AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 14, 2000
REGISTRATION NO. 333-69431
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-6
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
-----------------
SELECT*LIFE VARIABLE ACCOUNT
(Exact Name of Unit Investment Trust)
RELIASTAR LIFE INSURANCE COMPANY
(Name of Depositor)
James M. Odland
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.
<PAGE>
SELECT*LIFE VARIABLE ACCOUNT
CROSS REFERENCE SHEET
(RECONCILIATION AND TIE SHEET)
ITEM NUMBER OF
FORM N-8B-2 HEADING IN THE PROSPECTUS
- --------------- --------------------------------------------------
1 Cover Page
2 Cover Page
3 Not Applicable
4 Distribution of the Policies
5 ReliaStar Life Insurance
Company 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; 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 A; 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
i
<PAGE>
ITEM NUMBER OF
FORM N-8B-2 HEADING IN THE PROSPECTUS
- --------------- -------------------------------------------------
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
ii
<PAGE>
ITEM NUMBER OF
FORM N-8B-2 HEADING IN THE PROSPECTUS
- --------------- -------------------------------------------------
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
iii
<PAGE>
[LOGO]RELIASTAR
20 Washington Avenue South
Minneapolis, Minnesota 55401
---------------------------
FLEXDESIGN(R) VUL
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 described in this prospectus. ReliaStar designed the
Policy to provide (1) a death benefit payable when the insured person dies; 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 Pilgrim Variable Products Trust
Fidelity Variable Insurance Products Fund OCC Accumulation 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. The
current prospectuses for 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................................................... 12
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
Monthly Deduction........................................................ 14
Cost of Insurance....................................................... 15
Monthly Administrative Charge........................................... 15
Monthly Amount Charge................................................... 15
Monthly Mortality and Expense Risk Charge............................... 15
Optional Insurance Benefit Charges...................................... 16
Surrender Charge......................................................... 16
General................................................................. 16
Montana Residents....................................................... 16
Partial Withdrawal and Transfer Charges.................................. 17
Modification of Charges.................................................. 17
Investment Advisory Fees and Other Fund Expenses......................... 17
Fund Expenses (Before Reimbursements).................................... 18
The Variable Account..................................................... 19
Investments of the Variable Account...................................... 19
Performance Information.................................................. 20
Death Benefit............................................................ 20
Death Benefit Qualification Tests........................................ 20
Guideline Premium Test.................................................. 21
Cash Value Accumulation Test............................................ 21
Which Death Benefit Qualification Test to Choose......................... 21
Death Benefit Options.................................................... 21
Level Amount Option..................................................... 21
Variable Amount Option.................................................. 22
Face Amount Plus Premium Amount Option.................................. 22
Which Death Benefit Option to Choose..................................... 22
Requested Changes in Face Amount......................................... 22
Increases............................................................... 22
Decreases............................................................... 22
2
<PAGE>
Effect of Requested Changes in Face Amount.............................. 23
Insurance Protection..................................................... 23
Changing the Death Benefit Option........................................ 24
Accelerated Benefit Rider................................................ 24
Payment and Allocation of Premiums....................................... 25
Issuing the Policy....................................................... 25
Coverage................................................................ 25
Minimum Initial Premium................................................. 25
Temporary Insurance..................................................... 25
Allocating Premiums...................................................... 26
Crediting Net Premiums.................................................. 26
Refunding Premiums...................................................... 26
Amount and Timing of Premiums............................................ 26
Planned Periodic Premiums................................................ 27
Paying Premiums by Mail.................................................. 27
Death Benefit Guarantee.................................................. 27
Requirements for the Death Benefit Guarantee............................. 28
Accumulation Value....................................................... 28
Illustration of Policy Benefits.......................................... 29
Specialized Uses of the Policy........................................... 29
Policy Lapse and Reinstatement........................................... 30
Lapse................................................................... 30
Reinstatement........................................................... 30
Surrender Benefits....................................................... 30
Total Surrender.......................................................... 30
Partial Withdrawal....................................................... 30
Effect of Partial Withdrawals........................................... 31
Transfers................................................................ 31
Telephone/Fax Instructions.............................................. 32
Dollar Cost Averaging Service........................................... 32
Portfolio Rebalancing Service........................................... 32
Transfer Limits......................................................... 33
Transfer Charges........................................................ 33
Policy Loans............................................................. 33
General................................................................. 33
Immediate Effect of Policy Loans........................................ 34
Effect on Investment Performance........................................ 34
Effect on Policy Coverage............................................... 34
Interest................................................................ 34
Repayment of Loan Amount................................................ 35
Tax Considerations...................................................... 35
1035 Exchanges.......................................................... 35
Free Look and Conversion Rights.......................................... 35
Free Look Rights........................................................ 35
Conversion Rights....................................................... 35
General Option......................................................... 35
Connecticut............................................................ 36
Additional Information on the Investments of the Variable Account........ 36
Investment Limits........................................................ 36
Addition, Deletion, or Substitution of Investments....................... 37
Voting Rights............................................................ 37
Disregarding Voting Instructions........................................ 38
Paid-up Life Insurance Option............................................ 38
General Provisions....................................................... 38
Ownership................................................................ 38
Proceeds................................................................. 38
Beneficiary.............................................................. 39
Postponement of Payments................................................. 39
3
<PAGE>
Settlement Options....................................................... 39
Interest on Settlement Options.......................................... 39
Incontestability......................................................... 40
Misstatement of Age and Sex.............................................. 40
Suicide.................................................................. 40
Termination.............................................................. 40
Amendment................................................................ 40
Reports.................................................................. 40
Annual Statement........................................................ 40
Projection Report....................................................... 40
Other Reports........................................................... 41
Dividends................................................................ 41
Collateral Assignment.................................................... 41
Optional Insurance Benefits.............................................. 41
Accelerated Benefit Rider............................................... 41
Accidental Death Benefit Rider.......................................... 41
Additional Insured Rider................................................ 41
Waiver of Monthly Deduction Rider....................................... 41
Children's Insurance Rider.............................................. 41
Cost of Living Increase Rider........................................... 41
Extended Death Benefit Guarantee Rider.................................. 41
Term Insurance Rider.................................................... 41
Waiver of Specified Premium Rider....................................... 42
Federal Tax Matters...................................................... 42
Introduction............................................................. 42
Tax Status of the Policy................................................. 42
Tax Treatment of Policy Benefits......................................... 42
In General.............................................................. 42
Modified Endowment Contracts............................................ 43
Distributions from Modified Endowment Contracts......................... 43
Distributions from Policies That Are Not Modified Endowment Contracts... 43
Policy Loans............................................................ 43
Multiple Policies....................................................... 43
Taxation of ReliaStar Life Insurance Company............................. 43
Possible Changes in Taxation............................................. 44
Other Considerations..................................................... 44
Legal Developments Regarding Employment-Related Benefit Plans............ 44
Distribution of the Policies............................................. 44
Management............................................................... 45
Directors and Officers................................................... 45
State Regulation......................................................... 48
Montana Residents........................................................ 48
Legal Proceedings........................................................ 48
Bonding Arrangements..................................................... 48
Legal Matters............................................................ 48
Experts.................................................................. 49
Registration Statement Contains Further Information...................... 49
Financial Statements..................................................... 49
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
28, 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 20.
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 27.
DEATH BENEFIT OPTION. One of three death benefit options available under the
Policy (the Level Amount Option, the Variable Amount Option, and the Face
Amount Plus Premium Amount Option). See "Death Benefit -- Death Benefit
Options" at page 21.
FACE AMOUNT. The minimum Death Benefit under the Policy as long as the Policy
remains in force except for Option C when withdrawals exceed premiums. See
"Death Benefit" at page 20.
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 28 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 "Investments of the Variable Account" at page
19.
INITIAL PREMIUM TRANSFER DATE. The Initial Premium Transfer Date shown on the
Policy Data Page. It is generally 16 days after the print date of the
Policy or if later the date we receive from you final material required to
put the Policy in force. This may vary by state.
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 33.
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 27.
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 14.
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 27.
POLICY. FlexDesign(R) VUL, 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 (currently 5%) 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 10 Policy Years and the first 10 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 A.
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 A.
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 28 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
FlexDesign(R) VUL 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 FLEXDESIGN(R) VUL WORKS
[FLOW CHART]
PREMIUM PAYMENTS
MINUS
PREMIUM EXPENSE CHARGES
Invested in Variable Sub-Accounts
or Fixed Account
Variable Sub-Accounts Fixed Account
AIM Fidelity(R) Neuberger Berman Pilgrim
Alger Janus OpCap Putnam
PLUS
INVESTMENT RETURN
(Net of Fund Expenses)
MINUS
MONTHLY DEDUCTIONS
* Monthly Amount Charge * Cost of Insurance
* Monthly Administrative Charge * Optional Benefit Charges
* Mortality and Expense Risk Charge
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 midnight of the
10th day after you receive it, 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 require 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 100
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 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) 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
(Select*Life Variable separate accounts and consists of several
Account) Sub-Accounts. We only 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 3% per year on any
amounts you allocate to the Fixed Account.
o We may, in our sole discretion, credit interest in
excess of 3%. 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.
o We will first place the portion of the initial
allocation of your Net Premium directed to the
Variable Account in the Fidelity VIP Money Market
Sub-Account and this will count against the 17
investment portfolio limit. See "Allocating
Premiums".
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 Trends Fund H.S. Dent Advisors, Inc.
Funds
Houston, TX
=================== ================== ========================== ============== ============== =================
Alger Alger American Fred Alger
American Growth Management, Inc.
Portfolio
------------------ -------------------------- -------------- -------------- -----------------
Alger American Fred Alger
Leveraged Management, Inc.
All Cap Portfolio
------------------ -------------------------- -------------- -------------- -----------------
New York, N.Y. Alger American Fred Alger
MidCap Management, Inc.
Growth
Portfolio
------------------ -------------------------- -------------- -------------- -----------------
Alger American Fred Alger
Small Management, Inc.
Capitalization
Portfolio
=================== ================== ========================== ============== ============== =================
Fidelity VIP Fidelity Management
Investments(R) Equity-Income & Research Company
Portfolio - X
Initial Class
------------------ -------------------------- -------------- -------------- -----------------
VIP Growth Fidelity Management
Portfolio - & Research Company
Initial Class
------------------ -------------------------- -------------- -------------- -----------------
Boston, Mass. VIP Fidelity Management
High Income & Research Company
Portfolio - X
Initial Class
------------------ -------------------------- -------------- -------------- -----------------
VIP Fidelity Management
Money Market & Research Company
Portfolio - X
Initial Class
------------------ -------------------------- -------------- -------------- -----------------
VIP II Fidelity Management
Contrafund(R) & Research Company
Portfolio -
Initial Class
------------------ -------------------------- -------------- -------------- -----------------
VIP II Fidelity Management
Fidelity Index 500 & Research Company
Investments(R) Portfolio - X
Initial Class
------------------ -------------------------- -------------- -------------- -----------------
is a registered VIP II Fidelity Management
trademark of Investment & Research Company
FMR Corp. Grade Bond X
Portfolio -
Initial Class
=================== ================== ========================== ============== ============== =================
[WIDE TABLE CONTINUED FROM ABOVE]
<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 of capital that are likely to benefit
Insurance X from changing
Funds demographic, economic
and lifestyle trends
Houston, TX
=================== =============== ========== ======== ================== ========================== ===========================
Alger Long-term capital Equity securities of
American X appreciation large companies
--------------- ---------- -------- ------------------ -------------------------- ---------------------------
Long-term capital Equity securities of
X appreciation companies of any size
--------------- ---------- -------- ------------------ -------------------------- ---------------------------
New York, N.Y. Long-term capital Equity securities
appreciation within the range of
X S&P(R) MidCap 400
Index
--------------- ---------- -------- ------------------ -------------------------- ---------------------------
Long-term capital Equity securities
appreciation within the range of
X Russell(R) 2000 Growth
and S&P(R) SmallCap 600
Indexes
=================== =============== ========== ======== ================== ========================== ===========================
Fidelity Reasonable income; Income-producing
Investments(R) also considers potential equity securities and
for capital appreciation debt obligations
--------------- ---------- -------- ------------------ -------------------------- ---------------------------
X Capital appreciation Common stocks
--------------- ---------- -------- ------------------ -------------------------- ---------------------------
Boston, Mass. 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 capital securities
and liquidity
--------------- ---------- -------- ------------------ -------------------------- ---------------------------
Capital appreciation Securities of
companies whose
value the adviser
X 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
Aggressive Capital
Denver, Co. 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
Berman Management Management/
Trust Limited Neuberger Berman, X
Maturity Bond LLC
Portfolio
------------------ ------------------- -------------- -------------- -----------------
New York, N.Y. Advisers Neuberger Berman
Management Management/
Trust Partners Neuberger Berman,
Portfolio LLC
------------------ ------------------- -------------- -------------- -----------------
Advisers Neuberger Berman
Management Management/
Trust Socially Neuberger Berman,
Responsive LLC
Portfolio
================= ================== =================== ============== ============== =================
OCC OCC Accumulation OpCap
Trust Equity Advisors
New York, N.Y. Portfolio
------------------ ------------------- -------------- -------------- -----------------
OCC Accumulation OpCap
Trust Global Advisors
Equity Portfolio
------------------ ------------------- -------------- -------------- -----------------
OCC Accumulation OpCap
Trust Managed Advisors
Portfolio
------------------ ------------------- -------------- -------------- -----------------
OCC Accumulation OpCap
Trust Small Advisors
Cap Portfolio
================= ================== =================== ============== ============== =================
[WIDE TABLE CONTINUED FROM ABOVE]
<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
capital of common stocks
--------------- ---------- -------- ------------------ ----------------------- -------------------------
Denver, Co. Long-term capital Diversified common
X growth stocks
--------------- ---------- -------- ------------------ ----------------------- -------------------------
X Long-term capital Foreign issuers of
growth common stocks
--------------- ---------- -------- ------------------ ----------------------- -------------------------
X Long-term capital Foreign and domestic
growth common stocks
================= =============== ========== ======== ================== ======================= =========================
Neuberger High current income Short to
Berman consistent with low intermediate term
risk to principal and investment-grade debt
liquidity and securities
secondarily total
return
--------------- ---------- -------- ------------------ ----------------------- -------------------------
New York, N.Y. Capital growth Common stocks of
medium- and large-
X capitalization
companies
--------------- ---------- -------- ------------------ ----------------------- -------------------------
Long-term Common stocks of
X capital growth companies that meet
both financial and
social criteria
================= =============== ========== ======== ================== ======================= =========================
OCC Long-term capital Securities of
X appreciation undervalued
New York, N.Y. companies
--------------- ---------- -------- ------------------ ----------------------- -------------------------
Long-term capital Global investments in
X appreciation equity securities
--------------- ---------- -------- ------------------ ----------------------- -------------------------
Growth of capital Common stocks,
X bonds and cash
equivalents
--------------- ---------- -------- ------------------ ----------------------- -------------------------
Capital appreciation Equity securities of
X 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
High Yield Investments, Inc. X
Portfolio
----------------- ---------------------- -------------- -------------- -----------------
Pilgrim VP Pilgrim Investments,
International Inc./Brandes
Value Portfolio Investment
Partners, L.P.
----------------- ---------------------- -------------- -------------- -----------------
Pilgrim VP Pilgrim
MagnaCap Investments, Inc. X
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
Investments, Inc. VT Growth and Management, Inc.
Income Fund -- X
Class IA Shares
----------------- ---------------------- -------------- -------------- -----------------
Boston, Mass. Putnam Putnam Investment
VT New Management, Inc.
Opportunities
Fund -- Class
IA Shares
----------------- ---------------------- -------------- -------------- -----------------
Putnam Putnam Investment
VT Voyager Management, Inc.
Fund -- Class
IA Shares
==================== ================= ====================== ============== ============== =================
[WIDE TABLE CONTINUED FROM ABOVE]
<CAPTION>
PRIMARY
FUND GROUP INTERNATIONAL BALANCED GROWTH AGGRESSIVE GROWTH OBJECTIVE(S) INVESTMENTS
==================== =============== ========== ======== ================== ======================== =======================
<S> <C> <C> <C> <C> <C> <C>
Pilgrim Long-term capital Common stocks of
X growth large cap, mid cap or
Phoenix, AZ small cap companies
--------------- ---------- -------- ------------------ ------------------------ -----------------------
Capital appreciation Equity securities
from investing in a
X diversified portfolio
of equity securities
--------------- ---------- -------- ------------------ ------------------------ -----------------------
High current yield and High-yield bonds
capital appreciation
--------------- ---------- -------- ------------------ ------------------------ -----------------------
Long-term capital International equities
X appreciation
--------------- ---------- -------- ------------------ ------------------------ -----------------------
Capital growth Common stocks
--------------- ---------- -------- ------------------ ------------------------ -----------------------
Long-term capital Common stocks of
X appreciation mid-sized
U.S. companies
--------------- ---------- -------- ------------------ ------------------------ -----------------------
X Long-term capital Common stocks
appreciation
--------------- ---------- -------- ------------------ ------------------------ -----------------------
X Long-term capital Common stocks
appreciation
==================== =============== ========== ======== ================== ======================== =======================
Putnam Capital growth & Value stocks
Investments, Inc. current income
--------------- ---------- -------- ------------------ ------------------------ -----------------------
Boston, Mass. Long-term capital Growth stocks
X appreciation
--------------- ---------- -------- ------------------ ------------------------ -----------------------
X Capital appreciation Growth stocks
==================== =============== ========== ======== ================== ======================== =======================
</TABLE>
For each Fund's expenses, see page 18 of this Prospectus and the
Prospectuses for the Funds.
CHARGES AGAINST THE ACCUMULATION VALUE
The Accumulation Value of the Policy is subject to the Monthly Deduction
charges. Except for the Monthly Mortality and Expense Risk Charge, 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. We will deduct the Monthly Mortality
and Expense Risk Charge on a proportionate basis from each Sub-Account of the
Variable Account depending on their relationship to the Variable Accumulation
Value 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, 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 .35% of the Variable Accumulation Value and guaranteed not to
exceed 1/12 of .60% of the Variable Accumulation Value.
o Monthly Amount Charge -- a monthly charge that varies by the Insured's
Issue Age, Sex and Face Amount and is assessed during the first 10
Policy Years (and first 10 years after a Face Amount increase). The
maximum amount of this charge is $3.333 per $1,000 of Face Amount for
a male Issue Age 85.
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 10 Policy Years (or during the first 10
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 10-year period. 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, 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 90% 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 4.762%.
o After the 10th Policy Year, we currently charge
interest at an annual rate of 2.913% (guaranteed
not to exceed 3.382%) 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 12 transfers per 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 any
transfer. See "Transfers".
DEATH BENEFIT OVERVIEW
You may choose one of two Death Benefit Qualification Tests for compliance
with Code Section 7702's definition of "life insurance": (1) the Guideline
Premium Test; and (2) the Cash Value Accumulation Test.
12
<PAGE>
You also can choose one of three Death Benefit Options:
o Level Amount Option -- whereby the Death Benefit until Age 100 is
the greater of the Face Amount or the corridor percentage of
Accumulation Value;
o Variable Amount Option -- whereby the Death Benefit until Age 100
is equal to the greater of the Face Amount plus the Accumulation
Value, or the corridor percentage of Accumulation Value; or
o Face Plus Premium Amount Option -- whereby the Death Benefit
until Age 100 is the greater of the Face Amount plus premiums
less withdrawals, or the corridor percentage of the Accumulation
Value. See "Death Benefit".
The Death Benefit until Age 100 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.
The Death Benefit until Age 100 under the Face Plus Premium Amount Option may
be less than Face Amount if cumulative withdrawals exceed cumulative premiums
paid. After Age 100, the Death Benefit under all Death Benefit Options will be
the Accumulation Value.
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
"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 -- Change in 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 Standard
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, or from
the Variable Account only. 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. The amount
remaining after we deduct the Premium Expense Charge is called the Net Premium.
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.
Except for the Monthly Mortality and Expense Risk Charge, 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. We will deduct the
14
<PAGE>
Monthly Mortality and Expense Risk Charge on a proportionate basis from each
Sub-Account of the Variable Account depending on their relationship to the
Variable Accumulation Value 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
1.002466 (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 3%), 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, Age, Face Amount, 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 AMOUNT CHARGE. Each month during the first 10 Policy Years (and
for 10 years following any requested increase in Face Amount) we will deduct a
monthly charge per $1,000 of Face Amount. For a Policy issued in New Jersey,
the reduction of these charges after the first ten Policy Years is not
guaranteed, and these charges may be assessed for the duration of the Policy.
The amount of this charge will vary by the Insured's Sex, Rate Class, Issue Age
and Face Amount on the Policy Date (or on the effective date of any Face Amount
increase). These Monthly Amount Charges are shown in Appendix D. Any decreases
in Face Amount or any change in Face Amount resulting from a change in the
Death Benefit Option will not affect the Monthly Amount Charge. The maximum
amount of this charge is $3.333 per $1,000 of Face Amount for a male Issue Age
85 for Insureds of Age 85. This charge compensates us for expenses relating to
the distribution of the Policy, including agents' commissions, advertising, and
the printing of the prospectus and sales literature for new sales of the
Policy. A portion of this charge may also contribute to Company profits.
MONTHLY MORTALITY AND EXPENSE RISK CHARGE. Each month we will deduct a
charge currently equal to 1/12 of .35% of the Variable Accumulation Value
(minus the portion of the following charges taken from the Variable
Accumulation Value: the cost of insurance charge, the Monthly Amount Charge,
the Monthly Administrative Charge, and the cost of any riders). We guarantee
that the Mortality and Expense Risk Charge will not exceed 1/12 of .60% of the
Variable Accumulation Value 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.
15
<PAGE>
OPTIONAL INSURANCE BENEFIT CHARGES. Each month we deduct charges for any
optional insurance benefits added to the Policy by rider. See "General
Provisions -- Optional Insurance Benefits".
SURRENDER CHARGE
GENERAL. During the first 10 years the Policy is in force and the first 10
years following a requested increase in the Face Amount, there is a Surrender
Charge if you surrender the Policy or the Policy lapses. We will determine the
maximum Surrender Charge for the initial Face Amount or any requested increase
in Face Amount on the Policy Date or on the effective date of any requested
increase. The Surrender Charge for the initial Face Amount reduces in equal
monthly increments until it becomes zero at the end of 10 years. For any
requested increase in Face Amount, an additional Surrender Charge begins at
zero, increases in equal monthly increments until it reaches the maximum after
three years, and then reduces in equal monthly increments until it becomes zero
at the end of 10 years. Thus if the Policy remains in force during the entire
relevant 10-year period, you do not pay the Surrender Charge. The Surrender
Charge will vary depending on the Insured's Age, sex, and Rate Class on the
Policy Date or on the effective date of an increase in Face Amount. The maximum
amount of the Surrender Charge is $5.50 per thousand for a female Insured at
Issue Age 65.
The Surrender Charge for the initial Face Amount or any requested increase
in Face Amount is determined by multiplying (1) the applicable Surrender Charge
per $1,000 of Face Amount from Appendix C by (2) the initial Face Amount or the
Face Amount of the increase, as applicable, and by (3) the applicable
percentage from the Surrender Charge Percentage Table below, and then dividing
this amount by 1000.
EXAMPLE. The following example illustrates how we determine the Surrender
Charge. Assume that a male, Age 35 buys a Policy with an initial Face Amount of
$100,000 and surrenders the Policy at the end of the third Policy Year.
Based on these assumptions, the Surrender Charge will be the result of
multiplying (1) $19.00 (from Appendix C for a male Age 35) by (2) $100,000 (the
initial Face Amount) and by (3) 70% (the applicable percentage from the
Surrender Charge Percentage Table), and then dividing by 1000, which results in
a Surrender Charge of $1,330 (($19.00 x $100,000 x 70%) / 1000).
The additional Surrender Charge for requested increases in Face Amount
will be calculated in the same manner as illustrated in the example above,
except that the different Surrender Charge Percentages apply for requested
increases in Face Amount.
SURRENDER CHARGE PERCENTAGE TABLE
THE FOLLOWING PERCENTAGES OF THE
SURRENDER CHARGE WILL BE PAYABLE FOR:
IF SURRENDER OR LAPSE OCCURS IN
THE LAST MONTH OF POLICY YEAR:* INITIAL FACE AMOUNT FACE AMOUNT INCREASES
- --------------------------------- --------------------- ----------------------
0 100% 0%
1 90% 23.3%
2 80% 46.7%
3 70% 70%
4 60% 60%
5 50% 50%
6 40% 40%
7 30% 30%
8 20% 20%
9 10% 10%
10 0% 0%
*For requested increases, years are measured from the date of the increase.
MONTANA RESIDENTS. Appendix C, Appendix D, and the preceding illustrations
of the Surrender Charge do not apply to Policies issued in Montana. The
Insured's sex does not affect the Surrender Charge applied to Policies issued
in Montana. Therefore, the Surrender Charge made on Policies issued in Montana
will differ from the charge made in other states.
16
<PAGE>
PARTIAL WITHDRAWAL AND TRANSFER CHARGES
We currently make no charge for the first 24 transfers in a Policy Year.
We make a $25 charge for each subsequent transfer. We currently make a $10.00
charge for each partial withdrawal. These charges are guaranteed not to exceed
$25.00 per transfer or partial withdrawal for the duration of the Policy. The
transfer charge will not be imposed on transfers that occur as a result of
Policy loans or the exercise of conversion rights.
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. Reductions will not be unfairly discriminatory against any
person, including the affected Policy owners and owners of all other policies
funded by the Variable Account.
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 on the next
page 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.
17
<PAGE>
FUND EXPENSES (BEFORE REIMBURSEMENTS)
<TABLE>
<CAPTION>
TOTAL INVESTMENT
MANAGEMENT OTHER FUND AMOUNT
FUND FEES EXPENSES EXPENSES
- ------------------------------------------------------------------ ------------ ---------- -----------------
<S> <C> <C> <C>
AIM V.I. 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 funds pay was
used to reduce fund expenses. In addition, certain funds have
entered into arrangements with their custodian whereby credits
realized as a result of uninvested cash balances 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 VIP
Growth
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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 stated
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. 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 Variable Products Trust has
agreed to reimburse the 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).
INVESTMENTS OF THE VARIABLE ACCOUNT
There are currently 34 investment options (Funds) available under the
Variable Account that are offered through this Prospectus. However, we only
permit you to participate in a maximum of 17
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<PAGE>
investment options over the lifetime of your Policy. You also should 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 may also 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
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").
DEATH BENEFIT QUALIFICATION TESTS
You choose one of the two Death Benefit Qualification Tests for compliance
with the Code Section 7702 definition of life insurance. These tests are the
Cash Value Accumulation Test and the Guideline Premium Test. You cannot change
this choice after issue.
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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 not 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)).
GUIDELINE PREMIUM TEST
CORRIDOR PERCENTAGE TABLE
<TABLE>
<CAPTION>
CORRIDOR CORRIDOR CORRIDOR
INSURED'S AGE ON PERCENTAGE OF INSURED'S AGE ON PERCENTAGE OF INSURED'S AGE ON PERCENTAGE OF
PREVIOUS POLICY ACCUMULATION PREVIOUS POLICY ACCUMULATION PREVIOUS POLICY ACCUMULATION
ANNIVERSARY VALUE ANNIVERSARY VALUE ANNIVERSARY VALUE
- ------------------ -------------- ------------------ -------------- ------------------ --------------
<S> <C> <C> <C> <C> <C>
40 or younger 250% 54 157 68 117
41 243 55 150 69 116
42 236 56 146 70 115
43 229 57 142 71 114
44 222 58 138 72 113
45 215 59 134 73 111
46 209 60 130 74 109
47 203 61 128 75-90 105
48 197 62 126 91 104
49 191 63 124 92 103
50 185 64 122 93 102
51 178 65 120 94 101
52 171 66 119 95 or older 100
53 164 67 118
</TABLE>
CASH VALUE ACCUMULATION TEST. The Death Benefit is never less than the
amount required for this Policy to be deemed "life insurance" based on the Cash
Value Accumulation Test as defined in Code Section 7702(b). Generally, the Cash
Value Accumulation Test requires that under the terms of a life insurance
policy, the Death Benefit must be sufficient so that the Accumulation Value
does not at any time exceed the net single premium required to fund the future
benefits under the Policy. The net single premiums under the Policy vary
according to the Age, sex, and Rate Class of the Insured. The net single
premium is calculated using a 4% interest rate and using the guaranteed
mortality charges as of the time the Policy is issued. The corridor percentage
for the Cash Value Accumulation Test is then equal to 100% divided by the net
single premium for the current Age, Sex, and Rate Class.
