<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 1, 1997
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. 4 /X/
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / /
AMENDMENT NO. 5 /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, L.L.P.
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2404
------------------------
It is proposed that this filing become effective (check appropriate box):
/ / immediately upon filing pursuant to paragraph (b) of
Rule 485;
/X/ on May 1, 1997 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, 1996 on February 25, 1997.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<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
ITEM OF FORM N-4 PROSPECTUS CAPTION
- ---------------- ------------------
1. Cover Page ....................... Cover Page
2. Definitions....................... Definitions
3. Synopsis ......................... Expense Tables; Summary
4. Condensed Financial Information .. Condensed Financial Information; Yields
and Total Returns
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
<PAGE>
13. Legal Proceedings .................. Legal Proceedings
14. Table of Contents for the Statement
of Additional Information ......... Statement of Additional Information
Table of Contents
PART B
ITEM OF FORM N-4 PART B CAPTION
- ---------------- --------------
15. Cover Page ......................... Cover Page
16. Table of Contents .................. Table of Contents
17. General Information and History .... N/A
18. Services
(a) Fees and Expenses of Registrant. N/A
(b) Management Contracts ........... N/A
(c) Custodian ...................... N/A
Independent Public Accountant .. Experts
(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 Data .... Calculation of Yields and Total
Returns; Yields and Total Returns
(prospectus)
22. Annuity Payments ................... Payment Options (prospectus)
23. Financial Statements ............... Financial Statements
PART C -- OTHER INFORMATION
ITEM OF FORM N-4 PART C CAPTION
- ---------------- --------------
24. Financial Statements and Exhibits... Financial Statements and Exhibits
(a) Financial Statements ........... (a) Financial Statements
(b) Exhibits ....................... (b) Exhibits
25. Directors and Officers of the
Depositor ......................... Directors and Officers of Farm
Bureau Life Insurance Company
26. Persons Controlled By or Under
Common Control with the
Depositor or Registrant ........... Persons Controlled By or In 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 Records ... Location of Books and Records
31. Management Services ................ Management Services
32. Undertakings ....................... Undertakings and Representations
Signature Page ..................... Signatures
<PAGE>
[Logo]
VARIABLE ANNUITY
[LOGO]
May 1, 1997
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 Value Growth 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 29 of this Prospectus. You may obtain a copy
of the Statement of Additional Information free of charge by writing 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, 1997
<PAGE>
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TABLE OF CONTENTS
- --------------------------------------------------------------------------------
PAGE
EXPENSE TABLES............................................................. 3
- --------------------------------------------------------------------------------
DEFINITIONS................................................................ 5
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SUMMARY.................................................................... 6
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CONDENSED FINANCIAL INFORMATION............................................ 7
- --------------------------------------------------------------------------------
THE COMPANY, ACCOUNT AND FUND.............................................. 8
Farm Bureau Life Insurance Company..................... 8
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............................................ 11
Issuance of a Contract................................. 11
Premiums............................................... 11
Free-Look Period....................................... 11
Allocation of Premiums................................. 12
Variable Cash Value.................................... 12
Transfer Privilege..................................... 13
Partial Surrenders and Surrenders...................... 13
Death Benefit Before the Retirement Date............... 14
Proceeds on the Retirement Date........................ 15
Payments............................................... 15
Modification........................................... 15
Reports to Owners...................................... 16
Inquiries.............................................. 16
- --------------------------------------------------------------------------------
THE DECLARED INTEREST OPTION............................................... 16
Minimum Guaranteed and Current Interest Rates.......... 16
Transfers From Declared Interest Option................ 17
Payment Deferral....................................... 17
- --------------------------------------------------------------------------------
CHARGES AND DEDUCTIONS..................................................... 17
Surrender Charge (Contingent Deferred Sales Charge).... 17
Annual Administrative Charge........................... 18
Transfer Processing Fee................................ 18
Mortality and Expense Risk Charge...................... 18
Fund Expenses.......................................... 18
Premium Taxes.......................................... 18
Other Taxes............................................ 18
- --------------------------------------------------------------------------------
PAYMENT OPTIONS............................................................ 19
Election of Options.................................... 19
Description of Options................................. 19
- --------------------------------------------------------------------------------
YIELDS AND TOTAL RETURNS................................................... 20
- --------------------------------------------------------------------------------
FEDERAL TAX MATTERS........................................................ 21
Introduction........................................... 21
Tax Status of the Contract............................. 22
Taxation of Annuities.................................. 23
Transfers, Assignments or Exchanges of a Contract...... 25
Withholding............................................ 25
Multiple Contracts..................................... 25
Taxation of Qualified Plans............................ 25
Possible Charge for the Company's Taxes................ 26
Other Tax Consequences................................. 27
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DISTRIBUTION OF THE CONTRACTS.............................................. 27
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LEGAL PROCEEDINGS.......................................................... 27
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VOTING RIGHTS.............................................................. 27
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FINANCIAL STATEMENTS....................................................... 28
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STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS...................... 29
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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*
</TABLE>
* The Company reserves the right to charge a transfer fee in the future. See
"Charges and Deductions."
<TABLE>
<S> <C>
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>
VALUE GROWTH
PORTFOLIO
---------------
<S> <C>
Management Fees (investment advisory fees)................................................ 0.45%
Other Expenses After Reimbursement....................................................... 0.20%
Total Annual Fund Expenses (after reimbursements)...................................... 0.65%(1)
<CAPTION>
HIGH GRADE
BOND PORTFOLIO
---------------
<S> <C>
Management Fees (investment advisory fees)................................................ 0.30%
Other Expenses After Reimbursement....................................................... 0.35%
Total Annual Fund Expenses (after reimbursements)...................................... 0.65%(1)
<CAPTION>
HIGH YIELD
BOND PORTFOLIO
---------------
<S> <C>
Management Fees (investment advisory fees)................................................ 0.45%
Other Expenses After Reimbursement....................................................... 0.20%
Total Annual Fund Expenses (after reimbursements)...................................... 0.65%(1)
<CAPTION>
MANAGED
PORTFOLIO
---------------
<S> <C>
Management Fees (investment advisory fees)................................................ 0.45%
Other Expenses After Reimbursement....................................................... 0.20%
Total Annual Fund Expenses (after reimbursements)...................................... 0.65%(1)
<CAPTION>
MONEY MARKET
PORTFOLIO
---------------
<S> <C>
Management Fees (investment advisory fees)............................................... 0.25%
Other Expenses After Reimbursement....................................................... 0.40%
Total Annual Fund Expenses (after reimbursements)...................................... 0.65%(1)
<CAPTION>
BLUE CHIP
PORTFOLIO
---------------
<S> <C>
Management Fees (investment advisory fees)............................................... 0.20%
Other Expenses After Reimbursement....................................................... 0.28%
Total Annual Fund Expenses (after reimbursements)...................................... 0.48%
</TABLE>
(1) Total portfolio operating expenses were 0.55% for Value Growth, High Grade
Bond, High Yield Bond, Managed and Money Market for the fiscal year ended
December 31, 1996. The figures have been restated for the reduction in
management fees from 0.50% to 0.45% for Value Growth and High Yield Bond,
0.55% to 0.45% for Managed and 0.30% to 0.25% for Money Market, and the
increase in expense reimbursement to 0.65% effective May 1, 1997. (The High
Grade Bond Portfolio did not decrease its management fees.)
3
<PAGE>
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 1996 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 adviser has voluntarily agreed to reimburse each Portfolio for
expenses that exceed 0.55% of the Portfolio's average daily net assets for the
period January 1, 1997 through April 30, 1997, and 0.65% for the period May 1,
1997 through December 31, 1997. Although there can be no assurance that this
reimbursement will be continued, the Fund expects it to be renewed for the 1998
fiscal year. Absent the reimbursements, the Portfolio's total expenses for the
1996 fiscal year would have been: Value Growth 0.69%, High Grade Bond 0.80%,
High Yield Bond 0.87%, Managed 0.75% and Money Market 0.82%.
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>
Value Growth.............................................................................. $ 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................................................................................. 108 187 266
<CAPTION>
SUBACCOUNT 10 YEARS
- ------------------------------------------------------------------------------------------ -----------
<S> <C>
Value Growth.............................................................................. $ 508
High Grade Bond........................................................................... 508
High Yield Bond........................................................................... 508
Managed................................................................................... 508
Money Market.............................................................................. 508
Blue Chip................................................................................. 501
</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>
Value Growth.............................................................................. $ 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................................................................................. 48 144 243
<CAPTION>
SUBACCOUNT 10 YEARS
- ------------------------------------------------------------------------------------------ -----------
<S> <C>
Value Growth.............................................................................. $ 508
High Grade Bond........................................................................... 508
High Yield Bond........................................................................... 508
Managed................................................................................... 508
Money Market.............................................................................. 508
Blue Chip................................................................................. 507
</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 Friday after 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 Idaho, North Dakota and
Wisconsin are allowed to return the Contract within 20
days after he or she receives it. Owners may be entitled
to a 20-day free-look period if the Contract is a
replacement.) 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,
1996.
<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>
Value Growth Subaccount
1994 $ 10.000000 $ 9.444367 432,277.301991
1995 9.444367 11.757386 517,391.062449
1996 11.757386 13.674196 842,024.475801
High Grade Bond Subaccount
1994 $ 10.000000 $ 9.814168 76,901.476870
1995 9.814168 11.081686 111,363.527645
1996 11.081686 11.598221 157,246.624168
High Yield Bond Subaccount
1994 $ 10.000000 $ 9.694750 121,183.181173
1995 9.694750 11.030995 204,375.618302
1996 11.030995 12.279317 259,711.686337
Managed Subaccount
1994 $ 10.000000 $ 9.391586 399,444.197239
1995 9.391586 11.673937 470,401.235924
1996 11.673937 13.544603 874,077.697751
Money Market Subaccount
1994 $ 10.000000 $ 10.244543 34,710.804010
1995 10.244543 10.674932 35,138.421239
1996 10.674932 11.060720 98,181.048713
Blue Chip Subaccount
1994 $ 10.000000 $ 9.894181 79,759.631145
1995 9.894181 12.994267 166,613.068180
1996 12.994267 15.598591 420,198.490583
</TABLE>
7
<PAGE>
- --------------------------------------------------------------------------------
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. At December 31, 1996,
Iowa Farm Bureau Federation owns 63.86% of the
outstanding voting stock of FBL Financial Group, Inc. The
Company is principally engaged in the offering of life
insurance policies, disability income insurance policies
and annuity contracts and is admitted to do business in
fifteen states--Arizona, Colorado, Idaho, Iowa, Kansas,
Minnesota, Montana, Nebraska, New Mexico, North Dakota,
Oklahoma, South Dakota, Utah, Wisconsin and Wyoming.
- --------------------------------------------------------------------------------
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 Value Growth
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.
8
<PAGE>
VALUE GROWTH PORTFOLIO. This Portfolio seeks
long-term capital appreciation. The Portfolio pursues
this objective by investing primarily in equity
securities of companies that the investment adviser
believes have a potential to earn a high return on
capital and/or in equity securities that the
investment adviser believes are undervalued by the
market place. Such equity securities may include
common stock, preferred stock and securities
convertible or exchangeable into common stock.
HIGH GRADE BOND PORTFOLIO. This Portfolio seeks as
high a level of current income as is consistent with
an investment in a high grade 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) growth common stocks and
securities convertible or exchangeable into growth
common stocks, including warrants and rights; (ii)
high grade 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
9
<PAGE>
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.)
STRUCTURAL CHART
[CHART]
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
10
<PAGE>
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. The Contract date will be the
date the properly completed application is received by
the Company at its Home Office. If this date is the 29th,
30th or 31st of any month, the Contract date will be the
28th of such month. 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.
The Company offers a conversion program for its term
insurance or Executive Term policies. Under the program,
owners of a term policy issued by the Company can elect
to convert their term policy to a Contract at any time
between the first and sixth policy anniversaries of their
term policy. Upon conversion, the Company will credit to
the initial premium for the Contract an amount equal to
the annual premium paid on the term policy, up to a limit
of $5.00 per $1,000 of the term insurance face amount.
Custom Term II contains a Premium Credit Benefit that
allows the policy owner credit towards the purchase of a
Contract at any time between the first and sixth policy
anniversaries on their term policy. Upon exercise of this
benefit, the Company will credit to the initial premium
for the Contract an amount equal to the annual premium
paid on the term policy, up to a limit of $5.00 per
$1,000 of the term insurance face amount. The existing
Custom Term II policy need not be canceled to use this
benefit. These credits will be treated as a premium for
purposes of Contract provisions applicable to premiums,
such as premium taxes and contingent deferred sales
charges. Please see your registered representative for
more information. A commission is paid to a registered
representative upon a conversion.
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 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 Idaho,
11
<PAGE>
North Dakota and Wisconsin are allowed to return the
Contract within 20 days of receiving it. Owners may be
entitled to a 20-day free-look period if the Contract is
a replacement.) 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 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
12
<PAGE>
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 of 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.
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
13
<PAGE>
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 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.
14
<PAGE>
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
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.
15
<PAGE>
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 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).
16
<PAGE>
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.
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.
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.
17
<PAGE>
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. (If the Contract date falls on Thanksgiving,
the Friday following Thanksgiving or the weekend
following Thanksgiving, the annual administrative charge
will be deducted on the preceding Business Day.) 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. 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.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
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.
18
<PAGE>
- --------------------------------------------------------------------------------
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 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.
19
<PAGE>
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 last 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
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).
20
<PAGE>
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 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
21
<PAGE>
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 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
22
<PAGE>
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.
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.
23
<PAGE>
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);
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;
24
<PAGE>
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,
selection 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
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,
25
<PAGE>
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.
SIMPLE RETIREMENT ACCOUNTS. Beginning January 1, 1997,
certain small employers may establish Simple Retirement
Accounts as provided by Section 408(p) of the Code, under
which employees may elect to defer up to $6,000 (as
increased for cost of living adjustments) as a percentage
of compensation. The sponsoring employer is required to
make a matching contribution on behalf of contributing
employees. Distributions from a Simple Retirement Account
are subject to the same restrictions that apply to IRA
distributions and are taxed as ordinary income. Subject
to certain exceptions, premature distributions prior to
age 59 1/2 are subject to a 10% penalty tax, which is
increased to 25% if the distribution occurs within the
first two years after the commencement of the employee's
participation in the plan. The failure of the Simple
Retirement Account to meet Code requirements may result
in adverse tax consequences.
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. Code section 403(b)(11)
restricts the distribution under Code section 403(b)
annuity contracts of: (1) elective contributions made in
years beginning after December 31, 1988; (2) earnings on
those contributions; and (3) earnings in such years on
amounts held as of the last year beginning before January
1, 1989. Distribution of those amounts may only occur
upon 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.
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
26
<PAGE>
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 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
27
<PAGE>
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 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, 1996 and 1995, 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, 1996, 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, 1996 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.
28
<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>
- --------------------------------------------------------------------------------
29
<PAGE>
[This page intentionally left blank]
<PAGE>
[LOGO]
FARM BUREAU LIFE INSURANCE COMPANY
FARM BUREAU MUTUAL FUNDS
[LOGO]
5400 UNIVERSITY AVENUE
WEST DES MOINES, IOWA 50266
737-524 (5/97)
<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, 1997
<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 are 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)6 - 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 12/31/96 ENDED 12/31/96 PORTFOLIO TO 12/31/96
- ----------------------------------- ----------------------- ----------------------- -------------------------
<S> <C> <C> <C>
Value Growth....................... 10.10 12.79 7.99
High Grade Bond.................... (1.61) 5.36 8.00
High Yield Bond.................... 5.10 9.10 9.99
Managed............................ 9.84 12.82 10.15
Money Market (1)................... (2.65) 2.05 3.14
Blue Chip (2)...................... 13.88 13.93 16.80
</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, L.L.P. 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, 1996 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, 1996 and 1995 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, 1996, 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, 1996
WITH REPORT OF INDEPENDENT AUDITORS
<PAGE>
FARM BUREAU LIFE ANNUITY ACCOUNT
FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1996
CONTENTS
Report of Independent Auditors . . . . . . . . . . . . . . 1
Financial Statements
Statement of Net Assets . . . . . . . . . . . . . . . . . 2
Statement of Operations . . . . . . . . . . . . . . . . . 3
Statements of Changes in Net Assets . . . . . . . . . . . 5
Notes to Financial Statements . . . . . . . . . . . . . . 8
<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 Value Growth, High Grade Bond,
High Yield Bond, Managed, Money Market, and Blue Chip Subaccounts) as of
December 31, 1996, 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,
1996, 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,
1996, 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 5, 1997
1
<PAGE>
FARM BUREAU LIFE ANNUITY ACCOUNT
STATEMENT OF NET ASSETS
December 31, 1996
<TABLE>
<S> <C>
Assets
Investments in FBL Variable Insurance Series Fund:
Value Growth Subaccount:
Value Growth Portfolio, 876,924 shares at net asset
value of $13.13 per share (cost $10,699,206) $11,514,008
High Grade Bond Subaccount:
High Grade Bond Portfolio, 185,532 shares at net asset value
of $9.83 per share (cost $1,824,312) 1,823,781
High Yield Bond Subaccount:
High Yield Bond Portfolio, 321,804 shares at net asset value
of $9.91 per share (cost $3,162,763) 3,189,082
Managed Subaccount:
Managed Portfolio, 954,761 shares at net asset value of $12.40
per share (cost $11,320,549) 11,839,036
Money Market Subaccount:
Money Market Portfolio, 1,085,953 shares at net asset value of
$1.00 per share (cost $1,085,953) 1,085,953
Blue Chip Subaccount:
Blue Chip Portfolio, 265,580 shares at net asset value of $24.68
per share (cost $5,596,150) 6,554,504
-----------
Total investments (cost $33,688,933) 36,006,364
LIABILITIES --
-----------
NET ASSETS $36,006,364
-----------
-----------
</TABLE>
EXTENDED
UNITS UNIT VALUE VALUE
-------------- ---------- -----------
Net assets are represented by:
Value Growth Subaccount 842,024.475801 $13.674196 $11,514,008
High Grade Bond Subaccount 157,246.624168 11.598221 1,823,781
High Yield Bond Subaccount 259,711.686337 12.279317 3,189,082
Managed Subaccount 874,077.697751 13.544603 11,839,036
Money Market Subaccount 98,181.048713 11.060720 1,085,953
Blue Chip Subaccount 420,198.490583 15.598591 6,554,504
-----------
Total net assets $36,006,364
-----------
SEE ACCOMPANYING NOTES.
2
<PAGE>
FARM BUREAU LIFE ANNUITY ACCOUNT
STATEMENT OF OPERATIONS
Year ended December 31, 1996
VALUE
GROWTH
COMBINED SUBACCOUNT
---------- ----------
Net investment income:
Dividend income $2,772,011 $1,067,084
Mortality and expense risk charges (319,355) (101,491)
---------- ----------
Net investment income 2,452,656 965,593
Net realized and unrealized gain (loss) on investments:
Net realized gain from investment transactions 133,418 57,568
Change in unrealized appreciation/depreciation of
investments 1,224,615 330,549
---------- ----------
Net gain (loss) on investments 1,358,033 388,117
---------- ----------
Net increase in net assets resulting from operations $3,810,689 $1,353,710
---------- ----------
---------- ----------
SEE ACCOMPANYING NOTES.
