<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 1, 1997
REGISTRATION NO. 33-12789
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
POST-EFFECTIVE AMENDMENT NO. 11 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, L.L.P.
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2404
------------------------
It is proposed that this filing will become effective (check appropriate
box):
/ / immediately upon filing pursuant to paragraph (b) of
Rule 485;
/X/ on May 1, 1997 pursuant to paragraph (b) of Rule 485;
/ / 60 days after filing pursuant to paragraph (a) of
Rule 485;
/ / on May 1, 1996 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,
1996 on February 25, 1997.
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RECONCILIATION AND TIE BETWEEN ITEMS
IN FORM N-8B-2 AND THE PROSPECTUS
Item No. of
Form N-8B-2 Caption in Prospectus
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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
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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
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[Logo]
VARIABLE UNIVERSAL LIFE
[LOGO]
May 1, 1997
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
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Farm Bureau Life Variable Account
Flexible Premium Variable Life Insurance Policy
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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.
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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.
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Issued By
Farm Bureau Life Insurance Company
5400 University Avenue
West Des Moines, Iowa 50266
THE DATE OF THIS PROSPECTUS IS MAY 1, 1997.
<PAGE>
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TABLE OF CONTENTS
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PAGE
DEFINITIONS........................................................... 3
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SUMMARY AND DIAGRAM OF THE POLICY..................................... 5
The Policy........................................ 5
The Variable Account.............................. 5
The Declared Interest Option...................... 5
Premiums.......................................... 5
Policy Benefits................................... 6
Charges........................................... 7
Distribution of the Policies...................... 8
Tax Treatment..................................... 8
Cancellation Privilege............................ 8
Illustrations..................................... 8
Diagram........................................... 9
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FARM BUREAU LIFE INSURANCE COMPANY AND THE VARIABLE ACCOUNT........... 9
Farm Bureau Life Insurance Company................ 9
Iowa Farm Bureau Federation....................... 10
The Variable Account.............................. 10
FBL Variable Insurance Series Fund................ 10
Addition, Deletion or Substitution of 13
Investments.......................................
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THE POLICY............................................................ 13
Purpose of the Policy............................. 13
Purchasing the Policy............................. 14
Premiums.......................................... 14
Policy Lapse and Reinstatement.................... 16
Examination of Policy (Cancellation Privilege).... 17
Special Transfer Privilege........................ 17
Exchange Privilege................................ 17
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POLICY BENEFITS....................................................... 18
Cash Value Benefits............................... 18
Transfers......................................... 20
Loan Benefits..................................... 20
Death Proceeds.................................... 22
Accelerated Payments of Death Proceeds............ 25
Benefits at Maturity.............................. 25
Payment Options................................... 26
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CHARGES AND DEDUCTIONS................................................ 27
Premium Expense Charge............................ 27
Monthly Deduction................................. 27
Transfer Charge................................... 30
Surrender Charge.................................. 30
Variable Account Charges.......................... 30
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THE DECLARED INTEREST OPTION.......................................... 31
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GENERAL PROVISIONS.................................................... 33
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DISTRIBUTION OF THE POLICIES.......................................... 35
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FEDERAL TAX MATTERS................................................... 35
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ADDITIONAL INFORMATION................................................ 39
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FINANCIAL STATEMENTS.................................................. 46
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APPENDIX A............................................................ A-1
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APPENDIX B............................................................ B-1
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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
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DEFINITIONS
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<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 Friday after 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 Value Growth 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
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<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
Value Growth, 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 Value Growth, 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>
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SUMMARY AND DIAGRAM OF THE POLICY
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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.
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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.
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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 Value Growth
Subaccount (formerly known as 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.")
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THE DECLARED INTEREST
OPTION
As an alternative to the Variable Account, the
Policyowner may allocate or transfer all 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.")
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PREMIUMS
The Company may require the Policyowner to pay an initial
premium 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 may also 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.
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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. (Owners in the State of Utah will
receive the greater of (1) 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 or (2) premiums paid.) (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. At December 31, 1996,
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
fifteen states--Arizona, Colorado, Idaho, Iowa, Kansas,
Minnesota, Montana, Nebraska, New Mexico, North Dakota,
Oklahoma, South Dakota, Utah, Wisconsin and Wyoming. 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 Value Growth
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.
VALUE GROWTH PORTFOLIO. This Portfolio seeks
long-term capital appreciation. The Portfolio pursues
its objective by investing primarily in equity
securities of companies that the investment adviser
believes have a potential to earn a high return on
equity and/or in equity securities that the
investment adviser believes are undervalued by the
market place. Such equity securities may include
common stock, preferred stock and securities
convertible or exchangeable into common stock.
HIGH GRADE BOND PORTFOLIO. This Portfolio seeks as
high a level of current income as is consistent with
a high grade portfolio of debt securities. The
Portfolio will pursue this objective by investing
primarily in debt securities rated
10
<PAGE>
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.
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) growth common stocks and
securities convertible or exchangeable into growth
common stocks, including warrants and rights; (ii)
high grade 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.)
11
<PAGE>
STRUCTURAL CHART
[CHART]
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
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>
Value Growth................................................... 0.45 % 0.45 % 0.40 %
High Grade Bond................................................ 0.30 % 0.275 % 0.25 %
High Yield Bond................................................ 0.45 % 0.45 % 0.40 %
Managed........................................................ 0.45 % 0.45 % 0.45 %
Money Market................................................... 0.25 % 0.25 % 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 to the extent that annual
operating expenses, including the investment advisory
fee, exceed .55% for the period January 1, 1997 through
April 30, 1997, and exceed .65% for the period May 1,
1997 through December 31, 1997. There can be no assurance
that the Adviser will continue to limit expenses beyond
December 31, 1997. (See "CHARGES AND DEDUCTIONS--Variable
Account Charges--FUND EXPENSES.")
12
<PAGE>
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 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.
13
<PAGE>
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 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.
The Company offers a conversion program for its term
insurance or Executive Term policies. Under the program,
owners of a term policy issued by the Company can elect
to convert their term insurance policy to a permanent
insurance Policy at any time between the first and sixth
policy anniversaries of their term policy. Upon
conversion, the Company will credit to the initial
premium for the Policy an amount equal to the annual
premium paid on the term policy, up to a limit of $5.00
per $1,000 of the term insurance face amount. Custom Term
II contains a Premium Credit Benefit that allows the
policy owner credit towards the purchase of a Policy at
any time between the first and sixth policy anniversaries
on their term policy. Upon exercise of this benefit, the
14
<PAGE>
Company will credit to the initial premium for the Policy
an amount equal to the annual premium paid on the term
policy, up to a limit of $5.00 per $1,000 of the term
insurance face amount. The existing Custom Term II policy
need not be canceled to use this benefit. These credits
will be treated as a premium for purposes of Policy
provisions applicable to premiums, such as premium taxes
and sales charges. Please see your registered
representative for more information. A commission is paid
to a registered representative upon a conversion.
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 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
15
<PAGE>
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.
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").
16
<PAGE>
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.
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EXAMINATION OF POLICY
(CANCELLATION
PRIVILEGE)
The Policyowner may cancel the Policy by delivering or
mailing written notice or 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. (Owners in the
state of Utah will receive the greater of (1) 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 or (2) premiums paid.)
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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.
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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 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.
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<PAGE>
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.")
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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").
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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 "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
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<PAGE>
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.
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.
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<PAGE>
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.
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. 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.
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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.")
20
<PAGE>
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.")
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
21
<PAGE>
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.
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."
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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.
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<PAGE>
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.
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--
23
<PAGE>
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.
(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
24
<PAGE>
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.
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.
Pursuant to the recently enacted Health Insurance
Portability and Accountability Act of 1996, the Company
believes that for federal income tax purposes, an
accelerated death benefit payment received under an
accelerated death benefit endorsement should be fully
excludable from the gross income of the beneficiary, as
long as the beneficiary is the insured under the Policy.
However, the Policyowner should consult a qualified tax
adviser about the consequences of adding this Endorsement
to a Policy or requesting an accelerated death benefit
payment under this Endorsement.
- --------------------------------------------------------------------------------
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
25
<PAGE>
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 five 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.
Payments under Options 2, 3, 4 or 5 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.
26
<PAGE>
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.
ALTERNATE PAYMENT OPTION. In lieu of one of the
above options, the cash value, cash surrender value
or death benefit, as applicable, may be settled under
any other payment option made available by the
Company or requested and agreed to by the Company.
- --------------------------------------------------------------------------------
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 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. (If the Monthly
Deduction Day falls on Thanksgiving, the Friday following
Thanksgiving or the weekend following Thanksgiving, the
monthly deduction will be deducted on the preceding
Business 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
27
<PAGE>
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. (If the Monthly
Deduction Day falls on Thanksgiving, the Friday following
Thanksgiving or the weekend following Thanksgiving, Cash
Values will be determined as of the end of the preceding
Business 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.
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
- --------------
(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>
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.")
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 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.
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>
$100,000
$25,000 $50,000 TO
AGE TO 49,999 TO 99,999 249,000 $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 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.
- --------------------------------------------------------------------------------
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>
Value Growth................................................ 0.45 % 0.45 % 0.40 %
High Grade Bond............................................. 0.30 % 0.275 % 0.25 %
High Yield Bond............................................. 0.45 % 0.45 % 0.40 %
Managed..................................................... 0.45 % 0.45 % 0.45 %
Money Market................................................ 0.25 % 0.25 % 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 to the
extent that annual operating expenses, including the
investment advisory fee, exceed .55% for the period
January 1, 1997 through April 30, 1997, and exceed .65%
for the period May 1, 1997 through December 31, 1997.
There can be no assurance that the Adviser will continue
to limit expenses beyond December 31, 1997.
- --------------------------------------------------------------------------------
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.
31
<PAGE>
- --------------------------------------------------------------------------------
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.
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 CASH VALUE
Net premiums allocated to the Declared Interest Option
are credited to the Policy. 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.
32
<PAGE>
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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 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
33
<PAGE>
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;
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 OR
BENEFICIARY
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 request and the change must be in a form satisfactory
to the Company and must
34
<PAGE>
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; (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 currently receives annual compensation of $100
per registered representative 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 minimum
initial 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 minimum initial 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
35
<PAGE>
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, 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
36
<PAGE>
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.
- --------------------------------------------------------------------------------
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") and the assignment
of a Policy or the exercise of the right to change
Policyowners (see "GENERAL PROVISIONS-- Changing the
Policyowner or Beneficiary") 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.
Pursuant to the recently enacted Health Insurance
Portability and Accountability Act of 1996, the Company
believes that for federal income tax purposes, an
accelerated death benefit payment received under an
accelerated death benefit endorsement should be fully
excludable from the gross income of the beneficiary, as
long as the beneficiary is the insured under the Policy.
However, the Policyowner should consult a qualified tax
adviser about the consequences of adding this Endorsement
to a Policy or requesting an accelerated death benefit
payment under this Endorsement.
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."
37
<PAGE>
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 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
treatment 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,
38
<PAGE>
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.
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 Chubb Insurance Group in the
amount of $5,000,000 covering all the officers and
employees of the Company.
39
<PAGE>
- --------------------------------------------------------------------------------
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 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.
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.
- --------------------------------------------------------------------------------
STATE REGULATION OF
THE COMPANY
The Company, a stock life insurance company organized
under the laws of 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.
40
<PAGE>
- --------------------------------------------------------------------------------
OFFICERS AND
DIRECTORS OF FARM
BUREAU LIFE INSURANCE
COMPANY
<TABLE>
<CAPTION>
NAME AND POSITION PRINCIPAL OCCUPATION
WITH THE COMPANY* LAST FIVE YEARS**
- ------------------------------ --------------------------------------------------
<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.; President, Ag Tech Farm
Service; 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>
- --------------
* The principal business address of each person listed, unless otherwise
indicated, is 5400 University Avenue, West
Des Moines, Iowa 50266.
** The principal occupation shown reflects the principal employment of each
individual during the past five years.
Corporate positions may, in some instances, have changed during the period.
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., Utah Farm
Bureau Insurance Company 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
Charles E. Norris, Director Farmer; Director, Farm Bureau Mutual Insurance
Company, FBL Insurance Brokerage, Inc. and FBL
Financial Services, Inc.
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.
</TABLE>
- --------------
* The principal business address of each person listed, unless otherwise
indicated, is 5400 University Avenue, West
Des Moines, Iowa 50266.
** The principal occupation shown reflects the principal employment of each
individual during the past five years.
Corporate positions may, in some instances, have changed during the period.
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, Farmer; Chairman and Director, FBL Financial
President and Director Group, Inc.; President and Director, Iowa Farm
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
and Farm Bureau Agricultural Business Corporation;
Director, Multi-Pig Corporation, Western
Agricultural Insurance Company, Western Ag
Insurance Agency, Inc., Western Farm Bureau Life
Insurance Company and American Ag Insurance
Company
Craig A. Lang, Vice President Farmer; Director, Growmark, Inc., Western Farm
and Director 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>
- --------------
* The principal business address of each person listed, unless otherwise
indicated, is 5400 University Avenue, West
Des Moines, Iowa 50266.
** The principal occupation shown reflects the principal employment of each
individual during the past five years.
Corporate positions may, in some instances, have changed during the period.
43
<PAGE>
<TABLE>
<CAPTION>
NAME AND POSITION PRINCIPAL OCCUPATION
WITH THE COMPANY* LAST FIVE YEARS**
- ------------------------------ --------------------------------------------------
<S> <C>
Richard D. Harris, Senior Vice Senior Vice President and Secretary- Treasurer,
President and Farm Bureau Mutual Insurance Company, FBL
Secretary-Treasurer 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 Senior Vice President and General Counsel, FBL
President and General Financial Group, Inc.
Counsel
Thomas R. Gibson, Chief Chief Executive Officer, FBL Financial Group, Inc.
Executive Officer
William J. Oddy, Executive Chief Operating Officer, FBL Financial Group, Inc.
Vice President and General
Manager
Timothy J. Hoffman, Vice Vice President, Chief Property/Casualty Officer,
President FBL Financial Group, Inc.
Richard D. Warming, Chief Chief Investment Officer and Assistant Treasurer,
Investment Officer and FBL Financial Group, Inc.
Assistant Treasurer
James W. Noyce, Chief Chief Financial Officer, FBL Financial Group, Inc.
Financial Officer
Barbara J. Moore, Vice Vice President-Property/Casualty Operations, FBL
President Financial Group, Inc.
JoAnn W. Rumelhart, Vice Vice President-Life Operations, FBL Financial
President-Life Operations Group, Inc.
Monte R. Roumpf, Vice Vice President-Corporate Administration, FBL
President Financial Group, Inc.
Lynn E. Wilson, Vice Vice President-Life Sales, FBL Financial Group,
President- Inc.
Life Sales
F. Walter Tomenga, Vice Vice President-Corporate Affairs and Marketing
President Services, FBL Financial Group, Inc.
Robert L. Tatge, Vice Vice President-Property/Casualty Operations, FBL
President Financial Group, Inc.
Thomas E. Burlingame, Vice Vice President-Associate General Counsel, FBL
President-Associate General Financial Group, Inc.
Counsel
Donald L. Carter, Life Life Underwriting Vice President, FBL Financial
Underwriting Vice President Group, Inc.
Kathryn Coleson Horner, Accounting Vice President, FBL Financial Group,
Accounting Vice President Inc.
</TABLE>
- --------------
* The principal business address of each person listed, unless otherwise
indicated, is 5400 University Avenue, West
Des Moines, Iowa 50266.
** The principal occupation shown reflects the principal employment of each
individual during the past five years.
Corporate positions may, in some instances, have changed during the period.
44
<PAGE>
<TABLE>
<CAPTION>
NAME AND POSITION PRINCIPAL OCCUPATION
WITH THE COMPANY* LAST FIVE YEARS**
- ------------------------------ --------------------------------------------------
<S> <C>
Dennis M. Marker, Investment Investment Vice President, Administration, FBL
Vice President, Financial Group, Inc.
Administration
Paul Grinvalds, Financial Financial Planning Vice President, Appointed
Planning Vice President Actuary, FBL Financial Group, Inc.
James P. Brannen, Tax and Tax and Investment Accounting Vice President, FBL
Investment Accounting Vice Financial Group, Inc.
President
Ronald J. Palmer, Agency Agency Services Vice President, FBL Financial
Services Vice President Group, Inc.
Christopher G. Daniels, Life Life Product Development and Pricing Vice
Product Development and President, FBL Financial Group, Inc.
Pricing Vice President
James M. Mincks, Human Human Resources Vice President, FBL Financial
Resources Vice President Group, Inc.
Kermit J. Larson, Agency Vice Agency Vice President, Farm Bureau Life Insurance
President Company
Larry W. Riley, Agency Vice Agency Vice President, Farm Bureau Life Insurance
President Company
John F. Mottet, Agency Vice Agency Vice President, Farm Bureau Life Insurance
President Company
Richard J. January, Senior Senior Agency Vice President, Farm Bureau Life
Agency Vice President Insurance Company
Cyrus S. Winters, Senior Senior Agency Vice President, Farm Bureau Life
Agency Vice President Insurance Company
Michael J. Tousley, Senior Senior Agency Vice President, Farm Bureau Life
Agency Vice President Insurance Company
Ronnie G. Lee, Agency Vice Agency Vice President, Farm Bureau Life Insurance
President Company
</TABLE>
- --------------
* The principal business address of each person listed, unless otherwise
indicated, is 5400 University Avenue, West
Des Moines, Iowa 50266.
** The principal occupation shown reflects the principal employment of each
individual during the past five years.
Corporate positions may, in some instances, have changed during the period.
45
<PAGE>
- --------------------------------------------------------------------------------
LEGAL MATTERS
Sutherland, Asbill & Brennan, L.L.P. 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, 1996 and for each of the three years in the
period ended December 31, 1996, and of the Company at
December 31, 1996 and 1995 and for each of the three
years in the period ended December 31, 1996, 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, 1996 and the related statements of
operations and changes in net assets for each of the
three years in the period ended December 31, 1996, and
the consolidated balance sheets of the Company at
December 31, 1996 and 1995 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, 1996, appearing herein, have been
audited by Ernst & Young LLP, independent auditors, as
set forth in their respective reports thereon appearing
elsewhere herein.
46
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
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 Value Growth, High Grade Bond,
High Yield Bond, Managed, Money Market, and Blue Chip Subaccounts) as of
December 31, 1996, 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, 1996, 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,
1996, 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 LLP
Des Moines, Iowa
March 5, 1997
48
<PAGE>
FARM BUREAU LIFE VARIABLE ACCOUNT
STATEMENT OF NET ASSETS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Investments in FBL Variable Insurance Series Fund:
Value Growth Subaccount:
Value Growth Portfolio, 1,193,845 shares at net asset value of $13.13 per share
(cost $14,231,022) $15,675,188
High Grade Bond Subaccount:
High Grade Bond Portfolio, 174,069 shares at net asset value of $9.83 per share
(cost $1,726,519) 1,711,102
High Yield Bond Subaccount:
High Yield Bond Portfolio, 257,603 shares at net asset value of $9.91 per share
(cost $2,539,939) 2,552,842
Managed Subaccount:
Managed Portfolio, 1,144,466 shares at net asset value of $12.40 per share
(cost $13,353,613) 14,191,379
Money Market Subaccount:
Money Market Portfolio, 967,022 shares at net asset value of $1.00 per share
(cost $967,022) 967,022
Blue Chip Subaccount:
Blue Chip Portfolio, 321,726 shares at net asset value of $24.68 per share
(cost $5,938,735) 7,940,202
-----------
Total investments (cost $38,756,850) 43,037,735
LIABILITIES --
-----------
NET ASSETS $43,037,735
-----------
-----------
</TABLE>
<TABLE>
<CAPTION>
UNITS UNIT VALUE EXTENDED VALUE
<S> <C> <C> <C>
-------------------------------------------------
Net assets are represented by:
Value Growth Subaccount 696,561.203115 $ 22.503676 $ 15,675,188
High Grade Bond Subaccount 100,066.956362 17.099574 1,711,102
High Yield Bond Subaccount 122,913.031338 20.769500 2,552,842
Managed Subaccount 621,591.989925 22.830697 14,191,379
Money Market Subaccount 75,170.700816 12.864348 967,022
Blue Chip Subaccount 287,174.141676 27.649433 7,940,202
--------------
Total net assets $ 43,037,735
--------------
--------------
</TABLE>
SEE ACCOMPANYING NOTES.
49
<PAGE>
FARM BUREAU LIFE VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
COMBINED VALUE GROWTH SUBACCOUNT
------------------------------------ ----------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31 DECEMBER 31
1996 1995 1994 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------
Net investment income:
Dividend income $ 3,350,569 $1,470,294 $ 1,037,561 $ 1,468,287 $ 600,695 $ 366,515
Mortality and expense risk charges (307,070) (194,849) (124,327) (112,696) (73,171) (45,358)
------------------------------------------------------------------------
Net investment income 3,043,499 1,275,445 913,234 1,355,591 527,524 321,157
Net realized and unrealized gain (loss) on
investments:
Net realized gain (loss) from investment
transactions 101,081 36,576 (15,607) 38,673 10,200 (7,916)
Change in unrealized appreciation/depreciation of
investments 2,136,480 3,442,425 (1,409,360) 661,242 1,319,331 (565,067)
------------------------------------------------------------------------
Net gain (loss) on investments 2,237,561 3,479,001 (1,424,967) 699,915 1,329,531 (572,983)
------------------------------------------------------------------------
Net increase (decrease) in net assets resulting
from operations $ 5,281,060 $4,754,446 $ (511,733) $ 2,055,506 $1,857,055 $(251,826)
------------------------------------------------------------------------
------------------------------------------------------------------------
<CAPTION>
HIGH GRADE BOND SUBACCOUNT HIGH YIELD BOND SUBACCOUNT
------------------------------------ ----------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31 DECEMBER 31
1996 1995 1994 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------
Net investment income:
Dividend income $ 109,132 $ 87,448 $ 62,855 $ 209,673 $ 148,611 $ 97,005
Mortality and expense risk charges (13,511) (10,003) (7,181) (19,103) (12,752) (8,145)
------------------------------------------------------------------------
Net investment income 95,621 77,445 55,674 190,570 135,859 88,860
Net realized and unrealized gain (loss) on
investments:
Net realized gain (loss) from investment
transactions (988) (884) (2,084) (445) (2,644) (1,504)
Change in unrealized appreciation/depreciation of
investments (18,165) 59,549 (60,346) 46,768 46,925 (101,553)
------------------------------------------------------------------------
Net gain (loss) on investments (19,153) 58,665 (62,430) 46,323 44,281 (103,057)
------------------------------------------------------------------------
Net increase (decrease) in net assets resulting
from operations $ 76,468 $ 136,110 $ (6,756) $ 236,893 $ 180,140 $ (14,197)
------------------------------------------------------------------------
------------------------------------------------------------------------
</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
1996 1995 1994 1996 1995 1994 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------------
Net investment income:
Dividend income $1,393,489 $ 556,379 $469,045 $23,870 $10,664 $1,247 $146,118 $ 66,497 $ 40,894
Mortality and expense risk
charges (102,690) (66,386) (44,750) (4,490) (1,788) (304) (54,580) (30,749) (18,589)
-------------------------------------------------------------------------------------
NET INVESTMENT INCOME 1,290,799 489,993 424,295 19,380 8,876 943 91,538 35,748 22,305
Net realized and unrealized gain
(loss) on investments:
Net realized gain (loss) from
investment transactions 24,883 (1,192) (14,100) -- -- -- 38,958 31,096 9,997
Change in unrealized
appreciation/depreciation of
investments 458,029 1,155,520 (683,673) -- -- -- 988,606 861,100 1,279
-------------------------------------------------------------------------------------
NET GAIN (LOSS) ON INVESTMENTS 482,912 1,154,328 (697,773) -- -- -- 1,027,564 892,196 11,276
-------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS $1,773,711 $1,644,321 $(273,478) $19,380 $8,876 $ 943 $1,119,102 $927,944 $ 33,581
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
</TABLE>
51
<PAGE>
FARM BUREAU LIFE VARIABLE ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
COMBINED VALUE GROWTH SUBACCOUNT
---------------------------------------- ---------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31 DECEMBER 31
1996 1995 1994 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------
Operations:
Net investment income $ 3,043,499 $ 1,275,445 $ 913,234 $ 1,355,591 $ 527,524 $ 321,157
Net realized gain
(loss) from investment
transactions 101,081 36,576 (15,607) 38,673 10,200 (7,916)
Change in unrealized
appreciation/
depreciation of
investments 2,136,480 3,442,425 (1,409,360) 661,242 1,319,331 (565,067)
---------------------------------------------------------------------------------
Net increase (decrease)
in net assets resulting
from operations 5,281,060 4,754,446 (511,733) 2,055,506 1,857,055 (251,826)
Capital share
transactions:
Transfers of net
premiums 16,143,306 10,027,479 12,057,583 4,673,744 3,373,068 4,884,501
Transfers of death
benefits (50,801) (76,039) -- (24,621) (20,773) --
Transfers of surrenders (734,432) (640,433) (280,286) (228,419) (260,324) (113,833)
Transfers of policy
loans (701,757) (420,627) (268,564) (260,923) (173,175) (129,057)
Transfers of cost of
insurance and transfer
charges (4,854,913) (3,764,873) (2,988,193) (1,591,999) (1,307,686) (1,123,660)
Transfers between
subaccounts 769,812 170,949 (274,657) 838,861 226,020 (84,996)
---------------------------------------------------------------------------------
Net increase in net
assets resulting from
capital share
transactions 10,571,215 5,296,456 8,245,883 3,406,643 1,837,130 3,432,955
---------------------------------------------------------------------------------
Total increase in net
assets 15,852,275 10,050,902 7,734,150 5,462,149 3,694,185 3,181,129
Net assets at beginning
of year 27,185,460 17,134,558 9,400,408 10,213,039 6,518,854 3,337,725
---------------------------------------------------------------------------------
Net assets at end of year $ 43,037,735 $27,185,460 $17,134,558 $ 15,675,188 $10,213,039 $6,518,854
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
</TABLE>
52
<PAGE>
<TABLE>
<CAPTION>
HIGH GRADE BOND SUBACCOUNT HIGH YIELD BOND SUBACCOUNT MANAGED SUBACCOUNT
------------------------------- --------------------------------- -----------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER DECEMBER DECEMBER
31 31 31
1996 1995 1994 1996 1995 1994 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------------------------------
Operations:
Net investment income $ 95,621 $ 77,445 $55,674 $ 190,570 $ 135,859 $ 88,860 $ 1,290,799 $ 489,993 $ 424,295
Net realized gain
(loss) from investment
transactions (988) (884) (2,084) (445) (2,644) (1,504) 24,883 (1,192) (14,100)
Change in unrealized
appreciation/
depreciation of
investments (18,165) 59,549 (60,346) 46,768 46,925 (101,553) 458,029 1,155,520 (683,673)
-------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets resulting
from operations 76,468 136,110 (6,756) 236,893 180,140 (14,197) 1,773,711 1,644,321 (273,478)
Capital share
transactions:
Transfers of net
premiums 466,620 374,188 472,154 875,412 636,472 749,481 4,298,411 2,880,711 4,455,735
Transfers of death
benefits (4,420) (12,573) -- (4,411) (2,339) -- (12,239) (21,898) --
Transfers of surrenders (29,704) (5,473) (7,186) (70,714) (27,257) (21,981) (279,779) (273,471) (68,697)
Transfers of policy
loans (29,714) (11,630) (12,693) (54,879) (28,014) (16,467) (225,813) (134,744) (77,932)
Transfers of cost of
insurance and transfer
charges (177,675) (163,615) (139,626) (276,886) (240,083) (191,048) (1,418,517) (1,178,595) (1,125,916)
Transfers between
subaccounts 134,027 17,031 (15,124) 167,619 (1,383) (25,938) 1,055,783 80,167 (92,453)
-------------------------------------------------------------------------------------------------------
Net increase in net
assets resulting from
capital share
transactions 359,134 197,928 297,525 636,141 337,396 494,047 3,417,846 1,352,170 3,090,737
-------------------------------------------------------------------------------------------------------
Total increase in net
assets 435,602 334,038 290,769 873,034 517,536 479,850 5,191,557 2,996,491 2,817,259
Net assets at beginning
of year 1,275,500 941,462 650,693 1,679,808 1,162,272 682,422 8,999,822 6,003,331 3,186,072
-------------------------------------------------------------------------------------------------------
Net assets at end of year $1,711,102 $1,275,500 $941,462 $2,552,842 $1,679,808 $1,162,272 $14,191,379 $8,999,822 $6,003,331
-------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------
</TABLE>
53
<PAGE>
FARM BUREAU LIFE VARIABLE ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
MONEY MARKET SUBACCOUNT BLUE CHIP SUBACCOUNT
-------------------------------- ------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31 DECEMBER 31
1996 1995 1994 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
----------------------------------------------------------------------
Operations:
Net investment income $ 19,380 $ 8,876 $ 943 $ 91,538 $ 35,748 $ 22,305
Net realized gain (loss)
from investment
transactions -- -- -- 38,958 31,096 9,997
Change in unrealized
appreciation/depreciation
of investments -- -- -- 988,606 861,100 1,279
----------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from
operations 19,380 8,876 943 1,119,102 927,944 33,581
Capital share transactions:
Transfers of net premiums 2,945,406 1,129,049 20,472 2,883,713 1,633,991 1,475,240
Transfers of death benefits -- -- -- (5,110) (18,456) --
Transfers of surrenders (6,116) (2,924 ) (366) (119,700) (70,984) (68,223)
Transfers of policy loans (1,728) (172 ) (675) (128,700) (72,892) (31,740)
Transfers of cost of
insurance and transfer
charges (469,674) (253,153 ) (7,693) (920,162) (621,741) (400,250)
Transfers between
subaccounts (2,037,433) (400,420 ) (10,118) 610,955 249,534 (46,028)
----------------------------------------------------------------------
Net increase in net assets
resulting from capital share
transactions 430,455 472,380 1,620 2,320,996 1,099,452 928,999
----------------------------------------------------------------------
Total increase in net assets 449,835 481,256 2,563 3,440,098 2,027,396 962,580
Net assets at beginning of
year 517,187 35,931 33,368 4,500,104 2,472,708 1,510,128
----------------------------------------------------------------------
Net assets at end of year $ 967,022 $ 517,187 $35,931 $7,940,202 $4,500,104 $2,472,708
----------------------------------------------------------------------
----------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES.
