AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 21, 2000
REGISTRATION NO. 33-65870
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 11
TO
FORM S-6
FOR REGISTRATION STATEMENT 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 Unit Investment Trust)
RELIASTAR LIFE INSURANCE COMPANY
(Name of Depositor)
Gregory A. Olson
Associate Counsel
ReliaStar Life Insurance Company
20 Washington Avenue South
Minneapolis, Minnesota 55401
-----------------
It is proposed that this filing will become effective
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[X] on May 1, 2000 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 insurance contracts issued
by a registered separate account.
Approximate date of Proposal Public Offering: As soon as practicable after the
Registration Statement becomes effective.
<PAGE>
SELECT*LIFE VARIABLE ACCOUNT
CROSS REFERENCE SHEET
(RECONCILIATION AND TIE SHEET)
<TABLE>
<CAPTION>
ITEM NUMBER OF
FORM N-8B-2 HEADING IN THE PROSPECTUS
- --------------- --------------------------------------------------
<S> <C>
1 Cover Page
2 Cover Page
3 Not Applicable
4 Distribution of the Policies
5 ReliaStar Life Insurance
Company and 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; Sales Charge
Refund; Policy Lapse and Reinstatement; Surrender Benefits;
Additional Information on the Investments of the Variable
Account; Transfers; Policy Loans; Free Look and Conversion
Rights; Voting Rights; General Provisions; Appendix B
11 Deductions and Charges; Investments of the
Variable Account
12 Additional Information on the Investments of the
Variable Account
13 Deductions and Charges
14 The Policies; General Provisions; Distribution of
the Policies
15 Payment and Allocation of Premiums; Additional
Information on the Investments of the Variable
Account
16 Payment and Allocation of Premiums; Surrender
Benefits; Additional Information on the
Investments of the Variable Account
17 Surrender Benefits; Policy Loans; Free Look and
Conversion Rights; General Provisions
18 The Variable Account; Additional Information on
the Investments of the Variable Account; Payment
and Allocation of Premiums
19 Voting Rights; General Provisions
20 Not Applicable
21 Policy Loans
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
ITEM NUMBER OF
FORM N-8B-2 HEADING IN THE PROSPECTUS
- --------------- -------------------------------------------------
<S> <C>
22 Not Applicable
23 Bonding Arrangements
24 Definitions; General Provisions
25 ReliaStar Life Insurance Company
26 Not Applicable
27 ReliaStar Life Insurance Company; Other
Contracts Issued by Us
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 Management
43 Not Applicable
44 Additional Information on the Investments of the
Variable Account; Payment and Allocation of
Premiums; Deductions and Charges
45 Not Applicable
46 Additional Information on the Investments of the
Variable Account; Deductions and Charges
47 Additional Information on the 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
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
ITEM NUMBER OF
FORM N-8B-2 HEADING IN THE PROSPECTUS
- --------------- -------------------------------------------------
<S> <C>
52 Additional Information on the Investments of the
Variable Account
53 Federal Tax Matters
54 Not Applicable
55 Not Applicable
56 Not Applicable
57 Not Applicable
58 Not Applicable
59 Financial Statements
</TABLE>
iii
<PAGE>
[LOGO] RELIASTAR
20 Washington Avenue South
Minneapolis, Minnesota 55401
---------------------------
SELECT*LIFE III
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICIES
ISSUED BY
SELECT*LIFE VARIABLE ACCOUNT
OF
RELIASTAR LIFE INSURANCE COMPANY
ReliaStar Life Insurance Company is offering the flexible premium variable
life insurance policy (Select*Life III) described in this prospectus. ReliaStar
designed the Policy to provide (1) insurance protection to age 95; and (2)
maximum flexibility regarding premium payments and death benefits. Subject to
certain restrictions, Policy owners may:
o vary the frequency and amount of premium payments;
o increase or decrease the level of death benefits payable under the
Policy; and
o allocate premiums to:
-- the Fixed Account, an account that provides a minimum specified rate
of interest; and
-- Sub-Accounts of Select*Life Variable Account, a variable account
allowing you to invest in certain portfolios of the following Funds:
<TABLE>
<S> <C>
AIM Variable Insurance Funds Neuberger Berman Advisers Management Trust
The Alger American Fund OCC Accumulation Trust
Fidelity Variable Insurance Products Fund Pilgrim Variable Products Trust
Fidelity Variable Insurance Products Fund II Putnam Variable Trust
Janus Aspen Series
</TABLE>
If you allocate net premiums to Sub-Accounts of Select*Life Variable
Account, the amount of the Policy's death benefit may, and the total value
attributed to a Policy will, vary to reflect the investment performance of the
Sub-Accounts you select.
The Policy's primary purpose is to provide insurance protection for the
beneficiary. ReliaStar does not claim that investing in the Policy is in any way
similar or comparable to a systematic investment plan of a mutual fund.
Generally, the Policy will remain in force as long as the cash surrender
value (that is, the amount that ReliaStar would pay if you surrender the Policy)
is sufficient to pay certain monthly charges. However, under certain
circumstances the Policy provides a death benefit guarantee that allows the
Policy to remain in force without regard to the cash surrender value (See "Death
Benefit Guarantee").
INTERESTS IN THE POLICIES AND SHARES OF THE FUNDS ARE NOT DEPOSITS OR
OBLIGATIONS OF OR GUARANTEED BY A BANK, AND ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED THESE SECURITIES OR
DETERMINED THAT THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
Please read this prospectus carefully and keep it for future reference.
Call 1-800-456-6965 to obtain a current prospectus for any of the Funds. 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, 2000
1
<PAGE>
TABLE OF CONTENTS
DEFINITIONS............................................................... 5
PART 1. SUMMARY
The Policy................................................................ 7
Free Look Rights.......................................................... 8
Premium Payments.......................................................... 8
The Variable Account...................................................... 8
The Fixed Account......................................................... 8
The Funds................................................................. 8
Charges Against the Accumulation Value................................... 11
Charge Upon Lapse or Total Surrender of the Policy....................... 12
Surrenders............................................................... 12
Partial Withdrawals...................................................... 12
Loans.................................................................... 12
Transfers................................................................ 12
Death Benefit Overview................................................... 13
Adjusting the Death Benefit.............................................. 13
Death Benefit Guarantee.................................................. 13
Lapse.................................................................... 13
Taxation of Death Benefit Proceeds....................................... 13
Taxation of the Policy................................................... 13
PART 2. DETAILED INFORMATION
ReliaStar Life Insurance Company......................................... 14
The Policies............................................................. 14
Deductions and Charges................................................... 14
Premium Expense Charge................................................... 14
Sales Charge............................................................ 14
Premium Tax Charge...................................................... 15
Premium Processing Charge............................................... 15
Monthly Deduction........................................................ 15
Cost of Insurance....................................................... 15
Monthly Administrative Charge........................................... 15
Monthly Mortality and Expense Risk Charge............................... 15
Optional Insurance Benefit Charges...................................... 15
Surrender Charge......................................................... 16
General................................................................. 16
Contingent Deferred Administrative Charge............................... 16
Contingent Deferred Sales Charge........................................ 16
Sales Charge Refund...................................................... 17
Initial Face Amount..................................................... 17
Requested Increases in Face Amount...................................... 18
Effect of Sales Charge Refund........................................... 18
Partial Withdrawal and Transfer Charges.................................. 18
Modification of Charges.................................................. 19
Investment Advisory Fees and Other Fund Expenses......................... 19
Fund Expenses............................................................ 20
The Variable Account..................................................... 21
Investments of the Variable Account...................................... 22
Performance Information.................................................. 22
Death Benefit............................................................ 22
Death Benefit Options.................................................... 23
Level Amount Option..................................................... 23
Variable Amount Option.................................................. 23
Which Death Benefit Option to Choose..................................... 23
2
<PAGE>
Requested Changes in Face Amount......................................... 23
Increases............................................................... 23
Decreases............................................................... 24
Effect of Requested Changes in Face Amount.............................. 24
Insurance Protection..................................................... 25
Changing the Death Benefit Option........................................ 25
Accelerated Benefit Rider................................................ 26
Payment and Allocation of Premiums....................................... 26
Issuing the Policy....................................................... 26
Coverage................................................................ 26
Minimum Initial Premium................................................. 27
Temporary Insurance..................................................... 27
Allocating Premiums...................................................... 27
Crediting Net Premiums.................................................. 27
Refunding Premiums...................................................... 27
Amount and Timing of Premiums............................................ 28
Planned Periodic Premiums................................................ 28
Paying Premiums by Mail.................................................. 28
Death Benefit Guarantee.................................................. 29
Requirements for the Death Benefit Guarantee............................. 29
Accumulation Value....................................................... 30
Illustration of Policy Benefits.......................................... 30
Specialized Uses of the Policy........................................... 31
Policy Lapse and Reinstatement........................................... 31
Lapse................................................................... 31
Reinstatement........................................................... 32
Surrender Benefits....................................................... 32
Total Surrender.......................................................... 32
Partial Withdrawal....................................................... 32
Effect of Partial Withdrawals........................................... 32
Transfers................................................................ 33
Telephone/Fax Instructions.............................................. 33
Dollar Cost Averaging Service........................................... 34
Portfolio Rebalancing Service........................................... 34
Transfer Limits......................................................... 34
Transfer Charges........................................................ 34
Policy Loans............................................................. 35
General................................................................. 35
Immediate Effect of Policy Loans........................................ 35
Effect on Investment Performance........................................ 35
Effect on Policy Coverage............................................... 36
Interest................................................................ 36
Repayment of Loan Amount................................................ 36
Tax Considerations...................................................... 36
Free Look and Conversion Rights.......................................... 37
Free Look Rights........................................................ 37
Conversion Rights....................................................... 37
General Option........................................................ 37
Connecticut........................................................... 37
Additional Information on the Investments of the Variable Account........ 38
Investment Limits........................................................ 38
Addition, Deletion, or Substitution of Investments....................... 38
Voting Rights............................................................ 39
Disregarding Voting Instructions........................................ 39
Paid-up Life Insurance Option............................................ 40
General Provisions....................................................... 40
Ownership................................................................ 40
Proceeds................................................................. 40
3
<PAGE>
Beneficiary.............................................................. 40
Postponement of Payments................................................. 40
Settlement Options....................................................... 41
Interest on Settlement Options.......................................... 41
Incontestability......................................................... 41
Misstatement of Age and Sex.............................................. 42
Suicide.................................................................. 42
Termination.............................................................. 42
Amendment................................................................ 42
Reports.................................................................. 42
Annual Statement........................................................ 42
Projection Report....................................................... 42
Other Reports........................................................... 42
Dividends................................................................ 43
Collateral Assignment.................................................... 43
Optional Insurance Benefits.............................................. 43
Accelerated Benefit Rider............................................... 43
Accidental Death Benefit Rider.......................................... 43
Additional Insured Rider................................................ 43
Waiver of Monthly Deduction Rider....................................... 43
Children's Insurance Rider.............................................. 43
Waiver of Specified Premium Rider....................................... 43
Federal Tax Matters...................................................... 43
Introduction............................................................. 43
Tax Status of the Policy................................................. 43
Tax Treatment of Policy Benefits......................................... 44
In General.............................................................. 44
Modified Endowment Contracts............................................ 44
Distributions from Modified Endowment Contracts......................... 44
Distributions from Policies That Are Not Modified Endowment Contracts... 45
Policy Loans............................................................ 45
Multiple Policies....................................................... 45
Taxation of ReliaStar Life Insurance Company............................. 45
Possible Changes in Taxation............................................. 45
Other Considerations..................................................... 45
Legal Developments Regarding Employment-Related Benefit Plans............ 45
Distribution of the Policies............................................. 46
Management............................................................... 47
Directors and Officers................................................... 47
State Regulation......................................................... 50
Massachusetts and Montana Residents...................................... 50
Legal Proceedings........................................................ 50
Bonding Arrangements..................................................... 50
Legal Matters............................................................ 50
Experts.................................................................. 51
Registration Statement Contains Further Information...................... 51
Financial Statements..................................................... 51
Appendices.............................................................. A-1
THE POLICY MAY NOT BE AVAILABLE IN ALL JURISDICTIONS. THIS PROSPECTUS
CONSTITUTES AN OFFERING OR SOLICITATION ONLY IN THOSE JURISDICTIONS WHERE SUCH
OFFERING OR SOLICITATION MAY LAWFULLY BE MADE.
RELIASTAR HAS NOT AUTHORIZED ANY PERSON TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS REGARDING THE POLICY OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS OR THE ACCOMPANYING FUND PROSPECTUSES. DO NOT RELY ON ANY SUCH
INFORMATION OR REPRESENTATIONS.
4
<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 30, and
Appendix B.
AGE. The Insured's age at the last birthday determined as of the beginning of
each Policy Year.
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.
We will reduce the proceeds payable to the beneficiary upon the Insured's
death by any Loan Amount and any unpaid Monthly Deductions. See "Death
Benefit" at page 22.
DEATH BENEFIT GUARANTEE. A feature 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. See "Death Benefit
Guarantee" at page 29.
DEATH BENEFIT OPTION. One 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 23.
FACE AMOUNT. The minimum Death Benefit under the Policy as long as the Policy
remains in force. See "Death Benefit" at page 22.
FIXED ACCOUNT. ReliaStar Life Insurance Company's assets 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 based on
amounts in the Fixed Account. Unlike the Variable Accumulation Value, the
Fixed Accumulation Value will not reflect the investment performance of the
Funds. See "Accumulation Value" at page 30 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. See
"Summary" at page 7 and "Fund Expenses" at page 20.
INSURED. The person upon whose life we issue the Policy.
ISSUE DATE. The date insurance coverage under a Policy begins.
LOAN AMOUNT. The sum of all unpaid Policy loans including unpaid interest due
thereon. See "Policy Loans" at page 35.
MINIMUM FACE AMOUNT. The minimum Face Amount shown in the Policy (currently
$150,000 for issue ages 0-44 and $100,000 for issue ages 45-80). The minimum
Face Amount after issue is currently $125,000 for issue ages 0-44 and $75,000
for issue ages 45-80.
MINIMUM MONTHLY PREMIUM. A monthly premium amount that we determine when we
issue the Policy. Your Policy will specify this amount. See "Death Benefit
Guarantee" at page 29.
MONTHLY ANNIVERSARY. The same date in each succeeding month as the Policy Date.
If the Monthly Anniversary falls on a date other than a Valuation Date, then
the Monthly Anniversary will be the next Valuation Date. The first Monthly
Anniversary is on the Policy Date.
MONTHLY DEDUCTION. A monthly charge we deduct from the Accumulation Value of
the Policy. See "Deductions and Charges -- Monthly Deduction" at page 15.
NET PREMIUM. The premium you pay less a Premium Expense Charge.
5
<PAGE>
PLANNED PERIODIC PREMIUM. The scheduled premium you select of a level amount
at a fixed interval. The Policy will show the initial Planned Periodic
Premium you select. See "Payment and Allocation of Premiums -- Planned
Periodic Premiums" at page 28.
POLICY. Select*Life III, the flexible premium variable life insurance policy
described in this prospectus.
POLICY ANNIVERSARY. The same date in each succeeding year as the Policy Date. If
the Policy Anniversary falls on a date other than a Valuation Date, the
Policy Anniversary will be the next Valuation Date.
POLICY DATE. The date shown on your Policy that ReliaStar uses to determine
Policy Years, Policy Months, Monthly Anniversaries, and Policy Anniversaries.
POLICY MONTH. A one-month period beginning on a Monthly Anniversary.
POLICY YEAR. A 12-month period beginning on a Policy Anniversary.
PREMIUM EXPENSE CHARGE. An amount (5% in Policy Years 1 to 10 and currently 3%
thereafter) ReliaStar deducts from each premium payment resulting in the Net
Premium. See "Deductions and Charges -- Premium Expense Charge" at page 14.
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 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 that 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 "Deduction and Charges -- Surrender
Charge" at page 16.
UNIT VALUE. The unit measure by which we determine the value of the Policy's
interest in each Sub-Account. See Appendix B.
VALUATION DATE. Each day the New York Stock Exchange is open for business
except for days 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; Rev. Dr. Martin Luther King, Jr.
Day; Presidents' Day; Good Friday; Memorial Day; July Fourth; Labor Day;
Thanksgiving Day; and Christmas Day. See Appendix B.
VALUATION PERIOD. The period beginning at the close of business on a Valuation
Date and ending at the close of business on the next Valuation Date. See
Appendix B.
VARIABLE ACCOUNT. Select*Life Variable Account, a separate investment account we
established to receive and invest Net Premiums paid under the Policy and
other variable life insurance policies we issue. See "The Variable Account"
at page 8.
VARIABLE ACCUMULATION VALUE. The value attributable to a specific Policy based
on amounts in the Variable Account. See "Accumulation Value" at page 30 and
Appendix B.
WE, US, OUR, THE COMPANY, OR RELIASTAR. ReliaStar Life Insurance Company.
YOU, YOUR. The Policy owner 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.
6
<PAGE>
PART 1. SUMMARY
This is a brief summary of the Policy's features. Please read the entire
Prospectus and the Policy for more detailed information.
THE POLICY
Select*Life III is a flexible premium variable life insurance contract with
death benefits, cash values, and other features of traditional life insurance
contracts. The Policies are:
o "FLEXIBLE PREMIUM" because you do not have to pay premiums according to
a fixed schedule; and
o "VARIABLE" because Accumulation Values and, under certain circumstances,
the Death Benefit will increase and decrease based on the investment
performance of the Funds corresponding to the Sub-Accounts to which you
allocate your premium payments.
Under current Federal tax law, as long as the Policy qualifies as life
insurance, Accumulation Value increases will be subject to the same Federal
income tax treatment as traditional life insurance cash values. Therefore, any
increases should accumulate on a tax deferred basis until you request a
distribution. See "Federal Tax Matters -- Tax Status of the Policy." The
following chart outlines the various features, charges, and expenses of the
Policies. Additional, detailed information pertaining to charges and expenses is
contained in this Summary and in "Deductions and Charges."
HOW SELECT*LIFE III WORKS
[FLOW CHART]
PREMIUM PAYMENTS
MINUS
PREMIUM EXPENSE CHARGES
Invested in Variable Sub-Accounts
or Fixed Account
Variable Sub-Accounts Fixed Accounts
AIM Fidelity(R) Neuberger Berman Pilgrim
Alger Janus OpCap Putnam
PLUS
INVESTMENT RETURN
(Net of Fund Expenses)
MINUS
MONTHLY DEDUCTIONS
* Monthly Administrative Charge * Mortality and Expense Risk Charge
* Cost of Insurance * Optional Benefit Charges
MINUS
PARTIAL WITHDRAWALS
EQUALS
ACCUMULATION VALUE
(Provides Living Benefits
and Death Benefits)
LIVING BENEFITS DEATH BENEFITS
ACCUMULATION VALUE ACCUMULATION VALUE
MINUS PLUS
SURRENDER CHARGE NET AMOUNT AT RISK
EQUALS EQUALS
CASH VALUE DEATH BENEFIT
MINUS MINUS
POLICY LOAN POLICY LOAN
EQUALS EQUALS
CASH SURRENDER VALUE DEATH BENEFIT PROCEEDS
7
<PAGE>
FREE LOOK RIGHTS o If you return the Policy to us by (1) midnight of the
20th day after you receive it, (2) midnight of the
20th day after a written Notice of Right of Withdrawal
is mailed or delivered to you, or (3) midnight of the
45th day after the date of your application for the
Policy is signed, we will send you a refund of all
premiums paid unless otherwise stipulated by state
law. See "Free Look and Conversion Rights -- Free Look
Rights."
o Certain states may allow a longer period of time for
the free look period and refund a different amount.
PREMIUM PAYMENTS o You choose when to pay and how much to pay.
o We may refuse to accept any premium less than $25.
o You cannot pay additional premiums after Age 95 except
as needed to keep your Policy in force for the
remainder of the current Policy Year.
o We may refuse any premium that would disqualify your
Policy as life insurance under Section 7702 of the
Code.
o You may be required to pay enough premiums to maintain
the Death Benefit Guarantee in order 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."
o We deduct a Premium Expense Charge (5.00% of each
premium payment in Policy years 1-10 and currently
3.00% of each premium payment after the 10th Policy
Year) and credit the remaining premium (the Net
Premium) to the Variable Account or the Fixed Account
according to your instructions. See "Deductions and
Charges -- Premium Expense Charge."
THE VARIABLE ACCOUNT o Select*Life Variable Account is one of our separate
(Select*Life Variable accounts and consists of several Sub-Accounts. We only
Account) invest premiums from our variable life insurance
policies in the Variable Account.
o We invest any Net Premiums you allocate to each
Sub-Account in shares of the Fund related to that
Sub-Account.
o Variable Accumulation Value will vary with the
investment performance of the Funds and the charges
deducted from the Variable Accumulation Value. See
"Accumulation Value."
THE FIXED ACCOUNT o Consists of all of our assets other than those in our
separate accounts (including the Variable Account).
o We credit interest of at least 4% per year on any
amounts you allocate to the Fixed Account.
o We may, in our sole discretion, credit interest in
excess of 4%. See Appendix A, "The Fixed Account."
THE FUNDS o You can instruct ReliaStar to place your Net Premium
in, or transfer to, up to 17 of 34 investment
portfolios over the lifetime of your Policy.
8
<PAGE>
The following chart lists the currently available Funds and outlines
certain of their important characteristics.
INVESTMENT FUNDS
<TABLE>
<CAPTION>
ADVISER/
FUND GROUP FUND SUBADVISER MONEY MARKET FIXED INCOME GROWTH & INCOME
=================== ================== ===================== ============== ============== =================
<S> <C> <C> <C> <C> <C>
AIM AIM V.I. Dent A I M
Variable Demographic Advisors, Inc./
Insurance Funds Trends Fund H.S. Dent Advisors,
Houston, TX Inc.
============================================================================================================
Alger Alger American Fred Alger
American Growth Management, Inc.
New York, N.Y. Portfolio
----------------------------------------------------------------------------------------
Alger American Fred Alger
Leveraged Management, Inc.
All Cap Portfolio
----------------------------------------------------------------------------------------
Alger American Fred Alger
MidCap Management, Inc.
Growth
Portfolio
----------------------------------------------------------------------------------------
Alger American Fred Alger
Small Management, Inc.
Capitalization
Portfolio
============================================================================================================
Fidelity VIP Fidelity Management X
Investments(R) Equity-Income & Research Company
Boston, Mass. Portfolio
-- Initial Class
----------------------------------------------------------------------------------------
VIP Growth Fidelity Management
Portfolio & Research Company
-- Initial Class
----------------------------------------------------------------------------------------
VIP Fidelity Management X
High Income & Research Company
Portfolio
-- Initial Class
----------------------------------------------------------------------------------------
VIP Fidelity Management X
Money Market & Research Company
Portfolio
-- Initial Class
----------------------------------------------------------------------------------------
VIP II Fidelity Management
Contrafund(R) & Research Company
Portfolio
-- Initial Class
----------------------------------------------------------------------------------------
VIP II Fidelity Management X
Index 500 & Research Company
Portfolio
Fidelity -- Initial Class
Investments(R) ----------------------------------------------------------------------------------------
is a registered VIP II Fidelity Management X
trademark of Investment & Research Company
FMR Corp. Grade Bond
Portfolio
-- Initial Class
============================================================================================================
</TABLE>
[WIDE TABLE CONTINUED FROM ABOVE]
<TABLE>
<CAPTION>
PRIMARY
FUND GROUP INTERNATIONAL BALANCED GROWTH AGGRESSIVE GROWTH OBJECTIVE(S) INVESTMENTS
=================== =============== ========== ======== ================== ========================== ========================
<S> <C> <C> <C> <C> <C> <C>
AIM Long-term growth Securities of companies
Variable X of capital that are likely to
Insurance Funds benefit
Houston, TX from changing
demographic, economic
and lifestyle trends
==============================================================================================================================
Alger Long-term capital Equity securities of
American X appreciation large companies
New York, N.Y.
----------------------------------------------------------------------------------------------------------
X Long-term capital Equity securities of
appreciation companies of any size
----------------------------------------------------------------------------------------------------------
X Long-term capital Equity securities
appreciation within the range of
S&P(R) MidCap 400
Index
----------------------------------------------------------------------------------------------------------
X Long-term capital Equity securities
appreciation within the range of
Russell(R) 2000 Growth
or S&P(R) SmallCap 600
Indexes
==============================================================================================================================
Fidelity Reasonable income; Income-producing
Investments(R) also considers potential equity securities and
Boston, Mass. for capital appreciation debt obligations
----------------------------------------------------------------------------------------------------------
X Capital appreciation Common stocks
----------------------------------------------------------------------------------------------------------
High current income Income-producing debt
securities, preferred
stocks and convertible
securities, with an
emphasis on lower-
quality debt securities
----------------------------------------------------------------------------------------------------------
High current income U.S. dollar-denominated
consistent with money market
preservation of securities
capital
----------------------------------------------------------------------------------------------------------
X Capital appreciation Securities of
companies whose
value the adviser
believes is not
fully recognized
by the public
----------------------------------------------------------------------------------------------------------
Total return that Common stocks of
corresponds to that of S&P 500
Fidelity S&P 500 Index
Investments(R) ----------------------------------------------------------------------------------------------------------
is a registered High current income Investment-grade
trademark of consistent with intermediate fixed
FMR Corp. preservation of capital income securities
==============================================================================================================================
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
ADVISER/
FUND GROUP FUND SUBADVISER MONEY MARKET FIXED INCOME GROWTH & INCOME
================= ================== =================== ============== ============== =================
<S> <C> <C> <C> <C> <C>
Janus Aspen Series Janus
Denver, Co. Aggressive Capital
Growth Corporation
Portfolio
--------------------------------------------------------------------------------------
Aspen Series Janus
Growth Capital
Portfolio Corporation
--------------------------------------------------------------------------------------
Aspen Series Janus
International Capital
Growth Corporation
Portfolio
--------------------------------------------------------------------------------------
Aspen Series Janus
Worldwide Capital
Growth Corporation
Portfolio
========================================================================================================
Neuberger Advisers Neuberger Berman X
Berman Management Management Inc./
New York, N.Y. Trust Limited Neuberger Berman,
Maturity Bond LLC
Portfolio
--------------------------------------------------------------------------------------
Advisers Neuberger Berman
Management Management Inc./
Trust Partners Neuberger Berman,
Portfolio LLC
--------------------------------------------------------------------------------------
Advisers Neuberger Berman
Management Management Inc./
Trust Socially Neuberger Berman,
Responsive LLC
Portfolio
========================================================================================================
OCC OCC Accumulation OpCap
New York, N.Y. Trust Equity Advisors
Portfolio
--------------------------------------------------------------------------------------
OCC Accumulation OpCap
Trust Global Advisors
Equity Portfolio
--------------------------------------------------------------------------------------
OCC Accumulation OpCap
Trust Managed Advisors
Portfolio
--------------------------------------------------------------------------------------
OCC Accumulation OpCap
Trust Small Advisors
Cap Portfolio
========================================================================================================
</TABLE>
[WIDE TABLE CONTINUED FROM ABOVE]
<TABLE>
<CAPTION>
PRIMARY
FUND GROUP INTERNATIONAL BALANCED GROWTH AGGRESSIVE GROWTH OBJECTIVE(S) INVESTMENTS
================= =============== ========== ======== ================== ====================== =========================
<S> <C> <C> <C> <C> <C> <C>
Janus X Long-term growth of Nondiversified portfolio
Denver, Co. capital of common stocks
-------------------------------------------------------------------------------------------------------
X Long-term capital Diversified common
growth stocks
-------------------------------------------------------------------------------------------------------
X Long-term capital Foreign issuers of
growth common stocks
-------------------------------------------------------------------------------------------------------
X Long-term capital Foreign and domestic
growth common stocks
=========================================================================================================================
Neuberger Highest available Short to
Berman current income intermediate-term
New York, N.Y. consistent with investment-grade debt
liquidity and low securities
risk to principal;
total return is a
secondary goal
-------------------------------------------------------------------------------------------------------
X Growth of Capital Common stocks of
medium- to large-
capitalization
companies
-------------------------------------------------------------------------------------------------------
X Long-term Common stocks of
capital growth medium to large
capitalization
companies
=========================================================================================================================
OCC X Long-term capital Securities of
New York, N.Y. appreciation undervalued
companies
-------------------------------------------------------------------------------------------------------
X Long-term capital Global investments in
appreciation equity securities
-------------------------------------------------------------------------------------------------------
X Growth of capital Common stocks,
bonds and cash
equivalents
-------------------------------------------------------------------------------------------------------
X Capital appreciation Equity securities of
companies under
$1 billion
=========================================================================================================================
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
ADVISER/
FUND GROUP FUND SUBADVISER MONEY MARKET FIXED INCOME GROWTH & INCOME
==================== ================= ====================== ============== ============== =================
<S> <C> <C> <C> <C> <C>
Pilgrim Pilgrim VP Pilgrim
Growth Investments, Inc.
Phoenix, AZ Opportunities
Portfolio
----------------------------------------------------------------------------------------
Pilgrim VP Pilgrim Investments,
Growth + Value Inc./Navellier Fund
Portfolio Management, Inc.
----------------------------------------------------------------------------------------
Pilgrim VP Pilgrim X
High Yield Bond Investments, Inc.
Portfolio
----------------------------------------------------------------------------------------
Pilgrim VP Pilgrim Investments,
International Inc./Brandes
Value Portfolio Investment
Partners, L.P.
----------------------------------------------------------------------------------------
Pilgrim VP Pilgrim
MagnaCap Investments, Inc.
Portfolio
----------------------------------------------------------------------------------------
Pilgrim VP Pilgrim
MidCap Investments, Inc.
Opportunities
Portfolio
----------------------------------------------------------------------------------------
Pilgrim VP Pilgrim Investments,
Research Inc. /J.P. Morgan
Enhanced Investment
Index Portfolio Management Inc.
----------------------------------------------------------------------------------------
Pilgrim VP Pilgrim
SmallCap Investments, Inc.
Opportunities
Portfolio
=============================================================================================================
Putnam Putnam Putnam Investment X
Investments, Inc. VT Growth and Management, Inc.
Income Fund
Class IA Shares
----------------------------------------------------------------------------------------
Boston, Mass. Putnam Putnam Investment
VT New Management, Inc.
Opportunities
Fund Class IA
Shares
----------------------------------------------------------------------------------------
Putnam Putnam Investment
VT Voyager Fund Management, Inc.
Class IA Shares
=============================================================================================================
</TABLE>
[WIDE TABLE CONTINUED FROM ABOVE]
<TABLE>
<CAPTION>
PRIMARY
FUND GROUP INTERNATIONAL BALANCED GROWTH AGGRESSIVE GROWTH OBJECTIVE(S) INVESTMENTS
==================== =============== ========== ======== ================== ======================== =======================
<S> <C> <C> <C> <C> <C> <C>
Pilgrim X Long-term capital Common stocks of
growth large cap, mid cap or
Phoenix, AZ small cap companies
-------------------------------------------------------------------------------------------------------
X Capital appreciation Equity securities
from investing in a
diversified portfolio
of equity securities
-------------------------------------------------------------------------------------------------------
High current yield and High-yield bonds
capital appreciation
-------------------------------------------------------------------------------------------------------
X Long-term capital International equities
appreciation
-------------------------------------------------------------------------------------------------------
X Capital growth Common stocks
-------------------------------------------------------------------------------------------------------
X Long-term capital Common stocks of
appreciation mid-sized
U.S. companies
-------------------------------------------------------------------------------------------------------
X Long-term capital Common stocks
appreciation
-------------------------------------------------------------------------------------------------------
X Long-term capital Common stocks
appreciation
============================================================================================================================
Putnam Capital growth & Common stocks
Investments, Inc. current income
-------------------------------------------------------------------------------------------------------
Boston, Mass. Long-term capital Common stocks
X appreciation
-------------------------------------------------------------------------------------------------------
X Capital appreciation Common stocks
============================================================================================================================
</TABLE>
For each Fund's expenses, see "Investment Advisory Fees and Other Fund
Expenses."
CHARGES AGAINST THE ACCUMULATION VALUE
The Accumulation Value of the Policy is subject to the Monthly Deduction
charges. We will deduct the Monthly Deduction each month from both the Fixed
Accumulation Value and the Variable Accumulation Value on a proportionate basis
depending on their relative Accumulation Values at that time. See "Deductions
and Charges -- Monthly Deduction."
The Monthly Deduction includes:
o A charge for the cost of insurance -- varies based on the Insured's sex,
Age, Policy Year, Rate Class and Face Amount.
o Monthly Administrative Charge -- currently $8.25 per month and guaranteed
not to exceed $12.00 per month.
11
<PAGE>
o Monthly Mortality and Expense Risk Charge -- currently equal to 1/12 of
.90% of the Variable Accumulation Value during the first 10 policy years.
Each month thereafter, the deduction equals 1/12 of .30% and is guaranteed
not to exceed 1/12 of .60% of the Variable Accumulation Value.
o Any charges for optional insurance benefits -- vary depending upon the
benefit(s) selected.
CHARGE UPON LAPSE OR TOTAL SURRENDER OF THE POLICY
o We assess a Surrender Charge if your Policy lapses or if you surrender the
Policy during the first 15 Policy Years (or during the first 15 years
following a Face Amount increase).
o We will determine the maximum Surrender Charge for the initial Face Amount
and any requested increases in Face Amount on the Policy Date and on the
effective date of any such requested increase.
o The Surrender Charge for the initial Face Amount will depend on the
initial Face Amount, the Insured's Age on the Policy Date, and the
Insured's sex.
o You do not pay this charge if the Policy remains in force during the
entire relevant 15-year period. The Surrender Charge has two parts -- the
Contingent Deferred Administrative Charge and the Contingent Deferred
Sales Charge, which are determined separately. Surrender during the first
two Policy Years and 24 months after increases in the Face Amount may be
eligible for a refund of part of the Contingent Deferred Sales Charge.
See "Deductions and Charges -- Surrender Charge."
SURRENDERS o In general, you will receive the Cash Surrender Value if
you surrender the Policy.
o To determine the Cash Surrender Value, we reduce your
Accumulation Value by the Surrender Charge, if any, and
any Loan Amount and unpaid Monthly Deductions. See
"Surrender Benefits -- Total Surrender."
PARTIAL WITHDRAWALS o Once each Policy Year, after the first Policy Year, you
can withdraw part of your Cash Surrender Value.
o You will not incur a Surrender Charge, but partial
withdrawals are subject to a processing charge (currently
$10, guaranteed not to exceed $25). See "Surrender
Benefits -- Partial Withdrawal."
LOANS o Depending on your state of residence, you can borrow up to
75% of your Policy's Cash Value less any existing Loan
Amount.
o Interest is payable in advance for each Policy Year and
accrues daily at an effective annual rate that will not
exceed 8.00%.
o After the 10th Policy Year, we currently charge interest
at an annual rate of 5.21% on the portion of your Loan
Amount that is not in excess of (1) the Accumulation
Value, less (2) the total of all premiums paid net of all
partial withdrawals.
o We reserve the right to limit borrowing during the first
Policy Year. See "Policy Loans."
TRANSFERS o Currently, you can transfer all or part of your
Accumulation Value among the investment options.
o We currently do not limit the number of transfers per
Policy Year. We reserve the right to limit you to 4
transfers per Policy Year.
o There are certain restrictions on transfers from the Fixed
Account.
o We currently make no charge for the first 24 transfers in
a Policy Year. We make a $25 charge for each subsequent
transfer. We reserve the right to assess a maximum charge
of $25 for each transfer. See "Transfers."
12
<PAGE>
DEATH BENEFIT OVERVIEW
You can choose one of two Death Benefit Options:
o Level Amount Option -- whereby the Death Benefit is the greater of the
Face Amount or the corridor percentage of Accumulation Value; or
o Variable Amount Option -- whereby the Death Benefit is equal to the
greater of the Face Amount plus the Accumulation Value, or the corridor
percentage of Accumulation Value. See "Death Benefit."
