SAFECO DEFERRED VARIABLE ANNUITY ACCOUNT, N-4, 1998-09-30

SAFECO DEFERRED VARIABLE ANNUITY ACCOUNT
N-4, 1998-09-30

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<PAGE>

As filed with the Securities and Exchange Commission on September 30, 1998
File No. 333-
File No. 811-4961

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-4

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]

Pre-Effective Amendment No. ___ [_]
Post-Effective Amendment No. [ ]

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 18 [X]

SAFECO DEFERRED VARIABLE ANNUITY ACCOUNT
(formerly WM Life Deferred Variable Annuity Account)
(Exact Name of Registrant)

SAFECO LIFE INSURANCE COMPANY
(Name of Depositor)

15411 N.E. 51st Street
Redmond, Washington 98052
(Address of Depositor's Principal Executive Offices)

Depositor's Telephone Number: (425) 867-8000

William E. Crawford, Esquire
SAFECO Life Insurance Company
15411 N.E. 51st Street
Redmond, Washington 98052
(Name and Address of Agent for Service of Process)

Copy to:
Frederick R. Bellamy, Esquire
Sutherland, Asbill & Brennan LLP
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2415

APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:

The Registrant hereby amends this Registration Statement on such dates as may
be neccassary to delay its effective date until the Registrant shall file a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.

Title of securities being registered: Variable Annuity Contracts

<PAGE>

CROSS REFERENCE SHEET
Pursuant to Rules 481(a) and 495(a)

Showing location in Part A (prospectus) and Part B (Statement of Additional
Information) of registration statement of information required by Form N-4

PART A

ITEM OF FORM N-4 PROSPECTUS CAPTION

1. Cover Page . . . . . . . . . . . . Cover Page

2. Definitions. . . . . . . . . . . . Glossary

3. Synopsis . . . . . . . . . . . . . Introduction

4. Condensed Financial Information. . Condensed Financial Information

5. General

(a) Depositor. . . . . . . . . . . SAFECO Life Insurance Company
(b) Registrant . . . . . . . . . . The Variable Account
(c) Portfolio Company. . . . . . . Composite Deferred Series, Inc.
. . . . . . . . . . . . . . . . . Scudder Variable Life Investment Fund
(d) Fund Prospectus. . . . . . . . Composite Deferred Series, Inc.
. . . . . . . . . . . . . . . . . Scudder Variable Life Investment Fund
(e) Voting Rights. . . . . . . . . Voting Rights
(f) Administrators . . . . . . . . Contract Maintenance Charge

6. Deductions and Expenses

(a) General. . . . . . . . . . . . Charges and Other Deductions
(b) Sales Load % . . . . . . . . . Contingent Deferred Sales Charge
(c) Special Purchase Plan. . . . . Not Applicable
(d) Commissions. . . . . . . . . . Sales Commission
(e) Expenses - Registrant. . . . . Variable Account Expenses
(f) Fund Expenses . . . . . . . . Composite Deferred Series, Inc.
. . . . . . . . . . . . . . . . . Scudder Variable Life Investment Fund

7. Contracts

(a) Persons with Rights. . . . . . The Contracts; Death Benefits; Annuity
Payments; Voting Rights; Assignments;
Beneficiary; Contract Owner
(b)(i) Allocation of Purchase
Payments. . . . . . . . . . Allocation of Purchase Payments
(ii) Transfers . . . . . . . . . Transfers
(iii) Exchanges . . . . . . . . . N/A
(c) Changes. . . . . . . . . . . . Modifications

1
<PAGE>

(d) Inquiries. . . . . . . . . . . Customer Inquiries

8. Annuity Period . . . . . . . . . . Annuity Payments

9. Death Benefit. . . . . . . . . . . Death Benefits

10. Purchases and Contract Value

(a) Purchases. . . . . . . . . . . Purchase of the Contracts; Crediting
of Purchase Payments
(b) Valuation. . . . . . . . . . . Value of Variable Account Accumulation
Units
(c) Daily Calculation. . . . . . . Value of Variable Account Accumulation
Units
(d) Underwriter. . . . . . . . . . SAFECO Securities, Inc.

11. Redemptions

(a) - By Owners. . . . . . . . . . Surrenders and Withdrawals
- By Annuitant . . . . . . . . Annuity Options

(b) Texas ORP. . . . . . . . . . . N/A
(c) Check Delay. . . . . . . . . . N/A
(d) Lapse. . . . . . . . . . . . . N/A
(e) Free Look. . . . . . . . . . . N/A

12. Taxes. . . . . . . . . . . . . . . Federal Tax Matters

13. Legal Proceedings. . . . . . . . . N/A

14. Table of Contents for the
Statement of Additional
Information. . . . . . . . . . . . Table of Contents of the Statement of
Additional Information

PART B

ITEM OF FORM N-4 PART B CAPTION

15. Cover Page . . . . . . . . . . . . Cover Page

16. Table of Contents. . . . . . . . . Table of Contents

17. General Information and
History. . . . . . . . . . . . . . SAFECO Life Insurance Company

18. Services

(a) Fees and Expenses of

2
<PAGE>

Registrant . . . . . . . . . . Contract Maintenance Charge
(b) Management Contracts . . . . . Contract Maintenance Charge
(c) Custodian. . . . . . . . . . . Safekeeping of the Variable Account's
Assets
Independent Public
Accountant . . . . . . . . . . Independent Auditors
(d) Assets of Registrant . . . . . Safekeeping of the Variable Account's
Assets
(e) Affiliated Persons . . . . . . N/A
(f) Principal Underwriter. . . . . SAFECO Securities, Inc.

19. Purchase of Securities
Being Offered. . . . . . . . . . . Purchase of Contracts
Offering Sales Load. . . . . . . . N/A

20. Underwriters . . . . . . . . . . . SAFECO Securities, Inc.

21. Calculation of Performance
Data . . . . . . . . . . . . . . . Performance Data

22. Annuity Payments . . . . . . . . . Annuity Payments

23. Financial Statements . . . . . . . Financial Statements

PART C -- OTHER INFORMATION

ITEM OF FORM N-4 PART C CAPTION

24. Financial Statements and
Exhibits . . . . . . . . . . . . . Financial Statements and Exhibits
(a) Financial Statements . . . . (a) Financial Statements
(b) Exhibits . . . . . . . . . . (b) Exhibits

25. Directors and Officers of
the Depositor. . . . . . . . . . . Directors and Officers of the
Depositor

26. Persons Controlled By or Under
Common Control with the Depositor
or Registrant . . . . . Persons Controlled By or under Common
Control with the Depositor or
Registrant

27. Number of Contract Owners. . . . . Number of Contract Owners

28. Indemnification. . . . . . . . . . Indemnification

29. Principal Underwriters . . . . . . Relationship of Principal Underwriter
to other Investment Companies

3
<PAGE>

30. Location of Accounts and
Records. . . . . . . . . . . . . . Location of Accounts and Records

31. Management Services. . . . . . . . Management Services
32. Undertakings . . . . . . . . . . . Undertakings

4
<PAGE>
INDIVIDUAL FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACTS
ISSUED BY
SAFECO DEFERRED VARIABLE ANNUITY ACCOUNT
AND
SAFECO LIFE INSURANCE COMPANY
----------------

<TABLE>
<S> <C>
HOME OFFICE: ANNUITY SERVICE OFFICE:
SAFECO Life Insurance Company SAFECO Life Insurance Company
15411 N.E. 51st Street Retirement Services Department
Redmond, WA 98052 P.O. Box 34690
Tel: 1-800-426-7649 Fax: 425-867-8793 Seattle, WA 98124-1690
</TABLE>

This Prospectus describes the Flexible Premium Deferred Variable Annuity
Contract ("Contract") offered by SAFECO Life Insurance Company (the "Company").
SAFECO Securities, Inc. ("SSI") or other authorized representatives
("Distributor") are the distributor of the Contracts.

The Contract is primarily designed to aid you in long-term financial
planning and generally can be used for retirement planning regardless of whether
your plan qualifies for special federal income tax treatment. The Contract has
the flexibility to allow you to shape an annuity to fit your particular needs.
Under the Contract, you can allocate your cash value to the SAFECO Life Deferred
Variable Annuity Account (the "Variable Account"), where it will reflect the
investment experience of one or more selected mutual fund portfolios, or to the
Fixed Account, where it will earn at least a guaranteed minimum rate. The
following mutual fund portfolios are available through the Variable Account:

<TABLE>
<S> <C>
COMPOSITE DEFERRED SERIES, INC: SCUDDER VARIABLE LIFE INVESTMENT FUND:
Growth and Income Portfolio Capital Growth Portfolio
Northwest Portfolio International Portfolio
Income Portfolio Money Market Portfolio
</TABLE>

These mutual fund portfolios should not be confused with any similarly named
mutual fund portfolios that are available directly to the public without
purchasing a Contract.

This Prospectus is a concise statement of the relevant information about the
Variable Account that you should know before making a decision to purchase the
Contract. Additional information about the Contracts is contained in the
Statement of Additional Information, which is dated the same date as this
Prospectus, and has been filed with the Securities and Exchange Commission. If
you wish to receive the Statement of Additional Information, you may obtain a
free copy by writing or calling the Company at the address and telephone number
above. The Table of Contents of the Statement of Additional Information is on
page 26 of this Prospectus. The Statement of Additional Information has been
incorporated by reference into this Prospectus.

This Prospectus and the Statement of Additional Information generally
describe only the variable portion of the Contract.

This Prospectus is valid only when accompanied by current prospectuses for
the Composite Deferred Series, Inc. and the Scudder Variable Life Investment
Fund. Contract Owners may have voting rights in those mutual funds.

CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR ENDORSED OR GUARANTEED BY,
ANY BANK, NOR ARE THEY FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY. CONTRACTS INVOLVE
CERTAIN INVESTMENT RISKS INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
--------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

Please Read This Prospectus Carefully and Keep It For Future Reference

The Date Of This Prospectus Is , 1998

The Contracts Are Not Available In All States.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO DEALER, SALESPERSON, OR OTHER
PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN
THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON.
<PAGE>
TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
GLOSSARY.................................................................. 5

INTRODUCTION.............................................................. 7

CONDENSED FINANCIAL INFORMATION........................................... 11

FINANCIAL STATEMENTS...................................................... 12

SAFECO LIFE INSURANCE COMPANY AND THE VARIABLE ACCOUNT.................... 12
SAFECO Life Insurance Company........................................... 12
The Variable Account.................................................... 12
The Composite Deferred Series, Inc...................................... 13
The Scudder Variable Life Investment Fund............................... 14

VOTING RIGHTS............................................................. 14

THE CONTRACTS............................................................. 15
Purchase of the Contracts............................................... 15
Crediting of Purchase Payments.......................................... 15
Allocation of Purchase Payments......................................... 15
Value of Variable Account Accumulation Units............................ 15
Transfers............................................................... 15
Surrenders and Withdrawals.............................................. 16
Default................................................................. 17
Contracts Issued Prior to February 15, 1995............................. 17

CHARGES AND OTHER DEDUCTIONS.............................................. 17
Deductions from Purchase Payments....................................... 17
Contract Maintenance Charge............................................. 17
Mortality and Expense Risk Charge....................................... 17
Contingent Deferred Sales Charge........................................ 18
Sales Commission........................................................ 18
Taxes................................................................... 18
Composite Deferred Series, Inc. ("Composite Fund") Expenses............. 19
Scudder Variable Life Investment Fund ("Scudder Fund") Expenses......... 19

ANNUITY PAYMENTS.......................................................... 19
Annuity Date............................................................ 19
Annuity Options......................................................... 19
Fixed Annuity Payments.................................................. 20

PERFORMANCE DATA.......................................................... 20

GENERAL MATTERS........................................................... 21
Contract Owner.......................................................... 21
Beneficiary............................................................. 21
Death Benefits.......................................................... 21
Required Distributions.................................................. 22
Delay of Payments....................................................... 22
Assignments............................................................. 22
Modifications........................................................... 22
Customer Inquiries...................................................... 23
</TABLE>

3
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
FEDERAL TAX MATTERS....................................................... 23
Introduction............................................................ 23
Taxation of Annuities in General........................................ 23

YEAR 2000................................................................. 25

STATEMENT OF ADDITIONAL INFORMATION....................................... 25
</TABLE>

This Prospectus generally describes only the Contracts and the Variable
Account, and not the Fixed Account. The Statement of Additional Information
contains more information regarding the Fixed Account.

4
<PAGE>
GLOSSARY

ACCUMULATION UNIT--An accounting unit used to calculate the Contract Value prior
to the Annuity Date. The Fixed Account and each Sub-Account of the Variable
Account have their own distinct Accumulation Unit values.

AGE--Age on last birthday.

ANNUITANT--A person whose life determines the duration of annuity payments
involving life contingencies. "Annuitant" may include a Joint Annuitant.

ANNUITY DATE--The date Annuity Payments are to begin under the Contract.

ANNUITY PAYMENTS--A series of periodic annuity payments made by the Company to
the Annuitant or Beneficiary.

BENEFICIARY--The person to whom benefits will be paid upon the Owner's death. In
the event a beneficiary is not named, the Company will treat the estate of the
Contract Owner as the beneficiary.

COMPANY--The issuer of the Contract, SAFECO Life Insurance Company.

CONTINGENT DEFERRED SALES CHARGE--The charge that may be assessed by the Company
on surrender or partial withdrawals of the Contract Value.

CONTRACT--The flexible premium deferred variable annuity contract that is
described in this prospectus.

CONTRACT ANNIVERSARY--An anniversary of the date that the Contract was issued to
the Contract Owner.

CONTRACT OWNER ("OWNER," "YOU," OR "YOUR")--Unless otherwise provided by notice
to the Company, the Owner is as stated in the application. The Owner may, during
his or her lifetime and while this Contract is in force: (a) assign or surrender
the Contract; (b) amend the Contract, with the Company's consent; (c) exercise
any right conferred by the Contract; (d) exchange the Contract for another
annuity contract issued by the Company, subject to the Company's requirements;
or (e) within thirty days of the death of any Annuitant prior to the Annuity
Date, name a new Annuitant upon notice to the Company. If an Annuitant is not
named in this time, the Owner will be deemed the Annuitant.

CONTRACT VALUE--The sum of the value of all Accumulation Units under a Contract.

CONTRACT YEAR--The one year period commencing on either the Issue Date or a
Contract Anniversary.

DEATH BENEFIT--The amount payable to the Beneficiary on the death of the Owner
so long as the death occurs on or before the Annuity Date.

DESIGNATED BENEFICIARY--The Internal Revenue Code may require distribution of
the Contract Value to the Designated Beneficiary. This is the person who is (a)
the named Beneficiary, or (b) if no Beneficiary is named, the Joint Owner who
becomes the Owner, or (c) if neither of the above, the Owner's estate.

DUE PROOF OF DEATH--One of the following: (a) a copy of a certified death
certificate; (b) a copy of a certified decree of a court of competent
jurisdiction as to the finding of death; (c) a written statement by a medical
doctor who attended the deceased; or (d) any other proof satisfactory to the
Company.

ELIGIBLE PORTFOLIOS--The mutual fund portfolios of the Composite Deferred
Series, Inc. and the Scudder Variable Life Investment Fund which are available
through this Prospectus. The Composite Deferred Series, Inc. offers three
portfolios through this prospectus: the Growth and Income Portfolio, the Income
Portfolio and the Northwest Portfolio. The Scudder Variable Life Investment Fund
offers three portfolios through this prospectus: the Capital Growth Portfolio,
the International Portfolio and the Money Market Portfolio.

FIXED ACCOUNT--All assets of the Company other than those in a separate
investment account.

5
<PAGE>
FIXED ANNUITY--An annuity with payments having a guaranteed amount.

INVESTMENT ALTERNATIVE--The Fixed Account or any of the available Sub-Accounts
of the Variable Account.

JOINT ANNUITANT--The person, along with the Annuitant, whose life determines the
duration of annuity payments under a joint and last survivor annuity. The Joint
Annuitant is the person who will become the Annuitant if the Annuitant dies
prior to the Annuity Date.

NET INVESTMENT FACTOR--The factor for a particular Sub-Account used to determine
the value of an Accumulation Unit in any Valuation Period.

NON-QUALIFIED CONTRACTS--Contracts that do not qualify for special federal
income tax treatment.

PURCHASE PAYMENTS--The amounts paid by the Contract Owner to the Company.

QUALIFIED CONTRACTS--Contracts issued under plans that qualify for special
federal income tax treatment.

SUB-ACCOUNT--A sub-division of the Variable Account. Each Sub-Account invests
exclusively in shares of an Eligible Portfolio.

TRANSFER CHARGE--This charge applies only to transfers from the Fixed Account.
The amount of the charge is the lesser of 6% or the applicable Contingent
Deferred Sales Charge on amounts transferred in excess of the 25% which may be
transferred without charge under certain circumstances.

VALUATION DATE--Each day that the New York Stock Exchange is open for trading.

VALUATION PERIOD--The period between successive Valuation Dates, commencing at
the close of business of each Valuation Date (1:00 p.m. Pacific Time) and ending
at the close of business of the next succeeding Valuation Date.

VARIABLE ACCOUNT--SAFECO Deferred Variable Annuity Account, a separate
investment account established by the Company to receive and invest the Purchase
Payments paid under the Contracts.

6
<PAGE>
INTRODUCTION

1. WHAT IS THE PURPOSE OF THE CONTRACT?

The Contract allows you to accumulate funds at rates that reflect the
investment performance of one or more mutual fund portfolios and to receive
Annuity Payments, if desired. THERE IS NO ASSURANCE THAT THIS GOAL WILL BE
ACHIEVED. In attempting to achieve this goal, the Contract Owner can allocate
Purchase Payments to one or more of the Eligible Portfolios of the Variable
Account, or to the Fixed Account. The Contract Owner may bear the entire
investment risk under this Contract because Contract Values may depend on the
investment experience of selected Eligible Portfolios. See "Value of Variable
Account Accumulation Units," page 15.

2. WHAT TYPES OF INVESTMENTS UNDERLIE THE VARIABLE ACCOUNT?

The Variable Account currently invests exclusively (1) in shares of the
Composite Deferred Series, Inc., (the "Composite Fund"), a mutual fund managed
by Composite Research & Management Co. ("Composite Research"), a wholly owned
subsidiary of Washington Mutual, Inc., and (2) in shares of the Scudder Variable
Life Investment Fund (the "Scudder Fund"). The Composite Fund has three Eligible
Portfolios: The Growth and Income Portfolio, the Northwest Portfolio, and the
Income Portfolio. (The Company intends to eliminate these Portfolios of the
Composite Fund and substitute other mutual fund portfolios in the near future.)
The Scudder Fund has three Eligible Portfolios: the Capital Growth Portfolio,
the International Portfolio, and the Money Market Portfolio. The assets of each
Eligible Portfolio are held separately from the other Eligible Portfolios and
each has distinct investment objectives and policies which are described in the
accompanying prospectuses for the Eligible Portfolios.

3. HOW DO I PURCHASE A CONTRACT?

The Contract is no longer available for purchase. You may continue to make
subsequent Purchase Payments of at least $100 at any time.

4. HOW DO I ALLOCATE PURCHASE PAYMENTS?

On your application, you allocated your Purchase Payment among the Fixed
Account and the six currently available Sub-Accounts (i.e., Growth and Income,
Northwest, Income, Capital Growth, International and Money Market). All
allocations were in whole numbers and totaled 100%. Allocations may be changed
by notifying the Company in writing. See "Allocation of Purchase Payments", page
15.

5. CAN I TRANSFER AMOUNTS BETWEEN THE INVESTMENT ALTERNATIVES?

Prior to the Annuity Date, unlimited free transfers may be made from the
Sub-Accounts of the Variable Account at any time. These transfers must be at
least $1,000 or the entire amount in that Sub-Account if it is less than $1,000.
Limited free transfers may also be made from the Fixed Account. Any time six
months after the Issue Date and once each Contract Year, up to 25% of the Fixed
Account portion of the Contract Value may be transferred to the Variable Account
free of charge, so long as no transfer from the Fixed Account has occurred in
the previous six-month period. Other transfers from the Fixed Account will be
subject to a Transfer Charge. No transfers may be made after the Annuity Date.
See "Transfers", page 15.

6. CAN I GET MY MONEY IF I NEED IT?

All or part of the Contract Value can be withdrawn at any time prior to or
at the earlier of the Owner's death or the Annuity Date. Amounts withdrawn may
be subject to a Contingent Deferred Sales Charge of 0% to 7% depending on the
year of withdrawal. Up to ten percent of the total Contract Value may be
withdrawn without a contingent deferred sales charge once per Contract Year each
year after the first.

7
<PAGE>
Withdrawals may be taxable and a penalty tax may be imposed on withdrawals. See
"Surrenders and Withdrawals," page 16, and "Taxation of Annuities in General,"
pages 23 and 24.

7. WHAT ARE THE CHARGES AND DEDUCTIONS UNDER THE CONTRACT?

The Company currently does not deduct sales charges at the time of
investment. However, a Contingent Deferred Sales Charge of up to 7% of the
Purchase Payment withdrawn may apply to certain withdrawals. The Company deducts
an annual charge of $30.00 for maintaining the Contract ("Contract Maintenance
Charge"). See "Contract Maintenance Charge," page 17, for how and when this
charge is deducted. To meet its death benefit obligations and to pay expenses
not covered by the Contract Maintenance Charge, the Company deducts a daily
charge equal on an annual basis to 1.20% of the Contract's daily net assets. See
"Mortality and Expense Risk Charge," page 17. Transfers from the Fixed Account
may be subject to a charge equal to 6% of the amount transferred. See
"Transfers," page 15.

Additional deductions may be made for premium taxes at the time such taxes
are incurred. The Company reserves the right to deduct charges for other types
of taxes, although currently no such deductions are made. See "Taxes," page 18.

CHARGES AND DEDUCTIONS

The following table summarizes these charges and deductions, as well as the
fees and expenses of the Eligible Portfolios. These figures assume the entire
Contract Value is in the Variable Account.

<TABLE>
<S> <C>
Sales Load Imposed on Purchases...................... None

CONTRACT OWNER TRANSACTION EXPENSES(1)
Sales Transfer Fees(2)............................... None
Surrender Fees....................................... None

Contingent Deferred Sales Charge
(as a % of purchase payments withdrawn)

Less than 3 years.................................... 7%
3 years, but less than 4 years....................... 6%
4 years, but less than 5 years....................... 5%
5 years, but less than 6 years....................... 3%
6 years, but less than 7 years....................... 1%
7 years or more...................................... 0%
Annual Contract Maintenance Charge(3)................ $ 30

VARIABLE ACCOUNT ANNUAL EXPENSES
(as a % of average Contract Value)

Mortality and Expense Risk Charge.................... 1.20%
Administrative Charge................................ None
---------
Total Variable Account Annual Expenses............... 1.20%
---------
---------
</TABLE>

- ------------------------

(1) Premium taxes are not shown. The current range of premium taxes in
jurisdictions which the Contracts are made available is from 0% to 4%. (See
"Taxes," page 18).

(2) Transfers from the Fixed Account may be subject to a Transfer Charge of up
to 6%. (See "Transfers," page 15.)

(3) The Company will waive the annual Contract Maintenance Charge if the account
value is $25,000 or greater on the Contract Anniversary.

8
<PAGE>
ELIGIBLE PORTFOLIO ANNUAL EXPENSES

(as a % of average account value)(4)

<TABLE>
<CAPTION>
ADVISORY 12B-1 OTHER TOTAL
FEES FEES EXPENSES EXPENSES
-------- ----- -------- --------
<S> <C> <C> <C> <C>
COMPOSITE FUND
Growth and Income Portfolio................................. .50% -- .09% .59%
Northwest Portfolio......................................... .50% -- .18% .68%
Income Portfolio............................................ .50% -- .20% .70%

SCUDDER FUND
Capital Growth Portfolio.................................... .47% .25% .03% .75%
International Portfolio..................................... .83% .25% .16% 1.24%
Money Market Portfolio...................................... .37% -- .09% .46%
</TABLE>

The purpose of this Table is to assist the Owner in understanding the
various costs and expenses that an Owner will bear directly and indirectly. The
Table reflects historical charges and expenses of the Separate Account of the
Growth and Income, Northwest, Income, Capital Growth, International, and Money
Market Portfolios for year ended December 31, 1997. Charges and expenses may be
higher or lower in future years. Additional deductions may be made for taxes.
For more information on the charges described in this Table, see "Charges and
Deductions," page 17, and the portfolios' prospectuses which accompany this
Prospectus.

EXAMPLES

An Owner would pay the following expenses on a $1,000 investment, assuming a
5% annual return on assets and expenses of the Portfolios for 1997:

1. If you surrender your Contract at the end of the applicable time period:

<TABLE>
<CAPTION>
SUB-ACCOUNT 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------------------------- --------- --------- --------- -----------
<S> <C> <C> <C> <C>
Growth and Income....................................... 83.34 119.16 134.59 223.27
Northwest............................................... 85.19 121.75 139.08 232.72
Income.................................................. 85.38 122.33 140.07 234.80
Capital Growth.......................................... 85.85 123.76 142.55 240.00
International........................................... 90.45 137.70 166.50 289.51
Money Market............................................ 83.12 115.41 128.08 209.46
</TABLE>

2. If you annuitize at the end of the applicable time period, or if you do not
surrender or annuitize your Contract:

<TABLE>
<CAPTION>
SUB-ACCOUNT 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------------------------- --------- --------- --------- -----------
<S> <C> <C> <C> <C>
Growth and Income....................................... 19.40 60.00 103.16 223.27
Northwest............................................... 20.30 62.75 107.78 232.72
Income.................................................. 20.50 63.35 108.80 234.80
Capital Growth.......................................... 21.00 64.87 111.35 240.00
International........................................... 25.91 76.65 136.04 289.51
Money Market............................................ 18.09 56.03 96.45 209.46
</TABLE>

- ------------------------

(4) The expenses shown above are assessed at the underlying fund level and are
not direct charges against Variable Account assets or reductions from
Contract Values. These expenses are taken into consideration in computing
each portfolio's net asset value, which is the share price used to calculate
the Variable Account's unit value.

