BANNER LIFE VARIABLE ANNUITY ACCOUNT, 485BPOS, 1996-05-01

BANNER LIFE VARIABLE ANNUITY ACCOUNT
485BPOS, 1996-05-01

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PROSPECTUS: FLEXIBLE PREMIUM VARIABLE ANNUITY
Issued Through Banner Life Variable Annuity Account by
Banner Life Insurance Company - 1701 Research Boulevard Rockville,
Maryland 20850

This Prospectus describes a Flexible Premium Variable Annuity (the "Policy")
offered by Banner Life Insurance Company. The Policy is designed to aid in
long-term financial planning and provides for the accumulation of capital by
individuals on a tax-deferred basis for retirement or other long-term
purposes.

The Owner may allocate Premium Payments to one or more Sub-Accounts of the
Banner Life Variable Annuity Account (the "Variable Account"), to the General
Account which guarantees a minimum fixed return, or to a combination of these
Accounts. The Variable Account currently has five different Sub-Accounts.
Assets of each Sub-Account are invested in a corresponding Portfolio of a
mutual fund, the Scudder Variable Life Investment Fund (the "Fund"). The
following five Portfolios of Class A shares currently are available under the
Policies: a Money Market Portfolio; a Bond Portfolio; a Capital Growth
Portfolio; a Balanced Portfolio; and an International Portfolio. The Fund is
described in a separate prospectus that accompanies this Prospectus.

The Account Value will vary in accordance with the investment performance of
the Account and/or Sub-Accounts selected by the Owner. Therefore, the Owner
bears the entire investment risk under this Policy for all amounts allocated
to the Variable Account. Amounts allocated to the General Account are
guaranteed by Banner Life Insurance Company ("Banner Life") and will earn a
specified rate of interest declared periodically.

The Policies provide for monthly annuity payments to be made by Banner Life
for the life of the Annuitant or for some other period, beginning on the
Maturity Date selected by the Owner. Both prior to and after the Maturity
Date, the Owner can transfer amounts between the Accounts or Sub-Accounts
(some restrictions may apply, especially on transfers out of the General
Account). The Owner can also elect to surrender all or a portion of the
Account Value in exchange for a cash withdrawal payment from Banner Life;
however, withdrawals may be taxable, and subject to a Contingent Deferred
Sales Charge and a tax penalty. Partial surrenders from the General Account
may also be subject to restrictions regarding time and amount.

This Prospectus sets forth the information that a prospective investor should
consider before investing in a Policy. A Statement of Additional Information
about the Policy and the Variable Account, which has the same date as this
Prospectus, has been filed with the Securities and Exchange Commission and is
incorporated herein by reference. The Statement of Additional Information is
available at no cost to any person requesting a copy by writing Banner Life
at the address provided above or by calling (301) 294-6940. The table of
contents of the Statement of Additional Information is included at the end of
this Prospectus.

This Prospectus and the Statement of Additional Information generally
describe only the Policies and the Variable Account, except when the General
Account is specifically mentioned.

THIS PROSPECTUS MUST BE ACCOMPANIED OR PRECEDED BY A CURRENT PROSPECTUS FOR
THE SCUDDER VARIABLE LIFE INVESTMENT FUND. THESE SECURITIES HAVE NOT BEEN
APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE
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.

THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO DEALER, SALESPERSON OR OTHER
PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS IN
CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON.

The Date of This Prospectus is May 1, 1996.

TABLE OF CONTENTS
Page

DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . .4

SUMMARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . .6

FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . 13

HISTORICAL PERFORMANCE DATA. . . . . . . . . . . . . . . . . . 13
Standardized Performance Data . . . . . . . . . . . . . . 13
Non-Standardized Performance Data . . . . . . . . . . . . 14

BANNER LIFE INSURANCE COMPANY. . . . . . . . . . . . . . . . . 14

THE BANNER LIFE VARIABLE ANNUITY ACCOUNT . . . . . . . . . . . 15
The Banner Life Variable Annuity Account. . . . . . . . . 15
Scudder Variable Life Investment Fund . . . . . . . . . . 15
The General Account . . . . . . . . . . . . . . . . . . . 18

THE POLICY . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Policy Application and Issuance of Policies . . . . . . . 20
Premium Payments. . . . . . . . . . . . . . . . . . . . . 20
Account Value . . . . . . . . . . . . . . . . . . . . . . 21
Transfers . . . . . . . . . . . . . . . . . . . . . . . . 22
Non-Participating Policy. . . . . . . . . . . . . . . . . 22

DISTRIBUTIONS UNDER THE POLICY . . . . . . . . . . . . . . . . 23
Tax Consequences. . . . . . . . . . . . . . . . . . . . . 23
Surrenders. . . . . . . . . . . . . . . . . . . . . . . . 23
Annuity Payments. . . . . . . . . . . . . . . . . . . . . 24
Annuity Payment Plans . . . . . . . . . . . . . . . . . . 24
Death Benefit . . . . . . . . . . . . . . . . . . . . . . 27
Restrictions Under the Texas Optional Retirement Program. 27
Restrictions Under Section 403(b) Plans . . . . . . . . 28

CHARGES AND DEDUCTIONS . . . . . . . . . . . . . . . . . . . . 28
Contingent Deferred Sales Charge. . . . . . . . . . . . . 28
Mortality and Expense Risk Charge . . . . . . . . . . . . 29
Administrative Charges. . . . . . . . . . . . . . . . . . 30
Premium Taxes . . . . . . . . . . . . . . . . . . . . . . 30
Federal, State and Local Taxes. . . . . . . . . . . . . . 30
Transfer Charge . . . . . . . . . . . . . . . . . . . . . 30
Other Expenses Including Investment Advisory Fees . . . . 31

CERTAIN FEDERAL INCOME TAX CONSEQUENCES. . . . . . . . . . . . 31
Taxation of Annuities . . . . . . . . . . . . . . . . . . 32
Qualified Plans . . . . . . . . . . . . . . . . . . . . . 34
General . . . . . . . . . . . . . . . . . . . . . . . . . 36

DISTRIBUTOR OF THE POLICIES. . . . . . . . . . . . . . . . . . 36

VOTING RIGHTS. . . . . . . . . . . . . . . . . . . . . . . . . 37

LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . 37

STATEMENT OF ADDITIONAL INFORMATION. . . . . . . . . . . . . . 38

<PAGE>
DEFINITIONS

Account Value -- The sum of the Variable Account Value and the General
Account Value.

Accumulation Unit -- An accounting unit of measure used in calculating the
Variable Account Value.

Administrative Office -- The Administrative Office of Banner Life Insurance
Company is located at 1701 Research Boulevard, Rockville, Maryland 20850.

Annuitant -- The person entitled to receive Annuity Payments after the
Maturity Date and during whose life any Annuity Payments involving life
contingencies will continue.

Annuity Payment Plan -- A method of receiving a stream of Annuity Payments.

Annuity Unit -- An accounting unit of measure used in the calculation of the
amount of the second and each subsequent Variable Annuity Payment.

Annuity Value -- The Policy's value after the Maturity Date.

Banner Life Variable Annuity Account -- A separate account established by
Banner Life and registered as a unit investment trust under the Investment
Company Act of 1940 to which Premium Payments under the Policies may be
allocated and which invests in the Scudder Variable Life Investment Fund.
The separate account meets the definition of a separate account under federal
securities laws.

Beneficiary -- The person, designated in the application, who has the right
to the death benefit set forth in the Policy.

Cash Surrender Value -- The Account Value less the Contingent Deferred Sales
Charge, if any, and a pro rata portion of the Administrative Charge.

Code -- The Internal Revenue Code of 1986, as amended.

Due Proof of Death -- A certified copy of a death certificate, a certified
copy of a decree of a court of competent jurisdiction as to the finding of
death, a written statement by the attending physician, or any other proof
satisfactory to Banner Life will constitute Due Proof of Death.

Fixed Annuity Payments -- Payments made pursuant to an Annuity Payment Plan
which do not fluctuate in amount.

Fund -- The Scudder Variable Life Investment Fund, a diversified, open-end
management company in which the Variable Account invests.

General Account -- All of the assets of Banner Life that are not in separate
accounts.

Maturity Date -- The date upon which the Account Value is applied to provide
an Annuity Payment Plan. The Maturity Date is elected by the Policyowner and
is shown in the Policy Schedule. Annuity years and anniversaries are
measured from this date.

Nonqualified Policy -- A Policy other than a Qualified Policy.

Policy -- One of the flexible premium variable annuity policies offered by
this Prospectus.

Policy Date -- The date the Policy becomes a binding legal contract, as shown
on the Policy Schedule Page. Policy years and anniversaries are measured
from the Policy Date.

Policyowner or Owner -- The person who may exercise all rights and privileges
under the Policy. The Policyowner during the lifetime of the Annuitant and
prior to the Maturity Date is the person designated as the Policyowner in the
application; the Policyowner on and after the Maturity Date is the Annuitant.

Premium Payment -- An amount paid to Banner Life by the Policyowner or on the
Policyowner's behalf as consideration for the benefits provided by the
Policy.

Qualified Policy -- A policy that is issued in connection with plans that
qualify for special federal income tax treatment under section 401, 403, 408
or 457 of the Internal Revenue Code of 1986, as amended. See "Certain
Federal Income Tax Consequences."

Sub-Account -- A division within the Variable Account which invests in a
specified Portfolio of the Fund.

Valuation Day -- Any day that the New York Stock Exchange is open for trading
and Banner Life is open for business.

Valuation Period -- The period of time from the end of one valuation day to
the end of the next valuation day.

Variable Annuity Payments -- Payments made pursuant to an Annuity Payment
Plan which fluctuate as to dollar amount in relation to the investment
performance of the specified Sub-Accounts within the Variable Account.

Written Notice or Request -- Written notice in a form satisfactory to Banner
Life, signed by the Policyowner, and received and recorded at the
Administrative Office.
<PAGE>
SUMMARY

The Policy

The Policy is a flexible premium variable annuity which can be purchased on
a non-tax qualified basis ("Nonqualified Policy") or with the proceeds from
certain plans qualifying for favorable federal income tax treatment
("Qualified Policy"). The Owner allocates the Premium Payments among the
Variable and the General Accounts of Banner Life Insurance Company ("Banner
Life").

The Accounts

The Variable Account. The Banner Life Variable Annuity Account is a separate
account of Banner Life, which invests exclusively in shares of the Scudder
Variable Life Investment Fund (the "Fund"), a mutual fund managed by Scudder,
Stevens & Clark, Inc., which also provides investment advisory services for
the Fund. The following five portfolios of Class A shares of the Fund are
available under the policies: the Money Market Portfolio, the Bond Port-
folio, the Capital Growth Portfolio, the Balanced Portfolio, and the
International Portfolio. Each of the Sub-Accounts of the Variable Account
invests solely in a corresponding Portfolio of the Fund. Because Account
Values may depend on the investment experience of the selected Sub-Accounts,
the Owner bears the entire investment risk with respect to Premium Payments
allocated to, and amounts transferred to, the Variable Account. (See The
Variable Account.)

The General Account. The General Account guarantees safety of principal and
a minimum 4% Guaranteed Interest Rate on Premium Payments allocated to, and
amounts transferred to, the General Account. Banner Life may, in its sole
discretion, declare a higher Current Interest Rate which is not guaranteed
for any length of time. (See The General Account.)

Premium Payments

A Policy may be purchased with a minimum initial Premium of $1,000. An owner
may make additional Premium Payments of at least $50 at any time before the
Maturity Date.

On the Policy Date, a state premium tax may be deducted, if applicable. The
remaining initial Net Premium Payment is allocated among the Accounts and
Sub-Accounts according to the Owner's instructions in the application. The
initial premium allocation percentages may be changed by sending Written
Notice to Banner Life's Administrative Office. Any allocation must be in
whole numbers and at least 10%, and of course the sum of the percentages
allocated to all of the accounts must equal 100%. Net Premiums and Account
Value may not be allocated to more than five accounts among the General
Account and the Sub-Accounts of the Variable Account. (See Premium
Payments.)

Transfers

Prior to the Maturity Date, an owner can transfer some or all of the Account
Value among the Sub-Accounts of the Variable Account or between one or more
Sub-Accounts and the General
Account, with certain limitations. Similarly, after the maturity date, the
owner can transfer some or all of the Annuity Value among the Sub-Accounts of
the Variable Account or between one or more Sub-Accounts and the General
Account, within certain limitations.

The amount transferred from the General Account or any Sub-Account of the
Variable Account must be at least $500 or the value in that Account, if less.
Transfers out of the General Account are restricted to one per Policy or
Annuity Year, on the Policy or Annuity Anniversary, and the transfer request
must be received at least 30 days prior to the Anniversary. The maximum
amount that may be transferred out of the General Account is limited to the
greater of 25% of the General Account value on the Anniversary and $500.

Banner Life reserves the right to restrict the number of transfers out of a
Sub-Account of the Variable Account in a Policy Year (both before and after
the Maturity Date). Transfers may be subject to a service charge, which will
be deducted from the amount transferred. (See Transfers.)

Surrenders

The Owner may elect to surrender all or a portion of the Cash Surrender Value
($500 minimum) in the Variable Account at any time prior to the Maturity
Date. The Cash Surrender Value equals the Account Value less any applicable
Contingent Deferred Sales Charge and a pro rata portion of the annual
Administrative Charge (described below). The amount of a partial surrender
may not exceed the Account Value on the date of partial surrender less
$1,000. A surrender request must be made by Written Request, and a request
for a partial surrender can specify the Accounts or Sub-Accounts from which
the withdrawal is requested. There is currently no limit on the frequency or
timing of withdrawals from the Variable Account. (Surrenders from the
General Account are subject to the same restrictions as transfers described
above). Surrenders may be taxable transactions, and in certain cases a
penalty tax may apply. (See Certain Federal Income Tax Consequences.)

Charges and Deductions

Contingent Deferred Sales Charge. Banner Life does not deduct sales charges
at the time of investment. Instead, a Contingent Deferred Sales Charge is
imposed on certain full or partial withdrawals of Premium Payments in order
to cover expenses relating to the sale of the Policies. However, once each
Policy Year, up to 10% of total premiums paid can be withdrawn free of the
surrender charge, and there is no surrender charge after the ninth Policy
Year. Amounts withdrawn in the first nine Policy Years, after the first
withdrawal in the current Policy Year, or in excess of 10% of the total
Premiums paid, may be subject to a Contingent Deferred Sales Charge of up to
7.5%. For a full surrender, the charge is a percentage of total premiums
paid less prior partial surrenders. For a partial surrender, the charge is
a percentage of the lesser of (a) the amount withdrawn, or (b) total premiums
paid less prior partial surrenders. There is no sales charge on amounts
withdrawn after the ninth Policy Year, regardless of how long such amounts
have been invested in the Policy.

Account Charges. Banner Life deducts a daily charge equal to a percentage of
the net assets in the Variable Account for the mortality and expense risks
assumed by Banner Life. The effective annual rate of this charge currently
is 1.15% and it is guaranteed never to exceed 1.25% of the value of the
Accounts' net assets. (See Mortality and Expense Risk Charge.)

Policy Charges. There is also an Annual Administrative Charge each year for
Policy maintenance and related administrative expenses. This charge
currently is $30 per year. This charge may be increased in the future but it
will never exceed $40 per year. (See Administrative Charge.)

Taxes. Banner Life may incur premium taxes relating to the Policies. Banner
Life will deduct any premium taxes related to a particular Policy from the
Premiums before allocating the Premiums to the Accounts. (See Premium
Taxes.)

No charges are currently made against any of the Accounts for federal, state,
or local income taxes. Should Banner Life determine that any such taxes may
be imposed with respect to any of the Accounts, Banner Life may deduct such
taxes from amounts held in the relevant Account. (See Federal, State and
Local Taxes.)

Transfer Fees. Currently, there is no charge for the first four transfers in
a Policy Year. There is a charge of $15 for the fifth and subsequent
transfers in a Policy Year. This fee may be increased in the future (and/or
applied to all transfers), but it will never exceed $25.00.

Charges Against the Fund. The value of the net assets of the Sub-Accounts of
the Variable Account will reflect the investment advisory fee and other
expenses incurred by the Fund. (See Other Expenses Including Investment
Advisory Fees.)
<PAGE>
<TABLE>
<CAPTION>
Expense Data. The charges and deductions are summarized in the following tables.
This tabular information regarding expenses assumes that the entire Account Value
is in the Variable Account (1).

Money Capital
Policyowner Transaction Expenses Market Bond Growth Balanced International
<S> <C> <C> <C> <C> <C>
Sales Load On Purchase Payments 0 0 0 0 0

Maximum Contingent Deferred 7.5% 7.5% 7.5% 7.5% 7.5%
Sales Load (as a % of
Premium Payment Surrendered)(2)

</TABLE>
Annual Administrative Fee 30 Per Policy
(current)

Transfer Fee (current) First Four Per Year - $0
After Four Per Year - $15
<TABLE>
<CAPTION>

<S> <C> <C> <C> <C> <C>
Variable Account Annual Expenses
(as a percentage of Account Value)
(current)

Mortality and Expense Risk Fees 1.15% 1.15% 1.15% 1.15% 1.15%

Scudder Variable Life Investment
Fund Annual Expenses
(as a percentage of average net assets)

Management Investment
Advisory Fees .370% .475% .475% .475% .875%

Other Expenses(3) .130% .085% .095% .175% .205%

Total Scudder Variable Life .50% .56% .57% .65% 1.08%
Investment Fund Annual Expenses

<FN>
(1) The Policy Owner Transaction Expenses apply to each Policy, regardless of how Account Value
is allocated among the Variable Account and the General Account. The Variable Account Annual
Expenses do not apply to the General Account (see Other Expenses Including Investment Advisory Fees).

(2) The contingent deferred sales load is decreased based on the Policy Year in which the withdrawal
is made. For issue ages 0-57, the load is 7.5% of premiums (minus partial surrenders) in the first
five Policy Years and decreases by 1.5% each subsequent year to 0% in the tenth Policy Year and
thereafter. For issue ages 58-80, the load is 7.5% of premiums (minus partial surrenders) in the first
two Policy Years, 7.0% in third Policy Year and decreases by 1.0% each subsequent year to 0% in
the tenth Policy Year and thereafter.

(3) The expenses listed for the Scudder Variable Life Investment Fund are actual, historical expenses
for the year ended December 31, 1995, after reimbursement. Future expenses may be lower or higher.

</TABLE>

Examples

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

1. If the Policy is surrendered or annuitized over less than a five year
period at the end of the applicable time period:

1 Year 3 Years 5 Years 10 Years

Money Market Portfolio* $ 85 $ 120 $ 157 $ 193
Bond Portfolio* $ 86 $ 121 $ 160 $ 199
Capital Growth Portfolio* $ 86 $ 122 $ 160 $ 200
Balanced Portfolio* $ 87 $ 124 $ 164 $ 209
International Portfolio* $ 91 $ 141 $ 191 $ 272

2. If the Policy is not surrendered or is annuitized over at least a five
year period at the end of the applicable time period:

1 Year 3 Years 5 Years 10 Years

Money Market Portfolio* $ 18 $ 52 $ 89 $ 193
Bond Portfolio* $ 18 $ 54 $ 92 $ 199
Capital Growth Portfolio* $ 18 $ 54 $ 93 $ 200
Balanced Portfolio* $ 19 $ 57 $ 97 $ 209
International Portfolio* $ 23 $ 74 $127 $ 272

*Class A shares

The above tables are intended to assist the Owner in understanding the costs
and expenses that will be borne, directly or indirectly, including the
expenses of the Scudder Variable Life Investment Fund. Note that the tables
are based on a policy issued through age 57 and are thus the maximum
illustrative charges and the fixed Administrative Charge is expressed as .1%
based on an anticipated average account value of $25,000 and is also a
percentage of the anticipated average Account Value. See Charges and
Deductions, and the Scudder Variable Life Investment Fund prospectus. In
addition to the expenses listed above, premium taxes may be applicable.

The Examples should not be considered a representation of past or future
expenses, and actual expenses may be greater or lesser than those shown.

Death Benefit

Upon receipt of Due Proof of Death of the Annuitant or Owner while the Policy
is in force prior to the Maturity Date, a Death Benefit will be paid to the
Beneficiary. The Death Benefit will be the Account Value of the Policy as of
the date of the death. No Contingent Deferred Sales Charge is imposed upon
amounts received as a Death Benefit. The Death Benefit may be paid as either
a lump sum cash benefit or, if the beneficiary is an individual, as an
Annuity Payment Plan. (See Death Benefit.)

Right to Return the Policy

The Policyowner may cancel the Policy within twenty (20) days after it is
received by the Policyowner by returning it to the agent through whom it was
purchased or delivering or mailing the Policy and a Written Notice of
Cancellation to Banner Life at its Administrative Office or such other
methods as described in the contract. In the event of cancellation, Banner
Life generally will return the sum of all Premium Payments made under the
Policy and the accumulated gains or losses in the Variable Account, if
Premium Payments were allocated to that account. However, if required by
state law, Banner Life will refund the premium(s) paid or, if greater, the
Account Value.

Federal Income Tax Consequences of Investment in the Policy

With respect to Owners who are natural persons, there should be no federal
income tax on increases in the Account Value until a distribution under the
Policy occurs (e.g., a surrender or Annuity Payment) or is deemed to occur
(e.g., a pledge, loan, or assignment of a Policy). Generally, a portion of
any distribution or deemed distribution will be taxable as ordinary income.
The taxable portion of certain distributions will be subject to withholding
unless the recipient elects otherwise (withholding is mandatory for certain
Qualified Policies). In addition, a penalty tax may apply to certain
distributions or deemed distributions under the Policy. (See Certain Federal
Income Tax Consequences.)

