As filed with the Securities and Exchange Commission on April 16, 1998
REGISTRATION NO. 333-18517
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
POST-EFFECTIVE
AMENDMENT NO. 3 TO
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT
TRUSTS REGISTERED ON FORM N-8B-2
SELECT*LIFE VARIABLE ACCOUNT
(Exact Name of Registrant)
RELIASTAR LIFE INSURANCE COMPANY
20 Washington Avenue South
Minneapolis, MN 55440
(Name and Address of principal executive office of depositor)
-----------------
Stewart D. Gregg
Counsel
ReliaStar Life Insurance Company
20 Washington Avenue South
Minneapolis, MN 55440
Copy to:
Jeffrey A. Proulx
Associate Counsel
ReliaStar Life Insurance Company
20 Washington Avenue South
Minneapolis, MN 55440
It is proposed that this filing will become effective
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[X] on May 1, 1998 pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a) of Rule 485
[ ] on (date) pursuant to paragraph (a) of Rule 485
Title of securities being registered: Variable life contracts issued by a
registered separate account.
<PAGE>
SELECT*LIFE VARIABLE ACCOUNT
CROSS REFERENCE SHEET
(RECONCILIATION AND TIE SHEET)
ITEM NUMBER OF
FORM N-8B-2 HEADING IN THE PROSPECTUS
- --------------- -----------------------------------------------
1 Cover Page
2 Cover Page
3 Not Applicable
4 Distribution of the Policies
5 ReliaStar Life Insurance Company; The Variable
Account
6 The Variable Account
7 Not Applicable
8 Not Applicable
9 Not Applicable
10 Summary; Death Benefit; Payment and
Allocation of Premiums; Death Benefit
Guarantee; Accumulation Value; Policy
Lapse and Reinstatement; Surrender Benefits;
Investments of the Variable Account;
Transfers; Policy Loans; Free Look and
Conversion Rights; Voting Rights;
General Provisions; Appendix A; Appendix B
11 Deductions and Charges; Investments of the
Variable Account
12 Investments of the Variable Account
13 Deductions and Charges
14 The Policies; Definitions; Distribution of the
Policies
15 Payment and Allocation of Premiums;
Investments of the Variable Account
16 Payment and Allocation of Premiums;
Surrender Benefits; Investments of the
Variable Account
17 Surrender Benefits; Policy Loans; Free
Look and Conversion Rights; General
Provisions
18 The Variable Account; Investments of the
Variable Account; Payment and Allocation
of Premiums
19 Voting Rights; General Provisions
20 Not Applicable
21 Policy Loans
22 Not Applicable
<PAGE>
ITEM NUMBER OF
FORM N-8B-2 HEADING IN THE PROSPECTUS
- --------------- ---------------------------------------------
23 Bonding Arrangements
24 Definitions; General Provisions
25 ReliaStar Life Insurance Company
26 Not Applicable
27 ReliaStar Life Insurance Company
28 Management
29 ReliaStar Life Insurance Company
30 Not Applicable
31 Not Applicable
32 Not Applicable
33 Not Applicable
34 Not Applicable
35 Not Applicable
36 Not Applicable
37 Not Applicable
38 Distribution of the Policies
39 Distribution of the Policies
40 Distribution of the Policies
41 Distribution of the Policies
42 Not Applicable
43 Not Applicable
44 Investments of the Variable Account; Payment
and Allocation of Premiums; Deductions and
Charges
45 Not Applicable
46 Investments of the Variable Account;
Deductions and Charges
47 Investments of the Variable Account
48 ReliaStar Life Insurance Company; State
Regulation
49 Not Applicable
50 The Variable Account
51 Cover Page; The Policies; Death Benefit;
Payment and Allocation of Premiums;
Deductions and Charges; Policy Lapse and
Reinstatement; General Provisions; Free Look
and Conversion Rights
52 Investments of the Variable Account
53 Federal Tax Matters
<PAGE>
ITEM NUMBER OF
FORM N-8B-2 HEADING IN THE PROSPECTUS
- --------------- --------------------------
54 Not Applicable
55 Not Applicable
56 Not Applicable
57 Not Applicable
58 Not Applicable
59 Not Applicable
<PAGE>
20 Washington Avenue South
Minneapolis, Minnesota 55401
---------------------------
SURVIVORSHIP FLEXIBLE PREMIUM VARIABLE
LIFE INSURANCE POLICIES
ISSUED BY
SELECT*LIFE VARIABLE ACCOUNT
OF
RELIASTAR LIFE INSURANCE COMPANY
This Prospectus describes a survivorship flexible premium variable life
insurance policy (the "Policy") offered by ReliaStar Life Insurance Company
("we", "us", "our" or the "Company"). This Policy is designed to provide
lifetime insurance protection, if the Policy's Cash Surrender Value (that is,
the amount that would be paid to you upon surrender of the Policy) is sufficient
to pay certain monthly charges imposed under the Policy (including the cost of
insurance and certain administrative charges). It also is designed to provide
flexibility in connection with premium payments and death benefits. The Policy
owner ("you", "your") may allocate net premiums among investment alternatives
with different investment objectives. A Policy owner may, subject to certain
restrictions, including limitations on premium payments, vary the frequency and
amount of premium payments and increase or decrease the level of death benefits
payable under the Policy. This flexibility allows a Policy owner to provide for
changing insurance needs under a single insurance contract.
The Policy provides for a Death Benefit payable at the Surviving Joint
Insured's death. As long as the Policy remains in force, the Death Benefit up to
age 100 of the younger Joint Insured will never be less than the current Face
Amount less any Policy loans and unpaid charges. After age 100 of the younger
Joint Insured the Death Benefit is equal to the Accumulation Value. The Face
Amount may be increased, subject to certain limitations. Generally, the Policy
will remain in force as long as the Policy's Cash Surrender Value (that is, the
amount that would be paid to you upon surrender of the Policy) is sufficient to
pay certain monthly charges imposed in connection with the Policy (including the
cost of insurance and certain administrative charges). In addition, the Policy
will remain in force during the Death Benefit Guarantee Period specified in your
Policy, without regard to the Cash Surrender Value, if on each Monthly
Anniversary the total premiums paid on the Policy, less any partial withdrawals
and Policy loans, equals or exceeds the total required Minimum Monthly Premium
payments specified in your Policy (which is a feature of the Policy called the
"Death Benefit Guarantee").
(Continued on next page)
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
SHARES OF THE FUNDS AND INTERESTS IN THE POLICIES ARE NOT DEPOSITS OR
OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY A BANK, AND THE SHARES AND
INTERESTS ARE NOT FEDERALLY INSURED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENTAL
AGENCY. ANY INVESTMENT IN THE POLICY INVOLVES CERTAIN INVESTMENT RISK WHICH MAY
INCLUDE THE POSSIBLE LOSS OF PRINCIPAL.
THIS PROSPECTUS SHOULD BE READ CAREFULLY AND RETAINED FOR FUTURE REFERENCE. A
CURRENT PROSPECTUS FOR EACH OF THE FUNDS MUST ACCOMPANY THIS PROSPECTUS AND
SHOULD BE READ IN CONJUNCTION WITH THIS PROSPECTUS.
THE DATE OF THIS PROSPECTUS IS MAY 1, 1998.
46203a
<PAGE>
You can allocate net premiums paid under the Policy to the Select*Life Variable
Account (the "Variable Account"), which is one of our separate accounts or to
our General Account (the "Fixed Account"). Any amounts allocated to the Variable
Account will be allocated to one or more Sub-Accounts of the Variable Account.
The assets of each Sub-Account will be invested solely in one of the three
portfolios available through The Alger American Fund, in one of the five
portfolios of Fidelity Variable Insurance Products Fund ("VIP"), in one of the
four portfolios of Fidelity Variable Insurance Products Fund II ("VIP II"), in
one of the four portfolios of Janus Aspen Series, in one of the two portfolios
available through Neuberger&Berman Advisers Management Trust, in one of the five
portfolios available through the Northstar Variable Trust, in one of four
portfolios available through the OCC Accumulation Trust and in one of the six
funds available through Putnam Variable Trust, (collectively the "Funds").
If net premiums are allocated to the Variable Account, the amount of the
Policy's Death Benefit may, and the Policy's Accumulation Value (that is, the
total amount that a Policy provides for investment at any time) will, reflect
the investment performance of the Sub-Accounts of the Variable Account that you
select. You bear the entire investment risk for any amounts allocated to the
Variable Account; no minimum Accumulation Value in the Variable Account is
guaranteed. Regardless of how net premiums are allocated, the Policy's Death
Benefit may, and the Policy's Accumulation Value will, also depend upon the
frequency and amount of premiums paid, any partial withdrawals, loans, and the
charges and deductions assessed in connection with the Policy.
Replacing existing insurance with a Policy described in this Prospectus may not
be to your advantage. In addition, it may not be to your advantage to purchase
this Policy to obtain additional insurance protection if you already own another
survivorship flexible premium variable life insurance policy.
<PAGE>
DEFINITIONS................................................................ 6
PART 1. SUMMARY
Premium Payments........................................................... 9
Deductions From Each Premium Payment....................................... 9
The Fixed Account.......................................................... 9
The Variable Account....................................................... 9
The Investment Advisers of the Funds....................................... 9
The Funds................................................................. 10
Transfers Between the Sub-Accounts and/or the Fixed Account............... 10
Charges Against the Accumulation Value.................................... 10
Charges Made Upon Lapse or Total Surrender of the Policy.................. 11
The Value of the Policy if You Surrender It............................... 11
Partial Withdrawals....................................................... 11
The Free Look and Conversion Rights....................................... 11
Borrowing Against the Value of the Policy................................. 11
The Death Benefit......................................................... 11
You May Adjust the Amount of the Death Benefit............................ 12
The Death Benefit Guarantee............................................... 12
Unless the Death Benefit Guarantee is in Effect, We May Cause the Policy
to Lapse................................................................. 12
Death Benefit Proceeds Generally Not Taxable Income to the Beneficiary.... 12
Accumulation Value Increases Generally Not Taxable Income
While Accumulating....................................................... 12
Exercising Certain Policy Rights and Tax Consequences..................... 12
Modified Endowment Contracts.............................................. 12
PART 2. DETAILED INFORMATION
ReliaStar Life Insurance Company.......................................... 13
The Variable Account...................................................... 13
Performance Information................................................... 13
The Policies.............................................................. 14
Death Benefit............................................................. 14
Death Benefit Options.................................................... 15
Which Death Benefit Option to Choose..................................... 16
Requested Changes in Face Amount......................................... 16
Insurance Protection..................................................... 18
Change in Death Benefit Option........................................... 18
Payment and Allocation of Premiums........................................ 19
Issuing the Policy....................................................... 19
Allocation of Premiums................................................... 20
Amount and Timing of Premiums............................................ 20
Planned Periodic Premiums................................................ 21
Unscheduled Additional Premiums.......................................... 21
Paying Premiums by Mail.................................................. 21
Death Benefit Guarantee................................................... 21
Requirements............................................................. 22
Accumulation Value........................................................ 23
Specialized Uses of the Policy............................................ 23
Deductions and Charges.................................................... 24
Premium Expense Charge................................................... 24
Monthly Deduction........................................................ 24
Surrender Charge......................................................... 25
Partial Withdrawal and Transfer Charges.................................. 26
The Investment Advisory Fees and Other Fund Expenses
After Reimbursement..................................................... 26
Reduction of Charges..................................................... 28
Policy Lapse and Reinstatement............................................ 28
Surrender Benefits........................................................ 29
Total Surrender.......................................................... 29
<PAGE>
Partial Withdrawal....................................................... 29
Transfers................................................................. 30
Telephone/Fax Instructions............................................... 30
Dollar Cost Averaging Service............................................ 31
Portfolio Rebalancing Service............................................ 31
Transfer Limits.......................................................... 32
Transfer Charges......................................................... 32
Policy Loans.............................................................. 32
Free Look and Conversion Rights........................................... 34
Free Look Rights......................................................... 34
Conversion Rights........................................................ 34
Investments of the Variable Account....................................... 34
Fund Descriptions......................................................... 36
Addition, Deletion, or Substitution of Investments....................... 37
Voting Rights............................................................. 37
General Provisions........................................................ 38
Benefits After Age 100................................................... 38
Ownership................................................................ 38
Proceeds................................................................. 38
Beneficiary.............................................................. 38
Postponement of Payments................................................. 38
Settlement Options....................................................... 39
Incontestability......................................................... 40
Misstatement of Age and Sex.............................................. 40
Suicide.................................................................. 40
Termination.............................................................. 40
Amendment................................................................ 40
Reports.................................................................. 40
Dividends................................................................ 41
Collateral Assignment.................................................... 41
Optional Insurance Benefits.............................................. 41
Federal Tax Matters....................................................... 41
Introduction............................................................. 41
Tax Status of the Policy................................................. 42
Tax Treatment of Policy Benefits......................................... 42
Taxation of ReliaStar Life Insurance Company............................. 43
Possible Changes in Taxation............................................. 43
Other Considerations..................................................... 44
Preparing for Year 2000................................................... 44
Distribution of the Policies.............................................. 44
Management................................................................ 45
Directors................................................................ 45
Executive Officers....................................................... 47
State Regulation.......................................................... 47
Montana Residents......................................................... 47
Legal Proceedings......................................................... 47
Bonding Arrangements...................................................... 47
Legal Matters............................................................. 48
Experts................................................................... 48
Registration Statement Contains Further Information....................... 48
Financial Statements...................................................... 48
Appendix A -- The Fixed Account.......................................... A-1
Appendix B -- Calculation of Accumulation Value.......................... B-1
Appendix C -- Illustration of Accumulation Values, Surrender Charges, Cash
Surrender Values and Death Benefits....................... C-1
Appendix D -- Monthly Amount Charge Per $1,000 of Face Amount............ D-1
<PAGE>
FUND PROSPECTUSES ("SELECT-PRODUCT INVESTMENT OPTIONS")
The Alger American Fund
Fidelity Variable Insurance Products Fund ("VIP")
Fidelity Variable Insurance Products Fund II ("VIP II")
Janus Aspen Series Neuberger&Berman Advisers Management Trust ("AMT")
Northstar Variable Trust ("Northstar")
OCC Accumulation Trust
Putnam Variable Trust
THE POLICY MAY NOT BE AVAILABLE IN ALL JURISDICTIONS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFERING OR SOLICITATION IN ANY JURISDICTION IN WHICH SUCH
OFFERING OR SOLICITATION MAY NOT LAWFULLY BE MADE. NO PERSON IS AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS
OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR THE ACCOMPANYING FUND
PROSPECTUSES AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED.
THE PRIMARY PURPOSE OF THE POLICY IS TO PROVIDE INSURANCE PROTECTION FOR THE
BENEFICIARY NAMED IN THE POLICY. NO CLAIM IS MADE THAT THE POLICY IS IN ANY WAY
SIMILAR OR COMPARABLE TO A SYSTEMATIC INVESTMENT PLAN OR A MUTUAL FUND.
<PAGE>
DEFINITIONS
ACCUMULATION VALUE. The total value attributable to a specific Policy, which
equals the sum of the Variable Accumulation Value (the total of the values in
each Sub-Account of the Variable Account) and the Fixed Accumulation Value
(the value in the Fixed Account). See "Accumulation Value" at page 23 and
Appendix B.
AVERAGE AGE. The sum of the ages of the Joint Insureds divided by two rounded
to the higher age.
CASH SURRENDER VALUE. The Accumulation Value less any Surrender Charge, Loan
Amount and unpaid Monthly Deductions.
CASH VALUE. The Accumulation Value less any Surrender Charge.
CODE. Internal Revenue Code of 1986, as amended.
DEATH BENEFIT. The amount determined under the applicable Death Benefit Option
(the Level Amount Option or the Variable Amount Option). The proceeds payable
to the beneficiary of the Policy upon the death of the Surviving Joint
Insured under either Death Benefit Option will be reduced by any Loan Amount
and any unpaid Monthly Deductions. See "Death Benefit" at page 14.
DEATH BENEFIT GUARANTEE. A feature of the Policy guaranteeing that the Policy
will not lapse during the Death Benefit Guarantee Period specified in your
Policy if, on each Monthly Anniversary, the total premiums paid on the
Policy, less any partial withdrawals and any Loan Amount, equals or exceeds
the total required Minimum Monthly Premium payments specified in your Policy,
including the Minimum Monthly Premium for the current Monthly Anniversary.
See "Death Benefit Guarantee" at page 21.
DEATH BENEFIT OPTION. Either of two death benefit options available under the
Policy (the Level Amount Option and the Variable Amount Option). See "Death
Benefit -- Death Benefit Options" at page 15.
FACE AMOUNT. The minimum Death Benefit under the Policy to age 100 of the
younger Joint Insured as long as the Policy remains in force. See "Death
Benefit" at page 14.
FIXED ACCOUNT. The assets of ReliaStar Life Insurance Company other than those
allocated to the Variable Account or any other separate account. See
Appendix A.
FIXED ACCUMULATION VALUE. The value attributable to a specific Policy to the
extent such amount is attributable to the Fixed Account (our General
Account). Unlike the Variable Accumulation Value, the Fixed Accumulation
Value will not reflect the investment performance of the Funds. See
"Accumulation Value" at page 23 and Appendix B.
FUNDS. Any open-end management investment company (or portfolio thereof) or unit
investment trust (or series thereof) in which a Sub-Account invests as
described herein. See "Investments of the Variable Account" at page 34.
ISSUE DATE. The date insurance coverage under a Policy begins.
JOINT INSUREDS. The persons upon whose lives this Policy is issued.
LEVEL AMOUNT OPTION. One of two Death Benefit Options available under the
Policy. Under this option, the Death Benefit is the greater of the current
Face Amount or the Accumulation Value multiplied by the corridor percentage
according to the younger Joint Insured's attained age. After age 100 the
Death Benefit is equal to the Accumulation Value. See "Death Benefit -- Death
Benefit Options" at page 15.
LOAN AMOUNT. The sum of all unpaid Policy loans including unpaid interest due
thereon. See "Policy Loans" at page 32.
MINIMUM FACE AMOUNT. The minimum Face Amount shown in the Policy (currently
$250,000).
MINIMUM MONTHLY PREMIUM. A monthly premium amount specified in the Policy and
determined by us at issuance of the Policy. See "Death Benefit Guarantee"
at page 21.
<PAGE>
MONTHLY ANNIVERSARY. The same date in each succeeding month as the Policy Date.
Whenever the Monthly Anniversary falls on a date other than a Valuation Date,
the Monthly Anniversary will be considered to be the next Valuation Date. The
Monthly Anniversary begins with the Policy Date.
MONTHLY DEDUCTION. A monthly charge deducted from the Accumulation Value of the
Policy. See "Deductions and Charges -- Monthly Deduction" at page 24.
MONTHLY ADMINISTRATIVE CHARGE. A monthly charge to reimburse us for expenses
incurred in administering the Policy. See "Deductions and Charges --
Monthly Deduction" at page 24.
MONTHLY AMOUNT CHARGE. A monthly charge per $1,000 of Face Amount to reimburse
us for expenses incurred in distributing and issuing the Policy. See
"Deductions and Charges -- Monthly Deduction" at page 24. See Appendix D for
the Monthly Amount Charge per $1,000 of Face Amount.
MONTHLY MORTALITY AND EXPENSE RISK CHARGE. A monthly charge to compensate us
for certain mortality and expense risks we assume under the Policy. See
"Deductions and Charges -- Monthly Mortality and Expense Risk Charge" at
page 25.
NET PREMIUM. The gross premium less a Premium Expense Charge deducted from each
premium.
PLANNED PERIODIC PREMIUM. The scheduled premium selected by you of a level
amount at a fixed interval. The initial Planned Periodic Premium you select
will be shown in the Policy. See "Payment and Allocation of Premiums --
Planned Periodic Premiums" at page 21.
POLICY, POLICIES. The survivorship flexible premium variable life insurance
Policy offered by us and described in this Prospectus.
POLICY ANNIVERSARY. The same date in each succeeding year as the Policy Date.
Whenever the Policy Anniversary falls on a date other than a Valuation Date,
the Policy Anniversary will be considered to be the next Valuation Date.
POLICY DATE. The Policy Date is used in determining Policy Years, Policy
Months, Monthly Anniversaries, and Policy Anniversaries. The Policy Date
will be shown in the Policy.
POLICY MONTH. A month beginning on the Monthly Anniversary.
POLICY YEAR. A year beginning on the Policy Anniversary.
PREMIUM EXPENSE CHARGE. An amount deducted from each premium payment. The
Premium Expense Charge is guaranteed not to exceed 6.25% of each premium
payment. See "Deductions and Charges -- Premium Expense Charge" at page 24.
RATE CLASS. A group of Insureds we determine based on our expectation that they
will have similar mortality experience.
SEC. Securities and Exchange Commission.
SIGNATURE GUARANTEE. A guarantee of your signature by a member firm of the New
York, American, Boston, Midwest, Philadelphia, or Pacific Stock Exchange, or
by a commercial bank (not a savings bank) which is a member of the Federal
Deposit Insurance Corporation, or, in certain cases, by a member firm of the
National Association of Securities Dealers, Inc. that has entered into an
appropriate agreement with us.
SUB-ACCOUNT. A sub-division of the Variable Account. Each Sub-Account invests
exclusively in the shares of a specified Fund.
SURRENDER CHARGE. A charge imposed upon total surrender or lapse of the Policy
during the first 15 Policy Years and the first 15 years following any
requested increase in Face Amount. See "Deductions and Charges -- Surrender
Charge" at page 25.
SURVIVING JOINT INSURED. The Joint Insured who remains alive after the other
Joint Insured has died.
UNIT VALUE. The unit measure by which the value of the Policy's interest in
each Sub-Account is determined. See Appendix B.
<PAGE>
VALUATION DATE. Each day on which the New York Stock Exchange is open for
business except for a day that a Sub-Account's corresponding Fund does not
value its shares. The New York Stock Exchange is currently closed on weekends
and on the following holidays: New Year's Day; Martin Luther King, Jr. Day;
Presidents' Day; Good Friday; Memorial Day; July Fourth; Labor Day;
Thanksgiving Day; and Christmas Day.
VALUATION PERIOD. The period between two successive Valuation Dates, commencing
at the close of business of a Valuation Date and ending at the close of
business of the next Valuation Date. See Appendix B.
VARIABLE ACCOUNT. Select*Life Variable Account, a separate investment account
established by us to receive and invest Net Premiums paid under the Policy.
See "The Variable Account" at page 13.
VARIABLE ACCUMULATION VALUE. The value attributable to a specific Policy to the
extent such amount is attributable to the Variable Account. See
"Accumulation Value" at page 23 and Appendix B.
VARIABLE AMOUNT OPTION. One of two Death Benefit Options available under the
Policy. Under this option, the Death Benefit is the greater of the Face
Amount plus the Accumulation Value of the Policy, or the Accumulation Value
multiplied by the corridor percentage on the Valuation Date on or next
following the date of the younger Joint Insured's death. After age 100 the
Death Benefit is equal to the Accumulation Value. See "Death Benefit -- Death
Benefit Options" at page 15.
WE, US, OUR OR THE COMPANY. ReliaStar Life Insurance Company.
YOU, YOUR. The Policy owner(s) as designated in the application for the Policy
or as subsequently changed. If a Policy has been absolutely assigned, the
assignee is the Policy owner. A collateral assignee is not the Policy
owner.
<PAGE>
PART 1. SUMMARY
This is a brief summary of the Policy's features. More detailed information
is provided in this Prospectus and the Policy.
PREMIUM PAYMENTS
With certain restrictions, you can choose when you pay premiums and how
much each payment will be. In most cases, however, payment of cumulative
premiums sufficient to maintain the Death Benefit Guarantee will be required to
keep the Policy in force during at least the first several Policy Years. See
"Death Benefit Guarantee" and "Payment and Allocation of Premiums -- Amount and
Timing of Premiums".
DEDUCTIONS FROM EACH PREMIUM PAYMENT
We deduct an amount (the Premium Expense Charge) from each premium and
credit the remaining premium (the Net Premium) to the Fixed Account or to the
Variable Account in accordance with your instructions. The Premium Expense
Charge is guaranteed not to exceed 6.25% of each premium payment. The Premium
Expense Charge is currently 6.25% of each premium payment in Policy Years 1-10
and 3.75% of each premium after the tenth Policy Year. See "Deductions and
Charges -- Premium Expense Charge".
THE FIXED ACCOUNT
The Fixed Account consists of all of our assets other than those in our
separate accounts (including the Variable Account). We credit interest of at
least 4% per year on any amounts you have in the Fixed Account. From time to
time we may guarantee interest in excess of 4%. See Appendix A, "The Fixed
Account".
THE VARIABLE ACCOUNT
The Select*Life Variable Account is one of our separate accounts. Only
premiums from our variable life insurance policies are invested in the Variable
Account. See "The Variable Account". The Variable Account is divided into
Sub-Accounts. Premiums allocated to each Sub-Account are invested in shares, at
net asset value, of the Fund corresponding to that Sub-Account. The Variable
Accumulation Value of the Policy will vary with, among other things, the
investment performance of the Funds to which Policy premiums are allocated and
the charges deducted from the Variable Accumulation Value. See "Accumulation
Value".
THE INVESTMENT ADVISERS OF THE FUNDS
* Fred Alger Management, Inc. ("Alger Management") is the investment manager
for the three Alger American Portfolios and is responsible for the overall
administration of the Fund, subject to the supervision of the Board of
Trustees.
* Fidelity Management & Research Company ("FMR") is the investment adviser
of the VIP Funds' five portfolios and the VIP II Funds' four portfolios.
* Each of the four portfolios of Janus Aspen Series has an investment
advisory agreement with Janus Capital Corporation ("Janus Capital"). Janus
Capital is the investment adviser of the four portfolios of Janus Aspen
Series.
* Neuberger&Berman Management, with the assistance of Neuberger&Berman, LLC
as sub-adviser, is the investment manager of AMT Limited Maturity Bond
Investments and AMT Partners Investments.
* Northstar Investment Management Corporation, an affiliate of ours, is the
investment adviser of Northstar's five portfolios of the Northstar
Variable Trust. The Northstar Variable Trust Growth Portfolio is
sub-advised by Navellier Fund Management, Inc., and the Northstar Variable
Trust International Value Portfolio is sub-advised by Brandes Investment
Partners, L.P.
* OpCap Advisors is the investment manager for each of the four OCC
Accumulation Trust Portfolios and is a subsidiary of Oppenheimer Capital,
a registered investment adviser.
<PAGE>
* Putnam Investment Management, Inc. ("Putnam Management") is the
investment adviser of Putnam Variable Trust's six funds.
For the expenses of each Fund, see "The Investment Advisory Fees and Other
Fund Expenses After Reimbursement."
THE FUNDS
You can put your money in up to seventeen (17) of these thirty-three (33)
investment portfolios which are described in the prospectuses for the
portfolios. You do not have to choose your investment options in advance, but
upon participation in the seventeenth Fund you would only be able to transfer
within the seventeen Funds already utilized. See "Investments of the Variable
Account."
<TABLE>
<CAPTION>
FIDELITY VARIABLE INSURANCE NEUBERGER&BERMAN ADVISERS
THE ALGER AMERICAN FUND PRODUCTS FUND II MANAGEMENT TRUST OCC ACCUMULATION TRUST
- ------------------------- ----------------------------- --------------------------- ------------------------
<S> <C> <C> <C>
Growth Portfolio VIP II Asset Manager Limited Maturity Bond Equity Portfolio
MidCap Growth Portfolio Portfolio Global Equity Portfolio
Portfolio VIP II Contrafund Partners Portfolio Managed Portfolio
Small Capitalization Portfolio Small Cap Portfolio
Portfolio VIP II Index 500
Portfolio
VIP II Investment
Grade Bond Portfolio
FIDELITY VARIABLE
INSURANCE PRODUCTS FUND JANUS ASPEN SERIES NORTHSTAR VARIABLE TRUST PUTNAM VARIABLE TRUST
- ------------------------- ----------------------------- --------------------------- ------------------------
VIP Equity-Income Aggressive Growth Growth Portfolio Putnam VT Asia Pacific
Portfolio Portfolio High Yield Bond Growth Fund
VIP Growth Portfolio Growth Portfolio Portfolio Putnam VT Diversified
VIP High Income International Growth Income and Growth Income Fund
Portfolio Portfolio Portfolio Putnam VT Growth
VIP Money Market Worldwide Growth International Value and Income Fund
Portfolio Portfolio Portfolio Putnam VT New
VIP Overseas Portfolio Multi-Sector Bond Opportunities Fund
Portfolio Putnam VT Utilities
Growth and Income
Fund
Putnam VT Voyager
Fund
</TABLE>
TRANSFERS BETWEEN THE SUB-ACCOUNTS AND/OR THE FIXED ACCOUNT
Subject to certain restrictions, you can transfer all or part of your
Accumulation Value among the investment options of the Policy. We currently
allow up to twelve transfers per Policy Year. Transfers from the Fixed Account
are subject to certain additional restrictions. See "Transfers".
CHARGES AGAINST THE ACCUMULATION VALUE
The Accumulation Value of the Policy is subject to several charges -- the
Monthly Deduction and Transfer and Partial Withdrawal Charges.
The Monthly Deduction will be deducted monthly from both the Fixed
Accumulation Value and the Variable Accumulation Value on a proportionate basis
depending upon their relative Accumulation Values at that time, and includes the
cost of insurance, the Monthly Administrative Charge, the Monthly Mortality and
Expense Risk Charge, the Monthly Amount Charge, and charges for optional
insurance benefits. The cost of insurance will be determined by multiplying the
applicable cost of insurance rate(s) by the net amount at risk. The Monthly
Administrative Charge is currently $8.25 per month and is guaranteed not to
exceed $12.00 per month. The Monthly Amount Charge will be determined by
multiplying the Face Amount by the applicable charge per $1,000 of Face Amount.
This Charge applies only during the first 20 Policy Years (and 20 Policy Years
after any requested Face Amount increase relative to the increase amounts). The
Monthly Mortality and Expense Risk Charge will be equal to
<PAGE>
one-twelfth of .90% of the Variable Accumulation Value (that is, the total value
attributable to a specific Policy in the Sub-Accounts of the Variable Account)
of the Policy during the first 10 Policy Years. Beginning on Policy Year 11 and
each year thereafter, it is currently anticipated that this monthly charge will
be one-twelfth of .25% but in no event will it exceed one-twelfth of .90% for
the duration of the Policy. The charges for optional insurance benefits will
vary depending upon the benefit(s) selected. See "Deductions and Charges --
Monthly Deduction".
CHARGES MADE UPON LAPSE OR TOTAL SURRENDER OF THE POLICY
During the first 15 years the Policy is in force and the first 15 years
following a requested increase in the Face Amount, there is a charge if the
Policy lapses or you surrender the Policy (the Surrender Charge). See
"Deductions and Charges -- Surrender Charge".
The maximum Surrender Charge on the Initial Face Amount will be equal to
$10.00 per thousand of Initial Face Amount. The maximum Surrender Charge on any
requested increase in Face Amount will be equal to $10.00 per thousand of
increase in Face Amount. This maximum charge then remains level during the first
five years (adjusted for increases in the first three years) in the relevant 15
year period, and then reduces in equal monthly increments until it becomes zero
at the end of 15 years.
THE VALUE OF THE POLICY IF YOU SURRENDER IT
In general, the Cash Surrender Value is the amount you would receive if you
surrender the Policy. To determine the Cash Surrender Value, your Accumulation
Value is reduced by the Surrender Charge, if any, and any Loan Amount and unpaid
Monthly Deductions. See "Surrender Benefits -- Total Surrender".
PARTIAL WITHDRAWALS
You can withdraw part of your Cash Surrender Value. You will not incur a
Surrender Charge, but partial withdrawals are subject to a processing charge.
Only one partial withdrawal is allowed in any Policy Year. See "Surrender
Benefits -- Partial Withdrawal".
THE FREE LOOK AND CONVERSION RIGHTS
You have a limited free look period during which you have a right to return
the Policy and receive a refund of all premiums paid. See "Free Look and
Conversion Rights -- Free Look Rights". The Policy must be returned to us by
midnight of the 10th day after you receive it.
Also, the Policy may in effect be converted in whole or in part to a "fixed
benefit" policy (providing benefits that do not vary with the investment
performance of the Variable Account) at any time during the first two Policy
Years by transferring all or part of the Accumulation Value of the Policy from
the Variable Account to the Fixed Account.
Similar free look and conversion rights will be available for requested
increases in the Face Amount.
BORROWING AGAINST THE VALUE OF THE POLICY
At any time after the first Policy Year, generally you can borrow,
depending upon the state in which you reside, up to 75% of the Cash Value of the
Policy less any existing Loan Amount. Each loan must be at least $500. Interest
is payable in advance for each Policy Year and accrues daily at an effective
annual rate that will not exceed 8.00% (which is 7.40% when payable in advance).
After the tenth Policy Year, we will charge interest at an annual rate of 5.50%
(which is 5.21% when payable in advance) on the portion of your Loan Amount that
is not in excess of (a) the Accumulation Value, less (b) the total of all
premiums paid net of all partial withdrawals. See "Policy Loans".
THE DEATH BENEFIT
You choose one of two Death Benefit Options -- the Level Amount Option or
the Variable Amount Option. The Death Benefit under the Level Amount Option is
the greater of the Face Amount or the Accumulation Value multiplied by the
corridor percentage according to the younger Joint Insured's attained age. The
Death Benefit under the Variable Amount Option is equal to the greater of the
Face Amount plus the Accumulation Value, or the Accumulation Value multiplied by
the corridor percentage according to the younger Joint Insured's attained age.
See "Death Benefit".
<PAGE>
The proceeds payable upon the death of the Surviving Joint Insured under
either Death Benefit Option will be reduced by any Loan Amount and any unpaid
Monthly Deductions.
The Death Benefit up to age 100 of the younger Joint Insured will never be
less than the Face Amount as long as the Policy is in force and there is no Loan
Amount or unpaid Monthly Deductions. After age 100 the Death Benefit is the
Accumulation Value.
YOU MAY ADJUST THE AMOUNT OF THE DEATH BENEFIT
After the fourth Policy Year, you have flexibility to adjust the Death
Benefit by increasing or decreasing the Face Amount. You cannot decrease the
Face Amount below the Minimum Face Amount shown in the Policy. Any increase in
the Face Amount must be at least $5,000 and may require additional evidence of
insurability satisfactory to us and will result in additional charges. See
"Death Benefit -- Requested Changes in Face Amount".
Generally, you may also change the Death Benefit Option at any time after
the fourth Policy Year. We may require evidence of insurability satisfactory to
us. See "Death Benefit -- Change in Death Benefit Option".
For a discussion of available techniques to adjust the amount of insurance
protection to satisfy changing insurance needs. See "Death Benefit -- Insurance
Protection".
THE DEATH BENEFIT GUARANTEE
During the Death Benefit Guarantee Period specified in your Policy, if you
meet the requirements for the Death Benefit Guarantee we will not lapse your
Policy, even if the Cash Surrender Value is not sufficient to cover the Monthly
Deduction that is due. See "Death Benefit Guarantee".
UNLESS THE DEATH BENEFIT GUARANTEE IS IN EFFECT, WE MAY CAUSE THE POLICY TO
LAPSE
The Policy will only lapse if the Cash Surrender Value is less than the
Monthly Deduction due and if a grace period of 61 days expires without a
sufficient payment. The Policy thus differs in two important respects from
traditional life insurance. First, the failure to pay a Planned Periodic Premium
will not automatically cause the Policy to lapse. Second, even if Planned
Periodic Premiums have been paid, the Policy may lapse. See "Policy Lapse and
Reinstatement -- Lapse".
DEATH BENEFIT PROCEEDS GENERALLY NOT TAXABLE INCOME TO THE BENEFICIARY
Under current Federal tax law, as long as the Policy qualifies as life
insurance, the Death Benefit under the Policy will be subject to the same
Federal income tax treatment as proceeds of traditional life insurance.
Therefore, the Death Benefit should generally not be taxable income to the
beneficiary. See "Federal Tax Matters -- Policy Proceeds".
ACCUMULATION VALUE INCREASES GENERALLY NOT TAXABLE INCOME WHILE ACCUMULATING
Under current Federal tax law, as long as the Policy qualifies as life
insurance, Accumulation Value increases will also be subject to the same Federal
income tax treatment as traditional life insurance cash values. Therefore, any
increases generally should accumulate on a tax deferred basis.
See "Federal Tax Matters -- Policy Proceeds".
EXERCISING CERTAIN POLICY RIGHTS AND TAX CONSEQUENCES
A change of owners, a partial withdrawal, a total surrender, or a Policy
loan may have tax consequences depending on the particular circumstances. See
"Federal Tax Matters -- Policy Proceeds".
MODIFIED ENDOWMENT CONTRACTS
We intend for the Policy to satisfy the definition of a life insurance
contract under Section 7702 of the Internal Revenue Code of 1986, as amended
(the "Code"). Under certain circumstances, a Policy could be treated as a
"modified endowment contract." We will monitor Policies and will attempt to
notify a Policy owner on a timely basis if his or her Policy is in jeopardy of
becoming a modified endowment contract. See "Federal Tax Matters."
<PAGE>
PART 2. DETAILED INFORMATION
RELIASTAR LIFE INSURANCE COMPANY
We are a stock life insurance company organized in 1885 and incorporated
under the laws of the State of Minnesota. We are a direct, wholly-owned
subsidiary of ReliaStar Financial Corp., a Minneapolis based holding Company
whose subsidiaries specialize in life insurance and related financial services
businesses. We offer individual life insurance and annuities, employee benefits
and retirement contracts. The Policies described in this Prospectus are
nonparticipating. On a consolidated basis, ReliaStar Financial Corp. has $267
billion of life insurance in force and assets of $21.0 billion as of December
31, 1997. Our Home Office is at 20 Washington Avenue South, Minneapolis,
Minnesota 55401 (telephone 612-372-5507).
We may from time to time publish in advertisements, sales literature, and
reports, the ratings and other information assigned to us by one or more
independent rating organizations such as A.M. Best Company, Standard & Poor's,
Moody's, and Duff & Phelps. The purpose of the ratings is to reflect our
financial strength and/or claims-paying ability and should not be considered as
bearing on the investments held in the Variable Account. Each year the A.M. Best
Company reviews the financial status of many insurers, culminating in the
assignment of Best's Ratings. These ratings reflect their current opinion of the
relative financial strength and operating performance of an insurance company in
comparison to the norms of the life/health insurance industry. We have been
assigned a rating of A+ by A.M. Best, which is a rating assigned to companies
demonstrating superior overall performance and a very strong ability to meet
obligations to Policy holders over a long period.
THE VARIABLE ACCOUNT
The Variable Account is a Separate Account of ours, established by the
Board of Directors on October 11, 1984 pursuant to the laws of the State of
Minnesota. The Variable Account will receive and invest the Net Premiums paid
and allocated to it under this Policy. In addition, the Variable Account
currently receives and invests net premiums for other classes of flexible
premium variable life insurance policies and may do so for additional classes in
the future. The Variable Account meets the definition of a "separate account"
under the federal securities laws and has been registered with the SEC as a unit
investment trust under the Investment Company Act of 1940. The registration does
not involve supervision by the SEC of the management or investment policies or
practices of the Variable Account, us, or the Funds.
We own the assets of the Variable Account. However, the Minnesota laws
under which the Variable Account was established provide that the Variable
Account cannot be charged with liabilities arising out of any other business we
may conduct. We are required to maintain assets which are at least equal to the
reserves and other liabilities of the Variable Account. We may transfer assets
which exceed these reserves and liabilities to our general account (the Fixed
Account).
For a description of the Fixed Account, see Appendix A to this Prospectus.
PERFORMANCE INFORMATION
Performance information for the Sub-Accounts of the Variable Account and
the Funds available for investment by the Variable Account may appear in
advertisements, sales literature, or reports to Policy owners or prospective
purchasers. Performance information for the Sub-Accounts will reflect deductions
of Fund expenses and be adjusted to reflect the Mortality and Expense Risk
Charge, but will not reflect deductions for the cost of insurance or the
Surrender Charge. Quotations of performance information for the Funds will be
accompanied by performance information for the Sub-Accounts. Performance
information for the Funds will take into account all fees and charges at the
Fund level, but will not reflect any deductions from the Variable Account.
Performance information reflects only the performance of a hypothetical
investment during a particular time period in which the calculations are based.
Performance information showing total returns and average annual total returns
may be provided for periods prior to the date a Sub-Account commenced operation.
Such performance information will be calculated based on the assumption that the
Sub-Accounts were in existence for the same periods as those indicated for the
Funds, with the level of charges at the Variable Account level that were in
effect at the inception of the Sub-Accounts. Performance information should be
considered in light of the investment objectives and policies, characteristics
and quality of the portfolio of the Fund in which the Sub-Account invests, and
the market conditions during the given period of time, and should not be
considered as a representation of what may be achieved in the future.
<PAGE>
We may also provide individualized hypothetical illustrations of Policy
Accumulation Value, Cash Surrender Value and Death Benefit based on historical
investment returns of the Funds. These illustrations will reflect deductions for
Fund expenses and Policy and Variable Account charges, including the Monthly
Deduction, Premium Expense Charge and the Surrender Charge. These hypothetical
illustrations will be based on the actual historical experience of the Funds as
if the Sub-Accounts had been in existence and a Policy issued for the same
periods as those indicated for the Funds.
Performance of the Sub-Accounts and/or the Funds as reported from time to
time in advertisements and sales literature may be compared to other variable
life insurance issuers in general or to the performance of particular types of
variable life insurance policies investing in mutual funds, or investment series
of mutual funds with investment objectives similar to each of the Sub-Accounts,
whose performance is reported by Lipper Analytical Services, Inc. ("Lipper") and
Morningstar, Inc. ("Morningstar") or reported by other series, companies,
individuals or other industry or financial publications of general interest,
such as FORBES, MONEY, THE WALL STREET JOURNAL, BUSINESS WEEK, BARRON'S,
KIPLINGER'S PERSONAL FINANCE, and FORTUNE. Lipper and Morningstar are
independent services which monitor and rank the performances of variable life
insurance issuers in each of the major categories of investment objectives on an
industry-wide basis.
We may also compare the performance of each Sub-Account in advertising and
sales literature to the Standard & Poor's Index of 500 common stocks and the Dow
Jones Industrials, which are widely used measures of stock market performance.
We may also compare the performance of each Sub-Account to other widely
recognized indices. Unmanaged indices may assume the reinvestment of dividends,
but typically do not reflect any "deduction" for the expense of operating or
managing an investment portfolio.
THE POLICIES
The Policies are survivorship flexible premium variable life insurance
contracts with death benefits, cash values, and other features of traditional
life insurance contracts. They are "flexible premium" because premiums do not
have to be paid according to a fixed schedule. They are "variable" because, to
the extent Accumulation Value is attributable to the Variable Account,
Accumulation Values and, under certain circumstances, the Death Benefit will
increase and decrease based on the investment performance of the Funds in which
the Sub-Accounts to which you allocate your premium payments invest.
DEATH BENEFIT
The proceeds payable upon the death of the Surviving Joint Insured, while
the Policy is in force, will be the Death Benefit (see "Death Benefit Options"
below) reduced by any Loan Amount and unpaid Monthly Deductions. All or part of
the proceeds may be paid in cash to your beneficiaries or under one or more of
the settlement options we offer (see "General Provisions -- Settlement
Options").
The Policy provides two Death Benefit Options: the Level Amount Option and
the Variable Amount Option. You choose the Death Benefit Option on the
application for the Policy. Subject to certain limitations, you can change the
Death Benefit Option after issuance of the Policy. See "Death Benefit -- Change
in Death Benefit Option".
The Death Benefit may vary with the Policy's Accumulation Value. Under the
Level Amount Option, the Death Benefit will only vary with the Accumulation
Value whenever the Accumulation Value multiplied by the corridor percentage (see
"Death Benefit Options -- Level Amount Option") exceeds the Face Amount of the
Policy. The Death Benefit under the Variable Amount Option will always vary with
the Accumulation Value because the Death Benefit equals the Face Amount plus the
Accumulation Value, or the corridor percentage of the Accumulation Value. Under
either Death Benefit Option, however, the Death Benefit to age 100 of the
younger Joint Insured will never be less than the current Face Amount of the
Policy and will be payable only as long as the Policy remains in force. After
age 100 the Death Benefit is the Accumulation Value.
In addition to affecting the amount of the Death Benefit as described
above, the Accumulation Value generally determines how long the Policy remains
in force. See "Policy Lapse and Reinstatement". This means that, to the extent
Accumulation Value is attributable to the Variable Account, the investment
performance of the Variable Account (and the underlying Funds) may affect the
duration of the Policy by affecting the amount of Accumulation Value. You bear
the investment risk with respect to
<PAGE>
any amounts allocated to the Variable Account. If, however, the Death Benefit
Guarantee is in effect (see "Death Benefit Guarantee"), the Policy will stay in
force without regard to the investment performance under the Policy.
Appendix C illustrates Accumulation Values, Surrender Charges, Cash
Surrender Values, and Death Benefits assuming different levels of premium
payments and investment returns for selected ages and Face Amounts.
DEATH BENEFIT OPTIONS
The Level Amount Option and the Variable Amount Option are described
below.
LEVEL AMOUNT OPTION. The Death Benefit is the greater of the current Face
Amount of the Policy or the Accumulation Value multiplied by the corridor
percentage according to the younger Joint Insured's attained age. The corridor
percentage is 250% for the younger Joint Insured age 40 or below, and the
percentage declines with increasing ages as shown in the Corridor Percentage
Table on page 21. Accordingly, under the Level Amount Option the Death Benefit
will remain level unless the corridor percentage of Accumulation Value exceeds
the current Face Amount, in which case the amount of the Death Benefit will vary
as the Accumulation Value varies.
ILLUSTRATION OF LEVEL AMOUNT OPTION. For purposes of this illustration,
assume that the younger Joint Insured is under age 40, and that there is no Loan
Amount. Under the Level Amount Option, a Policy with a $100,000 Face Amount will
generally have a $100,000 Death Benefit. However, because the Death Benefit must
be equal to or be greater than 250% of the Accumulation Value, any time the
Accumulation Value of the Policy exceeds $40,000, the Death Benefit will exceed
the $100,000 Face Amount. Each additional dollar added to the Accumulation Value
above $40,000 will increase the Death Benefit by $2.50. Thus, if the
Accumulation Value exceeds $40,000 and increases by $100 because of investment
performance or premium payments, the Death Benefit will increase by $250. A
Policy owner with an Accumulation Value of $50,000 will be entitled to a Death
Benefit of $125,000 ($50,000 X 250%); an Accumulation Value of $75,000 will
yield a Death Benefit of $187,500 ($75,000 X 250%); and an Accumulation Value of
$100,000 will yield a Death Benefit of $250,000 ($100,000 X 250%).
Similarly, as long as the Accumulation Value exceeds $40,000, each dollar
taken out of the Accumulation Value will reduce the Death Benefit by $2.50. If,
for example, the Accumulation Value is reduced from $75,000 to $70,000 because
of partial withdrawals, charges, or negative investment performance, the Death
Benefit will be reduced from $187,500 to $175,000. If at any time before the
younger Joint Insured's age 100, however, the Accumulation Value multiplied by
the corridor percentage is less than the Face Amount, the Death Benefit will
equal the current Face Amount of the Policy.
The corridor percentage becomes lower as the younger Joint Insured's age
increases. If the current age of the younger Joint Insured in the illustration
above were, for example, 50 (rather than under age 40), the corridor percentage
would be 185%. The Death Benefit would not exceed the $100,000 Face Amount
unless the Accumulation Value exceeded approximately $54,055 (rather than
$40,000), and each $1 then added to or taken from the Accumulation Value would
change the Death Benefit by $1.85 (rather than $2.50).
CORRIDOR PERCENTAGE TABLE
YOUNGER JOINT CORRIDOR
INSURED'S AGE PERCENTAGE
ON PREVIOUS OF
POLICY ACCUMULATION
ANNIVERSARY VALUE
------------------ -------------
40 or
younger 250%
41 243
42 236
43 229
44 222
45 215
46 209
YOUNGER JOINT CORRIDOR
INSURED'S AGE PERCENTAGE
ON PREVIOUS OF
POLICY ACCUMULATION
ANNIVERSARY VALUE
------------------ -------------
47 203%
48 197
49 191
50 185
51 178
52 171
53 164
54 157
YOUNGER JOINT CORRIDOR
INSURED'S AGE PERCENTAGE
ON PREVIOUS OF
POLICY ACCUMULATION
ANNIVERSARY VALUE
------------------ -------------
55 150%
56 146
57 142
58 138
59 134
60 130
61 128
62 126
<PAGE>
YOUNGER JOINT CORRIDOR
INSURED'S AGE PERCENTAGE
ON PREVIOUS OF
POLICY ACCUMULATION
ANNIVERSARY VALUE
--------------- -------------
63 124%
64 122
65 120
66 119
67 118
68 117
YOUNGER JOINT CORRIDOR
INSURED'S AGE PERCENTAGE
ON PREVIOUS OF
POLICY ACCUMULATION
ANNIVERSARY VALUE
--------------- -------------
69 116%
70 115
71 113
72 111
73 109
74 107
YOUNGER JOINT CORRIDOR
INSURED'S AGE PERCENTAGE
ON PREVIOUS OF
POLICY ACCUMULATION
ANNIVERSARY VALUE
--------------- -------------
75-90 105%
91 104
92 103
93 102
94 101
95-100 100
VARIABLE AMOUNT OPTION. The Death Benefit is equal to the greater of the
current Face Amount plus the Accumulation Value of the Policy, or the
Accumulation Value multiplied by the corridor percentage according to the
younger Joint Insured's attained age. The corridor percentage is 250% for the
younger Joint Insured age 40 or below, and the percentage declines with
increasing age as shown in the Corridor Percentage Table above. Accordingly,
under the Variable Amount Option the amount of the Death Benefit will always
vary as the Accumulation Value varies.
ILLUSTRATION OF VARIABLE AMOUNT OPTION. For purposes of this illustration,
assume that the younger Joint Insured is under age 40 and that there is no Loan
Amount. Under the Variable Amount Option, a Policy with a Face Amount of
$100,000 will generally pay a Death Benefit of $100,000 plus the Accumulation
Value. Thus, for example, a Policy with an Accumulation Value of $20,000 will
have a Death Benefit of $120,000 ($100,000 + $20,000); an Accumulation Value of
$40,000 will yield a Death Benefit of $140,000 ($100,000 + $40,000). The Death
Benefit, however, must be at least 250% of the Accumulation Value. As a result,
if the Accumulation Value of the Policy exceeds approximately $66,667, the Death
Benefit will be greater than the Face Amount plus the Accumulation Value. Each
additional dollar of the Accumulation Value above $66,667 will increase the
Death Benefit by $2.50. Thus, if the Accumulation Value exceeds $66,667 and
increases by $100 because of investment performance or premium payments, the
Death Benefit will increase by $250. A Policy owner with an Accumulation Value
of $75,000 will be entitled to a Death Benefit of $187,500 ($75,000 X 250%); an
Accumulation Value of $100,000 will yield a Death Benefit of $250,000 ($100,000
X 250%); and an Accumulation Value of $125,000 will yield a Death Benefit of
$312,500 ($125,000 X 250%).
Similarly, any time the Accumulation Value exceeds $66,667, each dollar
taken out of the Accumulation Value will reduce the Death Benefit by $2.50. If,
for example, the Accumulation Value is reduced from $75,000 to $70,000 because
of partial withdrawals, charges, or negative investment performance, the Death
Benefit will be reduced from $187,500 to $175,000. If at any time before the
younger Joint Insured's age 100, however, the Accumulation Value multiplied by
the corridor percentage is less than the Face Amount plus the Accumulation
Value, then the Death Benefit will be the current Face Amount plus the
Accumulation Value of the Policy. The Death Benefit after age 100 is the
Accumulation Value.
The corridor percentage becomes lower as the younger Joint Insured's age
increases. If the current age of the younger Joint Insured in the illustration
above were, for example, 50 (rather than under 40), the corridor percentage
would be 185%. The amount of the Death Benefit would be the sum of the
Accumulation Value plus $100,000 unless the Accumulation Value exceeded
approximately $117,647 (rather than $66,667), and each $1 then added to or taken
from the Accumulation Value would change the Death Benefit by $1.85 (rather than
$2.50).
WHICH DEATH BENEFIT OPTION TO CHOOSE
If you prefer to have premium payments and favorable investment performance
reflected partly in the form of an increasing Death Benefit, you should choose
the Variable Amount Option. If you are satisfied with the amount of your
existing insurance coverage and prefer to have premium payments and favorable
investment performance reflected to the maximum extent in the Accumulation Value
and lower cost of insurance charges, you should choose the Level Amount Option.
REQUESTED CHANGES IN FACE AMOUNT
Subject to certain limitations, you may request an increase or decrease in
the Face Amount. No increase or decrease in the Face Amount will be permitted
during the first four Policy Years.
<PAGE>
INCREASES. For an increase in the Face Amount, a written request must be
submitted to us. We may also require additional evidence of insurability
satisfactory to us. The effective date of the increase will be the Monthly
Anniversary on or next following our approval of the increase. The increase may
not be less than $5,000 and no increase will be permitted after any Joint
Insured reaches age 85. You cannot request an increase in the Face Amount more
frequently than once every two years. We will deduct any charges associated with
the increase (the increases in the cost of insurance and the Surrender Charge
upon lapse or total surrender -- see "Effect of Requested Changes in Face
Amount") from the Accumulation Value, whether or not you pay an additional
premium in connection with the increase. You will be entitled to limited free
look and conversion rights and refund rights with respect to requested increases
in Face Amount. See "Free Look and Conversion Rights".
DECREASES. For a decrease in the Face Amount, a written request must also
be submitted to us. Any decrease in the Face Amount will be effective on the
Monthly Anniversary on or next following our receipt of a written request. You
cannot request a decrease in the Face Amount more frequently than once every six
months. The Face Amount remaining in force after any requested decrease may not
be less than the Minimum Face Amount shown in the Policy. Under our current
policies, the Minimum Face Amount is $250,000, but we reserve the right to
establish a different Minimum Face Amount in the future. If, following a
decrease in Face Amount, the Policy would no longer qualify as life insurance
under Federal tax law (see "Federal Tax Matters -- Policy Proceeds"), the
decrease will be limited to the extent necessary to meet these requirements.
For purposes of determining the cost of insurance, decreases in the Face
Amount will be applied to reduce the current Face Amount in the following order:
(a) The Face Amount provided by the most recent increase;
(b) The next most recent increases successively; and
(c) The Face Amount when the Policy was issued.
By reducing the current Face Amount in this manner, the Rate Class
applicable to the most recent increase in Face Amount will be eliminated first,
then the Rate Class applicable to the next most recent increase, and so on, for
the purposes of calculating the cost of insurance. This assumption will affect
the cost of insurance under the Policy only if different Rate Classes have been
applied to the current Face Amount. A Rate Class is a group of Insureds we
determine based upon our expectation that they will have similar mortality
experience. We currently place Insureds into standard Rate Classes or into
substandard Rate Classes that involve a higher mortality risk (for example, a
200% Rate Class or a 300% Rate Class). In an otherwise identical Policy, an
Insured in the standard Rate Class will have a lower cost of insurance than an
Insured in a substandard Rate Class with higher mortality risks. See "Deductions
and Charges -- Monthly Deduction".
For example, assume that the Initial Face Amount was $50,000 with a
standard Rate Class, and that successive increases of $25,000 (at a Rate Class
of 200%) and $50,000 (at a Rate Class of 300%) were added. If a decrease of
$50,000 or less is requested, the amount of insurance at a 300% Rate Class will
be reduced first. If a decrease of more than $50,000 is requested, the amount at
a 300% Rate Class will be eliminated, and the excess over $50,000 will next
reduce the amount of insurance at a 200% Rate Class.
EFFECT OF REQUESTED CHANGES IN FACE AMOUNT. An increase or decrease in Face
Amount will affect the Monthly Deduction because the cost of insurance and the
Monthly Amount Charge depend upon the Face Amount. The charge for certain
optional insurance benefits may also be affected. See "Deductions and Charges --
Monthly Deduction". An increase in the Face Amount will increase the Surrender
Charge, but a decrease in the Face Amount will not reduce the Surrender Charge.
The Surrender Charge is, however, imposed only upon lapse or total surrender of
the Policy and not upon a requested decrease in Face Amount.
See "Deductions and Charges -- Surrender Charge".
An increase in the Face Amount will increase the Minimum Monthly Premium as
of the effective date of the increase. Therefore, additional premium payments
may be required to maintain the Death Benefit Guarantee. A decrease in the Face
Amount will reduce the Minimum Monthly Premium as of the effective date of the
decrease. Face Amount changes may also change the Death Benefit Guarantee
Period. See "Death Benefit Guarantee".
<PAGE>
The additional Surrender Charge on a requested increase in the Face Amount
will reduce the Cash Surrender Value (which is the Accumulation Value less any
Surrender Charge, Loan Amount and unpaid Monthly Deductions). If the resulting
Cash Surrender Value is not sufficient to cover the Monthly Deduction, the
Policy may lapse unless the Death Benefit Guarantee is in effect. See "Policy
Lapse and Reinstatement -- Lapse" and "Death Benefit Guarantee".
