<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 1, 1996
FILE NO. 33-67538
FILE NO. 811-7974
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / /
PRE-EFFECTIVE AMENDMENT NO. _____ / /
POST-EFFECTIVE AMENDMENT NO. 3 /X/
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / /
AMENDMENT NO. 4 /X/
------------------------
FARM BUREAU LIFE ANNUITY ACCOUNT
(Exact Name of Registrant)
FARM BUREAU LIFE INSURANCE COMPANY
(Name of Depositor)
5400 University Avenue
West Des Moines, Iowa 50266
(Address of Depositor's Principal Executive Offices)
Depositor's Telephone Number: 1-800-247-4170
------------------------
STEPHEN M. MORAIN, ESQUIRE
5400 University Avenue
West Des Moines, Iowa 50266
(Name and Address of Agent for Service of Process)
------------------------
COPY TO:
STEPHEN E. ROTH, ESQUIRE
Sutherland, Asbill & Brennan
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2404
------------------------
It is proposed that this filing become effective (check appropriate box):
/X/ immediately upon filing pursuant to paragraph (b) of
Rule 485;
/ / on (date) pursuant to paragraph (b) of Rule 485;
/ / 60 days after filing pursuant to paragraph (a) of Rule
485; or
/ / on (date) pursuant to paragraph (a) of Rule 485.
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, the
registrant has previously registered an indefinite amount of securities under
the Securities Act of 1933. The registrant filed a Rule 24f-2 Notice for the
fiscal year ended December 31, 1995 on February 26, 1996.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
CROSS REFERENCE SHEET
PURSUANT TO RULES 481(A) AND 495(A)
Showing location in Part A (prospectus) and Part B (statement of additional
information) of registration statement of information required by Form N-4
PART A
<TABLE>
<CAPTION>
ITEM OF FORM N-4 PROSPECTUS CAPTION
- ------------------------------------
----------------------------------------------------------------------------------------------
<C> <S> <C>
1. Cover Page..................... Cover Page
2. Definitions.................... Definitions
3. Synopsis....................... Expense Tables; Summary
4. Condensed Financial Condensed Financial Information; Yields and Total Returns
Information...................
5. General
(a) Depositor.................. Farm Bureau Life Insurance Company; FBL Financial Group, Inc.
(b) Registrant................. Farm Bureau Life Annuity Account
(c) Portfolio Company.......... FBL Variable Insurance Series Fund
(d) Fund Prospectus............ FBL Variable Insurance Series Fund
(e) Voting Rights.............. Voting Rights
(f) Administrators............. N/A
6. Deductions and Expenses
(a) General.................... Charges and Deductions; Summary
(b) Sales Load %............... Charges and Deductions; Summary
(c) Special Purchase Plan...... N/A
(d) Commissions................ Distribution of the Contracts
(e) Expenses -- Registrant..... Charges and Deductions; Summary
(f) Fund Expenses.............. FBL Variable Insurance Series Fund; Charges and Deductions
(g) Organizational Expenses.... N/A
7. Contracts
(a) Persons with Rights........ Summary; Addition, Deletion or Substitution of Investments; Description of Annuity Contract;
Payment Options; Voting Rights
(b) (i) Allocation of Purchase
Payments................. Summary; Premiums; Free-Look Period; Allocation of Premiums
(ii) Transfers................. Summary; Transfer Privilege
(iii) Exchanges................ Transfers, Assignments or Exchange of a Contract
(c) Changes.................... Additions, Deletions or Substitutions of Investments; Description of Annuity Contract;
Modification;
(d) Inquiries.................. Cover page; Inquiries
8. Annuity Period................. Summary; Payment Options
9. Death Benefit.................. Death Benefit Before the Retirement Date
10. Purchases and Contract Value
(a) Purchases.................. Summary; Issuance of a Contract; Premiums; Free Look Period; Allocation of Premiums; Variable
Cash Value;
(b) Valuation.................. Definitions; Variable Cash Value;
(c) Daily Calculation.......... Definitions; Variable Cash Value;
(d) Underwriter................ Issuance of a Contract; Distribution of the Contracts
11. Redemptions
(a) -- By Owners............... Summary; Transfer Privilege; Surrenders and Partial Surrenders; Proceeds on the Retirement
Date; Payments; Payment Options; Federal Tax Matters
-- By Annuitant................ Summary; Transfer Privilege; Surrenders and Partial Surrenders; Proceeds on the Retirement
Date; Payments; Payment Options; Federal Tax Matters
(b) Taxes ORP.................. N/A
(c) Check Delay................ Payments
(d) Lapse...................... N/A
(e) Free Look.................. Summary; Free Look Period
12. Taxes.......................... Summary; Federal Tax Matters
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C>
13. Legal Proceedings.............. Legal Proceedings
14. Table of Contents for the Statement of Additional Information
Statement of Additional Table of Contents
Information...................
</TABLE>
PART B
<TABLE>
<CAPTION>
ITEM OF FORM N-4 PART B CAPTION
- ------------------------------------
----------------------------------------------------------------------------------------------
<C> <S> <C>
15. Cover Page..................... Cover Page
16. Table of Contents.............. Table of Contents
17. General Information and N/A
History.......................
18. Services
(a) Fees and Expenses of N/A
Registrant....................
(b) Management Contracts....... N/A
(c) Custodian.................. N/A
Independent Public Experts
Accountant....................
(d) Assets of Registrant....... N/A
(e) Affiliated Persons......... N/A
(f) Principal Underwriter...... Distribution of the Contracts (prospectus)
19. Purchase of Securities
Being Offered.................. Distribution of the Contracts (prospectus)
Offering Sales Load............ N/A
20. Underwriters................... Distribution of the Contracts (prospectus)
21. Calculation of Performance Calculation of Yields and Total Returns; Yields and Total Returns (prospectus)
Data..........................
22. Annuity Payments............... Payment Options (prospectus)
23. Financial Statements........... Financial Statements
</TABLE>
PART C -- OTHER INFORMATION
<TABLE>
<CAPTION>
ITEM OF FORM N-4 PART C CAPTION
- ------------------------------------
----------------------------------------------------------------------------------------------
<C> <S> <C>
24. Financial Statements and Financial Statements and Exhibits
Exhibits......................
(a) Financial Statements....... (a) Financial Statements
(b) Exhibits................... (b) Exhibits
25. Directors and Officers of the Directors and Officers of Farm Bureau Life Insurance Company
Depositor.....................
26. Persons Controlled By or Under Persons Controlled By or In Common Control with the Depositor or Registrant
Common Control with the
Depositor or Registrant.......
27. Number of Contractowners....... Number of owners
28. Indemnification................ Indemnification
29. Principal Underwriters......... Principal Underwriter
30. Location of Accounts and Location of Books and Records
Records.......................
31. Management Services............ Management Services
32. Undertakings................... Undertakings and Representations
Signature Page................. Signatures
</TABLE>
<PAGE>
[LOGO]
VARIABLE ANNUITY
[LOGO]
May 1, 1996
Prospectuses for:
Flexible Premium Deferred Variable
Annuity Contracts
issued by
Farm Bureau Life
Insurance Company
-------------------------------------------
FBL Variable Insurance
Series Fund
managed by
FBL Investment
Advisory Services, Inc.
Call Toll-Free
1-800-247-4170
225-5846 (Des Moines)
<PAGE>
PROSPECTUS
- --------------------------------------------------------------------------------
Farm Bureau Life Annuity Account
Individual Flexible Premium Deferred
Variable Annuity Contract
- --------------------------------------------------------------------------------
This Prospectus describes the individual flexible premium deferred variable
annuity contract (the "Contract") being offered by Farm Bureau Life Insurance
Company (the "Company"). The Contract may be sold to or in connection with
retirement plans, including those that qualify for special federal tax treatment
under the Internal Revenue Code.
Premiums and cash values are allocated, as designated by the owner, to one or
more of the subaccounts of the Farm Bureau Life Annuity Account (the "Account"),
the Declared Interest Option, or both. The assets of each Subaccount will be
invested solely in a corresponding portfolio of FBL Variable Insurance Series
Fund (the "Fund"). The accompanying prospectus for the Fund describes its six
Portfolios--the Growth Common Stock Portfolio, the High Grade Bond Portfolio,
the High Yield Bond Portfolio, the Managed Portfolio, the Money Market Portfolio
and the Blue Chip Portfolio. The cash value of the Contracts prior to the
retirement date, except for amounts in the Declared Interest Option, will vary
according to the investment performance of the portfolios of the Fund in which
the selected Subaccounts are invested. THE OWNER BEARS THE ENTIRE INVESTMENT
RISK ON AMOUNTS ALLOCATED TO THE ACCOUNT.
This Prospectus sets forth basic information about the Contract and the Account
that a prospective investor should know before investing. Additional information
about the Contract and the Account is contained in the Statement of Additional
Information, which has been filed with the Securities and Exchange Commission.
The Statement of Additional Information is dated the same as this Prospectus and
is incorporated herein by reference. The table of contents for the Statement of
Additional Information is on page 28 of this Prospectus. You may obtain a copy
of the Statement of Additional Information free of charge by writing to or
calling the Company at the address or phone number shown below.
- --------------------------------------------------------------------------------
PLEASE READ THIS PROSPECTUS CAREFULLY AND KEEP IT FOR FUTURE REFERENCE. THIS
PROSPECTUS MUST BE ACCOMPANIED BY A CURRENT PROSPECTUS FOR THE FUND.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
Issued By
Farm Bureau Life Insurance Company
5400 University Avenue
West Des Moines, Iowa 50266
1-800-247-4170
515-225-5846
THE DATE OF THIS PROSPECTUS IS
MAY 1, 1996
<PAGE>
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
PAGE
EXPENSE TABLES............................................................. 3
- --------------------------------------------------------------------------------
DEFINITIONS................................................................ 5
- --------------------------------------------------------------------------------
SUMMARY.................................................................... 6
- --------------------------------------------------------------------------------
CONDENSED FINANCIAL INFORMATION............................................ 7
- --------------------------------------------------------------------------------
THE COMPANY, ACCOUNT AND FUND.............................................. 7
Farm Bureau Life Insurance Company..................... 7
Iowa Farm Bureau Federation............................ 8
Farm Bureau Life Annuity Account....................... 8
FBL Variable Insurance Series Fund..................... 8
Addition, Deletion or Substitution of Investments...... 10
- --------------------------------------------------------------------------------
DESCRIPTION OF ANNUITY CONTRACT............................................ 10
Issuance of a Contract................................. 10
Premiums............................................... 10
Free-Look Period....................................... 11
Allocation of Premiums................................. 11
Variable Cash Value.................................... 11
Transfer Privilege..................................... 12
Partial Surrenders and Surrenders...................... 13
Death Benefit Before the Retirement Date............... 13
Proceeds on the Retirement Date........................ 14
Payments............................................... 14
Modification........................................... 14
Reports to Owners...................................... 15
Inquiries.............................................. 15
- --------------------------------------------------------------------------------
THE DECLARED INTEREST OPTION............................................... 15
Minimum Guaranteed and Current Interest Rates.......... 15
Transfers From Declared Interest Option................ 16
Payment Deferral....................................... 16
- --------------------------------------------------------------------------------
CHARGES AND DEDUCTIONS..................................................... 16
Surrender Charge (Contingent Deferred Sales Charge).... 16
Annual Administrative Charge........................... 17
Transfer Processing Fee................................ 17
Mortality and Expense Risk Charge...................... 17
Fund Expenses.......................................... 18
Premium Taxes.......................................... 18
Other Taxes............................................ 18
- --------------------------------------------------------------------------------
PAYMENT OPTIONS............................................................ 18
Election of Options.................................... 18
Description of Options................................. 18
- --------------------------------------------------------------------------------
YIELDS AND TOTAL RETURNS................................................... 19
- --------------------------------------------------------------------------------
FEDERAL TAX MATTERS........................................................ 21
Introduction........................................... 21
Tax Status of the Contract............................. 21
Taxation of Annuities.................................. 22
Transfers, Assignments or Exchanges of a Contract...... 24
Withholding............................................ 24
Multiple Contracts..................................... 24
Taxation of Qualified Plans............................ 24
Possible Charge for the Company's Taxes................ 25
Other Tax Consequences................................. 25
- --------------------------------------------------------------------------------
DISTRIBUTION OF THE CONTRACTS.............................................. 26
- --------------------------------------------------------------------------------
LEGAL PROCEEDINGS.......................................................... 26
- --------------------------------------------------------------------------------
VOTING RIGHTS.............................................................. 26
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS....................................................... 27
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS...................... 28
- --------------------------------------------------------------------------------
2
<PAGE>
- --------------------------------------------------------------------------------
EXPENSE TABLES
- --------------------------------------------------------------------------------
The following expense information assumes that the entire cash value is variable
cash value.
<TABLE>
<S> <C>
OWNER TRANSACTION EXPENSES
Sales Charge Imposed on Premiums...................................................... None
Maximum Surrender Charge (contingent deferred sales charge) as a percentage of the
amount surrendered................................................................... 6 %
Transfer Processing Fee............................................................... None*
ANNUAL ADMINISTRATIVE CHARGE............................................................ $ 30
ACCOUNT ANNUAL EXPENSES (as a percentage of average net assets)
Mortality and Expense Risk Charge..................................................... 1.25 %
Other Account Expenses................................................................ None
Total Account Expenses.............................................................. 1.25 %
ANNUAL FUND EXPENSES (as a percentage of average net assets)
<CAPTION>
GROWTH COMMON
STOCK PORTFOLIO
-----------------
<S> <C>
Management Fees (investment advisory fees)............................................. 0.50%
Other Expenses After Reimbursement.................................................... 0.05%
Total Annual Fund Expenses (after reimbursements)................................... 0.55%
<CAPTION>
HIGH GRADE
BOND PORTFOLIO
-----------------
<S> <C>
Management Fees (investment advisory fees)............................................. 0.30%
Other Expenses After Reimbursement.................................................... 0.25%
Total Annual Fund Expenses (after reimbursements)................................... 0.55%
<CAPTION>
HIGH YIELD
BOND PORTFOLIO
-----------------
<S> <C>
Management Fees (investment advisory fees)............................................. 0.50%
Other Expenses After Reimbursement.................................................... 0.05%
Total Annual Fund Expenses (after reimbursements)................................... 0.55%
<CAPTION>
MANAGED
PORTFOLIO
-----------------
<S> <C>
Management Fees (investment advisory fees)............................................. 0.55%
Other Expenses After Reimbursement.................................................... 0.00%
Total Annual Fund Expenses (after reimbursements)................................... 0.55%
<CAPTION>
MONEY MARKET
PORTFOLIO
-----------------
<S> <C>
Management Fees (investment advisory fees)............................................ 0.30%
Other Expenses After Reimbursement.................................................... 0.25%
Total Annual Fund Expenses (after reimbursements)................................... 0.55%
<CAPTION>
BLUE CHIP
PORTFOLIO
-----------------
<S> <C>
Management Fees (investment advisory fees)............................................ 0.20%
Other Expenses After Reimbursement.................................................... 0.35%
Total Annual Fund Expenses (after reimbursements)................................... 0.55%
</TABLE>
The above tables are intended to assist the owner of a contract in understanding
the costs and expenses that he or she will bear directly or indirectly. The
tables reflect the expenses for the Account based on the actual expenses for
each Portfolio of the Fund for the 1995 fiscal year. For a more complete
description of the various costs and expenses see "Charges and Deductions" and
the prospectus for the Fund which accompanies this Prospectus.
The annual expenses listed for all of the Portfolios of the Fund are net of
certain reimbursements by the Fund's investment adviser. Operating expenses
(including the investment advisory fee but excluding brokerage, interest, taxes
and extraordinary expenses) of a Portfolio that exceed 1.50% of the Portfolio's
average daily net assets for any fiscal year are reimbursed by the Fund's
investment adviser up to the amount of the advisory fee. In addition, the
investment
* The Company reserves the right to charge a transfer fee in the future. See
"Charges and Deductions."
3
<PAGE>
adviser has voluntarily agreed to reimburse each Portfolio for expenses that
exceed .55% of the Portfolio's average daily net assets for the fiscal year
ending December 31, 1996. Although there can be no assurance that this
reimbursement will be continued, the Fund expects it to be renewed for the 1997
fiscal year. Absent the reimbursements, the Portfolio's total expenses for the
1995 fiscal year would have been: Growth Common Stock 0.72%, High Grade Bond
0.84%, High Yield Bond 0.88%, Managed 0.77%, Money Market 0.90% and Blue Chip
0.59%.
EXAMPLES: An owner would pay the following expenses on a $1,000 investment,
assuming a 5% annual return on assets:
1. If the Contract is surrendered or is annuitized at the end of the
applicable time period:
<TABLE>
<CAPTION>
SUBACCOUNT 1 YEAR 3 YEARS 5 YEARS
- ------------------------------------------------------------------------------------------ ----------- ----------- -----------
<S> <C> <C> <C>
Growth Common Stock....................................................................... $ 108 $ 189 $ 269
High Grade Bond........................................................................... 108 189 269
High Yield Bond........................................................................... 108 189 269
Managed................................................................................... 108 189 269
Money Market.............................................................................. 108 189 269
Blue Chip................................................................................. 108 189 269
<CAPTION>
SUBACCOUNT 10 YEARS
- ------------------------------------------------------------------------------------------ -----------
<S> <C>
Growth Common Stock....................................................................... $ 508
High Grade Bond........................................................................... 508
High Yield Bond........................................................................... 508
Managed................................................................................... 508
Money Market.............................................................................. 508
Blue Chip................................................................................. 508
</TABLE>
2. If the Contract is not surrendered or annuitized at the end of the
applicable time period:
<TABLE>
<CAPTION>
SUBACCOUNT 1 YEAR 3 YEARS 5 YEARS
- ------------------------------------------------------------------------------------------ ----------- ----------- -----------
<S> <C> <C> <C>
Growth Common Stock....................................................................... $ 48 $ 146 $ 247
High Grade Bond........................................................................... 48 146 247
High Yield Bond........................................................................... 48 146 247
Managed................................................................................... 48 146 247
Money Market.............................................................................. 48 146 247
Blue Chip................................................................................. 48 146 247
<CAPTION>
SUBACCOUNT 10 YEARS
- ------------------------------------------------------------------------------------------ -----------
<S> <C>
Growth Common Stock....................................................................... $ 508
High Grade Bond........................................................................... 508
High Yield Bond........................................................................... 508
Managed................................................................................... 508
Money Market.............................................................................. 508
Blue Chip................................................................................. 508
</TABLE>
The examples provided above assume that no transfer charges or premium taxes
have been assessed. The examples also assume that the annual administrative
charge is $30 and that the cash value per contract is $10,000, which translates
the administrative charge into an assumed .30% charge for the purposes of the
examples based on a $1,000 investment.
THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. THE ASSUMED 5% ANNUAL RATE OF RETURN IS HYPOTHETICAL AND SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE ANNUAL RETURNS, WHICH MAY BE
GREATER OR LESS THAN THIS ASSUMED RATE.
4
<PAGE>
- --------------------------------------------------------------------------------
DEFINITIONS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ACCOUNT......................... Farm Bureau Life Annuity Account.
ANNUITANT.................... The person whose life determines the annuity benefits payable under the
Contract and whose death determines the death benefit. The owner is always
the annuitant.
BENEFICIARY.................. The person to whom the proceeds payable on the death of the owner/annuitant
will be paid.
BUSINESS DAY................. Each day that the New York Stock Exchange is open for trading, except the
day after Thanksgiving, the Tuesday before Christmas and any day on which
the Home Office is closed because of a weather-related or comparable type
of emergency and is unable to segregate orders and redemption requests
received on that day.
CASH SURRENDER VALUE......... The cash value less any applicable surrender charge.
CASH VALUE................... The total amount invested under the Contract. It is the sum of the values
of the Contract in each subaccount of the Account plus the value of the
Contract in the Declared Interest Option.
THE CODE..................... The Internal Revenue Code of 1986, as amended.
CONTRACT ANNIVERSARY......... Same date in each Contract Year as the Contract Date.
CONTRACT DATE................ The date set forth on the data page of the Contract which is used to
determine Contract Years and Contract Anniversaries.
CONTRACT YEAR................ A twelve-month period beginning on the Contract Date or on a Contract
Anniversary.
DECLARED INTEREST OPTION..... An investment option under the Contract funded by the Company's general
account. It is not part of, nor dependent upon, the investment performance
of the Account.
DUE PROOF OF DEATH........... Proof of death satisfactory to the Company. Such proof may consist of the
following if acceptable to the Company:
(a) a certified copy of the death certificate;
(b) a certified copy of a court decree reciting a finding of death; or
(c) any other proof satisfactory to the Company.
GENERAL ACCOUNT.............. The assets of the Company other than those allocated to the Account or any
other separate account of the Company.
HOME OFFICE.................. The principal offices of the Company at 5400 University Avenue, West Des
Moines, Iowa 50266.
NON-QUALIFIED CONTRACT....... A Contract that is not a "Qualified Contract."
OWNER........................ The annuitant. Also the person who owns the Contract and who is entitled to
exercise all rights and privileges provided in the Contract.
QUALIFIED CONTRACT........... A Contract that is issued in connection with plans that qualify for special
federal income tax treatment under Sections 401, 403(b) or 408 of the Code.
RETIREMENT DATE.............. The date when the cash value will be applied under a payment option, if the
annuitant is still living.
SEC.......................... U.S. Securities and Exchange Commission.
SUBACCOUNT................... A subdivision of the Account, the assets of which are invested in a
corresponding portfolio of the Fund.
VALUATION PERIOD............. The period that starts at 3:00 p.m. central time on one Business Day and
ends at 3:00 p.m. central time on the next succeeding Business Day.
WRITTEN NOTICE............... A written request or notice in a form satisfactory to the Company which is
signed by the owner and received at the Home Office.
</TABLE>
5
<PAGE>
- --------------------------------------------------------------------------------
SUMMARY
- --------------------------------------------------------------------------------
THE CONTRACT
ISSUANCE OF A CONTRACT. Contracts may be sold in
connection with retirement plans which may or may not
qualify for special federal tax treatment under the Code.
There is no maximum age for owners on the Contract date.
(See "Issuance of a Contract.")
FREE-LOOK PERIOD. The owner has the right to return the
Contract within 10 days after he or she receives it.
(Owners in the states of North Dakota and Wisconsin are
allowed to return the Contract within 20 days after he or
she receives it.) The returned Contract will become void.
The Company will return to the owner an amount equal to
the greater of the premiums paid or the cash value on the
date the returned Contract is received at the West Des
Moines Home Office plus administrative charges and
charges deducted from the Account. (See "Free-Look
Period.")
PREMIUMS. The minimum amount which the Company will
accept as an initial premium is $1,000. Subsequent
premiums of not less than $50 may be paid under the
Contract. (See "Premiums.")
ALLOCATION OF PREMIUMS. Premiums under a Contract will
be allocated, as designated by the owner, to one or more
Subaccounts, the Declared Interest Option, or both. The
initial premium will be allocated to the Money Market
Subaccount for a 10-day period following the Contract
date. At the end of that period, the amount in the Money
Market Subaccount will be allocated among the Subaccounts
and the Declared Interest Option in accordance with the
owner's percentage allocation in the application. The
assets of each Subaccount will be invested solely in a
corresponding portfolio of the Fund. The cash value,
except for amounts in the Declared Interest Option, will
vary according to the investment performance of the
portfolios of the Fund in which the selected Subaccounts
are invested. Interest will be credited to amounts in the
Declared Interest Option at a guaranteed minimum rate of
3% per year, or a higher current interest rate declared
by the Company. (See "Allocation of Premiums.")
TRANSFERS. On or before the retirement date, the owner
may transfer all or part of the amount in a Subaccount
or the Declared Interest Option to another Subaccount or
the Declared Interest Option subject to certain
restrictions.
The total amount transferred each time must be at least
$100 or the entire amount in the Subaccount, if less.
Only one transfer out of the Declared Interest Option is
allowed each Contract year and that transfer must be for
no more than 25% of the cash value in that option. No fee
is currently charged for transfers, but the Company
reserves the right to assess a transfer processing fee of
$25 for each transfer after the first transfer during a
Contract year. (See "Transfer Privilege.")
PARTIAL SURRENDER. Upon written notice at any time
before the retirement date, the owner may surrender part
of the cash surrender value subject to certain
limitations. (See "Partial Surrenders.")
SURRENDER. Upon written notice received on or before the
retirement date, the owner may surrender the Contract
and receive its cash surrender value. (See "Surrender.")
- --------------------------------------------------------------------------------
CHARGES AND
DEDUCTIONS
The following charges and deductions are assessed under
the Contract:
SURRENDER CHARGE (CONTINGENT DEFERRED SALES CHARGE). No
charge for sales expense is deducted from premiums at
the time premiums are paid. However, if a Contract has
not been in force for six full Contract years, upon
surrender, partial surrender or the application of the
cash value to certain payment options under certain
circumstances, a surrender charge is deducted from the
amount surrendered or from the remaining cash value.
For the first Contract year, the charge is 6% of the
amount surrendered. Thereafter, the surrender charge
decreases by 1% each subsequent Contract year. In no
event will the total surrender charge on any Contract
exceed 8 1/2% of the total premiums paid under the
Contract. (See "Charge for Partial Surrender or
Surrender.")
6
<PAGE>
Subject to certain restrictions, for the first partial
surrender or surrender in each Contract year after the
first Contract year, up to 10% of the cash value (as of
the date the surrender request is received at the Home
Office) may be surrendered without a surrender charge.
(See "Amounts Not Subject to Surrender Charge.") The
surrender charge may be waived as provided in the
Contracts. (See "Waiver of Surrender Charge.")
ANNUAL ADMINISTRATIVE CHARGE. On the Contract date and
on each Contract anniversary prior to the retirement
date, the Company deducts an annual administrative charge
of $30 from the cash value. (See "Annual Administrative
Charge.")
MORTALITY AND EXPENSE RISK CHARGE. The Company deducts a
daily mortality and expense risk charge to compensate it
for assuming certain mortality and expense risks. The
charge is deducted from the assets of the Account at an
annual rate of 1.25% (approximately 0.86% for mortality
risk and 0.39% for expense risks). (See "Mortality and
Expense Risk Charge.")
- --------------------------------------------------------------------------------
ANNUITY PROVISIONS
On the retirement date, the cash value (less any
applicable surrender charge) will be applied under a
payment option, unless the owner chooses to receive the
cash surrender value in a lump sum. Payments under these
options do not depend upon the Account's performance.
(See "Payment Options.")
- --------------------------------------------------------------------------------
FEDERAL TAX MATTERS
Generally, a distribution (including a surrender, partial
surrender or death benefit payment) may result in taxable
income. In certain circumstances, a 10% penalty tax may
apply. For further discussion of the federal income
status of variable annuity contracts, see "Federal Tax
Matters."
- --------------------------------------------------------------------------------
CONDENSED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
The Account commenced operations on December 13, 1993,
however, no premiums were received until January 3, 1994.
The information presented below reflects the Accumulation
Unit information for the Subaccounts through December 31,
1995.