Inquiries and Written Notices and Requests

Any questions about procedures or the Policy, or any Written Notice or
Written Request required to be sent to Banner Life, should be sent to Banner
Life's Administrative Office, 1701 Research Boulevard, Rockville, Maryland
20850. Telephone requests and inquires may be made by calling (301) 294-6940.
All inquiries, Notices and Requests should include the Policy number,
the Owner's name and the Annuitant's name.

Note: The foregoing summary is qualified in its entirety by the detailed
information in the remainder of this Prospectus and in the prospectuses for
the Scudder Variable Life Investment Fund, and in the Policy, all of which
should be referred to for more detailed information. This Prospectus gener-
ally describes only the Policy and the Variable Account. A separate
prospectus describes the Scudder Variable Life Investment Fund. (There is no
prospectus for the General Account since interests in the General Account are
not securities. See The General Account.)

CONDENSED FINANCIAL INFORMATION

Banner Life Variable Annuity Account

The following information relating to accumulated unit values and number of
accumulation units for the life of the account is derived from the Variable
Account's financial statements. The information relating to accumulation
unit values and number of accumulation units should be read in conjunction
with the Variable Account's financial statements and notes in the Statement
of Additional Information.

Money Capital
1995 Market Bond Growth Balanced International
<S> <C> <C> <C> <C> <C>
Accumulation
Unit Value
- -Beginning of Period $1.1562 $1.1178 $1.4322 $1.1155 $1.1454
- -End of Period $1.2077 $1.2263 $1.6444 $1.4039 $1.2737
Number of
Accumulation Units
- -End of Period 82,581 262,550 1,449,832 2,421,201 1,064,079

</TABLE>
<TABLE>
Money Capital
1994 Market Bond Growth Balanced International
<S> <C> <C> <C> <C> <C>
Accumulation
Unit Value

- - Beginning of Period $1.1254 $1.1178 $1.4322 $1.1535 $1.1722
- - End of Period $1.1562 $1.0495 $1.2708 $1.1155 $1.1454
Number of
Accumulation Units
- - End of Period 86,096 284,000 1,234,715 2,454,916 1,261,525
</TABLE>
<TABLE>
Money Capital
1993 Market Bond Growth Balanced International

<S> <C> <C> <C> <C> <C>
Accumulation
Unit Value

- - Beginning of Period $1.1100 $1.0777 $1.2382 $1.1331 $0.8849
- - End of Period $1.1254 $1.1178 $1.4322 $1.1535 $1.1722

Number of
Accumulation Units

- - End of Period 75,541 67,307 361,656 412,210 210,675
</TABLE>

FINANCIAL STATEMENTS

The consolidated financial statements for Banner Life Insurance Company as of
December 31, 1995, 1994 and 1993 and for each of the three years in the
period ended December 31, 1995, the financial statements of the Banner Life
Variable Annuity Account as of December 31, 1995, and for each of the three
years in the period ended December 31, 1995 and the related reports of the
independent accountants are contained in the Statement of Additional
Information.

HISTORICAL PERFORMANCE DATA

Standardized Performance Data
From time to time, Banner Life may advertise historical yields and total
returns for the Sub-Accounts of the Variable Account. In addition, Banner
Life may advertise the effective yield of the Money Market Sub-Account.
These figures will be calculated according to standardized methods prescribed
by the Securities and Exchange Commission ("SEC"). They will be based on
historical earnings and are not intended to indicate future performance.

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

The yield of a Sub-Account of the Variable Account (other than the Money
Market Sub-Account) refers to the annualized income generated by an invest-
ment under a Policy in the Sub-Account over a specified thirty-day period.
The yield is calculated by assuming that the income generated by the invest-
ment during that thirty-day period is generated each thirty-day period over
a 12-month period and is shown as a percentage of the investment.

The total return of a Sub-Account of the Variable Account refers to return
quotations assuming an investment under a Policy has been held in the
Sub-Account for various periods of time including, but not limited to,
a period measured from the date the Sub-Account commenced operations.
When a Sub-Account has been in operation for one, five, and ten years,
respectively, the total return for these periods will be provided. The total
return quotations for a Sub-Account will represent the average annual
compounded rates of return that equate an initial investment of $1,000 in the
Sub-Account to the redemption value of that investment as of the first day of
each of the periods for which total return quotations are provided.

The yield and total return calculations for a Sub-Account do not reflect the
effect of any premium taxes that may be applicable to a particular Policy.
The yield calculations also do not reflect the effect of any Contingent
Deferred Sales Charge that may be applicable to a particular Policy. To the
extent that a premium tax and/or Contingent Deferred Sales Charge is applic-
able to a particular Policy, the yield and/or total return of that Policy
will be reduced. For additional information regarding yields and total
returns calculated using the standard formats briefly summarized above,
please refer to the Statement of Additional Information, a copy of which may
be obtained from Banner Life.

Non-Standardized Performance Data

Banner Life may from time to time also advertise or disclose average annual
total return or other performance data in non-standard formats for a
Sub-Account of the Variable Account. The non-standard performance data may
assume that no Contingent Deferred Sales Charge is applicable, and may also
make other assumptions.

All non-standard performance data will be advertised only if the standard
performance data is also disclosed. For additional information regarding the
calculation of other performance data, please refer to the Statement of
Additional Information, a copy of which may be obtained from Banner Life.
BANNER LIFE INSURANCE COMPANY

Banner Life Insurance Company ("Banner Life") is a stock life insurance
company that is a wholly owned subsidiary of Legal and General Life Insurance
Company of America, Inc., which in turn is a wholly owned subsidiary of Legal
and General America, Inc., which in turn is wholly owned by Legal and General
Netherlands Holding BV, which is a wholly-owned subsidiary of Legal &
General, International Limited, a United Kingdom based holding company. The
ultimate controlling entity is Legal and General Group Plc, a United Kingdom
company. Banner Life is principally engaged in offering life insurance and
annuities and is licensed in the District of Columbia and all states except
Maine and New York.

Banner Life is the successor to Government Employees Life Insurance Company
("GELICO"), which was a subsidiary of GEICO Corporation. GELICO was
organized as a District of Columbia corporation on April 28, 1949. GELICO
changed its name to Banner Life Insurance Company, and became a wholly owned
indirect subsidiary of Legal and General Group Plc on December 1, 1983.

THE BANNER LIFE VARIABLE ANNUITY ACCOUNT

Premiums paid under a Policy may be allocated to the Variable Account or to
the General Account, or to a combination of these Accounts.

The Banner Life Variable Annuity Account

The Banner Life Variable Annuity Account (the "Variable Account") is
currently divided into five Sub-Accounts. Each Sub-Account invests
exclusively in shares of a single portfolio of Class A shares of the Scudder
Variable Life Investment Fund. Income and both realized and unrealized gains
or losses from the assets of each Sub-Account are credited to or charged
against that Sub-Account without regard to income, gains or losses from any
other Sub-Account of the Variable Annuity Account or arising out of any other
business Banner Life may conduct.

Although the assets in the Variable Account are the property of Banner Life,
the assets in the Variable Account attributable to the Policies are not
chargeable with liabilities arising out of any other business which Banner
Life may conduct. The Variable Account was established by Banner Life as a
segregated asset account on June 14, 1989. The Variable Account will receive
and invest the premiums allocated to it under the Policies. The obligations
under the Policies are obligations of Banner Life Insurance Company.

The Variable Account has been registered as a unit investment trust under the
Investment Company Act of 1940. Registration with the Securities and
Exchange Commission does not involve supervision of the management or
investment practices or policies of the Variable Account or Banner Life by
the Commission.

Scudder Variable Life Investment Fund

The Variable Account invests in shares of the Scudder Variable Life
Investment Fund (the "Fund"), a mutual fund of the series type. The Fund
consists of the following portfolios of Class A shares: a Money Market
Portfolio, a Bond Portfolio, a Capital Growth Portfolio, a Balanced
Portfolio, and a International Portfolio (collectively, the "Portfolios").
The assets of each Portfolio of the Fund are held separate from the assets of
the other Portfolios. Thus, each Portfolio operates as a separate investment
portfolio, and the income or losses of one Portfolio have no effect on the
investment performance of any other Portfolio.

The investment objectives and policies of each Portfolio are summarized
below. There is no assurance that any of the Portfolios will achieve their
stated objectives. More detailed information, including a description of
risks, is in the Fund's prospectus, which accompanies this Prospectus and
which should be read carefully in conjunction with this Prospectus and kept
for future reference.

The Fund is designed to provide investment vehicles for variable annuity or
variable life insurance contracts of various insurance companies. For more
information about the risks associated with the use of the same funding
vehicle for both variable annuity and variable life insurance contracts of
various insurance companies, see the Fund's prospectus.

Portfolios of the Fund. The following five Portfolios of the Fund are
available under the Policies:

Money Market Portfolio (Class A Shares). This Portfolio seeks to maintain
stability of capital and, consistent therewith, to maintain liquidity of
capital and to provide current income. The Portfolio purchases money market
securities such as U.S. Treasury obligations, commercial paper, and
certificates of deposit and banker's acceptances of domestic and foreign
banks, including foreign branches of domestic banks, and enters into
repurchase agreements.

An investment in this Portfolio is neither insured nor guaranteed by the U.S.
government, and there is no assurance that the portfolio will be able to
maintain a stable net asset value.

Bond Portfolio (Class A Shares). This Portfolio pursues a policy of
investing for a high level of income consistent with a high quality portfolio
of securities. Under normal circumstances, the Portfolio invests at least
65% of its assets in bonds, including U.S. Government, corporate, and other
notes and bonds paying high current income. The Portfolio may also invest in
preferred stocks consistent with the Portfolio's objectives.

Capital Growth Portfolio (Class A Shares). This Portfolio seeks long-term
capital appreciation and, consistent therewith, current income through a
broad and flexible investment program. The Portfolio seeks to achieve these
objectives by investing primarily in income producing, publicly-traded equity
securities, such as common stocks and securities convertible into common
stock, with an emphasis on securities of established companies. However, in
order to reduce risk, as market or economic conditions may periodically
warrant, the Portfolio may also invest up to 25% of its assets in short-term
indebtedness.

Balanced Portfolio (Class A Shares). The investment objective of this
Portfolio is to realize a high level of long-term total rate of return
consistent with prudent investment risk. The assets of this Portfolio will
be invested in the following three market sectors: (1) common stock,
preferred stock, and other equity securities; (2) bonds and other debt se-
curities with maturities generally exceeding one year; and (3) money market
instruments and other debt securities with maturities generally not exceeding
one year.
<PAGE>
International Portfolio (Class A Shares). This Portfolio seeks long-term
growth of capital primarily through diversified holdings of marketable
foreign equity investments. The Portfolio invests in companies, wherever
organized, which do business primarily outside the United States. The
Portfolio intends to diversify investments among several countries and not to
concentrate investments in any particular industry. The Portfolio primarily
invests in equity securities, and it may also invest in fixed income
securities of foreign governments and companies.

Fund Management and Fees. Scudder, Stevens & Clark, Inc. (the "Adviser")
provides management and investment advisory services to the Fund. The
Adviser provides investment research and portfolio management services to a
number of mutual funds and other clients. Each Portfolio pays the Adviser a
fee for its investment advisory services at the following annual rates:

Percentage of the Portfolio's
Portfolio Average Daily Net Asset Value

Money Market Portfolio* .370%
Bond Portfolio* .475%
Capital Growth Portfolio* .475%
Balanced Portfolio* .475%
International Portfolio* .875%

* Class A Shares

Addition, Deletion, or Substitution of Investments. Banner Life does not
control the Fund and cannot guarantee that it or any Portfolio thereof will
be available for investment in the future or that it or any Portfolio thereof
will accept premiums or transfers. In the event that the Fund or any Port-
folio is not available, Banner Life may take reasonable action to secure a
comparable or otherwise appropriate funding vehicle, although it is not
required to and may not do so. In the unlikely event that the Fund is not
available in the future and a substitute funding vehicle is not obtained,
then all Account Values could be maintained in the General Account. If the
Fund or other funding vehicle restricts or refuses to accept transfers or
other transactions, then the transfer privilege may be modified or revoked or
other changes made.

Banner Life reserves the right, subject to compliance with applicable law, to
make additions to, deletions from, or substitutions for the shares of the
Fund that are held by the Variable Account (or any Sub-Account) or that the
Variable Account (or any Sub-Account) may purchase. Banner Life reserves the
right to eliminate the shares of any of the Portfolios of the Fund and to
substitute shares of another Portfolio of the Fund or any other investment
vehicle or of another open-end, registered investment company if laws or
regulations are changed, if the shares of the Fund or a Portfolio are no
longer available for investment, or if in our judgment further investment in
any Portfolio should become inappropriate in view of the purposes of the
Sub-Account. Banner Life will not substitute any shares attributable to a
Policyowner's interest in a Sub-Account of the Variable Account without
notice and prior approval of the Securities and Exchange Commission and the
insurance regulator of the state where the Policy was delivered, if and where
required. Nothing contained herein 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.

Banner Life also reserves the right to establish additional Sub-Accounts of
the Variable Account, each of which would invest in a new Portfolio of the
Fund, or in shares of another investment company or suitable investment, with
a specified investment objective. New Sub-Accounts may be established when,
in the sole discretion of Banner Life, marketing needs or investment condi-
tions warrant, and any new Sub-Account will be made available to existing
Policyowners on a basis to be determined by Banner Life. Banner Life may
also eliminate one or more Sub-Accounts if, in its sole discretion,
marketing, tax, or investment conditions warrant.

In the event of any such substitution or change, Banner Life may, by
appropriate endorsement, make such changes in this and other policies as may
be necessary or appropriate to reflect such substitution or change. If
deemed by Banner Life to be in the best interests of persons having voting
rights under the Policies, the Variable Account may be operated as a manage-
ment company under the Investment Company Act of 1940, it may be deregistered
under that Act in the event such registration is no longer required, or it
may be combined with other Banner Life separate accounts.

The General Account

This Prospectus is generally intended to serve as a disclosure document only
for the Policy and the Variable Account. For complete details regarding the
General Account, see the Policy itself.

Premiums allocated and amounts transferred to the General Account become part
of the general account of Banner Life, which supports insurance and annuity
obligations. Interests in the general account have not been registered under
the Securities Act of 1933 (the "1933 Act"), nor is the general account
registered as an investment company under the Investment Company Act of 1940
(the "1940 Act"). Accordingly, neither the general account nor any interests
therein are generally subject to the provisions of the 1933 or 1940 Acts and
Banner Life has been advised that the staff of the Securities and Exchange
Commission has not reviewed the disclosures in this Prospectus which relate
to the fixed portion.

The General Account is made up of all the general assets of Banner Life,
other than those in the Variable Account, or in any other segregated asset
account. The Policyowner may allocate Premium Payments to the General
Account at the time of Premium Payment or by subsequent transfers from the
Variable Account. Instead of the Policyowner bearing the investment risk as
is the case for values in the Variable Account, Banner Life bears the full
investment risk for all values in the General Account. Banner Life has sole
discretion to invest the assets of its general account subject to applicable
law.

The allocation or transfer of funds to the General Account does not entitle
the Policyowner to share in the investment experience of the General Account.
Instead, Banner Life guarantees that the General Account Value will accrue
interest at an effective annual rate of at least 4%, without regard to the
actual investment experience of the General Account. Consequently, if the
Policyowner allocates all net premiums only to the General Account and makes
no transfers, the minimum amount of the Account Value will be determinable
and guaranteed.

General Account Value. The General Account Value is the sum of (1) plus (2)
plus (3) minus the sum of (4) plus (5) where:

(1) is the General Account Value on the prior Policy Anniversary, plus
interest from that day, less the proportion of the annual administrative
charge attributable to the General Account;

(2) are net premiums credited to the General Account since the prior Policy
Anniversary, plus interest from the day net premiums are credited;

(3) are transfers from the Variable Account to the General Account since the
prior Policy Anniversary, plus interest from the date of the transfer;

(4) are transfers to the Variable Account from the General Account since the
prior Policy Anniversary, plus interest from the date of transfer; and

(5) are partial surrenders from the General Account together with any
partial surrender charges, plus interest from the date of partial
surrender.

The guaranteed interest rate used in the calculation of the General Account
Value is .32737% a month, compounded monthly. This is equivalent to 4% per
year, compounded yearly. Interest in excess of the guaranteed rate, if any,
may be used in the calculation of the General Account Value at such increased
rate and in such manner as determined by Banner Life in its sole discretion.

Transfers From the General Account. Prior to the Maturity Date, transfers
from the General Account may be made once per Policy Year, only on the Policy
Anniversary, and Banner Life must receive the transfer request at least 30
days prior to the Policy Anniversary. The minimum amount that may be
transferred from the General Account is the lesser of: (1) $500; or (2) the
entire General Account Value. The maximum amount that may be transferred
from the General Account is the greater of: (1) $500; or (2) 25% of General
Account Value.

After the maturity date, transfers from the General Account may be made once
per Annuity Year, on the Annuity Anniversary, and Banner Life must receive
the transfer request at least 30 days prior to the Annuity Anniversary. The
maximum amount that may be transferred out of the General Account each year
is 25% of the Annuity Value in the General Account.

Banner Life may postpone the calculation and payment of surrender values or
transfers from the General Account for up to 6 months. Transfers may be
subject to a service charge.

Banner Life guarantees that, at any time prior to the Maturity Date, the
amount in the General Account allocable to a particular Policy will be not
less than the amount of the Premium Payments allocated or transferred to the
General Account, plus interest at the rate of 4.0% per year, plus any excess
interest credited to amounts in the General Account, less the sum of all
Administrative Charges (See Administrative Charges) allocated to the General
Account, and any applicable premium or other taxes allocable to the General
Account, and less any amounts deducted from the General Account in connection
with partial surrenders (including any Contingent Deferred Sales Charges) or
transfers to the Variable Account.

THE POLICY

The rights and benefits under the Flexible Premium Variable Annuity Policy
are summarized below. However, the description of the Policy contained in
this Prospectus is qualified in its entirety by the Policy itself, a copy of
which is available upon request from Banner Life.

Policy Application and Issuance of Policies

Before it will issue a Policy, Banner Life must receive a completed Policy
application and a minimum initial Premium of at least $1,000. A Policy
ordinarily will be issued only in respect of Annuitants Age 0 through 80.
Acceptance or declination of an application or premium payment shall be based
on the Company's underwriting standards and the Company reserves the right to
reject any application or premium payment based on those standards.

If the application can be accepted in the form received, the initial Premium
Payment will be credited to the Account Value not later than two business
days after the later of the date of receipt of the application or receipt of
the initial Premium Payment. If the initial Premium Payment cannot be
credited within two days because the application or other issuing require-
ments are incomplete, and the incomplete application is not made complete
within five business days after receipt, then the applicant will be contacted
and given an explanation for the delay and the initial Premium Payment will
be returned within five days unless the applicant consents to Banner Life's
retaining the initial Premium Payment and crediting it as soon as the
necessary requirements are fulfilled.

The date on which the initial Premium Payment is credited to the Account
Value is the Policy Date. The Policy Date is the date used to determine
Policy Years and Policy Anniversaries.

Premium Payments

All Premium Payment checks or drafts should be made payable to Banner Life
Insurance Company. Except for the initial Premium Payment, all Premium
Payments should be sent to the Administrative Office.

Initial Premium Payment. The minimum initial Premium Payment that Banner
Life currently will accept under a Policy is $1,000. Banner Life reserves
the right to increase or decrease this amount for a class of Policies issued
after some future date. The initial Premium Payment is the only Premium
Payment required to be paid under a Policy.

Additional Premium Payments. While the Annuitant is living and prior to the
Maturity Date, the Owner may make additional Premium Payments at any time,
and in any frequency. The amount of each additional premium payment must be
at least $50 and not more than $100,000 without Banner Life's approval.
Additional Premium Payments will be credited to the Policy and added to the
Account Value as of the Valuation Day when they are received. Banner Life
reserves the right to reject any Premium Payment. If no Premiums Payments
are made for any three year consecutive period and if the Account Value of
the Policy falls below $500 during that period, Banner Life reserves the
right to terminate the Policy and pay the Cash Surrender Value to the
Policyowner.

Allocation of Premium Payments. On the date of issue, Banner Life will
allocate Premium Payments to the Sub-Accounts of the Variable Account and the
General Account in accordance with the initial Net Premium Allocation
Percentages. The initial net premium allocation percentages are set forth in
the application. The Policyowner may change this allocation by giving
Written Notice to Banner Life. Net premiums may not be allocated to more
than five accounts among the General Account and the Sub-Accounts of the
Variable Account. The Policyowner may allocate any whole percentages of at
least 10%, and the total allocation must equal 100%. Any allocation will be
used for additional Premium Payments until and unless the Owner requests a
change of allocation. All additional Premium Payments will be allocated and
credited to the Owner's Policy at the end of the Valuation Period during
which they are received. The Owner may change the allocation instructions
for future additional Premium Payments by sending Written Notice, signed by
the Owner, to Banner Life's Administrative Office. The allocation change
will apply to payments received after the date the Written Notice is
received.

Payment Not Honored by Bank. Any payment due under the Policy which is
derived, all or in part, from any amount paid to Banner Life by check or
draft may be postponed until such time as Banner Life determines that such
instrument has been honored.

Account Value

On the Policy Date, the Account Value equals the net premium(s) received by
Banner Life on or before that date. Thereafter, the Account Value equals the
sum of the Variable Account value and General Account value. The Account
Value will increase by (1) any additional Premium Payments received by Banner
Life; and (2) any increases in the Account Value due to investment results of
the selected Account(s). The Account Value will decrease by (1) any
surrenders; (2) any decreases in the Account Value due to investment results
of the selected Accounts or Sub-Accounts; and (3) the charges imposed by
Banner Life.