54
<PAGE>
FARM BUREAU LIFE VARIABLE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
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. Effective December 1, 1996, the Growth Common Stock
Subaccount was renamed the Value Growth Subaccount. 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.
MORTALITY AND EXPENSE RISK CHARGES: The Company deducts a daily mortality and
expense risk charge from the Account at an effective annual rate of .90% of the
average daily net asset value of the Account. These charges are assessed in
return for the Company's 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 or 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
------------------------------------------------------------------------
1996 1995 1994
------------------------- ---------------------- ---------------------
PURCHASES SALES PURCHASES SALES PURCHASES SALES
<S> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------
Value Growth Subaccount $ 5,113,277 $ 351,043 $2,688,930 $ 324,276 $4,084,035 $ 329,923
High Grade Bond Subaccount 540,232 85,477 340,165 64,792 404,442 51,243
High Yield Bond Subaccount 925,422 98,711 590,219 116,964 657,604 74,697
Managed Subaccount 5,015,366 306,721 2,251,170 409,007 3,726,025 210,993
Money Market Subaccount 2,681,085 2,231,250 1,170,205 688,949 23,735 21,172
Blue Chip Subaccount 2,563,886 151,352 1,286,359 151,159 1,084,139 132,835
------------------------------------------------------------------------
Combined $ 16,839,268 $ 3,224,554 $8,327,048 $1,755,147 $9,979,980 $ 820,863
------------------------------------------------------------------------
------------------------------------------------------------------------
</TABLE>
5.SUMMARY OF CHANGES FROM UNIT TRANSACTIONS
Transactions in units of each subaccount 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, 1996
Value Growth Subaccount 179,005 $ 3,644,990 11,662 $ 238,347 167,343 $ 3,406,643
High Grade Bond Subaccount 26,068 431,101 4,336 71,967 21,732 359,134
High Yield Bond Subaccount 36,666 715,749 4,082 79,608 32,584 636,141
Managed Subaccount 172,450 3,621,877 9,748 204,031 162,702 3,417,846
Money Market Subaccount 209,942 2,657,215 176,569 2,226,760 33,373 430,455
Blue Chip Subaccount 94,956 2,417,768 3,772 96,772 91,184 2,320,996
------------------------------------------------------------------------
Combined 719,087 $ 13,488,700 210,169 $ 2,917,485 508,918 $ 10,571,215
------------------------------------------------------------------------
------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1995
Value Growth 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
Value Growth 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
------------------------------------------------------------------------
------------------------------------------------------------------------
</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, 1996 consisted of:
<TABLE>
<CAPTION>
HIGH GRADE HIGH YIELD
VALUE GROWTH 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 $ 32,594,102 $ 11,609,651 $1,456,141 $2,067,393 $ 10,864,831 $ 936,563 $5,659,523
Accumulated undistributed
net investment income 6,061,667 2,582,698 271,366 472,991 2,463,899 30,459 240,254
Accumulated undistributed
net realized gain (loss)
from investment
transactions 101,081 38,673 (988) (445) 24,883 -- 38,958
Net unrealized appreciation
(depreciation) of
investments 4,280,885 1,444,166 (15,417) 12,903 837,766 -- 2,001,467
------------------------------------------------------------------------------------------------
Net assets $ 43,037,735 $ 15,675,188 $1,711,102 $2,552,842 $ 14,191,379 $ 967,022 $7,940,202
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
</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, 1996 and 1995, 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, 1996. 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, 1996 and 1995, and the
consolidated results of its operations and its cash flows for each of the three
years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles.
As described in Note 4 to the consolidated financial statements, in 1994 the
Company changed its method of accounting for certain investments in debt
securities.
/s/ Ernst & Young LLP
Des Moines, Iowa
March 3, 1997
57
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1996 1995
-------------- -------------
<S> <C> <C>
ASSETS
Investments:
Fixed maturities:
Held for investment, at amortized cost (market: 1996--$574,338;
1995--$580,379) $ 562,283 $ 556,099
Available for sale, at market (amortized cost: 1996--$1,096,179;
1995--$943,219) 1,128,587 1,001,302
Equity securities, at market (cost: 1996--$69,915;
1995--$72,731) 79,786 78,173
Held in inventory, at estimated fair value (amortized cost: 1996--$8,716;
1995--$21,555), substantially all held for sale in 1996 13,781 21,913
Mortgage loans on real estate 235,331 215,690
Investment real estate, less allowances for depreciation of $1,741 in
1996 and $1,498 in 1995 26,384 26,384
Policy loans 88,940 88,526
Other long-term investments 8,376 2,892
Short-term investments 62,025 35,358
-------------- -------------
Total investments 2,205,493 2,026,337
Cash and cash equivalents 1,802 --
Securities and indebtedness of related parties 39,244 73,138
Accrued investment income 24,298 24,012
Accounts and notes receivable 1,526 2,009
Amounts receivable from affiliates 7,095 3,824
Reinsurance recoverable 5,552 2,225
Deferred policy acquisition costs 145,614 124,302
Value of insurance in force acquired 39 75
Property and equipment, less allowances for depreciation of $17,313 in
1996 and $42,084 in 1995 36,182 59,990
Current income taxes recoverable -- 12,939
Goodwill, less accumulated amortization of $2,172 in 1996 and $1,556 in 1995 9,726 10,342
Other assets 5,349 11,544
Assets held in separate accounts 79,043 44,789
-------------- -------------
Total assets $ 2,560,963 $ 2,395,526
-------------- -------------
-------------- -------------
</TABLE>
58
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1996 1995
-------------- -------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Policy liabilities and accruals:
Future policy benefits:
Universal life and annuity products $ 1,078,463 $ 1,020,345
Traditional life insurance and accident and health products 555,664 541,356
Unearned revenue reserve 22,182 20,081
Other policy claims and benefits 7,313 5,640
-------------- -------------
1,663,622 1,587,422
Other policyholders' funds:
Supplementary contracts without life contingencies 120,649 111,505
Advance premiums and other deposits 66,572 66,260
Accrued dividends 12,796 12,600
-------------- -------------
200,017 190,365
Long-term debt 81 12,604
Amounts payable to affiliates 12,063 10,443
Current income taxes payable 56 --
Deferred income taxes 43,810 43,723
Other liabilities 71,267 65,784
Liabilities related to separate accounts 79,043 44,789
-------------- -------------
Total liabilities 2,069,959 1,955,130
Commitments and contingencies
Stockholder's equity:
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, issued and outstanding
50,000 shares 2,500 2,500
Additional paid-in capital 55,285 50,426
Net unrealized investment gains 26,327 34,146
Retained earnings 406,892 353,324
-------------- -------------
Total stockholder's equity 491,004 440,396
-------------- -------------
Total liabilities and stockholder's equity $ 2,560,963 $ 2,395,526
-------------- -------------
-------------- -------------
</TABLE>
SEE ACCOMPANYING NOTES.
59
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1996 1995 1994
----------------- ---------------- ----------------
<S> <C> <C> <C>
Revenues:
Universal life and annuity product charges $ 33,755 $ 33,343 $ 30,983
Traditional life insurance premiums 52,051 48,511 46,161
Accident and health premiums 9,560 9,396 2,444
Property-casualty premiums -- 18,709 17,778
Net investment income 166,422 184,348 145,148
Realized gains on investments 54,454 5,902 11,234
Other income 11,887 28,011 26,954
----------------- ---------------- ----------------
Total revenues 328,129 328,220 280,702
Benefits and expenses:
Universal life and annuity benefits 90,720 88,147 75,844
Traditional life insurance and accident and health benefits 42,370 37,710 37,800
Increase in traditional and accident and health future policy benefits 13,679 15,310 6,501
Distributions to participating policyholders 23,725 23,838 22,753
Property-casualty losses and loss adjustment expenses -- 13,621 13,441
Underwriting, acquisition and insurance expenses 45,714 54,336 56,486
Interest expense 425 1,007 1,836
Other expenses 7,814 17,776 17,505
----------------- ---------------- ----------------
Total benefits and expenses 224,447 251,745 232,166
----------------- ---------------- ----------------
103,682 76,475 48,536
Income taxes (34,156) (27,291) (18,434)
Minority interest in losses (earnings) of subsidiaries -- (12) 4
Equity income (loss), net of related income taxes 4,138 1,488 (1,587)
----------------- ---------------- ----------------
Income from continuing operations 73,664 50,660 28,519
Discontinued operations--gain on disposal of cable television operations,
net of related income taxes -- -- 6,479
----------------- ---------------- ----------------
Net income $ 73,664 $ 50,660 $ 34,998
----------------- ---------------- ----------------
----------------- ---------------- ----------------
</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 TOTAL
COMMON PAID-IN GAINS RETAINED STOCKHOLDERS'
STOCK CAPITAL (LOSSES) EARNINGS EQUITY
------ ---------- ---------- -------- ------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1994 $1,194 $ 27,030 $ 5,737 $278,316 $ 312,277
Contribution of minority interest of
subsidiaries from parent -- 24,702 -- -- 24,702
Cumulative effect on prior years (to
December 31, 1993) of change in
method of accounting for fixed
maturity securities -- -- 38,913 -- 38,913
Net income for 1994 -- -- -- 34,998 34,998
Change in net unrealized investment
gains/losses -- -- (55,418 ) -- (55,418 )
------ ---------- ---------- -------- ------------
Balance at December 31, 1994 1,194 51,732 (10,768 ) 313,314 355,472
Issuance of 26,119.72 shares
pursuant to stock dividend 1,306 (1,306 ) -- -- --
Net income for 1995 -- -- -- 50,660 50,660
Change in net unrealized investment
gains/losses -- -- 45,375 -- 45,375
Dividend of Utah Farm Bureau
Insurance Company to parent -- -- (461 ) (10,650) (11,111 )
------ ---------- ---------- -------- ------------
Balance at December 31, 1995 2,500 50,426 34,146 353,324 440,396
Net income for 1996 -- -- -- 73,664 73,664
Change in net unrealized investment
gains/losses -- -- (7,819 ) -- (7,819 )
Adjustment resulting from capital
transaction of equity investee -- 4,859 -- -- 4,859
Dividend of FBL Financial Services,
Inc. to parent -- -- -- (15,096) (15,096 )
Cash dividend paid to parent -- -- -- (5,000) (5,000 )
------ ---------- ---------- -------- ------------
Balance at December 31, 1996 $2,500 $ 55,285 $ 26,327 $406,892 $ 491,004
------ ---------- ---------- -------- ------------
------ ---------- ---------- -------- ------------
</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,
-----------------------------------------
1996 1995 1994
<S> <C> <C> <C>
-----------------------------------------
OPERATING ACTIVITIES
Continuing operations:
Net income $ 73,664 $ 50,660 $ 28,519
Adjustments to reconcile net income to net cash provided by continuing operations:
Adjustments related to interest sensitive products:
Interest credited to account balances 77,281 77,207 69,954
Charges for mortality and administration (35,050) (34,083) (32,161)
Deferral of unearned revenues 1,825 1,696 2,058
Amortization of unearned revenue reserve (530) (956) (880)
Provision for depreciation and amortization 5,906 10,034 13,449
Net gains and losses related to investments held in inventory (3,125) (25,801) 206
Realized gains on investments (54,454) (5,902) (11,234)
Increase in traditional, accident and health and property-casualty benefit
accruals 13,646 16,144 10,972
Policy acquisition costs deferred (18,561) (18,995) (17,591)
Amortization of deferred policy acquisition costs 7,271 10,181 10,080
Provision for deferred income taxes 6,310 15,026 7,792
Other 14,554 (9,352) (3,522)
-----------------------------------------
Net cash provided by continuing operations 88,737 85,859 77,642
Discontinued operations:
Net income -- -- 6,479
Adjustments to reconcile net income to net cash used in discontinued operations -- -- (10,293)
-----------------------------------------
Net cash used in discontinued operations -- -- (3,814)
-----------------------------------------
Net cash provided by operating activities 88,737 85,859 73,828
INVESTING ACTIVITIES
Sale, maturity or repayment of investments:
Fixed maturities--held for investment 33,212 16,529 31,540
Fixed maturities--available for sale 222,093 208,189 348,722
Equity securities 101,937 29,766 43,612
Held in inventory 9,779 8,045 7,106
Mortgage loans on real estate 21,977 18,646 24,036
Investment real estate 4,829 927 885
Policy loans 20,092 19,701 18,263
Other long-term investments 625 3,564 31,608
Short-term investments--net -- 68,799 --
-----------------------------------------
414,544 374,166 505,772
</TABLE>
62
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1996 1995 1994
<S> <C> <C> <C>
-----------------------------------------
Acquisition of investments:
Fixed maturities--held for investment $ (38,472) $ (120,885) $ (166,332)
Fixed maturities--available for sale (374,808) (282,657) (262,905)
Equity securities (28,824) (30,380) (37,965)
Held in inventory (532) (13,618) (6,698)
Mortgage loans on real estate (40,601) (17,110) (12,953)
Investment real estate (4,988) (8,034) (668)
Policy loans (20,506) (20,275) (19,207)
Other long-term investments (3) (14) (13,654)
Short-term investments--net (30,249) -- (63,737)
-----------------------------------------
(538,983) (492,973) (584,119)
Proceeds from disposal, repayments of advances and other distributions from equity
investees 36,265 31,986 44,890
Investments in and advances to equity investees (10,396) (21,463) (39,418)
Net purchases of property and equipment and other (7,062) (7,664) (5,167)
Investing activities of discontinued operations -- -- 29,539
-----------------------------------------
Net cash used in investing activities (105,632) (115,948) (48,503)
FINANCING ACTIVITIES
Receipts from interest sensitive products credited to policyholder account balances 173,776 158,650 170,623
Return of policyholder account balances on interest sensitive products (148,745) (121,863) (137,232)
Proceeds from short-term borrowings -- 8 8,288
Repayments of short-term borrowings -- (6,396) (9,217)
Repayments of long-term debt (1,199) (5,915) (12,119)
Net cash returned to parent as dividend (5,135) (248) --
Financing activities of discontinued operations -- -- (44,000)
-----------------------------------------
Net cash provided by (used in) financing activities 18,697 24,236 (23,657)
-----------------------------------------
Increase (decrease) in cash and cash equivalents 1,802 (5,853) 1,668
Cash and cash equivalents at beginning of year -- 5,853 4,185
-----------------------------------------
Cash and cash equivalents at end of year $ 1,802 $ -- $ 5,853
-----------------------------------------
-----------------------------------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest $ 415 $ 1,086 $ 1,880
Income taxes 17,694 16,833 17,691
</TABLE>
SEE ACCOMPANYING NOTES.
63
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
Farm Bureau Life Insurance Company (the Company), a wholly-owned subsidiary of
FBL Financial Group, Inc., 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 15 midwestern and western
states.
Prior to May 31, 1996, the Company owned 100% of the outstanding common stock of
FBL Financial Services, Inc., a holding company which, through its subsidiaries,
provided investment advisory, marketing and distribution, and leasing services.
On May 31, 1996, the common stock of FBL Financial Services, Inc. was
transferred to FBL Financial Group, Inc. in the form of a dividend. FBL
Financial Services, Inc. had investments of $6.1 million, property and equipment
of $26.1 million, other assets of $3.3 million, long-term debt of $11.3 million
and other liabilities of $8.8 million on the date of the dividend.
Prior to December 31, 1995, the Company owned approximately 99% 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.
Utah Farm Bureau Insurance Company had investments of $26.0 million, reinsurance
recoverable of $26.7 million, other assets of $7.6 million, reserves on
property-casualty policies of $30.0 million and other liabilities of $19.1
million on the date of the dividend.
CONSOLIDATION
The consolidated financial statements include the financial statements of the
Company and its direct and indirect subsidiaries. All significant intercompany
transactions have been eliminated.
INVESTMENTS
FIXED MATURITIES AND EQUITY SECURITIES
Fixed maturity securities, comprised of bonds and redeemable preferred stocks,
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.
Equity securities, comprised of common and non-redeemable preferred stocks, are
reported at market value. The change in unrealized appreciation and depreciation
of equity securities is included directly in stockholders' equity, net of any
related deferred income taxes.
HELD IN INVENTORY
The Company has a venture capital investment company subsidiary and, prior to
the dividend of FBL Financial Services, Inc., had certain subsidiaries involved
as broker/dealers. 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.
Held in inventory assets include securities with carrying values of $7.0 million
and $18.6 million at December 31, 1996 and 1995, 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. (FBL
Ventures), the venture capital investment company subsidiary holding the
securities. 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
64
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
During 1996, the Company ceased making new venture capital investments and began
selling the private equity investments held by FBL Ventures in an attempt to
exit most aspects of the venture capital investment business. During 1996, 20
securities with a fair value of $9.7 million were sold including $6.0 million in
securities to a subsidiary of Farm Bureau Mutual Insurance Company, an
affiliate. At December 31, 1996, FBL Ventures had 13 private equity securities
with a fair value of $13.8 million. It is anticipated that these securities will
be sold to unaffiliated third parties or transferred to the Company during 1997.
The Company records transfers to or from FBL Ventures at fair value at the date
of transfer, re-establishing a new cost basis for the security. Prior to 1996,
transfers typically occurred when a previously private issue went public, or
when a private equity security was purchased or otherwise received by another
member of the consolidated group. During the year ended December 31, 1995, two
securities with a total fair value of $27.6 million were transferred out of FBL
Ventures. During the year ended December 31, 1994, two securities with a fair
value of $1.4 million were transferred to FBL Ventures. A gain (recognized in
net investment income) of $24.6 million was recognized on the 1995 transfers,
although neither transfer had an impact on net income (as unrealized
appreciation had been reported prior to the transfer), and no 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 is 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), 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
recognized as realized gains or losses on investments.
INVESTMENT REAL ESTATE
Investment real estate is reported at cost less allowances for depreciation.
Real estate acquired through 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
reduced or eliminated should the fair value of the property increase. Changes in
this valuation allowance are recognized as realized gains or losses on
investments. At December 31, 1996 and 1995, the Company had no such valuation
allowances.
OTHER INVESTMENTS
Policy loans are reported at unpaid principal. Other long-term investments 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.
Changes in the value of the Company's investment in equity investees
attributable to capital transactions of the investee, such as a public offering
of stock, are recorded directly to stockholders' equity.
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 on investments. Realized gains
and losses on sales are determined on the basis
65
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 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 represents the cost assigned to insurance
contracts when an insurance company is acquired. 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 charged to expense 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, comprised primarily of home office properties, furniture
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. Depreciation expense for the years
ended December 31, 1996, 1995 and 1994 was $5.1 million, $9.3 million and $9.0
million, respectively.
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. 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, 1996, 1995 or 1994.
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 2.5% to 6.0%. The
average rate of assumed investment yields used in estimating gross margins was
8.34% in 1996, 8.14% in 1995 and 8.10% in 1994. Accrued dividends for
participating business are established for anticipated amounts earned to date
for the period through the policy's next
66
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 45% of receipts from
policyholders during the year ended December 31, 1996 and represented 20% of
life insurance inforce at December 31, 1996.
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 5.75% to 7.50% in 1996, 5.50%
to 7.50% in 1995, and 5.50% to 7.25% in 1994.
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 was determined using case-basis evaluations and
statistical analyses and represented estimates of the ultimate cost of all
unpaid losses incurred through December 31 of each year. Salvage and subrogation
recoverables were offset against reserves on property-casualty policies and were
also estimated using statistical analysis.
Property-casualty insurance unearned premiums were 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 underlying
investment risk. The 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
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.
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.
Property-casualty insurance premiums were recognized using a daily or monthly
pro rata method over the terms of the policies.
All insurance-related revenues, benefits, losses and expenses are reported net
of reinsurance ceded.
67
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
REINSURANCE
The Company uses reinsurance to manage certain risks associated with its
insurance operations. These reinsurance arrangements provide for greater
diversification of business, allow management to control exposure to potential
risks arising from large losses and provide additional capacity for growth.
The Company's life insurance operations cede reinsurance to various reinsurers.
The cost of reinsurance is generally amortized over the contract periods of the
reinsurance agreements.
The Company's property-casualty operations assumed and ceded reinsurance,
principally as a participant in a reinsurance pooling agreement with two
affiliates. The Company's contracts were prospective and the cost of insurance
was amortized over the contract periods in proportion to the amount of insurance
protection provided.
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, 1996, 1995 and 1994, revenues
included as other income aggregated $2.7 million, $8.4 million and $8.5 million,
respectively.
RECLASSIFICATION
Certain amounts in the 1995 and 1994 consolidated financial statements have been
reclassified to conform to the 1996 financial statement presentation.
USE OF ESTIMATES
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. For
example, 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.
2. FAIR VALUES OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards (SFAS) 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.
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.
68
<PAGE>
Farm Bureau Life Insurance Company
Notes to Consolidated Financial Statements (continued)
2. FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)
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 AND POLICY LOANS: Fair values are estimated by
discounting expected cash flows using interest rates currently being offered for
similar loans.
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 cash surrender value, the cost the Company would incur to extinguish
the liability. The Company is not required to estimate the fair value of its
liabilities under other contracts.
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.
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.
The following sets forth a comparison of the fair values and carrying values of
the Company's financial instruments subject to the provisions of SFAS No. 107:
<TABLE>
<CAPTION>
DECEMBER 31
------------------------------------------------------------
1996 1995
------------------------------ ----------------------------
CARRYING FAIR CARRYING
VALUE VALUE VALUE FAIR VALUE
------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Fixed maturities:
Held for investment $ 562,283 $ 574,338 $ 556,099 $ 580,379
Available for sale 1,128,587 1,128,587 1,001,302 1,001,302
Equity securities 79,786 79,786 78,173 78,173
Held in inventory 13,781 13,781 21,913 21,913
Mortgage loans on real estate 235,331 245,125 215,690 227,208
Policy loans 88,940 88,940 88,526 88,526
Cash and short-term investments 63,827 63,827 35,358 35,358
Assets held in separate accounts 79,043 79,043 44,789 44,789
LIABILITIES
Future policy benefits $ 702,739 $ 691,261 $ 650,025 $ 644,311
Other policyholders' funds 186,535 186,535 176,811 176,811
Long-term debt 81 90 12,604 12,490
Deposit administration funds 41,630 39,011 33,834 31,294
Liabilities related to separate accounts 79,043 79,043 44,789 44,789
</TABLE>
3. REORGANIZATION AND DISCONTINUED OPERATIONS
In January 1994, the Boards of Directors of the Company and Western Farm Bureau
Life Insurance Company (Western Life) approved an agreement, pursuant to which,
effective January 1, 1994, the acquisition of Western Life was consummated
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 FBL Financial Group, Inc. Under
the agreement, 100% of the common stock of the Company and Western Life were
exchanged for
69
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. REORGANIZATION AND DISCONTINUED OPERATIONS (CONTINUED)
stock in the holding company. In addition, in 1994, the minority interests of
FBL Insurance Company and Rural Security Life Insurance Company (Rural Security
Life) were exchanged for equivalent value in the holding company. Subsequently,
FBL Financial Group, Inc. contributed the minority interests of FBL Insurance
Company and Rural Security Life and, in 1995, these subsidiaries were
liquidated.
The issuance of holding company stock 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 $24.7 million, 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
$4.4 million, which is being amortized over 20 years. Goodwill associated with
Rural Security Life remains attributable to the still existing operations in
Wisconsin which include a license to do business in Wisconsin, an active agency
force, customer lists, a marketing relationship with the Wisconsin Farm Bureau
Federation and an exclusive use of the Farm Bureau trademark in Wisconsin in
connection with the sale of life insurance and annuity products.
On December 23, 1994, the Company sold substantially all operating assets and
certain liabilities of its cable television subsidiary, Vantage Cable
Associates, L.P., to Galaxy Telecom, L.P. for $38.4 million, of which $32.0
million was paid in cash and $6.4 million was represented by a Class D limited
partnership interest in Galaxy Telecom, L.P. The Company recognized a gain on
the sale of approximately $15.4 million, after expenses, closing adjustments and
post-closing adjustments of approximately $1.4 million.
Revenues of the discontinued operations aggregated $10.2 million for the period
from January 1, 1994 through December 22, 1994. Interest expense, $2.9 million
for the period from January 1, 1994 through December 22, 1994, has been
allocated to discontinued operations based on debt that can be identified as
specifically attributed to those operations.
