UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-K
Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
The registrant meets the conditions set forth in General Instruction
I(1)(a) and (b) of Form 10-K and is therefore filing this Form with the reduced
disclosure format.
For fiscal year ended December 31, 1999 Commission file numbers: 333-59765
333-59769
333-88045
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, NE 68506-4142
1-800-525-9287
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
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 by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]
As of December 31, 1999, 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>
LINCOLN BENEFIT LIFE COMPANY
(A wholly owned subsidiary of Allstate Life Insurance Company)
Annual Report for 1999 on Form 10-K
TABLE OF CONTENTS
PAGE
PART I
ITEM 1. Business**...................................................... 3
ITEM 2. Properties**.................................................... 4
ITEM 3. Legal Proceedings............................................... 4
ITEM 4. Submission of Matters to a Vote of Security Holders*............ N/A
PART II
ITEM 5. Market for Registrant's Common Equity and
Related Stockholder Matters..................................... 4
ITEM 6. Selected Financial Data*........................................ N/A
ITEM 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations....................................... 5
ITEM 7A. Quantitative and Qualitative Disclosures About
Market Risk..................................................... 11
ITEM 8. Consolidated Financial Statements and Supplementary Data........ 11
ITEM 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure............................. N/A
PART III
ITEM 10. Directors and Executive Officers of the Registrant*............. N/A
ITEM 11. Executive Compensation*......................................... N/A
ITEM 12. Security Ownership of Certain Beneficial Owners and
Management*..................................................... N/A
ITEM 13. Certain Relationships and Related Transactions*................. N/A
PART IV
ITEM 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K............................................. 11
Index to Financial Statements Schedules.................................. 12
Signatures............................................................... 13
* Omitted pursuant to General Instruction I(2) of Form 10-K.
** Item prepared in accordance with General Instruction I(2) of Form 10-K.
<PAGE>
PART I
ITEM 1. BUSINESS
Lincoln Benefit Life Company ("Lincoln Benefit" or the "Company") is a stock
life insurance company organized under the laws of the state of Nebraska in
1938. Our legal domicile and principal business address is 2940 South 84th
Street, Lincoln, Nebraska, 68506-4142. Lincoln Benefit is a wholly owned
subsidiary of Allstate Life Insurance Company ("Allstate Life" or "ALIC"), a
stock life insurance company incorporated under the laws of the State of
Illinois. Allstate Life is a wholly owned subsidiary of Allstate Insurance
Company ("AIC"), a stock property-liability insurance company incorporated under
the laws of Illinois. All outstanding capital stock of AIC is owned by The
Allstate Corporation ("Corporation").
Lincoln Benefit is authorized to conduct life insurance and annuity business in
the District of Columbia, Guam, U.S. Virgin Islands and all states except New
York.
Under the reinsurance agreements with Allstate Life, substantially all
contract-related transactions are transferred to Allstate Life. Through Lincoln
Benefit's reinsurance agreements with Allstate Life, substantially all of the
assets backing Lincoln Benefit's reinsured liabilities are owned by Allstate
Life. These assets represent the Company's general account and are invested and
managed by Allstate Life. Accordingly, the results of operations with respect to
applications received and contracts issued by Lincoln Benefit are not reflected
in the Company's consolidated financial statements. The amounts reflected in
Lincoln Benefit's consolidated financial statements relate only to the
investment of those assets of Lincoln Benefit that are not transferred to
Allstate Life under the reinsurance agreements. While the reinsurance agreements
provide Lincoln Benefit with financial backing from Allstate Life, it does not
create a direct contractual relationship between Allstate Life and Lincoln
Benefit policyholders.
Under the Company's reinsurance agreements with ALIC, the Company reinsures all
reserve liabilities with ALIC except for variable contracts. The Company's
variable contract assets and liabilities are held in legally-segregated,
unitized Separate Accounts and are retained by the Company. However, the
transactions related to such variable contracts such as premiums, expenses and
benefits are transferred to ALIC.
Lincoln Benefit's general account assets, like the general account assets of
other insurance companies, including Allstate Life, must be invested in
accordance with applicable state laws. These laws govern the nature and quality
of investments that may be made by life insurance companies and the percentage
of their assets that may be committed to any particular type of investment. In
general, these laws permit us, within specified limits and subject to certain
qualifications, to invest in federal, state, and municipal obligations,
corporate bonds, preferred stocks, real estate mortgages, real estate and
certain other investments. All of Lincoln Benefit's general account assets are
available to meet its obligations.
Lincoln Benefit is engaged in a business that is highly competitive. Many other
life insurance companies and other entities sell insurance and annuities. There
are approximately 1,700 insurers in business in the United States. As of April
1, 1999, A.M. Best Company assigns a rating of A+ (Superior) to Allstate Life,
which automatically reinsures all net general account business of Lincoln
Benefit. A.M. Best Company also assigns Lincoln Benefit a rating of A+(r),
because Lincoln Benefit automatically reinsures all general account business
with Allstate Life. Standard & Poor's Insurance Rating Services assigns an AA+
(Very Strong.) to Lincoln Benefit's financial strength rating. Moody's assigns
an Aa2 (Excellent) financial stability rating to Lincoln Benefit. Lincoln
Benefit shares the same ratings as its parent, Allstate Life.
Although the federal government generally does not directly regulate the
business of insurance, federal initiatives often have an impact on the business
in a variety of ways. Current and proposed measures which may significantly
affect the Company's insurance business relate to the taxation of insurance
companies, the tax treatment of insurance products and the removal of barriers
preventing banks and other financial organizations from engaging in the
insurance business.
Lincoln Benefit Life is regulated by the Securities and Exchange Commission
("SEC") as an issuer of registered products. The SEC also regulates certain
Lincoln Benefit Life Separate Accounts which issue variable life contracts or,
together with the Company, issue variable annuity contracts.
3
<PAGE>
ITEM 2. PROPERTIES
Lincoln Benefit leases office space in Lincoln, Nebraska. The combined
leased spaces are used for home office administration and marketing operations.
ITEM 3. 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. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
All of the Company's outstanding shares are owned by its parent, ALIC. ALIC's
outstanding shares are owned by AIC. All of the outstanding capital stock of AIC
is owned by The Corporation.
4
<PAGE>
ITEM 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
LINCOLN BENEFIT LIFE COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion highlights significant factors influencing the
results of operations and changes in financial position of Lincoln Benefit Life
Company ("LBL") and its wholly owned subsidiary, AFD, Inc., ("AFDI", formerly
Allstate Financial Distributors, Inc.) (collectively the "Company"). It should
be read in conjunction with the consolidated financial statements and related
notes. To conform with the 1999 presentation, certain prior year amounts have
been reclassified.
LBL is 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").
The Company 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
consolidated statements of operations and comprehensive income.
CONSOLIDATED RESULTS OF OPERATIONS
($ in thousands)
<TABLE>
<CAPTION>
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Net investment income $ 10,740 $ 10,078 $ 10,067
========= ========= =========
Realized capital gains and losses, after-tax $ (593) $ 87 $ 11
========= ========= =========
Net income $ 4,957 $ 6,670 $ 6,852
========= ========= =========
Total investments $ 159,137 $ 162,659 $ 148,931
========= ========= =========
</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 consolidated 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. The results of AFDI and certain non-investment
related expenses which are not transferred under the reinsurance agreements are
presented in other income and expenses.
Net income was $5.0 million in 1999 compared to $6.7 million in 1998, as
increased net investment income was more than offset by realized capital losses
and a $2.0 million write-down of the Company's building and unamortized building
improvements. In 1998, net income was $6.7 million compared to $6.9 million in
1997 as higher realized capital gains were more than offset by lower income from
AFDI.
