FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
The registrant meets the conditions set forth in General Instruction H(1)(a) and
(b) of Form 10-Q and is therefore filing this Form with the reduced disclosure
format.
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended: March 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number: 333-59765
333-59769
333-82427
LINCOLN BENEFIT LIFE COMPANY
(Exact name of registrant as specified in its charter)
Nebraska 470221457
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2940 South 84th Street
Lincoln, Nebraska 68506-4142
(Address of principal executive offices)(zip code)
1-800-525-9287
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes. . ./X/. . No
Indicate the number of shares of each of the issuer's classes of common
stock as of March 31, 2000; there were 25,000 shares of common capital stock
outstanding, par value $100 per share all of which shares are held by Allstate
Life Insurance Company.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Statements of Financial Position
March 31, 2000(Unaudited) and December 31, 1999.................. 3
Statements of Operations
Three Months Ended March 31, 2000 and
March 31, 1999 (Unaudited)....................................... 4
Statements of Cash Flows
Three Months Ended March 31, 2000 and
March 31, 1999 (Unaudited)................................. 5
Notes to Financial Statements.................................... 6
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS....................... 9
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE
ABOUT MARKET RISK*................................................. N/A
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS................................................. 11
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS*........................ N/A
Item 3. DEFAULTS UPON SENIOR SECURITIES*.................................. N/A
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS*.......................................................... N/A
Item 5. OTHER INFORMATION................................................. 11
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.................................. 11
SIGNATURE PAGE.............................................................. 12
*Omitted pursuant to General Instruction H(2) of Form 10-Q.
2
<PAGE>
LINCOLN BENEFIT LIFE COMPANY
STATEMENTS OF FINANCIAL POSITION
<TABLE>
<S> <C> <C>
March 31, December 31,
2000 1999
---------------- ----------------
($ in thousands, except par value) (Unaudited)
Assets
Investments
Fixed income securities, at fair value
(amortized cost $159,007 and $158,747) $ 157,608 $ 157,218
Short-term 4,001 1,919
---------- ----------
Total investments 161,609 159,137
Cash 1,277 982
Reinsurance recoverable from
Allstate Life Insurance Company 7,807,189 7,539,995
Reinsurance recoverables from non-affiliates 276,982 260,324
Receivable from affiliates, net 8,783 -
Other assets 3,208 4,497
Separate Accounts 1,616,052 1,411,996
---------- ----------
Total assets $9,875,100 $ 9,376,931
========== ===========
Liabilities
Reserve for life-contingent contract benefits $ 448,807 $ 419,117
Contractholder funds 7,627,403 7,369,664
Current income taxes payable 3,184 3,404
Deferred income taxes 1,976 745
Payable to affiliates, net - 12,650
Other liabilities and accrued expenses 18,021 1,528
Separate Accounts 1,616,052 1,411,996
----------- ----------
Total liabilities 9,715,443 9,219,104
----------- ----------
Commitments and Contingent Liabilities (Note 4)
Shareholder's equity
Common stock, $100 par value, 30,000 shares
authorized, 25,000 issued and outstanding 2,500 2,500
Additional capital paid-in 116,750 116,750
Retained income 41,316 39,571
Accumulated other comprehensive loss:
Unrealized net capital losses (909) (994)
------------ ------------
Total accumulated other comprehensive loss (909) (994)
------------ ------------
Total shareholder's equity 159,657 157,827
------------ ------------
Total liabilities and shareholder's equity $ 9,875,100 $ 9,376,931
============ ============
See notes to financial statements.
3
<PAGE>
LINCOLN BENEFIT LIFE COMPANY
STATEMENTS OF OPERATIONS
Three Months Ended
March 31,
-----------------------------------
($ in thousands) 2000 1999
--------------- ---------------
(Unaudited)
Revenues
Net investment income $ 2,784 $ 2,659
Realized capital gains and losses (3) 1
Other expenses (26) (29)
------- --------
Income from operations
before income tax expense 2,755 2,631
Income tax expense 964 930
------- -------
Net income $ 1,791 $ 1,701
======= =======
</TABLE>
See notes to financial statements.