3
<PAGE>
HIGH GRADE HIGH YIELD MONEY
BOND BOND MANAGED MARKET BLUE CHIP
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ---------- ---------- ----------
$109,506 $278,842 $1,162,640 $32,404 $121,535
(18,785) (35,174) (104,535) (8,390) (50,980)
---------- ---------- ---------- ---------- ----------
90,721 243,668 1,058,105 24,014 70,555
100 1,834 24,808 -- 49,108
(14,630) 61,194 212,363 -- 635,139
---------- ---------- ---------- ---------- ----------
(14,530) 63,028 237,171 -- 684,247
---------- ---------- ---------- ---------- ----------
$ 76,191 $306,696 $1,295,276 $24,014 $754,802
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
4
<PAGE>
FARM BUREAU LIFE ANNUITY ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
COMBINED VALUE GROWTH SUBACCOUNT
------------------------ ------------------------
YEAR ENDED DECEMBER 31 YEAR ENDED DECEMBER 31
1996 1995 1996 1995
----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Operations:
Net investment income $ 2,452,656 $ 825,381 $ 965,593 $ 298,909
Net realized gain (loss) from investment
transactions 133,418 10,164 57,568 4,628
Change in unrealized appreciation/
depreciation of investments 1,224,615 1,891,891 330,549 794,935
----------- ----------- ----------- ----------
Net increase in net assets resulting from
operations 3,810,689 2,727,436 1,353,710 1,098,472
Capital share transactions:
Transfers of net premiums 14,564,927 3,832,438 1,010,140 219,051
Transfers of death benefits -- (8,289) -- (2,783)
Transfers of surrenders (1,083,116) (347,150) (287,461) (109,405)
Transfers of administrative charges (36,178) (26,819) (13,281) (10,548)
Transfers between subaccounts 1,146,764 517,344 3,367,733 805,794
----------- ----------- ----------- ----------
Net increase in net assets resulting from
capital share transactions 14,592,397 3,967,524 4,077,131 902,109
---------- --------- ----------- ----------
Total increase in net assets 18,403,086 6,694,960 5,430,841 2,000,581
Net assets at beginning of year 17,603,278 10,908,318 6,083,167 4,082,586
----------- ----------- ----------- ----------
Net assets at end of year $36,006,364 $17,603,278 $11,514,008 $6,083,167
----------- ----------- ----------- ----------
----------- ----------- ----------- ----------
</TABLE>
5
<PAGE>
HIGH GRADE HIGH YIELD
BOND BOND
SUBACCOUNT SUBACCOUNT MANAGED SUBACCOUNT
---------------------- ---------------------- ----------------------
YEAR ENDED DECEMBER 31 YEAR ENDED DECEMBER 31 YEAR ENDED DECEMBER 31
1996 1995 1996 1995 1996 1995
---------- ---------- ----------- --------- ----------- ---------
$ 90,721 $ 63,300 $ 243,668 $ 152,276 $ 1,058,105 $ 286,163
100 (554) 1,834 (2,670) 24,808 (3,203)
(14,630) 48,916 61,194 41,135 212,363 688,689
---------- ---------- ---------- ---------- ----------- ----------
76,191 111,662 306,696 190,741 1,295,276 971,649
--
162,342 112,029 303,788 362,017 1,247,608 145,281
-- (2,705) -- -- -- (2,801)
(149,055) (15,868) (106,444) (32,757) (378,612) (125,899)
(2,092) (1,511) (3,090) (2,050) (11,934) (9,974)
502,299 275,765 433,666 561,674 4,195,264 761,763
---------- ---------- ---------- ---------- ----------- ----------
513,494 367,710 627,920 888,884 5,052,326 768,370
---------- ---------- ---------- ---------- ----------- ----------
589,685 479,372 934,616 1,079,625 6,347,602 1,740,019
1,234,096 754,724 2,254,466 1,174,841 5,491,434 3,751,415
---------- ---------- ---------- ---------- ----------- ----------
$1,823,781 $1,234,096 $3,189,082 $2,254,466 $11,839,036 $5,491,434
---------- ---------- ---------- ---------- ----------- ----------
---------- ---------- ---------- ---------- ----------- ----------
6
<PAGE>
FARM BUREAU LIFE ANNUITY ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
MONEY MARKET SUBACCOUNT BLUE CHIP SUBACCOUNT
----------------------- -----------------------
YEAR ENDED DECEMBER 31 YEAR ENDED DECEMBER 31
------------------------ -----------------------
1996 1995 1996 1995
----------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Operations:
Net investment income $ 24,014 $ 9,224 $ 70,555 $ 15,509
Net realized gain (loss) from investment
transactions -- -- 49,108 11,963
Change in unrealized appreciation/
depreciation of investments -- -- 635,139 318,216
----------- ---------- ---------- ----------
Net increase in net assets resulting from
operations 24,014 9,224 754,802 345,688
Capital share transactions:
Transfers of net premiums 11,059,760 2,756,283 781,289 237,777
Transfers of death benefits -- -- -- --
Transfers of surrenders (4,846) (4,029) (156,698) (59,192)
Transfers of administrative charges (388) (468) (5,393) (2,268)
Transfers between subaccounts (10,367,687) (2,741,506) 3,015,489 853,854
----------- ---------- ---------- ----------
Net increase in net assets resulting from
capital share transactions 686,839 10,280 3,634,687 1,030,171
----------- ---------- ---------- ----------
Total increase in net assets 710,853 19,504 4,389,489 1,375,859
Net assets at beginning of year 375,100 355,596 2,165,015 789,156
----------- ---------- ---------- ----------
Net assets at end of year $ 1,085,953 $ 375,100 $6,554,504 $2,165,015
----------- ---------- ---------- ----------
----------- ---------- ---------- ----------
</TABLE>
SEE ACCOMPANYING NOTES.
7
<PAGE>
FARM BUREAU LIFE ANNUITY ACCOUNT
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
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. Effective December 1, 1996, the
Growth Common Stock Subaccount was renamed the Value Growth Subaccount.
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 deducts 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 are assessed
in return for the Company's 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 in the Fixed Interest Subaccount.
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.
8
<PAGE>
FARM BUREAU LIFE ANNUITY ACCOUNT
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 or 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.
4. INVESTMENT TRANSACTIONS
The aggregate cost of investment securities purchased and proceeds from
investment securities sold by subaccount are as follows:
YEAR ENDED DECEMBER 31
1996 1995
----------------------- ------------------------
PURCHASES SALES PURCHASES SALES
----------- ---------- ---------- ----------
Value Growth Subaccount $ 5,679,612 $ 636,888 $1,524,853 $ 323,835
High Grade Bond Subaccount 839,451 235,236 483,880 52,870
High Yield Bond Subaccount 1,284,585 412,997 1,205,311 164,151
Managed Subaccount 6,449,185 338,754 1,426,900 372,367
Money Market Subaccount 7,635,182 6,924,329 2,931,906 2,912,402
Blue Chip Subaccount 4,038,721 333,479 1,188,676 142,996
----------- ---------- ---------- ----------
Combined $25,926,736 $8,881,683 $8,761,526 $3,968,621
----------- ---------- ---------- ----------
----------- ---------- ---------- ----------
5. SUMMARY OF CHANGES FROM UNIT TRANSACTIONS
Transactions in units of each subaccount 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, 1996
Value Growth Subaccount 369,011 $ 4,612,528 44,377 $ 535,397 324,634 $ 4,077,131
High Grade Bond Subaccount 65,166 729,945 19,283 216,451 45,883 513,494
High Yield Bond Subaccount 87,020 1,005,743 31,684 377,823 55,336 627,920
Managed Subaccount 422,671 5,286,545 18,994 234,219 403,677 5,052,326
Money Market Subaccount 698,512 7,602,778 635,469 6,915,939 63,043 686,839
Blue Chip Subaccount 272,909 3,917,187 19,323 282,500 253,586 3,634,687
--------- ----------- ------- ---------- --------- -----------
Combined 1,915,289 $23,154,726 769,130 $8,562,329 1,146,159 $14,592,397
--------- ----------- ------- ---------- --------- -----------
--------- ----------- ------- ---------- --------- -----------
</TABLE>
9
<PAGE>
FARM BUREAU LIFE ANNUITY ACCOUNT
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. SUMMARY OF CHANGES FROM UNIT TRANSACTIONS (CONTINUED)
<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
Value Growth 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
------- ---------- ------- ---------- ------- ----------
------- ---------- ------- ---------- ------- ----------
</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,
1996 consisted of:
<TABLE>
<CAPTION>
VALUE HIGH GRADE HIGH YIELD MONEY
GROWTH BOND BOND MANAGED MARKET BLUE CHIP
COMBINED SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
----------- ----------- ---------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Paid-in capital $29,700,408 $ 9,177,226 $1,638,381 $2,702,992 $ 9,697,090 $1,043,283 $5,441,436
Accumulated undistributed net
investment income 3,855,107 1,464,412 185,831 457,937 1,598,651 42,670 105,606
Accumulated undistributed net
realized gain from investment
transactions 133,418 57,568 100 1,834 24,808 -- 49,108
Net unrealized appreciation
(depreciation) of investments 2,317,431 814,802 (531) 26,319 518,487 -- 958,354
----------- ---------- ---------- ---------- ----------- ---------- ----------
Net assets $36,006,364 $11,514,008 $1,823,781 $3,189,082 $11,839,036 $1,085,953 $6,554,504
----------- ----------- ---------- ---------- ----------- ---------- ----------
----------- ----------- ---------- ---------- ----------- ---------- ----------
</TABLE>
10
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS
FARM BUREAU LIFE INSURANCE COMPANY
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
WITH REPORT OF INDEPENDENT AUDITORS
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors...................................................................... 1
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, 1996 and 1995, 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, 1996. 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, 1996 and 1995, and the
consolidated results of its operations and its cash flows for each of the three
years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles.
As described in Note 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 3, 1997
1
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1996 1995
-------------- -------------
<S> <C> <C>
ASSETS
Investments:
Fixed maturities:
Held for investment, at amortized cost (market: 1996--$574,338;
1995--$580,379) $ 562,283 $ 556,099
Available for sale, at market (amortized cost: 1996--$1,096,179;
1995--$943,219) 1,128,587 1,001,302
Equity securities, at market (cost: 1996--$69,915;
1995--$72,731) 79,786 78,173
Held in inventory, at estimated fair value (amortized cost: 1996--$8,716;
1995--$21,555), substantially all held for sale in 1996 13,781 21,913
Mortgage loans on real estate 235,331 215,690
Investment real estate, less allowances for depreciation of $1,741 in
1996 and $1,498 in 1995 26,384 26,384
Policy loans 88,940 88,526
Other long-term investments 8,376 2,892
Short-term investments 62,025 35,358
-------------- -------------
Total investments 2,205,493 2,026,337
Cash and cash equivalents 1,802 --
Securities and indebtedness of related parties 39,244 73,138
Accrued investment income 24,298 24,012
Accounts and notes receivable 1,526 2,009
Amounts receivable from affiliates 7,095 3,824
Reinsurance recoverable 5,552 2,225
Deferred policy acquisition costs 145,614 124,302
Value of insurance in force acquired 39 75
Property and equipment, less allowances for depreciation of $17,313 in
1996 and $42,084 in 1995 36,182 59,990
Current income taxes recoverable -- 12,939
Goodwill, less accumulated amortization of $2,172 in 1996 and $1,556 in 1995 9,726 10,342
Other assets 5,349 11,544
Assets held in separate accounts 79,043 44,789
-------------- -------------
Total assets $ 2,560,963 $ 2,395,526
-------------- -------------
-------------- -------------
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1996 1995
-------------- -------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Policy liabilities and accruals:
Future policy benefits:
Universal life and annuity products $ 1,078,463 $ 1,020,345
Traditional life insurance and accident and health products 555,664 541,356
Unearned revenue reserve 22,182 20,081
Other policy claims and benefits 7,313 5,640
-------------- -------------
1,663,622 1,587,422
Other policyholders' funds:
Supplementary contracts without life contingencies 120,649 111,505
Advance premiums and other deposits 66,572 66,260
Accrued dividends 12,796 12,600
-------------- -------------
200,017 190,365
Long-term debt 81 12,604
Amounts payable to affiliates 12,063 10,443
Current income taxes payable 56 --
Deferred income taxes 43,810 43,723
Other liabilities 71,267 65,784
Liabilities related to separate accounts 79,043 44,789
-------------- -------------
Total liabilities 2,069,959 1,955,130
Commitments and contingencies
Stockholder's equity:
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, issued and outstanding
50,000 shares 2,500 2,500
Additional paid-in capital 55,285 50,426
Net unrealized investment gains 26,327 34,146
Retained earnings 406,892 353,324
-------------- -------------
Total stockholder's equity 491,004 440,396
-------------- -------------
Total liabilities and stockholder's equity $ 2,560,963 $ 2,395,526
-------------- -------------
-------------- -------------
</TABLE>
SEE ACCOMPANYING NOTES.
3
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1996 1995 1994
----------------- ---------------- ----------------
<S> <C> <C> <C>
Revenues:
Universal life and annuity product charges $ 33,755 $ 33,343 $ 30,983
Traditional life insurance premiums 52,051 48,511 46,161
Accident and health premiums 9,560 9,396 2,444
Property-casualty premiums -- 18,709 17,778
Net investment income 166,422 184,348 145,148
Realized gains on investments 54,454 5,902 11,234
Other income 11,887 28,011 26,954
----------------- ---------------- ----------------
Total revenues 328,129 328,220 280,702
Benefits and expenses:
Universal life and annuity benefits 90,720 88,147 75,844
Traditional life insurance and accident and health benefits 42,370 37,710 37,800
Increase in traditional and accident and health future policy benefits 13,679 15,310 6,501
Distributions to participating policyholders 23,725 23,838 22,753
Property-casualty losses and loss adjustment expenses -- 13,621 13,441
Underwriting, acquisition and insurance expenses 45,714 54,336 56,486
Interest expense 425 1,007 1,836
Other expenses 7,814 17,776 17,505
----------------- ---------------- ----------------
Total benefits and expenses 224,447 251,745 232,166
----------------- ---------------- ----------------
103,682 76,475 48,536
Income taxes (34,156) (27,291) (18,434)
Minority interest in losses (earnings) of subsidiaries -- (12) 4
Equity income (loss), net of related income taxes 4,138 1,488 (1,587)
----------------- ---------------- ----------------
Income from continuing operations 73,664 50,660 28,519
Discontinued operations--gain on disposal of cable television operations,
net of related income taxes -- -- 6,479
----------------- ---------------- ----------------
Net income $ 73,664 $ 50,660 $ 34,998
----------------- ---------------- ----------------
----------------- ---------------- ----------------
</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, 1994 $ 1,194 $ 27,030 $ 5,737 $ 278,316
Contribution of minority interest 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
Net income for 1996 -- -- -- 73,664
Change in net unrealized investment gains/losses -- -- (7,819) --
Adjustment resulting from capital transaction of equity
investee -- 4,859 -- --
Dividend of FBL Financial Services, Inc. to parent -- -- -- (15,096)
Cash dividend paid to parent -- -- -- (5,000)
----------- ----------- ----------- ------------
Balance at December 31, 1996 $ 2,500 $ 55,285 $ 26,327 $ 406,892
----------- ----------- ----------- ------------
----------- ----------- ----------- ------------
<CAPTION>
TOTAL
STOCKHOLDERS'
EQUITY
--------------
<S> <C>
Balance at January 1, 1994 $ 312,277
Contribution of minority interest 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
Net income for 1996 73,664
Change in net unrealized investment gains/losses (7,819)
Adjustment resulting from capital transaction of equity
investee 4,859
Dividend of FBL Financial Services, Inc. to parent (15,096)
Cash dividend paid to parent (5,000)
--------------
Balance at December 31, 1996 $ 491,004
--------------
--------------
</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,
--------------------------------
1996 1995 1994
--------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Continuing operations:
Net income $ 73,664 $ 50,660 $ 28,519
Adjustments to reconcile net income to net cash provided by
continuing operations:
Adjustments related to interest sensitive products:
Interest credited to account balances 77,281 77,207 69,954
Charges for mortality and administration (35,050) (34,083) (32,161)
Deferral of unearned revenues 1,825 1,696 2,058
Amortization of unearned revenue reserve (530) (956) (880)
Provision for depreciation and amortization 5,906 10,034 13,449
Net gains and losses related to investments held in inventory (3,125) (25,801) 206
Realized gains on investments (54,454) (5,902) (11,234)
Increase in traditional, accident and health and
property-casualty benefit accruals 13,646 16,144 10,972
Policy acquisition costs deferred (18,561) (18,995) (17,591)
Amortization of deferred policy acquisition costs 7,271 10,181 10,080
Provision for deferred income taxes 6,310 15,026 7,792
Other 14,554 (9,352) (3,522)
--------------------------------
Net cash provided by continuing operations 88,737 85,859 77,642
Discontinued operations:
Net income -- -- 6,479
Adjustments to reconcile net income to net cash used in
discontinued operations -- -- (10,293)
--------------------------------
Net cash used in discontinued operations -- -- (3,814)
--------------------------------
Net cash provided by operating activities 88,737 85,859 73,828
INVESTING ACTIVITIES
Sale, maturity or repayment of investments:
Fixed maturities--held for investment 33,212 16,529 31,540
Fixed maturities--available for sale 222,093 208,189 348,722
Equity securities 101,937 29,766 43,612
Held in inventory 9,779 8,045 7,106
Mortgage loans on real estate 21,977 18,646 24,036
Investment real estate 4,829 927 885
Policy loans 20,092 19,701 18,263
Other long-term investments 625 3,564 31,608
Short-term investments--net -- 68,799 --
--------------------------------
414,544 374,166 505,772
</TABLE>
6
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1996 1995 1994
--------------------------------
<S> <C> <C> <C>
Acquisition of investments:
Fixed maturities--held for investment $ (38,472) $(120,885) $(166,332)
Fixed maturities--available for sale (374,808) (282,657) (262,905)
Equity securities (28,824) (30,380) (37,965)
Held in inventory (532) (13,618) (6,698)
Mortgage loans on real estate (40,601) (17,110) (12,953)
Investment real estate (4,988) (8,034) (668)
Policy loans (20,506) (20,275) (19,207)
Other long-term investments (3) (14) (13,654)
Short-term investments--net (30,249) -- (63,737)
--------------------------------
(538,983) (492,973) (584,119)
Proceeds from disposal, repayments of advances and other
distributions from equity investees 36,265 31,986 44,890
Investments in and advances to equity investees (10,396) (21,463) (39,418)
Net purchases of property and equipment and other (7,062) (7,664) (5,167)
Investing activities of discontinued operations -- -- 29,539
--------------------------------
Net cash used in investing activities (105,632) (115,948) (48,503)
FINANCING ACTIVITIES
Receipts from interest sensitive products credited to policyholder
account balances 173,776 158,650 170,623
Return of policyholder account balances on interest sensitive
products (148,745) (121,863) (137,232)
Proceeds from short-term borrowings -- 8 8,288
Repayments of short-term borrowings -- (6,396) (9,217)
Repayments of long-term debt (1,199) (5,915) (12,119)
Net cash returned to parent as dividend (5,135) (248) --
Financing activities of discontinued operations -- -- (44,000)
--------------------------------
Net cash provided by (used in) financing activities 18,697 24,236 (23,657)
--------------------------------
Increase (decrease) in cash and cash equivalents 1,802 (5,853) 1,668
Cash and cash equivalents at beginning of year -- 5,853 4,185
--------------------------------
Cash and cash equivalents at end of year $ 1,802 $ -- $ 5,853
--------------------------------
--------------------------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest $ 415 $ 1,086 $ 1,880
Income taxes 17,694 16,833 17,691
</TABLE>
SEE ACCOMPANYING NOTES.