9
<PAGE>
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES AND THE ACTUAL EXPENSES PAID MAY BE GREATER OR LESSER THAN THOSE SHOWN.
THE $30 ANNUAL CONTRACT MAINTENANCE CHARGE IS REFLECTED IN THESE EXAMPLES AS A
CHARGE OF .120%, BASED ON AN AVERAGE CONTRACT VALUE OF $25,000.

8. WHAT ANNUITY OPTIONS ARE AVAILABLE UNDER THE CONTRACT?

The Annuitant must receive Annuity Payments on a completely fixed basis. The
Contract Owner has some flexibility in choosing when Annuity Payments begin.
Payments must begin by the later of the month following the Annuitant's 85th
birthday or the 10th Contract Anniversary. See "Annuity Payments," page 19, and
"Annuity Date," page 19.

Three Annuity Options are listed in the Contract: (1) payments for life but
with 120 monthly payments certain; (2) payments for the life of the Annuitant
and Joint Annuitant; and (3) payments for a specified period. Other options are
available at the Company's discretion; however, Contingent Deferred Sales
Charges may apply if Annuity Payments are made for a specified period of less
than 120 months.

Federal tax law may limit the availability of annuity options. See "Annuity
Options," page 19.

9. DOES THE CONTRACT PAY ANY DEATH BENEFITS?

Death benefits will be paid to the Beneficiary if the Owner dies before the
Annuity Date. Death benefits after the Annuity Date, if any, depend on the
Annuity Option chosen. See "Death Benefits," page 21.

10. IS THERE ANY TIME WHEN THE CONTRACT VALUE MUST BE DISTRIBUTED PRIOR TO THE
ANNUITY DATE?

If any Contract Owner dies prior to the Annuity Date and the Designated
Beneficiary is not the spouse of the deceased owner, federal tax laws require
distribution of the Contract Value within five years after the death of the
Contract Owner. Contingent Deferred Sales Charges may apply to distributions not
qualifying as a death benefit. See "Required Distribution," page 22.

11. ARE THERE ANY SHORT-TERM CANCELLATION RIGHTS?

Contract Owners may cancel a Contract any time within 10 days after receipt
(or longer, if required by law) of the Contract. Subject to the requirements of
any tax-qualified plan, and in accordance with applicable state law, the Company
will return either the Purchase Payment or any Purchase Payments allocated to
the Fixed Account, plus any Purchase Payments allocated to the Variable Account,
adjusted to reflect net investment gain or loss that occurred from the date of
allocation through the date of cancellation.

12. DOES THE CONTRACT OWNER HAVE ANY VOTING RIGHTS UNDER THE CONTRACT?

The Contract Owner may have the right to instruct the Company how to vote
shares of any Eligible Portfolio attributable to the Contract. See "Voting
Rights," page 14.

10
<PAGE>
CONDENSED FINANCIAL INFORMATION

The Accumulation Unit Values and the number of Accumulation Units
outstanding for each Sub-Account are shown below.

GROWTH AND INCOME SUB-ACCOUNT

<TABLE>
<CAPTION>
ACCUMULATION UNIT ACCUMULATION UNIT
VALUE VALUE UNITS OUTSTANDING
FOR THE YEARS ENDED DECEMBER 31, AT BEGINNING OF PERIOD AT END OF PERIOD AT END OF PERIOD
- --------------------------------------------- ---------------------- ---------------------- -----------------
<S> <C> <C> <C>
1988......................................... $ 13.269666 $ 15.550317 86,088.8700
1989......................................... $ 15.550317 $ 17.066620 112,858.3629
1990......................................... $ 17.066620 $ 16.038440 129,029.0207
1991......................................... $ 16.038440 $ 19.933651 200,515.1720
1992......................................... $ 19.933651 $ 21.779677 337,823.9280
1993......................................... $ 21.779677 $ 23.134830 480,444.5897
1994......................................... $ 23.134830 $ 23.488002 599,699.6262
1995......................................... $ 23.488002 $ 31.036917 784,123.9148
1996......................................... $ 31.036917 $ 37.430940 1,102,088.6226
1997......................................... $ 37.430940 $ 47.956752 1,188,292.7224
</TABLE>

INCOME SUB-ACCOUNT

<TABLE>
<CAPTION>
ACCUMULATION UNIT ACCUMULATION UNIT
VALUE VALUE UNITS OUTSTANDING
FOR THE YEARS ENDED DECEMBER 31, AT BEGINNING OF PERIOD AT END OF PERIOD AT END OF PERIOD
- --------------------------------------------- ---------------------- ---------------------- -----------------
<S> <C> <C> <C>
1988......................................... $ 15.405389 $ 16.722149 201,358.5798
1989......................................... $ 16.722149 $ 18.195754 196,494.4114
1990......................................... $ 18.195754 $ 19.492740 190,007.4209
1991......................................... $ 19.492740 $ 22.322568 192,692.8965
1992......................................... $ 22.322568 $ 23.585839 257,438.8000
1993......................................... $ 23.585839 $ 25.630161 350,949.9905
1994......................................... $ 25.630161 $ 24.180377 443,479.9661
1995......................................... $ 24.180377 $ 28.646883 526,873.5025
1996......................................... $ 28.646883 $ 28.977614 596,682.7576
1997......................................... $ 28.977614 $ 31.676875 577,882.8896
</TABLE>

NORTHWEST SUB-ACCOUNT(5)

- ------------------------

(5) The Northwest Portfolio commenced operations on January 1, 1993, and was not
available to Contract Owners prior to 1993. The Company voluntarily
reimbursed the Northwest Portfolio for all its operating expenses and waived
the Mortality and Expense Risk Fees during 1993. Composite Research
voluntarily charged no management fees to the Northwest Portfolio during
1993. These practices were discontinued on January 1, 1994.

11
<PAGE>
CAPITAL GROWTH SUB-ACCOUNT*

<TABLE>
<CAPTION>
ACCUMULATION UNIT
ACCUMULATION UNIT VALUE VALUE UNITS OUTSTANDING
FOR THE YEAR ENDED DECEMBER 31, AT BEGINNING OF PERIOD AT END OF PERIOD AT END OF PERIOD
- --------------------------------------------- ----------------------- ---------------------- -----------------
<S> <C> <C> <C>
1997......................................... $ 15.00 $ 18.441781 30,619.3146
</TABLE>

INTERNATIONAL SUB-ACCOUNT*

MONEY MARKET SUB-ACCOUNT*

<TABLE>
<CAPTION>
ACCUMULATION UNIT ACCUMULATION UNIT
VALUE VALUE UNITS OUTSTANDING
FOR THE YEAR ENDED DECEMBER 31, AT BEGINNING OF PERIOD AT END OF PERIOD AT END OF PERIOD
- --------------------------------------------- ---------------------- ---------------------- -----------------
<S> <C> <C> <C>
1997......................................... $ 15.00 $ 15.407070 9,728.7527
</TABLE>

- ------------------------

* Sub-Account was not available to Contract Owners prior to 1997.

FINANCIAL STATEMENTS

The financial statements of the SAFECO Deferred Variable Annuity Account and
SAFECO Life Insurance Company are not part of this prospectus, but may be found
in the Statement of Additional Information, which is available upon request.

SAFECO LIFE INSURANCE COMPANY AND THE VARIABLE ACCOUNT

SAFECO LIFE INSURANCE COMPANY

The Company is the issuer of the Contract. The Company is a stock life
insurance company that was organized under the laws of Washington on January 23,
1957. The Company writes individual and group life, accident and health
insurance and annuities. The Company is currently licensed to do business in the
District of Columbia and all states except New York. The Company is a wholly
owned subsidiary of SAFECO Corporation which is a holding company whose
subsidiaries are engaged primarily in insurance and financial service
businesses. The Company's home office is located at 15411 N.E. 51st Street,
Redmond, Washington 98052.

WM Life Insurance Company was the original issuer of the Contract. On
December 31, 1997, WM Life Insurance Company was acquired by and became a wholly
owned subsidiary of the Company. Effective June 30, 1998, WM Life Insurance
Company was merged into the Company.

THE VARIABLE ACCOUNT

The Variable Account (formerly known as WM Life Deferred Variable Annuity
Account) was established on December 23, 1986, and is registered with the
Securities and Exchange Commission (the "Commission") as a unit investment trust
under the Investment Company Act of 1940 and meets the definition of a Separate
Account under Federal Securities laws. Such registration does not signify that
the Commission supervises the management or investment practices or policies of
the Variable Account. The investment performance of the Variable Account is
entirely independent of both the investment performance of the Company's general
account and the performance of any other separate account.

The assets of the Variable Account are held separately from the other assets
of the Company. They are not chargeable with liabilities incurred in the
Company's other business operations (except to the extent that they exceed the
reserves and other liabilities of the Account). Accordingly, the income, capital
gains and capital losses, realized or unrealized, incurred on the assets of the
Variable Account are credited

12
<PAGE>
to or charged against the assets of the Variable Account, without regard to the
income, capital gains or capital losses arising out of any other business the
Company may conduct.

The Variable Account currently has six active Sub-Accounts--Growth and
Income, Northwest, Income, Capital Growth, International and Money Market--each
of which invests solely in its corresponding portfolio of either the Composite
Deferred Series, Inc. or the Scudder Variable Life Investment Fund. Additional
Sub-Accounts may be added at the discretion of the Company.

The Sub-Accounts invest directly in the corresponding Eligible Portfolios.
Each of these Eligible Portfolios was formed as an investment vehicle for
insurance company separate accounts. The investment objectives and policies of
certain Eligible Portfolios are similar to the investment objectives and
policies of other portfolios that may be managed by the same investment adviser
or manager. The investment results of the Eligible Portfolios, however, may be
higher or lower than the results of such other portfolios. There can be no
assurance, and no representation is made, that the investment results of any of
the Eligible Portfolios will be comparable to the investment results of any
other portfolio, even if the other portfolio has the same investment adviser or
manager.

The Company cannot guarantee and does not represent that shares of the
currently Eligible Portfolios will always be available for new investments or
for transfers. The Company retains the right, subject to any applicable law, to
make additions to, deletions from, or substitutions for the Eligible Portfolio
shares held by any Sub-Account of the Variable Account. The Company reserves the
right to eliminate the shares of any of the Eligible Portfolios and to
substitute shares of another portfolio of the Composite Fund or the Scudder
Fund, or of another open-end, registered investment company, if the shares of
the Eligible Portfolio are no longer available for investment, or if, in the
Company's judgment, investment in any Eligible Portfolio would become
inappropriate in view of the purposes of the Variable Account, or for other
reasons. Substitutions of shares attributable to a Contract Owner's interest in
a Sub-Account will not be made until the Owner has been notified of the change,
and until the Commission has approved the change, to the extent such
notification and approval is required by the Investment Company Act of 1940.
Nothing contained in the prospectus or Statement of Additional Information shall
prevent the Variable Account from purchasing other securities for other series
or classes of contracts, or from effecting a conversion between series or
classes of contracts on the basis of requests made by Contract Owners.

THE COMPOSITE DEFERRED SERIES, INC.

The Variable Account invests in the Composite Deferred Series, Inc. (the
"Composite Fund"). The Composite Fund has three Eligible Portfolios available
for investment: the Growth and Income Portfolio, the Northwest Portfolio, and
the Income Portfolio. Each portfolio has different investment objectives and
policies and operates as a separate investment fund.

The Growth and Income Portfolio seeks, as its primary objective, growth of
capital through investments in common stock and as a secondary objective income
when consistent with its primary objective.

The Northwest Portfolio invests in a portfolio of common stocks selected
from companies doing business in or located in the Northwestern United States
(Alaska, Idaho, Montana, Oregon, and Washington).

The Income Portfolio seeks, as its primary objective, to earn a high level
of current income by investing in a professionally managed portfolio consisting
principally of fixed-income securities and, as a secondary objective, capital
appreciation when consistent with its primary objective.

Composite Research & Management Co. ("Composite Research"), is the
investment manager of the Composite Deferred Series, Inc. As compensation for
investment management services, the Composite Fund pays Composite Research a
monthly advisory fee at an annual rate of 0.5% of the daily net assets of the
respective portfolios. These expenses are more fully described in the Composite
Fund's prospectus attached to this Prospectus.

13
<PAGE>
THE SCUDDER VARIABLE LIFE INVESTMENT FUND

The Variable Account invests in the Scudder Variable Life Investment Fund
(the "Scudder Fund"). The Scudder Fund has three Eligible Portfolios available
for investment: the Capital Growth Portfolio, the International Portfolio and
the Money Market Portfolio. Each portfolio has different investment objectives
and policies and operates as a separate investment fund.

The Capital Growth Portfolio seeks to maximize long-term capital growth from
a portfolio consisting primarily of equity securities.

The International Portfolio seeks long-term growth of capital, principally
from a diversified portfolio of foreign equity securities.

The Money Market Portfolio seeks stability and current income from a
portfolio of money market instruments. The average portfolio maturity of 90 days
or less is an effort to maintain a constant net asset value of $1.00 per share.

The Scudder Fund retains the investment advisory firm of Scudder Kemper
Investments, Inc., a Delaware corporation, to manage each portfolio's daily
investment and business affairs subject to the policies established by the
Scudder Variable Life Investment Fund Trustees. The Trustees have overall
responsibility for the management of the Scudder Fund.

The Scudder Fund has adopted a plan pursuant to Rule 12b-1 under the
Investment Company Act of 1940 for the Capital Growth and International
Portfolios. Pursuant to the Plan, those portfolios will pay the Scudder Fund's
distributor, for remittance to the Company (and other participating insurance
companies) for various costs incurred by such insurance companies in connection
with the distribution of shares of the portfolio. The Plan provides that the
amount of such expenses paid by a portfolio will not exceed, on an annual basis,
0.25% of the average daily assets of the Portfolio.

THERE IS NO ASSURANCE THAT ANY OF THE PORTFOLIOS WILL ATTAIN THEIR
RESPECTIVE STATED OBJECTIVES. Fund shares are not deposits or obligations of, or
endorsed or guaranteed by, any bank, nor are they insured or guaranteed by the
Federal Deposit Insurance Corporation, the United States government, or any
other agency. Additional information concerning the investment objectives and
policies of the portfolios can be found in the current prospectuses for the
portfolios accompanying this Prospectus.

THE PROSPECTUSES OF THE PORTFOLIOS SHOULD BE READ CAREFULLY BEFORE ANY
DECISION IS MADE CONCERNING THE ALLOCATION OF PURCHASE PAYMENTS TO A PARTICULAR
PORTFOLIO.

VOTING RIGHTS

The Contract Owner or anyone with a voting interest in the Sub-Account of
the Variable Account may instruct the Company on how to vote at shareholder
meetings of the portfolios. The Company will solicit and cast each vote
according to the procedures set up by the respective mutual fund and to the
extent required by law. The Company reserves the right to vote the shares in its
own right, if subsequently permitted by the Investment Company Act of 1940, its
regulations or interpretations thereof.

Before the Annuity Date, the Contract Owner holds the voting interest in the
Sub-Account. (The number of votes for the Contract Owner will be determined by
dividing the Contract Value attributable to a Sub-Account by the net asset value
per share of the applicable Eligible Portfolio.) There are no voting rights
attributable to Contract Values in the Fixed Account or after the Annuity Date.

14
<PAGE>
THE CONTRACTS

PURCHASE OF THE CONTRACTS

The Contracts are no longer available for purchase. For outstanding
Contracts, subsequent Purchase Payments of at least $100 may be made at any
time. Purchase Payments allocated to the Fixed Account may exceed $100,000 in
any Contract Year only with prior approval of the Company. The Contracts can be
used for both non-qualified and qualified retirement plans or for other
financial planning purposes, except that the Contracts cannot be purchased for
Section 403(b) Tax Sheltered Annuities.

CREDITING OF PURCHASE PAYMENTS

Purchase Payments will be credited to the Contract at the close of the
Valuation Period during which the Purchase Payment is received.

ALLOCATION OF PURCHASE PAYMENTS

On the application the Contract Owner instructed the Company how to allocate
the Purchase Payment among the Fixed Account and the six currently available
Sub-Accounts (the six "Investment Alternatives"). Purchase Payments may be
allocated in whole percents, from 0% to 100%, to any Investment Alternative so
long as the total allocation equals 100%. Unless the Contract Owner notifies the
Company otherwise, subsequent Purchase Payments are allocated according to the
instructions in the application.

Each Purchase Payment will be credited to the Contract as Fixed Account or
Variable Account Accumulation Units equal to the amount of Purchase Payment
allocated to each Investment Alternative divided by the Accumulation Unit value
for that Investment Alternative next computed after the Purchase Payment is
credited to the Contract. For example, if a $10,000 Purchase Payment is credited
to the Contract when the Accumulation Value equals $10, then 1,000 Accumulation
Units would be credited to the Contract. The Variable Account, in turn,
purchases shares of the corresponding Eligible Portfolio.

VALUE OF VARIABLE ACCOUNT ACCUMULATION UNITS

The Accumulation Units in each Sub-Account of the Variable Account are
valued separately. The value of Accumulation Units may change each Valuation
Period according to the investment performance of the shares purchased by each
Sub-Account and the deduction of certain expenses and charges.

A Valuation Period is the period between successive Valuation Dates. It
begins at the close of business of each Valuation Date and ends at the close of
business of the next succeeding Valuation Date. A Valuation Date is each day
that the New York Stock Exchange is open for business.

The value of an Accumulation Unit in a Sub-Account for any Valuation Period
equals the value of the Accumulation Unit as of the immediately preceding
Valuation Period, multiplied by the Net Investment Factor for that Sub-Account
for the current Valuation Period. The Net Investment Factor is a number
representing the change on successive Valuation Dates in the value of
Sub-Account assets due to investment income, realized or unrealized capital gain
or loss, deductions for taxes, if any, and deductions for the Mortality and
Expense Risk Charge. The Net Investment Factor is described in detail in the
Statement of Additional Information.

The value of Fixed Account Accumulation Units is also discussed in detail in
the Statement of Additional Information.

TRANSFERS

The Contract Owner may transfer funds from the six Sub-Accounts without
charge. These transfers must be at least $1,000 or the total amount in the
Sub-Account, whichever is less. THE COMPANY

15
<PAGE>
GUARANTEES THAT NO CHARGE WILL EVER BE IMPOSED FOR TRANSFERS FROM THE VARIABLE
ACCOUNT.

Once each Contract Year a portion of Contract Value in the Fixed Account may
be transferred to the Variable Account without charge at any time six months
after the Issue Date (and prior to the Annuity Date). Up to 25% may be
transferred without charge so long as no transfer from the Fixed Account has
occurred in the previous six month period. Otherwise, amounts transferred from
the Fixed Account will be charged a Transfer Charge of the lesser of the
applicable Contingent Deferred Sales Charge or 6% of the amount transferred.

Transfers may be made pursuant to telephone instructions by calling
1-800-882-8003 or by completing a telephone authorization form provided by the
Company. Telephone transfers may not be permitted by some states for their
residents who purchase variable annuities. All transfer instructions by
telephone are tape recorded. Neither the Company nor its authorized
representatives will be responsible for losses resulting from acting upon
telephone requests reasonably believed to be genuine. The Company will employ
reasonable procedures to confirm that instructions communicated by telephone are
genuine, including, but not limited to, requiring callers to identify themselves
as Contract Owner, or representing the Contract Owner, by providing the Owner's
name and social security number and other information determined by the Company
to be necessary. If the Company fails to follow those procedures, it may be
liable for losses caused by unauthorized or fraudulent transactions. Telephone
transfers received before 1:00 PM Pacific Time are effected the same day (at
that time). Telephone transfers received after 1:00 PM Pacific Time are effected
at 1:00 PM the next day (at the next computed value.) The Company may permit the
Contract Owner to pre-authorize transfers among Sub-Accounts under certain
circumstances. Transfer requests may also be made in writing on a form provided
by the Company. No transfers may be made after the Annuity Date.

Transfers from the Fixed Account or from Sub-Accounts of the Variable
Account will be made based on the Accumulation Unit values next computed after
the Company receives the transfer request at its Administrative Service Center.

SURRENDERS AND WITHDRAWALS

The Contract Owner may withdraw all or part of the Contract Value at any
time prior to or at the earlier of the Owner's death or the Annuity Date. The
amount available for withdrawal is the Contract Value next computed after the
Company receives the request for a withdrawal at its Annuity Service Office,
less any Contingent Deferred Sales Charges, any Contract Maintenance Charge, and
any remaining charge for premium taxes. Withdrawals from the Variable Account
will be paid within seven days of receipt of the request, subject to
postponement in certain circumstances (see "Delay of Payments," see page 16).

The minimum partial withdrawal is $1,000. If the Contract Value is less than
$1,000, or if the Contract Value after a partial withdrawal would be less than
$1,000, then the Company will treat the request as one for a total surrender of
the Contract and the entire Contract Value, less any charges and any premium
taxes, will be paid out.

Withdrawals and surrenders may be taxable and subject to a 10% tax penalty.
See "Federal Tax Matters" on page 23.

The total amount paid at surrender may be more or less than the total
Purchase Payments due to prior withdrawals, any deductions, and investment
performance.

To complete partial withdrawals, the Company will cancel Accumulation Units
in an amount equal to the withdrawal and any Contingent Deferred Sales Charge
and premium taxes. The Contract Owner must name the Investment Alternative from
which the withdrawal is to be made. If none is named, then the withdrawal will
be made first from the Investment Alternative with the largest value, then
successively from the next largest Investment Alternative.

16
<PAGE>
DEFAULT

So long as the Contract Value is not reduced to zero or a withdrawal does
not reduce it to less than $1,000, the Contract will stay in force until the
Annuity Date even if no Purchase Payments are made after the first Purchase
Payment.

CONTRACTS ISSUED PRIOR TO FEBRUARY 15, 1995

Contracts issued prior to or on February 15, 1995 differ in some respects
from the Contracts described in this prospectus. In general, the Contingent
Deferred Sales Charge, Death Benefit, annuity options and other general
provisions of the contract have been modified. The Statement of Additional
Information contains more descriptive information on the nature of these
modifications.

CHARGES AND OTHER DEDUCTIONS

DEDUCTIONS FROM PURCHASE PAYMENTS

No deductions other than premium taxes, if any, are currently made from
Purchase Payments. Therefore, except for any premium taxes, the full amount of
every Purchase Payment is invested in the Investment Alternatives to increase
the potential for investment gain. Partial withdrawals or full surrenders,
however, may be subject to a Contingent Deferred Sales Charge, as described
below.

CONTRACT MAINTENANCE CHARGE

A Contract Maintenance Charge of $30.00 is deducted annually on each
Contract Anniversary from the Contract Value to reimburse the Company for its
costs in maintaining each Contract and the Variable Account. The Contract
Maintenance Charge will also be deducted in full if the contract is surrendered
in its entirety. Prior to the Annuity Date, the Contract Maintenance Charge will
be deducted as follows: (a) if the Contract contains one or more Sub-Accounts of
the Variable Account, the Contract Maintenance Charge will be deducted from the
Sub-Account with the largest value; or (b) if the contract contains only a Fixed
Account, the Contract Maintenance Charge will be deducted from the Fixed
Account, provided Purchase Payments or transferred amounts have been applied to
the Fixed Account during the Contract Year. THE COMPANY GUARANTEES THAT THE
AMOUNT OF THIS CHARGE WILL NOT INCREASE OVER THE LIFE OF THE CONTRACT.
Maintenance costs include, but are not limited to, expenses incurred in billing
and collecting Purchase Payments; keeping records; processing death benefit
claims and cash surrender; Contract changes and proxy statements; calculating
Accumulation Unit values; and issuing reports to owners and regulatory agencies.
No Contract Maintenance Charge will be deducted if the Contract Value is greater
than $25,000 on the Contract Anniversary.

MORTALITY AND EXPENSE RISK CHARGE

A Mortality and Expense Risk Charge will be deducted daily prior to the
Annuity Date at a rate equal on an annual basis to 1.20% of the assets in the
Variable Account and the Fixed Account allocable to your Contract. Interest
rates declared by the Company for the Fixed Account are net of the 1.20%
Mortality and Expense Risk Charge. There will be no Mortality and Expense Risk
Charge after the Annuity Date. THE COMPANY GUARANTEES THAT THE AMOUNT OF THIS
CHARGE WILL NOT INCREASE OVER THE LIFE OF THE CONTRACT.

The mortality risk arises from the Company's guarantee to cover all death
benefits and to make Income Payments in accordance with the annuity tables, thus
relieving the Annuitants of the risk of outliving funds accumulated for
retirement. The expense risk arises from the possibility that the Contract
Maintenance and Contingent Deferred Sales Charges, both of which are guaranteed
not to increase, will be insufficient to cover maintenance and distribution
costs. Since the Company anticipates these charges will fail to cover all the
distribution expenses, any deficiency will be met from the Company's general

17
<PAGE>
corporate funds, including amounts derived from the Mortality and Expense Risk
Charge. If these charges exceed the distribution expenses, any excess will be
profit to the Company.

CONTINGENT DEFERRED SALES CHARGE

The Contract Owner may withdraw the Contract Value at any time before or at
the Annuity Date. Amounts surrendered may be subject to a Contingent Deferred
Sales Charge. Up to ten percent of the total Contract Value (on the date of
withdrawal) may be withdrawn without Contingent Deferred Sales Charge once each
Contract Year after the first. This free partial withdrawal applies only to the
first withdrawal of each Contract Year, and not using any or all of the free
partial withdrawal in one year does not increase the amount that can be
withdrawn free of charge in subsequent years. Contingent Deferred Sales Charges,
if any, will be deducted from the amount paid.