4
<PAGE>
LINCOLN BENEFIT LIFE COMPANY
STATEMENTS OF CASH FLOWS
<TABLE>
Three Months Ended
March 31,
------------------------------------
($ in thousands) 2000 1999
---------------- ----------------
(Unaudited)
Cash flows from operating activities
<S> <C> <C>
Net income $ 1,791 $ 1,701
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation, amortization and other non-cash items (32) 20
Realized capital gains and losses 3 (1)
Changes in:
Life-contingent contract benefits and
contractholder funds 3,578 (1,561)
Income taxes payable 965 926
Other operating assets and liabilities (3,727) 642
------- ------
Net cash provided by operating activities 2,578 1,727
------- ------
Cash flows from investing activities
Fixed income securities
Proceeds from sales 8,701 -
Investment collections 746 4,986
Investment purchases (9,606) (6,812)
Change in short-term investments, net (2,124) (516)
--------- --------
Net cash used in investing activities (2,283) (2,342)
--------- --------
Net increase (decrease) in cash 295 (615)
Cash at the beginning of period 982 1,579
--------- --------
Cash at end of period $ 1,277 $ 964
========= ========
</TABLE>
See notes to financial statements.
5
<PAGE>
LINCOLN BENEFIT LIFE COMPANY
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The accompanying financial statements include the accounts of Lincoln
Benefit Life Company ("the Company"), a wholly owned subsidiary of
Allstate Life Insurance Company ("ALIC"), which is wholly owned by
Allstate Insurance Company ("AIC"), a wholly owned subsidiary of The
Allstate Corporation (the "Corporation"). These financial statements have
been prepared in conformity with generally accepted accounting
principles.
The financial statements and notes as of March 31, 2000 and for the three
month periods ended March 31, 2000 and 1999 are unaudited. The interim
financial statements reflect all adjustments (consisting only of normal
recurring accruals) which are, in the opinion of management, necessary
for the fair presentation of the financial position, results of
operations and cash flows for the interim periods. The financial
statements and notes should be read in conjunction with the consolidated
financial statements and notes thereto included in the Lincoln Benefit
Life Company Annual Report on Form 10-K for 1999. The results of
operations for the interim periods should not be considered indicative of
results to be expected for the full year.
On January 25, 2000, the Company paid a dividend of all common shares of
AFD, Inc. ("AFDI") stock, a registered broker-dealer, to ALIC. Prior to
the dividend, AFDI had been consolidated in the Company's financial
statements and related disclosures. In conjunction with the dividend, the
Company has restated its prior year financial results to exclude AFDI.
To conform with the 2000 presentation, certain amounts in the prior
years' financial statements and notes have been reclassified.
2. Reinsurance
The Company has reinsurance agreements whereby certain premiums, contract
charges, credited interest, policy benefits and expenses are ceded to
ALIC and reflected net of such reinsurance in the statements of
operations. Reinsurance recoverable and the related reserve for
life-contingent contract benefits and contractholder funds are reported
separately in the statements of financial position. The Company continues
to have primary liability as the direct insurer for risks reinsured.
6
<PAGE>
LINCOLN BENEFIT LIFE COMPANY
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Investment income earned on the assets which support contractholder funds
and the reserve for life-contingent contract benefits is not included in
the Company's financial statements as those assets are owned and managed
under terms of the reinsurance agreements. The following amounts were
ceded to ALIC under reinsurance agreements.
<TABLE>
<S> <C>
Three Months Ended
March 31,
------------------------------------
($ in thousands) 2000 1999
---------------- ----------------
Premiums $18,858 $13,383
Contract charges 34,472 31,897
Credited interest, policy benefits,
and certain expenses 173,484 167,288
The Company also purchases reinsurance from non-affiliates. The following
amounts were ceded to third parties under reinsurance agreements.
