<PAGE>
As Filed With The Securities And Exchange Commission On April 30, 1999
Registration No. 33-79502
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. [_]
Post-Effective Amendment No. 6 [X]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 15 [X]
PEOPLES BENEFIT LIFE INSURANCE COMPANY
SEPARATE ACCOUNT V
(Exact Name of Registrant)
PEOPLES BENEFIT LIFE INSURANCE COMPANY
(Name of Depositor)
20 Moores Road
Frazer, Pennsylvania 19355
(Address of Depositor's Principal Executive Office)
Depositor's Telephone Number: (800) 523-7900
Gregory E. Miller-Breetz, Esquire
Peoples Benefit Life Insurance Company
400 West Market Street
P.O. Box 32830
Louisville, Kentucky 40232
(Name and Address of Agent for Service)
Copies to:
Michael Berenson, Esquire
Jorden Burt Boros Cicchetti Berenson & Johnson LLP
1025 Thomas Jefferson Street, N.W.
Suite 400 East
Washington, D.C. 20007-0805
Approximate Date of Proposed Public Offering:
As soon as practicable after the effective date of this Registration Statement.
It is proposed that this filing will become effective (check appropriate box):
[_] Immediately upon filing pursuant to paragraph (b) of Rule 485.
[X] On 05/01/99 pursuant to paragraph (b) of Rule 485.
[_] 60 days after filing pursuant to paragraph (a)(1) of Rule 485.
[_] On pursuant to paragraph (a)(1) of Rule 485.
[_] 75 days after filing pursuant to paragraph (a)(2) of Rule 485.
[_] On pursuant to paragraph (a)(2) of Rule 485.
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<PAGE>
PURSUANT TO RULE 481
SHOWING LOCATION IN PART A (PROSPECTUS) AND PART B
(STATEMENT OF ADDITIONAL INFORMATION) OF REGISTRATION
STATEMENT OF INFORMATION REQUIRED BY FORM N-4
PART A
<TABLE>
<CAPTION>
ITEM OF
- -------
FORM N-4 PROSPECTUS CAPTION
- -------- ------------------
<S> <C>
1. Cover Page............................. Cover Page
2. Definitions............................ GLOSSARY
3. Synopsis............................... Summary; FEE TABLE;
Performance Measures
4. Condensed Financial Information........ Condensed Financial Information
5. General Description of Registrant,
Depositor, and Portfolio Companies..... Peoples Benefit Life
Insurance Company
Separate Account V; The
Portfolios; Voting Rights
6. Deductions............................. Expenses; Taxes; FEE TABLE
7. General Description of Variable Annuity
Contracts.............................. The Annuity Contract
8. Annuity Period......................... Annuity Payments
9. Death Benefit.......................... Death Benefit
10. Purchases and Contract Value........... Contract Application and
Purchase Payments; Accumulated
Value
11. Redemptions............................ Access to Your Money
12. Taxes.................................. Taxes
13. Legal Proceedings...................... Legal Matters
14. Table of Contents of the Statement
of Additional Information.............. Table of Contents of the
Peoples Benefit Marquee
Variable Annuity
Statement of Additional
Information
</TABLE>
<PAGE>
PART B
<TABLE>
<CAPTION>
ITEM OF STATEMENT OF ADDITIONAL
- ------- -----------------------
FORM N-4 INFORMATION CAPTION
- -------- -------------------
<S> <C>
15. Cover Page............................. Cover Page
16. Table of Contents...................... Table of Contents
17. General Information and History........ Peoples Benefit
18. Services............................... Part A: Auditors; Part B:
SAFEKEEPING OF ACCOUNT
ASSETS; DISTRIBUTION OF THE
CONTRACTS
19. Purchase of Securities Being DISTRIBUTION OF THE
Offered................................ CONTRACTS; Exchanges
20. Underwriters........................... DISTRIBUTION OF THE
CONTRACTS
21. Calculation of Performance Data........ PERFORMANCE INFORMATION
22. Annuity Payments....................... Computations of Annuity Income
Payments
23. Financial Statements................... FINANCIAL STATEMENTS
</TABLE>
<PAGE>
THE PEOPLES BENEFIT MARQUEE
VARIABLE ANNUITY
Issued Through
Peoples Benefit Life Insurance Company
Separate Account V
By
Peoples Benefit Life Insurance Company
Prospectus
May 1, 1999
The Peoples Benefit Marquee Variable Annuity (the "Contract") provides a means
of investing on a tax-deferred basis in twelve investment company portfolios
(the "Portfolios") and in four guaranteed options available under Peoples
Benefit's general account. The Contract is an individual variable annuity
contract and is intended for retirement savings or other long-term investment
purposes. For investments in the Portfolios, you bear all investment risk
(including the possible loss of principal), and investment results are not
guaranteed. The Contract provides a Right to Cancel period of at least 10 days
(30 days or more in some instances) during which the Contract may be
cancelled.
Before investing you should carefully read this prospectus and the
accompanying prospectuses for the Portfolios. These prospectuses give you
important information about the Contract and the Portfolios, including the
objectives, risks, and strategies of the Portfolios. A Statement of Additional
Information for the Contract prospectus has been filed with the Securities and
Exchange Commission, is incorporated by reference, and is available free by
calling our Administrative Offices at 800-866-6007. The Table of Contents of
the Statement of Additional Information is included at the end of this
prospectus.
The Contract is not available in all states.
This prospectus does not constitute an offering in any jurisdiction where it
would be unlawful to make an offering like this. We have not authorized anyone
to give any information or make any representations about this offering other
than those contained in this prospectus. You should not rely on any other
information or representations.
THE PORTFOLIOS
Variable Insurance Products Fund
Advised by Fidelity Management & Research Company
Fidelity VIP Money Market
Fidelity VIP Equity-Income
Fidelity VIP Growth
Variable Insurance Products Fund II
Advised by Fidelity Management & Research Company
Fidelity VIP II Asset Manager
Dreyfus Variable Investment Fund
Advised by the Dreyfus Corporation
Dreyfus Variable Investment Fund:
Growth and Income
Dreyfus Variable Investment Fund:
Quality Bond
T. Rowe Price Equity Series, Inc.
Advised by T. Rowe Price Associates, Inc.
T. Rowe Price Equity Income
T. Rowe Price New America Growth
T. Rowe Price International Series, Inc.
Advised by Rowe Price-Fleming International, Inc.
T. Rowe Price International Stock
OCC Accumulation Trust
Advised by OpCap Advisors
OCC Accumulation Trust Managed
OCC Accumulation Trust Small Cap
OCC Accumulation Trust U.S.
Government Income
Neither the Securities and Exchange Commission nor any state securities
regulator has approved or disapproved these securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is
a criminal offense.
ARC0016H8N 599
<PAGE>
Contents
<TABLE>
<C> <S>
1 Cross Reference to Definitions
2 Summary
6 Fee Table
7 Example
8 The Annuity Contract
9 Annuity Payments
11 Purchase
15 Investment Options
19 Expenses
</TABLE>
<TABLE>
<C> <S>
20 Taxes
24 Access to Your Money
26 Performance
27 Death Benefit
31 Other Information
35 Table of Contents of Statement of Additional Information
A-1 Appendix A (Condensed Financial Information)
B-1 Appendix B (General Account Fixed Options)
</TABLE>
CROSS REFERENCE TO DEFINITIONS
We have generally defined the technical terms associated with the Contract
where they are used in the prospectus. The following list shows where certain
of the more technical and more frequently used terms are defined in the
prospectus. In the text you can easily locate the defined word because it will
appear in bold type or its definition will be covered in a space on the page
set aside specifically for discussion of the term.
<TABLE>
<S> <C>
Accumulation Phase....................................................... 8
Annuitant................................................................ 28, 29
Annuity Date............................................................. 9
Annuity Payment Options.................................................. 9
Beneficiary.............................................................. 28, 29
Business Day............................................................. 11
Contract................................................................. 8
Contract Anniversary..................................................... 12
Contract Date............................................................ 12
Contract Owner........................................................... 32
Contract Year............................................................ 12
General Account Guaranteed Options....................................... B-1
Income Phase............................................................. 9
Initial Purchase Payment................................................. 11
Joint Annuitant.......................................................... 29
Net Purchase Payment..................................................... 12
Qualified Contract....................................................... 12, 24
Portfolios............................................................... 15
Purchase Payment......................................................... 12
Right to Cancel Period................................................... 32
Tax Deferral............................................................. 21
</TABLE>
1
<PAGE>
SUMMARY
The numbered sections in this Summary provide you with a concise discussion of
the major topics covered in this prospectus. Each section of the Summary is
discussed in greater detail in the main body of the prospectus at
corresponding numbered headings. Please read the full prospectus carefully.
1. THE ANNUITY CONTRACT
The Peoples Benefit Marquee Variable Annuity
Peoples Benefit Marquee is a flexible-premium multi-funded variable annuity
offered by Peoples Benefit Life Insurance Company ("Peoples Benefit"). The
Contract provides a means of investing on a tax-deferred basis in twelve
investment company portfolios and in four General Account Guaranteed Options
offered by Peoples Benefit.
Who Should Invest
The Contract is intended for long-term investors who want tax-deferred
accumulations of funds, generally for retirement but also for other long-term
purposes.
The Contract provides benefits in two distinct phases: accumulation and
income.
The Accumulation Phase
During the Accumulation Phase, you choose to allocate your investment in the
Contract among the twelve Portfolios and four General Account Guaranteed
Options available under the Contract. You can contribute additional amounts to
the Contract and you can take withdrawals from the Contract during the
Accumulation Phase. The value of your investment depends on the investment
performance of the Portfolios you choose. Your earnings are generally not
taxed during this phase unless you withdraw them.
The Income Phase
During the Income Phase, you can receive regular annuity payments on a fixed
or variable basis and for various periods of time depending on your need for
income and the choices available under the Contract. See ANNUITY PAYMENTS,
page 9, for more information about Annuity Payment Options.
2. ANNUITY PAYMENTS
During the Income Phase, you receive regular annuity payments under a wide
range of Annuity Payment Options. The Contract allows you to receive an income
guaranteed for as long as you live or until the second of two people dies. You
may also choose to receive a guaranteed number of payments over a number of
years. Most Annuity Payment Options are available on either a variable basis
(where the amount of the payment rises or falls depending on the investment
performance of the Portfolios you have chosen) or a fixed basis (where the
payment is guaranteed).
3. PURCHASE
You can buy the Contract with a minimum investment of $5,000 for Non-Qualified
Contracts and $2,000 for Qualified Contracts. You can add $500 or more to Non-
Qualified Contracts and $50 to Qualified Contracts at any time during the
Accumulation Phase. Your Contract may not exceed $1,000,000 in total Purchase
Payments without our prior approval.
2
<PAGE>
4. INVESTMENT OPTIONS
You can allocate your Purchase Payments to one or more of the following
Portfolios described in the six Funds' prospectuses and to the General Account
Guaranteed Options:
The Portfolios
Variable Insurance Products Fund
Advised by Fidelity Management & Research Company
Fidelity VIP Money Market Portfolio
Fidelity VIP Equity-Income Portfolio
Fidelity VIP Growth Portfolio
Variable Insurance Products Fund II
Advised by Fidelity Management & Research Company
Fidelity VIP II Asset Manager Portfolio
Dreyfus Variable Investment Fund
Advised by the Dreyfus Corporation
Dreyfus Variable Investment Fund: Growth and Income Portfolio
Dreyfus Variable Investment Fund: Quality Bond Portfolio
T. Rowe Price Equity Series, Inc.
Advised by T. Rowe Price Associates, Inc.
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price International Series, Inc.
Advised by Rowe Price-Fleming International, Inc.
T. Rowe Price International Stock Portfolio
OCC Accumulation Trust
Advised by OpCap Advisors
OCC Accumulation Trust Managed Portfolio
OCC Accumulation Trust Small Cap Portfolio
OCC Accumulation Trust U.S. Government Income Portfolio
You can make or lose money in any of these Portfolios depending on their
investment performance.
3
<PAGE>
The General Account Guaranteed Options
There are four General Account Guaranteed Options offered by Peoples Benefit:
The Dollar Cost Averaging Fixed Account Option
The One-Year Guaranteed Rate Option
The Multi-Year Guaranteed Rate Option
The Guaranteed Equity Option
Please see Appendix B for a description of the General Account Guaranteed
Options.
The availability, structure, and features of these options vary by state.
Check with your sales representative for details on the availability and
characteristics of these options before purchasing.
5. EXPENSES
No sales load is deducted from Purchase Payments.
A declining Surrender Charge applies to certain withdrawals during the first
six Contract Years.
Peoples Benefit will deduct a daily charge corresponding to an annual charge
of 0.15% of the net asset value of the Separate Account as an Administrative
Expense Charge and an annual charge of 1.25% for the mortality and expense
risks it assumes. There is also a $30 annual Contract Fee.
You will also pay certain expenses associated with the operation of the
Portfolios.
6. TAXES
In general, you are not taxed on earnings on your investment in the Contract
until you withdraw them or receive Annuity Payments. Earnings are taxed as
ordinary income. During the Accumulation Phase, for tax purposes withdrawals
are taken from earnings first, then from your investment in the Contract. For
Annuity Payments, payments come partially from earnings, partially from your
investment. You are taxed only on the investment portion of each Annuity
Payment. If you receive money from the Contract before age 59 1/2, you may
have to pay a 10% penalty tax on the earnings portion received.
7. ACCESS TO YOUR MONEY
You can take money out of your Contract at any time during the Accumulation
Phase. You may take up to 10% of the Accumulated Value free of Surrender
Charges once each year or pursuant to a series of Systematic Withdrawals. No
Surrender Charge will apply after the sixth Contract Year. Each withdrawal you
make must be at least $500. No Withdrawals or Exchanges from the Guaranteed
Equity Option are permitted until the end of the applicable guarantee period.
You may have to pay income tax and a tax penalty on any money you take out.
8. PERFORMANCE
The investment performance of the Portfolios you choose directly affects the
value of your Contract. For investments in the Portfolios, you bear all
investment risk (including the possible loss of principal), and investment
results are not guaranteed.
From time to time, Peoples Benefit may advertise the investment performance of
the Portfolios. In doing so, it will use standardized methods prescribed by
the Securities and Exchange Commission, as well as certain non-standardized
methods.
Past performance does not indicate or predict future performance.
4
<PAGE>
9. DEATH BENEFIT
If the Annuitant dies during the Accumulation Phase, the Beneficiary will
receive the Death Benefit. The Death Benefit is the greater of the then-
current Accumulated Value of the Contract (plus any positive Market Value
Adjustment applicable under the Multi-Year Guaranteed Rate Option) or the
Adjusted Death Benefit. During the first six Contract Years, the Adjusted
Death Benefit is the sum of all Net Purchase Payments minus any partial
withdrawals. During each following six-year period, the Adjusted Death Benefit
is the Death Benefit on the last day of the previous six-year period plus any
Net Purchase Payments made during that six-year period minus any partial
withdrawals taken during that six-year period. After the Annuitant reaches age
75, the Adjusted Death Benefit remains equal to the Death Benefit on the last
day of the six-year period before the Annuitant reaches age 75 plus any Net
Purchase Payments subsequently made minus any partial withdrawals subsequently
taken. The Beneficiary may elect to receive these amounts as a lump sum or as
Annuity Payments.
Federal tax law requires that if a Contract Owner is a natural person and dies
before the Annuity Date, then the entire value of the Contract must be
distributed within five years of the date of death of the Contract Owner.
Special rules may apply to a surviving spouse. If the Contract Owner is not a
natural person, the death of the primary Annuitant triggers the same
distribution requirement.
10. OTHER INFORMATION
Right to Cancel Period
The Contract provides for a Right to Cancel Period of 10 days (30 or more days
in some instances as specified in your Contract) plus a 5 day period to allow
for mail delivery. To cancel your investment, please return your Contract to
us or to the agent from whom you purchased the Contract.
Peoples Benefit Life Insurance Company
Peoples Benefit Life Insurance Company is a life insurance company
incorporated under Missouri law. It is principally engaged in offering life
insurance and annuity contracts.
Peoples Benefit Life Insurance Company Separate Account V
Established by Peoples Benefit under Missouri law, the Separate Account is a
unit investment trust registered with the Securities and Exchange Commission.
The Separate Account has twelve Subaccounts dedicated to the Contract, each of
which invests solely in a corresponding Portfolio of the Funds.
Other topics
Additional information on the topics summarized above and on other topics not
summarized here can be found at OTHER INFORMATION, page 31.
11. INQUIRIES AND CONTRACT AND POLICYHOLDER INFORMATION
For more information about the Peoples Benefit Marquee variable annuity, call
or write:
Peoples Benefit Life Insurance Company
Variable Annuity Department
4333 Edgewood Road, N.E.
Cedar Rapids, Iowa 52499
800-866-6007
If you have questions about your Contract, please telephone our Administrative
Offices at 800-866-6007 between the hours of 8 a.m. and 5 p.m. Eastern time.
Please have ready the Contract number and the Contract Owner's name when you
call. As Contract Owner, you will receive periodic statements confirming any
transactions that take place as well as quarterly statements and an annual
statement.
5
<PAGE>
FEE TABLE
The following table illustrates all expenses (except for Premium Taxes that
may be assessed) that you would incur as a Contract Owner. The purpose of this
table is to assist you in understanding the various costs and expenses that
you would bear directly or indirectly as a purchaser of the Contract. The fee
table reflects all expenses for both the Separate Account and the Funds. For a
complete discussion of Contract costs and expenses, see EXPENSES, page 19.
<TABLE>
<S> <C>
Contractowner Transaction Expenses
Sales Load Imposed on Purchases....................................... None
Contingent Deferred Sales Load (surrender charge)..................... 6%*
Exchange Fees......................................................... None
Annual Contract Maintenance Fee....................................... $30
Separate Account Annual Expenses (as a percentage of assets in the
Separate Account)
Mortality and Expense Risk Charge..................................... 1.25%
Administrative Charge................................................. 0.15%
-----
Total Annual Separate Account Expenses................................ 1.40%**
</TABLE>
* You may withdraw up to 10% of the Accumulated Value as of the last Contract
Anniversary (10% of the initial Net Purchase Payment during the first
Contract Year) once per Contract Year, or pursuant to a series of systematic
withdrawals, without a surrender charge (the "Penalty Free Amount").
Additional withdrawals in excess of the Penalty Free Amount in the first
Contract Year are subject to a 6% charge on the portion of the withdrawal
that consists of Net Purchase Payments. The charge decreases one percentage
point per year until after the sixth Contract Year, at which time there is
no surrender charge. The total surrender charges assessed will not be
greater than 8.5% of the Purchase Payments under the Contract.
**Separate Account Annual Expenses are not charged against the General Account
Guaranteed Options.
Portfolio Annual Expenses
Except as indicated, the figures below are based on expenses for fiscal year
1998 (as a percentage of each Portfolio's average net assets after fee waiver
and/or expense reimbursement limitation, if applicable).
<TABLE>
<CAPTION>
Management and Other Total Portfolio
Advisory Expenses Expenses Annual Expenses
----------------- -------- ---------------
<S> <C> <C> <C>
Fidelity VIP Money Market*......... 0.20% 0.10% 0.30%
Fidelity VIP Equity-Income*........ 0.49% 0.08% 0.57%
Fidelity VIP Growth*............... 0.59% 0.07% 0.66%
Fidelity VIP II Asset Manager*..... 0.54% 0.09% 0.63%
DVIF: Growth and Income............ 0.75% 0.03% 0.78%
DVIF: Quality Bond................. 0.65% 0.08% 0.73%
T. Rowe Price Equity Income........ 0.85% 0.00% 0.85%
T. Rowe Price New America Growth... 0.85% 0.00% 0.85%
T. Rowe Price International Stock.. 1.05% 0.00% 1.05%
OCC Accumulation Trust Managed**... 0.78% 0.04% 0.82%
OCC Accumulation Trust Small Cap
**................................ 0.80% 0.08% 0.88%
OCC Accumulation Trust U.S.
Government Income**............... 0.40% 0.60% 1.00%
</TABLE>
* A portion of the brokerage commissions that certain funds pay was used to
reduce fund expenses. In addition, certain funds have entered into
arrangements with their custodian whereby credits realized as a result of
uninvested cash balances were used to reduce custodian expenses. Excluding
these reductions, the Total Portfolio Annual Expenses would have been 0.58%
for the Equity-Income Portfolio, 0.68% for the Growth Portfolio, and 0.64%
for the Asset Manager Portfolio.
6
<PAGE>
** Total Portfolio Annual Expenses are limited by OpCap Advisors so that each
of the OCC Accumulation Trust Portfolios' annualized operating expenses
(net of any expense offsets) do not exceed 1.00% of average daily net
assets. Without such limitation and without giving effect to any expense
offsets, the Management and Advisory Expenses, Other Expenses, and Total
Annual Portfolio Expenses would have been: 0.60%, 0.60%, and 1.20% for the
U.S. Government Income Portfolio.
EXAMPLE
The following example illustrates the expenses that you would incur on a
$1,000 Purchase Payment over various periods, assuming (1) a 5% annual rate of
return and (2) full surrender at the end of each period.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Fidelity VIP Money
Market................. $73.64 $ 94.55 $115.48 $204.60
Fidelity VIP Equity-
Income................. $76.20 $102.49 $129.12 $233.26
Fidelity VIP Growth..... $77.05 $105.12 $133.63 $242.63
Fidelity VIP II Asset
Manager................ $76.77 $104.24 $132.13 $239.52
DVIF: Growth and
Income................. $78.18 $108.61 $139.60 $254.98
DVIF: Quality Bond...... $77.71 $107.16 $137.12 $249.86
T. Rowe Price Equity
Income................. $78.84 $110.64 $143.07 $262.12
T. Rowe Price New
America Growth......... $78.84 $110.64 $143.07 $262.12
T. Rowe Price
International Stock.... $80.73 $116.43 $152.92 $282.20
OCC Accumulation Trust
Managed................ $78.56 $109.77 $141.59 $259.07
OCC Accumulation Trust
Small Cap.............. $79.13 $111.51 $144.56 $265.16
OCC Accumulation Trust
U.S. Government
Income................. $80.25 $114.99 $150.47 $277.22
</TABLE>
The following example illustrates the expenses that you would incur on a
$1,000 Purchase Payment over various periods, assuming (1) a 5% annual rate of
return and (2) that you do not surrender your Contract or that you annuitize
your Contract at the end of each period.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Fidelity VIP Money
Market................. $17.69 $54.78 $ 94.27 $204.60
Fidelity VIP Equity-
Income................. $20.41 $63.03 $108.20 $233.26
Fidelity VIP Growth..... $21.31 $65.77 $112.80 $242.63
Fidelity VIP II Asset
Manager................ $21.01 $64.86 $111.26 $239.52
DVIF: Growth and
Income................. $22.52 $69.41 $118.90 $254.98
DVIF: Quality Bond...... $22.01 $67.89 $116.36 $249.86
T. Rowe Price Equity
Income................. $23.22 $71.52 $122.44 $262.12
T. Rowe Price New
America Growth......... $23.22 $71.52 $122.44 $262.12
T. Rowe Price
International Stock.... $25.22 $77.54 $132.49 $282.20
OCC Accumulation Trust
Managed................ $22.92 $70.62 $120.92 $259.07
OCC Accumulation Trust
Small Cap.............. $23.52 $72.43 $123.95 $265.16
OCC Accumulation Trust
U.S. Government
Income................. $24.72 $76.04 $129.98 $277.22
</TABLE>
The Annual Contract Maintenance Fee is reflected in these examples as a
percentage of the total amount of fees collected during a calendar year
divided by the total average net assets of the Portfolios during the same
calendar year. The fee is assumed to remain the same in each year of the above
periods. Peoples Benefit will deduct the Annual Contract Maintenance Fee on
each Contract Anniversary and upon surrender, on a pro rata basis, from each
Subaccount. Peoples Benefit may deduct Premium Taxes, if any, as it incurs
them.
You should not consider these examples to be a representation of past or
future expenses or performance. Actual expenses may be higher than those
shown, subject to the guarantees in the Contract.
7
<PAGE>
CONDENSED FINANCIAL INFORMATION
Please note that Appendix A contains a history of accumulation unit values in
a table labeled "Condensed Financial Information."
1. THE ANNUITY CONTRACT
The Peoples Benefit Marquee variable annuity is a flexible-premium multi-
funded variable annuity offered by Peoples Benefit. The Contract provides a
means of investing on a tax-deferred basis in twelve portfolios (the
"Portfolios") offered by a number of investment companies and in four
guaranteed options available under Peoples Benefit's general account.
Who Should Invest
The Contract is intended for long-term investors who want tax-deferred
accumulation of funds, generally for retirement but also for other long-term
investment purposes. The tax-deferred feature of the Contract is most
attractive to investors in high federal and state marginal tax brackets who
have exhausted other avenues of tax deferral, such as pre-tax contributions to
employer-sponsored retirement or savings plans.
About the Contract
The Peoples Benefit Marquee variable annuity is a contract between you, the
Contract Owner, and Peoples Benefit, the issuer of the Contract.
The Contract provides benefits in two distinct phases: accumulation and
income.
Accumulation Phase
The Accumulation Phase starts when you purchase your Contract and ends
immediately before the Annuity Date, when the Income Phase starts. During the
Accumulation Phase, you choose to allocate your investment in the Contract
among the twelve available Portfolios and the four General Account Guaranteed
Options. The Contract is a variable annuity because the value of your
investment in the Portfolios can go up or down depending on the investment
performance of the Portfolios you choose. The Contract is a flexible-premium
annuity because you can make additional investments of at least $500 until the
Income Phase begins. During this phase, you are generally not taxed on
earnings from amounts invested unless you withdraw them.
Other benefits available during the Accumulation Phase include the ability to:
. Make exchanges among your Portfolio choices at no charge and without
current tax consequences. (See Exchanges Among the Portfolios, page 17.)
. Withdraw up to 10% of your money once a year or pursuant to a series of
systematic withdrawals with no surrender penalty charged by Peoples
Benefit, although you may incur income taxes and a 10% penalty tax. (See
Full and Partial Withdrawals, page 24.)
Income Phase
During the Income Phase, you receive regular annuity payments. The amount of
these payments is based in part on the amount of money accumulated under your
Contract (its Accumulated Value) and the Annuity Payment Option you select.
The Annuity Payment Options are explained at ANNUITY PAYMENTS, page 9.
8
<PAGE>
At your election, payments can be either variable or fixed. If variable, the
payments rise or fall depending on the investment performance of the
Portfolios you choose. If fixed, the payment amounts are guaranteed.
Annuity payments are available in a wide variety of options, including
payments over a specified period or for life (for either a single life or
joint lives), with or without a guaranteed number of payments.
The Separate Account
When you purchase a Contract, money you have allocated to the Portfolios is
deposited into Peoples Benefit's Separate Account V. The Separate Account
contains a number of Subaccounts that invest exclusively in shares of the
corresponding Portfolios. The investment performance of each Subaccount is
linked directly to the investment performance of one of the Portfolios. Assets
in the Separate Account belong to Peoples Benefit but are accounted for
separately from Peoples Benefit's other assets and can be used only to satisfy
its obligations to Contract Owners.
2. ANNUITY PAYMENTS
During the Income Phase, you receive regular annuity payments under a wide
range of Annuity Payment Options.
Starting the Income Phase
As Contract Owner, you exercise control over when the Income Phase begins by
specifying an Annuity Date on the customer order form when you purchase the
Contract. The Annuity Date is the date on which annuity payments begin and is
always the first day of the month you specify. You may also change the Annuity
Date at any time in writing, as long as the Annuitant or Joint Annuitant is
living and Peoples Benefit receives the request at least 30 days before the
then-scheduled Annuity Date. Any Annuity Date you request must be at least 30
days from the day Peoples Benefit receives written notice of it. The latest
possible Annuity Date Peoples Benefit will accept without prior approval is
the first day of the month after the Annuitant's 85th birthday.
The Annuity Date for Qualified Contracts may also be controlled by
endorsements, the plan, or applicable law.
Annuity Payment Options
The income you take from the Contract during the Income Phase can take several
different forms, depending on your particular needs. Except for the Designated
Period Annuity Option listed below, the Annuity Payment Options listed below
are available on either a variable basis or a fixed basis.
If available on a variable basis, the Annuity Payment Options provide payments
that, after the initial payment, will go up or down depending on the
investment performance of the Portfolios you choose.
If available on a fixed basis, the Annuity Payment Options provide payments in
an amount that does not change. If you choose a fixed Annuity Payment Option,
Peoples Benefit will move your investment out of the Portfolios and into the
general account of Peoples Benefit.
. Life Annuity - Monthly Annuity Payments are paid for the life of an
Annuitant, ending with the last payment before the Annuitant dies.
. Joint and Last Survivor Annuity - Monthly Annuity Payments are paid for as
long as at least one of two named Annuitants is living, ending with the
last payment before the surviving Annuitant dies.
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. Life Annuity With Period Certain - Monthly Annuity Payments are paid for as
long as the Annuitant lives, with payments guaranteed to be made for a
period of at least 10 years, 15 years, or 20 years, as elected. If the
Annuitant dies before the period certain ends, Peoples Benefit will make
any remaining payments to the Beneficiary.
. Installment or Unit Refund Life Annuity - Available as either a fixed
(Installment Refund) or variable (Unit Refund) Annuity Payment Option.
Monthly Annuity Payments are paid for the life of an Annuitant, with a
period certain determined by dividing the Accumulated Value by the first
Annuity Payment. If the Annuitant dies before the period certain ends,
Peoples Benefit will make any remaining payments to the Beneficiary.
. Designated Period Annuity - Available only on a fixed basis. Monthly
Annuity Payments are paid for a specified period, which may be from 10 to
30 years.
Calculating Annuity Payments
Fixed Annuity Payments. Each fixed Annuity Payment is guaranteed to be at
least the amount shown in the Contract's Annuity Tables corresponding to the
Annuity Payment Option selected.
Variable Annuity Payments. To calculate variable Annuity Payments, Peoples
Benefit determines the amount of the first variable Annuity Payment. The first
variable Annuity Payment will equal the amount shown in the applicable Annuity
Table in the Contract. This amount depends on the Accumulated Value of your
Contract on the Annuity Date, the sex and age of the Annuitant (and Joint
Annuitant where there is one), the Annuity Payment Option selected, and any
applicable Premium Taxes. Subsequent variable Annuity Payments depend on the
investment experience of the Portfolios chosen. If the actual net investment
experience of the Portfolios chosen exactly equals the Assumed Interest Rate
of 4%, then the variable Annuity Payments will not change in amount. If the
actual net investment experience of the Portfolios chosen is greater than the
Assumed Interest Rate of 4%, then the variable Annuity Payments will increase.
On the other hand, they will decrease if the actual experience is lower. The
Statement of Additional Information contains a more detailed description of
the method of calculating variable Annuity Payments.
Impact of Annuitant's Age on Annuity Payments. For either fixed or variable
Annuity Payments involving life income, the actual ages of the Annuitant and
Joint Annuitant will affect the amount of each payment. Since payments based
on the lives of older Annuitants and Joint Annuitants are expected to be fewer
in number, the amount of each Annuity Payment will be greater.
Impact of Annuitant's Sex on Annuity Payments. For either fixed or variable
Annuity Payments involving life income, the sex of the Annuitant and Joint
Annuitant will affect the amount of each payment. Since payments based on the
lives of male Annuitants and Joint Annuitants are expected to be fewer in
number, in most states the amount of each Annuity Payment will be greater than
for female Annuitants and Joint Annuitants.
Impact of Length of Payment Periods on Annuity Payments. The value of all
payments, both fixed and variable, will be greater for shorter guaranteed
periods than for longer guaranteed periods, and greater for single-life
annuities than for joint and survivor annuities, because they are expected to
be made for a shorter period.
10
<PAGE>
A Few Things to Keep in Mind Regarding Annuity Payments
. If an Annuity Payment Option is not selected, Peoples Benefit will assume
that you chose the Life Annuity With Period Certain option (with 10 years
of payments guaranteed). Any amounts in a Portfolio immediately before
the Income Phase begins will be applied under a variable Annuity Payment
Option based on the performance of that Portfolio.
. The minimum payment is $100. If on the Annuity Date your Accumulated
Value is below $5,000 ($2,000 for Texas Contract Owners as specified in
the Contract), Peoples Benefit reserves the right to pay that amount to
you in a lump sum.
. From time to time, Peoples Benefit may require proof that the Annuitant,
Joint Annuitant, or Contract Owner is living.
. If someone has assigned ownership of a Contract to you, or if a non-
natural person (e.g., a corporation) owns a Contract, you may not start
the Income Phase of the Contract without Peoples Benefit's consent.
. At the time Peoples Benefit calculates your fixed Annuity Payments,
Peoples Benefit may offer more favorable rates than those guaranteed in
the Annuity Tables found in the Contract.
. Once Annuity Payments begin, you may not select a different Annuity
Payment Option. Nor may you cancel an Annuity Payment Option after
Annuity Payments have begun.
. If you have selected a variable Annuity Payment Option, you may change
the Portfolios funding the variable Annuity Payments by written request
or by calling 800-866-6007.
. You may select an Annuity Payment Option and allocate a portion of the
value of your Contract to a fixed version of that Annuity Payment Option
and a portion to a variable version of that Annuity Payment Option
(assuming the Annuity Payment Option is available on both a fixed and
variable basis). You may not select more than one Annuity Payment Option.
. If you choose an Annuity Payment Option and the postal or other delivery
service is unable to deliver checks to the Payee's address of record, no
interest will accrue on amounts represented by uncashed Annuity Payment
checks. It is the Payee's responsibility to keep Peoples Benefit informed
of the Payee's most current address of record.
3. PURCHASE
Customer Order Form and Issuance of Contracts
To invest in the Peoples Benefit Marquee variable annuity, you should send a
completed customer order form and your Initial Purchase Payment to the address
indicated on the customer order form. If you wish to make a personal delivery
by hand or courier to Peoples Benefit of your completed customer order form
and Initial Purchase Payment (rather than through the mail), do so at our
Administrative Offices, 4333 Edgewood Road, N.E., Cedar Rapids, Iowa 52499.
Peoples Benefit will issue a Contract only if the Annuitant and Joint
Annuitant are 75 years of age or less.
If the customer order form and any other required documents are received in
good order, Peoples Benefit will issue the Contract and will credit the
Initial Purchase Payment within two Business Days after receipt. (A Business
Day is any day that the New York Stock Exchange is open for trading.) Along
with the Contract, Peoples Benefit will also send a Contract acknowledgment
form, which you should complete, sign, and return in accordance with its
instructions. Please note that until Peoples Benefit receives the
acknowledgment form signed by the Owner and Joint Owner, the Owner and any
Joint Owner must obtain a signature guarantee on their written signed request
in order to exercise any rights under the Contract.
If Peoples Benefit cannot credit the Initial Purchase Payment because the
customer order form or other required documentation is incomplete, Peoples
Benefit will contact the applicant in writing, explain the reason for the
delay, and refund the Initial Purchase Payment within five Business Days
unless the applicant consents to Peoples Benefit's retaining the Initial
Purchase Payment and crediting it as soon as the necessary requirements are
fulfilled.
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In addition to Non-Qualified Contracts, Peoples Benefit also offers the
Peoples Benefit Marquee as a Qualified Contract. Note that Qualified Contracts
contain certain other restrictive provisions limiting the timing of payments
to and distributions from the Qualified Contract. (See QUALIFIED INDIVIDUAL
RETIREMENT ANNUITIES, page x.)
DEFINITION
Qualified Contract
When the term "Qualified Contract" is used in this prospectus we mean a
Contract that qualifies as an individual retirement annuity under either
Section 403(b), 408(b), or 408A of the Internal Revenue Code.
Purchase Payments
A Purchase Payment is any amount you use to buy or add to the Contract. A
Purchase Payment may be reduced by any applicable Premium Tax. In that case,
the resulting amount is called a Net Purchase Payment.
A Few Things to Keep in Mind Regarding Purchase Payments
. The minimum Initial Purchase Payment for a Non-Qualified Contract is
$5,000.
. The minimum Initial Purchase Payment for a Qualified Contract is $2,000
(or $50 if by payroll deduction).
. You may make additional Purchase Payments at any time during the
Accumulation Phase and while the Annuitant or Joint Annuitant, if
applicable, is living. Additional Purchase Payments must be at least $500
for Non-Qualified Contracts. Additional Purchase Payments must be at
least $50 for Qualified Contracts. Additional Purchase Payments are
limited to $10,000 annually after the first Contract Anniversary.
. Additional Purchase Payments received before the close of the New York
Stock Exchange (usually 4:00 p.m. Eastern time) are credited to the
Contract's Accumulated Value as of the close of business that same day.
. The minimum amount that you can allocate to any one Portfolio is $250
(except where Purchase Payments are made by monthly payroll deduction).
Each allocation to a General Account Option must be at least $1,000,
except for the Dollar Cost Averaging Fixed Account, which has a minimum
of $5,000.
. The total of all Purchase Payments may not exceed $1,000,000 without our
prior approval.
. Depending on the state of issue of your Contract, your Initial Net
Purchase Payment may be immediately invested among the Portfolios
selected in your customer order form, or it may be invested in the
Fidelity VIP Money Market Portfolio until the end of the Right to Cancel
Period. See Allocation of Purchase Payments, page 13, for more
information.
The date on which the Contract is issued is called the Contract Date. A
Contract Anniversary is any anniversary of the Contract Date. A Contract Year
is a period of twelve months starting with the Contract Date or any Contract
Anniversary.
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DEFINITION
Premium Tax
A Premium Tax is a regulatory tax some states assess on the Purchase
Payments made into a Contract. If we should have to pay any Premium Tax, we
will deduct it from each Purchase Payment or from the Accumulated Value as
we incur the tax.
As of the date of this Prospectus, the following states assesses a Premium
Tax on all initial and subsequent Purchase Payments:
<TABLE>
<CAPTION>
Qualified Non-Qualified
--------- -------------
<S> <C> <C>
South Dakota............. 0.00% 1.25%
</TABLE>
As of the date of this Prospectus, the following states assess a Premium Tax
against the Accumulated Value if the Owner chooses an Annuity Payment Option
instead of receiving a lump sum distribution:
<TABLE>
<CAPTION>
Qualified Non-Qualified
--------- -------------
<S> <C> <C>
California............... 0.50% 2.35%
Kentucky................. 2.00 2.00
Maine.................... 0.00 2.00
Nevada................... 0.00 3.50
West Virginia............ 1.00 1.00
Wyoming.................. 0.00 1.00
</TABLE>
Purchasing by Wire
For wiring instructions, please contact our Administrative Office at 800-866-
6007.
Allocation of Purchase Payments
You specify on the customer order form what portion of your Purchase Payments
you want to be allocated among which Portfolios and which General Account
Guaranteed Options. You may allocate your Purchase Payments to one or more
Portfolios or to any of the General Account Guaranteed Options. All
allocations you make to the Portfolios must be in whole-number percentages and
must be at least $250 except where Purchase Payments are made by monthly
payroll deduction. Each allocation to a General Account Option must be at
least $1,000, except the Dollar Cost Averaging Fixed Account Option, which has
a $5,000 minimum.
If the state of issue of your Contract is Georgia, Idaho, Louisiana, Michigan,
Missouri, Nebraska, New Hampshire, New Jersey, North Carolina, Oklahoma,
Oregon, South Carolina, Utah, Virginia, or West Virginia, we will not
immediately invest your initial Net Purchase Payment in the Portfolios shown
on your customer order form until the Right to Cancel Period has passed.
Instead, those amounts will be invested in the Fidelity VIP Money Market
Portfolio until the Right to Cancel Period passes, at which time your initial
allocation instructions will be followed, except that any accrued earnings
will remain in the Fidelity VIP Money Market Portfolio if you selected it as
an initial allocation option. If the state of issue of your Contract is any
other state, then your initial Net Purchase Payment will be immediately
invested in the Portfolios in the percentages specified on your customer order
form without waiting for the Right to Cancel Period to pass. In that case, you
will bear full investment risk for any amounts allocated to the Portfolios
during the Right to Cancel Period.
If you selected the Guaranteed Equity Option as an initial allocation option,
no amount of your initial Net Purchase Payments attributable to the Guaranteed
Equity Option will be invested in that option
13
<PAGE>
until the Right to Cancel Period has passed, no matter what the state of issue
of your Contract is. This is because the Guaranteed Equity Option is illiquid
for the applicable guarantee period.
If you selected any General Account Guaranteed Option other than the
Guaranteed Equity Option, the amount of your initial Net Purchase Payments
attributable to those options will be invested immediately into those options
without waiting for the Right to Cancel Period to pass.
Should your investment goals change, you may change the allocation percentages
for additional Net Purchase Payments by sending written notice to or by
calling Peoples Benefit. Requests for Exchanges received before the close of
the New York Stock Exchange (generally 4 p.m. Eastern time) are processed as
of that day. Requests received after the close of the New York Stock Exchange
are processed the next Business Day.
