,947 15,802
1994 250,000 20,970 19,254 250,000 19,403 17,687
1995 250,000 28,467 27,180 250,000 26,166 24,879
1996 250,000 32,331 31,473 250,000 29,479 28,621
1997 250,000 38,308 37,879 250,000 34,618 34,189
1998 250,000 44,017 44,017 250,000 39,381 39,381
1999 250,000 46,007 46,007 250,000 40,726 40,726
</TABLE>
- --------------------------------------------------------------------------------
(1) Assumes the premium shown is paid at the beginning of each policy year.
Values would be different if premiums are paid with a different frequency
or in different amounts.
THESE ILLUSTRATIONS ARE BASED UPON PAST PERFORMANCE AND ARE NOT INDICATIVE OF
FUTURE RESULTS. FUTURE POLICY BENEFITS WILL FLUCTUATE BASED UPON ACTUAL
INVESTMENT RESULTS WHICH MAY BE MORE OR LESS THAN THOSE ACHIEVED IN THE PAST AND
WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY THE
OWNER. NO REPRESENTATION CAN BE MADE BY SAFECO OR THE FUNDS THAT THESE RESULTS
CAN BE ACHIEVED IN THE FUTURE.
C-19
<PAGE>
VARIABLE UNIVERSAL LIFE
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
MALE
PREFERRED NON-SMOKER
<TABLE>
<S> <C> <C> <C>
Initial Face Amount: $250,000 Annual Planned Premium(1): $4,000.00
Death Benefit Option: A Issue Age: 45
Death Benefits Payable to Age: 95 Premiums Payable to Age: 95
</TABLE>
- --------------------------------------------------------------------------------
J.P. MORGAN U.S. DESCIPLINED EQUITY PORTFOLIO
<TABLE>
<CAPTION>
POLICY POLICY CASH POLICY CASH
YEAR END DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER
DECEMBER 31ST BENEFIT VALUE VALUE BENEFIT VALUE VALUE
BASED UPON CURRENT CHARGES BASED UPON GUARANTEED CHARGES
<S> <C> <C> <C> <C> <C> <C>
1995 250,000 4,075 2,875 250,000 3,811 2,611
1996 250,000 8,726 7,166 250,000 8,200 6,640
1997 250,000 15,016 13,096 250,000 14,142 12,222
1998 250,000 22,196 20,051 250,000 20,888 18,743
1999 250,000 29,762 27,617 250,000 27,934 25,789
</TABLE>
- --------------------------------------------------------------------------------
(1) Assumes the premium shown is paid at the beginning of each policy year.
Values would be different if premiums are paid with a different frequency
or in different amounts.
THESE ILLUSTRATIONS ARE BASED UPON PAST PERFORMANCE AND ARE NOT INDICATIVE OF
FUTURE RESULTS. FUTURE POLICY BENEFITS WILL FLUCTUATE BASED UPON ACTUAL
INVESTMENT RESULTS WHICH MAY BE MORE OR LESS THAN THOSE ACHIEVED IN THE PAST AND
WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY THE
OWNER. NO REPRESENTATION CAN BE MADE BY SAFECO OR THE FUNDS THAT THESE RESULTS
CAN BE ACHIEVED IN THE FUTURE.
C-20
<PAGE>
VARIABLE UNIVERSAL LIFE
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
MALE
PREFERRED NON-SMOKER
<TABLE>
<S> <C> <C> <C>
Initial Face Amount: $250,000 Annual Planned Premium(1): $4,000.00
Death Benefit Option: A Issue Age: 45
Death Benefits Payable to Age: 95 Premiums Payable to Age: 95
</TABLE>
- --------------------------------------------------------------------------------
INVESCO VIF -- REAL ESTATE OPPORTUNITY FUND PORTFOLIO
<TABLE>
<CAPTION>
POLICY POLICY CASH POLICY CASH
YEAR END DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER
DECEMBER 31ST BENEFIT VALUE VALUE BENEFIT VALUE VALUE
BASED UPON CURRENT CHARGES BASED UPON GUARANTEED CHARGES
<S> <C> <C> <C> <C> <C> <C>
1998 250,000 2,238 1,038 250,000 2,038 838
1999 250,000 5,314 3,754 250,000 4,927 3,367
</TABLE>
- --------------------------------------------------------------------------------
(1) Assumes the premium shown is paid at the beginning of each policy year.
Values would be different if premiums are paid with a different frequency
or in different amounts.
THESE ILLUSTRATIONS ARE BASED UPON PAST PERFORMANCE AND ARE NOT INDICATIVE OF
FUTURE RESULTS. FUTURE POLICY BENEFITS WILL FLUCTUATE BASED UPON ACTUAL
INVESTMENT RESULTS WHICH MAY BE MORE OR LESS THAN THOSE ACHIEVED IN THE PAST AND
WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY THE
OWNER. NO REPRESENTATION CAN BE MADE BY SAFECO OR THE FUNDS THAT THESE RESULTS
CAN BE ACHIEVED IN THE FUTURE.