7
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
Farm Bureau Life Insurance Company (the Company), a wholly-owned subsidiary of
FBL Financial Group, Inc., 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 15 midwestern and western
states.
Prior to May 31, 1996, the Company owned 100% of the outstanding common stock of
FBL Financial Services, Inc., a holding company which, through its subsidiaries,
provided investment advisory, marketing and distribution, and leasing services.
On May 31, 1996, the common stock of FBL Financial Services, Inc. was
transferred to FBL Financial Group, Inc. in the form of a dividend. FBL
Financial Services, Inc. had investments of $6.1 million, property and equipment
of $26.1 million, other assets of $3.3 million, long-term debt of $11.3 million
and other liabilities of $8.8 million on the date of the dividend.
Prior to December 31, 1995, the Company owned approximately 99% 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.
Utah Farm Bureau Insurance Company had investments of $26.0 million, reinsurance
recoverable of $26.7 million, other assets of $7.6 million, reserves on
property-casualty policies of $30.0 million and other liabilities of $19.1
million on the date of the dividend.
CONSOLIDATION
The consolidated financial statements include the financial statements of the
Company and its direct and indirect subsidiaries. All significant intercompany
transactions have been eliminated.
INVESTMENTS
FIXED MATURITIES AND EQUITY SECURITIES
Fixed maturity securities, comprised of bonds and redeemable preferred stocks,
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.
Equity securities, comprised of common and non-redeemable preferred stocks, are
reported at market value. The change in unrealized appreciation and depreciation
of equity securities is included directly in stockholders' equity, net of any
related deferred income taxes.
HELD IN INVENTORY
The Company has a venture capital investment company subsidiary and, prior to
the dividend of FBL Financial Services, Inc., had certain subsidiaries involved
as broker/dealers. 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.
Held in inventory assets include securities with carrying values of $7.0 million
and $18.6 million at December 31, 1996 and 1995, 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. (FBL
Ventures), the venture capital investment company subsidiary holding the
securities. 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
8
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
During 1996, the Company ceased making new venture capital investments and began
selling the private equity investments held by FBL Ventures in an attempt to
exit most aspects of the venture capital investment business. During 1996, 20
securities with a fair value of $9.7 million were sold including $6.0 million in
securities to a subsidiary of Farm Bureau Mutual Insurance Company, an
affiliate. At December 31, 1996, FBL Ventures had 13 private equity securities
with a fair value of $13.8 million. It is anticipated that these securities will
be sold to unaffiliated third parties or transferred to the Company during 1997.
The Company records transfers to or from FBL Ventures at fair value at the date
of transfer, re-establishing a new cost basis for the security. Prior to 1996,
transfers typically occurred when a previously private issue went public, or
when a private equity security was purchased or otherwise received by another
member of the consolidated group. During the year ended December 31, 1995, two
securities with a total fair value of $27.6 million were transferred out of FBL
Ventures. During the year ended December 31, 1994, two securities with a fair
value of $1.4 million were transferred to FBL Ventures. A gain (recognized in
net investment income) of $24.6 million was recognized on the 1995 transfers,
although neither transfer had an impact on net income (as unrealized
appreciation had been reported prior to the transfer), and no 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 is 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), 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
recognized as realized gains or losses on investments.
INVESTMENT REAL ESTATE
Investment real estate is reported at cost less allowances for depreciation.
Real estate acquired through 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
reduced or eliminated should the fair value of the property increase. Changes in
this valuation allowance are recognized as realized gains or losses on
investments. At December 31, 1996 and 1995, the Company had no such valuation
allowances.
OTHER INVESTMENTS
Policy loans are reported at unpaid principal. Other long-term investments 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.
Changes in the value of the Company's investment in equity investees
attributable to capital transactions of the investee, such as a public offering
of stock, are recorded directly to stockholders' equity.
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 on investments. Realized gains
and losses on sales are determined on the basis
9
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 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 represents the cost assigned to insurance
contracts when an insurance company is acquired. 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 charged to expense 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, comprised primarily of home office properties, furniture
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. Depreciation expense for the years
ended December 31, 1996, 1995 and 1994 was $5.1 million, $9.3 million and $9.0
million, respectively.
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 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, 1996, 1995 or 1994.
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 2.5% to 6.0%. The
average rate of assumed investment yields used in estimating gross margins was
8.34% in 1996, 8.14% in 1995 and 8.10% in 1994. Accrued dividends for
participating business are established for anticipated amounts earned to date
for the period through the policy's next
10
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 45% of receipts from
policyholders during the year ended December 31, 1996 and represented 20% of
life insurance inforce at December 31, 1996.
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 5.75% to 7.50% in 1996, 5.50%
to 7.50% in 1995, and 5.50% to 7.25% in 1994.
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 was determined using case-basis evaluations and
statistical analyses and represented estimates of the ultimate cost of all
unpaid losses incurred through December 31 of each year. Salvage and subrogation
recoverables were offset against reserves on property-casualty policies and were
also estimated using statistical analysis.
Property-casualty insurance unearned premiums were 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 underlying
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.
RECOGNITION OF PREMIUM REVENUES AND COSTS
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.
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.
Property-casualty insurance premiums were recognized using a daily or monthly
pro rata method over the terms of the policies.
All insurance-related revenues, benefits, losses and expenses are reported net
of reinsurance ceded.
11
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
REINSURANCE
The Company uses reinsurance to manage certain risks associated with its
insurance operations. These reinsurance arrangements provide for greater
diversification of business, allow management to control exposure to potential
risks arising from large losses and provide additional capacity for growth.
The Company's life insurance operations cede reinsurance to various reinsurers.
The cost of reinsurance is generally amortized over the contract periods of the
reinsurance agreements.
The Company's property-casualty operations assumed and ceded reinsurance,
principally as a participant in a reinsurance pooling agreement with two
affiliates. The Company's contracts were prospective and the cost of insurance
was amortized over the contract periods in proportion to the amount of insurance
protection provided.
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, 1996, 1995 and 1994, revenues
included as other income aggregated $2.7 million, $8.4 million and $8.5 million,
respectively.
RECLASSIFICATION
Certain amounts in the 1995 and 1994 consolidated financial statements have been
reclassified to conform to the 1996 financial statement presentation.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities 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. For
example, 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.
2. FAIR VALUES OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards (SFAS) 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.
12
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)
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 AND POLICY LOANS: Fair values are estimated by
discounting expected cash flows using interest rates currently being offered for
similar loans.
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 cash surrender value, the cost the Company would incur to extinguish
the liability. The Company is not required to estimate the fair value of its
liabilities under other contracts.
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.
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.
The following sets forth a comparison of the fair values and carrying values of
the Company's financial instruments subject to the provisions of SFAS No. 107:
<TABLE>
<CAPTION>
DECEMBER 31
------------------------------------------------------------
1996 1995
------------------------------ ----------------------------
CARRYING FAIR CARRYING
VALUE VALUE VALUE FAIR VALUE
<S> <C> <C> <C> <C>
------------------------------------------------------------
(DOLLARS IN THOUSANDS)
ASSETS
Fixed maturities:
Held for investment $ 562,283 $ 574,338 $ 556,099 $ 580,379
Available for sale 1,128,587 1,128,587 1,001,302 1,001,302
Equity securities 79,786 79,786 78,173 78,173
Held in inventory 13,781 13,781 21,913 21,913
Mortgage loans on real estate 235,331 245,125 215,690 227,208
Policy loans 88,940 88,940 88,526 88,526
Cash and short-term investments 63,827 63,827 35,358 35,358
Assets held in separate accounts 79,043 79,043 44,789 44,789
LIABILITIES
Future policy benefits $ 702,739 $ 691,261 $ 650,025 $ 644,311
Other policyholders' funds 186,535 186,535 176,811 176,811
Long-term debt 81 90 12,604 12,490
Deposit administration funds 41,630 39,011 33,834 31,294
Liabilities related to separate accounts 79,043 79,043 44,789 44,789
</TABLE>
3. REORGANIZATION AND DISCONTINUED OPERATIONS
In January 1994, the Boards of Directors of the Company and Western Farm Bureau
Life Insurance Company (Western Life) approved an agreement, pursuant to which,
effective January 1, 1994, the acquisition of Western Life was consummated
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 FBL Financial
13
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. REORGANIZATION AND DISCONTINUED OPERATIONS (CONTINUED)
Group, Inc. Under the agreement, 100% of the common stock of the Company and
Western Life were exchanged for stock in the holding company. In addition, in
1994, the minority interests of FBL Insurance Company and Rural Security Life
Insurance Company (Rural Security Life) were exchanged for equivalent value in
the holding company. Subsequently, FBL Financial Group, Inc. contributed the
minority interests of FBL Insurance Company and Rural Security Life and, in
1995, these subsidiaries were liquidated.
The issuance of holding company stock 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 $24.7 million, 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
$4.4 million, which is being amortized over 20 years. Goodwill associated with
Rural Security Life remains attributable to the still existing operations in
Wisconsin which include a license to do business in Wisconsin, an active agency
force, customer lists, a marketing relationship with the Wisconsin Farm Bureau
Federation and an exclusive use of the Farm Bureau trademark in Wisconsin in
connection with the sale of life insurance and annuity products.
On December 23, 1994, the Company sold substantially all operating assets and
certain liabilities of its cable television subsidiary, Vantage Cable
Associates, L.P., to Galaxy Telecom, L.P. for $38.4 million, of which $32.0
million was paid in cash and $6.4 million was represented by a Class D limited
partnership interest in Galaxy Telecom, L.P. The Company recognized a gain on
the sale of approximately $15.4 million, after expenses, closing adjustments and
post-closing adjustments of approximately $1.4 million.
Revenues of the discontinued operations aggregated $10.2 million for the period
from January 1, 1994 through December 22, 1994. Interest expense, $2.9 million
for the period from January 1, 1994 through December 22, 1994, has been
allocated to discontinued operations based on debt that can be identified as
specifically attributed to those operations.
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 and equity securities at December 31, 1996 and 1995:
<TABLE>
<CAPTION>
HELD FOR INVESTMENT
--------------------------------------------------------
GROSS GROSS
UNREALIZED UNREALIZED ESTIMATED
AMORTIZED COST GAINS LOSSES MARKET VALUE
<S> <C> <C> <C> <C>
--------------------------------------------------------
(DOLLARS IN THOUSANDS)
DECEMBER 31, 1996
Bonds:
United States Government and agencies --
mortgage-backed securities $ 168,409 $ 5,976 $ (550) $ 173,835
Industrial and miscellaneous:
Mortgage and asset-backed securities 388,865 10,601 (4,612) 394,854
Other 5,009 649 (9) 5,649
--------------------------------------------------------
Total fixed maturities $ 562,283 $ 17,226 $ (5,171) $ 574,338
--------------------------------------------------------
--------------------------------------------------------
</TABLE>
14
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. INVESTMENT OPERATIONS (CONTINUED)
<TABLE>
<CAPTION>
AVAILABLE FOR SALE
--------------------------------------------------------
GROSS GROSS
UNREALIZED UNREALIZED ESTIMATED
AMORTIZED COST GAINS LOSSES MARKET VALUE
--------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
DECEMBER 31, 1996
Bonds:
United States Government and agencies:
Mortgage-backed securities $ 62,999 $ 3,362 $ (496) $ 65,865
Other 44,440 237 (281) 44,396
State, municipal and other governments 11,530 383 (53) 11,860
Public utilities 119,619 4,995 (836) 123,778
Industrial and miscellaneous:
Mortgage and asset-backed securities 215,309 4,029 (2,297) 217,041
Other 611,021 32,078 (9,989) 633,110
Redeemable preferred stock 31,261 1,369 (93) 32,537
--------------------------------------------------------
Total fixed maturities $ 1,096,179 $ 46,453 $ (14,045) $ 1,128,587
--------------------------------------------------------
--------------------------------------------------------
Equity securities $ 69,915 $ 28,671 $ (18,800) $ 79,786
--------------------------------------------------------
--------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
HELD FOR INVESTMENT
----------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES MARKET VALUE
<S> <C> <C> <C> <C>
----------------------------------------------------
(DOLLARS IN THOUSANDS)
DECEMBER 31, 1995
Bonds:
United States Government and agencies--
mortgage-backed securities $ 178,293 $ 9,518 $ (535 ) $ 187,276
Industrial and miscellaneous:
Mortgage and asset-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
----------------------------------------------------
----------------------------------------------------
<CAPTION>
AVAILABLE FOR SALE
----------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES MARKET VALUE
----------------------------------------------------
(DOLLARS IN THOUSANDS)
<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>
15
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. INVESTMENT OPERATIONS (CONTINUED)
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, 1996, 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>
----------------------------------------------------------
(DOLLARS IN THOUSANDS)
Due in one year or less $ -- $ -- $ 33,970 $ 33,901
Due after one year through five years -- -- 134,031 139,295
Due after five years through ten years -- -- 203,794 212,596
Due after ten years 5,009 5,649 414,815 427,352
----------------------------------------------------------
5,009 5,649 786,610 813,144
Mortgage and asset-backed securities 557,274 568,689 278,308 282,906
Redeemable preferred stocks -- -- 31,261 32,537
----------------------------------------------------------
$ 562,283 $ 574,338 $ 1,096,179 $ 1,128,587
----------------------------------------------------------
----------------------------------------------------------
</TABLE>
The unrealized appreciation or depreciation on fixed maturity and equity
securities available for sale is reported as a separate component of
stockholders' equity, reduced by adjustments to deferred policy acquisition
costs, value of insurance in force acquired and unearned revenue reserve that
would have been required as a charge or credit to income had such amounts been
realized, and a provision for deferred income taxes. Net unrealized investment
gains as reported were comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1996 1995
<S> <C> <C>
-----------------------
(DOLLARS IN THOUSANDS)
Unrealized appreciation on fixed maturity and equity securities available for sale $ 42,279 $ 63,525
Adjustments for assumed changes in amortization pattern of:
Deferred policy acquisition costs (2,159) (12,181)
Unearned revenue reserve 383 1,189
Provision for deferred income taxes (14,176) (18,387)
-----------------------
Net unrealized investment gains $ 26,327 $ 34,146
-----------------------
-----------------------
</TABLE>
Amortized cost of securities held in inventory was $8.7 million and $21.6
million at December 31, 1996 and 1995, respectively. Net unrealized appreciation
on securities held in inventory as of December 31, 1996 and 1995, included gross
unrealized gains of $5.4 million and $1.6 million and gross unrealized losses of
$0.3 million and $1.3 million, 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: Pacific
(28% in 1996 and 25% in 1995), which includes California, Oregon and Washington;
and Mountain (20% in 1996 and 23% in 1995), which includes Arizona, Colorado,
Idaho, New Mexico, Utah and Wyoming. Mortgage loans on real estate have also
been analyzed during the years presented by collateral types with office
buildings (46% in 1996 and 37% in 1995) and retail facilities (34% in 1996 and
36% in 1995), representing the largest holdings.
16
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. INVESTMENT OPERATIONS (CONTINUED)
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,
--------------------------------
1996 1995 1994
<S> <C> <C> <C>
--------------------------------
(DOLLARS IN THOUSANDS)
Balance at beginning of year $ 600 $ 600 $ 600
Realized losses 2,527 -- --
Uncollectible amounts written off, net of recoveries (2,527) -- --
--------------------------------
Balance at end of year $ 600 $ 600 $ 600
--------------------------------
--------------------------------
</TABLE>
The Company's investment in impaired loans (those loans in which the Company
does not believe it will collect all amounts due according to the contractual
terms of the respective loan agreements) totaled $3.1 million at December 31,
1996 and $3.3 million at December 31, 1995. No valuation allowance was
established for the impaired loans as of December 31, 1996 and 1995.
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 $11.7 million and
$34.0 million at December 31, 1996 and 1995, respectively. These loans and
advances were made at similar interest rates and under similar terms as other
mortgage loans.
NET INVESTMENT INCOME
Components of net investment income are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------
1996 1995 1994
<S> <C> <C> <C>
--------------------------------------
(DOLLARS IN THOUSANDS)
Fixed maturities:
Held for investment $ 45,744 $ 42,016 $ 31,235
Available for sale 85,722 83,490 79,280
Equity securities 1,345 1,098 1,527
Held in inventory 3,162 25,868 (130)
Mortgage loans on real estate 20,297 19,544 20,417
Investment real estate 4,495 4,191 4,239
Policy loans 5,653 5,567 5,433
Other long-term investments 536 381 2,696
Short-term investments 3,166 2,671 2,496
Other 3,485 5,581 3,905
--------------------------------------
173,605 190,407 151,098
Less investment expenses (7,183) (6,059) (5,950)
--------------------------------------
Net investment income $ 166,422 $ 184,348 $ 145,148
--------------------------------------
--------------------------------------
</TABLE>
Investment income from investments held in inventory is comprised of:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1996 1995 1994
<S> <C> <C> <C>
--------------------------------
(DOLLARS IN THOUSANDS)
Dividends, interest and other income $ 77 $ 138 $ 205
Net realized gain (loss) from investment transactions (1,811) 25,810 4,026
Change in unrealized appreciation/depreciation of investments 4,896 (80) (4,361)
--------------------------------
$ 3,162 $ 25,868 $ (130)
--------------------------------
--------------------------------
</TABLE>
17
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. INVESTMENT OPERATIONS (CONTINUED)
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 stockholders' equity by $38.9
million, net of offsets aggregating $40.0 million.