For information about Exchanges to and from the General Account Guaranteed
Options, see Appendix B.
WHAT'S MY CONTRACT WORTH TODAY?
Accumulated Value
The Accumulated Value of your Contract is the value of all amounts
accumulated under the Contract during the Accumulation Phase (similar to the
current market value of a mutual fund account). When the Contract is opened,
the Accumulated Value is equal to your initial Net Purchase Payment. On any
Business Day thereafter, the Accumulated Value equals the Accumulated Value
from the previous Business Day,
plus -
. any additional Net Purchase Payments credited
. any increase in the Accumulated Value due to investment results of the
Portfolio(s) you selected and the interest credited to the General Account
Guaranteed Options
minus -
. any decrease in the Accumulated Value due to investment results of the
Portfolio(s) you selected
. the daily Mortality and Expense Risk Charge
. the daily Administrative Expense Charge
. the Annual Contract Maintenance Fee, if applicable
. any withdrawals
. any Market Value Adjustment or other deduction due to early Exchanges or
Withdrawals from the General Account Guaranteed Options
. any charges for Exchanges made after the first twelve in a Contract Year
. any Premium Taxes that occur during the Valuation Period.
The Valuation Period is any period between two successive Business Days
beginning at the close of business of the first Business Day and ending at
the close of business of the next Business Day.
You should expect the Accumulated Value of your Contract to change from
Valuation Period to Valuation Period, reflecting the investment experience
of the Portfolios you have selected as well as the daily deduction of
charges.
An Accumulation Unit is a measure of your ownership interest in the Contract
during the Accumulation Phase. When you allocate your Net Purchase Payments
to a selected Portfolio, Peoples Benefit will credit a certain number of
Accumulation Units to your Contract. Peoples Benefit
14
<PAGE>
determines the number of Accumulation Units it credits by dividing the
dollar amount you have allocated to a Portfolio by the Accumulation Unit
Value for that Portfolio as of the end of the Valuation Period in which the
payment is received. Each Portfolio has its own Accumulation Unit Value
(similar to the share price (net asset value) of a mutual fund). The
Accumulation Unit Value varies each Valuation Period with the net rate of
return of the Portfolio. The net rate of return reflects the performance of
the Portfolio for the Valuation Period and is net of asset charges to the
Portfolio. Per Portfolio, the Accumulated Value equals the number of
Accumulation Units multiplied by the Accumulation Unit Value for that
Portfolio.
All dividends and capital gains earned will be reinvested and reflected in
the Accumulation Unit Value. Only in this way can these earnings remain tax-
deferred.
4. INVESTMENT OPTIONS
The Peoples Benefit Marquee variable annuity offers you a means of investing
in twelve portfolios offered by six different investment companies (each
investment company a "Fund") and four General Account Guaranteed Options. A
brief description of each Fund and Portfolio is given below. For detailed
information regarding the Funds and the Portfolios, you should read the
prospectuses for the Funds that accompany the Contract prospectus. For
information about the General Account Guaranteed Options, see Appendix B.
The general public may invest in the Portfolios only through certain insurance
contracts. The investment objectives and policies of the Portfolios may be
similar to those of certain publicly available funds or portfolios. However,
you should not expect that the investment results of any publicly available
funds or portfolios will be comparable to those of the Portfolios.
Variable Insurance Products Fund
Advised by Fidelity Management & Research Company
The Fund is a diversified, open-end management investment company organized by
Fidelity Management & Research Company and registered with the Securities and
Exchange Commission ("SEC") under the Investment Company Act of 1940 (the
"1940 Act"). The Fund consists of several investment portfolios, three of
which are available as part of the Peoples Benefit Marquee.
Fidelity VIP Money Market Portfolio seeks to obtain as high a level of
current income, while maintaining a stable $1.00 share price, as is
consistent with preserving capital and providing liquidity. It invests only
in high-quality U.S. dollar-denominated money market instruments of
domestic and foreign issuers. An investment in the Portfolio is not insured
or guaranteed by the FDIC or any other government agency. Although the
Portfolio seeks to preserve the value of your investment at $1.00 per
share, it is possible to lose money by investing in the Portfolio.
Fidelity VIP Equity-Income Portfolio seeks reasonable income by investing
primarily in income-producing equity securities. In choosing these
securities, the Portfolio will also consider the potential for capital
appreciation. The Portfolio's goal is to achieve a yield that exceeds the
composite yield on the securities comprising the Standard & Poor's
Composite Index of 500 Stocks.
Fidelity VIP Growth Portfolio seeks to achieve capital appreciation
normally through the purchase of common stocks (although the Portfolio's
investments are not restricted to any one type of security). Capital
appreciation may also be found in other types of securities, including
bonds and preferred stocks.
Variable Insurance Products Fund II
Advised by Fidelity Management & Research Company
The Fund is a diversified, open-end management investment company organized by
Fidelity Management & Research Company and registered with the SEC under the
1940 Act. The Fund consists of several investment portfolios, one of which is
available as part of the Peoples Benefit Marquee.
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<PAGE>
Fidelity VIP II Asset Manager Portfolio seeks high total return with
reduced risk over the long term by allocating its assets among domestic and
foreign stocks, bonds, and short-term and money market instruments.
Dreyfus Variable Investment Fund
Advised by the Dreyfus Corporation
The Fund is an open-end management investment company organized under the 1940
Act. The Fund consists of thirteen separate investment portfolios, two of
which are available under the Peoples Benefit Marquee.
Dreyfus Variable Investment Fund: Growth and Income Portfolio ("DVIF:
Growth and Income Portfolio") is non-diversified portfolio, whose goal is
long-term capital growth, current income, and growth of income, consistent
with reasonable investment risk. The Portfolio invests in equity and debt
securities and money market instruments of domestic and foreign issuers.
Dreyfus Variable Investment Fund: Quality Bond Portfolio ("DVIF: Quality
Bond Portfolio") is a diversified portfolio, whose goal is to provide the
maximum amount of current income to the extent consistent with the
preservation of capital and the maintenance of liquidity. The Portfolio
invests in fixed-income securities and in securities of the U.S. government
and its agencies and instrumentalities.
T. Rowe Price Equity Series, Inc.
Advised by T. Rowe Price Associates, Inc.
The Fund is a Maryland corporation organized in 1994 and is registered with
the SEC under the 1940 Act as a diversified, open-end management investment
company, commonly known as a "mutual fund." The corporation is a series fund
and has the authority to issue other series in addition to the T. Rowe Price
Equity Income and the T. Rowe Price New America Growth Portfolios, each of
which represents a separate series having different objectives and investment
policies, and both of which are available as part of the Peoples Benefit
Marquee.
T. Rowe Price Equity Income Portfolio seeks to provide substantial dividend
income as well as long-term growth of capital through investments in the
common stocks of established companies. In pursuing its objective, the
Portfolio will normally invest in common stocks of well-established
companies paying above-average dividends. T. Rowe Price seeks companies
that appear to be undervalued by various measures and may be temporarily
out of favor, but have good prospects for capital appreciation and dividend
growth.
T. Rowe Price New America Growth Portfolio seeks to provide long-term
growth of capital through investments primarily in the common stocks of
U.S. growth companies which operate in service industries. In pursuing its
objective, the Portfolio will invest in service companies that T. Rowe
Price believes are above-average performers in their fields. T. Rowe Price
focuses on service companies, which represent more than half of the U.S.
economy, because of their growth potential and because they may have
advantages over manufacturing companies. The Portfolio may also take
advantage of its ability to invest up to 25% of its assets in nonservice
growth companies as opportunities occur.
T. Rowe Price International Series, Inc.
Advised by Rowe Price-Fleming International, Inc.
The Fund is a Maryland corporation organized in 1994 and is registered with
the SEC under the 1940 Act as a diversified, open-end management company,
commonly known as a "mutual fund." The corporation is a series fund and has
the authority to issue other series in addition to the T. Rowe Price
International Stock Portfolio currently available as part of the Peoples
Benefit Marquee.
16
<PAGE>
T. Rowe Price International Stock Portfolio seeks long-term growth of
capital through investments primarily in common stocks of established, non-
U.S. companies. In pursuing its objective, the Portfolio will invest
substantially all of its assets outside the U.S. and will diversify broadly
among developed and emerging countries through out the world. Stock
selection reflects a growth style.
OCC Accumulation Trust
Advised by OpCap Advisors, a subsidiary of Oppenheimer Capital
The Fund is a Massachusetts business trust and is registered with the SEC
under the 1940 Act as a diversified, open-end management investment company.
The Fund currently consists of seven series, three of which are available as
part of the Peoples Benefit Marquee. The Fund was formerly known as the Quest
for Value Accumulation Trust.
OCC Accumulation Trust Managed Portfolio seeks to achieve growth of capital
over time through investment in a portfolio consisting of common stocks,
bonds, and cash equivalents, the percentages of which will vary over time
based on the investment manager's assessments of the relative outlook for
such investments.
OCC Accumulation Trust Small Cap Portfolio seeks capital appreciation
through investments in a diversified portfolio consisting primarily of
equity securities of companies with market capitalizations under $1
billion.
OCC Accumulation Trust U.S. Government Income Portfolio seeks a high level
of current income together with the protection of capital. The Portfolio
seeks to achieve its investment objective by investing exclusively in debt
obligations, including mortgage-backed securities, issued or guaranteed by
the U.S. government, its agencies, or its instrumentalities.
There is no assurance that a Portfolio will achieve its stated objective.
Additional information regarding the investment objectives and policies of the
Portfolios and the investment advisory services, total expenses, and charges
can be found in the current prospectuses for the corresponding Funds.
Exchanges Among the Portfolios
Should your investment goals change, you may make unlimited exchanges of money
among the Portfolios at no cost, subject to the following conditions:
. You may make requests for exchanges in writing or by telephone. Peoples
Benefit will process requests it receives before the close of the New York
Stock Exchange (generally 4:00 p.m. Eastern time) at the close of business
that same day. Requests received after the close of the New York Stock
Exchange are processed the next Business Day.
For information concerning the exchanges to and from the General Account
Guaranteed Options, see Appendix B.
. The minimum amount you may exchange from a Portfolio is $250 (unless the
Accumulated Value in a Portfolio is less than $250).
. The $250 minimum balance requirement per Portfolio must be satisfied at all
times unless Purchase Payments are being made by monthly payroll deduction.
The General Account Guaranteed Options require a $1,000 minimum at all
times. If you do not maintain the minimum balance requirement, Peoples
Benefit will transfer any remaining amount to your other Portfolios on a
pro rata basis.
. Peoples Benefit does not currently charge a fee for exchanges among the
Portfolios, although it reserves the right to charge a $15 fee for
Exchanges in excess of 12 per Contract Year.
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<PAGE>
Telephone Exchanges
You may establish the telephone exchange privilege on your Contract by
completing the appropriate section of the Contract acknowledgment form you
will receive with your Contract or by completing a separate telephone
authorization form at a later date. You may also authorize a third party to
initiate transactions by telephone by completing a third party authorization
form or the appropriate section of the Contract acknowledgment form.
Peoples Benefit will take reasonable steps to confirm that instructions
communicated by telephone are genuine. Before we act on any request, we will
ask the caller for his or her Contract number and Social Security number. In
addition, we will take reasonable steps to confirm that instructions
communicated by telephone from a third party are genuine. The third party
caller will be asked for his or her name, company affiliation (if
appropriate), the Contract number to which he or she is referring, and the
Social Security number of the Contract Owner. This information will be
verified with the Contract Owner's records prior to processing a transaction,
and all transactions performed will be verified with the Contract Owner
through a written confirmation statement. We will record all calls. Neither
the Company nor the Funds shall be liable for any loss, cost, or expense for
action on telephone instructions that are believed to be genuine in accordance
with these procedures.
Dollar-Cost Averaging Options
Dollar Cost Averaging Money Market Option. If you have at least $5,000 of
Accumulated Value in the Fidelity VIP Money Market Portfolio, you can use the
Dollar-Cost Averaging Money Market Option to move a specified dollar amount
each month from the Fidelity VIP Money Market Portfolio to other Portfolios
available under the Contract, subject to the following conditions:
. The minimum amount you may exchange under this option is $250.
. The maximum amount you may exchange under this option is the Accumulated
Value in the Fidelity VIP Money Market Portfolio when elected, divided by
12.
. The transfer date will be the same calendar day each month as the Contract
Date.
. Peoples Benefit will allocate the dollar amount to the Portfolios in the
proportions you specify on the appropriate Peoples Benefit form or, if you
specify none, in accordance with your original investment allocation.
. If, on any transfer date, the Accumulated Value in the Fidelity VIP Money
Market Portfolio is equal to or less than the amount you have elected to
have transferred, Peoples Benefit will transfer the entire amount and the
option will end.
. You may change the transfer amount once each Contract Year.
. You may cancel this option by sending the appropriate Peoples Benefit form
to our Administrative Offices. We must receive the form at least seven days
before the next transfer date.
Dollar Cost Averaging Fixed Account Option. For information about the Dollar
Cost Averaging Fixed Account Option, see Appendix B.
A CLOSER LOOK AT
Dollar-Cost Averaging
The main objective of Dollar-Cost Averaging is to shield your investment
from short-term price fluctuations. Since the same dollar amount is
transferred to other Portfolios each month, more Accumulation Units are
credited to a Portfolio if the value per Accumulation Unit is low, while
fewer Accumulation Units are credited if the value per Accumulation Unit is
high. Therefore, it is possible to achieve a lower average cost per
Accumulation Unit over the long term if the Accumulation Unit Value declines
over that period. This plan of investing allows investors to take advantage
of market fluctuations but does not assure a profit or protect against a
loss in declining markets.
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<PAGE>
5. EXPENSES
There are charges and expenses associated with the Contract that reduce the
return on your investment in the policy.
Surrender Charge Schedule
No sales load is deducted from Purchase Payments, and during the Accumulation
Phase up to 10% of the Accumulated Value as of the last Contract Anniversary
(10% of the initial Net Purchase Payment during the first Contract Year) can
be withdrawn once per year, or pursuant to a series of Systematic Withdrawals,
without a surrender charge (the "Penalty Free Amount"). Additional withdrawals
in excess of the Penalty Free Amount are subject to a surrender charge (i.e.,
a contingent deferred sales load) according to the following schedule on the
portion of such withdrawal that consists of Net Purchase Payments:
<TABLE>
<CAPTION>
Surrender
Contract Year Charge
------------- ---------
<S> <C>
1 6%
2 5%
3 4%
4 3%
5 2%
6 1%
7 0%
</TABLE>
The total surrender charges assessed will not exceed 8.5% of the Purchase
Payments under the Contract. Peoples Benefit does not assess a surrender
charge upon the death of the Annuitant or after the sixth Contract Year or
upon your starting the Income Phase.
Keep in mind that withdrawals may be taxable and, if made before age 59 1/2,
may be subject to a 10% penalty tax on earnings withdrawn. For tax purposes,
withdrawals are taken first from earnings on the Contract and then from the
money you invested in the Contract. See Taxation of Full and Partial
Withdrawals, page 21.
Mortality and Expense Risk Charge
Peoples Benefit charges a fee as compensation for bearing certain mortality
and expense risks under the Contract. The annual charge is assessed daily
based on the net assets of the Separate Account. The annual Mortality and
Expense Risk Charge is 1.25% of the net asset value of the Separate Account.
We guarantee that this annual charge will not increase. If the charge is more
than sufficient to cover actual costs or assumed risks, any excess will be
added to Peoples Benefit's surplus. If the charges collected under the
Contract are not enough to cover actual costs or assumed risks, then Peoples
Benefit will bear the loss.
A CLOSER LOOK AT
The Mortality and Expense Risk Charge
Peoples Benefit assumes mortality risk in two ways. First, where Contract
Owners elect an Annuity Payment Option under which Peoples Benefit
guarantees a number of payments over a life or joint lives, Peoples Benefit
assumes the risk of making monthly annuity payments regardless of how long
all Annuitants may live. Second, Peoples Benefit assumes mortality risk in
guaranteeing a minimum Death Benefit in the event the Annuitant dies during
the Accumulation Phase.
The expense risk that Peoples Benefit assumes is that the charges for
administrative expenses, which are guaranteed not to increase beyond the
rates shown for the life of the Contract, may not be great enough to cover
the actual costs of issuing and administering the Contract.
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Administrative Expense Charge
Peoples Benefit assesses each Contract an annual Administrative Expense Charge
to cover the cost of issuing and administering each Contract and of
maintaining the Separate Account. The Administrative Expense Charge is
assessed daily at a rate equal to 0.15% annually of the net asset value of the
Separate Account.
Annual Contract Maintenance Fee
Peoples Benefit charges an Annual Contract Maintenance Fee of $30. The fee is
to reimburse Peoples Benefit for the costs it expects over the life of the
Contract for maintaining each Contract and the Separate Account. The fee is
deducted proportionately from each of the Portfolios you have selected.
Peoples Benefit will deduct the Annual Contract Maintenance Fee on each
Contract Anniversary and upon surrender.
Exchange Fee
Each Contract Year you may make an unlimited number of free Exchanges between
Portfolios, provided that after an Exchange no Portfolio or General Account
Guaranteed Option (except the Dollar Cost Averaging Fixed Account Option) may
contain a balance of less than $250 or $1,000, respectively, except in cases
where Purchase Payments are made by monthly payroll deduction. We reserve the
right to charge a $15 fee in the future for Exchanges in excess of twelve per
Contract Year.
Portfolio Expenses
The value of the assets in the Separate Account will reflect the fees and
expenses paid by the Portfolios. A complete description of these expenses is
found in the "Fee Table" section of this prospectus and in each Fund's
prospectus and Statement of Additional Information.
6. TAXES
INTRODUCTION
The following discussion of annuity taxation is general in nature and is based
on Peoples Benefit's understanding of the treatment of annuity contracts under
current federal income tax law, particularly Section 72 of the Internal
Revenue Code and various Treasury Regulations and Internal Revenue Service
interpretations dealing with Section 72. The discussion does not touch upon
state or local taxes. It is not tax advice. You should consult with a
qualified tax adviser about your particular situation to ensure that your
purchase of a Contract results in the tax treatment you desire. Additional
discussion of tax matters is included in the Statement of Additional
Information.
TAXATION OF ANNUITIES IN GENERAL
Tax Deferral
Special rules in the Internal Revenue Code for annuity taxation exist today.
In general, those rules provide that you are not currently taxed on increases
in value under a Contract until you take some form of withdrawal or
distribution from it. However, it is important to note that, under certain
circumstances, you might not get the advantage of tax deferral, meaning that
the increase in value would be subject to current federal income tax. (See
ANNUITY CONTRACTS OWNED BY NON-NATURAL PERSONS, page 22, and DIVERSIFICATION
STANDARDS, page 23.)
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A CLOSER LOOK AT
Tax Deferral
Tax deferral means no current tax on earnings in your Contract. The amount
you would have paid in income taxes can be left in the Contract and earn
money for you.
One tradeoff of tax deferral is that there are certain restrictions on your
ability to access your money, including penalty taxes for early withdrawals.
This is one reason why a variable annuity is intended as a long-term
investment.
Another tradeoff is that, when funds are withdrawn, they are taxed at
ordinary income rates instead of capital gains rates, which apply to certain
other sorts of investments.
Taxation of Full and Partial Withdrawals
If you make a full or partial withdrawal (including a Systematic Withdrawal)
from a Non-Qualified Contract during the Accumulation Phase, you as Contract
Owner will be taxed at ordinary income rates on earnings you withdraw at that
time. For purposes of this rule, withdrawals are taken first from earnings on
the Contract and then from the money you invested in the Contract. This
"investment in the contract" can generally be described as the cost of the
Contract, and it generally includes all Purchase Payments minus any amounts
you have already received under the Contract that represented the return of
invested money. Also for purposes of this rule, a pledge or assignment of a
Contract is treated as a partial withdrawal from a Contract. (If you are
contemplating using your Contract as collateral for a loan, you may be asked
to pledge or assign it.)
Taxation of Annuity Payments
When you take Annuity Payments in the Income Phase of a Non-Qualified
Contract, for tax purposes each payment is deemed to return to you a portion
of your investment in the Contract. Since with a Non-Qualified Contract you
have already paid taxes on those amounts (the Contract was funded with after-
tax dollars), you will not be taxed again on your investment - only on your
earnings.
For fixed Annuity Payments from a Non-Qualified Contract, in general, Peoples
Benefit calculates the taxable portion of each payment using a formula known
as the "exclusion ratio." This formula establishes the ratio that the
investment in the Contract bears to the total expected amount of Annuity
Payments for the term of the Contract. Peoples Benefit then applies that ratio
to each payment to determine the non-taxable portion of the payment. The
remaining portion of each payment is taxable at ordinary income tax rates.
For variable Annuity Payments from a Non-Qualified Contract, in general,
Peoples Benefit calculates the taxable portion of each payment using a formula
that establishes a specific dollar amount of each payment that is not taxed.
To find the dollar amount, Peoples Benefit divides the investment in the
Contract by the total number of expected periodic payments. The remaining
portion of each payment is taxable at ordinary income tax rates.
Once your investment in the Contract has been returned, the balance of the
Annuity Payments represent earnings only and therefore are fully taxable.
Taxation of Withdrawals and Distributions From Qualified Contracts
Generally, the entire amount distributed from a Qualified Contract is taxable
to the Contract Owner. In the case of Qualified Contracts with after-tax
contributions, you may exclude the portion of each withdrawal or Annuity
Payment constituting a return of after-tax contributions. Once all of your
after-tax
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contributions have been returned to you on a non-taxable basis, subsequent
withdrawals or annuity payments are fully taxable as ordinary income. Since
Peoples Benefit has no knowledge of the amount of after-tax contributions you
have made, you will need to make this computation in the preparation of your
federal income tax return.
Tax Withholding
Federal tax law requires that Peoples Benefit withhold federal income taxes on
all distributions unless the recipient elects not to have any amounts withheld
and properly notifies Peoples Benefit of that election. In certain situations,
Peoples Benefit will withhold taxes on distributions to non-resident aliens at
a flat 30% rate unless an exemption from withholding applies under an
applicable tax treaty.
Penalty Taxes on Certain Early Withdrawals
The Internal Revenue Code provides for a penalty tax in connection with
certain withdrawals or distributions that are includible in income. The
penalty amount is 10% of the amount includible in income that is received
under an annuity. However, there are exceptions to the penalty tax. For
instance, it does not apply to withdrawals: (i) made after the taxpayer
reaches age 59 1/2; (ii) made on or after the death of the Contract Owner or,
where the Contract Owner is not an individual, on or after the death of the
primary Annuitant (who is defined as the individual the events in whose life
are of primary importance in affecting the timing and payment under the
Contracts); (iii) attributable to the disability of the taxpayer which
occurred after the purchase of the Contract (as defined in the Internal
Revenue Code); (iv) that are part of a series of substantially equal periodic
payments made at least annually for the life (or life expectancy) of the
taxpayer, or joint lives (or joint life expectancies) of the taxpayer and his
or her beneficiary; (v) from a Qualified Contract (note, however, that other
penalties may apply); (vi) under an immediate annuity contract (as defined in
the Internal Revenue Code); (vii) that can be traced to an investment in the
Contract prior to August 14, 1982; or (viii) under a Contract that an employer
purchases on termination of certain types of qualified plans and that the
employer holds until the employee separates from service.
If the penalty tax does not apply to a withdrawal as a result of the
application of item (iv) above, and the series of payments is subsequently
modified (for some reason other than death or disability), the tax for the
year in which the modification occurs will be increased by an amount (as
determined under Treasury Regulations) equal to the penalty tax that would
have been imposed but for item (iv) above, plus interest for the deferral
period. The foregoing rule applies if the modification takes place (a) before
the close of the period that is five years from the date of the first payment
and after the taxpayer attains age 59 1/2, or (b) before the taxpayer reaches
age 59 1/2.
For Qualified Contracts, other tax penalties may apply to certain
distributions as well as to certain contributions and other transactions.
The penalty tax may not apply to distributions from Qualified Contracts issued
under Section 408(b) or 408A of the Internal Revenue Code that you use to pay
qualified higher education expenses or the acquisition costs (up to $10,000)
involved in the purchase of a principal residence by a first-time homebuyer.
ANNUITY CONTRACTS OWNED BY NON-NATURAL PERSONS
Where a non-natural person (for example, a corporation) holds a Contract, that
Contract is generally not treated as an annuity contract for federal income
tax purposes, and the income on that Contract (generally the increase in the
net Accumulated Value less the payments) is considered taxable income each
year. This rule does not apply where the non-natural person is only a nominal
owner such as a trust or other entity acting as an agent for a natural person.
The rule also does not apply where the
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estate of a decedent acquires a Contract, where an employer purchases a
Contract on behalf of an employee upon termination of a qualified plan, or to
an immediate annuity (as defined in the Internal Revenue Code).
MULTIPLE-CONTRACTS RULE
All non-qualified annuity contracts issued by the same company (or affiliate)
to the same Contract Owner during any calendar year are to be aggregated and
treated as one contract for purposes of determining the amount includible in
the taxpayer's gross income. Thus, any amount received under any Contract
prior to the Contract's Annuity Date, such as a partial withdrawal, will be
taxable (and possibly subject to the 10% federal penalty tax) to the extent of
the combined income in all such contracts. The Treasury Department has
specific authority to issue regulations that prevent the avoidance of the
multiple-contracts rules through the serial purchase of annuity contracts or
otherwise. In addition, there may be other situations in which the Treasury
Department may conclude that it would be appropriate to aggregate two or more
Contracts purchased by the same Contract Owner. Accordingly, a Contract Owner
should consult a tax adviser before purchasing more than one Contract or other
annuity contracts. (The aggregation rules do not apply to immediate annuities
(as defined in the Internal Revenue Code).)
TRANSFERS OF ANNUITY CONTRACTS
Any transfer of a Non-Qualified Contract during the Accumulation Phase for
less than full and adequate consideration will generally trigger income tax
(and possibly the 10% federal penalty tax) on the gain in the Contract to the
Contract Owner at the time of such transfer. The transferee's investment in
the Contract will be increased by any amount included in the Contract Owner's
income. This provision, however, does not apply to transfers between spouses
or former spouses incident to a divorce that are governed by Internal Revenue
Code Section 1041(a).
ASSIGNMENTS OF ANNUITY CONTRACTS
A transfer of ownership in a Contract, a collateral assignment, or the
designation of an Annuitant or other beneficiary who is not also the Contract
Owner may result in tax consequences to the Contract Owner, Annuitant, or
beneficiary that this prospectus does not discuss. A Contract Owner
considering such a transfer or assignment of a Contract should contact a tax
adviser about the potential tax effects of such a transaction.
DIVERSIFICATION STANDARDS
To comply with certain regulations under Internal Revenue Code Section 817(h),
after a start-up period, each Subaccount of the Separate Account will be
required to diversify its investments in accordance with certain
diversification standards. A "look-through" rule applies that suggests that
each Subaccount of the Separate Account will be tested for compliance with the
diversification standards by looking through to the assets of the Portfolios
in which each Subaccount invests.
In connection with the issuance of temporary diversification regulations in
1986, the Treasury Department announced that such regulations did not provide
guidance on the extent to which Contract Owners may direct their investments
to particular subaccounts of a separate account. It is possible that
regulations or revenue rulings may be issued in this area at some time in the
future. It is not clear, at this time, what these regulations or rulings would
provide. It is possible that when the regulations or rulings are issued, the
Contract may need to be modified in order to remain in compliance. For these
reasons, Peoples Benefit reserves the right to modify the Contract, as
necessary, to maintain the tax-deferred status of the Contract.
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We intend to comply with the diversification regulations to assure that the
Contract continues to be treated as an annuity contract for federal income tax
purposes.
QUALIFIED INDIVIDUAL RETIREMENT ANNUITIES
Qualified Contracts contain special provisions and are subject to limitations
on contributions and the timing of when distributions can and must be made.
Tax penalties may apply to contributions greater than specified limits, loans,
reassignments, distributions that do not meet specified requirements, or in
other circumstances. Anyone desiring to purchase a Qualified Contract should
consult a personal tax adviser.
403(b) Contracts
Peoples Benefit will offer Contracts in connection with retirement plans
adopted by public school systems and certain tax-exempt organizations for
their employees under Section 403(b) of the Internal Revenue Code. More
detailed information on 403(b) Contracts may be found in the Statement of
Additional Information.
7. ACCESS TO YOUR MONEY
The value of your Contract can be accessed during the Accumulation Phase -
. by making a full or partial withdrawal
. by electing an Annuity Payment Option
. by your Beneficiary in the form of a Death Benefit
Full and Partial Withdrawals
You may withdraw all or part of your money at any time during the Accumulation
Phase of your Contract. All partial withdrawals must be for at least $500.
On the date Peoples Benefit receives your request for a full withdrawal, the
amount payable is the Surrender Value, which equals the Accumulated Value,
adjusted for any Market Value Adjustment for amounts allocated to the Multi-
Year Guaranteed Rate Option, less any early withdrawal charges for amounts
allocated to the One-Year Guaranteed Rate Option, less any amount allocated to
the Guaranteed Equity Option, less any applicable surrender charge and any
applicable Premium Taxes incurred but not yet deducted.
You may not make any full or partial withdrawals from the Guaranteed Equity
Option before the end of the guarantee period. Partial withdrawals from the
Dollar Cost Averaging Fixed Account Option are made on a first-in, first-out
basis, so that amounts put into the Dollar Cost Averaging Fixed Account Option
first will be withdrawn first. However, for tax purposes, withdrawals are
taken first from earnings on the Contract and them from the money you invested
in the Contract. See Taxation of Full and Partial Withdrawals, page 21.
To make a withdrawal, send your written request on the appropriate Peoples
Benefit form to our Administrative Offices.
Because you assume the investment risk for amounts allocated to the
Portfolios under the Contract, the total amount paid upon a full withdrawal
of the Contract may be more or less than the total Purchase Payments made
(taking prior withdrawals and Surrender Charges into account).
Systematic Withdrawal Option
You may elect to have a specified dollar amount provided to you from your
Contract's Accumulated Value on a monthly, quarterly, semiannual, or annual
basis. The minimum amount for each Systematic Withdrawal is $100.
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You may elect this option by completing a Systematic Withdrawal Request Form.
Peoples Benefit must receive your Form at least 30 days before the date you
want systematic withdrawals to begin. Peoples Benefit will process each
Systematic Withdrawal on the date and at the frequency you specified in your
Systematic Withdrawal Program Application Form. The start date for systematic
withdrawals must be between the first and the twenty-eighth day of the month.
You may discontinue the Systematic Withdrawal Option at any time by notifying
us in writing at least 30 days prior to your next scheduled withdrawal date.
We reserve the right to discontinue offering this option upon 30 days' notice,
and we also reserve the right to charge a fee for the option.
Note that the Systematic Withdrawal Option may trigger a surrender charge. See
Surrender Charge Schedule, page 19.
Minimum Balance Requirements
The minimum required balance in any Portfolio is $250, except where Purchase
Payments are made by monthly payroll deduction. The minimum required balance
in any General Account Guaranteed Option, except the Dollar Cost Averaging
Fixed Account Option, is $1,000. If an exchange or withdrawal would reduce the
balance in a Portfolio to less than $250 (or $1,000 in the case of a General
Account Guaranteed Option other than the Dollar Cost Averaging Fixed Account
Option), Peoples Benefit will transfer the remaining balance to the remaining
Portfolios under the Contract on a pro rata basis. If the entire value of the
Contract falls below $1,000, and if you have not made a Purchase Payment
within three years, Peoples Benefit may notify you that the Accumulated Value
of your Contract is below the minimum balance requirement. In that case, you
will be given 60 days to make an Additional Purchase Payment before your
Contract is liquidated. Peoples Benefit would then promptly pay proceeds to
the Contract Owner. The proceeds would be taxed as a withdrawal from the
Contract. Full withdrawal will result in an automatic termination of the
Contract. We will not exercise this right to cancel your Contract if it is a
Qualified Contract.
Payment of Full or Partial Withdrawal Proceeds
Peoples Benefit will pay cash withdrawals within seven days after receipt of
your written request for withdrawal except in one of the following situations,
in which Peoples Benefit may delay the payment beyond seven days:
. the New York Stock Exchange is closed on a day that is not a weekend or a
holiday, or trading on the New York Stock Exchange is otherwise restricted
. an emergency exists as defined by the Securities and Exchange Commission
(the "SEC"), or the SEC requires that trading be restricted
. the SEC permits a delay for your protection as a Contract Owner
. the payment is derived from premiums paid by check, in which case Peoples
Benefit may delay payment until the check has cleared your bank
Taxation of Withdrawals
For important information on the tax consequences of withdrawals, see
Taxation of Full and Partial Withdrawals, page 21, and Penalty Taxes on
Certain Early Withdrawals, page 22.
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Tax Withholding on Withdrawals
If you do not provide Peoples Benefit with a written request not to have
federal income taxes withheld when you request a full or partial withdrawal,
federal tax law requires Peoples Benefit to withhold federal income taxes from
the taxable portion of any withdrawal and send that amount to the federal
government.
8. PERFORMANCE
PERFORMANCE MEASURES
Performance for the Subaccounts of the Separate Account, including the yield
and effective yield of the Fidelity VIP Money Market Subaccount, the yield of
the other Subaccounts, and the total return of all Subaccounts may appear in
reports and promotional literature to current or prospective Contract Owners.
Please refer to the discussion below and to the Statement of Additional
Information for a more detailed description of the method used to calculate a
Portfolio's yield and total return, and a list of the indexes and other
benchmarks used in evaluating a Portfolio's performance.
Standardized Average Annual Total Return
When advertising performance of the Subaccounts, Peoples Benefit will show the
Standardized Average Annual Total Return for a Subaccount which, as prescribed
by the rules of the SEC, is the effective annual compounded rate of return
that would have produced the cash redemption value over the stated period had
the performance remained constant throughout. The Standardized Average Annual
Total Return assumes a single $1,000 payment made at the beginning of the
period and full redemption at the end of the period. It reflects the deduction
of all applicable sales loads (including the contingent deferred sales load),
the Annual Contract Fee and all other Portfolio, Separate Account and Contract
level charges except Premium Taxes, if any.
ADDITIONAL PERFORMANCE MEASURES
Non-Standardized Cumulative Total Return and Non-Standardized Average Annual
Total Return
Peoples Benefit may show Non-Standardized Cumulative Total Return (i.e., the
percentage change in the value of an Accumulation Unit) for one or more
Subaccounts with respect to one or more periods. Peoples Benefit may also show
Non-Standardized Average Annual Total Return (i.e., the average annual change
in Accumulation Unit Values) with respect to one or more periods. For one
year, the Non-Standardized Cumulative Total Return and the Non-Standardized
Average Annual Total Return are effective annual rates of return and are
equal. For periods greater than one year, the Non-Standardized Average Annual
Total Return is the effective annual compounded rate of return for the periods
stated. Because the value of an Accumulation Unit reflects the Separate
Account and Portfolio expenses (see "Fee Table"), the Non-Standardized
Cumulative Total Return and Non-Standardized Average Annual Total Return also
reflect these expenses. These returns do not reflect the Annual Contract Fee,
any sales loads or Premium Taxes (if any), which, if included, would reduce
the percentages reported.
Non-Standardized Total Return Year-To-Date
Peoples Benefit may show Non-Standardized Total Return Year-to-Date as of a
particular date, or simply Total Return YTD, for one or more subaccounts with
respect to one or more non-standardized base periods commencing at the
beginning of a calendar year. Total Return YTD figures reflect the
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percentage change in actual Accumulation Unit Values during the relevant
period. These returns reflect a deduction for the Separate Account and
Portfolio expenses, but do not include the Annual Contract Fee, any sales
loads or Premium Taxes (if any), which, if included, would reduce the
percentages reported by Peoples Benefit.
Non-Standardized One Year Return
Peoples Benefit may show Non-Standardized One Year Return for one or more
Subaccounts with respect to one or more non-standardized base periods
commencing at the beginning of a calendar year (or date of Portfolio
inception, if during the relevant year) and ending at the end of such calendar
year. One Year Return figures reflect the historical performance of the
Portfolios as if the Contract were in existence before its inception date
(which it was not). After the Contract's inception date, the figures reflect
the percentage change in actual Accumulation Unit Values during the relevant
period. These returns reflect a deduction for the Separate Account and
Portfolio expenses, but do not include the Annual Contract Fee, any sales
loads or Premium Taxes (if any), which, if included, would reduce the
percentage reported by Peoples Benefit.
Non-Standardized Adjusted Historical Cumulative Return and Non-Standardized
Adjusted Historical Average Annual Total Return
Peoples Benefit may show Non-Standardized Adjusted Historical Cumulative
Return and Non-Standardized Adjusted Historical Average Annual Total Return,
calculated on the basis of the historical performance of the Portfolios, and
may assume the Contract was in existence prior to its inception date (which it
was not). After the Contract's inception date, the calculations will reflect
actual Accumulation Unit Values. These returns are based on specified premium
patterns which produce the resulting Accumulated Values. These returns reflect
a deduction for the Separate Account expenses and Portfolio expenses. These
returns do not include the Annual Contract Fee, any sales loads or Premium
Taxes (if any) which, if included, would reduce the percentages reported.
The Non-Standardized Adjusted Historical Cumulative Return for a Subaccount is
the effective annual rate of return that would have produced the ending
Accumulated Value of the stated one-year period.
The Non-Standardized Adjusted Historical Average Annual Total Return for a
Subaccount is the effective annual compounded rate of return that would have
produced the ending Accumulated Value over the stated period had the
performance remained constant throughout.
YIELD AND EFFECTIVE YIELD
Peoples Benefit may also show yield and effective yield figures for the
Subaccount investing in shares of the Fidelity VIP Money Market Portfolio.
"Yield" refers to the income generated by an investment in Fidelity VIP Money
Market over a seven-day period, which is then "annualized." That is, the
amount of income generated by the investment during that week is assumed to be
generated each week 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 in Fidelity VIP Money Market is
assumed to be reinvested. Therefore, the effective yield will be slightly
higher than the yield because of the compounding effect of this assumed
reinvestment. These figures do not reflect the Annual Contract Fee, any sales
loads or Premium Taxes (if any) which, if included, would reduce the yields
reported.
From time to time a Portfolio of a Fund may advertise its yield and total
return investment performance. For each Subaccount other than Fidelity VIP
Money Market for which Peoples Benefit advertises yield, Peoples Benefit shall
furnish a yield quotation referring to the Portfolio computed in the following
manner: the net investment income per Accumulation Unit earned during a recent
one month period divided by the Accumulation Unit Value on the last day of the
period.
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Please refer to the Statement of Additional Information for a description of
the method used to calculate a Portfolio's yield and total return, and a list
of the indexes and other benchmarks used in evaluating a Portfolio's
performance.
The performance measures discussed above reflect results of the Portfolios and
are not intended to indicate or predict future performance. For more detailed
information, see the Statement of Additional Information.
Performance information for the Subaccounts may be contrasted with other
comparable variable annuity separate accounts or other investment products
surveyed by Lipper Analytical Services, a nationally recognized independent
reporting service that ranks mutual funds and other investment companies by
overall performance, investment objectives, and assets. Performance may also
be tracked by other ratings services, companies, publications, or persons who
rank separate accounts or other investment products on overall performance or
other criteria. Performance figures will be calculated in accordance with
standardized methods established by each reporting service.
9. DEATH BENEFIT
In General
If the Annuitant dies during the Accumulation Phase, the Beneficiary will
receive the Death Benefit. The Death Benefit is the greater of the then-
current Accumulated Value of the Contract (plus any positive Market Value
Adjustment applicable under the Multi-Year Guaranteed Rate Option) or the
Adjusted Death Benefit. During the first six Contract Years, the Adjusted
Death Benefit is the sum of all Net Purchase Payments minus any partial
withdrawals. During each following six-year period, the Adjusted Death Benefit
is the Death Benefit on the last day of the previous six-year period plus any
Net Purchase Payments made during that six-year period minus any partial
withdrawals taken during that six-year period. After the Annuitant reaches age
75, the Adjusted Death Benefit remains equal to the Death Benefit on the last
day of the six-year period before the Annuitant reaches age 75 plus any Net
Purchase Payments subsequently made minus any partial withdrawals subsequently
taken. The Beneficiary may elect to receive these amounts as a lump sum or as
Annuity Payments.
Federal tax law requires that if a Contract Owner is a natural person and dies
before the Annuity Date, then the entire value of the Contract must be
distributed within five years of the date of death of the Contract Owner. If
the Contract Owner is not a natural person, the death of the primary Annuitant
triggers the same distribution requirement. Special rules may apply to a
surviving spouse.