WHICH DEATH BENEFIT QUALIFICATION TEST TO CHOOSE
The Cash Value Accumulation Test does not limit the amount of premium that
may be paid into a Policy. If you desire to pay premiums in excess of the
guideline premium test limitations you should elect the Cash Value Accumulation
Test. However, any premium that would increase the net amount at risk is
subject to evidence of insurability satisfactory to us. Required increases in
the minimum death benefit due to growth in Accumulation Value will generally be
greater under the Cash Value Accumulation Test than under the Guideline Premium
Test.
The Guideline Premium Test limits the amount of premium that may be paid
into a Policy. If you do not desire to pay premiums in excess of the Guideline
Premium Test limitations, you should consider the Guideline Premium Test.
DEATH BENEFIT OPTIONS
The Policy provides three 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 100 depends on the Death Benefit Option
chosen as described below regardless of the Death Benefit Option chosen. The
Death Benefit after Age 100 is the Accumulation Value.
OPTION A. (Level Amount Option.) Prior to Age 100, 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
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<PAGE>
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 100, 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.
OPTION C. (Face Amount Plus Premium Amount Option.) Prior to Age 100, the
Death Benefit is the greater of the Face Amount plus cumulative premiums less
cumulative withdrawals, or the Corridor Percentage of the Accumulation Value on
the Valuation Date following the date of the Insured's death. Under Option C,
the amount of the Death Benefit will vary as the premiums are paid or
withdrawals are made, or if the Corridor Percentage of the Accumulation Value
exceeds the current Face Amount.
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. If you require a specific Death Benefit which would
include a return of the premium paid, such as under an employer sponsored
benefit plan, Option C may meet your needs.
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 85, 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 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. Under our current
rules, the Minimum Face Amount is $25,000, but we reserve the right to
establish a different Minimum Face Amount in the future. If, following a
decrease in Face Amount, the Policy would no longer qualify as life insurance
under Federal tax law (see "Federal Tax Matters -- 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
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<PAGE>
substandard Rate Classes that involve a higher mortality risk (for example, a
200% Rate Class or a 300% Rate Class). In an otherwise identical Policy, an
Insured in the standard Rate Class will have a lower cost of insurance than an
Insured in a substandard Rate Class with higher mortality risks. See
"Deductions and Charges -- Monthly Deduction".
For example, assume that the initial Face Amount was $50,000 with a
standard Rate Class, and that successive increases of $25,000 (at a Rate Class
of 200%) and $50,000 (at a Rate Class of 300%) were added. If a decrease of
$50,000 or less is requested, the amount of insurance at a 300% Rate Class will
be reduced first. If a decrease of more than $50,000 is requested, the amount
at a 300% Rate Class will be eliminated, and the excess over $50,000 will next
reduce the amount of insurance at a 200% Rate Class.
EFFECT OF REQUESTED CHANGES IN FACE AMOUNT. An increase or decrease in
Face Amount will affect the Monthly Deduction because the cost of insurance
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".
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, 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
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<PAGE>
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 the Face Plus Premium Amount Option, until the
corridor percentage of Accumulation Value exceeds the Face
Amount, the level of premium payments will affect the amount
of pure insurance protection.
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. We
allow changes from Option A to Option B, from Option B to Option A, and,
currently, from Option C to Option A. We will not allow changes to Option C
after issue. 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 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. If you
change from Option C to Option A, we will increase the Face Amount by an amount
equal to cumulative premiums less cumulative withdrawals taken.
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
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<PAGE>
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 the 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 the 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 85 or less who supplies evidence of insurability satisfactory to
us. The minimum Face Amount is currently $25,000, 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 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.
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ALLOCATING PREMIUMS
We will credit the initial Net Premium and any premiums received prior to
the Initial Premium Transfer Date to the Fidelity VIP Money Market Sub-Account
on the later of the Policy Date or the date we receive your premium. On the
Initial Premium Transfer Date, we will transfer the Variable Accumulation Value
in the Fidelity VIP Money Market Sub-Account to the Fixed Account and the
Sub-Accounts of the Variable Account as you designated on the Policy
application. After the Initial Premium Transfer Date, we credit premiums to the
Fixed Account and the Sub-Accounts of the Variable Account as you designated on
the Policy application.
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".
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.
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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
100. 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
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 expires at the Insured's Age 65 for Issue
Ages 0 through 60, or at the end of five Policy Years for Issue Ages 61 through
80, or at the end of three Policy Years for Issue Ages 81 through 85. The Death
Benefit Guarantee Period is shorter for substandard rated policies or if any
term insurance rider is attached.
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 10 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.
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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 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. You can reinstate the Death
Benefit Guarantee within the first 5 Policy Years by paying any past due
Minimum Monthly Premiums. After the first 5 Policy Years, a lapsed 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.
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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 3%), 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.
We have also filed an example of such an illustration as an exhibit to the
registration statement referred to on page 49 of this Prospectus. This form of
illustration (Form A) is available to you upon request and is incorporated
herein by reference. There also may be state specific product features that
make the illustrations applicable to you differ 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".
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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 is less
than the Monthly Deduction due, and a grace period of 61 days expires without a
sufficient payment.
During the early Policy Years, the Cash Surrender Value will generally not
be sufficient to cover the Monthly Deduction, so that premium payments
sufficient to maintain the Death Benefit Guarantee will be required to avoid
lapse. See "Death Benefit Guarantee".
The Policy does not lapse, and the insurance coverage continues, until the
expiration of a 61-day grace period which begins on the date we send you
written notice indicating that the Cash Surrender Value is less than the
Monthly Deduction due. Our written notice 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.
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".
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 10 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.
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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 (currently $25,000).
If the Variable Amount Option or the Face Plus Premium 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.
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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.
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. For
a Policy issued in New Jersey, we may not discontinue this service, but we
reserve the right to charge up to $50 per transfer. 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
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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. For
a Policy issued in New Jersey, we may not discontinue this service, but we
reserve the right to charge up to $50 per transfer. 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 unlimited
transfers in a Policy Year, although we reserve the right to limit you to no
more than 12 transfers per 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 per transfer for any
transfer. 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 and
New Jersey may take loans during the first Policy year if there is a Loan
Amount). The maximum amount you may borrow at any time is equal to the loan
value of the Policy, which is equal to 90% of the Cash Value (100% in Texas)
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.
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".
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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 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 3.00%. 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,
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, 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 4.762%, payable in advance. After the 10th Policy Year, we currently charge
interest at an annual rate of 2.913% (guaranteed not to exceed 3.382%), 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 4.762%, 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
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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. 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".
1035 EXCHANGES. We reserve the right to permit a Policy Loan prior to the
first Policy Anniversary for Policies issued pursuant to a transfer of Cash
Values from another life insurance policy under Section 1035(a) of the Code, as
amended. In the event of such a Policy Loan, the Policy Loan will be treated
for all purposes as made on the Policy Issue Date.
FREE LOOK AND CONVERSION RIGHTS
FREE LOOK RIGHTS
The Policy provides for a "free look" period after application for and
issuance of the Policy. The Policy also provides for a "free look" period after
any requested increase in Face Amount.
During the free look period after application for and issuance of the
Policy, you have a right to return the Policy for cancellation. You must return
the Policy to your agent or us and ask us to cancel the Policy by midnight of
the 10th day after receiving the Policy. Upon cancellation of the Policy, you
will receive a refund of premiums paid for the Policy.
During the free look period after a requested increase in Face Amount, you
have the right to cancel the increase. You must request cancellation of the
increase by midnight of the 10th day after receiving the new Policy Data Page
reflecting the increase. 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. Whether this conversion right is
exercised during the first two Policy Years or during the two years following a
Face Amount increase, we will allow the full Accumulation Value to be
transferred to the Fixed Account on request. 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".
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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 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 there are currently 34 Variable Account investment options
offered through this prospectus, we currently only permit you to participate in
a maximum of 17 investment options over the lifetime of your Policy. The
initial allocation of your premium to the Fidelity VIP Money Market Sub-Account
will count against the 17 investment option limitation. 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
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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, 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.
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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 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 100, 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. The amount by which this
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.
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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 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.
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 2.0%.
In determining amounts we pay under Options 3, 4,and 5, we assume interest
at an effective annual rate of 2%. Also, for Option 3 and "certain" periods
under Option 4, we credit any excess interest we
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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.
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.
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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 Investment Funds, will
be mailed to your household, even if you or other persons in your household
have more than one contract issued by ReliaStar Life 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.
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 level term coverage to age 100 on a
family member 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.
COST OF LIVING INCREASE RIDER. Provides optional increases in Face Amount
on the life of the Insured every two years based on the cost of living without
evidence of insurability.
EXTENDED DEATH BENEFIT GUARANTEE RIDER. Provides a death benefit guarantee
to Age 100 for payment of the guideline annual premium each year or on a
cumulative basis.
TERM INSURANCE RIDER. Provides level term insurance on the Insured if
death occurs prior to the Insured's Age 100.
The current cost of insurance rates for the rider are different than for
the base Policy. In addition, the base Policy's Monthly Amount Charges per
$1,000 and Surrender Charge do not apply to coverage under the rider. However,
the Term Insurance Rider will cause the Death Benefit Guarantee Period of the
base Policy to be shortened.
After the tenth Policy Year if the base Death Benefit is equal to the
Accumulation Value multiplied by the corridor percentage (see "Death Benefit"),
you may ask us to replace the Term Insurance Rider amount with base coverage
without providing evidence of insurability. We must replace the entire rider
amount if any amount is replaced. Neither Surrender Charges nor Monthly Amount
Charges will apply to the new additional base coverage. Cost of insurance rates
on this new additional base coverage will be equal to the cost of insurance
rates for the base coverage based on the original rider issue date.
There may be times in which it will be to your economic advantage to
include a significant portion of your insurance coverage under a term rider. In
some other circumstances, it may be in your interest
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to obtain a Policy without term rider coverage. These circumstances depend on
many factors, including the premium levels and amount and duration of coverage
you choose, as well as the age, sex, and rate class of the Insured.
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.
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
42
<PAGE>
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 59-1/2 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.
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 a 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.
43
<PAGE>
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
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 50% of the premiums paid up to the
annualized Minimum Monthly Premium, plus 2% of additional premiums. In any
subsequent Policy Year, commissions generally will be 2% of premiums paid in
that year. Corresponding commissions will be paid upon a requested increase in
Face Amount.
44
<PAGE>
In addition, a commission of .25% 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 which use 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.
MANAGEMENT
The following is a list of the current directors and executive officers of
the Company, their principal occupation and business experience.
PRINCIPAL OCCUPATION
DIRECTORS AND OFFICERS AND BUSINESS EXPERIENCE
- ---------------------- -----------------------
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.
45
<PAGE>
PRINCIPAL OCCUPATION
DIRECTORS AND OFFICERS AND BUSINESS EXPERIENCE
- ---------------------- -----------------------
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.
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.
46
<PAGE>
PRINCIPAL OCCUPATION
DIRECTORS AND OFFICERS AND BUSINESS EXPERIENCE
- ---------------------- -----------------------
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.
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.
- ------------------
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.
NAME AND PRINCIPAL
BUSINESS ADDRESS POSITIONS AND OFFICES
- ------------------------ -----------------------------------------------------
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
- --------------------
* 20 Washington Avenue South
Minneapolis, Minnesota 55401
47
<PAGE>
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.
MONTANA RESIDENTS
If you are a resident of 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 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 Illustration 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 James M. Odland, Esquire,
Attorney for the Company.
48
<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 1998 and for the 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 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.
49
<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
50
<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.
51
<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.
52
<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.
53
<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.
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 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.
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>
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.
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>
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.
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>
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.
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>
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.
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>
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.
60
<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.
61
<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.
62
<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>
63
<PAGE>
(This page has been left blank intentionally.)
64
<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.
DELOITTE & TOUCHE LLP
Minneapolis, Minnesota
February 1, 2000
65
<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.
66
<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.
67
<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.
68
<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.
69
<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
70
<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.
71
<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.
72
<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
73
<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>
74
<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
75
<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>
76
<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
77
<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
78
<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>
79
<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.
86
<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 3%,
independent of the investment experience of the Fixed Account. From time to
time, we may guarantee interest at a rate higher than 3%.
ANY INTEREST CREDITED TO AMOUNTS ALLOCATED TO THE FIXED ACCOUNT IN EXCESS
OF 3% 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 3% 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 / 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 3%. 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 SURRENDER CHARGES
PER $1,000 OF FACE AMOUNT
<TABLE>
<CAPTION>
ISSUE ISSUE
AGE* MALE FEMALE UNISEX AGE* MALE FEMALE UNISEX
- ------- ---------- ---------- ---------- ------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
0 $ 5.35 $ 5.30 $ 5.34 43 $ 24.39 $ 22.02 $ 23.90
1 5.58 5.44 5.55 44 25.25 22.68 24.72
2 5.81 5.58 5.76 45 26.00 23.39 25.60
3 6.04 5.72 5.98 46 27.08 24.12 26.47
4 6.27 5.86 6.19 47 28.06 24.89 27.40
5 6.50 6.00 6.40 48 29.12 25.72 28.41
6 6.73 6.14 6.61 49 30.25 26.61 29.49
7 6.96 6.28 6.82 50 31.48 27.56 30.66
8 7.19 6.42 7.04 51 32.80 28.57 31.91
9 7.42 6.56 7.25 52 34.22 29.66 33.26
10 7.65 6.70 7.46 53 35.75 30.81 34.70
11 7.88 6.84 7.67 54 37.40 32.05 36.26
12 8.11 6.98 7.88 55 38.75 33.37 37.90
13 8.34 7.12 8.10 56 39.84 34.68 39.09
14 8.57 7.26 8.31 57 40.92 36.08 40.28
15 8.80 7.40 8.52 58 42.01 37.62 41.46
16 9.17 7.71 8.88 59 43.09 39.28 42.65
17 9.54 8.02 9.24 60 44.18 41.10 43.84
18 9.91 8.33 9.59 61 45.26 43.08 45.03
19 10.28 8.64 9.95 62 46.35 45.24 46.22
20 10.65 8.95 10.31 63 47.43 47.30 47.40
21 11.02 9.26 10.67 64 48.52 48.90 48.59
22 11.39 9.57 11.03 65 49.60 50.50 49.78
23 11.76 9.88 11.38 66 49.04 50.07 49.25
24 12.13 10.19 11.74 67 48.48 49.64 48.71
25 12.50 10.50 12.10 68 47.92 49.21 48.18
26 13.15 11.05 12.73 69 47.36 48.78 47.64
27 13.80 11.60 13.36 70 46.80 48.35 47.11
28 14.45 12.15 13.99 71 46.24 47.92 46.58
29 15.10 12.70 14.62 72 45.68 47.49 46.04
30 15.75 13.25 15.25 73 45.12 47.06 45.51
31 16.40 13.80 15.88 74 44.56 46.63 44.97
32 17.05 14.35 16.51 75 44.00 46.20 44.44
33 17.70 14.90 17.14 76 43.49 46.12 44.01
34 18.35 15.45 17.77 77 42.97 46.05 43.59
35 19.00 16.00 18.40 78 42.46 45.97 43.16
36 19.70 16.85 19.13 79 41.94 45.89 42.73
37 20.30 17.70 19.86 80 41.43 45.82 42.30
38 20.87 18.55 20.54 81 40.91 45.74 41.88
39 21.48 19.40 21.12 82 40.40 45.66 41.45
40 22.14 20.25 21.75 83 39.88 45.58 41.02
41 22.84 20.81 22.42 84 39.37 45.51 40.59
42 23.59 21.40 23.14 85 38.85 45.43 40.16
</TABLE>
- ------------------
* Based on the Insured's age on the Policy Date, or on the Effective Date of
any increase in face amount, as appropriate.
C-1
<PAGE>
APPENDIX D
MONTHLY AMOUNT CHARGES
PER $1,000 OF FACE AMOUNT*
<TABLE>
<CAPTION>
MALE FEMALE UNISEX
----------------------------- ----------------------------- ----------------------------
ISSUE FACE AMOUNT FACE AMOUNT FACE AMOUNT FACE AMOUNT FACE AMOUNT FACE AMOUNT
AGE** BAND 1 BANDS 2-4 BAND 1 BANDS 2-4 BAND 1 BANDS 2-4
- ------- ------------- ------------- ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
0 $ 0.045 $ 0.020 $ 0.020 $ 0.006 $ 0.040 $ 0.017
1 0.050 0.020 0.025 0.006 0.045 0.017
2 0.055 0.020 0.029 0.006 0.049 0.017
3 0.060 0.020 0.033 0.006 0.054 0.017
4 0.065 0.020 0.037 0.006 0.059 0.017
5 0.070 0.020 0.041 0.006 0.064 0.017
6 0.075 0.023 0.045 0.008 0.069 0.020
7 0.080 0.026 0.050 0.009 0.074 0.022
8 0.085 0.029 0.054 0.011 0.078 0.025
9 0.090 0.032 0.058 0.012 0.083 0.028
10 0.095 0.035 0.062 0.014 0.088 0.030
11 0.100 0.038 0.066 0.015 0.093 0.033
12 0.105 0.041 0.070 0.017 0.098 0.036
13 0.110 0.044 0.075 0.018 0.103 0.038
14 0.115 0.046 0.079 0.020 0.107 0.041
15 0.120 0.046 0.083 0.021 0.112 0.044
16 0.121 0.046 0.084 0.024 0.114 0.046
17 0.123 0.046 0.085 0.027 0.115 0.049
18 0.124 0.046 0.087 0.030 0.117 0.051
19 0.126 0.046 0.088 0.034 0.118 0.054
20 0.127 0.046 0.089 0.037 0.119 0.056
21 0.129 0.048 0.090 0.040 0.121 0.059
22 0.130 0.050 0.092 0.043 0.122 0.061
23 0.132 0.053 0.093 0.046 0.124 0.064
24 0.133 0.056 0.094 0.049 0.125 0.066
25 0.135 0.059 0.095 0.052 0.127 0.069
26 0.143 0.064 0.102 0.059 0.134 0.076
27 0.151 0.068 0.108 0.065 0.142 0.083
28 0.159 0.074 0.114 0.072 0.150 0.090
29 0.167 0.080 0.120 0.078 0.157 0.097
30 0.175 0.086 0.127 0.085 0.165 0.105
31 0.183 0.093 0.133 0.092 0.173 0.112
32 0.191 0.102 0.139 0.098 0.180 0.119
33 0.199 0.111 0.145 0.105 0.188 0.126
34 0.207 0.121 0.152 0.111 0.196 0.133
35 0.215 0.133 0.158 0.118 0.203 0.141
36 0.228 0.146 0.169 0.128 0.216 0.155
37 0.242 0.160 0.180 0.138 0.229 0.169
38 0.255 0.175 0.190 0.148 0.242 0.183
39 0.269 0.192 0.201 0.159 0.255 0.198
40 0.282 0.210 0.212 0.169 0.268 0.212
41 0.296 0.228 0.223 0.179 0.281 0.226
42 0.309 0.248 0.234 0.189 0.294 0.241
</TABLE>
- ------------------
* Rates for Face Amount Band 1 rates apply to the initial Face Amount if less
than $100,000, and to any increase in face amount less than $100,000. Rates
for Face Amount Bands 2-4 apply to the initial Face Amount if $100,000 or
larger, and to any increase in face amount of $100,000 or larger.
** Based on the Insured's age on the Policy Date, or on the Effective Date of
any increase in face amount, as appropriate.
D-1
<PAGE>
APPENDIX D
MONTHLY AMOUNT CHARGES
PER $1,000 OF FACE AMOUNT*
<TABLE>
<CAPTION>
MALE FEMALE UNISEX
----------------------------- ----------------------------- ----------------------------
ISSUE FACE AMOUNT FACE AMOUNT FACE AMOUNT FACE AMOUNT FACE AMOUNT FACE AMOUNT
AGE** BAND 1 BANDS 2-4 BAND 1 BANDS 2-4 BAND 1 BANDS 2-4
- ------- ------------- ------------- ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
43 0.323 0.269 0.245 0.199 0.307 0.255
44 0.336 0.284 0.255 0.209 0.320 0.269
45 0.350 0.300 0.266 0.220 0.333 0.284
46 0.375 0.321 0.281 0.236 0.356 0.304
47 0.400 0.343 0.296 0.252 0.380 0.324
48 0.426 0.364 0.311 0.268 0.403 0.345
49 0.451 0.386 0.326 0.284 0.426 0.365
50 0.477 0.407 0.341 0.300 0.450 0.386
51 0.502 0.429 0.356 0.317 0.473 0.406
52 0.527 0.450 0.371 0.333 0.496 0.427
53 0.553 0.472 0.386 0.349 0.520 0.447
54 0.578 0.493 0.401 0.365 0.543 0.467
55 0.604 0.515 0.416 0.381 0.566 0.488
56 0.652 0.556 0.450 0.410 0.611 0.527
57 0.700 0.597 0.483 0.438 0.656 0.565
58 0.747 0.639 0.516 0.467 0.701 0.604
59 0.795 0.680 0.550 0.495 0.746 0.643
60 0.843 0.721 0.583 0.524 0.791 0.682
61 0.891 0.763 0.616 0.552 0.836 0.720
62 0.939 0.804 0.650 0.581 0.881 0.759
63 0.987 0.845 0.683 0.609 0.926 0.798
64 1.035 0.887 0.716 0.638 0.971 0.837
65 1.083 0.928 0.750 0.666 1.016 0.876
66 1.191 1.000 0.816 0.721 1.116 0.944
67 1.300 1.072 0.883 0.775 1.216 1.013
68 1.408 1.144 0.950 0.830 1.316 1.081
69 1.516 1.217 1.016 0.884 1.416 1.150
70 1.625 1.289 1.083 0.939 1.516 1.219
71 1.733 1.361 1.150 0.993 1.616 1.287
72 1.841 1.433 1.216 1.048 1.716 1.356
73 1.950 1.505 1.283 1.102 1.816 1.425
74 2.058 1.577 1.350 1.157 1.916 1.493
75 2.166 1.650 1.416 1.211 2.016 1.562
76 2.283 1.710 1.504 1.257 2.127 1.619
77 2.400 1.770 1.591 1.302 2.238 1.676
78 2.516 1.830 1.679 1.348 2.349 1.733
79 2.633 1.890 1.766 1.393 2.460 1.790
80 2.750 1.950 1.854 1.439 2.570 1.847
81 2.866 2.010 1.941 1.484 2.681 1.904
82 2.983 2.070 2.029 1.530 2.792 1.962
83 3.100 2.130 2.116 1.575 2.903 2.019
84 3.216 2.190 2.204 1.621 3.014 2.076
85 3.333 2.250 2.291 1.666 3.125 2.133
</TABLE>
- ------------------
* Rates for Face Amount Band 1 rates apply to the initial Face Amount if less
than $100,000, and to any increase in face amount less than $100,000. Rates
for Face Amount Bands 2-4 apply to the initial Face Amount if $100,000 or
larger, and to any increase in face amount of $100,000 or larger.
** Based on the Insured's age on the Policy Date, or on the Effective Date of
any increase in face amount, as appropriate.
D-2
<PAGE>
[LOGO] RELIASTAR
20 Washington Avenue South
Minneapolis, Minnesota 55401
---------------------------
FLEXDESIGN(R) VUL
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 described in this prospectus. ReliaStar designed the
Policy to provide (1) a death benefit payable when the insured person dies; 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:
Fidelity Variable Insurance Products Fund Mitchell Hutchins Series Trust
Fidelity Variable Insurance Products Fund II Pilgrim Variable Products Trust
Janus Aspen Series Putnam Variable Trust
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. The
current prospectuses for 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................................... 10
Charge Upon Lapse or Total Surrender of the Policy....................... 11
Surrenders............................................................... 11
Partial Withdrawals...................................................... 11
Loans.................................................................... 11
Transfers................................................................ 11
Death Benefit Overview................................................... 11
Adjusting the Death Benefit.............................................. 12
Death Benefit Guarantee.................................................. 12
Lapse.................................................................... 12
Taxation of Death Benefit Proceeds....................................... 12
Taxation of the Policy................................................... 12
PART 2. DETAILED INFORMATION
ReliaStar Life Insurance Company......................................... 13
The Policies............................................................. 13
Deductions and Charges................................................... 13
Premium Expense Charge................................................... 13
Monthly Deduction........................................................ 13
Cost of Insurance....................................................... 14
Monthly Administrative Charge........................................... 14
Monthly Amount Charge................................................... 14
Monthly Mortality and Expense Risk Charge............................... 14
Optional Insurance Benefit Charges...................................... 15
Surrender Charge......................................................... 15
General................................................................. 15
Montana Residents....................................................... 15
Partial Withdrawal and Transfer Charges.................................. 16
Modification of Charges.................................................. 16
Investment Advisory Fees and Other Fund Expenses......................... 16
Fund Expenses Before Reimbursement....................................... 17
The Variable Account..................................................... 18
Investments of the Variable Account...................................... 18
Performance Information.................................................. 18
Death Benefit............................................................ 19
Death Benefit Qualification Tests........................................ 19
Guideline Premium Test.................................................. 19
Cash Value Accumulation Test............................................ 20
Which Death Benefit Qualification Test to Choose......................... 20
Death Benefit Options.................................................... 20
Level Amount Option..................................................... 20
Variable Amount Option.................................................. 20
Face Amount Plus Premium Amount Option.................................. 21
Which Death Benefit Option to Choose..................................... 21
Requested Changes in Face Amount......................................... 21
Increases............................................................... 21
Decreases............................................................... 21
2
<PAGE>
Effect of Requested Changes in Face Amount.............................. 22
Insurance Protection..................................................... 22
Changing the Death Benefit Option........................................ 23
Accelerated Benefit Rider................................................ 23
Payment and Allocation of Premiums....................................... 24
Issuing the Policy....................................................... 24
Coverage................................................................ 24
Minimum Initial Premium................................................. 24
Temporary Insurance..................................................... 24
Allocating Premiums...................................................... 24
Crediting Net Premiums.................................................. 25
Refunding Premiums...................................................... 25
Amount and Timing of Premiums............................................ 25
Planned Periodic Premiums................................................ 26
Paying Premiums by Mail.................................................. 26
Death Benefit Guarantee.................................................. 26
Requirements for the Death Benefit Guarantee............................. 27
Accumulation Value....................................................... 27
Illustration of Policy Benefits.......................................... 28
Specialized Uses of the Policy........................................... 28
Policy Lapse and Reinstatement........................................... 28
Lapse................................................................... 28
Reinstatement........................................................... 29
Surrender Benefits....................................................... 29
Total Surrender.......................................................... 29
Partial Withdrawal....................................................... 29
Effect of Partial Withdrawals........................................... 29
Transfers................................................................ 30
Telephone/Fax Instructions.............................................. 31
Dollar Cost Averaging Service........................................... 31
Portfolio Rebalancing Service........................................... 31
Transfer Limits......................................................... 32
Transfer Charges........................................................ 32
Policy Loans............................................................. 32
General................................................................. 32
Immediate Effect of Policy Loans........................................ 33
Effect on Investment Performance........................................ 33
Effect on Policy Coverage............................................... 33
Interest................................................................ 33
Repayment of Loan Amount................................................ 34
Tax Considerations...................................................... 34
1035 Exchanges.......................................................... 34
Free Look and Conversion Rights.......................................... 34
Free Look Rights........................................................ 34
Conversion Rights....................................................... 34
General Option......................................................... 34
Connecticut............................................................ 35
Additional Information on the Investments of the Variable Account........ 35
Investment Limits........................................................ 35
Addition, Deletion, or Substitution of Investments....................... 36
Voting Rights............................................................ 36
Disregarding Voting Instructions........................................ 37
Paid-up Life Insurance Option............................................ 37
General Provisions....................................................... 37
Ownership................................................................ 37
Proceeds................................................................. 37
Beneficiary.............................................................. 38
Postponement of Payments................................................. 38
3
<PAGE>
Settlement Options....................................................... 38
Interest on Settlement Options.......................................... 39
Incontestability......................................................... 39
Misstatement of Age and Sex.............................................. 39
Suicide.................................................................. 39
Termination.............................................................. 39
Amendment................................................................ 39
Reports.................................................................. 39
Annual Statement........................................................ 39
Projection Report....................................................... 40
Other Reports........................................................... 40
Dividends................................................................ 40
Collateral Assignment.................................................... 40
Optional Insurance Benefits.............................................. 40
Accelerated Benefit Rider............................................... 40
Accidental Death Benefit Rider.......................................... 40
Additional Insured Rider................................................ 40
Waiver of Monthly Deduction Rider....................................... 40
Children's Insurance Rider.............................................. 40
Cost of Living Increase Rider........................................... 40
Extended Death Benefit Guarantee Rider.................................. 40
Term Insurance Rider.................................................... 40
Waiver of Specified Premium Rider....................................... 41
Federal Tax Matters...................................................... 41
Introduction............................................................. 41
Tax Status of the Policy................................................. 41
Tax Treatment of Policy Benefits......................................... 41
In General.............................................................. 41
Modified Endowment Contracts............................................ 42
Distributions from Modified Endowment Contracts......................... 42
Distributions from Policies That Are Not Modified Endowment Contracts... 42
Policy Loans............................................................ 42
Multiple Policies....................................................... 42
Taxation of ReliaStar Life Insurance Company............................. 43
Possible Changes in Taxation............................................. 43
Other Considerations..................................................... 43
Legal Developments Regarding Employment-Related Benefit Plans............ 43
Distribution of the Policies............................................. 43
Management............................................................... 45
Directors and Officers................................................... 45
State Regulation......................................................... 48
Montana Residents........................................................ 48
Legal Proceedings........................................................ 48
Bonding Arrangements..................................................... 48
Legal Matters............................................................ 48
Experts.................................................................. 49
Registration Statement Contains Further Information...................... 49
Financial Statements..................................................... 49
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
27, 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 19.