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,
--------------------------------------
1996 1995 1994
<S> <C> <C> <C>
--------------------------------------
(DOLLARS IN THOUSANDS)
REALIZED
Fixed maturities--available for sale $ 2,199 $ 5,526 $ 2,554
Equity securities 56,522 (763) 9,535
Mortgage loans on real estate (2,527) -- --
Investment real estate 619 123 (316)
Other long-term investments (154) (158) (1,773)
Securities and indebtedness of related parties (1,438) 1,182 2,864
Notes receivable and other (767) (8) (1,630)
--------------------------------------
Realized gains on investments $ 54,454 $ 5,902 $ 11,234
--------------------------------------
--------------------------------------
UNREALIZED
Fixed maturities:
Held for investment $ (12,225) $ 50,905 $ (51,071)
Available for sale (25,675) 75,590 (96,413)
Equity securities 4,429 9,209 (12,578)
--------------------------------------
Change in unrealized appreciation/depreciation of investments $ (33,471) $ 135,704 $ (160,062)
--------------------------------------
--------------------------------------
</TABLE>
An analysis of sales, maturities and principal repayments of the Company's fixed
maturities portfolio for the years ended December 31, 1996, 1995, and 1994 is as
follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED REALIZED REALIZED
COST GAINS LOSSES PROCEEDS
<S> <C> <C> <C> <C>
-------------------------------------------------
(DOLLARS IN THOUSANDS)
YEAR ENDED DECEMBER 31, 1996
Scheduled principal repayments and calls:
Available for sale $ 148,299 $ -- $ -- $ 148,299
Held for investment 33,212 -- -- 33,212
Sales--available for sale 71,095 5,197 (2,498) 73,794
-------------------------------------------------
Total $ 252,606 $ 5,197 $ (2,498) $ 255,305
-------------------------------------------------
-------------------------------------------------
</TABLE>
18
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. INVESTMENT OPERATIONS (CONTINUED)
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED REALIZED REALIZED
COST GAINS LOSSES PROCEEDS
-------------------------------------------------
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
YEAR ENDED DECEMBER 31, 1995
Scheduled principal repayments and calls:
Available for sale $ 74,710 $ -- $ -- $ 74,710
Held for investment 16,529 -- -- 16,529
Sales--available for sale 127,738 7,186 (1,445) 133,479
-------------------------------------------------
Total $ 218,977 $ 7,186 $ (1,445) $ 224,718
-------------------------------------------------
-------------------------------------------------
YEAR ENDED DECEMBER 31, 1994
Scheduled principal repayments and calls:
Available for sale $ 130,917 $ 1 $ (51) $ 130,867
Held for investment 31,540 -- -- 31,540
Sales--available for sale 215,251 9,247 (6,643) 217,855
-------------------------------------------------
Total $ 377,708 $ 9,248 $ (6,694) $ 380,262
-------------------------------------------------
-------------------------------------------------
</TABLE>
Realized losses totaling $0.5 million and $0.2 million were incurred during the
years ended December 31, 1996 and 1995, respectively, as a result of writedowns
for other than temporary impairment of fixed maturity securities. No such
writedowns were incurred during 1994.
Income taxes during the years ended December 31, 1996, 1995 and 1994 include a
provision of $19.1 million, $2.1 million and $3.9 million, respectively, for the
tax effect of realized gains.
OTHER
In February 1996, an equity investee of the Company completed an initial public
offering which resulted in an increase of $4.9 million, net of $2.6 million in
taxes, in the Company's share of the investee's stockholders' equity. This
increase was credited directly to additional paid-in capital. As a result of the
public offering, the Company's voting stock interest in the investee declined to
an amount less than 20%. Accordingly, the Company discontinued the use of the
equity method of accounting for this investment and has classified the
investment as equity securities (carrying value $18.0 million at December 31,
1996) in the consolidated balance sheet. At December 31, 1995, the investment
had a carrying value of $4.9 million and was classified as securities and
indebtedness of related parties in the consolidated balance sheet. During 1996,
the Company sold approximately 77% of its holdings in this investment and
realized a gain of $50.4 million.
At December 31, 1996, affidavits of deposits covering bonds with a carrying
value of $1,574.4 million, preferred stocks with a carrying value of $20.0
million, mortgage loans (including those made to related parties) with an unpaid
balance of $262.0 million, real estate with a book value of $25.3 million and
policy loans with an unpaid balance of $88.9 million were on deposit with state
agencies to meet regulatory requirements.
At December 31, 1996, the Company had committed to provide additional funding
for mortgage loans on real estate aggregating $5.3 million. 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, 1996, include: fixed maturities--$3.0
million; mortgage loans on real estate--$3.1 million; and other long-term
investments--$1.6 million.
No investment in any person or its affiliates (other than bonds issued by
agencies of the United States Government) exceeded 10% of stockholders' equity
at December 31, 1996.
19
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. REINSURANCE AND POLICY PROVISIONS
LIFE INSURANCE OPERATIONS
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 $0.5 million of coverage per
individual life. The Company does not use financial or surplus relief
reinsurance. At December 31, 1996, life insurance in force ceded on a
consolidated basis totaled $594.9 million or approximately 4.9% 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. Insurance premiums and product charges have been
reduced by $3.4 million, $3.3 million and $5.0 million and insurance benefits
have been reduced by $4.0 million, $1.7 million and $3.6 million during the
years ended December 31, 1996, 1995 and 1994, respectively, as a result of
cession agreements. The amount of reinsurance assumed is not significant.
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,
--------------------------------
1996 1995 1994
<S> <C> <C> <C>
--------------------------------
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Unpaid claims liability, net of related reinsurance, at beginning of year $ 13,899 $ 10,494 $ 16,116
Add:
Provision for claims occurring in the current year 4,737 5,011 3,723
Increase (decrease) in estimated expense for claims occurring in the prior years (371) 2,357 804
--------------------------------
Incurred claim expense during the current year 4,366 7,368 4,527
Deduct expense payments for claims occurring during:
Current year 1,681 2,109 2,585
Prior years 2,772 1,854 7,564
--------------------------------
4,453 3,963 10,149
--------------------------------
Unpaid claims liability, net of related reinsurance, at end of year 13,812 13,899 10,494
Active life reserve 15,376 14,614 15,248
--------------------------------
Net accident and health reserves 29,188 28,513 25,742
Reinsurance ceded 1,483 934 2,706
--------------------------------
Gross accident and health reserves $ 30,671 $ 29,447 $ 28,448
--------------------------------
--------------------------------
</TABLE>
Reserves for unpaid claims are developed using industry mortality and morbidity
data. One year development on prior year reserves represents Company experience
being more or less favorable than that of the industry. Over time, the Company
expects its experience with respect to disability income business to be
comparable to that of the industry. A certain level of volatility in development
is inherent in these reserves since the underlying block of business is
relatively small.
PROPERTY-CASUALTY OPERATIONS
Utah Insurance is a participant with Farm Bureau Mutual Insurance Company and
South Dakota Farm Bureau Mutual Insurance Company, another affiliate, in a
reinsurance pooling agreement (the Farm Bureau Mutual pool). Under the terms of
the agreement, Utah Insurance and South Dakota Farm Bureau Mutual Insurance
Company cede to Farm
20
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. REINSURANCE AND POLICY PROVISIONS (CONTINUED)
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 and 1994, Utah Insurance's participation in the reinsurance
pool was 8%.
Property-casualty premiums earned and losses and loss adjustment expenses
incurred, reflect the following reinsurance amounts:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
----------------------
1995 1994
<S> <C> <C>
----------------------
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C> <C>
PREMIUMS EARNED
Direct premiums written $ 26,244 $ 26,427
Assumed from non-affiliates 5 8
Ceded to non-affiliates (615) (541)
Assumed from Farm Bureau Mutual pool 18,851 18,339
Ceded to Farm Bureau Mutual pool (25,634) (25,894)
----------------------
Net premiums written 18,851 18,339
Increase in reserve for unearned premiums, net of reinsurance (150) (582)
Increase in accrued retrospective premiums 8 21
----------------------
Total premiums earned $ 18,709 $ 17,778
----------------------
----------------------
LOSSES AND LOSS ADJUSTMENT EXPENSES INCURRED
Direct losses and loss adjustment expenses paid $ 18,532 $ 18,033
Net ceded to non-affiliates 91 (175)
Assumed from Farm Bureau Mutual pool 13,030 12,933
Ceded to Farm Bureau Mutual pool (18,623) (17,858)
----------------------
Net losses and loss adjustment expenses paid 13,030 12,933
Increase in losses and loss adjustment expense reserves, net of reinsurance 591 508
----------------------
Total losses and loss adjustment expenses incurred $ 13,621 $ 13,441
----------------------
----------------------
</TABLE>
The difference between premiums on a written and on an earned basis is not
significant.
21
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. REINSURANCE AND POLICY PROVISIONS (CONTINUED)
The activity in the reserves on property-casualty policies, net of reinsurance
and salvage and subrogation recoverables, is summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
----------------------
1995 1994
<S> <C> <C>
----------------------
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Reserves on property-casualty policies (gross), beginning of year $ 28,828 $ 26,291
Less reinsurance recoverables on unpaid losses and loss adjustment expenses, beginning of year (16,646) (14,616)
----------------------
Reserves for losses and loss adjustment expenses, net of related reinsurance, beginning of
year 12,182 11,675
Add:
Provision for losses and loss adjustment expenses for claims occurring in the current year 14,529 14,368
Decrease in estimated losses and loss adjustment expenses for claims occurring in the prior
years (908) (927)
----------------------
Incurred losses and loss adjustment expenses during the current year 13,621 13,441
Deduct loss and loss adjustment expense payments for claims occurring during:
Current year (7,678) (7,917)
Prior years (5,351) (5,017)
----------------------
(13,029) (12,934)
----------------------
Reserve for losses and loss adjustment expenses, net of related reinsurance, end of year 12,774 12,182
Reinsurance recoverables on unpaid losses and loss adjustment expenses, end of year 17,210 16,646
Transfer to parent as part of dividend of Utah Farm Bureau Insurance Company (29,984) --
----------------------
Reserves on property-casualty policies (gross), end of year $ -- $ 28,828
----------------------
----------------------
</TABLE>
6. 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 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.
22
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. INCOME TAXES (CONTINUED)
Income tax expenses (credits) are included in the consolidated financial
statements as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
-------------------------------
(DOLLARS IN THOUSANDS)
<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 $ 28,400 $ 13,278 $ 16,682
Deferred 5,756 14,013 1,752
-------------------------------
34,156 27,291 18,434
Equity income (loss):
Current 1,674 (212) 240
Deferred 554 1,013 (1,097)
-------------------------------
2,228 801 (857)
Discontinued operations:
Current -- -- (3,649)
Deferred -- -- 7,137
-------------------------------
-- -- 3,488
Taxes provided in consolidated statement of changes in
stockholders' equity:
Cumulative effect of change in method of accounting for fixed
maturity securities--deferred -- -- 20,954
Change in net unrealized investment gains/losses--deferred (4,211) 24,435 (29,836)
Adjustment resulting from capital transaction of equity
investee-- deferred 2,617 -- --
-------------------------------
(1,594) 24,435 (8,882)
-------------------------------
$ 34,790 $ 52,527 $ 12,183
-------------------------------
-------------------------------
</TABLE>
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,
----------------------------------
1996 1995 1994
<S> <C> <C> <C>
----------------------------------
(DOLLARS IN THOUSANDS)
Income from continuing operations before income taxes, minority interest in
earnings of subsidiaries and equity income (loss) $ 103,682 $ 76,475 $ 48,536
----------------------------------
----------------------------------
Income tax at federal statutory rate (35%) $ 36,289 $ 26,766 $ 16,988
Tax effect (decrease) of:
Tax-exempt interest income (383) (574) (549)
Tax-exempt dividend income (1,246) (798) (603)
Adjustments from IRS examinations -- -- 2,766
State taxes 242 1,337 (112)
Other items (746) 560 (56)
----------------------------------
Income tax expense $ 34,156 $ 27,291 $ 18,434
----------------------------------
----------------------------------
</TABLE>
During 1994, the Company reached partial settlement with the Internal Revenue
Service (IRS) for tax years 1988 through 1990 and the IRS is in the process of
conducting examinations for 1991 through 1994. During the year ended December
31, 1994, the Company paid $2.8 million for settlement of certain items arising
from the examination of prior years. Management believes that amounts provided
in the income tax provision for IRS examinations are adequate to settle any
adjustments raised by the IRS.
23
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. INCOME TAXES (CONTINUED)
The tax effect of temporary differences giving rise to the Company's deferred
income tax assets and liabilities at December 31, 1996 and 1995, is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1996 1995
<S> <C> <C>
-----------------------
(DOLLARS IN THOUSANDS)
Deferred income tax liabilities:
Fixed maturity and equity securities $ 17,265 $ 22,700
Deferred policy acquisition costs 44,307 35,236
Deferred investment gains 10,551 9,891
Other 13,437 12,413
-----------------------
85,560 80,240
Deferred income tax assets:
Future policy benefits (22,304) (19,541)
Accrued dividends (2,997) (3,010)
Accrued pension costs (10,082) (9,144)
Other (6,367) (4,822)
-----------------------
(41,750) (36,517)
-----------------------
Deferred income tax liability $ 43,810 $ 43,723
-----------------------
-----------------------
</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, 1996 was $11.1 million. 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
stockholders in excess of $374.8 million, such excess would be subject to
federal income taxes at rates then effective. Deferred income taxes of $3.9
million 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.
Deferred income taxes were also reported on equity income (loss) and income 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.
7. CREDIT ARRANGEMENTS
SHORT-TERM DEBT
As an investor in the Federal Home Loan Bank (FHLB), the Company has the right
to borrow up to $48.2 million from the FHLB as of December 31, 1996. As of
December 31, 1996, the Company had no outstanding debt under this credit
arrangement.
LONG-TERM DEBT
Long-term debt consists of:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1996 1995
----------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Lease-backed notes payable, secured by rentals to be received under certain
operating leases from members of consolidated group and other affiliates,
4.89%, due December 1996 $ -- $ 12,516
Note payable to Rural Mutual Insurance Company, an affiliate, 10%, due through
December 2000 81 88
----------------------
$ 81 $ 12,604
----------------------
----------------------
</TABLE>
24
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. 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 net periodic pension cost
of 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 $5.9 million, $7.9 million and $6.2 million for the
years ended December 31, 1996, 1995 and 1994, respectively.
Prior to January 1, 1996, the Company provided benefits to agents of the Company
and certain of its affiliates through the Agents' Career Incentive Plan. Company
contributions to the plan were based upon the individual agent's earned
commissions and varied 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 and 1994 were $1.4 million and
$1.6 million, respectively. During 1996, in conjunction with a restructuring of
the agents' compensation program, contributions to this plan were discontinued.
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. Postretirement benefit
expense is allocated in a manner consistent with pension expense discussed
above. Postretirement pension expense aggregated $0.1 million for the years
ended December 31, 1996, 1995 and 1994.
9. STOCKHOLDERS' EQUITY OF SUBSIDIARIES
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 SUBSIDIARY DIVIDENDS
The ability of the Company 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 1997, the Company can pay dividends to the parent company of
approximately $34.9 million, without prior approval of statutory authorities.
Also, the amount ($210.4 million at December 31, 1996) 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)
deferred income taxes are provided for the difference between the financial
statement and income tax bases of assets and liabilities; (f) 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; (g) declines in the estimated
realizable value of investments are charged
25
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. STOCKHOLDERS' EQUITY OF SUBSIDIARIES (CONTINUED)
to the statement of income when such declines 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; (h) agents' balances and certain other assets
designated as "non-admitted assets" for statutory purposes are reported as
assets rather than being charged to surplus; (i) 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; (j) 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; (k) 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; (l) the financial statements of
subsidiaries are consolidated with those of the Company; and (m) 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.
Total statutory capital and surplus of the Company was $280.6 million at
December 31, 1996 and $231.6 million at December 31, 1995. Net income (loss) for
the Company determined in accordance with statutory accounting practices was
$75.0 million in 1996, $47.4 million in 1995 and $(11.0) million in 1994.
The Company's insurance subsidiaries reported the following statutory amounts to
regulatory agencies, after appropriate eliminations of intercompany accounts:
<TABLE>
<CAPTION>
CAPITAL AND SURPLUS
NET INCOME (LOSS)
DECEMBER 31, YEAR ENDED DECEMBER 31,
-------------------- -------------------------------
1996 1995 1996 1995 1994
-----------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Life insurance subsidiaries $ 3,352 $ 3,200 $ 151 $ 92 $ (2,827)
Property-casualty insurance subsidiary -- -- -- 1,454 799
-----------------------------------------------------
Total $ 3,352 $ 3,200 $ 151 $ 1,546 $ (2,028)
-----------------------------------------------------
-----------------------------------------------------
</TABLE>
The National Association of Insurance Commissioners currently is in the process
of codifying statutory accounting practices, the result of which is expected to
constitute the only source of "prescribed" statutory accounting practices. That
project, which is expected to be completed in the near future, will likely
change, to some extent, statutory accounting practices. The codification may
result in changes to the accounting practices that the Company and its insurance
subsidiaries use to prepare their statutory-basis financial statements.
10. 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, prior to January 1, 1996, the Company participated in a management
agreement with Farm Bureau Management Corporation, a wholly-owned subsidiary of
the Iowa Farm Bureau Federation. Under this agreement, Farm Bureau Management
Corporation provided general business, administration and management services to
the Company. During 1996, the Company's parent assumed responsibility for
providing a majority of these services for itself as well as Farm Bureau
Management Corporation and other affiliates. During the years ended December 31,
1996, 1995 and 1994, the Company incurred expenses under these contracts of $2.4
million, $3.7 million and $3.1 million, respectively.
The Company has equipment and auto lease agreements with FBL Leasing Services,
Inc., a wholly-owned subsidiary of FBL Financial Services, Inc. The Company
incurred expenses totaling $0.7 million during the seven month period ended
December 31, 1996 (period in 1996 subsequent to the dividend of FBL Financial
Services, Inc. to FBL Financial Group, Inc.) under these agreements.
26
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. MANAGEMENT AND SERVICES AGREEMENTS (CONTINUED)
FBL Investment Advisory Services, Inc., a wholly-owned subsidiary of FBL
Financial Services, Inc., provides investment advisory services to the Company.
The related fees are based on the level of assets under management plus certain
out-of-pocket expenses. The Company incurred expenses totaling $1.6 million
during the seven month period ended December 31, 1996 relating to these
services.
Effective January 1, 1996, the Company entered into marketing agreements with
the property-casualty companies operating within its marketing territory,
including Farm Bureau Mutual Insurance Company and other affiliates. Under the
marketing agreements, the property-casualty companies assumed responsibility for
development and management of the Company's agency force for a fee equal to a
percentage of commissions on first year life insurance premiums and annuity
deposits. The Company paid $2.8 million to the property-casualty companies under
these arrangements during the year ended December 31, 1996.
11. COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Company may be involved in litigation
where amounts are alleged that are substantially in excess of contractual policy
benefits or certain other agreements. At December 31, 1996, management is not
aware of any claims for which a material loss is reasonably possible.
Assessments are, from time to time, levied on the insurance subsidiaries of the
Company by guaranty associations in most states in which the subsidiaries are
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. Because the Company is not able to
reasonably estimate the potential amounts of future assessments, the Company
recognizes its obligation for guaranty fund assessments when it receives notice
that an amount is payable to a guaranty fund. Expenses incurred for guaranty
fund assessments were $0.4 million, $0.7 million and $1.0 million during the
years ended December 31, 1996, 1995 and 1994, respectively.
The Company has extended a line of credit in the amount of $15.0 million to FBL
Leasing Services, Inc. Interest on this agreement is based on the prime rate of
a national bank and payable monthly. No amounts were outstanding at December 31,
1996.
In connection with an investment in a limited real estate partnership in 1996,
the Company has agreed to pay any cash flow deficiencies of a medium-sized
shopping center owned by the partnership through January 1, 2001. At December
31, 1996, the Company assessed the probability and amount of future cash flows
from the property and determined that no accrual was necessary. During 1996, the
limited partnership obtained a $5.4 million mortgage loan, secured by the
shopping center, from Farm Bureau Mutual Insurance Company.
The Company has guaranteed the payment of principal and interest on notes
totaling $24.5 million payable by FBL Leasing Services, Inc. to a bank. The
notes are due August 1999 and are backed by lease agreements primarily with
affiliates. The Company believes no losses will be recognized in connection with
this guarantee due to the value of the underlying collateral.
27
<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").(1)
(2) Not Applicable.
(3) Underwriting agreement among the Company, the Account and FBL Marketing Services, Inc. ("FBL
Marketing").(3)
(4) (a)Contract Form.(2)
*(b)Revised Contract Form -- 1996.