<TABLE>
<CAPTION>
ACCUMULATION UNIT ACCUMULATION
VALUE AT BEGINNING UNIT VALUE AT NUMBER OF UNITS AT
YEAR ENDED 12/31 OF YEAR END OF YEAR END OF YEAR
- ------------------------------------- ------------------ ------------- ------------------
<S> <C> <C> <C>
Growth Common Stock Subaccount
1994 $ 10.000000 $ 9.444367 432,277.301991
1995 9.444367 11.757386 517,391.062449
High Grade Bond Subaccount
1994 $ 10.000000 $ 9.814168 76,901.476870
1995 9.814168 11.081686 111,363.527645
High Yield Bond Subaccount
1994 $ 10.000000 $ 9.694750 121,183.181173
1995 9.694750 11.030995 204,375.618302
Managed Subaccount
1994 $ 10.000000 $ 9.391586 399,444.197239
1995 9.391586 11.673937 470,401.235924
Money Market Subaccount
1994 $ 10.000000 $ 10.244543 34,710.804010
1995 10.244543 10.674932 35,138.421239
Blue Chip Subaccount
1994 $ 10.000000 $ 9.894181 79,759.631145
1995 9.894181 12.994267 166,613.068180
</TABLE>
- --------------------------------------------------------------------------------
THE COMPANY, ACCOUNT AND FUND
- --------------------------------------------------------------------------------
FARM BUREAU LIFE
INSURANCE COMPANY
The Company is a stock life insurance company
incorporated in the State of Iowa on October 30, 1944.
100% of the outstanding voting shares of the Company are
owned by FBL Financial Group, Inc. (formerly Farm Bureau
Multi-State Services, Inc.). At December 31, 1995, Iowa
Farm Bureau Federation owns 63.86% of the outstanding
voting stock of FBL Financial Group, Inc. The Company is
principally engaged in the
7
<PAGE>
offering of life insurance policies, disability income
insurance policies and annuity contracts and is admitted
to do business in thirteen states--Arizona, Idaho, Iowa,
Kansas, Minnesota, Montana, Nebraska, North Dakota,
Oklahoma, South Dakota, Utah, Wisconsin and Wyoming. The
Company expects to be admitted to do business in Colorado
and New Mexico in the next several months.
- --------------------------------------------------------------------------------
IOWA FARM BUREAU
FEDERATION
Iowa Farm Bureau Federation is an Iowa not-for-profit
corporation, the members of which are county Farm Bureau
organizations and their individual members. Iowa Farm
Bureau Federation is primarily engaged, through various
divisions and subsidiaries, in the formulation, analysis
and promotion of programs (at local, state, national and
international levels) that are designed to foster the
educational, social and economic advancement of its
members. The principal offices of Iowa Farm Bureau
Federation are at 5400 University Avenue, West Des
Moines, Iowa 50266.
- --------------------------------------------------------------------------------
FARM BUREAU LIFE
ANNUITY ACCOUNT
The Account was established by the Company as a separate
account on July 26, 1993. The Account will receive and
invest premiums paid under the Contracts. In addition,
the Account may receive and invest premiums for any other
variable annuity contracts issued in the future by the
Company.
Although the assets in the Account are the property of
the Company, the assets in the Account attributable to
the Contracts are not chargeable with liabilities arising
out of any other business which the Company may conduct.
The assets of the Account are available to cover the
general liabilities of the Company only to the extent
that the Account's assets exceed its liabilities arising
under the Contracts and any other contracts supported by
the Account. The Company has the right to transfer to the
general account any assets of the Account which are in
excess of such reserves and other contract liabilities.
All obligations arising under the Contracts are general
corporate obligations of the Company.
The Account currently is divided into six Subaccounts but
may, in the future, include additional subaccounts. Each
Subaccount invests exclusively in shares of a single
corresponding portfolio of the Fund. Income and realized
and unrealized gains or losses from the assets of each
Subaccount are credited to or charged against that
Subaccount without regard to income, gains or losses from
any other Subaccount.
The Account has been registered as a unit investment
trust under the Investment Company Act of 1940 (the "1940
Act") and meets the definition of a separate account
under the federal securities laws. Registration with the
Securities and Exchange Commission does not involve
supervision of the management or investment practices or
policies of the Account or the Company by the Commission.
The Account is also subject to the laws of the State of
Iowa which regulate the operations of insurance companies
domiciled in Iowa.
- --------------------------------------------------------------------------------
FBL VARIABLE
INSURANCE SERIES FUND
The Account invests in shares of the Fund, a management
investment company of the series type with six investment
Portfolios. The Fund currently has a Growth Common Stock
Portfolio, High Grade Bond Portfolio, High Yield Bond
Portfolio, Managed Portfolio, Money Market Portfolio and
Blue Chip Portfolio. The Fund may, in the future, provide
for additional portfolios. Each Portfolio has its own
investment objectives and the income and losses for each
Portfolio of the Fund will be determined separately.
The investment objectives and policies of each Portfolio
are summarized below. There is no assurance that any
Portfolio will achieve its stated objectives. More
detailed information, including a description of risks
and expenses, may be found in the prospectus for the
Fund, which must accompany or precede this Prospectus and
which should be read carefully and retained for future
reference.
GROWTH COMMON STOCK PORTFOLIO. This Portfolio seeks
long-term capital appreciation with current income as
a secondary objective. The Portfolio will pursue
these objectives by investing in common stocks which
appear to the Fund's investment adviser to possess
above-average potential for appreciation in market
value.
8
<PAGE>
HIGH GRADE BOND PORTFOLIO. This Portfolio seeks as
high a level of current income as is consistent with
an investment in a high quality portfolio of debt
securities. The Portfolio will pursue this objective
by investing primarily in debt securities rated AAA,
AA or A by Standard & Poor's Corporation or Aaa, Aa
or A by Moody's Investors Service, Inc. and in
securities issued or guaranteed by the United States
government or its agencies or instrumentalities.
HIGH YIELD BOND PORTFOLIO. This Portfolio seeks as a
primary objective, as high a level of current income
as is consistent with investment in a portfolio of
fixed-income securities rated in the lower categories
of established rating services. As a secondary
objective, the Portfolio seeks capital appreciation
when consistent with its primary objective. The
Portfolio pursues these objectives by investing
primarily in fixed-income securities rated Baa or
lower by Moody's Investors Service, Inc. and/or BBB
or lower by Standards & Poor's Corporation, or in
unrated securities of comparable quality. AN
INVESTMENT IN THIS PORTFOLIO MAY ENTAIL GREATER THAN
ORDINARY FINANCIAL RISK. (See the Fund Prospectus
"Principal Risk Factors--Special Considerations--High
Yield Bonds.")
MANAGED PORTFOLIO. This Portfolio seeks the highest
total investment return of income and capital
appreciation. The Portfolio will pursue this
objective through a fully managed investment policy
consisting of investment in the following three
market sectors: (i) common stocks and other equity
securities of the type in which the Growth Common
Stock Portfolio may invest; (ii) high quality debt
securities and preferred stocks of the type in which
the High Grade Bond Portfolio may invest; and (iii)
high quality short-term money market instruments of
the type in which the Money Market Portfolio may
invest.
MONEY MARKET PORTFOLIO. This Portfolio seeks maximum
current income consistent with liquidity and
stability of principal. The Portfolio will pursue
this objective by investing in high quality
short-term money market instruments. AN INVESTMENT IN
THE MONEY MARKET PORTFOLIO IS NEITHER INSURED NOR
GUARANTEED BY THE U .S. GOVERNMENT. THERE CAN BE NO
ASSURANCE THAT THE MONEY MARKET PORTFOLIO WILL BE
ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00
PER SHARE.
BLUE CHIP PORTFOLIO. This Portfolio seeks growth of
capital and income. The Portfolio pursues this
objective by investing primarily in common stocks of
well-capitalized, established companies. Because this
Portfolio may be invested heavily in particular
stocks or industries, an investment in this Portfolio
may entail relatively greater risk of loss.
The Fund currently sells shares only to the Account and a
separate account of the Company supporting variable life
insurance contracts. The Fund may in the future sell
shares to other separate accounts of the Company or its
life insurance company affiliates supporting other
variable products, or to variable life insurance and
annuity separate accounts of insurance companies not
affiliated with the Company. The Company currently does
not foresee any disadvantages to owners arising from the
sale of shares to support its variable life insurance
contracts or that would arise if the Fund were to offer
its shares to support products other than the Contracts
or such variable life insurance contracts. However, the
management of the Fund will monitor events in order to
identify any material irreconcilable conflicts that might
possibly arise if the Fund were to offer its shares to
support products other than the Contracts or such
variable life insurance contracts. In the event of such a
conflict, it would determine what action, if any, should
be taken in response to the conflict. In addition, if the
Company believes that the Fund's response to any such
conflicts insufficiently protects owners, it will take
appropriate action on its own, including withdrawing the
Account's investment in the Fund. (See the Fund
Prospectus for more detail.)
9
<PAGE>
FBL Investment Advisory Services, Inc. (the "Adviser")
serves as investment adviser to the Fund and manages its
assets in accordance with policies, programs and
guidelines established by the Trustees of the Fund. The
Adviser is a wholly-owned, indirect subsidiary of the
Company.
The Fund is registered with the SEC as an open-end,
diversified management investment company. Such
registration does not involve supervision of the
management or investment practices or policies of the
Fund by the SEC.
- --------------------------------------------------------------------------------
ADDITION, DELETION OR
SUBSTITUTION OF
INVESTMENTS
The Company reserves the right, subject to applicable
law, to make additions to, deletions from or
substitutions for the shares that are held in the Account
or that the Account may purchase. If the shares of a
Portfolio of the Fund are no longer available for
investment or if, in the Company's judgment, further
investment in any Portfolio should become inappropriate
in view of the purposes of the Account, the Company may
redeem the shares, if any, of that Portfolio and
substitute shares of another Portfolio of the Fund or of
another registered open-end management investment
company. The Company will not substitute any shares
attributable to a Contract's interest in a Subaccount
without notice and prior approval of the SEC and state
insurance authorities, to the extent required by the 1940
Act or other applicable law.
The Company also reserves the right to establish
additional subaccounts of the Account, each of which
would invest in shares corresponding to a portfolio of
the Fund or in shares of another investment company
having a specified investment objective. The Company may,
in its sole discretion, establish new subaccounts or
eliminate or combine one or more Subaccounts if marketing
needs, tax considerations or investment conditions
warrant. Any new subaccounts may be made available to
existing Contract owners on a basis to be determined by
the Company. Subject to obtaining any approvals or
consents required by applicable law, the assets of one or
more Subaccounts may be transferred to any other
Subaccount if, in the sole discretion of the Company,
marketing, tax or investment conditions warrant.
In the event of any such substitution or change, the
Company may, by appropriate endorsement, change the
Contract to reflect the substitution or change. If the
Company deems it to be in the best interest of Contract
owners and annuitants, and subject to any approvals that
may be required under applicable law, the Account may be
operated as a management investment company under the
1940 Act, it may be deregistered under that Act if
registration is no longer required, it may be combined
with other Company separate accounts or its assets may be
transferred to another separate account of the Company.
In addition, the Company may, when permitted by law,
restrict or eliminate any voting rights of owners or the
persons who have such rights under the Contracts.
- --------------------------------------------------------------------------------
DESCRIPTION OF ANNUITY CONTRACT
- --------------------------------------------------------------------------------
ISSUANCE OF A
CONTRACT
In order to purchase a Contract, application must be made
to the Company through a licensed representative of the
Company, who is also a registered representative of FBL
Marketing Services, Inc. ("FBL Marketing"), a
broker-dealer having a selling agreement with FBL
Marketing or a broker-dealer having a selling agreement
with such broker/dealer. Contracts may be sold to or in
connection with retirement plans that do not qualify for
special tax treatment as well as retirement plans that
qualify for special tax treatment under the Code. There
is no maximum age for owners on the Contract date.
- --------------------------------------------------------------------------------
PREMIUMS
The minimum initial premium which the Company will accept
is $1,000. Subsequent premium payments may be paid at any
time during the annuitant's lifetime and before the
retirement date and must be for at least $50.
At the time of application, a premium reminder notice
schedule may be selected based on an annual, semi-annual
or quarterly payment. The owner will receive a premium
reminder notice at the specified interval. The owner may
change the amount and schedule of the premium reminder
notice. Also, under the Automatic
10
<PAGE>
Payment Plan, the owner can select a monthly payment
schedule pursuant to which premium payments will be
automatically deducted from a bank account or other
source rather than being "billed." The Contract will not
necessarily lapse even if premiums are not paid.
- --------------------------------------------------------------------------------
FREE-LOOK PERIOD
The Contract provides for an initial "free-look" period.
The owner has the right to return the Contract within 10
days of receiving it. (Owners in the states of North
Dakota and Wisconsin are allowed to return the Contract
within 20 days of receiving it.) When the Company
receives the returned Contract at its Home Office, it
will cancel the Contract and refund to the owner an
amount equal to the greater of the premiums paid under
the Contract or the sum of the cash value as of the date
the returned Contract is received by the Company at its
Home Office plus the amount of the annual administration
charge and any charges deducted from the Account.
- --------------------------------------------------------------------------------
ALLOCATION OF
PREMIUMS
If the application for a Contract is properly completed
and is accompanied by all the information necessary to
process it, including payment of the initial premium, the
initial premium will be allocated to the Money Market
Subaccount within two business days of receipt of such
premium by the Company at its Home Office. If the
application is not properly completed, the Company
reserves the right to retain the premium for up to five
business days while it attempts to complete the
application. If the application is not complete at the
end of the 5-day period, the Company will inform the
applicant of the reason for the delay and the initial
premium will be returned immediately, unless the
applicant specifically consents to the Company retaining
the premium until the application is complete. Once the
application is complete, the initial premium will be
allocated to the Money Market Subaccount within two
business days.
At the time of application, the owner selects how the
initial premium is to be allocated among the Subaccounts
and the Declared Interest Option. Any allocation must be
for at least 10% of a premium payment and be in whole
percentages.
The initial premium will be allocated to the Money Market
Subaccount for a 10-day period following the Contract
date. After the expiration of the 10-day period, the
amount in the Money Market Subaccount will be allocated
among the Subaccounts and the Declared Interest Option in
accordance with the owner's percentage allocation in the
application. Any subsequent premiums will be allocated at
the end of the valuation period in which the subsequent
premium is received by the Company in the same manner,
unless the allocation percentages are changed. Subsequent
premiums will be allocated in accordance with the
allocation schedule in effect at the time the premium
payment is received. However, owners may direct
individual payments to a specific Subaccount or the
Declared Interest Option (or any combination thereof)
without changing the existing allocation schedule.
The allocation schedule may be changed by the owner at
any time by written notice. Changing the allocation
schedule will not change the allocation of existing cash
values among the Subaccounts or the Declared Interest
Option.
The cash values allocated to a Subaccount will vary with
that Subaccount's investment experience, and the owner
bears the entire investment risk. Owners should
periodically review their premium allocation schedule in
light of market conditions and their overall financial
objectives.
- --------------------------------------------------------------------------------
VARIABLE CASH VALUE
The variable cash value will reflect the investment
experience of the selected Subaccounts, any premiums
paid, any surrenders or partial surrenders, any transfers
and any charges assessed in connection with the Contract.
There is no guaranteed minimum variable cash value, and,
because a Contract's variable cash value on any future
date depends upon a number of variables, it cannot be
predetermined.
CALCULATION OF VARIABLE CASH VALUE. The variable cash
value is determined at the end of each valuation period.
The value will be the aggregate of the values
attributable to
11
<PAGE>
the Contract in each of the Subaccounts, determined for
each Subaccount by multiplying that Subaccount's unit
value for the relevant valuation period by the number of
Subaccount units allocated to the Contract.
DETERMINATION OF NUMBER OF UNITS. Any amounts allocated
to the Subaccounts will be converted into Subaccount
units. The number of units to be credited to a Contract
is determined by dividing the dollar amount being
allocated to a Subaccount by the unit value for that
Subaccount at the end of the valuation period during
which the amount was allocated. The number of units in
any Subaccount will be increased at the end of the
valuation period by any premiums allocated to the
Subaccount during the current valuation period and by any
amounts transferred to the Subaccount from another
Subaccount or the Declared Interest Option during the
current valuation period. The number of units in any
Subaccount will be decreased at the end of the valuation
period by any amounts transferred from that Subaccount to
another Subaccount or the Declared Interest Option, any
amounts surrendered during the current valuation period,
any surrender charge assessed upon a partial or full
surrender and the annual administrative charge, if
assessed during the current valuation period.
DETERMINATION OF UNIT VALUE. The unit value for each
Subaccount's first valuation period is set at $10. The
unit value for a Subaccount is calculated for each
subsequent valuation period by dividing (a) by (b) where:
(a) is the net result of:
1. the value of the net assets in the
Subaccount at the end of the preceding valuation
period; plus
2. the investment income, dividends and
capital gains, realized or unrealized, credited to
the Subaccount during the current valuation
period; minus
3. the capital losses, realized or
unrealized, charged against the Subaccount during
the current valuation period; minus
4. any amount charged for taxes or any amount
set aside during the valuation period as a
provision for taxes attributable to the
Subaccount; minus
5. the daily amount charged for mortality and
expense risks for each day of the current
valuation period; and
(b) the number units outstanding at the end of
the preceding valuation period.
- --------------------------------------------------------------------------------
TRANSFER PRIVILEGE
Before the retirement date, an owner may transfer all or
part of an amount in a Subaccount to another Subaccount
or the Declared Interest Option at any time, or transfer
up to 25% of an amount in the Declared Interest Option to
one or more Subaccounts. However, if a transfer request
would reduce the amount in the Declared
Interest Option below $1,000, the owner may transfer the
entire amount from the Declared Interest Option. The
minimum transfer amount must be the lesser of $100 or the
entire amount in that Subaccount or the Declared Interest
Option.
The transfer will be made as of the business day on or
next following the day written notice requesting such
transfer is received at the Home Office. There is no
limit on the number of transfers that can be made among
or between Subaccounts or the Declared Interest Option.
However, only one transfer may be made from the Declared
Interest Option each Contract year (See "Transfers from
Declared Interest Option.")
Currently, there is no charge for transfers. The Company
reserves the right, however to charge $25 for each
transfer after the first transfer in any Contract year.
For the purpose of assessing the transfer fee, all
transfer requests received together in a valuation period
would be considered to be one transfer, regardless of the
Subaccounts or the Declared Interest Option affected. The
processing fee would be deducted from the amount being
transferred.
12
<PAGE>
Transfers may be made based upon instructions given by
telephone, provided the appropriate election has been
made at the time of application or proper authorization
is provided to the Company. The Company reserves the
right to suspend telephone transfer privileges at any
time, for any class of Contracts, for any reason.
- --------------------------------------------------------------------------------
PARTIAL SURRENDERS
AND SURRENDERS
PARTIAL SURRENDERS. At any time before the retirement
date, an owner may make a partial surrender of the cash
surrender value. The minimum amount which may be
surrendered is $500; the maximum amount is that which
would leave the remaining cash value equal to or less
than $2,000. A partial surrender request that would
reduce the cash value to $2,000 or less will be treated
as a full surrender of the Contract. The Company will
withdraw the amount requested from the cash value as of
the Business Day on or next following the day written
notice requesting the partial surrender is received at
the Home Office. Any applicable surrender charge will, at
the election of the owner, be deducted from the remaining
cash value or be deducted from the amount withdrawn. (See
"Surrender Charge.")
The owner may specify the amount of the partial surrender
to be made from certain Subaccounts or the Declared
Interest Option. If the owner does not so specify, or if
the amount in the designated Subaccount(s) or Declared
Interest Option is inadequate to comply with the request,
the partial surrender will be made from each Subaccount
and the Declared Interest Option based on the proportion
that the value in such Subaccount bears to the total cash
value immediately prior to the partial surrender.
A partial surrender may have adverse federal income tax
consequences, including a penalty tax. (See "Taxation of
Annuities.")
SURRENDER. At any time before the retirement date, the
owner may request a surrender of the contract for its
cash surrender value. The cash surrender value will be
determined as of the Business Day on or next following
the date written notice requesting surrender and the
Contract are received at the Home Office. The cash
surrender value will be paid in a lump sum unless the
owner requests payment under a payment option. A
surrender may have adverse federal income tax
consequences. (See "Taxation of Annuities.")
SURRENDER AND PARTIAL SURRENDER RESTRICTIONS. The
owner's right to make surrenders and partial surrenders
is subject to any restrictions imposed by applicable law
or employee benefit plan.
RESTRICTIONS ON DISTRIBUTIONS FROM CERTAIN TYPES OF
CONTRACTS. There are certain restrictions on surrenders
and partial surrenders of Contracts used as funding
vehicles for Code Section 403(b) retirement plans.
Section 403(b)(11) of the Code restricts the distribution
under Section 403(b) annuity contracts of: (i) elective
contributions made in years beginning after December 31,
1988; (ii) earnings on those contributions; and (iii)
earnings in such years on amounts held as of the last
year beginning before January 1, 1989. Distributions of
those amounts may only occur upon the death of the
employee, attainment of age 59 1/2, separation from
service, disability or financial hardship. In addition,
income attributable to elective contributions may not be
distributed in the case of hardship.
- --------------------------------------------------------------------------------
DEATH BENEFIT BEFORE
THE RETIREMENT DATE
If the annuitant (who is always the owner) dies before
the retirement date, the Company will pay the death
benefit under the Contract to the beneficiary. The death
benefit is equal to the greater of the sum of the
premiums paid less any partial surrenders (including
applicable surrender charges), or the cash value on the
date the Company receives due proof of the annuitant's
death. There is no death benefit payable if the annuitant
dies after the retirement date. The death benefit will be
paid to the beneficiary in a lump sum unless the owner or
beneficiary elects a payment option.
If the annuitant (who is always the owner) dies before
the retirement date, federal tax law applicable to a
Non-Qualified Contract requires that the cash value be
distributed to the beneficiary within five years after
the date of the owner's death. These
13
<PAGE>
distribution requirements will be considered satisfied as
to any portion of the proceeds payable to, or for the
benefit of, a designated beneficiary, and which is
distributed over the life (or a period not exceeding the
life expectancy) of that beneficiary, provided that such
distributions begin within one year of the owner's death.
However, if the owner's spouse is the designated
beneficiary, the Contract may be continued with such
surviving spouse as the new owner.
If the owner dies on or after the retirement date, any
remaining payments must be distributed at least as
rapidly as under the payment option in effect on the date
of such owner's death.
Other rules may apply to a Qualified Contract.
- --------------------------------------------------------------------------------
PROCEEDS ON THE
RETIREMENT DATE
The retirement date is selected by the owner. For
Non-Qualified Contracts, the retirement date may not be
after the later of the annuitant's age 70 or 10 years
after the Contract date. For Qualified Contracts, the
retirement date must be no later than the annuitant's age
70 1/2 or such other date as meets the requirements of
the Code.
On the retirement date, the proceeds will be applied
under the life income annuity payment option with ten
years guaranteed, unless the owner chooses to have the
proceeds paid under another payment option or in a lump
sum. (See "Payment Options.") If a payment option is
elected, the amount that will be applied is the cash
value less any applicable surrender charge. If a lump sum
payment is chosen, the amount paid will be the cash
surrender value on the retirement date.
The retirement date may be changed subject to these
limitations: the owner's written notice must be received
at the Home Office at least 30 days before the current
retirement date; the requested retirement date must be a
date that is at least 30 days after receipt of the
written notice; and the requested retirement date must be
no later than the annuitant's 70th birthday or any
earlier date required by law.
- --------------------------------------------------------------------------------
PAYMENTS
Any surrender, partial surrender or death benefit will
usually be paid within seven days of receipt of a written
request, any information or documentation reasonably
necessary to process the request and, in the case of a
death benefit, receipt and filing of due proof of death.
However, payments may be postponed if:
1. the New York Stock Exchange is closed, other
than customary weekend and holiday closings, or
trading on the exchange is restricted as determined
by the SEC; or
2. the SEC permits by an order the postponement
for the protection of owners; or
3. the SEC determines that an emergency exists
that would make the disposal of securities held in
the Account or the determination of the value of the
Account's net assets not reasonably practicable.
If a recent check or draft has been submitted, the
Company has the right to delay payment until it has
assured itself that the check or draft has been honored.
The Company has the right to defer payment of any
surrender, partial surrender or transfer from the
Declared Interest Option for up to six months from the
date of receipt of written notice for such a surrender or
transfer. If payment is not made within 30 days after
receipt of documentation necessary to complete the
transaction, or such shorter period as required by a
particular jurisdiction, interest will be added to the
amount paid from the date of receipt of documentation at
3% or such higher rate required for a particular state.
- --------------------------------------------------------------------------------
MODIFICATION
Upon notice to the owner, the Company may modify the
Contract if:
1. necessary to make the Contract or the Account
comply with any law or regulation issued by a
governmental agency to which the Company is subject;
or
14
<PAGE>
2. necessary to assure continued qualification
of the Contract under the Internal Revenue Code or
other federal or state laws relating to retirement
annuities or variable annuity contracts; or
3. necessary to reflect a change in the
operation of the Account; or
4. the modification provides additional Account
and/or fixed accumulation options.
In the event of most such modifications, the Company will
make appropriate endorsement to the Contract.
- --------------------------------------------------------------------------------
REPORTS TO OWNERS
At least annually, the Company will mail to each owner,
at such owner's last known address of record, a report
containing the cash value (including the cash value in
each Subaccount and the Declared Interest Option) of the
Contract, premiums paid and charges deducted since the
last report, partial surrenders made since the last
report and any further information required by any
applicable law or regulation.
- --------------------------------------------------------------------------------
INQUIRIES
Inquiries regarding a Contract may be made by writing to
the Company at its Home Office.
- --------------------------------------------------------------------------------
THE DECLARED INTEREST OPTION
- --------------------------------------------------------------------------------
An owner may allocate some or all of the premiums and
transfer some or all of the cash value to the Declared
Interest Option, which is part of the general account and
pays interest at declared rates guaranteed for each
Contract year (subject to a minimum guaranteed interest
rate of 3%). The principal, after deductions, is also
guaranteed. The Company's general account supports its
insurance and annuity obligations.
The Declared Interest Option has not been, and is not
required to be, registered with the SEC under the
Securities Act of 1933, and neither the Declared Interest
Option nor the Company's general account has been
registered as an investment company under the 1940 Act.
Therefore, neither the Company's general account, the
Declared Interest Option, nor any interests therein are
generally subject to regulation under the 1933 Act or the
1940 Act. The disclosures relating to these accounts
which are included in this Prospectus are for the owner's
information and have not been reviewed by the SEC.
However, such disclosures may be subject to certain
generally applicable provisions of Federal securities
laws relating to the accuracy and completeness of
statements made in prospectuses.
The portion of the cash value allocated to the Declared
Interest Option (the "Declared Interest Option cash
value") will be credited with rates of interest, as
described below. Since the Declared Interest Option is
part of the general account, the Company assumes the risk
of investment gain or loss on this amount. All assets in
the general account are subject to the Company's general
liabilities from business operations.