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 and equity securities at December 31, 1996 and 1995:
<TABLE>
<CAPTION>
HELD FOR INVESTMENT
--------------------------------------------------------
GROSS GROSS
UNREALIZED UNREALIZED ESTIMATED
AMORTIZED COST GAINS LOSSES MARKET VALUE
--------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
DECEMBER 31, 1996
Bonds:
United States Government and agencies --
mortgage-backed securities $ 168,409 $ 5,976 $ (550) $ 173,835
Industrial and miscellaneous:
Mortgage and asset-backed securities 388,865 10,601 (4,612) 394,854
Other 5,009 649 (9) 5,649
--------------------------------------------------------
Total fixed maturities $ 562,283 $ 17,226 $ (5,171) $ 574,338
--------------------------------------------------------
--------------------------------------------------------
</TABLE>
70
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. INVESTMENT OPERATIONS (CONTINUED)
<TABLE>
<CAPTION>
AVAILABLE FOR SALE
--------------------------------------------------------
GROSS GROSS
UNREALIZED UNREALIZED ESTIMATED
AMORTIZED COST GAINS LOSSES MARKET VALUE
--------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
DECEMBER 31, 1996
Bonds:
United States Government and agencies:
Mortgage-backed securities $ 62,999 $ 3,362 $ (496) $ 65,865
Other 44,440 237 (281) 44,396
State, municipal and other governments 11,530 383 (53) 11,860
Public utilities 119,619 4,995 (836) 123,778
Industrial and miscellaneous:
Mortgage and asset-backed securities 215,309 4,029 (2,297) 217,041
Other 611,021 32,078 (9,989) 633,110
Redeemable preferred stock 31,261 1,369 (93) 32,537
--------------------------------------------------------
Total fixed maturities $ 1,096,179 $ 46,453 $ (14,045) $ 1,128,587
--------------------------------------------------------
--------------------------------------------------------
Equity securities $ 69,915 $ 28,671 $ (18,800) $ 79,786
--------------------------------------------------------
--------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
HELD FOR INVESTMENT
----------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES MARKET VALUE
----------------------------------------------------
(DOLLARS IN THOUSANDS)
<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 and asset-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
----------------------------------------------------
(DOLLARS IN THOUSANDS)
<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>
71
<PAGE>
Farm Bureau Life Insurance Company
Notes to Consolidated Financial Statements (continued)
4. INVESTMENT OPERATIONS (CONTINUED)
Short-term investments have been excluded from the above schedules as amortized
cost approximates market value for these securities.
The carrying value and estimated market value of the Company's portfolio of
fixed maturity securities at December 31, 1996, 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
----------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Due in one year or less $ -- $ -- $ 33,970 $ 33,901
Due after one year through five years -- -- 134,031 139,295
Due after five years through ten years -- -- 203,794 212,596
Due after ten years 5,009 5,649 414,815 427,352
----------------------------------------------------------
5,009 5,649 786,610 813,144
Mortgage and asset-backed securities 557,274 568,689 278,308 282,906
Redeemable preferred stocks -- -- 31,261 32,537
----------------------------------------------------------
$ 562,283 $ 574,338 $ 1,096,179 $ 1,128,587
----------------------------------------------------------
----------------------------------------------------------
</TABLE>
The unrealized appreciation or depreciation on fixed maturity and equity
securities available for sale is reported as a separate component of
stockholders' equity, reduced by adjustments to deferred policy acquisition
costs, value of insurance in force acquired and unearned revenue reserve that
would have been required as a charge or credit to income had such amounts been
realized, and a provision for deferred income taxes. Net unrealized investment
gains as reported were comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1996 1995
-----------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Unrealized appreciation on fixed maturity and equity securities available for sale $ 42,279 $ 63,525
Adjustments for assumed changes in amortization pattern of:
Deferred policy acquisition costs (2,159) (12,181)
Unearned revenue reserve 383 1,189
Provision for deferred income taxes (14,176) (18,387)
-----------------------
Net unrealized investment gains $ 26,327 $ 34,146
-----------------------
-----------------------
</TABLE>
Amortized cost of securities held in inventory was $8.7 million and $21.6
million at December 31, 1996 and 1995, respectively. Net unrealized appreciation
on securities held in inventory as of December 31, 1996 and 1995, included gross
unrealized gains of $5.4 million and $1.6 million and gross unrealized losses of
$0.3 million and $1.3 million, respectively.
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: Pacific
(28% in 1996 and 25% in 1995), which includes California, Oregon and Washington;
and Mountain (20% in 1996 and 23% in 1995), which includes Arizona, Colorado,
Idaho, New Mexico, Utah and Wyoming. Mortgage loans on real estate have also
been analyzed during the years presented by collateral types with office
buildings (46% in 1996 and 37% in 1995) and retail facilities (34% in 1996 and
36% in 1995), representing the largest holdings.
72
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. INVESTMENT OPERATIONS (CONTINUED)
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,
--------------------------------
1996 1995 1994
--------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Balance at beginning of year $ 600 $ 600 $ 600
Realized losses 2,527 -- --
Uncollectible amounts written off, net of recoveries (2,527) -- --
--------------------------------
Balance at end of year $ 600 $ 600 $ 600
--------------------------------
--------------------------------
</TABLE>
The Company's investment in impaired loans (those loans in which the Company
does not believe it will collect all amounts due according to the contractual
terms of the respective loan agreements) totaled $3.1 million at December 31,
1996 and $3.3 million at December 31, 1995. No valuation allowance was
established for the impaired loans as of December 31, 1996 and 1995.
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 $11.7 million and
$34.0 million at December 31, 1996 and 1995, 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,
--------------------------------------
1996 1995 1994
--------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Fixed maturities:
Held for investment $ 45,744 $ 42,016 $ 31,235
Available for sale 85,722 83,490 79,280
Equity securities 1,345 1,098 1,527
Held in inventory 3,162 25,868 (130)
Mortgage loans on real estate 20,297 19,544 20,417
Investment real estate 4,495 4,191 4,239
Policy loans 5,653 5,567 5,433
Other long-term investments 536 381 2,696
Short-term investments 3,166 2,671 2,496
Other 3,485 5,581 3,905
--------------------------------------
173,605 190,407 151,098
Less investment expenses (7,183) (6,059) (5,950)
--------------------------------------
Net investment income $ 166,422 $ 184,348 $ 145,148
--------------------------------------
--------------------------------------
</TABLE>
Investment income from investments held in inventory is comprised of:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1996 1995 1994
--------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Dividends, interest and other income $ 77 $ 138 $ 205
Net realized gain (loss) from investment transactions (1,811) 25,810 4,026
Change in unrealized appreciation/depreciation of investments 4,896 (80) (4,361)
--------------------------------
$ 3,162 $ 25,868 $ (130)
--------------------------------
--------------------------------
</TABLE>
73
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. INVESTMENT OPERATIONS (CONTINUED)
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 stockholders' equity by $38.9
million, net of offsets aggregating $40.0 million.
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,
--------------------------------------
1996 1995 1994
--------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
REALIZED
Fixed maturities--available for sale $ 2,199 $ 5,526 $ 2,554
Equity securities 56,522 (763) 9,535
Mortgage loans on real estate (2,527) -- --
Investment real estate 619 123 (316)
Other long-term investments (154) (158) (1,773)
Securities and indebtedness of related parties (1,438) 1,182 2,864
Notes receivable and other (767) (8) (1,630)
--------------------------------------
Realized gains on investments $ 54,454 $ 5,902 $ 11,234
--------------------------------------
--------------------------------------
UNREALIZED
Fixed maturities:
Held for investment $ (12,225) $ 50,905 $ (51,071)
Available for sale (25,675) 75,590 (96,413)
Equity securities 4,429 9,209 (12,578)
--------------------------------------
Change in unrealized appreciation/depreciation of investments $ (33,471) $ 135,704 $ (160,062)
--------------------------------------
--------------------------------------
</TABLE>
An analysis of sales, maturities and principal repayments of the Company's fixed
maturities portfolio for the years ended December 31, 1996, 1995, and 1994 is as
follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED REALIZED REALIZED
COST GAINS LOSSES PROCEEDS
-------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1996
Scheduled principal repayments and calls:
Available for sale $ 148,299 $ -- $ -- $ 148,299
Held for investment 33,212 -- -- 33,212
Sales--available for sale 71,095 5,197 (2,498) 73,794
-------------------------------------------------
Total $ 252,606 $ 5,197 $ (2,498) $ 255,305
-------------------------------------------------
-------------------------------------------------
</TABLE>
74
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. INVESTMENT OPERATIONS (CONTINUED)
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED REALIZED REALIZED
COST GAINS LOSSES PROCEEDS
-------------------------------------------------
(DOLLARS IN THOUSANDS)
YEAR ENDED DECEMBER 31, 1995
<S> <C> <C> <C> <C>
Scheduled principal repayments and calls:
Available for sale $ 74,710 $ -- $ -- $ 74,710
Held for investment 16,529 -- -- 16,529
Sales--available for sale 127,738 7,186 (1,445) 133,479
-------------------------------------------------
Total $ 218,977 $ 7,186 $ (1,445) $ 224,718
-------------------------------------------------
-------------------------------------------------
YEAR ENDED DECEMBER 31, 1994
Scheduled principal repayments and calls:
Available for sale $ 130,917 $ 1 $ (51) $ 130,867
Held for investment 31,540 -- -- 31,540
Sales--available for sale 215,251 9,247 (6,643) 217,855
-------------------------------------------------
Total $ 377,708 $ 9,248 $ (6,694) $ 380,262
-------------------------------------------------
-------------------------------------------------
</TABLE>
Realized losses totaling $0.5 million and $0.2 million were incurred during the
years ended December 31, 1996 and 1995, respectively, as a result of writedowns
for other than temporary impairment of fixed maturity securities. No such
writedowns were incurred during 1994.
Income taxes during the years ended December 31, 1996, 1995 and 1994 include a
provision of $19.1 million, $2.1 million and $3.9 million, respectively, for the
tax effect of realized gains.
OTHER
In February 1996, an equity investee of the Company completed an initial public
offering which resulted in an increase of $4.9 million, net of $2.6 million in
taxes, in the Company's share of the investee's stockholders' equity. This
increase was credited directly to additional paid-in capital. As a result of the
public offering, the Company's voting stock interest in the investee declined to
an amount less than 20%. Accordingly, the Company discontinued the use of the
equity method of accounting for this investment and has classified the
investment as equity securities (carrying value $18.0 million at December 31,
1996) in the consolidated balance sheet. At December 31, 1995, the investment
had a carrying value of $4.9 million and was classified as securities and
indebtedness of related parties in the consolidated balance sheet. During 1996,
the Company sold approximately 77% of its holdings in this investment and
realized a gain of $50.4 million.
At December 31, 1996, affidavits of deposits covering bonds with a carrying
value of $1,574.4 million, preferred stocks with a carrying value of $20.0
million, mortgage loans (including those made to related parties) with an unpaid
balance of $262.0 million, real estate with a book value of $25.3 million and
policy loans with an unpaid balance of $88.9 million were on deposit with state
agencies to meet regulatory requirements.
At December 31, 1996, the Company had committed to provide additional funding
for mortgage loans on real estate aggregating $5.3 million. 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, 1996, include: fixed maturities--$3.0
million; mortgage loans on real estate--$3.1 million; and other long-term
investments--$1.6 million.
No investment in any person or its affiliates (other than bonds issued by
agencies of the United States Government) exceeded 10% of stockholders' equity
at December 31, 1996.
75
<PAGE>
Farm Bureau Life Insurance Company
Notes to Consolidated Financial Statements (continued)
5. REINSURANCE AND POLICY PROVISIONS
LIFE INSURANCE OPERATIONS
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 $0.5 million of coverage per
individual life. The Company does not use financial or surplus relief
reinsurance. At December 31, 1996, life insurance in force ceded on a
consolidated basis totaled $594.9 million or approximately 4.9% 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. Insurance premiums and product charges have been
reduced by $3.4 million, $3.3 million and $5.0 million and insurance benefits
have been reduced by $4.0 million, $1.7 million and $3.6 million during the
years ended December 31, 1996, 1995 and 1994, respectively, as a result of
cession agreements. The amount of reinsurance assumed is not significant.
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,
--------------------------------
1996 1995 1994
--------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Unpaid claims liability, net of related
reinsurance, at beginning of year $ 13,899 $ 10,494 $ 16,116
Add:
Provision for claims occurring in the current
year 4,737 5,011 3,723
Increase (decrease) in estimated expense for
claims occurring in the prior years (371) 2,357 804
--------------------------------
Incurred claim expense during the current year 4,366 7,368 4,527
Deduct expense payments for claims occurring
during:
Current year 1,681 2,109 2,585
Prior years 2,772 1,854 7,564
--------------------------------
4,453 3,963 10,149
--------------------------------
Unpaid claims liability, net of related
reinsurance, at end of year 13,812 13,899 10,494
Active life reserve 15,376 14,614 15,248
--------------------------------
Net accident and health reserves 29,188 28,513 25,742
Reinsurance ceded 1,483 934 2,706
--------------------------------
Gross accident and health reserves $ 30,671 $ 29,447 $ 28,448
--------------------------------
--------------------------------
</TABLE>
Reserves for unpaid claims are developed using industry mortality and morbidity
data. One year development on prior year reserves represents Company experience
being more or less favorable than that of the industry. Over time, the Company
expects its experience with respect to disability income business to be
comparable to that of the industry. A certain level of volatility in development
is inherent in these reserves since the underlying block of business is
relatively small.
PROPERTY-CASUALTY OPERATIONS
Utah Insurance is a participant with Farm Bureau Mutual Insurance Company and
South Dakota Farm Bureau Mutual Insurance Company, another affiliate, in a
reinsurance pooling agreement (the Farm Bureau Mutual pool). Under the terms of
the agreement, Utah Insurance and South Dakota Farm Bureau Mutual Insurance
Company cede to Farm
76
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. REINSURANCE AND POLICY PROVISIONS (CONTINUED)
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 and 1994, Utah Insurance's participation in the reinsurance
pool was 8%.
Property-casualty premiums earned and losses and loss adjustment expenses
incurred, reflect the following reinsurance amounts:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
----------------------
1995 1994
----------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
PREMIUMS EARNED
Direct premiums written $ 26,244 $ 26,427
Assumed from non-affiliates 5 8
Ceded to non-affiliates (615) (541)
Assumed from Farm Bureau Mutual pool 18,851 18,339
Ceded to Farm Bureau Mutual pool (25,634) (25,894)
----------------------
Net premiums written 18,851 18,339
Increase in reserve for unearned premiums, net of
reinsurance (150) (582)
Increase in accrued retrospective premiums 8 21
----------------------
Total premiums earned $ 18,709 $ 17,778
----------------------
----------------------
LOSSES AND LOSS ADJUSTMENT EXPENSES INCURRED
Direct losses and loss adjustment expenses paid $ 18,532 $ 18,033
Net ceded to non-affiliates 91 (175)
Assumed from Farm Bureau Mutual pool 13,030 12,933
Ceded to Farm Bureau Mutual pool (18,623) (17,858)
----------------------
Net losses and loss adjustment expenses paid 13,030 12,933
Increase in losses and loss adjustment expense
reserves, net of reinsurance 591 508
----------------------
Total losses and loss adjustment expenses incurred $ 13,621 $ 13,441
----------------------
----------------------
</TABLE>
The difference between premiums on a written and on an earned basis is not
significant.
77
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. REINSURANCE AND POLICY PROVISIONS (CONTINUED)
The activity in the reserves on property-casualty policies, net of reinsurance
and salvage and subrogation recoverables, is summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
----------------------
1995 1994
----------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Reserves on property-casualty policies (gross),
beginning of year $ 28,828 $ 26,291
Less reinsurance recoverables on unpaid losses and
loss adjustment expenses, beginning of year (16,646) (14,616)
----------------------
Reserves for losses and loss adjustment expenses,
net of related reinsurance, beginning of year 12,182 11,675
Add:
Provision for losses and loss adjustment
expenses for claims occurring in the current
year 14,529 14,368
Decrease in estimated losses and loss adjustment
expenses for claims occurring in the prior
years (908) (927)
----------------------
Incurred losses and loss adjustment expenses
during the current year 13,621 13,441
Deduct loss and loss adjustment expense payments
for claims occurring during:
Current year (7,678) (7,917)
Prior years (5,351) (5,017)
----------------------
(13,029) (12,934)
----------------------
Reserve for losses and loss adjustment expenses,
net of related reinsurance, end of year 12,774 12,182
Reinsurance recoverables on unpaid losses and loss
adjustment expenses, end of year 17,210 16,646
Transfer to parent as part of dividend of Utah
Farm Bureau Insurance Company (29,984) --
----------------------
Reserves on property-casualty policies (gross),
end of year $ -- $ 28,828
----------------------
----------------------
</TABLE>
6. 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 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.
78
<PAGE>
Farm Bureau Life Insurance Company
Notes to Consolidated Financial Statements (continued)
6. INCOME TAXES (CONTINUED)
Income tax expenses (credits) are included in the consolidated financial
statements as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1996 1995 1994
---------------------------------
(DOLLARS IN THOUSANDS)
<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 $ 28,400 $ 13,278 $ 16,682
Deferred 5,756 14,013 1,752
---------------------------------
34,156 27,291 18,434
Equity income (loss):
Current 1,674 (212) 240
Deferred 554 1,013 (1,097)
---------------------------------
2,228 801 (857)
Discontinued operations:
Current -- -- (3,649)
Deferred -- -- 7,137
---------------------------------
-- -- 3,488
Taxes provided in consolidated statement of
changes in stockholders' equity:
Cumulative effect of change in method of
accounting for fixed maturity
securities--deferred -- -- 20,954
Change in net unrealized investment
gains/losses--deferred (4,211) 24,435 (29,836)
Adjustment resulting from capital transaction of
equity investee-- deferred 2,617 -- --
---------------------------------
(1,594) 24,435 (8,882)
---------------------------------
$ 34,790 $ 52,527 $ 12,183
---------------------------------
---------------------------------
</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,
----------------------------------
1996 1995 1994
----------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Income from continuing operations before income
taxes, minority interest in earnings of
subsidiaries and equity income (loss) $ 103,682 $ 76,475 $ 48,536
----------------------------------
----------------------------------
Income tax at federal statutory rate (35%) $ 36,289 $ 26,766 $ 16,988
Tax effect (decrease) of:
Tax-exempt interest income (383) (574) (549)
Tax-exempt dividend income (1,246) (798) (603)
Adjustments from IRS examinations -- -- 2,766
State taxes 242 1,337 (112)
Other items (746) 560 (56)
----------------------------------
Income tax expense $ 34,156 $ 27,291 $ 18,434
----------------------------------
----------------------------------
</TABLE>
During 1994, the Company reached partial settlement with the Internal Revenue
Service (IRS) for tax years 1988 through 1990 and the IRS is in the process of
conducting examinations for 1991 through 1994. During the year ended December
31, 1994, the Company paid $2.8 million for settlement of certain items arising
from the examination of prior years. Management believes that amounts provided
in the income tax provision for IRS examinations are adequate to settle any
adjustments raised by the IRS.
79
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. INCOME TAXES (CONTINUED)
The tax effect of temporary differences giving rise to the Company's deferred
income tax assets and liabilities at December 31, 1996 and 1995, is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1996 1995
-----------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Deferred income tax liabilities:
Fixed maturity and equity securities $ 17,265 $ 22,700
Deferred policy acquisition costs 44,307 35,236
Deferred investment gains 10,551 9,891
Other 13,437 12,413
-----------------------
85,560 80,240
Deferred income tax assets:
Future policy benefits (22,304) (19,541)
Accrued dividends (2,997) (3,010)
Accrued pension costs (10,082) (9,144)
Other (6,367) (4,822)
-----------------------
(41,750) (36,517)
-----------------------
Deferred income tax liability $ 43,810 $ 43,723
-----------------------
-----------------------
</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, 1996 was $11.1 million. 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
stockholders in excess of $374.8 million, such excess would be subject to
federal income taxes at rates then effective. Deferred income taxes of $3.9
million 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 income 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.
7. CREDIT ARRANGEMENTS
SHORT-TERM DEBT
As an investor in the Federal Home Loan Bank (FHLB), the Company has the right
to borrow up to $48.2 million from the FHLB as of December 31, 1996. As of
December 31, 1996, the Company had no outstanding debt under this credit
arrangement.
LONG-TERM DEBT
Long-term debt consists of:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1996 1995
----------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Lease-backed notes payable, secured by rentals to
be received under certain operating leases from
members of consolidated group and other
affiliates, 4.89%, due December 1996 $ -- $ 12,516
Note payable to Rural Mutual Insurance Company, an
affiliate, 10%, due through December 2000 81 88
----------------------
$ 81 $ 12,604
----------------------
----------------------
</TABLE>
80
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. 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 net periodic pension cost
of 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 $5.9 million, $7.9 million and $6.2 million for the
years ended December 31, 1996, 1995 and 1994, respectively.
Prior to January 1, 1996, the Company provided benefits to agents of the Company
and certain of its affiliates through the Agents' Career Incentive Plan. Company
contributions to the plan were based upon the individual agent's earned
commissions and varied 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 and 1994 were $1.4 million and
$1.6 million, respectively. During 1996, in conjunction with a restructuring of
the agents' compensation program, contributions to this plan were discontinued.
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.
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. Postretirement benefit
expense is allocated in a manner consistent with pension expense discussed
above. Postretirement pension expense aggregated $0.1 million for the years
ended December 31, 1996, 1995 and 1994.
9. STOCKHOLDERS' EQUITY OF SUBSIDIARIES
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 SUBSIDIARY DIVIDENDS
The ability of the Company 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 1997, the Company can pay dividends to the parent company of
approximately $34.9 million, without prior approval of statutory authorities.
Also, the amount ($210.4 million at December 31, 1996) 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)
deferred income taxes are provided for the difference between the financial
statement and income tax bases of assets and liabilities; (f) 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; (g) declines in the estimated
realizable value of investments are charged
81
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. STOCKHOLDERS' EQUITY OF SUBSIDIARIES (CONTINUED)
to the statement of income when such declines 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; (h) agents' balances and certain other assets
designated as "non-admitted assets" for statutory purposes are reported as
assets rather than being charged to surplus; (i) 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; (j) 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; (k) 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; (l) the financial statements of
subsidiaries are consolidated with those of the Company; and (m) 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.
Total statutory capital and surplus of the Company was $280.6 million at
December 31, 1996 and $231.6 million at December 31, 1995. Net income (loss) for
the Company determined in accordance with statutory accounting practices was
$75.0 million in 1996, $47.4 million in 1995 and $(11.0) million in 1994.
The Company's insurance subsidiaries reported the following statutory amounts to
regulatory agencies, after appropriate eliminations of intercompany accounts:
<TABLE>
<CAPTION>
CAPITAL AND NET INCOME (LOSS)
SURPLUS YEAR ENDED DECEMBER
DECEMBER 31, 31,
-------------- ----------------------
1996 1995 1996 1995 1994
--------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Life insurance subsidiaries $3,352 $3,200 $ 151 $ 92 $(2,827)
Property-casualty insurance subsidiary -- -- -- 1,454 799
--------------------------------------
Total $3,352 $3,200 $ 151 $1,546 $(2,028)
--------------------------------------
--------------------------------------
</TABLE>
The National Association of Insurance Commissioners currently is in the process
of codifying statutory accounting practices, the result of which is expected to
constitute the only source of "prescribed" statutory accounting practices. That
project, which is expected to be completed in the near future, will likely
change, to some extent, statutory accounting practices. The codification may
result in changes to the accounting practices that the Company and its insurance
subsidiaries use to prepare their statutory-basis financial statements.
10. 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, prior to January 1, 1996, the Company participated in a management
agreement with Farm Bureau Management Corporation, a wholly-owned subsidiary of
the Iowa Farm Bureau Federation. Under this agreement, Farm Bureau Management
Corporation provided general business, administration and management services to
the Company. During 1996, the Company's parent assumed responsibility for
providing a majority of these services for itself as well as Farm Bureau
Management Corporation and other affiliates. During the years ended December 31,
1996, 1995 and 1994, the Company incurred expenses under these contracts of $2.4
million, $3.7 million and $3.1 million, respectively.
The Company has equipment and auto lease agreements with FBL Leasing Services,
Inc., a wholly-owned subsidiary of FBL Financial Services, Inc. The Company
incurred expenses totaling $0.7 million during the seven month period ended
December 31, 1996 (period in 1996 subsequent to the dividend of FBL Financial
Services, Inc. to FBL Financial Group, Inc.) under these agreements.
82
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. MANAGEMENT AND SERVICES AGREEMENTS (CONTINUED)
FBL Investment Advisory Services, Inc., a wholly-owned subsidiary of FBL
Financial Services, Inc., provides investment advisory services to the Company.
The related fees are based on the level of assets under management plus certain
out-of-pocket expenses. The Company incurred expenses totaling $1.6 million
during the seven month period ended December 31, 1996 relating to these
services.
Effective January 1, 1996, the Company entered into marketing agreements with
the property-casualty companies operating within its marketing territory,
including Farm Bureau Mutual Insurance Company and other affiliates. Under the
marketing agreements, the property-casualty companies assumed responsibility for
development and management of the Company's agency force for a fee equal to a
percentage of commissions on first year life insurance premiums and annuity
deposits. The Company paid $2.8 million to the property-casualty companies under
these arrangements during the year ended December 31, 1996.
11. COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Company may be involved in litigation
where amounts are alleged that are substantially in excess of contractual policy
benefits or certain other agreements. At December 31, 1996, management is not
aware of any claims for which a material loss is reasonably possible.
Assessments are, from time to time, levied on the insurance subsidiaries of the
Company by guaranty associations in most states in which the subsidiaries are
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. Because the Company is not able to
reasonably estimate the potential amounts of future assessments, the Company
recognizes its obligation for guaranty fund assessments when it receives notice
that an amount is payable to a guaranty fund. Expenses incurred for guaranty
fund assessments were $0.4 million, $0.7 million and $1.0 million during the
years ended December 31, 1996, 1995 and 1994, respectively.
The Company has extended a line of credit in the amount of $15.0 million to FBL
Leasing Services, Inc. Interest on this agreement is based on the prime rate of
a national bank and payable monthly. No amounts were outstanding at December 31,
1996.
In connection with an investment in a limited real estate partnership in 1996,
the Company has agreed to pay any cash flow deficiencies of a medium-sized
shopping center owned by the partnership through January 1, 2001. At December
31, 1996, the Company assessed the probability and amount of future cash flows
from the property and determined that no accrual was necessary. During 1996, the
limited partnership obtained a $5.4 million mortgage loan, secured by the
shopping center, from Farm Bureau Mutual Insurance Company.
The Company has guaranteed the payment of principal and interest on notes
totaling $24.5 million payable by FBL Leasing Services, Inc. to a bank. The
notes are due August 1999 and are backed by lease agreements primarily with
affiliates. The Company believes no losses will be recognized in connection with
this guarantee due to the value of the underlying collateral.