INSURANCE PROTECTION
You may increase or decrease the pure insurance protection provided by the
Policy (that is, the difference between the Death Benefit and the Accumulation
Value) in one of several ways as your insurance needs change. These ways include
increasing or decreasing the Face Amount of insurance, changing the level of
premium payments, and, to a lesser extent, making a partial withdrawal under the
Policy. Although the consequences of each of these methods will depend upon the
individual circumstances, they may be generally summarized as follows:
(a) A decrease in the Face Amount will, subject to the corridor percentage
limitations (see "Death Benefit -- Death Benefit Options"), decrease
the pure insurance protection without reducing the Accumulation Value.
If the Face Amount is decreased, the Policy charges generally will
decrease as well. (Note that the Surrender Charge will not be reduced.
See "Deductions and Charges -- Surrender Charge".)
(b) An increase in the Face Amount (which is generally subject to
underwriting approval -- see "Death Benefit -- Requested Changes in
Face Amount") will likely increase the amount of pure insurance
protection, depending on the amount of Accumulation Value and the
resultant corridor percentage limitation. If the insurance protection
is increased, the Policy charges generally will increase as well.
(c) A partial withdrawal will reduce the Death Benefit. See "Surrender
Benefits -- Partial Withdrawal". However, it has a limited effect on
the amount of pure insurance protection and charges under the Policy,
because the decrease in the Death Benefit is usually equal to the
amount of Accumulation Value withdrawn. The primary use of a partial
withdrawal is to withdraw Accumulation Value. Furthermore, it results
in a reduced amount of Accumulation Value and increases the
possibility that the Policy will lapse.
(d) Under the Level Amount Option, until the corridor percentage of
Accumulation Value exceeds the Face Amount, (i) an increased level of
premium payments will reduce the amount of pure insurance protection,
and (ii) a reduced level of premium payments will increase the amount
of pure insurance protection.
(e) Under the Variable Amount Option, until the corridor percentage of
Accumulation Value exceeds the Face Amount plus the Accumulation
Value, the level of premium payments will not affect the amount of
pure insurance protection. (However, both the Accumulation Value and
the Death Benefit will be increased if premium payments are increased,
and reduced if premium payments are reduced.)
(f) Under either Death Benefit Option, if the Death Benefit is the
corridor percentage of Accumulation Value, then (i) an increased level
of premium payments will increase the amount of pure insurance
protection (subject to underwriting approval -- see "Payment and
Allocation of Premiums -- Amount and Timing of Premiums"), and (ii) a
reduced level of premium payments will reduce the pure insurance
protection.
THE TECHNIQUES DESCRIBED IN THIS SECTION FOR CHANGING THE AMOUNT OF PURE
INSURANCE PROTECTION UNDER THE POLICY (FOR EXAMPLE, CHANGING THE FACE
AMOUNT, MAKING A PARTIAL WITHDRAWAL, AND CHANGING THE AMOUNT OF PREMIUM
PAYMENTS) MUST BE CONSIDERED TOGETHER WITH THE OTHER RESTRICTIONS AND
CONSIDERATIONS DESCRIBED ELSEWHERE IN THIS PROSPECTUS.
CHANGE IN DEATH BENEFIT OPTION
After the fourth Policy Year you may change the Death Benefit Option once
each Policy Year. You must submit a written request to change the Death Benefit
Option. The change is effective on the
<PAGE>
Monthly Anniversary on or next following the date we receive your request. A
change in the Death Benefit Option will also change the Face Amount. If the
Death Benefit Option is changed from the Level Amount Option to the Variable
Amount Option, the Face Amount will be decreased by an amount equal to the
Accumulation Value on the effective date of the change. You cannot change from
the Level Amount Option to the Variable Amount Option if the resulting Face
Amount would fall below the Minimum Face Amount.
If the Death Benefit Option is changed from the Variable Amount Option to
the Level Amount Option, the Face Amount will be increased by an amount equal to
the Policy's Accumulation Value on the effective date of the change.
An increase or decrease in Face Amount resulting from a change in the Death
Benefit Option will affect the future Monthly Deductions because the cost of
insurance depends upon the Face Amount. The charge for certain optional
insurance benefits may also be affected. See "Deductions and Charges -- Monthly
Deduction". The Surrender Charge, however, will not be affected by an increase
or decrease in Face Amount resulting from a change in Death Benefit Option. The
Death Benefit Guarantee Period may also be affected.
Unless prohibited by state law, changes in the Death Benefit Option may
require additional evidence of insurability.
PAYMENT AND ALLOCATION OF PREMIUMS
ISSUING THE POLICY
To apply for a Policy, both individuals must complete the application and
personally deliver it to our licensed agent. We will generally only issue a
Policy to an applicant where both Joint Insureds' ages are 85 or less and both
supply evidence of insurability satisfactory to us. Acceptance is subject to our
underwriting rules and we reserve the right to reject an application for any
reason permitted by law.
COVERAGE. Coverage under a Policy begins on the later of the Issue Date or
the date we receive at least the minimum initial premium (see immediately
following section). In general, if the applicant pays at least the minimum
initial premium with the application, the Issue Date will be the later of the
date of the application or the date of any medical examination required by our
underwriting procedures. However, if underwriting approval has not occurred
within 45 days after we receive the application or if you authorize premiums to
be paid by bank account monthly deduction, the Issue Date will be the date of
underwriting approval.
If you authorize premiums to be paid by government allotment, the Issue
Date generally will be, subject to our underwriting approval, the first day of
the month in which we receive the first Minimum Monthly Premium through
government allotment, whether or not a Minimum Monthly Premium is collected with
the application. If a Minimum Monthly Premium is collected with the application,
it will be allocated to the Sub-Accounts of the Variable Account and the Fixed
Account on the Valuation Date next following the Issue Date.
MINIMUM INITIAL PREMIUM. The minimum initial premium is three Minimum
Monthly Premiums. See "Death Benefit Guarantee". If, however, you authorize
premiums to be paid by bank account monthly deduction or government allotment,
we will accept one Minimum Monthly Premium together with the required
authorization forms. The Minimum Monthly Premium is specified in the Policy and
determines the payments required to maintain the Death Benefit Guarantee.
TEMPORARY INSURANCE. At the time the application is taken, the applicant
can receive temporary insurance coverage by paying a premium equal to 10% of
annualized Minimum Monthly Premium. The temporary insurance will be for the face
amount specified in the premium receipt and will be effective until the earliest
of the following:
* The date the coverage under the Policy is effective.
* The date the applicant receives an offer for an alternative policy, a
notice of termination of temporary insurance coverage, or notice that
we have rejected the application.
* The date of death of the proposed Surviving Joint Insured or any
proposed additional Joint Insured.
* The 180th day after the date of the receipt for the temporary
insurance.
<PAGE>
CREDITING NET PREMIUMS. We will credit Net Premiums to the Sub-Accounts of
the Variable Account and to the Fixed Account on the basis of the applicant's
allocation on the latest of the following dates:
* The Valuation Date following the date of underwriting approval.
* The Valuation Date on or next following the Policy Date.
* The Valuation Date on or next following the date we have received at
least the required minimum initial premium payment.
* In the case of Policies issued under government allotment programs,
the Valuation Date next following the Issue Date.
Until the date on which Net Premiums are credited as described above,
premium payments will be held in our General Account. No interest will be earned
on these premium payments during this period of time.
REFUNDING PREMIUM. We will return all premiums paid without interest if
any of the following occur:
* We send notice to the applicant(s) that the insurance is declined.
* The applicant(s) refuses an offer for an alternative policy.
* The applicant(s) does not supply required medical exams or tests
within 30 days of the date of the application.
* The applicant(s) returns the Policy under the limited free look right.
See "Free Look and Conversion Rights -- Free Look Rights".
ALLOCATION OF PREMIUMS
You choose the initial allocation of your Net Premiums (your gross premiums
less the Premium Expense Charge) to the Fixed Account and the Sub-Accounts of
the Variable Account on the application for the Policy. You may change the
allocation at any time by notifying us in writing. Changes will not be effective
until the date we receive your request and will only affect premiums we receive
on or after that date. The premium allocation may be 100% to the Fixed Account
or the Sub-Accounts or divided among the Fixed Account and the Sub-Accounts in
whole percentage points totaling 100%. We reserve the right to adjust any
allocation to eliminate fractional percentages. Changing the current Net Premium
allocation will not affect the allocation of existing Accumulation Value.
AMOUNT AND TIMING OF PREMIUMS
The amount and frequency of premium payments will affect the Accumulation
Value, the Cash Surrender Value, and how long the Policy will remain in force
(including affecting whether the Death Benefit Guarantee is in effect ). See
"Death Benefit Guarantee". After the initial premium, you may determine the
amount and timing of subsequent premium payments within the following
restrictions:
* PAYMENT OF CUMULATIVE PREMIUMS SUFFICIENT TO MAINTAIN THE DEATH
BENEFIT GUARANTEE MAY BE REQUIRED TO KEEP THE POLICY IN FORCE DURING
AT LEAST THE FIRST SEVERAL POLICY YEARS. SEE "DEATH BENEFIT
GUARANTEE".
* We may choose not to accept any premium less than $25.00.
* We reserve the right to limit the amount of any premium payment. In
general, during the first Policy Year we will not accept total premium
payments in excess of $250,000 on the lives of the Joint Insureds for
the Policy, whether such payments are received on a Policy or on any
other insurance policy issued by us or our affiliates. Also, we will
not accept any premium payment in excess of $50,000 on any Policy
after the first Policy Year. At our discretion, however, we may waive
any of these premium limitations.
* We may require additional evidence of insurability satisfactory to us
if any premium would increase the difference between the Death Benefit
and the Accumulation Value (that is, the net amount at risk). A
premium payment would increase the net amount at risk if at the time
of
<PAGE>
payment the Death Benefit would be based upon the applicable
percentage of Accumulation Value. See "Death Benefit -- Death Benefit
Options".
* In no event may the total of all premiums paid, both scheduled and
unscheduled, exceed the current maximum premium payments allowed for
life insurance under Section 7702 of the Code. If at any time a
premium is paid which would result in total premiums exceeding the
current maximum premiums allowed, we will only accept that portion of
the premium which would make total premiums equal the maximum. Any
part of the premium in excess of that amount will be returned, and no
further premiums will be accepted until allowed by the current maximum
premium limitations.
* If you contemplate a large premium payment under this Policy, and you
wish to avoid Modified Endowment Contract classification, you may
contact us in writing before making the payment and we will tell you
the maximum amount which can be paid into the Policy. See "Federal Tax
Matters -- Policy Proceeds".
PLANNED PERIODIC PREMIUMS
You may choose a Planned Periodic Premium schedule which indicates a
preference as to future amounts and frequency of payment. The Planned Periodic
Premiums may be paid annually, semi-annually, quarterly or, if you choose, you
can pay the Planned Periodic Premiums by bank account monthly deduction or
government allotment.
The amount and frequency of your initial Planned Periodic Premium will be
shown in the Policy. You may change the Planned Periodic Premium at any time by
written request. We may limit the amount of any increase.
Failure to make any Planned Periodic Premium payment will not, however,
necessarily result in lapse of the Policy. On the other hand, making Planned
Periodic Premium payments will not guarantee that the Policy remains in force.
See "Death Benefit Guarantee" and "Policy Lapse and Reinstatement".
UNSCHEDULED ADDITIONAL PREMIUMS
Premiums, other than Planned Periodic Premiums, may be paid at any time
while the Policy is in force. We may limit the number and amount of these
additional payments.
PAYING PREMIUMS BY MAIL
Planned Periodic Premiums and Unscheduled Additional Premiums may be paid
to the Company by mailing them to:
ReliaStar Life Insurance Company
P.O. Box 802511
Chicago, Illinois 60680-2511
DEATH BENEFIT GUARANTEE
If you meet the requirements described below, we guarantee that we will not
lapse the Policy even if the Cash Surrender Value is not sufficient to cover the
Monthly Deduction that is due. This feature of the Policy is called the "Death
Benefit Guarantee".(In Maryland, this feature is referred to as the "No Lapse
Guarantee.") The length of the Death Benefit Guarantee Period is specified in
your Policy and is uniquely determined on a Policy by Policy basis. The Death
Benefit Guarantee Period depends on the issue ages and premium classes of the
Joint Insureds, Death Benefit Option, and any Optional Insurance Benefits.
Certain Policy changes may also change the Death Benefit Guarantee Period.
Following is a table of typical Death Benefit Guarantee Periods. The examples
assume that the Joint Insureds are a male and a female, both of the same issue
age, both with no substandard ratings, a $1,000,000 Face Amount, and no Optional
Insurance Benefits. Policies with substandard ratings and Optional Insurance
Benefits will typically have a shorter Death Benefit Guarantee Period.
<PAGE>
DEATH BENEFIT DEATH BENEFIT
AGE AND CLASS OF JOINT INSUREDS OPTION GUARANTEE PERIOD
- --------------------------------- -------------- -----------------
45 Non-Tobacco ............... A (Level) 37 Years
45 Non-Tobacco ............... B (Variable) 35 Years
65 Non-Tobacco ............... A (Level) 17 Years
65 Non-Tobacco ............... B (Variable) 16 Years
45 Tobacco ................... A (Level) 35 Years
45 Tobacco ................... B (Variable) 33 Years
65 Tobacco ................... A (Level) 15 Years
65 Tobacco ................... B (Variable) 14 Years
In Massachussetts, the Death Benefit Guarantee Period may not exceed 5
Policy Years.
In general, the two most significant benefits from the Death Benefit
Guarantee are as follows. First, during the early Policy Years, the Cash
Surrender Value may not be sufficient to cover the Monthly Deduction, so that
the Death Benefit Guarantee will be necessary to avoid lapse of the Policy. See
"Policy Lapse and Reinstatement". This occurs when the Surrender Charge exceeds
the Accumulation Value in these years. In this regard, you should consider that
if you request an increase in Face Amount, an additional Surrender Charge would
apply for the fifteen years following the increase, which could create a similar
possibility of lapse as exists during the early Policy Years. Second, to the
extent the Cash Surrender Value declines due to poor investment performance, or
due to an additional Surrender Charge after a requested increase, the Cash
Surrender Value may not be sufficient even in later Policy Years to cover the
Monthly Deduction, so that the Death Benefit Guarantee may also be necessary in
later Policy Years to avoid lapse of the Policy. THUS, EVEN THOUGH THE POLICY
PERMITS PREMIUM PAYMENTS THAT ARE LESS THAN THE MINIMUM MONTHLY PREMIUMS, YOU
MAY LOSE THE SIGNIFICANT PROTECTION PROVIDED BY THE DEATH BENEFIT GUARANTEE BY
PAYING LESS THAN THE MINIMUM MONTHLY PREMIUMS.
REQUIREMENTS
The Death Benefit Guarantee will be in effect during the specified Death
Benefit Guarantee Period if the sum of all premiums paid minus any partial
withdrawals and any loans are equal to or greater than the sum of the Minimum
Monthly Premiums since the Policy Date, including the Minimum Monthly Premium
for the current Monthly Anniversary.
The requirements for the Death Benefit Guarantee must be satisfied as of
each Monthly Anniversary, even though you do not have to pay premiums monthly.
EXAMPLE: The Policy Date is January 1, 1998. The Minimum Monthly Premium
is $1000 per month. No Policy loans or partial withdrawals are taken and no
Face Amount changes have occurred.
Case 1. You pay $1000 each month. The Death Benefit Guarantee is
maintained.
Case 2. You pay $10,000 on January 1, 1998. The $10,000 maintains the
Death Benefit Guarantee without your paying any additional
premiums for the next 10 months (through October 31, 1998).
However, you must pay at least $1000 by November 1, 1998 to
maintain the Death Benefit Guarantee through November 30, 1998.
The amount of the initial Minimum Monthly Premium will be determined by us
at issuance of the Policy and will be shown in the Policy. The initial Minimum
Monthly Premium will depend upon each Joint Insured's sex, age at issue, Rate
Class, optional insurance benefits added by rider, and the Initial Face Amount.
The following Policy changes may change the Minimum Monthly Premium and the
Death Benefit Guarantee Period:
* A requested increase or decrease in the Face Amount (see "Death
Benefit Requested Changes in Face Amount").
* A change in the Death Benefit Option (see "Death Benefit -- Change in
Death Benefit Option").
* The addition or termination of a Policy rider (see "General Provisions
-- Optional Insurance Benefits").
<PAGE>
We will notify you in writing of any changes in the Minimum Monthly Premium
or the Death Benefit Guarantee Period.
If, as of any Monthly Anniversary, you have not made sufficient premium
payments to maintain the Death Benefit Guarantee, we will send you notice of the
premium payment required to maintain it. If we do not receive the required
premium payment within 61 days from the date of our notice, the Death Benefit
Guarantee will terminate. THE DEATH BENEFIT GUARANTEE CANNOT BE REINSTATED.
Even if the Death Benefit Guarantee terminates, the Policy will not
necessarily lapse. For a discussion of the circumstances under which the Policy
may lapse. See "Policy Lapse and Reinstatement".
ACCUMULATION VALUE
The Accumulation Value of the Policy (that is, the total value attributable
to a specific Policy in the Variable Account and the Fixed Account) is equal to
the sum of the Variable Accumulation Value (the amount attributable to the
Variable Account) plus the Fixed Accumulation Value (the amount attributable to
the Fixed Account). The Accumulation Value should be distinguished from the Cash
Surrender Value that would actually be paid to you upon total surrender of the
Policy, which is the Accumulation Value less any Surrender Charge, Loan Amount
and unpaid Monthly Deductions. See "Surrender Benefits -- Total Surrender". The
Accumulation Value should also be distinguished from the Cash Value, which
determines the amount available for Policy loans, and is the Accumulation Value
less any Surrender Charge. See "Policy Loans."
The Variable Accumulation Value will increase or decrease to reflect the
investment performance of the Funds in which Sub-Accounts of the Variable
Account have been invested. The Variable Accumulation Value will also be
increased by (a) any Net Premiums credited to the Variable Account and (b) any
transfers from the Fixed Account. The Variable Accumulation Value will also be
reduced by (a) the Monthly Deduction attributable to the Variable Account, (b)
partial withdrawals from the Variable Account, (c) any transfer and partial
withdrawal charges attributable to the Variable Account, and (d) any amounts
transferred from the Variable Account to the Fixed Account (including amounts
transferred from the Variable Account to the Fixed Account as security for
Policy loans). See "Policy Loans". The Variable Accumulation Value will
generally vary daily.
The Fixed Accumulation Value will be increased by (a) any Net Premiums
credited to it in the Fixed Account, (b) any interest credited to it in the
Fixed Account (determined at our discretion, but guaranteed not to be less than
4%), and (c) any amounts transferred from the Variable Account to it in the
Fixed Account (including amounts transferred to the Fixed Account as security
for Policy loans). See "Policy Loans". The Fixed Accumulation Value will be
reduced by (a) the Monthly Deduction attributable to it in the Fixed Account,
(b) partial withdrawals from it in the Fixed Account, (c) any transfer and
partial withdrawal charges attributable to it in the Fixed Account, and (d) any
amounts transferred from the Fixed Account to the Variable Account.
For a detailed discussion of the calculation of Accumulation Value, see
Appendix B. An illustration of various Accumulation Values, Surrender Charges,
Cash Surrender Values, and Death Benefits, assuming different levels of premium
payments and various investment returns for selected ages and Face Amounts, is
shown in Appendix C.
SPECIALIZED USES OF THE POLICY
Because the Policy provides for an accumulation of Cash Surrender Value as
well as a Death Benefit, the Policy can be used for various individual and
business financial planning purposes. Purchasing the Policy in part for such
purposes entails certain risks. For example, if the investment performance of
the Sub-Accounts to which Accumulation Value is allocated is poorer than
expected or if sufficient premiums are not paid, the Policy may lapse or may not
accumulate sufficient Accumulation Value or Cash Surrender Value to fund the
purpose for which the Policy was purchased. Withdrawals and Policy loans may
significantly affect current and future Accumulation Value, Cash Surrender
Value, or Death Benefit proceeds. Depending upon Sub-Account investment
performance and the amount of a Policy loan, the loan may cause a Policy to
lapse. Because the Policy is designed to provide benefits on a long-term basis,
before purchasing a Policy for a specialized purpose you should consider whether
the long-term nature of the Policy is consistent with the purpose for which it
is being considered. Using a Policy for a specialized purpose may have tax
consequences. See "Federal Tax Matters."
<PAGE>
DEDUCTIONS AND CHARGES
Charges will be deducted in connection with the Policy for (a) providing
the insurance benefits of the Policy (including any riders), (b) administering
the Policy, (c) assuming certain risks in connection with the Policy, and (d)
incurring expenses in distributing the Policy.
Some of these charges are deducted from each premium payment. Certain other
charges are deducted monthly from both the Fixed Account and the Variable
Account, or from the Variable Account only. A charge is also made for each
partial withdrawal and a charge may be made for each transfer.
We may realize a profit on one or more of these charges, such as the
mortality and expense risk charge. We may use any such profits for any proper
corporate purpose, including, among other things, payment of sales expenses.
PREMIUM EXPENSE CHARGE
We deduct the Premium Expense Charge from each premium. The Premium Expense
Charge is guaranteed not to exceed 6.25% of each premium payment. The Premium
Expense Charge is currently 6.25% of each premium payment in Policy Years 1-10
and 3.75% of each premium after the tenth Policy Year. The amount remaining
after we have deducted the Premium Expense Charge is called the Net Premium. The
Net Premium is then credited to the Fixed Account and the Sub-Accounts of the
Variable Account according to your allocation.
MONTHLY DEDUCTION
We deduct the charges described below from the Accumulation Value of the
Policy on a monthly basis. The total of these charges is called the Monthly
Deduction.
The Monthly Deduction will be deducted on each Monthly Anniversary from the
Fixed Account and the Sub-Accounts of the Variable Account on a proportionate
basis depending on their relative Accumulation Values at that time. For purposes
of determining these proportions, the Fixed Accumulation Value is reduced by the
Loan Amount. Because the cost of insurance portion of the Monthly Deduction can
vary from month to month, the Monthly Deduction itself will vary in amount from
month to month.
If the Cash Surrender Value is not sufficient to cover the Monthly
Deduction on a Monthly Anniversary and the Death Benefit Guarantee is not in
effect, the Policy may lapse. See "Death Benefit Guarantee" and "Policy Lapse
and Reinstatement".
COST OF INSURANCE. We will determine the monthly cost of insurance by
multiplying the applicable cost of insurance rate or rates by the net amount at
risk under the Policy. The net amount at risk under the Policy for a Policy
Month is (a) the Death Benefit at the beginning of the Policy Month divided by
1.00327374 (which reduces the net amount at risk, solely for purposes of
computing the cost of insurance, by taking into account assumed monthly earnings
at an annual rate of 4%), less (b) the Accumulation Value at the beginning of
the Policy Month (reduced by any charges for rider benefits). As a result, the
net amount at risk may be affected by changes in the Accumulation Value or in
the Death Benefit.
The Rate Class of any Joint Insured may affect the cost of insurance. A
Rate Class is a group of Insureds we determine based upon our expectation that
they will have similar mortality experience. We currently place Insureds into
standard Rate Classes or into substandard Rate Classes that involve a higher
mortality risk. In an otherwise identical Policy, any Insured in the standard
Rate Class will have a lower cost of insurance than any Insured in a Rate Class
with higher mortality risks.
If there is an increase in the Face Amount and the Rate Class applicable to
the increase is different from that for the Initial Face Amount or any prior
requested increases in Face Amount, the net amount at risk will be calculated
separately for each Rate Class. For purposes of determining the net amount at
risk for each Rate Class, the Accumulation Value will first be assumed to be
part of the Initial Face Amount. If the Accumulation Value is greater than the
Initial Face Amount, it will then be assumed to be part of each increase in
order, starting with the first increase.
Cost of insurance rates will be based on the sex, Issue age, Policy Year
and Rate Class(es) of each Joint Insured. The actual monthly cost of insurance
rates will reflect our expectations as to future experience. They will not,
however, be greater than the guaranteed cost of insurance rates shown in the
Policy, which are based on the Commissioner's 1980 Standard Ordinary Mortality
Tables for Smokers or Nonsmokers, respectively.
<PAGE>
MONTHLY ADMINISTRATIVE CHARGE. Each month we deduct an administrative
charge of $8.25 which is guaranteed not to exceed $12.00 each month.
MONTHLY MORTALITY AND EXPENSE RISK CHARGE. Each month during the first 10
Policy Years we will deduct a charge at an annual rate of .90% of the Variable
Accumulation Value of the Policy. Each month thereafter, it is currently
anticipated that we will deduct this charge at an annual rate of .25% of the
Variable Accumulation Value but in no event will it exceed .90% for the duration
of the Policy.
The mortality risk assumed is that Joint Insureds may live for a shorter
period of time than we estimated and that, as a result, we would have to pay a
greater amount in Death Benefits than we collect in premium payments. The
expense risk assumed is that expenses incurred in issuing and administering the
Policy will be greater than we estimated.
MONTHLY AMOUNT CHARGE. Each month during the first 20 Policy Years (and for
20 Policy Years following any requested increase in Face Amount) we deduct a
monthly charge per $1,000 of Face Amount. The amount of this charge varies by
average age of the Joint Insureds on the Policy Date (or on the effective date
of any requested increase in Face Amount, as appropriate). See Appendix D.
OPTIONAL INSURANCE BENEFIT CHARGES. Each month we deduct charges for any
optional insurance benefits added to the Policy by rider. See "General
Provisions -- Optional Insurance Benefits".
SURRENDER CHARGE
GENERAL. During the first 15 Policy Years and during the first 15 years
following any requested increase in Face Amount, we make a Surrender Charge if
you surrender the Policy or the Policy lapses. The Surrender Charge will not be
affected by any decrease in Face Amount or by any change in Face Amount
resulting from a change in the Death Benefit Option.
The Surrender Charge imposed upon early surrender or lapse will be
significant. For example, if you make premium payments no greater than the
Minimum Monthly payments specified in your Policy, you can expect that during at
least the early Policy Years, all or substantially all of your premium payments
will be required to pay the Surrender Charge and other charges associated with
the Policy. As a result, you should purchase a Policy only if you have the
financial capability to keep it in force for a substantial period of time.
SURRENDER CHARGE. The maximum Surrender Charge for the Initial Face Amount
or any requested increase in Face Amount will be determined on the Policy Date
or on the effective date of any requested increase respectively. The maximum
Surrender Charge on the Initial Face Amount will be equal to $10.00 per $1,000
of Initial Face Amount. The maximum Surrender Charge on any requested increase
in Face Amount will be equal to $10.00 per $1,000 of increase in the Face
Amount. This Surrender Charge for the Initial Face Amount remains level equal to
the maximum Surrender Charge during the first five Policy Years and then reduces
in equal monthly increments until it becomes zero at the end of 15 years. The
Surrender Charge for any requested increase in Face Amount follows a similar
pattern except that the Surrender Charge is reduced in the first three Policy
Years following the effective date of the increase.
SURRENDER CHARGE CALCULATION. The Surrender Charge for the Initial Face
Amount or any requested increase in Face Amount is determined by multiplying (i)
$10.00 by (ii) the Initial Face Amount or the Face Amount of the increase, as
applicable, and by (iii) the applicable percentage from the Surrender Charge
Percentage Table below, and then dividing this amount by 1000. For example, a
$250,000 Face Amount Policy would have a maximum $2,500 Surrender Charge ($10 x
250,000 / 1,000 x 100%) the first five years of the Policy, and decline during
the next ten years as indicated by the Table below. For the Initial Face Amount,
a Surrender Charge is measured from the Issue Date and applies for 15 years from
that Date. An increase in Face Amount of $100,000 in year 5 of the Policy would
have its own (additional) Surrender Charge of $333 at the end of the first year
($10 x 100,000 / 1,000 x 33%), and vary according to the Table below. The 15
year applicable Surrender Charge for each increase applies for 15 years from the
increase Date. In this example, all Surrender Charges would cease to apply after
the twentieth Policy Year.
<PAGE>
SURRENDER CHARGE PERCENTAGE TABLE
IF SURRENDER OR LAPSE OCCURS INITIAL FACE FACE AMOUNT
IN THE LAST MONTH OF POLICY YEAR: AMOUNT INCREASES
- ----------------------------------- -------------- ------------
1 100% 33%
2 100% 67%
3 100% 100%
4 100% 100%
5 100% 100%
6 90% 90%
7 80% 80%
8 70% 70%
9 60% 60%
10 50% 50%
11 40% 40%
12 30% 30%
13 20% 20%
14 10% 10%
15 and later 0% 0%
For requested increases, years are measured from the date of the increase.
The percentages reduce equally for each Policy Month during the years
shown. For example, during the eleventh Policy Year, the percentage reduces
equally each month from 50% at the end of the tenth Policy Year to 40% at the
end of the eleventh Policy Year.
PARTIAL WITHDRAWAL AND TRANSFER CHARGES
We currently make no charge for transfers and a $10.00 charge for each
partial withdrawal. These charges are guaranteed not to exceed $25.00 per
transfer or partial withdrawal for the duration of the Policy. The transfer
charge will not be imposed on transfers that occur as a result of Policy loans
or the exercise of conversion rights.
THE INVESTMENT ADVISORY FEES AND OTHER FUND EXPENSES AFTER REIMBURSEMENT
Because the Variable Account purchases shares of the Funds, the net asset
value of the investments of the Variable Account will reflect the investment
advisory fees and other expenses incurred by the Funds. Set forth below is
information provided by each Fund on its total 1997 annual expenses as a
percentage of the Fund's average net assets. For more information concerning
these expenses, see the prospectuses for the Funds that are contained in the
accompanying book entitled "Select-Product Investment Options".
<PAGE>
<TABLE>
<CAPTION>
TOTAL INVESTMENT
MANAGEMENT OTHER FUND ANNUAL
FUND FEES EXPENSES EXPENSES
- -------------------------------------------------------------------- ------------ ---------- -----------------
<S> <C> <C> <C>
Alger American Growth Portfolio (a) ................................ 0.75% 0.04% 0.79%
Alger American MidCap Growth Portfolio (a) ......................... 0.80% 0.04% 0.84%
Alger American Small Capitalization Portfolio (a) .................. 0.85% 0.04% 0.89%
Fidelity VIP Equity-Income Portfolio (a) (b) ....................... 0.50% 0.08% 0.58%
Fidelity VIP Growth Portfolio (a) (b) .............................. 0.60% 0.09% 0.69%
Fidelity VIP High Income Portfolio (a) ............................. 0.59% 0.12% 0.71%
Fidelity VIP Money Market Portfolio ................................ 0.21% 0.10% 0.31%
Fidelity VIP Overseas Portfolio (a) (b) ............................ 0.75% 0.17% 0.92%
Fidelity VIP II Asset Manager Portfolio (a) (b) .................... 0.55% 0.10% 0.65%
Fidelity VIP II Contrafund Portfolio (a) (b) ....................... 0.60% 0.11% 0.71%
Fidelity VIP II Index 500 Portfolio (a) (c) ........................ 0.24% 0.04% 0.28%
Fidelity VIP II Investment Grade Bond Portfolio (a) ................ 0.44% 0.14% 0.58%
Janus Aggressive Growth Portfolio (a) (d) .......................... 0.73% 0.03% 0.76%
Janus Growth Portfolio (a) (d) ..................................... 0.65% 0.05% 0.70%
Janus International Growth Portfolio (a) (d) ....................... 0.67% 0.29% 0.96%
Janus Worldwide Growth Portfolio (a) (d) ........................... 0.66% 0.08% 0.74%
Neuberger&Berman AMT Limited Maturity Bond Portfolio (a) ........... 0.65% 0.12% 0.77%
Neuberger&Berman AMT Partners Portfolio (a) ........................ 0.80% 0.06% 0.86%
Northstar Variable Trust Growth Portfolio(e) ....................... 0.75% 0.05% 0.80%
Northstar Variable Trust High Yield Bond Portfolio (e) ............. 0.75% 0.05% 0.80%
Northstar Variable Trust Income and Growth Portfolio (e) ........... 0.75% 0.05% 0.80%
Northstar Variable Trust International Value Portfolio (e) ......... 0.75% 0.05% 0.80%
Northstar Variable Trust Multi-Sector Bond Portfolio (e) ........... 0.75% 0.05% 0.80%
OCC Equity Portfolio (a) (f) ....................................... 0.80% 0.19% 0.99%
OCC Global Equity Portfolio (a) (f) ................................ 0.79% 0.40% 1.19%
OCC Managed Portfolio (a) (f) ...................................... 0.80% 0.07% 0.87%
OCC Small Cap Portfolio (a) (f) .................................... 0.80% 0.17% 0.97%
Putnam VT Asia Pacific Growth Fund ................................. 0.80% 0.27% 1.07%
Putnam VT Diversified Income Fund .................................. 0.69% 0.11% 0.80%
Putnam VT Growth and Income Fund ................................... 0.47% 0.04% 0.51%
Putnam VT New Opportunities Fund ................................... 0.58% 0.05% 0.63%
Putnam VT Utilities Growth and Income Fund ......................... 0.67% 0.07% 0.74%
Putnam VT Voyager Fund ............................................. 0.54% 0.05% 0.59%
</TABLE>
(a) The Company or its affiliates may receive compensation from an affiliate or
affiliates of certain of the Funds based upon an annual percentage of the
average net assets held in that Fund by the Company and by certain of the
Company's insurance company affiliates. These amounts are intended to
compensate the Company or the Company's affiliates for administrative,
record keeping, and in some cases distribution, and other services provided
by the Company and its affiliates to Funds and/or the Funds' affiliates.
Payments of such amounts by an affiliate or affiliates of the Funds do not
increase the fees paid by the Funds or their shareholders. The percentage
paid may vary from one fund company to another.
(b) A portion of the brokerage commissions that certain funds pay was used to
reduce funds 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. Including
these reductions, the Total Investment Fund Annual Expenses presented in
the table would have been: 0.57% for Fidelity VIP Equity-Income
Portfolio; 0.67% for Fidelity VIP Growth Portfolio; 0.90% for Fidelity
VIP Overseas Portfolio; 0.64% for Fidelity VIP II Asset Manager
Portfolio; and 0.68% for Fidelity VIP II Contrafund Portfolio.
(c) FMR agreed to reimburse a portion of Fidelity VIP II Index 500 Portfolio's
expenses during the
<PAGE>
period. Without this reimbursement, the fund's Management Fee, Other
Expenses and Total Investment Fund Annual Expenses would have been 0.27%,
0.13%, and 0.40% respectively. Expense reimbursements are voluntary. There
is no assurance of ongoing reimbursement.
(d) The fees and expenses in the table above are based on gross expenses before
expense offset arrangements for the fiscal year ended December 31, 1997.
The information for each Portfolio is net of fee reductions from Janus
Capital. Fee reductions for the Aggressive Growth, Growth, International
Growth, and Worldwide Growth Portfolios reduce the management fee to the
level of the corresponding Janus retail fund. Without such reductions, the
Management Fee, Other Expenses and Total Investment Fund Annual Expenses
would have been: 0.74%, 0.04%, and 0.78% for Janus Aggressive Growth
Portfolio; 0.74%, 0.04%, and 0.78% for Janus Growth Portfolio; 0.79%,
0.29%, and 1.08% for Janus International Growth Portfolio; and 0.72%,
0.09%, and 0.81% for Janus Worldwide Growth Portfolio. Janus Capital may
modify or terminate the reductions at any time upon at least 90 days'
notice to the Trustees of Janus Aspen Series.
(e) The investment adviser to the Northstar Variable Trust has agreed to
reimburse the five Northstar Portfolios for any expenses in excess of 0.80%
of each Portfolio's average daily net assets. In the absence of the
investment adviser's expense reimbursements, the Total Investment Fund
Annual Expenses that would have been paid by each Portfolio during its
fiscal year ended December 31, 1997 would have been: 1.09% for the
Northstar Variable Trust Growth Portfolio; 1.35% for the Northstar Variable
Trust High Yield Bond Portfolio; 1.11% for the Northstar Variable Trust
Income and Growth Portfolio; 1.36% for the Northstar Variable Trust
Multi-Sector Bond Portfolio; and 2.61% for the Northstar Variable Trust
International Value Portfolio. Expense reimbursements are voluntary. There
is no assurance of ongoing reimbursement.
(f) Management Fees reflect effective management fees after taking into effect
any waiver. Other Expenses are shown gross of expense offsets afforded the
Portfolios which effectively lowered overall custody expenses. Total
Investment Fund Annual Expenses for the Equity, Small Cap and Managed
Portfolios are limited by OpCap Advisors so that their respective
annualized operating expenses (net of any expense offsets) do not exceed
1.00% of average daily net assets. Total Investment Fund Annual Expenses
for the Global Equity Portfolio are limited to 1.25% of average daily net
assets. Without such limitation and without giving effect to any expense
offsets, the Management Fees, Other Expenses and Total Investment Fund
Annual Expenses incurred for the fiscal year ended December 31, 1997 would
have been: 0.80%, 0.19% and 0.99%, respectively, for the Equity Portfolio;
0.80%, 0.40% and 1.20%, respectively, for the Global Equity Portfolio;
0.80%, 0.07% and 0.87%, respectively, for the Managed Portfolio; and 0.80%,
0.17% and 0.97%, respectively, for the Small Cap Portfolio.
REDUCTION OF CHARGES
Any of the charges under the Policy, as well as the Minimum Face Amount set
forth in this Prospectus, may be reduced because of special circumstances that
result in lower sales, administrative, or mortality expenses. For example,
special circumstances may exist in connection with group sales to our
policyholders or those of affiliated insurance companies, or sales to employees
or clients of members of our affiliated group of insurance companies. The amount
of any reductions will reflect the reduced sales effort and administrative costs
resulting from, or the different mortality experience expected as a result of,
the special circumstances. Reductions will not be unfairly discriminatory
against any person, including the affected Policy owners and owners of all other
policies funded by the Variable Account.
POLICY LAPSE AND REINSTATEMENT
LAPSE. Unlike traditional life insurance policies, the failure to make a
Planned Periodic Payment will not by itself cause the Policy to lapse. If the
Death Benefit Guarantee is not in effect, the Policy will lapse if, as of any
Monthly Anniversary, the Cash Surrender Value is less than the Monthly Deduction
due, and a grace period of 61 days expires without a sufficient payment. A
sufficient premium is any premium payment such that the Net Premium is larger
than the sum of 1+2, where 1 is the amount by which the Accumulation Value is
less than the Surrender Charge as of the beginning of the grace period and 2 is
the sum of the past due Monthly Deductions.
During the early Policy Years, the Cash Surrender Value will generally not
be sufficient to cover the Monthly Deduction, so that premium payments
sufficient to maintain the Death Benefit Guarantee will be required to avoid
lapse. See "Death Benefit Guarantee".
<PAGE>
The Policy does not lapse, and the insurance coverage continues, until the
expiration of a 61-day grace period which begins on the date we send you written
notice indicating that the Cash Surrender Value is less than the Monthly
Deduction due. Our written notice to you will indicate the amount of the payment
required to avoid lapse. Failure to make a sufficient payment within the grace
period will result in lapse of the Policy without value.
If the Surviving Joint Insured dies during the grace period, the proceeds
payable will equal the amount of the Death Benefit on the Valuation Date on or
next following the date of the Surviving Joint Insured's death, reduced by any
Loan Amount and any unpaid Monthly Deductions.
If the Death Benefit Guarantee is in effect, we will not lapse the Policy.
See "Death Benefit Guarantee".
REINSTATEMENT. Reinstatement means putting a lapsed Policy back in force.
You may reinstate a lapsed Policy by written request any time within five years
after it has lapsed if it has not been surrendered for its Cash Surrender Value.
To reinstate the Policy and any riders, you must submit evidence of
insurability satisfactory to us that each Joint Insured is still insurable, or
if the policy lapsed after the first death of the Joint Insured, then evidence
of insurability for the Surviving Joint Insured. You must pay a premium large
enough such that the Net Premium is as large as the sum of the Surrender Charge
after reinstatement, plus the Monthly Deductions for the date of reinstatement
and the following Monthly Anniversary.
The Death Benefit Guarantee cannot be reinstated. See "Death Benefit
Guarantee".
SURRENDER BENEFITS
Subject to certain limitations, you may make a total surrender of the
Policy or a partial withdrawal of the Policy's Cash Surrender Value by sending
us a written request. The amount available for a total surrender or partial
withdrawal will be determined at the end of the Valuation Period during which
your written request is received. Any amounts payable from the Variable Account
upon total surrender or partial withdrawal will generally be paid within seven
days of receipt of your written request. Postponement of payments may, however,
occur in certain circumstances. See "General Provisions -- Postponement of
Payments".
TOTAL SURRENDER
By making a written request, you may surrender the Policy at any time for
its Cash Surrender Value. The Cash Surrender Value is the Accumulation Value of
the Policy reduced by any Surrender Charge, Loan Amount and unpaid Monthly
Deductions. If the Cash Surrender Value at the time of a surrender exceeds
$25,000, the written request must include a Signature Guarantee. An illustration
of Accumulation Values, Surrender Charges, Cash Surrender Values, and Death
Benefits assuming different levels of premium payments and investment returns
for selected ages and Face Amounts is shown in Appendix C.
PARTIAL WITHDRAWAL
After the first Policy Year, you may also withdraw part of the Policy's
Cash Surrender Value by sending us a written request. If the amount being
withdrawn exceeds $25,000, the written request must include a Signature
Guarantee. Only one partial withdrawal is allowed in any Policy Year. We
currently make a $10.00 charge for each partial withdrawal. This charge is
guaranteed not to exceed $25.00 for each partial withdrawal. See "Deductions and
Charges -- Partial Withdrawal and Transfer Charges". The amount of any partial
withdrawal must be at least $500 and, during the first 15 Policy Years, may not
be more than 20% of the Cash Surrender Value on the date we receive your written
request. No interest will accrue on amounts represented by uncashed distribution
or redemption checks.
Unless you specify a different allocation, we make partial withdrawals from
the Fixed Account and the Sub-Accounts of the Variable Account on a
proportionate basis based upon the Accumulation Value. These proportions will be
determined at the end of the Valuation Period during which your written request
is received. For purposes of determining these proportions, any outstanding Loan
Amount is first subtracted from the Fixed Accumulation Value.
EFFECT OF PARTIAL WITHDRAWALS. The Accumulation Value will be reduced by
the amount of any partial withdrawal. The Death Benefit will also be reduced by
the amount of the withdrawal, or, if the
<PAGE>
Death Benefit is based on the corridor percentage of Accumulation Value (see
"Death Benefit -- Death Benefit Options"), by an amount equal to the corridor
percentage times the amount of the partial withdrawal.
If the Level Amount Option is in effect, the Face Amount will be reduced by
the amount of the partial withdrawal. When increases in the Face Amount have
occurred previously, we reduce the current Face Amount by the amount of the
partial withdrawal in the following order:
(a) The Face Amount provided by the most recent increase;
(b) The next most recent increases successively; and
(c) The Face Amount when the policy was issued.
Thus, partial withdrawals may affect the way in which the cost of insurance
is calculated and the amount of pure insurance protection under the Policy. See
"Death Benefit -- Requested Changes in Face Amount", "Deductions and Charges --
Monthly Deduction" and "Death Benefit -- Insurance Protection".
We do not allow a partial withdrawal if the Face Amount after a partial
withdrawal would be less than the Minimum Face Amount.
If the Variable Amount Option is in effect, a partial withdrawal does not
affect the Face Amount.
A partial withdrawal may also cause the termination of the Death Benefit
Guarantee because the amount of the partial withdrawal is deducted from the
total premiums paid in calculating whether sufficient premiums have been paid in
order to maintain the Death Benefit Guarantee.
Like partial withdrawals, Policy loans are a means of withdrawing funds
from the Policy. See "Policy Loans". A partial withdrawal or a Policy loan may
have tax consequences depending on the circumstances of such withdrawal or
loan. See "Federal Tax Matters -- Policy Proceeds".
TRANSFERS
You may transfer all or part of the Variable Accumulation Value between the
Sub-Accounts or to the Fixed Account subject to any conditions the Funds whose
shares are involved may impose. Transfer requests must be in writing.
Telephone/fax transfers are available when you complete a telephone/fax form.
See "Telephone/Fax Instructions". You may also direct us to automatically make
periodic transfers under the Dollar Cost Averaging or Portfolio Rebalancing
services as described below.
To transfer all or part of the Variable Accumulation Value from a
Sub-Account, Accumulation Units are redeemed and their values are reinvested in
other Sub-Accounts, or the Fixed Account, as directed in your request. We will
effect transfers, and determine all values in connection with transfers, at the
end of the Valuation Period during which we receive your request, except as
otherwise specified for the Dollar Cost Averaging or Portfolio Rebalancing
services. With respect to future Net Premium payments, however, your current
premium allocation will remain in effect unless (i) you have requested the
Portfolio Rebalancing service, or (ii) you are transferring all of the Variable
Accumulation Value from the Variable Account to the Fixed Account in exercise of
conversion rights. See "Free Look and Conversion Rights -- Conversion Rights".
Transfers from the Fixed Account to the Variable Account are subject to the
following additional restrictions: (i) your transfer request must be postmarked
no more than 30 days before or after the Policy Anniversary in any year, and
only one transfer is permitted during this period, (ii) the Fixed Accumulation
Value after the transfer must be at least equal to the Loan Amount, (iii) no
more than 50% of the Fixed Accumulation Value, less any Loan Amount, may be
transferred unless the balance, after the transfer, would be less than $1,000,
in which event the full Fixed Accumulation Value, less any Loan Amount, may be
transferred, and (iv) you must transfer at least the lesser of $500 or the total
Fixed Accumulation Value, less any Loan Amount. See Appendix A. Some of these
restrictions may be waived for transfers due to the Portfolio Rebalancing
service.
TELEPHONE/FAX INSTRUCTIONS. You are allowed to enter certain types of
instructions either by telephone or by fax if you complete a telephone/fax
instruction authorization form. If you complete the form, you can enter the
following types of instructions by telephone or fax: transfers between
Sub-Accounts, changes of allocations among fund options, and change of
Sub-Account for variable
<PAGE>
annuitization payouts. If the Owner completes the telephone/fax form, the Owner
agrees that we will not be liable for any loss, liability, cost or expense when
we act in accordance with the telephone/fax transfer instructions that are
received and, if by telephone, are recorded on voice recording equipment. If a
telephone/fax transfer request is later determined not to have been made by the
Owner or was made without the Owner's authorization, and loss results from such
unauthorized transfer, the Owner bears the risk of this loss. Any requests via
fax are considered telephone requests and are bound by the conditions in the
telephone/fax transfer authorization form you sign. Any fax request should
include your name, daytime telephone number, Policy number and, in the case of
transfers, the names of the Sub-Accounts from which and to which money will be
transferred and the allocation percentage. The Company will employ reasonable
procedures to confirm that instructions communicated by telephone/fax are
genuine. In the event the Company does not employ such procedures, the Company
may be liable for any losses due to unauthorized or fraudulent instructions.
Such procedures may include, among others, requiring forms of personal
identification prior to acting upon telephone/fax instructions, providing
written confirmation of such instructions, and/or tape recording telephone
instructions.
DOLLAR COST AVERAGING SERVICE. You may request this service if your
Accumulation Value, less any Loan Amount, is at least $5,000. If you request
this service, you direct us to automatically make specific periodic transfers of
a fixed dollar amount from any of the Sub-Accounts to one or more of the
Sub-Accounts or to the Fixed Account. No transfers from the Fixed Account are
permitted under this service. Transfers of this type may be made on a monthly,
quarterly, semi-annual, or annual basis. This service is intended to allow you
to use "Dollar Cost Averaging", a long term investment method which provides for
regular investments over time. We make no guarantees that Dollar Cost Averaging
will result in a profit or protect against loss. You may discontinue this
service at any time by notifying us in writing.
If you are interested in the Dollar Cost Averaging service you may obtain a
separate application form and full information concerning this service and its
restrictions from us.
If you are using the Dollar Cost Averaging service, this service will be
discontinued immediately (i) on receipt of any request to begin a Portfolio
Rebalancing service, (ii) if the Policy is in the grace period on any date when
Dollar Cost Averaging transfers are scheduled, or (iii) if the specified
transfer amount from any Sub-Account is more than the Accumulation Value in that
Sub-Account.
We reserve the right to discontinue, modify, or suspend this service. Any
such modification or discontinuation would not affect any Dollar Cost Averaging
service requests already commenced.
PORTFOLIO REBALANCING SERVICE. You may request this service if your
Accumulation Value, less any Loan Amount, is at least $10,000. If you request
this service, you direct us to automatically make periodic transfers to maintain
your specified percentage allocation of Accumulation Value, less any Loan
Amount, among the Sub-Accounts of the Variable Account and the Fixed Account;
your allocation of future Net Premium payments will also be changed to be equal
to this specified percentage allocation. Transfers made under this service may
be made on a quarterly, semi-annual, or annual basis. This service is intended
to maintain the allocation you have selected consistent with your personal
objectives.
The Accumulation Value in each Sub-Account of the Variable Account and the
Fixed Account will grow or decline at different rates over time. Portfolio
Rebalancing will periodically transfer Accumulation Values from those accounts
that have increased in value to those accounts that have increased at a slower
rate or declined in value. If all accounts decline in value, it will transfer
Accumulation Values from those that have decreased less in value to those that
have decreased more in value. We make no guarantees that Portfolio Rebalancing
will result in a profit or protect against loss. You may discontinue this
service at any time by notifying us in writing.
If you are interested in the Portfolio Rebalancing service you may obtain a
separate application form and full information concerning this service and its
restrictions from us.
If you are using the Portfolio Rebalancing service, this service will be
discontinued immediately (i) on receipt of any request to change the allocation
of premiums to the Fixed Account and Sub-Account of the Variable Account, (ii)
on receipt of any request to begin a Dollar Cost Averaging service, (iii) upon
receipt of any request to transfer Accumulation Value among the Fixed Account or
Sub-Accounts, or (iv) if the policy is in the grace period or the Accumulation
Value, less any Loan Amount, is less than $7,500 on any Valuation Date when
Portfolio Rebalancing transfers are scheduled.
<PAGE>
We reserve the right to discontinue, modify, or suspend this service. Any
such modification or discontinuation could affect Portfolio Rebalancing services
currently in effect, but only after 30 days notice to affected Policy owners.
TRANSFER LIMITS. We currently allow twelve transfers in a Policy Year,
although we reserve the right to limit you to no more than four transfers per
Policy Year. All transfers that are effective on the same Valuation Date will be
treated as one transfer transaction. Transfers made due to the Dollar Cost
Averaging or Portfolio Rebalancing services do not currently count toward the
limit on number of transfers.
TRANSFER CHARGES. While there is currently no charge imposed on a transfer,
including transfers to implement Dollar Cost Averaging and Portfolio
Rebalancing, we reserve the right to make a charge not to exceed $25.00 per
transfer for the duration of the Policy. See "Deductions and Charges -- Partial
Withdrawal and Transfer Charges". In no event, however, will any charge be
imposed in connection with the exercise of a conversion right or transfers
occurring as the result of Policy Loans. All transfers are also subject to any
charges and conditions imposed by the Fund whose shares are involved. All
transfers that are effective on the same Valuation Date will be treated as one
transfer transaction.
POLICY LOANS
GENERAL. As long as the Policy remains in effect, you may borrow money from
us at any time after the first Policy Year using the Policy as security for the
loan (except that under Policies issued in Indiana loans may be made during the
first Policy Year). You may not borrow at any time more than the Loan Value of
the Policy, which is equal to 75% of the Cash Value less the existing Loan
Amount, except that under Policies issued in Texas the percentage is 100% and
under Policies issued in Alabama, Maryland and Virginia, the percentage is 90%.
Each Policy loan must be at least $500, except in Connecticut it must be at
least $200. After the older Joint Insured reaches age 65, we currently allow
100% of the Cash Surrender Value to be borrowed.
Loan requests may be made in writing or by telephoning us on any Valuation
Date. Any loan request in excess of $25,000 will require a Signature Guarantee
and telephone loan requests cannot exceed $10,000. No election form is currently
required to make telephone loan requests. We will employ reasonable procedures
to confirm that loan requests made by telephone are genuine. In the event we do
not employ such procedures, we may be liable for any losses due to unauthorized
or fraudulent instructions. Such procedures may include, among others, requiring
forms of personal identification prior to acting upon telephone instructions,
providing written confirmations of such instructions and/or tape recording
telephone instructions.
Policy loans have priority over the claims of any subsequent assignee or
other person. A Policy loan may be repaid in whole or in part at any time while
any Joint Insured is alive.
The loan proceeds will normally be paid to you within seven days after we
receive your request. Payment of loan proceeds to you may be postponed under
certain circumstances. See "General Provisions -- Postponement of Payments".
Payments made by you generally will be treated as premium payments, rather
than Policy loan repayments, unless you indicate that the payment should be
treated otherwise or unless we decide, at our discretion, to apply the payment
as a Policy loan repayment. As a result, unless you indicate that a payment is a
loan repayment, all payments you make to the Policy will generally be subject to
the Premium Expense Charge. See "Deductions and Charges -- Premium Expense
Charge".
The total of your outstanding Policy loans including unpaid interest due
thereon is called the "Loan Amount".
IMMEDIATE EFFECT OF POLICY LOANS. When we make a Policy loan, an amount
equal to the Policy loan (which includes interest payable in advance) will be
segregated within the Accumulation Value of your Policy and held in the Fixed
Account as security for the loan. As described below, you will pay interest to
us on the Policy loan, but we will also credit interest to you on the amount
held in the Fixed Account as security for the loan. The amount segregated in the
Fixed Account as security for the Policy loan will be included as part of the
Fixed Accumulation Value under the Policy, but will (as described below) be
credited with interest on a basis different from other amounts in the Fixed
Account.
<PAGE>
Unless you specify differently, amounts held as security for the Policy
loan will come proportionately from the Fixed Accumulation Value and the
Variable Accumulation Value (with the proportions being determined as described
below). Assets equal to the portion of the Policy loan coming from the Variable
Accumulation Value will be transferred from the Sub-Accounts of the Variable
Account to the Fixed Account, THEREBY REDUCING THE ACCUMULATION VALUE HELD IN
THE SUB-ACCOUNTS. These transfers are not treated as transfers for the purposes
of the transfer charge or the limit on the number of transfers.
EFFECT ON INVESTMENT PERFORMANCE. Amounts coming from the Variable Account
as security for Policy loans will no longer participate in the investment
performance of the Variable Account. All amounts held in the Fixed Account as
security for Policy loans (that is, the Loan Amount) will only be credited with
interest at an effective annual rate currently equal to 5.50% (guaranteed to be
no less than 4.00%). NO ADDITIONAL INTEREST WILL BE CREDITED TO THESE AMOUNTS.
On the Policy Anniversary, any interest credited on these amounts will be
credited to the Fixed Account and the Variable Account according to the premium
allocation then in effect. See "Payment and Allocation of Premiums -- Allocation
of Premiums".
Although Policy loans may be repaid in whole or in part at any time, Policy
loans will permanently affect the Policy's potential Accumulation Value. As a
result, to the extent that the Death Benefit depends upon the Accumulation Value
(see "Death Benefit -- Death Benefit Options"), Policy loans will also affect
the Death Benefit under the Policy. This effect could be favorable or
unfavorable depending on whether the investment performance of the assets
allocated to the Sub-Account(s) is less than or greater than the interest being
credited on the assets transferred to the Fixed Account while the loan is
outstanding. Compared to a Policy under which no loan is made, values under the
Policy will be lower when such interest credited is less than the investment
performance of assets held in the Sub-Account(s).
EFFECT ON POLICY COVERAGE. If, on any Monthly Anniversary, the Loan Amount
is greater than the Accumulation Value, less the then applicable Surrender
Charge, we will notify you. If we do not receive sufficient payment within 61
days from the date we send notice to you, the Policy will lapse and terminate
without value. Our written notice to you will indicate the amount of the payment
required to avoid lapse. The Policy may, however, later be reinstated.
See "Policy Lapse and Reinstatement".
A Policy loan may also cause termination of the Death Benefit Guarantee,
because the Loan Amount is deducted from the total premiums paid in calculating
whether sufficient premiums have been paid in order to maintain the Death
Benefit Guarantee. See "Death Benefit Guarantee".
Proceeds payable upon the death of the Surviving Joint Insured will be
reduced by any Loan Amount.
INTEREST. The interest rate charged on Policy loans will be an annual rate
of 7.40%, payable in advance. After the tenth Policy Year, we will charge
interest at an annual rate of 5.21%, payable in advance, on that portion of your
Loan Amount that is not in excess of (a) the Accumulation Value, less (b) the
total of all premiums paid and all partial withdrawals. This portion of your
loan amount is called a preferred loan. Any excess of this amount will be
charged interest at the annual rate of 7.40%.
Interest is payable in advance (for the rest of the Policy Year) at the
time any Policy loan is made and at the beginning of each Policy Year thereafter
(for that entire Policy Year). If interest is not paid when due, it will be
deducted from the Cash Surrender Value as an additional Policy loan (see
"Immediate Effect of Policy Loans" above) and will be added to the existing Loan
Amount.
