<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 1, 1998
REGISTRATION NO. 33-12789
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
POST-EFFECTIVE AMENDMENT NO. 12 TO
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT
TRUSTS REGISTERED ON FORM N-8B-2 /X/
FARM BUREAU LIFE VARIABLE ACCOUNT
(Exact Name of Registrant)
FARM BUREAU LIFE INSURANCE COMPANY
(Name of Depositor)
5400 University Avenue
West Des Moines, Iowa 50266
(Address of Principal Executive Office)
------------------------
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, LLP
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2415
------------------------
Approximate date of Proposed Public Offering: As soon as practicable after
the effective date of this Registration Statement.
It is proposed that this filing will become effective (check appropriate
box):
/ / immediately upon filing pursuant to paragraph (b) of
Rule 485;
/X/ on May 1, 1998 pursuant to paragraph (b) of Rule 485;
/ / 60 days after filing pursuant to paragraph (a) of
Rule 485;
/ / on (date) pursuant to paragraph (a) of Rule 485.
Title of Securities Being Registered: Flexible Premium Variable Life
Insurance Policies
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<PAGE>
RECONCILIATION AND TIE BETWEEN ITEMS
IN FORM N-8B-2 AND THE PROSPECTUS
<TABLE>
<CAPTION>
ITEM NO. OF
FORM N-8B-2 CAPTION IN PROSPECTUS
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<C> <S>
1. Cover Page
2. Cover Page
3. Not Applicable
4. Distribution of the Policies
5. Farm Bureau Life Insurance Company; The Variable Account
6. The Variable Account
7. Not Required
8. Not Required
9. Legal Proceedings
10. Summary; The Variable Account; EquiTrust Variable Insurance Series Fund; Charges and Deductions;
Policy Benefits; Voting Rights; General Provisions
11. Summary; EquiTrust Variable Insurance Series Fund
12. Summary; EquiTrust Variable Insurance Series Fund
13. Summary; Charges and Deductions; EquiTrust Variable Insurance Series Fund
14. Summary; Premiums
15. Premiums
16. Premiums; EquiTrust Variable Insurance Series Fund
17. Summary; Charges and Deductions; Policy Benefits; EquiTrust Variable Insurance Series Fund
18. EquiTrust Variable Insurance Series Fund; Premiums
19. General Provisions; Voting Rights
20. Not Applicable
21. Policy Benefits; General Provisions
22. Not Applicable
23. Safekeeping of the Variable Account's Assets
24. General Provisions
25. Farm Bureau Life Insurance Company
26. Not Applicable
27. Farm Bureau Life Insurance Company
28. Executive Officers and Directors of Farm Bureau Life Insurance Company
29. Farm Bureau Life Insurance Company
30. Not Applicable
31. Not Applicable
32. Not Applicable
33. Not Applicable
34. Not Applicable
35. Distribution of the Policies
36. Not Required
37. Not Applicable
38. Summary; Distribution of the Policies
39. Summary; Distribution of the Policies
40. Not Applicable
41. Farm Bureau Life Insurance Company; Distribution of the Policies
42. Not Applicable
43. Not Applicable
44. Premiums
45. Not Applicable
46. Policy Benefits
47. EquiTrust Variable Insurance Series Fund
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
ITEM NO. OF
FORM N-8B-2 CAPTION IN PROSPECTUS
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<C> <S>
48. Not Applicable
49. Not Applicable
50. The Variable Account
51. Cover Page; Summary; Charges and Deductions; Policy Benefits; Premiums
52. EquiTrust Variable Insurance Series Fund
53. Federal Tax Matters
54. Not Applicable
55. Not Applicable
56. Not Required
57. Not Required
58. Not Required
59. Not Required
</TABLE>
ii
<PAGE>
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[Logo]
VARIABLE UNIVERSAL LIFE
[LOGO]
May 1, 1998
Prospectuses for:
Flexible Premium Variable
Life Insurance Policies
issued by
Farm Bureau Life
Insurance Company
-----------------------------------------------
EquiTrust Variable Insurance
Series Fund
managed by
EquiTrust Investment
Management Services, Inc.
Call Toll-Free
1-800-247-4170
225-5810 (Des Moines)
<PAGE>
PROSPECTUS
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Farm Bureau Life Variable Account
Flexible Premium Variable Life Insurance Policy
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This Prospectus describes a flexible premium variable life insurance policy (the
"Policy") issued by Farm Bureau Life Insurance Company (the "Company"). This
type of life insurance is also commonly called variable universal life. The
Policy is designed to provide lifetime insurance protection to age 95. The
Policy permits the policyowner to vary premium payments and adjust the death
proceeds payable under the Policy. The Policy has been designed for maximum
flexibility in meeting changing insurance needs.
The minimum specified amount for which a Policy will be issued is normally
$25,000. The Policy provides for the payment of the death proceeds upon the
death of the insured and for a net cash value that can be obtained upon complete
or partial surrender of the Policy. Death proceeds may, and cash value will,
vary with the investment experience of Farm Bureau Life Variable Account (the
"Variable Account"). THE POLICYOWNER BEARS THE ENTIRE INVESTMENT RISK; THERE IS
NO GUARANTEED MINIMUM CASH VALUE. The Policy also provides for loans using the
Policy as collateral. The Policy will remain in force so long as net cash value
is sufficient to pay certain monthly charges imposed in connection with the
Policy.
A policyowner may allocate net premiums under a Policy to one or more of the
subaccounts of the Variable Account. Each Subaccount invests exclusively in a
corresponding Portfolio of EquiTrust Variable Insurance Series Fund (formerly
known as FBL Variable Insurance Series Fund) (the "Fund"). The accompanying
prospectus for the Fund describes the investment objectives and attendant risks
of each of the Portfolios of the Fund.
Net premiums may also be allocated to the Declared Interest Option. The Declared
Interest Option is supported by the Company's General Account. Cash value
allocated to the Declared Interest Option is credited with interest at a
declared rate guaranteed to be at least 4.5%.
This Prospectus generally describes only the portion of the Policy involving the
Variable Account. For a brief summary of the Declared Interest Option, see "THE
DECLARED INTEREST OPTION."
A policy may be treated as a modified endowment contract depending upon the
amount of premiums paid in relation to the death benefit provided under such
Policy. If a contract is a modified endowment contract, any loan, partial
surrender, surrender and/or assignment of the policy could result in adverse tax
consequences and/or penalties.
It may not be advantageous to purchase a Policy as a replacement for another
type of life insurance or as a means to obtain additional insurance protection
if the purchaser already owns another flexible premium variable life insurance
policy.
THIS PROSPECTUS MUST BE ACCOMPANIED OR PRECEDED BY A CURRENT PROSPECTUS FOR
EQUITRUST VARIABLE INSURANCE SERIES FUND.
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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.
PLEASE READ THIS PROSPECTUS CAREFULLY AND RETAIN IT FOR FUTURE REFERENCE.
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Issued By
Farm Bureau Life Insurance Company
5400 University Avenue
West Des Moines, Iowa 50266
THE DATE OF THIS PROSPECTUS IS MAY 1, 1998.
<PAGE>
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TABLE OF CONTENTS
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PAGE
DEFINITIONS........................................................... 3
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SUMMARY AND DIAGRAM OF THE POLICY..................................... 5
The Policy........................................ 5
The Variable Account.............................. 5
The Declared Interest Option...................... 5
Premiums.......................................... 5
Policy Benefits................................... 6
Charges........................................... 7
Distribution of the Policies...................... 8
Tax Treatment..................................... 8
Cancellation Privilege............................ 8
Illustrations..................................... 8
Diagram........................................... 9
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FARM BUREAU LIFE INSURANCE COMPANY AND THE VARIABLE ACCOUNT........... 9
Farm Bureau Life Insurance Company................ 9
Iowa Farm Bureau Federation....................... 10
The Variable Account.............................. 10
EquiTrust Variable Insurance Series Fund.......... 10
Addition, Deletion or Substitution of 13
Investments.......................................
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THE POLICY............................................................ 13
Purpose of the Policy............................. 13
Purchasing the Policy............................. 14
Premiums.......................................... 14
Policy Lapse and Reinstatement.................... 16
Examination of Policy (Cancellation Privilege).... 17
Special Transfer Privilege........................ 17
Exchange Privilege................................ 17
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POLICY BENEFITS....................................................... 19
Cash Value Benefits............................... 19
Transfers......................................... 21
Loan Benefits..................................... 21
Death Proceeds.................................... 23
Accelerated Payments of Death Proceeds............ 26
Benefits at Maturity.............................. 26
Payment Options................................... 26
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CHARGES AND DEDUCTIONS................................................ 28
Premium Expense Charge............................ 28
Monthly Deduction................................. 28
Transfer Charge................................... 31
Surrender Charge.................................. 31
Variable Account Charges.......................... 31
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THE DECLARED INTEREST OPTION.......................................... 32
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GENERAL PROVISIONS.................................................... 33
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DISTRIBUTION OF THE POLICIES.......................................... 35
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FEDERAL TAX MATTERS................................................... 36
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ADDITIONAL INFORMATION................................................ 40
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FINANCIAL STATEMENTS.................................................. 47
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APPENDIX A............................................................ A-1
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APPENDIX B............................................................ B-1
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The Policy is not available in all States.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT BE LAWFULLY MADE. NO DEALER, SALESMAN OR OTHER PERSON IS
AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS IN CONNECTION
WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON.
THE PURPOSE OF THIS VARIABLE LIFE INSURANCE POLICY IS TO PROVIDE INSURANCE
PROTECTION. NO CLAIM IS MADE THAT THE POLICY IS IN ANY WAY SIMILAR OR COMPARABLE
TO AN INVESTMENT IN A MUTUAL FUND.
2
<PAGE>
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DEFINITIONS
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<TABLE>
<S> <C>
ATTAINED AGE................. The Insured's age on his or her last birthday on the Policy Date plus the
number of Policy Years since the Policy Date.
BENEFICIARY.................. The person or entity named by the Policyowner in the application or by
later designation to receive the death proceeds upon the death of the
Insured.
BUSINESS DAY................. Each day that the New York Stock Exchange is open for trading, except the
day after Thanksgiving, the day before Christmas (in 1998) 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 VALUE................... The total amount invested under the Policy. It is the sum of the values of
the Policy in each subaccount of the Variable Account plus the value of the
Policy in the Declared Interest Option.
COMPANY...................... Farm Bureau Life Insurance Company.
DECLARED INTEREST OPTION..... A part of the Company's General Account. Net Premiums may be allocated, and
Cash Value may be transferred, to the Declared Interest Option. Cash Value
in the Declared Interest Option is credited with interest at a declared
annual rate guaranteed to be at least 4.5%.
DUE PROOF OF DEATH........... Proof of death that is 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.
FUND......................... EquiTrust Variable Insurance Series Fund, an open-end, diversified
management investment company in which the Variable Account invests. The
Fund currently has 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.
GENERAL ACCOUNT.............. The assets of the Company other than those allocated to the Variable
Account or any other separate account.
GRACE PERIOD................. The 61-day period beginning on the date the Company sends notice to the
Policyowner that Net Cash Value is insufficient to cover the monthly
deduction.
HOME OFFICE.................. The principal offices of the Company at 5400 University Avenue, West Des
Moines, Iowa 50266.
INSURED...................... The person upon whose life the Policy is issued.
ISSUE DATE................... The date which the Policy is issued and mailed to the Policyowner.
MATURITY DATE................ The Policy Anniversary nearest the Insured's 95th birthday. It is the date
on which the Policy terminates and the Policy's Cash Value less Policy Debt
becomes payable to the Policyowner or the Policyowner's estate.
MONTHLY DEDUCTION DAY........ The same date in each month as the Policy Date. The monthly deduction is
made on the Business Day coinciding with or immediately following the
Monthly Deduction Day. (See "CHARGES AND DEDUCTIONS--Monthly Deduction.")
NET ASSET VALUE.............. The total current value of each Subaccount's securities, cash, receivables
and other assets less liabilities.
NET CASH VALUE............... The Cash Value of the Policy reduced by any outstanding Policy Debt and
increased by any unearned loan interest.
NET PREMIUM.................. The amount of premium remaining after the premium expense charge (see
"CHARGES AND DEDUCTIONS--Premium Expense Charge") has been deducted. This
amount will be allocated, according to the Policyowner's instructions,
among the subaccounts of the Variable Account and the Declared Interest
Option.
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
POLICY....................... The flexible premium variable life insurance policy offered by the Company
and described in this Prospectus, which term includes the Policy described
in this Prospectus, the Policy application, any supplemental applications
and any endorsements.
POLICY ANNIVERSARY........... The same date in each year as the Policy Date.
POLICY DATE.................. The date set forth on the Policy data page which is used to determine
Policy Years, Policy Months and Policy Anniversaries. The Policy Date may,
but will not always, coincide with the effective date of insurance coverage
under the Policy. (See "THE POLICY--Purchasing the Policy.")
POLICY DEBT.................. The sum of all outstanding Policy Loans and any due and unpaid Policy Loan
interest.
POLICY LOAN.................. An amount borrowed by the Policyowner from the Company for which the Policy
serves as the sole security. Interest on Policy Loans is payable in advance
(for the remainder of the Policy Year) upon taking a Policy Loan and upon
each Policy Anniversary thereafter (for the following Policy Year) until
the Policy Loan is repaid.
POLICY MONTH................. A one-month period beginning on a Monthly Deduction Day and ending on the
day immediately preceding the next Monthly Deduction Day.
POLICYOWNER.................. The person who owns a Policy. The original Policyowner is named in the
application.
POLICY YEAR.................. A twelve-month period that starts on the Policy Date or on a Policy
Anniversary.
PORTFOLIO.................... A separate investment portfolio of the Fund.
SPECIFIED AMOUNT............. The minimum death benefit payable under a Policy so long as the Policy
remains in force. The Specified Amount as of the Policy Date is set forth
on the data page in each Policy.
SUBACCOUNT................... A subdivision of the Variable Account. Net premiums for a Policy are
allocated, in accordance with the instructions of the Policyowner, to the
Value Growth, High Grade Bond, High Yield Bond, Managed, Money Market
and/or Blue Chip Subaccounts of the Variable Account, which invest
exclusively in shares of, respectively, the Value Growth, High Grade Bond,
High Yield Bond, Managed, Money Market and Blue Chip Portfolios of the
Fund.
SURRENDER CHARGE............. A charge that is assessed at the time of any partial or complete surrender
equal to the lesser of (i) $25 or (ii) 2.0% of the amount surrendered.
UNIT VALUE................... The value determined by dividing each Subaccount's Net Asset Value by the
number of units outstanding at the time of calculation.
VALUATION PERIOD............. The period between the close of business (3:00 p.m. central time) on a
Business Day and the close of business on the next Business Day.
VARIABLE ACCOUNT............. Farm Bureau Life Variable Account, a separate investment account
established by the Company to receive and invest the Net Premiums paid
under the Policies.
</TABLE>
4
<PAGE>
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SUMMARY AND DIAGRAM OF THE POLICY
- --------------------------------------------------------------------------------
THE FOLLOWING SUMMARY OF PROSPECTUS INFORMATION SHOULD
BE READ IN CONJUNCTION WITH THE DETAILED INFORMATION
APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE
INDICATED, THE DESCRIPTION OF THE POLICY CONTAINED IN
THIS PROSPECTUS ASSUMES THAT THE POLICY IS IN FORCE AND
THAT THERE IS NO OUTSTANDING POLICY DEBT.
- --------------------------------------------------------------------------------
THE POLICY
Under the Policy, subject to certain limitations, the
Policyowner has flexibility in determining the frequency
and amount of premiums. (See "THE POLICY-- Premiums.")
Thus, unlike conventional fixed-benefit life insurance,
the Policy does not require a Policyowner to adhere to a
fixed premium schedule. Also, unlike conventional
fixed-benefit life insurance, the amount and/or duration
of the life insurance coverage and the Cash Value of the
Policy is not guaranteed and may increase or decrease,
depending upon the investment experience of the assets
supporting the Policy. Accordingly, the Policyowner bears
the investment risk of any depreciation of, but reaps the
benefit of any appreciation in, the value of the
underlying assets. As long as the Policy remains in
force, the Policy will provide for death proceeds payable
to the Beneficiary upon the Insured's death, the
accumulation of Cash Value, surrender rights and policy
loan privileges. The Policy will remain in force so long
as Net Cash Value is sufficient to pay certain monthly
charges imposed in connection with the Policy. The
minimum Specified Amount for which a Policy will be
issued is normally $25,000, although the Company may in
its discretion issue Policies with Specified Amounts of
less than $25,000.
Life Insurance is not a short-term investment.
Prospective Policyowners should consider their need for
insurance coverage and the Policy's long-term investment
potential.
- --------------------------------------------------------------------------------
THE VARIABLE ACCOUNT
Net Premiums are allocated, in accordance with the
instructions of the Policyowner, to the Variable Account,
the Declared Interest Option, or both. The Variable
Account consists of six Subaccounts: the Value Growth
Subaccount, the High Grade Bond Subaccount, the High
Yield Bond Subaccount, the Managed Subaccount, the Money
Market Subaccount and the Blue Chip Subaccount. Each
Subaccount invests exclusively in a corresponding
Portfolio of the Fund.
Cash Value will, and death proceeds may, vary with the
investment experience of the Subaccounts, as well as with
the frequency and amount of premium payments, any partial
surrenders and any charges imposed in connection with the
Policy. (See "POLICY BENEFITS--Cash Value Benefits.")
- --------------------------------------------------------------------------------
THE DECLARED INTEREST
OPTION
As an alternative to the Variable Account, the
Policyowner may allocate or transfer all or a portion of
the Cash Value to the Declared Interest Option, which
guarantees a specified minimum rate of return. (See "THE
DECLARED INTEREST OPTION.")
- --------------------------------------------------------------------------------
PREMIUMS
The Company may require the Policyowner to pay an initial
premium that, when reduced by the premium expense charge
(see "CHARGES AND DEDUCTIONS-- Premium Expense Charge"),
will be sufficient to pay the monthly deductions for the
first three Policy Months. Each Policyowner will
determine a planned periodic premium schedule. The
Policyowner is not required to pay premiums in accordance
with the planned periodic premium schedule. (See "THE
POLICY--Premiums-- PLANNED PERIODIC PREMIUMS.") The
schedule will provide for a premium payment of a level
amount at a fixed interval over a specified period of
time. Failure to pay premiums in accordance with the
schedule will not itself cause the Policy to lapse. (See
"THE POLICY--Policy Lapse and Reinstatement--LAPSE.")