- --------------------------------------------------------------------------------
MINIMUM GUARANTEED
AND CURRENT INTEREST
RATES
The Declared Interest Option cash value is guaranteed to
accumulate at a minimum effective annual interest rate of
3%. The Company intends to credit the Declared Interest
Option cash value with current rates in excess of the
minimum guarantee but is not obligated to do so. These
current interest rates are influenced by, but do not
necessarily correspond to, prevailing general market
interest rates. Any interest credited on the amounts in
the Declared Interest Option in excess of the minimum
guaranteed rate of 3% per year will be determined in the
sole discretion of the Company. The owner, therefore,
assumes the risk that interest credited may not exceed
the guaranteed rate.
From time to time, the Company establishes new current
interest rates for the Declared Interest Option under the
Contracts. The rate applicable for a particular Contract
is the rate in effect on the most recent Contract
anniversary. This rate remains unchanged for that
Contract until the next Contract anniversary (i.e., for
the entire Contract year). During each Contract year, the
entire Declared Interest Option
15
<PAGE>
cash value (including amounts allocated or transferred to
the Declared Interest Option during that year) is
credited with the interest rate in effect for that
Contract year. Once credited, interest becomes part of
the Declared Interest Option cash value.
The Company reserves the right to change the method of
crediting interest from time to time, provided that such
changes do not have the effect of reducing the guaranteed
rate of interest below 3% per annum or shorten the period
for which the current interest rate applies to less than
a Contract year (except for the year in which such amount
is received or transferred).
CALCULATION OF DECLARED INTEREST OPTION CASH VALUE. The
Declared Interest Option cash value at any time is equal
to amounts allocated and transferred to it, plus interest
credited less amounts deducted, transferred or withdrawn.
- --------------------------------------------------------------------------------
TRANSFERS FROM
DECLARED INTEREST
OPTION
One transfer is allowed from the Declared Interest Option
to any or all of the Subaccounts in each Contract year.
The amount transferred from the Declared Interest Option
may not exceed 25% of the Declared Interest Option cash
value on the date of transfer, unless the balance after
the transfer would be less than $1,000, in which case the
entire amount may be transferred.
- --------------------------------------------------------------------------------
PAYMENT DEFERRAL
The Company has the right to defer payment of any
surrender, partial surrender or transfer from the
Declared Interest Option up to six months from the date
of receipt of the written notice for surrender or
transfer.
- --------------------------------------------------------------------------------
CHARGES AND DEDUCTIONS
- --------------------------------------------------------------------------------
SURRENDER CHARGE
(CONTINGENT DEFERRED
SALES CHARGE)
GENERAL. No charge for sales expenses is deducted from
premiums at the time premiums are paid. However, within
certain time limits described below, a surrender charge
(contingent deferred sales charge) is deducted from the
cash value if a partial surrender or surrender is made
before the retirement date. Also, as described below, a
surrender charge may be deducted from amounts applied to
certain payment options.
In the event surrender charges are not sufficient to
cover sales expenses, the loss will be borne by the
Company; conversely, if the amount of such charges proves
more than enough, the excess will be retained by the
Company. The Company does not currently believe that the
surrender charges imposed will cover the expected costs
of distributing the Contracts. Any shortfall will be made
up from the Company's general assets which may include
amounts derived from the mortality and expense risk
charge.
CHARGE FOR PARTIAL SURRENDER OR SURRENDER. During the
first six Contract years, if a partial surrender or
surrender is made, the applicable surrender charge will
be as follows:
<TABLE>
<CAPTION>
CONTRACT YEAR IN CHARGE AS PERCENTAGE OF
WHICH SURRENDER OCCURS AMOUNT SURRENDERED
- -------------------------------------- -----------------------
<S> <C>
1..................................... 6%
2..................................... 5
3..................................... 4
4..................................... 3
5..................................... 2
6..................................... 1
7 and after........................... 0
</TABLE>
No surrender charge is deducted if the partial surrender
or surrender occurs after six full Contract years.
In no event will the total surrender charges assessed
under a Contract exceed 8 1/2% of the total premiums paid
under that Contract.
16
<PAGE>
If the Contract is being surrendered, the surrender
charge is deducted from the cash value in determining the
cash surrender value. For a partial surrender, the
surrender charge may, at the election of the owner, be
deducted from the cash value remaining after the amount
requested is withdrawn or be deducted from the amount of
the withdrawal requested.
AMOUNTS NOT SUBJECT TO SURRENDER CHARGE. For the first
partial surrender or surrender in each Contract year
after the first Contract year, up to 10% of the cash
value (as of the date the surrender request is received
at the Home Office) may be surrendered without a
surrender charge.
Any amounts surrendered in excess of 10% or subsequent to
the first partial surrender will be assessed a surrender
charge. This right is not cumulative from Contract year
to Contract year.
SURRENDER CHARGE AT THE RETIREMENT DATE. If any payment
option is selected at the retirement date other than
options 2-5 described below (see "Payment Options"), the
surrender charge is assessed against the cash value
applied to that option. If payment options 3 or 5 are
selected, no surrender charge is assessed and if payment
options 2 or 4 are selected, the surrender charge is
applied by adding the fixed number of years for which
payments will be made under the option to the number of
Contract years since the Contract date and using this sum
in the surrender charge table.
WAIVER OF SURRENDER CHARGE. Upon written notice from the
owner before the retirement date, the surrender charge
will be waived on any partial or full surrender if he or
she is, as defined in the Contract, confined to a nursing
home, becomes totally disabled or becomes terminally ill.
- --------------------------------------------------------------------------------
ANNUAL ADMINISTRATIVE
CHARGE
On the Contract date and on each Contract anniversary
prior to the retirement date, the Company deducts from
the cash value an annual administrative charge of $30 to
reimburse it for administrative expenses relating to the
Contract. The charge will be deducted from each
Subaccount and the Declared Interest Option based on the
proportion that the value in each such Subaccount bears
to the total cash value. The Company does not expect to
make a profit on this charge. No annual administrative
charge is payable during the annuity payment period.
- --------------------------------------------------------------------------------
TRANSFER PROCESSING
FEE
Currently, there is no charge for transfers. The Company
reserves the right, however, to charge $25 for each
transfer after the first transfer in any Contract year.
For the purpose of assessing the fee, all transfer
requests received together in a given valuation period
would be considered to be one transfer, regardless of the
Subaccounts or the Declared Interest Option affected. The
fee would be deducted from the amount being transferred.
The Company does not expect to make a profit from this
charge in the event that it is taken.
- --------------------------------------------------------------------------------
MORTALITY AND EXPENSE
RISK CHARGE
To compensate the Company for assuming mortality and
expense risks, the Company deducts a daily mortality and
expense risk charge from the assets of the Account. The
charge is at an annual rate of 1.25% (daily rate of
0.0034035%) (approximately 0.86% for mortality risk and
0.39% for expense risk).
The mortality risk the Company assumes is that annuitants
may live for a longer period of time than estimated when
the guarantees in the Contract were established. Because
of these guarantees, each payee is assured that longevity
will not have an adverse effect on the annuity payments
received. The mortality risk that the Company assumes
also includes a guarantee to pay a death benefit if the
owner/annuitant dies before the retirement date. The
expense risk that the Company assumes is the risk that
the administrative fees and transfer fees may be
insufficient to cover actual future expenses.
If the mortality and expense risk charge is insufficient
to cover the actual cost of the mortality and expense
risks undertaken by the Company, the Company will bear
the shortfall. Conversely, if the charge proves more than
sufficient, the excess will be profit to the Company and
will be available for any proper corporate purpose
including, among other things, payment of sales expenses.
17
<PAGE>
- --------------------------------------------------------------------------------
FUND EXPENSES
Because the Account purchases shares of the Fund, the net
assets of the Account will reflect the investment
advisory fees and other operating expenses incurred by
the Fund. (See the accompanying Fund Prospectus.)
- --------------------------------------------------------------------------------
PREMIUM TAXES
Currently, no charge or deduction is made under the
Contracts for premium taxes. The Company reserves the
right, however, to deduct such taxes from cash value.
Various states and other governmental entities levy a
premium tax, currently ranging up to 3.5%, on annuity
contracts issued by insurance companies. Premium tax
rates are subject to change, from time to time, by
legislative and other governmental action.
- --------------------------------------------------------------------------------
OTHER TAXES
Currently, no charge is made against the Account for any
federal, state or local taxes that the Company incurs or
that may be attributable to the Account or the Contracts.
The Company may, however, make such a charge in the
future for any such tax or economic burden on the Company
resulting from the application of the tax laws that it
determines to be properly attributable to the Account or
Contracts.
- --------------------------------------------------------------------------------
PAYMENT OPTIONS
- --------------------------------------------------------------------------------
The Contract ends on the retirement date, at which time
the cash value (or, under certain options, the cash
surrender value) will be applied under a payment option,
unless the owner elects to receive the cash surrender
value in a single sum. If an election of a payment option
has not been filed at the Home Office on the retirement
date, the proceeds will be paid as a life income annuity
with payments for ten years guaranteed. Prior to the
retirement date, the owner can have the entire cash
surrender value applied under a payment option, or a
beneficiary can have the death benefit applied under a
payment option. The Contract must be surrendered so that
the applicable amount can be paid in a lump sum or a
supplemental contract for the applicable payment option
can be issued.
The payment options available are described below. The
term "payee" means a person who is entitled to receive
payment under that option. The payment options are fixed,
which means that each option has a fixed and guaranteed
amount to be paid during the annuity payment period that
is not in any way dependent upon the investment
experience of the Account.
- --------------------------------------------------------------------------------
ELECTION OF OPTIONS
An option may be elected, revoked or changed at any time
before the retirement date while the annuitant is living.
If an election is not in effect at the annuitant's death
or if payment is to be made in one sum under an existing
election, the beneficiary may elect one of the options
after the death of the owner/annuitant.
An election of payment options and any revocation or
change must be made by written notice and signed by the
owner or beneficiary, as appropriate.
The Company reserves the right to refuse the election of
a payment option other than paying the proceeds in a lump
sum if: 1) the total payments together would be less than
$2,000; 2) each payment would be less than $20; or 3) the
payee is an assignee, estate, trustee, partnership,
corporation or association.
- --------------------------------------------------------------------------------
DESCRIPTION OF
OPTIONS
OPTION 1--INTEREST INCOME. To have the proceeds left
with the Company to earn interest at a rate to be
determined by the Company. Interest will be paid every
month or every 3, 6 or 12 months as the payee selects.
Under this option, the payee may withdraw part or all of
the proceeds at any time.
OPTION 2--INCOME FOR A FIXED TERM. To have the proceeds
paid out in equal installments for a fixed number of
years.
OPTION 3--LIFE INCOME OPTION WITH SPECIFIED NUMBER OF
YEARS GUARANTEED. To have the proceeds paid in equal
amounts (at intervals elected by the payee) during the
Payee's lifetime with the guarantee that payments will be
made for a period of not less than the specified number
of years. Under this option, at the death of a payee
having no beneficiary (or where the beneficiary died
prior to the payee), the present value of the current
dollar amount on the date of death of any remaining
guaranteed payments
18
<PAGE>
will be paid in one sum to the executors or
administrators of the payee's estate. Also under this
option, if any Beneficiary dies while receiving payment,
the present value of the current dollar amount on the
date of death of any remaining guaranteed payments will
be paid in one sum to the executors or administrators of
the beneficiary's estate. Calculation of such present
value shall be no less than 3%.
OPTION 4--INCOME OF A FIXED AMOUNT. To have the proceeds
paid out in equal installments (at intervals elected by
the payee) of a specific amount. The payments will
continue until all the proceeds plus interest have been
paid out.
OPTION 5--JOINT AND TWO-THIRDS TO SURVIVOR MONTHLY LIFE
INCOME. To have proceeds paid out in equal installments
for as long as two joint payees live. When one payee
dies, installments of two-thirds of the first installment
will be paid to the surviving payee until he or she dies.
The amount of each payment will be determined from the
tables in the Contract which apply to the particular
option using the payee's age and sex. Age will be
determined from the nearest birthday at the due date of
the first payment.
ALTERNATE PAYMENT OPTION. In lieu of one of the above
options, the cash value, cash surrender value or death
benefit, as applicable, may be settled under any other
payment option made available by the Company or requested
and agreed to by the Company.
- --------------------------------------------------------------------------------
YIELDS AND TOTAL RETURNS
- --------------------------------------------------------------------------------
From time to time, the Company may advertise or include
in sales literature yields, effective yields and total
returns for the Subaccounts. THESE FIGURES ARE BASED ON
HISTORICAL EARNINGS AND DO NOT INDICATE OR PROJECT
FUTURE PERFORMANCE. Each Subaccount may, from time to
time, advertise or include in sales literature
performance relative to certain performance rankings and
indices compiled by independent organizations. More
detailed information as to the calculation of
performance, as well as comparisons with unmanaged market
indices, appears in the Statement of Additional
Information.
Effective yields and total returns for the Subaccounts
are based on the investment performance of the
corresponding portfolios of the Fund. The Fund's
performance in part reflects the Fund's expenses. (See
the Fund Prospectus.)
The yield of the Money Market Subaccount refers to the
annualized income generated by an investment in the
Subaccount over a specified seven-day period. The yield
is calculated by assuming that the income generated for
that seven-day period is generated each seven-day period
over a 52-week period and is shown as a percentage of the
investment. The effective yield is calculated similarly
but, when annualized, the income earned by an investment
in the Subaccount is assumed to be reinvested. The
effective yield will be slightly higher than the yield
because of the compounding effect of this assumed
reinvestment.
The yield of a Subaccount (except the Money Market
Subaccount) refers to the annualized income generated by
an investment in the Subaccount over a specified 30-day
or one-month period. The yield is calculated by assuming
that the income generated by the investment during that
30-day or one-month period is generated each period over
a 12-month period and is shown as a percentage of the
investment.
The total return of a Subaccount refers to return
quotations assuming an investment under a Contract has
been held in the Subaccount for various periods of time.
When a Subaccount has been in operation for one, five and
ten years, respectively, the total return for these
periods will be provided. For periods prior to the date
the Account commenced operations, performance information
will be calculated based on the performance of the Fund's
portfolios and the assumption that the Subaccounts were
19
<PAGE>
in existence for the same periods as those indicated for
the Fund's portfolios, with the level of Contract charges
that were in effect at the inception of the Subaccounts
for the Contracts.
The average annual total return quotations represent the
average annual compounded rates of return that would
equate an initial investment of $1,000 under a Contract
to the redemption value of that investment as of the last
day of each of the periods for which total return
quotations are provided. Average annual total return
information shows the average percentage change in the
value of an investment in the Subaccount from the
beginning date of the measuring period to the end of that
period. This standardized version of average annual total
return reflects all historical investment results less
all charges and deductions applied against the Subaccount
(including any surrender charge that would apply if an
owner terminated the Contract at the end of each period
indicated, but excluding any deductions for premium
taxes).
In addition to the standard version described above,
total return performance information computed on two
different non-standard bases may be used in
advertisements or sales literature. Average annual total
return information may be presented, computed on the same
basis as described above, except deductions will not
include the surrender charge. In addition, the Company
may, from time to time, disclose cumulative total return
for Contracts funded by Subaccounts.
From time to time, yields, standard average annual total
returns and non-standard total returns for the Fund's
portfolios may be disclosed, including such disclosures
for periods prior to the date the Account commenced
operations.
Non-standard performance data will only be disclosed if
the standard performance data for the required periods is
also disclosed. For additional information regarding the
calculation of other performance data, please refer to
the Statement of Additional Information.
In advertising and sales literature, the performance of
each Subaccount may be compared to the performance of
other variable annuity issuers in general, or to the
performance of particular types of variable annuities
investing in mutual funds or investment portfolios of
mutual funds with investment objectives similar to each
of the Subaccounts. Lipper Analytical Services, Inc.
("Lipper") and the Variable Annuity Research Data Service
("VARDS") are independent services which monitor and rank
the performance of variable annuity issuers in each of
the major categories of investment objectives on an
industry-wide basis.
Lipper's rankings include variable life insurance issuers
as well as variable annuity issuers. VARDS rankings
compare only variable annuity issuers. The performance
analyses prepared by Lipper and VARDS each rank such
issuers on the basis of total return, assuming
reinvestment of distributions, but do not take sales
charges, redemption fees or certain expense deductions at
the separate account level into consideration. In
addition, VARDS prepares risk rankings, which consider
the effects of market risk on total return performance.
This type of ranking provides data as to which funds
provide the highest total return within various
categories of funds defined by the degree of risk
inherent in their investment objectives.
Advertising and sales literature may also compare the
performance of each Subaccount to the Standard & Poor's
Index of 500 Common Stocks, a widely used measure of
stock performance. This unmanaged index assumes the
reinvestment of dividends but does not reflect any
"deduction" for the expense of operating or managing an
investment portfolio. Other independent ranking services
and indices may also be used as a source of performance
comparison.
The Company may also report other information including
the effect of tax-deferred compounding on a Subaccount's
investment returns, or returns in general, which may be
illustrated by tables, graphs or charts. All income and
capital gains derived
20
<PAGE>
from Subaccount investments are reinvested and can lead
to substantial long-term accumulation of assets, provided
that the underlying Portfolio's investment experience is
positive.
- --------------------------------------------------------------------------------
FEDERAL TAX MATTERS
THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED
AS TAX ADVICE
- --------------------------------------------------------------------------------
INTRODUCTION
This discussion is not intended to address the tax
consequences resulting from all of the situations in
which a person may be entitled to or may receive a
distribution under the annuity contract issued by the
Company. Any person concerned about these tax
implications should consult a competent tax adviser
before initiating any transaction. This discussion is
based upon the Company's understanding of the present
Federal income tax laws, as they are currently
interpreted by the Internal Revenue Service. No
representation is made as to the likelihood of the
continuation of the present federal income tax laws or of
the current interpretation by the Internal Revenue
Service. Moreover, no attempt has been made to consider
any applicable state or other tax laws.
The Contract may be purchased on a non-qualified basis
("Non-Qualified Contract") or purchased and used in
connection with plans qualifying for favorable tax
treatment ("Qualified Contract"). The Qualified Contract
is designed for use by individuals whose premium payments
are comprised solely of proceeds from and/or
contributions under retirement plans which are intended
to qualify as plans entitled to special income tax
treatment under Sections 401(a), 403(b), or 408 of the
Internal Revenue Code of 1986, as amended (the "Code").
The ultimate effect of federal income taxes on the
amounts held under a Contract, or annuity payments, and
on the economic benefit to the owner, the annuitant or
the beneficiary depends on the type of retirement plan,
on the tax and employment status of the individual
concerned, and on the Company's tax status. In addition,
certain requirements must be satisfied in purchasing a
Qualified Contract with proceeds from a tax-qualified
plan and receiving distributions from a Qualified
Contract in order to continue receiving favorable tax
treatment. Therefore, purchasers of Qualified Contracts
should seek competent legal and tax advice regarding the
suitability of a Contract for their situation, the
applicable requirements and the tax treatment of the
rights and benefits of a Contract. The following
discussion assumes that Qualified Contracts are purchased
with proceeds from and/or contributions under retirement
plans that qualify for the intended special federal
income tax treatment.
- --------------------------------------------------------------------------------
TAX STATUS OF THE
CONTRACT
DIVERSIFICATION REQUIREMENTS. Section 817(h) of the Code
provides that separate account investments underlying a
contract must be "adequately diversified" in accordance
with Treasury regulations in order for the contract to
qualify as an annuity contract under Section 72 of the
Code. The Account, through each Portfolio of the Fund,
intends to comply with the diversification requirements
prescribed in regulations under Section 817(h) of the
Code, which affect how the assets in the various
Subaccounts may be invested. Although the Company does
not have control over the Fund in which the Account
invests, we believe that each Portfolio in which the
Account owns shares will meet the diversification
requirements, and therefore, the Contract will be treated
as an annuity contract under the Code.
In certain circumstances, owners of variable annuity
contracts may be considered the owners, for federal
income tax purposes, of the assets of the separate
account used to support their contracts. In those
circumstances, income and gains from the separate account
assets would be includible in the variable annuity
contract owner's gross income. Several years ago, the IRS
stated in published rulings that a variable contract
owner will be considered the owner of separate account
assets if the contract owner possesses incident of
ownership in those assets, such as the ability to
exercise investment control over the assets. More
recently, the Treasury Department announced, in
connection with the issuance of regulations concerning
investment diversification, that those regulations "do
not provide guidance concerning the circumstances in
which investor control of the investments of a segregated
asset
21
<PAGE>
account may cause the investor (I.E., the contract
owner), rather than the insurance company, to be treated
as the owner of the assets in the account." This
announcement also states that guidance would be issued by
way of regulations or rulings on the "extent to which
policyholders may direct their investments to particular
subaccounts without being treated as owners of the
underlying assets."
The ownership rights under the Contracts are similar to,
but different in certain respects from, those described
by the Service in rulings in which it was determined that
contract owners were not owners of separate account
assets. For example, the owner of a Contract has the
choice of one or more Subaccounts in which to allocate
premiums and Contract values, and may be able to transfer
among Subaccounts more frequently than in such rulings.
These differences could result in the contract owner
being treated as the owner of the assets of the Account.
In addition, the Company does not know what standards
will be set forth, if any, in the regulations or rulings
which the Treasury Department has stated it expects to
issue. The Company therefore reserves the right to modify
the Contract as necessary to attempt to prevent the
contract owner from being considered the owner of the
assets of the Account.
REQUIRED DISTRIBUTIONS. In order to be treated as an
annuity contract for federal income tax purposes,
Section 72(s) of the Code requires any Non-Qualified
Contract to provide that: (a) if any owner dies on or
after the retirement date but prior to the time the
entire interest in the contract has been distributed, the
remaining portion of such interest will be distributed at
least as rapidly as under the method of distribution
being used as of the date of that owner's death; and (b)
if any owner dies prior to the annuity commencement date,
the entire interest in the Contract will be distributed
within five years after the date of the owner's death.
These requirements will be considered satisfied as to any
portion of the owner's interest which is payable to or
for the benefit of a "designated beneficiary" and which
is distributed over the life of such beneficiary or over
a period not extending beyond the life expectancy of that
beneficiary, provided that such distributions begin
within one year of that owner's death. The owner's
"designated beneficiary" is the person designated by such
owner as a beneficiary and to whom ownership of the
contract passes by reason of death and must be a natural
person. However, if the owner's "designated beneficiary"
is the surviving spouse of the owner, the Contract may be
continued with the surviving spouse as the new owner.
The Non-Qualified Contracts contain provisions which are
intended to comply with the requirements of Section 72(s)
of the Code, although no regulations interpreting these
requirements have yet been issued. The Company intends to
review such provisions and modify them if necessary to
assure that they comply with the requirements of Code
Section 72(s) when clarified by regulation or otherwise.
Other rules may apply to Qualified Contracts.
The following discussion assumes that the Contracts will
qualify as annuity contracts for federal income tax
purposes.
- --------------------------------------------------------------------------------
TAXATION OF ANNUITIES
IN GENERAL. Section 72 of the Code governs taxation of
annuities in general. The Company believes that an owner
who is a natural person is not taxed on increases in the
value of a Contract until distribution occurs by
withdrawing all or part of the cash value (e.g., partial
surrenders and surrenders) or as annuity payments under
the payment option elected. For this purpose, the
assignment, pledge, or agreement to assign or pledge any
portion of the cash value (and in the case of a Qualified
Contract, any portion of an interest in the qualified
plan) generally will be treated as a distribution. The
taxable portion of a distribution (in the form of a
single sum payment or payment option) is taxable as
ordinary income.
The owner of any annuity contract who is not a natural
person generally must include in income any increase in
the excess of the cash value over the "investment in the
contract" during the taxable year. There are some
exceptions to this rule, and a prospective owner that is
not a natural person may wish to discuss these with a
competent tax adviser.
22
<PAGE>
The following discussion generally applies to Contracts
owned by natural persons.
PARTIAL SURRENDERS. In the case of a partial surrender
from a Qualified Contract, under Section 72(e) of the
Code, a ratable portion of the amount received is
taxable, generally based on the ratio of the "investment
in the contract" to the participant's total accrued
benefit or balance under the retirement plan. The
"investment in the contract" generally equals the
portion, if any, of any premium payments paid by or on
behalf of the individual under a Contract which was not
excluded from the individual's gross income. For
Contracts issued in connection with qualified plans, the
"investment in the contract" can be zero. Special tax
rules may be available for certain distributions from
Qualified Contracts.
In the case of a partial surrender from a Non-Qualified
Contract, under Section 72(e) amounts received are
generally first treated as taxable income to the extent
that the cash value immediately before the partial
surrender exceeds the "investment in the contract" at
that time. Any additional amount withdrawn is not
taxable.
In the case of a full surrender under a Qualified or
Non-Qualified Contract, the amount received generally
will be taxable only to the extent it exceeds the
"investment in the contract."
Section 1035 of the Code provides that no gain or loss
shall be recognized on the exchange of one annuity
contract for another. If the surrendered contract was
issued prior to August 14, 1982, the tax rules formerly
provided that the surrender was taxable only to the
extent the amount received exceeds the owner's investment
in the contract will continue to apply to amounts
allocable to investments in that contract prior to August
14, 1982. In contrast, contracts issued after January 19,
1985 in a Code Section 1035 exchange are treated as new
contracts for purposes of the penalty and
distribution-at-death rules. Special rules and procedures
apply to Section 1035 transactions. Prospective owners
wishing to take advantage of Section 1035 should consult
their tax adviser.
ANNUITY PAYMENTS. Although tax consequences may vary
depending on the payment option elected under an annuity
contract, under Code Section 72(b), generally (prior to
recovery of the investment in the contract) gross income
does not include that part of any amount received as an
annuity under an annuity contract that bears the same
ratio to such amount as the investment in the contract
bears to the expected return at the annuity starting
date. Stated differently, prior to recovery of the
investment in the contract, generally, there is no tax on
the amount of each payment which represents the same
ratio that the "investment in the contract" bears to the
total expected value of the annuity payments for the term
of the payment; however, the remainder of each income
payment is taxable. After the "investment in the
contract" is recovered, the full amount of any additional
annuity payments is taxable.
TAXATION OF DEATH BENEFIT PROCEEDS. Amounts may be
distributed from a Contract because of the death of the
owner. Generally, such amounts are includible in the
income of the recipient as follows: (i) if distributed in
a lump sum, they are taxed in the same manner as a full
surrender of the contract or (ii) if distributed under a
payment option, they are taxed in the same way as annuity
payments. For these purposes, the investment in the
Contract is not affected by the owner's death. That is,
the investment in the Contract remains the amount of any
purchase payments which were not excluded from gross
income.
PENALTY TAX ON CERTAIN WITHDRAWALS. In the case of a
distribution pursuant to a Non-Qualified Contract, there
may be imposed a federal penalty tax equal to 10% of the
amount treated as taxable income. In general, however,
there is no penalty on distributions:
1. made on or after the taxpayer reaches age
59 1/2;
2. made on or after the death of the holder (or
if the holder is not an individual, the death of the
primary annuitant);
23
<PAGE>
3. attributable to the taxpayer becoming
disabled;
4. as part of a series of substantially equal
periodic payments (not less frequently than annually)
for the life (or life expectancy) of the taxpayer or
the joint lives (or joint life expectancies) of the
taxpayer and his or her designated beneficiary;
5. made under certain annuities issued in
connection with structured settlement agreements;
6. made under an annuity contract that is
purchased with a single premium when the retirement
date is no later than a year from purchase of the
annuity and substantially equal periodic payments are
made, not less frequently than annually, during the
annuity payment period; and
7. any payment allocable to an investment
(including earnings thereon) made before August 14,
1982 in a contract issued before that date.