Because we charge interest in advance, any interest that we have not earned
will be refunded to you upon lapse or surrender of the Policy or repayment of
the Policy Loan.
REPAYMENT OF LOAN AMOUNT. The Loan Amount may be repaid any time while any
Joint Insured is living. If not repaid, the Loan Amount will be deducted by us
from any amount payable under the Policy. As described above, unless you provide
us with notice to the contrary, any payments on the Policy will generally be
treated as premium payments, which are subject to the Premium Expense Charge,
rather than repayments on the Loan Amount. Any repayments on the Loan Amount
will result in amounts being reallocated from the Fixed Account and to the
Sub-Accounts of the Variable Account according to your current premium
allocation.
<PAGE>
TAX CONSIDERATIONS. A Policy loan, particularly after the 10th Policy year,
may have tax consequences depending on the circumstances of the loan. A
competent tax adviser should be consulted prior to taking out a Policy loan.
See "Federal Tax Matters -- Policy Proceeds".
FREE LOOK AND CONVERSION RIGHTS
FREE LOOK RIGHTS
The Policy provides for two types of return or "free look" periods, one
after application for and issuance of the Policy and the other after any
requested increase in Face Amount.
AT INITIAL ISSUE. The Policy provides for an initial free look period
during which you have a right to return the Policy for cancellation and receive
a refund of all premiums paid. You must return the Policy to us or your agent
and ask us to cancel the Policy by midnight of the 10th day after receiving it.
FOLLOWING A REQUESTED INCREASE IN FACE AMOUNT. Any requested increase in
Face Amount is also subject to a free look period during which you have a right
to cancel the increase and receive a refund. You must notify us or your agent
and ask us to cancel the increase by midnight of the 10th day after receiving a
new Policy Data Page.
Upon requesting cancellation of the increase, you will receive a refund, if
you so request, or otherwise a restoration to the Policy's Accumulation Value
(allocated among the Fixed Account and the Sub-Accounts of the Variable Account
as if it were a Net Premium payment), in an amount equal to all Monthly
Deductions attributable to the increase in Face Amount, including rider costs
arising from the increase. This refund or credit will be made within seven days
after we receive the request for cancellation on the appropriate form. In
addition, the Surrender Charge will be adjusted so that it will be as though no
such increase in Face Amount had occurred. Premiums paid after an increase in
Face Amount will not be refunded following cancellation of the increase. If you
request an increase in Face Amount you should take this into account in deciding
whether to make any premium payments during the free look period for the
increase.
CONVERSION RIGHTS
During the first two Policy Years and the first two years following a
requested increase in Face Amount, we provide you with an option to convert the
Policy or any requested increase in Face Amount to a life insurance policy under
which the benefits do not vary with the investment experience of the Variable
Account. This option is made available by permitting you to transfer all or a
part of your Variable Accumulation Value to the Fixed Account.
GENERAL OPTION. You may exercise your conversion right by transferring all
or any part of your Variable Accumulation Value to the Fixed Account. If, at any
time during the first two Policy Years or the first two years following a
requested increase in Face Amount, you request transfer from the Variable
Account to the Fixed Account and indicate that you are making the transfer in
exercise of your conversion right, the transfer will not be subject to the
transfer charge and will not count against the limit on the number of transfers.
At the time of such transfer, there is no effect on the Policy's Death Benefit,
Face Amount, net amount at risk, Rate Class(es) or issue age -- only the method
of funding the Accumulation Value under the Policy will be affected. See "Death
Benefit", "Accumulation Value" and Appendix A, "The Fixed Account".
If you transfer all of the Variable Accumulation Value from the Variable
Account to the Fixed Account and indicate that you are making this transfer in
exercise of your Conversion Right, we will automatically credit all future
premium payments on the policy to the Fixed Account unless you request a
different allocation.
INVESTMENTS OF THE VARIABLE ACCOUNT
There are currently 33 investment alternatives available under the Variable
Account. Alger Management is the investment manager for the three Alger American
Fund Portfolios and is responsible for the overall administration of the Fund,
subject to the supervision of the Board of Trustees. Fidelity Management &
Research Company is the investment adviser for the five portfolios of the
Variable Insurance Products Fund (VIP) and the four portfolios of the Variable
Insurance Products Fund II (VIP II). Each of the four portfolios of Janus Aspen
Series has an investment advisory agreement with Janus Capital. Neuberger&Berman
Management, with the assistance of Neuberger&Berman, LLC as sub-adviser,
<PAGE>
is the investment manager of AMT Limited Maturity Bond Investments and AMT
Partners Investments. Northstar Investment Management Corporation, an affiliate
of the Company, is the investment adviser of the five Northstar Portfolios. The
Northstar Variable Trust Growth Portfolio is sub-advised by Navellier Fund
Management, Inc., and the Northstar Variable Trust International Value Portfolio
is sub-advised by Brandes Investment Partners, L.P. OpCap Advisors is the
investment manager for each of the four OCC Accumulation Trust Portfolios and is
a subsidiary of Oppenheimer Capital, a registered investment adviser. Putnam
Investment Management, Inc. is the investment adviser for the six funds of
Putnam Variable Trust.
We reserve the right to establish additional Sub-Accounts of the Variable
Account, each of which could invest in a new Fund with a specified investment
objective. The Variable Account currently consists of 33 investment options; you
would only be permitted, however, to participate in a maximum of seventeen
investment options over the lifetime of your Policy. You do not have to choose
your investment options in advance, but upon participation in the seventeenth
Fund since the issue of the Policy, you would only be able to transfer within
the seventeen Funds already utilized and which are still available. This
limitation includes transfers.
The Company has entered into service agreements with the managers or
distributors of certain of the Funds pursuant to which the Company or its
affiliates may receive from affiliates of the Funds compensation for providing
administrative, recordkeeping, distribution, and other services to the Funds or
their affiliates. Such compensation is paid based upon assets invested in the
particular Funds, or based upon aggregated net asset goals. Currently, the
Company has service arrangements with Alger, Fidelity, Janus, Neuberger&Berman
Management, and OCC.
The Funds currently offered are described below. A brief summary of
investment objectives is contained in the description of each Fund. In addition,
you should read the prospectuses of the Funds, which are contained in the
accompanying "Select-Product Investment Options" book, for more detailed
information and particularly, a more thorough explanation of investment
objectives of the Funds. There is no assurance that any Fund will achieve its
investment objectives. There is a possibility that one Fund might become liable
for any misstatement, inaccuracy or incomplete disclosure in another Fund's
prospectus.
The Fund shares may be available to fund benefits under both variable
annuity and variable life contracts and policies. This could, in the future,
result in an irreconcilable conflict between the interests of the holders of the
different types of variable contracts. The Funds have advised us that they will
monitor for such conflicts and will promptly provide us with information
regarding any such conflicts should they arise or become imminent and we will
promptly advise the Funds if we become aware of any such conflicts. If any such
material irreconcilable conflict arises we will arrange to eliminate and remedy
such conflict up to and including establishing a new management investment
company and segregating the assets underlying the variable policies and
contracts at no cost to the holders of the policies and contracts. For a brief
explanation of the conflicts that may be involved in such situations, refer to
the Fund Prospectuses.
<PAGE>
The Funds described below distribute dividends and capital gains. However,
distributions are automatically reinvested in additional Fund shares, at net
asset value. The Sub-Account receives the distributions which are then reflected
in the Unit Value of that Sub-Account. See "Accumulation Value".
FUND DESCRIPTIONS
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT FUNDS INVESTMENT OBJECTIVE
- -------------------------------------------------------- ------------------------------------------
THE ALGER AMERICAN FUND:
Alger American Growth Portfolio long-term capital appreciation
Alger American MidCap Growth Portfolio long-term capital appreciation
Alger American Small Capitalization Portfolio long-term capital appreciation
FIDELITY VARIABLE INSURANCE PRODUCTS FUND:
VIP Equity-Income Portfolio reasonable income; capital appreciation
VIP Growth Portfolio capital appreciation
VIP High Income Portfolio high current income
VIP Money Market Portfolio income while maintaining stable $1.00 share price
VIP Overseas Portfolio long-term capital growth
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II:
VIP II Asset Manager Portfolio high total return with reduced risk over
the long-term
VIP II Contrafund Portfolio capital appreciation
VIP II Index 500 Portfolio total return that corresponds to that of
the Standard & Poor's 500 Index
VIP II Investment Grade Bond Portfolio high current income JANUS ASPEN
SERIES:
Aggressive Growth Portfolio long-term capital growth
Growth Portfolio long-term capital growth
International Growth Portfolio long-term capital growth
Worldwide Growth Portfolio long-term capital growth
NEUBERGER&BERMAN ADVISERS MANAGEMENT TRUST ("AMT"):
Limited Maturity Bond Portfolio highest current income consistent with low
risk to principal and liquidity, and
secondarily, total return
Partners Portfolio capital growth
NORTHSTAR VARIABLE TRUST (NORTHSTAR):
Northstar Variable Trust Growth Portfolio long-term capital growth
Northstar Variable Trust High Yield Bond Portfolio high current yield and capital appreciation
Northstar Variable Trust Income and Growth consistent level of income;
Portfolio capital appreciation
Northstar Variable Trust International Value long-term capital appreciation
Portfolio
Northstar Variable Trust Multi-Sector Bond current income; capital preservation
Portfolio
OCC ACCUMULATION TRUST:
Equity Portfolio long-term capital appreciation
Global Equity Portfolio long-term capital appreciation
Managed Portfolio capital growth
Small Cap Portfolio capital appreciation
PUTNAM VARIABLE TRUST:
Putnam VT Asia Pacific Growth Fund capital appreciation
Putnam VT Diversified Income Fund capital growth; current income
Putnam VT Growth and Income Fund capital growth; current income
Putnam VT New Opportunities Fund capital appreciation
Putnam VT Utilities Growth and Income Fund capital growth; current income
Putnam VT Voyager Fund capital appreciation
</TABLE>
<PAGE>
ADDITION, DELETION, OR SUBSTITUTION OF INVESTMENTS
We reserve the right, subject to compliance with applicable law, to make
additions to, deletions from, or substitutions for the shares that are held by
the Variable Account or that the Variable Account may purchase. We reserve the
right to eliminate the shares of any of the Funds and to substitute shares of
another Fund or of another open-end, registered investment company. We will not
substitute any shares attributable to your interest in a Sub-Account of the
Variable Account without notice and prior approval of the SEC, to the extent
required by the Investment Company Act of 1940 or other applicable law. Nothing
contained herein shall prevent the Variable Account from purchasing other
securities of other Funds or classes of policies, or from permitting a
conversion between Funds or classes of policies on the basis of requests made by
Policy owners.
We also reserve the right to establish additional Sub-Accounts of the
Variable Account, each of which would invest in a new Fund, or in shares of
another investment company, with a specified investment objective. New
Sub-Accounts may be established when, in our sole discretion, marketing needs or
investment conditions warrant, and any new Sub-Accounts will be made available
to existing Policy owners on a basis to be determined by us. We may also
eliminate one or more Sub-Accounts if, in our sole discretion, marketing, tax,
regulatory requirements or investment conditions warrant.
In the event of any such substitution, deletion or change, we may make such
changes in this and other policies as may be necessary or appropriate to reflect
such substitution, deletion or change. If all or a portion of your investments
are allocated to any of the current funds that are being substituted for or
deleted on the date such action is announced, you may transfer the portion of
the Accumulation Value affected without payment of a transfer charge to
available Sub-Accounts. If deemed by us to be in the best interests of persons
having voting rights under the Policies, the Variable Account may be operated as
a management company under the Investment Company Act of 1940, it may be
deregistered under that Act in the event such registration is no longer
required, or it may be combined with our other separate accounts.
The Company currently plans to discontinue offering certain of the Funds as
investment options. It is anticipated that this will occur in the first half of
1999, subject to and contingent upon receipt of various approvals. It is
expected that any policyholder monies that are invested in Sub-Accounts
investing in the discontinued Funds will be transferred to alternate Funds with
similar investment objectives. Policyholders who have investments in any of
discontinued Funds will be permitted for a period of 30 days to transfer their
investment into a non-discontinued Fund without payment of any transfer charge.
VOTING RIGHTS
You have the right to instruct us how to vote the Fund shares attributable
to the Policy at regular meetings and special meetings of the Funds. We will
vote the Fund shares held in Sub-Accounts according to the instructions
received, as long as:
* The Variable Account is registered as a unit investment trust under
the Investment Company Act of 1940; and
* The assets of the Variable Account are invested in Fund shares.
If we determine that, because of applicable law or regulation, we do not
have to vote according to the voting instructions received, we will vote the
Fund shares at our discretion.
All persons entitled to voting rights and the number of votes they may cast
are determined as of a record date, selected by us, not more than 90 days before
the meeting of the Fund. All Fund proxy materials and appropriate forms used to
give voting instructions will be sent to persons having voting interests.
Any Fund shares held in the Variable Account for which we do not receive
timely voting instructions, or which are not attributable to Policy owners, will
be voted by us in proportion to the instructions received from all Policy owners
having a voting interest in the Fund. Any Fund shares held by us or any of our
affiliates in general accounts will, for voting purposes, be allocated to all
separate accounts having voting interests in the Fund in proportion to each
account's voting interest in the respective Fund, and will be voted in the same
manner as are the respective account's votes.
Owning the Policy does not give you the right to vote at meetings of our
stockholders.
<PAGE>
DISREGARD OF VOTING INSTRUCTIONS. We may, when required by state insurance
regulatory authorities, disregard voting instructions if the instructions
require that the shares be voted so as to cause a change in the
subclassification or investment objective of any Fund or to approve or
disapprove an investment advisory contract for any Fund. In addition, we may
disregard voting instructions in favor of changes initiated by a Policy owner in
the investment policy or the investment adviser of any Fund if we reasonably
disapprove of such changes. A change would be disapproved only if the proposed
change is contrary to state law or prohibited by state regulatory authorities or
we determine that the change would have an adverse effect on the Variable
Account in that the proposed investment policy for a Fund may result in
speculative or unsound investments. In the event we do disregard voting
instructions, a summary of that action and the reasons for such action will be
included in the next annual report to owners.
GENERAL PROVISIONS
BENEFITS AFTER AGE 100
If either of the Joint Insureds is living after age 100 of the younger
Joint Insured and the Policy is in force, the Death Benefit will be the
Accumulation Value.
OWNERSHIP
While the Surviving Joint Insured is alive, subject to the Policy's
provisions you may:
* Change the amount and frequency of premium payments.
* Change the allocation of premiums.
* Make transfers between accounts.
* Surrender the Policy for cash.
* Make a partial withdrawal for cash.
* Receive a cash loan.
* Assign the Policy as collateral.
* Change the beneficiary.
* Transfer ownership of the Policy.
* Enjoy any other rights the Policy allows.
While both Joint Insureds are alive, subject to this policy's provisions,
you may:
* Change the Death Benefit Option.
* Change the Face Amount.
PROCEEDS
At the Surviving Joint Insured's death, the proceeds payable include the
Death Benefit then in force:
* Plus any additional amounts provided by rider on the life of the
Surviving Joint Insured;
* Plus any Policy loan interest that we have collected but not earned;
* Minus any Loan Amount; and
* Minus any unpaid Monthly Deductions.
BENEFICIARY
You may name one or more beneficiaries on the application when you apply
for the Policy. You may later change beneficiaries by written request. If no
beneficiary is surviving when the Surviving Joint Insured dies, the Death
Benefit will be paid to you, if surviving, or otherwise to your estate.
POSTPONEMENT OF PAYMENTS
Payments from the Variable Account for Death Benefits, cash surrender,
partial withdrawal, or loans will generally be made within seven days after we
receive all the documents required for the payments.
<PAGE>
We may, however, delay making a payment when we are not able to determine
the Variable Accumulation Value because (i) the New York Stock Exchange is
closed, other than customary weekend or holiday closings, or trading on the New
York Stock Exchange is restricted by the SEC, (ii) the SEC by order permits
postponement for the protection of Policyholders, or (iii) an emergency exists,
as determined by the SEC, as a result of which disposal of securities is not
reasonably practicable or it is not reasonably practicable to determine the
value of the Variable Account's net assets. Transfers and allocation to and
against any Sub-Account of the Variable Account may also be postponed under
these circumstances.
Any of the payments described above which are made from the Fixed Account
may be delayed up to six months from the date we receive the documents required.
We will pay interest at an effective annual rate of not less than 3.50% from the
date of the request to the date of payment if we delay payment more than 30
days. No additional interest will be credited to any delayed payments. The time
a payment from the Fixed Account may be delayed and the rate of interest paid on
such amounts may vary among states.
SETTLEMENT OPTIONS
Settlement Options are ways you can choose to have the Policy's proceeds
paid. These options apply to proceeds paid:
* At the Surviving Joint Insured's death.
* On total surrender of the Policy.
The proceeds are paid to one or more payees. The proceeds may be paid in a
lump sum or may be applied to one of the following Settlement Options. Proceeds
will be paid in one sum unless one or more Options are requested. A combination
of options may be used. At least $2,500 must be applied to any option for each
payee under that option. Under an installment Option, each payment must be at
least $25.00. We may adjust the interval between payments to make each payment
at least $25.00.
Proceeds applied to any Option no longer earn interest at the rate applied
to the Fixed Account or participate in the investment performance of the Funds.
Option 1 -- Proceeds are left with us to earn interest. Withdrawals and any
changes are subject to our approval.
Option 2 -- Proceeds and interest are paid in equal installments of a
specified amount until the proceeds and interest are all paid.
Option 3 -- Proceeds and interest are paid in equal installments for a
specified period until the proceeds and interest are all paid.
Option 4 -- The proceeds provide an annuity payment with a specified number
of months "certain". The payments are continued for the life of the primary
payee. If the primary payee dies before the certain period is over, the
remaining payments are paid to a contingent payee.
Option 5 -- The proceeds provide a life income for two payees. When one
payee dies, the surviving payee receives two-thirds of the amount of the
joint monthly payment for life.
Option 6 -- The proceeds are used to provide an annuity based on the rates
in effect when the proceeds are applied. We do not apply this Option if a
similar option would be more favorable to the payee at that time.
INTEREST ON SETTLEMENT OPTIONS. We base the interest rate for proceeds
applied under Options 1 and 2 on the interest rate we declare on funds that we
consider to be in the same classification based on the Option, restrictions on
withdrawal, and other factors. The interest rate will never be less than an
effective annual rate of 3.50%.
In determining amounts to be paid under Options 3 and 4, we assume interest
at an effective annual rate of 3.50%. Also, for Option 3 and "certain" periods
under Option 4, we credit any excess interest we may declare on funds that we
consider to be in the same classification based on the Option, restrictions on
withdrawal, and other factors.
<PAGE>
INCONTESTABILITY
After the Policy has been in force during both Joint Insured's lifetime for
two years from the Policy's Issue Date, we cannot claim the Policy is void or
refuse to pay any proceeds unless the Policy has lapsed.
If you make a Face Amount increase or a premium payment which requires
proof of insurability, the corresponding Death Benefit increase has its own
two-year contestable period measured from the date of the increase.
If the Policy is reinstated, the contestable period is measured from the
date of reinstatement with respect to statements made on the application for
reinstatement.
MISSTATEMENT OF AGE AND SEX
If any Joint Insured's age or sex or both are misstated, the Death Benefit
will be the amount that the most recent cost of insurance would purchase using
the current cost of insurance rate for the correct age and sex.
SUICIDE
If any Joint Insured commits suicide, whether sane or insane, within two
years of the Policy's Issue Date, we do not pay the Death Benefit. Instead, we
refund all premiums paid for the Policy and any attached riders, minus any Loan
Amounts and partial withdrawals.
If you make a Face Amount increase or a premium payment which requires
proof of insurability, the corresponding Death Benefit increase has its own
two-year suicide limitation for the proceeds associated with that increase. If
any Joint Insured commits suicide, whether sane or insane, within two years of
the effective date of the increase, we pay the Death Benefit prior to the
increase and refund the cost of insurance for that increase.
Under Policies issued in Colorado and North Dakota, the suicide period is
shortened to one year.
TERMINATION
The Policy terminates when any of the following occurs:
* The Policy lapses. See "Policy Lapse and Reinstatement".
* The Surviving Joint Insured dies.
* The Policy is surrendered for its Cash Surrender Value.
* The Policy is amended according to the amendment provision described
below and you do not accept the amendment.
AMENDMENT
We reserve the right to amend the Policy in order to include any future
changes relating to the following:
* Any SEC rulings and regulations.
* The Policy's qualification for treatment as a life insurance policy
under the following:
-- The Code.
-- Internal Revenue Service rulings and regulations.
-- Any requirements imposed by the Internal Revenue Service.
REPORTS
ANNUAL STATEMENT. We will send you an Annual Statement once each year free
of charge, showing the Face Amount, Death Benefit, Accumulation Value, Cash
Surrender Value, Loan Amount, premiums paid, Planned Periodic Premiums, interest
credits, partial withdrawals, transfers, and charges since the last statement.
<PAGE>
Additional statements are available upon request. We may make a charge not
to exceed $50.00 for each additional Annual Statement you request.
PROJECTION REPORT. Upon request after the first Policy Year, we will
provide you a report projecting future results based on the Death Benefit Option
you specify, the Planned Periodic Premiums you specify, the Accumulation Value
of your Policy at the end of the prior Policy Year and any other assumptions
specified by you or us (subject to any SEC limitations). The first request for a
Projection Report in any Policy Year will be without charge; thereafter, we may
make a charge not to exceed $50.00 for each Projection Report you request.
DIVIDENDS
The Policy does not entitle you to participate in our surplus. We do not
pay you dividends under the Policy.
The Sub-Account receives any dividends paid by the related Fund. Any such
dividend is credited to you through the calculation of the Sub-Account's daily
Unit Value.
COLLATERAL ASSIGNMENT
You may assign the benefits of the Policy as collateral for a debt. This
limits your rights to the Cash Surrender Value and the beneficiary's rights to
the proceeds. An assignment is not binding on us until we receive written
notice.
OPTIONAL INSURANCE BENEFITS
The Policy can include additional benefits, in the form of riders to the
Policy, if our requirements for issuing such benefits are met. We currently
offer the following benefit riders although some riders may not be available in
some states.
POLICY SPLIT OPTION RIDER (PSO) -- Allows the policyowner to split the
Policy into two individual permanent life insurance policies in the event of a
divorce of the Joint Insureds, dissolution of a business partnership of the
Joint Insureds, or if there is a change in the federal estate tax laws that
would eliminate the unlimited marital deduction or reduce by at least 50% the
estate taxes payable at death. Evidence of insurability on each Joint Insured
may be required to exercise this option. There is no cost for this rider.
SURVIVORSHIP TERM RIDER (STR) -- Provides a level term insurance benefit
payable on the death of the Surviving Joint Insured if death occurs prior to age
100 of the younger Joint Insured. The current cost of insurance rates for the
rider are expected to be lower than for the base Policy. In addition, the base
policy's Monthly Amount Charge per $1,000 and Surrender Charge do not apply to
coverage under the rider. However, the STR will cause the Death Benefit
Guarantee Period of the base Policy to be shortened.
By Company practice, if the base Death Benefit is equal to the Accumulation
Value multiplied by the corridor percentage (see "Death Benefit"), the STR
amount may be replaced with base coverage without providing evidence of
insurability. The entire rider amount must be replaced if any amount is
replaced. Neither Surrender Charges nor Monthly Amount Charges will apply to the
new additional base coverage. Cost of insurance rates on this new additional
base coverage will be equal to the cost of insurance rates for the original base
coverage.
There may be times in which it will be to your economic advantage to
include a significant portion of your insurance coverage under a term rider. In
some other circumstances, it may be in your interest to obtain a Policy without
term rider coverage. These circumstances depend on many factors, including the
premium levels and amount and duration of coverage you choose, as well as the
ages, sexes, and premium classes of the Joint Insureds.
FOUR YEAR TERM RIDER (FTR) -- Provides a four year, level term benefit if
the Surviving Joint Insured dies during the first four Policy Years.
FEDERAL TAX MATTERS
INTRODUCTION
The following summary provides a general description of the Federal income
tax considerations associated with the Policy and does not purport to be
complete or to cover all tax situations. This
<PAGE>
discussion is not intended as tax advice. Counsel or other competent tax
advisors should be consulted for more complete information. This discussion is
based upon our understanding of the present Federal income tax laws. No
representation is made as to the likelihood of continuation of the present
Federal income tax laws or as to how they may be interpreted by the Internal
Revenue Service (the "IRS").
Any Qualified plan contemplating the purchase of a life policy should
consult a tax advisor.
TAX STATUS OF THE POLICY
In order to qualify as a life insurance contract for Federal income tax
purposes and to receive the tax treatment normally accorded life insurance
contracts under Federal tax law, a Policy must satisfy certain requirements
which are set forth in the Internal Revenue Code. Guidance as to how these
requirements are to be applied is limited. Nevertheless, the Company believes
that a Policy issued on the basis of a standard risk class should satisfy the
applicable requirements. There is less guidance with respect to Policies issued
on a substandard basis (i.e., a premium class involving higher than standard
mortality risk), and it is not clear whether such a Policy would satisfy the
applicable requirements, particularly if the owner pays the full amount of
premiums permitted under the Policy. If it is subsequently determined that a
Policy does not satisfy the applicable requirements, the Company may take
appropriate steps to bring the Policy into compliance with such requirements and
reserves the right to restrict Policy transactions in order to do so.
In certain circumstances, owners of variable life insurance contracts have
been considered for Federal income tax purposes to be the owners of the assets
of the variable account supporting their policies due to their ability to
exercise investment control over these assets. Where this is the case, the
Policy owners have been currently taxed on income and gains attributable to the
variable account assets. There is little guidance in this area, and some
features of the Policies, such as the flexibility of an owner to allocate
premium payments and Policy Accumulation Values, have not been explicitly
addressed in published rulings. While the Company believes that the Policies do
not give owners investment control over Variable Account assets, the Company
reserves the right to modify the Policies as necessary to prevent an owner from
being treated as the owner of the Variable Account assets supporting the Policy.
In addition, the Code requires that the investments of the Variable Account
be "adequately diversified" in order for the Policies to be treated as life
insurance contracts for Federal income tax purposes. It is intended that the
Variable Account, through the Funds, will satisfy these diversification
requirements.
The following discussion assumes that the Policy will qualify as a life
insurance contract for Federal income tax purposes.
TAX TREATMENT OF POLICY BENEFITS
IN GENERAL. The Company believes that the Death Benefit under a Policy
should be excludible from the gross income of the Beneficiary. Federal, state
and local transfer, and other tax consequences of ownership or receipt of Policy
proceeds depend on the circumstances of each owner or beneficiary. A tax advisor
should be consulted on these consequences.
Generally, the owner will not be deemed to be in constructive receipt of
the Policy Accumulation Value until there is a distribution. When distributions
from a Policy occur, or when loans are taken out from or secured by (e.g., by
assignment) a Policy, the tax consequences depend on whether the Policy is
classified as a "Modified Endowment Contract."
MODIFIED ENDOWMENT CONTRACTS. Under the Internal Revenue Code, certain life
insurance contracts are classified as "Modified Endowment Contracts," with less
favorable tax treatment than other life insurance contracts. Due to the
flexibility of the Policies as to premiums and benefits, the individual
circumstances of each Policy will determine whether it is classified as a
Modified Endowment Contract. The rules are too complex to be summarized here,
but generally depend on the amount of premiums paid during the first seven
Policy Years. Certain changes in a Policy after it is issued could also cause it
to be classified as a Modified Endowment Contract. A current or prospective
owner should consult with a competent advisor to determine whether a Policy
transaction will cause the Policy to be classified as a Modified Endowment
Contract. The Company will monitor the Policies, however, and will attempt to
notify an owner on a timely basis if it believes that such owner's Policy is in
jeopardy of becoming a Modified Endowment Contract.
<PAGE>
DISTRIBUTIONS FROM MODIFIED ENDOWMENT CONTRACTS. Policies classified as
Modified Endowment Contracts are subject to the following tax rules:
(1) All distributions, including distributions upon surrender and
withdrawals, will be treated as ordinary income subject to tax up to
an amount equal to the excess (if any) of the Policy Accumulation
Value (Cash Surrender Value for surrenders) immediately before the
distribution plus prior distributions over the Policy owner's total
investment in the Policy at that time. "Total investment in the
Policy" means the aggregate amount on any premiums or other
considerations paid for a Policy, plus any previously taxed
distributions, minus any credited dividends.
(2) Loans taken from or secured by (e.g., by assignment) such a Policy are
treated as distributions and taxed accordingly.
(3) A 10 percent additional income tax is imposed on the amount included
in income except where distribution is made when the Policy owner has
attained age 591|M/2 or is disabled, or where the distribution is part
of a series of substantially equal periodic payments for the life (or
life expectancy) of the Policy owner or the joint lives (or joint life
expectancies) of the Policy owner and the Policy owner's beneficiary
or designated beneficiary.
DISTRIBUTIONS FROM POLICIES THAT ARE NOT MODIFIED ENDOWMENT CONTRACTS.
Distributions from a Policy that is not a Modified Endowment Contract are
generally treated first as a recovery of a Policy owner's investment in the
Policy and only after the recovery of all investments in the Policy as taxable
income. However, certain distributions which must be made in order to enable the
Policy to continue to qualify as a life insurance contract for Federal income
tax purposes if Policy benefits are reduced during the first 15 Policy Years may
be treated in whole or in part as ordinary income subject to tax.
Loans from or secured by a Policy that is not a Modified Endowment Contract
are not treated as distributions.
Finally, neither distributions from nor loans from or secured by a Policy
that is not a modified Endowment Contract are subject to the 10 percent
additional tax.
POLICY LOANS. In general, interest on a loan from a Policy will not be
deductible. Before taking out a Policy loan, a Policy owner should consult a
tax advisor as to the tax consequences.
MULTIPLE POLICIES. All Modified Endowment Contracts that are issued by the
Company (or its affiliates) to the same Policy owner during any calendar year
are treated as one Modified Endowment Contract for purposes of determining the
amount includible in the Policy owner's income when a taxable distribution
occurs.
TAXATION OF RELIASTAR LIFE INSURANCE COMPANY
We do not initially expect to incur any income tax burden upon the earnings
or the realized capital gains attributable to the Variable Account. Based on
this expectation, no charge is being made currently to the Variable Account for
Federal income taxes which may be attributable to the Account. If, however, we
determine that we may incur such tax burden, we may assess a charge for such
burden from the Variable Account.
We may also incur state and local taxes, in addition to premium taxes, in
several states. At present these taxes are not significant. If there is a
material change in state or local tax laws, charges for such taxes, if any,
attributable to the Variable Account, may be made.
POSSIBLE CHANGES IN TAXATION
The President's 1999 Budget Proposal has also recommended legislation in
1998 that, if enacted, would adversely modify the federal taxation of certain
life insurance and annuity contracts. For example, one proposal would tax
transfers among investment options and tax exchanges involving variable
contracts. A second proposal would reduce the "investment in the contract" under
cash value life insurance and certain annuity contracts, thereby increasing the
amount of income for purposes of computing gain. Although the likelihood of
legislative changes is uncertain, there is always the possibility that the tax
treatment of the Policy could change by legislation or other means. Moreover, it
is also possible that any change could be retroactive (that is, effective prior
to the date of the change). You should consult a tax adviser with respect to
legislative developments and their effect on the Policy.
<PAGE>
OTHER CONSIDERATIONS
The foregoing discussion is general and is not intended as tax advice. Any
person concerned about these tax implications should consult a competent tax
adviser. This discussion is based on our understanding of the present Federal
income tax laws as they are currently interpreted by the IRS. No representation
is made as to the likelihood of continuation of these current laws and
interpretations. It should be further understood that the foregoing discussion
is not exhaustive and that special rules not described in this Prospectus may be
applicable in certain situations. Moreover, no attempt has been made to consider
any applicable state or other tax laws.
PREPARING FOR YEAR 2000
Like all financial services providers, we utilize systems that may be
affected by Year 2000 transition issues and we rely upon service providers,
including the Funds, that also may be affected. The Company has developed, and
is in the process of implementing, a Year 2000 transition plan, and is
confirming that its service providers are also so engaged. The resources that
are being devoted to this effort are substantial. It is difficult to predict
with precision whether the amount of resources ultimately devoted, or the
outcome of these efforts, will have any negative impact on us. However, as of
the date of this prospectus, it is not anticipated that Policy owners will
experience negative effects on their investment, or on the services provided in
connection therewith, as a result of Year 2000 transition implementation. We
currently anticipate that our systems will be Year 2000 compliant on or about
January 1, 1999, but there can be no assurance that we will be successful, or
that interaction with other service providers will not impair our services at
that time.
DISTRIBUTION OF THE POLICIES
We intend to sell the Policies in all jurisdictions where we are licensed.
The Policies will be sold by licensed insurance agents who are also registered
representatives of broker-dealers registered with the SEC under the Securities
Exchange Act of 1934 who are members of the National Association of Securities
Dealers, Inc.
The Policies will be distributed by the general distributor, Washington
Square Securities, Inc., (WSSI), a Minnesota corporation, which is an affiliate
of ours. WSSI is a securities broker-dealer registered with the SEC and is a
member of the National Association of Securities Dealers, Inc. It is primarily a
mutual funds dealer and has dealer agreements under which it markets shares of
more than 50 mutual funds. It also markets limited partnerships and other
tax-sheltered or tax-deferred investments, and acts as general distributor
(principal underwriter) for variable annuity products issued by us. The Policies
may also be sold through other broker-dealers authorized by WSSI and applicable
law to do so. Registered representatives of such broker-dealers may be paid on a
different basis than described below.
Registered representatives who sell the Policies will receive commissions
based on a commission schedule. In the first Policy Year, commissions generally
will be no more than 45% of the premiums paid up to the annualized Minimum
Monthly Premium, plus 2% of additional premiums. In subsequent Policy Years 2
through 10, commissions generally will be 2% of premiums paid in that year.
Corresponding commissions will be paid upon a requested increase in Face Amount.
In addition, a commission of .10% of the average monthly Accumulation Value
during each Policy Year may be paid. Further, registered representatives may be
eligible to receive certain overrides and other benefits which may be based on
the amount of earned commissions.
<PAGE>
MANAGEMENT
The following list the current directors and executive officers of the
Company, their principal occupation and business experience.
<TABLE>
<CAPTION>
TERM PRINCIPAL OCCUPATION
DIRECTORS EXPIRES AND BUSINESS EXPERIENCE
- --------- --------- ------------------------------------------------------------------------
<S> <C> <C>
R. Michael Conley 1999 Senior Vice President of ReliaStar Financial Corp. since 1991; Senior
Vice President, ReliaStar Employee Benefits of ReliaStar Life Insurance
Company since 1986; President of NWNL Benefits Corporation since
1988; Executive Vice President of ReliaStar Life Insurance Company of
New York since 1996; Director of various subsidiaries of ReliaStar
Financial Corp.
Richard R. Crowl 1999 Senior Vice President, General Counsel and Secretary of ReliaStar
Financial Corp. since 1996; Senior Vice President and General Counsel
of ReliaStar Life Insurance Company, Northern Life Insurance Company,
and ReliaStar United Services Life Insurance Company since 1996;
Senior Vice President and General Counsel of ReliaStar Life Insurance
Company of New York since 1994; Senior Vice President and General
Counsel of Washington Square Advisers, Inc. since 1986; Vice President
and Associate General Counsel of ReliaStar Financial Corp. from 1989
to 1996; Vice President and Associate General Counsel of ReliaStar
Life Insurance Company from 1985 to 1996; Director and Senior Vice
President of various subsidiaries of ReliaStar Financial Corp.
Michael J. Dubes 1999 President and Chief Executive Officer of Northern Life Insurance
Company since 1994; Senior Vice President, Individual Insurance
of ReliaStar Life Insurance Company from 1987 to 1994; Chairman of
Washington Square Securities, Inc. from 1987 to 1994; Director and
Officer of various subsidiaries of ReliaStar Financial Corp.
John H. Flittie 1999 Vice Chairman, President and Chief Operating Officer of ReliaStar
Life Insurance Company since 1996; President, Chief Operating Officer,
and Director of ReliaStar Financial Corp. and ReliaStar Life Insurance
Company since 1993; Vice Chairman, Chief Executive Officer and
President of ReliaStar Life Insurance Company of New York since
1996; Chairman and Director of Washington Square Securities, Inc.
since 1996; Chairman and Director of PrimeVest Financial Services
since 1996; Vice Chairman and President of ReliaStar United Services
Life Insurance Company and ReliaStar Life Insurance Company of
New York since 1995; Senior Executive Vice President and Chief
Operating Officer of ReliaStar Financial Corp. and ReliaStar Life
Insurance Company from 1992 to 1993; Senior Executive Vice President
and Chief Operating Officer of ReliaStar Financial Corp. from 1991 to
1992; Executive Vice President and Chief Financial Officer of ReliaStar
Financial Corp. and ReliaStar Life Insurance Company from 1989 to
1991; Senior Vice President and Chief Financial Officer of ReliaStar
Financial Corp. since 1985; Director of Community First BankShares,
Inc. and Director and Officer of various subsidiaries of ReliaStar
Financial Corp.
Wayne R. Huneke 1999 Senior Vice President of ReliaStar Financial Corp. and ReliaStar Life
Insurance Company since 1994; Chief Financial Officer and Treasurer
of ReliaStar Financial Corp. and ReliaStar Life Insurance Company
from 1994 to 1998; Vice President, Treasurer and Chief Accounting
Officer from 1990 to 1994; Director and Officer of various subsidiaries
of ReliaStar Financial Corp.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TERM PRINCIPAL OCCUPATION
DIRECTORS EXPIRES AND BUSINESS EXPERIENCE
- --------- --------- ------------------------------------------------------------------------
<S> <C> <C>
Ronald D. Jarvis 1999 Senior Vice President of ReliaStar Financial Corp. since 1997; Director
of ReliaStar Life Insurance Company of New York since 1997; Chairman,
President and Chief Executive Officer of Security-Connecticut
Corporation from 1993 to 1997; Chief Executive Officer of Security-
Connecticut Life Insurance Company since 1984; President of Security-
Connecticut Life Insurance Company since 1976; Director, President
and Chief Executive Officer of Lincoln Security Life Insurance Company
from 1984 to 1997; Director and Officer of various subsidiaries of
ReliaStar Financial Corp.
Mark S. Jordahl 1999 Senior Vice President and Chief Investment Officer of ReliaStar Life
Insurance Company and ReliaStar Financial Corp. since 1998; Vice
President of ReliaStar Life Insurance Company and ReliaStar Financial
Corp. from 1987 to 1998; Director and Officer of various subsidiaries of
ReliaStar Financial Corp.
Kenneth U. Kuk 1999 Senior Vice President of ReliaStar Financial Corp. and ReliaStar Life
Insurance Company since 1996; Vice President, Strategic Marketing of
ReliaStar Financial Corp. and ReliaStar Life Insurance Company since
1996; Vice President of Investments of ReliaStar Financial Corp. from
1991 to 1996; President of Washington Square Advisers, Inc. since 1995;
Chairman of ReliaStar Mortgage Corporation since 1988; Director and
Officer of various subsidiaries of ReliaStar Financial Corp.
William R. Merriam 1999 Senior Vice President, Life & Health Reinsurance of ReliaStar Life Insurance
Company since 1991; Vice President from 1984 to 1991.
James R. Miller 1999 Senior Vice President, Chief Financial Officer and Treasurer of ReliaStar
Financial Corp. since 1997; Vice President, Corporate Development of
ReliaStar Financial Corp. from 1985 to 1992; Executive Vice President
and Chief Operating Officer of Northern Life Insurance Company from 1992 to 1997.
Robert C. Salipante 1999 Senior Vice President, Personal Financial Services, of ReliaStar Financial
Corp. and ReliaStar Life Insurance Company since 1996; Executive
Vice President of ReliaStar Life Insurance Company of New York since
1996; Senior Vice President, of Individual Division and Technology of
ReliaStar Life Insurance Company in 1996; Senior Vice President of
Strategic Marketing and Technology of ReliaStar Financial Corp. and
ReliaStar Life Insurance Company from 1994 to 1996; Senior Vice
President and Chief Financial Officer of ReliaStar Financial Corp. and
ReliaStar Life Insurance Company from 1992 to 1994; Executive Vice
President of Ameritrust Corporation from 1988 to 1992; Director and
Officer of various subsidiaries of ReliaStar Financial Corp.
John G. Turner 1999 Chairman and Chief Executive Officer of ReliaStar Financial Corp. and
ReliaStar Life Insurance Company since 1993; Chairman of ReliaStar
United Services Life Insurance Company and ReliaStar Life Insurance
Company of New York since 1995; Chairman of Northern Life Insurance
Company since 1992; Chairman, President and Chief Executive Officer
of ReliaStar Financial Corp. and ReliaStar Life Insurance Company in
1993; President and Chief Executive Officer of ReliaStar Financial
Corp. and ReliaStar Life Insurance Company from 1991 to 1993;
President and Chief Operating Officer of ReliaStar Financial Corp.
from 1989 to 1991; President and Chief Operating Officer of ReliaStar
Life Insurance Company from 1986 to 1991; Director and Officer of
various subsidiaries of ReliaStar Financial Corp.
</TABLE>
<PAGE>
The Executive Committee and Finance Committee of our Board of Directors
consists of Directors Flittie, Huneke, Salipante, Crowl and Turner.
EXECUTIVE OFFICERS
John G. Turner Chairman and Chief Executive Officer
John H. Flittie Vice Chairman, President and Chief Operating Officer
R. Michael Conley Senior Vice President
Richard R. Crowl Senior Vice President and General Counsel
Wayne R. Huneke Senior Vice President
Mark S. Jordahl Senior Vice President and Chief Investment Officer
Kenneth U. Kuk Senior Vice President
William R. Merriam Senior Vice President
James R. Miller Senior Vice President, Chief Financial Officer and Treasurer
Robert C. Salipante Senior Vice President
All of the foregoing executive officers have been officers or employees of
ours for the past five years, except for James R. Miller, who has been an
employee of ours since 1997. However, Mr. Miller has been employed by an
affiliate of ours since 1991.
STATE REGULATION
We are subject to the laws of the State of Minnesota governing insurance
companies and to regulation and supervision by the Insurance Division of the
State of Minnesota Department of Commerce. An annual statement in a prescribed
form is filed with the Insurance Division each year, and in each state we do
business, covering our operations for the preceding year and our financial
condition as of the end of that year. Our books and accounts are subject to
review by the Insurance Division and a full examination of our operations is
conducted periodically (usually every three years) by the National Association
of Insurance Commissioners. This regulation does not, however, involve
supervision or management of our investment practices or policies.
In addition, we are subject to regulation under the insurance laws of other
jurisdictions in which we operate.
We are also subject to supervision and verification by the State of
Minnesota regarding participating business allocated to the Participation Fund
Account, which was established in connection with the reorganization and
demutualization of the Company in 1989. The Participation Fund Account was
established for the purpose of maintaining the dividend practices relative to
certain policies previously issued by the Company's former Mutual Department.
The Participation Fund Account is not a separate account as described under
Minnesota Statutes Chapter 61A. An annual examination of the Participation Fund
Account is made by independent consulting actuaries representing the Insurance
Division of the State of Minnesota.
MONTANA RESIDENTS
All Policy provisions described in the prospectus that are based on the sex
of the Joint Insureds should be disregarded. This Policy will be issued on a
unisex basis.
References made to the rates and mortality tables applicable to this Policy
are to be disregarded and substituted with an 80% male 20% female blend of the
1980 Commissioner's Standard Ordinary Smoker and Non-Smoker Mortality Tables,
Age Last Birthday.
LEGAL PROCEEDINGS
The Company and its affiliates, like other life insurance companies, are
involved in lawsuits, including class action lawsuits. In some class action and
other lawsuits involving insurers, substantial damages have been sought and/or
material settlement payments have been made. Although the outcome of any
litigation cannot be predicted with certainty, the Company believes that at the
present time there are not pending or threatened lawsuits that are reasonably
likely to have a material adverse impact on the Variable Account or the Company.
BONDING ARRANGEMENTS
An insurance company blanket bond is maintained providing $25,000,000
coverage for our officers and employees and those of Washington Square
Securities, Inc. (WSSI), subject to a $500,000 deductible.
<PAGE>
LEGAL MATTERS
Legal matters in connection with the Variable Account and the Policy
described in this Prospectus have been passed upon by Jeffrey A. Proulx,
Esquire, Attorney for the Company.
EXPERTS
The financial statements of ReliaStar's Select*Life Variable Account as of
December 31, 1997 and for each of the three years then ended and the annual
financial statements of ReliaStar Life Insurance Company included in this
Prospectus have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their reports which are included herein, and have been so included in
reliance upon the reports of such firm given upon their authority as experts in
accounting and auditing.
Actuarial matters included in this Prospectus have been examined by Craig
A. Krogstad, F.S.A., as stated in the opinion filed as an exhibit to the
Registration Statement.
REGISTRATION STATEMENT CONTAINS FURTHER INFORMATION
A Registration Statement has been filed with the SEC under the Securities
Act of 1933 with respect to the Policies. This Prospectus does not contain all
information included in the Registration Statement, its amendments and exhibits.
For further information concerning the Variable Account, the Funds, the Policies
and us, please refer to the Registration Statement.
Statements in this Prospectus concerning provisions of the Policy and other
legal documents are summaries. Please refer to the documents as filed with the
SEC for a complete statement of the provisions of those documents.
Information may be obtained from the SEC's principal office in Washington,
D.C., for a fee it prescribes, or examined there without charge.
FINANCIAL STATEMENTS
The financial statements for the Variable Account reflect the operations of
the Variable Account for each of the three years in the period ended December
31, 1997. The financial statements are audited. The periods covered are not
necessarily indicative of the longer term performance of the assets held in the
Variable Account.
The financial statements of ReliaStar Life Insurance Company which are
included in this Prospectus should be distinguished from the financial
statements of the Variable Account and should be considered only as bearing upon
the ability of ReliaStar Life Insurance Company to meet its obligations under
the Policies. They should not be considered as bearing on the investment
performance of the assets held in the Variable Account.
These financial statements are as of December 31, 1997 and 1996 and for
each of the two years in the period ended December 31, 1997. The periods covered
are not necessarily indicative of the longer term performance of the Company.
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
ReliaStar Life Insurance
Company and Policy Owners of
Select*Life Variable Account:
We have audited the accompanying combined statement of assets and
liabilities of ReliaStar Select*Life Variable Account as of December 31, 1997
and the related combined statements of operations and changes in policy owners'
equity for each of the years ended December 31, 1997, 1996 and 1995. These
financial statements are the responsibility of the management of ReliaStar Life
Insurance Company. Our responsibility is to express an opinion on these
financial statements based on our audits.
We have 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
misstatements. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures include
confirmation of the securities owned as of December 31, 1997, by correspondence
with the account custodians. 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 Select*Life Variable Account
as of December 31, 1997 and the results of its combined operations and changes
in its policy owners' equity for the years ended December 31, 1997, 1996 and
1995, in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Minneapolis, Minnesota
February 20, 1998
<PAGE>
RELIASTAR SELECT*LIFE VARIABLE ACCOUNT
COMBINED STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997
(In Thousands, Except Shares)
<TABLE>
<CAPTION>
ASSETS: SHARES COST MARKET VALUE
- ----------------------------------------------------------------- ------------ ----------- -------------
<S> <C> <C> <C>
Investments in mutual funds at market value:
The Alger American Fund:
Alger American Growth Portfolio ................................ 7,972 $ 340 $ 341
Alger American MidCap Growth Portfolio ......................... 15,349 387 371
Alger American Small Capitalization ............................ 14,656 664 641
Fidelity's Variable Insurance Products Fund (VIP) and
Variable Insurance Products Fund II (VIP II):
VIP Equity-Income Portfolio ................................... 3,415,866 58,785 82,937
VIP Growth Portfolio .......................................... 2,811,788 71,276 104,317
VIP High Income Portfolio ..................................... 1,427,461 16,630 19,385
VIP Money Market Portfolio .................................... 11,497,246 11,497 11,497
VIP Overseas Portfolio ........................................ 1,465,393 24,808 28,136
VIP II Asset Manager Portfolio ................................ 2,031,835 30,324 36,593
VIP II Contrafund Portfolio . ................................. 1,224,811 20,126 24,423
VIP II Index 500 Portfolio .................................... 194,635 18,181 22,264
VIP II Investment Grade Bond Portfolio ........................ 308,377 3,617 3,873
Janus Aspen Series:
Aggressive Growth Portfolio .................................... 12,665 254 260
Growth Portfolio ............................................... 15,402 283 285
International Growth Portfolio ................................. 45,587 854 843
Worldwide Growth Portfolio ..................................... 103,147 2,429 2,413
Neuberger&Berman Advisers Management Trust:
Limited Maturity Bond Portfolio ................................ 78,101 1,096 1,103
Partners Portfolio ............................................. 85,494 1,741 1,761
Northstar Variable Trust:
Northstar Variable Trust Growth Portfolio ...................... 42,105 680 667
Northstar Variable Trust High Yield Bond Portfolio ............. 10,708 58 57
Northstar Variable Trust Income & Growth Portfolio ............. 110,903 1,360 1,442
Northstar Variable Trust International Value Portfolio ......... 38,817 392 392
Northstar Variable Trust Multi-Sector Bond Portfolio ........... 112,673 588 579
OCC Accumulation Trust:
Equity Portfolio ............................................... 5,683 200 208
Global Equity Portfolio ........................................ 21,120 332 303
Managed Portfolio .............................................. 27,124 1,143 1,150
Small Cap Portfolio ............................................ 24,963 662 658
Putnam Variable Trust:
Putnam VT Asia Pacific Growth Fund ............................. 245,347 2,605 2,257
Putnam VT Diversified Income Fund .............................. 176,668 1,905 1,998
Putnam VT Growth and Income Fund ............................... 854,462 20,151 24,198
Putnam VT New Opportunities Fund ............................... 1,032,518 18,525 21,920
Putnam VT Utilities Growth and Income Fund ..................... 161,576 2,194 2,769
Putnam VT Voyager Fund ......................................... 1,363,056 42,390 53,268
-------- --------
Total Investments .............................................. $356,477
Total Assets ................................................. $453,309
========
LIABILITIES AND POLICY OWNERS' EQUITY:
- ------------------------------------------------------------------
Due to ReliaStar Life Insurance Company
for contract charges ........................................... $ 97
Policy Owners' Equity ........................................... 453,212
--------
Total Liabilities and Policy Owners' Equity .................... $453,309
========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
RELIASTAR SELECT*VARIABLE ACCOUNT
COMBINED STATEMENTS OF OPERATIONS AND
CHANGES IN POLICYOWNERS' EQUITY
For the years ended
December 31, 1997, 1996 and 1995
(In Thousands)
<TABLE>
<CAPTION>
TOTAL ALL FUNDS
COMBINED
-----------------------------------------------------------
1997 1996 1995
------------------ ------------------ -----------------
<S> <C> <C> <C>
Net investment income (loss):
Reinvested dividend income ............................... $ 5,580 $ 2,990 $ 2,259
Reinvested capital gains ................................. 14,480 8,110 1,456
Administrative expenses .................................. (2,742) (1,935) (1,186)
--------------- --------------- ---------------
Net investment income (loss) and capital gains ......... 17,318 9,165 2,529
--------------- --------------- ---------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemptions
of fund shares .......................................... 6,393 3,085 1,345
Increase (decrease) in unrealized appreciation
of investments .......................................... 46,873 15,731 27,857
--------------- --------------- ---------------
Net realized and unrealized gains (losses) ............. 53,266 18,816 29,202
--------------- --------------- ---------------
Additions (reductions) from operations ................. 70,584 27,981 31,731
--------------- --------------- ---------------
Policy Owners' transactions:
Net premium payments ..................................... 141,159 108,108 66,506
Transfers from (to) fixed account ........................ 74 95 (401)
Policy loans ............................................. (4,385) (2,266) (1,582)
Loan collateral interest crediting ....................... 292 174 101
Surrenders ............................................... (8,917) (5,080) (3,576)
Death benefits ........................................... (588) (203) (220)
Cost of insurance charges ................................ (26,634) (19,202) (12,860)
Death benefit guarantee charges .......................... (439) (459) (488)
Monthly expense charges .................................. (4,207) (2,932) (1,831)
--------------- --------------- ---------------
Additions (reductions) for Contract Owners'
transactions .......................................... 96,355 78,235 45,649
--------------- --------------- ---------------
Net additions (reductions) for the year ................ 166,939 106,216 77,380
Policy Owners' Equity, beginning of the year .............. 286,273 180,057 102,677
--------------- --------------- ---------------
Policy Owners' Equity, end of the year .................... $ 453,212 $ 286,273 $ 180,057
=============== =============== ===============
Units Outstanding, beginning of the year .................. 15,861,312.070 10,541,629.343 6,899,131.998
Units Outstanding, end of the year ........................ 21,952,826.717 15,861,312.070 10,541,629.343
Net Asset Value per Unit:
Select*Life I ............................................
Select*Life Series 2000 ..................................