Subject to certain restrictions, unscheduled premium
payments may also be made. (See "THE
POLICY--Premiums--UNSCHEDULED PREMIUMS.")
A Policy will only lapse when Net Cash Value is
insufficient on a Monthly Deduction Day to cover the
monthly deduction (see "CHARGES AND DEDUCTIONS--Monthly
Deduction") and a Grace Period expires without a
sufficient payment (see "THE POLICY--Policy Lapse and
Reinstatement--LAPSE"). With respect to premiums,
5
<PAGE>
therefore, the Policy differs in two important ways from
a conventional life insurance policy. First, the failure
to pay a planned periodic premium will not in itself
automatically cause the Policy to lapse. Second, a Policy
can lapse even if planned periodic premiums or premiums
in other amounts have been paid.
- --------------------------------------------------------------------------------
POLICY BENEFITS
CASH VALUE BENEFITS. The Policy provides for a Cash
Value. The Cash Value will reflect the amount and
frequency of premium payments, the investment experience
of the chosen subaccounts of the Variable Account, the
interest earned on the Cash Value in the Declared
Interest Option, any Policy Loans, any partial surrenders
and the charges imposed in connection with the Policy.
The entire investment risk for amounts allocated to the
Variable Account is borne by the Policyowner; the Company
does not guarantee a minimum Cash Value. (See "POLICY
BENEFITS--Cash Value Benefits-- CALCULATION OF CASH
VALUE.")
The Policyowner may, at any time, surrender a Policy and
receive the Net Cash Value. Subject to certain
limitations, the Policyowner may also partially surrender
the Policy and obtain a portion of the Net Cash Value at
any time prior to the Maturity Date. Partial surrenders
will reduce both the Cash Value and death proceeds
payable under the Policy. (See "POLICY BENEFITS--Cash
Value Benefits--SURRENDER PRIVILEGES.") A charge will be
assessed upon partial or complete surrender. (See
"CHARGES AND DEDUCTIONS--Surrender Charge.")
TRANSFERS. A Policyowner may transfer amounts (minimum
$100) among the subaccounts of the Variable Account an
unlimited number of times in a Policy Year; however, only
one transfer per Policy Year may be made between the
Declared Interest Option and the Variable Account. The
first transfer in a Policy Year is free; subsequent
transfers in that Policy Year will be assessed a charge
of $25. The transfer charge, unless paid in cash, will be
deducted from the amount transferred. (See "POLICY
BENEFITS--Transfers.") A transfer from the Variable
Account to the Declared Interest Option requested in
connection with the exercise of the special transfer
privilege under the Policy (see "THE POLICY--Special
Transfer Privilege") will not be considered a transfer
for purposes of the one-transfer limit or the $25 charge.
POLICY LOANS. So long as a Policy is in force and has a
positive Net Cash Value, the Policyowner may borrow up
to 90% of the Policy's Cash Value as of the end of the
Valuation Period during which the request for the Policy
Loan is received at the Home Office, less any previously
outstanding Policy Debt. A loan taken from, or secured
by, a Policy may have federal income tax consequences.
(See "FEDERAL TAX MATTERS-- Policy Proceeds.")
Interest on Policy Loans is payable in advance for each
Policy Year at an annual rate that will not exceed 7.4%
per year in advance (which is equal to an effective rate
of 8.0%). When a Policy Loan is made, an amount equal to
the Policy Loan will be transferred to, and segregated
within, the Declared Interest Option as security for the
Policy Loan and will earn interest daily at a fixed
annual rate. (See "POLICY BENEFITS--Loan Benefits--POLICY
LOANS.") Upon partial or full repayment of Policy Debt,
the portion of the Cash Value in the Declared Interest
Option securing the repaid portion of the Policy Debt
will no longer be segregated within the Declared Interest
Option as security for Policy Debt, but will remain in
the Declared Interest Option unless, and until, the
Policyowner transfers such amount to one or more of the
subaccounts of the Variable Account. (See "POLICY
BENEFITS--Loan Benefits-- REPAYMENT OF POLICY DEBT.") Any
outstanding Policy Debt, reduced by any unearned loan
interest, will be deducted from the proceeds payable upon
death or surrender. Any outstanding Policy Debt will be
deducted from the proceeds payable upon maturity.
Depending upon investment performance of Net Cash Value
and on the amount of Policy Debt, loans may cause a
policy to lapse. If a Policy is not a modified endowment
contract, lapse of the Policy with loans outstanding may
have adverse tax consequences. (See "FEDERAL TAX
MATTERS--Policy Proceeds.")
6
<PAGE>
DEATH PROCEEDS. The Policy provides for the payment of
death proceeds following receipt by the Company (at its
Home Office) of Due Proof of Death of the Insured. The
Policy contains two death benefit options. Under Option
A, the death benefit is the greater of the sum of the
Specified Amount and the Policy's Cash Value, or the Cash
Value multiplied by the specified amount factor for the
Insured's Attained Age, as set forth in the Policy. Under
Option B, the death benefit is the greater of the
Specified Amount, or the Cash Value multiplied by the
specified amount factor for the Insured's Attained Age,
as set forth in the Policy. For this purpose, all
calculations are made as of the end of the Business Day
coinciding with or immediately following the date of
death.
Under either death benefit option, so long as the Policy
remains in force, the death benefit will not be less than
the Specified Amount of the Policy on the date of death.
The death benefit may, however, exceed the Specified
Amount. The amount by which the death benefit exceeds the
Specified Amount depends upon the death benefit option
chosen and the Cash Value of the Policy. (See "POLICY
BENEFITS--Death Proceeds.") To determine the death
proceeds, the death benefit will be reduced by any
outstanding Policy Debt and increased by any unearned
loan interest and any premiums paid after the date of
death. The proceeds may be paid in a lump sum or in
accordance with a payment option. (See "POLICY
BENEFITS--Payment Options.")
Anytime after the first Policy Year, the Policyowner may,
subject to certain restrictions, adjust the death benefit
payable under the Policy by increasing or decreasing the
Specified Amount. (See "POLICY BENEFITS--Death
Proceeds--CHANGE IN EXISTING COVERAGE.") In addition, the
Policyowner may, at any time, change the death benefit
option in effect. (See "POLICY BENEFITS--Death
Proceeds--CHANGE IN DEATH BENEFIT OPTION.")
BENEFITS AT MATURITY. If the Insured is alive and the
Policy is in force on the Maturity Date, the Policyowner
will be paid the Cash Value of the Policy as of the end
of the Business Day coinciding with or immediately
following the Maturity Date, reduced by any outstanding
Policy Debt.
- --------------------------------------------------------------------------------
CHARGES
PREMIUM EXPENSE CHARGE. The Net Premium equals the
premium paid less a premium expense charge. The premium
expense charge consists of a 5.0% sales charge (used to
compensate the Company for expenses incurred in
connection with the distribution of the Policies) and a
2.0% premium tax charge (used to compensate the Company
for premium taxes imposed by various states and
subdivisions thereof). (See "CHARGES AND
DEDUCTIONS--Premium Expense Charge.")
CASH VALUE CHARGES. Cash Value will be reduced each
Policy Month on the Monthly Deduction Day by a monthly
deduction equal to the sum of a cost of insurance charge,
the cost of any additional insurance benefits added by
rider and an administrative charge of $3.00. In addition,
during the first twelve Policy Months and during the
twelve Policy Months immediately following an increase in
Specified Amount, the monthly deduction will include a
first year monthly administrative charge. This charge
will range from $0.05 to $0.50 per $1,000 of Specified
Amount and will depend upon the Attained Age of the
Insured and the Policy's total Specified Amount. (See
"CHARGES AND DEDUCTIONS--Monthly Deduction--FIRST YEAR
MONTHLY ADMINISTRATIVE CHARGE.") The monthly deduction
will vary in amount from month to month. (See "CHARGES
AND DEDUCTIONS--Monthly Deduction.")
Upon partial or complete surrender of a Policy, a charge
equal to the lesser of $25 or 2.0% of the amount
surrendered will be assessed. (See "CHARGES AND
DEDUCTIONS--Surrender Charge.") During a Policy Year, a
charge may be made for the second and subsequent
transfers of assets among the Subaccounts and between the
Variable Account and the Declared Interest Option. (See
"CHARGES AND DEDUCTIONS--Transfer Charge.")
CHARGES AGAINST THE VARIABLE ACCOUNT. A daily charge at
the rate of .0024548% of the average daily net assets of
each Subaccount will be imposed to compensate the
7
<PAGE>
Company for certain mortality and expense risks incurred
in connection with the Policies. (See "CHARGES AND
DEDUCTIONS--Variable Account Charges.") This corresponds
to an effective annual rate of .90%.
Currently, no charge is made to the Variable Account for
federal income taxes that may be attributable to the
Variable Account. The Company may, however, make such a
charge in the future.
FUND EXPENSES. In addition, because the Variable Account
purchases shares of the Fund, the value of the net
assets of the Variable Account will reflect the
investment advisory fee and other expenses incurred by
the Fund. (See "CHARGES AND DEDUCTIONS--Variable Account
Charges--FUND EXPENSES.")
- --------------------------------------------------------------------------------
DISTRIBUTION OF THE
POLICIES
The Policies will be distributed by registered
representatives of EquiTrust Marketing Services, Inc.
(formerly known as FBL Marketing Services, Inc.).
EquiTrust Marketing Services, Inc., a wholly-owned
indirect subsidiary of the Company, is registered as a
broker-dealer with the Securities and Exchange Commission
and is a member of the National Association of Securities
Dealers, Inc.
- --------------------------------------------------------------------------------
TAX TREATMENT
If a Policy is issued on the basis of a standard premium
class, while there is some uncertainty, the Company
believes that the Policy should qualify as a life
insurance contract for federal income tax purposes. If a
Policy is issued on a substandard basis, it is not clear
whether or not the Policy would qualify as a life
insurance contract for federal income tax purposes.
Assuming that a Policy qualifies as a life insurance
contract for federal income tax purposes, the Cash Value
under a Policy should be subject to the same federal
income tax treatment as cash value under a conventional
fixed-benefit Policy. Under existing tax law, the
Policyowner is not deemed to be in constructive receipt
of Cash Values under a Policy until there is a
distribution from the Policy. Like death benefits payable
under conventional life insurance policies, death
proceeds payable under a Policy should be completely
excludable from the gross income of the Beneficiary. As a
result, the Beneficiary generally will not be taxed on
these proceeds.
A Policy entered into or "materially changed" after June
20, 1988 may be treated as a "modified endowment
contract" depending upon the amount of premiums paid in
relation to the death benefit. If the Policy is a
modified endowment contract, then all pre-death
distributions, including Policy Loans, will be treated
first as a distribution of taxable income and then as a
return of basis or investment in the contract. In
addition, prior to age 59 1/2, any such distributions
generally will be subject to a 10% additional tax. For
further discussion of modified endowment contracts,
including a discussion of premium limitation rules, see
"FEDERAL TAX MATTERS--Modified Endowment Contracts."
If the Policy is not a modified endowment contract,
distributions generally will be treated first as a return
of basis or investment in the contract and then as a
disbursement of taxable income. Moreover, loans will not
be treated as distributions. Finally, neither
distributions nor loans from a Policy that is not a
modified endowment contract are subject to the 10%
additional tax. (See "FEDERAL TAX MATTERS.")
- --------------------------------------------------------------------------------
CANCELLATION
PRIVILEGE
The Policyowner is granted a 20-day period following
receipt of the Policy in which to examine and return the
Policy. The Policyowner will receive the Policy's Cash
Value plus an amount approximately equal to any charges
which have been deducted from premiums, Cash Value and
the Variable Account. (Owners in the State of Utah will
receive the greater of (1) the Policy's Cash Value plus
an amount approximately equal to any charges which have
been deducted from premiums, Cash Value and the Variable
Account or (2) premiums paid.) (See "THE
POLICY--Examination of Policy (Cancellation Privilege).")
- --------------------------------------------------------------------------------
ILLUSTRATIONS
Sample projections of hypothetical Policy values are
included starting at page A-1 of this Prospectus. These
projections of hypothetical values may be helpful in
understanding the long-term effects of different levels
of investment performance, charges and deductions,
electing one or the other death benefit option and
generally
8
<PAGE>
in comparing this Policy to other life insurance
policies. NONETHELESS, THE ILLUSTRATIONS ARE BASED ON
HYPOTHETICAL INVESTMENT RATES OF RETURN AND ARE NOT A
REPRESENTATION OF PAST OR FUTURE PERFORMANCE. Actual
rates of return may be more or less than those reflected
in the illustrations and, therefore, actual values will
be different from those illustrated.
This Prospectus describes only those aspects of the
Policy that relate to the Variable Account, except where
Declared Interest Option matters are specifically
mentioned. For a brief summary of the aspects of the
Policy relating to the Declared Interest Option, see "THE
DECLARED INTEREST OPTION."
- --------------------------------------------------------------------------------
DIAGRAM
The diagram below illustrates how premium payments are
distributed in the Policy.
[CHART]
- --------------------------------------------------------------------------------
FARM BUREAU LIFE INSURANCE COMPANY
AND THE VARIABLE ACCOUNT
- --------------------------------------------------------------------------------
FARM BUREAU LIFE
INSURANCE COMPANY
The Company is a stock life insurance company which was
incorporated in the State of Iowa on October 30, 1944.
One hundred percent of the outstanding voting shares of
the Company are owned by FBL Financial Group, Inc. At
December 31, 1997, 66.36% of the outstanding voting
shares of FBL Financial Group, Inc. was owned by Iowa
Farm Bureau Federation. 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,
9
<PAGE>
Minnesota, Montana, Nebraska, New Mexico, North Dakota,
Oklahoma, South Dakota, Utah, Wisconsin and Wyoming. The
principal offices of the Company are at 5400 University
Avenue, West Des Moines, Iowa 50266.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
THE VARIABLE ACCOUNT
The Variable Account was established by the Company as a
separate account on March 3, 1987. The Variable Account
will receive and invest the Net Premiums paid under the
Policies. In addition, the Variable Account may receive
and invest net premiums for any other variable life
insurance policies issued in the future by the Company.
Although the assets in the Variable Account are the
property of the Company, the assets in the Variable
Account attributable to the Policies generally are not
chargeable with liabilities arising out of any other
business which the Company may conduct. The assets of the
Variable Account are available to cover the general
liabilities of the Company only to the extent that the
Variable Account's assets exceed its liabilities arising
under the Policies and any other policies supported by
the Variable Account. The Company has the right to
transfer to the General Account any assets of the
Variable Account which are in excess of such reserves and
other policy liabilities.
The Variable 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 Variable Account has been registered as a unit
investment trust under the Investment Company Act of 1940
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
Variable Account or the Company by the Commission. The
Variable Account is also subject to the laws of the State
of Iowa which regulate the operations of insurance
companies domiciled in Iowa.
- --------------------------------------------------------------------------------
EQUITRUST VARIABLE
INSURANCE SERIES FUND
The Variable Account invests in shares of the Fund, a
mutual fund 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,
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.
VALUE GROWTH PORTFOLIO. This Portfolio seeks
long-term capital appreciation. The Portfolio pursues
its objective by investing primarily in equity
securities of companies that the investment adviser
believes have a potential to earn a high return on
equity 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.
10
<PAGE>
HIGH GRADE BOND PORTFOLIO. This Portfolio seeks as
high a level of current income as is consistent with
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 and/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 Standard & Poor's, 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 investments 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 Variable
Account and to separate accounts of the Company
supporting other variable life insurance policies and
variable annuity 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 insurance products, or to variable life
insurance and variable annuity separate accounts of
insurance companies not affiliated with the Company. The
Company currently does not foresee any disadvantages to
Policyowners arising from the sale of shares to support
variable life insurance policies and variable annuity
contracts, or from shares being sold to separate accounts
of insurance companies that may or may not be affiliated
with the Company. However, the management of the Fund
intends to monitor events in order to identify any
material irreconcilable conflicts that might possibly
arise if the Fund were to offer the shares to support
such products. In that event, it would determine what
action, if any, should be taken in response to those
events or conflicts. In addition, if the Company believes
that the Fund's response to any of those events or
conflicts insufficiently protects Policyowners, it will
take appropriate action on its own, including withdrawing
the Variable Account's investment in the Fund. (See the
Fund prospectus for more detail.)
11
<PAGE>
[CHART]
EquiTrust Investment Management Services, Inc. (formerly
known as 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. As compensation for the advisory and management
services provided by the Adviser, the Fund has agreed to
pay the Adviser an annual management fee, accrued daily
and payable monthly, based on an annual percentage of the
average daily net assets of each Portfolio as follows:
<TABLE>
<CAPTION>
AVERAGE DAILY NET
ASSETS
----------------------------------
FIRST SECOND OVER
$200 $200 $400
PORTFOLIO MILLION MILLION MILLION
- -------- --------- ---------- ---------
<S> <C> <C> <C>
Value Growth............................ 0.45% 0.45 % 0.40%
High Grade Bond......................... 0.30% 0.275% 0.25%
High Yield Bond......................... 0.45% 0.45 % 0.40%
Managed................................. 0.45% 0.45 % 0.45%
Money Market............................ 0.25% 0.25 % 0.25%
Blue Chip............................... 0.20% 0.20 % 0.20%
</TABLE>
The Adviser, at its expense, furnishes the Fund with
office space and facilities, simple business equipment,
advisory, research and statistical facilities, and
clerical services and personnel to administer the
business affairs of the Fund. The Fund pays its other
expenses. The Adviser has agreed to reimburse the Fund to
the extent that the annual operating expenses (including
the investment advisory fee but excluding brokerage,
interest, taxes and extraordinary expenses) of any
Portfolio of the Fund exceed 1.50% of average daily net
assets of that Portfolio for any fiscal year of the Fund.
This reimbursement agreement will remain in effect as
long as the Investment Advisory agreement remains in
effect and cannot be changed without shareholder
approval. Additionally, the Adviser has agreed to
reimburse any Portfolio to the extent that annual
operating expenses, including the investment advisory
fee, exceed .65%.
12
<PAGE>
There can be no assurance that the Adviser will continue
to limit expenses beyond December 31, 1998. (See "CHARGES
AND DEDUCTIONS--Variable Account Charges--FUND
EXPENSES.")
The Fund is registered with the Securities and Exchange
Commission 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 Securities and Exchange
Commission.