C-21
<PAGE>
VARIABLE UNIVERSAL LIFE
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
MALE
PREFERRED NON-SMOKER
<TABLE>
<S> <C> <C> <C>
Initial Face Amount: $250,000 Annual Planned Premium(1): $4,000.00
Death Benefit Option: A Issue Age: 45
Death Benefits Payable to Age: 95 Premiums Payable to Age: 95
</TABLE>
- --------------------------------------------------------------------------------
LEXINGTON NATURAL RESOURCES PORTFOLIO
<TABLE>
<CAPTION>
POLICY POLICY CASH POLICY CASH
YEAR END DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER
DECEMBER 31ST BENEFIT VALUE VALUE BENEFIT VALUE VALUE
BASED UPON CURRENT CHARGES BASED UPON GUARANTEED CHARGES
<S> <C> <C> <C> <C> <C> <C>
1992 250,000 3,038 1,838 250,000 2,809 1,609
1993 250,000 6,803 5,243 250,000 6,352 4,792
1994 250,000 9,216 7,296 250,000 8,614 6,694
1995 250,000 14,261 12,116 250,000 13,327 11,182
1996 250,000 21,891 19,746 250,000 20,406 18,261
1997 250,000 26,520 24,804 250,000 24,589 22,873
1998 250,000 23,402 22,115 250,000 21,508 20,221
1999 250,000 29,888 29,030 250,000 27,226 26,368
</TABLE>
- --------------------------------------------------------------------------------
LEXINGTON EMERGING MARKETS PORTFOLIO
<TABLE>
<CAPTION>
POLICY POLICY CASH POLICY CASH
YEAR END DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER
DECEMBER 31ST BENEFIT VALUE VALUE BENEFIT VALUE VALUE
BASED UPON CURRENT CHARGES BASED UPON GUARANTEED CHARGES
<S> <C> <C> <C> <C> <C> <C>
1995 250,000 2,796 1,596 250,000 2,575 1,375
1996 250,000 6,318 4,758 250,000 5,888 4,328
1997 250,000 8,157 6,237 250,000 7,607 5,687
1998 250,000 7,837 5,962 250,000 7,261 5,116
1999 250,000 25,116 22,971 250,000 23,378 21,233
</TABLE>
- --------------------------------------------------------------------------------
(1) Assumes the premium shown is paid at the beginning of each policy year.
Values would be different if premiums are paid with a different frequency
or in different amounts.
THESE ILLUSTRATIONS ARE BASED UPON PAST PERFORMANCE AND ARE NOT INDICATIVE OF
FUTURE RESULTS. FUTURE POLICY BENEFITS WILL FLUCTUATE BASED UPON ACTUAL
INVESTMENT RESULTS WHICH MAY BE MORE OR LESS THAN THOSE ACHIEVED IN THE PAST AND
WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY THE
OWNER. NO REPRESENTATION CAN BE MADE BY SAFECO OR THE FUNDS THAT THESE RESULTS
CAN BE ACHIEVED IN THE FUTURE.
C-22
<PAGE>
VARIABLE UNIVERSAL LIFE
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
MALE
PREFERRED NON-SMOKER
<TABLE>
<S> <C> <C> <C>
Initial Face Amount: $250,000 Annual Planned Premium(1): $4,000.00
Death Benefit Option: A Issue Age: 45
Death Benefits Payable to Age: 95 Premiums Payable to Age: 95
</TABLE>
- --------------------------------------------------------------------------------
SCUDDER VLIF BALANCED PORTFOLIO
<TABLE>
<CAPTION>
POLICY POLICY CASH POLICY CASH
YEAR END DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER
DECEMBER 31ST BENEFIT VALUE VALUE BENEFIT VALUE VALUE
BASED UPON CURRENT CHARGES BASED UPON GUARANTEED CHARGES
<S> <C> <C> <C> <C> <C> <C>
1985 250,000 3,913 2,713 250,000 3,654 2,454
1986 250,000 8,193 6,633 250,000 7,690 6,130
1987 250,000 10,955 9,035 250,000 10,283 8,363
1988 250,000 15,893 13,748 250,000 14,899 12,754
1989 250,000 22,500 20,355 250,000 21,026 18,881
1990 250,000 24,818 23,102 250,000 23,049 21,333
1991 250,000 35,154 33,867 250,000 32,474 31,187
1992 250,000 40,523 39,665 250,000 37,196 36,338
1993 250,000 46,430 46,001 250,000 42,308 41,879
1994 250,000 48,009 48,009 250,000 43,352 43,352
1995 250,000 64,155 64,155 250,000 57,493 57,493
1996 250,000 74,510 74,510 250,000 66,333 66,333
1997 250,000 95,523 95,523 250,000 84,595 84,595
1998 250,000 120,492 120,492 250,000 106,287 106,287
1999 250,000 141,425 141,425 250,000 124,357 124,357
</TABLE>
- --------------------------------------------------------------------------------
(1) Assumes the premium shown is paid at the beginning of each policy year.
Values would be different if premiums are paid with a different frequency
or in different amounts.
THESE ILLUSTRATIONS ARE BASED UPON PAST PERFORMANCE AND ARE NOT INDICATIVE OF
FUTURE RESULTS. FUTURE POLICY BENEFITS WILL FLUCTUATE BASED UPON ACTUAL
INVESTMENT RESULTS WHICH MAY BE MORE OR LESS THAN THOSE ACHIEVED IN THE PAST AND
WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY THE
OWNER. NO REPRESENTATION CAN BE MADE BY SAFECO OR THE FUNDS THAT THESE RESULTS
CAN BE ACHIEVED IN THE FUTURE.
C-23
<PAGE>
VARIABLE UNIVERSAL LIFE
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
MALE
PREFERRED NON-SMOKER
<TABLE>
<S> <C> <C> <C>
Initial Face Amount: $250,000 Annual Planned Premium(1): $4,000.00
Death Benefit Option: A Issue Age: 45
Death Benefits Payable to Age: 95 Premiums Payable to Age: 95
</TABLE>
- --------------------------------------------------------------------------------
SCUDDER VLIF INTERNATIONAL PORTFOLIO
<TABLE>
<CAPTION>
POLICY POLICY CASH POLICY CASH
YEAR END DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER
DECEMBER 31ST BENEFIT VALUE VALUE BENEFIT VALUE VALUE
BASED UPON CURRENT CHARGES BASED UPON GUARANTEED CHARGES
<S> <C> <C> <C> <C> <C> <C>
1987 250,000 2,409 1,209 250,000 2,202 1,002
1988 250,000 6,445 4,885 250,000 6,002 4,442
1989 250,000 13,137 11,217 250,000 12,311 10,391
1990 250,000 14,771 12,626 250,000 13,809 11,664
1991 250,000 19,707 17,562 250,000 18,357 16,212
1992 250,000 21,821 20,105 250,000 20,187 18,471
1993 250,000 34,099 32,812 250,000 31,387 30,100
1994 250,000 36,482 35,624 250,000 33,347 32,489
1995 250,000 43,549 43,120 250,000 39,500 39,071
1996 250,000 53,065 53,065 250,000 47,742 47,742
1997 250,000 60,650 60,650 250,000 54,149 54,149
1998 250,000 74,803 74,803 250,000 66,346 66,346
1999 250,000 119,505 119,505 250,000 105,599 105,599
</TABLE>
- --------------------------------------------------------------------------------
(1) Assumes the premium shown is paid at the beginning of each policy year.