In certain cases, distributions required by federal tax law (see "Required
Distributions" on page 22) and payments under Annuity Options with a specified
period of less than 120 months may be subject to a Contingent Deferred Sales
Charge.

Except as provided under the "Penalty Free Partial Withdrawal" section of
the Contract, a Contingent Deferred Sales Charge will be applied to amounts
withdrawn as set forth below until the total amounts withdrawn equal the total
amount of Purchase Payments under this contract. For purposes of calculating the
contingent deferred sales charge, all Purchase Payments are deemed to be
withdrawn before any earnings. Once all Purchase Payments have been withdrawn,
earnings can be withdrawn without any contingent deferred sales charge.

<TABLE>
<CAPTION>
APPLICABLE CONTINGENT
DEFERRED SALES CHARGE
ELAPSED TIME SINCE ISSUE DATE PERCENTAGE
- ------------------------------------------------------------------------ -------------------------
<S> <C>
Less than 3 years....................................................... 7%
3 years, but less than 4 years.......................................... 6%
4 years, but less than 5 years.......................................... 5%
5 years, but less than 6 years.......................................... 3%
6 years, but less than 7 years.......................................... 1%
7 years or more......................................................... 0%
</TABLE>

Contingent Deferred Sales Charges will be used to pay sales commissions and
other promotional or distribution expenses associated with the marketing of the
Contracts.

Certain surrenders or withdrawals may also be taxable and subject to a
federal tax penalty. See "Federal Tax Matters," page 23.

SALES COMMISSION

From its profits the Company may pay a maximum sales commission of 5.5% of
Purchase Payments to its authorized sales representatives.

TAXES

The Company will deduct state premium taxes or other taxes relative to the
Contract (collectively referred to as "premium taxes") when incurred by the
Company. Premium taxes vary from 0% to 4%, although many states do not impose a
premium tax on annuities.

If incurred at the Annuity Date, the charge for premium taxes will be
deducted from each Investment Alternative in the proportion that the Contract
Owner's interest in the Investment Alternative bears to the total Contract
Value.

18
<PAGE>
The Company reserves the right to deduct charges for other types of taxes,
or any such economic burden resulting from such taxes, although currently no
such deductions are made.

COMPOSITE DEFERRED SERIES, INC. ("COMPOSITE FUND") EXPENSES

A complete description of the expenses and deductions from the Portfolios is
found in the Composite Fund's prospectus which is attached to this Prospectus.

SCUDDER VARIABLE LIFE INVESTMENT FUND ("SCUDDER FUND") EXPENSES

A complete description of the expenses of the Portfolios is found in the
Scudder Fund's prospectus, which is attached to this prospectus.

ANNUITY PAYMENTS

ANNUITY DATE

The Annuity Date is the day that Annuity Payments will start under the
Contract. The Contract Owner may change the Annuity Date at any time by
notifying the Company in writing of the change at least 30 days before the
current Annuity Date. The Annuity Date must be: (a) at least two years after the
Issue Date; and (b) no later than the last day of the month following the
Annuitant's 85th birthday, or the 10th Contract Anniversary , if later.

Unless the Contract Owner notifies the Company in writing otherwise, the
Annuity Date will be the later of the first day of the calendar month after the
Annuitant reaches age 85 or the 10th Contract Anniversary.

ANNUITY OPTIONS

The Annuitant must receive Annuity Payments on a completely fixed basis. If
no election has been made by the Contract Owner, a fixed annuity for life with
payments for 120 months certain will automatically apply. Up to 30 days before
the Annuity Date, the Contract Owner may change the Annuity Option or request
any other form of annuity agreeable to both the Company and the Owner. If the
Contract Value to be applied to an Annuity Option is less than $2,000, or if the
monthly payments determined under the Annuity Option are less than $60, the
Company may pay the Contract Value in a lump sum or change the payment frequency
to an interval which results in Annuity Payments of at least $60. If an Annuity
Option is chosen which depends on the Annuitant's or Joint Annuitant's life,
proof of age will be required before Annuity Payments begin. Premium taxes may
be assessed. The Annuity Options include:

ANNUITY OPTION 1--PAYMENT OF LIFE INCOME. Payments will continue for the
lifetime of the Annuitant. The Owner may elect to have the payments guaranteed
for 10 years and continue thereafter for the lifetime of the Annuitant. If the
Owner makes this election and the Annuitant dies before 120 monthly payments
have been made, the remainder of the 120 guaranteed payments will be made to the
Beneficiary, if living; otherwise to the Annuitant's estate.

ANNUITY OPTION 2--JOINT AND LAST SURVIVOR. The Owner must select a Joint
Annuitant. Monthly payments beginning on the Annuity Date will be made for as
long as either the Annuitant or Joint Annuitant is living. No Annuity Payments
will be made after the deaths of both the Annuitant and Joint Annuitant. It is
possible under this option that only one monthly payment will be made if the
Annuitant and Joint Annuitant both die before the second payment is made, or
only two monthly payments will be made if they both die before the third
payment, and so forth.

ANNUITY OPTION 3--PAYMENTS FOR A SPECIFIED PERIOD. Monthly payments
beginning on the Annuity Date will be made during the specified period which
must be at least 120 months (otherwise, Annuity

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Payments may be subject to a Contingent Deferred Sales Charge). Such payments do
not depend on the continuation of the life of the Annuitant.

At the Company's discretion, other Annuity Options may be available. The
Company currently uses sex-distinct annuity tables. However, the Company
reserves the right to use annuity tables which do not distinguish on the basis
of sex, in accordance with applicable state or federal law or regulation.

The level of annuity payments will not be affected by the mortality
experience (death rate) of persons receiving such payments or of the general
population. The Company assumes the "mortality risk" by virtue of annuity rates
incorporated in the Contract. In addition, the Company guarantees that it will
not increase charges for maintenance of the Contracts regardless of its actual
expenses.

FIXED ANNUITY PAYMENTS

A fixed annuity is an annuity with payments which are guaranteed by the
Company as to dollar amount during the annuity payment period. The amount of the
annuity payments, if any, will be determined by applying the Contract Value to
the applicable Annuity Table in accordance with the Annuity Option elected. This
will be done at the Annuity Date. Accordingly, Fixed Annuity Payments have a
fixed and guaranteed amount that is not in any way dependent upon the investment
experience of the Eligible Portfolio. The amount of the monthly payments depends
only on the Annuity Option chosen, the age (and possibly sex) of the Annuitant,
and the total amount applied to purchase the annuity.

The Company does not credit discretionary interest to fixed annuity payments
during the annuity payment period. The annuitant must rely on the Annuity Tables
contained in the Contracts to determine the guaranteed amount of such fixed
annuity payments. However, if you could obtain a larger Fixed Annuity Payment on
the basis of our rates then in effect on the Annuity Date for fully guaranteed
Single Premium Immediate Annuities, the Company will provide such higher
payments.

PERFORMANCE DATA

Yields and total returns are used to measure the performance of the various
Sub-Accounts. Yield may be calculated for the Income and Money Market
Sub-Accounts; total returns may be calculated for the Income, Growth and Income,
Northwest, Capital Growth, and International Sub-Accounts. Both yields and total
returns are calculated in accordance with rules adopted by and required by the
Securities and Exchange Commission. All yields and total returns are based on
historical earnings and are not intended to indicate future performance. The
Commission standardized yield for the Income Sub-Account refers to annualized
current income generated by an investment in the Sub-Account over a specified
thirty-day period. The Commission's standardized yield is calculated by assuming
that the current income for the specified thirty-day period is generated for
each thirty-day period over a twelve-month period. The yield is the annualized
income expressed as a percentage of the investment.

Yield and effective yield are calculated for the Money Market Sub-Account.
Yield for the Money Market Sub-Account refers to the annualized income generated
by an investment in that Sub-Account over a specified seven-day period. The
yield is calculated by assuming that the income generated for that seven-day
period is generated each seven-day period over a 52-week period and is shown as
a percentage of the investment. The effective yield is calculated similarly but,
when annualized, the income earned by an investment in that Sub-Account is
assumed to be reinvested. The effective yield will be slightly higher than the
yield because of the compounding effect of this assumed reinvestment.

Total returns are calculated for the Income, Growth and Income, Northwest,
Capital Growth, International and Money Market Sub-Accounts for various
specified periods. A hypothetical payment is invested in the Sub-Account. At the
end of the specified period, the redeemable value of the payment is compared to
the original payment. The total return is the average annual compounded rate at
which the initial payment must increase in order to equal the redeemable value
at the end of the period. The total

20
<PAGE>
return for continuing contracts substitutes the full value in the Sub-Account
for the redeemable value. The full value differs from the redeemable value by
the amount of the Contingent Deferred Sales Charge at the end of the specified
period.

Performance data may be provided for periods prior to the commencement of
operations of the Sub-Accounts, if the corresponding Portfolio has a prior
operating history. In this event, the Portfolio's performance would be adjusted
to reflect the Variable Account and Contract Charges.

Performance data calculations are discussed in detail in the Statement of
Additional Information.

GENERAL MATTERS

CONTRACT OWNER

The Contract Owner, which may be a person or entity, has the sole right to
exercise all rights and privileges under the Contract, except as otherwise
provided in the Contract.

BENEFICIARY

The Beneficiary is the person named as such in the application. Subject to
the terms of any existing assignment or the rights of any irrevocable
Beneficiary, the Contract Owner may change the Beneficiary by notifying the
Company in writing. Any change will be effective when it is endorsed in the
Company's records but will relate back and take effect as of the date the Owner
signed it. The Company will not, however, be liable as to any payment or
settlement made prior to receiving the written notice.

Unless otherwise provided in the Beneficiary designation, the right of any
Beneficiary predeceasing the Owner will revert to the Contract Owner. Multiple
Beneficiaries may be named. Unless otherwise provided in the Beneficiary
designation, if more than one Beneficiary survives, the surviving Beneficiaries
will share equally in any amounts due.

DEATH BENEFITS

The Company will determine the value of the Death Benefit at the end of the
Valuation Period coinciding with or next following the earlier of the date the
Company receives the Beneficiary's election or the ninetieth day following
receipt of Due Proof of Death. Interest will be paid on the Death Proceeds from
this date to the date of settlement at a rate not less than that required by
law.

If any Owner under age 80 dies prior to the Annuity Date, the Death Benefit
will be:

1. The Contract Value; or

2. The total amount of Purchase Payments less withdrawals and any
applicable charges; or

3. The sum of:

a. The total amount of Purchase Payments, less withdrawals and any
applicable charges, as of the specified Contract Anniversary
immediately preceding the date of the Owner's death; plus

b. Fifty percent of the excess, if any, of the Contract Value over the
total amount of Purchase Payments, less withdrawals and any
applicable charges, as of the specified Contract Anniversary
immediately preceding the date of the Owner's death; plus

c. The total amount of Purchase Payments, less withdrawals and any
applicable charges, after the specified Contract Anniversary
immediately preceding the date of the Owner's death, whichever is
greatest. For purposes of this section, specified Contract
Anniversary means every fifth Contract Anniversary.

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<PAGE>
If any Owner age 80 and over dies prior to the Annuity Date, the Death
Benefit will be the Contract Value or the total of the Purchase Payments,
reduced by any previous withdrawals and any applicable charges, whichever is
greater. All Death Benefits arising prior to the Annuity Date will be paid upon
the Company's receipt of Due Proof of Death and a request for a lump sum payment
or an Annuity Option. Federal law may limit the availability of Annuity Options.
The Company will not pay any Death Benefit until it receives Due Proof of Death.

If any Annuity Option is not elected within 90 days of receipt of
notification and proof of death, the Company will make a lump sum settlement to
the Beneficiary at the end of the 90-day period. The Company guarantees that the
Death Benefit within this 90-day period will never be less than the total of the
Purchase Payments, determined as of the date of the Owner's death, reduced by
any previous withdrawals, and any applicable charges.

If the Annuitant and any Joint-Annuitant(s) die(s) after the Annuity Date,
the Death Benefit, if any, will be as provided in the Annuity Option elected.
Payments will be made in conformity with applicable laws or regulations.

REQUIRED DISTRIBUTIONS

Federal tax law requires that if the Owner or any Joint Owner of the
Contract dies before the Annuity Date, the entire value of the Contract must be
distributed within five (5) years of the date of death of the Owner. Special
rules may apply to spouses of the deceased owner. See the Statement of
Additional Information or the Contract for a detailed description of these
rules. Other required distribution rules apply to Qualified Contracts.

DELAY OF PAYMENTS

Payment of any amounts due from the Variable Account under the Contract will
occur within seven days, unless:

1. The New York Stock Exchange is closed for other than usual weekends or
holidays, or trading on the New York Stock Exchange is otherwise
restricted; or

2. An emergency exists as defined by the SEC; or

3. The SEC permits delay for the protection of the security holders.

The Company reserves the right to postpone payments or transfers from the
Fixed Account for up to six months.

ASSIGNMENTS

The Contract may be assigned prior to the Annuity Date and during the
Owner's lifetime, subject to the rights of any irrevocable Beneficiary. Any
assignment will not be binding until received in writing by the Company. The
Company will not be responsible for deciding if an assignment is valid or the
extent of an assignee's interest. An assignment may result in income tax
liability to the Owner.

No Beneficiary may assign benefits under the Contract until they are due
and, to the extent permitted by law, payments are not subject to the debts of
any Beneficiary or to any judicial process for payment of the Beneficiary's
debts.

MODIFICATIONS

The Company may not modify the Contract without the consent of the Contract
Owner except to make the Contract meet the requirements of the Investment
Company Act of 1940, or to make the

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<PAGE>
Contracts conform with any changes in the Internal Revenue Code, or as required
by the Internal Revenue Code or by any other applicable law in order to continue
treatment of the Contract as an annuity.

CUSTOMER INQUIRIES

The Contract Owners or any other persons with an interest in the Contract
may make inquiries regarding the Contract by calling or writing the Company.

FEDERAL TAX MATTERS

INTRODUCTION

The ultimate effect of federal income taxes on Contracts or the individuals
with rights under the Contracts depends on the purpose for which the Contract is
purchased, on the tax and employment status of the individual concerned and on
the Company's tax status. THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT
INTENDED AS TAX ADVICE. If you are concerned about these tax implications, you
should consult a competent tax adviser.

TAXATION OF ANNUITIES IN GENERAL

The following discussion assumes that the Contract will qualify as an
annuity contract for federal income tax purposes. The Statement of Additional
Information discusses such qualifications.

Generally, an annuity contract owner who is a natural person is not taxed on
increases in the Contract Value until a distribution occurs. For federal income
tax purposes, distributions include the receipt of proceeds from loans and an
assignment or pledge of any portion of the value of the Contract, as well as
withdrawals, surrenders, Annuity Payments, or Death Benefits. Contract Owners
who are not natural persons generally must include in income any increase during
the taxable year in the excess of the Contract Value over the Contract Owner's
investment in the Contract. However, there are exceptions to this exception and
you should discuss these with your tax counsel. The following discussion applies
only to Contracts owned by natural persons.

Generally, in the case of a surrender or withdrawal under a Non-Qualified
Contract, amounts received are first treated as taxable income to the extent
that the cash value of the Contract immediately before the surrender exceeds the
"investment in the contract" at that time. Any additional amount is not taxable.
The "investment in the contract" equals the portion, if any, of any Purchase
Payments paid by or on behalf of an individual under a Contract that was not
excluded from the individual's gross income.

In case of a surrender or withdrawal under a Qualified Contract, the portion
of the amount received which bears the same ratio to the total amount received
that the "investment in the contract" bears to the total Contract Value, can be
excluded from income. For Contracts issued in connection with qualified plans,
the "investment in the contract" can be zero.

In the case of Annuity Payments, although the tax consequences may vary
depending on the Annuity Option elected under the Contract, until the investment
in the contract is recovered generally, only the portion of the Annuity Payment
that represents the amount by which the Contract Value exceeds the "investment
in the contract" will be taxed; after the investment in the Contract is
recovered, the full amount of any additional Annuity Payments is taxable. For
Fixed Annuity Payments, until recovery of the investment in the Contract,
generally there is no tax on the amount of each payment which represents the
same ratio that the "investment in the contract" bears to the total expected
value of the Annuity Payments for the term of the payments; however, the
remainder of each Annuity Payment is taxable until recovery of the investment in
the Contract, and thereafter the full amount of each Annuity Payment is taxable.

Amounts may be distributed from a Contract because of the death of an Owner.
Generally, such amounts are includable in the income of the recipient as
follows: (1) if distributed in a lump sum, they are

23
<PAGE>
taxed in the same manner as a full surrender of the Contract, as described
above, or (2) if distributed under an Annuity Option, they are taxed in the same
manner as annuity payments, as described above. For these purposes, the
investment in the contract is not affected by the owner's death. That is, the
investment in the contract remains the amount of any Purchase Payments paid
which were not excluded from gross income.

The taxable portion of a distribution (in the form of an annuity or a lump
sum payment) is taxed as ordinary income. All non-qualified annuity contracts
issued by the Company, or an affiliated insurance company, to the same Contract
Owner during any calendar year will be treated as one annuity contract, and
therefore aggregated for purposes of determining the amount includable in gross
income.

Premature distributions from both Qualified and Non-Qualified Contracts may
be subject to a penalty tax. For Non-Qualified Contracts, the penalty tax is
equal to ten percent (10%) of the amount treated as taxable income. However, for
Non-Qualified Contracts there should be no penalty tax on distributions to
Contract Owners (1) made on or after the owner attains age 59 1/2; (2) made as a
result of the Owner's death or disability; or (3) received in substantially
equal installments as a life annuity. Other tax penalties may apply to
distributions pursuant to a Qualified Contract.

The Company is required to withhold federal and, where required, state
income taxes on all distributions unless the recipient elects not to have taxes
withheld and properly notifies the Company of that election. However, effective
January 1, 1993, certain distributions from Section 401(a), 403(a) and 401(b)
annuity contracts or plans are subject to mandatory withholding.

In past years, legislation has been proposed that would have adversely
modified the federal taxation of certain annuities. For example, one such
proposal would have changed the tax treatment of non-qualified annuities that
did not have "substantial life contingencies" by taxing income as it is credited
to the annuity. Section 408A of the Internal Revenue Code of 1986 (as amended)
permits eligible individuals to make nondeductible contributions to an
individual retirement program known as a Roth Individual Retirement Annuity.
Section 408A includes limits on how much you may contribute to a Roth Individual
Annuity and when distributions may commence. Qualified distributions from Roth
Individual Retirement Annuities are excluded from taxable gross income.
"Qualified distributions" are distributions which (a) are made more than five
years after the taxable year of the first contribution to the Roth Individual
Retirement Annuity, and (b) meet any of the following conditions: (1) the
annuity owner has reached age 59 1/2; (2) the distribution is paid to a
beneficiary after the owner's death; (3) the annuity owner is disabled; or (4)
the distribution will be used for a first time home purchase. (Qualified
distributions for first time home purchases may not exceed $10,000.)
Nonqualified distributions are includible in taxable gross income only to the
extent that they exceed the contributions made to the Roth Individual Retirement
Annuity. The taxable portion of a nonqualified distribution may distribution may
be subject to the 10% penalty tax.

Subject to certain limitations, you may convert a traditional Individual
Retirement Account or Annuity to a Roth Individual Retirement Annuity. You will
be required to include the taxable portion of the conversion in your taxable
gross income, but you will not be required to pay the 10% penalty tax.

As of the date of this prospectus Congress is not considering additional
legislation regarding taxation of annuities. However, there is always the
possibility that the tax treatment of annuities could change by legislation or
other means (such as IRS regulation, revenue rulings, judicial decision, etc.).
Moreover, it is also possible that any change could be retroactive (that is,
effective prior to the date of the change).

It should be understood that the foregoing comments on the federal tax
consequences under the Contract are not exhaustive and that special rules apply
to other tax situations not discussed in this Prospectus. Before making an
investment, a qualified tax adviser should be consulted.

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<PAGE>
YEAR 2000

Like other insurance, mutual fund, financial and business organizations and
individuals around the world, the Company and the Variable Account could be
adversely affected if the computer systems used by the Company, its principal
underwriter, underlying mutual fund managers and investment advisors or other
companies that provide services to the Variable Account do not properly process
and calculate date related information from and after January 1, 2000. This is
commonly called the "Year 2000 problem." The Company is taking steps it believes
are reasonably designed to address the Year 2000 problem with respect to the
computer systems that each of them uses and to obtain satisfactory assurances
that comparable steps are being taken by each of the Company's other, major
service providers. It is not anticipated that the Variable Account will incur
any charges or that there will be any difficulties in accurate and timely
reporting resulting from the change in year from 1999 to 2000.

STATEMENT OF ADDITIONAL INFORMATION

The Statement of Additional Information contains more detailed information
about the Contracts and the Company. The following is the table of contents for
the Statement of Additional Information.

25
<PAGE>
TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INTRODUCTION.............................................................. 4
SAFECO Life Insurance Company........................................... 4
SAFECO Securities, Inc.................................................. 4
Composite Deferred Series, Inc. ("Composite Fund")...................... 4
Scudder Variable Life Investment Fund ("Scudder Fund").................. 4
Additions, Deletions or Substitutions of Investments.................... 4
Reinvestment............................................................ 5

PERFORMANCE DATA.......................................................... 5
Money Market Sub-Account Yield Calculation.............................. 5
Income Sub-Account Yield Calculation.................................... 5
Average Annual Total Return Calculations................................ 6
Calculation Assumptions................................................. 6

THE CONTRACT.............................................................. 7
Purchase of Contracts................................................... 7
Value of Variable Account Accumulation Units............................ 7
The Fixed Account....................................................... 8
Value of Fixed Account Accumulation Units............................... 9
Tax-Free Exchanges (Section 1035)....................................... 9
Required Distributions.................................................. 9
Contracts Issued Prior to February 15, 1995............................. 10
Contracts Issued Prior to or on March 13, 1988.......................... 10
Contracts Issued Prior to or on April 30, 1991.......................... 10
Contracts Issued After April 30, 1991, and Before April 30, 1992........ 10
Contracts Issued After April 30, 1992 and Before February 15, 1995...... 10

CHARGES AND OTHER DEDUCTIONS.............................................. 11
Contract Maintenance Charge............................................. 11
Premium Taxes........................................................... 11
Tax Reserves............................................................ 11

ANNUITY PAYMENTS.......................................................... 11
Legal Developments Regarding Annuity Tables............................. 11
Variable Annuity Payments............................................... 12
Proof of Survival....................................................... 13

GENERAL MATTERS........................................................... 13
Incontestability........................................................ 13
Settlements............................................................. 13
Safekeeping of the Variable Account's Assets............................ 13
Independent Auditors.................................................... 13
Legal Matters........................................................... 14

FEDERAL TAX MATTERS....................................................... 14
Taxation of SAFECO Life Insurance Company............................... 14
Tax Status of the Contracts............................................. 14
Qualified Plans......................................................... 15

VOTING RIGHTS............................................................. 16

FINANCIAL STATEMENTS...................................................... 16
</TABLE>
<PAGE>

PART B

<PAGE>

STATEMENT OF ADDITIONAL INFORMATION

SAFECO DEFERRED VARIABLE ANNUITY ACCOUNT

SAFECO LIFE INSURANCE COMPANY

15411 N.E. 51st Street
Redmond, Washington 98052

This Statement of Additional Information supplements the information in the
prospectus for the Flexible Premium Deferred Variable Annuity Contract
("Contract") offered by SAFECO Life Insurance Company (the "Company"). The
Contract is primarily designed to aid individuals in long-term financial
planning, and it can be used for retirement planning regardless of whether your
plan qualifies for special federal income tax treatment.

THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND SHOULD BE READ
ONLY WITH THE SAFECO DEFERRED VARIABLE ANNUITY ACCOUNT PROSPECTUS FOR THE
CONTRACT.

You may obtain a copy of the prospectus from SAFECO Securities, Inc. ("SSI"),
the principal distributor of the Contract, or by calling or writing the Company
at the address listed above.

The prospectus, dated the same date as this Statement of Additional Information,
has been filed with the Securities and Exchange Commission.

Dated , 1998
--------------

1
<PAGE>

TABLE OF CONTENTS

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
SAFECO Life Insurance Company. . . . . . . . . . . . . . . . . . . . . . . .4
SAFECO Securities, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . .4
Composite Deferred Series, Inc. ("Composite Fund") . . . . . . . . . . . . .4
Scudder Variable Life Investment Fund ("Scudder Fund") . . . . . . . . . . .4
Additions, Deletions or Substitutions of Investments . . . . . . . . . . . .4
Reinvestment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5

PERFORMANCE DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Money Market Sub-Account Yield Calculation . . . . . . . . . . . . . . . . .5
Income Sub-Account Yield Calculation . . . . . . . . . . . . . . . . . . . .5
Average Annual Total Return Calculations . . . . . . . . . . . . . . . . . .6
Calculation Assumptions. . . . . . . . . . . . . . . . . . . . . . . . . . .6

THE CONTRACT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
Purchase of Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . .7
Value of Variable Account Accumulation Units . . . . . . . . . . . . . . . .7
The Fixed Account. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
Value of Fixed Account Accumulation Units. . . . . . . . . . . . . . . . . .9
Tax-Free Exchanges (Section 1035). . . . . . . . . . . . . . . . . . . . . .9
Required Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . .9
Contracts Issued Prior to February 15, 1995. . . . . . . . . . . . . . . . 10
Contracts Issued Prior to or on March 13, 1988 . . . . . . . . . . . . . . 10
Contracts Issued Prior to or on April 30, 1991 . . . . . . . . . . . . . . 10
Contracts Issued After April 30, 1991, and Before April 30, 1992 . . . . . 10
Contracts Issued After April 30, 1992 and Before February 15, 1995 . . . . 10

CHARGES AND OTHER DEDUCTIONS . . . . . . . . . . . . . . . . . . . . . . . . 11
Contract Maintenance Charge. . . . . . . . . . . . . . . . . . . . . . . . 11
Premium Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Tax Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

ANNUITY PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Legal Developments Regarding Annuity Tables. . . . . . . . . . . . . . . . 11
Variable Annuity Payments. . . . . . . . . . . . . . . . . . . . . . . . . 12
Proof of Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

GENERAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Incontestability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Settlements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Safekeeping of the Variable Account's Assets . . . . . . . . . . . . . . . 13
Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Legal Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

FEDERAL TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Taxation of SAFECO Life Insurance Company. . . . . . . . . . . . . . . . . 14
Tax Status of the Contracts. . . . . . . . . . . . . . . . . . . . . . . . 14
Qualified Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

VOTING RIGHTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

2
<PAGE>

FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

3
<PAGE>

INTRODUCTION

SAFECO LIFE INSURANCE COMPANY

The Company is the issuer of the Contract. The Company is a wholly owned
subsidiary of SAFECO Corporation which is a holding company whose subsidiaries
are engaged primarily in insurance and financial services businesses.