- --------------------------------------------------------------------------------
ADDITION, DELETION OR
SUBSTITUTION OF
INVESTMENTS
The Company reserves the right, subject to compliance
with applicable law, to make additions to, deletions from
or substitutions for the shares of the mutual fund
Portfolios that are held by the Variable Account or that
the Variable Account may purchase. If the shares of a
Portfolio are no longer available for investment or if,
in its judgment, further investment in any Portfolio
should become inappropriate in view of the purposes of
the Variable Account, the Company reserves the right to
dispose of the shares of any Portfolio of the Fund and to
substitute shares of another Portfolio of the Fund or of
another open-end, registered management investment
company. The Company will not substitute any shares
attributable to a Policyowner's Cash Value in the
Variable Account without notice to and prior approval of
the Securities and Exchange Commission, to the extent
required by the Investment Company Act of 1940 or other
applicable law. Nothing contained in this Prospectus
shall prevent the Variable Account from purchasing other
securities for other series or classes of policies, or
from permitting a conversion between series or classes of
policies on the basis of requests made by Policyowners.
The Company also reserves the right to establish
additional subaccounts of the Variable Account, each of
which would invest in shares of a new portfolio of the
Fund, or in shares of another investment company, with a
specified investment objective. New subaccounts may be
established when, in the sole discretion of the Company,
marketing, tax or investment conditions warrant, and any
new subaccounts may be made available to existing
Policyowners 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(s), or one or
more Subaccounts may be eliminated or combined with any
other Subaccount(s) 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, make such
changes in these and other policies as may be necessary
or appropriate to reflect such substitution or change. If
deemed by the Company to be in the best interests of
persons having voting rights under the Policies, the
Variable Account may be operated as a management company
under the Investment Company Act of 1940, may be
deregistered under that Act in the event such
registration is no longer required, or, subject to
obtaining any approvals or consents required by
applicable law, may be combined with other Company
separate accounts. To the extent permitted by applicable
law, the Company may also transfer the assets of the
Variable Account associated with the Policies to another
separate account. In addition, the Company may, when
permitted by law, restrict or eliminate any voting rights
of Policyowners or other persons who have voting rights
as to the Variable Account. (See "ADDITIONAL
INFORMATION--Voting Rights.")
- --------------------------------------------------------------------------------
THE POLICY
- --------------------------------------------------------------------------------
PURPOSE OF THE POLICY
The Policy is designed to provide the Policyowner with
both lifetime insurance protection and significant
flexibility in connection with the amount and frequency
of premium payments and the level of death proceeds
payable under a Policy. Unlike conventional life
insurance, the Policyowner is not required to pay
scheduled premiums to keep a Policy in force, but may,
subject to certain limitations, vary the frequency and
amount of premium payments. Moreover, the Policy allows a
Policyowner to adjust the level of death proceeds payable
under a Policy, without
13
<PAGE>
having to purchase a new policy, by increasing or
decreasing the Specified Amount. Thus, as insurance needs
or financial conditions change, the Policyowner has the
flexibility to adjust death proceeds and vary premium
payments.
The Policy varies from conventional fixed-benefit life
insurance in a number of additional respects. Because the
death proceeds may, and the Cash Value will, vary with
the investment experience of the chosen Subaccounts, the
Policyowner bears the investment risk of any depreciation
of, but reaps the benefit of any appreciation in, the
value of the underlying assets. As a result, whether or
not a Policy continues in force may depend in part upon
the investment experience of the chosen Subaccounts. The
failure to pay a planned periodic premium will not
necessarily cause the Policy to lapse, but the Policy
could lapse even if planned periodic premiums have been
paid, depending upon the investment experience of the
Variable Account.
Life Insurance is not a short-term investment.
Prospective policyowners should consider their need for
insurance coverage and the Policy's long-term investment
potential. A prospective policyowner who already has life
insurance coverage should consider whether or not
changing or adding to existing coverage would be
advantageous. Generally, it is not advisable to purchase
another policy to replace an existing policy.
- --------------------------------------------------------------------------------
PURCHASING THE POLICY
Before it will issue a Policy, the Company must receive a
completed application, including payment of the initial
premium, at its Home Office. A Policy ordinarily will be
issued only for Insureds who are 0 to 80 years of age at
their last birthday and who supply satisfactory evidence
of insurability to the Company. Acceptance is subject to
the Company's underwriting rules and the Company may, in
its sole discretion, reject any application or premium
for any reason. The minimum Specified Amount for which a
Policy will be issued is normally $25,000, although the
Company may, in its discretion, issue Policies with
Specified Amounts of less than $25,000.
The Policy Date will be the later of (i) the date of the
initial application, or (ii) if additional medical or
other information is required pursuant to the Company's
underwriting rules, the date all such additional
information is received by the Company at its Home
Office. The Policy Date may also be any other date
mutually agreed to by the Company and the Policyowner. If
the later of (i) and (ii) above is the 29th, 30th or 31st
of any month, the Policy Date will be the 28th of such
month. The Policy Date is the date used to determine
Policy Years, Policy Months and Policy Anniversaries. The
Policy Date may, but will not always, coincide with the
effective date of insurance coverage under the Policy.
The effective date of insurance coverage under the Policy
will be the later of (i) the Policy Date, (ii) if an
amendment to the initial application is required pursuant
to the Company's underwriting rules, the date the Insured
signs the last such amendment, or (iii) the date on which
the full initial premium is received by the Company at
its Home Office.
- --------------------------------------------------------------------------------
PREMIUMS
Subject to certain limitations, a Policyowner has
flexibility in determining the frequency and amount of
premiums.
PREMIUM FLEXIBILITY. Unlike conventional insurance
policies, the Policy frees the Policyowner from the
requirement that premiums be paid in accordance with a
rigid and inflexible premium schedule. The Company may
require the Policyowner to pay an initial premium equal
to the greater of $100 or an amount that, when reduced by
the premium expense charge (see "CHARGES AND
DEDUCTIONS--Premium Expense Charge"), will be sufficient
to pay the monthly deduction for the first three Policy
Months. Thereafter, subject to the minimum and maximum
premium limitations described below, a Policyowner may
also make unscheduled premium payments at any time prior
to the Maturity Date.
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 insurance policy to a permanent
insurance Policy 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 Policy an amount equal to the
14
<PAGE>
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
Policy 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 Policy 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
Policy provisions applicable to premiums, such as premium
taxes and sales charges. Please see your registered
representative for more information. A commission is paid
to a registered representative upon a conversion.
PLANNED PERIODIC PREMIUMS. Each Policyowner will
determine a planned periodic premium schedule that
provides for the payment of a level premium over a
specified period of time on a quarterly, semi-annual or
annual basis. The Company may, at its discretion, permit
planned periodic payments to be made on a monthly basis.
Periodic reminder notices ordinarily will be sent to the
Policyowner for each planned periodic premium. Depending
on the duration of the planned periodic premium schedule,
the timing of planned payments could affect the tax
status of the Policy. (See "FEDERAL TAX MATTERS.")
The Policyowner is not required to pay premiums in
accordance with the planned periodic premium schedule.
Furthermore, the Policyowner has considerable flexibility
to alter the amount, frequency and the time period over
which planned periodic premiums are paid; however, no
planned periodic payment may be less than $100 without
the Company's consent. Changes in the planned premium
schedule may have federal income tax consequences. (See
"FEDERAL TAX MATTERS.")
The payment of a planned periodic premium will not
guarantee that the Policy remains in force. Instead, the
duration of the Policy depends upon the Policy's Cash
Value. Thus, even if planned periodic premiums are paid
by the Policyowner, the Policy will nevertheless lapse if
Net Cash Value is insufficient on a Monthly Deduction Day
to cover the monthly deduction (see "CHARGES AND
DEDUCTIONS--Monthly Deduction") and a Grace Period
expires without a sufficient payment (see "THE
POLICY--Policy Lapse and Reinstatement--LAPSE").
UNSCHEDULED PREMIUMS. Each unscheduled premium payment
must be at least $100; however, the Company may, in its
discretion, waive this minimum requirement. The Company
reserves the right to limit the number and amount of
unscheduled premium payments. An unscheduled premium
payment may have federal income tax consequences. (See
"FEDERAL TAX MATTERS.")
PREMIUM LIMITATIONS. In no event may the total of all
premiums paid, both planned periodic and unscheduled,
exceed the applicable maximum premium limitation imposed
by federal tax laws. Because the maximum premium
limitation is in part dependent upon the Specified Amount
for each Policy, changes in the Specified Amount may
affect this limitation. If at any time a premium is paid
which would result in total premiums exceeding the
applicable maximum premium limitation, the Company will
accept only that portion of the premium which will make
total premiums equal the maximum. Any part of the premium
in excess of that amount will be returned and no further
premiums will be accepted until allowed by the applicable
maximum premium limitation.
PAYMENT OF PREMIUMS. Payments made by the Policyowner
will be treated first as payment of any outstanding
Policy Debt unless the Policyowner indicates that the
payment should be treated otherwise. Where no indication
is made, any portion of a payment that exceeds the amount
of any outstanding Policy Debt will be treated as a
premium payment.
NET PREMIUMS. The Net Premium is the amount available
for investment. The Net Premium equals the premium paid
less the premium expense charge. (See "CHARGES AND
DEDUCTIONS--Premium Expense Charge.")
ALLOCATION OF NET PREMIUMS. In the application for a
Policy, the Policyowner can allocate Net Premiums or
portions thereof to the Subaccounts, to the Declared
Interest Option, or both. Notwithstanding the allocation
in the application, the Net
15
<PAGE>
Premiums will first be allocated to the Money Market
Subaccount as of the Issue Date. When the Company
receives, at its Home Office, a notice signed by the
Policyowner that the Policy has been received and
accepted, the Policy's Cash Value in the Money Market
Subaccount automatically will be allocated, without
charge, among the Subaccounts and the Declared Interest
Option in accordance with the Policyowner's percentage
allocation in the application. The Policyowner does not
waive his cancellation privilege by sending the signed
notice of receipt and acceptance of the Policy to the
Company (see "THE POLICY--Examination of Policy
(Cancellation Privilege)").
Net Premiums received after the date the Company receives
the signed notice will be allocated in accordance with
the Policyowner's percentage allocation in the
application or the most recent written instructions of
the Policyowner. The minimum percentage of each premium
that may be allocated to any subaccount of the Variable
Account or to the Declared Interest Option is 10%; no
fractional percentages will be permitted. The allocation
for future Net Premiums may be changed without charge, at
any time while the Policy is in force, by providing the
Company with written notice on a form acceptable to the
Company signed by the Policyowner. The change will take
effect on the date the written notice is received at the
Home Office and will have no effect on prior cash values.
- --------------------------------------------------------------------------------
POLICY LAPSE AND
REINSTATEMENT
LAPSE. Unlike conventional life insurance policies, the
failure to make a planned periodic premium payment will
not itself cause a Policy to lapse. Lapse will occur only
when Net Cash Value is insufficient on a Monthly
Deduction Day to cover the monthly deduction (see
"CHARGES AND DEDUCTIONS--Monthly Deduction") and a Grace
Period expires without a sufficient payment. Insurance
coverage will continue during the Grace Period, but the
Policy will be deemed to have no Cash Value for purposes
of Policy Loans and surrenders during such Grace Period.
The death proceeds payable during the Grace Period will
equal the amount of the death proceeds payable
immediately prior to the commencement of the Grace
Period, reduced by any due and unpaid monthly deductions.
To avoid lapse and termination of the Policy without
value, the Company must receive from the Policyowner
during the Grace Period a premium payment that, when
reduced by the premium expense charge (see "CHARGES AND
DEDUCTIONS-- Premium Expense Charge"), will be at least
equal to three times the monthly deduction due on the
Monthly Deduction Day immediately preceding the Grace
Period (see "CHARGES AND DEDUCTIONS--Monthly Deduction").
A Grace Period of 61 days will commence on the date the
Company sends a notice of any insufficiency to the
Policyowner.
REINSTATEMENT. Prior to the Maturity Date, a lapsed
Policy may be reinstated at any time within five years
of the Monthly Deduction Day immediately preceding the
Grace Period which expired without payment of the
required premium. Reinstatement is effected by submitting
the following items to the Company:
1. A written application for reinstatement signed by the
Policyowner and the Insured;
2. Evidence of insurability satisfactory to the Company;
3. A premium that, after the deduction of the premium
expense charge, is at least sufficient to keep the
Policy in force for three months; and
4. An amount equal to the monthly cost of insurance for
the two Policy Months prior to lapse.
(State law may limit the premium to be paid on
reinstatement to an amount less than that described.) To
the extent that the first year monthly administrative
charge was not deducted for a total of twelve Policy
Months prior to lapse, such charge will continue to be
deducted following reinstatement of the Policy until such
charge has been assessed, both before and after the
lapse, for a total of 12 Policy Months. (See "CHARGES AND
DEDUCTIONS--Monthly Deduction.") The Company will not
reinstate a Policy surrendered for its Cash Value. The
lapse of a Policy with loans outstanding may have adverse
tax consequences (see "FEDERAL TAX MATTERS-- Policy
Proceeds").
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<PAGE>
The effective date of the reinstated Policy will be the
Monthly Deduction Day coinciding with or next following
the date the Company approves the application for
reinstatement.
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EXAMINATION OF POLICY
(CANCELLATION
PRIVILEGE)
The Policyowner may cancel the Policy by delivering or
mailing written notice or sending a telegram to the
Company at its Home Office, and returning the Policy to
the Company at its Home Office before midnight of the
twentieth day after the Policyowner receives the Policy.
Notice given by mail and return of the Policy by mail are
effective on being postmarked, properly addressed and
postage prepaid.
With respect to all Policies, the Company will refund,
within seven days after receipt of satisfactory notice of
cancellation and the returned Policy at its Home Office,
an amount equal to the sum of (a) the Cash Value of the
Policy on the Business Day on or next following the date
the Policy is received by the Company at its Home Office,
(b) any premium expense charges which were deducted from
premiums, (c) monthly deductions made on the Policy Date
and any Monthly Deduction Day, and (d) amounts
approximating the daily mortality and expense risk
charges against the Variable Account. (Owners in the
state of Utah will receive the greater of (1) the
Policy's Cash Value plus an amount approximately equal to
any charges which have been deducted from premiums, Cash
Value and the Variable Account or (2) premiums paid.)
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SPECIAL TRANSFER
PRIVILEGE
A Policyowner may, at any time prior to the Maturity Date
while the Policy is in force, convert the Policy to a
flexible premium fixed-benefit life insurance policy by
requesting that all of the Cash Value in the Variable
Account be transferred to the Declared Interest Option.
The Policyowner may exercise this special transfer
privilege once each Policy Year. Once a Policyowner
exercises the special transfer privilege, all future
premium payments automatically will be credited to the
Declared Interest Option, until such time as the
Policyowner requests a change in allocation. No charge
will be imposed for any transfers resulting from the
exercise of the special transfer privilege.
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EXCHANGE PRIVILEGE
The Company will permit the owner of a flexible premium
fixed-benefit life insurance policy ("fixed-benefit
policy") issued by the Company or Western Farm Bureau
Life Insurance Company (a company held by the same
holding company as the Company), within 12 months of the
policy date shown in such policy, to exchange his
fixed-benefit policy (forms #434-112 and #834-112 only)
for a Policy on the life of the Insured. After the first
12 months following the policy date shown in these fixed-
benefit policies (as well as certain other fixed-benefit
policies issued by the Company or Western Farm Bureau
Life Insurance Company), the Company will permit the
owner of such policy to exchange his fixed-benefit policy
for a Policy when the owner applies for an increase of
$25,000 or more in Specified Amount.
The Policy Date will be the date the application for the
Policy is signed. If an exchange occurs in the first 12
months following the Policy Date, the Policy will have a
Specified Amount equal to the specified amount of the
fixed-benefit policy and will require no evidence of
insurability to exercise the exchange privilege. The
Insured will be placed in the premium class applicable to
the initial specified amount under the fixed-benefit
policy, unless there has been an underwritten increase in
specified amount, in which event the Insured will be
placed, with respect to the entire Specified Amount under
the Policy, in the premium class applicable to such
increase in specified amount.
If an exchange occurs after the first 12 months following
the Policy Date, the Policy will have a Specified Amount
equal to the specified amount of the fixed-benefit policy
plus the increase to purchase a Policy, and the increase
will require underwriting to exercise the exchange
privilege. The Insured will be placed in the premium
class applicable to the initial specified amount under
the fixed-benefit policy, unless there has been an
underwritten increase in specified amount, in which event
the Insured will be placed, with respect to the entire
amount exchanged, in the premium class applicable to such
increase in specified amount. With regard to the increase
in Specified Amount, the Insured will be placed in the
premium class applicable to the increase.
The net cash value of the fixed-benefit policy will
initially be allocated to the Money Market Subaccount.
When the Company receives, at its Home Office, a notice
signed
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<PAGE>
by the Policyowner that the Policy has been received and
accepted, the Policy's cash value in the Money Market
Subaccount automatically will be allocated, without
charge, among the Subaccounts and the Declared Interest
Option pursuant to the allocation instructions set forth
in the application for the Policy.
The Company will waive the sales charge and premium taxes
(see "CHARGES AND DEDUCTIONS--Premium Expense
Charge--SALES CHARGE and PREMIUM TAXES") on the net cash
value of the fixed-benefit policy applied to the Policy
pursuant to an exchange. In addition, the Company will
assess the First Year Monthly Administrative Charge (see
"CHARGES AND DEDUCTIONS--Monthly Deduction--FIRST YEAR
MONTHLY ADMINISTRATIVE CHARGE") only to the extent that
12 monthly per $1,000 charges under the fixed-benefit
policy have not been assessed. An increase in Specified
Amount related to a fixed-benefit policy exchanged after
the first 12 months will be assessed the First Year
Monthly Administrative Charge. Otherwise, charges and
deductions will be made in the manner and amounts
described elsewhere in the Prospectus.
With regard to an exchange after the first 12 months of
the fixed-benefit policy, the incontestable and suicide
provisions of the Policy will apply only to the increased
amount of coverage, except for any period remaining on
the fixed-benefit policy.
An exchanging owner will not be permitted to carry over
an outstanding loan under his fixed-benefit policy. Any
outstanding loan and loan interest must be repaid prior
to the date of exchange. If not repaid prior to the date
of exchange, the amount of the outstanding loan and
interest thereon will be reflected in the net cash value
of the fixed-benefit policy. To the extent a
fixed-benefit policy with an outstanding loan is
exchanged for an unencumbered Policy, the exchanging
owner could recognize income at the time of the exchange
up to the amount of such loan (including any due and
unpaid interest on such loan). (See "FEDERAL TAX
MATTERS--Tax Treatment of Policy Benefits").
Riders issued on the original fixed-benefit policy which
are not offered in the Policy will not be available on
the new Policy. Riders which are available may be
exchanged to the new Policy.
Registered representatives will receive commissions on
the increase in Specified Amount only.