Three Months Ended
March 31,
------------------------------------
($ in thousands) 2000 1999
---------------- ----------------
Premiums $45,599 $29,937
Credited interest, policy benefits,
and certain expenses 64,397 57,371
</TABLE>
7
<PAGE>
LINCOLN BENEFIT LIFE COMPANY
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
3. Comprehensive Income
The components of other comprehensive income on a pretax and after-tax
basis for the three months ended March 31, are as follows:
<TABLE>
<S> <C> <C> <C>
($ in thousands) 2000 1999
---------------------------------- ----------------------------------
After- After-
Pretax Tax tax Pretax Tax tax
Unrealized capital gains and
and losses:
-----------------------------------------
Unrealized holding gains (losses)
arising during the period $127 $(44) $ 83 $(3,165) $1,108 $(2,057)
Less: reclassification adjustments (3) 1 (2) 1 - 1
------- ------- ------- --------- ------- --------
Unrealized net capital gains
(losses) 130 (45) 85 (3,166) 1,108 (2,058)
------- ------ ------- --------- ------- --------
Other comprehensive income
(loss) $130 $ (45) 85 $(3,166) $1,108 (2,058)
====== ======= ======== =======
Net income 1,791 1,701
------ -------
Comprehensive income (loss) $1,876 $ (357)
======= =======
</TABLE>
4. Commitments and Contingent Liabilities
Regulation and legal proceedings
The Company's business is subject to the effects of a changing social,
economic and regulatory environment. Public and regulatory initiatives
have varied and have included employee benefit regulations, removal of
barriers preventing banks from engaging in the securities and insurance
business, tax law changes affecting the taxation of insurance companies
and tax treatment of insurance products and its impact on the relative
desirability of various personal investment vehicles. The ultimate changes
and eventual effects, if any, of these initiatives are uncertain.
From time to time the Company is involved in pending and threatened
litigation in the normal course of its business in which claims for
monetary damages are asserted. In the opinion of management, the ultimate
liability, if any, arising from such pending or threatened litigation is
not expected to have a material effect on the results of operations,
liquidity or financial position of the Company.
8
<PAGE>
Lincoln Benefit Life Company
Management's Discussion and Analysis
of Financial Condition and Results of Operations
The following discussion highlights significant factors influencing
results of operations and changes in financial position of Lincoln Benefit Life
Company (the "Company"). It should be read in conjunction with the consolidated
financial statements and related notes thereto found under items 7 and 8 of Part
II of the Lincoln Benefit Life Company Annual Report on Form 10-K for the year
ended December 31, 1999.
The Company, a wholly owned subsidiary of Allstate Life Insurance Company
("ALIC"), which is a wholly owned subsidiary of Allstate Insurance Company
("AIC"), a wholly owned subsidiary of The Allstate Corporation ("Corporation"),
markets a broad line of life insurance and savings products through independent
insurance agents and brokers. Life insurance consists of traditional products,
including term and whole life, interest-sensitive life, immediate annuities with
life contingencies, variable life and indexed life insurance. Savings products
include deferred annuities and immediate annuities without life contingencies.
Deferred annuities include fixed rate, market value adjusted, indexed and
variable annuities.
The Company has identified itself as a single segment entity.
The assets and liabilities related to variable annuity and variable life
contracts are legally segregated and reflected as Separate Accounts. The assets
of the Separate Accounts are carried at fair value. Separate Accounts
liabilities represent the contractholders' claim to the related assets and are
carried at the fair value of the assets. In the event that the asset value of
certain contractholder accounts are projected to be below the value guaranteed
by the Company, a liability is established through a charge to earnings.
Investment income and realized gains and losses of the Separate Accounts accrue
directly to the contractholders and therefore, are not included in the Company's
statements of operations.
On January 25, 2000, the Company paid a dividend of all common shares of
AFD, Inc. ("AFDI") stock, a registered broker-dealer, to ALIC. Prior to the
dividend, AFDI had been consolidated in the Company's financial statements and
related disclosures. In conjunction with the dividend, the Company has restated
its prior year financial results to exclude AFDI.
Results of Operations
($ in thousands)
<TABLE>
<S> <C> <C>
Three Months Ended
March 31,
2000 1999
------------- -------------
Net investment income $ 2,784 $ 2,659
============= =============
Realized capital gains and losses, after-tax $ (2) $ 1
============= =============
Net income $ 1,791 $ 1,701
============= =============
Total investments $ 161,609 $ 161,968
============= =============
</TABLE>
The Company has reinsurance agreements under which contract and policy
related transactions are transferred, primarily to ALIC. The Company also has
reinsurance agreements with third parties. The Company's results of operations
include primarily net investment income and realized capital gains and losses
earned on the assets of the Company that are not transferred under the
reinsurance agreements. Certain non-investment related expenses which are not
transferred under reinsurance agreements are presented in other expenses.