Death of the Annuitant During the Accumulation Phase
If the Annuitant dies during the Accumulation Phase, the Beneficiary will be
entitled to the Death Benefit. When it receives Due Proof of Death of the
Annuitant, Peoples Benefit will calculate the Death Benefit. The Beneficiary
can choose to receive the amount payable in a lump-sum cash benefit or under
one of the Annuity Payment Options. The Contract Owner can choose an Annuity
Payment Option for the Beneficiary before the Annuitant's death. However, if
the Contract Owner does not make such a choice and Peoples Benefit has not
already paid a cash benefit, the Beneficiary may choose a payment option after
the Annuitant's death.
Paid as a lump sum, the Death Benefit is the greater of:
(1) the Accumulated Value (plus any positive Market Value Adjustment
applicable under the Multi-Year Guaranteed Rate Option) on the date we
receive Due Proof of Death; or
(2) the Adjusted Death Benefit.
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Paid under one of the Annuity Payment Options, the Death Benefit will be based
on the greater of:
(1) the Accumulated Value (plus any positive Market Value Adjustment
applicable under the Multi-Year Guaranteed Rate Option) on the Annuity
Date elected by the Beneficiary and approved by Peoples Benefit or
(2) the Adjusted Death Benefit.
The amount of the Adjusted Death Benefit is calculated as follows. During the
first six Contract Years, the Adjusted Death Benefit is the sum of all Net
Purchase Payments minus any partial withdrawals. During each following six-
year period, the Adjusted Death Benefit is the Death Benefit on the last day
of the previous six-year period plus any Net Purchase Payments made during
that six-year period minus any partial withdrawals taken during that six-year
period. After the Annuitant reaches age 75, the Adjusted Death Benefit remains
equal to the Death Benefit on the last day of the six-year period before the
Annuitant reaches age 75 plus any Net Purchase Payments subsequently made
minus any partial withdrawals subsequently taken.
DEFINITION
Due Proof of Death
When the term "Due Proof of Death" is used in this prospectus we mean any of
the following:
. a certified death certificate
. a certified decree of a court of competent jurisdiction as to the finding
of death
. a written statement by a medical doctor who attended the deceased
. any other proof satisfactory to Peoples Benefit
Death of the Annuitant During the Income Phase
The Death Benefit, if any, payable if the Annuitant dies during the Income
Phase depends on the Annuity Payment Option selected. Upon the Annuitant's
death, Peoples Benefit will pay the Death Benefit, if any, to the Beneficiary
under the Annuity Payment Option in effect. For instance, if the Life Annuity
With Period Certain option has been elected, and if the Annuitant dies during
the Income Phase, then any unpaid payments certain will be paid to the
Beneficiary.
A Word About Joint Annuitants
The Contract permits you as Contract Owner to name a Joint Annuitant. This
can have different effects depending on whether the Contract is in the
Accumulation Phase or the Income Phase.
During the Accumulation Phase, the Death Benefit is payable only after the
death of both the Annuitant and the Joint Annuitant.
During the Income Phase, it will not matter that you have named a Joint
Annuitant unless you have chosen an Annuity Payment Option, such as the
Joint and Last Survivor Annuity option, that pays over the life of more than
one person. Therefore, if you have chosen an Annuity Payment Option that
provides income over the life of someone other than the person named as
Joint Annuitant, the Joint Annuitant's death during the Income Phase will
have no effect on the benefits due under the Contract.
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Designation of a Beneficiary
The Contract Owner may select one or more Beneficiaries and name them in the
customer order form. Thereafter, while the Annuitant or Joint Annuitant is
living, the Contract Owner may change the Beneficiary by written notice. The
change will take effect as of the date the Contract Owner signs the notice,
but it will not affect any payment made or any other action taken before
Peoples Benefit acknowledges the notice. The Contract Owner may also make the
designation of Beneficiary irrevocable by sending written notice to Peoples
Benefit and obtaining approval from Peoples Benefit. Changes in the
Beneficiary may then be made only with the consent of the designated
irrevocable Beneficiary.
If the Annuitant dies during the Accumulation Period, the following will apply
unless the Contract Owner has made other provisions:
. If there is more than one Beneficiary, each will share in the Death Benefit
equally.
. If one or two or more Beneficiaries have already died, Peoples Benefit will
pay that share of the Death Benefit equally to the survivor(s).
. If no Beneficiary is living, Peoples Benefit will pay the proceeds to the
Contract Owner.
. If a Beneficiary dies at the same time as the Annuitant, Peoples Benefit
will pay the proceeds as though the Beneficiary had died first. If a
Beneficiary dies within 15 days after the Annuitant's death and before
Peoples Benefit receives due proof of the Annuitant's death, Peoples
Benefit will pay proceeds as though the Beneficiary had died first.
If a Beneficiary who is receiving Annuity Payments dies, Peoples Benefit will
pay any remaining Payments Certain to that Beneficiary's named
Beneficiary(ies) when due. If no Beneficiary survives the Annuitant, the right
to any amount payable will pass to the Contract Owner. If the Contract Owner
is not living at this time, this right will pass to his or her estate.
Death of the Contract Owner
Death of the Contract Owner During the Accumulation Phase. With two
exceptions, federal tax law requires that when either the Contract Owner or
the Joint Owner (if any) dies during the Accumulation Phase, Peoples Benefit
must pay out the entire value of the Contract within five years of the date of
death. First exception: If the entire value is to be distributed to the
Owner's Designated Beneficiary, he or she may elect to have it paid under an
Annuity Payment Option over his or her life or over a period certain no longer
than his or her life expectancy as long as the payments begin within one year
of the Contract Owner's death. Second exception: If the Owner's Designated
Beneficiary is the spouse of the Contract Owner (or Joint Owner), the spouse
may elect to continue the Contract in his or her name as Contract Owner
indefinitely and to continue deferring tax on the accrued and future income
under the Contract. ("Owner's Designated Beneficiary" means the natural person
whom the Contract Owner names as a beneficiary and who becomes the Contract
Owner upon the Contract Owner's death.) If the Contract Owner and the
Annuitant are the same person, then upon that person's death the Beneficiary
is entitled to the Death Benefit. In this regard, see Death of the Annuitant
During the Accumulation Phase, page 29.
Death of the Contract Owner During the Income Phase. Federal tax law requires
that when either the Contract Owner or the Joint Owner (if any) dies during
the Income Phase, Peoples Benefit must pay the remaining portions of the value
of the Contract at least as rapidly as under the method of distribution being
used on the date of death.
Non-Natural Person as Contract Owner. Where the Contract Owner is not a
natural person (for example, is a corporation), the death of the "primary
Annuitant" is treated as the death of the Contract
30
<PAGE>
Owner for purposes of federal tax law. (The Internal Revenue Code defines a
"primary Annuitant" as the individual who is of primary importance in
affecting the timing or the amount of payout under the Contract.) In addition,
where the Contract Owner is not a natural person, a change in the identity of
the "primary Annuitant" is also treated as the death of the Contract Owner for
purposes of federal tax law.
Payment of Lump-Sum Death Benefits
Peoples Benefit will pay lump-sum Death Benefits within seven days after the
election to take a lump sum becomes effective except in one of the following
situations, in which Peoples Benefit may delay the payment beyond seven days:
. the New York Stock Exchange is closed on a day that is not a weekend or a
holiday, or trading on the New York Stock Exchange is otherwise restricted
. an emergency exists as defined by the SEC, or the SEC requires that trading
be restricted
. the SEC permits a delay for your protection as a Contract Owner
. the payment is derived from premiums paid by check, in which case Peoples
Benefit may delay payment until the check has cleared your bank.
10. OTHER INFORMATION
Peoples Benefit Life Insurance Company ("Peoples Benefit," "We," "Us," "Our")
Peoples Benefit Life Insurance Company is a stock life insurance company
incorporated under the laws of the state of Missouri on August 6, 1920, with
Administrative Offices at 4333 Edgewood Road, N.E., Cedar Rapids, Iowa 52499.
It is principally engaged in offering life insurance and annuity contracts,
and is licensed in 49 states, the District of Columbia, and Puerto Rico.
As of December 31, 1998, Peoples Benefit had statutory-basis assets of
approximately $12.6 billion. It is a wholly owned indirect subsidiary of AEGON
USA, Inc., which conducts substantially all of its operations through
subsidiary companies engaged in the insurance business or in providing non-
insurance financial services. AEGON N.V. of The Netherlands indirectly owns
all of the stock of AEGON USA, Inc. AEGON N.V., a holding company, conducts
its business through subsidiary companies engaged primarily in the insurance
business.
Peoples Benefit is a charter member of the Insurance Marketplace Standards
Association ("IMSA"). IMSA is an independent, voluntary organization of life
insurance companies. It promotes high ethical standards in the sales,
advertising, and servicing of individual life insurance and annuity products.
Member companies must undergo a rigorous self- and independent assessment of
their practices to become a member of IMSA. The IMSA logo in our sales
literature shows our ongoing commitment to these standards.
Peoples Benefit Life Insurance Company Separate Account V
Peoples Benefit established the Separate Account as a separate account under
the laws of the state of Missouri on February 14, 1992.
The Separate Account is a unit investment trust registered with the SEC under
the 1940 Act. Such registration does not signify that the SEC supervises the
management or the investment practices or policies of the Separate Account.
Peoples Benefit owns the assets of the Separate Account, and the obligations
under the Contract are obligations of Peoples Benefit. These assets are held
separately from the other assets of Peoples
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Benefit and are not chargeable with liabilities incurred in any other business
operation of Peoples Benefit (except to the extent that assets in the Separate
Account exceed the reserves and other liabilities of the Separate Account).
Peoples Benefit will always keep assets in the Separate Account with a value
at least equal to the total Accumulated Value under the Contracts. Income,
gains, and losses incurred on the assets in the Separate Account, whether or
not realized, are credited to or charged against the Separate Account without
regard to other income, gains, or losses of Peoples Benefit. Therefore, the
investment performance of the Separate Account is entirely independent of the
investment performance of Peoples Benefit's general account assets or any
other separate account Peoples Benefit maintains.
The Separate Account has twelve Subaccounts dedicated to the Contract, each of
which invests solely in a corresponding Portfolio of the Funds. Additional
Subaccounts may be established at Peoples Benefit's discretion. The Separate
Account meets the definition of a "separate account" under Rule O-1(e)(1) of
the 1940 Act.
Contract Owner ("You," "Your")
The Contract Owner is the person or persons designated as the Contract Owner
in the customer order form to participate in the Contract. The term shall also
include any person named as Joint Owner. A Joint Owner shares ownership in all
respects with the Owner. The Owner has the right to assign ownership to a
person or party other than himself.
Payee
The Payee is the Contract Owner, Annuitant, Beneficiary, or any other person,
estate, or legal entity to whom benefits are to be paid.
Right to Cancel Period
The period during which the Contract Owner may cancel the Contract can be
canceled and treated as void from the Contract Date. The period ranges in
length from 10 to 30 days (or more in some cases), as specified in your
Contract.
Voting Rights
The Funds do not hold regular meetings of shareholders. The directors/trustees
of the Funds may call special meetings of shareholders as the 1940 Act or
other applicable law may require. To the extent required by law, Peoples
Benefit will vote the Portfolio shares held in the Separate Account at
shareholder meetings of the Funds in accordance with instructions received
from persons having voting interests in the corresponding Portfolio. Peoples
Benefit will vote Fund shares as to which no timely instructions are received
and those shares held by Peoples Benefit as to which Contract Owners have no
beneficial interest in proportion to the voting instructions that are received
with respect to all Contracts participating in that Portfolio. Voting
instructions to abstain on any item to be voted upon will be applied on a pro
rata basis to reduce the votes eligible to be cast.
Prior to the Annuity Date, the Contract Owner holds a voting interest in each
Portfolio to which the Accumulated Value is allocated. The number of votes
which are available to a Contract Owner will be determined by dividing the
Accumulated Value attributable to a Portfolio by the net asset value per share
of the applicable Portfolio. After the Annuity Date, the person receiving
Annuity Payments under any variable Annuity Payment Option has the voting
interest. The number of votes after the Annuity Date will be determined by
dividing the reserve for such Contract allocated to the Portfolio by the net
asset value per share of the corresponding Portfolio. After the Annuity Date,
the votes attributable to a Contract decrease as the reserves allocated to the
Portfolio decrease. In determining the number of votes, fractional shares will
be recognized.
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The number of votes of the Portfolio that are available will be determined as
of the date established by that Portfolio for determining shareholders
eligible to vote at the meeting of the Fund. Voting instructions will be
solicited by written communication prior to such meeting in accordance with
procedures established by the Fund.
Additions, deletions, or substitutions of investments
Peoples Benefit retains the right, subject to any applicable law, to make
certain changes. Peoples Benefit reserves the right to eliminate the shares of
any of the Portfolios and to substitute shares of another Portfolio of the
Funds or of another registered open-end management investment company, if the
shares of the Portfolios are no longer available for investment or if, in
Peoples Benefit's judgment, investment in any Portfolio would be inappropriate
in view of the purposes of the Separate Account. To the extent the 1940 Act
requires, substitutions of shares attributable to a Contract Owner's interest
in a Portfolio will not be made until SEC approval has been obtained and the
Contract Owner has been notified of the change.
Peoples Benefit may establish new Portfolios when marketing, tax, investment,
or other conditions so warrant. Peoples Benefit will make any new Portfolios
available to existing Contract Owners on a basis Peoples Benefit will
determine. Peoples Benefit may also eliminate one or more Portfolios if
marketing, tax, investment, or other conditions so warrant.
In the event of any such substitution or change, Peoples Benefit may, by
appropriate endorsement, make whatever changes in the Contracts may be
necessary or appropriate to reflect such substitution or change. Furthermore,
if deemed to be in the best interests of persons having voting rights under
the Contracts, Peoples Benefit may operate the Separate Account as a
management company under the 1940 Act or any other form permitted by law, may
deregister the Separate Account under the 1940 Act in the event such
registration is no longer required, or may combine the Separate Account with
one or more other separate accounts.
Year 2000 Readiness Disclosure
In March 1997, Peoples Benefit adopted and presently has in place a Year 2000
Project Plan (the "Plan") to review and analyze existing hardware and software
systems, as well as voice and data communications systems, to determine if
they are Year 2000 compliant. As of March 1, 1999, substantially all of
Peoples Benefit's mission-critical systems are Year 2000 compliant. The Year
2000 Project Plan remains on track as Peoples Benefit continues with the
validation of its mission-critical and non-mission-critical systems, including
revalidation testing in 1999. In addition, Peoples Benefit has undertaken
aggressive initiatives to test all systems that interface with any third
parties and other business partners. All of these steps are aimed at allowing
current operations to remain unaffected by the year 2000 date change.
As of the date of this prospectus, Peoples Benefit has identified and made
available what it believes are the appropriate resources of hardware, people,
and dollars, including the engagement of outside third parties, to ensure that
the Plan will be completed.
The actions taken by management under the Plan are intended to significantly
reduce Peoples Benefit's risk of a material business interruption based on the
Year 2000 issues. It should be noted that the Year 2000 computer problem, and
its resolution, is complex and multifaceted, and any company's success cannot
be conclusively known until the Year 2000 is reached. In spite of its efforts
or results, Peoples Benefit's ability to function unaffected to and through
the Year 2000 may be adversely affected by actions, or failure to act, of
third parties beyond our knowledge or control.
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This statement is a Year 2000 Readiness Disclosure pursuant to Section 3(9) of
the Year 2000 Information and Readiness Disclosure Act, 15 U.S.C. Section 1
(1998).
Financial Statements
The audited statutory-basis financial statements of Peoples Benefit and the
audited financial statements of certain subaccounts of the Separate Account
which are available for investment by Peoples Benefit Marquee Contract Owners
(as well as the Independent Auditors' Reports on them) are contained in the
Statement of Additional Information.
Auditors
Ernst & Young LLP serves as independent auditors for Peoples Benefit and
certain subaccounts of the Separate Account which are available for investment
by Peoples Benefit Marquee Contract Owners and audits their financial
statements annually.
Legal Matters
The law firm of Jorden Burt Boros Cicchetti Berenson & Johnson LLP, of
Washington, D.C., has provided legal advice concerning the issue and sale of
the Contract under the applicable federal securities laws. On behalf of
Peoples Benefit, Gregory E. Miller-Breetz, Esquire, has passed upon all
matters of Missouri law pertaining to the validity of the Contract and Peoples
Benefit's right to issue the Contract.
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TABLE OF CONTENTS FOR THE PEOPLES BENEFIT MARQUEE VARIABLE ANNUITY
STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
Page
----
<S> <C>
THE CONTRACT.............................................................. 1
Computation of Variable Annuity Income Payments......................... 1
Exchanges............................................................... 1
Exceptions to Charges and to Transactions or Balance Requirements....... 2
403(b) Contracts........................................................ 2
GENERAL MATTERS........................................................... 4
Non-Participating....................................................... 4
Misstatement of Age or Sex.............................................. 4
Assignment.............................................................. 4
Annuity Data............................................................ 4
Annual Statement........................................................ 4
Incontestability........................................................ 4
Ownership............................................................... 5
PERFORMANCE INFORMATION................................................... 5
Money Market Subaccount Yields.......................................... 5
30-Day Yield for Non-Money Market Subaccounts........................... 6
Standardized Average Annual Total Return for Subaccounts................ 6
ADDITIONAL PERFORMANCE MEASURES........................................... 7
Non-Standardized Cumulative Total Return and Non-Standardized Average
Annual Total Return.................................................... 7
Non-Standardized Total Return Year-to-Date.............................. 8
Non-Standardized One Year Return........................................ 9
Non-Standardized Adjusted Historical Cumulative Return and Non-
Standardized Adjusted Historical Average Annual Total Return........... 10
Individualized Computer Generated Illustrations......................... 16
PERFORMANCE COMPARISONS................................................... 16
SAFEKEEPING OF ACCOUNT ASSETS............................................. 18
CONFLICTS OF INTEREST WITH OTHER SEPARATE ACCOUNTS........................ 18
PEOPLES BENEFIT........................................................... 19
TAXES..................................................................... 19
STATE REGULATION OF PEOPLES BENEFIT....................................... 19
RECORDS AND REPORTS....................................................... 20
DISTRIBUTION OF THE CONTRACTS............................................. 20
LEGAL PROCEEDINGS......................................................... 20
OTHER INFORMATION......................................................... 20
FINANCIAL STATEMENTS...................................................... 20
</TABLE>
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APPENDIX A
CONDENSED FINANCIAL INFORMATION
(For the period January 1, 1994 through December 31, 1998)
<TABLE>
<CAPTION>
Fidelity VIP Fidelity VIP Fidelity VIP II DVIF:
Money Equity- Asset Fidelity VIP Growth and DVIF:
Market Income Manager Growth Income Quality Bond
------------ ------------- --------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Accumulation unit value
as of:
Start Date*............ 10.041 10.000 10.000 10.000 10.000 10.000
12/31/94............... 10.144 9.677 9.604 10.159 9.472 9.910
12/31/95............... 10.592 12.892 11.076 13.562 14.977 11.769
12/31/96............... 11.010 14.527 12.516 15.338 17.831 11.966
12/31/97............... 11.452 18.351 14.891 18.676 20.434 12.911
12/31/98............... 11.912 20.201 16.895 25.690 22.531 13.431
Number of units
outstanding as of
12/31/94............... 81,408 14,705 45,464 21,033 9,468 7,987
12/31/95............... 1,284,076 487,004 298,894 522,172 302,521 167,901
12/31/96............... 1,548,218 1,184,506 518,430 1,253,800 909,709 450,012
12/31/97............... 1,015,530 1,437,452 598,055 1,454,049 1,093,082 494,239
12/31/98............... 1,125,652 1,338,847 556,486 1,278,743 966,939 633,413
<CAPTION>
OCC
OCC OCC Accumulation
TRP TRP TRP Accumulation Accumulation Trust
Equity International New America Trust Trust U.S. Gov't
Income Stock Growth Managed Small Cap Income
------------ ------------- --------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Accumulation unit value
as of:
Start Date*............ 10.000 10.000 10.000 10.000 10.000 10.000
12/31/94............... 9.797 9.518 10.000 9.699 10.166 0
12/31/95............... 13.020 10.435 14.899 13.921 11.551 11.007
12/31/96............... 15.348 11.802 17.642 16.852 13.522 11.182
12/31/97............... 19.502 11.998 21.070 20.322 16.299 11.087
12/31/98............... 20.976 13.707 24.623 21.468 14.622 12.594
Number of units outstanding as of
12/31/94............... 3,274 23,019 1,503 19,221 11,734 N/A
12/31/95............... 162,561 460,990 235,983 426,184 349,767 52,450
12/31/96............... 470,214 1,270,362 747,969 926,772 648,328 141,598
12/31/97............... 714,325 1,409,640 831,485 1,207,354 839,642 173,723
12/31/98............... 718,943 1,134,692 683,188 1,085,492 700,061 256,126
</TABLE>
* Date of commencement of operations for Fidelity Money Market was 8/2/94, for
Fidelity Equity-Income, Fidelity Growth, DVIF: Quality Bond and T. Rowe Price
International was 8/17/94; for DVIF: Growth and Income was 8/31/94; for T.
Rowe Price Equity Income was 9/1/94; for Fidelity Asset Manager was 9/14/94;
for OCC Accumulation Trust Managed was 11/3/94; for OCC Accumulation Trust
Small Cap was 11/4/94; for T. Rowe Price New America Growth was 12/30/94; and
for OCC Accumulation Trust U.S. Government Income was 11/18/94. The OCC
Accumulation Trust U.S. Government Income Portfolio had activity in 1994 but
no Accumulation Units were outstanding at 12/31/94.
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APPENDIX B
THE GENERAL ACCOUNT GUARANTEED OPTIONS
Because of applicable exemptive and exclusionary provisions, interests in the
General Account have not been registered under the Securities Act of 1933
("1933 Act"), nor under the 1940 Act. Thus, neither our General Account, nor
any interest therein is generally subject to regulation under the provisions
of the 1933 Act or the 1940 Act. Accordingly, Peoples Benefit has been advised
that the staff of the SEC has not reviewed the disclosure in this Appendix
relating to the General Account. These disclosures regarding the General
Account may, however, be subject to certain generally applicable provisions of
the federal securities laws relating to the accuracy and completeness of
statements made in prospectuses.
Note: The General Account Guaranteed Options, or certain of them, are
currently available for sale in most, but not all, states. Please check with
your sales representative for details of the availability of these features
before purchasing.
Note: The following descriptions of the General Account Guaranteed Options
apply to Contracts issued on or after May 1, 1999. Contract Holders with
Contracts issued before that date should refer to the discussion of the
General Account Guaranteed Options in the prospectus which preceded or
accompanied their purchase of the Contract.
The General Account contains all of the assets of Peoples Benefit other than
those in the separate accounts we establish. Peoples Benefit has sole
discretion to invest the assets of the General Account, subject to applicable
law. Allocation of any amounts to the General Account does not entitle you to
share directly in the investment experience of these assets.
There are four fixed options under the General Account: the Dollar Cost
Averaging Fixed Account Option, the One-Year Guaranteed Rate Option, the
Multi-Year Guaranteed Rate Option, and the Guaranteed Equity Option, each
described below:
The Dollar Cost Averaging Fixed Account Option
The Dollar Cost Averaging Fixed Account Option may not be available in all
states. Please see your sales representative for details of the availability
of this option before purchasing.
The Dollar Cost Averaging Fixed Account Option has a one-year interest rate
guarantee. The current interest rate Peoples Benefit credits may vary on
different portions of the Dollar Cost Averaging Fixed Account Option. The
credited interest rate will never be less than the minimum effective annual
interest rate of 3%.
If prior to the Annuity Date you have at least $5,000 in the Dollar Cost
Averaging Fixed Account, you may choose to have a specified dollar amount
transferred from this Account to any Portfolios in the Separate Account on a
monthly basis. The automatic transfer will occur monthly on a first-in, first-
out basis, so that amounts put into the Account first will be transferred out
of the Account first.
The main objective of Dollar Cost Averaging is to shield your investment from
short-term price fluctuations. Since the same dollar amount is transferred to
Portfolios each month, more Accumulation Units are credited to a Portfolio if
the value per Accumulation Unit is low, while fewer Accumulation Units are
credited if the value per Accumulation Unit is high. Therefore, it is possible
to achieve a lower average cost per Accumulation Unit over the long term if
the Accumulation Unit Value declines over the period. This plan of investing
allows investors to take advantage of market fluctuations but does not assure
a profit or protect against a loss in declining markets.
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This Dollar Cost Averaging Option may be elected on the customer order form or
at a later date. The minimum amount that may be transferred each month into
any Portfolio is $250. The maximum amount that may be transferred is equal to
the Accumulated Value in the Dollar Cost Averaging Fixed Account Option when
elected, divided by 12.
If Peoples Benefit receives a Dollar Cost Averaging Fixed Account Option
request prior to the 28th day of any month, the first transfer from the Dollar
Cost Averaging Fixed Account Option will occur on the 28th day of that month.
If Peoples Benefit receives a Dollar Cost Averaging Fixed Account Option
request on or after the 28th day of any month, the first transfer will occur
on the 28th day of the following month. The dollar amount will be allocated to
the Portfolios in the proportions you specify (in whole percentages only) on
the appropriate Peoples Benefit form. If, on any transfer date, the
Accumulated Value is equal to or less than the amount you have elected to have
transferred, the entire amount will be transferred and the option will end.
You may change the transfer amount once each Contract Year. You may change the
choice of Portfolios to which transfers are allocated at any time. Peoples
Benefit must receive notice of any change on the appropriate Peoples Benefit
form or by telephone at least seven days before the next transfer date.
Transfers must be scheduled for at least six, but not more than twenty-four,
months each time the Dollar Cost Averaging Fixed Account Option is elected.
Prior to the Annuity Date, no Exchanges (except through Dollar Cost Averaging)
will be allowed from the Dollar Cost Averaging Fixed Account. On the Annuity
Date, any funds remaining in the Dollar Cost Averaging Fixed Account will be
applied to the Annuity Payment Option selected.
You may discontinue automatic transfers from the Dollar Cost Averaging Fixed
Account Option after satisfying the minimum number of required transfers by
contacting Peoples Benefit by phone or by written notice at least seven days
before the next transfer date. If for any reason you terminate automatic
transfers from the Dollar Cost Averaging Fixed Account, any remaining value
attributable to the Dollar Cost Averaging Fixed Account will remain in the
Dollar Cost Averaging Fixed Account and will continue to earn interest until
such time as you either restart automatic transfers or make a full withdrawal
of the funds. If you wish to restart automatic transfers but have less than
$5,000 in the Dollar Cost Averaging Fixed Account, an exception will be made
and automatic transfers will continue until the value in the Dollar Cost
Averaging Fixed Account is depleted. After such a resumption of automatic
transfers, you will not be able to discontinue the automatic transfers until
the value in the Dollar Cost Averaging Fixed Account is depleted.
Peoples Benefit may defer payment of a partial or full withdrawal from the
Dollar Cost Averaging Fixed Account Option for up to six months from its
receipt of written notice.
One-Year Guaranteed Rate Option
You may allocate your Accumulated Value to this option at any time. Any
allocations you make to the one-year guarantee period must be at least $1,000
and you must maintain a minimum balance of $1,000 in each one-year guarantee
period. The Accumulated Value you allocate under this option earns interest at
a rate declared by Peoples Benefit at the time your allocation is made with a
guarantee that the Accumulated Value in this General Account Guaranteed Option
will not be less than the amounts allocated, plus 3% annually.
You may allocate any or all of your Accumulated Value from this General
Account Guaranteed Option to any of the Subaccounts or other General Account
Guaranteed Options at any time before the end of the one-year guarantee
period. However, for any amounts so transferred and for full and partial
withdrawals of amounts allocated to this General Account Guaranteed Option
prior to the end of the one-year guarantee period, we will deduct an amount
equal to the interest earned on the amount transferred or withdrawn during the
previous 90 days at the applicable one-year rate, subject to a
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guarantee that any amounts allocated to this General Account Guaranteed Option
will earn interest of at least 3% annually.
If you have more than one allocation in this option, you may choose which
allocation or allocations any exchanges or surrenders are to be made from. If
you do not specify which allocation or allocations to take the exchanges or
surrenders from, we will first take from the allocation with the shortest time
remaining until the end of its guarantee period and then from the allocation
or allocations with the next shortest time remaining until the amount of the
exchange or withdrawal is reached.
At the end of the one-year guarantee period, you may, without loss of
interest, elect to transfer all or part of your Accumulated Value under this
option to any of the Subaccounts or transfer to another General Account
Guaranteed Option or renew your participation in this option. Notice of such
an election must be provided to Peoples Benefit by phone or in writing no
later than 10 days after the end of the one-year guarantee period (and each
subsequent one-year guarantee period). If no such election is made, your
Accumulated Value will automatically be renewed under this option for the next
one-year guarantee period.
Multi-Year Guaranteed Rate Option
You may allocate your Accumulated Value to this option at any time. You may
select any guarantee period then offered. Peoples Benefit currently expects to
offer guarantee periods of two to ten years, inclusive, but reserves the right
to change such offerings in its discretion. Any allocations you make to a
guarantee period must be at least $1,000 and you must maintain a minimum
balance of $1,000 in each guarantee period. The Accumulated Value you allocate
under this option earns interest at a rate declared by Peoples Benefit
applicable to the guarantee period you select at the time your allocation is
made with a guarantee that the Accumulated Value in this General Account
Guaranteed Option will not be less than the amount initially allocated, plus
3%, compounded annually.
You may allocate any or all of your Accumulated Value from this General
Account Guaranteed Option to any of the Subaccounts or other General Account
Guaranteed Options at any time before the end of the selected guarantee
period. However, for any amounts so transferred we will apply a Market Value
Adjustment (as described below) against such amounts. For full and partial
withdrawals of amounts allocated to this General Account Guaranteed Option
prior to the end of the selected guarantee period, we will apply a Market
Value Adjustment (as described below) against such amounts withdrawn.
The Market Value Adjustment ("MVA") Factor for the Multi-Year Guaranteed Rate
Option will be as follows:
N X (B-E)
12
whereN= the number of months left in the guarantee period at the time of
the transfer or surrender (including any partial months which will
count as full months for purposes of this calculation).
B= the interest rate in effect for the applicable guarantee period
which was declared on the date of the applicable allocation.
E= the constant maturity Treasury rate for the duration equal to that
of the applicable guarantee period (or, if not published, the
published constant maturity rate of the next longest maturity).
The MVA is applied to the Accumulated Value in order to determine the net
amount of the transfer or surrender under this option. Generally, if the
declared interest rate at the beginning of the guarantee
B-3
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period is lower than the applicable constant maturity Treasury rate prevailing
at the time of the transfer or surrender, then the application of the MVA will
result in a lower payment upon transfer or surrender. Similarly, if the
declared rate at the beginning of the guarantee period is higher than the
prevailing applicable constant maturity Treasury rate at the time of transfer
or surrender, then the application of the MVA will result in a higher payment
upon transfer or surrender.
The following is an example of how your Accumulated Value under the Multi-Year
Guaranteed Rate Option with a five-year guarantee period is affected by a
positive Market Value Adjustment:
Assume an initial allocation of $100,000 when the declared interest rate of a
five-year guarantee period is 8%. At the end of 12 months, your Accumulated
Value is $108,000. Assume also you surrender at the end of one year with 48
months of the guarantee period remaining and the five-year constant maturity
Treasury rate is 7%.
Accumulated Value =$108,000
MVA Factor = 48 X (.08-.07) = 4 X .01 = .04
12
Adjustment =$108,000 X .04 = $4,320
=$108,000+$4,320 = $112,320 = Net amount of transfer or
surrender
The following is an example of how your Accumulated Value under the Multi-Year
Guaranteed Rate Option with a five year guarantee period is affected by a
negative Market Value Adjustment:
Assume an initial allocation of $100,000 when the declared interest rate for a
five-year guarantee period is 8%. At the end of 12 months, your Accumulated
Value is $108,000. Assume also you surrender at the end of one year with 48
months remaining in the guarantee period and the five-year constant maturity
Treasury rate is 9%.
Accumulated Value =$108,000
MVA Factor = 48 X (.08-.09) = 4 X .01 = .04
12
Adjustment =$108,000 X .04 = $4,320
=$108,000-$4,320 = $103,680 = Net amount of transfer or
surrender
Notwithstanding application of a negative Market Value Adjustment, any Net
Purchase Payments allocated to this General Account Guaranteed Option will
earn interest of at least 3%, compounded annually.
If you have more than one allocation in this option, you may choose which
allocation or allocations any exchanges or surrenders are to be made from. If
you do not specify which allocation or allocations to take the exchanges or
surrenders from, we will first take from the allocation with the shortest time
remaining until the end of its guarantee period and then from the allocation
or allocations with the next shortest time remaining until the amount of the
exchange or withdrawal is reached.
At the end of the selected guarantee period and within a ten-day period
starting on the first day of any automatic renewal (as described below), you
may, without loss of interest, elect to transfer any or all of your
Accumulated Value under this option to any of the Subaccounts or transfer to
another General Account Guaranteed Option or renew your participation in this
option for any guarantee period then available whose ending date is not later
than the Annuity Date at a rate Peoples Benefit declares at the time of
renewal. Such election may also be provided in writing to Peoples Benefit
before the end
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of the guarantee period (and each subsequent guarantee period). If no election
is made, your Accumulated Value will automatically be renewed under this
option for another guarantee period of the same duration as the one just ended
at a rate we declare at the time of the renewal. In cases where such a renewal
would result in a guarantee period whose ending date is later than the Annuity
Date, we will transfer the value of that allocation to the Fidelity VIP Money
Market Portfolio.
Guaranteed Equity Option
You may allocate your Accumulated Value to this option as of the first
business day of each month. Any allocations you make must be at least $1,000.
On the date you make an allocation to this option Peoples Benefit will
declare: (a) the duration of the guarantee period applicable to the
allocation; (b) the duration of the Averaging Period; and (c) the
Participation Rate. (The Averaging Period and the Participation Rate are
described below.) Each allocation will have its own guarantee period,
Averaging Period, and Participation Rate.
During the guarantee period applicable to Accumulated Value allocated to this
option, Peoples Benefit will credit interest at a guaranteed annual effective
rate of 3%, compounded annually. At the end of the guarantee period we will
credit additional interest in an amount equal to the amount by which (x)
exceeds (y), where (x) equals a declared portion of the percentage change in
the S&P 500 Composite Stock Price Index ("S&P 500 Index") from its value on
the date Accumulated Value is allocated to a value determined at the end of
the guarantee period multiplied by the amount allocated (all calculated as
described below); and (y) equals the total amount of interest credited during
the guarantee period.
The amount (x) in the preceding paragraph is equal to the amount allocated to
the applicable guarantee period multiplied by the following factor:
PR X [(EV/SV)-1]
wherePR = the Participation Rate;
EV= the average closing values of the S&P 500 Index on the last
business day of each month during the Averaging Period; and
SV= the closing value of the S&P 500 Index on the date Accumulated
Value is allocated to this option.
The "Participation Rate" is the rate at which you participate in the
percentage change of the S&P 500 Index for an allocation as used in the
calculation above. It will be declared by Peoples Benefit with respect to each
allocation to this option. In no event will the Participation Rate be less
than 0%.
The "Averaging Period" is the number of months prior to the end of an
allocation's guarantee period that we will use to determine the ending value
of the S&P 500 Index for that allocation's guarantee period for purposes of
this option as used in the calculation above. It will be declared by Peoples
Benefit with respect to each allocation to this option. In no event will the
Averaging Period be less than one.
("S&P" is a trademark of The McGraw-Hill Companies, Inc. and has been licensed
for use by Peoples Benefit.)
This option is illiquid for the entire guarantee period and, accordingly, does
not permit any Exchanges or reallocations of Accumulated Value to the
Subaccounts or other General Account Guaranteed Options or full or partial
withdrawals during such guarantee period. However, during such guarantee
period, the Accumulated Value allocated under this option may be annuitized
under any of the Annuity Payment Options.
B-5
<PAGE>
(The S&P 500 Index is a stock price index. Its composition and calculation do
not include dividends, if any, paid upon component stocks of the index or
reinvestment, if any, or such dividends.)
At the end of the guarantee period, you may, without loss of earnings, elect
to transfer all or part of your Accumulated Value under this option to any of
the Subaccounts, transfer into another General Account Guaranteed Option, or
renew your participation in this option. Such election must be received by
Peoples Benefit no later than 30 days prior to the end of the guarantee
period. If no election is received, your Accumulated Value will automatically
be transferred to the Fidelity VIP Money Market Portfolio. This option may not
be available at all times.
DISCLAIMER REGARDING STANDARD & POOR'S 500 INDEX
The Guaranteed Equity Option (the "GEO") is not sponsored, endorsed, sold or
promoted by Standard & Poor's Corporation ("S&P"). S&P makes no representation
or warranty, express or implied, to investors in the GEO or any member of the
public regarding the advisability of investing in securities generally or in
the GEO particularly or the ability of the S&P 500 Index to track general
stock market performance. S&P's only relationship to Peoples Benefit Life
Insurance Company is the licensing of certain trademarks and trade names of
S&P and the S&P 500 Index which is determined, composed and calculated by S&P
without regard to Peoples Benefit Life Insurance Company or the GEO. S&P has
no obligation to take the needs of Peoples Benefit Life Insurance Company or
the Investors in the GEO into consideration in determining, composing or
calculating the S&P 500 Index. S&P is not responsible for and has not
participated in the determination of the timing of the issuance or sale of the
GEO or in the determination or calculation of the equation by which the GEO is
to be converted into cash. S&P has no obligation or liability in connection
with the administration, marketing or trading of the GEO.
S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE S&P 500
INDEX OR ANY DATA INCLUDED THEREIN AND S&P SHALL HAVE NO LIABILITY FOR ANY
ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. S&P MAKES NO WARRANTY, EXPRESS OR
IMPLIED, AS TO RESULTS TO BE OBTAINED BY PEOPLES BENEFIT LIFE INSURANCE
COMPANY, INVESTORS IN THE GEO, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF
THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN. S&P MAKES NO EXPRESS OR
IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY
OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE S&P 500 INDEX
OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO
EVENT SHALL S&P HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR
CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE
POSSIBILITY OF SUCH DAMAGES.
B-6
<PAGE>
PEOPLES BENEFIT LIFE INSURANCE COMPANY
SEPARATE ACCOUNT V
STATEMENT OF ADDITIONAL INFORMATION
for the
PEOPLES BENEFIT MARQUEE VARIABLE ANNUITY
Offered by
Peoples Benefit Life Insurance Company
(A Missouri Stock Company)
Administrative Offices
4333 Edgewood Road, N.E.
Cedar Rapids, Iowa 52499
This Statement of Additional Information expands upon subjects discussed in the
current Prospectus for the Peoples Benefit Marquee variable annuity contracts
(the "Contracts" and each a "Contract," respectively) offered by Peoples Benefit
Life Insurance Company ("Peoples Benefit"). You may obtain a copy of the
Prospectus dated May 1, 1999, by calling 800-866-6007 or by writing to our
Administrative Offices, at 4333 Edgewood Road, N.E., Cedar Rapids, Iowa 52499.
Terms used in the current Prospectus for the Contract are incorporated in this
Statement of Additional Information.
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND SHOULD BE READ
ONLY IN CONJUNCTION WITH THE PROSPECTUS FOR THE CONTRACT.
May 1, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE CONTRACT................................................................... 1
Computation of Variable Annuity Income Payments.............................. 1
Exchanges.................................................................... 1
Exceptions to Charges and to Transactions or Balance Requirements............ 2
403(b) Contracts............................................................. 2
GENERAL MATTERS................................................................ 4
Non-Participating............................................................ 4
Misstatement of Age or Sex................................................... 4
Assignment................................................................... 4
Annuity Data................................................................. 4
Annual Statement............................................................. 4
Incontestability............................................................. 4
Ownership.................................................................... 5
PERFORMANCE INFORMATION........................................................ 5
Money Market Subaccount Yields............................................... 5
30-Day Yield for Non-Money Market Subaccounts................................ 6
Standardized Average Annual Total Return for Subaccounts..................... 6
ADDITIONAL PERFORMANCE MEASURES................................................ 7
Non-Standardized Cumulative Total Return and Non-Standardized Average
Annual Total Return........................................................ 7
Non-Standardized Total Return Year-to-Date................................... 8
Non-Standardized One Year Return............................................. 9
Non-Standardized Adjusted Historical Cumulative Return and Non-Standardized
Adjusted Historical Average Annual Total Return............................. 10
Individualized Computer Generated Illustrations.............................. 16
PERFORMANCE COMPARISONS........................................................ 16
SAFEKEEPING OF ACCOUNT ASSETS.................................................. 18
CONFLICTS OF INTEREST WITH OTHER SEPARATE ACCOUNTS............................. 18
PEOPLES BENEFIT................................................................ 19
TAXES.......................................................................... 19
STATE REGULATION OF PEOPLES BENEFIT............................................ 19
RECORDS AND REPORTS............................................................ 20
DISTRIBUTION OF THE CONTRACTS.................................................. 20
LEGAL PROCEEDINGS.............................................................. 20
OTHER INFORMATION.............................................................. 20
FINANCIAL STATEMENTS........................................................... 20
</TABLE>
<PAGE>
THE CONTRACT
In order to supplement the description in the Prospectus and Appendixes A and B
thereto, the following provides additional information about the Contract which
may be of interest to Contract Owners.
