<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 1, 1996
REGISTRATION NO. 33-12789
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
POST-EFFECTIVE AMENDMENT NO. 10 TO
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT
TRUSTS REGISTERED ON FORM N-8B-2
FARM BUREAU LIFE VARIABLE ACCOUNT
(Exact Name of Registrant)
FARM BUREAU LIFE INSURANCE COMPANY
(Name of Depositor)
5400 University Avenue
West Des Moines, Iowa 50266
(Address of Principal Executive Office)
------------------------
STEPHEN M. MORAIN, ESQUIRE
5400 University Avenue
West Des Moines, Iowa 50266
(Name and Address of Agent for Service of Process)
------------------------
COPY TO:
STEPHEN E. ROTH, ESQUIRE
Sutherland, Asbill & Brennan
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2404
------------------------
It is proposed that this filing will become effective (check appropriate box):
/X/ immediately upon filing pursuant to paragraph (b) of
Rule 485;
/ / on (date) pursuant to paragraph (b) of Rule 485;
/ / 60 days after filing pursuant to paragraph (a) of
Rule 485;
/ / on May 1, 1995 pursuant to paragraph (a) of Rule 485.
Pursuant to Rule 24f-2 under the Investment Company Act of
1940, the registrant has registered an indefinite amount of securities
under the Securities Act of 1933 with respect to its variable life
insurance policies. The registrant has filed a Rule 24f-2 Notice for the
fiscal year ended December 31, 1995 on February 26, 1996.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
RECONCILIATION AND TIE BETWEEN ITEMS
IN FORM N-8B-2 AND THE PROSPECTUS
Item No. of
Form N-8B-2 Caption in Prospectus
- ----------- ---------------------
1. Cover Page
2. Cover Page
3. Not Applicable
4. Distribution of the Policies
5. Farm Bureau Life Insurance Company; The
Variable Account
6. The Variable Account
7. Not Required
8. Not Required
9. Legal Proceedings
10. Summary; The Variable Account; FBL Variable
Insurance Series Fund; Charges and Deductions;
Policy Benefits; Voting Rights; General Provisions
11. Summary; FBL Variable Insurance Series Fund
12. Summary; FBL Variable Insurance Series Fund
13. Summary; Charges and Deductions; FBL Variable Insurance
Series Fund
14. Summary; Premiums
15. Premiums
16. Premiums; FBL Variable Insurance Series Fund
17. Summary; Charges and Deductions; Policy Benefits; FBL
Variable Insurance Series Fund
18. FBL Variable Insurance Series Fund; Premiums
19. General Provisions; Voting Rights
20. Not Applicable
21. Policy Benefits; General Provisions
22. Not Applicable
23. Safekeeping of the Variable Account's Assets
24. General Provisions
25. Farm Bureau Life Insurance Company
26. Not Applicable
27. Farm Bureau Life Insurance Company
28. Executive Officers and Directors of Farm Bureau
Life Insurance Company
29. Farm Bureau Life Insurance Company
30. Not Applicable
31. Not Applicable
32. Not Applicable
33. Not Applicable
34. Not Applicable
35. Distribution of the Policies
36. Not Required
-i-
<PAGE>
37. Not Required
38. Summary; Distribution of the Policies
39. Summary; Distribution of the Policies
40. Not Applicable
41. Farm Bureau Life Insurance Company;
Distribution of the Policies
42. Not Applicable
43. Not Applicable
44. Premiums
45. Not Applicable
46. Policy Benefits
47. FBL Variable Insurance Series Fund
48. Not Applicable
49. Not Applicable
50. The Variable Account
51. Cover Page; Summary; Charges and Deductions;
Policy Benefits; Premiums
52. FBL Variable Insurance Series Fund
53. Federal Tax Matters
54. Not Applicable
55. Not Applicable
56. Not Required
57. Not Required
58. Not Required
59. Not Required
-ii-
<PAGE>
[LOGO]
<TABLE>
<S> <C> <C>
VARIABLE UNIVERSAL LIFE
</TABLE>
[LOGO]
May 1, 1996
Prospectuses for:
Flexible Premium Variable
Life Insurance Policies
issued by
Farm Bureau Life
Insurance Company
-------------------------------------------
FBL Variable Insurance
Series Fund
managed by
FBL Investment
Advisory Services, Inc.
Call Toll-Free
1-800-247-4170
225-5810 (Des Moines)
<PAGE>
PROSPECTUS
- --------------------------------------------------------------------------------
Farm Bureau Life Variable Account
Flexible Premium Variable Life Insurance Policy
- --------------------------------------------------------------------------------
This Prospectus describes a flexible premium variable life insurance policy (the
"Policy") issued by Farm Bureau Life Insurance Company (the "Company"). This
type of life insurance is also commonly called variable universal life. The
Policy is designed to provide lifetime insurance protection to age 95. The
Policy permits the policyowner to vary premium payments and adjust the death
proceeds payable under the Policy. The Policy has been designed for maximum
flexibility in meeting changing insurance needs.
The minimum specified amount for which a Policy will be issued is normally
$25,000. The Policy provides for the payment of the death proceeds upon the
death of the insured and for a net cash value that can be obtained upon complete
or partial surrender of the Policy. Death proceeds may, and cash value will,
vary with the investment experience of Farm Bureau Life Variable Account (the
"Variable Account"). THE POLICYOWNER BEARS THE ENTIRE INVESTMENT RISK; THERE IS
NO GUARANTEED MINIMUM CASH VALUE. The Policy also provides for loans using the
Policy as collateral. The Policy will remain in force so long as net cash value
is sufficient to pay certain monthly charges imposed in connection with the
Policy.
A policyowner may allocate net premiums under a Policy to one or more of the
subaccounts of the Variable Account. Each Subaccount invests exclusively in a
corresponding Portfolio of FBL Variable Insurance Series Fund (the "Fund"). The
accompanying prospectus for the Fund describes the investment objectives and
attendant risks of each of the Portfolios of the Fund.
Net premiums may also be allocated to the Declared Interest Option. The Declared
Interest Option is supported by the Company's General Account. Cash value
allocated to the Declared Interest Option is credited with interest at a
declared rate guaranteed to be at least 4.5%.
This Prospectus generally describes only the portion of the Policy involving the
Variable Account. For a brief summary of the Declared Interest Option, see "THE
DECLARED INTEREST OPTION."
A policy may be treated as a modified endowment contract depending upon the
amount of premiums paid in relation to the death benefit provided under such
Policy. If a contract is a modified endowment contract, any loan, partial
surrender, surrender and/or assignment of the policy could result in adverse tax
consequences and/or penalties.
It may not be advantageous to purchase a Policy as a replacement for another
type of life insurance or as a means to obtain additional insurance protection
if the purchaser already owns another flexible premium variable life insurance
policy.
THIS PROSPECTUS MUST BE ACCOMPANIED OR PRECEDED BY A CURRENT PROSPECTUS FOR FBL
VARIABLE INSURANCE SERIES FUND.
- --------------------------------------------------------------------------------
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 RETAIN IT FOR FUTURE REFERENCE.
- --------------------------------------------------------------------------------
Issued By
Farm Bureau Life Insurance Company
5400 University Avenue
West Des Moines, Iowa 50266
THE DATE OF THIS PROSPECTUS IS MAY 1, 1996.
<PAGE>
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
PAGE
<TABLE>
<S> <C>
DEFINITIONS.................................................................................................. 3
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
SUMMARY AND DIAGRAM OF THE POLICY............................................................................ 5
</TABLE>
<TABLE>
<S> <C> <C>
The Policy................................................................... 5
</TABLE>
<TABLE>
<S> <C> <C>
The Variable Account......................................................... 5
</TABLE>
<TABLE>
<S> <C> <C>
The Declared Interest Option................................................. 5
</TABLE>
<TABLE>
<S> <C> <C>
Premiums..................................................................... 5
</TABLE>
<TABLE>
<S> <C> <C>
Policy Benefits.............................................................. 6
</TABLE>
<TABLE>
<S> <C> <C>
Charges...................................................................... 7
</TABLE>
<TABLE>
<S> <C> <C>
Distribution of the Policies................................................. 8
</TABLE>
<TABLE>
<S> <C> <C>
Tax Treatment................................................................ 8
</TABLE>
<TABLE>
<S> <C> <C>
Cancellation Privilege....................................................... 8
</TABLE>
<TABLE>
<S> <C> <C>
Illustrations................................................................ 8
</TABLE>
<TABLE>
<S> <C> <C>
Diagram...................................................................... 9
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
FARM BUREAU LIFE INSURANCE COMPANY AND THE VARIABLE ACCOUNT.................................................. 9
</TABLE>
<TABLE>
<S> <C> <C>
Farm Bureau Life Insurance Company........................................... 9
</TABLE>
<TABLE>
<S> <C> <C>
Iowa Farm Bureau Federation.................................................. 10
</TABLE>
<TABLE>
<S> <C> <C>
The Variable Account......................................................... 10
</TABLE>
<TABLE>
<S> <C> <C>
FBL Variable Insurance Series Fund........................................... 10
</TABLE>
<TABLE>
<S> <C> <C>
Addition, Deletion or Substitution of Investments............................ 12
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
THE POLICY................................................................................................... 13
</TABLE>
<TABLE>
<S> <C> <C>
Purpose of the Policy........................................................ 13
</TABLE>
<TABLE>
<S> <C> <C>
Purchasing the Policy........................................................ 13
</TABLE>
<TABLE>
<S> <C> <C>
Premiums..................................................................... 14
</TABLE>
<TABLE>
<S> <C> <C>
Policy Lapse and Reinstatement............................................... 15
</TABLE>
<TABLE>
<S> <C> <C>
Examination of Policy (Cancellation Privilege)............................... 16
</TABLE>
<TABLE>
<S> <C> <C>
Special Transfer Privilege................................................... 16
</TABLE>
<TABLE>
<S> <C> <C>
Exchange Privilege........................................................... 16
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
POLICY BENEFITS.............................................................................................. 17
</TABLE>
<TABLE>
<S> <C> <C>
Cash Value Benefits.......................................................... 17
</TABLE>
<TABLE>
<S> <C> <C>
Transfers.................................................................... 20
</TABLE>
<TABLE>
<S> <C> <C>
Loan Benefits................................................................ 20
</TABLE>
<TABLE>
<S> <C> <C>
Death Proceeds............................................................... 22
</TABLE>
<TABLE>
<S> <C> <C>
Accelerated Payments of Death Proceeds....................................... 24
</TABLE>
<TABLE>
<S> <C> <C>
Benefits at Maturity......................................................... 25
</TABLE>
<TABLE>
<S> <C> <C>
Payment Options.............................................................. 25
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
CHARGES AND DEDUCTIONS....................................................................................... 26
</TABLE>
<TABLE>
<S> <C> <C>
Premium Expense Charge....................................................... 26
</TABLE>
<TABLE>
<S> <C> <C>
Monthly Deduction............................................................ 27
</TABLE>
<TABLE>
<S> <C> <C>
Transfer Charge.............................................................. 30
</TABLE>
<TABLE>
<S> <C> <C>
Surrender Charge............................................................. 30
</TABLE>
<TABLE>
<S> <C> <C>
Variable Account Charges..................................................... 30
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
THE DECLARED INTEREST OPTION................................................................................. 31
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
GENERAL PROVISIONS........................................................................................... 32
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
DISTRIBUTION OF THE POLICIES................................................................................. 35
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
FEDERAL TAX MATTERS.......................................................................................... 35
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ADDITIONAL INFORMATION....................................................................................... 39
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
FINANCIAL STATEMENTS......................................................................................... 47
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
APPENDIX A................................................................................................... A-1
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
APPENDIX B................................................................................................... B-1
</TABLE>
- --------------------------------------------------------------------------------
The Policy is not available in all States.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT BE LAWFULLY MADE. NO DEALER, SALESMAN 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.
THE PURPOSE OF THIS VARIABLE LIFE INSURANCE POLICY IS TO PROVIDE INSURANCE
PROTECTION. NO CLAIM IS MADE THAT THE POLICY IS IN ANY WAY SIMILAR OR COMPARABLE
TO AN INVESTMENT IN A MUTUAL FUND.
2
<PAGE>
- --------------------------------------------------------------------------------
DEFINITIONS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ATTAINED AGE................. The Insured's age on his or her last birthday on the Policy Date plus the
number of Policy Years since the Policy Date.
BENEFICIARY.................. The person or entity named by the Policyowner in the application or by
later designation to receive the death proceeds upon the death of the
Insured.
BUSINESS DAY................. Each day that the New York Stock Exchange is open for trading, except the
day after Thanksgiving, the Tuesday before Christmas and any day on which
the Home Office is closed because of a weather-related or comparable type
of emergency and is unable to segregate orders and redemption requests
received on that day.
CASH VALUE................... The total amount invested under the Policy. It is the sum of the values of
the Policy in each subaccount of the Variable Account plus the value of the
Policy in the Declared Interest Option.
COMPANY...................... Farm Bureau Life Insurance Company.
DECLARED INTEREST OPTION..... Net Premiums may be allocated, and Cash Value may be transferred, to the
Declared Interest Option. Cash Value in the Declared Interest Option is
credited with interest at a declared rate guaranteed to be at least 4.5%.
DUE PROOF OF DEATH........... Proof of death that is satisfactory to the Company. Such proof may consist
of the following if acceptable to the Company:
(a) A certified copy of the death certificate;
(b) A certified copy of a court decree reciting a finding of death; or
(c) Any other proof satisfactory to the Company.
FUND......................... FBL Variable Insurance Series Fund, an open-end, diversified management
investment company in which the Variable Account invests. The Fund
currently has six Portfolios: the Growth Common Stock Portfolio, the High
Grade Bond Portfolio, the High Yield Bond Portfolio, the Managed Portfolio,
the Money Market Portfolio and the Blue Chip Portfolio.
GENERAL ACCOUNT.............. The assets of the Company other than those allocated to the Variable
Account or any other separate account.
GRACE PERIOD................. The 61-day period beginning on the date the Company sends notice to the
Policyowner that Net Cash Value is insufficient to cover the monthly
deduction.
HOME OFFICE.................. The principal offices of the Company at 5400 University Avenue, West Des
Moines, Iowa 50266.
INSURED...................... The person upon whose life the Policy is issued.
ISSUE DATE................... The date which the Policy is issued and mailed to the Policyowner.
MATURITY DATE................ The Policy Anniversary nearest the Insured's 95th birthday. It is the date
on which the Policy terminates and the Policy's Cash Value less Policy Debt
becomes payable to the Policyowner or the Policyowner's estate.
MONTHLY DEDUCTION DAY........ The same date in each month as the Policy Date. The monthly deduction is
made on the Business Day coinciding with or immediately following the
Monthly Deduction Day. (See "CHARGES AND DEDUCTIONS--Monthly Deduction.")
NET ASSET VALUE.............. The total current value of each Subaccount's securities, cash, receivables
and other assets less liabilities.
NET CASH VALUE............... The Cash Value of the Policy reduced by any outstanding Policy Debt and
increased by any unearned loan interest.
NET PREMIUM.................. The amount of premium remaining after the premium expense charge (see
"CHARGES AND DEDUCTIONS--Premium Expense Charge") has been deducted. This
amount will be allocated, according to the Policyowner's instructions,
among the subaccounts of the Variable Account and the Declared Interest
Option.
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
POLICY....................... The flexible premium variable life insurance policy offered by the Company
and described in this Prospectus, which term includes the Policy described
in this Prospectus, the Policy application, any supplemental applications
and any endorsements.
POLICY ANNIVERSARY........... The same date in each year as the Policy Date.
POLICY DATE.................. The date set forth on the Policy data page which is used to determine
Policy Years, Policy Months and Policy Anniversaries. The Policy Date may,
but will not always, coincide with the effective date of insurance coverage
under the Policy. (See "THE POLICY--Purchasing the Policy.")
POLICY DEBT.................. The sum of all outstanding Policy Loans and any due and unpaid policy loan
interest.
POLICY LOAN.................. An amount borrowed by the Policyowner from the Company for which the Policy
serves as the sole security. Interest on Policy Loans is payable in advance
(for the remainder of the Policy Year) upon taking a Policy Loan and upon
each Policy Anniversary thereafter (for the following Policy Year) until
the Policy Loan is repaid.
POLICY MONTH................. A one-month period beginning on a Monthly Deduction Day and ending on the
day immediately preceding the next Monthly Deduction Day.
POLICYOWNER.................. The person who owns a Policy. The original Policyowner is named in the
application.
POLICY YEAR.................. A twelve-month period that starts on the Policy Date or on a Policy
Anniversary.
PORTFOLIO.................... A separate investment portfolio of the Fund.
SPECIFIED AMOUNT............. The minimum death benefit payable under a Policy so long as the Policy
remains in force. The Specified Amount as of the Policy Date is set forth
on the data page in each Policy.
SUBACCOUNT................... A subdivision of the Variable Account. Net premiums for a Policy are
allocated, in accordance with the instructions of the Policyowner, to the
Growth Common Stock, High Grade Bond, High Yield Bond, Managed, Money
Market and/or Blue Chip Subaccounts of the Variable Account, which invest
exclusively in shares of, respectively, the Growth Common Stock, High Grade
Bond, High Yield Bond, Managed, Money Market and Blue Chip Portfolios of
the Fund.
UNIT VALUE................... The value determined by dividing each Subaccount's Net Asset Value by the
number of units outstanding at the time of calculation.
SURRENDER CHARGE............. A charge that is assessed at the time of any partial or complete surrender
equal to the lesser of (i) $25 or (ii) 2.0% of the amount surrendered.
VALUATION PERIOD............. The period between the close of business (3:00 p.m. central time) on a
Business Day and the close of business on the next Business Day.
VARIABLE ACCOUNT............. Farm Bureau Life Variable Account, a separate investment account
established by the Company to receive and invest the Net Premiums paid
under the Policies.
</TABLE>
4
<PAGE>
- --------------------------------------------------------------------------------
SUMMARY AND DIAGRAM OF THE POLICY
- --------------------------------------------------------------------------------
THE FOLLOWING SUMMARY OF PROSPECTUS INFORMATION SHOULD
BE READ IN CONJUNCTION WITH THE DETAILED INFORMATION
APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE
INDICATED, THE DESCRIPTION OF THE POLICY CONTAINED IN
THIS PROSPECTUS ASSUMES THAT THE POLICY IS IN FORCE AND
THAT THERE IS NO OUTSTANDING POLICY DEBT.
- --------------------------------------------------------------------------------
THE POLICY
Under the Policy, subject to certain limitations, the
Policyowner has flexibility in determining the frequency
and amount of premiums. (See "THE POLICY--Premiums.")
Thus, unlike conventional fixed-benefit life insurance,
the Policy does not require a Policyowner to adhere to a
fixed premium schedule. Also, unlike conventional
fixed-benefit life insurance, the amount and/or duration
of the life insurance coverage and the Cash Value of the
Policy is not guaranteed and may increase or decrease,
depending upon the investment experience of the assets
supporting the Policy. Accordingly, the Policyowner bears
the investment risk of any depreciation of, but reaps the
benefit of any appreciation in, the value of the
underlying assets. As long as the Policy remains in
force, the Policy will provide for death proceeds payable
to the Beneficiary upon the Insured's death, the
accumulation of Cash Value, surrender rights and policy
loan privileges. The Policy will remain in force so long
as Net Cash Value is sufficient to pay certain monthly
charges imposed in connection with the Policy. The
minimum Specified Amount for which a Policy will be
issued is normally $25,000, although the Company may in
its discretion issue Policies with Specified Amounts of
less than $25,000.
Life Insurance is not a short-term investment.
Prospective Policyowners should consider their need for
insurance coverage and the Policy's long-term investment
potential.
- --------------------------------------------------------------------------------
THE VARIABLE ACCOUNT
Net Premiums are allocated, in accordance with the
instructions of the Policyowner, to the Variable Account,
the Declared Interest Option, or both. The Variable
Account consists of six Subaccounts: the Growth Common
Stock Subaccount, the High Grade Bond Subaccount, the
High Yield Bond Subaccount, the Managed Subaccount, the
Money Market Subaccount and the Blue Chip Subaccount.
Each Subaccount invests exclusively in a corresponding
Portfolio of the Fund.
Cash Value will, and death proceeds may, vary with the
investment experience of the Subaccounts, as well as with
the frequency and amount of premium payments, any partial
surrenders and any charges imposed in connection with the
Policy. (See "POLICY BENEFITS--Cash Value Benefits.")
- --------------------------------------------------------------------------------
THE DECLARED INTEREST
As an alternative to the Variable Account, the
Policyowner may allocate or transfer all
OPTION
or a portion of the Cash Value to the Declared Interest
Option, which guarantees a specified minimum rate of
return. (See "THE DECLARED INTEREST OPTION.")
- --------------------------------------------------------------------------------
PREMIUMS
The Company may require the Policyowner to pay an initial
premium equal to the greater of $100 or an amount that,
when reduced by the premium expense charge (see "CHARGES
AND DEDUCTIONS--Premium Expense Charge"), will be
sufficient to pay the monthly deductions for the first
three Policy Months. Each Policyowner will determine a
planned periodic premium schedule. The Policyowner is not
required to pay premiums in accordance with the planned
periodic premium schedule. (See "THE
POLICY--Premiums--PLANNED PERIODIC PREMIUMS.") The
schedule will provide for a premium payment of a level
amount at a fixed interval over a specified period of
time. Failure to pay premiums in accordance with the
schedule will not itself cause the Policy to lapse. (See
"THE POLICY--Policy Lapse and Reinstatement-- LAPSE.")
Subject to certain restrictions, unscheduled premium
payments also may be made. (See "THE
POLICY--Premiums--UNSCHEDULED PREMIUMS.")
A Policy will only lapse when Net Cash Value is
insufficient on a Monthly Deduction Day to cover the
monthly deduction (see "CHARGES AND DEDUCTIONS--Monthly
Deduction") and a Grace Period expires without a
sufficient payment (see "THE POLICY--Policy Lapse and
Reinstatement--LAPSE"). With respect to premiums,
5
<PAGE>
therefore, the Policy differs in two important ways from
a conventional life insurance policy. First, the failure
to pay a planned periodic premium will not in itself
automatically cause the Policy to lapse. Second, a Policy
can lapse even if planned periodic premiums or premiums
in other amounts have been paid.
- --------------------------------------------------------------------------------
POLICY BENEFITS
CASH VALUE BENEFITS. The Policy provides for a Cash
Value. The Cash Value will reflect the amount and
frequency of premium payments, the investment experience
of the chosen subaccounts of the Variable Account, the
interest earned on the Cash Value in the Declared
Interest Option, any Policy Loans, any partial surrenders
and the charges imposed in connection with the Policy.
The entire investment risk for amounts allocated to the
Variable Account is borne by the Policyowner; the Company
does not guarantee a minimum Cash Value. (See "POLICY
BENEFITS--Cash Value Benefits-- CALCULATION OF CASH
VALUE.")
The Policyowner may, at any time, surrender a Policy and
receive the Net Cash Value. Subject to certain
limitations, the Policyowner may also partially surrender
the Policy and obtain a portion of the Net Cash Value at
any time prior to the Maturity Date. Partial surrenders
will reduce both the Cash Value and death proceeds
payable under the Policy. (See "POLICY BENEFITS--Cash
Value Benefits--SURRENDER PRIVILEGES.") A charge will be
assessed upon partial or complete surrender. (See
"CHARGES AND DEDUCTIONS--Surrender Charge.")
TRANSFERS. A Policyowner may transfer amounts among the
subaccounts of the Variable Account an unlimited number
of times in a Policy Year; however, only one transfer per
Policy Year may be made between the Declared Interest
Option and the Variable Account. The first transfer in a
Policy Year is free; subsequent transfers in that Policy
Year will be assessed a charge of $25. The transfer
charge, unless paid in cash, will be deducted from the
amount transferred. (See "POLICY BENEFITS--Transfers.") A
transfer from the Variable Account to the Declared
Interest Option requested in connection with the exercise
of the special transfer privilege under the Policy (see
"THE POLICY--Special Transfer Privilege") will not be
considered a transfer for purposes of the one-transfer
limit or the $25 charge.
POLICY LOANS. So long as a Policy is in force and has a
positive Net Cash Value, the Policyowner may borrow up
to 90% of the Policy's Cash Value as of the end of the
Valuation Period during which the request for the Policy
Loan is received at the Home Office, less any previously
outstanding Policy Debt. A loan taken from, or secured
by, a Policy may have federal income tax consequences.
(See "FEDERAL TAX MATTERS-- Policy Proceeds.")
Interest on Policy Loans is payable in advance for each
Policy Year at an annual rate that will not exceed 7.4%
per year in advance (which is equal to an effective rate
of 8.0%). When a Policy Loan is made, an amount equal to
the Policy Loan will be transferred to, and segregated
within, the Declared Interest Option as security for the
Policy Loan and will earn interest daily at a fixed
annual rate. (See "POLICY BENEFITS--Loan Benefits--POLICY
LOANS.") Upon partial or full repayment of Policy Debt,
the portion of the Cash Value in the Declared Interest
Option securing the repaid portion of the Policy Debt
will no longer be segregated within the Declared Interest
Option as security for Policy Debt, but will remain in
the Declared Interest Option unless, and until, the
Policyowner transfers such amount to one or more of the
subaccounts of the Variable Account. (See "POLICY
BENEFITS--Loan Benefits-- REPAYMENT OF POLICY DEBT.") Any
outstanding Policy Debt, reduced by any unearned loan
interest, will be deducted from the proceeds payable upon
death or surrender. Any outstanding Policy Debt will be
deducted from the proceeds payable upon maturity.
Depending upon investment performance of Net Cash Value
and on the amount of Policy Debt, loans may cause a
policy to lapse. If a Policy is not a modified endowment
contract, lapse of the Policy with loans outstanding may
have adverse tax consequences. (See "FEDERAL TAX
MATTERS--Policy Proceeds.")
DEATH PROCEEDS. The Policies provide for the payment of
death proceeds following receipt by the Company (at its
Home Office) of Due Proof of Death of the Insured. The
6
<PAGE>
Policy contains two death benefit options. Under Option
A, the death benefit is the greater of the sum of the
Specified Amount and the Policy's Cash Value, or the Cash
Value multiplied by the specified amount factor for the
Insured's Attained Age, as set forth in the Policy. Under
Option B, the death benefit is the greater of the
Specified Amount, or the Cash Value multiplied by the
specified amount factor for the Insured's Attained Age,
as set forth in the Policy. For this purpose, all
calculations are made as of the end of the Business Day
coinciding with or immediately following the date of
death.
Under either death benefit option, so long as the Policy
remains in force, the death benefit will not be less than
the Specified Amount of the Policy on the date of death.
The death benefit may, however, exceed the Specified
Amount. The amount by which the death benefit exceeds the
Specified Amount depends upon the death benefit option
chosen and the Cash Value of the Policy. (See "POLICY
BENEFITS--Death Proceeds.") To determine the death
proceeds, the death benefit will be reduced by any
outstanding Policy Debt and increased by any unearned
loan interest and any premiums paid after the date of
death. The proceeds may be paid in a lump sum or in
accordance with a payment option. (See "POLICY
BENEFITS--Payment Options.")
Anytime after the first Policy Year, the Policyowner may,
subject to certain restrictions, adjust the death benefit
payable under the Policy by increasing or decreasing the
Specified Amount. (See "POLICY BENEFITS--Death
Proceeds--CHANGE IN EXISTING COVERAGE.") In addition, the
Policyowner may, at any time, change the death benefit
option in effect. (See "POLICY BENEFITS--Death
Proceeds--CHANGE IN DEATH BENEFIT OPTION.")
BENEFITS AT MATURITY. If the Insured is alive and the
Policy is in force on the Maturity Date, the Policyowner
will be paid the Cash Value of the Policy as of the end
of the Business Day coinciding with or immediately
following the Maturity Date, reduced by any outstanding
Policy Debt.
- --------------------------------------------------------------------------------
CHARGES
PREMIUM EXPENSE CHARGE. The Net Premium equals the
premium paid less a premium expense charge. The premium
expense charge consists of a 5.0% sales charge (used to
compensate the Company for expenses incurred in
connection with the distribution of the Policies) and a
2.0% premium tax charge (used to compensate the Company
for premium taxes imposed by various states and
subdivisions thereof). (See "CHARGES AND
DEDUCTIONS--Premium Expense Charge.")
CASH VALUE CHARGES. Cash Value will be reduced each
Policy Month on the Monthly Deduction Day by a monthly
deduction equal to the sum of a cost of insurance charge,
the cost of any additional insurance benefits added by
rider and an administrative charge of $3.00. In addition,
during the first twelve Policy Months and during the
twelve Policy Months immediately following an increase in
Specified Amount, the monthly deduction will include a
first year monthly administrative charge. This charge
will range from $0.05 to $0.50 per $1,000 of Specified
Amount and will depend upon the Attained Age of the
Insured and the Policy's total Specified Amount. (See
"CHARGES AND DEDUCTIONS--Monthly Deduction--FIRST YEAR
MONTHLY ADMINISTRATIVE CHARGE.") The monthly deduction
will vary in amount from month to month. (See "CHARGES
AND DEDUCTIONS--Monthly Deduction.")
Upon partial or complete surrender of a Policy, a charge
equal to the lesser of $25 or 2.0% of the amount
surrendered will be assessed. (See "CHARGES AND
DEDUCTIONS--Surrender Charge.") During a Policy Year, a
charge will be made for the second and subsequent
transfers of assets among the Subaccounts and between the
Variable Account and the Declared Interest Option. (See
"CHARGES AND DEDUCTIONS--Transfer Charge.")
CHARGES AGAINST THE VARIABLE ACCOUNT. A daily charge at
the rate of .0024548% of the average daily net assets of
each Subaccount will be imposed to compensate the Company
for certain mortality and expense risks incurred in
connection with the Policies. (See "CHARGES AND
DEDUCTIONS--Variable Account Charges.") This corresponds
to an effective annual rate of .90%.
7
<PAGE>
Currently, no charge is made to the Variable Account for
federal income taxes that may be attributable to the
Variable Account. The Company may, however, make such a
charge in the future.
FUND EXPENSES. In addition, because the Variable Account
purchases shares of the Fund, the value of the net
assets of the Variable Account will reflect the
investment advisory fee and other expenses incurred by
the Fund. (See "CHARGES AND DEDUCTIONS--Variable Account
Charges--FUND EXPENSES.")
- --------------------------------------------------------------------------------
DISTRIBUTION OF THE
POLICIES
The Policies will be distributed by registered
representatives of FBL Marketing Services, Inc. FBL
Marketing Services, Inc., a wholly-owned indirect
subsidiary of the Company, is registered as a
broker-dealer with the Securities and Exchange Commission
and is a member of the National Association of Securities
Dealers, Inc.
- --------------------------------------------------------------------------------
TAX TREATMENT
If a Policy is issued on the basis of a standard premium
class, while there is some uncertainty, the Company
believes that the Policy should qualify as a life
insurance contract for federal income tax purposes. If a
Policy is issued on a substandard basis, it is not clear
whether or not the Policy would qualify as a life
insurance contract for federal income tax purposes.
Assuming that a Policy qualifies as a life insurance
contract for federal income tax purposes, the Cash Value
under a Policy should be subject to the same federal
income tax treatment as cash value under a conventional
fixed-benefit Policy. Under existing tax law, the
Policyowner is not deemed to be in constructive receipt
of Cash Values under a Policy until there is a
distribution from the Policy. Like death benefits payable
under conventional life insurance policies, death
proceeds payable under a Policy should be completely
excludable from the gross income of the Beneficiary. As a
result, the Beneficiary generally will not be taxed on
these proceeds.
A Policy entered into or "materially changed" after June
20, 1988 may be treated as a "modified endowment
contract" depending upon the amount of premiums paid in
relation to the death benefit. If the Policy is a
modified endowment contract, then all pre-death
distributions, including Policy Loans, will be treated
first as a distribution of taxable income and then as a
return of basis or investment in the contract. In
addition, prior to age 59 1/2, any such distributions
generally will be subject to a 10% additional tax. For
further discussion of modified endowment contracts,
including a discussion of premium limitation rules, see
"FEDERAL TAX MATTERS--Modified Endowment Contracts."
If the Policy is not a modified endowment contract,
distributions generally will be treated first as a return
of basis or investment in the contract and then as a
disbursement of taxable income. Moreover, loans will not
be treated as distributions. Finally, neither
distributions nor loans from a Policy that is not a
modified endowment contract are subject to the 10%
additional tax. (See "FEDERAL TAX MATTERS.")
- --------------------------------------------------------------------------------
CANCELLATION
PRIVILEGE
The Policyowner is granted a 20-day period following
receipt of the Policy in which to examine and return the
Policy. The Policyowner will receive the Policy's Cash
Value plus an amount approximately equal to any charges
which have been deducted from premiums, Cash Value and
the Variable Account. (See "THE POLICY--Examination of
Policy (Cancellation Privilege).")
- --------------------------------------------------------------------------------
ILLUSTRATIONS
Sample projections of hypothetical Policy values are
included starting at page A-1 of this Prospectus. These
projections of hypothetical values may be helpful in
understanding the long-term effects of different levels
of investment performance, charges and deductions,
electing one or the other death benefit option and
generally in comparing this Policy to other life
insurance policies. NONETHELESS, THE ILLUSTRATIONS ARE
BASED ON HYPOTHETICAL INVESTMENT RATES OF RETURN AND ARE
NOT A REPRESENTATION OF PAST OR FUTURE PERFORMANCE.
Actual rates of return may be more or less than those
reflected in the illustrations and, therefore, actual
values will be different from those illustrated.
8
<PAGE>
This Prospectus describes only those aspects of the
Policy that relate to the Variable Account, except where
Declared Interest Option matters are specifically
mentioned. For a brief summary of the aspects of the
Policy relating to the Declared Interest Option, see "THE
DECLARED INTEREST OPTION."
- --------------------------------------------------------------------------------
DIAGRAM
The diagram below illustrates how premium payments are
distributed in the Policy.
Graphic
- --------------------------------------------------------------------------------
FARM BUREAU LIFE INSURANCE COMPANY
AND THE VARIABLE ACCOUNT
- --------------------------------------------------------------------------------
FARM BUREAU LIFE
INSURANCE COMPANY
The Company is a stock life insurance company which was
incorporated in the State of Iowa on October 30, 1944.
100% of the outstanding voting shares of the Company are
owned by FBL Financial Group, Inc. (formerly Farm Bureau
Multi-State Services, Inc.). At December 31, 1995, 63.86%
of the outstanding voting shares of FBL Financial Group,
Inc. is owned by Iowa Farm Bureau Federation. The Company
is principally engaged in the offering of life insurance
policies, disability income insurance policies and
annuity contracts and is admitted to do business in
thirteen states--Arizona, Idaho, Iowa, Kansas, Minnesota,
Montana, Nebraska, North Dakota, Oklahoma, South Dakota,
Utah, Wisconsin and Wyoming. The Company expects to be
admitted to do business in Colorado and New Mexico in the
next several months. The principal offices of the Company
are at 5400 University Avenue, West Des Moines, Iowa
50266.
9
<PAGE>
- --------------------------------------------------------------------------------
IOWA FARM BUREAU
FEDERATION
Iowa Farm Bureau Federation is an Iowa not-for-profit
corporation, the members of which are county Farm Bureau
organizations and their individual members. Iowa Farm
Bureau Federation is primarily engaged, through various
divisions and subsidiaries, in the formulation, analysis
and promotion of programs (at local, state, national and
international levels) that are designed to foster the
educational, social and economic advancement of its
members. The principal offices of Iowa Farm Bureau
Federation are at 5400 University Avenue, West Des
Moines, Iowa 50266.
- --------------------------------------------------------------------------------
THE VARIABLE ACCOUNT
The Variable Account was established by the Company as a
separate account on March 3, 1987. The Variable Account
will receive and invest the Net Premiums paid under the
Policies. In addition, the Variable Account may receive
and invest net premiums for any other variable life
insurance policies issued in the future by the Company.
Although the assets in the Variable Account are the
property of the Company, the assets in the Variable
Account attributable to the Policies generally are not
chargeable with liabilities arising out of any other
business which the Company may conduct. The assets of the
Variable Account are available to cover the general
liabilities of the Company only to the extent that the
Variable Account's assets exceed its liabilities arising
under the Policies and any other policies supported by
the Variable Account. The Company has the right to
transfer to the General Account any assets of the
Variable Account which are in excess of such reserves and
other policy liabilities.
The Variable Account currently is divided into six
Subaccounts but may, in the future, include additional
subaccounts. Each Subaccount invests exclusively in
shares of a single corresponding Portfolio of the Fund.
Income and realized and unrealized gains or losses from
the assets of each Subaccount are credited to or charged
against, that Subaccount without regard to income, gains
or losses from any other Subaccount.
The Variable Account has been registered as a unit
investment trust under the Investment Company Act of 1940
and meets the definition of a separate account under the
federal securities laws. Registration with the Securities
and Exchange Commission does not involve supervision of
the management or investment practices or policies of the
Variable Account or the Company by the Commission. The
Variable Account is also subject to the laws of the State
of Iowa which regulate the operations of insurance
companies domiciled in Iowa.
- --------------------------------------------------------------------------------
FBL VARIABLE
INSURANCE SERIES FUND
The Variable Account invests in shares of the Fund, a
mutual fund of the series type with six investment
Portfolios. The Fund currently has a Growth Common Stock
Portfolio, High Grade Bond Portfolio, High Yield Bond
Portfolio, Managed Portfolio, Money Market Portfolio and
Blue Chip Portfolio. The Fund may, in the future, provide
for additional portfolios. Each Portfolio has its own
investment objectives and the income and losses for each
Portfolio of the Fund will be determined separately.
The investment objectives and policies of each Portfolio
are summarized below. There is no assurance that any
Portfolio will achieve its stated objectives. More
detailed information, including a description of risks,
may be found in the prospectus for the Fund, which must
accompany or precede this Prospectus and which should be
read carefully and retained for future reference.
GROWTH COMMON STOCK PORTFOLIO. This Portfolio seeks
long-term capital appreciation with current income as
a secondary objective. The Portfolio will pursue
these objectives by investing in common stocks which
appear to the Fund's investment adviser to possess
above-average potential for appreciation in market
value.
HIGH GRADE BOND PORTFOLIO. This Portfolio seeks as
high a level of current income as is consistent with
a high quality portfolio of debt securities. The
Portfolio will pursue this objective by investing
primarily in debt securities rated AAA, AA or A by
Standard & Poor's Corporation and/or Aaa, Aa or A by
Moody's Investors Service, Inc., and in securities
issued or guaranteed by the United States government
or its agencies or instrumentalities.
10
<PAGE>
HIGH YIELD BOND PORTFOLIO. This Portfolio seeks, as a
primary objective, as high a level of current income
as is consistent with investment in a portfolio of
fixed-income securities rated in the lower categories
of established rating services. As a secondary
objective, the Portfolio seeks capital appreciation
when consistent with its primary objective. The
Portfolio pursues these objectives by investing
primarily in fixed-income securities rated Baa or
lower by Moody's Investors Service, Inc. and/or BBB
or lower by Standard & Poor's Corporation, or in
unrated securities of comparable quality. AN
INVESTMENT IN THIS PORTFOLIO MAY ENTAIL GREATER THAN
ORDINARY FINANCIAL RISK. (See the Fund Prospectus
"PRINCIPAL RISK FACTORS--Special Considerations--High
Yield Bonds.")
MANAGED PORTFOLIO. This Portfolio seeks the highest
total investment return of income and capital
appreciation. The Portfolio will pursue this
objective through a fully managed investment policy
consisting of investments in the following three
market sectors: (i) common stocks and other equity
securities of the type in which the Growth Common
Stock Portfolio may invest; (ii) high quality debt
securities and preferred stocks of the type in which
the High Grade Bond Portfolio may invest; and (iii)
high quality short-term money market instruments of
the type in which the Money Market Portfolio may
invest.
MONEY MARKET PORTFOLIO. This Portfolio seeks maximum
current income consistent with liquidity and
stability of principal. The Portfolio will pursue
this objective by investing in high quality
short-term money market instruments. AN INVESTMENT IN
THE MONEY MARKET PORTFOLIO IS NEITHER INSURED NOR
GUARANTEED BY THE U.S. GOVERNMENT. THERE CAN BE NO
ASSURANCE THAT THE MONEY MARKET PORTFOLIO WILL BE
ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00
PER SHARE.
BLUE CHIP PORTFOLIO. This Portfolio seeks growth of
capital and income. The Portfolio pursues this
objective by investing primarily in common stocks of
well-capitalized, established companies. Because this
Portfolio may be invested heavily in particular
stocks or industries, an investment in this Portfolio
may entail relatively greater risk of loss.
The Fund currently sells shares only to the Variable
Account and a separate account of the Company supporting
variable annuity contracts. The Fund may in the future
sell shares to other separate accounts of the Company or
its life insurance company affiliates supporting other
variable insurance products, or to variable life
insurance and variable annuity separate accounts of
insurance companies not affiliated with the Company. The
Company currently does not foresee any disadvantages to
Policyowners arising from the sale of shares to support
its variable annuity contracts or that would arise if the
Fund were to offer its shares to support products other
than the Policies or such variable annuity contracts.
However, the management of the Fund
intends to monitor events in order to identify any
material irreconcilable conflicts that might possibly
arise if the Fund were to offer the shares to support
products other than the Policies or such variable annuity
contracts. In that event, it would determine what action,
if any, should be taken in response to those events or
conflicts. In addition, if the Company believes that the
Fund's response to any of those events or conflicts
insufficiently protects Policyowners, it will take
appropriate action on its own, including withdrawing the
Variable Account's investment in the Fund. (See the Fund
Prospectus for more detail.)
FBL Investment Advisory Services, Inc. (the "Adviser")
serves as investment adviser to the Fund and manages its
assets in accordance with policies, programs and
guidelines established by the Trustees of the Fund. The
Adviser is a wholly-owned, indirect subsidiary of the
Company. As compensation for the advisory and management
11
<PAGE>
services provided by the Adviser, the Fund has agreed to
pay the Adviser an annual management fee, accrued daily
and payable monthly, based on an annual percentage of the
average daily net assets of each Portfolio as follows:
<TABLE>
<CAPTION>
AVERAGE DAILY NET
ASSETS
------------------------------------
FIRST SECOND OVER
$200 $200 $400
PORTFOLIO MILLION MILLION MILLION
----------- ---------- -----------
<S> <C> <C> <C>
Growth Common Stock............................................ 0.50 % 0.45 % 0.40 %
High Grade Bond................................................ 0.30 % 0.275 % 0.25 %
High Yield Bond................................................ 0.50 % 0.45 % 0.40 %
Managed........................................................ 0.55 % 0.50 % 0.45 %
Money Market................................................... 0.30 % 0.275 % 0.25 %
Blue Chip...................................................... 0.20 % 0.20 % 0.20 %
</TABLE>
The Adviser, at its expense, furnishes the Fund with
office space and facilities, simple business equipment,
advisory, research and statistical facilities, and
clerical services and personnel to administer the
business affairs of the Fund. The Fund pays its other
expenses. The Adviser has agreed to reimburse the Fund to
the extent that the annual operating expenses (including
the investment advisory fee but excluding brokerage,
interest, taxes and extraordinary expenses) of any
Portfolio of the Fund exceed 1.50% of average daily net
assets of that Portfolio for any fiscal year of the Fund.
