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VARIABLE ANNUITY
1996 ANNUAL REPORT
[SBL LOGO]
Security Benefit Life Insurance Company
A Member of The Security Benefit
Group of Companies
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A LETTER FROM THE PRESIDENT
Security Benefit is one company dedicated to the successful mastery of our
mission: MAINTAINING A STRONG FINANCIAL POSITION AND CONSISTENT GROWTH FOR THE
PROTECTION AND SECURITY OF ALL OF OUR POLICYHOLDERS AND CUSTOMERS. All of us at
Security Benefit renew our commitment to this mission every day. We want to be
the best and do our best for you. As a member of the Security Benefit team, I am
especially proud that mastering successful growth is an achievement we have come
to expect as a team.
It is my pleasure to report that 1996 was again a record year of outstanding
achievements for Security Benefit.
* Sales surpassed 1995 results by 48%
* Profits are up 18% over last year
* Revenues and deposit funds exceeded 1995 results by 28%
* Company assets rose 17% over 1995 figures
These accomplishments would just be facts on paper without the efforts of the
people who work at Security Benefit. They are the heart of our company, and I am
proud to be part of their team.
My wish for 1997 is to have another record year for our company. Last year's
accomplishments will be difficult to top but all of us at Security Benefit have
our sights and goals set high. We are well positioned with new, creative
products designed in response to our customers' changing investment goals and
lifestyle requirements. We know true mastery does not come easily. With
perseverance and attention to constantly improving what we do best, I know we
can do it.
HOWARD R. FRICKE
Howard R. Fricke
Chairman of the Board
President and Chief Executive Officer
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BOARD OF DIRECTORS
HOWARD R. FRICKE
CHAIRMAN OF THE BOARD, PRESIDENT & CEO
Security Benefit Life Insurance Company
Topeka, Kansas
THOMAS R. CLEVENGER
Wichita, Kansas
SISTER LORETTO MARIE COLWELL
PRESIDENT
St. Francis Hospital and Medical Center
Topeka, Kansas
JOHN C. DICUS
CHAIRMAN OF THE BOARD
Capitol Federal Savings & Loan Association
Topeka, Kansas
MELANIE S. FANNIN
PRESIDENT
Kansas - Southwestern Bell Telephone
Topeka, Kansas
WILLIAM W. HANNA
PRESIDENT & CHIEF OPERATING OFFICER
Koch Industries
Wichita, Kansas
JOHN E. HAYES, JR.
CHAIRMAN OF THE BOARD, PRESIDENT & CEO
Western Resources, Inc.
Topeka, Kansas
LAIRD G. NOLLER
PRESIDENT
Noller Enterprises
Topeka, Kansas
FRANK SABATINI
CHAIRMAN OF THE BOARD AND PRESIDENT
Capital City Bank
Topeka, Kansas
ROBERT C. WHEELER
PRESIDENT
Hill's Pet Nutrition, Inc.
Topeka, Kansas
NOTICE OF POLICYOWNERS' MEETING
We encourage you to attend the annual meeting of policyowners to be held on
Tuesday, June 3, 1997 at Security Benefit Life, 700 SW Harrison St., Topeka,
Kansas, at 2:00 p.m. Each policyowner is entitled to vote, either in person or
by proxy, on all matters coming before the meeting. Proxies are available from
the corporate secretary and must be returned at least 30 days prior to the
annual meeting.
This report is submitted only for the general information of Security Benefit
Life Variable Annuity contractowners and participants and is not authorized
for distribution to the public.
For More Information Call
1-800-888-2461
www.securitybenefit.com
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REPORT OF INDEPENDENT AUDITORS
THE CONTRACT OWNERS OF SBL VARIABLE ANNUITY
ACCOUNT AND THE BOARD OF DIRECTORS OF
SECURITY BENEFIT LIFE INSURANCE COMPANY
We have audited the accompanying balance sheet of SBL Variable Annuity Account
(the Company) as of December 31, 1996, and the related statements of operations
and changes in net assets for the year then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of investments owned as of December 31, 1996, by correspondence
with the custodian. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of SBL Variable Annuity Account at
December 31, 1996, and the results of its operations and changes in its net
assets for the year then ended in conformity with generally accepted accounting
principles.
Ernst & Young LLP
February 7, 1997
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SBL VARIABLE ANNUITY ACCOUNT
BALANCE SHEET
DECEMBER 31, 1996
ASSETS
(DOLLARS IN THOUSANDS)
Investments:
Security Equity Fund (Series E) - 13,458,485 shares at
net asset value of $7.20 per share (cost, $80,561) $ 96,901
Security Growth and Income Fund (Series I) - 3,477,572
shares at net asset value of $8.60 per share (cost, $25,694) 29,907
Security Income Fund - Corporate Bond (Series B) - 715,357
shares at net asset value of $6.87 per share (cost, $5,210) 4,915
Security Ultra Fund (Series U) - 32,740 shares at net
asset value of $7.62 per share (cost, $242) 249
Mortality guarantee receivable 65
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Total assets $132,037
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LIABILITIES AND NET ASSETS
Actuarial risk fees payable $ 20
Net assets are represented by (Note 3):
NUMBER
OF UNITS UNIT VALUE AMOUNT
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Series E:
Accumulation units 12,915,768 $7.20 $92,994
Annuity reserves 545,836 7.20 3,930 96,924
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Series I:
Accumulation units 3,288,510 8.60 28,281
Annuity reserves 191,637 8.60 1,648 29,929
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Series B:
Accumulation units 696,330 6.87 4,784
Annuity reserves 19,006 6.87 131 4,915
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Series U:
Accumulation units 32,388 7.62 247
Annuity reserves 344 7.62 2 249
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Total liabilities and net assets $132,037
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See accompanying notes.