COMPUTATION OF VARIABLE ANNUITY INCOME PAYMENTS
The amounts shown in the Annuity Tables contained in your Contract represent the
guaranteed minimum for each Annuity Payment under a Fixed Payment Option.
Variable annuity income payments are computed as follows. First, the Accumulated
Value (or the portion of the Accumulated Value used to provide variable
payments) is applied under the Annuity Tables contained in your Contract
corresponding to the Annuity Payment Option elected by the Contract Owner and
based on an assumed interest rate of 4%. This will produce a dollar amount which
is the first monthly payment.
The amount of each Annuity Payment after the first is determined by means of
Annuity Units. The number of Annuity Units is determined by dividing the first
Annuity Payment by the Annuity Unit Value for the selected Subaccount ten
Business Days prior to the Annuity Date. The number of Annuity Units for the
Subaccount then remains fixed, unless an Exchange of Annuity Units (as set forth
below) is made. After the first Annuity Payment, the dollar amount of each
subsequent Annuity Payment is equal to the number of Annuity Units multiplied by
the Annuity Unit Value for the Subaccount ten Business Days before the due date
of the Annuity Payment.
The Annuity Unit Value for each Subaccount was initially established at $10.00
on the date money was first deposited in that Subaccount. The Annuity Unit Value
for any subsequent Business Day is equal to (a) times (b) times (c), where
(a) the Annuity Unit Value for the immediately preceding Business Day;
(b) the Net Investment Factor for the day;
(c) the investment result adjustment factor (.99989255 per day), which
recognizes an assumed interest rate of 4% per year used in
determining the Annuity Payment amounts.
The Net Investment Factor is a factor applied to a Subaccount that reflects
daily changes in the value of the Subaccount due to:
(a) any increase or decrease in the value of the Subaccount due to
investment results;
(b) a daily charge assessed at an annual rate of 1.25% for the mortality
and expense risks assumed by Peoples Benefit;
(c) a daily charge for the cost of administering the Contract
corresponding to an annual charge of .15% of the value of the
Subaccount plus the Annual Contract Fee.
The Annuity Tables contained in the Contract are based on the 1983 Table "A"
Mortality Table projected for mortality improvement to the year 2000 using
Projection Scale G and an interest rate of 4% a year; except that in
Massachusetts and Montana, the Annuity Tables contained in the Contract are
based on a 60% female/40% male blending of the above for all annuitants of
either gender.
EXCHANGES
After the Annuity Date you may, by making a written request, exchange the
current value of an existing Subaccount to Annuity Units of any other
Subaccount(s) then available. The written request for an Exchange must be
received by us, however, at least 10 Business Days prior to the first payment
date on which the Exchange is to take effect. An Exchange shall result in the
same dollar amount as that of the Annuity Payment on the date of Exchange (the
"Exchange Date"). Each year you may make an unlimited number of free Exchanges
between Subaccounts. We reserve the right to charge a $15 fee in the future for
Exchanges in excess of twelve per Contract Year.
1
<PAGE>
Exchanges will be made using the Annuity Unit Value for the Subaccounts on the
date the written request for Exchange is received. On the Exchange Date, Peoples
Benefit will establish a value for the current Subaccounts by multiplying the
Annuity Unit Value by the number of Annuity Units in the existing Subaccounts
and compute the number of Annuity Units for the new Subaccounts by dividing the
Annuity Unit Value of the new Subaccounts into the value previously calculated
for the existing Subaccounts.
EXCEPTIONS TO CHARGES AND TO TRANSACTION OR BALANCE REQUIREMENTS
Peoples Benefit may reduce any applicable sales loads and reduce administrative
charges or other deductions from Purchase Payments in certain situations where
Peoples Benefit expects to realize significant economies of scale or other
economic benefits with respect to the sales of Contracts. This is possible
because sales costs do not increase in proportion to the dollar amount of the
Contracts sold. For example, the per-dollar transaction cost for a sale of a
Contract equal to $5,000 is generally much higher than the per-dollar cost for a
sale of a Contract equal to $1,000,000. As a result, any applicable sales charge
declines as a percentage of the dollar amount of Contracts sold as the dollar
amount increases.
Peoples Benefit may also reduce any applicable sales loads and reduce
administrative charges and fees on sales to directors, officers and bona fide
full-time employees (and their spouses and minor children) of Peoples Benefit,
its ultimate parent company, and certain of their affiliates and certain sales
representatives for the Contract. Peoples Benefit may also grant waivers or
modifications of certain minimum or maximum purchase and transaction amounts or
balance requirements in these circumstances.
Notwithstanding the above, any variations in the sales loads, administrative
charges or other deductions from Purchase Payments or in the minimum or maximum
transaction or balance requirements shall reflect differences in costs or
services and shall not be unfairly discriminatory against any person.
403(b) CONTRACTS
Contracts will be offered in connection with retirement plans adopted by public
school systems and certain tax-exempt organizations (Code Section 501(c)(3)
organizations) for their employees under Section 403(b) of the Code; except, as
discussed below and subject to any conditions in an employer's plan, a Contract
used in connection with a Section 403(b) Plan offers the same benefits and is
subject to the same charges described in the Prospectus.
The Code imposes a maximum limit on annual Purchase Payments which may be
excluded from your gross income. Such limit must be calculated in accordance
with Sections 403(b), 415 and 402(g) of the Code. In addition, Purchase
Payments will be excluded from your gross income only if the 403(b) Plan meets
certain Code non-discrimination requirements.
Under your 403(b) Contract, you may borrow against your Contract's Surrender
Value after the first Contract Year. No additional loans will be extended until
prior loan balances are paid in full. The loan amount must be at least $1,000
and your Contract must have a minimum vested Accumulated Value of $2,000. The
loan amount may not exceed the lesser of (a) or (b), where (a) is 50% of the
Contract's vested Accumulated Value on the date on which the loan is made, and
(b) is $50,000 reduced by the excess, if any, of the highest outstanding balance
of loans during the one-year period ending on the day before the current loan is
made over the outstanding balance of loans on the date of the current loan. If
you are married, your spouse must consent in writing to a loan request. This
consent must be given within the 90-day period before the loan is to be made.
On the first Business Day of each calendar month, Peoples Benefit will determine
a loan interest rate. The loan interest rate for the calendar month in which
the loan is effective will apply for one year from the loan effective date.
Annually on the anniversary of the loan effective date, the rate will be
adjusted to equal the loan interest rate determined for the month in which the
loan anniversary occurs.
Principal and interest on loans must be repaid in substantially level payments,
not less frequently than quarterly, over a five year term except for certain
loans for the purchase of a principal residence. If the loan interest rate is
adjusted, future payments will be adjusted so that the outstanding loan balance
is amortized in equal quarterly installments over
2
<PAGE>
the remaining term. A $40 processing fees is charged for each loan. The
remainder of each repayment will be credited to the individual account.
If a loan payment is not made when due, interest will continue to accrue. The
defaulted payment plus accrued interest will be deducted from any future
distributions under the Contract and paid to us. Any loan payment which is not
made when due, plus interest, will be treated as a distribution, as permitted by
law. The loan payment may be taxable to the borrower, and may be subject to the
early withdrawal tax penalty. When a loan is made, unless instructed to the
contrary by the Annuitant, the number of Accumulation Units equal to the loan
amount will be withdrawn from the individual account and placed in the
Collateral Fixed Account. Accumulation Units taken from the individual account
to provide a loan do not participate in the investment experience of the related
Portfolios or the guarantees of the General Account Guaranteed Options. The loan
amount will be withdrawn on a pro rata basis first from the Portfolios to which
Accumulated Value has been allocated, and if that amount is insufficient,
collateral will then be transferred from the General Account Guaranteed Options
except the Guaranteed Equity Option. As with any withdrawal, Market Value
Adjustments or other deductions applicable to amounts allocated to General
Account Guaranteed Options may be applied and no amounts may be withdrawn from
the Guaranteed Equity Option. Until the loan is repaid in full, that portion of
the Collateral Fixed Account shall be credited with interest at a rate of 2%
less than the loan interest rate applicable to the loan however, the interest
rate credited will never been less than the General Account Guaranteed Option's
guaranteed rate of 3%.
A bill in the amount of the quarterly principal and interest will be mailed
directly to you in advance of the payment due date. The initial quarterly
repayment will be due three months from the loan date. The loan date will be the
date that Peoples Benefit receives the loan request form in good order. Payment
is due within 30 calendar days after the due date. Subsequent quarterly
installments are based on the first due date.
When repayment of principal is made, Accumulation Units will be reallocated on a
current value basis among the same investment Portfolios and/or General Account
Guaranteed Options and in the same proportion as when the loan was initially
made, unless the Annuitant specifies otherwise. If a repayment in excess of a
billed amount is received, the excess will be applied towards the principal
portion of the outstanding loan. Payments received which are less than the
billed amount will not be accepted and will be returned to you.
If a partial surrender is taken from your individual account due to nonpayment
of a billed quarterly installment, the date of the surrender will be the first
business day following the 30 calendar day period in which the repayment was
due.
Prepayment of the entire loan is allowed. At the time of prepayment, Peoples
Benefit will bill you for any accrued interest. Peoples Benefit will consider
the loan paid when the loan balance and accrued interest are paid.
If the individual account is surrendered or if the Annuitant dies with an
outstanding loan balance, the outstanding loan balance and accrued interest will
be deducted from the Surrender Value or the Death Benefit, respectively. If the
individual account is surrendered, with an outstanding loan balance, due to the
Contract Owner's death or the election of an Annuity Payment Option, the
outstanding loan balance and accrued interest will be deducted.
Peoples Benefit may require that any outstanding loan be paid if the individual
account value falls below an amount equal to 25% of total loans outstanding.
The Code requires the aggregation of all loans made to an individual employee
under a single employer-sponsored 403(b) Plan. However, since Peoples Benefit
has no information concerning the outstanding loans that you may have with
other companies, it will only use the information available under the Contracts
issued by Peoples Benefit.
The Code imposes restrictions on full or partial surrenders from 403(b)
individual accounts attributable to Purchase Payments under a salary reduction
agreement and to any earnings on the entire 403(b) individual account credited
on and after January 1, 1989. Surrenders of these amounts are allowed only if
the Contract Owner (a) has died, (b) has become disabled, as defined in the
Code, (c) has attained age 59 1/2, or (d) has separated from service. Surrenders
are allowed if the Contract Owner can show "hardship" as defined by the Internal
Revenue Service, but the surrender is limited to the lesser of Purchase Payments
made on or after January 1, 1989 or the amount necessary to relieve the
hardship. Even if a surrender is permitted under these provisions, a 10% federal
tax penalty may be assessed on the withdrawn amount if it does not otherwise
meet the exceptions to the penalty tax provisions.
3
<PAGE>
Under the Code, you may request a full or partial surrender of an amount equal
to the individual account cash value as of December 31, 1988 (the
"grandfathered" amount), subject to the terms of the 403(b) Plan. Although the
Code surrender restrictions does not apply to this amount, a 10% federal penalty
tax may be assessed on the withdrawn amount if it does not otherwise meet the
exceptions to the penalty tax provisions.
Peoples Benefit believes that the Code surrender restrictions do not apply to
tax-free transfers pursuant to Revenue Ruling 90-24. Peoples Benefit further
believes that the surrender restrictions will not apply to any "grandfathered"
amount transferred pursuant to Revenue Ruling 90-24 into another 403(b)
Contract.
GENERAL MATTERS
NON-PARTICIPATING
The Contracts are non-participating. No dividends are payable and the Contracts
will not share in the profits or surplus earnings of Peoples Benefit.
MISSTATEMENT OF AGE OR SEX
Peoples Benefit may require proof of age and sex before making Annuity Payments.
If the Annuitant's stated age, sex or both in the Contract are incorrect,
Peoples Benefit will change the annuity benefits payable to those benefits which
the Purchase Payments would have purchased for the correct age and sex. In the
case of correction of the stated age and/or sex after payments have commenced,
Peoples Benefit will: (1) in the case of underpayment, pay the full amount due
with the next payment; and (2) in the case of overpayment, deduct the amount due
from one or more future payments.
ASSIGNMENT
Any Non-Qualified Contract may be assigned by you prior to the Annuity Date and
during the Annuitant's lifetime. Peoples Benefit is not responsible for the
validity of any assignment. No assignment will be recognized until Peoples
Benefit receives the appropriate Peoples Benefit form notifying Peoples Benefit
of such assignment. The interest of any beneficiary which the assignor has the
right to change shall be subordinate to the interest of an assignee. Any amount
paid to the assignee shall be paid in one sum notwithstanding any settlement
agreement in effect at the time assignment was executed. Peoples Benefit shall
not be liable as to any payment or other settlement made by Peoples Benefit
before receipt of the appropriate Peoples Benefit form.
ANNUITY DATA
Peoples Benefit will not be liable for obligations which depend on receiving
information from a Payee until such information is received in a form
satisfactory to Peoples Benefit.
ANNUAL STATEMENT
Once each Contract Year, Peoples Benefit will send you an annual statement of
the current Accumulated Value allocated to each Subaccount and any Purchase
Payments, charges, Exchanges or withdrawals during the year. This report will
also give you any other information required by law or regulation. You may ask
for an annual statement like this at any time. We will also send you quarterly
statements. However, we reserve the right to discontinue quarterly statements at
any time.
INCONTESTABILITY
This Contract is incontestable from the Contract Date, subject to the
"Misstatement of Age or Sex" provision.
4
<PAGE>
OWNERSHIP
The Contract Owner on the Contract Date is the Annuitant, unless otherwise
specified in the application. The Contract Owner may specify a new Contract
Owner by sending us the appropriate Peoples Benefit form at any time thereafter.
The term Contract Owner also includes any person named as a Joint Owner. A Joint
Owner shares ownership in all respects with the Contract Owner. During the
Annuitant's lifetime, all rights and privileges under this Contract may be
exercised solely by the Contract Owner. Upon the death of the Contract Owner,
ownership is retained by the surviving Joint Owner or passes to the Owner's
Designated Beneficiary, if one has been designated by the Contract Owner. If no
Owner's Designated Beneficiary has been selected or if no Owner's Designated
Beneficiary is living, then the Owner's Designated Beneficiary is the Contract
Owner's estate. From time to time Peoples Benefit may require proof that the
Contract Owner is still living.
PERFORMANCE INFORMATION
Performance information for the Subaccounts including the yield and effective
yield of the Fidelity VIP Money Market Subaccount, the yield of the remaining
Subaccounts, and the total return of all Subaccounts, may appear in reports or
promotional literature to current or prospective Contract Owners.
Where applicable in calculating performance information, the Annual Contract Fee
is reflected as a percentage equal to the estimated total amount of fees
collected during a calendar year divided by the estimated total average net
assets of the Portfolios during the same calendar year. The fee is assumed to
remain the same in each year of the applicable period. (With respect to partial
year periods, if any, the Annual Contract Fee is pro-rated to reflect only the
applicable portion of the partial year period.)
Where applicable, the following Subaccount inception dates are used in the
calculation of performance figures: 8/2/94 for the Fidelity VIP Money Market
Portfolio; 8/17/94 for the Fidelity VIP Equity-Income, Fidelity VIP Growth,
Dreyfus Quality Bond and T. Rowe Price International Portfolios; 8/31/94 for the
Dreyfus Growth and Income Portfolio; 9/1/94 for the T. Rowe Price Equity Income
Portfolio; 9/14/94 for the Fidelity VIP II Asset Manager Portfolio; 11/3/94 for
the OCC Accumulation Trust Managed Portfolio; 11/4/94 for the OCC Accumulation
Trust Small Cap Portfolio; 12/31/94 for the T. Rowe Price New America Growth
Portfolio; and 11/18/94 for the OCC Accumulation Trust Small Cap Portfolio;
12/30/94 for the T. Rowe Price New America Growth Portfolio; and 11/18/94 for
the OCC Accumulation Trust U.S. Government Income Portfolio.
On September 16, 1994, an investment company then called Quest for Value
Accumulation Trust (the "Old Trust") was effectively divided into two investment
funds, the Old Trust and the Quest for Value Accumulation Trust (now known as
the OCC Accumulation Trust) that is included in the Contract (the "New Trust"),
at which time the New Trust commenced operations. The total net assets for each
of the OCC Accumulation Trust Small Cap and OCC Accumulation Trust Managed
Portfolios immediately after the transaction were $139,812,573 and $682,601,380,
respectively, with respect to the Old Trust and, with respect to the New Trust
were $8,129,274 and $51,345,102, for the OCC Accumulation Trust Small Cap and
OCC Accumulation Trust Managed Portfolios, respectively. For the period prior to
September 16, 1994, performance figures for each of the OCC Accumulation Trust
Small Cap and OCC Accumulation Trust Managed Portfolios reflect the performances
of the corresponding Portfolios of the Old Trust.
MONEY MARKET SUBACCOUNT YIELDS
Current yield for the Fidelity VIP Money Market Subaccount will be based on the
change in the value of a hypothetical investment (exclusive of capital changes)
over a particular 7-day period, less a pro-rata share of Subaccount expenses
accrued over that period (the "base period"), and stated as a percentage of the
investment at the start of the base period (the "base period return"). The base
period return is then annualized by multiplying by 365/7, with the resulting
yield figure carried to at least the nearest hundredth of one percent.
Calculation of "effective yield" begins with the same "base period return" used
in the calculation of yield, which is then annualized to reflect weekly
compounding pursuant to the following formula:
Effective Yield = [((Base Period Return)+1)/365/7/]-1
5
<PAGE>
30-DAY YIELD FOR NON-MONEY MARKET SUBACCOUNTS
Quotations of yield for the remaining Subaccounts will be based on all
investment income per Unit earned during a particular 30-day period, less
expenses accrued during the period ("net investment income"), and will be
computed by dividing net investment income by the value of a Unit on the last
day of the period, according to the following formula:
YIELD = 2[(a-b + 1)/6/-1]
---
cd
Where:
[a] equals the net investment income earned during the period by the Portfolio
attributable to shares owned by a Subaccount;
[b] equals the expenses accrued for the period (net of reimbursement);
[c] equals the average daily number of Units outstanding during the period;
and
[d] equals the maximum offering price per Accumulation Unit on the last day of
the period.
Yield on a Subaccount is earned from the increase in net asset value of shares
of the Portfolio in which the Subaccount invests and from dividends declared and
paid by the Portfolio, which are automatically reinvested in shares of the
Portfolio.
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FOR SUBACCOUNTS
When advertising performance of the Subaccounts, Peoples Benefit will show the
"Standardized Average Annual Total Return," calculated as prescribed by the
rules of the SEC, for each Subaccount. The Standardized Average Annual Total
Return is the effective annual compounded rate of return that would have
produced the cash redemption value over the stated period had the performance
remained constant throughout. The calculation assumes a single $1,000 payment
made at the beginning of the period and full redemption at the end of the
period. It reflects the deduction of all applicable sales loads (including the
contingent deferred sales load), the Annual Contract Fee and all other
Portfolio, Separate Account and Contract level charges except Premium Taxes, if
any.
Quotations of average annual total return for any Subaccount will be expressed
in terms of the average annual compounded rate of return of a hypothetical
investment in a Contract over a period of one, five and ten years (or, if less,
up to the life of the Subaccount), calculated pursuant to the formula:
P(1+T)n=ERV
Where:
(1) [P] equals a hypothetical initial Purchase Payment of $1,000;
(2) [T] equals an average annual total return;
(3) [n] equals the number of years; and
(4) [ERV] equals the ending redeemable value of a hypothetical $1,000 Purchase
Payment made at the beginning of the period (or fractional portion
thereof).
6
<PAGE>
The following table show the Standardized Average Annual Total Return for the
Subaccounts for the period beginning at the inception of each Subaccount and
ending on December 31, 1998.
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
FOR PERIOD ENDING DECEMBER 31, 1998
<TABLE>
<CAPTION>
Since
Subaccount
Subaccount 1 Year Inception
- --------------------------------------------------------- ------- -----------
<S> <C> <C>
Fidelity VIP Money Market Portfolio...................... -0.71% 3.58%
Fidelity VIP Equity-Income Portfolio..................... 5.09% 17.12%
Fidelity VIP Growth Portfolio............................ 31.33% 23.50%
Fidelity VIP II Asset Manager Portfolio.................. 8.31% 12.13%
DVIF: Growth and Income Portfolio........................ 5.26% 20.05%
DVIF: Quality Bond Portfolio............................. 0.11% 6.50%
T. Rowe Price Equity Income Portfolio.................... 2.68% 18.01%
T. Rowe Price New America Growth Portfolio............... 11.57% 21.44%
T. Rowe Price International Stock Portfolio.............. 9.07% 6.71%
OCC Accumulation Trust Managed Portfolio................. 0.84% 17.99%
OCC Accumulation Trust Small Cap Portfolio............... -14.36% 8.25%
OCC Accumulation Trust U.S. Government Income Portfolio.. 1.82% 5.30%
</TABLE>
ADDITIONAL PERFORMANCE MEASURES
NON-STANDARDIZED CUMULATIVE TOTAL RETURN AND NON-STANDARDIZED AVERAGE ANNUAL
TOTAL RETURN
Peoples Benefit may show Non-Standardized Cumulative Total Return (i.e., the
percentage change in the value of an Accumulation Unit) for one or more
Subaccounts with respect to one or more periods. Peoples Benefit may also show
Non-Standardized Average Annual Total Return (i.e., the average annual change in
Accumulation Unit Value) with respect to one or more periods. For one year, the
Non-Standardized Cumulative Total Return and the Non-Standardized Average Annual
Total Return are effective annual rates of return and are equal. For periods
greater than one year, the Non-Standardized Average Annual Total Return is the
effective annual compounded rate of return for the periods stated. Because the
value of an Accumulation Unit reflects the Separate Account and Portfolio
expenses (see Fee Table in the Prospectus), the Non-Standardized Cumulative
Total Return and Non-Standardized Average Annual Total Return also reflect these
expenses. However, these percentages do not reflect the Annual Contract Fee, any
sales loads or Premium Taxes (if any), which, if included, would reduce the
percentages reported by Peoples Benefit.
7
<PAGE>
NON-STANDARDIZED CUMULATIVE TOTAL RETURN
FOR PERIOD ENDING DECEMBER 31, 1998
<TABLE>
<CAPTION>
Since
Subaccount
Subaccount 1 Year Inception
- --------------------------------------------------------- ------- -----------
<S> <C> <C>
Fidelity VIP Money Market Portfolio...................... 4.01% 19.12%
Fidelity VIP Equity-Income Portfolio..................... 10.08% 102.01%
Fidelity VIP Growth Portfolio............................ 37.56% 157.54%
Fidelity VIP II Asset Manager Portfolio.................. 13.46% 68.95%
DVIF: Growth and Income Portfolio........................ 10.26% 125.31%
DVIF: Quality Bond Portfolio............................. 4.63% 34.94%
T. Rowe Price Equity Income Portfolio.................... 7.56% 109.76%
T. Rowe Price New America Growth Portfolio............... 16.86% 146.23%
T. Rowe Price International Stock Portfolio.............. 14.25% 36.58%
OCC Accumulation Trust Managed Portfolio................. 5.64% 114.68%
OCC Accumulation Trust Small Cap Portfolio............... -10.29% 46.22%
OCC Accumulation Trust U.S. Government Income Portfolio.. 6.66% 25.94%
</TABLE>
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
FOR PERIOD ENDING DECEMBER 31, 1998
<TABLE>
<CAPTION>
Since
Subaccount
Subaccount 1 Year Inception
- --------------------------------------------------------- ------- -----------
<S> <C> <C>
Fidelity VIP Money Market Portfolio...................... 4.01% 5.30%
Fidelity VIP Equity-Income Portfolio..................... 10.08% 12.82%
Fidelity VIP Growth Portfolio............................ 37.56% 15.83%
Fidelity VIP II Asset Manager Portfolio.................. 13.46% 11.11%
DVIF: Growth and Income Portfolio........................ 10.26% 20.30%
DVIF: Quality Bond Portfolio............................. 4.63% 7.55%
T. Rowe Price Equity Income Portfolio.................... 7.56% 18.84%
T. Rowe Price New America Growth Portfolio............... 16.86% 20.88%
T. Rowe Price International Stock Portfolio.............. 14.25% 8.15%
OCC Accumulation Trust Managed Portfolio................. 5.64% 17.53%
OCC Accumulation Trust Small Cap Portfolio............... -10.29% 11.40%
OCC Accumulation Trust U.S. Government Income Portfolio.. 6.66% 6.09%
</TABLE>
NON-STANDARDIZED TOTAL RETURN YEAR-TO-DATE
Peoples Benefit may show Non-Standardized Total Return Year-to-Date as of a
particular date, or simply Total Return YTD, for one or more subaccounts with
respect to one or more non-standardized base periods commencing at the beginning
of a calendar year. Total Return YTD figures reflect the percentage change in
actual Accumulation Unit Values during the relevant period. These percentages
reflect a deduction for the Separate Account and Portfolio expenses, but do not
include the Annual Contract Fee, any sales loads or Premium Taxes (if any),
which, if included, would reduce the percentages reported by Peoples Benefit.
8
<PAGE>
NON-STANDARDIZED TOTAL RETURN YEAR-TO-DATE
<TABLE>
<CAPTION>
Total Return
YTD as of
Subaccount 12/31/98
- ---------- --------
<S> <C>
Fidelity VIP Money Market Portfolio 4.01%
Fidelity VIP Equity-Income Portfolio 10.08%
Fidelity VIP Growth Portfolio 37.56%
Fidelity VIP II Asset Manager Portfolio 13.46%
DVIF: Growth and Income Portfolio 10.26%
DVIF: Quality Bond Portfolio 4.63%
T. Rowe Price Equity Income Portfolio 7.56%
T. Rowe Price New America Growth Portfolio 16.86%
T. Rowe Price International Stock Portfolio 14.25%
OCC Accumulation Trust Managed Portfolio 5.64%
OCC Accumulation Trust Small Cap Portfolio -10.29%
OCC Accumulation Trust U.S. Government Income Portfolio 6.66%
</TABLE>
NON-STANDARDIZED ONE YEAR RETURN
Peoples Benefit may show Non-Standardized One Year Return, for one or more
Subaccounts with respect to one or more non-standardized base periods commencing
at the beginning of a calendar year (or date of Portfolio inception, if during
the relevant year) and ending at the end of such calendar year. One Year Return
figures reflect the historical performance of the Portfolios as if the Contract
were in existence before its inception date (which it was not). After the
Contract's inception date, the figures reflect the percentage change in actual
Accumulation Unit Values during the relevant period. These percentages reflect a
deduction for the Separate Account and Portfolio expenses, but do not include
the Annual Contract Fee, any sales loads or Premium Taxes (if any), which, if
included, would reduce the percentages reported by Peoples Benefit.
NON-STANDARDIZED ONE YEAR RETURN
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994 1993 1992
------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Fidelity VIP Money Market Portfolio......... 4.01% 4.02% 3.94% 4.42% 2.79% 1.78% 2.45%
Fidelity VIP Equity-income Portfolio........ 10.08% 26.33% 12.68% 33.22% 5.57% 16.63% 15.25%
Fidelity VIP Growth Portfolio............... 37.56% 21.76% 13.10% 33.49% -1.42% 17.70% 7.79%
Fidelity VIP II Asset Manager Portfolio..... 13.46% 18.97% 13.00% 15.33% -7.40% 19.53% 10.15%
DVIF: Growth and Income Portfolio........... 10.26% 14.60% 19.06% 59.65% N/A N/A N/A
DVIF: Quality Bond Portfolio................ 4.63% 7.27% 1.68% 18.75% -5.93% 13.72% 10.52%
T. Rowe Price Equity Income Portfolio....... 7.56% 27.06% 21.05% 32.89% N/A N/A N/A
T. Rowe Price New America
Growth Portfolio........................ 16.86% 19.43% 17.06% 48.99% N/A N/A N/A
T. Rowe Price Int'l Stock Portfolio......... 14.25% 1.66% 13.09% 9.64% N/A N/A N/A
OCC Accumulation Trust Managed Portfolio.... 5.64% 20.59% 21.05% 43.53% N/A N/A N/A
OCC Accumulation Trust Small Cap Portfolio.. -10.29% 20.54% 17.06% 13.63% N/A N/A N/A
OCC Accumulation Trust U.S. Gov't
Income Portfolio........................ 6.66% 5.59% 1.59% 10.07% N/A N/A N/A
</TABLE>
9
<PAGE>
NON-STANDARDIZED ADJUSTED HISTORICAL CUMULATIVE RETURN AND NON-STANDARDIZED
ADJUSTED HISTORICAL AVERAGE ANNUAL TOTAL RETURN
Peoples Benefit may show Non-Standardized Adjusted Historical Cumulative Return
and Non-Standardized Adjusted Historical Average Annual Total Return, calculated
on the basis of the historical performance of the Portfolios (calculated
beginning from the end of the year of inception for each Portfolio) and may
assume the Contract was in existence prior to its inception date (which it was
not). After the Contract's inception date, the calculations will reflect actual
Accumulation Unit Values. These returns are based on specified premium patterns
which produce the resulting Accumulated Values. They reflect a deduction for the
Separate Account expenses and Portfolio expenses. However, they do not include
the Annual Contract Fee, any sales loads or Premium Taxes (if any), which, if
included, would reduce the percentages reported.
The Non-Standardized Adjusted Historical Cumulative Return for a Subaccount is
the effective annual rate of return that would have produced the ending
Accumulated Value of the stated one-year period.
The Non-Standardized Adjusted Historical Average Annual Total Return for a
Subaccount is the effective annual compounded rate of return that would have
produced the ending Accumulated Value over the stated period had the performance
remained constant throughout.
When applicable, the following Funds' inception dates are used in the
calculation of non-standardized adjusted historical performance figures:
April 1, 1982 for the Fidelity VIP Money Market Portfolio; October 9, 1986 for
the Fidelity VIP Equity-Income Portfolio; October 9, 1986 for the Fidelity VIP
Growth Portfolio; September 6, 1989 for the Fidelity VIP II Asset Manager
Portfolio; May 2, 1994 for the Dreyfus Growth and Income Portfolio; August 31,
1990 for the Dreyfus Quality Bond Portfolio; March 31, 1994 for the T. Rowe
Price Income Portfolio; March 31, 1994 for the T. Rowe Price New America Growth
Portfolio; March 31, 1994 for the T. Rowe Price International Stock Portfolio;
July 31, 1988 for the OCC Accumulation Trust Managed Portfolio; July 31, 1988
for the OCC Accumulation Trust Small Cap Portfolio; and November 18, 1994 for
the OCC Accumulation Trust U.S. Government Income Portfolio.
ADJUSTED HISTORICAL CUMULATIVE RETURNS FOR PERIODS ENDING 12/31/98
(BASED ON SINGLE INITIAL PURCHASE)
<TABLE>
<CAPTION>
Total Since
Fund
Inception
1 Year 3 Year 5 Year Year-End
------- ------- ------- ------------
<S> <C> <C> <C> <C>
Fidelity VIP Money Market Portfolio................. 4.01% 12.46% 20.73% 137.51%
Fidelity VIP Equity-Income Portfolio................ 10.08% 56.69% 120.60% 334.00%
Fidelity VIP Growth Portfolio....................... 37.56% 89.43% 149.31% 497.80%
Fidelity VIP II Asset Manager Portfolio............. 13.46% 52.53% 62.89% 166.93%
DVIF: Growth and Income Portfolio................... 10.26% 50.44% N/A 136.78%
DVIF: Quality Bond Portfolio........................ 4.63% 14.12% 27.51% 83.41%
TRP Equity Income Portfolio......................... 7.56% 61.11% N/A 127.02%
TRP New America Growth Portfolio.................... 16.86% 65.27% N/A 146.14%
TRP International Stock Portfolio................... 14.25% 31.35% N/A 45.09%
OCC Accumulation Trust Managed Portfolio............ 5.64% 54.21% 123.97% 437.92%
OCC Accumulation Trust Small Cap Portfolio.......... -10.29% 26.58% 40.39% 207.88%
OCC Accumulation Trust U.S. Gov't Income Portfolio.. 6.66% 14.41% N/A 27.53%
</TABLE>
10
<PAGE>
ADJUSTED HISTORICAL AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING 12/31/98
(BASED ON SINGLE INITIAL PURCHASE)
<TABLE>
<CAPTION>
Total Since
Fund
Inception
1 Year 3 Year 5 Year Year-End
------- ------- ------- ------------
<S> <C> <C> <C> <C>
Fidelity VIP Money Market Portfolio................. 4.01% 3.99% 3.84% 5.30%
Fidelity VIP Equity-Income Portfolio................ 10.08% 16.15% 17.14% 12.82%
Fidelity VIP Growth Portfolio....................... 37.56% 23.73% 20.05% 15.83%
Fidelity VIP II Asset Manager Portfolio............. 13.46% 15.11% 10.25% 11.11%
DVIF: Growth and Income Portfolio................... 10.26% 14.58% N/A 20.30%
DVIF: Quality Bond Portfolio........................ 4.63% 4.50% 4.98% 7.55%
TRP Equity Income Portfolio......................... 7.56% 17.23% N/A 18.84%
TRP New America Growth Portfolio.................... 16.86% 18.23% N/A 20.88%
TRP International Stock Portfolio................... 14.25% 9.52% N/A 8.15%
OCC Accumulation Trust Managed Portfolio............ 5.64% 15.53% 17.50% 17.53%
OCC Accumulation Trust Small Cap Portfolio.......... -10.29% 8.18% 7.02% 11.40%
OCC Accumulation Trust U.S. Gov't Income Portfolio.. 6.66% 4.59% N/A 6.08%
</TABLE>
Note: Advertisements and other sales literature for the Portfolios may quote
total returns which are calculated on non-standardized base periods. These total
returns also represent the historic change in the value of an investment in the
Portfolios based on monthly reinvestment of dividends over a specific period of
time.