83
<PAGE>
- --------------------------------------------------------------------------------
APPENDIX A
- --------------------------------------------------------------------------------
ILLUSTRATIONS OF
DEATH BENEFITS AND
CASH VALUES
The following tables illustrate how the death benefits
and Cash Values of a Policy may 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 0.65% 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 0.65%, will vary from year to year,
and will vary with the Subaccount selected. Nonetheless
the Company expects the actual expenses to average 0.65%
over the six portfolios. This is because the Adviser has
agreed to reimburse any Portfolio to the extent that
annual operating expenses, including the investment
advisory fee, exceed 0.65%. There can be no assurance
that the Adviser will continue to limit expenses beyond
December 31, 1997. Absent the agreement to limit
expenses, actual fees and expenses of the Fund would be
more than 0.65%. Absent the agreement to limit expense,
actual expenses for 1996 would have averaged 0.70%. 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 -1.55%, 2.45%, 6.45% and
10.45%, 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
NON-TOBACCO 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....................... 684.50 173 100,173 189 100,189 206 100,206
3....................... 1,052.62 313 100,313 345 100,345 379 100,379
4....................... 1,439.15 448 100,448 502 100,502 561 100,561
5....................... 1,845.01 578 100,578 660 100,660 751 100,751
6....................... 2,271.16 702 100,702 817 100,817 949 100,949
7....................... 2,718.62 821 100,821 976 100,976 1,157 101,157
8....................... 3,188.45 935 100,935 1,134 101,134 1,374 101,374
9....................... 3,681.77 1,042 101,042 1,292 101,292 1,601 101,601
10....................... 4,199.76 1,141 101,141 1,446 101,446 1,835 101,835
15....................... 7,205.08 1,485 101,485 2,142 102,142 3,108 103,108
20....................... 11,040.72 1,441 101,441 2,528 102,528 4,409 104,409
25....................... 15,936.08 925 100,925 2,441 102,441 5,612 105,612
30....................... 22,183.93 * * 1,568 101,568 6,405 106,405
35....................... 30,157.95 * * * * 6,235 106,235
Age 65....................... 40,335.04 * * * * 3,345 103,345
<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....................... 415 100,415
4....................... 624 100,624
5....................... 852 100,852
6....................... 1,099 101,099
7....................... 1,369 101,369
8....................... 1,663 101,663
9....................... 1,983 101,983
10....................... 2,329 102,329
15....................... 4,530 104,530
20....................... 7,666 107,666
25....................... 12,186 112,186
30....................... 18,683 118,683
35....................... 27,979 127,979
Age 65....................... 44,462 144,462
</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 -1.55%, 2.45%, 6.45% AND 10.45%, 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
NON-TOBACCO 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....................... 1,110.69 355 100,355 363 100,363 391 100,391
3....................... 1,708.02 602 100,602 658 100,658 718 100,718
4....................... 2,335.23 852 100,852 949 100,949 1,053 101,053
5....................... 2,993.79 1,085 101,085 1,232 101,232 1,396 101,396
6....................... 3,685.28 1,300 101,300 1,508 101,508 1,745 101,745
7....................... 4,411.34 1,493 101,493 1,772 101,772 2,098 102,098
8....................... 5,173.71 1,665 101,665 2,024 102,024 2,455 102,455
9....................... 5,974.19 1,817 101,817 2,264 102,264 2,817 102,817
10....................... 6,814.70 1,949 101,949 2,492 102,492 3,184 103,184
15....................... 11,691.27 2,274 102,274 3,391 103,391 5,052 105,052
20....................... 17,915.13 1,869 101,869 3,630 103,630 6,754 106,754
25....................... 25,858.54 464 100,464 2,763 102,763 7,827 107,827
30....................... 35,996.57 * * 132 100,132 7,487 107,487
35....................... 48,935.54 * * * * 3,383 103,383
Age 65....................... 35,996.57 * * * * 7,046 107,046
<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....................... 781 100,781
4....................... 1,166 101,166
5....................... 1,577 101,577
6....................... 2,015 102,015
7....................... 2,480 102,480
8....................... 2,974 102,974
9....................... 3,502 103,502
10....................... 4,065 104,065
15....................... 7,520 107,520
20....................... 12,266 112,266
25....................... 18,684 118,684
30....................... 27,259 127,259
35....................... 37,358 137,358
Age 65....................... 29,173 129,173
</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 -1.55%, 2.45%, 6.45% AND 10.45%, 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
NON-TOBACCO PREMIUM CLASS
<TABLE>
<CAPTION>
0% ASSUMED 4% ASSUMED 8% ASSUMED
HYPOTHETICAL HYPOTHETICAL 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 $ 156 $ 100,156 $ 175 $ 100,175 $ 195 $ 100,195
2...................... 1,984.61 647 100,647 699 100,699 754 100,754
3...................... 3,051.94 1,108 101,108 1,214 101,214 1,326 101,326
4...................... 4,172.63 1,539 101,539 1,717 101,717 1,911 101,911
5...................... 5,349.36 1,938 101,938 2,208 102,208 2,508 102,508
6...................... 6,584.93 2,302 102,302 2,681 102,681 3,113 103,113
7...................... 7,882.28 2,630 102,630 3,134 103,134 3,725 103,725
8...................... 9,244.49 2,919 102,919 3,563 103,563 4,341 104,341
9...................... 10,674.82 3,162 103,162 3,961 103,961 4,954 104,954
10...................... 12,176.66 3,360 103,360 4,326 104,326 5,563 105,563
15...................... 20,890.21 3,644 103,644 5,580 105,580 8,485 108,485
20...................... 32,011.15 2,397 102,397 5,343 105,343 10,673 110,673
25...................... 46,204.60 * * 1,762 101,762 10,023 110,023
30...................... 64,319.45 * * * * 3,292 103,292
35...................... 87,439.09 * * * * * *
Age 65...................... 32,011.15 1,828 101,828 4,946 104,946 10,839 110,839
<CAPTION>
12% ASSUMED
HYPOTHETICAL
GROSS RETURN
GUARANTEED COST
OF INSURANCE
END OF ---------------------------
POLICY CASH DEATH
YEAR VALUE BENEFIT
----------- ------------ -------------
<S> <C> <C>
1...................... $ 214 $ 100,214
2...................... 810 100,810
3...................... 1,445 101,445
4...................... 2,121 102,121
5...................... 2,842 102,842
6...................... 3,607 103,607
7...................... 4,419 104,419
8...................... 5,280 105,280
9...................... 6,187 106,187
10...................... 7,145 107,145
15...................... 12,835 112,835
20...................... 20,215 120,215
25...................... 28,348 128,348
30...................... 35,329 135,329
35...................... 33,376 133,376
Age 65...................... 21,810 121,810
</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 -1.55%, 2.45%, 6.45% AND 10.45%, 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
NON-TOBACCO 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 $ 316 $ 100,316 $ 350 $ 100,350 $ 384 $ 100,384
2...................... 3,370.82 1,058 101,058 1,149 101,149 1,242 101,242
3...................... 5,183.66 1,743 101,743 1,920 101,920 2,108 102,108
4...................... 7,087.14 2,373 102,373 2,666 102,666 2,985 102,985
5...................... 9,085.80 2,948 102,948 3,383 103,383 3,870 103,870
6...................... 11,184.39 3,459 103,459 4,062 104,062 4,754 104,754
7...................... 13,387.90 3,898 103,898 4,692 104,692 5,629 105,629
8...................... 15,701.60 4,249 104,249 5,254 105,254 6,476 106,476
9...................... 18,130.98 4,492 104,492 5,726 105,726 7,270 107,270
10...................... 20,681.83 4,611 104,611 6,085 106,085 7,990 107,990
15...................... 35,481.63 3,136 103,136 5,822 105,822 9,983 109,983
20...................... 54,370.35 * * 182 100,182 6,863 106,863
25...................... 78,477.67 * * * * * *
30...................... 109,245.40 * * * * * *
35...................... 148,513.68 * * * * * *
Age 65...................... 20,681.83 4,598 104,598 6,321 106,321 8,621 108,621
<CAPTION>
12% ASSUMED HYPOTHETICAL
GROSS RETURN
GUARANTEED COST
OF INSURANCE
END OF ---------------------------
POLICY CASH DEATH
YEAR VALUE BENEFIT
----------- ------------ -------------
<S> <C> <C>
1...................... $ 419 $ 100,419
2...................... 1,339 101,339
3...................... 2,308 102,308
4...................... 3,331 103,331
5...................... 4,412 104,412
6...................... 5,548 105,548
7...................... 6,734 106,734
8...................... 7,958 107,958
9...................... 9,201 109,201
10...................... 10,445 110,445
15...................... 16,364 116,364
20...................... 19,705 119,705
25...................... 11,769 111,769
30...................... * *
35...................... * *
Age 65...................... 11,680 111,680
</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 -1.55%, 2.45%, 6.45% AND 10.45%, 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
NON-TOBACCO 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....................... 684.50 174 100,000 190 100,000 206 100,000
3....................... 1,052.62 314 100,000 346 100,000 380 100,000
4....................... 1,439.15 450 100,000 504 100,000 562 100,000
5....................... 1,845.01 581 100,000 662 100,000 754 100,000
6....................... 2,271.16 705 100,000 821 100,000 953 100,000
7....................... 2,718.62 826 100,000 981 100,000 1,163 100,000
8....................... 3,188.45 940 100,000 1,141 100,000 1,382 100,000
9....................... 3,681.77 1,049 100,000 1,301 100,000 1,612 100,000
10........................ 4,199.76 1,150 100,000 1,458 100,000 1,850 100,000
15........................ 7,205.08 1,506 100,000 2,173 100,000 3,155 100,000
20........................ 11,040.72 1,479 100,000 2,596 100,000 4,530 100,000
25........................ 15,936.08 984 100,000 2,569 100,000 5,884 100,000
30........................ 22,183.93 * * 1,774 100,000 6,966 100,000
35........................ 30,157.95 * * * * 7,242 100,000
Age 65....................... 40,335.04 * * * * 5,432 100,000
<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....................... 416 100,000
4....................... 626 100,000
5....................... 855 100,000
6....................... 1,104 100,000
7....................... 1,376 100,000
8....................... 1,673 100,000
9....................... 1,998 100,000
10........................ 2,349 100,000
15........................ 4,601 100,000
20........................ 7,880 100,000
25........................ 12,762 100,000
30........................ 20,139 100,000
35........................ 31,516 100,000
Age 65....................... 54,489 100,000
</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 -1.55%, 2.45%, 6.45% AND 10.45%, 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
NON-TOBACCO 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....................... 1,110.69 336 100,000 364 100,000 393 100,000
3....................... 1,708.02 604 100,000 661 100,000 721 100,000
4....................... 2,335.23 856 100,000 953 100,000 1,058 100,000
5....................... 2,993.79 1,091 100,000 1,240 100,000 1,404 100,000
6....................... 3,685.28 1,309 100,000 1,518 100,000 1,758 100,000
7....................... 4,411.34 1,506 100,000 1,787 100,000 2,117 100,000
8....................... 5,173.71 1,682 100,000 2,045 100,000 2,482 100,000
9....................... 5,974.19 1,839 100,000 2,292 100,000 2,853 100,000
10........................ 6,814.70 1,977 100,000 2,528 100,000 3,232 100,000
15........................ 11,691.27 2,341 100,000 3,492 100,000 5,206 100,000
20........................ 17,915.13 1,989 100,000 3,848 100,000 7,150 100,000
25........................ 25,858.54 630 100,000 3,153 100,000 8,706 100,000
30........................ 35,996.57 * * 700 100,000 9,245 100,000
35........................ 48,935.54 * * * * 6,603 100,000
Age 65....................... 35,996.57 * * * * 9,049 100,000
<CAPTION>
12% ASSUMED HYPOTHETICAL
GROSS RETURN
GUARANTEED COST
OF INSURANCE
END OF ---------------------------
POLICY CASH DEATH
YEAR VALUE BENEFIT
----------- ------------ -------------
<S> <C> <C>
1....................... $ 84 $ 100,000
2....................... 422 100,000
3....................... 784 100,000
4....................... 1,172 100,000
5....................... 1,587 100,000
6....................... 2,030 100,000
7....................... 2,503 100,000
8....................... 3,007 100,000
9....................... 3,547 100,000
10........................ 4,128 100,000
15........................ 7,755 100,000
20........................ 12,978 100,000
25........................ 20,606 100,000
30........................ 32,117 100,000
35........................ 49,572 100,000
Age 65....................... 35,020 100,000
</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 -1.55%, 2.45%, 6.45% AND 10.45%, 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
NON-TOBACCO PREMIUM CLASS
<TABLE>
<CAPTION>
0% ASSUMED 4% ASSUMED 8% ASSUMED
HYPOTHETICAL HYPOTHETICAL 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...................... 1,984.61 651 100,000 704 100,000 759 100,000
3...................... 3,051.94 1,117 100,000 1,224 100,000 1,337 100,000
4...................... 4,172.63 1,554 100,000 1,734 100,000 1,930 100,000
5...................... 5,349.36 1,961 100,000 2,235 100,000 2,539 100,000
6...................... 6,584.93 2,336 100,000 2,721 100,000 3,160 100,000
7...................... 7,882.28 2,677 100,000 3,190 100,000 3,794 100,000
8...................... 9,244.49 2,980 100,000 3,640 100,000 4,437 100,000
9...................... 10,674.82 3,241 100,000 4,062 100,000 5,084 100,000
10....................... 12,176.66 3,459 100,000 4,457 100,000 5,736 100,000
15....................... 20,890.21 3,880 100,000 5,943 100,000 9,044 100,000
20....................... 32,011.15 2,809 100,000 6,112 100,000 12,096 100,000
25....................... 46,204.60 * * 3,097 100,000 13,248 100,000
30....................... 64,319.45 * * * * 9,635 100,000
35....................... 87,439.09 * * * * * *
Age 65...................... 32,011.15 2,274 100,000 5,823 100,000 12,532 100,000
<CAPTION>
12% ASSUMED
HYPOTHETICAL
GROSS RETURN
GUARANTEED COST
OF INSURANCE
END OF ---------------------------
POLICY CASH DEATH
YEAR VALUE BENEFIT
----------- ------------ -------------
<S> <C> <C>
1...................... $ 216 $ 100,000
2...................... 815 100,000
3...................... 1,457 100,000
4...................... 2,142 100,000
5...................... 2,877 100,000
6...................... 3,662 100,000
7...................... 4,502 100,000
8...................... 5,399 100,000
9...................... 6,353 100,000
10....................... 7,372 100,000
15....................... 13,692 100,000
20....................... 22,818 100,000
25....................... 35,691 100,000
30....................... 55,026 100,000
35....................... 86,927 100,000
Age 65...................... 25,032 100,000
</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 -1.55%, 2.45%, 6.45% AND 10.45%, 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
NON-TOBACCO PREMIUM CLASS
<TABLE>
<CAPTION>
0% ASSUMED 4% ASSUMED 8% ASSUMED
HYPOTHETICAL HYPOTHETICAL 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 $ 322 $ 100,000 $ 356 $ 100,000 $ 390 $ 100,000
2.................... 3,370.82 1,073 100,000 1,165 100,000 1,260 100,000
3.................... 5,183.66 1,773 100,000 1,953 100,000 2,145 100,000
4.................... 7,087.14 2,424 100,000 2,724 100,000 3,050 100,000
5.................... 9,085.80 3,026 100,000 3,473 100,000 3,974 100,000
6.................... 11,184.39 3,570 100,000 4,194 100,000 4,911 100,000
7.................... 13,387.90 4,048 100,000 4,876 100,000 5,854 100,000
8.................... 15,701.60 4,447 100,000 5,503 100,000 6,788 100,000
9.................... 18,130.98 4,746 100,000 6,054 100,000 7,694 100,000
10..................... 20,681.83 4,929 100,000 6,509 100,000 8,554 100,000
15..................... 35,481.63 3,860 100,000 6,982 100,000 11,822 100,000
20..................... 54,370.35 * * 2,335 100,000 11,374 100,000
25..................... 78,477.67 * * * * * *
30..................... 109,245.40 * * * * * *
35..................... 148,513.68 * * * * * *
Age 65.................... 20,681.83 4,988 100,000 6,858 100,000 9,357 100,000
<CAPTION>
12% ASSUMED
HYPOTHETICAL
GROSS RETURN
GUARANTEED COST
OF INSURANCE
END OF ---------------------------
POLICY CASH DEATH
YEAR VALUE BENEFIT
----------- ------------ -------------
<S> <C> <C>
1.................... $ 425 $ 100,000
2.................... 1,358 100,000
3.................... 2,348 100,000
4.................... 3,404 100,000
5.................... 4,532 100,000
6.................... 5,734 100,000
7.................... 7,008 100,000
8.................... 8,349 100,000
9.................... 9,746 100,000
10..................... 11,193 100,000
15..................... 19,253 100,000
20..................... 28,628 100,000
25..................... 36,655 100,000
30..................... 37,834 100,000
35..................... 5,656 100,000
Age 65.................... 12,687 100,000
</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 -1.55%, 2.45%, 6.45% AND 10.45%, 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
NON-TOBACCO PREMIUM CLASS
<TABLE>
<CAPTION>
0% ASSUMED 4% ASSUMED 8% ASSUMED
HYPOTHETICAL HYPOTHETICAL 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 $ 93 $ 100,093 $ 103 $ 100,103
2...................... 914.81 290 100,290 315 100,315 340 100,340
3...................... 1,406.80 495 100,495 543 100,543 595 100,595
4...................... 1,923.39 698 100,698 780 100,780 869 100,869
5...................... 2,465.81 899 100,899 1,022 101,022 1,160 101,160
6...................... 3,035.35 1,096 101,096 1,270 101,270 1,469 101,469
7...................... 3,633.37 1,287 101,287 1,521 101,521 1,796 101,796
8...................... 4,261.29 1,472 101,472 1,776 101,776 2,141 102,141
9...................... 4,920.60 1,650 101,650 2,031 102,031 2,503 102,503
10...................... 5,612.88 1,819 101,819 2,287 102,287 2,882 102,882
15...................... 9,629.43 2,485 102,485 3,513 103,513 5,017 105,017
20...................... 14,755.68 2,737 102,737 4,497 104,497 7,494 107,494
25...................... 21,298.22 2,369 102,369 4,948 104,948 10,158 110,158
30...................... 29,648.34 1,056 101,056 4,389 104,389 12,628 112,628
35...................... 40,305.44 * * 1,837 101,837 13,895 113,895
Age 65...................... 53,906.90 * * * * 11,081 111,081
<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...................... 650 100,650
4...................... 965 100,965
5...................... 1,313 101,313
6...................... 1,697 101,697
7...................... 2,118 102,118
8...................... 2,580 102,580
9...................... 3,085 103,085
10...................... 3,637 103,637
15...................... 7,219 107,219
20...................... 12,623 112,623
25...................... 20,713 120,713
30...................... 32,728 132,728
35...................... 50,163 150,163
Age 65...................... 80,963 180,963
</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 -1.55%, 2.45%, 6.45% AND 10.45%, 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
NON-TOBACCO PREMIUM CLASS
<TABLE>
<CAPTION>
0% ASSUMED 4% ASSUMED 8% ASSUMED
HYPOTHETICAL HYPOTHETICAL 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 $ 185 $ 100,185 $ 201 $ 100,201
2...................... 1,435.72 568 100,568 610 100,610 654 100,654
3...................... 2,207.85 948 100,948 1,034 101,034 1,126 101,126
4...................... 3,018.60 1,311 101,311 1,457 101,457 1,615 101,615
5...................... 3,869.88 1,654 101,654 1,875 101,875 2,122 102,122
6...................... 4,763.72 1,977 101,977 2,289 102,289 2,645 102,645
7...................... 5,702.26 2,277 102,277 2,695 102,695 3,184 103,184
8...................... 6,687.72 2,555 102,555 3,092 103,092 3,740 103,740
9...................... 7,722.45 2,814 102,814 3,484 103,484 4,315 104,315
10...................... 8,808.93 3,042 103,042 3,859 103,859 4,900 104,900
15...................... 15,112.55 3,726 103,726 5,438 105,438 7,974 107,974
20...................... 23,157.74 3,384 103,384 6,153 106,153 11,006 111,006
25...................... 33,425.67 1,319 101,319 5,039 105,039 13,041 113,041
30...................... 46,530.45 * * 579 100,579 12,312 112,312
35...................... 63,255.83 * * * * 5,227 105,227
Age 65...................... 46,530.45 * * * * 11,529 111,529
<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...................... 699 100,699
3...................... 1,222 101,222
4...................... 1,786 101,786
5...................... 2,395 102,395
6...................... 3,051 103,051
7...................... 3,758 103,758
8...................... 4,519 104,519
9...................... 5,343 105,343
10...................... 6,226 106,226
15...................... 11,728 111,728
20...................... 19,490 119,490
25...................... 29,936 129,936
30...................... 43,259 143,259
35...................... 58,473 158,473
Age 65...................... 46,181 146,181
</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 -1.55%, 2.45%, 6.45% AND 10.45%, 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
NON-TOBACCO PREMIUM CLASS
<TABLE>
<CAPTION>
0% ASSUMED 4% ASSUMED 8% ASSUMED
HYPOTHETICAL HYPOTHETICAL 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 $ 333 $ 100,333 $ 360 $ 100,360 $ 387 $ 100,387
2.................... 2,477.53 991 100,991 1,067 101,067 1,144 101,144
3.................... 3,809.95 1,611 101,611 1,761 101,761 1,920 101,920
4.................... 5,209.00 2,190 102,190 2,441 102,441 2,714 102,714
5.................... 6,678.00 2,725 102,725 3,103 103,103 3,524 103,524
6.................... 8,220.45 3,216 103,216 3,743 103,743 4,347 104,347
7.................... 9,840.02 3,655 103,655 4,355 104,355 5,178 105,178
8.................... 11,540.58 4,038 104,038 4,930 104,930 6,009 106,009
9.................... 13,326.15 4,358 104,358 5,461 105,461 6,836 106,836
10.................... 15,201.01 4,607 104,607 5,939 105,939 7,648 107,648
15.................... 26,078.77 4,598 104,598 7,218 107,218 11,176 111,176
20.................... 39,961.86 1,671 101,671 5,461 105,461 12,489 112,489
25.................... 57,680.59 * * * * 8,194 108,194
30.................... 80,294.67 * * * * * *
35.................... 109,156.61 * * * * * *
Age 65.................... 39,961.86 554 100,554 4,500 104,500 12,196 112,196
<CAPTION>
12% ASSUMED
HYPOTHETICAL
GROSS RETURN
GUARANTEED COST
OF INSURANCE
END OF ---------------------------
POLICY CASH DEATH
YEAR VALUE BENEFIT
----------- ------------ -------------
<S> <C> <C>
1.................... $ 415 $ 100,415
2.................... 1,225 101,225
3.................... 2,089 102,089
4.................... 3,010 103,010
5.................... 3,992 103,992
6.................... 5,036 105,036
7.................... 6,144 106,144
8.................... 7,314 107,314
9.................... 8,545 108,545
10.................... 9,836 109,836
15.................... 17,130 117,130
20.................... 25,272 125,272
25.................... 31,969 131,969
30.................... 32,023 132,023
35.................... 13,655 113,655
Age 65.................... 26,811 126,811
</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 -1.55%, 2.45%, 6.45% AND 10.45%, 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
NON-TOBACCO PREMIUM CLASS
<TABLE>
<CAPTION>
0% ASSUMED 4% ASSUMED 8% ASSUMED
HYPOTHETICAL HYPOTHETICAL 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 $ 714 $ 100,714 $ 767 $ 100,767 $ 821 $ 100,821
2.................... 4,698.91 1,813 101,813 1,958 101,958 2,107 102,107
3.................... 7,226.00 2,809 102,809 3,090 103,090 3,388 103,388
4.................... 9,879.45 3,698 103,698 4,157 104,157 4,655 104,655
5.................... 12,665.58 4,470 104,470 5,143 105,143 5,896 105,896
6.................... 15,591.00 5,114 105,114 6,035 106,035 7,096 107,096
7.................... 18,662.70 5,619 105,619 6,817 106,817 8,239 108,239
8.................... 21,887.99 5,969 105,969 7,469 107,469 9,303 109,303
9.................... 25,274.54 6,147 106,147 7,966 107,966 10,260 110,260
10.................... 28,830.42 6,132 106,132 8,281 108,281 11,082 111,082
15.................... 49,461.30 2,627 102,627 6,281 106,281 12,083 112,083
20.................... 75,792.13 * * * * 3,451 103,451
25.................... 109,397.67 * * * * * *
30.................... 152,287.80 * * * * * *
35.................... 207,027.69 * * * * * *
Age 65.................... 28,830.42 5,891 105,891 8,373 108,373 11,720 111,720
<CAPTION>
12% ASSUMED
HYPOTHETICAL
GROSS RETURN
GUARANTEED COST
OF INSURANCE
END OF ---------------------------
POLICY CASH DEATH
YEAR VALUE BENEFIT
----------- ------------ -------------
<S> <C> <C>
1.................... $ 874 $ 100,874
2.................... 2,262 102,262
3.................... 3,703 103,703
4.................... 5,198 105,198
5.................... 6,738 106,738
6.................... 8,315 108,315
7.................... 9,920 109,920
8.................... 11,537 111,537
9.................... 13,145 113,145
10.................... 14,719 114,719
15.................... 21,154 121,154
20.................... 20,775 120,775
25.................... 1,697 101,697
30.................... * *
35.................... * *
Age 65.................... 16,216 116,216
</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 -1.55%, 2.45%, 6.45% AND 10.45%, 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
NON-TOBACCO PREMIUM CLASS
<TABLE>
<CAPTION>
0% ASSUMED 4% ASSUMED 8% ASSUMED
HYPOTHETICAL HYPOTHETICAL 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.................... 914.81 291 100,000 316 100,000 341 100,000
3.................... 1,406.80 497 100,000 545 100,000 597 100,000
4.................... 1,923.39 701 100,000 783 100,000 872 100,000
5.................... 2,465.81 903 100,000 1,027 100,000 1,165 100,000
6.................... 3,035.35 1,102 100,000 1,277 100,000 1,478 100,000
7.................... 3,633.37 1,295 100,000 1,531 100,000 1,808 100,000
8.................... 4,261.29 1,482 100,000 1,788 100,000 2,157 100,000
9.................... 4,920.60 1,662 100,000 2,047 100,000 2,524 100,000
10.................... 5,612.88 1,834 100,000 2,307 100,000 2,909 100,000
15.................... 9,629.43 2,522 100,000 3,569 100,000 5,100 100,000
20.................... 14,755.68 2,808 100,000 4,620 100,000 7,710 100,000
25.................... 21,298.22 2,490 100,000 5,194 100,000 10,666 100,000
30.................... 29,648.34 1,229 100,000 4,835 100,000 13,752 100,000
35.................... 40,305.44 * * 2,546 100,000 16,285 100,000
Age 65.................... 53,906.90 * * * * 16,586 100,000
<CAPTION>
12% ASSUMED
HYPOTHETICAL
GROSS RETURN
GUARANTEED COST
OF INSURANCE
END OF ----------------------------
POLICY CASH DEATH
YEAR VALUE BENEFIT
----------- ------------- -------------
<S> <C> <C>
1.................... $ 112 $ 100,000
2.................... 368 100,000
3.................... 652 100,000
4.................... 969 100,000
5.................... 1,319 100,000
6.................... 1,707 100,000
7.................... 2,132 100,000
8.................... 2,600 100,000
9.................... 3,112 100,000
10.................... 3,673 100,000
15.................... 7,345 100,000
20.................... 13,002 100,000
25.................... 21,763 100,000
30.................... 35,520 100,000
35.................... 57,539 100,000
Age 65.................... 104,082 124,898
</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 -1.55%, 2.45%, 6.45% AND 10.45%, 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
NON-TOBACCO PREMIUM CLASS
<TABLE>
<CAPTION>
0% ASSUMED 4% ASSUMED 8% ASSUMED
HYPOTHETICAL HYPOTHETICAL 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 $ 201 $ 100,000
2...................... 1,435.72 569 100,000 612 100,000 656 100,000
3...................... 2,207.85 952 100,000 1,039 100,000 1,130 100,000
4...................... 3,018.60 1,317 100,000 1,464 100,000 1,623 100,000
5...................... 3,869.88 1,664 100,000 1,887 100,000 2,135 100,000
6...................... 4,763.72 1,992 100,000 2,307 100,000 2,667 100,000
7...................... 5,702.26 2,298 100,000 2,720 100,000 3,215 100,000
8...................... 6,687.72 2,583 100,000 3,127 100,000 3,783 100,000
9...................... 7,722.45 2,850 100,000 3,530 100,000 4,374 100,000
10...................... 8,808.93 3,087 100,000 3,918 100,000 4,979 100,000
15...................... 15,112.55 3,841 100,000 5,613 100,000 8,239 100,000
20...................... 23,157.74 3,610 100,000 6,555 100,000 11,724 100,000
25...................... 33,425.67 1,669 100,000 5,832 100,000 14,784 100,000
30...................... 46,530.45 * * 1,844 100,000 16,153 100,000
35...................... 63,255.83 * * * * 12,812 100,000
Age 65...................... 46,530.45 * * 366 100,000 15,980 100,000
<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...................... 702 100,000
3...................... 1,227 100,000
4...................... 1,796 100,000
5...................... 2,411 100,000
6...................... 3,076 100,000
7...................... 3,795 100,000
8...................... 4,572 100,000
9...................... 5,418 100,000
10...................... 6,329 100,000
15...................... 12,129 100,000
20...................... 20,771 100,000
25...................... 33,689 100,000
30...................... 53,724 100,000
35...................... 87,157 101,102
Age 65...................... 59,011 100,000
</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 -1.55%, 2.45%, 6.45% AND 10.45%, 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
NON-TOBACCO PREMIUM CLASS
<TABLE>
<CAPTION>
0% ASSUMED 4% ASSUMED 8% ASSUMED
HYPOTHETICAL HYPOTHETICAL 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 $ 335 $ 100,000 $ 363 $ 100,000 $ 390 $ 100,000
2.................. 2,477.53 998 100,000 1,074 100,000 1,152 100,000
3.................. 3,809.95 1,624 100,000 1,776 100,000 1,937 100,000
4.................. 5,209.00 2,214 100,000 2,468 100,000 2,745 100,000
5.................. 6,678.00 2,762 100,000 3,146 100,000 3,573 100,000
6.................. 8,220.45 3,270 100,000 3,807 100,000 4,423 100,000
7.................. 9,840.02 3,730 100,000 4,446 100,000 5,288 100,000
8.................. 11,540.58 4,137 100,000 5,055 100,000 6,165 100,000
9.................. 13,326.15 4,487 100,000 5,628 100,000 7,050 100,000
10.................. 15,201.01 4,771 100,000 6,156 100,000 7,934 100,000
15.................. 26,078.77 5,010 100,000 7,857 100,000 12,163 100,000
20.................. 39,961.86 2,390 100,000 6,864 100,000 15,150 100,000
25.................. 57,680.59 * * 152 100,000 14,224 100,000
30.................. 80,294.67 * * * * 3,224 100,000
35.................. 109,156.61 * * * * * *
Age 65.................. 39,961.86 1,314 100,000 6,090 100,000 15,379 100,000
<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.................. 1,233 100,000
3.................. 2,107 100,000
4.................. 3,044 100,000
5.................. 4,049 100,000
6.................. 5,126 100,000
7.................. 6,278 100,000
8.................. 7,508 100,000
9.................. 8,819 100,000
10.................. 10,213 100,000
15.................. 18,648 100,000
20.................. 30,222 100,000
25.................. 46,484 100,000
30.................. 72,084 100,000
35.................. 120,147 126,154
Age 65.................. 33,001 100,000
</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 -1.55%, 2.45%, 6.45% AND 10.45%, 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
NON-TOBACCO PREMIUM CLASS
<TABLE>
<CAPTION>
0% ASSUMED 4% ASSUMED 8% ASSUMED
HYPOTHETICAL HYPOTHETICAL 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 $ 725 $ 100,000 $ 779 $ 100,000 $ 833 $ 100,000
2.................. 4,698.91 1,844 100,000 1,991 100,000 2,143 100,000
3.................. 7,226.00 2,782 100,000 3,159 100,000 3,464 100,000
4.................. 9,879.45 3,806 100,000 4,278 100,000 4,792 100,000
5.................. 12,665.58 4,635 100,000 5,335 100,000 6,119 100,000
6.................. 15,591.00 5,353 100,000 6,320 100,000 7,435 100,000
7.................. 18,662.70 5,947 100,000 7,221 100,000 8,732 100,000
8.................. 21,887.99 6,403 100,000 8,018 100,000 9,994 100,000
9.................. 25,274.54 6,704 100,000 8,692 100,000 11,203 100,000
10.................. 28,830.42 6,830 100,000 9,219 100,000 12,339 100,000
15.................. 49,461.30 4,151 100,000 8,804 100,000 16,185 100,000
20.................. 75,792.13 * * * * 13,278 100,000
25.................. 109,397.67 * * * * * *
30.................. 152,287.80 * * * * * *
35.................. 207,027.69 * * * * * *
Age 65.................. 28,830.42 6,745 100,000 9,560 100,000 13,366 100,000
<CAPTION>
12% ASSUMED
HYPOTHETICAL
GROSS RETURN
GUARANTEED COST
OF INSURANCE
END OF ----------------------------
POLICY CASH DEATH
YEAR VALUE BENEFIT
----------- ------------- -------------
<S> <C> <C>
1.................. $ 887 $ 100,000
2.................. 2,300 100,000
3.................. 3,786 100,000
4.................. 5,351 100,000
5.................. 6,995 100,000
6.................. 8,718 100,000
7.................. 10,522 100,000
8.................. 12,405 100,000
9.................. 14,364 100,000
10.................. 16,395 100,000
15.................. 27,724 100,000
20.................. 41,359 100,000
25.................. 58,845 100,000
30.................. 91,107 100,000
35.................. 156,309 164,124
Age 65.................. 18,483 100,000
</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 -1.55%, 2.45%, 6.45% AND 10.45%, 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>
- --------------------------------------------------------------------------------
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>
[LOGO]
FARM BUREAU LIFE INSURANCE COMPANY
FARM BUREAU MUTUAL FUNDS
[LOGO]
5400 UNIVERSITY AVENUE
WEST DES MOINES, IOWA 50266
737-523 (5-97)
<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 SECTION 26(e)(2)A
The Company represents that the aggregate charges under the Contracts are
reasonable in relation to the services rendered, the expenses to be incurred
and the risks assumed by the Company.