Other tax penalties may apply to certain distributions
under a Qualified Contract.
POSSIBLE CHANGES IN TAXATION. In past years, legislation
has been proposed that would have adversely modified the
federal taxation of certain annuities. For example, one
such proposal would have changed the tax treatment of
non-qualified annuities that did not have "substantial
life contingencies" by taxing income as it is credited to
the annuity. Although as of the date of this prospectus
Congress is not considering any legislation regarding
taxation of annuities, there is always the possibility
that the tax treatment of annuities could change by
legislation or other means (such as IRS regulations,
revenue rulings, judicial decisions, etc.). Moreover, it
is also possible that any change could be retroactive
(that is, effective prior to the date of the change).
- --------------------------------------------------------------------------------
TRANSFERS,
ASSIGNMENTS OR
EXCHANGES OF A
CONTRACT
A transfer of ownership of a Contract, the designation of
an annuitant, Payee or other Beneficiary who is not also
the owner, the selection of certain retirement dates or
the exchange of a Contract may result in certain tax
consequences to the owner that are not discussed herein.
An owner contemplating any such transfer, assignment or
exchange of a Contract should contact a competent tax
adviser with respect to the potential tax effects of such
a transaction.
- --------------------------------------------------------------------------------
WITHHOLDING
Pension and annuity distributions generally are subject
to withholding for the recipient's federal income tax
liability at rates that vary according to the type of
distribution and the recipient's tax status. Recipients,
however, generally are provided the opportunity to elect
not to have tax withheld from distributions. Effective
January 1, 1993, distributions from certain qualified
plans are generally subject to mandatory withholding.
Certain states also require withholding of state income
tax whenever federal income tax is withheld.
- --------------------------------------------------------------------------------
MULTIPLE CONTRACTS
All non-qualified deferred annuity contracts entered into
after October 21, 1988 that are issued by the Company (or
its affiliates) to the same owner during any calendar
year are treated as one annuity Contract for purposes of
determining the amount includible in gross income under
Section 72(e). This rule could affect the time when
income is taxable and the amount that might be subject to
the 10% penalty tax described above. In addition, the
Treasury Department has specific authority to issue
regulations that prevent the avoidance of Section 72(e)
through the serial purchase of annuity contracts or
otherwise. There may also be other situations in which
the Treasury may conclude that it would be appropriate to
aggregate two or more annuity contracts purchased by the
same owner. Accordingly, a Contract owner should consult
a competent tax adviser before purchasing more than one
annuity contract.
- --------------------------------------------------------------------------------
TAXATION OF QUALIFIED
PLANS
The Contracts are designed for use with several types of
qualified plans. The tax rules applicable to participants
in these qualified plans vary according to the type of
plan and the terms and conditions of the plan itself.
Special favorable tax treatment may be available for
certain types of contributions and distributions. Adverse
tax consequences may result from contributions in excess
of specified limits; distributions prior to age 59 1/2
(subject to certain exceptions); distributions that do
24
<PAGE>
not conform to specified commencement and minimum
distribution rules; aggregate distributions in excess of
a specified annual amount; and in other specified
circumstances. Therefore, no attempt is made to provide
more than general information about the use of the
Contracts with the various types of qualified retirement
plans. Contract owners, the annuitants, and beneficiaries
are cautioned that the rights of any person to any
benefits under these qualified retirement plans may be
subject to the terms and conditions of the plans
themselves, regardless of the terms and conditions of the
Contract, but the Company shall not be bound by the terms
and conditions of such plans to the extent such terms
contradict the Contract, unless the Company consents.
Some retirement plans are subject to distribution and
other requirements that are not incorporated into our
Contract administration procedures. Owners, participants
and beneficiaries are responsible for determining that
contributions, distributions and other transactions with
respect to the Contracts comply with applicable law.
Brief descriptions follow of the various types of
qualified retirement plans available in connection with a
Contract. The Company will amend the Contract as
necessary to conform it to the requirements of the Code.
CORPORATE PENSION AND PROFIT SHARING PLANS AND H.R. 10
PLANS. Section 401(a) of the Code permits corporate
employers to establish various types of retirement plans
for employees, and permits self-employed individuals to
establish these plans for themselves and their employees.
These retirement plans may permit the purchase of the
Contracts to accumulate retirement savings under the
plans. Adverse tax or other legal consequences to the
plan, to the participant or both may result if this
Contract is assigned or transferred to any individual as
a means to provide benefit payments, unless the plan
complies with all legal requirements applicable to such
benefits prior to transfer of the Contract. Employers
intending to use the Contract with such plans should seek
competent advice.
INDIVIDUAL RETIREMENT ANNUITIES. Section 408 of the Code
permits eligible individuals to contribute to an
individual retirement program known as an "Individual
Retirement Annuity" or "IRA". These IRAs are subject to
limits on the amount that may be contributed, the persons
who may be eligible and on the time when distributions
may commence. Also, distributions from certain other
types of qualified retirement plans may be "rolled over"
on a tax-deferred basis into an IRA. Sales of the
Contract for use with IRAs may be subject to special
requirements of the Internal Revenue Service. Employers
may establish Simplified Employee Pension (SEP) Plans to
provide IRA contributions on behalf of their employees.
TAX SHELTERED ANNUITIES. Section 403(b) of the Code
allows employees of certain Section 501(c)(3)
organizations and public schools to exclude from their
gross income the premiums paid, within certain limits, on
a Contract that will provide an annuity for the
employee's retirement. These premiums may be subject to
FICA (social security) tax.
RESTRICTIONS UNDER QUALIFIED CONTRACTS. Other
restrictions with respect to the election, commencement
or distribution of benefits may apply under Qualified
Contracts or under the terms of the plans in respect of
which Qualified Contracts are issued.
- --------------------------------------------------------------------------------
POSSIBLE CHARGE FOR
THE COMPANY'S TAXES
At the present time, the Company makes no charge to the
Subaccounts for any Federal, state or local taxes that
the Company incurs which may be attributable to such
Subaccounts or the Contracts. The Company, however,
reserves the right in the future to make a charge for any
such tax or other economic burden resulting from the
application of the tax laws that it determines to be
properly attributable to the Subaccounts or to the
Contracts.
- --------------------------------------------------------------------------------
OTHER TAX
CONSEQUENCES
As noted above, the foregoing comments about the Federal
tax consequences under these Contracts are not
exhaustive, and special rules are provided with respect
to other tax situations not discussed in the Prospectus.
Further, the Federal income tax consequences discussed
herein reflect the Company's understanding of current law
and the law may change. Federal estate and state and
local estate, inheritance and
25
<PAGE>
other tax consequences of ownership or receipt of
distributions under a Contract depend on the individual
circumstances of each owner or recipient of the
distribution. A competent tax adviser should be consulted
for further information.
- --------------------------------------------------------------------------------
DISTRIBUTION OF THE CONTRACTS
- --------------------------------------------------------------------------------
The Contracts will be offered to the public on a
continuous basis. The Company does not anticipate
discontinuing the offering of the Contracts, but reserves
the right to discontinue the offering. Applications for
Contracts are solicited by agents who are licensed by
applicable state insurance authorities to sell the
Company's variable annuity contracts and who are also
registered representatives of FBL Marketing,
broker/dealers having selling agreements with FBL
Marketing or broker/dealers having selling agreements
with such broker/dealers. FBL Marketing is an indirect
wholly-owned subsidiary of the Company and is registered
with the SEC under the Securities Exchange Act of 1934 as
a broker-dealer and is a member of the National
Association of Securities Dealers, Inc.
FBL Marketing acts as the Principal Underwriter, as
defined in the 1940 Act, of the Contracts for the Account
pursuant to an Underwriting Agreement between the Company
and FBL Marketing. FBL Marketing is not obligated to sell
any specific number of Contracts. FBL Marketing's
principal business address is the same as that of the
Company.
The Company may pay sales representatives commissions up
to an amount equal to 4% of the premiums paid under a
Contract during the first six Contract years and 1% of
the premiums paid in the seventh and subsequent Contract
years. Managers of sales representatives may also receive
commission overrides of up to 30% of the sales
representative's commissions. The Company also may pay
other distribution expenses such as production incentive
bonuses, agent's insurance and pension benefits, and
agency expense allowances. These distribution expenses do
not result in any additional charges against the
Contracts that are not described under "Charges and
Deductions."
- --------------------------------------------------------------------------------
LEGAL PROCEEDINGS
- --------------------------------------------------------------------------------
There are no legal proceedings to which the Account is a
party or the assets of the Account are subject. The
Company is not involved in any litigation that is of
material importance in relation to its total assets or
that relates to the Account.
- --------------------------------------------------------------------------------
VOTING RIGHTS
- --------------------------------------------------------------------------------
In accordance with its view of current applicable law,
the Company will vote the Fund shares held in the Account
at regular and special shareholder meetings of the Fund
in accordance with instructions received from persons
having voting interests in the corresponding Subaccounts.
If, however, the 1940 Act or any regulation thereunder
should be amended, or if the present interpretation
thereof should change, or the Company otherwise
determines that it is allowed to vote the shares in its
own right, it may elect to do so.
The number of votes that an owner has the right to
instruct will be calculated separately for each
Subaccount, and may include fractional votes. An owner
holds a voting interest in each Subaccount to which the
cash value is allocated. The owner only has voting
interest prior to the retirement date. For each owner,
the number of votes attributable to a Subaccount will be
determined by dividing the cash value attributable to
that owner's Contract in that Subaccount by the net asset
value per share of the Fund portfolio in which that
Subaccount invests.
The number of votes of a Portfolio which are available to
the owner will be determined as of the date coincident
with the date established by the Portfolio for
determining shareholders eligible to vote at the relevant
meeting of the Fund. Voting instructions will be
solicited by written communication prior to such meeting
in
26
<PAGE>
accordance with procedures established by the Fund. Each
owner having a voting interest in a Subaccount will
receive proxy materials and reports relating to any
meeting of shareholders of the Portfolio in which that
Subaccount invests.
Fund shares as to which no timely instructions are
received and shares held by the Company in a Subaccount
as to which no owner has a beneficial interest will be
voted in proportion to the voting instructions which are
received with respect to all Contracts participating in
that Subaccount. Voting instructions to abstain on any
item to be voted upon will be applied to reduce the total
number of votes eligible to be cast on a matter.
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The audited consolidated balance sheets of the Company as
of December 31, 1995 and 1994, and the related
consolidated statements of income, changes in
stockholders' equity and cash flows for each of the three
years in the period ended December 31, 1995, as well as
the related Report of Independent Auditors are contained
in the Statement of Additional Information. Likewise, the
audited statement of net assets for the Account as of
December 31, 1995 and the related statements of
operations for the year then ended and changes in net
assets for each of the two years then ended, as well as
the related Report of Independent Auditors are contained
in the Statement of Additional Information.
27
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS
- --------------------------------------------------------------------------------
PAGE
<TABLE>
<S> <C>
ADDITIONAL CONTRACT PROVISIONS.................................................................... 1
</TABLE>
<TABLE>
<S> <C> <C>
The Contract......................................................... 1
</TABLE>
<TABLE>
<S> <C> <C>
Incontestability..................................................... 1
</TABLE>
<TABLE>
<S> <C> <C>
Misstatement of Age or Sex........................................... 1
</TABLE>
<TABLE>
<S> <C> <C>
Non-Participation.................................................... 1
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
CALCULATION OF YIELDS AND TOTAL RETURNS........................................................... 1
</TABLE>
<TABLE>
<S> <C> <C>
Money Market Subaccount Yields....................................... 1
</TABLE>
<TABLE>
<S> <C> <C>
Other Subaccount Yields.............................................. 3
</TABLE>
<TABLE>
<S> <C> <C>
Average Annual Total Returns......................................... 4
</TABLE>
<TABLE>
<S> <C> <C>
Other Total Returns.................................................. 6
</TABLE>
<TABLE>
<S> <C> <C>
Effect of the Administrative Charge on Performance Data.............. 6
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
LEGAL MATTERS..................................................................................... 6
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
EXPERTS........................................................................................... 7
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
OTHER INFORMATION................................................................................. 7
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
FINANCIAL STATEMENTS.............................................................................. 7
</TABLE>
- --------------------------------------------------------------------------------
28
<PAGE>
[This page intentionally left blank]
<PAGE>
[LOGO]
FARM BUREAU LIFE INSURANCE COMPANY
FARM BUREAU MUTUAL FUNDS
5400 UNIVERSITY AVENUE
WEST DES MOINES, IOWA 50266
737-524 (5/96)
<PAGE>
PART B
STATEMENT OF ADDITIONAL INFORMATION
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
FARM BUREAU LIFE INSURANCE COMPANY
5400 University Avenue
West Des Moines, Iowa 50266
1-800-247-4170
FARM BUREAU LIFE ANNUITY ACCOUNT
INDIVIDUAL FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT
This Statement of Additional Information contains information in addition to the
information described in the Prospectus for the flexible premium deferred
variable annuity contract (the "Contract") offered by Farm Bureau Life Insurance
Company (the "Company"). This Statement of Additional Information is not a
Prospectus, and it should be read only in conjunction with the Prospectuses for
the Contract and FBL Variable Insurance Series Fund. The Prospectus is dated the
same as this Statement of Additional information. You may obtain a copy of the
Prospectus by writing or calling us at our address or phone number shown above.
May 1, 1996
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
<TABLE>
<S> <C>
ADDITIONAL CONTRACT PROVISIONS...................................................................... 1
The Contract...................................................................................... 1
Incontestability.................................................................................. 1
Misstatement of Age or Sex........................................................................ 1
Non-Participation................................................................................. 1
CALCULATION OF YIELDS AND TOTAL RETURNS............................................................. 1
Money Market Subaccount Yields.................................................................... 1
Other Subaccount Yields........................................................................... 3
Average Annual Total Returns...................................................................... 4
Other Total Returns............................................................................... 6
Effect of the Administrative Fee On Performance Data.............................................. 6
LEGAL MATTERS....................................................................................... 6
EXPERTS............................................................................................. 7
OTHER INFORMATION................................................................................... 7
FINANCIAL STATEMENTS................................................................................ 7
</TABLE>
<PAGE>
ADDITIONAL CONTRACT PROVISIONS
THE CONTRACT
The application and all other attached papers are part of the Contract. The
statements made in the application are deemed representations and not
warranties. The Company will not use any statement in defense of a claim or to
void the Contract unless it is contained in the application.
INCONTESTABILITY
The Company will not contest the Contract from its Contract date.
MISSTATEMENT OF AGE OR SEX
If the age or sex of the annuitant has been misstated, the amount which will be
paid is that which the proceeds would have purchased at the correct age and sex.
NON-PARTICIPATION
The Contracts not eligible for dividends and will not participate in the
Company's divisible surplus.
CALCULATION OF YIELDS AND TOTAL RETURNS
From time to time, the Company may disclose yields, total returns and other
performance data pertaining to the contracts for a Subaccount. Such performance
data will be computed, or accompanied by performance data computed, in
accordance with the standards defined by the SEC.
MONEY MARKET SUBACCOUNT YIELDS
From time to time, advertisements and sales literature may quote the current
annualized yield of the Money Market Subaccount for a seven-day period in a
manner which does not take into consideration any realized or unrealized gains
or losses on shares of the Fund's Money Market Portfolio or on its portfolio
securities.
This current annualized yield is computed by determining the net change
(exclusive or realized gains and losses on the sale of securities and unrealized
appreciation and depreciation) at the end of the seven-day period in the value
of a hypothetical account under a Contract having a balance of 1 unit of the
Money Market Subaccount at the beginning of the period, dividing such net change
in account value by the value of the hypothetical account at the beginning of
the period to determine the base period return, and annualizing this quotient on
a 365-day basis.
1
<PAGE>
The net change in account value reflects: 1) net income from the portfolio
attributable to the hypothetical account; and 2) charges and deductions imposed
under the Contract which are attributable to the hypothetical account. The
charges and deductions include the per unit charges for the hypothetical account
for: 1) the annual administrative fee and 2) the mortality and expense risk
charge. For purposes of calculating current yields for a Contract, an average
per unit administrative fee is used based on the $30 administrative fee deducted
at the beginning of each Contract Year. Current Yield will be calculated
according to the following formula:
<TABLE>
<S> <C> <C>
Current Yield = ((NCS - ES)/UV) X (365/7)
Where:
NCS = the net change in the value of the Portfolio (exclusive or realized gains or losses
on the sale of securities and unrealized appreciation and depreciation) for the
seven-day period attributable to a hypothetical account having a balance of 1
subaccount unit.
ES = per unit expenses attributable to the hypothetical account for the seven-day
period.
UV = the unit value for the first day of the seven-day period.
Effective Yield = (1 + ((NCS-ES)/UV))365/7 - 1
Where:
NCS = the net change in the value of the Portfolio (exclusive of realized gains or losses
on the sale of securities and unrealized appreciation and depreciation) for the
seven-day period attributable to a hypothetical account having a balance of 1
subaccount unit.
ES = per unit expenses attributable to the hypothetical account for the seven-day
period.
UV = the unit value for the first day of the seven-day period.
</TABLE>
Because of the charges and deductions imposed under the Contract, the yield for
the Money Market Subaccount will be lower than the yield for the Money Market
Portfolio.
2
<PAGE>
The current and effective yields on amounts held in the Money Market Subaccount
normally will fluctuate on a daily basis. THEREFORE, THE DISCLOSED YIELD FOR ANY
GIVEN PAST PERIOD IS NOT AN INDICATION OR REPRESENTATION OF FUTURE YIELDS OR
RATES OF RETURN. The Money Market Subaccount's actual yield is affected by
changes in interest rates on money market securities, average portfolio maturity
of the Money Market Portfolio, the types of quality of portfolio securities held
by the Money Market Portfolio, and the Money Market Portfolio's operating
expenses. Yields on amounts held in the Money Market Subaccount may also be
presented for periods other than a seven-day period.
OTHER SUBACCOUNT YIELDS
From time to time, sales literature or advertisements may quote the current
annualized yield of one or more of the subaccounts (except the Money Market
Subaccount) for a Contract for 30-day or one month periods. The annualized yield
or a subaccount refers to income generated by the subaccount during a 30-day or
one-month period is assumed to be generated each period over a 12-month period.
The yield is computed by: 1) dividing net investment income of the portfolio
attributable to the subaccount units less subaccount expenses for the period; by
2) the maximum offering price per unit on the last day of the period times the
daily average number of units outstanding for the period; by 3) compounding that
yield for a six-month period; and by 4) multiplying that result by 2. Expenses
attributable to the subaccount include the annual administrative fee and the
mortality and expense risk charge. The yield calculation assumes an
administrative fee of $30 per year per Contract deducted at the beginning of
each Contract year. For purposes of calculating the 30-day or one-month yield,
an average administrative fee per dollar of Contract value in the Account issued
to determine the amount of the charge attributable to the subaccount for the
30-day or one-month period. The 30-day or one-month yield is calculated
according to the following formula:
<TABLE>
<S> <C> <C>
Yield = 2 X ((NI - ES)/(U X UV)) + 1) - 1
Where:
NI = net income of the portfolio for the 30-day or one-month period attributable to the
subaccount's units.
ES = expenses of the subaccount for the 30-day or one-month period.
U = the average number of units outstanding.
</TABLE>
3
<PAGE>
<TABLE>
<S> <C> <C>
UV = the unit value at the close of the last day in the 30-day one-month period.
</TABLE>
Because of the charges and deductions imposed under the Contracts, the yield for
the subaccount will be lower that the yield for the corresponding fund
portfolio.
The yield on the amounts held in the subaccounts normally will fluctuate over
time. THEREFORE, THE DISCLOSED YIELD FOR ANY GIVEN PAST PERIOD IS NOT AN
INDICATION OR REPRESENTATION OF FUTURE YIELDS OR RATES OF RETURN. A subaccount's
actual yield is affected by the types and quality of portfolio securities held
by the corresponding portfolio and its operating expenses.
Yield calculations do not take into account the Surrender Charge under the
Contract equal to 1% to 6% of the amount surrendered during the first six
Contract years. A surrender charge will not be imposed upon surrender or on the
first partial surrender in any Contract year on an amount up to 10% of the cash
value as of the time of such surrender.
AVERAGE ANNUAL TOTAL RETURNS
From time to time, sales literature or advertisements may also quote average
annual total returns for one or more of the subaccounts for various periods of
time.
When a subaccount has been in operation for 1, 5 and 10 years, respectively, the
average annual total return for these periods will be provided. Average annual
total returns for other periods of time may, from time to time, also be
disclosed.
Standard average annual total returns represent the average annual compounded
rates of return that would equate an initial investment of $1,000 under a
Contract to the redemption value of that investment as of the last day of each
of the periods. The ending date for each period for which total return
quotations are provided will be for the most recent month-end practicable,
considering the type and media of the communication that will be stated in the
communication.
Standard average annual total returns will be calculated using subaccount unit
values which the Company calculates on each valuation day based on the
performance of the subaccounts underlying portfolio, the deductions for the
mortality and expense risk charge, and the annual administrative fee. The
calculation assumes that the administrative fee is $30 per year per Contract
deducted at the beginning of each Contract year. For purposes of calculating
average annual total return, an average per dollar administrative fee
attributable to the hypothetical account for the period is used. The
4
<PAGE>
calculation also assumes surrender of the Contract at the end of the period for
the return quotation. Total returns will therefore reflect a deduction of the
surrender charge for any period less than seven years. The total return will
then be calculated according to the following formula:
<TABLE>
<S> <C> <C>
TR = ((ERV/P)/N)-1
Where:
TR = the average annual total return net of subaccount recurring charges.
EHV = the ending redeemable value (net of any applicable surrender charge) of the
hypothetical account at the end of the period.
P = a hypothetical initial payment of $1,000.
N = the number of years in the period.
</TABLE>
From time to time, sales literature or advertisements may also quote average
annual total returns for periods prior to the date the Account commenced
operations. Such performance information for the subaccounts will be calculated
based on the performance of the Fund's portfolios and the assumption that the
subaccounts were in existence for the same periods as those indicated for the
Fund's portfolios, with the level of Contract charges that were in effect at the
inception of the subaccounts.
Such average annual total return information for the Subaccounts is as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD FROM DATE
FOR THE 1-YEAR PERIOD FOR THE 5-YEAR PERIOD OF INCEPTION OF FUND
SUBACCOUNT ENDED 12/31/95 ENDED 12/31/95 PORTFOLIO TO 12/31/95
- ----------------------------------- ----------------------- ----------------------- -------------------------
<S> <C> <C> <C>
Growth Common Stock................ 18.32 12.17 7.04
High Grade Bond.................... 6.71 7.41 8.45
High Yield Bond.................... 7.60 11.88 9.85
Money Market (1)................... (2.08) 2.22 2.45
Managed............................ 18.14 11.89 9.47
Blue Chip (2)...................... 25.26 15.20 16.00
</TABLE>
- ------------------------
(1) The Money Market Portfolio commenced operations on February 20, 1990.
(2) The Blue Chip Portfolio commenced operations on October 15, 1990.
5
<PAGE>
OTHER TOTAL RETURNS
From time to time, sales literature or advertisements may also quote average
annual total returns that do not reflect the surrender charge. These are
calculated in exactly the same way as average annual total returns described
above, except that the ending redeemable value of the hypothetical account for
the period is replaced with an ending value for the period that does not take
into account any charges on amounts surrendered or withdrawn.
The Company may disclose cumulative total returns in conjunction with the
standard formats described above. The cumulative total returns will be
calculated using the following formula:
<TABLE>
<S> <C> <C>
CTR = (ERV/P) - 1
Where:
CTR = The cumulative total return net of subaccount recurring charges for the period.
ERV = The ending redeemable value of the hypothetical investment at the end of the
period.
P = A hypothetical single payment of $1,000.
</TABLE>
EFFECT OF THE ADMINISTRATIVE FEE ON PERFORMANCE DATA
The Contract provides for a $30 annual administrative fee to be deducted
annually at the beginning of each Contract Year, from the subaccounts and the
Declared Interest Option based, on the proportion that the value of each such
account bears to the total cash value. For purposes of reflecting the
administrative fee in yield and total return quotations, the annual charge is
converted into a per-dollar per-day charge based on the average contract value
in the Account of all Contracts on the last day of the period for which
quotations are provided. The per-dollar per-day average charge will then be
adjusted to reflect the basis upon which the particular quotation is calculated.
LEGAL MATTERS
All matters relating to Iowa law pertaining to the Contracts, including the
validity of the Contracts and the Company's authority to issue the Contracts,
have been passed upon by Stephen M. Morain, Esquire, Senior Vice President and
General Counsel of the Company. Sutherland, Asbill & Brennan of Washington D.C.
has provided advice on certain matters relating to the federal securities laws.
6
<PAGE>
EXPERTS
The Account's statement of net assets as of December 31, 1995 and the related
statements of operations for the year then ended and changes in net assets for
each of the two years in the period then ended and the consolidated balance
sheets of the Company at December 31, 1995 and 1994 and the related consolidated
statements of income, changes in stockholders' equity and cash flows for each of
the three years in the period ended December 31, 1995, appearing herein, have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
respective reports thereon appearing elsewhere herein, and are included in
reliance upon such reports given upon the authority of such firm as experts in
accounting and auditing.
OTHER INFORMATION
A registration statement has been filed with the SEC under the Securities Act of
1933 as amended, with respect to the Contracts discussed in this Statement of
Additional Information. Not all the information set forth in the registration
statement, amendments and exhibits thereto has been included in this Statement
of Additional Information. Statements contained in this Statement of Additional
Information concerning the content of the Contracts and other legal instruments
are intended to be summaries. For a complete statement of the terms of these
documents, reference should be made to the instruments filed with the SEC.
FINANCIAL STATEMENTS
The Company's financial statements included in this Statement of additional
Information should be considered only as bearing on the Company's ability to
meet its obligations under the Contracts. They should not be considered as
bearing on the investment performance of the assets held in the Account.
7
<PAGE>
FINANCIAL STATEMENTS
FARM BUREAU LIFE ANNUITY ACCOUNT
YEAR ENDED DECEMBER 31, 1995
WITH REPORT OF INDEPENDENT AUDITORS
<PAGE>
FARM BUREAU LIFE ANNUITY ACCOUNT
FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1995
CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors...................................................................... 1
Financial Statements
Statement of Net Assets............................................................................. 3
Statement of Operations............................................................................. 4
Statements of Changes in Net Assets................................................................. 6
Notes to Financial Statements....................................................................... 9
</TABLE>
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Participants
Farm Bureau Life Insurance Company
We have audited the accompanying statement of net assets of Farm Bureau Life
Annuity Account (comprising, respectively, the Growth Common Stock, High Grade
Bond, High Yield Bond, Managed, Money Market, and Blue Chip Subaccounts) as of
December 31, 1995, the related statements of operations for the year then ended,
and changes in net assets for each of the two years in the period then ended.