The Account Value is expected to change from Valuation Period to Valuation
Period, reflecting the investment experience of the selected Account(s)
and/or Sub-Account(s), as well as the deductions for charges. A Valuation
Period is the period between successive Valuation Days. It begins at the
close of business on each Valuation Day and ends at the close of business on
the next succeeding Valuation Day. A Valuation Day is each day that both the
New York Stock Exchange and Banner Life's Administrative Office are open for
business. Holidays are generally not Valuation Days.

The Variable Account Value. When a Premium is allocated or an amount is
transferred to a Sub-Account of the Variable Account, it is credited to the
Policy in the form of Accumulation Units. Each Sub-Account of the Variable
Account has a distinct Accumulation Unit value (the "Unit Value"). The
number of units credited is determined by dividing the Premium Payment or
amount transferred by the Unit Value of the Sub-Account as of the end of the
Valuation Period during which the allocation is made. When amounts are
transferred out of, or surrendered or withdrawn from an Account or Sub-Account,
units are canceled or redeemed in a similar manner.

For each Sub-Account, the Unit Value for a given Valuation Day is based on
the net asset value of a share of the corresponding Portfolio of the Fund.
Therefore, the Unit Values will fluctuate from day to day based on the
investment experience of the corresponding Portfolio. The determination of
Sub-Account Unit Values is described in detail in the Statement of Additional
Information.

Transfers

An Owner can transfer Account Value from one Account or Sub-Account to
another Account or Sub-Account prior to or after the Maturity date, within
certain limits.

Subject to the limitations and restrictions described below, transfers from
an Account or Sub-Account may be made by sending Written Notice, signed by
the Policyowner, to the Administrative Office. The minimum amount which may
be transferred is the lesser of $500 or the entire value of the account or
sub-account. In other words, a minimum of $500 must be transferred, unless
the value in an account or sub-account before the transfer is less than $500.

Transfers out of a Sub-Account of the Variable Account currently may be made
as often as the Owner wishes, subject to the minimum amount specified above
(Banner Life reserves the right to otherwise limit or restrict transfers in
the future). Transfers are subject to the Postponement of Payments provision
(see page 4 of the Statement of Additional Information, which is available
from Banner Life upon request).

Transfers from the General Account are subject to the restrictions described
above under "Transfers From the General Account."

A transfer charge may be imposed for any transfer. Currently, there is a
transfer charge of $15 for the fifth and subsequent transfer in a Policy
Year, which will be deducted from the amount transferred. The maximum
transfer charge that will be imposed is $25 per transfer.

Banner Life reserves the right to revoke or modify the transfer privilege in
any way, such as limiting the number or frequency of transfers.

Non-participating Policy

The Policy does not participate or share in the profits or surplus earnings
of Banner Life. No dividends are payable on the Policy.

DISTRIBUTIONS UNDER THE POLICY

Tax Consequences

Certain distributions may have tax consequences. See the discussion below
under Certain Federal Income Tax Consequences.

Surrenders

The Owner may surrender the Policy for the Cash Surrender Value in exchange
for a cash withdrawal payment from Banner Life at any time prior to the
Maturity Date. The Cash Surrender Value is the Account Value on the
surrender date less any applicable Contingent Deferred Sales Charge and the
pro rata portion of the Administrative Charge. The Owner may, if an
individual, elect to receive the Cash Surrender Value in the form of one of
the Annuity Payment Plans described below. After the Maturity Date, the
Policy cannot be surrendered unless Annuity Option E (Income for a period
certain) has been selected.

Since the Owner assumes the investment risk with respect to Premium Payments
allocated to the Variable Account, and because withdrawals are subject to a
Contingent Deferred Sales Charge, the total amount paid upon total surrender
of the Policy (taking any prior surrenders into account) may be more or less
than the total Premium Payments made. Following a surrender of the Policy,
or if the Policy terminates for any other reason, all rights of the Owner and
Annuitant will terminate.

Partial Surrender. The Owner may withdraw a portion of the Cash Surrender
Value from the Variable Account at any time prior to the Maturity Date by
sending a Written Request to Banner Life's Administrative Office. The
minimum amount that can be withdrawn from any Sub-Account or Account is $500,
and the amount withdrawn cannot exceed the Account Value on the date of
partial surrender less $1,000. The Owner may specify the Accounts or
Sub-Accounts from which partial surrender amounts should be taken. If an
allocation for a partial surrender is not made, the amount withdrawn will be
allocated in proportion to the Account Values in the Sub-Accounts and the
General Account. After the Maturity Date, partial surrenders are not per-
mitted (See Annuity Payments.)

Surrender Charge. The only charge for surrenders is the Contingent Deferred
Sales Charge, if it applies. Accordingly, the amount available for surrender
is the Cash Surrender Value, which is the Account Value less any applicable
Contingent Deferred Sales Charge and less the pro rata portion of the annual
Administrative Charge. However, an Owner may surrender up to 10% of the
premiums paid without a Contingent Deferred Sales Charge if no withdrawal has
been made in the current Policy Year. Amounts withdrawn in excess of this
free withdrawal amount or withdrawn in the same Policy Year as a previous
withdrawal are subject to the Contingent Deferred Sales Charge, but only
during the first nine Policy Years. In addition, a Contingent Deferred Sales
Charge will not be assessed if Account Value is applied to an Annuity Payment
Plan with payments over at least a five year period. For a discussion of the
Contingent Deferred Sales Charge. (See Contingent Deferred Sales Charge.)

Annuity Payments

Maturity Date. Annuity Payments under a Policy will begin on the Maturity
Date, which is selected by the Policyowner at the time the Policy is applied
for. The Owner may change the Maturity Date by Written Notice to Banner
Life, provided that notice of each change is received by Banner Life at its
Administrative Office at least thirty (30) days prior to the then current
Maturity Date.

The Maturity Date must be:
For issue ages 0-57: at least 13 years after the Policy Date, and cannot be
later than the Policy Anniversary following the Annuitant's 95th birthday.
For issue ages 58-80: at least 10 years after the Policy Date, and cannot be
later than the Policy Anniversary following the Annuitant's 95th birthday.

Election of Annuity Payment Plan. The Policyowner will choose an Annuity
Payment Plan in the application. However, during the lifetime of the
Annuitant and at any time prior to the Maturity Date, the Policyowner may
change the election. If no election is made prior to the Maturity Date,
Annuity Payments will be made under Option B (described below).

If the Annuitant or Owner dies before the Maturity Date, the Beneficiary will
receive the Death Benefit in a lump sum. However, if the beneficiary is an
individual receiving payment in his or her own right, then the Beneficiary
can elect to receive the Death Benefit under one of the Annuity Payment
Plans, to the extent allowed by law and subject to the terms of any
settlement agreement. (See Death Benefit.) Annuity Payments will be made on
either a fixed basis or a variable basis as selected by the Policyowner (or
the Beneficiary, after the Annuitant's or Owner's death).

Annuity Payment Plans

The Policy provides five Annuity Payment Plans which are described below.
The Policyowner may elect a Fixed Payment Option, a Variable Payment Option,
or a combination of both. If the Policyowner elects a combination, he must
specify what part of the Account Value is to be applied to the Fixed and
Variable Options. If the Owner does not specify fixed or variable payments,
then the separate account value will be applied to provide a variable
annuity, and the general account value will be applied to provide a fixed
annuity. Under the variable annuity, a maximum of three of the Portfolios of
the Fund then available can be selected by the Owner. If Account Value is in
more than three Sub-Accounts at the Maturity Date, the annuity payments will
not begin until the Owner specifies the allocation.

The effect of choosing a Fixed Annuity Option is that the minimum amount of
each payment will be set on the Maturity Date and will not change. If a
Fixed Annuity Option is selected, the Account Value will be transferred to
the general account of Banner Life, and the Annuity Payments will be fixed in
minimum amount by the Account Value, the Annuity Payment Plan selected, and
the age and sex of the Annuitant. For further information, contact Banner
Life at its Administrative Office.

The following options are currently available:

Option A -- Life Income. Monthly payments will be made during the lifetime
of the Annuitant. Payments will end with the last monthly payment before his
or her death.

Option B -- Life Income with 10 Years Certain. Monthly payments will be made
during the lifetime of the Annuitant. If death of the Annuitant occurs
before the end of the ten year certain period, payments will continue during
the remainder of the ten year period.

Option C -- Life Income with 20 Years Certain. Monthly payments will be made
during the life of the Annuitant. If death of the Annuitant occurs before
the end of 20 year certain period, payments will continue during the
remainder of the 20 year period.

Option D -- Joint Life Income. Monthly payments are made for the lifetime of
the first of two people named. If the second person survives the first,
payments will continue for his or her life.

Option E -- Income for a Period Certain. Monthly payments will be made to
the Annuitant for a specified period certain. Payments are guaranteed for
that specified period. Under this option, the Policy can be surrendered for
its Annuity Value after Annuity Payments begin. (See Annuity Value.) The
Annuity Value may be reduced by a Contingent Deferred Sales Charge, depending
upon the Policy Year of Surrender. Although this Option does not involve a
life contingency, if variable payments are selected the amount of the
payments will reflect the deduction for mortality and expense risks, since
that charge is included in the calculation of Annuity Unit values.

Option F -- Single Sum Payment. Payment will be made in a single sum.

Other Options may be arranged by agreement with Banner Life.

Note Carefully: Under Payment Options A and D, it would be possible for only
one Annuity Payment to be made if the Annuitant(s) were to die before the due
date of the second annuity payment, only two Annuity Payments if the
Annuitant(s) were to die before the due date of the third annuity payment,
and so forth.

Variable Payment Options. The dollar amount of the first Variable Annuity
Payment will be determined in accordance with the annuity payment rates based
on the assumed interest rate of 4%. The dollar amount of every subsequent
Variable Annuity Payment will vary based on the investment performance of the
Sub-Account(s) of the Variable Account selected by the Annuitant or
Beneficiary.

The amount of the variable payments will be based on the table in the Policy
for the variable option selected. If the actual investment performance
exactly matched the assumed interest rate of 4% at all times, the amount of
each Variable Annuity Payment would remain equal. If actual investment per-
formance exceeds the assumed interest rate, the amount of the payments would
increase. Conversely, if actual investment performance is worse than the
assumed interest rate, the amount of the payments would decrease.

Determination of the First Variable Payment. The amount of the first
variable payment depends upon the Account Value, sex and age of the Annuitant
on the Maturity Date, and on the Annuity Payment Plan.

Determination of Subsequent Variable Payments. All Variable Annuity Payments
other than the first are calculated using "Annuity Units" which are allocated
to the Policy. The number of Annuity Units to be allocated in respect of a
particular Sub-Account is determined by dividing that portion of the first
Variable Annuity Payment attributable to that Sub-Account by the Annuity Unit
value of that Sub-Account for the Valuation Day on which the initial payment
is determined. The number of Annuity Units of each particular Sub-Account
allocated to the Policy then remains fixed. The dollar value of variable
annuity units in the chosen Sub-Account will increase or decrease reflecting
the investment experience of the chosen Sub-Account. The dollar amount of
each Variable Annuity Payment after the first may increase, decrease or
remain constant, and is equal to the sum of the amounts determined by
multiplying the number of Annuity Units of each particular Sub-Account
credited to the Policy by the Annuity Unit Value for the particular
Sub-Account on the date the payment is made. The calculation of Annuity Unit
Values is described in the Statement of Additional Information.

A portion or the entire amount of the Annuity Payments may be taxable as
ordinary income. If, at the time the Annuity Payments begin, the Policyowner
has not provided Banner Life with a written election not to have federal
income taxes withheld, Banner Life must by law withhold such taxes from the
taxable portion of such annuity payments and remit that amount to the federal
government. (See Certain Federal Income Tax Consequences.)

Adjustment of Annuity Payments. If the initial monthly Annuity Payment is
less than $50, Banner Life will reduce the frequency of payments to
quarterly, semi-annually, or annually, until the initial payment is not less
than $50. If the initial annual Annuity Payment is less than $50, Banner
Life will pay the Account Value at maturity. If Banner Life pays the account
value, Banner Life will have no further obligation under this policy.

Annuity Value. The Annuity Value is the sum of the annuity values in the
General Account and the Variable Account. In the General Account, the
Annuity Value on the Maturity Date is the Account Value allocated to the
General Account on the Maturity Date. Thereafter, the Annuity value is
decreased when annuity payments are made from the General Account, and
increased or decreased when transfers are made to or from the General
Account. Remaining General Account Annuity Values are credited with 4%
interest, compounded annually. Banner Life may credit additional interest to
the General Account Annuity Value.

In any Sub-Account of the Variable Account, the Annuity Value equals the
product of the Accumulation Unit Value and the annuity unit balance. The
annuity unit balance on the Maturity Date equals the Account Value allocated
to the Sub-Account divided by the Accumulation Unit Value. Thereafter, the
annuity unit balance is decreased when annuity payments are made, and
increased or decreased when transfers to or from the sub-account are made.
Accumulation unit values are described in the Statement of Additional
Information.

Death Benefit

Death of Annuitant or Owner Prior to Maturity Date. If the Annuitant or
Owner dies prior to the Maturity Date, a Death Benefit will be paid to the
Beneficiary. The Death Benefit will equal the Account Value of the Policy
(without any deduction of a Contingent Deferred Sales Charge) as of the date
of death.

The Death Benefit is payable upon receipt of Due Proof of Death of the
Annuitant or Owner as well as proof that the Annuitant or Owner died prior to
the commencement of Annuity Payments. The Beneficiary may receive the amount
payable in a lump sum cash benefit, or, if the Beneficiary is an individual
receiving payment in his or her right, subject to any limitation under any
state or federal law, rule, or regulation, under one of the Annuity Payment
Plans described above, unless a settlement agreement is effective at the
death of the Annuitant or Owner preventing such election.

If the beneficiary is not an individual, then only a single sum payment will
be made.

Federal tax law requires that if the Policyowner (or any Contingent
Policyowner) dies before the Maturity Date, the entire value of the Policy
must generally be distributed within five years of the date of death of the
Policyowner (or the Contingent Policyowner). Special rules may apply to the
spouse of the deceased Owner. See the Statement of Additional Information
for a detailed description of these requirements.

Death of Annuitant On or After Maturity Date. The death benefit payable if
the Annuitant dies on or after the Maturity Date depends on the Annuity
Payment Plan selected. Upon the Annuitant's death, the remaining portion of
the Annuitant's interest in the Policy, if any, will be distributed at least
as rapidly as under the method of distribution being used as of the date of
the Annuitant's death.

Beneficiary. The Beneficiary designation in the application will remain in
effect until changed. The Policyowner may change the designated Beneficiary
by sending Written Notice to Banner Life. The Beneficiary's consent to such
change is not required unless the Beneficiary was irrevocably designated or
consent is required by law. (If an irrevocable Beneficiary dies, the
Policyowner may then designate a new Beneficiary.) The change will take
effect as of the date the Policyowner signs the Written Notice, whether or
not the Policyowner is living when the Notice is received by Banner Life.
Banner Life will not be liable for any payment made before the Written Notice
is received. If more than one Beneficiary is designated, and the Policyowner
fails to specify their interests, they will share equally.

Restrictions Under the Texas Optional Retirement Program

Section 36.105 of the Texas Educational Code permits participants in the
Texas Optional Retirement Program (ORP) to withdraw their interest in a
variable annuity Policy issued under the ORP only upon (1) termination of
employment in the Texas public institutions of higher education; (2)
retirement; or (3) death. Accordingly, a participant in the ORP (or the
participant's estate if the participant has died) will be required to obtain
a certificate of termination from the employer or a certificate of death
before the account can be redeemed.

Restrictions Under Section 403(b) Plans

Section 403(b) of the Internal Revenue Code provides for tax-deferred
retirement savings plans for employees of certain non-profit and educational
organizations. In accordance with the requirements of Section 403(b), any
Policy used for a 403(b) plan will prohibit distributions of elective
contributions and earnings on elective contributions except upon death of the
employee, attainment of age 59.5, separation from service, disability, or
financial hardship. In addition, income attributable to elective
contributions may not be distributed in the case of hardship.

CHARGES AND DEDUCTIONS

Banner Life will make certain charges and deductions in connection with the
Policy in order to compensate it for incurring expenses in distributing the
Policy, bearing mortality and expense risks under the Policy, and
administering the Accounts and the Policies. Charges may also be made for
premium taxes, federal, state or local taxes, or for certain transfers or
other transactions.

Contingent Deferred Sales Charge

Banner Life will incur expenses relating to the sale of Policies, including
commissions to registered representatives and other promotional expenses.
Banner Life may apply a Contingent Deferred Sales Charge to any Account Value
surrendered (i.e., withdrawn) in connection with a full or partial Policy
surrender in order to cover distribution expenses. A Contingent Deferred
Sales Charge will not be applied to a withdrawal of up to 10% of the Premiums
Paid, if it is the first withdrawal in the current Policy Year. A Contingent
Deferred Sales Charge will also not be applied if Account Value is applied to
an Annuity Payment Plan with payments over at least a five year period.

The amount of the Contingent Deferred Sales Charge is determined by
multiplying the applicable Contingent Deferred Sales Charge Percentage by
total premiums paid less prior partial surrenders, for full surrenders; or by
the lesser of (a) the amount withdrawn, or (b) total premiums paid less prior
partial surrenders, for partial surrenders. The applicable Contingent
Deferred Sales Charge Percentage will depend upon the Policy Year and age at
issue of the annuitant. The charge will be: for issue ages 0-57, 7.5% for
the first five years, then decreasing by 1.5% per year to 0% at the 10th
Policy Year; for issue ages 58-80, 7.5% for the first two years, 7.0% in the
third year, then decreasing by 1.0% per year to 0% at the 10th Policy Year.
There is no charge after the Policy has been in effect for nine full years.
Premium Payments are deemed to be withdrawn before earnings, and after all
Premium Payments have been withdrawn, the remaining Account Value may be
withdrawn without any Contingent Deferred Sales Charge. In no event will the
aggregate Contingent Deferred Sales Charges exceed 7.5% of aggregate premiums
paid. The following is the table of Contingent Deferred Sales Charge
Percentages:

Applicable Contingent Deferred
Policy Year Sales Charge Percentage

Issue ages 0-57: Issue ages 58-80:
1 7.5% 7.5%
2 7.5% 7.5%
3 7.5% 7.0%
4 7.5% 6.0%
5 7.5% 5.0%
6 6.0% 4.0%
7 4.5% 3.0%
8 3.0% 2.0%
9 1.5% 1.0%
10 and 0.0% 0.0%
thereafter

The Contingent Deferred Sales Charge applies to both total and partial
surrenders and to Annuity Payment Plans that cover less than five years. For
partial surrenders, the charge will usually be deducted from the Account
Value remaining after Banner Life pays the Policyowner the requested amount.

Banner Life anticipates that the Contingent Deferred Sales Charge will not
generate sufficient funds to pay the cost of distributing the Policies. If
this charge is insufficient to cover the distribution expenses, the
deficiency will be met from Banner Life's general funds, which will include
amounts derived from the charge for mortality and expense risks.

Mortality and Expense Risk Charge

Banner Life imposes a daily charge as compensation for bearing certain
mortality and expense risks in connection with the Policies. This charge
currently is equal to an effective annual rate of 1.15% of the value of net
assets in the Variable Account. This rate may increase but it is guaranteed
not to exceed 1.25% for the duration of the Policy. The Mortality and
Expense Risk Charge is reflected in the Accumulation or Annuity Unit Values
for the Policy for each Sub-Account; accordingly, this charge is imposed both
before and after the Maturity Date.

Account Values and Annuity Payments are not affected by changes in actual
mortality experience nor by actual expenses incurred by Banner Life. The
mortality risks assumed by Banner Life arise from its contractual obligations
to make Annuity Payments (determined in accordance with the Annuity tables
and other provisions contained in the Policy) and to pay Death Benefits prior
to the Maturity Date. Thus, Owners are assured that neither an Annuitant's
own longevity nor an unanticipated improvement in general life expectancy
will adversely affect the monthly Annuity payments that the Annuitant will
receive under the Policy.

Banner Life also bears substantial risk in connection with the Death Benefit
guarantee since Banner Life will pay a Death Benefit equal to the Account
Value, without deducting any applicable Contingent Deferred Sales Charge.
The expense risk assumed by Banner Life is the risk that Banner Life's actual
expenses in administering the Policy and the Accounts will exceed the amount
recovered through the Administrative Charges.

If the Mortality and Expense Risk Charge is insufficient to cover Banner
Life's actual costs, Banner Life will bear the loss; conversely, if the
charge is more than sufficient to cover costs, the excess will be profit to
Banner Life. Banner Life expects a profit from this charge. To the extent
that the Contingent Deferred Sales Charge is insufficient to cover the actual
cost of Policy distribution, the deficiency will be met from Banner Life's
general corporate assets, which may include amounts, if any, derived from the
Mortality and Expense Risk Charge.

Administrative Charges

In order to cover the costs of administering the Policies and the Accounts,
Banner Life deducts an annual Administrative Charge from the Account Value of
each Policy prior to the Maturity Date.

The annual Administrative Charge is deducted from the Account Value of each
Policy at the end of each Policy Year prior to the Maturity Date. If the
Policy is surrendered during a Policy Year, this charge will be deducted on
a pro rata basis based on the number of months elapsed in the Policy Year.
After the Maturity Date, the charge is not deducted. This annual Admin-
istrative Charge currently is $30 and may be increased but will never exceed
$40. Banner Life does not anticipate realizing any profit from this charge.
The Administrative Charge will be deducted from the General Account and the
Sub-Accounts of the Variable Account in the same proportion that the
Policyowner's interest in each bears to the total Account Value.

Premium Taxes

For those contracts subject to premium tax, the tax will be deducted either
from the premium payment when paid or from the Account Value upon
annuitization as determined in accordance with applicable law. Banner Life
believes that as of the date of this prospectus, premium taxes range from 0%
to 3.0%.