SAFECO SECURITIES, INC.

As of September 22, 1998, SAFECO Securities, Inc. ("SSI") acts as the
principal underwriter for the Contracts. Prior to September 22, 1998, Composite
Funds Distributor, Inc. ("CFDI") served as the principal distributor of the
Contract. As compensation for its distribution services, WM Life Insurance
Company (the former depositor of the Variable Account) paid CFDI, $1,238,048,
$1,251,291, and $787,040 for the years ended December 31, 1995, 1996 and 1997,
respectively.

COMPOSITE DEFERRED SERIES, INC. ("COMPOSITE FUND")

The Variable Account invests in the Composite Deferred Series, Inc. (the
"Composite Fund"), a mutual fund registered with the Securities and Exchange
Commission. The Composite Fund has three currently Eligible Portfolios
available for investment: The Growth and Income Portfolio, the Northwest
Portfolio, and the Income Portfolio.

SCUDDER VARIABLE LIFE INVESTMENT FUND ("SCUDDER FUND")

The Variable Account invests in the Scudder Variable Life Investment Fund
(the "Scudder Fund"). The Scudder Fund has three currently Eligible Portfolios
available for investment: the Capital Growth Portfolio, the International
Portfolio and the Money Market Portfolio.

ADDITIONS, DELETIONS OR SUBSTITUTIONS OF INVESTMENTS

The Company cannot guarantee and does not represent that shares of the
currently Eligible Portfolios will always be available for new investments or
for transfers. The Company retains the right, subject to any applicable law,
to make additions to, deletions from, or substitutions for the Eligible
Portfolio shares held by any Sub-Account of the Variable Account. The Company
reserves the right to eliminate the shares of any of the Eligible Portfolios and
to substitute shares of another portfolio of the Composite Fund or the Scudder
Fund, or of another open-end, registered investment company, if the shares of
the Eligible Portfolio are no longer available for investment, or if, in the
Company's judgment, investment in any Eligible Portfolio would become
inappropriate in view of the purposes of the Variable Account. Substitutions of
shares attributable to a Contract Owner's interest in a Sub-Account will not be
made until the Owner has been notified of the change, and until the Securities
and Exchange Commission has approved the change, to the extent such notification
and approval is required by the Investment Company Act of 1940. Nothing
contained in the prospectus or Statement of Additional Information shall prevent
the Variable Account from purchasing other securities for other series or
classes of contracts, or from effecting a conversion between series or classes
of contracts on the basis of requests made by Contract Owners.

The Company may also establish additional Sub-Accounts of the Variable
Account. Each additional Sub-Account would purchase shares in a new portfolio
of the Composite Fund or the Scudder Fund or in another mutual fund. New
Sub-Accounts may be established when, in the sole discretion of the Company,
marketing needs or investment conditions warrant. Any new Sub-Accounts will be
made available to existing Contract Owners on a basis to be determined by the
Company. The Company may also eliminate one or more Sub-Accounts, if, in its
sole discretion, marketing, tax, investment or other conditions so warrant.

4
<PAGE>

In the event of any such substitution or change, the Company may, by
appropriate endorsement, make such changes in this and other contracts as may be
necessary or appropriate to reflect such substitution or change. If deemed to
be in the best interests of persons having voting rights under the policies, the
Variable Account may be operated as a management company under the Investment
Company Act of 1940 or it may be de-registered under such Act in the event such
registration is no longer required.

REINVESTMENT

All dividends and capital gain distributions from Eligible Portfolios are
automatically reinvested in shares of the distributing Portfolio at their net
asset value.

PERFORMANCE DATA

MONEY MARKET SUB-ACCOUNT YIELD CALCULATION

In accordance with regulations adopted by the Securities and Exchange
Commission, the Company is required to compute the Money Market Sub-Account's
current annualized yield for a seven-day period in a manner that does not take
into consideration any realized or unrealized gains or losses on shares of the
Money Market portfolio or on its portfolio securities. This current annualized
yield is computed by determining the net change (exclusive of realized gains and
losses on the sale of securities and unrealized appreciation and depreciation
and income other than investment income) in the value of a hypothetical account
having a balance of one unit of the Money Market Sub-Account at the beginning of
such seven-day period, dividing such net change in account value by the value of
the account at the beginning of the period to determine the base period return
and annualizing this quotient on a 365-day basis. The net change in account
value reflects the deductions for administrative expenses, the mortality and
expense risk charge, and income and expenses accrued during the period. Because
of these deductions, the yield for the Money Market Sub-Account of the Variable
Account will be lower than the yield for the Money Market Portfolio of the
Scudder Fund.

The Securities and Exchange Commission also permits the Company to disclose
the effective yield of the Money Market Sub-Account for the same seven-day
period, determined on a compounded basis. The effective yield is calculated by
compounding the annualized base period return by adding one to the base period
return, raising the sum to a power equal to 365 divided by 7 and subtracting one
from the result. The yield figures do not reflect the contingent deferred sales
charge.
The yield on amounts held in the Money Market Sub-Account normally will
fluctuate on a daily basis. Therefore, the disclosed yield for any given past
period is not an indication or representation of future yields or rates of
return. They Money Market Sub-Account's actual yield is affected by changes in
interest rates on money market securities, average portfolio maturity of the
Money Market Portfolio, the types and quality of portfolio securities held by
the Money Market Portfolio, and its operating expenses.

INCOME SUB-ACCOUNT YIELD CALCULATION

Yields for the Income Sub-Account will be calculated based on a one month
period. The computation is accomplished by dividing the net investment income
per accumulation unit earned during the period by the price per unit on the last
day of the period, according to the following formula:

YIELD = 2 [(a - b + 1) - 1]
-----
cd

Where:
a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of accumulation units outstanding during the
period.

5
<PAGE>

d = the maximum offering price per accumulation unit on the last day of
the period.

Interest earned will be determined in accordance with rules established by
the Securities and Exchange Commission. Accrued expenses will include all
recurring fees that are charged to all contract owner accounts. The yield
figures does not reflect the contingent deferred sales charge.

AVERAGE ANNUAL TOTAL RETURN CALCULATIONS

An average annual total return may be calculated for a given period. It is
computed by finding the average annual compounded rate of return over the period
that would equate the initial amount invested to the redeemable value, according
to the following formula:

n
P (1 + T) = ERV

Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years in the period
ERV = ending redeemable value at the end of the period of a hypothetical
$1,000 payment made at the beginning of the period.

All recurring fees that are charged to all contract owner accounts are
recognized in the ending redeemable value.
The Securities and Exchange Commission also permits the Company to disclose
an Average Annual Total Return for Continuing Contracts. The Average Annual
Total Return for Continuing Contracts is calculated using the same formula as
the Average Annual Return except that EV, the Ending Value of the account is
substituted for ERV, the Ending Redeemable Value of the Account. The EV is
equal to the ERV plus the Contingent Deferred Sales Charge. The Average Annual
Total Return for Continuing Contracts will always be accompanied by the
Securities and Exchange Commission standardized Average Annual Total Return.

The average annual total returns (including surrender charges) for the
Income, Growth and Income, and Northwest Sub-Accounts were as follows:

<TABLE>
<CAPTION>
Five Period of
Year-ended Years-ended Inception* through
Sub-Account December 31, 1997 December 31, 1997 December 31, 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Income (0.38)% 2.64% 4.97%
Growth and Income 17.24% 13.82% 8.98%
Northwest 20.25% 11.48% 11.48%
</TABLE>

* The Income and Growth and Income Sub-Accounts commenced operations on
June 15, 1987. The Northwest Sub-Account commenced operations on January 1,
1993.

CALCULATION ASSUMPTIONS

The former depositor for the Variable Account voluntarily charged no
Contract Maintenance Charge and no Mortality and Expense Risk Charge for the
period from November 1, 1987, through January 31, 1988. From June 15, 1987,
through April 30, 1988, the former depositor also voluntarily reimbursed the
Composite Fund for all its operating expenses and Composite Research voluntarily
charged no management fees to the Fund. The former

6
<PAGE>

depositor voluntarily reimbursed the Northwest Portfolio for all its operating
expenses and waived the Mortality and Expense Charge during 1993. Composite
Research voluntarily charged no management fees to the Northwest Portfolio
during 1993. These practices were discontinued on January 1, 1994.

In the sub-sections above, yields and total annual average returns were
calculated as if the Contract Maintenance Charge and Mortality and Expense Risk
Charge had been applied since inception. In no case were premium taxes
deducted.

The Contract Maintenance Charge of $30.00 is deducted annually from the
Investment Alternative with the largest value. When Income Sub-Account yield
is calculated, this charge is recognized as an accrued expense. For a
period of an exact number of months, the accrued expense is calculated as
(a) x (b) x (c) x (d) where:

(a) = number of months in period
(b) = 1 year per 12 months
(c) = $30.00 per contract per year
(d) = number of contracts, as of the end of the period, for which the
Sub-Account is largest.

For any period not an exact number of months, the accrued expense will be
calculated as (e) x (f) x (c) x (d) where (c) and (d) are as above and

(e) = number of days in period
(f) = 1 year per 365 days

To calculate Income Sub-Account yield for a given month, the accrued
Mortality and Expense Risk Charge is calculated to be .000032877, times the
number of days in the month, times the average number of dollars in the
Sub-Account attributable to annuity holders.

THE CONTRACT

PURCHASE OF CONTRACTS

The Contracts are no longer offered to the public.

VALUE OF VARIABLE ACCOUNT ACCUMULATION UNITS

The value of Variable Account Accumulation Units will vary in accordance
with investment experience of the Eligible Portfolio in which the Sub-Account
invests. The number of such Accumulation Units credited to a Contract will not,
however, change as a result of any fluctuations in the value of the Accumulation
Unit.

The Accumulation Units in each Sub-Account of the Variable Account are
valued separately. The value of Accumulation Units in any Valuation Period
will depend upon the investment performance of the shares purchased by each
Sub-Account in a particular Eligible Portfolio.

The value of an Accumulation Unit in a Sub-Account for any Valuation Period
equals the value of such a unit as of the immediately preceding Valuation
Period, multiplied by the "Net Investment Factor" for that Sub-Account for the
current Valuation Period. The Net Investment Factor for each Sub-Account for
any Valuation Period is determined by dividing (A) by (B) and subtracting (C),
where:

(A) is calculated to be:

(1) the value of the Sub-Account's assets at the end of the prior Valuation
Period after any allocations to, or withdrawals from, the Sub-Account at the end
of the prior Valuation Period; plus

7
<PAGE>

(2) the sum of any investment income and realized or unrealized capital
gains credited to the Sub-Account during the current Valuation Period; minus

(3) any realized or unrealized capital losses charged against the
Sub-Account during the current Valuation Period; minus
(4) any amount charged for taxes associated with the operation of the
Variable Account during the current Valuation Period; plus (or minus)

(5) the decrease (or increase) in amounts, if any, set aside as a reserve
for taxes associated with the operation of the Variable Account during the
current Valuation Period.

(B) is the value of the Sub-Account's assets at the end of the prior
Valuation Period after any allocations to, or withdrawals from, the Sub-Account
at the end of the prior Valuation Period.

(C) is the daily charge of 0.000032877 times the number of calendar days in
the current Valuation Period for assuming the mortality and expense risks under
the Contract.

THE FIXED ACCOUNT

Contributions under the fixed portion of the annuity contracts and
transfers to the fixed portion become part of the general account of the
Company, which supports insurance and annuity obligations. Because of
exemptive and exclusionary provisions, interests in the general account have not
been registered under the Securities Act of 1933 ("1933 Act"), nor is the
general account registered as an investment company under the Investment Company
Act of 1940 ("1940 Act"). Accordingly, neither the general account nor any
interests therein are generally subject to the provisions of the 1933 or 1940
Acts and the Company has been advised that the staff of the Securities and
Exchange Commission has not reviewed the disclosures in this prospectus which
relate to the fixed portion.

The Company will credit the amounts allocated to the Fixed Account in the
form of Fixed Account Accumulation Units. The interest factors declared on any
day are guaranteed to be equivalent to at least an effective annual yield of
4.2%. For a given Contract, interest factors are guaranteed for one year and
may change only on the Contract Anniversary. A daily charge for the mortality
and expense risks equivalent to an annual yield of 1.20% applies to the Fixed
Account. Hence, the Company guarantees that the value of Fixed Account
Accumulation Units will increase at an effective annual yield of at least 3%.

ANY INTEREST CREDITED TO AMOUNTS ALLOCATED TO THE FIXED ACCOUNT IN EXCESS
OF THE GUARANTEED YIELD OF 4.2% PER YEAR WILL BE DETERMINED AT THE SOLE
DISCRETION OF THE COMPANY.

The Contract Owner assumes the risk that interest credited to Fixed Account
Accumulation Units may not exceed the guaranteed minimum yield of 4.2% per year.

The Company guarantees that, at any time prior to the Annuity Date, the
Contract Value in the Fixed Account will not be less than the amount of the
Purchase Payments allocated or transferred to the Fixed Account, plus interest
at the yield of 4.2% per year, plus any excess interest which the Company
credits to the Fixed Account Accumulation Units, less the sum of all Contract
Maintenance Charges, Mortality and Expense Risk Charges, and any applicable
premium taxes allocable to the Fixed Account, and less any amounts deducted from
the Fixed Account, in connection with partial surrenders or transfers to the
Variable Account.

8
<PAGE>

VALUE OF FIXED ACCOUNT ACCUMULATION UNITS

The value of Fixed Account Accumulation Units will vary in accordance with
the Company's declared interest factor. At the end of any Valuation Period, the
value is calculated by multiplying the prior value by the declared Net Interest
Factor during the Valuation Period. The value of Fixed Account Accumulation
Units is guaranteed to increase at an effective annual yield of at least 3%.

The Net Interest Factor for any Valuation Period is (A) minus (B) where:

(A) is 1.0 plus the number of days in the current Valuation Period times
the declared interest factor for the current Valuation Period, and

(B) is the daily charge of .000032877 for assuming the mortality and
expense risks under this Contract, times the number of days in the current
Valuation Period.

The interest factor declared on any day is guaranteed to be equivalent to
at least an effective annual yield of 4.2%, resulting in a Net Interest Factor
equivalent to at least an effective annual yield of 3% (because the daily charge
in (B) above is equivalent to an annual yield of 1.2%). Different interest
factors may be declared, and different Net Interest Factors may be used for
different Accumulation Units based upon the date(s) of your Purchase Payment(s).

TAX-FREE EXCHANGES (SECTION 1035)

The Company accepts Purchase Payments which are the proceeds of a Contract
in a transaction qualifying for a tax-free exchange under Section 1035 of the
Internal Revenue Code. Except as required by federal law in calculating the
basis of the Contract, the Company does not differentiate between Section 1035
Purchase Payments and non-Section 1035 Purchase Payments.

The Company also accepts "rollovers" from Contracts qualifying as
individual retirement annuities or accounts (IRAs), or any other qualified
contract which is eligible to "rollover" into an IRA (except 403(b) contracts).
The Company differentiates between non-qualified Contracts and IRAs to the
extent necessary to comply with federal tax laws. For example, the Company
restricts the assignment, transfer or pledge of IRAs to anyone except the
Company, so the Contracts will continue to qualify for special tax treatment.

REQUIRED DISTRIBUTIONS

If the Owner or any Joint Owner of the Contract dies before the Annuity
Date, the entire value of the Contract must be distributed to the Designated
Beneficiary as described in this section so that the Contracts qualify as
annuities under the Internal Revenue Code.

Where a Death Benefit is payable, unless prohibited by federal tax laws,
the Company will make a lump sum settlement to the Designated Beneficiary if the
Designated Beneficiary does not select an Annuity Option as described in this
section within 90 days of the Company's receipt of notification and proof of
death.
The Company must make a required distribution as described in this section.
In such instances, the Designated Beneficiary must select an Annuity Option
within one (1) year of the Owner's death, or surrender the Contract no later
than five (5) years after the death of the Owner or Joint Owner. A Contingent
Deferred Sales Charge may be imposed on each surrender.

If the Designated Beneficiary selects an Annuity Option, payments must
start within one year of the death of the Owner or Joint Owner and must be
payable for the life of the Designated Beneficiary or for a period not exceeding
the life expectancy of the Designated Beneficiary.

9
<PAGE>

The distribution rules described in this section shall not apply if the
Designated Beneficiary is the spouse of the deceased Owner or Joint Owner. If
the spouse is the Designated Beneficiary, that person may continue the Contract
as Owner without regard to the required distribution rules.

CONTRACTS ISSUED PRIOR TO FEBRUARY 15, 1995

Contracts issued prior to or on February 15, 1995, although essentially
similar, differ in some respects from contracts issued after that date. The
following provisions apply to contracts issued prior to that date. (Note that
beginning in 1997, the term "Income Payments" was changed in the Contract,
Prospectus, and this Statement of Additional Information. The term "Income
Payments" has been changed to "Annuity Payments." This new term was determined
to be more descriptive. This revision has no effect on the Contract Value or
any other material provisions of the Contract.)

CONTRACTS ISSUED PRIOR TO OR ON MARCH 13, 1988

The following Contingent Deferred Sales Charges apply:

<TABLE>
<CAPTION>
Applicable Contingent
Elapsed Time Since Date of Deferred Sales Charge
Purchase Payment Percentage
---------------- ----------
<S> <C>
Less than 1 year 6%
1 year, but less than 2 years 5%
2 years, but less than 3 years 4%
3 years, but less than 4 years 3%
4 years, but less than 5 years 2%
5 years, but less than 6 years 1%
6 years or more 0%
</TABLE>

In addition, allocations to the Fixed Account are not permitted.

CONTRACTS ISSUED PRIOR TO OR ON APRIL 30, 1991

Death Benefits - The Death Benefit will be the Contract Value. There is
no minimum death benefit since the Contract Value depends on the investment
performance of the Eligible Portfolios and may be reduced to zero.

Annuity Options - The Annuitant may receive Annuity Payments on a
completely variable basis, a completely fixed basis, or a combination variable
and fixed basis. If no election is made, a completely Variable Annuity for life
with payments for 120 months certain will automatically apply. See "Variable
Annuity Payments," page 12.

CONTRACTS ISSUED AFTER APRIL 30, 1991, AND BEFORE APRIL 30, 1992

Annuity Options - The Annuitant may receive Annuity Payments on a
completely variable basis, a completely fixed basis, or a combination variable
and fixed basis. If no election is made, an annuity in such form and allocation
by percentage as the Owner's selected investment base, for Life with Payments
for 120 Months Certain will automatically apply. See "Variable Annuity
Payments," page 12.

CONTRACTS ISSUED AFTER APRIL 30, 1992 AND BEFORE FEBRUARY 15, 1995

Death Benefits - The Death Benefit will be the Contract Value without
enhancements and dependent entirely on the investment performance of the
eligible portfolios.

10
<PAGE>

Contingent Deferred Sales Charges - Contingent Deferred Sales Charges will
apply to withdrawals from the Contract Value based on the time elapsed since the
Purchase Payment.

CHARGES AND OTHER DEDUCTIONS

CONTRACT MAINTENANCE CHARGE

Record keeping and operations functions are performed by and are the
responsibility of the Company. These functions include, but are not limited to:
billing and collecting Purchase Payments, record keeping, processing death
claims, processing surrenders and withdrawals, processing policy changes,
preparing proxy statements, calculating Accumulation Unit values, and issuing
reports to Owners and regulatory agencies. The Contract Maintenance Charge is
designed to reimburse the Company for the expenses of performing these
maintenance functions.

As an alternative to performing record keeping and operations functions,
the Company may secure similar services from other sources. At the Company's
sole discretion, these services will be purchased on a basis which affords the
best service at the lowest cost. The Company reserves the right to select a
purveyor of services which it deems best able to perform these services in a
satisfactory manner, even though the costs for these services may be higher than
would prevail elsewhere. The Company may also elect to perform all or any part
of the maintenance services directly or through a subsidiary or an affiliate.

PREMIUM TAXES

Applicable premium tax rates on Purchase Payments depend on the Contract
Owner's state of residence, and the insurance laws and status of the Company in
those states where premium taxes are incurred. Premium tax rates may be changed
by legislation, administrative interpretations or judicial acts.

TAX RESERVES

Currently, the Company does not establish capital gains tax reserves for
the Sub-Account, nor deduct charges for tax reserves because the Company
believes that capital gains attributable to the Variable Account will not be
taxable. However, the Company reserves the right to establish tax reserves for
potential taxes on realized or unrealized capital gains. If such reserves are
established, then Sub-Account Values would be reduced to reflect deductions for
maintaining any such reserves.

ANNUITY PAYMENTS

LEGAL DEVELOPMENTS REGARDING ANNUITY TABLES

On July 6, 1983, the Supreme Court held in ARIZONA GOVERNING COMMITTEE V.
NORRIS that annuity benefits provided by employers' retirement and fringe
benefit plans may not vary on the basis of sex. The Norris decision expressly
applies only to employment practices, not to insurance or annuity practices.
However, it is unclear at this time which employment benefit plans may be
subject to Norris. The Contracts offered by this prospectus contain life
annuity tables that provide for different benefit payments to men and women of
the same age. Nevertheless, in accordance with Norris, in certain employment
related situations, annuity tables that do not vary on the basis of sex may be
used. Accordingly, if the Contract is to be used in connection with an
employment-related retirement or benefit plan, consideration should be given, in
consultation with legal counsel, to the impact of Norris on any such plan before
making any contributions under these Contracts.

In addition, legislation has been introduced in Congress and some states,
which, if enacted, could require the use of tables that do not vary on the basis
of sex for some or all annuity contracts.

11
<PAGE>

VARIABLE ANNUITY PAYMENTS

(Note that beginning in 1997, the term "Variable Annuity Income Payments"
was changed in the Contract, Prospectus, and this Statement of Additional
Information. This term was changed to "Variable Annuity Payments". This new
term was determined to be more descriptive. This revision has no effect on the
Contract Value or any other material provisions of the Contract.)

Contracts issued prior to April 30, 1992, may be eligible to receive
Variable Annuity Payments. The Contract states which annuity options are
available to the contract holder.

The following information pertains to Variable Annuity Payments:

AMOUNT OF VARIABLE ANNUITY PAYMENTS.

The amount of the first Annuity Payment is calculated by applying the
Contract Value allocated to each Sub-Account, less any premium tax
charge deducted at this time, to the Annuity Payment tables in the
Contract. The first Variable Annuity Payment is divided by the
Sub-Account's then current Annuity Unit Value to determine the number
of Annuity Units upon which later Income payments will be based.
Variable Annuity Payments after the first will be equal to the sum of
the number of Annuity Units determined in this manner for each
Sub-Account times the then current Annuity Unit Value for each
respective Sub-Account.

The value of an Annuity Unit in each Sub-Account of the Variable
Account was initially set at $100. Annuity Units in each Sub-Account
are valued separately and Annuity Unit Values will depend upon the
investment experience of the Eligible Portfolios in which the
Sub-Account invests. The value of the Annuity Unit for each
Sub-Account at the end of any Valuation Period is calculated by: (a)
multiplying the prior value by the Sub-Account's Net Investment Factor
during the period; and then (b) dividing the product by the sum of 1.0
plus the assumed investment rate for the period. The assumed
investment rate adjusts for the interest rate assumed in the annuity
table used to determine the dollar amount of the first Variable
Annuity Income Payment, and is an effective annual yield of 4.0%.

Currently, the amount of the first Income Payment paid under an
Annuity Option is determined using 4% interest and the 1983 Table a
for Individual Annuity Valuation. Due to judicial or legislative
developments regarding the use of tables which do not differentiate on
the basis of sex, in some cases a different annuity table may be used.

After the Annuity Date, transfers from a Sub-Account may not be made until
six months after that date, and may be made thereafter only once in any six
month period. No transfers may be made from the Fixed Account after the Annuity
Date.

After the Annuity Date, persons receiving Variable Annuity Payments have a
voting interest. The votes decrease as Annuity Payments are made and as the
reserves for the Contract decrease. That person's number of votes will be
determined by dividing the reserve for such Contract allocated to the applicable
Sub-Account by the net asset value per share of the corresponding Eligible
Portfolio.

No transfers may be made for six months after the Annuity Date and may be
made thereafter only once in any six month period. Amounts used to purchase a
fixed annuity may not later be transferred to a variable annuity.

The amount of Variable Annuity Payments depends upon the investment
experience of the Eligible Portfolios selected by the Contract Owner, any
premium taxes, the age (and possibly sex) of the Annuitant, and the Annuity
Option chosen. The Company guarantees that the Annuity Payments will not be
affected by (1) actual mortality experience and (2) amount of the Company's
administration expenses.

12
<PAGE>

The Annuity Payments may be more or less than total Purchase Payments made
because (a) Variable Annuity Payments vary with the investment results of the
underlying Portfolios, (b) the Contract Owner bears the investment risk, and (c)
Annuitants may die before the actuarially predicted date of death. As such, the
amount of Annuity Payments cannot be predicted.