This reimbursement agreement will remain in effect as
long as the Investment Advisory agreement remains in
effect and cannot be changed without shareholder
approval. Additionally, the Adviser has agreed to
reimburse any Portfolio for calendar year 1996 to the
extent that annual operating expenses, including the
investment advisory fee, exceed .55%. There can be no
assurance that the Adviser will continue to limit
expenses beyond December 31, 1996. (See "CHARGES AND
DEDUCTIONS--Variable Account Charges--FUND EXPENSES.")
The Fund is registered with the Securities and Exchange
Commission as an open-end, diversified management
investment company. Such registration does not involve
supervision of the management or investment practices or
policies of the Fund by the Securities and Exchange
Commission.
- --------------------------------------------------------------------------------
ADDITION, DELETION OR
SUBSTITUTION OF
INVESTMENTS
The Company reserves the right, subject to compliance
with applicable law, to make additions to, deletions from
or substitutions for the shares of the mutual fund
Portfolios that are held by the Variable Account or that
the Variable Account may purchase. If the shares of a
Portfolio are no longer available for investment or if,
in its judgment, further investment in any Portfolio
should become inappropriate in view of the purposes of
the Variable Account, the Company reserves the right to
dispose of the shares of any Portfolio of the Fund and to
substitute shares of another Portfolio of the Fund or of
another open-end, registered management investment
company. The Company will not substitute any shares
attributable to a Policyowner's Cash Value in the
Variable Account without notice to and prior approval of
the Securities and Exchange Commission, to the extent
required by the Investment Company Act of 1940 or other
applicable law. Nothing contained in this Prospectus
shall prevent the Variable Account from purchasing other
securities for other series or classes of policies, or
from permitting a conversion between series or classes of
policies on the basis of requests made by Policyowners.
The Company also reserves the right to establish
additional subaccounts of the Variable Account, each of
which would invest in shares of a new portfolio of the
Fund, or in shares of another investment company, with a
specified investment objective. New subaccounts may be
established when, in the sole discretion of the Company,
marketing, tax or investment conditions warrant, and any
new subaccounts may be made available to existing
Policyowners on a basis to be determined by the Company.
Subject to obtaining any approvals or consents required
by applicable law, the assets
12
<PAGE>
of one or more Subaccounts may be transferred to any
other Subaccount(s), or one or more Subaccounts may be
eliminated or combined with any other Subaccount(s) if,
in the sole discretion of the Company, marketing, tax or
investment conditions warrant.
In the event of any such substitution or change, the
Company may, by appropriate endorsement, make such
changes in these and other policies as may be necessary
or appropriate to reflect such substitution or change. If
deemed by the Company 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, may be
deregistered under that Act in the event such
registration is no longer required, or, subject to
obtaining any approvals or consents required by
applicable law, may be combined with other Company
separate accounts. To the extent permitted by applicable
law, the Company may also transfer the assets of the
Variable Account associated with the Policies to another
separate account. In addition, the Company may, when
permitted by law, restrict or eliminate any voting rights
of Policyowners or other persons who have voting rights
as to the Variable Account. (See "ADDITIONAL
INFORMATION--Voting Rights.")
- --------------------------------------------------------------------------------
THE POLICY
- --------------------------------------------------------------------------------
PURPOSE OF THE POLICY
The Policy is designed to provide the Policyowner with
both lifetime insurance protection and significant
flexibility in connection with the amount and frequency
of premium payments and the level of death proceeds
payable under a Policy. Unlike conventional life
insurance, the Policyowner is not required to pay
scheduled premiums to keep a Policy in force, but may,
subject to certain limitations, vary the frequency and
amount of premium payments. Moreover, the Policy allows a
Policyowner to adjust the level of death proceeds payable
under a Policy, without having to purchase a new policy,
by increasing or decreasing the Specified Amount. Thus,
as insurance needs or financial conditions change, the
Policyowner has the flexibility to adjust death proceeds
and vary premium payments.
The Policy varies from conventional fixed-benefit life
insurance in a number of additional respects. Because the
death proceeds may, and the Cash Value will, vary with
the investment experience of the chosen Subaccounts, the
Policyowner bears the investment risk of any depreciation
of, but reaps the benefit of any appreciation in, the
value of the underlying assets. As a result, whether or
not a Policy continues in force may depend in part upon
the investment experience of the chosen Subaccounts. The
failure to pay a planned periodic premium will not
necessarily cause the Policy to lapse, but the Policy
could lapse even if planned periodic premiums have been
paid, depending upon the investment experience of the
Variable Account.
Life Insurance is not a short-term investment.
Prospective policyowners should consider their need for
insurance coverage and the Policy's long-term investment
potential. A prospective policyowner who already has life
insurance coverage should consider whether or not
changing or adding to existing coverage would be
advantageous. Generally, it is not advisable to purchase
another policy to replace an existing policy.
- --------------------------------------------------------------------------------
PURCHASING THE POLICY
Before it will issue a Policy, the Company must receive a
completed application, including payment of the initial
premium, at its Home Office. A Policy ordinarily will be
issued only for Insureds who are 0 to 80 years of age at
their last birthday and who supply satisfactory evidence
of insurability to the Company. Acceptance is subject to
the Company's underwriting rules and the Company may, in
its sole discretion, reject any application or premium
for any reason. The minimum Specified Amount for which a
Policy will be issued is normally $25,000, although the
Company may, in its discretion, issue Policies with
Specified Amounts of less than $25,000.
The Policy Date will be the later of (i) the date of the
initial application, or (ii) if additional medical or
other information is required pursuant to the Company's
underwriting rules, the date all such additional
information is received by the
13
<PAGE>
Company at its Home Office. The Policy Date may also be
any other date mutually agreed to by the Company and the
Policyowner. If the later of (i) and (ii) above is the
29th, 30th or 31st of any month, the Policy Date will be
the 28th of such month. The Policy Date is the date used
to determine Policy Years, Policy Months and Policy
Anniversaries. The Policy Date may, but will not always,
coincide with the effective date of insurance coverage
under the Policy.
The effective date of insurance coverage under the Policy
will be the later of (i) the Policy Date, (ii) if an
amendment to the initial application is required pursuant
to the Company's underwriting rules, the date the Insured
signs the last such amendment, or (iii) the date on which
the full initial premium is received by the Company at
its Home Office.
- --------------------------------------------------------------------------------
PREMIUMS
Subject to certain limitations, a Policyowner has
flexibility in determining the frequency and amount of
premiums.
PREMIUM FLEXIBILITY. Unlike conventional insurance
policies, the Policy frees the Policyowner from the
requirement that premiums be paid in accordance with a
rigid and inflexible premium schedule. The Company may
require the Policyowner to pay an initial premium equal
to the greater of $100 or an amount that, when reduced by
the premium expense charge (see "CHARGES AND
DEDUCTIONS--Premium Expense Charge"), will be sufficient
to pay the monthly deduction for the first three Policy
Months. Thereafter, subject to the minimum and maximum
premium limitations described below, a Policyowner may
also make unscheduled premium payments at any time prior
to the Maturity Date.
PLANNED PERIODIC PREMIUMS. Each Policyowner will
determine a planned periodic premium schedule that
provides for the payment of a level premium over a
specified period of time on a quarterly, semi-annual or
annual basis. The Company may, at its discretion, permit
planned periodic payments to be made on a monthly basis.
Periodic reminder notices ordinarily will be sent to the
Policyowner for each planned periodic premium. Depending
on the duration of the planned periodic premium schedule,
the timing of planned payments could affect the tax
status of the Policy. (See "FEDERAL TAX MATTERS.")
The Policyowner is not required to pay premiums in
accordance with the planned periodic premium schedule.
Furthermore, the Policyowner has considerable flexibility
to alter the amount, frequency and the time period over
which planned periodic premiums are paid; however, no
planned periodic payment may be less than $100 without
the Company's consent. Changes in the planned premium
schedule may have federal income tax consequences. (See
"FEDERAL TAX MATTERS.")
The payment of a planned periodic premium will not
guarantee that the Policy remains in force. Instead, the
duration of the Policy depends upon the Policy's Cash
Value. Thus, even if planned periodic premiums are paid
by the Policyowner, the Policy will nevertheless lapse if
Net Cash Value is insufficient on a Monthly Deduction Day
to cover the monthly deduction (see "CHARGES AND
DEDUCTIONS--Monthly Deduction") and a Grace Period
expires without a sufficient payment (see "THE
POLICY--Policy Lapse and Reinstatement--LAPSE").
UNSCHEDULED PREMIUMS. Each unscheduled premium payment
must be at least $100; however, the Company may, in its
discretion, waive this minimum requirement. The Company
reserves the right to limit the number and amount of
unscheduled premium payments. An unscheduled premium
payment may have federal income tax consequences. (See
"FEDERAL TAX MATTERS.")
PREMIUM LIMITATIONS. In no event may the total of all
premiums paid, both planned periodic and unscheduled,
exceed the applicable maximum premium limitation imposed
by federal tax laws. Because the maximum premium
limitation is in part dependent upon the Specified Amount
for each Policy, changes in the Specified Amount may
affect this limitation. If at any time a premium is paid
which would result in total premiums exceeding the
applicable maximum premium limitation, the
14
<PAGE>
Company will accept only that portion of the premium
which will make total premiums equal the maximum. Any
part of the premium in excess of that amount will be
returned and no further premiums will be accepted until
allowed by the applicable maximum premium limitation.
PAYMENT OF PREMIUMS. Payments made by the Policyowner
will be treated first as payment of any outstanding
Policy Debt unless the Policyowner indicates that the
payment should be treated otherwise. Where no indication
is made, any portion of a payment that exceeds the amount
of any outstanding Policy Debt will be treated as a
premium payment.
NET PREMIUMS. The Net Premium is the amount available
for investment. The Net Premium equals the premium paid
less the premium expense charge. (See "CHARGES AND
DEDUCTIONS--Premium Expense Charge.")
ALLOCATION OF NET PREMIUMS. In the application for a
Policy, the Policyowner can allocate Net Premiums or
portions thereof to the Subaccounts, to the Declared
Interest Option, or both. Notwithstanding the allocation
in the application, the Net Premiums will first be
allocated to the Money Market Subaccount as of the Issue
Date. When the Company receives, at its Home Office, a
notice signed by the Policyowner that the Policy has been
received and accepted, the Policy's Cash Value in the
Money Market Subaccount automatically will be allocated,
without charge, among the Subaccounts and the Declared
Interest Option in accordance with the Policyowner's
percentage allocation in the application. The Policyowner
does not waive his cancellation privilege by sending the
signed notice of receipt and acceptance of the Policy to
the Company (see "THE POLICY--Examination of Policy
(Cancellation Privilege)").
Net Premiums received after the date the Company receives
the signed notice will be allocated in accordance with
the Policyowner's percentage allocation in the
application or the most recent written instructions of
the Policyowner. The minimum percentage of each premium
that may be allocated to any subaccount of the Variable
Account or to the Declared Interest Option is 10%; no
fractional percentages will be permitted. The allocation
for future Net Premiums may be changed without charge, at
any time while the Policy is in force, by providing the
Company with written notice on a form acceptable to the
Company signed by the Policyowner. The change will take
effect on the date the written notice is received at the
Home Office and will have no effect on prior cash values.
- --------------------------------------------------------------------------------
POLICY LAPSE AND
REINSTATEMENT
LAPSE. Unlike conventional life insurance policies, the
failure to make a planned periodic premium payment will
not itself cause a Policy to lapse. Lapse will occur only
when Net Cash Value is insufficient on a Monthly
Deduction Day to cover the monthly deduction (see
"CHARGES AND DEDUCTIONS--Monthly Deduction") and a Grace
Period expires without a sufficient payment. Insurance
coverage will continue during the Grace Period, but the
Policy will be deemed to have no Cash Value for purposes
of Policy Loans and surrenders during such Grace Period.
The death proceeds payable during the Grace Period will
equal the amount of the death proceeds payable
immediately prior to the commencement of the Grace
Period, reduced by any due and unpaid monthly deductions.
To avoid lapse and termination of the Policy without
value, the Company must receive from the Policyowner
during the Grace Period a premium payment that, when
reduced by the premium expense charge (see "CHARGES AND
DEDUCTIONS-- Premium Expense Charge"), will be at least
equal to three times the monthly deduction due on the
Monthly Deduction Day immediately preceding the Grace
Period (see "CHARGES AND DEDUCTIONS--Monthly Deduction").
A Grace Period of 61 days will commence on the date the
Company sends a notice of any insufficiency to the
Policyowner.
15
<PAGE>
REINSTATEMENT. Prior to the Maturity Date, a lapsed
Policy may be reinstated at any time within five years
of the Monthly Deduction Day immediately preceding the
Grace Period which expired without payment of the
required premium. Reinstatement is effected by submitting
the following items to the Company:
1. A written application for reinstatement signed by the
Policyowner and the Insured;
2. Evidence of insurability satisfactory to the Company;
3. A premium that, after the deduction of the premium
expense charge, is at least sufficient to keep the
Policy in force for three months; and
4. An amount equal to the monthly cost of insurance for
the two Policy Months prior to lapse.
(State law may limit the premium to be paid on
reinstatement to an amount less than that described.) To
the extent that the first year monthly administrative
charge was not deducted for a total of twelve Policy
Months prior to lapse, such charge will continue to be
deducted following reinstatement of the Policy until such
charge has been assessed, both before and after the
lapse, for a total of 12 Policy Months. (See "CHARGES AND
DEDUCTIONS--Monthly Deduction.") The Company will not
reinstate a Policy surrendered for its Cash Value. The
lapse of a Policy with loans outstanding may have adverse
tax consequences (see "FEDERAL TAX MATTERS-- Policy
Proceeds").
The effective date of the reinstated Policy will be the
Monthly Deduction Day coinciding with or next following
the date the Company approves the application for
reinstatement.
- --------------------------------------------------------------------------------
EXAMINATION OF POLICY
The Policyowner may cancel the Policy by delivering or
mailing written notice or
(CANCELLATION
PRIVILEGE)
sending a telegram to the Company at its Home Office, and
returning the Policy to the Company at its Home Office
before midnight of the twentieth day after the
Policyowner receives the Policy. Notice given by mail and
return of the Policy by mail are effective on being
postmarked, properly addressed and postage prepaid.
With respect to all Policies, the Company will refund,
within seven days after receipt of satisfactory notice of
cancellation and the returned Policy at its Home Office,
an amount equal to the sum of (a) the Cash Value of the
Policy on the Business Day on or next following the date
the Policy is received by the Company at its Home Office,
(b) any premium expense charges which were deducted from
premiums, (c) monthly deductions made on the Policy Date
and any Monthly Deduction Day, and (d) amounts
approximating the daily mortality and expense risk
charges against the Variable Account.
- --------------------------------------------------------------------------------
SPECIAL TRANSFER
PRIVILEGE
A Policyowner may, at any time prior to the Maturity Date
while the Policy is in force, convert the Policy to a
flexible premium fixed-benefit life insurance policy by
requesting that all of the Cash Value in the Variable
Account be transferred to the Declared Interest Option.
The Policyowner may exercise this special transfer
privilege once each Policy Year. Once a Policyowner
exercises the special transfer privilege, all future
premium payments automatically will be credited to the
Declared Interest Option, until such time as the
Policyowner requests a change in allocation. No charge
will be imposed for any transfers resulting from the
exercise of the special transfer privilege.
- --------------------------------------------------------------------------------
EXCHANGE PRIVILEGE
The Company will permit the owner of a flexible premium
fixed-benefit life insurance policy issued by the Company
or Western Farm Bureau Life Insurance Company (a company
held by the same holding company as the Company)
("fixed-benefit policy"), within 12 months of the policy
date shown in such policy, to exchange his fixed-benefit
policy for a Policy on the life of the Insured.
The Policy Date will be the date the application for the
Policy is signed. The Policy will have a Specified Amount
equal to the specified amount of the fixed-benefit
policy. No evidence of insurability is required to
exercise this privilege. The Insured will be
16
<PAGE>
placed in the premium class applicable to the initial
specified amount under the fixed-benefit policy, unless
there has been an underwritten increase in specified
amount, in which event the Insured will be placed, with
respect to the entire Specified Amount under the Policy,
in the premium class applicable to such increase in
specified amount.
The net cash value of the fixed-benefit policy will
initially be allocated to the Money Market Subaccount.
When the Company receives, at its Home Office, a notice
signed by the Policyowner that the Policy has been
received and accepted, the policy's cash value in the
Money Market Subaccount automatically will be allocated,
without charge, among the Subaccounts and the Declared
Interest Option pursuant to the allocation instructions
set forth in the application for the Policy.
The Company will waive the sales charge and premium taxes
(see "CHARGES AND DEDUCTIONS--Premium Expense
Charge--SALES CHARGE, and--PREMIUM TAXES") on the net
cash value of the fixed-benefit policy applied to the
Policy pursuant to the exchange. In addition, the Company
will assess the First Year Monthly Administrative Charge
(see "CHARGES AND DEDUCTIONS--Monthly Deduction--FIRST
YEAR MONTHLY ADMINISTRATIVE CHARGE") only to the extent
that 12 monthly per $1,000 charges under the
fixed-benefit policy have not been assessed. Otherwise,
charges and deductions will be made in the manner and
amounts described elsewhere in this Prospectus.
An exchanging owner will not be permitted to carry over
an outstanding loan under his fixed-benefit policy. Any
outstanding loan and loan interest may be repaid prior to
the date of exchange. If not repaid prior to the date of
exchange, the amount of the outstanding loan and interest
thereon will be reflected in the net cash value of the
fixed-benefit policy. To the extent a fixed-benefit
policy with an outstanding loan is exchanged for an
unencumbered Policy, the exchanging owner could recognize
income at the time of the exchange up to the amount of
such loan (including any due and unpaid interest on such
loan). (See "FEDERAL TAX MATTERS--Tax Treatment of Policy
Benefits.")
- --------------------------------------------------------------------------------
POLICY BENEFITS
- --------------------------------------------------------------------------------
While a Policy is in force, it provides for certain
benefits prior to the Maturity Date. Subject to certain
limitations, the Policyowner may at any time obtain all
or a portion of the Net Cash Value by completely or
partially surrendering the Policy. (See "POLICY
BENEFITS--Cash Value Benefits--SURRENDER PRIVILEGES.") In
addition, the Policyowner has certain policy loan
privileges under the Policies. (See "POLICY
BENEFITS--Loan Benefits--POLICY LOANS.") The Policy also
provides for the payment of death proceeds upon the death
of the Insured under one of two death benefit options
selected by the Policyowner (see "POLICY BENEFITS--Death
Proceeds-- DEATH BENEFIT OPTIONS"), and benefits upon the
maturity of a Policy (see "POLICY BENEFITS--Benefits at
Maturity").
- --------------------------------------------------------------------------------
CASH VALUE BENEFITS
SURRENDER PRIVILEGES. At any time prior to the Maturity
Date while the Policy is in force, a Policyowner may
surrender the Policy in whole or in part by sending a
written request to the Company at its Home Office. A
nominal Surrender Charge to cover the cost of processing
the surrender will be payable upon complete surrender and
upon each partial surrender. The charge is equal to the
lesser of $25 or 2.0% of the amount requested. (See
"CHARGES AND DEDUCTIONS--Surrender Charge.") Surrender
proceeds ordinarily will be mailed to the Policyowner
within seven days after the Company receives a signed
request for a surrender at its Home Office, although
payments may be postponed under certain circumstances.
(See "GENERAL PROVISIONS--Postponement of Payments.")
COMPLETE SURRENDERS. The amount payable on complete
surrender of the Policy is the Net Cash Value at the end
of the Valuation Period during which the request is
received less the Surrender Charge. This amount may be
paid in a lump sum or under one of the payment options
specified in the Policy, as requested by the Policyowner.
(See
17
<PAGE>
"POLICY BENEFITS--Payment Options.") If the entire Net
Cash Value is surrendered, all insurance in force will
terminate. For a discussion of the tax consequences
associated with Complete Surrenders, see "FEDERAL TAX
MATTERS."
PARTIAL SURRENDERS. A Policyowner may obtain a portion
of the Policy's Net Cash Value upon partial surrender of
the Policy. A partial surrender must be at least $500 and
cannot exceed the lesser of (1) the Net Cash Value less
$500 or (2) 90% of the Net Cash Value. The Surrender
Charge will be deducted from the amount surrendered. The
Policyowner may request that the proceeds of a partial
surrender be paid in a lump sum or under one of the
payment options specified in the Policy. (See "POLICY
BENEFITS--Payment Options.")
A partial surrender will be allocated among the
Subaccounts and the Declared Interest Option in
accordance with the written instructions of the
Policyowner. If no such instructions are received with
the request for partial surrender, the partial surrender
will be allocated among the Subaccounts and the Declared
Interest Option in the same proportion that the Cash
Value in each of the Subaccounts and the Cash Value in
the Declared Interest Option, reduced by any outstanding
Policy Debt, bears to the total Cash Value on the date
the request is received at the Home Office.
Partial surrenders will affect both the Policy's Cash
Value and the death proceeds payable under the Policy.
The Policy's Cash Value will be reduced by the amount of
the partial surrender. If the death benefit payable under
either death benefit option both before and after the
partial surrender is equal to the Cash Value multiplied
by the specified amount factor set forth in the Policy, a
partial surrender will result in a reduction in death
proceeds equal to the amount of the partial surrender,
multiplied by the specified amount factor then in effect.
If the death benefit is not so affected by the specified
amount factor, the reduction in death proceeds will be
equal to the partial surrender. (See "POLICY
BENEFITS--Death Proceeds.")
Partial surrenders will reduce the Policy's Specified
Amount by the amount of Cash Value surrendered if Option
B is in effect at the time of the surrender. If Option A
is in effect at the time of the surrender, there will be
no effect on Specified Amount. (See "POLICY
BENEFITS--Death Proceeds--DEATH BENEFIT OPTIONS.") The
Specified Amount remaining in force after a partial
surrender may not be less than the minimum Specified
Amount for the Policy in effect on the date of the
partial surrender, as published by the Company. As a
result, the Company will not process any partial
surrender that would reduce the Specified Amount below
this minimum. If increases in the Specified Amount
previously have occurred, a partial surrender will first
reduce the Specified Amount of the most recent increase,
then the next most recent increases successively, then
the coverage under the original application. Thus, a
partial surrender may either increase or decrease the
amount of the cost of insurance charge, depending upon
the particular circumstances. (See "CHARGES AND
DEDUCTIONS--Monthly Deduction--COST OF INSURANCE.") For a
discussion of the tax consequences associated with
partial surrenders, see "FEDERAL TAX MATTERS".
NET CASH VALUE. Net Cash Value equals the Policy's Cash
Value reduced by any outstanding Policy Debt and
increased by any unearned loan interest.
CALCULATION OF CASH VALUE. The Policy provides for the
accumulation of Cash Value. Cash Value will be
determined on each Business Day. A Policy's Cash Value
will reflect a number of factors, including Net Premiums
paid, partial surrenders, Policy Loans, charges assessed
in connection with the Policy, the interest earned on the
Cash Value in the Declared Interest Option and the
investment performance of the Subaccounts to which the
Cash Value is allocated. There is no guaranteed minimum
Cash Value. The Cash Value of the Policy is equal to the
sum of the Cash Values in each Subaccount, plus the Cash
Value in the Declared Interest Option, including amounts
transferred to the Declared Interest Option to secure
outstanding Policy Debt.
As of the Issue Date, the Policy's Cash Value equals the
initial Net Premium less the monthly deduction made on
the Policy Date.
18
<PAGE>
On the Business Day coinciding with or immediately
following the date the Company receives notice that the
Policy has been received and accepted by the Policyowner,
the Policy's Cash Value (all of which is in the Money
Market Subaccount) will be transferred automatically
among the Subaccounts and the Declared Interest Option in
accordance with such percentage allocation instructions.
At the end of each Valuation Period thereafter, the Cash
Value in a Subaccount will equal:
(1) The total Subaccount units represented by the
cash value at the end of the preceding valuation
period, multiplied by the Subaccount's unit value
for the current valuation period; PLUS
(2) Any Net Premiums received during the current
Valuation Period which are allocated to the
Subaccount; PLUS
(3) All Cash Values transferred to the Subaccount
from the Declared Interest Option or from another
Subaccount during the current Valuation Period;
MINUS
(4) All Cash Values transferred from the Subaccount
to another Subaccount or to the Declared Interest
Option during the current Valuation Period,
including amounts transferred to the Declared
Interest Option to secure Policy Debt; MINUS
(5) All partial surrenders from the Subaccount during
the current Valuation Period; MINUS
(6) The portion of any monthly deduction charged to
the Subaccount during the current Valuation Period
to cover the Policy Month following the Monthly
Deduction Day.
The Policy's total Cash Value in the Variable Account
equals the sum of the Policy's Cash Value in each
Subaccount.
UNIT VALUE. Each Subaccount has a Unit Value. When Net
Premiums are allocated to, or other amounts are
transferred into, a Subaccount, a number of units are
purchased based on the Unit Value of the Subaccount as of
the end of the Valuation Period during which the transfer
is made. Likewise, when amounts are transferred out of a
Subaccount, units are redeemed on the same basis. On any
day, a Policy's Cash Value in a Subaccount is equal to
the number of units held in such Subaccount, multiplied
by the Unit Value of such Subaccount on that date.
For each Subaccount, the Unit Value was initially set at
$10 when the Subaccount first purchased shares of the
designated Portfolio. The Unit Value for each subsequent
valuation period is calculated by dividing (a) by (b)
where:
(a) is (1) the Net Asset Value of the net assets of
the Subaccount at the end of the preceding
Valuation Period, plus (2) the investment income
and capital gains, realized or unrealized,
credited to the net assets of that Subaccount
during the Valuation Period for which the Unit
Value is being determined, minus (3) the capital
losses, realized or unrealized, charged against
those assets during the Valuation Period, minus
(4) any amount charged against the Subaccount for
taxes, or any amount set aside during the
Valuation Period by the Company as a provision for
taxes attributable to the operation or maintenance
of that Subaccount; and minus (5) a charge no
greater than .0024548% of the average daily net
assets of the Subaccount for each day in the
Valuation Period. This corresponds to an effective
annual rate of .90% of the average daily net
assets of the Subaccount for mortality and expense
risks incurred in connection with the Policies.
(b) is the number of units outstanding at the end of
the preceding Valuation Period.
19
<PAGE>
The Unit Value for a Valuation Period applies for each
day in the period. The assets in the Variable Account
will be valued at their fair market value in accordance
with accepted accounting practices and applicable laws
and regulations.
- --------------------------------------------------------------------------------
TRANSFERS
Policyowners may transfer amounts among the Subaccounts
an unlimited number of times in a Policy Year; however,
only one transfer per Policy Year may be made between the
Declared Interest Option and the Variable Account.
Transfers are made by written request to the Home Office
or, if the Policyowner has elected the "Telephone
Transfer Authorization" on the supplemental application,
by calling the Home Office toll-free at (800) 247-4170.
The amount of the transfer must be at least $100 or the
total Cash Value in the Subaccount or in the Declared
Interest Option (reduced, in the case of the Declared
Interest Option, by any outstanding Policy Debt), if less
than $100. The Company may, at its discretion, waive the
$100 minimum requirement. The transfer will be effective
as of the end of the Valuation Period during which the
request is received at the Home Office.
The first transfer in each Policy Year will be made
without charge; each time amounts are subsequently
transferred in that Policy Year, a transfer charge of $25
will be assessed. The transfer charge, unless paid in
cash, will be deducted from the amount transferred. The
$25 charge is the Company's estimate of the average
actual cost of present and future typical transfers; the
Company does not expect to make a profit from the process
of executing transfers. Once a Policy is issued, the
amount of the transfer charge is guaranteed for the life
of the Policy. (See "CHARGES AND DEDUCTIONS--Transfer
Charge.")
For purposes of these limitations and charges, all
transfers effected on the same day will be considered a
single transfer.
- --------------------------------------------------------------------------------
LOAN BENEFITS
POLICY LOANS. So long as the Policy remains in force and
has a positive Net Cash Value, a Policyowner may borrow
money from the Company at any time using the Policy as
the sole security for the Policy Loan. A loan taken from,
or secured by, a Policy may have federal income tax
consequences. (See "FEDERAL TAX MATTERS.")
The maximum amount that may be borrowed at any time is
90% of the Cash Value as of the end of the Valuation
Period during which the request for the Policy Loan is
received at the Home Office, less any previously
outstanding Policy Debt. The Company's claim for
repayment of Policy Debt has priority over the claims of
any assignee or other person.
During any time that there is outstanding Policy Debt,
payments made by the Policyowner will be treated first as
payment of outstanding Policy Debt, unless the
Policyowner indicates that the payment should be treated
otherwise. Where no indication is made, any portion of a
payment that exceeds the amount of any outstanding Policy
Debt will be treated as a premium payment.
ALLOCATION OF POLICY LOAN. When a Policy Loan is made,
an amount equal to the Policy Loan will be segregated
within the Declared Interest Option as security for the
Policy Loan. If, immediately prior to the Policy Loan,
the Cash Value in the Declared Interest Option less
Policy Debt outstanding is less than the amount of such
Policy Loan, the difference will be transferred from the
subaccounts of the Variable Account, which have Cash
Value, in the same proportions that the Policy's Cash
Value in each Subaccount bears to the Policy's total Cash
Value in the Variable Account. Cash Values will be
determined as of the end of the Valuation Period during
which the request for the Policy Loan is received at the
Home Office.
Loan proceeds will normally be mailed to the Policyowner
within seven days after receipt of a written request.
Postponement of a Policy Loan may take place under
certain circumstances. (See "GENERAL
PROVISIONS--Postponement of Payments.")
Amounts segregated within the Declared Interest Option as
security for Policy Debt will bear interest at an
effective annual rate set by the Company. (See "POLICY
BENEFITS--Loan Benefits--EFFECT ON INVESTMENT
PERFORMANCE.")
20
<PAGE>
LOAN INTEREST CHARGED. The interest rate charged on
Policy Loans is not fixed. Initially, it will be the
rate shown in the Policy on the policy data page. The
Company may at any time elect to change the interest
rate, subject to the following conditions: (i) the rate
may not exceed 7.4% per year in advance (which is equal
to an effective rate of 8.0%); (ii) any increase in the
interest rate may not exceed 1.0% per calendar year; and
(iii) changes in the interest rate may not occur more
often than once in any twelve-month period. The Company
will send notice of any change in rate to the
Policyowner. The new rate will take effect on the Policy
Anniversary coinciding with or next following the date
the rate is changed.
Interest is payable in advance at the time any Policy
Loan is made (for the remainder of the Policy Year) and
on each Policy Anniversary thereafter (for the entire
Policy Year) so long as there is Policy Debt outstanding.
Interest payable at the time a Policy Loan is made will
be subtracted from the loan proceeds. Thereafter,
interest not paid when due will be added to the existing
Policy Debt and bear interest at the same rate charged
for Policy Loans. The amount equal to unpaid interest
will be segregated within the Declared Interest Option in
the same manner that amounts for Policy Loans are
segregated within the Declared Interest Option. (See
"POLICY BENEFITS-- Loan Benefits--ALLOCATION OF POLICY
LOAN.")
Because interest is charged in advance, any interest that
has not been earned will be added to the death benefit
payable at the Insured's death and to the Cash Value upon
complete surrender, and will be credited to the Cash
Value in the Declared Interest Option upon repayment of
Policy Debt.
EFFECT ON INVESTMENT PERFORMANCE. Amounts transferred
from the Variable Account as security for Policy Debt
will no longer participate in the investment performance
of the Variable Account. All amounts held in the Declared
Interest Option as security for Policy Debt will be
credited with interest on each Monthly Deduction Day at
an effective annual rate of between 4.5% and 6.0%, as
determined and declared by the Company. No additional
interest will be credited to these amounts. The interest
credited will remain in the Declared Interest Option
unless and until transferred by the Policyowner to the
Variable Account, but will not be segregated within the
Declared Interest Option as security for Policy Debt.
Even though Policy Debt may be repaid in whole or in part
at any time prior to the Maturity Date if the Policy is
still in force, Policy Loans will affect the Cash Value
of a Policy and may affect the death proceeds payable.
The effect could be favorable or unfavorable depending
upon whether the investment performance of the
Subaccount(s) from which the Cash Value was transferred
is less than or greater than the interest rates actually
credited to the Cash Value segregated within the Declared
Interest Option as security for Policy Debt while Policy
Debt is outstanding. In comparison to a Policy under
which no Policy Loan was made, Cash Value will be lower
where such interest rates credited were less than the
investment performance of the Subaccount(s), but will be
greater where such interest rates were greater than the
performance of the Subaccount(s). In addition, death
proceeds will reflect a reduction of the death benefit by
any outstanding Policy Debt.
POLICY DEBT. Policy Debt equals the sum of all unpaid
Policy Loans and any due and unpaid policy loan
interest. Policy Debt is not included in Net Cash Value
and therefore Net Cash Value is reduced by the amount of
any Policy Debt. If Net Cash Value is insufficient on a
Monthly Deduction Day to cover the monthly deduction (see
"Charges and Deductions--Monthly Deduction"), the Company
will notify the Policyowner. To avoid lapse and
termination of the Policy without value (see "THE
POLICY--Policy Lapse and Reinstatement--LAPSE"), the
Policyowner must, during the Grace Period, make a premium
payment that, when reduced by the premium expense charge
(see "CHARGES AND DEDUCTIONS--Premium Expense Charge"),
will be at least equal to three times the monthly
deduction due on the Monthly Deduction Day immediately
preceding the Grace Period (see "CHARGES AND
DEDUCTIONS--Monthly Deduction"). Therefore the greater
the Policy Debt under a Policy, the more likely it would
be to lapse.
21
<PAGE>
REPAYMENT OF POLICY DEBT. Policy Debt may be repaid in
whole or in part any time during the Insured's life and
before the Maturity Date so long as the Policy is in
force. Any Policy Debt not repaid is subtracted from the
death benefit payable at the Insured's death, from Cash
Value upon complete surrender or from the maturity
benefit. Any payments made by a Policyowner will be
treated first as the repayment of any outstanding Policy
Debt, unless the Policyowner indicates otherwise. Upon
repayment of Policy Debt, the portion of the Cash Value
in the Declared Interest Option securing the repaid
portion of the Policy Debt will no longer be segregated
within the Declared Interest Option as security for
Policy Debt, but will remain in the Declared Interest
Option unless and until transferred to the Variable
Account by the Policyowner.
For a discussion of the tax consequences associated with
Policy Loans and lapses, see "FEDERAL TAX MATTERS."
- --------------------------------------------------------------------------------
DEATH PROCEEDS
So long as the Policy remains in force, the Policy
provides for the payment of death proceeds upon the death
of the Insured. Proceeds will be paid to the primary
Beneficiary or a contingent Beneficiary. One or more
primary Beneficiaries or contingent Beneficiaries may be
named. If no Beneficiary survives the Insured, the death
proceeds will be paid to the Policyowner or his estate.
Death proceeds may be paid in a lump sum or under a
payment option. (See "POLICY BENEFITS--Payment Options.")
To determine the death proceeds, the death benefit will
be reduced by any outstanding Policy Debt and increased
by any unearned loan interest and any premiums paid after
the date of death. Proceeds will ordinarily be mailed to
the Policyowner within seven days after receipt by the
Company of Due Proof of Death. Payment may, however, be
postponed under certain circumstances. (See "GENERAL
PROVISIONS--Postponement of Payments.") The Company pays
interest on those proceeds, at a rate of no less than
3.0%, from the date of death to the date payment is made.
DEATH BENEFIT OPTIONS. Policyowners designate in the
initial application one of two death benefit options
offered under the Policy. The amount of the death benefit
payable under a Policy will depend upon the option in
effect at the time of the Insured's death. Under Option
A, the death benefit will be equal to the greater of (i)
the sum of the current Specified Amount and the Cash
Value, or (ii) the Cash Value multiplied by the specified
amount factor. Cash Value will be determined as of the
end of the Business Day coinciding with or immediately
following the date of death. The specified amount factor
is 2.50 for an Insured Attained Age 40 or below on the
date of death. For Insureds with an Attained Age over 40
on the date of death, the factor declines with age as
shown in the Specified Amount Factor Table in Appendix B.
Accordingly, under Option A, the death proceeds will
always vary as the Cash Value varies (but will never be
less than the Specified Amount). Policyowners who prefer
to have favorable investment performance and additional
premiums reflected in increased death benefits generally
should select Option A.
Under Option B, the death benefit will be equal to the
greater of the current Specified Amount or the Cash Value
(determined as of the end of the Business Day coinciding
with or immediately following the date of death)
multiplied by the specified amount factor. The specified
amount factor is the same as under Option A: 2.50 for an
Insured Attained Age 40 or below on the date of death,
and for Insureds with an Attained Age over 40 on the date
of death, the factor declines with age as shown in the
Specified Amount Factor Table in Appendix B. Accordingly,
under Option B the death benefit will remain level at the
Specified Amount unless the Cash Value multiplied by the
specified amount factor exceeds the current Specified
Amount, in which case the amount of the death benefit
will vary as the Cash Value varies. Policyowners who are
satisfied with the amount of their insurance coverage
under the Policy and who prefer to have favorable
investment performance and additional premiums reflected
in higher Cash Value, rather than increased death
benefits, generally should select Option B.
Examples illustrating Option A and Option B can be found
in Appendix B.
22
<PAGE>
CHANGE IN DEATH BENEFIT OPTION. The death benefit option
in effect may be changed at any time by sending a
written request for the change to the Company at its Home
Office. The effective date of such a change will be the
Monthly Deduction Day coinciding with or immediately
following the date the change is approved by the Company.
A change in death benefit options may have federal income
tax consequences. (See "FEDERAL TAX MATTERS.")
If the death benefit option is changed from Option A to
Option B, the current Specified Amount will not change.
If the benefit option is changed from Option B to Option
A, the current Specified Amount will be reduced by an
amount equal to the Cash Value on the effective date of
the change. A change in the death benefit option may not
be made if it would result in a Specified Amount which is
less than the minimum Specified Amount in effect on the
effective date of the change or if after the change the
Policy would no longer qualify as life insurance under
federal tax law.
No charges will be imposed in connection with a change in
death benefit option; however, a change in death benefit
option will affect the cost of insurance charges. (See
"CHARGES AND DEDUCTIONS--Monthly Deduction--COST OF
INSURANCE.")
CHANGE IN EXISTING COVERAGE. After a Policy has been in
force for one Policy Year, a Policyowner may adjust the
existing insurance coverage by increasing or decreasing
the Specified Amount. To make a change, the Policyowner
must send a written request to the Company at its Home
Office. Any change in the Specified Amount may affect the
cost of insurance rate and the net amount at risk, both
of which will affect a Policyowner's cost of insurance
charge. (See "CHARGES AND DEDUCTIONS-- Monthly
Deduction--COST OF INSURANCE RATE, and--NET AMOUNT AT
RISK.") If decreases in the Specified Amount cause the
premiums paid to exceed the maximum premium limitations
imposed by federal tax law (see "THE POLICY--Premiums--
PREMIUM LIMITATIONS"), the decrease will be limited to
the extent necessary to meet these requirements. A change
in existing coverage may have federal income tax
consequences. (See "FEDERAL TAX MATTERS--Tax Treatment of
Policy Benefits.")
Any decrease in the Specified Amount will become
effective on the Monthly Deduction Day coinciding with or
immediately following the date the request is approved by
the Company. The decrease will first reduce the Specified
Amount provided by the most recent increase, then the
next most recent increases successively, then the
Specified Amount under the original application. The
Specified Amount following a decrease can never be less
than the minimum Specified Amount for the Policy in
effect on the date of the decrease.
To apply for an increase, evidence of insurability
satisfactory to the Company must be provided. Any
approved increase will become effective on the Monthly
Deduction Day coinciding with or immediately following
the date the request is approved by the Company. An
increase will not become effective, however, if the
Policy's Cash Value on the effective date would not be
sufficient to cover the deduction for the increased cost
of the insurance for the next Policy Month.
CHANGES IN INSURANCE PROTECTION. A Policyowner may
increase or decrease the pure insurance protection
provided by a Policy--the difference between the death
benefit and the Cash Value--in one of several ways as
insurance needs change. These ways include increasing or
decreasing the Specified Amount of insurance, changing
the level of premium payments and, to a lesser extent,
partially surrendering Cash Value. Although the
consequences of each of these methods will depend upon
the individual circumstances, they may be summarized as
follows:
(a) A decrease in the Specified Amount will, subject
to the applicable specified amount factor
limitations (see "POLICY BENEFITS--Death
Proceeds-- DEATH BENEFIT OPTIONS"), decrease the
pure insurance protection and the cost of
insurance charges under the Policy without
generally reducing the Cash Value.
23
<PAGE>
(b) An increase in the Specified Amount may increase
the amount of pure insurance protection, depending
on the amount of Cash Value and the resultant
applicable specified amount factor. If the
insurance protection is increased, the cost of
insurance charge generally will increase as well.
(c) If Option B is elected, an increased level of
premium payments will increase the Cash Value and
reduce the pure insurance protection, until the
Cash Value multiplied by the applicable specified
amount factor exceeds the Specified Amount.
Increased premiums should also increase the amount
of funds available to keep the Policy in force.
(d) If Option B is elected, a reduced level of
premium payments generally will increase the
amount of pure insurance protection, depending on
the applicable specified amount factor. It also
will result in a reduced amount of Cash Value and
will increase the possibility that the Policy will
lapse.
(e) A partial surrender will reduce the death
benefit. (See "POLICY BENEFITS-- Cash Value
Benefits--SURRENDER PRIVILEGES.") However, it only
affects the amount of pure insurance protection if
the death benefit payable is based on the
specified amount factor, because otherwise the
decrease in the benefit is offset by the amount of
Cash Value withdrawn. The primary use of a partial
surrender is to withdraw cash and reduce Cash
Value.
In comparison, an increase in the death benefit due to
the operation of the specified amount factor occurs
automatically and is intended to help assure that the
Policy remains qualified as life insurance under federal
tax law. The calculation of the death benefit based upon
the specified amount factor occurs only when the Cash
Value of a Policy reaches a certain proportion of the
Specified Amount (which may or may not occur). Additional
premium payments, favorable investment performance and
large initial premiums tend to increase the likelihood of
the specified amount factor becoming operational after
the first few Policy Years. Such increases will be
temporary, however, if the investment performance becomes
unfavorable and/or premium payments are stopped or
decreased.