The Death Benefit until Age 95 under the Level Amount Option and the
Variable Amount Option 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.
We will reduce the proceeds payable upon the death of the Insured under any
Death Benefit Option by any Loan Amount and any unpaid Monthly Deductions.
Under certain circumstances, you may receive a part of the Death Benefit
when the Insured has been diagnosed as having a terminal illness. See "Death
Benefit -- Accelerated Benefit Rider."
ADJUSTING THE DEATH BENEFIT
Although we reserve the right to limit Face Amount increases and decreases
during the first two Policy Years, 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 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 second Policy Year. See "Death Benefit -- Changing the Death Benefit
Option."
See "Death Benefit -- Insurance Protection" for a discussion of available
techniques to adjust the amount of insurance protection to satisfy changing
insurance needs.
DEATH BENEFIT GUARANTEE
If you meet the requirements for the Death Benefit Guarantee, we will not
lapse your Policy during the Death Benefit Guarantee Period even if the Cash
Surrender Value is not sufficient to cover the Monthly Deduction that is due.
See "Death Benefit Guarantee."
LAPSE
If the Death Benefit Guarantee is not in effect, the Policy will lapse if
the Cash Surrender Value is less than the Monthly Deduction due and if you do
not make a sufficient payment during the grace period of 61 days. See "Policy
Lapse and Reinstatement."
TAXATION OF DEATH BENEFIT PROCEEDS
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 not be taxable income to the beneficiary. See "Federal Tax
Matters -- Tax Status of the Policy."
TAXATION OF THE POLICY
The Company intends for the Policy to satisfy the definition of a life
insurance contract under Section 7702 of the Code. Under certain circumstances,
a Policy could be treated as a "modified endowment contract." The Company will
monitor Policies and will attempt to notify an owner on a timely basis if his or
her Policy is in jeopardy of becoming a modified endowment contract. See
"Federal Tax Matters" for further discussion of the tax status of a Policy and
the tax consequences of being treated as a life insurance contract or a modified
endowment contract.
A Policy lapse, surrender, partial withdrawal or loan may have adverse tax
consequences in certain circumstances. See "Federal Tax Matters."
13
<PAGE>
PART 2. DETAILED INFORMATION
RELIASTAR LIFE INSURANCE COMPANY
ReliaStar Life Insurance Company is 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. We offer
individual life insurance and annuities, employee benefits and retirement
contracts. Our Home Office is at 20 Washington Avenue South, Minneapolis,
Minnesota 55401 (telephone 612-372-5507).
From time to time, we may 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 investment performance of assets 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 policyholders over a long period. Such
ratings do not reflect the investment in the Variable Account.
ReliaStar is a charter member of the Insurance Marketplace Standards
Association ("IMSA"). Companies that belong to IMSA subscribe to a rigorous set
of standards that cover the various aspects of sales and service for
individually sold life insurance and annuities. IMSA members have adopted
policies and procedures that demonstrate a commitment to honesty, fairness and
integrity in all customer contacts involving sales and service of individual
life insurance and annuity products.
THE POLICIES
The Policies are flexible premium variable life insurance contracts with
death benefits, cash values, and other features of traditional life insurance
contracts.
DEDUCTIONS AND CHARGES
We deduct certain charges in connection with the Policy to compensate us
for (1) providing the insurance benefits of the Policy (including any riders),
(2) administering the Policy, (3) assuming certain risks in connection with the
Policy, and (4) incurring expenses in distributing the Policy.
We deduct some charges from each premium payment. We deduct certain other
charges monthly from both the Fixed Account and the Variable Account. We also
assess a charge for each partial withdrawal and we may assess a charge 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, payments of sales expenses.
The Surrender Charge usually exceeds the Accumulation Value in the early
Policy Years. This occurs because the Surrender Charge is usually more than the
accumulated Minimum Monthly Premiums less Policy charges in the early Policy
Years.
PREMIUM EXPENSE CHARGE
We deduct the Premium Expense Charge from each premium payment. The Premium
Expense Charge equals 5.00% of each premium payment in Policy Years 1 to 10 and
3% (guaranteed not to exceed 5.00%) in Policy Years after that. It consists of a
sales charge and a premium tax charge. The amount remaining after we deduct the
Premium Expense Charge is called the Net Premium.
SALES CHARGE. A sales charge of 2.50% of each premium payment is deducted
during the first ten Policy Years and a sales charge of .50% (guaranteed not to
exceed 2.5%) is currently deducted after the tenth Policy Year. In addition, we
may charge a contingent deferred sales charge if you surrender the Policy or the
Policy lapses. See "Deductions and Charges -- Surrender Charge."
14
<PAGE>
PREMIUM TAX CHARGE. Various states and subdivisions impose a tax on
premiums received by insurance companies. Premium taxes vary from state to
state. A charge of 2.50% of each premium payment will be deducted by us. The
deduction represents an amount we consider necessary to pay all taxes imposed by
the state and any subdivisions.
PREMIUM PROCESSING CHARGE. We may make a charge of up to $2.00 per premium
payment to reimburse us for the cost of collecting and processing premiums,
although we currently make no such charge. If a premium processing charge is
made, it will be deducted from premium payments before the percentage deductions
for sales charge and premium taxes.
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.
We will deduct the Monthly Deduction 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, we reduce the Fixed Accumulation Value 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, 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 (1) the Death Benefit at the beginning of the Policy Month divided by
1.004074 (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 5%), less (2) 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 an 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, an Insured in the standard Rate Class
will have a lower cost of insurance than an 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, we will first assume the Accumulation Value 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.
We base cost of insurance rates on the sex, Issue Age, Policy Year and Rate
Class(es) of the 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.
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 equal to 1/12 of .90% of the Variable
Accumulation Value. Each month thereafter we will deduct a charge equal to 1/12
of .30% of the Variable Accumulation Value, guaranteed not to exceed 1/12 of
.60% for the duration of the Policy. The mortality and expense risk we assume is
that our Cost of Insurance charges and other expense charges are not sufficient
to cover our costs of death benefits, and any other expenses incurred in issuing
and administering the Policies.
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."
15
<PAGE>
SURRENDER CHARGE
GENERAL. During the first 15 Policy Years and during the first 15 years
following any requested increase in Face Amount, there is a Surrender Charge if
you surrender the Policy or the Policy lapses. The Surrender Charge has two
parts -- The Contingent Deferred Administrative Charge and the Contingent
Deferred Sales Charge which are determined separately. 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 maximum amount of the
Surrender Charge is $50.60 per thousand for a male Insured at Issue Age 61.
CONTINGENT DEFERRED ADMINISTRATIVE CHARGE. The maximum Contingent Deferred
Administrative Charge for the initial Face Amount or any requested increase in
Face Amount is determined on the Policy Date or on the effective date of any
requested increase in Face Amount respectively. The maximum charge for the
initial Face Amount during the first five Policy Years is $5.00 per $1,000 of
Face Amount, which decreases thereafter in equal monthly increments until it
becomes zero at the end of the 15 year period. For any requested increase in
Face Amount, an additional Contingent Deferred Administrative Charge begins at
zero, increases in equal monthly increments until it reaches the maximum after
three years, and then remains level for the next two years. Beginning five years
after the effective date of the increase, the additional Contingent Deferred
Administrative Charge reduces in equal monthly increments until it becomes zero
at the end of 15 years.
The Contingent Deferred Administrative Charge for the initial Face Amount
or a requested increase in Face Amount can be determined by multiplying (a)
$5.00 by (b) the initial Face Amount or the Face Amount of the increase, as the
case may be, and by (c) the applicable percentage from the Surrender Charge
Percentage Table shown on page 17, and then dividing this amount by 1000.
The calculation of the additional Contingent Deferred Administrative Charge
for a requested increase in Face Amount is the same as for the initial Face
Amount, except that (a) the charges are based on the amount of the increase, (b)
the years and months are measured from the effective date of the increase, and
(c) different surrender percentage factors apply.
CONTINGENT DEFERRED SALES CHARGE. The maximum Contingent Deferred Sales
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. For the initial Face Amount, the Contingent Deferred
Sales Charge will remain level for the first five years in the relevant 15 year
period, and then reduces in equal monthly increments until it becomes zero at
the end of 15 years. For any requested increase in Face Amount, an additional
Contingent Deferred Sales Charge begins at zero, increases in equal monthly
increments until it reaches the maximum after three years, and then remains
level for the next two years. Beginning five years after the effective date of
the increase, the additional Contingent Deferred Sales Charge reduces in equal
monthly increments until it becomes zero at the end of 15 years. The Contingent
Deferred Sales Charge will vary depending upon the Insured's Age (on the Policy
Date or on the effective date of an increase in Face Amount) and the Insured's
sex.
If you surrender the Policy during the first two Policy Years or during
the first 24 months following a requested increase in Face Amount, you may be
entitled to a refund of a portion of the Contingent Deferred Sales Charge. See
"Sales Charge Refund."
The Contingent Deferred Sales Charge will be equal to the lesser of:
(a) 47.50% of the premiums attributable to the initial Face Amount
of the Policy and any premiums attributable to an increase in
Face Amount; or
(b) The result of the Contingent Deferred Sales Charge calculation
described below.
CONTINGENT DEFERRED SALES CHARGE CALCULATION. For purposes of (b) above,
the Contingent Deferred Sales Charge for the initial Face Amount or any
requested increase in Face Amount is determined by multiplying (i) the
applicable Charge per $1,000 of Face Amount from Appendix C 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 on the next
page, and then dividing this amount by 1000.
The additional Contingent Deferred Sales Charge for requested increases in
Face Amount will be calculated in the same manner as illustrated in the example
above. However, for purposes of determining the amount in (a) in the above
example, the cumulative premium paid is replaced by the
16
<PAGE>
premiums attributable to the increase in Face Amount. The premiums attributable
to the requested increase will consist of a defined proportion of the existing
Accumulation Value on the date of the increase, plus an equal proportion of all
premium payments made after the effective date of the increase. The defined
proportion is determined by dividing (a) the Surrender Charge Guideline for the
requested increase, by (b) the sum of the Surrender Charge Guidelines for the
Initial Face Amount and each requested increase in Face Amount.
The Surrender Charge Guideline for the initial Face Amount or any requested
increase in Face Amount is determined by multiplying (i) the applicable
Guideline per $1,000 from Appendix D by (ii) the Initial Face Amount or the Face
Amount of the increase, as applicable, and dividing by 1000.
MASSACHUSETTS, MONTANA AND PENNSYLVANIA RESIDENTS. Appendix C and Appendix
D and the preceding descriptions of the Contingent Deferred Sales Charge do not
apply to policies issued in Massachusetts, Montana and Pennsylvania. The
Contingent Deferred Sales Charge applied to Policies issued in Massachusetts and
Montana is not affected by the Insured's sex. Therefore, the Contingent Deferred
Sales Charge made on Policies issued in these two states will differ from the
charge made in other states. In Pennsylvania, the Insured's sex will be a factor
in determining the amount of Contingent Deferred Sales Charge applied to a
Policy, but the charge will differ from the charge described above.
SURRENDER CHARGE PERCENTAGE TABLE
<TABLE>
<CAPTION>
THE FOLLOWING PERCENTAGES OF
THE
SURRENDER CHARGE WILL BE
PAYABLE
FOR:**
-----------------------------
IF SURRENDER OR LAPSE OCCURS IN INITIAL FACE FACE AMOUNT
THE LAST MONTH OF POLICY YEAR:* AMOUNT INCREASES
- -------------------------------- -------------- ------------
<S> <C> <C>
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%
</TABLE>
*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 seventh Policy Year, the percentage reduces equally
each month from 90% at the end of the sixth Policy Year to 80% at the end of
the seventh Policy Year.
SALES CHARGE REFUND
During the first two Policy Years and during the first 24 Policy Months
following the effective date of any requested increase in Face Amount, we may be
required to refund a portion of the Contingent Deferred Sales Charge if you
surrender the Policy. This refund is called the Sales Charge Refund.
Any amount used in the calculation described below will be determined on
the effective date of surrender.
INITIAL FACE AMOUNT. If the Policy is surrendered during the first two
Policy Years, a Sales Charge Refund will be made to the extent that the total
sales charge deducted (the sales charge deducted from each premium payment and
the Contingent Deferred Sales Charge) exceeds (i) 30% of actual premium payments
made during the first Policy Year up to the amount of the Surrender Charge
Guideline (see below) for the initial Face Amount, plus (ii) 9% of any actual
premium payments made that exceed (i).
17
<PAGE>
In addition, the amount of the refund will never decrease as the result of the
payment of a premium. After the second Policy Year, there is no Sales Charge
Refund with respect to the initial Face Amount.
As described above, the Sales Charge Refund is calculated based on
percentages of premium payments. While the total sales charge deducted under the
Policy is not based solely on premium payments, it is possible to translate the
total sales charge into a percentage of premium payments. In general, the total
sales charge deducted (before calculating the Sales Charge Refund) will be 50%
of each premium payment until premium payments reach a certain level. The level
ranges from approximately 35% of a Surrender Charge Guideline for a male age 0,
up to approximately 111% of a Surrender Charge Guideline for a male age 40, and
down to approximately 44% of a Surrender Charge Guideline for a male age 75.
After premium payments reach this level, the total sales charge will equal 2.50%
of each additional premium payment. During the two Policy Years when the Sales
Charge Refund applies, however, the total sales charge will be limited to 30% of
actual first year premium payments up to the amount of a Surrender Charge
Guideline, 9% of actual premium payments until payments reach the level where
the total sales charge drops to 2.50%, and 2.50% of any additional premium
payments beyond that level. If you have any questions regarding the amount of
your Sales Charge Refund, please call us.
Due to the Sales Charge Refund, the total sales charge for the initial Face
Amount will be significantly less if a Policy is surrendered during the first
two Policy Years rather than shortly thereafter.
The Surrender Charge Guideline will equal the amount obtained by dividing
the Face Amount or the amount of the increase, as the case may be, by $1,000,
and multiplying the result by the applicable factor from Appendix D.
REQUESTED INCREASES IN FACE AMOUNT. If you cancel a requested increase in
Face Amount during the first 24 Policy Months following the increase (but after
the free look period -- see "Free Look and Conversion Rights -- Free Look
Rights"), and the Policy is surrendered at any time thereafter, a Sales Charge
Refund will be made to the extent that the total sales charge for the increase
(the sales charge deducted from the portion of premiums attributable to the
increase and the Contingent Deferred Sales Charge for the increase) exceeds (i)
30% of the premiums attributable to the increase in the 12 Policy Months
following the increase up to the amount of the Surrender Charge Guideline for
the increase (see immediately preceding paragraph), plus (ii) 9% of any premiums
attributable to the increase that exceed (i). In addition, the amount of the
refund will never decrease as the result of the payment of a premium. This
refund is only available if the increase is cancelled within the 24 Policy
Months following its effective date, and the Policy is subsequently surrendered.
No refund is available if the increase is cancelled after the 24-month period.
Calculating total sales charge deducted for an increase as a percentage of
premiums attributable to the increase is, in general, the same as described
above for the initial Face Amount. Thus, due to the Sales Charge Refund, the
total sales charge for a requested increase in Face Amount may be significantly
less if the increase is cancelled during the 24-month period following the
increase rather than shortly thereafter. If you have any questions regarding the
amount of your Sales Charge Refund, please call us.
For the purposes of the preceding paragraph, the premiums attributable to
the increase will be determined as described in the section entitled "Deductions
and Charges -- Surrender Charge -- Calculation of Contingent Deferred Sales
Charge," which means that, in effect, a proportionate amount of the existing
Accumulation Value on the effective date of the increase will be deemed to be a
premium payment for the increase, and subsequent premium payments will be
prorated.
EFFECT OF SALES CHARGE REFUND. The Sales Charge Refund will be applied to
maintain the Policy in force when the Cash Surrender Value is insufficient to
cover the Monthly Deduction. If the remaining Sales Charge Refund (not already
applied to keep the Policy in force) is insufficient to cover the Monthly
Deduction, this remaining Sales Charge Refund may be applied for the grace
period under the Policy. See "Policy Lapse and Reinstatement." Any Sales Charge
Refund not so applied will be refunded to you upon the total surrender of the
Policy.
PARTIAL WITHDRAWAL AND TRANSFER CHARGES
We currently make no charge for the first 24 transfers in a Policy Year and
assess a $25 charge for each subsequent transfer. We currently assess a $10.00
charge for each partial withdrawal. These charges
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<PAGE>
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.
MODIFICATION OF CHARGES
ReliaStar may modify any of the charges under the Policy, as well as the
minimum Face Amount set forth in this Prospectus, because of special
circumstances that result in lower sales, administrative, or mortality expenses.
For example, special circumstances may exist in connection with group or
sponsored arrangements, 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. Modifications will not be unfairly discriminatory against any
person, including the affected Policy owners and owners of all other policies
funded by the Variable Account.
Persons purchasing under a sponsored arrangement may apply for simplified
underwriting. If we approve such simplified underwriting, the cost of insurance
may increase as a result of higher than anticipated mortality experience.
However, any such increase will not cause the cost of insurance charge to exceed
the guaranteed rates set forth in the Policy.
INVESTMENT ADVISORY FEES AND OTHER FUND EXPENSES
Because the Variable Account purchases shares of the Funds, the net asset
value of the Variable Account's investments 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 1999 annual expenses as a percentage of the
Fund's average net assets. See the prospectuses for the Funds for more
information concerning these expenses.
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<PAGE>
FUND EXPENSES (BEFORE REIMBURSEMENTS)
<TABLE>
<CAPTION>
TOTAL INVESTMENT
MANAGEMENT OTHER FUND AMOUNT
FUND FEES EXPENSES EXPENSES
- ------------------------------------------------------------------- ------------ ---------- -----------------
<S> <C> <C> <C>
AIM Dent Demographic Trends Fund (a) .............................. 0.85% 0.55% 1.40%
Alger American Growth Portfolio (a) ............................... 0.75% 0.04% 0.79%
Alger American Leveraged AllCap Portfolio (a) ..................... 0.85% 0.08% 0.93%
Alger American MidCap Growth Portfolio (a) ........................ 0.80% 0.05% 0.85%
Alger American Small Capitalization Portfolio (a) ................. 0.85% 0.05% 0.90%
Fidelity VIP Equity-Income Portfolio -- Initial Class (a) (b) ..... 0.48% 0.09% 0.57%
Fidelity VIP Growth Portfolio -- Initial Class (a) (b) ............ 0.58% 0.08% 0.66%
Fidelity VIP High Income Portfolio -- Initial Class (a) ........... 0.58% 0.11% 0.69%
Fidelity VIP Money Market Portfolio -- Initial Class .............. 0.18% 0.09% 0.27%
Fidelity VIP II Contrafund Portfolio -- Initial Class (a) (b) ..... 0.58% 0.09% 0.67%
Fidelity VIP II Index 500 Portfolio -- Initial Class (a) (b) ...... 0.24% 0.10% 0.34%
Fidelity VIP II Investment Grade Bond Portfolio -- Initial
Class (a) ........................................................ 0.43% 0.11% 0.54%
Janus Aspen Aggressive Growth Portfolio (a) (c) ................... 0.65% 0.02% 0.67%
Janus Aspen Growth Portfolio (a) (c) .............................. 0.65% 0.02% 0.67%
Janus Aspen International Growth Portfolio (a) (c) ................ 0.65% 0.11% 0.76%
Janus Aspen Worldwide Growth Portfolio (a) (c) .................... 0.65% 0.05% 0.70%
Neuberger Berman Advisers Management Trust Limited
Maturity Bond Portfolio (a) ...................................... 0.65% 0.11% 0.76%
Neuberger Berman Advisers Management Trust Partners
Portfolio (a) .................................................... 0.80% 0.07% 0.87%
Neuberger Berman Advisers Management Trust Socially
Responsive Portfolio (a) (d) ..................................... 0.85% 8.19% 9.04%
OCC Accumulation Trust Equity Portfolio (a) (e) ................... 0.80% 0.11% 0.91%
OCC Accumulation Trust Global Equity Portfolio (a) (e) ............ 0.80% 0.30% 1.10%
OCC Accumulation Trust Managed Portfolio (a) (e) .................. 0.77% 0.06% 0.83%
OCC Accumulation Trust Small Cap Portfolio (a) (e) ................ 0.80% 0.09% 0.89%
Pilgrim VP Trust Growth Opportunities Portfolio (f) (g) ........... 0.75% 0.34% 1.09%
Pilgrim VP Trust Growth + Value Portfolio (f) ..................... 0.75% 0.22% 0.97%
Pilgrim VP Trust High Yield Bond Portfolio (f) .................... 0.75% 0.36% 1.11%
Pilgrim VP Trust International Value Portfolio (f) ................ 1.00% 0.52% 1.52%
Pilgrim VP Trust MagnaCap Portfolio (f) (g) ....................... 0.75% 0.34% 1.09%
Pilgrim VP Trust MidCap Opportunities Portfolio (f) (g) ........... 0.75% 0.34% 1.09%
Pilgrim VP Trust Research Enhanced Index Portfolio (f) ............ 0.75% 0.51% 1.26%
Pilgrim VP Trust SmallCap Opportunities Portfolio (f) ............. 0.75% 0.34% 1.09%
Putnam VT Growth and Income Fund -- Class IA Shares ............... 0.46% 0.04% 0.50%
Putnam VT New Opportunities Fund -- Class IA Shares ............... 0.54% 0.05% 0.59%
Putnam VT Voyager Fund -- Class IA Shares ......................... 0.53% 0.04% 0.57%
</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 portfolios pay was
used to reduce Portfolio expenses. In addition, certain Portfolios have
entered into arrangements with their custodian whereby credits realized
as a result of uninvested cash balances are used to reduce custodian
expenses. Including these reductions, the total operating expenses
presented in the table would have been: 0.56% for Fidelity VIP
Equity-Income Portfolio; 0.65% for Fidelity
20
<PAGE>
VIP Growth Portfolio; 0.28% for Fidelity VIP II Index 500 Portfolio; and
0.65% for Fidelity VIP II Contrafund Portfolio.
(c) Expenses are based upon expenses for the fiscal year ended December 31,
1999, restated to reflect a reduction in the management fee for Growth,
Aggressive Growth, International Growth, and Worldwide Growth
Portfolios. All expenses are shown without the effect of expense offset
arrangements.
(d) Neuberger Berman Management Inc. ("NBMI") has undertaken to reimburse
the Socially Responsive Portfolio for certain operating expenses,
including the compensation of Neuberger Berman Advisers Management Trust
and excluding taxes, interest, extraordinary expenses, brokerage
commissions and transaction costs, that exceed in the aggregate, 1.50%
of the average daily net asset value of the Socially Responsive
Portfolio. Expenses were 1.53% for the fiscal period ending December 31,
1999, after the reimbursement. The expense reimbursement policy is
subject to termination upon 60 days' written notice. There can be no
assurance that this policy will be continued after May 1, 2001. See
"Expense Limitation" in the Socially Responsive Portfolio prospectus for
further information.
(e) Management Fees reflect effective management fees before taking into
effect any waiver. Other Expenses are shown before expense offsets
afforded the Portfolios. Total Portfolio Expenses for the Equity, Small
Cap and Managed Portfolios are limited by OpCap Advisors so that their
respective annualized operating expenses (net of expense offsets) do not
exceed 1.00% of average daily net assets. Total Portfolio Expenses for
the Global Equity Portfolio are limited to 1.25% of average daily net
assets (net of expense offsets).
(f) The investment adviser to the Pilgrim VP Trust has agreed to reimburse
the Pilgrim VP Growth + Value Portfolio and High Yield Bond Portfolio
for any expenses in excess of 0.80% of each Portfolio's average daily
net assets. It has also agreed to reimburse the SmallCap Opportunities
Portfolio, Research Enhanced Index Portfolio, Growth Opportunities
Portfolio, MagnaCap Portfolio, and MidCap Opportunities Portfolio for
amounts in excess of 0.90%. It has agreed to reimburse International
Value Portfolio for amounts in excess of 1.00%. After the investment
adviser's expense reimbursements, the Total Fund Annual Expenses that
were paid by each Portfolio during its fiscal year ended December 31,
1999 were: Growth + Value Portfolio: 0.80%; High Yield Bond Portfolio:
0.80%; International Value Portfolio: 1.00%; Research Enhanced Index
Portfolio: 0.89%; SmallCap Opportunities Portfolio: 0.90%. Expense
reimbursements are voluntary. There is no assurance of ongoing
reimbursement.
(g) This portfolio had not commenced operations as of December 31, 1999, and
therefore these expenses are estimated.
THE VARIABLE ACCOUNT
On October 11, 1984, we established the Select*Life Variable Account as
one of our separate accounts pursuant to the laws of the State of Minnesota.
The Variable Account:
o will receive and invest the Net Premiums paid and allocated to it under
this Policy;
o currently receives and invests net premiums for other classes of flexible
premium variable life insurance policies we issue and may do so for
additional classes in the future;
o meets the definition of a "separate account" under the federal securities
laws; and
o is registered with the SEC as a unit investment trust under the
Investment Company Act of 1940 ("1940 Act"). Such 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 Variable Account's assets. However, Minnesota law provides that
we cannot charge the Variable Account 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).
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<PAGE>
INVESTMENTS OF THE VARIABLE ACCOUNT
There are currently 34 investment options (Funds) available under the
Variable Account. However, we only permit you to participate in a maximum of 17
investment options over the lifetime of your Policy. You should also read the
Funds' prospectuses for more detailed information, particularly because several
of the Funds and portfolios may have objectives that are quite similar. Please
call the telephone number listed on the first page of this Prospectus to request
a Fund's prospectus. THERE IS NO ASSURANCE THAT ANY FUND WILL ACHIEVE ITS
INVESTMENT OBJECTIVE(S).
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. Such 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. We will accompany quotations of performance information for
the Funds 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.
We may provide performance information showing total returns and average annual
total returns for periods prior to the date a Sub-Account commenced operation.
We will calculate such performance information 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.
We provide individualized hypothetical illustrations of 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. We will base these hypothetical
illustrations 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.
We may compare performance of the Sub-Accounts and/or the Funds in
advertisements and sales literature:
o to other variable life insurance issuers in general;
o to the performance of particular types of variable life insurance
policies investing in mutual funds;
o to investment series of mutual funds with investment objectives similar
to each of the Sub-Accounts, whose performance is reported by Lipper
Analytical Services, Inc. and Morningstar, Inc. (independent services
that monitor and rank the performances of variable life insurance issuers
in each of the major categories of investment objectives on an
industry-wide basis), 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, and FORTUNE; and
o 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.
DEATH BENEFIT
If the Insured dies while the Policy is in force, we will pay the Death
Benefit reduced by any Loan Amount and unpaid Monthly Deductions. This amount
is called the proceeds. We may pay all or part of the proceeds in cash to your
beneficiaries or under one or more of the settlement options we offer. See
"General Provisions -- Settlement Options."
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<PAGE>
GUIDELINE PREMIUM TEST. The Death Benefit will be determined with reference
to the requirements for the Guideline Premium Test for qualifying a Policy as a
life insurance contract under Code Section 7702(a)(2). Under these requirements,
the sum of the premiums paid under a Policy may not exceed the "guideline
premium limitations," as defined in Code Section 7702(a). The Death Benefit at
any time is never less than the Accumulation Value multiplied by the Corridor
Percentages, which vary according to the Age of the Insured, (as defined in Code
Section 7702(d)).
CORRIDOR PERCENTAGE TABLE
<TABLE>
<CAPTION>
CORRIDOR CORRIDOR
INSURED'S AGE ON PERCENTAGE OF INSURED'S AGE ON PERCENTAGE OF
PREVIOUS POLICY ACCUMULATION PREVIOUS POLICY ACCUMULATION
ANNIVERSARY VALUE ANNIVERSARY VALUE
- ------------------ -------------- ------------------ --------------
<S> <C> <C> <C>
40 or younger 250% 54 157
41 243 55 150
42 236 56 146
43 229 57 142
44 222 58 138
45 215 59 134
46 209 60 130
47 203 61 128
48 197 62 126
49 191 63 124
50 185 64 122
51 178 65 120
52 171 66 119
53 164 67 118
</TABLE>
<TABLE>
<CAPTION>
INSURED'S AGE ON PERCENTAGE OF
PREVIOUS POLICY ACCUMULATION
ANNIVERSARY VALUE
- ------------------ -------------
<S> <C>
68 117
69 116
70 115
71 114
72 113
73 111
74 109
75-90 105
91 104
92 103
93 102
94 101
95 or older 100
</TABLE>
DEATH BENEFIT OPTIONS
The Policy provides two Death Benefit Options as shown below. 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 prior to Age 95 depends on the Death Benefit Option
chosen as described below.
OPTION A. (Level Amount Option.) Prior to Age 95, the Death Benefit is the
greater of the current Face Amount of the Policy or the Corridor Percentage of
Accumulation Value on the Valuation Date on or next following the date of the
Insured's death. Under Option A, 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.
OPTION B. (Variable Amount Option.) Prior to Age 95, the Death Benefit is
equal to the greater of the current Face Amount plus the Accumulation Value of
the Policy, or the corridor percentage of the Accumulation Value on the
Valuation Date on or next following the date of the Insured's death. Under
Option B, the amount of the Death Benefit will always vary as the Accumulation
Value varies.
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. We reserve the right to limit increases and decreases in the
Face Amount during the first two Policy Years.
INCREASES. For an increase in the Face Amount, you must submit a written
request 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. We will currently permit increases up to the Insured's
Age 80, if our requirements are met. 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" below) from the Accumulation Value, whether or not you pay an additional
premium in
23
<PAGE>
connection with the increase. You will be entitled to limited free look rights
with respect to requested increases in Face Amount. See "Free Look Rights."
DECREASES. For a decrease in the Face Amount, you must submit a written
request 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. If, following a
decrease in Face Amount, the Policy would no longer qualify as life insurance
under Federal tax law (see "Federal Tax Matters -- Tax Status of the Policy"),
we will limit the decrease to the extent necessary to meet these requirements.
For purposes of determining the cost of insurance, we will apply decreases
in the Face Amount to reduce the current Face Amount in the following order:
(1) The Face Amount provided by the most recent increase;
(2) The next most recent increases successively; and
(3) 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 $200,000 with a
standard Rate Class, and that successive increases of $50,000 (at a Rate Class
of 200%) and $100,000 (at a Rate Class of 300%) were added. If a decrease of
$100,000 or less is requested, the amount of insurance at a 300% Rate Class will
be reduced first. If a decrease of more than $100,000 is requested, the amount
at a 300% Rate Class will be eliminated, and the excess over $100,000 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 depends
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 and Monthly Amount Charge,
but a decrease in the Face Amount will not reduce the Surrender Charge or the
Monthly Amount 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. A Face Amount decrease may also shorten the Death Benefit Guarantee
Period if a term insurance rider is attached. See "Death Benefit Guarantee."
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."
24
<PAGE>
INSURANCE PROTECTION
As your insurance needs change, 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. These ways
include
o increasing or decreasing the Face Amount of insurance;
o changing the level of premium payments; and
o 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:
o 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.
o 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 Cost of Insurance charges generally
will decrease as well. (Note that the Surrender Charge will not be
reduced. See "Deductions and Charges -- Surrender Charge.")
o A CHANGE IN THE LEVEL OF PREMIUM can have a variety of effects, as
follows.
Under the Level Amount Option, until the corridor percentage of
Accumulation Value exceeds the Face Amount, (a) an increased level of
premium payments will reduce the amount of pure insurance protection,
and (b) a reduced level of premium payments will increase the amount of
pure insurance protection.
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.)
Under any Death Benefit Option, if the Death Benefit is the corridor
percentage of Accumulation Value, then (a) 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 (b) a reduced level of premium
payments will reduce the pure insurance protection.
o 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.
YOU SHOULD CONSIDER 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) TOGETHER WITH THE OTHER RESTRICTIONS AND CONSIDERATIONS DESCRIBED
ELSEWHERE IN THIS PROSPECTUS.
CHANGING THE DEATH BENEFIT OPTION
After the second Policy Year, you may change the Death Benefit Option. You
must submit a written request to change the Death Benefit Option. 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
25
<PAGE>
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 (currently $25,000).
If you change the Death Benefit Option from the Variable Amount Option to
the Level Amount Option, we will increase the Face Amount 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. A change in the Face Amount resulting
from a change in the Death Benefit Option may also affect the charge for certain
optional insurance benefits. See "Deductions and Charges -- Monthly Deduction."
However, a Face Amount change resulting from a Death Benefit Option change will
not affect the Surrender Charge.
Changes in the Death Benefit Option do not currently require additional
evidence of insurability.
ACCELERATED BENEFIT RIDER
Under certain circumstances, the Accelerated Benefit Rider allows a Policy
owner to accelerate benefits from the Policy that we otherwise would pay upon
the Insured's death. The benefit may vary state-by-state and you should consult
your registered representative as to whether and to what extent the rider is
available in a particular state and on any particular Policy. Generally, we will
provide an Accelerated Benefit if the Insured has a terminal illness that will
result in the death of the Insured within 12 months, as certified by a
physician. The Accelerated Benefit will not be more than 50% of the amount that
would be payable at the death of the Insured. The Accelerated Benefit will first
be used to pay off any outstanding Policy loans and interest due. The remainder
of the Accelerated Benefit will be paid in a lump sum to the Policy owner.
Limitations, as described in the Accelerated Benefit Rider, may apply.
We will establish a lien against the Policy for the amount of the
Accelerated Benefit plus an administrative charge, plus interest on the lien. We
will first use any proceeds from the Policy to repay this lien. We will reduce
your access to the Cash Value by the amount of the lien. We also will reduce the
proceeds payable to the beneficiary by the amount of the lien. We will assess an
administrative charge of up to $300 at the time we pay the Accelerated Benefit.
The Accelerated Benefit will not affect the premium payable on the Policy.
Receipt of a benefit under the Accelerated Benefit Rider may give rise to
Federal or state income tax. Consult a competent tax advisor for further
information.
The above information is not a complete summary of the Rider. All of the
terms and provisions of the Accelerated Benefit Rider are set forth in the Rider
and you should refer to the Rider in order to fully ascertain its benefits and
limitations.
PAYMENT AND ALLOCATION OF PREMIUMS
ISSUING THE POLICY
An individual applying for a Policy must complete an application and
personally deliver it to our licensed agent. We will only issue a Policy to an
applicant Age 80 or less who supplies evidence of insurability satisfactory to
us. The minimum Face Amount is currently $150,000 for issue ages 0 through 44
and $100,000 for issue ages 45 through 80, but we reserve the right to specify a
different minimum Face Amount for issuing a new Policy. 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
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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:
o The date the coverage under the Policy is effective.
o 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.
o The date of death of the proposed Insured, any proposed additional
Insured's, or any proposed Insured child.
o The 180th day after the date of the receipt for the temporary insurance.
ALLOCATING PREMIUMS
You may choose the initial allocation of your Net Premiums (your Gross
Premiums less the Premium Expense Charge) to the Fixed Account and/or to the
Sub-Accounts of the Variable Account on the application for the Policy.
You may change the premium 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 new premium
allocation may be 100% to any Account or divided in whole percentage points
totaling 100%. We reserve the right to adjust any allocation to eliminate
fractional percentages. Changing the current premium allocation will not affect
the allocation of existing Accumulation Value.
CREDITING NET PREMIUMS. We will credit Net Premiums on the latest of the
following dates:
o The Valuation Date following the date of underwriting approval.
o The Valuation Date on or next following the Policy Date.
o The Valuation Date on or next following the date we receive at least the
required minimum initial premium payment.
o In the case of Policies issued under government allotment programs, the
Valuation Date next following the Issue Date.
REFUNDING PREMIUMS. We will return all premiums paid without interest if
any of the following occur:
o We send notice to the applicant that the insurance is declined.
o The applicant refuses an offer for an alternative policy.
o The applicant does not supply required medical exams or tests within 30
days of the date of the application.
o The applicant returns the Policy under the limited free look right. See
"Free Look and Conversion Rights -- Free Look Rights."