5
<PAGE>
LINCOLN BENEFIT LIFE COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Pretax net investment income increased 6.6% to $10.7 million in 1999 as
higher investment balances, before the impact of unrealized gains and losses on
fixed income securities, and reduced investment expenses were partially offset
by slightly lower investment yields. In 1998, pretax net investment income was
flat compared to 1997 as investment income earned on higher investment balances
were offset by increased investment expenses. For both years, the higher
investment balances arose from positive cash flows from operating activities.
Investments, excluding Separate Accounts and unrealized gains and losses on
fixed income securities, grew 4.6% and 7.7% in 1999 and 1998, respectively.
Despite recent increases in interest rates, current investment yields are still
lower than average portfolio yields, therefore funds from maturing investments
were generally reinvested at lower yields resulting in reduced investment
income. If interest rates continue to rise, this trend may reverse over time.
Realized capital losses, after-tax, were $593 thousand compared to realized
capital gains of $87 thousand and $11 thousand in 1998 and 1997, respectively.
In 1999, sales of fixed income securities resulted in the majority of the
losses. In 1998, the increase in realized capital gains arose principally from
pre-payments of fixed income securities. Year-to-year fluctuations in realized
capital gains and losses are largely the result of the timing of sales decisions
reflecting management's view of individual securities and overall market
conditions.
CONSOLIDATED FINANCIAL POSITION
($ in thousands)
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Fixed income securities (1) $ 157,218 $ 158,984
Short-term investments 1,919 3,675
---------- ----------
Total investments $ 159,137 $ 162,659
========== ==========
Reinsurance recoverable from ALIC $7,539,995 $6,938,717
========== ==========
Separate Accounts assets and liabilities $1,411,996 $ 763,416
========== ==========
Contractholder funds $7,369,664 $6,785,070
========== ==========
</TABLE>
(1) Fixed income securities are carried at fair value. Amortized cost for these
securities was $158,747 and $149,898 at December 31, 1999 and 1998,
respectively.
Total investments were $159.1 million at December 31, 1999 compared to
$162.7 million at December 31, 1998. Positive cash flows generated from
operations were more than offset by unrealized losses on fixed income
securities.
FIXED INCOME SECURITIES The Company's fixed income securities portfolio
consists of publicly traded corporate bonds, mortgage-backed securities, U.S.
government bonds and tax-exempt municipal bonds. The Company generally holds
its fixed income securities to maturity, but has classified all these
securities as available for sale to allow maximum flexibility in portfolio
management. At December 31, 1999, unrealized net capital losses on the fixed
income securities portfolio totaled $1.5 million compared to unrealized net
capital gains of $9.1 million at December 31, 1998. The change in the
unrealized position is primarily attributable to an increase in interest
rates.
At December 31, 1999, all of the Company's fixed income securities
portfolio was rated investment grade, which is defined by the Company as a
security having a National Association of Insurance
6
<PAGE>
LINCOLN BENEFIT LIFE COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Commissioners ("NAIC") rating of 1 or 2, a Moody's rating of Aaa, Aa, A or Baa,
or a comparable Company internal rating. The quality mix of the Company's fixed
income securities portfolio at December 31, 1999 is presented in the following
table.
($ in thousands)
<TABLE>
<CAPTION>
NAIC
RATINGS MOODY'S EQUIVALENT DESCRIPTION FAIR VALUE PERCENT TO TOTAL
------- ------------------------------ ---------- ----------------
<S> <C> <C> <C>
1 Aaa/Aa/A $136,849 87.0%
2 Baa 20,369 13.0%
-------- -----
$157,218 100.0%
======== =====
</TABLE>
At December 31, 1999 and 1998, $42.0 million and $51.2 million,
respectively, of the fixed income portfolio was invested in mortgage-backed
securities ("MBS"). The MBS portfolio consists primarily of securities which
were issued by or have underlying collateral that is guaranteed by U.S.
government agencies or sponsored entities, thus minimizing credit risk.
The MBS portfolio is subject to interest rate risk since the price
volatility and ultimate realized yield are affected by the rate of repayment of
the underlying mortgages. The Company attempts to limit interest rate risk on
these securities by investing a portion of the portfolio in securities that
provide prepayment protection. At December 31, 1999, over 22% of the MBS
portfolio was invested in planned amortization class bonds.
The Company closely monitors its fixed income portfolio for declines in
value that are other than temporary. Securities are placed on non-accrual status
when they are in default or when the receipt of interest payments is in doubt.
SHORT-TERM INVESTMENTS The Company's short-term investment portfolio was $1.9
million and $3.7 million at December 31, 1999 and 1998, respectively. The
Company invests available cash balances primarily in taxable short-term
securities having a final maturity date or redemption date of one year or less.
CONTRACTHOLDER FUNDS AND REINSURANCE RECOVERABLE FROM ALIC During 1999,
contractholder funds and reinsurance recoverable from ALIC under reinsurance
agreements increased $584.6 million and $601.3 million, respectively. The
increases resulted primarily from higher sales of market value adjusted and
indexed annuities and interest-sensitive life contracts and higher levels of
interest credited to contracholder balances partially offset by fixed annuity
surrenders and withdrawals. Reinsurance recoverable from ALIC relates to
contract benefit obligations ceded to ALIC.
SEPARATE ACCOUNTS Separate Accounts assets and liabilities increased 85.0% to
$1.41 billion in 1999. The increases were primarily due to sales of variable
annuity contracts and favorable investment performance of the Separate Accounts
investment portfolios.
MARKET RISK
Market risk is the risk that the Company will incur losses due to adverse
changes in equity prices or interest rates. The Company's primary market risk
exposure is to changes in interest rates, although the Company also has certain
exposures to changes in equity prices.
7
<PAGE>
LINCOLN BENEFIT LIFE COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CORPORATE OVERSIGHT In formulating and implementing policies for investing
new and existing funds, the Corporation, as indirect parent of the Company,
administers and oversees investment risk management processes primarily
through the Boards of Directors and Investment Committees of its operating
subsidiaries, and the Credit and Risk Management Committee ("CRMC"). The
Boards of Directors and Investment Committees provide executive oversight of
investment activities. The CRMC is a senior management committee consisting
of the Chief Investment Officer, the Investment Risk Manager, and other
investment officers who are responsible for the day-to-day management of
market risk. The CRMC meets at least monthly to provide detailed oversight of
investment risk, including market risk.
The Corporation has investment guidelines that define the overall framework
for managing market and other investment risks, including the accountabilities
and controls over these activities. In addition, AIC has specific investment
policies for each of its affiliates, including the Company, that delineate the
investment limits and strategies that are appropriate for the Company's
liquidity, surplus, product and regulatory requirements.
INTEREST RATE RISK Interest rate risk is the risk that the Company will incur
economic losses due to adverse changes in interest rates, as the Company invests
substantial funds in interest-sensitive assets.
One of the measures used to quantify this exposure is duration. Duration
measures the sensitivity of the fair value of assets to changes in interest
rates. For example, if interest rates increase 1%, the fair value of an asset
with a duration of 5 years is expected to decrease in value by approximately 5%.
At December 31, 1999, the Company's asset duration was approximately 4.1 years
versus 4.3 years at December 31, 1998.
To calculate duration, the Company projects asset cash flows, and discounts
them to a net present value basis using a risk-free market rate adjusted for
credit quality, sector attributes, liquidity and other specific risks. Duration
is calculated by revaluing these cash flows at an alternative level of interest
rates, and determining the percentage change in fair value from the base case.
The projections include assumptions (based upon historical market and Company
specific experience) reflecting the impact of changing interest rates on the
prepayment and/or option features of instruments, where applicable. Such
assumptions relate primarily to mortgage-backed securities, collateralized
mortgage obligations, and municipal and corporate obligations.