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 26.
DEATH BENEFIT OPTION. One of three death benefit options available under the
Policy (the Level Amount Option, the Variable Amount Option, and the Face
Amount Plus Premium Amount Option). See "Death Benefit -- Death Benefit
Options" at page 20.
FACE AMOUNT. The minimum Death Benefit under the Policy as long as the Policy
remains in force except for Option C when withdrawals exceed premiums. See
"Death Benefit" at page 19.
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 27 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 "Investments of the Variable Account" at page
18.
INITIAL PREMIUM TRANSFER DATE. The Initial Premium Transfer Date shown on the
Policy Data Page. It is generally 16 days after the print date of the
Policy or if later the date we receive from you final material required to
put the Policy in force. This may vary by state.
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 32.
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 26.
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 13.
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 26.
POLICY. FlexDesign(R) VUL, 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 (currently 5%) ReliaStar deducts from each
premium payment resulting in the Net Premium. See "Deductions and Charges
-- Premium Expense Charge" at page 13.
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 10 Policy Years and the first 10 years following any
requested increase in Face Amount. See "Deduction and Charges -- Surrender
Charge" at page 15.
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 A.
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 A.
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 27 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
FlexDesign(R) VUL 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 FLEXDESIGN(R) VUL WORKS
[FLOW CHART]
PREMIUM PAYMENTS
MINUS
PREMIUM EXPENSE CHARGES
Invested in Variable Sub-Accounts
or Fixed Account
Variable Sub-Accounts Fixed Account
Fidelity(R) Mitchell Hutchins Putnam
Janus Pilgrim
PLUS
INVESTMENT RETURN
(Net of Fund Expenses)
MINUS
MONTHLY DEDUCTIONS
* Monthly Amount Charge * Cost of Insurance
* Monthly Administrative Charge * Optional Benefit Charges
* Mortality and Expense Risk Charge
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 midnight of the
10th day after you receive it, 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 require a longer period of time
for the free look period and refund a different
amount.
o You choose when to pay and how much to pay.
PREMIUM PAYMENTS o We may refuse to accept any premium less than $25.
o You cannot pay additional premiums after Age 100
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 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) 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
(Select*Life Variable separate accounts and consists of several
Account) Sub-Accounts. We only 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."
o Consists of all of our assets other than those in
our separate accounts (including the Variable
Account).
THE FIXED ACCOUNT o We credit interest of at least 3% per year on any
amounts you allocate to the Fixed Account.
o We may, in our sole discretion, credit interest in
excess of 3%. 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 23
investment portfolios over the lifetime of your
Policy.
o We will first place the portion of the initial
allocation of your Net Premium directed to the
Variable Account in the Fidelity VIP Money Market
Sub-Account and this will count against the 17
investment portfolio limit. See "Allocating
Premiums".
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>
Fidelity VIP Fidelity Management
Investments(R) Equity-Income & Research Company
Boston, Mass. Portfolio - X
Service Class
--------------------- --------------------- -------------- -------------- -----------------
VIP Growth Fidelity Management
Portfolio - & Research Company
Service Class
--------------------- --------------------- -------------- -------------- -----------------
VIP Fidelity Management
High Income & Research Company
Portfolio - X
Service Class
--------------------- --------------------- -------------- -------------- -----------------
VIP Fidelity Management
Money Market & Research Company
Portfolio - X
Initial Class
--------------------- --------------------- -------------- -------------- -----------------
VIP II Fidelity Management
Contrafund & Research Company
Portfolio -
Service Class
--------------------- --------------------- -------------- -------------- -----------------
Fidelity VIP II Fidelity Management
Investments(R) Investment & Research Company
is a registered Grade Bond X
trademark of Portfolio -
FMR Corp. Initial Class
=================== ===================== ===================== ============== ============== =================
Janus Aspen Series Janus
Aggressive Capital
Denver, Co. Growth Corporation
Portfolio -
Service Shares
--------------------- --------------------- -------------- -------------- -----------------
Aspen Series Janus
Growth Capital
Portfolio - Corporation
Service Shares
--------------------- --------------------- -------------- -------------- -----------------
Aspen Series Janus
International Capital
Growth Corporation
Portfolio -
Service Shares
--------------------- --------------------- -------------- -------------- -----------------
Aspen Series Janus
Worldwide Capital
Growth Corporation
Portfolio -
Service Shares
=================== ===================== ===================== ============== ============== =================
Mitchell Global Income Mitchell Hutchins
Hutchins Portfolio - Asset X
Series Class I Shares Management Inc.
Trust --------------------- --------------------- -------------- -------------- -----------------
New York, NY
Growth and Income Mitchell Hutchins
Portfolio - Asset X
Class I Shares Management Inc.
--------------------- --------------------- -------------- -------------- -----------------
Tactical Allocation Mitchell Hutchins
Portfolio - Asset
Class I Shares Management Inc.
=================== ===================== ===================== ============== ============== =================
[WIDE TABLE CONTINUED FROM ABOVE]
<CAPTION>
PRIMARY
FUND GROUP INTERNATIONAL BALANCED GROWTH AGGRESSIVE GROWTH OBJECTIVE(S) INVESTMENTS
=================== =============== ========== ======== ================== ========================== ===========================
<S> <C> <C> <C> <C> <C> <C>
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 capital securities
and liquidity
--------------- ---------- -------- ------------------ -------------------------- ---------------------------
Capital appreciation Securities of
companies whose
value the adviser
X believes is not
fully recognized
by the public
--------------- ---------- -------- ------------------ -------------------------- ---------------------------
Fidelity High current income Investment-grade
Investments(R) consistent with intermediate fixed
is a registered preservation of capital income securities
trademark of
FMR Corp.
=================== =============== ========== ======== ================== ========================== ===========================
Janus Long-term growth of Nondiversified portfolio
X capital of common stocks
--------------- ---------- -------- ------------------ -------------------------- ---------------------------
Denver, Co.
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
=================== =============== ========== ======== ================== ========================== ===========================
Mitchell Primarily high current Bonds of governmental
Hutchins income; secondarily and private issuers in
Series capital appreciation the U.S. and developed
Trust foreign countries
New York, NY --------------- ---------- -------- ------------------ -------------------------- ---------------------------
Current income and Stocks believed to
capital growth have substantial potential
for capital growth and
dividend paying stocks
--------------- ---------- -------- ------------------ -------------------------- ---------------------------
Total return consisting Equity securities
X of long-term capital designed to track
appreciation and the S&P 500, U.S.
current income Treasury Notes or Bills.
=================== =============== ========== ======== ================== ========================== ===========================
</TABLE>
9
<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
High Yield Investments, Inc. X
Portfolio
------------------- ---------------------- -------------- -------------- -----------------
Pilgrim VP Pilgrim Investments,
International Inc./Brandes
Value Portfolio Investment
Partners, L.P.
------------------- ---------------------- -------------- -------------- -----------------
Pilgrim VP Pilgrim
MagnaCap Investments, Inc. X
Portfolio
------------------- ---------------------- -------------- -------------- -----------------
Pilgrim VP Pilgrim
MidCap Investments, Inc.
Opportunities
Portfolio
------------------- ---------------------- -------------- -------------- -----------------
Pilgrim VP Pilgrim
SmallCap Investments, Inc.
Opportunities
Portfolio
==================== =================== ====================== ============== ============== =================
Putnam Putnam Putnam Investment
Investments, Inc. VT Growth and Management, Inc. X
Income Fund -
Class IB Shares
------------------- ---------------------- -------------- -------------- -----------------
Boston, Mass. Putnam Putnam Investment
VT New Management, Inc.
Opportunities
Fund - Class
IB Shares
------------------- ---------------------- -------------- -------------- -----------------
Putnam Putnam Investment
VT Voyager Fund - Management, Inc.
Class IB Shares
==================== =================== ====================== ============== ============== =================
[WIDE TABLE CONTINUED FROM ABOVE]
<CAPTION>
PRIMARY
FUND GROUP INTERNATIONAL BALANCED GROWTH AGGRESSIVE GROWTH OBJECTIVE(S) INVESTMENTS
==================== =============== ========== ======== ================== ======================== =======================
<S> <C> <C> <C> <C> <C> <C>
Pilgrim Long-term capital Common stocks of
X growth large cap, mid cap
Phoenix, AZ or small cap
companies
--------------- ---------- -------- ------------------ ------------------------ -----------------------
Capital appreciation Equity securities
from investing in a
X diversified portfolio
of equity securities
--------------- ---------- -------- ------------------ ------------------------ -----------------------
High current yield and High-yield bonds
capital appreciation
--------------- ---------- -------- ------------------ ------------------------ -----------------------
Long-term capital International equities
X appreciation
--------------- ---------- -------- ------------------ ------------------------ -----------------------
Capital growth Common stocks
--------------- ---------- -------- ------------------ ------------------------ -----------------------
Long-term capital Common stocks of
X appreciation mid-sized
U.S. companies
--------------- ---------- -------- ------------------ ------------------------ -----------------------
Long-term capital Common stocks
X appreciation
==================== =============== ========== ======== ================== ======================== =======================
Putnam Capital growth & Value stocks
Investments, Inc. current income
--------------- ---------- -------- ------------------ ------------------------ -----------------------
Boston, Mass. X Long-term capital Growth stocks
appreciation
--------------- ---------- -------- ------------------ ------------------------ -----------------------
X Capital appreciation Growth stocks
==================== =============== ========== ======== ================== ======================== =======================
</TABLE>
For each Fund's expenses, see page 17 of this Prospectus and the
Prospectuses for the Funds.
CHARGES AGAINST THE ACCUMULATION VALUE
The Accumulation Value of the Policy is subject to the Monthly Deduction
charges. Except for the Monthly Mortality and Expense Risk Charge, 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. We will deduct the Monthly Mortality
and Expense Risk Charge on a proportionate basis from each Sub-Account of the
Variable Account depending on their relationship to the Variable Accumulation
Value 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, Rate Class and Face Amount.
o Monthly Administrative Charge -- currently $8.25 per month and
guaranteed not to exceed $12.00 per month.
o Monthly Mortality and Expense Risk Charge -- currently equal to
1/12 of .35% of the Variable Accumulation Value and guaranteed
not to exceed 1/12 of .60% of the Variable Accumulation Value.
10
<PAGE>
o Monthly Amount Charge -- a monthly charge that varies by the
Insured's Issue Age, Sex and Face Amount and is assessed during
the first 10 Policy Years (and first 10 years after a Face Amount
increase). The maximum amount of this charge is $3.333 per $1,000
of Face Amount for a male Issue Age 85.
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 10 Policy Years (or during
the first 10 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 10-year period. 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, 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 90% 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 4.762%.
o After the 10th Policy Year, we currently charge
interest at an annual rate of 2.913% (guaranteed
not to exceed 3.382%) 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 12 transfers per 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".
DEATH BENEFIT OVERVIEW
You may choose one of two Death Benefit Qualification Tests for compliance
with Code Section 7702's definition of "life insurance": (1) the Guideline
Premium Test; and (2) the Cash Value Accumulation Test.
11
<PAGE>
You also can choose one of three Death Benefit Options:
o Level Amount Option -- whereby the Death Benefit until Age 100 is
the greater of the Face Amount or the corridor percentage of
Accumulation Value;
o Variable Amount Option -- whereby the Death Benefit until Age 100
is equal to the greater of the Face Amount plus the Accumulation
Value, or the corridor percentage of Accumulation Value; or
o Face Plus Premium Amount Option -- whereby the Death Benefit
until Age 100 is the greater of the Face Amount plus premiums
less withdrawals, or the corridor percentage of the Accumulation
Value. See "Death Benefit".
The Death Benefit until Age 100 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.
The Death Benefit until Age 100 under the Face Plus Premium Amount Option may
be less than Face Amount if cumulative withdrawals exceed cumulative premiums
paid. After Age 100, the Death Benefit under all Death Benefit Options will be
the Accumulation Value.
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
"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 -- Change in 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."
12
<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 Standard
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, or from
the Variable Account only. 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. The amount
remaining after we deduct the Premium Expense Charge is called the Net Premium.
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.
Except for the Monthly Mortality and Expense Risk Charge, 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. We will deduct the
13
<PAGE>
Monthly Mortality and Expense Risk Charge on a proportionate basis from each
Sub-Account of the Variable Account depending on their relationship to the
Variable Accumulation Value 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
1.002466 (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 3%), 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, Age, Face Amount, 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 AMOUNT CHARGE. Each month during the first 10 Policy Years (and
for 10 years following any requested increase in Face Amount) we will deduct a
monthly charge per $1,000 of Face Amount. For a Policy issued in New Jersey,
the reduction of these charges after the first ten Policy Years is not
guaranteed and these charges may be assessed for the duration of the Policy.
The amount of this charge will vary by the Insured's Sex, Rate Class, Issue Age
and Face Amount on the Policy Date (or on the effective date of any Face Amount
increase). These Monthly Amount Charges are shown in Appendix D. Any decreases
in Face Amount or any change in Face Amount resulting from a change in the
Death Benefit Option will not affect the Monthly Amount Charge. The maximum
amount of this charge is $3.333 per $1,000 of Face Amount for a male Issue Age
85 for Insureds of Age 85. This charge compensates us for expenses relating to
the distribution of the Policy, including agents' commissions, advertising, and
the printing of the prospectus and sales literature for new sales of the
Policy. A portion of this charge may also contribute to Company profits.
MONTHLY MORTALITY AND EXPENSE RISK CHARGE. Each month we will deduct a
charge currently equal to 1/12 of .35% of the Variable Accumulation Value
(minus the portion of the following charges taken from the Variable
Accumulation Value: the cost of insurance charge, the Monthly Amount Charge,
the Monthly Administrative Charge, and the cost of any riders). We guarantee
that the Mortality and Expense Risk Charge will not exceed 1/12 of .60% of the
Variable Accumulation Value 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.
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<PAGE>
OPTIONAL INSURANCE BENEFIT CHARGES. Each month we deduct charges for any
optional insurance benefits added to the Policy by rider. See "General
Provisions -- Optional Insurance Benefits".
SURRENDER CHARGE
GENERAL. During the first 10 years the Policy is in force and the first 10
years following a requested increase in the Face Amount, there is a Surrender
Charge if you surrender the Policy or the Policy lapses. We will determine the
maximum Surrender Charge for the initial Face Amount or any requested increase
in Face Amount on the Policy Date or on the effective date of any requested
increase. The Surrender Charge for the initial Face Amount reduces in equal
monthly increments until it becomes zero at the end of 10 years. For any
requested increase in Face Amount, an additional Surrender Charge begins at
zero, increases in equal monthly increments until it reaches the maximum after
three years, and then reduces in equal monthly increments until it becomes zero
at the end of 10 years. Thus if the Policy remains in force during the entire
relevant 10-year period, you do not pay the Surrender Charge. The Surrender
Charge will vary depending on the Insured's Age, sex, and Rate Class on the
Policy Date or on the effective date of an increase in Face Amount. The maximum
amount of the Surrender Charge is $5.50 per thousand for a female Insured at
Issue Age 65.
The Surrender Charge for the initial Face Amount or any requested increase
in Face Amount is determined by multiplying (1) the applicable Surrender Charge
per $1,000 of Face Amount from Appendix C by (2) the initial Face Amount or the
Face Amount of the increase, as applicable, and by (3) the applicable
percentage from the Surrender Charge Percentage Table below, and then dividing
this amount by 1000.
EXAMPLE. The following example illustrates how we determine the Surrender
Charge. Assume that a male, Age 35 buys a Policy with an initial Face Amount of
$100,000 and surrenders the Policy at the end of the third Policy Year.
Based on these assumptions, the Surrender Charge will be the result of
multiplying (1) $19.00 (from Appendix C for a male Age 35) by (2) $100,000 (the
initial Face Amount) and by (3) 70% (the applicable percentage from the
Surrender Charge Percentage Table), and then dividing by 1000, which results in
a Surrender Charge of $1,330 (($19.00 x $100,000 x 70%) / 1000).
The additional Surrender Charge for requested increases in Face Amount
will be calculated in the same manner as illustrated in the example above,
except that the different Surrender Charge Percentages apply for requested
increases in Face Amount.
SURRENDER CHARGE PERCENTAGE TABLE
THE FOLLOWING PERCENTAGES OF THE
SURRENDER CHARGE WILL BE PAYABLE FOR:
IF SURRENDER OR LAPSE OCCURS IN
THE LAST MONTH OF POLICY YEAR:* INITIAL FACE AMOUNT FACE AMOUNT INCREASES
- --------------------------------- --------------------- ----------------------
0 100% 0%
1 90% 23.3%
2 80% 46.7%
3 70% 70%
4 60% 60%
5 50% 50%
6 40% 40%
7 30% 30%
8 20% 20%
9 10% 10%
10 0% 0%
*For requested increases, years are measured from the date of the increase.
MONTANA RESIDENTS. Appendix C and Appendix D and the preceding
illustrations of the Surrender Charge do not apply to Policies issued in
Montana. The Insured's sex does not affect the Surrender Charge applied to
Policies issued in Montana. Therefore, the Surrender Charge made on Policies
issued in Montana will differ from the charge made in other states.
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<PAGE>
PARTIAL WITHDRAWAL AND TRANSFER CHARGES
We currently make no charge for the first 24 transfers in a Policy Year.
We make a $25 charge for each subsequent transfer. We currently make a $10.00
charge for each partial withdrawal. These charges are guaranteed not to exceed
$25.00 per transfer or partial withdrawal for the duration of the Policy. The
transfer charge will not be imposed on transfers that occur as a result of
Policy loans or the exercise of conversion rights.
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. Reductions will not be unfairly discriminatory against any
person, including the affected Policy owners and owners of all other policies
funded by the Variable Account.
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 on the next
page 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 REIMBURSEMENT
<TABLE>
<CAPTION>
TOTAL INVESTMENT
MANAGEMENT OTHER 12B-1 FUND AMOUNT
FUND FEES EXPENSES FEES EXPENSES
- ------------------------------------------------------------- ------------ ---------- ---------- -----------------
<S> <C> <C> <C> <C>
Fidelity VIP Equity-Income Portfolio --
Service Class 2 (a) (b) (c) ................................ 0.48% 0.10% 0.25% 0.83%
Fidelity VIP Growth Portfolio -- Service Class 2
(a) (b) (c) ................................................ 0.58% 0.10% 0.25% 0.93%
Fidelity VIP High Income Portfolio --
Service Class 2 (a) (b) .................................... 0.58% 0.12% 0.25% 0.95%
Fidelity VIP Money Market Portfolio -- Initial Class ........ 0.18% 0.09% N/A 0.27%
Fidelity VIP II Contrafund Portfolio --
Service Class 2 (a) (b) (c) ................................ 0.58% 0.12% 0.25% 0.95%
Fidelity VIP II Investment Grade Bond Portfolio --
Initial Class (a) .......................................... 0.43% 0.11% N/A 0.54%
Janus Aspen Aggressive Growth Portfolio -- Service
Shares (a) (b) (d) ......................................... 0.65% 0.02% 0.25% 0.92%
Janus Aspen Growth Portfolio -- Service
Shares (a) (b) (d) ......................................... 0.65% 0.02% 0.25% 0.92%
Janus Aspen International Growth Portfolio -- Service
Shares (a) (b) (d) ......................................... 0.65% 0.11% 0.25% 1.01%
Janus Aspen Worldwide Growth Portfolio --
Service Shares (a) (b) (d) ................................. 0.65% 0.05% 0.25% 0.95%
Mitchell Hutchins Series Trust Global Income Portfolio --
Class I Shares (a) (b) (e) ................................. 0.75% 1.34% 0.25% 2.34%
Mitchell Hutchins Series Trust Growth and Income
Portfolio -- Class I Shares (a) (b) (e) .................... 0.70% 0.53% 0.25% 1.48%
Mitchell Hutchins Series Trust Tactical Allocation
Portfolio -- Class I Shares (a) (b) (e) .................... 0.50% 0.24% 0.25% 0.99%
Pilgrim VP Trust Growth Opportunities Portfolio (f) (g) ..... 0.75% 0.34% N/A 1.09%
Pilgrim VP Trust Growth + Value Portfolio (f) ............... 0.75% 0.22% N/A 0.97%
Pilgrim VP Trust High Yield Bond Portfolio (f) .............. 0.75% 0.36% N/A 1.11%
Pilgrim VP Trust MagnaCap Portfolio (f) (g) ................. 0.75% 0.34% N/A 1.09%
Pilgrim VP Trust MidCap Opportunities Portfolio (f) (g) ..... 0.75% 0.34% N/A 1.09%
Pilgrim VP Trust International Value Portfolio (f) .......... 1.00% 0.52% N/A 1.52%
Pilgrim VP Trust SmallCap Opportunities Portfolio (f) ....... 0.75% 0.34% N/A 1.09%
Putnam VT Growth and Income Fund -- Class IB
Shares (b) ................................................. 0.46% 0.04% 0.15% 0.65%
Putnam VT New Opportunities Fund -- Class IB
Shares (b) ................................................. 0.54% 0.05% 0.15% 0.74%
Putnam VT Voyager Fund -- Class IB Shares (b) ............... 0.53% 0.04% 0.15% 0.72%
</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) The Funds' distribution plan or "Rule 12b-1 Plan" is described in
each Fund's prospectus. See Fund prospectuses for details.
(c) A portion of the brokerage commissions that certain funds pay was
used to reduce fund expenses. In addition, through arrangements
with certain funds' custodian, credits realized as a result of
uninvested cash balances were used to reduce a portion of each
applicable fund's expenses. Without these reductions, the total
operating expenses presented in the table would
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<PAGE>
have been .67% for Equity-Income Portfolio, .77% for Growth
Portfolio, and .78% for Contrafund Portfolio. Service Class 2
expenses are based on estimated expenses for the first year.
(d) Expenses are based on the estimated expenses that the new Service
Shares Class of each Portfolio expects to incur in its initial
fiscal year. All expenses are stated without the effect of any
expense offset arrangements.
(e) This fee and expense information has been restated to reflect
current fees and expenses effective April 30, 2000.
(f) The investment adviser to the Pilgrim Variable Products Trust has
agreed to reimburse the 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, Growth
Opportunities Portfolio, MagnaCap Portfolio, and MidCap 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%; and 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 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).
INVESTMENTS OF THE VARIABLE ACCOUNT
There are currently 23 investment options (Funds) available under the
Variable Account that are offered through this Prospectus. However, we only
permit you to participate in a maximum of 17 investment options over the
lifetime of your Policy. You also should 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
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<PAGE>
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 may also 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. Some or all of these sub-accounts
invest in service-class shares that assess a 12b-1 fee. These service class
shares were not available through the Variable Account until May 1, 2000, and
were not offered by the applicable Fund until after the inception date of that
Fund. Performance of these service class shares is shown from the Fund inception
date. Performance up to the date that these service class shares were first
offered by the applicable Fund has been calculated based on the performance of
the initial class of shares offered by that Fund. Actual performance for service
class shares will be lower than for initial class shares because of the
assessment of a 12b-1 fee on service class shares.
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
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").
DEATH BENEFIT QUALIFICATION TESTS
You choose one of the two Death Benefit Qualification Tests for compliance
with the Code Section 7702 definition of life insurance. These tests are the
Cash Value Accumulation Test and the Guideline Premium Test. You cannot change
this choice after issue.
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
19
<PAGE>
not 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)).
GUIDELINE PREMIUM TEST
CORRIDOR PERCENTAGE TABLE
<TABLE>
<CAPTION>
CORRIDOR CORRIDOR CORRIDOR
INSURED'S AGE ON PERCENTAGE OF INSURED'S AGE ON PERCENTAGE OF INSURED'S AGE ON PERCENTAGE OF
PREVIOUS POLICY ACCUMULATION PREVIOUS POLICY ACCUMULATION PREVIOUS POLICY ACCUMULATION
ANNIVERSARY VALUE ANNIVERSARY VALUE ANNIVERSARY VALUE
- ------------------ -------------- ------------------ -------------- ------------------ --------------
<S> <C> <C> <C> <C> <C>
40 or younger 250% 54 157 68 117
41 243 55 150 69 116
42 236 56 146 70 115
43 229 57 142 71 114
44 222 58 138 72 113
45 215 59 134 73 111
46 209 60 130 74 109
47 203 61 128 75-90 105
48 197 62 126 91 104
49 191 63 124 92 103
50 185 64 122 93 102
51 178 65 120 94 101
52 171 66 119 95 or older 100
53 164 67 118
</TABLE>
CASH VALUE ACCUMULATION TEST. The Death Benefit is never less than the
amount required for this Policy to be deemed "life insurance" based on the Cash
Value Accumulation Test as defined in Code Section 7702(b). Generally, the Cash
Value Accumulation Test requires that under the terms of a life insurance
policy, the Death Benefit must be sufficient so that the Accumulation Value
does not at any time exceed the net single premium required to fund the future
benefits under the Policy. The net single premiums under the Policy vary
according to the Age, sex, and Rate Class of the Insured. The net single
premium is calculated using a 4% interest rate and using the guaranteed
mortality charges as of the time the Policy is issued. The corridor percentage
for the Cash Value Accumulation Test is then equal to 100% divided by the net
single premium for the current Age, Sex, and Rate Class.
WHICH DEATH BENEFIT QUALIFICATION TEST TO CHOOSE
The Cash Value Accumulation Test does not limit the amount of premium that
may be paid into a Policy. If you desire to pay premiums in excess of the
guideline premium test limitations you should elect the Cash Value Accumulation
Test. However, any premium that would increase the net amount at risk is
subject to evidence of insurability satisfactory to us. Required increases in
the minimum death benefit due to growth in Accumulation Value will generally be
greater under the Cash Value Accumulation Test than under the Guideline Premium
Test.
The Guideline Premium Test limits the amount of premium that may be paid
into a Policy. If you do not desire to pay premiums in excess of the Guideline
Premium Test limitations, you should consider the Guideline Premium Test.
DEATH BENEFIT OPTIONS
The Policy provides three 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 100 depends on the Death Benefit Option
chosen as described below regardless of the Death Benefit Option chosen. The
Death Benefit after Age 100 is the Accumulation Value.