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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:
o In most cases, we will require that you pay cumulative premiums
sufficient to maintain the Death Benefit Guarantee to keep the Policy in
force during at least the first several Policy Years. See "Death Benefit
Guarantee."
o We may choose not to accept any premium less than $25.
o 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 life of any Insured, 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.
We may waive any of these premium limitations.
o 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 payment
the Death Benefit would be based upon the applicable corridor percentage
of Accumulation Value. See "Death Benefit -- Death Benefit Options."
o 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 you pay a
premium that 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. We will
return any part of the premium in excess of that amount, and we will not
accept further premiums until allowed by the current maximum premium
limitations.
o You may pay additional premiums (other than Planned Periodic Premiums)
at any time while the Policy is in force before Age 95. We may limit the
number and amount of these additional payments. However you may always
pay premiums if needed to keep your Policy in force for the remainder of
the current Policy Year.
o If you want to make 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 you can pay into the Policy. See "Federal Tax
Matters -- Tax Status of the Policy."
PLANNED PERIODIC PREMIUMS
You may choose a Planned Periodic Premium schedule which indicates a
preference as to future amounts and frequency of payment. You may pay Planned
Periodic Premiums annually, semi-annually, quarterly or, if you choose, you can
pay the Planned Periodic Premiums by bank account monthly deduction or
government allotment.
Your Policy will show the amount and frequency of your initial Planned
Periodic Premium. 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."
PAYING PREMIUMS BY MAIL
You may pay Planned Periodic Premiums and Unscheduled Additional Premiums
to the Company by mailing the payments to:
ReliaStar Life Insurance Company
P.O. Box 1880
Minneapolis, Minnesota 55480-1880
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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." Each Policy will specify the Death Benefit Guarantee Period.
For a standard rated Policy without any term insurance riders, the Death Benefit
Guarantee Period is the first five Policy Years for issue ages 0-59 and the
first four Policy Years for issue ages 60-80.
In general, the two most significant benefits from the Death Benefit
Guarantee are as follows:
o First, during the early Policy Years, the Cash Surrender Value will
generally 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 because the Surrender
Charge usually 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 15 years
following the increase, which could create a similar possibility of
lapse as exists during the early Policy Years.
o 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 FOR THE DEATH BENEFIT GUARANTEE
The Death Benefit Guarantee will be in effect 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. You must satisfy
the requirements for the Death Benefit Guarantee as of each Monthly Anniversary,
even though you do not have to pay premiums monthly.
EXAMPLE: The Policy Date is January 1, 2000. The Minimum Monthly Premium
is $100 per month. No Policy loans or partial withdrawals are taken and no Face
Amount changes have occurred.
Case 1. You pay $100 each month. The Death Benefit Guarantee is maintained.
Case 2. You pay $1,000 on January 1, 2000. The $1,000 maintains the Death
Benefit Guarantee without your paying any additional premiums for the
next 10 months (through October 31, 2000). However, you must pay at
least $100 by November 1, 2000 to maintain the Death Benefit
Guarantee through November 30, 2000.
We will determine (and the Policy will indicate) the amount of the initial
Minimum Monthly Premium at issuance of the Policy. The initial Minimum Monthly
Premium will depend upon the 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:
o A requested increase or decrease in the Face Amount (see "Death Benefit
-- Requested Changes in Face Amount").
o A change in the Death Benefit Option (see "Death Benefit -- Changing the
Death Benefit Option").
o The addition or termination of a Policy rider (see "General Provisions
-- Optional Insurance Benefits").
We will notify you in writing of any changes in the Minimum Monthly Premium.
If you have not made sufficient premium payments to maintain the Death
Benefit Guarantee as of any Monthly Anniversary, we will send you notice of the
premium payment required to maintain the
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Death Benefit Guarantee. 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 value attributable to the
Variable Account) plus the Fixed Accumulation Value (the value attributable to
the Fixed Account). You should distinguish the Accumulation Value 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." You
should also distinguish the Accumulation Value 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 generally vary daily and will increase
or decrease to reflect the investment performance of the Funds in which
Sub-Accounts of the Variable Account have been invested.
We will increase the Variable Accumulation Value by:
o any Net Premiums credited to the Variable Account, and
o any transfers from the Fixed Account.
We will reduce the Variable Accumulation Value by:
o the Monthly Deduction attributable to the Variable Account,
o partial withdrawals from the Variable Account,
o any transfer and partial withdrawal charges attributable to the Variable
Account, and
o 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").
We will increase the Fixed Accumulation Value by:
o any Net Premiums credited to the Fixed Account,
o any interest credited to the Fixed Account (determined at our
discretion, but guaranteed not to be less than 4%), and
o any amounts transferred from the Variable Account to the Fixed Account
(including amounts transferred to the Fixed Account as security for
Policy loans -- see "Policy Loans").
We will reduce the Fixed Accumulation Value by:
o the Monthly Deduction attributable to the Fixed Account,
o partial withdrawals from the Fixed Account,
o any transfer and partial withdrawal charges attributable to the Fixed
Account, and
o any amounts transferred from the Fixed Account to the Variable Account.
See Appendix B for a detailed discussion of the calculation of Accumulation
Value.
ILLUSTRATION OF POLICY BENEFITS
In order to help you understand how your Policy values would vary over time
under different sets of assumptions, we will provide you with certain
personalized illustrations upon request. These will be based on the age and
insurance risk characteristics of the Insured under your Policy and such factors
as the specified face amount, death benefit option, premium payment amounts and
rates of return (within limits) that you request. You can request such
illustrations at any time.
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We have also filed an example of such an illustration as an exhibit to the
registration statement referred to on page 51 of this Prospectus. This form of
illustration is available to you upon request and is incorporated herein by
reference. There may also be state specific product features that make the
illustrations applicable to you different from the form of illustration shown in
the exhibit.
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 a purchaser 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."
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
(terminate). If the Death Benefit Guarantee is not in effect, the Policy will
lapse only if, as of any Monthly Anniversary, the Cash Surrender Value plus any
Sales Charge Refund is less than the Monthly Deduction due, and a grace period
of 61 days expires without a sufficient payment. If (during the first two Policy
Years or the first 24 Policy Months after a requested increase in Face Amount)
there exists any Sales Charge Refund (see "Sales Charge Refund") sufficient to
supplement the Cash Surrender Value so as to cover the Monthly Deduction, then
the Sales Charge Refund will be applied by us to keep the Policy in force. The
amount of Sales Charge Refund available for such application is reduced on each
Monthly Anniversary as so applied. Any payment made by you after we have kept
the Policy in force in this manner will first be used to reimburse us for the
amount of Sales Charge Refund so applied.
During the early Policy Years, the Cash Surrender Value (even when
supplemented by the Sales Charge Refund) 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."
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 plus any Sales Charge Refund is
less than the Monthly Deduction due. Our written notice will indicate the amount
of the payment required to avoid lapse. If you do not make a sufficient payment
within the grace period, then the Policy will lapse without value.
As discussed above, any Sales Charge Refund will be applied to keep the
Policy in force when the Cash Surrender Value is less than the Monthly
Deduction. When a total surrender of the Policy is requested after the start of
a grace period, any remaining Sales Charge Refund (not already applied to keep
the Policy in force) will be so applied for the grace period, and consequently
not refunded, unless the surrender request is received by us within 30 days
after we mail the grace period notice to you. If such a request is timely
received, you will be refunded an amount equal to any unapplied Sales Charge
Refund that existed as of the Monthly Anniversary on which the Cash Surrender
Value deficiency causing the grace period notice occurred, plus any unearned
prepaid loan interest as of such Monthly Anniversary.
If the 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 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."
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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 and you must pay a premium large enough to keep
the Policy in force for at least two months.
A lapsed Death Benefit Guarantee cannot be reinstated after the fifth
Policy Year.
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. We will determine the amount available for a total
surrender or partial withdrawal at the end of the Valuation Period when we
receive your written request. Generally, we will pay any amounts from the
Variable Account upon total surrender or partial withdrawal within seven days
after we receive your written request. We may postpone payments, however, in
certain circumstances. See "General Provisions -- Postponement of Payments."
TOTAL SURRENDER
You may surrender the Policy at any time for its Cash Surrender Value by
making a written request. 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.
PARTIAL WITHDRAWAL
After the first Policy Year, you may withdraw part of the Cash Surrender
Value by sending us a written request. If the amount being withdrawn exceeds
$25,000, then the written request must include a Signature Guarantee. We
currently allow only one partial withdrawal in any Policy Year. We currently
make a $10 charge for each partial withdrawal. We guarantee that this charge
will not exceed $25 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.
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. We will determine these
proportions at the end of the Valuation Period during which we receive your
written request. For purposes of determining these proportions, we first
subtract any outstanding Loan Amount from the Fixed Accumulation Value.
EFFECT OF PARTIAL WITHDRAWALS. We will reduce the Accumulation Value by the
amount of any partial withdrawal. We will also reduce the Death Benefit by the
amount of the withdrawal, or, if the 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, we will reduce the Face Amount 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:
(1) The Face Amount provided by the most recent increase;
(2) The next most recent increases successively; and
(3) The Face Amount when the Policy was issued.
(This assumption also applies to requested decreases in Face Amount -- see
"Death Benefit -- Requested Changes in Face Amount.") 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.
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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 we deduct the amount of the partial withdrawal from the total
premiums paid in calculating whether you have paid sufficient premiums in order
to maintain the Death Benefit Guarantee.
Like partial withdrawals, Policy loans are a means of withdrawing money
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 -- Tax Status of the Policy."
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. You must make your transfer request in writing
unless you have completed a telephone transfer authorization form. 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, we redeem Accumulation Units and reinvest their values in other
Sub-Accounts, or the Fixed Account, as you direct 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 (1) you have requested the
Portfolio Rebalancing service, or (2) 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:
o 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,
o you may only transfer up to 50% of the Fixed Accumulation Value, less
any Loan Amount, unless the balance, after the transfer, would be less
than $1,000, in which event you may transfer the full Fixed Accumulation
Value, less any Loan Amount, and
o you must transfer at least the lesser of $500 or the total Fixed
Accumulation Value, less any Loan Amount.
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:
o transfers between Sub-Accounts
o changes of allocations among fund options
By completing the telephone/fax form, you agree 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 we receive or are recorded on voice
recording equipment. If we later determine that you did not make a telephone/fax
transfer request or the request was made without your authorization, and loss
results from such unauthorized transfer, you bear the risk of this loss. We
consider any requests made via fax as telephone requests and such requests 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. ReliaStar
will employ reasonable procedures to confirm that instructions communicated by
telephone/fax are genuine. If 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/fax instructions, providing written confirmation of such
instructions, and/or tape recording telephone instructions.
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DOLLAR COST AVERAGING SERVICE. You may request this service if your Face
Amount is at least $100,000 and 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. We do
not permit transfers from the Fixed Account under this service. You may request
that we make transfers of this type 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 or our registered representative.
We will discontinue the Dollar Cost Averaging service immediately (1) on
receipt of any request to begin a Portfolio Rebalancing service, (2) if the
Policy is in the grace period on any date when Dollar Cost Averaging transfers
are scheduled, or (3) 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 Face
Amount is at least $200,000 and 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. We will also change your allocation of future Net
Premium payments to be equal to this specified percentage allocation. You may
request that we make transfers under this service 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 or our registered representative.
If you are using the Portfolio Rebalancing service, we will discontinue
this service immediately (1) on receipt of any request to change the allocation
of premiums to the Fixed Account and Sub-Account of the Variable Account, (2) on
receipt of any request to begin a Dollar Cost Averaging service, (3) upon
receipt of any request to transfer Accumulation Value among the accounts, or (4)
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.
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 do not limit the number of transfers,
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. We currently make no charge for the first 24 transfers
during a Policy Year. We make a $25 charge for each subsequent transfer. We
reserve the right to make a charge not to exceed $25
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for each transfer for the duration of the Policy. Further, no charge currently
is made for transfers to implement Dollar Cost Averaging and Portfolio
Rebalancing. See "Deductions and Charges -- Partial Withdrawal and Transfer
Charges." In no event, however, will we impose any charge 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. We will treat all transfers that are
effective on the same Valuation Date as one transfer transaction for the purpose
of assessing any transfer charge.
POLICY LOANS
GENERAL. As long as the Policy remains in effect, you may borrow money from
us using the Policy as security for the loan. We reserve the right to limit
loans during the first Policy year (except that persons in Indiana may take
loans during the first Policy year). The maximum amount you may borrow at any
time is equal to the loan value of the Policy, which is equal to 75% of the Cash
Value (100% in Texas and in Alabama, Maryland and Virginia the percentage is
90%) less the existing Loan Amount. If the Policy is in force as paid-up life
insurance, the loan value is equal to the Cash Value on the next Policy
Anniversary less any existing Loan Amount and loan interest to that date. Each
Policy loan must be at least $500 ($200 in Connecticut). After Age 65, we
currently allow you to borrow 100% of the Cash Surrender Value.
You can make loan requests in writing or by telephoning us on any Valuation
Date. Any loan request in excess of $25,000 will require a Signature Guarantee.
Telephone loan requests cannot exceed $10,000. We currently do not require any
election form 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 assignee or other person.
You may repay a Policy loan in whole or in part at any time, on or before the
Insured reaches Age 95 and while the Insured is living.
We will normally pay the loan proceeds to you within seven days after we
receive your request. We may postpone payment of loan proceeds to you under
certain circumstances. See "General Provisions -- Postponement of Payments."
Payments you make generally will be treated as premium payments, rather
than Policy loan repayments, unless you indicate that we should treat the
payment 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."
IMMEDIATE EFFECT OF POLICY LOANS. When we make a Policy loan, we will
segregate an amount equal to the Policy loan (which includes interest payable in
advance) within the Accumulation Value of your Policy and hold it 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. We will include the amount
segregated in the Fixed Account as security for the Policy loan as part of the
Fixed Accumulation Value under the Policy, but we will credit that amount with
interest on a basis different from other amounts in the Fixed Account.
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). We will transfer assets equal to the portion of the Policy loan coming
from the Variable Accumulation Value from the Sub-Accounts of the Variable
Account to the Fixed Account, THEREBY REDUCING THE POLICY VALUE HELD IN THE
SUB-ACCOUNTS. We do not treat these transfers as transfers for the purposes of
assessing the transfer charge or calculating 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. We will
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credit all amounts held in the Fixed Account as security for Policy loans (that
is, the Loan Amount) with interest at an effective annual rate equal to 5.50%
(guaranteed to be not less than 4.00%). WE WILL NOT CREDIT ADDITIONAL INTEREST
TO THESE AMOUNTS. On the Policy Anniversary, we will allocate any interest
credited on these amounts to the Fixed Account and the Variable Account
according to the premium allocation then in effect (see "Payment and Allocation
of Premiums -- Allocating Premiums").
Although you may repay Policy loans in whole or in part at any time before
the Insured's Age 95, 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. We will notify you if, on any Monthly
Anniversary, the Loan Amount is greater than the Accumulation Value plus any
Sales Charge Refund, less the then applicable Surrender Charge. 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 we deduct the Loan Amount from the total premiums paid in calculating
whether you have paid sufficient premiums in order to maintain the Death
Benefit Guarantee. See "Death Benefit Guarantee."
We will reduce proceeds payable upon the death of the Insured 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 10th Policy Year, we currently 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 (1) the Accumulation Value, less (2) the
total of all premiums paid less all partial withdrawals. We will charge interest
on any excess of this amount at the annual rate of 7.40%, payable in advance.
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 you do not pay interest when due, we will
deduct it from the Cash Surrender Value as an additional Policy loan (see
"Immediate Effect of Policy Loans" above) and we will add it to the existing
Loan Amount.
Because we charge interest in advance, we will refund any interest that we
have not earned to you upon lapse or surrender of the Policy or repayment of the
Policy Loan.
REPAYMENT OF LOAN AMOUNT. You may repay the Loan Amount any time while the
Insured is living and before Age 95. If not repaid, we will deduct the Loan
Amount from any amount payable under the Policy. As described above, unless you
provide us with notice to the contrary, we generally will treat any payments on
the Policy 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.
TAX CONSIDERATIONS. A Policy loan may have tax consequences depending on
the circumstances of the loan. See "Federal Tax Matters -- Tax Status of the
Policy."
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FREE LOOK AND CONVERSION RIGHTS
FREE LOOK RIGHTS
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 the latest of:
o Midnight of the 20th day after receiving it;
o Midnight of the 20th day after a written Notice of Right of Withdrawal
is mailed or delivered to you; or
o Midnight of the 45th day after the date your application for the Policy
is signed.
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 the latest of:
o Midnight of the 20th day after receiving a new Policy Data Page;
o Midnight of the 20th day after a written Notice of Right of Withdrawal
is mailed or delivered to you; or
o Midnight of the 45th day after the date your request for the increase is
signed.
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 cost
arising from 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. For policies issued in all states, except Connecticut, we make this
option available by permitting you to transfer all or a part of your Variable
Accumulation Value to the Fixed Account. For policies issued in Connecticut, you
may exchange this Policy for a different permanent fixed benefit life insurance
policy that we offer in that state. The two conversion right options are
discussed below.
GENERAL OPTION. In all states except Connecticut, 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, we will not assess
any transfer charge on the transfer, and the transfer 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.
CONNECTICUT. During the first two Policy Years and during the first 24
months following a requested increase in Face Amount, you may convert the Policy
or the Face Amount increase to any fixed benefit whole life insurance policy we
offer. We will not require any evidence of insurability for the conversion. In
order to convert to a new policy, we must receive a written conversion request.
If the entire Policy is being converted, you must surrender the Policy to us.
The conversion must be made while the Policy is in force; and any outstanding
Loan Amount must be repaid.
The new policy will have the same Issue Age and rate class as the Policy.
If you are converting the entire Policy, the effective date of the conversion
will be the date on which we receive both your written
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conversion request and the Policy. If you are converting a Face Amount increase,
the effective date of the conversion will be the date on which we receive your
written conversion request.
On the effective date of the conversion, the new policy will have, at your
option, either:
(1) A death benefit which is equal to the Death Benefit of the Policy on the
effective date of the conversion, or in the case of a Face Amount
increase, a death benefit equal to the increase in Face Amount; or
(2) A net amount at risk which equals the Death Benefit of the Policy on the
effective date of the conversion, less the Accumulation Value on that
date, or in the case of a Face Amount increase, a net amount at risk
which equals the Face Amount increase on the effective date of
conversion less the Accumulation Value on that date which is considered
to be part of the Face Amount increase.
The conversion will be subject to an equitable adjustment in payments and
Policy values to reflect variances, if any, in the payments and Policy values
under the Policy and the new policy. We may require an additional premium
payment. The old Policy's Surrender Charge will not be applied. The new Policy's
provisions and charges will be the same as those that would have been in effect
had the new Policy been issued on the Policy Date.
ADDITIONAL INFORMATION ON THE INVESTMENTS OF THE VARIABLE ACCOUNT
INVESTMENT LIMITS
Although the Variable Account currently consists of 34 investment options,
we currently only permit you to participate in a maximum of 17 investment
options over the lifetime of your Policy. You do not have to choose your
investment options in advance, but once you participate in the 17th Fund since
your Policy was issued, you would only be able to transfer within those 17 Funds
already used and which are still available.
The Fund shares may be available to fund benefits under both variable
annuity and variable life contracts and policies. This could 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.
There also is a possibility that one Fund might become liable for any
misstatement, inaccuracy or incomplete disclosure in another Fund's prospectus.
The Funds distribute dividends and capital gains. However, we automatically
reinvest distributions 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."
ReliaStar has entered into service arrangements with the managers or
distributors of certain of the Funds. Under these arrangements, ReliaStar or its
affiliates may receive compensation from affiliates of the Funds. This
compensation is 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 on the aggregated net
asset goals. 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 to another.
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.
o We 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. We may
establish new Sub-Accounts when, in our sole discretion,
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marketing needs or investment conditions warrant, and we will make any new
Sub-Accounts available to existing Policy owners on a basis we determine.
o We may eliminate one or more Sub-Accounts, or prohibit additional new
premium or transfers into a Sub-Account, if, in our sole discretion,
marketing, tax, regulatory requirements or investment conditions warrant.
o 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:
o Purchasing other securities of other Funds or classes of policies,
o Permitting a conversion between Funds or classes of policies on the basis
of requests made by Policy owners, or
o Substituting the shares of one fund for shares of another fund in the
event of a merger of funds or similar transaction.
In the event of any such substitution, deletion or change, we may make
appropriate changes in this and other policies to reflect such substitution,
deletion or change. If you allocated all or a portion of your investments to any
of the current funds that are being substituted for or deleted, you may transfer
the portion of the Accumulation Value affected without paying a transfer charge.
If we deem it to be in the best interests of persons having voting rights
under the Policies, we may:
o operate the Variable Account as a management company under the 1940 Act,
o deregister the Variable Account under the 1940 Act in the event such
registration is no longer required, or
o combine the Variable Account with our other separate accounts.
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:
o The Variable Account is registered as a unit investment trust under the
Investment Company Act of 1940; and
o The Variable Account's assets 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.
We will vote 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, 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.
DISREGARDING 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
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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. We would disapprove a change 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, we will include a summary of that action and the reasons for such
action in the next annual report to owners.
PAID-UP LIFE INSURANCE OPTION
Before Age 95, if the Insured is living and the Policy is in force, you may
make a written request to direct us to apply the Cash Surrender Value of the
Policy to purchase paid-up life insurance. If the insured is living at Age 95
and the Policy is in force, the Cash Surrender Value of the Policy will
automatically be applied to purchase paid-up life insurance unless the Insured
notifies us in writing before Age 95 that the Cash Surrender Value should be
paid in cash. The amount by which any paid-up insurance will exceed its cash
value cannot be greater than the amount by which the Policy's Death Benefit
exceeds the Policy's Accumulation Value. We will pay you in cash any Cash
Surrender Value not used to purchase paid-up life insurance. Any cash paid out
or Policy loans forgiven may be considered a taxable event.
GENERAL PROVISIONS
OWNERSHIP
While the Insured is alive, subject to the Policy's provisions you may:
o Change the amount and frequency of premium payments.
o Change the allocation of premiums.
o Change the Death Benefit Option.
o Change the Face Amount.
o Make transfers between accounts.
o Surrender the Policy for cash.
o Make a partial withdrawal for cash.
o Receive a cash loan.
o Assign the Policy as collateral.
o Change the beneficiary.
o Transfer ownership of the Policy.
o Enjoy any other rights the Policy allows.
PROCEEDS
At the Insured's death, the proceeds payable include the Death Benefit then
in force:
o Plus any additional amounts provided by rider on the life of the
Insured;
o Plus any Policy loan interest that we have collected but not earned;
o Minus any Loan Amount; and
o 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. You may
also name a beneficiary whom you cannot change without his or her consent
(irrevocable beneficiary). If no beneficiary is surviving when the Insured dies,
we will pay the Death Benefit to you, if surviving, or otherwise to your estate.
POSTPONEMENT OF PAYMENTS
We generally make payments from the Variable Account for Death Benefits,
cash surrender, partial withdrawal, or loans within seven days after we receive
all the documents required for the payments.
We may, however, delay making a payment when we are not able to determine
the Variable Accumulation Value because (1) the New York Stock Exchange is
closed, other than customary weekend or holiday closings, or the SEC restricts
trading on the New York Stock Exchange, (2) the SEC by order
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permits postponement for the protection of Policyholders, or (3) the SEC
determines that an emergency exists which makes disposing of securities not
reasonably practicable, or which makes it not reasonably practicable to
determine the value of the Variable Account's net assets. We may also postpone
transfers and allocations to and from any Sub-Account of the Variable Account
under these circumstances.
We may delay any of the payments that we make from the Fixed Account for up
to six months from the date we receive the documents required. We will pay
interest at an effective annual rate of 3.50% if we delay payment more than 30
days. We will not credit any additional interest 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 Settlement Options apply to proceeds paid:
o At the Insured's death.
o On total surrender of the Policy.
We pay the proceeds to one or more payees. We may pay the proceeds in a
lump sum or we may apply the proceeds to one of the following Settlement
Options. You may request that we use a combination of Options. You must apply at
least $2,500 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 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 we pay under Options 3, 4,and 5, 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.
INCONTESTABILITY
After the Policy has been in force during the 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 effective date of the increase.
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If the Policy is reinstated, we measure the contestable period from the
date of reinstatement with respect to statements made on the application for
reinstatement.
MISSTATEMENT OF AGE AND SEX
If the Insured's Age or sex or both are misstated (except where unisex
rates apply), 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 the Insured commits suicide, whether sane or insane, within two years of
the Policy's Issue Date (one year in Colorado and North Dakota), 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
the 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.
TERMINATION
The Policy terminates when any of the following occurs:
o The Policy lapses. See "Policy Lapse and Reinstatement."
o The Insured dies.
o You surrender the Policy for its Cash Surrender Value.
o We amend the Policy 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:
o Any SEC rulings and regulations.
o The Policy's qualification for treatment as a life insurance policy
under the following:
-- The Code as amended.
-- 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,
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.
Additional statements are available upon request. We may make a charge not
to exceed $50 for each additional Annual Statement you request.
PROJECTION REPORT. Upon request, we will provide you a report projecting
future results based on the Death Benefit Option you specify, the Planned
Periodic Premiums you specify, and the Accumulation Value of your Policy at the
end of the prior Policy Year. We may make a charge not to exceed $50 for each
Projection Report you request after the first report and after the first report
in a Policy Year.
OTHER REPORTS. The Company will mail to you at your last known address of
record at least annually a report containing such information as may be required
by any applicable law. To reduce expenses, only one copy of most financial
reports and prospectuses including reports and prospectuses for the Funds, will
be mailed to your household, even if you or other persons in your household have
more than one contract issued by ReliaStar or an affiliate. Call 1-800-456-6965
if you need additional copies of financial reports, prospectuses, or annual and
semi-annual reports, or if you would like to receive one copy for each contract
in all future mailings.
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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.
ACCELERATED BENEFIT RIDER. Under certain circumstances we pay a part of
the Death Benefit to you when the Insured has been diagnosed as having a
terminal illness. See "Accelerated Benefit Rider."
ACCIDENTAL DEATH BENEFIT RIDER. Provides an additional benefit if the
Insured dies from an accidental injury.
ADDITIONAL INSURED RIDER. Provides a 10 year, guaranteed level premium and
level term coverage for the Insured, the Insured's spouse, or a child of the
Insured.
WAIVER OF MONTHLY DEDUCTION RIDER. The Monthly Deduction for the Policy is
waived while the Insured is totally disabled under the terms of the rider.
CHILDREN'S INSURANCE RIDER. Provides up to $10,000 of term life insurance
on the life of each of the Insured's children, up to age 25.
WAIVER OF SPECIFIED PREMIUM RIDER. Contributes a specified amount of
premium to the Policy each month while the Insured is totally disabled under the
terms of the rider. This rider may not be available in all states. Ask your
registered representative about the availability of this rider in your state.
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 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 the Company's 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.
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<PAGE>
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, including payments arising from any maturity benefits, 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.
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 unloaned Policy Accumulation
Value (Cash Surrender Value for surrenders) immediately before the
distribution plus prior distributions over the owner's total investment
in the Policy at that time. "Total investment in the Policy" means the
aggregate amount of 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 or loan is made when the owner has
attained age 591/2 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 owner or the joint lives (or joint life expectancies)
of the owner and the owner's beneficiary or designated beneficiary.
44
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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 an owner's investment in the Policy and
only after the recovery of all investment 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, except that upon lapse of a Policy any
outstanding Policy loan will be deemed to be distributed.
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, you should consult a tax advisor
as to the tax consequences.
MULTIPLE POLICIES. All Modified Endowment Contracts that we (or our
affiliates) issue to the same owner during any calendar year are treated as one
Modified Endowment Contract for purposes of determining the amount includible in
the 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, we currently make no charge 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, we may make charges for such taxes,
if any, attributable to the Variable Account.
POSSIBLE CHANGES IN TAXATION
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.
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
advisor. This discussion is based on our understanding of the present Federal
income tax laws as they are currently interpreted by the Internal Revenue
Service. We make no representations as to the likelihood of continuation of
these current laws and interpretations. In addition, the foregoing discussion is
not exhaustive and special rules not described in this Prospectus may be
applicable in certain situations. Moreover, we have made no attempt to consider
any applicable state or other tax laws.
LEGAL DEVELOPMENTS REGARDING EMPLOYMENT-RELATED BENEFIT PLANS
The Policy is based on actuarial tables which distinguish between men and
women and therefore provide different benefits to men and women of the same Age.
Employers and employee organizations should consider, in consultation with legal
counsel, the impact of the Supreme Court decision of July 6, 1983 in ARIZONA
GOVERNING COMMITTEE V. NORRIS. That decision stated that optional annuity
benefits provided under an employee's deferred compensation plan could not,
under Title VII of the Civil Rights Act of 1964, vary between men and women on
the basis of sex. Employers and employee organizations should also consider, in
consultation with legal counsel, the impact of Title VII generally, and
comparable state laws that may be applicable, on any employment-related
insurance or benefit plan for which a Policy may be purchased.
Because of the NORRIS decision, the charges under the Policy that vary
depending on sex may in some cases not vary on the basis of the Insured's sex.
Unisex rates to be provided by us will apply, if requested on the application,
for tax-qualified plans and those plans where an employer believes that the
45
<PAGE>
NORRIS decision applies. In this case, references made to the 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.
DISTRIBUTION OF THE POLICIES
We intend to sell the Policies in all jurisdictions where we are licensed.
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
many 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 and variable life insurance products issued by
us. The Policies will be sold by licensed insurance agents who are also
registered representatives of WSSI or of other 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 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.
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. 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 35% of the premiums paid up to the
annualized Minimum Monthly Premium, plus 2.50% of additional premiums. In any
subsequent Policy Year, commissions generally will be 2.50% 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 excluding any Loan Amount during each Policy Year may be
paid. Further, registered representatives may be eligible to receive certain
overrides and other benefits based on the amount of earned commissions.
For all Policies issued by the Select*Life Variable Account, the aggregate
amount paid to WSSI under our Distribution Agreement was $51,164,472 in 1999,
$46,485,880 in 1998, and $34,572,698 in 1997.
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MANAGEMENT
The following is a list of the current directors and executive officers of
the Company, their principal occupation and business experience.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
DIRECTORS AND OFFICERS AND BUSINESS EXPERIENCE
- ------------------------ --------------------------------------------------------------------------
<S> <C> <C>
Richard R. Crowl(2) Senior Vice President, General Counsel and Secretary of ReliaStar
Financial Corp. since 1996; Senior Vice President and General Counsel
of Security-Connecticut Life Insurance Company since 1997; Senior
Vice President and General Counsel of ReliaStar Life Insurance
Company, Northern Life Insurance Company, and ReliaStar Life
Insurance Company of New York since 1996; Senior Vice President and
General Counsel of ReliaStar United Services Life Insurance Company
from 1996 to 1998 at which time this company merged into ReliaStar
Life Insurance Company; Senior Vice President and General Counsel
of ReliaStar Investment Research, Inc. (formerly known as 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(2) President and Chief Executive Officer of Northern Life Insurance
Company since 1994; Senior Vice President of ReliaStar Life Insurance
Company since 1987; Senior Vice President of Security-Connecticut
Life Insurance Company since 1999; Chairman of Washington Square
Securities, Inc. from 1987 to 1994; Senior Vice President of ReliaStar
Financial Corp. since 1997; Director and Officer of various subsidiaries
of ReliaStar Financial Corp.
Wayne R. Huneke(2) Senior Executive Vice President of ReliaStar Financial Corp. and
ReliaStar Life Insurance Company since 1999; Senior Vice President of
ReliaStar Financial Corp. and ReliaStar Life Insurance Company from
1994 to 1999; Chief Financial Officer and Treasurer of ReliaStar
Financial Corp. and ReliaStar Life Insurance Company from 1994 to
1997; Director and Officer of various subsidiaries of ReliaStar Financial
Corp.
Dewette Ingham, Jr.(1) Senior Vice President of ReliaStar Financial Corp. since 1998; Corporate
Vice President of R.R. Donnelley & Sons Company from 1993 to 1998;
Director of ReliaStar Life Insurance Company.
Mark S. Jordahl(2) President and Chief Executive Officer of ReliaStar Investment Research,
Inc. since 1998; Senior Vice President and Chief Investment Officer of
ReliaStar Life Insurance Company and ReliaStar Financial Corp. since
1998; Senior Vice President of Security-Connecticut Life Insurance
Company 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(2) Executive Vice President of ReliaStar Financial Corp. and ReliaStar
Life Insurance Company since 1999; Senior Vice President of ReliaStar
Financial Corp. and ReliaStar Life Insurance Company from 1996 to
1999; Vice President of ReliaStar Life Insurance Company from 1996 to
1998; Vice President of ReliaStar Financial Corp. from 1991 to 1998;
President of Washington Square Advisers, Inc. from 1995 to 1998;
Chairman of ReliaStar Mortgage Corporation from 1988 to 1998;
Director and Officer of various subsidiaries of ReliaStar Financial
Corp.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
DIRECTORS AND OFFICERS AND BUSINESS EXPERIENCE
- ------------------------ --------------------------------------------------------------------------
<S> <C>
Susan W. A. Mead(2) Vice President of ReliaStar Financial Corp. and ReliaStar Life Insurance
Company since 1996; President, ReliaStar Document Management
Center (formerly known as ReliaStar Printing and Fulfillment Services)
of ReliaStar Financial Corp. since 1996; Second Vice President of
ReliaStar Financial Corp. and ReliaStar Life Insurance Company from
1992 to 1996; Director and Officer of various subsidiaries of ReliaStar
Financial Corp.
William R. Merriam(2) Executive Vice President of ReliaStar Life Insurance Company since 1999; Senior
Vice President of ReliaStar Life Insurance Company from 1991 to 1999.
James R. Miller(2) Senior Vice President, Chief Financial Officer and Treasurer of ReliaStar
Financial Corp. and ReliaStar Life Insurance Company since 1997;
Executive Vice President and Chief Operating Officer of Northern Life
Insurance Company from 1992 to 1997; Vice President of ReliaStar
Financial Corp. from 1985 to 1992; Director and Officer of various
subsidiaries of ReliaStar Financial Corp.
Robert C. Salipante(2) Chairman of Security-Connecticut Life Insurance Company since 2000;
President and Chief Operating Officer of ReliaStar Financial Corp. and
ReliaStar Life Insurance Company since 1999; Senior Vice President of
ReliaStar Financial Corp. and ReliaStar Life Insurance Company from
1996 to 1999; Vice Chairman of ReliaStar Life Insurance Company of
New York since 1999; President and Chief Executive Officer of ReliaStar
Life Insurance Company of New York from 1998 to 1999; Senior Vice
President of ReliaStar Financial Corp. from 1994 to 1996; Senior Vice
President and Chief Financial Officer of ReliaStar Financial Corp. from
1992 to 1994; Director and Officer of various subsidiaries of ReliaStar
Financial Corp.
John G. Turner(2) Chairman and Chief Executive Officer of ReliaStar Financial Corp. and
ReliaStar Life Insurance Company since 1993; Chairman of ReliaStar
United Services Life Insurance Company from 1995 until its merger
with ReliaStar Life Insurance Company in 1998; Chairman of ReliaStar
Life Insurance Company of New York since 1995; Chairman of Northern
Life Insurance Company since 1992; Director and Officer of various
subsidiaries of ReliaStar Financial Corp.
James R. Gelder(3) President and Chief Executive Officer of ReliaStar Life Insurance
Company of New York since 1999; Senior Vice President of ReliaStar
Life Insurance Company since 1999; Executive Vice President of
ReliaStar Life Insurance Company of New York from 1998 to 1999;
President and Chief Executive Officer of Security-Connecticut Life
Insurance Company since 1998; Executive Vice President and Chief
Operating Officer of Security-Connecticut Life Insurance Company
from 1997 to 1998; Vice President of ReliaStar Life Insurance Company
from 1994 to 1999; Director and Officer of various subsidiaries of
ReliaStar Financial Corp.