Values would be different if premiums are paid with a different frequency
or in different amounts.
THESE ILLUSTRATIONS ARE BASED UPON PAST PERFORMANCE AND ARE NOT INDICATIVE OF
FUTURE RESULTS. FUTURE POLICY BENEFITS WILL FLUCTUATE BASED UPON ACTUAL
INVESTMENT RESULTS WHICH MAY BE MORE OR LESS THAN THOSE ACHIEVED IN THE PAST AND
WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY THE
OWNER. NO REPRESENTATION CAN BE MADE BY SAFECO OR THE FUNDS THAT THESE RESULTS
CAN BE ACHIEVED IN THE FUTURE.
C-24
<PAGE>
VARIABLE UNIVERSAL LIFE
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
MALE
PREFERRED NON-SMOKER
<TABLE>
<S> <C> <C> <C>
Initial Face Amount: $250,000 Annual Planned Premium(1): $4,000.00
Death Benefit Option: A Issue Age: 45
Death Benefits Payable to Age: 95 Premiums Payable to Age: 95
</TABLE>
- --------------------------------------------------------------------------------
TEMPLETON DEVELOPING MARKETS SECURITIES FUND PORTFOLIO
<TABLE>
<CAPTION>
POLICY POLICY CASH POLICY CASH
YEAR END DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER
DECEMBER 31ST BENEFIT VALUE VALUE BENEFIT VALUE VALUE
BASED UPON CURRENT CHARGES BASED UPON GUARANTEED CHARGES
<S> <C> <C> <C> <C> <C> <C>
1996 250,000 2,710 1,510 250,000 2,493 1,293
1997 250,000 3,968 2,408 250,000 3,659 2,099
1998 250,000 5,397 3,477 250,000 4,992 3,072
1999 250,000 13,006 10,861 250,000 12,113 9,968
</TABLE>
- --------------------------------------------------------------------------------
(1) Assumes the premium shown is paid at the beginning of each policy year.
Values would be different if premiums are paid with a different frequency
or in different amounts.
THESE ILLUSTRATIONS ARE BASED UPON PAST PERFORMANCE AND ARE NOT INDICATIVE OF
FUTURE RESULTS. FUTURE POLICY BENEFITS WILL FLUCTUATE BASED UPON ACTUAL
INVESTMENT RESULTS WHICH MAY BE MORE OR LESS THAN THOSE ACHIEVED IN THE PAST AND
WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY THE
OWNER. NO REPRESENTATION CAN BE MADE BY SAFECO OR THE FUNDS THAT THESE RESULTS
CAN BE ACHIEVED IN THE FUTURE.
C-25
<PAGE>
VARIABLE UNIVERSAL LIFE
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
MALE
PREFERRED NON-SMOKER
<TABLE>
<S> <C> <C> <C>
Initial Face Amount: $250,000 Annual Planned Premium(1): $4,000.00
Death Benefit Option: A Issue Age: 45
Death Benefits Payable to Age: 95 Premiums Payable to Age: 95
</TABLE>
- --------------------------------------------------------------------------------
WANGER U.S. SMALL CAP PORTFOLIO
<TABLE>
<CAPTION>
POLICY POLICY CASH POLICY CASH
YEAR END DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER
DECEMBER 31ST BENEFIT VALUE VALUE BENEFIT VALUE VALUE
BASED UPON CURRENT CHARGES BASED UPON GUARANTEED CHARGES
<S> <C> <C> <C> <C> <C> <C>
1996 250,000 4,528 3,328 250,000 4,249 3,049
1997 250,000 9,938 8,378 250,000 9,364 7,804
1998 250,000 14,055 12,135 250,000 13,245 11,325
1999 250,000 21,313 19,168 250,000 20,067 17,922
</TABLE>
- --------------------------------------------------------------------------------
(1) Assumes the premium shown is paid at the beginning of each policy year.
Values would be different if premiums are paid with a different frequency
or in different amounts.
THESE ILLUSTRATIONS ARE BASED UPON PAST PERFORMANCE AND ARE NOT INDICATIVE OF
FUTURE RESULTS. FUTURE POLICY BENEFITS WILL FLUCTUATE BASED UPON ACTUAL
INVESTMENT RESULTS WHICH MAY BE MORE OR LESS THAN THOSE ACHIEVED IN THE PAST AND
WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY THE
OWNER. NO REPRESENTATION CAN BE MADE BY SAFECO OR THE FUNDS THAT THESE RESULTS
CAN BE ACHIEVED IN THE FUTURE.
C-26
<PAGE>
NET RATE OF RETURN
The SAFECO RST tables shown earlier in this appendix are based on the investment
performance, after actual expenses, of the corresponding SAFECO RST Portfolios.
The average annual total return used in calculating the death benefit, policy
account value and cash surrender value for the respective Portfolios are listed
below. These annual total returns do not account for insurance and
administrative charges but are net of the mortality and expense risk charge of
.70%; and, they are not an estimate or a guarantee of future investment
performance.