The Policy differs from a fixed-benefit policy in many
significant respects. Most importantly, the Cash Value
under this Policy may consist, entirely on in part, of
Subaccount value which fluctuates in response to the net
investment return of the Variable Account. In contrast,
the cash values under a fixed-benefit policy always
reflect interest credited by the Company. While a minimum
rate of interest is guaranteed, the Company in the past
has credited interest at higher rates. Accordingly, cash
values under a fixed-benefit policy reflect changing
current interest rates and do not vary with the
investment performance of a Variable Account.
Other significant differences between the Policy and a
fixed-benefit policy include: (1) additional charges
applicable under the Policy not found in a fixed-benefit
policy; (2) different surrender charges; (3) different
death benefits; and (4) differences in federal and state
laws and regulations applicable to each of the types of
policies.
The Company believes that an exchange of a fixed-benefit
policy for a Policy generally should be treated as a
nontaxable exchange within the meaning of Section 1035 of
the Internal Revenue Code of 1986, as amended. A Policy
purchased in exchange will generally be treated as a
newly issued contract as of the effective date of the
Policy. This could have various tax consequences. (See
"FEDERAL TAX MATTERS--Tax Treatment of Policy Benefits.")
IF YOU SURRENDER YOUR FIXED-BENEFIT POLICY IN WHOLE OR IN
PART, AND AFTER RECEIPT OF THE PROCEEDS YOU USE THE
SURRENDER PROCEEDS OR PARTIAL SURRENDER PROCEEDS TO
PURCHASE A POLICY, IT WILL NOT BE TREATED AS A
NON-TAXABLE EXCHANGE. THE SURRENDER PROCEEDS WILL
GENERALLY BE INCLUDIBLE IN INCOME.
Owners of a fixed-benefit policy should carefully
consider whether it will be advantageous to replaced a
fixed-benefit policy with a Policy. IT MAY NOT BE
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<PAGE>
ADVANTAGEOUS TO EXCHANGE A FIXED-BENEFIT POLICY FOR A
POLICY (OR TO SURRENDER IN FULL OR IN PART A
FIXED-BENEFIT POLICY AND USE THE SURRENDER OR PARTIAL
SURRENDER PROCEEDS TO PURCHASE A POLICY.) Owners of a
fixed-benefit policy should consult their tax advisers
before exchanging a fixed-benefit policy for this Policy,
or before surrendering in whole or in part their
fixed-benefit policy and using the proceeds to purchase a
Policy.
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POLICY BENEFITS
- --------------------------------------------------------------------------------
While a Policy is in force, it provides for certain
benefits prior to the Maturity Date. Subject to certain
limitations, the Policyowner may at any time obtain all
or a portion of the Net Cash Value by completely or
partially surrendering the Policy. (See "POLICY
BENEFITS--Cash Value Benefits--SURRENDER PRIVILEGES.") In
addition, the Policyowner has certain policy loan
privileges under the Policies. (See "POLICY
BENEFITS--Loan Benefits--POLICY LOANS.") The Policy also
provides for the payment of death proceeds upon the death
of the Insured under one of two death benefit options
selected by the Policyowner (see "POLICY BENEFITS--Death
Proceeds-- DEATH BENEFIT OPTIONS"), and benefits upon the
maturity of a Policy (see "POLICY BENEFITS--Benefits at
Maturity").
- --------------------------------------------------------------------------------
CASH VALUE BENEFITS
SURRENDER PRIVILEGES. At any time prior to the Maturity
Date while the Policy is in force, a Policyowner may
surrender the Policy in whole or in part by sending a
written request to the Company at its Home Office. A
nominal Surrender Charge to cover the cost of processing
the surrender will be payable upon complete surrender and
upon each partial surrender. The charge is equal to the
lesser of $25 or 2.0% of the amount requested. (See
"CHARGES AND DEDUCTIONS--Surrender Charge.") Surrender
proceeds ordinarily will be mailed to the Policyowner
within seven days after the Company receives a signed
request for a surrender at its Home Office, although
payments may be postponed under certain circumstances.
(See "GENERAL PROVISIONS--Postponement of Payments.")
COMPLETE SURRENDERS. The amount payable on complete
surrender of the Policy is the Net Cash Value at the end
of the Valuation Period during which the request is
received less the Surrender Charge. This amount may be
paid in a lump sum or under one of the payment options
specified in the Policy, as requested by the Policyowner.
(See "POLICY BENEFITS--Payment Options.") If the entire
Net Cash Value is surrendered, all insurance in force
will terminate. For a discussion of the tax consequences
associated with Complete Surrenders, see "FEDERAL TAX
MATTERS."
PARTIAL SURRENDERS. A Policyowner may obtain a portion
of the Policy's Net Cash Value upon partial surrender of
the Policy. A partial surrender must be at least $500 and
cannot exceed the lesser of (1) the Net Cash Value less
$500 or (2) 90% of the Net Cash Value. The Surrender
Charge will be deducted from the remaining Cash Value.
The Policyowner may request that the proceeds of a
partial surrender be paid in a lump sum or under one of
the payment options specified in the Policy. (See "POLICY
BENEFITS--Payment Options.")
A partial surrender will be allocated among the
Subaccounts and the Declared Interest Option in
accordance with the written instructions of the
Policyowner. If no such instructions are received with
the request for partial surrender, the partial surrender
will be allocated among the Subaccounts and the Declared
Interest Option in the same proportion that the Cash
Value in each of the Subaccounts and the Cash Value in
the Declared Interest Option, reduced by any outstanding
Policy Debt, bears to the total Cash Value on the date
the request is received at the Home Office.
Partial surrenders will affect both the Policy's Cash
Value and the death proceeds payable under the Policy.
The Policy's Cash Value will be reduced by the amount of
the partial surrender. If the death benefit payable under
either death benefit option both before and after the
partial surrender is equal to the Cash Value multiplied
by the specified amount factor set forth in the Policy, a
partial surrender will result in a reduction in death
proceeds equal to the amount of the partial surrender,
multiplied by the specified amount factor then in effect.
If the death benefit is not so affected by the specified
amount factor, the reduction in death proceeds will be
equal to the partial surrender. (See "POLICY
BENEFITS--Death Proceeds.")
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<PAGE>
Partial surrenders will reduce the Policy's Specified
Amount by the amount of Cash Value surrendered if Option
B is in effect at the time of the surrender. If Option A
is in effect at the time of the surrender, there will be
no effect on Specified Amount. (See "POLICY
BENEFITS--Death Proceeds--DEATH BENEFIT OPTIONS.") The
Specified Amount remaining in force after a partial
surrender may not be less than the minimum Specified
Amount for the Policy in effect on the date of the
partial surrender, as published by the Company. As a
result, the Company will not process any partial
surrender that would reduce the Specified Amount below
this minimum. If increases in the Specified Amount
previously have occurred, a partial surrender will first
reduce the Specified Amount of the most recent increase,
then the next most recent increases successively, then
the coverage under the original application. Thus, a
partial surrender may either increase or decrease the
amount of the cost of insurance charge, depending upon
the particular circumstances. (See "CHARGES AND
DEDUCTIONS--Monthly Deduction--COST OF INSURANCE.") For a
discussion of the tax consequences associated with
partial surrenders, see "FEDERAL TAX MATTERS".
NET CASH VALUE. Net Cash Value equals the Policy's Cash
Value reduced by any outstanding Policy Debt and
increased by any unearned loan interest.
CALCULATION OF CASH VALUE. The Policy provides for the
accumulation of Cash Value. Cash Value will be
determined on each Business Day. A Policy's Cash Value
will reflect a number of factors, including Net Premiums
paid, partial surrenders, Policy Loans, charges assessed
in connection with the Policy, the interest earned on the
Cash Value in the Declared Interest Option and the
investment performance of the Subaccounts to which the
Cash Value is allocated. There is no guaranteed minimum
Cash Value. The Cash Value of the Policy is equal to the
sum of the Cash Values in each Subaccount, plus the Cash
Value in the Declared Interest Option, including amounts
transferred to the Declared Interest Option to secure
outstanding Policy Debt.
As of the Issue Date, the Policy's Cash Value equals the
initial Net Premium less the monthly deduction made on
the Policy Date.
On the Business Day coinciding with or immediately
following the date the Company receives notice that the
Policy has been received and accepted by the Policyowner,
the Policy's Cash Value (all of which is in the Money
Market Subaccount) will be transferred automatically
among the Subaccounts and the Declared Interest Option in
accordance with such percentage allocation instructions.
At the end of each Valuation Period thereafter, the Cash
Value in a Subaccount will equal:
(1) The total Subaccount units represented by the
cash value at the end of the preceding Valuation
Period, multiplied by the Subaccount's unit value
for the current Valuation Period; PLUS
(2) Any Net Premiums received during the current
Valuation Period which are allocated to the
Subaccount; PLUS
(3) All Cash Values transferred to the Subaccount
from the Declared Interest Option or from another
Subaccount during the current Valuation Period;
MINUS
(4) All Cash Values transferred from the Subaccount
to another Subaccount or to the Declared Interest
Option during the current Valuation Period,
including amounts transferred to the Declared
Interest Option to secure Policy Debt; MINUS
(5) All partial surrenders from the Subaccount during
the current Valuation Period; MINUS
(6) The portion of any monthly deduction charged to
the Subaccount during the current Valuation Period
to cover the Policy Month following the Monthly
Deduction Day.
20
<PAGE>
The Policy's total Cash Value in the Variable Account
equals the sum of the Policy's Cash Value in each
Subaccount.
UNIT VALUE. Each Subaccount has a Unit Value. When Net
Premiums are allocated to, or other amounts are
transferred into, a Subaccount, a number of units are
purchased based on the Unit Value of the Subaccount as of
the end of the Valuation Period during which the transfer
is made. Likewise, when amounts are transferred out of a
Subaccount, units are redeemed on the same basis. On any
day, a Policy's Cash Value in a Subaccount is equal to
the number of units held in such Subaccount, multiplied
by the Unit Value of such Subaccount on that date.
For each Subaccount, the Unit Value was initially set at
$10 when the Subaccount first purchased shares of the
designated Portfolio. The Unit Value for each subsequent
valuation period is calculated by dividing (a) by (b)
where:
(a) is (1) the Net Asset 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 is being determined, minus (3) the capital
losses, realized or unrealized, charged against
those 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; and minus (5) a charge no
greater than .0024548% of the average daily net
assets of the Subaccount for each day in the
Valuation Period. This corresponds to an effective
annual rate of .90% of the average daily net
assets of the Subaccount for mortality and expense
risks incurred in connection with the Policies.
(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. The assets in the Variable Account
will be valued at their fair market value in accordance
with accepted accounting practices and applicable laws
and regulations.
- --------------------------------------------------------------------------------
TRANSFERS
Policyowners may transfer amounts among the Subaccounts
an unlimited number of times in a Policy Year; however,
only one transfer per Policy Year may be made between the
Declared Interest Option and the Variable Account.
Transfers are made by written request to the Home Office
or, if the Policyowner has elected the "Telephone
Transfer Authorization" on the supplemental application,
by calling the Home Office toll-free at (800) 247-4170.
The amount of the transfer must be at least $100 or the
total Cash Value in the Subaccount or in the Declared
Interest Option (reduced, in the case of the Declared
Interest Option, by any outstanding Policy Debt), if less
than $100. The Company may, at its discretion, waive the
$100 minimum requirement. The transfer will be effective
as of the end of the Valuation Period during which the
request is received at the Home Office.
The first transfer in each Policy Year will be made
without charge; each time amounts are subsequently
transferred in that Policy Year, a transfer charge of $25
may be assessed. The transfer charge, unless paid in
cash, will be deducted from the amount transferred. Once
a Policy is issued, the amount of the transfer charge is
guaranteed for the life of the Policy. (See "CHARGES AND
DEDUCTIONS--Transfer Charge.")
For purposes of these limitations and charges, all
transfers effected on the same day will be considered a
single transfer.
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LOAN BENEFITS
POLICY LOANS. So long as the Policy remains in force and
has a positive Net Cash Value, a Policyowner may borrow
money from the Company at any time using the Policy as
the sole security for the Policy Loan. A loan taken from,
or secured by, a Policy may have federal income tax
consequences. (See "FEDERAL TAX MATTERS.")
21
<PAGE>
The maximum amount that may be borrowed at any time is
90% of the Cash Value as of the end of the Valuation
Period during which the request for the Policy Loan is
received at the Home Office, less any previously
outstanding Policy Debt. The Company's claim for
repayment of Policy Debt has priority over the claims of
any assignee or other person.
During any time that there is outstanding Policy Debt,
payments made by the Policyowner will be treated first as
payment of outstanding Policy Debt, unless the
Policyowner indicates that the payment should be treated
otherwise. Where no indication is made, any portion of a
payment that exceeds the amount of any outstanding Policy
Debt will be treated as a premium payment.
ALLOCATION OF POLICY LOAN. When a Policy Loan is made,
an amount equal to the Policy Loan will be segregated
within the Declared Interest Option as security for the
Policy Loan. If, immediately prior to the Policy Loan,
the Cash Value in the Declared Interest Option less
Policy Debt outstanding is less than the amount of such
Policy Loan, the difference will be transferred from the
subaccounts of the Variable Account, which have Cash
Value, in the same proportions that the Policy's Cash
Value in each Subaccount bears to the Policy's total Cash
Value in the Variable Account. Cash Values will be
determined as of the end of the Valuation Period during
which the request for the Policy Loan is received at the
Home Office.
Loan proceeds will normally be mailed to the Policyowner
within seven days after receipt of a written request.
Postponement of a Policy Loan may take place under
certain circumstances. (See "GENERAL
PROVISIONS--Postponement of Payments.")
Amounts segregated within the Declared Interest Option as
security for Policy Debt will bear interest at an
effective annual rate set by the Company. (See "POLICY
BENEFITS--Loan Benefits--EFFECT ON INVESTMENT
PERFORMANCE.")
LOAN INTEREST CHARGED. The interest rate charged on
Policy Loans is not fixed. Initially, it will be the
rate shown in the Policy on the policy data page. The
Company may at any time elect to change the interest
rate, subject to the following conditions: (i) the rate
may not exceed 7.4% per year in advance (which is equal
to an effective rate of 8.0%); (ii) any increase in the
interest rate may not exceed 1.0% per calendar year; and
(iii) changes in the interest rate may not occur more
often than once in any twelve-month period. The Company
will send notice of any change in rate to the
Policyowner. The new rate will take effect on the Policy
Anniversary coinciding with or next following the date
the rate is changed.
Interest is payable in advance at the time any Policy
Loan is made (for the remainder of the Policy Year) and
on each Policy Anniversary thereafter (for the entire
Policy Year) so long as there is Policy Debt outstanding.
Interest payable at the time a Policy Loan is made will
be subtracted from the loan proceeds. Thereafter,
interest not paid when due will be added to the existing
Policy Debt and bear interest at the same rate charged
for Policy Loans. The amount equal to unpaid interest
will be segregated within the Declared Interest Option in
the same manner that amounts for Policy Loans are
segregated within the Declared Interest Option. (See
"POLICY BENEFITS-- Loan Benefits--ALLOCATION OF POLICY
LOAN.")
Because interest is charged in advance, any interest that
has not been earned will be added to the death benefit
payable at the Insured's death and to the Cash Value upon
complete surrender, and will be credited to the Cash
Value in the Declared Interest Option upon repayment of
Policy Debt.
EFFECT ON INVESTMENT PERFORMANCE. Amounts transferred
from the Variable Account as security for Policy Debt
will no longer participate in the investment performance
of the Variable Account. All amounts held in the Declared
Interest Option as security for Policy Debt will be
credited with interest on each Monthly Deduction Day at
an effective annual rate of between 4.5% and 6.0%, as
determined and declared by the Company. No additional
interest will be credited to these amounts. The interest
22
<PAGE>
credited will remain in the Declared Interest Option
unless and until transferred by the Policyowner to the
Variable Account, but will not be segregated within the
Declared Interest Option as security for Policy Debt.
Even though Policy Debt may be repaid in whole or in part
at any time prior to the Maturity Date if the Policy is
still in force, Policy Loans will affect the Cash Value
of a Policy and may affect the death proceeds payable.
The effect could be favorable or unfavorable depending
upon whether the investment performance of the
Subaccount(s) from which the Cash Value was transferred
is less than or greater than the interest rates actually
credited to the Cash Value segregated within the Declared
Interest Option as security for Policy Debt while Policy
Debt is outstanding. In comparison to a Policy under
which no Policy Loan was made, Cash Value will be lower
where such interest rates credited were less than the
investment performance of the Subaccount(s), but will be
greater where such interest rates were greater than the
performance of the Subaccount(s). In addition, death
proceeds will reflect a reduction of the death benefit by
any outstanding Policy Debt.
POLICY DEBT. Policy Debt equals the sum of all unpaid
Policy Loans and any due and unpaid policy loan
interest. Policy Debt is not included in Net Cash Value
and therefore Net Cash Value is reduced by the amount of
any Policy Debt. If Net Cash Value is insufficient on a
Monthly Deduction Day to cover the monthly deduction (see
"Charges and Deductions--Monthly Deduction"), the Company
will notify the Policyowner. To avoid lapse and
termination of the Policy without value (see "THE
POLICY--Policy Lapse and Reinstatement--LAPSE"), the
Policyowner must, during the Grace Period, make a premium
payment that, when reduced by the premium expense charge
(see "CHARGES AND DEDUCTIONS--Premium Expense Charge"),
will be at least equal to three times the monthly
deduction due on the Monthly Deduction Day immediately
preceding the Grace Period (see "CHARGES AND
DEDUCTIONS--Monthly Deduction"). Therefore the greater
the Policy Debt under a Policy, the more likely it would
be to lapse.
REPAYMENT OF POLICY DEBT. Policy Debt may be repaid in
whole or in part any time during the Insured's life and
before the Maturity Date so long as the Policy is in
force. Any Policy Debt not repaid is subtracted from the
death benefit payable at the Insured's death, from Cash
Value upon complete surrender or from the maturity
benefit. Any payments made by a Policyowner will be
treated first as the repayment of any outstanding Policy
Debt, unless the Policyowner indicates otherwise. Upon
repayment of Policy Debt, the portion of the Cash Value
in the Declared Interest Option securing the repaid
portion of the Policy Debt will no longer be segregated
within the Declared Interest Option as security for
Policy Debt, but will remain in the Declared Interest
Option unless and until transferred to the Variable
Account by the Policyowner.
For a discussion of the tax consequences associated with
Policy Loans and lapses, see "FEDERAL TAX MATTERS."