Federal, State and Local Taxes

No charges are currently made for federal, state, or local taxes other than
premium taxes. However, Banner Life reserves the right to deduct such taxes
from the Accounts or Sub-Accounts in the future.

Transfer Charge

Transfers may be subject to a service charge which will be deducted from the
amount transferred. Currently, there is no charge for the first four
transfers each Policy Year. The current charge is $15 for the fifth and
subsequent transfer in a Policy Year (the charge may increase but the maximum
transfer charge which will be made for any transfer is $25). For the purpose
of determining whether a transfer charge is payable, initial Premium Payment
allocations are not considered transfers. All transfer requests made
simultaneously will be treated as a single request.
No transfer charge will be imposed for any transfer which is not at the
Owner's request. Banner Life reserves the right to revoke or modify the
transfer privilege. For example, the number or frequency of transfers could
be restricted, or charges could be imposed for all transfers. The amount of
the charge may be increased in the future.

Other Expenses Including Investment Advisory Fees

Each Portfolio of the Fund is responsible for all of its expenses. In
addition, charges will be made against each Portfolio of the Fund for
investment advisory services provided to the Account or Portfolio. The net
assets of each Portfolio of the Fund will reflect deductions in connection
with the investment advisory fee and other expenses.

For more information concerning the investment advisory fee and other charges
against the Portfolios, see the prospectus for the Fund, a current copy of
which accompanies this Prospectus.

CERTAIN FEDERAL INCOME TAX CONSEQUENCES

The following discussion is a general description of federal tax
considerations relating to the Policy and is not intended as tax advice.
This discussion is not intended to address the tax consequences resulting
from all of the situations in which a person may be entitled to or may
receive a distribution under the Policy. Any person concerned about these
tax implications should consult a competent tax adviser before initiating any
transaction. This discussion is based upon Banner Life'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
the continuation of the present Federal income tax laws or of the current
interpretation by the Internal Revenue Service. Moreover, no attempt has
been made to consider any applicable state or other tax laws.

The Policy may be purchased on a non-qualified tax basis ("Nonqualified
Policy") or purchased and used in connection with plans qualifying for
favorable tax treatment ("Qualified Policy"). Qualified Policies are
designed for use by individuals whose premium payments are comprised solely
of proceeds from and/or contributions under retirement plans which are
intended to qualify as plans entitled to special income tax treatment under
Sections 401(a), 403(b), 408, or 457 of the Internal Revenue Code of 1986, as
amended (the "Code"). The ultimate effect of Federal income taxes on the
amounts held under a Policy, on annuity payments, and on the economic benefit
to the Owner, the Annuitant, or the Beneficiary depends on the type of
retirement plan, on the tax and employment status of the individual concerned
and on the Employer's tax status. In addition, certain requirements must be
satisfied in purchasing a Qualified Policy with proceeds from a tax qualified
plan and receiving distributions from a Qualified Policy in order to continue
receiving favorable tax treatment. Therefore, purchasers of Qualified
Policies should seek competent legal and tax advice regarding the suitability
of the Policy for their situation, the applicable requirements, and the tax
treatment of the rights and benefits of the Policy. The following discussion
assumes that a Qualified Policy is purchased with proceeds from and/or
contributions under retirement plans that qualify for the intended special
Federal income tax treatment.
<PAGE>
The following discussion is based on the assumption that the Policy qualifies
as an annuity contract for federal income tax purposes. The Statement of
Additional Information discusses the requirements for qualifying as an
annuity.

Taxation of Annuities

1. In General

Section 72 of the Code governs taxation of annuities in general. Banner
Life believes that an Owner who is a natural person generally is not
taxed on increases in the value of a Policy until distribution occurs by
withdrawing all or part of the Account Value (e.g., partial withdrawals
and surrenders) or as Annuity Payments under the Annuity Payment Plan
elected. For this purpose, the assignment, pledge, or agreement to
assign or pledge any portion of the Account Value (and in the case of a
Qualified Policy, any portion of an interest in the qualified plan) gen-
erally will be treated as a distribution. The taxable portion of a
distribution (in the form of a single sum payment or an annuity) is
taxable as ordinary income.

The Owner of any annuity contract who is not a natural person generally
must include in income any increase in the excess of the Policy's
Account Value over the "investment in the contract" (discussed below)
during the taxable year. There are some exceptions to this rule and a
prospective Owner that is not a natural person may wish to discuss these
with a competent tax adviser.

The following discussion generally applies to a Policy owned by a natural
person.

2. Surrenders

In the case of a surrender under a Qualified Policy (other than a
section 457 plan), under section 72(e) of the Code a ratable portion of
the amount received is taxable, generally based on the ratio of the
"investment in the contract" to the individual's total accrued benefit
or balance under the retirement plan. The "investment in the contract"
is generally the amount of any premium payments paid by or on behalf of
any individual. For a Policy issued in connection with qualified plans,
the "investment in the contract" can be zero. Special tax rules may be
available for certain distributions from a Qualified Policy.

In the case of a surrender under a Nonqualified Policy before the
Maturity Date, under Code section 72(e) amounts received are generally
first treated as taxable income to the extent that the Account Value
immediately before the surrender exceeds the "investment in the
contract" at that time. Any additional amount withdrawn is not taxable.

3. Annuity Payments

Although tax consequences may vary depending on the annuity option
elected under the Policy, under Code section 72(b), generally gross
income does not include that part of any amount received as an annuity
under an annuity contract that bears the same ratio to such amount as
the investment in the contract bears to the expected return at the
Maturity Date. In this respect (prior to recovery of the investment in
the contract), there is generally no tax on the amount of each payment
which represents the same ratio that the "investment in the contract"
bears to the total expected value of the annuity payments for the term
of the payments; however, the remainder of each income payment is
taxable. In all cases, after the "investment in the contract" is
recovered, the full amount of any additional annuity payments is
taxable.

4. Taxation of Death Benefit Proceeds

Amounts may be distributed from a policy because of the death of an
owner or the annuitant. Generally, such amounts are includible in the
income of the recipients as follows:

(1) if a lump sum, the amounts received are taxed in the same manner
as in a full surrender of the policy;

(2) if distributed under an annuity payment option, the amounts
received are taxed in the same manner as annuity payments.

5. Penalty Tax

In the case of a distribution pursuant to a Nonqualified Policy, there
may be imposed a Federal penalty tax equal to 10% of the amount treated
as taxable income. In general, however, there is no penalty tax on
distributions: (1) made on or after the date on which the Owner attains
age 59.5; (2) made as a result of death or disability of the Owner;
(3) received in substantially equal periodic payments as a life annuity
or a joint and surviving annuity for the lives or life expectancies of
the Owner and a "designated beneficiary"; (4) from a qualified plan; (5)
allocable to investment in the contract before August 14, 1982; (6)
under a qualified funding asset (as defined in Code section 130(d));
(7) under an immediate annuity (as defined in Code section 72(u)(4)), or
(8) which are purchased by an employer on termination of certain types
of qualified plans and which are held by the employer until the employee
separates from service. Other tax penalties may apply to certain
distributions under a Qualified Policy.

6. Transfers, Assignments, or Exchanges of the Policy

A transfer of ownership of a Policy, the designation of an Annuitant or
other Beneficiary who is not also the Owner, the selection of certain
maturity dates, or the exchange of a Policy may result in certain tax
consequences to the Owner that are not discussed herein. An Owner
contemplating any such transfer, assignment, or exchange of a Policy
should contact a competent tax adviser with respect to the potential tax
effects of such a transaction.
<PAGE>
7. Multiple Policies

All non-qualified deferred annuity contracts that are issued by Banner
Life (or its affiliates) to the same Owner during any calendar year are
treated as one annuity contract for purposes of determining the amount
includible in gross income under section 72(e) of the Code. In
addition, the Treasury Department has specific authority to issue
regulations that prevent the avoidance of section 72(e) through the
serial purchase of annuity contracts or otherwise. Congress has also
indicated that the Treasury Department may have authority to treat the
combination purchase of an immediate annuity contract and a separate
deferred annuity contract as a single annuity contract under its general
authority to prescribe rules as may be necessary to enforce the income
tax laws.

8. Withholding

Pension and annuity distributions generally are subject to withholding
for the recipient's federal income tax liability at rates that vary
according to the type of distribution and the recipient's tax status.
Recipients, however, generally are provided the opportunity to elect not
to have tax withheld from distributions.

9. Other Tax Consequences

As noted above, the foregoing discussion of the Federal income tax
consequences under the Policy is not exhaustive and special rules are
provided with respect to other tax situations not discussed in this
prospectus. Further, the Federal income tax consequences discussed
herein reflect Banner Life's understanding of current law and the law
may change. Federal estate and state and local estate, inheritance, and
other tax consequences of ownership or receipt of distributions under
the Policy depend on the individual circumstances of each Owner or
recipient of the distribution. A competent tax adviser should be
consulted for further information.

10. Possible Changes in Taxation

In past years, legislation has been proposed that would have adversely
modified the federal taxation of certain annuities. For example, one
such proposal would have changed the tax treatment on non-qualified
annuities that did not have "susbstantial life contingnecies" by taxing
income as it is credited to the annuity. Although as of the date of
this prospectus Congress is not considering any legislation regarding
taxation of annuities, there is always the possibility that the tax
treatment of annuities could change by legislation or other means (such
as IRS regulations, revenue rulings, judicial decisions, etc.).
Moreover, it is also possible that any change could be retroactive (that
is, effective prior to the date of the change).

Qualified Plans

The Policy is designed for use with several types of qualified plans. The
tax rules applicable to Owners in qualified plans, including restrictions on
contributions and benefits, taxation of distributions, and any tax penalties,
vary according to the type of plan and the terms and conditions of the plan
itself. Various tax penalties may apply to contributions in excess of
specified limits, aggregate distributions in excess of $150,000 annually,
distributions that do not satisfy specified requirements, and certain other
transactions with respect to qualified plans. Therefore, no attempt is made
to provide more than general information about the use of the Policy with the
various types of qualified plans. Owners, Annuitants and Beneficiaries are
cautioned that the rights of any person to any benefits under qualified plans
may be subject to the terms and conditions of the plans themselves,
regardless of the terms and conditions of the Policy. Following are brief
descriptions of the various types of qualified plans in connection with which
Banner Life will issue the Policy. Policies for all types of qualified plans
may not be available in all states. When issued in connection with a
qualified plan, the Policy will be amended as necessary to conform to the
requirements of the plan.

H.R. 10 Plans. The Self-Employed Individuals' Tax Retirement Act of 1962, as
amended, commonly referred to as "H.R. 10," permits self-employed individuals
to establish qualified plans for themselves and their employees. In order to
establish such a plan, a plan document, often in prototype form preapproved
by the Internal Revenue Service, is adopted and implemented by or for the
self-employed person. Purchasers of a Policy for use with H.R. 10 Plans
should seek competent advice regarding the suitability of the proposed plan
documents and of the Policy to their specific needs.

Individual Retirement Annuities and Individual Retirement Accounts. Section
408 of the Code permits eligible individuals to contribute to an individual
retirement program known as an Individual Retirement Annuity or Individual
Retirement Account (each hereinafter referred to as "IRA"). Also,
distributions from certain other types of qualified plans may be "rolled
over" on a tax-deferred basis into an IRA. The sale of a Policy for use with
an IRA may be subject to special disclosure requirements of the Internal
Revenue Service. Purchasers of the Policy for use with IRAs will be provided
with supplemental information required by the Internal Revenue Service or
other appropriate agency. Such purchasers will have the right to revoke
their purchase within 7 days of the earlier of the establishment of the IRA
or their purchase. Purchasers should seek competent advice as to the
suitability of the Policy for use with IRAs.

Corporate Pension and Profit Sharing Plans. Sections 401(a) of the Code
permits corporate employers to establish various types of retirement plans
for employees. Corporate employers intending to use the Policy in connection
with such plans should seek competent advice.

Tax-Sheltered Annuities. Section 403(b) of the Code permits public school
employees and employees of certain types of religious, charitable, educa-
tional, and scientific organizations specified in Section 501(c)(3) of the
Code to purchase annuity contracts and, subject to certain limitations,
exclude the amount of premiums from gross income for tax purposes. These
annuity contracts are commonly referred to as "Tax-Sheltered Annuities."
Premiums excluded from gross income will be subject to FICA taxes. Subject
to certain exceptions, withdrawals under Tax-Sheltered Annuities which are
attributable to contributions made pursuant to salary reduction agreements
are prohibited unless made after the Owner attains age 59.5, upon the Owner's
separation of service, upon the Owner's death or disability, or for an amount
not greater than the total of such contributions in the case of hardship.

Section 457 Deferred Compensation ("Section 457") Plans. Under Section 457
of the Code, employees of (and independent contractors who perform services
for) certain state and local governmental units or certain tax-exempt
employers may participate in a Section 457 plan of their employer allowing
them to defer part of their salary or other compensation. The amount
deferred and any income on such amount will not be taxable until paid or
otherwise made available to the employee. In general, all amounts received
under a section 457 plan are taxable and are subject to federal income tax
withholding as wages.

The maximum amount that can be deferred under a Section 457 plan in any tax
year is ordinarily one-third of the employee's includible compensation, up to
$7,500. Includible compensation means earnings for services rendered to the
employer which is includible in the employee's gross income, but excluding
any contributions under the Section 457 plan or a Tax-Sheltered Annuity.
During the last three years before an individual attains normal retirement
age additional "catch-up" deferrals are permitted.

The deferred amounts will be used by the employer to purchase the Policy.
The Policy will be issued to the employer, and all Account Values will be
subject to the claims of the employer's creditors. The employee has no
rights or vested interest in the Policy and is only entitled to payment in
accordance with the Section 457 plan provisions. Depending on the terms of
the particular plan, the employer may be entitled to draw on deferred amounts
for purposes unrelated to its section 457 plan obligations. Present federal
income tax law does not allow tax-free transfers or rollovers for amounts
accumulated in a Section 457 plan except for transfers to other Section 457
plans in certain limited cases.

General

At the time the initial Premium Payment is paid, a prospective purchaser must
specify whether he or she is purchasing a Nonqualified Policy or a Qualified
Policy. If the initial Premium Payment is derived from an exchange or
surrender of another annuity Policy, Banner Life may require that the
prospective purchaser provide information with regard to the federal income
tax status of the previous annuity Policy. Banner Life will require that
persons purchase separate Policies if they desire to invest monies qualifying
for different annuity tax treatment under the Code. Each such separate
Policy would require the minimum initial Premium Payment stated above.
Additional Premium Payments under a Policy must qualify for the same federal
income tax treatment as the initial Premium Payment under the Policy; Banner
Life will not accept an additional Premium Payment under a Policy if the
federal income tax treatment of such Premium Payment would be different from
that of the initial Premium Payment.

DISTRIBUTOR OF THE POLICIES

Banner Financial Services Group, Inc., ("Banner Financial") an affiliate of
Banner Life, is the principal underwriter and the distributor of the
Policies. Banner Financial may enter into contracts with various
broker-dealers to aid in the distribution of the Policies. The
commissions paid to dealers are no greater than 5% of Premium Payments.

<PAGE>
VOTING RIGHTS

To the extent required by law, Banner Life will vote the Fund shares held by
the Variable Account at regular and special shareholder meetings of the Fund
in accordance with instructions received from persons having voting interests
in the portfolios. If, however, the 1940 Act or any regulation thereunder
should be amended or if the present interpretation thereof should change, and
as a result Banner Life determines that it is permitted to vote the Fund's
shares in its own right, it may elect to do so.

Before the Maturity Date, the Policyowner holds the voting interest in the
selected Portfolios. The number of votes that an Owner has the right to
instruct will be calculated separately for each Sub-Account. The number of
votes that an Owner has the right to instruct for a particular Sub-Account
will be determined by dividing his or her Account Value in the Sub-Account by
the net asset value per share of the corresponding Portfolio in which the
Sub-Account invests. Fractional shares will be counted.

After the Maturity Date, the person receiving Annuity Payments has the voting
interest, and the number of votes decreases as Annuity Payments are made and
as the reserves for the Policy decrease. The person's number of votes will
be determined by dividing the reserve for the Policy allocated to the
applicable Sub-Account by the net asset value per share of the corresponding
Portfolio of the Fund. Fractional shares will be counted.

The number of votes that the Owner or annuitant has the right to instruct
will be determined as of the date established by the Fund for determining
shareholders eligible to vote at the meeting of the Fund. Banner Life will
solicit voting instructions by sending Owners or other persons entitled to
vote written requests for instructions prior to that meeting in accordance
with procedures established by the Fund. Portfolio shares as to which no
timely instructions are received and shares held by Banner Life in which
Owners or other persons entitled to vote have no beneficial interest will be
voted in proportion to the voting instructions that are received with respect
to all Policies participating in the same Sub-Account.

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

LEGAL PROCEEDINGS

There are no legal proceedings to which the Variable Account is a party or to
which the assets of the Account are subject. Banner Life is not involved in
any litigation that is of material importance in relation to its total assets
or that relates to the Variable Account.
STATEMENT OF ADDITIONAL INFORMATION

A Statement of Additional Information is available (at no cost) which
contains more details concerning the subjects discussed in this Prospectus.
The following is the Table of Contents for that Statement:

TABLE OF CONTENTS
Page

THE POLICY-GENERAL PROVISIONS. . . . . . . . . . . . . . . . . .3
Owner . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Policy. . . . . . . . . . . . . . . . . . . . . . . . . . .3
Right to Contest. . . . . . . . . . . . . . . . . . . . .3
Non-Participating Policy. . . . . . . . . . . . . . . . . .3
Postponement of Payments . . . . . . . . . . . . . . . . .3
Misstatement of Age or Sex. . . . . . . . . . . . . . . . .4
Assignment. . . . . . . . . . . . . . . . . . . . . . . . .4
Evidence of Survival. . . . . . . . . . . . . . . . . . . .4

FEDERAL TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . .5
Tax Status of the Policy. . . . . . . . . . . . . . . . . .5
Taxation of Banner Life . . . . . . . . . . . . . . . . . .6

INVESTMENT EXPERIENCE. . . . . . . . . . . . . . . . . . . . . .6
Accumulation Units. . . . . . . . . . . . . . . . . . . . .7
Annuity Payment Provisions. . . . . . . . . . . . . . . . .7

STATE REGULATION OF BANNER LIFE. . . . . . . . . . . . . . . . .8
ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . . . .8

RECORDS AND REPORTS. . . . . . . . . . . . . . . . . . . . . . .9

DISTRIBUTION OF THE POLICIES . . . . . . . . . . . . . . . . . .9

CUSTODY OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . .9

HISTORICAL PERFORMANCE DATA. . . . . . . . . . . . . . . . . . .9
Money Market Yields . . . . . . . . . . . . . . . . . . . .9
Other Sub-Account Yields. . . . . . . . . . . . . . . . . 10
Total Returns . . . . . . . . . . . . . . . . . . . . . . 11
Other Performance Data. . . . . . . . . . . . . . . . . . 12

LEGAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . 12

LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . 13

EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

SENIOR OFFICERS AND DIRECTORS OF BANNER LIFE INSURANCE COMPANY 13

FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . 15
STATEMENT OF ADDITIONAL INFORMATION

FLEXIBLE PREMIUM VARIABLE ANNUITY

Issued through

BANNER LIFE VARIABLE
ANNUITY ACCOUNT

Offered by
BANNER LIFE INSURANCE COMPANY

1701 Research Boulevard
Rockville, Maryland 20850

This Statement of Additional Information expands upon subjects discussed in
the current Prospectus for the Flexible Premium Variable Annuity Policy (the
"Policy") offered by Banner Life Insurance Company. You may obtain a copy of
the Prospectus dated May 1, 1996 by calling (301) 294-6940, or by writing to
Banner Life Insurance Company, 1701 Research Boulevard, Rockville, Maryland
20850. Terms used in the current Prospectus for the Policy are incorporated
in this Statement.

THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND SHOULD BE
READ ONLY IN CONJUNCTION WITH THE PROSPECTUS FOR THE POLICY AND THE VARIABLE
ACCOUNT.

Dated: May 1, 1996

TABLE OF CONTENTS
Page

THE POLICY-GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . .3
Owner . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Policy. . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Right to Contest. . . . . . . . . . . . . . . . . . . . . . . .3
Non-Participating Policy. . . . . . . . . . . . . . . . . . . .3
Postponement of Payments. . . . . . . . . . . . . . . . . . . .3
Misstatement of Age or Sex. . . . . . . . . . . . . . . . . . .4
Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . .4
Evidence of Survival. . . . . . . . . . . . . . . . . . . . . .4

FEDERAL TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . . . .5
Tax Status of the Policy. . . . . . . . . . . . . . . . . . . .5
Taxation of Banner Life . . . . . . . . . . . . . . . . . . . .6

INVESTMENT EXPERIENCE. . . . . . . . . . . . . . . . . . . . . . . .6
Accumulation Units. . . . . . . . . . . . . . . . . . . . . . .7
Annuity Payment Provisions. . . . . . . . . . . . . . . . . . .7

STATE REGULATION OF BANNER LIFE. . . . . . . . . . . . . . . . . . .8

ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . . .8

RECORDS AND REPORTS. . . . . . . . . . . . . . . . . . . . . . . . .9

DISTRIBUTION OF THE POLICIES . . . . . . . . . . . . . . . . . . . .9

CUSTODY OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . .9

HISTORICAL PERFORMANCE DATA. . . . . . . . . . . . . . . . . . . . .9
Money Market Yields . . . . . . . . . . . . . . . . . . . . . .9
Other Sub-Account Yields 10
Total Returns . . . . . . . . . . . . . . . . . . . . . . . . 11
Other Performance Data. . . . . . . . . . . . . . . . . . . . 12

LEGAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . 12

LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . . 13

EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

SENIOR OFFICERS AND DIRECTORS OF BANNER LIFE INSURANCE COMPANY . . 13

FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . 15

In order to supplement the description in the Prospectus, the following
provides additional information about Banner Life and the Policy which may be
of interest to an Owner.