If the actual net investment experience is less than the assumed investment
rate, then the dollar amount of Variable Annuity Payments will decrease. The
dollar amount of Variable Annuity Payments will stay level if the net investment
experience equals the assumed investment rate and the dollar amount of the
Annuity Payments will increase if the net investment experience exceeds the
assumed investment rate.

For Variable Annuities, after payments begin, the Contract may be
surrendered at any time for the commuted value of remaining payments. The
commuted value shall be calculated using the same interest rate as was used to
determine the amount of the monthly payments.

If ANNUITY OPTION 3 - PAYMENTS FOR A SPECIFIED PERIOD is selected for a
Variable Annuity, the Mortality and Expense Risk Charge will apply, even though
the Company would no longer be assuming any mortality risk under this Contract.

For Variable Annuity Payments, in general, the taxable portion of each
Annuity Payment (prior to recovery of the investment in the contract) is
determined by a formula which establishes the specific dollar amount of each
Annuity Payment that is not taxed. This dollar amount is determined by dividing
the "investment in the contract" by the total number of expected Annuity
Payments.

PROOF OF SURVIVAL

If an Annuity Option which depends on one or more persons being alive on a
payment date is elected, satisfactory proof of survival may be required before
any Annuity Payments or death benefits will be paid.

GENERAL MATTERS

INCONTESTABILITY

The Contract will not be contested after it is issued.

SETTLEMENTS

The Contract must be returned to the Company prior to any settlement. Due
proof of death must be received prior to settlement of a death claim.

SAFEKEEPING OF THE VARIABLE ACCOUNT'S ASSETS

The Company holds title to the assets of the Variable Account. The assets
are kept physically segregated and held separate and apart from the Company's
general corporate assets. Records are maintained of all purchases and
redemptions of the Eligible Portfolio shares held by each of the Sub-Accounts.

Neither the Composite Fund nor the Scudder Fund issue certificates and,
therefore, the Company holds the Account's assets in open account in lieu of
stock certificates.

INDEPENDENT AUDITORS

13
<PAGE>

Ernst & Young LLP, 999 Third Avenue, Suite 3500, Seattle, WA 98104, are the
independent auditors of the financial statements of the SAFECO Deferred Variable
Annuity Account and the financial statement of SAFECO Life Insurance Company,
which are included herein.

LEGAL MATTERS

Sutherland, Asbill & Brennan LLP, Washington, DC, has provided legal advice
regarding certain matters relating to the federal securities laws.

FEDERAL TAX MATTERS

The ultimate effect of federal income taxes on the Contract Value, on
Annuity Payments, and on the economic benefit to the Contract Owner, the
Annuitant, or the Beneficiary depends on the type of retirement plan for which
the Contract is purchased, on the tax and employment status of the individual
concerned, and on the Company's tax status. THE FOLLOWING DISCUSSION IS GENERAL
AND IS NOT INTENDED AS TAX ADVICE. Any person concerned about these tax
implications should consult a competent tax adviser. This discussion is based
upon the Company's understanding of the present federal income tax laws as they
are currently interpreted by the Internal Revenue Service. No representation is
made as to the likelihood of continuation of these present federal income tax
laws or of the current interpretations by the Internal Revenue Service.
Moreover, no attempt has been made to consider any applicable state or other tax
laws.

TAXATION OF SAFECO LIFE INSURANCE COMPANY

The Company is taxed as a life insurance company under Part I of
Subchapter L of the Internal Revenue Code. Since the Variable Account is not
an entity separate from the Company, and its operations form a part of the
Company, it will not be taxed separately as a "regulated investment company"
under Subchapter M of the Code. Investment income and realized capital gains
are automatically applied to increase reserves under the Contract. Under
existing federal income tax law, the Company believes that the Variable
Account investment income and realized net capital gains will not be taxed to
the extent that such income and gains are applied to increase the reserves
under the Contract.

Accordingly, the Company does not anticipate that it will incur any federal
income tax liability attributable to the Variable Account, and therefore the
Company does not intend to make provisions for any such taxes. However, if
changes in the federal tax laws or interpretations thereof result in the Company
being taxed on income or gains attributable to the Variable Account, then the
Company may impose a charge against the Variable Account (with respect to some
or all Contracts) in order to set aside provisions to pay such taxes.

TAX STATUS OF THE CONTRACTS

Section 817(h) of the Code provides that a variable annuity based on a
separate account (such as the Contracts) will not qualify as an annuity contract
under section 72 of the Code unless the investments of the separate account are
"adequately diversified" in accordance with Treasury regulations. The Variable
Account, through the Funds, intends to comply with the diversification
requirements prescribed by the Treasury in Treas. Reg. 1.817-5 which affect how
the Funds' assets may be invested.

In certain circumstances, owners of variable annuity contracts may be
considered the owners, for federal income tax purposes, of the assets of the
separate accounts used to support their contracts. In those circumstances,
income and gains from the separate account assets would be includable in the
variable contract owner's gross income. The IRS has stated in published rulings
that a variable contract owner will be considered the owner of separate account
assets if the contract owner possesses incidents of ownership in those assets,
such as the ability to exercise investment control over the assets. The
Treasury Department has also announced, in connection with the issuance of
regulations concerning diversification, that those regulations "do not provide
guidance concerning the

14
<PAGE>

circumstances in which investor control for the investments of a segregated
asset account may cause the investor (i.e., the Owner), rather than the
insurance company, to be treated as the owner of the assets in the account."
This announcement also stated that guidance would be issued by way of
regulations or rulings on the "extent to which policyholders may direct their
investments to particular sub-accounts without being treated as owners of the
underlying assets."

The ownership rights under the Contract are similar to, but different in
certain respects from, those described by the IRS in rulings in which it was
determined that owners were not owners of separate account assets. For example,
the Owner has additional flexibility in allocating premium payments and account
values. These differences could result in an Owner being treated as the owner
of a pro rata portion of the assets of the Variable Account. In addition, the
Company does not know what standards will be set forth, if any, in the
regulations or rulings which the Treasury Department might issue in the future.
The Company, therefore, reserves the right to modify the Contract as necessary
to attempt to prevent an Owner from being considered the owner of a pro rata
share of the assets of the Variable Account.

Federal tax laws also require that annuity contracts contain specific
provisions for distribution of the policy proceeds upon the death of the
contract holder. The Company believes that because of the Required Distribution
provision of the Contracts (see "Required Distributions" above), it has complied
with the federal tax laws, and the Contracts will qualify as annuities under
section 72 of the Internal Revenue Code. The sales representative may use sales
literature which contains charts or other illustrations demonstrating the
effects of tax-deferral applicable to the Contract.

QUALIFIED PLANS

The Contract is designed for use with several types of Qualified Plans.
The tax rules applicable to participants in such Qualified Plans vary according
to the type of plan and the terms and conditions of the plan itself. Special
favorable tax treatment may be available for certain types of contributions and
distributions (including certain lump sum distributions). Adverse tax
consequences may result from contributions in excess of specified limits,
distributions prior to age 59 1/2 (subject to certain exceptions), distributions
that do not conform to specified minimum distribution rules, aggregate
distributions in excess of a specified annual amount, and in certain other
circumstances. Therefore, the Company makes no attempt to provide more than
general information about the use of the Contracts with the various types of
Qualified Plans. Contract Owners and participants under Qualified Plans, as
well as Annuitants and Beneficiaries, are cautioned that the right of any person
to any benefits under Qualified Plans may be subject to the terms and conditions
of the plans themselves, regardless of the terms and conditions of the Contract
issued in connection therewith. Those purchasing Contracts for use with any
Qualified Plan should seek competent advice regarding the suitability of the
Contract therefore. The Contracts cannot be used for Section 403(b) plans.

(a) H.R. 10 Plans. The Self-Employed Individuals Tax Retirement Act of
1962, as amended, commonly referred to as "H.R. 10" or "Keogh," permits
self-employed individuals to establish Qualified Plans for themselves and their
employees. These plans are limited by law to maximum permissible contributions,
distribution dates, and nonforfeitability of interests. In order to establish
such a plan, a plan document, usually in a form approved in advance by the
Internal Revenue Service, is adopted and implemented by the employer.

(b) Individual Retirement Annuities. Sections 219 and 408 of the Code
permit individuals or their employers to contribute to an individual retirement
program known as an "Individual Retirement Annuity." Individual Retirement
Annuities are subject to limitations on the amount which may be contributed, and
on the time when distributions may commence. In addition, distributions from
certain other types of Qualified Plans may be placed into an Individual
Retirement Annuity on a tax deferred basis. The Internal Revenue Service has
not reviewed the Contract for qualification as an IRA, and has not addressed in
a ruling of general applicability whether a death benefit provision such as the
provision in the Contract comports with IRA qualification requirements.

15
<PAGE>

(c) Corporate Pension and Profit-Sharing Plans. Sections 401(a) and 403(a)
of the Code permit corporate employers to establish various types of retirement
plans for employees. Such retirement plans may permit the purchase of the
Contracts to provide benefits under the plans. Adverse tax consequences to the
plan, to the participant or to both may result if this Contract is assigned or
transferred to any individual as a means to provide benefit payments.

(d) Certain Deferred Compensation Plans. Section 457 of the Code, while
not actually providing for a Qualified Plan as that term is normally used,
provides for certain Deferred Compensation Plans with respect to service for
state governments, local governments and political subdivisions, agencies,
instrumentalities and certain affiliates of such entities and certain tax exempt
organizations which enjoy special treatment. The Contracts can be used with
such plans. Under such plans, a participant may specify the form of investment
in which his or her participation will be made. All such investments are owned
by, and subject to, the claims of general creditors of the sponsoring employer.
Depending on the terms of the particular plan, the employer may be entitled to
draw on deferred amounts for purposes unrelated to its section 457 plan
obligations. In general, all amounts received under a section 457 plan are
taxable.

Other restrictions with respect to the election, commencement, or
distribution of benefits may apply under Qualified Contracts or under the terms
of the plans in respect of which Qualified Contracts are issued.

VOTING RIGHTS

The number of votes which a person has the right to instruct will be
calculated separately for each Sub-Account. That number will be determined by
applying his/her percentage interest, if any, in a particular Sub-Account to the
total number of votes attributable to the Sub-Account.

The number of votes of the Portfolio which a Contract Owner has a right to
instruct will be determined as of the date coincident with the date established
by that Portfolio for determining shareholders eligible to vote at the meeting
of either of the Funds. Voting instructions will be solicited by written
communication prior to such meeting, in accordance with procedures established
by the Fund. The Company reserves the right to vote Eligible Shares in its own
right, if subsequently permitted by the Investment Company Act of 1940, its
regulations or interpretations thereof. The Company may control a majority of
the Eligible Shares through its ownership of seed money used to establish the
Fund. As of December 31, 1997, the Company did not have control in excess of
10% in any of the Sub-Accounts.

Fund shares, as to which no timely instructions are received, will be voted
in proportion to the voting instructions which are received with respect to all
Contracts participating in that Sub- Account. Voting instructions to abstain on
any item to be voted upon will be applied on a pro rata basis to reduce the
votes eligible to be cast.

Each person having a voting interest in a Sub-Account will receive proxy
material, reports and other materials relating to the appropriate Eligible
Portfolio.

FINANCIAL STATEMENTS

The financial statements of the Company, which are included in this
Statement of Additional Information, should be considered as bearing only the
ability of the Company to meet its obligations under the Contracts. They should
not be considered as bearing on the investment performance of the Variable
Account.

16
<PAGE>

Report of Ernst & Young LLP, Independent Auditors

To the Board of Directors of WM Life Insurance Company and
Participants of WM Life Deferred Variable Annuity Account

We have audited the accompanying statement of net assets and liabilities of WM
Life Deferred Variable Annuity Account (comprising, respectively, the Growth and
Income, Income, Northwest, International, Capital Growth, and Money Market
Sub-Accounts) as of December 31, 1997, and the related statements of operations
and changes in net assets for each of the periods indicated therein. These
financial statements are the responsibility of WM Life Deferred Variable Annuity
Account's management. Our responsibility is to express an opinion on these
financial statements based on our audits. The financial statements of WM Life
Deferred Variable Annuity Account for the year ended December 31, 1996, were
audited by other auditors whose report, dated March 28, 1997, expressed an
unqualified opinion on the statements.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of portfolio shares owned as of December 31, 1997, by
correspondence with 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 audit provides a reasonable basis for our
opinion.

In our opinion, the 1997 financial statements referred to above present fairly,
in all material respects, the financial position of each of the sub-accounts
constituting WM Life Deferred Variable Annuity Account at December 31, 1997, the
results of their operations, and the changes in their net assets for each of the
periods indicated therein, in conformity with generally accepted accounting
principles.

/s/ Ernst & Young LLP

Seattle, Washington
March 20, 1998

A-1

<PAGE>

CASCADE DEFERRED VARIABLE ACCOUNT
OF WM LIFE INSURANCE COMPANY

STATEMENT OF NET ASSETS

December 31, 1997

Composite Sub-Accounts
------------------------------------------------------
Northwest
Growth Income 50
Portfolio Portfolio Portfolio
---------------- ----------------- ----------------
<S> <C> <C> <C>
Investment In Shares of the Composite
Deferred Series, Inc. portfolios at
net asset value $ 57,254,686 $ 18,364,173 $ 19,923,975
---------------- ----------------- ----------------
---------------- ----------------- ----------------

Net Assets, representing:
Equity of Contract-holders $ 57,023,289 $ 18,324,355 $ 19,050,770
Equity of WM Life Insurance Co. 231,397 39,818 873,205
---------------- ----------------- ----------------

$ 57,254,686 $ 18,364,173 $ 19,923,975
---------------- ----------------- ----------------
---------------- ----------------- ----------------
</TABLE>

Scudder Sub-Accounts
---------------------------------------------------
Capital Money
International Growth Market
Portfolio Portfolio Portfolio
---------------- ----------------- ----------------
<S> <C> <C> <C>
Investment In Shares of the Scudder
Variable Life Investment Fund
portfolios at net asset value $ 348,094 $ 546,304 $ 149,914
---------------- ----------------- ----------------
---------------- ----------------- ----------------

Net Assets, representing:
Equity of Contract-holders $ 348,094 $ 546,304 $ 149,914
Equity of WM Life Insurance Co. 0 0 0
---------------- ----------------- ----------------

$ 348,094 $ 546,304 $ 149,914
---------------- ----------------- ----------------
---------------- ----------------- ----------------
</TABLE>

A-2
<PAGE>

CASCADE DEFERRED VARIABLE ACCOUNT
OF WM LIFE INSURANCE COMPANY

STATEMENT OF OPERATIONS

December 31, 1997

Dividend Distributions $ 3,658,611 $ 1,136,580 $ 410,113

EXPENSES
Charges to Contract-holders:
Mortality and Expense Risks 610,070 210,912 195,334
Surrender Charge 48,365 11,188 16,696
Contract Maintenance 19,763 4,195 6,133
----------------- ----------------- -----------------
Total Expenses 678,198 226,295 218,163
----------------- ----------------- -----------------

INCOME/(LOSS) ,NET 2,980,413 910,285 191,950

REALIZED AND UNREALIZED GAIN / (LOSS)
ON INVESTMENTS, NET
Capital Gain / (Loss) Distributions Received 869,463 20,072 312,864
Unrealized Increase in Value of Investments, Net 8,493,421 644,931 3,857,133
----------------- ----------------- -----------------

NET GAIN ON INVESTMENTS 9,362,884 665,003 4,169,997
----------------- ----------------- -----------------

NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 12,343,297 $ 1,575,288 $ 4,361,947
----------------- ----------------- -----------------
----------------- ----------------- -----------------
</TABLE>

<TABLE>
<CAPTION>
Scudder Sub-Accounts*
----------------------------------------------------
Capital Money
International Growth Market
Portfolio Portfolio Portfolio
----------------- ----------------- ----------------
<S> <C> <C> <C>
INVESTMENT INCOME

Dividend Distributions $ - $ - $ 3,439

EXPENSES
Charges to Contract-holders:
Mortality and Expense Risks 1,589 2,598 933
Surrender Charge - - -
Contract Maintenance - - -
----------------- ----------------- ----------------
Total Expenses 1,589 2,598 933
----------------- ----------------- ----------------

INCOME/(LOSS) ,NET (1,589) (2,598) 2,506

REALIZED AND UNREALIZED GAIN / (LOSS)
ON INVESTMENTS, NET
Capital Gain / (Loss) Distributions Received 77 76 -
Unrealized Increase in Value of Investments, Net (10,247) 18,724 668
----------------- ----------------- ----------------

NET GAIN ON INVESTMENTS (10,170) 18,800 668
----------------- ----------------- ----------------

NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ (11,759) $ 16,202 $ 3,174
----------------- ----------------- ----------------
----------------- ----------------- ----------------
*For the period from May 1, 1997 (inception date) to December 31, 1997
</TABLE>

A-3
<PAGE>

CASCADE DEFERRED VARIABLE ACCOUNT
OF WM LIFE INSURANCE COMPANY

STATEMENT OF OPERATIONS

December 31, 1996

Composite Sub-Accounts
-------------------------------------------------------------------
Money Northwest
Market Growth Income 50
Portfolio Portfolio Portfolio Portfolio
--------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME

Dividend Distributions $ 3,989 $ 517,216 $ 1,050,810 $ 54,083

EXPENSES
Charges to Contract-holders:
Mortality and Expense Risks 391,086 195,150 111,523
Surrender Charge 18,167 7,171 2,662
Contract Maintenance 26,035 7,588 4,383
--------------- ---------------- ---------------- ----------------
Total Expenses - 435,287 209,909 118,568
--------------- ---------------- ---------------- ----------------

INCOME/(LOSS) ,NET $ 3,989 81,929 840,901 (64,485)

REALIZED AND UNREALIZED GAIN / (LOSS)
ON INVESTMENTS, NET
Capital Gain / (Loss) Distributions Received - 188,787 3,063 88,547
Unrealized Increase in Value of Investments, Net - 5,895,061 (620,989) 1,918,060
--------------- ---------------- ---------------- ----------------

NET GAIN ON INVESTMENTS 6,083,848 (617,926) 2,006,607
--------------- ---------------- ---------------- ----------------

NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 3,989 $ 6,165,777 $ 222,976 $ 1,942,122
--------------- ---------------- ---------------- ----------------
--------------- ---------------- ---------------- ----------------
</TABLE>

A-4
<PAGE>

CASCADE DEFERRED VARIABLE ACCOUNT
OF WM LIFE INSURANCE COMPANY

STATEMENT OF CHANGES IN NET ASSETS

December 31, 1997

Income/(Loss), Net $ 2,980,413 $ 910,285 $ 191,950

Capital Gain / (Loss) Distribution Received 869,463 20,072 312,864
Unrealized Increase in Value of
Investments, Net 8,493,421 644,931 3,857,133
---------------- ---------------- ----------------

Net Increase in Net Assets
Resulting from Operations 12,343,297 1,575,288 4,361,947

NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM PREMIUM
PAYMENTS AND OTHER OPERATING
TRANSFERS 3,511,410 (596,756) 2,796,782
---------------- ---------------- ----------------

TOTAL INCREASE IN NET ASSETS 15,854,707 978,532 7,158,729

NET ASSETS:
Beginning of Year 41,399,979 17,385,641 12,765,246
---------------- ---------------- ----------------

End of Year $ 57,254,686 $ 18,364,173 $ 19,923,975
---------------- ---------------- ----------------
---------------- ---------------- ----------------

</TABLE>

Scudder Sub-Accounts*
------------------------------------------------------
Capital Money
International Growth Market
Portfolio Portfolio Portfolio
---------------- ---------------- ----------------
<S> <C> <C> <C>
OPERATIONS:

Income/(Loss), Net $ (1,589) $ (2,598) $ 2,506

Capital Gain / (Loss) Distribution Received 77 76 -
Unrealized Increase in Value of
Investments, Net (10,247) 18,724 668
---------------- ---------------- ----------------

Net Increase in Net Assets
Resulting from Operations (11,759) 16,202 3,174

NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM PREMIUM
PAYMENTS AND OTHER OPERATING
TRANSFERS 359,853 530,102 146,740
---------------- ---------------- ----------------

TOTAL INCREASE IN NET ASSETS 348,094 546,304 149,914

NET ASSETS:
Beginning of Year - - -
---------------- ---------------- ----------------

End of Year $ 348,094 $ 546,304 $ 149,914
---------------- ---------------- ----------------
---------------- ---------------- ----------------
*For the period from May 1, 1997 (inception date) to December 31, 1997

</TABLE>

A-5
<PAGE>

CASCADE DEFERRED VARIABLE ACCOUNT
OF WM LIFE INSURANCE COMPANY

STATEMENT OF CHANGES IN NET ASSETS

December 31, 1996

Composite Sub-Accounts
------------------------------------------------------------------------
Money Northwest
Market Growth Income 50
Portfolio Portfolio Portfolio Portfolio
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
OPERATIONS:

Income/(Loss), Net $ 3,989 $ 81,929 $ 840,901 $ (64,485)

Capital Gain / (Loss) Distribution Received 188,787 3,063 88,547
Unrealized Increase in Value of
Investments, Net 5,895,061 (620,989) 1,918,060
----------------- ----------------- ----------------- -----------------

Net Increase in Net Assets
Resulting from Operations $ 3,989 6,165,777 222,976 1,942,122

NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM PREMIUM
PAYMENTS AND OTHER OPERATING
TRANSFERS (224,985) 10,783,500 1,960,748 3,328,405
----------------- ----------------- ----------------- -----------------

TOTAL INCREASE IN NET ASSETS (220,996) 16,949,277 2,183,723 5,270,527

NET ASSETS:
Beginning of Year 220,996 24,450,702 15,201,918 7,494,719
----------------- ----------------- ----------------- -----------------

End of Year - $ 41,399,979 $ 17,385,641 $ 12,765,246
----------------- ----------------- ----------------- -----------------
----------------- ----------------- ----------------- -----------------

</TABLE>

A-6
<PAGE>

CASCADE DEFERRED VARIABLE ACCOUNT
OF WM LIFE INSURANCE COMPANY

NOTES TO FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 1997 AND 1996

NOTE A - GENERAL:

The Composite Deferred Variable Account of WM Life Insurance Company (the
Account) was established on December 23, 1986 under Arizona law as a separate
investment account of WM Life Insurance Company (WM Life), which is a
wholly-owned subsidiary of Safeco Life Insurance Company. The assets of the
Account are segregated from WM Life's other assets.

The Account is registered under the Investment Act of 1940, as amended, as a
unit investment trust. There are six sub-accounts within the Account, three of
which invest only in a corresponding portfolio of the Composite Deferred Series,
Inc. and three that invest only in a corresponding portfolio of the Scudder
Variable Life Investment Fund. The underlying investments of the Funds are
valued at fair value on the last day of the year. The Composite Fund is managed
by Composite Research & Management Co. The Scudder Fund is managed by Scudder
Insurance Asset Management.

On January 1, 1993, the Company added the fourth sub-account which invests in
shares of the Northwest Fund Portfolio. At the same time, future deposits into
the Money Market sub-account were temporarily suspended because the portfolio
expenses and variable account charges currently exceeded the total investment
income in that sub-account. The Money Market Portfolio was closed during the
latter part of 1996. On May 1, 1997, the Company added three Scudder
sub-accounts which invest in shares of the International Portfolio - Class B,
Capital Growth Portfolio - Class B, and the Money Market Portfolio,
respectively.

Assets of the Account are recorded at fair value, as determined by the fair
value of the individual portfolios of the Funds. Unrealized gains (losses) are
determined based on the change in fair value of the portfolios of the Funds
during the year. Dividend distributions are recorded as Investment Income when
received by the Account.

The increase in net assets resulting from premium payments and other operating
transfers represents the net effect of premiums, surrenders and other transfers.

A-7
<PAGE>

NOTE B - INVESTMENT INFORMATION FOR THE COMPOSITE
DEFERRED SERIES, INC. PORTFOLIOS AND THE SCUDDER
LIFE INVESTMENT FUND PORTFOLIOS

The net asset value per share for each portfolio of the Funds, the number of and
activity in shares of each portfolio held by the sub-accounts of the Account,
and the aggregate cost of investments in such shares as of and for the year
ended December 31, 1997 were as follows -

Shares Shares NAV Per
Owned Owned Share at
December 31, Shares Shares December 31, December 31, Actual
1996 Purchased Sold 1997 1997 Cost
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Composite Growth & Income Portfolio $1,702,313 $367,205 $(99,245) $1,970,273 $29.06 $37,843,737
Composite Income Portfolio 1,430,974 235,062 (208,808) 1,457,228 12.53 17,556,634
Composite North Portfolio 700,075 184,533 (38,680) 845,928 23.55 12,934,144
Scudder International Portfolio - 24,872* (202)* 24,670 14.11 358,340
Scudder Capital Growth Portfolio - 26,566* (21)* 26,545 20.58 527,580
Scudder Money Market Portfolio - 219,825* (70,580)* 149,245 1.00 149,245

</TABLE>

NOTE C - CHARGES AND EXPENSES:

A. Mortality and Expense Risk Charges -

The variable annuity contract specifies mortality risk and expense risk
charges at an effective annual rate of 1.2% applied daily against the
net assets representing equity of contractholders held in each account.

B. Contract Maintenance Charge -

The variable annuity contract specifies that a contract maintenance
charge be deducted from each contract, and assessed against the
sub-account with the largest value. The maintenance charge for all
contracts issued prior to April 29, 1988 was $2.50 per month. All
contracts issued on or after April 29, 1988 are charged $30 annually on
the anniversary date of the contract.

C. Contingent Deferred Sales Charge -

A contingent deferred sales charge (surrender charge) is imposed upon
the withdrawal of funds from certain variable annuity contracts to
compensate WM Life for sales and other marketing expenses during the
first seven policy years. The amount of any sales charge will depend on
the amount withdrawn and the number of contract years that have elapsed
since the deposit date. No deferred sales charge is imposed on death
benefits.