- --------------------------------------------------------------------------------
ACCELERATED PAYMENTS
OF DEATH PROCEEDS
In the event that the Insured becomes terminally ill (as
defined below), the Policyowner (if residing in a state
that has approved such an endorsement) may, by written
request and subject to the conditions stated below, have
the Company pay all or a portion of the accelerated death
benefit immediately to the Policyowner. If not attached
to the Policy beforehand, the Company will issue an
accelerated death benefit endorsement (the "Endorsement")
providing for this right.
For this purpose, an Insured is terminally ill when a
physician (as defined by the Endorsement) certifies that
he or she has a life expectancy of 12 months or less.
The accelerated death benefit is equal to the Policy's
death benefit as described on page 6, up to a maximum of
$250,000 (the $250,000 maximum applies in aggregate to
all policies issued by the Company on the Insured), less
an amount representing a discount for 12 months at the
interest rate charged for loans under the Policy. The
accelerated death benefit does not include the amount of
any death benefit payable under a rider that covers the
life of someone other than the Insured.
In the event that there is a loan outstanding under the
Policy on the date that the Policyowner requests a
payment under the Endorsement, the accelerated death
benefit is reduced by a portion of the outstanding loan
in the same proportion that the requested payment under
the Endorsement bears to the total death benefit under
the Policy. If the amount requested by the Policyowner to
be paid under the Endorsement is less than the total
death benefit under the Policy and the Specified Amount
of the Policy is equal to or greater than the minimum
Specified Amount, the Policy will remain in force with
all values and benefits under the Policy being reduced in
the same proportion that the new Policy benefit bears to
the Policy benefit before exercise of the Endorsement.
24
<PAGE>
There are several other restrictions associated with the
Endorsement. These are: (1) the Endorsement is not valid
if the Policy is within five years of being matured, (2)
the consent of any irrevocable beneficiary or assignee is
required to exercise the Endorsement, (3) the Company
reserves the right, in its sole discretion, to require
the consent of the Insured or of any beneficiary,
assignee, spouse or other party of interest before
permitting the exercise of the Endorsement, (4) the
Company reserves the right to obtain the concurrence of a
second medical opinion as to whether any Insured is
terminally ill and (5) the Endorsement is not effective
where (a) the Insured or the Policyowner would be
otherwise required by law to use the Endorsement to meet
the claims of creditors, or (b) the Insured would be
otherwise required by any government agency to exercise
the Endorsement in order to apply for, obtain or keep a
government benefit or entitlement.
The Endorsement will terminate at the earlier of the end
of the grace period for which any premium is unpaid, upon
receipt in the Home Office of a written request from the
Policyowner to cancel the Endorsement or upon termination
of the Policy.
The tax consequences associated with the addition of, or
the payment from, an accelerated death benefit
endorsement are unclear. A tax adviser should be
consulted on these matters before adding such an
Endorsement to a Policy.
- --------------------------------------------------------------------------------
BENEFITS AT MATURITY
If the Insured is alive and the Policy is in force on the
Maturity Date, the Company will pay to the Policyowner
the Policy's Cash Value as of the end of the Business Day
coinciding with or immediately following the Maturity
Date, reduced by any outstanding Policy Debt. (See
"POLICY BENEFITS--Loan Benefits--REPAYMENT OF POLICY
DEBT.") Benefits at maturity may be paid in a lump sum or
under a payment option. The Maturity Date is Attained Age
95.
- --------------------------------------------------------------------------------
PAYMENT OPTIONS
Death proceeds and Cash Value paid at maturity or upon
complete or partial surrender of a Policy may be paid in
whole or in part under a payment option. There are
currently six payment options available. Payments may
also be made under any new payment option available at
the time proceeds become payable. In addition, proceeds
may be paid in any other manner acceptable to the
Company.
An option may be designated in the application or by
notifying the Company in writing at its Home Office.
During the life of the Insured, the Policyowner may
select a payment option; in addition, during that time
the Policyowner may change a previously selected option
by sending written notice to the Company requesting the
cancellation of the prior option and the designation of a
new option. If the Policyowner has not chosen an option
prior to the Insured's death, the Beneficiary may choose
an option. The Beneficiary may change a payment option by
sending a written request to the Company, provided that a
prior option chosen by the Policyowner is not in effect.
If no option is chosen, the Company will pay the proceeds
of the Policy in one sum. The Company will also pay the
proceeds in one sum if, (i) the proceeds are less than
$2,000; (ii) periodic payments would be less than $20; or
(iii) the payee is an assignee, estate, trustee,
partnership, corporation or association.
Amounts paid under a payment option are paid pursuant to
a payment contract and will not depend upon the
investment performance of the Variable Account. Proceeds
applied under a payment option earn interest at a rate
guaranteed to be no less than 3.0% compounded yearly. The
Company may be crediting higher interest rates on the
effective date of the payment contract. The Company may,
but is not obligated to, declare additional interest to
be applied to such funds.
If a payee dies, any remaining payments will be paid to a
contingent payee. At the death of the last payee, the
commuted value of any remaining payments will be paid to
the last payee's estate. A payee may not withdraw funds
under a payment option unless the Company has agreed to
such withdrawal in the payment contract. The Company
reserves the right to defer a withdrawal for up to six
months and to refuse to allow partial withdrawals of less
than $250.
25
<PAGE>
Payments under Options 2, 3, 4, 5 or 6 will begin as of
the date of the Insured's death, on surrender or on the
Maturity Date. Payments under Option 1 will begin at the
end of the first interest period after the date proceeds
are otherwise payable.
OPTION 1--INTEREST INCOME. Periodic payments of
interest earned from the proceeds will be paid.
Payments can be annual, semi-annual, quarterly or
monthly, as selected by the payee, and will begin at
the end of the first period chosen. Proceeds left
under this plan will earn interest at a rate
determined by the Company, in no event less than 3.0%
compounded yearly. The payee may withdraw all or part
of the proceeds at any time.
OPTION 2--INCOME FOR A FIXED PERIOD. Periodic
payments will be made for a fixed period not longer
than 30 years. Payments can be annual, semi-annual,
quarterly or monthly. Guaranteed amounts payable
under the plan will earn interest at a rate
determined by the Company, in no event less than 3.0%
compounded yearly.
OPTION 3--LIFE INCOME WITH TERM CERTAIN. Equal
periodic payments will be made for a guaranteed
minimum period elected. If the payee lives longer
than the minimum period, payments will continue for
his or her life. The minimum period can be 0, 5, 10,
15 or 20 years. Guaranteed amounts payable under this
plan will earn interest at a rate determined by the
Company, in no event less than 3.0% compounded
yearly.
OPTION 4--INCOME OF A FIXED AMOUNT. Equal periodic
payments of a definite amount will be paid. Payments
can be annual, semi-annual, quarterly or monthly. The
amount paid each period must be at least $20 for each
$1,000 of proceeds. Payments will continue until the
proceeds are exhausted. The last payment will equal
the amount of any unpaid proceeds. Unpaid proceeds
will earn interest at a rate determined by the
Company, in no event less than 3.0% compounded
yearly.
OPTION 5--JOINT AND TWO-THIRDS SURVIVOR MONTHLY LIFE
INCOME. Equal monthly payments will be made for as
long as two payees live. The guaranteed amount
payable under this plan will earn interest at a
minimum rate of 3.0% compounded yearly. When one
payee dies, payments of two-thirds of the original
monthly payment will be made to the surviving payee.
Payments will stop when the surviving payee dies.
OPTION 6--JOINT AND SURVIVOR MONTHLY LIFE
INCOME. Equal monthly payments will be made as long
as the principal payee lives. The guaranteed amount
payable will earn interest at a minimum rate of 3.0%
compounded yearly. When the principal payee dies,
payments of 50% of the original payments will be paid
to the surviving payee for the balance of the
surviving payee's life.
- --------------------------------------------------------------------------------
CHARGES AND DEDUCTIONS
- --------------------------------------------------------------------------------
Charges will be deducted in connection with the Policy to
compensate the Company for providing the insurance
benefits set forth in the Policy and any additional
benefits added by rider, for distributing and
administering the Policy, for applicable taxes and for
assuming certain risks in connection with the Policy. The
nature and amount of these charges are described more
fully below.
- --------------------------------------------------------------------------------
PREMIUM EXPENSE
CHARGE
Prior to allocation of Net Premiums among the Subaccounts
and the Declared Interest Option, premiums paid will be
reduced by a premium expense charge consisting of a sales
charge and a charge for premium taxes. The premium less
the premium expense charge equals the Net Premium.
SALES CHARGE. A sales charge of 5.0% of the premium will
be deducted from each premium to compensate the Company
for expenses incurred in distributing the Policy. These
expenses include agent sales commissions, the cost of
printing prospectuses and sales literature, and
advertising costs. The sales charge in any Policy Year is
not necessarily related to actual distribution expenses
incurred in that year. Instead, the Company expects to
incur the majority of distribution expenses in the
26
<PAGE>
early Policy Years and to recover any deficiency over the
life of the Policy and from the Company's general assets,
including amounts derived from the mortality and expense
risk charge and from mortality gains.
PREMIUM TAXES. Various states and subdivisions thereof
impose a tax on premiums received by insurance
companies. Therefore, the premium expense charge
currently includes a deduction of 2.0% of every premium
for these taxes. Premium taxes vary from state to state.
The deduction represents an amount the Company considers
necessary to pay all premium taxes imposed by the states
and any subdivisions thereof. The Company reserves the
right to change the amount of this premium tax charge.
- --------------------------------------------------------------------------------
MONTHLY DEDUCTION Charges will be deducted monthly from the Cash Value of
each Policy ("monthly deduction") to compensate the
Company for the cost of insurance coverage and any
additional benefits added by rider (See "GENERAL
PROVISIONS--Additional Insurance Benefits"), for
underwriting and start-up expenses in connection with
issuing a Policy and for certain administrative costs.
The monthly deduction will be deducted on the Policy Date
and on each Monthly Deduction Day. It will be deducted
from the Declared Interest Option and each Subaccount in
the same proportion that the Policy's Net Cash Value in
the Declared Interest Option and the Policy's Cash Value
in each Subaccount bear to the total Net Cash Value of
the Policy. For purposes of making deductions from the
Declared Interest Option and the Subaccounts, Cash Values
will be determined as of the end of the Business Day
coinciding with or immediately following the Monthly
Deduction Day. Because portions of the monthly deduction,
such as the cost of insurance, can vary from month to
month, the monthly deduction itself will vary in amount
from month to month.
The monthly deduction will be made on the Business Day
coinciding with or immediately following each Monthly
Deduction Day and will equal:
(a) the cost of insurance for the Policy; plus
(b) the cost of any optional insurance benefits added
by rider; plus
(c) the monthly administrative charge.
During the first twelve Policy Months and during the
twelve Policy Months immediately following an increase in
Specified Amount, the monthly deduction will include a
first year monthly administrative charge.
COST OF INSURANCE. This charge is designed to compensate
the Company for the anticipated cost of paying death
proceeds to Beneficiaries of those Insureds who die prior
to the Maturity Date. The cost of insurance is determined
on a monthly basis, and is determined separately for the
initial Specified Amount and for any subsequent increases
in Specified Amount. The Company will determine the
monthly cost of insurance charge by dividing the
applicable cost of insurance rate, or rates, by 1,000 and
multiplying the result by the net amount at risk for each
Policy Month.
27
<PAGE>
NET AMOUNT AT RISK. Under Option A the net amount at
risk for a Policy Month is equal to (a) divided by (b),
and under Option B the net amount at risk for a Policy
Month is equal to (a) divided by (b), minus (c), where:
(a) is the Specified Amount;
(b) is 1.0036748;(1) and
(c) is the Cash Value.
The Specified Amount and the Cash Value will be
determined as of the end of the Business Day coinciding
with or immediately following the Monthly Deduction Day.
The net amount at risk is determined separately for the
initial Specified Amount and any increases in Specified
Amount. In determining the net amount at risk for each
Specified Amount, the Cash Value will be first considered
a part of the initial Specified Amount. If the Cash Value
exceeds the initial Specified Amount, it will be
considered to be a part of any increase in the Specified
Amount in the same order as the increases occurred.
COST OF INSURANCE RATE. The cost of insurance rate for
the initial Specified Amount will be based on the
Insured's sex, premium class and Attained Age. For any
increase in Specified Amount, the cost of insurance rate
will be based on the Insured's sex, premium class and age
at last birthday on the effective date of the increase.
Actual cost of insurance rates may change and the actual
monthly cost of insurance rates will be determined by the
Company based on its expectations as to future mortality
experience. However, the actual cost of insurance rates
will never be greater than the guaranteed maximum cost of
insurance rates set forth in the Policy. These guaranteed
rates are based on the 1980 Commissioners' Standard
Ordinary Non-Smoker and Smoker Mortality Table. Current
cost of insurance rates are generally less than the
guaranteed maximum rates. Any change in the cost of
insurance rates will apply to all persons of the same
age, sex and premium class whose Policies have been in
force the same length of time.
The cost of insurance rates generally increase as the
Insured's Attained Age increases. The premium class of an
Insured also will affect the cost of insurance rate. The
Company currently places Insureds into a standard premium
class or into premium classes involving a higher
mortality risk. In an otherwise identical Policy,
Insureds in the standard premium class will have a lower
cost of insurance rate than those in premium classes
involving higher mortality risk. The standard premium
class is also divided into three categories: tobacco,
non-tobacco and preferred plus. Non-tobacco-using
Insureds will generally have a lower cost of insurance
rate than similarly situated Insureds who use tobacco,
and preferred plus Insureds will generally have a lower
cost of insurance rate than similarly situated
non-tobacco-using Insureds.
The cost of insurance rate is determined separately for
the initial Specified Amount and for the amount of any
increase in Specified Amount. In calculating the cost of
insurance charge, the rate for the premium class on the
Policy Date will be applied to the net amount at risk for
the initial Specified Amount; for each increase in
Specified Amount, the rate for the premium class
applicable to the increase will be used. However, if the
death benefit is calculated as the Cash Value times the
specified amount factor, the rate for the premium class
for the most recent increase that required evidence of
insurability will be used for the amount of death benefit
in excess of the total Specified Amount.
ADDITIONAL INSURANCE BENEFITS. The monthly deduction
will include charges for any additional benefits
provided by rider. (See "GENERAL PROVISIONS--Additional
Insurance Benefits.")
- ---------
(1)Dividing by 1.0036748 reduces the net amount at risk, solely for the purposes
of computing the cost of insurance, by taking into account assumed monthly
earnings at an annual rate of 4.5%.
28
<PAGE>
MONTHLY ADMINISTRATIVE CHARGE. The Company has primary
responsibility for the administration of the Policy and
the Variable Account. Administrative expenses include
premium billing and collection, recordkeeping, processing
death benefit claims, cash surrenders and Policy changes,
and reporting and overhead costs. As reimbursement for
administrative expenses related to the maintenance of
each Policy and the Variable Account, the Company
assesses a monthly administrative charge against each
Policy. This charge is $3 per Policy Month. Once a Policy
is issued, the amount of this charge is guaranteed for
the life of the Policy. The Company does not anticipate
that it will make any profit on this charge.
The Company may administer the Policy itself, or the
Company may purchase administrative services from such
sources (including affiliates) as may be available. Such
services will be acquired on a basis which, in the
Company's sole discretion, affords the best services at
the lowest cost. The Company reserves the right to select
a company to provide services which the Company deems, in
its sole discretion, is the best able to perform such
services in a satisfactory manner even though the costs
for such services may be higher than would prevail
elsewhere.
FIRST YEAR MONTHLY ADMINISTRATIVE CHARGE. A monthly
administrative charge will be deducted from Cash Value
as part of the monthly deduction during the first twelve
Policy Months and during the twelve Policy Months
immediately following an increase in Specified Amount.
The charge will compensate the Company for first year
underwriting, processing and start-up expenses incurred
in connection with the Policy and the Variable Account.
These expenses include the cost of processing
applications, conducting medical examinations,
determining insurability and the Insured's premium class,
and establishing policy records. The charges deducted
during the first 12 Policy Months will be based on the
Insured's Attained Age. The charges deducted during the
12 Policy Months following any increase in specified
amount will be based on the Insured's age at last
birthday on the effective date of the increase. The
Company does not anticipate that it will make a profit on
this charge.
29
<PAGE>
The first year monthly administrative charge per $1,000
of Specified Amount depends on the Specified Amount of
the Policy and the age of the Insured, as shown in the
following table:
<TABLE>
<CAPTION>
$25,000 $50,000 $100,000
AGE TO 49,999 TO 99,999 TO 249,000 $250,000+
- ---------- ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
0-25 .... $ 0.20 $ 0.15 $ 0.10 $ 0.05
26 ...... 0.21 0.16 0.11 0.06
27 ...... 0.22 0.17 0.12 0.06
28 ...... 0.23 0.18 0.13 0.07
29 ...... 0.24 0.19 0.14 0.07
30 ...... 0.25 0.20 0.15 0.08
31 ...... 0.26 0.21 0.16 0.08
32 ...... 0.27 0.22 0.17 0.09
33 ...... 0.28 0.23 0.18 0.09
34 ...... 0.29 0.24 0.19 0.10
35 ...... 0.30 0.25 0.20 0.10
36 ...... 0.31 0.26 0.21 0.11
37 ...... 0.32 0.27 0.22 0.11
38 ...... 0.33 0.28 0.23 0.12
39 ...... 0.34 0.29 0.24 0.12
40 ...... 0.35 0.30 0.25 0.13
41 ...... 0.36 0.31 0.26 0.13
42 ...... 0.37 0.32 0.27 0.14
43 ...... 0.38 0.33 0.28 0.14
44 ...... 0.39 0.34 0.29 0.15
45 ...... 0.40 0.35 0.30 0.15
46 ...... 0.41 0.36 0.31 0.16
47 ...... 0.42 0.37 0.32 0.16
48 ...... 0.43 0.38 0.33 0.17
49 ...... 0.44 0.39 0.34 0.17
50 ...... 0.45 0.40 0.35 0.18
51 ...... 0.46 0.41 0.36 0.18
52 ...... 0.47 0.42 0.37 0.19
53 ...... 0.48 0.43 0.38 0.19
54 ...... 0.49 0.44 0.39 0.20
55 & up... 0.50 0.45 0.40 0.20
</TABLE>
- --------------------------------------------------------------------------------
TRANSFER CHARGE
A transfer charge of $25 will be imposed for the second
and each subsequent transfer during a Policy Year to
compensate the Company for the costs in effectuating the
transfer. The transfer charge will be deducted from the
amount transferred. Once a Policy is issued, the amount
of this charge is guaranteed for the life of the Policy.
The Company does not expect to make a profit on the
transfer charge. The transfer charge will not be imposed
on transfers that occur as a result of Policy Loans, the
exercise of the special transfer privilege or the initial
allocation of Cash Value among the Subaccounts and the
Declared Interest Option following acceptance of the
Policy by the Policyowner.
Currently there is no charge for changing the net premium
allocation instructions.
- --------------------------------------------------------------------------------
SURRENDER CHARGE
Upon partial or complete surrender of a Policy, a charge
equal to the lesser of $25 or 2.0% of the amount
surrendered will be assessed to compensate the Company
for costs incurred in accomplishing the surrender. The
surrender charge will be deducted from the amount
surrendered. The Company does not anticipate that it will
make any profit on this charge.
- --------------------------------------------------------------------------------
VARIABLE ACCOUNT
CHARGES
MORTALITY AND EXPENSE RISK CHARGE. The Company deducts a
daily mortality and expense risk charge from each
Subaccount at an effective annual rate of .90% of the
average daily net assets of the Subaccounts. This charge
is guaranteed not to increase for the duration of the
Policy. The Company may realize a profit from this
charge.
30
<PAGE>
The mortality risk assumed by the Company is that
Insureds may die sooner than anticipated and therefore,
the Company may pay an aggregate amount of life insurance
proceeds greater than anticipated. The expense risk
assumed is that expenses incurred in issuing and
administering the Policies will exceed the amounts
realized from the administrative charges assessed against
the Policies.
FEDERAL TAXES. Currently no charge is made to the
Variable Account for federal income taxes that may be
attributable to the Variable Account. The Company may,
however, make such a charge in the future. Charges for
other taxes, if any, attributable to the Account may also
be made. (See "FEDERAL TAX MATTERS--Taxation of the
Company.")
FUND EXPENSES. The value of net assets of the Variable
Account will reflect the investment advisory fee and
other expenses incurred by the Fund. The investment
advisory fee is accrued daily and payable monthly, and is
based on an annual percentage of the average daily net
assets of each Portfolio as follows:
<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSETS
------------------------------------
FIRST SECOND OVER
$200 $200 $400
PORTFOLIO MILLION MILLION MILLION
- ------------------------------------------------------------ ----------- ---------- -----------
<S> <C> <C> <C>
Growth Common Stock......................................... 0.50 % 0.45 % 0.40 %
High Grade Bond............................................. 0.30 % 0.275 % 0.25 %
High Yield Bond............................................. 0.50 % 0.45 % 0.40 %
Managed..................................................... 0.55 % 0.50 % 0.45 %
Money Market................................................ 0.30 % 0.275 % 0.25 %
Blue Chip................................................... 0.20 % 0.20 % 0.20 %
</TABLE>
The Adviser, at its expense, furnishes the Fund with
office space and facilities, certain business equipment,
advisory, research and statistical facilities, and
clerical services and personnel to administer the
business affairs of the Fund. The Fund pays its other
expenses. The Adviser has agreed to reimburse the Fund to
the extent that the annual operating expenses (including
the investment advisory fee but excluding brokerage,
interest, taxes and extraordinary expenses) of any
Portfolio of the Fund exceed 1.50% of average daily net
assets of that Portfolio for any fiscal year of the Fund.
However, the amount reimbursed shall not exceed the
amount of the advisory fee paid by the Portfolio for such
period. More detailed information is contained in the
Fund Prospectus which is attached to this Prospectus.
The Adviser has agreed to reimburse any Portfolio for
calendar year 1996 to the extent that annual operating
expenses, including the investment advisory fee, exceed
.55%. There can be no assurance that the Adviser will
continue to limit expenses beyond December 31, 1996.
- --------------------------------------------------------------------------------
THE DECLARED INTEREST OPTION
- --------------------------------------------------------------------------------
Policyowners may allocate Net Premiums and transfer Cash
Value to the Declared Interest Option. BECAUSE OF
EXEMPTIVE AND EXCLUSIONARY PROVISIONS, INTERESTS IN THE
DECLARED INTEREST OPTION HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 AND THE DECLARED INTEREST
OPTION HAS NOT BEEN REGISTERED AS AN INVESTMENT COMPANY
UNDER THE INVESTMENT COMPANY ACT OF 1940. ACCORDINGLY,
NEITHER THE DECLARED INTEREST OPTION NOR ANY INTERESTS
THEREIN ARE SUBJECT TO THE PROVISIONS OF THESE ACTS AND,
AS A RESULT, THE STAFF OF THE SECURITIES AND EXCHANGE
COMMISSION HAS NOT REVIEWED THE DISCLOSURES IN THIS
PROSPECTUS RELATING TO THE DECLARED INTEREST OPTION.
DISCLOSURES REGARDING THE DECLARED INTEREST OPTION MAY,
HOWEVER, BE SUBJECT TO CERTAIN GENERALLY APPLICABLE
PROVISIONS OF THE FEDERAL SECURITIES LAWS RELATING TO THE
ACCURACY AND COMPLETENESS OF STATEMENTS MADE IN
PROSPECTUSES.
- --------------------------------------------------------------------------------
GENERAL DESCRIPTION
The Declared Interest Option is supported by the General
Account. The General Account consists of all assets owned
by the Company other than those in the Variable Account
and other separate accounts. Subject to applicable law,
the Company has sole discretion over the investment of
the assets of the General Account.
31
<PAGE>
A Policyowner may elect to allocate Net Premiums to the
Declared Interest Option, the Variable Account, or both.
The Policyowner may also transfer Cash Value from the
Subaccounts to the Declared Interest Option, or from the
Declared Interest Option to the Subaccounts. The
allocation or transfer of funds to the Declared Interest
Option does not entitle a Policyowner to share in the
investment experience of the General Account. Instead,
the Company guarantees that Cash Value in the Declared
Interest Option will accrue interest at an effective
annual rate of at least 4.5%, independent of the actual
investment experience of the General Account.
- --------------------------------------------------------------------------------
THE POLICY
This Prospectus describes a flexible premium variable
life insurance policy. This Prospectus is generally
intended to serve as a disclosure document for the
aspects of the Policy involving the Variable Account. For
complete details regarding the Declared Interest Option,
see the Policy itself.
- --------------------------------------------------------------------------------
DECLARED INTEREST
OPTION
Net premiums allocated to the Declared Interest Option
are credited to the Policy.
CASH VALUE
The Company bears the full investment risk for these
amounts. The Company guarantees that interest credited to
each Policyowner's Cash Value in the Declared Interest
Option will not be less than an effective annual rate of
4.5%. The Company may, in its sole discretion, credit a
higher rate of interest, although it is not obligated to
credit interest in excess of 4.5% per year, and might not
do so. Any interest credited on the Policy's Cash Value
in the Declared Interest Option in excess of the
guaranteed rate of 4.5% per year will be determined in
the sole discretion of the Company and may be changed at
any time by the Company, in its sole discretion. The
Policyowner assumes the risk that the interest credited
may not exceed the guaranteed minimum rate of 4.5% per
year. The interest credited to the Policy's Cash Value in
the Declared Interest Option that equals Policy Debt may
be greater than 4.5%, but will in no event be greater
than 6.0%. The Cash Value in the Declared Interest Option
will be calculated no less frequently than each Monthly
Deduction Day.
The Company guarantees that, at any time prior to the
Maturity Date, the Cash Value in the Declared Interest
Option will not be less than the amount of the Net
Premiums allocated or Cash Value transferred to the
Declared Interest Option, plus interest at the rate of
4.5% per year, plus any excess interest which the Company
credits, less the sum of all policy charges allocable to
the Declared Interest Option and any amounts deducted
from the Declared Interest Option in connection with
partial surrenders or transfers to the Variable Account.
- --------------------------------------------------------------------------------
TRANSFERS, SURRENDERS
AND POLICY LOANS
Amounts may be transferred between the Subaccounts and
the Declared Interest Option. A transfer charge of $25
will be imposed in connection with the transfer unless
such transfer is the first transfer requested by the
Policyowner during such Policy Year. Unless paid in cash,
the transfer charge will be deducted from the amount
transferred. A Policyowner may make only one transfer
between the Variable Account and the Declared Interest
Option in each Policy Year. No more than 50% of the Net
Cash Value in the Declared Interest Option may be
transferred from the Declared Interest Option unless the
balance in the Declared Interest Option immediately after
the transfer will be less than $1,000. If the balance in
the Declared Interest Option after a transfer would be
less than $1,000, the full Net Cash Value in the Declared
Interest Option may be transferred. A Policyowner may
also make surrenders and obtain Policy Loans from the
Declared Interest Option at any time prior to the
Policy's Maturity Date.
Transfers and surrenders from, and payments of Policy
Loans allocated to, the Declared Interest Option may be
delayed for up to six months.
- --------------------------------------------------------------------------------
GENERAL PROVISIONS
- --------------------------------------------------------------------------------
THE CONTRACT
The Policy is issued in consideration of the statements
in the application and the payment of the initial
premium. The Policy, the application, and any
supplemental applications and endorsements make up the
entire contract. In the absence of fraud, the statements
made in an application or supplemental application will
be treated as
32
<PAGE>
representations and not as warranties. No statement will
void the Policy or be used in defense of a claim unless
contained in the application or any supplemental
application.
- --------------------------------------------------------------------------------
INCONTESTABILITY
The Policy is incontestable, except for fraudulent
statements made in the application or supplemental
applications, after it has been in force during the
lifetime of the Insured for two years from the Policy
Date or date of reinstatement. Any increase in Specified
Amount will be incontestable only after it has been in
force during the lifetime of the Insured for two years
from the effective date of the increase.
- --------------------------------------------------------------------------------
CHANGE OF PROVISIONS
The Company reserves the right to change the Policy, in
the event of future changes in the federal tax law, to
the extent required to maintain the Policy's
qualification as life insurance under federal tax law.
Except as provided in the foregoing paragraph, no one can
change any part of the Policy except the Policyowner and
the President, a Vice President, the Secretary or an
Assistant Secretary of the Company. Both must agree to
any change and such change must be in writing. No agent
may change the Policy or waive any of its provisions.
- --------------------------------------------------------------------------------
MISSTATEMENT OF AGE
OR SEX
If the Insured's age or sex was misstated in the
application, each benefit and any amount to be paid under
the Policy will be adjusted to reflect the correct age
and sex.
- --------------------------------------------------------------------------------
SUICIDE EXCLUSION
If the Policy is in force and the Insured commits
suicide, while sane or insane, within one year from the
Policy Date, life insurance proceeds payable under the
Policy will be limited to all premiums paid, reduced by
any outstanding Policy Debt and any partial surrenders,
and increased by any unearned loan interest. If the
Policy is in force and the Insured commits suicide, while
sane or insane, within one year from the effective date
of any increase in Specified Amount, any increase in the
death benefit resulting from the requested increase in
specified amount will not be paid. Instead, the Company
will refund to the Policyowner an amount equal to the
total cost of insurance applied to the increase.
- --------------------------------------------------------------------------------
ANNUAL REPORT
At least once each year, an annual report will be sent to
each Policyowner. The report will show the current death
benefit, the Cash Value in each Subaccount and in the
Declared Interest Option, outstanding Policy Debt and
premiums paid, partial surrenders made and charges
assessed since the last report. The report will also
include any other information required by state law or
regulation. Further, the Company will send the
Policyowner the reports required by the Investment
Company Act of 1940.
- --------------------------------------------------------------------------------
NON-PARTICIPATION
The Policy does not participate in the Company's profits
or surplus earnings. No dividends are payable.
- --------------------------------------------------------------------------------
OWNERSHIP OF ASSETS
The Company shall have the exclusive and absolute
ownership and control over assets, including the assets
of the Variable Account.
- --------------------------------------------------------------------------------
WRITTEN NOTICE
Any written notice should be sent to the Company at its
Home Office. The notice should include the policy number
and the Insured's full name. Any notice sent by the
Company to a Policyowner will be sent to the address
shown in the application unless an appropriate address
change form has been filed with the Company.
- --------------------------------------------------------------------------------
POSTPONEMENT OF
PAYMENTS
The Company will usually mail the proceeds of complete
surrenders, partial surrenders and Policy Loans within
seven days after the Policyowner's signed request is
received at the Home Office. The Company will usually
mail death proceeds within seven days after receipt of
Due Proof of Death and maturity benefits within seven
days of the Maturity Date. However, payment of any amount
upon complete or partial surrender, payment of any Policy
Loan, and payment of death proceeds or benefits at
maturity may be postponed whenever:
a) the New York Stock Exchange is closed other than
customary weekend and holiday closings, or trading
on the New York Stock Exchange is restricted as
determined by the Securities and Exchange
Commission;
33
<PAGE>
b) the Securities and Exchange Commission by order
permits postponement for the protection of
Policyowners; or
c) an emergency exists, as determined by the
Securities and Exchange Commission, as a result of
which disposal of the securities is not reasonably
practicable or it is not reasonably practicable to
determine the value of the net assets of the
Variable Account.
Transfers may also be postponed under these
circumstances.
Payments under the Policy which are derived from any
amount paid to the Company by check or draft may be
postponed until such time as the Company is satisfied
that the check or draft has cleared the bank upon which
it is drawn.
- --------------------------------------------------------------------------------
CONTINUANCE OF
INSURANCE
The insurance under a Policy will continue until the
earlier of:
a) the end of the Grace Period following the Monthly
Deduction Day on which the Net Cash Value is less
than the monthly deduction for the following
Policy Month;
b) the date the Policyowner surrenders the Policy
for its entire Net Cash Value;
c) the death of the Insured; or
d) the Maturity Date.
Any rider to a Policy will terminate on the date
specified in the rider.
- --------------------------------------------------------------------------------
OWNERSHIP
The Policy belongs to the Policyowner. The original
Policyowner is the person named as owner in the
application. Ownership of the Policy may change according
to the ownership option selected as part of the original
application or by a subsequent endorsement to the Policy.
During the Insured's lifetime, all rights granted by the
Policy belong to the Policyowner, except as otherwise
provided for in the Policy.
Special ownership rules may apply if the Insured is under
legal age (as defined by state law in the state in which
the Policy is delivered) on the Policy Date.
The Policyowner may assign the Policy as collateral
security. The Company assumes no responsibility for the
validity or effect of any collateral assignment of the
Policy. No assignment will bind the Company unless in
writing and until received by the Company at its Home
Office. The assignment is subject to any payment or
action taken by the Company before it received the
assignment at the Home Office.
- --------------------------------------------------------------------------------
THE BENEFICIARY
The primary Beneficiaries and contingent Beneficiaries
are designated by the Policyowner in the application. If
changed, the primary Beneficiary or contingent
Beneficiary is as shown in the latest change filed with
the Company. One or more primary or contingent
Beneficiaries may be named in the application. In such
case, the proceeds will be paid in equal shares to the
survivors in the appropriate beneficiary class, unless
requested otherwise by the Policyowner.
Unless a payment option is chosen, the proceeds payable
at the Insured's death will be paid in a lump sum to the
primary Beneficiary. If the primary Beneficiary dies
before the Insured, the proceeds will be paid to the
contingent Beneficiary. If no Beneficiary survives the
Insured, the proceeds will be paid to the Policyowner or
the Policyowner's estate.
- --------------------------------------------------------------------------------
CHANGING THE
POLICYOWNER
During the Insured's life, the Policyowner and the
Beneficiary may be changed. To make a change, written
request must be sent to the Company at its Home Office.
The
OR BENEFICIARY
request and the change must be in a form satisfactory to
the Company and must actually be received and recorded by
the Company. The change will take effect as of the date
the request is signed by the Policyowner. The change will
be subject to any payment made before the change is
recorded by the Company. The Company may require return
of the Policy for endorsement.
- --------------------------------------------------------------------------------
ADDITIONAL INSURANCE
Subject to certain requirements, one or more of the
following additional insurance
BENEFITS
benefits may be added to a Policy by rider: (i) Universal
Cost of Living Increase;
34
<PAGE>
(ii) Universal Waiver of Charges; (iii) Universal Adult
Term Insurance; (iv) Universal Children's Term Insurance
and (v) Universal Guaranteed Insurability Option. The
cost of any additional insurance benefits will be
deducted as part of the monthly deduction. (See "CHARGES
AND DEDUCTIONS--Monthly Deduction.") Detailed information
concerning available riders may be obtained from the
agent selling the Policy.
- --------------------------------------------------------------------------------
DISTRIBUTION OF THE POLICIES
- --------------------------------------------------------------------------------
The Policies will be sold by individuals who in addition
to being licensed as life insurance agents for the
Company, are also registered representatives of the
principal underwriter of the Policies, FBL Marketing
Services, Inc. ("FBL Marketing"). FBL Marketing, a
corporation organized on May 7, 1970, under the laws of
the State of Delaware, is registered with the Securities
and Exchange Commission under the Securities Exchange Act
of 1934 as a broker-dealer and is a member of the
National Association of Securities Dealers, Inc. FBL
Marketing does not currently retain any compensation for
acting as principal underwriter.
For Policies sold in states other than Kansas, writing
agents will receive commissions based on a commission
schedule and rules. The Company may pay agents first year
commissions at a rate not exceeding 50% of planned
periodic premiums and 4% of unscheduled premiums paid in
the first Policy Year. Agents will be paid renewal
commissions at a rate equal to 5% of planned periodic
premiums and 4% of unscheduled premiums paid after the
first Policy Year. Additional commissions at a rate not
exceeding 50% of the increase in planned periodic
premiums may be paid during the first year following an
increase in Specified Amount.
For Policies sold in Kansas, writing agents will receive
commissions based on a commission schedule and rules. The
Company may pay agents first year commissions at a rate
not exceeding 60% of planned periodic premiums and 3% of
unscheduled premiums paid in the first Policy Year.
Agents will be paid renewal commissions at a rate equal
to 4% of planned periodic premiums and 3% of unscheduled
premiums paid after the first Policy Year. Additional
commissions at a rate not exceeding 60% of the increase
in planned periodic premiums may be paid during the first
year following an increase in Specified Amount.
These commissions (and other distribution expenses, such
as production incentive bonuses, agent's insurance and
pensions benefits, agency management compensation and
bonuses and expense allowances) are paid by the Company.
They do not result in any additional charges against the
Policy that are not described above under "CHARGES AND
DEDUCTIONS."
- --------------------------------------------------------------------------------
FEDERAL TAX MATTERS
- --------------------------------------------------------------------------------
INTRODUCTION
The following discussion is general and is not intended
as tax advice. Any person concerned about these tax
considerations should consult a competent tax adviser.
This discussion is based on 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 current laws and interpretations,
and various changes have been proposed that would alter
these laws in ways that would have significant adverse
impacts. It should be further understood that the
following discussion is not exhaustive and does not
purport to be complete or to cover all situations and
that special rules not described in this Prospectus may
be applicable in certain situations. Moreover, no attempt
has been made to consider any applicable state or other
tax laws.
- --------------------------------------------------------------------------------
TAX STATUS OF THE
POLICY
Section 7702 of the Internal Revenue Code of 1986, as
amended (the "Code") includes a definition of a life
insurance contract for federal tax purposes. The
Secretary of the Treasury (the "Treasury") is authorized
to prescribe regulations interpreting and implementing
section 7702 and has issued proposed regulations on
certain aspects of section 7702. Guidance as to how
section 7702 is to be applied is,
35
<PAGE>
however, limited. If a Policy were determined not to be a
life insurance contract for purposes of section 7702,
such Policy would not provide most of the tax advantages
normally provided by a life insurance policy.
With respect to a Policy issued exclusively on the basis
of a standard premium class, while there is some
uncertainty due to the limited guidance on section 7702,
the Company believes that in light of the proposed
regulations such a Policy should meet the section 7702
definition of a life insurance contract. However, with
respect to a Policy issued in whole or in part on a
substandard basis (i.e., a premium class involving higher
than standard mortality risk), it is not clear whether or
not such a Policy would satisfy section 7702,
particularly if the Policyowner pays the full amount of
premiums permitted under the Policy. If it is
subsequently determined that a Policy does not satisfy
section 7702, the Company will take whatever steps are
appropriate and necessary to attempt to cause such a
Policy to comply with section 7702, including possibly
refunding any premiums paid that exceed the limitations
allowable under section 7702 (together with interest or
other earnings on any such premiums refunded as required
by law). For these reasons, the Company reserves the
right to modify the Policy as necessary to attempt to
qualify it as a life insurance contract under section
7702.
Section 817(h) of the Code authorizes the Treasury to set
standards by regulation or otherwise for the investments
of the Account to be "adequately diversified" in order
for the Policy to be treated as a life insurance contract
for federal tax purposes. The Variable Account, through
the Fund, intends to comply with the diversification
requirements prescribed in Regulations section 1.817-5,
which affect how each Fund's assets may be invested.
Although the investment adviser is an affiliate of the
Company, the Company does not have control over the Fund
or its investments. Nonetheless, the Company believes
that each Portfolio of the Fund in which the Variable
Account owns shares will be operated in compliance with
the requirements prescribed by the Treasury.
In certain circumstances, owners of variable life
insurance contracts may be considered the owners, for
federal income tax purposes, of the assets of the
separate account 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 also
announced, in connection with the issuance of regulations
concerning diversification, that those regulations "do
not provide guidance concerning the circumstances in
which investor control of the investments of a segregated
asset account may cause the investor (I.E., the
Policyowner), 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
subaccounts without being treated as owners of the
underlying assets."
The ownership rights under the Policy are similar to, but
different in certain respects from, those described by
the IRS in rulings in which it was determined that policy
owners were not owners of separate account assets. For
example, a Policyowner has additional flexibility in
allocating premium payments and policy values. These
differences could result in a Policyowner being treated
as the owner of a pro rata portion of the assets of the
Separate 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 has
stated it expects to issue. The Company therefore
reserves the right to modify the Policy as necessary to
attempt to prevent a Policyowner from being considered
the owner of a pro rata share of the assets of the
Separate Account.
The following discussion assumes that the Policy will
qualify as a life insurance contract for federal income
tax purposes.
36
<PAGE>
- --------------------------------------------------------------------------------
TAX TREATMENT OF
POLICY BENEFITS
IN GENERAL. The Company believes that the proceeds and
cash value increases of a Policy should be treated in a
manner consistent with a fixed-benefit life insurance
policy for federal income tax purposes. Thus, the death
benefit under the Policy should be excludable from the
gross income of the Beneficiary under section 101(a)(l)
of the Code.
A change in a Policy's Specified Amount, the payment of
an unscheduled premium, a Policy loan, a partial
withdrawal, a surrender, a lapse with outstanding
indebtedness, a change in death benefit options, the
exchange of a Policy for a fixed-benefit policy (see "THE
POLICY--Special Transfer Privilege"), the assignment of a
Policy or the exercise of the right to change
Policyowners (see "GENERAL PROVISIONS-- Changing the
Policyowner or Beneficiary"), and the addition of, or
payment from, an accelerated death benefit endorsement
may have tax consequences depending upon the
circumstances. In addition, federal estate and state and
local estate, inheritance, and other tax consequences of
ownership or receipt of Policy proceeds depend upon the
circumstances of each Policyowner or Beneficiary. A
competent tax adviser should be consulted for further
information.
The Company further believes that an exchange of a
fixed-benefit policy issued by the Company for a Policy
as provided under "THE POLICY--Exchange Privilege"
generally should be treated as a non-taxable exchange of
life insurance policies within the meaning of section
1035 of the Code. However, in certain circumstances, the
exchanging owner may receive a cash distribution that
might have to be recognized as income to the extent there
was gain in the fixed-benefit policy. Moreover, to the
extent a fixed-benefit policy with an outstanding loan is
exchanged for an unencumbered Policy, the exchanging
owner could recognize income at the time of the exchange
up to the amount of such loan (including any due and
unpaid interest on such loan). An exchanging owner should
consult a tax adviser as to whether an exchange of a
fixed-benefit policy for the Policy will have tax
consequences to such owner.
The Policies may be used in various arrangements,
including nonqualified deferred compensation or salary
continuance plans, split dollar insurance plans,
executive bonus plans, retiree medical benefit plans and
others. The tax consequences of such plans may vary
depending on the particular facts and circumstances of
each individual arrangement. Therefore, if it is
contemplated that a Policy may be used in any arrangement
the value of which depends in part on its tax
consequences, a qualified tax adviser should be consulted
regarding the tax attributes of the particular
arrangement.
Generally, the Policyowner will not be deemed to be in
constructive receipt of the cash value, including
increments thereof, under the Policy until there is a
distribution. The tax consequences of distributions from,
and loans taken from or secured by, a Policy depend on
whether the Policy is classified as a "modified endowment
contract."