Paul H. Gulstrand(3) Senior Vice President of ReliaStar Life Insurance Company since 1999; Vice
President of ReliaStar Life Insurance Company from 1996 to 1999; Second
Vice President of ReliaStar Life Insurance Company from 1995 to 1996;
Regional Vice President of ReliaStar Life Insurance Company from 1994
to 1995.
Blake W. Mohr(3) Senior Vice President of ReliaStar Life Insurance Company since 1999; Vice
President of ReliaStar Life Insurance Company from 1997 to 1999; Second
Vice President of ReliaStar Life Insurance Company from 1993 to 1997.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
DIRECTORS AND OFFICERS AND BUSINESS EXPERIENCE
- ------------------------ ----------------------------------------------------------------------
<S> <C> <C>
Roger A. Weber(3) Senior Vice President of ReliaStar Life Insurance Company since 1999;
Vice President of ReliaStar Life Insurance Company from 1996 to
1999; Vice President and Chief Auditor of ReliaStar Financial Corp.
and ReliaStar Life Insurance Company in 1996; Second Vice President
and Auditor of ReliaStar Financial Corp. and ReliaStar Life Insurance
Company from 1989 to 1996.
Theresa A. Wurst(3) Senior Vice President of ReliaStar Life Insurance Company since 1999; Vice
President of ReliaStar Life Insurance Company from 1993 to 1999.
</TABLE>
- ------------------
(1) Director of ReliaStar Life Insurance Company
(2) Director and Officer of ReliaStar Life Insurance Company
(3) Officer of ReliaStar Life Insurance Company
The Executive Committee of our Board of Directors consists of Directors
Salipante, Crowl and Turner.
The following is a list of the current directors and executive officers of
the principal underwriter and their business addresses.
<TABLE>
<CAPTION>
NAME AND PRINCIPAL
BUSINESS ADDRESS POSITIONS AND OFFICES
- ------------------------ ------------------------------------------------------
<S> <C>
Wayne R. Huneke* Director
Robert C. Salipante* Director
Jeffrey A. Montgomery* President and Chief Executive Officer, Director
Kenneth S. Cameranesi* Executive Vice President and Chief Operations Officer
Gene Grayson* Vice President, National Sales and Marketing
Keith Loveland* Vice President and Chief Compliance Officer
Daniel S. Kuntz* Assistant Vice President and Treasurer
David A. Sheridan Vice President
20 Security Drive
Avon, Connecticut 06001
Susan M. Bergen* Secretary
Margaret B. Wall* Vice President
Loralee A. Renelt* Assistant Secretary
Allen Kidd Assistant Secretary
222 North Arch Road
Richmond, Virginia 23236
</TABLE>
- ------------------
* 20 Washington Avenue South
Minneapolis, Minnesota 55401
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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. We file an annual statement in a prescribed form 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.
MASSACHUSETTS AND MONTANA RESIDENTS
If you are a resident of Massachusetts or Montana, you should disregard all
Policy provisions described in the prospectus that are based on the sex of the
Insured. We will issue this Policy in Massachusetts and Montana on a unisex
basis. You also should disregard references made to the mortality tables
applicable to this Policy and substitute these references with an 80% male 20%
female blend of the 1980 Commissioner's Standard Ordinary Smoker and Non-Smoker
Mortality Tables, Age Last Birthday. You should also be aware that the
Illustrations of Policy Values that are included as an exhibit to the
Registration Statement are sex distinct, and therefore, you should request a
unisex illustration.
LEGAL PROCEEDINGS
The Variable Account is not a party to any pending legal proceedings. The
Company is a defendant in various lawsuits in connection with the normal conduct
of its insurance operations. Some of the claims seek to be granted class action
status and many of the claims seek both compensatory and punitive damages. In
the opinion of management, the ultimate resolution of such litigation will not
have a material adverse impact to the financial position of the Company. It
should be noted, however, that a number of financial services companies have
been subjected to significant awards in connection with punitive damages claims
and the Company can make no assurances that it will not be subjected to such an
award. The defense of the putative class actions pending against the Company may
require the commitment of substantial internal resources and the retention of
legal counsel and expert advisors.
The Company is a defendant in litigation in New York State court regarding
an alleged reinsurance contract. The plaintiff alleges damages in excess of $100
million. The Company believes that no contract exists and the suit is without
merit. The Company filed a motion for summary judgment on February 18, 2000. If
the court does not grant the Company's motion, the case may go to trial later
this year.
BONDING ARRANGEMENTS
The Company maintains a 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.
LEGAL MATTERS
Legal matters in connection with the Variable Account and the Policy
described in this Prospectus have been passed upon by Gregory A. Olson, Esquire,
Attorney for the Company.
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<PAGE>
EXPERTS
The financial statements of ReliaStar's Select*Life Variable Account as of
December 31, 1999 and for each of the three years then ended and the
consolidated financial statements of ReliaStar Life Insurance Company and
subsidiaries as of December 31, 1999 and December 31, 1998 and for the two years
then ended 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., M.A.A.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 and its Sub-Accounts as of December 31, 1999 and for each
of the three years in the period then ended. 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 consolidated financial statements of ReliaStar Life Insurance Company
and subsidiaries 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
consolidated financial statements are as of December 31, 1999 and for each of
the two years in the period ended December 31, 1999. The financial statements
are audited. The periods covered are not necessarily indicative of the longer
term performance of the Company.
51
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
ReliaStar Life Insurance Company
We have audited the accompanying combined statement of assets and liabilities of
ReliaStar Select*Life Variable Account as of December 31, 1999 and the related
combined statements of operations and changes in policy owners' equity
(including the sub-accounts which comprise the account) for each of the years
ended December 31, 1999, 1998 and 1997. 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, 1999, 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 each of the respective
sub-accounts constituting the Select*Life Variable Account as of December 31,
1999 and the results of its operations and changes in its policy owners' equity
for the years ended December 31, 1999, 1998 and 1997, in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Minneapolis, Minnesota
February 11, 2000
52
<PAGE>
RELIASTAR SELECT*LIFE VARIABLE ACCOUNT
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT SHARES)
<TABLE>
<CAPTION>
SHARES COST MARKET VALUE
ASSETS: ------------ ---------- ------------
<S> <C> <C> <C>
Investments in mutual funds at market value:
The Alger American Fund:
Alger American Growth Portfolio .......................... 568,379 $ 31,001 $ 36,592
Alger American MidCap Growth Portfolio ................... 154,465 4,154 4,978
Alger American Small Capitalization Portfolio ............ 117,446 5,196 6,477
Fidelity's Variable Insurance Products Fund (VIP):
VIP Equity-Income Portfolio -- IC Shares ................. 3,874,559 78,509 99,615
VIP Growth Portfolio -- IC Shares ........................ 3,765,747 122,689 206,852
VIP High Income Portfolio -- IC Shares ................... 1,781,115 20,894 20,144
VIP Money Market Portfolio -- IC Shares .................. 33,296,505 33,297 33,297
VIP Overseas Portfolio -- IC Shares ...................... 1,081,911 20,259 29,688
Fidelity's Variable Insurance Products Fund (VIP II):
VIP II Asset Manager Portfolio -- IC Shares .............. 1,839,674 29,099 34,347
VIP II Contrafund Portfolio -- IC Shares . ............... 2,591,694 52,826 75,548
VIP II Index 500 Portfolio -- IC Shares .................. 505,363 64,538 84,603
VIP II Investment Grade Bond Portfolio -- IC Shares ...... 525,728 6,473 6,393
Janus Aspen Series:
Aggressive Growth Portfolio .............................. 437,294 16,666 26,102
Growth Portfolio ......................................... 555,135 15,075 18,680
International Growth Portfolio ........................... 307,127 8,020 11,877
Worldwide Growth Portfolio ............................... 1,150,408 37,676 54,932
Neuberger Berman Advisers Management Trust:
AMT Limited Maturity Bond Portfolio ...................... 252,056 3,378 3,337
AMT Partners Portfolio ................................... 450,351 8,460 8,845
AMT Socially Responsive Portfolio ........................ 4,049 44 47
Northstar Galaxy Trust:
Northstar Emerging Growth Portfolio ...................... 353,924 7,096 10,349
Northstar Growth + Value Portfolio ....................... 225,243 5,847 6,766
Northstar International Value Portfolio .................. 259,782 3,460 3,837
Northstar Research Enhanced Index Portfolio .............. 390,993 1,901 1,951
Northstar High Yield Bond Portfolio ...................... 177,331 834 762
OCC Accumulation Trust:
Equity Portfolio ......................................... 47,977 1,802 1,802
Global Equity Portfolio .................................. 72,584 1,252 1,202
Managed Portfolio ........................................ 123,385 5,279 5,386
Small Cap Portfolio ...................................... 183,212 4,215 4,126
Putnam Variable Trust:
Putnam VT Asia Pacific Growth Fund -- Class IA Shares..... 265,928 2,500 4,598
Putnam VT Diversified Income Fund -- Class IA Shares ..... 177,824 1,904 1,766
Putnam VT Growth and Income Fund -- Class IA Shares....... 1,411,324 36,717 37,823
Putnam VT New Opportunities Fund -- Class IA Shares ...... 1,361,731 28,126 59,290
Putnam VT Utilities Growth and Income Fund --
Class IA Shares ......................................... 179,068 2,882 3,039
Putnam VT Voyager Fund -- Class IA Shares ................ 2,127,569 78,817 140,951
----------
Total Assets ........................................... $1,046,002
==========
LIABILITIES AND POLICY OWNERS' EQUITY:
Due from ReliaStar Life Insurance Company
for contract charges ..................................... $ 64
Policy Owners' Equity ..................................... 1,045,938
----------
Total Liabilities and Policy Owners' Equity .............. $1,046,002
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
53
<PAGE>
RELIASTAR SELECT*LIFE VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND
CHANGES IN POLICYOWNERS' EQUITY
For the years ended December 31, 1999, 1998 and 1997
(In Thousands, Except Value Per Unit)
<TABLE>
<CAPTION>
Total All Funds
-----------------------------------------------------
1999 1998 1997
--------------- --------------- ---------------
<S> <C> <C> <C>
Net investment income:
Reinvested dividend income ....................... $ 9,107 $ 7,644 $ 5,580
Reinvested capital gains ......................... 41,674 34,463 14,480
Administrative expenses .......................... (7,060) (4,152) (2,742)
--------------- --------------- ---------------
Net investment income (loss) and
capital gains ................................. 43,721 37,955 17,318
--------------- --------------- ---------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemptions of
fund shares ..................................... 39,243 12,939 6,393
Increase (decrease) in unrealized appreciation
of investments .................................. 152,399 55,885 46,873
--------------- --------------- ---------------
Net realized and unrealized gains (losses) ..... 191,642 68,824 53,266
--------------- --------------- ---------------
Additions (reductions) from operations ......... 235,363 106,779 70,584
--------------- --------------- ---------------
Policy Owners' transactions:
Net premium payments ............................. 220,865 184,473 141,159
Transfers between funds and/or fixed account ..... (627) (251) 74
Policy loans ..................................... (12,966) (5,343) (4,385)
Loan collateral interest crediting ............... 692 462 292
Surrenders ....................................... (23,743) (16,659) (8,917)
Death benefits ................................... (1,708) (1,646) (588)
Costs of insurance charges ....................... (43,115) (34,996) (26,634)
Death benefit guarantee charges .................. (1,938) (630) (439)
Monthly expense charges .......................... (6,873) (5,413) (4,207)
--------------- --------------- ---------------
Additions (reductions) for policy
owners' transactions .......................... 130,587 119,997 96,355
--------------- --------------- ---------------
Net additions (reductions) for the year ........ 365,950 226,776 166,939
Policy Owners' Equity, beginning of the year ...... 679,988 453,212 286,273
--------------- --------------- ---------------
Policy Owners' Equity, end of the year ............ $ 1,045,938 $ 679,988 $ 453,212
=============== =============== ===============
Units Outstanding, beginning of the year .......... 29,584,452.030 21,952,826.717 15,861,312.070
Units Outstanding, end of the year ................ 36,956,472.845 29,584,452.030 21,952,826.717
Net Asset Value per Unit:
Select*Life I .................................. -- -- --
Select*Life Series 2000 ........................ -- -- --
</TABLE>
[WIDE TABLE CONTINUED FROM ABOVE]
<TABLE>
<CAPTION>
Alger American
Growth Portfolio
--------------------------------------------------
1999 1998 1997
-------------- -------------- --------------
<S> <C> <C> <C>
Net investment income:
Reinvested dividend income ....................... $ 22 $ 3 $ --
Reinvested capital gains ......................... 1,535 182 --
Administrative expenses .......................... (183) (16) --
-------------- -------------- --------------
Net investment income (loss) and
capital gains ................................. 1,374 169 --
-------------- -------------- --------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemptions of
fund shares ..................................... 441 37 --
Increase (decrease) in unrealized appreciation
of investments .................................. 4,801 789 1
-------------- -------------- --------------
Net realized and unrealized gains (losses) ..... 5,242 826 1
-------------- -------------- --------------
Additions (reductions) from operations ......... 6,616 995 1
-------------- -------------- --------------
Policy Owners' transactions:
Net premium payments ............................. 10,595 2,300 175
Transfers between funds and/or fixed account ..... 15,621 2,512 175
Policy loans ..................................... (234) (40) (1)
Loan collateral interest crediting ............... 13 -- --
Surrenders ....................................... (270) (19) --
Death benefits ................................... (18) -- --
Costs of insurance charges ....................... (1,284) (194) (6)
Death benefit guarantee charges .................. (35) (4) --
Monthly expense charges .......................... (275) (28) (1)
-------------- -------------- --------------
Additions (reductions) for policy
owners' transactions .......................... 24,113 4,527 342
-------------- -------------- --------------
Net additions (reductions) for the year ........ 30,729 5,522 343
Policy Owners' Equity, beginning of the year ...... 5,865 343 --
-------------- -------------- --------------
Policy Owners' Equity, end of the year ............ $ 36,594 $ 5,865 $ 343
============== ============== ==============
Units Outstanding, beginning of the year .......... 402,669.328 34,697.106 --
Units Outstanding, end of the year ................ 1,879,018.360 402,669.328 34,697.106
Net Asset Value per Unit:
Select*Life I .................................. $ 19.144387 $ 14.429571 $ 9.823427
Select*Life Series 2000 ........................ $ 19.516075 $ 14.592177 $ 9.854808
</TABLE>
[WIDE TABLE CONTINUED FROM ABOVE]
<TABLE>
<CAPTION>
Alger American
MidCap Growth Portfolio
--------------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Net investment income:
Reinvested dividend income ....................... $ -- $ -- $ --
Reinvested capital gains ......................... 415 61 --
Administrative expenses .......................... (27) (8) (1)
------------ ------------ ------------
Net investment income (loss) and
capital gains ................................. 388 53 (1)
------------ ------------ ------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemptions of
fund shares ..................................... 59 (30) --
Increase (decrease) in unrealized appreciation
of investments .................................. 622 218 (16)
------------ ------------ ------------
Net realized and unrealized gains (losses) ..... 681 188 (16)
------------ ------------ ------------
Additions (reductions) from operations ......... 1,069 241 (17)
------------ ------------ ------------
Policy Owners' transactions:
Net premium payments ............................. 1,336 1,205 132
Transfers between funds and/or fixed account ..... 725 512 263
Policy loans ..................................... (21) -- (2)
Loan collateral interest crediting ............... 1 -- --
Surrenders ....................................... (67) (9) --
Death benefits ................................... (1) (11) --
Costs of insurance charges ....................... (223) (82) (5)
Death benefit guarantee charges .................. (7) (4) --
Monthly expense charges .......................... (45) (12) (1)
------------ ------------ ------------
Additions (reductions) for policy
owners' transactions .......................... 1,698 1,599 387
------------ ------------ ------------
Net additions (reductions) for the year ........ 2,767 1,840 370
Policy Owners' Equity, beginning of the year ...... 2,210 370 --
------------ ------------ ------------
Policy Owners' Equity, end of the year ............ $ 4,977 $ 2,210 $ 370
============ ============ ============
Units Outstanding, beginning of the year .......... 172,814.592 37,772.926 --
Units Outstanding, end of the year ................ 295,715.008 172,814.592 37,772.926
Net Asset Value per Unit:
Select*Life I .................................. $ 16.557934 $ 12.659555 $ 9.793978
Select*Life Series 2000 ........................ $ 16.879516 $ 12.802277 $ 9.825275
</TABLE>
[WIDE TABLE CONTINUED FROM ABOVE]
<TABLE>
<CAPTION>
Alger American
Small Capitalization Portfolio
--------------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Net investment income:
Reinvested dividend income ....................... $ -- $ -- $ --
Reinvested capital gains ......................... 402 155 --
Administrative expenses .......................... (32) (8) (1)
------------ ------------ ------------
Net investment income (loss) and
capital gains ................................. 370 147 (1)
------------ ------------ ------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemptions of
fund shares ..................................... 109 6 (5)
Increase (decrease) in unrealized appreciation
of investments .................................. 1,171 133 (23)
------------ ------------ ------------
Net realized and unrealized gains (losses) ..... 1,280 139 (28)
------------ ------------ ------------
Additions (reductions) from operations ......... 1,650 286 (29)
------------ ------------ ------------
Policy Owners' transactions:
Net premium payments ............................. 1,603 1,373 235
Transfers between funds and/or fixed account ..... 911 555 452
Policy loans ..................................... (20) (19) --
Loan collateral interest crediting ............... 2 -- --
Surrenders ....................................... (42) (8) (2)
Death benefits ................................... (5) -- --
Costs of insurance charges ....................... (236) (124) (14)
Death benefit guarantee charges .................. (10) (6) --
Monthly expense charges .......................... (50) (18) (2)
------------ ------------ ------------
Additions (reductions) for policy
owners' transactions .......................... 2,153 1,753 669
------------ ------------ ------------
Net additions (reductions) for the year ........ 3,803 2,039 640
Policy Owners' Equity, beginning of the year ...... 2,679 640 --
------------ ------------ ------------
Policy Owners' Equity, end of the year ............ $ 6,482 $ 2,679 $ 640
============ ============ ============
Units Outstanding, beginning of the year .......... 230,199.995 63,628.672 --
Units Outstanding, end of the year ................ 388,991.269 230,199.995 63,628.672
Net Asset Value per Unit:
Select*Life I .................................. $ 16.369247 $ 11.505655 $ 10.039295
Select*Life Series 2000 ........................ $ 16.687171 $ 11.635433 $ 10.071361
</TABLE>
The accompanying notes are an integral part of the financial statements.
54
<PAGE>
RELIASTAR SELECT*LIFE VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND
CHANGES IN POLICYOWNERS' EQUITY, Continued
For the years ended December 31, 1999, 1998 and 1997
(In Thousands, Except Value Per Unit)
<TABLE>
<CAPTION>
Fidelity's VIP
Equity-Income Portfolio
IC Shares
--------------------------------------------------
1999 1998 1997
-------------- -------------- --------------
<S> <C> <C> <C>
Net investment income:
Reinvested dividend income .......................... $ 1,476 $ 1,175 $ 1,013
Reinvested capital gains ............................ 3,264 4,180 5,096
Administrative expenses ............................. (864) (705) (551)
-------------- -------------- --------------
Net investment income (loss) and
capital gains .................................... 3,876 4,650 5,558
-------------- -------------- --------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemption of fund
shares ............................................. 6,688 2,533 1,778
Increase (decrease) in unrealized appreciation of
investments ........................................ (5,132) 2,086 9,445
-------------- -------------- --------------
Net realized and unrealized gains (losses) ........ 1,556 4,619 11,223
-------------- -------------- --------------
Additions (reductions) from operations ............ 5,432 9,269 16,781
-------------- -------------- --------------
Policy Owners' transactions:
Net premium payments ................................ 15,156 18,161 17,102
Transfers between funds and/or fixed account ........ (8,382) (2,096) (1,313)
Policy loans ........................................ (2,073) (1,121) (1,209)
Loan collateral interest crediting .................. 146 113 76
Surrenders .......................................... (3,298) (3,152) (1,627)
Death benefits ...................................... (420) (264) (160)
Cost of insurance charges ........................... (4,541) (4,711) (4,240)
Death benefit guarantee charges ..................... (139) (114) (111)
Monthly expense charges ............................. (625) (659) (596)
-------------- -------------- --------------
Additions (reductions) for policy
owners' transactions ............................. (4,176) 6,157 7,922
-------------- -------------- --------------
Net additions (reductions) for the year ........... 1,256 15,426 24,703
Policy Owners' Equity, beginning of the year ......... 98,336 82,910 58,207
-------------- -------------- --------------
Policy Owners' Equity, end of the year ............... $ 99,592 $ 98,336 $ 82,910
============== ============== ==============
Units Outstanding, beginning of the year ............. 3,348,679.958 3,053,047.193 2,622,030.390
Units Outstanding, end of the year ................... 3,274,491.085 3,348,679.958 3,053,047.193
Net Asset Value per Unit:
Select*Life I ..................................... $ 40.949711 $ 38.822462 $ 35.058961
Select*Life Series 2000 ........................... $ 25.020668 $ 23.531218 $ 21.080180
</TABLE>
[WIDE TABLE CONTINUED FROM ABOVE]
<TABLE>
<CAPTION>
Fidelity's VIP
Growth Portfolio
IC Shares
--------------------------------------------------
1999 1998 1997
-------------- -------------- --------------
<S> <C> <C> <C>
Net investment income:
Reinvested dividend income .......................... $ 271 $ 537 $ 526
Reinvested capital gains ............................ 17,026 14,057 2,357
Administrative expenses ............................. (1,452) (971) (722)
-------------- -------------- --------------
Net investment income (loss) and
capital gains .................................... 15,845 13,623 2,161
-------------- -------------- --------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemption of fund
shares ............................................. 10,864 4,873 2,098
Increase (decrease) in unrealized appreciation of
investments ........................................ 28,390 22,732 14,061
-------------- -------------- --------------
Net realized and unrealized gains (losses) ........ 39,254 27,605 16,159
-------------- -------------- --------------
Additions (reductions) from operations ............ 55,099 41,228 18,320
-------------- -------------- --------------
Policy Owners' transactions:
Net premium payments ................................ 22,365 21,080 21,483
Transfers between funds and/or fixed account ........ (3,110) (1,512) (1,822)
Policy loans ........................................ (3,915) (1,618) (1,280)
Loan collateral interest crediting .................. 196 138 92
Surrenders .......................................... (6,338) (4,327) (2,498)
Death benefits ...................................... (409) (370) (160)
Cost of insurance charges ........................... (7,181) (6,378) (5,741)
Death benefit guarantee charges ..................... (270) (168) (163)
Monthly expense charges ............................. (1,047) (956) (876)
-------------- -------------- --------------
Additions (reductions) for policy
owners' transactions ............................. 291 5,889 9,035
-------------- -------------- --------------
Net additions (reductions) for the year ........... 55,390 47,117 27,355
Policy Owners' Equity, beginning of the year ......... 151,390 104,273 76,918
-------------- -------------- --------------
Policy Owners' Equity, end of the year ............... $ 206,780 $ 151,390 $ 104,273
============== ============== ==============
Units Outstanding, beginning of the year ............. 4,282,470.411 3,971,201.581 3,452,718.980
Units Outstanding, end of the year ................... 4,401,398.280 4,282,470.411 3,971,201.581
Net Asset Value per Unit:
Select*Life I ..................................... $ 68.164143 $ 49.996221 $ 36.130923
Select*Life Series 2000 ........................... $ 36.733274 $ 26.727479 $ 19.160956
</TABLE>
[WIDE TABLE CONTINUED FROM ABOVE]
<TABLE>
<CAPTION>
Fidelity's VIP
High Income Portfolio
IC Shares
--------------------------------------------------
1999 1998 1997
-------------- -------------- --------------
<S> <C> <C> <C>
Net investment income:
Reinvested dividend income .......................... $ 1,861 $ 1,415 $ 1,063
Reinvested capital gains ............................ 70 899 131
Administrative expenses ............................. (173) (160) (132)
-------------- -------------- --------------
Net investment income (loss) and
capital gains .................................... 1,758 2,154 1,062
-------------- -------------- --------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemption of fund
shares ............................................. (177) 210 301
Increase (decrease) in unrealized appreciation of
investments ........................................ (69) (3,436) 1,318
-------------- -------------- --------------
Net realized and unrealized gains (losses) ........ (246) (3,226) 1,619
-------------- -------------- --------------
Additions (reductions) from operations ............ 1,512 (1,072) 2,681
-------------- -------------- --------------
Policy Owners' transactions:
Net premium payments ................................ 4,236 5,161 5,072
Transfers between funds and/or fixed account ........ (4,013) (469) (1,001)
Policy loans ........................................ (325) (268) (282)
Loan collateral interest crediting .................. 29 21 15
Surrenders .......................................... (557) (740) (397)
Death benefits ...................................... (13) (88) (39)
Cost of insurance charges ........................... (1,068) (1,230) (1,198)
Death benefit guarantee charges ..................... (51) (31) (29)
Monthly expense charges ............................. (126) (144) (140)
-------------- -------------- --------------
Additions (reductions) for policy
owners' transactions ............................. (1,888) 2,212 2,001
-------------- -------------- --------------
Net additions (reductions) for the year ........... (376) 1,140 4,682
Policy Owners' Equity, beginning of the year ......... 20,517 19,377 14,695
-------------- -------------- --------------
Policy Owners' Equity, end of the year ............... $ 20,141 $ 20,517 $ 19,377
============== ============== ==============
Units Outstanding, beginning of the year ............. 1,053,934.152 916,625.159 773,942.356
Units Outstanding, end of the year ................... 982,653.237 1,053,934.152 916,625.159
Net Asset Value per Unit:
Select*Life I ..................................... $ 30.499630 $ 28.427207 $ 29.952917
Select*Life Series 2000 ........................... $ 16.349223 $ 15.116470 $ 15.800365
</TABLE>
[WIDE TABLE CONTINUED FROM ABOVE]
<TABLE>
<CAPTION>
Fidelity's VIP
Money Market Portfolio
IC Shares
--------------------------------------------------
1999 1998 1997
-------------- -------------- --------------
<S> <C> <C> <C>
Net investment income:
Reinvested dividend income .......................... $ 1,087 $ 669 $ 556
Reinvested capital gains ............................ -- -- --
Administrative expenses ............................. (181) (92) (67)
-------------- -------------- --------------
Net investment income (loss) and
capital gains .................................... 906 577 489
-------------- -------------- --------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemption of fund
shares ............................................. -- -- --
Increase (decrease) in unrealized appreciation of
investments ........................................ -- -- --
-------------- -------------- --------------
Net realized and unrealized gains (losses) ........ -- -- --
-------------- -------------- --------------
Additions (reductions) from operations ............ 906 577 489
-------------- -------------- --------------
Policy Owners' transactions:
Net premium payments ................................ 36,690 10,376 10,226
Transfers between funds and/or fixed account ........ (14,511) (7,227) (5,733)
Policy loans ........................................ (977) (31) (147)
Loan collateral interest crediting .................. 100 18 13
Surrenders .......................................... (768) (285) (802)
Death benefits ...................................... (113) (7) (43)
Cost of insurance charges ........................... (1,337) (817) (755)
Death benefit guarantee charges ..................... (534) (55) (8)
Monthly expense charges ............................. (156) (74) (73)
-------------- -------------- --------------
Additions (reductions) for policy
owners' transactions ............................. 18,394 1,898 2,678
-------------- -------------- --------------
Net additions (reductions) for the year ........... 19,300 2,475 3,167
Policy Owners' Equity, beginning of the year ......... 13,968 11,493 8,326
-------------- -------------- --------------
Policy Owners' Equity, end of the year ............... $ 33,268 $ 13,968 $ 11,493
============== ============== ==============
Units Outstanding, beginning of the year ............. 1,021,422.904 875,038.346 654,425.374
Units Outstanding, end of the year ................... 2,329,160.577 1,021,422.904 875,038.346
Net Asset Value per Unit:
Select*Life I ..................................... $ 18.153875 $ 17.399235 $ 16.628903
Select*Life Series 2000 ........................... $ 13.611549 $ 12.941412 $ 12.269546
</TABLE>
The accompanying notes are an integral part of the financial statements.
55
<PAGE>
RELIASTAR SELECT*LIFE VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND
CHANGES IN POLICYOWNERS' EQUITY, Continued
For the years ended December 31, 1999, 1998 and 1997
(In Thousands, Except Value Per Unit)
<TABLE>
<CAPTION>
Fidelity's VIP
Overseas Portfolio
IC Shares
--------------------------------------------------
1999 1998 1997
-------------- -------------- --------------
<S> <C> <C> <C>
Net investment income:
Reinvested dividend income ....................... $ 489 $ 551 $ 411
Reinvested capital gains ......................... 789 1,626 1,630
Administrative expenses .......................... (236) (247) (220)
-------------- -------------- --------------
Net investment income (loss) and
capital gains ................................. 1,042 1,930 1,821
-------------- -------------- --------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemptions of
fund shares ..................................... 2,572 1,235 724
Increase (decrease) in unrealized appreciation
of investments .................................. 5,914 187 5
-------------- -------------- --------------
Net realized and unrealized gains (losses) ..... 8,486 1,422 729
-------------- -------------- --------------
Additions (reductions) from operations ......... 9,528 3,352 2,550
-------------- -------------- --------------
Policy Owners' transactions:
Net premium payments ............................. 1,521 5,928 7,156
Transfers between funds and/or fixed account ..... (9,986) (2,715) (1,515)
Policy loans ..................................... (508) (396) (379)
Loan collateral interest crediting ............... 18 44 28
Surrenders ....................................... (1,003) (889) (690)
Death benefits ................................... (33) (60) (18)
Cost of insurance charges ........................ (1,183) (1,589) (1,667)
Death benefit guarantee charges .................. (27) (37) (43)
Monthly expense charges .......................... (172) (241) (253)
-------------- -------------- --------------
Additions (reductions) for policy
owners' transactions .......................... (11,373) 45 2,619
-------------- -------------- --------------
Net additions (reductions) for the year ........ (1,845) 3,397 5,169
Policy Owners' Equity, beginning of the year ...... 31,514 28,117 22,948
-------------- -------------- --------------
Policy Owners' Equity, end of the year ............ $ 29,669 $ 31,514 $ 28,117
============== ============== ==============
Units Outstanding, beginning of the year .......... 1,752,679.671 1,733,459.426 1,536,316.506
Units Outstanding, end of the year ................ 1,162,674.433 1,752,679.671 1,733,459.426
Net Asset Value per Unit:
Select*Life I .................................. $ 31.755579 $ 22.444163 $ 20.066499
Select*Life Series 2000 ........................ $ 22.456788 $ 15.745282 $ 13.964753
</TABLE>
[WIDE TABLE CONTINUED FROM ABOVE]
<TABLE>
<CAPTION>
Fidelity's VIP II
Asset Manager Portfolio
IC Shares
--------------------------------------------------
1999 1998 1997
-------------- -------------- --------------
<S> <C> <C> <C>
Net investment income:
Reinvested dividend income ................... $ 1,409 $ 1,161 $ 1,010
Reinvested capital gains ..................... 1,785 3,484 2,533
Administrative expenses ...................... (316) (323) (270)
-------------- -------------- --------------
Net investment income (loss) and
capital gains ............................. 2,878 4,322 3,273
-------------- -------------- --------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemptions of
fund shares ................................. 2,289 274 346
Increase (decrease) in unrealized appreciation
of investments .............................. (1,681) 660 2,222
-------------- -------------- --------------
Net realized and unrealized gains (losses) . 608 934 2,568
-------------- -------------- --------------
Additions (reductions) from operations ..... 3,486 5,256 5,841
-------------- -------------- --------------
Policy Owners' transactions:
Net premium payments ......................... 1,752 5,834 6,096
Transfers between funds and/or fixed account . (9,250) (717) (651)
Policy loans ................................. (626) (482) (371)
Loan collateral interest crediting ........... 16 51 38
Surrenders ................................... (1,691) (1,458) (694)
Death benefits ............................... (78) (60) (68)
Cost of insurance charges .................... (1,686) (2,041) (2,034)
Death benefit guarantee charges .............. (43) (52) (56)
Monthly expense charges ...................... (201) (255) (264)
-------------- -------------- --------------
Additions (reductions) for policy
owners' transactions ...................... (11,807) 820 1,996
-------------- -------------- --------------
Net additions (reductions) for the year .... (8,321) 6,076 7,837
Policy Owners' Equity, beginning of the year .. 42,656 36,580 28,743
-------------- -------------- --------------
Policy Owners' Equity, end of the year ........ $ 34,335 $ 42,656 $ 36,580
============== ============== ==============
Units Outstanding, beginning of the year ...... 2,091,427.861 2,034,040.832 1,892,481.312
Units Outstanding, end of the year ............ 1,510,293.812 2,091,427.861 2,034,040.832
Net Asset Value per Unit:
Select*Life I .............................. $ 26.757824 $ 24.280390 $ 21.274161
Select*Life Series 2000 .................... $ 19.272715 $ 17.348504 $ 15.079031
</TABLE>
[WIDE TABLE CONTINUED FROM ABOVE]
<TABLE>
<CAPTION>
Fidelity's VIP II
Contrafund Portfolio
IC Shares
--------------------------------------------------
1999 1998 1997
-------------- -------------- --------------
<S> <C> <C> <C>
Net investment income:
Reinvested dividend income ....................... $ 235 $ 180 $ 94
Reinvested capital gains ......................... 1,722 1,324 247
Administrative expenses .......................... (526) (229) (104)
-------------- -------------- --------------
Net investment income (loss) and
capital gains ................................. 1,431 1,275 237
-------------- -------------- --------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemptions of
fund shares ..................................... 569 651 61
Increase (decrease) in unrealized appreciation
of investments .................................. 11,058 7,367 3,113
-------------- -------------- --------------
Net realized and unrealized gains (losses) ..... 11,627 8,018 3,174
-------------- -------------- --------------
Additions (reductions) from operations ......... 13,058 9,293 3,411
-------------- -------------- --------------
Policy Owners' transactions:
Net premium payments ............................. 18,650 16,875 12,617
Transfers between funds and/or fixed account ..... 3,457 605 767
Policy loans ..................................... (563) (197) (66)
Loan collateral interest crediting ............... 14 6 1
Surrenders ....................................... (1,275) (882) (307)
Death benefits ................................... (48) (130) (10)
Cost of insurance charges ........................ (3,655) (2,823) (1,815)
Death benefit guarantee charges .................. (127) (15) --
Monthly expense charges .......................... (610) (512) (344)
-------------- -------------- --------------
Additions (reductions) for policy
owners' transactions .......................... 15,843 12,927 10,843
-------------- -------------- --------------
Net additions (reductions) for the year ........ 28,901 22,220 14,254
Policy Owners' Equity, beginning of the year ...... 46,647 24,427 10,173
-------------- -------------- --------------
Policy Owners' Equity, end of the year ............ $ 75,548 $ 46,647 $ 24,427
============== ============== ==============
Units Outstanding, beginning of the year .......... 1,974,535.451 1,334,244.465 686,514.792
Units Outstanding, end of the year ................ 2,609,699.831 1,974,535.451 1,334,244.465
Net Asset Value per Unit:
Select*Life I .................................. $ 16.376549 $ 13.286083 $ 10.304064
Select*Life Series 2000 ........................ $ 29.708780 $ 23.909755 $ 18.395120
</TABLE>
[WIDE TABLE CONTINUED FROM ABOVE]
<TABLE>
<CAPTION>
Fidelity's VIP II
Index 500 Portfolio
IC Shares
--------------------------------------------------
1999 1998 1997
-------------- -------------- --------------
<S> <C> <C> <C>
Net investment income:
Reinvested dividend income ....................... $ 491 $ 278 $ 95
Reinvested capital gains ......................... 333 644 193
Administrative expenses .......................... (592) (229) (91)
-------------- -------------- --------------
Net investment income (loss) and
capital gains ................................. 232 693 197
-------------- -------------- --------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemptions of
fund shares ..................................... 2,738 1,033 427
Increase (decrease) in unrealized appreciation
of investments .................................. 9,397 6,585 2,896
-------------- -------------- --------------
Net realized and unrealized gains (losses) ..... 12,135 7,618 3,323
-------------- -------------- --------------
Additions (reductions) from operations ......... 12,367 8,311 3,520
-------------- -------------- --------------
Policy Owners' transactions:
Net premium payments ............................. 23,262 16,991 9,635
Transfers between funds and/or fixed account ..... 9,341 3,742 3,272
Policy loans ..................................... (837) (264) (104)
Loan collateral interest crediting ............... 33 14 4
Surrenders ....................................... (1,561) (670) (188)
Death benefits ................................... (151) (59) (3)
Cost of insurance charges ........................ (4,256) (2,579) (1,225)
Death benefit guarantee charges .................. (250) (30) (7)
Monthly expense charges .......................... (643) (434) (226)
-------------- -------------- --------------
Additions (reductions) for policy
owners' transactions .......................... 24,938 16,711 11,158
-------------- -------------- --------------
Net additions (reductions) for the year ........ 37,305 25,022 14,678
Policy Owners' Equity, beginning of the year ...... 47,283 22,261 7,583
-------------- -------------- --------------
Policy Owners' Equity, end of the year ............ $ 84,588 $ 47,283 $ 22,261
============== ============== ==============
Units Outstanding, beginning of the year .......... 1,628,829.448 981,434.839 441,948.368
Units Outstanding, end of the year ................ 2,420,819.714 1,628,829.448 981,434.839
Net Asset Value per Unit:
Select*Life I .................................. $ 35.507758 $ 29.701980 $ 23.332252
Select*Life Series 2000 ........................ $ 34.868839 $ 28.934443 $ 22.547720
</TABLE>
The accompanying notes are an integral part of the financial statements.