HYPOTHETICAL ILLUSTRATIONS
Fidelity VIP Equity Income Portfolio
<TABLE>
<CAPTION>
$2,000 Purchase Payment made December 31, 1986 $50,000 Single Purchase Payment Made
and Yearly December 31st Thereafter December 31, 1986
--------------------------------------------------- --------------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
---------------------------- --------------------- -------------------------- ----------------------
One Average One Average
Year Annual Year Annual Cumulative
Cumulative Accumulated Total Total Cumulative Accumulated Total Total Fund Total
Date Payment Value Return Return Payment Value Return Return Return
- ---------- ------------ -------------- --------- ---------- ---------- -------------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/86 $ 2,000 N/A N/A N/A $50,000 N/A N/A N/A N/A
12/31/87 $ 4,000 $ 1,950 -2.51% -2.51% $50,000 $ 48,743 -2.51% -2.51% -2.51%
12/31/88 $ 6,000 $ 4,779 20.99% 12.46% $50,000 $ 58,975 20.99% 8.60% 17.95%
12/31/89 $ 8,000 $ 7,843 15.70% 14.00% $50,000 $ 68,233 15.70% 10.92% 36.47%
12/31/90 $10,000 $ 8,221 -16.48% 1.09% $50,000 $ 56,991 -16.48% 3.33% 13.98%
12/31/91 $12,000 $13,247 29.60% 9.52% $50,000 $ 73,860 29.60% 8.12% 47.72%
12/31/92 $14,000 $17,572 15.25% 11.01% $50,000 $ 85,126 15.25% 9.27% 70.25%
12/31/93 $16,000 $22,828 16.63% 12.25% $50,000 $ 99,286 16.63% 10.30% 98.57%
12/31/94 $18,000 $26,211 5.57% 10.90% $50,000 $104,817 5.57% 9.69% 109.63%
12/31/95 $20,000 $37,583 33.22% 14.48% $50,000 $139,637 33.22% 12.09% 179.27%
12/31/96 $22,000 $44,602 12.68% 14.20% $50,000 $157,345 12.68% 12.15% 214.69%
12/31/97 $24,000 $58,872 26.33% 15.78% $50,000 $198,769 26.33% 13.37% 297.54%
12/31/98 $26,000 $67,007 10.08% 15.06% $50,000 $218,804 10.08% 13.09% 337.61%
</TABLE>
11
<PAGE>
Fidelity VIP Growth Portfolio
<TABLE>
<CAPTION>
$2,000 Purchase Payment made December 31, 1986 $50,000 Single Purchase Payment Made
and Yearly December 31st Thereafter December 31, 1986
--------------------------------------------------- --------------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
---------------------------- --------------------- -------------------------- ----------------------
One Average One Average
Year Annual Year Annual Cumulative
Cumulative Accumulated Total Total Cumulative Accumulated Total Total Fund Total
Date Payment Value Return Return Payment Value Return Return Return
- ---------- ------------ -------------- --------- ---------- ---------- -------------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/86 $ 2,000 N/A N/A N/A $50,000 N/A N/A N/A N/A
12/31/87 $ 4,000 $ 2,044 2.21% 2.21% $50,000 $ 51,104 2.21% 2.21% 2.21%
12/31/88 $ 6,000 $ 4,609 13.96% 9.83% $50,000 $ 58,240 13.96% 7.93% 16.48%
12/31/89 $ 8,000 $ 8,570 29.67% 18.92% $50,000 $ 75,519 29.67% 14.73% 51.04%
12/31/90 $10,000 $ 9,199 -12.97% 5.67% $50,000 $ 65,727 -12.97% 7.08% 31.45%
12/31/91 $12,000 $16,068 43.47% 16.25% $50,000 $ 94,300 43.47% 13.53% 88.60%
12/31/92 $14,000 $19,475 7.79% 14.02% $50,000 $101,646 7.79% 12.55% 103.29%
12/31/93 $16,000 $25,276 17.70% 14.82% $50,000 $119,636 17.70% 13.27% 139.27%
12/31/94 $18,000 $26,889 -1.42% 11.46% $50,000 $117,937 -1.42% 11.32% 135.87%
12/31/95 $20,000 $38,563 33.49% 14.98% $50,000 $157,433 33.49% 13.59% 214.87%
12/31/96 $22,000 $45,876 13.10% 14.69% $50,000 $178,051 13.10% 13.54% 256.10%
12/31/97 $24,000 $58,295 21.76% 15.63% $50,000 $216,803 21.76% 14.27% 333.61%
12/31/98 $26,000 $82,940 37.56% 18.09% $50,000 $298,228 37.56% 16.05% 496.46%
</TABLE>
Fidelity VIP II Asset Manager Portfolio
<TABLE>
<CAPTION>
$2,000 Purchase Payment made December 31, 1989 $50,000 Single Purchase Payment Made
and Yearly December 31st Thereafter December 31, 1989
--------------------------------------------------- --------------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
---------------------------- --------------------- -------------------------- ----------------------
One Average One Average
Year Annual Year Annual Cumulative
Cumulative Accumulated Total Total Cumulative Accumulated Total Total Fund Total
Date Payment Value Return Return Payment Value Return Return Return
- ---------- ------------ -------------- --------- ---------- ---------- -------------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/89 $ 2,000 N/A N/A N/A $50,000 N/A N/A N/A N/A
12/31/90 $ 4,000 $ 2,105 5.23% 5.23% $50,000 $ 52,613 5.23% 5.23% 5.23%
12/31/91 $ 6,000 $ 4,960 20.84% 15.23% $50,000 $ 63,580 20.84% 12.76% 27.16%
12/31/92 $ 8,000 $ 7,666 10.15% 12.76% $50,000 $ 70,031 10.15% 11.89% 40.06%
12/31/93 $10,000 $11,554 19.53% 15.26% $50,000 $ 83,709 19.53% 13.75% 67.42%
12/31/94 $12,000 $12,551 -7.40% 7.67% $50,000 $ 77,511 -7.40% 9.16% 55.02%
12/31/95 $14,000 $16,782 15.33% 9.67% $50,000 $ 89,396 15.33% 10.17% 78.79%
12/31/96 $16,000 $21,223 13.00% 10.42% $50,000 $101,016 13.00% 10.57% 102.03%
12/31/97 $18,000 $27,629 18.97% 12.06% $50,000 $120,182 18.97% 11.59% 140.36%
12/31/98 $20,000 $33,616 13.46% 12.30% $50,000 $136,353 13.46% 11.79% 172.71%
</TABLE>
12
<PAGE>
Fidelity VIP Money Market Portfolio
<TABLE>
<CAPTION>
$2,000 Purchase Payment made December 31, 1983 $50,000 Single Purchase Payment Made
and Yearly December 31st Thereafter December 31, 1983
--------------------------------------------------- --------------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
---------------------------- --------------------- -------------------------- ----------------------
One Average One Average
Year Annual Year Annual Cumulative
Cumulative Accumulated Total Total Cumulative Accumulated Total Total Fund Total
Date Payment Value Return Return Payment Value Return Return Return
- ---------- ------------ -------------- --------- ---------- ---------- -------------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/83 $ 2,000 N/A N/A N/A $50,000 N/A N/A N/A N/A
12/31/84 $ 4,000 $ 2,178 8.88% 8.88% $50,000 $ 54,442 8.88% 8.88% 8.88%
12/31/85 $ 6,000 $ 4,453 6.60% 7.37% $50,000 $ 58,033 6.60% 7.73% 16.07%
12/31/86 $ 8,000 $ 6,789 5.21% 6.31% $50,000 $ 61,055 5.21% 6.88% 22.11%
12/31/87 $10,000 $ 9,224 4.95% 5.78% $50,000 $ 64,077 4.95% 6.40% 28.15%
12/31/88 $12,000 $11,885 5.89% 5.81% $50,000 $ 67,849 5.89% 6.30% 35.70%
12/31/89 $14,000 $14,939 7.59% 6.29% $50,000 $ 73,000 7.59% 6.51% 46.00%
12/31/90 $16,000 $18,045 6.53% 6.35% $50,000 $ 77,765 6.53% 6.51% 55.53%
12/31/91 $18,000 $20,968 4.60% 5.98% $50,000 $ 81,346 4.60% 6.27% 62.69%
12/31/92 $20,000 $23,530 2.45% 5.32% $50,000 $ 83,335 2.45% 5.84% 66.67%
12/31/93 $22,000 $25,985 1.79% 4.71% $50,000 $ 84,822 1.78% 5.43% 69.64%
12/31/94 $24,000 $28,766 2.79% 4.41% $50,000 $ 87,189 2.79% 5.19% 74.38%
12/31/95 $26,000 $32,125 4.42% 4.41% $50,000 $ 91,039 4.42% 5.12% 82.08%
12/31/96 $28,000 $35,469 3.94% 4.35% $50,000 $ 94,625 3.94% 5.03% 89.25%
12/31/97 $30,000 $38,000 4.02% 4.31% $50,000 $ 98,432 4.02% 4.96% 96.86%
12/31/98 $32,000 $42,621 4.01% 4.27% $50,000 $102,383 4.01% 4.89% 104.77%
</TABLE>
Dreyfus Quality Bond Portfolio
<TABLE>
<CAPTION>
$2,000 Purchase Payment made December 31, 1989 $50,000 Single Purchase Payment Made
and Yearly December 31st Thereafter December 31, 1989
--------------------------------------------------- --------------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
---------------------------- --------------------- -------------------------- ----------------------
One Average One Average
Year Annual Year Annual Cumulative
Cumulative Accumulated Total Total Cumulative Accumulated Total Total Fund Total
Date Payment Value Return Return Payment Value Return Return Return
- ---------- ------------ -------------- --------- ---------- ---------- -------------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/89 $ 2,000 N/A N/A N/A $50,000 N/A N/A N/A N/A
12/31/90 $ 4,000 $ 2,019 0.97% 0.97% $50,000 $50,483 0.97% 0.97% 0.97%
12/31/91 $ 6,000 $ 4,523 12.52% 8.47% $50,000 $56,805 12.52% 6.59% 13.61%
12/31/92 $ 8,000 $ 7,209 10.52% 9.46% $50,000 $62,781 10.52% 7.88% 25.56%
12/31/93 $10,000 $10,472 13.72% 11.07% $50,000 $71,392 13.72% 9.31% 42.78%
12/31/94 $12,000 $11,733 -5.93% 5.38% $50,000 $67,161 -5.93% 6.08% 34.32%
12/31/95 $14,000 $16,308 18.75% 8.83% $50,000 $79,755 18.75% 8.09% 59.51%
12/31/96 $16,000 $18,615 1.68% 7.13% $50,000 $81,000 1.68% 7.15% 62.18%
12/31/97 $18,000 $22,113 7.27% 7.16% $50,000 $86,987 7.27% 7.17% 73.97%
12/31/98 $20,000 $25,231 4.63% 6.69% $50,000 $91,017 4.63% 6.88% 82.03%
</TABLE>
13
<PAGE>
Dreyfus Growth and Income Portfolio
<TABLE>
<CAPTION>
$2,000 Purchase Payment made December 31, 1994 $50,000 Single Purchase Payment Made
and Yearly December 31st Thereafter December 31, 1994
--------------------------------------------------- --------------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
---------------------------- --------------------- -------------------------- ----------------------
One Average One Average
Year Annual Year Annual Cumulative
Cumulative Accumulated Total Total Cumulative Accumulated Total Total Fund Total
Date Payment Value Return Return Payment Value Return Return Return
- ---------- ------------ -------------- --------- ---------- ---------- -------------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/94 $ 2,000 N/A N/A N/A $50,000 N/A N/A N/A N/A
12/31/95 $ 4,000 $ 3,193 59.65% 59.65% $50,000 $ 79,825 59.65% 59.65% 59.65%
12/31/96 $ 6,000 $ 6,183 19.06% 32.80% $50,000 $ 95,039 19.06% 37.87% 90.08%
12/31/97 $ 8,000 $ 9,377 14.60% 24.05% $50,000 $108,910 14.60% 29.63% 117.82%
12/31/98 $10,000 $12,545 10.26% 18.83% $50,000 $120,088 10.26% 24.49% 140.18%
</TABLE>
T. Rowe Price Equity Income Portfolio
<TABLE>
<CAPTION>
$2,000 Purchase Payment made December 31, 1994 $50,000 Single Purchase Payment Made
and Yearly December 31st Thereafter December 31, 1994
--------------------------------------------------- --------------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
---------------------------- --------------------- -------------------------- ----------------------
One Average One Average
Year Annual Year Annual Cumulative
Cumulative Accumulated Total Total Cumulative Accumulated Total Total Fund Total
Date Payment Value Return Return Payment Value Return Return Return
- ---------- ------------ -------------- --------- ---------- ---------- -------------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/94 $ 2,000 N/A N/A N/A $50,000 N/A N/A N/A N/A
12/31/95 $ 4,000 $ 2,658 32.89% 32.89% $50,000 $ 66,446 32.89% 32.89% 32.89%
12/31/96 $ 6,000 $ 5,491 17.88% 23.07% $50,000 $ 78,330 17.88% 25.16% 56.66%
12/31/97 $ 8,000 $ 9,518 27.06% 24.92% $50,000 $ 99,529 27.06% 25.79% 99.06%
12/31/98 $10,000 $12,389 7.56% 18.28% $50,000 $107,050 7.56% 20.96% 114.10%
</TABLE>
T. Rowe Price International Portfolio
<TABLE>
<CAPTION>
$2,000 Purchase Payment made December 31, 1994 $50,000 Single Purchase Payment Made
and Yearly December 31st Thereafter December 31, 1994
--------------------------------------------------- --------------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
---------------------------- --------------------- -------------------------- ----------------------
One Average One Average
Year Annual Year Annual Cumulative
Cumulative Accumulated Total Total Cumulative Accumulated Total Total Fund Total
Date Payment Value Return Return Payment Value Return Return Return
- ---------- ------------ -------------- --------- ---------- ---------- -------------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/94 $ 2,000 N/A N/A N/A $50,000 N/A N/A N/A N/A
12/31/95 $ 4,000 $ 2,193 9.64% 9.64% $50,000 $54,818 9.64% 9.64% 9.64%
12/31/96 $ 6,000 $ 4,742 13.09% 11.89% $50,000 $61,995 13.09% 11.35% 23.99%
12/31/97 $ 8,000 $ 6,853 1.66% 6.80% $50,000 $63,023 1.66% 8.02% 26.05%
12/31/98 $10,000 $10,115 14.25% 9.61% $50,000 $72,005 14.25% 9.55% 44.01%
</TABLE>
14
<PAGE>
T. Rowe Price New America Growth Fund Portfolio
<TABLE>
<CAPTION>
$2,000 Purchase Payment made December 31, 1994 $50,000 Single Purchase Payment Made
and Yearly December 31st Thereafter December 31, 1994
--------------------------------------------------- --------------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
---------------------------- --------------------- -------------------------- ----------------------
One Average One Average
Year Annual Year Annual Cumulative
Cumulative Accumulated Total Total Cumulative Accumulated Total Total Fund Total
Date Payment Value Return Return Payment Value Return Return Return
- ---------- ------------ -------------- --------- ---------- ---------- -------------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/94 $ 2,000 N/A N/A N/A $50,000 N/A N/A N/A N/A
12/31/95 $ 4,000 $ 2,980 48.99% 48.99% $50,000 $ 74,495 48.99% 48.99% 48.99%
12/31/96 $ 6,000 $ 5,954 19.13% 29.63% $50,000 $ 89,227 19.13% 33.62% 76.42%
12/31/97 $ 8,000 $ 9,431 19.43% 24.39% $50,000 $105,351 19.43% 28.20% 110.70%
12/31/98 $10,000 $13,359 16.86% 21.60% $50,000 $123,116 16.86% 25.27% 146.23%
</TABLE>
OCC Accumulation Trust Managed Portfolio
<TABLE>
<CAPTION>
$2,000 Purchase Payment made December 31, 1988 $50,000 Single Purchase Payment Made
and Yearly December 31st Thereafter December 31, 1988
--------------------------------------------------- --------------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
---------------------------- --------------------- -------------------------- ----------------------
One Average One Average
Year Annual Year Annual Cumulative
Cumulative Accumulated Total Total Cumulative Accumulated Total Total Fund Total
Date Payment Value Return Return Payment Value Return Return Return
- ---------- ------------ -------------- --------- ---------- ---------- -------------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/88 $ 2,000 N/A N/A N/A $50,000 N/A N/A N/A N/A
12/31/89 $ 4,000 $ 2,504 25.19% 25.19% $50,000 $62,595 25.19% 25.19% 25.19%
12/31/90 $ 6,000 $ 3,229 -28.32% -13.46% $50,000 $44,868 -28.32% -5.27% -10.26%
12/31/91 $ 8,000 $ 7,809 49.36% 13.77% $50,000 $67,015 49.36% 10.26% 34.03%
12/31/92 $10,000 $ 7,861 -19.86% -0.70% $50,000 $53,706 -19.86% 1.80% 7.41%
12/31/93 $12,000 $ 9,046 -8.26% -3.32% $50,000 $49,270 -8.26% -0.29% -1.46%
12/31/94 $14,000 $10,124 -8.35% -4.84% $50,000 $45,156 -8.35% -1.68% -9.69%
12/31/95 $16,000 $17,402 43.53% -0.25% $50,000 $64,814 43.53% 3.78% 29.63%
12/31/96 $18,000 $23,487 21.05% 8.49% $50,000 $78,459 21.05% 5.79% 56.92%
12/31/97 $20,000 $30,736 20.59% 10.56% $50,000 $94,618 20.59% 7.34% 89.24%
12/31/98 $22,000 $34,581 5.64% 9.76% $50,000 $99,951 5.64% 7.17% 99.90%
</TABLE>
OCC Accumulation Trust US Government Income Portfolio
<TABLE>
<CAPTION>
$2,000 Purchase Payment made December 31, 1994 $50,000 Single Purchase Payment Made
and Yearly December 31st Thereafter December 31, 1994
--------------------------------------------------- --------------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
---------------------------- --------------------- -------------------------- ----------------------
One Average One Average
Year Annual Year Annual Cumulative
Cumulative Accumulated Total Total Cumulative Accumulated Total Total Fund Total
Date Payment Value Return Return Payment Value Return Return Return
- ---------- ------------ -------------- --------- ---------- ---------- -------------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/94 $ 2,000 N/A N/A N/A $50,000 N/A N/A N/A N/A
12/31/95 $ 4,000 $2,201 10.07% 10.07% $50,000 $55,035 10.07% 10.07% 10.07%
12/31/96 $ 6,000 $4,294 2.21% 4.83% $50,000 $56,250 2.21% 6.07% 11.82%
12/31/97 $ 8,000 $6,619 5.59% 4.99% $50,000 $59,036 5.59% 5.69% 18.07%
12/31/98 $10,000 $9,193 6.66% 5.64% $50,000 $62,968 6.66% 5.93% 25.94%
</TABLE>
15
<PAGE>
OCC Accumulation Trust Small Cap Portfolio
<TABLE>
<CAPTION>
$2,000 Purchase Payment made December 31, 1988 $50,000 Single Purchase Payment Made
and Yearly December 31st Thereafter December 31, 1988
--------------------------------------------------- --------------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
---------------------------- --------------------- -------------------------- ----------------------
One Average One Average
Year Annual Year Annual Cumulative
Cumulative Accumulated Total Total Cumulative Accumulated Total Total Fund Total
Date Payment Value Return Return Payment Value Return Return Return
- ---------- ------------ -------------- --------- ---------- ---------- -------------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/88 $ 2,000 N/A N/A N/A $50,000 N/A N/A N/A N/A
12/31/89 $ 4,000 $ 2,290 14.52% 14.52% $50,000 $57,259 14.52% 14.52% 14.52%
12/31/90 $ 6,000 $ 3,225 -24.82% -13.52% $50,000 $43,047 -24.82% -7.21% -13.90%
12/31/91 $ 8,000 $ 8,457 61.85% 18.17% $50,000 $69,670 61.85% 11.69% 39.35%
12/31/92 $10,000 $ 8,457 -19.13% 2.24% $50,000 $56,345 -19.13% 3.03% 12.69%
12/31/93 $12,000 $10,143 -3.01% 0.47% $50,000 $54,650 -3.01% 1.79% 9.30%
12/31/94 $14,000 $ 9,917 -18.33% -5.42% $50,000 $44,634 -18.33% -1.87% 10.74%
12/31/95 $16,000 $13,541 13.63% -0.42% $50,000 $50,715 13.63% 0.20% 1.43%
12/31/96 $18,000 $18,192 17.06% 2.85% $50,000 $59,365 17.06% 2.17% 18.73%
12/31/97 $20,000 $24,339 20.54% 5.98% $50,000 $71,560 20.54% 4.06% 43.12%
12/31/98 $22,000 $23,629 -10.29% 3.01% $50,000 $64,197 -10.29% 2.53% 28.39%
</TABLE>
Individualized Computer Generated Illustrations
Peoples Benefit may from time to time use computer-based software available
through Morningstar, CDA/Wiesnberger and/or other firms to provide registered
representatives and existing and/or potential owners of Contracts with
individualized hypothetical performance illustrations for some or all of the
Portfolios. Such illustrations may include, without limitation, graphs, bar
charts and other types of formats presenting the following information: (i) the
historical results of a hypothetical investment in a single Portfolio; (ii) the
historical fluctuation of the value of a single Portfolio (actual and
hypothetical); (iii) the historical results of a hypothetical investment in more
than one Portfolio; (iv) the historical performance of two or more market
indices in relation to one another and/or one or more Portfolios; (v) the
historical performance of two or more market indices in comparison to a single
Portfolio or a group of Portfolios; (vi) a market risk/reward scatter chart
showing the historical risk/reward relationship of one or more mutual funds or
Portfolios to one or more indices and a broad category of similar anonymous
variable annuity subaccounts; and (vii) Portfolio data sheets showing various
information about one or more Portfolios (such as information concerning total
return for various periods, fees and expenses, standard deviation, alpha and
beta, investment objective, inception date and net assets).
PERFORMANCE COMPARISONS
Performance information for any Subaccount reflects only the performance of a
hypothetical Contract under which Accumulation Value is allocated to a
Subaccount during a particular time period on which the calculations are based.
Performance information should be considered in light of the investment
objectives and policies, characteristics and quality of the Portfolio in which
the Subaccount invests, and the market conditions during the given period, and
should not be considered as a representation of what may be achieved in the
future.
Reports and marketing materials may, from time to time, include information
concerning the rating of Peoples Benefit Life Insurance Company, Inc. as
determined by one or more of the ratings services listed below, or other
recognized rating services. Reports and promotional literature may also contain
other information including (i) the ranking of any Subaccount derived from
rankings of variable annuity separate accounts or other investment products
tracked by Lipper Analytical Services or by other rating services, companies,
publications, or other person who rank separate accounts or other investment
products on overall performance or other criteria, and (ii) the effect of tax-
deferred compounding on a Subaccount's investment returns, or returns in
general, which may be illustrated by graphs, charts, or
16
<PAGE>
otherwise, and which may include a comparison, at various points in time, of the
return from an investment in a Contract (or returns in general) on a tax-
deferred basis (assuming one or more tax rates) with the return on a taxable
basis.
Each Subaccount's performance depends on, among other things, the performance of
the underlying Portfolio which, in turn, depends upon such variables as:
. quality of underlying investments;
. average maturity of underlying investments;
. type of instruments in which the Portfolio is invested;
. changes in interest rates and market value of underlying investments;
. changes in Portfolio expenses; and
. the relative amount of the Portfolio's cash flow.
From time to time, we may advertise the performance of the Subaccounts and the
underlying Portfolios as compared to similar funds or portfolios using certain
indexes, reporting services and financial publications, and we may advertise
rankings or ratings issued by certain services and/or other institutions. These
may include, but are not limited to, the following:
. Dow Jones Industrial Average ("DJIA"), an unmanaged index representing
share prices of major industrial corporations, public utilities, and
transportation companies. Produced by the Dow Jones & Company, it is
cited as a principal indicator of market conditions.
. Standard & Poor's Daily Stock Price Index of 500 Common Stocks, a
composite index of common stocks in industrial, transportation, and
financial and public utility companies, which can be used to compare to
the total returns of funds whose portfolios are invested primarily in
common stocks. In addition, the Standard & Poor's index assumes
reinvestments of all dividends paid by stocks listed on its index. Taxes
due on any of these distributions are not included, nor are brokerage or
other fees calculated into the Standard & Poor's figures.
. Lipper Analytical Services, Inc., a reporting service that ranks funds
in various fund categories by making comparative calculations using
total return. Total return assumes the reinvestment of all income
dividends and capital gains distributions, if any. From time to time, we
may quote the Portfolios' Lipper rankings in various fund categories in
advertising and sales literature.
. Bank Rate Monitor National Index, Miami Beach, Florida, a financial
reporting service which publishes weekly average rates of 50 leading
bank and thrift institution money market deposit accounts. The rates
published in the index are an average of the personal account rates
offered on the Wednesday prior to the date of publication by ten of the
largest banks and thrifts in each of the five largest Standard
Metropolitan Statistical Areas. Account minimums range upward from
$2,500 in each institution, and compounding methods vary. If more than
one rate is offered, the lowest rate is used. Rates are subject to
change at any time specified by the institution.
. Shearson Lehman Government/Corporate (Total) Index, an index comprised
of approximately 5,000 issues which include: non-convertible bonds
publicly issued by the U.S. government or its agencies; corporate bonds
guaranteed by the U.S. government and quasi-federal corporations; and
publicly issued, fixed-rate, non-convertible domestic bonds of companies
in industry, public utilities and finance. The average maturity of these
bonds approximates nine years. Tracked by Shearson Lehman, Inc., the
index calculates total returns for one month, three month, twelve month,
and ten year periods and year-to-date.
17
<PAGE>
. Shearson Lehman Government/Corporate (Long-Term) Index, an index
composed of the same types of issues as defined above. However, the
average maturity of the bonds included in this index approximates 22
years.
. Shearson Lehman Government Index, an unmanaged index comprised of all
publicly issued, non-convertible domestic debt of the U.S. government,
or any agency thereof, or any quasi-federal corporation and of corporate
debt guaranteed by the U.S. government. Only notes and bonds with a
minimum outstanding principal of $1 million and a minimum maturity of
one year are included.
. Morningstar, Inc., an independent rating service that publishes the bi-
weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their risk-
adjusted returns. The maximum rating is five stars, and ratings are
effective for two weeks.
. Money, a monthly magazine that regularly ranks money market funds in
various categories based on the latest available seven-day compound
(effective) yield. From time to time, the Fund will quote its Money
ranking in advertising and sales literature.
. Standard & Poor's Utility Index, an unmanaged index of common stocks
from forty different utilities. This index indicates daily changes in
the price of the stocks. The index also provides figures for changes in
price from the beginning of the year to date, and for a twelve month
period.
. Dow Jones Utility Index, an unmanaged index comprised of fifteen utility
stocks that tracks changes in price daily and over a six month period.
The index also provides the highs and lows for each of the past five
years.
. The Consumer Price Index, a measure for determining inflation.
Investors may use such indexes (or reporting services) in addition to the Funds'
Prospectuses to obtain a more complete view of each Portfolio's performance
before investing. Of course, when comparing each Portfolio's performance to any
index, conditions such as composition of the index and prevailing market
conditions should be considered in assessing the significance of such companies.
Unmanaged indexes may assume the reinvestment of dividends but generally do not
reflect deductions for administrative and management costs and expenses.
When comparing funds using reporting services, or total return and yield, or
effective yield, investors should take into consideration any relevant
differences in funds such as permitted portfolio compositions and methods used
to value portfolio securities and compute offering price.
SAFEKEEPING OF ACCOUNT ASSETS
Title to assets of the Separate Account is held by Peoples Benefit. The assets
are kept physically segregated and held separate and apart from Peoples
Benefit's General Account assets. The General Account contains all of the assets
of Peoples Benefit. Records are maintained of all purchases and redemptions of
eligible Portfolio shares held by each of the Subaccounts and the General
Account.
CONFLICTS OF INTEREST WITH OTHER SEPARATE ACCOUNTS
The Portfolios may be made available to registered separate accounts offering
variable annuity and variable life products of Peoples Benefit or other
insurance companies. Although Peoples Benefit believes it is unlikely, a
material conflict could arise between the interests of the Separate Account and
one or more of the other participating separate accounts. In the event a
material conflict does exist, the affected insurance companies agree to take
any necessary steps, including removing their separate accounts from the Fund
if required by law, to resolve the matter. See the Fund's prospectus for more
information.
18
<PAGE>
PEOPLES BENEFIT
The Company is a direct subsidiary of Monumental Life Insurance Company, Capital
Liberty, L.P., and Commonwealth General Corporation, which, respectively, have
76.3%, 20%, and 3.7% interests in the Company. Monumental Life Insurance Company
is a direct subsidiary of Capital General Development Corporation and First AUSA
Life Insurance Company, which, respectively, have 73.23% and 26.77% interests in
Monumental Life Insurance Company. Monumental Life Insurance Company and
Commonwealth General Corporation have, respectively, 99% and 1% interests in
Capital Liberty, L.P. Commonwealth General Corporation is a wholly owned
subsidiary of AEGON USA, Inc. Capital General Development Corporation is a
wholly owned subsidiary of Commonwealth General Corporation. First AUSA Life
Insurance Company is a wholly owned subsidiary of AEGON USA, Inc.
The Company is a wholly owned indirect subsidiary of AEGON USA, Inc., which in
turn is wholly owned by AEGON U.S. Holding Corporation, a wholly owned
subsidiary of AEGON International N.V. AEGON International N.V. is a wholly
owned subsidiary of AEGON N.V. Vereniging AEGON (a Netherlands membership
association) has a 53.63% interest in AEGON N.V.
The Company was formerly known as National Home Life Assurance Company, until
July 1, 1995, when it changed its name to Providian Life and Health Insurance
Company. On October 1, 1998, it changed its name to Peoples Benefit Life
Insurance Company.
TAXES
Peoples Benefit is taxed as a life insurance company under Part I of Subchapter
L of the Internal Revenue Code. Since the Separate Account is not a separate
entity from Peoples Benefit and its operations form a part of Peoples Benefit,
the Separate Account will not be taxed separately as a "regulated investment
company" under Subchapter M of the Internal Revenue Code. Investment income and
realized capital gains on the assets of the Separate Account are reinvested and
taken into account in determining the Accumulated Value. Under existing federal
income tax law, the Separate Account's investment income, including realized net
capital gains, is not taxed to Peoples Benefit. Peoples Benefit reserves the
right to make a deduction for taxes should they be imposed with respect to such
items in the future.
Under present laws, Peoples Benefit will incur state or local taxes in several
states. At the present, Peoples Benefit does not charge the Contract Owner for
these taxes. If there is a change in state or local tax laws, Peoples Benefit
may make charges for such taxes. Peoples Benefit does not expect to incur any
federal income tax liability attributable to investment income or capital gains
retained as part of the reserves under the Contracts. Based upon these
expectations, no charge is currently being made to the Separate Account for
corporate federal income taxes that may be attributable to the Separate Account.
Peoples Benefit will periodically review the question of a charge to the
Separate Account for corporate federal income taxes related to the Separate
Account. Such a charge may be made in future years for any federal income taxes
Peoples Benefit incurs. This might become necessary if Peoples Benefit
ultimately determines that its tax treatment is not what it currently believes
it to be, if there are changes in the federal income tax treatment of annuities
at the corporate level, or if there is a change in Peoples Benefit's tax status.
If Peoples Benefit should incur federal income taxes attributable to investment
income or capital gains retained as part of the reserves under the Contracts,
the Accumulated Value of the Contract would be correspondingly adjusted by any
provision or charge for such taxes.
STATE REGULATION OF PEOPLES BENEFIT
Peoples Benefit is a stock life insurance company organized under the laws of
Missouri, and is subject to regulation by the Missouri State Department of
Insurance. An annual statement is filed with the Missouri Commissioner of
Insurance on or before March 1st of each year covering the operations and
reporting on the financial condition of Peoples Benefit as of December 31st of
the preceding calendar year. Periodically, the Missouri Commissioner of
Insurance examines the financial condition of Peoples Benefit, including the
liabilities and reserves of the Separate Account.
19
<PAGE>
RECORDS AND REPORTS
All records and accounts relating to the Separate Account will be maintained by
Peoples Benefit. As presently required by the Investment Company Act of 1940 and
regulations promulgated thereunder, Peoples Benefit will mail to all Contract
Owners at their last known address of record, at least semi-annually, reports
containing such information as may be required under that Act or by any other
applicable law or regulation. Contract Owners will also receive confirmation of
each financial transaction and any other reports required by law or regulation.
DISTRIBUTION OF THE CONTRACTS
AFSG Securities Corporation ("AFSG"), formerly Providian Securities Corporation,
the principal underwriter of the Contract, is ultimately a wholly-owned
subsidiary of AEGON N.V. AFSG 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, Inc. Commissions and expense allowance
payments not to exceed, in the aggregate, 6.75% of Purchase Payments may be paid
to entities which sell the Contract. Additional payments may be made for other
services not directly related to the sale of the Contract.
The Contract is offered to the public through brokers licensed under the federal
securities laws and state insurance laws that have entered into agreements with
AFSG. The offering of the Contract is continuous and AFSG does not anticipate
discontinuing the offering of the Contract. However, AFSG does reserve the right
to discontinue the offering of the Contract.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Separate Account is a party or to
which the assets of the Separate Account are subject. Peoples Benefit is not
involved in any litigation that is of material importance in relation to its
total assets or that relates to the Separate Account.
OTHER INFORMATION
A Registration Statement has been filed with the Securities and Exchange
Commission, under the Securities Act of 1933 as amended, with respect to the
Contract discussed in this Statement of Additional Information. Not all of the
information set forth in the Registration Statement, amendments and exhibits
thereto has been included in this Statement of Additional Information.
Statements contained in this Statement of Additional Information concerning the
content of the Contract and other legal instruments are intended to be
summaries. For a complete statement of the terms of these documents, reference
should be made to the instruments filed with the Securities and Exchange
Commission.
FINANCIAL STATEMENTS
The audited financial statements of certain subaccounts of the Separate Account
which are available for investment by Peoples Benefit Marquee Contract Owners as
of December 31, 1998, and for each of the two years in the period then ended,
including the Report of Independent Auditors thereon, are included in this
Statement of Additional Information.
The audited statutory-basis financial statements of Peoples Benefit as of
December 31, 1998 and 1997, and for the three years in the period ended December
31, 1998, including the Reports of Independent Auditors' thereon, are included
in this Statement of Additional Information. They should be distinguished from
the financial statements of certain subaccounts of the Separate Account which
are available for investment by Peoples Benefit Marquee Contract Owners and
should be considered only as bearing on the ability of Peoples Benefit to meet
its obligations under the Contracts. They should not be considered as bearing on
the investment performance of the assets held in the Separate Account.
20
<PAGE>
FINANCIAL STATEMENTS
PEOPLES BENEFIT LIFE INSURANCE COMPANY
SEPARATE ACCOUNT V - MARQUEE
VARIABLE ANNUITY
YEAR ENDED DECEMBER 31, 1998
WITH REPORT OF INDEPENDENT AUDITORS
<PAGE>
Peoples Benefit Life Insurance Company
Separate Account V - Marquee Variable Annuity
Financial Statements
Year ended December 31, 1998
CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors.............................................. 1
Financial Statements
Balance Sheet............................................................... 2
Statement of Operations..................................................... 6
Statements of Changes in Contract Owners' Equity............................ 10
Notes to Financial Statements............................................... 15
</TABLE>
<PAGE>
Report of Independent Auditors
The Board of Directors and Contract Owners of the
Marquee Variable Annuity,
Peoples Benefit Life Insurance Company
We have audited the accompanying balance sheet of certain subaccounts of Peoples
Benefit Life Insurance Company Separate Account V (formerly the Providian Life
and Health Insurance Company Separate Account V), which are available for
investment by the Marquee Variable Annuity contract owners, as of December 31,
1998, and the related statements of operations for the year then ended and
changes in contract owners' equity for each of the two years then ended. These
financial statements are the responsibility of the Variable Account's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of mutual fund shares owned as of December 31, 1998, by
correspondence with the mutual fund's transfer agent. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of certain subaccounts of Peoples
Benefit Life Insurance Company Separate Account V, which are available for
investment by the Marquee Variable Annuity contract owners, at December 31, 1998
and the results of their operations for the year then ended and changes in their
contract owners' equity for each of the two years then ended in conformity with
generally accepted accounting principles.
/s/ Ernst & Young
Des Moines, Iowa
January 29, 1999
1
<PAGE>
Peoples Benefit Life Insurance Company
Separate Account V - Marquee Variable Annuity
Balance Sheet
December 31, 1998
<TABLE>
<CAPTION>
FIDELITY
VIP MONEY
MARKET
TOTAL SUBACCOUNT
----------------------------------
<S> <C> <C>
ASSETS
Cash $ 153 $ 12
Investments in mutual funds, at current market value:
Variable Insurance Products Fund I and II:
Fidelity VIP Money Market Portfolio 14,017,713 14,017,713
Fidelity VIP Equity-Income Portfolio 28,278,482 -
Fidelity VIP Growth Portfolio 33,700,924 -
Fidelity VIP II Asset Manager Portfolio 9,698,095 -
Dreyfus Variable Investment Fund:
Growth and Income Portfolio 22,797,812 -
Quality Bond Portfolio 8,672,455 -
T. Rowe Price Equity Series, Inc.:
Equity Income Portfolio 15,798,743 -
New America Growth Portfolio 17,391,601 -
T. Rowe Price International Series, Inc.:
International Stock Portfolio 16,202,335 -
OCC Accumulation Trust:
Managed Portfolio 24,230,549 -
Small Cap Portfolio 10,792,489 -
U. S. Government Income Portfolio 3,281,586 -
-----------------------------------
Total investments in mutual funds 204,862,784 14,017,713
-----------------------------------
Total assets $204,862,937 $14,017,725
===================================
LIABILITIES AND CONTRACT OWNERS' EQUITY
Liabilities:
Contract terminations payable $ 4,043 $ -
-----------------------------------
Total liabilities 4,043 -
Contract owners' equity:
Deferred annuity contracts terminable by owners 204,858,894 14,017,725
-----------------------------------
Total liabilities and contract owners' equity $204,862,937 $14,017,725
===================================
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
FIDELITY VIP FIDELITY VIP FIDELITY VIP II GROWTH AND
EQUITY-INCOME GROWTH ASSET MANAGER INCOME QUALITY BOND
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ - $ - $ - $ 53 $ -
- - - - -
28,278,482 - - - -
- 33,700,924 - - -
- - 9,698,095 - -
- - - 22,797,812 -
- - - - 8,672,455
- - - - -
- - - - -
- - - - -
- - - - -
- - - - -
- - - - -
- -------------------------------------------------------------------------------------------
28,278,482 33,700,924 9,698,095 22,797,812 8,672,455
- -------------------------------------------------------------------------------------------
$28,278,482 $33,700,924 $9,698,095 $22,797,865 $8,672,455
===========================================================================================
$ 1,363 $ 126 $ 1,372 $ - $ 113
- -------------------------------------------------------------------------------------------
1,363 126 1,372 - 113
28,277,119 33,700,798 9,696,723 22,797,865 8,672,342
- -------------------------------------------------------------------------------------------
$28,278,482 $33,700,924 $9,698,095 $22,797,865 $8,672,455
===========================================================================================
</TABLE>
3
<PAGE>
Peoples Benefit Life Insurance Company
Separate Account V - Marquee Variable Annuity
Balance Sheet (continued)
<TABLE>
<CAPTION>
EQUITY INCOME
SUBACCOUNT
----------------
<S> <C>
ASSETS
Cash $ 70
Investments in mutual funds, at current market value:
Variable Insurance Products Fund I and II:
Fidelity VIP Money Market Portfolio -
Fidelity VIP Equity-Income Portfolio -
Fidelity VIP Growth Portfolio -
Fidelity VIP II Asset Manager Portfolio -
Dreyfus Variable Investment Fund:
Growth and Income Portfolio -
Quality Bond Portfolio -
T. Rowe Price Equity Series, Inc.:
Equity Income Portfolio 15,798,743
New America Growth Portfolio -
T. Rowe Price International Series, Inc.:
International Stock Portfolio -
OCC Accumulation Trust:
Managed Portfolio -
Small Cap Portfolio -
U. S. Government Income Portfolio -
----------------
Total investments in mutual funds 15,798,743
----------------
Total assets $15,798,813
================
LIABILITIES AND CONTRACT OWNERS' EQUITY
Liabilities:
Contract terminations payable $ -
----------------
Total liabilities -
Contract owners' equity:
Deferred annuity contracts terminable by owners 15,798,813
----------------
Total liabilities and contract owners' equity $15,798,813
================
</TABLE>
See accompanying notes.
4
<PAGE>
<TABLE>
<CAPTION>
U. S.
NEW AMERICA INTERNATIONAL GOVERNMENT
GROWTH STOCK MANAGED SMALL CAP INCOME
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ - $ 18 $ - $ - $ -
- - - - -
- - - - -
- - - - -
- - - - -
- - - - -
- - - - -
- - - - -
17,391,601 - - - -
- 16,202,335 - - -
- - 24,230,549
- - - 10,792,489 -
- - - - 3,281,586
- -----------------------------------------------------------------------------------
17,391,601 16,202,335 24,230,549 10,792,489 3,281,586
- -----------------------------------------------------------------------------------
$17,391,601 $16,202,353 $24,230,549 $10,792,489 $3,281,586
===================================================================================
$ 491 $ - $ 37 $ 343 $ 198
- -----------------------------------------------------------------------------------
491 - 37 343 198
17,391,110 16,202,353 24,230,512 10,792,146 3,281,388
- -----------------------------------------------------------------------------------
$17,391,601 $16,202,353 $24,230,549 $10,792,489 $3,281,586
===================================================================================
</TABLE>
5
<PAGE>
Peoples Benefit Life Insurance Company
Separate Account V - Marquee Variable Annuity
Statement of Operations
Year ended December 31, 1998
<TABLE>
<CAPTION>
FIDELITY
VIP MONEY
MARKET
TOTAL SUBACCOUNT
----------------------------
<S> <C> <C>
NET INVESTMENT INCOME
Income:
Dividends $11,858,847 $ 702,552
Expenses:
Administration fee 83,510 3,830
Mortality and expense risk charge 2,810,389 181,009
----------------------------
Net investment income 8,964,948 517,713
NET REALIZED AND UNREALIZED CAPITAL GAIN (LOSS) FROM
INVESTMENTS
Net realized capital gain from sales of investments:
Proceeds from sales 68,246,581 17,981,842
Cost of investments sold 60,727,405 17,981,842
----------------------------
Net realized capital gain from sales of investments 7,519,176 -
Net change in unrealized appreciation/depreciation of
investments:
Beginning of the period 29,782,175 -
End of the period 35,766,501 -
----------------------------
Net change in unrealized appreciation/depreciation of
investments 5,984,326 -
----------------------------
Net realized and unrealized capital gain (loss) from
investments 13,503,502 -
----------------------------
Increase (decrease) from operations $22,468,450 $ 517,713
============================
</TABLE>
See accompanying notes.
6
<PAGE>
<TABLE>
<CAPTION>
FIDELITY VIP
EQUITY- FIDELITY VIP FIDELITY VIP II GROWTH AND
INCOME GROWTH ASSET MANAGER INCOME QUALITY BOND
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$1,759,481 $ 3,855,950 $1,161,588 $ 661,149 $ 572,687
11,979 11,195 3,778 12,063 3,041
388,375 418,028 130,281 320,518 104,733
- ------------------------------------------------------------------------------------------
1,359,127 3,426,727 1,027,529 328,568 464,913
7,249,730 7,729,434 1,756,074 6,513,948 1,784,317
6,133,467 6,331,830 1,665,668 6,046,402 1,745,048
- ------------------------------------------------------------------------------------------
1,116,263 1,397,604 90,406 467,546 39,269
5,243,591 5,451,176 1,258,351 1,128,602 163,629
5,373,984 10,265,423 1,305,450 2,597,934 (51,289)
- ------------------------------------------------------------------------------------------
130,393 4,814,247 47,099 1,469,332 (214,918)
- ------------------------------------------------------------------------------------------
1,246,656 6,211,851 137,505 1,936,878 (175,649)
- ------------------------------------------------------------------------------------------
$2,605,783 $ 9,638,578 $1,165,034 $2,265,446 $ 289,264
==========================================================================================
</TABLE>
7
<PAGE>
Peoples Benefit Life Insurance Company
Separate Account V - Marquee Variable Annuity
Statement of Operations (continued)
<TABLE>
<CAPTION>
EQUITY
INCOME
SUBACCOUNT
--------------
<S> <C>
NET INVESTMENT INCOME
Income:
Dividends $ 806,615
Expenses:
Administration fee 6,088
Mortality and expense risk charge 214,683
--------------
Net investment income 585,844
NET REALIZED AND UNREALIZED CAPITAL GAIN (LOSS) FROM INVESTMENTS
Net realized capital gain from sales of investments:
Proceeds from sales 3,655,875
Cost of investments sold 2,953,958
--------------
Net realized capital gain from sales of investments 701,917
Net change in unrealized appreciation/depreciation of investments:
Beginning of the period 2,819,124
End of the period 2,657,775
--------------
Net change in unrealized appreciation/depreciation of investments (161,349)
--------------
Net realized and unrealized capital gain (loss) from investments 540,568
--------------
Increase (decrease) from operations $1,126,412
==============
</TABLE>
See accompanying notes.
8
<PAGE>
<TABLE>
<CAPTION>
U. S.
NEW AMERICA INTERNATIONAL GOVERNMENT
GROWTH STOCK MANAGED SMALL CAP INCOME
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 347,754 $ 255,470 $1,004,327 $ 564,739 $166,535
7,352 7,138 11,263 5,131 652
243,669 236,784 361,701 177,160 33,448
- --------------------------------------------------------------------------------------
96,733 11,548 631,363 382,448 132,435
5,051,119 5,110,391 6,495,709 4,409,893 508,249
3,754,781 4,405,757 5,178,811 4,036,728 493,113
- --------------------------------------------------------------------------------------
1,296,338 704,634 1,316,898 373,165 15,136
4,224,036 1,230,719 5,493,807 2,739,617 29,523
5,468,223 2,713,219 4,861,157 536,017 38,608
- --------------------------------------------------------------------------------------
1,244,187 1,482,500 (632,650) (2,203,600) 9,085
- --------------------------------------------------------------------------------------
2,540,525 2,187,134 684,248 (1,830,435) 24,221
- --------------------------------------------------------------------------------------
$2,637,258 $2,198,682 $1,315,611 $(1,447,987) $156,656
======================================================================================
</TABLE>
9
<PAGE>
Peoples Benefit Life Insurance Company
Separate Account V - Marquee Variable Annuity
Statements of Changes in Contract Owners' Equity
Years ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
FIDELITY VIP
TOTAL MONEY MARKET SUBACCOUNT
-------------------------------- -------------------------------
1998 1997 1998 1997
-------------------------------- -------------------------------
<S> <C> <C>
Operations:
Net investment income (loss) $ 8,964,948 $ 6,595,177 $ 517,713 $ 529,250
Net realized capital gain 7,519,176 2,942,730 - -
Net change in unrealized appreciation/
depreciation of investments 5,984,326 17,742,256 - -
-------------------------------- ------------------------------
Increase (decrease) from operations 22,468,450 27,280,163 517,713 529,250
Contract transactions:
Net contract purchase payments 17,502,992 33,932,081 8,505,749 4,440,198
Transfer payments from (to) other subaccounts
or general account (4,163,482) 43,791 (2,831,329) (9,168,279)
Contract terminations, withdrawals and other
deductions (29,589,672) (11,475,665) (4,315,475) (1,880,823)
-------------------------------- ------------------------------
Increase (decrease) from contract transactions (16,250,162) 22,500,207 1,358,945 (6,608,904)
-------------------------------- ------------------------------
Net increase (decrease) in contract owners'
equity 6,218,288 49,780,370 1,876,658 (6,079,654)
Contract owners' equity:
Beginning of the period 198,640,606 148,860,236 12,141,067 18,220,721
-------------------------------- ------------------------------
End of the period $204,858,894 $198,640,606 $14,017,725 $12,141,067
================================ ==============================
</TABLE>
See accompanying notes.