(5) (a)Contract Application.(3)
*(b)Revised Contract Application -- 1996.
(6) (a)Certificate of Incorporation of the Company.(1)
(b) By-Laws of the Company.(1)
(7) Not Applicable.
(8) Participation agreement between the registrant and the Company.(3)
(9) Opinion and Consent of Stephen M. Morain, Esquire.(2)
(10) *(a) Consent of Sutherland, Asbill & Brennan, L.L.P.
*(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.(3)
</TABLE>
- ------------------------
* Attached as an exhibit.
(1)Incorporated herein by reference to the initial filing of this registration
statement (File No. 33-67538) on August 17, 1993.
(2)Incorporated herein by reference to pre-effective amendment No. 1 to this
registration statement (File No. 33-67538) filed on November 30, 1993.
(3)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 - 45 of the prospectus in
post-effective amendment number 11 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, 1997.
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. 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>
FBL FINANCIAL GROUP, INC.
OWNERSHIP CHART
[CHART]
2
<PAGE>
ITEM 27. NUMBER OF CONTRACT OWNERS
As of April 7, 1997 there were 2,905 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 COMPANY
- ------------------------------------------------------ ------------------------------------------------------------------------
<S> <C>
Stephen M. Morain General Counsel and Assistant Secretary, Iowa Farm Bureau Federation;
Senior Vice President, General Counsel and Director General Counsel, Secretary and Director, Farm Bureau Management
Corporation; Senior Vice President, General Counsel and Director, FBL
Financial Group, Inc.; Senior Vice President and General Counsel, Farm
Bureau Life Insurance Company and other affiliates of the foregoing.
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 Chief Operating Officer, FBL Financial Group, Inc., Farm Bureau Life
Chief Operating Officer and Director Insurance Company, Western Farm Bureau Life Insurance Company and other
affiliates of the foregoing. Holds various positions with affiliates of
the foregoing.
Dennis M. Marker Investment Vice President, Administration, FBL Financial Group, Inc.
Investment Vice President, Administration, Secretary Holds various positions with affiliates of the foregoing.
and Director
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
NAME AND PRINCIPAL BUSINESS ADDRESS* POSITIONS AND OFFICES WITH THE COMPANY
- ------------------------------------------------------ ------------------------------------------------------------------------
<S> <C>
Richard D. Warming Chief Investment Officer and Assistant Treasurer, Farm Bureau Life
Chief Investment Officer and Director Insurance Company, FBL Financial Group, Inc., Western Farm Bureau Life
Insurance Company and other affiliates of the foregoing. Holds various
positions with affiliates of the foregoing.
Thomas R. Gibson Chief Executive Officer and Director, FBL Financial Group, Inc.; Chief
Chief Executive Officer and Director Executive Officer, Farm Bureau Life Insurance Company, Western Farm
Bureau Life Insurance Company and other affiliates of the foregoing.
Holds various positions with affiliates of the foregoing.
Timothy J. Hoffman Chief Property/Casualty Officer, FBL Financial Group, Inc.; Vice
Vice President and Director President, Farm Bureau Life Insurance Company, Western Farm Bureau Life
Insurance Company and other affiliates of the foregoing. Holds various
positions with affiliates of the foregoing.
James W. Noyce Chief Financial Officer, Farm Bureau Life Insurance Company, FBL
Chief Financial Officer, Treasurer and Director Financial Group, Inc., Western Farm Bureau Life Insurance Company and
other affiliates of the foregoing. Holds various positions with
affiliates of the foregoing.
Thomas E. Burlingame Vice President - Associate General Counsel, FBL Financial Group, Inc.
Vice President - Associate General Counsel and and FBL Investment Advisory Services, Inc.
Director
F. Walter Tomenga Vice President - Corporate Affairs and Marketing Services, FBL Financial
Vice President and Director Group, Inc. Holds various positions with affiliates of the foregoing.
Lynn E. Wilson Vice President - Life Sales, FBL Financial Group, Inc. Holds various
President and Director 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., FBL Money Market Fund, Inc.,
Assistant Secretary 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 F. Grefe Investment Management Vice President, FBL Financial Group, Inc. and FBL
Investment Management Vice President Investment Advisory Services, Inc.
Lou Ann Sandburg Investment Vice President, Securities, FBL Financial Group, Inc. and FBL
Investment Vice President, Securities Investment Advisory Services, Inc.
Robert Rummelhart Fixed Income Vice President, FBL Financial Group, Inc. and FBL
Fixed Income Vice President Investment Advisory Services, Inc.
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.
4
<PAGE>
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.
(e) The Company represents that the aggregate charges under the Contracts
are reasonable in relation to the services rendered, the expenses expected to be
incurred and the risks assumed by the Company.
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. 4 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 29th day of April, 1997.
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. 4 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 29, 1997
Edward M. Wiederstein Officer]
Senior Vice President and
/s/ RICHARD D. HARRIS Secretary-Treasurer
- ----------------------------------- [Principal Financial April 29, 1997
Richard D. Harris Officer]
/s/ JAMES W. NOYCE Chief Financial Officer
- ----------------------------------- [Principal Accounting April 29, 1997
James W. Noyce Officer]
- ----------------------------------- Vice President and April 29, 1997
Craig A. Lang* Director
- ----------------------------------- Director April 29, 1997
Kenneth R. Ashby*
- ----------------------------------- Director April 29, 1997
Caroll C. Burling*
- ----------------------------------- Director April 29, 1997
Al Christopherson*
- ----------------------------------- Director April 29, 1997
Ernest A. Glienke*
- ----------------------------------- Director April 29, 1997
William C. Hanson*
- ----------------------------------- Director April 29, 1997
Craig D. Hill*
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------------- ------------------------- ----------------
<C> <S> <C>
- ----------------------------------- Director April 29, 1997
Daniel L. Johnson*
- ----------------------------------- Director April 29, 1997
Richard G. Kjerstad*
- ----------------------------------- Director April 29, 1997
Lindsey D. Larsen*
- ----------------------------------- Director April 29, 1997
David R. Machacek*
- ----------------------------------- Director April 29, 1997
Donald O. Narigon*
- ----------------------------------- Director April 29, 1997
Bryce P. Neidig*
- ----------------------------------- Director April 29, 1997
Charles E. Norris*
- ----------------------------------- Director April 29, 1997
Bennett M. Osmonson*
- ----------------------------------- Director April 29, 1997
Howard D. Poulson*
- ----------------------------------- Director April 29, 1997
Sally A. Puttmann*
- ----------------------------------- Director April 29, 1997
James E. Sage*
- ----------------------------------- Director April 29, 1997
Beverly L. Schnepel*
- ----------------------------------- Director April 29, 1997
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. 4 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 29th day of April, 1997.
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>
NON-PARTICIPATING
FLEXIBLE PREMIUM
DEFERRED VARIABLE ANNUITY POLICY
RETIREMENT BENEFIT PAYABLE ON THE RETIREMENT DATE. DEATH BENEFIT PAYABLE AT
DEATH BEFORE THE RETIREMENT DATE. FLEXIBLE PREMIUMS PAYABLE FOR THE ANNUITANT'S
LIFE OR UNTIL THE RETIREMENT DATE. THE CASH VALUE IN THE VARIABLE ACCOUNT IS
BASED ON THE INVESTMENT EXPERIENCE OF THAT ACCOUNT, AND MAY INCREASE OR DECREASE
DAILY. IT IS NOT GUARANTEED AS TO DOLLAR AMOUNT. THE VARIABLE FEATURES OF THIS
POLICY ARE DESCRIBED ON PAGES 10 TO 12.
Farm Bureau Life Insurance Company will pay the benefits of this policy subject
to all of its terms.
RIGHT TO EXAMINE POLICY
The owner may cancel this policy by delivering or mailing a written notice or
sending a telegram or fax to the agent through whom it was purchased or the Farm
Bureau Life Insurance Company, 5400 University Avenue, West Des Moines, Iowa
50266-5997 and by returning the policy or contract before midnight of the tenth
day after the date you receive the policy. Notice given by mail and return of
the policy or contract by mail are effective on being postmarked, properly
addressed and postage prepaid. Farm Bureau Life will refund, within seven days
after it receives the returned policy, an amount equal to the greater of the
premiums paid or the sum of:
a) the cash value of the policy on the date the policy is received at the home
office;
b) any administrative charges which were deducted; and
c) amounts approximating daily charges against the variable account.
Signed for and on behalf of Farm Bureau Life Insurance Company at its home
office at 5400 University Avenue, West Des Moines, Iowa, 50266-5997, effective
as of the date of issue of this policy.
/s/ Edward M. Wiederstein /s/ Eugene R. Maahs
President Secretary
FARM BUREAU
LIFE INSURANCE COMPANY
[LOGO]
5400 University Avenue FARM BUREAU
West Des Moines, Iowa 50266-5997 FINANCIAL SERVICES
FORM #: 434-062(03-96)
<PAGE>
This policy is a legal contract between the owner and Farm Bureau Life Insurance
Company.
READ YOUR POLICY CAREFULLY
INDEX OF MAJOR POLICY PROVISIONS
POLICY DATA. . . . . . . . . . . . . . . . . . . . . Page 3
Annuitant; Age; Sex; Policy Number; Policy Date; Owner(s); Normal
Retirement Date; Interest Rates; Schedule of Forms and Premiums;
Schedule of Changes; Schedule of Investment Options.
SECTION 1 - DEFINITIONS. . . . . . . . . . . . . . . Page 5
1.1 You or Your; 1.2 Annuitant; 1.3 Age; 1.4 Business Day; 1.5 Declared
Interest Option; 1.6 Eligibility for Waiver of Surrender Charge; 1.7 Fund;
1.8 General Account; 1.9 Home Office; 1.10 Nursing Home; 1.11 Physician;
1.12 Policy Anniversary; 1.13 Policy Date; 1.14 Policy Year; 1.15
Retirement Date; 1.16 SEC; 1.17 Surrender Charge; 1.18 Terminally Ill; 1.19
Total Disability; 1.20 Valuation Period; 1.21 Variable Account; 1.22 We,
Our, Us or the Company.
SECTION 2 - THE CONTRACT . . . . . . . . . . . . . . Page 6
2.1 Retirement Date; 2.2 Contract; 2.3 Modification; 2.4 Incontestable
Clause; 2.5 Misstatement of Age or Sex; 2.6 Return of Policy and Policy
Settlement; 2.7 Termination; 2.8 Non-Participation.
SECTION 3 - OWNERSHIP AND BENEFICIARIES. . . . . . . Page 8
3.1 Ownership; 3.2 Beneficiary; 3.3 Change of Owner or Beneficiary; 3.4
Assignment.
SECTION 4 - PREMIUMS . . . . . . . . . . . . . . . . Page 8
4.1 Premium Payment; 4.2 Payment Frequency; 4.3 Unscheduled Premiums;
Allocation of Premiums.
SECTION 5 - ANNUITY AND DEATH BENEFITS . . . . . . . Page 9
5.1 Annuity Benefit; 5.2 Death Benefit; 5.3 Distribution Upon Death of
Owner.
SECTION 6 - VARIABLE ACCOUNT . . . . . . . . . . . .Page 10
6.1 Variable Account; 6.2 Subaccounts; 6.3 Fund Portfolios; 6.4 Transfers.
SECTION 7 - CASH VALUE BENEFITS. . . . . . . . . . .Page 12
7.1 Cash Value; 7.2 Net Cash Value; 7.3 Variable Cash Value; 7.4 Subaccount
Units; 7.5 Unit Value; 7.6 Declared Interest Option Cash Value; 7.7
Declared Interest Option; rest; 7.8 Surrender; 7.9 Surrender Charge; 7.10
Ten Percent Withdrawal Privilege; 7.11 Waiver of Surrender Charge; 7.12
Delay of Payment; 7.13 Tax Charges; 7.14 Annual Report.
SECTION 8 - PAYMENT OF PROCEEDS. . . . . . . . . . .Page 17
8.1 Choice of Options; 8.2 Payment Options; 8.3 Interest and Mortality; 8.4
Requirements; 8.5 Effective Date; 8.6 Death of Payee; 8.7 Withdrawal of
Proceeds; 8.8 Claims of Creditors.
PAYMENT OPTION TABLES. . . . . . . . . . . . . . . .Page 19
Any additional benefits and endorsements which apply to this policy are listed
on page 3 and are described in the forms which follow page 20 of this policy.
<PAGE>
POLICY DATA
Annuitant
Age
Sex
Policy Number
Policy Date
Owner(s)
Normal Retirement Date
On Declared Interest Option:
Guaranteed Interest Rate 3.00%
Current Interest Rate 5.25%
Current Interest Rate guaranteed to
- ----------------------- SCHEDULE OF FORMS AND PREMIUMS ------------------------
Form No. Description
434-062(03-96) NON-PARTICIPATING FLEXIBLE PREMIUM
DEFERRED VARIABLE ANNUITY POLICY
3
<PAGE>
SCHEDULE OF CHARGES
-------------------
Annual Administrative Charge $30 per year
Guaranteed Maximum Transfer Charge $25
Mortality and Expense Risk Charge 0.0034035% of the variable cash value
per day (equivalent to 1.25% per year)
A surrender charge will apply during the first 6 years.
The surrender charge will be as shown in the following table:
Surrender Charge
Policy Year (as a percent of Cash Value)
----------- ----------------------------
1 6%
2 5%
3 4%
4 3%
5 2%
6 1%
Thereafter 0%
However, the total surrender charge assessed will never exceed 8.5% of the
premiums paid.
There is a special reduction in the surrender charge if the cash value is
applied under certain payment options available under this policy.
After the first policy year, up to 10% of the cash value may be surrendered
each year without being subject to the surrender charge.
SCHEDULE OF INVESTMENT OPTIONS
------------------------------
General Account The general assets of Farm Bureau Life Insurance Company
Separate Account Farm Bureau Life Annuity Account
Subaccounts A)Money Market Subaccount
B)Value Growth Subaccount
C)Blue Chip Subaccount
D)High Grade Bond Subaccount
E)High Yield Bond Subaccount
F)Managed Subaccount
Fund FBL Variable Insurance Series Fund
Fund Portfolios A)Money Market Portfolio
B)Value Growth Portfolio
C)Blue Chip Portfolio
D)High Grade Bond Portfolio
E)High Yield Bond Portfolio
F)Managed Portfolio
Allocation of Premium A)Money Market Subaccount 100%
B)Value Growth Subaccount 0%
C)Blue Chip Subaccount 0%
D)High Grade Bond Subaccount 0%
E)High Yield Bond Subaccount 0%
F)Managed Subaccount 0%
G)General Account (DIO) 100%
Form Number 434-062(03-96)
Policy Number 09000034A
4
<PAGE>
- --------------------------------------------------------------------------------
SECTION 1 - DEFINITIONS
- --------------------------------------------------------------------------------
1.1 YOU OR YOUR
means the owner of this policy. The owner must also be the annuitant, except as
provided in the ownership provision.
1.2 ANNUITANT
The annuitant is the person on whose life annuity benefits are determined as
shown on page 3.
1.3 AGE
means age at the last birthday.
1.4 BUSINESS DAY
means a day when the New York Stock Exchange is open for trading, except for the
day after Thanksgiving, any other designated Company holidays, and any day the
home office is closed because of a weather-related or comparable type of
emergency. Assets are valued at the close of the business day.
1.5 DECLARED INTEREST OPTION
means an option pursuant to which cash value accrues interest at a guaranteed
minimum rate. The declared interest option is supported by the general account.
1.6 ELIGIBILITY FOR WAIVER OF SURRENDER CHARGE
means the annuitant:
a) is terminally ill;
b) is totally disabled; or
c) has a condition which has required three months of continuous confinement
in a nursing home, as certified by a physician, and is expected to remain
there for the rest of his or her life.
1.7 FUND
means the fund shown on page 4. The fund is registered with the SEC under the
Investment Company Act of 1940 as an open-end diversified management investment
company.
1.8 GENERAL ACCOUNT
means all our assets other than those allocated to the variable account or any
other separate account. We have complete ownership and control of the assets of
the general account.
1.9 HOME OFFICE
means Farm Bureau Life Insurance Company at 5400 University Avenue, West Des
Moines, Iowa, 50266-5997.
1.10 NURSING HOME
means a place which is a separate facility or a distinct part of another health
care facility. It is appropriately licensed as a skilled care, intermediate care
or custodial nursing facility. Such facility provides continuous room and board
accommodations for its patients. It is equipped to provide personal assistance
to six or more persons who are unable to care for themselves due to age,
illness, physical or mental infirmity. It is under the supervision of a licensed
registered nurse or a licensed practical nurse.
1.11 PHYSICIAN
means a licensed, medical practitioner performing within the scope of his/her
license. Such person must be someone other than you, the annuitant, or a member
of the immediate family of either you or the annuitant.
5
<PAGE>
1.12 POLICY ANNIVERSARY
means the same date in each year as the policy date.
1.13 POLICY DATE
means the policy date shown on page 3. This date is used to determine policy
years and anniversaries. The date of issue is equal to the policy date.
1.14 POLICY YEAR
means the 12-month period that begins on the policy date or on a policy
anniversary.
1.15 RETIREMENT DATE
means the policy anniversary nearest the retirement age chosen in the
application. If no age is chosen, age 70 will be used. Subject to the payment
option provisions, the owner may change the retirement date at any time.
However, the retirement date may not be changed after payments begin.
1.16 SEC
means the Securities and Exchange Commission, a U.S. government agency.
1.17 SURRENDER CHARGE
means a fee that is applied at the time of any partial or full surrender.
1.18 TERMINALLY ILL
means an illness or physical condition that, notwithstanding appropriate medical
care and which, as certified by a physician, is reasonably expected to result in
death within 12 months from the date of surrender.
1.19 TOTAL DISABILITY
means the inability to do all of the substantial and material acts necessary to
the prosecution of the annuitant's occupation in a customary and usual manner by
reason of any medically determinable physical or mental impairment that can be
expected to:
a) result in death; or
b) to be of long-continued and indefinite duration.
Proof of the existence of total disability must be furnished in such form and
manner as the Company may request.
1.20 VALUATION PERIOD
means the period between the close of business on a business day and the close
of business on the next business day.
1.21 VARIABLE ACCOUNT
means the Separate Account shown on page 4. It is a unit investment trust
registered with the SEC under the Investment Company Act of 1940.
1.22 WE, OUR, US OR THE COMPANY
means the Farm Bureau Life Insurance Company.
- --------------------------------------------------------------------------------
SECTION 2 - THE CONTRACT
- --------------------------------------------------------------------------------
2.1 RETIREMENT DATE
The owner may choose a retirement date on the application. However, such
retirement date may not be after the latest of the annuitant's 70th birthday or
the 10th policy anniversary. If no date is chosen on the application, age 70
will be used. Before such
6
<PAGE>
retirement date, the owner may choose to defer the first annuity payment until a
later retirement date. However, if the policy is subject to Internal Revenue
Service minimum distribution requirements, we will begin distributions as
required.
2.2 CONTRACT
This policy is a legal contract. We issue this policy in consideration of the
first premium and the statements in the application. The entire contract
consists of:
a) the basic policy;
b) any endorsements or additional benefit riders;
c) the attached copy of your application; and
d) any amendments, supplemental applications or other attached papers.
We rely on statements made in the application for the policy. These statements
in the absence of fraud are deemed representations and not warranties. No
statement will void this policy or be used in defense of a claim unless:
a) it is contained in the application; and
b) such application is attached to this policy.