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
COMBINED STATEMENTS OF OPERATIONS AND
CHANGES IN POLICYOWNERS' EQUITY, CONTINUED
<TABLE>
<CAPTION>
ALGER AMERICAN ALGER AMERICAN ALGER AMERICAN
GROWTH PORTFOLIO MIDCAP GROWTH PORTFOLIO SMALL CAPITALIZATION PORTFOLIO
- ------------------------------------ ------------------------------------ -------------------------------------
1997 1996 1995 1997 1996 1995 1997 1996 1995
- -------------------- ------ ------ -------------------- ------ ------ -------------------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ -- $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ --
-- -- -- -- -- -- -- -- --
-- -- -- (1) -- -- (1) -- --
------------- ---- ---- ------------- ---- ---- ------------- ---- ----
-- -- -- (1) -- -- (1) -- --
------------- ---- ---- ------------- ---- ---- ------------- ---- ----
-- -- -- -- -- -- (5) -- --
1 -- -- (16) -- -- (23) -- --
------------- ---- ---- ------------- ---- ---- ------------- ---- ----
1 -- -- (16) -- -- (28) -- --
------------- ---- ---- ------------- ---- ---- ------------- ---- ----
1 -- -- (17) -- -- (29) -- --
------------- ---- ---- ------------- ---- ---- ------------- ---- ----
175 -- -- 132 -- -- 235 -- --
175 -- -- 263 -- -- 452 -- --
(1) -- -- (2) -- -- -- -- --
-- -- -- -- -- -- -- -- --
-- -- -- -- -- -- (2) -- --
-- -- -- -- -- -- -- -- --
(6) -- -- (5) -- -- (14) -- --
-- -- -- -- -- -- -- -- --
(1) -- -- (1) -- -- (2) -- --
------------- ---- ---- ------------- ---- ---- ------------- ---- ----
342 -- -- 387 -- -- 669 -- --
------------- ---- ---- ------------- ---- ---- ------------- ---- ----
343 -- -- 370 -- -- 640 -- --
-- -- -- -- -- -- -- -- --
------------- ---- ---- ------------- ---- ---- ------------- ---- ----
$ 343 $ -- -- $ 370 $ -- $ -- $ 640 $ -- $ --
============= ==== ==== ============= ==== ==== ============= ==== ====
-- -- -- -- -- -- -- -- --
34,697.106 -- -- 37,772.926 -- -- 63,628.672 -- --
$ 9.823427 $ -- $ -- $ 9.793978 $ -- $ -- $ 10.039295 $ -- $ --
$ 9.854808 $ -- $ -- $ 9.825275 $ -- $ -- $ 10.071361 $ -- $ --
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
RELIASTAR SELECT*LIFE VARIABLE ACCOUNT
COMBINED STATEMENTS OF OPERATIONS AND
CHANGES IN POLICYOWNERS' EQUITY, CONTINUED
For the years ended December 31, 1997, 1996 and 1995
(In Thousands)
<TABLE>
<CAPTION>
FIDELITY'S VIP
EQUITY-INCOME
PORTFOLIO
---------------------
1997
---------------------
<S> <C>
Net investment income:
Reinvested dividend income .............................................. $ 1,013
Reinvested capital gains . .............................................. 5,096
Administrative expenses ................................................. (551)
-----------------
Net investment income (loss) and capital gains ........................ 5,558
-----------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemptions of fund shares . ............. 1,778
Increase (decrease) in unrealized appreciation of investments . ......... 9,445
-----------------
Net realized and unrealized gains (losses). . ......................... 11,223
-----------------
Additions (reductions) from operations ................................ 16,781
-----------------
Policy Owners' transactions:
Net premium payments. . ................................................. 17,102
Transfers (to) from fixed account ....................................... (1,313)
Policy loans ............................................................ (1,209)
Loan collateral interest crediting ...................................... 76
Surrenders .............................................................. (1,627)
Death benefits .......................................................... (160)
Cost of insurance charges ............................................... (4,240)
Death benefit guarantee charges ......................................... (111)
Monthly expense charges ................................................. (596)
-----------------
Additions for policy owners' transactions . ........................... 7,922
-----------------
Net additions for the year . .......................................... 24,703
Policy Owners' Equity, beginning of the year ............................. 58,207
-----------------
Policy Owners' Equity, end of the year ................................... $ 82,910
=================
Units Outstanding, beginning of the year ................................. 2,622,030.390
Units Outstanding, end of the year ....................................... 3,053,047.193
Net Asset Value per Unit:
Select*Life I ........................................................... $ 35.058961
Select*Life Series 2000 ................................................. $ 21.080180
</TABLE>
[WIDE TABLE CONTINUED]
<TABLE>
<CAPTION>
FIDELITY'S VIP
EQUITY-INCOME PORTFOLIO
---------------------------------------
1996 1995
--------------------- -----------------
<S> <C> <C>
Net investment income:
Reinvested dividend income .............................................. $ 67 $ 798
Reinvested capital gains . .............................................. 1,929 1,292
Administrative expenses ................................................. (458) (276)
----------------- ---------------
Net investment income (loss) and capital gains ........................ 1,538 1,814
----------------- ---------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemptions of fund shares . ............. 812 290
Increase (decrease) in unrealized appreciation of investments . ......... 3,943 7,526
----------------- ---------------
Net realized and unrealized gains (losses). . ......................... 4,755 7,816
----------------- ---------------
Additions (reductions) from operations ................................ 6,293 9,630
----------------- ---------------
Policy Owners' transactions:
Net premium payments. . ................................................. 15,950 11,299
Transfers (to) from fixed account ....................................... (782) 1,140
Policy loans ............................................................ (576) (592)
Loan collateral interest crediting ...................................... 49 26
Surrenders .............................................................. (977) (893)
Death benefits .......................................................... (72) (60)
Cost of insurance charges ............................................... (3,423) (2,545)
Death benefit guarantee charges ......................................... (115) (120)
Monthly expense charges ................................................. (475) (336)
----------------- ---------------
Additions for policy owners' transactions . ........................... 9,579 7,919
----------------- ---------------
Net additions for the year . .......................................... 15,872 17,549
Policy Owners' Equity, beginning of the year ............................. 42,335 24,786
----------------- ---------------
Policy Owners' Equity, end of the year ................................... $ 58,207 $ 42,335
================= ===============
Units Outstanding, beginning of the year ................................. 2,023,713.030 1,463,010.155
Units Outstanding, end of the year ....................................... 2,622,030.390 2,023,713.030
Net Asset Value per Unit:
Select*Life I ........................................................... $ 27.587247 $ --
Select*Life Series 2000 ................................................. $ -- $ --
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
COMBINED STATEMENTS OF OPERATIONS AND
CHANGES IN POLICYOWNERS' EQUITY, CONTINUED
<TABLE>
<CAPTION>
FIDELITY'S VIP FIDELITY'S VIP
GROWTH PORTFOLIO HIGH INCOME PORTFOLIO
------------------------------------------------------------- -------------------------------------------------------
1997 1996 1995 1997 1996 1995
----------------- ----------------- ----------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
$ 526 $ 156 $ 172 $ 1,063 $ 832 $ 514
2,357 3,939 -- 131 163 --
(722) (557) (367) (132) (103) (74)
----------------- ----------------- ----------------- --------------- --------------- ---------------
2,161 3,538 (195) 1,062 892 440
----------------- ----------------- ----------------- --------------- --------------- ---------------
2,098 980 429 301 162 202
14,061 3,837 11,788 1,318 473 906
----------------- ----------------- ----------------- --------------- --------------- ---------------
16,159 4,817 12,217 1,619 635 1,108
----------------- ----------------- ----------------- --------------- --------------- ---------------
18,320 8,355 12,022 2,681 1,527 1,548
----------------- ----------------- ----------------- --------------- --------------- ---------------
21,483 21,247 15,747 5,072 4,359 3,599
(1,822) 329 3,598 (1,001) (267) 63
(1,280) (758) (541) (282) (67) (105)
92 57 34 15 9 6
(2,498) (1,807) (1,219) (397) (286) (217)
(160) (53) (34) (39) (10) (30)
(5,741) (4,894) (3,745) (1,198) (995) (819)
(163) (173) (179) (29) (32) (36)
(876) (739) (536) (140) (121) (99)
----------------- ----------------- ----------------- --------------- --------------- ---------------
9,035 13,209 13,125 2,001 2,590 2,362
----------------- ----------------- ----------------- --------------- --------------- ---------------
27,355 21,564 25,147 4,682 4,117 3,910
76,918 55,354 30,207 14,695 10,578 6,668
----------------- ----------------- ----------------- --------------- --------------- ---------------
$ 104,273 $ 76,918 $ 55,354 $ 19,377 $ 14,695 $ 10,578
================= ================= ================= =============== =============== ===============
3,452,718.980 2,622,289.757 1,761,649.810 773,942.356 577,083.123 397,251.963
3,971,201.581 3,452,718.980 2,622,289.757 916,625.159 773,942.356 577,083.123
$ 36.130923 $ 29.496120 $ 25.923659 $ 29.952917 $ 25.660930 $ 22.685998
$ 19.160956 $ -- $ -- $ 15.800365 $ -- $ --
</TABLE>
[WIDE TABLE CONTINUED]
<TABLE>
<CAPTION>
FIDELITY'S VIP
MONEY MARKET PORTFOLIO
----------------------------------------------------------
1997 1996 1995
-------------- -------------- ---------------
<S> <C> <C>
$ 556 $ 417 $ 254
-- -- --
(67) (68) (41)
-------------- -------------- ---------------
489 349 213
-------------- -------------- ---------------
-- -- --
-- -- --
-------------- -------------- ---------------
-- -- --
-------------- -------------- ---------------
489 349 213
-------------- -------------- ---------------
10,226 7,798 4,498
(5,733) (4,502) (1,606)
(147) (97) (28)
13 7 5
(802) (164) (99)
(43) (1) --
(755) (698) (423)
(8) (8) (10)
(73) (62) (37)
-------------- -------------- ---------------
2,678 2,273 2,300
-------------- -------------- ---------------
3,167 2,622 2,513
8,326 5,704 3,191
-------------- -------------- ---------------
$ 11,493 $ 8,326 $ 5,704
============== ============== ===============
654,425.374 454,516.667 240,089.964
875,038.346 654,425.374 454,516.667
$ 16.628903 $ 15.890521 $ 15.196421
$ 12.269546 $ -- $ --
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
RELIASTAR SELECT*LIFE VARIABLE ACCOUNT
COMBINED STATEMENTS OF OPERATIONS AND
CHANGES IN POLICYOWNERS' EQUITY, CONTINUED
For the years ended December 31, 1997, 1996 and 1995
(In Thousands)
<TABLE>
<CAPTION>
FIDELITY'S VIP
OVERSEAS PORTFOLIO
---------------------
1997
---------------------
<S> <C>
Net investment income:
Reinvested dividend income ............................................ $ 411
Reinvested capital gains . ............................................ 1,630
Administrative expenses ............................................... (220)
-----------------
Net investment income (loss) and capital gains ...................... 1,821
-----------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemptions of fund shares ............. 724
Increase (decrease) in unrealized appreciation of investments ......... 5
-----------------
Net realized and unrealized gains (losses) .......................... 729
-----------------
Additions (reductions) from operations .............................. 2,550
-----------------
Policy Owners' transactions:
Net premium payments .................................................. 7,156
Transfers (to) from fixed account ..................................... (1,515)
Policy loans .......................................................... (379)
Loan collateral interest crediting .................................... 28
Surrenders ............................................................ (690)
Death benefits ........................................................ (18)
Cost of insurance charges ............................................. (1,667)
Death benefit guarantee charges ....................................... (43)
Monthly expense charges ............................................... (253)
-----------------
Additions for policy owners' transactions ........................... 2,619
-----------------
Net additions for the year . ........................................ 5,169
Policy Owners' Equity, beginning of the year ........................... 22,948
-----------------
Policy Owners' Equity, end of the year ................................. $ 28,117
=================
Units Outstanding, beginning of the year ............................... 1,536,316.506
Units Outstanding, end of the year ..................................... 1,733,459.426
Net Asset Value per Unit:
Select*Life I ......................................................... $ 20.066499
Select*Life Series 2000 ............................................... $ 13.964753
</TABLE>
[WIDE TABLE CONTINUED]
<TABLE>
<CAPTION>
FIDELITY'S VIP
OVERSEAS PORTFOLIO
-------------------------------------------
1996 1995
--------------------- ---------------------
<S> <C> <C>
Net investment income:
Reinvested dividend income ............................................ $ 202 $ 48
Reinvested capital gains . ............................................ 223 49
Administrative expenses ............................................... (119) (123)
----------------- -----------------
Net investment income (loss) and capital gains ...................... 306 (26)
----------------- -----------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemptions of fund shares ............. 354 267
Increase (decrease) in unrealized appreciation of investments ......... 1,706 1,073
----------------- -----------------
Net realized and unrealized gains (losses) .......................... 2,060 1,340
----------------- -----------------
Additions (reductions) from operations .............................. 2,366 1,314
----------------- -----------------
Policy Owners' transactions:
Net premium payments .................................................. 6,819 7,140
Transfers (to) from fixed account ..................................... (582) (1,410)
Policy loans .......................................................... (235) (132)
Loan collateral interest crediting .................................... 16 10
Surrenders ............................................................ (493) (357)
Death benefits ........................................................ (17) (27)
Cost of insurance charges ............................................. (1,500) (1,417)
Death benefit guarantee charges ....................................... (47) (55)
Monthly expense charges ............................................... (227) (205)
----------------- -----------------
Additions for policy owners' transactions ........................... 3,734 3,547
----------------- -----------------
Net additions for the year . ........................................ 6,100 4,861
Policy Owners' Equity, beginning of the year ........................... 16,848 11,987
----------------- -----------------
Policy Owners' Equity, end of the year ................................. $ 22,948 $ 16,848
================= =================
Units Outstanding, beginning of the year ............................... 1,229,928.330 900,424.038
Units Outstanding, end of the year ..................................... 1,536,316.506 1,229,928.330
Net Asset Value per Unit:
Select*Life I ......................................................... $ 18.132967 $ 16.146219
Select*Life Series 2000 ............................................... $ -- $ --
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
COMBINED STATEMENTS OF OPERATIONS AND
CHANGES IN POLICYOWNERS' EQUITY, CONTINUED
<TABLE>
<CAPTION>
FIDELITY'S VIP II FIDELITY'S VIP II
ASSET MANAGER PORTFOLIO CONTRAFUND PORTFOLIO
------------------------------------------------------------- --------------------------------------------------
1997 1996 1995 1997 1996 1995
----------------- ----------------- ----------------- ----------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
$ 1,010 $ 840 $ 289 $ 94 $ -- $ 8
2,533 692 -- 247 22 16
(270) (210) (159) (104) (48) (5)
----------------- ----------------- ----------------- ----------------- ------------- ------------
3,273 1,322 130 237 (26) 19
----------------- ----------------- ----------------- ----------------- ------------- ------------
346 169 168 61 25 13
2,222 1,834 2,652 3,113 1,155 29
----------------- ----------------- ----------------- ----------------- ------------- ------------
2,568 2,003 2,820 3,174 1,180 42
----------------- ----------------- ----------------- ----------------- ------------- ------------
5,841 3,325 2,950 3,411 1,154 61
----------------- ----------------- ----------------- ----------------- ------------- ------------
6,096 6,607 7,749 12,617 7,406 1,567
(651) (1,215) 1,972 767 730 466
(371) (209) (126) (66) (21) (2)
38 26 13 1 -- --
(694) (545) (535) (307) (60) (1)
(68) (25) (37) (10) -- --
(2,034) (1,948) (1,841) (1,815) (837) (114)
(56) (61) (65) -- -- --
(264) (262) (242) (344) (155) (21)
----------------- ----------------- ----------------- ----------------- ------------- ------------
1,996 2,368 6,888 10,843 7,063 1,895
----------------- ----------------- ----------------- ----------------- ------------- ------------
7,837 5,693 9,838 14,254 8,217 1,956
28,743 23,050 13,212 10,173 1,956 --
----------------- ----------------- ----------------- ----------------- ------------- ------------
$ 36,580 $ 28,743 $ 23,050 $ 24,427 $ 10,173 $ 1,956
================= ================= ================= ================= ============= ============
1,892,481.312 1,704,151.254 1,132,373.018 686,514.792 160,147.180 --
2,034,040.832 1,892,481.312 1,704,151.254 1,334,244.465 686,514.792 160,147.180
$ 21.274161 $ 17.774921 $ 15.635834 $ 10.304064 $ -- $ --
$ 15.079031 $ -- $ -- $ 18.395120 $ -- $ --
</TABLE>
<TABLE>
<CAPTION>
FIDELITY'S VIP II
INDEX 500 PORTFOLIO
----------------------------------------------------------
1997 1996 1995
-------------- -------------- --------------
<S> <C> <C>
$ 95 $ 33 $ 13
193 84 2
(91) (40) (13)
-------------- -------------- --------------
197 77 2
-------------- -------------- --------------
427 80 40
2,896 793 390
-------------- -------------- --------------
3,323 873 430
-------------- -------------- --------------
3,520 950 432
-------------- -------------- --------------
9,635 3,577 1,343
3,272 1,125 295
(104) (9) (3)
4 1 --
(188) (76) (24)
(3) (4) (12)
(1,225) (447) (178)
(7) (5) (3)
(226) (86) (30)
-------------- -------------- --------------
11,158 4,076 1,388
-------------- -------------- --------------
14,678 5,026 1,820
7,583 2,557 737
-------------- -------------- --------------
$ 22,261 $ 7,583 $ 2,557
============== ============== ==============
441,948.368 181,509.017 70,686.713
981,434.839 441,948.368 181,509.017
$ 23.332252 $ 17.724683 $ 14.548311
$ 22.547720 $ -- $ --
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
RELIASTAR SELECT*LIFE VARIABLE ACCOUNT
COMBINED STATEMENTS OF OPERATIONS AND
CHANGES IN POLICYOWNERS' EQUITY, CONTINUED
For the years ended December 31, 1997, 1996 and 1995
(In Thousands)
<TABLE>
<CAPTION>
FIDELITY'S VIP II
INVESTMENT GRADE BOND
PORTFOLIO
--------------
1997
--------------
<S> <C>
Net investment income:
Reinvested dividend income ........................................ $ 194
Reinvested capital gains .......................................... --
Administrative expenses ........................................... (27)
--------------
Net investment income (loss) and capital gains .................. 167
--------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemptions of fund shares ......... 16
Increase (decrease) in unrealized appreciation of investments 94
--------------
Net realized and unrealized gains (losses) ...................... 110
--------------
Additions (reductions) from operations .......................... 277
--------------
Policy Owners' transactions:
Net premium payments .............................................. 907
Transfers (to) from fixed account ................................. (169)
Policy loans ...................................................... (37)
Loan collateral interest crediting ................................ 2
Surrenders ........................................................ (69)
Death benefits .................................................... (2)
Cost of insurance charges ......................................... (225)
Death benefit guarantee charges ................................... (5)
Monthly expense charges ........................................... (28)
--------------
Additions for policy owners' transactions ....................... 374
--------------
Net additions for the year ...................................... 651
Policy Owners' Equity, beginning of the year ....................... 3,221
--------------
Policy Owners' Equity, end of the year ............................. $ 3,872
================
Units Outstanding, beginning of the year ........................... 247,189.999
Units Outstanding, end of the year ................................. 276,930.635
Net Asset Value per Unit:
Select*Life I ..................................................... $ 15.837535
Select*Life Series 2000 ........................................... $ 12.685026
</TABLE>
[WIDE TABLE CONTINUED FROM ABOVE]
<TABLE>
<CAPTION>
FIDELITY'S VIP II
INVESTMENT GRADE BOND PORTFOLIO
------------------------------------
1996 1995
-------------- --------------
<S> <C> <C>
Net investment income:
Reinvested dividend income ........................................ $ 139 $ 65
Reinvested capital gains .......................................... -- --
Administrative expenses ........................................... (24) (18)
-------------- --------------
Net investment income (loss) and capital gains .................. 115 47
-------------- --------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemptions of fund shares ......... 12 2
Increase (decrease) in unrealized appreciation of investments (51) 273
-------------- --------------
Net realized and unrealized gains (losses) ...................... (39) 275
-------------- --------------
Additions (reductions) from operations .......................... 76 322
-------------- --------------
Policy Owners' transactions:
Net premium payments .............................................. 986 983
Transfers (to) from fixed account ................................. (300) (36)
Policy loans ...................................................... (19) 23
Loan collateral interest crediting ................................ 1 --
Surrenders ........................................................ (47) (53)
Death benefits .................................................... (5) (15)
Cost of insurance charges ......................................... (211) (187)
Death benefit guarantee charges ................................... (6) (7)
Monthly expense charges ........................................... (27) (22)
-------------- --------------
Additions for policy owners' transactions ....................... 372 686
-------------- --------------
Net additions for the year ...................................... 448 1,008
Policy Owners' Equity, beginning of the year ....................... 2,773 1,765
-------------- --------------
Policy Owners' Equity, end of the year ............................. $ 3,221 $ 2,773
================ ================
Units Outstanding, beginning of the year ........................... 214,771.624 153,890.893
Units Outstanding, end of the year ................................. 247,189.999 214,771.624
Net Asset Value per Unit:
Select*Life I ..................................................... $ 14.638773 $ 14.301995
Select*Life Series 2000 ........................................... $ -- $ --
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
[WIDE TABLE CONTINUED FROM ABOVE]
COMBINED STATEMENTS OF OPERATIONS AND
CHANGES IN POLICYOWNERS' EQUITY, CONTINUED
<TABLE>
<CAPTION>
JANUS ASPEN SERIES JANUS ASPEN SERIES JANUS ASPEN SERIES
AGGRESSIVE GROWTH PORTFOLIO GROWTH PORTFOLIO INTERNATIONAL GROWTH PORTFOLIO
- ------------------------------------ ------------------------------------ -------------------------------------
1997 1996 1995 1997 1996 1995 1997 1996 1995
- -------------------- ------ ------ -------------------- ------ ------ -------------------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ -- $ -- $ -- $ 1 $ -- $ -- $ 1 $ -- $ --
-- -- -- -- -- -- -- -- --
-- -- -- -- -- -- (1) -- --
-------------- ---- ---- -------------- ---- ---- ---------------- ---- ----
-- -- -- 1 -- -- -- -- --
-------------- ---- ---- -------------- ---- ---- --------------- ---- ----
(1) -- -- -- -- -- (1) -- --
6 -- -- 2 -- -- (11) -- --
--------------- ---- ---- -------------- ---- ---- --------------- ---- ----
5 -- -- 2 -- -- (12) -- --
--------------- ---- ---- -------------- ---- ---- --------------- ---- ----
5 -- -- 3 -- -- (12) -- --
--------------- ---- ---- -------------- ---- ---- --------------- ---- ----
109 -- -- 157 -- -- 250 -- --
156 -- -- 136 -- -- 623 -- --
1 -- -- (3) -- -- (2) -- --
-- -- -- 1 -- -- -- -- --
-- -- -- -- -- -- -- -- --
-- -- -- -- -- -- -- -- --
(6) -- -- (7) -- -- (13) -- --
-- -- -- -- -- -- -- -- --
(1) -- -- (1) -- -- (2) -- --
---------------- ---- ---- ---------------- ---- ---- ---------------- ---- ----
259 -- -- 283 -- -- 856 -- --
--------------- ---- ---- --------------- ---- ---- --------------- ---- ----
264 -- -- 286 -- -- 844 -- --
-- -- -- -- -- -- -- -- --
--------------- ---- ---- --------------- ---- ---- --------------- ---- ----
$ 264 $ -- $ -- $ 286 $ -- $ -- $ 844 $ -- $ --
=============== ==== ==== =============== ==== ==== =============== ==== ====
-- -- -- -- -- -- -- -- --
24,053.408 -- -- 28,040.816 -- -- 87,549.532 -- --
$ 10.925142 $ -- $ -- $ 10.154694 $ -- $ -- $ 9.594712 $ -- $ --
$ 10.960002 $ -- $ -- $ 10.187114 $ -- $ -- $ 9.625377 $ -- $ --
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
RELIASTAR SELECT*VARIABLE ACCOUNT
COMBINED STATEMENTS OF OPERATIONS AND
CHANGES IN POLICYOWNERS' EQUITY, CONTINUED
For the years ended December 31, 1997, 1996 and 1995
(In Thousands)
<TABLE>
<CAPTION>
JANUS ASPEN SERIES
WORLDWIDE GROWTH PORTFOLIO
-----------------------------------
1997 1996 1995
-------------- ------ ------
<S> <C> <C> <C>
Net investment income:
Reinvested dividend income ............................................ $ 5 $ -- $ --
Reinvested capital gains .............................................. -- -- --
Administrative expenses ............................................... (3) -- --
-------------- ---- ----
Net investment income (loss) and capital gains ...................... 2 -- --
-------------- ---- ----
Realized and unrealized gains (losses):
Net realized gains (losses) on redemptions of fund shares ............. -- -- --
(Decrease) increase in unrealized appreciation of investments ......... (16) -- --
-------------- ---- ----
Net realized and unrealized (losses) gains .......................... (16) -- --
-------------- ---- ----
Additions (reductions) from operations .............................. (14) -- --
-------------- ---- ----
Policy Owners' transactions:
Net premium payments .................................................. 906 -- --
Transfers from (to) fixed account ..................................... 1,582 -- --
Policy loans .......................................................... (4) -- --
Loan collateral interest crediting .................................... -- -- --
Surrenders ............................................................ (1) -- --
Death benefits ........................................................ -- -- --
Cost of insurance charges ............................................. (49) -- --
Death benefit guarantee charges ....................................... -- -- --
Monthly expense charges ............................................... (7) -- --
-------------- ---- ----
Additions for policy owners' transactions ........................... 2,427 -- --
-------------- ---- ----
Net additions for the year .......................................... 2,413 -- --
Policy Owners' Equity, beginning of the year ........................... -- -- --
-------------- ---- ----
Policy Owners' Equity, end of the year ................................. $ 2,413 $ -- $ --
============== ==== ====
Units Outstanding, beginning of the year ............................... -- -- --
Units Outstanding, end of the year ..................................... 245,314.904 -- --
Net Asset Value per Unit:
Select*Life I ......................................................... $ 9.804994 $ -- $ --
Select*Life Series 2000 ............................................... $ 9.836310 $ -- $ --
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
COMBINED STATEMENTS OF OPERATIONS AND
CHANGES IN POLICYOWNERS' EQUITY, CONTINUED
<TABLE>
<CAPTION>
NEUBERGER&BERMAN NEUBERGER&BERMAN
ADVISERS MANAGEMENT TRUST ADVISERS MANAGEMENT TRUST NORTHSTAR VARIABLE TRUST
LIMITED MATURITY BOND PORTFOLIO PARTNERS PORTFOLIO GROWTH PORTFOLIO
--------------------------------- --------------------------------- --------------------------------
1997 1996 1995 1997 1996 1995 1997 1996 1995
-------------- ---- ---- -------------- ---- ---- ------------- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ -- $ -- $ -- $ -- $ -- $ -- $ 1 $ -- $ --
-- -- -- -- -- -- 7 -- --
-- -- -- (2) -- -- (1) -- --
-------------- ---- ---- -------------- ---- ---- ------------- ---- ----
-- -- -- (2) -- -- 7 -- --
-------------- ---- ---- -------------- ---- ---- ------------- ---- ----
-- -- -- 3 -- -- 1 -- --
7 -- -- 20 -- -- (13) -- --
-------------- ---- ---- -------------- ---- ---- ------------- ---- ----
7 -- -- 23 -- -- (12) -- --
-------------- ---- ---- -------------- ---- ---- ------------- ---- ----
7 -- -- 21 -- -- (5) -- --
-------------- ---- ---- -------------- ---- ---- ------------- ---- ----
209 -- -- 484 -- -- 187 -- --
896 -- -- 1,288 -- -- 497 -- --
(2) -- -- (2) -- -- (2) -- --
-- -- -- 1 -- -- -- -- --
-- -- -- (2) -- -- (1) -- --
-- -- -- -- -- -- -- -- --
(6) -- -- (26) -- -- (10) -- --
-- -- -- -- -- -- -- -- --
(1) -- -- (3) -- -- (1) -- --
-------------- ---- ---- -------------- ---- ---- ------------- ---- ----
1,096 -- -- 1,740 -- -- 670 -- --
-------------- ---- ---- -------------- ---- ---- ------------- ---- ----
1,103 -- -- 1,761 -- -- 665 -- --
-- -- -- -- -- -- -- -- --
-------------- ---- ---- -------------- ---- ---- ------------- ---- ----
$ 1,103 $ -- $ -- $ 1,761 $ -- $ -- $ 665 $ -- $ --
============== ==== ==== ============== ==== ==== ============= ==== ====
-- -- -- -- -- -- -- -- --
107,550.694 -- -- 170,599.212 -- -- 65,399.595 -- --
$ 10.221530 $ -- $ -- $ 10.292965 $ -- $ -- $ 10.156905 $ -- $ --
$ 10.254171 $ -- $ -- $ 10.325813 $ -- $ -- $ 10.189337 $ -- $ --
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
RELIASTAR SELECT*LIFE VARIABLE ACCOUNT
COMBINED STATEMENTS OF OPERATIONS AND
CHANGES IN POLICYOWNERS' EQUITY, CONTINUED
For the years ended December 31, 1997, 1996 and 1995
(In Thousands)
<TABLE>
<CAPTION>
NORTHSTAR VARIABLE TRUST
HIGH YIELD BOND PORTFOLIO
---------------------------------
1997 1996 1995
-------------- ---- ----
<S> <C> <C> <C>
Net investment income:
Reinvested dividend income ............................................ $ 1 $ -- $ --
Reinvested capital gains .............................................. -- -- --
Administrative expenses ............................................... -- -- --
-------------- ---- ----
Net investment income (loss) and capital gains ....................... 1 -- --
-------------- ---- ----
Realized and unrealized gains (losses):
Net realized gains (losses) on redemptions of fund shares ............. -- -- --
(Decrease) increase in unrealized appreciation of investments ......... (1) -- --
-------------- ---- ----
Net realized and unrealized (losses) gains .......................... (1) -- --
-------------- ---- ----
Additions (reductions) from operations .............................. -- -- --
-------------- ---- ----
Policy Owners' transactions:
Net premium payments .................................................. 52 -- --
Transfers from (to) fixed account ..................................... 9 -- --
Policy loans .......................................................... (2) -- --
Loan collateral interest crediting .................................... -- -- --
Surrenders ............................................................ -- -- --
Death benefits ........................................................ -- -- --
Cost of insurance charges ............................................. (2) -- --
Death benefit guarantee charges ....................................... -- -- --
Monthly expense charges ............................................... -- -- --
-------------- ---- ----
Additions for policy owners' transactions ............................ 57 -- --
-------------- ---- ----
Net additions for the year ........................................... 57 -- --
Policy Owners' Equity, beginning of the year ........................... -- -- --
-------------- ---- ----
Policy Owners' Equity, end of the year ................................. $ 57 $ -- $ --
============== ==== ====
Units Outstanding, beginning of the year ............................... -- -- --
Units Outstanding, end of the year ..................................... 5,488.146 -- --
Net Asset Value per Unit:
Select*Life I ......................................................... $ 10.373728 $ -- $ --
Select*Life Series 2000 ............................................... $ 10.406855 $ -- $ --
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
COMBINED STATEMENTS OF OPERATIONS AND
CHANGES IN POLICYOWNERS' EQUITY, CONTINUED
<TABLE>
<CAPTION>
NORTHSTAR VARIABLE TRUST NORTHSTAR VARIABLE TRUST NORTHSTAR VARIABLE TRUST
INCOME & GROWTH PORTFOLIO INTERNATIONAL VALUE PORTFOLIO MULTI-SECTOR BOND PORTFOLIO
- -------------------------------------------- --------------------------- --------------------------------------------
1997 1996 1995 1997 1996 1995 1997 1996 1995
- ------------ ------------ ------------ ------------ ---- ---- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 36 $ 13 $ 2 $ 1 $-- $-- $ 34 $ 14 $ 6
9 38 2 -- -- -- 3 5 --
(5) (3) -- -- -- -- (3) (1) (1)
- ------------ ------------ ------------ ------------ ---- ---- ------------ ------------ ------------
40 48 4 1 -- -- 34 18 5
- ------------ ------------ ------------ ------------ ---- ---- ------------ ------------ ------------
3 2 -- -- -- -- 2 1 --
83 (2) 1 -- -- -- (12) 3 --
- ------------ ------------ ------------ ------------ ---- ---- ------------ ------------ ------------
86 -- 1 -- -- -- (10) 4 --
- ------------ ------------ ------------ ------------ ---- ---- ------------ ------------ ------------
126 48 5 1 -- -- 24 22 5
- ------------ ------------ ------------ ------------ ---- ---- ------------ ------------ ------------
826 413 71 144 -- -- 296 124 36
47 68 37 258 -- -- 42 52 77
(11) -- -- -- -- -- (8) -- --
- ------------ ------------ ------------ ------------ ---- ---- ------------ ------------ ------------
(21) -- -- (2) -- -- (13) -- --
(1) -- -- -- -- -- (1) -- --
(96) (39) (5) (8) -- -- (41) (15) (4)
- ------------ ------------ ------------ ------------ ---- ---- ------------ ------------ ------------
(19) (7) (1) (1) -- -- (5) (2) --
- ------------ ------------ ------------ ------------ ---- ---- ------------ ------------ ------------
725 435 102 391 -- -- 270 159 109
- ------------ ------------ ------------ ------------ ---- ---- ------------ ------------ ------------
851 483 107 392 -- -- 294 181 114
590 107 -- -- -- -- 295 114 --
- ------------ ------------ ------------ ------------ ---- ---- ------------ ------------ ------------
$ 1,441 $ 590 $ 107 $ 392 $-- $-- $ 589 $ 295 $ 114
============ ============ ============ ============ ==== ==== ============ ============ ============
42,551.251 8,746.326 -- -- -- -- 22,576.638 9,904.096 --
90,105.753 42,551.251 8,746.326 38,707.007 -- -- 41,273.079 22,576.638 9,904.096
$ 10.383806 $ -- $ -- $ 10.097293 $-- $-- $ 10.240441 $ -- $ --
$ 16.036372 $ -- $ -- $ 10.129526 $-- $-- $ 14.264010 $ -- $ --
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
RELIASTAR SELECT*LIFE VARIABLE ACCOUNT
COMBINED STATEMENTS OF OPERATIONS AND
CHANGES IN POLICYOWNERS' EQUITY, CONTINUED
For the years ended December 31, 1997, 1996 and 1995
(In Thousands)
<TABLE>
<CAPTION>
OCC ACCUMULATION TRUST
EQUITY PORTFOLIO
---------------------------------------
1997 1996 1995
-------------------- ------ -------
<S> <C> <C> <C>
Net investment income:
Reinvested dividend income ............................................ $ -- $ -- $ --
Reinvested capital gains .............................................. -- -- --
Administrative expenses ............................................... -- -- --
-------------- ---- ----
Net investment income (loss) and capital gains ...................... -- -- --
-------------- ---- ----
Realized and unrealized gains (losses):
Net realized gains (losses) on redemptions of fund shares ............. 1 -- --
Increase (decrease) in unrealized appreciation of investments ......... 8 -- --
-------------- ---- ----
Net realized and unrealized gains (losses) .......................... 9 -- --
-------------- ---- ----
Additions (reductions) from operations .............................. 9 -- --
-------------- ---- ----
Policy Owners' transactions:
Net premium payments .................................................. 52 -- --
Transfers from (to) fixed account ..................................... 151 -- --
Policy loans .......................................................... (2) -- --
Loan collateral interest crediting .................................... -- -- --
Surrenders ............................................................ -- -- --
Death benefits ........................................................ -- -- --
Cost of insurance charges ............................................. (2) -- --
Death benefit guarantee charges ....................................... -- -- --
Monthly expense charges ............................................... -- -- --
--------------- ---- ----
Additions for policy owners' transactions ........................... 199 -- --
--------------- ---- ----
Net additions for the year .......................................... 208 -- --
Policy Owners' Equity, beginning of the year ........................... -- -- --
--------------- ---- ----
Policy Owners' Equity, end of the year ................................. $ 208 $ -- $ --
=============== ==== ====
Units Outstanding, beginning of the year ............................... -- -- --
Units Outstanding, end of the year ..................................... 19,312.138 -- --
Net Asset Value per Unit:
Select*Life I ......................................................... $ 10.719660 $ -- $ --
Select*Life Series 2000 ............................................... $ 10.753858 $ -- $ --
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
COMBINED STATEMENTS OF OPERATIONS AND
CHANGES IN POLICYOWNERS' EQUITY, CONTINUED
<TABLE>
<CAPTION>
OCC ACCUMULTION TRUST OCC ACCUMULATION TRUST OCC ACCUMULATION TRUST
GLOBAL EQUITY PORTFOLIO MANAGED PORTFOLIO SMALL CAP PORTFOLIO
- ------------------------------------ ------------------------------------- -------------------------------------
1997 1996 1995 1997 1996 1995 1997 1996 1995
- -------------------- ------ ------ --------------------- ------ ------ -------------------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 1 $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ --
14 -- -- -- -- -- -- -- --
(1) -- -- (1) -- -- (1) -- --
---------------- ---- ---- ----------------- ---- ---- ---------------- ---- ----
14 -- -- (1) -- -- (1) -- --
--------------- ---- ---- ----------------- ---- ---- ---------------- ---- ----
(1) -- -- -- -- -- -- -- --
(29) -- -- 7 -- -- (4) -- --
--------------- ---- ---- ---------------- ---- ---- ---------------- ---- ----
(30) -- -- 7 -- -- (4) -- --
--------------- ---- ---- ---------------- ---- ---- ---------------- ---- ----
(16) -- -- 6 -- -- (5) -- --
--------------- ---- ---- ---------------- ---- ---- ---------------- ---- ----
51 -- -- 357 -- -- 254 -- --
272 -- -- 804 -- -- 420 -- --
1 -- -- (1) -- -- -- -- --
-- -- -- -- -- -- -- -- --
-- -- -- -- -- -- -- -- --
-- -- -- -- -- -- -- -- --
(5) -- -- (16) -- -- (10) -- --
-- -- -- -- -- -- -- -- --
(1) -- -- (1) -- -- (1) -- --
---------------- ---- ---- ----------------- ---- ---- ---------------- ---- ----
318 -- -- 1,143 -- -- 663 -- --
--------------- ---- ---- ---------------- ---- ---- --------------- ---- ----
302 -- -- 1,149 -- -- 658 -- --
-- -- -- -- -- -- -- -- --
--------------- ---- ---- ---------------- ---- ---- --------------- ---- ----
$ 302 $ -- $ -- $ 1,149 $ -- $ -- $ 658 $ -- $ --
=============== ==== ==== ================ ==== ==== =============== ==== ====
-- -- -- -- -- -- -- -- --
31,784.854 -- -- 112,854.997 -- -- 64,284.089 -- --
$ 9.487891 $ -- $ -- $ 10.143089 $ -- $ -- $ 10.220080 $ -- $ --
$ 9.518205 $ -- $ -- $ 10.175476 $ -- $ -- $ 10.252721 $ -- $ --
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
RELIASTAR SELECT*LIFE VARIABLE ACCOUNT
COMBINED STATEMENTS OF OPERATIONS AND
CHANGES IN POLICYOWNERS' EQUITY, CONTINUED
For the years ended December 31, 1997, 1996 and 1995
(In Thousands)
<TABLE>
<CAPTION>
PUTNAM VT
ASIA PACIFIC GROWTH FUND
-------------------------------------------------------
1997 1996 1995
--------------------- ---------------- ----------------
<S> <C> <C> <C>
Net investment income:
Reinvested dividend income ............................................ $ 39 $ 8 $ --
Reinvested capital gains .............................................. -- -- --
Administrative expenses ............................................... (15) (8) (1)
-------------- -------------- -------------
Net investment income (loss) and capital gains ...................... 24 -- (1)
-------------- ------------- -------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemptions of fund shares ............. 4 14 --
(Decrease) increase in unrealized appreciation of investments ......... (410) 54 8
-------------- ------------- ------------
Net realized and unrealized (losses) gains .......................... (406) 68 8
-------------- ------------- ------------
(Reductions) additions from operations .............................. (382) 68 7
-------------- ------------- ------------
Policy Owners' transactions:
Net premium payments .................................................. 1,417 1,193 251
Transfers (to) from Fixed Account ..................................... (122) 204 68
Policy loans .......................................................... (9) (2) --
Loan collateral interest crediting .................................... -- -- --
Surrenders ............................................................ (24) (5) --
Death benefits ........................................................ (2) -- --
Cost of insurance charges ............................................. (194) (130) (22)
Death benefit guarantee charges ....................................... -- -- --
Monthly expense charges ............................................... (34) (21) (3)
---------------- ------------- ------------
Additions for policy owners' transactions ........................... 1,032 1,239 294
---------------- ------------- ------------
Net additions for the year .......................................... 650 1,307 301
Policy Owners' Equity, beginning of the year ........................... 1,608 301 --
---------------- ------------- ------------
Policy Owners' Equity, end of the year ................................. $ 2,258 $ 1,608 $ 301
================ ============= ============
Units Outstanding, beginning of the year ............................... 144,086.091 29,436.771 --
Units Outstanding, end of the year ..................................... 236,947.013 144,086.091 29,436.771
Net Asset Value per Unit:
Select*Life I ......................................................... $ -- $ -- $ --
Select*Life Series 2000 ............................................... $ 9.525464 $ -- $ --
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
COMBINED STATEMENTS OF OPERATIONS AND
CHANGES IN POLICYOWNERS' EQUITY, CONTINUED
<TABLE>
<CAPTION>
PUTNAM VT PUTNAM VT
DIVERSIFIED INCOME FUND GROWTH AND INCOME FUND
- ---------------------------------------------- ------------------------------------------------
1997 1996 1995 1997 1996 1995
- -------------- -------------- -------------- ---------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
$ 86 $ 63 $ 16 $ 283 $ 117 $ 32
14 -- -- 690 204 18
(13) (10) (4) (120) (60) (19)
- -------------- -------------- -------------- ---------------- -------------- --------------
87 53 12 853 261 31
- -------------- -------------- -------------- ---------------- -------------- --------------
16 10 2 123 125 17
6 25 63 2,475 1,043 529
- -------------- -------------- -------------- ---------------- -------------- --------------
22 35 65 2,598 1,168 546
- -------------- -------------- -------------- ---------------- -------------- --------------
109 88 77 3,451 1,429 577
- -------------- -------------- -------------- ---------------- -------------- --------------
785 696 391 10,331 6,047 2,526
(100) (65) 172 1,033 1,274 490
(10) (4) (4) (71) (38) (10)
-- -- -- 3 1 --
(27) (17) (4) (288) (109) (13)
(3) (1) (2) (27) (5) (2)
(130) (92) (55) (1,524) (784) (296)
-- (1) -- (4) (2) (1)
(21) (15) (9) (252) (130) (53)
- -------------- -------------- -------------- ---------------- -------------- --------------
494 501 489 9,201 6,254 2,641
- -------------- -------------- -------------- ---------------- -------------- --------------
603 589 566 12,652 7,683 3,218
1,395 806 240 11,547 3,864 646
- -------------- -------------- -------------- ---------------- -------------- --------------
$ 1,998 $ 1,395 $ 806 $ 24,199 $ 11,547 $ 3,864
============== ============== ============== ================ ============== ==============
112,611.941 70,401.445 25,076.593 691,973.875 282,045.753 64,421.965
150,285.794 112,611.941 70,401.445 1,169,049.817 691,973.875 282,045.753
$ 13.418177 $ 12.597066 $ 11.671211 $ 20.529605 $ 16.669506 $ 13.783753
$ 13.290543 $ -- $ -- $ 20.717931 $ -- $ --
</TABLE>
[WIDE TABLE CONTINUED]
PUTNAM VT
NEW OPPORTUNITIES FUND
- -----------------------------------------------
1997 1996 1995
- ---------------- -------------- -------------
$ -- $ -- $ --
-- -- --
(92) (44) (4)
- ---------------- -------------- -------------
(92) (44) (4)
- ---------------- -------------- -------------
239 99 22
3,361 (86) 120
- ---------------- -------------- -------------
3,600 13 142
- ---------------- -------------- -------------
3,508 (31) 138
- ---------------- -------------- -------------
11,656 8,025 1,072
(862) 1,664 375
(100) (8) (4)
1 -- --
(271) (64) (1)
(8) -- --
(1,770) (804) (80)
-- -- --
(343) (154) (15)
- ---------------- -------------- -------------
8,303 8,659 1,347
- ---------------- -------------- -------------
11,811 8,628 1,485
10,113 1,485 --
- ---------------- -------------- -------------
$ 21,924 $ 10,113 $ 1,485
================ ============== =============
681,263.859 110,223.166 --
1,197,940.702 681,263.859 110,223.166
$ -- $ -- $ --
$ 18.301715 $ -- $ --
The accompanying notes are an integral part of the financial statements.
<PAGE>
RELIASTAR SELECT*VARIABLE ACCOUNT
COMBINED STATEMENTS OF OPERATIONS AND
CHANGES IN POLICYOWNERS' EQUITY, CONTINUED
For the years ended December 31, 1997, 1996 and 1995
(In Thousands)
<TABLE>
<CAPTION>
PUTNAM VT
UTILITIES GROWTH AND INCOME FUND
------------------------------------------------
1997 1996 1995
--------------- --------------- --------------
<S> <C> <C> <C>
Net investment income:
Reinvested dividend income ...................................... $ 61 $ 41 $ 32
Reinvested capital gains ........................................ 84 -- --
Administrative expenses ......................................... (14) (11) (7)
--------------- --------------- --------------
Net investment income (loss) and capital gains ................ 131 30 25
--------------- --------------- --------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemptions of fund shares ....... 40 71 20
Increase (decrease) in unrealized appreciation of investments 338 83 161
--------------- --------------- --------------
Net realized and unrealized gains (losses) .................... 378 154 181
--------------- --------------- --------------
Additions (reductions) from operations ........................ 509 184 206
--------------- --------------- --------------
Policy Owners' transactions:
Net premium payments ............................................ 903 663 505
Transfers from (to) fixed account ............................... 50 (104) (40)
Policy loans .................................................... (17) (36) (1)
Loan collateral interest crediting .............................. 1 1 --
Surrenders ...................................................... (24) (35) (9)
Death benefits .................................................. (3) (4) --
Cost of insurance charges ....................................... (168) (117) (80)
Death benefit guarantee charges ................................. (1) (1) (1)
Monthly expense charges ......................................... (26) (19) (13)
--------------- --------------- --------------
Additions for policy owners' transactions ..................... 715 348 361
--------------- --------------- --------------
Net additions for the year .................................... 1,224 532 567
Policy Owners' Equity, beginning of the year ..................... 1,547 1,015 448
--------------- --------------- --------------
Policy Owners' Equity, end of the year ........................... $ 2,771 $ 1,547 $ 1,015
=============== =============== ==============
Units Outstanding, beginning of the year ......................... 107,970.108 81,748.531 46,807.467
Units Outstanding, end of the year ............................... 152,514.030 107,970.108 81,748.531
Net Asset Value per Unit:
SELECT*LIFE I ................................................... $ 18.375382 $ 14.583970 $ 12.696559
SELECT*LIFE Series 2000 ......................................... $ 18.153329 $ -- $ --
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
COMBINED STATEMENTS OF OPERATIONS AND
CHANGES IN POLICYOWNERS' EQUITY, CONTINUED
<TABLE>
<CAPTION>
PUTNAM VT SELECT CAPITAL SELECT MANAGED
VOYAGER FUND GROWTH FUND, INC. FUND, INC.
- ------------------------------------------------- ----------------------------- ------------------------
1997 1996 1995 1997 1996 1995 1997 1996 1995
- --------------- ---------------- -------------- ------ ------ -------------- ----- ---- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 68 $ 48 $ 10 $ -- $ -- $ -- $ -- $ -- $ --
1,472 811 77 -- -- -- -- -- --
(284) (171) (56) -- -- (6) -- -- (12)
- --------------- ---------------- -------------- ---- ---- -------------- ---- ---- ------------
1,256 688 31 -- -- (6) -- -- (12)
- --------------- ---------------- -------------- ---- ---- -------------- ---- ---- ------------
218 169 28 -- -- (138) -- -- (17)
7,940 921 1,951 -- -- 217 -- -- 170
- --------------- ---------------- -------------- ---- ---- -------------- ---- ---- ------------
8,158 1,090 1,979 -- -- 79 -- -- 153
- --------------- ---------------- -------------- ---- ---- -------------- ---- ---- ------------
9,414 1,778 2,010 -- -- 73 -- -- 141
- --------------- ---------------- -------------- ---- ---- -------------- ---- ---- ------------
20,897 16,198 7,418 -- -- 123 -- -- 188
169 2,466 947 -- -- (2,420) -- -- (4,589)
(263) (187) (31) -- -- (5) -- -- (21)
16 6 -- -- -- 2 -- -- 5
(969) (395) (81) -- -- (45) -- -- (25)
(40) (6) -- -- -- (1) -- -- --
(3,626) (2,268) (902) -- -- (53) -- -- (94)
(12) (8) (3) -- -- (3) -- -- (5)
(683) (430) (189) -- -- (7) -- -- (13)
- --------------- ---------------- -------------- ---- ---- -------------- ---- ---- ------------
15,489 15,376 7,159 -- -- (2,409) -- -- (4,554)
- --------------- ---------------- -------------- ---- ---- -------------- ---- ---- ------------
24,903 17,154 9,169 -- -- (2,336) -- -- (4,413)
28,364 11,210 2,041 -- -- 2,336 -- -- 4,413
- --------------- ---------------- -------------- ---- ---- -------------- ---- ---- -------------
$ 53,267 $ 28,364 $ 11,210 $ -- $ -- $ -- $ -- $ -- $ --
=============== ================ ============== ==== ==== ============== ==== ==== ============
1,750,710.230 781,013.273 199,880.663 -- -- 157,399.779 -- -- 286,168.977
2,601,649.957 1,750,710.230 781,013.273 -- -- -- -- -- --
$ 20.608071 $ 16.420248 $ 14.653218 $ -- $ -- $ -- $ -- $ -- $ --
$ 20.460670 $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ --
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
RELIASTAR SELECT*LIFE VARIABLE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION:
ReliaStar SELECT*LIFE Variable Account (the "Account") is a separate account
of ReliaStar Life Insurance Company ("ReliaStar Life"), a wholly owned
subsidiary of ReliaStar Financial Corp. (formerly The NWNL Companies, Inc.).
The Account is registered as a unit investment trust under the Investment
Company Act of 1940.
Payments received under the polices are allocated to sub-accounts of the
Account, each of which is invested in one of the following funds during the
year:
FIDELITY'S VARIABLE
THE ALGER AMERICAN FUND INSURANCE PRODUCTS FUND
- ------------------------------ ------------------------
Growth Portfolio VIP Equity-Income
MidCap Growth Portfolio Portfolio
Small Capitalization Portfolio VIP Growth Portfolio
VIP High Income
Portfolio
VIP Money Market
Portfolio
VIP Overseas Portfolio
FIDELITY'S VARIABLE
INSURANCE PRODUCTS FUND II
- -------------------------------
VIP II Asset Manager Portfolio
VIP II Contrafund Portfolio
VIP II Index 500 Portfolio
VIP II Investment Grade Bond
Portfolio
NEUBERGER&BERMAN
ADVISERS MANAGEMENT
JANUS ASPEN SERIES TRUST
- ----------------------------------- --------------------
Aggressive Growth Portfolio Limited Maturity
Bond Portfolio
Growth Portfolio Partners Portfolio
International Growth Portfolio
Worldwide Growth Portfolio
NORTHSTAR VARIABLE TRUST OCC ACCUMULATION TRUST
- ------------------------------- -------------------------
Northstar Variable Trust Equity Portfolio
Growth Portfolio Global Equity Portfolio
Northstar Variable Trust Managed Portfolio
High Yield Bond Portfolio Small Capitalization
Northstar Variable Trust Portfolio
Income & Growth Portfolio
Northstar Variable Trust
International Value Portfolio
Northstar Variable Trust
Multi-Sector Bond Portfolio
PUTNAM VARIABLE TRUST
- ----------------------------------
Putnam VT Asia Pacific Growth
Fund
Putnam VT Diversified Income Fund
Fund
Putnam VT Growth and Income
Funds
Putnam VT New Opportunities Fund
Putnam VT Utilities Growth and
Income Fund
Putnam VT Voyager Fund
Fred Alger Management, Inc. is the investment adviser for the three
portfolios of The Alger American Fund and is paid fees for its services by
The Alger American Funds Portfolios. Fidelity Management & Research Company
is the investment adviser for Fidelity Variable Insurance Products Fund (VIP)
and Variable Insurance Products Fund II (VIP II) and is paid for its services
by the VIP and VIP II Portfolios. Janus Capital Corporation is the investment
adviser for the four portfolios of Janus Aspen Series and is paid fees for
its services by the Janus Aspen Series Portfolios. Neuberger&Berman
Management is the investment manager for the two portfolios of the Advisers
Management Trust and is paid fees for its services by the funds. Northstar
Investment Management Corporation, an affiliate of ReliaStar Life, is the
investment adviser for the five Northstar Variable Trust Portfolios and is
paid fees for its services by the Portfolios. OpCap Advisors is the
investment adviser for the four Portfolios of the OCC Accumulation Trust and
is paid fees for its services by the OCC Accumulation Trust Funds. Putnam
Investment Management, Inc. is the investment adviser for Putnam Variable
Trust and is paid fees for its services by Putnam Variable Trust. See the
related
<PAGE>
RELIASTAR SELECT*LIFE VARIABLE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
funds' prospectuses for further information. On May 3, 1993, ReliaStar Life
added the sub-accounts investing in shares of Index 500 Portfolio. On January
1, 1994, sub-accounts investing in Putnam VT Diversified Income Fund, Putnam
VT Growth and Income Fund, Putnam VT Utilities Growth and Income Fund and
Putnam VT Voyager Fund were made available through the SELECT*LIFE Series
2000 policies and on May 2, 1994, sub-accounts investing in Putnam Variable
Trust were made available to SELECT*LIFE I policies. On December 30, 1994,
sub-accounts investing in the Northstar Variable Trust Portfolios were made
available to SELECT*LIFE Series 2000 policies. On April 30, 1995,
sub-accounts investing in the VIP II Contrafund Portfolio, Putnam VT Asia
Pacific Growth Fund and Putnam VT New Opportunities Fund were made available
to SELECT*LIFE Series 2000 policies. On August 8, 1997, sub-accounts
investing in Northstar Variable Trust Growth Portfolio, Northstar Variable
Trust High Yield Bond Portfolio, Northstar Variable Trust International Value
Portfolio, Alger American, Janus Aspen Series, OCC Accumulation Trust, and
Neuberger&Berman Advisers Management Trust were made available to SELECT*LIFE
policies.
2. SIGNIFICANT ACCOUNTING POLICIES:
SECURITIES VALUATION TRANSACTIONS AND RELATED INVESTMENT INCOME:
The market value of investments in the sub-accounts is based on the closing
net asset values of the fund shares held at the end of the year. Investment
transactions are accounted for on the trade date (date the order to purchase
or redeem is executed) and dividend income and capital gain distributions are
recorded on the ex-dividend date. Net realized gains and losses on
redemptions of shares of the funds are determined on the basis of specific
identification of fund share costs.
3. FEDERAL INCOME TAXES:
Under current tax law, the income, gains, and losses from the separate
account investments are not taxable to either the Account or ReliaStar Life.
4. POLICY CHARGES:
Certain charges are made by ReliaStar Life to Policy Owners' Variable
Accumulation Values in the Account in accordance with the terms of the
policies. These charges may include: cost of insurance, computed as set forth
in the policies; a monthly expense charge as set forth in the policies: death
benefit guarantee charge; optional insurance benefit charges based upon the
policy terms for optional benefits; and surrender charges and sales charge
refunds, as set forth in the policies.
5. RELIASTAR LIFE'S SELECT FUNDS:
On May 1, 1995, Select Capital Growth Fund, Inc. ("SCG") and Select Managed
Fund, Inc. ("SMF") were liquidated, and Policy Owners' values in the
sub-accounts investing in SCG and SMF were transferred to the sub-accounts
investing in shares of the VIP Growth Portfolio and VIP II Asset Manager
Portfolio, respectively.
<PAGE>
RELIASTAR SELECT*LIFE VARIABLE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
6. INVESTMENTS:
For the year ended December 31, 1997, investment activity in the funds was
as follows (in thousands):
COST OF PROCEEDS
INVESTING FUND PURCHASES FROM SALES
- --------------------------------------------------------- ---------- ----------
The Alger American Fund:
Alger American Growth Portfolio ........................ $ 357 $ 17
Alger American MidCap Growth Portfolio ................. 449 62
Alger American Small Capitalization .................... 797 128
Fidelity's Variable Insurance Products Fund (VIP) and
Variable Insurance Products Fund II (VIP II):
VIP Equity-Income Portfolio ............................ 17,209 3,724
VIP Growth Portfolio ................................... 14,861 3,669
VIP High Income Portfolio .............................. 4,899 1,841
VIP Money Market Portfolio ............................. 13,314 10,148
VIP Overseas Portfolio ................................. 7,101 2,652
VIP II Asset Manager Portfolio ......................... 7,510 2,241
VIP II Contrafund Portfolio ............................ 11,409 333
VIP II Index 500 Portfolio ............................. 12,251 895
VIP II Investment Grade Bond Portfolio ................. 910 369
Janus Aspen Series:
Aggressive Growth Portfolio ............................ 346 91
Growth Portfolio ....................................... 357 74
International Growth Portfolio ......................... 905 50
Worldwide Growth Portfolio ............................. 2,520 91
Neuberger&Berman Advisers Management Trust:
Limited Maturity Bond Portfolio ........................ 1,151 55
Partners Portfolio ..................................... 1,970 232
Northstar Variable Trust:
Northstar Variable Trust Growth Portfolio .............. 698 19
Northstar Variable Trust High Yield Bond Portfolio ..... 60 2
Northstar Variable Trust Income & Growth Portfolio ..... 810 44
Northstar Variable Trust International Value Portfolio 397 5
Northstar Variable Trust Multi-Sector Bond Portfolio ... 377 83
OCC Accumulation Trust:
Equity Portfolio ....................................... 217 18
Global Equity Portfolio ................................ 364 31
Managed Portfolio ...................................... 1,178 35
Small Cap Portfolio .................................... 700 38
Putnam Variable Trust:
Putnam VT Asia Pacific Growth Fund ..................... 1,312 257
Putnam VT Diversified Income Fund ...................... 784 204
Putnam VT Growth and Income Fund ....................... 10,425 372
Putnam VT New Opportunities Fund ....................... 9,070 864
Putnam VT Utilities Growth and Income Fund ............. 1,010 170
Putnam VT Voyager Fund ................................. 17,414 674
-------- -------
Total .................................................. $143,132 $29,488
======== =======
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholder
ReliaStar Life Insurance Company
(A Wholly Owned Subsidiary of ReliaStar Financial Corp.)
Minneapolis, Minnesota
We have audited the accompanying consolidated balance sheets of ReliaStar
Life Insurance Company and subsidiaries (the Company) as of December 31, 1997
and 1996, and the related statements of income, shareholder's equity, and cash
flows for each of the two years in the period ended December 31, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of ReliaStar
Life Insurance Company and subsidiaries as of December 31, 1997 and 1996 and the
results of their operations and their cash flows for each of the two years in
the period ended December 31, 1997 in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE LLP
Minneapolis, Minnesota
February 3, 1998
<PAGE>
RELIASTAR LIFE INSURANCE COMPANY AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.)
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS)
<TABLE>
<CAPTION>
DECEMBER 31
-------------------------------
1997 1996
-------------- --------------
<S> <C> <C>
ASSETS
Fixed Maturity Securities (Amortized Cost: 1997, $10,655.9;
1996, $8,993.5) ........................................... $ 11,146.7 $ 9,298.2
Equity Securities (Cost: 1997, $21.2; 1996, $32.0) ......... 23.0 36.9
Mortgage Loans on Real Estate .............................. 2,270.7 1,855.4
Real Estate and Leases ..................................... 74.5 77.5
Policy Loans ............................................... 663.3 549.0
Other Invested Assets ...................................... 81.3 60.2
Short-Term Investments ..................................... 130.3 99.3
----------- -----------
Total Investments ......................................... 14,389.8 11,976.5
----------- -----------
Cash ....................................................... 23.5 15.9
Accounts and Notes Receivable .............................. 176.7 136.9
Reinsurance Receivable ..................................... 324.4 199.0
Deferred Policy Acquisition Costs .......................... 1,091.9 1,006.0
Present Value of Future Profits ............................ 480.0 220.2
Property and Equipment, Net ................................ 106.3 118.2
Accrued Investment Income .................................. 200.6 164.7
Other Assets ............................................... 552.3 319.5
Participation Fund Account Assets .......................... 316.6 316.2
Assets Held in Separate Accounts ........................... 3,149.3 2,096.0
----------- -----------
Total Assets .............................................. $ 20,811.4 $ 16,569.1
=========== ===========
LIABILITIES
Future Policy and Contract Benefits ........................ $ 13,329.4 $ 11,332.2
Pending Policy Claims ...................................... 338.2 287.6
Other Policyholder Funds ................................... 286.5 190.6
Notes and Mortgages Payable -- Unaffiliated ................ 252.7 170.8
Note Payable -- Parent ..................................... 100.0 100.0
Income Taxes ............................................... 205.2 135.3
Other Liabilities .......................................... 463.0 338.4
Participation Fund Account Liabilities ..................... 316.6 316.2
Liabilities Related to Separate Accounts ................... 3,143.8 2,090.5
----------- -----------
Total Liabilities ......................................... 18,435.4 14,961.6
----------- -----------
SHAREHOLDER'S EQUITY
Common Stock (Shares Issued: 2.0) .......................... 2.5 2.5
Additional Paid-In Capital ................................. 1,057.4 538.9
Net Unrealized Investment Gains ............................ 226.1 140.8
Retained Earnings .......................................... 1,090.0 925.3
----------- -----------
Total Shareholder's Equity ................................ 2,376.0 1,607.5
----------- -----------
Total Liabilities and Shareholder's Equity ................ $ 20,811.4 $ 16,569.1
=========== ===========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
<PAGE>
RELIASTAR LIFE INSURANCE COMPANY AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.)