10
<PAGE>
<TABLE>
<CAPTION>
FIDELITY VIP FIDELITY VIP GROWTH FIDELITY VIP II ASSET GROWTH AND INCOME
EQUITY-INCOME SUBACCOUNT SUBACCOUNT MANAGER SUBACCOUNT SUBACCOUNT
- ---------------------------- ---------------------------- ----------------------------- --------------------------
1998 1997 1998 1997 1998 1997 1998 1997
- ---------------------------- ---------------------------- ----------------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 1,359,127 $ 1,600,921 $ 3,426,727 $ 413,989 $1,027,529 $ 701,777 $ 328,568 $ 1,627,746
1,116,263 364,714 1,397,604 321,195 90,406 65,362 467,546 196,004
130,393 3,282,840 4,814,247 3,948,877 47,099 564,700 1,469,332 1,051,272
- ---------------------------- ---------------------------- ----------------------------- --------------------------
2,605,783 5,248,475 9,638,578 4,684,061 1,165,034 1,331,839 2,265,446 2,875,022
1,818,880 4,129,515 1,340,912 4,082,709 378,953 1,132,267 813,885 3,748,081
441,333 1,438,872 (886,136) 588,121 (213,276) 300,557 (627,108) 1,032,543
(3,975,823) (1,370,409) (4,188,738) (1,282,342) (754,935) (307,316) (3,190,244) (1,218,963)
- ---------------------------- ---------------------------- ----------------------------- --------------------------
(1,715,610) 4,197,978 (3,733,962) 3,388,488 (589,258) 1,125,508 (3,003,467) 3,561,661
- ---------------------------- ---------------------------- ----------------------------- --------------------------
890,173 9,446,453 5,904,616 8,072,549 575,776 2,457,347 (738,021) 6,436,683
27,386,946 17,940,493 27,796,182 19,723,633 9,120,947 6,663,600 23,535,886 17,099,203
- ---------------------------- ---------------------------- ----------------------------- --------------------------
$28,277,119 $27,386,946 $33,700,798 $27,796,182 $9,696,723 $9,120,947 $22,797,865 $23,535,886
============================ ============================ ============================= ==========================
</TABLE>
11
<PAGE>
Peoples Benefit Life Insurance Company
Separate Account V - Marquee Variable Annuity
Statements of Changes in Contract Owners' Equity (continued)
<TABLE>
<CAPTION>
QUALITY BOND SUBACCOUNT EQUITY INCOME SUBACCOUNT
--------------------------- ----------------------------
1998 1997 1998 1997
--------------------------- ----------------------------
<S> <C> <C> <C>
Operations:
Net investment income (loss) $ 464,913 $ 359,054 $ 585,844 $ 557,956
Net realized capital gain 39,269 12,093 701,917 220,130
Net change in unrealized appreciation/
depreciation of investments (214,918) 116,913 (161,349) 1,892,105
--------------------------- ----------------------------
Increase (decrease) from operations 289,264 488,060 1,126,412 2,670,191
Contract transactions:
Net contract purchase payments 468,330 1,136,459 842,349 2,999,769
Transfer payments from (to) other subaccounts
or general account 2,030,574 (9,597) 844,703 1,714,653
Contract terminations, withdrawals and other
deductions (705,325) (518,455) (1,547,521) (449,026)
--------------------------- ----------------------------
Increase (decrease) from contract transactions 1,793,579 608,407 139,531 4,265,396
--------------------------- ----------------------------
Net increase (decrease) in contract owners' equity 2,082,843 1,096,467 1,265,943 6,935,587
Contract owners' equity:
Beginning of the period 6,589,499 5,493,032 14,532,870 7,597,283
--------------------------- ----------------------------
End of the period $8,672,342 $6,589,499 $15,798,813 $14,532,870
=========================== ============================
</TABLE>
See accompanying notes.
12
<PAGE>
<TABLE>
<CAPTION>
NEW AMERICA GROWTH INTERNATIONAL STOCK
SUBACCOUNT SUBACCOUNT MANAGED SUBACCOUNT SMALL CAP SUBACCOUNT
- --------------------------- ----------------------------- --------------------------- --------------------------
1998 1997 1998 1997 1998 1997 1998 1997
- --------------------------- ----------------------------- --------------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 96,733 $ (190,310) $ 11,548 $ 141,309 $ 631,363 $ 478,314 $ 382,448 $ 295,708
1,296,338 576,555 704,634 254,236 1,316,898 603,725 373,165 329,147
1,244,187 2,647,777 1,482,500 (171,867) (632,650) 2,844,038 (2,203,600) 1,538,278
- --------------------------- ----------------------------- --------------------------- --------------------------
2,637,258 3,034,022 2,198,682 223,678 1,315,611 3,926,077 (1,447,987) 2,163,133
371,250 2,155,478 345,832 2,499,219 1,980,560 5,370,560 519,147 2,111,272
(1,047,711) 528,375 (1,466,210) 471,062 (305,121) 1,302,872 (1,092,585) 1,531,265
(2,612,725) (1,271,212) (2,472,050) (1,083,857) (4,086,676) (1,516,771) (1,651,904) (505,908)
- --------------------------- ----------------------------- --------------------------- --------------------------
(3,289,186) 1,412,641 (3,592,428) 1,886,424 (2,411,237) 5,156,661 (2,225,342) 3,136,629
- --------------------------- ----------------------------- --------------------------- --------------------------
(651,928) 4,446,663 (1,393,746) 2,110,102 (1,095,626) 9,082,738 (3,673,329) 5,299,762
18,043,038 13,596,375 17,596,099 15,485,997 25,326,138 16,243,400 14,465,475 9,165,713
- --------------------------- ----------------------------- --------------------------- --------------------------
$17,391,110 $18,043,038 $16,202,353 $17,596,099 $24,230,512 $25,326,138 $10,792,146 $14,465,475
=========================== ============================= =========================== ==========================
</TABLE>
13
<PAGE>
Peoples Benefit Life Insurance Company
Separate Account V - Marquee Variable Annuity
Statements of Changes in Contract Owners' Equity (continued)
<TABLE>
<CAPTION>
U. S. GOVERNMENT INCOME
SUBACCOUNT
---------------------------------
1998 1997
---------------------------------
<S> <C> <C>
Operations:
Net investment income (loss) $ 132,435 $ 79,463
Net realized capital gain 15,136 (431)
Net change in unrealized appreciation/depreciation of investments 9,085 27,323
-------------------------------
Increase (decrease) from operations 156,656 106,355
Contract transactions:
Net contract purchase payments 117,145 126,554
Transfer payments from (to) other subaccounts or general account 989,384 313,347
Contract terminations, withdrawals and other deductions (88,256) (70,583)
-------------------------------
Increase (decrease) from contract transactions 1,018,273 369,318
-------------------------------
Net increase (decrease) in contract owners' equity 1,174,929 475,673
Contract owners' equity:
Beginning of the period 2,106,459 1,630,786
-------------------------------
End of the period $3,281,388 $2,106,459
===============================
</TABLE>
See accompanying notes.
14
<PAGE>
Peoples Benefit Life Insurance Company
Separate Account V - Marquee Variable Annuity
Notes to Financial Statements
December 31, 1998
1. ACCOUNTING POLICIES
ORGANIZATION OF THE ACCOUNT
Peoples Benefit Life Insurance Company Separate Account V (the "Mutual Fund
Account"), formerly Providian Life and Health Insurance Company Separate Account
V, is a segregated investment account of Peoples Benefit Life Insurance Company
("PBL"), an indirect, wholly-owned subsidiary of AEGON N.V., a holding company
organized under the laws of The Netherlands.
The Mutual Fund Account is registered with the Securities and Exchange
Commission as a Unit Investment Trust pursuant to provisions of the Investment
Company Act of 1940. The Mutual Fund Account consists of forty-nine investment
subaccounts, four of which are invested in specified portfolios of the Variable
Insurance Products Fund I and II, three of which are invested in specified
portfolios of the OCC Accumulation Trust, two of which are invested in specified
portfolios of the Dreyfus Variable Investment Fund, two of which are invested in
specified portfolios of the T. Rowe Price Equity Series, Inc., and one of which
is invested in the T. Rowe Price International Stock Portfolio of the T. Rowe
Price International Series, Inc. (each a "Series Fund" and collectively "the
Series Funds"). Activity in these twelve subaccounts is available to contract
owners of the Marquee Variable Annuity. Activity in the Variable Insurance
Products Money Market Portfolio and the Variable Insurance Products Fund II
Asset Manager Portfolio are also available for investment by contract owners of
the Personal Manager Variable Annuity, also issued by PBL. Activity in the
International Stock Portfolio of the T. Rowe Price International Series, Inc. is
also available for investment by contract owners of the Advisor's Edge Variable
Annuity and Advisor's Edge Select Variable Annuity, also issued by PBL. The
remaining thirty-seven subaccounts (not included herein), are available to
contract owners of the Prism Variable Annuity, Dimensional Variable Annuity, PGA
Retirement Annuity, Advisor's Edge Variable Annuity, Advisor's Edge Select
Variable Annuity, and Personal Manager Variable Annuity, also issued by PBL.
Prior to October 1, 1998, the Mutual Fund Account was an investment account of
Providian Life and Health Insurance Company ("PLH"). Effective October 1, 1998,
PLH changed its name to PBL.
Prior to June 10, 1997, PLH was an indirect, wholly-owned subsidiary of
Providian Corporation ("Providian"). On June 10, 1997, Providian's insurance
operations, including the operations of PLH, were merged with an indirect,
wholly-owned subsidiary of AEGON N.V., an international insurance organization
headquartered in The Hague, The Netherlands. Providian was the surviving
corporation in the merger. Effective October 15, 1997, Providian's name was
changed to Commonwealth General Corporation ("CGC"). Effective December 31,
1997, ownership of CGC was transferred to AEGON USA, Inc., an indirect, wholly-
owned subsidiary of AEGON N.V.
15
<PAGE>
Peoples Benefit Life Insurance Company
Separate Account V - Marquee Variable Annuity
Notes to Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
Effective April 30, 1998, PBL terminated sales of the "A" unit contracts of the
Marquee Variable Annuity. Only additional premiums allowable on existing
contracts will be accepted after that date.
INVESTMENTS
Net purchase payments received by the Mutual Fund Account are invested in the
portfolios of the Series Funds, as selected by the contract owner. Investments
are stated at the closing net asset values per share as of December 31, 1998.
Prior to July 17, 1998, realized capital gains and losses from the sale of
shares in the Series Funds were determined on the basis of average cost.
Subsequent to this date, such gains or losses are determined on the first-in,
first-out basis. This change was implemented by establishing the average cost of
the portfolio as of July 17, 1998 as the opening cost for purposes of the first-
in, first-out basis. This change has no effect on "net realized and unrealized
capital gain (loss) from investments" and "increase (decrease) from operations"
as reported in the Statement of Operations.
Investment transactions are accounted for on the trade date (date the order to
buy or sell is executed) and dividend income is recorded on the ex-dividend
date. Unrealized gains or losses from investments in the mutual funds are
credited or charged to contract owners' equity.
DIVIDEND INCOME
Dividends received from the mutual fund investments are reinvested to purchase
additional mutual fund shares.
16
<PAGE>
Peoples Benefit Life Insurance Company
Separate Account V - Marquee Variable Annuity
Notes to Financial Statements (continued)
2. INVESTMENTS
A summary of the mutual fund investments at December 31, 1998 follows:
<TABLE>
<CAPTION>
NUMBER OF NET ASSET MARKET
SHARES HELD VALUE PER SHARE VALUE COST
---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Variable Insurance Products Fund I
and II:
Fidelity VIP Money Market
Portfolio 14,017,712.520 $ 1.00 $ 14,017,713 $ 14,017,713
Fidelity VIP Equity-Income
Portfolio 1,112,450.127 25.42 28,278,482 22,904,498
Fidelity VIP Growth Portfolio 751,079.200 44.87 33,700,924 23,435,501
Fidelity VIP II Asset Manager
Portfolio 534,036.051 18.16 9,698,095 8,392,645
Dreyfus Variable Investment Fund:
Growth and Income Portfolio 1,007,415.482 22.63 22,797,812 20,199,878
Quality Bond Portfolio 754,126.485 11.50 8,672,455 8,723,744
T. Rowe Price Equity Series, Inc.:
Equity Income Portfolio 820,713.984 19.25 15,798,743 13,140,968
New America Growth Portfolio 702,974.976 24.74 17,391,601 11,923,378
T. Rowe Price International Series, Inc.:
International Stock Portfolio 1,115,863.276 14.52 16,202,335 13,489,116
OCC Accumulation Trust:
Managed Portfolio 553,967.738 43.74 24,230,549 19,369,392
Small Cap Portfolio 467,207.308 23.10 10,792,489 10,256,472
U. S. Government Income Portfolio 307,841.118 10.66 3,281,586 3,242,978
----------------------------------
$204,862,784 $169,096,283
==================================
</TABLE>
17
<PAGE>
Peoples Benefit Life Insurance Company
Separate Account V - Marquee Variable Annuity
Notes to Financial Statements (continued)
2. INVESTMENTS (CONTINUED)
The aggregate cost of purchases and proceeds from sales of investments were as
follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1998 1997
------------------------------ ------------------------------
PURCHASES SALES PURCHASES SALES
------------------------------ ------------------------------
<S> <C> <C> <C> <C>
Variable Insurance Products Fund I
and II:
Fidelity VIP Money Market
Portfolio $19,858,488 $17,981,842 $13,551,708 $19,300,395
Fidelity VIP Equity-Income
Portfolio 6,894,610 7,249,730 8,532,425 2,733,526
Fidelity VIP Growth Portfolio 7,422,325 7,729,434 7,394,160 3,591,683
Fidelity VIP II Asset Manager Portfolio 2,195,717 1,756,074 2,669,145 841,860
Dreyfus Variable Investment Fund:
Growth and Income Portfolio 3,838,996 6,513,948 8,213,896 3,024,490
Quality Bond Portfolio 4,042,911 1,784,317 2,716,853 1,749,381
T. Rowe Price Equity Series, Inc.:
Equity Income Portfolio 4,381,180 3,655,875 6,026,485 1,203,133
New America Growth Portfolio 1,859,157 5,051,119 4,491,185 3,268,854
T. Rowe Price International Series, Inc.:
International Stock Portfolio 1,529,493 5,110,391 4,802,433 2,774,700
OCC Accumulation Trust:
Managed Portfolio 4,715,872 6,495,709 8,901,954 3,266,979
Small Cap Portfolio 2,567,342 4,409,893 5,688,636 2,256,299
U. S. Government Income Portfolio 1,659,174 508,249 709,024 260,262
------------------------------ ------------------------------
$60,965,265 $68,246,581 $73,697,904 $44,271,562
============================== ==============================
</TABLE>
18
<PAGE>
Peoples Benefit Life Insurance Company
Separate Account V - Marquee Variable Annuity
Notes to Financial Statements (continued)
3. CONTRACT OWNERS' EQUITY
A summary of deferred annuity contracts terminable by owners at December 31,
1998 follows:
<TABLE>
<CAPTION>
A UNIT CONTRACTS
---------------------------------------------------------
ACCUMULATION ACCUMULATION TOTAL CONTRACT
SUBACCOUNT UNITS OWNED UNIT VALUE VALUE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fidelity VIP Money Market 49,858.809 $12.211060 $ 608,829
Fidelity VIP Equity-Income 58,545.651 21.035549 1,231,540
Fidelity VIP Growth 30,755.012 27.638599 850,025
Fidelity VIP II Asset Manager 16,815.106 17.552312 295,144
Growth and Income 42,532.046 23.795353 1,012,065
Quality Bond 11,702.245 14.118744 165,221
Equity Income 32,762.010 21.930687 718,493
New America Growth 22,954.059 24.781268 568,831
International Stock 45,476.282 14.268049 648,858
Managed 41,520.084 22.330075 927,147
Small Cap 36,866.539 15.075500 555,782
U. S. Government Income 4,525.920 12.342712 55,862
-------------
$7,637,797
=============
<CAPTION>
B UNIT CONTRACTS
---------------------------------------------------------
ACCUMULATION ACCUMULATION TOTAL CONTRACT
SUBACCOUNT UNITS OWNED UNIT VALUE VALUE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fidelity VIP Money Market 1,125,652.265 $11.912112 $ 13,408,896
Fidelity VIP Equity-Income 1,338,846.818 20.200652 27,045,579
Fidelity VIP Growth 1,278,742.692 25.689901 32,850,773
Fidelity VIP II Asset Manager 556,485.737 16.894555 9,401,579
Growth and Income 966,939.246 22.530681 21,785,800
Quality Bond 633,412.731 13.430612 8,507,121
Equity Income 718,942.620 20.975693 15,080,320
New America Growth 683,188.251 24.623197 16,822,279
International Stock 1,134,691.826 13.707242 15,553,495
Managed 1,085,491.800 21.468025 23,303,365
Small Cap 700,061.421 14.622094 10,236,364
U. S. Government Income 256,125.857 12.593520 3,225,526
---------------
$197,221,097
===============
</TABLE>
19
<PAGE>
Peoples Benefit Life Insurance Company
Separate Account V - Marquee Variable Annuity
Notes to Financial Statements (continued)
3. CONTRACT OWNERS' EQUITY (CONTINUED)
At December 31, 1998, contract owners' equity was comprised of:
<TABLE>
<CAPTION>
FIDELITY VIP FIDELITY VIP FIDELITY
MONEY EQUITY- VIP
MARKET INCOME GROWTH
TOTAL SUBACCOUNT SUBACCOUNT SUBACCOUNT
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Unit transactions, accumulated net
investment income and realized
capital gains $169,092,393 $14,017,725 $22,903,135 $23,435,375
Adjustment for appreciation
(depreciation) to market value 35,766,501 - 5,373,984 10,265,423
-------------------------------------------------------------------
Total contract owners' equity $204,858,894 $14,017,725 $28,277,119 $33,700,798
===================================================================
</TABLE>
<TABLE>
<CAPTION>
FIDELITY
VIP II ASSET GROWTH AND QUALITY
MANAGER INCOME BOND
SUBACCOUNT SUBACCOUNT SUBACCOUNT
--------------------------------------------------
<S> <C> <C> <C>
Unit transactions, accumulated net investment
income and realized capital gains $8,391,273 $20,199,931 $8,723,631
Adjustment for appreciation (depreciation) to
market value 1,305,450 2,597,934 (51,289)
--------------------------------------------------
Total contract owners' equity $9,696,723 $22,797,865 $8,672,342
==================================================
<CAPTION>
NEW
EQUITY AMERICA INTERNATIONAL
INCOME GROWTH STOCK
SUBACCOUNT SUBACCOUNT SUBACCOUNT
-------------------------------------------------
<S> <C> <C> <C>
Unit transactions, accumulated net investment
income and realized capital gains $13,141,038 $11,922,887 $13,489,134
Adjustment for appreciation (depreciation) to
market value 2,657,775 5,468,223 2,713,219
-------------------------------------------------
Total contract owners' equity $15,798,813 $17,391,110 $16,202,353
=================================================
</TABLE>
20
<PAGE>
Peoples Benefit Life Insurance Company
Separate Account V - Marquee Variable Annuity
Notes to Financial Statements (continued)
3. CONTRACT OWNERS' EQUITY (CONTINUED)
<TABLE>
<CAPTION>
U. S.
GOVERNMENT
MANAGED SMALL CAP INCOME
SUBACCOUNT SUBACCOUNT SUBACCOUNT
----------------------------------------------------
<S> <C> <C> <C>
Unit transactions, accumulated net investment
income and realized capital gains $19,369,355 $10,256,129 $3,242,780
Adjustment for appreciation (depreciation) to
market value 4,861,157 536,017 38,608
----------------------------------------------------
Total contract owners' equity $24,230,512 $10,792,146 $3,281,388
====================================================
</TABLE>
A summary of changes in contract owners' account units follows:
<TABLE>
<CAPTION>
FIDELITY FIDELITY
FIDELITY VIP FIDELITY VIP II
VIP MONEY EQUITY- VIP ASSET
MARKET INCOME GROWTH MANAGER
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Units outstanding at January 1, 1997 1,653,633 1,233,596 1,284,052 532,040
Units purchased 1,137,657 400,688 391,363 134,401
Units redeemed and transferred (1,731,994) (143,748) (189,288) (54,379)
-----------------------------------------------------------------
Units outstanding at December 31, 1997 1,059,296 1,490,536 1,486,127 612,062
Units purchased 959,280 170,305 111,861 48,472
Units redeemed and transferred (843,065) (263,449) (288,490) (87,233)
-----------------------------------------------------------------
Units outstanding at December 31, 1998 1,175,511 1,397,392 1,309,498 573,301
=================================================================
<CAPTION>
NEW
GROWTH QUALITY EQUITY AMERICA
AND INCOME BOND INCOME GROWTH
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Units outstanding at January 1, 1997 956,902 458,712 494,201 770,827
Units purchased 332,869 186,542 307,782 244,376
Units redeemed and transferred (140,732) (135,554) (57,947) (158,882)
-----------------------------------------------------------------
Units outstanding at December 31, 1997 1,149,039 509,700 744,036 856,321
Units purchased 98,823 110,651 117,539 44,200
Units redeemed and transferred (238,391) 24,764 (109,870) (194,379)
-----------------------------------------------------------------
Units outstanding at December 31, 1998 1,009,471 645,115 751,705 706,142
=================================================================
</TABLE>
21
<PAGE>
Peoples Benefit Life Insurance Company
Separate Account V - Marquee Variable Annuity
Notes to Financial Statements (continued)
3. CONTRACT OWNERS' EQUITY (CONTINUED)
<TABLE>
<CAPTION>
U. S.
INTERNATIONAL GOVERNMENT
STOCK MANAGED SMALL CAP INCOME
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
-----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Units outstanding at January 1, 1997 1,311,018 962,889 677,317 145,977
Units purchased 360,294 434,257 347,930 53,339
Units redeemed and transferred (206,576) (152,207) (138,903) (20,789)
-----------------------------------------------------------------------
Units outstanding at December 31, 1997 1,464,736 1,244,939 886,344 178,527
Units purchased 70,640 163,398 103,369 24,438
Units redeemed and transferred (355,208) (281,325) (252,785) 57,687
-----------------------------------------------------------------------
Units outstanding at December 31, 1998 1,180,168 1,127,012 736,928 260,652
=======================================================================
</TABLE>
4. ADMINISTRATIVE, MORTALITY AND EXPENSE RISK CHARGE
An annual charge is deducted from the unit values of the subaccounts of the
Mutual Fund Account for PBL's assumption of certain mortality and expense risks
incurred in connection with the contract. The charge is assessed daily based on
the net asset value of the Mutual Fund Account, attributable to the "A" unit
contracts and "B" unit contracts. For the years ended December 31, 1998 and
1997, the effective annual rate for this charge was .65% for "A" unit contracts
and 1.25% for "B" unit contracts.
An administrative charge equal to .15% annually is deducted from the unit values
of the subaccounts of the Mutual Fund Account. This charge is assessed daily by
PBL. PBL also deducts an annual policy fee of $30 per contract. The annual
policy fee is deducted proportionately from the subaccounts' accumulated value.
These deductions represent reimbursement for the costs expected to be incurred
over the life of the contract for issuing and maintaining each contract and the
Mutual Fund Account.
5. TAXES
Operations of the Mutual Fund Account form a part of PBL, which is taxed as a
life insurance company under Subchapter L of the Internal Revenue Code of 1986,
as amended (the "Code"). The operations of the Mutual Fund Account are accounted
for separately from other operations of PBL for purposes of federal income
taxation. The Mutual Fund Account is not separately taxable as a regulated
investment company under Subchapter M of the Code and is not otherwise taxable
as an entity separate from PBL. Under existing federal income tax laws, the
income of the Mutual Fund Account, to the extent applied to increase reserves
under the variable annuity contracts, is not taxable to PBL.
22
<PAGE>
Peoples Benefit Life Insurance Company
Separate Account V - Marquee Variable Annuity
Notes to Financial Statements (continued)
6. YEAR 2000 (UNAUDITED)
The term Year 2000 Issue generally refers to the improper processing of dates
and incorrect date calculations that might occur in computer software and
hardware and embedded systems as the Year 2000 is approached. The use of
computer programs that rely on two-digit date fields to perform computations and
decision-making functions may cause systems to malfunction when processing
information involving dates after 1999. For example, any computer software that
has date-sensitive coding might recognize a code of 00 as the year 1900 rather
than the year 2000.
PBL has developed a Year 2000 Project Plan (the Plan) to address the Year 2000
issue as it affects PBL's internal IT and non-IT systems, and to assess Year
2000 issues relating to third parties with whom PBL has critical relationships.
The Plan for addressing internal systems generally includes an assessment of
internal IT and non-IT systems and equipment affected by the Year 2000 issue;
definition of strategies to address affected systems and equipment; remediation
of identified systems and equipment; internal testing and certification that
each internal system is Year 2000 compliant; and a review of existing and
revised business resumption and contingency plans to address potential Year 2000
issues. PBL has remediated and tested substantially all of its mission-critical
internal IT systems as of December 31, 1998. PBL continues to remediate and test
certain non-critical internal IT systems, internal non-IT systems and will
continue with a revalidation testing program throughout 1999.
PBL's Year 2000 issues are more complex because a number of its systems
interface with other systems not under PBL's control. PBL's most significant
interfaces and uses of third-party vendor systems are in the bank, financial
services and trust areas. PBL utilizes various banks to handle numerous types of
financial and sales transactions. Several of these banks also provide trustee
and custodial services for PBL's investment holdings and transactions. These
services are critical to a financial services company such as PBL as its
business centers around cash receipts and disbursements to policyholders and the
investment of policyholder funds. PBL has received written confirmation from its
vendor banks regarding their status on Year 2000. The banks indicate their
dedication to resolving any Year 2000 issues related to their systems and
services prior to December 31, 1999. PBL anticipates that a considerable effort
will be necessary to ensure that its corrected or new systems can properly
interface with those business partners with whom it transmits and receives data
and other information (external systems). PBL has undertaken specific testing
regimes with these third-party business partners and expects to continue working
with its business partners on any interfacing of systems. However, the timing of
external system compliance cannot currently be predicted with accuracy because
the implementation of Year 2000 readiness will vary from one company to another.
23
<PAGE>
Peoples Benefit Life Insurance Company
Separate Account V - Marquee Variable Annuity
Notes to Financial Statements (continued)
6. YEAR 2000 (UNAUDITED) (CONTINUED)
PBL does have some exposure to date sensitive embedded technology such as micro-
controllers, but PBL views this exposure as minimal. Unlike other industries
that may be equipment intensive, like manufacturing, PBL is a life insurance and
financial services organization providing insurance, annuities and pension
products to its customers. As such, the primary equipment and electronic devices
in use are computers and telephone related equipment. This type of hardware can
have date sensitive embedded technology which could have Year 2000 problems.
Because of this exposure, PBL has reviewed its computer hardware and telephone
systems, with assistance from the applicable vendors, and has upgraded, or
replaced, or is in the process of replacing any equipment that will not properly
process date sensitive data in the Year 2000 or beyond. This undertaking has
been substantially completed for all operations.
For PBL, a reasonably likely worst case scenario might include one or more of
PBL's significant policyholder systems being non-compliant. Such an event could
result in a material disruption of PBL's operations. Specifically, a number of
PBL's operations could experience an interruption in the ability to collect and
process premiums or deposits, process claim payments, accurately maintain
policyholder information, accurately maintain accounting records, and or perform
adequate customer service. Should the worst case scenario occur, it could,
dependent upon its duration, have a material impact on PBL's business and
financial condition. Simple failures can be repaired and returned to production
within a matter of hours with no material impact. Unanticipated failures with a
longer service disruption period could have a more serious impact. For this
reason, PBL is placing significant emphasis on risk management and Year 2000
business resumption contingency planning in 1999 by modifying its existing
business resumption and disaster recovery plans to address potential Year 2000
issues.
The actions taken by management under the Year 2000 Project Plans are intended
to significantly reduce PBL's risk of a material business interruption based on
the Year 2000 issues. It should be noted that the Year 2000 computer problem,
and its resolution, is complex and multifaceted, and any company's success
cannot be conclusively known until the Year 2000 is reached. In spite of its
efforts or results, PBL's ability to function unaffected to and through the Year
2000 may be adversely affected by actions (or failure to act) of third parties
beyond our knowledge or control. It is anticipated that there may be problems
that will have to be resolved in the ordinary course of business on and after
the Year 2000. However, PBL does not believe that the problems will have a
material adverse affect on PBL's operations or financial condition.
24
<PAGE>
FINANCIAL STATEMENTS - STATUTORY BASIS
PEOPLES BENEFIT LIFE INSURANCE COMPANY
(FORMERLY PROVIDIAN LIFE AND
HEALTH INSURANCE COMPANY)
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
WITH REPORT OF INDEPENDENT AUDITORS
<PAGE>
Peoples Benefit Life Insurance Company
Financial Statements - Statutory Basis
Years ended December 31, 1998, 1997 and 1996
CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors.................................. 1
Audited Financial Statements
Balance Sheets - Statutory Basis................................ 3
Statements of Operations - Statutory Basis...................... 5
Statements of Changes in Capital and Surplus - Statutory Basis.. 6
Statements of Cash Flows - Statutory Basis...................... 7
Notes to Financial Statements - Statutory Basis................. 8
</TABLE>
<PAGE>
Report of Independent Auditors
The Board of Directors
Peoples Benefit Life Insurance Company
We have audited the accompanying statutory-basis balance sheets of Peoples
Benefit Life Insurance Company (formerly Providian Life and Health Insurance
Company) as of December 31, 1998 and 1997, and the related statutory-basis
statements of operations, changes in capital and surplus, and cash flows for
each of the three years in the period ended December 31, 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As described in Note 1 to the financial statements, the Company presents its
financial statements in conformity with accounting practices prescribed or
permitted by the Missouri Department of Insurance, which practices differ from
generally accepted accounting principles. The variances between such practices
and generally accepted accounting principles also are described in Note 1. The
effects on the financial statements of these variances are not reasonably
determinable but are presumed to be material.
In our opinion, because of the effects of the matters described in the preceding
paragraph, the financial statements referred to above do not present fairly, in
conformity with generally accepted accounting principles, the financial position
of Peoples Benefit Life Insurance Company at December 31, 1998 and 1997, or the
results of its operations or its cash flows for each of the three years in the
period ended December 31, 1998.
1
<PAGE>
However, in our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Peoples Benefit Life
Insurance Company at December 31, 1998 and 1997, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1998 in conformity with accounting practices prescribed or
permitted by the Missouri Department of Insurance.
/s/ Ernst & Young LLP
February 19, 1999
2
<PAGE>
Peoples Benefit Life Insurance Company
Balance Sheets - Statutory Basis
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
DECEMBER 31
1998 1997
---------------------------------
<S> <C> <C>
Admitted assets
Cash and invested assets:
Cash and short-term investments $ 193,367 $ 45,122
Bonds 4,299,430 4,363,420
Stocks:
Preferred 91,609 31,519
Common (cost: 1998 - $37,955; 1997 - $41,804) 38,092 40,343
Common stock sold, but not yet purchased [cost:
1998 - $(80,447); 1997 - $(7,081)] (83,727) (7,548)
Affiliated entities (cost: 1998 - $202,606; 1997 -
$202,606) 457,011 455,036
Mortgage loans on real estate 2,041,729 2,269,507
Real estate 3,980 8,759
Policy loans 154,703 155,430
Other invested assets 268,783 216,266
---------------------------------
Total cash and invested assets 7,464,977 7,577,854
Premiums deferred and uncollected 44,117 46,428
Accrued investment income 79,705 91,639
Receivable from affiliates 72,156 17,480
Federal income taxes recoverable 12,157 230
Other assets 54,432 15,182
Separate account assets 4,915,961 3,573,052
---------------------------------
Total admitted assets $12,643,505 $11,321,865
=================================
</TABLE>
See accompanying notes.
3
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31
1998 1997
--------------------------------
<S> <C> <C>
Liabilities and capital and surplus
Liabilities:
Aggregate reserves for policies and contracts:
Life $ 1,120,051 $ 1,149,528
Annuity 3,126,053 3,342,986
Accident and health 81,793 80,534
Policy and contract claim reserves:
Life 30,445 21,199
Accident and health 29,556 27,836
Policyholder contract deposits 1,740,041 1,770,902
Other policyholders' funds 524,254 460,883
Remittances and items not allocated 11,644 24,861
Asset valuation reserve 134,828 109,465
Interest maintenance reserve 16,131 -
Short-term notes payable to affiliates 102,293 -
Payable for securities 116,191 87,078
Other liabilities 68,767 53,142
Transfers to separate accounts 3,215 447
Payable to affiliates 79,952 18,429
Separate account liabilities 4,884,819 3,544,304
--------------------------------
Total liabilities 12,070,033 10,691,594
Commitments and contingencies
Capital and surplus:
Common stock, $11 par value, 1,145,000 shares
authorized, issued and outstanding 12,595 12,595
Preferred stock, $11 par value, $240 liquidation
value, 2,290,000 shares authorized, issued and 25,190 25,190
outstanding
Paid-in surplus 2,583 2,583
Unassigned surplus 533,104 589,903
--------------------------------
Total capital and surplus 573,472 630,271
--------------------------------
Total liabilities and capital and surplus $12,643,505 $11,321,865
================================
</TABLE>
See accompanying notes.
4
<PAGE>
Peoples Benefit Life Insurance Company
Statements of Operations - Statutory Basis
(Dollars in thousands)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1998 1997 1996
------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Premiums and other considerations, net of
reinsurance:
Life $ 165,442 $ 169,292 $ 178,578
Annuity 1,584,173 1,232,283 1,237,874
Accident and health 133,490 144,713 154,993
Net investment income 512,102 559,656 569,860
Amortization of interest maintenance reserve 7,046 6,333 3,109
Commissions and expense allowances on reinsurance
ceded 4,542 2,323 1,123
Other (9,666) 7,770 10,196
------------------------------------------------------------
2,397,129 2,122,370 2,155,733
Benefits and expenses:
Benefits paid or provided for:
Life benefits 207,521 112,403 110,905
Surrender benefits 1,338,387 1,120,236 1,078,321
Accident and health benefits 75,372 79,576 80,190
Other benefits 89,301 162,215 147,974
Increase (decrease) in aggregate reserves for
policies and contracts:
Life (27,717) (16,974) (13,045)
Annuity (210,997) (141,304) (283,135)
Accident and health (2,347) (4,169) (2,301)
Other 32,453 (96,839) 289,343
------------------------------------------------------------
1,501,973 1,215,144 1,408,252
Insurance expenses:
Commissions 46,200 54,554 51,365
General insurance expenses 75,102 106,666 101,446
Taxes, licenses and fees 8,037 10,036 8,933
Net transfers to separate accounts 633,128 599,633 425,800
Other expenses 199 559 3,015
------------------------------------------------------------
762,666 771,448 590,559
------------------------------------------------------------
2,264,639 1,986,592 1,998,811
------------------------------------------------------------
Gain from operations before federal income tax
expense and net realized capital gains on
investments 132,490 135,778 156,922
Federal income tax expense 32,960 54,615 50,639
------------------------------------------------------------
Net income before net realized capital gains on
investments 99,530 81,163 106,283
Net realized capital gains on investments (net of
related federal income taxes and amounts
transferred to interest maintenance reserve) 27,621 24,702 3,394
------------------------------------------------------------
Net income $ 127,151 $ 105,865 $ 109,677
============================================================
</TABLE>
See accompanying notes.
5
<PAGE>
Peoples Benefit Life Insurance Company
Statements of Changes in Capital and Surplus - Statutory Basis
(Dollars in thousands)
<TABLE>
<CAPTION>
TOTAL
COMMON PREFERRED PAID-IN UNASSIGNED CAPITAL AND
STOCK STOCK SURPLUS SURPLUS SURPLUS
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1996 $12,595 $25,190 $2,583 $ 536,126 $ 576,494
Net income - - - 109,677 109,677
Change in net unrealized
capital gains (losses) - - - 40,540 40,540
Change in non-admitted assets - - - 4,737 4,737
Change in asset valuation reserve - - - (7,683) (7,683)
Dividend to stockholders - - - (125,000) (125,000)
Prior year federal income tax adjustment - - - 6,546 6,546
------------------------------------------------------------------------------------
Balance at December 31, 1996 12,595 25,190 2,583 564,943 605,311
Net income - - - 105,865 105,865
Change in net unrealized capital gains - - - 45,907 45,907
Change in non-admitted assets - - - 341 341
Change in asset valuation reserve - - - (12,296) (12,296)
Change in surplus in separate accounts - - - 424 424
Dividend to stockholders - - - (120,000) (120,000)
Prior year federal income tax adjustment - - - 4,719 4,719
------------------------------------------------------------------------------------
Balance at December 31, 1997 12,595 25,190 2,583 589,903 630,271
Net income - - - 127,151 127,151
Change in net unrealized capital losses - - - (15,584) (15,584)
Change in non-admitted assets - - - 9,324 9,324
Change in liability for
reinsurance in unauthorized companies - - - (27) (27)
Change in asset valuation reserve - - - (25,363) (25,363)
Change in surplus in separate accounts - - - 3,581 3,581
Dividend to stockholders - - - (160,000) (160,000)
Tax benefits on stock options exercised - - - 4,119 4,119
------------------------------------------------------------------------------------
Balance at December 31, 1998 $12,595 $25,190 $2,583 $ 533,104 $ 573,472
====================================================================================
</TABLE>
See accompanying notes.
6
<PAGE>
Peoples Benefit Life Insurance Company
Statements of Cash Flows - Statutory Basis
(Dollars in thousands)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1998 1997 1996
------------------------------------------------------------
<S> <C> <C> <C>
Operating activities
Premiums and other considerations, net of reinsurance $ 1,884,760 $ 1,557,727 $ 1,584,509
Net investment income 529,718 544,108 574,079
Life claims (198,317) (108,112) (107,884)
Surrender benefits and other fund withdrawals (1,338,387) (1,120,708) (1,078,321)
Disability benefits under accident and health policies (73,604) (77,681) (78,376)
Other benefits to policyholders (89,304) (161,602) (148,215)
Commissions, other expenses and other taxes (136,417) (171,155) (172,193)
Net transfers to separate accounts (633,128) (602,788) (412,252)
Federal income taxes, excluding tax on capital gains (40,998) (53,792) (56,121)
Other, net 78,339 (59,738) (308,586)
------------------------------------------------------------
Net cash used in operating activities (17,338) (253,741) (203,360)
INVESTING ACTIVITIES
Proceeds from investments sold, matured or repaid:
Bonds and preferred stocks 2,370,321 4,006,319 2,992,250
Common stocks 275,513 259,925 233,066
Mortgage loans on real estate 732,217 648,588 705,134
Real estate 7,733 8,784 32,398
Policy loans 727 2,744 590
Other 51,375 136,271 16,871
------------------------------------------------------------
3,437,886 5,062,631 3,980,309
Cost of investments acquired:
Bonds and preferred stocks (2,316,926) (4,114,568) (2,833,247)
Common stocks (293,534) (249,597) (216,931)
Mortgage loans on real estate (485,488) (385,022) (627,598)
Other (118,648) (34,263) (39,734)
------------------------------------------------------------
(3,214,596) (4,783,450) (3,717,510)
------------------------------------------------------------
Net cash provided by investing activities 223,290 279,181 262,799
FINANCING ACTIVITIES
Issuance of short-term intercompany notes payable 102,293 - -
Dividends paid to stockholders (160,000) (120,000) (125,000)
Other - (23) -
------------------------------------------------------------
Net cash used in financing activities (57,707) (120,023) (125,000)
------------------------------------------------------------
Increase (decrease) in cash and short-term 148,245 (94,583) (65,561)
investments
Cash and short-term investments at beginning of year 45,122 139,705 205,266
------------------------------------------------------------
Cash and short-term investments at end of year $ 193,367 $ 45,122 $ 139,705
============================================================
</TABLE>
See accompanying notes.