THE POLICY - GENERAL PROVISIONS

Owner

The Owner is entitled to the benefits, rights and privileges of ownership and
can exercise the rights described in the Policy. The Owner can transfer
ownership by Written Notice to Banner Life at its Administrative Office. The
transfer will not affect the interest of a beneficiary. While the Annuitant
is living, the Owner may assign the Policy (see Assignment, below).

The Policy

The Policy, attached riders, amendments, benefits, and the application, and
any supplemental applications for additional amounts, form the entire
contract. Only the President, a Vice President, or the Secretary of Banner
Life may change or waive any provision in the Policy. Any changes or waivers
must be in writing.

Banner Life may change or amend the Policy if such change or amendment is
necessary for the Policy to comply with or take advantage of any state or
federal law, rule or regulation.

Right to Contest

Unless the Policyowner fails to pay the initial premium, Banner Life does not
have the right to contest this policy.

Non-participating Policy

The Policy does not participate or share in the profits or surplus earnings
of Banner Life. No dividends are payable on the Policy.

Postponement of Payments

Banner Life may postpone the calculation and payment of surrender values,
loans, transfers or Death Benefits from the Variable Account if:

(1) The New York Stock Exchange is closed on other than customary week-end
and holiday closures, or trading on the New York Stock Exchange is
restricted as determined by the Securities and Exchange Commission
("SEC"); or

(2) The SEC by order permits postponement for the protection of
Policyholders; or

<PAGE>
(3) An emergency exists, as determined by the SEC, as a result of which
disposal of securities is not reasonable, or practicable, or it is not
reasonable or practicable to determine the value of the net assets of
the Variable Account.

In addition, while it is Banner Life's current intent to process all
transfers from Sub-Accounts immediately upon receipt of a transfer request,
Banner Life reserves the right to delay effecting a transfer from a Sub-Account
for up to seven days. Banner Life may delay effecting such a
transfer to avoid severe disruptions to the Portfolios of the Fund if one of
the Portfolios must sell portfolio securities in order to make funds
available for large amounts of redemptions or transfers being made at the
same time by or on behalf of Policyowners. If this happens, Banner Life will
calculate the dollar value or number of units involved on or as of the date
Banner Life receives a written transfer request, but will not process the
transfer to the transferee Sub-Account or the General Account until a later
date during the 7-day delay period when the Portfolio underlying the
transferring Sub-Account obtains liquidity to fund the transfer request
through sales of portfolio securities, new Premium payments, transfers by
Policyowners or otherwise. During this delay period, the amount transferred
will not be invested in a Sub-Account or the General Account.

Banner Life may postpone the payment of proceeds or surrender values or
transfers from the General Account for up to six months from the date Written
Request for such is received at the Administrative Office. However, a
partial surrender used to pay a premium on any Policy issued by Banner Life
will not be postponed. Payments from the Policy of any amounts derived from
premiums paid by check may be delayed until such time as the check has
cleared.

Misstatement of Age or Sex

If the annuitant's age or sex has been misstated, any payments under the
Policy will be those the premiums paid would have purchased at the correct
age or sex.

Assignment

During the lifetime of the Annuitant the Policyowner may assign any rights
under the Policy as security for a loan or other reasons. This does not
change the ownership of the Policy, but the rights of the Owner and any
Beneficiary are subject to the terms of the assignments. An assignment will
not be binding on Banner Life until a copy has been filed at its
Administrative Office. Banner Life is not responsible for the validity of
the assignment. An assignment may have tax consequences.

Evidence of Survival

Banner Life reserves the right to require satisfactory evidence that a person
is alive if a payment is based on that person being alive. No payment will
be made until Banner Life receives such evidence.

<PAGE>
FEDERAL TAX MATTERS

Tax Status of the Policy

Diversification Requirements. Section 817(h) of the Code provides that in
order for a variable contract which is based on a segregated asset account to
qualify as an annuity contract under the Code, the investments made by such
account must be "adequately diversified" in accordance with Treasury
regulations. The Treasury regulations issued under Section 817(h) (Treas.
Reg. 1.817-5) apply a diversification requirement to each of the Sub-Accounts
of the Variable Account. The Variable Account, through the Fund and
its Portfolios, intends to comply with the diversification requirements of
the Treasury. Banner Life and the Fund have entered into an agreement
regarding participation in the Fund that requires the Fund and its Portfolios
to be operated in compliance with the Treasury regulations.

Owner Control.

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 includible 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 Policyowners were not owners of separate account assets. For
example, a Policyowner has additional flexibility in allocating premium
payments and policy values. These differences could result in a Policyowner
being treated as the owner of a pro rata portion of the assets of the
Variable Account. In addition, we do 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. Banner Life 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 Variable
Account.

Distribution Requirements. In order to be treated as an annuity contract for
Federal income tax purposes, section 72(s) of the Code requires any
Non-qualified Policy to provide that (a) if any Owner dies on or after the
Maturity Date but prior to the time the entire interest in the Policy
<PAGE>
has been distributed, the remaining portion of such interest will be
distributed at least as rapidly as under the method of distribution being
used as of the date of that Owner's death; and (b) if any Owner dies prior to
the Maturity Date, the entire interest in the Policy will be distributed
within five years after the date of the Owner's death. These requirements
will be considered satisfied as to any portion of the Owner's interest which
is payable to or for the benefit of a "designated beneficiary" and which is
distributed over the life of such "designated beneficiary" or over a period
not extending beyond the life expectancy of that beneficiary, provided that
such distributions begin within one year of that Owner's death. The Owner's
"designated beneficiary" is the person designated by such owner as a
Beneficiary and to whom ownership of the Policy passes by reason of death and
must be a natural person. However, if the Owner's "designated beneficiary"
is the surviving spouse of the Owner, the Policy may be continued with the
surviving spouse as the new Owner.

The Policy contains provisions which are intended to comply with the
requirements of section 72(s) of the Code, although no regulations
interpreting these requirements have yet been issued. Banner Life intends to
review such provisions and modify them if necessary to assure that they
comply with the requirements of Code section 72(s) when clarified by
regulation or otherwise.

Similar rules may apply to a Qualified Policy.

Taxation of Banner Life

Banner Life at present is taxed as a life insurance company under part I of
Subchapter L of the Code. The Variable Account is treated as part of Banner
Life and, accordingly, will not be taxed separately as "regulated investment
companies" under Subchapter M of the Code. Banner Life does not expect to
incur any federal income tax liability with respect to investment income and
net capital gains arising from the activities of the Variable Account
retained as part of the reserves under the Policy. Based on this
expectation, it is anticipated that no charges will be made against the
Variable Account for federal income taxes. If, in future years, any federal
income taxes are incurred by Banner Life with respect to the Variable
Account, Banner Life may make a charge to the Variable Account.

Under current laws, Banner Life may incur state and local taxes in certain
states. At present, these taxes are not significant. If there is a material
change in applicable state or local tax laws, charges may be made for such
taxes or reserves for such taxes, if any, attributable to the Variable
Account.

INVESTMENT EXPERIENCE

On any Valuation Day, the separate account value is equal to the totals of
the values allocated to the Policy in each Sub-Account. The Account Value
held in any Sub-Account is equal to the number of Sub-Account units allocated
to this Policy multiplied by the Sub-Account accumulation unit value as
described below.

The number of Sub-Account units will increase when:

(1) Net premiums are credited to that Sub-Account; or

(2) Transfers from other Sub-Accounts, or from the General Account, are
credited to that Sub-Account.

The number of Sub-Account units will decrease when:

(1) A partial surrender, including the applicable surrender charge, is
taken from that Sub-Account;

(2) A proportion of the annual administrative charge is taken from that
Sub-Account; or

(3) A transfer is made from that Sub-Account to other Sub-Accounts or to
the General Account.

Accumulation Units

Accumulation unit values are determined for each Sub-Account at the end of
each Valuation Day before the transfer or allocation of any amounts to or
from the Sub-Accounts. Each Sub-Account accumulation unit value may increase
or decrease on each Valuation Day and is equal to the accumulation unit value
for the Sub-Account at the end of the immediately preceding valuation period
multiplied by the "Net Investment Factor" for the current valuation period.
The Net Investment Factor is used to determine the value of Accumulation
Units and Annuity Units.

The Net Investment Factor for any Sub-Account for any valuation period is
determined by dividing (1) minus (2) by (3) and then subtracting (4), where:

(1) Is the value of the net assets of the shares of the investment company
portfolio in which the Sub-Account invests, determined at the end of the
valuation period;

(2) Is any reserve for taxes which we may consider necessary;

(3) Is the value of the net assets of the shares of the Fund Portfolio in
which the Sub-Account invests, determined at the end of the preceding
valuation period; and

(4) Is the charge for mortality and expense risks. The effective annual
rate of this charge currently is 1.15% and it is guaranteed never to
exceed 1.25% of the value of the net assets in the Sub-Account.

Annuity Payment Provisions

On the Valuation Day that the initial annuity payment is determined, the
number of annuity units in each Sub-Account is determined by dividing the
portion of the initial annuity payment allocated to the Sub-Account by the
annuity unit value for that Sub-Account. Transfers between Sub-Accounts in
the Separate Account may increase or decrease the number of annuity units in
the Sub-Account. After the initial annuity payment, each subsequent annuity
payment will be determined by the product of the number of annuity units and
the annuity unit value of each Sub-Account. The annuity unit value of the
Sub-Account is the product of (1), (2), and (3), where:

(1) Is the annuity unit value as of the preceding Valuation Day;

(2) Is the net investment factor for the valuation period of the Sub-Account
in the Variable Account; and

(3) Is .9998926 per day of the valuation period. This is an adjustment
corresponding to the assumed rate of 4% on a yearly basis, which is used
in the calculation of the initial annuity payment.

The valuation period is the period from the close of the immediately
preceding Valuation Day to the close of the current Valuation Day.

STATE REGULATION OF BANNER LIFE

Banner Life is subject to regulation by the Maryland Insurance Administration
(Banner Life's state of domicile). An annual statement is filed with the
Maryland Insurance Administration each year covering the operations and
reporting on the financial condition of Banner Life as of December 31 of the
preceding year. Periodically, the Maryland Insurance Administration or other
authorities examine the reserves of Banner Life and certifies their adequacy.
A full examination of Banner Life's operations is conducted periodically by
the Maryland Insurance Administration.

In addition, Banner Life 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.

A Policy is governed by the law of the state in which it is delivered. The
values and benefits of each policy are at least equal to those required by
such state.

ADMINISTRATION

Banner Life will perform administrative services itself. Such services
include issuance of the Policies, maintenance of records concerning the
Policies, and certain valuation services.

Banner Life may, at some time in the future, enter into an administration
services agreement to secure administrative services from other sources.
Services would be purchased on a basis which, in Banner Life's sole discre-
tion, affords the best service at the lowest cost. Banner Life, however,
reserves the right to select a provider of services which Banner Life, in its
sole discretion, considers best able to perform such services in a satis-
factory manner even though the costs for the service may be higher than would
prevail elsewhere.
<PAGE>
RECORDS AND REPORTS

All records and accounts relating to the Variable Account will be maintained
by Banner Life. As presently required by the Investment Company Act of 1940
and regulations promulgated thereunder, Banner Life will mail to all
Policyowners at their last known address of record, at least annually,
reports containing such information as may be required under that Act or by
any other applicable law or regulation. Policyowners will also receive
confirmations of each financial transaction and any other reports required by
federal or state law or regulation.

DISTRIBUTION OF THE POLICIES

The Policies are offered to the public through brokers licensed under the
federal securities laws and state insurance laws.

The Policies will be sold by individuals who are registered representatives
of Banner Financial Services Group, Inc. ("Banner Financial"), the principal
underwriter of the Policies, or of broker-dealers who have entered into
written sales agreements with Banner Financial. Banner Financial is
registered with the SEC under the Securities Exchange Act of 1934 as a
broker-dealer and is a member of the National Association of Securities
Dealers. Banner Financial is an affiliate of Banner Life. The amount of
commissions payable to Banner Financial in 1995, 1994, and 1993 were
$209,060, $168,014, and $37,460, respectively.

CUSTODY OF ASSETS

The assets of the Sub-Accounts of the Variable Account are held by Banner
Life. The assets of the Sub-Accounts of the Variable Account are held
separate and apart from the assets of any other segregated asset accounts and
from Banner Life's general account assets. Banner Life maintains records of
all purchases and redemptions of shares of the Fund held by each of the
Sub-Accounts. Additional protection for the assets of the and Variable Account
is afforded by Banner Life's fidelity bond, presently in the amount of
$5,000,000, covering the acts of officers and employees of Banner Life.

HISTORICAL PERFORMANCE DATA

The Scudder Variable Life Investment Fund commenced operations in 1985, and
therefore figures based on the Fund's past performance, adjusted for the
charges under the Policies, may be advertised or otherwise made available.

Money Market Yields

Banner Life may from time to time disclose the current annualized yield of
the Money Market Sub-Account, which invests in the Money Market Portfolio,
for a 7-day period in a manner which does not take into consideration any
realized or unrealized gains or losses on shares of the Money Market Port-
folio or on its portfolio securities. This current annualized yield is
computed by determining the net change (exclusive of realized gains and
losses on the sa0le of securities and unrealized appreciation and
depreciation) at the end of the 7-day period in the value of a hypothetical
account having a balance of 1 unit of the Money Market Sub-Account at the
beginning of the 7-day period, dividing such net change in account value by
the value of the account at the beginning of the period to determine the base
period return, and annualizing this quotient on a 365-day basis. The net
change in account value reflects (i) net income from the Portfolio
attributable to the hypothetical account; and (ii) charges and deductions
imposed under a Policy that are attributable to the hypothetical account.

Banner Life may also disclose the effective yield of the Money Market
Sub-Account for the same 7-day period, determined on a compounded basis. The
effective yield is calculated by compounding the unannualized base period
return by adding one to the base period return, raising the sum to a power
equal to 365 divided by 7, and subtracting one from the result.

The effective yield is calculated by compounding the unannualized base period
return according to the following formula:

EFFECTIVE YIELD = [(BASE PERIOD RETURN + 1) 365/7] - 1

The yield on amounts held in the Money Market Sub-Account normally will
fluctuate on a daily basis. Therefore, the disclosed yield for any given
past period is not an indication or representation of future yields or rates
of return. The Money Market Sub-Account's actual yield is affected by
changes in interest rates on money market securities, average portfolio
maturity of the Money Market Portfolio, the types and quality of portfolio
securities held by the Money Market Portfolio and its operating expenses.

Other Sub-Account Yields

Banner Life may from time to time advertise or disclose the current
annualized yield of one or more of the Sub-Accounts of the Variable Account
(except the Money Market Sub-Account) for 30-day periods. The annualized
yield of a Sub-Account refers to income generated by the Sub-Account over a
specific 30-day period. Because the yield is annualized, the yield generated
by a Sub-Account during the 30-day period is assumed to be generated each 30-day
period over a 12-month period. The yield is computed by: (i) dividing
the net investment income per accumulation unit earned during the period by
the price per unit on the last day of the period, according to the following
formula:

<PAGE>
Yield = 2 [(a - b + 1)^6 - 1]/cd

Where:

a = Net investment income earned during the period attributable to
shares of the Sub-Account.

b = Expenses accrued for the period.

c = The average number of accumulation units outstanding during the
period.

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

Because of the charges and deductions imposed by the Variable Account, the
yield for a Sub-Account of the Variable Account will be lower than the yield
for its corresponding Portfolio. The yield calculations do not reflect the
effect of any premium taxes or Contingent Deferred Sales Charges that may be
applicable to a particular Policy. Contingent Deferred Sales Charges range
from 7.5% to 0% of the amount surrendered or the total premiums paid less
prior partial surrenders, based on the Policy Year of surrender.

The yield on amounts held in the Sub-Accounts of the Variable Account
normally will fluctuate over time. Therefore, the disclosed yield for any
given past period is not an indication or representation of future yields or
rates of return. A Sub-Account's actual yield is affected by the types and
quality of the Portfolio's investments and its operating expenses.

Total Returns

Banner Life may from time to time also advertise or disclose total returns
for one or more of the Sub-Accounts of the Variable Account for various
periods of time. When a Sub-Account has been in operation for 1, 5 and 10
years, respectively, the total return for these periods will be provided.
Total returns for other periods of time may from time to time also be
disclosed. Total returns represent the average annual compounded rates of
return that would equate the initial amount invested to the redemption value
of that investment as of the last day of each of the periods.

Total returns will be calculated using Sub-Account Unit Values which Banner
Life calculates on each Valuation Day based on the performance of the
Sub-Account's underlying Portfolio, and the deductions for the Mortality and
Expense Risk Charge and the Administrative Charges. Total return calcula-
tions will reflect the effect of Contingent Deferred Sales Charges that may
be applicable to a particular period. The total return will then be
calculated according to the following formula:

<PAGE>
P(1 + T)^n = ERV

Where:

P = A hypothetical initial payment of $1,000.
T = Average annual total return.
n = Number of years in the period.
ERV = Ending redeemable value of a hypothetical $1,000 payment made at
the beginning of the one, five or ten-year period, at the end of
the one, five or ten-year period (or fractional portion thereof).

Other Performance Data

Banner Life may from time to time also disclose average annual total returns
in a non-standard format in conjunction with the standard format described
above. The non-standard format will be identical to the standard format
except that the Contingent Deferred Sales Charge percentage will be assumed
to be 0%.

Banner Life may from time to time also disclose cumulative total returns in
conjunction with the standard format described above. The cumulative returns
will be calculated using the following formula assuming that the Contingent
Deferred Sales Charge percentage will be 0%.

CTR = (ERV / P) - 1

Where:

CTR = The cumulative total return net of Sub-Account recurring charges
for the period.

ERV = The ending redeemable value of the hypothetical investment made at
the beginning of the one, five or ten-year period, at the end of
the one, five or ten-year period (or fractional portion thereof).

P = A hypothetical initial payment of $1,000.

All non-standard performance data will only be advertised if the standard
performance data for the same period, as well as for the required period, is
also disclosed.

LEGAL MATTERS

Legal advice regarding certain matters relating to the federal securities
laws applicable to the issuance of the Policy described in this Prospectus
has been provided by Sutherland, Asbill & Brennan, Washington, D.C. All
matters of Maryland law pertaining to the Policy, including the validity of
the Policy and Banner Life's right to issue the Policy under Maryland
Insurance Law and any other applicable state insurance or securities laws,
have been passed upon by Mark A. Canter, Vice President, Secretary & General
Counsel of Banner Life.

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. Banner Life 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 consolidated financial statements of Banner Life Insurance Company as of
December 31, 1995, and for each of the three years in the period ended
December 31, 1995, and the financial statements of the Banner Life Variable
Annuity Account as of December 31, 1995 and for each of the three years in
the period ended December 31, 1995 included in this Prospectus have been so
included in reliance on the reports of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.

SENIOR OFFICERS AND DIRECTORS OF BANNER LIFE INSURANCE COMPANY

Name and Position Principal Occupation
with Banner Life Last Five Years

Mark A. Canter Vice President, Secretary &
Vice President, Secretary General Counsel
and General Counsel Banner Life

Barbara A. Esau Vice President - Human Resources
Vice President and Banner Life
Director

Robert E. Freeman President and Chief Operating Officer
Director (now retired)
William Penn Life Insurance Company
of New York,
Garden City, New York

Gene R. Gilbertson Senior Vice President,
Senior Vice President, Chief Banner Life
Financial Officer, Treasurer and
Director

Dewey D. Goodrich, Jr. Senior Vice President - Information
Senior Vice President and Systems and Services
Director Legal & General America, Inc. (1995)
Vice President - Information Services
Interstate Assurance Company
Des Moines, Iowa

Robert L. Hill Vice President & Controller (1993)
Vice President Assistant Controller
Banner Life

Bentti O. Hoiska Chief Investment Officer and
Executive Vice President Executive Vice President
and Director Legal & General America, Inc. (1995)
Principal
State Street Global Advisors
Boston, Massachusetts

David S. Lenaburg President and Chief Executive
Chairman, President and Officer
Chief Executive Officer and Banner Life
Director

Charles A. Lingaas(2) Senior Vice President,Customer Service
Senior Vice President and William Penn Life Insurance Company
Director of New York
Garden City, NY

Otto P. Maracello(2) Senior Vice President - Underwriting
Senior Vice President and William Penn Life Insurance Company
Director of New York

Vincent R. McLean Retired
Director

Wayne L. Miller Vice President,
Vice President, Sales Banner Life

Michael D. Mullaney Vice President - Corporate
Taxation
Vice President Legal & General America, Inc.

David J. Orr Senior Vice President, Sales
Senior Vice President Banner Life
and Chief Actuary

FINANCIAL STATEMENTS

The consolidated financial statements of Banner Life which are included in
this Statement of Additional Information should be considered only as bearing
on the ability of Banner Life to meet the obligations under the Policies.
They should not be considered as bearing on the investment performance of the
assets held in the Variable Account.