Net income for the first quarter of 2000 increased 5.3% to $1.8 million.
Pretax net investment income for the three month period ended March 31, 2000
increased 4.7% to $2.8 million primarily attributable to higher investment
balances. Investments at March 31, 2000, excluding Separate Accounts and
unrealized gains and losses on fixed income securities, grew 4.5% from the same
period last year.
9
<PAGE>
Financial Position
($ in thousands)
<TABLE>
March 31, December 31,
<S> <C> <C>
2000 1999
-------------- --------------
Fixed income securities (1) $ 157,608 $ 157,218
Short-term investments 4,001 1,919
-------------- --------------
Total investments $ 161,609 $ 159,137
============== ==============
Reinsurance recoverable from ALIC $ 7,807,189 $ 7,539,995
============== ==============
Separate Accounts assets and liabilities $ 1,616,052 $ 1,411,996
============== ==============
Contractholder funds $ 7,627,403 $ 7,369,664
============== ==============
</TABLE>
(1)Fixed income securities are carried at fair value. Amortized cost for these
securities was $159,007 and $158,747 at March 31, 2000 and December 31, 1999,
respectively.
Total investments were $161.6 million at March 31, 2000 compared to $159.1
million at December 31, 1999. The increase was due primarily to positive cash
flows generated from operations. At March 31, 2000, unrealized net capital
losses on fixed income securities were $1.4 million compared to $1.5 million at
December 31, 1999.
At March 31, 1999, all of the Company's fixed income securities portfolio
is rated investment grade, with a National Association of Insurance
Commissioners ("NAIC") rating of 1 or 2, a Moody's rating of Aaa, Aa, A or Baa,
or a comparable Company internal rating.
During the three months ended March 31, 2000, contractholder funds
increased $257.7 million and amounts recoverable from ALIC under reinsurance
agreements increased $267.2 million. The increases resulted primarily from sales
of market value adjusted annuity contracts and interest credited to
contractholders partially offset by fixed annuity surrenders and withdrawals.
Reinsurance recoverable from ALIC relates to contract benefit obligations ceded
to ALIC.
Separate Account assets and liabilities increased 14.5% to $1.62 billion
at March 31, 2000. The increases were primarily attributable to sales of
variable annuity contracts and the favorable investment performance of the
Separate Account investment portfolios, partially offset by surrenders and
withdrawals.
Liquidity and Capital Resources
Under the terms of reinsurance agreements, premiums and deposits, excluding
those relating to Separate Accounts, are transferred primarily to ALIC, which
maintains the investment portfolios supporting the Company's products. Payments
of policyholder claims, benefits, contract maturities, contract surrenders and
withdrawals and certain operating costs are also reimbursed primarily by ALIC,
under the terms of the reinsurance agreements. The Company continues to have
primary liability as a direct insurer for risks reinsured. The Company's ability
to meet liquidity demands is dependent on ALIC's ability to meet those demands.
ALIC's claims-paying ability was rated Aa2, AA+, and A+ by Moody's, Standard &
Poor's and A.M. Best, respectively, at March 31, 2000.
The primary sources for the remainder of the Company's funds are
collection of principal and interest from the investment portfolio and capital
contributions from ALIC. The primary uses for the remainder of the Company's
funds are to purchase investments and pay costs associated with the maintenance
of the Company's investment portfolio.
At March 31, 2000, the Moody's and Standard and Poor's claims-paying
ratings for the Company were Aa2 and AA+, respectively.
Forward-Looking Statements
The statements contained in this Management's Discussion and Analysis that
are not historical information are forward-looking statements that are based on
management's estimates, assumptions and projections. The Private Securities
Litigation Reform Act of 1995 provides a safe harbor under The Securities Act of
1933 and The Securities Exchange Act of 1934 for forward-looking statements.