These financial statements are the responsibility of the Account's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1995, by correspondence with
the transfer agent. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of each of the respective
subaccounts constituting the Farm Bureau Life Annuity Account at December 31,
1995, and the results of their operations for the year then ended and changes in
their net assets for each of the two years in the period then ended, in
conformity with generally accepted accounting principles.
/s/ Ernst & Young, LLP
Des Moines, Iowa
March 4, 1996
1
<PAGE>
(This page has been left blank intentionally.)
2
<PAGE>
FARM BUREAU LIFE ANNUITY ACCOUNT
STATEMENT OF NET ASSETS
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS
Investments in FBL Variable Insurance Series Fund:
Growth Common Stock Subaccount:
Growth Common Stock Portfolio, 494,165 shares at net asset value of $12.31 per share
(cost $5,598,914) $ 6,083,167
High Grade Bond Subaccount:
High Grade Bond Portfolio, 123,657 shares at net asset value of $9.98 per share
(cost $1,219,997) 1,234,096
High Yield Bond Subaccount:
High Yield Bond Portfolio, 232,659 shares at net asset value of $9.69 per share
(cost $2,289,341) 2,254,466
Managed Subaccount:
Managed Portfolio, 468,953 shares at net asset value of $11.71 per share (cost
$5,185,310) 5,491,434
Money Market Subaccount:
Money Market Portfolio, 375,100 shares at net asset value of $1.00 per share (cost
$375,100) 375,100
Blue Chip Subaccount:
Blue Chip Portfolio, 104,590 shares at net asset value of $20.70 per share (cost
$1,841,800) 2,165,015
-----------
Total investments (cost $16,510,462) $17,603,278
LIABILITIES --
-----------
NET ASSETS (NOTE 6) 17,603,278
-----------
-----------
</TABLE>
<TABLE>
<CAPTION>
UNITS UNIT VALUE EXTENDED VALUE
<S> <C> <C> <C>
-------------------------------------------------
Net assets are represented by:
Growth Common Stock Subaccount 517,391.062449 $ 11.757386 $ 6,083,167
High Grade Bond Subaccount 111,363.527645 11.081686 1,234,096
High Yield Bond Subaccount 204,375.618302 11.030995 2,254,466
Managed Subaccount 470,401.235924 11.673937 5,491,434
Money Market Subaccount 35,138.421239 10.674932 375,100
Blue Chip Subaccount 166,613.068180 12.994267 2,165,015
--------------
Total net assets $ 17,603,278
--------------
--------------
</TABLE>
SEE ACCOMPANYING NOTES.
3
<PAGE>
FARM BUREAU LIFE ANNUITY ACCOUNT
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
GROWTH COMMON
COMBINED STOCK SUBACCOUNT
<S> <C> <C>
--------------------------------
Investment income -- dividends $ 992,310 $ 359,806
Expenses -- mortality and expense risk charges (NOTE 2): (166,929) (60,897)
<CAPTION>
--------------------------------
<S> <C> <C>
Net investment income 825,381 298,909
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) from investment transactions 10,164 4,628
Change in unrealized appreciation/depreciation of investments 1,891,891 794,935
<CAPTION>
--------------------------------
<S> <C> <C>
Net gain on investments 1,902,055 799,563
<CAPTION>
--------------------------------
<S> <C> <C>
Net increase in net assets resulting from operations $ 2,727,436 $ 1,098,472
<CAPTION>
--------------------------------
--------------------------------
</TABLE>
SEE ACCOMPANYING NOTES.
4
<PAGE>
<TABLE>
<CAPTION>
HIGH GRADE HIGH YIELD
BOND BOND MANAGED MONEY MARKET BLUE CHIP
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------
$ 75,214 $ 172,202 $ 341,264 $ 11,990 $ 31,834
(11,914) (19,926) (55,101) (2,766) (16,325)
<CAPTION>
- --------------------------------------------------------------------
<S> <C> <C> <C> <C>
63,300 152,276 286,163 9,224 15,509
(554) (2,670) (3,203) -- 11,963
48,916 41,135 688,689 -- 318,216
<CAPTION>
- --------------------------------------------------------------------
<S> <C> <C> <C> <C>
48,362 38,465 685,486 -- 330,179
<CAPTION>
- --------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 111,662 $ 190,741 $ 971,649 $ 9,224 $ 345,688
<CAPTION>
- --------------------------------------------------------------------
- --------------------------------------------------------------------
</TABLE>
5
<PAGE>
FARM BUREAU LIFE ANNUITY ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
GROWTH COMMON
COMBINED STOCK SUBACCOUNT
------------------------------- -----------------------------
YEAR ENDED YEAR ENDED
1995 DECEMBER 31 1994 1995DECEMBER 311994
<S> <C> <C> <C> <C>
--------------------------------------------------------------
Operations:
Net investment income $ 825,381 $ 578,854 $ 298,909 $ 199,140
Net realized gain (loss) from investment transactions 10,164 (11,948) 4,628 (3,858)
Change in unrealized appreciation/depreciation of investments 1,891,891 (799,075) 794,935 (310,682)
<CAPTION>
--------------------------------------------------------------
<S> <C> <C> <C> <C>
Net increase (decrease) in net assets resulting from operations 2,727,436 (232,169) 1,098,472 (115,400)
Capital share transactions (NOTE 5):
Transfers of net premiums 3,832,438 8,992,426 219,051 518,765
Transfers of death benefits (8,289) (25,784) (2,783) (2,417)
Transfers of surrenders (347,150) (37,776) (109,405) (22,407)
Transfers of administrative charges (26,819) -- (10,548) --
Transfers between subaccounts 517,344 2,211,621 805,794 3,704,045
<CAPTION>
--------------------------------------------------------------
<S> <C> <C> <C> <C>
Net increase in net assets resulting from capital share
transactions 3,967,524 11,140,487 902,109 4,197,986
<CAPTION>
--------------------------------------------------------------
<S> <C> <C> <C> <C>
Total increase in net assets 6,694,960 10,908,318 2,000,581 4,082,586
Net assets at beginning of year 10,908,318 -- 4,082,586 --
<CAPTION>
--------------------------------------------------------------
<S> <C> <C> <C> <C>
Net assets at end of year $ 17,603,278 $ 10,908,318 $ 6,083,167 $ 4,082,586
<CAPTION>
--------------------------------------------------------------
--------------------------------------------------------------
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
HIGH GRADE BOND SUBACCOUNT HIGH YIELD BOND SUBACCOUNT MANAGED SUBACCOUNT
- --------------------------- ----------------------------- -----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31 DECEMBER 31 DECEMBER 31
1995 1994 1995 1994 1995 1994
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------
$ 63,300 $ 34,306 $ 152,276 $ 65,725 $ 286,163 $ 262,710
(554) (1,942) (2,670) (1,062) (3,203) (5,124)
48,916 (34,817) 41,135 (76,010) 688,689 (382,565)
<CAPTION>
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
111,662 (2,453) 190,741 (11,347) 971,649 (124,979)
112,029 58,339 362,017 158,735 145,281 354,898
(2,705) -- -- -- (2,801) (23,367)
(15,868) (529) (32,757) (541) (125,899) (14,088)
(1,511) -- (2,050) -- (9,974) --
275,765 699,365 561,674 1,027,994 761,763 3,558,951
<CAPTION>
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
367,710 757,177 888,884 1,186,188 768,370 3,876,394
<CAPTION>
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
479,372 754,724 1,079,625 1,174,841 1,740,019 3,751,415
754,724 -- 1,174,841 -- 3,751,415 --
<CAPTION>
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 1,234,096 $ 754,724 $ 2,254,466 $ 1,174,841 $ 5,491,434 $ 3,751,415
<CAPTION>
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
FARM BUREAU LIFE ANNUITY ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
MONEY MARKET SUBACCOUNT BLUE CHIP SUBACCOUNT
------------------------------- ---------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31 DECEMBER 31
1995 1994 1995 1994
<S> <C> <C> <C> <C>
------------------------------------------------------------
Operations:
Net investment income $ 9,224 $ 9,432 $ 15,509 $ 7,541
Net realized gain (loss) from investment transactions -- -- 11,963 38
Change in unrealized appreciation/depreciation of investments -- -- 318,216 4,999
<CAPTION>
------------------------------------------------------------
<S> <C> <C> <C> <C>
Net increase (decrease) in net assets resulting from operations 9,224 9,432 345,688 12,578
Capital share transactions (NOTE 5):
Transfers of net premiums 2,756,283 7,826,663 237,777 75,026
Transfers of death benefits -- -- -- --
Transfers of surrenders (4,029) -- (59,192) (213)
Transfers of administrative charges (468) -- (2,268) --
Transfers between subaccounts (2,741,506) (7,480,499) 853,854 701,765
<CAPTION>
------------------------------------------------------------
<S> <C> <C> <C> <C>
Net increase in net assets resulting from capital share
transactions 10,280 346,164 1,030,171 776,578
<CAPTION>
------------------------------------------------------------
<S> <C> <C> <C> <C>
Total increase in net assets 19,504 355,596 1,375,859 789,156
Net assets at beginning of year 355,596 -- 789,156 --
<CAPTION>
------------------------------------------------------------
<S> <C> <C> <C> <C>
Net assets at end of year $ 375,100 $ 355,596 $ 2,165,015 $ 789,156
<CAPTION>
------------------------------------------------------------
------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES.
8
<PAGE>
FARM BUREAU LIFE ANNUITY ACCOUNT
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. SIGNIFICANT ACCOUNTING POLICIES
Farm Bureau Life Annuity Account (the Account) is a unit investment trust
registered under the Investment Company Act of 1940. The Account was established
as a separate investment account within Farm Bureau Life Insurance Company (the
Company) to fund flexible premium deferred variable annuity insurance policies.
The Account commenced operations on January 1, 1994.
The Account has six separate subaccounts, each of which invests solely, as
directed by contract owners, in a different portfolio of FBL Variable Insurance
Series Fund (the Fund), an open-end, diversified management investment company
sponsored by the Company. Contract owners also may direct investments to a fixed
interest subaccount held in the general assets of the Company.
Investments in shares of the Fund are stated at market value, which is the
closing net asset value per share as determined by the Fund. The average cost
basis has been used in determining the net realized gain or loss from investment
transactions and unrealized appreciation or depreciation on investments.
Dividends paid to the Account are automatically reinvested in shares of the Fund
on the payable date.
2. EXPENSE CHARGES
The Account pays the Company certain amounts relating to the distribution and
administration of the policies funded by the Account and as reimbursement for
certain mortality and other risks assumed by the Company. The following
summarizes those amounts.
MORTALITY AND EXPENSE RISK CHARGE: The Company will deduct a daily mortality
and expense risk charge from the Account at an effective annual rate of 1.25% of
the average daily net asset value of the Account. These charges will be deducted
by the Company in return for its assumption of risks associated with adverse
mortality experience or excess administrative expenses in connection with
policies issued.
ADMINISTRATIVE CHARGE: Prior to the annuity payment period, the Company will
deduct an annual administrative charge of $30 to reimburse it for administrative
expenses related to the contract. A portion of this charge may be deducted from
funds held outside of the Account (i.e., in the Declared Interest Option).
SURRENDER CHARGE: A surrender charge is imposed in the event of a full or
partial surrender during the first six contract years. During the second through
sixth contract years, this charge is not assessed on the first 10% of cash value
surrendered. The amount charged is 6% of the amount surrendered during the first
contract year and declines by 1% in each of the next five contract years. No
surrender charge is deducted if the partial surrender or surrender occurs after
six full contract years.
3. FEDERAL INCOME TAXES
The operations of the Account form a part of, and are taxed with, operations of
the Company, which is taxed as a "life insurance company" under the Internal
Revenue Code. Under current law, no federal income taxes are payable with
respect to the Account's net investment income and the net realized gain on
investments. Accordingly, no charge for income tax is currently being made to
the Account. If such taxes are incurred by the Company in the future, a charge
to the Account may be assessed.
9
<PAGE>
FARM BUREAU LIFE ANNUITY ACCOUNT
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. INVESTMENT TRANSACTIONS
The aggregate cost of investment securities purchased and proceeds from
investment securities sold by subaccount are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------------------------
1995 1994
------------------------ -----------------------
PURCHASES SALES PURCHASES SALES
<S> <C> <C> <C> <C>
-------------------------------------------------
Growth Common Stock Subaccount $ 1,524,853 $ 323,835 $ 4,494,027 $ 96,901
High Grade Bond Subaccount 483,880 52,870 878,906 87,423
High Yield Bond Subaccount 1,205,311 164,151 1,271,946 20,033
Managed Subaccount 1,426,900 372,367 4,313,822 174,718
Money Market Subaccount 2,931,906 2,912,402 7,466,506 7,110,910
Blue Chip Subaccount 1,188,676 142,996 804,979 20,860
-------------------------------------------------
Combined $ 8,761,526 $ 3,968,621 $19,230,186 $7,510,845
-------------------------------------------------
-------------------------------------------------
</TABLE>
5. SUMMARY OF CHANGES FROM UNIT TRANSACTIONS
Transactions in units of each subaccount of the Account were as follows:
<TABLE>
<CAPTION>
UNITS SOLD UNITS REDEEMED NET INCREASE
------------------------ ---------------------- ------------------------
UNITS AMOUNT UNITS AMOUNT UNITS AMOUNT
<S> <C> <C> <C> <C> <C> <C>
--------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1995
Growth Common Stock Subaccount 111,109 $ 1,165,046 25,995 $ 262,937 85,114 $ 902,109
High Grade Bond Subaccount 38,442 408,665 3,980 40,955 34,462 367,710
High Yield Bond Subaccount 97,042 1,030,699 13,849 141,815 83,193 888,884
Managed Subaccount 102,423 1,085,636 31,466 317,266 70,957 768,370
Money Market Subaccount 278,281 2,919,915 277,854 2,909,635 427 10,280
Blue Chip Subaccount 98,536 1,156,842 11,683 126,671 86,853 1,030,171
--------------------------------------------------------------------------
Combined 725,833 $ 7,766,803 364,827 $ 3,799,279 361,006 $ 3,967,524
--------------------------------------------------------------------------
--------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1994
Growth Common Stock Subaccount 439,065 $ 4,262,465 6,788 $ 64,479 432,277 $ 4,197,986
High Grade Bond Subaccount 85,102 838,202 8,201 81,025 76,901 757,177
High Yield Bond Subaccount 122,418 1,198,112 1,235 11,924 121,183 1,186,188
Managed Subaccount 414,266 4,018,837 14,822 142,443 399,444 3,876,394
Money Market Subaccount 740,711 7,451,759 706,000 7,105,595 34,711 346,164
Blue Chip Subaccount 81,367 792,091 1,607 15,513 79,760 776,578
--------------------------------------------------------------------------
Combined 1,882,929 $ 18,561,466 738,653 $ 7,420,979 1,144,276 $ 11,140,487
--------------------------------------------------------------------------
--------------------------------------------------------------------------
</TABLE>
6. NET ASSETS
The Account has an unlimited number of units of beneficial interest authorized
with no par value. Net assets as of December 31, 1995 consisted of:
<TABLE>
<CAPTION>
GROWTH HIGH GRADE HIGH YIELD
COMMON STOCK BOND BOND MANAGED MONEY MARKET BLUE CHIP
COMBINED SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
<S> <C> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------
Paid-in capital $15,108,011 $5,100,095 $1,124,887 $2,075,072 $4,644,764 $ 356,444 $1,806,749
Accumulated undistributed net
investment income 1,392,287 494,191 95,664 216,939 543,749 18,656 23,088
Accumulated undistributed net
realized gain (loss) from
investment transactions 10,164 4,628 (554) (2,670) (3,203) -- 11,963
Net unrealized appreciation
(depreciation) of investments 1,092,816 484,253 14,099 (34,875) 306,124 -- 323,215
-----------------------------------------------------------------------------------------------
Net assets $17,603,278 $6,083,167 $1,234,096 $2,254,466 $5,491,434 $ 375,100 $2,165,015
-----------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS
FARM BUREAU LIFE INSURANCE COMPANY
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
WITH REPORT OF INDEPENDENT AUDITORS
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors...................................................................... 1
Audited Consolidated Financial Statements
Consolidated Balance Sheets......................................................................... 2
Consolidated Statements of Income................................................................... 4
Consolidated Statements of Changes in Stockholders' Equity.......................................... 5
Consolidated Statements of Cash Flows............................................................... 6
Notes to Consolidated Financial Statements.......................................................... 8
</TABLE>
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholder
Farm Bureau Life Insurance Company
We have audited the accompanying consolidated balance sheets of Farm Bureau Life
Insurance Company as of December 31, 1995 and 1994, and the related consolidated
statements of income, changes in stockholders' equity, and cash flows for each
of the three years in the period ended December 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Farm
Bureau Life Insurance Company at December 31, 1995 and 1994, and the
consolidated results of its operations and its cash flows for each of the three
years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements, in 1995 the
Company adopted certain accounting changes to conform with generally accepted
accounting principles for stock life companies. As described in Notes 1 and 4 to
the consolidated financial statements, in 1994 the Company changed its method of
accounting for certain investments in debt securities.
/s/ Ernst & Young LLP
Des Moines, Iowa
March 12, 1996
1
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31
-----------------------------
1995 1994
-------------- -------------
<S> <C> <C>
ASSETS
Investments:
Fixed maturities:
Held for investment, at amortized cost (market: 1995 -- $580,379; 1994 -- $428,719) $ 556,099 $ 455,344
Available for sale, at market (amortized cost: 1995 -- $943,219; 1994 -- $882,421) 1,001,302 864,914
Equity securities, at market (cost: 1995 -- $72,731; 1994 -- $45,259) 78,173 41,492
Held in inventory, at estimated fair value (amortized cost: 1995 -- $21,555; 1994 -- $17,731) 21,913 18,169
Mortgage loans on real estate 215,690 222,519
Investment real estate, less allowances for depreciation of $1,498 in 1995 and $1,011 in 1994 26,384 19,685
Policy loans 88,526 87,952
Other long-term investments 2,892 6,654
Short-term investments 35,358 106,641
-------------- -------------
Total investments 2,026,337 1,823,370
Cash and cash equivalents -- 5,853
Securities and indebtedness of related parties 73,138 74,934
Accrued investment income 24,012 22,220
Accounts and notes receivable 2,009 2,821
Amounts receivable from affiliates 3,824 716
Reinsurance recoverable 2,225 30,728
Deferred policy acquisition costs 121,571 130,830
Value of insurance in force acquired 75 104
Property and equipment, less allowances for depreciation of $42,084 in 1995 and $37,850 in 1994 59,990 61,018
Current income taxes recoverable 12,939 8,255
Goodwill, less accumulated amortization of $1,556 in 1995 and $932 in 1994 10,342 10,966
Other assets 11,544 13,095
Assets held in separate accounts 44,789 28,043
-------------- -------------
Total assets $ 2,392,795 $ 2,212,953
-------------- -------------
-------------- -------------
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31
-----------------------------
1995 1994
-------------- -------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Policy liabilities and accruals:
Future policy benefits:
Universal life and annuity products $ 1,020,345 $ 956,732
Traditional life insurance and accident and health products 541,356 528,375
Unearned revenue reserve 17,350 17,962
Other policy claims and benefits 5,640 5,216
Reserves and unearned premiums on property-casualty policies -- 44,482
-------------- -------------
1,584,691 1,552,767
Other policyholders' funds:
Supplementary contracts without life contingencies 111,505 95,208
Advance premiums and other deposits 66,260 65,956
Accrued dividends 12,600 12,314
-------------- -------------
190,365 173,478
Short-term borrowings -- 6,388
Long-term debt 12,604 18,519
Amounts payable to affiliates 10,443 8,716
Deferred income taxes 43,723 3,246
Other liabilities 65,784 66,249
Liabilities related to separate accounts 44,789 28,043
-------------- -------------
Total liabilities 1,952,399 1,857,406
Commitments and contingencies
Minority interest in subsidiary -- 75
Stockholder's equity:
First preferred stock, 7-1/2% cumulative, par value $50.00 per share --
authorized 6,000 shares -- --
Common stock, par value $50.00 per share - authorized 994,000 shares in
1995 and 25,000 shares in 1994, issued and outstanding 50,000 shares in
1995 and 23,880.28 shares in 1994 2,500 1,194
Additional paid-in capital 50,426 51,732
Net unrealized investment gains (losses) 34,146 (10,768)
Retained earnings 353,324 313,314
-------------- -------------
Total stockholder's equity 440,396 355,472
-------------- -------------
Total liabilities and stockholder's equity $ 2,392,795 $ 2,212,953
-------------- -------------
-------------- -------------
</TABLE>
SEE ACCOMPANYING NOTES.
3
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------------------------------
1995 1994 1993
----------------- ---------------- ----------------
<S> <C> <C> <C>
Revenues:
Universal life and annuity product charges $ 33,343 $ 30,983 $ 26,500
Traditional life insurance premiums 48,511 46,161 46,050
Accident and health premiums 9,396 2,444 46,437
Property-casualty premiums 18,709 17,778 16,937
Net investment income 184,348 145,148 138,320
Realized gains on investments 5,902 11,234 3,967
Other income 28,011 26,954 25,251
----------------- ---------------- ----------------
Total revenues 328,220 280,702 303,462
Benefits and expenses:
Universal life and annuity benefits 88,147 75,844 73,305
Traditional life insurance and accident and health benefits 37,710 37,800 66,028
Increase in traditional and accident and health future policy benefits 15,310 6,501 14,428
Distributions to participating policyholders 23,838 22,753 22,967
Losses and loss adjustment expenses incurred on property-casualty
policies 13,621 13,441 13,948
Underwriting, acquisition and insurance expenses 54,336 56,486 56,632
Interest expense 1,007 1,836 2,303
Other expenses 17,776 17,505 14,920
----------------- ---------------- ----------------
Total benefits and expenses 251,745 232,166 264,531
----------------- ---------------- ----------------
76,475 48,536 38,931
Income taxes (27,291) (18,434) (14,439)
Minority interest in earnings of subsidiaries (12) 4 (2,417)
Equity income (loss), net of related income taxes 1,488 (1,587) 630
----------------- ---------------- ----------------
Income from continuing operations 50,660 28,519 22,705
Discontinued operations:
Loss from cable television operations, net of related income taxes -- -- (2,902)
Gain on disposal of cable television operations, net of related income
taxes -- 6,479 --
----------------- ---------------- ----------------
Net income $ 50,660 $ 34,998 $ 19,803
----------------- ---------------- ----------------
----------------- ---------------- ----------------
</TABLE>
SEE ACCOMPANYING NOTES.
4
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NET
UNREALIZED
ADDITIONAL INVESTMENT
COMMON PAID-IN GAINS RETAINED
STOCK CAPITAL (LOSSES) EARNINGS
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Balance at January 1, 1993 $ 1,105 $ 18 $ 2,946 $ 258,513
Issuance of 1,783.48 shares of common stock in exchange for
99.5% of common stock of Rural Security Life Company 89 27,012 -- --
Net income for 1993 -- -- -- 19,803
Change in net unrealized investment gains/losses -- -- 2,791 --
----------- ----------- ----------- ------------
Balance at December 31, 1993 1,194 27,030 5,737 278,316
Contribution of minority interests of subsidiaries from
parent -- 24,702 -- --
Cumulative effect on prior years (to December 31, 1993) of
change in method of accounting for fixed maturity
securities -- -- 38,913 --
Net income for 1994 -- -- -- 34,998
Change in net unrealized investment gains/losses -- -- (55,418) --
----------- ----------- ----------- ------------
Balance at December 31, 1994 1,194 51,732 (10,768) 313,314
Issuance of 26,119.72 shares pursuant to stock dividend 1,306 (1,306) -- --
Net income for 1995 -- -- -- 50,660
Change in net unrealized investment gains/losses -- -- 45,375 --
Dividend of Utah Farm Bureau Insurance
Company to parent -- -- (461) (10,650)
----------- ----------- ----------- ------------
Balance at December 31, 1995 $ 2,500 $ 50,426 $ 34,146 $ 353,324
----------- ----------- ----------- ------------
----------- ----------- ----------- ------------
<CAPTION>
TOTAL
STOCKHOLDERS'
EQUITY
--------------
<S> <C>
Balance at January 1, 1993 $ 262,582
Issuance of 1,783.48 shares of common stock in exchange for
99.5% of common stock of Rural Security Life Company 27,101
Net income for 1993 19,803
Change in net unrealized investment gains/losses 2,791
--------------
Balance at December 31, 1993 312,277
Contribution of minority interests of subsidiaries from
parent 24,702
Cumulative effect on prior years (to December 31, 1993) of
change in method of accounting for fixed maturity
securities 38,913
Net income for 1994 34,998
Change in net unrealized investment gains/losses (55,418)
--------------
Balance at December 31, 1994 355,472
Issuance of 26,119.72 shares pursuant to stock dividend --
Net income for 1995 50,660
Change in net unrealized investment gains/losses 45,375
Dividend of Utah Farm Bureau Insurance
Company to parent (11,111)
--------------
Balance at December 31, 1995 $ 440,396
--------------
--------------
</TABLE>
SEE ACCOMPANYING NOTES.