CONSOLIDATED STATEMENTS OF INCOME
(IN MILLIONS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
---------------------------
1997 1996
------------ ------------
<S> <C> <C>
REVENUES
Premiums .................................................. $ 884.3 $ 836.9
Net Investment Income ..................................... 1,022.4 937.2
Realized Investment Gains, Net ............................ 11.7 11.2
Policy and Contract Charges ............................... 332.9 245.9
Other Income .............................................. 89.1 81.8
-------- --------
Total .................................................... 2,340.4 2,113.0
-------- --------
BENEFITS AND EXPENSES
Benefits to Policyholders ................................. 1,370.5 1,288.3
Sales and Operating Expenses .............................. 429.0 370.3
Amortization of Deferred Policy Acquisition Costs and
Present Value of Future Profits .......................... 146.1 113.0
Interest Expense .......................................... 19.7 16.2
Dividends and Experience Refunds to Policyholders ......... 24.8 19.7
-------- --------
Total .................................................... 1,990.1 1,807.5
-------- --------
Income before Income Taxes ................................ 350.3 305.5
Income Tax Expense ........................................ 123.8 105.9
-------- --------
Net Income ............................................... $ 226.5 $ 199.6
======== ========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
<PAGE>
RELIASTAR LIFE INSURANCE COMPANY AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.)
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
(IN MILLIONS)
YEAR ENDED DECEMBER 31
--------------------------
1997 1996
----------- ------------
COMMON STOCK
Beginning and End of Year ................ $ 2.5 $ 2.5
--------- ---------
ADDITIONAL PAID-IN CAPITAL
Beginning of Year ........................ 538.9 538.9
Capital Contribution from Parent ......... 518.5 --
--------- ---------
End of Year ............................. 1,057.4 538.9
--------- ---------
NET UNREALIZED INVESTMENT GAINS (LOSSES)
Beginning of Year ........................ 140.8 246.8
Change for the Year ...................... 85.3 (106.0)
--------- ---------
End of Year ............................. 226.1 140.8
--------- ---------
RETAINED EARNINGS
Beginning of Year ........................ 925.3 786.8
Net Income ............................... 226.5 199.6
Dividends to Shareholder ................. (61.8) (61.1)
--------- ---------
End of Year ............................. 1,090.0 925.3
--------- ---------
Total Shareholder's Equity .............. $ 2,376.0 $ 1,607.5
========= =========
The accompanying notes are an integral part of the
consolidated financial statements.
<PAGE>
RELIASTAR LIFE INSURANCE COMPANY AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN MILLIONS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
---------------------------
1997 1996
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net Income ............................................................... $ 226.5 $ 199.6
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities
Interest Credited to Insurance Contracts ................................ 548.9 500.1
Future Policy Benefits .................................................. (396.9) (238.9)
Capitalization of Policy Acquisition Costs .............................. (212.7) (196.2)
Amortization of Deferred Policy Acquisition Costs and
Present Value of Future Profits ....................................... 146.1 113.0
Deferred Income Taxes ................................................... 8.1 22.3
Net Change in Receivables and Payables .................................. 30.1 47.2
Other Assets ............................................................ (94.8) (48.4)
Realized Investment Gains, Net .......................................... (11.7) (11.2)
Other ................................................................... 1.8 1.6
---------- ----------
Net Cash Provided by Operating Activities ................................ 245.4 389.1
---------- ----------
INVESTING ACTIVITIES
Proceeds from Sales of Fixed Maturity Securities ......................... 474.0 204.1
Proceeds from Maturities or Repayment of Fixed Maturity Securities ....... 910.7 882.3
Cost of Fixed Maturity Securities Acquired ............................... (1,431.6) (1,594.7)
Sales of Equity Securities, Net .......................................... 15.9 5.6
Proceeds of Mortgage Loans Sold, Matured or Repaid ....................... 350.4 483.8
Cost of Mortgage Loans Acquired .......................................... (649.4) (407.3)
Sales of Real Estate and Leases, Net ..................................... 14.1 35.7
Policy Loans Issued, Net ................................................. (41.5) (49.2)
Purchases of Other Invested Assets, Net .................................. (10.1) (.4)
Sales (Purchases) of Short-Term Investments, Net ......................... (31.0) 11.4
Cash Acquired from Contribution of Security-Connecticut .................. 10.8 --
---------- ----------
Net Cash Used by Investing Activities .................................... (387.7) (428.7)
---------- ----------
FINANCING ACTIVITIES
Deposits to Insurance Contracts .......................................... 1,429.3 1,173.3
Maturities and Withdrawals from Insurance Contracts ...................... (1,299.5) (1,133.0)
Increase in Notes and Mortgages Payable .................................. 82.1 26.8
Repayment of Notes and Mortgages Payable ................................. (.2) (.6)
Dividends to Shareholder ................................................. (61.8) (54.0)
---------- ----------
Net Cash Provided by Financing Activities ................................ 149.9 12.5
---------- ----------
Increase (Decrease) in Cash .............................................. 7.6 (27.1)
Cash at Beginning of Year ................................................ 15.9 43.0
---------- ----------
Cash at End of Year ...................................................... $ 23.5 $ 15.9
========== ==========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
<PAGE>
RELIASTAR LIFE INSURANCE COMPANY AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. CHANGES IN ACCOUNTING PRINCIPLES
ACCOUNTING FOR TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND
EXTINGUISHMENTS OF LIABILITIES
Effective for transactions occurring on or after January 1, 1997, ReliaStar
Life Insurance Company (ReliaStar Life) and its subsidiaries (the Company)
adopted those provisions of Statement of Financial Accounting Standards (SFAS)
No. 125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities," which have not been deferred by SFAS No. 127,
"Deferral of the Effective Date of Certain Provisions of FASB Statement No.
125." SFAS No. 125 requires a company to recognize the financial and servicing
assets it controls and the liabilities it has incurred and to derecognize
financial assets when control has been surrendered in accordance with the
criteria provided in SFAS No. 125. The adoption of this standard did not have a
significant effect on the financial results of the Company.
ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED
ASSETS TO BE DISPOSED OF
Effective January 1, 1996, the Company adopted SFAS No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of." SFAS No. 121 establishes accounting standards for the impairment of
long-lived assets, certain identifiable intangibles, and goodwill related to
those assets to be held and used and for long-lived assets and certain
identifiable intangibles to be disposed of. This Statement requires that
long-lived assets and certain identifiable intangibles to be held and used by an
entity be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable.
Measurement of an impairment loss for long-lived assets and identifiable
intangibles that an entity expects to hold and use should be based on the fair
value of the asset. Long-lived assets and certain identifiable intangibles to be
disposed of must be reported at the lower of carrying amount or fair value less
cost to sell. The adoption of this standard did not have a significant effect on
the financial results of the Company.
NOTE 2. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
The Company is principally engaged in the business of providing life
insurance and related financial services products. The Company provides and
distributes individual life insurance and annuities; employee benefit products
and services; life and health reinsurance; retirement plans and residential
mortgages. The Company operates primarily in the United States and is authorized
to do business in all 50 states.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of ReliaStar
Life and its subsidiaries and exclude the effects of all material intercompany
transactions. ReliaStar Life is a wholly owned subsidiary of ReliaStar Financial
Corp. (ReliaStar). ReliaStar Life's principal subsidiaries are Northern Life
Insurance Company (Northern), ReliaStar United Services Life Insurance Company
(United Services), ReliaStar Life Insurance Company of New York (RLNY),
Security-Connecticut Life Insurance Company (Security-Connecticut), Lincoln
Security Life Insurance Company (Lincoln Security), ReliaStar Reinsurance Group
(UK), Ltd. and ReliaStar Mortgage Corporation. Effective January 1, 1998,
Lincoln Security merged with and into RLNY.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
<PAGE>
RELIASTAR LIFE INSURANCE COMPANY AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INVESTMENTS
Fixed maturity securities (bonds and redeemable preferred stocks) are
classified as available-for-sale and are valued at fair value.
Equity securities (common stocks and nonredeemable preferred stocks) are
valued at fair value.
Mortgage loans on real estate are carried at amortized cost less an
impairment allowance for estimated uncollectible amounts.
Investment real estate owned directly by the Company is carried at cost
less accumulated depreciation and allowances for estimated losses. Investments
in real estate joint ventures are accounted for using the equity method. Real
estate acquired through foreclosure is carried at the lower of fair value less
estimated costs to sell or cost.
Short-term investments are carried at amortized cost, which approximates
fair value.
Unrealized investment gains and losses of equity and fixed maturity
securities classified as available-for-sale, net of related deferred policy
acquisition costs (DAC), present value of future profits (PVFP), and tax
effects, are accounted for as a direct increase or decrease in shareholder's
equity.
Realized investment gains and losses enter into the determination of net
income. Realized investment gains and losses on sales of securities are
determined on the specific identification method. Write-offs of investments that
decline in value below cost on other than a temporary basis and the changes in
the allowances for mortgage loans and wholly owned real estate are included with
realized investment gains and losses in the Consolidated Statements of Income.
The Company records write-offs or allowances for its investments based upon
an evaluation of specific problem investments. The Company reviews, on a
continual basis, all invested assets (including marketable bonds, private
placements, mortgage loans and real estate investments) to identify investments
where the Company has credit concerns. Investments with credit concerns include
those the Company has identified as problem investments, which are issues
delinquent in a required payment of principal or interest, issues in bankruptcy
or foreclosure and restructured or foreclosed assets. The Company also
identifies investments as potential problem investments, which are investments
where the Company has serious doubts as to the ability of the borrowers to
comply with the present loan repayment terms.
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost, net of accumulated depreciation
of $97.5 million and $90.7 million at December 31, 1997 and 1996, respectively.
The Company provides for depreciation of property and equipment using
straight-line and accelerated methods over the estimated useful lives of the
assets. Buildings are generally depreciated over 35 to 50 years. Depreciation
expense for 1997 and 1996 amounted to $5.6 million and $5.9 million,
respectively.
PARTICIPATION FUND ACCOUNT
On January 3, 1989, the Commissioner of Commerce of the State of Minnesota
approved a Plan of Conversion and Reorganization (the Plan) which provided,
among other things, for the conversion of ReliaStar Life from a combined stock
and mutual life insurance company to a stock life insurance company.
The Plan provided for the establishment of a Participation Fund Account
(PFA) for the benefit of certain participating individual life insurance
policies and annuities issued by ReliaStar Life prior to the effective date of
the Plan. Under the terms of the PFA, the insurance liabilities and assets with
respect to such policies are segregated in the accounting records of ReliaStar
Life to assure the continuation of policyholder dividend practices. Assets and
liabilities of the PFA are presented in accordance with statutory accounting
practices. Earnings derived from the operation of the PFA will inure solely to
the benefit of the policies covered by the PFA and no benefit will inure to the
Company. Accordingly, results
<PAGE>
RELIASTAR LIFE INSURANCE COMPANY AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
of operations for the PFA are excluded from the Company's Consolidated
Statements of Income. In the event that the assets of the PFA are insufficient
to provide the contractual benefits guaranteed by the affected policies,
ReliaStar Life must provide such contractual benefits from its general assets.
SEPARATE ACCOUNTS
The Company operates separate accounts. The assets and liabilities of the
separate accounts are primarily related to variable annuity, variable life and
401(k) contracts and represents policyholder directed funds that are separately
administered. The assets (principally investments) and liabilities (principally
to contractholders) of each account are clearly identifiable and distinguishable
from other assets and liabilities of the Company. Assets are valued at fair
value. Revenues from these separate account contracts consist primarily of
charges for mortality risk and expenses, cost of insurance, contract
administration and surrender charges. Revenue for these products is recognized
when due.
PREMIUM REVENUE AND BENEFITS TO POLICYHOLDERS
RECOGNITION OF TRADITIONAL LIFE, GROUP AND ANNUITY PREMIUM REVENUE AND
BENEFITS TO POLICYHOLDERS -- Traditional life insurance products include those
products with fixed and guaranteed premiums and benefits, and consist
principally of term and whole life insurance policies and certain annuities with
life contingencies (immediate annuities). Life insurance premiums and immediate
annuity premiums are recognized as premium revenue when due. Group insurance
premiums are recognized as premium revenue over the time period to which the
premiums relate. Benefits and expenses are associated with earned premiums so as
to result in recognition of profits over the life of the contracts. This
association is accomplished by means of the provision for liabilities for future
policy benefits and the amortization of DAC and PVFP.
RECOGNITION OF UNIVERSAL LIFE-TYPE CONTRACTS REVENUE AND BENEFITS TO
POLICYHOLDERS -- Universal life-type policies are insurance contracts with terms
that are not fixed and guaranteed. The terms that may be changed could include
one or more of the amounts assessed the policyholder, premiums paid by the
policyholder or interest accrued to policyholder balances. Amounts received as
deposits for such contracts are not reported as premium revenues.
Revenues for universal life-type policies consist of charges assessed
against policy account values for deferred policy loading and the cost of
insurance and policy administration. Policy benefits and claims that are charged
to expense include interest credited to contracts and benefit claims incurred in
the period in excess of related policy account balances.
RECOGNITION OF INVESTMENT CONTRACT REVENUE AND BENEFITS TO POLICYHOLDERS --
Contracts that do not subject the Company to risks arising from policyholder
mortality or morbidity are referred to as investment contracts. Guaranteed
Investment Contracts (GICs) and certain deferred annuities are considered
investment contracts. Amounts received as deposits for such contracts are not
reported as premium revenues.
Revenues for investment contracts consist of investment income and policy
administration charges. Contract benefits that are charged to expense include
benefit claims incurred in the period in excess of related contract balances,
and interest credited to contract balances.
POLICY ACQUISITION COSTS
Those costs of acquiring new business, which vary with and are primarily
related to the production of new business, have been deferred to the extent that
such costs are deemed recoverable. Such costs include commissions, certain costs
of policy issuance and underwriting and certain variable agency expenses.
Costs deferred related to traditional life insurance products are amortized
over the premium paying period of the related policies, in proportion to the
ratio of annual premium revenues to total anticipated
<PAGE>
RELIASTAR LIFE INSURANCE COMPANY AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
premium revenues. Such anticipated premium revenues are estimated using the same
assumptions used for computing liabilities for future policy benefits.
Costs deferred related to universal life-type policies and investment
contracts are amortized over the lives of the policies, in relation to the
present value of estimated gross profits from mortality, investment, surrender
and expense margins.
PRESENT VALUE OF FUTURE PROFITS
The present value of future profits reflects the unamortized value of
acquired insurance business in force and represents the portion of the cost to
acquire that was allocated to the estimated value to receive future cash flows
from insurance contracts existing at the date of acquisition.
An analysis of the PVFP asset account is presented below:
YEAR ENDED DECEMBER 31
-------------------------
1997 1996
----------- -----------
(IN MILLIONS)
Balance, Beginning of Year ........................... $ 220.2 $ 192.0
Acquisition .......................................... 323.6 --
Imputed Interest ..................................... 25.5 16.4
Amortization ......................................... (66.0) (37.5)
Impact of Net Unrealized Investment Gains and Losses . (23.3) 49.3
-------- --------
Balance, End of Year ................................. $ 480.0 $ 220.2
======== ========
Based on current conditions and assumptions as to future events on acquired
policies in force, the Company expects that the net amortization of the December
31, 1997 PVFP balance will be between 6% and 8% in each of the years 1998
through 2002. The interest rates used to determine the amount of imputed
interest on the unamortized PVFP balance ranged from 5% to 8%.
GOODWILL
Goodwill is the excess of the amount paid to acquire a company over the
fair value of the net assets acquired and is amortized on a straight-line basis
over 40 years. The carrying value of goodwill is monitored for indicators of
impairment of value. No events or circumstances were identified which warrant
consideration of impairment or a revised estimate of useful lives.
FUTURE POLICY AND CONTRACT BENEFITS
Liabilities for future policy benefits for traditional life insurance
contracts are calculated using the net level premium method and assumptions as
to investment yields, mortality, withdrawals and dividends. The assumptions are
based on projections of past experience and include provisions for possible
unfavorable deviation. These assumptions are made at the time the contract is
issued or, for purchased contracts, at the date of acquisition.
Liabilities for future policy and contract benefits on universal life-type
and investment contracts are based on the policy account balance.
The liabilities for future policy and contract benefits for group disabled
life reserves and long-term disability reserves are based upon interest rate
assumptions and morbidity and termination rates from published tables, modified
for Company experience.
INCOME TAXES
The provision for income taxes includes amounts currently payable and
deferred income taxes resulting from the cumulative differences in the assets
and liabilities determined on a tax return and financial statement basis.
<PAGE>
RELIASTAR LIFE INSURANCE COMPANY AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The Company files a consolidated tax return with certain of its affiliates.
The method by which the total consolidated federal income tax for each entity is
allocated to each of the companies is subject to a written agreement approved by
the Company's Board of Directors. Allocation is based upon a separate return
calculation such that each company in the consolidated return pays the same tax
or receives the same refunds it would have paid or received had it consistently
filed separate federal income tax returns. Intercompany tax balances are settled
within a reasonable time after filing of the consolidated federal income tax
returns with the Internal Revenue Service.
INTEREST RATE SWAP AGREEMENTS
Interest rate swap agreements are used as hedges for asset/liability
management of adjustable rate and short-term invested assets. The Company does
not enter into any interest rate swap agreements for trading purposes. The
interest rate swap transactions involve the exchange of fixed and floating rate
interest payments without the exchange of underlying principal amounts and do
not contain other optional provisions. The Company utilizes the settlement
method of accounting for its interest rate swap agreements whereby the
difference between amounts paid and amounts received or accrued on interest rate
swap agreements is reflected in net investment income.
The characteristics (notional amount, maturity and payment dates) of the
interest rate swap agreements are similar to the characteristics of the
designated hedged assets. In the event of interest rate swap agreement would
cease to be an effective hedge, the affected interest rate swap agreement would
be recorded as an asset or liability at fair value with changes in fair value
recorded as income or expense. There were no terminations of interest rate swap
agreements during 1997 and 1996. The fair value and changes in fair value of
interest rate swap agreements are not recognized in the consolidated financial
statements.
NOTE 3. ACQUISITION
On July 1, 1997, ReliaStar completed the acquisition of
Security-Connecticut Corporation, which was a holding company with two primary
subsidiaries: Security-Connecticut of Avon, Connecticut and Lincoln Security of
Brewster, New York. Concurrent with the acquisition, ReliaStar contributed all
of the capital stock of Security-Connecticut and Lincoln Security to ReliaStar
Life.
The acquisition was accounted for using the purchase method of accounting.
Therefore, the consolidated financial statements include the accounts of
Security-Connecticut and Lincoln Security since the date of acquisition.
Goodwill of approximately $140 million was recorded.
The following pro forma consolidated financial information was prepared,
assuming the acquisition had taken place at the beginning of each period
presented:
YEAR ENDED DECEMBER 31
-----------------------------
1997 1996
------------- -------------
(IN MILLIONS)
Revenues ........... $ 2,496.9 $ 2,435.6
Net Income ......... 243.7 233.0
The pro forma consolidated financial information is not necessarily
indicative of either the results of operations that would have occurred if this
acquisition had been completed at the beginning of each year presented or of
future operations of the combined companies.
<PAGE>
RELIASTAR LIFE INSURANCE COMPANY AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 4. INVESTMENTS
Investment income summarized by type of investment was as follows:
YEAR ENDED DECEMBER 31
-------------------------
1997 1996
----------- -----------
(IN MILLIONS)
Fixed Maturity Securities ............. $ 787.9 $ 709.4
Equity Securities ..................... 2.2 4.1
Mortgage Loans on Real Estate ......... 197.6 187.6
Real Estate and Leases ................ 16.1 18.0
Policy Loans .......................... 34.3 32.2
Other Invested Assets ................. 3.6 7.3
Short-Term Investments ................ 6.7 5.7
--------- --------
Gross Investment Income .............. 1,048.4 964.3
Investment Expenses ................... 26.0 27.1
--------- --------
Net Investment Income ................ $ 1,022.4 $ 937.2
========= ========
Net pretax realized investment gains (losses) were as follows:
YEAR ENDED DECEMBER 31
----------------------
1997 1996
---------- ---------
(IN MILLIONS)
Net Gains (Losses) on Sales
Fixed Maturity Securities
Gross Gains ........................... $ 10.3 $ 8.7
Gross Losses .......................... (6.4) (5.5)
Equity Securities ...................... 5.1 1.3
Mortgage Loans ......................... -- .1
Foreclosed Real Estate ................. .1 1.8
Real Estate ............................ .6 2.7
Other .................................. 9.8 13.2
------- -------
19.5 22.3
------- -------
Provisions for Losses
Fixed Maturity Securities .............. (3.0) (2.6)
Equity Securities ...................... ( .1) --
Mortgage Loans ......................... (2.4) (3.5)
Foreclosed Real Estate ................. (1.6) (3.5)
Real Estate ............................ ( .7) (1.1)
Other .................................. -- ( .4)
------- -------
(7.8) (11.1)
------- -------
Realized Investment Gains, Net ......... $ 11.7 $ 11.2
======= =======
All fixed maturity securities sales were from the available-for-sale
portfolio.
<PAGE>
RELIASTAR LIFE INSURANCE COMPANY AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 4. INVESTMENTS (CONTINUED)
The amortized cost and fair value of investments in fixed maturity
securities by type of investment were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1997
------------------------------------------------------
GROSS UNREALIZED
AMORTIZED ----------------------
COST GAINS (LOSSES) FAIR VALUE
------------- --------- ---------- -------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
United States Government and Government Agencies
and Authorities .......................................... $ 128.8 $ 9.3 $ (.3) $ 137.8
States, Municipalities and Political Subdivisions ......... 66.8 4.5 (.3) 71.0
Foreign Governments ....................................... 94.8 7.3 (.1) 102.0
Public Utilities .......................................... 895.0 61.4 (.9) 955.5
Corporate Securities ...................................... 6,911.0 327.2 (14.9) 7,223.3
Mortgage-Backed/Structured Finance ........................ 2,554.3 99.8 (2.6) 2,651.5
Redeemable Preferred Stock ................................ 5.2 .4 -- 5.6
---------- ------- ------- ----------
Total .................................................... $ 10,655.9 $ 509.9 $ (19.1) $ 11,146.7
========== ======= ======= ==========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1996
---------------------------------------------------
GROSS UNREALIZED
AMORTIZED ----------------------
COST GAINS (LOSSES) FAIR VALUE
------------ --------- ---------- -----------
(IN MILLIONS)
<S> <C> <C> <C> <C>
United States Government and Government Agencies
and Authorities .......................................... $ 130.8 $ 6.5 $ (.1) $ 137.2
States, Municipalities and Political Subdivisions ......... 56.7 2.8 (.2) 59.3
Foreign Governments ....................................... 82.9 4.2 (.1) 87.0
Public Utilities .......................................... 754.6 42.2 (3.0) 793.8
Corporate Securities ...................................... 5,800.4 223.9 (29.1) 5,995.2
Mortgage-Backed/Structured Finance ........................ 2,166.0 66.0 (8.3) 2,223.7
Redeemable Preferred Stock ................................ 2.1 -- (.1) 2.0
--------- ------- ------- ---------
Total .................................................... $ 8,993.5 $ 345.6 $ (40.9) $ 9,298.2
========= ======= ======= =========
</TABLE>
The amortized cost and fair value of fixed maturity securities by
contractual maturity are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1996
----------------------------- -------------------------
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
------------- ------------- ----------- -----------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Maturing in:
One Year or Less .......................... $ 199.9 $ 200.9 $ 155.8 $ 157.4
One to Five Years ......................... 3,651.3 3,789.2 2,967.6 3,057.0
Five to Ten Years ......................... 3,006.4 3,180.7 2,622.4 2,723.6
Ten Years or Later ........................ 1,244.0 1,324.4 1,055.3 1,108.7
Mortgage-Backed/Structured Finance ......... 2,554.3 2,651.5 2,192.4 2,251.5
---------- ---------- --------- ---------
Total ..................................... $ 10,655.9 $ 11,146.7 $ 8,993.5 $ 9,298.2
========== ========== ========= =========
</TABLE>
<PAGE>
RELIASTAR LIFE INSURANCE COMPANY AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 4. INVESTMENTS (CONTINUED)
The fair values for the marketable bonds are determined based upon the
quoted market prices for bonds actively traded. The fair values for marketable
bonds without an active market are obtained through several commercial pricing
services which provide the estimated fair values. Fair values of privately
placed bonds which are not considered problems are determined utilizing a
matrix-based pricing model. The model considers the current level of risk-free
interest rates, current corporate spreads, the credit quality of the issuer and
cash flow characteristics of the security. Using this data, the model generates
estimated market values which the Company considers reflective of the fair value
of each privately placed bond. Fair values for privately placed bonds which are
considered problems are determined though consideration of factors such as the
net worth of borrower, the value of collateral, the capital structure of the
borrower, the presence of guarantees and the Company's evaluation of the
borrower's ability to compete in their relevant market.
At December 31, 1997, the largest industry concentration in the private
placement portfolio was financial services, where 20.5% of the portfolio was
invested, and the largest industry concentration in the marketable bond
portfolio was mortgage-backed/structured finance where 31.4% of the portfolio
was invested. At December 31, 1997, the largest geographic concentration of
commercial mortgage loans was in the Midwest region of the United States, where
approximately 32.7% of the commercial mortgage loan portfolio was invested.
At December 31, 1997 and 1996, gross unrealized appreciation of equity
securities was $2.3 million and $5.2 million, respectively, and gross unrealized
depreciation was $.5 million and $.3 million, respectively.
Invested assets which were nonincome producing (no income received for the
12 months preceding the balance sheet date) were as follows:
DECEMBER 31
--------------------
1997 1996
--------- --------
(IN MILLIONS)
Fixed Maturity Securities ............. $ 1.5 $ .6
Mortgage Loans on Real Estate ......... 1.1 1.2
Real Estate and Leases ................ 21.5 16.0
------ ------
Total ................................ $ 24.1 $ 17.8
====== ======
Allowances for losses on investments are reflected on the Consolidated
Balance Sheets as a reduction of the related assets and were as follows:
DECEMBER 31
-----------------------
1997 1996
---------- ----------
(IN MILLIONS)
Mortgage Loans ................. $ 10.5 $ 11.7
Foreclosed Real Estate ......... 9.1 11.2
Investment Real Estate ......... 2.8 2.1
Other Invested Assets .......... 1.7 2.6
<PAGE>
RELIASTAR LIFE INSURANCE COMPANY AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 4. INVESTMENTS (CONTINUED)
The total investment in impaired mortgage loans (before allowances for
credit losses), the related allowance for credit losses and the average
investment related to impaired mortgage loans at December 31, 1997 and 1996, and
the interest income recognized on impaired mortgage loans during 1997 and 1996
were as follows:
1997 1996
---------- ----------
(IN MILLIONS)
Impaired Mortgage Loans
Total Investment .................... $ 14.4 $ 22.3
Allowance for Credit Losses ......... 10.5 11.7
Average Investment .................. 1.6 1.9
Interest Income Recognized .......... 1.3 1.4
Increases to the allowance for credit losses account were $2.4 million and
$2.9 million, and the amount of decreases to the allowance account were $3.6
million and $3.6 million for the years ended December 31, 1997 and 1996,
respectively. The Company does not accrue interest income on impaired mortgage
loans when the likelihood of collection is doubtful. Cash receipts for interest
payments are recognized as income in the period received.
Noncash investing activities consisted of the following:
YEAR ENDED DECEMBER 31
-----------------------
1997 1996
---------- ----------
(IN MILLIONS)
Real Estate Assets Acquired Through Foreclosure ......... $ 11.3 $ 14.8
Mortgage Loans Acquired in Sales of Real Estate Assets .. -- 11.2
The components of net unrealized investment gains reported in shareholder's
equity are shown below:
DECEMBER 31
-------------------------
1997 1996
----------- -----------
(IN MILLIONS)
Unrealized Investment Gains .............. $ 489.0 $ 310.5
DAC/PVFP Adjustment ...................... (138.8) (93.8)
Deferred Income Taxes .................... (124.1) (75.9)
-------- --------
Net Unrealized Investment Gains ......... $ 226.1 $ 140.8
======== ========
<PAGE>
RELIASTAR LIFE INSURANCE COMPANY AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 5. INCOME TAXES
The income tax liability as reflected on the Consolidated Balance Sheets
consisted of the following:
DECEMBER 31
-----------------------
1997 1996
---------- ----------
(IN MILLIONS)
Current Income Taxes .......... $ 25.3 $ 7.8
Deferred Income Taxes ......... 179.9 127.5
------- -------
Total ........................ $ 205.2 $ 135.3
======= =======
The provision for income taxes reflected on the Consolidated Statements of
Income consisted of the following:
YEAR ENDED DECEMBER 31
------------------------
1997 1996
----------- ----------
(IN MILLIONS)
Currently Payable ......... $ 115.7 $ 83.6
Deferred .................. 8.1 22.3
-------- -------
Total .................... $ 123.8 $ 105.9
======== =======
The Internal Revenue Service has completed its review of the Company's tax
return for all years through 1993.
Deferred income taxes reflect the impact for financial statement reporting
purposes of "temporary differences" between the financial statement carrying
amounts and tax bases of assets and liabilities. The "temporary differences"
that give rise to the net deferred tax liability relate to the following:
DECEMBER 31
---------------------------
1997 1996
------------ ------------
(IN MILLIONS)
Future Policy and Contract Benefits ........... $ (363.6) $ (265.1)
Investment Write-Offs and Allowances .......... ( 41.4) ( 39.0)
Pension and Postretirement Benefit Plans ...... ( 6.2) ( 9.0)
Employee Benefits ............................. ( 12.8) ( 11.1)
Other ......................................... ( 59.5) ( 52.3)
-------- --------
Gross Deferred Tax Asset ...................... (483.5) (376.5)
-------- --------
Deferred Policy Acquisition Costs ............. 322.9 296.0
Present Value of Future Profits ............... 142.8 92.4
Net Unrealized Investment Gains ............... 95.6 32.1
Property and Equipment ........................ 22.9 28.5
Real Estate Joint Ventures .................... 16.5 12.0
Accrual of Market Discount .................... 9.1 7.9
Policyholder Dividends ........................ 7.9 5.2
Other ......................................... 45.7 29.9
-------- --------
Gross Deferred Tax Liability .................. 663.4 504.0
-------- --------
Net Deferred Tax Liability ................... $ 179.9 $ 127.5
======== ========
Federal income tax regulations allowed certain special deductions for 1983
and prior years which are accumulated in a memorandum tax account designated as
"policyholders' surplus." Generally, this policyholders' surplus account will
become subject to tax at the then current rates only if the
<PAGE>
RELIASTAR LIFE INSURANCE COMPANY AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 5. INCOME TAXES (CONTINUED)
accumulated balance exceeds certain maximum limitations or if certain cash
distributions are deemed to be paid out of the account. At December 31, 1997,
ReliaStar Life and its life insurance subsidiaries have accumulated
approximately $51 million in their separate policyholders' surplus accounts.
Deferred taxes have not been provided on this temporary difference.
There have been no deferred taxes recorded for the unremitted equity in
subsidiaries as the earnings are considered to be permanently invested or will
be remitted only when tax effective to do so.
The difference between the U.S. federal income tax rate and the
consolidated tax provision rate is summarized as follows:
YEAR ENDED DECEMBER 31
-----------------------
1997 1996
---------- ----------
Statutory Tax Rate .......... 35.0% 35.0%
Other ....................... .3 (.3)
---- ----
Effective Tax Rate ......... 35.3% 34.7%
==== ====
Cash paid for federal income taxes was $89.0 million and $74.5 million for
the years ended December 31, 1997 and 1996, respectively.
NOTE 6. NOTES AND MORTGAGES PAYABLE
A summary of notes and mortgages payable is as follows:
DECEMBER 31
-------------------------
1997 1996
----------- -----------
(IN MILLIONS)
Unaffiliated:
Commercial Paper .............................. $ 218.5 $ 146.5
Bank Borrowings ............................... 26.0 15.9
Other Indebtedness -- Current Portion ......... .1 .1
-------- --------
Short-Term Debt .............................. 244.6 162.5
-------- --------
Other Indebtedness -- Noncurrent Portion ...... 8.1 8.3
-------- --------
Total Unaffiliated ............................. $ 252.7 $ 170.8
======== ========
Note Payable to Parent ......................... $ 100.0 $ 100.0
======== ========
At December 31, 1997 and 1996, other indebtedness is primarily mortgage
notes assumed in connection with certain real estate investments with interest
rates ranging from 6.2% to 9.6% at December 31, 1997.
The weighted average interest rate on the commercial paper outstanding at
December 31, 1997 and 1996 was 6.18% and 5.56%, respectively, with maturities
ranging from 2 to 14 days at December 31, 1997. The Company has unsecured
revolving credit facilities with banks totaling $350.0 million for commercial
paper back-up and general corporate purposes. At December 31, 1997, $26.0
million was borrowed under these facilities at an interest rate of 5.8%. At
December 31, 1997, $105.5 million remains available under the revolving credit
facilities. The facilities require an annual commitment fee of 7/100%.
<PAGE>
RELIASTAR LIFE INSURANCE COMPANY AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 6. NOTES AND MORTGAGES PAYABLE (CONTINUED)
Principal payments required in each of the next five years and thereafter
are as follows:
(IN MILLIONS)
-------------
1998 -- $244.6 2001 -- $1.9
1999 -- $ .1 2002 -- $ .1
2000 -- $ 5.8 2003 and thereafter -- $ .2
ReliaStar has loaned $100.0 million to ReliaStar Life under a surplus note.
The original note, dated April 1, 1989, was issued in connection with ReliaStar
Life's demutualization and was used to offset the surplus reduction related to
the cash distribution to the mutual policyholders in the demutualization. This
original note was replaced by a successor surplus note (the 1994 Note) dated
November 1, 1994. The 1994 Note provides, subject to the regulatory constraints
discussed below, that (i) it is a surplus note which will mature on September
15, 2003 with principal due at maturity, but payable without penalty, in whole
or in part before maturity; (ii) interest is at 65|M/8% payable semi-annually;
and (iii) in the event that ReliaStar Life is in default in the payment of any
required interest or principal, ReliaStar Life cannot pay cash dividends on its
capital stock (all of which is owned directly by ReliaStar). The 1994 Note
further provides that there may be no payment of interest or principal without
the express approval of the Minnesota Department of Commerce.
Interest paid on debt was $13.1 million and $9.3 million for the years
ended December 31, 1997 and 1996 respectively.
NOTE 7. EMPLOYEE BENEFIT PLANS
PENSION PLANS
The Company has noncontributory defined benefit retirement plans covering
substantially all employees. The plans, which may be terminated as to accrual of
additional benefits at any time by the Company's Board of Directors, provide
benefits to employees upon retirement.
The benefits under the plans are based on years of service and the
employee's compensation during the last five years of employment. The Company's
policy is to fund the minimum required contribution necessary to meet the
present and future obligations of the plans. Contributions are intended to
provide not only for benefits attributed to service to date but also for those
expected to be earned in the future. Contributions are made to a tax-exempt
trust. Plan assets consist principally of investments in stock mutual funds,
common stock and corporate bonds. As of December 31, 1997, plan assets included
1,232,982 shares of ReliaStar common stock with a fair value of $50.8 million.
The Company and ReliaStar also have unfunded noncontributory defined
benefit plans providing for benefits to employees in excess of limits for
qualified retirement plans and for benefits to nonemployee members of the
ReliaStar Board of Directors.
Net periodic pension expense for ReliaStar and its subsidiaries included
the following components:
YEAR ENDED DECEMBER 31
----------------------
1997 1996
--------- ---------
(IN MILLIONS)
Service Cost -- Benefits Earned During the Year .... $ 4.9 $ 3.8
Interest Cost on Projected Benefit Obligation ...... 15.2 13.6
Actual Return on Plan Assets ....................... (45.2) (23.0)
Net Amortization and Deferral ...................... 30.8 8.4
------- -------
Net Periodic Pension Expense ...................... $ 5.7 $ 2.8
======= =======
<PAGE>
RELIASTAR LIFE INSURANCE COMPANY AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7. EMPLOYEE BENEFIT PLANS (CONTINUED)
The above amounts are for ReliaStar and its subsidiaries as the Company's
portion is not determinable.
The following table sets forth, for ReliaStar and its subsidiaries, the
funded status of the plans as of December 31:
<TABLE>
<CAPTION>
FUNDED PLANS UNFUNDED PLANS
--------------------------- -------------------------
1997 1996 1997 1996
------------ ------------ ----------- -----------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Accumulated Benefit Obligation
Vested ................................................... $ (197.2) $ (164.7) $ (15.0) $ (11.8)
Nonvested ................................................ (4.7) (4.0) (.7) (.5)
Effect of Projected Future Compensation Increases ......... (18.0) (12.7) (1.5) (2.1)
-------- -------- ------- -------
Projected Benefit Obligation .............................. (219.9) (181.4) (17.2) (14.4)
Plan Assets at Fair Value ................................. 229.1 184.9 -- --
-------- -------- ------- -------
Plan Assets Greater (Less) Than Projected Benefit
Obligation ............................................... 9.2 3.5 (17.2) (14.4)
Unrecognized Net Loss and Prior Service Cost .............. 13.4 19.0 5.4 5.3
Unrecognized Transition Asset ............................. (.1) (.4) -- --
Additional Minimum Liability .............................. -- -- (3.9) (3.5)
-------- -------- ------- -------
Net Pension Asset (Liability) ............................ $ 22.5 $ 22.1 $ (15.7) $ (12.6)
======== ======== ======= =======
</TABLE>
The above amounts are for ReliaStar and its subsidiaries as the Company's
portion is not determinable.
The projected benefit obligation was determined using an assumed discount
rate of 7.25% and 7.50% at January 1, 1998 and 1997, respectively. The
weighted-average assumed long-term rate of compensation increase was 4.5%. The
assumed long-term rate of return on plan assets was 10%.
Net periodic pension expense allocated to the Company for all defined
benefit plans for the years ended December 31, 1997 and 1996 was $4.0 million
and $1.8 million, respectively.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company provides certain health care and life insurance benefits to
retired employees (and their eligible dependents). Substantially all of the
Company's employees will become eligible for those benefits if they meet
specified age and service requirements and reach retirement age while working
for the Company, unless the plans are terminated or amended. The postretirement
health care plan is contributory, with retiree contribution levels adjusted
annually; the life insurance plan provides a flat amount of noncontributory life
benefits and optional contributory coverage.
During 1996, the Company amended its plans to reduce the level of benefits
provided to current and future retirees. The amendment resulted in a reduction
of the accumulated postretirement benefit obligation for ReliaStar and its
subsidiaries of approximately $9.9 million. The plan amendment also reduces net
periodic postretirement benefit costs as the unrecognized prior service cost is
amortized.
<PAGE>
RELIASTAR LIFE INSURANCE COMPANY AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7. EMPLOYEE BENEFIT PLANS (CONTINUED)
The Company's postretirement health care plans currently are not funded.
The accumulated postretirement benefit obligation (APBO) and the accrued
postretirement benefit liability were as follows:
DECEMBER 31
---------------------
1997 1996
--------- ---------
(IN MILLIONS)
Retirees .......................................... $ 7.2 $ 7.3
Fully Eligible Active Plan Participants ........... 1.2 .9
Other Active Plan Participants .................... 2.5 1.6
------ ------
Unfunded APBO .................................... 10.9 9.8
Unrecognized Prior Service Cost ................... 7.2 8.9
Unrecognized Gain ................................. 1.7 1.5
------ ------
Accrued Postretirement Benefit Liability ......... $ 19.8 $ 20.2
====== ======
The above amounts are for ReliaStar and its subsidiaries as the Company's
portion is not determinable.
Net periodic postretirement benefit costs consisted of the following
components:
YEAR ENDED DECEMBER 31
----------------------
1997 1996
---------- --------
(IN MILLIONS)
Service Cost -- Benefits Earned .................... $ .4 $ .6
Interest Cost on APBO .............................. .7 1.0
Amortization of Prior Service Cost ................. (1.7) (1.2)
------ ------
Net Periodic Postretirement Expense (Credit) ...... $ (.6) $ .4
====== ======
The above amounts are for ReliaStar and its subsidiaries as the Company's
portion is not determinable.
The assumed health care cost trend rate used in measuring the APBO as of
January 1, 1998 was 6.0%, decreasing gradually to 5.0% in the year 1999 and
thereafter. The assumed health care cost trend rate used in measuring the APBO
as of January 1, 1997 was 7.0%, decreasing gradually to 5.0% in the year 1999
and thereafter. The assumed discount rate used in determining the APBO was 7.25%
and 7.50% at January 1, 1998 and 1997, respectively. The assumed health care
cost trend rate has an effect on the amounts reported. For example, a
one-percentage-point increase in the assumed health care cost trend rate for
each year would increase the APBO as of December 31, 1997 by approximately $.4
million and 1997 net postretirement health care costs by approximately $.1
million.
The net benefit recorded by the Company for postretirement costs was $1.0
million and $.8 million for the years ended December 31, 1997 and 1996,
respectively.
SUCCESS SHARING PLAN AND ESOP
The Success Sharing Plan and ESOP (Success Sharing Plan) was designed to
increase employee ownership and reward employees when certain Company
performance objectives are met. Essentially all employees are eligible to
participate in the Success Sharing Plan, except for employees of Security-
Connecticut and Lincoln Security who will become eligible to participate in the
Success Sharing Plan in 1998. The Success Sharing Plan has both qualified and
nonqualified components. The nonqualified component is equal to 25% of the
annual award and is paid in cash to employees. The qualified component is equal
to 75% of the annual award, with 25% of the annual award contributed to a
deferred investment account and the remaining 50% of the annual award
contributed to the ESOP
<PAGE>
RELIASTAR LIFE INSURANCE COMPANY AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7. EMPLOYEE BENEFIT PLANS (CONTINUED)
portion of the Success Sharing Plan. Costs charged to expense for the Success
Sharing Plan were $6.5 million and $9.4 million in 1997 and 1996, respectively.
STOCK-BASED COMPENSATION
Officers and key employees of the Company participate in stock-based
compensation plans of ReliaStar. ReliaStar applies Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees," and related
interpretations in accounting for its stock-based compensation plans.
Accordingly, the Company has recorded no compensation expense for these
stock-based compensation plans other than for restricted stock and
performance-based awards. Had compensation cost for ReliaStar's stock option
plans been determined based upon the fair value at the grant date for awards
under these plans consistent with the optional accounting methodology prescribed
under SFAS No. 123, ReliaStar's net income would have been reduced by
approximately $4.9 million and $2.3 million in 1997 and 1996, respectively. The
pro forma effect on net income for 1996 is not representative of the pro forma
effect on net income in future years because it does not take into consideration
pro forma compensation expense related to grants prior to 1995. The fair value
of the options granted during 1997 and 1996 is estimated as $9.17 and $4.72,
respectively, on the date of grant using the Black-Scholes option-pricing model
with the following assumptions: dividend yield 1.675% to 2.0%, volatility
ranging from .1868 to .2065, risk-free interest rates of 6.157 for 1997 and 5.1%
to 5.3% for 1996 and an expected life of 2.65 to 5.83 years.
NOTE 8. RELATED PARTY TRANSACTIONS
The Company and ReliaStar have entered into agreements whereby ReliaStar
and the Company provide certain management, administrative, legal, and other
services for each other. The net amounts billed resulted in the Company making
payments of $26.3 million and $28.3 million to ReliaStar in 1997 and 1996,
respectively. The net costs allocated to the Company under these agreements may
not be indicative of costs the Company might incur if these services were not
provided by ReliaStar. During 1997 and 1996, the Company paid cash and non-cash
dividends of $61.8 million and $61.1 million, respectively to ReliaStar.
NOTE 9. SHAREHOLDER'S EQUITY
DIVIDEND RESTRICTIONS
The ability of ReliaStar Life to pay cash dividends to ReliaStar is
restricted by law or subject to approval of the insurance regulatory authorities
of the State of Minnesota. These authorities recognize only statutory accounting
practices for the ability of an insurer to pay dividends to its shareholders.
Under Minnesota insurance law regulating the payment of dividends by
ReliaStar Life, any such payment must be an amount deemed prudent by ReliaStar
Life's Board of Directors and, unless otherwise approved by the Commissioner of
the Minnesota Department of Commerce (the Commissioner), must be paid solely
from the adjusted earned surplus of ReliaStar Life. Adjusted earned surplus
means the earned surplus as determined in accordance with statutory accounting
practices (unassigned funds) less 25% of the amount of such earned surplus which
is attributable to unrealized capital gains. Further, without approval of the
Commissioner, ReliaStar Life may not pay in any calendar year any dividend
which, when combined with other dividends paid within the preceding 12 months,
exceeds the greater of (i) 10% of ReliaStar Life's statutory surplus at the
prior year-end or (ii) 100% of ReliaStar Life's statutory net gain from
operations (not including realized capital gains) for the prior calendar year.
For 1998, the amount of dividends which can be paid by ReliaStar Life without
Commissioner approval is $186.4 million.
STATUTORY SURPLUS AND NET INCOME
Net income of ReliaStar Life and its subsidiaries, as determined in
accordance with statutory accounting practices, was $185.4 million and $150.4
million for 1997 and 1996, respectively. ReliaStar
<PAGE>
RELIASTAR LIFE INSURANCE COMPANY AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 9. SHAREHOLDER'S EQUITY (CONTINUED)
Life's statutory capital and surplus, as determined in accordance with statutory
accounting practices, was $1,031.8 million and $783.4 million at December 31,
1997 and 1996, respectively.
NOTE 10. REINSURANCE
The Company is a member of reinsurance associations established for the
purpose of ceding the excess of life insurance over retention limits. In
addition, the Life and Health Reinsurance Division of ReliaStar Life assumes and
cedes reinsurance on certain life and health risks as its primary business.
Premium amounts received for prospective reinsurance that meet conditions for
reinsurance accounting are recorded as unearned premium revenue and are
amortized into earned premium revenue ratably over the remaining reinsurance
contract period. Reinsurance contracts do not relieve the Company from its
obligations to policyholders. Failure of reinsurers to honor their obligations
could result in losses to the Company; consequently, allowances are established
for amounts deemed uncollectible. The amount of the allowance for uncollectible
reinsurance receivables was immaterial at December 31, 1997 and 1996. The
Company evaluates the financial condition of its reinsurers and monitors
concentrations of credit risk to minimize its exposure to significant losses
from reinsurer insolvencies. The Company's retention limit is $500,000 per life
for individual coverage and, to the extent that ReliaStar Life reinsures life
policies written by Northern and RLNY, the limit is $400,000 per life. For group
coverage and reinsurance assumed, the retention is $500,000 per life with per
occurrence limitations, subject to certain maximums. As of December 31, 1997,
$34.3 billion of life insurance in force was ceded to other companies. The
Company has assumed $43.0 billion of life insurance in force as of December 31,
1997 (including $35.8 billion of reinsurance assumed pertaining to Federal
Employees' Group Life Insurance and Servicemans' Group Life Insurance). Also
included in these amounts are $817.2 million of reinsurance ceded and $7.2
billion of reinsurance assumed by the Life and Health Reinsurance Division of
ReliaStar Life.
The effect of reinsurance on premiums and recoveries is as follows:
YEAR ENDED DECEMBER 31
-------------------------
1997 1996
----------- -----------
(IN MILLIONS)
Direct Premiums ................. $ 675.6 $ 609.9
Reinsurance Assumed ............. 382.6 334.3
Reinsurance Ceded ............... (173.9) (107.3)
-------- --------
Net Premiums ................... $ 884.3 $ 836.9
======== ========
Reinsurance Recoveries ......... $ 114.4 $ 96.3
======== ========
<PAGE>
RELIASTAR LIFE INSURANCE COMPANY AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 11. LIABILITY FOR UNPAID ACCIDENT AND HEALTH CLAIMS AND CLAIM ADJUSTMENT
EXPENSE
The change in the liability for unpaid accident and health claims and claim
adjustment expenses is summarized as follows:
1997 1996
----------- -----------
(IN MILLIONS)
Balance at January 1 .................. $ 383.3 $ 369.4
Less Reinsurance Recoverables ......... 102.6 81.6
-------- --------
Net Balance at January 1 .............. 280.7 287.8
Incurred Related to:
Current Year ......................... 178.6 223.5
Prior Year ........................... (3.0) (5.7)
-------- --------
Total Incurred ........................ 175.6 217.8
Paid Related to:
Current Year ......................... 107.4 127.8
Prior Year ........................... 82.1 97.1
-------- --------
Total Paid ............................ 189.5 224.9
Net Balance at December 31 ............ 266.8 280.7
Plus Reinsurance Recoverables ......... 120.2 102.6
-------- --------
Balance at December 31 ............... $ 387.0 $ 383.3
======== ========
The liability for unpaid accident and health claims and claim adjustment
expenses is included in Future Policy and Contract Benefits on the Consolidated
Balance Sheets.
NOTE 12. COMMITMENTS AND CONTINGENCIES
LITIGATION
The Company is a defendant in a number of lawsuits arising out of the
normal course of the business of the Company, some of which include claims for
punitive damages. In the opinion of management, the ultimate resolution of such
litigation will not result in any material adverse impact to the financial
position of the Company.
JOINT GROUP LIFE AND ANNUITY CONTRACTS
ReliaStar Life has issued certain participating group annuity and group
life insurance contracts jointly with another insurance company. ReliaStar Life
has entered into an arrangement with this insurer whereby ReliaStar Life will
gradually transfer these liabilities (approximately $236.4 million at December
31, 1997) to the other insurer over a ten-year period which commenced in 1993.
The terms of the arrangement specify the interest rate on the liabilities and
provide for a transfer of assets and liabilities scheduled in a manner
consistent with the expected cash flows of the assets allocated to support the
liabilities. A contingent liability exists with respect to the joint obligor's
portion of the contractual liabilities attributable to contributions received
prior to July 1, 1993 ($604.5 million) in the event the joint obligor is unable
to meet its obligations.
FINANCIAL INSTRUMENTS
The Company is a party to financial instruments with off-balance-sheet risk
in the normal course of business to reduce its exposure to fluctuations in
interest rates. These financial instruments include commitments to extend
credit, financial guarantees, futures contracts, interest rate swaps and
interest rate caps. Those instruments involve, to varying degrees, elements of
credit, interest rate or liquidity risk in excess of the amount recognized in
the Consolidated Balance Sheets.
<PAGE>
RELIASTAR LIFE INSURANCE COMPANY AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 12. COMMITMENTS AND CONTINGENCIES (CONTINUED)
The Company's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit and
financial guarantees written is represented by the contractual amount of those
instruments. The Company uses the same credit policies in making commitments and
conditional obligations as it does for on-balance-sheet instruments. For
interest rate swap and interest rate cap transactions, the contract or notional
amounts do not represent exposure to credit loss. The Company's exposure to
credit loss is limited to those swaps and caps where the Company has an
unrealized gain. The Company has no remaining futures contracts as of December
31, 1997.
Unless otherwise noted, the Company does not require collateral or other
security to support financial instruments with credit risk.
<TABLE>
<CAPTION>
DECEMBER 31
-------------------------
1997 1996
----------- -----------
(IN MILLIONS)
<S> <C> <C>
Contract or Notional Amount Financial Instruments Whose Contract
Amounts Represent Credit Risk
Commitments to Extend Credit .................................. $ 156.3 $ 181.6
Financial Guarantees .......................................... 40.0 40.9
Financial Instruments Whose Notional or Contract Amounts Exceed
the Amount of Credit Risk
Futures Contracts ............................................. -- 76.6
Interest Rate Swap Agreements ................................. 1,162.5 1,109.5
Interest Rate Cap Agreements .................................. 510.0 --
</TABLE>
COMMITMENTS TO EXTEND CREDIT -- Commitments to extend credit are legally
binding agreements to lend to a customer. Commitments generally have fixed
expiration dates or other termination clauses and may require payment of a fee.
They generally may be terminated by the Company in the event of deterioration in
the financial condition of the borrower. Since some of the commitments are
expected to expire without being drawn upon, the total commitment amounts do not
necessarily represent future liquidity requirements. The Company evaluates each
customer's creditworthiness on a case-by-case basis.
FINANCIAL GUARANTEES -- Financial guarantees are conditional commitments
issued by the Company guaranteeing the performance of the borrower to a third
party. Those guarantees are primarily issued to support public and private
commercial mortgage borrowing arrangements. The credit risk involved is
essentially the same as that involved in issuing commercial mortgage loans.
ReliaStar Life is a partner in eight real estate joint ventures where it
has guaranteed the repayment of loans of the partnership. As of December 31,
1997, ReliaStar Life had guaranteed repayment of $40.0 million ($40.9 million at
December 31, 1996) of such loans including the portion allocable to the PFA. If
any payment were made under these guarantees, ReliaStar Life would be allowed to
make a claim for repayment from the joint venture, foreclose on the assets of
the joint venture including its real estate investment and, in certain
instances, make a claim against the joint venture's general partner.
For certain of these partnerships, ReliaStar Life has made capital
contributions from time to time to provide the partnerships with sufficient cash
to meet its obligations, including operating expenses, tenant improvements and
debt service. Capital contributions during 1997 and 1996 were insignificant.
Further capital contributions are likely to be required in future periods for
certain of the joint ventures with the guarantees. The Company cannot predict
the amount of such future contributions.
INTEREST RATE SWAP AGREEMENTS -- The Company enters into interest rate swap
agreements to manage interest rate exposure. The primary reason for the interest
rate swap agreements is to extend the duration of adjustable rate investments.
Interest rate swap transactions generally involve the exchange of fixed and
floating rate interest payment obligations without the exchange of the
underlying principal
<PAGE>
RELIASTAR LIFE INSURANCE COMPANY AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 12. COMMITMENTS AND CONTINGENCIES (CONTINUED)
amounts. Changes in market interest rates impact income from adjustable rate
investments and have an opposite (and approximately offsetting) effect on the
reported income from the swap portfolio. The risks under interest rate swap
agreements are generally similar to those of futures contracts. Notional
principal amounts are often used to express the volume of these transactions but
do not represent the much smaller amounts potentially subject to credit risk.
The amount subject to credit risk is approximately equal to the unrealized gain
on the agreements which was $13.3 million at December 31, 1997.
INTEREST RATE CAP AGREEMENTS -- The Company has entered into interest rate
cap agreements as a hedge against the effects of rising interest rates on the
invested assets supporting a portfolio of single premium deferred annuity
contracts. Notional principal amounts are often used to express the volume of
these transactions but do not represent the much smaller amounts potentially
subject to credit risk. The amount subject to credit risk is approximately equal
to the unrealized gain on the agreements which was $.2 million at December 31,
1997.
FUTURES CONTRACTS -- Futures contracts are contracts for delayed delivery
of securities or money market instruments in which the seller agrees to make
delivery at a specified future date of a specified instrument, at a specified
price or yield. These contracts are entered into to manage interest rate risk as
part of the Company's asset and liability management. Risks arise from the
movements in securities values and interest rates.
During 1997, the Company closed out of all of its futures contracts and
immediately entered into zero coupon interest rate swaps with similar
maturities. The deferred gain on the closed futures contracts was approximately
$22 million, which is being amortized into income over the life of the
liabilities whose cash flows they supported.
LEASES
The Company has operating leases for office space and certain computer
processing and other equipment. Rental expense for these items was $16.7 million
and $13.9 million for 1997 and 1996, respectively.
Future minimum aggregate rental commitments at December 31, 1997 for
operating leases were as follows:
(IN MILLIONS)
- ---------------------------------------------------
1998 -- $11.5 2001 -- $ 7.3
1999 -- $ 9.5 2002 -- $ 4.5
2000 -- $ 8.0 2003 and thereafter -- $13.7
NOTE 13. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosures are made in accordance with the requirements of
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments." SFAS No.
107 requires disclosure of fair value information about financial instruments,
whether or not recognized in the balance sheet, for which it is practicable to
estimate that value. In cases where quoted market prices are not available, fair
values are based on estimates using present value or other valuation techniques.
