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VARIABLE ANNUITY
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1999 ANNUAL REPORT
[SBL LOGO]
SECURITY BENEFIT LIFE
INSURANCE COMPANIY
A Member of The Security Benefit
Group of companies
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A MESSAGE FROM SECURITY BENEFIT
SECURITY BENEFIT GROUP KNOWS WALL STREET AND MAIN STREET
In 1999, Security Benefit Life Insurance Company had another year of outstanding
financial results. The driving forces behind our tremendous financial
performance were consumers' demand for individual retirement products and the
extension of our money management and customer service competencies.
As consumers focus on their future, they look to SBL as a partner for developing
personal retirement strategies. Our core competencies--money management and
customer service--are very solid and the cornerstone of our stronghold in the
market segments.
SECURITY BENEFIT IS A CLEAR CHOICE
There are many qualities that make partnering with Security Benefit a clear
choice:
* variety of retirement products
* cutting edge service
* pool of flexible and responsive employees
* rich heritage of innovation and creativity
* a rock solid financial foundation
* a strong risk management philosophy
However, if we were asked to capture what makes partnering with SBL a clear
choice in one sentence, here's what we'd say--Security Benefit knows Wall Street
and Main Street.
Wall Street and Main Street are among the most famous streets in America, but
they're known better for their characteristics rather than their location.
Everyone knows that Wall Street is in New York, but Wall Street is more of an
adjective today than it is a noun. What are the characteristics of something
that's Wall Street-like? It's fast paced, risky and high stress.
Likewise, Main Street has become an adjective. The characteristics of something
that's Main Street-like are being friendly, courteous, relaxed, and having a
real interest and concern for your neighbor.
Knowledge of both streets is one of our competitive advantages and it's why we
are positioned for strong growth in the future.
SECURITY BENEFIT KNOWS WALL STREET
Even though SBL operates out of America's Heartland in Topeka, Kansas--the exact
opposite of the Wall Street-like atmosphere--we know Wall Street because of our
experience, technology and people.
EXPERIENCE. We've been in the equities business for a long time. SBL was one of
the first in the industry to introduce a variable annuity and we were on the
front end of the mutual fund explosion.* We're as interested in the return of
customers' investments as we are in the return on customers' investments.
TECHNOLOGY. In today's computer age, we receive financial news and information
at the same time as any other Wall Street professional. When that one important
announcement comes across the wire, we receive the information in real time and
our money managers can react appropriately.
PEOPLE. There's an abundance of investment talent and expertise grown in
America's breadbasket and SBL attracts its fair share. Here, our talent is
moderately insulated from the steady stream of Wall Street noise, so they can
focus on what they do best--manage money.
SECURITY BENEFIT KNOWS MAIN STREET
In order to survive in the financial services industry today, you need to be
good at providing three things:
* products with good performance
* competitive product pricing
* good customer service
But, in order to thrive in the industry, you need to be great at one of those
things.
At Security Benefit, we've got good products with good performance and
competitively priced. But, we've made a conscious decision to be great at
customer service. In 1999, Dalbar, Inc. recognized Security Benefit for its
great customer service--again.
Where does our ability to provide outstanding service stem from? It stems from
everyone at Security Benefit having a deep knowledge of Main Street. Main Street
is part of Americana. Our goal is to provide customers the high-touch,
personalized service you receive when you enter an establishment on Main Street,
USA.
In the year 2000 and beyond, we will invest in initiatives that enhance the
value we offer to customers and make partnering with Security Benefit an even
clearer choice. Thanks for choosing Security Benefit in 1999.
*Variable annuities and mutual funds distributed by Security Distributors, Inc.
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BOARD OF DIRECTORS
HOWARD R. FRICKE
CHAIRMAN OF THE BOARD AND CEO
Security Benefit Life Insurance Company
Topeka, Kansas
SISTER LORETTO MARIE COLWELL
PRESIDENT AND CEO
St. Francis Hospital and Medical Center
Topeka, Kansas
JOHN C. DICUS
CHAIRMAN OF THE BOARD
Capitol Federal Savings & Loan Association
Topeka, Kansas
STEVEN J. DOUGLASS
CHAIRMAN AND CEO
Payless ShoeSource
Topeka, Kansas
WILLIAM W. HANNA
VICE CHAIRPERSON
Koch Industries
Wichita, Kansas
JOHN E. HAYES, JR.
CHAIRMAN OF THE BOARD AND CEO (Ret.)
Western Resources, Inc.
Topeka, Kansas
KRIS A. ROBBINS
PRESIDENT AND COO
Security Benefit Life Insurance Company
Topeka, Kansas
FRANK SABATINI
CHAIRMAN OF THE BOARD AND CEO
Capital City Bank
Topeka, Kansas
ROBERT C. WHEELER
CHAIRMAN AND CEO
Hill's Pet Nutrition, Inc.
Topeka, Kansas
NOTICE OF MEETING OF MEMBERS
The annual meeting of members of Security Benefit Mutual Holding Company (the
"Mutual Holding Company") will be held on Tuesday, June 6, 2000, at 700 SW
Harrison St., Topeka, Kansas, at 1:00 p.m. Each owner of an insurance policy
issued by Security Benefit Life Insurance Company is a member of the Mutual
Holding Company and 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 no later than May 31, 2000.
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 individual and combined balance sheets of SBL
Variable Annuity Account (comprised of the individual series as indicated
therein) as of December 31, 1999, and the related statements of operations and
changes in net assets for the period then ended. These financial statements are
the responsibility of Security Benefit Life Insurance 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 auditing standards generally accepted
in the United States. 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, 1999,
by correspondence with the transfer agent. An audit also includes assessing the
accounting principles used and significant estimates made by management as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the individual and combined financial position of the
individual series of SBL Variable Annuity Account at December 31, 1999, and the
individual and combined results of their operations and changes in their net
assets for the period then ended in conformity with accounting principles
generally accepted in the United States.