2.3 MODIFICATION
No one can change any part of this policy except the owner and one of our
officers. Both must agree to a change, and it must be in writing. No agent may
change this policy or waive any of its provisions.
2.4 INCONTESTABLE CLAUSE
We will not contest this policy from its policy date.
2.5 MISSTATEMENT OF AGE OR SEX
We have the right to correct benefits for misstated age or sex. In such an
event, benefits will be the amount the premium actually paid would have bought
at the correct age or sex.
2.6 RETURN OF POLICY AND POLICY SETTLEMENT
We reserve the right to have this policy sent to us for any:
a) modification; b) death settlement; c) surrender or partial surrender; d)
assignment; e) change of owner or beneficiary; f) election; or g) exercise of
any policy privilege.
We will send a payment contract to replace this policy if any payment option is
chosen. All sums to be paid by us under this policy are considered paid when
tendered by us at our home office.
2.7 TERMINATION
This policy ends when any one of the following events occurs:
a) the owner requests that the policy be canceled;
b) the annuitant dies; or
c) the policy is surrendered.
2.8 NON-PARTICIPATION
This policy does not share in the Company's surplus or profits.
7
<PAGE>
- --------------------------------------------------------------------------------
SECTION 3 - OWNERSHIP AND BENEFICIARIES
- --------------------------------------------------------------------------------
3.1 OWNERSHIP
The annuitant will be the owner of the policy except when the policy is funding
a qualified pension plan or trust for the direct benefit of the annuitant. In
such event, a trust will be owner of the policy.
3.2 BENEFICIARY
Beneficiaries are as named in the application, unless changed by the owner. The
interests of any beneficiary in a class who dies before you will pass to any
survivors of the class, unless the policy provides otherwise. Secondary
beneficiaries will have the right to receive the proceeds only if no primary
beneficiary survives. If no beneficiary survives you, we will pay the proceeds
to the owner or the owner's estate.
In finding and identifying beneficiaries we may rely on sworn statements, other
facts, or evidence we deem satisfactory. Any benefits we pay based on such
information will be a valid discharge of our duty up to the amount paid.
3.3 CHANGE OF OWNER OR BENEFICIARY
While the annuitant lives, a change of owner or beneficiary can be made at any
time, subject to the following rules:
a) if the annuitant is the owner, as provided in Section 3.1, the owner may
not change;
b) the change must be in writing on a form acceptable to us;
c) it must be signed by the owner;
d) the form must be sent to and recorded by us; and
e) the change will take effect on the date signed, but it will not apply to
any payment or action by us before we receive the form.
3.4 ASSIGNMENT
No assignment of this policy will bind us unless:
a) it is in writing on a form acceptable to us;
b) signed by the owner; and
c) received by us at our home office.
We will not be responsible for the validity of an assignment.
- --------------------------------------------------------------------------------
SECTION 4 - PREMIUMS
- --------------------------------------------------------------------------------
4.1 PREMIUM PAYMENT
Premium payments may be made at any time. However, we reserve the right to
limit or restrict the amount of a premium payment as we deem appropriate.
Premiums are to be paid at our home office. The first premium must be equal to
or greater than $1,000. Thereafter, premium payments are flexible as to both
timing and amount. Each premium is to be paid at our home office. No payment may
be less than $50 without our consent.
8
<PAGE>
4.2 PAYMENT FREQUENCY
The first premium is due on or prior to the policy date. We will send periodic
reminder notices to the owner. The minimum amount for which such notice will be
sent will be $50. A reminder notice may be sent for different periods, which may
be 12, 6, or 3 months. The reminder notice period may be changed upon request.
4.3 UNSCHEDULED PREMIUMS
Unscheduled premium payments of at least $50 may be made at any time prior to
the maturity date. The Company may, in its discretion, waive the $50 minimum
requirements. The Company reserves the right to limit the number and amount of
unscheduled premium payments.
4.4 ALLOCATION OF PREMIUM
The owner will determine the percentage of premium that will be allocated to
each subaccount of the variable account and to the declared interest option. The
owner may choose to allocate all the premium, a percentage or nothing to a
particular subaccount or to the declared interest option. Any allocation must be
for at least 10% of the premium. A fractional percent may not be chosen.
On the policy date, premiums will be initially allocated to the money market
subaccount. On the eleventh day following the policy date, we will transfer part
or all of the cash value in the money market subaccount to the subaccounts or
the declared interest option in accordance with the premium allocation
percentages shown in the application. For any premium received after we receive
the signed form, the premium will be allocated in accordance with the premium
allocation percentages shown in the application or the most recent written
instructions of the owner.
The owner may change the allocation for future premiums at any time, subject to
the following rules:
a) the policy must be in force;
b) there must be a cash value;
c) the change must be in writing on a form acceptable to us;
d) the form must be signed by the owner;
e) the change will take effect on the business day on or next following the
date we receive the signed form at our home office.
A change of allocation of future premiums does not affect current cash values.
- --------------------------------------------------------------------------------
SECTION 5 - ANNUITY AND DEATH BENEFITS
- --------------------------------------------------------------------------------
5.1 ANNUITY BENEFIT
If the annuitant lives to the retirement date, we will pay the annuitant a
monthly income for the rest of the annuitant's life beginning on the retirement
date if:
a) this policy is in force on the retirement date;
b) the owner has not elected to have the cash value paid in a single sum; and
c) the owner has not elected a payment option.
The amount of payments will be obtained by applying the cash value under payment
9
<PAGE>
option 3. We will make at least 120 payments. After 120 payments the annuitant
must be living to receive further payments. If you die before 120 payments have
been received, any remaining payments will be paid to your beneficiaries. If no
beneficiary survives, we will pay the commuted value, as determined by us, of
any remaining payments to the estate of the last beneficiary to die.
5.2 DEATH BENEFIT
We will pay the death proceeds to the beneficiary:
a) if the annuitant dies before the retirement date;
b) within two months after receipt by us of due proof of the annuitant's
death;
c) if the policy is in force on the date of the annuitant's death; and
d) subject to the terms and conditions of this policy.
The death proceeds will be the greater of the cash value or the sum of premiums
paid minus any previous partial surrenders, as of receipt of due proof of death.
Interest will be paid on the death proceeds from such date to the date of
payment at a rate set by us, but not less than 3% of an annual basis or any rate
required by law.
5.3 DISTRIBUTION UPON DEATH OF OWNER
If the owner of a non-qualified policy dies before the retirement date, the
death proceeds will be paid to the beneficiary in accordance with the provisions
of Section 72(s) of the Internal Revenue Code (IRC). The death proceeds must be:
a) distributed within five calendar years of the date of death; or
b) annuitized within one calendar year after date of death over a period not
exceeding the life expectancy of the beneficiary.
If the annuitant's spouse is named as beneficiary, such spouse may continue this
policy as the annuitant and owner.
- --------------------------------------------------------------------------------
SECTION 6 - VARIABLE ACCOUNT
- --------------------------------------------------------------------------------
6.1 VARIABLE ACCOUNT
We own the assets of the variable account. We will value the assets of the
variable account each business day. The assets of such account will be kept
separate from the assets of our general account and any other separate accounts.
Income, and realized and unrealized gains or losses from assets in the variable
account will be credited to or charged against such account without regard to
our other income, gains or losses.
That portion of the assets of the variable account which equals the reserves and
other policy liabilities of the policies which are supported by the variable
account will not be charged with liabilities arising from any other business we
conduct. We have the right to transfer to our general account any assets of the
variable account which are in excess of such reserves and other policy
liabilities.
While the variable account is registered with the SEC and thereby subject to
SEC rules and regulations, it is also subject to the laws of the State of Iowa
which regulate the operations of insurance companies incorporated in Iowa. The
investment policy of the variable account will not be changed without the
approval of the Insurance Commissioner of the State of Iowa. The approval
process is on file with the insurance
10
<PAGE>
commissioner of the state in which this policy was delivered.
We also reserve the right to transfer assets of the variable account, which we
determine to be associated with the class of policies to which this policy
belongs, to another separate account. If this type of transfer is made, the term
"variable account," as used in this policy, shall then mean the variable account
to which the assets were transferred.
When permitted by law, we also reserve the right to:
a) deregister the variable account under the Investment Company Act of 1940;
b) manage the variable account under the direction of a committee;
c) restrict or eliminate any voting rights of owners, or other persons who
have voting rights as to the variable account; and
d) combine the variable account with other separate accounts.
6.2 SUBACCOUNTS
The variable account is divided into subaccounts. The subaccounts are listed on
page 4. Subject to obtaining any approvals or consents required by applicable
law, we reserve the right to eliminate or combine any subaccounts and the right
to transfer the assets of one or more subaccounts to any other subaccount. We
also reserve the right to add new subaccounts and make such subaccounts
available to any class or series of policies as we deem appropriate. Each new
subaccount would invest in a new portfolio of the Fund, or in shares of another
investment company. The owner will determine the percentage of premium that will
be allocated to each subaccount in accordance with the allocation of premium
provision.
6.3 FUND PORTFOLIOS
The fund has several portfolios each of which corresponds to one of the
subaccounts of the variable account. The portfolios are listed on page 4.
Premiums allocated to a subaccount will automatically be invested in the fund
portfolio associated with that subaccount. The owner will share only in the
income, gains or losses of the portfolio(s) where shares are held.
We have the right, subject to compliance with any applicable laws, to make:
a) additions to;
b) deletions from; or
c) substitutions for;
the shares of a fund portfolio that are held by the variable account or that the
account may purchase.
We also reserve the right to dispose of the shares of a portfolio of the fund
listed on page 4 and to substitute shares of another portfolio of such fund or
another mutual fund portfolio, if:
a) the shares of the portfolio are no longer available for investment; or
b) if in our judgment further investment in the portfolio should become
inappropriate in view of the purposes of the variable account.
11
<PAGE>
In the event of any substitution or change, we may, by appropriate endorsement,
make such changes in this and other policies as may be necessary or appropriate
to reflect the substitution or change.
6.4 TRANSFERS
The owner may transfer all or part of the cash value among the subaccounts of
the variable account and between the subaccounts and the declared interest
option, subject to the following rules:
a) The transfer request must be in writing on a form acceptable to us.
b) The form must be signed by the owner.
c) The transfer will take effect as of the end of the valuation period during
which we receive the signed form at our home office.
d) The owner may transfer amounts among the subaccounts of the variable
account an unlimited number of times in a policy year.
e) The owner may transfer amounts from the declared interest option to the
variable account only once in a policy year. Amounts transferred from the
declared interest option are considered transferred on a last-in-first-out
basis.
f) The first transfer in each policy year will be made without a transfer
charge. Thereafter, each time amounts are transferred a transfer charge may
be imposed. The guaranteed maximum transfer charge is shown on page 4.
g) The cash value on the date of the transfer will not be affected by the
transfer except to the extent of the transfer charge. Unless paid in cash,
the transfer charge will be deducted on a pro rata basis from the declared
interest option and/or the subaccounts to which the transfer is made.
h) The owner must transfer at least:
(1) a total of $100; or
(2) the total cash value in the subaccount or the total cash value in the
declared interest option, if the total amount transferred is less
than $100.
i) No more than 25% of the cash value in the declared interest option may be
transferred unless the balance in the declared interest option after the
transfer would be less than $1,000. If the balance in the declared interest
option would fall below $1,000, the cash value in the declared interest
option may be transferred.
- --------------------------------------------------------------------------------
SECTION 7 - CASH VALUE BENEFITS
- --------------------------------------------------------------------------------
7.1 CASH VALUE
The cash value of this policy will be the sum of:
a) the cash value in the subaccounts of the variable account; plus
b) the cash value in the declared interest option.
12
<PAGE>
All of the values are the same or more than the minimums set by the laws of the
state where the policy is delivered.
7.2 NET CASH VALUE
The net cash value of this policy will be the cash value less a surrender
charge. All of the values are the same or more than the minimums set by the laws
of the state where the policy is delivered.
7.3 VARIABLE CASH VALUE
On the business day on or next following the day we receive a completed
application and the minimum initial premium, the variable cash value is the
total amount of premium, if any, allocated to the subaccounts of the variable
account. After such date, the policy's variable cash value is equal to the sum
of the policy's cash value in each subaccount. The value in a subaccount is
equal to a) multiplied by b) where:
a) is the current number of subaccount units; and
b) is the current unit value.
The variable cash value will vary from business day to business day reflecting
changes in a) and b) above.
7.4 SUBACCOUNT UNITS
When transactions are made which affect the variable cash value, dollar amounts
are converted to subaccount units. The number of subaccount units for a
transaction is determined by dividing the dollar amount of the transaction by
the current unit value.
The number of units for a subaccount attributable to a policy increases when:
a) premiums are allocated under the policy to that subaccount; or
b) transfers from the declared interest option or other subaccounts are
credited under the policy to that subaccount.
The number of units for a subaccount attributable to a policy decreases when:
a) the owner makes a surrender from that subaccount;
b) transfers are made from that subaccount to the declared interest option or
other subaccounts; or
c) the annual administrative charge shown on page 4 is deducted (the annual
administrative charge will be prorated among the subaccounts and the
declared interest option).
7.5 UNIT VALUE
The unit value for a subaccount on any business day is determined by dividing
each subaccount's net asset value by the number of units outstanding at the time
of calculation. The unit value for each subaccount was set initially at $10.00
when the subaccounts first purchased fund shares. The unit value for each
subsequent valuation period is calculated by dividing a) by b), where:
a) is:
(1) the value of the net assets of the subaccount at the end of the
preceding valuation period; plus
(2) the investment income and capital gains, realized or unrealized,
credited to the net assets of that subaccount during the valuation
period for which the unit value
13
<PAGE>
is being determined; minus
(3) the capital losses, realized or unrealized, charged against those net
assets during the valuation period; minus
(4) any amount charged against the subaccount for taxes, or any amount set
aside during the valuation period by the Company as a provision for
taxes attributable to the operation or maintenance of that
subaccount; minus
(5) a charge no greater than .0034035% of the daily net assets in that
subaccount for each day in the valuation period. This corresponds
to a charge of 1.25% per year of the average daily net assets of the
subaccount for mortality and expense risks.
b) is the number of units outstanding at the end of the preceding valuation
period.
The unit value for a valuation period applies for each day in the period. We
will value the net assets in each subaccount at their fair market value in
accordance with accepted accounting practices and applicable laws and
regulations.
7.6 DECLARED INTEREST OPTION CASH VALUE
The declared interest option cash value as of the eleventh day following the
policy date is the premium allocated to the declared interest option as of that
date. Thereafter, the declared interest option cash value changes every
valuation period.
The declared interest option cash value increases when:
a) premiums are allocated to the declared interest option; or
b) transfers from the other subaccounts are credited to the declared interest
option; or
c) any interest is credited to the declared interest option.
The declared interest option cash value decreases when:
a) the owner makes a surrender or partial surrender from the declared interest
option; or
b) transfers are made from the declared interest option to other subaccounts;
or
c) the annual administrative charge shown on page 4 is deducted (the annual
administrative charge will be prorated among the subaccounts and the
declared interest option).
For the purposes of the above calculation, interest does not accrue on amounts
deducted for policy charges, amounts transferred from or on amounts surrendered
from the declared interest option. Interest is accrued on the cash value of the
declared interest option on a daily basis and is credited no less frequently
than once a policy year.
7.7 DECLARED INTEREST OPTION INTEREST
The guaranteed minimum interest rate applied to the declared interest option
cash value is an effective rate of 3.0% per year. Interest in excess of the
minimum rate may be applied. The amount of the excess interest credited for any
policy year will be set by us at the start of that policy year and will be
guaranteed for such year.
14
<PAGE>
7.8 SURRENDER
Before the retirement date, the owner may surrender all or a portion of the cash
value, subject to the following rules:
a) The owner must send a written request to us along with such information or
evidence as may be required by law or as may be needed to process the
request.
b) The amount of any such surrender may be paid in cash; if it is a full
surrender, we may apply part or all of it under a payment option.
c) The amount of any partial surrender must be at least $500.
d) If the cash value after a partial surrender is less than $2,000, we have
the right to pay the remaining cash value to the owner as a full surrender.
e) We have the right to defer payment of a surrender from the declared
interest option for up to 6 months.
f) During the first six policy years, the amount of cash value surrendered
will be subject to a surrender charge.
g) If the entire cash value is surrendered, the policy will terminate.
h) The cash value will be reduced by the amount of any partial surrender and
surrender charge. The owner may tell us how to allocate a partial surrender
among the subaccounts and the declared interest option. If the owner does
not so instruct, we will prorate the partial surrender among the
subaccounts and the declared interest option. The allocation will be in the
same proportion that the cash value in each of the subaccounts and the cash
value of the declared interest option bears to the total cash value on the
date we receive the request.
i) Amounts surrendered from the declared interest option are considered
surrendered on a last-in-first-out basis.
7.9 SURRENDER CHARGE
The surrender charge will be a percentage of the cash value surrendered. The
percentage will be 6% for the first policy year. The rate will reduce by 1% each
year on the policy anniversary until it reaches 0%. However, the total surrender
charges assessed will never exceed 8.5% of premiums paid.
If all of the cash value is applied under payment option 2, 3, 4 or 5, the
surrender charge will be reduced as follows:
a) if option 3 or 5 is used, the surrender charge will be zero; or
b) if option 2 or 4 is used, the surrender charge will be applied, however,
the fixed number of years for which payment will be made is added to the
number of years the contract has been in force to determine what the charge
will be.
All of the values are the same or more than the minimums set by the laws of the
state where the policy is delivered.
7.10 TEN PERCENT WITHDRAWAL PRIVILEGE
After the first policy year, on the first full or partial surrender from the
policy during a policy year, an amount equal to or less than 10% of the cash
value on the date of full or partial surrender will not be subject to any
surrender charge. The amount of a full surrender or the amount of any partial
surrender in excess of 10% of the cash value
15
<PAGE>
will be subject to any surrender charge. The entire amount of any subsequent
partial surrender in the same policy year will be subject to any surrender
charge.
7.11 WAIVER OF SURRENDER CHARGE
The owner may make a full or partial surrender of this policy without incurring
a surrender charge if the annuitant becomes eligible for waiver of the surrender
charge.
The waiver of the surrender charge is subject to the following rules:
a) We must receive a written request on our form signed by the owner.
b) The policy must be in force or not providing benefits under any payment
option.
c) The date of total disability, the date of terminal illness as certified by
a physician, or the date of confinement in a nursing home for which
eligibility for waiver of surrender charge is claimed must begin after the
policy date.
d) Proof must be provided that the conditions of eligibility requirements for
waiver of the surrender charge have been met, including an attending
physician's statement and any other proof we may require. We reserve the
right to seek a second medical opinion or have an examination performed at
our expense by a physician we choose.
7.12 DELAY OF PAYMENT
Proceeds from full surrenders and partial surrenders will usually be mailed to
the owner within seven days after the owner's signed request is received in our
home office. We will usually mail any death claim proceeds within seven days
after we receive due proof of death. We have the right to delay such payment
whenever:
a) the New York Stock Exchange is closed other than on customary weekend and
any holiday closing;
b) trading on the New York Stock Exchange is restricted as determined by the
SEC;
c) the SEC, by order, permits postponement for the protection of policyowners;
d) as a result of an emergency, as determined by the SEC, it is not reasonably
possible to dispose of securities or to determine the value of the net
assets of the variable account.