56
<PAGE>
RELIASTAR SELECT*LIFE VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND
CHANGES IN POLICYOWNERS' EQUITY, Continued
For the years ended December 31, 1999, 1998 and 1997
(In Thousands, Except Value Per Unit)
<TABLE>
<CAPTION>
Fidelity's VIP II
Investment Grade Bond Portfolio
IC Shares
--------------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Net investment income:
Reinvested dividend income ....................... $ 208 $ 206 $ 194
Reinvested capital gains ......................... 65 25 --
Administrative expenses .......................... (50) (36) (27)
------------ ------------ ------------
Net investment income (loss) and
capital gains ................................. 223 195 167
------------ ------------ ------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemptions of
fund shares ..................................... 52 128 16
Increase (decrease) in unrealized appreciation
of investments .................................. (383) 47 94
------------ ------------ ------------
Net realized and unrealized gains (losses) ..... (331) 175 110
------------ ------------ ------------
Additions (reductions) from operations ......... (108) 370 277
------------ ------------ ------------
Policy Owners' transactions:
Net premium payments ............................. 1,615 2,363 907
Transfers between funds and/or fixed account ..... 548 (1,154) (169)
Policy loans ..................................... (96) (50) (37)
Loan collateral interest crediting ............... 7 4 2
Surrenders ....................................... (175) (106) (69)
Death benefits ................................... (6) (7) (2)
Cost of insurance charges ........................ (316) (280) (225)
Death benefit guarantee charges .................. (19) (7) (5)
Monthly expense charges .......................... (35) (30) (28)
------------ ------------ ------------
Additions (reductions) for policy
owners' transactions .......................... 1,523 733 374
------------ ------------ ------------
Net additions (reductions) for the year ........ 1,415 1,103 651
Policy Owners' Equity, beginning of the year ...... 4,975 3,872 3,221
------------ ------------ ------------
Policy Owners' Equity, end of the year ............ $ 6,390 $ 4,975 $ 3,872
============ ============ ============
Units Outstanding, beginning of the year .......... 333,810.100 276,930.635 247,189.999
Units Outstanding, end of the year ................ 444,440.696 333,810.100 276,930.635
Net Asset Value per Unit:
Select*Life I .................................. $ 16.785852 $ 17.100659 $ 15.837535
Select*Life Series 2000 ........................ $ 13.662210 $ 13.807112 $ 12.685026
</TABLE>
[WIDE TABLE CONTINUED FROM ABOVE]
<TABLE>
<CAPTION>
Janus Aspen Series
Aggressive Growth Portfolio
--------------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Net investment income:
Reinvested dividend income ....................... $ 98 $ -- $ --
Reinvested capital gains ......................... 168 -- --
Administrative expenses .......................... (76) (7) --
------------ ------------ ------------
Net investment income (loss) and
capital gains ................................. 190 (7) --
------------ ------------ ------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemptions of
fund shares ..................................... 870 95 (1)
Increase (decrease) in unrealized appreciation
of investments .................................. 9,113 317 6
------------ ------------ ------------
Net realized and unrealized gains (losses) ..... 9,983 412 5
------------ ------------ ------------
Additions (reductions) from operations ......... 10,173 405 5
------------ ------------ ------------
Policy Owners' transactions:
Net premium payments ............................. 4,198 884 109
Transfers between funds and/or fixed account ..... 11,069 194 156
Policy loans ..................................... (153) (4) 1
Loan collateral interest crediting ............... 13 2 --
Surrenders ....................................... (111) (15) --
Death benefits ................................... (16) -- --
Cost of insurance charges ........................ (491) (88) (6)
Death benefit guarantee charges .................. (22) (4) --
Monthly expense charges .......................... (144) (13) (1)
------------ ------------ ------------
Additions (reductions) for policy
owners' transactions .......................... 14,343 956 259
------------ ------------ ------------
Net additions (reductions) for the year ........ 24,516 1,361 264
Policy Owners' Equity, beginning of the year ...... 1,625 264 --
------------ ------------ ------------
Policy Owners' Equity, end of the year ............ $ 26,141 $ 1,625 $ 264
============ ============ ============
Units Outstanding, beginning of the year .......... 110,510.717 24,053.408 --
Units Outstanding, end of the year ................ 790,834.555 110,510.717 24,053.408
Net Asset Value per Unit:
Select*Life I .................................. $ 32.536277 $ 14.550679 $ 10.925142
Select*Life Series 2000 ........................ $ 33.167484 $ 14.714669 $ 10.960002
</TABLE>
[WIDE TABLE CONTINUED FROM ABOVE]
<TABLE>
<CAPTION>
Janus Aspen Series
Growth Portfolio
--------------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Net investment income:
Reinvested dividend income ....................... $ 27 $ 41 $ 1
Reinvested capital gains ......................... 50 32 --
Administrative expenses .......................... (92) (10) --
------------ ------------ ------------
Net investment income (loss) and
capital gains ................................. (15) 63 1
------------ ------------ ------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemptions of
fund shares ..................................... 1,286 (16) --
Increase (decrease) in unrealized appreciation
of investments .................................. 3,062 541 2
------------ ------------ ------------
Net realized and unrealized gains (losses) ..... 4,348 525 2
------------ ------------ ------------
Additions (reductions) from operations ......... 4,333 588 3
------------ ------------ ------------
Policy Owners' transactions:
Net premium payments ............................. 4,929 1,477 157
Transfers between funds and/or fixed account ..... 6,660 2,294 136
Policy loans ..................................... (44) 2 (3)
Loan collateral interest crediting ............... 3 -- 1
Surrenders ....................................... (772) (74) --
Death benefits ................................... (13) (8) --
Cost of insurance charges ........................ (669) (132) (7)
Death benefit guarantee charges .................. (19) (2) --
Monthly expense charges .......................... (147) (22) (1)
------------ ------------ ------------
Additions (reductions) for policy
owners' transactions .......................... 9,928 3,535 283
------------ ------------ ------------
Net additions (reductions) for the year ........ 14,261 4,123 286
Policy Owners' Equity, beginning of the year ...... 4,409 286 --
------------ ------------ ------------
Policy Owners' Equity, end of the year ............ $ 18,670 $ 4,409 $ 286
============ ============ ============
Units Outstanding, beginning of the year .......... 319,301.091 28,040.816 --
Units Outstanding, end of the year ................ 940,075.013 319,301.091 28,040.816
Net Asset Value per Unit:
Select*Life I .................................. $ 19.519150 $ 13.665622 $ 10.154694
Select*Life Series 2000 ........................ $ 19.898078 $ 13.819668 $ 10.187114
</TABLE>
[WIDE TABLE CONTINUED FROM ABOVE]
<TABLE>
<CAPTION>
Janus Aspen Series
International Growth Portfolio
--------------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Net investment income:
Reinvested dividend income ....................... $ 16 $ 35 $ 1
Reinvested capital gains ......................... -- 5 --
Administrative expenses .......................... (55) (16) (1)
------------ ------------ ------------
Net investment income (loss) and
capital gains .................................... (39) 24 --
------------ ------------ ------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemptions of
fund shares ...................................... 1,568 52 (1)
Increase (decrease) in unrealized appreciation
of investments ................................... 3,678 190 (11)
------------ ------------ ------------
Net realized and unrealized gains (losses) ....... 5,246 242 (12)
------------ ------------ ------------
Additions (reductions) from operations ........... 5,207 266 (12)
------------ ------------ ------------
Policy Owners' transactions:
Net premium payments ............................. 2,432 1,711 250
Transfers between funds and/or fixed account ..... 1,499 745 623
Policy loans ..................................... (39) (11) (2)
Loan collateral interest crediting ............... 3 1 --
Surrenders ....................................... (81) (18) --
Death benefits ................................... (3) -- --
Cost of insurance charges ........................ (359) (167) (13)
Death benefit guarantee charges .................. (15) (5) --
Monthly expense charges .......................... (66) (26) (2)
------------ ------------ ------------
Additions (reductions) for policy
owners' transactions ............................. 3,371 2,230 856
------------ ------------ ------------
Net additions (reductions) for the year .......... 8,578 2,496 844
Policy Owners' Equity, beginning of the year ...... 3,340 844 --
------------ ------------ ------------
Policy Owners' Equity, end of the year ............ $ 11,918 $ 3,340 $ 844
============ ============ ============
Units Outstanding, beginning of the year .......... 296,248.488 87,549.532 --
Units Outstanding, end of the year ................ 580,535.174 296,248.488 87,549.532
Net Asset Value per Unit:
Select*Life I .................................... $ 20.176465 $ 11.158415 $ 9.594712
Select*Life Series 2000 .......................... $ 20.567965 $ 11.284244 $ 9.625377
</TABLE>
The accompanying notes are an integral part of the financial statements.
57
<PAGE>
RELIASTAR SELECT*LIFE VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND
CHANGES IN POLICYOWNERS' EQUITY, Continued
For the years ended December 31, 1999, 1998 and 1997
(In Thousands, Except Value Per Unit)
<TABLE>
<CAPTION>
Janus Aspen Series
Worldwide Growth Portfolio
--------------------------------------------------
1999 1998 1997
-------------- -------------- --------------
<S> <C> <C> <C>
Net Investment income:
Reinvested dividend income ....................... $ 56 $ 210 $ 5
Reinvested capital gains ......................... -- 81 --
Administrative expenses .......................... (270) (57) (3)
-------------- -------------- --------------
Net investment income (loss) and
capital gains ................................. (214) 234 2
-------------- -------------- --------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemptions of
fund shares ..................................... 3,533 99 --
Increase (decrease) in unrealized appreciation
of investments .................................. 15,797 1,475 (16)
-------------- -------------- --------------
Net realized and unrealized gains (losses) ..... 19,330 1,574 (16)
-------------- -------------- --------------
Additions (reductions) from operations ......... 19,116 1,808 (14)
-------------- -------------- --------------
Policy Owners' transactions:
Net premium payments ............................. 12,515 7,344 906
Transfers between funds and/or fixed account ..... 11,478 4,415 1,582
Policy loans ..................................... (256) (13) (4)
Loan collateral interest crediting ............... 11 1 --
Surrenders ....................................... (426) (90) (1)
Death benefits ................................... (148) (53) --
Cost of insurance charges ........................ (1,904) (755) (49)
Death benefit guarantee charges .................. (43) (12) --
Monthly expense charges .......................... (348) (106) (7)
-------------- -------------- --------------
Additions (reductions) for policy
owners' transactions .......................... 20,879 10,731 2,427
-------------- -------------- --------------
Net additions (reductions) for the year ........ 39,995 12,539 2,413
Policy Owners' Equity, beginning of the year ...... 14,952 2,413 --
-------------- -------------- --------------
Policy Owners' Equity, end of the year ............ $ 54,947 $ 14,952 $ 2,413
============== ============== ==============
Units Outstanding, beginning of the year .......... 1,180,179.061 245,314.904 --
Units Outstanding, end of the year ................ 2,640,454.020 1,180,179.061 245,314.904
Net Asset Value per Unit:
Select*Life I .................................. $ 20.456930 $ 12.539787 $ 9.804994
Select*Life Series 2000 ........................ $ 20.853866 $ 12.681124 $ 9.836310
</TABLE>
[WIDE TABLE CONTINUED FROM ABOVE]
<TABLE>
<CAPTION>
Neuberger Berman
Advisers Management Trust
Limited Maturity Bond Portfolio
--------------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Net Investment income:
Reinvested dividend income ....................... $ 115 $ 79 $ --
Reinvested capital gains ......................... -- -- --
Administrative expenses .......................... (23) (9) --
------------ ------------ ------------
Net investment income (loss) and
capital gains ................................. 92 70 --
------------ ------------ ------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemptions of
fund shares ..................................... (27) (21) --
Increase (decrease) in unrealized appreciation
of investments .................................. (49) 1 7
------------ ------------ ------------
Net realized and unrealized gains (losses) ..... (76) (20) 7
------------ ------------ ------------
Additions (reductions) from operations ......... 16 50 7
------------ ------------ ------------
Policy Owners' transactions:
Net premium payments ............................. 1,521 1,242 209
Transfers between funds and/or fixed account ..... 133 (296) 896
Policy loans ..................................... (61) (2) (2)
Loan collateral interest crediting ............... -- -- --
Surrenders ....................................... (29) (2) --
Death benefits ................................... (14) (5) --
Cost of insurance charges ........................ (170) (94) (6)
Death benefit guarantee charges .................. (6) (2) --
Monthly expense charges .......................... (36) (11) (1)
------------ ------------ ------------
Additions (reductions) for policy
owners' transactions .......................... 1,338 830 1,096
------------ ------------ ------------
Net additions (reductions) for the year ........ 1,354 880 1,103
Policy Owners' Equity, beginning of the year ...... 1,983 1,103 --
------------ ------------ ------------
Policy Owners' Equity, end of the year ............ $ 3,337 $ 1,983 $ 1,103
============ ============ ============
Units Outstanding, beginning of the year .......... 185,303.929 107,550.694 --
Units Outstanding, end of the year ................ 307,256.114 185,303.929 107,550.694
Net Asset Value per Unit:
Select*Life I .................................. $ 10.655507 $ 10.584999 $ 10.221530
Select*Life Series 2000 ........................ $ 10.862584 $ 10.704404 $ 10.254171
</TABLE>
[WIDE TABLE CONTINUED FROM ABOVE]
<TABLE>
<CAPTION>
Neuberger Berman
Advisers Management Trust
Partners Portfolio
--------------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Net Investment income:
Reinvested dividend income ....................... $ 120 $ 11 $ --
Reinvested capital gains ......................... 208 342 --
Administrative expenses .......................... (83) (45) (2)
------------ ------------ ------------
Net investment income (loss) and
capital gains ................................. 245 308 (2)
------------ ------------ ------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemptions of
fund shares ..................................... (153) (137) 3
Increase (decrease) in unrealized appreciation
of investments .................................. 529 (164) 20
------------ ------------ ------------
Net realized and unrealized gains (losses) ..... 376 (301) 23
------------ ------------ ------------
Additions (reductions) from operations ......... 621 7 21
------------ ------------ ------------
Policy Owners' transactions:
Net premium payments ............................. 3,534 5,576 484
Transfers between funds and/or fixed account ..... (4,159) 3,196 1,288
Policy loans ..................................... (66) (55) (2)
Loan collateral interest crediting ............... 2 2 1
Surrenders ....................................... (146) (58) (2)
Death benefits ................................... (15) -- --
Cost of insurance charges ........................ (653) (518) (26)
Death benefit guarantee charges .................. (18) (11) --
Monthly expense charges .......................... (93) (64) (3)
------------ ------------ ------------
Additions (reductions) for policy
owners' transactions .......................... (1,614) 8,068 1,740
------------ ------------ ------------
Net additions (reductions) for the year ........ (993) 8,075 1,761
Policy Owners' Equity, beginning of the year ...... 9,836 1,761 --
------------ ------------ ------------
Policy Owners' Equity, end of the year ............ $ 8,843 $ 9,836 $ 1,761
============ ============ ============
Units Outstanding, beginning of the year .......... 914,725.581 170,599.212 --
Units Outstanding, end of the year ................ 766,507.228 914,725.581 170,599.212
Net Asset Value per Unit:
Select*Life I .................................. $ 11.333244 $ 10.640408 $ 10.292965
Select*Life Series 2000 ........................ $ 11.553436 $ 10.760407 $ 10.325813
</TABLE>
[WIDE TABLE CONTINUED FROM ABOVE]
<TABLE>
<CAPTION>
Neuberger Berman
Advisers Management Trust
Socially Responsive Portfolio
-------------------------------------------
1999 1998 1997
------------ ------------ ------------
<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 ..................................... -- -- --
Increase (decrease) in unrealized appreciation
of investments .................................. 3 -- --
------------ ------------ ------------
Net realized and unrealized gains (losses) ..... 3 -- --
------------ ------------ ------------
Additions (reductions) from operations ......... 3 -- --
------------ ------------ ------------
Policy Owners' transactions:
Net premium payments ............................. 23 -- --
Transfers between funds and/or fixed account ..... 26 -- --
Policy loans ..................................... -- -- --
Loan collateral interest crediting ............... -- -- --
Surrenders ....................................... -- -- --
Death benefits ................................... -- -- --
Cost of insurance charges ........................ (3) -- --
Death benefit guarantee charges .................. (1) -- --
Monthly expense charges .......................... -- -- --
------------ ------------ ------------
Additions (reductions) for policy
owners' transactions .......................... 45 -- --
------------ ------------ ------------
Net additions (reductions) for the year ........ 48 -- --
Policy Owners' Equity, beginning of the year ...... -- -- --
------------ ------------ ------------
Policy Owners' Equity, end of the year ............ $ 48 $ -- $ --
============ ============ ============
Units Outstanding, beginning of the year .......... -- -- --
Units Outstanding, end of the year ................ 4,350.420 -- --
Net Asset Value per Unit:
Select*Life I .................................. $ -- $ -- $ --
Select*Life Series 2000 ........................ $ 10.754901 $ -- $ --
</TABLE>
The accompanying notes are an integral part of the financial statements.
58
<PAGE>
RELIASTAR SELECT*LIFE VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND
CHANGES IN POLICYOWNERS' EQUITY, Continued
For the years ended December 31, 1999, 1998 and 1997
(In Thousands, Except Value Per Unit)
<TABLE>
<CAPTION>
Northstar Galaxy Trust
Emerging Growth Portfolio
--------------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Net investment income:
Reinvested dividend income ....................... $ -- $ 58 $ 36
Reinvested capital gains ......................... 1,382 107 9
Administrative expenses .......................... (40) (11) (5)
------------ ------------ ------------
Net investment income (loss) and
capital gains ................................. 1,342 154 40
------------ ------------ ------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemptions of
fund shares ..................................... 473 10 3
Increase (decrease) in unrealized appreciation
of investments .................................. 2,990 181 83
------------ ------------ ------------
Net realized and unrealized gains (losses) ..... 3,463 191 86
------------ ------------ ------------
Additions (reductions) from operations ......... 4,805 345 126
------------ ------------ ------------
Policy Owners' transactions:
Net premium payments ............................. 1,278 990 826
Transfers between funds and/or fixed account ..... 2,248 (2) 47
Policy loans ..................................... (95) (13) (11)
Loan collateral interest crediting ............... 1 -- --
Surrenders ....................................... (64) (27) (21)
Death benefits ................................... (5) -- (1)
Cost of insurance charges ........................ (255) (179) (96)
Death benefit guarantee charges .................. (17) (1) --
Monthly expense charges .......................... (40) (30) (19)
------------ ------------ ------------
Additions (reductions) for policy
owners' transactions .......................... 3,051 738 725
------------ ------------ ------------
Net additions (reductions) for the year ........ 7,856 1,083 851
Policy Owners' Equity, beginning of the year ...... 2,524 1,441 590
------------ ------------ ------------
Policy Owners' Equity, end of the year ............ $ 10,380 $ 2,524 $ 1,441
============ ============ ============
Units Outstanding, beginning of the year .......... 134,480.431 90,105.753 42,551.251
Units Outstanding, end of the year ................ 237,818.778 134,480.431 90,105.753
Net Asset Value per Unit:
Select*Life I .................................. $ 28.891610 $ 12.082938 $ 10.383806
Select*Life Series 2000 ........................ $ 45.340005 $ 18.810805 $ 16.036372
</TABLE>
[WIDE TABLE CONTINUED FROM ABOVE]
<TABLE>
<CAPTION>
Northstar Galaxy Trust
Growth + Value Portfolio
--------------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Net investment income:
Reinvested dividend income ....................... $ -- $ -- $ 1
Reinvested capital gains ......................... 1,025 14 7
Administrative expenses .......................... (25) (8) (1)
------------ ------------ ------------
Net investment income (loss) and
capital gains ................................. 1,000 6 7
------------ ------------ ------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemptions of
fund shares ..................................... 586 -- 1
Increase (decrease) in unrealized appreciation
of investments .................................. 655 277 (13)
------------ ------------ ------------
Net realized and unrealized gains (losses) ..... 1,241 277 (12)
------------ ------------ ------------
Additions (reductions) from operations ......... 2,241 283 (5)
------------ ------------ ------------
Policy Owners' transactions:
Net premium payments ............................. 1,278 1,061 187
Transfers between funds and/or fixed account ..... 1,675 59 497
Policy loans ..................................... (20) 4 (2)
Loan collateral interest crediting ............... 1 -- --
Surrenders ....................................... (23) (4) (1)
Death benefits ................................... -- (94) --
Cost of insurance charges ........................ (178) (115) (10)
Death benefit guarantee charges .................. (9) (3) --
Monthly expense charges .......................... (34) (11) (1)
------------ ------------ ------------
Additions (reductions) for policy
owners' transactions .......................... 2,690 897 670
------------ ------------ ------------
Net additions (reductions) for the year ........ 4,931 1,180 665
Policy Owners' Equity, beginning of the year ...... 1,845 665 --
------------ ------------ ------------
Policy Owners' Equity, end of the year ............ $ 6,776 $ 1,845 $ 665
============ ============ ============
Units Outstanding, beginning of the year .......... 151,938.013 65,399.595 --
Units Outstanding, end of the year ................ 286,240.204 151,938.013 65,399.595
Net Asset Value per Unit:
Select*Life I .................................. $ 23.255009 $ 12.022926 $ 10.156905
Select*Life Series 2000 ........................ $ 23.706151 $ 12.158465 $ 10.189337
</TABLE>
[WIDE TABLE CONTINUED FROM ABOVE]
<TABLE>
<CAPTION>
Northstar Galaxy Trust
International Portfolio
--------------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Net investment income:
Reinvested dividend income ....................... $ 45 $ 21 $ 1
Reinvested capital gains ......................... 352 68 --
Administrative expenses .......................... (22) (7) --
------------ ------------ ------------
Net investment income (loss) and
capital gains ................................. 375 82 1
------------ ------------ ------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemptions of
fund shares ..................................... 497 47 --
Increase (decrease) in unrealized appreciation
of investments .................................. 344 33 --
------------ ------------ ------------
Net realized and unrealized gains (losses) ..... 841 80 --
------------ ------------ ------------
Additions (reductions) from operations ......... 1,216 162 1
------------ ------------ ------------
Policy Owners' transactions:
Net premium payments ............................. 1,001 975 144
Transfers between funds and/or fixed account ..... 229 218 258
Policy loans ..................................... (16) (4) --
Loan collateral interest crediting ............... 3 2 --
Surrenders ....................................... (23) (9) (2)
Death benefits ................................... (13) -- --
Cost of insurance charges ........................ (153) (96) (8)
Death benefit guarantee charges .................. (6) (3) --
Monthly expense charges .......................... (27) (11) (1)
------------ ------------ ------------
Additions (reductions) for policy
owners' transactions .......................... 995 1,072 391
------------ ------------ ------------
Net additions (reductions) for the year ........ 2,211 1,234 392
Policy Owners' Equity, beginning of the year ...... 1,626 392 --
------------ ------------ ------------
Policy Owners' Equity, end of the year ............ $ 3,837 $ 1,626 $ 392
============ ============ ============
Units Outstanding, beginning of the year .......... 137,264.427 38,707.007 --
Units Outstanding, end of the year ................ 216,064.849 137,264.427 38,707.007
Net Asset Value per Unit:
Select*Life I .................................. $ 17.448357 $ 11.712172 $ 10.097293
Select*Life Series 2000 ........................ $ 17.787065 $ 11.844211 $ 10.129526
</TABLE>
[WIDE TABLE CONTINUED FROM ABOVE]
<TABLE>
<CAPTION>
Northstar Galaxy Trust
Research Enhanced Index Portfolio
--------------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Net investment income:
Reinvested dividend income ....................... $ 36 $ 77 $ 34
Reinvested capital gains ......................... -- -- 3
Administrative expenses .......................... (15) (7) (3)
------------ ------------ ------------
Net investment income (loss) and
capital gains ................................. 21 70 34
------------ ------------ ------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemptions of
fund shares ..................................... (25) (16) 2
Increase (decrease) in unrealized appreciation
of investments .................................. 115 (56) (12)
------------ ------------ ------------
Net realized and unrealized gains (losses) ..... 90 (72) (10)
------------ ------------ ------------
Additions (reductions) from operations ......... 111 (2) 24
------------ ------------ ------------
Policy Owners' transactions:
Net premium payments ............................. 633 866 296
Transfers between funds and/or fixed account ..... (9) 58 42
Policy loans ..................................... (18) (5) (8)
Loan collateral interest crediting ............... 1 -- --
Surrenders ....................................... (17) (13) (13)
Death benefits ................................... (4) -- (1)
Cost of insurance charges ........................ (115) (86) (41)
Death benefit guarantee charges .................. (10) (3) --
Monthly expense charges .......................... (14) (12) (5)
------------ ------------ ------------
Additions (reductions) for policy
owners' transactions .......................... 447 805 270
------------ ------------ ------------
Net additions (reductions) for the year ........ 558 803 294
Policy Owners' Equity, beginning of the year ...... 1,392 589 295
------------ ------------ ------------
Policy Owners' Equity, end of the year ............ $ 1,950 $ 1,392 $ 589
============ ============ ============
Units Outstanding, beginning of the year .......... 96,571.672 41,273.079 22,576.638
Units Outstanding, end of the year ................ 128,528.216 96,571.672 41,273.079
Net Asset Value per Unit:
Select*Life I .................................. $ 10.808243 $ 10.296187 $ 10.240441
Select*Life Series 2000 ........................ $ 15.298625 $ 14.457253 $ 14.264010
</TABLE>
The accompanying notes are an integral part of the financial statements.
59
<PAGE>
RELIASTAR SELECT*LIFE VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND
CHANGES IN POLICYOWNERS' EQUITY, Continued
For the years ended December 31, 1999, 1998 and 1997
(In Thousands, Except Value Per Unit)
<TABLE>
<CAPTION>
Northstar Galaxy Trust
High Yield Bond Portfolio
--------------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Net investment income:
Reinvested dividend income ....................... $ 61 $ 24 $ 1
Reinvested capital gains ......................... -- 1 --
Administrative expenses .......................... (6) (2) --
------------ ------------ ------------
Net investment income (loss) and
capital gains ................................. 55 23 1
------------ ------------ ------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemptions of
fund shares ..................................... (4) (43) --
Increase (decrease) in unrealized appreciation
of investments .................................. (82) 11 (1)
------------ ------------ ------------
Net realized and unrealized gains (losses) ..... (86) (32) (1)
------------ ------------ ------------
Additions (reductions) from operations ......... (31) (9) --
------------ ------------ ------------
Policy Owners' transactions:
Net premium payments ............................. 325 482 52
Transfers between funds and/or fixed account ..... 7 35 9
Policy loans ..................................... (3) 2 (2)
Loan collateral interest crediting ............... -- -- --
Surrenders ....................................... (2) (1) --
Death benefits ................................... -- (5) --
Cost of insurance charges ........................ (52) (28) (2)
Death benefit guarantee charges .................. (2) (1) --
Monthly expense charges .......................... (8) (3) --
------------ ------------ ------------
Additions (reductions) for policy owners'
transactions .................................. 265 481 57
------------ ------------ ------------
Net additions (reductions) for the year .......... 234 472 57
Policy Owners' Equity, beginning of the year ...... 529 57 --
------------ ------------ ------------
Policy Owners' Equity, end of the year ............ $ 763 $ 529 $ 57
============ ============ ============
Units Outstanding, beginning of the year .......... 50,566.068 5,488.146 --
Units Outstanding, end of the year ................ 75,420.881 50,566.068 5,488.146
Net Asset Value per Unit:
Select*Life I .................................. $ 9.937790 $ 10.351379 $ 10.373728
Select*Life Series 2000 ........................ $ 10.130924 $ 10.468149 $ 10.406855
</TABLE>
[WIDE TABLE CONTINUED FROM ABOVE]
<TABLE>
<CAPTION>
OCC Accumulation Trust
Equity Portfolio
--------------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Net investment income:
Reinvested dividend income ....................... $ 13 $ 3 $ --
Reinvested capital gains ......................... 59 12 --
Administrative expenses .......................... (14) (5) --
------------ ------------ ------------
Net investment income (loss) and
capital gains ................................. 58 10 --
------------ ------------ ------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemptions of
fund shares ..................................... 19 6 1
Increase (decrease) in unrealized appreciation
of investments .................................. (54) 46 8
------------ ------------ ------------
Net realized and unrealized gains (losses) ..... (35) 52 9
------------ ------------ ------------
Additions (reductions) from operations ......... 23 62 9
------------ ------------ ------------
Policy Owners' transactions:
Net premium payments ............................. 747 822 52
Transfers between funds and/or fixed account ..... (131) 297 151
Policy loans ..................................... (4) 1 (2)
Loan collateral interest crediting ............... -- -- --
Surrenders ....................................... (12) (10) --
Death benefits ................................... (3) -- --
Cost of insurance charges ........................ (112) (59) (2)
Death benefit guarantee charges .................. (5) (1) --
Monthly expense charges .......................... (20) (9) --
------------ ------------ ------------
Additions (reductions) for policy owners'
transactions .................................. 460 1,041 199
------------ ------------ ------------
Net additions (reductions) for the year .......... 483 1,103 208
Policy Owners' Equity, beginning of the year ...... 1,311 208 --
------------ ------------ ------------
Policy Owners' Equity, end of the year ............ $ 1,794 $ 1,311 $ 208
============ ============ ============
Units Outstanding, beginning of the year .......... 109,118.612 19,312.138 --
Units Outstanding, end of the year ................ 146,392.070 109,118.612 19,312.138
Net Asset Value per Unit:
Select*Life I .................................. $ 12.099718 $ 11.895001 $ 10.719660
Select*Life Series 2000 ........................ $ 12.334780 $ 12.029100 $ 10.753858
</TABLE>
[WIDE TABLE CONTINUED FROM ABOVE]
<TABLE>
<CAPTION>
OCC Accumulation Trust
Global Portfolio
--------------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Net investment income:
Reinvested dividend income ....................... $ 16 $ 8 $ 1
Reinvested capital gains ......................... 166 28 14
Administrative expenses .......................... (9) (4) (1)
------------ ------------ ------------
Net investment income (loss) and
capital gains ................................. 173 32 14
------------ ------------ ------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemptions of
fund shares ..................................... 108 (5) (1)
Increase (decrease) in unrealized appreciation
of investments .................................. (43) 22 (29)
------------ ------------ ------------
Net realized and unrealized gains (losses) ..... 65 17 (30)
------------ ------------ ------------
Additions (reductions) from operations ......... 238 49 (16)
------------ ------------ ------------
Policy Owners' transactions:
Net premium payments ............................. 296 348 51
Transfers between funds and/or fixed account ..... 43 86 272
Policy loans ..................................... (10) (2) 1
Loan collateral interest crediting ............... -- -- --
Surrenders ....................................... (15) (7) --
Death benefits ................................... (15) -- --
Cost of insurance charges ........................ (55) (39) (5)
Death benefit guarantee charges .................. (2) (1) --
Monthly expense charges .......................... (10) (5) (1)
------------ ------------ ------------
Additions (reductions) for policy owners'
transactions .................................. 232 380 318
------------ ------------ ------------
Net additions (reductions) for the year .......... 470 429 302
Policy Owners' Equity, beginning of the year ...... 731 302 --
------------ ------------ ------------
Policy Owners' Equity, end of the year ............ $ 1,201 $ 731 $ 302
============ ============ ============
Units Outstanding, beginning of the year .......... 67,997.586 31,784.854 --
Units Outstanding, end of the year ................ 88,327.523 67,997.586 31,784.854
Net Asset Value per Unit:
Select*Life I .................................. $ 13.383356 $ 10.662721 $ 9.487891
Select*Life Series 2000 ........................ $ 13.643299 $ 10.782965 $ 9.518205
</TABLE>
[WIDE TABLE CONTINUED FROM ABOVE]
<TABLE>
<CAPTION>
OCC Accumulation Trust
Managed Portfolio
--------------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Net investment income:
Reinvested dividend income ....................... $ 84 $ 17 $ --
Reinvested capital gains ......................... 188 56 --
Administrative expenses .......................... (48) (24) (1)
------------ ------------ ------------
Net investment income (loss) and
capital gains ................................. 224 49 (1)
------------ ------------ ------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemptions of
fund shares ..................................... (23) 2 --
Increase (decrease) in unrealized appreciation
of investments .................................. 26 74 7
------------ ------------ ------------
Net realized and unrealized gains (losses) ..... 3 76 7
------------ ------------ ------------
Additions (reductions) from operations ......... 227 125 6
------------ ------------ ------------
Policy Owners' transactions:
Net premium payments ............................. 2,406 3,191 357
Transfers between funds and/or fixed account ..... (2,222) 1,487 804
Policy loans ..................................... (15) (1) (1)
Loan collateral interest crediting ............... 2 -- --
Surrenders ....................................... (84) (17) --
Death benefits ................................... (13) (76) --
Cost of insurance charges ........................ (375) (294) (16)
Death benefit guarantee charges .................. (8) (4) --
Monthly expense charges .......................... (58) (32) (1)
------------ ------------ ------------
Additions (reductions) for policy owners'
transactions .................................. (367) 4,254 1,143
------------ ------------ ------------
Net additions (reductions) for the year .......... (140) 4,379 1,149
Policy Owners' Equity, beginning of the year ...... 5,528 1,149 --
------------ ------------ ------------
Policy Owners' Equity, end of the year ............ $ 5,388 $ 5,528 $ 1,149
============ ============ ============
Units Outstanding, beginning of the year .......... 507,204.969 112,854.997 --
Units Outstanding, end of the year ................ 471,347.494 507,204.969 112,854.997
Net Asset Value per Unit:
Select*Life I .................................. $ 11.226640 $ 10.778607 $ 10.143089
Select*Life Series 2000 ........................ $ 11.444770 $ 10.900163 $ 10.175476
</TABLE>
The accompanying notes are an integral part of the financial statements.