5
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------------------
1995 1994 1993
<S> <C> <C> <C>
-----------------------------------------
OPERATING ACTIVITIES
Continuing operations:
Net income $ 50,660 $ 28,519 $ 22,705
Adjustments to reconcile net income to net cash provided by continuing operations:
Adjustments related to interest sensitive products:
Interest credited to account balances 77,207 69,954 67,806
Charges for mortality and administration (34,083) (32,161) (27,876)
Deferral of unearned revenues 1,696 2,058 1,933
Amortization of unearned revenue reserve (956) (880) (557)
Provision for depreciation and amortization 10,034 13,449 9,411
Net gains and losses related to investments held in inventory (25,801) 206 (74)
Realized gains on investments (5,902) (11,234) (3,967)
Increase in traditional, accident and health and property-casualty benefit
accruals 16,144 10,972 20,032
Policy acquisition costs deferred (18,995) (17,591) (17,524)
Amortization of deferred policy acquisitionL costs 10,181 10,080 6,023
Provision for deferred income taxes 15,026 7,792 (3,408)
Other (9,352) (3,522) 11,619
------------- ------------ ------------
Net cash provided by continuing operations 85,859 77,642 86,123
Discontinued operations:
Net income (loss) -- 6,479 (2,902)
Adjustments to reconcile net loss to net cash provided by (used in) discontinued
operations -- (10,293) 6,286
------------- ------------ ------------
Net cash provided by (used in) discontinued operations -- (3,814) 3,384
------------- ------------ ------------
Net cash provided by operating activities 85,859 73,828 89,507
INVESTING ACTIVITIES
Sale, maturity or repayment of investments:
Fixed maturities -- held for investment 16,529 31,540 393,476
Fixed maturities -- available for sale 208,189 348,722 --
Equity securities 29,766 43,612 29,831
Held in inventory 8,045 7,106 103
Mortgage loans on real estate 18,646 24,036 15,970
Investment real estate 927 885 5,441
Policy loans 19,701 18,263 18,710
Other long-term investments 3,564 31,608 6,796
Short-term investments -- net 68,799 -- --
------------- ------------ ------------
374,166 505,772 470,327
</TABLE>
6
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------------------
1995 1994 1993
<S> <C> <C> <C>
-----------------------------------------
Acquisition of investments:
Fixed maturities -- held for investment $ (120,885) $ (166,332) $ (490,113)
Fixed maturities -- available for sale (282,657) (262,905) --
Equity securities (30,380) (37,965) (22,688)
Held in inventory (13,618) (6,698) (4,036)
Mortgage loans on real estate (17,110) (12,953) (72,581)
Investment real estate (8,034) (668) (204)
Policy loans (20,275) (19,207) (17,845)
Other long-term investments (14) (13,654) --
Short-term investments -- net -- (63,737) (22,907)
------------- ------------ ------------
(492,973) (584,119) (630,374)
Proceeds from disposal, repayments of advances and other distributions from entities
accounted for by the equity method 31,986 44,890 28,281
Investments in and advances to entities accounted for by the equity method (21,463) (39,418) (26,247)
Net cash received in acquisition -- -- 272
Other (7,664) (5,167) (8,499)
Investing activities of discontinued operations -- 29,539 (539)
------------- ------------ ------------
Net cash used in investing activities (115,948) (48,503) (166,779)
FINANCING ACTIVITIES
Receipts from interest sensitive products credited to policyholder account balances 158,650 170,623 179,480
Return of policyholder account balances on interest sensitive products (121,863) (137,232) (110,959)
Proceeds from short-term borrowings 8 8,288 6,806
Repayments of short-term borrowings (6,396) (9,217) (6,198)
Proceeds from long-term debt -- -- 21,122
Repayments of long-term debt (5,915) (12,119) (4,255)
Net cash returned to parent as dividend (248) -- --
Financing activities of discontinued operations -- (44,000) (5,000)
------------- ------------ ------------
Net cash provided by financing activities 24,236 (23,657) 80,996
------------- ------------ ------------
Increase (decrease) in cash and cash equivalents (5,853) 1,668 3,724
Cash and cash equivalents at beginning of year 5,853 4,185 461
------------- ------------ ------------
Cash and cash equivalents at end of year $ -- $ 5,853 $ 4,185
------------- ------------ ------------
------------- ------------ ------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest $ 1,086 $ 1,880 $ 2,766
Income taxes 16,833 17,691 14,600
</TABLE>
SEE ACCOMPANYING NOTES.
7
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
DECEMBER 31, 1995
1. SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
Farm Bureau Life Insurance Company (the Company) is a wholly-owned subsidiary of
FBL Financial Group, Inc. (formerly called Farm Bureau Multi-State Services,
Inc.). The Company operates predominantly in the individual life and annuity
area of the insurance industry. The Company markets its products to Farm Bureau
members and other individuals and businesses in seven midwestern and western
states.
Prior to December 31, 1995, the Company owned 99.167% of the outstanding common
stock of Utah Farm Bureau Insurance Company, a property-casualty insurance
company providing individual and small business coverages. On December 31, 1995,
the common stock of Utah Farm Bureau Insurance Company was transferred to FBL
Financial Group, Inc. in the form of a dividend.
ORGANIZATION AND BASIS OF PRESENTATION
As more fully described in Note 3, effective January 1, 1994, FBL Financial
Group, Inc. acquired 100% of the outstanding common stock of the Company in a
transaction treated as a reorganization, in exchange for equivalent shares of
newly issued common stock of FBL Financial Group, Inc. Additionally, FBL
Financial Group, Inc. acquired the minority interests in the Company's
subsidiaries, FBL Insurance Company and Rural Security Life Insurance Company
(Rural Security Life) for equivalent shares of newly issued common stock of FBL
Financial Group, Inc. The minority interests were contributed to the Company;
and FBL Insurance Company and Rural Security Life were subsequently merged into
the Company and liquidated.
In anticipation of an initial public offering of stock by its parent, during
1995, the Company adopted certain accounting changes to conform with generally
accepted accounting principles for stock life insurance companies. In prior
years, the Company had only prepared its financial statements in conformity with
accounting practices prescribed or permitted by the Insurance Division,
Department of Commerce, of the State of Iowa. The preparation of financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Significant estimates and assumptions are utilized in the calculation of
deferred policy acquisition costs, policyholder liabilities and accruals and
valuation allowances on investments. It is reasonably possible that actual
experience could differ from the estimates and assumptions utilized which could
have a material impact on the consolidated financial statements.
CONSOLIDATION
The consolidated financial statements include the Company and its direct and
indirect subsidiaries. All significant intercompany transactions have been
eliminated.
INVESTMENTS
FIXED MATURITIES AND EQUITY SECURITIES
Effective January 1, 1994, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 115, "Accounting for Certain Investments in Debt and Equity
Securities". Prior to the adoption of SFAS No. 115, all of the Company's fixed
maturity securities were classified as "held for investment". Pursuant to SFAS
No. 115, fixed maturity securities (bonds and redeemable preferred stock) that
the Company has the positive intent and ability to hold to maturity are
designated as "held for investment". Held for investment securities are reported
at cost adjusted for amortization of premiums and discounts. Changes in the
market value of these securities, except for declines that are other than
temporary, are not reflected in the Company's financial statements. Fixed
maturity securities which may be sold are designated as "available for sale".
Available for sale securities are reported at market value and unrealized gains
and losses on these securities are included directly in stockholders' equity,
net of certain adjustments (see Note 4). Premiums and discounts are
amortized/accrued using methods which result in a constant yield over the
securities' expected lives. Amortization/accrual of premiums and discounts on
mortgage and asset-backed securities incorporates a prepayment assumption to
estimate the securities' expected lives.
8
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Equity securities (common and non-redeemable preferred stocks) are reported at
market. The change in unrealized appreciation and depreciation of marketable
equity securities (net of related deferred income taxes, if any) is included
directly in stockholders' equity.
HELD IN INVENTORY
The Company has certain subsidiaries involved as broker-dealers and another as a
venture capital investment company. In accordance with accounting practices for
these specialized industries, marketable securities are valued at market value
if readily marketable or at fair value, as determined by the Board of Directors
of the subsidiary holding the security, if not readily marketable. The resulting
difference between cost and market is included in the statements of income as
net investment income. Realized gains and losses are also reported as a
component of net investment income.
The Company's investments held in inventory portfolio includes securities with
carrying values of $18,574 and $13,735 at December 31, 1995 and 1994,
respectively, for which market quotations are not readily available and for
which fair value is determined in good faith by the Board of Directors of FBL
Ventures of South Dakota, Inc., the venture capital investment company
subsidiary holding the security. In determining fair value for securities not
readily marketable, investments are initially stated at cost until significant
subsequent events require a change in valuation. Among the factors considered by
the Board of Directors in determining fair value of investments are the cost of
the investment, developments since the acquisition of the investment, the sale
price of recently issued securities, the financial condition and operating
results of the issuer, the long-term business potential of the issuer, the
quoted market price of securities with similar quality and yield that are
publicly traded and other factors generally pertinent to the valuation of
investments. The Board of Directors, in making its evaluation, has relied on
financial data of investees provided by the management of the investee
companies.
On occasion, transfers will be made to or from the venture capital investment
company. Such transfers typically occur when a previously private issue goes
public, or when a private equity security is purchased or otherwise received by
another member of the consolidated group. The Company records transfers to or
from the venture capital investment company at fair value at the date of
transfer, re-establishing a new cost basis for the security. During the year
ended December 31, 1995, two securities with a total fair value of $27,630 were
transferred out of the venture capital investment company. During the year ended
December 31, 1994, two securities with a fair value of $1,397 were transferred
to the venture capital investment company. A realized gain (recognized in net
investment income) of $24,628 was recognized on the 1995 transfers, although
neither transfer had an impact on net income, and no realized gains or losses
were recognized on the 1994 transfers.
MORTGAGE LOANS ON REAL ESTATE
Mortgage loans on real estate are reported at cost adjusted for amortization of
premiums and accrual of discounts. If the value of any mortgage loan is
determined to be impaired (i.e., when it is probable that the Company will be
unable to collect all amounts due according to the contractual terms of the loan
agreement), the carrying value of the mortgage loan has been reduced to its fair
value, which may be based upon the present value of expected future cash flows
from the loan (discounted at the loan's effective interest rate), the loan's
observable market price, or the fair value of the underlying collateral. The
carrying value of impaired loans is reduced by the establishment of a valuation
allowance, changes to which are charged or credited to income.
INVESTMENT REAL ESTATE
Investment real estate, which includes real estate acquired through foreclosure,
is reported at cost less allowances for depreciation. Real estate acquired
through foreclosure, or in-substance foreclosure, is recorded at the lower of
cost (which includes the balance of the mortgage loan, any accrued interest and
any costs incurred to obtain title to the property) or fair value as determined
at or before the foreclosure date. The carrying value of these assets is subject
to regular review. If the fair value, less estimated sales costs, of real estate
owned decreases to an amount lower than its carrying value, a valuation
allowance is established for the difference. This valuation allowance can be
restored should the fair value of the property increase. Changes in this
valuation allowance are charged or credited to income. At December 31, 1995 and
1994, the Company had no such valuation allowance.
9
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
OTHER INVESTMENTS
Policy loans are reported at unpaid principal. Other long-term investments
(consisting principally of Title One home improvement loans) and short-term
investments are reported at cost adjusted for amortization of premiums and
accrual of discounts. Investments accounted for by the equity method include
investments in, and advances to, various joint ventures and partnerships and are
reported as securities and indebtedness of related parties.
REALIZED GAINS AND LOSSES ON INVESTMENTS
The carrying values of all the Company's investments are reviewed on an ongoing
basis for credit deterioration, and if this review indicates a decline in market
value that is other than temporary, the Company's carrying value in the
investment is reduced to its estimated realizable value (the sum of the
estimated nondiscounted cash flows for securities or fair value for mortgage
loans on real estate) and a specific writedown is taken. Such reductions in
carrying value are recognized as realized losses and charged to income. Realized
gains and losses on sales are determined on the basis of specific identification
of investments. If the Company expects that an issuer of a security will modify
its payment pattern from contractual terms but no writedown is required, future
investment income is recognized at the rate implicit in the calculation of net
realizable value under the expected payment pattern.
MARKET VALUES
Market values, as reported herein, of publicly traded fixed maturity securities
are as reported by an independent pricing service. Market values of conventional
mortgage-backed securities not actively traded in a liquid market are estimated
using a matrix calculation assuming a spread over U. S. Treasury bonds based
upon the expected average lives of the securities. Market values of private
placement bonds are estimated using a matrix that assumes a spread (based on
interest rates and a risk assessment of the bonds) over U. S. Treasury bonds.
Market values of redeemable preferred stock and equity securities are based on
the latest quoted market prices, or for those not readily marketable, at values
which are representative of the market values of issues of comparable yield and
quality.
CASH AND CASH EQUIVALENTS
For purposes of the consolidated statement of cash flows, the Company considers
all highly liquid debt instruments purchased with a maturity of three months or
less to be cash equivalents.
DEFERRED POLICY ACQUISITION COSTS AND VALUE OF INSURANCE IN FORCE ACQUIRED
To the extent recoverable from future policy revenues and gross profits, certain
costs of acquiring new insurance business, principally commissions and other
expenses related to the production of new business, have been deferred. The
value of insurance in force acquired is an asset that arose with the acquisition
of Rural Security Life discussed in Note 3. The initial value is determined by
an actuarial study using expected future gross profits as a measurement of the
net present value of the insurance acquired. Interest accrues on the unamortized
balance at a rate of 6.79%.
For participating traditional life insurance and universal life insurance and
investment products, these costs are being amortized generally in proportion to
expected gross profits (after dividends to policyholders, if applicable) from
surrender charges and investment, mortality, and expense margins. That
amortization is adjusted retrospectively when estimates of current or future
gross profits/margins (including the impact of investment gains and losses) to
be realized from a group of products are revised. The deferred policy
acquisition costs for property-casualty insurance are amortized over the
effective period of the related insurance policies; deferred policy acquisition
costs for these policies are expensed when such costs are deemed not to be
recoverable from the related unearned premiums and any related investment
income.
PROPERTY AND EQUIPMENT
Property and equipment are reported at cost less allowances for depreciation.
Depreciation expense is computed primarily using the straight-line method over
the estimated useful lives of the assets.
GOODWILL
Goodwill represents the excess of the fair value of assets exchanged over the
net assets acquired. Goodwill is generally being amortized on a straight-line
basis over a period of 20 years.
The carrying value of goodwill is regularly reviewed for indicators of
impairment in value, which in the view of management are other than temporary.
If facts and circumstances suggest that goodwill is impaired, the Company
10
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
assesses the fair value of the underlying business and reduces goodwill to an
amount that results in the book value of the underlying business approximating
fair value. The Company has not recorded any such writedowns during the years
ended December 31, 1995, 1994 or 1993.
FUTURE POLICY BENEFITS
The liability for future policy benefits for participating traditional life
insurance is based on net level premium reserves, including assumptions as to
interest, mortality, and other assumptions underlying the guaranteed policy cash
values. Reserve interest assumptions are level and range from 2.0% to 6.0%.
Accrued dividends for participating business are established for anticipated
amounts earned to date for the period through the policy's next anniversary and
are provided for as a separate liability. The declaration of future dividends
for participating business is at the discretion of the Board of Directors.
Participating business accounted for 48% of receipts from policyholders during
the year ended December 31, 1995 and represented 22% of life insurance inforce
at December 31, 1995.
The liabilities for future policy benefits for accident and health insurance are
computed using a net level or two-year preliminary term method, including
assumptions as to morbidity, mortality and interest and to include provisions
for possible unfavorable deviations. Policy benefit claims are charged to
expense in the period that the claims are incurred.
Future policy benefit reserves for universal life insurance and investment
products are computed under a retrospective deposit method and represent policy
account balances before applicable surrender charges. Policy benefits and claims
that are charged to expense include benefit claims incurred in the period in
excess of related policy account balances. Interest crediting rates for
universal life and investment products ranged from 5.50% to 7.50% in 1995, 5.50%
to 7.25% in 1994, and 4.00% to 8.25% in 1993.
The unearned revenue reserve reflects the unamortized balance of the excess of
first year administration charges over renewal period administration charges
(policy initiation fees) on universal life products. These excess charges have
been deferred and are being recognized in income over the period benefited using
the same assumptions and factors used to amortize deferred policy acquisition
costs.
RESERVES AND UNEARNED PREMIUMS ON PROPERTY-CASUALTY POLICIES
Unpaid property-casualty losses and loss adjustment expenses represent the
estimated liability for reported claims plus those incurred but not yet reported
and the related estimated adjustment expenses. The reserve for unpaid claims and
related adjustment expenses is determined using case-basis evaluations and
statistical analyses and represents estimates of the ultimate cost of all unpaid
losses incurred through December 31 of each year. Although considerable
variability is inherent in such estimates, management believes that the reserve
for unpaid losses and related loss adjustment expenses is adequate. The
estimates are continually reviewed and adjusted as necessary; such adjustments
are included in current operations and are accounted for as changes in
estimates.
Salvage and subrogation recoverables are estimated using statistical analysis.
The salvage and subrogation recoverable amount, which has been offset against
reserves and unearned premiums on property-casualty policies in the accompanying
consolidated balance sheets, was $718 at December 31, 1994.
Property-casualty insurance unearned premiums are calculated on a pro rata
basis.
DEFERRED INCOME TAXES
Deferred tax assets or liabilities are computed based on the difference between
the financial statement and income tax bases of assets and liabilities using the
enacted marginal tax rate. Deferred income tax expenses or credits are based on
the changes in the asset or liability from period to period.
SEPARATE ACCOUNTS
The separate account assets and liabilities reported in the accompanying
consolidated balance sheets represent funds that are separately administered,
principally for the benefit of certain policyholders who bear the investment
risk. The separate account assets and liabilities are carried at fair value.
Revenues and expenses related to the separate account assets and liabilities, to
the extent of benefits paid or provided to the separate account policyholders,
are excluded from the amounts reported in the accompanying consolidated
statements of income.
11
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECOGNITION OF PREMIUM REVENUES AND COSTS
Traditional life insurance premiums are recognized as revenues over the
premium-paying period. Future policy benefits and policy acquisition costs are
recognized as expenses over the life of the policy by means of the provision for
future policy benefits and amortization of deferred policy acquisition costs.
All insurance-related revenues, benefits, losses and expenses are reported net
of reinsurance ceded.
Revenues for universal life and annuity products consist of policy charges for
the cost of insurance, administration charges, amortization of policy initiation
fees and surrender charges assessed against policyholder account balances during
the period. Expenses related to these products include interest credited to
policyholder account balances and benefit claims incurred in excess of
policyholder account balances.
Property-casualty insurance premiums are recognized pro rata over the terms of
the policies. All insurance-related revenues and costs are reported net of
reinsurance. Reinsurance premiums, losses and expenses are accounted for in
accordance with the provisions of the underlying agreements and consistent with
the reinsured policies.
OTHER INCOME AND OTHER EXPENSES
Other income and other expenses include revenue and expenses generated by the
Company's various non-insurance subsidiaries for services related to investment
advisory, marketing and distribution, and leasing. A portion of these activities
are performed on behalf of affiliates of the Company. In addition, certain
revenue generated by the insurance companies have been classified as other
income. During the years ended December 31, 1995, 1994 and 1993, revenues
included as other income aggregated $8,413, $8,492 and $9,774, respectively.
2. FAIR VALUES OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures About Fair
Value of Financial Instruments", requires disclosure of fair value information
about financial instruments, whether or not recognized in the consolidated
balance sheet, for which it is practicable to estimate that value. In cases
where quoted market prices are not available, fair values are based on estimates
using present value or other valuation techniques. Those techniques are
significantly affected by the assumptions used, including the discount rate and
estimates of future cash flows. In that regard, the derived fair value estimates
cannot be substantiated by comparison to independent markets and, in many cases,
could not be realized in immediate settlement of the instrument. SFAS No. 107
also excludes certain financial instruments and all nonfinancial instruments
from its disclosure requirements and allows companies to forego the disclosures
when those estimates can only be made at excessive cost. Accordingly, the
aggregate fair value amounts presented herein are limited by each of these
factors and do not purport to represent the underlying value of the Company.
The following methods and assumptions were used by the Company in estimating its
fair value disclosures for financial instruments.
FIXED MATURITY SECURITIES: Fair values for fixed maturity securities are based
on quoted market prices, where available. For fixed maturity securities not
actively traded, fair values are estimated using values obtained from
independent pricing services or, in the case of private placements, are
estimated by discounting the expected future cash flows using current market
rates applicable to the coupon rate, credit, and maturity of the investments.
EQUITY SECURITIES: The fair values for equity securities are based on quoted
market prices, where available; for equity securities that are not actively
traded, estimated fair values are based on values of issues of comparable yield
and quality.
HELD IN INVENTORY: The fair values for investments held in inventory are based
on quoted market prices, where available; for holdings that are not actively
traded, fair values are determined in good faith by the Board of Directors of
the subsidiary holding the security.
MORTGAGE LOANS ON REAL ESTATE: Fair values are estimated by discounting
expected cash flows using interest rates currently being offered for similar
loans.
POLICY LOANS: The Company has not determined the fair values associated with
its policy loans. Policy loans with a carrying value of $26,221 and $23,524 at
December 31, 1995 and 1994, respectively, provide for variable interest rates.
12
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
2. FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)
Management believes any differences between the Company's carrying value and the
fair values of its other policy loans are immaterial to the Company's financial
position and, accordingly, the cost to provide such disclosure is not worth the
benefit to be derived. At December 31, 1995 and 1994, amounts outstanding
related to policy loans, summarized by interest rates, are as follows:
<TABLE>
<CAPTION>
DECEMBER 31
---------------------
RATE 1995 1994
<S> <C> <C>
- ---------------- ---------------------
3.50% - 4.99% $ -- $ 734
5.00% - 5.99% 28,830 30,912
6.00% - 6.99% 11,165 11,457
7.00% - 7.99% 18,444 37,775
8.00% - 8.99% 30,087 7,074
---------------------
$ 88,526 $ 87,952
---------------------
---------------------
</TABLE>
CASH AND SHORT-TERM INVESTMENTS: The carrying amounts reported in the
consolidated balance sheet for these instruments approximate their fair values.
ASSETS AND LIABILITIES OF SEPARATE ACCOUNTS: Separate account assets and
liabilities are reported at estimated fair value in the Company's consolidated
balance sheet.
FUTURE POLICY BENEFITS AND OTHER POLICYHOLDERS' FUNDS: Fair values of the
Company's liabilities under contracts not involving significant mortality or
morbidity risks (principally deferred annuities and supplementary contracts),
are stated at the cost the Company would incur to extinguish the liability;
i.e., the cash surrender value. The Company is not required to estimate the fair
value of its liabilities under other contracts.
RESERVES AND UNEARNED PREMIUMS ON PROPERTY-CASUALTY POLICIES: The fair value of
reserves and unearned premiums on property-casualty policies approximate
carrying value as the Company's policies are substantially all short-duration
contracts.
SHORT-TERM BORROWINGS AND LONG-TERM DEBT: The fair values for long-term debt
are estimated using discounted cash flow analysis based on the Company's current
incremental borrowing rate for similar types of borrowing arrangements. For
short-term debt, the carrying value approximates fair value.
DEPOSIT ADMINISTRATION FUNDS: The Company administers the funded portion of
certain employee benefit plans of its affiliates through deposit administration
funds. The fair value of the deposit administration funds attributed to the
Agent's Career Incentive Plan are stated at amounts which are estimated to be
currently vested, based on service and production criteria. Other funds are
stated at carrying value.
OFF-BALANCE SHEET INSTRUMENTS: The Company has entered into lines of credit,
both as a lender and borrower. The Company has not attempted to place fair
values on these obligations as management believes losses have already been
accrued to the extent that they eventually are expected to be realized.
13
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
2. FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)
The following sets forth a comparison of the fair values and carrying values of
the Company's financial instruments subject to the provisions of Statement of
Financial Accounting Standards No. 107:
<TABLE>
<CAPTION>
DECEMBER 31
--------------------------------------------------------
1995 1994
------------------------------ ------------------------
CARRYING FAIR CARRYING
VALUE VALUE VALUE FAIR VALUE
<S> <C> <C> <C> <C>
--------------------------------------------------------
ASSETS
Fixed maturities:
Held for investment $ 556,099 $ 580,379 $ 455,344 $ 428,719
Available for sale 1,001,302 1,001,302 864,914 864,914
Equity securities 78,173 78,173 41,492 41,492
Held in inventory 21,913 21,913 18,169 18,169
Mortgage loans on real estate 215,690 227,208 222,519 223,502
Policy loans 88,526 88,526 87,952 87,952
Cash and short-term investments 35,358 35,358 112,494 112,494
Assets held in separate accounts 44,789 44,789 28,043 28,043
LIABILITIES
Future policy benefits $ 650,025 $ 644,311 $ 625,380 $ 605,811
Reserves and unearned premiums on property-casualty policies -- -- 44,482 44,482
Other policyholders' funds 176,811 176,811 160,584 160,584
Short-term borrowings -- -- 6,388 6,388
Long-term debt 12,604 12,490 18,519 17,179
Deposit administration funds 33,834 31,294 25,760 23,421
Liabilities related to separate accounts 44,789 44,789 28,043 28,043
</TABLE>
3. REORGANIZATION AND DISCONTINUED OPERATIONS
On February 26, 1993, the Company entered into a stock exchange agreement with
Rural Mutual Insurance Company. Under terms of the agreement, the Company
acquired 99.5% of the issued and outstanding common stock of Rural Security Life
in exchange for newly issued common stock of the Company (approximately 7.47% of
the total amount outstanding after the exchange). The transaction was accounted
for as a purchase and the purchase price of $27,101 (based upon the appraised
value of the Company's stock at the time of purchase) was allocated to the
assets and liabilities acquired. This allocation resulted in goodwill of
approximately $6,988, which is being amortized over 20 years.
In January, 1994, the Boards of Directors of the Company and Western Farm Bureau
Life Insurance Company approved a plan of merger between the Company and Western
Farm Bureau Life Insurance Company, the latter domiciled in the state of
Colorado. Pursuant to the plan of merger, effective January 1, 1994, the
ownership and operations of the Company and Western Farm Bureau Life Insurance
Company are facilitated through Farm Bureau Multi-State Services, Inc., a
holding company which was incorporated in the State of Iowa on October 13, 1993.
In March 1996, Farm Bureau Multi-State Services, Inc. was renamed to FBL
Financial Group, Inc. Under the agreement, 100% of the common stock of the
Company and Western Farm Bureau Life Insurance Company were exchanged for stock
in the holding company.
In addition, at that same time, the minority interests of FBL Insurance Company
and Rural Security Life were exchanged for equivalent value in the holding
company. The issuance of stock of FBL Financial Group, Inc. in exchange for the
minority interests of FBL Insurance Company and Rural Security Life has been
accounted for as a purchase and the purchase price of $24,702, based upon the
appraised value of the Company's stock at the time of purchase, was allocated to
the assets and liabilities acquired. These allocations resulted in goodwill of
approximately $4,419, which is being amortized over 20 years. Subsequently, FBL
Financial Group, Inc. contributed the minority interests of FBL Insurance
Company and Rural Security Life to the Company and, in 1995, FBL Insurance
Company and Rural Security Life were liquidated.
14
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
3. REORGANIZATION AND DISCONTINUED OPERATIONS (CONTINUED)
During December 1993, the Company decided to sell its investment in Vantage
Cable Associates, L.P., a cable television subsidiary, and at that time
classified the subsidiary as a discontinued operation. On December 23, 1994, the
Company sold substantially all operating assets and certain liabilities of
Vantage Cable Associates, L.P. to Galaxy Telecom, L.P. for $38,400, of which
$32,016 was paid in cash and $6,384 was represented by a Class D limited
partnership interest in Galaxy Telecom, L.P. The Company recognized a gain on
the sale of approximately $15,400, after expenses, closing adjustments and
post-closing adjustments of approximately $1,400.
Revenues of the discontinued operations aggregated $10,224 and $10,436 for the
period from January 1, 1994 through December 22, 1994 and the year ended
December 31, 1993, respectively. Interest expense has been allocated to
discontinued operations based on debt that can be identified as specifically
attributed to those operations. For the period from January 1, 1994 through
December 22, 1994 and the year ended December 31, 1993, interest expense related
to discontinued operations was $2,884 and $2,227, respectively.
15
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
4. INVESTMENT OPERATIONS
FIXED MATURITIES, EQUITY SECURITIES AND INVESTMENTS HELD IN INVENTORY
The following tables contain amortized cost and market value information on
fixed maturities (bonds and redeemable preferred stocks) and equity securities
(common stock and nonredeemable preferred stocks) at December 31, 1995 and 1994.