BANNER LIFE
VARIABLE ANNUITY ACCOUNT
REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1995

REPORT OF INDEPENDENT ACCOUNTANTS

April 10, 1996

To Banner Life Insurance Company
and Contract Owners of
The Banner Life Variable Annuity Account

In our opinion, the accompanying statement of assets and liabilities and the
related statements of operations and of changes in net assets present fairly,
in all material respects, the financial position of The Banner Life Variable
Annuity Account and the Money Market, Balanced, Bond, Capital Growth and
International subaccounts thereof at December 31, 1995, and the results of
their operations for the year then ended and the changes in their net assets
for each of the two years in the period then ended in conformity with
generally accepted accounting principles. These financial statements are
the responsibility of Banner Life Insurance Company's management; our
responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards which 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, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of shares held at December 31, 1995 by correspondence with the
transfer agent, provide a reasonable basis for the opinion expressed above.
<PAGE>
<TABLE>
BANNER LIFE VARIABLE ANNUITY ACCOUNT
STATEMENT OF ASSETS AND LIABILITIES
AS OF DECEMBER 31, 1995
<CAPTION>

Subaccounts

Money Capital
Market Balanced Bond Growth International Total
<S> <C> <C> <C> <C> <C> <C>
ASSETS

Money Market Fund, 103,973
shares at net asset value
of $1.00 per share (cost
$103,973) $103,973 $103,973

Balanced Fund, 315,851
shares at net asset value of
$10.95 per share
cost $2,921,952) $3,458,565 3,458,565

Bond Fund, 46,452 shares
at net asset value of
$7.17 per share (cost $310,462) $333,060 333,060

Capital Growth Fund, 159,606
shares at net asset value
of $15.08 per share`
(cost $2,034,750) $2,406,862 2,406,862

International Fund, 116,587
shares at net asset value of
$11.82 per share (cost
$1,282,030) $1,378,061 1,378,061

Total assets 103,973 3,458,565 333,060 2,406,862 1,378,061 7,680,521

LIABILITIES

Administrative expense fee
payable 83 2,405 250 1,534 1,068 5,340

Mortality and expense fee
payable 3,594 59,505 7,281 39,692 27,483 137,555

Total Liabilities 3,677 61,910 7,531 41,226 28,551 142,895

Net assets $100,296 $3,396,655 $325,529 $2,365,636 $1,349,510 $7,537,626

Number of units outstanding 82,581 2,421,201 262,550 1,449,832 1,064,079

Net asset value per unit $1.21 $1.40 $1.24 $1.63 $1.27

<FN>
See Notes to Financial Statements
</FN>
</TABLE>
<TABLE>
BANNER LIFE VARIABLE ANNUITY ACCOUNT
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995

<CAPTION>
Subaccounts
Money Capital

Market Balanced Bond Growth International Total

<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME

Dividends $5,993 $ 94,190 $21,542 $15,168 $6,640 $143,533
Net investment income 5,993 94,190 21,542 15,168 6,640 143,533

EXPENSES

Mortality and expense
risk fee 1,244 36,065 3,755 23,001 16,022 80,087
Total expense 1,244 36,065 3,755 23,001 16,022 80,087

Net investment gain (loss) 4,749 58,125 17,787 (7,833) (9,382) 63,446

REALIZED AND
UNREALIZED GAIN
(LOSS) ON INVESTMENTS

Net realized (loss) gain
on investments - (2,967) (3,625) (21,677) 11,604 (16,665)
Net realized gain
distributions - 18,799 - 57,211 - 76,010

Net change in unrealized
appreciation - 628,873 37,640 442,452 137,377 1,246,342

Net gain on investments - 644,705 34,015 477,986 148,981 1,305,687

Net change in net assets
resulting from operations $4,749 $702,830 $51,802 $470,153 $139,599 $1,369,133

<FN>
See Notes to Financial Statements
</FN>
</TABLE>

<TABLE>

BANNER LIFE VARIABLE ANNUITY ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994

<CAPTION>
Money Market Balanced Bond
Subaccount Subaccount Subaccount
1995 1994 1995 1994 1995 1994
<S> <C> <C> <C> <C> <C> <C>

INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS

Net investment income (loss) $4,749 $4,045 $58,125 $34,095 $17,787 $11,357

Net realized (loss) gain on
investments - - (2,967) (8,913) (3,625) (6,172)

Net realized gain distributions - - 18,799 54,485 - 2,414

Net change in unrealized
appreciation (depreciation)
of investments - - 628,873 (102,983) 37,640 (16,089)

Net change in net assets resulting
from operations 4,749 4,045 702,830 (23,316) 51,802 (8,490)

UNIT TRANSACTIONS

Proceeds from units issued 474 72,098 96,202 2,406,638 8,035 246,455
Net asset value of units
redeememed (44) (45,774) (178,965) (33,688) (18,699) (3,896)
Net asset value of units redeemed
for administrative expenses (129) (75) (6,302) (1,828) (577) (267)
Transfer (to) from other
subaccounts (4,752) 244,946 58,545 (36,879) (13,903) (8,460)
Transfer to General Account - (260,255) (19,965) (42,082) - (1,709)

Net (decrease) increase in net assets
from unit transactions (4,451) 10,940 (50,485) 2,292,161 (25,144) 232,123

Net change in net assets 298 14,985 652,345 2,268,845 26,658 223,633

NET ASSETS

Beginning of period 99,998 85,013 2,744,310 475,465 298,871 75,238
End of period $100,296 $99,998 $3,396,655 $2,744,310 $325,529 $298,871

<FN>

See Notes to Financial Statements

</FN>
</TABLE>
<TABLE>
<CAPTION>

Capital Growth International
Subaccount Subaccount Total
1995 1994 1995 1994 1995 1994
<C> <C> <C> <C> <C> <C>
($7,833) ($8,028) ($9,382) ($7,210) $63,446 $34,259

(21,677) (35,193) 11,604 20,627 (16,665) (29,651)

57,211 57,818 - - 76,010 114,717

442,452 (110,074) 137,377 (64,994) 1,246,342 (294,140)

470,153 (95,477) 139,599 (51,577) 1,369,133 (174,815)

192,991 1,329,999 128,480 1,302,822 426,182 5,358,012
(70,351) (9,614) (106,372) (5,810) (374,431) (98,782)

(4,423) (1,594) (3,322) (942) (14,753) (4,706)
195,622 (159,094) (235,512) (40,513) - -
(555) - (24,305) - (44,825) (304,046)

313,284 1,159,697 (241,031) 1,255,557 (7,827) 4,950,478

783,437 1,064,220 (101,432) 1,203,980 1,361,306 4,775,663

1,582,199 517,979 1,450,942 246,962 6,176,320 1,400,657
$2,365,636 $1,582,199 $1,349,510 $1,450,942 $7,537,626 $6,176,320
</TABLE>

BANNER LIFE VARIABLE ANNUITY ACCOUNT
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1995

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES

The Banner Life Variable Annuity Account (the Account) is registered under
the Investment Company Act of 1940, as amended, as a unit investment trust.
The Account invests in shares of the Scudder Variable Life Investment Fund
(the Fund), a mutual fund of the series type. The Account contains five
subaccounts - Money Market, Balanced (previously named Diversified), Bond,
Capital Growth and International. The assets of each subaccount are held
separate from the assets of the other subaccounts. The operations of the
Account are part of Banner Life Insurance Company (the Insurance Company).
The Account commenced operations on June 1, 1991.

The following is a summary of significant accounting policies consistently
followed by the Account in conformity with generally accepted accounting
principles.

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 at the date of the
financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates.

Security valuation

Investments are valued at the net asset value of fund shares held which
approximates fair value.

Security transactions and related investment income

Security transactions are accounted for on the trade date (the date the order
to buy or sell is executed). Dividend distributions received from the Fund
are reinvested in additional shares of the Fund, and dividend income is
recorded on the ex-dividend date. Gains and losses from sales of investments
are computed on the basis of average cost.

Federal income taxes

The operations of the Account are taxed as part of the total operations of
the Insurance Company. The Insurance Company is taxed as a life insurance
company under the Internal Revenue Code. Under existing Federal income tax
law, no taxes are payable on the investment income or on the capital gains
of the Account.

Annuity reserves

The Account has no contracts receiving annuity payments at December 31, 1995.

Reclassification

Certain prior year amounts were reclassified to conform to current year
presentation.

NOTE 2 - PURCHASES AND SALES OF INVESTMENTS

The aggregate cost of purchases and proceeds from sales of investments for
the years ended December 31, 1995 and 1994 were as follows:

Subaccounts

Money Capital
Market Balanced Bond Growth International

1995:

Purchases $61,530 $264,386 $43,421 $594,247 $233,276
Sales 59,997 202,339 104,034 189,911 419,643

1994:

Purchases $400,898 $2,590,427 $413,987 $1,535,610 $1,358,836
Sales 385,388 171,374 92,822 307,899 143,820

NOTE 3 - RELATED PARTY TRANSACTIONS

Although variable annuity payments differ according to the investment
performance of the Account, they are not affected by mortality or expense
experience because the Insurance Company assumes the mortality risk and the
expense risk under the contracts. The Insurance Company charges the Account
assets for assuming those risks. For the year ended December 31, 1995, the
Account was charged an annual rate of 1.15% of net asset value for mortality
and expense risk charges.

The expense risk assumed by the Insurance Company is the risk that the
deductions for sales and administrative expenses and for investment advisory
services provided for in the variable annuity contract may prove insufficient
to cover the cost of those items.

The mortality risk is the risk that the cost of insurance charges specified
in the policy may prove insufficient to meet actual claims.

Funds received by the Account for the sale of Account units represent gross
contract premiums received by the Insurance Company less any applicable
premium taxes. There were no premium tax deductions in 1995 and 1994. No
charge for sales distribution expense is deducted from premiums paid.

The Insurance Company may apply a contingent deferred sales charge to any
Account value surrendered in connection with a full or partial policy
surrender in order to cover distribution expenses. The applicable contingent
deferred sales charge percentage will depend upon the policy year. The
charge will be 7.5% for the first five years, then decreasing by 1.5% per
year. There is no charge after the policy has been in effect for
nine full years. Premium payments are deemed to be withdrawn before
earnings,
and after all premium payments have been withdrawn, the remaining account
value may be withdrawn without any contingent deferred sales charge. The
Account has been advised that contingent sales charges of $21,327 and $5,294
were charged to policyholders in 1995 and 1994, respectively.

In order to cover the costs of administering the policies and the accounts,
the Insurance Company deducts an annual administrative charge of $30 from the
account value of each policy prior to the maturity date. If the policy is
surrendered during a policy year, this charge will be deducted on a pro rata
basis based on the number of months elapsed in the policy year. After the
maturity date, the charge is not deducted. Administrative charges were
$14,753 and $4,706 in 1995 and 1994, respectively.

A transfer charge may be imposed for each transfer request. The charge will
be deducted from the amount transferred to compensate the Insurance Company
for the costs in effectuating the transfer. There is no charge for the first
four transfers in each policy year, and a $15 charge is imposed on each
additional transfer request. There were no transfer charges in 1995 and
1994.

Included in the assets of the Account at December 31, 1995 is $21,459 related
to policies held by an officer of the Insurance Company.

NOTE 4 - UNIT ACTIVITY

Transactions in units of each subaccount were as follows:

Subaccounts
Money Capital
Market Balanced Bond Growth International

Units outstanding at
December 31, 1993 75,541 412,210 67,307 361,656 210,675

Units issued 63,722 2,143,300 230,217 1,009,673 1,090,856
Units redeemed (53,167) (100,594) (13,524) (136,614) (40,006)

Units outstanding at
December 31, 1994 86,096 2,454,916 284,000 1,234,715 1,261,525

Units issued 13,723 125,701 14,199 271,885 125,111
Units redeemed (17,238) (159,416) (35,649) (56,768) (322,557)

Units outstanding at
December 31, 1995 82,581 2,421,201 262,550 1,449,832 1,064,079
BANNER LIFE INSURANCE COMPANY
(an ultimate wholly-owned subsidiary
of Legal & General Group Plc)
FINANCIAL STATEMENTS FOR THE YEARS ENDED
DECEMBER 31, 1995, 1994 AND 1993

REPORT OF INDEPENDENT ACCOUNTANTS

February 19, 1996

To the Board of Directors and
Shareholder of Banner Life Insurance Company

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, of shareholder's equity and of cash flows
present fairly, in all material respects, the financial position of Banner
Life Insurance Company (an ultimate wholly-owned subsidiary of Legal &
General Group Plc) and its subsidiaries (the Company) at December 31, 1995
and 1994, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1995 in conformity
with generally accepted accounting principles. These financial statements
are the responsibility of the Company's management; our responsiblity is
to express an opinion on these financial statements based on our audits.
We conducted our audits of these statements in accordance with generally
accepted auditing standards which 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, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
the opinion expressed above.

As discussed in Note 2, the Company, effective January 1, 1994, adopted
Statement of Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities."

/S/ Price Waterhouse LLP

<PAGE>

BANNER LIFE INSURANCE COMPANY
(an ultimate wholly-owned subsidiary of Legal & General Group Plc)
CONSOLIDATED BALANCE SHEETS
(in 000's)

<TABLE>
<CAPTION>
December 31,
<S> 1995 1994
ASSETS <C> <C>
Investments:
Fixed maturities:
Available-for-sale, at market (amortized cost $1,334,453
and $1,191,964) $1,401,147 $1,120,369
Held-to-maturity, at amortized cost (market $170,526
and $297,188) 164,195 310,827
Equity securities, available-for-sale, at market
(amortized cost $1,543 and $1,358) 2,878 2,323
Mortgage loans 1,574 1,968
Policy loans 129,070 130,365
Other invested assets 398 300
Total investments 1,699,262 1,566,152
Cash and cash equivalents 153,315 47,899
Accrued investment income 25,582 26,949
Reinsurance recoverable 25,420 21,434
Property and equipment 6,762 6,973
Deferred policy acquisition costs 148,803 190,875
Value of business in force 101,457 146,796
Goodwill and other intangibles 39,787 41,729
Separate account assets 23,933 14,594
Other assets 8,632 9,212
Total assets $2,232,953 $2,072,613

LIABILITIES
Life policy reserves $ 286,510 $ 299,980
Policy account balances 1,369,483 1,279,964
Accident and health reserves 1,353 1,415
Unearned revenue reserve 3,682 4,001
Claim reserves 42,678 37,679
Deferred Federal income taxes 49,580 34,007
Accounts payable and accrued expenses 8,333 5,530
Reinsurance ceded 7,811 6,857
Separate account liabilities 23,933 14,594
Other liabilities 28,859 21,295
Total liabilities 1,822,222 1,705,322

SHAREHOLDER'S EQUITY
Common stock, $1 par value - 2,500,000 shares authorized, issued and
outstanding 2,500 2,500
Additional paid-in capital 233,659 233,165
Net unrealized appreciation (depreciation) on investments 15,800
(10,500)
Retained Earnings 158,772 142,126
Total shareholder's equity 410,731 367,291
Total liabilities and shareholder's equity $2,232,953 $2,072,613
</TABLE>

BANNER LIFE INSURANCE COMPANY
(an ultimate wholly-owned subsidiary of Legal & General Group Plc)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in 000's)

<TABLE>
<CAPTION> Year ended December 31,
1995 1994 1993

Cash flows from operating activities:
Net income $16,646 $17,793 $16,845
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 10,729 5,965 12,884
Realized investment gains (18,264) (974) (24,730)
Provision for deferred Federal income taxes 1,382 8,715 5,369
Decrease (increase) in accrued investment income 1,367 (2,178) (1,207)
Increase in deferred policy acquisition costs (17,725) (31,179) (20,822)
(Increase) decrease in other assets (4,684) 2,846 4,337
Increase in reserves 80,667 110,594 130,120
Increase (decrease) in accounts payable and other
liabilities 12,645 (1,109) (1,328)
Total adjustments 66,117 92,680 104,623

Net cash provided by operating activities 82,763 110,473 121,468

Cash flows from investing activities:
Purchases of securities (2,612,530) (189,628) (523,548)
Purchases of property and equipment, net (823) (525) (1,146)
Proceeds from sale of securities 2,625,802 84,501 380,582
Maturities of securities 8,415 36,400 13,250
Decrease (increase) in policy loans 1,295 (2,669) 326

Net cash provided by (used in) investing activities 22,159 (71,921) (130,536)

Cash flows from financing activities:
Dividend paid to parent - (6,300) (6,200)
Capital Contribution - Shawfield merger 494 - -

Net cash provided by (used in) financing activities 494 (6,300) (6,200)

Net increase (decrease) in cash and cash equivalents 105,416 32,252 (15,268)
Cash and cash equivalents at beginning of year 47,899 15,647 30,915

Cash and cash equivalents at end of year $ 153,315 $ 47,899 $ 15,647
</TABLE>
<PAGE>
BANNER LIFE INSURANCE COMPANY
(an ultimate wholly-owned subsidiary of Legal & General Group Plc)
CONSOLIDATED STATEMENTS OF INCOME
(in 000's)
<TABLE>
<CAPTION>
For the Year Ended December 31,
1995 1994 1993

Insurance revenues:
Life insurance premiums $ 38,678 $41,855 $51,036
Universal life and investment product policy charges 51,619 46,663 48,520
Accident and health premiums 382 425 457
Net investment income 122,610 117,300 113,194
Reinsurance allowance 11,347 12,170 11,267
Realized investment gains 18,264 974 24,730
Other income 726 1,229 851
Total revenue 243,626 220,616 250,055

BENEFITS AND EXPENSES
Benefits to policyholders and beneficiaries
Life insurance benefits 57,247 53,745 57,036
Universal life and investment product benefits 98,072 84,850 85,902
Accident and health benefits 415 439 714
Change in policy and other reserves:
Life (13,527) (5,851) 3,610
Accident and health (62) (42) (222)
Commissions 40,087 46,588 43,197
Expenses and taxes 46,601 42,270 42,362
Increase in deferred policy acquisition costs (17,725) (31,179) (20,821)
Amortization of value of business in force 5,532 1,010 10,104
Amortization of goodwill and other intangibles 1,941 1,941 1,941
Total benefits and expenses 218,581 193,771 223,823
Operating income before
Federal income taxes 25,045 26,845 26,232

Provision for Federal income taxes:
Current 7,017 337 4,018
Deferred 1,382 8,715 5,369
Total provision for Federal income taxes 8,399 9,052 9,387

Net income $16,646 $17,793 $16,845
</TABLE>
<PAGE>
BANNER LIFE INSURANCE COMPANY
(an ultimate wholly-owned subsidiary
of Legal & General Group Plc)
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(in 000's)

<TABLE>
<CAPTION> Net
Unrealized
Appreciation
Additional (Depreciation) Total
Common Paid in on Retained Shareholder's
Stock Capital Investments Earnings Equity

<S> <C> <C> <C> <C>
Balance at December 31, 1992 $2,000 $233,165 $846 $120,488 $356,499
Net income 16,845 16,845
Dividend payment to parent (6,200) (6,200)
Change in net unrealized
appreciation on investments 261 261
Stock dividend 500 (500) -

Balance at December 31, 1993 2,500 233,165 1,107 130,633 367,405
Net income 17,793 17,793
Effect of adoption of SFAS 115
on January 1, 1994 7,056 7,056
Dividend payment to parent (6,300) (6,300)
Change in net unrealized
(depreciation) on investments (18,663) (18,663)

Balance at December 31, 1994 2,500 233,165 (10,500) 142,126 367,291
Net income 16,646 16,646
Shawfield merger 494 494
Change in net unrealized
appreciation on investments 26,300 26,300

Balance at December 31, 1995 $2,500 $233,659 $15,800 $158,772 $410,731

<FN>
See Notes to Consolidated Financial Statements
</FN>
</TABLE>

BANNER LIFE INSURANCE COMPANY
(an ultimate wholly-owned subsidiary
of Legal & General Group Plc)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

NOTE 1 - ORGANIZATION AND DESCRIPTION OF OPERATIONS

Banner Life Insurance Company (the Company) is a wholly-owned subsidiary of
Legal & General America, Inc. (Legal & General America), which, in turn, is
an ultimate wholly-owned subsidiary of Legal & General Group Plc.

On December 31, 1995, the Company's parent, Legal & General Life Insurance
Company of America, Inc. (L&G Life), merged with its parent Legal & General
America, Inc., a Delaware corporation. Legal & General America now owns all
outstanding shares of Banner. Full control of Legal & General America
ultimately resides with Legal & General Group, Plc (Legal & General).
Legal & General was founded in 1836 and is a United Kingdom company
with primary insurance activities being pension, accident, life and general
insurance.

The Company operates predominantly in the individual traditional life,
universal life and annuity markets of the life insurance industry and has
several wholly-owned subsidiaries: William Penn Life Insurance Company of
New York (William Penn New York), European Life Insurance Company, First
British American Life Insurance Company and Group Concepts, Inc., which in
turn wholly-owns Banner Financial Services Group, Inc. The Company and its
life insurance subsidiaries on a combined basis are licensed to transact
business in every state except Maine.

At December 31, 1995, Shawfield, Inc. (an ultimate wholly-owned subsidiary
of Legal & General) was merged into Group Concepts. The merger is expected
to provide additional operating and investment opportunities to the Company.
Shawfield's income and net assets in 1995, 1994 and 1993 were immaterial.

NOTE 2 - SIGNIFICANT ACCOUNTING PRACTICES

The significant accounting policies followed by the Company and its consolidated
subsidiaries are described below.

Basis of Financial Reporting

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumption
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statement and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

The accompanying financial statements have been prepared in accordance with
generally accepted accounting principles. These accounting principles differ
in many respects from the statutory accounting practices applicable to the
Company and its life subsidiaries which are prescribed or permitted by
regulatory authorities and are primarily designed to demonstrate solvency.
Under statutory reporting practices, statutory capital and surplus
of the Company, including equity investments in subsidiaries, at December 31,
1995 and 1994 was $95,277,000 and $88,584,000, respectively. Statutory net
income of the Company was $11,981,000, $2,081,000 and $4,491,000 for the
years ended December 31, 1995, 1994 and 1993, respectively.

The maximum amount of dividends that may be paid by State of Maryland
insurance companies to shareholders without prior approval of the Insurance
Commissioner is subject to restrictions relating to statutory capital and
surplus and statutory gains from operations. The maximum dividend payout
which may be made in 1996 without prior approval is $23,819,000.

Regulatory risk-based capital rules require a specified level of capital
depending on the types and quality of investments held, the types of
business written and the types of liabilities maintained. Depending on
the ratio of an insurer's surplus to its risk-based capital, the insurer
could be subject to various regulatory actions ranging from increased
scrutiny to conservatorship. The Company's risk-based capital ratios for 1995
and 1994 are significantly above the regulatory action levels.