OPTION A. (Level Amount Option.) Prior to Age 100, 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 100, 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
20
<PAGE>
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.
OPTION C. (Face Amount Plus Premium Amount Option.) Prior to Age 100, the
Death Benefit is the greater of the Face Amount plus cumulative premiums less
cumulative withdrawals, or the Corridor Percentage of the Accumulation Value on
the Valuation Date following the date of the Insured's death. Under Option C,
the amount of the Death Benefit will vary as the premiums are paid or
withdrawals are made, or if the Corridor Percentage of the Accumulation Value
exceeds the current Face Amount.
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. If you require a specific Death Benefit which would
include a return of the premium paid, such as under an employer sponsored
benefit plan, Option C may meet your needs.
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 85, 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 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. Under our current
rules, the Minimum Face Amount is $25,000, but we reserve the right to
establish a different Minimum Face Amount in the future. If, following a
decrease in Face Amount, the Policy would no longer qualify as life insurance
under Federal tax law (see "Federal Tax Matters -- 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".
21
<PAGE>
For example, assume that the initial Face Amount was $50,000 with a
standard Rate Class, and that successive increases of $25,000 (at a Rate Class
of 200%) and $50,000 (at a Rate Class of 300%) were added. If a decrease of
$50,000 or less is requested, the amount of insurance at a 300% Rate Class will
be reduced first. If a decrease of more than $50,000 is requested, the amount at
a 300% Rate Class will be eliminated, and the excess over $50,000 will next
reduce the amount of insurance at a 200% Rate Class.
EFFECT OF REQUESTED CHANGES IN FACE AMOUNT. An increase or decrease in
Face Amount will affect the Monthly Deduction because the cost of insurance
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".
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, 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
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and the Death Benefit will be increased if premium payments are
increased, and reduced if premium payments are reduced.)
Under the Face Plus Premium Amount Option, until the
corridor percentage of Accumulation Value exceeds the Face
Amount, the level of premium payments will affect the amount
of pure insurance protection.
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. We
allow changes from Option A to Option B, from Option B to Option A, and,
currently, from Option C to Option A. We will not allow changes to Option C
after issue. 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 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. If you
change from Option C to Option A, we will increase the Face Amount by an amount
equal to cumulative premiums less cumulative withdrawals taken.
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.
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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 the 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 the 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 85 or less who supplies evidence of insurability satisfactory to
us. The minimum Face Amount is currently $25,000, 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 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
We will credit the initial Net Premium and any premiums received prior to
the Initial Premium Transfer Date to the Fidelity VIP Money Market Sub-Account
on the later of the Policy Date or the date we receive your premium. On the
Initial Premium Transfer Date, we will transfer the Variable Accumulation Value
in the Fidelity VIP Money Market Sub-Account to the Fixed Account and the
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Sub-Accounts of the Variable Account as you designated on the Policy
application. After the Initial Premium Transfer Date, we credit premiums to the
Fixed Account and the Sub-Accounts of the Variable Account as you designated on
the Policy application.
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".
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.
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o You may pay additional premiums (other than Planned Periodic
Premiums) at any time while the Policy is in force before Age
100. 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
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 expires at the Insured's Age 65 for Issue
Ages 0 through 60, or at the end of five Policy Years for Issue Ages 61 through
80, or at the end of three Policy Years for Issue Ages 81 through 85. The Death
Benefit Guarantee Period is shorter for substandard rated policies or if any
term insurance rider is attached.
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 10 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.
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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 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. You can reinstate the Death
Benefit Guarantee within the first 5 Policy Years by paying any past due
Minimum Monthly Premiums. After the first 5 Policy Years, a lapsed 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.
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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 3%), 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.
We have also filed an example of such an illustration as an exhibit to the
registration statement as referred to on page 49 of this prospectus. This form
of illustration (Form B) is available to you upon request and is incorporated
herein by reference. There also may be state specific product features that
make the illustrations applicable to you differ from the form of illustrations
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,
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the Policy will lapse only if, as of any Monthly Anniversary, the Cash
Surrender Value is less than the Monthly Deduction due, and a grace period of
61 days expires without a sufficient payment.
During the early Policy Years, the Cash Surrender Value will generally not
be sufficient to cover the Monthly Deduction, so that premium payments
sufficient to maintain the Death Benefit Guarantee will be required to avoid
lapse. See "Death Benefit Guarantee".
The Policy does not lapse, and the insurance coverage continues, until the
expiration of a 61-day grace period which begins on the date we send you
written notice indicating that the Cash Surrender Value is less than the
Monthly Deduction due. Our written notice 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.
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".
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 10 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
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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 (currently $25,000).
If the Variable Amount Option or the Face Plus Premium 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.
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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.
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. For
a Policy issued in New Jersey, we may not discontinue this service, but we
reserve the right to charge up to $50 per transfer. 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
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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. For
a Policy issued in New Jersey, we may not discontinue this service, but we
reserve the right to charge up to $50 per transfer. Any such modification or
discontinuation could affect Portfolio Rebalancing services currently in
effect, but only after 30 days notice to affected Policy owners.
TRANSFER LIMITS. We currently allow unlimited transfers in a Policy Year,
although we reserve the right to limit you to no more than twelve transfers per
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 per transfer for any
transfer. 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 and
New Jersey may take loans during the first Policy year if there is a Loan
Amount). The maximum amount you may borrow at any time is equal to the loan
value of the Policy, which is equal to 90% of the Cash Value (100% in Texas)
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.
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".
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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 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 3.00%. 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,
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, 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 4.762%, payable in advance. After the 10th Policy Year, we currently charge
interest at an annual rate of 2.913% (guaranteed not to exceed 3.382%), 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 4.762%, 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
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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. 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".
1035 EXCHANGES. We reserve the right to permit a Policy Loan prior to the
first Policy Anniversary for Policies issued pursuant to a transfer of Cash
Values from another life insurance policy under Section 1035(a) of the Code, as
amended. In the event of such a Policy Loan, the Policy Loan will be treated
for all purposes as made on the Policy Issue Date.
FREE LOOK AND CONVERSION RIGHTS
FREE LOOK RIGHTS
The Policy provides for a "free look" period after application for and
issuance of the Policy. The Policy also provides for a "free look" period after
any requested increase in Face Amount.
During the free look period after application for and issuance of the
Policy, you have a right to return the Policy for cancellation. You must return
the Policy to your agent or us and ask us to cancel the Policy by midnight of
the 10th day after receiving the Policy. Upon cancellation of the Policy, you
will receive a refund of premiums paid for the Policy.
During the free look period after a requested increase in Face Amount, you
have the right to cancel the increase. You must request cancellation of the
increase by midnight of the 10th day after receiving the new Policy Data Page
reflecting the increase. 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. Whether this conversion right is
exercised during the first two Policy Years or during the two years following a
Face Amount increase, we will allow the full Accumulation Value to be
transferred to the Fixed Account on request. 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".
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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 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 there are currently 23 Variable Account investment options
offered through this Prospectus, we currently only permit you to participate in
a maximum of 17 investment options over the lifetime of your Policy. The
initial allocation of your premium to the Fidelity VIP Money Market Sub-Account
will count against the 17 investment option limitation. 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
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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, 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.
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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 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 100, 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. The amount by which this
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.
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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 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.
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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 2.0%.
In determining amounts we pay under Options 3, 4,and 5, we assume interest
at an effective annual rate of 2%. 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.
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.
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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 Investment Funds, will
be mailed to your household, even if you or other persons in your household
have more than one contract issued by ReliaStar Life 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.
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 level term coverage to age 100 on a
family member 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.
COST OF LIVING INCREASE RIDER. Provides optional increases in Face Amount
on the life of the Insured every two years based on the cost of living without
evidence of insurability.
EXTENDED DEATH BENEFIT GUARANTEE RIDER. Provides a death benefit guarantee
to Age 100 for payment of the guideline annual premium each year or on a
cumulative basis.
TERM INSURANCE RIDER. Provides level term insurance on the Insured if
death occurs prior to the Insured's Age 100.
The current cost of insurance rates for the rider are different than for
the base Policy. In addition, the base Policy's Monthly Amount Charges per
$1,000 and Surrender Charge do not apply to coverage under the rider. However,
the Term Insurance Rider will cause the Death Benefit Guarantee Period of the
base Policy to be shortened.
After the tenth Policy Year if the base Death Benefit is equal to the
Accumulation Value multiplied by the corridor percentage (see "Death Benefit"),
you may ask us to replace the Term Insurance Rider
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amount with base coverage without providing evidence of insurability. We must
replace the entire rider amount if any amount is replaced. Neither Surrender
Charges nor Monthly Amount Charges will apply to the new additional base
coverage. Cost of insurance rates on this new additional base coverage will be
equal to the cost of insurance rates for the base coverage based on the
original rider issue date.
There may be times in which it will be to your economic advantage to
include a significant portion of your insurance coverage under a term rider. In
some other circumstances, it may be in your interest to obtain a Policy without
term rider coverage. These circumstances depend on many factors, including the
premium levels and amount and duration of coverage you choose, as well as the
age, sex, and rate class of the Insured.
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.
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
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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.
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 a 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.
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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
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.
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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 50% of the premiums paid up to the
annualized Minimum Monthly Premium, plus 2% of additional premiums. In any
subsequent Policy Year, commissions generally will be 2% of premiums paid in
that year. Corresponding commissions will be paid upon a requested increase in
Face Amount. In addition, a commission of .25% 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 which use 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.
PRINCIPAL OCCUPATION
DIRECTORS AND OFFICERS AND BUSINESS EXPERIENCE
- ---------------------- -----------------------
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.
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PRINCIPAL OCCUPATION
DIRECTORS AND OFFICERS AND BUSINESS EXPERIENCE
- ---------------------- -----------------------
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.
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PRINCIPAL OCCUPATION
DIRECTORS AND OFFICERS AND BUSINESS EXPERIENCE
- ---------------------- -----------------------
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.
- ------------------
1 Director of ReliaStar Life Insurance Company
2 Director and Officer of ReliaStar Life Insurance Company
3 Officer of ReliaStar Life Insurance Company
The following is a list of the current directors and executive officers of
the principal underwriter and their business addresses.
NAME AND PRINCIPAL
BUSINESS ADDRESS POSITIONS AND OFFICES
- ------------------------ -----------------------------------------------------
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
- --------------------
* 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.
MONTANA RESIDENTS
If you are a resident of 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 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 Illustration 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 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 James M. Odland, Esquire,
Attorney for the Company.
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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 annual
consolidated financial statements of ReliaStar Life Insurance Company and
subsidiaries as of December 31, 1999 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 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
financial statements are 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.
49
<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
50
<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.
51
<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.
52
<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.
53
<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.
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 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.
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>
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.
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>
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.
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>
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.
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>
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.
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>
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.
60
<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.
61
<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.
62
<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>
63
<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.
DELOITTE & TOUCHE LLP
Minneapolis, Minnesota
February 1, 2000
64
<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.
65
<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.
66
<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.
67
<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.
68
<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
69
<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.
70
<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.
71
<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
72
<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>
73
<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
74
<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>
75
<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
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<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
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<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>
78
<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.
85
<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.
86
<PAGE>
APPENDIX A
THE FIXED ACCOUNT
The Fixed Account consists of all of our assets other than those in our
separate accounts. We have complete ownership and control of all of the assets
of the Fixed Account.
Because of exemptions and exclusions contained in the Securities Act of
1933 and the Investment Company Act of 1940, the Fixed Account has not been
registered under these acts. Neither the Fixed Account nor any interest in it
is subject to the provisions of these acts and as a result the SEC has not
reviewed the disclosures in this Prospectus relating to the Fixed Account.
However, disclosures relating to the Fixed Account are subject to generally
applicable provisions of the federal securities laws relating to the accuracy
and completeness of statements made in prospectuses.
We guarantee both principal and interest on amounts credited to the Fixed
Account. We credit interest at an effective annual rate of at least 3%,
independent of the investment experience of the Fixed Account. From time to
time, we may guarantee interest at a rate higher than 3%.
ANY INTEREST CREDITED TO AMOUNTS ALLOCATED TO THE FIXED ACCOUNT IN EXCESS
OF 3% 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 3% 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 / 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 3%. 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 SURRENDER CHARGES
PER $1,000 OF FACE AMOUNT
<TABLE>
<CAPTION>
ISSUE ISSUE
AGE* MALE FEMALE UNISEX AGE* MALE FEMALE UNISEX
- ------- ---------- ---------- ---------- ------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
0 $ 5.35 $ 5.30 $ 5.34 43 $ 24.39 $ 22.02 $ 23.90
1 5.58 5.44 5.55 44 25.25 22.68 24.72
2 5.81 5.58 5.76 45 26.00 23.39 25.60
3 6.04 5.72 5.98 46 27.08 24.12 26.47
4 6.27 5.86 6.19 47 28.06 24.89 27.40
5 6.50 6.00 6.40 48 29.12 25.72 28.41
6 6.73 6.14 6.61 49 30.25 26.61 29.49
7 6.96 6.28 6.82 50 31.48 27.56 30.66
8 7.19 6.42 7.04 51 32.80 28.57 31.91
9 7.42 6.56 7.25 52 34.22 29.66 33.26
10 7.65 6.70 7.46 53 35.75 30.81 34.70
11 7.88 6.84 7.67 54 37.40 32.05 36.26
12 8.11 6.98 7.88 55 38.75 33.37 37.90
13 8.34 7.12 8.10 56 39.84 34.68 39.09
14 8.57 7.26 8.31 57 40.92 36.08 40.28
15 8.80 7.40 8.52 58 42.01 37.62 41.46
16 9.17 7.71 8.88 59 43.09 39.28 42.65
17 9.54 8.02 9.24 60 44.18 41.10 43.84
18 9.91 8.33 9.59 61 45.26 43.08 45.03
19 10.28 8.64 9.95 62 46.35 45.24 46.22
20 10.65 8.95 10.31 63 47.43 47.30 47.40
21 11.02 9.26 10.67 64 48.52 48.90 48.59
22 11.39 9.57 11.03 65 49.60 50.50 49.78
23 11.76 9.88 11.38 66 49.04 50.07 49.25
24 12.13 10.19 11.74 67 48.48 49.64 48.71
25 12.50 10.50 12.10 68 47.92 49.21 48.18
26 13.15 11.05 12.73 69 47.36 48.78 47.64
27 13.80 11.60 13.36 70 46.80 48.35 47.11
28 14.45 12.15 13.99 71 46.24 47.92 46.58
29 15.10 12.70 14.62 72 45.68 47.49 46.04
30 15.75 13.25 15.25 73 45.12 47.06 45.51
31 16.40 13.80 15.88 74 44.56 46.63 44.97
32 17.05 14.35 16.51 75 44.00 46.20 44.44
33 17.70 14.90 17.14 76 43.49 46.12 44.01
34 18.35 15.45 17.77 77 42.97 46.05 43.59
35 19.00 16.00 18.40 78 42.46 45.97 43.16
36 19.70 16.85 19.13 79 41.94 45.89 42.73
37 20.30 17.70 19.86 80 41.43 45.82 42.30
38 20.87 18.55 20.54 81 40.91 45.74 41.88
39 21.48 19.40 21.12 82 40.40 45.66 41.45
40 22.14 20.25 21.75 83 39.88 45.58 41.02
41 22.84 20.81 22.42 84 39.37 45.51 40.59
42 23.59 21.40 23.14 85 38.85 45.43 40.16
</TABLE>
- ------------------
* Based on the Insured's age on the Policy Date, or on the Effective Date of
any increase in face amount, as appropriate.
C-1
<PAGE>
APPENDIX D
MONTHLY AMOUNT CHARGES
PER $1,000 OF FACE AMOUNT*
<TABLE>
<CAPTION>
MALE FEMALE UNISEX
----------------------------- ----------------------------- ----------------------------
ISSUE FACE AMOUNT FACE AMOUNT FACE AMOUNT FACE AMOUNT FACE AMOUNT FACE AMOUNT
AGE** BAND 1 BANDS 2-4 BAND 1 BANDS 2-4 BAND 1 BANDS 2-4
- ------- ------------- ------------- ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
0 $ 0.045 $ 0.020 $ 0.020 $ 0.006 $ 0.040 $ 0.017
1 0.050 0.020 0.025 0.006 0.045 0.017
2 0.055 0.020 0.029 0.006 0.049 0.017
3 0.060 0.020 0.033 0.006 0.054 0.017
4 0.065 0.020 0.037 0.006 0.059 0.017
5 0.070 0.020 0.041 0.006 0.064 0.017
6 0.075 0.023 0.045 0.008 0.069 0.020
7 0.080 0.026 0.050 0.009 0.074 0.022
8 0.085 0.029 0.054 0.011 0.078 0.025
9 0.090 0.032 0.058 0.012 0.083 0.028
10 0.095 0.035 0.062 0.014 0.088 0.030
11 0.100 0.038 0.066 0.015 0.093 0.033
12 0.105 0.041 0.070 0.017 0.098 0.036
13 0.110 0.044 0.075 0.018 0.103 0.038
14 0.115 0.046 0.079 0.020 0.107 0.041
15 0.120 0.046 0.083 0.021 0.112 0.044
16 0.121 0.046 0.084 0.024 0.114 0.046
17 0.123 0.046 0.085 0.027 0.115 0.049
18 0.124 0.046 0.087 0.030 0.117 0.051
19 0.126 0.046 0.088 0.034 0.118 0.054
20 0.127 0.046 0.089 0.037 0.119 0.056
21 0.129 0.048 0.090 0.040 0.121 0.059
22 0.130 0.050 0.092 0.043 0.122 0.061
23 0.132 0.053 0.093 0.046 0.124 0.064
24 0.133 0.056 0.094 0.049 0.125 0.066
25 0.135 0.059 0.095 0.052 0.127 0.069
26 0.143 0.064 0.102 0.059 0.134 0.076
27 0.151 0.068 0.108 0.065 0.142 0.083
28 0.159 0.074 0.114 0.072 0.150 0.090
29 0.167 0.080 0.120 0.078 0.157 0.097
30 0.175 0.086 0.127 0.085 0.165 0.105
31 0.183 0.093 0.133 0.092 0.173 0.112
32 0.191 0.102 0.139 0.098 0.180 0.119
33 0.199 0.111 0.145 0.105 0.188 0.126
34 0.207 0.121 0.152 0.111 0.196 0.133
35 0.215 0.133 0.158 0.118 0.203 0.141
36 0.228 0.146 0.169 0.128 0.216 0.155
37 0.242 0.160 0.180 0.138 0.229 0.169
38 0.255 0.175 0.190 0.148 0.242 0.183
39 0.269 0.192 0.201 0.159 0.255 0.198
40 0.282 0.210 0.212 0.169 0.268 0.212
41 0.296 0.228 0.223 0.179 0.281 0.226
42 0.309 0.248 0.234 0.189 0.294 0.241
</TABLE>
- ------------------
* Rates for Face Amount Band 1 rates apply to the initial Face Amount if less
than $100,000, and to any increase in face amount less than $100,000. Rates
for Face Amount Bands 2-4 apply to the initial Face Amount if $100,000 or
larger, and to any increase in face amount of $100,000 or larger.
** Based on the Insured's age on the Policy Date, or on the Effective Date of
any increase in face amount, as appropriate.
D-1
<PAGE>
APPENDIX D
MONTHLY AMOUNT CHARGES
PER $1,000 OF FACE AMOUNT*
<TABLE>
<CAPTION>
MALE FEMALE UNISEX
----------------------------- ----------------------------- ----------------------------
ISSUE FACE AMOUNT FACE AMOUNT FACE AMOUNT FACE AMOUNT FACE AMOUNT FACE AMOUNT
AGE** BAND 1 BANDS 2-4 BAND 1 BANDS 2-4 BAND 1 BANDS 2-4
- ------- ------------- ------------- ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
43 0.323 0.269 0.245 0.199 0.307 0.255
44 0.336 0.284 0.255 0.209 0.320 0.269
45 0.350 0.300 0.266 0.220 0.333 0.284
46 0.375 0.321 0.281 0.236 0.356 0.304
47 0.400 0.343 0.296 0.252 0.380 0.324
48 0.426 0.364 0.311 0.268 0.403 0.345
49 0.451 0.386 0.326 0.284 0.426 0.365
50 0.477 0.407 0.341 0.300 0.450 0.386
51 0.502 0.429 0.356 0.317 0.473 0.406
52 0.527 0.450 0.371 0.333 0.496 0.427
53 0.553 0.472 0.386 0.349 0.520 0.447
54 0.578 0.493 0.401 0.365 0.543 0.467
55 0.604 0.515 0.416 0.381 0.566 0.488
56 0.652 0.556 0.450 0.410 0.611 0.527
57 0.700 0.597 0.483 0.438 0.656 0.565
58 0.747 0.639 0.516 0.467 0.701 0.604
59 0.795 0.680 0.550 0.495 0.746 0.643
60 0.843 0.721 0.583 0.524 0.791 0.682
61 0.891 0.763 0.616 0.552 0.836 0.720
62 0.939 0.804 0.650 0.581 0.881 0.759
63 0.987 0.845 0.683 0.609 0.926 0.798
64 1.035 0.887 0.716 0.638 0.971 0.837
65 1.083 0.928 0.750 0.666 1.016 0.876
66 1.191 1.000 0.816 0.721 1.116 0.944
67 1.300 1.072 0.883 0.775 1.216 1.013
68 1.408 1.144 0.950 0.830 1.316 1.081
69 1.516 1.217 1.016 0.884 1.416 1.150
70 1.625 1.289 1.083 0.939 1.516 1.219
71 1.733 1.361 1.150 0.993 1.616 1.287
72 1.841 1.433 1.216 1.048 1.716 1.356
73 1.950 1.505 1.283 1.102 1.816 1.425
74 2.058 1.577 1.350 1.157 1.916 1.493
75 2.166 1.650 1.416 1.211 2.016 1.562
76 2.283 1.710 1.504 1.257 2.127 1.619
77 2.400 1.770 1.591 1.302 2.238 1.676
78 2.516 1.830 1.679 1.348 2.349 1.733
79 2.633 1.890 1.766 1.393 2.460 1.790
80 2.750 1.950 1.854 1.439 2.570 1.847
81 2.866 2.010 1.941 1.484 2.681 1.904
82 2.983 2.070 2.029 1.530 2.792 1.962
83 3.100 2.130 2.116 1.575 2.903 2.019
84 3.216 2.190 2.204 1.621 3.014 2.076
85 3.333 2.250 2.291 1.666 3.125 2.133
</TABLE>
- ------------------
* Rates for Face Amount Band 1 rates apply to the initial Face Amount if less
than $100,000, and to any increase in face amount less than $100,000. Rates
for Face Amount Bands 2-4 apply to the initial Face Amount if $100,000 or
larger, and to any increase in face amount of $100,000 or larger.
** Based on the Insured's age on the Policy Date, or on the Effective Date of
any increase in face amount, as appropriate.
D-2
<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 the requirements of Securities Act
Rule 485(b) for the effectiveness of this Registration Statement and has caused
this Post-effective Amendment No. 1 to this Registration Statement to be signed
on its behalf, in the City of Minneapolis and State of Minnesota, on this 14th
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
Post-effective Amendment No. 1 to this Registration Statement to be signed on
its behalf, in the City of Minneapolis and State of Minnesota, on this 14th 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 Post-effective Amendment No. 1
to this Registration Statement has been signed on this 14th day of April, 2000
by the following directors and officers of Depositor in the capacities
indicated:
SIGNATURE TITLE
--------- -----
/S/ JOHN G. TURNER Chairman and Chief Executive Officer
-------------------------------------
John G. Turner
/S/ JAMES R. MILLER Senior Vice President, Chief Financial
-------------------------------------- Officer and Treasurer
James R. Miller
*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
James M. Odland, 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/ JAMES M. ODLAND
-----------------------------------------
James M. Odland, 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 (Form A), consisting of 93 pages.
The general form of Prospectus (Form B), consisting of 92 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. James M. Odland, 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) Insured's Cost of Living Rider (Filed in S-6 on December 22,
1998, File No. 333-69431 and incorporated herein and by
reference)
(5) (f) Waiver of Monthly Deduction Rider (Filed in S-6 on December
22, 1998, File No. 333-69431 and incorporated herein and
by reference)
(5) (g) Accidental Death Benefit Rider (Filed in S-6 on December 22,
1998, File No. 333-69431 and incorporated herein and by
reference)
II-3
<PAGE>
(5) (h) Waiver of Specified Premium Rider (Filed in S-6 on December
22, 1998, File No. 333-69431 and incorporated herein and
by reference)
(5) (i) Term Insurance Rider (Filed in S-6 on December 22, 1998, File
No. 333-69431 and incorporated herein and by reference)
(5) (j) Extended Death Benefit Guarantee Rider (Filed in S-6 on
December 22, 1998, File No. 333-69431 and incorporated
herein and by reference)
(5) (k) Form of personalized illustration
(5) (l) Form of personalized illustration
(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) Form of Amendment No. 10 to Participation Agreement with
Fidelity's Variable Insurance Products Fund and Fidelity
Distributors Corporation. (Filed in S-6A on April 5, 1999,
File No. 333-69431 and incorporated herein by reference.)
(8) (c) Form of Amendment No. 11 to Participation Agreement with
Fidelity's Variable Insurance Products Fund and Fidelity
Distributors Corporation.
(8) (d) 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) (e) Form of Amendment No. 9 to Participation Agreement with
Fidelity's Variable Insurance Products Fund II and
Fidelity Distributors Corporation. (Filed in S-6A on April
5, 1999, File No. 333-69431 and incorporated herein by
reference.)
(8) (f) Form of Amendment No. 10 to Participation Agreement with
Fidelity's Variable Insurance Products Fund II and
Fidelity Distributors Corporation.
(8) (g) Form of Service Agreement and Contract among 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) (h) 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) (i) Form of Amendment No. 3 to Participation Agreement with Putnam
Capital Manager Trust and Putnam Mutual Funds Corp.
(8) (j) Form of Service Agreement by and between ReliaStar Life
Insurance Company and Janus Capital Corporation. (Filed in
485BPOS on August 4, 1997, File No. 2-95392 and
incorporated herein and by reference.)
(8) (k) Form of Service Agreement by and between ReliaStar Life
Insurance Company and Fred Alger Management, Inc. (Filed
in 485BPOS on August 4, 1997, File No. 2-95392 and
incorporated herein and by reference.)
II-4
<PAGE>
(8) (l) Form of Service Agreement by and between ReliaStar Life
Insurance Company and OpCap Advisors. (Filed in 485BPOS on
August 4, 1997, File No. 2-95392 and incorporated herein
and by reference.)
(8) (m) Form of Service Agreement by and between ReliaStar Life
Insurance Company and Neuberger Berman Management
Incorporated ("NBMI"). (Filed in 485BPOS on August 4,
1997, File No. 2-95392 and incorporated herein and by
reference.)
(8) (n) 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.)
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 485POS on March 31,
2000, file No. 33-57244 and incorporated herein by reference.)
(8) (o) Form of Participation Agreement by and between ReliaStar Life
Insurance Company and Janus Aspen Series. (Filed in
485BPOS on August 4, 1997, File No. 2-95392 and
incorporated herein and by reference.)
(8) (p) Form of Participation Agreement by and between ReliaStar Life
Insurance Company and Fred Alger Management, Inc., (Filed
in 485BPOS on August 4, 1997, File No. 2-95392 and
incorporated herein and by reference.)
Exhibit to Participation Agreement (Filed in 485BPOS on
March 31, 2000, File No. 33-57244 and incorporated herein
and by reference.)
(8) (q) Form of Participation Agreement by and between ReliaStar Life
Insurance Company and OpCap Advisors. (Filed in 485BPOS on
August 4, 1997, File No. 2-95392 and incorporated herein
and by reference.)
(8) (r) Form of Participation Agreement by and among ReliaStar Life
Insurance Company, Mitchell Hutchins Series Trust, and
Mitchell Hutchins Asset Management Inc.
(8) (s) Form of Service Agreement by and between ReliaStar Life
Insurance Company and Mitchell Hutchins Asset Management
Inc.