Based upon the information and assumptions the Company uses in its duration
calculation and interest rates in effect at December 31, 1999, management
estimates that a 100 basis point immediate, parallel increase in interest rates
("rate shock") would decrease the net fair value of its assets identified above
by approximately $6.5 million, a slight decrease from the $6.8 million at
December 31, 1998. The selection of a 100 basis point immediate parallel
increase in interest rates should not be construed as a prediction by the
Company's management of future market events, but rather, is intended to
illustrate the potential impact of such an event.
To the extent that actual results differ from the assumptions utilized, the
Company's duration and rate shock measures could be significantly impacted.
Additionally, the Company's calculation assumes that the current relationship
between short-term and long-term interest rates (the term structure of interest
8
<PAGE>
LINCOLN BENEFIT LIFE COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
rates) will remain constant over time. As a result, these calculations may not
fully capture the impact of non-parallel changes in the term structure of
interest rates and/or large changes in interest rates.
EQUITY PRICE RISK Equity price risk is the risk that the Company will incur
economic losses due to adverse changes in a particular stock, stock fund or
stock market. At December 31, 1999 the Company had variable annuity and variable
life funds with balances totaling $1.41 billion. This is an increase over the
$763.4 million of variable funds at December 31, 1998. The Company earns
mortality and expense fees as a percentage of fund balance. In the event of an
immediate decline of 10% in the fund balances due to equity market declines, the
Company would earn approximately $1.8 million less in annualized fee income
which would be ceded to ALIC. This is an increase over the $1.0 million amount
determined at December 31, 1998. The contractholder of a variable annuity
product may elect to purchase a minimum death benefit guarantee or a minimum
income benefit guarantee, generally at the time of purchase. Both guarantees may
subject the Company to additional equity price risk, as the beneficiary or
contractholder may receive their benefit for an amount greater than the fund
balance under contractually defined circumstances and terms. The Company
recorded actuarially determined reserves as of December 31, 1999 for these
exposures and has ceded them either to ALIC or a third party. The Company
expects growth in its variable annuity products in the future, stemming from
both new sales as well as market value appreciation, which will increase its
exposure to equity price risk.
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 reinsurer 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 December 31, 1999.
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 December 31, 1999, the Moody's and Standard and Poor's claims-paying
ratings for the Company were Aa2 and AA+, respectively.
The NAIC has a standard for assessing the solvency of insurance companies,
which is referred to as risk-based capital ("RBC"). The requirement consists of
a formula for determining each insurer's RBC and a model law specifying
regulatory actions if an insurer's RBC falls below specified levels. The RBC
formula for life insurance companies establishes capital requirements relating
to insurance, business, asset and interest rate risks. At December 31, 1999, RBC
for the Company was significantly above a level that would require regulatory
action.
YEAR 2000
The Company is dependent upon certain service provided for it by the
Corporation including computer-related systems, and systems and equipment
that are not typically thought of as computer-
9
<PAGE>
LINCOLN BENEFIT LIFE COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
related (referred to as "non-IT"). For this reason, the Company is reliant upon
the Corporation for the establishment and maintenance of its computer-related
systems and non-IT.
In 1995, the Corporation commenced a four phase plan which included
reprogramming, remediating or replacing computer systems and equipment which may
have failed to operate properly in or after the year 1999, due to the inability
of the systems and equipment to only recognize the last two digits of the year
in any date ("Year 2000"). Because of the comprehensiveness of the Corporation's
plan, and its timely completion, the Corporation has experienced no material
impacts on its results of operations, liquidity or financial position due to the
Year 2000 issue. The Corporation expects to incur total costs related to this
plan of $109 million between the years of 1995 and 2000. These costs are
expensed as incurred. A portion of these costs were incurred by the Company on a
pro rata basis of usage of computer-related systems and non-IT, as compared to
the usage of all the entities which shares these services with the Corporation.
These amounts were not material to the results of operations of the Company.
OTHER DEVELOPMENTS
The NAIC's codification initiative has produced a comprehensive guide of
statutory accounting principles, which the Company will implement in January
2001. The Company's state of domicile, Nebraska, has passed legislation revising
various statutory accounting requirements to conform to codification. These
requirements are not expected to have a material impact on the statutory surplus
of the Company.
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
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The pertinent provisions of Management's Discussion and Analysis of Financial
Condition and Results of Operations are herein incorporated by reference.
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
PART IV
ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) The following documents are filed as part of this Report. The page
number, if any, listed opposite a document indicates the page number in the
sequential numbering system in the manually signed original of this Report where
such document can be found.
(1) The consolidated financial statements filed as part of this Report are
listed in Item 8.
(2) Financial Statement Schedules
Schedule IV - Reinsurance page F-17
(c) Exhibits
Exh. No. Description
-------- -----------
3(a) Articles of Incorporation*
3(b) Bylaws*
27 Financial Data Schedule
- -------------------------------------------------
* Incorporated herein by reference to the Registration Statement on Form S-6
for the Lincoln Benefit Life Variable Life Account (File No. 333-47717)
filed March 11, 1998.
11
<PAGE>
Consolidated Financial Statements
INDEX
PAGE
Independent Auditors' Report............................................ F-1
Consolidated Financial Statements:
Consolidated Statements of Financial Position
December 31, 1999 and 1998........................................ F-2
Consolidated Statements of Operations and Comprehensive Income
for the Years Ended December 31, 1999, 1998 and 1997.............. F-3
Consolidated Statements of Shareholder's Equity for the Years Ended
December 31, 1999, 1998 and 1997.................................. F-4
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1999, 1998 and 1997.................................. F-5
Notes to Consolidated Financial Statements........................... F-6
Schedule IV - Reinsurance for the Years Ended
December 31, 1999, 1998 and 1997.................................. F-19
12
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND SHAREHOLDER
OF LINCOLN BENEFIT LIFE COMPANY:
We have audited the accompanying Consolidated Statements of Financial Position
of Lincoln Benefit Life Company and subsidiary (the "Company", an affiliate of
The Allstate Corporation) as of December 31, 1999 and 1998, and the related
Consolidated Statements of Operations and Comprehensive Income, Shareholder's
Equity and Cash Flows for each of the three years in the period ended December
31, 1999. Our audits also included Schedule IV - Reinsurance. These consolidated
financial statements and financial statement schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements and financial statement schedule 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, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company as of December 31, 1999
and 1998, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 1999 in conformity with generally
accepted accounting principles. Also, in our opinion, Schedule IV - Reinsurance,
when considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
/s/ Deloitte & Touche LLP
Chicago, Illinois
February 25, 2000
F-1
<PAGE>
LINCOLN BENEFIT LIFE COMPANY
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1999 1998
----------- -----------
($ in thousands, except par value)
<S> <C> <C>
ASSETS
Investments
Fixed income securities, at fair value
(amortized cost $158,747 and $149,898) $ 157,218 $ 158,984
Short-term 1,919 3,675
----------- -----------
Total investments 159,137 162,659
Cash 1,110 1,735
Reinsurance recoverable from
Allstate Life Insurance Company 7,539,995 6,938,717
Reinsurance recoverables from non-affiliates 260,324 199,997
Other assets 4,447 12,286
Separate Accounts 1,411,996 763,416
----------- -----------
TOTAL ASSETS $ 9,377,009 $ 8,078,810
=========== ===========
LIABILITIES
Reserve for life-contingent contract benefits $ 419,117 $ 346,974
Contractholder funds 7,369,664 6,785,070
Current income taxes payable 3,401 3,659
Deferred income taxes 745 5,546
Payable to affiliates, net 12,723 10,536
Other liabilities and accrued expenses 1,528 3,831
Separate Accounts 1,411,996 763,416
----------- -----------
TOTAL LIABILITIES 9,219,174 7,919,032
----------- -----------
COMMITMENTS AND CONTINGENT LIABILITIES (NOTE 12)
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 39,579 34,622
Accumulated other comprehensive (loss) income:
Unrealized net capital (losses) gains (994) 5,906
----------- -----------
TOTAL ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME (994) 5,906
----------- -----------
TOTAL SHAREHOLDER'S EQUITY 157,835 159,778
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $ 9,377,009 $ 8,078,810
=========== ===========
</TABLE>
See notes to consolidated financial statements.