CALENDAR YEAR AVERAGE NET ANNUAL TOTAL RETURN (%) FOR THE SAFECO RST PORTFOLIOS
<TABLE>
<CAPTION>
SAFECO SAFECO
SAFECO SAFECO RST SAFECO RST
RST RST GROWTH RST SMALL CO.
YEAR BOND EQUITY OPPORTUNITIES NORTHWEST VALUE
<S> <C> <C> <C> <C> <C>
1988 6.33 25.28
1989 10.60 26.41
1990 5.87 -5.91
1991 13.28 26.15
1992 6.12 7.36
1993 9.85 27.22
1994 -3.63 8.24 11.22 2.95
1995 17.17 27.93 40.30 6.72
1996 -0.16 24.09 31.36 11.74
1997 7.71 24.15 43.85 30.32 n/a
1998 8.2 24.19 1.13 2.19 -20.65
1999 -4.61 8.55 4.89 53.57 14.60
</TABLE>
The AIM V.I. tables shown earlier in this appendix are based on the investment
performance, after actual expenses, of the corresponding AIM V.I. Portfolios.
The average annual total return used in calculating the death benefit, policy
account value and cash surrender value for the respective Portfolios are listed
below. These annual total returns do not account for insurance and
administrative charges but are net of the mortality and expense risk charge of
.70%; and, they are not an estimate or a guarantee of future investment
performance.
CALENDAR YEAR AVERAGE NET ANNUAL TOTAL RETURN (%) FOR THE AIM V.I. PORTFOLIOS
<TABLE>
<CAPTION>
AIM V.I.
AIM V.I. AGGRESSIVE
YEAR GROWTH GROWTH
<S> <C> <C>
1993 15.60
1994 -3.67
1995 33.78
1996 11.75
1997 21.19
1998 24.20 -2.92
1999 29.15 43.69
</TABLE>
C-27
<PAGE>
The American VP Balanced and International ("ACVP") tables shown earlier in this
appendix are based on the investment performance, after actual expenses, of the
corresponding ACVP Portfolios. The average annual total return used in
calculating the death benefit, policy account value and cash surrender value for
the respective Portfolios are listed below. These annual total returns do not
account for insurance and administrative charges, but are net of the mortality
and expense risk charge of .70%; and, they are not an estimate or a guarantee of
future investment performance.
CALENDAR YEAR AVERAGE NET ANNUAL TOTAL RETURN (%) FOR THE ACVP PORTFOLIOS
<TABLE>
<CAPTION>
ACVP ACVP
YEAR BALANCED INTERNATIONAL
<S> <C> <C>
1992 -6.70
1993 7.00
1994 -0.10
1995 20.40 11.50
1996 11.40 13.60
1997 15.11 17.93
1998 15.07 18.06
1999 9.30 62.93
</TABLE>
The Dreyfus Socially Responsible Growth Fund, Dreyfus IP and Dreyfus VIF tables
shown earlier in this appendix are based on the investment performance, after
actual expenses, of the corresponding Dreyfus Portfolios. The average annual
total return used in calculating the death benefit, policy account value and
cash surrender value for the respective Portfolios are listed below. These
annual total returns do not account for insurance and administrative charges but
are net of the mortality and expense risk charge of .70%; and, they are not an
estimate or a guarantee of future investment performance.
CALENDAR YEAR AVERAGE NET ANNUAL TOTAL RETURN (%) FOR THE DREYFUS PORTFOLIOS
<TABLE>
<CAPTION>
DREYFUS
DREYFUS VIF SOCIALLY DREYFUS IP
QUALITY DREYFUS VIF RESPONSIBLE DREYFUS IP TECHNOLOGY
YEAR BOND APPRECIATION GROWTH MIDCAP STOCK GROWTH
<S> <C> <C> <C> <C> <C>
1990 6.61
1991 13.34
1992 2.00
1993 14.54 8.46 34.69
1994 -5.25 2.32 -1.55
1995 19.59 32.61 33.64
1996 2.40 24.69 20.39
1997 8.66 27.17 27.56
1998 4.76 29.32 28.49 -4.44
1999 -0.52 10.68 29.19 10.05 273.01
</TABLE>
C-28
<PAGE>
The Federated High Income Bond Fund II and Utility Fund II tables shown earlier
in this appendix are based on the investment performance, after actual expenses,
of the corresponding Federated Portfolios. The average annual total return used
in calculating the death benefit, policy account value and cash surrender value
for the respective Portfolios are listed below. These annual total returns do
not account for insurance and administrative charges but are net of the
mortality and expense risk charge of .70%; and, they are not an estimate or a
guarantee of future investment performance.
CALENDAR YEAR AVERAGE NET ANNUAL TOTAL RETURN (%) FOR THE FEDERATED PORTFOLIOS
<TABLE>
<CAPTION>
FEDERATED
HIGH INCOME FEDERATED
YEAR BOND UTILITY
<S> <C> <C>
1994 -4.98 -4.43
1995 19.55 23.33
1996 13.52 10.79
1997 13.05 25.77
1998 1.98 13.16
1999 1.59 0.99
</TABLE>
The Fidelity VIP, VIP II, and VIP III tables shown earlier in this section
appendix are based on the investment performance, after actual expenses, of the
corresponding Fidelity VIP, VIP II and VIP III Portfolios. The average annual
total return used in calculating the death benefit, policy account value and
cash surrender value for the respective Portfolios are listed below. These
annual total returns do not account for insurance and administrative charges but
are net of the mortality and expense risk charge of .70%; and, they are not an
estimate or a guarantee of future investment performance.