Those techniques are significantly affected by the assumptions used, including
the discount rate and estimates of future cash flows. In that regard, the
derived fair value estimates, in many cases, could not be realized in immediate
settlement of the instrument.
SFAS No. 107 excludes certain financial instruments and all nonfinancial
instruments from its disclosure requirements. Accordingly, the aggregate fair
value amounts presented do not represent the underlying value of the Company.
The fair value estimates presented herein are based on pertinent
information available to management as of December 31, 1997 and 1996. Although
management is not aware of any factors that would
<PAGE>
RELIASTAR LIFE INSURANCE COMPANY AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 13. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
significantly affect the estimated fair value amounts, such amounts have not
been comprehensively revalued for purposes of these financial statements since
that date; therefore, current estimates of fair value may differ significantly
from the amounts presented herein.
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments:
FIXED MATURITY SECURITIES -- The estimated fair value disclosures for debt
securities satisfy the fair value disclosure requirements of SFAS No. 107 (see
Note 4).
EQUITY SECURITIES -- Fair value equals carrying value as these securities
are carried at quoted market value.
MORTGAGE LOANS ON REAL ESTATE -- The fair values for mortgage loans on real
estate are estimated using discounted cash flow analyses, using interest rates
currently being offered in the marketplace for similar loans to borrowers with
similar credit ratings. Loans with similar characteristics are aggregated for
purposes of the calculations.
CASH, SHORT-TERM INVESTMENTS AND POLICY LOANS -- The carrying amounts for
these assets approximate the assets' fair values.
OTHER FINANCIAL INSTRUMENTS REPORTED AS ASSETS -- The carrying amounts for
these financial instruments (primarily premiums and other accounts receivable
and accrued investment income) approximate those assets' fair values.
INVESTMENT CONTRACT LIABILITIES -- The fair value for deferred annuities
was estimated to be the amount payable on demand at the reporting date, as those
investment contracts have no defined maturity and are similar to a deposit
liability. The amount payable at the reporting date was calculated as the
account balance less applicable surrender charges.
The fair value for GICs was estimated using discounted cash flow analyses.
The discount rate used was based upon current industry offering rates on GICs of
similar durations.
The fair values for supplementary contracts without life contingencies and
immediate annuities were estimated using discounted cash flow analyses. The
discount rate was based upon treasury rates plus a pricing margin.
The carrying amounts reported for other investment contracts, which
includes participating pension contracts and retirement plan deposits,
approximate those liabilities' fair value.
CLAIM AND OTHER DEPOSIT FUNDS -- The carrying amounts for claim and other
deposit funds approximate the liabilities' fair value.
NOTES AND MORTGAGES PAYABLE -- The fair value for publicly traded debt was
based upon quoted market prices. For other debt obligations, discounted cash
flow analyses were used. The discount rate was based upon the Company's
estimated current incremental borrowing rates.
OTHER FINANCIAL INSTRUMENTS REPORTED AS LIABILITIES -- The carrying amounts
for other financial instruments (primarily normal payables of a short-term
nature) approximate those liabilities' fair values.
FINANCIAL GUARANTEES -- The fair values for financial guarantees were
estimated using discounted cash flow analyses based upon the expected future net
amounts to be expended. The estimated net amounts to be expended were determined
based on projected cash flows and a valuation of the underlying collateral.
INTEREST RATE SWAPS -- The fair value for interest rate swaps was estimated
using discounted cash flow analyses. The discount rate was based upon rates
currently being offered for similar interest rate swaps available from similar
counterparties.
<PAGE>
RELIASTAR LIFE INSURANCE COMPANY AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 13. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The carrying amounts and estimated fair values of the Company's financial
instruments as of December 31, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1997 1996
------------------------------- -----------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------------- -------------- ------------- -------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Financial Instruments Recorded as Assets
Fixed Maturity Securities ................................... $ 11,146.7 $ 11,146.7 $ 9,298.2 $ 9,298.2
Equity Securities ........................................... 23.0 23.0 36.9 36.9
Mortgage Loans on Real Estate
Commercial ................................................. 1,594.9 1,679.1 1,359.6 1,391.9
Residential and Other ...................................... 675.8 687.3 495.8 507.4
Policy Loans ................................................ 663.3 663.3 549.0 549.0
Cash and Short-Term Investments ............................. 153.8 153.8 115.2 115.2
Other Financial Instruments Recorded as Assets .............. 704.3 704.3 534.7 534.7
Financial Instruments Recorded as Liabilities
Investment Contracts
Deferred Annuities ........................................ (7,753.1) (7,321.6) (6,970.9) (6,547.9)
GICs ...................................................... (62.5) (90.0) (74.7) (102.0)
Supplementary Contracts and
Immediate Annuities ...................................... (337.1) (330.5) (134.5) (131.4)
Other Investment Contracts ................................ (454.9) (454.9) (488.3) (488.3)
Claim and Other Deposit Funds ............................... (148.1) (148.1) (123.6) (123.6)
Notes and Mortgages Payable ................................. (251.9) (252.4) (169.8) (170.4)
Other Financial Instruments Recorded as Liabilities ......... (285.4) (285.4) (229.0) (229.0)
Off-Balance Sheet Financial Instruments
Financial Guarantees ........................................ -- (3.5) -- (4.5)
Interest Rate Swaps ......................................... -- 13.3 -- 10.8
</TABLE>
Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial instrument.
These estimates do not reflect any premium or discount that could result from
offering for sale at one time the Company's holdings of a particular financial
instrument. Because no market exists for a significant portion of the Company's
financial instruments, fair value estimates are based on judgments regarding
future expected loss experience, current economic conditions, risk
characteristics of various financial instruments and other factors. These
estimates are subjective in nature and involve uncertainties and matters of
significant judgment and, therefore, cannot be determined with precision.
Changes in assumptions could significantly affect the estimates.
Fair value estimates are based on existing on and off-balance sheet
financial instruments without attempting to estimate the value of anticipated
future business and the value of assets and liabilities that are not considered
financial instruments. In addition, the tax ramifications related to the
realization of the unrealized gains and losses can have a significant effect on
fair value estimates and have not been considered in the estimates.
<PAGE>
APPENDIX A
THE FIXED ACCOUNT
The Fixed Account consists of all of our assets other than those in our
separate accounts. We have complete ownership and control of all of the assets
of the Fixed Account.
Because of exemptions and exclusions contained in the Securities Act of
1933 and the Investment Company Act of 1940, the Fixed Account has not been
registered under these acts. Neither the Fixed Account nor any interest in it is
subject to the provisions of these acts and as a result the SEC has not reviewed
the disclosures in this Prospectus relating to the Fixed Account. However,
disclosures relating to the Fixed Account are subject to generally applicable
provisions of the federal securities laws relating to the accuracy and
completeness of statements made in prospectuses.
We guarantee both principal and interest on amounts credited to the Fixed
Account. We credit interest at an effective annual rate of at least 4%,
independent of the investment experience of the Fixed Account. From time to
time, we may guarantee interest at a rate higher than 4%.
ANY INTEREST CREDITED TO AMOUNTS ALLOCATED TO THE FIXED ACCOUNT IN EXCESS
OF 4% PER YEAR WILL BE DETERMINED AT OUR SOLE DISCRETION. YOU ASSUME THE RISK
THAT INTEREST CREDITED TO THE FIXED ACCOUNT MAY NOT EXCEED THE MINIMUM GUARANTEE
OF 4% FOR A GIVEN YEAR.
We do not use a specific formula for determining excess interest credits.
However, we consider the following:
* General economic trends,
* Rates of return currently available on our investments,
* Rates of return anticipated in our investments, regulatory and tax
factors, and
* Competitive factors.
We are not aware of any statutory limitations to the maximum amount of
interest we may credit and our Board of Directors has not set any limitations.
The Fixed Accumulation Value of the Policy is the sum of the Net Premiums
credited to it in the Fixed Account. It is increased by transfers and Loan
Amounts from the Variable Account, and interest credits. It is decreased by
Monthly Deductions and partial withdrawals taken from it in the Fixed Account
and transfers to the Variable Account. The Fixed Accumulation Value will be
calculated at least monthly on the monthly anniversary date.
You may transfer all or part of your Fixed Accumulation Value to the
Sub-Accounts of the Variable Account, subject to the following transfer
limitations:
* The request to transfer must be postmarked no more than 30 days before
the Policy Anniversary and no later than 30 days after the Policy
Anniversary. Only one transfer is allowed during this period.
* The Fixed Accumulation Value after the transfer must be at least equal
to the Loan Amount.
* No more than 50% of the Fixed Accumulation Value (minus any Loan Amount)
may be transferred unless the balance, after the transfer, would be less
than $1,000. If the balance would be less than $1,000, the full Fixed
Accumulation Value (minus any Loan Amount) may be transferred.
* You must transfer at least:
-- $500, or
-- the total Fixed Accumulation Value (minus any Loan Amount) if less
than $500.
We make the Monthly Deduction from your Fixed Accumulation Value in
proportion to the total Accumulation Value of the Policy.
The Surrender Charge described in the Prospectus applies to the total
Accumulation Value, which includes the Fixed Accumulation Value. If the Owner
surrenders the Policy for its Cash Surrender Value, the Fixed Accumulation Value
will be reduced by any applicable Surrender Charge, any Loan Amount and unpaid
Monthly Deductions applicable to the Fixed Account.
<PAGE>
APPENDIX B
CALCULATION OF ACCUMULATION VALUE
The Accumulation Value of the Policy is equal to the sum of the Variable
Accumulation Value plus the Fixed Accumulation Value.
VARIABLE ACCUMULATION VALUE
The Variable Accumulation Value is the total of your values in each
Sub-Account. The value for each Sub-Account is equal to:
1 multiplied by 2, where:
1
Is your current number of Accumulation Units (described below).
2
Is the current Unit Value (described below).
The Variable Accumulation Value will vary from Valuation Date to Valuation
Date (described below) reflecting changes in 1 and 2 above.
ACCUMULATION UNITS. When transactions are made which affect the Variable
Accumulation Value, dollar amounts are converted to Accumulation Units. The
number of Accumulation Units for a transaction is found by dividing the dollar
amount of the transaction by the current Unit Value.
The number of Accumulation Units for a Sub-Account increases when:
* Net Premiums are credited to that Sub-Account; or
* Transfers from the Fixed Account or other Sub-Accounts are credited to
that Sub-Account.
The number of Accumulation Units for a Sub-Account decreases when:
* You take out a Policy loan from that Sub-Account;
* You take a partial withdrawal from that Sub-Account;
* We take a portion of the Monthly Deduction from that Sub-Account; or
* Transfers are made from that Sub-Account to the Fixed Account or other
Sub-Accounts.
UNIT VALUE. The Unit Value for a Sub-Account on any Valuation Date is equal
to the previous Unit Value times the Net Investment Factor for that Sub-Account
(described below) for the Valuation Period (described below) ending on that
Valuation Date. The Unit Value was initially set at $10 when the Sub-Account
first purchased Fund shares.
NET INVESTMENT FACTOR. The Net Investment Factor is a number that reflects
charges to the Policy and the investment performance during a Valuation Period
of the Fund in which a Sub-Account is invested. If the Net Investment Factor is
greater than one, the Unit Value is increased. If the Net Investment Factor is
less than one, the Unit Value is decreased. The Net Investment Factor for a
Sub-Account is determined by dividing 1 by 2.
(1 / 2), where:
1
Is the result of:
* The net asset value per share of the Fund shares in which the Sub-Account
invests, determined at the end of the current Valuation Period;
* Plus the per share amount of any dividend or capital gain distributions
made on the Fund shares in which the Sub-Account invests during the
current Valuation Period;
* Plus or minus a per share charge or credit for any taxes reserved which we
determine has resulted from the investment operations of the Sub-Account
and to be applicable to the Policy.
<PAGE>
2 Is the result of:
* The net asset value per share of the Fund shares held in the Sub-Account,
determined at the end of the last prior Valuation Period;
* Plus or minus a per share charge or credit for any taxes reserved for
during the last prior Valuation Period which we determine resulted from
the investment operations of the Sub-Account and was applicable to the
Policy.
VALUATION DATE; VALUATION PERIOD. A Valuation Date is each day the New York
Stock Exchange is open for business except for a day that a Sub-Account's
corresponding Fund does not value its shares. A Valuation Period is the period
between two successive Valuation Dates, commencing at the close of business of a
Valuation Date and ending at the close of business on the next Valuation Date.
FIXED ACCUMULATION VALUE
The Fixed Accumulation Value on the Policy Date is your Net Premium
credited to the Fixed Account on that date minus the Monthly Deduction
applicable to the Fixed Accumulation Value for the first Policy Month.
After the Policy Date, the Fixed Accumulation Value is calculated as:
1 + 2 + 3 + 4 - 5 - 6, where:
1
Is the Fixed Accumulation Value on the preceding Monthly Anniversary, plus
interest from the Monthly Anniversary to the date of the calculation.
2
Is the total of your Net Premiums credited to the Fixed Account since the
preceding Monthly Anniversary, plus interest from the date premiums are credited
to the date of the calculation.
3
Is the total of your transfers from the Variable Account to the Fixed Account
since the preceding Monthly Anniversary, plus interest from the date of transfer
to the date of the calculation.
4
Is the total of your Loan Amount transferred from the Variable Account since the
preceding Monthly Anniversary.
5
Is the total of your transfers to the Variable Account from the Fixed Account
since the preceding Monthly Anniversary, plus interest from the date of transfer
to the date of the calculation.
6
Is the total of your partial withdrawals from the Fixed Account since the
preceding Monthly Anniversary, plus interest from the date of withdrawal to the
date of the calculation.
If the date of the calculation is a Monthly Anniversary, we also reduce the
Fixed Accumulation Value by the applicable Monthly Deduction for the Policy
Month following the Monthly Anniversary.
The minimum interest rate applied in the calculation of the Fixed
Accumulation Value is an effective annual rate of 4%. Interest in excess of the
minimum rate may be applied in the calculation of your Fixed Accumulation Value
in a manner which our Board of Directors determines.
<PAGE>
APPENDIX C
ILLUSTRATION OF ACCUMULATION VALUES, SURRENDER CHARGES,
CASH SURRENDER VALUES, AND DEATH BENEFITS
The following tables illustrate how the Accumulation Values, Cash Surrender
Values, and Death Benefits of a Policy may change with the investment experience
of the Variable Account. The tables show how the Accumulation Values, Cash
Surrender Values, and Death Benefits of a Policy issued to two hypothetical
Joint Insureds (who pay the given Planned Periodic Premiums annually) would vary
over time if the investment return of the assets held in the Funds were a
uniform, gross, after-tax, annual rate of 0 percent, 6 percent or 12 percent.
The tables on pages C-3 through C-8 illustrate a Policy issued to a male
Joint Insured Age 55 and a female Joint Insured Age 55, in a standard Rate Class
and qualifying for non-tobacco rates. The Accumulation Values, Cash Surrender
Values, and Death Benefits would be lower if either Joint Insured were in a
substandard Rate Class or did not qualify for the non-tobacco rates because the
cost of insurance would be increased. The Accumulation Values, Cash Surrender
Values and Death Benefits would be different from those shown if the gross
annual investment returns averaged 0 percent, 6 percent, and 12 percent over a
period of years, but fluctuated above and below those averages for individual
Policy Years.
Within the tables, the second and fifth columns illustrate the Accumulation
Value of the Policy over the designated period. The Accumulation Value is the
total amount that a Policy provides for investment at any time. The third and
sixth columns illustrate the Cash Surrender Value of a Policy over the
designated period. The Cash Surrender Value is equal to the Accumulation Value
less any Surrender Charges, Loan Amount (assumed to be zero in these
illustrations) and unpaid Monthly Deductions (also assumed to be zero). The
fourth and seventh columns illustrate the Death Benefit of a Policy over the
designated period. The second, third, and fourth columns assume that throughout
the life of the Policy, the monthly charge for the cost of insurance, the
Monthly Mortality and Expense Charge and the Monthly Administrative Charge are
based upon the maximums (i.e., guaranteed) permitted in the policy. The maximum
allowable cost of insurance rates are based on the frasierized 1980
Commissioners Standard Ordinary Mortality Tables for Nonsmokers and Smokers. The
fifth, sixth, and seventh columns assume that the monthly charge for cost of
insurance, the Monthly Mortality and Expense Charge, and the Monthly
Administrative Charge are based on the current amounts expected to be charged.
The Death Benefits also vary between tables depending upon whether the Level
Amount Death Benefit Option (Tables at pages C-3 through C-5) or the Variable
Amount Death Benefit Option (Tables at pages C-6 through C-8) is illustrated.
The amounts shown for the Accumulation Values, Cash Surrender Values, and
Death Benefits reflect the fact that the net investment return of the
Sub-Accounts of the Variable Account is lower than the gross, after-tax return
on the assets held in the Funds as a result of the Funds' operating expenses.
The values shown take into account the daily total operating expenses paid by
the three portfolios of The Alger American Trust, the five portfolios of the
Fidelity VIP Fund, the four portfolios of the Fidelity VIP Fund II, the four
portfolios of Janus Aspen Series, the two portfolios of the Neuberger&Berman
Advisers Management Trust, the five portfolios of Northstar Variable Trust, the
four portfolios of the OCC Accumulation Trust, and the six funds of Putnam
Variable Trust, which together are assumed to be at an average annual rate of
0.76% for all years. This figure is derived based on a simple average of the
Funds' 1997 operating expenses net of any limitations on such expenses paid by
the Funds. Thus, the illustrated gross annual investment rates of return of 0
percent, 6 percent and 12 percent correspond to approximate net annual rates of
return of -0.76%, 5.24%, and 11.24%, respectively. Without such expense
reimbursements, total expenses would be 0.88%. Hypothetical Accumulation Values,
Cash Surrender Values and the Death Benefits may be lower without the expense
reimbursement. Expense reimbursements are voluntary. While it is currently
anticipated that expense reimbursements will continue past the current year,
there is no assurance of ongoing reimbursements.
The hypothetical values shown in the tables do not reflect any charges for
Federal income taxes attributable to the Variable Account because we do not
currently make any such charges. However, such charges may be made in the future
and, in that event, the gross annual investment return would have to exceed 0
percent, 6 percent, or 12 percent by an amount sufficient to cover the tax
charges in order to
<PAGE>
produce the Accumulation Values, Cash Surrender Values, and Death Benefits
illustrated. (See section entitled "Federal Tax Matters" in the prospectus).
The tables illustrate the Policy values that would result based upon the
hypothetical rates of return if premiums are paid as indicated, if all Net
Premiums are allocated to the Variable Account, and if no Policy loans have been
made. The tables are also based on the assumptions that the Policy owner has not
requested an increase or decrease in the Face Amount, that no partial
withdrawals have been made, that no transfers have been made, and total
operating expenses of the Funds continue as anticipated. Actual results will
depend on the expenses and performance of the investment choice made by the
owner.
Upon request, we will provide a comparable illustration based upon each
proposed Joint Insureds' Age, sex, underwriting classification, the Face Amount
and Planned Periodic Premium schedule requested, and any available riders
requested.
<PAGE>
RELIASTAR LIFE INSURANCE COMPANY
SURVIVORSHIP FLEXIBLE PREMIUM VARIABLE LIFE
1 FEMALE AND 1 MALE JOINT INSURED
BOTH NON-TOBACCO PREMIUM CLASS
BOTH ISSUE AGE: 55
$11,140.00 ANNUAL PREMIUM
$1,000,000 FACE AMOUNT
LEVEL DEATH BENEFIT OPTION
ASSUMED HYPOTHETICAL GROSS ANNUAL
INVESTMENT RATE OF RETURN: 0%
<TABLE>
<CAPTION>
GUARANTEED COSTS CURRENT COSTS
------------------------------------------------ ---------------------------------
ACCUMULATION CASH SURRENDER DEATH ACCUMULATION CASH SURRENDER DEATH
POLICY VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR (1) (2) (1) (2) (1) (2) (1) (2) (1) (2) (1) (2)
- -------- -------------- ---------------- ------------ -------------- ---------------- -----------
<S> <C> <C> <C> <C> <C> <C>
1 9,126 0 1,000,000* 9,181 0 1,000,000*
2 17,985 7,985 1,000,000 18,125 8,125 1,000,000
3 26,556 16,556 1,000,000 26,830 16,830 1,000,000
4 34,818 24,818 1,000,000 35,293 25,293 1,000,000
5 42,744 32,744 1,000,000 43,508 33,508 1,000,000
6 50,297 41,297 1,000,000 51,469 42,469 1,000,000
7 57,431 49,431 1,000,000 59,152 51,152 1,000,000
8 64,082 57,082 1,000,000 66,527 59,527 1,000,000
9 70,169 64,169 1,000,000 73,559 67,559 1,000,000
10 75,599 70,599 1,000,000 80,211 75,211 1,000,000
11 80,270 76,270 1,000,000 87,252 83,252 1,000,000
12 84,074 81,074 1,000,000 93,870 90,870 1,000,000
13 86,905 84,905 1,000,000 100,033 98,033 1,000,000
14 88,618 87,618 1,000,000 105,700 104,700 1,000,000
15 89,044 89,044 1,000,000 110,819 110,819 1,000,000
20 60,320 60,320 1,000,000 125,639 125,639 1,000,000
AGE
80 0 0 0 124,188 124,188 1,000,000
85 0 0 0 35,615 35,615 1,000,000
**
</TABLE>
- --------------------------------------------------------------------------------
(1) Assumes an $11,140.00 premium (which exceeds the Annualized Minimum Monthly
Premium) is paid at the beginning of each Policy Year. Values will be
different if premiums are paid with a different frequency or in different
amounts.
(2) Assumes that no Policy Loans or partial withdrawals have been made.
Excessive loans or withdrawals may cause the Policy to lapse because of
insufficient Cash Surrender Value.
* Based on (1) and (2) above, the Death Benefit Guarantee is in effect during
the years shown, therefore, the Policy remains in force even though the Cash
Surrender Value is zero.
** Policy terminates prior to Age 90.
THE HYPOTHETICAL INVESTMENT RESULTS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT
RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN, AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY A POLICYHOLDER, AND THE
DIFFERENT INVESTMENT RETURNS FOR THE FUNDS. THE ACCUMULATION VALUE, CASH
SURRENDER VALUE, AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE
SHOWN ABOVE IF THE ACTUAL INVESTMENT RESULTS APPLICABLE TO THE POLICY AVERAGE 0%
OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY US OR BY THE FUNDS
THAT THESE HYPOTHETICAL RETURNS CAN BE ACHIEVED FOR ANY ONE YEAR, OR SUSTAINED
OVER ANY PERIOD OF TIME.
<PAGE>
RELIASTAR LIFE INSURANCE COMPANY
SURVIVORSHIP FLEXIBLE PREMIUM VARIABLE LIFE
1 FEMALE AND 1 MALE JOINT INSURED
BOTH NON-TOBACCO PREMIUM CLASS
BOTH ISSUE AGE: 55
$11,140.00 ANNUAL PREMIUM
$1,000,000 FACE AMOUNT
LEVEL DEATH BENEFIT OPTION
ASSUMED HYPOTHETICAL GROSS ANNUAL
INVESTMENT RATE OF RETURN: 6%
<TABLE>
<CAPTION>
GUARANTEED COSTS CURRENT COSTS
------------------------------------------------ ---------------------------------
ACCUMULATION CASH SURRENDER DEATH ACCUMULATION CASH SURRENDER DEATH
POLICY VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR (1) (2) (1) (2) (1) (2) (1) (2) (1) (2) (1) (2)
- -------- -------------- ---------------- ------------ -------------- ---------------- -----------
<S> <C> <C> <C> <C> <C> <C>
1 9,710 0 1,000,000* 9,767 0 1,000,000*
2 19,717 9,717 1,000,000 19,865 9,865 1,000,000
3 30,008 20,008 1,000,000 30,303 20,303 1,000,000
4 40,570 30,570 1,000,000 41,089 31,089 1,000,000
5 51,382 41,382 1,000,000 52,228 42,228 1,000,000
6 62,414 53,414 1,000,000 63,726 54,726 1,000,000
7 73,625 65,625 1,000,000 75,572 67,572 1,000,000
8 84,954 77,954 1,000,000 87,747 80,747 1,000,000
9 96,320 90,320 1,000,000 100,227 94,227 1,000,000
10 107,632 102,632 1,000,000 112,988 107,988 1,000,000
11 118,784 114,784 1,000,000 127,083 123,083 1,000,000
12 129,663 126,663 1,000,000 141,549 138,549 1,000,000
13 140,154 138,154 1,000,000 156,378 154,378 1,000,000
14 150,106 149,106 1,000,000 171,553 170,553 1,000,000
15 159,340 159,340 1,000,000 187,053 187,053 1,000,000
20 182,885 182,885 1,000,000 268,098 268,098 1,000,000
AGE
80 117,522 117,522 1,000,000 362,288 362,288 1,000,000
85 0 0 0 423,954 423,954 1,000,000
90 0 0 0 393,243 393,243 1,000,000
95 0 0 0 105,455 105,455 1,000,000
**
</TABLE>
- --------------------------------------------------------------------------------
(1) Assumes an $11,140.00 premium (which exceeds the Annualized Minimum Monthly
Premium) is paid at the beginning of each Policy Year. Values will be
different if premiums are paid with a different frequency or in different
amounts.
(2) Assumes that no Policy Loans or partial withdrawals have been made.
Excessive loans or withdrawals may cause the Policy to lapse because of
insufficient Cash Surrender Value.
* Based on (1) and (2) above, the Death Benefit Guarantee is in effect during
the years shown, therefore, the Policy remains in force even though the Cash
Surrender Value is zero.
** Policy terminates prior to Age 100.
THE HYPOTHETICAL INVESTMENT RESULTS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT
RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN, AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY A POLICYHOLDER, AND THE
DIFFERENT INVESTMENT RETURNS FOR THE FUNDS. THE ACCUMULATION VALUE, CASH
SURRENDER VALUE, AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE
SHOWN ABOVE IF THE ACTUAL INVESTMENT RESULTS APPLICABLE TO THE POLICY AVERAGE 6%
OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY US OR BY THE FUNDS
THAT THESE HYPOTHETICAL RETURNS CAN BE ACHIEVED FOR ANY ONE YEAR, OR SUSTAINED
OVER ANY PERIOD OF TIME.
<PAGE>
RELIASTAR LIFE INSURANCE COMPANY
SURVIVORSHIP FLEXIBLE PREMIUM VARIABLE LIFE
1 FEMALE AND 1 MALE JOINT INSURED
BOTH NON-TOBACCO PREMIUM CLASS
BOTH ISSUE AGE: 55
$11,140.00 ANNUAL PREMIUM
$1,000,000 FACE AMOUNT
LEVEL DEATH BENEFIT OPTION
ASSUMED HYPOTHETICAL GROSS ANNUAL
INVESTMENT RATE OF RETURN: 12%
<TABLE>
<CAPTION>
GUARANTEED COSTS CURRENT COSTS
----------------------------------------------- ----------------------------------------------
ACCUMULATION CASH SURRENDER DEATH ACCUMULATION CASH SURRENDER DEATH
POLICY VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR (1) (2) (1) (2) (1) (2) (1) (2) (1) (2) (1) (2)
- -------- -------------- ---------------- ----------- -------------- ---------------- ----------
<S> <C> <C> <C> <C> <C> <C>
1 10,295 295 1,000,000 10,353 353 1,000,000
2 21,520 11,520 1,000,000 21,675 11,675 1,000,000
3 33,745 23,745 1,000,000 34,062 24,062 1,000,000
4 47,048 37,048 1,000,000 47,614 37,614 1,000,000
5 61,507 51,507 1,000,000 62,442 52,442 1,000,000
6 77,201 68,201 1,000,000 78,671 69,671 1,000,000
7 94,210 86,210 1,000,000 96,416 88,416 1,000,000
8 112,605 105,605 1,000,000 115,804 108,804 1,000,000
9 132,452 126,452 1,000,000 136,970 130,970 1,000,000
10 153,820 148,820 1,000,000 160,065 155,065 1,000,000
11 176,785 172,785 1,000,000 186,745 182,745 1,000,000
12 201,435 198,435 1,000,000 216,064 213,064 1,000,000
13 227,885 225,885 1,000,000 248,308 246,308 1,000,000
14 256,245 255,245 1,000,000 283,791 282,791 1,000,000
15 286,640 286,640 1,000,000 322,871 322,871 1,000,000
20 473,174 473,174 1,000,000 588,563 588,563 1,000,000
AGE
80 752,213 752,213 1,000,000 1,050,647 1,050,647 1,103,180
85 1,249,015 1,249,015 1,311,466 1,828,023 1,828,023 1,919,424
90 2,033,507 2,033,507 2,135,183 3,101,312 3,101,312 3,256,378
95 3,282,044 3,282,044 3,314,864 5,216,385 5,216,385 5,268,550
100 5,414,107 5,414,107 5,414,107 8,848,369 8,848,369 8,848,369
</TABLE>
- --------------------------------------------------------------------------------
(1) Assumes an $11,140.00 premium (which exceeds the Annualized Minimum Monthly
Premium) is paid at the beginning of each Policy Year. Values will be
different if premiums are paid with a different frequency or in different
amounts.
(2) Assumes that no Policy Loans or partial withdrawals have been made.
Excessive loans or withdrawals may cause the Policy to lapse because of
insufficient Cash Surrender Value.
THE HYPOTHETICAL INVESTMENT RESULTS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT
RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN, AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY A POLICYHOLDER, AND THE
DIFFERENT INVESTMENT RETURNS FOR THE FUNDS. THE ACCUMULATION VALUE, CASH
SURRENDER VALUE, AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE
SHOWN ABOVE IF THE ACTUAL INVESTMENT RESULTS APPLICABLE TO THE POLICY AVERAGE
12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY US OR BY THE FUNDS
THAT THESE HYPOTHETICAL RETURNS CAN BE ACHIEVED FOR ANY ONE YEAR, OR SUSTAINED
OVER ANY PERIOD OF TIME.
<PAGE>
RELIASTAR LIFE INSURANCE COMPANY
SURVIVORSHIP FLEXIBLE PREMIUM VARIABLE LIFE
1 FEMALE AND 1 MALE JOINT INSURED
BOTH NON-TOBACCO PREMIUM CLASS
BOTH ISSUE AGE: 55
$11,140.00 ANNUAL PREMIUM
$1,000,000 FACE AMOUNT
VARIABLE DEATH BENEFIT OPTION
ASSUMED HYPOTHETICAL GROSS ANNUAL
INVESTMENT RATE OF RETURN: 0%
<TABLE>
<CAPTION>
GUARANTEED COSTS CURRENT COSTS
------------------------------------------------ -----------------------------------------------
ACCUMULATION CASH SURRENDER DEATH ACCUMULATION CASH SURRENDER DEATH
POLICY VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR (1) (2) (1) (2) (1) (2) (1) (2) (1) (2) (1) (2)
- -------- -------------- ---------------- ------------ -------------- ---------------- -----------
<S> <C> <C> <C> <C> <C> <C>
1 9,126 0 1,009,126* 9,181 0 1,009,181*
2 17,981 7,981 1,017,981 18,122 8,122 1,018,122
3 26,544 16,544 1,026,544 26,821 16,821 1,026,821
4 34,788 24,788 1,034,788 35,272 25,272 1,035,272
5 42,683 32,683 1,042,683 43,467 33,467 1,043,467
6 50,186 41,186 1,050,186 51,399 42,399 1,051,399
7 57,246 49,246 1,057,246 59,038 51,038 1,059,038
8 63,789 56,789 1,063,789 66,351 59,351 1,066,351
9 69,721 63,721 1,069,721 73,297 67,297 1,073,297
10 74,938 69,938 1,074,938 79,832 74,832 1,079,832
11 79,324 75,324 1,079,324 86,709 82,709 1,086,709
12 82,755 79,755 1,082,755 93,113 90,113 1,093,113
13 85,110 83,110 1,085,110 99,004 97,004 1,099,004
14 86,232 85,232 1,086,232 104,330 103,330 1,104,330
15 85,937 85,937 1,085,937 109,029 109,029 1,109,029
20 51,451 51,451 1,051,451 120,086 120,086 1,120,086
AGE
80 0 0 0 111,606 111,606 1,111,606
85 0 0 0 10,344 10,344 1,010,344
**
</TABLE>
- --------------------------------------------------------------------------------
(1) Assumes an $11,140.00 premium (which exceeds the Annualized Minimum Monthly
Premium) is paid at the beginning of each Policy Year. Values will be
different if premiums are paid with a different frequency or in different
amounts.
(2) Assumes that no Policy Loans or partial withdrawals have been made.
Excessive loans or withdrawals may cause the Policy to lapse because of
insufficient Cash Surrender Value.
* Based on (1) and (2) above, the Death Benefit Guarantee is in effect during
the years shown, therefore, the Policy remains in force even though the Cash
Surrender Value is zero.
** Policy terminates prior to Age 90.
THE HYPOTHETICAL INVESTMENT RESULTS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT
RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN, AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY A POLICYHOLDER, AND THE
DIFFERENT INVESTMENT RETURNS FOR THE FUNDS. THE ACCUMULATION VALUE, CASH
SURRENDER VALUE, AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE
SHOWN ABOVE IF THE ACTUAL INVESTMENT RESULTS APPLICABLE TO THE POLICY AVERAGE 0%
OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY US OR BY THE FUNDS
THAT THESE HYPOTHETICAL RETURNS CAN BE ACHIEVED FOR ANY ONE YEAR, OR SUSTAINED
OVER ANY PERIOD OF TIME.
<PAGE>
RELIASTAR LIFE INSURANCE COMPANY
SURVIVORSHIP FLEXIBLE PREMIUM VARIABLE LIFE
1 FEMALE AND 1 MALE JOINT INSURED
BOTH NON-TOBACCO PREMIUM CLASS
BOTH ISSUE AGE: 55
$11,140.00 ANNUAL PREMIUM
$1,000,000 FACE AMOUNT
VARIABLE DEATH BENEFIT OPTION
ASSUMED HYPOTHETICAL GROSS ANNUAL
INVESTMENT RATE OF RETURN: 6%
<TABLE>
<CAPTION>
GUARANTEED COSTS CURRENT COSTS
------------------------------------------------ -----------------------------------------------
ACCUMULATION CASH SURRENDER DEATH ACCUMULATION CASH SURRENDER DEATH
POLICY VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR (1) (2) (1) (2) (1) (2) (1) (2) (1) (2) (1) (2)
- -------- -------------- ---------------- ------------ -------------- ---------------- -----------
<S> <C> <C> <C> <C> <C> <C>
1 9,710 0 1,009,710* 9,766 0 1,009,766*
2 19,713 9,713 1,019,713 19,861 9,861 1,019,861
3 29,994 19,994 1,029,994 30,293 20,293 1,030,293
4 40,535 30,535 1,040,535 41,064 31,064 1,041,064
5 51,308 41,308 1,051,308 52,178 42,178 1,052,178
6 62,275 53,275 1,062,275 63,637 54,637 1,063,637
7 73,382 65,382 1,073,382 75,422 67,422 1,075,422
8 84,553 77,553 1,084,553 87,507 80,507 1,087,507
9 95,685 89,685 1,095,685 99,856 93,856 1,099,856
10 106,659 101,659 1,106,659 112,430 107,430 1,112,430
11 117,334 113,334 1,117,334 126,254 122,254 1,126,254
12 127,558 124,558 1,127,558 140,350 137,350 1,140,350
13 137,168 135,168 1,137,168 154,685 152,685 1,154,685
14 145,960 144,960 1,145,960 169,210 168,210 1,169,210
15 153,685 153,685 1,153,685 183,868 183,868 1,183,868
20 160,980 160,980 1,160,980 255,838 255,838 1,255,838
AGE
80 57,408 57,408 1,057,408 326,543 326,543 1,326,543
85 0 0 0 310,177 310,177 1,310,177
90 0 0 0 93,062 93,062 1,093,062
**
</TABLE>
- --------------------------------------------------------------------------------
(1) Assumes an $11,140.00 premium (which exceeds the Annualized Minimum Monthly
Premium) is paid at the beginning of each Policy Year. Values will be
different if premiums are paid with a different frequency or in different
amounts.
(2) Assumes that no Policy Loans or partial withdrawals have been made.
Excessive loans or withdrawals may cause the Policy to lapse because of
insufficient Cash Surrender Value.
* Based on (1) and (2) above, the Death Benefit Guarantee is in effect during
the years shown, therefore, the Policy remains in force even though the Cash
Surrender Value is zero.
** Policy terminates prior to Age 95.
THE HYPOTHETICAL INVESTMENT RESULTS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT
RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN, AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY A POLICYHOLDER, AND THE
DIFFERENT INVESTMENT RETURNS FOR THE FUNDS. THE ACCUMULATION VALUE, CASH
SURRENDER VALUE, AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE
SHOWN ABOVE IF THE ACTUAL INVESTMENT RESULTS APPLICABLE TO THE POLICY AVERAGE 6%
OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY US OR BY THE FUNDS
THAT THESE HYPOTHETICAL RETURNS CAN BE ACHIEVED FOR ANY ONE YEAR, OR SUSTAINED
OVER ANY PERIOD OF TIME.
<PAGE>
RELIASTAR LIFE INSURANCE COMPANY
SURVIVORSHIP FLEXIBLE PREMIUM VARIABLE LIFE
1 FEMALE AND 1 MALE JOINT INSURED
BOTH NON-TOBACCO PREMIUM CLASS
BOTH ISSUE AGE: 55
$11,140.00 ANNUAL PREMIUM
$1,000,000 FACE AMOUNT
VARIABLE DEATH BENEFIT OPTION
ASSUMED HYPOTHETICAL GROSS ANNUAL
INVESTMENT RATE OF RETURN: 12%
<TABLE>
<CAPTION>
GUARANTEED COSTS CURRENT COSTS
----------------------------------------------- ----------------------------------------------
ACCUMULATION CASH SURRENDER DEATH ACCUMULATION CASH SURRENDER DEATH
POLICY VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR (1) (2) (1) (2) (1) (2) (1) (2) (1) (2) (1) (2)
- -------- -------------- ---------------- ----------- -------------- ---------------- ----------
<S> <C> <C> <C> <C> <C> <C>
1 10,294 294 1,010,294 10,353 353 1,010,353
2 21,515 11,515 1,021,515 21,672 11,672 1,021,672
3 33,730 23,730 1,033,730 34,050 24,050 1,034,050
4 47,007 37,007 1,047,007 47,585 37,585 1,047,585
5 61,417 51,417 1,061,417 62,382 52,382 1,062,382
6 77,025 68,025 1,077,025 78,558 69,558 1,078,558
7 93,891 85,891 1,093,891 96,220 88,220 1,096,220
8 112,059 105,059 1,112,059 115,478 108,478 1,115,478
9 131,554 125,554 1,131,554 136,446 130,446 1,136,446
10 152,388 147,388 1,152,388 159,246 154,246 1,159,246
11 174,563 170,563 1,174,563 185,480 181,480 1,185,480
12 198,072 195,072 1,198,072 214,161 211,161 1,214,161
13 222,904 220,904 1,222,904 245,509 243,509 1,245,509
14 249,011 248,011 1,249,011 279,755 278,755 1,279,755
15 276,304 276,304 1,276,304 317,147 317,147 1,317,147
20 420,435 420,435 1,420,435 560,937 560,937 1,560,937
AGE
80 526,806 526,806 1,526,806 947,771 947,771 1,947,771
85 442,568 442,568 1,442,568 1,477,237 1,477,237 2,477,237
90 0 0 0 2,144,001 2,144,001 3,144,001
95 0 0 0 2,947,359 2,947,359 3,947,359
100 0 0 0 3,902,605 3,902,605 4,902,605
</TABLE>
- --------------------------------------------------------------------------------
(1) Assumes an $11,140.00 premium (which exceeds the Annualized Minimum Monthly
Premium) is paid at the beginning of each Policy Year. Values will be
different if premiums are paid with a different frequency or in different
amounts.
(2) Assumes that no Policy Loans or partial withdrawals have been made.
Excessive loans or withdrawals may cause the Policy to lapse because of
insufficient Cash Surrender Value.
THE HYPOTHETICAL INVESTMENT RESULTS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT
RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN, AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY A POLICYHOLDER, AND THE
DIFFERENT INVESTMENT RETURNS FOR THE FUNDS. THE ACCUMULATION VALUE, CASH
SURRENDER VALUE, AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE
SHOWN ABOVE IF THE ACTUAL INVESTMENT RESULTS APPLICABLE TO THE POLICY AVERAGE
12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY US OR BY THE FUNDS
THAT THESE HYPOTHETICAL RETURNS CAN BE ACHIEVED FOR ANY ONE YEAR, OR SUSTAINED
OVER ANY PERIOD OF TIME.
<PAGE>
APPENDIX D
MONTHLY AMOUNT CHARGE
PER $1,000 OF FACE AMOUNT
The following table provides the factors that are used in determining the
Monthly Amount Charge which is deducted each Policy Month during the first 20
Policy Years (and for 20 Policy Years after any requested increase in Face
Amount relative to the increased amount). The Monthly Amount Charge per $1,000
is based on the average age of the Joint Insureds on the Policy Date (or on the
effective date of any requested increase in Face Amount, as appropriate).
<TABLE>
<CAPTION>
AVERAGE AGE OF MONTHLY AMOUNT CHARGE PER AVERAGE AGE OF MONTHLY AMOUNT CHARGE PER
JOINT INSUREDS $1,000 OF FACE AMOUNT JOINT INSUREDS $1,000 OF FACE AMOUNT
- -------------------- ----------------------------- -------------------- -----------------------------
<S> <C> <S> <C>
0-25 $ 0.050 56 $ 0.080
26 0.050 57 0.085
27 0.050 58 0.085
28 0.050 59 0.090
29 0.050 60 0.090
30 0.055 61 0.090
31 0.055 62 0.095
32 0.055 63 0.095
33 0.055 64 0.100
34 0.055 65 0.100
35 0.055 66 0.110
36 0.055 67 0.120
37 0.055 68 0.125
38 0.060 69 0.135
39 0.060 70 0.145
40 0.060 71 0.155
41 0.060 72 0.165
42 0.060 73 0.170
43 0.065 74 0.180
44 0.065 75 0.190
45 0.065 76 0.205
46 0.065 77 0.220
47 0.070 78 0.230
48 0.070 79 0.245
49 0.070 80 0.260
50 0.075 81 0.275
51 0.075 82 0.290
52 0.075 83 0.300
53 0.075 84 0.315
54 0.080 85 0.330
55 0.080
</TABLE>
<PAGE>
UNDERTAKINGS TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities and
Exchange Act of 1934, the undersigned Registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
RULE 484 UNDERTAKING
Insofar as indemnification for liability arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
"REASONABLENESS" REPRESENTATION PURSUANT TO 26(e)(2)(A)
OF THE INVESTMENT COMPANY ACT OF 1940
Depositor represents that the fees and charges deducted under the flexible
premium variable life insurance policy, in the aggregate, are reasonable in
relation to the services rendered, the expenses expected to be incurred, and the
risks assumed by ReliaStar Life Insurance Company.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, Registrant Certifies that it meets all of the requirements of
effectiveness of this Amendment to the Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has caused this Amendment to the
Registration Statement to be signed on its behalf, in the City of Minneapolis
and State of Minnesota, on this 16 day of April, 1998.
SELECT*LIFE VARIABLE ACCOUNT
(Registrant)
By: RELIASTAR LIFE INSURANCE COMPANY
(Depositor)
By: /S/ JOHN G. TURNER
-------------------------------------
John G. Turner, Chairman
and Chief Executive Officer
As required by the Securities Act of 1933, Depositor has caused this
Post-Effective Amendment No. 3 to Registration Statement to be signed on its
behalf, in the City of Minneapolis and State of Minnesota, on April 16, 1998.
RELIASTAR LIFE INSURANCE COMPANY
(Depositor)
By: /S/ JOHN G. TURNER
-------------------------------------
John G. Turner, Chairman
and Chief Executive Officer
As required by the Securities Act of 1933, this Post-Effective Amendment No. 3
to the Registration Statement S-6 has been signed on April 16, 1998 by the
following directors and officers of Depositor in the capacities indicated:
SIGNATURE TITLE
--------- -----
/S/ JOHN G. TURNER Chairman and Chief Executive Officer
- --------------------------
John G. Turner
/S/ JAMES R. MILLER Senior Vice President and Chief Financial Officer
- --------------------------
James R. Miller
R. Michael Conley* Wayne R. Huneke* William R. Merriam*
Richard R. Crowl* Ronald D. Jarvis* James R. Miller*
Michael J. Dubes* Mark S. Jordahl Robert C. Salipante*
John H. Flittie* Kenneth U. Kuk* John G. Turner*
* A majority of the Board of Directors
Jeffrey A. Proulx, by signing his name hereto, does hereby sign this document on
behalf of each of the above-named directors of ReliaStar Life Insurance Company
pursuant to powers of attorney duly executed by such persons.
/S/ JEFFREY A. PROULX
-----------------------------------
Jeffrey A. Proulx, Attorney-In-Fact
<PAGE>
PART II
CONTENTS OF REGISTRATION STATEMENT
This Post-Effective Amendment No. 3 to the Registration Statement comprises the
following papers and documents:
The Facing Sheet.
The general form of Prospectus, consisting of 108 pages.
Undertakings to file reports.
Rule 484 Undertakings.
"Reasonableness" representation pursuant to Section 26(e)(2)(A) of the
Investment Company Act of 1940..
The signatures.
Written consents of the following persons:
1. Jeffrey A. Proulx, Esq. -- Filed as part of EX-99.2.
2. Craig A. Krogstad, F.S.A. -- Filed as EX-99.C6.
3. Independent Auditor's Consent of Deloitte & Touche, LLP. -- Filed as
EX-99.C1.
The following exhibits:
1. The following exhibits correspond to those required by Paragraph A of
the instructions as to exhibits in Form N-8B-2:
A. (1) Resolutions of Board of Directors of Northwestern National Life
Insurance Company ("NWNL") establishing the SELECT*LIFE Variable
Account. (Filed as an Exhibit in S-6EL24 on December 23, 1996,
File No. 333-18517, and incorporated herein by reference.)
(2) Not applicable.
(3) (a) General Distributor Agreement between Washington Square
Securities Inc. and ReliaStar. (Filed in S-6EL24 on December
23, 1996, File No. 333-18517, and incorporated herein by
reference.)
(b) Specimens of Selling Agreements. (Filed in S-6EL24 on
December 23, 1996, File No. 333-18517, and incorporated
herein by reference.)
(c) Form of Broker-Dealer Agency Compensation Schedule.
(4) Not applicable.
(5) Form of Policy available (together with available Policy riders).
(Filed in Form S-6 on August 8, 1997, File No. 333-18517, and
incorporated herein by reference.)
(6) (a) Amended Articles of Incorporation of ReliaStar Life
Insurance Company. (Filed in S-6EL24 on December 23, 1996,
File No. 333-18517, and incorporated herein by reference.)
(6) (b) Amended By-laws of ReliaStar Life Insurance Company. (Filed
in S-6EL24 on December 23, 1996, File No. 333-18517, and
incorporated herein by reference.)
(7) Not applicable.
(8) (a) Form of Participation Agreement by and between ReliaStar
Life Insurance Company and Fred Alger Management, Inc.
(Filed in Form S-6 on August 4, 1997, File No. 2-95392, and
incorporated herein by reference.)
(8) (b) Participation Agreement with Fidelity's Variable Insurance
Products Fund and Fidelity Distributors Corporation and
Amendments Nos. 1-8. (Filed in S-6EL24 on December 23, 1996,
File No. 333-18517, and incorporated herein by reference.)
<PAGE>
(8) (c) Participation Agreement with Fidelity's Variable Insurance
Products Fund II and Fidelity Distributors Corporation and
Amendments Nos. 1-7. (Filed in S-6EL24 on December 23, 1996,
File No. 333-18517, and incorporated herein by reference.)
(8) (d) Form of Participation Agreement by and between ReliaStar
Life Insurance Company and Janus Aspen Series. (Filed in
Form S-6 on August 4, 1997, File No. 2-95392, and
incorporated herein by reference.)
(8) (e) Form of Participation Agreement by and among ReliaStar Life
Insurance Company, Neuberger&Berman Advisers Management
Trust, and Advisers Managers Trust and NBMI. (Filed in Form
S-6 on August 4, 1997, File No. 2-95392, and incorporated
herein by reference.)
(8) (f) Form of Participation Agreement by and between ReliaStar
Life Insurance Company and OpCap Advisors. (Filed in Form
S-6 on August 4, 1997, File No. 2-95392, and incorporated
herein by reference.)
(8) (g) Participation Agreement with Putnam Variable Trust and
Putnam Mutual Funds Corp. and Amendments Nos. 1-2. (Filed in
S-6EL24 on December 23, 1996, File No. 333-18517, and
incorporated herein by reference.)
(8) (h) Form of Service Agreement by and between ReliaStar Life
Insurance Company and Fred Alger Management, Inc. (Filed in
Form S-6 on August 4, 1997, File No. 2-95392, and
incorporated herein by reference.)
(8) (i) Form of Service Agreement and Contract between ReliaStar
Life Insurance Company, WSSI, and Fidelity Investments
Institutional Operations Company and Distributors
Corporation dated January 1, 1997. (Filed in Form S-6 on
March 31, 1997, File No. 333-18517, and incorporated herein
by reference.)
(8) (j) Form of Service Agreement by and between ReliaStar Life
Insurance Company and Janus Capital Corporation. (Filed in
Form S-6 on August 4, 1997, File No. 2-95392, and
incorporated herein by reference.)
(8) (k) Form of Service Agreement by and between ReliaStar Life
Insurance Company and Neuberger&Berman Management
Incorporated ("NBMI"). (Filed in Form S-6 on August 4, 1997,
File No. 2-95392, and incorporated herein by reference.)
(8) (l) Form of Service Agreement by and between ReliaStar Life
Insurance Company and OpCap Advisors. (Filed in Form S-6 on
August 4, 1997, File No. 2-95392, and incorporated herein by
reference.)
(9) Not applicable.
(10) (a) Policy application. (Filed in S-6EL24 on December 23, 1996,
File No. 333-18517, and incorporated herein by reference.)
(b) Supplemental application.
2. Opinion and consent of Jeffrey A. Proulx, Esquire, as to the legality
of the Securities being registered. See EX-99.2.
3. Not applicable.
4. Not applicable.
EX-99.C1. Auditors' Consent.
EX-99.C2. Not applicable.
EX-99.C3. Not applicable.
EX-99.C4. See EX-99.2.
EX-99.C5. Not applicable.
EX-99.C6. Actuarial Opinion and Consent.
EX-99.D1. Memorandum describing ReliaStar Life's issuance, transfer
and redemption procedures for the Policies and ReliaStar
Life's procedure for conversion to a
<PAGE>
fixed benefit policy. (Filed in Form S-6 on May 13, 1997,
File No. 333-18517, and incorporated herein by reference.)
EX-24. Powers of Attorney.
R. Michael Conley(1)
Richard R. Crowl(1)
Michael J. Dubes
John H. Flittie(1)
Wayne R. Huneke(1)
Ronald D. Jarvis
Kenneth U. Kuk(1)
William R. Merriam(1)
James R. Miller
Robert C. Salipante(1)
John G. Turner(1)
- ------------------
(1) Filed in S-6EL24 on December 23, 1996, File No. 333-18517, and incorporated
herein by reference.
<PAGE>
INDEX TO EXHIBITS
EX-99.2. Opinion and consent of Jeffrey A. Proulx, Esquire, as to the
legality of the Securities being registered.
EX-99.A3C. Form of Broker-Dealer Agency Compensation Schedule.
EX-99.C1. Independent Auditor's Consent of Deloitte & Touche, LLP.
EX-99.C6. Actuarial Opinion and Consent of Craig A. Krogstad, F.S.A.
EX-99.24. Powers of Attorney.
EX-99.A9b. Supplemental application.
JEFFREY A. PROULX
Associate Counsel
Phone (612) 372-1810
Fax (612) 342-7531
[email protected]
April 15, 1998
ReliaStar Life Insurance Company
20 Washington Avenue South
Minneapolis, MN 55401
Sir/Madam:
In connection with the proposed registration under the Securities Act of 1933,
as amended, of flexible premium variable life insurance policies (the
"Policies") and interests in Select*Life Variable Account (the "Variable
Account"), I have examined documents relating to the establishment of the
Variable Account by the Board of Directors of ReliaStar Life Insurance Company
(the "Company") as a separate account for assets applicable to variable
contracts, pursuant to Minnesota Statutes Sections 61A.13 to 61A.21, as amended,
and the Registration Form S-6, as amended through and including Post-Effective
Amendment No. 3 thereto, File No. 333-18517 (the "Registration Statement") and I
have examined such other documents and have reviewed such matters as I deemed
necessary for this opinion, and I advise you that in my opinion:
1. The Variable Account is a separate account of the Company duly
created and validly existing pursuant to the laws of the State
of Minnesota.
2. The Policies, when issued in accordance with the Prospectus
constituting a part of the Registration Statement and upon
compliance with applicable local law, will be legal and
binding obligations of the company in accordance with their
respective terms.
3. The portion of the assets held in the Variable Account equal
to reserves and other contract liabilities with respect to the
Variable Accounts are not chargeable with liabilities arising
out of any other business the Company may conduct.
I consent to the filing of this opinion as an exhibit to the Registration
Statement and to the use of my name under the heading "legal Matters" in the
Prospectus constituting a part of the Registration Statement and to the
references to me wherever appearing therein.
Sincerely yours,
Jeffrey A. Proulx
Associate Counsel
BROKER-DEALER AGENCY
COMPENSATION SCHEDULE FOR
RELIASTAR LIFE INSURANCE COMPANY ("RELIASTAR LIFE")
VARIABLE CONTRACTS
EFFECTIVE OCTOBER 1, 1997
This Compensation Schedule shall be used to determine compensation payable
to the Broker-Dealer under the Broker-Dealer Agency Selling Agreement for
Variable Contracts through Broker-Dealer from the Effective Date of this
Schedule until it is suspended, cancelled, changed or replaced.
This Schedule is applicable to the following Variable Contracts:
1. RELIASTAR LIFE SELECT*ANNUITY III
Broker-Dealer shall be paid a total dealer concession according to the
following schedule:
ReliaStar Life has two commission schedules on Select*Annuity III.
Schedule A pays all commissions as a percentage of premiums paid.
Representatives may select on a policy by policy basis which commission
schedule they desire by marking on the application. If the respresentative
does not select an option, commissions will default to Schedule A, full
front end commissions.
Commission Schedule A:
Total Cumulative* Ages 0-75 Dealer Ages 76-85 Dealer
Premium From Issue Concession Concession
------------------ ---------------- -----------------
$ 0 - 4,999 4.0% 2.4%
$ 5,000 - 9,999 5.0% 3.0%
$10,000 + 6.0% 3.3%
Commission Schedule B:
Total Cumulative* Ages 0-75 Dealer Ages 76-85 Dealer
Premium From Issue Concession Concession
------------------ ---------------- -----------------
$ 0 - 4,999 3.0% 1.4%
$ 5,000 - 9,999 4.0% 2.0%
$10,000 + 5.0% 2.3%
<PAGE>
Annual Dealer Concession Trail
Year (as % of Contract Value)**
------ --------------------------
1 .00%
2-6 .20%
7+ .40%
* First premium that brings Cumulative Premium into the next tier will
receive the next tier's rate. Commissions paid on earlier premiums will not
be adjusted.
** Trail commissions will be calculated quarterly (measured from contract
date) based on the contract value at the time. The first calculation will
take place at the end of the 15th contract month. The trail commission will
be paid for eligible contracts at the end of each calendar quarter.
2. RELIASTAR LIFE SELECT*LIFE II
Broker-Dealer shall be paid a total dealer concession according to the
following schedule:
Issue Ages 0-65 Issue Ages 66-75
--------------- ----------------
1st Year 90.00% 81.00%
Excess Premium 3.60% 3.60%
(1st Year)
Basic Renewal and 2.00% 2.00%
Lifetime Renewal
Commissions
Asset Based*** 0.25% 0.25%
3. RELIASTAR LIFE SELECT*LIFE III
Broker-Dealer shall be paid a total dealer concession according to the
following schedule:
Issue Ages 0-65 Issue Ages 66-75
--------------- ----------------
1st Year 63.00% 54.00%
Excess Premium 4.50% 4.50%
(1st Year)
Basic Renewal and 2.50% 2.50%
Lifetime Renewal
Commissions
Asset Based*** 0.10% 0.10%
<PAGE>
4. RELIASTAR LIFE SELECT*SURVIVORSHIP LIFE (SVUL I)
Broker-Dealer shall be paid a total dealer concession according to the
following schedule:
Issue Ages 20-85
----------------
1st Year**** 81.00%
Excess Premium 3.60%
(1st Year)
Basic Renewal 2.00%
Commissions
Lifetime Renewal 0.00%
Commissions
Asset Based*** 0.10%
*** Asset Based commissions, per policy, are based on the average of the twelve
monthly Accumulation Values (net of loaned accumulation values) measured at
the end of the Policy Month. The Asset Based Commissions are payable at the
end of each Policy Year when that average is greater than or equal to
$5,000.00. It will be paid concurrently with the first pay period
immediately following the Policy Anniversary.