F-2
<PAGE>
LINCOLN BENEFIT LIFE COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
($ in thousands) 1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
REVENUES
Net investment income $ 10,740 $ 10,078 $ 10,067
Realized capital gains and losses (913) 134 17
Other (expense) income (2,311) 162 503
-------- -------- --------
INCOME FROM OPERATIONS
BEFORE INCOME TAX EXPENSE 7,516 10,374 10,587
Income tax expense 2,559 3,704 3,735
-------- -------- --------
NET INCOME 4,957 6,670 6,852
-------- -------- --------
OTHER COMPREHENSIVE (LOSS) INCOME, AFTER TAX
Change in unrealized net capital gains and losses (6,900) 1,774 2,331
-------- -------- --------
COMPREHENSIVE (LOSS) INCOME $ (1,943) $ 8,444 $ 9,183
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
LINCOLN BENEFIT LIFE COMPANY
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------
($ in thousands) 1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
COMMON STOCK $ 2,500 $ 2,500 $ 2,500
--------- --------- ---------
ADDITIONAL CAPITAL PAID-IN $ 116,750 $ 116,750 $ 116,750
--------- --------- ---------
RETAINED INCOME
Balance, beginning of year $ 34,622 $ 27,952 $ 21,110
Net income 4,957 6,670 6,852
Dividend-in-kind - - (10)
--------- --------- ---------
Balance, end of year 39,579 34,622 27,952
--------- --------- ---------
ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME
Balance, beginning of year $ 5,906 $ 4,132 $ 1,801
Change in unrealized net capital gains
and losses (6,900) 1,774 2,331
--------- --------- ---------
Balance, end of year (994) 5,906 4,132
--------- --------- ---------
TOTAL SHAREHOLDER'S EQUITY $ 157,835 $ 159,778 $ 151,334
========= ========= =========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
LINCOLN BENEFIT LIFE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
($ in thousands) 1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 4,957 $ 6,670 $ 6,852
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation, amortization and other non-cash items (5,313) 2 20
Realized capital gains and losses 913 (134) (17)
Changes in:
Life-contingent contract benefits and
contractholder funds (4,868) 1,394 427
Income taxes payable (1,343) 2,973 (381)
Other operating assets and liabilities 11,344 (2,867) (4,606)
-------- -------- --------
Net cash provided by operating activities 5,690 8,038 2,295
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Fixed income securities
Proceeds from sales 17,760 - -
Investment collections 13,580 10,710 11,980
Investments purchases (39,723) (18,587) (18,307)
Change in short-term investments, net 2,068 (2,646) 840
-------- -------- --------
Net cash used in investing activities (6,315) (10,523) (5,487)
-------- -------- --------
NET DECREASE IN CASH (625) (2,485) (3,192)
CASH AT THE BEGINNING OF YEAR 1,735 4,220 7,412
-------- -------- --------
CASH AT END OF YEAR $ 1,110 $ 1,735 $ 4,220
======== ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Noncash financing activity
Dividend-in-kind to Allstate Life Insurance Company $ - $ - $ (10)
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
LINCOLN BENEFIT LIFE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ IN THOUSANDS)
1. GENERAL
BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of
Lincoln Benefit Life Company ("LBL") and its wholly owned subsidiary, AFD, Inc.
(formerly Allstate Financial Distributors, Inc), a registered broker-dealer,
(collectively, the "Company"). LBL is 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 consolidated financial statements have been prepared in
conformity with generally accepted accounting principles. All significant
intercompany accounts and transactions have been eliminated.
To conform with the 1999 presentation, certain amounts in the prior years'
financial statements and notes have been reclassified.
NATURE OF OPERATIONS
The Company markets a broad line of life insurance and savings products
primarily 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. In 1999, annuity
premiums and deposits represented 80.9% of the Company's total statutory
premiums and deposits.
Annuity contracts and life insurance policies issued by the Company are subject
to discretionary surrender or withdrawal by customers, subject to applicable
surrender charges. These policies and contracts are reinsured primarily with
ALIC (see Note 3), which invests premiums and deposits to provide cash flows
that will be used to fund future benefits and expenses.
The Company monitors economic and regulatory developments which have the
potential to impact its business. Recently enacted federal legislation will
allow for banks and other financial organizations to have greater participation
in the securities and insurance businesses. This legislation may present an
increased level of competition for sales of the Company's products. Furthermore,
the market for deferred annuities and interest-sensitive life insurance is
enhanced by the tax incentives available under current law. Any legislative
changes which lessen these incentives are likely to negatively impact the demand
for these products.
Additionally, traditional demutualizations of mutual insurance companies and
enacted and pending state legislation to permit mutual insurance companies to
convert to a hybrid structure known as a mutual holding company could have a
number of significant effects on the Company by (1) increasing industry
competition through consolidation caused by mergers and acquisitions related to
the new corporate form of business; and (2) increasing competition in the
capital markets.
The Company is authorized to sell life and savings products in all states except
New York, as well as in the District of Columbia, Guam and the U.S. Virgin
Islands. The top geographic locations for statutory premiums and deposits for
the Company were California, Florida, Wisconsin, Pennsylvania and Illinois for
the year ended December 31, 1999. No other jurisdiction accounted for more than
5% of statutory premiums and deposits. All premiums and deposits are ceded under
reinsurance agreements.
F-6
<PAGE>
LINCOLN BENEFIT LIFE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ IN THOUSANDS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVESTMENTS
Fixed income securities include bonds and mortgage-backed securities. All fixed
income securities are carried at fair value and may be sold prior to their
contractual maturity ("available for sale"). The difference between amortized
cost and fair value, net of deferred income taxes, is reflected as a component
of shareholder's equity. Provisions are recognized for declines in the value of
fixed income securities that are other than temporary. Such writedowns are
included in realized capital gains and losses. Short-term investments are
carried at cost or amortized cost which approximates fair value.
Investment income consists primarily of interest and short-term investment
dividends. Interest is recognized on an accrual basis and dividends are recorded
at the ex-dividend date. Interest income on mortgaged-backed securities is
determined on the effective yield method, based on the estimated principal
repayments. Accrual of income is suspended for fixed income securities that are
in default or when the receipt of interest payments is in doubt. Realized
capital gains and losses are determined on a specific identification basis.
REINSURANCE RECOVERABLE
The Company has reinsurance agreements whereby all premiums, contract charges,
credited interest, policy benefits and certain expenses are ceded. Such amounts
are reflected net of such reinsurance in the consolidated statements of
operations and comprehensive income. 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 consolidated financial statements as
those assets are owned and managed under terms of the reinsurance agreements.
Reinsurance recoverable and the related reserve for life-contingent contract
benefits and contractholder funds are reported separately in the consolidated
statements of financial position. The Company continues to have primary
liability as the direct insurer for risks reinsured.
RECOGNITION OF INSURANCE REVENUE AND RELATED BENEFITS AND INTEREST CREDITED
Traditional life insurance products consist principally of products with fixed
and guaranteed premiums and benefits, primarily term and whole life insurance
products and certain annuities with life contingencies. Premiums from these
products are recognized as revenue when due. Benefits are recognized in relation
to such revenue so as to result in the recognition of profits over the life of
the policy and are reflected in contract benefits.