Whether a Policy is or is not a modified endowment
contract, upon a complete surrender or lapse of a Policy,
or when benefits are paid at such Policy's maturity date,
if the amount received plus the amount of indebtedness
exceeds the total investment in the Policy, the excess
will generally be treated as ordinary income subject to
tax.
MODIFIED ENDOWMENT CONTRACTS. A Policy may be treated as
a modified endowment contract depending upon the amount
of premiums paid in relation to the death benefit
provided under such Policy. The premium limitation rules
for determining whether a Policy is a modified endowment
contract are extremely complex. In general, however, a
Policy will be a modified endowment contract if the
accumulated premiums paid at any time during the first
seven policy years exceeds the sum of the net level
premiums which would have been paid on or before such
time if the Policy provided for paid-up future benefits
after the payment of seven level annual premiums. In
addition, if a Policy is "materially changed," it may
cause such Policy to be treated as a modified endowment
contract. The material change rules for determining
whether a Policy is a modified endowment contract are
also extremely
37
<PAGE>
complex. In general, however, the determination whether a
Policy will be a modified endowment contract after a
material change generally depends upon the relationship
among the death benefit at the time of such change, the
cash value at the time of such change and the additional
premiums paid in the seven policy years starting with the
date on which the material change occurs.
Due to the Policy's flexibility, classification of a
Policy as a modified endowment contract will depend upon
the circumstances of each Policy. Accordingly, a
prospective Policyowner should contact a competent tax
adviser before purchasing a Policy to determine the
circumstances under which the Policy would be a modified
endowment contract. In addition, a Policyowner should
contact a competent tax adviser before paying any
unscheduled premiums or changing the planned premium
schedule or making any other change to, including an
exchange of, a Policy to determine whether such premium
or change would cause the Policy (or the new Policy in
the case of an exchange) to be treated as a modified
endowment contract.
DISTRIBUTIONS FROM POLICIES CLASSIFIED AS MODIFIED
ENDOWMENT CONTRACTS. Policies classified as modified
endowment contracts are subject to the following tax
rules: First, all distributions, including distributions
upon surrender and benefits paid at maturity, from such a
Policy are treated as ordinary income subject to tax up
to the amount equal to the excess (if any) of the cash
value immediately before the distribution over the
investment in the Policy (described below) at such time.
Second, loans taken from, or secured by, such a Policy
are treated as distributions from such a Policy and taxed
accordingly. In this regard, the Internal Revenue Service
could take the position that capitalized interest on such
loans are to be treated as a taxable distribution. Third,
a 10 percent additional tax is imposed on the portion of
any distribution from, or loan taken from or secured by,
such a Policy that is included in income except where the
distribution or loan is made on or after the Policyowner
attains age 59 1/2, is attributable to the Policyowner's
becoming disabled, or is part of a series of
substantially equal periodic payments for the life (or
life expectancy) of the Policyowner or the joint lives
(or joint life expectancies) of the Policyowner and the
Policyowner's Beneficiary.
If a Policy becomes a modified endowment contract after
it is issued, distributions made during the policy year
in which it becomes a modified endowment contract,
distributions in any subsequent policy year and
distributions within two years before the Policy becomes
a modified endowment contract will be subject to the tax
treatement described above. This means that a
distribution from a Policy that is not a modified
endowment contract could later become taxable as a
distribution from a modified endowment contract.
DISTRIBUTIONS FROM POLICIES NOT CLASSIFIED AS MODIFIED
ENDOWMENT CONTRACTS. Distributions from a Policy that is
not classified as a modified endowment contract are
generally treated as first recovering the investment in
the policy (described below) and then, only after the
return of all such investment in the policy, as
distributing taxable income. An exception to this general
rule occurs in the case of a partial withdrawal, a
decrease in the Specified Amount, or any other change
that reduces benefits under the Policy in the first 15
years after the Policy is issued and that results in a
cash distribution to the Policyowner in order for the
Policy to continue complying with the section 7702
definitional limits. In that case, such distribution will
be taxed in whole or in part as ordinary income (to the
extent of any gain in the Policy) under rules prescribed
in section 7702.
Loans from, or secured by, a Policy that is not a
modified endowment contract are not treated as
distributions. Instead, such loans are treated as
indebtedness of the Policyowner.
Finally, neither distributions (including distributions
upon surrender or lapse) nor loans from, or secured by, a
Policy that is not a modified endowment contract are
subject to the 10 percent additional tax.
38
<PAGE>
POLICY LOAN INTEREST. Interest paid on any loan under a
Policy may not be deductible. Therefore, a Policyowner
should consult a competent tax adviser before deducting
any Policy loan interest.
INVESTMENT IN THE POLICY. Investment in the policy means
(i) the aggregate amount of any premiums or other
consideration paid for a Policy, minus (ii) the aggregate
amount received under the Policy which is excluded from
the gross income of the Policyowner (except that the
amount of any loan from, or secured by, a Policy that is
a modified endowment contract, to the extent such amount
is excluded from gross income, will be disregarded), plus
(iii) the amount of any loan from, or secured by, a
Policy that is a modified endowment contract to the
extent that such amount is included in the gross income
of the Policyowner.
MULTIPLE POLICIES. All modified endowment contracts that
are issued by the Company (or its affiliates) to the
same Policyowner during any calendar year are treated as
one modified endowment contract for purposes of
determining the amount includable in gross income under
section 72(e).
- --------------------------------------------------------------------------------
TAXATION OF THE
COMPANY
At the present time, the Company makes no charge to the
Variable Account, or to the Policy for any Federal, state
or local taxes (other than state premium taxes) that it
incurs that may be attributable to such Account or to the
Policies. The Company, however, reserves the right in the
future to make a charge for any such tax or other
economic burden resulting from the application of the tax
laws that it determines to be properly attributable to
the Variable Account or to the Policies.
- --------------------------------------------------------------------------------
EMPLOYMENT-RELATED
BENEFIT PLANS
The Supreme Court held in ARIZONA GOVERNING COMMITTEE V.
NORRIS that optional annuity benefits provided under an
employer's deferred compensation plan could not, under
Title VII of the Civil Rights Act of 1964, vary between
men and women on the basis of sex. In addition,
legislative, regulatory or decisional authority of some
states may prohibit use of sex-distinct mortality tables
under certain circumstances. The Policy described in this
Prospectus contains guaranteed cost of insurance rates
and guaranteed purchase rates for certain payment options
that distinguish between men and women. Accordingly,
employers and employee organizations should consider, in
consultation with legal counsel, the impact of NORRIS,
and Title VII generally, on any employment-related
insurance or benefit program for which a Policy may be
purchased.
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
SAFEKEEPING OF THE
VARIABLE ACCOUNT'S
ASSETS
The Company holds the assets of the Variable Account. The
assets are kept physically segregated and held separate
and apart from the General Account. The Company maintains
records of all purchases and redemptions of Fund shares
by each of the Subaccounts. Additional protection for the
assets of the Variable Account is afforded by a blanket
fidelity bond issued by National Union Fire Insurance
Company of Pittsburgh in the amount of $5,000,000
covering all the officers and employees of the Company.
- --------------------------------------------------------------------------------
VOTING RIGHTS
To the extent required by law, the Company will vote the
Fund shares held in the Variable Account at regular and
special shareholder meetings of the Fund in accordance
with instructions received from persons having voting
interests in the corresponding Subaccounts. If, however,
the Investment Company Act of 1940 or any regulation
thereunder should be amended or if the present
interpretation thereof should change, and, as a result,
the Company determines that it is permitted to vote the
Fund shares in its own right, it may elect to do so.
The number of votes which a Policyowner has the right to
instruct are calculated separately for each Subaccount
and are determined by dividing a Policy's Cash Value in a
Subaccount by the net asset value per share of the
corresponding Portfolio in which the Subaccount invests.
Fractional shares will be counted. The number of votes of
the Portfolio which the Policyowner has the right to
instruct will be determined as of the date coincident
with the date established by that Portfolio for
determining
39
<PAGE>
shareholders eligible to vote at such meeting of the
Fund. Voting instructions will be solicited by written
communications prior to such meeting in accordance with
procedures established by the Fund. Each person having a
voting interest in a Subaccount will receive proxy
materials, reports and other materials relating to the
appropriate Portfolio.
The Company will vote Fund shares attributable to
Policies as to which no timely instructions are received
(as well as any Fund shares held in the Variable Account
which are not attributable to Policies) in proportion to
the voting instructions which are received with respect
to all Policies participating in each Portfolio. 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 on a matter.
At some future date, Fund shares may also be held by
separate accounts of other affiliated and unaffiliated
insurance companies. The Company expects that those
shares will be voted in accordance with instructions of
the owners of insurance policies and contracts issued by
those other insurance companies. Voting instructions
given by owners of other insurance policies will dilute
the effect of voting instructions of Policyowners.
The Company provided initial capital for the Fund by
purchasing $15 million worth of shares. The Company
intends to vote all shares it owns directly in proportion
to the voting instructions received from Policyowners and
from other owners of variable insurance policies and
variable annuity contracts funded by the Fund that may be
issued by the Company in the future. From time to time
the company withdraws portions of this capital.
DISREGARD OF VOTING INSTRUCTIONS. The Company may, when
required by state insurance regulatory authorities,
disregard voting instructions if the instructions require
that the shares be voted so as to cause a change in the
sub-classification or investment objective of the Fund or
one or more of its Portfolios or to approve or disapprove
an investment advisory contract for a Portfolio of the
Fund. In addition, the Company itself may disregard
voting instructions in favor of changes initiated by a
Policyowner in the investment policy or the investment
adviser of a Portfolio of the Fund if the Company
reasonably disapproves of such changes. A change would be
disapproved only if the proposed change is contrary to
state law or prohibited by state regulatory authorities,
or the Company determined that the change would have an
adverse effect on the General Account in that the
proposed investment policy for a Portfolio may result in
overly speculative or unsound investments. In the event
the Company does disregard voting instructions, a summary
of that action and the reasons for such action will be
included in the next annual report to Policyowners.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
STATE REGULATION OF THE The Company, a stock life insurance company organized under the laws of
COMPANY Iowa, is subject to regulation by the Iowa Insurance Department. An annual
statement is filed with the Iowa Insurance Department on or before March
lst of each year covering the operations and reporting on the financial
condition of the Company as of December 31st of the preceding year.
Periodically, the Iowa Insurance Department examines the liabilities and
reserves of the Company and the Variable Account and certifies their
adequacy, and a full examination of operations is conducted periodically by
the National Association of Insurance Commissioners.
In addition, the Company is subject to the insurance laws and regulations
of other states within which it is licensed or may become licensed to
operate. Generally, the insurance department of any other state applies the
laws of the state of domicile in determining permissible investments.
</TABLE>
40
<PAGE>
- --------------------------------------------------------------------------------
OFFICERS AND
DIRECTORS OF FARM
BUREAU LIFE INSURANCE
COMPANY
<TABLE>
<S> <C>
Kenneth R. Ashby, Director Farmer; President, Utah Farm Bureau Federation and affiliated companies and
Ashby's Valley View Farms; Vice President and Director, Utah Farm Bureau
Insurance Co.; Director, Millard County Water Conservancy District,
American Farm Bureau Federation and affiliated companies, Multi States
Farmers Service Co., FBL Financial Group, Inc. and Universal Assurors Life
Insurance Company
Carroll C. Burling, Director Farmer; President, Burling Farms, Inc.
Al Christopherson, Director Farmer; President, Minnesota Farm Bureau Federation; Director, FBL
Financial Group, Inc., Universal Assurors Life Insurance Company, Farm
Bureau Mutual Insurance Company and FBL Insurance Brokerage, Inc.
Ernest A. Glienke, Director Farmer; Director, Farm Bureau Mutual Insurance Company, FBL Insurance
Brokerage, Inc., Utah Farm Bureau Insurance Company and FBL Financial
Services, Inc.
William C. Hanson, Director Farmer; Director, Rural Mutual Insurance Company and Growmark, Inc.; Vice
President, Midwest Livestock Producers
Craig D. Hill, Director Farmer; President, CAPA Hill, Inc.; Director, Farm Bureau Mutual Insurance
Company, FBL Insurance Brokerage, Inc., Utah Farm Bureau Insurance Company
and FBL Financial Services, Inc.
Daniel L. Johnson, Director Farmer; Farm Bureau Mutual Insurance Company, FBL Insurance Brokerage, Inc.
and FBL Financial Services, Inc.
Richard G. Kjerstad, Director Farmer; President and Director, South Dakota Farm Bureau Federation and
South Dakota Farm Bureau Mutual Insurance Company; Director, FBL Financial
Group, Inc. and Universal Assurors Life Insurance Company
</TABLE>
41
<PAGE>
<TABLE>
<CAPTION>
NAME AND POSITION PRINCIPAL OCCUPATION
WITH THE COMPANY* LAST FIVE YEARS**
- ----------------------------- ---------------------------------------------------------------------------
<S> <C>
Lindsey D. Larsen, Director Farmer; Director, Farm Bureau Mutual
Insurance Company, FBL Insurance Brokerage,
Inc. and FBL Financial Services, Inc.
David R. Machacek, Director Farmer; Director, Farm Bureau Mutual
Insurance Company, FBL Insurance Brokerage,
Inc., and FBL Financial Services, Inc.
Donald O. Narigon, Director Farmer; Director, Farm Bureau Mutual
Insurance Company, FBL Insurance Brokerage,
Inc., and FBL Financial Services, Inc.
Bryce P. Neidig, Director Farmer; President, Nebraska Farm Bureau
Federation, Nebraska Farm Bureau Services,
Inc., Farm Bureau Insurance Company of
Nebraska, Nebraska Farm Bureau Insurance
Agency, Inc.; Director, American Agriculture
Insurance Company, American Agriculture
Insurance Agency, Inc., American Farm Bureau
Service Company, American Farm Bureau
Federation, American Agricultural
Communications Systems, Inc., Western
Agricultural Insurance Co., Western
Agricultural Management Corp., FBL Financial
Group, Inc., Blue Cross/Blue Shield of
Nebraska and Universal Assurors Life
Insurance Company
Bennett M. Osmonson, Director Farmer
Howard D. Poulson, Director Farmer; President, Wisconsin Farm Bureau
Federation, Rural Mutual Insurance Company
and Midwest Livestock Producers; Director,
FBL Financial Group, Inc. and Universal
Assurors Life Insurance Company
Sally A. Puttnam, Director Farmer; Director, Farm Bureau Mutual
Insurance Company, FBL Insurance Brokerage,
Inc. and FBL Financial Services, Inc.
Henry V. Rayhons, Director Farmer; Director, Farm Bureau Mutual
Insurance Company, FBL Insurance Brokerage,
Inc., FBL Financial Services, Inc. and Utah
Farm Bureau Insurance Company
</TABLE>
42
<PAGE>
<TABLE>
<CAPTION>
NAME AND POSITION PRINCIPAL OCCUPATION
WITH THE COMPANY* LAST FIVE YEARS**
- -------------------------------------------- --------------------------------------------
<S> <C>
James E. Sage, Director Farmer; Director, Interstate Producers
Livestock Association, Farm Bureau Mutual
Insurance Company, FBL Insurance Brokerage,
Inc., FBL Financial Services, Inc. and Utah
Farm Bureau Insurance Company
Beverly L. Schnepel, Director Farmer; Director, Farm Bureau Mutual
Insurance Company, FBL Insurance Brokerage,
Inc. and FBL Financial Services, Inc.
F. Gary Steiner, Director Farmer; Director, Wisconsin Farm Bureau
Insurance Company and Bank of Alma (Alma,
WI)
Edward M. Wiederstein, President and Farmer; President and Director, Iowa Farm
Director Bureau Federation, FBL Insurance Brokerage,
Inc., Farm Bureau Mutual Insurance Company,
Utah Farm Bureau Insurance Company, FBL
Financial Services, Inc., Universal Assurors
Life Insurance Company, Farm Bureau
Agricultural Business Corporation and FBL
Financial Group, Inc.; Director, Multi-Pig
Corporaton, Western Farm Bureau Management
Corporation, Western Agricultural Insurance
Company, Western Farm Bureau Life Insurance
Company and American Ag Insurance Company
Craig A. Lang, Vice President and Director Farmer; Director, Growmark, Inc., Western
Farm Bureau Life Insurance Company, Utah
Farm Bureau Insurance Company, Vice
President and Director, Farm Bureau Mutual
Insurance Company, FBL Insurance Brokerage,
Inc. and FBL Financial Services, Inc., Vice
President, Universal Assurors Life Insurance
Company
</TABLE>
43
<PAGE>
<TABLE>
<CAPTION>
NAME AND POSITION PRINCIPAL OCCUPATION
WITH THE COMPANY* LAST FIVE YEARS**
- -------------------------------------------- --------------------------------------------
<S> <C>
Eugene R. Maahs, Senior Vice President and Senior Vice President and Secretary-
Secretary-Treasurer Treasurer, Farm Bureau Mutual Insurance
Company, FBL Insurance Brokerage, Inc.,
Universal Assurors Life Insurance Company,
Utah Farm Bureau Insurance Company, Western
Farm Bureau Life Insurance Company, FBL
Financial Services, Inc. and FBL Financial
Group, Inc.; Senior Vice President and
Assistant Secretary-Treasurer, South Dakota
Farm Bureau Mutual Insurance Company
Stephen M. Morain, Senior Vice President and Senior Vice President and General Counsel,
General Counsel Farm Bureau Life Insurance Company and FBL
Financial Group, Inc.
Thomas R. Gibson, Executive Vice President Executive Vice President and General
and General Manager Manager, Farm Bureau Life Insurance Company
and FBL Financial Group, Inc.
William J. Oddy, Vice President, Chief Vice President, Chief Operating Officer and
Operating Officer and Assistant General Assistant General Manager,
Manager Farm Bureau Life Insurance Company and FBL
Financial Group, Inc.
Timothy J. Hoffman, Vice President, Chief Vice President, Chief Marketing Officer,
Marketing Officer Farm Bureau Life Insurance Company and FBL
Financial Group, Inc.
Richard D. Warming, Vice President, Chief Vice President, Chief Investment Officer and
Investment Officer and Assistant Treasurer Assistant Treasurer, Farm Bureau Life
Insurance Company and FBL Financial Group,
Inc.
James W. Noyce, Vice President, Chief Vice President-Chief Financial Officer,
Financial Officer Farm Bureau Life Insurance Company and FBL
Financial Group, Inc.
Ronald C. Price, Vice President-Agency Vice President-Agency, Farm Bureau Life
Insurance Company
JoAnn W. Rumelhart, Vice President-Life Vice President-Life Operations, Farm Bureau
Operations Life Insurance Company
Monte R. Roumpf, Vice President-Information Vice President-Information Technology, Farm
Technology Bureau Life Insurance Company
W. Kent Fairchild, Vice President-Product Vice President, Product Development and
Development and Marketing Services Marketing Services, Farm Bureau Life
Insurance Company
Lynn E. Wilson, Vice President- Vice President, Multi-State Sales, Farm
Multi-State Sales Bureau Life Insurance Company
</TABLE>
44
<PAGE>
<TABLE>
<CAPTION>
NAME AND POSITION PRINCIPAL OCCUPATION
WITH THE COMPANY* LAST FIVE YEARS**
- -------------------------------------------- --------------------------------------------
<S> <C>
F. Walter Tomenga, Vice President-Corporate Vice President-Corporate Affairs, Farm
Affairs Bureau Life Insurance Company
Robert L. Tatge, Vice President- Vice President-Property/Casualty Operations,
Property/Casualty Operations Farm Bureau Life Insurance Company
Thomas E. Burlingame, Vice President- Vice President-Associate General Counsel,
Associate General Counsel Farm Bureau Life Insurance Company
Donald L. Carter, Life Underwriting Vice Life Underwriting Vice President, Farm
President Bureau Life Insurance Company
T. Edgar Coffman, Technical Services Vice Technical Services Vice President, Farm
President Bureau Life Insurance Company
Joel H. Klisart, Investment Vice President, Investment Vice President, Real Estate, Farm
Real Estate Bureau Life Insurance Company
Kathryn Coleson Horner, Accounting Vice Accounting Vice President, Farm Bureau Life
President Insurance Company
Arlen F. Pence, Benefits and Payroll Vice Benefits and Payroll Vice President, Farm
President Bureau Life Insurance Company
Jeffrey L. Buehler, Information Systems Vice Information Systems Vice President, Farm
President Bureau Life Insurance Company
Douglas M. Childes, Internal Audit Vice Internal Audit Vice President, Farm Bureau
President Life Insurance Company
Kermit J. Larson, Minnesota Agency Vice Minnesota Agency Vice President, Farm Bureau
President Life Insurance Company
Dennis M. Marker, Investment Vice President, Investment Vice President, Administration,
Administration Farm Bureau Life Insurance Company
Larry W. Riley, Utah Agency Vice President Utah Agency Vice President, Farm Bureau Life
Insurance Company
John F. Mottet, Western Iowa Agency Vice Western Iowa Agency Vice President, Farm
President Bureau Life Insurance Company
Richard J. January, South Dakota Agency Vice South Dakota Agency Vice President, Farm
President Bureau Life Insurance Company
Cyrus S. Winters, Northeastern Iowa Agency Northeastern Iowa Agency Vice President,
Vice President Farm Bureau Life Insurance Company
Dale L. Brooks, Property/Casualty Product Property/Casualty Product Development and
Development and Pricing Vice President Pricing Vice President, Farm Bureau Life
Insurance Company
Paul Grinvalds, Financial Planning Vice Financial Planning Vice President, Farm
President Bureau Life Insurance Company
Roger F. Grefe, Investment Management Vice Investment Management Vice President, Farm
President Bureau Life Insurance Company
</TABLE>
45
<PAGE>
<TABLE>
<CAPTION>
NAME AND POSITION PRINCIPAL OCCUPATION
WITH THE COMPANY* LAST FIVE YEARS**
- -------------------------------------------- --------------------------------------------
<S> <C>
Curtis J. Lankford, Farm and Commercial Vice Farm and Commercial Vice President, Farm
President Bureau Life Insurance Company
Thomas E. Eppenauer, Claims Vice President Claims Vice President, Farm Bureau Life
Insurance Company
Oscar J. Olsen, Crop Insurance Vice Crop Insurance Vice President, Farm Bureau
President Life Insurance Company
Richard W. Pope, Automobile and Personal Automobile and Personal Lines Vice
Lines Vice President President, Farm Bureau Life Insurance
Company
Clayton L. Porter, Operations Vice President Operations Vice President, Farm Bureau Life
Insurance Company
Robert J. Rummelhart, Fixed Income Vice Fixed Income Vice President, Farm Bureau
President Life Insurance Company
Lou Ann Sandburg, Investment Vice President, Investment Vice President, Securities, Farm
Securities Bureau Life Insurance Company
Roger PJ Soener, Real Estate Vice President Real Estate Vice President, Farm Bureau Life
Insurance Company
DeWayne E. Stroud, Claims Litigation Vice Claims Litigation Vice President, Farm
President Bureau Life Insurance Company
Terry B. Swim, Information Systems Vice Information Systems Vice President, Farm
President Bureau Life Insurance Company
Christopher L. Van Note, Education Services Education Services Vice President, Farm
Vice President Bureau Life Insurance Company
James P. Brannen, Tax and Investment Tax and Investment Accounting Vice
Accounting Vice President President, Farm Bureau Life Insurance
Company
Ronald J. Palmer, Agency Services Vice Agency Services Vice President, Farm Bureau
President Life Insurance Company
Christopher G. Daniels, Life Product Life Product Development and Pricing Vice
Development and Pricing Vice President President, Farm Bureau Life Insurance
Company
James M. Mincks, Human Resources Vice Human Resources Vice President, Farm Bureau
President Life Insurance Company
</TABLE>
46
<PAGE>
- --------------------------------------------------------------------------------
LEGAL MATTERS
Sutherland, Asbill & Brennan of Washington, D.C. has
provided advice on certain legal matters relating to
federal securities laws applicable to the issuance of the
flexible premium variable life insurance policy described
in this Prospectus. All matters of Iowa law pertaining to
the Policy, including the validity of the Policy and the
Company's right to issue the Policy under Iowa Insurance
Law, have been passed upon by Stephen M. Morain, Senior
Vice President and General Counsel of the Company.
- --------------------------------------------------------------------------------
LEGAL PROCEEDINGS
There are no legal proceedings to which the Variable
Account is a party or to which the assets of the Variable
Account are subject. The Company is not involved in any
litigation that is of material importance in relation to
its total assets or that relates to the Variable Account.
- --------------------------------------------------------------------------------
EXPERTS
The financial statements of the Variable Account at
December 31, 1995 and for each of the three years in the
period ended December 31, 1995, and of the Company at
December 31, 1995 and 1994 and for each of the three
years in the period ended December 31, 1995, appearing
herein, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their respective
reports thereon appearing elsewhere herein and are
included in reliance upon such reports given upon the
authority of such firms as experts in accounting and
auditing.
Actuarial matters included in this Prospectus have been
examined by JoAnn W. Rumelhart, FSA, MAAA, Vice
President-Life Operations, as stated in the opinion filed
as an exhibit to the registration statement.
- --------------------------------------------------------------------------------
OTHER INFORMATION
A registration statement has been filed with the
Securities and Exchange Commission under the Securities
Act of 1933, as amended, with respect to the Policy
offered hereby. This Prospectus does not contain all the
information set forth in the registration statement and
the amendments and exhibits to the registration
statement, to all of which reference is made for further
information concerning the Variable Account, the Company
and the Policy offered hereby. Statements contained in
this Prospectus as to the contents of the Policy and
other legal instruments are summaries. For a complete
statement of the terms thereof, reference is made to such
instruments as filed.
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The Variable Account's statement of net assets as of
December 31, 1995 and the related statements of
operations and changes in net assets for each of the
three years in the period ended December 31, 1995, and
the consolidated balance sheets of the Company at
December 31, 1995 and 1994 and the related consolidated
statements of income, changes in stockholders' equity and
cash flows for each of the three years in the period
ended December 31, 1995, appearing herein, have been
audited by Ernst & Young LLP, independent auditors, as
set forth in their respective reports thereon appearing
elsewhere herein, and are included in reliance upon such
reports given upon the authority of such firm as experts
in accounting and auditing.
47
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Participants
Farm Bureau Life Insurance Company
We have audited the accompanying statement of net assets of Farm Bureau Life
Variable Account (comprising, respectively, the Growth Common Stock, High Grade
Bond, High Yield Bond, Managed, Money Market, and Blue Chip Subaccounts) as of
December 31, 1995, and the related statements of operations and changes in net
assets for each of the three years in the period then ended. These financial
statements are the responsibility of the Account'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. Our procedures included
confirmation of securities owned as of December 31, 1995, by correspondence with
the transfer agent. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of each of the respective
subaccounts constituting the Farm Bureau Life Variable Account at December 31,
1995, and the results of their operations and changes in their net assets for
each of the three years in the period then ended, in conformity with generally
accepted accounting principles.
/s/ Ernst & Young
Des Moines, Iowa
March 4, 1996
48
<PAGE>
FARM BUREAU LIFE VARIABLE ACCOUNT
STATEMENT OF NET ASSETS
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS
Investments in FBL Variable Insurance Series Fund:
Growth Common Stock Subaccount:
Growth Common Stock Portfolio, 829,654 shares at net asset value of $12.31 per share
(cost $9,430,115) $10,213,039
High Grade Bond Subaccount:
High Grade Bond Portfolio, 127,806 shares at net asset value of $9.98 per share (cost
$1,272,752) 1,275,500
High Yield Bond Subaccount:
High Yield Bond Portfolio, 173,355 shares at net asset value of $9.69 per share (cost
$1,713,673) 1,679,808
Managed Subaccount:
Managed Portfolio, 768,559 shares at net asset value of $11.71 per share (cost
$8,620,085) 8,999,822
Money Market Subaccount:
Money Market Portfolio, 517,187 shares at net asset value of $1.00 per share (cost
$517,187) 517,187
Blue Chip Subaccount:
Blue Chip Portfolio, 217,396 shares at net asset value of $20.70 per share (cost
$3,487,243) 4,500,104
-----------
Total investments (cost $25,041,055) 27,185,460
LIABILITIES --
-----------
NET ASSETS (NOTE 6) $27,185,460
-----------
-----------
</TABLE>
<TABLE>
<CAPTION>
UNITS UNIT VALUE EXTENDED VALUE
<S> <C> <C> <C>
-------------------------------------------------
Net assets are represented by:
Growth Common Stock Subaccount 529,217.685116 $ 19.298371 $ 10,213,039
High Grade Bond Subaccount 78,335.606656 16.282500 1,275,500
High Yield Bond Subaccount 90,328.571991 18.596642 1,679,808
Managed Subaccount 458,889.751196 19.612166 8,999,822
Money Market Subaccount 41,798.048449 12.373460 517,187
Blue Chip Subaccount 195,990.522067 22.960825 4,500,104
--------------
Total net assets $ 27,185,460
--------------
--------------
</TABLE>
SEE ACCOMPANYING NOTES.
49
<PAGE>
FARM BUREAU LIFE VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
GROWTH COMMON STOCK
COMBINED SUBACCOUNT
----------------------------------- ---------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31 DECEMBER 31
1995 1994 1993 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
----------------------------------------------------------------------
Investment income:
Dividend income $ 1,470,294 $ 1,037,561 $ 701,927 $ 600,695 $ 366,515 $ 328,196
Administrative charges (NOTE 2) (194,849) (124,327) (49,288) (73,171) (45,358) (16,950)
<CAPTION>
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net investment income 1,275,445 913,234 652,639 527,524 321,157 311,246
Net realized and unrealized gain (loss) on
investments:
Net realized gain (loss) from investment
transactions 36,576 (15,607) 25,431 10,200 (7,916) 9,563
Change in unrealized appreciation/depreciation of
investments 3,442,425 (1,409,360) 54,089 1,319,331 (565,067) 10,505
<CAPTION>
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net gain (loss) on investments 3,479,001 (1,424,967) 79,520 1,329,531 (572,983) 20,068
<CAPTION>
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net increase (decrease) in net assets resulting from
operations $ 4,754,446 $ (511,733) $ 732,159 $ 1,857,055 $(251,826) $ 331,314
<CAPTION>
----------------------------------------------------------------------
----------------------------------------------------------------------
HIGH GRADE BOND SUBACCOUNT HIGH YIELD BOND SUBACCOUNT
----------------------------------- ---------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31 DECEMBER 31
1995 1994 1993 1995 1994 1993
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Dividend income $ 87,448 $ 62,855 $ 35,199 $ 148,611 $ 97,005 $ 47,811
Administrative charges (NOTE 2) (10,003) (7,181) (4,190) (12,752) (8,145) (4,276)
<CAPTION>
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net investment income 77,445 55,674 31,009 135,859 88,860 43,535
Net realized and unrealized gain (loss) on
investments:
Net realized gain (loss) from investment
transactions (884) (2,084) 348 (2,644) (1,504) 1,119
Change in unrealized appreciation/depreciation of
investments 59,549 (60,346) 476 46,925 (101,553) 17,842
<CAPTION>
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net gain (loss) on investments 58,665 (62,430) 824 44,281 (103,057) 18,961
<CAPTION>
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net increase (decrease) in net assets resulting from
operations $ 136,110 $ (6,756) $ 31,833 $ 180,140 $ (14,197) $ 62,496
<CAPTION>
----------------------------------------------------------------------
----------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES.
50
<PAGE>
<TABLE>
<CAPTION>
MONEY MARKET
MANAGED SUBACCOUNT SUBACCOUNT BLUE CHIP SUBACCOUNT
------------------------------- ---------------------- ----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31 DECEMBER 31 DECEMBER 31
1995 1994 1993 1995 1994 1993 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------------
Investment income:
Dividend income $ 556,379 $ 469,045 $261,932 $10,664 $1,247 $ 587 $ 66,497 $ 40,894 $ 28,202
Administrative charges (NOTE 2) (66,386) (44,750) (13,292) (1,788) (304) (200) (30,749) (18,589) (10,380)
<CAPTION>
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net investment income 489,993 424,295 248,640 8,876 943 387 35,748 22,305 17,822
Net realized and unrealized gain
(loss) on investments:
Net realized gain (loss) from
investment transactions (1,192) (14,100) 2,505 -- -- -- 31,096 9,997 11,896
Change in unrealized
appreciation/depreciation of
investments 1,155,520 (683,673) (92,155) -- -- -- 861,100 1,279 117,421
<CAPTION>
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net gain (loss) on investments 1,154,328 (697,773) (89,650) -- -- -- 892,196 11,276 129,317
<CAPTION>
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net increase (decrease) in net
assets resulting from operations $1,644,321 $(273,478) $158,990 $ 8,876 $ 943 $ 387 $927,944 $ 33,581 $147,139
<CAPTION>
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
</TABLE>
51
<PAGE>
FARM BUREAU LIFE VARIABLE ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
GROWTH
COMMON STOCK
COMBINED SUBACCOUNT
--------------------------------------- ---------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31 DECEMBER 31
1995 1994 1993 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
--------------------------------------------------------------------------------
Operations:
Net investment income $ 1,275,445 $ 913,234 $ 652,639 $ 527,524 $ 321,157 $ 311,246
Net realized gain (loss) from
investment transactions 36,576 (15,607) 25,431 10,200 (7,916) 9,563
Change in unrealized
appreciation/ depreciation of
investments 3,442,425 (1,409,360) 54,089 1,319,331 (565,067) 10,505
--------------------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from operations 4,754,446 (511,733) 732,159 1,857,055 (251,826) 331,314
Capital share transactions (NOTE
5):
Transfers of net premiums 10,027,479 12,057,583 7,719,468 3,373,068 4,884,501 2,618,609
Transfers of death benefits (76,039) -- 233 (20,773) -- 175
Transfers of surrenders (640,433) (280,286) (73,390) (260,324) (113,833) (12,516)
Transfers of policy loans (420,627) (268,564) (152,052) (173,175) (129,057) (70,318)
Transfers of cost of insurance
and transfer charges (3,764,873) (2,988,193) (1,314,969) (1,307,686) (1,123,660) (406,386)
Transfers between subaccounts 170,949 (274,657) (63,345) 226,020 (84,996) (28,043)
--------------------------------------------------------------------------------
Net increase in net assets
resulting from capital share
transactions 5,296,456 8,245,883 6,115,945 1,837,130 3,432,955 2,101,521
--------------------------------------------------------------------------------
Total increase in net assets 10,050,902 7,734,150 6,848,104 3,694,185 3,181,129 2,432,835
Net assets at beginning of year 17,134,558 9,400,408 2,552,304 6,518,854 3,337,725 904,890
--------------------------------------------------------------------------------
Net assets at end of year $ 27,185,460 $17,134,558 $9,400,408 $ 10,213,039 $ 6,518,854 $3,337,725
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
</TABLE>
52
<PAGE>
<TABLE>
<CAPTION>
MANAGED
HIGH GRADE BOND SUBACCOUNT HIGH YIELD BOND SUBACCOUNT SUBACCOUNT
------------------------------------- -------------------------------------- ------------
YEAR ENDED YEAR ENDED
DECEMBER 31 DECEMBER 31
1995 1994 1993 1995 1994 1993 1995
<S> <C> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------------------
Operations:
Net investment income $ 77,445 $ 55,674 $ 31,009 $ 135,859 $ 88,860 $ 43,535 $ 489,993
Net realized gain (loss) from
investment transactions (884) (2,084) 348 (2,644) (1,504) 1,119 (1,192)
Change in unrealized
appreciation/ depreciation of
investments 59,549 (60,346) 476 46,925 (101,553) 17,842 1,155,520
-------------------------------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from operations 136,110 (6,756) 31,833 180,140 (14,197) 62,496 1,644,321
Capital share transactions (NOTE
5):
Transfers of net premiums 374,188 472,154 441,358 636,472 749,481 483,929 2,880,711
Transfers of death benefits (12,573) -- -- (2,339) -- -- (21,898)
Transfers of surrenders (5,473) (7,186) (1,765) (27,257) (21,981) (12,694) (273,471)
Transfers of policy loans (11,630) (12,693) (9,290) (28,014) (16,467) (7,195) (134,744)
Transfers of cost of insurance
and transfer charges (163,615) (139,626) (98,580) (240,083) (191,048) (126,734) (1,178,595)
Transfers between subaccounts 17,031 (15,124) (4,090) (1,383) (25,938) (6,264) 80,167
-------------------------------------------------------------------------------------------
Net increase in net assets
resulting from capital share
transactions 197,928 297,525 327,633 337,396 494,047 331,042 1,352,170
-------------------------------------------------------------------------------------------
Total increase in net assets 334,038 290,769 359,466 517,536 479,850 393,538 2,996,491
Net assets at beginning of year 941,462 650,693 291,227 1,162,272 682,422 288,884 6,003,331
-------------------------------------------------------------------------------------------
Net assets at end of year $ 1,275,500 $ 941,462 $ 650,693 $ 1,679,808 $ 1,162,272 $ 682,422 $ 8,999,822
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED
DECEMBER 31
1994 1993
<S> <C> <C>
Operations:
Net investment income $ 424,295 $ 248,640
Net realized gain (loss) from
investment transactions (14,100) 2,505
Change in unrealized
appreciation/ depreciation of
investments (683,673) (92,155)
Net increase (decrease) in net
assets resulting from operations (273,478) 158,990
Capital share transactions (NOTE
5):
Transfers of net premiums 4,455,735 3,149,038
Transfers of death benefits -- --
Transfers of surrenders (68,697) (24,430)
Transfers of policy loans (77,932) (46,468)
Transfers of cost of insurance
and transfer charges (1,125,916) (410,183)
Transfers between subaccounts (92,453) 65,387
Net increase in net assets
resulting from capital share
transactions 3,090,737 2,733,344
Total increase in net assets 2,817,259 2,892,334
Net assets at beginning of year 3,186,072 293,738
Net assets at end of year $ 6,003,331 $3,186,072
</TABLE>
53
<PAGE>
FARM BUREAU LIFE VARIABLE ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
MONEY MARKET SUBACCOUNT
-------------------------------------
YEAR ENDED
DECEMBER 31
1995 1994 1993
<S> <C> <C> <C>
-------------------------------------
Operations:
Net investment income $ 8,876 $ 943 $ 387
Net realized gain (loss) from investment transactions -- -- -
Change in unrealized appreciation/depreciation of investments -- -- --
<CAPTION>
-------------------------------------
<S> <C> <C> <C>
Net increase (decrease) in net assets resulting from operations 8,876 943 387
Capital share transactions (NOTE 5):
Transfers of net premiums 1,129,049 20,472 31,211
Transfers of death benefits -- -- --
Transfers of surrenders (2,924) (366) (30)
Transfers of policy loans (172) (675) (992)
Transfers of cost of insurance and transfer charges (253,153) (7,693) (5,087)
Transfers between subaccounts (400,420) (10,118) (5,911)
<CAPTION>
-------------------------------------
<S> <C> <C> <C>
Net increase in net assets resulting from capital share transactions 472,380 1,620 19,191
<CAPTION>
-------------------------------------
<S> <C> <C> <C>
Total increase in net assets 481,256 2,563 19,578
Net assets at beginning of year 35,931 33,368 13,790
<CAPTION>
-------------------------------------
<S> <C> <C> <C>
Net assets at end of year $ 517,187 $ 35,931 $ 33,368
<CAPTION>
-------------------------------------
-------------------------------------
<CAPTION>
BLUE CHIP SUBACCOUNT
--------------------------------------
YEAR ENDED
DECEMBER 31
1995 1994 1993
<S> <C> <C> <C>
Operations:
Net investment income $ 35,748 $ 22,305 $ 17,822
Net realized gain (loss) from investment transactions 31,096 9,997 11,896
Change in unrealized appreciation/depreciation of investments 861,100 1,279 117,421
<S> <C> <C> <C>
Net increase (decrease) in net assets resulting from operations 927,944 33,581 147,139
Capital share transactions (NOTE 5):
Transfers of net premiums 1,633,991 1,475,240 995,323
Transfers of death benefits (18,456) -- 58
Transfers of surrenders (70,984) (68,223) (21,955)
Transfers of policy loans (72,892) (31,740) (17,789)
Transfers of cost of insurance and transfer charges (621,741) (400,250) (267,999)
Transfers between subaccounts 249,534 (46,028) (84,424)
<S> <C> <C> <C>
Net increase in net assets resulting from capital share transactions 1,099,452 928,999 603,214
<S> <C> <C> <C>
Total increase in net assets 2,027,396 962,580 750,353
Net assets at beginning of year 2,472,708 1,510,128 759,775
<S> <C> <C> <C>
Net assets at end of year $ 4,500,104 $ 2,472,708 $1,510,128
</TABLE>
SEE ACCOMPANYING NOTES.
54
<PAGE>
FARM BUREAU LIFE VARIABLE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
1.SIGNIFICANT ACCOUNTING POLICIES
Farm Bureau Life Variable Account (the Account) is a unit investment trust
registered under the Investment Company Act of 1940. The Account was established
as a separate investment account within Farm Bureau Life Insurance Company (the
Company) to fund flexible premium variable life insurance policies.
The Account has six separate subaccounts, each of which invests solely, as
directed by contract owners, in a different portfolio of FBL Variable Insurance
Series Fund (the Fund), an open-end, diversified management investment company
sponsored by the Company. Contract owners also may direct investments to a fixed
interest subaccount held in the general assets of the Company.
Investments in shares of the Fund are stated at market value, which is the
closing net asset value per share as determined by the Fund. The average cost
basis has been used in determining the net realized gain or loss from investment
transactions and unrealized appreciation or depreciation on investments.
Dividends paid to the Account are automatically reinvested in shares of the Fund
on the payable date.
2.EXPENSE CHARGES
The Account pays the Company certain amounts relating to the distribution and
administration of the policies funded by the Account and as reimbursement for
certain mortality and other risks assumed by the Company. The following
summarizes those amounts.
PREMIUM EXPENSE CHARGE: Premiums paid by the contractholders are reduced by a
5% sales charge (used to compensate the Company for expenses incurred in
connection with the distribution of the policies) and a 2% premium tax charge
(used to compensate the Company for premium taxes imposed by various states and
political subdivisions).
COST OF INSURANCE: The Company assumes the responsibility for providing
insurance benefits included in the policy. The cost of insurance is determined
each month based upon the applicable insurance rate and current net amount at
risk. Also, the cost of insurance includes a flat monthly administration charge
of $3.00 and a first year monthly charge based on age and amount of insurance
inforce. The aggregate cost of insurance can vary from month to month since the
determination of both the insurance rate and the current net amount at risk
depends on a number of variables as described in the Account's prospectus.
ADMINISTRATIVE CHARGE: The Company will deduct a daily mortality and expense
risk charge from the Account at an effective annual rate of .90% of the average
daily net assets value of the Account. These charges will be deducted by the
Company in return for its assumption of risks associated with adverse mortality
experience or excess administrative expenses in connection with policies issued.