II-2
<PAGE>
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.
The Prospectus consisting of 102 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, L.L.P.
Ernst & Young LLP, Independent Auditors
JoAnn W. Rumelhart, FSA, MAAA, Vice President-Life Operations
II-3
<PAGE>
The following exhibits:
1.A. 1 Certified Resolution of the Board of Directors of
the Company establishing the Variable Account. (1)
2 None.
3 (a) Form of Principal Underwriting Agreement. (2)
(b) (i) Forms of Career Agent's Contract. (2)
(ii) Forms of Financed Career Agent's Contract. (2)
(c) Commission schedules. (2) (See Exhibits
3(b)(i) and 3(b)(ii) above.)
(d) Planning Consultants Agreement. (5)
4 None.
5 (a) Form of Policy. (2)
(b) State variation of Form of Policy. (2)
(c) Form of Application. (2)
(d) Revised Policy Form (4)
(e) 1995 Revised Policy Form. (6)
(f) Accelerated Death Benefit Rider. (6)
*(g) 1996 Revised Policy Form.
*(h) 1996 Revised Application Form.
6 (a) Certificate of Incorporation of the Company. (2)
(b) By-Laws of the Company. (1)
7 None.
8 None.
9 Form of Participation Agreement. (3)
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, L.L.P.
II-4
<PAGE>
4. None.
5. Not applicable.
6. *Opinion and Consent of JoAnn W. Rumelhart, FSA, MAAA, Vice
President-Life Operations.
7. *Consent of Ernst & Young LLP.
8. Memorandum describing the Company's conversion procedure (included in
Exhibit 9 hereto). (1)
9. Memorandum describing the Company's issuance, transfer and redemption
procedures for the Policy. (6)
- ------------------------
* Attached as an exhibit.
(1) 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.
(2) 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.
(3) 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.
(4) 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.
(5) 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.
(6) 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. 11 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 29th day of April, 1997.
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. 11 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 29 , 1997
- ------------------------- [Principal Executive -----------------
Edward M. Wiederstein Officer]
/s/ Richard D. Harris Senior Vice President and April 29 , 1997
- ------------------------- Secretary-Treasurer -----------------
Richard D. Harris [Principal Financial
Officer]
/s/ James W. Noyce Chief Financial Officer April 29 , 1997
- ------------------------- [Principal Accounting -----------------
James W. Noyce Officer]
<PAGE>
April 29 , 1997
- ------------------------- -----------------
Craig A. Lang* Vice President and
Director
April 29 , 1997
- ------------------------- -----------------
Kenneth R. Ashby* Director
April 29 , 1997
- ------------------------- -----------------
Caroll C. Burling* Director
April 29 , 1997
- ------------------------- -----------------
Al Christopherson* Director
April 29 , 1997
- ------------------------- -----------------
Ernest A. Glienke* Director
April 29 , 1997
- ------------------------- -----------------
William C. Hanson* Director
April 29 , 1997
- ------------------------- -----------------
Craig D. Hill* Director
April 29 , 1997
- ------------------------- -----------------
Daniel L. Johnson* Director
April 29 , 1997
- ------------------------- -----------------
Richard G. Kjerstad* Director
<PAGE>
April 29 , 19987
- ------------------------- -----------------
Lindsey D. Larsen* Director
April 29 , 1997
- ------------------------- -----------------
David R. Machacek* Director
April 29 , 1997
- ------------------------- -----------------
Donald O. Narigon* Director
April 29 , 1997
- ------------------------- -----------------
Bryce P. Neidig* Director
April 29 , 1997
- ------------------------- -----------------
Charles E. Norris* Director
April 29 , 1997
- ------------------------- -----------------
Bennett M. Osmonson* Director
April 29 , 1997
- ------------------------- -----------------
Howard D. Poulson* Director
April 29 , 1997
- ------------------------- -----------------
Sally A. Puttmann* Director
April 29 , 1997
- ------------------------- -----------------
James E. Sage* Director
<PAGE>
April 29 , 1997
- ------------------------- -----------------
Beverly L. Schnepel* Director
April 29 , 1997
- ------------------------- -----------------
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.
11 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
29th day of April, 1997.
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>
- -------------------------------------------------------------------------------
NON-PARTICIPATING
FLEXIBLE PREMIUM VARIABLE
LIFE INSURANCE POLICY
DEATH PROCEEDS PAYABLE AT THE INSURED'S DEATH PRIOR TO THE MATURITY DATE.
FLEXIBLE PREMIUMS PAYABLE FOR THE INSURED'S LIFE OR UNTIL THE MATURITY DATE.
THE AMOUNT OF THE DEATH BENEFIT OR THE DURATION OF THE DEATH BENEFIT MAY VARY
UNDER THE CONDITIONS DESCRIBED IN THE DEATH BENEFIT PROVISIONS. THE CASH
VALUE IN THE VARIABLE ACCOUNT IS BASED ON THE INVESTMENT EXPERIENCE OF THAT
ACCOUNT AND MAY INCREASE OR DECREASE DAILY. IT IS NOT GUARANTEED AS TO DOLLAR
AMOUNT. THE VARIABLE FEATURES OF THIS POLICY ARE DESCRIBED ON PAGES 13
THROUGH 16.
Farm Bureau Life Insurance Company will pay the benefits of this policy
subject to all of its terms.
RIGHT TO EXAMINE POLICY
The owner may cancel this policy by delivering or mailing a written notice or
sending a telegram or fax to the agent through whom it was purchased or the
Farm Bureau Life Insurance Company, 5400 University Avenue, West Des Moines,
Iowa 50266-5997 and by returning the policy or contract before midnight of
the twentieth day after the date you receive the policy. Notice given by mail
and return of the policy or contract by mail are effective on being
postmarked, properly addressed and postage prepaid. Farm Bureau Life will
refund within seven days after it receives notice of cancellation and the
returned policy an amount equal to the sum of:
a) the cash value of the policy on the date the policy is received at our
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 daily charges against the variable account.
Signed for and on behalf of Farm Bureau Life Insurance Company at its home
office at 5400 University Avenue, West Des Moines, Iowa 50266-5997, effective
as of the date of issue of this policy.
/s/ Edward M. Wiederstein /s/ Eugene R. Maahs
President Secretary
FARM BUREAU [LOGO]
LIFE INSURANCE COMPANY
5400 University Avenue
West Des Moines, Iowa 50266-5997
- -------------------------------------------------------------------------------
Form #: 434-114(03-96)
<PAGE>
This policy is a legal contract between the owner and Farm Bureau Life
Insurance Company.
READ YOUR POLICY CAREFULLY
INDEX OF MAJOR POLICY PROVISIONS
POLICY DATA...........................................................Page 3
Insured; Insuring Age; Sex; Policy Number; Policy Date; Owner(s);
Date of Issue; Death Benefit Option; Maturity Date; Current Specified
Amount; Schedule of Forms and Premiums; Schedule of Administrative
Charges.
TABLE OF GUARANTEED MAXIMUM MONTHLY INSURANCE RATES PER $1000.........Page 5
SPECIFIED AMOUNT FACTORS..............................................Page 6
SECTION 1 - DEFINITIONS...............................................Page 7
1.1 You or Your; 1.2 Age; 1.3 Attained Age; 1.4 Business Day;
1.5 Declared Interest Option; 1.6 Fund; 1.7 General Account;
1.8 Home Office; 1.9 Monthly Deduction Day; 1.10 Net Premium;
1.11 Policy Anniversary; 1.12 Policy Date; 1.13 Policy Year;
1.14 SEC; 1.15 Surrender Charge; 1.16 Valuation Period;
1.17 Variable Account; 1.18 We, Our, Us or the Company.
SECTION 2 - THE CONTRACT..............................................Page 8
2.1 Death Proceeds 2.2 Death Benefit Options; 2.3 Contract;
2.4 Modification; 2.5 Incontestable Clause; 2.6 Misstatement of
Age or Sex; 2.7 Suicide; 2.8 Return of Policy and Policy Settlement;
2.9 Maturity Proceeds; 2.10 Termination; 2-11 Non-Participation.
SECTION 3 - OWNERSHIP AND BENEFICIARIES...............................Page 10
3.1 Ownership; 3.2 Beneficiary; 3.3 Change of Owner or Beneficiary;
3.4 Assignment.
SECTION 4 - PREMIUMS AND REINSTATEMENT................................Page 11
4.1 Premium Payment; 4.2 Payment Frequency; 4.3 Grace Period;
4.4 Reinstatement; 4.5 Unscheduled Premiums; 4.6 Premium Limitations;
4.7 Premium Application; 4.8 Allocation of Premium.
SECTION 5 - POLICY CHANGE.............................................Page 13
5.1 Change of Specified Amount; 5.2 Specified Amount Decrease;
5.3 Specified Amount Increase; 5.4 Change of Death Benefit Option;
5.5 Life Insurance Qualification.
SECTION 6 - VARIABLE ACCOUNT..........................................Page 14
6.1 Variable Account; 6.2 Subaccounts; 6.3 Fund Portfolios; 6.4 Transfers;
6.5 Special Transfer Privilege.
SECTION 7 - CASH VALUE BENEFITS.......................................Page 16
7.1 Cash Value Determination; 7.2 Net Cash Value; 7.3 Variable Cash
Value; 7.4 Account Units; 7.5 Unit Value; 7.6 Declared Interest Option
Cash Value; 7.7 Declared Interest Option Interest; 7.8 Monthly Deduction;
7.9 Cost of Insurance; 7.10 Cost of Insurance Rate; 7.11 Basis of Values;
7.12 Surrender; 7.13 Delay of Payment; 7.14 Continuance of Insurance;
7.15 Annual Report.
SECTION 8 - POLICY LOANS..............................................Page 22
8.1 Cash Loan; 8.2 Loan Value; 8.3 Loan Interest; 8.4 Loan Allocation;
8.5 Loan Repayment.
SECTION 9 - PAYMENT OF PROCEEDS.......................................Page 23
9.1 Choice of Options; 9.2 Payment Options; 9.3 Interest and Mortality;
9.4 Requirements; 9.5 Effective Date; 9.6 Death of Payee; 9.7 Withdrawal
of Proceeds; 9.8 Claims of Creditors.
PAYMENT OPTION TABLES.................................................Page 26
Any additional benefits and endorsements which apply to this policy are listed
on page 3 and are described in the forms which follow page 27 of this policy.
<PAGE>
POLICY DATA
Insured
Insuring Age
Sex
Policy Number
Policy Date
Owner(s)
Date of Issue
Death Benefit Option
Maturity Date
Current Specified Amount of consisting of:
Description Specified Amount Effective Date Premium Class
AT ISSUE
Universal Adult Term Life Insurance Rider - Covered Adult
Current Specified Amount of consisting of:
Description Specified Amount Effective Date Premium Class
AT ISSUE
- ------------------------ SCHEDULE OF FORMS AND PREMIUMS ---------------------
Original
Amount or Effective
Form No. Description No. of Units Date
434-114(03-96) NON-PARTICIPATING FLEXIBLE PREMIUM
VARIABLE LIFE INSURANCE POLICY
434-024 (03-96) UNIVERSAL WAIVER OF CHARGES RIDER
434-092 (03-96) UNIVERSAL GUARANTEED INSURABILITY
OPTION RIDER
434-091 (03-96) UNIVERSAL COST OF LIVING INCREASE
RIDER
434-085 (03-96) LIVING BENEFIT RIDER
434-962R (03-96) UNIVERSAL ADULT TERM RIDER
434-832R (03-96) UNIVERSAL CHILDRENS TERM RIDER
3
<PAGE>
SCHEDULE OF CHARGES
-------------------
Premium Expense Charge 7% of each premium payment (includes 2% for
premium taxes)
Policy Expense Charge $3.00 per month
First-Year Administrative Charge A charge per $1,000 for 12 monthly
deductions following issue. Also deducted
for 12 months following any increase.
See table on page 18.
Surrender Charge 2% of the amount surrendered, not to exceed
$25.00.
Transfer Charge $25.00
Mortality and Expense Risk Charge 0.0024548% of the variable cash value per
day (equivalent to 0.90% per year)
Monthly Deduction Day 15th day of each month
Maximum Policy Loan Interest Rate 7.40% per year in advance (equal to an
effective rate of 8.00% per year)
SCHEDULE OF INVESTMENT OPTIONS
------------------------------
General Account The general assets of Farm Bureau Life Insurance
Company
Separate Account Farm Bureau Life Variable Account
Subaccounts A) Money Market Subaccount
B) Value Growth Subaccount
C) Blue Chip Subaccount
D) High Grade Bond Subaccount
E) High Yield Bond Subaccount
F) Managed Subaccount
Fund FBL Variable Insurance Series Fund
Fund Portfolios A) Money Market Portfolio
B) Value Growth Portfolio
C) Blue Chip Portfolio
D) High Grade Bond Portfolio
E) High Yield Bond Portfolio
F) Managed Portfolio
Allocation of Net Premium A) Money Market Subaccount 100%
B) Value Growth Subaccount 0%
C) Blue Chip Subaccount 0%
D) High Grade Bond Subaccount 0%
E) High Yield Bond Subaccount 0%
F) Managed Subaccount 0%
G) General Account (DIO) 0%
100%
Form Number 434-114(03-96)
Policy Number 023003618V
4
<PAGE>
TABLE OF GUARANTEED MAXIMUM MONTHLY INSURANCE RATES
PER $1,000 FOR TOBACCO AND NON-TOBACCO RATE CLASSES
<TABLE>
<CAPTION>
Tobacco Non-Tobacco Tobacco Non-Tobacco
------- ----------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Attained Male Female Male Female Attained Male Female Male Female
Age Rate Rate Rate Rate Age Rate Rate Rate Rate
0 0.08917 0.07251 50 0.79229 0.54530 0.40933 0.34929
1 0.08917 0.07251 51 0.87076 0.58367 0.44603 0.37514
2 0.08251 0.06750 52 0.95257 0.62706 0.48857 0.40433
3 0.08167 0.06584 53 1.04609 0.67796 0.53612 0.43853
4 0.07917 0.06417 54 1.15132 0.72970 0.59118 0.47356
5 0.07501 0.06334 55 1.26326 0.78395 0.65209 0.51109
6 0.07167 0.06084 56 1.38441 0.83820 0.71968 0.54947
7 0.06667 0.06000 57 1.50978 0.90665 0.79146 0.58785
8 0.06334 0.05834 58 1.64353 0.93838 0.86909 0.62456
9 0.06167 0.05750 59 1.78234 0.98848 0.95675 0.66377
10 0.06084 0.05667 60 1.93624 1.04359 1.05444 0.70967
11 0.06417 0.05750 61 2.10944 1.11457 1.16302 0.76392
12 0.07084 0.06000 62 2.30447 1.20061 1.28665 0.83236
13 0.08251 0.06250 63 2.52553 1.31673 1.42787 0.91834
14 0.09584 0.06667 64 2.76931 1.44626 1.58752 1.02021
15 0.10751 0.07000 65 3.03334 1.59170 1.77899 1.13044
16 0.11918 0.07334 66 3.30841 1.73551 1.95381 1.24906
17 0.12835 0.07667 67 3.59706 1.88521 2.15965 1.36937
18 0.18003 0.09084 0.13335 0.07917 68 3.89427 2.02074 2.38065 1.49055
19 0.18837 0.09418 0.13835 0.08167 69 4.21099 2.17305 2.62186 1.62012
20 0.19254 0.09666 0.14002 0.08417 70 4.56071 2.33460 2.89419 1.76979
21 0.19420 0.09834 0.13919 0.08501 71 4.94853 2.54396 3.25305 1.94879
22 0.19170 0.10084 0.13669 0.08667 72 5.38973 2.80367 3.55929 2.17053
23 0.18837 0.10251 0.13418 0.08751 73 5.88695 3.12054 3.96902 2.44094
24 0.18420 0.10584 0.13085 0.09001 74 6.42941 3.49047 4.42953 2.75926
25 0.17837 0.10751 0.12668 0.09084 75 7.02991 3.90183 4.92413 3.16163
26 0.17336 0.11168 0.12335 0.09334 76 7.64974 4.34547 5.45291 3.51565
27 0.17170 0.11501 0.12168 0.09501 77 8.27796 4.81137 6.00585 3.94131
28 0.17003 0.11835 0.12001 0.09751 78 8.90442 5.30129 6.58221 4.39675
29 0.17170 0.12335 0.12001 0.10001 79 9.54780 5.81782 7.19473 4.89467
30 0.17503 0.12918 0.12001 0.10334 80 10.23622 6.39564 7.86724 5.45628
31 0.18087 0.13418 0.12252 0.10584 81 10.98690 7.04935 8.61695 6.10032
32 0.18670 0.14002 0.12502 0.10918 82 11.82145 7.79699 9.46542 6.84571
33 0.19587 0.14585 0.12918 0.11251 83 12.74626 8.64662 10.42336 7.70559
34 0.20671 0.15502 0.13418 0.11835 84 13.72670 9.66332 11.64317 8.66019
35 0.21921 0.16169 0.14085 0.12252 85 14.73050 10.64717 12.58987 9.70835
36 0.23422 0.17420 0.14752 0.13002 86 15.72512 11.78647 13.75325 10.83105
37 0.25340 0.19004 0.15669 0.13919 87 16.69584 12.88645 14.95279 12.03563
38 0.27508 0.20754 0.16669 0.14919 88 17.75732 14.13279 16.16464 13.30897
39 0.30009 0.22755 0.17837 0.16086 89 18.80718 15.32034 17.40526 14.67130
40 0.32844 0.25006 0.19087 0.17336 90 19.86094 16.69153 18.69215 16.12162
41 0.36180 0.27758 0.20588 0.18837 91 20.93947 18.15714 20.04733 17.68913
42 0.39599 0.30343 0.22088 0.20337 92 22.08818 19.76127 21.51567 19.41995
43 0.43519 0.33011 0.23339 0.21838 93 23.56765 21.58524 23.16008 21.39829
44 0.47606 0.35679 0.25590 0.23339 94 25.47888 23.83051 25.25984 23.83051
45 0.52277 0.38431 0.27674 0.24923
46 0.56949 0.41267 0.29926 0.26590
47 0.62038 0.44270 0.32344 0.28425
48 0.67379 0.47356 0.34929 0.30426
49 0.73387 0.50692 0.37848 0.32511
</TABLE>
5
<PAGE>
SPECIFIED AMOUNT FACTORS
Attained Attained Attained
Age At Date Age At Date Age At Date
of Death Factor of Death Factor Of Death Factor
0-40 2.50 59 1.34 78 1.05
41 2.43 60 1.30 79 1.05
42 2.36 61 1.28 80 1.05
43 2.29 62 1.26 81 1.05
44 2.22 63 1.24 82 1.05
45 2.15 64 1.22 83 1.05
46 2.09 65 1.20 84 1.05
47 2.03 66 1.19 85 1.05
48 1.97 67 1.18 86 1.05
49 1.91 68 1.17 87 1.05
50 1.85 69 1.16 88 1.05
51 1.78 70 1.15 89 1.05
52 1.71 71 1.13 90 1.05
53 1.64 72 1.11 91 1.04
54 1.57 73 1.09 92 1.03
55 1.50 74 1.07 93 1.02
56 1.46 75 1.05 94 1.01
57 1.42 76 1.05 95 1.00
58 1.38 77 1.05
6
<PAGE>
- -------------------------------------------------------------------------------
SECTION 1 - DEFINITIONS
- -------------------------------------------------------------------------------
1.1 means the person whose life is insured.
YOU AND YOUR
1.2 means age at the last birthday.
AGE
1.3 means your age at issue plus the number of policy years since
ATTAINED AGE the policy date.
1.4 means a day when the New York Stock Exchange is open for
BUSINESS DAY trading, except for the day after Thanksgiving, any other
designated Company holidays, and any day the home office
is closed because of a weather-related or comparable type
of emergency. Assets are valued at the close of the
business day.
1.5 means an option pursuant to which cash value accrues interest
DECLARED INTEREST at a guaranteed minimum rate. The declared interest option
OPTION is supported by the general account.
1.6 means the fund shown on page 4. The fund is registered with
FUND the SEC under the Investment Company Act of 1940 as an
open-end diversified management investment company.
1.7 means all our assets other than those allocated to the
GENERAL ACCOUNT variable account or any other separate account. We have
complete ownership and control of the assets of the general
account.
1.8 means Farm Bureau Life Insurance Company at 5400
HOME OFFICE University Avenue, West Des Moines, Iowa, 50266-5997.
1.9 means the same date in each month as the policy date. The
MONTHLY DEDUCTION charges for this policy are deducted on the business day
DAY on or next following the monthly deduction day.
1.10 means the amount of premium remaining after the premium
NET PREMIUM expense charge shown on page 4 has been deducted. This amount
will be allocated among the subaccounts of the variable
account and the declared interest option according to the
allocations shown on page 4 or the most recent instructions
received from the owner.
1.11 means the same date in each year as the policy date.