CALENDAR YEAR AVERAGE NET ANNUAL TOTAL RETURN (%) FOR THE FIDELITY VIP
PORTFOLIOS
<TABLE>
<CAPTION>
VIP VIP
MONEY VIP EQUITY- VIP VIP
YEAR MARKET HIGH INCOME INCOME GROWTH OVERSEAS
<S> <C> <C> <C> <C> <C>
1983 8.46
1984 9.73
1985 7.41
1986 6.00 16.98
1987 5.74 0.52 -1.83 2.96
1988 6.69 10.94 22.01 14.88 7.43
1989 8.42 -4.87 16.64 30.81 25.58
1990 7.34 -2.93 -15.99 -12.43 -2.37
1991 5.39 34.38 30.74 44.81 7.30
1992 3.20 22.47 16.19 8.62 -11.42
1993 2.53 19.70 17.59 18.67 36.65
1994 3.55 -2.34 6.37 -0.72 1.02
1995 5.17 20.02 34.39 34.66 8.98
1996 4.71 13.33 13.58 14.01 12.45
1997 4.81 16.97 27.41 22.78 10.86
1998 4.84 -5.03 10.93 38.79 12.05
1999 4.42 7.41 5.60 36.50 41.66
</TABLE>
C-29
<PAGE>
CALENDAR YEAR AVERAGE NET ANNUAL TOTAL RETURN (%) FOR THE FIDELITY VIP II
PORTFOLIOS
<TABLE>
<CAPTION>
VIP II
INVESTMENT VIP II VIP II VIP II VIP II
GRADE ASSET INDEX ASSET MGR: CONTRA-
YEAR BOND MANAGER 500 GROWTH FUND
<S> <C> <C> <C> <C> <C>
1989 9.56
1990 5.51 6.02
1991 15.68 21.86
1992 5.95 11.01
1993 10.26 20.53 9.04
1994 -4.46 -6.79 0.34
1995 16.62 16.26 36.49 22.43 38.92
1996 2.49 13.90 22.01 19.34 20.52
1997 8.36 19.95 32.12 24.37 23.44
1998 8.15 14.35 27.61 16.87 29.28
1999 -1.74 10.36 19.71 14.49 23.40
</TABLE>
CALENDAR YEAR AVERAGE NET ANNUAL TOTAL RETURN (%) FOR THE FIDELITY VIP III
PORTFOLIOS
<TABLE>
<CAPTION>
VIP III VIP III
GROWTH VIP III GROWTH &
YEAR OPPORTUNITIES BALANCED INCOME
<S> <C> <C> <C>
1995 31.82 13.22
1996 17.57 9.28
1997 29.25 21.48 29.39
1998 23.91 16.94 28.89
1999 3.55 3.83 8.43
</TABLE>
C-30
<PAGE>
The Franklin Small Cap Fund -- Class 2 and U.S. Government Fund -- Class 2
tables shown earlier in this appendix are based on the investment performance,
after actual expenses, of the corresponding Franklin Portfolios. The average
annual total return used in calculating the death benefit, policy account value
and cash surrender value for the respective Portfolios are listed below. These
annual total returns do not account for insurance and administrative charges but
are net of the mortality and expense risk charge of .70%; and, they are not an
estimate or a guarantee of future investment performance.
CALENDAR YEAR AVERAGE NET ANNUAL TOTAL RETURN (%) FOR THE FRANKLIN PORTFOLIOS
<TABLE>
<CAPTION>
FRANKLIN U.S. FRANKLIN
GOVERNMENT- SMALL CAP-
YEAR CLASS 2 CLASS 2
<S> <C> <C>
1989 6.05
1990 8.16
1991 14.49
1992 7.46
1993 4.41
1994 -5.59
1995 18.63 37.27
1996 2.90 28.19
1997 8.55 16.61
1998 6.70 -1.68
1999 -1.79 95.60
</TABLE>
The INVESCO VIF-Real Estate Opportunity tables shown earlier in this appendix
are based on the investment performance, after actual expenses, of the
corresponding INVESCO Portfolio. The average annual total return used in
calculating the death benefit, policy account value and cash surrender value for
the respective Portfolios are listed below. These annual total returns do not
account for insurance and administrative charges but are net of the mortality
and expense risk charge of .70%; and, they are not an estimate or a guarantee of
future investment performance.
CALENDAR YEAR AVERAGE NET ANNUAL TOTAL RETURN (%) FOR THE INVESCO PORTFOLIO
<TABLE>
<CAPTION>
INVESCO VIF-
REAL ESTATE
YEAR OPPORTUNITY
<S> <C>
1998 -21.15
1999 -0.35
</TABLE>
C-31
<PAGE>
The J.P. Morgan U.S. Disciplined Equity tables shown earlier in this appendix
are based on the investment performance, after actual expenses, of the
corresponding J.P. Morgan Portfolio. The average annual total return used in
calculating the death benefit, policy account value and cash surrender value for
the respective Portfolios are listed below. These annual total returns do not
account for insurance and administrative charges but are net of the mortality
and expense risk charge of .70%; and, they are not an estimate or a guarantee of
future investment performance.
CALENDAR YEAR AVERAGE NET ANNUAL TOTAL RETURN (%) FOR THE J.P. MORGAN PORTFOLIO
<TABLE>
<CAPTION>
J.P. MORGAN
U.S.
DISCIPLINED
YEAR EQUITY
<S> <C>
1995 32.79
1996 20.45
1997 26.60
1998 22.51
1999 17.71
</TABLE>
The Lexington Natural Resources Trust and Lexington Emerging Markets Fund tables
shown earlier in this appendix are based on the investment performance, after
actual expenses, of the corresponding Lexington Portfolios. The average annual
total return used in calculating the death benefit, policy account value and
cash surrender value for the respective Portfolios are listed below. These
annual total returns do not account for insurance and administrative charges but
are net of the mortality and expense risk charge of .70%; and, they are not an
estimate or a guarantee of future investment performance.