Ernst & Young LLP
February 4, 2000
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SBL VARIABLE ANNUITY ACCOUNT
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BALANCE SHEETS DECEMBER 31, 1999
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ASSETS (DOLLARS IN THOUSANDS - EXCEPT PER SHARE AND UNIT VALUES)
Investments:
Security Equity Fund (Series E) - 11,932,356 shares
at net asset value of $10.70 per share(cost, $91,834)........... $127,676
Security Growth and Income Fund (Series I) - 4,103,519
shares at net asset value of $6.89 per share (cost, $31,850).... 28,274
Security Income Fund - Corporate Bond (Series B) - 573,000
shares at net asset value of $6.47 per share (cost, $4,003)..... 3,707
Security Ultra Fund (Series U) - 47,718 shares at net asset
value of $12.12 per share (cost, $428).......................... 578
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Combined assets....................................................... $160,235
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LIABILITIES AND NET ASSETS
Actuarial risk fees payable........................................... $ 108
Mortality guarantee payable........................................... 25
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Total liabilities..................................................... 133
NUMBER UNIT
OF UNITS VALUE AMOUNT
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Net assets are represented by (NOTE 3):
Series E:
Accumulation units.............. 11,419,696 $10.71 $122,266
Annuity reserves................ 498,506 10.71 5,337 $127,603
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Series I:
Accumulation units.............. 3,848,124 6.88 26,459
Annuity reserves................ 255,267 6.88 1,755 28,214
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Series B:
Accumulation units.............. 558,064 6.47 3,611
Annuity reserves................ 14,844 6.47 96 3,707
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Series U:
Accumulation units.............. 47,341 12.12 573
Annuity reserves................ 377 12.12 5 578
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Combined net assets.................. 160,102
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Combined liabilities and net assets.. $160,235
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See accompanying notes.
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<TABLE>
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS YEAR ENDED DECEMBER 31, 1999
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(IN THOUSANDS)
<CAPTION>
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SERIES E SERIES I SERIES B SERIES U COMBINED
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<S> <C> <C> <C> <C> <C>
Dividend distributions ........................................ $ --- $ 500 $ 253 $--- $ 753
Expenses (NOTE 2):
Mortality and expense risk fee .............................. (988) (234) (33) (2) (1,257)
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Net investment income (loss) .................................. (988) 266 220 (2) (504)
Capital gains distributions ................................... 4,239 456 --- 13 4,708
Realized gain (loss) on investments ........................... 1,942 (50) (53) 5 11,844
Unrealized appreciation(depreciation) on investments .......... (3,188) (114) (361) 134 (3,529)
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Net realized and unrealized gain (loss) on investments ........ 12,993 292 (414) 152 13,023
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Net increase (decrease) in net assets resulting from operations 12,005 558 (194) 150 12,519
Net assets at beginning of year ............................... 130,930 31,372 4,452 282 167,036
Variable annuity deposits(NOTES 2 AND 3) ...................... 8,965 734 434 185 10,318
Terminations and withdrawals (NOTES 2 AND 3) .................. (23,725) (4,182) (959) (39) (28,905)
Annuity payments(NOTES 2 AND 3) ............................... (651) (270) (26) --- (947)
Net mortality guarantee transfer .............................. 79 2 --- --- 81
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Net assets at end of year ..................................... $127,603 $28,214 $3,707 $578 $160,102
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</TABLE>
See accompanying notes.
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SBL VARIABLE ANNUITY ACCOUNT
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NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
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 - emphasis on
long-term capital appreciation), Security Growth and Income Fund (Series I -
emphasis on capital appreciation with secondary emphasis on income), Security
Income Fund - Corporate Bond (Series B - emphasis on current income with
security of principal) or Security Ultra Fund (Series U - emphasis on
long-term capital appreciation).
Under the terms of the investment advisory contracts, portfolio investments
of the underlying mutual funds are made by Security Management Company, LLC,
a limited liability company controlled by its members, SBL and 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
funds). The first-in, first-out cost method is used to determine realized
gains and losses. Security transactions are accounted for on the trade date.
The cost of investments purchased and proceeds from investments sold for the
year ended December 31 were as follows:
COST OF PROCEEDS
PURCHASES FROM SALES
--------- ----------
Security Equity Fund (Series E) ................. $14,051 $26,063
Security Growth and Income Fund (Series I) ...... 1,954 4,901
Security Income Fund - Corporate Bond (Series B). 697 1,029
Security Ultra Fund (Series U) .................. 197 40
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 - The operations of the Account are a part of the
operations of SBL. Under current law, no federal income taxes are allocated
by SBL to the operations of the Account.
USE OF ESTIMATE - The preparation of financial statements in conformity with
accounting principles generally accepted in the United States 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 net 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 1999.
3. SUMMARY OF UNIT TRANSACTIONS
UNITS
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Series E:
Variable annuity deposits ......................................... 885
Terminations, withdrawals and annuity payments .................... 2,403
Dividends and capital gains distributions, net of expenses paid ... 316
Series I:
Variable annuity deposits ......................................... 121
Terminations, withdrawals and annuity payments .................... 638
Dividends and capital gains distributions, net of expenses paid ... 111
Series B:
Variable annuity deposits ......................................... 63
Terminations, withdrawals and annuity payments .................... 146
Dividends and capital gains distributions, net of expenses paid ... 32
Series U:
Variable annuity deposits ......................................... 15
Terminations, withdrawals and annuity payments .................... 4
Dividends and capital gains distributions, net of expenses paid ... 1