NOTE D - TAXES:

The operations of the sub-accounts form a part of, and are taxed with, the
operations of WM Life. Under the Internal Revenue Code, all ordinary income and
capital gains allocated to the contract owners are not taxed to WM Life. As a
result, the net asset values of the sub-accounts and the Account in total, are
not affected by federal income taxes on distributions received by the
sub-accounts.

A-8
<PAGE>

NOTE E - ACCUMULATION UNIT TRANSACTIONS:

The number of accumulation units purchased and withdrawn throughout the periods
ended December 31 were as follows -

<TABLE>
<CAPTION>
1997 1996
----------------- ---------------- ----------------- -----------------
Accumulation Accumulation Accumulation Accumulation
Units Units Units Units
Sub-Account Purchased Withdrawn Purchased Withdrawn
- - -------------------------- ----------------- ---------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Composite Money Market* - - - -
Composite Growth & Income 180,381 94,177 374,607 56,643
Composite Income 74,857 93,657 162,060 92,251
Composite Northwest 143,464 39,729 191,512 28,057
Scudder International** 22,195 - - -
Scudder Capital Growth** 30,619 - - -
Scudder Money Market** 14,281 4,552 - -
</TABLE>

*Sub-account closed in 1996. No contractholder activity during 1996 or 1997. See
Note 1

**For the period from May 1, 1997 (inception date) to December 31, 1997.

The number of accumulation units and the unit value of such units were as
follows at December 31, 1997 and 1996.

---------------- --------------- ----------- -------------
Sub-Account Units Unit Value Units Unit Value
- --------------------------- ---------------- --------------- ----------- -------------
<S> <C> <C> <C> <C>
Composite Growth & Income 1,188,292.7224 $47.96 1,102,089 $37.43
Composite Income 577,882.8896 31.68 596,683 28.98
Composite Northwest 633,794.7227 30.06 530,060 22.89
Scudder International 22,194.9609 15.66 - -
Scudder Capital Growth 30,619.3146 18.44 - -
Scudder Money Market 9,728.7527 15.41 - -
</TABLE>

A-9
<PAGE>

AUDITED CONSOLIDATED FINANCIAL STATEMENTS

SAFECO LIFE INSURANCE COMPANY
AND SUBSIDIARIES

FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995

A-10
<PAGE>

SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
-----

<S> <C>
Report of Independent Auditors................................................................ A-12

Consolidated Financial Statements

Consolidated Balance Sheet................................................................ A-13

Statement of Consolidated Income.......................................................... A-14

Statement of Changes in Shareholder's Equity.............................................. A-15

Statement of Consolidated Cash Flows...................................................... A-16

Notes to Consolidated Financial Statements................................................ A-18
</TABLE>

A-11
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

Board of Directors
SAFECO Life Insurance Company

We have audited the accompanying consolidated balance sheet of SAFECO Life
Insurance Company and subsidiaries as of December 31, 1997 and 1996, and the
related statements of consolidated income, changes in shareholder's equity, and
cash flows for each of the three years in the period ended December 31, 1997.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of SAFECO Life
Insurance Company and subsidiaries at December 31, 1997 and 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles.

As described in Note 1 to the Consolidated Financial Statements, SAFECO Life
Insurance Company and subsidiaries adopted certain new accounting standards in
1995 as required by the Financial Accounting Standards Board.

/s/ Ernst & Young LLP

Seattle, Washington
February 13, 1998

A-12
<PAGE>

SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In Thousands Except Share Amounts)

<TABLE>
<CAPTION>
DECEMBER 31
------------------------
1997 1996
----------- -----------
<S> <C> <C>
ASSETS
Investments (Note 3):
Fixed Maturities Available-for-Sale, at Market Value
(Amortized Cost: 1997-$8,901,583; 1996-$7,597,733)...................... $ 9,401,886 $ 7,853,553
Fixed Maturities Held-to-Maturity, at Amortized Cost
(Market Value: 1997-$3,159,888; 1996-$2,670,004)........................ 2,708,558 2,488,324
Marketable Equity Securities, at Market Value
(Cost: 1997-$10,651; 1996-$9,629)....................................... 15,552 18,902
First Mortgage Loans on Real Estate:
Nonaffiliates (At cost, less allowance for losses:
1997-$11,609; 1996-$10,943)........................................... 475,975 447,596
Affiliates.............................................................. 175,183 140,743
Real Estate............................................................... 3,399 4,134
Policy Loans.............................................................. 60,249 58,153
Short-Term Investments (At cost which approximates market)................ 56,374 69,878
Investment in Limited Partnerships........................................ 250 250
----------- -----------
Total Investments....................................................... 12,897,426 11,081,533
Cash........................................................................ 244,512 19,136
Accrued Investment Income................................................... 181,757 159,790
Accounts and Notes Receivable (At cost, less allowance
for doubtful accounts: 1997-$78; 1996-$85)................................ 48,204 23,582
Reinsurance Recoverables (Note 6)........................................... 28,515 25,204
Deferred Policy Acquisition Costs (Net of valuation
allowance: 1997-$35,349; 1996-$19,040).................................... 239,843 240,464
Present Value of Future Profits............................................. 13,239 --
Other Assets................................................................ 63,544 5,497
Current Income Taxes Recoverable (Note 10).................................. -- 792
Assets Held in Separate Accounts............................................ 905,417 491,212
----------- -----------
Total Assets........................................................ $14,622,457 $12,047,210
----------- -----------
----------- -----------

LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Policy and Contract Liabilities (Note 6):
Future Policy Benefits.................................................. $ 151,675 $ 149,624
Policy and Contract Claims.............................................. 37,688 29,155
Premiums Paid in Advance................................................ 9,145 8,846
Funds Held Under Deposit Contracts...................................... 11,539,473 9,792,730
Other Policyholders' Funds.............................................. 166,759 134,422
----------- -----------
Total Policy and Contract Liabilities................................. 11,904,740 10,114,777
Other Liabilities......................................................... 125,247 76,089
Federal Income Taxes (Note 10):
Current................................................................. 19,192 --
Deferred (Includes tax on unrealized appreciation of investment
securities: 1997-$164,449; 1996-$86,120)............................... 179,296 103,648
Liabilities Related to Separate Accounts.................................. 905,417 491,212
----------- -----------
Total Liabilities..................................................... 13,133,892 10,785,726
----------- -----------
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 (Note 8)................................................ 1,093,048 1,011,439
Unrealized Appreciation of Investment Securities, Net of Tax (Note 3)..... 305,517 160,045
----------- -----------
Total Shareholder's Equity............................................ 1,488,565 1,261,484
----------- -----------
Total Liabilities and Shareholder's Equity.......................... $14,622,457 $12,047,210
----------- -----------
----------- -----------
</TABLE>

See Notes to Consolidated Financial Statements

A-13
<PAGE>

SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED INCOME
(In Thousands)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------------
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Revenues:
Premiums...................................................... $ 240,595 $ 240,100 $ 237,025
Investment Income:
Interest on Fixed Maturities................................ 830,837 767,309 716,510
Interest on Mortgage Loans.................................. 56,232 52,127 51,912
Interest on Short-Term Investments.......................... 3,419 2,935 4,017
Dividends from Marketable Equity Securities................. 1,044 843 1,387
Dividends from Redeemable Preferred Stock................... 16,026 12,654 3,065
Other Investment Income..................................... 3,843 3,879 4,155
---------- ---------- ----------

Total................................................... 911,401 839,747 781,046
Less Investment Expenses.................................... 3,485 3,709 3,546
---------- ---------- ----------

Net Investment Income......................................... 907,916 836,038 777,500
---------- ---------- ----------

Other Revenue................................................. 21,751 12,933 11,608
Realized Investment Gain (Note 3)............................. 6,807 10,439 5,676
---------- ---------- ----------

Total................................................... 1,177,069 1,099,510 1,031,809
---------- ---------- ----------

Benefits and Expenses:
Policy Benefits............................................... 844,926 782,213 723,466
Commissions................................................... 93,681 74,724 79,163
Personnel Costs............................................... 48,503 43,609 42,314
Taxes Other Than Payroll and Income Taxes..................... 11,817 15,512 7,913
Other Operating Expenses...................................... 46,639 45,224 42,978
Amortization of Deferred Policy Acquisition Costs............. 36,946 35,652 32,376
Deferral of Policy Acquisition Costs.......................... (53,068) (42,426) (35,347)
---------- ---------- ----------

Total................................................... 1,029,444 954,508 892,863
---------- ---------- ----------

Income before Federal Income Taxes.............................. 147,625 145,002 138,946
---------- ---------- ----------

Provision (Benefit) for Federal Income Taxes (Note 10):
Current....................................................... 54,705 57,417 61,830
Deferred...................................................... (4,689) (6,471) (13,800)
---------- ---------- ----------

Total................................................... 50,016 50,946 48,030
---------- ---------- ----------

Net Income...................................................... $ 97,609 $ 94,056 $ 90,916
---------- ---------- ----------
---------- ---------- ----------
</TABLE>

See Notes to Consolidated Financial Statements

A-14
<PAGE>

SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
STATEMENT OF CHANGES IN SHAREHOLDER'S EQUITY
(In Thousands)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------------
1997 1996 1995
---------- ---------- ----------

<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.......................... 1,011,439 921,383 834,467
Net Income................................................ 97,609 94,056 90,916
Dividends to Parent....................................... (16,000) (4,000) (4,000)
---------- ---------- ----------
Balance at the End of Year................................ 1,093,048 1,011,439 921,383
---------- ---------- ----------
Unrealized Appreciation of Investment Securities, Net of Tax
(Note 3):
Balance at the Beginning of Year.......................... 160,045 320,452 (126,229)
Change in Unrealized Appreciation......................... 156,073 (175,861) 474,511
Change in Deferred Policy Acquisition Costs Valuation
Allowance............................................... (10,601) 15,454 (27,830)
---------- ---------- ----------
Balance at the End of Year................................ 305,517 160,045 320,452
---------- ---------- ----------
Shareholder's Equity.................................... $1,488,565 $1,261,484 $1,331,835
---------- ---------- ----------
---------- ---------- ----------
</TABLE>

See Notes to Consolidated Financial Statements

A-15
<PAGE>

SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED CASH FLOWS
(In Thousands)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Insurance Premiums Received................................. $ 216,089 $ 216,801 $ 216,269
Dividends and Interest Received............................. 819,433 754,878 703,053
Other Operating Receipts.................................... 19,299 12,948 10,607
Insurance Claims and Policy Benefits Paid................... (353,227) (302,955) (272,206)
Underwriting, Acquisition and Insurance Operating Costs
Paid...................................................... (202,077) (172,251) (169,904)
Income Taxes Paid........................................... (36,140) (71,255) (61,247)
----------- ----------- -----------
Net Cash Provided by Operating Activities............... 463,377 438,166 426,572
----------- ----------- -----------
INVESTING ACTIVITIES:
Purchases of:
Fixed Maturities Available-for-Sale....................... (1,891,778) (1,544,998) (1,424,510)
Fixed Maturities Held-to-Maturity......................... (199,589) (473,206) (291,965)
Purchase of Subsidiary, Net of Cash Acquired.............. 116,122 -- --
Marketable Equity Securities.............................. (5,773) (272) (260)
Other Investments......................................... (15) (15) (14)
Policy and Nonaffiliated Mortgage Loans................... (96,019) (85,485) (55,302)
Affiliated Mortgage Loans................................. (40,000) (34,650) (12,643)
Maturities of Fixed Maturities Available-for-Sale........... 435,788 466,509 375,291
Maturities of Fixed Maturities Held-to-Maturity............. 8,907 21,694 17,878
Sales of:
Fixed Maturities Available-for-Sale....................... 869,091 721,229 327,160
Fixed Maturities Held-to-Maturity......................... -- 13,316 --
Marketable Equity Securities.............................. 11,185 10,394 2,172
Other Investments......................................... 2,000 1,100 180
Real Estate............................................... 639 1,086 876
Policy and Nonaffiliated Mortgage Loans................... 61,159 48,341 50,734
Affiliated Mortgage Loans................................. 5,560 31,730 8,977
Net (Increase) Decrease in Short-Term Investments........... 11,519 (1,250) (5,811)
Other....................................................... (50,141) (747) (122)
----------- ----------- -----------
Net Cash Used in Investing Activities................... (761,345) (825,224) (1,007,359)
----------- ----------- -----------
FINANCING ACTIVITIES:
Funds Received Under Deposit Contracts...................... 1,392,517 1,148,590 1,304,665
Return of Funds Held Under Deposit Contracts................ (861,221) (765,480) (720,845)
Dividends to Parent......................................... (13,000) (4,000) (4,000)
Net Proceeds from (Repayment of) Short-Term Borrowings...... 5,048 (7,802) 9,143
----------- ----------- -----------
Net Cash Provided by Financing Activities............... 523,344 371,308 588,963
----------- ----------- -----------
Net Increase (Decrease) in Cash............................... 225,376 (15,750) 8,176
Cash at Beginning of Year..................................... 19,136 34,886 26,710
----------- ----------- -----------
Cash at End of Year........................................... $ 244,512 $ 19,136 $ 34,886
----------- ----------- -----------
----------- ----------- -----------
</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

A-16
<PAGE>

SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED CASH FLOWS --
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES
(In Thousands)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Net Income........................................................... $ 97,609 $ 94,056 $ 90,916
--------- --------- ---------
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Realized Investment Gain......................................... (6,807) (10,439) (5,676)
Amortization of Fixed Maturity Investments....................... (24,929) (26,811) (26,050)
Deferred Federal Income Tax Benefit.............................. (4,689) (6,471) (13,800)
Interest Expense on Deposit Contracts............................ 473,851 460,594 432,327
Other............................................................ (7,877) 574 3,140

Changes in:
Future Policy Benefits......................................... 1,855 (4,466) (1,232)
Policy and Contract Claims..................................... 2,830 2,748 (2,643)
Premiums Paid in Advance....................................... 299 637 (574)
Deferred Policy Acquisition Costs.............................. (15,688) (6,198) (6,116)
Accrued Investment Income...................................... (11,451) (8,893) (8,990)
Accrued Interest on Accrual Bonds.............................. (48,354) (44,015) (36,908)
Other Receivables.............................................. (5,467) (8,639) (2,353)
Current Federal Income Taxes................................... 18,565 (13,839) 583
Other Assets and Liabilities................................... (2,350) 4,668 449
Other Policyholders' Funds..................................... (4,020) 4,660 3,499
--------- --------- ---------
Total Adjustments............................................ 365,768 344,110 335,656
--------- --------- ---------
Net Cash Provided by Operating Activities............................ $ 463,377 $ 438,166 $ 426,572
--------- --------- ---------
--------- --------- ---------
</TABLE>

See Notes to Consolidated Financial Statements

A-17
<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 offers individual and group insurance products, pension plans and
annuity products, marketed through professional agents in all states and the
District of Columbia. The Company directly owns three subsidiaries, SAFECO
National Life Insurance Company, First SAFECO National Life Insurance Company
of New York, and WM Life Insurance Company, and indirectly owns Empire Life
Insurance Company. The Company acquired WM Life Insurance Company and Empire
Life Insurance Company in 1997 (see Note 2). 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.

BASIS OF REPORTING. The consolidated financial statements have been prepared
in accordance with generally accepted accounting principles appropriate in
the circumstances and include amounts based on the best estimates and
judgments of management. The financial statements include SAFECO Life
Insurance 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 1997 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) which the Company has the positive intent and ability to
hold to maturity are classified as held-to-maturity and carried at amortized
cost in the balance sheet. Fixed maturities classified as available-for-sale
are carried at market value, with changes in unrealized gains and losses
recorded directly to shareholder's equity, net of applicable income taxes and
deferred policy acquisition costs valuation allowance. The Company has no
fixed maturities classified as trading.

All marketable equity securities are classified as available-for-sale and
carried at market value, with changes in unrealized gains and losses recorded
directly to shareholder's equity, net of applicable income taxes.

When the collectibility of income on certain investments is considered
doubtful, they are placed on non-accrual status and thereafter interest
income is recognized only when payment is received. Investments that have
declined in market value below cost and for which the decline is judged to be
other than temporary are written down to fair value. Writedowns are made
directly on an individual security basis and reduce realized investment gains
in the Statement of Consolidated Income.

The cost of security investments sold is determined by the "identified cost"
method.

Mortgage loans are carried at outstanding principal balances, less an
allowance for loan losses.

REAL ESTATE AND DEPRECIATION. Income-producing real estate is classified as
an investment. The Company provides straight-line depreciation on its
buildings based upon their estimated useful lives.

Investment real estate that has declined in market value below cost and for
which the decline is judged to be other than temporary is written down to
estimated realizable value. Writedowns reduce realized investment gains in
the Statement of Consolidated Income.

A-18
<PAGE>

SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 (continued)
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. There were no
significant revisions made in 1997, 1996 or 1995.

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 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 1997.

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 option premiums are amortized as an expense over the term
of the option on a straight-line basis. Gains and losses on these instruments
are recorded in income when realized. The balance in other assets for call
option premiums at December 31, 1997 is $21,232.

The Financial Accounting Standards Board (FASB) has issued an exposure draft
addressing accounting and disclosure requirements for derivative financial
instruments. The Company's accounting treatment for options may change in the
future based on the issuance of definitive guidance from the FASB.

On December 31, 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. multi-state banking
network. The portion of this transaction relating to the distribution
agreement is valued at $35 million and will be amortized on a straight-line
basis over 15 years. The unamortized balance of $35 million 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 5.5% 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
8.5% 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.

A-19
<PAGE>

SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 (continued)
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 Account are
not reflected in the Statement of Consolidated Income. Management fees and
other charges assessed against the contracts are included in other revenue.

FEDERAL INCOME TAXES. The Company and its subsidiaries, except for WM Life
Insurance Company and 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.

NEW ACCOUNTING STANDARDS. In 1993, the FASB adopted Statement 114,
"Accounting by Creditors for Impairment of a Loan," which provides guidance
on valuing impaired loans. The FASB also issued Statement 118, "Accounting by
Creditors for Impairment of a Loan -- Income Recognition and Disclosures," in
1994, which amends Statement 114. Both statements were effective for 1995 and
adopted by the Company on January 1, 1995. Adoption did not affect net
income. For additional disclosure relating to these two statements, see Note
3.

In June of 1997, the FASB issued Statement 130, "Reporting Comprehensive
Income." Statement 130 is effective for fiscal years beginning after December
15, 1997 and the Company will adopt it in the first quarter of 1998. Adoption
will have no effect on net income but will require the reporting of
"comprehensive income," which will include net income and certain items
currently reported in shareholder's equity.

The FASB issued Statement 131, "Disclosures about Segments of an Enterprise
and Related Information," in June of 1997. Statement 131 changes the way
information about business segments is reported in annual financial
statements and requires the reporting of selected segment information in
interim reports. This statement is effective for financial statements for
periods beginning after December 15, 1997, and the Company plans on providing
the required segment information in its 1998 consolidated financial
statements. This statement has no effect on net income.

2. ACQUISITION

On December 31, 1997, the Company acquired Washington Mutual, Inc.'s life
insurance subsidiaries, WM Life Insurance Company and Empire Life Insurance
Company for $105.8 million. The fair value of assets acquired, excluding
cash, was $766,921, and the fair value of liabilities assumed was $882,226.
The acquisition is being treated as a purchase for accounting purposes, and
allocation of purchase price resulted in no goodwill. The transaction was
financed through internal sources.

The unaudited pro forma condensed results of operations presented below
assume the acquisition of WM Life Insurance Company and Empire Life Insurance
Company occurred at the beginning of 1996, and give effects to actual
operating results prior to the acquisition. These pro forma results are not
necessarily indicative of what actually would have occurred if the
acquisition had been completed as of the beginning of 1996 nor are they
necessarily indicative of future consolidated results.

A-20
<PAGE>

SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 2 (continued)
PRO FORMA INFORMATION -- UNAUDITED

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------
1997 1996
----------- -----------
<S> <C> <C>
Revenues................................ $ 1,244,530 $ 1,162,614
Net income.............................. 103,474 97,654
</TABLE>

3. INVESTMENT SUMMARY

A summary of fixed maturities and marketable equity securities classified as
available-for-sale at December 31, 1997 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.............. $ 604,305 $ 61,328 $ (47) $ 61,281 $ 665,586
States, municipalities and political
subdivisions.......................... 134,160 13,439 (720) 12,719 146,879
Foreign governments..................... 102,053 6,674 (7) 6,667 108,720
Public utilities........................ 1,467,168 100,208 (1,175) 99,033 1,566,201
All other corporate bonds............... 3,803,982 186,502 (1,174) 185,328 3,989,310
Mortgage-backed securities.............. 2,789,915 139,056 (3,781) 135,275 2,925,190
----------- ----------- ------------ ------------ -----------
Total fixed maturities classified as
available-for-sale.................... 8,901,583 507,207 (6,904) 500,303 9,401,886
Marketable equity securities............ 10,651 4,906 (5) 4,901 15,552
----------- ----------- ------------ ------------ -----------
Total investment securities classified
as available-for-sale................. $ 8,912,234 $ 512,113 $ (6,909) 505,204 $ 9,417,438
----------- ----------- ------------ -----------
----------- ----------- ------------ -----------
Deferred policy acquisition costs
valuation allowance........................................................... (35,349)
Applicable federal income tax................................................... (164,338)
------------
Unrealized appreciation of investment
securities, net of tax, included in
shareholder's equity.......................................................... $ 305,517
------------
------------
</TABLE>

A summary of fixed maturities classified as held-to-maturity at December 31,
1997 follows:

A-21
<PAGE>

SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 3 (continued)
A summary of fixed maturities and marketable equity securities classified as
available-for-sale at December 31, 1996 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.............. $ 746,401 $ 38,689 $ (1,915) $ 36,774 $ 783,175
States, municipalities and political
subdivisions.......................... 131,538 11,192 (1,009) 10,183 141,721
Foreign governments..................... 74,427 4,575 (7) 4,568 78,995
Public utilities........................ 1,428,912 72,384 (7,220) 65,164 1,494,076
All other corporate bonds............... 2,707,297 100,673 (15,464) 85,209 2,792,506
Mortgage-backed securities.............. 2,509,158 72,485 (18,563) 53,922 2,563,080
----------- ----------- ------------ ------------ -----------
Total fixed maturities classified as
available-for-sale.................... 7,597,733 299,998 (44,178) 255,820 7,853,553
Marketable equity securities............ 9,629 9,518 (245) 9,273 18,902
----------- ----------- ------------ ------------ -----------
Total investment securities classified
as available-for-sale................. $ 7,607,362 $ 309,516 $ (44,423) 265,093 $ 7,872,455
----------- ----------- ------------ -----------
----------- ----------- ------------ -----------
Deferred policy acquisition costs
valuation allowance........................................................... (19,040)
Applicable federal income tax................................................... (86,008)
------------
Unrealized appreciation of investment
securities, net of tax, included in
shareholder's equity.......................................................... $ 160,045
------------
------------
</TABLE>

A summary of fixed maturities classified as held-to-maturity at December 31,
1996 follows:

A-22
<PAGE>

SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 3 (continued)
The amortized cost and estimated market value of fixed maturities at December
31, 1997, 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............................... $ 243,954 $ 245,140 $ -- $ --
Due after one year through five years................. 1,886,758 1,959,986 3 4
Due after five years through ten years................ 1,268,615 1,320,613 49,128 56,715
Due after ten years................................... 2,712,341 2,950,957 2,358,485 2,766,747
Mortgage-backed securities............................ 2,789,915 2,925,190 300,942 336,422
----------- ----------- ----------- -----------
Total............................................. $ 8,901,583 $ 9,401,886 $ 2,708,558 $ 3,159,888
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>

At December 31, 1997 and 1996, the Company held below investment grade fixed
maturities of $316 million and $242 million at amortized cost, respectively.
The respective market values of these investments were approximately $329
million and $239 million. These holdings amounted to 2.6% and 2.3% of the
Company's investments in fixed maturities at market value at December 31,
1997 and 1996, respectively.

Certain fixed maturity securities with an amortized cost of $7,543 and $4,648
at December 31, 1997 and 1996, respectively, were on deposit with various
regulatory authorities to meet requirements of insurance and financial codes.

At December 31, 1997 and 1996, mortgage loans constituted approximately 4.5%
and 4.9% 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 39% of the total in California.
Individual loans generally do not exceed $5 million.

The carrying value of investments in fixed maturities and mortgage loans that
did not produce income during the year ended December 31, 1997 is less than
one percent of the total of such investments.

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 SECURITIES
----------------- ---------------- -----------------
<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>

A-23
<PAGE>

SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 3 (continued)
The proceeds from sales of investment securities and related gains and losses
for 1996 are as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
------------------------------------------------------
FIXED MATURITIES FIXED MATURITIES MARKETABLE
AVAILABLE-FOR-SALE HELD-TO-MATURITY EQUITY SECURITIES
----------------- ---------------- -----------------
<S> <C> <C> <C>
Proceeds from sales................................. $ 721,229 $ 13,316 $ 10,394
----------------- -------- --------
----------------- -------- --------
Gross realized gains on sales....................... $ 19,779 $ -- $ 4,847
Gross realized losses on sales...................... (18,837) (1,328) --
----------------- -------- --------
Realized gains (losses) on sales................ 942 (1,328) 4,847
Other (Including net gain or loss on calls and
redemptions)...................................... 13,687 (141) --
Writedowns (Including writedowns on securities
subsequently sold)................................ (5,465) -- --
----------------- -------- --------
Total realized gain (loss).......................... $ 9,164 $ (1,469) $ 4,847
----------------- -------- --------
----------------- -------- --------
</TABLE>

Two fixed maturities classified as held-to-maturity were sold during 1996 due
to evidence of a significant deterioration in credit quality. The amortized
cost of these securities was $14,644, and the losses realized on these sales
were $1,328.