CALENDAR YEAR AVERAGE NET ANNUAL TOTAL RETURN (%) FOR THE LEXINGTON PORTFOLIOS
<TABLE>
<CAPTION>
LEXINGTON LEXINGTON
NATURAL EMERGING
YEAR RESOURCES MARKETS
<S> <C> <C>
1992 2.52
1993 10.20
1994 -6.08
1995 16.17 -4.63
1996 26.19 6.76
1997 6.45 -12.25
1998 -20.32 -28.65
1999 13.30 126.43
</TABLE>
C-32
<PAGE>
The Scudder VLIF Balanced and International tables shown earlier in this
appendix are based on the investment performance, after actual expenses, of the
corresponding Scudder VLIF Portfolios. The average annual total return used in
calculating the death benefit, policy account value and cash surrender value for
the respective Portfolios are listed below. These annual total returns do not
account for insurance and administrative charges but are net of the mortality
and expense risk charge of .70%; and, they are not an estimate or a guarantee of
future investment performance.
CALENDAR YEAR AVERAGE NET ANNUAL TOTAL RETURN (%) FOR THE SCUDDER VLIF
PORTFOLIOS
<TABLE>
<CAPTION>
SCUDDER VLIF SCUDDER VLIF
YEAR BALANCED INTERNATIONAL
<S> <C> <C>
1985 28.09
1986 15.09
1987 -2.39 -16.08
1988 13.42 15.92
1989 18.67 36.85
1990 -2.61 -8.30
1991 26.06 10.68
1992 6.22 -3.76
1993 6.71 36.88
1994 -2.74 -1.54
1995 25.80 10.34
1996 11.11 13.99
1997 23.35 8.31
1998 22.34 17.67
1999 14.52 53.47
</TABLE>
The Templeton Developing Markets Securities tables shown earlier in this
appendix are based on the investment performance, after actual expenses, of the
corresponding Templeton Portfolio. The average annual total return used in
calculating the death benefit, policy account value and cash surrender value for
the respective Portfolios are listed below. These annual total returns do not
account for insurance and administrative charges but are net of the mortality
and expense risk charge of .70%; and, they are not an estimate or a guarantee of
future investment performance.
CALENDAR YEAR AVERAGE NET ANNUAL TOTAL RETURN (%) FOR THE TEMPLETON PORTFOLIO
<TABLE>
<CAPTION>
TEMPLETON
DEVELOPING
MARKETS
YEAR SECURITIES
<S> <C>
1996 -7.15
1997 -29.83
1998 -21.60
1999 52.23
</TABLE>
C-33
<PAGE>
The Wanger U.S. Small Cap tables shown earlier in this appendix are based on the
investment performance, after actual expenses, of the corresponding Wanger
Portfolio. The average annual total return used in calculating the death
benefit, policy account value and cash surrender value for the respective
Portfolios are listed below. These annual total returns do not account for
insurance and administrative charges but are net of the mortality and expense
risk charge of .70%; and, they are not an estimate or a guarantee of future
investment performance.
CALENDAR YEAR AVERAGE NET ANNUAL TOTAL RETURN (%) FOR THE WANGER PORTFOLIO
<TABLE>
<CAPTION>
WANGER
U.S. SMALL
YEAR CAP
<S> <C>
1996 45.93
1997 28.71
1998 7.98
1999 24.21
</TABLE>
C-34
<PAGE>
POLICY DIAGRAM
PREMIUM PAYMENTS
- You can vary the amount
and the frequency
/
PREMIUM ALLOCATION
You direct premium, less state premium
tax if applicable, to be invested in the
fixed account and/or to the portfolios
managed by:
- SAFECO Asset Management Company
- AIM Management Group
- American Century Investment
Management, Inc.
- The Dreyfus Corporation
- Federated Investment Management
Company
- Fidelity Management & Research Company
- Franklin Advisors, Inc.
- INVESCO Funds Group, Inc.
- J.P. Morgan Investment Management Inc.
- Lexington Management Corporation
- Scudder Kemper Investments, Inc.
- Templeton Asset Management Ltd.
- Wanger Asset Management Company, L.P.
Not all portfolios may be available to
all policy owners.
/
EXPENSES
- Monthly charge for cost of insurance and cost of any riders.
- Charge for administrative expenses of $25.00 each month for
the first year, $5.00 each month thereafter.
- Daily charge, at an annual rate of .70% from the portfolios
for mortality and expense risks. This charge is not deducted
from the fixed account.
- Investment advisory fees and fund expenses are deducted from
each portfolio.
/
BENEFITS
LIVING BENEFITS:
- Policy loans are available during the first 10 policy years
at 2% net interest.
- Preferred policy loans and all loans following the tenth
policy anniversary have a zero net interest rate.
- You can surrender the policy at any time for its policy
value.
- You can make withdrawals after the first policy anniversary
(subject to certain restrictions). The death benefit will be
reduced by the amount of the withdrawal.
RETIREMENT PLANNING:
- You can supplement retirement income by making scheduled
loans and/or withdrawals.
DEATH BENEFITS:
- Death benefits are income tax free to the beneficiary.
- Lifetime income to the beneficiary is available in a variety
of settlement options.
- A Guaranteed Death Benefit Endorsement may be added to
certain policies.
D-1
<PAGE>
PART II
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15 (d) of the Securities Exchange
Act of 1934. The undersigned Registrant hereby undertakes to file with the
Securities and Exchange Commission such supplementary and periodic information,
documents, and reports as may be prescribed by any rule or regulation of the
Commission theretofore or hereafter duly adopted pursuant to authority conferred
in that section.
Pursuant to section 26(e) of the Investment Company Act of 1940, the registrant
and SAFECO Life Insurance Company represent that the fees and charges deducted
under the contract, in the aggregate, are reasonable in relation to the services
rendered, the expenses expected to be incurred and risks assumed by the
insurance company.
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 or 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 if 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 Policies 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.