POLICY
ANNIVERSARY
1.12 means the policy date shown on page 3. This date is used to
POLICY DATE determine policy years and any policy anniversaries.
1.13 means the 12-month period that begins on the policy date or
POLICY YEAR on a policy anniversary.
1.14 means the Securities and Exchange Commission, a U.S.
SEC government agency.
7
<PAGE>
1.15 means a fee that is applied at the time of any partial
SURRENDER or full surrender. The surrender charge will be the lesser
CHARGE of $25 or 2% of the amount surrendered.
1.16 means the period between the close of business on a
VALUATION PERIOD business day and the close of business on the next
business day.
1.17 means the Separate Account shown on page 4. It is a unit
VARIABLE ACCOUNT investment trust registered with the SEC under the
Investment Company Act of 1940.
1.18 means the Farm Bureau Life Insurance Company.
WE, OUR, US OR
THE COMPANY
- ------------------------------------------------------------------------------
SECTION 2 - THE CONTRACT
- ------------------------------------------------------------------------------
2.1 We will pay the death proceeds to the beneficiary:
DEATH
PROCEEDS a) within seven days after receipt by us of due proof
of your death;
b) if the policy is in force on the date of your death; and
c) subject to the terms and conditions of this policy.
The death proceeds will be the sum of:
a) the death benefit shown under death benefit option on
page 3;
b) any premiums paid after the date of death; and
c) any unearned policy loan interest on the date of death;
less:
a) any policy loan; and
b) any policy loan interest due;
plus any interest credited on this amount from the date
of death to the date of payment, the rate to be set by us
but not less than 3% per year or any rate required by law.
2.2 The death benefit option in effect for this policy is shown
DEATH BENEFIT on page 3 and is one of the following:
OPTIONS
Option A -- The death benefit will be the greater of a) and
b) where:
a) is the sum of the specified amount shown on page 3 and
the cash value; and
b) is the cash value multiplied by the specified amount
factor from the table on page 6 for your attained age.
Option B -- The death benefit will be the greater of a)
and b) where:
a) is the specified amount shown on page 3; and
8
<PAGE>
b) is the cash value multiplied by the specified amount
factor from the table on page 6 for your attained
age.
All values are determined as of the end of the business
day on or next following the date of death.
2.3 This policy is legal contract. We issue this policy in
CONTRACT consideration of the first premium and the statements in the
application. The entire contract consists of:
a) this basic policy;
b) any endorsements or additional benefit riders;
c) the attached copy of your application; and
d) any amendments, supplemental applications or other
attached papers.
We rely on statements made in the application for the
policy. These statements in the absence of fraud are deemed
representations and not warranties. No statement will void
this policy or be used in defense of a claim unless:
a) it is contained in the application; and
b) such application is attached to this policy.
2.4 No one can change any part of this policy except the
MODIFICATION owner and one of our officers. Both must agree to a change,
and it must be in writing. No agent may change this policy
or waive any of its provisions.
2.5 We will not contest payment of the death benefit for any
INCONTESTABLE reason other than fraud after this policy has been in force
CLAUSE during your lifetime for two years from the date of issue
shown on page 3.
Any requested increase in the specified amount will be
incontestable only after such increase has been in force
during your lifetime for two years from the effective date
of such increase.
2.6 We have the right to correct benefits for misstated age or
MISSTATEMENT sex. In such an event, benefits will be the amount the
OF AGE OR SEX premium actually paid would have bought at the correct age
or sex.
2.7 If, within one year of the policy date, you die by suicide,
SUICIDE whether sane or insane, our liability is limited to the
premium paid plus any unearned loan interest at the date
of death, less any policy loan, any loan interest due and
any partial surrenders.
Any increase in death benefits resulting from a requested
increase in specified amount will not be paid if the
insured dies by suicide, while sane or insane, within one
year of the date of such increase. Instead, we will return
to the owner an amount equal to the cost of insurance for
such increase in specified amount.
2.8 We reserve the right to have this policy sent to us for
RETURN OF any:
POLICY AND
POLICY a) modification; b) death settlement; c) surrender;
SETTLEMENT d) assignment; e) change of owner or beneficiary;
f) election; or g) exercise of any policy privilege.
We will send a payment contract to replace this policy if
any payment option is
9
<PAGE>
chosen. All sums to be paid by us under this policy are
considered paid when tendered by us at our home office.
2.9 If you are living on the maturity date and this policy is
MATURITY in force, we will pay the proceeds to the owner. Such
PROCEEDS proceeds will be:
a) the cash value; less
b) any policy loan.
The maturity date will be your attained age 95.
All values are determined as of the end of the business
day on or next following the maturity date.
2.10 This policy ends when any one of the following events occurs:
TERMINATION
a) the owner requests that the policy be canceled;
b) you die;
c) the policy matures;
d) the policy is surrendered; or
e) the grace period ends without payment of the premium.
2.11 This policy does not share in the Company's surplus or
NON-PARTICIPATION profits.
- -------------------------------------------------------------------------------
SECTION 3 - OWNERSHIP AND BENEFICIARIES
- -------------------------------------------------------------------------------
3.1 The original owner of this policy is shown on page 3.
OWNERSHIP Ownership of the policy may change according to the
provisions indicated in the original application or by a
subsequent endorsement to the policy.
3.2 Beneficiaries are as named in the application, unless changed
BENEFICIARY by the owner. The interests of any beneficiary in a class
who dies before you will pass to any survivors of the class,
unless the policy provides otherwise. Secondary
beneficiaries will have the right to receive the proceeds
only if no primary beneficiary survives. If no beneficiary
survives you, we will pay the proceeds to the owner or the
owner's estate.
In finding and identifying beneficiaries we may rely on
sworn statements, other facts, or evidence we deem
satisfactory. Any benefits we pay based on such
information will be a valid discharge of our duty up to
the amount paid.
3.3 While you live, a change of owner or beneficiary can be made
CHANGE OF at any time, subject to the following rules:
OWNER OR
BENEFICIARY a) the change must be in writing on a form acceptable to us;
b) it must be signed by the owner;
10
<PAGE>
c) the form must be sent to our home
office and recorded by us; and
d) the change will take effect on the
date signed, but it will not apply
to any payment or action by us before
we receive the form.
3.4 No assignment of this policy will bind us unless:
ASSIGNMENT
a) it is in writing on a form acceptable
to us;
b) signed by the owner and
c) received by us at our home office.
We will not be responsible for the validity
of an assignment.
- -------------------------------------------------------------------------------
SECTION 4 - PREMIUMS AND REINSTATEMENT
- -------------------------------------------------------------------------------
4.1 The first premium must be equal to the greater of $100
PREMIUM or an amount that, when reduced by the premium expense
PAYMENT charge, will pay the monthly deductions for at least
three months. Thereafter, premium payments are flexible as
to both timing and amount. Each premium is to be paid at our
home office. No payment may be less than $100 without our
consent.
4.2 The first premium is due on or prior to the policy date.
PAYMENT We will send periodic reminder notices to the
FREQUENCY owner upon request. The minimum amount for which such
notice will be sent will be $100. A reminder notice may
be sent for different periods, which may be 12, 6, 3 or
1 month intervals. The reminder notice period may be
changed upon request.
4.3 If the net cash value is not large enough on any monthly
GRACE deduction day to cover the monthly deduction due, a grace
PERIOD period of 61 days will be allowed for payment of a premium
that, when reduced by the premium expense charge, is at
least equal to three times the monthly deduction charge due
such date. The grace period begins on the date we send the
owner of record written notice of the required payment. Such
premium shall be due on such monthly deduction day and if not
received by us within the grace period, all coverage under
this policy will terminate without value at the end of the
61-day period. If a claim by death during the grace period
becomes payable under the policy, any due and unpaid monthly
deductions due will be deducted from the proceeds.
4.4 Prior to the maturity date, a lapsed policy which has not
REINSTATEMENT been surrendered for its cash value may be reinstated at any
time within 5 years of the monthly deduction day immediately
preceding the grace period which expired without payment of
the required premium, subject to the following rules:
a) You and the owner must send a written request to us.
b) You must provide proof of your good health and
insurability satisfactory to us.
c) A premium sufficient to keep the policy in force for
three months must be paid.
d) The owner must pay a charge equal to the cost of
insurance for the coverage
11
<PAGE>
provided during the 61-day grace period which was in
effect prior to the termination of this policy.
e) The effective date of the reinstated policy will be the
monthly deduction day on or next following the date we
approve reinstatement.
4.5 Unscheduled premium payments of at least $100 may be made at
UNSCHEDULED any time prior to the maturity date. The Company may, in its
PREMIUMS discretion, waive the $100 minimum requirements. The Company
reserves the right to limit the number and amount of
unscheduled premium payments.
4.6 The company reserves the right to limit the number and amount
PREMIUM of premium payments in order to maintain this policy's
LIMITATIONS qualifications under federal tax law. We will refund any
portion of a premium payment that would cause the policy to
lose such qualification.
4.7 While any policy loan is outstanding, unless the owner
PREMIUM requests otherwise, premium payments will be applied as
APPLICATION a payment to reduce the outstanding balance of the loan.
When such loan has been re-paid, the balance of any premium
payment remaining after payment of the loan, plus any
subsequent payments, will be allocated as described in the
following provision.
4.8 The owner will determine the percentage of net premium that
ALLOCATION OF will be allocated to each subaccount of the variable account
PREMIUM and to the declared interest option. The owner may choose to
allocate all the net premium, a percentage or nothing to a
particular subaccount or to the declared interest option.
Any allocation must be for at least 10% of the net premium.
A fractional percent may not be chosen.
Net premiums will be allocated to the declared interest
option during the underwriting period. Upon completion of
underwriting, net premiums will be allocated to the money
market subaccount. When we receive a notice signed by the
owner that the policy has been received and accepted, we
will transfer part or all of the cash value in the money
market subaccount in accordance with the net premium
allocation percentages shown in the application. For any
premium received after we receive the signed form, the
net premium will be allocated in accordance with the net premium
allocation percentages shown in the application or the
most recent written instructions of the owner.
The owner may change the allocation for future net premiums
at any time, subject to the following rules:
a) the policy must be in force;
b) there must be a net cash value;
c) the change must be in writing on a form acceptable to us;
d) the form must be signed by the owner and
e) the change will take effect on the business day on or next
following the date we receive the signed form at our home
office.
12
<PAGE>
- -------------------------------------------------------------------------------
SECTION 5 - POLICY CHANGE
- -------------------------------------------------------------------------------
5.1 The owner may change the specified amount at any time after
CHANGE OF the policy has been in effect for one policy year, subject to
SPECIFIED the following rules:
AMOUNT
a) The change must be in writing on a form acceptable
to us.
b) It must be signed by the owner.
c) The change will take effect on the monthly deduction
day coinciding with or next following the date the
request is approved by us.
d) We will issue a new page 3 for any change in specified
amount.
5.2 Any decrease in specified amount will reduce such amount in
SPECIFIED the following order:
AMOUNT
DECREASE a) the specified amount provided by the most recent
increase will be reduced; then
b) the next most recent increases will be reduced in
succession; and
c) the initial specified amount will be reduced last.
The total specified amount which remains in force after a
requested decrease may not be less than the minimum
specified amount in effect for the policy on the date of
decrease, as published by us.
5.3 In addition to the rules for change in specified amount, an
SPECIFIED increase in specified amount is subject to the following:
AMOUNT
INCREASE a) proof of insurability acceptable to us; and
b) payment of the first month's cost of insurance or
sufficient cash value for deduction of such cost of
insurance.
5.4 The owner may request to change the death benefit option.
CHANGE OF The change will take effect on the monthly deduction day
DEATH BENEFIT coinciding with or next following the date we approve the
OPTION request.
If Option A is changed to Option B, the current specified
amount will not change.
If Option B is changed 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.
5.5 If following a requested change of specified amount or a
LIFE change of death benefit option, this policy would no longer
INSURANCE qualify as life insurance under federal tax law, we will
QUALIFICATION limit the change to an amount that would maintain such
qualification. 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.
13
<PAGE>
- -------------------------------------------------------------------------------
SECTION 6 - VARIABLE ACCOUNT
- -------------------------------------------------------------------------------
6.1 We own the assets of the variable account. We will value
VARIABLE the assets of the variable account each business day. The
ACCOUNT assets of such account will be kept separate from the
assets of our general account and any other separate
accounts. Income, and realized and unrealized gains or
losses from assets in the variable account will be
credited to or charged against such account without regard
to our other income, gains or losses.
That portion of the assets of the variable account which
equals the reserves and other policy liabilities of the
policies which are supported by the variable account will
not be charged with liabilities arising from any other
business we conduct. We have the right to transfer to our
general account any assets of the variable account which
are in excess of such reserves and other policy liabilities.
While the variable account is registered with the SEC and
thereby subject to SEC rules and regulations, it is also
subject to the laws of the State of Iowa which regulate the
operations of insurance companies incorporated in Iowa. The
investment policy of the variable account will not be
changed without the approval of the Insurance Commissioner
of the State of Iowa. The approval process is on file with
the insurance commissioner of the state in which this policy
was delivered.
We also reserve the right to transfer assets of the
variable account, which we determine to be associated with
the class of policies to which this policy belongs, to
another separate account. If this type of transfer is made,
the term "variable account," as used in this policy, shall
then mean the variable account to which the assets were
transferred.
When permitted by law, we also reserve the right to:
a) deregister the variable account under the Investment
Company Act of 1940;
b) manage the variable account under the direction of a
committee;
c) restrict or eliminate any voting rights of owners, or
other persons who have voting rights as to the variable
account; and
d) combine the variable account with other separate
accounts.
6.2 The variable account is divided into subaccounts. The
SUBACCOUNTS subaccounts are listed on page 4. Subject to obtaining any
approvals or consents required by applicable law, we
reserve the right to eliminate or combine any subaccounts
and the right to transfer the assets of one or more
subaccounts to any other subaccount. We also reserve the
right to add new subaccounts and make such subaccounts
available to any class or series of policies as we deem
appropriate. Each new subaccount would invest in a new
portfolio of the Fund, or in shares of another investment
company. The owner will determine the percentage of net
premium that will be allocated to each subaccount in
accordance with the allocation of premium provision.
6.3 The fund has several portfolios each of which corresponds
FUND to one of the subaccounts of the variable account. The
PORTFOLIOS portfolios are listed on page 4. Net premiums allocated to
a subaccount will automatically be invested in the fund
portfolio associated with that subaccount. The owner will
share only in the income, gains or losses of the
portfolio(s)
14
<PAGE>
to which net premiums have been allocated through the
sub-accounts.
We have the right, subject to compliance with any
applicable laws, to make:
a) additions to;
b) deletions from; or
c) substitutions for
the shares of a fund portfolio that are held by the variable
account or that the account may purchase.
We also reserve the right to dispose of the shares of a
portfolio of the fund listed on page 4 and to substitute shares
of another portfolio of such fund or another mutual fund
portfolio, if:
a) the shares of the portfolio are no longer available for
investment; or
b) if in our judgment further investment in the portfolio
should become inappropriate in view of the purposes of
the variable account.
In the event of any substitution or change, we may, by
appropriate endorsement, make such changes in this and other
policies as may be necessary or appropriate to reflect the
substitution or change.
6.4 The owner may transfer all or part of the cash value among the
TRANSFERS sub-accounts of the variable account and between the subaccounts
and the declared interest option, subject to the following
rules:
a) The change must be in writing on a form acceptable to us.
b) The form must be signed by the owner.
c) The transfer will take effect as of the end of the
valuation period during which we receive the signed
form at our Home Office.
d) The owner may transfer amounts among the subaccounts
of the variable account an unlimited number of times
in a policy year.
e) The owner may transfer amounts between the declared
interest option and the variable account only once in
a policy year.
f) The first transfer in each policy year will be made
without a transfer charge. Thereafter, each time amounts
are transferred a transfer charge will be imposed. This
transfer charge is shown on page 4.
g) The cash value on the date of the transfer will not be
affected by the transfer except to the extent of the
transfer charge. Unless paid in cash, the transfer charge
will be deducted on a pro rata basis from the declared
interest option and/or the subaccounts to which the
transfer is made.
h) The owner must transfer at least:
15
<PAGE>
(1) a total of $100; or
(2) the total cash value in the subaccount or the total
cash value in the declared interest option less any
policy loan, if the total amount transferred is less
than $100.
The following additional rules apply to transfers from the
declared interest option:
a) The cash value in the declared interest option after a
transfer from such option must at least equal the
amount of all policy loans.
b) No more than 50% of the net cash value in the declared
interest option may be transferred unless the balance
in the declared interest option after the transfer,
would be less than $1,000. If the balance in the
declared interest option would fall below $1,000, the
full net cash value in the declared interest option
may be transferred.
6.5 The owner may transfer, at any time, all of the amounts in
SPECIAL the subaccounts to the declared interest option. This policy
TRANSFER will then become one in which the benefits do not vary with
PRIVILEGE the investment performance of the variable account. The owner
must tell us this special transfer privilege is being
exercised. We will then waive the transfer charge. The owner
may exercise this special transfer privilege once per policy
year.
If the owner exercises this special transfer privilege, we
will automatically credit all future premium payments to the
declared interest option until the owner requests a change
in the allocation. At the time of the transfer, there is no
effect on the policy's death benefit, cash value, specified
amount, or net amount at risk, or on your premium class or
attained age.
- ------------------------------------------------------------------------------
SECTION 7 - CASH VALUE BENEFITS
- ------------------------------------------------------------------------------
7.1 The cash value in the policy is equal to:
CASH VALUE
DETERMINATION a) the cash value allocated to the subaccounts of the variable
account; plus
b) the cash value in the declared interest option.
7.2 The net cash value of this policy will be the cash value less
NET CASH a) less b) plus c) where:
VALUE
a) is the amount of any policy loan;
b) is any policy loan interest due; and
c) is any unearned loan interest.
7.3 On the business day on or next following the day we receive
VARIABLE notice that the owner has received and accepted the policy,
CASH VALUE the variable cash value is the total amount of net premium,
if any, credited to the subaccounts of the variable account,
minus the monthly deduction applicable to those subaccounts
if the net premium is allocated on a monthly deduction day.
After such date, the policy's variable cash value is equal
to the sum of the policy's cash value in each subaccount. The
value in a subaccount
16
<PAGE>
is equal to a) multiplied by b) where:
a) is the current number of account units; and
b) is the current unit value.
The variable cash value will vary from business day to
business day reflecting changes in a) and b) above.
7.4 When transactions are made which affect the variable cash
ACCOUNT UNITS value, dollar amounts are converted to account units. The
number of account units for a transaction is found by
dividing the dollar amount of the transaction by the current
unit value.
The number of account units for a subaccount increases when:
a) net premiums are credited to that subaccount; or
b) transfers from the declared interest option or other
subaccounts are credited to that subaccount.
The number of account units for a subaccount decreases when:
a) the owner takes out a policy loan from that subaccount;
b) the owner makes a partial surrender from that subaccount;
c) we take a portion of the monthly deduction from that
subaccount; or
d) transfers are made from that subaccount to the declared
interest option or other subaccounts.
7.5 The unit value for a subaccount on any business day is
UNIT VALUE determined by dividing each subaccount's net asset value
by the number of units outstanding at the time of
calculation. The unit value for each subaccount was set
initially at $10.00 when the subaccounts first purchased
fund shares. 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 net 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; minus
(5) a charge no greater than .0024548% of the daily net
assets in that subaccount
17
<PAGE>
for each day in the valuation period. This corresponds
to a charge of .90% per year of the average daily net
assets of the subaccount for mortality and expense
risks.
b) is the number of units outstanding at the end of the
preceding valuation period.
The unit value for a valuation period applies for each day
in the period. We will value the net assets in each
subaccount at their fair market value in accordance with
accepted accounting practices and applicable laws and
regulations.
7.6 The declared interest option cash value as of the policy
DECLARED date is the net premium credited to the declared interest
INTEREST option as of that date minus the monthly deduction
OPTION applicable to the declared interest option for the first
CASH VALUE policy month.
After the policy date, the declared interest option cash
value is computed as a) +b) + c) + d) - e) - f), where:
a) is the declared interest option value on the preceding
monthly deduction day plus any interest from the
previous monthly deduction day to the date of
calculation;
b) is the total of net premiums credited to the declared
interest option since the preceding monthly deduction
day, plus interest from the date premiums are credited
to the date of calculation;
c) is the total of the transfers from the variable account
to the declared interest option since the preceding
monthly deduction day, plus interest from the date of
transfer to the date of calculation;
d) is the total amount transferred from the variable
account to thedeclared interest option to secure policy
loans since the preceding monthly deduction day, plus
interest from the date of transfer to the date of
calculation;
e) is the total of the transfers to the variable account
from the declared interest option since the preceding
monthly deduction day, plus interest from the date of
transfer to the date of the calculation; and
f) is the total of partial surrenders from the declared
interest option since the preceding monthly deduction
day, plus interest from the date of surrender to the
date of calculation.
If the date of calculation is a monthly deduction day, we
also reduce the declared interest option cash value by the
applicable monthly deduction for the policy month following
the monthly deduction day.
7.7 The minimum interest rate applied to the declared interest
DECLARED option cash value is an effective rate of 4.5% per year.
INTEREST Interest in excess of the minimum rate may be applied. The
OPTION amount of the excess interest and the manner in which it
INTEREST is determined will be set by us.
The interest credited on the portion of the declared
interest option cash value which equals any policy loan will
be no greater than 6% per year and may be less but not less
than the guaranteed rate.
18
<PAGE>
Interest will be credited to the declared interest option cash
value on each monthly deduction day.
7.8 The monthly deduction is a charge made each monthly deduction day
MONTHLY from the declared interest option cash value and the variable
DEDUCTION cash value on a proportionate basis as of the close of business
on the monthly deduction day. For the purpose of determining the
proportion of the deduction, the declared interest option cash
value is reduced by the amount of any policy loans. We make the
deduction from each subaccount of the variable account based on
each subaccount's proportional percentage of the variable cash
value.
The monthly deduction for a policy month will be computed as
a) plus b) plus c) plus d), where:
a) is the cost of insurance as described in the cost of insurance
provision;
b) is the charge for all additional benefit riders attached to
this policy;
c) is a $3 per month policy expense charge; and
d) is the monthly per $1,000 charge from the following table
based on your age, multiplied by the number of thousands of
specified amount or the number of thousands of any increase
in specified amount. This charge will be deducted for 12
months following issue of this policy and during the 12
months following the effective date of an increase in the
specified amount. The charge deducted during the 12 months
following issue of the policy will be based on your attained
age. The charge deducted during the 12 months following an
increase in specified amount will be based on your age last
birthday on the effective date of the increase. Should this
policy lapse and later be reinstated, to the extent that the
monthly per $1,000 charge was not deducted for a total of
twelve policy months prior to lapse, the charges 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.
MONTHLY PER $1,000 CHARGE PER SPECIFIED AMOUNT*
<TABLE>
<CAPTION>
Attained $25,000 $50,000 $100,000 Attained $25,000 $50,000 $100,000
Age to 49,999 to 99,999 to 249,999 $250,000+ Age to 49,999 to 99,999 to 249,999 $250,000+
-------- --------- --------- ---------- --------- -------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0-25 .20 .15 .10 .05 40 .35 .30 .25 .13
26 .21 .16 .11 .06 41 .36 .31 .26 .13
27 .22 .17 .12 .06 42 .37 .32 .27 .14
28 .23 .18 .13 .07 43 .38 .33 .28 .14
29 .24 .19 .14 .07 44 .39 .34 .29 .15
30 .25 .20 .15 .08 45 .40 .35 .30 .15
31 .26 .21 .16 .08 46 .41 .36 .31 .16
32 .27 .22 .17 .09 47 .42 .37 .32 .16
33 .28 .23 .18 .09 48 .43 .38 .33 .17
34 .29 .24 .19 .10 49 .44 .39 .34 .17
35 .30 .25 .20 .10 50 .45 .40 .35 .18
36 .31 .26 .21 .11 51 .46 .41 .36 .18
37 .32 .27 .22 .11 52 .47 .42 .37 .19
38 .33 .28 .23 .12 53 .48 .43 .38 .19
39 .34 .29 .24 .12 54 .49 .44 .39 .20
55+ .50 .45 .40 .20
</TABLE>
*During first 12 months following issue or increase in specified amount.
7.9 If the owner chooses death benefit option B, the cost of
COST OF insurance is computed as a) multiplied by the result of b)
INSURANCE minus c). If death benefit option A is chosen, the cost of
insurance is computed as a) multiplied by b). In either case:
19
<PAGE>
a) is the cost of insurance rate as described in the
cost of insurance rate provisions, divided by 1000;
b) is the specified amount as described in the death
benefit provisions as of the close of business on
the monthly deduction day, divided by 1.0036748; and
c) is the cash value as of the close of business on the
monthly deduction day.
The cost of insurance is determined separately for the
initial specified amount and any increases made later. If
the premium class for the initial specified amount is
different from that of any increases, the cash value will
first be considered a part of the initial specified amount.
If the cash value as of the close of business on the
monthly deduction day 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.
7.10 The cost of insurance rate is subject to the following
COST OF rules:
INSURANCE RATE
a) The rate for the initial specified amount is based
on your sex, premium class and attained age. For
any increase in the specified amount, age will be
determined from your age as of your last birthdate
on the effective date of the increase.
b) The monthly rates will be determined by us based on
our expectation as to future mortality experience.
c) If we change the rates, we will change them for
everyone in your premium class.
d) The monthly guaranteed rates shown on page 5 are
based on the 1980 Commissioners' Standard Ordinary
Smoker and Nonsmoker Mortality Table. The monthly
rate will never be more than the rates shown on
page 5.
7.11 All minimum values in the policy are based on the
BASIS OF Commissioners' 1980 Standard Ordinary Smoker and Non-smoker
VALUES Mortality Table with an interest rate of 4.5% per year.
All of the values are the same or more than the minimums
set by the laws of the state where the policy is delivered.
We have filed a detailed statement of the way these values
are determined with the insurance department in that
state. It shows the figures and methods used.
7.12 While you live and prior to the maturity date, the owner
SURRENDER may surrender all or a portion of the net cash value,
subject to the following rules:
a) The request must be in writing to us.
b) The amount of any partial surrender must be at least
$500 and may not exceed the lesser of:
(1) the net cash value less $500; or
(2) 90% of the net cash value.
c) The amount of any such surrender may be paid in cash
or we will apply part or
20
<PAGE>
all of it under a payment option.
d) We have the right to defer payment of a surrender from
the declared interest option for up to 6 months.
e) The amount of net cash value surrendered will be subject
to a surrender charge. If the surrender charge is not
paid in cash, such charge will be deducted from the
amount surrendered.
f) The death benefit will be reduced as a result of any
partial surrender.
g) A partial surrender will reduce the 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.
h) 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
surrender, as published by the Company.
i) If the entire net cash value is surrendered, all
insurance in force will terminate.
j) The cash value will be reduced by the amount of any
partial surrender. The owner may tell us how to
allocate a partial surrender among the subaccounts and
the declared interest option. If the owner does not so
instruct, we will allocate the partial surrender 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 of the declared interest
option reduced by any outstanding policy loans bears
to the total cash value reduced by any outstanding
policy loans on the date we received the request.