The proceeds from sales of investment securities and related gains and losses
for 1995 are as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
------------------------------------------------------
FIXED MATURITIES FIXED MATURITIES MARKETABLE
AVAILABLE-FOR-SALE HELD-TO-MATURITY EQUITY SECURITIES
----------------- ---------------- -----------------
<S> <C> <C> <C>
Proceeds from sales................................. $ 327,160 $ -- $ 2,172
----------------- -------- -------
----------------- -------- -------
Gross realized gains on sales....................... $ 16,366 $ -- $ 1,253
Gross realized losses on sales...................... (4,336) -- (282)
----------------- -------- -------
Realized gains on sales......................... 12,030 -- 971
Other (Including net gain on calls and
redemptions)...................................... 7,833 -- --
Writedowns (Including writedowns on securities
subsequently sold)................................ (13,628) -- --
----------------- -------- -------
Total realized gain................................. $ 6,235 $ -- $ 971
----------------- -------- -------
----------------- -------- -------
</TABLE>

A-24
<PAGE>

SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 3 (continued)
The following summarizes the realized gain before federal income taxes and
the net change in unrealized appreciation:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------------
1997 1996 1995
---------- ---------- ----------

<S> <C> <C> <C>
Realized gains (losses):
Fixed maturities..................................................... $ 1,272 $ 7,695 $ 6,235
Marketable equity securities......................................... 6,435 4,847 971
First mortgage loans on real estate.................................. (900) (2,050) (1,600)
Real estate.......................................................... -- (114) 70
Investment in limited partnerships................................... -- 61 --
---------- ---------- ----------
Realized gain before federal income taxes.......................... $ 6,807 $ 10,439 $ 5,676
---------- ---------- ----------
---------- ---------- ----------

YEAR ENDED DECEMBER 31
----------------------------------
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Increase (decrease) in unrealized appreciation of:
Fixed maturities classified as available-for-sale.................... $ 244,483 $ (268,956) $ 726,046
Marketable equity securities......................................... (4,372) (1,599) 3,971
Deferred policy acquisition costs valuation allowance................ (16,309) 23,775 (42,815)
Applicable federal income tax........................................ (78,330) 86,373 (240,521)
---------- ---------- ----------
Net change in unrealized appreciation................................ $ 145,472 $ (160,407) $ 446,681
---------- ---------- ----------
---------- ---------- ----------
</TABLE>

The following table summarizes the Company's allowance for credit losses on
non-affiliated mortgage loans:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31
--------------------
1997 1996
--------- ---------
<S> <C> <C>
Allowance at beginning of year......................................................... $ 10,943 $ 9,633

Provision for credit losses............................................................ 900 2,050

Loans charged off as uncollectible..................................................... (234) (740)
--------- ---------

Allowance at end of year............................................................... $ 11,609 $ 10,943
--------- ---------
--------- ---------
</TABLE>

The allowance includes amounts determined under FAS 114 and FAS 118 (specific
reserves), as well as general reserve amounts. The total investment in
impaired loans, as defined under FAS 114 and 118 and before any reserve for
losses, is $3.3 and $3.2 million at December 31, 1997 and 1996, respectively.
A specific loan loss reserve has been established for each impaired loan, the
total of which is $550 and $835 and is included in the overall allowance of
$11.6 and $10.9 million at December 31, 1997 and 1996, 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 were $2,401 at December 31, 1997. At
December 31, 1997, unfunded mortgage loan commitments approximated $5,785.
The Company had no other material commitments or contingencies at December
31, 1997.

A-25
<PAGE>

SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

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>
1997 1996
---------------------------- ------------------------
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
------------- ------------- ----------- -----------

<S> <C> <C> <C> <C>
Financial assets:

Fixed maturities available-for-sale.............. $ 9,401,886 $ 9,401,886 $ 7,853,553 $ 7,853,553

Fixed maturities held-to-maturity................ 2,708,558 3,159,888 2,488,324 2,670,004

Marketable equity securities..................... 15,552 15,552 18,902 18,902

Mortgage loans................................... 651,158 677,000 588,339 596,000

Financial liabilities:

Funds held under deposit contracts............... 11,539,473 12,021,000 9,792,730 9,935,000
</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 $3.3 billion and $2.9 billion, at market
values, at December 31, 1997 and 1996, respectively, are primarily
residential collateralized mortgage obligations and pass-throughs ("CMOs").
CMOs, while technically defined as derivative instruments, are exempt from
derivative disclosure requirements. The Company's investment in CMOs
comprised of the riskier, more volatile type (e.g., interest only, inverse
floaters, etc.) has been intentionally limited to only a small amount (i.e.,
less than 1.5% and 1% of total CMOs at December 31, 1997 and 1996,
respectively).

The Company does not enter into financial instruments for trading or
speculative purposes. The Company's involvement in other investment-type
derivatives is also, intentionally, of a very limited nature. Such
derivatives include call options, interest rate swaps on bond investments,
currency-linked bonds and fixed-rate loan commitments. Individually, and in
the aggregate, the notional amounts and fair values of these derivatives are
not material and thus no additional disclosures are warranted.

A-26
<PAGE>

SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6. POLICY AND CONTRACT LIABILITIES

REINSURANCE. The Company protects itself from excessive losses by ceding
reinsurance to other companies, using automatic and facultative treaties.
Reinsurance contracts do not relieve the Company of its obligations to
policyholders. A continuing liability exists in the event a reinsurance
company is unable to meet its obligations to the Company. The financial
condition of its reinsurers is evaluated by the Company to minimize its
exposure to losses from reinsurer insolvencies.

The balance sheet caption "Reinsurance Recoverables" is comprised of the
following amounts:

<TABLE>
<CAPTION>
DECEMBER 31
--------------------
1997 1996
--------- ---------
<S> <C> <C>
Unpaid losses and adjustment expense................................................... $ 906 $ 136

Paid claims............................................................................ 770 957

Life policy liabilities................................................................ 26,756 23,784

Other reinsurance recoverables......................................................... 83 327
--------- ---------

Total reinsurance recoverables................................................. $ 28,515 $ 25,204
--------- ---------
--------- ---------
</TABLE>

The effects of reinsurance on the premium and policy benefit amounts in the
Statement of Consolidated Income are as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------
1997 1996 1995
--------- --------- ---------

<S> <C> <C> <C>
Reinsurance Ceded:

Premiums................................................................ $ (13,305) $ (13,679) $ (10,385)
--------- --------- ---------
--------- --------- ---------

Policy benefits......................................................... $ (7,853) $ (4,039) $ (6,344)
--------- --------- ---------
--------- --------- ---------

Reinsurance Assumed:

Premiums................................................................ $ 180 $ 175 $ (5,456)
--------- --------- ---------
--------- --------- ---------

Policy benefits......................................................... $ 2,902 $ 2,500 $ (2,503)
--------- --------- ---------
--------- --------- ---------
</TABLE>

In 1995, the Company sold a reinsurance assumed block of group disabled
lives, involving disability income coverage, back to the ceding reinsurance
pool. The ceding pool acquired the Company's $5.7 million disabled life claim
reserve for a return-of-premium payment of $5.7 million. The reinsurance
assumed premiums and policy benefits shown above reflect this transaction.

POLICY AND CONTRACT CLAIMS. Accident and health claim reserves, the majority
of which are incurred and paid in full within a one-year period, amount to
less than 1% of total policy and contract liabilities. Therefore, no
additional disclosures are warranted.

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.

A-27
<PAGE>

SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 7 (continued)
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 Statement of Consolidated Income 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 shareholder's equity, by company, are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------------
1997 1996 1995
---------- ---------- ----------

<S> <C> <C> <C>
Statutory Net Income:

SAFECO Life Insurance Company.......................................... $ 95,012 $ 95,676 $ 101,456

SAFECO National Life Insurance Company................................. 1,322 1,249 1,187

First SAFECO National Life Insurance Company
of New York.......................................................... 314 318 404
---------- ---------- ----------

Total............................................................ $ 96,648 $ 97,243 $ 103,047
---------- ---------- ----------
---------- ---------- ----------

DECEMBER 31
----------------------------------
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>

Statutory Stockholder's Equity:

SAFECO Life Insurance Company and Subsidiaries......................... $ 672,230 $ 587,658 $ 504,683
---------- ---------- ----------
---------- ---------- ----------
</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, 1997.

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 $94,672 at December 31,
1997.

9. EMPLOYEE BENEFIT PLANS

SAFECO Corporation and subsidiary companies (the Companies) administer
defined contribution, defined benefit and profit sharing bonus plans covering
substantially all employees. The defined contribution plans include profit
sharing retirement plans and a savings plan. Benefits are earned under the
defined benefit plan for each year of service after 1988, based on the
employee's compensation level plus a stipulated rate of return on the benefit
balance. It is SAFECO Corporation's policy to fund the defined benefit plan
on a current basis to the full extent deductible under federal income tax
regulations. The cost of these plans to the Company was $7,531, $7,901 and
$7,599 for the years ended December 31, 1997, 1996 and 1995, respectively.

A-28
<PAGE>

SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 9 (continued)

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. The Company accrues for these costs during the years that
employees provide services, pursuant to FASB Statement 106. Net periodic
other postretirement benefit costs for the Company were $392, $474 and $282
in 1997, 1996 and 1995, respectively.

The following table summarizes the Company's allocated share of the funded
status of the plan:

<TABLE>
<CAPTION>
DECEMBER 31
--------------------
1997 1996
--------- ---------
<S> <C> <C>
Total accumulated postretirement benefit obligation (APBO)..................... $ 4,709 $ 3,765

Less: plan assets at fair value................................................ 172 133
--------- ---------

APBO in excess of plan assets.................................................. 4,537 3,632

Unrecognized gain.............................................................. 631 1,283
--------- ---------

Accrued postretirement benefit cost recorded on the balance sheet.............. $ 5,168 $ 4,915
--------- ---------
--------- ---------
</TABLE>

Discount rate assumptions of 7.375%, 7.75% and 7.5% were used at December
31, 1997, 1996 and 1995, respectively. The accumulated postretirement
benefit obligation at December 31, 1997 was determined using a healthcare
cost trend rate of 10% for 1998, declining by 1% per year, starting in 1999,
to 6% and remaining at that level thereafter. A one percentage point
increase in the assumed healthcare cost trend rate for each year would
increase the accumulated other postretirement benefit obligation as of
December 31, 1997 by $626 and the annual net periodic other postretirement
benefit cost for the year then ended by $68.

10. INCOME TAXES

The Company uses the liability method of accounting for income taxes pursuant
to FASB Statement 109, "Accounting for Income Taxes." Under the liability
method, deferred tax assets and liabilities are determined based on the
differences between their financial reporting and their tax bases and are
measured using the enacted tax rates.

Differences between income tax computed by applying the U.S. federal income
tax rate of 35% to income before income taxes and the provision for federal
income taxes are as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Computed "expected" tax expense...................................... $ 51,669 $ 50,751 $ 48,631
Dividends received deduction......................................... (49) (24) (44)
Tax exempt interest.................................................. (4) (6) (7)
Other................................................................ (1,600) 225 (550)
--------- --------- ---------
Income tax expense........................................... $ 50,016 $ 50,946 $ 48,030
--------- --------- ---------
--------- --------- ---------
Percent of income tax expense to income before tax................... 33.9% 35.1% 34.6%
--------- --------- ---------
--------- --------- ---------
</TABLE>

A-29
<PAGE>

SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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
--------------------
1997 1996
--------- ---------

<S> <C> <C>
Deferred tax assets:

Discounted loss and adjustment expense reserves........................... $ 77 $ 1,359

Uncollected premium adjustment............................................ 2,607 2,270

Adjustment to life policy liabilities..................................... 51,176 34,773

Capitalization of policy acquisition costs................................ 40,354 33,393

Postretirement benefits................................................... 1,809 1,720

Realized capital losses................................................... 3,534 5,887

Guarantee fund assessments................................................ 4,163 3,518

Other..................................................................... 2,031 1,630
--------- ---------

Total deferred tax assets........................................... 105,751 84,550
--------- ---------

Deferred tax liabilities:

Deferred policy acquisition costs......................................... 96,317 90,826

Present value of future profits........................................... 3,084 --

Bond discount accrual..................................................... 19,631 9,525

Unrealized appreciation of investment securities (Net of deferred policy
acquisition costs valuation allowance: 1997-$12,372; 1996-$6,664)....... 164,449 86,120

Other..................................................................... 1,566 1,727
--------- ---------

Total deferred tax liabilities...................................... 285,047 188,198
--------- ---------

Net deferred tax liability.......................................... $ 179,296 $ 103,648
--------- ---------
--------- ---------
</TABLE>

The following table reconciles the deferred tax benefit in the Statement of
Income to the change in the deferred tax liability in the balance sheet for
the year ended December 31:

<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------

<S> <C> <C> <C>
Deferred tax benefit............................................... $ (4,689) $ (6,471) $ (13,800)

Net deferred tax liability acquired in acquisitions................ 2,008 -- --

Deferred tax changes reported in shareholder's equity:

Increase (decrease) in liability related to unrealized
appreciation or depreciation of investment securities.......... 84,037 (94,694) 255,506

Increase (decrease) in liability related to deferred policy
acquisition costs valuation allowance.......................... (5,708) 8,321 (14,985)
--------- --------- ---------

Increase (decrease) in net deferred tax liability.................. $ 75,648 $ (92,844) $ 226,721
--------- --------- ---------
--------- --------- ---------
</TABLE>

A-30
<PAGE>

SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

11. SEGMENT DATA

A major portion of investment income, realized gains or losses and assets is
specifically identifiable with an industry segment. The remainder of these
amounts has been allocated in proportion to the investment income identified
with each segment.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
---------------------------------------
FINANCIAL EMPLOYEE
SERVICES BENEFITS TOTAL
----------- ----------- -------------
<S> <C> <C> <C>
Revenue:
Premiums and Other (Including $29,169 of financial services
revenue received from affiliates)............................. $ 56,649 $ 205,697 $ 262,346
Identifiable Investment Income.................................. 564,917 263,240 828,157
Investment Income Allocated..................................... 54,188 25,571 79,759
Identifiable Realized Gain (Loss) from Investments.............. (789) 1,400 611
Realized Gain from Investments Allocated........................ 4,213 1,983 6,196
----------- ----------- -------------
Total Revenue............................................. $ 679,178 $ 497,891 $ 1,177,069
----------- ----------- -------------
----------- ----------- -------------
Amortization of Deferred Policy Acquisition Costs................. $ 16,249 $ 20,697 $ 36,946
----------- ----------- -------------
----------- ----------- -------------
Income Before Income Taxes........................................ $ 80,110 $ 67,515 $ 147,625
----------- ----------- -------------
----------- ----------- -------------

DECEMBER 31, 1997
---------------------------------------
FINANCIAL EMPLOYEE
SERVICES BENEFITS TOTAL
----------- ----------- -------------
<S> <C> <C> <C>
Identifiable Assets:
Deferred Policy Acquisition Costs............................... $ 166,447 $ 73,396 $ 239,843
Policy Loans.................................................... 32,091 28,158 60,249
Invested Assets................................................. 8,378,819 3,412,049 11,790,868
Other........................................................... 627,490 834,628 1,462,118
Invested Assets Allocated......................................... 710,485 335,825 1,046,310
Other Assets Allocated............................................ 15,543 7,526 23,069
----------- ----------- -------------
Total Assets.............................................. $ 9,930,875 $ 4,691,582 $ 14,622,457
----------- ----------- -------------
----------- ----------- -------------
</TABLE>

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
---------------------------------------
FINANCIAL EMPLOYEE
SERVICES BENEFITS TOTAL
----------- ----------- -------------
<S> <C> <C> <C>
Revenue:
Premiums and Other (Including $35,477 of financial services
revenue received from affiliates)............................. $ 48,964 $ 204,069 $ 253,033
Identifiable Investment Income.................................. 506,628 256,939 763,567
Investment Income Allocated..................................... 48,157 24,314 72,471
Identifiable Realized Gain from Investments..................... 2,636 2,884 5,520
Realized Gain from Investments Allocated........................ 3,271 1,648 4,919
----------- ----------- -------------
Total Revenue............................................. $ 609,656 $ 489,854 $ 1,099,510
----------- ----------- -------------
----------- ----------- -------------
Amortization of Deferred Policy Acquisition Costs................. $ 13,756 $ 21,896 $ 35,652
----------- ----------- -------------
----------- ----------- -------------
Income Before Income Taxes........................................ $ 81,849 $ 63,153 $ 145,002
----------- ----------- -------------
----------- ----------- -------------
</TABLE>

A-31
<PAGE>

SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 11 (continued)
<TABLE>
<CAPTION>
DECEMBER 31, 1996
---------------------------------------
FINANCIAL EMPLOYEE
SERVICES BENEFITS TOTAL
----------- ----------- -------------

Identifiable Assets:
<S> <C> <C> <C>

Deferred Policy Acquisition Costs............................... $ 163,802 $ 76,662 $ 240,464

Policy Loans.................................................... 30,774 27,379 58,153

Invested Assets................................................. 6,660,938 3,298,105 9,959,043

Other........................................................... 163,855 533,823 697,678

Invested Assets Allocated......................................... 707,269 357,068 1,064,337

Other Assets Allocated............................................ 18,288 9,247 27,535
----------- ----------- -------------

Total Assets.............................................. $ 7,744,926 $ 4,302,284 $ 12,047,210
----------- ----------- -------------
----------- ----------- -------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
---------------------------------------
FINANCIAL EMPLOYEE
SERVICES BENEFITS TOTAL
----------- ----------- -------------

<S> <C> <C> <C>
Revenue:

Premiums and Other (Including $29,029 of financial services
revenue received from affiliates)............................. $ 45,284 $ 203,349 $ 248,633

Identifiable Investment Income.................................. 450,655 256,570 707,225

Investment Income Allocated..................................... 44,043 26,232 70,275

Identifiable Realized Gain (Loss) from Investments.............. 16,020 (8,586) 7,434

Realized Loss from Investments Allocated........................ (1,112) (646) (1,758)
----------- ----------- -------------

Total Revenue............................................. $ 554,890 $ 476,919 $ 1,031,809
----------- ----------- -------------
----------- ----------- -------------

Amortization of Deferred Policy Acquisition Costs................. $ 12,222 $ 20,154 $ 32,376
----------- ----------- -------------
----------- ----------- -------------

Income Before Income Taxes........................................ $ 84,956 $ 53,990 $ 138,946
----------- ----------- -------------
----------- ----------- -------------

DECEMBER 31, 1995
---------------------------------------
FINANCIAL EMPLOYEE
SERVICES BENEFITS TOTAL
----------- ----------- -------------
<S> <C> <C> <C>

Identifiable Assets:

Deferred Policy Acquisition Costs............................... $ 143,228 $ 67,263 $ 210,491

Policy Loans.................................................... 29,109 26,816 55,925

Invested Assets................................................. 6,086,143 3,261,042 9,347,185

Other........................................................... 155,358 327,863 483,221

Invested Assets Allocated......................................... 671,864 400,160 1,072,024

Other Assets Allocated............................................ 18,179 11,148 29,327
----------- ----------- -------------

Total Assets.................................................... $ 7,103,881 $ 4,094,292 $ 11,198,173
----------- ----------- -------------
----------- ----------- -------------
</TABLE>

A-32
<PAGE>

SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

12. IMPACT OF YEAR 2000 (UNAUDITED)

Some of the Company's older computer programs were written using two digits
rather than four to define the applicable year. As a result, those computer
programs have time sensitive software that recognize a date using "00" as the
year 1900 rather than the year 2000. This is commonly called the "Year 2000
problem." The Company has completed its assessment and has been modifying and
replacing portions of its software so that its computer systems will function
properly with respect to dates in the year 2000 and thereafter. The Year 2000
compliance cost for the Company is estimated at approximately $1,050, and as
of December 31, 1997, the Company has incurred and expensed approximately
$570. Based on the current progress and continuing modifications, the Company
believes that it will be Year 2000 compliant and that the Year 2000 problem
will not pose significant operational problems for its computer systems.

A-33

<PAGE>

PART C

<PAGE>

PART C

OTHER INFORMATION

24a. FINANCIAL STATEMENTS

All required financial information and financial statements are included in Part
A and Part B of the registration statement

24b. EXHIBITS

(1)(a) Resolution of the Board of Directors of WM Life Insurance Company
authorizing establishment of the Composite Deferred Variable Account. 1/

(b) Resolution of the Board of Directors of SAFECO Life Insurance Company.

(2) Not applicable.

(3) (a) Form of Principal Underwriter Agreement
(b) Agent Agreement. 3/

(4) Specimen Contract. 5/

(5) Form of application for a Contract. 5/

(6)(a) Articles of Incorporation of SAFECO Life Insurance Company. 6/
(b) By-laws of SAFECO Life Insurance Company. 6/

(7) Not applicable.

(8) Not applicable.

(9)(a) Opinion of Sutherland, Asbill & Brennan LLP. 2/
(b) Consent of Sutherland, Asbill & Brennan LLP.

(10) Consent of Ernst & Young LLP.

(11) Not Applicable.

(12) Agreement to Purchase Shares. 2/

(13) Data Performance Computation Schedules. 4/

1/ Filed with the initial registration statement of WM Life Deferred Variable
Annuity Account (File No. 33-11011) on December 29, 1986, and
incorporated herein by reference.
2/ Filed with Pre-Effective Amendment No. 1 of WM Life Deferred Variable
Annuity Account (File No. 33-11011) on April 10, 1987, and incorporated
herein by reference.
3/ Filed with Post-Effective Amendment No. 1 of WM Life Deferred Variable
Annuity Account (File No. 33-11011) on January 19, 1988, and incorporated
herein by reference.
4/ Filed with Post-Effective Amendment No. 3 of WM Life Deferred Variable
Annuity Account (File No. 33-11011) on April 29, 1988, and incorporated
herein by reference.
5/ Filed with Post-Effective Amendment No. 12 of WM Life Deferred Variable
Annuity Account (File No. 33-11011) on April 28, 1995, and incorporated
herein by reference.

<PAGE>

6/ Filed with SAFECO Separate Account C's registration statement on Form N-4
(File No. 33-60331 and 811-8052) on June 16, 1995, and incorporated
herein by reference.

25. DIRECTORS AND OFFICERS OF THE DEPOSITOR

Set forth below is a list of each director and officer of SAFECO Life Insurance
Company ("SAFECO") who is engaged in activities relating to SAFECO Deferred
Variable Annuity Account or the variable annuity contracts offered through
SAFECO Deferred Variable Annuity Account

Name and Principal Position and Offices
Business Address With Depositor
---------------- --------------------

Roger H. Eigsti Director, Chairman of the Board
Randall H. Talbot Director, President
John P. Fenlason Senior Vice President
Roger F. Harbin Executive Vice President, Actuary
Rod A. Pierson Director, Senior Vice President, Secretary
James T. Flynn Vice President, Controller, Assistant Secretary
Michael J. Kinzer Vice President , Chief Actuary
George C. Pagos Vice President, Associate General Counsel, Secretary
Ronald L. Spaulding Director, Vice President, Treasurer
Donald S. Chapman Director
Boh A. Dickey Director
Dale E. Lauer Director
James W. Ruddy Director
W. Randall Stoddard Director
William C Huff Actuary

The principal business address of the foregoing (except for Dale Lauer) for
business relating to SAFECO is SAFECO Plaza, Seattle, Washington 98185. The
principal business address of Dale Lauer is 500 N. Meridian Street,
Indianapolis, IN 46204.

26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH DEPOSITOR OR REGISTRANT.

SAFECO Life Insurance Company is a wholly owned subsidiary of SAFECO
Corporation, which is a publicly owned company. SAFECO Life Insurance Company
is a Washington corporation. 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 and 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 Market Square Holding,
Inc., a Minnesota 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, and WM Life
Insurance Company, an Arizona corporation. WM Life Insurance Company owns 100%
of Empire Life Insurance Company, a Washington corporation. SAFECO
Administrative Services, Inc. owns 100% of Employee Benefit Claims of Wisconsin,
Inc. and Wisconsin Pension and Group Services, Inc., each a Wisconsin
corporation. General America Corporation owns 100% of COMAV Managers, Inc., an
Illinois corporation, F.B. Beattie & Co., Inc., a Washington corporation,
General America Corp. of Texas, a Texas corporation, Talbot Financial
Corporation, a Washington corporation, Goldware & Taylor Insurance Service, a
California corporation and

<PAGE>

SAFECO Select Insurance Services, Inc., a California corporation. F.B. Beattie
& Co., Inc. owns 100% of F.B. Beattie Insurance Services, Inc., a California
corporation. General America Corp. of Texas is Attorney-in-fact for SAFECO
Lloyds Insurance Company, a Texas corporation. Talbot Financial Corporation
owns 100% of Talbot Agency, Inc., a New Mexico corporation. Talbot Agency, Inc.
owns 100% of PNMR Securities, Inc., a Washington corporation. SAFECO Properties
Inc. owns 100% of the following, each a Washington corporation: SAFECARE
Company, Inc. and Winmar Company, Inc. SAFECARE Company, Inc. owns 100% of the
following, each a Washington corporation: RIA Development, Inc., S.C. Arkansas,
Inc., S.C. Bellevue/Lynn, S.C. Bellevue, Inc., S.C. Everett, Inc., S.C.
Everett/Lynn, S.C. Lynden, Inc., S.C. Lynden/Lynn, S.C. Marysville, Inc., S.C.
Northgate, Inc., S.C. Northgate/LR1, L.L.C., S.C. Vancouver, Inc., S.C.
Vancouver/Lynn (Joint Venture), SAFECARE S.C. Bakersfield, Inc. and SAFECARE
S.C. Bakersfield/Lynn Limited Partnership. SAFECARE Company, Inc. owns 50% of
Lifeguard Ventures, Inc., a California corporation, and S.C. River Oaks, Inc., a
Washington corporation. Winmar Company, Inc. owns 100% of the following: C-W
Properties, Inc., Gem State Investors, Inc., Kitsap Mall, Inc., WNY Development,
Inc., Winmar Cascade, Inc., Winmar Metro, Inc., Winmar Northwest, Inc., Winmar
Redmond, Inc. and Winmar of Kitsap, Inc., each a Washington corporation, and
Capitol Court Corp., a Wisconsin corporation, SAFECO Properties of Boise, Inc.,
an Idaho corporation, SCIT, Inc., a Massachusetts corporation, Valley Fair
Shopping Centers, Inc., a Delaware corporation, WDI Golf Club, Inc., a
California corporation, Winmar Oregon, Inc., an Oregon corporation, Winmar of
Texas, Inc., a Texas corporation, and Winmar of the Desert, Inc., a California
corporation. Winmar Oregon, Inc. owns 100% of the following, each an Oregon
corporation: North Coast Management, Inc., Pacific Surfside Corp., Winmar of
Jantzen Beach, Inc. and W-P Development, Inc., and 100% of the following, each a
Washington corporation: Washington Square, Inc. and Winmar Pacific, Inc.