Basis of Consolidation

The consolidated financial statements include the accounts of the Company and
its subsidiaries. All significant intercompany accounts and transactions
have been eliminated.

Investments

At January 1, 1994, the Company adopted Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities," which expanded the use of fair value accounting for those
securities that a company does not have positive intent and ability to hold
to maturity. Accordingly, fixed maturities (comprised of bonds and redeemable
preferred stocks) which the Company has both the ability and intent to hold
to maturity are stated at amortized cost. Fixed maturities and equity
securities which have been identified as available for sale are reported at
fair value. Unrealized holding gains or losses for the securities classified
as available for sale are reported in shareholder's equity, net of the effect
of the gains or losses on deferred acquisition costs and value of business in
force, as well as net of deferred Federal income tax. Fixed maturities
reported at amortized cost are reduced to estimated net realizable value when
necessary for impairments in value considered to be other than temporary.
Implementation of this statement increased shareholder's equity by $7,056,000,
net of deferred policy acquisition costs, value of business in force and
deferred Federal income tax.

Mortgage loans on real estate are stated at unpaid balances adjusted for
amortization of discount. Policy loans are carried at the aggregate of
unpaid balances with interest. Prepayment assumptions for loan-backed bonds
and structured securities were obtained from broker-dealer survey values or
internal estimates. These are consistent with the current interest rate
and economic environment.

Interest on bonds and policy loans is recorded as income when it is earned.
Purchase premium or discount is amortized over the life of the investment
utilizing the effective interest method. Realized gains and losses are
reported as a component of revenue based upon specific identification of
the investments sold. When impairment of the value of an investment is
considered other than temporary, the decrease in value is reported as a
realized investment loss and a new cost basis is established.

Cash Equivalents

The Company considers short-term investments with original maturities of
three months or less to be cash equivalents.

Reinsurance

During 1993, the Company implemented Statement of Financial Accounting
Standards No. 113 (SFAS 113), "Accounting and Reporting for Reinsurance
of Short-Duration and Long-Duration Contracts," which requires reinsurance
recoverables previously netted against insurance reserves to be reclassified
and reported as assets, and earned premiums ceded and recoveries recognized
under reinsurance contracts to be disclosed. The statement also requires
gains on certain reinsurance contracts to be deferred and recognized over the
contract settlement period. The effect on net income from implementation of
the income recognition provisions of SFAS 113 was not material.

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 under excess
coverage and coinsurance contracts.

Amounts paid or deemed to have been paid for reinsurance contracts are recorded
as reinsurance receivables. The cost of reinsurance related to long-duration
contracts is accounted for over the life of the underlying reinsured policies
using assumptions consistent with those used to account for the underlying
policies.

Property and Equipment

Property and equipment is stated at cost less accumulated depreciation.
Depreciation is charged to operations using the straight-line method over
their estimated useful lives of twenty-five years for the Company's building
and five to ten years for furniture, equipment and automobiles. Gains and
losses upon disposition are included in other operating income.

Separate Accounts

The separate account assets and liabilities reflected in the financial
statements represent funds for which the holder of the policy or contract,
rather than the Company, bears the investment risk. These include separately
administered group retirement annuity contracts, variable universal life and
variable annuity products. Such amounts are stated at market value.

Deferred Policy Acquisition Costs

The costs of acquiring new business, which vary with and are primarily related
to the production of new business, principally commissions, and certain policy
underwriting and issue costs, have been deferred.

Deferred policy acquisition costs for traditional life policies are amortized
through the use of factors in a manner which charges each year's operations
with costs in proportion to the receipt of policy premiums. The factors were
developed consistent with the same assumptions as to interest, mortality and
withdrawals used in computing the liability for future policy benefits.

Deferred policy acquisition costs for universal life-type and investment-type
policies are amortized in relation to the present value of estimated gross
profits from the related contracts. The Company performs analyses of actual
experience on each block of business with respect to interest rates,
mortality, terminations and expenses, and adjusts the amortization and the
assets accordingly.

The Company incurred and deferred total policy acquisition costs of
$40,214,000, $42,628,000 and $36,326,000 for the years ended December 31,
1995, 1994 and 1993, respectively. The related amortization expense was
$22,489,000, $11,449,000 and $15,505,000 in 1995, 1994 and 1993, respectively.

Value of Business in Force

The value of business in force represents the remaining unamortized portion
of actuarially determined fair market values of blocks of business, including
the Company's original block of business, valued at acquisition date.

Amortization of the value of business in force for traditional life blocks
of business is based on factors developed using the defined valuation premium
method to estimate the value of business in force at durations subsequent to
the purchase date. The value of business in force for the interest sensitive
blocks of business is amortized in relation to the present value of estimated
gross profits from the related purchased blocks of business. The Company
performs analyses of actual experience on each block of business with respect
to interest rates, mortality, terminations and expenses, and adjusts the
amortization and the value of business in force accordingly.

Goodwill and Other Intangibles

Goodwill represents the excess of acquisition cost over the net fair value of
assets acquired and liabilities assumed in the acquisition of the Company's
subsidiaries. Amortization of goodwill and other intangible assets acquired
is provided on the straight-line method over the periods of benefit, which
range from five to forty years. Accumulated amortization of goodwill and
other intangible assets acquired was $24,842,000 and $22,901,000 at
December 31, 1995 and 1994, respectively.

Reserve for Life Policies

The reserve for individual traditional life policies is primarily computed
utilizing the net level premium method based upon assumptions regarding
interest rates, mortality and withdrawals, including provisions for
unfavorable deviations from such assumptions. Level interest rates of 9.0%
for certain products and 6.25% for other products are assumed for
all years of issue. For all other products, a graded scale is assumed
which begins at rates ranging from 8.5% to 10.0% and grades to rates
ranging from 7.0% to 8.0% over periods of five to twenty years. Mortality
assumptions are based on multiples of the 1965- 1970 and 1975 - 1980 select
and ultimate tables. The multiples vary with the characteristics of the
risks assumed and are adjusted for non-smoker mortality where
applicable.

The reserves for universal life-type policies consist primarily of the
accumulated policy account balances computed utilizing the retrospective
deposit method based upon policy account values as defined in the contracts
before surrender charges.

Recognition of Premium Revenue and Costs

For individual traditional life policies, premiums are recognized as income
when due. Benefits and expenses associated with such premiums are allocated
over the life of the policies. This allocation is accomplished by means of
the reserving method and the amortization of deferred policy acquisition
costs.

For universal life-type policies, revenues are generally recognized as
mortality, expense and surrender charges are assessed against universal
life-type policyholder account balances, while excess policy loads are earned
over the life of the policy. For annuity contracts, revenues are recognized
as policy loads and expense charges are assessed against annuity
contractholder account balances. Benefits expense consists of interest
credited to the policy account balances and benefit claims incurred in
excess of policy account balances. Such expenses are recognized as incurred.

Claim reserves include amounts for claims in course of settlement and claims
incurred but not reported.

Unearned Revenue Reserve

Amounts assessed against policyholder account balances as front-load charges
are accounted for as unearned revenues and are credited to income in the same
manner as deferred policy acquisition costs are amortized.

Income Taxes

The Company accounts for income taxes under the liability method which requires
the recording of deferred taxes based on the differences between the basis of
assets and liabilities for financial statement purposes versus tax purposes
at current tax rates.

New Accounting Pronouncements

In March 1995, the FASB issued Statement No. 121, "Accounting for the
Impairment of Long-Lived Assets and For Long-Lived Assets to Be Disposed Of,"
which requires an assessment of impairment of long-lived assets, including
goodwill, whenever events and changes in circumstances indicate the carrying
amount of such assets may not be recoverable. The Statement is effective as
of January 1, 1996. Management believes there will be no significant impact
on the financial statements on adoption.

<PAGE>
NOTE 3 - REINSURANCE

During 1993, the Company adopted SFAS 113, "Accounting and Reporting for
Reinsurance of Short-Duration and Long-Duration Contracts." The accounting
policies for reporting the effects of reinsurance are described in Note 2.

The Company generally retains up to a limit of $200,000 for each life insured,
except for William Penn New York which has a maximum retention limit of
$250,000. Business purchased from Monarch is currently subject to retention
limits up to $400,000, although a spread loss reinsurance treaty (coinsurance
basis) is in effect, which reduces the net liability to the Company's
$200,000 retention limit.

The principal reinsurance treaties of William Penn New York function to
distribute the risk among William Penn New York and the reinsurance pool
members, of the first dollar of insurance issued up to a retention limit
of $250,000. These risks are ceded principally under treaties with pools
each consisting of four or five reinsurance companies. The universal life
products are reinsured on a yearly renewable term basis while the term
insurance products are reinsured on a coinsurance basis. Each five member
and four member pool functions to share proportionately in the reinsurance
at 16.67% and 20% of the policy face amount up to William Penn New York's
retention limit and at 20% and 25% of the policy face amount in excess of
William Penn New York's retention limit, respectively.

Reinsurance contracts do not relieve the Company from its obligations to
policyholders. Failure of reinsurers to honor their obligations could result
in losses to the Company; consequently, allowances are established for amounts
deemed uncollectible. The Company evaluates the financial condition of its
reinsurers and monitors concentrations of credit risk arising from similar
geographic regions, activities or economic characteristics of the reinsurers
to minimize its exposure to significant losses from reinsurers' insolvencies.
Reinsurance recoverables with a carrying value of $25.4 million and $21.4
million were associated with five reinsurers who compose 68% of all
reinsurance activities of the Company at both December 31, 1995 and 1994.
The Company holds collateral under related reinsurance agreements in the form
of letters of credits and trust agreements totaling $114.1 million that can
be drawn on for amounts that remain unpaid for more than 120 days.

Approximately 64%, 64% and 65% of the amount of life insurance in force at
December 31, 1995, 1994 and 1993, respectively, was reinsured.

The effect of reinsurance on premiums earned and benefits incurred for the
years ended December 31, 1995 and
1994 are as follows (in 000's):
<TABLE>
<CAPTION>

Year Ended December 31,
1995 1994 1993
<S> <C> <C> <C>
Direct premiums and amounts assessed against
policyholders $169,497 $164,123 $171,344
Reinsurance assumed 907 1,001 762
Reinsurance ceded (79,725) (76,181) (72,093)
Net premiums $ 90,679 $ 88,943 $100,013

Direct benefits paid and assessed against
policyholders $216,934 $190,581 $188,284
Reinsurance assumed 80 170 787
Reinsurance ceded (61,280) (51,717) (45,419)
Net benefits $155,734 $139,034 $143,652<PAGE>
NOTE 4 - INVESTMENTS
</TABLE>
<TABLE>
<CAPTION>
The following information summarizes the components of investment income and realized investment gains (losses)
and changes in unrealized investment appreciation (in 000's):

Year Ended December 31,
1995 1994 1993
<S> <C> <C> <C>
Investment income:
Fixed maturities $111,052 $108,218 $104,411
Equity securities 997 302 381
Mortgage loans 154 21 441
Policy loans 8,202 8,540 8,597
Short-term investments 4,183 1,581 1,059
Other 80 29 34

Gross investment income 124,668 118,881 114,923
Less investment expense (2,058) (1,581) (1,729)

Net investment income $122,610 $117,300 $113,194

Realized investment gains (losses)
Fixed maturities $18,127 $708 $24,592
Equity securities 182 278 131
Other (45) (12) 7
Gross realized investment gains $18,264 $974 $24,730

Change in unrealized investment appreciation
(depreciation):
Fixed maturities $139,725 $(71,595) -
Equity securities 370 (713) 396
140,095 (72,308) 396
Amounts attributable to other balance sheet
accounts:
Deferred policy acquisition costs (59,797) 31,692 -
Value of business in force (39,807) 22,764 -
Deferred Federal income taxes (14,191) 6,245 (135)
Change in unrealized appreciation
(depreciation) on investments $26,300 $(11,607) $261
</TABLE>

At December 31, 1995, investments in debt securities held-to-maturity include
bonds of $164,020,000 and redeemable preferred stock of $175,000 and
investments in debt securities available-for-sale include bonds totaling
$1,401,147,000. The amortized cost and market value of investments in debt
securities at December 31, 1995 are as follows (in 000's):

Gross Gross
Amortized Unrealized Unrealized Market
Held-to-Maturity: Cost Gains Losses Value
<S> <C> <C> <C> <C>
U.S. Treasury securities and
obligations of U.S.
government agencies $26,988 $1,538 $ - $28,526

Debt securities issued by
foreign governments 3,338 339 - 3,677

Corporate securities 38,068 1,895 - 39,963

Mortgage-backed securities 95,801 2,587 (28) 98,360

Total $164,195 $6,359 $(28) $170,526
</TABLE>
<TABLE>
<CAPTION>

Gross Gross
Amortized Unrealized Unrealized Market
Available-for-Sale: Cost Gains Losses Value
<S> <C> <C> <C> <C>

U.S. Treasury securities and
obligations of U.S.
government agencies $82,599 $2,500 $(23) $85,076

Debt securities issued by
foreign governments 43,578 3,309 (40) 46,847

Corporate securities 1,120,807 59,734 (188) 1,180,352

Mortgage-backed securities 87,469 1,535 (132) 88,872

Total $1,334,453 $67,078 $(383) $1,401,147
</TABLE>

<PAGE>
The amortized cost and market value of debt securities held as assets at
December 31, 1995 by contracted maturity are shown below (in 000's). Actual
maturities may differ from contractual maturities because borrowers may have
the right to call or prepay obligations with or without call or prepayment
penalties.

Held-to-Maturity Available-for-sale
Amortized Market Amortized Market
Cost Value Cost Value
Due in one year or less $- $- $22,235 $22,354
Due after one year through
five years - - 357,556 369,635
Due after five years through
ten years 49,247 51,430 602,452 634,735
Due after ten years 115,948 119,096 352,210 374,423

Total $164,195 $170,526 $1,334,453 $1,401,147

At December 31, 1994, investments in debt securities held-to-maturity include
bonds of $310,653,000 and redeemable preferred stock of $174,000 and
investments in debt securities available-for-sale include bonds totaling
$1,120,369,000. The amortized cost and market value of investments in debt
securities at December 31, 1994 are as follows (in 000's):

Gross Gross
Amortized Unrealized Unrealized Market
Held-to-Maturity: Cost Gains Losses Value

U.S. Treasury securities and
obligations of U.S.
government agencies $63,914 $20 $(3,572) $ 60,362

Debt securities issued by
foreign governments 11,530 7 (126) 11,411

Corporate securities 179,919 2,844 (10,593) 172,170
Mortgage backed securities 55,464 - (2,219) 53,245

Total $310,827 $2,871 $(16,510) $297,188

Gross Gross
Amortized Unrealized Unrealized Market
Available-for-Sale: Cost Gains Losses Value

U.S. Treasury securities and
obligations of U.S.
government agencies $164,548 $0 $(8,118) $156,430

Obligations of states and
political subdivisions 7,824 208 (65) 7,967

Debt securities issued by
foreign governments 53,460 23 (4,741) 48,742

Corporate securities 784,127 3,913 (51,774) 736,266

Mortgage backed securities 182,005 127 (11,168) 170,964

Total 1,191,964 $4,271 $(75,866) $1,120,369

The proceeds from sales of investments held-to-maturity of $19,113,000 in 1995
were generated by $1,358,000 of involuntary call activity, $8,415,000 of
matured securities and $1,702,000 of mortgage-backed security paydowns.
Gross gains of $492,000 were realized on these sales in 1995. The securities
had an amortized cost of $18,621,000 in 1995. On November 30, 1995, the
Company transferred $247,182,000 of securities classified as held-to-maturity
to the available-for-sale portfolio. As a result, unrealized gains on fixed
maturities increased by $16,853,000.

Proceeds from sales of investments in debt securities classified as
available-for-sale were $2,142,146,000 in 1995. Gross gains of $26,237,000
and gross losses of $9,594,000 were realized on these sales in 1995.

Proceeds from the sales of debt securities classified as trading were
$238,457,000 in 1995. Gross gains of $1,226,000 and gross losses of $234,000
were realized on these sales in 1995. There were no securities held in the
trading portfolio at December 31, 1995.

Proceeds from sales of all other securities were $1,415,600,000 in 1995,
comprised primarily of $1,174,698,000 in short term investments. Gross
gains of $182,000 were realized on these sales in 1995.

NOTE 5 - FINANCIAL INSTRUMENTS

Fair Values of Financial Instruments

Cash and cash equivalents: The carrying amount approximates fair value because
of the short maturity of those instruments.

Fixed-income securities: The fair values of fixed income securities are
estimated based on quoted market prices for those or similar instruments.
When there is no quoted market price, estimates of fair value are based on
quotes from industry recognized rating services. Estimated fair values of
these instruments are contained in Note 4 to the financial statements.

Equity securities: The fair values are estimated based principally on quoted
market prices. These securities are carried at fair value.

Mortgage loans The carrying amount approximates fair value, because the average
interest rates on outstanding balances are similar to current market rates.

Policy loans: Policy loans are issued with varying interest rates, depending
on the terms of the insurance policies. Future cash flows are uncertain and
difficult to predict. Accordingly, it was not practicable to estimate fair
value of policy loans.

Investment contracts: The carrying amount of $515,237,000 approximates fair
values. The fair value of annuities in the payout phase is assumed to be the
present value of the anticipated cash flows discounted at current interest
rates. The Fair Value of annuities in the accumulation phase is assumed to
be the contract holders' account value less surrender charge.

Financial Instruments with Off-Balance Sheet Risk

In 1995, the Company entered into forward purchase contracts for
mortgage-backed securities which provide for future receipt of securities at
specified prices. The contracts are then closed prior to settlement without
taking delivery of the securities. These instruments are treated as
off-balance sheet items. No cash is required at inception, and the cash
required at settlement is the notional value. The contract does not require
collateral. Risk arises from the potential inability of counterparties to
perform under the terms of the contracts and from changes in securities value
and interest rates. Changes in unrealized gains and losses on these contracts
are included in earnings, with corresponding offsetting amounts
reflected as assets or liabilities.

At December 31, 1995, the Company had open forward purchase contracts for
mortgage-backed securities which had a notional (contract) value of $70 million
at an average price of $101.03 (for Banner Life securities) and $100.60 (for
William Penn New York securities). The open contracts were closed in
January 1996 at a gain of $825,000. Net trading gains for 1995 related to
forward purchase contracts was $1,503,000 including $889,000, which was
unrealized at December 31, 1995.

NOTE 6 - FEDERAL INCOME TAXES

The Company and its subsidiaries join in the filing of a life-nonlife
consolidated Federal income tax return with Legal & General America. Each
member in the consolidated return provides for income taxes under the
provisions of an intercompany tax sharing agreement. The tax sharing
agreement provides that loss companies are given credit to the extent that
such losses reduce the consolidated tax liability. The utilization of
operating losses of the nonlife companies are generally limited to
thirty-five percent of the lesser of nonlife subgroup losses or current
period life subgroup taxable income. William Penn New York will become
eligible to join the life-nonlife consolidated Federal income tax return
in 1995.

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the Company's deferred tax assets and liabilities as of December 31, 1995
and 1994 are as follows (in 000's):

1995 1994
Deferred tax assets:
Reserves $43,209 $43,592
Pension and compensation accruals 685 253
Net operating loss carryovers 17,000 -
Other, net 2,439 1,788
Gross deferred tax assets 63,333 45,633

Deferred tax liabilities:
Insurance in force 40,822 40,279
Policy acquisition costs deferred 45,378 42,556
Other, net 1,198 2,481
Valuation allowance 17,000 -
Gross deferred tax liabilities 104,398 85,316

Net deferred tax liability before deferred 41,065 39,683
tax on unrealized appreciation
(depreciation) on investments

Deferred tax on unrealized appreciation 8,515 (5,676)
(depreciation) on investments

Net deferred tax liability 49,580 34,007

As discussed in Note 1, at December 31, 1995, Shawfield Inc. was merged into
Group Concepts. Shawfield had net operating loss carryovers of approximately
$50 million that are eligible to offset the future taxable income of Group
Concepts and a deferred tax asset has been established for these loss
carryovers. It is expected that the loss carryovers will be utilized in
future periods. A valuation allowance has been established for these loss
carryovers and will be reduced in future periods as such loss carryovers
are utilized.

The difference between the provision for income taxes and the amount of
income tax determined by applying the applicable U.S. statutory Federal
income tax rate to pre-tax income is due to the dividends received deduction,
the nondeductible expenses, and the expenses related to acquisition activities,
none of which are material in amount.

Income taxes paid by the Company during 1995, 1994 and 1993 were $2,700,000,
$1,400,000 and $2,200,000 respectively.

<PAGE>
NOTE 7 - EMPLOYEE BENEFIT PLANS

Legal & General America maintains a non-contributory defined benefit pension
plan (the Plan) covering substantially all full-time employees of the Company.

Benefits under the Plan are based on years of service and compensation levels.
The funding policies of the Plan are to contribute amounts that meet minimum
funding requirements, but which do not exceed the maximum funding limits as
currently determined under applicable tax regulations. The Plan has reached
its funding limitation and, accordingly, the Company made no contribution to
the Plan in 1995, 1994 and 1993.