(8) (t) Form of Participation Agreement by and among AIM Variable
Insurance Funds, Inc, AIM Distributors, Inc., and
ReliaStar Life Insurance Company. (Filed in 485BPOS on
March 31, 2000, File No. 33-57244 and incorporated herein
and by reference.)
(8) (u) Form of Service Agreement by and between ReliaStar Life
Insurance Company, Northern Life Insurance Company,
ReliaStar Life Insurance Company of New York and A I M
Advisors, Inc. (Filed in 485BPOS on March 31, 2000, File
No. 33-57244 and incorporated herein and by reference.)
(8) (v) Form of Service Agreement by and between ReliaStar Life
Insurance Company and Janus Aspen Series.
(8) (w) Form of Participation Agreement by and between Janus Aspen
Series and ReliaStar Life Insurance Company.
(9) Not applicable.
(10)(a) Policy Application Form. (Filed in S-6A on April 5, 1999,
Accession Number 0000897101-99-000359, CIK 0000897899 and
incorporated herein by reference.)
(b) Supplements to Policy Application Form.
II-5
<PAGE>
2. Opinion and consent of James M. Odland, 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 and the Company's
procedure for conversion to a fixed benefit policy. (Filed
as an Exhibit in S-6EL24 on December 23, 1996, Accession
Number 0000897899-96-000017, CIK 0000897899 and
incorporated herein by reference.)
EX-24. Powers of Attorney. (Filed in N-4 on February 17, 2000,
File No. 333-30614 and incorporated herein by reference.)
Powers of Attorney.
Richard R. Crowl Susan W. A. Mead
Michael J. Dubes William R. Merriam
Wayne R. Huneke James R. Miller
Dewette Ingham, Jr. Robert C. Salipante
Mark S. Jordahl John G. Turner
Kenneth U. Kuk
II-6
EXHIBIT 1.A(5)(k)
FORM A
HYPOTHETICAL ILLUSTRATIONS:
The following illustrations use hypothetical examples to show the way a
Policy works. The illustrations are illustrative only and are 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 these
illustrations 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.
A-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 No Tobacco
Initial Total Face Amount: $100,000 Death Benefit Guarantee (DBG) to end of
year: 25
Initial Death Benefit Option: A (Level)
Annual Premium: $1,200.00
<TABLE>
<CAPTION>
CURRENT POLICY COSTS
--------------------------------------------------------------------------------------
0.00% GROSS HYPOTHETICAL RETURN 12.00% GROSS HYPOTHETICAL RETURN
(-1.14% NET RETURN) (10.86% NET RETURN)
---------------------------------------- -------------------------------------------
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 1,200 660 0 100,000 767 0 100,000
2 42 1,200 1,314 0 100,000 1,617 0 100,000
3 43 1,200 1,961 411 100,000 2,561 1,012 100,000
4 44 1,200 2,596 1,268 100,000 3,604 2,275 100,000
5 45 1,200 3,207 2,100 100,000 4,741 3,634 100,000
-----
6,000
6 46 1,200 3,796 2,911 100,000 5,986 5,101 100,000
7 47 1,200 4,360 3,696 100,000 7,349 6,685 100,000
8 48 1,200 4,900 4,457 100,000 8,843 8,400 100,000
9 49 1,200 5,413 5,192 100,000 10,480 10,258 100,000
10 50 1,200 5,897 5,897 100,000 12,273 12,273 100,000
-----
12,000
11 51 1,200 6,598 6,598 100,000 14,503 14,503 100,000
12 52 1,200 7,257 7,257 100,000 16,948 16,948 100,000
13 53 1,200 7,867 7,867 100,000 19,624 19,624 100,000
14 54 1,200 8,427 8,427 100,000 22,559 22,559 100,000
15 55 1,200 8,939 8,939 100,000 25,787 25,787 100,000
------
18,000
20 60 1,200 10,669 10,669 100,000 47,658 47,658 100,000
25 65 1,200 10,498 10,498 100,000 84,430 84,430 103,004
30 70 1,200 7,285 7,285 100,000 146,103 146,103 169,479
*35 75 1,200 0 0 0 247,824 247,824 265,171
40 80 1,200 0 0 0 417,039 417,039 437,890
45 85 1,200 0 0 0 692,819 692,819 727,460
50 90 1,200 0 0 0 1,136,448 1,136,448 1,193,269
55 95 1,200 0 0 0 1,868,985 1,868,985 1,887,675
60 100 1,200 0 0 0 3,131,284 3,131,284 3,131,284
</TABLE>
- ------------------
*Year 35, 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.
A-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 No Tobacco
Initial Total Face Amount: $100,000 Death Benefit Guarantee (DBG) to end of
year: 25
Initial Death Benefit Option: A (Level)
Annual Premium: $1,200.00
<TABLE>
<CAPTION>
MAXIMUM GUARANTEED POLICY COSTS
--------------------------------------------------------------------------------------
0.00% GROSS HYPOTHETICAL RETURN 12.00% GROSS HYPOTHETICAL RETURN
(-1.39% NET RETURN) (10.61% NET RETURN)
---------------------------------------- -------------------------------------------
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 1,200 497 0 100,000 593 0 100,000
2 42 1,200 971 0 100,000 1,232 0 100,000
3 43 1,200 1,421 0 100,000 1,920 370 100,000
4 44 1,200 1,846 518 100,000 2,661 1,332 100,000
5 45 1,200 2,224 1,137 100,000 3,459 2,352 100,000
-----
6,000
6 46 1,200 2,612 1,727 100,000 4,318 3,432 100,000
7 47 1,200 2,950 2,286 100,000 5,243 4,579 100,000
8 48 1,200 3,255 2,813 100,000 6,239 5,796 100,000
9 49 1,200 3,526 3,305 100,000 7,312 7,091 100,000
10 50 1,200 3,760 3,760 100,000 8,469 8,469 100,000
-----
12,000
11 51 1,200 4,204 4,204 100,000 9,982 9,982 100,000
12 52 1,200 4,599 4,599 100,000 11,618 11,618 100,000
13 53 1,200 4,940 4,940 100,000 13,387 13,387 100,000
14 54 1,200 5,220 5,220 100,000 15,299 15,299 100,000
15 55 1,200 5,433 5,433 100,000 17,366 17,366 100,000
------
18,000
20 60 1,200 5,268 5,268 100,000 30,618 30,618 100,000
25 65 1,200 2,031 2,031 100,000 51,107 51,107 100,000
30 70 1,200 0 0 0 85,382 85,382 100,000
35 75 1,200 0 0 0 144,344 144,344 154,448
40 80 1,200 0 0 0 240,661 240,661 252,693
45 85 1,200 0 0 0 392,271 392,271 411,884
50 90 1,200 0 0 0 623,996 623,996 655,195
55 95 1,200 0 0 0 997,314 997,314 1,007,286
60 100 1,200 0 0 0 1,653,177 1,653,177 1,653,177
</TABLE>
- ------------------
*Year 27, Month 9
Based on the maximum guaranteed 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.
A-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 0.35% of the Variable Account assets. For
guaranteed costs, the mortality and risk charge on an annual basis is equal to
0.60%. An average portfolio operating expense of 0.93% 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.
FlexDesign VUL 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 24 times per year
without charge. We reserve the right to limit transfers to four per year and
charge up to $25.00 per transfer.
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 3% 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 $96.00 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. The base policy death benefit guarantee is in
effect for 25 years provided cumulative minimum monthly premiums (net of policy
loans and withdrawals) are paid. The death benefit guarantee period will be
shorter for substandard policies and for policies with a term rider. 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.
DEATH BENEFIT QUALIFICATION TEST. This illustration uses the Guideline
Premium Test to qualify the proposed policy as life insurance under Section
7702 of the Internal Revenue Code. Under the Guideline Premium Test, the
premiums paid into the policy must never exceed the guideline premium limit.
Additionally, a minimum corridor of death benefit in relation to cash value
must be maintained. (See the corridor limit section of the prospectus for more
information.)
DEATH BENEFIT OPTION. Under Option A (Level), the death benefit until age
100 is equal to the face amount. Under Option B (Variable), the death benefit
until age 100 is equal to the face amount plus the accumulation value. Under
Option C (Face Amount plus Premium), the death benefit until age 100 is equal
to the face amount plus total premiums less total withdrawals, or if greater,
the minimum death benefit to qualify as life insurance based on the Death
Benefit Qualification Test. The death benefit after age 100 is equal to the
accumulation value. The initial Death Benefit Option assumed in this
illustration is A (Level).
A-4
<PAGE>
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 10 years and the first 10 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 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 59-1/2. For complete information on how
distributions from this policy may affect your personal tax situation, always
consult your professional tax advisor.
ISSUER. FlexDesign VUL 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 #85-484 (may vary by state).
PREMIUM LIMITS SUMMARY.
Minimum First Year Annual Premium: $ 1,152.00
Initial Guideline Level Premium: $ 1,756.44
Initial Guideline Single Premium: $ 20,488.52
Initial MEC 7-pay Premium: $ 4,437.96
A-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 No Tobacco
Initial Total Face Amount: $100,000
Initial Death Benefit Option: A (Level)
Annual Premium: $1,200.00
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
(-1.53% NET RETURN) (-1.28% NET RETURN) (10.72% NET RETURN)
--------------------------- --------------------------- ---------------------------
<S> <C> <C> <C>
Year 10, Age 50
Cash Surrender Value: 3,724 5,847 12,168
Death Benefit: 100,000 100,000 100,000
Year 20, Age 60
Cash Surrender Value: 5,157 10,497 46,794
Death Benefit: 100,000 100,000 100,000
Projected age when
Death Benefit Ends: 66 74 100
</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 for life.
At attained age 100, the death benefit becomes equal to the accumulation value
of the policy. 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.
DEATH BENEFIT QUALIFICATION TEST. This illustration uses the Guideline
Premium Test to qualify the proposed policy as life insurance under Section
7702 of the Internal Revenue Code. Under the Guideline Premium Test, the
premiums paid into the policy must never exceed the guideline premium limit.
Additionally, a minimum corridor of death benefit in relation to cash value
must be maintained. (See the corridor limit section of the prospectus for more
information.)
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 3.0%.
A-6
<PAGE>
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.
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 and other
expenses, and mortality and expense risks assumed by the Company. If I
surrender the policy or allow it to lapse during the first 10 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
A-7
EXHIBIT 1.A(5)(l)
FORM B
HYPOTHETICAL ILLUSTRATIONS:
The following illustrations use hypothetical examples to show the way a
Policy works. The illustrations are illustrative only and are 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 these
illustrations 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.
B-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 No Tobacco
Initial Total Face Amount: $100,000
Initial Death Benefit Option: A (Level)
Annual Premium: $1,200.00
<TABLE>
<CAPTION>
CURRENT POLICY COSTS
--------------------------------------------------------------------------------------
0.00% GROSS HYPOTHETICAL RETURN 12.00% GROSS HYPOTHETICAL RETURN
(-1.28% NET RETURN) (10.72% NET RETURN)
---------------------------------------- -------------------------------------------
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 1,200 659 0 100,000 766 0 100,000
2 42 1,200 1,311 0 100,000 1,614 0 100,000
3 43 1,200 1,955 405 100,000 2,554 1,004 100,000
4 44 1,200 2,586 1,258 100,000 3,590 2,262 100,000
5 45 1,200 3,192 2,085 100,000 4,720 3,613 100,000
-----
6,000
6 46 1,200 3,776 2,890 100,000 5,955 5,070 100,000
7 47 1,200 4,333 3,669 100,000 7,305 6,641 100,000
8 48 1,200 4,866 4,423 100,000 8,783 8,340 100,000
9 49 1,200 5,372 5,150 100,000 10,399 10,178 100,000
10 50 1,200 5,847 5,847 100,000 12,168 12,168 100,000
-----
12,000
11 51 1,200 6,539 6,539 100,000 14,368 14,368 100,000
12 52 1,200 7,188 7,188 100,000 16,776 16,776 100,000
13 53 1,200 7,788 7,788 100,000 19,409 19,409 100,000
14 54 1,200 8,336 8,336 100,000 22,291 22,291 100,000
15 55 1,200 8,835 8,835 100,000 25,456 25,456 100,000
------
18,000
20 60 1,200 10,497 10,497 100,000 46,794 46,794 100,000
25 65 1,200 10,248 10,248 100,000 82,385 82,385 100,509
30 70 1,200 6,960 6,960 100,000 141,856 141,856 164,552
*35 75 1,200 0 0 0 239,331 239,331 256,084
40 80 1,200 0 0 0 400,477 400,477 420,500
45 85 1,200 0 0 0 661,424 661,424 694,495
50 90 1,200 0 0 0 1,078,472 1,078,472 1,132,395
55 95 1,200 0 0 0 1,762,880 1,762,880 1,780,508
60 100 1,200 0 0 0 2,935,394 2,935,394 2,935,393
</TABLE>
- ------------------
*Year 35, Month 7
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.
B-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 No Tobacco
Initial Total Face Amount: $100,000
Initial Death Benefit Option: A (Level)
Annual Premium: $1,200.00
<TABLE>
<CAPTION>
MAXIMUM GUARANTEED POLICY COSTS
--------------------------------------------------------------------------------------
0.00% GROSS HYPOTHETICAL RETURN 12.00% GROSS HYPOTHETICAL RETURN
(-1.53% NET RETURN) (10.47% NET RETURN)
---------------------------------------- -------------------------------------------
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 1,200 496 0 100,000 592 0 100,000
2 42 1,200 968 0 100,000 1,228 0 100,000
3 43 1,200 1,416 0 100,000 1,913 364 100,000
4 44 1,200 1,838 509 100,000 2,650 1,322 100,000
5 45 1,200 2,232 1,125 100,000 3,442 2,335 100,000
-----
6,000
6 46 1,200 2,596 1,711 100,000 4,293 3,408 100,000
7 47 1,200 2,930 2,265 100,000 5,208 4,544 100,000
8 48 1,200 3,230 2,787 100,000 6,193 5,750 100,000
9 49 1,200 3,496 3,274 100,000 7,251 7,030 100,000
10 50 1,200 3,724 3,724 100,000 8,391 8,391 100,000
----- ----- ----- ------- ----- ----- -------
12,000
11 51 1,200 4,162 4,162 100,000 9,881 9,881 100,000
12 52 1,200 4,551 4,551 100,000 11,492 11,492 100,000
13 53 1,200 4,884 4,884 100,000 13,229 13,229 100,000
14 54 1,200 5,157 5,157 100,000 15,104 15,104 100,000
15 55 1,200 5,362 5,362 100,000 17,126 17,126 100,000
------ ----- ----- ------- ------ ------ -------
18,000
20 60 1,200 5,157 5,157 100,000 30,008 30,008 100,000
25 65 1,200 1,887 1,887 100,000 49,681 49,681 100,000
30 70 1,200 0 0 0 82,117 82,117 100,000
35 75 1,200 0 0 0 138,156 138,156 147,826
40 80 1,200 0 0 0 229,199 229,199 240,658
45 85 1,200 0 0 0 371,574 371,574 390,152
50 90 1,200 0 0 0 587,723 587,723 617,109
55 95 1,200 0 0 0 933,843 933,843 943,181
60 100 1,200 0 0 0 1,538,696 1,538,696 1,538,695
</TABLE>
- ------------------
*Year 27, 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.
B-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 0.35% of the Variable Account assets. For
guaranteed costs, the mortality and risk charge on an annual basis is equal to
0.60%. 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.
FlexDesign VUL 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 24 times per year
without charge. We reserve the right to limit transfers to four per year and
charge up to $25.00 per transfer.
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 3% 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 $96.00 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. The base policy death benefit guarantee is in
effect for 25 years provided cumulative minimum monthly premiums (net of policy
loans and withdrawals) are paid. The death benefit guarantee period will be
shorter for substandard policies and for policies with a term rider. 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.
DEATH BENEFIT QUALIFICATION TEST. This illustration uses the Guideline
Premium Test to qualify the proposed policy as life insurance under Section
7702 of the Internal Revenue Code. Under the Guideline Premium Test, the
premiums paid into the policy must never exceed the guideline premium limit.
Additionally, a minimum corridor of death benefit in relation to cash value
must be maintained. (See the corridor limit section of the prospectus for more
information.)
DEATH BENEFIT OPTION. Under Option A (Level), the death benefit until age
100 is equal to the face amount. Under Option B (Variable), the death benefit
until age 100 is equal to the face amount plus the accumulation value. Under
Option C (Face Amount plus Premium), the death benefit until age 100 is equal
to the face amount plus total premiums less total withdrawals, or if greater,
the minimum death benefit to qualify as life insurance based on the Death
Benefit Qualification Test. The death benefit after age 100 is equal to the
accumulation value. The initial Death Benefit Option assumed in this
illustration is A (Level).
B-4
<PAGE>
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 10 years and the first 10 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 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. FlexDesign VUL 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 #85-484 (may vary by state).
PREMIUM LIMITS SUMMARY.
Minimum First Year Annual Premium: $ 1,152.00
Initial Guideline Level Premium: $ 1,756.44
Initial Guideline Single Premium: $ 20,488.52
Initial MEC 7-pay Premium: $ 4,437.96
B-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 No Tobacco
Initial Total Face Amount: $100,000 Death Benefit Guarantee (DBG) to end of
year: 25
Initial Death Benefit Option: A (Level)
Annual Premium: $1,200.00
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
(-1.39% NET RETURN) (-1.14% NET RETURN) (10.86% NET RETURN)
--------------------------- --------------------------- ---------------------------
<S> <C> <C> <C>
Year 10, Age 50
Cash Surrender Value: 3,760 5,897 12,273
Death Benefit: 100,000 100,000 100,000
Year 20, Age 60
Cash Surrender Value: 5,268 10,669 47,658
Death Benefit: 100,000 100,000 100,000
Projected age when
Death Benefit Ends: 66 74 100
</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 for life.
At attained age 100, the death benefit becomes equal to the accumulation value
of the policy. 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.
DEATH BENEFIT QUALIFICATION TEST. This illustration uses the Guideline
Premium Test to qualify the proposed policy as life insurance under Section
7702 of the Internal Revenue Code. Under the Guideline Premium Test, the
premiums paid into the policy must never exceed the guideline premium limit.
Additionally, a minimum corridor of death benefit in relation to cash value
must be maintained. (See the corridor limit section of the prospectus for more
information.)
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 3.0%.
B-6
<PAGE>
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.
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 and other
expenses, and mortality and expense risks assumed by the Company. If I
surrender the policy or allow it to lapse during the first 10 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
B-7
EXHIBIT 1.A(8)(c)
AMENDMENT NO. 11 TO PARTICIPATION AGREEMENT
ReliaStar Life Insurance Company (formerly Northwestern National Life
Insurance Company), Variable Insurance Products Fund and Fidelity Distributors
Corporation, hereby amend their Participation Agreement, dated March 16, 1988
and as subsequently amended, by replacing section 2.5 in its entirety with the
following:
2.5. (a) With respect to Initial Class shares, the Fund currently does
not intend to make any payments to finance distribution expenses pursuant
to Rule 12b-1 under the 1940 Act or otherwise, although it may make such
payments in the future. The Fund has adopted a "no fee" or "defensive" Rule
12b-1 Plan under which it makes no payments for distribution expenses. To
the extent that it decides to finance distribution expenses pursuant to
Rule 12b-1, the Fund undertakes to have a board of trustees, a majority of
whom are not interested persons of the Fund, formulate and approve any plan
under Rule 12b-1 to finance distribution expenses.
(b) With respect to Service Class Shares and Service Class 2 shares,
the Fund has adopted Rule 12b-1 Plans under which it makes payments to
finance distribution and service expenses. The Fund represents and warrants
that it has a board of trustees, a majority of whom are not interested
persons of the Fund, which has formulated and approved each of its Rule
12b-1 Plans to finance distribution and service expenses of the Fund and
that any changes to the Fund's Rule 12b-1 Plans will be approved by a
similarly constituted board of trustees.
IN WITNESS WHEREOF, each party has caused this Amendment to be executed in
its name on its behalf by its duly authorized representative as of ,
2000.
RELIASTAR LIFE INSURANCE COMPANY VARIABLE INSURANCE PRODUCTS FUND
By: By:
----------------------------------- ---------------------------------
Name: Name:
--------------------------------- -------------------------------
Title: Title:
-------------------------------- ------------------------------
FIDELITY DISTRIBUTORS CORPORATION
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
EXHIBIT 1.A(8)(f)
AMENDMENT NO. 10 TO PARTICIPATION AGREEMENT
ReliaStar Life Insurance Company (formerly Northwestern National Life
Insurance Company), Variable Insurance Products Fund II and Fidelity
Distributors Corporation, hereby amend their Participation Agreement, dated
January 1, 1991 and as subsequently amended, by replacing section 2.5 in its
entirety with the following:
2.5. (a) With respect to Initial Class shares, the Fund currently does
not intend to make any payments to finance distribution expenses pursuant
to Rule 12b-1 under the 1940 Act or otherwise, although it may make such
payments in the future. The Fund has adopted a "no fee" or "defensive" Rule
12b-1 Plan under which it makes no payments for distribution expenses. To
the extent that it decides to finance distribution expenses pursuant to
Rule 12b-1, the Fund undertakes to have a board of trustees, a majority of
whom are not interested persons of the Fund, formulate and approve any plan
under Rule 12b-1 to finance distribution expenses.
(b) With respect to Service Class shares and Service Class 2 shares,
the Fund has adopted Rule 12b-1 Plans under which it makes payments to
finance distribution and service expenses. The Fund represents and warrants
that it has a board of trustees, a majority of whom are not interested
persons of the Fund, which has formulated and approved each of its Rule
12b-1 Plans to finance distribution and service expenses of the Fund and
that any changes to the Fund's Rule 12b-1 Plans will be approved by a
similarly constituted board of trustees.
IN WITNESS WHEREOF, each party has caused this Amendment to be executed in
its name on its behalf by its duly authorized representative as of ,
2000.
RELIASTAR LIFE INSURANCE COMPANY VARIABLE INSURANCE PRODUCTS FUND II
By: By:
----------------------------------- ---------------------------------
Name: Name:
--------------------------------- -------------------------------
Title: Title:
-------------------------------- ------------------------------
FIDELITY DISTRIBUTORS CORPORATION
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
EXHIBIT 1.A(8)(i)
AMENDMENT 3 TO
PARTICIPATION AGREEMENT
BY AND AMONG
RELIASTAR LIFE INSURANCE COMPANY
AND
PUTNAM VARIABLE TRUST
AND
PUTNAM MUTUAL FUNDS CORP.
THIS AMENDMENT 3 TO PARTICIPATION AGREEMENT ("Amendment 3") is made and entered
into this 31st day of March, 2000 among Reliastar Life Insurance Company (the
"Company"), Putnam Variable Trust (the "Fund"), and Putnam Mutual Funds Corp.
(the "Distributor").
WHEREAS, the Company, the Fund and the Distributor are parties to the
Participation Agreement dated January 14, 1994 (the "Agreement"); and
WHEREAS, the parties now desire to amend the Agreement to restate the list of
funds which serve as funding vehicles for the Accounts ("Authorized Funds") and
to provide that new life insurance policies and annuity contracts and modified
products offered by a new form of prospectus will invest in Class IB Shares of
the Authorized Funds;
NOW, THEREFORE, in consideration of their mutual promises, the Company, the Fund
and the Distributor agree as follows:
1. AUTHORIZED FUNDS. As of the date hereof, the list of Authorized
Funds is as follows:
Putnam VT Asia Pacific Fund
Putnam VT Diversified Income Fund
Putnam VT Growth & Income Fund
Putnam VT New Opportunities Fund
Putnam Utilities Growth & Income Fund
Putnam VT Voyager Fund
Such list is subject to the letter of the Company, dated May 29, 1998, giving
notice that it will discontinue the sale of certain Authorized Funds.
2. SERVICE FEES. With respect to any investment in Class IB Shares of
the Authorized Funds:
a) Provided the Company complies with its obligations under
the Agreement, the Distributor will pay the Company a
service fee ("Service Fee") on Class IB shares of the
Authorized Funds held in the Account at the rate of
0.15% per annum.
<PAGE>
b) The Company understands and agrees that all Service Fee
payments are subject to the limitations contained in
each Authorized Fund's Distribution Plan, which may be
varied or discontinued at any time, and understands and
agrees that it will cease to receive such Service Fee
Payments with respect to an Authorized Fund if the
Authorized Fund ceases to pay fees to the Distributor
pursuant to its Distribution Plan.
c) The Company's failure to provide the services described
in Section 2(e) below or otherwise to comply with the
terms of the Agreement will render it ineligible to
receive Service Fees.
d) The Distributor may, without the consent of the Company,
amend the terms of the Section 2, provided that such
amendment reflects the Distributor's policy to all
holders of Class IB shares and is not directed solely at
the Company.
e) The Company will provide the following services to
Contract owners who allocate purchase payments to
subaccounts of the Account investing in the Authorized
Funds:
i) Maintain regular contact with Contract
owners and assist in answering inquiries
concerning Authorized Funds;
ii) Assist in printing and/or distributing
shareholder reports, prospectuses, service
literature and sales literature or other
promotional materials provided by the
Distributor;
iii) Assist the Distributor and its affiliates in
the establishment and maintenance of
Contract owner and shareholder accounts and
records;
iv) Assist Contract owners in effecting
administrative changes, such as exchanging
into or out of the subaccounts of the
Account investing in shares of the
Authorized Funds;
v) Assist in processing purchase and redemption
transactions; and
vi) Provide any other information or services as
the Contract owners of the Distributor may
reasonably request.
The Company will support the Distributor's
marketing and servicing efforts for granting
reasonable requests for visits to the
Company's offices by representatives of the
Distributor.
2
<PAGE>
f) The Company's compliance with the service requirement
set forth in this Amendment 3 will be evaluated from
time to time by the Distributor's monitoring of
redemption levels of Authorized Fund shares held in the
Account and by such other methods as the Distributor
deems appropriate.
g) The provisions of this Section 2 shall remain in effect
for not more than one year from the date hereof and
thereafter for successive annual periods only so long as
such continuance is specifically approved at least
annually by the Trustees in conformity with Rule 12b-1.
This Agreement shall automatically terminate in the
event of its assignment (as defined by the 1940 Act). In
addition, this Section 2 may be terminated at any time,
without the payment of any penalty, with respect to any
Fund or the Trust as a whole by any party upon written
notice delivered or mailed by registered mail, postage
prepaid, to the other party, or, as provided in Rule
12b-1 under the 1940 Act by the Trustees or by the vote
of the holders of the outstanding voting securities of
any Fund.
3. DEFINITIONS. Terms not defined in this Amendment 3 will have the
meaning as those terms defined in the Agreement.
4. COUNTERPARTS. This Amendment 3 may be executed simultaneously in two
or more counterparts, each of which taken together will constitute
one and the same instrument.
3
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IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment 3 to be
executed in its name and on its behalf by its duly authorized representatives as
of the date specified above.
PUTNAM VARIABLE TRUST PUTNAM MUTUAL FUNDS CORP.
By: _______________________________ By: _______________________________
Name: _____________________________ Name: _____________________________
Title: ____________________________ Title: ____________________________
RELIASTAR LIFE INSURANCE COMPANY
By: _______________________________
Name: _____________________________
Title: ____________________________
4
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SCHEDULE A
CONTRACTS
1. ReliaStar Select Variable Account
(a) Flexible Premium Individual Deferred Retirement Annuity.
Contract Form Number: 81-870 and State Exceptions.
Select*Annuity II.
(b) Flexible Premium Individual Deferred Retirement Annuity.
Contract Form Number: 84-420 and State Exceptions.
Select*Annuity III.
(c) Flexible Premium Individual Deferred Retirement Annuity.
Contract Form Number: 84-420 with, 85-841, 85-843,
85-472 and State Exceptions. Advantage SE.
2. Select*Life Account
(a) Flexible Premium Variable Life Insurance Policy.
Contract Form Number: 83-300 and the State Exceptions.
Select*Life.
(b) Flexible Premium Variable Life Insurance Policy.
Contract Form Number: 84-662 and State Exceptions.
Select*Life II.
(c) Flexible Premium Variable Life Insurance Policy.