OTHER CHARGES: A transfer charge of $25 will be imposed for the second and each
subsequent transfer between subaccounts in any one policy year. A surrender
charge equal to the lesser of $25 or 2.0% of the amount surrendered will be
imposed in the event of a partial or full contract surrender or lapse.
3.FEDERAL INCOME TAXES
The operations of the Account form a part of, and are taxed with, operations of
the Company, which is taxed as a "life insurance company" under the Internal
Revenue Code. Under current law, no federal income taxes are payable with
respect to the Account's net investment income and the net realized gain on
investments. Accordingly, no charge for income tax is currently being made to
the Account. If such taxes are incurred by the Company in the future, a charge
to the Account may be assessed.
55
<PAGE>
FARM BUREAU LIFE VARIABLE ACCOUNT
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4.INVESTMENT TRANSACTIONS
The aggregate cost of investment securities purchased and proceeds from
investment securities sold by subaccount are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------------------------------------------------
1995 1994 1993
------------------------ --------------------- ---------------------
PURCHASES SALES PURCHASES SALES PURCHASES SALES
<S> <C> <C> <C> <C> <C> <C>
----------------------------------------------------------------------
Growth Common Stock Subaccount $ 2,688,930 $ 324,276 $4,084,035 $ 329,923 $2,519,063 $ 106,296
High Grade Bond Subaccount 340,165 64,792 404,442 51,243 386,918 28,276
High Yield Bond Subaccount 590,219 116,964 657,604 74,697 409,428 34,851
Managed Subaccount 2,251,170 409,007 3,726,025 210,993 3,041,844 59,860
Money Market Subaccount 1,170,205 688,949 23,735 21,172 35,850 16,272
Blue Chip Subaccount 1,286,359 151,159 1,084,139 132,835 756,322 135,286
----------------------------------------------------------------------
Combined $ 8,327,048 $ 1,755,147 $9,979,980 $ 820,863 $7,149,425 $ 380,841
----------------------------------------------------------------------
----------------------------------------------------------------------
</TABLE>
5.SUMMARY OF CHANGES FROM UNIT TRANSACTIONS
Transactions in units of each subaccount of the Account were as follows:
<TABLE>
<CAPTION>
UNITS SOLD UNITS REDEEMED NET INCREASE
---------------------- ---------------------- ----------------------
UNITS AMOUNT UNITS AMOUNT UNITS AMOUNT
<S> <C> <C> <C> <C> <C> <C>
----------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1995
Growth Common Stock Subaccount 122,230 $ 2,088,235 14,829 $ 251,105 107,401 $ 1,837,130
High Grade Bond Subaccount 16,369 252,717 3,538 54,789 12,831 197,928
High Yield Bond Subaccount 24,846 441,608 5,868 104,212 18,978 337,396
Managed Subaccount 96,919 1,694,791 19,696 342,621 77,223 1,352,170
Money Market Subaccount 94,936 1,159,542 56,176 687,162 38,760 472,380
Blue Chip Subaccount 59,767 1,219,862 5,679 120,410 54,088 1,099,452
----------------------------------------------------------------------
Combined 415,067 $ 6,856,755 105,786 $ 1,560,299 309,281 $ 5,296,456
----------------------------------------------------------------------
----------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1994
Growth Common Stock Subaccount 235,366 $ 3,717,521 18,098 $ 284,566 217,268 $ 3,432,955
High Grade Bond Subaccount 23,824 341,587 3,077 44,062 20,747 297,525
High Yield Bond Subaccount 34,294 560,599 4,040 66,552 30,254 494,047
Managed Subaccount 201,404 3,256,980 10,453 166,243 190,951 3,090,737
Money Market Subaccount 1,936 22,488 1,798 20,868 138 1,620
Blue Chip Subaccount 60,441 1,043,245 6,682 114,246 53,759 928,999
----------------------------------------------------------------------
Combined 557,265 $ 8,942,420 44,148 $ 696,537 513,117 $ 8,245,883
----------------------------------------------------------------------
----------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1993
Growth Common Stock Subaccount 140,419 $ 2,190,868 5,817 $ 89,347 134,602 $ 2,101,521
High Grade Bond Subaccount 24,876 351,718 1,713 24,085 23,163 327,633
High Yield Bond Subaccount 23,053 361,616 1,963 30,574 21,090 331,042
Managed Subaccount 172,147 2,779,910 2,823 46,566 169,324 2,733,344
Money Market Subaccount 3,084 35,264 1,404 16,073 1,608 19,191
Blue Chip Subaccount 45,544 728,120 7,688 124,906 37,856 603,214
----------------------------------------------------------------------
Combined 409,123 $ 6,447,496 21,408 $ 331,551 387,715 $ 6,115,945
----------------------------------------------------------------------
----------------------------------------------------------------------
</TABLE>
6.NET ASSETS
The Account has an unlimited number of units of beneficial interest authorized
with no par value. Net assets as of December 31, 1995 consisted of:
<TABLE>
<CAPTION>
GROWTH HIGH GRADE HIGH YIELD
COMMON STOCK BOND BOND MANAGED MONEY MARKET BLUE CHIP
COMBINED SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
<S> <C> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------
Paid-in capital $22,022,887 $8,203,008 $1,097,007 $1,431,252 $7,446,985 $ 506,108 $3,338,527
Accumulated undistributed net
investment income 2,981,592 1,216,907 176,629 285,065 1,174,292 11,079 117,620
Accumulated undistributed net
realized gain (loss) from
investment transactions 36,576 10,200 (884) (2,644) (1,192) -- 31,096
Net unrealized appreciation
(depreciation) of investments 2,144,405 782,924 2,748 (33,865) 379,737 -- 1,012,861
-----------------------------------------------------------------------------------------------
Net assets $27,185,460 $10,213,039 $1,275,500 $1,679,808 $8,999,822 $ 517,187 $4,500,104
-----------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------
</TABLE>
56
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholder
Farm Bureau Life Insurance Company
We have audited the accompanying consolidated balance sheets of Farm Bureau Life
Insurance Company as of December 31, 1995 and 1994, and the related consolidated
statements of income, changes in stockholders' equity, and cash flows for each
of the three years in the period ended December 31, 1995. 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 consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Farm
Bureau Life Insurance Company at December 31, 1995 and 1994, and the
consolidated results of its operations and its cash flows for each of the three
years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements, in 1995 the
Company adopted certain accounting changes to conform with generally accepted
accounting principles for stock life companies. As described in Notes 1 and 4 to
the consolidated financial statements, in 1994 the Company changed its method of
accounting for certain investments in debt securities.
/s/ Ernst & Young
Des Moines, Iowa
March 12, 1996
57
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31
-----------------------------
1995 1994
-------------- -------------
<S> <C> <C>
ASSETS
Investments:
Fixed maturities:
Held for investment, at amortized cost (market: 1995 -- $580,379;
1994 -- $428,719) $ 556,099 $ 455,344
Available for sale, at market (amortized cost: 1995 -- $943,219;
1994 -- $882,421) 1,001,302 864,914
Equity securities, at market (cost: 1995 -- $72,731; 1994 -- $45,259) 78,173 41,492
Held in inventory, at estimated fair value (amortized cost: 1995 -- $21,555;
1994 -- $17,731) 21,913 18,169
Mortgage loans on real estate 215,690 222,519
Investment real estate, less allowances for depreciation of $1,498 in
1995 and $1,011 in 1994 26,384 19,685
Policy loans 88,526 87,952
Other long-term investments 2,892 6,654
Short-term investments 35,358 106,641
-------------- -------------
Total investments 2,026,337 1,823,370
Cash and cash equivalents -- 5,853
Securities and indebtedness of related parties 73,138 74,934
Accrued investment income 24,012 22,220
Accounts and notes receivable 2,009 2,821
Amounts receivable from affiliates 3,824 716
Reinsurance recoverable 2,225 30,728
Deferred policy acquisition costs 121,571 130,830
Value of insurance in force acquired 75 104
Property and equipment, less allowances for depreciation of $42,084 in
1995 and $37,850 in 1994 59,990 61,018
Current income taxes recoverable 12,939 8,255
Goodwill, less accumulated amortization of $1,556 in 1995 and $932 in 1994 10,342 10,966
Other assets 11,544 13,095
Assets held in separate accounts 44,789 28,043
-------------- -------------
Total assets $ 2,392,795 $ 2,212,953
-------------- -------------
-------------- -------------
</TABLE>
58
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31
-----------------------------
1995 1994
-------------- -------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Policy liabilities and accruals:
Future policy benefits:
Universal life and annuity products $ 1,020,345 $ 956,732
Traditional life insurance and accident and health products 541,356 528,375
Unearned revenue reserve 17,350 17,962
Other policy claims and benefits 5,640 5,216
Reserves and unearned premiums on property-casualty policies -- 44,482
-------------- -------------
1,584,691 1,552,767
Other policyholders' funds:
Supplementary contracts without life contingencies 111,505 95,208
Advance premiums and other deposits 66,260 65,956
Accrued dividends 12,600 12,314
-------------- -------------
190,365 173,478
Short-term borrowings -- 6,388
Long-term debt 12,604 18,519
Amounts payable to affiliates 10,443 8,716
Deferred income taxes 43,723 3,246
Other liabilities 65,784 66,249
Liabilities related to separate accounts 44,789 28,043
-------------- -------------
Total liabilities 1,952,399 1,857,406
Commitments and contingencies
Minority interest in subsidiary -- 75
Stockholder's equity:
First preferred stock, 7-1/2% cumulative, par value $50.00 per share --
authorized 6,000 shares -- --
Common stock, par value $50.00 per share - authorized 994,000 shares in
1995 and 25,000 shares in 1994, issued and outstanding 50,000 shares in
1995 and 23,880.28 shares in 1994 2,500 1,194
Additional paid-in capital 50,426 51,732
Net unrealized investment gains (losses) 34,146 (10,768)
Retained earnings 353,324 313,314
-------------- -------------
Total stockholder's equity 440,396 355,472
-------------- -------------
Total liabilities and stockholder's equity $ 2,392,795 $ 2,212,953
-------------- -------------
-------------- -------------
</TABLE>
SEE ACCOMPANYING NOTES.
59
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------------------------------
1995 1994 1993
----------------- ---------------- ----------------
<S> <C> <C> <C>
Revenues:
Universal life and annuity product charges $ 33,343 $ 30,983 $ 26,500
Traditional life insurance premiums 48,511 46,161 46,050
Accident and health premiums 9,396 2,444 46,437
Property-casualty premiums 18,709 17,778 16,937
Net investment income 184,348 145,148 138,320
Realized gains on investments 5,902 11,234 3,967
Other income 28,011 26,954 25,251
----------------- ---------------- ----------------
Total revenues 328,220 280,702 303,462
Benefits and expenses:
Universal life and annuity benefits 88,147 75,844 73,305
Traditional life insurance and accident and health benefits 37,710 37,800 66,028
Increase in traditional and accident and health future policy benefits 15,310 6,501 14,428
Distributions to participating policyholders 23,838 22,753 22,967
Losses and loss adjustment expenses incurred on property-casualty
policies 13,621 13,441 13,948
Underwriting, acquisition and insurance expenses 54,336 56,486 56,632
Interest expense 1,007 1,836 2,303
Other expenses 17,776 17,505 14,920
----------------- ---------------- ----------------
Total benefits and expenses 251,745 232,166 264,531
----------------- ---------------- ----------------
76,475 48,536 38,931
Income taxes (27,291) (18,434) (14,439)
Minority interest in earnings of subsidiaries (12) 4 (2,417)
Equity income (loss), net of related income taxes 1,488 (1,587) 630
----------------- ---------------- ----------------
Income from continuing operations 50,660 28,519 22,705
Discontinued operations:
Loss from cable television operations, net of related income taxes -- -- (2,902)
Gain on disposal of cable television operations, net of related income
taxes -- 6,479 --
----------------- ---------------- ----------------
Net income $ 50,660 $ 34,998 $ 19,803
----------------- ---------------- ----------------
----------------- ---------------- ----------------
</TABLE>
SEE ACCOMPANYING NOTES.
60
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NET
UNREALIZED
ADDITIONAL INVESTMENT
COMMON PAID-IN GAINS RETAINED
STOCK CAPITAL (LOSSES) EARNINGS
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Balance at January 1, 1993 $ 1,105 $ 18 $ 2,946 $ 258,513
Issuance of 1,783.48 shares of common stock in exchange for
99.5% of common stock of Rural Security Life Company 89 27,012 -- --
Net income for 1993 -- -- -- 19,803
Change in net unrealized investment gains/losses -- -- 2,791 --
----------- ----------- ----------- ------------
Balance at December 31, 1993 1,194 27,030 5,737 278,316
Contribution of minority interests of subsidiaries from
parent -- 24,702 -- --
Cumulative effect on prior years (to December 31, 1993) of
change in method of accounting for fixed maturity
securities -- -- 38,913 --
Net income for 1994 -- -- -- 34,998
Change in net unrealized investment gains/losses -- -- (55,418) --
----------- ----------- ----------- ------------
Balance at December 31, 1994 1,194 51,732 (10,768) 313,314
Issuance of 26,119.72 shares pursuant to stock dividend 1,306 (1,306) -- --
Net income for 1995 -- -- -- 50,660
Change in net unrealized investment gains/losses -- -- 45,375 --
Dividend of Utah Farm Bureau Insurance Company to parent -- -- (461) (10,650)
----------- ----------- ----------- ------------
Balance at December 31, 1995 $ 2,500 $ 50,426 $ 34,146 $ 353,324
----------- ----------- ----------- ------------
----------- ----------- ----------- ------------
<CAPTION>
TOTAL
STOCKHOLDERS'
EQUITY
--------------
<S> <C>
Balance at January 1, 1993 $ 262,582
Issuance of 1,783.48 shares of common stock in exchange for
99.5% of common stock of Rural Security Life Company 27,101
Net income for 1993 19,803
Change in net unrealized investment gains/losses 2,791
--------------
Balance at December 31, 1993 312,277
Contribution of minority interests of subsidiaries from
parent 24,702
Cumulative effect on prior years (to December 31, 1993) of
change in method of accounting for fixed maturity
securities 38,913
Net income for 1994 34,998
Change in net unrealized investment gains/losses (55,418)
--------------
Balance at December 31, 1994 355,472
Issuance of 26,119.72 shares pursuant to stock dividend --
Net income for 1995 50,660
Change in net unrealized investment gains/losses 45,375
Dividend of Utah Farm Bureau Insurance Company to parent (11,111)
--------------
Balance at December 31, 1995 $ 440,396
--------------
--------------
</TABLE>
SEE ACCOMPANYING NOTES.
61
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------------------
1995 1994 1993
<S> <C> <C> <C>
-----------------------------------------
OPERATING ACTIVITIES
Continuing operations:
Net income $ 50,660 $ 28,519 $ 22,705
Adjustments to reconcile net income to net cash provided by continuing operations:
Adjustments related to interest sensitive products:
Interest credited to account balances 77,207 69,954 67,806
Charges for mortality and administration (34,083) (32,161) (27,876)
Deferral of unearned revenues 1,696 2,058 1,933
Amortization of unearned revenue reserve (956) (880) (557)
Provision for depreciation and amortization 10,034 13,449 9,411
Net gains and losses related to investments held in inventory (25,801) 206 (74)
Realized gains on investments (5,902) (11,234) (3,967)
Increase in traditional, accident and health and property-casualty benefit
accruals 16,144 10,972 20,032
Policy acquisition costs deferred (18,995) (17,591) (17,524)
Amortization of deferred policy acquisition costs 10,181 10,080 6,023
Provision for deferred income taxes 15,026 7,792 (3,408)
Other (9,352) (3,522) 11,619
-----------------------------------------
Net cash provided by continuing operations 85,859 77,642 86,123
Discontinued operations:
Net income (loss) -- 6,479 (2,902)
Adjustments to reconcile net loss to net cash provided by (used in) discontinued
operations -- (10,293) 6,286
-----------------------------------------
Net cash provided by (used in) discontinued operations -- (3,814) 3,384
-----------------------------------------
Net cash provided by operating activities 85,859 73,828 89,507
INVESTING ACTIVITIES
Sale, maturity or repayment of investments:
Fixed maturities -- held for investment 16,529 31,540 393,476
Fixed maturities -- available for sale 208,189 348,722 --
Equity securities 29,766 43,612 29,831
Held in inventory 8,045 7,106 103
Mortgage loans on real estate 18,646 24,036 15,970
Investment real estate 927 885 5,441
Policy loans 19,701 18,263 18,710
Other long-term investments 3,564 31,608 6,796
Short-term investments -- net 68,799 -- --
-----------------------------------------
374,166 505,772 470,327
</TABLE>
62
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------------------
1995 1994 1993
<S> <C> <C> <C>
-----------------------------------------
Acquisition of investments:
Fixed maturities -- held for investment $ (120,885) $ (166,332) $ (490,113)
Fixed maturities -- available for sale (282,657) (262,905) --
Equity securities (30,380) (37,965) (22,688)
Held in inventory (13,618) (6,698) (4,036)
Mortgage loans on real estate (17,110) (12,953) (72,581)
Investment real estate (8,034) (668) (204)
Policy loans (20,275) (19,207) (17,845)
Other long-term investments (14) (13,654) --
Short-term investments -- net -- (63,737) (22,907)
-----------------------------------------
(492,973) (584,119) (630,374)
Proceeds from disposal, repayments of advances and other distributions from entities
accounted for by the equity method 31,986 44,890 28,281
Investments in and advances to entities accounted for by the equity method (21,463) (39,418) (26,247)
Net cash received in acquisition -- -- 272
Other (7,664) (5,167) (8,499)
Investing activities of discontinued operations -- 29,539 (539)
-----------------------------------------
Net cash used in investing activities (115,948) (48,503) (166,779)
FINANCING ACTIVITIES
Receipts from interest sensitive products credited to policyholder account balances 158,650 170,623 179,480
Return of policyholder account balances on interest sensitive products (121,863) (137,232) (110,959)
Proceeds from short-term borrowings 8 8,288 6,806
Repayments of short-term borrowings (6,396) (9,217) (6,198)
Proceeds from long-term debt -- -- 21,122
Repayments of long-term debt (5,915) (12,119) (4,255)
Net cash returned to parent as dividend (248) -- --
Financing activities of discontinued operations -- (44,000) (5,000)
-----------------------------------------
Net cash provided by financing activities 24,236 (23,657) 80,996
-----------------------------------------
Increase (decrease) in cash and cash equivalents (5,853) 1,668 3,724
Cash and cash equivalents at beginning of year 5,853 4,185 461
-----------------------------------------
Cash and cash equivalents at end of year $ -- $ 5,853 $ 4,185
-----------------------------------------
-----------------------------------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest $ 1,086 $ 1,880 $ 2,766
Income taxes 16,833 17,691 14,600
</TABLE>
SEE ACCOMPANYING NOTES.
63
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
DECEMBER 31, 1995
1. SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
Farm Bureau Life Insurance Company (the Company) is a wholly-owned subsidiary of
FBL Financial Group, Inc. (formerly called Farm Bureau Multi-State Services,
Inc.). The Company operates predominantly in the individual life and annuity
area of the insurance industry. The Company markets its products to Farm Bureau
members and other individuals and businesses in seven midwestern and western
states.
Prior to December 31, 1995, the Company owned 99.167% of the outstanding common
stock of Utah Farm Bureau Insurance Company, a property-casualty insurance
company providing individual and small business coverages. On December 31, 1995,
the common stock of Utah Farm Bureau Insurance Company was transferred to FBL
Financial Group, Inc. in the form of a dividend.
ORGANIZATION AND BASIS OF PRESENTATION
As more fully described in Note 3, effective January 1, 1994, FBL Financial
Group, Inc. acquired 100% of the outstanding common stock of the Company in a
transaction treated as a reorganization, in exchange for equivalent shares of
newly issued common stock of FBL Financial Group, Inc. Additionally, FBL
Financial Group, Inc. acquired the minority interests in the Company's
subsidiaries, FBL Insurance Company and Rural Security Life Insurance Company
(Rural Security Life) for equivalent shares of newly issued common stock of FBL
Financial Group, Inc. The minority interests were contributed to the Company;
and FBL Insurance Company and Rural Security Life were subsequently merged into
the Company and liquidated.
In anticipation of an initial public offering of stock by its parent, during
1995, the Company adopted certain accounting changes to conform with generally
accepted accounting principles for stock life insurance companies. In prior
years, the Company had only prepared its financial statements in conformity with
accounting practices prescribed or permitted by the Insurance Division,
Department of Commerce, of the State of Iowa. The preparation of financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Significant estimates and assumptions are utilized in the calculation of
deferred policy acquisition costs, policyholder liabilities and accruals and
valuation allowances on investments. It is reasonably possible that actual
experience could differ from the estimates and assumptions utilized which could
have a material impact on the consolidated financial statements.
CONSOLIDATION
The consolidated financial statements include the Company and its direct and
indirect subsidiaries. All significant intercompany transactions have been
eliminated.
INVESTMENTS
FIXED MATURITIES AND EQUITY SECURITIES
Effective January 1, 1994, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 115, "Accounting for Certain Investments in Debt and Equity
Securities". Prior to the adoption of SFAS No. 115, all of the Company's fixed
maturity securities were classified as "held for investment". Pursuant to SFAS
No. 115, fixed maturity securities (bonds and redeemable preferred stock) that
the Company has the positive intent and ability to hold to maturity are
designated as "held for investment". Held for investment securities are reported
at cost adjusted for amortization of premiums and discounts. Changes in the
market value of these securities, except for declines that are other than
temporary, are not reflected in the Company's financial statements. Fixed
maturity securities which may be sold are designated as "available for sale".
Available for sale securities are reported at market value and unrealized gains
and losses on these securities are included directly in stockholders' equity,
net of certain adjustments (see Note 4). Premiums and discounts are
amortized/accrued using methods which result in a constant yield over the
securities' expected lives. Amortization/accrual of premiums and discounts on
mortgage and asset-backed securities incorporates a prepayment assumption to
estimate the securities' expected lives.
64
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Equity securities (common and non-redeemable preferred stocks) are reported at
market. The change in unrealized appreciation and depreciation of marketable
equity securities (net of related deferred income taxes, if any) is included
directly in stockholders' equity.
HELD IN INVENTORY
The Company has certain subsidiaries involved as broker-dealers and another as a
venture capital investment company. In accordance with accounting practices for
these specialized industries, marketable securities are valued at market value
if readily marketable or at fair value, as determined by the Board of Directors
of the subsidiary holding the security, if not readily marketable. The resulting
difference between cost and market is included in the statements of income as
net investment income. Realized gains and losses are also reported as a
component of net investment income.
The Company's investments held in inventory portfolio includes securities with
carrying values of $18,574 and $13,735 at December 31, 1995 and 1994,
respectively, for which market quotations are not readily available and for
which fair value is determined in good faith by the Board of Directors of FBL
Ventures of South Dakota, Inc., the venture capital investment company
subsidiary holding the security. In determining fair value for securities not
readily marketable, investments are initially stated at cost until significant
subsequent events require a change in valuation. Among the factors considered by
the Board of Directors in determining fair value of investments are the cost of
the investment, developments since the acquisition of the investment, the sale
price of recently issued securities, the financial condition and operating
results of the issuer, the long-term business potential of the issuer, the
quoted market price of securities with similar quality and yield that are
publicly traded and other factors generally pertinent to the valuation of
investments. The Board of Directors, in making its evaluation, has relied on
financial data of investees provided by the management of the investee
companies.
On occasion, transfers will be made to or from the venture capital investment
company. Such transfers typically occur when a previously private issue goes
public, or when a private equity security is purchased or otherwise received by
another member of the consolidated group. The Company records transfers to or
from the venture capital investment company at fair value at the date of
transfer, re-establishing a new cost basis for the security. During the year
ended December 31, 1995, two securities with a total fair value of $27,630 were
transferred out of the venture capital investment company. During the year ended
December 31, 1994, two securities with a fair value of $1,397 were transferred
to the venture capital investment company. A realized gain (recognized in net
investment income) of $24,628 was recognized on the 1995 transfers, although
neither transfer had an impact on net income, and no realized gains or losses
were recognized on the 1994 transfers.
MORTGAGE LOANS ON REAL ESTATE
Mortgage loans on real estate are reported at cost adjusted for amortization of
premiums and accrual of discounts. If the value of any mortgage loan is
determined to be impaired (i.e., when it is probable that the Company will be
unable to collect all amounts due according to the contractual terms of the loan
agreement), the carrying value of the mortgage loan has been reduced to its fair
value, which may be based upon the present value of expected future cash flows
from the loan (discounted at the loan's effective interest rate), the loan's
observable market price, or the fair value of the underlying collateral. The
carrying value of impaired loans is reduced by the establishment of a valuation
allowance, changes to which are charged or credited to income.
INVESTMENT REAL ESTATE
Investment real estate, which includes real estate acquired through foreclosure,
is reported at cost less allowances for depreciation. Real estate acquired
through foreclosure, or in- substance foreclosure, is recorded at the lower of
cost (which includes the balance of the mortgage loan, any accrued interest and
any costs incurred to obtain title to the property) or fair value as determined
at or before the foreclosure date. The carrying value of these assets is subject
to regular review. If the fair value, less estimated sales costs, of real estate
owned decreases to an amount lower than its carrying value, a valuation
allowance is established for the difference. This valuation allowance can be
restored should the fair value of the property increase. Changes in this
valuation allowance are charged or credited to income. At December 31, 1995 and
1994, the Company had no such valuation allowance.
65
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
OTHER INVESTMENTS
Policy loans are reported at unpaid principal. Other long-term investments
(consisting principally of Title One home improvement loans) and short-term
investments are reported at cost adjusted for amortization of premiums and
accrual of discounts. Investments accounted for by the equity method include
investments in, and advances to, various joint ventures and partnerships and are
reported as securities and indebtedness of related parties.
REALIZED GAINS AND LOSSES ON INVESTMENTS
The carrying values of all the Company's investments are reviewed on an ongoing
basis for credit deterioration, and if this review indicates a decline in market
value that is other than temporary, the Company's carrying value in the
investment is reduced to its estimated realizable value (the sum of the
estimated nondiscounted cash flows for securities or fair value for mortgage
loans on real estate) and a specific writedown is taken. Such reductions in
carrying value are recognized as realized losses and charged to income. Realized
gains and losses on sales are determined on the basis of specific identification
of investments. If the Company expects that an issuer of a security will modify
its payment pattern from contractual terms but no writedown is required, future
investment income is recognized at the rate implicit in the calculation of net
realizable value under the expected payment pattern.
MARKET VALUES
Market values, as reported herein, of publicly traded fixed maturity securities
are as reported by an independent pricing service. Market values of conventional
mortgage- backed securities not actively traded in a liquid market are estimated
using a matrix calculation assuming a spread over U. S. Treasury bonds based
upon the expected average lives of the securities. Market values of private
placement bonds are estimated using a matrix that assumes a spread (based on
interest rates and a risk assessment of the bonds) over U. S. Treasury bonds.
Market values of redeemable preferred stock and equity securities are based on
the latest quoted market prices, or for those not readily marketable, at values
which are representative of the market values of issues of comparable yield and
quality.
CASH AND CASH EQUIVALENTS
For purposes of the consolidated statement of cash flows, the Company considers
all highly liquid debt instruments purchased with a maturity of three months or
less to be cash equivalents.
DEFERRED POLICY ACQUISITION COSTS AND VALUE OF INSURANCE IN FORCE ACQUIRED
To the extent recoverable from future policy revenues and gross profits, certain
costs of acquiring new insurance business, principally commissions and other
expenses related to the production of new business, have been deferred. The
value of insurance in force acquired is an asset that arose with the acquisition
of Rural Security Life discussed in Note 3. The initial value is determined by
an actuarial study using expected future gross profits as a measurement of the
net present value of the insurance acquired. Interest accrues on the unamortized
balance at a rate of 6.79%.
For participating traditional life insurance and universal life insurance and
investment products, these costs are being amortized generally in proportion to
expected gross profits (after dividends to policyholders, if applicable) from
surrender charges and investment, mortality, and expense margins. That
amortization is adjusted retrospectively when estimates of current or future
gross profits/margins (including the impact of investment gains and losses) to
be realized from a group of products are revised. The deferred policy
acquisition costs for property-casualty insurance are amortized over the
effective period of the related insurance policies; deferred policy acquisition
costs for these policies are expensed when such costs are deemed not to be
recoverable from the related unearned premiums and any related investment
income.
PROPERTY AND EQUIPMENT
Property and equipment are reported at cost less allowances for depreciation.
Depreciation expense is computed primarily using the straight-line method over
the estimated useful lives of the assets.
GOODWILL
Goodwill represents the excess of the fair value of assets exchanged over the
net assets acquired. Goodwill is generally being amortized on a straight-line
basis over a period of 20 years.
66
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The carrying value of goodwill is regularly reviewed for indicators of
impairment in value, which in the view of management are other than temporary.
If facts and circumstances suggest that goodwill is impaired, the Company
assesses the fair value of the underlying business and reduces goodwill to an
amount that results in the book value of the underlying business approximating
fair value. The Company has not recorded any such writedowns during the years
ended December 31, 1995, 1994 or 1993.
FUTURE POLICY BENEFITS
The liability for future policy benefits for participating traditional life
insurance is based on net level premium reserves, including assumptions as to
interest, mortality, and other assumptions underlying the guaranteed policy cash
values. Reserve interest assumptions are level and range from 2.0% to 6.0%.
Accrued dividends for participating business are established for anticipated
amounts earned to date for the period through the policy's next anniversary and
are provided for as a separate liability. The declaration of future dividends
for participating business is at the discretion of the Board of Directors.
Participating business accounted for 48% of receipts from policyholders during
the year ended December 31, 1995 and represented 22% of life insurance inforce
at December 31, 1995.
The liabilities for future policy benefits for accident and health insurance are
computed using a net level or two-year preliminary term method, including
assumptions as to morbidity, mortality and interest and to include provisions
for possible unfavorable deviations. Policy benefit claims are charged to
expense in the period that the claims are incurred.
Future policy benefit reserves for universal life insurance and investment
products are computed under a retrospective deposit method and represent policy
account balances before applicable surrender charges. Policy benefits and claims
that are charged to expense include benefit claims incurred in the period in
excess of related policy account balances. Interest crediting rates for
universal life and investment products ranged from 5.50% to 7.50% in 1995, 5.50%
to 7.25% in 1994, and 4.00% to 8.25% in 1993.
The unearned revenue reserve reflects the unamortized balance of the excess of
first year administration charges over renewal period administration charges
(policy initiation fees) on universal life products. These excess charges have
been deferred and are being recognized in income over the period benefited using
the same assumptions and factors used to amortize deferred policy acquisition
costs.
RESERVES AND UNEARNED PREMIUMS ON PROPERTY-CASUALTY POLICIES
Unpaid property-casualty losses and loss adjustment expenses represent the
estimated liability for reported claims plus those incurred but not yet reported
and the related estimated adjustment expenses. The reserve for unpaid claims and
related adjustment expenses is determined using case-basis evaluations and
statistical analyses and represents estimates of the ultimate cost of all unpaid
losses incurred through December 31 of each year. Although considerable
variability is inherent in such estimates, management believes that the reserve
for unpaid losses and related loss adjustment expenses is adequate. The
estimates are continually reviewed and adjusted as necessary; such adjustments
are included in current operations and are accounted for as changes in
estimates.
Salvage and subrogation recoverables are estimated using statistical analysis.
The salvage and subrogation recoverable amount, which has been offset against
reserves and unearned premiums on property-casualty policies in the accompanying
consolidated balance sheets, was $718 at December 31, 1994.
Property-casualty insurance unearned premiums are calculated on a pro rata
basis.
DEFERRED INCOME TAXES
Deferred tax assets or liabilities are computed based on the difference between
the financial statement and income tax bases of assets and liabilities using the
enacted marginal tax rate. Deferred income tax expenses or credits are based on
the changes in the asset or liability from period to period.
SEPARATE ACCOUNTS
The separate account assets and liabilities reported in the accompanying
consolidated balance sheets represent funds that are separately administered,
principally for the benefit of certain policyholders who bear the investment
risk. The
67
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
separate account assets and liabilities are carried at fair value. Revenues and
expenses related to the separate account assets and liabilities, to the extent
of benefits paid or provided to the separate account policyholders, are excluded
from the amounts reported in the accompanying consolidated statements of income.
RECOGNITION OF PREMIUM REVENUES AND COSTS
Traditional life insurance premiums are recognized as revenues over the
premium-paying period. Future policy benefits and policy acquisition costs are
recognized as expenses over the life of the policy by means of the provision for
future policy benefits and amortization of deferred policy acquisition costs.
All insurance-related revenues, benefits, losses and expenses are reported net
of reinsurance ceded.
Revenues for universal life and annuity products consist of policy charges for
the cost of insurance, administration charges, amortization of policy initiation
fees and surrender charges assessed against policyholder account balances during
the period. Expenses related to these products include interest credited to
policyholder account balances and benefit claims incurred in excess of
policyholder account balances.
Property-casualty insurance premiums are recognized pro rata over the terms of
the policies. All insurance-related revenues and costs are reported net of
reinsurance. Reinsurance premiums, losses and expenses are accounted for in
accordance with the provisions of the underlying agreements and consistent with
the reinsured policies.
OTHER INCOME AND OTHER EXPENSES
Other income and other expenses include revenue and expenses generated by the
Company's various non-insurance subsidiaries for services related to investment
advisory, marketing and distribution, and leasing. A portion of these activities
are performed on behalf of affiliates of the Company. In addition, certain
revenue generated by the insurance companies have been classified as other
income. During the years ended December 31, 1995, 1994 and 1993, revenues
included as other income aggregated $8,413, $8,492 and $9,774, respectively.
2. FAIR VALUES OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures About Fair
Value of Financial Instruments", requires disclosure of fair value information
about financial instruments, whether or not recognized in the consolidated
balance sheet, for which it is practicable to estimate that value. In cases
where quoted market prices are not available, fair values are based on estimates
using present value or other valuation techniques. Those techniques are
significantly affected by the assumptions used, including the discount rate and
estimates of future cash flows. In that regard, the derived fair value estimates
cannot be substantiated by comparison to independent markets and, in many cases,
could not be realized in immediate settlement of the instrument. SFAS No. 107
also excludes certain financial instruments and all nonfinancial instruments
from its disclosure requirements and allows companies to forego the disclosures
when those estimates can only be made at excessive cost. Accordingly, the
aggregate fair value amounts presented herein are limited by each of these
factors and do not purport to represent the underlying value of the Company.
68
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
2. FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)
The following methods and assumptions were used by the Company in estimating its
fair value disclosures for financial instruments.
FIXED MATURITY SECURITIES: Fair values for fixed maturity securities are based
on quoted market prices, where available. For fixed maturity securities not
actively traded, fair values are estimated using values obtained from
independent pricing services or, in the case of private placements, are
estimated by discounting the expected future cash flows using current market
rates applicable to the coupon rate, credit, and maturity of the investments.
EQUITY SECURITIES: The fair values for equity securities are based on quoted
market prices, where available; for equity securities that are not actively
traded, estimated fair values are based on values of issues of comparable yield
and quality.
HELD IN INVENTORY: The fair values for investments held in inventory are based
on quoted market prices, where available; for holdings that are not actively
traded, fair values are determined in good faith by the Board of Directors of
the subsidiary holding the security.
MORTGAGE LOANS ON REAL ESTATE: Fair values are estimated by discounting
expected cash flows using interest rates currently being offered for similar
loans.
POLICY LOANS: The Company has not determined the fair values associated with
its policy loans. Policy loans with a carrying value of $26,221 and $23,524 at
December 31, 1995 and 1994, respectively, provide for variable interest rates.
Management believes any differences between the Company's carrying value and the
fair values of its other policy loans are immaterial to the Company's financial
position and, accordingly, the cost to provide such disclosure is not worth the
benefit to be derived. At December 31, 1995 and 1994, amounts outstanding
related to policy loans, summarized by interest rates, are as follows:
<TABLE>
<CAPTION>
DECEMBER 31
---------------------
RATE 1995 1994
<S> <C> <C>
- ---------------- ---------------------
3.50% - 4.99% $ -- $ 734
5.00% - 5.99% 28,830 30,912
6.00% - 6.99% 11,165 11,457
7.00% - 7.99% 18,444 37,775
8.00% - 8.99% 30,087 7,074
---------------------
$ 88,526 $ 87,952
---------------------
---------------------
</TABLE>
CASH AND SHORT-TERM INVESTMENTS: The carrying amounts reported in the
consolidated balance sheet for these instruments approximate their fair values.
ASSETS AND LIABILITIES OF SEPARATE ACCOUNTS: Separate account assets and
liabilities are reported at estimated fair value in the Company's consolidated
balance sheet.
FUTURE POLICY BENEFITS AND OTHER POLICYHOLDERS' FUNDS: Fair values of the
Company's liabilities under contracts not involving significant mortality or
morbidity risks (principally deferred annuities and supplementary contracts),
are stated at the cost the Company would incur to extinguish the liability;
i.e., the cash surrender value. The Company is not required to estimate the fair
value of its liabilities under other contracts.
RESERVES AND UNEARNED PREMIUMS ON PROPERTY-CASUALTY POLICIES: The fair value of
reserves and unearned premiums on property-casualty policies approximate
carrying value as the Company's policies are substantially all short-duration
contracts.
SHORT-TERM BORROWINGS AND LONG-TERM DEBT: The fair values for long-term debt
are estimated using discounted cash flow analysis based on the Company's current
incremental borrowing rate for similar types of borrowing arrangements. For
short-term debt, the carrying value approximates fair value.
69
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
2. FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)
DEPOSIT ADMINISTRATION FUNDS: The Company administers the funded portion of
certain employee benefit plans of its affiliates through deposit administration
funds. The fair value of the deposit administration funds attributed to the
Agent's Career Incentive Plan are stated at amounts which are estimated to be
currently vested, based on service and production criteria. Other funds are
stated at carrying value.
OFF-BALANCE SHEET INSTRUMENTS: The Company has entered into lines of credit,
both as a lender and borrower. The Company has not attempted to place fair
values on these obligations as management believes losses have already been
accrued to the extent that they eventually are expected to be realized.
The following sets forth a comparison of the fair values and carrying values of
the Company's financial instruments subject to the provisions of Statement of
Financial Accounting Standards No. 107:
<TABLE>
<CAPTION>
DECEMBER 31
--------------------------------------------------------
1995 1994
------------------------------ ------------------------
CARRYING FAIR CARRYING
VALUE VALUE VALUE FAIR VALUE
<S> <C> <C> <C> <C>
--------------------------------------------------------
ASSETS
Fixed maturities:
Held for investment $ 556,099 $ 580,379 $ 455,344 $ 428,719
Available for sale 1,001,302 1,001,302 864,914 864,914
Equity securities 78,173 78,173 41,492 41,492
Held in inventory 21,913 21,913 18,169 18,169
Mortgage loans on real estate 215,690 227,208 222,519 223,502
Policy loans 88,526 88,526 87,952 87,952
Cash and short-term investments 35,358 35,358 112,494 112,494
Assets held in separate accounts 44,789 44,789 28,043 28,043
LIABILITIES
Future policy benefits $ 650,025 $ 644,311 $ 625,380 $ 605,811
Reserves and unearned premiums on property-casualty policies -- -- 44,482 44,482
Other policyholders' funds 176,811 176,811 160,584 160,584
Short-term borrowings -- -- 6,388 6,388
Long-term debt 12,604 12,490 18,519 17,179
Deposit administration funds 33,834 31,294 25,760 23,421
Liabilities related to separate accounts 44,789 44,789 28,043 28,043
</TABLE>
3. REORGANIZATION AND DISCONTINUED OPERATIONS
On February 26, 1993, the Company entered into a stock exchange agreement with
Rural Mutual Insurance Company. Under terms of the agreement, the Company
acquired 99.5% of the issued and outstanding common stock of Rural Security Life
in exchange for newly issued common stock of the Company (approximately 7.47% of
the total amount outstanding after the exchange). The transaction was accounted
for as a purchase and the purchase price of $27,101 (based upon the appraised
value of the Company's stock at the time of purchase) was allocated to the
assets and liabilities acquired. This allocation resulted in goodwill of
approximately $6,988, which is being amortized over 20 years.
In January, 1994, the Boards of Directors of the Company and Western Farm Bureau
Life Insurance Company approved a plan of merger between the Company and Western
Farm Bureau Life Insurance Company, the latter domiciled in the state of
Colorado. Pursuant to the plan of merger, effective January 1, 1994, the
ownership and operations of the Company and Western Farm Bureau Life Insurance
Company are facilitated through Farm Bureau Multi-State Services, Inc., a
holding company which was incorporated in the State of Iowa on October 13, 1993.
In March 1996, Farm Bureau Multi-State Services, Inc. was renamed to FBL
Financial Group, Inc. Under the agreement, 100% of the common stock of the
Company and Western Farm Bureau Life Insurance Company were exchanged for stock
in the holding company.
70
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
3. REORGANIZATION AND DISCONTINUED OPERATIONS (CONTINUED)
In addition, at that same time, the minority interests of FBL Insurance Company
and Rural Security Life were exchanged for equivalent value in the holding
company. The issuance of stock of FBL Financial Group, Inc. in exchange for the
minority interests of FBL Insurance Company and Rural Security Life has been
accounted for as a purchase and the purchase price of $24,702, based upon the
appraised value of the Company's stock at the time of purchase, was allocated to
the assets and liabilities acquired. These allocations resulted in goodwill of
approximately $4,419, which is being amortized over 20 years. Subsequently, FBL
Financial Group, Inc. contributed the minority interests of FBL Insurance
Company and Rural Security Life to the Company and, in 1995, FBL Insurance
Company and Rural Security Life were liquidated.
During December 1993, the Company decided to sell its investment in Vantage
Cable Associates, L.P., a cable television subsidiary, and at that time
classified the subsidiary as a discontinued operation. On December 23, 1994, the
Company sold substantially all operating assets and certain liabilities of
Vantage Cable Associates, L.P. to Galaxy Telecom, L.P. for $38,400, of which
$32,016 was paid in cash and $6,384 was represented by a Class D limited
partnership interest in Galaxy Telecom, L.P. The Company recognized a gain on
the sale of approximately $15,400, after expenses, closing adjustments and
post-closing adjustments of approximately $1,400.
Revenues of the discontinued operations aggregated $10,224 and $10,436 for the
period from January 1, 1994 through December 22, 1994 and the year ended
December 31, 1993, respectively. Interest expense has been allocated to
discontinued operations based on debt that can be identified as specifically
attributed to those operations. For the period from January 1, 1994 through
December 22, 1994 and the year ended December 31, 1993, interest expense related
to discontinued operations was $2,884 and $2,227, respectively.