10
<PAGE>
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
The Company and its Board of Directors know of no material legal proceedings
pending to which the Company is a party or which would materially affect the
Company. The Company is involved in pending and threatened litigation in the
normal course of its business in which claims for monetary damages are asserted.
Management, after consultation with legal counsel, does not anticipate the
ultimate liability arising from such pending or threatened litigation to have a
material effect on the financial condition of the Company.
Item 5. OTHER INFORMATION
Not applicable.
Item 6. EXHIBITS AND REPORTS ON FORM 8-k
(a) Exhibits required by Item 601 of Regulation S-K
(2) None
(3) (i) Articles of Incorporation*
(ii) By-laws*
(4) Lincoln Benefit Life Company Flexible Premium Deferred
Annuity Contract and Application**
(10) Reinsurance Agreement between Lincoln Benefit Life Company
and Allstate Life Insurance Company*
(11) None
(15) None
(18) None
(19) None
(22) None
(23) (a) Consent of Independent Public Accountants***
(b) Consent of Attorneys***
(24) None
(27) Financial Data Schedule
(99) None
(b) Reports on 8-K
No reports on Form 8-K were filed during the second quarter of
1998.
*Incorporated herein by reference to the Registration Statement on Form N-4 for
Lincoln Benefit Life Variable Annuity Account (File No. 333-50545, 811-07924)
filed April 21, 1998.
**Incorporated herein by reference to the Registration Statement on Form N-4 for
Lincoln Benefit Life Variable Annuity Account (File No. 333-50545, 811-07924)
filed April 21, 1998. Incorporated herein by reference to the Registration
Statement on Form N-4 for Lincoln Benefit Life Variable Annuity Account (File
No. 333-50737, 811-07924) filed April 22, 1998. Incorporated by reference to the
Registration Statement on Form N-4 for Lincoln Benefit Life Variable Annuity
Account (File No. 333-82427, 811-07924) filed July 8, 1999.
***Incorporated herein by reference to the Post-effective Amendment #2 to
Registration Statement on Form S-3 for Lincoln Benefit life Company (File No.
333-59765) filed April 28, 2000. Incorporated herein by reference to the
Post-effective Amendment #2 to Registration Statement on Form S-3 for Lincoln
Benefit Life Company (File No. 333-59769) filed April 28, 2000. Incorporated
herein by reference to Post-effective Amendment No. 1 to the Registration
Statement on Form S-3 for Lincoln Benefit Life Company (File No. 333-88045)
filed April 5, 2000.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registration has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized, on the 12th day of May, 2000.
LINCOLN BENEFIT LIFE COMPANY
(Registrant)
/s/B. Eugene Wraith
- ----------------------- PRESIDENT, CHIEF OPERATING
B. EUGENE WRAITH OFFICER AND DIRECTOR
(PRINCIPAL EXECUTIVE OFFICER)
/S/ Marvin P. Ehly
- ----------------------- SENIOR VICE PRESIDENT
MARVIN P. EHLY TREASURER, CONTROLLER AND DIRECTOR
(PRINCIPAL FINANCIAL OFFICER)
(PRINCIPAL ACCOUNTING OFFICER)
12
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
THIS SCHEUDLE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM STATEMENTS
OF FINANCIAL POSITION AT MARCH 31, 2000; STATEMENTS OF OPERATIONS THREE MONTHS
ENDED MARCH 31, 2000; AND STATEMENTS OF CASH FLOWS THREE MONTHS ENDED MARCH 31,
2000.
</LEGEND>
<CIK> 0000910739
<NAME> Lincoln Benefit Life
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<DEBT-HELD-FOR-SALE> 157,608
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 0
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 161,609
<CASH> 1,277
<RECOVER-REINSURE> 8,084,171
<DEFERRED-ACQUISITION> 0
<TOTAL-ASSETS> 9,875,100
<POLICY-LOSSES> 448,807
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 7,627,403
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0
0
<COMMON> 2,500
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<TOTAL-LIABILITY-AND-EQUITY> 9,875,100
0
<INVESTMENT-INCOME> 2,784
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<UNDERWRITING-OTHER> 26
<INCOME-PRETAX> 2,755
<INCOME-TAX> 964
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</TABLE>