<PAGE>
Item 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
SAFECO Life Insurance Company ("SAFECO") established SAFECO Separate Account SL
("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, 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, SAFECO Insurance Company of Illinois, an Illinois corporation,
SAFECO U.K. Limited, a corporation organized under the laws of the United
Kingdom, and American States Insurance Company, American Economy Insurance
Company, and American States Preferred Insurance Company, each an Indiana
corporation. General Insurance Company of America owns 100% of SAFECO Insurance
Company of Pennsylvania, a Pennsylvania corporation SAFECO Insurance Company of
America owns 100% of SAFECO Surplus Lines Insurance Company, a Washington
corporation, and SAFECO Management Company, a New York corporation. SAFECO Life
Insurance Company owns 100% of SAFECO National Life Insurance Company, a
Washington corporation, First SAFECO National Life Insurance Company of New
York, a New York corporation, American States Life Insurance Company, an Indiana
corporation, and D.W. Van Dyke & Co., Inc., a Delaware corporation. SAFECO Life
Insurance Company owns 15% of Medical Risk Managers, Inc., a Delaware
corporation. SAFECO Insurance Company of Illinois owns 100% of Insurance Company
of Illinois, an Illinois corporation. American Economy Insurance Company owns
100% of American States Insurance Company of Texas, a Texas 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 SAFECO Investment
Services, Inc., F.B. Beattie & Co., Inc., and Talbot Financial Corporation, each
a Washington corporation, General America Corp. of Texas, a Texas corporation,
SAFECO Select Insurance Services, Inc., a California corporation, and R.F.
Bailey Holdings Limited, a U.K. 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
and American States Lloyds Insurance Company, both Texas corporations. R.F.
Bailey Holdings Limited owns 100% of R.F. Bailey (Underwriting Agencies)
Limited, a U.K. corporation. Talbot Financial Corporation owns 100% of Talbot
Agency, Inc., a New Mexico corporation. SAFECO Properties Inc. owns 100% of the
following, corporations: 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. Marysville, Inc. Winmar Company, Inc.
owns 100% of the following: Winmar Metro, Inc., Winmar Redmond, Inc. and Winmar
of Kitsap, Inc., each a Washington corporation, and Capitol Court Corp., a
Wisconsin corporation, SCIT, Inc., a Massachusetts corporation, Winmar Oregon,
Inc., an Oregon corporation, Winmar of Texas, Inc., a Texas 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.
No person is directly or indirectly controlled by Registrant.
<PAGE>
All subsidiaries are included in consolidated financial statements. In addition
SAFECO Life Insurance Company files a separate financial statement in connection
with its issuance of products associated with its registration statement.
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises:
I. The following papers and documents:
The facing sheet.
The Prospectus consisting of pages. The undertaking to file reports.
The signatures. Written consents of the following persons:
(1) Ernst & Young LLP, Independent Auditors
(2) James Mankin, Actuary
II. The following exhibits:
A. Copies of all exhibits required by paragraph A of instructions for
Exhibits in Form N-8B-2.
(1) Resolution of Board of Directors of the Company authorizing
the Separate Account *
(2) Not applicable
(3) (a) Principal Underwriter's Agreement *
(b) Broker-Dealer Selling Agreement
(c) Commission Schedule ****
(4) Not Applicable
(5) Individual Flexible Premium Variable Life Insurance
Policy****
(6) (a) Articles of Incorporation of the Company
Revised as of 11/90 *
(b) Bylaws of the Company
Revised 11/91 *
(7) Not applicable
(8) Not applicable
(9) (a) Reinsurance Agreement *
(b) Form of Participation Agreement (Fidelity VIP I & II)
Form of Sub-Licensing Agreement *
(c) Form of Participation Agreement (Fidelity VIP III)
Form of Sub-Licensing Agreement *
(d) Participation Agreement by and among SAFECO Life
Insurance Company, Lexington Natural Resources Trust,
and Lexington Management Corporation **
(e) Form of Participation Agreement (Wanger)
Form of Sub-Licensing Agreement ****
(f) Form of Participation Agreement (ACVP)
Form of Sub-Licensing Agreement ****
(g) Form of Participation Agreement (AIM)
Form of Sub-Licensing Agreement ***
(h) Form of Participation Agreement (Dreyfus)
Form of Sub-Licensing Agreement ***
(i) Form of Participation Agreement (Franklin)
Form of Sub-Licensing Agreement ***
(j) Form of Participation Agreement (J.P. Morgan)
Form of Sub-Licensing Agreement ***
(k) Form of Participation Agreement (Federated)
Form of Sub-Licensing Agreement **
(l) Form of Participation Agreement (Scudder)
Form of Sub-Licensing Agreement **
<PAGE>
(m) Form of Participation Agreement (INVESCO)
Form of Sub-Licensing Agreement **
(10) (a) Application Form (revised 4/91) *
(b) Part IV Application Form (revised 7/97) *****
(13) Power of Attorney***
99.C1 Consent of Independent Auditor
99.2 Opinion and Consent of Counsel (SAFECO Life Ins. Co.)
99.C6 Consent of Actuary (James Mankin)
* Incorporated by reference to Post-Effective Amendment of SAFECO Separate
Account SL file with the SEC on April 30, 1997 (File No. 33-10248)
** Incorporated by reference to Post-Effective Amendment of SAFECO Separate
Account C filed with the SEC on April 29, 1996 (File No. 33-69712)
*** Incorporated by reference to Post-Effective Amendment of SAFECO Separate
Account C filed with the SEC on or about April 28, 2000 (File No.
33-69712)
**** Incorporated by reference to Registrant's Post-Effective Amendment of
SAFECO Separate Account SL file with the SEC on October 30, 1997 (File No.