60
<PAGE>
RELIASTAR SELECT*LIFE VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND
CHANGES IN POLICYOWNERS' EQUITY, Continued
For the years ended December 31, 1999, 1998 and 1997
(In Thousands, Except Value Per Unit)
<TABLE>
<CAPTION>
OCC Accumulation Trust
Small Cap Portfolio
--------------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Net investment income:
Reinvested dividend income ....................... $ 15 $ 3 $ --
Reinvested capital gains ......................... -- 33 --
Administrative expenses .......................... (25) (10) (1)
------------ ------------ ------------
Net investment income (loss) and
capital gains ................................. (10) 26 (1)
------------ ------------ ------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemptions of
fund shares ..................................... (62) (13) --
(Increase) decrease in unrealized appreciation
of investments .................................. 66 (151) (4)
------------ ------------ ------------
Net realized and unrealized gains (losses) ..... 4 (164) (4)
------------ ------------ ------------
Additions (reductions) from operations ......... (6) (138) (5)
------------ ------------ ------------
Policy Owners' transactions:
Net premium payments ............................. 1,581 1,525 254
Transfers between funds and/or fixed account ..... 658 340 420
Policy loans ..................................... (23) (4) --
Loan collateral interest crediting ............... 1 -- --
Surrenders ....................................... (32) (6) --
Death benefits ................................... (1) -- --
Cost of insurance charges ........................ (221) (140) (10)
Death benefit guarantee charges .................. (8) (3) --
Monthly expense charges .......................... (38) (18) (1)
------------ ------------ ------------
Additions (reductions) for policy
owners' transactions .......................... 1,917 1,694 663
------------ ------------ ------------
Net additions (reductions) for the year ........ 1,911 1,556 658
Policy Owners' Equity, beginning of the year ...... 2,214 658 --
------------ ------------ ------------
Policy Owners' Equity, end of the year ............ $ 4,125 $ 2,214 $ 658
============ ============ ============
Units Outstanding, beginning of the year .......... 237,553.351 64,284.089 --
Units Outstanding, end of the year ................ 450,944.640 237,553.351 64,284.089
Net Asset Value per Unit:
Select*Life I .................................. $ 8.981750 $ 9.223192 $ 10.220080
Select*Life Series 2000 ........................ $ 9.156366 $ 9.327299 $ 10.252721
</TABLE>
[WIDE TABLE CONTINUED FROM ABOVE]
<TABLE>
<CAPTION>
Putnam VT
Asia Pacific Growth Fund
Class IA Shares
--------------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Net investment income:
Reinvested dividend income ....................... $ -- $ 105 $ 39
Reinvested capital gains ......................... -- -- --
Administrative expenses .......................... (29) (18) (15)
------------ ------------ ------------
Net investment income (loss) and
capital gains ................................. (29) 87 24
------------ ------------ ------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemptions of
fund shares ..................................... 30 (4) 4
(Increase) decrease in unrealized appreciation
of investments .................................. 2,591 (145) (410)
------------ ------------ ------------
Net realized and unrealized gains (losses) ..... 2,621 (149) (406)
------------ ------------ ------------
Additions (reductions) from operations ......... 2,592 (62) (382)
------------ ------------ ------------
Policy Owners' transactions:
Net premium payments ............................. 303 1,150 1,417
Transfers between funds and/or fixed account ..... (810) (206) (122)
Policy loans ..................................... (40) (14) (9)
Loan collateral interest crediting ............... -- 1 --
Surrenders ....................................... (106) (51) (24)
Death benefits ................................... -- (1) (2)
Cost of insurance charges ........................ (166) (183) (194)
Death benefit guarantee charges .................. (3) (1) --
Monthly expense charges .......................... (27) (32) (34)
------------ ------------ ------------
Additions (reductions) for policy
owners' transactions .......................... (849) 663 1,032
------------ ------------ ------------
Net additions (reductions) for the year ........ 1,743 601 650
Policy Owners' Equity, beginning of the year ...... 2,859 2,258 1,608
------------ ------------ ------------
Policy Owners' Equity, end of the year ............ $ 4,602 $ 2,859 $ 2,258
============ ============ ============
Units Outstanding, beginning of the year .......... 317,373.587 236,947.013 144,086.091
Units Outstanding, end of the year ................ 246,200.626 317,373.587 236,947.013
Net Asset Value per Unit:
Select*Life I .................................. $ -- $ -- $ --
Select*Life Series 2000 ........................ 18.686981 $ 9.003039 $ 9.525464
</TABLE>
[WIDE TABLE CONTINUED FROM ABOVE]
<TABLE>
<CAPTION>
Putnam VT
Diversified Income Fund
Class IA Shares
--------------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Net investment income:
Reinvested dividend income ....................... $ 163 $ 88 $ 86
Reinvested capital gains ......................... -- 37 14
Administrative expenses .......................... (18) (18) (13)
------------ ------------ ------------
Net investment income (loss) and
capital gains ................................. 145 107 87
------------ ------------ ------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemptions of
fund shares ..................................... (78) 18 16
(Increase) decrease in unrealized appreciation
of investments .................................. (49) (182) 6
------------ ------------ ------------
Net realized and unrealized gains (losses) ..... (127) (164) 22
------------ ------------ ------------
Additions (reductions) from operations ......... 18 (57) 109
------------ ------------ ------------
Policy Owners' transactions:
Net premium payments ............................. 254 895 785
Transfers between funds and/or fixed account ..... (800) (71) (100)
Policy loans ..................................... (10) (10) (10)
Loan collateral interest crediting ............... -- 1 --
Surrenders ....................................... (58) (53) (27)
Death benefits ................................... (9) (1) (3)
Cost of insurance charges ........................ (122) (166) (130)
Death benefit guarantee charges .................. (3) (1) --
Monthly expense charges .......................... (16) (24) (21)
------------ ------------ ------------
Additions (reductions) for policy
owners' transactions .......................... (764) 570 494
------------ ------------ ------------
Net additions (reductions) for the year ........ (746) 513 603
Policy Owners' Equity, beginning of the year ...... 2,511 1,998 1,395
------------ ------------ ------------
Policy Owners' Equity, end of the year ............ $ 1,765 $ 2,511 $ 1,998
============ ============ ============
Units Outstanding, beginning of the year .......... 191,652.487 150,285.794 112,611.941
Units Outstanding, end of the year ................ 132,402.534 191,652.487 150,285.794
Net Asset Value per Unit:
Select*Life I .................................. $ 13.253124 $ 13.128436 $ 13.418177
Select*Life Series 2000 ........................ $ 13.339586 $ 13.108403 $ 13.290543
</TABLE>
[WIDE TABLE CONTINUED FROM ABOVE]
<TABLE>
<CAPTION>
Putnam VT
Growth and Income Fund
Class IA Shares
--------------------------------------------------
1999 1998 1997
-------------- -------------- --------------
<S> <C> <C> <C>
Net investment income:
Reinvested dividend income ....................... $ 492 $ 458 $ 283
Reinvested capital gains ......................... 2,457 2,991 690
Administrative expenses .......................... (331) (201) (120)
-------------- -------------- --------------
Net investment income (loss) and
capital gains ................................. 2,618 3,248 853
-------------- -------------- --------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemptions of
fund shares ..................................... 685 435 123
(Increase) decrease in unrealized appreciation
of investments .................................. (3,184) 243 2,475
-------------- -------------- --------------
Net realized and unrealized gains (losses) ..... (2,499) 678 2,598
-------------- -------------- --------------
Additions (reductions) from operations ......... 119 3,926 3,451
-------------- -------------- --------------
Policy Owners' transactions:
Net premium payments ............................. 9,574 10,650 10,331
Transfers between funds and/or fixed account ..... (1,854) (1,739) 1,033
Policy loans ..................................... (375) (145) (71)
Loan collateral interest crediting ............... 16 10 3
Surrenders ....................................... (812) (753) (288)
Death benefits ................................... (25) (129) (27)
Cost of insurance charges ........................ (2,089) (2,010) (1,524)
Death benefit guarantee charges .................. (58) (14) (4)
Monthly expense charges .......................... (340) (333) (252)
-------------- -------------- --------------
Additions (reductions) for policy
owners' transactions .......................... 4,037 5,537 9,201
-------------- -------------- --------------
Net additions (reductions) for the year ........ 4,156 9,463 12,652
Policy Owners' Equity, beginning of the year ...... 33,662 24,199 11,547
-------------- -------------- --------------
Policy Owners' Equity, end of the year ............ $ 37,818 $ 33,662 $ 24,199
============== ============== ==============
Units Outstanding, beginning of the year .......... 1,409,556.585 1,169,049.817 691,973.875
Units Outstanding, end of the year ................ 1,559,790.647 1,409,556.585 1,169,049.817
Net Asset Value per Unit:
Select*Life I .................................. $ 23.687497 $ 23.505531 $ 20.529605
Select*Life Series 2000 ........................ $ 24.291674 $ 23.912286 $ 20.717931
</TABLE>
The accompanying notes are an integral part of the financial statements.
61
<PAGE>
RELIASTAR SELECT*LIFE VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND
CHANGES IN POLICYOWNERS' EQUITY, Continued
For the years ended December 31, 1999, 1998 and 1997
(In Thousands, Except Value Per Unit)
<TABLE>
<CAPTION>
Putnam VT
New Opportunities Fund
Class IA Shares
--------------------------------------------------
1999 1998 1997
-------------- -------------- --------------
<S> <C> <C> <C>
Net investment income:
Reinvested dividend income ....................... $ -- $ -- $ --
Reinvested capital gains ......................... 490 353 --
Administrative expenses .......................... (352) (175) (92)
-------------- -------------- --------------
Net investment income (loss) and
capital gains ................................. 138 178 (92)
-------------- -------------- --------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemptions of
fund shares ..................................... 1,400 416 239
Increase (decrease) in unrealized appreciation
of investments .................................. 22,263 5,506 3,361
-------------- -------------- --------------
Net realized and unrealized gains (losses) ..... 23,663 5,922 3,600
-------------- -------------- --------------
Additions (reductions) from operations ......... 23,801 6,100 3,508
-------------- -------------- --------------
Policy Owners' transactions:
Net premium payments ............................. 10,067 11,786 11,656
Transfers between funds and/or fixed account ..... (4,660) (1,903) (862)
Policy loans ..................................... (408) (121) (100)
Loan collateral interest crediting ............... 12 4 1
Surrenders ....................................... (1,076) (683) (271)
Death benefits ................................... (34) (44) (8)
Cost of insurance charges ........................ (2,385) (2,195) (1,770)
Death benefit guarantee charges .................. (40) (5) --
Monthly expense charges .......................... (442) (412) (343)
-------------- -------------- --------------
Additions (reductions) for policy
owners' transactions .......................... 1,034 6,427 8,303
-------------- -------------- --------------
Net additions (reductions) for the year ........ 24,835 12,527 11,811
Policy Owners' Equity, beginning of the year ...... 34,451 21,924 10,113
-------------- -------------- --------------
Policy Owners' Equity, end of the year ............ $ 59,286 $ 34,451 $ 21,924
============== ============== ==============
Units Outstanding, beginning of the year .......... 1,513,397.971 1,197,940.702 681,263.859
Units Outstanding, end of the year ................ 1,537,759.325 1,513,397.971 1,197,940.702
Net Asset Value per Unit:
Select*Life I .................................. $ -- $ -- $ --
Select*Life Series 2000 ........................ $ 38.550963 $ 22.763799 $ 18.301715
</TABLE>
[WIDE TABLE CONTINUED FROM ABOVE]
<TABLE>
<CAPTION>
Putnam VT
Utilities Growth and Income Fund
Class IA Shares
--------------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Net investment income:
Reinvested dividend income ....................... $ 106 $ 87 $ 61
Reinvested capital gains ......................... 112 149 84
Administrative expenses .......................... (32) (24) (14)
------------ ------------ ------------
Net investment income (loss) and
capital gains ................................. 186 212 131
------------ ------------ ------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemptions of
fund shares ..................................... 279 149 40
Increase (decrease) in unrealized appreciation
of investments .................................. (518) 100 338
------------ ------------ ------------
Net realized and unrealized gains (losses) ..... (239) 249 378
------------ ------------ ------------
Additions (reductions) from operations ......... (53) 461 509
------------ ------------ ------------
Policy Owners' transactions:
Net premium payments ............................. 429 1,035 903
Transfers between funds and/or fixed account ..... (869) 108 50
Policy loans ..................................... (43) (34) (17)
Loan collateral interest crediting ............... 1 2 1
Surrenders ....................................... (130) (96) (24)
Death benefits ................................... (10) (4) (3)
Cost of insurance charges ........................ (214) (237) (168)
Death benefit guarantee charges .................. (7) (3) (1)
Monthly expense charges .......................... (33) (37) (26)
------------ ------------ ------------
Additions (reductions) for policy
owners' transactions .......................... (876) 734 715
------------ ------------ ------------
Net additions (reductions) for the year ........ (929) 1,195 1,224
Policy Owners' Equity, beginning of the year ...... 3,966 2,771 1,547
------------ ------------ ------------
Policy Owners' Equity, end of the year ............ $ 3,037 $ 3,966 $ 2,771
============ ============ ============
Units Outstanding, beginning of the year .......... 190,123.952 152,514.030 107,970.108
Units Outstanding, end of the year ................ 146,646.122 190,123.952 152,514.030
Net Asset Value per Unit:
Select*Life I .................................. $ 20.642919 $ 20.947449 $ 18.375382
Select*Life Series 2000 ........................ $ 20.723572 $ 20.861089 $ 18.153329
</TABLE>
[WIDE TABLE CONTINUED FROM ABOVE]
<TABLE>
<CAPTION>
Putnam VT
Voyager Fund
Class IA Shares
--------------------------------------------------
1999 1998 1997
-------------- -------------- --------------
<S> <C> <C> <C>
Net investment income:
Reinvested dividend income ....................... $ 95 $ 144 $ 68
Reinvested capital gains ......................... 7,611 3,517 1,472
Administrative expenses .......................... (863) (470) (284)
-------------- -------------- --------------
Net investment income (loss) and
capital gains ................................. 6,843 3,191 1,256
-------------- -------------- --------------
Realized and unrealized gains (losses):
Net realized gains (losses) on redemptions of
fund shares ..................................... 2,077 915 218
Increase (decrease) in unrealized appreciation
of investments .................................. 41,058 10,198 7,940
-------------- -------------- --------------
Net realized and unrealized gains (losses) ..... 43,135 11,113 8,158
-------------- -------------- --------------
Additions (reductions) from operations ......... 49,978 14,304 9,414
-------------- -------------- --------------
Policy Owners' transactions:
Net premium payments ............................. 22,760 22,816 20,897
Transfers between funds and/or fixed account ..... (2,189) (1,602) 169
Policy loans ..................................... (1,072) (428) (263)
Loan collateral interest crediting ............... 47 27 16
Surrenders ....................................... (2,679) (2,127) (969)
Death benefits ................................... (72) (170) (40)
Cost of insurance charges ........................ (5,408) (4,567) (3,626)
Death benefit guarantee charges .................. (124) (27) (12)
Monthly expense charges .......................... (947) (839) (683)
-------------- -------------- --------------
Additions (reductions) for policy
owners' transactions .......................... 10,316 13,083 15,489
-------------- -------------- --------------
Net additions (reductions) for the year ........ 60,294 27,387 24,903
Policy Owners' Equity, beginning of the year ...... 80,654 53,267 28,364
-------------- -------------- --------------
Policy Owners' Equity, end of the year ............ $ 140,948 $ 80,654 $ 53,267
============== ============== ==============
Units Outstanding, beginning of the year .......... 3,169,909.581 2,601,649.957 1,750,710.230
Units Outstanding, end of the year ................ 3,503,220.110 3,169,909.581 2,601,649.957
Net Asset Value per Unit:
Select*Life I .................................. $ 39.904396 $ 25.423734 $ 20.608071
Select*Life Series 2000 ........................ $ 40.259562 $ 25.445248 $ 20.460670
</TABLE>
The accompanying notes are an integral part of the financial statements.
62
<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. The Account is registered as a unit
investment trust under the Investment Company Act of 1940.
Payments received under the policies are allocated to sub-accounts of the
Account, each of which is invested in one of the following funds during the
year:
<TABLE>
<CAPTION>
The Alger American Fund Fidelity's VIP Fidelity's VIP II
- ----------------------------------- ------------------------------------- -------------------------------------
<S> <C> <C>
Growth Portfolio Equity-Income Portfolio -- Asset Manager Portfolio -- IC Shares
MidCap Growth Portfolio IC Shares Contrafund Portfolio -- IC Shares
Small Capitalization Portfolio Growth Portfolio -- IC Shares Index 500 Portfolio -- IC Shares
High Income Portfolio -- IC Shares Investment Grade Bond Portfolio --
Money Market Portfolio -- IC Shares IC Shares
Overseas Portfolio -- IC Shares
</TABLE>
<TABLE>
<CAPTION>
Janus Aspen Series Putnam Variable Trust
- ----------------------------------- --------------------------------------------------------------
<S> <C>
Aggressive Growth Portfolio Putnam VT Asia Pacific Growth Fund -- Class IA Shares
Growth Portfolio Putnam VT Diversified Income Fund -- Class IA Shares
International Growth Portfolio Putnam VT Growth and Income Fund -- Class IA Shares
Worldwide Growth Portfolio Putnam VT New Opportunities Fund -- Class IA Shares
Putnam VT Utilities Growth and Income Fund -- Class IA Shares
Putnam VT Voyager Fund -- Class IA Shares
</TABLE>
<TABLE>
<CAPTION>
Northstar Galaxy Trust OCC Accumulation Trust Neuberger Berman Advisers Management Trust
- ---------------------------------- ------------------------- ------------------------------------------
<S> <C> <C>
Emerging Growth Portfolio Equity Portfolio AMT Limited Maturity Bond Portfolio
Growth + Value Fund Portfolio Global Equity Portfolio AMT Partners Portfolio
International Value Portfolio Managed Portfolio AMT Socially Responsive Portfolio
Research Enhanced Index Small Capitalization
Portfolio Portfolio
High Yield Bond Portfolio
</TABLE>
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 Fund 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, Inc. is the investment manager for the three portfolios of the
Neuberger Berman Advisers Management Trust and is paid fees for its services
by the Neuberger Berman Advisers Management Trust Portfolios. Pilgrim
Advisors, Inc., an affiliate of ReliaStar Life, is the investment adviser for
the five Northstar Galaxy 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. Further information is contained in the
related funds' prospectuses.
Fidelity VIP II Contrafund Portfolio is a registered trademark of FMMR
Corporation.
On August 8, 1997, sub-accounts investing in Northstar Galaxy Trust Growth +
Value Portfolio, Northstar Galaxy Trust High Yield Bond Portfolio, Northstar
Galaxy Trust International Value Portfolio, The Alger American Fund, Janus
Aspen Series, OCC Accumulation Trust, and Neuberger Berman Advisers
Management Trust were made available to Select*Life policies.
63
<PAGE>
RELIASTAR SELECT*LIFE VARIABLE ACCOUNT
NOTES TO FINANCIAL STATEMENTS, CONTINUED
1. ORGANIZATION, CONTINUED:
On July 29, 1998, Northstar Variable Trust Portfolio changed its name to
Northstar Galaxy Trust Portfolio (GT). Also on July 29, 1998, the Northstar
Variable Trust Growth Portfolio changed its name to Northstar Galaxy Trust
Growth + Value Portfolio.
On November 9, 1998, Northstar Galaxy Trust Income and Growth Portfolio
changed its name to Northstar Galaxy Trust Emerging Growth Portfolio.
On April 8, 1999, shareholders of the Northstar Galaxy Trust Multi-Sector
Bond Portfolio approved a proposal to modify the investment objective of the
Portfolio from the objective of seeking to maximize income consistent with
the preservation of capital to the objective of seeking capital appreciation.
Also on April 8, 1999, the name of the Portfolio was changed to Northstar
Galaxy Trust Research Enhanced Index Portfolio to better reflect the
Portfolio's investment objective.
On April 30, 1999, sub-accounts investing in Neuberger Berman Advisers
Management Trust Socially Responsive Portfolio were made available to
Select*Life policies.
On April 30, 1999, Fidelity VIP Overseas Portfolio, Fidelity VIP II Asset
Manager Portfolio, Putnam VT Asia Pacific Growth Fund, Putnam VT Diversified
Income Fund and Putnam VT Utilities Growth and Income Fund were closed to new
premium and transfers.
On November 1, 1999, Northstar Investment Management Corporation changed its
name to Pilgrim Advisors, Inc. Substantially the same personnel are
performing the investment advisory services on behalf of Pilgrim Advisors,
Inc.
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:
ReliaStar Life makes certain charges to Policy Owners' Variable Accumulation
Values in the Account in accordance with the terms of the policies. These
charges are set forth in the policies and may include: cost of insurance;
monthly expense charge; death benefit guarantee charge; optional insurance
benefit charges; and surrender charges and sales charge refunds.
64
<PAGE>
RELIASTAR SELECT*LIFE VARIABLE ACCOUNT
NOTES TO FINANCIAL STATEMENTS, CONTINUED
5. INVESTMENTS:
For the year ended December 31, 1999, investment activity in the funds was as
follows (in thousands):
<TABLE>
<CAPTION>
COST OF PROCEEDS
INVESTING FUND PURCHASES FROM SALES
-------------- ----------- -----------
<S> <C> <C>
The Alger American Fund:
Alger American Growth Portfolio ............................... $ 28,569 $ 3,075
Alger American MidCap Growth Portfolio ........................ 9,951 7,863
Alger American Small Capitalization Portfolio ................. 15,351 12,828
Fidelity's VIP:
VIP Equity-Income Portfolio -- IC Shares ...................... 19,740 20,037
VIP Growth Portfolio -- IC Shares ............................. 37,372 21,222
VIP High Income Portfolio -- IC Shares ........................ 23,375 23,508
VIP Money Market Portfolio -- IC Shares ....................... 177,526 158,196
VIP Overseas Portfolio -- IC Shares ........................... 6,357 16,691
Fidelity's VIP II:
VIP II Asset Manager Portfolio -- IC Shares ................... 4,113 13,044
VIP II Contrafund Portfolio -- IC Shares . .................... 19,043 1,766
VIP II Index 500 Portfolio -- IC Shares ....................... 37,056 11,859
VIP II Investment Grade Bond Portfolio -- IC Shares ........... 3,639 1,891
Janus Aspen Series:
Aggressive Growth Portfolio ................................... 22,586 8,081
Growth Portfolio .............................................. 17,332 7,362
International Growth Portfolio ................................ 42,313 39,019
Worldwide Growth Portfolio .................................... 42,215 21,553
Neuberger Berman Advisers Management Trust:
AMT Limited Maturity Bond Portfolio ........................... 2,001 571
AMT Partners Portfolio ........................................ 3,146 4,507
AMT Socially Responsive Portfolio ............................. 49 5
Northstar Galaxy Trust:
Northstar Emerging Growth Portfolio ........................... 8,949 4,588
Northstar Growth + Value Portfolio ............................ 6,517 2,840
Northstar International Value Portfolio ....................... 21,183 19,806
Northstar Research Enhanced Index Portfolio ................... 2,153 1,685
Northstar High Yield Bond Portfolio ........................... 578 258
OCC Accumulation Trust:
Equity Portfolio .............................................. 912 386
Global Equity Portfolio ....................................... 7,373 6,968
Managed Portfolio ............................................. 2,443 2,583
Small Cap Portfolio ........................................... 7,022 5,105
Putnam Variable Trust:
Putnam VT Asia Pacific Growth Fund -- Class IA Shares ......... 5,701 6,581
Putnam VT Diversified Income Fund -- Class IA Shares .......... 311 930
Putnam VT Growth and Income Fund -- Class IA Shares ........... 10,258 3,599
Putnam VT New Opportunities Fund -- Class IA Shares ........... 12,277 11,092
Putnam VT Utilities Growth and Income Fund -- Class IA
Shares ....................................................... 1,221 1,911
Putnam VT Voyager Fund -- Class IA Shares ..................... 27,999 10,843
-------- --------
Total ......................................................... $626,631 $452,253
======== ========
</TABLE>
65
<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, 1999 and
1998, and the related statements of income, shareholder's equity and
comprehensive income, and cash flows for each of the two years in the period
ended December 31, 1999. 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, 1999 and 1998 and the
results of their operations and their cash flows for each of the two years in
the period ended December 31, 1999 in conformity with generally accepted
accounting principles.
/s/ DELOITTE & TOUCHE LLP
Minneapolis, Minnesota
February 1, 2000
66
<PAGE>
CONSOLIDATED BALANCE SHEETS
RELIASTAR LIFE INSURANCE COMPANY AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.)
<TABLE>
<CAPTION>
DECEMBER 31 (IN MILLIONS) 1999 1998
- ------------------------------------------------------------- ----------- -----------
<S> <C> <C>
ASSETS
Fixed Maturity Securities (Amortized Cost: 1999, $11,223.6;
1998, $11,106.5) .......................................... $ 11,009.3 $ 11,609.9
Equity Securities (Cost: 1999, $42.7; 1998, $48.1) ......... 42.7 49.1
Mortgage Loans on Real Estate .............................. 2,309.7 2,154.8
Real Estate and Leases ..................................... 20.6 53.3
Policy Loans ............................................... 739.9 702.3
Other Invested Assets ...................................... 88.1 113.5
Short-Term Investments ..................................... 136.0 116.0
- ------------------------------------------------------------- ----------- -----------
TOTAL INVESTMENTS .......................................... 14,346.3 14,798.9
Cash ....................................................... 33.2 --
Accounts and Notes Receivable .............................. 260.8 245.1
Reinsurance Receivable ..................................... 605.4 417.7
Deferred Policy Acquisition Costs .......................... 1,479.0 1,215.5
Present Value of Future Profits ............................ 434.6 422.5
Property and Equipment, Net ................................ 118.8 110.0
Accrued Investment Income .................................. 197.0 195.8
Other Assets ............................................... 282.0 272.0
Participation Fund Account Assets .......................... 310.9 311.6
Assets Held in Separate Accounts ........................... 6,196.7 4,310.6
- ------------------------------------------------------------- ----------- -----------
TOTAL ASSETS ............................................... $ 24,264.7 $ 22,299.7
============================================================= =========== ===========
LIABILITIES
Future Policy and Contract Benefits ........................ $ 13,671.4 $ 13,519.8
Pending Policy Claims ...................................... 584.2 431.8
Other Policyholder Funds ................................... 354.3 304.6
Notes and Mortgages Payable -- Unaffiliated ................ 8.0 8.2
Note Payable -- Parent ..................................... 100.0 100.0
Income Taxes ............................................... 117.3 225.4
Other Liabilities .......................................... 548.8 529.8
Participation Fund Account Liabilities ..................... 310.9 311.6
Liabilities Related to Separate Accounts ................... 6,191.2 4,305.1
- ------------------------------------------------------------- ----------- -----------
TOTAL LIABILITIES .......................................... 21,886.1 19,736.3
- ------------------------------------------------------------- ----------- -----------
SHAREHOLDER'S EQUITY
Common Stock (Shares Issued: 2.0) .......................... 2.5 2.5
Additional Paid-In Capital ................................. 1,057.4 1,057.4
Retained Earnings .......................................... 1,427.6 1,242.7
Accumulated Other Comprehensive Income (Loss) .............. (108.9) 260.8
- ------------------------------------------------------------- ----------- -----------
TOTAL SHAREHOLDER'S EQUITY ................................. 2,378.6 2,563.4
- ------------------------------------------------------------- ----------- -----------
TOTAL LIABILITES AND SHAREHOLDER'S EQUITY .................. $ 24,264.7 $ 22,299.7
============================================================= =========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
67
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
RELIASTAR LIFE INSURANCE COMPANY AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 (IN MILLIONS) 1999 1998
- ---------------------------------------------------------------- ---------- ----------
<S> <C> <C>
REVENUES
Premiums ...................................................... $ 1,186.6 $ 1,007.9
Net Investment Income ......................................... 1,102.4 1,109.8
Realized Investment Gains (Losses), Net ....................... (7.8) 17.3
Policy and Contract Charges ................................... 454.5 427.6
Other Income .................................................. 43.7 73.7
- ---------------------------------------------------------------- ---------- ----------
TOTAL ......................................................... 2,779.4 2,636.3
- ---------------------------------------------------------------- ---------- ----------
BENEFITS AND EXPENSES
Benefits to Policyholders ..................................... 1,712.7 1,549.4
Sales and Operating Expenses .................................. 434.3 473.9
Amortization of Deferred Policy Acquisition Costs and
Present Value of Future Profits .............................. 185.5 192.4
Interest Expense .............................................. 6.7 6.9
Dividends and Experience Refunds to Policyholders ............. 28.1 29.4
- ---------------------------------------------------------------- ---------- ----------
TOTAL ......................................................... 2,367.3 2,252.0
- ---------------------------------------------------------------- ---------- ----------
Income from Continuing Operations Before Income Taxes ......... 412.1 384.3
Income Tax Expense ............................................ 145.2 136.4
- ---------------------------------------------------------------- ---------- ----------
INCOME FROM CONTINUING OPERATIONS ............................. 266.9 247.9
Loss from Discontinued Operations, Net of Tax ................. -- (7.2)
- ---------------------------------------------------------------- ---------- ----------
NET INCOME .................................................... $ 266.9 $ 240.7
================================================================ ========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
68
<PAGE>
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY AND
COMPREHENSIVE INCOME
RELIASTAR LIFE INSURANCE COMPANY AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.)
<TABLE>
<CAPTION>
Shareholder's Equity Comprehensive Income
------------------------- ------------------------
YEAR ENDED DECEMBER 31 (IN MILLIONS) 1999 1998 1999 1998
- -------------------------------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
COMMON STOCK
Beginning and End of Year ............ $ 2.5 $ 2.5
- --------------------------------------- --------- ---------
ADDITIONAL PAID-IN CAPITAL
Beginning and End of Year ............ 1,057.4 1,057.4
- --------------------------------------- --------- ---------
RETAINED EARNINGS
Beginning of Year .................... 1,242.7 1,090.0
Net Income ........................... 266.9 240.7 $ 266.9 $ 240.7
Dividends to Shareholder ............. (82.0) (88.0)
- --------------------------------------- --------- ---------
End of Year ......................... 1,427.6 1,242.7
- --------------------------------------- --------- ---------
ACCUMULATED OTHER COMPREHENSIVE INCOME
Beginning of Year .................... 260.8 226.1
Change for the Year .................. (369.7) 34.7 (369.7) 34.7
- --------------------------------------- --------- ---------
End of Year ......................... (108.9) 260.8
- --------------------------------------- --------- ---------
COMPREHENSIVE INCOME (LOSS) .......... $ (102.8) $ 275.4
======================================= ======== ========
TOTAL SHAREHOLDER'S EQUITY ........... $ 2,378.6 $ 2,563.4
======================================= ========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
69
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
RELIASTAR LIFE INSURANCE COMPANY AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 (IN MILLIONS) 1999 1998
- --------------------------------------------------------------------------- ---------- ----------
<S> <C> <C>
OPERATING ACTIVITIES
Net Income ............................................................... $ 266.9 $ 240.7
Adjustments to Reconcile Net Income to Net
Cash Provided by (Used in) Operating Activities
Interest Credited to Insurance Contracts .............................. 564.1 586.8
Future Policy Benefits ................................................ (699.0) (685.6)
Capitalization of Policy Acquisition Costs ............................ (290.9) (258.7)
Amortization of Deferred Policy Acquisition Costs and
Present Value of Future Profits ...................................... 185.5 192.4
Deferred Income Taxes ................................................. 48.1 15.5
Net Change in Receivables and Payables ................................ 62.0 14.0
Other Assets .......................................................... (11.2) 295.4
Realized Investment (Gains) Losses, Net ............................... 7.8 (17.3)
Other ................................................................. (24.4) (20.9)
- --------------------------------------------------------------------------- ---------- ----------
Net Cash Provided by Operating Activities ............................... 108.9 362.3
- --------------------------------------------------------------------------- ---------- ----------
INVESTING ACTIVITIES
Proceeds from Sales of Fixed Maturity Securities ......................... 951.3 535.8
Proceeds from Maturities or Repayment of Fixed Maturity Securities ....... 1,374.6 1,096.6
Cost of Fixed Maturity Securities Acquired ............................... (2,438.5) (2,062.9)
Sales (Purchases) of Equity Securities, Net .............................. 5.5 (27.4)
Proceeds of Mortgage Loans Sold, Matured or Repaid ....................... 340.7 654.4
Cost of Mortgage Loans Acquired .......................................... (497.5) (539.9)
Sales of Real Estate and Leases, Net ..................................... 41.4 23.7
Policy Loans Issued, Net ................................................. (37.6) (39.0)
Sales (Purchases) of Other Invested Assets, Net .......................... (8.3) 7.1
Sales (Purchases) of Short-Term Investments, Net ......................... (20.0) 14.3
- --------------------------------------------------------------------------- ---------- ----------
Net Cash Used in Investing Activities ................................... (288.4) (337.3)
- --------------------------------------------------------------------------- ---------- ----------
FINANCING ACTIVITIES
Deposits to Insurance Contracts .......................................... 1,678.0 1,634.9
Maturities and Withdrawals from Insurance Contracts ...................... (1,383.1) (1,350.9)
Increase in Notes and Mortgages Payable .................................. -- 24.0
Repayment of Notes and Mortgages Payable ................................. (.2) (268.5)
Dividends to Shareholder ................................................. (82.0) (88.0)
- --------------------------------------------------------------------------- ---------- ----------
Net Cash Provided by (Used in) Financing Activities ..................... 212.7 (48.5)
- --------------------------------------------------------------------------- ---------- ----------
Increase (Decrease) in Cash .............................................. 33.2 (23.5)
Cash at Beginning of Year ................................................ -- 23.5
- --------------------------------------------------------------------------- ---------- ----------
Cash at End of Year ...................................................... $ 33.2 $ --
=========================================================================== ========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
70
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
RELIASTAR LIFE INSURANCE COMPANY AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.)
NOTE 1. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
ReliaStar Life Insurance Company (ReliaStar Life or 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; retirement
plans and life and health reinsurance. The Company operates primarily in the
United States and, through its subsidiaries, is authorized to conduct business
in all 50 states.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company 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), Security-Connecticut Life Insurance Company
(Security-Connecticut), ReliaStar Life Insurance Company of New York (RLNY) and
ReliaStar Reinsurance Group (UK), Ltd. Effective December 31, 1998, ReliaStar
United Services Life Insurance Company, an affiliate, merged with and into
ReliaStar Life.
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.
INVESTMENTS
Fixed maturity securities (bonds and redeemable preferred stocks) are classified
as available-for-sale and are carried at fair value.
Equity securities (common stocks and nonredeemable preferred stocks) are carried
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 on equity securities and fixed maturity
securities, 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 to the accumulated other comprehensive income (loss)
component of 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 change in the allowance
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 periodically reviews 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
71
<PAGE>
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.
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. Interest rate swaps are carried at fair value, and
changes in fair value are recorded as a direct increase or decrease in the
accumulated other comprehensive income component of shareholder's equity. In the
event an interest rate swap agreement would cease to qualify for hedge
accounting, changes in fair value of the affected swap would be recorded as
income or expense. There were no terminations of interest rate swap agreements
during 1999 and 1998.
EQUITY INDEX CALL OPTIONS
Equity index call options are tied to the performance of the S&P 500 Index and
are used for asset/liability management of equity indexed annuity products. The
Company does not purchase options for trading purposes. The notional amounts and
other characteristics of the options correspond to the characteristics of
obligations to policyholders for deposits received on equity indexed annuities.
The change in the fair value of the call options approximates the change in the
corresponding equity indexed annuity account value. The call options are carried
at fair value, and changes in fair value are recorded as income or expense,
consistent with the equity indexed annuity products.
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 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 estimated fair value of
acquired insurance business in force and represents the portion of the
acquisition cost that was allocated to the value of future cash flows from
insurance contracts existing at the date of acquisition. Such value is the
present value of the actuarially determined projected net cash flows from the
acquired insurance contracts. PVFP is amortized over the lives of the acquired
insurance business in force in a manner consistent with amortization of policy
acquisition costs.