Interest-sensitive life contracts are insurance contracts whose terms are not
fixed and guaranteed. The terms that may be changed include premiums paid by the
contractholder, interest credited to the contractholder account balance and one
or more amounts assessed against the contractholder. Premiums from these
contracts are reported as deposits to contractholder funds. Contract charge
revenue consists of fees assessed against the contractholder account balance for
cost of insurance (mortality risk), contract administration and surrender
charges. Contract benefits include interest credited to contracts and claims
incurred in excess of related contractholder account balance.
Limited payment contracts, a type of immediate annuity with life contingencies
and single premium life contract, are contracts that provide insurance
protection over a contract period that extends beyond the period in which
premiums are collected. Gross premiums in excess of the net premium on limited
payment contracts are deferred and recognized over the contract period. Contract
benefits are recognized in relation to such revenues so as to result in the
recognition of profits over the life of the policy.
Contracts that do not subject the Company to significant risk arising from
mortality or morbidity are referred to as investment contracts. Fixed rate
annuities, market value adjusted annuities, indexed
F-7
<PAGE>
LINCOLN BENEFIT LIFE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ IN THOUSANDS)
annuities and immediate annuities without life contingencies are considered
investment contracts. Deposits received for such contracts are reported as
deposits to contractholder funds. Contract charge revenue for investment
contracts consists of charges assessed against the contractholder account
balance for contract administration and surrenders. Contract benefits include
interest credited and claims incurred in excess of the related contractholder
account balance.
Crediting rates for fixed rate annuities and interest-sensitive life contracts
are adjusted periodically by the Company to reflect current market conditions.
Crediting rates for indexed annuities and indexed life products are based on an
interest rate index, such as LIBOR or an equity index, such as the S&P 500.
Investment contracts also include variable annuity and variable life contracts
which are sold as Separate Accounts products. The assets supporting these
products are legally segregated and available only to settle Separate Accounts
contract obligations. Deposits received are reported as Separate Accounts
liabilities. The Company's contract charge revenue for these contracts consists
of charges assessed against the Separate Accounts fund balances for contract
maintenance, administration, mortality, expense and surrenders.
All premiums, contract charges, contract benefits and interest credited are
reinsured.
INCOME TAXES
The income tax provision is calculated under the liability method and presented
net of reinsurance. Deferred tax assets and liabilities are recorded based on
the difference between the financial statement and tax bases of assets and
liabilities at the enacted tax rates. Deferred income taxes arise primarily from
unrealized capital gains or losses on fixed income securities carried at fair
value and differences in the tax bases of investments.
SEPARATE ACCOUNTS
The Company issues deferred variable annuity and variable life contracts, the
assets and liabilities of which are legally segregated and recorded as assets
and liabilities of the Separate Accounts. Absent any contract provisions wherein
the Company contractually guarantees either a minimum return or account value to
the beneficiaries of the contractholders in the form of a death benefit, the
contractholders bear the investment risk that the Separate Accounts' funds may
not meet their stated objectives.
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 capital gains and losses of the Separate Accounts
accrue directly to the contractholders and therefore, are not included in the
Company's consolidated statements of operations and comprehensive income.
Revenues to the Company from Separate Accounts consist of contract maintenance
and administration fees, and mortality, surrender and expense charges.
RESERVE FOR LIFE-CONTINGENT CONTRACT BENEFITS
The reserve for life-contingent contract benefits, which relates to traditional
life insurance, immediate annuities with life contingencies and certain variable
annuity contract guarantees, is computed on the basis of assumptions as to
mortality, future investment yields, terminations and expenses at the time the
policy is issued. These assumptions, which for traditional life insurance are
applied using the net level premium method, include provisions for adverse
deviation and generally vary by such characteristics as type of coverage, year
of issue and policy duration. Detailed reserve assumptions and reserve interest
rates are outlined in Note 6.
F-8
<PAGE>
LINCOLN BENEFIT LIFE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ IN THOUSANDS)
CONTRACTHOLDER FUNDS
Contractholder funds arise from the issuance of interest-sensitive life and
certain investment contracts. Deposits received are recorded as interest-bearing
liabilities. Contractholder funds are equal to deposits received, net of
commissions, and interest credited to the benefit of the contractholder less
withdrawals, mortality charges and administrative expenses. Detailed information
on crediting rates and surrender and withdrawal protection on contractholder
funds are outlined in Note 6.
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 amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
NEW ACCOUNTING STANDARDS
In 1999, the Company adopted Statement of Position ("SOP") 97-3, "Accounting by
Insurance and Other Enterprises for Insurance-Related Assessments." The SOP
provides guidance concerning when to recognize a liability for insurance-related
assessments and how those liabilities should be measured. Specifically,
insurance-related assessments should be recognized as liabilities when all of
the following criteria have been met: 1) an assessment has been imposed or it is
probable that an assessment will be imposed, 2) the event obligating an entity
to pay an assessment has occurred and 3) the amount of the assessment can be
reasonably estimated. Adoption of this statement was not material to the
Company's results of operations or financial position.
3. RELATED PARTY TRANSACTIONS
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 consolidated statements of operations
and comprehensive income. Reinsurance recoverable and the related reserve for
life-contingent contract benefits and contractholder funds are reported
separately in the consolidated statements of financial position. The Company
continues to have primary liability as the direct insurer for risks reinsured.
Investment income earned on the assets which support contractholder funds and
the reserve for life-contingent contract benefits are not included in the
Company's consolidated 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>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
($ in thousands) 1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Premiums $ 60,451 $ 30,811 $ 34,834
Contract charges 127,403 106,158 87,061
Credited interest, policy benefits, and other
expenses 684,704 624,620 533,369
</TABLE>
BUSINESS OPERATIONS
The Company utilizes services provided by AIC and ALIC and business facilities
owned or leased, and operated by AIC in conducting its business activities. The
Company reimburses AIC and ALIC for the operating expenses incurred on behalf of
the Company. The Company is charged for the cost of these operating expenses
based on the level of services provided. Operating expenses, including
compensation and retirement and other benefit programs, allocated to the Company
were $26,418,
F-9
<PAGE>
LINCOLN BENEFIT LIFE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ IN THOUSANDS)
$45,940 and $34,947 in 1999, 1998 and 1997, respectively. Of these costs, the
Company retains investment related expenses. All other costs are ceded to ALIC
under reinsurance agreements.
4. INVESTMENTS
FAIR VALUES
The amortized cost, gross unrealized gains and losses, and fair value for fixed
income securities are as follows:
<TABLE>
<CAPTION>
GROSS UNREALIZED
------------------
AMORTIZED FAIR
COST GAINS LOSSES VALUE
--------- ------- -------- --------
<S> <C> <C> <C> <C>
AT DECEMBER 31, 1999
U.S. government and agencies $ 11,849 $ 606 $ (30) $ 12,425
Corporate 95,036 439 (3,282) 92,193
Municipal 10,625 78 (108) 10,595
Mortgage-backed securities 41,237 1,372 (604) 42,005
--------- ------- -------- --------
Total fixed income securities $ 158,747 $ 2,495 $ (4,024) $ 157,218
========= ======= ======== ========
AT DECEMBER 31, 1998
U.S. government and agencies $ 14,105 $ 2,498 $ - $ 16,603
Corporate 84,547 3,548 (151) 87,944
Foreign government 3,031 239 - 3,270
Mortgage-backed securities 48,215 2,972 (20) 51,167
--------- ------- -------- --------
Total fixed income securities $ 149,898 $ 9,257 $ (171) $158,984
========= ======= ======== ========
</TABLE>
SCHEDULED MATURITIES
The scheduled maturities for fixed income securities are as follows at December
31, 1999:
<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
--------- --------
<S> <C> <C>
Due in one year or less $ 2,000 $ 1,999
Due after one year through five years 38,778 38,374
Due after five years through ten years 56,887 54,579
Due after ten years 19,845 20,261
--------- --------
117,510 115,213
Mortgage-backed securities 41,237 42,005
--------- --------
Total $ 158,747 $157,218
========= ========
</TABLE>
Actual maturities may differ from those scheduled as a result of prepayments by
the issuers.