<TABLE>
<CAPTION>
HELD FOR INVESTMENT
------------------------------------------------------
GROSS GROSS
ESTIMATED UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES MARKET VALUE
<S> <C> <C> <C> <C>
------------------------------------------------------
DECEMBER 31, 1995
Bonds:
United States Government and agencies --
mortgage-backed securities $ 178,293 $ 9,518 $ (535) $ 187,276
Industrial and miscellaneous:
Mortgage-backed securities 372,806 16,693 (1,680) 387,819
Other 5,000 284 -- 5,284
------------------------------------------------------
Total fixed maturities $ 556,099 $ 26,495 $ (2,215) $ 580,379
------------------------------------------------------
------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
AVAILABLE FOR SALE
------------------------------------------------------
GROSS GROSS
ESTIMATED UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES MARKET VALUE
<S> <C> <C> <C> <C>
------------------------------------------------------
DECEMBER 31, 1995
Bonds:
United States Government and agencies:
Mortgage-backed securities $ 76,718 $ 4,419 $ (520) $ 80,617
Other 71,289 935 (509) 71,715
State, municipal and other governments 10,514 61 (330) 10,245
Public utilities 105,397 7,088 (866) 111,619
Industrial and miscellaneous:
Mortgage and asset-backed securities 58,231 3,633 (380) 61,484
Other 584,421 54,328 (9,553) 629,196
Redeemable preferred stock 36,649 873 (1,096) 36,426
------------------------------------------------------
Total fixed maturities $ 943,219 $ 71,337 $ (13,254) $ 1,001,302
------------------------------------------------------
------------------------------------------------------
Equity securities $ 72,731 $ 6,042 $ (600) $ 78,173
------------------------------------------------------
------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
HELD FOR INVESTMENT
----------------------------------------------------
GROSS GROSS
ESTIMATED UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES MARKET VALUE
<S> <C> <C> <C> <C>
----------------------------------------------------
DECEMBER 31, 1994
Bonds:
United States Government and agencies --
mortgage-backed securities $ 165,467 $ 737 $ (6,291) $ 159,913
Industrial and miscellaneous -- mortgage-backed
securities 289,877 922 (21,993) 268,806
----------------------------------------------------
Total fixed maturities $ 455,344 $ 1,659 $ (28,284) $ 428,719
----------------------------------------------------
----------------------------------------------------
</TABLE>
16
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
4. INVESTMENT OPERATIONS (CONTINUED)
<TABLE>
<CAPTION>
AVAILABLE FOR SALE
----------------------------------------------------
GROSS GROSS
ESTIMATED UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES MARKET VALUE
<S> <C> <C> <C> <C>
----------------------------------------------------
DECEMBER 31, 1994
Bonds:
United States Government and agencies:
Mortgage-backed securities $ 64,726 $ 2,577 $ (738) $ 66,565
Other 48,274 206 (2,178) 46,302
State, municipal and other governments 27,812 303 (1,127) 26,988
Public utilities 86,894 1,220 (3,869) 84,245
Industrial and miscellaneous:
Mortgage and asset-backed securities 36,751 -- (285) 36,466
Other 574,074 13,228 (24,204) 563,098
Redeemable preferred stock 43,890 893 (3,533) 41,250
----------------------------------------------------
Total fixed maturities $ 882,421 $ 18,427 $ (35,934) $ 864,914
----------------------------------------------------
----------------------------------------------------
Equity securities $ 45,259 $ 1,538 $ (5,305) $ 41,492
----------------------------------------------------
----------------------------------------------------
</TABLE>
Short-term investments have been excluded from the above schedules as amortized
cost approximates market value for these securities.
The carrying value and estimated market value of the Company's portfolio of
fixed maturity securities at December 31, 1995, by contractual maturity, are
shown below. Expected maturities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or without call
or prepayment penalties.
<TABLE>
<CAPTION>
HELD FOR INVESTMENT AVAILABLE FOR SALE
-------------------------- ----------------------------
ESTIMATED ESTIMATED
AMORTIZED MARKET AMORTIZED MARKET
COST VALUE COST VALUE
<S> <C> <C> <C> <C>
--------------------------------------------------------
Due in one year or less $ -- $ -- $ 58,919 $ 58,667
Due after one year through five years -- -- 130,019 134,930
Due after five years through ten years -- -- 202,205 213,406
Due after ten years 5,000 5,284 380,478 415,772
--------------------------------------------------------
5,000 5,284 771,621 822,775
Mortgage and asset-backed securities 551,099 575,095 134,949 142,101
Redeemable preferred stocks -- -- 36,649 36,426
--------------------------------------------------------
$ 556,099 $ 580,379 $ 943,219 $ 1,001,302
--------------------------------------------------------
--------------------------------------------------------
</TABLE>
The unrealized appreciation or depreciation on fixed maturity and equity
securities available for sale are reported as a separate component of
stockholder's equity, reduced by adjustments to deferred policy acquisition
costs and
17
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
4. INVESTMENT OPERATIONS (CONTINUED)
unearned revenue reserve that would have been required as a charge or credit to
income had such amounts been realized, a provision for deferred income taxes and
amounts attributable to minority interests in subsidiary. Net unrealized
investment gains (losses) as reported were comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31
---------------------------------
1995 1994
<S> <C> <C>
---------------------------------
Unrealized appreciation (depreciation) on fixed maturity and equity
securities available for sale $ 63,525 $ (21,274)
Adjustments for assumed changes in amortization pattern of:
Deferred policy acquisition costs (12,181) 4,868
Unearned revenue reserve 1,189 (163)
Provision for deferred income taxes (18,387) 5,798
Amounts attributable to minority interest in subsidiary -- 3
---------------------------------
Net unrealized investment gains (losses) $ 34,146 $ (10,768)
---------------------------------
---------------------------------
</TABLE>
Amortized cost of securities held in inventory was $21,555 and $17,731 at
December 31, 1995 and 1994, respectively. Net unrealized appreciation on
securities held in inventory as of December 31, 1995 and 1994, included gross
unrealized gains of $1,613 and $1,719 and gross unrealized losses of $1,255 and
$1,281, respectively.
MORTGAGE LOANS ON REAL ESTATE
The Company's mortgage loan portfolio consists principally of commercial
mortgage loans. The Company's lending policies establish limits on the amount
that can be loaned to one borrower and require diversification by geographic
location and collateral type. Regions in which at least 20% of the Company's
mortgage loan portfolio is invested during the years presented include Mountain
(23% in 1995 and 22% in 1994), which includes Arizona, Colorado, New Mexico,
Nevada, Utah and Wyoming; and Pacific (25% in 1995 and 23% in 1994), which
includes California. Mortgage loans on real estate have also been analyzed
during the years presented by collateral types with retail facilities (36% in
1995, 37% in 1994) and office buildings (37% in 1995, 28% in 1994), representing
the largest holdings.
The Company has also provided an allowance for possible losses against its
mortgage loan portfolio. An analysis of this allowance for loan losses is as
follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------
1995 1994 1993
<S> <C> <C> <C>
-------------------------------
Balance at beginning of year $ 600 $ 600 $ 600
Realized losses during year -- -- 388
Current year chargeoffs, net of recoveries -- -- (388)
-------------------------------
Balance at end of year $ 600 $ 600 $ 600
-------------------------------
-------------------------------
</TABLE>
Securities and indebtedness of related parties include mortgage loans and
similar advances to joint ventures and limited partnerships in which the Company
maintains an equity interest. Such indebtedness aggregated $33,960 and $34,738
at December 31, 1995 and 1994, respectively. These loans and advances were made
at similar interest rates and under similar terms as other mortgage loans.
18
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
4. INVESTMENT OPERATIONS (CONTINUED)
NET INVESTMENT INCOME
Components of net investment income are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------------
1995 1994 1993
<S> <C> <C> <C>
--------------------------------------
Fixed maturities:
Held for investment $ 42,016 $ 31,235 $ 106,897
Available for sale 83,490 79,280 --
Equity securities 1,098 1,527 2,178
Held in inventory 25,868 (130) 183
Mortgage loans on real estate 19,544 20,417 19,805
Investment real estate 4,191 4,239 5,090
Policy loans 5,567 5,433 5,400
Other long-term investments 381 2,696 3,197
Short-term investments 2,671 2,496 1,202
Other 5,581 3,905 3,997
--------------------------------------
190,407 151,098 147,949
Less investment expenses (6,059) (5,950) (9,629)
--------------------------------------
Net investment income $ 184,348 $ 145,148 $ 138,320
--------------------------------------
--------------------------------------
</TABLE>
Investment income of investments held in inventory is comprised of:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------
1995 1994 1993
<S> <C> <C> <C>
--------------------------------
Dividends, interest and other income $ 138 $ 205 $ 312
Net realized gain from investment transactions 25,810 4,026 --
Change in unrealized appreciation/depreciation of investments (80) (4,361) (129)
--------------------------------
$ 25,868 $ (130) $ 183
--------------------------------
--------------------------------
</TABLE>
REALIZED AND UNREALIZED GAINS AND LOSSES
Effective January 1, 1994, the Company adopted SFAS No. 115, "Accounting for
Certain Investments in Debt and Equity Securities". The cumulative effect of
this change in accounting method was to increase stockholder's equity by
$38,913, net of offsets aggregating $39,993.
19
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
4. INVESTMENT OPERATIONS (CONTINUED)
Realized gains (losses) and the change in unrealized appreciation/depreciation
on investments (excluding amounts attributed to investments held in inventory
discussed above) are summarized below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------------
1995 1994 1993
<S> <C> <C> <C>
-------------------------------------
REALIZED
Fixed maturities:
Held for investment $ -- $ -- $ (287)
Available for sale 5,526 2,554 --
Equity securities (763) 9,535 5,498
Mortgage loans on real estate -- -- (388)
Investment real estate 123 (316) (40)
Other long-term investments (158) (1,773) (330)
Equity investments 1,182 2,864 --
Notes receivable -- (1,624) --
Other (8) (6) (486)
-------------------------------------
Realized gains on investments $ 5,902 $ 11,234 $ 3,967
-------------------------------------
-------------------------------------
UNREALIZED
Fixed maturities:
Held for investment $ 50,905 $ (51,071) $ 38,399
Available for sale 75,590 (96,413) --
Equity securities 9,209 (12,578) 4,329
-------------------------------------
Change in unrealized appreciation/depreciation of investments $ 135,704 $ (160,062) $ 42,728
-------------------------------------
-------------------------------------
</TABLE>
Proceeds from sales of fixed maturity investments available for sale (excluding
proceeds from maturities, repayments and calls) aggregated $133,479 and $217,855
during the years ended December 31, 1995 and 1994, respectively. Gross gains of
$7,186 and $9,247 and gross losses of $1,661 and $6,643 for the years ended
December 31, 1995 and 1994, respectively, were realized on those sales. Proceeds
received from fixed maturity investments held for investment during the years
ended December 31, 1995 and 1994 resulted entirely from maturities, repayments
and calls. Proceeds from sales of fixed maturity investments held for investment
(excluding proceeds from maturities, repayments and calls) were $136,164 for the
year ended December 31, 1993 and resulted in gross gains of $11,407 and gross
losses of $1,439.
Income taxes during the years ended December 31, 1995, 1994 and 1993 include a
provision of $2,066, $3,932 and $1,388, respectively, for the tax effect of
realized gains.
20
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
4. INVESTMENT OPERATIONS (CONTINUED)
OTHER
At December 31, 1995, affidavits of deposits covering bonds with a carrying
value of $1,411,879, preferred stocks with a
carrying value of $6,422, mortgage loans (including those made to related
parties) with an unpaid balance of $253,558, real estate with a book value of
$26,241 and policy loans with an unpaid balance of $88,526 were on deposit with
state agencies to meet regulatory requirements. The Company has pledged bonds
with a carrying value of $5,855 as collateral against the guarantee of a loan
agreement with a bank arising from the sale of a real estate property to an
unrelated party (see Note 12).
At December 31, 1995, the Company had committed to provide additional funding
for mortgage loans on real estate aggregating $10,475. These commitments arose
in the normal course of business at terms which are comparable to similar
investments.
The carrying value of investments which have been non-income producing for the
twelve months preceding December 31, 1995, include fixed maturities - $1,650,
and mortgage loans on real estate - $3,343.
No investment in any person or its affiliates (other than bonds issued by
agencies of the United States Government) exceeded 10% of stockholder's equity
at December 31, 1995.
5. PROPERTY AND EQUIPMENT
Property and equipment are comprised of:
<TABLE>
<CAPTION>
DECEMBER 31
------------------------
1995 1994
<S> <C> <C>
------------------------
Land $ 1,191 $ 727
Home office building and claims center 37,752 37,283
Leasehold improvements 166 166
Furniture and equipment 62,965 60,692
------------------------
102,074 98,868
Allowances for depreciation (42,084) (37,850)
------------------------
$ 59,990 $ 61,018
------------------------
------------------------
</TABLE>
6. REINSURANCE AND POLICY PROVISIONS
LIFE INSURANCE OPERATIONS
The value of insurance in force acquired is an asset that represents the present
value of future profits on business acquired. An analysis of the value of
insurance in force acquired for the years ended December 31, 1995, 1994 and 1993
is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------
1995 1994 1993
<S> <C> <C> <C>
-------------------------------
Balance at beginning of year $ 104 $ 117 $ --
Additions resulting from acquisitions -- -- 157
Accretion of interest during the year 6 7 7
Amortization of asset (35) (20) (47)
-------------------------------
Balance at end of year $ 75 $ 104 $ 117
-------------------------------
-------------------------------
</TABLE>
Amortization of the value of insurance in force acquired for the next five years
is expected to be as follows: 1996 - $37; 1997 - $30; and 1998 - $8.
In the normal course of business, the Company seeks to limit its exposure to
loss on any single insured and to recover a portion of benefits paid by ceding
reinsurance to other insurance enterprises or reinsurers. Reinsurance coverages
for life insurance vary according to the age and risk classification of the
insured with retention limits ranging up to $500 of
21
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
6. REINSURANCE AND POLICY PROVISIONS (CONTINUED)
coverage per individual life. The Company does not use financial or surplus
relief reinsurance. At December 31, 1995, life insurance in force ceded on a
consolidated basis amounted to $481,305 or approximately 4.3% of total life
insurance in force.
Reinsurance contracts do not relieve the Company of its obligations to its
policyholders. To the extent that reinsuring companies are later unable to meet
obligations under reinsurance agreements, the Company would be liable for these
obligations, and payment of these obligations could result in losses to the
Company. To limit the possibility of such losses, the Company evaluates the
financial condition of its reinsurers and monitors concentrations of credit
risk.
No allowance for uncollectible amounts has been established against the
Company's asset for reinsurance recoverable since none of the receivables are
deemed to be uncollectible, and because such receivables, either individually or
in the aggregate, are not material to the Company's operations. Insurance
premiums and product charges have been reduced by $3,274, $4,988 and $6,973 and
insurance benefits have been reduced by $1,721, $3,551 and $3,809 during the
years ended December 31, 1995, 1994 and 1993, respectively, as a result of the
cession agreements. The amount of reinsurance assumed is not significant.
Effective January 1, 1994, the Company transferred all of its group accident and
health business to other carriers. However, there was some run-off of the group
accident and health line during 1995 and 1994. Also, effective January 1, 1994,
the Company entered into a 100% coinsurance agreement with an unaffiliated third
party to administer the remaining individual medical business. The Company has
effectively removed itself from the medical business as of December 31, 1993
other than stop-loss coverages for self-insured groups of certain related
companies. The Company continues to write individual disability income policies
which are classified as accident and health herein.
Unpaid claims on accident and health policies include amounts for losses and
related adjustment expense and are estimates of the ultimate net costs of all
losses, reported and unreported. These estimates are subject to the impact of
future changes in claim severity, frequency and other factors. The activity in
the liability for unpaid claims and related adjustment expense, net of
reinsurance, is summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------
1995 1994 1993
<S> <C> <C> <C>
--------------------------------
Unpaid claims liability, net of related reinsurance, at beginning of year $ 10,494 $ 16,116 $ 9,863
Add:
Provision for claims occurring in the current year, net of reinsurance 5,011 3,723 37,786
Increase in estimated expense for claims occurring in the prior years, net of
reinsurance 2,357 804 3,437
--------------------------------
Incurred claim expense during the current year, net of reinsurance 7,368 4,527 41,223
Unpaid claims liability of companies acquired -- -- 5,065
Deduct expense payments for claims, net of reinsurance, occurring during:
Current year 2,109 2,585 31,614
Prior years 1,854 7,564 8,421
--------------------------------
3,963 10,149 40,035
--------------------------------
Unpaid claims liability, net of related reinsurance, at end of year 13,899 10,494 16,116
Active life reserve 14,614 15,248 19,162
--------------------------------
Net accident and health reserves 28,513 25,742 35,278
Reinsurance ceded 934 2,706 1,510
--------------------------------
Gross accident and health reserves $ 29,447 $ 28,448 $ 36,788
--------------------------------
--------------------------------
</TABLE>
The Company's unpaid claims reserve was increased by $2,357, $804 and $3,437 for
the years ended December 31, 1995, 1994 and 1993, respectively, for claims that
occurred prior to those balance sheet dates. A substantial portion of these
claims are related to the disability income block of business. The establishment
of disability income reserves is
22
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
6. REINSURANCE AND POLICY PROVISIONS (CONTINUED)
dependent upon factors that attempt to project future payments based upon
experience to date. These factors tend to increase as the length of the
disability increases. Accordingly, deficiencies noted above resulted primarily
from experience less favorable than assumed in the reserve basis.
PROPERTY-CASUALTY OPERATIONS
Risks are reinsured with other companies to permit the recovery of a portion of
losses and loss adjustment expenses incurred and are treated (to the extent of
the reinsurance) as risks for which the Company is not liable; however, the
Company remains liable to the extent that reinsuring companies cannot meet their
obligations under these reinsurance contracts.
Utah Farm Bureau Insurance Company, which was transferred to FBL Financial
Group, Inc. as of December 31, 1995 (see Note 1) is a participant with two
affiliates, Farm Bureau Mutual Insurance Company and South Dakota Farm Bureau
Mutual Insurance Company, in a reinsurance pooling agreement. Under the terms of
the agreement, Utah Farm Bureau Insurance Company and South Dakota Farm Bureau
Mutual Insurance Company cede to Farm Bureau Mutual Insurance Company all of
their insurance business and assume back from Farm Bureau Mutual Insurance
Company an amount equal to their participation in the pooling agreement. Also,
losses, loss adjustment expenses, and other underwriting and administrative
expenses are prorated among the companies on the basis of their participation in
the pooling agreement. For the years ended December 31, 1995, 1994 and 1993,
Utah Farm Bureau Insurance Company was an 8% participant in the pool.
The following table provides a reconciliation of the beginning and ending
reserve balances, net of reinsurance and salvage and subrogation recoverables:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------------
1995 1994 1993
<S> <C> <C> <C>
-----------------------------------
Reserve for losses and loss adjustment expenses, net of related reinsurance and
salvage and subrogation recoverables, at beginning of year $ 12,182 $ 11,675 $ 10,593
Add:
Provision for losses and loss adjustment expenses for claims
occurring in the current year, net of reinsurance and salvage and
subrogation 14,529 14,368 14,148
Decrease in estimated losses and loss adjustment expenses for
claims occurring in the prior years, net of reinsurance and salvage
and subrogation (908) (927) (200)
-----------------------------------
Incurred losses and loss adjustment expenses during the current year, net of
reinsurance and salvage and subrogation 13,621 13,441 13,948
Deduct loss and loss adjustment expense payments for claims, net of reinsurance
and salvage and subrogation, occurring during:
Current year (7,678) (7,917) (7,799)
Prior years (5,351) (5,017) (5,067)
-----------------------------------
(13,029) (12,934) (12,866)
-----------------------------------
Reserve for losses and loss adjustment expenses, net of related reinsurance and
salvage and subrogation recoverables, at end of year 12,774 12,182 11,675
Reinsurance recoverables on unpaid losses and loss adjustment expenses, at end
of year 17,210 16,646 14,616
Unearned premium reserve, at end of year 15,906 15,654 13,721
Transferred to parent as part of dividend of Utah Farm Bureau Insurance Company (45,890) -- --
-----------------------------------
Reserves and unearned premiums (gross) on property-casualty policies, at end of
year $ -- $ 44,482 $ 40,012
-----------------------------------
-----------------------------------
</TABLE>
23
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
7. FEDERAL INCOME TAXES
The Company files a consolidated federal income tax return with FBL Financial
Group, Inc. and all of the Company's majority-owned subsidiaries, except FBL
Insurance Company and Rural Security Life Insurance Company. FBL Insurance
Company and Rural Security Life Insurance Company filed separate federal income
tax returns for periods prior to their liquidation during 1995. FBL Financial
Group, Inc. and its direct and indirect subsidiaries included in the
consolidated federal income tax return each report current income tax expense as
allocated under a consolidated tax allocation agreement. Generally, this
allocation results in profitable companies recognizing a tax provision as if the
individual company filed a separate return and loss companies recognizing
benefits to the extent their losses contribute to reduce consolidated taxes.
Deferred income taxes have been established by the Company and its subsidiaries
based upon the temporary differences, the reversal of which will result in
taxable or deductible amounts in future years when the related asset or
liability is recovered or settled, within each entity.
Income tax expenses (credits) are included in the consolidated financial
statements as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
---------------------------------
1995 1994 1993
<S> <C> <C> <C>
---------------------------------
Taxes provided in consolidated statements of income on:
Income from continuing operations before minority interest in earnings of
subsidiaries and equity income (loss):
Current $ 13,278 $ 16,682 $ 17,643
Deferred 14,013 1,752 (3,204)
---------------------------------
27,291 18,434 14,439
Equity income (loss):
Current (212) 240 (188)
Deferred 1,013 (1,097) 513
---------------------------------
801 (857) 325
Discontinued operations:
Current -- (3,649) (975)
Deferred -- 7,137 (587)
---------------------------------
-- 3,488 (1,562)
Taxes provided in consolidated statement of changes in stockholders' equity:
Cumulative effect of change in method of accounting for certain debt
securities -- deferred -- 20,954 --
Amounts attributable to net unrealized investment gains and losses
during year -- deferred 24,435 (29,836) 1,540
---------------------------------
24,435 (8,882) 1,540
---------------------------------
$ 52,527 $ 12,183 $ 14,742
---------------------------------
---------------------------------
</TABLE>
24
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
7. FEDERAL INCOME TAXES (CONTINUED)
The effective tax rate on income from continuing operations before income taxes,
minority interest in earnings of subsidiaries and equity income (loss) is
different from the prevailing federal income tax rate as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------
1995 1994 1993
<S> <C> <C> <C>
--------------------------------
Income from continuing operations before income taxes, minority interest in
earnings of subsidiaries and equity income (loss) $ 76,475 $ 48,536 $ 38,931
--------------------------------
--------------------------------
Income tax at federal statutory rate (35%) $ 26,766 $ 16,988 $ 13,626
Tax effect (decrease) of:
Tax-exempt interest income (574) (549) (563)
Tax-exempt dividend income (798) (603) (546)
Possible adjustments from IRS examinations -- 2,766 1,786
State taxes 1,337 (112) (32)
Other items 560 (56) 168
--------------------------------
Income tax expense $ 27,291 $ 18,434 $ 14,439
--------------------------------
--------------------------------
</TABLE>
During 1994, the Company reached partial settlement with the Internal Revenue
Service (IRS) for tax years 1988 through 1990, that resulted in a payment of
$2,766. The IRS is in the process of conducting examinations for 1991 through
1994. During the years ended December 31, 1994 and 1993, the Company provided
$2,766 and $1,786, respectively, for additional adjustments from routine IRS
examinations. Management believes that amounts provided in the income tax
provision for IRS examinations are adequate to settle any adjustments raised by
the IRS.
The tax effect of temporary differences giving rise to the Company's deferred
income tax liabilities at December 31, 1995 and 1994, is as follows:
<TABLE>
<CAPTION>
DECEMBER 31
-----------------------
1995 1994
<S> <C> <C>
-----------------------
Deferred tax liabilities:
Fixed maturity and equity securities $ 22,700 $ --
Deferred policy acquisition costs 36,192 40,295
Deferred investment gains 9,891 4,711
Other 12,413 12,403
-----------------------
81,196 57,409
Deferred tax assets:
Fixed maturity and equity securities -- (11,217)
Future policy benefits (20,497) (22,793)
Accrued dividends (3,010) (4,282)
Accrued pension costs (9,144) (8,563)
Other (4,822) (7,308)
-----------------------
(37,473) (54,163)
-----------------------
Deferred income tax liability $ 43,723 $ 3,246
-----------------------
-----------------------
</TABLE>
Prior to 1984, a portion of current income of the Company was not subject to
current income taxation, but was accumulated, for tax purposes, in a memorandum
account designated as "policyholders' surplus account". The aggregate
accumulation in this account at December 31, 1995 was $11,148. Should the
policyholders' surplus account of the Company exceed the limitation prescribed
by federal income tax law, or should distributions be made by the Company to its
stockholder in excess of $235,284, such excess would be subject to federal
income taxes at rates then effective. Deferred income taxes of $3,902 have not
been provided on amounts included in this memorandum account since the Company
contemplates no action and can foresee no events that would create such a tax.
25
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
7. FEDERAL INCOME TAXES (CONTINUED)
Deferred income taxes were also reported on equity income (loss) and on the
income (loss) from discontinued operations during these periods. These taxes
arise from the recognition of income and losses differently for purposes of
filing federal income tax returns than for financial reporting purposes.
8. CREDIT ARRANGEMENTS
SHORT-TERM BORROWINGS
As an investor in the Federal Home Loan Bank (FHLB), the Company has the right
to borrow up to $48,229 from the FHLB as of December 31, 1995. As of December
31, 1995, the Company had no outstanding borrowings under this credit
arrangement.
LONG-TERM DEBT
Long-term debt consists of:
<TABLE>
<CAPTION>
DECEMBER 31
---------------------
1995 1994
<S> <C> <C>
---------------------
Lease-backed notes payable, 4.98%, scheduled principal and interest payments through December
1996, secured by rentals to be received under certain operating leases from members of
consolidated group and other affiliates $ 12,516 $ 16,145
Mortgage loan payable to insurance company, 10.25%, due in monthly installments of $25 through
June 1995 when balloon payment of approximately $2,250 was due -- 2,282
Note payable to Rural Mutual Insurance Company, 10%, due through December 2000, collateralized
by an interest in note receivable with a carrying value of $288 88 92
---------------------
$ 12,604 $ 18,519
---------------------
---------------------
</TABLE>
At December 31, 1995, the annual maturities of long-term debt during the next
five years ending on December 31 are as follows:
<TABLE>
<S> <C>
Years ending December 31:
1996 $ 12,521
1997 6
1998 6
1999 7
2000 64
---------
$ 12,604
---------
---------
</TABLE>
9. RETIREMENT AND COMPENSATION PLANS
The Company participates with several other affiliates in various defined
benefit plans covering substantially all employees. The benefits of these plans
are based primarily on years of service and employees' compensation. The Company
and affiliates have adopted a policy of allocating the required contribution to
the plans between themselves generally on a basis of time incurred by the
respective employees for each employer. Such allocations are reviewed annually.