- --------------------------------------------------------------------------------
DEATH PROCEEDS
So long as the Policy remains in force, the Policy
provides for the payment of death proceeds upon the death
of the Insured. Proceeds will be paid to the primary
Beneficiary or a contingent Beneficiary. One or more
primary Beneficiaries or contingent Beneficiaries may be
named. If no Beneficiary survives the Insured, the death
proceeds will be paid to the Policyowner or his estate.
Death proceeds may be paid in a lump sum or under a
payment option. (See "POLICY BENEFITS--Payment Options.")
To determine the death proceeds, the death benefit will
be reduced by any outstanding Policy Debt and increased
by any unearned loan interest and any premiums paid after
the date of death. Proceeds will ordinarily be mailed to
the Policyowner within seven days after receipt by the
Company of Due Proof of Death. Payment may, however, be
postponed under certain circumstances. (See "GENERAL
PROVISIONS--Postponement of Payments.") The Company pays
interest on those proceeds, at an annual rate of no less
than 3.0%, from the date of death to the date payment is
made.
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<PAGE>
DEATH BENEFIT OPTIONS. Policyowners designate in the
initial application one of two death benefit options
offered under the Policy. The amount of the death benefit
payable under a Policy will depend upon the option in
effect at the time of the Insured's death. Under Option
A, the death benefit will be equal to the greater of (i)
the sum of the current Specified Amount and the Cash
Value, or (ii) the Cash Value multiplied by the specified
amount factor. Cash Value will be determined as of the
end of the Business Day coinciding with or immediately
following the date of death. The specified amount factor
is 2.50 for an Insured Attained Age 40 or below on the
date of death. For Insureds with an Attained Age over 40
on the date of death, the factor declines with age as
shown in the Specified Amount Factor Table in Appendix B.
Accordingly, under Option A, the death proceeds will
always vary as the Cash Value varies (but will never be
less than the Specified Amount). Policyowners who prefer
to have favorable investment performance and additional
premiums reflected in increased death benefits generally
should select Option A.
Under Option B, the death benefit will be equal to the
greater of the current Specified Amount or the Cash Value
(determined as of the end of the Business Day coinciding
with or immediately following the date of death)
multiplied by the specified amount factor. The specified
amount factor is the same as under Option A. Accordingly,
under Option B the death benefit will remain level at the
Specified Amount unless the Cash Value multiplied by the
specified amount factor exceeds the current Specified
Amount, in which case the amount of the death benefit
will vary as the Cash Value varies. Policyowners who are
satisfied with the amount of their insurance coverage
under the Policy and who prefer to have favorable
investment performance and additional premiums reflected
in higher Cash Value, rather than increased death
benefits, generally should select Option B.
Examples illustrating Option A and Option B can be found
in Appendix B.
CHANGE IN DEATH BENEFIT OPTION. The death benefit option
in effect may be changed at any time by sending a
written request for the change to the Company at its Home
Office. The effective date of such a change will be the
Monthly Deduction Day coinciding with or immediately
following the date the change is approved by the Company.
A change in death benefit options may have federal income
tax consequences. (See "FEDERAL TAX MATTERS.")
If the death benefit option is changed from Option A to
Option B, the current Specified Amount will not change.
If the benefit option is changed from Option B to Option
A, the current Specified Amount will be reduced by an
amount equal to the Cash Value on the effective date of
the change. A change in the death benefit option may not
be made if it would result in a Specified Amount which is
less than the minimum Specified Amount in effect on the
effective date of the change or if after the change the
Policy would no longer qualify as life insurance under
federal tax law.
No charges will be imposed in connection with a change in
death benefit option; however, a change in death benefit
option will affect the cost of insurance charges. (See
"CHARGES AND DEDUCTIONS--Monthly Deduction--COST OF
INSURANCE.")
CHANGE IN EXISTING COVERAGE. After a Policy has been in
force for one Policy Year, a Policyowner may adjust the
existing insurance coverage by increasing or decreasing
the Specified Amount. To make a change, the Policyowner
must send a written request to the Company at its Home
Office. Any change in the Specified Amount may affect the
cost of insurance rate and the net amount at risk, both
of which will affect a Policyowner's cost of insurance
charge. (See "CHARGES AND DEDUCTIONS-- Monthly
Deduction--COST OF INSURANCE RATE, and--NET AMOUNT AT
RISK.") If decreases in the Specified Amount cause the
premiums paid to exceed the maximum premium limitations
imposed by federal tax law (see "THE POLICY--Premiums--
PREMIUM LIMITATIONS"), the decrease will be limited to
the extent necessary to meet these requirements. A change
in existing coverage may have federal income tax
consequences. (See "FEDERAL TAX MATTERS--Tax Treatment of
Policy Benefits.")
24
<PAGE>
Any decrease in the Specified Amount will become
effective on the Monthly Deduction Day coinciding with or
immediately following the date the request is approved by
the Company. The decrease will first reduce the Specified
Amount provided by the most recent increase, then the
next most recent increases successively, then the
Specified Amount under the original application. The
Specified Amount following a decrease can never be less
than the minimum Specified Amount for the Policy in
effect on the date of the decrease.
To apply for an increase, evidence of insurability
satisfactory to the Company must be provided. Any
approved increase will become effective on the Monthly
Deduction Day coinciding with or immediately following
the date the request is approved by the Company. An
increase will not become effective, however, if the
Policy's Cash Value on the effective date would not be
sufficient to cover the deduction for the increased cost
of the insurance for the next Policy Month.
CHANGES IN INSURANCE PROTECTION. A Policyowner may
increase or decrease the pure insurance protection
provided by a Policy--the difference between the death
benefit and the Cash Value--in one of several ways as
insurance needs change. These ways include increasing or
decreasing the Specified Amount of insurance, changing
the level of premium payments and, to a lesser extent,
partially surrendering Cash Value. Although the
consequences of each of these methods will depend upon
the individual circumstances, they may be summarized as
follows:
(a) A decrease in the Specified Amount will, subject
to the applicable specified amount factor
limitations (see "POLICY BENEFITS--Death
Proceeds-- DEATH BENEFIT OPTIONS"), decrease the
pure insurance protection and the cost of
insurance charges under the Policy without
generally reducing the Cash Value.
(b) An increase in the Specified Amount may increase
the amount of pure insurance protection, depending
on the amount of Cash Value and the resultant
applicable specified amount factor. If the
insurance protection is increased, the cost of
insurance charge generally will increase as well.
(c) If Option B is elected, an increased level of
premium payments will increase the Cash Value and
reduce the pure insurance protection, until the
Cash Value multiplied by the applicable specified
amount factor exceeds the Specified Amount.
Increased premiums should also increase the amount
of funds available to keep the Policy in force.
(d) If Option B is elected, a reduced level of
premium payments generally will increase the
amount of pure insurance protection, depending on
the applicable specified amount factor. It also
will result in a reduced amount of Cash Value and
will increase the possibility that the Policy will
lapse.
(e) A partial surrender will reduce the death
benefit. (See "POLICY BENEFITS-- Cash Value
Benefits--SURRENDER PRIVILEGES.") However, it only
affects the amount of pure insurance protection if
the death benefit payable is based on the
specified amount factor, because otherwise the
decrease in the benefit is offset by the amount of
Cash Value withdrawn. The primary use of a partial
surrender is to withdraw cash and reduce Cash
Value.
In comparison, an increase in the death benefit due to
the operation of the specified amount factor occurs
automatically and is intended to help assure that the
Policy remains qualified as life insurance under federal
tax law. The calculation of the death benefit based upon
the specified amount factor occurs only when the Cash
Value of a Policy reaches a certain proportion of the
Specified Amount (which may or may not occur). Additional
premium payments, favorable investment performance and
large initial premiums tend to increase the likelihood of
the specified amount factor becoming operational after
the first few Policy Years. Such increases will be
temporary, however, if the investment performance becomes
unfavorable and/or premium payments are stopped or
decreased.
25
<PAGE>
- --------------------------------------------------------------------------------
ACCELERATED PAYMENTS
OF DEATH PROCEEDS
In the event that the Insured becomes terminally ill (as
defined below), the Policyowner (if residing in a state
that has approved such an endorsement) may, by written
request and subject to the conditions stated below, have
the Company pay all or a portion of the accelerated death
benefit immediately to the Policyowner. If not attached
to the Policy beforehand, the Company will issue an
accelerated death benefit endorsement (the "Endorsement")
providing for this right.
For this purpose, an Insured is terminally ill when a
physician (as defined by the Endorsement) certifies that
he or she has a life expectancy of 12 months or less.
The accelerated death benefit is equal to the Policy's
death benefit as described on page 6, up to a maximum of
$250,000 (the $250,000 maximum applies in aggregate to
all policies issued by the Company on the Insured), less
an amount representing a discount for 12 months at the
interest rate charged for loans under the Policy. The
accelerated death benefit does not include the amount of
any death benefit payable under a rider that covers the
life of someone other than the Insured.
In the event that there is a loan outstanding under the
Policy on the date that the Policyowner requests a
payment under the Endorsement, the accelerated death
benefit is reduced by a portion of the outstanding loan
in the same proportion that the requested payment under
the Endorsement bears to the total death benefit under
the Policy. If the amount requested by the Policyowner to
be paid under the Endorsement is less than the total
death benefit under the Policy and the Specified Amount
of the Policy is equal to or greater than the minimum
Specified Amount, the Policy will remain in force with
all values and benefits under the Policy being reduced in
the same proportion that the new Policy benefit bears to
the Policy benefit before exercise of the Endorsement.
There are several other restrictions associated with the
Endorsement. These are: (1) the Endorsement is not valid
if the Policy is within five years of being matured, (2)
the consent of any irrevocable beneficiary or assignee is
required to exercise the Endorsement, (3) the Company
reserves the right, in its sole discretion, to require
the consent of the Insured or of any beneficiary,
assignee, spouse or other party of interest before
permitting the exercise of the Endorsement, (4) the
Company reserves the right to obtain the concurrence of a
second medical opinion as to whether any Insured is
terminally ill and (5) the Endorsement is not effective
where (a) the Insured or the Policyowner would be
otherwise required by law to use the Endorsement to meet
the claims of creditors, or (b) the Insured would be
otherwise required by any government agency to exercise
the Endorsement in order to apply for, obtain or keep a
government benefit or entitlement.
The Endorsement will terminate at the earlier of the end
of the grace period for which any premium is unpaid, upon
receipt in the Home Office of a written request from the
Policyowner to cancel the Endorsement or upon termination
of the Policy.
Pursuant to the recently enacted Health Insurance
Portability and Accountability Act of 1996, the Company
believes that for federal income tax purposes, an
accelerated death benefit payment received under an
accelerated death benefit endorsement should be fully
excludable from the gross income of the beneficiary, as
long as the beneficiary is the insured under the Policy.
However, the Policyowner should consult a qualified tax
adviser about the consequences of adding this Endorsement
to a Policy or requesting an accelerated death benefit
payment under this Endorsement.
- --------------------------------------------------------------------------------
BENEFITS AT MATURITY
If the Insured is alive and the Policy is in force on the
Maturity Date, the Company will pay to the Policyowner
the Policy's Cash Value as of the end of the Business Day
coinciding with or immediately following the Maturity
Date, reduced by any outstanding Policy Debt. (See
"POLICY BENEFITS--Loan Benefits--REPAYMENT OF POLICY
DEBT.") Benefits at maturity may be paid in a lump sum or
under a payment option. The Maturity Date is Attained Age
95.
- --------------------------------------------------------------------------------
PAYMENT OPTIONS
Death proceeds and Cash Value paid at maturity, or upon
complete or partial surrender of a Policy, may be paid in
whole or in part under a payment option. There
26
<PAGE>
are currently five payment options available. Payments
may also be made under any new payment option available
at the time proceeds become payable. In addition,
proceeds may be paid in any other manner acceptable to
the Company.
An option may be designated in the application or by
notifying the Company in writing at its Home Office.
During the life of the Insured, the Policyowner may
select a payment option; in addition, during that time
the Policyowner may change a previously selected option
by sending written notice to the Company requesting the
cancellation of the prior option and the designation of a
new option. If the Policyowner has not chosen an option
prior to the Insured's death, the Beneficiary may choose
an option. The Beneficiary may change a payment option by
sending a written request to the Company, provided that a
prior option chosen by the Policyowner is not in effect.
If no option is chosen, the Company will pay the proceeds
of the Policy in one sum. The Company will also pay the
proceeds in one sum if, (i) the proceeds are less than
$2,000; (ii) periodic payments would be less than $20; or
(iii) the payee is an assignee, estate, trustee,
partnership, corporation or association.
Amounts paid under a payment option are paid pursuant to
a payment contract and will not depend upon the
investment performance of the Variable Account. Proceeds
applied under a payment option earn interest at a rate
guaranteed to be no less than 3.0% compounded yearly. The
Company may be crediting higher interest rates on the
effective date of the payment contract. The Company may,
but is not obligated to, declare additional interest to
be applied to such funds.
If a payee dies, any remaining payments will be paid to a
contingent payee. At the death of the last payee, the
commuted value of any remaining payments will be paid to
the last payee's estate. A payee may not withdraw funds
under a payment option unless the Company has agreed to
such withdrawal in the payment contract. The Company
reserves the right to defer a withdrawal for up to six
months and to refuse to allow partial withdrawals of less
than $250.
Payments under Options 2, 3, 4 or 5 will begin as of the
date of the Insured's death, on surrender or on the
Maturity Date. Payments under Option 1 will begin at the
end of the first interest period after the date proceeds
are otherwise payable.
OPTION 1--INTEREST INCOME. Periodic payments of
interest earned from the proceeds will be paid.
Payments can be annual, semi-annual, quarterly or
monthly, as selected by the payee, and will begin at
the end of the first period chosen. Proceeds left
under this plan will earn interest at a rate
determined by the Company, in no event less than 3.0%
compounded yearly. The payee may withdraw all or part
of the proceeds at any time.
OPTION 2--INCOME FOR A FIXED PERIOD. Periodic
payments will be made for a fixed period not longer
than 30 years. Payments can be annual, semi-annual,
quarterly or monthly. Guaranteed amounts payable
under the plan will earn interest at a rate
determined by the Company, in no event less than 3.0%
compounded yearly.
OPTION 3--LIFE INCOME WITH TERM CERTAIN. Equal
periodic payments will be made for a guaranteed
minimum period elected. If the payee lives longer
than the minimum period, payments will continue for
his or her life. The minimum period can be 0, 5, 10,
15 or 20 years. Guaranteed amounts payable under this
plan will earn interest at a rate determined by the
Company, in no event less than 3.0% compounded
yearly.
OPTION 4--INCOME OF A FIXED AMOUNT. Equal periodic
payments of a definite amount will be paid. Payments
can be annual, semi-annual, quarterly or monthly. The
amount paid each period must be at least $20 for each
$1,000 of proceeds. Payments will continue until the
proceeds are exhausted. The last payment will equal
the amount of any unpaid proceeds. Unpaid proceeds
will earn interest at a rate determined by the
Company, in no event less than 3.0% compounded
yearly.
27
<PAGE>
OPTION 5--JOINT AND TWO-THIRDS SURVIVOR MONTHLY LIFE
INCOME. Equal monthly payments will be made for as
long as two payees live. The guaranteed amount
payable under this plan will earn interest at a
minimum rate of 3.0% compounded yearly. When one
payee dies, payments of two-thirds of the original
monthly payment will be made to the surviving payee.
Payments will stop when the surviving payee dies.
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.
- --------------------------------------------------------------------------------
CHARGES AND DEDUCTIONS
- --------------------------------------------------------------------------------
Charges will be deducted in connection with the Policy to
compensate the Company for providing the insurance
benefits set forth in the Policy and any additional
benefits added by rider, for distributing and
administering the Policy, for applicable taxes and for
assuming certain risks in connection with the Policy. The
nature and amount of these charges are described more
fully below.
- --------------------------------------------------------------------------------
PREMIUM EXPENSE
CHARGE
Prior to allocation of Net Premiums among the Subaccounts
and the Declared Interest Option, premiums paid will be
reduced by a premium expense charge consisting of a sales
charge and a charge for premium taxes. The premium less
the premium expense charge equals the Net Premium.
SALES CHARGE. A sales charge of 5.0% of the premium will
be deducted from each premium to compensate the Company
for expenses incurred in distributing the Policy. These
expenses include agent sales commissions, the cost of
printing prospectuses and sales literature, and
advertising costs. The sales charge in any Policy Year is
not necessarily related to actual distribution expenses
incurred in that year. Instead, the Company expects to
incur the majority of distribution expenses in the early
Policy Years and to recover any deficiency over the life
of the Policy and from the Company's general assets,
including amounts derived from the mortality and expense
risk charge and from mortality gains.
PREMIUM TAXES. Various states and subdivisions thereof
impose a tax on premiums received by insurance
companies. Therefore, the premium expense charge
currently includes a deduction of 2.0% of every premium
for these taxes. Premium taxes vary from state to state.
The deduction represents an amount the Company considers
necessary to pay all premium taxes imposed by the states
and any subdivisions thereof. The Company reserves the
right to change the amount of this premium tax charge.
- --------------------------------------------------------------------------------
MONTHLY DEDUCTION
Charges will be deducted monthly from the Cash Value of
each Policy ("monthly deduction") to compensate the
Company for the cost of insurance coverage and any
additional benefits added by rider (See "GENERAL
PROVISIONS--Additional Insurance Benefits"), for
underwriting and start-up expenses in connection with
issuing a Policy and for certain administrative costs.
The monthly deduction will be deducted on the Policy Date
and on each Monthly Deduction Day. (If the Monthly
Deduction Day falls on Thanksgiving, the Friday following
Thanksgiving or the weekend following Thanksgiving; or on
the 27th or 28th day of February, 1999, the monthly
deduction will be deducted on the preceding Business
Day.) It will be deducted from the Declared Interest
Option and each Subaccount in the same proportion that
the Policy's Net Cash Value in the Declared Interest
Option and the Policy's Cash Value in each Subaccount
bear to the total Net Cash Value of the Policy. For
purposes of making deductions from the Declared Interest
Option and the Subaccounts, Cash Values will be
determined as of the end of the Business Day coinciding
with or immediately following the Monthly Deduction Day.
(If the Monthly Deduction Day falls on Thanksgiving, the
Friday following Thanksgiving or the weekend following
Thanksgiving; or on the 27th or 28th day of February,
1999, Cash Values will be determined as of the end of the
preceding Business Day.) Because
28
<PAGE>
portions of the monthly deduction, such as the cost of
insurance, can vary from month to month, the monthly
deduction itself will vary in amount from month to month.