7
<PAGE>
Peoples Benefit Life Insurance Company
Notes to Financial Statements - Statutory Basis
(Dollars in thousands)
December 31, 1998
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Peoples Benefit Life Insurance Company (the "Company", formerly Providian Life
and Health Insurance Company) is a life and health insurance company domiciled
in Missouri. Prior to June 10, 1997, the Company was an indirect, wholly-owned
subsidiary of Providian Corporation ("Providian"). On June 10, 1997, Providian's
insurance operations, including the operations of the Company, were merged with
an indirect, wholly-owned subsidiary of AEGON N.V., a holding company organized
under the laws of The Netherlands. Providian was the surviving corporation in
the merger. Effective October 15, 1997, Providian's name was changed to
Commonwealth General Corporation ("Commonwealth"). Effective January 1, 1998,
ownership of Commonwealth was transferred to AEGON USA, Inc. ("AEGON"), an
indirect, wholly-owned subsidiary of AEGON N.V.
The Company is directly owned by Monumental Life Insurance Company 76%, Capital
Liberty, Limited Partnership ("CLLP") 20%, and Commonwealth 4%. The Company
wholly owns an insurance subsidiary, Veterans Life Insurance Company ("VLIC").
NATURE OF OPERATIONS
The Company sells and services life and accident and health insurance products,
primarily utilizing direct response methods, such as television, telephone, mail
and third-party programs to reach low to middle-income households nationwide.
The Company also sells and services group and individual accumulation products,
primarily utilizing brokers, fund managers, financial planners, stock brokerage
firms and a mutual fund.
BASIS OF PRESENTATION
The preparation of financial statements of insurance companies requires
management to make estimates and assumptions that affect amounts reported in the
financial statements and accompanying notes. Actual results could differ from
those estimates.
Significant estimates and assumptions are utilized in the calculation of
aggregate policy reserves, policy and contract claim reserves, guaranty fund
assessment accruals and valuation allowances on investments. It is reasonably
possible that actual experience could differ from the estimates and assumptions
utilized which could have a material impact on the financial statements.
8
<PAGE>
Peoples Benefit Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The accompanying financial statements have been prepared on the basis of
accounting practices prescribed or permitted by the Missouri Department of
Insurance ("Insurance Department"), which practices differ in some respects from
generally accepted accounting principles. The more significant of these
differences are as follows: (a) bonds are generally reported at amortized cost
rather than segregating the portfolio into held-to-maturity (reported at
amortized cost), available-for-sale (reported at fair value), and trading
(reported at fair value) classifications; (b) acquisition costs of acquiring new
business are charged to current operations as incurred rather than deferred and
amortized over the life of the policies; (c) policy reserves on traditional life
products are based on statutory mortality rates and interest which may differ
from reserves based on reasonable assumptions of expected mortality, interest,
and withdrawals which include a provision for possible unfavorable deviation
from such assumptions; (d) policy reserves on certain investment products use
discounting methodologies based on statutory interest rates rather than full
account values; (e) reinsurance amounts are netted against the corresponding
asset or liability rather than shown as gross amounts on the balance sheet; (f)
deferred income taxes are not provided for the difference between the financial
statement and income tax bases of assets and liabilities; (g) net realized gains
or losses attributed to changes in the level of interest rates in the market are
deferred and amortized over the remaining life of the bond or mortgage loan,
rather than recognized as gains or losses in the statement of operations when
the sale is completed; (h) potential declines in the estimated realizable value
of investments are provided for through the establishment of a formula-
determined statutory investment reserve (reported as a liability), changes to
which are charged directly to surplus, rather than through recognition in the
statement of operations for declines in value, when such declines are judged to
be other than temporary; (i) certain assets designated as "non-admitted assets"
have been charged to surplus rather than being reported as assets; (j) revenues
for universal life and investment products consist of premiums received rather
than policy charges for the cost of insurance, policy administration charges,
amortization of policy initiation fees and surrender charges assessed; (k)
pension expense is recorded as amounts are paid; (l) stock options settled in
cash are recorded as expense of the Company's indirect parent rather than
charged to current operations; (m) adjustments to federal income taxes of prior
years are charged or credited directly to unassigned surplus, rather than
reported as a component of expense in the statement of operations; (n) a
liability is established for "unauthorized reinsurers" and changes in this
liability are charged or credited directly to unassigned surplus; and (o) the
financial statements of wholly-owned affiliates are not consolidated with those
of the Company. The effects of these variances have not been determined by the
Company but are presumed to be material.
9
<PAGE>
Peoples Benefit Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
In 1998, the National Association of Insurance Commissioners ("NAIC") adopted
codified statutory accounting principles ("Codification"). Codification will
likely change, to some extent, prescribed statutory accounting practices and may
result in changes to the accounting practices that the Company uses to prepare
its statutory-basis financial statements. Codification will require adoption by
the various states before it becomes the prescribed statutory basis of
accounting for insurance companies domesticated within those states.
Accordingly, before Codification becomes effective for the Company, the State of
Missouri must adopt Codification as the prescribed basis of accounting on which
domestic insurers must report their statutory-basis results to the Insurance
Department. At this time, it is unclear whether the State of Missouri will adopt
Codification. However, based on current guidance, management believes that the
impact of Codification will not be material to the Company's statutory-basis
financial statements.
CASH AND CASH EQUIVALENTS
For purposes of the statements of cash flows, the Company considers all highly
liquid investments with remaining maturities of one year or less when purchased
to be cash equivalents.
INVESTMENTS
Investments in bonds (except those to which the Securities Valuation Office of
the NAIC has ascribed a value), mortgage loans on real estate and short-term
investments are reported at cost adjusted for amortization of premiums and
accrual of discounts. Amortization is computed using methods which result in a
level yield over the expected life of the security. The Company reviews its
prepayment assumptions on mortgage and other asset-backed securities at regular
intervals and adjusts amortization rates retrospectively when such assumptions
are changed due to experience and/or expected future patterns. Investments in
preferred stocks in good standing are reported at cost. Investments in preferred
stocks not in good standing are reported at the lower of cost or market. Common
stocks of unaffiliated companies, which include shares of mutual funds (money
market and other), are carried at market. Common stock sold but not yet
purchased is carried at market as a negative asset. Common stock of the
Company's affiliated insurance subsidiary is recorded at the equity in net
assets. Real estate is reported at cost less allowances for depreciation.
Depreciation is computed principally by the straight-line method. Policy loans
are reported at unpaid principal. Other invested assets consist principally of
investments in various limited partnerships and are recorded at equity in
underlying net assets. Derivative financial instruments, consisting primarily of
interest rate swap agreements, including basis swaps, and futures, are valued
consistently with the hedged item. Hedges of fixed income assets and/or
liabilities are valued at amortized cost. Hedges of items carried at fair value
are valued at fair value. Derivatives which cease to be effective hedges are
valued at fair value. Other "admitted assets" are valued, principally at cost,
as required or permitted by Missouri Insurance Laws.
10
<PAGE>
Peoples Benefit Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Common stock sold but not yet purchased represents obligations of the Company to
deliver specified securities at contracted prices, thereby creating a liability
to purchase the securities at prevailing market prices. Accordingly, these
transactions result in off-balance sheet risk as the Company's ultimate
obligation to satisfy the sale of securities sold but not yet purchased may
exceed the current amount recognized in the financial statements. The Missouri
Department of Insurance has approved the Company's accounting for common stock
sold but not yet purchased as a permitted practice.
Realized capital gains and losses are determined on the basis of specific
identification and are recorded net of related federal income taxes. The Asset
Valuation Reserve (AVR) is established by the Company to provide for potential
losses in the event of default by issuers of certain invested assets. These
amounts are determined using a formula prescribed by the NAIC and are reported
as a liability. The formula for the AVR provides for a corresponding adjustment
for realized gains and losses. Under a formula prescribed by the NAIC, the
Company defers, in the Interest Maintenance Reserve (IMR), the portion of
realized gains and losses on sales of fixed income investments, principally
bonds and mortgage loans, attributable to changes in the general level of
interest rates and amortizes those deferrals over the remaining period to
maturity of the security.
Interest income is recognized on an accrual basis. The Company does not accrue
income on bonds in default, mortgage loans on real estate in default and/or
foreclosure or which are delinquent more than twelve months, or on real estate
where rent is in arrears for more than three months. Further, income is not
accrued when collection is uncertain. At December 31, 1998, 1997 and 1996, the
Company excluded investment income due and accrued of $1,503, $308 and $504,
respectively, with respect to such practices.
The Company uses interest rate swaps as part of its overall interest rate risk
management strategy for certain life insurance and annuity products. The Company
entered into several interest rate swap contracts to modify the interest rate
characteristics of the underlying liabilities. The net interest effect of such
swap transactions is reported as an adjustment of interest income from the
hedged items as incurred.
AGGREGATE POLICY RESERVES
Life, annuity and accident and health benefit reserves are developed by
actuarial methods and are determined based on published tables based on
statutorily specified interest rates and valuation methods that will provide, in
the aggregate, reserves that are greater than or equal to the minimum required
by law.
11
<PAGE>
Peoples Benefit Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The aggregate policy reserves for life insurance policies are based principally
upon the 1941, 1958 and 1980 Commissioners' Standard Ordinary Mortality and
American Experience Mortality Tables. The reserves are calculated using interest
rates ranging from 2.00 to 6.00 percent and are computed principally on the Net
Level Premium Valuation and the Commissioners' Reserve Valuation Methods.
Reserves for universal life policies are based on account balances adjusted for
the Commissioners' Reserve Valuation Method.
Deferred annuity reserves are calculated according to the Commissioners' Annuity
Reserve Valuation Method including excess interest reserves to cover situations
where the future interest guarantees plus the decrease in surrender charges are
in excess of the maximum valuation rates of interest. Reserves for immediate
annuities and supplementary contracts with and without life contingencies are
equal to the present value of future payments assuming interest rates ranging
from 2.50 to 11.25 percent and mortality rates, where appropriate, from a
variety of tables.
Accident and health policy reserves are equal to the greater of the gross
unearned premiums or any required midterminal reserves plus net unearned
premiums and the present value of amounts not yet due on both reported and
unreported claims.
POLICY AND CONTRACT CLAIM RESERVES
Claim reserves represent the estimated accrued liability for claims reported to
the Company and claims incurred but not yet reported through the statement date.
These reserves are estimated using either individual case-basis valuations or
statistical analysis techniques. These estimates are subject to the effects of
trends in claim severity and frequency. The estimates are continually reviewed
and adjusted as necessary as experience develops or new information becomes
available.
POLICYHOLDER CONTRACT DEPOSITS
Policyholder contract deposits are comprised primarily of guaranteed investment
contracts (GICs). The GICs consist of three types. One type is guaranteed as to
principal along with interest guarantees based upon predetermined indices. The
second type guarantees principal and interest but also includes a penalty if the
contract is surrendered early. The third type guarantees principal and interest
and is non-surrenderable before the fixed maturity date. Policy reserves on the
GICs are determined following the retrospective deposit method and consist of
contract values that accrue to the benefit of the policyholder.
12
<PAGE>
Peoples Benefit Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
SEPARATE ACCOUNTS
Assets held in trust for purchases of variable annuity contracts and the
Company's corresponding obligation to the contract owners are shown separately
in the balance sheets. The assets in the separate accounts are valued at market.
Income and gains and losses with respect to the assets in the separate accounts
accrue to the benefit of the policyholders and, accordingly, the operations of
the separate accounts are not included in the accompanying financial statements.
The Company received variable contract premiums of $858,751, $784,931 and
$587,137 in 1998, 1997 and 1996, respectively. All variable account contracts
are subject to discretionary withdrawal by the policyholder at the market value
of the underlying assets less the current surrender charge.
Certain separate account assets and liabilities reported in the accompanying
financial statements contain contractual guarantees. Guaranteed separate
accounts represent funds invested by the Company for the benefit of individual
contract holders who are guaranteed certain returns as specified in the
contracts. Separate account asset performance different than guaranteed
requirements is either transferred to or received from the general account and
reported in the statements of operations.
STOCK OPTION PLAN
AEGON N.V. sponsors a stock option plan for eligible employees of the Company.
Under this plan, certain employees have indicated a preference to immediately
sell shares received as a result of their exercise of the stock options; in
these situations, AEGON N.V. has settled such options in cash rather than
issuing stock to these employees. These cash settlements are paid by the
Company, and AEGON N.V. subsequently reimburses the Company for such payments.
Under statutory accounting principles, the Company does not record any expense
related to this plan, as the expense is recognized by AEGON N.V. However, the
Company is allowed to record a deduction in the consolidated tax return filed by
the Company and certain affiliates. The tax benefit of this deduction has been
credited directly to surplus.
RECLASSIFICATIONS
Certain reclassifications have been made to the 1997 and 1996 financial
statements to conform to the 1998 presentation.
13
<PAGE>
Peoples Benefit Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
2. FAIR VALUES OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards ("SFAS") No. 107, Disclosures about
Fair Value of Financial Instruments, requires disclosure of fair value
information about financial instruments, whether or not recognized in the
statutory-basis balance sheet, for which it is practicable to estimate that
value. SFAS No. 119, Disclosures about Derivative Financial Instruments and Fair
Value of Financial Instruments, requires additional disclosure about
derivatives. In cases where quoted market prices are not available, fair values
are based on estimates using present value or other valuation techniques. Those
techniques are significantly affected by the assumptions used, including the
discount rate and estimates of future cash flows. In that regard, the derived
fair value estimates cannot be substantiated by comparisons to independent
markets and, in many cases, could not be realized in immediate settlement of the
instrument. SFAS No. 107 and No. 119 exclude certain financial instruments and
all nonfinancial instruments from their disclosure requirements and allow
companies to forego the disclosures when those estimates can only be made at
excessive cost. Accordingly, the aggregate fair value amounts presented do not
represent the underlying value of the Company.
The following methods and assumptions were used by the Company in estimating its
fair value disclosures for financial instruments:
Cash and short-term investments: The carrying amounts reported in the balance
sheet for these instruments approximate their fair values.
Investment securities: Fair values for fixed maturity securities (including
redeemable preferred stocks) are based on quoted market prices, where
available. For fixed maturity securities not actively traded, fair values are
estimated using values obtained from independent pricing services or, in the
case of private placements, are estimated by discounting expected future cash
flows using a current market rate applicable to the yield, credit quality, and
maturity of the investments. The fair values for equity securities are based on
quoted market prices.
Mortgage loans and policy loans: The fair values for mortgage loans are
estimated utilizing discounted cash flow analyses, using interest rates
reflective of current market conditions and the risk characteristics of the
loans. The fair value of policy loans is assumed to equal their carrying value.
Investment contracts: Fair values for the Company's liabilities under
investment-type insurance contracts are estimated using discounted cash flow
calculations, based on interest rates currently being offered for similar
contracts with maturities consistent with those remaining for the contracts
being valued.
Interest rate swaps and forward-rate agreements: Estimated fair value of
interest rate swaps and forward-rate agreements are based on pricing models or
formulas using current assumptions.
14
<PAGE>
Peoples Benefit Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
2. FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)
Fair values for the Company's insurance contracts other than investment
contracts are not required to be disclosed. However, the fair values of
liabilities under all insurance contracts are taken into consideration in the
Company's overall management of interest rate risk, which minimizes exposure to
changing interest rates through the matching of investment maturities with
amounts due under insurance contracts.
The following sets forth a comparison of the fair values and carrying values of
the Company's financial instruments subject to the provisions of SFAS No. 107
and No. 119:
<TABLE>
<CAPTION>
DECEMBER 31
1998 1997
------------------------------- ------------------------------
CARRYING VALUE FAIR VALUE CARRYING VALUE FAIR VALUE
------------------------------- ------------------------------
<S> <C> <C> <C> <C>
Admitted assets
Cash and short-term
investments $ 193,367 $ 193,367 $ 45,122 $ 45,122
Bonds 4,299,430 4,439,611 4,363,420 4,459,542
Preferred stocks 91,609 98,346 31,519 31,640
Common stocks (45,635) (45,635) 32,795 32,795
Mortgage loans on real estate 2,041,729 2,100,897 2,269,507 2,329,452
Policy loans 154,703 154,703 155,430 155,430
Separate account assets 4,915,961 4,915,961 3,573,052 3,573,052
LIABILITIES
Investment contract liabilities 5,385,785 5,334,953 4,693,812 4,750,436
Separate account liabilities 4,863,189 4,673,802 3,542,308 3,542,308
Short-term notes payable to affiliates 102,293 102,293 - -
Interest rate swaps - 7,022 - 18,417
Forwards - - 1,927 1,927
</TABLE>
15
<PAGE>
3. INVESTMENTS
The carrying value and estimated fair value of investments in debt securities
were as follows:
<TABLE>
<CAPTION>
GROSS GROSS
UNREALIZED UNREALIZED ESTIMATED FAIR
CARRYING VALUE GAINS LOSSES VALUE
--------------------------------------------------------------
<S> <C> <C> <C> <C>
December 31, 1998
Bonds:
United States Government and agencies $ 219,751 $ 6,985 $ 593 $ 226,143
State, municipal and other government 78,160 1,745 3,223 76,682
Public utilities 269,117 11,187 848 279,456
Industrial and miscellaneous 2,546,799 174,695 49,392 2,672,102
Mortgage and other asset-backed securities 1,185,603 16,435 16,810 1,185,228
--------------------------------------------------------------
4,299,430 211,047 70,866 4,439,611
Preferred stocks 91,609 8,327 1,590 98,346
--------------------------------------------------------------
$4,391,039 $219,374 $72,456 $4,537,957
==============================================================
December 31, 1997
Bonds:
United States Government and agencies $ 133,391 $ 931 $ 229 $ 134,093
State, municipal and other government 48,757 1,444 67 50,134
Public utilities 229,353 3,239 3,726 228,866
Industrial and miscellaneous 2,750,636 106,085 11,989 2,844,732
Mortgage and other asset-backed securities 1,201,283 434 - 1,201,717
--------------------------------------------------------------
4,363,420 112,133 16,011 4,459,542
Preferred stocks 31,519 121 - 31,640
--------------------------------------------------------------
$4,394,939 $112,254 $16,011 $4,491,182
==============================================================
</TABLE>
The carrying value and estimated fair value of bonds at December 31, 1998, by
contractual maturity, are shown below. Expected maturities may differ from
contractual maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
ESTIMATED
CARRYING VALUE FAIR VALUE
--------------------------------
<S> <C> <C>
Due in one year or less $ 188,074 $ 195,766
Due after one year through five years 601,353 611,724
Due after five years through ten years 627,730 631,326
Due after ten years through fifteen years 238,383 254,067
Due after fifteen years through twenty years 306,216 326,339
Due after twenty years 1,152,071 1,235,161
--------------------------------
3,113,827 3,254,383
Mortgage and other asset-backed securities 1,185,603 1,185,228
--------------------------------
$4,299,430 $4,439,611
================================
</TABLE>
16
<PAGE>
Peoples Benefit Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
3. INVESTMENTS (CONTINUED)
A detail of net investment income is presented below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1998 1997 1996
------------------------------------------
<S> <C> <C> <C>
Interest on bonds and notes $337,793 $331,084 $331,264
Dividends on equity investments 3,824 3,267 3,996
Interest on mortgage loans 161,897 196,584 211,972
Rental income on real estate 327 - -
Interest on policy loans 4,645 7,322 7,094
Other investment income 28,830 37,576 30,589
------------------------------------------
Gross investment income 537,316 575,833 584,915
Investment expenses 25,214 16,177 15,055
------------------------------------------
Net investment income $512,102 $559,656 $569,860
==========================================
</TABLE>
Proceeds from sales and maturities of debt securities and related gross realized
gains and losses were as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1998 1997 1996
-------------------------------------------------
<S> <C> <C> <C>
Proceeds $2,370,321 $4,006,319 $2,992,250
=================================================
Gross realized gains $ 67,577 $ 43,227 $ 36,073
Gross realized losses (22,015) (29,488) (28,371)
-------------------------------------------------
Net realized gains $ 45,562 $ 13,739 $ 7,702
=================================================
</TABLE>
At December 31, 1998, investments with an aggregate carrying value of $3,950
were on deposit with regulatory authorities or were restrictively held in bank
custodial accounts for the benefit of such regulatory authorities as required by
statute.
17
<PAGE>
Peoples Benefit Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
3. INVESTMENTS (CONTINUED)
Realized investment gains (losses) and changes in unrealized gains (losses) for
investments are summarized below:
<TABLE>
<CAPTION>
REALIZED
--------------------------------------------
YEAR ENDED DECEMBER 31
1998 1997 1996
--------------------------------------------
<S> <C> <C> <C>
Debt securities $ 45,562 $ 13,739 $ 7,702
Short-term investments 127 - 1
Equity securities 6,098 16,694 6,679
Mortgage loans on real estate 6,921 (1,121) (5,949)
Real estate (243) 1,604 1,727
Other invested assets 16,592 13,385 (2,443)
--------------------------------------------
75,057 44,301 7,717
Tax effect (17,257) (9,506) (1,402)
Transfer to interest maintenance reserve (30,179) (10,093) (2,921)
--------------------------------------------
Net realized gains $ 27,621 $ 24,702 $ 3,394
============================================
</TABLE>
<TABLE>
<CAPTION>
CHANGE IN UNREALIZED
---------------------------------------
YEAR ENDED DECEMBER 31
1998 1997 1996
---------------------------------------
<S> <C> <C> <C>
Debt securities $50,675 $ 74,092 $(86,515)
Equity securities 760 44,032 37,736
---------------------------------------
Change in unrealized appreciation (depreciation) $51,435 $118,124 $(48,779)
=======================================
</TABLE>
Gross unrealized gains and gross unrealized losses on equity securities were as
follows:
<TABLE>
<CAPTION>
DECEMBER 31
1998 1997
-----------------------------
<S> <C> <C>
Unrealized gains $265,902 $253,958
Unrealized losses (14,640) (3,456)
-----------------------------
Net unrealized gains $251,262 $250,502
=============================
</TABLE>
During 1998, the Company issued mortgage loans with interest rates ranging from
5.0% to 8.5%. The maximum percentage of any one mortgage loan to the value of
the underlying real estate at origination was 83% for commercial loans and 95%
for residential loans. Mortgage loans with a carrying value of $2,012 were non-
income producing for the previous twelve months. Accrued interest of $241
related to these mortgage loans was excluded from investment income. The Company
requires all mortgaged properties to carry fire insurance equal to the value of
the underlying property.
18
<PAGE>
Peoples Benefit Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
3. INVESTMENTS (CONTINUED)
During 1998 and 1997, mortgage loans of $3,410 and $10,162, respectively, were
foreclosed and transferred to real estate. At December 31, 1998 and 1997, the
Company held a mortgage loan loss reserve in the asset valuation reserve of
$22,530 and $24,218, respectively. At December 31, 1998, the mortgage loan
portfolio is diversified by geographic region and specific collateral property
type as follows:
<TABLE>
<CAPTION>
GEOGRAPHIC DISTRIBUTION PROPERTY TYPE DISTRIBUTION
- ----------------------------------------- ------------------------------------------
<S> <C> <C> <C>
Pacific 24% Residential 28%
South Atlantic 18 Office 20
E. North Central 18 Apartment 17
Middle Atlantic 16 Retail 15
W. South Central 7 Agricultural 7
Mountain 6 Industrial 7
W. North Central 4 Other 4
E. South Central 4 Hotel/Motel 2
New England 3
</TABLE>
At December 31, 1998, the Company had the following investment (excluding U. S.
Government guaranteed or insured issues) which individually represented more
than ten percent of capital and surplus and the asset valuation reserve:
<TABLE>
<CAPTION>
DESCRIPTION OF SECURITY OR ISSUER CARRYING VALUE
- ----------------------------------------------------------------- --------------------
<S> <C>
Bonds:
Nomura $74,108
</TABLE>
The Company utilizes a variety of off-balance sheet financial instruments as
part of its efforts to hedge and manage fluctuations in the market value of its
investment portfolio attributable to changes in general interest rate levels and
to manage duration mismatch of assets and liabilities. Those instruments include
interest rate exchange agreements (swaps), options, futures contracts, and
commitments to extend credit, and all involve elements of credit and market
risks in excess of the amounts recognized in the accompanying financial
statements at a given point in time. The contract or notional amounts of those
instruments reflect the extent of involvement in the various types of financial
instruments.
The Company's exposure to credit risk is the risk of loss from a counterparty
failing to perform according to the terms of the contract. That exposure
includes settlement risk (i.e., the risk that the counterparty defaults after
the Company has delivered funds or securities under terms of the contract) that
would result in an accounting loss and replacement cost risk (i.e., the cost to
replace the contract at current market rates should the counterparty default
prior to settlement date). Credit loss exposure resulting from nonperformance by
a counterparty for commitments to extend credit is represented by the
contractual amounts of the instruments.
19
<PAGE>
Peoples Benefit Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
3. INVESTMENTS (CONTINUED)
At December 31, 1998 and 1997, the Company's outstanding financial instruments
with on and off-balance sheet risks, shown in notional amounts, are summarized
as follows:
<TABLE>
<CAPTION>
NOTIONAL AMOUNT
1998 1997
----------------------------
<S> <C> <C>
Derivative securities:
Interest rate swaps:
Receive fixed - pay floating $592,600 $989,490
Receive floating - pay floating 84,763 38,738
Receive floating - pay fixed 208,746 35,958
Futures 78,196 75,502
Forwards - 250,000
</TABLE>
4. REINSURANCE
The Company reinsures portions of risk on certain insurance policies which
exceed its established limits, thereby providing a greater diversification of
risk and minimizing exposure on larger risks. The Company remains contingently
liable with respect to any insurance ceded, and this would become an actual
liability in the event that the assuming insurance company became unable to meet
its obligation under the reinsurance treaty.
Reinsurance assumption treaties are transacted primarily with affiliates.
Premiums earned reflect the following reinsurance assumed and ceded amounts:
<TABLE>
<CAPTION>
1998 1997 1996
--------------------------------------------------
<S> <C> <C> <C>
Direct premiums $1,618,574 $1,249,031 $1,328,352
Reinsurance assumed 274,237 299,608 244,772
Reinsurance ceded (9,706) (2,281) (1,501)
--------------------------------------------------
Net premiums earned $1,883,105 $1,546,358 $1,571,623
==================================================
</TABLE>
The Company received reinsurance recoveries in the amount of $3,102, $994 and
$1,080 during 1998, 1997 and 1996, respectively. At December 31, 1998 and 1997,
estimated amounts recoverable from reinsurers that have been deducted from
policy and contract claim reserves totaled $903 and $682 respectively. The
aggregate reserves for policies and contracts were reduced for reserve credits
for reinsurance ceded at December 31, 1998 and 1997 of $12,542 and $1,453,
respectively.
20
<PAGE>
Peoples Benefit Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
5. INCOME TAXES
For federal income tax purposes, the Company joins in a consolidated tax return
filing with certain affiliated companies. Under the terms of a tax-sharing
agreement between the Company and its affiliates, the Company computes federal
income tax expense as if it were filing a separate income tax return, except
that tax credits and net operating loss carryforwards are determined on the
basis of the consolidated group. Additionally, the alternative minimum tax is
computed for the consolidated group and the resulting tax, if any, is allocated
back to the separate companies on the basis of the separate companies'
alternative minimum taxable income.
Federal income tax expense differs from the amount computed by applying the
statutory federal income tax rate to gain from operations before federal income
taxes and net realized capital gains primarily due to differences in the
statutory and tax treatment of deferred policy acquisition costs, dividend
received deduction, and differences in policy and contract liabilities.
Federal income tax expense differs from the amount computed by applying the
statutory federal income tax rate to net realized capital gains on investments
due to differences in book and tax asset bases at the time certain investments
are sold.
Prior to 1984, as provided for under the Life Insurance Company Tax Act of 1959,
a portion of statutory income was not subject to current taxation but was
accumulated for income tax purposes in a memorandum account referred to as the
policyholders' surplus account. No federal income taxes have been provided for
in the financial statements on income deferred in the policyholders' surplus
account ($17,425 at December 31, 1998). To the extent dividends are paid from
the amount accumulated in the policyholders' surplus account, net earnings would
be reduced by the amount of tax required to be paid. Should the entire amount in
the policyholders' surplus account become taxable, the tax thereon computed at
current rates would amount to approximately $6,099.
Included in the statements of changes in capital and surplus are certain
adjustments increasing surplus by $4,719 and $6,546 at December 31, 1997 and
1996, respectively, relating to tax accrual adjustments applicable to prior tax
years.
The Company's federal income tax returns have been examined and closing
agreements have been executed with the Internal Revenue Service through 1992. An
examination is underway for years 1993 through 1997.
21
<PAGE>
Peoples Benefit Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
6. POLICY AND CONTRACT ATTRIBUTES
Participating life insurance policies are issued by the Company which entitle
policyholders to a share in the earnings of the participating policies, provided
that a dividend distribution, which is determined annually based on mortality
and persistency experience of the participating policies, is authorized by the
Company. Participating insurance constituted approximately 12% and 14% of
ordinary life insurance in force at December 31, 1998 and 1997, respectively.
A portion of the Company's policy reserves and other policyholders' funds
(including separate account liabilities) relates to liabilities established on a
variety of the Company's products that are not subject to significant mortality
or morbidity risk; however, there may be certain restrictions placed upon the
amount of funds that can be withdrawn without penalty. The amount of reserves on
these products, by withdrawal characteristics, is summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31
1998 1997
------------------------------- --------------------------------
PERCENT PERCENT
AMOUNT OF TOTAL AMOUNT OF TOTAL
------------------------------- --------------------------------
<S> <C> <C> <C> <C>
Subject to discretionary withdrawal with
market value adjustment $ 1,401,397 13% $1,360,368 15%
Subject to discretionary withdrawal at
book value less surrender charge 310,839 3 385,683 4
Subject to discretionary withdrawal at
market value 4,697,903 46 3,519,863 39
Subject to discretionary withdrawal at
book value (minimal or no charges or
adjustments) 1,400,914 14 1,691,979 19
Not subject to discretionary withdrawal
provision 2,422,628 24 2,134,391 23
------------------------------- --------------------------------
10,233,681 100% 9,092,284 100%
Less reinsurance ceded 5,614 -
------------------ ------------------
Total policy reserves on annuities and
deposit fund liabilities $10,228,067 $9,092,284
================== ==================
</TABLE>
Reserves on the Company's traditional life products are computed using mean
reserving methodologies. These methodologies result in the establishment of
assets for the amount of the net valuation premiums that are anticipated to be
received between the policy's paid-through date to the policy's next anniversary
date. At December 31, 1998 and 1997, these assets (which are reported as
premiums deferred and uncollected) and the amounts of the related gross premiums
and loadings, are as follows:
22
<PAGE>
Peoples Benefit Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
6. POLICY AND CONTRACT ATTRIBUTES (CONTINUED)
<TABLE>
<CAPTION>
GROSS LOADING NET
-------------------------------------------
<S> <C> <C> <C>
December 31, 1998
Life and annuity:
Ordinary direct first year business $ 3,243 $ 1,565 $ 1,678
Ordinary direct renewal business 17,913 6,154 11,759
Group life direct business 40,548 11,816 28,732
Reinsurance ceded (182) - (182)
-------------------------------------------
61,522 19,535 41,987
Accident and health:
Direct 1,485 - 1,485
Reinsurance assumed 751 - 751
Reinsurance ceded (106) - (106)
-------------------------------------------
Total accident and health 2,130 2,130
-------------------------------------------
$63,652 $19,535 $44,117
===========================================
DECEMBER 31, 1997
Life and annuity:
Ordinary direct first year business $ 2,975 $ 2,161 $ 814
Ordinary direct renewal business 18,337 5,589 12,748
Group life direct business 41,659 11,453 30,206
Reinsurance ceded (36) - (36)
-------------------------------------------
62,935 19,203 43,732
Accident and health:
Direct 1,959 - 1,959
Reinsurance assumed 768 - 768
Reinsurance ceded (31) - (31)
-------------------------------------------
Total accident and health 2,696 - 2,696
-------------------------------------------
$65,631 $19,203 $46,428
===========================================
</TABLE>
At December 31, 1998 and 1997, the Company had insurance in force aggregating
$60,859 and $114,171, respectively, in which the gross premiums are less than
the net premiums required by the standard valuation standards established by the
Missouri Department of Insurance. The Company established policy reserves of
$495 and $559 to cover these deficiencies at December 31, 1998 and 1997,
respectively.
Separate accounts held by the Company represent funds held for individual
policyholders. The assets in the separate accounts, carried at estimated fair
value, consist of common stocks, mortgage loans, long-term bonds and cash.
During 1997, the Company made a capital contribution of $26,362 to the separate
accounts. At December 31, 1998 and 1997, the fair value of this capital
contribution was $31,142 and $28,748, respectively, which is included in the
separate account assets but is excluded from the corresponding liabilities.
23
<PAGE>
Peoples Benefit Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
6. POLICY AND CONTRACT ATTRIBUTES (CONTINUED)
Information regarding the separate accounts of the Company is as follows:
<TABLE>
<CAPTION>
NONINDEXED
GUARANTEED MORE
THAN 4% NONGUARANTEED TOTAL
--------------------------------------------------------
<S> <C> <C> <C>
Premiums, deposits and other
considerations for the year
ended December 31, 1998 $ 189 $ 858,562 $ 858,751
========================================================
Reserves for separate accounts
as of December 31, 1998 $143,533 $4,719,656 $4,863,189
========================================================
Reserves by withdrawal
characteristics as of December
31, 1998:
With market value adjustment $143,533 $ - $ 143,533
At market value - 4,719,656 4,719,656
--------------------------------------------------------
Total $143,533 4,719,656 $4,863,189
========================================================
Premiums, deposits and other
considerations for the year
ended December 31, 1997 $ 3,481 $ 781,075 $ 784,556
========================================================
Reserves for separate accounts
as of December 31, 1997 $166,241 $3,376,067 $3,542,308
========================================================
Reserves by withdrawal
characteristics as of December
31, 1997:
With market value adjustment $166,241 $ - $ 166,241
At market value - 3,376,067 3,376,067
--------------------------------------------------------
Total $166,241 $3,376,067 $3,542,308
========================================================
</TABLE>
24
<PAGE>
Peoples Benefit Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
6. POLICY AND CONTRACT ATTRIBUTES (CONTINUED)
<TABLE>
<CAPTION>
NONINDEXED
GUARANTEED MORE
THAN 4% NONGUARANTEED TOTAL
--------------------------------------------------------
<S> <C> <C> <C>
Premiums, deposits and other
considerations for the year
ended December 31, 1996 $ 6,467 $ 580,536 $ 587,004
========================================================
Reserves for separate accounts
as of December 31, 1996 $199,480 $2,231,028 $2,430,508
========================================================
Reserves by withdrawal
characteristics as of December
31, 1996:
With market value adjustment $199,480 $ - $ 199,480
At market value - 2,231,028 2,231,028
--------------------------------------------------------
Total $199,480 $2,231,028 $2,430,508
========================================================
</TABLE>
A reconciliation of the amounts transferred to and from the Company's separate
accounts for the years ended December 31, 1998, 1997 and 1996 is presented
below:
<TABLE>
<CAPTION>
1998 1997 1996
------------------------------------------------
<S> <C> <C> <C>
Transfers as reported in the Summary of
Operations of separate accounts annual
statement:
Transfers to separate accounts $ 858,751 $ 784,931 $ 587,137
Transfers from separate accounts (237,910) (189,627) (163,116)
------------------------------------------------
Net transfers to separate accounts 620,841 595,304 424,021
Reconciling adjustments:
Fees paid to external fund manager - 2,311 2,170
Other transfers to (from) modified separate
account 12,287 2,018 (391)
------------------------------------------------
12,287 4,329 1,779
------------------------------------------------
Transfers as reported in the Summary of
Operations of the Company's Life,
Accident & Health Annual Statement $ 633,128 $ 599,633 $ 425,800
================================================
</TABLE>
25
<PAGE>
Peoples Benefit Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
7. DIVIDEND RESTRICTIONS
The Company is subject to limitations, imposed by the State of Missouri, on the
payment of dividends to its parent company. Generally, dividends during any year
may not be paid, without prior regulatory approval, in excess of the greater of
(1) 10 percent of the Company's statutory capital and surplus as of the
preceding December 31, or (2) the Company's statutory net income for the
preceding year. Subject to availability of unassigned surplus at the time of
such dividend, the maximum payment which may be made in 1999, without prior
regulatory approval, is $99,530.
The Company paid dividends to its parent of $160,000, $120,000 and $125,000 in
1998, 1997 and 1996, respectively.
8. RELATED PARTY TRANSACTIONS
The Company shares certain offices, employees and general expenses with
affiliated companies.
The Company receives data processing, investment advisory and management,
marketing and administration services from certain affiliates. During 1998, the
Company paid $1,390 for these services, which approximates their costs to the
affiliates. Prior to 1998, the Company entered into agreements with its
affiliates whereby the Company performed administrative services, management
support services, and marketing services for its affiliates. The Company, as
compensation, received an amount equal to the actual cost of providing such
services. Amounts received were $63,000 and $70,000 in 1997 and 1996,
respectively. Such amounts are classified as reductions of general insurance and
other expenses in the accompanying statements of operations. These agreements
are no longer in place.
Payable to affiliates and intercompany borrowings bear interest at the thirty-
day commercial paper rate of 5.6% at December 31, 1998. During 1998, the Company
received net interest of $309 from affiliates. Interest received in 1997 and
1996 related to similar intercompany transactions was not significant to the
Company.
At December 31, 1998, the Company has a $102,293 short-term note payable to an
affiliate. Interest on this note accrues at rates from 5.25% to 5.35%.
The Company participates in various benefit plans sponsored by AEGON and the
related costs allocated to the Company are not significant.
26
<PAGE>
Peoples Benefit Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
8. RELATED PARTY TRANSACTIONS (CONTINUED)
The Company has 2,290,000 shares of redeemable preferred stock outstanding, all
of which are owned by CLLP. The preferred stock has a par value of $11 per share
and a liquidation value of $240 per share. CLLP is entitled to receive a
cumulative dividend equal to 8-1/2 percent per annum of the liquidation value of
the preferred stock. The Company may redeem all or any portion of the preferred
stock at the liquidation value commencing December 18, 2008.
On December 23, 1996, the Company made a capital contribution of its home office
data center with a book value of $4,657 to VLIC.
9. COMMITMENTS AND CONTINGENCIES
The Company is a party to legal proceedings incidental to its business. Although
such litigation sometimes includes substantial demands for compensatory and
punitive damages, in addition to contract liability, it is management's opinion,
after consultation with counsel and a review of available facts, that damages
arising from such demands will not be material to the Company's financial
position.
The Company is subject to insurance guaranty laws in the states in which it
writes business. These laws provide for assessments against insurance companies
for the benefit of policyholders and claimants in the event of insolvency of
other insurance companies. Assessments are charged to operations when received
by the Company except where right of offset against other taxes paid is allowed
by law; amounts available for future offsets are recorded as an asset on the
Company's balance sheet. Potential future obligations for unknown insolvencies
are not determinable by the Company. The future obligation has been based on the
most recent information available from the National Organization of Life and
Health Insurance Guaranty Associations. The Company has established a reserve of
$12,062 and $12,595 and an offsetting premium tax benefit of $4,604 and $0 at
December 31, 1998 and 1997, respectively, for its estimated share of future
guaranty fund assessments related to several major insurer insolvencies.
10. YEAR 2000 (UNAUDITED)
The term Year 2000 issue generally refers to the improper processing of dates
and incorrect date calculations that might occur in computer software and
hardware and embedded systems as the Year 2000 is approached. The use of
computer programs that rely on two-digit date fields to perform computations and
decision-making functions may cause systems to malfunction when processing
information involving dates after 1999. For example, any computer software that
has date-sensitive coding might recognize a code of 00 as the year 1900 rather
than the year 2000.
27
<PAGE>
Peoples Benefit Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
10. YEAR 2000 (UNAUDITED) (CONTINUED)
The Company has developed a Year 2000 Project Plan (the Plan) to address the
Year 2000 issue as it affects the Company's internal Information Technology
("IT") and non-IT systems, and to assess Year 2000 issues relating to third
parties with whom the Company has critical relationships.
The Plan for addressing internal systems generally includes an assessment of
internal IT and non-IT systems and equipment affected by the Year 2000 issue;
definition of strategies to address affected systems and equipment; remediation
of identified systems and equipment; internal testing and certification that
each internal system is Year 2000 compliant; and a review of existing and
revised business resumption and contingency plans to address potential Year 2000
issues. The Company has remediated and tested substantially all of its mission-
critical internal IT systems as of December 31, 1998. The Company continues to
remediate and test certain non-critical internal IT systems, internal non-IT
systems and will continue with a revalidation testing program throughout 1999.
The Company's Year 2000 issues are more complex because a number of its systems
interface with other systems not under the Company's control. The Company's most
significant interfaces and uses of third-party vendor systems are in the bank,
financial services and trust areas. The Company utilizes various banks to handle
numerous types of financial and sales transactions. Several of these banks also
provide trustee and custodial services for the Company's investment holdings and
transactions. These services are critical to a financial services company such
as the Company as its business centers around cash receipts and disbursements to
policyholders and the investment of policyholder funds. The Company has received
written confirmation from its vendor banks regarding their status on Year 2000.