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SBL VARIABLE ANNUITY ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)
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SERIES E SERIES I SERIES B SERIES U
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Dividend distributions $ 508 $ 532 $ 350 $ -
Mortality and expense
risk fee (Note 2) (716) (225) (42) (2)
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Net investment income (loss) (208) 307 308 (2)
Capital gains distribution 8,029 2,276 - 18
Realized gain (loss) on
investments 4,490 1,040 (89) -
Unrealized appreciation
(depreciation) on investments 5,381 1,275 (295) 21
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Net realized and unrealized
gain (loss) on investments 17,900 4,591 (384) 39
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Net increase (decrease) in
net assets resulting from
operations 17,692 4,898 (76) 37
Net assets at beginning
of year 85,025 27,970 5,552 219
Variable annuity deposits
(Notes 2 and 3) 6,683 1,345 434 -
Terminations and withdrawals
(Notes 2 and 3) (11,958) (4,108) (953) (7)
Annuity payments
(Notes 2 and 3) (562) (228) (42) -
Net mortality guarantee transfer 44 52 - -
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Net assets at end of year $96,924 $29,929 $4,915 $249
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SBL VARIABLE ANNUITY ACCOUNT
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION - SBL Variable Annuity Account (the Account) is a separate
account of Security Benefit Life Insurance Company (SBL). The Account is
registered as a unit investment trust under the Investment Company Act of
1940, as amended. Deposits received by the Account are invested, as directed
by the owners, in either Security Equity Fund (Series E), Security Growth
and Income Fund (Series I), the Security Income Fund - Corporate Bond
(Series B) or Security Ultra Fund (Series U).
Under the terms of the investment advisory contracts, portfolio investments
of the underlying mutual fund are made by Security Management Company, LLC,
which is owned 50% by SBL and 50% by Security Benefit Group, Inc., a
wholly-owned subsidiary of SBL.
INVESTMENT VALUATION - Investments in mutual fund shares are carried in the
balance sheet at market value (net asset value of the underlying mutual
fund). The first-in, first-out cost method is used to determine gains and
losses. Security transactions are accounted for on the trade date.
The cost of investments purchased and proceeds from investments sold during
1996 were as follows (In Thousands):
COST OF PROCEEDS
PURCHASES FROM SALES
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Security Equity Fund (Series E) $15,895 $13,877
Security Growth and Income
Fund (Series I) 4,450 4,892
Security Income Fund -
Corporate Bond (Series B) 819 1,070
Security Ultra Fund (Series U) 18 9
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1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ANNUITY RESERVES - Annuity reserves relate to contracts that have matured
and are in the payout stage. Such reserves are computed on the basis of
published mortality tables using assumed interest rates that will provide
reserves as prescribed by law. In cases where the payout option selected is
life contingent, SBL periodically recalculates the required annuity
reserves, and any resulting adjustment is either charged or credited to SBL
and not to the Account.
REINVESTMENT OF DIVIDENDS - Dividend and capital gains distributions paid by
the mutual fund to the Account are reinvested in additional shares of each
respective Series. Dividend income and capital gains distributions are
recorded as income on the ex-dividend date.
FEDERAL INCOME TAXES - Under current law, no federal income taxes are
payable with respect to the Account.
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 amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
2. VARIABLE ANNUITY CONTRACT CHARGES
Mortality and expense risks assumed by SBL are compensated for by a fee
equivalent to an annual rate of 0.795% of the asset value of each contract,
of which 0.675% is for assuming mortality risks and the remainder is for
assuming expense risks.
When applicable, an amount for state premium taxes is deducted as provided
by pertinent state law, either from purchase payments or from the amount
applied to effect an annuity at the time annuity payments commence.
Contract charges retained by SBL from the proceeds of sales of annuity
contracts were not significant during 1996.
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SBL VARIABLE ANNUITY ACCOUNT
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
3. SUMMARY OF UNIT TRANSACTIONS (In Thousands)
UNITS
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Series E:
Variable annuity deposits 958
Terminations, withdrawals, annuity payments
and expense charges 1,811
Dividends and capital gains distributions,
net of expenses paid 1,091
Series I:
Variable annuity deposits 171
Terminations, withdrawals, annuity payments
and expense charges 512
Dividends and capital gains distributions,
net of expenses paid 298
Series B:
Variable annuity deposits 63
Terminations, withdrawals, annuity payments
and expense charges 143
Dividends and capital gains distributions,
net of expenses paid 44
Series U:
Terminations, withdrawals, annuity payments
and expense charges 1
Dividends and capital gains distributions,
net of expenses paid 2
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[SBG LOGO] Bulk Rate
SECURITY BENEFIT GROUP OF COMPANIES U.S. Postage Paid
700 S.W. Harrison St., Topeka, Kansas 66636-0001 Topeka, KS
Permit No. 428