**** A portion of the 1st Year dealer concession paid on the SVUL I may be
charged back on any policy that lapses before the end of the third policy
year.
II
General Rules Pertaining to Variable Contracts
1. CHANGE OF DEALER AUTHORIZATION. No compensation of any kind shall be payable
in respect of Variable Contracts following the Insurer's or General
Distributor's receipt of a change of dealer authorization applicable to such
Variable contract.
2. CHANGE IN REPRESENTATIVE'S STATUS. If a Representative ceases to be an
affiliated person of Broker-Dealer, all compensation in respect of Variable
Contracts written by such Representative shall continue to be paid to
Broker-Dealer (provided Broker-Dealer or another Representative affiliated
with Broker-Dealer holds the required state insurance licenses and
appointments) until the earlier of:
(1) The date of a change of dealer authorization form or other customer
account transfer form signed by the Variable Contract Owner is filed
with Insurer and General Distributor; or
<PAGE>
(2) The date the written consent of Broker-Dealer to the block transfer of
all such Variable Contracts to another broker-dealer with whom ReliaStar
Life has a selling agreement for Variable Contracts is filed with Insurer
and General Distributor.
3. EXCLUSIVE COMPENSATION. Broker-Dealer agrees that no compensation of any kind
other than as described herein is payable by Insurer or General Distributor
in respect of Broker-Dealer's sales of Variable Contracts.
4. VESTING. First year commissions and Basic Renewal commissions in respect of
Select*Life Variable Contracts issued after the effective date and prior to
the termination date of Broker-Dealer's appointment are vested in
Broker-Dealer and will be paid to Broker-Dealer as and when the related
premium is received by the issuer and applied to the Select*Life Variable
Contract issued, and provided, however, that no First Year commissions or
Basic Renewal Commissions (Policy years 2 through 10), including those on
cost of living or any other policy increases, will be paid after
Broker-Dealer's appointment has been terminated for more than ten years.
The Asset Based Commission in respect of a Select*Life Variable Contract
issued after the effective date and prior to the termination date of
Broker-Dealer's appointment is vested in Broker-Dealer for a period of 120
months from the Policy Date and for a period of 120 months from the effective
date of any commissionable increase in coverage sold by Broker-Dealer's
Registered Representatives. Asset Based Commission, if payable, shall be
calculated and paid in accordance with Footnote (***) above. Asset Based
Commissions are not First Year Commissions, Basic Renewal Commissions, nor
Lifetime Renewal Commissions.
5. RENEWAL OVERWRITE COMMISSIONS. Renewal Overwrite Commission of 50% of the
Basic Renewal Commission or Lifetime Renewal Commission (renewals paid after
10th policy year) on renewal life insurance premiums paid on life insurance
polices written by Broker-Dealer's Representatives, will be paid when such
aggregate premiums exceed $300,000 per your contract year. Renewal overwrite
will be paid only on policies with an application signed date of January 1,
1994 or later.
6. REPLACEMENT BUSINESS. If any policy is issued to replace a policy previously
issued by Insurer or an affiliate, commissions will accrue only if and to the
extent that Insurer's established practices provide the commissions on such
replacements.
7. COMMISSIONS. Commissions shall accrue on Variable Contracts issued as and
when premiums are received by Insurer and applied as premiums due or payable
on such policies, except as Insurer's practices may otherwise provide.
8. CHARGE-BACKS. In any case, where Insurer has credited a commission to Broker-
Dealer on the basis of a premium on a Variable Contract issued and the
premium is returned to the purchaser, Insurer will charge back such
commissions.
9. ADDITIONAL BENEFITS AND RIDERS. Commissions will be credited based on
premiums for additional benefits (for example, waiver of premium and term
riders) added at issue of a policy at the same rate as applied to the base
policy premium.
<PAGE>
"A"
BROKER DEALER AGENCY
SELLING AGREEMENT
This Agreement is made among the following three parties:
1. RELIASTAR LIFE INSURANCE COMPANY
20 Washington Avenue South
Minneapolis, Minnesota 55401-1900
A MINNESOTA DOMICILED STOCK LIFE INSURANCE COMPANY
(hereinafter "INSURER"); and,
2. WASHINGTON SQUARE SECURITIES, INC.
20 Washington Avenue South
Minneapolis, Minnesota 55401-1900
AN AFFILIATE OF INSURER, REGISTERED AS A BROKER-DEALER WITH
THE SECURITIES AND EXCHANGE COMMISSION ("SEC") AND A MEMBER OF
THE NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC. ("NASD")
(hereinafter "GENERAL DISTRIBUTOR"); and,
3.
------------------------------
------------------------------
Street
------------------------------
City State ZIP
REGISTERED AS A BROKER-DEALER WITH THE SEC AND A MEMBER OF THE
NASD AND LICENSED AS AN INSURANCE AGENCY (hereinafter
"BROKER-DEALER").
RECITALS:
Whereas, Broker-Dealer is licensed as an insurance agency in order to
satisfy state insurance law requirements with respect to the sale of traditional
life insurance policies as well as variable insurance products which are
registered securities with the SEC.
Whereas, the parties wish to enter into an agreement for the
distribution of Variable Contracts and Traditional Life Insurance Policies by
Broker-Dealer; and
Whereas, Insurer has appointed General Distributor as principal
underwriter and distributor (as those terms are defined by the Investment
Company Act of 1940) of the Variable Contracts and has authorized General
Distributor to enter into selling agreements with registered broker-dealers for
the solicitation and sale of Variable Contracts; and,
<PAGE>
Whereas, Insurer and General Distributor propose to have
Broker-Dealer's registered representatives who are licensed as life
insurance/variable contract agents in appropriate jurisdictions
("Representatives") solicit and sell Variable Contracts and Traditional Life
Insurance Policies; and,
Whereas, Insurer and General Distributor propose to have Broker-Dealer
provide certain supervisory and administrative services as hereinafter described
with respect to the solicitation and sales of Variable Contracts and Traditional
Life Insurance Policies.
NOW THEREFORE, in consideration of the premises and the mutual
covenants hereinafter set forth, the parties now agree as follows:
1. DEFINITIONS
In this Agreement,
(a) The words "Variable Contract" shall mean those variable life
insurance policies and variable annuity contracts identified in Section
1 of Compensation Schedule A attached hereto, and as may hereafter be
amended.
Insurer may in its sole discretion and without notice to
Broker Dealer, suspend sales of any Variable Contracts or amend any
policies or contracts evidencing such Variable Contracts if, in
Insurer's opinion, such suspension or amendment is: (1) necessary for
compliance with federal, state, or local laws, regulations, or
administrative order(s); or, (2) necessary to prevent administrative or
financial hardship to Insurer. In all other situations, Insurer shall
provide 30 days notice to Broker Dealer prior to suspending sales of
any Variable Contracts or amending any policies or contracts evidencing
such Variable Contracts.
Insurer may issue and propose additional or successor
products, in which event Broker Dealer will be informed of the product
and its related Commission Schedule. If Broker Dealer does not agree to
distribute such product (s), it must notify Insurer in writing within
30 days of receipt of the Commission Schedule for such product(s). If
Broker Dealer does not indicate disapproval of the new product(s) or
the terms contained in the related Commission Schedule, Broker Dealer
will be deemed to have thereby agreed to distribute such product(s) and
agreed to the related Commission Schedule which shall be attached to
and made a part of this Agreement.
(b) The words "Traditional Life Insurance Policy" shall mean those life
insurance policies and annuity contracts identified in Section 2 of
Compensation Schedule A attached hereto, and as may hereafter be
amended.
<PAGE>
Insurer may in its sole discretion and without notice to
Broker Dealer, suspend sales of any Traditional Life Insurance Policies
or amend any policies or contracts evidencing such Traditional Life
Insurance Policies if, in Insurer's opinion, such suspension or
amendment is: (1) necessary for compliance with federal, state, or
local laws, regulations, or administrative order(s); or, (2) necessary
to prevent administrative or financial hardship to Insurer. In all
other situations, Insurer shall provide 30 days notice to Broker Dealer
prior to suspending sales of any Traditional Life Insurance Policies or
amending any policies or contracts evidencing such Traditional Life
Insurance Policies.
Insurer may issue and propose additional or successor
products, in which event Broker Dealer will be informed of the product
and its related Compensation Schedule. If Broker Dealer does not agree
to distribute such product (s), it must notify Insurer in writing
within 30 days of receipt of the Compensation Schedule for such
product(s). If Broker Dealer does not indicate disapproval of the new
product(s) or the terms contained in the related Compensation Schedule,
Broker Dealer will be deemed to have thereby agreed to distribute such
product(s) and agreed to the related Compensation Schedule which shall
be attached to and made a part of this Agreement.
2. AGENCY APPOINTMENT
On the effective date, Insurer and General Distributor appoint Broker
Dealer and Broker Dealer accepts the appointment to solicit sales of
and to sell Variable Contracts and Traditional Life Insurance Policies,
pursuant to the terms of this Agreement.
3. DUTIES OF BROKER DEALER
(a) Supervision of Representatives. Broker Dealer shall have full
responsibility for the training and supervision of all Representatives
who are engaged directly or indirectly in the offer or sale of the
Variable Contracts, and all such persons shall be subject to the
control of Broker Dealer with respect to such persons' securities
regulated activities in connection with the Variable Contracts. Broker
Dealer will cause the Representatives to be trained in the sale of the
Variable Contracts, will cause such Representatives to qualify under
applicable federal and state laws to engage in the sale of the Variable
Contracts; will cause such Representatives to be registered
representatives of Broker Dealer before such Representatives engage in
the solicitation of applications for the Variable Contracts; and will
cause such Representatives to limit solicitation of applications for
the Variable Contracts to jurisdictions where Insurer has authorized
such solicitation. Broker Dealer shall cause such Representatives'
qualifications to be certified to the satisfaction of General
Distributor and shall notify General Distributor if any Representative
ceases to be a registered representative of Broker Dealer or ceases to
maintain the proper licensing
<PAGE>
required for the sale of the Variable Contracts. All parties shall be
liable for their own negligence and misconduct under this paragraph.
(b) Representatives Insurance Compliance. Broker Dealer, prior to
allowing its Representatives to solicit for sales or sell the Variable
Contracts and Traditional Life Insurance Policies, shall require such
representatives to be validly insurance licensed, registered and
appointed by Insurer as a variable contract/life insurance agent in
accordance with the jurisdictional requirements of the place where the
solicitations and sales take place as well as the solicited person's or
entity's place of residence.
Broker Dealer shall assist Insurer in the appointment of
Representatives under the applicable insurance laws to sell Variable
Contracts and Traditional Life Insurance Policies. Broker Dealer shall
fulfill all Insurer requirements in conjunction with the submission of
licensing/appointment papers for all applicants as insurance agents of
Insurer. All such licensing/appointment papers shall be submitted to
Insurer or its designee by Broker Dealer. Notwithstanding such
submission, Insurer shall have sole discretion to appoint, refuse to
appoint, discontinue, or terminate the appointment of any
Representative as an insurance agent of Insurer.
(c) Compliance with NASD Conduct Rules of Fair Practice and Federal and
State Securities Laws. Broker Dealer shall fully comply with the
requirements of the National Association of Securities Dealers, Inc.,
the Securities Exchange Act of 1934 and all other applicable federal
and state laws. In addition, Broker Dealer will establish and maintain
such rules and procedures as may be necessary to cause diligent
supervision of the securities activities of the Representatives as
required by applicable law or regulation. Upon request by General
Distributor, Broker Dealer shall furnish such records as may be
necessary to establish such diligent supervision.
(d) Notice of Representative's Noncompliance. In the event a
Representative fails or refuses to submit to supervision of Broker
Dealer or otherwise fails to meet the rules and standards imposed by
Broker Dealer on its Representatives, Broker Dealer shall advise
General Distributor of this fact and shall immediately notify such
Representative that he or she is no longer authorized to sell the
Variable Contracts or Traditional Life Insurance Policies and Broker
Dealer shall take whatever additional action may be necessary to
terminate the sales activities of such Representative relating to such
contracts and policies.
(e) Prospectuses, Sales Promotion Material and Advertising.
Broker-Dealer shall be provided, without any expense to Broker Dealer,
with prospectuses relating to the Variable Contracts and such other
supplementary sales material as General Distributor determines is
necessary or desirable for use in connection with sales of the Variable
Contracts and Traditional Life Insurance Policies.
<PAGE>
NO SALES PROMOTION MATERIALS OR ANY ADVERTISING RELATING TO
THE VARIABLE CONTRACTS AND TRADITIONAL LIFE INSURANCE POLICIES,
INCLUDING WITHOUT LIMITATION GENERIC ADVERTISING MATERIAL WHICH DOES
NOT REFER TO INSURER BY NAME, SHALL BE USED BY BROKER DEALER UNLESS THE
SPECIFIC ITEM HAS BEEN APPROVED IN WRITING BY GENERAL DISTRIBUTOR PRIOR
TO SUCH USE.
In addition, Broker Dealer shall not print, publish or
distribute any advertisement, circular or any document relating to
Insurer unless such advertisement, circular or document shall have been
approved in writing by Insurer prior to such use.
Upon termination of this Agreement, all prospectuses, sales
promotion material, advertising, circulars, documents and software
relating to the sales of Insurer's contracts shall be promptly turned
over to Insurer free from any claim or retention of rights by the
Broker Dealer.
Insurer represents that the prospectus and registration
statement relating to the Variable Contracts contain no untrue
statements of material fact or omission to state material fact, the
omission of which makes any statement contained in the prospectus and
registration statement misleading. Insurer agrees to indemnify Broker
Dealer from and against any claims, liabilities and expenses which may
be incurred under the Securities Act of 1933, the Investment Company
Act of 1940, common law or otherwise arising out of a breach of the
agreement in this paragraph.
Broker Dealer agrees to hold harmless and indemnify Insurer
and General Distributor against any and all claims, liabilities and
expenses which Insurer or General Distributor may incur from
liabilities arising out of or based upon any alleged or untrue
statement other than statements contained in the registration
statement, prospectus or approved sales material of any Variable
Contract.
In accordance with the requirements of the laws of the several
states, Broker Dealer shall maintain complete records indicating the
manner and extent of distribution of any such solicitation material,
shall make such records and files available to staff of Insurer or its
designated agent in field inspections and shall make such material
available to personnel of state insurance departments, the NASD or
other regulatory agencies, including the SEC, which have regulatory
authority over Insurer or General Distributor. Broker Dealer holds
Insurer, General Distributor and their affiliates harmless from any
liability arising from the use of any material which either (a) has not
been specifically approved by Insurer in writing, or (b) although
previously approved, has been disapproved, in writing, for further use.
(f) Securing Applications. All applications for Variable Contracts and
Traditional Life Insurance Policies shall be made on application forms
supplied by Insurer and all payments collected by Broker Dealer or any
Representative thereof shall be remitted promptly in full, together
with such application forms
<PAGE>
and any other required documentation, directly to Insurer at the
address indicated on such application or to such other address as
Insurer may, from time-to-time, designate in writing. Broker Dealer
shall review all such applications for accuracy and completeness.
Checks or money orders in payment on any such Variable Contract or
Traditional Life Insurance Policy shall be drawn to the order of
"ReliaStar Life Insurance Company." All applications are subject to
acceptance or rejection by Insurer at its sole discretion. All records
or information obtained hereunder by Broker Dealer shall not be
disclosed or used except as expressly authorized herein, and Broker
Dealer will keep such records and information confidential, to be
disclosed only as authorized or if expressly required by federal or
state regulatory authorities.
(g) Collection of Purchase Payments. Broker Dealer agrees that all
money or other consideration tendered with or in respect of any
application for a Variable Contract or Traditional Life Insurance
Policy and the Variable Contract or Traditional Life Insurance Policy
when issued is the property of Insurer and shall be promptly remitted
in full to Insurer without deduction or offset for any reason,
including by way of example but not limitation, any deduction or offset
for compensation claimed by Broker Dealer.
(h) Policy Delivery. Insurer will transmit Variable Contracts and
Traditional Life Insurance Policies to Broker Dealer for delivery to
Policyowners. Broker Dealer hereby agrees to deliver all such Variable
Contracts to Policyowners within ten (10) days of their receipt by
Broker Dealer from Insurer. Broker Dealer agrees to indemnify and hold
harmless Insurer for any and all losses caused by Broker Dealer's
failure to perform the undertakings described in this paragraph. Broker
Dealer hereby authorizes Insurer to set off any amount it owes Insurer
under this paragraph against any and all amounts otherwise payable to
Broker Dealer by Insurer.
(i) Fidelity Bond. Broker Dealer represents that all directors,
officers, employees and Representatives of Broker Dealer who are
licensed pursuant to this Agreement as Insurer's agents for state
insurance law purposes or who have access to funds of Insurer,
including but not limited to funds submitted with applications for the
Variable Contracts and Traditional Life Insurance Policies, or funds
being returned to owners, are and shall be covered by a blanket
fidelity bond, including coverage for larceny and embezzlement, issued
by a reputable bonding company. This bond shall be maintained by Broker
Dealer at Broker Dealer's expense. Such bond shall be, at least, of the
form, type and amount required under the NASD Conduct Rules of Fair
Practice. Insurer may require evidence, satisfactory to it, that such
coverage is in force and Broker Dealer shall give prompt written notice
to Insurer of any notice of cancellation or change of coverage.
Broker Dealer assigns any proceeds received from the fidelity
bonding company to Insurer to the extent of Insurer's loss due to
activities covered by the bond. If there is any deficiency amount,
whether due to a deductible or otherwise, Broker Dealer shall promptly
pay Insurer such amount on demand
<PAGE>
and Broker Dealer hereby indemnifies and holds harmless Insurer from
any such deficiency and from the costs of collection thereof (including
reasonable attorneys' fees).
4. COMPENSATION
(a) Variable Contracts. Insurer, on behalf of General Distributor,
shall pay a dealer concession to Broker Dealer on all sales of Variable
Contracts through its Representatives, in accordance with the form of
Compensation Schedule A attached hereto, which is in effect when
purchase payment on such Variable Contracts are received by Insurer.
Dealer concessions will be paid as a percentage of premiums received in
cash or other legal tender and accepted by Insurer on applications
obtained by Broker Dealer's Representatives unless otherwise indicated
in Compensation Schedule A. Upon termination of this Agreement, all
compensation payable hereunder shall cease; however, Broker Dealer
shall continue to be liable for any chargebacks or for any other
amounts advanced by or otherwise due Insurer hereunder.
Insurer will pay all such Compensation to the Broker Dealer.
Broker Dealer agrees to hold Insurer and General Distributor harmless
from all claims of its Representatives for compensation in respect of
Representative's sales of Variable Contracts.
(b) Traditional Life Insurance Policies. Insurer shall pay commissions
to Broker Dealer on all sales of Traditional Life Insurance Policies
through its Representatives in accordance with the form of Compensation
Schedule A attached hereto, which is in effect when purchase payments
on such Traditional Life Insurance Policies are received by Insurer.
Commissions will be paid as a percentage of premiums received in cash
or other legal tender and accepted by insurer on applications obtained
by Broker-Dealer's Representatives unless otherwise indicated in
Compensation Schedule A. Upon termination of this Agreement, all
compensation payable hereunder shall cease; however, Broker Dealer
shall continue to be liable for any chargebacks or for any other
amounts advanced by or otherwise due Insurer hereunder.
Insurer will pay all such compensation to the Broker Dealer.
Broker Dealer agrees to hold Insurer harmless from all claims of its
Representatives for compensation in respect of Representative's sales
of Traditional Life Insurance Policies.
(c) Commission Statements. Broker Dealer will be provided with copies
of its Representatives' commission statements together with Broker
Dealer's own commission statement for each commission payment period in
which commissions are payable. Broker Dealer agrees that, except as to
clerical errors and material undisclosed facts, if any, such statements
constitutes a complete and accurate statement of the commission account
unless written notice is
<PAGE>
provided to Insurer within 120 days after the date of the statement,
which notice specifically sets forth the objections or exceptions
thereto.
(d) Compensation Schedules. The initial Compensation Schedule A is
attached.
Insurer and General Distributor reserve the right to change,
amend, or cancel any Compensation Schedule as to business produced
after such change by mailing notice of such change in the form of a new
Compensation Schedule to Broker Dealer. Such change shall be effective,
unless otherwise specified, ten (10) days after the notice is mailed.
(e) Rights of Rejection and Settlement. Insurer reserves the right to
reject any and all applications and collections submitted, to
discontinue writing any form of policy, to take possession of and
cancel any policy and return the premium or any part of it, and to make
any compromise settlement in respect of a policy. Broker Dealer will
not be entitled to receive or retain any compensation on premiums or
parts of premiums Insurer does not receive and retain because of such
rejection, discontinuance, cancellation, or compromise settlement. If
compensation has been paid to which Broker Dealer is not entitled, any
amount credited will be charged back, and if the account balance is
insufficient to cover the credited amount, Broker Dealer as applicable
agrees to promptly repay the credited amount.
5. TERMINATION
This Agreement may be terminated, without cause, by any party upon
thirty (30) days prior written notice; and may be terminated, for
failure to perform satisfactorily or other cause, by any party
immediately; and shall be terminated if Broker Dealer ceases to be
registered as a broker dealer under the Securities Exchange Act of 1934
and a member of the NASD or, if Broker Dealer ceases to maintain its
insurance agent license(s) in good standing in the jurisdictions in
which it conducts business.
6. ARBITRATION
Any dispute, claim or controversy arising out of or in connection with
this Agreement shall be submitted to arbitration pursuant to the NASD's
arbitration facilities. If the subject matter of the dispute, claim or
controversy is not within the scope of matters which may arbitrated
through the NASD arbitration facilities, then such dispute, claim or
controversy shall, upon the written request of any party, be submitted
to three arbitrators, one to be chosen by each party, and the third by
the two so chosen. If either party refuses or neglects to appoint an
arbitrator within thirty (30) days after the receipt of the written
notice from the other party requesting it to do so, the requesting
party may appoint two arbitrators. If the two arbitrators fail to agree
in the selection of a third arbitrator
<PAGE>
within thirty (30) days of their appointment, each of them shall name
two, of whom the other shall decline one and the decision shall be made
by drawing lots. All arbitrators shall be active or retired executive
officers of insurance companies not under the control of any party to
this Agreement. Each party shall submit its case to the arbitrators
within thirty (30) days of the appointment of the third arbitrator. The
arbitration shall be held in Minneapolis, Minnesota at the times agreed
upon by the arbitrators. The decision in writing of any two
arbitrators, when filed with the parties hereto shall be final and
binding on both parties. Judgment may be entered upon the final
decision of the arbitrators in any court having jurisdiction. Each
party shall bear the expense of its own arbitrator and shall jointly
and equally bear with the other party the expense of the third
arbitrator and of the arbitration.
7. GENERAL PROVISIONS
(a) Additions, Amendments, Modifications & Waivers. This Agreement
shall not be effective until approved by Insurer and General
Distributor. Insurer and General Distributor reserve the right to amend
this Agreement at any time, and the submission of an application by
Broker Dealer after notice of any such amendment has been sent shall
constitute Broker Dealer's agreement to any such amendment. No
additions, amendments or modifications of this Agreement or any waiver
of any provision will be valid unless approved, in writing, by one of
Insurer's duly authorized officers. In addition, no approved waiver of
any default, or failure of performance by Broker Dealer will affect
Insurer's or General Distributor's rights with respect to any later
default or failure of performance.
(b) Independent Contractor Relationship. This Agreement does not create
the relationship of employer and employee between the parties to this
Agreement. Insurer and General Distributor are independent contractors
with respect to Broker Dealer and its Representatives.
(c) Assignments. Broker Dealer will not assign or transfer, either
wholly or partially, this Agreement or any of the benefits accrued or
to accrue under it, without the written prior consent of a duly
authorized officer of the Insurer and General Distributor.
(d) Service of Process. If Broker Dealer receives or is served with any
notice or other paper concerning any legal action against Insurer or
General Distributor, Broker Dealer agrees to notify Insurer immediately
(in any event not later than the first business day after receipt) by
telephone and further agrees to transmit any papers that are served or
received by facsimile to (612) 342-7531 and by overnight mail to
Insurer's Office of General Counsel.
(e) Severability. It is understood and agreed by the parties to this
Agreement that if any part, term or provision of this Agreement is held
to be invalid or in conflict with any law or regulation, the validity
of the remaining portions or provisions will not be affected, and the
parties' rights and obligations will be
<PAGE>
construed and enforced as if this Agreement did not contain the
particular part, term or provision held to be invalid.
(f) Governing Law. It is agreed by the parties to this Agreement that
the Agreement and all of its provisions will be governed by the laws of
the State of Minnesota.
(g) Limitations. No party other than Insurer shall have the authority
on behalf of Insurer to make, alter, or discharge any policy, contract,
or certificate issued by Insurer, to waive any forfeiture or to grant,
permit, nor extend the time for making any payments nor to guarantee
earnings or rates, nor to alter the forms which Insurer may prescribe
or substitute other forms in place of those prescribed by Insurer, nor
to enter into any proceeding in a court of law or before a regulatory
agency in the name of or on behalf of Insurer, nor to open any bank
account in the full legal name of Insurer, any derivation thereof or
any tradename thereof.
8. TERRITORY
Broker Dealer's territory is limited geographically to those
jurisdictions in which the Variable Contracts and Traditional Life
Insurance Policies may lawfully be offered, provided that Broker
Dealer's right to solicit sales of and to sell the Variable Contracts
and Traditional Life Insurance Policies in such jurisdictions is not
exclusive.
9. EFFECTIVE DATE
This Agreement shall be effective ________________, 199__.
<PAGE>
IN WITNESS WHEREOF, we set our hands this ____ day of _________________. 199__.
INSURER:
RELIASTAR LIFE INSURANCE COMPANY
By: _____________________________
Title: _____________________________
GENERAL DISTRIBUTOR:
WASHINGTON SQUARE SECURITIES, INC.
By: _____________________________
Title: _____________________________
BROKER DEALER:
______________________________________
By: _____________________________
Title: _____________________________
<PAGE>
"B"
BROKER DEALER AGENCY
SELLING AGREEMENT
This Agreement is made among the following four parties:
1. RELIASTAR LIFE INSURANCE COMPANY
20 Washington Avenue South
Minneapolis, Minnesota 55401-1900
A MINNESOTA DOMICILED STOCK LIFE INSURANCE COMPANY
(hereinafter "INSURER"); and,
2. WASHINGTON SQUARE SECURITIES, INC.
20 Washington Avenue South
Minneapolis, Minnesota 55401-1900
AN AFFILIATE OF INSURER, REGISTERED AS A BROKER-DEALER WITH
THE SECURITIES AND EXCHANGE COMMISSION ("SEC") AND A MEMBER OF
THE NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC. ("NASD")
(hereinafter "GENERAL DISTRIBUTOR"); and,
3.
------------------------------
------------------------------
Street
------------------------------
City State ZIP
REGISTERED AS A BROKER-DEALER WITH THE SEC AND A MEMBER OF THE
NASD (hereinafter "BROKER-DEALER"); and,
4.
------------------------------
------------------------------
Street
------------------------------
City State ZIP
AN AFFILIATE OF BROKER-DEALER AND A LICENSED INSURANCE AGENCY
(hereinafter "AGENCY").
<PAGE>
RECITALS:
Whereas, Broker-Dealer has become affiliated with Agency in order to
satisfy state insurance law requirements with respect to the sale of variable
insurance products which are registered securities with the SEC.
Whereas, the parties wish to enter into an agreement for the
distribution of Variable Contracts and Traditional Life Insurance Policies by
Broker-Dealer and Agency; and
Whereas, Insurer has appointed General Distributor as principal
underwriter and distributor (as those terms are defined by the Investment
Company Act of 1940) of the Variable Contracts and has authorized General
Distributor to enter into selling agreements with registered broker-dealers for
the solicitation and sale of Variable Contracts; and,
Whereas, Insurer and General Distributor propose to have
Broker-Dealer's registered representatives who are affiliated with Agency and
who are licensed as life insurance/variable contract agents in appropriate
jurisdictions ("Representatives") solicit and sell Variable Contracts and
Traditional Life Insurance Policies; and,
Whereas, Insurer proposes to authorize Agency's employees who are not
registered representatives of Broker-Dealer but who are licensed as life
insurance agents in appropriate jurisdictions ("Agents") to solicit and sell
Traditional Life Insurance Policies; and,
Whereas, Insurer and General Distributor propose to have Broker-Dealer
provide certain supervisory and administrative services as hereinafter described
with respect to the solicitation and sales of Variable Contracts; and,
Whereas, Insurer proposes to have Agency provide certain supervisory
and administrative services as hereinafter described with respect to the
solicitation and sales of Traditional Life Insurance Policies by its Agents and
by Representatives who are affiliated with Agency.
NOW THEREFORE, in consideration of the premises and the mutual
covenants hereinafter set forth, the parties now agree as follows:
<PAGE>
1. DEFINITIONS
In this Agreement,
(a) The words "Variable Contract" shall mean those variable life
insurance policies and variable annuity contracts identified in Section
1 of Compensation Schedule A attached hereto, and as may hereafter be
amended.
Insurer may in its sole discretion and without notice to
Broker Dealer, suspend sales of any Variable Contracts or amend any
policies or contracts evidencing such Variable Contracts if, in
Insurer's opinion, such suspension or amendment is: (1) necessary for
compliance with federal, state, or local laws, regulations, or
administrative order(s); or, (2) necessary to prevent administrative or
financial hardship to Insurer. In all other situations, Insurer shall
provide 30 days notice to Broker Dealer prior to suspending sales of
any Variable Contracts or amending any policies or contracts evidencing
such Variable Contracts.
Insurer may issue and propose additional or successor
products, in which event Broker Dealer will be informed of the product
and its related Commission Schedule. If Broker Dealer does not agree to
distribute such product (s), it must notify Insurer in writing within
30 days of receipt of the Commission Schedule for such product(s). If
Broker Dealer does not indicate disapproval of the new product(s) or
the terms contained in the related Commission Schedule, Broker Dealer
will be deemed to have thereby agreed to distribute such product(s) and
agreed to the related Commission Schedule which shall be attached to
and made a part of this Agreement.
(b) The words "Traditional Life Insurance Policy" shall mean those life
insurance policies and annuity contracts identified in Section 2 of
Compensation Schedule A attached hereto, and as may hereafter be
amended.
Insurer may in its sole discretion and without notice to
Broker Dealer, suspend sales of any Traditional Life Insurance Policies
or amend any policies or contracts evidencing such Traditional Life
Insurance Policies if, in Insurer's opinion, such suspension or
amendment is: (1) necessary for compliance with federal, state, or
local laws, regulations, or administrative order(s); or, (2) necessary
to prevent administrative or financial hardship to Insurer. In all
other situations, Insurer shall provide 30 days notice to Broker Dealer
prior to suspending sales of any Traditional Life Insurance Policies or
amending any policies or contracts evidencing such Traditional Life
Insurance Policies.
<PAGE>
Insurer may issue and propose additional or successor
products, in which event Broker Dealer will be informed of the product
and its related Compensation Schedule. If Broker Dealer does not agree
to distribute such product (s), it must notify Insurer in writing
within 30 days of receipt of the Compensation Schedule for such
product(s). If Broker Dealer does not indicate disapproval of the new
product(s) or the terms contained in the related Compensation Schedule,
Broker Dealer will be deemed to have thereby agreed to distribute such
product(s) and agreed to the related Compensation Schedule which shall
be attached to and made a part of this Agreement.
2. AGENCY APPOINTMENTS
On the effective date,
(a) Insurer and General Distributor appoint Broker Dealer and Broker
Dealer accepts the appointment to solicit sales of and to sell Variable
Contracts only, pursuant to the terms of this Agreement.
(b) Insurer appoints Agency, and Agency accepts the appointment to
solicit sales of and to sell Traditional Life Insurance Policies only,
pursuant to the terms of this Agreement.
3. DUTIES OF BROKER DEALER
(a) Supervision of Representatives. Broker Dealer shall have full
responsibility for the training and supervision of all Representatives
who are engaged directly or indirectly in the offer or sale of the
Variable Contracts, and all such persons shall be subject to the
control of Broker Dealer with respect to such persons' securities
regulated activities in connection with the Variable Contracts. Broker
Dealer will cause the Representatives to be trained in the sale of the
Variable Contracts, will cause such Representatives to qualify under
applicable federal and state laws to engage in the sale of the Variable
Contracts; will cause such Representatives to be registered
representatives of Broker Dealer before such Representatives engage in
the solicitation of applications for the Variable Contracts; and will
cause such Representatives to limit solicitation of applications for
the Variable Contracts to jurisdictions where Insurer has authorized
such solicitation. Broker Dealer shall cause such Representatives'
qualifications to be certified to the satisfaction of General
Distributor and shall notify General Distributor if any Representative
ceases to be a registered representative of Broker Dealer or ceases to
maintain the proper licensing required for the sale of the Variable
Contracts. All parties shall be liable for their own negligence and
misconduct under this paragraph.
<PAGE>
(b) Representatives Insurance Compliance. Broker Dealer, prior to
allowing its Representatives to solicit for sales or sell the Variable
Contracts, shall require such representatives to be validly insurance
licensed, registered and appointed by Insurer as a variable contract
agent in accordance with the jurisdictional requirements of the place
where the solicitations and sales take place as well as the solicited
person's or entity's place of residence.
Broker Dealer shall assist Insurer in the appointment of
Representatives under the applicable insurance laws to sell the
Variable Contracts. Broker Dealer shall fulfill all Insurer
requirements in conjunction with the submission of
licensing/appointment papers for all applicants as insurance agents of
Insurer. All such licensing/appointment papers shall be submitted to
Insurer or its designee by Broker Dealer. Notwithstanding such
submission, Insurer shall have sole discretion to appoint, refuse to
appoint, discontinue, or terminate the appointment of any
Representative as an insurance agent of Insurer.
(c) Compliance with NASD Conduct Rules of Fair Practice and Federal and
State Securities Laws. Broker Dealer shall fully comply with the
requirements of the National Association of Securities Dealers, Inc.,
the Securities Exchange Act of 1934 and all other applicable federal
and state laws. In addition, Broker Dealer will establish and maintain
such rules and procedures as may be necessary to cause diligent
supervision of the securities activities of the Representatives as
required by applicable law or regulation. Upon request by General
Distributor, Broker Dealer shall furnish such records as may be
necessary to establish such diligent supervision.
(d) Notice of Representative's Noncompliance. In the event a
Representative fails or refuses to submit to supervision of Broker
Dealer or otherwise fails to meet the rules and standards imposed by
Broker Dealer on its Representatives, Broker Dealer shall advise
General Distributor of this fact and shall immediately notify such
Representative that he or she is no longer authorized to sell the
Variable Contracts and Broker Dealer shall take whatever additional
action may be necessary to terminate the sales activities of such
Representative relating to the Variable Contracts.
(e) Prospectuses, Sales Promotion Material and Advertising.
Broker-Dealer shall be provided, without any expense to Broker Dealer,
with prospectuses relating to the Variable Contracts and such other
supplementary sales material as General Distributor determines is
necessary or desirable for use in connection with sales of the Variable
Contracts.
<PAGE>
NO SALES PROMOTION MATERIALS OR ANY ADVERTISING RELATING TO
THE VARIABLE CONTRACTS, INCLUDING WITHOUT LIMITATION GENERIC
ADVERTISING MATERIAL WHICH DOES NOT REFER TO INSURER BY NAME, SHALL BE
USED BY BROKER DEALER UNLESS THE SPECIFIC ITEM HAS BEEN APPROVED IN
WRITING BY GENERAL DISTRIBUTOR PRIOR TO SUCH USE.
In addition, Broker Dealer shall not print, publish or
distribute any advertisement, circular or any document relating to
Insurer unless such advertisement, circular or document shall have been
approved in writing by Insurer prior to such use.
Upon termination of this Agreement, all prospectuses, sales
promotion material, advertising, circulars, documents and software
relating to the sales of the Variable Contracts shall be promptly
turned over to Insurer free from any claim or retention of rights by
the Broker Dealer.
Insurer represents that the prospectus and registration
statement relating to the Variable Contracts contain no untrue
statements of material fact or omission to state material fact, the
omission of which makes any statement contained in the prospectus and
registration statement misleading. Insurer agrees to indemnify Broker
Dealer from and against any claims, liabilities and expenses which may
be incurred under the Securities Act of 1933, the Investment Company
Act of 1940, common law or otherwise arising out of a breach of the
agreement in this paragraph.
Broker Dealer agrees to hold harmless and indemnify Insurer
and General Distributor against any and all claims, liabilities and
expenses which Insurer or General Distributor may incur from
liabilities arising out of or based upon any alleged or untrue
statement other than statements contained in the registration
statement, prospectus or approved sales material of any Variable
Contract.
In accordance with the requirements of the laws of the several
states, Broker Dealer shall maintain complete records indicating the
manner and extent of distribution of any such solicitation material,
shall make such records and files available to staff of Insurer or its
designated agent in field inspections and shall make such material
available to personnel of state insurance departments, the NASD or
other regulatory agencies, including the SEC, which have regulatory
authority over Insurer or General Distributor. Broker Dealer holds
Insurer, General Distributor and their affiliates harmless from any
liability arising from the use of any material which either (a) has not
been specifically approved in writing, or (b) although previously
approved, has been disapproved, in writing, for further use.
<PAGE>
(f) Securing Applications. All applications for Variable Contracts
shall be made on application forms supplied by Insurer and all payments
collected by Broker Dealer or any Representative thereof shall be
remitted promptly in full, together with such application forms and any
other required documentation, directly to Insurer at the address
indicated on such application or to such other address as Insurer may,
from time-to-time, designate in writing. Broker Dealer shall review all
such applications for accuracy and completeness. Checks or money orders
in payment on any such Variable Contract shall be drawn to the order of
"ReliaStar Life Insurance Company." All applications are subject to
acceptance or rejection by Insurer at its sole discretion. All records
or information obtained hereunder by Broker Dealer shall not be
disclosed or used except as expressly authorized herein, and Broker
Dealer will keep such records and information confidential, to be
disclosed only as authorized or if expressly required by federal or
state regulatory authorities.
(g) Collection of Purchase Payments. Broker Dealer agrees that all
money or other consideration tendered with or in respect of any
application for a Variable Contract and the Variable Contract when
issued is the property of Insurer and shall be promptly remitted in
full to Insurer without deduction or offset for any reason, including
by way of example but not limitation, any deduction or offset for
compensation claimed by Broker Dealer.
(h) Policy Delivery. Insurer will transmit Variable Contracts to Broker
Dealer for delivery to Policyowners. Broker Dealer hereby agrees to
deliver all such Variable Contracts to Policyowners within ten (10)
days of their receipt by Broker Dealer from Insurer. Broker Dealer
agrees to indemnify and hold harmless Insurer for any and all losses
caused by Broker Dealer's failure to perform the undertakings described
in this paragraph. Broker Dealer hereby authorizes Insurer to set off
any amount it owes Insurer under this paragraph against any and all
amounts otherwise payable to Broker Dealer by Insurer.
(i) Fidelity Bond. Broker Dealer represents that all directors,
officers, employees and Representatives of Broker Dealer who are
licensed pursuant to this Agreement as Insurer's agents for state
insurance law purposes or who have access to funds of Insurer,
including but not limited to funds submitted with applications for the
Variable Contracts or funds being returned to owners, are and shall be
covered by a blanket fidelity bond, including coverage for larceny and
embezzlement, issued by a reputable bonding company. This bond shall be
maintained by Broker Dealer at Broker Dealer's expense. Such bond shall
be, at least, of the form, type and amount required under the NASD
Conduct Rules of Fair Practice. Insurer may require evidence,
satisfactory to it, that such coverage is in force and Broker Dealer
shall give prompt written notice to Insurer of any notice of
cancellation or change of coverage.
<PAGE>
Broker Dealer assigns any proceeds received from the fidelity
bonding company to Insurer to the extent of Insurer's loss due to
activities covered by the bond. If there is any deficiency amount,
whether due to a deductible or otherwise, Broker Dealer shall promptly
pay Insurer such amount on demand and Broker Dealer hereby indemnifies
and holds harmless Insurer from any such deficiency and from the costs
of collection thereof (including reasonable attorneys' fees).
4. DUTIES OF AGENCY
(a) Supervision of Agents and Representatives. Agency shall have full
responsibility for the training and supervision of all Agents and
Representatives who are engaged directly or indirectly in the offer or
sale of Traditional Life Insurance Policies. Agency will cause the
Agents and Representatives to be trained in the sale of Traditional
Life Insurance Policies, will cause such Agents and Representatives to
qualify under applicable state insurance laws to engage in the sale of
life insurance before such Agents and Representatives engage in the
solicitation of applications for Traditional Life Insurance Policies;
and will cause such Agents and Representatives to limit solicitation of
applications for Traditional Life Insurance Policies to jurisdictions
where Insurer has authorized such solicitation. Agency shall cause such
Agents' and Representatives' qualifications to be certified to the
satisfaction of Insurer and shall notify Insurer if any Agent or
Representative ceases to be an employee of Agency or ceases to maintain
the proper licensing required for the sale of Traditional Life
Insurance Policies. All parties shall be liable for their own
negligence and misconduct under this paragraph.
(b) Agent Insurance Compliance. Agency, prior to allowing Agents or
Representatives to solicit for sales or sell Traditional Life Insurance
Policies, shall require such agents to be validly insurance licensed,
registered and appointed by Insurer as a life insurance agent in
accordance with the jurisdictional requirements of the place where the
solicitations and sales take place as well as the solicited person's or
entity's place of residence.
Agency shall assist Insurer in the appointment of Agents and
Representatives under the applicable insurance laws to sell Traditional
Life Insurance Policies. Agency shall fulfill all Insurer requirements
in conjunction with the submission of licensing/appointment papers for
all applicants as insurance agents of Insurer. All such
licensing/appointment papers shall be submitted to Insurer or its duly
appointed agent by Agency. Notwithstanding such submission, Insurer
shall have sole discretion to appoint, refuse to appoint, discontinue,
or terminate the appointment of any Agent or Representative as an
insurance agent of Insurer.
<PAGE>
(c) Sales Promotion Material and Advertising. Agency shall be provided,
without any expense to Agency, such sales promotion and advertising
materials as Insurer determines is necessary or desirable for use in
connection with sales of Traditional Life Insurance Policies.
NO SALES PROMOTION MATERIALS OR ANY ADVERTISING RELATING TO
TRADITIONAL LIFE INSURANCE POLICIES, INCLUDING WITHOUT LIMITATION
GENERIC ADVERTISING MATERIAL WHICH DOES NOT REFER TO INSURER BY NAME,
SHALL BE USED BY AGENCY UNLESS THE SPECIFIC ITEM HAS BEEN APPROVED IN
WRITING BY INSURER PRIOR TO SUCH USE.
In addition, Agency shall not print, publish or distribute any
advertisement, circular or any document relating to Insurer unless such
advertisement, circular or document shall have been approved in writing
by Insurer prior to such use.
Upon termination of this Agreement, all sales promotion
material, advertising, circulars, documents and software relating to
the sales of Traditional Life Insurance Policies shall be promptly
turned over to Insurer free from any claim or retention of rights by
the Agency.
In accordance with the requirements of the laws of the several
states, Agency shall maintain complete records indicating the manner
and extent of distribution of any such solicitation material, shall
make such records and files available to staff of Insurer or its
designated agent in field inspections and shall make such material
available to personnel of state insurance departments other regulatory
agencies which have regulatory authority over Insurer. Agency holds
Insurer and its affiliates harmless from any liability arising from the
use of any material which either (a) has not been specifically approved
in writing, or (b) although previously approved, has been disapproved,
in writing, for further use.
(d) Securing Applications. All applications for Traditional Life
Insurance Policies shall be made on application forms supplied by
Insurer and all payments collected by Agency or any Agent,
Broker-Dealer or any Representative thereof shall be remitted promptly
in full, together with such application forms and any other required
documentation, directly to Insurer at the address indicated on such
application or to such other address as Insurer may, from time-to-time,
designate in writing. Agency shall review all such applications for
accuracy and completeness. Checks or money orders in payment on any
such Traditional Life Insurance Policy shall be drawn to the order of
"ReliaStar Life Insurance Company." All applications are subject to
acceptance or rejection by Insurer at its sole discretion. All records
or information obtained hereunder by Agency shall not be disclosed or
used except as expressly authorized herein, and Agency will keep such
records and
<PAGE>
information confidential, to be disclosed only as authorized or if
expressly required by federal or state regulatory authorities.
(e) Collection of Purchase Payments. Agency agrees that all money or
other consideration tendered with or in respect of any application for
a Traditional Life Insurance Policy and the Traditional Life Insurance
Policy when issued is the property of Insurer and shall be promptly
remitted in full to Insurer without deduction or offset for any reason,
including by way of example but not limitation, any deduction or offset
for compensation claimed by Agency.
(f) Policy Delivery. Insurer may, upon written request of Agency,
transmit Traditional Life Insurance Policies to Agency or Broker-Dealer
for delivery to Policyowners. Agency and Broker-Dealer hereby agree to
deliver all such Traditional Life Insurance Policies to Policyowners
within ten (10) days of their receipt by Agency or Broker-Dealer from
Insurer. Agency and Broker-Dealer agree to indemnify and hold harmless
Insurer for any and all losses caused by Agency's or Broker-Dealer's
failure to perform the undertakings described in this paragraph. Agency
and Broker-Dealer hereby authorize Insurer to set off any amount it
owes Insurer under this paragraph against any and all amounts otherwise
payable to Agency or Broker-Dealer by Insurer.
5. COMPENSATION
(a) Variable Contracts. Insurer, on behalf of General Distributor,
shall pay a dealer concession to Broker Dealer on all sales of Variable
Contracts through such Representatives, in accordance with the form of
Compensation Schedule A attached hereto, which is in effect when
purchase payment on such Variable Contracts are received by Insurer.
Dealer concessions will be paid as a percentage of premiums received in
cash or other legal tender and accepted by Insurer on applications
obtained by Broker Dealer's Representatives unless otherwise indicated
in Compensation Schedule A. Upon termination of this Agreement, all
compensation payable hereunder shall cease; however, Broker Dealer
shall continue to be liable for any chargebacks or for any other
amounts advanced by or otherwise due Insurer hereunder.
Insurer will pay all such Compensation to and in the name of
Broker Dealer. Broker Dealer agrees to hold Insurer and General
Distributor harmless from all claims of its Representatives for
compensation in respect of such Representative's sales of Variable
Contracts.
<PAGE>
(b) Traditional Life Insurance Policies. Insurer shall pay commissions
to Broker Dealer on all sales of Traditional Life Insurance Policies
through Agents and Representatives in accordance with the form of
Compensation Schedule A attached hereto, which is in effect when
purchase payments on such Traditional Life Insurance Policies are
received by Insurer. Commissions will be paid as a percentage of
premiums received in cash or other legal tender and accepted by insurer
on applications obtained by Agency's Agents or Broker-Dealer's
Representatives unless otherwise indicated in Compensation Schedule A.
Upon termination of this Agreement, all compensation payable hereunder
shall cease; however, Broker Dealer shall continue to be liable for any
chargebacks or for any other amounts advanced by or otherwise due
Insurer hereunder.
Insurer will pay all such Compensation to and in the name of
Broker Dealer. Agency hereby assigns to Broker Dealer all compensation
which would otherwise be paid to Agency in respect of Representative's
and Agent's sales of Traditional Life Insurance Policies. Agency agrees
to hold Insurer harmless from all claims Agents or Representatives have
for compensation in respect of Agent's or Representative's sales of
Traditional Life Insurance Policies.
(c) Commission Statements. Broker Dealer will be provided with copies
of its Representatives' commission statements together with Broker
Dealer's own commission statements for each commission payment period
in which commissions are payable. Broker Dealer agrees that, except as
to clerical errors and material undisclosed facts, if any, such
statements constitutes a complete and accurate statement of the
commission account unless written notice is provided to Insurer within
120 days after the date of the statement, which notice specifically
sets forth the objections or exceptions thereto.
(d) Compensation Schedules. The initial Compensation Schedule A is
attached.
Insurer and General Distributor reserve the right to change,
amend, or cancel any Compensation Schedule as to business produced
after such change by mailing notice of such change in the form of a new
Compensation Schedule to Broker Dealer. Such change shall be effective,
unless otherwise specified, ten (10) days after the notice is mailed.
(e) Rights of Rejection and Settlement. Insurer reserves the right to
reject any and all applications and collections submitted, to
discontinue writing any form of policy, to take possession of and
cancel any policy and return the premium or any part of it, and to make
any compromise settlement in respect of a policy. Broker Dealer will
not be entitled to receive or retain any compensation on premiums or
parts of premiums Insurer does not receive and retain because of such
rejection, discontinuance, cancellation, or compromise settlement. If
compensation has been paid to which Broker Dealer is not entitled, any
amount
<PAGE>
credited will be charged back, and if the account balance is
insufficient to cover the credited amount, Broker Dealer as applicable
agrees to promptly repay the credited amount.
6. TERMINATION
This Agreement may be terminated, without cause, by any party upon
thirty (30) days prior written notice; and may be terminated, for
failure to perform satisfactorily or other cause, by any party
immediately; and shall be terminated if Broker Dealer ceases to be
registered as a broker dealer under the Securities Exchange Act of 1934
and a member of the NASD or, if Agency ceases to maintain its insurance
agent license(s) in good standing in the jurisdictions in which it
conducts business.
7. ARBITRATION
Any dispute, claim or controversy arising out of or in connection with
this Agreement shall be submitted to arbitration pursuant to the NASD's
arbitration facilities. If the subject matter of the dispute, claim or
controversy is not within the scope of matters which may arbitrated
through the NASD arbitration facilities, then such dispute, claim or
controversy shall, upon the written request of any party, be submitted
to three arbitrators, one to be chosen by each party, and the third by
the two so chosen. If either party refuses or neglects to appoint an
arbitrator within thirty (30) days after the receipt of the written
notice from the other party requesting it to do so, the requesting
party may appoint two arbitrators. If the two arbitrators fail to agree
in the selection of a third arbitrator within thirty (30) days of their
appointment, each of them shall name two, of whom the other shall
decline one and the decision shall be made by drawing lots. All
arbitrators shall be active or retired executive officers of insurance
companies not under the control of any party to this Agreement. Each
party shall submit its case to the arbitrators within thirty (30) days
of the appointment of the third arbitrator. The arbitration shall be
held in Minneapolis, Minnesota at the times agreed upon by the
arbitrators. The decision in writing of any two arbitrators, when filed
with the parties hereto shall be final and binding on both parties.
Judgment may be entered upon the final decision of the arbitrators in
any court having jurisdiction. Each party shall bear the expense of its
own arbitrator and shall jointly and equally bear with the other party
the expense of the third arbitrator and of the arbitration.
<PAGE>
8. GENERAL PROVISIONS
(a) Additions, Amendments, Modifications & Waivers. This Agreement
shall not be effective until approved by Insurer and General
Distributor. Insurer and General Distributor reserve the right to amend
this Agreement at any time, and the submission of an application by
either Broker Dealer or Agency after notice of any such amendment has
been sent shall constitute Broker Dealer's or Agency's, as applicable,
agreement to any such amendment. No additions, amendments or
modifications of this Agreement or any waiver of any provision will be
valid unless approved, in writing, by one of Insurer's duly authorized
officers. In addition, no approved waiver of any default, or failure of
performance by Broker Dealer or Agency will affect Insurer's or General
Distributor's rights with respect to any later default or failure of
performance.
(b) Independent Contractor Relationship. This Agreement does not create
the relationship of employer and employee between the parties to this
Agreement. Insurer and General Distributor are independent contractors
with respect to Broker Dealer, its Representatives, Agency and its
Agents.
(c) Assignments. Neither Broker Dealer nor Agency will assign or
transfer, either wholly or partially, this Agreement or any of the
benefits accrued or to accrue under it, without the written prior
consent of a duly authorized officer of the Insurer and General
Distributor.
(d) Service of Process. If Broker Dealer or Agency receives or is
served with any notice or other paper concerning any legal action
against Insurer or General Distributor, Broker Dealer or Agency agrees
to notify Insurer immediately (in any event not later than the first
business day after receipt) by telephone and transmit any papers that
are served or received by facsimile to (612) 342-7531 and by overnight
mail to Insurer's Office of General Counsel.
(e) Severability. It is understood and agreed by the parties to this
Agreement that if any part, term or provision of this Agreement is held
to be invalid or in conflict with any law or regulation, the validity
of the remaining portions or provisions will not be affected, and the
parties' rights and obligations will be construed and enforced as if
this Agreement did not contain the particular part, term or provision
held to be invalid.
(f) Governing Law. It is agreed by the parties to this Agreement that
the Agreement and all of its provisions will be governed by the laws of
the State of Minnesota.
<PAGE>
(g) Limitations. No party other than Insurer shall have the authority
on behalf of Insurer to make, alter, or discharge any policy, contract,
or certificate issued by insurer, to waive any forfeiture or to grant,
permit, nor extend the time for making any payments nor to guarantee
earnings or rates, nor to alter the forms which Insurer may prescribe
or substitute other forms in place of those prescribed by Insurer, nor
to enter into any proceeding in a court of law or before a regulatory
agency in the name of or on behalf of Insurer, nor to open any bank
account in the full legal name of Insurer, any derivation thereof or
any tradename thereof.
9. TERRITORY
Broker Dealer's territory is limited geographically to those
jurisdictions in which the Variable Contracts may lawfully be offered,
provided that Broker Dealer's right to solicit sales of and to sell the
Variable Contracts in such jurisdictions is not exclusive.
Agency's territory is limited geographically to those
jurisdictions in which the Traditional Life Insurance policies may be
lawfully be offered, provided that Agency's and Broker-Dealer's right
to solicit sales of and to sell the Traditional Life Insurance Policies
in such territory is not exclusive.
10. EFFECTIVE DATE
This Agreement shall be effective ________________, 199__.
<PAGE>
IN WITNESS WHEREOF, we set our hands this ____ day of _________________. 199__.
INSURER:
RELIASTAR LIFE INSURANCE COMPANY
By: _____________________________
Title: _____________________________
GENERAL DISTRIBUTOR:
WASHINGTON SQUARE SECURITIES, INC.
By: _____________________________
Title: _____________________________
BROKER DEALER:
______________________________________
By: _____________________________
Title: _____________________________
AGENCY:
______________________________________
By: ______________________________
Title: ______________________________
<PAGE>
"C"
BROKER DEALER AGENCY
SELLING AGREEMENT
FOR VARIABLE CONTRACTS
This Agreement is made among the following three parties:
1. RELIASTAR LIFE INSURANCE COMPANY
20 Washington Avenue South
Minneapolis, Minnesota 55401-1900
A MINNESOTA DOMICILED STOCK LIFE INSURANCE COMPANY
(hereinafter "INSURER"); and,
2. WASHINGTON SQUARE SECURITIES, INC.
20 Washington Avenue South
Minneapolis, Minnesota 55401-1900
AN AFFILIATE OF INSURER, REGISTERED AS A BROKER-DEALER WITH
THE SECURITIES AND EXCHANGE COMMISSION ("SEC") AND A MEMBER OF
THE NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC. ("NASD")
(hereinafter "GENERAL DISTRIBUTOR"); and,
3.
------------------------------
------------------------------
Street
------------------------------
City State ZIP
REGISTERED AS A BROKER-DEALER WITH THE SEC AND A MEMBER OF THE
NASD AND LICENSED AS AN INSURANCE AGENCY (hereinafter
"BROKER-DEALER").
RECITALS:
Whereas, Broker-Dealer is licensed as an insurance agency in order to
satisfy state insurance law requirements with respect to the sale of variable
insurance products which are registered securities with the SEC.
Whereas, the parties wish to enter into an agreement for the
distribution of Variable Contracts by Broker-Dealer; and
Whereas, Insurer has appointed General Distributor as principal
underwriter and distributor (as those terms are defined by the Investment
Company Act of 1940) of the Variable Contracts and has authorized General
Distributor to enter into selling agreements with registered broker-dealers for
the solicitation and sale of Variable Contracts; and,
<PAGE>
Whereas, Insurer and General Distributor propose to have
Broker-Dealer's registered representatives who are licensed as life
insurance/variable contract agents in appropriate jurisdictions
("Representatives") solicit and sell Variable Contracts and,
Whereas, Insurer and General Distributor propose to have Broker-Dealer
provide certain supervisory and administrative services as hereinafter described
with respect to the solicitation and sales of Variable Contracts.
NOW THEREFORE, in consideration of the premises and the mutual
covenants hereinafter set forth, the parties now agree as follows:
1. VARIABLE CONTRACTS
In this Agreement, the words "Variable Contract" shall mean
those variable life insurance policies and variable annuity contracts
identified in Section 1 of the Compensation Schedule attached hereto,
and as may hereafter be amended.
Insurer may in its sole discretion and without notice to
Broker Dealer, suspend sales of any Variable Contracts or amend any
policies or contracts evidencing such Variable Contracts if, in
Insurer's opinion, such suspension or amendment is: (1) necessary for
compliance with federal, state, or local laws, regulations, or
administrative order(s); or, (2) necessary to prevent administrative or
financial hardship to Insurer. In all other situations, Insurer shall
provide 30 days notice to Broker Dealer prior to suspending sales of
any Variable Contracts or amending any policies or contracts evidencing
such Variable Contracts.