Contract Form Number: 84-795 and State Exceptions.
Select*Life III.
(d) Flexible Premium Variable Life Insurance Policy.
Contract Form Number: 85-230 and the State Exceptions.
Variable Estate Design.
(e) Flexible Premium Variable Life Insurance Policy.
Contract Form Number: 85-484 and the State Exceptions.
Flex Design.
EXHIBIT 1.A(8)(v)
DISTRIBUTION AND SHAREHOLDER SERVICES AGREEMENT
SERVICE SHARES OF JANUS ASPEN SERIES
(for Insurance Companies)
This Agreement is made as of ______________, by and between Janus
Distributors, Inc. (the "Distributor"), a Colorado corporation, and ReliaStar
Life Insurance Company (the "Company"), a Minnesota life insurance company.
RECITALS
A. The Company has entered into a participation agreement with Janus
Aspen Series (the "Trust"), an open-end investment company registered under the
Investment Company Act of 1940 (the "1940 Act") with respect to the purchase of
a class of shares designated "Service Shares" of one or more series of the Trust
(each a "Portfolio") by certain separate accounts of the Company ("Accounts").
B. The Distributor serves as the distributor to Service Shares.
C. The Company desires to provide certain distribution and/or
shareholder services to owners ("Contract Owners") of variable life insurance
policies or variable annuity contracts ("Contracts") in connection with their
allocation of contract values in the Service Shares of the Portfolios and
Distributor desires Company to provide such services, subject to the conditions
of this Agreement.
D. Pursuant to Rule 12b-1 under the 1940 Act, the Service Shares of
each Portfolio have adopted a Distribution and Shareholder Servicing Plan (the
"12b-1 Plan") which, among other things, authorizes the Distributor to enter
into this Agreement with organizations such as Company and to compensate such
organizations out of each Portfolio's average daily net assets attributable to
the Service Shares.
AGREEMENT
1. Services of Company
(a) The Company shall provide any combination of the following
support services, as agreed upon by the parties from time to time, to Contract
Owners who allocate contract values to the Service Shares of the Portfolios:
delivering prospectuses, statements of additional information, shareholder
reports, proxy statements and marketing materials to prospective and existing
Contract Owners; providing educational materials regarding the Service Shares;
providing facilities to answer questions from prospective and existing Contract
Owners about the Portfolios; receiving and answering correspondence; complying
with federal and state securities laws pertaining to the sale of Service Shares;
assisting Contract Owners in completing application forms and
<PAGE>
selecting account options; and providing Contract Owner record-keeping and
similar administrative services.
(b) The Company will provide such office space and equipment,
telephone facilities, and personnel as may be reasonably necessary or beneficial
in order to provide such services to Contract Owners.
(c) The Company will furnish to the Distributor, the Trust or
their designees such information as the Distributor may reasonably request, and
will otherwise cooperate with the Distributor in the preparation of reports to
the Trust's Board of Trustees concerning this Agreement, as well as any other
reports or filings that may be required by law.
2. Indemnification. The Company shall indemnify Distributor, the Trust,
and their affiliates, directors, trustees, employees and shareholders for any
loss (including without limitation, litigation costs and expenses and attorneys'
and experts' fees) directly resulting from Company's grossly negligent or
willful act, omission or error, or Company's breach of this Agreement. Such
indemnification shall survive termination of the Agreement.
3. Maintenance of Records. The Company shall maintain and preserve all
records as required by law to be maintained and preserved in connection with
providing the services herein. Upon the reasonable request of Distributor or the
Trust, Company shall provide Distributor, the Trust or the representative of
either, copies of all such records.
4. Fees. In consideration of Company's performance of the services
described in this Agreement, Distributor shall pay to the Company a monthly fee
("Distribution Fee") calculated as follows: the average aggregate amount
invested in each month in the Service Shares of each Portfolio by the Accounts
is multiplied by a pro-rata fee factor. The pro-rata fee factor is calculated
by: (a) dividing the per annum factor set forth on Exhibit A for the Service
Shares of each Portfolio by the number of days in the applicable year, and (b)
multiplying the result by the actual number of days in the applicable month. The
average aggregate amount invested over a one-month period shall be computed by
totaling the aggregate investment by the Accounts (share net asset value
multiplied by total number of shares held) on each calendar day during the month
and dividing by the total number of calendar days during such month.
Distributor will calculate the fee at the end of each month
and will make such reimbursement to the Company. The reimbursement check will be
accompanied by a statement showing the calculation of the monthly amounts
payable by Distributor and such other supporting data as may be reasonably
requested by the Company.
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5. Representations, Warranties and Agreements. The Company represents,
warrants, and covenants that:
(a) It and its employees and agents meet the requirements of
applicable law, including but not limited to federal and state securities law
and state insurance law, for the performance of services contemplated herein;
(b) It will not purchase Service Shares with Account assets
derived from tax-qualified retirement plans except indirectly, through Contracts
purchased in connection with such plans and the Service Fee does not include any
payment to the Company that is prohibited under the Employee Retirement Income
Securities Act of 1974 ("ERISA") with respect to any assets of a Contract Owner
invested in a Contract using the Portfolios as investment vehicles;
(c) If required by applicable law, the Company will disclose
to each Contract Owner the existence of the Distribution Fee received by the
Company pursuant to this Agreement in a form consistent with the requirements of
applicable law.
6. Termination.
(a) Unless sooner terminated with respect to any Portfolio,
this Agreement will continue with respect to a Portfolio only if the continuance
of a form of this Agreement is specifically approved at least annually by the
vote of a majority of the members of the Board of Trustees of the Trust who are
not "interested persons" (as such term is defined in the 1940 Act) and who have
no direct or indirect financial interest in the 12b-1 Plan relating to such
Portfolio or any agreement relating to such 12b-1 Plan, including this
Agreement, cast in person at a meeting called for the purpose of voting on such
approval.
(b) This Agreement will automatically terminate with respect
to a Portfolio in the event of its assignment (as such term is defined in the
1940 Act) with respect to such Portfolio. This Agreement may be terminated with
respect to any Portfolio by the Distributor or by the Company, without penalty,
upon 60 days' prior written notice to the other party. This Agreement may also
be terminated with respect to any Portfolio at any time without penalty by the
vote of a majority of the members of the Board of Trustees of the Trust who are
not "interested persons" (as such term is defined in the 1940 Act) and who have
no direct or indirect financial interest in the 12b-1 Plan relating to such
Portfolio or any agreement relating to such Plan, including this Agreement, or
by a vote of a majority of the Service Shares of such Portfolio on 60 days'
written notice.
(c) In addition, either party may terminate this Agreement
immediately if at any time it is determined by any federal or state regulatory
authority that compensation to be paid under this Agreement is in violation of
or inconsistent with any federal or state law.
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<PAGE>
7. Miscellaneous.
(a) No modification of any provision of this Agreement will be
binding unless in writing and executed by the parties. No waiver of any
provision of this Agreement will be binding unless in writing and executed by
the party granting such waiver.
(b) This Agreement shall be binding upon and shall inure to
the benefit of the parties and their respective successors and assigns;
provided, however that neither this Agreement nor any rights, privileges,
duties, or obligations of the parties may be assigned by either party without
the written consent of the other party or as expressly contemplated by this
Agreement.
(c) This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Colorado, exclusive of conflicts of
laws.
(d) This Agreement may be executed in several counterparts,
each of which shall be an original but all of which together shall constitute
one and the same instrument.
JANUS DISTRIBUTORS, INC. RELIASTAR LIFE INSURANCE COMPANY
By: By: /s/ John Johnson
--------------------------------- ---------------------------------
Name: Name: John Johnson
------------------------------ ------------------------------
Title: Title: Vice President
----------------------------- -----------------------------
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<PAGE>
EXHIBIT A TO DISTRIBUTION AND SHAREHOLDER SERVICES AGREEMENT
Name of Portfolio Fee Factor*
----------------- ----------
All Portfolios of Janus Aspen Series 0.25%
(Service Shares)
*Shall not exceed 0.25%
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EXHIBIT 1.A(8)(w)
JANUS ASPEN SERIES
FUND PARTICIPATION AGREEMENT
(SERVICE SHARES)
THIS AGREEMENT is made this ____ day of ______________________, between
JANUS ASPEN SERIES, an open-end management investment company organized as a
Delaware business trust (the "Trust"), and RELIASTAR LIFE INSURANCE COMPANY, a
life insurance company organized under the laws of the State of Minnesota (the
"Company"), on its own behalf and on behalf of each segregated asset account of
the Company set forth on Schedule A, as may be amended from time to time (the
"Accounts").
W I T N E S S E T H:
-------------------
WHEREAS, the Trust has registered with the Securities and Exchange
Commission as an open-end management investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"), and the beneficial interest in
the Trust is divided into several series of shares, each series representing an
interest in a particular managed portfolio of securities and other assets (the
"Portfolios"); and
WHEREAS, the Trust has registered the offer and sale of a class of
shares designated the Service Shares ("Shares") of each of its Portfolios under
the Securities Act of 1933, as amended (the "1933 Act"); and
WHEREAS, the Trust desires to act as an investment vehicle for separate
accounts established for variable life insurance policies and variable annuity
contracts to be offered by insurance companies that have entered into
participation agreements with the Trust (the "Participating Insurance
Companies"); and
WHEREAS, the Trust has received an order from the Securities and
Exchange Commission granting Participating Insurance Companies and their
separate accounts exemptions from the provisions of Sections 9(a), 13(a), 15(a)
and 15(b) of the 1940 Act, and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder,
to the extent necessary to permit shares of the Trust to be sold to and held by
variable annuity and variable life insurance separate accounts of both
affiliated and unaffiliated life insurance companies and certain qualified
pension and retirement plans (the "Exemptive Order"); and
WHEREAS, the Company has registered or will register (unless
registration is not required under applicable law) certain variable life
insurance policies and/or variable annuity contracts under the 1933 Act (the
"Contracts"); and
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act or registration is not required in
reliance upon the exclusion from registration under Section 3(c)(11) of the 1940
Act; and
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WHEREAS, the Company desires to utilize the Shares of one or more
Portfolios as an investment vehicle of the Accounts;
NOW, THEREFORE, in consideration of their mutual promises, the parties
agree as follows:
ARTICLE I
Sale of Trust Shares
1.1 The Trust shall make Shares of its Portfolios available to the
Accounts at the net asset value next computed after receipt of such purchase
order by the Trust (or its agent), as established in accordance with the
provisions of the then current prospectus of the Trust. Shares of a particular
Portfolio of the Trust shall be ordered in such quantities and at such times as
determined by the Company to be necessary to meet the requirements of the
Contracts. The Trustees of the Trust (the "Trustees") may refuse to sell Shares
of any Portfolio to any person, or suspend or terminate the offering of Shares
of any Portfolio if such action is required by law or by regulatory authorities
having jurisdiction or is, in the sole discretion of the Trustees acting in good
faith and in light of their fiduciary duties under federal and any applicable
state laws, necessary in the best interests of the shareholders of such
Portfolio.
1.2 The Trust will redeem any full or fractional Shares of any
Portfolio when requested by the Company on behalf of an Account at the net asset
value next computed after receipt by the Trust (or its agent) of the request for
redemption, as established in accordance with the provisions of the then current
prospectus of the Trust. The Trust shall make payment for such shares in the
manner established from time to time by the Trust, but in no event shall payment
be delayed for a greater period than is permitted by the 1940 Act.
1.3 For the purposes of Sections 1.1 and 1.2, the Trust hereby appoints
the Company as its agent for the limited purpose of receiving and accepting
purchase and redemption orders resulting from investment in and payments under
the Contracts. Receipt by the Company shall constitute receipt by the Trust
provided that i) such orders are received by the Company in good order prior to
the time the net asset value of each Portfolio is priced in accordance with its
prospectus and ii) the Trust receives notice of such orders by 10:00 a.m. New
York time on the next following Business Day. "Business Day" shall mean any day
on which the New York Stock Exchange is open for trading and on which the Trust
calculates its net asset value pursuant to the rules of the Securities and
Exchange Commission.
1.4 Purchase orders that are transmitted to the Trust in accordance
with Section 1.3 shall be paid for no later than 12:00 noon New York time on the
same Business Day that the Trust receives notice of the order. Payments shall be
made in federal funds transmitted by wire.
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1.5 Issuance and transfer of the Trust's Shares will be by book entry
only. Stock certificates will not be issued to the Company or the Account.
Shares ordered from the Trust will be recorded in the appropriate title for each
Account or the appropriate subaccount of each Account.
1.6 The Trust shall furnish prompt notice to the Company of any income
dividends or capital gain distributions payable on the Trust's Shares. The
Company hereby elects to receive all such income dividends and capital gain
distributions as are payable on a Portfolio's Shares in additional Shares of
that Portfolio. The Trust shall notify the Company of the number of Shares so
issued as payment of such dividends and distributions.
1.7 The Trust shall make the net asset value per Share for each
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per Share is calculated and shall use its
best efforts to make such net asset value per Share available by 6 p.m. New York
time.
1.8 The Trust agrees that its Shares will be sold only to Participating
Insurance Companies and their separate accounts and to certain qualified pension
and retirement plans to the extent permitted by the Exemptive Order. No Shares
of any Portfolio will be sold directly to the general public. The Company agrees
that Trust Shares will be used only for the purposes of funding the Contracts
and Accounts listed in Schedule A, as amended from time to time.
1.9 The Trust agrees that all Participating Insurance Companies shall
have the obligations and responsibilities regarding pass-through voting and
conflicts of interest corresponding to those contained in Section 2.8 and
Article IV of this Agreement.
ARTICLE II
Obligations of the Parties
2.1 The Trust shall prepare and be responsible for filing with the
Securities and Exchange Commission and any state regulators requiring such
filing all shareholder reports, notices, proxy materials (or similar materials
such as voting instruction solicitation materials), prospectuses and statements
of additional information of the Trust. The Trust shall bear the costs of
registration and qualification of its shares, preparation and filing of the
documents listed in this Section 2.1 and all taxes to which an issuer is subject
on the issuance and transfer of its shares.
2.2 At the option of the Company, the Trust shall either (a) provide
the Company (at the Company's expense) with as many copies of the Trust's
Shares' current prospectus, annual report, semi-annual report and other
shareholder communications, including any amendments or supplements to any of
the foregoing, as the Company shall reasonably request; or (b) provide the
Company with a camera ready copy of such documents in a form suitable for
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<PAGE>
printing. At the Company's request, the Trust will also provide such materials
on computer diskette in such "read-only" word processing format as mutually
agreed upon by the parties. The Trust shall provide the Company with a copy of
the Shares' statement of additional information in a form suitable for
duplication by the Company. The Trust (at its expense) shall provide the Company
with copies of any Trust-sponsored proxy materials in such quantity as the
Company shall reasonably require for distribution to Contract owners.
2.3 (a) The Company shall bear the costs of printing or otherwise
reproducing and distributing the Trust's Shares' prospectus, statement of
additional information, shareholder reports and other shareholder communications
to owners of and applicants for policies for which Shares of the Trust are
serving or are to serve as an investment vehicle. The Company shall bear the
costs of distributing proxy materials (or similar materials such as voting
solicitation instructions) to Contract owners. The Company assumes sole
responsibility for ensuring that such materials are delivered to Contract owners
in accordance with applicable federal and state securities laws. If the Company
elects to include any such materials on its website, the Company assumes sole
responsibility for maintaining such materials in the form provided by the Trust
and for promptly replacing such materials with all updates provided by the
Trust.
(b) If the Company elects to include any materials provided by
the Trust, specifically prospectuses, SAIs, shareholder reports and proxy
materials, on its web site or in any other computer or electronic format, the
Company assumes sole responsibility for maintaining such materials in the form
provided by the Trust and for promptly replacing such materials with all updates
provided by the Trust.
2.4 The Company agrees and acknowledges that the Trust's adviser, Janus
Capital Corporation ("Janus Capital"), is the sole owner of the name and mark
"Janus" and that all use of any designation comprised in whole or part of Janus
(a "Janus Mark") under this Agreement shall inure to the benefit of Janus
Capital. Except as provided in Section 2.5, the Company shall not use any Janus
Mark on its own behalf or on behalf of the Accounts or Contracts in any
registration statement, advertisement, sales literature or other materials
relating to the Accounts or Contracts without the prior written consent of Janus
Capital. Upon termination of this Agreement for any reason, the Company shall
cease all use of any Janus Mark(s) as soon as reasonably practicable.
2.5 The Company shall furnish, or cause to be furnished, to the Trust
or its designee, a copy of each Contract prospectus or statement of additional
information in which the Trust or its investment adviser is named prior to the
filing of such document with the Securities and Exchange Commission. The Company
shall furnish, or shall cause to be furnished, to the Trust or its designee,
each piece of sales literature or other promotional material in which the Trust
or its investment adviser is named, at least fifteen Business Days prior to its
use. No such material shall be used if the Trust or its designee reasonably
objects to such use within fifteen Business Days after receipt of such material.
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2.6 The Company shall not give any information or make any
representations or statements on behalf of the Trust or concerning the Trust or
its investment adviser in connection with the sale of the Contracts other than
information or representations contained in and accurately derived from the
registration statement or prospectus for the Trust Shares (as such registration
statement and prospectus may be amended or supplemented from time to time),
reports of the Trust, Trust-sponsored proxy statements, or in sales literature
or other promotional material approved by the Trust or its designee, except as
required by legal process or regulatory authorities or with the written
permission of the Trust or its designee.
2.7 The Trust shall not give any information or make any
representations or statements on behalf of the Company or concerning the
Company, the Accounts or the Contracts other than information or representations
contained in and accurately derived from the registration statement or
prospectus for the Contracts (as such registration statement and prospectus may
be amended or supplemented from time to time), or in materials approved by the
Company for distribution including sales literature or other promotional
materials, except as required by legal process or regulatory authorities or with
the written permission of the Company.
2.8 So long as, and to the extent that the Securities and Exchange
Commission interprets the 1940 Act to require pass-through voting privileges for
variable policyowners, the Company will provide pass-through voting privileges
to owners of policies whose cash values are invested, through the Accounts, in
shares of the Trust. The Trust shall require all Participating Insurance
Companies to calculate voting privileges in the same manner and the Company
shall be responsible for assuring that the Accounts calculate voting privileges
in the manner established by the Trust. With respect to each Account, the
Company will vote Shares of the Trust held by the Account and for which no
timely voting instructions from policyowners are received as well as Shares it
owns that are held by that Account, in the same proportion as those Shares for
which voting instructions are received. The Company and its agents will in no
way recommend or oppose or interfere with the solicitation of proxies for Trust
shares held by Contract owners without the prior written consent of the Trust,
which consent may be withheld in the Trust's sole discretion.
2.9 The Company shall notify the Trust of any applicable state
insurance laws that restrict the Portfolios' investments or otherwise affect the
operation of the Trust and shall notify the Trust of any changes in such laws,
provided that the Company shall incur no liability to the Trust by reason of
this section.
ARTICLE III
Representations and Warranties
3.1 The Company represents and warrants that it is an insurance company
duly organized and in good standing under the laws of the State of Minnesota and
that it has legally
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and validly established each Account as a segregated asset account under such
law on the date set forth in Schedule A.
3.2 The Company represents and warrants that each Account (1) has been
registered or, prior to any issuance or sale of the Contracts, will be
registered as a unit investment trust in accordance with the provisions of the
1940 Act, or alternatively (2) has not been registered in proper reliance upon
the exclusion from registration under Section 3(c)(11) of the 1940 Act.
3.3 The Company represents and warrants that the Contracts or interests
in the Accounts (1) are or, prior to issuance, will be registered as securities
under the 1933 Act or, alternatively (2) are not registered because they are
properly exempt from registration under the 1933 Act or will be offered
exclusively in transactions that are properly exempt from registration under the
1933 Act. The Company further represents and warrants that the Contracts will be
issued and sold in compliance in all material respects with all applicable
federal and state laws; and the sale of the Contracts shall comply in all
material respects with state insurance suitability requirements.
3.4 The Trust represents and warrants that it is duly organized and
validly existing under the laws of the State of Delaware.
3.5 The Trust represents and warrants that the Trust Shares offered and
sold pursuant to this Agreement will be registered under the 1933 Act and the
Trust shall be registered under the 1940 Act prior to any issuance or sale of
such Shares. The Trust shall amend its registration statement under the 1933 Act
and the 1940 Act from time to time as required in order to effect the continuous
offering of its Shares. The Trust shall register and qualify its Shares for sale
in accordance with the laws of the various states only if and to the extent
deemed advisable by the Trust.
3.6 The Trust represents and warrants that the investments of each
Portfolio will comply with the diversification requirements set forth in Section
817(h) of the Internal Revenue Code of 1986, as amended, and the rules and
regulations thereunder.
ARTICLE IV
Potential Conflicts
4.1 The parties acknowledge that the Trust's Shares may be made
available for investment to other Participating Insurance Companies. In such
event, the Trustees will monitor the Trust for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
Participating Insurance Companies. An irreconcilable material conflict may arise
for a variety of reasons, including: (a) an action by any state insurance
regulatory authority; (b) a change in applicable federal or state insurance,
tax, or securities laws or regulations, or a public ruling, private letter
ruling, no-action or interpretative letter, or any similar action by insurance,
tax, or securities regulatory authorities; (c) an
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administrative or judicial decision in any relevant proceeding; (d) the manner
in which the investments of any Portfolio are being managed; (e) a difference in
voting instructions given by variable annuity contract and variable life
insurance contract owners; or (f) a decision by an insurer to disregard the
voting instructions of contract owners. The Trustees shall promptly inform the
Company if they determine that an irreconcilable material conflict exists and
the implications thereof.
4.2 The Company agrees to promptly report any potential or existing
conflicts of which it is aware to the Trustees. The Company will assist the
Trustees in carrying out their responsibilities under the Exemptive Order by
providing the Trustees with all information reasonably necessary for the
Trustees to consider any issues raised including, but not limited to,
information as to a decision by the Company to disregard Contract owner voting
instructions.
4.3 If it is determined by a majority of the Trustees, or a majority of
its disinterested Trustees, that a material irreconcilable conflict exists that
affects the interests of Contract owners, the Company shall, in cooperation with
other Participating Insurance Companies whose contract owners are also affected,
at its expense and to the extent reasonably practicable (as determined by the
Trustees) take whatever steps are necessary to remedy or eliminate the
irreconcilable material conflict, which steps could include: (a) withdrawing the
assets allocable to some or all of the Accounts from the Trust or any Portfolio
and reinvesting such assets in a different investment medium, including (but not
limited to) another Portfolio of the Trust, or submitting the question of
whether or not such segregation should be implemented to a vote of all affected
Contract owners and, as appropriate, segregating the assets of any appropriate
group (i.e., annuity contract owners, life insurance contract owners, or
variable contract owners of one or more Participating Insurance Companies) that
votes in favor of such segregation, or offering to the affected Contract owners
the option of making such a change; and (b) establishing a new registered
management investment company or managed separate account.
4.4 If a material irreconcilable conflict arises because of a decision
by the Company to disregard Contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Trust's election, to withdraw the affected Account's
investment in the Trust and terminate this Agreement with respect to such
Account; provided, however that such withdrawal and termination shall be limited
to the extent required by the foregoing material irreconcilable conflict as
determined by a majority of the disinterested Trustees. Any such withdrawal and
termination must take place within six (6) months after the Trust gives written
notice that this provision is being implemented. Until the end of such six (6)
month period, the Trust shall continue to accept and implement orders by the
Company for the purchase and redemption of shares of the Trust.
4.5 If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw the
affected Account's investment in the Trust and
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terminate this Agreement with respect to such Account within six (6) months
after the Trustees inform the Company in writing that it has determined that
such decision has created an irreconcilable material conflict; provided,
however, that such withdrawal and termination shall be limited to the extent
required by the foregoing material irreconcilable conflict as determined by a
majority of the disinterested Trustees. Until the end of such six (6) month
period, the Trust shall continue to accept and implement orders by the Company
for the purchase and redemption of shares of the Trust.
4.6 For purposes of Sections 4.3 through 4.6 of this Agreement, a
majority of the disinterested Trustees shall determine whether any proposed
action adequately remedies any irreconcilable material conflict, but in no event
will the Company be required to establish a new funding medium for the Contracts
if an offer to do so has been declined by vote of a majority of Contract owners
materially adversely affected by the irreconcilable material conflict. In the
event that the Trustees determine that any proposed action does not adequately
remedy any irreconcilable material conflict, then the Company will withdraw the
Account's investment in the Trust and terminate this Agreement within six (6)
months after the Trustees inform the Company in writing of the foregoing
determination; provided, however, that such withdrawal and termination shall be
limited to the extent required by any such material irreconcilable conflict as
determined by a majority of the disinterested Trustees.
4.7 The Company shall at least annually submit to the Trustees such
reports, materials or data as the Trustees may reasonably request so that the
Trustees may fully carry out the duties imposed upon them by the Exemptive
Order, and said reports, materials and data shall be submitted more frequently
if deemed appropriate by the Trustees.
4.8 If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any provision of the
1940 Act or the rules promulgated thereunder with respect to mixed or shared
funding (as defined in the Exemptive Order) on terms and conditions materially
different from those contained in the Exemptive Order, then the Trust and/or the
Participating Insurance Companies, as appropriate, shall take such steps as may
be necessary to comply with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3,
as adopted, to the extent such rules are applicable.
ARTICLE V
Indemnification
5.1 Indemnification By the Company. The Company agrees to indemnify and
hold harmless the Trust and each of its Trustees, officers, employees and agents
and each person, if any, who controls the Trust within the meaning of Section 15
of the 1933 Act (collectively, the "Indemnified Parties" for purposes of this
Article V) against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of the Company) or expenses
(including the reasonable costs of investigating or defending any alleged loss,
claim, damage, liability or expense and reasonable legal counsel fees incurred
in
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connection therewith) (collectively, "Losses"), to which the Indemnified Parties
may become subject under any statute or regulation, or at common law or
otherwise, insofar as such Losses:
(a) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in a
registration statement or prospectus for the Contracts or in the
Contracts themselves or in sales literature generated or approved by
the Company on behalf of the Contracts or Accounts (or any amendment or
supplement to any of the foregoing) (collectively, "Company Documents"
for the purposes of this Article V), or arise out of or are based upon
the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, provided that this indemnity shall not apply as
to any Indemnified Party if such statement or omission or such alleged
statement or omission was made in reliance upon and was accurately
derived from written information furnished to the Company by or on
behalf of the Trust for use in Company Documents or otherwise for use
in connection with the sale of the Contracts or Trust Shares; or
(b) arise out of or result from statements or representations
(other than statements or representations contained in and accurately
derived from Trust Documents as defined in Section 5.2(a)) or wrongful
conduct of the Company or persons under its control, with respect to
the sale or acquisition of the Contracts or Trust Shares; or
(c) arise out of or result from any untrue statement or
alleged untrue statement of a material fact contained in Trust
Documents as defined in Section 5.2(a) or the omission or alleged
omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading if such
statement or omission was made in reliance upon and accurately derived
from written information furnished to the Trust by or on behalf of the
Company; or
(d) arise out of or result from any failure by the Company to
provide the services or furnish the materials required under the terms
of this Agreement; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this Agreement or
arise out of or result from any other material breach of this Agreement
by the Company.
5.2 Indemnification By the Trust. The Trust agrees to indemnify and
hold harmless the Company and each of its directors, officers, employees and
agents and each person, if any, who controls the Company within the meaning of
Section 15 of the 1933 Act (collectively, the "Indemnified Parties" for purposes
of this Article V) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the Trust) or
expenses (including the reasonable costs of investigating or defending any
alleged loss, claim, damage, liability or expense and reasonable legal counsel
fees incurred in connection
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therewith) (collectively, "Losses"), to which the Indemnified Parties may become
subject under any statute or regulation, or at common law or otherwise, insofar
as such Losses:
(a) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in the
registration statement or prospectus for the Trust (or any amendment or
supplement thereto), (collectively, "Trust Documents" for the purposes
of this Article V), or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, provided that this indemnity shall not apply as to any
Indemnified Party if such statement or omission or such alleged
statement or omission was made in reliance upon and was accurately
derived from written information furnished to the Trust by or on behalf
of the Company for use in Trust Documents or otherwise for use in
connection with the sale of the Contracts or Trust Shares; or
(b) arise out of or result from statements or representations
(other than statements or representations contained in and accurately
derived from Company Documents) or wrongful conduct of the Trust or
persons under its control, with respect to the sale or acquisition of
the Contracts or Trust Shares; or
(c) arise out of or result from any untrue statement or
alleged untrue statement of a material fact contained in Company
Documents or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading if such statement or omission was
made in reliance upon and accurately derived from written information
furnished to the Company by or on behalf of the Trust; or
(d) arise out of or result from any failure by the Trust to
provide the services or furnish the materials required under the terms
of this Agreement; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by the Trust in this Agreement or
arise out of or result from any other material breach of this Agreement
by the Trust.