The monthly deduction will be made on the Business Day
coinciding with or immediately following each Monthly
Deduction Day and will equal:
(a) the cost of insurance for the Policy; plus
(b) the cost of any optional insurance benefits added
by rider; plus
(c) the monthly administrative charge.
During the first twelve Policy Months and during the
twelve Policy Months immediately following an increase in
Specified Amount, the monthly deduction will include a
first year monthly administrative charge.
COST OF INSURANCE. This charge is designed to compensate
the Company for the anticipated cost of paying death
proceeds to Beneficiaries of those Insureds who die prior
to the Maturity Date. The cost of insurance is determined
on a monthly basis, and is determined separately for the
initial Specified Amount and for any subsequent increases
in Specified Amount. The Company will determine the
monthly cost of insurance charge by dividing the
applicable cost of insurance rate, or rates, by 1,000 and
multiplying the result by the net amount at risk for each
Policy Month.
NET AMOUNT AT RISK. Under Option A the net amount at
risk for a Policy Month is equal to (a) divided by (b),
and under Option B the net amount at risk for a Policy
Month is equal to (a) divided by (b), minus (c), where:
(a) is the Specified Amount;
(b) is 1.0036748;(1) and
(c) is the Cash Value.
The Specified Amount and the Cash Value will be
determined as of the end of the Business Day coinciding
with or immediately following the Monthly Deduction Day.
The net amount at risk is determined separately for the
initial Specified Amount and any increases in Specified
Amount. In determining the net amount at risk for each
Specified Amount, the Cash Value will be first considered
a part of the initial Specified Amount. If the Cash Value
exceeds the initial Specified Amount, it will be
considered to be a part of any increase in the Specified
Amount in the same order as the increases occurred.
COST OF INSURANCE RATE. The cost of insurance rate for
the initial Specified Amount will be based on the
Insured's sex, premium class and Attained Age. For any
increase in Specified Amount, the cost of insurance rate
will be based on the Insured's sex, premium class and age
at last birthday on the effective date of the increase.
Actual cost of insurance rates may change and the actual
monthly cost of insurance rates will be determined by the
Company based on its expectations as to future mortality
experience. However, the actual cost of insurance rates
will never be greater than the guaranteed maximum cost of
insurance rates set forth in the Policy. These guaranteed
rates are based on the 1980 Commissioners' Standard
Ordinary Non-Smoker and Smoker Mortality Table. Current
cost of insurance rates are generally less than the
guaranteed maximum rates. Any change in the cost of
insurance rates will apply to all persons of the same
age, sex and premium class whose Policies have been in
force the same length of time.
The cost of insurance rates generally increase as the
Insured's Attained Age increases. The premium class of an
Insured also will affect the cost of insurance rate. The
Company currently places Insureds into a standard premium
class or into premium
- --------------
(1)Dividing by 1.0036748 reduces the net amount at risk, solely for the purposes
of computing the cost of insurance, by taking into account assumed monthly
earnings at an annual rate of 4.5%.
29
<PAGE>
classes involving a higher mortality risk. In an
otherwise identical Policy, Insureds in the standard
premium class will have a lower cost of insurance rate
than those in premium classes involving higher mortality
risk. The standard premium class is also divided into
three categories: tobacco, non-tobacco and preferred
plus. Non-tobacco-using Insureds will generally have a
lower cost of insurance rate than similarly situated
Insureds who use tobacco, and preferred plus Insureds
will generally have a lower cost of insurance rate than
similarly situated non-tobacco-using Insureds.
The cost of insurance rate is determined separately for
the initial Specified Amount and for the amount of any
increase in Specified Amount. In calculating the cost of
insurance charge, the rate for the premium class on the
Policy Date will be applied to the net amount at risk for
the initial Specified Amount; for each increase in
Specified Amount, the rate for the premium class
applicable to the increase will be used. However, if the
death benefit is calculated as the Cash Value times the
specified amount factor, the rate for the premium class
for the most recent increase that required evidence of
insurability will be used for the amount of death benefit
in excess of the total Specified Amount.
ADDITIONAL INSURANCE BENEFITS. The monthly deduction
will include charges for any additional benefits
provided by rider. (See "GENERAL PROVISIONS--Additional
Insurance Benefits.")
MONTHLY ADMINISTRATIVE CHARGE. The Company has primary
responsibility for the administration of the Policy and
the Variable Account. Administrative expenses include
premium billing and collection, recordkeeping, processing
death benefit claims, cash surrenders and Policy changes,
and reporting and overhead costs. As reimbursement for
administrative expenses related to the maintenance of
each Policy and the Variable Account, the Company
assesses a monthly administrative charge against each
Policy. This charge is $3 per Policy Month. Once a Policy
is issued, the amount of this charge is guaranteed for
the life of the Policy.
The Company may administer the Policy itself, or the
Company may purchase administrative services from such
sources (including affiliates) as may be available. Such
services will be acquired on a basis which, in the
Company's sole discretion, affords the best services at
the lowest cost. The Company reserves the right to select
a company to provide services which the Company deems, in
its sole discretion, is the best able to perform such
services in a satisfactory manner even though the costs
for such services may be higher than would prevail
elsewhere.
FIRST YEAR MONTHLY ADMINISTRATIVE CHARGE. A monthly
administrative charge will be deducted from Cash Value
as part of the monthly deduction during the first twelve
Policy Months and during the twelve Policy Months
immediately following an increase in Specified Amount.
The charge will compensate the Company for first year
underwriting, processing and start-up expenses incurred
in connection with the Policy and the Variable Account.
These expenses include the cost of processing
applications, conducting medical examinations,
determining insurability and the Insured's premium class,
and establishing policy records. The charges deducted
during the first 12 Policy Months will be based on the
Insured's Attained Age. The charges deducted during the
12 Policy Months following any increase in specified
amount will be based on the Insured's age at last
birthday on the effective date of the increase.
30
<PAGE>
The first year monthly administrative charge per $1,000
of Specified Amount depends on the Specified Amount of
the Policy and the age of the Insured, as shown in the
following table:
<TABLE>
<CAPTION>
$100,000
$25,000 $50,000 TO
AGE TO 49,999 TO 99,999 249,000 $250,000+
------- --------- --------- --------- ----------
<S> <C> <C> <C> <C>
0-25 $ 0.20 $ 0.15 $ 0.10 $ 0.05
26 0.21 0.16 0.11 0.06
27 0.22 0.17 0.12 0.06
28 0.23 0.18 0.13 0.07
29 0.24 0.19 0.14 0.07
30 0.25 0.20 0.15 0.08
31 0.26 0.21 0.16 0.08
32 0.27 0.22 0.17 0.09
33 0.28 0.23 0.18 0.09
34 0.29 0.24 0.19 0.10
35 0.30 0.25 0.20 0.10
36 0.31 0.26 0.21 0.11
37 0.32 0.27 0.22 0.11
38 0.33 0.28 0.23 0.12
39 0.34 0.29 0.24 0.12
40 0.35 0.30 0.25 0.13
41 0.36 0.31 0.26 0.13
42 0.37 0.32 0.27 0.14
43 0.38 0.33 0.28 0.14
44 0.39 0.34 0.29 0.15
45 0.40 0.35 0.30 0.15
46 0.41 0.36 0.31 0.16
47 0.42 0.37 0.32 0.16
48 0.43 0.38 0.33 0.17
49 0.44 0.39 0.34 0.17
50 0.45 0.40 0.35 0.18
51 0.46 0.41 0.36 0.18
52 0.47 0.42 0.37 0.19
53 0.48 0.43 0.38 0.19
54 0.49 0.44 0.39 0.20
55 & up 0.50 0.45 0.40 0.20
</TABLE>
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TRANSFER CHARGE
A transfer charge of $25 may be imposed for the second
and each subsequent transfer during a Policy Year to
compensate the Company for the costs in effectuating the
transfer. The transfer charge, unless paid in cash, will
be deducted from the amount transferred. Once a Policy is
issued, the amount of this charge is guaranteed for the
life of the Policy. The transfer charge will not be
imposed on transfers that occur as a result of Policy
Loans, the exercise of the special transfer privilege or
the initial allocation of Cash Value among the
Subaccounts and the Declared Interest Option following
acceptance of the Policy by the Policyowner.
Currently there is no charge for changing the net premium
allocation instructions.
- --------------------------------------------------------------------------------
SURRENDER CHARGE
Upon partial or complete surrender of a Policy, a charge
equal to the lesser of $25 or 2.0% of the amount
surrendered will be assessed to compensate the Company
for costs incurred in accomplishing the surrender. The
surrender charge will be deducted from the remaining Cash
Value.
- --------------------------------------------------------------------------------
VARIABLE ACCOUNT
CHARGES
MORTALITY AND EXPENSE RISK CHARGE. The Company deducts a
daily mortality and expense risk charge from each
Subaccount at an effective annual rate of .90% of the
average daily net assets of the Subaccounts. This charge
is guaranteed not to increase for the duration of the
Policy. The Company may realize a profit from this
charge.
31
<PAGE>
The mortality risk assumed by the Company is that
Insureds may die sooner than anticipated and therefore,
the Company may pay an aggregate amount of life insurance
proceeds greater than anticipated. The expense risk
assumed is that expenses incurred in issuing and
administering the Policies will exceed the amounts
realized from the administrative charges assessed against
the Policies.
FEDERAL TAXES. Currently no charge is made to the
Variable Account for federal income taxes that may be
attributable to the Variable Account. The Company may,
however, make such a charge in the future. Charges for
other taxes, if any, attributable to the Account may also
be made. (See "FEDERAL TAX MATTERS--Taxation of the
Company.")
FUND EXPENSES. The value of net assets of the Variable
Account will reflect the investment advisory fee and
other expenses incurred by the Fund. For a discussion of
the investment advisory fee and other expenses applicable
to each Portfolio, see "FARM BUREAU LIFE INSURANCE
COMPANY AND THE VARIABLE ACCOUNT-- EquiTrust Variable
Insurance Series Fund" and the attached prospectus for
the Fund.
- --------------------------------------------------------------------------------
THE DECLARED INTEREST OPTION
- --------------------------------------------------------------------------------
Policyowners may allocate Net Premiums and transfer Cash
Value to the Declared Interest Option. BECAUSE OF
EXEMPTIVE AND EXCLUSIONARY PROVISIONS, INTERESTS IN THE
DECLARED INTEREST OPTION HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 AND THE DECLARED INTEREST
OPTION HAS NOT BEEN REGISTERED AS AN INVESTMENT COMPANY
UNDER THE INVESTMENT COMPANY ACT OF 1940. ACCORDINGLY,
NEITHER THE DECLARED INTEREST OPTION NOR ANY INTERESTS
THEREIN ARE SUBJECT TO THE PROVISIONS OF THESE ACTS AND,
AS A RESULT, THE STAFF OF THE SECURITIES AND EXCHANGE
COMMISSION HAS NOT REVIEWED THE DISCLOSURES IN THIS
PROSPECTUS RELATING TO THE DECLARED INTEREST OPTION.
DISCLOSURES REGARDING THE DECLARED INTEREST OPTION MAY,
HOWEVER, BE SUBJECT TO CERTAIN GENERALLY APPLICABLE
PROVISIONS OF THE FEDERAL SECURITIES LAWS RELATING TO THE
ACCURACY AND COMPLETENESS OF STATEMENTS MADE IN
PROSPECTUSES.
- --------------------------------------------------------------------------------
GENERAL DESCRIPTION
The Declared Interest Option is supported by the General
Account. The General Account consists of all assets owned
by the Company other than those in the Variable Account
and other separate accounts. Subject to applicable law,
the Company has sole discretion over the investment of
the assets of the General Account.
A Policyowner may elect to allocate Net Premiums to the
Declared Interest Option, the Variable Account, or both.
The Policyowner may also transfer Cash Value from the
Subaccounts to the Declared Interest Option, or from the
Declared Interest Option to the Subaccounts. The
allocation or transfer of funds to the Declared Interest
Option does not entitle a Policyowner to share in the
investment experience of the General Account. Instead,
the Company guarantees that Cash Value in the Declared
Interest Option will accrue interest at an effective
annual rate of at least 4.5%, independent of the actual
investment experience of the General Account.
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THE POLICY
This Prospectus describes a flexible premium variable
life insurance policy. This Prospectus is generally
intended to serve as a disclosure document for the
aspects of the Policy involving the Variable Account. For
complete details regarding the Declared Interest Option,
see the Policy itself.
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DECLARED INTEREST
OPTION CASH VALUE
Net premiums allocated to the Declared Interest Option
are credited to the Policy. The Company bears the full
investment risk for these amounts. The Company guarantees
that interest credited to each Policyowner's Cash Value
in the Declared Interest Option will not be less than an
effective annual rate of 4.5%. The Company may, in its
sole discretion, credit a higher rate of interest,
although it is not obligated to credit interest in excess
of 4.5% per year, and might not do so. Any interest
credited on the Policy's Cash Value in the Declared
Interest Option in excess of the guaranteed rate of 4.5%
per year will be determined in the sole discretion of the
Company and may be changed at any time by the Company, in
its sole discretion. The Policyowner assumes the risk
that the interest credited may not exceed the guaranteed
minimum
32
<PAGE>
rate of 4.5% per year. The interest credited to the
Policy's Cash Value in the Declared Interest Option that
equals Policy Debt may be greater than 4.5%, but will in
no event be greater than 6.0%. The Cash Value in the
Declared Interest Option will be calculated no less
frequently than each Monthly Deduction Day.
The Company guarantees that, at any time prior to the
Maturity Date, the Cash Value in the Declared Interest
Option will not be less than the amount of the Net
Premiums allocated or Cash Value transferred to the
Declared Interest Option, plus interest at the rate of
4.5% per year, plus any excess interest which the Company
credits, less the sum of all policy charges allocable to
the Declared Interest Option and any amounts deducted
from the Declared Interest Option in connection with
partial surrenders or transfers to the Variable Account.
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TRANSFERS, SURRENDERS
AND POLICY LOANS
Amounts may be transferred between the Subaccounts and
the Declared Interest Option. A transfer charge of $25
may be imposed in connection with the transfer unless
such transfer is the first transfer requested by the
Policyowner during such Policy Year. Unless paid in cash,
the transfer charge will be deducted from the amount
transferred. A Policyowner may make only one transfer
between the Variable Account and the Declared Interest
Option in each Policy Year. No more than 50% of the Net
Cash Value in the Declared Interest Option may be
transferred from the Declared Interest Option unless the
balance in the Declared Interest Option immediately after
the transfer will be less than $1,000. If the balance in
the Declared Interest Option after a transfer would be
less than $1,000, the full Net Cash Value in the Declared
Interest Option may be transferred. A Policyowner may
also make surrenders and obtain Policy Loans from the
Declared Interest Option at any time prior to the
Policy's Maturity Date.
Transfers and surrenders from, and payments of Policy
Loans allocated to, the Declared Interest Option may be
delayed for up to six months.
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GENERAL PROVISIONS
- --------------------------------------------------------------------------------
THE CONTRACT
The Policy is issued in consideration of the statements
in the application and the payment of the initial
premium. The Policy, the application, and any
supplemental applications and endorsements make up the
entire contract. In the absence of fraud, the statements
made in an application or supplemental application will
be treated as representations and not as warranties. No
statement will void the Policy or be used in defense of a
claim unless contained in the application or any
supplemental application.
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INCONTESTABILITY
The Policy is incontestable, except for fraudulent
statements made in the application or supplemental
applications, after it has been in force during the
lifetime of the Insured for two years from the Policy
Date or date of reinstatement. Any increase in Specified
Amount will be incontestable only after it has been in
force during the lifetime of the Insured for two years
from the effective date of the increase.
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CHANGE OF PROVISIONS
The Company reserves the right to change the Policy, in
the event of future changes in the federal tax law, to
the extent required to maintain the Policy's
qualification as life insurance under federal tax law.
Except as provided in the foregoing paragraph, no one can
change any part of the Policy except the Policyowner and
the President, a Vice President, the Secretary or an
Assistant Secretary of the Company. Both must agree to
any change and such change must be in writing. No agent
may change the Policy or waive any of its provisions.
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MISSTATEMENT OF AGE
OR SEX
If the Insured's age or sex was misstated in the
application, each benefit and any amount to be paid under
the Policy will be adjusted to reflect the correct age
and sex.
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SUICIDE EXCLUSION
If the Policy is in force and the Insured commits
suicide, while sane or insane, within one year from the
Policy Date, life insurance proceeds payable under the
Policy will be limited to all premiums paid, reduced by
any outstanding Policy Debt and any partial surrenders,
and increased by any unearned loan interest. If the
Policy is in force and
33
<PAGE>
the Insured commits suicide, while sane or insane, within
one year from the effective date of any increase in
Specified Amount, any increase in the death benefit
resulting from the requested increase in specified amount
will not be paid. Instead, the Company will refund to the
Policyowner an amount equal to the total cost of
insurance applied to the increase.
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ANNUAL REPORT
At least once each year, an annual report will be sent to
each Policyowner. The report will show the current death
benefit, the Cash Value in each Subaccount and in the
Declared Interest Option, outstanding Policy Debt and
premiums paid, partial surrenders made and charges
assessed since the last report. The report will also
include any other information required by state law or
regulation. Further, the Company will send the
Policyowner the reports required by the Investment
Company Act of 1940.
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NON-PARTICIPATION
The Policy does not participate in the Company's profits
or surplus earnings. No dividends are payable.
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OWNERSHIP OF ASSETS
The Company shall have the exclusive and absolute
ownership and control over assets, including the assets
of the Variable Account.
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WRITTEN NOTICE
Any written notice should be sent to the Company at its
Home Office. The notice should include the policy number
and the Insured's full name. Any notice sent by the
Company to a Policyowner will be sent to the address
shown in the application unless an appropriate address
change form has been filed with the Company.
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POSTPONEMENT OF
PAYMENTS
The Company will usually mail the proceeds of complete
surrenders, partial surrenders and Policy Loans within
seven days after the Policyowner's signed request is
received at the Home Office. The Company will usually
mail death proceeds within seven days after receipt of
Due Proof of Death and maturity benefits within seven
days of the Maturity Date. However, payment of any amount
upon complete or partial surrender, payment of any Policy
Loan, and payment of death proceeds or benefits at
maturity may be postponed whenever:
a) the New York Stock Exchange is closed other than
customary weekend and holiday closings, or trading
on the New York Stock Exchange is restricted as
determined by the Securities and Exchange
Commission;
b) the Securities and Exchange Commission by order
permits postponement for the protection of
Policyowners; or
c) an emergency exists, as determined by the
Securities and Exchange Commission, as a result of
which disposal of the securities is not reasonably
practicable or it is not reasonably practicable to
determine the value of the net assets of the
Variable Account.