333-30329)
***** Incorporated by reference to Post-Effective Amendment of SAFECO Separate
Account SL filed with the SEC on April 30, 1998 (File No. 33-10248)
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Act of 1940, the Registrant certifies that it meets all of the requirements for
effectiveness of the Registration Statement pursuant to Rule 485 under the
Securities Act of 1933 and has duly caused this Registration Statement to be
signed on its behalf thereto duly authorized, in the City of Seattle and State
of Washington on the 26th day of February, 2000.
SAFECO Separate Account SL
By: SAFECO Life Insurance Company
(Depositor)
By: /s/ Randall H. Talbot
Randall H. Talbot, President
ATTEST: /s/ Rod Pierson
Rod Pierson, Secretary
Pursuant to the requirement of the Securities Act of 1933, this Post
Effective Amendment No. 19 to the Registration Statement on Form S-6 has been
signed by the following person in the capacities and on the dates indicated.
Those signatures with an asterisk indicated the signature was supplied by a duly
appointed attorney-in-fact under a valid Power of Attorney.
<TABLE>
<CAPTION>
NAME TITLE TITLE DATE
<S> <C> <C>
/s/ Donald S. Chapman * Director
- -----------------------
Donald S. Chapman
/s/ Boh A. Dickey Director
- -----------------
Boh A. Dickey
/s/ Roger H. Eigsti * Director and Chairman
- ---------------------
Roger H. Eigsti
/s/ Leslie J. Brandli * Controller and Assistant
- -----------------------
Leslie J. Brandli Secretary
/s/ Rod Pierson * Director, Senior Vice
- -----------------
Rod Pierson President and Secretary
/s/ James W. Ruddy * Director
- --------------------
James W. Ruddy
/s/ Ronald L. Spaulding * Director, Vice President and Treasurer
- -------------------------
Ronald L. Spaulding
/s/ W. Randall Stoddard * Director
- -------------------------
W. Randall Stoddard
/s/ Dale E. Lauer * Director
- -------------------
Dale E. Lauer
* By /s/ Boh A. Dickey
Boh A. Dickey
Attorney-in-Fact
* By /s/ Randall H. Talbot
Randall H. Talbot
Attorney-in-Fact
</TABLE>
<PAGE>
EXHIBITS TO
POST-EFFECTIVE AMENDMENT NO. 19
TO
FORM S-6
FOR
SEPARATE ACCOUNT SL
<PAGE>
EXHIBITS
99.C1 Consent of Independent Auditors
99.2 Opinion and Consent of Counsel
99.C6 Consent of Actuary
<PAGE>
EXHIBIT 99.C1
CONSENT OF INDEPENDENT AUDITORS
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report on the financial statements of SAFECO Life Separate Account
SL, dated February 22, 2000, and our report on the consolidated financial
statements of SAFECO Life Insurance Company and subsidiaries, dated February 11,
2000 in Post-Effective Amendment No. 19 to the Registration Statement (Form S-6,
No. 333-30329) and related prospectus of SAFECO Life Separate Account SL.
/s/ ERNST & YOUNG LLP
Seattle, Washington
April 14, 2000
<PAGE>
EXHIBIT 99.2
OPINION AND CONSENT OF COUNSEL
<PAGE>
April 28, 2000
Board of Directors
SAFECO Life Insurance Company
SAFECO Plaza
Seattle, WA 98185
Re: Registration NO. 333-30329
Gentlemen:
I have acted as counsel in connection with the filing with the Securities and
Exchange Commission of Post-Effective Amendment No. 19 to a Registration
Statement on Form S-6 for the Individual Flexible Premium Life Insurance Policy
(the "Policy") to be issued by SAFECO Life Insurance Company and its separate
account, Separate Account SL.
I have made such examination of the law and have examined such records and
documents as in my opinion are necessary or appropriate to enable me to render
the following opinion:
1. SAFECO Life Insurance Company is a valid and existing stock life insurance
company of the state of Washington.
2. Separate Account SL is a separate investment account of SAFECO Life Insurance
Company created and validly existing pursuant to the insurance laws and
regulations of the state of Washington.
3. All of the prescribed corporate procedures for the issuance of the Policies
have been followed, and, when such Policies are issued in accordance with the
Prospectus contained in the Registration Statement, all state requirements
relating to such Policies will have been complied with.
4. Upon the acceptance of Premium Payments made by a Policyowner pursuant to a
Policy issued in accordance with the prospectus contained in the Registration
Statement and upon compliance with acceptable law, such a Policyowner will
have legally-issued, fully paid, non-assessable contractual interest under
such Policy.
You may use this opinion letter, or a copy hereof, as an exhibit to the
Registration Statement.
Very truly yours,
William E. Crawford
Counsel
<PAGE>
EXHIBIT 99.C6
CONSENT OF ACTUARY
<PAGE>
April 2, 2000
Board of Directors
SAFECO Life Insurance Company
SAFECO Plaza
Seattle, WA 98185
The "Illustrations of Death Benefits, Policy Account, Cash Surrender Values and
Accumulated Premiums" ("Hypothetical Illustrations") and the "Illustrations of
Variation in Death Benefit, Policy Account and Cash Surrender Values in Relation
to the Funds' Investment Experience" ("Illustrations") contained in
Post-Effective Amendment No. 19 to the Registration Statement on Form S-6 of the
Separate Account SL, which issues flexible premium variable life insurance
policies, have been prepared in accordance with standard actuarial principles.
Both the Hypothetical Illustrations and Illustration reflect the operation of
the Policy by taking into account all charges under the Policy and in the
underlying Fund. The Hypothetical Illustrations are shown for males in two
underwriting classifications. The Illustrations are shown for a male preferred
non-smoker.
I hereby consent to the inclusion and use of the Hypothetical Illustrations and
Illustrations in Post-Effective Amendment No. 19.
Sincerely,
/s/ James A. Mankin
James A. Mankin, F.S.A., M.A.A.A.
Actuary