71
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
4. INVESTMENT OPERATIONS
FIXED MATURITIES, EQUITY SECURITIES AND INVESTMENTS HELD IN INVENTORY
The following tables contain amortized cost and market value information on
fixed maturities (bonds and redeemable preferred stocks) and equity securities
(common stock and nonredeemable preferred stocks) at December 31, 1995 and 1994.
<TABLE>
<CAPTION>
HELD FOR INVESTMENT
------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES MARKET VALUE
<S> <C> <C> <C> <C>
------------------------------------------------------
DECEMBER 31, 1995
Bonds:
United States Government and agencies --
mortgage-backed securities $ 178,293 $ 9,518 $ (535) $ 187,276
Industrial and miscellaneous:
Mortgage-backed securities 372,806 16,693 (1,680) 387,819
Other 5,000 284 -- 5,284
------------------------------------------------------
Total fixed maturities $ 556,099 $ 26,495 $ (2,215) $ 580,379
------------------------------------------------------
------------------------------------------------------
<CAPTION>
AVAILABLE FOR SALE
------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES MARKET VALUE
------------------------------------------------------
<S> <C> <C> <C> <C>
DECEMBER 31, 1995
Bonds:
United States Government and agencies:
Mortgage-backed securities $ 76,718 $ 4,419 $ (520) $ 80,617
Other 71,289 935 (509) 71,715
State, municipal and other governments 10,514 61 (330) 10,245
Public utilities 105,397 7,088 (866) 111,619
Industrial and miscellaneous:
Mortgage and asset-backed securities 58,231 3,633 (380) 61,484
Other 584,421 54,328 (9,553) 629,196
Redeemable preferred stock 36,649 873 (1,096) 36,426
------------------------------------------------------
Total fixed maturities $ 943,219 $ 71,337 $ (13,254) $ 1,001,302
------------------------------------------------------
------------------------------------------------------
Equity securities $ 72,731 $ 6,042 $ (600) $ 78,173
------------------------------------------------------
------------------------------------------------------
</TABLE>
72
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
4. INVESTMENT OPERATIONS (CONTINUED)
<TABLE>
<CAPTION>
HELD FOR INVESTMENT
----------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES MARKET VALUE
<S> <C> <C> <C> <C>
----------------------------------------------------
DECEMBER 31, 1994
Bonds:
United States Government and agencies --
mortgage-backed securities $ 165,467 $ 737 $ (6,291) $ 159,913
Industrial and miscellaneous -- mortgage-backed
securities 289,877 922 (21,993) 268,806
----------------------------------------------------
Total fixed maturities $ 455,344 $ 1,659 $ (28,284) $ 428,719
----------------------------------------------------
----------------------------------------------------
<CAPTION>
AVAILABLE FOR SALE
----------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES MARKET VALUE
----------------------------------------------------
<S> <C> <C> <C> <C>
DECEMBER 31, 1994
Bonds:
United States Government and agencies:
Mortgage-backed securities $ 64,726 $ 2,577 $ (738) $ 66,565
Other 48,274 206 (2,178) 46,302
State, municipal and other governments 27,812 303 (1,127) 26,988
Public utilities 86,894 1,220 (3,869) 84,245
Industrial and miscellaneous:
Mortgage and asset-backed securities 36,751 -- (285) 36,466
Other 574,074 13,228 (24,204) 563,098
Redeemable preferred stock 43,890 893 (3,533) 41,250
----------------------------------------------------
Total fixed maturities $ 882,421 $ 18,427 $ (35,934) $ 864,914
----------------------------------------------------
----------------------------------------------------
Equity securities $ 45,259 $ 1,538 $ (5,305) $ 41,492
----------------------------------------------------
----------------------------------------------------
</TABLE>
Short-term investments have been excluded from the above schedules as amortized
cost approximates market value for these securities.
73
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
4. INVESTMENT OPERATIONS (CONTINUED)
The carrying value and estimated market value of the Company's portfolio of
fixed maturity securities at December 31, 1995, by contractual maturity, are
shown below. Expected maturities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or without call
or prepayment penalties.
<TABLE>
<CAPTION>
HELD FOR INVESTMENT AVAILABLE FOR SALE
-------------------------- ----------------------------
ESTIMATED ESTIMATED
AMORTIZED MARKET AMORTIZED MARKET
COST VALUE COST VALUE
<S> <C> <C> <C> <C>
--------------------------------------------------------
Due in one year or less $ -- $ -- $ 58,919 $ 58,667
Due after one year through five years -- -- 130,019 134,930
Due after five years through ten years -- -- 202,205 213,406
Due after ten years 5,000 5,284 380,478 415,772
--------------------------------------------------------
5,000 5,284 771,621 822,775
Mortgage and asset-backed securities 551,099 575,095 134,949 142,101
Redeemable preferred stocks -- -- 36,649 36,426
--------------------------------------------------------
$ 556,099 $ 580,379 $ 943,219 $ 1,001,302
--------------------------------------------------------
--------------------------------------------------------
</TABLE>
The unrealized appreciation or depreciation on fixed maturity and equity
securities available for sale are reported as a separate component of
stockholder's equity, reduced by adjustments to deferred policy acquisition
costs and unearned revenue reserve that would have been required as a charge or
credit to income had such amounts been realized, a provision for deferred income
taxes and amounts attributable to minority interests in subsidiary. Net
unrealized investment gains (losses) as reported were comprised of the
following:
<TABLE>
<CAPTION>
DECEMBER 31
---------------------------------
1995 1994
<S> <C> <C>
---------------------------------
Unrealized appreciation (depreciation) on fixed maturity and equity
securities available for sale $ 63,525 $ (21,274)
Adjustments for assumed changes in amortization pattern of:
Deferred policy acquisition costs (12,181) 4,868
Unearned revenue reserve 1,189 (163)
Provision for deferred income taxes (18,387) 5,798
Amounts attributable to minority interest in subsidiary -- 3
---------------------------------
Net unrealized investment gains (losses) $ 34,146 $ (10,768)
---------------------------------
---------------------------------
</TABLE>
Amortized cost of securities held in inventory was $21,555 and $17,731 at
December 31, 1995 and 1994, respectively. Net unrealized appreciation on
securities held in inventory as of December 31, 1995 and 1994, included gross
unrealized gains of $1,613 and $1,719 and gross unrealized losses of $1,255 and
$1,281, respectively.
74
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
4. INVESTMENT OPERATIONS (CONTINUED)
MORTGAGE LOANS ON REAL ESTATE
The Company's mortgage loan portfolio consists principally of commercial
mortgage loans. The Company's lending policies establish limits on the amount
that can be loaned to one borrower and require diversification by geographic
location and collateral type. Regions in which at least 20% of the Company's
mortgage loan portfolio is invested during the years presented include Mountain
(23% in 1995 and 22% in 1994), which includes Arizona, Colorado, New Mexico,
Nevada, Utah and Wyoming; and Pacific (25% in 1995 and 23% in 1994), which
includes California. Mortgage loans on real estate have also been analyzed
during the years presented by collateral types with retail facilities (36% in
1995, 37% in 1994) and office buildings (37% in 1995, 28% in 1994), representing
the largest holdings.
The Company has also provided an allowance for possible losses against its
mortgage loan portfolio. An analysis of this allowance for loan losses is as
follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------
1995 1994 1993
<S> <C> <C> <C>
-------------------------------
Balance at beginning of year $ 600 $ 600 $ 600
Realized losses during year -- -- 388
Current year chargeoffs, net of recoveries -- -- (388)
-------------------------------
Balance at end of year $ 600 $ 600 $ 600
-------------------------------
-------------------------------
</TABLE>
Securities and indebtedness of related parties include mortgage loans and
similar advances to joint ventures and limited partnerships in which the Company
maintains an equity interest. Such indebtedness aggregated $33,960 and $34,738
at December 31, 1995 and 1994, respectively. These loans and advances were made
at similar interest rates and under similar terms as other mortgage loans.
NET INVESTMENT INCOME
Components of net investment income are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------------
1995 1994 1993
<S> <C> <C> <C>
--------------------------------------
Fixed maturities:
Held for investment $ 42,016 $ 31,235 $ 106,897
Available for sale 83,490 79,280 --
Equity securities 1,098 1,527 2,178
Held in inventory 25,868 (130) 183
Mortgage loans on real estate 19,544 20,417 19,805
Investment real estate 4,191 4,239 5,090
Policy loans 5,567 5,433 5,400
Other long-term investments 381 2,696 3,197
Short-term investments 2,671 2,496 1,202
Other 5,581 3,905 3,997
--------------------------------------
190,407 151,098 147,949
Less investment expenses (6,059) (5,950) (9,629)
--------------------------------------
Net investment income $ 184,348 $ 145,148 $ 138,320
--------------------------------------
--------------------------------------
</TABLE>
75
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
4. INVESTMENT OPERATIONS (CONTINUED)
Investment income of investments held in inventory is comprised of:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------
1995 1994 1993
<S> <C> <C> <C>
--------------------------------
Dividends, interest and other income $ 138 $ 205 $ 312
Net realized gain from investment transactions 25,810 4,026 --
Change in unrealized appreciation/depreciation of investments (80) (4,361) (129)
--------------------------------
$ 25,868 $ (130) $ 183
--------------------------------
--------------------------------
</TABLE>
REALIZED AND UNREALIZED GAINS AND LOSSES
Effective January 1, 1994, the Company adopted SFAS No. 115, "Accounting for
Certain Investments in Debt and Equity Securities". The cumulative effect of
this change in accounting method was to increase stockholder's equity by
$38,913, net of offsets aggregating $39,993.
Realized gains (losses) and the change in unrealized appreciation/depreciation
on investments (excluding amounts attributed to investments held in inventory
discussed above) are summarized below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------------
1995 1994 1993
<S> <C> <C> <C>
-------------------------------------
REALIZED
Fixed maturities:
Held for investment $ -- $ -- $ (287)
Available for sale 5,526 2,554 --
Equity securities (763) 9,535 5,498
Mortgage loans on real estate -- -- (388)
Investment real estate 123 (316) (40)
Other long-term investments (158) (1,773) (330)
Equity investments 1,182 2,864 --
Notes receivable -- (1,624) --
Other (8) (6) (486)
-------------------------------------
Realized gains on investments $ 5,902 $ 11,234 $ 3,967
-------------------------------------
-------------------------------------
UNREALIZED
Fixed maturities:
Held for investment $ 50,905 $ (51,071) $ 38,399
Available for sale 75,590 (96,413) --
Equity securities 9,209 (12,578) 4,329
-------------------------------------
Change in unrealized appreciation/depreciation of investments $ 135,704 $ (160,062) $ 42,728
-------------------------------------
-------------------------------------
</TABLE>
Proceeds from sales of fixed maturity investments available for sale (excluding
proceeds from maturities, repayments and calls) aggregated $133,479 and $217,855
during the years ended December 31, 1995 and 1994, respectively. Gross gains of
$7,186 and $9,247 and gross losses of $1,661 and $6,643 for the years ended
December 31, 1995 and 1994, respectively, were realized on those sales. Proceeds
received from fixed maturity investments held for investment during the years
ended December 31, 1995 and 1994 resulted entirely from maturities, repayments
and calls. Proceeds from sales of fixed maturity investments held for investment
(excluding proceeds from maturities, repayments and calls) were $136,164 for the
year ended December 31, 1993 and resulted in gross gains of $11,407 and gross
losses of $1,439.
Income taxes during the years ended December 31, 1995, 1994 and 1993 include a
provision of $2,066, $3,932 and $1,388, respectively, for the tax effect of
realized gains.
76
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
4. INVESTMENT OPERATIONS (CONTINUED)
OTHER
At December 31, 1995, affidavits of deposits covering bonds with a carrying
value of $1,411,879, preferred stocks with a carrying value of $6,422, mortgage
loans (including those made to related parties) with an unpaid balance of
$253,558, real estate with a book value of $26,241 and policy loans with an
unpaid balance of $88,526 were on deposit with state agencies to meet regulatory
requirements. The Company has pledged bonds with a carrying value of $5,855 as
collateral against the guarantee of a loan agreement with a bank arising from
the sale of a real estate property to an unrelated party (see Note 12).
At December 31, 1995, the Company had committed to provide additional funding
for mortgage loans on real estate aggregating $10,475. These commitments arose
in the normal course of business at terms which are comparable to similar
investments.
The carrying value of investments which have been non-income producing for the
twelve months preceding December 31, 1995, include fixed maturities - $1,650,
and mortgage loans on real estate - $3,343.
No investment in any person or its affiliates (other than bonds issued by
agencies of the United States Government) exceeded 10% of stockholder's equity
at December 31, 1995.
5. PROPERTY AND EQUIPMENT
Property and equipment are comprised of:
<TABLE>
<CAPTION>
DECEMBER 31
------------------------
1995 1994
<S> <C> <C>
------------------------
Land $ 1,191 $ 727
Home office building and claims center 37,752 37,283
Leasehold improvements 166 166
Furniture and equipment 62,965 60,692
------------------------
102,074 98,868
Allowances for depreciation (42,084) (37,850)
------------------------
$ 59,990 $ 61,018
------------------------
------------------------
</TABLE>
6. REINSURANCE AND POLICY PROVISIONS
LIFE INSURANCE OPERATIONS
The value of insurance in force acquired is an asset that represents the present
value of future profits on business acquired. An analysis of the value of
insurance in force acquired for the years ended December 31, 1995, 1994 and 1993
is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------
1995 1994 1993
<S> <C> <C> <C>
-------------------------------
Balance at beginning of year $ 104 $ 117 $ --
Additions resulting from acquisitions -- -- 157
Accretion of interest during the year 6 7 7
Amortization of asset (35) (20) (47)
-------------------------------
Balance at end of year $ 75 $ 104 $ 117
-------------------------------
-------------------------------
</TABLE>
Amortization of the value of insurance in force acquired for the next five years
is expected to be as follows: 1996 - $37; 1997 - $30; and 1998 - $8.
In the normal course of business, the Company seeks to limit its exposure to
loss on any single insured and to recover a portion of benefits paid by ceding
reinsurance to other insurance enterprises or reinsurers. Reinsurance coverages
for life insurance vary according to the age and risk classification of the
insured with retention limits ranging up to $500 of
77
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
6. REINSURANCE AND POLICY PROVISIONS (CONTINUED)
coverage per individual life. The Company does not use financial or surplus
relief reinsurance. At December 31, 1995, life insurance in force ceded on a
consolidated basis amounted to $481,305 or approximately 4.3% of total life
insurance in force.
Reinsurance contracts do not relieve the Company of its obligations to its
policyholders. To the extent that reinsuring companies are later unable to meet
obligations under reinsurance agreements, the Company would be liable for these
obligations, and payment of these obligations could result in losses to the
Company. To limit the possibility of such losses, the Company evaluates the
financial condition of its reinsurers and monitors concentrations of credit
risk.
No allowance for uncollectible amounts has been established against the
Company's asset for reinsurance recoverable since none of the receivables are
deemed to be uncollectible, and because such receivables, either individually or
in the aggregate, are not material to the Company's operations. Insurance
premiums and product charges have been reduced by $3,274, $4,988 and $6,973 and
insurance benefits have been reduced by $1,721, $3,551 and $3,809 during the
years ended December 31, 1995, 1994 and 1993, respectively, as a result of the
cession agreements. The amount of reinsurance assumed is not significant.
Effective January 1, 1994, the Company transferred all of its group accident and
health business to other carriers. However, there was some run-off of the group
accident and health line during 1995 and 1994. Also, effective January 1, 1994,
the Company entered into a 100% coinsurance agreement with an unaffiliated third
party to administer the remaining individual medical business. The Company has
effectively removed itself from the medical business as of December 31, 1993
other than stop-loss coverages for self-insured groups of certain related
companies. The Company continues to write individual disability income policies
which are classified as accident and health herein.
Unpaid claims on accident and health policies include amounts for losses and
related adjustment expense and are estimates of the ultimate net costs of all
losses, reported and unreported. These estimates are subject to the impact of
future changes in claim severity, frequency and other factors. The activity in
the liability for unpaid claims and related adjustment expense, net of
reinsurance, is summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------
1995 1994 1993
<S> <C> <C> <C>
--------------------------------
Unpaid claims liability, net of related reinsurance, at beginning of year $ 10,494 $ 16,116 $ 9,863
Add:
Provision for claims occurring in the current year, net of reinsurance 5,011 3,723 37,786
Increase in estimated expense for claims occurring in the prior years,
net of reinsurance 2,357 804 3,437
--------------------------------
Incurred claim expense during the current year, net of reinsurance 7,368 4,527 41,223
Unpaid claims liability of companies acquired -- -- 5,065
Deduct expense payments for claims, net of reinsurance, occurring during:
Current year 2,109 2,585 31,614
Prior years 1,854 7,564 8,421
--------------------------------
3,963 10,149 40,035
--------------------------------
Unpaid claims liability, net of related reinsurance, at end of year 13,899 10,494 16,116
Active life reserve 14,614 15,248 19,162
--------------------------------
Net accident and health reserves 28,513 25,742 35,278
Reinsurance ceded 934 2,706 1,510
--------------------------------
Gross accident and health reserves $ 29,447 $ 28,448 $ 36,788
--------------------------------
--------------------------------
</TABLE>
The Company's unpaid claims reserve was increased by $2,357, $804 and $3,437 for
the years ended December 31, 1995, 1994 and 1993, respectively, for claims that
occurred prior to those balance sheet dates. A substantial portion of these
claims are related to the disability income block of business. The establishment
of disability income reserves is
78
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
6. REINSURANCE AND POLICY PROVISIONS (CONTINUED)
dependent upon factors that attempt to project future payments based upon
experience to date. These factors tend to increase as the length of the
disability increases. Accordingly, deficiencies noted above resulted primarily
from experience less favorable than assumed in the reserve basis.
PROPERTY-CASUALTY OPERATIONS
Risks are reinsured with other companies to permit the recovery of a portion of
losses and loss adjustment expenses incurred and are treated (to the extent of
the reinsurance) as risks for which the Company is not liable; however, the
Company remains liable to the extent that reinsuring companies cannot meet their
obligations under these reinsurance contracts.
Utah Farm Bureau Insurance Company, which was transferred to FBL Financial
Group, Inc. as of December 31, 1995 (see Note 1) is a participant with two
affiliates, Farm Bureau Mutual Insurance Company and South Dakota Farm Bureau
Mutual Insurance Company, in a reinsurance pooling agreement. Under the terms of
the agreement, Utah Farm Bureau Insurance Company and South Dakota Farm Bureau
Mutual Insurance Company cede to Farm Bureau Mutual Insurance Company all of
their insurance business and assume back from Farm Bureau Mutual Insurance
Company an amount equal to their participation in the pooling agreement. Also,
losses, loss adjustment expenses, and other underwriting and administrative
expenses are prorated among the companies on the basis of their participation in
the pooling agreement. For the years ended December 31, 1995, 1994 and 1993,
Utah Farm Bureau Insurance Company was an 8% participant in the pool.
The following table provides a reconciliation of the beginning and ending
reserve balances, net of reinsurance and salvage and subrogation recoverables:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------------
1995 1994 1993
<S> <C> <C> <C>
-----------------------------------
Reserve for losses and loss adjustment expenses, net of related reinsurance and
salvage and subrogation recoverables, at beginning of year $ 12,182 $ 11,675 $ 10,593
Add:
Provision for losses and loss adjustment expenses for claims
occurring in the current year, net of reinsurance and salvage and
subrogation 14,529 14,368 14,148
Decrease in estimated losses and loss adjustment expenses for
claims occurring in the prior years, net of reinsurance and salvage
and subrogation (908) (927) (200)
-----------------------------------
Incurred losses and loss adjustment expenses during the current year, net of
reinsurance and salvage and subrogation 13,621 13,441 13,948
Deduct loss and loss adjustment expense payments for claims, net of reinsurance
and salvage and subrogation, occurring during:
Current year (7,678) (7,917) (7,799)
Prior years (5,351) (5,017) (5,067)
-----------------------------------
(13,029) (12,934) (12,866)
-----------------------------------
Reserve for losses and loss adjustment expenses, net of related reinsurance and
salvage and subrogation recoverables, at end of year 12,774 12,182 11,675
Reinsurance recoverables on unpaid losses and loss adjustment expenses, at end
of year 17,210 16,646 14,616
Unearned premium reserve, at end of year 15,906 15,654 13,721
Transferred to parent as part of dividend of Utah Farm Bureau Insurance Company (45,890) -- --
-----------------------------------
Reserves and unearned premiums (gross) on property-casualty policies, at end of
year $ -- $ 44,482 $ 40,012
-----------------------------------
-----------------------------------
</TABLE>
79
<PAGE>
7. FEDERAL INCOME TAXES
The Company files a consolidated federal income tax return with FBL Financial
Group, Inc. and all of the Company's majority-owned subsidiaries, except FBL
Insurance Company and Rural Security Life Insurance Company. FBL Insurance
Company and Rural Security Life Insurance Company filed separate federal income
tax returns for periods prior to their liquidation during 1995. FBL Financial
Group, Inc. and its direct and indirect subsidiaries included in the
consolidated federal income tax return each report current income tax expense as
allocated under a consolidated tax allocation agreement. Generally, this
allocation results in profitable companies recognizing a tax provision as if the
individual company filed a separate return and loss companies recognizing
benefits to the extent their losses contribute to reduce consolidated taxes.
Deferred income taxes have been established by the Company and its subsidiaries
based upon the temporary differences, the reversal of which will result in
taxable or deductible amounts in future years when the related asset or
liability is recovered or settled, within each entity.
Income tax expenses (credits) are included in the consolidated financial
statements as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
---------------------------------
1995 1994 1993
<S> <C> <C> <C>
---------------------------------
Taxes provided in consolidated statements of income on:
Income from continuing operations before minority interest in earnings of
subsidiaries and equity income (loss):
Current $ 13,278 $ 16,682 $ 17,643
Deferred 14,013 1,752 (3,204)
---------------------------------
27,291 18,434 14,439
Equity income (loss):
Current (212) 240 (188)
Deferred 1,013 (1,097) 513
---------------------------------
801 (857) 325
Discontinued operations:
Current -- (3,649) (975)
Deferred -- 7,137 (587)
---------------------------------
-- 3,488 (1,562)
Taxes provided in consolidated statement of changes in stockholders' equity:
Cumulative effect of change in method of accounting for certain debt
securities -- deferred -- 20,954 --
Amounts attributable to net unrealized investment gains and losses
during year -- deferred 24,435 (29,836) 1,540
---------------------------------
24,435 (8,882) 1,540
---------------------------------
$ 52,527 $ 12,183 $ 14,742
---------------------------------
---------------------------------
</TABLE>
The effective tax rate on income from continuing operations before income taxes,
minority interest in earnings of subsidiaries and equity income (loss) is
different from the prevailing federal income tax rate as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------
1995 1994 1993
<S> <C> <C> <C>
--------------------------------
Income from continuing operations before income taxes, minority interest in
earnings of subsidiaries and equity income (loss) $ 76,475 $ 48,536 $ 38,931
--------------------------------
--------------------------------
Income tax at federal statutory rate (35%) $ 26,766 $ 16,988 $ 13,626
Tax effect (decrease) of:
Tax-exempt interest income (574) (549) (563)
Tax-exempt dividend income (798) (603) (546)
Possible adjustments from IRS examinations -- 2,766 1,786
State taxes 1,337 (112) (32)
Other items 560 (56) 168
--------------------------------
Income tax expense $ 27,291 $ 18,434 $ 14,439
--------------------------------
--------------------------------
</TABLE>
80
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
7. FEDERAL INCOME TAXES (CONTINUED)
During 1994, the Company reached partial settlement with the Internal Revenue
Service (IRS) for tax years 1988 through 1990, that resulted in a payment of
$2,766. The IRS is in the process of conducting examinations for 1991 through
1994. During the years ended December 31, 1994 and 1993, the Company provided
$2,766 and $1,786, respectively, for additional adjustments from routine IRS
examinations. Management believes that amounts provided in the income tax
provision for IRS examinations are adequate to settle any adjustments raised by
the IRS.
The tax effect of temporary differences giving rise to the Company's deferred
income tax liabilities at December 31, 1995 and 1994, is as follows:
<TABLE>
<CAPTION>
DECEMBER 31
-----------------------
1995 1994
<S> <C> <C>
-----------------------
Deferred tax liabilities:
Fixed maturity and equity securities $ 22,700 $ --
Deferred policy acquisition costs 36,192 40,295
Deferred investment gains 9,891 4,711
Other 12,413 12,403
-----------------------
81,196 57,409
Deferred tax assets:
Fixed maturity and equity securities -- (11,217)
Future policy benefits (20,497) (22,793)
Accrued dividends (3,010) (4,282)
Accrued pension costs (9,144) (8,563)
Other (4,822) (7,308)
-----------------------
(37,473) (54,163)
-----------------------
Deferred income tax liability $ 43,723 $ 3,246
-----------------------
-----------------------
</TABLE>
Prior to 1984, a portion of current income of the Company was not subject to
current income taxation, but was accumulated, for tax purposes, in a memorandum
account designated as "policyholders' surplus account". The aggregate
accumulation in this account at December 31, 1995 was $11,148. Should the
policyholders' surplus account of the Company exceed the limitation prescribed
by federal income tax law, or should distributions be made by the Company to its
stockholder in excess of $235,284, such excess would be subject to federal
income taxes at rates then effective. Deferred income taxes of $3,902 have not
been provided on amounts included in this memorandum account since the Company
contemplates no action and can foresee no events that would create such a tax.
Deferred income taxes were also reported on equity income (loss) and on the
income (loss) from discontinued operations during these periods. These taxes
arise from the recognition of income and losses differently for purposes of
filing federal income tax returns than for financial reporting purposes.
8. CREDIT ARRANGEMENTS
SHORT-TERM BORROWINGS
As an investor in the Federal Home Loan Bank (FHLB), the Company has the right
to borrow up to $48,229 from the FHLB as of December 31, 1995. As of December
31, 1995, the Company had no outstanding borrowings under this credit
arrangement.
81
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
8. CREDIT ARRANGEMENTS (CONTINUED)
LONG-TERM DEBT
Long-term debt consists of:
<TABLE>
<CAPTION>
DECEMBER 31
---------------------
1995 1994
<S> <C> <C>
---------------------
Lease-backed notes payable, 4.98%, scheduled principal and interest payments through December
1996, secured by rentals to be received under certain operating leases from members of
consolidated group and other affiliates $ 12,516 $ 16,145
Mortgage loan payable to insurance company, 10.25%, due in monthly installments of $25 through
June 1995 when balloon payment of approximately $2,250 was due -- 2,282
Note payable to Rural Mutual Insurance Company, 10%, due through December 2000, collateralized
by an interest in note receivable with a carrying value of $288 88 92
---------------------
$ 12,604 $ 18,519
---------------------
---------------------
</TABLE>
At December 31, 1995, the annual maturities of long-term debt during the next
five years ending on December 31 are as follows:
<TABLE>
<S> <C>
Years ending December 31:
1996 $ 12,521
1997 6
1998 6
1999 7
2000 64
---------
$ 12,604
---------
---------
</TABLE>
9. RETIREMENT AND COMPENSATION PLANS
The Company participates with several other affiliates in various defined
benefit plans covering substantially all employees. The benefits of these plans
are based primarily on years of service and employees' compensation. The Company
and affiliates have adopted a policy of allocating the required contribution to
the plans between themselves generally on a basis of time incurred by the
respective employees for each employer. Such allocations are reviewed annually.
Pension expense aggregated $6,315, $6,171 and $5,109 for the years ended
December 31, 1995, 1994 and 1993, respectively. During the year ended December
31, 1994, the Company introduced a new supplemental plan that increased the
annual expense by approximately $3,193. In addition, during the year ended
December 31, 1993, the Company offered early retirement to a select group of
employees that resulted in a non-recurring charge of approximately $2,928.
The Company provides benefits to agents of the Company and certain of its
affiliates through the Agents' Career Incentive Plan. Company contributions to
the plan are based upon the individual agent's earned commissions and vary based
upon the overall production level and the number of years of service. Company
contributions charged to expense with respect to this plan during the years
ended December 31, 1995, 1994 and 1993 were $1,421, $1,648 and $1,388,
respectively.
The Company has established deferred compensation plans for certain key current
and former employees and has certain other benefit plans which provide for
retirement and other benefits. These plans have been accrued or funded as deemed
appropriate by management of the Company.
Certain of the assets related to these plans are on deposit with the Company and
amounts relating to these plans are included in the financial statements herein.
In addition, certain amounts included in the liability for deferred compensation
and other employee benefits relate to deposit administration funds maintained by
the Company on behalf of affiliates offering substantially the same benefit
programs as the Company.
82
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
9. RETIREMENT AND COMPENSATION PLANS (CONTINUED)
In addition to benefits offered under the aforementioned benefit plans, the
Company and several other affiliates sponsor a plan that provides group term
life insurance benefits to retired full-time employees who have worked ten years
and attained age 55 while in service with the Company.
The Company and affiliates allocate postretirement benefit expense in a manner
consistent with pension expense discussed above. Pension expense aggregated
$103, $96 and $34 for the years ended December 31, 1995, 1994 and 1993,
respectively, with respect to postretirement benefits.
10. STOCKHOLDER'S EQUITY
CHANGE IN AUTHORIZED SHARES
On April 4, 1995, the Board of Directors of the Company approved an increase in
the number of authorized shares of common stock from 25,000 shares to 994,000
shares.
STATUTORY LIMITATIONS ON DIVIDENDS
The ability of Farm Bureau Life to pay dividends to the parent company is
restricted because prior approval of insurance regulatory authorities is
required for payment of dividends to the stockholder which exceed an annual
limitation. During 1996, Farm Bureau Life can pay dividends to the parent
company of approximately $47,372, without prior approval of statutory
authorities. Also, the amount ($208,800 at December 31, 1995) by which the
stockholder's equity stated in conformity with generally accepted accounting
principles exceeds statutory capital and surplus as reported is restricted and
cannot be distributed.
STATUTORY ACCOUNTING POLICIES
The financial statements of the Company included herein differ from related
statutory- basis financial statements principally as follows: (a) the bond
portfolio is segregated into held-for-investment (carried at amortized cost),
available-for-sale (carried at fair value), and trading (reported at fair value)
classifications rather than generally being carried at amortized cost; (b)
acquisition costs of acquiring new business are deferred and amortized over the
life of the policies rather than charged to operations as incurred; (c) future
policy benefit reserves for participating traditional life insurance products
are based on net level premium methods and guaranteed cash value assumptions
which may differ from statutory reserves; (d) future policy benefit reserves on
certain universal life and annuity products are based on full account values,
rather than discounting methodologies utilizing statutory interest rates; (e) on
certain lines of property-casualty insurance, reserves in excess of the amounts
considered adequate by the Company may be necessary to conform with statutory
requirements; (f) reinsurance amounts are shown as gross amounts, net of an
allowance for uncollectible amounts, on the consolidated balance sheet rather
than netted against the corresponding receivable or payable; (g) deferred income
taxes are provided for the difference between the financial statement and income
tax bases of assets and liabilities; (h) net realized gains or losses attributed
to changes in the level of interest rates in the market are recognized as gains
or losses in the statement of income when the sale is completed rather than
deferred and amortized over the remaining life of the fixed maturity security or
mortgage loan; (i) declines in the estimated realizable value of investments are
charged to the statement of income for declines in value, when such declines in
value are judged to be other than temporary rather than through the
establishment of a formula-determined statutory investment reserve (carried as a
liability), changes in which are charged directly to surplus; (j) agents'
balances and certain other assets designated as "non-admitted assets" for
statutory purposes are reported as assets rather than being charged to surplus;
(k) revenues for universal life and annuity products consist of policy charges
for the cost of insurance, policy administration charges, amortization of policy
initiation fees and surrender charges assessed rather than premiums received;
(l) pension income or expense is recognized in accordance with SFAS No. 87,
"Employers' Accounting for Pensions" rather than in accordance with rules and
regulations permitted by the Employee Retirement Income Security Act of 1974;
(m) expenses for postretirement benefits other than pensions are recognized in
accordance with SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other than Pensions" rather than the statutory method which does not accrue for
non-vested employees; (n) adjustments to federal income taxes of prior years are
reported as a component of expense in the statement of income rather than as
charges or credits to surplus; (o) the financial statements of subsidiaries are
consolidated with those of the Company; (p) assets and liabilities are restated
to fair values when a change in ownership occurs that is accounted for as a
purchase, with provisions for goodwill and other intangible assets, rather than
continuing to be presented at historical cost; and (q) operating results of
discontinued operations are segregated from those of continuing operations.
83
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
10. STOCKHOLDER'S EQUITY (CONTINUED)
The National Association of Insurance Commissioners currently is in the process
of recodifying statutory accounting practices, the result of which is expected
to constitute the only source of "prescribed" statutory accounting practices.
That project, which is not expected to be completed before 1997, will likely
change, to some extent, statutory accounting practices. The codification may
result in changes to the permitted or prescribed accounting practices that the
Company uses to prepare their statutory-basis financial statements.
Total statutory capital and surplus of the Company was $231,596 at December 31,
1995 and $206,859 at December 31, 1994. Net income (loss) for the Company
determined in accordance with statutory accounting practices was $47,372 in
1995, $(11,013) in 1994 and $17,861 in 1993.
STATUTORY INFORMATION OF SUBSIDIARIES
Capital and surplus as of December 31, 1995 and 1994, and net income (loss) for
the years ended December 31, 1995, 1994 and 1993, as determined in accordance
with statutory accounting practices for the Company's insurance subsidiaries, is
as follows:
<TABLE>
<CAPTION>
CAPITAL AND SURPLUS NET INCOME (LOSS)
DECEMBER 31 YEAR ENDED DECEMBER 31
-------------------- -------------------------------
1995 1994 1995 1994 1993
<S> <C> <C> <C> <C> <C>
-------------------- -------------------------------
Life insurance subsidiaries:
Universal Assurors Life Insurance Company $ 3,200 $ 3,109 $ 92 $ 78 $ 43
FBL Insurance Company -- 5,721 -- 165 9,740
Rural Security Life -- 6,394 -- (3,070) 296
Property-casualty insurance subsidiary - Utah Farm Bureau
Insurance Company -- 7,829 1,454 799 (226)
</TABLE>
The statutory balances listed above include amounts attributable to minority
interest, as applicable.
11. MANAGEMENT AND SERVICES AGREEMENTS
The Company shares certain office facilities and services with the Iowa Farm
Bureau Federation and its affiliated companies. These expenses are allocated by
the Company on the basis of cost and time studies that are updated annually and
consist primarily of salaries and related expenses, travel, and occupancy costs.
In addition, the Company participates in a management agreement with Farm Bureau
Management Corporation (wholly owned by the Iowa Farm Bureau Federation). Under
this agreement, Farm Bureau Management Corporation provides general business,
administrative analysis, and management services to the Company. During the
years ended December 31, 1995, 1994 and 1993, the Company incurred expenses
under this contract of $3,667, $3,076 and $2,961, respectively.
12. COMMITMENTS AND CONTINGENCIES
ICG Partners, an affiliated joint venture, maintains a line of credit with the
Company and an affiliate, Farm Bureau Mutual Insurance Company, in the amounts
of $25,500 and $4,500, respectively. At December 31, 1995 and 1994, ICG Partners
had borrowed $4,167 and $5,024, respectively, from the Company against the line
of credit. Interest (11.5% at December 31, 1995) is payable at an annual rate
equal to the prime rate of The Chase Manhattan Bank, N.A., plus 3.00%. The line
of credit is collateralized by lease receivables and substantially all other
assets of ICG Partners, subject to senior positions.
In connection with the sale of certain real estate property, Rural Security Life
agreed to act as guarantor of a mortgage loan between the purchaser and a bank.
The Company has now taken the position of Rural Security Life with respect to
the guarantee. Pursuant to the agreement, the Company is required to deposit
securities in a trust in an amount at least equal to the outstanding balance of
the mortgage loan. Should the purchaser default on the mortgage, the bank has
the ability to withdraw the securities at which time the Company would secure a
first interest in the underlying property. At December 31, 1995, the outstanding
balance of the mortgage loan is $5,105. The mortgage loan, which is current at
December 31, 1995, requires monthly payments at the lenders' prime commercial
rate through December 31, 1996, at which time a balloon payment of $4,563 is
due.
84
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
12. COMMITMENTS AND CONTINGENCIES (CONTINUED)
In connection with the sale of the aforementioned real estate property, a
subsidiary of the Company entered into a real estate management agreement
whereby it agreed to pay any cash flow deficiencies (as defined in the
agreement) through 1997. The agreement also provided that the subsidiary would
receive 35% of any excess cash flow generated during the same period. At
December 31, 1995, the Company assessed the probability and amount of future
cash payments pursuant to the agreement and determined that an accrual of $555
was appropriate. While such future amounts are subject to the actual experience
of the underlying retail facility, management believes that assumptions utilized
in establishing the accrual are reasonable in all material respects.
The Company is involved in litigation where amounts are alleged that are
substantially in excess of contractual policy benefits or certain other
agreements. Management and its legal counsel do not believe any of these claims
will result in a material loss to the Company.
Assessments are, from time to time, levied on the Company by life and health
guaranty associations in most states in which the Company is licensed to cover
losses of policyholders of insolvent or rehabilitated companies. In some states,
these assessments can be partially recovered through a reduction in future
premium taxes. Assessments have not been material to the Company's financial
statements prior to 1991. However, the economy and other factors have caused a
number of failures of substantially larger companies since that time. The
Company has not been able to reasonably estimate potential future assessments,
so no amounts have been provided for in the accompanying financial statements.
Assessments paid by the Company amounted to $726, $985 and $708 during the years
ended December 31, 1995, 1994 and 1993, respectively.
85
<PAGE>
[THIS PAGE IS LEFT BLANK INTENTIONALLY]
86
<PAGE>
- --------------------------------------------------------------------------------
APPENDIX A
- --------------------------------------------------------------------------------
ILLUSTRATIONS OF
DEATH
The following tables illustrate how the death benefits
and Cash Values of a Policy may
BENEFITS AND CASH
VALUES
vary over an extended period of time for both males and
females at certain ages, assuming hypothetical rates of
investment return for the Variable Account equivalent to
constant gross annual rates of 0%, 4%, 8% and 12%.
The amounts shown are as of the end of each Policy Year.
The tables assume that the guaranteed (maximum) cost of
insurance rates will be charged for the entire period
illustrated. The amounts shown for the death benefits and
Cash Values reflect the deduction of the premium expense
charge and the monthly and first year monthly
administrative charges. The amounts shown for the death
benefits and Cash Values also reflect the fact that the
net investment return of the Variable Account is lower
than the gross, after-tax return on the assets held in
the Fund as a result of expenses paid by the Fund and
charges levied against the Variable Account. The values
shown take into account expenses paid by the Fund which
are assumed to be equivalent to 0.55% of the aggregate
average daily net assets of the Fund. Actual fees and
expenses of the Portfolios associated with a policy may
be more or less than 0.55%, will vary from year to year,
and will vary with the Subaccount selected. Nonetheless
the Company expects the actual expenses to average 0.55%
over the six portfolios. This is because the Adviser has
agreed to reimburse any Portfolio for calendar year 1995
to the extent that annual operating expenses, including
the investment advisory fee, exceed .55%. There can be no
assurance that the Adviser will continue to limit
expenses beyond December 31, 1996. Absent the agreement
to limit expenses, actual fees and expenses of the Fund
would be more than 0.55%. The .55% limit was also in
effect in 1995. Absent the agreement to limit expense,
actual expenses for 1995 would have averaged .78%. The
amounts shown also take into account the daily charge by
the Company to the Variable Account for assuming
mortality and expense risks, which is equivalent to a
charge at an effective annual rate of .90% of the net
assets of the Variable Account. After deduction of these
amounts, the illustrated gross annual investment rates of
return of 0%, 4%, 8% and 12% correspond to approximate
net annual investment rates of -1.45%, 2.55%, 6.55% and
10.55%, respectively.
The hypothetical values shown in the tables do not
reflect any charges for federal income taxes against the
Variable Account since the Company is not currently
making such charges. However, such charges may be made in
the future and, in that event, the gross annual
investment rate of return would have to exceed 0%, 4%, 8%
or 12% by an amount sufficient to cover tax charges in
order to produce the death benefits and Cash Values
illustrated. (See "FEDERAL TAX MATTERS--Taxation of the
Company.")
The tables illustrate the Policy values that would result
based upon the hypothetical investment rates of return if
premiums are paid as indicated, if all Net Premiums are
allocated to the Variable Account and if no Policy Loans
have been made. The tables are also based on the
assumptions that the Policyowner has not requested an
increase or decrease in Specified Amount, and that no
partial surrenders or transfers have been made.
For comparative purposes, the second column of each table
shows the amount to which the premiums would accumulate
if an amount equal to those premiums were invested to
earn interest at 5% compounded annually.
* * *
Upon request, the Company will provide a comparable
illustration based upon the proposed insured's age, sex
and premium class, the Specified Amount or premium
requested, and the proposed frequency of premium
payments.
A-1
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
FEMALE AGE 25 AT LAST BIRTHDAY
DEATH BENEFIT OPTION A
INITIAL SPECIFIED AMOUNT $100,000--ANNUAL PREMIUM $318
NONSMOKER PREMIUM CLASS
<TABLE>
<CAPTION>
0% ASSUMED HYPOTHETICAL 4% ASSUMED HYPOTHETICAL 8% ASSUMED HYPOTHETICAL
GROSS RETURN GROSS RETURN GROSS RETURN
GUARANTEED COST GUARANTEED COST GUARANTEED COST
PREMIUMS OF INSURANCE OF INSURANCE OF INSURANCE
END OF ACCUMULATED ------------------------- ------------------------- -------------------------
POLICY AT 5% CASH DEATH CASH DEATH CASH DEATH
YEAR PER YEAR VALUE BENEFIT VALUE BENEFIT VALUE BENEFIT
----------- ---------------- ---------- ------------- ---------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
1......................... $ 333.90 $ 29 $ 100,029 $ 35 $ 100,035 $ 41 $ 100,041
2......................... 684.50 174 100,174 190 100,190 206 100,206
3......................... 1,052.62 314 100,314 346 100,346 380 100,380
4......................... 1,439.15 450 100,450 503 100,503 562 100,562
5......................... 1,845.01 580 100,580 662 100,662 753 100,753
6......................... 2,271.16 705 100,705 820 100,820 952 100,952
7......................... 2,718.62 825 100,825 980 100,980 1,161 101,161
8......................... 3,188.45 939 100,939 1,139 101,139 1,380 101,380
9......................... 3,681.77 1,048 101,048 1,299 101,299 1,609 101,609
10......................... 4,199.76 1,148 101,148 1,455 101,455 1,846 101,846
15......................... 7,205.08 1,499 101,499 2,162 102,162 3,137 103,137
20......................... 11,040.72 1,461 101,461 2,564 102,564 4,471 104,471
25......................... 15,936.08 951 100,951 2,495 102,495 5,725 105,725
30......................... 22,183.93 * * 1,640 101,640 6,594 106,594
35......................... 30,157.95 * * * * 6,530 106,530
Age 65......................... 42,685.70 * * * * 3,815 103,815
<CAPTION>
12% ASSUMED HYPOTHETICAL
GROSS RETURN
GUARANTEED COST
OF INSURANCE
END OF -------------------------
POLICY CASH DEATH
YEAR VALUE BENEFIT
----------- ---------- -------------
<S> <C> <C>
1......................... $ 47 $ 100,047
2......................... 223 100,223
3......................... 416 100,416
4......................... 626 100,626
5......................... 854 100,854
6......................... 1,103 101,103
7......................... 1,374 101,374
8......................... 1,670 101,670
9......................... 1,993 101,993
10......................... 2,343 102,343
15......................... 4,573 104,573
20......................... 7,772 107,772
25......................... 12,419 112,419
30......................... 19,156 119,156
35......................... 28,895 128,895
Age 65......................... 46,394 146,394
</TABLE>
- --------------------------
* In the absence of an additional premium, the Policy would lapse.