F-10
<PAGE>
LINCOLN BENEFIT LIFE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ IN THOUSANDS)
<TABLE>
<CAPTION>
NET INVESTMENT INCOME
YEAR ENDED DECEMBER 31, 1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Fixed income securities $ 10,380 $ 10,375 $ 10,032
Short-term investments 577 286 195
------ ------ ------
Investment income, before expense 10,957 10,661 10,227
Investment expense 217 583 160
------ ------ ------
Net investment income $ 10,740 $ 10,078 $ 10,067
========= ======== ========
REALIZED CAPITAL GAINS AND LOSSES
YEAR ENDED DECEMBER 31, 1999 1998 1997
---- ---- ----
Fixed income securities $ (913) $ 134 $ 17
Income taxes (320) 47 6
-------- ------- --------
Realized capital gains and losses,
after tax $ (593) $ 87 $ 11
======== ======= ========
</TABLE>
Excluding calls and prepayments, gross gains of $1 and gross losses of $914 were
realized on sales of fixed income securities during 1999. There were no gross
gains or losses realized on sales of fixed income securities during 1998 and
1997.
UNREALIZED NET CAPITAL GAINS AND LOSSES
Unrealized net capital gains on fixed income securities included in
shareholder's equity at December 31, 1999 are as follows:
<TABLE>
<CAPTION>
COST/ GROSS UNREALIZED UNREALIZED
AMORTIZED COST FAIR VALUE GAINS LOSSES NET LOSSES
-------------- ---------- ----- ------ ----------
<S> <C> <C> <C> <C> <C>
Fixed income securities $ 158,747 $ 157,218 $2,495 $ (4,024) $ (1,529)
========== ========= ====== ========
Deferred income taxes 535
---------
Unrealized net capital losses $ (994)
=========
</TABLE>
<TABLE>
<CAPTION>
CHANGE IN UNREALIZED NET CAPITAL GAINS AND LOSSES
YEAR ENDED DECEMBER 31, 1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Fixed income securities $ (10,615) $ 2,729 $ 3,585
Deferred income taxes 3,715 (955) (1,254)
---------- -------- --------
(Decrease) increase in unrealized net
capital gains $ (6,900) $ 1,774 $ 2,331
========== ======== ========
</TABLE>
SECURITIES ON DEPOSIT
At December 31, 1999, fixed income securities with a carrying value
of $7,628 were on deposit with regulatory authorities as required by law.
5. FINANCIAL INSTRUMENTS
In the normal course of business, the Company invests in various financial
assets and incurs various financial liabilities. The fair value estimates of
financial instruments presented on the following page are not necessarily
indicative of the amounts the Company might pay or receive in actual market
transactions. Potential taxes and other transaction costs have not been
considered in estimating fair value. The disclosures that follow do not
reflect the fair value of the Company as a whole since a number of the
Company's significant assets (including reinsurance recoverables) and
liabilities (including traditional life
F-11
<PAGE>
LINCOLN BENEFIT LIFE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ IN THOUSANDS)
and interest-sensitive life insurance reserves and deferred income taxes) are
not considered financial instruments and are not carried at fair value.
Other assets and liabilities considered financial instruments, such as
accrued investment income and cash, are generally of a short-term nature.
Their carrying values are assumed to approximate fair value.
FINANCIAL ASSETS
The carrying value and fair value of financial assets at December 31, are as
follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
-------- ----- -------- -----
<S> <C> <C> <C> <C>
Fixed income securities $ 157,218 $ 157,218 $ 158,984 $ 158,984
Short-term investments 1,919 1,919 3,675 3,675
Separate Accounts 1,411,996 1,411,996 763,416 763,416
</TABLE>
Fair values for fixed income securities are based on quoted market prices
where available. Non-quoted securities are valued based on discounted cash
flows using current interest rates for similar securities. Short-term
investments are highly liquid investments with maturities of less than one
year whose carrying value are deemed to approximate fair value. Separate
Accounts assets are carried in the consolidated statements of financial
position at fair value based on quoted market prices.
FINANCIAL LIABILITIES
The carrying value and fair value of financial liabilities at December 31, are
as follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
-------- ----- -------- -----
<S> <C> <C> <C> <C>
Contractholder funds on
investment contracts $ 5,716,583 $ 5,424,725 $ 5,220,485 $ 5,006,124
Separate Accounts 1,411,996 1,411,996 763,416 763,416
</TABLE>
The fair value of contractholder funds on investment contracts is based on
the terms of the underlying contracts. Reserves on investment contracts with
no stated maturities (single premium and flexible premium deferred annuities)
are valued at the account balance less surrender charges. The fair value of
immediate annuities and annuities without life contingencies with fixed terms
is estimated using discounted cash flow calculations based on interest rates
currently offered for contracts with similar terms and durations. Separate
Accounts liabilities are carried at the fair value of the underlying assets.
F-12
<PAGE>
LINCOLN BENEFIT LIFE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ IN THOUSANDS)
6. RESERVE FOR LIFE-CONTINGENT CONTRACT BENEFITS AND CONTRACTHOLDER FUNDS
At December 31, the reserve for life-contingent contract benefits consists of
the following:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Immediate annuities $ 79,269 $ 56,683
Traditional life 312,130 228,734
Other 27,718 61,557
-------- ---------
Total life-contingent contract benefits $419,117 $ 346,974
======== =========
</TABLE>
The assumptions for mortality generally utilized in calculating reserves
include, the 1983 group annuity mortality table for immediate annuities; and
actual Company experience plus loading for traditional life. Interest rate
assumptions vary from 4.4% to 9.3% for immediate annuities and 4.0% to 8.0% for
traditional life. Other estimation methods used include the present value of
contractually fixed future benefits for immediate annuities and the net level
premium reserve method using the Company's withdrawal experience rates for
traditional life.
At December 31, contractholder funds consists of the following:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Interest-sensitive life $ 1,656,087 $ 1,572,478
Fixed annuities:
Immediate annuities 123,637 105,692
Deferred annuities 5,589,940 5,106,900
----------- ------------
Total contractholder funds $ 7,369,664 $ 6,785,070
=========== ============
</TABLE>
Contractholder funds are equal to deposits received, net of commissions, and
interest credited to the benefit of the contractholder less withdrawals,
mortality charges and administrative expenses. Interest rates credited range
from 5.2% to 7.4% for interest-sensitive life contracts; 4.4% to 9.3% for
immediate annuities and 1.6% to 26.2% for deferred annuities. Withdrawal and
surrender charge protection includes: i) for interest-sensitive life, either a
percentage of account balance or dollar amount grading off generally over 20
years; and, ii) for deferred annuities not subject to a market value adjustment,
either a declining or a level percentage charge generally over nine years or
less. Approximately 10% of deferred annuities are subject to a market value
adjustment.
7. REINSURANCE
The Company purchases reinsurance to limit aggregate and single losses on large
risks. The Company continues to have primary liability as the direct insurer for
risks reinsured. Estimating amounts of reinsurance recoverable is impacted by
the uncertainties involved in the establishment of loss reserves. Failure of
reinsurers to honor their obligations could result in losses to the Company.
The Company cedes a portion of the mortality risk on certain term life policies
with a pool of reinsurers.
Amounts recoverable from reinsurers are estimated based upon assumptions
consistent with those used in establishing the liabilities related to the
underlying reinsured contracts. Except for ALIC, no single
F-13
<PAGE>
LINCOLN BENEFIT LIFE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ IN THOUSANDS)
reinsurer had a material obligation to the Company nor is the Company's
business substantially dependent upon any reinsurance contract.