7.13 Proceeds from complete surrenders, partial surrenders, and
DELAY OF policy loans will usually be mailed to the owner within seven
PAYMENT days after the owner's signed request is received in our home
office. We will usually mail any death claim proceeds within
seven days after we receive due proof of death. We will
usually mail the maturity proceeds within seven days after
the maturity date. We have the right to delay such payment
whenever:
a) the New York Stock Exchange is closed other than on
customary weekend and a holiday closing;
b) trading on the New York Stock Exchange is restricted as
determined by the SEC;
c) the SEC, by order, permits postponement for the
protection of policyowners;
d) as a result of an emergency, as determined by the SEC,
it is not reasonably possible to dispose of securities;
or
e) it is not reasonably possible to determine the value
of the net assets of the variable account.
We have the right to defer payment which is derived from any
amount paid to us by check or draft until we are satisfied
the check or draft has been paid by the bank on
21
<PAGE>
which it is drawn.
We also have the right to delay making a complete surrender,
partial surrender, or policy loan from the declared interest
option for up to six months from the date we receive the
owner's request.
7.14 The insurance under this policy will continue until the earlier
CONTINUANCE of:
OF INSURANCE
a) the end of any grace period during which a required
premium payment is not made;
b) the date the owner surrenders this policy for its entire
net cash value;
c) the date of your death; or
d) the date the policy matures.
This provision will not continue the policy beyond the
maturity date or continue any rider beyond its termination
date as specified in the rider.
7.15 At least once each year we will send a report, without charge,
ANNUAL REPORT to the owner which shows:
a) all premiums paid and charges made since the last report;
b) the current cash value including the value in each
subaccount and the declared interest option;
c) any partial surrenders since the last report;
d) any policy loans; and
e) the current death benefit.
An illustrative report will be sent to the owner upon
request. A fee may be charged for this report.
- -------------------------------------------------------------------------------
SECTION 8 - POLICY LOANS
- -------------------------------------------------------------------------------
8.1 The owner may obtain a cash loan at any time on the sole
CASH LOAN security of this policy, if:
a) the policy is in force;
b) there is a net cash value.
We have the right to delay making a policy loan from the
declared interest option for up to six months from the date
we receive the owner's request.
8.2 The total of all loans may not exceed 90% of the cash value as
LOAN VALUE of the date of the most recent loan. For any loan that is
made we will deduct interest in advance on the requested loan
to the next policy anniversary.
22
<PAGE>
8.3 The annual loan interest is to be paid in advance on each
LOAN INTEREST anniversary. Interest not paid when due will be added to the
loan and will bear interest at the same rate. The loan
interest rate will be variable, and from time to time we may
set a new rate which will take effect on the next
anniversary. The rate will not exceed 7.4% per year in
advance, which is equal to an effective rate of 8% per year.
Any increase in the rate will not exceed 1% per calendar
year. No change in the rate will take effect in less than one
calendar year from the previous change. We will send written
notice of any change in the rate to the owner and to any
assignee of record.
8.4 When the owner takes out a policy loan, an amount equal to the
LOAN loan will be segregated within the declared interest option as
ALLOCATION security for the loan. Amounts held as security for the loan
will first be allocated to the cash value in the declared
interest option. If the cash value in the declared interest
option less any existing policy loan is not sufficient to
cover the amount of the policy loan, the balance necessary
will be transferred from the subaccounts on a proportional
basis. This transfer is not treated as a transfer for the
purpose of the transfer charge or the limit of one transfer
in a policy year.
A transfer will also be made from the subaccounts on a
proportional basis for any due and unpaid loan interest if
the cash value in the declared interest option is not
sufficient to cover such interest option.
8.5 All or part of any policy loan may be repaid at any time while
LOAN the policy is still in force. Loan amounts repaid will be
REPAYMENT allocated to the declared interest option.
If the net cash value is not large enough on any monthly
deduction day to cover the monthly deduction charge, a grace
period of 61 days will be allowed for the payment of a
premium that, when reduced by the premium expense charges, is
at least equal to three times the monthly deduction charge
due on such date. We will mail notice of the required payment
to the last known address of the owner of record. If we do
not receive the required premium payment within 61 days of
the date notice is sent, the policy will terminate without
value at the end of the 61-day period.
Any outstanding policy loans will be deducted from the
proceeds at death, maturity or complete surrender.
- -------------------------------------------------------------------------------
SECTION 9 - PAYMENT OF PROCEEDS
- -------------------------------------------------------------------------------
9.1 The owner may choose to have the proceeds of this policy paid
CHOICE OF under a payment option. After your death, the beneficiary may
OPTIONS choose an option if the owner had not done so before your
death. If no payment option is chosen, we will pay the
proceeds of this policy in one sum. We may also fulfill our
obligation under this policy by paying the proceeds in one
sum if:
a) the proceeds are less than $2,000;
b) periodic payments become less than $20; or
c) the payee is an assignee, estate, trustee, partnership,
corporation, or association.
9.2 The choice of payment options are:
PAYMENT
OPTIONS 1) INTEREST INCOME -- The proceeds will be left with us to earn
interest. The interest will be paid every 1, 3, 6 or 12
months as the payee chooses. The rate
23
<PAGE>
of interest will be determined by us. The payee may
withdraw all or part of the proceeds at any time.
2) INCOME FOR FIXED TERM -- The proceeds will be paid out in
equal installments for a fixed term of years.
3) LIFE INCOME WITH TERM CERTAIN -- The proceeds will be paid
out in equal installments for as long as the payee lives,
but for not less than a term certain. The owner or payee
may choose one of the terms certain shown in the payment
option tables.
4) INCOME FOR FIXED AMOUNT -- The proceeds will be paid out
in equal installments of a specified amount. The payments
will continue until all proceeds plus interest have been
paid out.
5) JOINT AND TWO-THIRDS TO SURVIVOR MONTHLY LIFE INCOME -- The
proceeds will be paid out in equal monthly installments
for as long as two joint payees live. When one payee
dies, installments of two-thirds of the first installment
will be paid to the surviving payee. Payments will stop
when the surviving payee dies.
The proceeds may be paid in any other manner requested and
agreed to by us, or under any other payment options made
available by the Company.
9.3 Proceeds applied under a payment option no longer earn
INTEREST AND interest at the rate applied to the declared interest option
MORTALITY or participate in the investment experience of the variable
account. The minimum interest rate used in computing any
payment option is 3% per year. Higher interest rates may be
used on the effective date of the payment contract. We may
at any time declare additional interest on these funds. The
amount of additional interest and how it is determined will
be set by us.
The mortality table which is used for options 3) and 5) is
the "1983 Table a" individual annuity mortality table.
9.4 For the owner to choose or change a payment option:
REQUIREMENTS
a) this contract must be in force;
b) the request must be in writing to us at our home
office; and
c) any prior option must be canceled.
After your death, and before this contract is settled, for a
beneficiary to choose or change a payment option:
a) a prior option by the owner cannot be in effect;
b) the request must be in writing to us at our home
office; and
c) any prior option must be canceled.
9.5 If a payment option has been chosen by the owner, it is
EFFECTIVE effective on the date the proceeds of this policy are due. If a
DATE beneficiary chooses a payment option, it is effective on the
date of election. The first payment under options 2, 3, 4,
or 5 is due on the effective date. The first payment under
payment option 1 is due at the end of the period chosen.
24
<PAGE>
9.6 If a payee dies, any remaining payments will be paid to a
DEATH OF contingent payee. If no payee survives, we will pay the
PAYEE commuted value of any remaining payments to the last payee's
estate.
9.7 The payee may not withdraw the funds under a payment option
WITHDRAWAL unless agreed to in the payment contract. We have the right to
OF PROCEEDS defer a withdrawal for up to 6 months. We may also refuse to
allow partial withdrawals of less than $250.
9.8 Payments under any payment option will be exempt from the claims
CLAIMS OF of creditors to the maximum extent allowed by law.
CREDITORS
25
<PAGE>
PAYMENT OPTION TABLES
(PER $1,000 OF PROCEEDS)
OPTION 2 - INCOME FOR FIXED TERM
INSTALLMENTS PER $1,000 PROCEEDS
- --------------------------------
NUMBER
OF YEARS ANNUAL MONTHLY
- --------------------------------
1 $1,000.00 $84.47
2 507.39 42.86
3 343.23 28.99
4 261.19 22.06
5 211.99 17.91
6 179.22 15.14
7 155.83 13.16
8 138.31 11.68
9 124.69 10.53
10 113.82 9.61
11 104.93 8.86
12 97.54 8.24
13 91.29 7.71
14 85.95 7.26
15 81.33 6.87
16 77.29 6.53
17 73.74 6.23
18 70.59 5.96
19 67.78 5.73
20 65.26 5.51
21 62.98 5.32
22 60.92 5.15
23 59.04 4.99
24 57.33 4.84
25 55.76 4.71
26 54.31 4.59
27 52.97 4.47
28 51.74 4.37
29 50.60 4.27
30 49.53 4.18
<TABLE>
<CAPTION>
GUARANTEED SETTLEMENT OPTION 3
LIFE INCOME WITH TERM CERTAIN
MONTHLY INSTALLMENTS PER $1,000 PROCEEDS
------------------------------------------------------------------------------------------
MALE FEMALE
------------------------------------------------------------------------------------------
YEARS CERTAIN YEARS CERTAIN
AGE 0 5 10 15 20 AGE 0 5 10 15 20
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------
0-21 $3.06 $3.05 $3.05 $3.05 $3.05 0-21 $2.95 $2.95 $2.95 $2.94 $2.94
22 3.08 3.08 3.07 3.07 3.07 22 2.96 2.96 2.96 2.96 2.96
23 3.10 3.10 3.09 3.09 3.09 23 2.98 2.98 2.98 2.98 2.98
24 3.12 3.12 3.12 3.11 3.11 24 3.00 3.00 3.00 3.00 2.99
25 3.14 3.14 3.14 3.14 3.13 25 3.02 3.02 3.02 3.02 3.01
------------------------------------------------------------------------------------------
26 3.17 3.17 3.16 3.16 3.15 26 3.04 3.04 3.04 3.03 3.03
27 3.19 3.19 3.19 3.19 3.18 27 3.06 3.06 3.06 3.06 3.05
28 3.22 3.22 3.22 3.21 3.20 28 3.08 3.08 3.08 3.08 3.07
29 3.25 3.25 3.24 3.24 3.23 29 3.10 3.10 3.10 3.10 3.09
30 3.28 3.28 3.27 3.27 3.26 30 3.13 3.13 3.12 3.12 3.12
------------------------------------------------------------------------------------------
31 3.31 3.31 3.30 3.30 3.29 31 3.15 3.15 3.15 3.14 3.14
32 3.34 3.34 3.33 3.33 3.32 32 3.18 3.17 3.17 3.17 3.16
33 3.37 3.37 3.37 3.36 3.35 33 3.20 3.20 3.20 3.20 3.19
34 3.41 3.41 3.40 3.39 3.38 34 3.23 3.23 3.23 3.22 3.22
35 3.44 3.44 3.44 3.43 3.41 35 3.26 3.26 3.26 3.25 3.24
------------------------------------------------------------------------------------------
36 3.48 3.48 3.48 3.46 3.45 36 3.29 3.29 3.29 3.28 3.27
37 3.52 3.52 3.51 3.50 3.48 37 3.32 3.32 3.32 3.31 3.30
38 3.57 3.56 3.56 3.54 3.52 38 3.35 3.35 3.35 3.34 3.33
39 3.61 3.61 3.60 3.58 3.56 39 3.39 3.39 3.38 3.38 3.37
40 3.66 3.65 3.64 3.63 3.60 40 3.42 3.42 3.42 3.41 3.40
------------------------------------------------------------------------------------------
41 3.71 3.70 3.69 3.67 3.64 41 3.46 3.46 3.46 3.45 3.43
42 3.76 3.75 3.74 3.72 3.68 42 3.50 3.50 3.50 3.49 3.47
43 3.81 3.81 3.79 3.77 3.73 43 3.54 3.54 3.54 3.53 3.51
44 3.87 3.86 3.85 3.82 3.77 44 3.59 3.59 3.58 3.57 3.55
45 3.93 3.92 3.90 3.87 3.82 45 3.63 3.63 3.63 3.61 3.59
------------------------------------------------------------------------------------------
46 3.99 3.98 3.96 3.92 3.87 46 3.68 3.68 3.67 3.66 3.63
47 4.05 4.05 4.02 3.98 3.92 47 3.73 3.73 3.72 3.71 3.68
48 4.12 4.11 4.09 4.04 3.97 48 3.79 3.79 3.77 3.76 3.72
49 4.19 4.18 4.15 4.10 4.03 49 3.84 3.84 3.83 3.81 3.77
50 4.27 4.26 4.22 4.17 4.08 50 3.90 3.90 3.89 3.86 3.82
------------------------------------------------------------------------------------------
51 4.34 4.33 4.29 4.23 4.14 51 3.97 3.96 3.95 3.92 3.88
52 4.43 4.41 4.37 4.30 4.20 52 4.03 4.03 4.01 3.98 3.93
53 4.51 4.50 4.45 4.37 4.26 53 4.10 4.10 4.08 4.04 3.99
54 4.60 4.59 4.54 4.45 4.32 54 4.18 4.17 4.15 4.11 4.04
55 4.70 4.68 4.62 4.53 4.39 55 4.25 4.25 4.22 4.18 4.11
------------------------------------------------------------------------------------------
56 4.80 4.78 4.72 4.61 4.45 56 4.34 4.33 4.30 4.25 4.17
57 4.91 4.89 4.82 4.69 4.51 57 4.42 4.41 4.38 4.32 4.23
58 5.03 5.00 4.92 4.78 4.58 58 4.52 4.50 4.47 4.40 4.30
59 5.15 5.12 5.03 4.87 4.64 59 4.61 4.60 4.56 4.48 4.37
60 5.28 5.25 5.14 4.96 4.71 60 4.72 4.70 4.66 4.57 4.44
------------------------------------------------------------------------------------------
61 5.42 5.39 5.26 5.06 4.78 61 4.83 4.81 4.76 4.66 4.51
62 5.57 5.53 5.39 5.16 4.84 62 4.95 4.93 4.86 4.75 4.58
63 5.74 5.69 5.52 5.26 4.90 63 5.07 5.05 4.98 4.85 4.65
64 5.91 5.85 5.66 5.36 4.96 64 5.21 5.18 5.10 4.95 4.72
65 6.10 6.03 5.81 5.46 5.02 65 5.35 5.32 5.22 5.05 4.79
------------------------------------------------------------------------------------------
66 6.29 6.21 5.96 5.56 5.08 66 5.51 5.47 5.36 5.16 4.86
67 6.50 6.41 6.11 5.66 5.13 67 5.67 5.63 5.50 5.26 4.93
68 6.73 6.62 6.28 5.76 5.18 68 5.85 5.80 5.65 5.37 5.00
69 6.97 6.84 6.44 5.86 5.23 69 6.04 5.98 5.80 5.49 5.06
70 7.23 7.07 6.61 5.96 5.27 70 6.25 6.18 5.96 5.60 5.12
------------------------------------------------------------------------------------------
71 7.51 7.32 6.78 6.05 5.31 71 6.47 6.39 6.14 5.71 5.18
72 7.80 7.58 6.96 6.14 5.34 72 6.71 6.62 6.31 5.83 5.23
73 8.12 7.85 7.14 6.23 5.37 73 6.97 6.86 6.50 5.94 5.28
74 8.45 8.14 7.32 6.31 5.40 74 7.26 7.12 6.69 6.04 5.32
75 8.82 8.44 7.49 6.38 5.42 75 7.56 7.39 6.89 6.14 5.35
------------------------------------------------------------------------------------------
76 9.21 8.76 7.67 6.45 5.44 76 7.90 7.69 7.09 6.24 5.39
77 9.62 9.09 7.84 6.51 5.45 77 8.26 8.01 7.29 6.33 5.41
78 10.07 9.44 8.01 6.57 5.47 78 8.65 8.34 7.49 6.41 5.43
79 10.55 9.80 8.17 6.62 5.48 79 9.07 8.69 7.69 6.48 5.45
80 11.06 10.17 8.33 6.66 5.49 80 9.53 9.07 7.89 6.55 5.47
------------------------------------------------------------------------------------------
81 11.61 10.55 8.48 6.70 5.49 81 10.03 9.46 8.08 6.61 5.48
82 12.19 10.94 8.61 6.73 5.50 82 10.57 9.87 8.26 6.66 5.49
83 12.81 11.33 8.74 6.76 5.50 83 11.16 10.30 8.43 6.70 5.49
84 13.46 11.72 8.86 6.79 5.51 84 11.79 10.74 8.59 6.74 5.50
85 14.16 12.12 8.97 6.81 5.51 85 12.48 11.19 8.74 6.77 5.50
------------------------------------------------------------------------------------------
AGES OVER 85 RATED AS AGE 85 AGES OVER 85 RATED AS AGE 85
</TABLE>
26
<PAGE>
GUARANTEED SETTLEMENT OPTION 5
JOINT AND TWO-THIRDS TO SURVIVOR MONTHLY LIFE INCOME
MONTHLY INSTALLMENTS PER $1,000 OF PROCEEDS
<TABLE>
<CAPTION>
FEMALE AGE
MALE
AGE 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
46 3.69 3.71 3.74 3.77 3.80 3.82 3.85 3.88 3.91 3.94 3.97 4.01 4.04 4.07 4.11 4.14 4.18 4.21 4.25 4.29
47 3.71 3.74 3.77 3.79 3.82 3.85 3.88 3.91 3.94 3.97 4.01 4.04 4.07 4.11 4.14 4.18 4.22 4.25 4.29 4.33
48 3.74 3.76 3.79 3.82 3.85 3.88 3.91 3.94 3.97 4.01 4.04 4.07 4.11 4.14 4.18 4.22 4.26 4.29 4.33 4.37
49 3.76 3.79 3.82 3.85 3.88 3.91 3.94 3.97 4.01 4.04 4.07 4.11 4.15 4.18 4.22 4.26 4.30 4.34 4.38 4.42
50 3.79 3.81 3.84 3.87 3.91 3.94 3.97 4.00 4.04 4.07 4.11 4.15 4.18 4.22 4.26 4.30 4.34 4.38 4.42 4.47
51 3.81 3.84 3.87 3.90 3.93 3.97 4.00 4.04 4.07 4.11 4.14 4.18 4.22 4.26 4.30 4.34 4.38 4.43 4.47 4.51
52 3.84 3.87 3.90 3.93 3.96 4.00 4.03 4.07 4.11 4.14 4.18 4.22 4.26 4.30 4.34 4.38 4.43 4.47 4.52 4.56
53 3.86 3.89 3.93 3.96 3.99 4.03 4.06 4.10 4.14 4.18 4.22 4.26 4.30 4.34 4.38 4.43 4.47 4.52 4.57 4.61
54 3.89 3.92 3.95 3.99 4.02 4.06 4.10 4.13 4.17 4.21 4.25 4.30 4.34 4.38 4.43 4.47 4.52 4.57 4.62 4.67
55 3.92 3.95 3.98 4.02 4.05 4.09 4.13 4.17 4.21 4.25 4.29 4.34 4.38 4.43 4.47 4.52 4.57 4.62 4.67 4.72
56 3.94 3.98 4.01 4.05 4.08 4.12 4.16 4.20 4.24 4.29 4.33 4.38 4.42 4.47 4.52 4.57 4.62 4.67 4.72 4.77
57 3.97 4.01 4.04 4.08 4.12 4.16 4.20 4.24 4.28 4.32 4.37 4.42 4.46 4.51 4.56 4.61 4.67 4.72 4.77 4.83
58 4.00 4.03 4.07 4.11 4.15 4.19 4.23 4.27 4.32 4.36 4.41 4.46 4.51 4.56 4.61 4.66 4.72 4.77 4.83 4.89
59 4.03 4.06 4.10 4.14 4.18 4.22 4.27 4.31 4.36 4.40 4.45 4.50 4.55 4.60 4.66 4.71 4.77 4.83 4.89 4.95
60 4.06 4.10 4.13 4.17 4.22 4.26 4.30 4.35 4.39 4.44 4.49 4.54 4.60 4.65 4.71 4.76 4.82 4.88 4.95 5.01
61 4.09 4.13 4.17 4.21 4.25 4.29 4.34 4.39 4.43 4.48 4.53 4.59 4.64 4.70 4.76 4.82 4.88 4.94 5.00 5.07
62 4.12 4.16 4.20 4.24 4.28 4.33 4.38 4.42 4.47 4.53 4.58 4.63 4.69 4.75 4.81 4.87 4.93 5.00 5.07 5.13
63 4.15 4.19 4.23 4.28 4.32 4.37 4.41 4.46 4.51 4.57 4.62 4.68 4.74 4.80 4.86 4.92 4.99 5.06 5.13 5.20
64 4.18 4.22 4.27 4.31 4.36 4.40 4.45 4.50 4.56 4.61 4.67 4.73 4.79 4.85 4.91 4.98 5.05 5.12 5.19 5.27
65 4.22 4.26 4.30 4.35 4.39 4.44 4.49 4.54 4.60 4.65 4.71 4.77 4.83 4.90 4.97 5.04 5.11 5.18 5.26 5.33
66 4.25 4.29 4.34 4.38 4.43 4.48 4.53 4.58 4.64 4.70 4.76 4.82 4.88 4.95 5.02 5.09 5.17 5.24 5.32 5.40
67 4.28 4.33 4.37 4.42 4.47 4.52 4.57 4.63 4.68 4.74 4.80 4.87 4.93 5.00 5.07 5.15 5.23 5.30 5.39 5.47
68 4.32 4.36 4.41 4.46 4.51 4.56 4.61 4.67 4.73 4.79 4.85 4.92 4.98 5.06 5.13 5.21 5.29 5.37 5.45 5.54
69 4.35 4.40 4.44 4.49 4.54 4.60 4.65 4.71 4.77 4.83 4.90 4.97 5.04 5.11 5.19 5.26 5.35 5.43 5.52 5.61
70 4.39 4.43 4.48 4.53 4.58 4.64 4.69 4.75 4.81 4.88 4.94 5.01 5.09 5.16 5.24 5.32 5.41 5.50 5.59 5.68
71 4.42 4.47 4.52 4.57 4.62 4.68 4.73 4.79 4.86 4.92 4.99 5.06 5.14 5.22 5.30 5.38 5.47 5.56 5.65 5.75
72 4.45 4.50 4.55 4.60 4.66 4.72 4.78 4.84 4.90 4.97 5.04 5.11 5.19 5.27 5.35 5.44 5.53 5.62 5.72 5.82
73 4.49 4.54 4.59 4.64 4.70 4.76 4.82 4.88 4.95 5.01 5.09 5.16 5.24 5.32 5.41 5.50 5.59 5.69 5.79 5.89
74 4.52 4.57 4.63 4.68 4.74 4.80 4.86 4.92 4.99 5.06 5.13 5.21 5.29 5.38 5.46 5.56 5.65 5.75 5.86 5.97
75 4.56 4.61 4.66 4.72 4.78 4.84 4.90 4.97 5.03 5.11 5.18 5.26 5.34 5.43 5.52 5.61 5.71 5.82 5.92 6.04
76 4.59 4.64 4.70 4.76 4.81 4.88 4.94 5.01 5.08 5.15 5.23 5.31 5.39 5.48 5.57 5.67 5.77 5.88 5.99 6.11
77 4.63 4.68 4.74 4.79 4.85 4.92 4.98 5.05 5.12 5.20 5.28 5.36 5.44 5.54 5.63 5.73 5.83 5.94 6.06 6.18
78 4.66 4.72 4.77 4.83 4.89 4.95 5.02 5.09 5.16 5.24 5.32 5.41 5.49 5.59 5.68 5.79 5.89 6.01 6.12 6.25
79 4.70 4.75 4.81 4.87 4.93 4.99 5.06 5.13 5.21 5.29 5.37 5.45 5.54 5.64 5.74 5.84 5.95 6.07 6.19 6.32
80 4.73 4.78 4.84 4.90 4.97 5.03 5.10 5.17 5.25 5.33 5.41 5.50 5.59 5.69 5.79 5.90 6.01 6.13 6.25 6.38
81 4.76 4.82 4.88 4.94 5.00 5.07 5.14 5.21 5.29 5.37 5.46 5.55 5.64 5.74 5.84 5.95 6.07 6.19 6.32 6.45
82 4.79 4.85 4.91 4.97 5.04 5.11 5.18 5.25 5.33 5.41 5.50 5.59 5.69 5.79 5.90 6.01 6.13 6.25 6.38 6.52
83 4.83 4.88 4.94 5.01 5.07 5.14 5.21 5.29 5.37 5.46 5.54 5.64 5.73 5.84 5.95 6.06 6.18 6.31 6.44 6.58
84 4.86 4.91 4.98 5.04 5.11 5.18 5.25 5.33 5.41 5.50 5.58 5.68 5.78 5.88 5.99 6.11 6.23 6.36 6.50 6.64
85 4.88 4.94 5.01 5.07 5.14 5.21 5.29 5.36 5.45 5.53 5.62 5.72 5.82 5.93 6.04 6.16 6.28 6.42 6.56 6.70
<CAPTION>
FEMALE AGE
MALE
AGE 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
46 4.32 4.36 4.40 4.44 4.48 4.52 4.57 4.61 4.65 4.70 4.74 4.79 4.83 4.88 4.92 4.97 5.01 5.06 5.10 5.14
47 4.37 4.41 4.45 4.49 4.53 4.58 4.62 4.66 4.71 7.76 4.80 4.85 4.89 4.94 4.99 5.03 5.08 5.13 5.17 5.21
48 4.41 4.45 4.50 4.54 4.58 4.63 4.67 4.72 4.77 4.81 4.86 4.91 4.96 5.01 5.05 5.10 5.15 5.20 5.24 5.29
49 4.46 4.50 4.55 4.59 4.64 4.68 4.73 4.78 4.83 4.87 4.92 4.97 5.02 5.07 5.12 5.17 5.22 5.27 5.32 5.36
50 4.51 4.55 4.60 4.64 4.69 4.74 4.79 4.84 4.89 4.94 4.99 5.04 5.09 5.14 5.19 5.24 5.30 5.35 5.39 5.44
51 4.56 4.60 4.65 4.70 4.75 4.80 4.85 4.90 4.95 5.00 5.05 5.11 5.16 5.21 5.27 5.32 5.37 5.42 5.48 5.53
52 4.61 4.66 4.71 4.76 4.81 4.86 4.91 4.96 5.02 5.07 5.12 5.18 5.23 5.29 5.34 5.40 5.45 5.51 5.56 5.61
53 4.66 4.71 4.76 4.81 4.87 4.92 4.97 5.03 5.08 5.14 5.20 5.25 5.31 5.37 5.42 5.48 5.54 5.59 5.65 5.70
54 4.72 4.77 4.82 4.87 4.93 4.98 5.04 5.10 5.15 5.21 5.27 5.33 5.39 5.45 5.51 5.57 5.63 5.68 5.74 5.80
55 4.77 4.83 4.88 4.93 4.99 5.05 5.11 5.17 5.23 5.29 5.35 5.41 5.47 5.53 5.60 5.66 5.72 5.78 5.84 5.90
56 4.83 4.88 4.94 5.00 5.06 5.12 5.18 5.24 5.30 5.37 5.43 5.49 5.56 5.62 5.69 5.75 5.81 5.88 5.94 6.00
57 4.89 4.94 5.00 5.06 5.13 5.19 5.25 5.32 5.38 5.45 5.51 5.58 5.65 5.72 5.78 5.85 5.92 5.98 6.05 6.11
58 4.95 5.01 5.07 5.13 5.20 5.26 5.33 5.40 5.46 5.53 5.60 5.67 5.74 5.81 5.88 5.95 6.02 6.09 6.16 6.22
59 5.01 5.07 5.14 5.20 5.27 5.34 5.41 5.48 5.55 5.62 5.69 5.77 5.84 5.91 5.99 6.06 6.13 6.21 6.28 6.35
60 5.07 5.14 5.21 5.27 5.34 5.42 5.49 5.56 5.64 5.71 5.79 5.87 5.94 6.02 6.10 6.18 6.25 6.33 6.40 6.47
61 5.14 5.21 5.26 5.35 5.42 5.50 5.57 5.65 5.73 5.81 5.89 5.97 6.05 6.13 6.21 6.29 6.37 6.45 6.53 6.61
62 5.20 5.28 5.35 5.42 5.50 5.58 5.66 5.74 5.82 5.91 5.99 6.08 6.16 6.25 6.33 6.42 6.50 6.59 6.67 6.75
63 5.27 5.35 5.42 5.50 5.58 5.67 5.75 5.84 5.92 6.01 6.10 6.19 6.28 6.37 6.48 6.55 6.64 6.73 6.81 6.90
64 5.34 5.42 5.50 5.58 5.67 5.75 5.84 5.93 6.02 6.12 6.21 6.31 6.40 6.50 6.59 6.69 6.78 6.87 6.97 7.06
65 5.41 5.49 5.58 5.67 5.75 5.84 5.94 6.03 6.13 6.23 6.33 6.43 6.53 6.63 6.73 6.83 6.93 7.03 7.12 7.22
66 5.48 5.57 5.66 5.75 5.84 5.94 6.03 6.13 6.24 6.34 6.44 6.55 6.66 6.76 6.87 6.97 7.08 7.19 7.29 7.39
67 5.56 5.65 5.74 5.83 5.93 6.03 6.13 6.24 6.35 6.45 6.56 6.68 6.79 6.90 7.01 7.13 7.24 7.35 7.46 7.57
68 5.63 5.72 5.82 5.92 6.02 6.13 6.23 6.34 6.46 6.57 6.69 6.81 6.93 7.05 7.17 7.29 7.40 7.52 7.64 7.76
69 5.70 5.80 5.90 6.01 6.11 6.22 6.34 6.45 6.57 6.69 6.82 6.94 7.07 7.19 7.32 7.45 7.58 7.70 7.83 7.95
70 5.78 5.88 5.98 6.09 6.20 6.32 6.44 6.56 6.69 6.81 6.95 7.08 7.21 7.35 7.48 7.62 7.75 7.89 8.02 8.15
71 5.85 5.98 6.07 6.18 6.30 6.42 6.54 6.67 6.80 6.94 7.08 7.22 7.36 7.50 7.64 7.79 7.93 8.08 8.22 8.36
72 5.93 6.04 6.15 6.27 6.39 6.52 6.65 6.78 6.92 7.07 7.21 7.36 7.51 7.66 7.81 7.97 8.12 8.27 8.43 8.58
73 6.00 6.12 6.24 6.36 6.49 6.62 6.76 6.90 7.04 7.19 7.35 7.50 7.66 7.82 7.98 8.15 8.31 8.48 8.64 8.80
74 6.08 6.20 6.32 6.45 6.58 6.72 6.86 7.01 7.16 7.32 7.48 7.65 7.82 7.99 8.16 8.33 8.51 8.68 8.86 9.03
75 6.15 6.28 6.40 6.54 6.68 6.82 6.97 7.13 7.29 7.45 7.62 7.80 7.97 8.16 8.34 8.52 8.71 8.90 9.08 9.27
76 6.23 6.36 6.49 6.63 6.77 6.92 7.08 7.24 7.41 7.58 7.76 7.95 8.13 8.33 8.52 8.72 8.91 9.11 9.31 9.51
77 6.30 6.43 6.57 6.71 6.86 7.02 7.18 7.35 7.53 7.71 7.90 8.10 8.29 8.50 8.70 8.91 9.12 9.34 9.55 9.76
78 6.38 6.51 6.65 6.80 6.96 7.12 7.29 7.47 7.65 7.84 8.04 8.25 8.46 8.67 8.89 9.11 9.33 9.56 9.79 10.01
79 6.45 6.59 6.74 6.89 7.05 7.22 7.40 7.58 7.77 7.97 8.18 8.40 8.62 8.84 9.07 9.31 9.55 9.79 10.03 10.27
80 6.52 6.67 6.82 6.97 7.14 7.32 7.50 7.69 7.89 8.10 8.32 8.55 8.78 9.02 9.26 9.51 9.76 10.02 10.28 10.54
81 6.59 6.74 6.90 7.06 7.23 7.41 7.60 7.80 8.01 8.23 8.46 8.69 8.94 9.19 9.45 7.71 9.98 10.25 10.53 10.80
82 6.66 6.81 6.97 7.14 7.32 7.51 7.70 7.91 8.13 8.36 8.59 8.84 9.09 9.36 9.63 9.91 10.19 10.48 10.77 11.07
83 6.73 6.88 7.05 7.22 7.41 7.60 7.80 8.02 8.24 8.48 8.73 8.98 9.25 9.53 9.81 10.10 10.40 10.71 11.02 11.33
84 6.79 6.95 7.12 7.30 7.49 7.69 7.90 8.12 8.35 8.60 8.86 9.12 9.40 9.69 9.99 10.30 10.61 10.94 11.26 11.60
85 6.86 7.02 7.19 7.38 7.57 7.78 7.99 8.22 8.46 8.72 8.98 9.26 9.55 9.85 10.16 10.49 10.82 11.16 11.51 11.86
</TABLE>
AGES OVER 85 RATED AS 85
27
<PAGE>
NON-PARTICIPATING
FLEXIBLE PREMIUM VARIABLE
LIFE INSURANCE POLICY
If you have any questions concerning this policy or
if anyone suggests that you change or replace this
policy, please contact your Farm Bureau Life agent
or our home office. (515-225-5400)
FARM BUREAU
LIFE INSURANCE COMPANY [LOGO]
5400 University Avenue
West Des Moines, Iowa 50266-5997
- -------------------------------------------------------------------------------
434-114(03-96)
<PAGE>
<TABLE>
<S><C>
[LOGO] LIFE-DISABILITY
FARM BUREAU
LIFE INSURANCE COMPANY
Account No.____________________
APPLICATION FOR_____________________________________ Date of birth _______________ Insurance Age ____________
PROPOSED INSURED MONTH DAY YEAR
/ / Male / / Female State of Birth_______________Social Security No.__________Applicant's St.-Co. Code____
BILLING ADDRESS____________________________________________________________________________________________
STREET CITY-TOWN STATE ZIP
- -----------------------------------------------------------------------------------------------------------------------------------
SECTION A COMPLETE THE APPROPRIATE SECTION FOR INSURANCE POLICIES DESIRED
I. LIFE
Policy
Number________________________________________________
(HOME OFFICE USE ONLY)
1. PLAN # AMOUNT
- ---------------------------------------------------------------
- ---------------------------------------------------------------
- ---------------------------------------------------------------
A B
Universal Life/Variable Universal Life Opt. / / / /
Yes No
Tobacco User / / / /
2. RIDERS Yes No
Spouse Rider $_______ Tobacco User / / / /
Universal Life/ AMOUNT
Variable Universal Life
F.T.R.________ C.T.R. _______ G.P.O. $__________
UNITS UNITS AMOUNT
A.D.B. $___________________ W.P. / / P.I. / /
AMOUNT
3. Is this application for an increase on or an
addition to an existing Universal Life or Yes No
Variable Universal Life policy? / / / /
Policy number____________________________
4. If Participating the Dividend Option is:
/ / Pay by Check / / Leave to Accumulate
/ / Apply to Premium / / Additional Paid-Up Ins.