The values illustrated assume the premium is paid at the beginning of the Policy
Year. Values would be different if premiums are paid with a different frequency
or in different amounts.
The values and benefits are as of the Policy Year shown. They assume that no
Policy Loan or surrenders have been made. Excessive Policy Loans or surrenders
may cause this Policy to lapse because of insufficient Cash Value.
THE HYPOTHETICAL GROSS ANNUAL INVESTMENT RATES OF RETURN SHOWN ABOVE ARE
ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST, OR A
PREDICTION OF FUTURE, INVESTMENT RATES OF RETURN. THE ACTUAL INVESTMENT RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING PREVAILING INTEREST RATES, RATES OF INFLATION, AND THE
ALLOCATIONS MADE BY A POLICYOWNER AMONG THE SUBACCOUNTS. THE GROSS HYPOTHETICAL
ANNUAL INVESTMENT RATES OF RETURN OF 0%, 4%, 8% AND 12% SHOWN ABOVE CORRESPOND
TO NET ANNUAL RATES OF RETURN OF -1.45%, 2.55%, 6.55% AND 10.55%, RESPECTIVELY.
THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE
SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 0%, 4%, 8% AND 12% OVER
A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE FUND THAT
THESE HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR
OR SUSTAINED FOR ANY PERIOD OF TIME.
A-2
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
FEMALE AGE 35 AT LAST BIRTHDAY
DEATH BENEFIT OPTION A
INITIAL SPECIFIED AMOUNT $100,000--ANNUAL PREMIUM $516
NONSMOKER PREMIUM CLASS
<TABLE>
<CAPTION>
0% ASSUMED HYPOTHETICAL 4% ASSUMED HYPOTHETICAL 8% ASSUMED HYPOTHETICAL
GROSS RETURN GROSS RETURN GROSS RETURN
GUARANTEED COST GUARANTEED COST GUARANTEED COST
PREMIUMS OF INSURANCE OF INSURANCE OF INSURANCE
END OF ACCUMULATED ------------------------- ------------------------- -------------------------
POLICY AT 5% CASH DEATH CASH DEATH CASH DEATH
YEAR PER YEAR VALUE BENEFIT VALUE BENEFIT VALUE BENEFIT
----------- ---------------- ---------- ------------- ---------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
1......................... $ 541.80 $ 54 $ 100,054 $ 64 $ 100,064 $ 74 $ 100,074
2......................... 1,110.69 336 100,336 363 100,363 392 100,392
3......................... 1,708.02 603 100,603 660 100,660 719 100,719
4......................... 2,335.23 855 100,855 951 100,951 1,056 101,056
5......................... 2,993.79 1,089 101,089 1,236 101,236 1,400 101,400
6......................... 3,685.28 1,304 101,304 1,513 101,513 1,751 101,751
7......................... 4,411.34 1,499 101,499 1,779 101,779 2,107 102,107
8......................... 5,173.71 1,674 101,674 2,034 102,034 2,467 102,467
9......................... 5,974.19 1,827 101,827 2,276 102,276 2,833 102,833
10......................... 6,814.70 1,961 101,961 2,507 102,507 3,203 103,203
15......................... 11,691.27 2,297 102,297 3,425 103,425 5,102 105,102
20......................... 17,915.13 1,902 101,902 3,688 103,688 6,858 106,858
25......................... 25,858.54 501 100,501 2,847 102,847 8,010 108,010
30......................... 35,996.57 * * 237 100,237 7,784 107,784
35......................... 48,935.54 * * * * 3,823 103,823
Age 65......................... 38,338.20 * * * * 7,369 107,369
<CAPTION>
12% ASSUMED HYPOTHETICAL
GROSS RETURN
GUARANTEED COST
OF INSURANCE
END OF -------------------------
POLICY CASH DEATH
YEAR VALUE BENEFIT
----------- ---------- -------------
<S> <C> <C>
1......................... $ 84 $ 100,084
2......................... 421 100,421
3......................... 783 100,783
4......................... 1,169 101,169
5......................... 1,582 101,582
6......................... 2,022 102,022
7......................... 2,490 102,490
8......................... 2,989 102,989
9......................... 3,521 103,521
10......................... 4,090 104,090
15......................... 7,595 107,595
20......................... 12,447 112,447
25......................... 19,073 119,073
30......................... 28,035 128,035
35......................... 38,827 138,827
Age 65......................... 30,058 130,058
</TABLE>
- --------------------------
* In the absence of an additional premium, the Policy would lapse.
The values illustrated assume the premium is paid at the beginning of the Policy
Year. Values would be different if premiums are paid with a different frequency
or in different amounts.
The values and benefits are as of the Policy Year shown. They assume that no
Policy Loan or surrenders have been made. Excessive Policy Loans or surrenders
may cause this Policy to lapse because of insufficient Cash Value.
THE HYPOTHETICAL GROSS ANNUAL INVESTMENT RATES OF RETURN SHOWN ABOVE ARE
ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST, OR A
PREDICTION OF FUTURE, INVESTMENT RATES OF RETURN. THE ACTUAL INVESTMENT RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING PREVAILING INTEREST RATES, RATES OF INFLATION, AND THE
ALLOCATIONS MADE BY A POLICYOWNER AMONG THE SUBACCOUNTS. THE GROSS HYPOTHETICAL
ANNUAL INVESTMENT RATES OF RETURN OF 0%, 4%, 8% AND 12% SHOWN ABOVE CORRESPOND
TO NET ANNUAL RATES OF RETURN OF -1.45%, 2.55%, 6.55% AND 10.55%, RESPECTIVELY.
THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE
SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 0%, 4%, 8% AND 12% OVER
A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE FUND THAT
THESE HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR
OR SUSTAINED FOR ANY PERIOD OF TIME.
A-3
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
FEMALE AGE 45 AT LAST BIRTHDAY
DEATH BENEFIT OPTION A
INITIAL SPECIFIED AMOUNT $100,000--ANNUAL PREMIUM $922
NONSMOKER PREMIUM CLASS
<TABLE>
<CAPTION>
0% ASSUMED HYPOTHETICAL 4% ASSUMED HYPOTHETICAL 8% ASSUMED HYPOTHETICAL
GROSS RETURN GROSS RETURN GROSS RETURN
GUARANTEED COST GUARANTEED COST GUARANTEED COST
PREMIUMS OF INSURANCE OF INSURANCE OF INSURANCE
END OF ACCUMULATED ------------------------- ------------------------- -------------------------
POLICY AT 5% CASH DEATH CASH DEATH CASH DEATH
YEAR PER YEAR VALUE BENEFIT VALUE BENEFIT VALUE BENEFIT
----------- ---------------- ---------- ------------- ---------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
1......................... $ 968.10 $ 157 $ 100,157 $ 176 $ 100,176 $ 195 $ 100,195
2......................... 1,984.61 648 100,648 701 100,701 755 100,755
3......................... 3,051.94 1,111 101,111 1,217 101,217 1,329 101,329
4......................... 4,172.63 1,543 101,543 1,722 101,722 1,916 101,916
5......................... 5,349.36 1,944 101,944 2,215 102,215 2,516 102,516
6......................... 6,584.93 2,311 102,311 2,691 102,691 3,125 103,125
7......................... 7,882.28 2,642 102,642 3,147 103,147 3,741 103,741
8......................... 9,244.49 2,933 102,933 3,580 103,580 4,362 104,362
9......................... 10,674.82 3,180 103,180 3,983 103,983 4,982 104,982
10......................... 12,176.66 3,381 103,381 4,354 104,354 5,598 105,598
15......................... 20,890.21 3,684 103,684 5,639 105,639 8,574 108,574
20......................... 32,011.15 2,451 102,451 5,441 105,441 10,850 110,850
25......................... 46,204.60 * * 1,896 101,896 10,328 110,328
30......................... 64,319.45 * * * * 3,754 103,754
35......................... 87,439.09 * * * * * *
Age 65......................... 34,579.81 1,884 101,884 5,052 105,052 11,038 111,038
<CAPTION>
12% ASSUMED HYPOTHETICAL
GROSS RETURN
GUARANTEED COST
OF INSURANCE
END OF -------------------------
POLICY CASH DEATH
YEAR VALUE BENEFIT
----------- ---------- -------------
<S> <C> <C>
1......................... $ 215 $ 100,215
2......................... 812 100,812
3......................... 1,448 101,448
4......................... 2,127 102,127
5......................... 2,850 102,850
6......................... 3,620 103,620
7......................... 4,438 104,438
8......................... 5,305 105,305
9......................... 6,221 106,221
10......................... 7,189 107,189
15......................... 12,968 112,968
20......................... 20,531 120,531
25......................... 29,013 129,013
30......................... 36,615 136,615
35......................... 35,710 135,710
Age 65......................... 22,179 122,179
</TABLE>
- --------------------------
* In the absence of an additional premium, the Policy would lapse.
The values illustrated assume the premium is paid at the beginning of the Policy
Year. Values would be different if premiums are paid with a different frequency
or in different amounts.
The values and benefits are as of the Policy Year shown. They assume that no
Policy Loan or surrenders have been made. Excessive Policy Loans or surrenders
may cause this Policy to lapse because of insufficient Cash Value.
THE HYPOTHETICAL GROSS ANNUAL INVESTMENT RATES OF RETURN SHOWN ABOVE ARE
ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST, OR A
PREDICTION OF FUTURE, INVESTMENT RATES OF RETURN. THE ACTUAL INVESTMENT RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING PREVAILING INTEREST RATES, RATES OF INFLATION, AND THE
ALLOCATIONS MADE BY A POLICYOWNER AMONG THE SUBACCOUNTS. THE GROSS HYPOTHETICAL
ANNUAL INVESTMENT RATES OF RETURN OF 0%, 4%, 8% AND 12% SHOWN ABOVE CORRESPOND
TO NET ANNUAL RATES OF RETURN OF -1.45%, 2.55%, 6.55% AND 10.55%, RESPECTIVELY.
THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE
SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 0%, 4%, 8% AND 12% OVER
A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE FUND THAT
THESE HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR
OR SUSTAINED FOR ANY PERIOD OF TIME.
A-4
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
FEMALE AGE 55 AT LAST BIRTHDAY
DEATH BENEFIT OPTION A
INITIAL SPECIFIED AMOUNT $100,000--ANNUAL PREMIUM $1,566
NONSMOKER PREMIUM CLASS
<TABLE>
<CAPTION>
0% ASSUMED HYPOTHETICAL 4% ASSUMED HYPOTHETICAL 8% ASSUMED HYPOTHETICAL
GROSS RETURN GROSS RETURN GROSS RETURN
GUARANTEED COST GUARANTEED COST GUARANTEED COST
PREMIUMS OF INSURANCE OF INSURANCE OF INSURANCE
END OF ACCUMULATED ------------------------- ------------------------- -------------------------
POLICY AT 5% CASH DEATH CASH DEATH CASH DEATH
YEAR PER YEAR VALUE BENEFIT VALUE BENEFIT VALUE BENEFIT
----------- ---------------- ---------- ------------- ---------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
1......................... $ 1,644.30 $ 317 $ 100,317 $ 351 $ 100,351 $ 385 $ 100,385
2......................... 3,370.82 1,060 101,060 1,151 101,151 1,245 101,245
3......................... 5,183.66 1,747 101,747 1,925 101,925 2,113 102,113
4......................... 7,087.14 2,380 102,380 2,674 102,674 2,993 102,993
5......................... 9,085.80 2,958 102,958 3,395 103,395 3,882 103,882
6......................... 11,184.39 3,473 103,473 4,078 104,078 4,773 104,773
7......................... 13,387.90 3,916 103,916 4,713 104,713 5,655 105,655
8......................... 15,701.60 4,271 104,271 5,281 105,281 6,509 106,509
9......................... 18,130.98 4,520 104,520 5,760 105,760 7,314 107,314
10......................... 20,681.83 4,644 104,644 6,127 106,127 8,045 108,045
15......................... 35,481.63 3,190 103,190 5,906 105,906 10,111 110,111
20......................... 54,370.35 * * 300 100,300 7,094 107,094
25......................... 78,477.67 * * * * * *
30......................... 109,245.40 * * * * * *
35......................... 148,513.68 * * * * * *
Age 65......................... 23,360.22 4,635 104,635 6,371 106,371 8,687 108,687
<CAPTION>
12% ASSUMED HYPOTHETICAL
GROSS RETURN
GUARANTEED COST
OF INSURANCE
END OF -------------------------
POLICY CASH DEATH
YEAR VALUE BENEFIT
----------- ---------- -------------
<S> <C> <C>
1......................... $ 420 $ 100,420
2......................... 1,342 101,342
3......................... 2,313 102,313
4......................... 3,340 103,340
5......................... 4,427 104,427
6......................... 5,569 105,569
7......................... 6,764 106,764
8......................... 7,999 107,999
9......................... 9,255 109,255
10......................... 10,515 110,515
15......................... 16,560 116,560
20......................... 20,141 120,141
25......................... 12,594 112,594
30......................... * *
35......................... * *
Age 65......................... 11,768 111,768
</TABLE>
- --------------------------
* In the absence of an additional premium, the Policy would lapse.
The values illustrated assume the premium is paid at the beginning of the Policy
Year. Values would be different if premiums are paid with a different frequency
or in different amounts.
The values and benefits are as of the Policy Year shown. They assume that no
Policy Loan or surrenders have been made. Excessive Policy Loans or surrenders
may cause this Policy to lapse because of insufficient Cash Value.
THE HYPOTHETICAL GROSS ANNUAL INVESTMENT RATES OF RETURN SHOWN ABOVE ARE
ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST, OR A
PREDICTION OF FUTURE, INVESTMENT RATES OF RETURN. THE ACTUAL INVESTMENT RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING PREVAILING INTEREST RATES, RATES OF INFLATION, AND THE
ALLOCATIONS MADE BY A POLICYOWNER AMONG THE SUBACCOUNTS. THE GROSS HYPOTHETICAL
ANNUAL INVESTMENT RATES OF RETURN OF 0%, 4%, 8% AND 12% SHOWN ABOVE CORRESPOND
TO NET ANNUAL RATES OF RETURN OF -1.45%, 2.55%, 6.55% AND 10.55%, RESPECTIVELY.
THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE
SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 0%, 4%, 8% AND 12% OVER
A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE FUND THAT
THESE HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR
OR SUSTAINED FOR ANY PERIOD OF TIME.
A-5
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
FEMALE AGE 25 AT LAST BIRTHDAY
DEATH BENEFIT OPTION B
INITIAL SPECIFIED AMOUNT $100,000--ANNUAL PREMIUM $318
NONSMOKER PREMIUM CLASS
<TABLE>
<CAPTION>
0% ASSUMED HYPOTHETICAL 4% ASSUMED HYPOTHETICAL 8% ASSUMED HYPOTHETICAL
GROSS RETURN GROSS RETURN GROSS RETURN
GUARANTEED COST GUARANTEED COST GUARANTEED COST
PREMIUMS OF INSURANCE OF INSURANCE OF INSURANCE
END OF ACCUMULATED ------------------------- ------------------------- -------------------------
POLICY AT 5% CASH DEATH CASH DEATH CASH DEATH
YEAR PER YEAR VALUE BENEFIT VALUE BENEFIT VALUE BENEFIT
----------- ---------------- ---------- ------------- ---------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
1....................... $ 333.90 $ 29 $ 100,000 $ 35 $ 100,000 $ 41 $ 100,000
2....................... 684.50 174 100,000 190 100,000 207 100,000
3....................... 1,052.62 315 100,000 347 100,000 381 100,000
4....................... 1,439.15 451 100,000 505 100,000 564 100,000
5....................... 1,845.01 582 100,000 665 100,000 756 100,000
6....................... 2,271.16 708 100,000 824 100,000 957 100,000
7....................... 2,718.62 829 100,000 985 100,000 1,168 100,000
8....................... 3,188.45 945 100,000 1,146 100,000 1,389 100,000
9....................... 3,681.77 1,055 100,000 1,308 100,000 1,621 100,000
10........................ 4,199.76 1,157 100,000 1,467 100,000 1,861 100,000
15........................ 7,205.08 1,520 100,000 2,193 100,000 3,184 100,000
20........................ 11,040.72 1,501 100,000 2,633 100,000 4,593 100,000
25........................ 15,936.08 1,011 100,000 2,625 100,000 6,002 100,000
30........................ 22,183.93 * * 1,852 100,000 7,169 100,000
35........................ 30,157.95 * * * * 7,635 100,000
Age 65....................... 42,685.70 * * * * 5,996 100,000
<CAPTION>
12% ASSUMED HYPOTHETICAL
GROSS RETURN
GUARANTEED COST
OF INSURANCE
END OF ---------------------------
POLICY CASH DEATH
YEAR VALUE BENEFIT
----------- ------------ -------------
<S> <C> <C>
1....................... $ 48 $ 100,000
2....................... 224 100,000
3....................... 417 100,000
4....................... 628 100,000
5....................... 858 100,000
6....................... 1,108 100,000
7....................... 1,382 100,000
8....................... 1,681 100,000
9....................... 2,008 100,000
10........................ 2,363 100,000
15........................ 4,645 100,000
20........................ 7,989 100,000
25........................ 13,006 100,000
30........................ 20,647 100,000
35........................ 32,535 100,000
Age 65....................... 56,788 100,000
</TABLE>
- --------------------------
* In the absence of an additional premium, the Policy would lapse.
The values illustrated assume the premium is paid at the beginning of the Policy
Year. Values would be different if premiums are paid with a different frequency
or in different amounts.
The values and benefits are as of the Policy Year shown. They assume that no
Policy Loan or surrenders have been made. Excessive Policy Loans or surrenders
may cause this Policy to lapse because of insufficient Cash Value.
THE HYPOTHETICAL GROSS ANNUAL INVESTMENT RATES OF RETURN SHOWN ABOVE ARE
ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST, OR A
PREDICTION OF FUTURE, INVESTMENT RATES OF RETURN. THE ACTUAL INVESTMENT RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING PREVAILING INTEREST RATES, RATES OF INFLATION, AND THE
ALLOCATIONS MADE BY A POLICYOWNER AMONG THE SUBACCOUNTS. THE GROSS HYPOTHETICAL
ANNUAL INVESTMENT RATES OF RETURN OF 0%, 4%, 8% AND 12% SHOWN ABOVE CORRESPOND
TO NET ANNUAL RATES OF RETURN OF -1.45%, 2.55%, 6.55% AND 10.55%, RESPECTIVELY.
THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE
SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 0%, 4%, 8% AND 12% OVER
A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE FUND THAT
THESE HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR
OR SUSTAINED FOR ANY PERIOD OF TIME.
A-6
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
FEMALE AGE 35 AT LAST BIRTHDAY
DEATH BENEFIT OPTION B
INITIAL SPECIFIED AMOUNT $100,000--ANNUAL PREMIUM $516
NONSMOKER PREMIUM CLASS
<TABLE>
<CAPTION>
0% ASSUMED HYPOTHETICAL 4% ASSUMED HYPOTHETICAL 8% ASSUMED HYPOTHETICAL
GROSS RETURN GROSS RETURN GROSS RETURN
GUARANTEED COST GUARANTEED COST GUARANTEED COST
PREMIUMS OF INSURANCE OF INSURANCE OF INSURANCE
END OF ACCUMULATED ------------------------- ------------------------- -------------------------
POLICY AT 5% CASH DEATH CASH DEATH CASH DEATH
YEAR PER YEAR VALUE BENEFIT VALUE BENEFIT VALUE BENEFIT
----------- ---------------- ---------- ------------- ---------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
1......................... $ 541.80 $ 54 $ 100,000 $ 64 $ 100,000 $ 74 $ 100,000
2......................... 1,110.69 337 100,000 365 100,000 393 100,000
3......................... 1,708.02 605 100,000 662 100,000 722 100,000
4......................... 2,335.23 859 100,000 956 100,000 1,061 100,000
5......................... 2,993.79 1,095 100,000 1,243 100,000 1,408 100,000
6......................... 3,685.28 1,314 100,000 1,524 100,000 1,764 100,000
7......................... 4,411.34 1,512 100,000 1,795 100,000 2,126 100,000
8......................... 5,173.71 1,691 100,000 2,055 100,000 2,494 100,000
9......................... 5,974.19 1,850 100,000 2,305 100,000 2,869 100,000
10.......................... 6,814.70 1,989 100,000 2,544 100,000 3,251 100,000
15.......................... 11,691.27 2,364 100,000 3,527 100,000 5,258 100,000
20.......................... 17,915.13 2,024 100,000 3,910 100,000 7,259 100,000
25.......................... 25,858.54 671 100,000 3,246 100,000 8,907 100,000
30.......................... 35,996.57 * * 823 100,000 9,588 100,000
35.......................... 48,935.54 * * * * 7,165 100,000
Age 65......................... 38,338.20 * * * * 9,429 100,000
<CAPTION>
12% ASSUMED HYPOTHETICAL
GROSS RETURN
GUARANTEED COST
OF INSURANCE
END OF -------------------------
POLICY CASH DEATH
YEAR VALUE BENEFIT
----------- ---------- -------------
<S> <C> <C>
1......................... $ 85 $ 100,000
2......................... 423 100,000
3......................... 786 100,000
4......................... 1,175 100,000
5......................... 1,591 100,000
6......................... 2,037 100,000
7......................... 2,513 100,000
8......................... 3,021 100,000
9......................... 3,567 100,000
10.......................... 4,153 100,000
15.......................... 7,833 100,000
20.......................... 13,170 100,000
25.......................... 21,033 100,000
30.......................... 33,014 100,000
35.......................... 51,423 100,000
Age 65......................... 36,057 100,000
</TABLE>
- --------------------------
* In the absence of an additional premium, the Policy would lapse.
The values illustrated assume the premium is paid at the beginning of the Policy
Year. Values would be different if premiums are paid with a different frequency
or in different amounts.
The values and benefits are as of the Policy Year shown. They assume that no
Policy Loan or surrenders have been made. Excessive Policy Loans or surrenders
may cause this Policy to lapse because of insufficient Cash Value.
THE HYPOTHETICAL GROSS ANNUAL INVESTMENT RATES OF RETURN SHOWN ABOVE ARE
ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST, OR A
PREDICTION OF FUTURE, INVESTMENT RATES OF RETURN. THE ACTUAL INVESTMENT RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING PREVAILING INTEREST RATES, RATES OF INFLATION, AND THE
ALLOCATIONS MADE BY A POLICYOWNER AMONG THE SUBACCOUNTS. THE GROSS HYPOTHETICAL
ANNUAL INVESTMENT RATES OF RETURN OF 0%, 4%, 8% AND 12% SHOWN ABOVE CORRESPOND
TO NET ANNUAL RATES OF RETURN OF -1.45%, 2.55%, 6.55% AND 10.55%, RESPECTIVELY.
THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE
SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 0%, 4%, 8% AND 12% OVER
A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE FUND THAT
THESE HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR
OR SUSTAINED FOR ANY PERIOD OF TIME.
A-7
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
FEMALE AGE 45 AT LAST BIRTHDAY
DEATH BENEFIT OPTION B
INITIAL SPECIFIED AMOUNT $100,000--ANNUAL PREMIUM $922
NONSMOKER PREMIUM CLASS
<TABLE>
<CAPTION>
0% ASSUMED HYPOTHETICAL 4% ASSUMED HYPOTHETICAL 8% ASSUMED HYPOTHETICAL
GROSS RETURN GROSS RETURN GROSS RETURN
GUARANTEED COST GUARANTEED COST GUARANTEED COST
PREMIUMS OF INSURANCE OF INSURANCE OF INSURANCE
END OF ACCUMULATED ------------------------- ------------------------- -------------------------
POLICY AT 5% CASH DEATH CASH DEATH CASH DEATH
YEAR PER YEAR VALUE BENEFIT VALUE BENEFIT VALUE BENEFIT
----------- ---------------- ---------- ------------- ---------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
1......................... $ 968.10 $ 158 $ 100,000 $ 177 $ 100,000 $ 197 $ 100,000
2......................... 1,984.61 652 100,000 705 100,000 760 100,000
3......................... 3,051.94 1,120 100,000 1,227 100,000 1,340 100,000
4......................... 4,172.63 1,558 100,000 1,739 100,000 1,935 100,000
5......................... 5,349.36 1,968 100,000 2,242 100,000 2,547 100,000
6......................... 6,584.93 2,345 100,000 2,731 100,000 3,172 100,000
7......................... 7,882.28 2,689 100,000 3,204 100,000 3,810 100,000
8......................... 9,244.49 2,995 100,000 3,658 100,000 4,459 100,000
9......................... 10,674.82 3,260 100,000 4,085 100,000 5,113 100,000
10.......................... 12,176.66 3,481 100,000 4,486 100,000 5,773 100,000
15.......................... 20,890.21 3,922 100,000 6,006 100,000 9,139 100,000
20.......................... 32,011.15 2,869 100,000 6,223 100,000 12,295 100,000
25.......................... 46,204.60 * * 3,262 100,000 13,622 100,000
30.......................... 64,319.45 * * * * 10,296 100,000
35.......................... 87,439.09 * * * * * *
Age 65......................... 34,579.81 2,338 100,000 5,944 100,000 12,760 100,000
<CAPTION>
12% ASSUMED HYPOTHETICAL
GROSS RETURN
GUARANTEED COST
OF INSURANCE
END OF -------------------------
POLICY CASH DEATH
YEAR VALUE BENEFIT
----------- ---------- -------------
<S> <C> <C>
1......................... $ 217 $ 100,000
2......................... 817 100,000
3......................... 1,460 100,000
4......................... 2,148 100,000
5......................... 2,886 100,000
6......................... 3,676 100,000
7......................... 4,521 100,000
8......................... 5,425 100,000
9......................... 6,389 100,000
10.......................... 7,419 100,000
15.......................... 13,834 100,000
20.......................... 23,173 100,000
25.......................... 36,504 100,000
30.......................... 56,839 100,000
35.......................... 91,185 100,000
Age 65......................... 25,453 100,000
</TABLE>
- --------------------------
* In the absence of an additional premium, the Policy would lapse.
The values illustrated assume the premium is paid at the beginning of the Policy
Year. Values would be different if premiums are paid with a different frequency
or in different amounts.
The values and benefits are as of the Policy Year shown. They assume that no
Policy Loan or surrenders have been made. Excessive Policy Loans or surrenders
may cause this Policy to lapse because of insufficient Cash Value.
THE HYPOTHETICAL GROSS ANNUAL INVESTMENT RATES OF RETURN SHOWN ABOVE ARE
ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST, OR A
PREDICTION OF FUTURE, INVESTMENT RATES OF RETURN. THE ACTUAL INVESTMENT RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING PREVAILING INTEREST RATES, RATES OF INFLATION, AND THE
ALLOCATIONS MADE BY A POLICYOWNER AMONG THE SUBACCOUNTS. THE GROSS HYPOTHETICAL
ANNUAL INVESTMENT RATES OF RETURN OF 0%, 4%, 8% AND 12% SHOWN ABOVE CORRESPOND
TO NET ANNUAL RATES OF RETURN OF -1.45%, 2.55%, 6.55% AND 10.55%, RESPECTIVELY.
THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE
SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 0%, 4%, 8% AND 12% OVER
A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE FUND THAT
THESE HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR
OR SUSTAINED FOR ANY PERIOD OF TIME.
A-8
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
FEMALE AGE 55 AT LAST BIRTHDAY
DEATH BENEFIT OPTION B
INITIAL SPECIFIED AMOUNT $100,000--ANNUAL PREMIUM $1,566
NONSMOKER PREMIUM CLASS
<TABLE>
<CAPTION>
0% ASSUMED HYPOTHETICAL 4% ASSUMED HYPOTHETICAL 8% ASSUMED HYPOTHETICAL
GROSS RETURN GROSS RETURN GROSS RETURN
GUARANTEED COST GUARANTEED COST GUARANTEED COST
PREMIUMS OF INSURANCE OF INSURANCE OF INSURANCE
END OF ACCUMULATED ------------------------- ------------------------- -------------------------
POLICY AT 5% CASH DEATH CASH DEATH CASH DEATH
YEAR PER YEAR VALUE BENEFIT VALUE BENEFIT VALUE BENEFIT
----------- ---------------- ---------- ------------- ---------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
1......................... $ 1,644.30 $ 323 $ 100,000 $ 357 $ 100,000 $ 391 $ 100,000
2......................... 3,370.82 1,075 100,000 1,167 100,000 1,262 100,000
3......................... 5,183.66 1,777 100,000 1,958 100,000 2,150 100,000
4......................... 7,087.14 2,432 100,000 2,732 100,000 3,058 100,000
5......................... 9,085.80 3,036 100,000 3,485 100,000 3,987 100,000
6......................... 11,184.39 3,584 100,000 4,211 100,000 4,930 100,000
7......................... 13,387.90 4,067 100,000 4,898 100,000 5,881 100,000
8......................... 15,701.60 4,471 100,000 5,532 100,000 6,824 100,000
9......................... 18,130.98 4,775 100,000 6,091 100,000 7,740 100,000
10.......................... 20,681.83 4,964 100,000 6,554 100,000 8,613 100,000
15.......................... 35,481.63 3,922 100,000 7,079 100,000 11,972 100,000
20.......................... 54,370.35 * * 2,495 100,000 11,685 100,000
25.......................... 78,477.67 * * * * * *
30.......................... 109,245.40 * * * * * *
35.......................... 148,513.68 * * * * * *
Age 65......................... 23,360.22 5,028 100,000 6,912 100,000 9,429 100,000
<CAPTION>
12% ASSUMED HYPOTHETICAL
GROSS RETURN
GUARANTEED COST
OF INSURANCE
END OF -------------------------
POLICY CASH DEATH
YEAR VALUE BENEFIT
----------- ---------- -------------
<S> <C> <C>
1......................... $ 426 $ 100,000
2......................... 1,361 100,000
3......................... 2,353 100,000
4......................... 3,413 100,000
5......................... 4,547 100,000
6......................... 5,756 100,000
7......................... 7,039 100,000
8......................... 8,392 100,000
9......................... 9,804 100,000
10.......................... 11,267 100,000
15.......................... 19,482 100,000
20.......................... 29,213 100,000
25.......................... 38,103 100,000
30.......................... 41,749 100,000
35.......................... 19,243 100,000
Age 65......................... 12,783 100,000
</TABLE>
- --------------------------
* In the absence of an additional premium, the Policy would lapse.
The values illustrated assume the premium is paid at the beginning of the Policy
Year. Values would be different if premiums are paid with a different frequency
or in different amounts.
The values and benefits are as of the Policy Year shown. They assume that no
Policy Loan or surrenders have been made. Excessive Policy Loans or surrenders
may cause this Policy to lapse because of insufficient Cash Value.
THE HYPOTHETICAL GROSS ANNUAL INVESTMENT RATES OF RETURN SHOWN ABOVE ARE
ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST, OR A
PREDICTION OF FUTURE, INVESTMENT RATES OF RETURN. THE ACTUAL INVESTMENT RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING PREVAILING INTEREST RATES, RATES OF INFLATION, AND THE
ALLOCATIONS MADE BY A POLICYOWNER AMONG THE SUBACCOUNTS. THE GROSS HYPOTHETICAL
ANNUAL INVESTMENT RATES OF RETURN OF 0%, 4%, 8% AND 12% SHOWN ABOVE CORRESPOND
TO NET ANNUAL RATES OF RETURN OF -1.45%, 2.55%, 6.55% AND 10.55%, RESPECTIVELY.
THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE
SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 0%, 4%, 8% AND 12% OVER
A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE FUND THAT
THESE HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR
OR SUSTAINED FOR ANY PERIOD OF TIME.
A-9
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE AGE 25 AT LAST BIRTHDAY
DEATH BENEFIT OPTION A
INITIAL SPECIFIED AMOUNT $100,000--ANNUAL PREMIUM $425
NONSMOKER PREMIUM CLASS
<TABLE>
<CAPTION>
0% ASSUMED HYPOTHETICAL 4% ASSUMED HYPOTHETICAL 8% ASSUMED HYPOTHETICAL
GROSS RETURN GROSS RETURN GROSS RETURN
GUARANTEED COST GUARANTEED COST GUARANTEED COST
PREMIUMS OF INSURANCE OF INSURANCE OF INSURANCE
END OF ACCUMULATED ------------------------- ------------------------- -------------------------
POLICY AT 5% CASH DEATH CASH DEATH CASH DEATH
YEAR PER YEAR VALUE BENEFIT VALUE BENEFIT VALUE BENEFIT
----------- ---------------- ---------- ------------- ---------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
1......................... $ 446.25 $ 84 $ 100,084 $ 94 $ 100,094 $ 103 $ 100,103
2......................... 914.81 291 100,291 315 100,315 341 100,341
3......................... 1,406.80 496 100,496 545 100,545 596 100,596
4......................... 1,923.39 700 100,700 782 100,782 871 100,871
5......................... 2,465.81 902 100,902 1,025 101,025 1,163 101,163
6......................... 3,035.35 1,100 101,100 1,275 101,275 1,475 101,475
7......................... 3,633.37 1,292 101,292 1,528 101,528 1,804 101,804
8......................... 4,261.29 1,479 101,479 1,784 101,784 2,151 102,151
9......................... 4,920.60 1,658 101,658 2,042 102,042 2,516 102,516
10.......................... 5,612.88 1,829 101,829 2,300 102,300 2,898 102,898
15.......................... 9,629.43 2,507 102,507 3,544 103,544 5,062 105,062
20.......................... 14,755.68 2,770 102,770 4,554 104,554 7,592 107,592
25.......................... 21,298.22 2,414 102,414 5,038 105,038 10,341 110,341
30.......................... 29,648.34 1,108 101,108 4,517 104,517 12,943 112,943
35.......................... 40,305.44 * * 2,001 102,001 14,403 114,403
Age 65......................... 57,048.49 * * * * 11,916 111,916
<CAPTION>
12% ASSUMED HYPOTHETICAL
GROSS RETURN
GUARANTEED COST
OF INSURANCE
END OF -------------------------
POLICY CASH DEATH
YEAR VALUE BENEFIT
----------- ---------- -------------
<S> <C> <C>
1......................... $ 112 $ 100,112
2......................... 367 100,367
3......................... 651 100,651
4......................... 967 100,967
5......................... 1,317 101,317
6......................... 1,703 101,703
7......................... 2,127 102,127
8......................... 2,592 102,592
9......................... 3,101 103,101
10.......................... 3,658 103,658
15.......................... 7,285 107,285
20.......................... 12,790 112,790
25.......................... 21,084 121,084
30.......................... 33,493 133,493
35.......................... 51,664 151,664
Age 65......................... 84,173 184,173
</TABLE>
- --------------------------
* In the absence of an additional premium, the Policy would lapse.
The values illustrated assume the premium is paid at the beginning of the Policy
Year. Values would be different if premiums are paid with a different frequency
or in different amounts.
The values and benefits are as of the Policy Year shown. They assume that no
Policy Loan or surrenders have been made. Excessive Policy Loans or surrenders
may cause this Policy to lapse because of insufficient Cash Value.
THE HYPOTHETICAL GROSS ANNUAL INVESTMENT RATES OF RETURN SHOWN ABOVE ARE
ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST, OR A
PREDICTION OF FUTURE, INVESTMENT RATES OF RETURN. THE ACTUAL INVESTMENT RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING PREVAILING INTEREST RATES, RATES OF INFLATION, AND THE
ALLOCATIONS MADE BY A POLICYOWNER AMONG THE SUBACCOUNTS. THE GROSS HYPOTHETICAL
ANNUAL INVESTMENT RATES OF RETURN OF 0%, 4%, 8% AND 12% SHOWN ABOVE CORRESPOND
TO NET ANNUAL RATES OF RETURN OF -1.45%, 2.55%, 6.55% AND 10.55%, RESPECTIVELY.
THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE
SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 0%, 4%, 8% AND 12% OVER
A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE FUND THAT
THESE HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR
OR SUSTAINED FOR ANY PERIOD OF TIME.
A-10
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE AGE 35 AT LAST BIRTHDAY
DEATH BENEFIT OPTION A
INITIAL SPECIFIED AMOUNT $100,000--ANNUAL PREMIUM $667
NONSMOKER PREMIUM CLASS
<TABLE>
<CAPTION>
0% ASSUMED HYPOTHETICAL 4% ASSUMED HYPOTHETICAL 8% ASSUMED HYPOTHETICAL
GROSS RETURN GROSS RETURN GROSS RETURN
GUARANTEED COST GUARANTEED COST GUARANTEED COST
PREMIUMS OF INSURANCE OF INSURANCE OF INSURANCE
END OF ACCUMULATED ------------------------- ------------------------- -------------------------
POLICY AT 5% CASH DEATH CASH DEATH CASH DEATH
YEAR PER YEAR VALUE BENEFIT VALUE BENEFIT VALUE BENEFIT
----------- ---------------- ---------- ------------- ---------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
1......................... $ 700.35 $ 170 $ 100,170 $ 186 $ 100,186 $ 201 $ 100,201
2......................... 1,435.72 569 100,569 611 100,611 655 100,655
3......................... 2,207.85 950 100,950 1,036 101,036 1,128 101,128
4......................... 3,018.60 1,314 101,314 1,461 101,461 1,619 101,619
5......................... 3,869.88 1,659 101,659 1,881 101,881 2,128 102,128
6......................... 4,763.72 1,984 101,984 2,297 102,297 2,655 102,655
7......................... 5,702.26 2,287 102,287 2,706 102,706 3,198 103,198
8......................... 6,687.72 2,567 102,567 3,107 103,107 3,757 103,757
9......................... 7,722.45 2,829 102,829 3,503 103,503 4,338 104,338
10......................... 8,808.93 3,060 103,060 3,882 103,882 4,930 104,930
15......................... 15,112.55 3,761 103,761 5,490 105,490 8,051 108,051
20......................... 23,157.74 3,436 103,436 6,245 106,245 11,166 111,166
25......................... 33,425.67 1,381 101,381 5,174 105,174 13,329 113,329
30......................... 46,530.45 * * 750 100,750 12,780 112,780
35......................... 63,255.83 * * * * 5,925 105,925
Age 65......................... 49,557.32 * * * * 12,039 112,039
<CAPTION>
12% ASSUMED HYPOTHETICAL
GROSS RETURN
GUARANTEED COST
OF INSURANCE
END OF -------------------------
POLICY CASH DEATH
YEAR VALUE BENEFIT
----------- ---------- -------------
<S> <C> <C>
1......................... $ 216 $ 100,216
2......................... 701 100,701
3......................... 1,224 101,224
4......................... 1,791 101,791
5......................... 2,402 102,402
6......................... 3,062 103,062
7......................... 3,773 103,773
8......................... 4,540 104,540
9......................... 5,372 105,372
10......................... 6,263 106,263
15......................... 11,842 111,842
20......................... 19,769 119,769
25......................... 30,539 130,539
30......................... 44,466 144,466
35......................... 60,761 160,761
Age 65......................... 47,558 147,558
</TABLE>
- --------------------------
* In the absence of an additional premium, the Policy would lapse.
The values illustrated assume the premium is paid at the beginning of the Policy
Year. Values would be different if premiums are paid with a different frequency
or in different amounts.
The values and benefits are as of the Policy Year shown. They assume that no
Policy Loan or surrenders have been made. Excessive Policy Loans or surrenders
may cause this Policy to lapse because of insufficient Cash Value.
THE HYPOTHETICAL GROSS ANNUAL INVESTMENT RATES OF RETURN SHOWN ABOVE ARE
ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST, OR A
PREDICTION OF FUTURE, INVESTMENT RATES OF RETURN. THE ACTUAL INVESTMENT RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING PREVAILING INTEREST RATES, RATES OF INFLATION, AND THE
ALLOCATIONS MADE BY A POLICYOWNER AMONG THE SUBACCOUNTS. THE GROSS HYPOTHETICAL
ANNUAL INVESTMENT RATES OF RETURN OF 0%, 4%, 8% AND 12% SHOWN ABOVE CORRESPOND
TO NET ANNUAL RATES OF RETURN OF -1.45%, 2.55%, 6.55% AND 10.55%, RESPECTIVELY.
THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE
SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 0%, 4%, 8% AND 12% OVER
A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE FUND THAT
THESE HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR
OR SUSTAINED FOR ANY PERIOD OF TIME.
A-11
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE AGE 45 AT LAST BIRTHDAY
DEATH BENEFIT OPTION A
INITIAL SPECIFIED AMOUNT $100,000--ANNUAL PREMIUM $1,151
NONSMOKER PREMIUM CLASS
<TABLE>
<CAPTION>
0% ASSUMED HYPOTHETICAL 4% ASSUMED HYPOTHETICAL 8% ASSUMED HYPOTHETICAL
GROSS RETURN GROSS RETURN GROSS RETURN
GUARANTEED COST GUARANTEED COST GUARANTEED COST
PREMIUMS OF INSURANCE OF INSURANCE OF INSURANCE
END OF ACCUMULATED ------------------------- ------------------------- -------------------------
POLICY AT 5% CASH DEATH CASH DEATH CASH DEATH
YEAR PER YEAR VALUE BENEFIT VALUE BENEFIT VALUE BENEFIT
----------- ---------------- ---------- ------------- ---------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
1......................... $ 1,208.55 $ 334 $ 100,334 $ 361 $ 100,361 $ 388 $ 100,388
2......................... 2,477.53 993 100,993 1,069 101,069 1,146 101,146
3......................... 3,809.95 1,614 101,614 1,765 101,765 1,925 101,925
4......................... 5,209.00 2,196 102,196 2,448 102,448 2,722 102,722
5......................... 6,678.00 2,734 102,734 3,113 103,113 3,535 103,535
6......................... 8,220.45 3,228 103,228 3,757 103,757 4,363 104,363
7......................... 9,840.02 3,671 103,671 4,374 104,374 5,200 105,200
8......................... 11,540.58 4,058 104,058 4,954 104,954 6,039 106,039
9......................... 13,326.15 4,382 104,382 5,492 105,492 6,875 106,875
10......................... 15,201.01 4,637 104,637 5,977 105,977 7,696 107,696
15......................... 26,078.77 4,651 104,651 7,299 107,299 11,298 111,298
20......................... 39,961.86 1,739 101,739 5,589 105,589 12,725 112,725
25......................... 57,680.59 * * * * 8,581 108,581
30......................... 80,294.67 * * * * * *
35......................... 109,156.61 * * * * * *
Age 65......................... 43,168.50 623 100,623 4,637 104,637 12,460 112,460
<CAPTION>
12% ASSUMED HYPOTHETICAL
GROSS RETURN
GUARANTEED COST
OF INSURANCE
END OF -------------------------
POLICY CASH DEATH
YEAR VALUE BENEFIT
----------- ---------- -------------
<S> <C> <C>
1......................... $ 416 $ 100,416
2......................... 1,227 101,227
3......................... 2,093 102,093
4......................... 3,018 103,018
5......................... 4,004 104,004
6......................... 5,055 105,055
7......................... 6,170 106,170
8......................... 7,349 107,349
9......................... 8,593 108,593
10......................... 9,898 109,898
15......................... 17,312 117,312
20......................... 25,697 125,697
25......................... 32,843 132,843
30......................... 33,660 133,660
35......................... 16,511 116,511
Age 65......................... 27,307 127,307
</TABLE>
- --------------------------
* In the absence of an additional premium, the Policy would lapse.