The following amounts were ceded to third parties under reinsurance
agreements:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Premiums $ 201,889 $ 154,320 $173,855
Policy benefits and other expenses 182,389 202,676 182,799
</TABLE>
8. CORPORATION RESTRUCTURING
On November 10, 1999 the Corporation announced a series of strategic
initiatives to aggressively expand its selling and servicing capabilities.
The Corporation also announced that it is implementing a program to reduce
expenses by approximately $600 million. The reduction will result in the
elimination of approximately 4,000 current non-agent positions, across all
employment grades and categories by the end of 2000, or approximately 10% of
the Corporation's non-agent work force. The impact of the reduction in employee
positions is not expected to materially impact the results of operations of
the Company.
These cost reductions are part of a larger initiative to redeploy the cost
savings to finance new initiatives including investments in direct access and
internet channels for new sales and service capabilities, new competitive
pricing and underwriting techniques, new agent and claim technology and
enhanced marketing and advertising. As a result of the cost reduction
program, the Corporation recorded restructuring and related charges of $81
million pretax during the fourth quarter of 1999. The Corporation anticipates
that additional pretax restructuring related charges of approximately $100
million will be expensed as incurred throughout 2000. The Company's allocable
share of these expenses were immaterial in 1999 and are expected to be
immaterial in 2000.
9. INCOME TAXES
The Company joins the Corporation and its other eligible domestic
subsidiaries (the "Allstate Group") in the filing of a consolidated federal
income tax return and is party to a federal income tax allocation agreement
(the "Allstate Tax Sharing Agreement"). Under the Allstate Tax Sharing
Agreement, the Company pays to or receives from the Corporation the amount,
if any, by which the Allstate Group's federal income tax liability is
affected by virtue of inclusion of the Company in the consolidated federal
income tax return. Effectively, this results in the Company's annual income
tax provision being computed, with adjustments, as if the Company filed a
separate return.
Prior to June 30, 1995, the Corporation was a subsidiary of Sears Roebuck &
Co. ("Sears") and, with its eligible domestic subsidiaries, was included in
the Sears consolidated federal income tax return and federal income tax
allocation agreement. Effective June 30, 1995, the Corporation and Sears
entered into a new tax sharing agreement, which governs their respective
rights and obligations with respect to federal income taxes for all periods
during which the Corporation was a subsidiary of Sears, including the
treatment of audits of tax returns for such periods.
The Internal Revenue Service ("IRS") has completed its review of the Allstate
Group's federal income tax returns through the 1993 tax year. Any adjustments
that may result from IRS examinations of tax returns
F-14
<PAGE>
LINCOLN BENEFIT LIFE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ IN THOUSANDS)
are not expected to have a material impact on the financial position,
liquidity or result of operations of the Company.
The components of the deferred income tax assets and liabilities at
December 31, are as follow:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
DEFERRED ASSETS
Unrealized net capital losses $ 535 $ -
Other assets 897 -
--------- --------
Total deferred assets 1,432 -
DEFERRED LIABILITIES
Difference in tax bases of investments (2,177) (2,244)
Unrealized net capital gains - (3,180)
Other liabilities - (122)
--------- --------
Total deferred liabilities (2,177) (5,546)
--------- --------
Net deferred liability $ (745) $ (5,546)
========= ========
</TABLE>
The components of the income tax expense for the year
ended at December 31, are as follow:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Current $ 3,645 $ 3,262 $ 4,321
Deferred (1,086) 442 (586)
-------- ------- -------
Total income tax expense $ 2,559 $ 3,704 $ 3,735
======== ======= =======
</TABLE>
The Company paid income taxes of $3,902, $731 and $4,116 in 1999, 1998 and
1997, respectively
A reconciliation of the statutory federal income tax rate to the effective
income tax rate on income from operations for the year ended December 31, is
as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Statutory federal income tax rate 35.0% 35.0% 35.0%
Other (1.0) .7 .3
---- ---- ----
Effective income tax rate 34.0% 35.7% 35.3%
==== ==== ====
</TABLE>
Prior to January 1, 1984, the Company was entitled to exclude certain amounts
from taxable income and accumulate such amounts in a "policyholder surplus"
account. The balance in this account at December 31, 1999, approximately
$340, will result in federal income taxes payable of $119 if distributed by
the Company. No provision for taxes has been made as the Company has no plan
to distribute amounts from this account. No further additions to the account
have been permitted since the Tax Reform Act of 1984.
F-15
<PAGE>
LINCOLN BENEFIT LIFE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ IN THOUSANDS)
10. STATUTORY FINANCIAL INFORMATION
The Company's statutory capital and surplus was $153,632 and $146,842 at
December 31, 1999 and 1998, respectively. The Company's statutory net income
was $6,091, $7,201 and $6,665 for the years ended December 31, 1999, 1998 and
1997, respectively.
PERMITTED STATUTORY ACCOUNTING PRACTICES
The Company prepares its statutory financial statements in accordance with
accounting practices prescribed or permitted by the Nebraska Department of
Insurance. Prescribed statutory accounting practices include a variety of
publications of the National Association of Insurance Commissioners ("NAIC"), as
well as state laws, regulations and general administrative rules. Permitted
statutory accounting practices encompass all accounting practices not so
prescribed. The Company does not follow any permitted statutory accounting
practices that have a significant impact on statutory surplus or statutory net
income.
The NAIC's codification initiative has produced a comprehensive guide of
statutory accounting principles, which the Company will implement in January
2001. The Company's state of domicile, Nebraska, has passed legislation revising
various statutory accounting requirements to conform to codification. These
requirements are not expected to have a material impact on the statutory surplus
of the Company.
DIVIDENDS
The ability of the Company to pay dividends is dependent on business conditions,
income, cash requirements of the Company and other relevant factors. The payment
of shareholder dividends by the Company without the prior approval of the state
insurance regulator is limited to formula amounts based on net income and
capital and surplus, determined in accordance with statutory accounting
practices, as well as the timing and amount of dividends paid in the preceding
twelve months. The maximum amount of dividends that the Company can distribute
during 2000 without prior approval of the Nebraska Department of Insurance is
$15,113.
RISK-BASED CAPITAL
The NAIC has a standard for assessing the solvency of insurance companies, which
is referred to as risk-based capital ("RBC"). The requirement consists of a
formula for determining each insurer's RBC and a model law specifying regulatory
actions if an insurer's RBC falls below specified levels. The RBC formula for
life insurance companies establishes capital requirements relating to insurance,
business, asset and interest rate risks. At December 31, 1999, RBC for the
Company was significantly above a level that would require regulatory action.
F-16
<PAGE>
LINCOLN BENEFIT LIFE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ IN THOUSANDS)
11. OTHER COMPREHENSIVE INCOME
The components of other comprehensive income on a pretax and after-tax basis for
the year ended December 31, are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
----------------------------- -------------------------- ---------------------------------
After- After- After-
Pretax Tax Tax Pretax Tax Tax Pretax Tax Tax
------ --- ------ ------ --- ------ ------ --- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
UNREALIZED CAPITAL GAINS
AND LOSSES:
- -------------------------
Unrealized holding
(losses) gains arising
during the period $ (11,528) $ 4,035 $ (7,493) $ 2,863 $(1,002) $ 1,861 $ 3,602 $ (1,260) $ 2,342
Less: reclassification
adjustments (913) 320 (593) 134 (47) 87 17 (6) 11
--------- ------- -------- ------- ------- ------- ------- -------- -------
Unrealized net capital
(losses) gains (10,615) 3,715 (6,900) 2,729 (955) 1,774 3,585 (1,254) 2,331
--------- ------- -------- ------- -------- ------- ------- -------- -------
Other comprehensive
(loss) income $ (10,615) $ 3,715 $ (6,900) $ 2,729 $ (955) $ 1,774 $ 3,585 $ (1,254) $ 2,331
========= ======= ======== ======= ======= ======= ======= ======== =======
</TABLE>
12. COMMITMENTS AND CONTINGENT LIABILITIES
LEASES
The Company leases certain office facilities and computer equipment.