Pension expense aggregated $6,315, $6,171 and $5,109 for the years ended
December 31, 1995, 1994 and 1993, respectively. During the year ended December
31, 1994, the Company introduced a new supplemental plan that increased the
annual expense by approximately $3,193. In addition, during the year ended
December 31, 1993, the Company offered early retirement to a select group of
employees that resulted in a non-recurring charge of approximately $2,928.
The Company provides benefits to agents of the Company and certain of its
affiliates through the Agents' Career Incentive Plan. Company contributions to
the plan are based upon the individual agent's earned commissions and vary
26
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
9. RETIREMENT AND COMPENSATION PLANS (CONTINUED)
based upon the overall production level and the number of years of service.
Company contributions charged to expense with respect to this plan during the
years ended December 31, 1995, 1994 and 1993 were $1,421, $1,648 and $1,388,
respectively.
The Company has established deferred compensation plans for certain key current
and former employees and has certain other benefit plans which provide for
retirement and other benefits. These plans have been accrued or funded as deemed
appropriate by management of the Company.
Certain of the assets related to these plans are on deposit with the Company and
amounts relating to these plans are included in the financial statements herein.
In addition, certain amounts included in the liability for deferred compensation
and other employee benefits relate to deposit administration funds maintained by
the Company on behalf of affiliates offering substantially the same benefit
programs as the Company.
In addition to benefits offered under the aforementioned benefit plans, the
Company and several other affiliates sponsor a plan that provides group term
life insurance benefits to retired full-time employees who have worked ten years
and attained age 55 while in service with the Company.
The Company and affiliates allocate postretirement benefit expense in a manner
consistent with pension expense discussed above. Pension expense aggregated
$103, $96 and $34 for the years ended December 31, 1995, 1994 and 1993,
respectively, with respect to postretirement benefits.
10.STOCKHOLDER'S EQUITY
CHANGE IN AUTHORIZED SHARES
On April 4, 1995, the Board of Directors of the Company approved an increase in
the number of authorized shares of common stock from 25,000 shares to 994,000
shares.
STATUTORY LIMITATIONS ON DIVIDENDS
The ability of Farm Bureau Life to pay dividends to the parent company is
restricted because prior approval of insurance regulatory authorities is
required for payment of dividends to the stockholder which exceed an annual
limitation. During 1996, Farm Bureau Life can pay dividends to the parent
company of approximately $47,372, without prior approval of statutory
authorities. Also, the amount ($208,800 at December 31, 1995) by which the
stockholder's equity stated in conformity with generally accepted accounting
principles exceeds statutory capital and surplus as reported is restricted and
cannot be distributed.
STATUTORY ACCOUNTING POLICIES
The financial statements of the Company included herein differ from related
statutory-basis financial statements principally as follows: (a) the bond
portfolio is segregated into held-for-investment (carried at amortized cost),
available-for-sale (carried at fair value), and trading (reported at fair value)
classifications rather than generally being carried at amortized cost; (b)
acquisition costs of acquiring new business are deferred and amortized over the
life of the policies rather than charged to operations as incurred; (c) future
policy benefit reserves for participating traditional life insurance products
are based on net level premium methods and guaranteed cash value assumptions
which may differ from statutory reserves; (d) future policy benefit reserves on
certain universal life and annuity products are based on full account values,
rather than discounting methodologies utilizing statutory interest rates; (e) on
certain lines of property-casualty insurance, reserves in excess of the amounts
considered adequate by the Company may be necessary to conform with statutory
requirements; (f) reinsurance amounts are shown as gross amounts, net of an
allowance for uncollectible amounts, on the consolidated balance sheet rather
than netted against the corresponding receivable or payable; (g) deferred income
taxes are provided for the difference between the financial statement and income
tax bases of assets and liabilities; (h) net realized gains or losses attributed
to changes in the level of interest rates in the market are recognized as gains
or losses in the statement of income when the sale is completed rather than
deferred and amortized over the remaining life of the fixed maturity security or
mortgage loan; (i) declines in the estimated realizable value of investments are
charged to the statement of income for declines in value, when such declines in
value are judged to be other than temporary rather than through the
establishment of a formula-determined statutory investment reserve (carried as a
liability), changes in which are charged directly to surplus; (j) agents'
balances and certain other assets designated as "non-admitted assets" for
statutory purposes are reported as assets rather than being
27
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
10.STOCKHOLDER'S EQUITY (CONTINUED)
charged to surplus; (k) revenues for universal life and annuity products consist
of policy charges for the cost of insurance, policy administration charges,
amortization of policy initiation fees and surrender charges assessed rather
than premiums received; (l) pension income or expense is recognized in
accordance with SFAS No. 87, "Employers' Accounting for Pensions" rather than in
accordance with rules and regulations permitted by the Employee Retirement
Income Security Act of 1974; (m) expenses for postretirement benefits other than
pensions are recognized in accordance with SFAS No. 106, "Employers' Accounting
for Postretirement Benefits Other than Pensions" rather than the statutory
method which does not accrue for non-vested employees; (n) adjustments to
federal income taxes of prior years are reported as a component of expense in
the statement of income rather than as charges or credits to surplus; (o) the
financial statements of subsidiaries are consolidated with those of the Company;
(p) assets and liabilities are restated to fair values when a change in
ownership occurs that is accounted for as a purchase, with provisions for
goodwill and other intangible assets, rather than continuing to be presented at
historical cost; and (q) operating results of discontinued operations are
segregated from those of continuing operations.
The National Association of Insurance Commissioners currently is in the process
of recodifying statutory accounting practices, the result of which is expected
to constitute the only source of "prescribed" statutory accounting practices.
That project, which is not expected to be completed before 1997, will likely
change, to some extent, statutory accounting practices. The codification may
result in changes to the permitted or prescribed accounting practices that the
Company uses to prepare their statutory-basis financial statements.
Total statutory capital and surplus of the Company was $231,596 at December 31,
1995 and $206,859 at December 31, 1994. Net income (loss) for the Company
determined in accordance with statutory accounting practices was $47,372 in
1995, $(11,013) in 1994 and $17,861 in 1993.
STATUTORY INFORMATION OF SUBSIDIARIES
Capital and surplus as of December 31, 1995 and 1994, and net income (loss) for
the years ended December 31, 1995, 1994 and 1993, as determined in accordance
with statutory accounting practices for the Company's insurance subsidiaries, is
as follows:
<TABLE>
<CAPTION>
CAPITAL AND SURPLUS NET INCOME (LOSS)
DECEMBER 31 YEAR ENDED DECEMBER 31
-------------------- -------------------------------
1995 1994 1995 1994 1993
<S> <C> <C> <C> <C> <C>
-------------------- -------------------------------
Life insurance subsidiaries:
Universal Assurors Life Insurance Company $ 3,200 $ 3,109 $ 92 $ 78 $ 43
FBL Insurance Company -- 5,721 -- 165 9,740
Rural Security Life -- 6,394 -- (3,070) 296
Property-casualty insurance subsidiary -- Utah Farm Bureau
Insurance Company -- 7,829 1,454 799 (226)
</TABLE>
The statutory balances listed above include amounts attributable to minority
interest, as applicable.
11.MANAGEMENT AND SERVICES AGREEMENTS
The Company shares certain office facilities and services with the Iowa Farm
Bureau Federation and its affiliated companies. These expenses are allocated by
the Company on the basis of cost and time studies that are updated annually and
consist primarily of salaries and related expenses, travel, and occupancy costs.
In addition, the Company participates in a management agreement with Farm Bureau
Management Corporation (wholly owned by the Iowa Farm Bureau Federation). Under
this agreement, Farm Bureau Management Corporation provides general business,
administrative analysis, and management services to the Company. During the
years ended December 31, 1995, 1994 and 1993, the Company incurred expenses
under this contract of $3,667, $3,076 and $2,961, respectively.
12.COMMITMENTS AND CONTINGENCIES
ICG Partners, an affiliated joint venture, maintains a line of credit with the
Company and an affiliate, Farm Bureau Mutual Insurance Company, in the amounts
of $25,500 and $4,500, respectively. At December 31, 1995 and 1994, ICG
28
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
12.COMMITMENTS AND CONTINGENCIES (CONTINUED)
Partners had borrowed $4,167 and $5,024, respectively, from the Company against
the line of credit. Interest (11.5% at December 31, 1995) is payable at an
annual rate equal to the prime rate of The Chase Manhattan Bank, N.A., plus
3.00%. The line of credit is collateralized by lease receivables and
substantially all other assets of ICG Partners, subject to senior positions.
In connection with the sale of certain real estate property, Rural Security Life
agreed to act as guarantor of a mortgage loan between the purchaser and a bank.
The Company has now taken the position of Rural Security Life with respect to
the guarantee. Pursuant to the agreement, the Company is required to deposit
securities in a trust in an amount at least equal to the outstanding balance of
the mortgage loan. Should the purchaser default on the mortgage, the bank has
the ability to withdraw the securities at which time the Company would secure a
first interest in the underlying property. At December 31, 1995, the outstanding
balance of the mortgage loan is $5,105. The mortgage loan, which is current at
December 31, 1995, requires monthly payments at the lenders' prime commercial
rate through December 31, 1996, at which time a balloon payment of $4,563 is
due.
In connection with the sale of the aforementioned real estate property, a
subsidiary of the Company entered into a real estate management agreement
whereby it agreed to pay any cash flow deficiencies (as defined in the
agreement) through 1997. The agreement also provided that the subsidiary would
receive 35% of any excess cash flow generated during the same period. At
December 31, 1995, the Company assessed the probability and amount of future
cash payments pursuant to the agreement and determined that an accrual of $555
was appropriate. While such future amounts are subject to the actual experience
of the underlying retail facility, management believes that assumptions utilized
in establishing the accrual are reasonable in all material respects.
The Company is involved in litigation where amounts are alleged that are
substantially in excess of contractual policy benefits or certain other
agreements. Management and its legal counsel do not believe any of these claims
will result in a material loss to the Company.
Assessments are, from time to time, levied on the Company by life and health
guaranty associations in most states in which the Company is licensed to cover
losses of policyholders of insolvent or rehabilitated companies. In some states,
these assessments can be partially recovered through a reduction in future
premium taxes. Assessments have not been material to the Company's financial
statements prior to 1991. However, the economy and other factors have caused a
number of failures of substantially larger companies since that time. The
Company has not been able to reasonably estimate potential future assessments,
so no amounts have been provided for in the accompanying financial statements.
Assessments paid by the Company amounted to $726, $985 and $708 during the years
ended December 31, 1995, 1994 and 1993, respectively.
29
<PAGE>
PART C
OTHER INFORMATION
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
All required financial statements are included in Part B.
(b) Exhibits
<TABLE>
<C> <C> <S>
(1) Certified resolution of the board of directors of Farm Bureau Life Insurance Company (the
"Company") establishing Farm Bureau Life Annuity Account (the "Account").*
(2) Not Applicable.
(3) Underwriting agreement among the Company, the Account and FBL Marketing Services, Inc. ("FBL
Marketing").***
(4) Contract Form.**
(5) Contract Application.***
(6) (a) Certificate of Incorporation of the Company.*
(b) By-Laws of the Company.*
(7) Not Applicable.
(8) Participation agreement the registrant and the Company.***
(9) Opinion and Consent of Stephen M. Morain, Esquire.**
(10) (a) Consent of Sutherland, Asbill & Brennan.
(b) Consent of Ernst & Young LLP.
(c) Consent of Stephen M. Morain
(11) Not Applicable.
(12) Not Applicable.
(13) Not Applicable.
(14) Powers of Attorney.***
</TABLE>
- ------------------------
* Incorporated herein by reference to the initial filing of this registration
statement (File No. 33-67538) on August 17, 1993.
** Incorporated herein by reference to pre-effective amendment No. 1 to this
registration statement (File No. 33-67538) filed on November 30, 1993.
*** Incorporated herein by reference to post-effective amendment No. 1 to this
registration statement (File No. 33-67538) filed on April 28, 1994.
ITEM 25. DIRECTORS AND OFFICERS OF THE COMPANY
Incorporated herein by reference to pages 41 - 46 of the prospectus in
post-effective amendment number 10 to the Form S-6 registration statement (File
No. 33-12789) for certain variable life insurance contracts issued by the
Company filed with the Commission on May 1, 1996.
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
The registrant is a segregated asset account of the Company and is therefore
owned and controlled by the Company. All of the Company's outstanding voting
common stock is owned by FBL Financial Group, Inc. (formerly Farm Bureau
Multi-State Services, Inc.). This Company and its affiliates are described more
fully in the prospectus included in this registration statement. Various
companies and other entities controlled by FBL Financial Group, Inc., may
therefore be considered to be under common control with the registrant or the
Company. Such other companies and entities, together with the identity of the
owners of their common stock (where applicable), are set forth on the following
diagram.
SEE ORGANIZATION CHART ON FOLLOWING PAGE
1
<PAGE>
[CHART]
2
<PAGE>
ITEM 27. NUMBER OF CONTRACT OWNERS
As of April 22, 1996 there were 1,689 owners of contracts.
ITEM 28. INDEMNIFICATION
Article XII of the Company's By-Laws provides for the indemnification by the
Company of any person who is a party or who is threatened to be made a party to
any threatened, pending, or completed action, suit or proceeding, whether civil,
criminal, administrative, or investigative (other than an action by or in the
right of the Company) by reason of the fact that he is or was a director or
officer of the Company, or is or was serving at the request of the Company as a
director, officer, employee, or agent of another corporation, partnership, joint
venture, trust or enterprise, against expenses (including attorneys' fees),
judgments, fines, and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding, if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Company, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. Article
XII also provides for the indemnification by the Company of any person who was
or is a party or is threatened to be made a party to any threatened, pending, or
completed action or suit by or in the right of the Company to procure a judgment
in its favor by reason of the fact that he is or was a director or officer of
the Company, or is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or another enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Company, except that no indemnification will be made in respect of any claim,
issue, or matter as to which such person shall have been adjudged to be liable
for negligence or misconduct in the performance of his duty to the Company
unless and only to the extent that the court in which such action or suit was
brought determines upon application that, despite the adjudication of liability
but in view of all circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which such court shall deem
proper.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
ITEM 29. PRINCIPAL UNDERWRITER
(a) FBL Marketing Services, Inc. is the registrant's principal underwriter
and also serves as the principal underwriter of certain variable life insurance
contracts issued by Farm Bureau Life Variable Account and the Company.
(b) Officers and Directors of FBL Marketing Services, Inc.
<TABLE>
<CAPTION>
NAME AND PRINCIPAL BUSINESS ADDRESS* POSITIONS AND OFFICES WITH THE UNDERWRITER
- ------------------------------------------------------ ------------------------------------------------------------------------
<S> <C>
Stephen M. Morain General Counsel and Assistant Secretary, Iowa Farm Bureau Federation;
Senior Vice President, General Counsel and Director General Counsel, and Director Secretary and Director, Farm Bureau
Management Corporation; Senior Vice President and General Counsel, FBL
Financial Group, Inc., Farm Bureau Life Insurance Company. Holds
various positions with affiliates of the foregoing. Director, Computer
Aided Design Software, Inc., and Iowa Business Development Finance
Corporation Chairman, Edge Technologies, Inc.
William J. Oddy Vice President, Chief Operating Officer and Assistant General Manager,
Vice President, Chief Operating Officer, Assistant FBL Financial Group, Inc., Farm Bureau Life Assistant General Manager
General Manager and Director Insurance Company, Western Farm Bureau Life and Director Insurance
Company. Holds various positions with affiliates of the foregoing.
President, Treasurer and Director, Communications Providers, Inc.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
NAME AND PRINCIPAL BUSINESS ADDRESS* POSITIONS AND OFFICES WITH THE UNDERWRITER
- ------------------------------------------------------ ------------------------------------------------------------------------
<S> <C>
Dennis M. Marker Investment Vice President, Administration, Farm Bureau Life Insurance
Investment Vice President, Administration, Secretary Company, Farm Bureau Mutual Insurance Company, FBL Insurance Secretary
and Director and Director Brokerage, Inc., Western Farm Bureau Life Insurance
Company. Holds various positions with affiliates of the foregoing.
Richard D. Warming Vice President, Chief Investment Officer and Assistant Treasurer, Farm
Vice President, Chief Investment Officer, and Director Bureau Life Insurance Company, FBL Financial Group, Inc., Western Farm
Bureau Life Insurance Company. Holds various positions with affiliates
of the foregoing.
Thomas R. Gibson Executive Vice President and General Manager, Farm Bureau Life Insurance
Executive Vice President, General Manager and Director Company, FBL Financial Group, Inc., Western Farm Bureau Life Insurance
Company. Holds various positions with affiliates of the foregoing.
Timothy J. Hoffman Vice President, Chief Marketing Officer, Farm Bureau Life Insurance
President and Director Company, FBL Financial Group, Inc., Western Farm Bureau Life Insurance
Company. Holds various positions with affiliates of the foregoing.
James W. Noyce Vice President, Chief Financial Officer, Farm Bureau Life Insurance
Vice President, Chief Financial Officer, Treasurer and Company, FBL Financial Group, Inc., Western Farm Bureau Life Insurance
Director Company. Holds various positions with affiliates of the foregoing.
Ronald C. Price Vice President - Agency, Farm Bureau Life Insurance Company, Farm Bureau
Vice President - Agency Mutual Insurance Company, FBL Insurance Brokerage, Inc., Western Farm
Bureau Life Insurance Company. Held various positions with affiliates
of the foregoing.
Sue A. Cornick Market Conduct and Mutual Funds Vice President and Assistant Secretary,
Market Conduct and Mutual Funds Vice President and FBL Investment Advisory Services, Inc.; Market Conduct and Mutual Funds
Assistant Secretary Manager, Assistant Secretary, FBL Money Market Fund, Inc., FBL Series
Fund, Inc. and FBL Variable Insurance Series Fund.
Kristi Rojohn Senior Compliance Assistant and Assistant Secretary, FBL Investment
Senior Compliance Assistant and Assistant Secretary Advisory Services, Inc.; Assistant Secretary, FBL Money Market Fund,
Inc., FBL Series Fund, Inc. and FBL Variable Insurance SeriesFund.
Elaine A. Followwill Compliance Assistant and Assistant Secretary, FBL Investment Advisory
Compliance Assistant and Assistant Secretary Services, Inc.; Assistant Secretary, FBL Money Market Fund, Inc., FBL
Series Fund, Inc. and FBL Variable Insurance Series Fund
Roger Grefe Investment Management Vice President, Farm Bureau Mutual Insurance
Investment Management Vice President Company, FBL Insurance Brokerage, Inc., Farm Bureau Life Insurance
Company, Western Farm Bureau Life Insurance Company. Holds various
positions with affiliates of the foregoing.
Lou Ann Sandburg Investment Vice President, Securities, Farm Bureau Mutual Insurance
Investment Vice President, Securities Company, FBL Insurance Brokerage, Inc., Farm Bureau Life Insurance
Company, Western Farm Bureau Life Insurance Company. Holds various
positions with affiliates of the foregoing.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
NAME AND PRINCIPAL BUSINESS ADDRESS* POSITIONS AND OFFICES WITH THE UNDERWRITER
- ------------------------------------------------------ ------------------------------------------------------------------------
<S> <C>
Robert Rummelhart Fixed Income Vice President, Farm Bureau Mutual Insurance Company, FBL
Fixed Income Vice President Insurance Brokerage, Inc., Farm Bureau Life Insurance Company, Western
Farm Bureau Life Insurance Company. Holds various positions with
affiliates of the foregoing.
Charles T. Happel Portfolio Manager, FBL Investment Advisory Services, Inc.
Portfolio Manager
Laura Kellen Beebe Portfolio Manager, FBL Investment Advisory Services, Inc.
Portfolio Manager
</TABLE>
- ------------------------
*The principal business address of all of the persons listed above is 5400
University Avenue, West Des Moines, Iowa 50266.
ITEM 30. LOCATION BOOKS AND RECORDS
All of the accounts, books, records or other documents required to be kept by
Section 31(a) of the Investment Company Act of 1940 and rules thereunder, are
maintained by the Company at 5400 University Avenue, West Des Moines, Iowa
50266.
ITEM 31. MANAGEMENT SERVICES
All management contracts are discussed in Part A or Part B of this registration
statement.
ITEM 32. UNDERTAKINGS AND REPRESENTATIONS
(a) The registrant undertakes that it will file a post-effective amendment
to this registration statement as frequently as is necessary to ensure that the
audited financial statements in the registration statement are never more than
16 months old for as long as purchase payments under the contracts offered
herein are being accepted.
(b) The registrant undertakes that it will include either (1) as part of any
application to purchase a contract offered by the prospectus, a space that an
applicant can check to request a statement of additional information, or (2) a
post card or similar written communication affixed to or included in the
prospectus that the applicant can remove and send to the Company for a statement
of additional information.
(c) The registrant undertakes to deliver any statement of additional
information and any financial statements required to be made available under
this Form N-4 promptly upon written or oral request to the Company at the
address or phone number listed in the prospectus.
(d) The Company represents that in connection with its offering of the
contracts as funding vehicles for retirement plans meeting the requirements of
Section 403(b) of the Internal Revenue Code of 1986, it is relying on a no-
action letter dated November 28, 1988, to the American Council of Life Insurance
(Ref. No. IP-6-88) regarding Sections 22(e), 27(c)(1), and 27(d) of the
Investment Company Act of 1940, and that paragraphs numbered (1) through (4) of
that letter will be complied with.
5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Farm Bureau Life
Insurance Company certifies that this amendment has met all requirements for
effectiveness pursuant to Paragraph (b) of Rule 485 and has duly caused this
Post-Effective Amendment No. 3 to the Registration Statement to be signed on its
behalf by the undersigned thereunto duly authorized in the City of West Des
Moines, State of Iowa, on the 26th day of April, 1996.
Farm Bureau Life Insurance Company
Farm Bureau Life Annuity Account
By: /s/ EDWARD M. WIEDERSTEIN
-----------------------------------
Edward M. Wiederstein
PRESIDENT
Farm Bureau Life Insurance Company
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 3 to the Registration Statement has been signed
below by the following Directors and Officers of Farm Bureau Life Insurance
Company on the date indicated.
SIGNATURE TITLE DATE
- ----------------------------------- ------------------------- ----------------
/s/ EDWARD M. WIEDERSTEIN President and Director
- ----------------------------------- [Principal Executive April 26, 1996
Edward M. Wiederstein Officer]
Senior Vice President and
/s/ EUGENE R. MAAHS Secretary-Treasurer
- ----------------------------------- [Principal Financial April 26, 1996
Eugene R. Maahs Officer]
Vice President, Chief
/s/ WILLIAM J. ODDY Operating Officer and
- ----------------------------------- Assistant General April 26, 1996
William J. Oddy Manager [Principal
Accounting Officer]
- ----------------------------------- Vice President and April 26, 1996
Craig A. Lang* Director
- ----------------------------------- Director April 26, 1996
Kenneth R. Ashby*
- ----------------------------------- Director April 26, 1996
Caroll C. Burling*
- ----------------------------------- Director April 26, 1996
Al Christopherson*
- ----------------------------------- Director April 26, 1996
Ernest A. Glienke*
- ----------------------------------- Director April 26, 1996
William C. Hanson*
- ----------------------------------- Director April 26, 1996
Craig D. Hill*
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------------- ------------------------- ----------------
<C> <S> <C>
- ----------------------------------- Director April 26, 1996
Daniel L. Johnson*
- ----------------------------------- Director April 26, 1996
Richard G. Kjerstad*
- ----------------------------------- Director April 26, 1996
Lindsey D. Larsen*
- ----------------------------------- Director April 26, 1996
David R. Machacek*
- ----------------------------------- Director April 26, 1996
Donald O. Narigon*
- ----------------------------------- Director April 26, 1996
Bryce P. Neidig*
- ----------------------------------- Director April 26, 1996
Bennett M. Osmonson*
- ----------------------------------- Director April 26, 1996
Howard D. Poulson*
- ----------------------------------- Director April 26, 1996
Sally A. Puttmann*
- ----------------------------------- Director April 26, 1996
Henry V. Rayhons*
- ----------------------------------- Director April 26, 1996
James E. Sage*
- ----------------------------------- Director April 26, 1996
Beverly L. Schnepel*
- ----------------------------------- Director April 26, 1996
F. Gary Steiner*
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant,
Farm Bureau Life Annuity Account, has duly caused this Post-Effective Amendment
No. 3 to the Registration Statement to be signed on its behalf by the
undersigned thereunto duly authorized in the City of West Des Moines, State of
Iowa, on the 26th day of April, 1996.
Farm Bureau Life Annuity Account
(Registrant)
By: Farm Bureau Life Insurance Company
(Depositor)
By: /s/ EDWARD M. WIEDERSTEIN
-----------------------------------
Edward M. Wiederstein
PRESIDENT
Farm Bureau Life Insurance Company
*By /s/ STEPHEN M. MORAIN
----------------------------------
Stephen M. Morain
ATTORNEY-IN-FACT,
pursuant to Power of Attorney.
<PAGE>
EXHIBIT 10(A)
<PAGE>
EXHIBIT 10(a)
SUTHERLAND, ASBILL & BRENNAN LETTERHEAD
APRIL 22, 1996
Board of Directors
Farm Bureau Life Insurance Company
5400 University Avenue
West Des Moines, Iowa 50266
Gentlemen:
We hereby consent to the reference to our name under the caption "Legal Matters"
in the statement of additional information filed as part of post-effective
amendment number 3 to the Registration Statement on Form N-4 filed by Farm
Bureau Life Insurance Company and Farm Bureau Life Annuity Account with the
Securities and Exchange Commission. In giving this consent, we do not admit that
we are in the category of persons whose consent is required under Section 7 of
the Securities Act of 1933.
Very truly yours,
SUTHERLAND, ASBILL & BRENNAN
By: /s/ STEPHEN E. ROTH
--------------------------------------
Stephen E. Roth
<PAGE>
EXHIBIT 10(b)
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors and Participants
Farm Bureau Life Insurance Company
We consent to the reference to our firm under the captions "Financial
Statements" and "Experts" and to the use of our reports dated March 4, 1996 with
respect to Farm Bureau Life Annuity Account and March 12, 1996 with respect to
Farm Bureau Life Insurance Company, in this Post-Effective Amendment to Form N-4
Registration Statement under the Securities Act of 1933 (No 33-67538) and
Registration Statement under the Investment Company Act of 1940 (No. 811-7974)
and related Prospectus to Farm Bureau Life Annuity Account dated May 1, 1996.
Ernst & Young LLP
Des Moines, Iowa
April 24, 1996
<PAGE>
EXHIBIT 10-C
Farm Bureau Financial Services
5400 University Avenue
West Des Moines, Iowa 50266-5997
April 25, 1996
Board of Directors
Farm Bureau Life Insurance Company
5400 University Avenue
West Des Moines, Iowa 50266
Gentlemen:
I hereby consent to the reference to my name under the caption "Legal
Matters" in the Statement of Additional Information filed as part of
Post-Effective Amendment No. 3 to the Registration Statement on Form N-4
filed by Farm Bureau Life Insurance Company and Farm Bureau Life Annuity
Account with the Securities and Exchange Commission.
Very truly yours,
/s/ Stephen M. Morain
Stephen M. Morain
Senior Vice President & General Counsel