We have the right to defer payment which is derived from any amount paid to us
by check or draft until we are satisfied the check or draft has been paid by the
bank on which it is drawn.
We also have the right to delay making a full surrender or partial surrender,
from the declared interest option for up to six months from the date we receive
the owner's request.
7.13 TAX CHARGES
The Company may deduct state and local government premium tax from the cash
value, if such taxes are applicable in your state. The Company may also make a
charge against the cash value of this policy for any tax or economic burden on
the Company resulting from the application of federal, state or local tax laws
that the Company determines to be properly attributable to the separate account
or the policies. The charge will be applied by:
16
<PAGE>
a) redeeming the number of subaccount units from the separate account equal to
the pro rata share of the charge applicable to the subaccounts; or
b) deducting from the declared interest option cash value the pro rata portion
of the charge applicable to the declared interest option.
7.14 ANNUAL REPORT
At least once each year we will send a report, without charge, to the owner
which shows:
a) all premiums paid and charges made since the last report;
b) the current cash value including the value in each subaccount and the
declared interest option; and
c) any partial surrenders since the last report.
An illustrative report will be sent to the owner upon request. A fee may be
charged for this report.
- --------------------------------------------------------------------------------
SECTION 8 - PAYMENT OF PROCEEDS
- --------------------------------------------------------------------------------
8.1 CHOICE OF OPTIONS
The owner may choose to have the proceeds of this policy paid under a payment
option. After the annuitant's death, the beneficiary may choose an option if the
owner had not done so before the annuitant's death. If no payment option is
chosen, we will pay the proceeds of this policy in one sum. We may also fulfill
our obligation under this policy by paying the proceeds in one sum if:
a) the proceeds are less than $2,000;
b) periodic payments become less than $20; or
c) the payee is an assignee, estate, trustee, partnership, corporation, or
association.
8.2 PAYMENT OPTIONS
The choice of payment options are:
1) INTEREST INCOME - The proceeds will be left with us to earn interest. The
interest will be paid every 1, 3, 6 or 12 months as the payee chooses. The
rate of interest will be determined by us. The payee may withdraw all or
part of the proceeds at any time.
2) INCOME FOR FIXED TERM - The proceeds will be paid out in equal installments
for a fixed term of years.
3) LIFE INCOME WITH TERM CERTAIN - The proceeds will be paid out in equal
installments for as long as the payee lives, but for not less than a term
certain. The owner or payee may choose one of the terms certain shown in
the payment option tables.
4) INCOME FOR FIXED AMOUNT - The proceeds will be paid out in equal
installments of a specified amount. The payments will continue until all
proceeds plus interest have been paid out.
17
<PAGE>
5) JOINT AND TWO-THIRDS TO SURVIVOR MONTHLY LIFE INCOME - The proceeds will be
paid out in equal monthly 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. Payments will stop when
the surviving payee dies.
The proceeds may be paid in any other manner requested and agreed to by us, or
under any other payment options made available by the Company.
8.3 INTEREST AND MORTALITY
The minimum interest rate used in computing any payment option is 3% per year.
Higher interest rates may be used on the effective date of the payment contract.
We may at any time declare additional interest on these funds. The amount of
additional interest and how it is determined will be set by us.
The mortality table which is used for options 3) and 5) is the "1983 Table a"
individual annuity mortality table.
8.4 REQUIREMENTS
For the owner to choose or change a payment option:
a) this contract must be in force;
b) the request must be in writing to us; and
c) any prior option must be canceled.
After your death, and before this contract is settled, for a beneficiary to
choose or change a payment option:
a) a prior option by the owner cannot be in effect;
b) the request must be in writing to us; and
c) any prior option must be canceled.
8.5 EFFECTIVE DATE
If a payment option has been chosen by the owner, it is effective on the date
the proceeds of this policy are due. If a beneficiary chooses a payment option,
it is effective on the date of election. The first payment under options 2, 3,
4, or 5 is due on the effective date. The first payment under payment option 1
is due at the end of the period chosen.
8.6 DEATH OF PAYEE
If a payee dies, any remaining payments will be paid to a contingent payee. If
no payee survives, we will pay the commuted value of any remaining payments to
the last payee's estate.
8.7 WITHDRAWAL OF PROCEEDS
The payee may not withdraw the funds under a payment option unless agreed to in
the payment contract. We have the right to defer a withdrawal for up to 6
months. We may also refuse to allow partial withdrawals of less than $250.
8.8 CLAIMS OF CREDITORS
Payments under any payment option will be exempt from the claims of creditors to
the maximum extent allowed by law.
18
<PAGE>
PAYMENT OPTION TABLES
(per $1,000 of proceeds)
- --------------------------------------------------------
OPTION 2 - INCOME FOR FIXED TERM
INSTALLMENTS PER $1,000 PROCEEDS
- --------------------------------------------------------
NUMBER
OF YEARS ANNUAL MONTHLY
- --------------------------------------------------------
1 $1,000.00 $84.47
2 507.39 42.86
3 343.23 28.99
4 261.19 22.06
5 211.99 17.91
6 179.22 15.14
7 155.83 13.16
8 138.31 11.68
9 124.69 10.53
10 113.82 9.61
11 104.93 8.86
12 97.54 8.24
13 91.29 7.71
14 85.95 7.26
15 81.33 6.87
16 77.29 6.53
17 73.74 6.23
18 70.59 5.96
19 67.78 5.73
20 65.26 5.51
21 62.98 5.32
22 60.92 5.15
23 59.04 4.99
24 57.33 4.84
25 55.76 4.71
26 54.31 4.59
27 52.97 4.47
28 51.74 4.37
29 50.60 4.27
30 49.53 4.18
- --------------------------------------------------------
<TABLE>
- --------------------------------------------------------------------------------------------------------------------------------
GUARANTEED SETTLEMENT OPTION 3
LIFE INCOME WITH TERM CERTAIN
MONTHLY INSTALLMENTS PER $1,000 PROCEEDS
- --------------------------------------------------------------------------------------------------------------------------------
MALE FEMALE
- --------------------------------------------------------------------------------------------------------------------------------
YEARS CERTAIN YEARS CERTAIN
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AGE 0 5 10 15 20 AGE 0 5 10 15 20
- --------------------------------------------------------------------------------------------------------------------------------
0-21 $3.06 $3.05 $3.05 $3.05 $3.05 0-21 $2.95 $2.95 $2.95 $2.94 $2.94
22 3.08 3.08 3.07 3.07 3.07 22 2.96 2.96 2.96 2.96 2.96
23 3.10 3.10 3.09 3.09 3.09 23 2.98 2.98 2.98 2.98 2.98
24 3.12 3.12 3.12 3.11 3.11 24 3.00 3.00 3.00 3.00 2.99
25 3.14 3.14 3.14 3.14 3.13 25 3.02 3.02 3.02 3.02 3.01
- --------------------------------------------------------------------------------------------------------------------------------
26 3.17 3.17 3.16 3.16 3.15 26 3.04 3.04 3.04 3.03 3.03
27 3.19 3.19 3.19 3.19 3.18 27 3.06 3.06 3.06 3.06 3.05
28 3.22 3.22 3.22 3.21 3.20 28 3.08 3.08 3.08 3.08 3.07
29 3.25 3.25 3.24 3.24 3.23 29 3.10 3.10 3.10 3.10 3.09
30 3.28 3.28 3.27 3.27 3.26 30 3.13 3.13 3.12 3.12 3.12
- --------------------------------------------------------------------------------------------------------------------------------
31 3.31 3.31 3.30 3.30 3.29 31 3.15 3.15 3.15 3.14 3.14
32 3.34 3.34 3.33 3.33 3.32 32 3.18 3.17 3.17 3.17 3.16
33 3.37 3.37 3.37 3.36 3.35 33 3.20 3.20 3.20 3.20 3.19
34 3.41 3.41 3.40 3.39 3.38 34 3.23 3.23 3.23 3.22 3.22
35 3.44 3.44 3.44 3.43 3.41 35 3.26 3.26 3.26 3.25 3.24
- --------------------------------------------------------------------------------------------------------------------------------
36 3.48 3.48 3.48 3.46 3.45 36 3.29 3.29 3.29 3.28 3.27
37 3.52 3.52 3.51 3.50 3.48 37 3.32 3.32 3.32 3.31 3.30
38 3.57 3.56 3.56 3.54 3.52 38 3.35 3.35 3.35 3.34 3.33
39 3.61 3.61 3.60 3.58 3.56 39 3.39 3.39 3.38 3.38 3.37
40 3.66 3.65 3.64 3.63 3.60 40 3.42 3.42 3.42 3.41 3.40
- --------------------------------------------------------------------------------------------------------------------------------
41 3.71 3.70 3.69 3.67 3.64 41 3.46 3.46 3.46 3.45 3.43
42 3.76 3.75 3.74 3.72 3.68 42 3.50 3.50 3.50 3.49 3.47
43 3.81 3.81 3.79 3.77 3.73 43 3.54 3.54 3.54 3.53 3.51
44 3.87 3.86 3.85 3.82 3.77 44 3.59 3.59 3.58 3.57 3.55
45 3.93 3.92 3.90 3.87 3.82 45 3.63 3.63 3.63 3.61 3.59
- --------------------------------------------------------------------------------------------------------------------------------
46 3.99 3.98 3.96 3.92 3.87 46 3.68 3.68 3.67 3.66 3.63
47 4.05 4.05 4.02 3.98 3.92 47 3.73 3.73 3.72 3.71 3.68
48 4.12 4.11 4.09 4.04 3.97 48 3.79 3.79 3.77 3.76 3.72
49 4.19 4.18 4.15 4.10 4.03 49 3.84 3.84 3.83 3.81 3.77
50 4.27 4.26 4.22 4.17 4.08 50 3.90 3.90 3.89 3.86 3.82
- --------------------------------------------------------------------------------------------------------------------------------
51 4.34 4.33 4.29 4.23 4.14 51 3.97 3.96 3.95 3.92 3.88
52 4.43 4.41 4.37 4.30 4.20 52 4.03 4.03 4.01 3.98 3.93
53 4.51 4.50 4.45 4.37 4.26 53 4.10 4.10 4.08 4.04 3.99
54 4.60 4.59 4.54 4.45 4.32 54 4.18 4.17 4.15 4.11 4.04
55 4.70 4.68 4.62 4.53 4.39 55 4.25 4.25 4.22 4.18 4.11
- --------------------------------------------------------------------------------------------------------------------------------
56 4.80 4.78 4.72 4.61 4.45 56 4.34 4.33 4.30 4.25 4.17
57 4.91 4.89 4.82 4.69 4.51 57 4.42 4.41 4.38 4.32 4.23
58 5.03 5.00 4.92 4.78 4.58 58 4.52 4.50 4.47 4.40 4.30
59 5.15 5.12 5.03 4.87 4.64 59 4.61 4.60 4.56 4.48 4.37
60 5.28 5.25 5.14 4.96 4.71 60 4.72 4.70 4.66 4.57 4.44
- --------------------------------------------------------------------------------------------------------------------------------
61 5.42 5.39 5.26 5.06 4.78 61 4.83 4.81 4.76 4.66 4.51
62 5.57 5.53 5.39 5.16 4.84 62 4.95 4.93 4.86 4.75 4.58
63 5.74 5.69 5.52 5.26 4.90 63 5.07 5.05 4.98 4.85 4.65
64 5.91 5.85 5.66 5.36 4.96 64 5.21 5.18 5.10 4.95 4.72
65 6.10 6.03 5.81 5.48 5.02 65 5.35 5.32 5.22 5.05 4.79
- --------------------------------------------------------------------------------------------------------------------------------
66 6.29 6.21 5.96 5.56 5.08 66 5.51 5.47 5.36 5.16 4.86
67 6.50 6.41 6.11 5.66 5.13 67 5.67 5.63 5.50 5.26 4.93
68 6.73 6.62 6.28 5.76 5.18 68 5.85 5.80 5.65 5.37 5.00
69 6.97 6.84 6.44 5.86 5.23 69 6.04 5.96 5.80 5.48 5.06
70 7.23 7.07 6.61 5.96 5.27 70 6.25 6.18 5.96 5.60 5.12
- --------------------------------------------------------------------------------------------------------------------------------
71 7.51 7.32 6.78 6.05 5.31 71 6.47 6.39 6.14 5.71 5.18
72 7.80 7.58 6.96 6.14 5.34 72 6.71 6.62 6.31 5.83 5.23
73 8.12 7.85 7.14 6.23 5.37 73 6.97 6.86 6.50 5.94 5.28
74 8.45 8.14 7.32 6.31 5.40 74 7.26 7.12 6.69 6.04 5.32
75 8.82 8.44 7.49 6.38 5.42 75 7.56 7.39 6.89 6.14 5.35
- --------------------------------------------------------------------------------------------------------------------------------
76 9.21 8.76 7.67 6.45 5.44 76 7.90 7.69 7.09 6.24 5.39
77 9.62 9.09 7.84 6.51 5.46 77 8.26 8.01 7.29 6.33 5.41
78 10.07 9.44 8.01 6.57 5.47 78 8.65 8.34 7.49 6.41 5.43
79 10.55 9.80 8.17 6.62 5.48 79 9.07 8.69 7.69 6.48 5.45
80 11.06 10.17 8.33 6.66 5.49 80 9.53 9.07 7.89 6.55 5.47
- --------------------------------------------------------------------------------------------------------------------------------
81 11.61 10.55 8.48 6.70 5.49 81 10.03 9.46 8.08 6.61 5.48
82 12.19 10.94 8.61 6.73 5.50 82 10.57 9.87 8.26 6.66 5.49
83 12.81 11.33 8.74 6.76 5.50 83 11.16 10.30 8.43 6.70 5.49
84 13.46 11.72 8.86 6.79 5.51 84 11.79 10.74 8.59 6.74 5.50
85 14.16 12.12 8.97 6.81 5.51 85 12.48 11.19 8.74 6.77 5.50
- --------------------------------------------------------------------------------------------------------------------------------
AGES OVER 85 RATED AS AGE 85 AGES OVER 85 RATED AS AGE 85
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GUARANTEED SETTLEMENT OPTION 5
JOINT AND TWO-THIRDS TO SURVIVOR MONTHLY LIFE INCOME
MONTHLY INSTALLMENTS PER $1,000 OF PROCEEDS
FEMALE AGE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MALE
AGE 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65
- ------------------------------------------------------------------------------------------------------------------------------------
46 3.69 3.71 3.74 3.77 3.80 3.82 3.85 3.88 3.91 3.94 3.97 4.01 4.04 4.07 4.11 4.14 4.18 4.21 4.25 4.29
47 3.71 3.74 3.77 3.79 3.82 3.85 3.88 3.91 3.94 3.97 4.01 4.04 4.07 4.11 4.14 4.18 4.22 4.25 4.29 4.33
48 3.74 3.76 3.79 3.82 3.85 3.88 3.91 3.94 3.97 4.01 4.04 4.07 4.11 4.14 4.18 4.22 4.26 4.29 4.33 4.37
49 3.76 3.79 3.82 3.85 3.88 3.91 3.94 3.97 4.01 4.04 4.07 4.11 4.15 4.18 4.22 4.26 4.30 4.34 4.38 4.42
50 3.79 3.81 3.84 3.87 3.91 3.94 3.97 4.00 4.04 4.07 4.11 4.15 4.18 4.22 4.26 4.30 4.34 4.38 4.42 4.47
51 3.81 3.84 3.87 3.90 3.93 3.97 4.00 4.04 4.07 4.11 4.14 4.18 4.22 4.26 4.30 4.34 4.38 4.43 4.47 4.51
52 3.84 3.87 3.90 3.93 3.96 4.00 4.03 4.07 4.11 4.14 4.18 4.22 4.26 4.30 4.34 4.38 4.43 4.47 4.52 4.56
53 3.86 3.89 3.93 3.96 3.99 4.03 4.06 4.10 4.14 4.18 4.22 4.26 4.30 4.34 4.38 4.43 4.47 4.52 4.57 4.61
54 3.89 3.92 3.95 3.99 4.02 4.06 4.10 4.13 4.17 4.21 4.25 4.30 4.34 4.38 4.43 4.47 4.52 4.57 4.62 4.67
55 3.92 3.95 3.98 4.02 4.05 4.09 4.13 4.17 4.21 4.25 4.29 4.34 4.38 4.43 4.47 4.52 4.57 4.62 4.67 4.72
56 3.94 3.98 4.01 4.05 4.08 4.12 4.16 4.20 4.24 4.29 4.33 4.38 4.42 4.47 4.52 4.57 4.62 4.67 4.72 4.77
57 3.97 4.01 4.04 4.08 4.12 4.16 4.20 4.24 4.28 4.32 4.37 4.42 4.46 4.51 4.56 4.61 4.67 4.72 4.77 4.83
58 4.00 4.03 4.07 4.11 4.15 4.19 4.23 4.27 4.32 4.36 4.41 4.46 4.51 4.56 4.61 4.66 4.72 4.77 4.83 4.89
59 4.03 4.06 4.10 4.14 4.18 4.22 4.27 4.31 4.36 4.40 4.45 4.50 4.55 4.60 4.66 4.71 4.77 4.83 4.89 4.95
60 4.06 4.10 4.13 4.17 4.22 4.26 4.30 4.35 4.39 4.44 4.49 4.54 4.60 4.65 4.71 4.76 4.82 4.88 4.95 5.01
61 4.09 4.13 4.17 4.21 4.25 4.29 4.34 4.39 4.43 4.48 4.53 4.59 4.64 4.70 4.76 4.82 4.88 4.94 5.00 5.07
62 4.12 4.16 4.20 4.24 4.28 4.33 4.38 4.42 4.47 4.53 4.58 4.63 4.69 4.75 4.81 4.87 4.93 5.00 5.07 5.13
63 4.15 4.19 4.23 4.28 4.32 4.37 4.41 4.46 4.51 4.57 4.62 4.68 4.74 4.80 4.86 4.92 4.99 5.06 5.13 5.20
64 4.18 4.22 4.27 4.31 4.36 4.40 4.45 4.50 4.56 4.61 4.67 4.73 4.79 4.85 4.91 4.98 5.05 5.12 5.19 5.27
65 4.22 4.26 4.30 4.35 4.39 4.44 4.49 4.54 4.60 4.65 4.71 4.77 4.83 4.90 4.97 5.04 5.11 5.18 5.26 5.33
66 4.25 4.29 4.34 4.38 4.43 4.48 4.53 4.58 4.64 4.70 4.76 4.82 4.88 4.95 5.02 5.09 5.17 5.24 5.32 5.40
67 4.28 4.33 4.37 4.42 4.47 4.52 4.57 4.63 4.68 4.74 4.80 4.87 4.93 5.00 5.07 5.15 5.23 5.30 5.39 5.47
68 4.32 4.36 4.41 4.46 4.51 4.56 4.61 4.67 4.73 4.79 4.85 4.92 4.98 5.06 5.13 5.21 5.29 5.37 5.45 5.54
69 4.35 4.40 4.44 4.49 4.54 4.60 4.65 4.71 4.77 4.83 4.90 4.97 5.04 5.11 5.19 5.26 5.35 5.43 5.52 5.61
70 4.39 4.43 4.48 4.53 4.58 4.64 4.69 4.75 4.81 4.88 4.94 5.01 5.09 5.16 5.24 5.32 5.41 5.50 5.59 5.68
71 4.42 4.47 4.52 4.57 4.62 4.68 4.73 4.79 4.86 4.92 4.99 5.06 5.14 5.22 5.30 5.38 5.47 5.56 5.65 5.75