/ / One Year Term (5th Opt.)
5. Premium / / Annually / / Semi-Annually / / Quarterly
Payable / / COM / / Other_________________________
6. Submitted Transfer
Premium $ of Funds $
(Do Not Include Transfer)
II. DISABILITY INCOME
Policy
Number____________________________
(HOME OFFICE USE ONLY)
1. Occ. Class ________ Basic Monthly Amt. $______________
Waiting Period__________ Benefit Period _______________
Yes No
2. Tobacco User / / / /
3. / / Series 234 FIXED
-----
Benefit Riders
WPI 541 / / LTPR 534 / / STPR 549 / / PD 552 / /
4. / / Series 236 FLEXIBLE
--------
Flexible Monthly Benefit $____________
AMOUNT
Benefit Riders
WPI 541 / / LTPR 534 / / STPR 549 / / PD 552 / /
5. / / Series 238 BOE
---
Benefit Riders
WPI / / LTPR / / STPR / /
Complete BOE Supplement
6. What is Applicant's Annual:
Gross Earned Income? $_________________
Net Earned Income? $_________________
7. Premium / / Annually / / Semi-Annually / / Quarterly
Payable / / COM / / Other_________________________
8. Submitted Transfer
Premium $ of Funds $
(Do Not Include Transfer)
- ---------------------------------------------------------------------------------------------------------
SECTION B COMPLETE THIS SECTION FOR ALL POLICIES
1. INSURANCE IN FORCE (if none, state "None") LIFE DISABILITY INCOME
- ----------------------------------------------------------------------------------------------------------
COMPANY AMOUNT ACC. DEATH AMOUNT WAITING/BENEFIT
PERIODS
- ----------------------------------------------------------------------------------------------------------
2. Is the policy applied for replacing or likely to replace any existing plan? / / Yes / / No
If "yes" indicate the amount, company name, give termination date and complete appropriate replacement
forms.
__________________________________________________________________________________________________________
__________________________________________________________________________________________________________
432-120 (3-94)
AGENT'S CERTIFICATE Agent Credit____________________________________________________________%__________
Name (Primary) State County Agent No.
____________________________________________________________%__________
Name State County Agent No.
Was I.R. ordered / / Yes / / No
Was Exam ordered / / Yes / / No Indicate the "key" letter used for medical requirements. ________
- -----------------------------------------------------------------------------------------------------------
Will this plan If yes, have replacement / / Yes Did you give "Notice to / / Yes
replace any other? / / Yes / / No forms been submitted? / / No Applicant" form to applicant? / / No
Did you see all persons / / Yes (If no - explain)
proposed for insurance? / / No
- --------------------------------------------------------------------------------------------------------------
If proposed insured is a married female: How long married? __________________________________________________
Maiden name______________________________ Husband's name and Amount of Life Ins. in force? ___________________
______________________________________________________________________________________________________________
Estate Planning: Attach copy of your programming or give full details.
____________________________________________________________________________________________________________
____________________________________________________________________________________________________________
____________________________________________________________________________________________________________
Business insurance: Give full reason for this insurance and nature of applicant's interest__________________
____________________________________________________________________________________________________________
____________________________________________________________________________________________________________
____________________________________________________________________________________________________________
The answers to each question of this application were recorded in my presence exactly as given. I know
nothing detrimental to the risk that is not recorded in these papers. I have rechecked all answers and
calculations for correctness.
Dated at_____________________________________________________________________________________________________
City State Signature of Agent
<PAGE>
SECTION C COMPLETE THIS SECTION FOR ALL POLICIES
1. Name of Proposed Insured (Print)
_____________________________________________________________________________
2. Present Address (if different from Billing Address already listed)
_____________________________________________________________________________
3. Phone No.: Home______________________ Bus.__________________________
A.M.
Best time to reach by phone____________________ P.M.
4. Married / / Single / / Widowed / / Divorced / /
5. Height ________ ft. _________in. Weight ________ lbs.
Questions 6 through 8 refer to the Proposed Insured if age 15 or over,
otherwise to the Owner if Proposed Insured is under 15.
6. a. Occupation_________________________________________
b. Duties_____________________________________________
c. Employer___________________________________________
d. Have you any other occupation or do you contemplate
any change in occupation? Yes / / No / / (give details in
REMARKS section)
7. Business Address_______________________________________
8. Spouse's Occupation____________________________________
(if applying for coverage)
- ---------------------------------------------------------------------------------------------------
SECTION D COMPLETE THIS SECTION IF OTHERS ARE TO BE INCLUDED
1. Names of all other persons proposed for insurance. (Include Family Members and Payor if Premium Insurance
is applied for)
DATE OF STATE AMOUNT OF
BIRTH INSURING OF LIFE INSURANCE
LAST FIRST MIDDLE SEX RELATIONSHIP MO. DAY YR. AGE BIRTH HEIGHT WEIGHT IN FORCE
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
2. Was any child under age 5 listed for coverage a premature birth? Yes No
(If yes, list birth weight and give details in Section G.) / / / /
3. Are all children listed the natural or legally adopted children
of the Proposed Insured or Spouse? / / / /
4. Has each child eligible for coverage been included? / / / /
5. Is the Proposed Insured's residence the permanent residence
of all children listed? / / / /
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SECTION E OWNER AND BENEFICIARY (IF REQUIRED)
I. OWNER: (If other than Proposed Insured):
1. OWNERSHIP TO BE VESTED IN
Name Social Security No.
________________________________________________________________
________________________________________________________________
________________________________________________________________
2. OWNERS ADDRESS
________________________________________________________________
________________________________________________________________
3. CONTINGENT OWNER (if any) Social Security No.
Name_____________________________________________________________
Address__________________________________________________________
II. BENEFICIARY as to proceeds at death of the Insured:
Survivors within a class (Primary or Secondary) entitled to the
proceeds shall share equally unless otherwise specified.
NAME RELATIONSHIP
1. Primary_______________________________________________________
2. Secondary, if primary beneficiary is not living:
NAME RELATIONSHIP
______________________________________________________________
/ / Children born to or adopted by the Proposed Insured and
________________________________(including any named above).
The Beneficiary as to proceeds at death of any person other
than the Insured or Joint Insured shall be as stated in the
applicable benefit provision.
3. / / Directions for settlement attached.
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SECTION F SPECIAL REQUESTS, REMARKS AND CORRECTIONS OR ENDORSEMENTS
(Policy date, certificates for additional insurance, etc.)
I request the adjustable policy loan interest rate.
I request the Cost of Living Increase Rider if available.
I request the Automatic Premium Loan privilege if available.
ADDITIONAL COMMENTS
<PAGE>
SECTION G MEDICAL HISTORY - HAS ANY PERSON PROPOSED FOR COVERAGE EVER HAD OR BEEN TOLD THEY HAD:
1. Epilepsy, fainting spells, convulsions, nervous YES NO
or mental condition, stroke, paralysis or any dis-
order of the brain or nervous system? / / / /
2. Heart attack, heart murmur, high blood pressure,
shortness of breath, pain or pressure in the
chest, palpitation, or any disorder of the heart,
blood or blood vessels? / / / /
3. Tuberculosis, asthma, spitting of blood, or any
disorder of the lungs, bronchial tubes, throat or
respiratory system? / / / /
4. Ulcer, indigestion, colitis, chronic diarrhea,
hepatitis, gallstones, hernia, passing blood or
any disorder of the stomach, intestines, rectum,
appendix, gallbladder or liver? / / / /
5. Nephritis, sugar, albumin, pus or blood in the
urine, syphilis, kidney stone, or any disorder of
the kidneys, urinary system or female or male
organs including the prostate? / / / /
6. Diabetes, gout, or any disorder of the thyroid or
other glands? / / / /
7. Immune system disorder? / / / /
8. Rheumatic fever, arthritis, back trouble, or any
disorder of the joints, muscles or bones? / / / /
9. Any disorder of the eyes, ears or skin? / / / /
10. Cancer, tumor or lymph node enlargement? / / / /
11. Any physical deformity or defect? / / / /
12. Any injury, disease, recurrent infection,
condition or disorder not indicated above? / / / /
HAS ANY PERSON PROPOSED FOR COVERAGE:
13. Gained or lost weight in the past year? (If yes,
give pounds gained or lost and reason) / / / /
14. Used drugs for high blood pressure or presently
taking medication of any type? / / / /
(If yes, show drugs, dosage, and duration taken)
15. Been advised to have or now contemplate surgery? / / / /
16. Smoked cigarettes or used tobacco in any form
within the past 12 months? / / / /
DURING THE PAST FIVE YEARS
HAS ANY PERSON PROPOSED FOR COVERAGE:
17. Been examined or had a physical check-up? / / / /
18. Had an x-ray, electrocardiogram, blood studies,
or any other laboratory test or study? / / / /
19. Give details to "yes" answers to questions 17 and 18 regarding check-ups, electrocardiograms, x-rays,
blood studies, or other tests.
- --------------------------------------------------------------------------------------------------------------
QUES. WHAT TEST NAME AND ADDRESS OF
NO. NAME WAS DONE DATE REASON FOR TEST WHAT WAS FOUND DOCTORS AND HOSPITALS
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
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INDICATE QUESTION # -- IDENTIFY PERSON
Circle specific condition, give date and severity of symptoms, type of surgery,
remaining effects, names & addresses of physicians & hospitals.
- --------------------------------------------------------------------------------------------------------------
CONDITIONAL RECEIPT -- CONTINUED
The DATE OF INSURABILITY is defined as the later of (1) the date on which all parts of this application
and any supplements hereto are completed on all persons proposed for insurance, or (2) the date on which all
medical examinations and procedures which may be required in connection with this application, including, when
required by the company, a second physical examination, electrocardiogram, urine specimen or chest x-ray, have
been completed, or (3) if the person proposed for insurance is a child, the date he or she attains the age of
7 days.
The total of all proceeds payable by the Company in connection with the interim insurance provided by
this receipt, if any, shall be equal to the face amount of the insurance applied for subject to the following
limitations and exceptions:
(1) If any person proposed for insurance is insurable on the DATE OF INSURABILITY, but only at a rate
which is higher than the rate applied for, the total proceeds which may be payable shall not exceed $50,000.
(2) In no event shall the total proceeds which may be payable exceed $250,000.
The payment for which this receipt is given will be applied to the premium due on any policy issued as a
result of or in connection with the application. If no such policy is issued, the amount of the payment will
be returned to the person from whom it was received.
No Agent or employee of the Farm Bureau Life Insurance Company has any power or authority to change or
modify any of the provisions of this Conditional Receipt.
DATED AT____________________________________ _________________ _______________________________
CITY STATE DATE SOLICITING AGENT
NOTICE TO APPLICANT
INFORMATION REGARDING YOUR INSURABILITY WILL BE TREATED AS CONFIDENTIAL. FARM BUREAU LIFE INSURANCE COMPANY
OR ITS REINSURERS MAY, HOWEVER, MAKE A BRIEF REPORT THEREON TO THE MEDICAL INFORMATION BUREAU, A NON-PROFIT
MEMBERSHIP ORGANIZATION OF LIFE INSURANCE COMPANIES, WHICH OPERATES AN INFORMATION EXCHANGE ON BEHALF OF ITS
MEMBERS. IF YOU APPLY TO ANOTHER MEDICAL INFORMATION BUREAU MEMBER COMPANY FOR LIFE OR HEALTH INSURANCE
COVERAGE, OR A CLAIM FOR BENEFITS IS SUBMITTED TO SUCH A COMPANY, THE MEDICAL INFORMATION BUREAU, UPON
REQUEST, WILL SUPPLY SUCH COMPANY WITH THE INFORMATION IN ITS FILE.
UPON RECEIPT OF A REQUEST FROM YOU, THE MEDICAL INFORMATION BUREAU WILL ARRANGE DISCLOSURE OF ANY INFORMATION
IT MAY HAVE IN YOUR FILE. (MEDICAL INFORMATION WILL BE DISCLOSED ONLY TO YOUR ATTENDING PHYSICIAN.) IF YOU
QUESTION THE ACCURACY OF INFORMATION IN THE MEDICAL INFORMATION BUREAU'S FILE, YOU MAY CONTACT THE MEDICAL
INFORMATION BUREAU AND SEEK A CORRECTION IN ACCORDANCE WITH THE PROCEDURES SET FORTH IN THE FEDERAL FAIR
CREDIT REPORTING ACT. THE ADDRESS OF THE MEDICAL INFORMATION BUREAU'S INFORMATION OFFICE IS POST OFFICE BOX
105, ESSEX STATION, BOSTON, MASSACHUSETTS 02112, TELEPHONE NUMBER (617) 426-3660.
FARM BUREAU LIFE INSURANCE COMPANY OR ITS REINSURERS MAY ALSO RELEASE INFORMATION IN ITS FILE TO OTHER LIFE
INSURANCE COMPANIES TO WHOM YOU MAY APPLY FOR LIFE OR HEALTH INSURANCE, OR TO WHOM A CLAIM FOR BENEFITS MAY BE
SUBMITTED. (SEE NOTICE TO APPLICANT -- ON REVERSE SIDE.)
<PAGE>
SECTION H GENERAL QUESTIONS -- HAS ANY PERSON PROPOSED FOR COVERAGE:
YES NO
1. Been treated for alcoholism or any drug habit;
used or taken narcotics, marijuana, LSD,
amphetamines or barbiturates on a regular basis? / / / /
2. Engaged in, or intend to engage in hazardous
sports or travel outside the U.S. and Canada? (If
yes for Hazardous Sports, complete Supplement
#432-87) / / / /
3. Made any aerial flights in the past two years or
contemplate such flights in the future, other
than as a civilian passenger? / / / /
(If yes, complete Supplement #432-87)
4. Volunteered for military service, been alerted,
or ordered to report for active duty? / / / /
5. Been rejected for or received a Medical Discharge
or Disability Benefits from Military Service? / / / /
6. A pending application for or reinstatement of
insurance in this or any other Company? / / / /
7. Ever had an application for insurance or
reinstatement declined, postponed, rated
up or limited? / / / /
8. Had any cases of stroke, heart attack, cancer,
diabetes, insanity, suicide, tuberculosis or
inheritable disorders in their family? / / / /
9. Applied for a pension, disability or medical
expense payments from any source? / / / /
10. Had a moving traffic violation in the past 2
years? Give the specific details of each violation. / / / /
INDICATE QUESTION # -- IDENTIFY PERSON
- ----------------------------------------------------------------------------------
GIVE DETAILS
- --------------------------------------------------------------------------------------------------------------
REPRESENTATIONS, AUTHORIZATION AND ACKNOWLEDGEMENT STATEMENT
I represent that the statements and answers in all parts of this application and supplements thereto are
true and complete to the best of my knowledge and belief. It is agreed that: (1) All such statements and
answers shall be the basis of any insurance issued; (2) Except as provided in the conditional receipt attached
hereto and unless it is delivered to the applicant and the premium payment therein described is made, no
insurance shall take effect unless a policy has been issued by the Company, physically received and accepted
by the applicant and the entire first premium paid while, to the best of his knowledge, there has been no
change, since the date of this application, in the health and insurability of all persons proposed for
coverage; (3) No agent or medical examiner is authorized to pass on acceptability for insurance or to make,
modify or discharge any contract of insurance or waive any of the Company's rights or requirements; (4) The
right to change any beneficiary is reserved unless otherwise requested; (5) All changes on the application
must be subject to written ratification by the proposed insured or owner.
STATEMENT regarding payment made with application: I have paid $____________ with this application for / /
Life / / Disability Income and I accept the terms of the conditional receipt detached from this application.
I hereby authorize any licensed physician, medical practitioner, hospital, clinic or other medical or
medically related facility, insurance company, the Medical Information Bureau, or other organization,
institution or person, that has any records or knowledge of me or my health or the health of my dependent, to
give to the Farm Bureau Life Insurance Company or its reinsurers any such information. This authorization
shall remain valid for two years.
I also acknowledge receipt of the NOTICE TO APPLICANT relating to information obtained by inspecting companies
and Medical Information Bureau. A photographic copy of this authorization and acknowledgement shall be as
valid as the original.
DATED AT_____________________________________ DATE SIGNED_________________________________________________
CITY AND STATE
___________________________________________________ _____________________________________________________
SIGNATURE OF WITNESS SIGNATURE OF PROPOSED INSURED
____________________________________________________________________ _____________________________________
SIGNATURE OF APPLICANT OWNER IF OTHER THAN PROPOSED INSURED SIGNATURE OF SPOUSE OR PAYOR (IF
PROPOSED FOR INSURANCE) OR PARENT
IF INSURED IS A CHILD UNDER AGE 15
- --------------------------------------------------------------------------------------------------------------
CONDITIONAL RECEIPT
Received from _____________________________this____________day of_______________________, 19_____,
the amount of $________________(this amount must be a minimum of one month's premium for each policy applied
for) in connection with an application for / / Life / / Disability Income insurance on which
_______________________________ is the Proposed Insured. This receipt shall be void and no further action will
be taken to process this application if any check or draft for which this receipt is given is not paid when
presented for payment.
IMPORTANT INFORMATION -- PLEASE READ CAREFULLY
Except as otherwise expressly provided below, no insurance is provided by this receipt or in connection
with or as a result of having completed this application, and no insurance will be provided by this receipt or
in connection with or as a result of having completed this application unless the person or persons proposed
for insurance in this application is insurable in accordance with the Company's rules and standards of
insurability with respect to the policy or policies applied for and the level of insurance applied for.
If the person or persons proposed for insurance in this application is insurable as described above, this
receipt provides interim insurance coverage from the DATE OF INSURABILITY, as defined below, until the
earliest of the following dates:
(1) the date the Company mails notice that the application is not accepted;
(2) the date the Company mails to the applicant or the proposed insured a policy or policies other than
the policy or policies applied for;
(3) the date the policy or policies applied for is issued and becomes effective; or
(4) the date 60 days after the DATE OF INSURABILITY.
No insurance is provided by this receipt after the earliest of the four dates listed above.
The terms and conditions of any interim insurance coverage which may be provided by this receipt shall be
the same as those contained in the policy or policies applied for, but shall not include the terms or
provisions of any Accidental Death Benefit rider or any other insurance rider or riders applied for.
(CONTINUED ON REVERSE SIDE OF THIS RECEIPT)
NOTICE TO APPLICANT -- (SEE REVERSE SIDE OF THIS NOTICE)
Federal law requires that notice of investigation be given to persons applying for insurance.
In making this application for insurance to Farm Bureau Life Insurance Company or its reinsurers, it is
understood that an investigative consumer report may be prepared whereby information is obtained through
personal interviews with your neighbors, friends, or others with whom you are acquainted. This inquiry
includes information as to your character, general reputation, personal characteristics and mode of living.
You have the right to make a written request within a reasonable period of time to receive additional,
detailed information about the nature and scope of this investigation. (See Notice to Applicant --
on reverse side.)
</TABLE>
<PAGE>
EXHIBIT 3(A)
Farm Bureau Financial Services
5400 University Avenue
West Des Moines, Iowa 50266-5997
April 25, 1997
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. 11 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, L.L.P.
1275 Pennsylvania Avenue, NW
Washington, DC 20004-2404
Tel: (202) 383-0100
Fax: (202) 637-3593
April 21, 1997
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. 11 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, L.L.P.
By: /s/ STEPHEN E. ROTH
------------------------------------------------------------------
Stephen E. Roth
<PAGE>
EXHIBIT 6
[LOGO]
April 25, 1997
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. 11 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 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.
(2) 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. 11 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 LLP 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 5, 1997 with respect to Farm Bureau Life
Variable Account and March 3, 1997 with respect to Farm Bureau Life Insurance
company, in Post-Effective Amendment No. 11 to the Registration Statement
(Form S-6 No. 33-12789) and related Prospectus of Farm Bureau Life Variable
Account dated May 1, 1997.
/s/ ERNST & YOUNG LLP
Des Moines, Iowa
April 25, 1997