Transfers may also be postponed under these
circumstances.
Payments under the Policy which are derived from any
amount paid to the Company by check or draft may be
postponed until such time as the Company is satisfied
that the check or draft has cleared the bank upon which
it is drawn.
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CONTINUANCE OF
INSURANCE
The insurance under a Policy will continue until the
earlier of:
a) the end of the Grace Period following the Monthly
Deduction Day on which the Net Cash Value is less
than the monthly deduction for the following
Policy Month;
b) the date the Policyowner surrenders the Policy
for its entire Net Cash Value;
c) the death of the Insured; or
d) the Maturity Date.
Any rider to a Policy will terminate on the date
specified in the rider.
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OWNERSHIP
The Policy belongs to the Policyowner. The original
Policyowner is the person named as owner in the
application. Ownership of the Policy may change according
to the
34
<PAGE>
ownership option selected as part of the original
application or by a subsequent endorsement to the Policy.
During the Insured's lifetime, all rights granted by the
Policy belong to the Policyowner, except as otherwise
provided for in the Policy.
Special ownership rules may apply if the Insured is under
legal age (as defined by state law in the state in which
the Policy is delivered) on the Policy Date.
The Policyowner may assign the Policy as collateral
security. The Company assumes no responsibility for the
validity or effect of any collateral assignment of the
Policy. No assignment will bind the Company unless in
writing and until received by the Company at its Home
Office. The assignment is subject to any payment or
action taken by the Company before it received the
assignment at the Home Office.
- --------------------------------------------------------------------------------
THE BENEFICIARY
The primary Beneficiaries and contingent Beneficiaries
are designated by the Policyowner in the application. If
changed, the primary Beneficiary or contingent
Beneficiary is as shown in the latest change filed with
the Company. One or more primary or contingent
Beneficiaries may be named in the application. In such
case, the proceeds will be paid in equal shares to the
survivors in the appropriate beneficiary class, unless
requested otherwise by the Policyowner.
Unless a payment option is chosen, the proceeds payable
at the Insured's death will be paid in a lump sum to the
primary Beneficiary. If the primary Beneficiary dies
before the Insured, the proceeds will be paid to the
contingent Beneficiary. If no Beneficiary survives the
Insured, the proceeds will be paid to the Policyowner or
the Policyowner's estate.
- --------------------------------------------------------------------------------
CHANGING THE
POLICYOWNER OR
BENEFICIARY
During the Insured's life, the Policyowner and the
Beneficiary may be changed. To make a change, written
request must be sent to the Company at its Home Office.
The request and the change must be in a form satisfactory
to the Company and must actually be received and recorded
by the Company. The change will take effect as of the
date the request is signed by the Policyowner. The change
will be subject to any payment made before the change is
recorded by the Company. The Company may require return
of the Policy for endorsement.
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ADDITIONAL
INSURANCE BENEFITS
Subject to certain requirements, one or more of the
following additional insurance benefits may be added to a
Policy by rider: (i) Universal Cost of Living Increase;
(ii) Universal Waiver of Charges; (iii) Universal Adult
Term Insurance; (iv) Universal Children's Term Insurance
and (v) Universal Guaranteed Insurability Option. The
cost of any additional insurance benefits will be
deducted as part of the monthly deduction. (See "CHARGES
AND DEDUCTIONS--Monthly Deduction.") Detailed information
concerning available riders may be obtained from the
agent selling the Policy.
- --------------------------------------------------------------------------------
DISTRIBUTION OF THE POLICIES
- --------------------------------------------------------------------------------
The Policies will be sold by individuals who in addition
to being licensed as life insurance agents for the
Company, are also registered representatives of the
principal underwriter of the Policies, EquiTrust
Marketing Services, Inc. ("EquiTrust Marketing").
EquiTrust Marketing, a corporation organized on May 7,
1970, under the laws of the State of Delaware, is
registered with the Securities and Exchange Commission
under the Securities Exchange Act of 1934 as a
broker-dealer and is a member of the National Association
of Securities Dealers, Inc. EquiTrust Marketing currently
receives annual compensation of $100 per registered
representative for acting as principal underwriter.
For Policies sold in states other than Kansas, writing
agents will receive commissions based on a commission
schedule and rules. The Company may pay agents first year
commissions at a rate not exceeding 50% of minimum
initial premiums and 4% of unscheduled premiums paid in
the first Policy Year. Agents will be paid renewal
commissions at a rate equal to 5% of planned periodic
premiums and 4% of
35
<PAGE>
unscheduled premiums paid after the first Policy Year.
Additional commissions at a rate not exceeding 50% of the
increase in planned periodic premiums may be paid during
the first year following an increase in Specified Amount.
For Policies sold in Kansas, writing agents will receive
commissions based on a commission schedule and rules. The
Company may pay agents first year commissions at a rate
not exceeding 60% of minimum initial premiums and 3% of
unscheduled premiums paid in the first Policy Year.
Agents will be paid renewal commissions at a rate equal
to 4% of planned periodic premiums and 3% of unscheduled
premiums paid after the first Policy Year. Additional
commissions at a rate not exceeding 60% of the increase
in planned periodic premiums may be paid during the first
year following an increase in Specified Amount.
These commissions (and other distribution expenses, such
as production incentive bonuses, agent's insurance and
pensions benefits, agency management compensation and
bonuses and expense allowances) are paid by the Company.
They do not result in any additional charges against the
Policy that are not described above under "CHARGES AND
DEDUCTIONS."
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FEDERAL TAX MATTERS
- --------------------------------------------------------------------------------
INTRODUCTION
The following discussion is general and is not intended
as tax advice. Any person concerned about these tax
considerations should consult a competent tax adviser.
This discussion is based on 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
continuation of these current laws and interpretations,
and various changes have been proposed that would alter
these laws in ways that would have significant adverse
impacts. It should be further understood that the
following discussion is not exhaustive and does not
purport to be complete or to cover all situations and
that special rules not described in this Prospectus may
be applicable in certain situations. Moreover, no attempt
has been made to consider any applicable state or other
tax laws.
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TAX STATUS OF THE
POLICY
Section 7702 of the Internal Revenue Code of 1986, as
amended (the "Code") includes a definition of a life
insurance contract for federal tax purposes. The
Secretary of the Treasury (the "Treasury") is authorized
to prescribe regulations interpreting and implementing
section 7702 and has issued proposed regulations on
certain aspects of section 7702. Guidance as to how
section 7702 is to be applied is, however, limited. If a
Policy were determined not to be a life insurance
contract for purposes of section 7702, such Policy would
not provide most of the tax advantages normally provided
by a life insurance policy.
With respect to a Policy issued exclusively on the basis
of a standard premium class, while there is some
uncertainty due to the limited guidance on section 7702,
the Company believes that in light of the proposed
regulations such a Policy should meet the section 7702
definition of a life insurance contract. However, with
respect to a Policy issued in whole or in part on a
substandard basis (i.e., a premium class involving higher
than standard mortality risk), it is not clear whether or
not such a Policy would satisfy section 7702,
particularly if the Policyowner pays the full amount of
premiums permitted under the Policy. If it is
subsequently determined that a Policy does not satisfy
section 7702, the Company will take whatever steps are
appropriate and necessary to attempt to cause such a
Policy to comply with section 7702, including possibly
refunding any premiums paid that exceed the limitations
allowable under section 7702 (together with interest or
other earnings on any such premiums refunded as required
by law). For these reasons, the Company reserves the
right to modify the Policy as necessary to attempt to
qualify it as a life insurance contract under section
7702.
Section 817(h) of the Code authorizes the Treasury to set
standards by regulation or otherwise for the investments
of the Account to be "adequately diversified" in order
for the Policy to be treated as a life insurance contract
for federal tax purposes. The
36
<PAGE>
Variable Account, through the Fund, intends to comply
with the diversification requirements prescribed in
Regulations section 1.817-5, which affect how each Fund's
assets may be invested. Although the investment adviser
is an affiliate of the Company, the Company does not have
control over the Fund or its investments. Nonetheless,
the Company believes that each Portfolio of the Fund in
which the Variable Account owns shares will be operated
in compliance with the requirements prescribed by the
Treasury.
In certain circumstances, owners of variable life
insurance 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 includable in the variable
contract owner's gross income. The IRS has stated in
published rulings that a variable contract owner will be
considered the owner of separate account assets if the
contract owner possesses incidents of ownership in those
assets, such as the ability to exercise investment
control over the assets. The Treasury Department also
announced, in connection with the issuance of regulations
concerning 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
Policyowner), rather than the insurance company, to be
treated as the owner of the assets in the account." This
announcement also stated 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 Policy are similar to, but
different in certain respects from, those described by
the IRS in rulings in which it was determined that policy
owners were not owners of separate account assets. For
example, a Policyowner has additional flexibility in
allocating premium payments and policy values. These
differences could result in a Policyowner being treated
as the owner of a pro rata portion of the assets of the
Separate Account. In addition, the Company does not know
what standards will be set forth, if any, in the
regulations or rulings which the Treasury Department has
stated it expects to issue. The Company therefore
reserves the right to modify the Policy as necessary to
attempt to prevent a Policyowner from being considered
the owner of a pro rata share of the assets of the
Separate Account.
Continuation of a Policy in force after the Insured's
100th birthday could have tax consequences. A tax adviser
should be consulted if a Policy is to continue in force
after the Insured's 100th birthday.
The following discussion assumes that the Policy will
qualify as a life insurance contract for federal income
tax purposes.
- --------------------------------------------------------------------------------
TAX TREATMENT OF
POLICY BENEFITS
IN GENERAL. The Company believes that the proceeds and
cash value increases of a Policy should be treated in a
manner consistent with a fixed-benefit life insurance
policy for federal income tax purposes. Thus, the death
benefit under the Policy should be excludable from the
gross income of the Beneficiary under section 101(a)(l)
of the Code.
A change in a Policy's Specified Amount, the payment of
an unscheduled premium, a Policy loan, a partial
withdrawal, a surrender, a lapse with outstanding
indebtedness, a change in death benefit options, the
exchange of a Policy for a fixed-benefit policy (see "THE
POLICY--Special Transfer Privilege") and the assignment
of a Policy or the exercise of the right to change
Policyowners (see "GENERAL PROVISIONS-- Changing the
Policyowner or Beneficiary") may have tax consequences
depending upon the circumstances. In addition, federal
estate and state and local estate, inheritance, and other
tax consequences of ownership or receipt of Policy
proceeds depend upon the circumstances of each
Policyowner or Beneficiary. A competent tax adviser
should be consulted for further information.
Pursuant to the recently enacted Health Insurance
Portability and Accountability Act of 1996, the Company
believes that for federal income tax purposes, an
accelerated
37
<PAGE>
death benefit payment received under an accelerated death
benefit endorsement should be fully excludable from the
gross income of the beneficiary, as long as the
beneficiary is the insured under the Policy. However, the
Policyowner should consult a qualified tax adviser about
the consequences of adding this Endorsement to a Policy
or requesting an accelerated death benefit payment under
this Endorsement.
The Company further believes that an exchange of a
fixed-benefit policy issued by the Company for a Policy
as provided under "THE POLICY--Exchange Privilege"
generally should be treated as a non-taxable exchange of
life insurance policies within the meaning of section
1035 of the Code. However, in certain circumstances, the
exchanging owner may receive a cash distribution that
might have to be recognized as income to the extent there
was gain in the fixed-benefit policy. Moreover, to the
extent a fixed-benefit policy with an outstanding loan is
exchanged for an unencumbered Policy, the exchanging
owner could recognize income at the time of the exchange
up to the amount of such loan (including any due and
unpaid interest on such loan). An exchanging owner should
consult a tax adviser as to whether an exchange of a
fixed-benefit policy for the Policy will have tax
consequences to such owner.
The Policies may be used in various arrangements,
including nonqualified deferred compensation or salary
continuance plans, split dollar insurance plans,
executive bonus plans, retiree medical benefit plans and
others. The tax consequences of such plans may vary
depending on the particular facts and circumstances of
each individual arrangement. Therefore, if it is
contemplated that a Policy may be used in any arrangement
the value of which depends in part on its tax
consequences, a qualified tax adviser should be consulted
regarding the tax attributes of the particular
arrangement.
In recent years, Congress has adopted new rules relating
to life insurance owned by businesses. Any business
should consult with a tax adviser regarding possible tax
consequences prior to acquiring a Policy and also prior
to entering into subsequent changes to or transactions
under a Policy.
Generally, the Policyowner will not be deemed to be in
constructive receipt of the cash value, including
increments thereof, under the Policy until there is a
distribution. The tax consequences of distributions from,
and loans taken from or secured by, a Policy depend on
whether the Policy is classified as a "modified endowment
contract."
Whether a Policy is or is not a modified endowment
contract, upon a complete surrender or lapse of a Policy,
or when benefits are paid at such Policy's maturity date,
if the amount received plus the amount of indebtedness
exceeds the total investment in the Policy, the excess
will generally be treated as ordinary income subject to
tax.
MODIFIED ENDOWMENT CONTRACTS. A Policy may be treated as
a modified endowment contract depending upon the amount
of premiums paid in relation to the death benefit
provided under such Policy. The premium limitation rules
for determining whether a Policy is a modified endowment
contract are extremely complex. In general, however, a
Policy will be a modified endowment contract if the
accumulated premiums paid at any time during the first
seven policy years exceeds the sum of the net level
premiums which would have been paid on or before such
time if the Policy provided for paid-up future benefits
after the payment of seven level annual premiums. In
addition, if a Policy is "materially changed," it may
cause such Policy to be treated as a modified endowment
contract. The material change rules for determining
whether a Policy is a modified endowment contract are
also extremely complex. In general, however, the
determination whether a Policy will be a modified
endowment contract after a material change generally
depends upon the relationship among the death benefit at
the time of such change, the cash value at the time of
such change and the additional premiums paid in the seven
policy years starting with the date on which the material
change occurs.
Due to the Policy's flexibility, classification of a
Policy as a modified endowment contract will depend upon
the circumstances of each Policy. Accordingly, a
38
<PAGE>
prospective Policyowner should contact a competent tax
adviser before purchasing a Policy to determine the
circumstances under which the Policy would be a modified
endowment contract. In addition, a Policyowner should
contact a competent tax adviser before paying any
unscheduled premiums or changing the planned premium
schedule or making any other change to, including an
exchange of, a Policy to determine whether such premium
or change would cause the Policy (or the new Policy in
the case of an exchange) to be treated as a modified
endowment contract.
DISTRIBUTIONS FROM POLICIES CLASSIFIED AS MODIFIED
ENDOWMENT CONTRACTS. Policies classified as modified
endowment contracts are subject to the following tax
rules: First, all distributions, including distributions
upon surrender and benefits paid at maturity, from such a
Policy are treated as ordinary income subject to tax up
to the amount equal to the excess (if any) of the cash
value immediately before the distribution over the
investment in the Policy (described below) at such time.
Second, loans taken from, or secured by, such a Policy
are treated as distributions from such a Policy and taxed
accordingly. In this regard, capitalized interest on such
loans will likely be treated as a taxable distribution.
Third, a 10 percent additional tax is imposed on the
portion of any distribution from, or loan taken from or
secured by, such a Policy that is included in income
except where the distribution or loan is made on or after
the Policyowner attains age 59 1/2, is attributable to
the Policyowner's becoming disabled, or is part of a
series of substantially equal periodic payments for the
life (or life expectancy) of the Policyowner or the joint
lives (or joint life expectancies) of the Policyowner and
the Policyowner's Beneficiary.
If a Policy becomes a modified endowment contract after
it is issued, distributions made during the policy year
in which it becomes a modified endowment contract,
distributions in any subsequent policy year and
distributions within two years before the Policy becomes
a modified endowment contract will be subject to the tax
treatment described above. This means that a distribution
from a Policy that is not a modified endowment contract
could later become taxable as a distribution from a
modified endowment contract.
DISTRIBUTIONS FROM POLICIES NOT CLASSIFIED AS MODIFIED
ENDOWMENT CONTRACTS. Distributions from a Policy that is
not classified as a modified endowment contract are
generally treated as first recovering the investment in
the policy (described below) and then, only after the
return of all such investment in the policy, as
distributing taxable income. An exception to this general
rule occurs in the case of a partial withdrawal, a
decrease in the Specified Amount, or any other change
that reduces benefits under the Policy in the first 15
years after the Policy is issued and that results in a
cash distribution to the Policyowner in order for the
Policy to continue complying with the section 7702
definitional limits. In that case, such distribution will
be taxed in whole or in part as ordinary income (to the
extent of any gain in the Policy) under rules prescribed
in section 7702.
Loans from, or secured by, a Policy that is not a
modified endowment contract are not treated as
distributions. Instead, such loans are treated as
indebtedness of the Policyowner.
Finally, neither distributions (including distributions
upon surrender or lapse) nor loans from, or secured by, a
Policy that is not a modified endowment contract are
subject to the 10 percent additional tax.
POLICY LOAN INTEREST. Interest paid on any loan under a
Policy may not be deductible. Therefore, a Policyowner
should consult a competent tax adviser before deducting
any Policy loan interest.
INVESTMENT IN THE POLICY. Investment in the policy means
(i) the aggregate amount of any premiums or other
consideration paid for a Policy, minus (ii) the aggregate
amount received under the Policy which is excluded from
the gross income of the Policyowner (except that the
amount of any loan from, or secured by, a Policy that is
a modified endowment contract, to the extent such amount
is excluded from gross
39
<PAGE>
income, will be disregarded), plus (iii) the amount of
any loan from, or secured by, a Policy that is a modified
endowment contract to the extent that such amount is
included in the gross income of the Policyowner.
MULTIPLE POLICIES. All modified endowment contracts that
are issued by the Company (or its affiliates) to the
same Policyowner during any calendar year are treated as
one modified endowment contract for purposes of
determining the amount includable in gross income under
section 72(e).
POSSIBLE TAX LAW CHANGES. The President's 1999 Budget
Proposal has recommended legislation that, if enacted,
would adversely modify the federal taxation of certain
insurance and annuity contracts. For example, one
proposal would tax transfers among investment options and
tax exchanges involving variable contracts. A second
proposal would reduce the "investment in the contract"
under cash value life insurance and certain annuity
contracts, thereby increasing the amount of income for
purposes of computing gain. Although the likelihood of
legislative changes is uncertain, there is always a
possibility that the tax treatment of a Policy could
change by legislation and other means. Moreover, it is
also possible that any change could be retroactive (that
is, effective prior to the date of the change). A tax
adviser should be consulted with respect to legislative
developments and their effect on the Policy.