72 4.45 4.50 4.55 4.60 4.66 4.72 4.78 4.84 4.90 4.97 5.04 5.11 5.19 5.27 5.35 5.44 5.53 5.62 5.72 5.82
73 4.49 4.54 4.59 4.64 4.70 4.76 4.82 4.88 4.95 5.01 5.09 5.16 5.24 5.32 5.41 5.50 5.59 5.69 5.79 5.89
74 4.52 4.57 4.63 4.68 4.74 4.80 4.86 4.92 4.99 5.06 5.13 5.21 5.29 5.38 5.46 5.56 5.65 5.75 5.86 5.97
75 4.56 4.61 4.66 4.72 4.78 4.84 4.90 4.97 5.03 5.11 5.18 5.26 5.34 5.43 5.52 5.61 5.71 5.82 5.92 6.04
76 4.59 4.64 4.70 4.76 4.81 4.88 4.94 5.01 5.08 5.15 5.23 5.31 5.39 5.48 5.57 5.67 5.77 5.88 5.99 6.11
77 4.63 4.68 4.74 4.79 4.85 4.92 4.98 5.05 5.12 5.20 5.28 5.36 5.44 5.54 5.63 5.73 5.83 5.94 6.06 6.18
78 4.66 4.72 4.77 4.83 4.89 4.95 5.02 5.09 5.16 5.24 5.32 5.41 5.49 5.59 5.68 5.79 5.89 6.01 6.12 6.25
79 4.70 4.75 4.81 4.87 4.93 4.99 5.06 5.13 5.21 5.29 5.37 5.45 5.54 5.64 5.74 5.84 5.95 6.07 6.19 6.32
80 4.73 4.78 4.84 4.90 4.97 5.03 5.10 5.17 5.25 5.33 5.41 5.50 5.59 5.69 5.79 5.90 6.01 6.13 6.25 6.38
81 4.76 4.82 4.88 4.94 5.00 5.07 5.14 5.21 5.29 5.37 5.46 5.55 5.64 5.74 5.84 5.95 6.07 6.19 6.32 6.45
82 4.79 4.85 4.91 4.97 5.04 5.11 5.18 5.25 5.33 5.41 5.50 5.59 5.69 5.79 5.90 6.01 6.13 6.25 6.38 6.52
83 4.83 4.88 4.94 5.01 5.07 5.14 5.21 5.29 5.37 5.46 5.54 6.64 5.73 5.84 6.95 6.06 6.18 6.31 6.44 6.58
84 4.86 4.91 4.98 5.04 5.11 5.18 5.25 5.33 5.41 5.50 5.58 5.68 5.78 5.88 5.99 6.11 6.23 6.36 6.50 6.64
85 4.88 4.94 5.01 5.07 5.14 5.21 5.29 5.36 5.45 5.53 5.62 5.72 5.82 5.93 6.04 6.16 6.28 6.42 6.56 6.70
<CAPTION>
FEMALE AGE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MALE
AGE 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85
- ------------------------------------------------------------------------------------------------------------------------------------
46 4.32 4.36 4.40 4.44 4.48 4.52 4.57 4.61 4.65 4.70 4.74 4.79 4.83 4.88 4.92 4.97 5.01 5.06 5.10 5.14
47 4.37 4.41 4.45 4.49 4.53 4.58 4.62 4.66 4.71 7.76 4.80 4.85 4.89 4.94 4.99 5.03 5.08 5.13 5.17 5.21
48 4.41 4.45 4.50 4.54 4.58 4.63 4.67 4.72 4.77 4.81 4.86 4.91 4.96 5.01 5.05 5.10 5.15 5.20 5.24 5.29
49 4.46 4.50 4.55 4.59 4.64 4.68 4.73 4.78 4.83 4.87 4.92 4.97 5.02 5.07 5.12 5.17 5.22 5.27 5.32 5.36
50 4.51 4.55 4.60 4.64 4.69 4.74 4.79 4.84 4.89 4.94 4.99 5.04 5.09 5.14 5.19 5.24 5.30 5.35 5.39 5.44
51 4.56 4.60 4.65 4.70 4.75 4.80 4.85 4.90 4.95 5.00 5.05 5.11 5.16 5.21 5.27 5.32 5.37 5.42 5.46 5.53
52 4.61 4.66 4.71 4.76 4.81 4.86 4.91 4.96 5.02 5.07 5.12 5.18 5.23 5.29 5.34 5.40 5.45 5.51 5.56 5.61
53 4.66 4.71 4.76 4.81 4.87 4.92 4.97 5.03 5.08 5.14 5.20 5.25 5.31 5.37 5.42 5.48 5.54 5.59 5.85 5.70
54 4.72 4.77 4.82 4.87 4.93 4.98 5.04 5.10 5.15 5.21 5.27 5.33 5.39 5.45 5.51 5.57 5.63 5.68 5.74 5.80
55 4.77 4.83 4.88 4.93 4.99 5.05 5.11 5.17 5.23 5.29 5.35 5.41 5.47 5.53 5.60 5.66 5.72 5.78 5.84 5.90
56 4.83 4.88 4.94 5.00 5.06 5.12 5.18 5.24 5.30 5.37 5.43 5.49 5.56 5.62 5.69 5.75 5.81 5.88 5.94 6.00
57 4.89 4.94 5.00 5.06 5.13 5.19 5.25 5.32 5.38 5.45 5.51 5.58 5.65 5.72 5.78 5.85 5.92 5.98 6.05 6.11
58 4.95 5.01 5.07 5.13 5.20 5.26 5.33 5.40 5.46 5.53 5.60 5.67 5.74 5.81 5.88 5.95 6.02 6.09 6.16 6.22
59 5.01 5.07 5.14 5.20 5.27 5.34 5.41 5.48 5.55 5.62 5.69 5.77 5.84 5.91 5.99 6.06 6.13 6.21 6.28 6.35
60 5.07 5.14 5.21 5.27 5.34 5.42 5.49 5.56 5.64 5.71 5.79 5.87 5.94 6.02 6.10 6.18 6.25 6.33 6.40 6.47
61 5.14 5.21 5.28 5.35 5.42 5.50 5.57 5.65 5.73 5.81 5.89 5.97 6.05 6.13 6.21 6.29 6.37 6.45 6.53 6.61
62 5.20 5.28 5.35 5.42 5.50 5.58 5.66 5.74 5.82 5.91 5.99 6.08 6.16 6.25 6.33 6.42 6.50 6.59 6.67 6.75
63 5.27 5.35 5.42 5.50 5.58 5.67 5.75 5.84 5.92 6.01 6.10 6.19 6.28 6.37 6.46 6.55 6.64 6.73 6.81 6.90
64 5.34 5.42 5.50 5.58 5.67 5.75 5.84 5.93 6.02 6.12 6.21 6.31 6.40 6.50 6.59 6.69 6.78 6.87 6.97 7.06
65 5.41 5.49 5.58 5.67 5.75 5.84 5.94 6.03 6.13 6.23 6.33 6.43 6.53 6.63 6.73 6.83 6.93 7.03 7.12 7.22
66 5.48 5.57 5.66 5.75 5.84 5.94 6.03 6.13 6.24 6.34 6.44 6.55 6.66 6.76 6.87 6.97 7.08 7.19 7.29 7.39
67 5.56 5.65 5.74 5.83 5.93 6.03 6.13 6.24 6.35 6.45 6.56 6.68 6.79 6.90 7.01 7.13 7.24 7.35 7.46 7.57
68 5.63 5.72 5.82 5.92 6.02 6.13 6.23 6.34 6.46 6.57 6.69 6.81 6.93 7.05 7.17 7.29 7.40 7.52 7.64 7.76
69 5.70 5.80 5.90 6.01 6.11 6.22 6.34 6.45 6.57 6.69 6.82 6.94 7.07 7.19 7.32 7.45 7.58 7.70 7.83 7.95
70 5.78 5.88 5.98 6.09 6.20 6.32 6.44 6.56 6.69 6.81 6.95 7.08 7.21 7.35 7.48 7.62 7.75 7.89 8.02 8.15
71 5.85 5.98 6.07 6.18 6.30 6.42 6.54 6.67 6.80 6.94 7.08 7.22 7.36 7.50 7.64 7.79 7.93 8.06 8.22 8.36
72 5.93 6.04 6.15 6.27 6.39 6.52 6.65 6.78 6.92 7.07 7.21 7.36 7.51 7.66 7.81 7.97 8.12 8.27 8.43 8.58
73 6.00 6.12 6.24 6.36 6.49 6.62 6.76 6.90 7.04 7.19 7.35 7.50 7.66 7.82 7.98 8.15 8.31 8.48 8.64 8.80
74 6.08 6.20 6.32 6.45 6.58 6.72 6.86 7.01 7.16 7.32 7.48 7.65 7.82 7.99 8.16 8.33 8.51 8.68 8.86 9.03
75 6.15 6.28 6.40 6.54 6.68 6.82 6.97 7.13 7.29 7.45 7.62 7.80 7.97 8.16 8.34 8.52 8.71 8.90 9.08 9.27
76 6.23 6.36 6.49 6.63 6.77 6.92 7.08 7.24 7.41 7.58 7.76 7.95 8.13 8.33 8.62 8.72 8.91 9.11 9.31 9.51
77 6.30 6.43 6.57 6.71 6.86 7.02 7.18 7.35 7.53 7.71 7.90 8.10 8.29 8.50 8.70 8.91 9.12 9.34 9.55 9.76
78 6.38 6.51 6.65 6.80 6.96 7.12 7.29 7.47 7.65 7.84 8.04 8.25 8.46 8.67 8.89 9.11 9.33 9.56 9.79 10.01
79 6.45 6.59 6.74 6.89 7.05 7.22 7.40 7.58 7.77 7.97 8.18 8.40 8.62 8.84 9.07 9.31 9.55 9.79 10.03 10.27
80 6.52 6.67 6.82 6.97 7.14 7.32 7.50 7.69 7.89 8.10 8.32 8.55 8.78 9.02 9.26 9.51 9.78 10.02 10.28 10.54
81 6.59 6.74 6.90 7.06 7.23 7.41 7.60 7.80 8.01 8.23 8.48 8.69 8.94 9.19 9.45 7.71 9.98 10.25 10.53 10.80
82 6.66 6.81 6.97 7.14 7.32 7.51 7.70 7.91 8.13 8.36 8.59 8.84 9.09 9.36 9.63 9.91 10.19 10.48 10.77 10.07
83 8.73 6.88 7.05 7.22 7.41 7.60 7.80 8.02 8.24 8.48 8.73 8.98 9.25 9.53 9.81 10.10 10.40 10.71 11.02 11.33
84 6.79 6.95 7.12 7.30 7.49 7.69 7.90 8.12 8.35 8.60 8.86 9.12 9.40 9.69 9.99 10.30 10.61 10.94 11.26 11.60
85 6.86 7.02 7.19 7.38 7.57 7.78 7.99 8.22 8.46 8.72 8.98 9.26 9.55 9.85 10.16 10.49 10.82 11.16 11.51 11.86
</TABLE>
AGES OVER 85 RATED AS 85
20
<PAGE>
NON-PARTICIPATING
FLEXIBLE PREMIUM
DEFERRED VARIABLE ANNUITY POLICY
If you have any questions concerning this policy or if anyone
suggests that you change or replace this policy, please contact your
Farm Bureau Life agent or our home office. (515-225-5400)
FARM BUREAU
LIFE INSURANCE COMPANY
5400 University Avenue
West Des Moines, Iowa 50266-5997
[LOGO]
- -------------------------------------------------------------------------------
434-062(03-96)
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
[LOGO] FLEXIBLE PREMIUM DEFERRED ANNUITY APPLICATION
FARM BUREAU FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY APPLICATION
FINANCIAL SERVICES
/ / FARM BUREAU LIFE
INSURANCE COMPANY
/ / WESTERN FARM BUREAU
LIFE INSURANCE COMPANY
ACCOUNT NO.____________________
APPLICATION FOR______________________________________________Policy Number______________________
PROPOSED ANNUITANT (HOME OFFICE USE ONLY)
ADDRESS________________________________________ ______________________________________________
STREET CITY-TOWN STATE ZIP ANNUITANT'S STATE-COUNTY CODE
/ / MALE
/ / FEMALE Date of Birth____________ Age______________ State of Birth_______Social Security No.______________
MONTH/DAY/YEAR (nearest birthday)
AGENT CREDIT__________________________________________________________________________________________________
Name State-County Agent No.
- ---------------------------------------------------------------------------------------------------------------------------
SECTION A ANNUITY
1. A birth certificate is attached (A birth certificate Yes No
must be submitted as proof of age
before annuity payments can begin) / / / /
2. As a condition precedent to receiving annuity
payments will you furnish satisfactory evidence
of life and identity as each payment falls due? / / / /
3. It is agreed that the money consideration for
the policy shall upon payment be nonrefundable
and the Company's obligation limited
to the terms of the annuity policy applied for. / / / /
4. Is the policy applied for replacing or likely to
replace any existing annuity or life insurance
policy? (If "YES", give details in Section C,
including name, insurer, and policy numbers. / / / /
5. Occupation________________For____Years
6. Annuity Plan: / / FPDA / / FPDVA
7. Check the appropriate box for the type of plan:
/ / Keogh / / IRA / / TDA / / SEP / / Non-Qualified
/ / Other_____________________
8. Premium / / Annual / / Semi-Annual / / Quarterly
Payable / / COM / / Other___________________
9. Company to begin payment on policy anniversary nearest
age 70 or ____________________________________________
10. If the name of a female proposed Annuitant is different
than her maiden name, give her maiden name:
____________________________________________________
11. Submitted Transfer
Premium: $ of Funds: $
- ---------------------------------------------------------------------------------------------------
SECTION B OWNER AND BENEFICIARY (IF REQUIRED)
1. BENEFICIARY as to proceeds at death of the Annuitant;
Survivors within a class (Primary or Secondary) entitled
to the proceeds shall share equally unless otherwise
specified.
NAME & ADDRESS SSN RELATIONSHIP
1. Primary______________________________________
_____________________________________________
2. Secondary, if primary beneficiary is not living:
NAME & ADDRESS SSN RELATIONSHIP
_____________________________________________
_____________________________________________
/ / Children born to or adopted by the Proposed
Annuitant and ____________________________
(including any named above). The Beneficiary
as to proceeds at death of any person other than
the annuitant shall be as stated in the applicable
benefit provision.
3. / / Directions for settlement attached.
II. OWNER: (If other than Proposed Annuitant.)
1. OWNERSHIP TO BE VESTED IN
OWNER EMPLOYER TIN:
_____________________________________________
Address:
- ---------------------------------------------------------------------------------------
SECTION C SPECIAL REQUESTS, REMARKS AND CORRECTIONS OR ENDORSEMENT
- ----------------------------------------------------------------------------------------
SECTION D REPRESENTATIONS, AUTHORIZATION AND ACKNOWLEDGEMENT STATEMENT
I have paid $__________ as payment of the first premium on the policy herein applied for, subject to and in accordance with the
provisions of the conditional receipt for such payment. I, the Applicant, agree that: (1) Acceptance of any Annuity Contract issued
on this application shall constitute ratification of any corrections, additions, or changes made by the Company and recorded in the
space "Special Requests, Remarks and Corrections or Endorsement" except that no change shall be made as to amount, classification,
plan or annuity, or benefits unless agreed to in writing. (2) This application and any continuations thereof or additions or
amendments thereto, and the policy herein applied for shall constitute the entire contract between the parties hereto. The Applicant
and the Proposed Annuitant (if other than Applicant) agree that to the best of their knowledge and belief all statements herein are
full, complete and true, and that the Applicant will be the owner until the retirement date of any policy issued on the basis of
this application unless otherwise agreed to in writing between the parties. It is understood that no agent, agency manager or other
unauthorized person except an Executive Officer or an Assistant Secretary of the company is authorized to waive forfeitures, to make
or alter contracts, or to waive any of the Company's rights or requirements.
I represent that the statements and answers on this application and supplements thereto are true and complete to the best of my
knowledge and belief.
Dated at________________________ Date signed_______________________________________________
City and State
________________________________ ___________________________________________________________
Signature of Witness Signature of Proposed Annuitant
________________________________ ____________________________________________________________
Agent's Signature Signature of Owner-Employer if other than Proposed Annuitant
- -----------------------------------------------------------------------------------------------------------------
432-121 (0396)
CONDITIONAL RECEIPT ______________________________________________ Plan________________________
FOR ADVANCE PAYMENT Name of Proposed Annuitant Annuity applied for
OF PREMIUM
RECEIVED OF________________________________________________________________
Name of Applicant
the sum of $___________ as the first premium for the annuity applied for in the application to the FARM BUREAU
LIFE INSURANCE COMPANY OR WESTERN FARM BUREAU LIFE INSURANCE COMPANY bearing the same date as the conditional
receipt. The annuity contract, subject to the terms and conditions thereof, shall take effect as of the date of
this receipt, provided the person upon whose life the annuity is based is eligible for same according to the
Company's rules and regulations, otherwise the payment evidenced by this receipt shall be refunded upon
surrender of the receipt. Any remittance not in cash is received subject to actual cash payment.
____________________________, 19_____ ____________________________________Agent
When premium is paid at the time of application, complete this receipt and give to the applicant. No other receipt will be
recognized by the Company.
If premium is not paid -- do not detach.
<PAGE>
Under penalties of perjury, I certify that the Social Security Number provided on this Annuity Application is true, correct and
complete.
Dated at_______________________________ Date signed________________________________________________
City and State
_______________________________________ ___________________________________________________________
Signature of Witness Signature of Proposed Annuitant
_______________________________________ ____________________________________________________________
Agent's Signature Signature of Owner-Employer if other than Proposed Annuitant
- -------------------------------------------------------------------------------------------------------------------
AGENT'S CERTIFICATE
Yes No
1. Will this plan replace any other plan? / / / /
2. If yes, have replacement forms been submitted? / / / /
3. Did you give "Notice to applicant" form to applicant? / / / /
4. Did you see the proposed annuitant? (If no - explain below.) / / / /
The answers to each question of this application were recorded in my presence exactly as given. I know nothing detrimental to the
risk that is not recorded in these papers. I have rechecked all answers and calculations for correctness.
Dated at_____________ ____________________________ __________________________________
City State Signature of Agent
</TABLE>
<PAGE>
EXHIBIT 10(a)
SUTHERLAND, ASBILL & BRENNAN, L.L.P. LETTERHEAD
APRIL 21, 1997
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 4 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, L.L.P.
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 5, 1997
with respect to Farm Bureau Life Annuity Account and March 3, 1997 with
respect to Farm Bureau Life Insurance Company, in Post-Effective Amendment
No. 4 to the Registration Statement (Form N-4 No. 33-67538) and related
Prospectus of Farm Bureau Life Annuity Account dated May 1, 1997.
Ernst & Young LLP
Des Moines, Iowa
April 25, 1997
<PAGE>
EXHIBIT 10-C
Farm Bureau Financial Services
5400 University Avenue
West Des Moines, Iowa 50266-5997
April 25, 1997
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. 4 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