SAFECO Corporation owns 100% of American States Financial Corporation, an
Indiana corporation. American States Financial Corporation owns 100% of American
States Insurance Company, an Indiana corporation. American States Insurance
Company owns 100% of the following Indiana corporations: American Economy
Insurance Company, American States Preferred Insurance Company, American States
Life Insurance company, and City Insurance Agency, Inc. American States
Insurance Company owns 100% of Insurance Company of Illinois, an Illinois
corporation, and American States Lloyds Insurance Company, a Texas corporation.
American Economy Insurance Company owns 100% of American States Insurance
Company of Texas, a Texas corporation.

No person is directly or indirectly controlled by SAFECO Deferred Variable
Annuity Account.

27. NUMBER OF CONTRACT OWNERS

As of July 31, 1998, there were 167 Owners of Qualified Contracts of the
Registrant, and 2029 Owners of Non-Qualified Contracts.

28. INDEMNIFICATION

Under its Bylaws, SAFECO, to the full extent permitted by the Washington
Business Corporation Act, shall indemnify any person who was or is a party to
any proceeding (whether brought by or in the right of SAFECO or otherwise) by
reason of the fact that he or she is or was a director of SAFECO, or, while a
director of SAFECO, is or was serving at the request of SAFECO as a director,
officer, partner, trustee, employee, or agent of another foreign or domestic
corporation, partnership, joint venture, trust, other enterprise, or employee
benefit plan, against judgments, penalties, fines, settlements and reasonable
expenses actually incurred by him or her in connection with such proceeding.

SAFECO shall extend such indemnification as is provided to directors above to
any person, not a director of SAFECO, who is or was an officer of SAFECO or is
or was serving at the request of SAFECO as a director, officer, partner,
trustee, or agent of another foreign or domestic corporation, partnership, joint
venture, trust, other enterprise, or employee benefit plan. In addition, the
Board of Directors of SAFECO may, by resolution, extend

<PAGE>

such further indemnification to an officer or such other person as may to it
seem fair and reasonable in view of all relevant circumstances.

Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of SAFECO
pursuant to such provisions of the bylaws or statutes or otherwise, SAFECO has
been advised that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in said Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by SAFECO of expenses incurred or paid
by a director, officer or controlling person of SAFECO in the successful defense
of any such action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the Contracts issued by the Separate
Account, SAFECO will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in said Act and will be governed by the final adjudication of such
issue.

29. PRINCIPAL UNDERWRITERS

SAFECO Securities, Inc., the principal underwriter for the Contracts, also acts
as the principal underwriter for SAFECO's Individual Flexible Premium Variable
Life Insurance Policies and Group

Variable Annuity Contracts, and SAFECO's Individual Flexible Purchase Payment
Deferred Variable Annuity Contracts issued through SAFECO Separate Account C.

The following information is provided for each principal officer and director of
the principal underwriter:

Positions and Offices with Principal
Name and Principal Business Address* Underwriter
----------------------------------- ------------------------------------

Rod. A. Pierson Director
Ronald Spaulding Director
David F. Hill Director, President and Secretary
Neal A. Fuller Vice President, Controller, Treasurer,
Financial Principal and Assistant
Secretary

* The business address for all individuals listed is SAFECO Plaza, Seattle,
Washington 98185.

During the fiscal year ended December 31, 1997, Composite Funds Distributor,
Inc. served as the principal underwriter for the Contracts. As compensation for
its distribution services, WM Life Insurance Company (the former depositor for
the Contracts and a wholly owned subsidiary of SAFECO) paid Composite Funds
Distributor, Inc. $787,040 for the year ended December 31, 1997.

30. LOCATION OF ACCOUNTS AND RECORDS

Roger Harbin
SAFECO Life Insurance Company
15411 NE 51st Street
Redmond, Washington 98052

31. MANAGEMENT SERVICES

No management related services are provided to the Registrant, except as
discussed in Parts A and B.

32. UNDERTAKINGS

<PAGE>

(a) A post-effective amendment to this registration statement will be filed as
frequently as is necessary to ensure that the audited financial statements in
the registration statement are never more than 16 months old for so long as
payments under the variable annuity contracts may be accepted.

(b) Any application to purchase a contract offered by the prospectus will
include a space that an applicant can check to request a Statement of Additional
Information.

(c) Any Statement of Additional Information and any financial statements
required to be made available under this form will be delivered promptly upon
written or oral request.

(d) SAFECO Life Insurance Company hereby represents that the fees and charges
deducted under the Contracts, in the aggregate, are reasonable in relation to
the services rendered, the expenses expected to be incurred, and the risks
assumed by SAFECO Life Insurance Company.

<PAGE>

SIGNATURES

As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant has caused this Registration Statement to be signed on
its behalf, in the City of Seattle, and State of Washington, on this 30th day
of September, 1998.

SAFECO DEFERRED VARIABLE ANNUITY ACCOUNT
(Registrant)

SAFECO LIFE INSURANCE COMPANY
(Depositor)
(SEAL)

By: /s/ Randall H. Talbot
------------------------------

As required by the Securities Act of 1933, this Registration Statement has been
signed below by the following persons in the capacities and on the dates
indicated.

Name Title Date

/s/ Donald S. Chapman Director
- --------------------------
Donald S. Chapman

/s/ Boh A. Dickey Director
- --------------------------
Boh A. Dickey

/s/ R.H. Eigsti Director and Chairman
- --------------------------
R.H. Eigsti

/s/ James T. Flynn Vice President, Controller and
- -------------------------- Assistant Secretary (Principal
James T. Flynn Accounting Officer)

/s/ Ronald Spaulding Director, Vice President and
- -------------------------- Treasurer
Ronald Spaulding

/s/ Rod A. Pierson Director, Senior Vice President
- -------------------------- and Secretary
Rod A. Pierson

/s/ James W. Ruddy Director
- --------------------------
James W. Ruddy

/s/ W. Randall Stoddard Director
- --------------------------
W. Randall Stoddard

/s/ Dale E. Lauer Director
- --------------------------
Dale E. Lauer

/s/ Randall H. Talbot Director and President
- -------------------------- (Principal Executive Officer)
Randall H. Talbot

7
<PAGE>

EXHIBIT INDEX

EXHIBIT NUMBER DESCRIPTION
<S> <C>
99.1.b. Resolution of the Board of Directors of SAFECO
Life Insurance Company

99.3.a. Form of Principal Underwriter Agreement

99.9.b. Consent of Sutherland, Asbill & Brennan LLP

99.10 Consent of Ernst & Young LLP

</TABLE>

<PAGE>

EXHIBIT 99.1b

SAFECO Life Insurance Company

Secretary's Certificate

The undersigned, Secretary of SAFECO Life Insurance Company, hereby certifies
that the following is a true and correct copy of a resolution adopted by the
Board of Directors of SAFECO Life Insurance Company on February 3, 1995 and that
the same is in full force and effect:

RESOLVED, That the Company be, and hereby is, authorized to develop a
program to issue and to sell variable and fixed annuity contracts, some of which
may be required to be registered with the Securities and Exchange Commission
pursuant to the securities laws;

RESOLVED FURTHER, That the appropriate officers of the Company be, and
hereby are, authorized to establish and designate one or more separate accounts
of the Company to provide for annuities (and other benefits incidental
thereto), payable in fixed or variable amounts or both;

RESOLVED FURTHER, That the purpose of any such separate account shall be to
provide an investment medium for such variable and fixed annuity contracts
issued by the Company as may be designated as participating therein;

RESOLVED FURTHER, That any such separate account shall receive, hold,
invest and reinvest only the monies arising from (i) premiums, contributions or
payments made pursuant to the variable and fixed annuity contracts participating
therein; (ii) such assets of the Company as shall be deemed appropriate to be
invested in the same manner as the assets applicable to the Company's reserve
liability under the variable and fixed annuity contracts participating in such
separate accounts, or as may be necessary for the establishment of such separate
accounts; and (iii) the dividends, interest and gains produced by the foregoing;

RESOLVED FURTHER, That the income, gains and losses, realized or
unrealized, in any such separate account shall be credited to or charged against
the amounts allocated to such separate account in accordance with the terms
of the variable and fixed annuity contracts, without regard to other income,
gains or losses of the Company, including upon insolvency;

RESOLVED FURTHER, That the reserves or liabilities of any such separate
account, which are kept in accordance with federal and state securities and
insurance laws, shall not be chargeable with liabilities arising out of any
other business which the Company conducts;

RESOLVED FURTHER, That any such separate account shall be divided into
accounts and subaccounts so that each account or subaccount may invest in the
shares of designated investment companies with the net premiums received under
the variable and fixed annuity contracts as directed by the owners of said
contracts;

<PAGE>

RESOLVED FURTHER, That the appropriate officers be, and each of them hereby
are, expressly authorized in their discretion and as they may deem appropriate
from time to time in accordance with applicable laws and regulations; (i) to
divide any such separate account into one or more accounts or subaccounts, (ii)
to modify, consolidate, or eliminate any such accounts or subaccounts, (iii) to
change the designation of any separate account to another designation, (iv)
to further designate any accounts or subaccounts thereof, and (v) to take such
other action as may be required to further any such separate account's
compliance with applicable federal and state laws;

RESOLVED FURTHER, That the appropriate officers of the Company be, and they
each hereby are, authorized:

(i) to register the variable and fixed annuity contracts
participating in any such separate accounts under the
provisions of the Securities Act of 1933 to the extent
that it shall be determined that such registration is
necessary;

(ii) to register any such separate accounts with the Securities
and Exchange Commission under the provisions of the
Investment Company Act of 1940 to the extent that it shall
be determined that such registration is necessary;

(iii) to prepare, execute and file such amendments to any
registration statements filed under the aforementioned
Acts (including post-effective amendments), supplements
and exhibits thereto as they may be deemed necessary or
desirable;

(iv) to apply for exemption from those provisions of the
aforementioned Acts as shall be deemed necessary and to
take any and all other actions which shall be deemed
necessary, desirable, or appropriate in connection with
such Acts, including to prepare, execute and file
amendments to any such application;

(v) to file the variable and fixed annuity contracts
participating in any such separate accounts with the
appropriate state insurance departments and to prepare and
execute all necessary documents to obtain approval of such
insurance departments; and

(vi) to prepare or have prepared and to execute all necessary
documents to obtain approval of, or clearance with, or
other appropriate actions required of, any other
regulatory authority that may be necessary;

RESOLVED FURTHER, That the appropriate officers of the Company be, and they
each hereby are, authorized to invest cash in any such separate account or in
any account thereof as may be deemed necessary or appropriate to facilitate the
commencement of such separate account's operations, including but not limited to
compliance with applicable tax laws, or to meet any minimum capital requirements
under the Investment Company Act of 1940 and to transfer cash or securities
from time to time between the Company's general account and such separate

<PAGE>

account as deemed necessary or appropriate so long as such transfers are not
prohibited by law and are consistent with the terms of the variable and fixed
annuity contracts;

RESOLVED FURTHER, That the appropriate officers of the Company be, and they
each hereby are, authorized and directed to execute such agreement or agreements
as they deem necessary or appropriate:

(i) with SAFECO Securities, Inc., or any other qualified
entity, under which SAFECO Securities, Inc. or such other
entity will be appointed principal underwriter and
distributor for the variable and fixed annuity contracts;

(ii) with one or more qualified banks or other qualified
entities including the Company or any of its affiliates to
provide administrative and/or custodial service in
connection with the establishment and maintenance of any
such separate account and the design, issuance and
administration of the variable and fixed annuity
contracts; and

(iii) with one or more investment companies, affiliated or
unaffiliated with the Company, to serve as eligible
investments under any such separate account;

RESOLVED FURTHER, That the appropriate officers of the Company be, and they
each hereby are, authorized to establish procedures to the extent required, or
deemed appropriate, and subject to the limitations of applicable law, for
providing a pass-through of voting rights for owners of the variable and fixed
annuity contracts with respect to the shares of an investment company or
companies, attributable to them, owned by any such separate account;

RESOLVED FURTHER, That for the purpose of executing any post-effective
amendments to the Company's registration statements related to the separate
accounts and the variable and fixed annuity contracts and in connection with the
filing of all other documents necessary or desirable to the amendment process,
the officers and directors of the Company be, and each of them hereby are,
authorized, for themselves and on behalf of the Company, to execute and deliver
their several powers of attorney to Boh A. Dickey and Richard E. Zunker, and
each of them.

RESOLVED FURTHER, That in connection with the offering and sale of the
variable and fixed annuity contracts in the various States of the United States,
as and to the extent necessary, the appropriate officers of the Company be, and
they each hereby are, authorized to take any and all such action, including but
not limited to the preparation, execution and filing with proper state
authorities, on behalf of and in the name of the Company, of such applications,
notices, certificates, affidavits, powers of attorney, consents to service of
process, issuer's covenants, certified copies of minutes of shareholders' and
directors' meetings, bonds, escrow and impounding agreements and other writings
and instruments, as may be required in order to render permissible the offering
and sale of the fixed and variable annuity contracts in such

<PAGE>

jurisdiction;

RESOLVED FURTHER, That the forms of any resolutions required by any state
authority to be filed in connection with any of the documents or instruments
referred to in any of the preceding resolutions be, and the same hereby are,
adopted as if fully set forth herein if (1) in the opinion of the appropriate
officers of the Company, the adoption of the resolutions is advisable and (2)
the Secretary or any Assistant Secretary of the Company evidences such adoption
by inserting into these minutes copies of such resolutions; and

RESOLVED, That the appropriate officers of the Company be, and they each
hereby are, authorized to prepare and to execute the necessary documents and to
take such further actions as may be deemed necessary or appropriate, in their
discretion, to implement the purpose of these resolutions.

RESOLVED, That the foregoing resolutions supersede the previous resolutions
adopted by the Directors of the Company on February 6, 1986 regarding the
foregoing.

SAFECO Life Insurance Company

Dated: May 22, 1995 By: /S/ ROD A. PIERSON
-------------------------------
Rod A. Pierson, Secretary

<PAGE>

EXHIBIT 99.3a

PRINCIPAL UNDERWRITER'S AGREEMENT

SAFECO DEFERRED VARIABLE ACCOUNT

This Agreement is made and entered into as of the 29th day of September, 1998
between SAFECO Life Insurance Company ("SAFECO Life") on behalf of SAFECO
Deferred Variable Account ("Separate Account") and SAFECO Securities, Inc., a
corporation registered as a broker-dealer with the Securities and Exchange
Commission and National Association of Securities Dealers, Inc. ("PRINCIPAL
UNDERWRITER").

WHEREAS, SAFECO Life is a life insurance company licensed to sell various
life insurance an annuity contracts (the "Policies"); and

WHEREAS, SAFECO Life proposes to issue and sell the Policies to the public
through PRINCIPAL UNDERWRITER:

NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties agree as follows:

1. SAFECO Life is a life insurance company licensed to offer and sell
life policies. SAFECO Life proposes to issue and sell the Policies to the public
through PRINCIPAL UNDERWRITER. The PRINCIPAL UNDERWRITER agrees to provide sales
service subject to the terms and conditions thereof. The Policies to be sold are
more fully described in the registration statements and the prospectuses
hereinafter mentioned. Such Policies will be issued by SAFECO Life through the
Separate Account.

2. SAFECO Life grants PRINCIPAL UNDERWRITER, the exclusive right, during
the term of this Agreement, subject to registration requirements of the
Securities Act of 1933 and the Investment Company Act of 1940 and the provisions
of the Securities Exchange Act of 1934, to be the principal underwriter of the
Policies issued through the Separate Accounts. PRINCIPAL UNDERWRITER will offer
and sell the Policies under such terms as set by SAFECO Life and will make such
sale to purchasers permitted to buy such Policies as specified in the
prospectuses.

3. PRINCIPAL UNDERWRITER agrees that it shall undertake to perform all
duties and functions which are necessary and proper for the distribution of the
Policies.

4. (a) All sales literature and advertisements relating to SAFECO Life
and the Separate Account used by PRINCIPAL UNDERWRITER shall be subject to
approval by SAFECO Life. SAFECO Life authorizes PRINCIPAL UNDERWRITER, in
connection with the sale or arranging for the sale of the Policies, to provide
only such information and to make only such statements or representations as are
contained in the then-current Prospectus and Statement of Additional Information
for the Separate Account or in sales literature or advertisements approved by
SAFECO Life or in such financial and other statements which are

<PAGE>

Principal Underwriter's Agreement
September 17, 1998
Page 2

furnished to the PRINCIPAL UNDERWRITER pursuant to the next paragraph. SAFECO
Life shall not be responsible in any way for any information provided or
statements or representations made by PRINCIPAL UNDERWRITER or its
representatives or agents other than the information, statements and
representations described in the preceding sentence. PRINCIPAL UNDERWRITER shall
review all materials submitted to it that describes SAFECO Life or the Policies.
PRINCIPAL UNDERWRITER shall not be responsible for any information provided or
statements or representations made by persons or entities other than PRINCIPAL
UNDERWRITER's representatives or agents.

(b) SAFECO Life shall keep PRINCIPAL UNDERWRITER fully informed with
regard to its affairs, shall furnish PRINCIPAL UNDERWRITER with a copy of all
financial statements and a signed copy of each report prepared by its
independent certified public accountants, and shall cooperate fully in the
efforts of PRINCIPAL UNDERWRITER to sell the Policies and in the performance by
PRINCIPAL UNDERWRITER of all its duties under this Agreement.

5. (a) SAFECO Life will pay or cause to be paid:

(1) registration fees for registering its Separate Accounts
under the Securities Act of 1933 (the "1933 Act");

(2) the expenses, including counsel fees, of preparing
registration statements and such other documents as SAFECO
Life believes are necessary for registering the Separate
Account with the Securities and Exchange Commission (the
"SEC") and such states as are deemed necessary or
appropriate;

(3) expenses incident to preparing amendments to the 1933 Act
and Investment Company Act of 1940, as amended (the "1940
Act") registration statements;

(4) expenses for preparing and setting in type all prospectuses
and the expense of supplying them to the applicants for the
Policies;

(5) expenses incident to the issuance of its Policies; and

(6) expenses incident to the preparation and mailing of notices,
reports and proxy solicitation material to its
Policyholders.

(b) PRINCIPAL UNDERWRITER shall be compensated for its distribution
service in such amount as to meet all of its obligations to selling
broker-dealers with respect to all payments for the Policies accepted by SAFECO
Life on the Policies covered by this Agreement.

6. (a) SAFECO Life shall maintain a currently effective Registration
Statement with respect to the Separate Account and the Policies of the Separate
Account on the appropriate SEC form and shall file with the SEC such reports and
other documents as may be required under the 1933 Act and the 1940 Act or by the
rules and regulations of the SEC thereunder.

<PAGE>

Principal Underwriter's Agreement
September 17, 1998
Page 3

(b) SAFECO Life represents and warrants that its Registration
Statements, post-effective amendments, Prospectuses and Statements of Additional
Information (excluding statements based upon written information furnished by
PRINCIPAL UNDERWRITER expressly for inclusion therein) shall not contain any
untrue statement of material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein not misleading,
and that all statements or information furnished to PRINCIPAL UNDERWRITER,
pursuant to Section 4 (b) hereof, shall be true and correct in all material
respects.

7. It is understood that officers, agents and shareholders of SAFECO Life
are or may be interested in PRINCIPAL UNDERWRITER as directors, officers,
shareholders, or otherwise; that directors, officers, agents and shareholders of
PRINCIPAL UNDERWRITER are or may be interested in SAFECO Life as officers,
shareholders or otherwise; that PRINCIPAL UNDERWRITER may be interested in
SAFECO Life as a shareholder or otherwise; and that the existence of any such
dual interest shall not affect the validity this Agreement or of any
transactions hereunder except as otherwise provided by specific provisions or
applicable law.

8. The parties contemplate PRINCIPAL UNDERWRITER will enter into dealer
agreements with registered and qualified securities dealers for the sale of the
Policies. The form of any such dealer agreement shall be mutually agreed upon
and approved by SAFECO Life and the PRINCIPAL UNDERWRITER.

9. PRINCIPAL UNDERWRITER is an independent contractor and shall be agent
for SAFECO Life only in respect to the sale and redemption of the Policies.

10. The services of PRINCIPAL UNDERWRITER to SAFECO Life under this
Agreement are not to be deemed exclusive, and the PRINCIPAL UNDERWRITER shall be
free to render similar services or other services to others so long as its
services hereunder are not impaired thereby.

11. This Agreement is terminable on not less than 60 days' notice to the
other party and will be terminated upon the mutual written consent of PRINCIPAL
UNDERWRITER and SAFECO Life. This Agreement will also automatically and
immediately terminate in the event of its assignment.

12. In the absence of willful misfeasance, bad faith, gross negligence or
reckless disregard of obligations or duties ("disabling conduct") hereunder on
the part of PRINCIPAL UNDERWRITER (and its officers, directors, agents,
employees, controlling persons and any other person or entity affiliated with
PRINCIPAL UNDERWRITER or retained by it to perform or assist in the performance
of its obligations under this Agreement), PRINCIPAL UNDERWRITER shall not be
subject to liability to SAFECO Life or for any act or omission in the course of,
or connected with, rendering services hereunder, including without limitation,
any error of judgment or mistake of law or for any loss suffered by any of them
in connection with the matters to which this Agreement relates.

13. Any notice, request, instruction or other document to be given
hereunder by either party hereto to the other shall be in writing and delivered
personally or sent by registered or certified mail, postage prepaid, as set
forth below:

<PAGE>

Principal Underwriter's Agreement
September 17, 1998
Page 4

If to SAFECO Life: President
SAFECO Life Insurance Company
15411 NE 51st Street
Redmond, WA 98052

If to PRINCIPAL UNDERWRITER: President
SAFECO Securities, Inc.
SAFECO Plaza
Seattle, WA 98115

14. This Agreement embodies the entire Agreement between PRINCIPAL
UNDERWRITER and SAFECO Life with respect to the principal underwriting services
to be provided by PRINCIPAL UNDERWRITER to SAFECO Life and the Separate Account
and supersedes any prior written or oral agreement between the parties. The
parties acknowledge that certain administrative responsibilities and obligations
in connection with the offer and sale of the Policies are stated in the
Administrative Services Agreement by and among SAFECO Life, PRINCIPAL
UNDERWRITER, and PNMR Securities, Inc. dated April 29, 1994. In the event that
either party should be required to take legal action in order to enforce its
rights under this Agreement, the prevailing party in any such action or
proceeding shall be entitled to recover from the other party costs and
reasonable attorneys' fees.

15. This Agreement may be executed in counterparts, each of which taken
together shall constitute one and the same instrument. PRINCIPAL UNDERWRITER
acknowledges that the rights and obligations of the Separate Account are
separate and distinct from those of any and all other Separate Accounts.

16. This Agreement shall be construed in accordance with and governed by
laws of the State of Washington.

IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
duly executed by their duly authorized officers and under their duly authorized
officers and under their respective seals as of the day and year first above
written.

SAFECO LIFE INSURANCE COMPANY SAFECO SECURITIES, INC.

By: /s/ Roger F. Harbin By: /s/ Neal A. Fuller
---------------------------------- -------------------------------------

Title: Executive Vice President Title: Vice President and Controller
------------------------------ -----------------------------------

<PAGE>

EXHIBIT 99.9b

[LETTERHEAD]

September 29, 1998

Safeco Life Insurance Company
15411 N.E. 51st Street
Redmond, WA 98052

RE: SAFECO LIFE DEFERRED VARIABLE ANNUITY ACCOUNT

Gentlemen:

We hereby consent to the reference to our name under the caption
"Legal Matters" in the Statement of Additional Information filed as part of the
Registration Statement on Form N-4 filed by Safeco Life Deferred Variable
Annuity Account for certain variable annuity contracts. In giving this consent,
we do not admit that we are in the category of persons whose consent is required
under Section 7 of the Securities Act of 1933.

Very truly yours,

SUTHERLAND ASBILL & BRENNAN LLP

By: /s/ Frederick R. Bellamy
-------------------------------
Frederick R. Bellamy

<PAGE>

Exhibit 99.10

Consent of Independent Auditors

We consent to the reference to our firm under the caption "Independent
Auditors" in the Statement of Additional Information and to the use of our
report on the financial statements of WM Life Deferred Variable Annuity
Account dated April 9, 1998, and our report on the financial statements of
SAFECO Life Insurance Company and Subsidiaries dated February 13, 1998, in
the Initial Registration Statement of SAFECO Life Deferred Variable Annuity
Account under the Securities Act of 1933 (Form N-4, No. 811-4961), filed on
September 30, 1998, and related Prospectus of SAFECO Life Deferred Variable
Annuity Account.

/s/ Ernst & Young LLP

Seattle, Washington
September 29, 1998