The values illustrated assume the premium is paid at the beginning of the Policy
Year. Values would be different if premiums are paid with a different frequency
or in different amounts.
The values and benefits are as of the Policy Year shown. They assume that no
Policy Loan or surrenders have been made. Excessive Policy Loans or surrenders
may cause this Policy to lapse because of insufficient Cash Value.
THE HYPOTHETICAL GROSS ANNUAL INVESTMENT RATES OF RETURN SHOWN ABOVE ARE
ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST, OR A
PREDICTION OF FUTURE, INVESTMENT RATES OF RETURN. THE ACTUAL INVESTMENT RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING PREVAILING INTEREST RATES, RATES OF INFLATION, AND THE
ALLOCATIONS MADE BY A POLICYOWNER AMONG THE SUBACCOUNTS. THE GROSS HYPOTHETICAL
ANNUAL INVESTMENT RATES OF RETURN OF 0%, 4%, 8% AND 12% SHOWN ABOVE CORRESPOND
TO NET ANNUAL RATES OF RETURN OF -1.45%, 2.55%, 6.55% AND 10.55%, RESPECTIVELY.
THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE
SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 0%, 4%, 8% AND 12% OVER
A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE FUND THAT
THESE HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR
OR SUSTAINED FOR ANY PERIOD OF TIME.
A-12
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE AGE 55 AT LAST BIRTHDAY
DEATH BENEFIT OPTION A
INITIAL SPECIFIED AMOUNT $100,000--ANNUAL PREMIUM $2,183
NONSMOKER PREMIUM CLASS
<TABLE>
<CAPTION>
0% ASSUMED HYPOTHETICAL 4% ASSUMED HYPOTHETICAL 8% ASSUMED HYPOTHETICAL
GROSS RETURN GROSS RETURN GROSS RETURN
GUARANTEED COST GUARANTEED COST GUARANTEED COST
PREMIUMS OF INSURANCE OF INSURANCE OF INSURANCE
END OF ACCUMULATED ------------------------- ------------------------- -------------------------
POLICY AT 5% CASH DEATH CASH DEATH CASH DEATH
YEAR PER YEAR VALUE BENEFIT VALUE BENEFIT VALUE BENEFIT
----------- ---------------- ---------- ------------- ---------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
1......................... $ 2,292.15 $ 715 $ 100,715 $ 768 $ 100,768 $ 822 $ 100,822
2......................... 4,698.91 1,816 101,816 1,961 101,961 2,111 102,111
3......................... 7,226.00 2,816 102,816 3,097 103,097 3,396 103,396
4......................... 9,879.45 3,709 103,709 4,169 104,169 4,668 104,668
5......................... 12,665.58 4,486 104,486 5,161 105,161 5,916 105,916
6......................... 15,591.00 5,135 105,135 6,060 106,060 7,124 107,124
7......................... 18,662.70 5,646 105,646 6,850 106,850 8,278 108,278
8......................... 21,887.99 6,003 106,003 7,511 107,511 9,353 109,353
9......................... 25,274.54 6,187 106,187 8,017 108,017 10,325 110,325
10......................... 28,830.42 6,179 106,179 8,343 108,343 11,162 111,162
15......................... 49,461.30 2,699 102,699 6,396 106,396 12,264 112,264
20......................... 75,792.13 * * * * 3,755 103,755
25......................... 109,397.67 * * * * * *
30......................... 152,287.80 * * * * * *
35......................... 207,027.69 * * * * * *
Age 65......................... 32,564.09 5,945 105,945 8,445 108,445 11,817 111,817
<CAPTION>
12% ASSUMED HYPOTHETICAL
GROSS RETURN
GUARANTEED COST
OF INSURANCE
END OF -------------------------
POLICY CASH DEATH
YEAR VALUE BENEFIT
----------- ---------- -------------
<S> <C> <C>
1......................... $ 876 $ 100,876
2......................... 2,266 102,266
3......................... 3,712 103,712
4......................... 5,212 105,212
5......................... 6,760 106,760
6......................... 8,348 108,348
7......................... 9,966 109,966
8......................... 11,599 111,599
9......................... 13,226 113,226
10......................... 14,823 114,823
15......................... 21,436 121,436
20......................... 21,374 121,374
25......................... 2,773 102,773
30......................... * *
35......................... * *
Age 65......................... 16,346 116,346
</TABLE>
- --------------------------
* In the absence of an additional premium, the Policy would lapse.
The values illustrated assume the premium is paid at the beginning of the Policy
Year. Values would be different if premiums are paid with a different frequency
or in different amounts.
The values and benefits are as of the Policy Year shown. They assume that no
Policy Loan or surrenders have been made. Excessive Policy Loans or surrenders
may cause this Policy to lapse because of insufficient Cash Value.
THE HYPOTHETICAL GROSS ANNUAL INVESTMENT RATES OF RETURN SHOWN ABOVE ARE
ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST, OR A
PREDICTION OF FUTURE, INVESTMENT RATES OF RETURN. THE ACTUAL INVESTMENT RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING PREVAILING INTEREST RATES, RATES OF INFLATION, AND THE
ALLOCATIONS MADE BY A POLICYOWNER AMONG THE SUBACCOUNTS. THE GROSS HYPOTHETICAL
ANNUAL INVESTMENT RATES OF RETURN OF 0%, 4%, 8% AND 12% SHOWN ABOVE CORRESPOND
TO NET ANNUAL RATES OF RETURN OF -1.45%, 2.55%, 6.55% AND 10.55%, RESPECTIVELY.
THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE
SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 0%, 4%, 8% AND 12% OVER
A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE FUND THAT
THESE HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR
OR SUSTAINED FOR ANY PERIOD OF TIME.
A-13
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE AGE 25 AT LAST BIRTHDAY
DEATH BENEFIT OPTION B
INITIAL SPECIFIED AMOUNT $100,000--ANNUAL PREMIUM $425
NONSMOKER PREMIUM CLASS
<TABLE>
<CAPTION>
0% ASSUMED HYPOTHETICAL 4% ASSUMED HYPOTHETICAL 8% ASSUMED HYPOTHETICAL
GROSS RETURN GROSS RETURN GROSS RETURN
GUARANTEED COST GUARANTEED COST GUARANTEED COST
PREMIUMS OF INSURANCE OF INSURANCE OF INSURANCE
END OF ACCUMULATED ------------------------- ------------------------- -------------------------
POLICY AT 5% CASH DEATH CASH DEATH CASH DEATH
YEAR PER YEAR VALUE BENEFIT VALUE BENEFIT VALUE BENEFIT
----------- ---------------- ---------- ------------- ---------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
1...................... $ 446.25 $ 85 $ 100,000 $ 94 $ 100,000 $ 103 $ 100,000
2...................... 914.81 292 100,000 316 100,000 342 100,000
3...................... 1,406.80 498 100,000 547 100,000 599 100,000
4...................... 1,923.39 703 100,000 785 100,000 875 100,000
5...................... 2,465.81 906 100,000 1,030 100,000 1,169 100,000
6...................... 3,035.35 1,106 100,000 1,282 100,000 1,483 100,000
7...................... 3,633.37 1,300 100,000 1,537 100,000 1,815 100,000
8...................... 4,261.29 1,489 100,000 1,797 100,000 2,167 100,000
9...................... 4,920.60 1,671 100,000 2,058 100,000 2,537 100,000
10...................... 5,612.88 1,845 100,000 2,321 100,000 2,926 100,000
15...................... 9,629.43 2,544 100,000 3,600 100,000 5,146 100,000
20...................... 14,755.68 2,843 100,000 4,679 100,000 7,811 100,000
25...................... 21,298.22 2,537 100,000 5,289 100,000 10,858 100,000
30...................... 29,648.34 1,284 100,000 4,974 100,000 14,093 100,000
35...................... 40,305.44 * * 2,733 100,000 16,863 100,000
Age 65...................... 57,048.49 * * * * 17,643 100,000
<CAPTION>
12% ASSUMED HYPOTHETICAL
GROSS RETURN
GUARANTEED COST
OF INSURANCE
END OF ----------------------------
POLICY CASH DEATH
YEAR VALUE BENEFIT
----------- ------------- -------------
<S> <C> <C>
1...................... $ 113 $ 100,000
2...................... 368 100,000
3...................... 654 100,000
4...................... 971 100,000
5...................... 1,323 100,000
6...................... 1,713 100,000
7...................... 2,141 100,000
8...................... 2,612 100,000
9...................... 3,128 100,000
10...................... 3,694 100,000
15...................... 7,412 100,000
20...................... 13,174 100,000
25...................... 22,153 100,000
30...................... 36,350 100,000
35...................... 59,247 100,000
Age 65...................... 107,878 129,454
</TABLE>
- --------------------------
* In the absence of an additional premium, the Policy would lapse.
The values illustrated assume the premium is paid at the beginning of the Policy
Year. Values would be different if premiums are paid with a different frequency
or in different amounts.
The values and benefits are as of the Policy Year shown. They assume that no
Policy Loans or surrenders have been made. Excessive Policy Loans or surrenders
may cause this Policy to lapse because of insufficient Cash Value.
THE HYPOTHETICAL GROSS ANNUAL INVESTMENT RATES OF RETURN SHOWN ABOVE ARE
ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST, OR A
PREDICTION OF FUTURE, INVESTMENT RATES OF RETURN. THE ACTUAL INVESTMENT RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING PREVAILING INTEREST RATES, RATES OF INFLATION, AND THE
ALLOCATIONS MADE BY A POLICYOWNER AMONG THE SUBACCOUNTS. THE GROSS HYPOTHETICAL
ANNUAL INVESTMENT RATES OF RETURN OF 0%, 4%, 8% AND 12% SHOWN ABOVE CORRESPOND
TO NET ANNUAL RATES OF RETURN OF -1.45%, 2.55%, 6.55% AND 10.55%, RESPECTIVELY.
THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE
SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 0%, 4%, 8% AND 12% OVER
A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE FUND THAT
THESE HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR
OR SUSTAINED FOR ANY PERIOD OF TIME.
A-14
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE AGE 35 AT LAST BIRTHDAY
DEATH BENEFIT OPTION B
INITIAL SPECIFIED AMOUNT $100,000--ANNUAL PREMIUM $667
NONSMOKER PREMIUM CLASS
<TABLE>
<CAPTION>
0% ASSUMED HYPOTHETICAL 4% ASSUMED HYPOTHETICAL 8% ASSUMED HYPOTHETICAL
GROSS RETURN GROSS RETURN GROSS RETURN
GUARANTEED COST GUARANTEED COST GUARANTEED COST
PREMIUMS OF INSURANCE OF INSURANCE OF INSURANCE
END OF ACCUMULATED ------------------------- ------------------------- -------------------------
POLICY AT 5% CASH DEATH CASH DEATH CASH DEATH
YEAR PER YEAR VALUE BENEFIT VALUE BENEFIT VALUE BENEFIT
----------- ---------------- ---------- ------------- ---------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
1......................... $ 700.35 $ 171 $ 100,000 $ 186 $ 100,000 $ 202 $ 100,000
2......................... 1,435.72 570 100,000 613 100,000 657 100,000
3......................... 2,207.85 954 100,000 1,041 100,000 1,133 100,000
4......................... 3,018.60 1,321 100,000 1,468 100,000 1,628 100,000
5......................... 3,869.88 1,670 100,000 1,893 100,000 2,142 100,000
6......................... 4,763.72 1,999 100,000 2,315 100,000 2,676 100,000
7......................... 5,702.26 2,308 100,000 2,732 100,000 3,229 100,000
8......................... 6,687.72 2,595 100,000 3,142 100,000 3,801 100,000
9......................... 7,722.45 2,865 100,000 3,549 100,000 4,398 100,000
10......................... 8,808.93 3,106 100,000 3,942 100,000 5,009 100,000
15......................... 15,112.55 3,877 100,000 5,666 100,000 8,319 100,000
20......................... 23,157.74 3,665 100,000 6,652 100,000 11,894 100,000
25......................... 33,425.67 1,738 100,000 5,983 100,000 15,106 100,000
30......................... 46,530.45 * * 2,054 100,000 16,722 100,000
35......................... 63,255.83 * * * * 13,794 100,000
Age 65......................... 49,557.32 * * 587 100,000 16,615 100,000
<CAPTION>
12% ASSUMED HYPOTHETICAL
GROSS RETURN
GUARANTEED COST
OF INSURANCE
END OF -------------------------
POLICY CASH DEATH
YEAR VALUE BENEFIT
----------- ---------- -------------
<S> <C> <C>
1......................... $ 217 $ 100,000
2......................... 703 100,000
3......................... 1,229 100,000
4......................... 1,800 100,000
5......................... 2,418 100,000
6......................... 3,087 100,000
7......................... 3,811 100,000
8......................... 4,594 100,000
9......................... 5,447 100,000
10......................... 6,367 100,000
15......................... 12,247 100,000
20......................... 21,068 100,000
25......................... 34,363 100,000
30......................... 55,188 100,000
35......................... 90,305 100,000
Age 65......................... 60,719 100,000
</TABLE>
- --------------------------
* In the absence of an additional premium, the Policy would lapse.
The values illustrated assume the premium is paid at the beginning of the Policy
Year. Values would be different if premiums are paid with a different frequency
or in different amounts.
The values and benefits are as of the Policy Year shown. They assume that no
Policy Loan or surrenders have been made. Excessive Policy Loans or surrenders
may cause this Policy to lapse because of insufficient Cash Value.
THE HYPOTHETICAL GROSS ANNUAL INVESTMENT RATES OF RETURN SHOWN ABOVE ARE
ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST, OR A
PREDICTION OF FUTURE, INVESTMENT RATES OF RETURN. THE ACTUAL INVESTMENT RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING PREVAILING INTEREST RATES, RATES OF INFLATION, AND THE
ALLOCATIONS MADE BY A POLICYOWNER AMONG THE SUBACCOUNTS. THE GROSS HYPOTHETICAL
ANNUAL INVESTMENT RATES OF RETURN OF 0%, 4%, 8% AND 12% SHOWN ABOVE CORRESPOND
TO NET ANNUAL RATES OF RETURN OF -1.45%, 2.55%, 6.55% AND 10.55%, RESPECTIVELY.
THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE
SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 0%, 4%, 8% AND 12% OVER
A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE FUND THAT
THESE HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR
OR SUSTAINED FOR ANY PERIOD OF TIME.
A-15
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE AGE 45 AT LAST BIRTHDAY
DEATH BENEFIT OPTION B
INITIAL SPECIFIED AMOUNT $100,000--ANNUAL PREMIUM $1,151
NONSMOKER PREMIUM CLASS
<TABLE>
<CAPTION>
0% ASSUMED HYPOTHETICAL 4% ASSUMED HYPOTHETICAL 8% ASSUMED HYPOTHETICAL
GROSS RETURN GROSS RETURN GROSS RETURN
GUARANTEED COST GUARANTEED COST GUARANTEED COST
PREMIUMS OF INSURANCE OF INSURANCE OF INSURANCE
END OF ACCUMULATED ------------------------- ------------------------- -------------------------
POLICY AT 5% CASH DEATH CASH DEATH CASH DEATH
YEAR PER YEAR VALUE BENEFIT VALUE BENEFIT VALUE BENEFIT
----------- ---------------- ---------- ------------- ---------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
1...................... $ 1,208.55 $ 336 $ 100,000 $ 363 $ 100,000 $ 391 $ 100,000
2...................... 2,477.53 1,000 100,000 1,076 100,000 1,154 100,000
3...................... 3,809.95 1,628 100,000 1,780 100,000 1,941 100,000
4...................... 5,209.00 2,220 100,000 2,475 100,000 2,752 100,000
5...................... 6,678.00 2,771 100,000 3,156 100,000 3,584 100,000
6...................... 8,220.45 3,282 100,000 3,822 100,000 4,439 100,000
7...................... 9,840.02 3,747 100,000 4,465 100,000 5,311 100,000
8...................... 11,540.58 4,158 100,000 5,080 100,000 6,196 100,000
9...................... 13,326.15 4,512 100,000 5,659 100,000 7,089 100,000
10...................... 15,201.01 4,802 100,000 6,195 100,000 7,985 100,000
15...................... 26,078.77 5,068 100,000 7,944 100,000 12,295 100,000
20...................... 39,961.86 2,471 100,000 7,015 100,000 15,428 100,000
25...................... 57,680.59 * * 374 100,000 14,752 100,000
30...................... 80,294.67 * * * * 4,193 100,000
35...................... 109,156.61 * * * * * *
Age 65...................... 43,168.50 1,398 100,000 6,256 100,000 15,697 100,000
<CAPTION>
12% ASSUMED HYPOTHETICAL
GROSS RETURN
GUARANTEED COST
OF INSURANCE
END OF ----------------------------
POLICY CASH DEATH
YEAR VALUE BENEFIT
----------- ------------- -------------
<S> <C> <C>
1...................... $ 418 $ 100,000
2...................... 1,235 100,000
3...................... 2,111 100,000
4...................... 3,052 100,000
5...................... 4,061 100,000
6...................... 5,145 100,000
7...................... 6,305 100,000
8...................... 7,544 100,000
9...................... 8,868 100,000
10...................... 10,278 100,000
15...................... 18,847 100,000
20...................... 30,724 100,000
25...................... 47,666 100,000
30...................... 74,889 100,000
35...................... 126,102 132,407
Age 65...................... 33,598 100,000
</TABLE>
- --------------------------
* In the absence of an additional premium, the Policy would lapse.
The values illustrated assume the premium is paid at the beginning of the Policy
Year. Values would be different if premiums are paid with a different frequency
or in different amounts.
The values and benefits are as of the Policy Year shown. They assume that no
Policy Loan or surrenders have been made. Excessive Policy Loans or surrenders
may cause this Policy to lapse because of insufficient Cash Value.
THE HYPOTHETICAL GROSS ANNUAL INVESTMENT RATES OF RETURN SHOWN ABOVE ARE
ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST, OR A
PREDICTION OF FUTURE, INVESTMENT RATES OF RETURN. THE ACTUAL INVESTMENT RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING PREVAILING INTEREST RATES, RATES OF INFLATION, AND THE
ALLOCATIONS MADE BY A POLICYOWNER AMONG THE SUBACCOUNTS. THE GROSS HYPOTHETICAL
ANNUAL INVESTMENT RATES OF RETURN OF 0%, 4%, 8% AND 12% SHOWN ABOVE CORRESPOND
TO NET ANNUAL RATES OF RETURN OF -1.45%, 2.55%, 6.55% AND 10.55%, RESPECTIVELY.
THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE
SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 0%, 4%, 8% AND 12% OVER
A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE FUND THAT
THESE HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR
OR SUSTAINED FOR ANY PERIOD OF TIME.
A-16
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE AGE 55 AT LAST BIRTHDAY
DEATH BENEFIT OPTION B
INITIAL SPECIFIED AMOUNT $100,000--ANNUAL PREMIUM $2,183
NONSMOKER PREMIUM CLASS
<TABLE>
<CAPTION>
0% ASSUMED HYPOTHETICAL 4% ASSUMED HYPOTHETICAL 8% ASSUMED HYPOTHETICAL
GROSS RETURN GROSS RETURN GROSS RETURN
GUARANTEED COST GUARANTEED COST GUARANTEED COST
PREMIUMS OF INSURANCE OF INSURANCE OF INSURANCE
END OF ACCUMULATED ------------------------- ------------------------- -------------------------
POLICY AT 5% CASH DEATH CASH DEATH CASH DEATH
YEAR PER YEAR VALUE BENEFIT VALUE BENEFIT VALUE BENEFIT
----------- ---------------- ---------- ------------- ---------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
1...................... $ 2,292.15 $ 726 $ 100,000 $ 780 $ 100,000 $ 834 $ 100,000
2...................... 4,698.91 1,847 100,000 1,995 100,000 2,147 100,000
3...................... 7,226.00 2,879 100,000 3,167 100,000 3,472 100,000
4...................... 9,879.45 3,817 100,000 4,290 100,000 4,805 100,000
5...................... 12,665.58 4,652 100,000 5,354 100,000 6,139 100,000
6...................... 15,591.00 5,375 100,000 6,346 100,000 7,465 100,000
7...................... 18,662.70 5,976 100,000 7,255 100,000 8,773 100,000
8...................... 21,887.99 6,440 100,000 8,063 100,000 10,049 100,000
9...................... 25,274.54 6,748 100,000 8,748 100,000 11,274 100,000
10...................... 28,830.42 6,882 100,000 9,288 100,000 12,428 100,000
15...................... 49,461.30 4,243 100,000 8,951 100,000 16,416 100,000
20...................... 75,792.13 * * * * 13,775 100,000
25...................... 109,397.67 * * * * * *
30...................... 152,287.80 * * * * * *
35...................... 207,027.69 * * * * * *
Age 65...................... 32,564.09 6,805 100,000 9,642 100,000 13,476 100,000
<CAPTION>
12% ASSUMED HYPOTHETICAL
GROSS RETURN
GUARANTEED COST
OF INSURANCE
END OF ----------------------------
POLICY CASH DEATH
YEAR VALUE BENEFIT
----------- ------------- -------------
<S> <C> <C>
1...................... $ 888 $ 100,000
2...................... 2,304 100,000
3...................... 3,795 100,000
4...................... 5,366 100,000
5...................... 7,018 100,000
6...................... 8,752 100,000
7...................... 10,570 100,000
8...................... 12,472 100,000
9...................... 14,453 100,000
10...................... 16,511 100,000
15...................... 28,083 100,000
20...................... 42,323 100,000
25...................... 61,487 100,000
30...................... 99,300 104,265
35...................... 169,998 178,498
Age 65...................... 18,631 100,000
</TABLE>
- --------------------------
* In the absence of an additional premium, the Policy would lapse.
The values illustrated assume the premium is paid at the beginning of the Policy
Year. Values would be different if premiums are paid with a different frequency
or in different amounts.
The values and benefits are as of the Policy Year shown. They assume that no
Policy Loans or surrenders have been made. Excessive Policy Loans or surrenders
may cause this Policy to lapse because of insufficient Cash Value.
THE HYPOTHETICAL GROSS ANNUAL INVESTMENT RATES OF RETURN SHOWN ABOVE ARE
ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST, OR A
PREDICTION OF FUTURE, INVESTMENT RATES OF RETURN. THE ACTUAL INVESTMENT RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING PREVAILING INTEREST RATES, RATES OF INFLATION, AND THE
ALLOCATIONS MADE BY A POLICYOWNER AMONG THE SUBACCOUNTS. THE GROSS HYPOTHETICAL
ANNUAL INVESTMENT RATES OF RETURN OF 0%, 4%, 8% AND 12% SHOWN ABOVE CORRESPOND
TO NET ANNUAL RATES OF RETURN OF -1.45%, 2.55%, 6.55% AND 10.55%, RESPECTIVELY.
THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE
SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 0%, 4%, 8% AND 12% OVER
A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE FUND THAT
THESE HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR
OR SUSTAINED FOR ANY PERIOD OF TIME.
A-17
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
- --------------------------------------------------------------------------------
APPENDIX B
- --------------------------------------------------------------------------------
DEATH BENEFIT OPTIONS
OPTION A EXAMPLE. For purposes of this example, assume
that the Insured's Attained Age is between 0 and 40 and
that there is no outstanding Policy Debt. Under Option A,
a Policy with a Specified Amount of $50,000 will
generally provide a death benefit of $50,000 plus Cash
Value. Thus, for example, a Policy with a Cash Value of
$5,000 will have a death benefit of $55,000 ($50,000 +
$5,000); a Cash Value of $10,000 will provide a death
benefit of $60,000 ($50,000 + $10,000). The death
benefit, however, must be at least 2.50 multiplied by the
Cash Value. As a result, if the Cash Value of the Policy
exceeds $33,333, the death benefit will be greater than
the Specified Amount plus Cash Value. Each additional
dollar of Cash Value above $33,333 will increase the
death benefit by $2.50. A Policy with a Specified Amount
of $50,000 and a Cash Value of $40,000 will provide a
death benefit of $100,000 ($40,000 x 2.50); a Cash Value
of $60,000 will provide a death benefit of $150,000
($60,000 x 2.50).
Similarly, any time Cash Value exceeds $33,333, each
dollar taken out of Cash Value will reduce the death
benefit by $2.50. If, for example, the Cash Value is
reduced from $40,000 to $35,000 because of partial
surrenders, charges, or negative investment performance,
the death benefit will be reduced from $100,000 to
$87,500. If at any time, however, Cash Value multiplied
by the specified amount factor is less than the Specified
Amount plus the Cash Value, then the death benefit will
be the current Specified Amount plus Cash Value of the
Policy.
The specified amount factor becomes lower as the
Insured's Attained Age increases. If the Attained Age of
the Insured in the example above were, for example, 50
(rather than under 40), the specified amount factor would
be 1.85. The amount of the death benefit would be the sum
of the Cash Value plus $50,000 unless the Cash Value
exceeded $58,824 (rather than $33,333), and each dollar
then added to or taken from the Cash Value would change
the death benefit by $1.85 (rather than $2.50).
OPTION B EXAMPLE. For purposes of this example, assume
that the Insured's Attained Age is between 0 and 40 and
that there is no outstanding Policy Debt. Under Option B,
a Policy with a $50,000 Specified Amount will generally
pay $50,000 in death benefits. However, because the death
benefit must be equal to or be greater than 2.50
multiplied by the Cash Value, any time the Cash Value of
the Policy exceeds $20,000, the death benefit will exceed
the $50,000 Specified Amount. Each additional dollar
added to Cash Value above $20,000 will increase the death
benefit by $2.50. A Policy with a $50,000 Specified
Amount and a Cash Value of $30,000 will provide death
proceeds of $75,000 ($30,000 x 2.50); a Cash Value of
$40,000 will provide a death benefit of $100,000 ($40,000
x 2.50); a Cash Value of $50,000 will provide a death
benefit of $125,000 ($50,000 x 2.50).
Similarly, so long as Cash Value exceeds $20,000, each
dollar taken out of Cash Value will reduce the death
benefit by $2.50. If, for example, the Cash Value is
reduced from $25,000 to $20,000 because of partial
surrenders, charges, or negative investment performance,
the death benefit will be reduced from $62,500 to
$50,000. If at any time, however, the Cash Value
multiplied by the specified amount factor is less than
the Specified Amount, the death benefit will equal the
current Specified Amount of the Policy.
The specified amount factor becomes lower as the
Insured's Attained Age increases. If the Attained Age of
the Insured in the example above were, for example, 50
(rather than between 0 and 40), the specified amount
factor would be 1.85. The death proceeds would not exceed
the $50,000 Specified Amount unless the Cash Value
exceeded approximately $27,028 (rather than $20,000), and
each dollar then added to or taken from the Cash Value
would change the life insurance proceeds by $1.85 (rather
than $2.50).
B-1
<PAGE>
<TABLE>
<CAPTION>
SPECIFIED AMOUNT FACTOR TABLE
- ----------------------------------------------
ATTAINED AGE SPECIFIED AMOUNT FACTOR
- ----------------- ---------------------------
<S> <C>
40 or
younger 2.50
41 2.43
42 2.36
43 2.29
44 2.22
45 2.15
46 2.09
47 2.03
48 1.97
49 1.91
50 1.85
51 1.78
52 1.71
53 1.64
54 1.57
55 1.50
56 1.46
57 1.42
58 1.38
59 1.34
60 1.30
61 1.28
62 1.26
63 1.24
64 1.22
65 1.20
66 1.19
67 1.18
68 1.17
69 1.16
70 1.15
71 1.13
72 1.11
73 1.09
74 1.07
75 to
90 1.05
91 1.04
92 1.03
93 1.02
94 1.01
95 or
older 1.00
</TABLE>
B-2
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
FARM BUREAU MUTUAL FUNDS
5400 UNIVERSITY AVENUE
WEST DES MOINES, IOWA 50266
737-523 (5-96)
<PAGE>
PART II
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore, or hereafter duly adopted pursuant to
authority conferred in that section.
RULE 484 UNDERTAKING
Article XII of the Company's By-Laws provides for the indemnification by
the Company of any person who is a party or who is threatened to be made a
party to any threatened, pending, or completed action, suit or proceeding,
whether civil, criminal, administrative, or investigative (other than an action
by or in the right of the Company) by reason of the fact that he is or was a
director or officer of the Company, or is or was serving at the request of the
Company as a director, officer, employee, or agent of another corporation,
partnership, joint venture, trust or enterprise, against expenses (including
attorneys' fees), judgments, fines, and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding,
if he acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the Company, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. Article XII also provides for the indemnification by the
Company of any person who was or is a party or is threatened to be made a party
to any threatened, pending, or completed action or suit by or in the right of
the Company to procure a judgment in its favor by reason of the fact that he is
or was a director or officer of the Company, or is or was serving at the
request of the Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or another enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Company, except that no indemnification will be made
in respect of any claim, issue, or matter as to which such person shall have
been adjudged to be liable for negligence or misconduct in the performance of
his duty to the Company unless and only to the extent that the court in which
such action or suit was brought determines upon application that, despite the
adjudication of liability but in view of all circumstances of the case, such
II-1
<PAGE>
person is fairly and reasonably entitled to indemnity for such expenses which
such court shall deem proper.
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant 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 the Act and will be governed by the final
adjudication of such issue.
REPRESENTATIONS PURSUANT TO RULE 6e-3 (T)
This filing is made pursuant to Rule 6c-3 and 6e-3(T) under the Investment
Company Act of 1940.
Registrant elects to be governed by Rule 6e-3(T)(b)(13)(i)(B) under the
Investment Company Act of 1940 with respect to the policies described in the
Prospectus.
Registrant makes the following representations:
(1) Section 6e-3(T)(b)(13)(iii)(F) has been relied upon.
(2) The level of the mortality and expense risk charge is within the
range of industry practice for comparable flexible premium variable
life insurance policies and is reasonable in relation to the risks
assumed.
(3) Registrant has concluded that there is a reasonable likelihood that
the distribution financing arrangement of the Variable Account will
benefit the Variable Account and Owners and will keep and make
available to the Commission on request a memorandum setting forth
the basis for this representation.
II-2
<PAGE>
(4) The Variable Account will invest only in management investment
companies which have undertaken to have a board of directors, a
majority of whom are not interested persons of the company,
formulate and approve any plan under Rule 12b-1 to finance
distribution expenses.
The methodology used to support the representation made in paragraph (2)
above is based on an analysis of other policies registered under the Securities
Act of 1933, including the level of other expense charges, uncertainties in
terms of expense and mortality factors, and policy guarantees, and of the
reasonableness of the mortality and expense risk charge in relation to the risk
assumed. Registrant undertakes to keep and make available to the Commission on
request the documents used to support the representation in paragraph (2) above.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers, and documents:
The facing sheet.
A reconciliation and tie-in of information shown in the Prospectus with the
items of Form N-8B-2.
Teh Prospectus consisting of 98 pages.
The undertaking to file reports.
The undertaking pursuant to Rule 484.
Representations pursuant to Rule 6e-3(T).
The signatures.
Written consents of the following persons:
Stephen M. Morain, Esquire
Messrs. Sutherland, Asbill & Brennan
Ernst & Young, LLP, Independent Auditors
JoAnn W. Rumelhart, FSA, MAAA, Vice President
II-3
<PAGE>
The following exhibits:
1.A. (1) Certified Resolution of the Board of Directors of
the Company establishing the Variable Account. */
(2) None.
(3) (a) Form of Principal Underwriting Agreement. **/
(b) (i) Forms of Career Agent's Contract. **/
(ii) Forms of Financed Career Agent's Contract. **/
(c) Commission schedules. **/ (See Exhibits
3(b)(i) and 3(b)(ii) above.)
(d) Planning Consultants Agreement. *****/
(4) None.
(5) (a) Form of Policy. **/
(b) State variation of Form of Policy. **/
(c) Form of Application. **/
(d) Revised Policy Form ****/
(e) 1995 Revised Policy Form. ******/
(f) Accelerated Death Benefit Rider. ******/
(6) (a) Certificate of Incorporation of the Company. **/
(b) By-Laws of the Company. */
(7) None.
(8) None.
(9) Form of Participation Agreement. ***/
(10) Form of Application (see Exhibit 1.A.(5)(b) above).
2. See Exhibit 1.A. (5) above.
3. (a) Opinion and Consent of Stephen M. Morain, Esquire.
(b) Consent of Messrs. Sutherland, Asbill & Brennan.
II-4
<PAGE>
4. None.
5. Not applicable.
6. Opinion and Consent of JoAnn W. Rumelhart, FSA, MAAA, Vice President.
7. Consent of Ernst & Young LLP.
8. Memorandum describing the Company's conversion procedure (included in
Exhibit 9 hereto). */
9. Memorandum describing the Company's issuance, transfer and redemption
procedures for the Policy.******
- ------------------------
*/ Incorporated herein by reference to the Registration Statement on
Form S-6 (File No. 33-12789) filed with the Securities and Exchange
Commission on March 20, 1987.
**/ Incorporated herein by reference to Pre-Effective Amendment No. 1 to
the Registration Statement on Form S-6 (File No. 33-12789) filed with the
Securities and Exchange Commission on September 4, 1987.
***/ Incorporated herein by reference to Post-Effective Amendment No. 3
to the Registration Statement on Form S-6 (File No. 33-12789) filed with the
Securities and Exchange Commission on April 24, 1990.
****/ Incorporated herein by reference to Post-Effective Amendment No. 6
to the Registration Statement on Form S-6 (File No. 33-12789) filed with the
Securities and Exchange Commission on April 6, 1993.
*****/ Incorporated herein by reference to Post-Effective Amendment No. 7
to the Registration Statement on Form S-6 (File No. 33-12789) filed with the
Securities and Exchange Commission on April 28, 1994.
******/ Incorporated herein by reference to Post-Effective Amendment No. 9
to the Registration Statement on Form S-6 (File No. 33-12789) filed with the
Securities and Exchange Commission on May 1, 1995.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Farm Bureau Life
Insurance Company certifies that this amendment has met all the requirements for
effectiveness pursuant to Paragraph (b) of Rule 485 and has duly caused this
Post-Effective Amendment No. 10 to the Registration Statement to be signed on
its behalf by the undersigned thereunto duly authorized in the City of West Des
Moines, State of Iowa, on the 26th day of April, 1996.
Farm Bureau Life Insurance Company
Farm Bureau Life Variable Account
By: /s/ Edward M. Wiederstein
---------------------------------
Edward M. Wiederstein
President
Farm Bureau Life Insurance Company
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment No. 10 to the Registration Statement has been signed below by the
following Directors and Officers of Farm Bureau Life Insurance Company on the
date indicated.
Signature Title Date
- --------- ----- ----
/s/ Edward M. Wiederstein President and Director April 26 , 1996
- ------------------------- [Principal Executive -----------------
Edward M. Wiederstein Officer]
/s/ Eugene R. Maahs Senior Vice President and April 26 , 1996
- ------------------------- Secretary-Treasurer -----------------
Eugene R. Maahs [Principal Financial
Officer]
/s/ William J. Oddy Vice President, Chief April 26 , 1996
- ------------------------- Operating Officer and -----------------
William J. Oddy Assistant General Manager
[Principal Accounting
Officer]
<PAGE>
April 26 , 1996
- ------------------------- -----------------
Craig A. Lang* Vice President and
Director
April 26 , 1996
- ------------------------- -----------------
Kenneth R. Ashby* Director
April 26 , 1996
- ------------------------- -----------------
Caroll C. Burling* Director
April 26 , 1996
- ------------------------- -----------------
Al Christopherson* Director
April 26 , 1996
- ------------------------- -----------------
Ernest A. Glienke* Director
April 26 , 1996
- ------------------------- -----------------
William C. Hanson* Director
April 26 , 1996
- ------------------------- -----------------
Craig D. Hill* Director
April 26 , 1996
- ------------------------- -----------------
Daniel L. Johnson* Director
April 26 , 1996
- ------------------------- -----------------
Richard G. Kjerstad* Director
<PAGE>
April 26 , 1996
- ------------------------- -----------------
Lindsey D. Larsen* Director
April 26 , 1996
- ------------------------- -----------------
David R. Machacek* Director
April 26 , 1996
- ------------------------- -----------------
Donald O. Narigon* Director
April 26 , 1996
- ------------------------- -----------------
Bryce P. Neidig* Director
April 26 , 1996
- ------------------------- -----------------
Bennett M. Osmonson* Director
April 26 , 1996
- ------------------------- -----------------
Howard D. Poulson* Director
April 26 , 1996
- ------------------------- -----------------
Sally A. Puttmann* Director
April 26 , 1996
- ------------------------- -----------------
Henry V. Rayhons* Director
April 26 , 1996
- ------------------------- -----------------
James E. Sage* Director
<PAGE>
April 26 , 1996
- ------------------------- -----------------
Beverly L. Schnepel* Director
April 26 , 1996
- ------------------------- -----------------
F. Gary Steiner* Director
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant, Farm
Bureau Life Variable Account, has duly caused this Post-Effective Amendment No.
10 to the Registration Statement to be signed on its behalf by the undersigned
thereunto duly authorized in the City of West Des Moines, State of Iowa, on the
26th day of April, 1996.
Farm Bureau Life Variable Account
(Registrant)
By: Farm Bureau Life Insurance Company
(Depositor)
By: /s/ Edward M. Wiederstein
---------------------------------
Edward M. Wiederstein
President
Farm Bureau Life Insurance Company
* By /s/ Stephen M. Morain Attorney-In-Fact, pursuant to Power of Attorney.
-----------------------
Stephen M. Morain
<PAGE>
EXHIBIT 3(A)
Farm Bureau Financial Services
5400 University Avenue
West Des Moines, Iowa 50266-5997
April 25, 1996
Board of Directors
Farm Bureau Life Insurance Company
5400 University Avenue
West Des Moines, Iowa 50266
Gentlemen:
I hereby consent to the reference to my name under the caption "Legal Matters"
in the Prospectus filed as part of Post-Effective Amendment No. 10 to Form S-6
for Farm Bureau Life Variable Account (File No. 33-12789).
Very truly yours,
/s/ STEPHEN M. MORAIN
- ------------------------
Stephen M. Morain
SENIOR VICE PRESIDENT & GENERAL COUNSEL
<PAGE>
EXHIBIT 3(B)
Sutherland, Asbill & Brennan
1275 Pennsylvania Avenue, NW
Washington, DC 20004-2404
Tel: (202) 383-0100
Fax: (202) 637-3593
April 22, 1996
Farm Bureau Life Insurance Company
5400 University Avenue
West Des Moines, Iowa 50266
Gentlemen:
We hereby consent to the reference to our name under the caption "Legal Matters"
in the Prospectus filed as part of the Post-Effective Amendment No. 10 to Form
S-6 for Farm Bureau Life Variable Account (File No. 33-12789). 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
By: /s/ STEPHEN E. ROTH
------------------------------------------------------------------
Stephen E. Roth
<PAGE>
EXHIBIT 6
[LOGO]
April 26, 1996
Farm Bureau Life Insurance Company
5400 University Avenue
West Des Moines, Iowa 50266
Gentlemen:
This opinion is furnished in connection with the registration by Farm Bureau
Life Insurance Company of a flexible premium variable life insurance policy
("Policy") under the Securities Act of 1933, as amended. The prospectus included
in Post-Effective Amendment No. 10 to the Registration Statement on Form S-6
(File No. 33-12789) describes the Policy. I have provided actuarial advice
concerning the preparation of the policy form described in the Registration
Statement, and I am familiar with the Registration Statement and exhibits
thereto.
It is my professional opinion that:
(1) The "sales load," as defined in paragraph (c)(4) of Rule 6e-3(T) under
the Investment Company Act of 1940, as amended, shall not exceed 9 per
centum of the payments made under the Policies, in conformance with
paragraphs (b)(13)(i)(B) and (c)(7) of Rule 6e-3(T).
(2) The illustrations of death benefits and cash values included in Appendix
A of the Prospectus, based on the assumptions stated in the
illustrations, are consistent with the provisions of the Policy. The rate
structure of the Policy has not been designed so as to make the
relationship between premiums and benefits, as shown in the
illustrations, appear more favorable for policyowners at the ages
illustrated than for policyowners at other ages.
(3) The information contained in the examples set forth in Appendix B of the
Prospectus, based on the assumptions stated in the examples, is
consistent with the provisions of the Policy.
I hereby consent to the use of this opinion as an exhibit to the Post-Effective
Amendment No. 10 to the Registration Statement and to the reference to my name
under the heading "Experts" in the Prospectus.
Sincerely,
/s/ JoAnn W. Rumelhart
JoAnn W. Rumelhart, FSA, MAAA
Vice President -- Life Operations
Farm Bureau Life Insurance Company
<PAGE>
ERNST & YOUNG LETTERHEAD
EXHIBIT 7
Consent of Independent Auditors
The Board of Directors and Participants
Farm Bureau Life Insurance Company
We consent to the reference to our firm under the caption "Experts" and to
the use of our reports dated March 4, 1996 with respect to Farm Bureau Life
Variable Account and March 12, 1996 with respect to Farm Bureau Life
Insurance Company, in this Post-Effective Amendment to Form S-6 Registration
Statement under the Securities Act of 1933 of Securities of Unit Investment
Trusts Registered on Form N-8B-2 (No. 33-12789) and related Prospectus of
Farm Bureau Life Variable Account dated May 1, 1996.
/s/ ERNST & YOUNG LLP
Des Moines, Iowa
April 24, 1996