72
<PAGE>
An analysis of the PVFP asset account is presented below:
<TABLE>
<CAPTION>
(IN MILLIONS) 1999 1998
- ------------------------------------------------------ -------- --------
<S> <C> <C>
Balance, Beginning of Year .......................... $ 422.5 $ 480.0
Acquisition ......................................... -- (7.3)
Imputed Interest .................................... 26.9 31.0
Amortization ........................................ (77.5) (90.1)
Impact of Net Unrealized Investment Losses .......... 62.7 8.9
- ------------------------------------------------------ -------- --------
BALANCE, END OF YEAR ................................ $ 434.6 $ 422.5
====================================================== ======== ========
</TABLE>
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, 1999, PVFP balance will be between 6% and 9% in each of the years 2000
through 2004. The interest rates used to determine the amount of imputed
interest on the unamortized PVFP balance ranged from 5% to 8%.
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost, net of accumulated depreciation of
$104.6 million and $100.5 million at December 31, 1999 and 1998, 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 the years ending December 31, 1999 and 1998, totaled $4.7 million
and $6.0 million, respectively.
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.
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 inure solely to the
benefit of the policies covered by the PFA and no benefit will inure to the
Company. Accordingly, results 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 represent policyholder-directed funds that are separately
administered. The assets (primarily investments) and liabilities (primarily to
contractholders) of each account are clearly identifiable and distinguishable
from other assets and liabilities of the Company. Assets are carried 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.
FUTURE POLICY AND CONTRACT BENEFITS
Liabilities for future policy benefits for traditional life 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.
73
<PAGE>
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 temporary differences in the assets
and liabilities determined on a tax return and financial statement basis.
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.
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 CONTRACT 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 to 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. Retirement plan
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 products consist of investment income and charges
assessed against contract account values for policy administration. 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.
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, 1998,
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 were 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
74
<PAGE>
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 had no effect on the financial results of the Company.
REPORTING COMPREHENSIVE INCOME
Effective January 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income." SFAS No. 130 establishes standards for the reporting and
display of comprehensive income and its components in a company's full set of
financial statements. Comprehensive income encompasses all changes in
shareholder's equity from transactions and other events and circumstances from
nonowner sources. Adoption of this standard had no effect on the financial
results of the Company.
EMPLOYERS' DISCLOSURES ABOUT PENSIONS AND OTHER POSTRETIREMENT BENEFITS
Effective December 31, 1998, the Company adopted SFAS No. 132, "Employers'
Disclosures about Pensions and Other Postretirement Benefits." SFAS No. 132
requires new disclosures relating to a company's pension and other
postretirement benefit plans. Adoption of this standard had no effect on the
financial results of the Company.
ACCOUNTING FOR THE COST OF COMPUTER SOFTWARE DEVELOPED OR OBTAINED FOR INTERNAL
USE
Effective January 1, 1998, the Company adopted Statement of Position (SOP) No.
98-1, "Accounting for the Cost of Computer Software Developed or Obtained for
Internal Use." SOP No. 98-1 provides guidance on accounting for costs associated
with computer software developed or obtained for internal use. Adoption of this
standard did not have a significant effect on the financial results of the
Company.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to current year
presentation.
NOTE 2. INVESTMENTS
FIXED MATURITY SECURITIES
The amortized cost and fair value of investments in fixed maturity securities by
type of investment were as follows:
<TABLE>
<CAPTION>
Gross Unrealized
------------------------
Amortized Fair
DECEMBER 31, 1999 (IN MILLIONS) Cost Gains (Losses) Value
- -------------------------------------------- ------------- --------- ------------ -----------
<S> <C> <C> <C> <C>
United States Government and Government
Agencies and Authorities .................. $ 85.2 $ 1.6 $ (.4) $ 86.4
States, Municipalities and Political
Subdivisions .............................. 30.8 1.0 (1.2) 30.6
Foreign Governments ........................ 69.2 .5 (1.1) 68.6
Public Utilities ........................... 599.6 12.0 (8.4) 603.2
Corporate Securities ....................... 7,109.4 65.0 (198.6) 6,975.8
Mortgage-Backed/Structured Finance ......... 3,316.9 22.5 (105.9) 3,233.5
Redeemable Preferred Stock ................. 12.5 .2 (1.5) 11.2
- --------------------------------------------- ---------- ------- -------- ----------
TOTAL ...................................... $ 11,223.6 $ 102.8 $ (317.1) $ 11,009.3
============================================= ========== ======= ======== ==========
</TABLE>
<TABLE>
<CAPTION>
Gross Unrealized
-----------------------
Amortized Fair
DECEMBER 31, 1998 (IN MILLIONS) Cost Gains (Losses) Value
- -------------------------------------------- ------------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
United States Government and Government
Agencies and Authorities .................. $ 103.6 $ 11.5 -- $ 115.1
States, Municipalities and Political
Subdivisions .............................. 49.9 4.1 -- 54.0
Foreign Governments ........................ 88.5 8.9 -- 97.4
Public Utilities ........................... 643.0 56.6 $ (.2) 699.4
Corporate Securities ....................... 7,416.0 378.3 (47.6) 7,746.7
Mortgage-Backed/Structured Finance ......... 2,793.0 99.9 (7.7) 2,885.2
Redeemable Preferred Stock ................. 12.5 .3 (.7) 12.1
- --------------------------------------------- ---------- ------- ------- ----------
TOTAL ...................................... $ 11,106.5 $ 559.6 $ (56.2) $ 11,609.9
============================================= ========== ======= ======= ==========
</TABLE>
75
<PAGE>
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>
Amortized Fair
DECEMBER 31, 1999 (IN MILLIONS) Cost Value
- -------------------------------------------------- ---------- ----------
<S> <C> <C>
Maturing in:
One Year or Less ............................... $ 416.1 $ 415.6
One to Five Years .............................. 3,456.8 3,444.6
Five to Ten Years .............................. 2,850.3 2,773.5
Ten Years or Later ............................. 1,183.5 1,142.1
Mortgage-Backed/Structured Finance .............. 3,316.9 3,233.5
- -------------------------------------------------- ---------- ----------
TOTAL ........................................... $ 11,223.6 $ 11,009.3
================================================== ========== ==========
</TABLE>
The fair values for the actively traded marketable bonds are determined based
upon the quoted market prices. 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 using 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 through consideration of factors such as the
net worth of the 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, 1999, the largest industry concentration in the private
placement portfolio was mortgage-backed/structured finance, where 16.9% of the
portfolio was invested, and the largest industry concentration in the marketable
bond portfolio was mortgage-backed/structured finance, where 34.5% of the
portfolio was invested.
EQUITY SECURITIES
The cost and fair value of investments in equity securities were as follows:
<TABLE>
<CAPTION>
DECEMBER 31 (IN MILLIONS) 1999 1998
- -------------------------------------------------------- ------- -------
<S> <C> <C>
Cost .................................................. $ 42.7 $ 48.1
Gross Unrealized Gains ................................ 2.8 2.2
Gross Unrealized Losses ............................... (2.8) (1.2)
- -------------------------------------------------------- ------- -------
FAIR VALUE ............................................ $ 42.7 $ 49.1
======================================================== ======= =======
</TABLE>
MORTGAGE LOANS ON REAL ESTATE
Investments in mortgage loans on real estate were as follows:
<TABLE>
<CAPTION>
DECEMBER 31 (IN MILLIONS) 1999 1998
- ------------------------------------------------------------------------ ---------- ----------
<S> <C> <C>
Mortgage Loans, Non-Impaired .......................................... $ 2,305.8 $ 2,152.3
Mortgage Loans, Impaired .............................................. 13.7 13.0
- ------------------------------------------------------------------------ ---------- ----------
2,319.5 2,165.3
---------- ----------
Allowance for Credit Losses, Beginning of Year ........................ (10.5) (10.5)
Increases ............................................................ -- --
Decreases ............................................................ .7 --
- ------------------------------------------------------------------------ ---------- ----------
Allowances for Credit Losses, End of Year ............................. (9.8) (10.5)
- ------------------------------------------------------------------------ ---------- ----------
TOTAL ................................................................. $ 2,309.7 $ 2,154.8
======================================================================== ========== ==========
Average Investment in Impaired Mortgage Loans on Real Estate .......... $ 2.0 $ 1.6
======================================================================== ========== ==========
</TABLE>
The Company does not accrue interest income on impaired mortgage loans when the
likelihood of collection is doubtful, rather income is recognized for these
loans as payments are received. Interest
76
<PAGE>
income recognized on impaired mortgage loans during the years ended December 31,
1999 and 1998, was $1.1 and $.9 million, respectively.
At December 31, 1999, the largest geographic concentration of commercial
mortgage loans was in the Midwest region of the United States, where
approximately 36.0% of the commercial mortgage loan portfolio was invested.
INVESTMENT INCOME
Investment income summarized by type of investment was as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 (IN MILLIONS) 1999 1998
- ----------------------------------------------------- --------- ---------
<S> <C> <C>
Fixed Maturity Securities .......................... $ 871.3 $ 866.7
Equity Securities .................................. 3.6 2.1
Mortgage Loans on Real Estate ...................... 181.2 181.6
Real Estate and Leases ............................. 9.2 21.6
Policy Loans ....................................... 42.5 41.8
Other Invested Assets .............................. 9.0 12.8
Short-Term Investments ............................. 8.7 10.9
- ----------------------------------------------------- --------- ---------
Gross Investment Income ........................... 1,125.5 1,137.5
Investment Expenses ................................ 23.1 27.7
- ----------------------------------------------------- --------- ---------
NET INVESTMENT INCOME .............................. $ 1,102.4 $ 1,109.8
===================================================== ========= =========
</TABLE>
REALIZED INVESTMENT GAINS AND LOSSES
Net pretax realized investment gains (losses) were as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 (IN MILLIONS) 1999 1998
- ------------------------------------------------------- ------- -------
<S> <C> <C>
Net Gains (Losses) on Sales
Fixed Maturity Securities
Gross Gains ....................................... $ 17.8 $ 26.3
Gross Losses ...................................... (15.2) (13.2)
Equity Securities
Gross Gains ....................................... .7 1.9
Gross Losses ...................................... (.5) (2.5)
Mortgage Loans on Real Estate ....................... .4 (0.2)
Real Estate and Leases .............................. 8.2 4.9
Other ............................................... 7.9 15.3
- ------------------------------------------------------- ------- -------
19.3 32.5
- ------------------------------------------------------- ------- -------
Provisions for Losses
Fixed Maturity Securities ........................... (13.6) (8.4)
Equity Securities ................................... -- --
Mortgage Loans on Real Estate ....................... (.1) --
Real Estate and Leases .............................. (.9) (2.4)
Other ............................................... (12.5) (4.4)
- ------------------------------------------------------- ------- -------
(27.1) (15.2)
- ------------------------------------------------------- ------- -------
PRETAX REALIZED INVESTMENT GAINS (LOSSES) ............ $ (7.8) $ 17.3
======================================================= ======= =======
</TABLE>
OTHER INVESTMENT INFORMATION
Invested assets which were nonincome producing (no income received for the 12
months preceding the balance sheet date) were as follows:
<TABLE>
<CAPTION>
DECEMBER 31 (IN MILLIONS) 1999 1998
- --------------------------------------------------------- ------ ------
<S> <C> <C>
Fixed Maturity Securities .............................. $ 4.5 $ 3.9
Mortgage Loans on Real Estate .......................... .2 1.5
Real Estate and Leases ................................. 2.9 7.1
Other Invested Assets .................................. 29.1 11.8
- --------------------------------------------------------- ------ ------
TOTAL .................................................. $ 36.7 $ 24.3
========================================================= ====== ======
</TABLE>
77
<PAGE>
Allowances for losses on investments are reflected on the Consolidated Balance
Sheets as a reduction of the related assets and were as follows:
<TABLE>
<CAPTION>
DECEMBER 31 (IN MILLIONS) 1999 1998
- ------------------------------------------------------------------------- ------ -------
<S> <C> <C>
Mortgage Loans on Real Estate .......................................... $ 9.8 $ 10.5
Real Estate and Leases ................................................. 4.7 9.0
Other Invested Assets .................................................. 8.5 6.0
- ------------------------------------------------------------------------- ------ -------
</TABLE>
Real estate assets acquired through foreclosure during the year ended December
31, 1999, totaled $1.3 million. There were none in 1998.
The components of net unrealized investment gains (losses) included in the
accumulated other comprehensive income (loss) component of shareholder's equity
are shown below:
<TABLE>
<CAPTION>
DECEMBER 31 (IN MILLIONS) 1999 1998
- ---------------------------------------------------------------------- -------- --------
<S> <C> <C>
Unrealized Investment Gains (Losses) ................................ $ (218.1) $ 529.8
DAC/PVFP Adjustment ................................................. 50.7 (128.6)
Deferred Income Taxes ............................................... 58.5 (140.4)
- ---------------------------------------------------------------------- -------- --------
TOTAL ............................................................... $ (108.9) $ 260.8
====================================================================== ======== ========
</TABLE>
The change in net unrealized investment gains and losses included in the change
in accumulated other comprehensive income (loss) consisted of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 (IN MILLIONS) 1999 1998
- ----------------------------------------------------------------------- -------- -------
<S> <C> <C>
Unrealized Investment Gains (Losses) Arising During The Period(1) .... $ (484.0) $ 36.7
Reclassification Adjustments(2) ...................................... (1.8) (8.7)
Change in DAC/PVFP Adjustment(3) ..................................... 116.1 6.7
- ----------------------------------------------------------------------- -------- -------
TOTAL ................................................................ $ (369.7) $ 34.7
======================================================================= ======== =======
</TABLE>
(1) Net of income taxes totaling $(261.2) million and $17.0 million for 1999 and
1998, respectively.
(2) Net of income taxes totaling $(1.0) million and $(4.1) million for 1999 and
1998, respectively.
(3) Net of income taxes totaling $63.3 million and $3.5 million for 1999 and
1998, respectively.
NOTE 3. NOTES AND MORTGAGES PAYABLE
A summary of notes and mortgages payable is as follows:
<TABLE>
<CAPTION>
DECEMBER 31 (IN MILLIONS) 1999 1998
- --------------------------------------------------------------------------- ------- -------
<S> <C> <C>
Unaffiliated:
Current Portion ......................................................... $ 5.8 $ .2
Noncurrent Portion ...................................................... 2.2 8.0
- --------------------------------------------------------------------------- ------- -------
TOTAL UNAFFILIATED ....................................................... $ 8.0 $ 8.2
- --------------------------------------------------------------------------- ------- -------
NOTE PAYABLE TO PARENT ................................................... $ 100.0 $ 100.0
=========================================================================== ======= =======
</TABLE>
At December 31, 1999 and 1998, unaffiliated debt consisted primarily of mortgage
notes assumed in connection with certain real estate investments with interest
rates ranging from 6.2% to 9.6%.
Principal payments required in each of the next five years and thereafter are as
follows:
(IN MILLIONS)
- ---------------------------------------------------------------------------
2000 - $ 5.8 2003 - $ .1
2001 - $ 2.0 2004 - $ --
2002 - $ .1 2005 and thereafter - $ --
- ---------------------------------------------------------------------------
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 65/8% payable semi-annually; and
(iii) in the event that
78
<PAGE>
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 unaffiliated debt was $.4 million during both 1999 and 1998.
NOTE 4. INCOME TAXES
The income tax liability reported on the Consolidated Balance Sheets consisted
of the following:
<TABLE>
<CAPTION>
DECEMBER 31 (IN MILLIONS) 1999 1998
- ------------------------------------------------------- ------- -------
<S> <C> <C>
Current Income Taxes ................................. $ 59.4 $ 18.4
Deferred Income Taxes ................................ 57.9 207.0
- ------------------------------------------------------- ------- -------
TOTAL ................................................ $ 117.3 $ 225.4
======================================================= ======= =======
</TABLE>
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:
<TABLE>
<CAPTION>
DECEMBER 31 (IN MILLIONS) 1999 1998
- --------------------------------------------------- -------- --------
<S> <C> <C>
Future Policy and Contract Benefits .............. $ (381.2) $ (368.8)
Net Unrealized Investment Losses ................. (77.6) --
Investment Write-Offs and Allowances ............. (24.5) (34.4)
Pension and Postretirement Benefit Plans ......... (8.1) (7.8)
Employee Benefits ................................ (12.4) (12.9)
Other ............................................ (25.2) (53.2)
- --------------------------------------------------- -------- --------
Gross Deferred Tax Asset ........................ (529.0) (477.1)
- --------------------------------------------------- -------- --------
Deferred Policy Acquisition Costs ................ 370.2 326.6
Present Value of Future Profits .................. 141.2 157.3
Net Unrealized Investment Gains .................. -- 119.3
Property and Equipment ........................... 25.4 24.4
Real Estate Joint Ventures ....................... 10.0 15.5
Other ............................................ 40.1 41.0
- --------------------------------------------------- -------- --------
Gross Deferred Tax Liability .................... 586.9 684.1
- --------------------------------------------------- -------- --------
NET DEFERRED TAX LIABILITY ....................... $ 57.9 $ 207.0
=================================================== ======== ========
</TABLE>
The provision for income taxes reported on the Consolidated Statements of Income
consisted of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 (IN MILLIONS) 1999 1998
- ------------------------------------------------------ ------- --------
<S> <C> <C>
Currently Payable ................................... $ 97.1 $ 120.9
Deferred ............................................ 48.1 15.5
- ------------------------------------------------------ ------- --------
TOTAL ............................................... $ 145.2 $ 136.4
====================================================== ======= ========
</TABLE>
The difference between the U.S. federal income tax rate and the consolidated
tax provision rate is summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 1999 1998
- ------------------------------------------------------- ---- ----
<S> <C> <C>
Statutory Tax Rate ................................... 35.0% 35.0%
Other ................................................ .2 .5
- ------------------------------------------------------- ---- ----
EFFECTIVE TAX RATE ................................... 35.2% 35.5%
======================================================= ==== ====
</TABLE>
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 accumulated balance
exceeds certain maximum limitations or if certain cash distributions are deemed
to be paid out of the account. At December 31, 1999, ReliaStar Life and its life
insurance subsidiaries have
79
<PAGE>
accumulated approximately $51.0 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 Internal Revenue Service has completed its review of the Company's tax
return for all years through 1995.
Cash paid for federal income taxes was $52.2 million and $123.3 million for the
years ended December 31, 1999 and 1998, respectively.
NOTE 5. EMPLOYEE BENEFIT PLANS
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 ReliaStar
performance objectives are met. Essentially all employees are eligible to
participate in the Success Sharing Plan. 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 which is contributed to the ESOP
portion of the Success Sharing Plan.
In addition, the Success Sharing Plan has a 401(k) feature whereby participants
may elect to contribute a percentage of their eligible earnings to the plan.
Beginning in 1999, the Company matched participants' 401(k) contributions up to
6% of eligible earnings.
Costs charged to expense for the Success Sharing Plan were $7.2 million and $6.6
million for the years ended December 31, 1999 and 1998, respectively.
PENSION AND OTHER POSTRETIREMENT BENEFITS
The Company has funded and unfunded noncontributory defined benefit retirement
plans which provide benefits to employees upon retirement (Pension Plans).
Effective December 31, 1998, the Company's qualified defined benefit retirement
plan was amended to suspend the accrual of additional benefits for future
services. Eligible employees retain all of their accrued benefits as of December
31, 1998, which will be paid monthly at retirement according to the provisions
of the plan. Employees meeting certain age and service requirements will receive
certain transition benefits until retirement. A curtailment gain was recorded in
1998 to reflect the impact of this plan amendment and the impact of employee
reductions resulting from the transfer of certain accident and health
administrative operations to a third party.
The Company provides certain health care and life insurance benefits to retired
employees and their eligible dependents (Other Plans). The postretirement health
care plan is contributory, with retiree contribution levels adjusted annually;
the life insurance plan provides a flat amount of noncontributory coverage and
optional contributory coverage.
Net periodic expense or benefit for ReliaStar and its subsidiaries for pension
and other plans included the following components:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 (IN MILLIONS) 1999 1998
- ------------------------------------------------------- ------- -------
PENSION PLANS
<S> <C> <C>
Service Cost ......................................... $ .3 $ 3.2
Interest Cost ........................................ 16.6 16.7
Expected Return on Plan Assets ....................... (22.0) (20.9)
Amortization of Prior Service Cost ................... .3 .8
Amortization of Transition Asset ..................... -- (.1)
Curtailment Gain ..................................... -- ( 3.7)
Settlement Loss ...................................... .3 --
Actuarial Loss ....................................... 1.5 1.6
- ------------------------------------------------------- ------- -------
NET BENEFIT .......................................... $ (3.0) $ (2.4)
======================================================= ======= =======
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 (IN MILLIONS) 1999 1998
- ----------------------------------------------------------- ------ ------
<S> <C> <C>
OTHER PLANS
Service Cost ............................................. $ .6 $ .5
Interest Cost ............................................ .9 .7
Amortization of Prior Service Cost ....................... (1.4) (1.5)
Curtailment Gain ......................................... -- (1.7)
Actuarial Gain ........................................... -- (.1)
- ----------------------------------------------------------- ------ ------
NET EXPENSE (BENEFIT) .................................... $ .1 $ (2.1)
=========================================================== ====== ======
</TABLE>
The funded status of the plans and net amounts recognized in ReliaStar's
Consolidated Balance Sheets were as follows:
<TABLE>
<CAPTION>
Pension Plans Other Plans
----------------------- --------------------
(IN MILLIONS) 1999 1998 1999 1998
- ---------------------------------------------------- -------- -------- ------- -------
<S> <C> <C> <C> <C>
Benefit Obligations at Beginning of Year .......... $ 238.7 $ 237.1 $ 10.8 $ 10.9
Service Cost ...................................... .3 3.2 .6 .5
Interest Cost ..................................... 16.6 16.7 .9 .7
Actuarial (Gain) Loss ............................. (6.6) 14.9 1.8 (.2)
Benefits Paid ..................................... (15.1) (15.4) (.8) (.4)
Plan Amendments ................................... .1 2.0 -- --
Transfers ......................................... .7 -- -- --
Termination Cost .................................. -- 1.0 -- --
Settlement ........................................ (2.2) -- -- --
Curtailment ....................................... -- (20.8) -- (.7)
- ---------------------------------------------------- -------- -------- ------- -------
Benefit Obligations at End of Year ............... 232.5 238.7 13.3 10.8
- ---------------------------------------------------- -------- -------- ------- -------
Fair Value of Plan Assets
at Beginning of Year ............................. 251.7 229.1 -- --
Actual Return on Plan Assets ...................... 109.8 36.6 -- --
Employer Contributions ............................ 3.4 1.4 .8 .4
Participant Contributions ......................... -- -- .5 .5
Settlement ........................................ (2.2) -- -- --
Benefits Paid ..................................... (15.1) (15.4) (1.3) (.9)
- ---------------------------------------------------- -------- -------- ------- -------
Fair Value of Plan Assets at End of Year ......... 347.6 251.7 -- --
- ---------------------------------------------------- -------- -------- ------- -------
Funded Status ..................................... 115.1 13.0 (13.3) (10.8)
Unrecognized Net Gain ............................. (98.2) (2.2) -- (1.8)
Unrecognized Prior Service Cost ................... 3.3 3.6 (3.3) (4.7)
- ---------------------------------------------------- -------- -------- ------- -------
NET ASSET (LIABILITY) RECOGNIZED $ 20.2 $ 14.4 $ (16.6) $ (17.3)
==================================================== ======== ======== ======= =======
</TABLE>
The components of the amounts recognized in ReliaStar's Consolidated Balance
Sheets were as follows:
<TABLE>
<CAPTION>
Pension Plans Other Plans
--------------------- ---------------------
DECEMBER 31 (IN MILLIONS) 1999 1998 1999 1998
- ------------------------------------ ------- ------- ------- -------
<S> <C> <C> <C> <C>
Prepaid Benefit Cost .............. $ 33.8 $ 28.2 -- --
Accrued Benefit Liability ......... (20.1) (19.1) $ (16.6) $ (17.3)
Intangible Asset .................. 6.5 5.3 -- --
- ------------------------------------ ------- ------- ------- -------
NET ASSET (LIABILITY) RECOGNIZED $ 20.2 $ 14.4 $ (16.6) $ (17.3)
==================================== ======= ======= ======= =======
</TABLE>
The aggregate projected benefit obligation and aggregate accumulated benefit
obligation for the unfunded pension plans were $20.1 million and $20.1 million,
respectively, as of December 31, 1999; and $19.4 million and $19.1 million,
respectively, as of December 31, 1998. As of December 31, 1999 and 1998, pension
plan assets included 1,232,982 shares of ReliaStar common stock with a fair
value of $48.3 million and $56.9 million, respectively. The benefit obligations
for the pension and other postretirement plans were determined using assumed
discount rates of 7.5% and 7.0% as of January 1, 2000 and 1999, respectively. A
weighted-average long-term rate of compensation increase of 4.5% was used for
the pension benefit obligation. The assumed long-term rate of return on pension
plan assets was 10.5% in 1999 and 1998. The assumed health care cost trend rate
for 2000 and thereafter used in measuring the
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<PAGE>
postretirement health care benefit obligation was 5.0%. The assumed health care
cost trend rate has an effect on the amounts reported. For example, a
one-percentage-point increase in the rate would increase the 1999 total service
and interest cost by $.1 million and the post retirement health care benefit
obligation by $.5 million. A one-percentage-point decrease in the rate would
decrease the 1999 total service and interest cost by $.1 million and the post
retirement health care benefit obligation by $.5 million.
The above amounts are for ReliaStar and its subsidiaries as the Company's
portion is not determinable.
STOCK INCENTIVE PLAN
Officers and key employees of the Company participate in the stock incentive
plans of ReliaStar. ReliaStar applies Accounting Principles Board Opinion No. 25
and related interpretations in accounting for its plans. Accordingly, the
Company has recorded no compensation expense for its 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 $11.1 million and $8.1
million for the years ended December 31, 1999 and 1998, respectively. The
weighted average fair value per option granted during 1999 and 1998 was $10.54
and $11.74, respectively, on the date of grant using the Black-Scholes
option-pricing model with the following assumptions: annual dividend yield
ranging from 1.6% to 1.8%, volatility factors ranging from .1881 to .2693,
risk-free interest rates ranging from 5.2% to 6.2% and an expected life of 5.0
to 5.8 years.
NOTE 6. UNPAID ACCIDENT AND HEALTH CLAIMS
The change in the liability for unpaid accident and health claims and claim
adjustment expenses is summarized as follows:
<TABLE>
<CAPTION>
(IN MILLIONS) 1999 1998
- ------------------------------------------------------ -------- --------
<S> <C> <C>
Balance at January 1 ................................ $ 480.3 $ 387.0
Less Reinsurance Recoverables ....................... 180.9 120.2
- ------------------------------------------------------ -------- --------
Net Balance at January 1 ............................ 299.4 266.8
Incurred Related to:
Current Year ....................................... 286.0 204.4
Prior Years ........................................ 20.8 8.2
- ------------------------------------------------------ -------- --------
Total Incurred ...................................... 306.8 212.6
Paid Related to:
Current Year ....................................... 113.2 84.2
Prior Years ........................................ 130.9 95.8
- ------------------------------------------------------ -------- --------
Total Paid .......................................... 244.1 180.0
Net Balance at December 31 .......................... 362.1 299.4
Plus Reinsurance Recoverables ....................... 293.4 180.9
- ------------------------------------------------------ -------- --------
BALANCE AT DECEMBER 31 .............................. $ 655.5 $ 480.3
====================================================== ======== ========
</TABLE>
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 7. SHAREHOLDER'S EQUITY
SHARE DATA
The authorized capital stock of the Company consists of 25,000,000 common shares
and 5,000,000 preferred shares, all with a par value of $1.25 per share.
2,000,000 common shares are issued and outstanding as of December 31, 1999 and
1998.
DIVIDEND RESTRICTIONS
ReliaStar Life's ability to pay cash dividends to ReliaStar is restricted by law
or subject to approval of the insurance regulatory authorities of Minnesota.
These authorities recognize only statutory accounting practices for determining
the ability of an insurer to pay dividends to its shareholders.
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<PAGE>
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 2000, the amount of dividends which can be paid by ReliaStar Life without
Commissioner approval is $208.4 million.
STATUTORY SURPLUS AND NET INCOME
Net income of ReliaStar Life and its subsidiaries, as determined in accordance
with statutory accounting practices, was $191.9 million and $153.3 million for
1999 and 1998, respectively. ReliaStar Life's statutory capital and surplus was
$1,153.7 million and $1,063.4 million at December 31, 1999 and 1998,
respectively.
NOTE 8. REINSURANCE
The Company is a member of reinsurance associations established for the purpose
of ceding the excess of life insurance over retention limits. The Reinsurance
Division of ReliaStar Life assumes and cedes reinsurance on certain life and
health risks as its primary business.
Reinsurance contracts do no 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, 1999 and 1998. 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.
ReliaStar Life's retention limit is $1,000,000 per insurable life for individual
coverage, with lower retention limits at ReliaStar Life's subsidiaries. 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, 1999, $47.9 billion of life insurance in force was ceded to
other companies. The Company had assumed $55.7 billion of life insurance in
force as of December 31, 1999. Included in these amounts are $50.9 billion of
reinsurance assumed pertaining to Federal Employees' Group Life Insurance and
Servicemans' Group Life Insurance. Also included in the above amounts are $4.8
billion of reinsurance assumed and $.9 billion of reinsurance ceded by the
Reinsurance Division of ReliaStar Life.
Premium amounts received for prospective reinsurance that meet conditions for
reinsurance accounting are recorded as unearned premium revenue and amortized
into earned premium ratably over the remaining reinsurance contract period.
The effect of reinsurance on premiums and recoveries was as follows:
YEAR ENDED DECEMBER 31 (IN MILLIONS) 1999 1998
- ------------------------------------------------------ --------- ---------
Direct Premiums ..................................... $ 838.0 $ 780.0
Reinsurance Assumed ................................. 744.1 498.8
Reinsurance Ceded ................................... (395.5) (270.9)
- ------------------------------------------------------ --------- ---------
NET PREMIUMS ........................................ $ 1,186.6 $ 1,007.9
====================================================== ========= =========
REINSURANCE RECOVERIES .............................. $ 355.2 $ 218.7
====================================================== ========= =========
NOTE 9. 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 $33.3 million and $30.7 million to ReliaStar in 1999 and
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<PAGE>
1998, 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 1999 and 1998, the Company paid
cash dividends of $82.0 million and $88.0 million, respectively, to ReliaStar.
NOTE 10. DISCONTINUED OPERATIONS AND OTHER
In December 1998, the Company completed the sale of its mortgage banking
subsidiary, ReliaStar Mortgage Corporation (RMC), for approximately $19 million
in cash. The results of RMC are presented as discontinued operations in the
Consolidated Statements of Income.
Revenues, income from operations and loss on disposal related to the former
mortgage banking subsidiary were as follows:
YEAR ENDED DECEMBER 31 (IN MILLIONS) 1999 1998
- ------------------------------------------------------------ ------ -------
Revenues ................................................... -- $ 18.9
Income from Operations ..................................... -- .1
Loss on Disposal(1) ........................................ -- (7.3)
============================================================= ====== =======
(1) Includes a $2.8 million pretax loss from operations during the phase-out
period and is net of a tax benefit of $4.3 million.
During 1998, the Company approved a plan to consolidate its five individual life
insurance and annuity service center operations into one new center. This
consolidation is expected to be substantially complete by the end of the year
2000 and affects approximately 700 positions at five separate service center
operations. Estimated costs of $24.8 million (pre-tax) were recorded primarily
for employee-related termination and non-cancelable lease contracts costs
associated with vacated facilities. The remaining liability as of December 31,
1999, was $22.4 million and reflects payments of $2.4 million made during 1999.
The 1999 transition of annuity operations to the new center was completed as
originally scheduled.
NOTE 11. COMMITMENTS AND CONTINGENCIES
LITIGATION
The Company is a defendant in a number of lawsuits arising out of the normal
course of its business. Some of the claims seek to be granted class action
status and many of the claims seek both compensatory and punitive damages. In
the opinion of management, the ultimate resolution of such litigation will not
have a material adverse impact to the financial position of the Company. It
should be noted, however, that a number of financial services companies have
been subjected to significant awards in connection with punitive damages claims
and the Company can make no assurances that it will not be subjected to such an
award.
The Company is a defendant in litigation in New York State court regarding an
alleged reinsurance contract. The plaintiff alleges damages in excess of $100
million. The Company believes that no contract exists and the suit is without
merit.
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 its liabilities (approximately $144 million at December 31,
1999) 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 (approximately $653 million at December 31, 1999) in the
event the joint obligor is unable to meet its obligations.
FINANCIAL INSTRUMENTS
The Company is a party to financial instruments with on and off-balance-sheet
risk in the normal course of business to reduce its exposure to fluctuations in
interest rates and equity prices. These financial instruments include
commitments to extend credit, financial guarantees, futures contracts, interest
rate
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<PAGE>
swaps, interest rate caps and equity indexed call options. Those instruments
involve, to varying degrees, elements of credit, interest rate, equity price, or
liquidity risk in excess of the amount recognized in the Consolidated Balance
Sheets.
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. For swaps, caps and equity
indexed call options, the Company's exposure to credit loss is limited to those
financial instruments where the Company has an unrealized gain.
Unless otherwise noted, the Company does not require collateral or other
security to support financial instruments with credit risk.
DECEMBER 31 (IN MILLIONS) 1999 1998
- ------------------------------------------------------- ------- --------
CONTRACT OR NOTIONAL AMOUNT
Financial Instruments Whose Contract
Amounts Represent Credit Risk
Commitments to Extend Credit ........................ $ 42.6 $ 101.0
Financial Guarantees ................................ 28.5 28.8
Financial Instruments Whose Notional
or Contract Amounts Exceed the Amount
of Credit Risk
Interest Rate Swap Agreements ....................... 790.5 897.5
Interest Rate Cap Agreements ........................ 510.0 510.0
Equity Indexed Call Options ......................... 55.6 28.7
- ------------------------------------------------------- ------- --------
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 six real estate joint ventures where it has
guaranteed the repayment of loans of the partnership. As of December 31, 1999,
ReliaStar Life had guaranteed repayment of $28.5 million 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 1999 and 1998 were insignificant. Further capital
contributions may be required in future periods for certain of the joint
ventures. 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 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
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<PAGE>
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. At December 31, 1999, there was no unrealized gain on the
agreements.
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 approximately $.1 million at
December 31, 1999.
EQUITY INDEXED CALL OPTIONS -- The Company holds certain call options indexed to
the performance of the S&P 500 Index as part of its asset/liability management
strategy for its equity indexed annuity products. The Company held 50 call
options with a notional amount of $55.6 million and an estimated fair value of
$19.6 million as of December 31, 1999.
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. The Company has not
entered into any new future contracts since 1997. As of December 31, 1999, the
remaining deferred gain on the closed futures contracts was approximately $17
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 $18.2 million
and $15.3 million for 1999 and 1998, respectively.
Future minimum aggregate rental commitments at December 31, 1999 for operating
leases were as follows:
(IN MILLIONS)
- --------------------------------------------------------------------------------
2000 - $ 12.0 2003 - $ 7.5
2001 - $ 11.3 2004 - $ 7.5
2002 - $ 8.8 2005 and thereafter - $ 27.1
- --------------------------------------------------------------------------------
NOTE 12. 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, 1999 and 1998, respectively. Although
Management is not aware of any factors that would significantly affect the
estimated fair value amounts, such amounts have not been comprehensively
revalued for purposes of these financial statements since those dates;
therefore, current estimates of fair value may differ significantly from the
amounts presented herein.
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<PAGE>
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 fixed
maturity securities satisfy the fair value disclosure requirements of SFAS No.
107 (see Note 2).
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 and 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 -- For 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.
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<PAGE>
The carrying amounts and estimated fair values of the Company's financial
instruments were as follows:
<TABLE>
<CAPTION>
1999 1998
------------------------------- -------------------------------
Carrying Fair Carrying Fair
DECEMBER 31 (IN MILLIONS) Amount Value Amount Value
- ------------------------------------------ -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
FINANCIAL INSTRUMENTS RECORDED AS ASSETS
Fixed Maturity Securities ............... $ 11,009.3 $ 11,009.3 $ 11,609.9 $ 11,609.9
Equity Securities ....................... 42.7 42.7 49.1 49.1
Mortgage Loans on Real Estate ...........