5.3 Neither the Company nor the Trust shall be liable under the
indemnification provisions of Sections 5.1 or 5.2, as applicable, with respect
to any Losses incurred or assessed against an Indemnified Party that arise from
such Indemnified Party's willful misfeasance, bad faith or negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations or duties under this Agreement.
5.4 Neither the Company nor the Trust shall be liable under the
indemnification provisions of Sections 5.1 or 5.2, as applicable, with respect
to any claim made against an Indemnified Party unless such Indemnified Party
shall have notified the other party in writing
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within a reasonable time after the summons, or other first written notification,
giving information of the nature of the claim shall have been served upon or
otherwise received by such Indemnified Party (or after such Indemnified Party
shall have received notice of service upon or other notification to any
designated agent), but failure to notify the party against whom indemnification
is sought of any such claim shall not relieve that party from any liability
which it may have to the Indemnified Party in the absence of Sections 5.1 and
5.2.
5.5 In case any such action is brought against the Indemnified Parties,
the indemnifying party shall be entitled to participate, at its own expense, in
the defense of such action. The indemnifying party also shall be entitled to
assume the defense thereof, with counsel reasonably satisfactory to the party
named in the action. After notice from the indemnifying party to the Indemnified
Party of an election to assume such defense, the Indemnified Party shall bear
the fees and expenses of any additional counsel retained by it, and the
indemnifying party will not be liable to the Indemnified Party under this
Agreement for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable costs
of investigation.
ARTICLE VI
Termination
6.1 This Agreement may be terminated by either party for any reason by
sixty (60) days advance written notice delivered to the other party.
6.2 Notwithstanding any termination of this Agreement, the Trust shall,
at the option of the Company, continue to make available additional shares of
the Trust (or any Portfolio) pursuant to the terms and conditions of this
Agreement for all Contracts in effect on the effective date of termination of
this Agreement, provided that the Company continues to pay the costs set forth
in Section 2.3.
6.3 The provisions of Article V shall survive the termination of this
Agreement, and the provisions of Article IV and Section 2.8 shall survive the
termination of this Agreement as long as Shares of the Trust are held on behalf
of Contract owners in accordance with Section 6.2.
ARTICLE VII
Notices
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
If to the Trust:
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Janus Aspen Series
100 Fillmore Street
Denver, Colorado 80206
Attention: General Counsel
If to the Company:
ReliaStar Life Insurance Company
5th Floor
20 Washington Ave. South
Minneapolis, MN 55401
Attention: Stewart Gregg
ARTICLE VIII
Miscellaneous
8.1 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
8.2 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
8.3 If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
8.4 This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of State of Colorado.
8.5 The parties to this Agreement acknowledge and agree that all
liabilities of the Trust arising, directly or indirectly, under this Agreement,
of any and every nature whatsoever, shall be satisfied solely out of the assets
of the Trust and that no Trustee, officer, agent or holder of shares of
beneficial interest of the Trust shall be personally liable for any such
liabilities.
8.6 Each party shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the
Securities and Exchange Commission, the National Association of Securities
Dealers, Inc., and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in
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connection with any investigation or inquiry relating to this Agreement or the
transactions contemplated hereby.
8.7 The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to under
state and federal laws.
8.8 The parties to this Agreement acknowledge and agree that this
Agreement shall not be exclusive in any respect.
8.9 Neither this Agreement nor any rights or obligations hereunder may
be assigned by either party without the prior written approval of the other
party.
8.10 No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by both
parties.
IN WITNESS WHEREOF, the parties have caused their duly authorized
officers to execute this Participation Agreement as of the date and year first
above written.
JANUS ASPEN SERIES
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
RELIASTAR LIFE INSURANCE COMPANY
By: /s/ John Johnson
-------------------------------------
Name: John Johnson
-----------------------------------
Title: Vice President
----------------------------------
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Schedule A
Separate Accounts and Associated Contracts
Contracts Funded
Name of Separate Account By Separate Account
- ------------------------ -------------------
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Exhibit 1.A(8)(s)
[MH LETTERHEAD]
December 1, 1999
ReliaStar Life Insurance Company
20 Washington Avenue South
Minneapolis, MN 55401
Ladies and Gentlemen:
This letter sets forth the terms and conditions of the services agreement
BETWEEN MITCHELL HUTCHINS ASSET MANAGEMENT, INC. ("MH"), and RELIASTAR LIFE
INSURANCE COMPANY (the "Company") effective as of the 1st day of December, 1999.
The Company, MH, and MITCHELL HUTCHINS SERIES TRUST ("Trust) have entered into a
PARTICIPATION AGREEMENT dated as of the1st day of December, 1999, as may be
amended from time to time (the "Participation Agreement"), pursuant to which the
Company, on behalf of certain of its separate accounts (the "Separate
Accounts"), purchases shares ("Shares") of certain Portfolios of the Trust
("Portfolios") to serve as an investment vehicle under certain variable annuity
and/or variable life insurance contracts ("Variable Contracts") offered by the
Company, which Portfolios may be one of several investment options available
under the Variable Contracts.
MH recognizes that in the course of soliciting applications for its Variable
Contracts and in servicing owners of the Variable Contracts, the Company and its
agents that are registered representatives of broker-dealers provide information
about the Trust and its Portfolios from time to time, answer questions
concerning the Trust and its Portfolios including questions respecting Variable
Contract owners' interests in one or more Portfolios, and provide services
respecting investments in the Portfolios.
MH desires that the efforts of the Company and its agents in providing written
and oral information and services regarding the Trust to current and prospective
Variable Contract owners shall continue.
Accordingly, the following represents the collective intention and understanding
of the services agreement between MH and the Company.
The Company and/or its affiliates agree to provide services ("Services") to
current owners of Variable Contracts including, but not limited to:
teleservicing support in connection with the Portfolios; delivery of current
Trust prospectuses, reports, notices, proxies and proxy statements and other
informational materials; facilitation of the tabulation of Variable Contract
owners' votes in the event of a meeting of Trust
<PAGE>
ReliaStar Life Insurance Company
December 1, 1999
Page 2
shareholders; maintenance of Variable Contract records reflecting Shares
purchased and redeemed and Share balances, and the conveyance of that
information to the Trust, its transfer agent, or MH as may be reasonably
requested; provision of support services including providing information about
the Trust and its Portfolios and answering questions concerning the Trust and
its Portfolios including questions respecting Variable Contract owners'
interests in one or more Portfolios; provision and administration of Variable
Contract features for the benefit of Variable Contract owners participating in
the Trust including fund transfers, dollar cost averaging, asset allocation,
portfolio rebalancing, and pre-authorized deposits and withdrawals; and
provision of other services as may be agreed upon from time to time.
In consideration of the Services, MH agrees to pay the Company 100% of the
service fee it receives from the TRUST with respect to the Shares up to an
annual rate equal to 25 basis points (0.25%) of the average daily value of the
Shares held in Separate Accounts. For purposes of computing the payment to the
Company under this paragraph, the average daily value of Shares held in Separate
Accounts over a monthly period shall be computed by totaling such Separate
Accounts' aggregate investment (Share net asset value multiplied by total number
of Shares held by such Separate Accounts) on each business day during the
calendar month, and dividing by the total number of business days during such
month. The payment to the Company under this paragraph shall be calculated by MH
at the end of each calendar month and will be paid to the Company within thirty
(30) days thereafter.
This services agreement shall remain in full force and effect for an initial
term of one year, and shall automatically renew for successive one year periods.
The services agreement may be terminated by either the Company or MH upon sixty
(60) days written notice to the other, and shall terminate automatically upon
redemption of all Shares held in Separate Accounts, upon termination of the
Participation Agreement, or upon assignment of the Participation Agreement by
either the Company or MH.
Notwithstanding the termination of the services agreement MH will continue to
pay the service fees in accordance with the preceding paragraph so long as net
assets of the Company or a Separate Account remain in a Portfolio, provided such
continued payment is permitted in accordance with applicable law and regulation.
This services agreement may be amended only upon mutual agreement of the Company
and MH in writing.
Nothing in this services agreement shall amend, modify or supersede any
contractual terms, obligations or covenants among or between any of the Company,
MH, or the
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ReliaStar Life Insurance Company
December 1, 1999
Page 3
Trust previously or currently in effect, including those contractual terms,
obligations or covenants contained in the Participation Agreement.
If this services agreement is consistent with your understanding of the matters
we discussed concerning the Company's provision of the Services, please sign
below.
Very truly yours,
MITCHELL HUTCHINS ASSET MANAGEMENT INC.
By:
Title:
ACKNOWLEDGED AND AGREED TO:
RELIASTAR LIFE INSURANCE COMPANY
By:
Title:
Exhibit 1.A(8)(r)
PARTICIPATION AGREEMENT
THIS AGREEMENT is made as of the 1st day of December, 1999, by and among
Mitchell Hutchins Series Trust ("TRUST") a Massachusetts business trust;
Mitchell Hutchins Asset Management Inc. ("MITCHELL HUTCHINS"); a Delaware
Corporation, and ReliaStar Life Insurance Company ("LIFE COMPANY"); a life
insurance company organized under the laws of the State of Minnesota.
WHEREAS, TRUST is registered with the Securities and Exchange Commission ("SEC")
under the Investment Company Act of 1940, as amended ("40 Act") as an open-end
management investment company; and
WHEREAS, TRUST is organized as a series fund comprised of several portfolios
("Portfolios"), the currently available of which are listed on Appendix A
hereto; and
WHEREAS, TRUST was organized to act as the funding vehicle for certain variable
life insurance and/or variable annuity contracts ("Variable Contracts") offered
by life insurance companies through separate accounts of such life insurance
companies ("Participating Insurance Companies") and also offers its shares to
certain qualified pension and retirement plans; and
WHEREAS, TRUST has received an order from the SEC, dated _________________ (File
No. __________), granting Participating Insurance Companies and their separate
accounts exemptions from the provisions of Sections 9(a), 13(a), 15(a) and 15(b)
of the '40 Act, and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the
extent necessary to permit shares of the Portfolios of the TRUST to be sold to
and held by variable annuity and variable life insurance separate accounts of
both affiliated and unaffiliated life insurance companies and certain qualified
pension and retirement plans (the "Order"); and
WHEREAS, LIFE COMPANY has established or will establish one or more separate
accounts ("Separate Accounts") to offer Variable Contracts and is desirous of
having TRUST as one of the underlying funding vehicles for such Variable
Contracts; and
WHEREAS, MITCHELL HUTCHINS is registered with the SEC as an investment adviser
under the Investment Advisers Act of 1940 and as a broker-dealer under the
Securities Exchange Act of 1934, as amended; and
WHEREAS, MITCHELL HUTCHINS is the investment adviser, administrator, and (for
Class I shares) distributor of the shares of each Portfolio of TRUST; and
WHEREAS, to the extent permitted by applicable insurance laws and regulations,
LIFE COMPANY intends to purchase shares of TRUST to fund the aforementioned
Variable Contracts and TRUST is authorized to sell such shares to LIFE COMPANY
at net asset value;
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NOW, THEREFORE, in consideration of their mutual promises, LIFE COMPANY, TRUST,
and MITCHELL HUTCHINS agree as follows:
Article I. SALE OF TRUST SHARES
1.1 TRUST agrees to make available to the Separate Accounts of LIFE COMPANY
shares of the selected Portfolios as listed in Appendix B for investment of
proceeds from Variable Contracts allocated to the designated Separate Accounts,
such shares to be offered as provided in TRUST's Prospectus.
1.2 TRUST agrees to sell to LIFE COMPANY those shares of the selected Portfolios
of TRUST which LIFE COMPANY orders, executing such orders on a daily basis at
the net asset value next computed after receipt by TRUST or its designee of the
order for the shares of TRUST. For purposes of this Section 1.2, LIFE COMPANY
shall be the designee of TRUST for receipt of such orders from LIFE COMPANY and
receipt by such designee shall constitute receipt by TRUST; provided that TRUST
receives notice of such order by 10:00 a.m. New York time on the next following
Business Day and reflect instructions received by the Life Company from Variable
Contract owners in good order prior to the time the net asset value of the Trust
is calculated in accordance with the Fund Registration Statement on the prior
Business Day. Orders reflecting instructions received by the Life Company in
good order after the time the net asset value of the Trust is calculated will
not be deemed received until the next succeeding Business Day. "Business Day"
shall mean any day on which the New York Stock Exchange is open for trading and
on which TRUST calculates its net asset value pursuant to the rules of the SEC.
1.3 TRUST agrees to redeem for cash, on LIFE COMPANY's request, any full or
fractional shares of TRUST held by LIFE COMPANY, executing such requests on a
daily basis at the net asset value next computed after receipt by TRUST or its
designee of the request for redemption. For purposes of this Section 1.3, LIFE
COMPANY shall be the designee of TRUST for receipt of requests for redemption
from LIFE COMPANY and receipt by such designee shall constitute receipt by
TRUST; provided that TRUST receives notice of such request for redemption by
10:00 a.m. New York time on the next following Business Day and reflect
instructions received by the Life Company from Variable Contract owners in good
order prior to the time the net asset value of the Trust is calculated in
accordance with the Fund Registration Statement on the prior Business Day.
Orders reflecting instructions received by the Life Company in good order after
the time the net asset value of the Trust is calculated will not be deemed
received until the next succeeding Business Day.
1.4 TRUST shall furnish, on or before the ex-dividend date, notice to LIFE
COMPANY of any income dividends or capital gain distributions payable on the
shares of any Portfolio of TRUST. LIFE COMPANY hereby elects to receive all such
income dividends and capital gain distributions as are payable on a Portfolio's
shares in additional shares of the Portfolio. TRUST shall notify LIFE COMPANY of
the number of shares so issued as payment of such dividends and distributions.
1.5 TRUST shall make the net asset value per share for the selected Portfolio(s)
available to LIFE COMPANY on a daily basis as soon as reasonably practicable
after the net asset value per share is calculated but shall use its reasonable
best efforts to make such net asset value available by 6:30 p.m. New York time.
If TRUST provides LIFE COMPANY with materially incorrect share net asset value
information, LIFE COMPANY shall be entitled to payment by MITCHELL HUTCHINS of
an amount equal to LIFE COMPANY'S reasonable administrative, clerical, and other
expenses in correcting the error, and LIFE COMPANY on behalf of the Separate
Accounts, shall be entitled to an adjustment to the number of shares purchased
or redeemed to reflect the correct share net asset value. Any material error in
the calculation of net asset value per share, dividend or capital gain
information shall be reported promptly upon discovery to LIFE COMPANY.
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1.6 At the end of each Business Day, LIFE COMPANY shall use the information
described in Section 1.5 to calculate Separate Account unit values for the day.
Using these unit values, LIFE COMPANY shall process each such Business Day's
Separate Account transactions based on requests and premiums received by it by
the close of trading on the floor of the New York Stock Exchange (currently 4:00
p.m. New York time) to determine the net dollar amount of TRUST shares which
shall be purchased or redeemed at that day's closing net asset value per share.
The net purchase or redemption orders so determined shall be transmitted to
TRUST by LIFE COMPANY by 10:00 a.m. New York Time on the Business Day next
following LIFE COMPANY's receipt of such requests and premiums in accordance
with the terms of Sections 1.2 and 1.3 hereof.
1.7 If LIFE COMPANY's order requests the purchase of TRUST shares, LIFE COMPANY
shall pay for such purchase by wiring federal funds to TRUST or its designated
custodial account on the day the order is transmitted by LIFE COMPANY. If LIFE
COMPANY's order requests a net redemption resulting in a payment of redemption
proceeds to LIFE COMPANY, TRUST shall wire the redemption proceeds to LIFE
COMPANY by the next Business Day, unless doing so would require TRUST to dispose
of portfolio securities or otherwise incur additional costs, but in such event,
proceeds shall be wired to LIFE COMPANY within the period required pursuant to
the 1940 Act or other applicable law and TRUST shall notify the person
designated in writing by LIFE COMPANY as the recipient for such notice of such
delay by 3:00 p.m. New York Time the same Business Day that LIFE COMPANY
transmits the redemption order to TRUST. If LIFE COMPANY's order requests the
application of redemption proceeds from the redemption of shares to the purchase
of shares of another fund advised, administered or distributed by MITCHELL
HUTCHINS, the amount wire transferred by LIFE COMPANY shall be reduced by the
amount of such proceeds and TRUST shall apply such proceeds the same Business
Day that LIFE COMPANY transmits such order to TRUST.
1.8 Notwithstanding Section 1.7, TRUST reserves the right to suspend the right
of redemption or postpone the date of payment or satisfaction upon redemption
consistent with Section 22(e) of the '40 Act and any rules thereunder.
1.9 TRUST agrees that all shares of the Portfolios of TRUST will be sold only to
Participating Insurance Companies which have agreed to participate in TRUST to
fund their Separate Accounts and/or to certain qualified pension and other
retirement plans, all in accordance with the requirements of Section 817(h) of
the Internal Revenue Code of 1986, as amended ("Code") and Treasury Regulation
1.817-5. Shares of the Portfolios of TRUST will not be sold directly to the
general public.
1.10 TRUST may refuse to sell shares of any Portfolio to any person, or suspend
or terminate the offering of the shares of any Portfolio if such action is
required by law or by regulatory authorities having jurisdiction or is, in the
sole discretion of the Board of Trustees of TRUST, deemed necessary and in the
best interests of the shareholders of such Portfolios.
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Article II. REPRESENTATIONS AND WARRANTIES
2.1 LIFE COMPANY represents and warrants that it is an insurance company duly
organized and in good standing under the laws of Minnesota and that it has
legally and validly established each Separate Account as a segregated asset
account under such laws, and that Washington Square Securities, Inc., the
principal underwriter for the Variable Contracts, is registered as a
broker-dealer under the Securities Exchange Act of 1934.
2.2 LIFE COMPANY represents and warrants that it has registered or, prior to any
issuance or sale of the Variable Contracts, will register each Separate Account
as a unit investment trust ("UIT") in accordance with the provisions of the '40
Act and cause each Separate Account to remain so registered to serve as a
segregated asset account for the Variable Contracts, unless an exemption from
registration is available.
2.3 LIFE COMPANY represents and warrants that the Variable Contracts will be
registered under the Securities Act of 1933 (the "33 Act") unless an exemption
from registration is available prior to any issuance or sale of the Variable
Contracts and that the Variable Contracts will be issued and sold in compliance
in all material respects with all applicable federal and state laws.
2.4 LIFE COMPANY represents and warrants that the Variable Contracts are
currently and at the time of issuance will be treated as life insurance,
endowment or annuity contracts under applicable provisions of the Code, that it
will maintain such treatment and that it will notify TRUST immediately upon
having a reasonable basis for believing that the Variable Contracts have ceased
to be so treated or that they might not be so treated in the future.
2.5 LIFE COMPANY represents and warrants that it shall deliver such
prospectuses, statements of additional information, proxy statements and
periodic reports of the Trust as required to be delivered under applicable
federal or state law in connection with the offer, sale or acquisition of the
Variable Contracts.
2.6 LIFE COMPANY represents and warrants that no existing text or formatting of
TRUST'S prospectus as delivered to LIFE COMPANY in electronic format will be
revised or altered by LIFE COMPANY or any employee or agent of LIFE COMPANY;
provided, that if MITCHELL HUTCHINS is notified in advance and does not
reasonably object to the addition of hyperlinks and other common electronic
features shall not constitute a revision or alteration of the material.
2.7 TRUST represents and warrants that the Portfolio shares offered and sold
pursuant to this Agreement will be registered under the '33 Act and sold in
accordance with all applicable federal and state laws, and TRUST shall be
registered under the '40 Act prior to and at the time of any issuance or sale of
such shares. TRUST shall amend its registration statement under the '33 Act and
the '40 Act from time to time as required in order to effect the continuous
offering of its shares. TRUST shall register and qualify its shares for sale in
accordance with the laws of the various states only if and to the extent deemed
advisable by TRUST.
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2.8 TRUST represents and warrants that each Portfolio will comply with the
diversification requirements set forth in Section 817(h) of the Code, and the
rules and regulations thereunder, including without limitation Treasury
Regulation 1.817-5, and will notify LIFE COMPANY immediately upon having a
reasonable basis for believing any Portfolio has ceased to comply or might not
so comply and will immediately take all reasonable steps to adequately diversify
the Portfolio to achieve compliance within the grace period afforded by
Regulation 1.817-5.
2.9 TRUST represents and warrants that each Portfolio invested in by the
Separate Account is currently qualified as a "regulated investment company"
under Subchapter M of the Code, that it will make every reasonable effort to
maintain such qualification and will notify LIFE COMPANY immediately upon having
a reasonable basis for believing it has ceased to so qualify or might not so
qualify in the future.
Article III. PROSPECTUSES, PERIODIC REPORTS, AND PROXY STATEMENTS
3.1 TRUST shall prepare and be responsible for filing with the SEC and any state
regulators requiring such filing all shareholder reports, notices, proxy
materials (or similar materials such as voting instruction solicitation
materials), prospectuses and statements of additional information of TRUST.
TRUST shall bear the costs of registration and qualification of shares of the
Portfolios, preparation and filing of the documents listed in this Section 3.1
and all taxes to which an issuer is subject on the issuance and transfer of its
shares.
3.2 TRUST will bear the printing costs (or duplicating costs with respect to the
statement of additional information), mailing costs, and, in the case of proxy
solicitations, tabulation costs, associated with the delivery of the following
TRUST (or individual Portfolio) documents, and any supplements thereto, to
existing variable Contract owners of LIFE COMPANY:
(i) prospectuses and statements of additional information;
(ii) annual and semi-annual reports; and
(iii) proxy materials.
If requested by LIFE COMPANY, the TRUST shall provide such documentation
(including a final copy of the TRUST's prospectus as set in type or in
camera-ready copy) and other assistance as is reasonably necessary in order for
LIFE COMPANY to print the current prospectus for the TRUST either as a
standalone document or together with the prospectus for the Variable Contracts
or the prospectuses for other funds offered through the Variable Contracts.
Should LIFE COMPANY wish to print any of these documents in a format different
from that provided by TRUST, LIFE COMPANY shall provide Trust with sixty (60)
days, prior written notice and LIFE COMPANY shall bear the cost associated with
any format change (but not the cost of printing or mailing).
LIFE COMPANY will submit any bills for printing, duplicating and/or mailing
costs, relating to the TRUST documents described above, to TRUST for
reimbursement by TRUST. LIFE COMPANY shall monitor such costs and shall use its
best efforts to control these costs. LIFE COMPANY will provide TRUST on a
semi-annual basis, or more frequently as reasonably
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requested by TRUST, with a current tabulation of the number of existing Variable
Contract owners of LIFE COMPANY whose Variable Contract values are invested in
TRUST. This tabulation will be sent to TRUST in the form of a letter signed by a
duly authorized officer of LIFE COMPANY attesting to the accuracy of the
information contained in the letter.
TRUST will provide, at its expense, LIFE COMPANY with the following TRUST (or
individual Portfolio) documents, and any supplements thereto, with respect to
prospective Variable Contract owners of LIFE COMPANY:
(i) camera-ready copy of the current prospectus for printing by
the LIFE COMPANY;
(ii) a copy of the statement of additional information suitable for
duplication;
(iii) camera-ready copy of proxy material suitable for printing; and
(iv) camera-ready copy of the annual and semiannual reports for
printing by the LIFE COMPANY.
3.4 TRUST, upon request of LIFE COMPANY, will provide LIFE COMPANY with
electronic copies of any of the TRUST (or individual portfolio) documents listed
in Section 3.1 of this Agreement, for use by LIFE COMPANY in the delivery of the
TRUST'S documents on an individual basis to current and prospective Variable
Contract Owners.
3.5 TRUST will provide LIFE COMPANY with at least one complete copy of all
prospectuses, statements of additional information, annual and semi-annual
reports, proxy statements, exemptive applications and all amendments or
supplements to any of the above that relate to the Portfolios promptly after the
filing of each such document with the SEC or other regulatory authority. LIFE
COMPANY will provide TRUST with at least one complete copy of all prospectuses,
statements of additional information, annual and semi-annual reports, proxy
statements, exemptive applications and all amendments or supplements to any of
the above that relate to a Separate Account promptly after the filing of each
such document with the SEC or other regulatory authority.
Article IV. SALES MATERIALS
4.1 LIFE COMPANY will furnish, or will cause to be furnished, to MITCHELL
HUTCHINS each piece of sales literature or other promotional material in which
TRUST, MITCHELL HUTCHINS, or PAINEWEBBER is named, at least fifteen (15)
Business Days prior to its intended use. No such material will be used if TRUST,
or MITCHELL HUTCHINS objects to its use in writing within ten (10) Business Days
after receipt of such material.
4.2 TRUST and MITCHELL HUTCHINS will furnish, or will cause to be furnished, to
LIFE COMPANY, each piece of sales literature or other promotional material in
which LIFE COMPANY or its Separate Accounts are named, at least fifteen (15)
Business Days prior to its intended use. No such material will be used if LIFE
COMPANY objects to its use in writing within ten (10) Business Days after
receipt of-such material.
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<PAGE>
4.3 TRUST and its affiliates and agents shall not give any information or make
any representations on behalf of LIFE COMPANY or concerning LIFE COMPANY, the
Separate Accounts, or the Variable Contracts issued by LIFE COMPANY, other than
the information or representations contained in a registration statement or
prospectus for such Variable Contracts, as such registration statement and
prospectus may be amended or supplemented from time to time, or in reports of
the Separate Accounts or reports prepared for distribution to owners of such
Variable Contracts, or in sales literature or other promotional material
approved by LIFE COMPANY or its designee, except with the written permission of
LIFE COMPANY.
4.4 LIFE COMPANY and its affiliates and agents shall not give any information or
make any representations on behalf of TRUST, MITCHELL HUTCHINS, or PAINEWEBBER
or concerning TRUST, MITCHELL HUTCHINS, or PAINEWEBBER other than the
information or representations contained in a registration statement or
prospectus for TRUST, as such registration statement and prospectus may be
amended or supplemented from time to time, or in sales literature or other
promotional material approved by TRUST or its designee, except with the written
permission of TRUST, MITCHELL HUTCHINS, or PAINEWEBBER.
4.5 For purposes of this Agreement, the phrase "sales literature or other
promotional material" or words of similar import include, without limitation,
advertisements (such as material published, or designed for use, in a newspaper,
magazine or other periodical, radio, television, telephone or tape recording,
videotape display, signs or billboards, motion pictures or other public media),
sales literature (such as any written communication distributed or made
generally available to customers or the public, including brochures, circulars,
research reports, market letters, form letters, seminar texts, or reprints or
excerpts of any other advertisement, sales literature, or published article),
educational or training materials or other communications distributed or made
generally available to some or all agents or employees, registration statements,
prospectuses, statements of additional information, shareholder reports and
proxy materials, and any other material constituting sales literature or
advertising under National Association of Securities Dealers, Inc. rules, the
'40 Act or the '33 Act, but shall not include depositor or variable account
financial statements sent to existing customers.