The banks indicate their dedication to resolving any Year 2000 issues related to
their systems and services prior to December 31, 1999. The Company anticipates
that a considerable effort will be necessary to ensure that its corrected or new
systems can properly interface with those business partners with whom it
transmits and receives data and other information (external systems). The
Company has undertaken specific testing regimes with these third-party business
partners and expects to continue working with its business partners on any
interfacing of systems. However, the timing of external system compliance cannot
currently be predicted with accuracy because the implementation of Year 2000
readiness will vary from one company to another.
The Company does have some exposure to date-sensitive embedded technology such
as micro-controllers, but the Company views this exposure as minimal. Unlike
other industries that may be equipment intensive, like manufacturing, the
Company is a life insurance and financial services organization providing
insurance, annuities and pension products to its customers. As such, the primary
equipment and electronic devices in use are computers and telephone related
equipment. This type of hardware can have date-sensitive embedded technology
which could have Year 2000 problems. Because of this
28
<PAGE>
Peoples Benefit Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
10. YEAR 2000 (UNAUDITED) (CONTINUED)
exposure, the Company has reviewed its computer hardware and telephone systems,
with assistance from the applicable vendors, and has upgraded, or replaced, or
is in the process of replacing any equipment that will not properly process
date-sensitive data in the Year 2000 or beyond.
For the Company, a reasonably likely worst case scenario might include one or
more of the Company's significant policyholder systems being non-compliant. Such
an event could result in a material disruption of the Company's operations.
Specifically, a number of the Company's operations could experience an
interruption in the ability to collect and process premiums or deposits, process
claim payments, accurately maintain policyholder information, accurately
maintain accounting records, and/or perform adequate customer service. Should
the worst case scenario occur, it could, dependent upon its duration, have a
material impact on the Company's business and financial condition. Simple
failures can be repaired and returned to production within a matter of hours
with no material impact. Unanticipated failures with a longer service disruption
period could have a more serious impact. For this reason, the Company is placing
significant emphasis on risk management and Year 2000 business resumption
contingency planning in 1999 by modifying its existing business resumption and
disaster recovery plans to address potential Year 2000 issues.
The actions taken by management under the Year 2000 Project Plans are intended
to significantly reduce the Company's risk of a material business interruption
based on the Year 2000 issues. It should be noted that the Year 2000 computer
problem, and its resolution, is complex and multifaceted, and any company's
success cannot be conclusively known until the Year 2000 is reached. In spite of
its efforts or results, the Company's ability to function unaffected to and
through the Year 2000 may be adversely affected by actions (or failure to act)
of third parties beyond our knowledge or control. It is anticipated that there
may be problems that will have to be resolved in the ordinary course of business
on and after the Year 2000. However, the Company does not believe that the
problems will have a material adverse affect on the Company's operations or
financial condition.
29
<PAGE>
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements.
Part A. None
Part B. Financial Statements of Subaccounts of Peoples Benefit Life
Insurance Company Separate Account V which are available for
investment by Peoples Benefit Marquee Contract Owners as of
December 31, 1998 and for each of the two years and the period
ended December 31, 1998.
Statutory-basis financial statements for Peoples Benefit Life
Insurance Company as of December 31, 1998 and 1997 and for
each of the three years in the period ended December 31, 1998
with Report of Auditors.
Part C. None
(b) Exhibits.
(1) Resolution of the Board of Directors of National Home Life
Assurance Company ("National Home") authorizing establishment
of the Separate Account./1/
(2) Not Applicable.
(3) Distribution Agreement.
(a) Form of Selling Agreement./5/
(4) (a) Form of variable annuity contract (A Unit)./6/
(b) Form of variable annuity contract (B Unit)./6/
(c) 403(b) Rider./5/
(d) Individual Retirement Annuity Rider./5/
(5) Form of Application./7/
(6) (a) Articles of Incorporation of National Home./1/
(b) Amendment to Articles of Incorporation of National
Home./1/
(c) Amended and Restated Articles of Incorporation of National
Home./1/
(d) Amended and Restated Articles of Incorporation of
Providian Life and Health Insurance Company./9/
(7) Not Applicable.
(8) (a) Form of Participation Agreement for the Funds./6/
- ---------
/1/ Incorporated by reference from the initial Registration Statement of
National Home Life Assurance Company Separate Account V, File No. 33-45862.
/2/ Incorporated by reference from the initial Registration Statement of
National Home Life Assurance Company Separate Account II, File No. 33-7033.
/3/ Incorporated by reference from Post-Effective Amendment No. 3 to the
Registration Statement of National Home Life Assurance Company Separate
Account II, File No. 33-7033.
/4/ Incorporated by reference from Post-Effective Amendment No. 5 to the
Registration Statement of National Home Life Assurance Company Separate
Account II, File No. 33-7033.
/5/ Incorporated by reference from Pre-Effective Amendment No. 1 to the
Registration Statement of National Home Life Assurance Company Separate
Account V, File No. 33-45862.
/6/ Incorporated by reference from the Registration Statement of National Home
Life Assurance Company Separate Account V, File No. 33-72838, filed on
December 10, 1933.
/7/ Incorporated by reference from the Registration Statement of National Home
Life Assurance Company Separate Account V, File No. 33-79502, filed on May
27, 1994.
/8/ Incorporated by reference from Post-Effective Amendment No. 2 to the
Registration Statement of National Home Life Assurance Company Separate
Account V, File No. 33-79502, filed on April 30, 1995.
/9/ Incorporated by reference from Post-Effective Amendment No. 3 to the
Registration Statement of Providian Life and Health Insurance Company
Separate Account V, File No. 33-79502, filed April 30, 1996.
/10/ Incorporated by reference from Post-Effective Amendment No. 4 to the
Registration Statement of Providian Life and Health Insurance Company
Separate Account V, File No. 33-79502, filed April 30, 1997.
/11/ Filed herewith.
<PAGE>
(b) Participation Agreement Among T. Rowe Price International
Series, Inc., T. Rowe Price Equity Series, Inc., T. Rowe
Price Investment Services, Inc., and National Home Life
Assurance Company dated as of July 8, 1994./8/
(c) Fund Participation Agreement between Dreyfus Variable
Investment Fund and National Home Life Assurance Company
dated as of October 17, 1994./8/
(d) Participation Agreement Among Variable Insurance Products
Fund II, Fidelity Distributors Corporation and National
Home Life Assurance Company dated as of November 1,
1993./8/
(e) Participation Agreement Among Variable Insurance Products
Fund, Fidelity Distributors and National Home Life
Assurance Company./8/
(f) Amendment dated June 2, 1994 to the Participation
Agreement Among Variable Insurance Product Fund II,
Fidelity Distributors Corporation and Providian Life and
Health Insurance Company (formerly National Home Life
Assurance Company) dated November 1, 1993. /10/
(g) Amendment dated March 20, 1996 to the Participation
Agreement Among Variable Insurance Products Fund II,
Fidelity Distributors Corporation and Providian Life and
Health Insurance Company (formerly National Home Life
Assurance Company) dated November 1, 1993. /10/
(9) (a) Opinion and Consent of Counsel./11/
(b) Consent of Counsel./11/
(10) Consent of Independent Auditors./11/
(11) No Financial Statements are omitted from Item 23.
(12) Not Applicable.
(13) Performance Computation./10/
(14) Not Applicable.
<PAGE>
ITEM 27. NUMBER OF CONTRACT OWNERS
As of March 31, 1999, there were 2,659 Contract Owners of the Peoples Benefit
Marquee Variable Annuity.
ITEM 28. INDEMNIFICATION
Item 28 is incorporated by reference from the Post-Effective Amendment No. 6 to
the Registration Statement of the National Home Life Assurance Company Separate
Account II, File No. 33-7033.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) AFSG Securities Corporation ("AFSG"), which serves as the principal
underwriter for the variable annuity contracts funded by Separate
Account V, also serves as the principal underwriter for variable life
insurance policies funded by Separate Account I and Variable Annuity
contracts funded by Separate Account II of Providian Life and Health
Insurance Company. In addition, AFSG serves as principal underwriter
for variable annuity contracts funded by Separate Account C of First
Providian Life and Health Insurance Company; PFL Life Variable Annuity
Account A, PFL Endeavor VA Separate Account, PFL Wright Variable
Annuity Account and PFL Retirement Builder Variable Annuity Account of
PFL Life Insurance Company and AUSA Endeavor Variable Annuity Account
of AUSA Life Insurance Company, Inc.
(b) Directors and Officers
<TABLE>
<CAPTION>
Positions and Officers
Name with Underwriter
---- ----------------------
<S> <C>
Larry N. Norman President and Director
Lisa A. Wachendorf Vice President and Chief Compliance Officer
Frank A. Camp Secretary and Director
Sarah J. Strange Vice President and Director
Linda Gilmer Treasurer/Controller
Debra C. Cubero Vice President
Anne M. Spaes Vice President
Robert W. Warner Assistant Compliance Officer
Emily Bates Assistant Treasurer
Clifton W. Flenniken Assistant Treasurer
Thomas E. Pierpan Vice President and Assistant Secretary
Priscilla I. Hechler Vice President and Assistant Secretary
Darin Smith Vice President and Assistant Secretary
</TABLE>
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The books, accounts and other documents required by Section 31(a) under the
Investment Company Act and the rules promulgated thereunder will be maintained
in the Administrative Offices of Providian Life and Health in Louisville,
Kentucky.
ITEM 31. MANAGEMENT SERVICES
All management contracts are discussed in Part A or Part B.
<PAGE>
Item 25. Directors and Officers of Depositor
<TABLE>
<CAPTION>
Positions and Offices with Depositor Name and Principal Business Address*
- ------------------------------------ ------------------------------------
<S> <C>
President Bart Herbert, Jr.
Senior Vice President Edward A. Biemer
Senior Vice President Thomas P. Bowie
Senior Vice President G. Douglas Mangum, Jr.
Executive Vice President William L. Busler
Treasurer Martha A. McConnell
Vice President Brian Alford
Vice President & Assistant Treasurer Nathan C. Anguiano
Vice President & Division General Counsel Frank A. Camp
Vice President Brenda K. Clancy
Vice President Michele M. Coan
Vice President Jane A. Coyne
Vice President Karen H. Fleming
Vice President Carolyn M. Johnson
Vice President Michael F. Lane
Vice President John A. Mazzuca
Vice President Daniel C. Mohwinkel
Vice President Maureen E. Nielsen
Vice President Larry N. Norman
Vice President G. Eric O'Brien
Vice President Daniel H. Odum
Vice President Douglas A. Sarcia
Vice President Gary H. Scott
Vice President Brian A. Smith
Vice President Colleen M. Tobiason
Vice President William A. Waldie, Jr.
Vice President Michael A. Wapp
Vice President & Actuary Ronald L. Ziegler
Assistant Vice President Janice Boehmler
Assistant Vice President & Qualified Actuary Michael A. Cioffi
Assistant Vice President Kimberly A. Cushing
Assistant Vice President Mary Ellen Fahringer
Assistant Vice President JoAnn Herndon
Assistant Vice President Patricia A. Lukacs
Assistant Vice President William R. Maurer
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Assistant Vice President Robert E. Payne
Assistant Vice President Teresa L. Stolba
Assistant Vice President Harvey Waite
Assistant Treasurer Cliford W. Flenniken
Assistant Controller Paul J. Lukacs
Assistant Controller Joseph C. Noone
Second Vice President Amy E. Anders
Second Vice President George E. Claiborne, Jr.
Second Vice President Cindy L. Chanley
Second Vice President Marvin A. Johnson
Second Vice President Anne M. Spaes
Second Vice President/Investments David L. Blankenship
Second Vice President/Investments C. Ray Brewer
Second Vice President/Investments Kirk W. Buese
Second Vice President/Investments Joel L. Coleman
Second Vice President/Investments William S. Cook
Second Vice President/Investments Deborah A. Dias
Second Vice President/Investments Lee W. Eastland
Second Vice President/Investments Donald E. Flynn
Second Vice President/Investments Eric B. Goodman
Second Vice President/Investments M. Josette Goulet
Second Vice President/Investments James Grant
Second Vice President/Investments David R. Halfpap
Second Vice President/Investments Robert L. Hansen
Second Vice President/Investments Donna L. Heitzman
Second Vice President/Investments David W. Hopewell
Second Vice President/Investments Frederick B. Howard
Second Vice President/Investments Claudia Jackson
Second Vice President/Investments Jon D. Kettering
Second Vice President/Investments Tim Kuussalo
Second Vice President/Investments James D. MacKinnon
Second Vice President/Investments Kathleen B. Madden
Second Vice President/Investments Jeffrey T. McGlaun
Second Vice President/Investments Paul D. Mier
Second Vice President/Investments Thomas L. Nordstrom
Second Vice President/Investments Ralph M. O'Brien
Second Vice President/Investments Douglas H. Owen, Jr.
Second Vice President/Investments Dennis Roland
Second Vice President/Investments James D. Ross
Second Vice President/Investments J. Alan Schork
Second Vice President/Investments Lindsay Schumacher
Second Vice President/Investments Michael B. Shaffer
Second Vice President/Investments Clifford Sheets
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
Second Vice President/Investments Michael B. Simpson
Second Vice President/Investments Jon L. Skaggs
Second Vice President/Investments Elizabeth A. Smedley
Second Vice President/Investments Michael S. Smith
Second Vice President/Investments Anne M. Spaes
Second Vice President/Investments Donna J. Spalding
Second Vice President/Investments Bradley L. Stofferahn
Second Vice President/Investments Randall K. Waddell
Second Vice President/Investments Marcia Weiland
Second Vice President/Investments Tammy C. Wetterer
Second Vice President/Special Markets Kim A. Bivins
Second Vice President/Special Markets Gregory M. Curry
Second Vice President/Special Markets Lisa L. Patterson
Second Vice President/Special Markets Rhonda L. Pritchett
Second Vice President/Special Markets Thomas E. Walsh
Second Vice President/Special Markets Harvey Willis
Assistant Secretary Colleen S. Lyons
Assistant Secretary Mary L. Schaefer
Assistant Secretary Gregory E. Miller - Breetz
Assistant Secretary R. Michael Slaven
Assistant Secretary Craig D. Vermie
Advertising Compliance Officer Nancy E. Partington
Product Compliance Officer James T. Bradley
DIRECTORS:
Jay H. Berman Danny L. Kolseud
Bart Herbert, Jr. Douglas A. Sarcia
G. Douglas Mangum, Jr. Brian A. Smith
Larry N. Norman Craig D. Vermie
Brenda K. Clancy
</TABLE>
*The business address of each director and officer of Providian Life and Health
Insurance Company is 20 Moores Road, Frazer, Pennsylvania 19355; 400 West Market
Street, Louisville, Kentucky 40202 or 4333 Edgewood Road NE, Cedar Rapids, Iowa
52499.
3
<PAGE>
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT.
The Depositor, Peoples Benefit Life Insurance Company ("Peoples Benefit") is
indirectly wholly owned by AEGON USA, Inc. The Registrant is a segregated asset
account of Peoples Benefit.
The following chart indicates the persons controlled by or under common con-
trol with Peoples Benefit.
<TABLE>
<CAPTION>
JURISDICTION OF PERCENT OF VOTING
NAME INCORPORATION SECURITIES OWNED BUSINESS
---- --------------- ----------------- --------
<S> <C> <C> <C>
AEGON N.V. Netherlands Corporation 53.63% of Vereniging Holding company
AEGON Netherlands
Membership Association
Groninger Financieringen Netherlands Corporation 100% of AEGON N.V. Holding company
B.V. Netherlands Corporation
AEGON Netherland N.V. Netherlands Corporation 100% of AEGON N.V. Holding company
Netherlands Corporation
AEGON Nevak Holding B.V. Netherlands Corporation 100% of AEGON N.V. Holding company
Netherlands Corporation
AEGON International N.V. Netherlands Corporation 100% of AEGON N.V. Holding company
Netherlands Corporation
Voting Trust Trustees: Delaware Voting Trust
K.J. Storm
Donald J. Shepard H.B.
Van Wijk Dennis Hersch
AEGON U.S. Holding Delaware 100% of Voting Trust Holding company
Corporation
Short Hills Management New Jersey 100% of AEGON U.S. Holding company
Company Holding Corporation
CORPA Reinsurance New York 100% of AEGON U.S. Holding company
Company Holding Corporation
AEGON Management Company Indiana 100% of AEGON U.S. Holding company
Holding Corporation
RCC North America Inc. Delaware 100% of AEGON U.S. Holding company
Holding Corporation
AEGON USA, Inc. Iowa 100% AEGON U.S. Holding Holding company
Corporation
AUSA Holding Company Maryland 100% AEGON USA, Inc. Holding company
Monumental General Maryland 100% AUSA Holding Co. Holding company
Insurance Group, Inc.
Trip Mate Insurance Kansas 100% Monumental General Sale/admin. of travel
Agency, Inc. Insurance Group, Inc. insurance
Monumental General Maryland 100% Monumental General Provides management
Administrators, Inc. Insurance Group, Inc. srvcs. to unaffiliated
third party
administrator
Executive Management and Maryland 100% Monumental General Provides actuarial
Consultant Services, Administrators, Inc. consulting services
Inc.
Monumental General Mass Maryland 100% Monumental General Marketing arm for sale
Marketing, Inc. Insurance Group, Inc. of mass marketed
insurance coverages
</TABLE>
C-3
<PAGE>
<TABLE>
<CAPTION>
JURISDICTION OF PERCENT OF VOTING
NAME INCORPORATION SECURITIES OWNED BUSINESS
---- --------------- ----------------- --------
<S> <C> <C> <C>
Diversified Investment Delaware 100% AUSA Holding Co. Registered investment
Advisors, Inc. advisor
Diversified Investors Delaware 100% Diversified Broker-Dealer
Securities Corp. Investment Advisors,
Inc.
AEGON USA Securities, Iowa 100% AUSA Holding Co. Broker-Dealer
Inc.
Supplemental Ins. Tennessee 100% AUSA Holding Co. Insurance
Division, Inc.
Creditor Resources, Inc. Michigan 100% AUSA Holding Co. Credit insurance
CRC Creditor Resources Canada 100% Creditor Resources, Insurance agency
Canadian Dealer Network Inc.
Inc.
AEGON USA Investment Iowa 100% AUSA Holding Co. Investment advisor
Management, Inc.
AEGON USA Realty Iowa 100% AUSA Holding Co. Provides real estate
Advisors, Inc. administrative and real
estate investment
services
Quantra Corporation Delaware 100% AEGON USA Realty Real estate and
Advisors, Inc. financial software
production and sales
Quantra Software Delaware 100% Quantra Corporation Manufacture and sell
Corporation mortgage loan and
security management
software
Landauer Realty Iowa 100% AEGON USA Realty Real estate counseling
Advisors, Inc. Advisors, Inc.
Landauer Associates, Delaware 100% AEGON USA Realty Real estate counseling
Inc. Advisors, Inc.
Realty Information Iowa 100% AEGON USA Realty Information Systems for
Systems, Inc. Advisors, Inc. real estate investment
management
AEGON USA Realty Iowa 100% AEGON USA Realty Real estate management
Management, Inc Advisors, Inc.
USP Real Estate Iowa 21.89% First AUSA Life Real estate investment
Investment Trust Ins. Co. trust
13.11% PFL Life Ins. Co.
4.86% Bankers United
Life Assurance Co.
RCC Properties Limited Iowa AEGON USA Realty Limited Partnership
Partnership Advisors, Inc. is
General Partner and 5%
owner.
AUSA Financial Markets, Iowa 100% AUSA Holding Co. Marketing
Inc.
Endeavor Investment California 49.9% AUSA Financial General Partnership
Advisors Markets, Inc.
Universal Benefits Iowa 100% AUSA Holding Co. Third party
Corporation administrator
Investors Warranty of Iowa 100% AUSA Holding Co. Provider of automobile
America, Inc. extended maintenance
contracts
Massachusetts Fidelity Iowa 100% AUSA Holding Co. Trust company
Trust Co.
Money Services, Inc. Delaware 100% AUSA Holding Co. Provides financial
counseling for
employees and agents of
affiliated companies
</TABLE>
C-4
<PAGE>
<TABLE>
<CAPTION>
JURISDICTION OF PERCENT OF VOTING
NAME INCORPORATION SECURITIES OWNED BUSINESS
---- --------------- ----------------- --------
<S> <C> <C> <C>
Zahorik Company, Inc. California 100% AUSA Holding Co. Broker-Dealer
ZCI, Inc. Alabama 100% Zahorik Company, Insurance agency
Inc.
AEGON Asset Management Delaware 100% AUSA Holding Co. Registered investment
Services, Inc. advisor
Intersecurities, Inc. Delaware 100% AUSA Holding Co. Broker-Dealer
ISI Insurance Agency, California 100% Western Reserve Insurance agency
Inc. Life Assurance Co.
of Ohio
ISI Insurance Agency of Ohio 100% ISI Insurance Insurance agency
Ohio, Inc. Agency, Inc.
ISI Insurance Agency of Texas 100% ISI Insurance Insurance agency
Texas, Inc. Agency, Inc.
ISI Insurance Agency of Massachusetts 100% ISI Insurance Insurance Agency
Massachusetts, Inc. Agency Inc.
Associated Mariner Michigan 100% Intersecurities, Holding co./management
Financial Group, Inc. Inc. services
Mariner Financial Michigan 100% Associated Broker/Dealer
Services, Inc. Mariner Financial
Group, Inc.
Mariner Planning Michigan 100% Mariner Financial planning
Corporation Financial Services,
Inc.
Associated Mariner Michigan 100% Associated Insurance agency
Agency, Inc. Mariner Financial
Group, Inc.
Associated Mariner Hawaii 100% Associated Insurance agency
Agency of Hawaii, Inc. Mariner Agency, Inc.
Associated Mariner Ins. Massachusetts 100% Associated Insurance agency
Agency of Mariner Agency, Inc.
Massachusetts, Inc.
Associated Mariner Ohio 100% Associated Insurance agency
Agency Ohio, Inc. Mariner Agency, Inc.
Associated Mariner Texas 100% Associated Insurance agency
Agency Texas, Inc. Mariner Agency, Inc.
Associated Mariner New Mexico 100% Associated Insurance agency
Agency New Mexico, Inc. Mariner Agency, Inc.
Mariner Mortgage Corp. Michigan 100% Associated Mortgage origination
Mariner Financial
Group, Inc.
Idex Investor Services, Florida 100% AUSA Holding Co. Shareholder services
Inc.
Idex Management, Inc. Delaware 50% AUSA Holding Co. Investment advisor
50% Janus Capital
Corp.
IDEX Series Fund Massachusetts Various Mutual fund
First AUSA Life Maryland 100% AEGON USA, Inc. Insurance holding
Insurance Company company
AUSA Life Insurance New York 100% First AUSA Life Insurance
Company, Inc. Insurance Company
Life Investors Insurance Iowa 100% First AUSA Life Insurance
Company of America Ins. Co.
Life Investors Alliance, Delaware 100% LIICA Purchase, own, and hold
LLC the equity interest of
other entities
Bankers United Life Iowa 100% Life Investors Insurance
Assurance Company Ins. Company of
America
</TABLE>
C-5
<PAGE>
<TABLE>
<CAPTION>
JURISDICTION OF PERCENT OF VOTING
NAME INCORPORATION SECURITIES OWNED BUSINESS
---- --------------- ----------------- --------
<S> <C> <C> <C>
Life Investors Agency Iowa 100% Life Investors Marketing
Group, Inc. Ins. Company of
America
PFL Life Insurance Iowa 100% First AUSA Life Insurance
Company Ins. Co.
AEGON Financial Services Minnesota 100% PFL Life Marketing
Group, Inc. Insurance Co.
AEGON Assignment Kentucky 100% AEGON Financial Administrator of
Corporation of Kentucky Services Group, Inc. structured settlements
AEGON Assignment Illinois 100% AEGON Administrator of
Corporation Financial Services Structured Settlements
Group, Inc.
Southwest Equity Life Arizona 100% of Common Voting Insurance
Ins. Co. Stock First AUSA Life
Ins. Co.
Iowa Fidelity Life Arizona 100% of Common Voting Insurance
Insurance Co. Stock First AUSA Life
Ins. Co.
Western Reserve Life Ohio 100% First AUSA Life Insurance
Assurance Co. of Ohio Ins. Co.
AEGON Equity Group, Inc. Florida 100% Western Reserve Insurance Agency
Life Assurance Co. of
Ohio
WRL Series Fund, Inc. Maryland Various Mutual fund
WRL Investment Services, Florida 100% Western Reserve Provides administration
Inc. Life Assurance Co. of for affiliated mutual
Ohio fund
WRL Investment Florida 100% Western Reserve Registered investment
Management, Inc. Life Assurance Co. of advisor
Ohio
Monumental Life Maryland 26.77% First AUSA Insurance
Insurance Co. Life Ins. Co.
73.23% Capital General
Dev. Corp.
AEGON Special Markets Maryland 100% Monumental Life Marketing
Group, Inc. Ins. Co.
Monumental General Maryland 100% First AUSA Life Insurance
Casualty Co. Ins. Co.
United Financial Maryland 100% First AUSA Life General agency
Services, Inc. Ins. Co.
Bankers Financial Life Arizona 100% First AUSA Life Insurance
Ins. Co. Ins. Co.
The Whitestone Maryland 100% First AUSA Life Insurance agency
Corporation Ins. Co.
Cadet Holding Corp. Iowa 100% First AUSA Life Holding company
Insurance Company
Commonwealth General Delaware 100% AEGON USA, Inc. Holding company
Corporation ("CGC")
PB Series Trust Massachusetts N/A Mutual fund
Monumental Agency Group, Kentucky 100% CGC Provider of srvcs. to
Inc. ins. cos.
Benefit Plans, Inc. Delaware 100% CGC TPA for Peoples Security
Life Insurance Company
Durco Agency, Inc. Virginia 100% Benefit Plans, General agent
Inc.
Commonwealth General. Kentucky 100% CGC Administrator of
Assignment Corporation structured settlements
</TABLE>
C-6
<PAGE>
<TABLE>
<CAPTION>
JURISDICTION OF PERCENT OF VOTING
NAME INCORPORATION SECURITIES OWNED BUSINESS
---- --------------- ----------------- --------
<S> <C> <C> <C>
AFSG Securities Pennsylvania 100% CGC Broker-Dealer
Corporation
PB Investment Advisors, Delaware 100% CGC Registered investment
Inc. advisor
Diversified Financial Delaware 100% CGC Provider of investment,
Products Inc. marketing and admin.
services to ins. cos.
AEGON USA Real Estate Delaware 100% Diversified Real estate and mortgage
Services, Inc. Financial Products Inc holding company
Capital Real Estate Delaware 100% CGC Furniture and equipment
Development Corporation lessor
Capital General Delaware 100% CGC Holding company
Development Corporation
JMH Operating Company, Mississippi 100% Peoples Security Real estate holdings
Inc. Life Insurance Company
Independence Automobile Florida 100% Capital Security Automobile Club
Association, Inc. Life Insurance Company
Independence Automobile Georgia 100% Capital Security Automobile Club
Club, Inc. Life Insurance Company
Capital 200 Block Delaware 100% CGC Real estate holdings
Corporation
Capital Broadway Kentucky 100% CGC Real estate holdings
Corporation
Southlife, Inc. Tennessee 100% CGC Investment subsidiary
Ampac Insurance Agency, Pennsylvania 100% CGC Provider of management
Inc. (EIN 23-1720755) support services
National Home Life Pennsylvania 100% Ampac Insurance Special-purpose
Corporation Agency, Inc. subsidiary
Compass Rose Development Pennsylvania 100% Ampac Insurance Special-purpose
Corporation Agency, Inc. subsidiary
Frazer Association Illinois 100% Ampac Insurance TPA license-holder
Consultants, Inc. Agency, Inc.
Valley Forge Associates, Pennsylvania 100% Ampac Insurance Furniture & equipment
Inc. Agency, Inc. lessor
Veterans Benefits Plans, Pennsylvania 100% Ampac Insurance Administrator of group
Inc. Agency, Inc. insurance programs
Veterans Insurance Delaware 100% Ampac Insurance Special-purpose
Services, Inc. Agency, Inc. subsidiary
Financial Planning Dist. Columbia 100% Ampac Insurance Special-purpose
Services, Inc. Agency, Inc. subsidiary
Academy Insurance Group, Delaware 100% CGC Holding company
Inc.
Academy Life Missouri 100% Academy Insurance Insurance company
Insurance Co. Group, Inc.
Pension Life Insurance New Jersey 100% Academy Insurance Insurance company
Company of America Group, Inc.
</TABLE>
C-7
<PAGE>
<TABLE>
<CAPTION>
JURISDICTION OF PERCENT OF VOTING
NAME INCORPORATION SECURITIES OWNED BUSINESS
---- --------------- ----------------- --------
<S> <C> <C> <C>
Academy Services, Inc. Delaware 100% Academy Insurance Special-purpose
Group, Inc. subsidiary
Ammest Development Corp. Kansas 100% Academy Insurance Special-purpose
Inc. Group, Inc. subsidiary
Ammest Insurance Agency, California 100% Academy Insurance General agent
Inc. Group, Inc.
Ammest Massachusetts Massachusetts 100% Academy Insurance Special-purpose
Insurance Agency, Inc. Group, Inc. subsidiary
Ammest Realty, Inc. Pennsylvania 100% Academy Insurance Special-purpose
Group, Inc. subsidiary
Ampac, Inc. Texas 100% Academy Insurance Managing general agent
Group, Inc.
Ampac Insurance Agency, Pennsylvania 100% Academy Insurance Special-purpose
Inc. Group, Inc. subsidiary
(EIN 23-2364438)
Data/Mark Services, Inc. Delaware 100% Academy Insurance Provider of mgmt.
Group, Inc. services
Force Financial Group, Delaware 100% Academy Insurance Special-purpose
Inc. Group, Inc. subsidiary
Force Financial Massachusetts 100% Force Fin. Group, Special-purpose
Services, Inc. Inc. subsidiary
Military Associates, Pennsylvania 100% Academy Insurance Special-purpose
Inc. Group, Inc. subsidiary
NCOA Motor Club, Inc. Georgia 100% Academy Insurance Automobile club
Group, Inc.
NCOAA Management Company Texas 100% Academy Insurance Special-purpose
Group, Inc. subsidiary
Unicom Administrative Pennsylvania 100% Academy Insurance Provider of admin.
Services, Inc. Group, Inc. services
Unicom Administrative Germany 100% Unicom Provider of admin.
Services, GmbH Administrative services
Services, Inc.
Capital Liberty, L.P. Delaware 99.0% Monumental Life Holding Company
Ins. Co.
1% CGC
Commonwealth General LLC Turks & 100% CGC Special-purpose
Caicos Islands subsidiary
Peoples Benefit Life Missouri 3.7% CGC Insurance company
Insurance Company 20% Capital Liberty,
L.P.
76.3% Monumental Life
Ins. Co.
Veterans Life Insurance Illinois 100% Peoples Benefit Insurance company
Co. Life Insurance Company
Peoples Benefit Pennsylvania 100% Veterans Life Ins. Special-purpose
Services, Inc. Co. subsidiary
</TABLE>
C-8
<PAGE>
ITEM 27. NUMBER OF CONTRACT OWNERS
As of March 31, 1999, there were 1,831 Contract Owners of the Advisor's Edge
Variable Annuity and 28 Contract Owners of the Advisor's Edge Select Variable
Annuity.
ITEM 28. INDEMNIFICATION
Item 28 is incorporated by reference from the Post-Effective Amendment No. 6 to
the Registration Statement of the National Home Life Assurance Company Separate
Account II, File No. 33-7033.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) AFSG Securities Corporation ("AFSG"), which serves as the principal
underwriter for the variable annuity contracts funded by Separate
Account V, also serves as the principal underwriter for variable life
insurance policies funded by Separate Account I and Variable Annuity
contracts funded by Separate Account II of Providian Life and Health
Insurance Company. In addition, AFSG serves as principal underwriter
for variable annuity contracts funded by Separate Account C of First
Providian Life and Health Insurance Company; PFL Life Variable Annuity
Account A, PFL Endeavor VA Separate Account, PFL Wright Variable
Annuity Account and PFL Retirement Builder Variable Annuity Account of
PFL Life Insurance Company and AUSA Endeavor Variable Annuity Account
of AUSA Life Insurance Company, Inc.
(b) Directors and Officers
<TABLE>
<CAPTION>
Positions and Officers
Name with Underwriter
---- ----------------------
<S> <C>
Larry N. Norman President and Director
Lisa A. Wachendorf Vice President and Chief Compliance Officer
Frank A. Camp Secretary and Director
Sarah J. Strange Vice President and Director
Linda Gilmer Treasurer/Controller
Debra C. Cubero Vice President
Anne M. Spaes Vice President
Robert W. Warner Assistant Compliance Officer
Emily Bates Assistant Treasurer
Clifton W. Flenniken Assistant Treasurer
Thomas E. Pierpan Vice President and Assistant Secretary
Priscilla I. Hechler Vice President and Assistant Secretary
Darin Smith Vice President and Assistant Secretary
</TABLE>
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The books, accounts and other documents required by Section 31(a) under the
Investment Company Act and the rules promulgated thereunder will be maintained
in the Administrative Offices of Providian Life and Health in Louisville,
Kentucky.
ITEM 31. MANAGEMENT SERVICES
All management contracts are discussed in Part A or Part B.
<PAGE>
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant, Peoples Benefit Life Insurance Company Separate Account V,
certifies that it meets the requirements of Securities Act Rule 485(b) for
effectiveness of this amended Registration Statement and has caused this amended
Registration Statement to be signed on its behalf in the County of Jefferson and
Commonwealth of Kentucky on the 30th day of April, 1999.
PEOPLES BENEFIT LIFE INSURANCE COMPANY
SEPARATE ACCOUNT V (REGISTRANT)
By: Peoples Benefit Life Insurance Company
BART HERBERT, JR.
By: ___________________________________________
Bart Herbert, Jr., President
PEOPLES BENEFIT LIFE INSURANCE COMPANY
(DEPOSITOR)
BART HERBERT, JR.
By: ___________________________________________
Bart Herbert, Jr., President
*By: /s/ Gregory E. Miller - Breetz
------------------------------
Gregory E. Miller - Breetz
Attorney-in-fact
<PAGE>
As required by the Securities Act of 1933, this amended Registration
Statement has been duly signed by the following persons in the capacities and on
the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
JAY H. BERMAN* Director April 30, 1999
- ---------------------------
Jay H. Berman
G. DOUGLAS MANGUM, JR.* Director and Senior Vice President April 30, 1999
- ---------------------------
G. Douglas Mangum, Jr.
MARTHA A. McCONNELL* Treasurer (Chief Accounting Officer) April 30, 1999
- ---------------------------
Martha A. McConnell
DOUGLAS A. SARCIA* Director and Vice President April 30, 1999
- ---------------------------
Douglas A. Sarcia
BRIAN A. SMITH* Director and Senior Vice President April 30, 1999
- ---------------------------
Brian A. Smith
BART HERBERT, JR.* Director and President April 30, 1999
- ---------------------------
Bart Herbert, Jr.
CRAIG D. VERMIE* Director April 30, 1999
- ---------------------------
Craig D. Vermie
*By: /s/ Gregory E. Miller - Breetz
-------------------------------
Gregory E. Miller - Breetz
Attorney-in-fact
</TABLE>
<PAGE>
SEPARATE ACCOUNT V
PEOPLES BENEFIT MARQUEE VARIABLE ANNUITY
INDEX TO EXHIBITS
EXHIBIT 9(a) OPINION AND CONSENT OF COUNSEL
EXHIBIT 9(b) CONSENT OF COUNSEL
EXHIBIT 10 CONSENT OF INDEPENDENT AUDITORS
<PAGE>
EXHIBIT 9(a)
April 30, 1999
Peoples Benefit Life Insurance Company
Administrative Offices
20 Moores Road
Frazer, Pennsylvania 19355
RE: PEOPLES BENEFIT LIFE INSURANCE COMPANY
SEPARATE ACCOUNT V (PEOPLES BENEFIT VARIABLE ANNUITY)- OPINION AND
CONSENT
To Whom It May Concern:
This opinion and consent is furnished in connection with the filing of Post-
Effective Amendment No. 6 (the "Amendment") to the Registration Statement on
Form N-4, File No. 33-79502 (the "Registration Statement") under the Securities
Act of 1933, as amended (the "Act"), of Peoples Benefit Life Insurance
Company Separate Account V ("Separate Account V"). Separate Account V receives
and invests premiums allocated to it under a flexible premium multi-funded
annuity contract (the "Annuity Contract"). The Annuity Contract is offered in
the manner described in the prospectuses contained in the Registration Statement
(the "Prospectuses").
In my capacity as legal adviser to Peoples Benefit Life Insurance Company,
I hereby confirm the establishment of Separate Account V pursuant to a
resolution adopted by the Board of Directors of Peoples Benefit Life
Insurance Company for a separate account for assets applicable to the Annuity
Contract, pursuant to the provisions of Section 376.309 of the Missouri
Insurance Statutes. In addition, I have made such examination of the law in
addition to consultation with outside counsel and have examined such corporate
records and such other documents as I consider appropriate as a basis for the
opinion hereinafter expressed. On the basis of such examination, it is my
professional opinion that:
1. Peoples Benefit Life Insurance Company is a corporation duly organized
and validly existing under the laws of the State of Missouri.
2. Separate Account V is an account established and maintained by Peoples
Benefit Life Insurance Company pursuant to the laws of the State of
Missouri, under which income, capital gains and capital losses incurred on
the assets of Separate Account V are credited to or charged against the
assets of Separate
<PAGE>
Account V, without regard to the income, capital gains or capital losses
arising out of any other business which Peoples Benefit Life Insurance
Company may conduct.
3. Assets allocated to Separate Account V will be owned by Peoples Benefit
Life Insurance Company. The assets in Separate Account V attributable to
the Annuity Contract generally are not chargeable with liabilities arising
out of any other business which Peoples Benefit Life Insurance Company
may conduct. The assets of Separate Account V are available to cover the
general liabilities of Peoples Benefit Life Insurance Company only to
the extent that the assets of Separate Account V exceed the liabilities
arising under the Annuity Contracts.
4. The Annuity Contracts have been duly authorized by Peoples Benefit
Life Insurance Company and, when sold in jurisdictions authorizing such
sales, in accordance with the Registration Statement, will constitute
validly issued and binding obligations of Peoples Benefit Life
Insurance Company in accordance with their terms.
5. Owners of the Annuity Contracts as such, will not be subject to any
deductions, charges or assessments imposed by Peoples Benefit Life
Insurance Company other than those provided in the Annuity Contract.
I hereby consent to the use of this opinion as an exhibit to the Amendment and
to the reference to my name under the heading "Legal Matters" in the
Prospectuses.
Very truly yours,
/s/ Gregory E. Miller-Breetz
Gregory E. Miller-Breetz
Attorney
<PAGE>
EXHIBIT 9(b)
JORDEN BURT BOROS CICCHETTI BERENSON & JOHNSON LLP
1025 THOMAS JEFFERSON STREET, N.W.
SUITE 400-EAST
WASHINGTON, D.C. 20007-0805
(202) 965-8100
TELECOPIER (202) 965-8104
April 30, 1999
Peoples Benefit Life
Insurance Company
20 Moores Road
Frazer, Pennsylvania 19355
Ladies and Gentlemen:
We hereby consent to the reference to our name under the caption "Legal
Matters" in the Prospectuses contained in Post-Effective Amendment No. 6 to the
Registration Statement on Form N-4 (file No.33-79502) filed by Peoples Benefit
Life Insurance Company and Peoples Benefit Life Insurance Company Separate
Account V with the Securities and Exchange Commission under the Securities Act
of 1933 and the Investment Company Act of 1940.
Very truly yours,
/s/ Jorden Burt Boros Cicchetti
Berenson & Johnson LLP
Jorden Burt Boros Cicchetti
Berenson & Johnson LLP
<PAGE>
Exhibit 10
Consent of Independent Auditors
We consent to the reference to our firm under the captions "Financial
Statements" in the Prospectus and Statement of Additional Information and
"Auditors" in the Prospectus and to the use of our reports (1) dated January 29,
1999 with respect to the financial statements of certain subaccounts of Peoples
Benefit Life Insurance Company Separate Account V, which are available for
investment by the Marquee Variable Annuity contract owners, and (2) dated
February 19, 1999 with respect to the statutory-basis financial statements and
schedules of Peoples Benefit Life Insurance Company included in Post-Effective
Amendment No. 6 to the Registration Statement (Form N-4 No. 33-79502) and
related Prospectus of The Peoples Benefit Marquee Variable Annuity.
/s/ Ernst & Young LLP
Des Moines, Iowa
April 27, 1999