Commercial ............................ 1,868.5 1,854.7 1,726.8 1,841.8
Residential and Other ................. 441.2 439.7 428.0 436.7
Policy Loans ............................ 739.9 739.9 702.3 702.3
Cash and Short-Term Investments ......... 169.2 169.2 113.5 113.5
Other Financial Instruments Recorded
as Assets .............................. 493.7 493.7 460.4 460.4
FINANCIAL INSTRUMENTS RECORDED
AS LIABILITIES
Investment Contracts
Deferred Annuities .................... (7,849.0) (7,460.8) (7,784.5) (7,366.3)
GICs .................................. (79.1) (96.8) (70.3) (98.2)
Supplementary Contracts and Immediate
Annuities ............................ (395.9) (394.3) (414.8) (416.5)
Other Investment Contracts ............ (311.6) (311.6) (396.4) (396.4)
Claim and Other Deposit Funds ........... (127.1) (127.1) (154.4) (154.4)
Notes and Mortgages Payable ............. (8.0) (8.4) (7.6) (8.1)
Other Financial Instruments Recorded
as Liabilities ......................... (407.7) (407.7) (411.8) (411.8)
OFF-BALANCE SHEET FINANCIAL INSTRUMENTS
Financial Guarantees .................... -- (2.1) -- (2.1)
- ------------------------------------------- ----------- ----------- ----------- -----------
</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.
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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:
o General economic trends,
o Rates of return currently available on our investments,
o Rates of return anticipated in our investments, regulatory and tax
factors, and
o 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 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 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:
o 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.
o The Fixed Accumulation Value after the transfer must be at least equal to
the Loan Amount.
o 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.
o 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.
A-1
<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:
o Net Premiums are credited to that Sub-Account; or
o 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:
o You take out a Policy loan from that Sub-Account;
o You take a partial withdrawal from that Sub-Account;
o We take a portion of the Monthly Deduction from that Sub-Account; or
o 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 divided by 2), where:
1
Is the result of:
o 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;
o 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;
o 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.
B-1
<PAGE>
2
Is the result of:
o 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;
o 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 trading. 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 Amounts 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.
B-2
<PAGE>
APPENDIX C
MAXIMUM CONTINGENT DEFERRED SALES CHARGES
PER $1,000 OF FACE AMOUNT
<TABLE>
<CAPTION>
E
CHARGE PER $1,000 OF CHARGE PER $1,000 OF FAC
FACE AMOUNT (INITIAL FACE
AMOUNT (INITIAL FACE AMOUNT
AMOUNT OR OR
AMOUNT OF R AMOUNT OF REQUESTED
INSURED'S AGE AT POLICY INCREASE) EQUESTED INSURED'S AGE AT POLICY INCREASE)
DATE OR EFFECTIVE DATE OF ----------------------- DATE OR EFFECTIVE DATE OF ----------------------------
INCREASE, AS APPROPRIATE MALE FEMALE INCREASE, AS APPROPRIATE MALE FEMALE
- --------------------------- ---------- ---------- -------------------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
0 $ 1.00 $ 1.00 41 $ 19.60 $ 16.10
1 1.10 1.00 42 20.40 17.20
2 1.20 1.00 43 21.30 18.00
3 1.30 1.00 44 22.10 18.90
4 1.40 1.00 45 23.00 19.50
5 1.50 1.00 46 23.90 20.60
6 1.60 1.00 47 24.90 21.70
7 1.80 1.00 48 25.90 22.50
8 2.00 1.00 49 27.00 23.30
9 2.20 1.20 50 28.20 24.20
10 2.50 1.40 51 29.40 25.20
11 2.80 1.60 52 30.70 26.20
12 3.00 1.80 53 32.10 27.20
13 3.20 2.00 54 33.50 28.00
14 3.50 2.20 55 35.00 29.50
15 3.80 2.40 56 36.70 30.70
16 4.00 2.60 57 38.40 32.00
17 4.20 2.80 58 40.20 33.40
18 4.50 3.00 59 42.20 34.80
19 4.80 3.20 60 44.30 36.40
20 5.00 3.50 61 45.60 38.10
21 5.30 3.90 62 45.40 40.00
22 5.90 4.20 63 45.30 41.90
23 6.30 4.50 64 44.90 43.90
24 6.90 5.00 65 44.60 45.50
25 7.50 5.50 66 44.30 45.00
26 7.80 6.10 67 43.90 44.60
27 8.40 6.70 68 43.60 44.10
28 8.80 7.30 69 43.30 43.70
29 9.40 7.70 70 43.10 43.30
30 10.00 8.00 71 42.80 42.90
31 10.80 8.60 72 42.60 42.50
32 11.50 9.20 73 42.40 42.10
33 12.30 9.80 74 42.20 41.70
34 13.10 10.40 75 41.90 41.20
35 14.00 11.00 76 41.60 40.80
36 14.90 11.60 77 41.30 40.40
37 15.70 12.20 78 41.00 39.90
38 16.80 12.80 79 40.70 39.50
39 17.90 13.90 80 40.50 39.10
40 19.00 15.00
</TABLE>
C-1
<PAGE>
APPENDIX D
SURRENDER CHARGE GUIDELINE PER $1,000 OF FACE AMOUNT
The following table provides the Surrender Charge Guideline factors that
are used in determining the Sales Charge Refund during the first two Policy
Years or the first two years following a requested increase in Face Amount (see
section entitled "Sales Charge Refund" in Prospectus). The Surrender Charge
Guideline factors are based upon the provisions of Rule 6e-3(T) adopted by the
Securities and Exchange Commission.
<TABLE>
<CAPTION>
CHARGE PER $1,000 OF CHARGE PER $1,000 OF FACE
FACE AMOUNT (INITIAL FACE
AMOUNT (INITIAL FACE AMOUNT
AMOUNT OR OR
AMOUNT OF R AMOUNT OF REQUESTED
INSURED'S AGE AT POLICY INCREASE) EQUESTED INSURED'S AGE AT POLICY INCREASE)
DATE OR EFFECTIVE DATE OF ----------------------- DATE OR EFFECTIVE DATE OF ----------------------------
INCREASE, AS APPROPRIATE MALE FEMALE INCREASE, AS APPROPRIATE MALE FEMALE
- --------------------------- ---------- ---------- -------------------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
0 $ 5.97 $ 4.46 41 $ 37.23 $ 27.91
1 6.14 4.58 42 39.06 29.27
2 6.39 4.77 43 40.97 30.69
3 6.67 4.97 44 42.98 32.19
4 6.95 5.18 45 45.09 33.76
5 7.26 5.40 46 47.30 35.40
6 7.58 5.64 47 49.62 37.14
7 7.92 5.89 48 52.07 38.96
8 8.28 6.15 49 54.64 40.89
9 8.66 6.42 50 57.34 42.91
10 9.06 6.71 51 60.18 45.04
11 9.48 7.02 52 63.16 47.28
12 9.92 7.34 53 66.29 49.64
13 10.38 7.67 54 69.58 52.13
14 10.85 8.03 55 73.03 54.76
15 11.34 8.39 56 76.66 57.53
16 11.85 8.77 57 80.47 60.47
17 12.37 9.17 58 84.48 63.57
18 12.91 9.59 59 88.70 66.87
19 13.47 10.03 60 93.15 70.38
20 14.07 10.49 61 97.82 74.10
21 14.69 10.98 62 102.75 78.05
22 15.34 11.48 63 107.93 82.23
23 16.03 12.02 64 113.38 86.67
24 16.76 12.58 65 119.11 91.37
25 17.53 13.17 66 125.14 96.36
26 18.35 13.79 67 131.50 101.66
27 19.21 14.44 68 138.21 107.32
28 20.11 15.12 69 145.30 113.37
29 21.07 15.84 70 152.79 119.85
30 22.08 16.60 71 160.71 126.78
31 23.14 17.39 72 169.07 134.21
32 24.26 18.22 73 177.88 142.15
33 25.43 19.10 74 187.17 150.62
34 26.66 20.03 75 196.97 159.67
35 27.96 21.00 76 201.77 167.86
36 29.32 22.02 77 212.73 178.12
37 30.76 23.09 78 224.41 189.17
38 32.26 24.21 79 236.91 201.12
39 33.84 25.39 80 250.35 214.09
40 35.49 26.62
</TABLE>
D-1
<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.
II-1
<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 for
effectiveness of this Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has caused this Amendment No. 11 to Form S-6
Registration Statement to be signed on its behalf, by the duly authorized
undersigned, in the City of Minneapolis and State of Minnesota, on this 21st day
of April, 2000.
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 Amendment
No. 11 to the Registration Statement to be signed on its behalf, in the City of
Minneapolis and State of Minnesota, on this 21st day of April, 2000.
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 Amendment No. 11 to the
Registration Statement has been signed on this 21st day of April, 2000 by the
following directors and officers of Depositor in the capacities indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------------------------------------- -----------------------------------------------
<S> <C>
/S/ JOHN G. TURNER Chairman and Chief Executive Officer
-------------------------------------
John G. Turner
/S/ JAMES R. MILLER Senior Vice President, Chief Financial Officer
------------------------------------- and Treasurer
James R. Miller
</TABLE>
*Richard R. Crowl *Mark S. Jordahl *James R. Miller
*Michael J. Dubes *Kenneth U. Kuk *Robert C. Salipante
*Wayne R. Huneke *Susan W. A. Mead *John G. Turner
*Dewette Ingham, Jr. *William R. Merriam
A majority of the Board of Directors
Gregory A. Olson, 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/ GREGORY A. OLSON
----------------------------------
Gregory A. Olson, Attorney-In-Fact
II-2
<PAGE>
PART II
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The Facing Sheet.
The general form of Prospectus, consisting of 113 pages.
Undertakings to file reports.
Rule 484 Undertaking.
Representation pursuant to Section 26(e)(2)(A).
The signatures.
Written consents of the following persons:
1. Gregory A. Olson, Esquire -- Filed as part of EX-99.2.
2. Craig A. Krogstad, FSA, MAAA -- Filed as part of EX-99.C6.
3. Independent Auditors' Consent -- Filed as part of 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,
Accession Number 0000897899-96-000017, CIK 0000897899 and
incorporated herein by reference.)
(2) Not applicable.
(3) (a) General Distributor Agreement between Washington Square
Securities, Inc. and ReliaStar Life. (Filed as part of
Select*Life Variable Account S-6EL24 on 12-23-96, Accession
Number 0000897899-96-000017, CIK 0000897899 and incorporated
herein by reference.)
(3) (b) Specimens of Selling Agreements. (Filed as part of
Select*Life Variable Account S-6EL24 on 12-23-96, Accession
Number 0000897899-96-000017, CIK 0000897899 and incorporated
herein by reference.)
(4) Not applicable.
(5) (a) Form of Policy (Filed in S-6 on December 22, 1998, File
No. 333-69431 and incorporated herein and by reference)
(5) (b) Accelerated Benefit Rider (Filed in S-6 on December 22,
1998, File No. 333-69431 and incorporated herein and by
reference)
(5) (c) Children's Insurance Rider (Filed in S-6 on December 22,
1998, File No. 333-69431 and incorporated herein and by
reference)
(5) (d) Additional Insured Rider (Filed in S-6 on December 22,
1998, File No. 333-69431 and incorporated herein and by
reference)
(5) (e) Waiver of Monthly Deduction Rider (Filed in S-6 on
December 22, 1998, File No. 333-69431 and incorporated
herein and by reference)
(5) (f) Accidental Death Benefit Rider (Filed in S-6 on December
22, 1998, File No. 333-69431 and incorporated herein and by
reference)
(5) (g) Waiver of Specified Premium Rider (Filed in S-6 on
December 22, 1998, File No. 333-69431 and incorporated
herein and by reference)
(5) (h) Form of personalized illustration
II-3
<PAGE>
(6) (a) Amended Articles of Incorporation of ReliaStar Life.
(Filed as part of Select*Life Variable Account S-6EL24 on
12-23-96, Accession Number 0000897899-96-000017, CIK
0000897899 and incorporated herein by reference.)
(6) (b) Amended By-Laws of ReliaStar Life. (Filed as part of
Select*Life Variable Account S-6EL24 on 12-23-96, Accession
Number 0000897899-96-000017, CIK 0000897899 and incorporated
herein by reference.)
(7) Not applicable.
(8) (a) Participation Agreement with Fidelity's Variable
Insurance Products Fund and Fidelity Distributors
Corporation and Amendments Nos. 1-8. (Filed as part of
Select*Life Variable Account S-6EL24 on 12-23-96, Accession
Number 0000897899-96-000017, CIK 0000897899 and incorporated
herein by reference.)
(8) (b) Participation Agreement with Fidelity's Variable
Insurance Products Fund II and Fidelity Distributors
Corporation and Amendments Nos. 1-7. (Filed as part of
Select*Life Variable Account S-6EL24 on 12-23-96, Accession
Number 0000897899-96-000017, CIK 0000897899 and incorporated
herein by reference.)
(8) (c) 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 S-6EL24/A on
March 31, 1997, File No. 333-18517, and incorporated herein
by reference.)
(8) (d) Participation Agreement with Putnam Capital Manager 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) (e) 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 and by reference.)
(8) (f) 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 and by reference.)
(8) (g) 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 and by reference.)
(8) (h) Form of Service Agreement by and between ReliaStar Life
Insurance Company and Neuberger Berman Management
Incorporated. (Filed in Form S-6 on August 4, 1997, File
No. 2-95392 and incorporated herein and by reference.)
(8) (i) Form of Participation Agreement by and among ReliaStar
Life Insurance Company, Neuberger Berman Advisers Management
Trust, Advisers Managers Trust and Neuberger Berman
Management Inc. (Filed in 485BPOS on August 4, 1997, File
No. 2-95392 and incorporated herein and by reference.)
(8) (j) Form of Amendment No. 1 to Participation Agreement by
and among ReliaStar Life Insurance Company, Neuberger Berman
Advisers Management Trust, Advisers Managers Trust and
Neuberger Berman Management Inc. (Filed in Pre-effective
Amendment No. 1 on April 5, 1999, File No. 033-69431 and
incorporated herein and by reference.)
(8) (k) 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 and by reference.)
II-4
<PAGE>
(8) (l) 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 and by reference.)
Amended Exhibit to Participation Agreement (Filed in 485BPOS
on March 31, 2000, File No. 33-57244 and incorporated herein
and by reference.)
(8) (m) 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 and by reference.)
(8) (n) Form of Participation Agreement by and between ReliaStar
Life Insurance Company and A I M Advisors, Inc. (Filed in
485BPOS on March 31, 2000, File No. 33-57244 and
incorporated herein by reference.)
(8) (o) Form of Administrative Services Agreement by and between
ReliaStar Life Insurance Company and A I M Advisors, Inc.
(Filed in 485BPOS on March 31, 2000, File No. 33-57244 and
incorporated herein by reference.)
(9) Not applicable.
(10) (a) Policy Application Form.
(b) Supplement to Policy Application Form.
2. Opinion and consent of Gregory A. Olson, Esquire, as to the legality
of the Securities being registered. See EX-99.2.
3. Not applicable.
4. Not applicable.
EX-99.C1. Independent 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 the Company's issuance, transfer and
redemption procedures for the Policies (Filed in Form S-6
on May 13, 1997, File No. 333-18517 and incorporated herein
by reference.)
EX-24. Powers of Attorney. (Filed on Form N-4 on February 17,
2000, File No. 333-30614 and incorporated herein and by
reference)
Powers of Attorney.
Richard R. Crowl
Michael J. Dubes
Wayne R. Huneke
Dewette Ingham, Jr.
Mark S. Jordahl
Kenneth U. Kuk
Susan W. A. Mead
William R. Merriam
James R. Miller
Robert C. Salipante
John G. Turner
II-5
EXHIBIT 1.A(5)(h)
HYPOTHETICAL ILLUSTRATION:
The following illustration uses a hypothetical example to show the way a
Policy works. The illustration is illustrative only and is not a representation
of past or future investment rates of return. Actual investment rates of return
will be different from those shown depending on a number of factors, including:
premium and cash value allocations or transfers among the investment divisions
and the Fixed Account made by an owner; and different rates of return of the
various Fund portfolios (which could include variations due to differences in
annual rates of return, even if the rates of return averaged 0% and 12% over a
period of years). Neither we nor the Fund make any representation that the
hypothetical rates of return shown in this illustration can be achieved in any
one year or sustained over any period of time.
Upon request, we will furnish an illustration reflecting the proposed
covered person's age, sex, the specified face amount or premium amount
requested, frequency of planned periodic premium payments and any available
rider requested.
1
<PAGE>
POLICY ILLUSTRATION
VARIABLE ACCOUNT
THE PURPOSE OF THIS ILLUSTRATION IS TO SHOW HOW THE PERFORMANCE OF THE
UNDERLYING SUB-ACCOUNTS COULD AFFECT THE POLICY CASH VALUE AND DEATH BENEFIT
ASSUMING THE CURRENT POLICY COSTS CONTINUE. THIS ILLUSTRATION IS HYPOTHETICAL
AND MAY NOT BE USED TO PROJECT OR PREDICT INVESTMENT RESULTS.
PREMIUMS ARE PAID AT THE BEGINNING OF THE YEAR. THE CASH VALUE AND DEATH
BENEFIT ARE SHOWN AS OF THE END OF EACH POLICY YEAR.
PREPARED FOR:
Male 40 Nonsmoker
Initial Total Face Amount: $150,000
Initial Death Benefit Option: A (Level)
Annual Premium: $1,800.00
<TABLE>
<CAPTION>
CURRENT POLICY COSTS
--------------------------------------------------------------------------------------
0.00% GROSS HYPOTHETICAL RETURN 12.00% GROSS HYPOTHETICAL RETURN
(-1.69% NET YRS 1-10, -1.09% YRS 11+) (10.31% NET YRS 1-10, 10.91% YRS 11+)
---------------------------------------- -------------------------------------------
END END CASH CASH
OF OF YEAR PREMIUM ACCUMULATION SURRENDER DEATH ACCUMULATION SURRENDER DEATH
YEAR AGE OUTLAY VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- ------ --------- --------- -------------- ----------- --------- -------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 41 1,800 1,321 0 150,000 1,501 0 150,000
2 42 1,800 2,603 143 150,000 3,139 679 150,000
3 43 1,800 3,846 531 150,000 4,926 1,611 150,000
4 44 1,800 5,048 1,448 150,000 6,875 3,275 150,000
5 45 1,800 6,206 2,606 150,000 9,002 5,402 150,000
-----
9,000
6 46 1,800 7,320 4,080 150,000 11,322 8,082 150,000
7 47 1,800 8,390 5,510 150,000 13,857 10,977 150,000
8 48 1,800 9,413 6,893 150,000 16,626 14,106 150,000
9 49 1,800 10,388 8,228 150,000 19,653 17,493 150,000
10 50 1,800 11,311 9,511 150,000 22,963 21,163 150,000
-----
18,000
11 51 1,800 12,291 10,851 150,000 26,785 25,345 150,000
12 52 1,800 13,218 12,138 150,000 30,996 29,916 150,000
13 53 1,800 14,083 13,363 150,000 35,635 34,915 150,000
14 54 1,800 14,881 14,521 150,000 40,747 40,387 150,000
15 55 1,800 15,605 15,605 150,000 46,385 46,385 150,000
------
27,000
20 60 1,800 17,883 17,883 150,000 84,957 84,957 150,000
25 65 1,800 17,218 17,218 150,000 150,603 150,603 183,736
30 70 1,800 10,673 10,673 150,000 259,110 259,110 300,568
35 75 1,800 0 0 0 437,728 437,728 468,368
40 80 1,800 0 0 0 734,917 734,917 771,663
45 85 1,800 0 0 0 1,216,234 1,216,234 1,277,046
50 90 1,800 0 0 0 1,982,833 1,982,833 2,081,974
55 95 1,800 0 0 0 3,250,798 3,250,798 3,283,305
</TABLE>
- ------------------
*Year 34, Month 8
Based on current costs and 0% hypothetical rate of return illustrated, the
policy would lapse and cannot be illustrated. Additional premiums would be
required to continue the coverage.
2
<PAGE>
POLICY ILLUSTRATION
VARIABLE ACCOUNT
THE PURPOSE OF THIS ILLUSTRATION IS TO SHOW HOW THE PERFORMANCE OF THE
UNDERLYING SUB-ACCOUNTS COULD AFFECT THE POLICY CASH VALUE AND DEATH BENEFIT
ASSUMING THE MAXIMUM POLICY COSTS WERE CHARGED. THIS ILLUSTRATION IS
HYPOTHETICAL AND MAY NOT BE USED TO PROJECT OR PREDICT INVESTMENT RESULTS.
PREMIUMS ARE PAID AT THE BEGINNING OF THE YEAR. THE CASH VALUE AND DEATH
BENEFIT ARE SHOWN AS OF THE END OF EACH POLICY YEAR.
PREPARED FOR:
Male 40 Nonsmoker
Initial Total Face Amount: $150,000
Initial Death Benefit Option: A (Level)
Annual Premium: $1,800.00
<TABLE>
<CAPTION>
MAXIMUM GUARANTEED POLICY COSTS
--------------------------------------------------------------------------------------
0.00% GROSS HYPOTHETICAL RETURN 12.00% GROSS HYPOTHETICAL RETURN
(-1.69% NET YRS 1-10, -1.39% YRS 11+) (10.31% NET YRS 1-10, 10.61% YRS 11+)
---------------------------------------- -------------------------------------------
END END CASH CASH
OF OF YEAR PREMIUM ACCUMULATION SURRENDER DEATH ACCUMULATION SURRENDER DEATH
YEAR AGE OUTLAY VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- ------ --------- --------- -------------- ----------- --------- -------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 41 1,800 1,187 0 150,000 1,359 0 150,000
2 42 1,800 2,331 0 150,000 2,833 373 150,000
3 43 1,800 3,431 116 150,000 4,432 1,117 150,000
4 44 1,800 4,486 886 150,000 6,167 2,567 150,000
5 45 1,800 5,492 1,892 150,000 8,051 4,451 150,000
-----
9,000
6 46 1,800 6,449 3,209 150,000 10,095 6,855 150,000
7 47 1,800 7,353 4,473 150,000 12,316 9,436 150,000
8 48 1,800 8,203 5,683 150,000 14,729 12,209 150,000
9 49 1,800 8,996 6,836 150,000 17,353 15,193 150,000
10 50 1,800 9,729 7,929 150,000 20,208 18,408 150,000
----- ----- ----- ------- ------ ------ -------
18,000
11 51 1,800 10,429 8,989 150,000 23,386 21,946 150,000
12 52 1,800 11,058 9,978 150,000 26,855 25,775 150,000
13 53 1,800 11,608 10,888 150,000 30,642 29,922 150,000
14 54 1,800 12,069 11,709 150,000 34,778 34,418 150,000
15 55 1,800 12,432 12,432 150,000 39,299 39,299 150,000
------ ------ ------ ------- ------ ------ -------
27,000
20 60 1,800 12,456 12,456 150,000 69,412 69,412 150,000
25 65 1,800 8,018 8,018 150,000 119,277 119,277 150,000
30 70 1,800 0 0 0 202,720 202,720 235,155
35 75 1,800 0 0 0 337,387 337,387 361,004
40 80 1,800 0 0 0 557,609 557,609 585,489
45 85 1,800 0 0 0 904,535 904,535 949,761
50 90 1,800 0 0 0 1,435,256 1,435,256 1,507,018
55 95 1,800 0 0 0 2,292,688 2,292,688 2,315,614
</TABLE>
- ------------------
*Year 29, Month 9
Based on the maximum guaranteed costs and a 0% hypothetical rate of return
illustrated, the policy would lapse and cannot be illustrated. Additional
premiums would be required to continue the coverage.
3
<PAGE>
VALUABLE INFORMATION ABOUT YOUR ILLUSTRATION
This is an illustration, not a contract, and must be preceded or
accompanied by a current Prospectus.
This illustration does not recognize that, because of inflation, a dollar
in the future has less value than a dollar today.
The values illustrated comply with the Internal Revenue Code definition of
life insurance.
GROSS HYPOTHETICAL RETURNS. The gross hypothetical returns shown are
illustrative only and should not be deemed a representation of past or future
rates of return. No representation may be made by your agent or ReliaStar Life
Insurance Company that these hypothetical rates of return can be achieved or
sustained over any period of time. The death benefits and cash surrender values
for a policy may be different from those shown, even if the actual rates of
return averaged the hypothetical rate of return illustrated over a period of
years but fluctuated above or below that average at any time during the period.
NET ANNUAL RETURN. The net rate illustrated reflects a reduction from the
gross rate to cover ReliaStar's mortality and expense risk charge and portfolio
operating expenses. For current costs, the mortality and expense risk charge on
an annual basis is equal to 0.90% of the Variable Account assets for years one
through ten, and 0.30% thereafter. For maximum guaranteed costs, the mortality
and risk charge on an annual basis is equal to 0.90%. An average portfolio
operating expense of 0.79% is deducted from the gross return. The actual
portfolio expense deducted would vary based on the premium allocation specified.
SUB-ACCOUNT ALLOCATION. This illustration assumes that the net premiums
(after expense deductions) have been allocated to the Variable Account.
Select*Life III offers the policy owner the opportunity to select those
sub-accounts that most clearly reflect their own tolerance for risk.
Sub-accounts and their allocations are selected initially and can be changed or
transferred between the sub-accounts of the policy without creating a taxable
event. Transfers between sub-accounts can be made up to 12 times per year
without charge. We reserve the right to limit transfers to four per year and
charge up to $25.00 per transfer.
SALES CHARGE REFUND. Cash surrender value does not include the sales charge
refund. Based on current charges, the sales charge refund would be $256.31 at
the end of policy year 1 and $1,098 at the end of policy year 2. Based on
guaranteed charges, the sales charge refund would be $114.07 at the end of
policy year 1 and $1,098 at the end of policy year 2. A sales charge refund may
also apply for 24 months following any increase in face amount.
FIXED ACCOUNT. A portion of premiums and accumulation values may also be
allocated to the Fixed Account. The Fixed Account is an interest paying account
that offers a guarantee of both principal and interest at a minimum annual rate
of 4% on amounts credited to the account. ReliaStar has complete ownership and
control of all of the assets of the Fixed Account. For current interest
crediting rates on the Fixed Account, ask your Registered Representative.
MINIMUM MONTHLY PREMIUM. A minimum monthly premium of $123.83 is required
to issue the policy and is guaranteed to maintain the base policy death benefit
guarantee. This minimum premium will change if increases of decreases are made
in any of the policy benefits.
DEATH BENEFIT GUARANTEE. A death benefit guarantee is in effect for 5
policy years if issued at ages 0 to 59, or 4 policy years if issued at ages 60
to 80, provided minimum monthly premiums (net of policy loans and withdrawals)
are paid. The death benefit guarantee prevents the policy from lapsing even if
the cash surrender value is not sufficient to cover the monthly deduction due.
The death benefit guarantee, while in effect, provides for payment of the policy
death benefit regardless of portfolio performance. Please see the Prospectus for
a full explanation of this provision.
DEDUCTIONS AND CHARGES. A premium expense charge is deducted from each
premium paid. The accumulation value of the policy is subject to several
charges: a monthly administration charge, a mortality and expense risk charge,
and the cost of insurance for the base policy and any riders. Surrender charges
are applicable for the first 15 years and the first 15 years following any
requested increase in the face amount.
TAXATION. Tax laws are complex and change frequently. Changes in premium
payments from those illustrated or other changes made to the illustrated policy
after issue may result in classification as a
4
<PAGE>
Modified Endowment Contract (MEC). Distributions from a Modified Endowment
Contract, including loans, are taxable as income in the year received to the
extent that the accumulation value of the policy prior to the distribution
exceeds the total premiums paid. In addition, distributions may be subject to an
additional 10% income tax penalty if taken before age 591/2. For complete
information on how distributions from this policy may affect your personal tax
situation, always consult your professional tax advisor.
ISSUER. Select*Life III is a product of ReliaStar Life Insurance Company
located at 20 Washington Avenue South, Minneapolis, MN 55401. The general
distributor is Washington Square Securities, Inc., an affiliated company,
member NASD/SIPC, located at 20 Washington Avenue South, Minneapolis, MN 55401
(612-372-5507). Form #84-795 (may vary by state).
PREMIUM LIMITS SUMMARY.
<TABLE>
<S> <C>
Minimum First Year Annual Premium: $ 1,485.96
Initial Guideline Level Premium: $ 2,455.79
Initial Guideline Single Premium: $ 27,606.19
Initial MEC 7-pay Premium: $ 6,660.60
</TABLE>
5
<PAGE>
ILLUSTRATION SUMMARY AND DISCLOSURE
VARIABLE ACCOUNT
THIS PAGE SUMMARIES INFORMATION FROM THE PREVIOUS LEDGER PAGES AND OUTLINES
SOME IMPORTANT POLICY PROVISIONS. REVIEW THE INFORMATION PRESENTED BELOW. IF
ACCEPTABLE SIGN, DATE AND RETURN THIS ILLUSTRATION, ALONG WITH THE APPLICATION
FOR INSURANCE, TO RELIASTAR LIFE INSURANCE COMPANY.
PREPARED FOR:
Male 40 Nonsmoker
Initial Total Face Amount: $150,000
Initial Death Benefit Option: A (Level)
Annual Premium: $1,800.00
This summary is based on the premium outlay in the policy illustration. The cash
value and death benefit are shown as of the end of the year.
<TABLE>
<CAPTION>
GUARANTEED COSTS CURRENT COSTS
--------------------------- ---------------------------------------------------------
0.00% GROSS ANNUAL RETURN 0.00% GROSS ANNUAL RETURN 12.00% GROSS ANNUAL RETURN
(-1.69% NET YRS 1-10, (-1.69% NET YRS 1-10, (10.31% NET YRS 1-10,
-1.39% YRS 11+) -1.09% YRS 11+) 10.91% YRS 11+)
--------------------------- --------------------------- ---------------------------
<S> <C> <C> <C>
Year 10, Age 50
Cash Surrender Value: 7,929 9,511 21,163
Death Benefit: 150,000 150,000 150,000
Year 20, Age 60
Cash Surrender Value: 12,456 17,883 84,957
Death Benefit: 150,000 150,000 150,000
Projected age when
Death Benefit Ends: 68 73 95
</TABLE>
- ------------------
You may adjust your payment amounts, within limits, to extend or increase the
cash value and death benefit.
I UNDERSTAND THAT:
PURCHASE OF LIFE INSURANCE. I am buying a flexible premium cash value
variable life insurance policy issued by ReliaStar Life Insurance Company.
RECEIPT OF PROSPECTUS. I received the current Prospectus describing the
terms and operation of the policy and the underlying sub-accounts. I'm keeping
the Prospectus for further reference. I understand the policy has some features
comparable to and others different from a traditional life insurance policy. I
realize this Disclosure Statement highlights some, but not all, of the important
aspects of the policy and that I should examine the Prospectus prior to
purchasing a policy.
INSURANCE PROTECTION. The policy provides insurance protection until age
95, if the cash surrender value, as explained in the Prospectus, is sufficient
to pay the monthly charges. The policy remains in force during the death benefit
guarantee period, without regard to the cash surrender value, if on each monthly
anniversary as described in the policy the total premiums paid, less any partial
withdrawals or policy loans, equals or exceeds the total required premium
payments specified in the policy.
SUB-ACCOUNT ALLOCATION. I may allocate a net premium (amount remaining
after expense deductions) among one or more sub-accounts, each of which invests
in one of the available portfolios. Each portfolio has a different investment
objective, as described in the current Prospectus. In allocating net premium to
a sub-account, the investment performance of the underlying portfolios I select
will impact the policy accumulation value and may impact the death benefit.
Thus, the investment risk for those amounts is mine, and no minimum accumulation
value in any sub-account(s) is guaranteed. I may also allocate net premiums to a
Fixed Account, which the Company guarantees both as to principal and interest at
a minimum annual rate of 4.0% (the Fixed Account is not available in New
Jersey).
SELECTED PORTFOLIO. The sub-accounts I select have varying portfolio
operating expenses. Changes to the selected sub-accounts and the allocation
percentages will have an impact on the policy cash values. This illustration
assumes the average portfolio expense of all underlying portfolios is deducted.
6
<PAGE>
ILLUSTRATIONS. The illustrations in the Prospectus present hypothetical
investment results and those presented by the Company's representative will
utilize hypothetical and/or historical investment results. Neither hypothetical
nor historical investment returns are guaranteed. The values set forth are
illustrative only and are not intended to predict actual performance. They are
intended to help explain how the policy operates and are not deemed to represent
future investment results. Actual investment results may be more or less and
depend on a number of factors, as explained in the Prospectus.
CHARGES AND DEDUCTIONS. As described in the Prospectus, there are (a)
charges made against each premium payment and (b) monthly deductions against the
accumulation value for the cost of insurance, administrative charges and
mortality and expense risks assumed by the Company. If I surrender the policy or
allow it to lapse during the first 15 years after issue or an increase, a
surrender charge will be imposed.
LOANS AND WITHDRAWALS. Policy loans and partial cash withdrawals are
available, subject to certain limits and charges as explained in the Prospectus.
If, at any time, the amount of the policy loan exceeds the cash surrender value,
the grace period goes into effect and we may lapse the policy. Policy loans and
partial withdrawals may cause the death benefit guarantee to terminate.
TAX MATTERS. The Company does not provide legal or tax advice in reference
to this life insurance policy. I acknowledge that the section in the Prospectus
"Federal Tax Matters," is not intended to be a complete description of the tax
status of the policy.
- ------------------------------------------ ----------------
APPLICANT OR POLICY OWNER DATE
- ---------------- --------------------
DATE OF PROSPECTUS PROSPECTUS FORM NUMBER
- ------------------------------------------ ----------------
JOHN R. PEMBLE DATE
7
EXHIBIT 99.C1
INDEPENDENT AUDITORS' CONSENT
Board of Directors and Contract Holders
Select*Life Variable Account
We consent to the use in this Post-Effective Amendment No. 11 to Registration
Statement No. 33-65870 on Form S-6 of Select*Life Variable Account filed under
the Securities Act of 1933 of our report dated February 11, 2000 on the audit of
the financial statements of Select*Life Variable Account as of December 31, 1999
and for each of the three years in the period then ended, and our report dated
February 1, 2000 related to the consolidated financial statements of ReliaStar
Life Insurance Company and subsidiaries as of and for the years ended December
31, 1999 and 1998, appearing in the Prospectus, which is a part of such
Registration Statement, and to the reference to us under the heading "Experts"
in such Prospectus.
/S/ DELOITTE & TOUCHE LLP
Deloitte & Touche LLP
Minneapolis, MN
April 18, 2000
EXHIBIT 99.C6
ACTUARIAL OPINION AND CONSENT
April 19, 2000
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 variable life insurance policy (the
"Contract") under the Securities Act of 1933, as amended. The Contract is
described in the Prospectus constituting a part of the Registration Form S-6.
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, shown in this Post-Effective
Amendment No. 11 to the Registration Statement on Form S-6 as Exhibit
1.A.(5)(h) based on the assumptions stated in the illustrations, are
consistent with the provisions of the Contract. 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 age 40
nonsmoker Rate Class, than to prospective purchasers of the Contract for
other ages, or Rate Classes or for females. 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 an insured age
40 than to prospective purchasers of the Contract for other ages or Rate
Classes.
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
Assistant Vice President and Actuary
EXHIBIT 99.2
ATTORNEY OPINION AND CONSENT
April 19, 2000
ReliaStar Life Insurance Company
20 Washington Avenue South
Minneapolis, MN 55440
Madam/Sir:
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 Section 61A.13 to 61A.21, as amended,
and the Registration Statement, on Amendment No. 11 to Form S-6, File No.
33-65870 (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.
4. Amendment No. 11 does not contain disclosures that would render it
ineligible to become effective under Rule 485(b) of the Securities Act of
1933.
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,
/S/ GREGORY A. OLSON
Gregory A. Olson
Associate Counsel