Article V. POTENTIAL CONFLICTS
5.1 The Board of Trustees of TRUST (the "Board") will monitor TRUST for the
existence of any material irreconcilable conflict between the interests of the
Variable Contract owners of Participating Insurance Company Separate Accounts
investing in the Portfolios. A material irreconcilable conflict may arise for a
variety of reasons, including: (a) state insurance regulatory authority action;
(b) a change in applicable federal or state insurance, tax, or securities laws
or regulations, or a public ruling, private letter ruling, or any similar action
by insurance, tax, or securities regulatory authorities; (c) an administrative
or judicial decision in any relevant proceeding; (d) the manner in which the
investments of the Portfolios are being managed; (e) a difference in voting
instructions given by variable annuity and variable life insurance contract
owners or by contract owners of different Participating Insurance Companies; or
(f) a decision by a Participating Insurance Company to disregard voting
instructions of Variable Contract owners.
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<PAGE>
5.2 LIFE COMPANY will report any potential or existing conflicts to the Board.
LIFE COMPANY will be responsible for assisting the Board in carrying out its
responsibilities under the Conditions set forth in the notice issued by the SEC
for the Portfolios on ________, 1999 (the "Notice") (Investment Company Act
Release No. ________), which LIFE COMPANY has reviewed, by providing the Board
with all information reasonably necessary for it to consider any issues raised.
This responsibility includes, but is not limited to, an obligation by LIFE
COMPANY to inform the Board whenever Variable Contract owner voting instructions
are disregarded by LIFE COMPANY. These responsibilities will be carried out with
a view only to the interests of the Variable Contract owners.
5.3 If a majority of the Board or a majority of its disinterested trustees or
directors, determines that a material irreconcilable conflict exists, affecting
the LIFE COMPANY, LIFE COMPANY, at its expense and to the extent reasonably
practicable (as determined by a majority of disinterested trustees or
directors), will take any reasonable steps necessary to remedy or eliminate the
irreconcilable material conflict, including: (a) withdrawing the assets
allocable to some or all of the Separate Accounts from the Funds or any series
thereof and reinvesting those assets in a different investment medium, which may
include another series of TRUST or another investment company or submitting the
question as to whether such segregation should be implemented to a vote of all
affected Variable Contract owners and, as appropriate, segregating the assets of
any appropriate group (i.e., Variable Contract owners of one or more
Participating Insurance Companies) that votes in favor of such segregation, or
offering to the affected Variable Contract owners the option of making such a
change; and (b) establishing a new registered management investment company or
managed separate account. If a material irreconcilable conflict arises because
of LIFE COMPANY's decision to disregard Variable Contract owner voting
instructions, and that decision represents a minority position or would preclude
a majority vote, LIFE COMPANY may be required, at the election of the relevant
Portfolio, to withdraw its Separate Account's investment in such Portfolio, and
no charge or penalty will be imposed as a result of such withdrawal. The
responsibility to take such remedial action shall be carried out with a view
only to the interests of the Variable Contract owners.
For the purposes of this Section 5.3, a majority of the disinterested members of
the Board shall determine whether or not any proposed action adequately remedies
any irreconcilable material conflict, but in no event will the relevant
Portfolio or MITCHELL HUTCHINS (or any other investment adviser of the
Portfolios) be required to establish a new funding medium for any Variable
Contract. Further, LIFE COMPANY shall not be required by this Section 5.3 to
establish a new funding medium for any Variable Contract if any offer to do so
has been declined by a vote of a majority of Variable Contract owners materially
affected by the irreconcilable material conflict.
5.4 The Board's determination of the existence of an irreconcilable material
conflict and its implications shall be made known promptly and in writing to
LIFE COMPANY.
5.5 No less than annually, LIFE COMPANY shall submit to the Board such reports,
materials or data as the Board may reasonably request so that the Board may
fully carry out the obligations imposed upon it by these Conditions. Such
reports, materials, and data shall be submitted more frequently if deemed
appropriate by the Board.
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<PAGE>
Article VI. VOTING
6.1 LIFE COMPANY will provide pass-through voting privileges to all Variable
Contract owners so long as the SEC continues to interpret the '40 Act as
requiring pass-through voting privileges for Variable Contract owners. This
condition will apply to Separate Accounts investing in TRUST. Accordingly, LIFE
COMPANY, where applicable, will vote shares of a Portfolio held in its Separate
Accounts in a manner consistent with voting instructions timely received from
its Variable Contract owners. LIFE COMPANY will be responsible for assuring that
each of its Separate Accounts that participates in any Portfolio calculates
voting privileges in a manner consistent with other participants as defined in
the Conditions set forth in the Notice ("Participants"). The obligation to
calculate voting privileges in a manner consistent with all other Separate
Accounts investing in a Portfolio will be a contractual obligation of all
Participants under the agreements governing participation in the Portfolios.
Each Participant will vote shares for which it has not received timely voting
instructions, as well as shares it owns, in the same proportion as it votes
those shares for which it has received voting instructions.
6.2 If and to the extent Rule 6e-2 and Rule 6e-3 (T) are amended, or Rule 6e-3
is adopted, to provide exemptive relief from any provision of the '40 Act or the
rules thereunder with respect to mixed and shared funding on terms and
conditions materially different from any exemptions granted in the Order, then
TRUST, MITCHELL HUTCHINS and/or the Participants, as appropriate, shall take
such steps as may be necessary to comply with Rule 6e-2 and Rule 6e-3(T), as
amended, and Rule 6e-3, as adopted, to the extent such Rules are applicable.
Article VII. INDEMNIFICATION
7.1 Indemnification by LIFE COMPANY. LIFE COMPANY agrees to indemnify and hold
harmless TRUST, MITCHELL HUTCHINS and each of their Trustees, directors,
officers, employees and agents and each person, if any, who controls TRUST or
MITCHELL HUTHCINS within the meaning of Section 15 of the '33 Act (collectively,
the "Indemnified Parties" for purposes of this Article VII) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of LIFE COMPANY, which consent shall not be unreasonably
withheld) or litigation (including reasonable legal and other expenses), to
which the Indemnified Parties may become subject under any statute, regulation,
at common law or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) or settlements are related to the
offer, sale or acquisition of TRUST's shares or the Variable Contracts and:
(a) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in
the Registration Statement, prospectus, or sales literature
for the Variable Contracts or contained in the Variable
Contracts (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements
therein not misleading, provided that this agreement to
indemnify shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission
was made in reliance upon and in conformity with information
furnished to LIFE
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<PAGE>
COMPANY by or on behalf of TRUST for use in the registration
statement or prospectus for the Variable Contracts or in the
Variable Contracts or sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale
of the Variable Contracts or TRUST shares; or
(b) arise out of or as a result of statements or representations
(other than statements or representations' contained in the
registration statement, prospectus or sales literature of
TRUST not supplied by LIFE COMPANY, or persons under its
control) or wrongful conduct of LIFE COMPANY or persons under
its control, with respect to the sale or distribution of the
Variable Contracts or TRUST shares; or
(c) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a registration statement,
prospectus, or sales literature of TRUST or any amendment
thereof or supplement thereto or the omission or alleged
omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading if such statement or omission or such alleged
statement or omission was made in reliance upon and in
conformity with information furnished to TRUST by or on behalf
of LIFE COMPANY; or
(d) arise as a result of any failure by LIFE COMPANY to
substantially provide the services and furnish the materials
under the terms of this Agreement; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by LIFE COMPANY in this
Agreement or arise out of or result from any other material
breach of this Agreement by LIFE COMPANY.
7.2 LIFE COMPANY shall not be liable under this indemnification provision with
respect to any losses, claims, damages, liabilities or litigation incurred or
assessed against an Indemnified Party as such may arise from such Indemnified
Party's willful misfeasance, bad faith, or gross negligence in the performance
of such Indemnified Party's duties or by reason of such Indemnified Party's
reckless disregard of obligations or duties under this Agreement or to TRUST,
whichever is applicable.
7.3 LIFE COMPANY shall not be liable under this indemnification provision with
respect to any claim made against an Indemnified Party unless such Indemnified
Party shall have notified LIFE COMPANY in writing within a reasonable time after
the summons or other first legal process giving information of the nature of the
claim shall have been served upon such Indemnified Party (or after such
Indemnified Party shall have received notice of such service on any designated
agent), but failure to notify LIFE COMPANY of any such claim shall not relieve
LIFE COMPANY from any liability which it may have to the Indemnified Party
against whom such action is brought otherwise than on account of this
indemnification provision. In case any such action is brought against an
Indemnified Party, LIFE COMPANY shall be entitled to participate at its own
expense in the defense of such action. LIFE COMPANY also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from LIFE COMPANY to such party of LIFE COMPANY's election
to assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and LIFE COMPANY will not be
liable to such party under this
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<PAGE>
Agreement for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof.
7.4 Indemnification by MITCHELL HUTCHINS. MITCHELL HUTCHINS agrees to indemnify
and hold harmless LIFE COMPANY and each of its directors, officers, employees,
and agents and each person, if any, who controls LIFE COMPANY within the meaning
of Section 15 of the '33 Act (collectively, the "Indemnified Parties" for the
purposes of this Article VII) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written consent of
MITCHELL HUTCHINS which consent shall not be unreasonably withheld) or
litigation (including reasonable legal and other expenses) to which the
Indemnified Parties may become subject under any statute, or regulation, at
common law or otherwise, insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof) or settlements are related to the
offer, sale or acquisition of TRUST's shares or the Variable Contracts and:
(a) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
registration statement or prospectus or sales literature of
TRUST (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements
therein not misleading, provided that this agreement to
indemnify shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission
was made in reliance upon and in conformity with information
furnished to MITCHELL HUTCHINS or TRUST by or on behalf of
LIFE COMPANY for use in the registration statement or
prospectus for TRUST or in sales literature (or any amendment
or supplement) or otherwise for use in connection with the
sale of the Variable Contracts or TRUST shares; or
(b) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus or sales literature for the
Variable Contracts not supplied by MITCHELL HUTCHINS or
persons under its control) or wrongful conduct of TRUST or
MITCHELL HUTCHINS or persons under their control, with
respect-to the sale or distribution of the Variable Contracts
or TRUST shares; or
(c) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a registration statement,
prospectus, or sales literature covering the Variable
Contracts, or any amendment thereof or supplement thereto or
the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the
statements therein not misleading, if such statement or
omission or such alleged statement or omission was made in
reliance upon and in conformity with information furnished to
LIFE COMPANY for inclusion therein by or on behalf of TRUST;
or
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<PAGE>
(d) arise as a result of (i) a failure by TRUST to substantially
provide the services and furnish the materials under the terms
of this Agreement; or (ii) a failure by a Portfolio(s)
invested in by the Separate Account to comply with the
diversification requirements of Section 817(h) of the Code; or
(iii) a failure by a Portfolio(s) invested in by the Separate
Account to qualify as a "regulated investment company" under
Subchapter M of the Code; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by MITCHELL HUTCHINS in
this Agreement or arise out of or result from any other
material breach of this Agreement by MITCHELL HUTCHINS.
7.5 MITCHELL HUTCHINS shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation to which
an Indemnified Party would otherwise be subject by reason of such Indemnified
Party's willful misfeasance, bad faith, or gross negligence in the performance
of such Indemnified Party's duties or by reason of such Indemnified Party's
reckless disregard of obligations and duties under this Agreement or to LIFE
COMPANY.
7.6 MITCHELL HUTCHINS shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless such
Indemnified Party shall have notified MITCHELL HUTCHINS in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify MITCHELL HUTCHINS
of any such claim shall not relieve MITCHELL HUTCHINS from any liability which
it may have to the Indemnified Party against whom such action is brought
otherwise than on account of this indemnification provision. In case any such
action is against the Indemnified Parties, MITCHELL HUTCHINS shall be entitled
to participate at its own expense in the defense thereof. MITCHELL HUTCHINS also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from MITCHELL HUTCHINS to such party
of MITCHELL HUTCHINS' election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel retained by it,
and MITCHELL HUTCHINS will not be liable to such party under this Agreement for
any legal or other expenses subsequently incurred by such party independently in
connection with the defense thereof.
Article VIII. TERM; TERMINATION
8.1 This Agreement shall be effective as of the date hereof and shall continue
in force until terminated in accordance with the provisions herein.
8.2 This Agreement shall terminate in accordance with the following provisions:
(a) At the option of LIFE COMPANY or TRUST at any time from the
date hereof upon 60 days' notice, unless a shorter time is
agreed to by the parties;
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(b) At the option of LIFE COMPANY, if TRUST shares are not
reasonably available to meet the requirements of the Variable
Contracts as determined by LIFE COMPANY. Prompt notice of
election to terminate shall be furnished by LIFE COMPANY, said
termination to be effective ten days after receipt of notice
unless TRUST makes available a sufficient number of shares to
reasonably meet the requirements of the Variable Contracts
within said ten-day period;
(c) At the option of LIFE COMPANY, upon the institution of formal
proceedings against TRUST by the SEC, or any other regulatory
body, the expected or anticipated ruling, judgment or outcome
of which would, in LIFE COMPANY's reasonable judgment,
materially impair TRUST's ability to meet and perform Trust's
obligations and duties hereunder. Prompt notice of election to
terminate shall be furnished by LIFE COMPANY with said
termination to be effective upon receipt of notice;
(d) At the option of TRUST, upon the institution of formal
proceedings against LIFE COMPANY by the SEC, the National
Association of Securities Dealers, Inc., or any other
regulatory body, the expected or anticipated ruling, judgment
or outcome of which would, in TRUST's reasonable judgment,
materially impair LIFE COMPANY's ability to meet and perform
its obligations and duties hereunder. Prompt notice of
election to terminate shall be furnished by TRUST with said
termination to be effective upon receipt of notice;
(e) In the event TRUST's shares are not registered, issued or sold
in accordance with applicable state or federal law, or such
law precludes the use of such shares as the underlying
investment medium of Variable Contracts issued or to be issued
by LIFE COMPANY. Termination shall be effective upon such
occurrence without notice;
(f) At the option of TRUST if the Variable Contracts cease to
qualify as annuity contracts or life insurance contracts, as
applicable, under the Code, or if TRUST reasonably believes
that the Variable Contracts may fail to so qualify.
Termination shall be effective upon receipt of notice by LIFE
COMPANY;
(g) At the option of LIFE COMPANY, upon TRUST's breach of any
material provision of this Agreement, which breach has not
been cured to the satisfaction of LIFE COMPANY within ten days
after written notice of such breach is delivered to TRUST;
(h) At the option of TRUST, upon LIFE COMPANY's breach of any
material provision of this Agreement, which breach has not
been cured to the satisfaction of TRUST within ten days after
written notice of such breach is delivered to LIFE COMPANY;
(i) At the option of TRUST, if the Variable Contracts are not
registered, issued or sold in accordance with applicable
federal and/or state law. Termination shall be effective
immediately upon such occurrence without notice;
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(j) In the event this Agreement is assigned without the prior
written consent of LIFE COMPANY, TRUST, and MITCHELL HUTCHINS,
termination shall be effective immediately upon such
occurrence without notice.
8.3 Notwithstanding any termination of this Agreement pursuant to Section 8.2
hereof, TRUST at its option may elect to continue to make available additional
TRUST shares, as provided below, for so long as TRUST desires pursuant to the
terms and conditions of this Agreement, for all Variable Contracts in effect on
the effective date of termination of this Agreement (hereinafter referred to as
"Existing Contracts"). Specifically, without limitation, if TRUST so elects to
make additional TRUST shares available, the owners of the Existing Contracts or
LIFE COMPANY, whichever shall have legal authority to do so, shall be permitted
to reallocate investments in TRUST, redeem investments in TRUST and/or invest in
TRUST upon the payment of additional premiums or a transfer from other
sub-accounts under the Existing Contracts. In the event of a termination of this
Agreement pursuant to Section 8.2 hereof, TRUST and MITCHELL HUTCHINS as
promptly as is practicable under the circumstances, shall notify LIFE COMPANY
whether TRUST elects to continue to make TRUST shares available after such
termination. If TRUST shares continue to be made available after such
termination, the provisions of this Agreement shall remain in effect and
thereafter either TRUST or LIFE COMPANY may terminate the Agreement, as so
continued pursuant to this Section 8.3, upon sixty (60) days prior written
notice to the other party.
8.4 Except as necessary to implement Variable Contract owner initiated
transactions, or as required by state insurance laws or regulations, LIFE
COMPANY shall not redeem the shares attributable to the Variable Contracts (as
opposed to the shares attributable to LIFE COMPANY's assets held in the Separate
Accounts), and LIFE COMPANY shall not prevent Variable Contract owners from
allocating payments to a Portfolio that was otherwise available under the
Variable Contracts, until thirty (30) days after the LIFE COMPANY shall have
notified TRUST of its intention to do so.
Article IX. NOTICES
Any notice hereunder shall be given by registered or certified mail return
receipt requested to the other party at the address of such party set forth
below or at such other address as such party may from time to time specify in
writing to the other party.
If to TRUST or MITCHELL HUTCHINS:
If to LIFE COMPANY:
ReliaStar Life Insurance Company
20 Washington Avenue South
5th Floor
Minneapolis, MN 55401
Attention: Stewart Gregg, Esq.
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Notice shall be deemed given on the date of receipt by the addressee as
evidenced by the return receipt.
Article X. MISCELLANEOUS
10.1 The captions in this Agreement are included for convenience of reference
only and in no way define or delineate any of the provisions hereof or otherwise
affect their construction or effect.
10.2 This Agreement may be executed simultaneously in two or more counterparts,
each of which taken together shall constitute one and the same instrument.
10.3 If any provision of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of the Agreement shall not
be affected thereby.
10.4 This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of the State of Minnesota. It shall also
be subject to the provisions of the federal securities laws and the rules and
regulations thereunder and to any orders of the SEC granting exemptive relief
therefrom and the conditions of such orders.
10.5 The parties agree that the assets and liabilities of each Portfolio are
separate and distinct from the assets and liabilities of each other Portfolio.
No Portfolio shall be liable or shall be charged for any debt, obligation or
liability of any other Portfolio. No Trustee, officer or agent shall be
personally liable for such debt, obligation or liability of any Portfolio and no
Portfolio or other investor, other than the Portfolio or other investors
investing in the Portfolio which incurs a debt, obligation or liability, shall
be liable therefor.
10.6 Each party shall cooperate with each other party and all appropriate
governmental authorities (including without limitation the SEC, the National
Association of Securities Dealers, Inc. and state insurance regulators) and
shall permit such authorities reasonable access to its books and records in
connection with any investigation or inquiry relating to this Agreement or the
transactions contemplated hereby.
10.7 The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, which the parties hereto are entitled to under state and
federal laws.
10.8 No provision of this Agreement may be amended or modified in any manner
except by a written agreement properly authorized and executed by TRUST,
MITCHELL HUTCHINS and the LIFE COMPANY.
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IN WITNESS WHEREOF, the parties have caused their duly authorized-officers to
execute this Fund Participation Agreement as of the date and year first above
written.
MITCHELL HUTCHINS SERIES TRUST
By:
---------------------------
Name:
Title:
MITCHELL HUTCHINS ASSET MANAGEMENT INC.
By:
---------------------------
Name:
Title:
RELIASTAR LIFE INSURANCE COMPANY
By:
---------------------------
Name:
Title:
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APPENDIX A
Mitchell Hutchins Series Trust Portfolios
- -----------------------------------------
Money Market
High Grade Fixed Income
Strategic Fixed Income
Strategic Income
Global Income
High Income
Balanced
Growth and Income
Tactical Allocation
Growth
Aggressive Growth
Small Cap
Global Growth
S&P 500 Index (not currently available)
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APPENDIX B
Separate Accounts Selected Portfolios
- ----------------- -------------------
Select Life Variable Account Global Income (Class I)
Growth and Income (Class I)
Tactical Allocation (Class I)
S&P 500 Index (Class I) (when
available)
18
1.A.10(b)
[LOGO] Reliastar
RELIASTAR LIFE INSURANCE COMPANY
P.O. Box 20, Minneapolis, Minnesota 55440
SUPPLEMENT TO
LIFE INSURANCE APPLICATION
1. DEATH BENEFIT QUALIFICATION TEST:
[] Guideline Premium Test []Cash Value Accumulation Test*
2. DEATH BENEFIT OPTION: [] Level [] Variable [] Face Amount Plus Premium*
*not available with all products
3. ALLOCATION OF PREMIUM PAYMENTS:
ALLOCATION MUST BE IN WHOLE PERCENTAGE POINTS TOTALING 100%.
a. [ %] Fixed Account (SFA)
AIM VARIABLE INSURANCE PRODUCTS FUND, INC.
b. [ %] AIM V.I. Dent Demographic Trends Fund (ADT)
THE ALGER AMERICAN FUND
c. [ %] Alger American Growth Portfolio (AGR)
d. [ %] Alger American Leveraged AllCap Portfolio (ALA)
e. [ %] Alger American MidCap Growth Portfolio (AMG)
f. [ %] Alger American Small Capitalization Portfolio (ASC)
FIDELITY VARIABLE INSURANCE PRODUCTS FUNDS
g. [ %] VIP Equity Income Portfolio (FEI)
h. [ %] VIP Growth Portfolio (FGP)
i. [ %] VIP High Income Portfolio (FHI)
j. [ %] VIP Money MarketPortfolio (FMM)
FIDELITY VARIABLE INSURANCE PRODUCTS FUNDS II
k. [ %] VIP II Contrafund Portfolio (FCF)
l. [ %] VIP II Index 500 Portfolio (FIN)
m. [ %] VIP II Investment Grade Bond Portfolio (FIG)
JANUS ASPEN SERIES
n. [ %] Aggressive Growth Portfolio (JAG)
o. [ %] Growth Portfolio (JGP)
p. [ %] International Growth Portfolio (JIG)
q. [ %] Worldwide Growth Portfolio (JWG)
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST
r. [ %] Limited Maturity Bond Portfolio (NLM)
s. [ %] Partners Portfolio (NPP)
t. [ %] Socially Responsive Portfolio (NSR)
PILGRIM VARIABLE PRODUCTS TRUST
u. [ %] VP Growth Opportunities Portfolio (PGO)
v. [ %] VP Growth + Value Portfolio (NGF)
w. [ %] VP High Yield Bond Portfolio (NHY)
x. [ %] VP International Value Portfolio (NIV)
y. [ %] VP MagnaCap Portfolio (PMP)
z. [ %] VP MidCap Opportunities Portfolio (PMO)
aa. [ %] VP Research Enhanced Index Portfolio (NMS)
bb. [ %] VP SmallCap Opportunities Portfolio (NIG)
OCC ACCUMULATION TRUST
cc. [ %] Equity Portfolio (OEP)
dd. [ %] Global Equity Portfolio (OGE)
ee. [ %] Managed Portfolio (OMP)
ff. [ %] Small Cap Portfolio (OSC)
PUTNAM VARIABLE TRUST
gg. [ %] Putnam VT Growth & Income Fund (PGI)
hh. [ %] Putnam VT New Opportunities Fund (PNO)
ii. [ %] Putnam VT Voyager Fund (PVY)
OTHER INVESTMENT COMPANIES/FUNDS
SPECIFY BOTH THE INVESTMENT COMPANY AND FUND NAMES.
___________
| |
jj. [ %] |___________|
___________
| |
kk. [ %] |___________|
___________
| |
ll. [ %] |___________|
___________
| |
mm. [ %] |___________|
We will allocate all future payments as shown above. You may change this
allocation by giving us written notice.
We reserve the right to limit your participation to a total of seventeen
Sub-Account funds over the lifetime of your Policy. Upon participation in the
seventeenth Sub-Account fund, you would be able to allocate premiums to and
transfer within the seventeen Sub-Account funds already used and which are still
available, but could not participate in any other Sub-Account funds. (This
limitation does not apply to all products.)
I understand and agree that this supplement is part of my application for life
insurance and will be considered part of my Policy with ReliaStar Life Insurance
Company.
______________________________________________________________________________
|Date | Signature of Agent | Signature of Proposed Owner(s) |
| | | |
|_____________|________________________|_______________________________________|
47554b 1-2000
<PAGE>
1.A.10(b)
[LOGO] Reliastar
RELIASTAR LIFE INSURANCE COMPANY
P.O. Box 20, Minneapolis, Minnesota 55440
SUPPLEMENT TO
LIFE INSURANCE APPLICATION
1. DEATH BENEFIT QUALIFICATION TEST:
[] Guideline Premium Test [ ] Cash Value Accumulation Test*
2. DEATH BENEFIT OPTION: [] Level [] Variable [] Face Amount Plus Premium*
*not available with all products
3. Allocation of Premium Payments:
ALLOCATION MUST BE IN WHOLE PERCENTAGE POINTS TOTALING 100%.
a. [ %] Fixed Account (SFA)
FIDELITY VARIABLE INSURANCE PRODUCTS FUNDS
b. [ %] VIP Equity Income Portfolio (FES)
c. [ %] VIP Growth Portfolio (FGS)
d. [ %] VIP High Income Portfolio (FHS)
e. [ %] VIP Money Market Portfolio (FMM)
FIDELITY VARIABLE INSURANCE PRODUCTS FUNDS II
f. [ %] VIP II Contrafund Portfolio (FCS)
g. [ %] VIP II Investment Grade Bond Portfolio (FIG)
JANUS ASPEN SERIES
h. [ %] Aggressive Growth Portfolio (JAN)
i. [ %] Growth Portfolio (JGN)
j. [ %] International Growth Portfolio (JIN)
k. [ %] Worldwide Growth Portfolio (JWN)
MITCHELL HUTCHINS SERIES TRUST
l. [ %] Global Income Portfolio (HGL)
m. [ %] Growth and Income Portfolio (HGI)
n. [ %] Tactical Allocation Portfolio (HTA)
PILGRIM VARIABLE PRODUCTS TRUST
o. [ %] VP Growth Opportunities Portfolio (PGO)
p. [ %] VP Growth + Value Portfolio (NGF)
q. [ %] VP High Yield Bond Portfolio (NHY)
r. [ %] VP International Value Portfolio (NIV)
s. [ %] VP MagnaCap Portfolio (PMP)
t. [ %] VP MidCap Opportunities Portfolio (PMO)
u. [ %] VP SmallCap Opportunities Portfolio (NIG)
PUTNAM VARIABLE TRUST
v. [ %] Putnam VT Growth & Income Fund (PGB)
w. [ %] Putnam VT New Opportunities Fund (PNB)
x. [ %] Putnam VT Voyager Fund (PVB)
OTHER INVESTMENT COMPANIES/FUNDS
Specify both the investment company and fund names.
___________
| |
y. [ %] |___________|
___________
| |
z. [ %] |___________|
___________
| |
aa. [ %] |___________|
___________
| |
bb. [ %] |___________|
We will allocate all future payments as shown above. You may change this
allocation by giving us written notice.
I understand and agree that this supplement is part of my application for life
insurance and will be considered part of my Policy with ReliaStar Life Insurance
Company.
______________________________________________________________________________
|Date | Signature of Agent | Signature of Proposed Owner(s) |
| | | |
|_____________|________________________|_______________________________________|
48134 1-2000
EXHIBIT 99.C1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 1 to
Registration Statement (File No. 333-69431) 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 on the audit of the consolidated financial statements of ReliaStar
Life Insurance Company and subsidiaries as of and for the years ended December
31, 1998 and 1997, appearing in the Prospectuses, which are 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 12, 2000
EXHIBIT 99.C6
ACTUARIAL OPINION AND CONSENT
April 12, 2000
ReliaStar Life Insurance Company
20 Washington Avenue South
Minneapolis, MN 55401
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.
Post-Effective Amendment No. 1 to the Registration Form S-6, File No.
333-69431.
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. 1 to the Registration Statement on Form S-6 as Exhibit
1.A.(5)(k) and (l) 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 to 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
LEGAL OPINION AND CONSENT
April 12, 2000
ReliaStar Life Insurance Company
20 Washington Avenue S.
Minneapolis, MN 55440
Dear Sir or Madam:
In connection with the proposed registration under the Securities Act of
1933, as amended, of flexible premium variable life insurance policies (the
"Policies") and interests in Select*Life Variable Account (the "Variable
Account"), I have examined documents relating to the establishment of the
Variable Account by the Board of Directors of ReliaStar Life Insurance Company
(the "Company") as a separate account for assets applicable to variable
contracts, pursuant to Minnesota Statutes Section 61A.13 to 61A.21, as amended,
and the Registration Statement, on Form S-6, File No. 333-69431 (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. 1 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/ JAMES M. ODLAND
James M. Odland
Counsel