The following table sets forth the consolidated funded status of the Plan at
January 1, 1995 and 1994 and the amount of prepaid pension cost included in
the accompanying balance sheets at December 31, 1995 and 1994 (in 000's):

1995 1994
Actuarial present value of periodic benefit obligations:

Vested $6,441 $5,113
Nonvested 340 311

Accumulated benefit obligation $6,781 $5,424

Projected benefit obligation $7,351 $5,833
Plan assets at fair value 8,105 8,108

Excess of Plan assets over projected
benefit obligation 754 2,275
Unrecognized prior service cost (171) (193)
Unrecognized net gain (50) (1,311)
Unrecognized portion of net transition assets (518) (638)

Prepaid pension cost included in other assets $15 $133

The consolidated net periodic pension cost for the Plan in 1995, 1994 and 1993
included the following components (in 000's):

Year Ended December 31,
1995 1994 1993
Service cost $ 347 $ 379 $ 314
Interest cost 493 438 411
Actual return on plan assets (580) (546) (506)
Net amortization (142) (142) (136)

Pension cost<PAGE>
$118 $129 $ 83
<PAGE>
The assumptions used in the accounting for the Plan were as follows:

1995 1994 1993
Discount rate 7.25% 7.50% 7.50%
Rate of increase in compensation 6.00% 6.00% 6.00%
Expected long-term return on Plan assets 8.00% 8.00% 8.00%

The Company administers the pension plan funds for the group of companies.
The Plan's assets are generally invested in U.S. Government securities,
listed common stocks and investment-grade corporate bonds. The assets and
liabilities of the Plan are included in the accompanying balance sheets as
a component of separate account assets and liabilities.

Legal & General America also maintains a voluntary defined contribution thrift
plan available to substantially all eligible employees of the Company with one
year of employment and 1,000 hours of service. Employees' contributions, up to
the maximum of 6% of their defined compensation, were matched 100% by the
Company in 1995, 1994 and 1993. The Company's contributions to the plan are
charged to expense and amounted to $505,000, $454,000 and $392,000 in 1995,
1994 and 1993, respectively.

NOTE 8 - COMMITMENTS

William Penn New York entered into an operating lease effective March 1992.
The lease contains escalation provisions for operating expenses and taxes of
four percent per year after 1993 and two renewable option terms of five years
each. The base lease terminates in 2002. Annual rent expense incurred was
$1,065,000 and $1,047,000 in 1995 and 1994, respectively. Future minimum
lease payments under the noncancellable operating lease are as follows
(in 000's):

1996 $1,123
1997 1,163
1998 1,205
1999 1,248
2000 1,293
Thereafter 1,514

Total $7,546

NOTE 9 - RELATED PARTY TRANSACTIONS AND PARENT COMPANY ACTIVITIES

Notes receivable from affiliates, included in Other assets in the accompanying
financial statements, include the following:
December 31,
1995 1994
Banner Life:
Note receivable from Legal & General America,
due December 1999 with interest at 7.8%,
collateralized by the Legal & General Data Center $1,600,000 $1,600,000
Accrued interest 508,590 356,020
Total $2,108,590 $1,956,020

The Company had a net intercompany receivable of $4,837,000 from affiliates at
December 31, 1995 and a net intercompany payable to affiliates of $468,000 at
December 31, 1994.

The Company paid cash dividends to its parent company, Legal & General Life,
totaling $6,300,000 and $6,200,000 on December 30, 1994 and December 27, 1993,
respectively. The Company also paid a stock dividend of $500,000 to its parent
company on September 29, 1993.

The Company allocated $561,000, $541,000 and $545,000 of general and
administrative expenses to Legal & General America in 1995, 1994 and 1993,
respectively. Legal & General America allocated $12,003,000, $10,807,000
and $6,077,000 of general and administrative expenses to the Company in
1995, 1994 and 1993, respectively.

NOTE 10 - CONTINGENCIES

Banner Life Insurance Company (Banner) is party to a purported class action
suit alleging that Banner, through one general agency, misrepresented its
universal life insurance policies as investment products to elderly
consumers. Banner has tentatively settled this case. Refund offer letters
will be mailed to certain qualifying policyowners who may convert their
policies to Banner annuity contracts or receive a full refund of premiums
paid plus interest and certain incidental expenses. The Company has accrued
$3.0 million for the pre-tax effect of the potential refunds and associated
legal costs.

<PAGE>
PART C - - OTHER INFORMATION

Item 24. Financial Statements and Exhibits

(A) Financial Statements
(B) Exhibits:
(1) Resolution of the Board of Directors of Banner Life Insurance Company
authorizing establishment of the Variable Account.
(2) Not Applicable.
(3) (a) Principal Underwriting Agreement by and between Banner Life
Insurance Company, on its own behalf and on the behalf of the
Variable Account, and Banner Financial Services Group, Inc.
(b) Form of Broker-Dealer Agreement.
(4) Form of Policy for the Flexible Premium Variable Annuity.(2)
(5) Form of Application for the Flexible Premium Variable Annuity.(2)
(6) (a) Articles of Incorporation of Banner Life Insurance Company.
(b) ByLaws of Banner Life Insurance Company. (3)
(7) Not Applicable.
(8) (a) Participation Agreement by and between Banner Life Insurance
Company and Scudder Variable Life Investment Fund.(5)
(b) Participation Contract & Policy Agreement with Scudder Fund
Dist., Inc.(5)
(c) Reimbursement Agreement with Scudder, Stevens & Clark, Inc.4
(9) (a) Opinion and Consent of Counsel.(4)
(b) Consent of Counsel.
(10) Consent of Independent Accountants.(4)
(11) Not Applicable.
(12) Not Applicable.
(13) Schedules for Computation of Performance Data.
(14) Power of Attorney (5)

(1) Filed with the initial filing of this Form N-4 Registration Statement
(File No. 33-31308) on September 28, 1989.

(2) Filed with Pre-Effective Amendment No. 1 of this Form N-4 Registration
Statement (File No. 33-31308) on January 24, 1990.

(3) Filed with Post-Effective Amendment No. 1 of this Form N-4 Registration
Statement (File No. 33-31308) on April 11, 1990

(4) Filed herewith.

(5) Filed with Post-Effective Amendment No. 6 of this Form N-4 Registration
Statement (File No. 33-31308) on April 26, 1995

Item 25. Directors and Officers of the Depositor

Name and Principal Positions and Offices with
Business Address1 Depositor

Mark A. Canter Vice President, Secretary and General Counsel

Barbara A. Esau Vice President and Director

Robert E. Freeman(2) Director

Gene R. Gilbertson Senior Vice President, Chief Financial Officer,
Treasurer and Director

Dewey D. Goodrich, Jr. Senior Vice President and Director

Robert L. Hill Vice President and Controller

Bentti O. Hoiska Executive Vice President and Director

David S. Lenaburg Chairman, President & Chief Executive Officer

Charles A. Lingaas(3) Senior Vice President and Director

Otto P. Marracello(3) Senior Vice President and Director

Vicent R. McLean(2) Director

Wayne L. Miller Vice President, Sales

Michael D. Mullaney Vice President, Corporate Taxation

David J. Orr Senior Vice President and Director

________________________
(1) The principal business address of each person listed, unless other
wise indicated, is Banner Life Insurance Company, 1701 Research Boulevard,
Rockville, MD 20850.

(2) Messers. Freeman and McLean are both retired and thus have no principal
business address.

(3) 100 Quentin Roosevelt Boulevard, Garden City, NY 11530

Item 26. Persons Controlled by or Under Common Control with the Depositor or
Registrant

Companies under common control with the depositor are listed below were
prepared on April 29, 1996.

Legal & General Group Plc

Country of Share
Incorporation Held

Legal & General Finance Inc. United States 100
Legal & General Finance PLC England 100
Legal & General Financial Services Limited England 100
Fairmount Group PLC England 100
Fairmount Stockbrokers Limited England 100
Fairmount Group Nominees Limited England 100
Fairmount Capital Management Limited England 100
Bell-Wild (Investment Managers) Limited England 100
British Organizers Limited England 100
Fairmount Financial Services Limited England 100
Fairmount Nominees Limited England 100
Fairmount-Wild Limited England 100
Investment & Estate Planning Services
Limited England 100
Individual Pension Funds Limited England 100
IPF Nominees Limited England 100
Fairmount Trust plc England 100
Ginn Reijs Nominees Limited England 100
Fairmount Trustee Services Limited England 100
Legal & General Estate Agencies Limited England 100
(50% owned by LGASL)
City & Urban Developments Limited England 100
Adam Kennedy Estate Agents Limited England 100
Land & Company Limited England 100
C J Hole Limited England 100
C.J. Hole (Bristol) Limited England 100
Ellis & Co (Estate Agents) Limited England 100
Ellis & Co. (Financial Services)
Limited England 100
Ellis & Co (Interiors) Limited England 100
Ronald Preston & Partners Limited England 100
Whitegates Estate Agency Limited England 100
William Parker and Son (Reading) Limited England 100
Legal & General Franchising Limited England 100
Whitegates (Holdings) Limited England 100
Keys & Company Limited England 100
The Key Group Limtied England 100
Whitegates Financial Services Limited England 100
Whitegates (Tyne & Wear) Limited England 100
Legal & General Financial Services Nominees
Limited England 100
(App to strike off)
Legal & General Holdings Limited England 100

Country of Share
Incorporation Held

Legal & General Insurance Holdings Limited England 100
Legal and General Assurance Society Limited England 100
Cogent (Holdings) Limited (50% owned by LGHL) England 100
Cogen Environmental Limited England 96
(Application made to Strike Off)
Cogent Investments Limited Scotland 85.80
Cogent Instrumentation Limited England 98.50
Cogent Limited England 100
Enterprise Capital Limited England 100
(Application made to Strike Off)
Cogent Management Limited England 100
(Application made to Strike Off)
Enterprise Capital Management Limited England 100
(Application made to Strike Off)
London Biotechnology Limited England 80
European Life (Channel Islands) Limited Guernsey 100
Legal & General Estate Agencies (FS) Limited England 100
Legal & General Healthcare Limited England 100
Legal & General Investment Acquisitions Limited England 100
Legal & General Investment Management (Holdings) Ltd England 100
Daytonian Limited England 100
Legal & General Assurance (Pensions Management)
Limited England 100
Legal & General Investment Management Limited England 100
Legal & General (Portfolio Management Services)
Limited England 100
Legal & General Portfolio Mangers Limited England 100
Legal and General Property Fund Managers Limited England 50
Legal & General Property Limited England 100
Legal & General (Unit Trust Managers) Limited England 100
Legal & General Ventures Limited England 100
LGV Candover Gellschaft fur Management Buy- Federal Republic
Outs und Beteiligungen mbH of Germany 51
Legal & General Ventures Partners Limited England 100
Legal & General Ventures Underwriters Limited England 100
Neonsystem PLC England 100
Legal & General Insurance Limited England 100
Gresham Insurance Company Limited England 90
Legal & General Direct Limited England 100
Legal & General GI Computer Services Limited England 100
Southgate Associates Limited England 100
Glanfield Securities Limited England 100
Bridge End Computers Limited England 100
Legal & General Investment Trust Limited England 100

Country of Share
Incorporation Held

Legal & General Insurance Holdings Limited
Legal and General Assurance Society Limited

Legal & General Mortgages Limited England 100
Legal & General Mortgage Services Limited England 100
Residential Mortgages No1 Limited England 100
Legal & General Professional Trust Services Limited England 100
Legal & General Share Scheme Trustees Limited England 100
Legal and General (United Assurance) Limited England 100
Legal and General (Unit Pensions) Limited England 100
Lion Holdings Limited England 83.33
Shelfco (No. 873) Limited England 100
The Cavendish Land Company Limited England 100
Lawgra (No. 240) Limited England 100
Paramount Realty Holdings Limited England 100
General Housing Company Limited England 100
(Application made to Strike Off)
Tringham Housing Limited England 100
Key Consultants Mortgages Nationwide Limited England 100
Key Mortgage & Property Limited England 100
Key Surveyors Nationwide Limited England 100
Legal & General International (Holdings) Limited England 100
Legal & General International Limited England 100
Banner Insurance Holdings Limited England 100
Legal & General Holdings (Overseas) Limited England 100
Banner Life Insurance Company Limited England 100
Legal & General Netherlands Holdings B.V. Holland 100
Banner International Holdings BV Holland 100
Legal & General Australia Limited Australia 100
Legal & General Financial Services Limited Australia 100
Banner Consultancy Services Limited Australia 100
Legal & General Corporate Support Limited Australia 100
Subscriber 1 Pty Limited Australia 100
Subscriber 2 Pty Limited Australia 100
Subscriber 3 Pty Limited Australia 100
Subscriber 4 Pty Limited Australia 100
Subscriber 5 Pty Limited Australia 100
Legal & General Custodial Services Limited Australia 100

<PAGE>
Country of Share
Incorporation Held

Legal & General International (Holdings) Limited
Legal & General International Limited
Legal & General Netherlands Holdings B.V.
Legal & General Austrialia Limited
Legal & General Financial Services Limited

Legener (Australia) Pty Limited Australia 100
Legal & General Property Investment
Limited Australia 100
Legal & General Superannuation Services
Limited Australia 100
Legal & General Life of Australia Limited Australia 100
Legal & General Properties No. 1 Pty
Limited Australia 100
Legal & General Properties No. 2 Pty Australia 100
Limited (In Liquidiation)
Legal & General Properties No. 3 Pty
Limited Australia 100
MicrOpay Pty Limited Australia 100
Legal & General America, Inc. United States 100
Legal & General Life Insurance Co of
America, Inc United States 100
Banner Life Insurance Company (USA) United States 100
European Life Insurance Company (USA) United States 100
First British American Life Ins.
Co (USA) United States 100
Group Concepts Incorporated United States 100
Banner Financial Services Group,
Inc United States 100
William Penn Life Ins. Co.
of New York United States 100
Banner Life Insurance Company of New York United States 100
Legal & General Finance Europe B.V. Holland 100
Legal & General Holdings (France) SA France 100
Legal & General Bank (France) S.A. France 100
Legal & General Bank Gestion S.A. France 100
Legal & General (France) SA France 100
Legal & General Risques Divers (France)
S.A. France 100
Legal & General Nederland Levensverzekering Holland 100
Maatschappij N.V.
Legal & General Nederland Exploitatie Holland 100
Maatschappij B.V.
Legal & General Nederland Vastgoed Holland 100
Maatschappij B.V.
Legal & General Overseas Holdings B.V. Holland 0

<PAGE>
Item 27. Number of Policyowners

As of March 31, 1996, there were 350 Owners of the Policies.

Item 28. Indemnification

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "1933 Act") may be permitted to directors, officers and
controlling persons of the Registrant, the Registrant has been advised that
in the opinion of the Securities and Exchange Commission such indemnificatio
n is against public policy as expressed in the 1933 Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Depositor of expenses incurred
or paid by a 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.

The By-Laws of Banner Life provide substantially as follows:

All Directors and Officers, former Directors and Officers of Banner Life
and any person who may have served at the request of Banner Life as a
Director or Officer of any other corporation in which Banner Life owns
stock or of which Banner Life is a creditor (and his heirs, executors or
administrators) shall be indemnified by Banner Life against all costs and
legal or other expenses, including costs or amount of settlement, reasonably
incurred by or imposed upon them, or any of them, in connection with or
resulting from any claim, action or proceeding, civil or criminal, in which
they, or any of them, are made parties by reasons of being or having been
Directors or Officers or a Director or Officer of Banner Life, or of such
other corporation.

The right of indemnification shall apply whether or not such Director or
Officer or former Director or Officer or person indemnified is such at the
time such costs or expenses are incurred or imposed. The right of
indemnification shall not apply, however, in relation to matters as to which
any such Director or Officer or former Director or Officer or person shall be
finally adjudged in such action, suit or proceeding to be liable for
negligence or misconduct in the performance of his duty as such Director or
Officer; provided, however, that an entry of judgment by consent as part of a
settlement shall not be deemed a final adjudication of liability for
negligence or misconduct in the performance of duty. If any such claim,
action or proceeding is settled (by consent or otherwise), the determination
in good faith by the Board of Directors that such claim, action or proceeding
did not arise out of negligence or misconduct in the performance of his duty
by the Director or Officer or former Director or Officer or person indemnified,
and that such Director or Officer or former Director or Officer or person
would not be held liable for such claim, action or proceeding, shall be
necessary and sufficient to justify indemnification. The right of
indemnification shall not be exclusive of any other rights to which those
indemnified may be entitled under any statute, other by-law,
agreement, vote of shareholders or otherwise.

Item 29. Principal Underwriter

Banner Financial Services Group, Inc.
1701 Research Boulevard
Rockville, Maryland 20850

Directors and Officers of Principal Underwriter

Name and Principal Positions and Offices with
Business Address Underwriter

Edward J. BovE Assistant General Counsel and Assistant
Secretary

Mark A. Canter Vice President, Secretary
and General Counsel

Gene R. Gilbertson Executive Vice President and Director

Robert L. Hill Treasurer

David S. Lenaburg Director

Wayne L. Miller Vice President

David J. Orr President and Director

The amount of commissions paid by Banner Life Insurance Company to the
principal underwriter during the year ended December 31, 1995 with respect
to the Policies was $209,060.

Item 30. Location of Accounts and Records.

The records required to be maintained by Section 31(a) of the Investment
Company Act of 1940 and Rules 31a-1 to 31a-3 promulgated thereunder, are
maintained by Banner Life Insurance Company at 1701 Research Boulevard,
Rockville, Maryland 20850.

Item 31. Management Services.

All management policies are discussed in Part A or Part B.

Item 32. Undertakings

(a) Registrant undertakes that it will file a post-effective amendment to
this registration statement as frequently as necessary to ensure that
the audited financial statements in the registration statement are never
more than 16 months old for so long as Premiums under the Policy may be
accepted.

(b) Registrant undertakes that it will include either (i) a postcard or
similar written communication affixed to or included in the Prospectus
that the applicant can remove to send for a Statement of Additional
Information or (ii) a space in the Policy application that an applicant
can check to request a Statement of Additional Information.

(c) Registrant undertakes to deliver any Statement of Additional Information
and any financial statements required to be made available under this
Form promptly upon written or oral request to Banner Life at the address
or phone number listed in the Prospectus.

Section 403(b) Representation.

Registrant represents that it is relying on a no-action letter dated
November 28, 1988, to the American Council of Life Insurance (Ref. No.
IP-6-88), regarding Sections 22(e), 27(c)(1) and 27(d) of the Investment
Company Act of 1940, in connection with redeemability restrictions on
Section 403(b) Policies, and that paragraphs numbered (1) through (4) of
that letter will be complied with.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, Banner Life Insurance Company certifies that this
amendment meets the requirements for effectiveness of this Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has
duly caused this Post Effective Amendment No. 6 to the Registration Statement
to be signed on its behalf by the undersigned thereunto duly authorized,
and its seal to be hereunto affixed and attested, all in
the City of Rockville, State of Maryland on the 29th day of April, 1996.

Banner Life Insurance Company

Attest: /s/ Edward J. Bove' By: /s/ Mark A. Canter
David S. Lenaburg*
Chairman, President &
Chief Executive Officer
Banner Life Insurance Company

Pursuant to the requirements of the Securities Act of 1933, this Amendment to
the Registration Statement has been signed below by the following Directors
and Officers of Banner Life Insurance Company in the capacities and on the
dates indicated.

Signature Title Date

/s/ Mark A. Canter
David S. Lenaburg* Chairman, President & April 29, 1996
Chief Executive Officer

/s/ Gene R. Gilbertson
Gene R. Gilbertson Senior Vice President, April 29, 1996
CFO, Treasurer and Director

/s/Dewey D. Goodrich, Jr
Dewey D. Goodrich, Jr Director April 29, 1996

/s/Bentti O. Hoiska
Bentti O. Hoiska Director April 29, 1996

/s/ David J. Orr
David J. Orr Senior Vice President April 29, 1996
and Director

/s/ Barbara A. Esau
Barbara A. Esau Vice President April 29, 1996
and Director
___________________________________________________________
* Signed by Mark A. Canter pursuant to a Power of Attorney signed by David S.
Lenaburg on April 26, 1994 and filed as an exhibit hereto.

Exhibit Description of Page
No. Exhibit No.

(9)(b) Consent of Counsel.

(10) Consent of Independent Accountants.

April 29, 1996

Banner Life Insurance Company
1701 Research Boulevard
Rockville, MD 20850

Re: Banner Life Variable Annuity Account
Form N-4, File No. 33-31308

Ladies and Gentlemen:

With reference to the Post-Effective Amendment No. 7 to the Registration
Statement on Form N-4 filed by Banner Life Insurance Company and its Variable
Annuity Account with the Securities and Exchange Commission covering
individual variable annuity contracts, I have examined such documents and such
law as I considered necessary and appropriate, and on the basis of such
examination, it is my opinion that:

1. Banner Life Insurance Company is duly organized and validly
existing under the laws of the state of Maryland and has been duly
authorized to issue variable life insurance contracts by the Maryland
Insurance Administration.

2. The individual variable annuity contracts, when issued as
contemplated by said Post-Effective Amendment No. 7 to the Registration
Statement on Form N-4, will constitute legal, validly issued and binding
obligations of Banner Life Insurance Company.

I hereby consent to the reference to my name under the caption "Legal Matters"
in the Prospectus filed as part of the Post-Effective Amendment No. 7 to the
Form N-4 Registration Statement Amendment for the Banner Life Variable Annuity
Account.

Sincerely,

/s/ Mark A. Canter

Mark A. Canter
Vice President, Secretary
& General Counsel
<PAGE>
April 30, 1996

Banner Life Insurance Company
1701 Research Boulevard
Rockville, Md 20850

Re: Banner Life Variable Annuiy Account
File No. 33-31308

Gentlemen:

We hereby consent to the reference to our name under the caption "Legal
Matters" in the Statement of Additional Information filed as part of
Post-Effective Amendment No. 7 to the form N-4 Registration Statement for the
Banner Life Variable Annuity Account. 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

/S/ Frederick R. Bellamy
Frederick R. Bellamy

<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form N-4 of our report dated February 19, 1996,
relating the consolidated financial statements of Banner Life Insurance
Company, which appears in such Prospectus. We also consent to the reference
to us under the heading "Experts" in such Prospectus.

/s/ Price Waterhouse LLP

Washington, D.C.
April 30, 1996

<PAGE>