Total rent expense for all leases was $2,042, $1,743 and $1,596 in 1999, 1998
and 1997, respectively. Minimum rental commitments under noncancelable
operating leases with initial or remaining term of more than one year as of
December 31, are as follows:
<TABLE>
<CAPTION>
1999
----
<S> <C>
2000 $ 1,815
2001 296
2002 12
2003 12
2004 12
Thereafter 264
-------
$ 2,411
=======
</TABLE>
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 regulation, 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, and proposed legislation to prohibit the use of gender in
determining insurance rates and benefits. 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
F-17
<PAGE>
LINCOLN BENEFIT LIFE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ IN THOUSANDS)
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.
GUARANTY FUNDS
Under state insurance guaranty fund laws, insurers doing business in a state can
be assessed, up to prescribed limits, for certain obligations of insolvent
insurance companies to policyholders and claimants. The Company's expenses
related to these funds have been immaterial. These expenses are ceded to ALIC
under reinsurance agreements.
MARKETING AND COMPLIANCE ISSUES
Companies operating in the insurance and financial services markets have come
under the scrutiny of regulators with respect to market conduct and compliance
issues. Under certain circumstances, companies have been held responsible for
providing incomplete or misleading sales materials and for replacing existing
policies with policies that were less advantageous to the policyholder. The
Company monitors its sales materials and enforces compliance procedures to
mitigate any exposure to potential litigation. The Company is a member of the
Insurance Marketplace Standards Association, an organization which advocates
ethical market conduct.
13. SALE OF BUILDING
Included within other income and expenses in the Company's consolidated
statements of operations and comprehensive income for 1999, is a write-down of
$798 associated with the sale of the Company's building in Lincoln, Nebraska
which occurred in the first quarter of 2000. Also included in other income and
expenses is the write-down of $1,200 related to unamortized building
improvements recognized in the third quarter of 1999 when the building was
vacated by the Company.
14. SUBSEQUENT EVENT
On January 13, 2000, the Company declared a dividend of all the common shares of
AFD, Inc stock to ALIC. AFD, Inc income (loss) after taxes, included within
other income and expenses and income tax expense was ($9), $136, and $580 in
1999, 1998 and 1997, respectively. Total assets for AFD, Inc were immaterial to
the Company in total at December 31, 1999 and 1998.
F-18
<PAGE>
LINCOLN BENEFIT LIFE COMPANY
SCHEDULE IV - REINSURANCE
($ IN THOUSANDS)
<TABLE>
<CAPTION>
GROSS NET
YEAR ENDED DECEMBER 31, 1999 AMOUNT CEDED AMOUNT
- ---------------------------- ------ ----- ------
<S> <C> <C> <C>
Life insurance in force $ 109,520,029 $ 109,520,029 $ -
============= ============= =========
Premiums and contract charges:
Life and annuities $ 369,540 $ 369,540 $ -
Accident and health 20,203 20,203 -
------------- ------------- ---------
$ 389,743 $ 389,743 $ -
============= ============= =========
GROSS NET
YEAR ENDED DECEMBER 31, 1998 AMOUNT CEDED AMOUNT
- ---------------------------- -------- ------- ------
Life insurance in force $ 97,690,299 $ 97,690,299 $ -
============= ============= =========
Premiums and contract charges:
Life and annuities $ 287,839 $ 287,839 $ -
Accident and health 3,450 3,450 -
------------- ------------- ---------
$ 291,289 $ 291,289 $ -
============= ============= =========
GROSS NET
YEAR ENDED DECEMBER 31, 1997 AMOUNT CEDED AMOUNT
- ---------------------------- ------ ----- ------
Life insurance in force $ 72,754,000 $ 72,754,000 $ -
============= ============= =========
Premiums and contract charges:
Life and annuities $ 277,825 $ 277,825 $ -
Accident and health 35,217 $ 35,217 -
------------- ------------- ---------
$ 313,042 $ 313,042 $ -
============= ============= =========
</TABLE>
F-19
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
LINCOLN BENEFIT LIFE COMPANY
By: /s/ B. Eugene Wraith
---------------------
B. Eugene Wraith
President and Chief Operating Officer
Date: March 27, 2000
---------------------
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
SIGNATURE TITLE DATE
- -------------------- ---------------------- -------------------
/s/ B. Eugene Wraith
- -------------------- President, Chief Operating
B. Eugene Wraith Officer and Director March 27, 2000
(PRINCIPAL EXECUTIVE OFFICER)
/s/ Marvin P. Ehly
- --------------------
Marvin P. Ehly Senior Vice President, March 27, 2000
(Principal Financial Treasurer, Controller and Director
Officer and Principal
Accounting Officer)
/s/ LAWRENCE W. DAHL
- --------------------- Executive Vice President March 27, 2000
Lawrence W. Dahl and Director
/s/ DOUGLAS F. GAER
- --------------------- Executive Vice President March 27, 2000
Douglas F. Gaer and Director
/s/ ROBERT E. RICH
- --------------------- Executive Vice President March 27, 2000
Robert E. Rich and Director
/s/ THOMAS R. ASHLEY
- --------------------- Director March 27, 2000
Thomas R. Ashley
/s/ THOMAS J. BERNEY
- --------------------- Director March 27, 2000
Thomas J. Berney
/s/ JOHN H. COLEMAN III
- --------------------- Director March 27, 2000
John H. Coleman III
/s/ RODGER A. HERGENRADER
- --------------------- Director March 27, 2000
Rodger A. Hergenrader
- --------------------- Director March 27, 2000
Kevin Slawin
/s/ J. SCOTT TAYLOR
- --------------------- Director March 27, 2000
J. Scott Taylor
- --------------------- Director March 27, 2000
Michael J. Velotta
/s/ CAROL S. WATSON
- --------------------- Director March 27, 2000
Carol S. Watson
/s/ DEAN M. WAY
- --------------------- Director March 27, 2000
Dean M. Way
- --------------------- Director March 27, 2000
Patricia W. Wilson
- --------------------- Chairman of the Board, March 27, 2000
Thomas J. Wilson, II Chief Executive Officer,
and Director
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
This schedule contains summary financial information extracted from statements
of financial position at December 31, 1999; Statements of Operations for the
year ended December 31, 1999; Statements of Shareholder's Equity for the year
ended December 31, 1999; and Statements of cash flows for the years ended
December 31, 1999 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000910739
<NAME> Lincoln Benefit Life Company
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-START> Jan-01-1999
<PERIOD-END> Dec-31-1999
<EXCHANGE-RATE> 1
<DEBT-HELD-FOR-SALE> 157,218
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 0
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 159,137
<CASH> 1,110
<RECOVER-REINSURE> 7,800,319
<DEFERRED-ACQUISITION> 0
<TOTAL-ASSETS> 9,377,009
<POLICY-LOSSES> 0
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 419,117
<POLICY-HOLDER-FUNDS> 7,369,664
<NOTES-PAYABLE> 0
0
0
<COMMON> 2,500
<OTHER-SE> 155,335
<TOTAL-LIABILITY-AND-EQUITY> 9,377,009
0
<INVESTMENT-INCOME> 10,740
<INVESTMENT-GAINS> (913)
<OTHER-INCOME> (2,311)
<BENEFITS> 0
<UNDERWRITING-AMORTIZATION> 0
<UNDERWRITING-OTHER> 0
<INCOME-PRETAX> 7,516
<INCOME-TAX> 2,559
<INCOME-CONTINUING> 4,957
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,957
<EPS-BASIC> 0
<EPS-DILUTED> 0
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