Insurer may issue and propose additional or successor
products, in which event Broker Dealer will be informed of the product
and its related Commission Schedule. If Broker Dealer does not agree to
distribute such product (s), it must notify Insurer in writing within
30 days of receipt of the Commission Schedule for such product(s). If
Broker Dealer does not indicate disapproval of the new product(s) or
the terms contained in the related Commission Schedule, Broker Dealer
will be deemed to have thereby agreed to distribute such product(s) and
agreed to the related Commission Schedule which shall be attached to
and made a part of this Agreement.
2. AGENCY APPOINTMENT
On the effective date, Insurer and General Distributor appoint Broker
Dealer and Broker Dealer accepts the appointment to solicit sales of
and to sell Variable Contracts, pursuant to the terms of this
Agreement.
<PAGE>
3. DUTIES OF BROKER DEALER
(a) Supervision of Representatives. Broker Dealer shall have full
responsibility for the training and supervision of all Representatives
who are engaged directly or indirectly in the offer or sale of the
Variable Contracts, and all such persons shall be subject to the
control of Broker Dealer with respect to such persons' securities
regulated activities in connection with the Variable Contracts. Broker
Dealer will cause the Representatives to be trained in the sale of the
Variable Contracts, will cause such Representatives to qualify under
applicable federal and state laws to engage in the sale of the Variable
Contracts; will cause such Representatives to be registered
representatives of Broker Dealer before such Representatives engage in
the solicitation of applications for the Variable Contracts; and will
cause such Representatives to limit solicitation of applications for
the Variable Contracts to jurisdictions where Insurer has authorized
such solicitation. Broker Dealer shall cause such Representatives'
qualifications to be certified to the satisfaction of General
Distributor and shall notify General Distributor if any Representative
ceases to be a registered representative of Broker Dealer or ceases to
maintain the proper licensing required for the sale of the Variable
Contracts. All parties shall be liable for their own negligence and
misconduct under this paragraph.
(b) Representatives Insurance Compliance. Broker Dealer, prior to
allowing its Representatives to solicit for sales or sell the Variable
Contracts, shall require such Representatives to be validly insurance
licensed, registered and appointed by Insurer as a variable
contract/life insurance agent in accordance with the jurisdictional
requirements of the place where the solicitations and sales take place
as well as the solicited person's or entity's place of residence.
Broker Dealer shall assist Insurer in the appointment of
Representatives under the applicable insurance laws to sell Variable
Contracts. Broker Dealer shall fulfill all Insurer requirements in
conjunction with the submission of licensing/appointment papers for all
applicants as insurance agents of Insurer. All such
licensing/appointment papers shall be submitted to Insurer or its
designee by Broker Dealer. Notwithstanding such submission, Insurer
shall have sole discretion to appoint, refuse to appoint, discontinue,
or terminate the appointment of any Representative as an insurance
agent of Insurer.
(c) Compliance with NASD Conduct Rules of Fair Practice and Federal and
State Securities Laws. Broker Dealer shall fully comply with the
requirements of the National Association of Securities Dealers, Inc.,
the Securities Exchange Act of 1934 and all other applicable federal
and state laws. In addition, Broker Dealer will establish and maintain
such rules and procedures as may be necessary to cause diligent
supervision of the securities activities of the Representatives as
required by applicable law or regulation. Upon request by General
Distributor, Broker Dealer shall furnish such records as may be
necessary to establish such diligent supervision.
<PAGE>
(d) Notice of Representative's Noncompliance. In the event a
Representative fails or refuses to submit to supervision of Broker
Dealer or otherwise fails to meet the rules and standards imposed by
Broker Dealer on its Representatives, Broker Dealer shall advise
General Distributor of this fact and shall immediately notify such
Representative that he or she is no longer authorized to sell the
Variable Contracts and Broker Dealer shall take whatever additional
action may be necessary to terminate the sales activities of such
Representative relating to such contracts and policies.
(e) Prospectuses, Sales Promotion Material and Advertising.
Broker-Dealer shall be provided, without any expense to Broker Dealer,
with prospectuses relating to the Variable Contracts and such other
supplementary sales material as General Distributor determines is
necessary or desirable for use in connection with sales of the Variable
Contracts.
NO SALES PROMOTION MATERIALS OR ANY ADVERTISING RELATING TO
THE VARIABLE CONTRACTS, INCLUDING WITHOUT LIMITATION GENERIC
ADVERTISING MATERIAL WHICH DOES NOT REFER TO INSURER BY NAME, SHALL BE
USED BY BROKER DEALER UNLESS THE SPECIFIC ITEM HAS BEEN APPROVED IN
WRITING BY GENERAL DISTRIBUTOR PRIOR TO SUCH USE.
In addition, Broker Dealer shall not print, publish or
distribute any advertisement, circular or any document relating to
Insurer unless such advertisement, circular or document shall have been
approved in writing by Insurer prior to such use.
Upon termination of this Agreement, all prospectuses, sales
promotion material, advertising, circulars, documents and software
relating to the sales of Insurer's contracts shall be promptly turned
over to Insurer free from any claim or retention of rights by the
Broker Dealer.
Insurer represents that the prospectus and registration
statement relating to the Variable Contracts contain no untrue
statements of material fact or omission to state material fact, the
omission of which makes any statement contained in the prospectus and
registration statement misleading. Insurer agrees to indemnify Broker
Dealer from and against any claims, liabilities and expenses which may
be incurred under the Securities Act of 1933, the Investment Company
Act of 1940, common law or otherwise arising out of a breach of the
agreement in this paragraph.
Broker Dealer agrees to hold harmless and indemnify Insurer
and General Distributor against any and all claims, liabilities and
expenses which Insurer or General Distributor may incur from
liabilities arising out of or based upon any alleged or untrue
statement other than statements contained in the registration
statement, prospectus or approved sales material of any Variable
Contract.
<PAGE>
In accordance with the requirements of the laws of the several
states, Broker Dealer shall maintain complete records indicating the
manner and extent of distribution of any such solicitation material,
shall make such records and files available to staff of Insurer or its
designated agent in field inspections and shall make such material
available to personnel of state insurance departments, the NASD or
other regulatory agencies, including the SEC, which have regulatory
authority over Insurer or General Distributor. Broker Dealer holds
Insurer, General Distributor and their affiliates harmless from any
liability arising from the use of any material which either (a) has not
been specifically approved by Insurer in writing, or (b) although
previously approved, has been disapproved, in writing, for further use.
(f) Securing Applications. All applications for Variable Contracts
shall be made on application forms supplied by Insurer and all payments
collected by Broker Dealer or any Representative thereof shall be
remitted promptly in full, together with such application forms and any
other required documentation, directly to Insurer at the address
indicated on such application or to such other address as Insurer may,
from time-to-time, designate in writing. Broker Dealer shall review all
such applications for accuracy and completeness. Checks or money orders
in payment on any such Variable Contract shall be drawn to the order of
"ReliaStar Life Insurance Company." All applications are subject to
acceptance or rejection by Insurer at its sole discretion. All records
or information obtained hereunder by Broker Dealer shall not be
disclosed or used except as expressly authorized herein, and Broker
Dealer will keep such records and information confidential, to be
disclosed only as authorized or if expressly required by federal or
state regulatory authorities.
(g) Collection of Purchase Payments. Broker Dealer agrees that all
money or other consideration tendered with or in respect of any
application for a Variable Contract and the Variable Contract when
issued is the property of Insurer and shall be promptly remitted in
full to Insurer without deduction or offset for any reason, including
by way of example but not limitation, any deduction or offset for
compensation claimed by Broker Dealer.
(h) Policy Delivery. Insurer will transmit Variable Contracts to Broker
Dealer for delivery to policyowners. Broker Dealer hereby agrees to
deliver all such Variable Contracts to Policyowners within ten (10)
days of their receipt by Broker Dealer from Insurer. Broker Dealer
agrees to indemnify and hold harmless Insurer for any and all losses
caused by Broker Dealer's failure to perform the undertakings described
in this paragraph. Broker Dealer hereby authorizes Insurer to set off
any amount it owes Insurer under this paragraph against any and all
amounts otherwise payable to Broker Dealer by Insurer.
(i) Fidelity Bond. Broker Dealer represents that all directors,
officers, employees and Representatives of Broker Dealer who are
licensed pursuant to this Agreement as Insurer's agents for state
insurance law purposes or who have access to funds of Insurer,
including but not limited to funds submitted with applications for the
Variable Contracts, or funds being returned to owners, are
<PAGE>
and shall be covered by a blanket fidelity bond, including coverage for
larceny and embezzlement, issued by a reputable bonding company. This
bond shall be maintained by Broker Dealer at Broker Dealer's expense.
Such bond shall be, at least, of the form, type and amount required
under the NASD Conduct Rules of Fair Practice. Insurer may require
evidence, satisfactory to it, that such coverage is in force and Broker
Dealer shall give prompt written notice to Insurer of any notice of
cancellation or change of coverage.
Broker Dealer assigns any proceeds received from the fidelity
bonding company to Insurer to the extent of Insurer's loss due to
activities covered by the bond. If there is any deficiency amount,
whether due to a deductible or otherwise, Broker Dealer shall promptly
pay Insurer such amount on demand and Broker Dealer hereby indemnifies
and holds harmless Insurer from any such deficiency and from the costs
of collection thereof (including reasonable attorneys' fees).
4. COMPENSATION
(a) Variable Contracts. Insurer, on behalf of General Distributor,
shall pay a dealer concession to Broker Dealer on all sales of Variable
Contracts through its Representatives, in accordance with the form of
the Compensation Schedule attached hereto, which is in effect when
purchase payment on such Variable Contracts are received by Insurer.
Dealer concessions will be paid as a percentage of premiums received in
cash or other legal tender and accepted by Insurer on applications
obtained by Broker Dealer's Representatives unless otherwise indicated
in Compensation Schedule A. Upon termination of this Agreement, all
compensation payable hereunder shall cease; however, Broker Dealer
shall continue to be liable for any chargebacks or for any other
amounts advanced by or otherwise due Insurer hereunder.
Insurer will pay all such Compensation to the Broker Dealer.
Broker Dealer agrees to hold Insurer and General Distributor harmless
from all claims of its Representatives for compensation in respect of
Representative's sales of Variable Contracts.
(b) Commission Statements. Broker Dealer will be provided with copies
of its Representatives' commission statements together with Broker
Dealer's own commission statement for each commission payment period in
which commissions are payable. Broker Dealer agrees that, except as to
clerical errors and material undisclosed facts, if any, such statements
constitute a complete and accurate statement of the commission account
unless written notice is provided to Insurer within 120 days after the
date of the statement, which notice specifically sets forth the
objections or exceptions thereto.
(c) Compensation Schedules. The initial Compensation Schedule is
attached.
<PAGE>
Insurer and General Distributor reserve the right to change,
amend, or cancel any Compensation Schedule as to business produced
after such change by mailing notice of such change in the form of a new
Compensation Schedule to Broker Dealer. Such change shall be effective,
unless otherwise specified, ten (10) days after the notice is mailed.
(d) Rights of Rejection and Settlement. Insurer reserves the right to
reject any and all applications and collections submitted, to
discontinue writing any form of policy, to take possession of and
cancel any policy and return the premium or any part of it, and to make
any compromise settlement in respect of a policy. Broker Dealer will
not be entitled to receive or retain any compensation on premiums or
parts of premiums Insurer does not receive and retain because of such
rejection, discontinuance, cancellation, or compromise settlement. If
compensation has been paid to which Broker Dealer is not entitled, any
amount credited will be charged back, and if the account balance is
insufficient to cover the credited amount, Broker Dealer as applicable
agrees to promptly repay the credited amount.
5. TERMINATION
This Agreement may be terminated, without cause, by any party upon
thirty (30) days prior written notice; and may be terminated, for
failure to perform satisfactorily or other cause, by any party
immediately; and shall be terminated if Broker Dealer ceases to be
registered as a broker dealer under the Securities Exchange Act of 1934
and a member of the NASD or, if Broker Dealer ceases to maintain its
insurance agent license(s) in good standing in the jurisdictions in
which it conducts business.
6. ARBITRATION
Any dispute, claim or controversy arising out of or in connection with
this Agreement shall be submitted to arbitration pursuant to the NASD's
arbitration facilities. If the subject matter of the dispute, claim or
controversy is not within the scope of matters which may arbitrated
through the NASD arbitration facilities, then such dispute, claim or
controversy shall, upon the written request of any party, be submitted
to three arbitrators, one to be chosen by each party, and the third by
the two so chosen. If either party refuses or neglects to appoint an
arbitrator within thirty (30) days after the receipt of the written
notice from the other party requesting it to do so, the requesting
party may appoint two arbitrators. If the two arbitrators fail to agree
in the selection of a third arbitrator within thirty (30) days of their
appointment, each of them shall name two, of whom the other shall
decline one and the decision shall be made by drawing lots. All
arbitrators shall be active or retired executive officers of insurance
companies not under the control of any party to this Agreement. Each
party shall submit its case to the arbitrators within thirty (30) days
of the appointment of the
<PAGE>
third arbitrator. The arbitration shall be held in Minneapolis,
Minnesota at the times agreed upon by the arbitrators. The decision in
writing of any two arbitrators, when filed with the parties hereto
shall be final and binding on both parties. Judgment may be entered
upon the final decision of the arbitrators in any court having
jurisdiction. Each party shall bear the expense of its own arbitrator
and shall jointly and equally bear with the other party the expense of
the third arbitrator and of the arbitration.
7. GENERAL PROVISIONS
(a) Additions, Amendments, Modifications & Waivers. This Agreement
shall not be effective until approved by Insurer and General
Distributor. Insurer and General Distributor reserve the right to amend
this Agreement at any time, and the submission of an application for
the purchase of a Variable Contract by Broker Dealer after notice of
any such amendment has been sent shall constitute Broker Dealer's
agreement to any such amendment. No additions, amendments or
modifications of this Agreement or any waiver of any provision will be
valid unless approved, in writing, by one of Insurer's duly authorized
officers. In addition, no approved waiver of any default, or failure of
performance by Broker Dealer will affect Insurer's or General
Distributor's rights with respect to any later default or failure of
performance.
(b) Independent Contractor Relationship. This Agreement does not create
the relationship of employer and employee between the parties to this
Agreement. Insurer and General Distributor are independent contractors
with respect to Broker Dealer and its Representatives.
(c) Assignments. Broker Dealer will not assign or transfer, either
wholly or partially, this Agreement or any of the benefits accrued or
to accrue under it, without the written prior consent of a duly
authorized officer of the Insurer and General Distributor.
(d) Service of Process. If Broker Dealer receives or is served with any
notice or other paper concerning any legal action against Insurer or
General Distributor, Broker Dealer agrees to notify Insurer immediately
(in any event not later than the first business day after receipt) by
telephone and further agrees to transmit any papers that are served or
received by facsimile to (612) 342-7531 and by overnight mail to
Insurer's Office of General Counsel.
(e) Severability. It is understood and agreed by the parties to this
Agreement that if any part, term or provision of this Agreement is held
to be invalid or in conflict with any law or regulation, the validity
of the remaining portions or provisions will not be affected, and the
parties' rights and obligations will be construed and enforced as if
this Agreement did not contain the particular part, term or provision
held to be invalid.
<PAGE>
(f) Governing Law. It is agreed by the parties to this Agreement that
the Agreement and all of its provisions will be governed by the laws of
the State of Minnesota.
(g) Limitations. No party other than Insurer shall have the authority
on behalf of Insurer to make, alter, or discharge any policy, contract,
or certificate issued by Insurer, to waive any forfeiture or to grant,
permit, nor extend the time for making any payments nor to guarantee
earnings or rates, nor to alter the forms which Insurer may prescribe
or substitute other forms in place of those prescribed by Insurer, nor
to enter into any proceeding in a court of law or before a regulatory
agency in the name of or on behalf of Insurer, nor to open any bank
account in the full legal name of Insurer, any derivation thereof or
any tradename thereof.
8. TERRITORY
Broker Dealer's territory is limited geographically to those
jurisdictions in which the Variable Contracts may lawfully be offered,
provided that Broker Dealer's right to solicit sales of and to sell the
Variable Contracts in such jurisdictions is not exclusive.
9. EFFECTIVE DATE
This Agreement shall be effective ________________, 199__.
<PAGE>
IN WITNESS WHEREOF, we set our hands this ____ day of _________________. 199__.
INSURER:
RELIASTAR LIFE INSURANCE COMPANY
By: _____________________________
Title: _____________________________
GENERAL DISTRIBUTOR:
WASHINGTON SQUARE SECURITIES, INC.
By: _____________________________
Title: _____________________________
BROKER DEALER:
______________________________________
By: _____________________________
Title: _____________________________
<PAGE>
"D"
BROKER DEALER AGENCY
SELLING AGREEMENT
FOR VARIABLE CONTRACTS
This Agreement is made among the following four parties:
1. RELIASTAR LIFE INSURANCE COMPANY
20 Washington Avenue South
Minneapolis, Minnesota 55401-1900
A MINNESOTA DOMICILED STOCK LIFE INSURANCE COMPANY
(hereinafter "INSURER"); and,
2. WASHINGTON SQUARE SECURITIES, INC.
20 Washington Avenue South
Minneapolis, Minnesota 55401-1900
AN AFFILIATE OF INSURER, REGISTERED AS A BROKER-DEALER WITH
THE SECURITIES AND EXCHANGE COMMISSION ("SEC") AND A MEMBER OF
THE NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC. ("NASD")
(hereinafter "GENERAL DISTRIBUTOR"); and,
3.
------------------------------
------------------------------
Street
------------------------------
City State ZIP
REGISTERED AS A BROKER-DEALER WITH THE SEC AND A MEMBER OF THE
NASD (hereinafter "BROKER-DEALER"); and,
4.
------------------------------
------------------------------
Street
------------------------------
City State ZIP
AN AFFILIATE OF BROKER-DEALER AND A LICENSED INSURANCE AGENCY
(hereinafter "AGENCY").
<PAGE>
RECITALS:
Whereas, Broker-Dealer has become affiliated with Agency in order to
satisfy state insurance law requirements with respect to the sale of variable
insurance products which are registered securities with the SEC.
Whereas, the parties wish to enter into an agreement for the
distribution of Variable Contracts by Broker-Dealer and Agency; and
Whereas, Insurer has appointed General Distributor as principal
underwriter and distributor (as those terms are defined by the Investment
Company Act of 1940) of the Variable Contracts and has authorized General
Distributor to enter into selling agreements with registered broker-dealers for
the solicitation and sale of Variable Contracts; and,
Whereas, Insurer and General Distributor propose to have
Broker-Dealer's registered representatives who are affiliated with Agency and
who are licensed as life insurance/variable contract agents in appropriate
jurisdictions ("Representatives") solicit and sell Variable Contracts; and,
Whereas, Insurer and General Distributor propose to have Broker-Dealer
provide certain supervisory and administrative services as hereinafter described
with respect to the solicitation and sales of Variable Contracts; and,
NOW THEREFORE, in consideration of the premises and the mutual
covenants hereinafter set forth, the parties now agree as follows:
1. VARIABLE CONTRACTS
In this Agreement, The words "Variable Contract" shall mean
those variable life insurance policies and variable annuity contracts
identified in Section 1 of the Compensation Schedule attached hereto,
and as may hereafter be amended.
Insurer may in its sole discretion and without notice to
Broker Dealer, suspend sales of any Variable Contracts or amend any
policies or contracts evidencing such Variable Contracts if, in
Insurer's opinion, such suspension or amendment is: (1) necessary for
compliance with federal, state, or local laws, regulations, or
administrative order(s); or, (2) necessary to prevent administrative or
financial hardship to Insurer. In all other situations, Insurer shall
provide 30 days notice to Broker Dealer prior to suspending sales of
any Variable Contracts or amending any policies or contracts evidencing
such Variable Contracts.
<PAGE>
Insurer may issue and propose additional or successor
products, in which event Broker Dealer will be informed of the product
and its related Commission Schedule. If Broker Dealer does not agree to
distribute such product (s), it must notify Insurer in writing within
30 days of receipt of the Commission Schedule for such product(s). If
Broker Dealer does not indicate disapproval of the new product(s) or
the terms contained in the related Commission Schedule, Broker Dealer
will be deemed to have thereby agreed to distribute such product(s) and
agreed to the related Commission Schedule which shall be attached to
and made a part of this Agreement.
2. AGENCY APPOINTMENTS
On the effective date, Insurer and General Distributor appoint Broker
Dealer and its affiliated Agency and Broker Dealer and Agency accept
the appointment to solicit sales of and to sell Variable Contracts
only, pursuant to the terms of this Agreement.
3. DUTIES OF BROKER DEALER
(a) Supervision of Representatives. Broker Dealer shall have full
responsibility for the training and supervision of all Representatives
who are engaged directly or indirectly in the offer or sale of the
Variable Contracts, and all such persons shall be subject to the
control of Broker Dealer with respect to such persons' securities
regulated activities in connection with the Variable Contracts. Broker
Dealer will cause the Representatives to be trained in the sale of the
Variable Contracts, will cause such Representatives to qualify under
applicable federal and state laws to engage in the sale of the Variable
Contracts; will cause such Representatives to be registered
representatives of Broker Dealer before such Representatives engage in
the solicitation of applications for the Variable Contracts; and will
cause such Representatives to limit solicitation of applications for
the Variable Contracts to jurisdictions where Insurer has authorized
such solicitation. Broker Dealer shall cause such Representatives'
qualifications to be certified to the satisfaction of General
Distributor and shall notify General Distributor if any Representative
ceases to be a registered representative of Broker Dealer or ceases to
maintain the proper licensing required for the sale of the Variable
Contracts. All parties shall be liable for their own negligence and
misconduct under this paragraph.
(b) Representatives Insurance Compliance. Broker Dealer, prior to
allowing its Representatives to solicit for sales or sell the Variable
Contracts, shall require such representatives to be validly insurance
licensed, registered and appointed by Insurer as a variable contract
agent in accordance with the jurisdictional
<PAGE>
requirements of the place where the solicitations and sales take place
as well as the solicited person's or entity's place of residence.
Broker Dealer and Agency shall assist Insurer in the
appointment of Representatives under the applicable insurance laws to
sell the Variable Contracts. Broker Dealer shall fulfill all Insurer
requirements in conjunction with the submission of
licensing/appointment papers for all applicants as insurance agents of
Insurer. All such licensing/appointment papers shall be submitted to
Insurer or its designee by Broker Dealer. Notwithstanding such
submission, Insurer shall have sole discretion to appoint, refuse to
appoint, discontinue, or terminate the appointment of any
Representative as an insurance agent of Insurer.
(c) Compliance with NASD Conduct Rules of Fair Practice and Federal and
State Securities Laws. Broker Dealer shall fully comply with the
requirements of the National Association of Securities Dealers, Inc.,
the Securities Exchange Act of 1934 and all other applicable federal
and state laws. In addition, Broker Dealer will establish and maintain
such rules and procedures as may be necessary to cause diligent
supervision of the securities activities of the Representatives as
required by applicable law or regulation. Upon request by General
Distributor, Broker Dealer shall furnish such records as may be
necessary to establish such diligent supervision.
(d) Notice of Representative's Noncompliance. In the event a
Representative fails or refuses to submit to supervision of Broker
Dealer or otherwise fails to meet the rules and standards imposed by
Broker Dealer on its Representatives, Broker Dealer shall advise
General Distributor of this fact and shall immediately notify such
Representative that he or she is no longer authorized to sell the
Variable Contracts and Broker Dealer shall take whatever additional
action may be necessary to terminate the sales activities of such
Representative relating to the Variable Contracts.
(e) Prospectuses, Sales Promotion Material and Advertising.
Broker-Dealer shall be provided, without any expense to Broker Dealer,
with prospectuses relating to the Variable Contracts and such other
supplementary sales material as General Distributor determines is
necessary or desirable for use in connection with sales of the Variable
Contracts.
NO SALES PROMOTION MATERIALS OR ANY ADVERTISING RELATING TO
THE VARIABLE CONTRACTS, INCLUDING WITHOUT LIMITATION GENERIC
ADVERTISING MATERIAL WHICH DOES NOT REFER TO INSURER BY NAME, SHALL BE
USED BY BROKER DEALER OR AGENCY UNLESS THE SPECIFIC ITEM HAS BEEN
APPROVED IN WRITING BY GENERAL DISTRIBUTOR PRIOR TO SUCH USE.
<PAGE>
In addition, neither Broker Dealer nor Agency shall print,
publish or distribute any advertisement, circular or any document
relating to Insurer unless such advertisement, circular or document
shall have been approved in writing by Insurer prior to such use.
Upon termination of this Agreement, all prospectuses, sales
promotion material, advertising, circulars, documents and software
relating to the sales of the Variable Contracts shall be promptly
turned over to Insurer free from any claim or retention of rights by
the Broker Dealer or Agency.
Insurer represents that the prospectus and registration
statement relating to the Variable Contracts contain no untrue
statements of material fact or omission to state material fact, the
omission of which makes any statement contained in the prospectus and
registration statement misleading. Insurer agrees to indemnify Broker
Dealer from and against any claims, liabilities and expenses which may
be incurred under the Securities Act of 1933, the Investment Company
Act of 1940, common law or otherwise arising out of a breach of the
agreement in this paragraph.
Broker Dealer and Agency agree to hold harmless and indemnify
Insurer and General Distributor against any and all claims, liabilities
and expenses which Insurer or General Distributor may incur from
liabilities arising out of or based upon any alleged or untrue
statement other than statements contained in the registration
statement, prospectus or approved sales material of any Variable
Contract.
In accordance with the requirements of the laws of the several
states, Broker Dealer and Agency shall maintain complete records
indicating the manner and extent of distribution of any such
solicitation material, shall make such records and files available to
staff of Insurer or its designated agent in field inspections and shall
make such material available to personnel of state insurance
departments, the NASD or other regulatory agencies, including the SEC,
which have regulatory authority over Insurer or General Distributor.
Broker Dealer and Agency, jointly and severally hold Insurer, General
Distributor and their affiliates harmless from any liability arising
from the use of any material which either (a) has not been specifically
approved in writing, or (b) although previously approved, has been
disapproved, in writing, for further use.
(f) Securing Applications. All applications for Variable Contracts
shall be made on application forms supplied by Insurer and all payments
collected by Broker Dealer or any Representative thereof shall be
remitted promptly in full, together with such application forms and any
other required documentation, directly to Insurer at the address
indicated on such application or to such other address as Insurer may,
from time-to-time, designate in writing. Broker Dealer shall review all
such applications for accuracy and completeness. Checks or
<PAGE>
money orders in payment on any such Variable Contract shall be drawn to
the order of "ReliaStar Life Insurance Company." All applications are
subject to acceptance or rejection by Insurer at its sole discretion.
All records or information obtained hereunder by Broker Dealer shall
not be disclosed or used except as expressly authorized herein, and
Broker Dealer will keep such records and information confidential, to
be disclosed only as authorized or if expressly required by federal or
state regulatory authorities.
(g) Collection of Purchase Payments. Broker Dealer agrees that all
money or other consideration tendered with or in respect of any
application for a Variable Contract and the Variable Contract when
issued is the property of Insurer and shall be promptly remitted in
full to Insurer without deduction or offset for any reason, including
by way of example but not limitation, any deduction or offset for
compensation claimed by Broker Dealer.
(h) Policy Delivery. Insurer will transmit Variable Contracts to Broker
Dealer for delivery to Policyowners. Broker Dealer hereby agrees to
deliver all such Variable Contracts to Policyowners within ten (10)
days of their receipt by Broker Dealer from Insurer. Broker Dealer
agrees to indemnify and hold harmless Insurer for any and all losses
caused by Broker Dealer's failure to perform the undertakings described
in this paragraph. Broker Dealer hereby authorizes Insurer to set off
any amount it owes Insurer under this paragraph against any and all
amounts otherwise payable to Broker Dealer by Insurer.
(i) Fidelity Bond. Broker Dealer represents that all directors,
officers, employees and Representatives of Broker Dealer who are
licensed pursuant to this Agreement as Insurer's agents for state
insurance law purposes or who have access to funds of Insurer,
including but not limited to funds submitted with applications for the
Variable Contracts or funds being returned to owners, are and shall be
covered by a blanket fidelity bond, including coverage for larceny and
embezzlement, issued by a reputable bonding company. This bond shall be
maintained by Broker Dealer at Broker Dealer's expense. Such bond shall
be, at least, of the form, type and amount required under the NASD
Conduct Rules of Fair Practice. Insurer may require evidence,
satisfactory to it, that such coverage is in force and Broker Dealer
shall give prompt written notice to Insurer of any notice of
cancellation or change of coverage.
Broker Dealer assigns any proceeds received from the fidelity
bonding company to Insurer to the extent of Insurer's loss due to
activities covered by the bond. If there is any deficiency amount,
whether due to a deductible or otherwise, Broker Dealer shall promptly
pay Insurer such amount on demand and Broker Dealer hereby indemnifies
and holds harmless Insurer from any such deficiency and from the costs
of collection thereof (including reasonable attorneys' fees).
<PAGE>
4. COMPENSATION
(a) Variable Contracts. Insurer, on behalf of General Distributor,
shall pay a dealer concession to Broker Dealer on all sales of Variable
Contracts through such Representatives, in accordance with the form of
the Compensation Schedule attached hereto, which is in effect when
purchase payment on such Variable Contracts are received by Insurer.
Dealer concessions will be paid as a percentage of premiums received in
cash or other legal tender and accepted by Insurer on applications
obtained by Broker Dealer's Representatives unless otherwise indicated
in Compensation Schedule A. Upon termination of this Agreement, all
compensation payable hereunder shall cease; however, Broker Dealer
shall continue to be liable for any chargebacks or for any other
amounts advanced by or otherwise due Insurer hereunder.
Insurer will pay all such Compensation to and in the name of
Broker Dealer or its affiliated Agency. Broker Dealer agrees to hold
Insurer and General Distributor harmless from all claims of its
Representatives for compensation in respect of such Representative's
sales of Variable Contracts.
(b) Commission Statements. Broker Dealer will be provided with copies
of its Representatives' commission statements together with Broker
Dealer's own commission statements for each commission payment period
in which commissions are payable. Broker Dealer agrees that, except as
to clerical errors and material undisclosed facts, if any, such
statements constitutes a complete and accurate statement of the
commission account unless written notice is provided to Insurer within
120 days after the date of the statement, which notice specifically
sets forth the objections or exceptions thereto.
(c) Compensation Schedules. The initial Compensation Schedule is
attached.
Insurer and General Distributor reserve the right to change,
amend, or cancel any Compensation Schedule as to business produced
after such change by mailing notice of such change in the form of a new
Compensation Schedule to Broker Dealer. Such change shall be effective,
unless otherwise specified, ten (10) days after the notice is mailed.
(d) Rights of Rejection and Settlement. Insurer reserves the right to
reject any and all applications and collections submitted, to
discontinue writing any form of policy, to take possession of and
cancel any policy and return the premium or any part of it, and to make
any compromise settlement in respect of a policy. Broker Dealer will
not be entitled to receive or retain any compensation on premiums or
parts of premiums Insurer does not receive and retain because of such
rejection, discontinuance, cancellation, or compromise settlement. If
compensation has been paid to which Broker Dealer is not entitled, any
amount
<PAGE>
credited will be charged back, and if the account balance is
insufficient to cover the credited amount, Broker Dealer as applicable
agrees to promptly repay the credited amount.
5. TERMINATION
This Agreement may be terminated, without cause, by any party upon
thirty (30) days prior written notice; and may be terminated, for
failure to perform satisfactorily or other cause, by any party
immediately; and shall be terminated if Broker Dealer ceases to be
registered as a broker dealer under the Securities Exchange Act of 1934
and a member of the NASD or, if Agency ceases to maintain its insurance
agent license(s) in good standing in the jurisdictions in which it
conducts business.
6. ARBITRATION
Any dispute, claim or controversy arising out of or in connection with
this Agreement shall be submitted to arbitration pursuant to the NASD's
arbitration facilities. If the subject matter of the dispute, claim or
controversy is not within the scope of matters which may arbitrated
through the NASD arbitration facilities, then such dispute, claim or
controversy shall, upon the written request of any party, be submitted
to three arbitrators, one to be chosen by each party, and the third by
the two so chosen. If either party refuses or neglects to appoint an
arbitrator within thirty (30) days after the receipt of the written
notice from the other party requesting it to do so, the requesting
party may appoint two arbitrators. If the two arbitrators fail to agree
in the selection of a third arbitrator within thirty (30) days of their
appointment, each of them shall name two, of whom the other shall
decline one and the decision shall be made by drawing lots. All
arbitrators shall be active or retired executive officers of insurance
companies not under the control of any party to this Agreement. Each
party shall submit its case to the arbitrators within thirty (30) days
of the appointment of the third arbitrator. The arbitration shall be
held in Minneapolis, Minnesota at the times agreed upon by the
arbitrators. The decision in writing of any two arbitrators, when filed
with the parties hereto shall be final and binding on both parties.
Judgment may be entered upon the final decision of the arbitrators in
any court having jurisdiction. Each party shall bear the expense of its
own arbitrator and shall jointly and equally bear with the other party
the expense of the third arbitrator and of the arbitration.
<PAGE>
7. GENERAL PROVISIONS
(a) Additions, Amendments, Modifications & Waivers. This Agreement
shall not be effective until approved by Insurer and General
Distributor. Insurer and General Distributor reserve the right to amend
this Agreement at any time, and the submission of an application for
the purchase of a Variable Contract by either Broker Dealer or Agency
after notice of any such amendment has been sent shall constitute
Broker Dealer's or Agency's, as applicable, agreement to any such
amendment. No additions, amendments or modifications of this Agreement
or any waiver of any provision will be valid unless approved, in
writing, by one of Insurer's duly authorized officers. In addition, no
approved waiver of any default, or failure of performance by Broker
Dealer or Agency will affect Insurer's or General Distributor's rights
with respect to any later default or failure of performance.
(b) Independent Contractor Relationship. This Agreement does not create
the relationship of employer and employee between the parties to this
Agreement. Insurer and General Distributor are independent contractors
with respect to Broker Dealer, its Representatives, Agency and its
Agents.
(c) Assignments. Neither Broker Dealer nor Agency will assign or
transfer, either wholly or partially, this Agreement or any of the
benefits accrued or to accrue under it, without the written prior
consent of a duly authorized officer of the Insurer and General
Distributor.
(d) Service of Process. If Broker Dealer or Agency receives or is
served with any notice or other paper concerning any legal action
against Insurer or General Distributor, Broker Dealer or Agency agrees
to notify Insurer immediately (in any event not later than the first
business day after receipt) by telephone and transmit any papers that
are served or received by facsimile to (612) 342-7531 and by overnight
mail to Insurer's Office of General Counsel.
(e) Severability. It is understood and agreed by the parties to this
Agreement that if any part, term or provision of this Agreement is held
to be invalid or in conflict with any law or regulation, the validity
of the remaining portions or provisions will not be affected, and the
parties' rights and obligations will be construed and enforced as if
this Agreement did not contain the particular part, term or provision
held to be invalid.
(f) Governing Law. It is agreed by the parties to this Agreement that
the Agreement and all of its provisions will be governed by the laws of
the State of Minnesota.
<PAGE>
(g) Limitations. No party other than Insurer shall have the authority
on behalf of Insurer to make, alter, or discharge any policy, contract,
or certificate issued by insurer, to waive any forfeiture or to grant,
permit, nor extend the time for making any payments nor to guarantee
earnings or rates, nor to alter the forms which Insurer may prescribe
or substitute other forms in place of those prescribed by Insurer, nor
to enter into any proceeding in a court of law or before a regulatory
agency in the name of or on behalf of Insurer, nor to open any bank
account in the full legal name of Insurer, any derivation thereof or
any tradename thereof.
8. TERRITORY
Broker Dealer's territory is limited geographically to those
jurisdictions in which the Variable Contracts may lawfully be offered,
provided that Broker Dealer's right to solicit sales of and to sell the
Variable Contracts in such jurisdictions is not exclusive.
9. EFFECTIVE DATE
This Agreement shall be effective ________________, 199__.
<PAGE>
IN WITNESS WHEREOF, we set our hands this ____ day of _________________. 199__.
INSURER:
RELIASTAR LIFE INSURANCE COMPANY
By: _____________________________
Title: _____________________________
GENERAL DISTRIBUTOR:
WASHINGTON SQUARE SECURITIES, INC.
By: _____________________________
Title: _____________________________
BROKER DEALER:
______________________________________
By: _____________________________
Title: _____________________________
AGENCY:
_______________________________________
By: ______________________________
Title: ______________________________
<PAGE>
RELIASTAR LIFE AND WASHINGTON SQUARE SECURITIES, INC.
COMPENSATION SCHEDULE NO. B-1987-1 MC
EFFECTIVE JANUARY 1, 1997
REGISTERED REPRESENTATIVE COMMISSIONS
If you have been appointed as a Registered Representative of Washington Square
Securities, Inc. (WSSI), and are validly licensed or appointed by ReliaStar Life
Insurance Company as a variable contracts agent in accordance with the
jurisdiction and governmental requirements of the place where solicitations and
sales take place, ReliaStar Life or WSSI will pay you compensation on Contracts
Issued (as that term is defined in your ReliaStar Life's Agent's Contract), in
accordance with this Compensation Schedule from the effective date of this
schedule until it is suspended, canceled, changed or replaced. Payment by either
ReliaStar Life or WSSI shall discharge both with respect to amounts paid.
The compensation payable shall be the net amount determined by application of
the Table of Commission Rates to the premiums on your Contracts Issued less any
chargebacks.
I
TABLE OF COMMISSION RATES
<TABLE>
<CAPTION>
Lifetime Asset
First Year Basic Renewal Based
Commission Renewal Commission Commission Commission
---------- ------------------ ---------- ----------
Policy Year
-----------
1st 2nd-5th 6th-10th 11th & Later
--- ------- -------- ------------
A. LIFE INSURANCE
(Select*Life Contracts)
<S> <C> <C> <C> <C> <C> <C>
Select*Life 2
Issue ages 0-65........... 50%(1) 2% 2% 2% .25%(3)(4)
Issue ages 66-75.......... 45%(1) 2% 2% 2% .25%(3)(4)
Select*Life 3
Issue ages 0-65........... 35%(2) 2.5% 2.5% 2.5% .10%(3)(4)
Issue ages 66-75.......... 30%(2) 2.5% 2.5% 2.5% .10%(3)(4)
Select*Survivorship....... 45%(1)(5) 2% 2% 0% .10%(3)(4)
(SVUL)
</TABLE>
FOOTNOTES
(1) The First Year Commission on this flexible premium policy is the stated
percentage of the minimum annual premium plus 2% of first year premiums
in excess of the minimum first year annual premium. In addition, the
stated percentage of the minimum annual premium attributable to any
increase in coverage will be paid to the Registered Representative most
recently selling a commissionable change in the policy with respect to
any increase in coverage made later. Payment of the Basic Renewal
Commission and/or the Lifetime Renewal Commission on Select*Life 2 and
SVUL 1 is suspended upon an increase in coverage until the amount of
the premium payments made after the effective date of such increase in
coverage exceeds the first year minimum premium associated with such
increase in coverage. An increase in coverage is any increase in face
amount requested by the policyholder or due to the addition of riders.
<PAGE>
(2) The First Year Commission on this flexible premium policy is the stated
percentage of the minimum annual premium plus 2.5% of the first year
premium in excess of the minimum annual premium. In addition, the
stated percentage of the minimum annual premium attributable to any
increase in coverage will be paid to the Registered Representative most
recently selling a commissionable change in the policy with respect to
any increase in coverage made later. Payment of the Basic Renewal
Commission and/or the Lifetime Renewal Commission on Select*Life 3 is
suspended upon an increase in coverage.
(3) For all Select*Life 2, Select*Life 3, and SVUL 1 Contracts Issued after
the effective date of your appointment as a Registered Representative
of WSSI, an Asset Based Commission of the stated percentage of the
average of the twelve monthly Accumulation Values (net of loaned
Accumulation Values) measured at the end of the Policy Month for each
Policy Year in which this average is greater than or equal to $5,000.00
will be calculated on the Policy Anniversary. It will be paid
concurrently with the first pay period immediately following the Policy
Anniversary.
(4) If another Registered Representative of WSSI sells a commissionable
increase in coverage under the policy, your share of any future Asset
Based Commission is the Asset Based Commission multiplied by a
fraction, the numerator of which is the Accumulation Value of the
policy immediately before the effective date of the commissionable
increase in coverage under the policy and the denominator of which is
the average of the twelve monthly Accumulation Values (measured at the
end of the Policy Month) for the Policy Year. Subsequent commissionable
increases in coverage shall be determined in a like manner.
(5) A portion of the First Year Commission paid on the SVUL 1 may be
charged back on any policy that lapses before the end of the third
policy year.
II
GENERAL RULES PERTAINING TO
REGISTERED REPRESENTATIVE COMMISSIONS
1. Vesting. Select*Life First Year Commissions and Basic Renewal
Commissions in respect of Select*Life Contracts Issued after the
effective date and prior to the termination date of your appointment as
a Registered Representative of WSSI are vested in you and will be paid
to you as and when the related premium is received by the issuer and
applied to the Select*Life Contract Issued. Lifetime Renewal
Commissions will not be payable after your termination.
The Asset Based Commission in respect of a Select*Life Contract Issued
after the effective date and prior to the termination date of your
appointment as a Registered Representative of WSSI is vested in you for
a period of 120 months from the Policy Date and for a period of 120
months from the effective date of any commissionable increase in
coverage you sell after the Policy Date. Asset Based Commissions, if
payable, shall be calculated and paid in accordance with Footnotes (3)
and (4) above.
In the event your appointment as a Registered Representative of WSSI
terminates because of your death, any commissions due in respect of
Select*Life Contracts Issued will be paid to your estate.
2. CORPORATE CONTRACTS - PAYMENT OF COMMISSIONS. If this Compensation
Schedule is part of a contract held by a corporation, commissions
earned on the sale of Variable Contracts will not be paid to the
corporation but will be paid to the individual Registered
Representative(s) designated on the application to receive commissions
on the sale of Contracts Issued. The Corporation agrees that such
payment shall completely discharge RELIASTAR LIFE and WSSI with respect
to amounts paid.
<PAGE>
3. COMPLIANCE WITH RULES, REGULATIONS AND STATUTES. You agree to comply
strictly with (a) the laws, rules and regulations of all state or local
governmental jurisdictions in which you solicit applications for and
sell Variable Contracts, (b) the laws, rules and regulations of the
SEC, (c) the rules of the NASD, (d) the rules of WSSI, and (e) the
rules of ReliaStar Life. You understand that failure to comply with
such laws, rules and regulations may result in disciplinary action
against you by the SEC, a state or other local regulatory agency that
has jurisdiction, the NASD, WSSI and ReliaStar Life. You agree that
before any solicitations or sales of Variable Contracts are made, you
will become familiar with and abide by the laws, rules and regulations
of all of the above mentioned agencies or parties as are currently in
effect and as they may from time to time by changed.
4. REPRESENTATIONS. You agree not to make any statements or comments
concerning Variable Contracts except those that are contained in the
current prospectuses and sales literature approved by WSSI and
ReliaStar Life and shall not solicit for applications or make sales
through the use of mailings, advertisements or other methods of contact
unless the material and method has the written approval of WSSI.
5. ASSET BASED COMMISSIONS. Asset Based Commissions are not First Year
Commissions, Basic Renewal Commissions nor Lifetime Renewal
Commissions.
<PAGE>
RELIASTAR LIFE INSURANCE COMPANY
COMPENSATION SCHEDULE NO. SA-1 996-1 EFFECTIVE JANUARY 1, 1996
SERVICING AGENT'S OVERWRITE COMMISSIONS
This Compensation Schedule is issued pursuant to Servicing Agent Contract (Form
No. SA111), and shall be used to determine compensation payable thereunder from
the Effective Date of this Schedule until it is suspended, canceled, changed, or
replaced. The compensation payable for any commission payment period shall be
the net amount determined by application of the following paragraphs less any
chargebacks.
(1) SERVICING AGENT OVERWRITE ON FIRST YEAR AGENT'S COMMISSIONS
Servicing Agent Overwrite Commissions of 40 percent of First Year
Agent's Commissions earned by you will be paid to you on sales of all
life insurance policies and annuity contracts set forth in the Table of
Commission Rates in the Agent's Compensation Schedule in effect on the
date the premium is received.
(2) SERVICING AGENT OVERWRITE ON SELECT LIFE FIRST YEAR AGENT'S COMMISSIONS
If you are a Registered Representative of Washington Square Securities,
Inc., Servicing Agent Overwrite Commissions of 40 percent of First Year
Agent's Commissions earned by you will be paid to you on sales of
Select*Life policies as set forth in the Table of Commission Rates in
the Registered Representative's Compensation Schedule in effect on the
date the premium is received.
(3) VESTING
Upon termination of your appointment pursuant to your Contract,
Servicing Agent Overwrite Commissions payable with respect to First
Year Agent's Commissions on Contracts issued after the Effective Date
of your Contract and before the date of the termination of your
appointment will be payable in full if and when earned subject to the
provisions of your Contract. In the event of your death, any Servicing
Agent Overwrite Commissions will be payable to your estate.
(4) GENERAL RULES
(a) REPLACEMENT BUSINESS. If any policy is issued to replace a
policy previously issued by us or an affiliate of ours,
commissions will accrue only if and to the extent that our
established practices provide for commissions on such
replacements.
(b) COMMISSIONS. Commissions shall accrue on Contracts Issued as
and when premiums are received by us and applied as premiums
due or payable on such policies.
(c) FIRST YEAR PREMIUMS PAID. First Year Premiums Paid, unless
otherwise specified for any particular policy or policies, is
the total of the premiums paid to the Company in cash prior to
the end of the grace period for their payment and applied as
premiums payable during the twelve month period commencing
with the policy date.
(d) CHARGE-BACKS. In any case where we have credited a commission
to you on the basis of a premium on a Contract Issued and the
premium is returned to the purchaser, we will charge you back
for such commissions.
(e) ADDITIONAL BENEFITS AND RIDERS. Commissions will be credited
based on premiums for additional benefits (for example, waiver
of premium and term riders) added at issue of a policy at the
same rate as applied to the base policy premiums.
(f) COMMISSIONS PAYABLE ON SUBSTANDARD EXTRA PREMIUMS. Commissions
rates payable on extra premiums other than on the Plan 3 and
4, and The Bonus Plan, will be 40 percent of the commission
percentage rate paid on the basic policy premium. No
commissions will be paid on any temporary extra premiums.
SUPPLEMENT TO LIFE INSURANCE APPLICATION
ALLOCATION OF PREMIUM PAYMENTS: Allocation must be in while percentage points
totaling 100%.
a. _____% Fixed Account (SFA)
THE ALGER AMERICAN FUND
a. _____% Alger American Growth Portfolio (AGR)
b. _____% Alger American MidCap Growth Portfolio (AMG)
c. _____% Alger American Small Capitalization Portfolio (ASC)
FIDELITY'S VARIABLE INSURANCE PRODUCTS FUNDS I & II
e. _____% Asset Manager Portfolio (FAM)
f. _____% Contrafund Portfolio (FCF)
g. _____% Equity Income Portfolio (FEI)
h. _____% Growth Portfolio (FGP)
I. _____% High Income Portfolio (FHI)
j. _____% Index 500 Portfolio (FIN)
k. _____% Investment Grade Bond Portfolio (FIG)
l. _____% Money Market Portfolio (FMM)
m._____% Overseas Portfolio (FOS)
JANUS ASPEN SERIES
n. _____% Aggressive Growth Portfolio (JAG)
o. _____% Growth Portfolio (JGP)
p. _____% International Growth Portfolio (JIG)
q. _____% Worldwide Growth Portfolio (JWG)
NEUBEGER&BERMAN ADVISORS MANAGEMENT TRUST
r. _____% Limited Maturity Bond Portfolio (NLM)
<PAGE>
s. _____% Partners Portfolio (NPP)
NORTHSTAR VARIABLE TRUST
t. _____% Northstar Growth Fund (NGF)
u. _____% Northstar High Yield Bond Fund (NHY)
v. _____% Northstar Income and Growth Fund (NIG)
w._____% Northstar International Value Fund (NIV)
x. _____% Northstar Multi-Sector Bond Fund (NMS)
OCC ACCUMULATION TRUST
y. _____% Equity Portfolio (OEP)
z. _____% Global Equity Portfolio (OGE)
aa. ____% Managed Portfolio (OMP)
bb. ____% Small Cap Portfolio (OSC)
PUTNAM VARIABLE TRUST
cc. ____% Putnam VT Asia Pacific Growth Fund (PAP)
dd. ____% Putnam VT Diversified Income Fund (PDI)
ee. ____% Putnam VT Growth & Income Fund (PGI)
ff. _____% Putnam VT New Opportunities Fund (PNO)
gg. ____% Putnam VT Utilities Growth & Income Fund (PUT)
hh. ____% Putnam VT Voyager Fund (PVY)
OTHER INVESTMENT COMPANIES/FUNDS
Specify both the investment company and fund names.
ii. _____% _________
jj. _____% __________
<PAGE>
kk. ____% __________
ll. _____% __________
Allocation affects all future payments until changed by you.
We reserve the right to limit your participation to a total of seventeen
Sub-Accounts over the lifetime of your Policy. Upon participation in the
seventeenth Sub-Account, you would be able to allocate premiums to and transfer
within the seventeen Sub-Accounts already used and which are still available,
but could not participate in any other Sub-Accounts.
I understand and agree that this supplement is part of my application for life
insurance and will be considered part of my Policy with ReliaStar Life Insurance
Company.
Date
Signature of Agent
Signature of Proposed Owner
INDEPENDENT AUDITORS' CONSENT
Board of Directors and Contract Holders
Select*Life Variable Account
We consent to the incorporation by reference in this Post-effective Amendment
No. 3 to Registration Statement on Form S-6 (File No. 333-18517) of Select*Life
Variable Account filed under the Securities Act of 1933, of our report dated
February 20, 1998 on the audit of financial statements of Select*Life Variable
Account as of December 31, 1997 and for the three years then ended, and the use
of our report dated February 3, 1998, on the audit of the consolidated financial
statements of ReliaStar Life Insurance Company as of December 31, 1997 and for
the two years then ended, appearing in the Statement of Additional Information
of such Registration Statement.
We also consent to the references to us under the headings "Experts" and
"Financial Statements" appearing in the Statement of Additional Information
which is part of such Registration Statement.
Deloitte & Touche LLP
Minneapolis, Minnesota
April 15, 1998
April 16, 1998
ReliaStar Life Insurance Company
20 Washington Avenue South
Minneapolis, MN 55440
Madam/Sir:
This opinion is furnished in connection with the registration by ReliaStar Life
Insurance Company of a flexible premium survivorship variable life insurance
policy (the "Contract") under the Securities Act of 1933, as amended. The
Contract, including variations thereof used in various states, is described in
the Prospectus constituting a part of the Registration Form S-6, as amended
through and including Post-Effective Amendment No. 3 thereto, File No.
333-18517.
The form of Contract was reviewed by me, and I am familiar with the Registration
Statement and Exhibits thereto.
In my opinion:
The illustrations of Accumulation Values, Surrender Charges, Cash
Surrender Values, and Death Benefits, included in the section entitled,
"Illustration of Accumulation Values, Surrender Charges, Cash Surrender
Values, and Death Benefits" in Appendix C of the Prospectus
constituting part of the Registration Statement, based on the
assumptions stated in the illustrations, are consistent with the
provisions of the Contract (including, as appropriate, any state
variation thereof). The rate structure of the Contract has not been
designed so as to make the relationship between premiums and benefits,
as shown in the illustrations, appear more favorable to a prospective
purchaser of a Contract for a male Joint Insured Age 55 and a female
Joint Insured Age 55, both nonsmokers in a standard Rate Class, than to
prospective purchasers of the Contract for other ages, sexes, or Rate
Classes. In any state where charges cannot be based upon the insured's
sex, the rate structure of the Contract has not been designed so as to
make the relationship between premium and benefits, as shown in the
illustrations, appear more favorable to a prospective purchaser of the
Contract for Joint Insureds who are both Age 55 than to prospective
purchasers of the Contract for other ages.
I hereby consent to the use of this opinion as an exhibit to the Registration
Statement and to the reference to my name under the heading "Experts" in the
Prospectus constituting a part of the Registration Statement.
Sincerely,
/s/ Craig A. Krogstad
- ------------------------
Craig A. Krogstad, FSA, MAAA
Actuary
RELIASTAR LIFE INSURANCE COMPANY
POWER OF ATTORNEY
OF DIRECTOR AND OFFICER
The undersigned director and/or officer of RELIASTAR LIFE INSURANCE
COMPANY, a Minnesota corporation, does hereby make, constitute and appoint
RICHARD R. CROWL, MICHAEL S. FISCHER, STEWART D. GREGG, ROBERT B. SAGINAW,
JEFFREY A. PROULX and LORI J. SOMMERFELD, and each or any one of them, the
undersigned's true and lawful attorneys-in-fact, with full power of
substitution, for the undersigned and in the undersigned's name, place and
stead, to sign and affix the undersigned's name as such director and/or officer
of said Company to a Registration Statement or Registration Statements, under
the Securities Act of 1933 (1933 Act) and the Investment Company Act of 1940
(1940 Act) and any other forms applicable to such registrations, and all
amendments, including post-effective amendments, thereto, to be filed by said
Company with the Securities and Exchange Commission, Washington, DC, in
connection with the registration under the 1933 and 1940 Acts, as amended, of
variable annuity contracts and accumulation units in the ReliaStar Select
Variable Account, the Northstar Variable Account, and of variable life insurance
policies and accumulation units in the Select*Life Variable Account, and to file
the same, with all exhibits thereto and other supporting documents, with said
Commission, granting unto said attorneys-in-fact, and each of them, full power
and authority to do and perform any and all acts necessary or incidental to the
performance and execution of the powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's
hand this 10 day of February, 1998.
/s/ Michael J. Dubes
-------------------------
Michael J. Dubes
<PAGE>
RELIASTAR LIFE INSURANCE COMPANY
POWER OF ATTORNEY
OF DIRECTOR AND OFFICER
The undersigned director and/or officer of RELIASTAR LIFE INSURANCE
COMPANY, a Minnesota corporation, does hereby make, constitute and appoint
RICHARD R. CROWL, MICHAEL S. FISCHER, STEWART D. GREGG, ROBERT B. SAGINAW,
JEFFREY A. PROULX and LORI J. SOMMERFELD, and each or any one of them, the
undersigned's true and lawful attorneys-in-fact, with full power of
substitution, for the undersigned and in the undersigned's name, place and
stead, to sign and affix the undersigned's name as such director and/or officer
of said Company to a Registration Statement or Registration Statements, under
the Securities Act of 1933 (1933 Act) and the Investment Company Act of 1940
(1940 Act) and any other forms applicable to such registrations, and all
amendments, including post-effective amendments, thereto, to be filed by said
Company with the Securities and Exchange Commission, Washington, DC, in
connection with the registration under the 1933 and 1940 Acts, as amended, of
variable annuity contracts and accumulation units in the ReliaStar Select
Variable Account, the Northstar Variable Account, and of variable life insurance
policies and accumulation units in the Select*Life Variable Account, and to file
the same, with all exhibits thereto and other supporting documents, with said
Commission, granting unto said attorneys-in-fact, and each of them, full power
and authority to do and perform any and all acts necessary or incidental to the
performance and execution of the powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's
hand this 19th day of February, 1998.
/s/ Ronald D. Jarvis
-------------------------
Ronald D. Jarvis
<PAGE>
RELIASTAR LIFE INSURANCE COMPANY
POWER OF ATTORNEY
OF DIRECTOR AND OFFICER
The undersigned director and/or officer of RELIASTAR LIFE INSURANCE
COMPANY, a Minnesota corporation, does hereby make, constitute and appoint
RICHARD R. CROWL, MICHAEL S. FISCHER, STEWART D. GREGG, ROBERT B. SAGINAW,
JEFFREY A. PROULX and LORI J. SOMMERFELD, and each or any one of them, the
undersigned's true and lawful attorneys-in-fact, with full power of
substitution, for the undersigned and in the undersigned's name, place and
stead, to sign and affix the undersigned's name as such director and/or officer
of said Company to a Registration Statement or Registration Statements, under
the Securities Act of 1933 (1933 Act) and the Investment Company Act of 1940
(1940 Act) and any other forms applicable to such registrations, and all
amendments, including post-effective amendments, thereto, to be filed by said
Company with the Securities and Exchange Commission, Washington, DC, in
connection with the registration under the 1933 and 1940 Acts, as amended, of
variable annuity contracts and accumulation units in the ReliaStar Select
Variable Account, the Northstar Variable Account, and of variable life insurance
policies and accumulation units in the Select*Life Variable Account, and to file
the same, with all exhibits thereto and other supporting documents, with said
Commission, granting unto said attorneys-in-fact, and each of them, full power
and authority to do and perform any and all acts necessary or incidental to the
performance and execution of the powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's
hand this 5th day of February, 1998.
/s/ James R. Miller
-------------------------
James R. Miller