- --------------------------------------------------------------------------------
TAXATION OF THE
COMPANY
At the present time, the Company makes no charge to the
Variable Account, or to the Policy for any Federal, state
or local taxes (other than state premium taxes) that it
incurs that may be attributable to such Account or to the
Policies. 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 Variable Account or to the Policies.
- --------------------------------------------------------------------------------
EMPLOYMENT-RELATED
BENEFIT PLANS
The Supreme Court held in ARIZONA GOVERNING COMMITTEE V.
NORRIS that optional annuity benefits provided under an
employer's deferred compensation plan could not, under
Title VII of the Civil Rights Act of 1964, vary between
men and women on the basis of sex. In addition,
legislative, regulatory or decisional authority of some
states may prohibit use of sex-distinct mortality tables
under certain circumstances. The Policy described in this
Prospectus contains guaranteed cost of insurance rates
and guaranteed purchase rates for certain payment options
that distinguish between men and women. Accordingly,
employers and employee organizations should consider, in
consultation with legal counsel, the impact of NORRIS,
and Title VII generally, on any employment-related
insurance or benefit program for which a Policy may be
purchased.
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
SAFEKEEPING OF THE
VARIABLE ACCOUNT'S
ASSETS
The Company holds the assets of the Variable Account. The
assets are kept physically segregated and held separate
and apart from the General Account. The Company maintains
records of all purchases and redemptions of Fund shares
by each of the Subaccounts. Additional protection for the
assets of the Variable Account is afforded by a blanket
fidelity bond issued by Chubb Insurance Group in the
amount of $5,000,000 covering all the officers and
employees of the Company.
- --------------------------------------------------------------------------------
VOTING RIGHTS To the extent required by law, the Company will vote the
Fund shares held in the Variable 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 Investment Company Act of 1940 or any regulation
thereunder should be amended or if the present
interpretation thereof should change, and, as a result,
the Company determines that it is permitted to vote the
Fund shares in its own right, it may elect to do so.
The number of votes which a Policyowner has the right to
instruct are calculated separately for each Subaccount
and are determined by dividing a Policy's Cash Value in a
Subaccount by the net asset value per share of the
corresponding Portfolio in which the Subaccount invests.
Fractional shares will be counted. The number of votes of
the Portfolio which the Policyowner has the right to
instruct will be determined as
40
<PAGE>
of the date coincident with the date established by that
Portfolio for determining shareholders eligible to vote
at such meeting of the Fund. Voting instructions will be
solicited by written communications prior to such meeting
in accordance with procedures established by the Fund.
Each person having a voting interest in a Subaccount will
receive proxy materials, reports and other materials
relating to the appropriate Portfolio.
The Company will vote Fund shares attributable to
Policies as to which no timely instructions are received
(as well as any Fund shares held in the Variable Account
which are not attributable to Policies) in proportion to
the voting instructions which are received with respect
to all Policies participating in each Portfolio. Voting
instructions to abstain on any item to be voted upon will
be applied on a PRO RATA basis to reduce the votes
eligible to be cast on a matter.
At some future date, Fund shares may also be held by
separate accounts of other affiliated and unaffiliated
insurance companies. The Company expects that those
shares will be voted in accordance with instructions of
the owners of insurance policies and contracts issued by
those other insurance companies. Voting instructions
given by owners of other insurance policies will dilute
the effect of voting instructions of Policyowners.
DISREGARD OF VOTING INSTRUCTIONS. The Company may, when
required by state insurance regulatory authorities,
disregard voting instructions if the instructions require
that the shares be voted so as to cause a change in the
sub-classification or investment objective of the Fund or
one or more of its Portfolios or to approve or disapprove
an investment advisory contract for a Portfolio of the
Fund. In addition, the Company itself may disregard
voting instructions in favor of changes initiated by a
Policyowner in the investment policy or the investment
adviser of a Portfolio of the Fund if the Company
reasonably disapproves of such changes. A change would be
disapproved only if the proposed change is contrary to
state law or prohibited by state regulatory authorities,
or the Company determined that the change would have an
adverse effect on the General Account in that the
proposed investment policy for a Portfolio may result in
overly speculative or unsound investments. In the event
the Company does disregard voting instructions, a summary
of that action and the reasons for such action will be
included in the next annual report to Policyowners.
- --------------------------------------------------------------------------------
STATE REGULATION OF
THE COMPANY
The Company, a stock life insurance company organized
under the laws of Iowa, is subject to regulation by the
Iowa Insurance Department. An annual statement is filed
with the Iowa Insurance Department on or before March lst
of each year covering the operations and reporting on the
financial condition of the Company as of December 31st of
the preceding year. Periodically, the Iowa Insurance
Department examines the liabilities and reserves of the
Company and the Variable Account and certifies their
adequacy, and a full examination of operations is
conducted periodically by the National Association of
Insurance Commissioners.
In addition, the Company is subject to the insurance laws
and regulations of other states within which it is
licensed or may become licensed to operate. Generally,
the insurance department of any other state applies the
laws of the state of domicile in determining permissible
investments.
41
<PAGE>
- --------------------------------------------------------------------------------
OFFICERS AND
DIRECTORS OF FARM
BUREAU LIFE INSURANCE
COMPANY
<TABLE>
<CAPTION>
NAME AND POSITION PRINCIPAL OCCUPATION
WITH THE COMPANY* LAST FIVE YEARS**
- ------------------------------ --------------------------------------------------
<S> <C>
Kenneth R. Ashby, Director Farmer; President, Utah Farm Bureau Federation and
affiliated companies and Ashby's Valley View
Farms; Vice President and Director, Utah Farm
Bureau Insurance Co.; Director, Millard County
Water Conservancy District, American Farm Bureau
Federation and affiliated companies, Multi States
Farmers Service Co., FBL Financial Group, Inc. and
Universal Assurors Life Insurance Company
Al Christopherson, Director Farmer; President, Minnesota Farm Bureau
Federation; Director, FBL Financial Group, Inc.,
Universal Assurors Life Insurance Company, Farm
Bureau Mutual Insurance Company and FBL Insurance
Brokerage, Inc.
Ernest A. Glienke, Director Farmer; Director, Farm Bureau Mutual Insurance
Company, FBL Insurance Brokerage, Inc., Utah Farm
Bureau Insurance Company and FBL Financial
Services, Inc.
Philip A. Hemesath, Director Farmer
Craig D. Hill, Director Farmer; President, CAPA Hill, Inc.; Director, Farm
Bureau Mutual Insurance Company, FBL Insurance
Brokerage, Inc., Utah Farm Bureau Insurance
Company and FBL Financial Services, Inc.
Daniel L. Johnson, Director Farmer; Farm Bureau Mutual Insurance Company, FBL
Insurance Brokerage, Inc. and FBL Financial
Services, Inc.
Richard G. Kjerstad, Director Farmer; President and Director, South Dakota Farm
Bureau Federation and South Dakota Farm Bureau
Mutual Insurance Company; Director, FBL Financial
Group, Inc. and Universal Assurors Life Insurance
Company
Lindsey D. Larsen, Director Farmer; Director, Farm Bureau Mutual Insurance
Company, FBL Insurance Brokerage, Inc., Utah Farm
Bureau Insurance Company and FBL Financial
Services, Inc.
</TABLE>
- --------------
* The principal business address of each person listed, unless otherwise
indicated, is 5400 University Avenue, West
Des Moines, Iowa 50266.
** The principal occupation shown reflects the principal employment of each
individual during the past five years.
Corporate positions may, in some instances, have changed during the period.
42
<PAGE>
<TABLE>
<CAPTION>
NAME AND POSITION PRINCIPAL OCCUPATION
WITH THE COMPANY* LAST FIVE YEARS**
- ------------------------------ --------------------------------------------------
<S> <C>
David R. Machacek, Director Farmer; Director, Farm Bureau Mutual Insurance
Company, FBL Insurance Brokerage, Inc., and FBL
Financial Services, Inc.
Donald O. Narigon, Director Farmer; Director, Farm Bureau Mutual Insurance
Company, FBL Insurance Brokerage, Inc., and FBL
Financial Services, Inc.
Bryce P. Neidig, Director Farmer; President, Nebraska Farm Bureau
Federation, Nebraska Farm Bureau Services, Inc.,
Farm Bureau Insurance Company of Nebraska,
Nebraska Farm Bureau Insurance Agency, Inc.;
Director, American Agriculture Insurance Company,
American Agriculture Insurance Agency, Inc.,
American Farm Bureau Service Company, American
Farm Bureau Federation, American Agricultural
Communications Systems, Inc., Western Agricultural
Insurance Co., Western Agricultural Management
Corp., FBL Financial Group, Inc., Blue Cross/Blue
Shield of Nebraska and Universal Assurors Life
Insurance Company
Charles E. Norris, Director Farmer; Director, Farm Bureau Mutual Insurance
Company, FBL Insurance Brokerage, Inc. and FBL
Financial Services, Inc.
Keith R. Olsen, Director Farmer
Bennett M. Osmonson, Director Farmer
Howard D. Poulson, Director Farmer; President, Wisconsin Farm Bureau
Federation, Rural Mutual Insurance Company and
Midwest Livestock Producers; Director, FBL
Financial Group, Inc. and Universal Assurors Life
Insurance Company
Sally A. Puttmann, Director Farmer; Director, Farm Bureau Mutual Insurance
Company, FBL Insurance Brokerage, Inc. and FBL
Financial Services, Inc.
Beverly L. Schnepel, Director Farmer; Director, Farm Bureau Mutual Insurance
Company, FBL Insurance Brokerage, Inc. and FBL
Financial Services, Inc.
F. Gary Steiner, Director Farmer; Director, Wisconsin Farm Bureau Insurance
Company and Bank of Alma (Alma, WI)
</TABLE>
- --------------
* The principal business address of each person listed, unless otherwise
indicated, is 5400 University Avenue, West
Des Moines, Iowa 50266.
** The principal occupation shown reflects the principal employment of each
individual during the past five years.
Corporate positions may, in some instances, have changed during the period.
43
<PAGE>
<TABLE>
<CAPTION>
NAME AND POSITION PRINCIPAL OCCUPATION
WITH THE COMPANY* LAST FIVE YEARS**
- ------------------------------ --------------------------------------------------
<S> <C>
Edward M. Wiederstein, Farmer; Chairman and Director, FBL Financial
President and Director Group, Inc.; President and Director, Iowa Farm
Bureau Federation, FBL Insurance Brokerage, Inc.,
Farm Bureau Mutual Insurance Company, Utah Farm
Bureau Insurance Company, FBL Financial Services,
Inc., Universal Assurors Life Insurance Company
and Farm Bureau Agricultural Business Corporation;
Director, Multi-Pig Corporation, Western
Agricultural Insurance Company, Western Ag
Insurance Agency, Inc., Western Farm Bureau Life
Insurance Company and American Ag Insurance
Company
Craig A. Lang, Vice President Farmer; Director, Growmark, Inc., Western Farm
and Director Bureau Life Insurance Company, Utah Farm Bureau
Insurance Company, Vice President and Director,
Farm Bureau Mutual Insurance Company, FBL
Insurance Brokerage, Inc. and FBL Financial
Services, Inc., Vice President, Universal Assurors
Life Insurance Company
Richard D. Harris, Senior Vice Senior Vice President and Secretary- Treasurer,
President and Farm Bureau Mutual Insurance Company, FBL
Secretary-Treasurer Insurance Brokerage, Inc., Universal Assurors Life
Insurance Company, Utah Farm Bureau Insurance
Company, Western Farm Bureau Life Insurance
Company, FBL Financial Services, Inc. and FBL
Financial Group, Inc.; Senior Vice President and
Assistant Secretary-Treasurer, South Dakota Farm
Bureau Mutual Insurance Company
Stephen M. Morain, Senior Vice Senior Vice President and General Counsel, FBL
President and General Financial Group, Inc.
Counsel
Thomas R. Gibson, Chief Chief Executive Officer, FBL Financial Group, Inc.
Executive Officer
William J. Oddy, Executive Chief Operating Officer, FBL Financial Group, Inc.
Vice President and General
Manager
Timothy J. Hoffman, Vice Vice President, Chief Property/Casualty Officer,
President FBL Financial Group, Inc.
James W. Noyce, Chief Chief Financial Officer, FBL Financial Group, Inc.
Financial Officer
</TABLE>
- --------------
* The principal business address of each person listed, unless otherwise
indicated, is 5400 University Avenue, West
Des Moines, Iowa 50266.
** The principal occupation shown reflects the principal employment of each
individual during the past five years.
Corporate positions may, in some instances, have changed during the period.
44
<PAGE>
<TABLE>
<CAPTION>
NAME AND POSITION PRINCIPAL OCCUPATION
WITH THE COMPANY* LAST FIVE YEARS**
- ------------------------------ --------------------------------------------------
<S> <C>
Barbara J. Moore, Vice Vice President-Property/Casualty Operations, FBL
President Financial Group, Inc.
John M. Paule, Vice President- Vice President-Information Technology, FBL
Information Technology Financial Group, Inc.
JoAnn W. Rumelhart, Vice Vice President-Life Operations, FBL Financial
President-Life Operations Group, Inc.
Monte R. Roumpf, Vice Vice President-Corporate Administration, FBL
President-Corporate Financial Group, Inc.
Administration
Lynn E. Wilson, Vice Vice President-Life Sales, FBL Financial Group,
President- Inc.
Life Sales
F. Walter Tomenga, Vice Vice President-Corporate Affairs and Marketing
President-Corporate Affairs Services, FBL Financial Group, Inc.
and Marketing Services
Robert L. Tatge, Vice Vice President-Property/Casualty Operations, FBL
President Financial Group, Inc.
LouAnn Sandburg, Vice Vice President-Investments and Assistant
President-Investments and Treasurer, FBL Financial Group, Inc.
Assistant Treasurer
Thomas E. Burlingame, Vice Vice President-Associate General Counsel, FBL
President-Associate General Financial Group, Inc.
Counsel
Kathryn Coleson Horner, Accounting Vice President, FBL Financial Group,
Accounting Vice President Inc.
Dennis M. Marker, Investment Investment Vice President, Administration, FBL
Vice President, Financial Group, Inc.
Administration
Paul Grinvalds, Variable Variable Operations Vice President, Appointed
Operations Vice President Actuary, FBL Financial Group, Inc.
James P. Brannen, Tax and Tax and Investment Accounting Vice President, FBL
Investment Accounting Vice Financial Group, Inc.
President
Ronald J. Palmer, Agency Agency Services Vice President, FBL Financial
Services Vice President Group, Inc.
Christopher G. Daniels, Life Life Product Development and Pricing Vice
Product Development and President, FBL Financial Group, Inc.
Pricing Vice President
James M. Mincks, Human Human Resources Vice President, FBL Financial
Resources Vice President Group, Inc.
Don Seibel, GAAP Accounting GAAP Accounting Vice President, FBL Financial
Vice President Group, Inc.
Scott Shuck, Marketing Marketing Services Vice President, FBL Financial
Services Vice President Group, Inc.
Jim Streck, Traditional Traditional Operations Vice President, FBL
Operations Vice President Financial Group, Inc.
Blake D. Weber, Sales Services Sales Services Vice President, FBL Financial
Vice President Group, Inc.
</TABLE>
- --------------
* The principal business address of each person listed, unless otherwise
indicated, is 5400 University Avenue, West
Des Moines, Iowa 50266.
** The principal occupation shown reflects the principal employment of each
individual during the past five years.
Corporate positions may, in some instances, have changed during the period.
45
<PAGE>
<TABLE>
<CAPTION>
NAME AND POSITION PRINCIPAL OCCUPATION
WITH THE COMPANY* LAST FIVE YEARS**
- ------------------------------ --------------------------------------------------
<S> <C>
Kermit J. Larson, Agency Vice Agency Vice President, Farm Bureau Life Insurance
President Company
Larry W. Riley, Agency Vice Agency Vice President, Farm Bureau Life Insurance
President Company
John F. Mottet, Agency Vice Agency Vice President, Farm Bureau Life Insurance
President Company
Richard J. January, Senior Senior Agency Vice President, Farm Bureau Life
Agency Vice President Insurance Company
Cyrus S. Winters, Senior Senior Agency Vice President, Farm Bureau Life
Agency Vice President Insurance Company
Michael J. Tousley, Senior Senior Agency Vice President, Farm Bureau Life
Agency Vice President Insurance Company
Ronnie G. Lee, Agency Vice Agency Vice President, Farm Bureau Life Insurance
President Company
Art Sieler, Agency Vice Agency Vice President, Farm Bureau Life Insurance
President Company
</TABLE>
- --------------
* The principal business address of each person listed, unless otherwise
indicated, is 5400 University Avenue, West Des Moines, Iowa 50266.
** The principal occupation shown reflects the principal employment of each
individual during the past five years. Corporate positions may, in some
instances, have changed during the period.
- --------------------------------------------------------------------------------
LEGAL MATTERS
Sutherland, Asbill & Brennan LLP of Washington, D.C. has
provided advice on certain legal matters relating to
federal securities laws applicable to the issuance of the
flexible premium variable life insurance policy described
in this Prospectus. All matters of Iowa law pertaining to
the Policy, including the validity of the Policy and the
Company's right to issue the Policy under Iowa Insurance
Law, have been passed upon by Stephen M. Morain, Senior
Vice President and General Counsel of the Company.
- --------------------------------------------------------------------------------
LEGAL PROCEEDINGS
There are no legal proceedings to which the Variable
Account is a party or to which the assets of the Variable
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 Variable Account.
- --------------------------------------------------------------------------------
EXPERTS
The financial statements of the Variable Account at
December 31, 1997 and for each of the three years in the
period ended December 31, 1997, and of the Company at
December 31, 1997 and 1996 and for each of the three
years in the period ended December 31, 1997, 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 firms as experts in accounting and
auditing.
Actuarial matters included in this Prospectus have been
examined by Christopher G. Daniels, FSA, MAAA, Life
Product Development and Pricing Vice President, as stated
in the opinion filed as an exhibit to the registration
statement.
- --------------------------------------------------------------------------------
YEAR 2000
Like other investment funds, financial and business
organizations and individuals around the world, the
Variable Account could be adversely affected if the
computer systems used by the Company and other service
providers do not properly process and calculate
date-related information and data from and after January
1, 2000. In 1997, the Company completed a comprehensive
assessment of the Year 2000 issue and developed a plan to
address the issue in a timely manner. The Company has and
will utilize both internal and external resources to
reprogram, or replace, and test the software for Year
2000 modifications. The Company anticipates completing
the Year 2000 project no later than December 31, 1998,
and prior to any anticipated impact on its operating
systems.
46
<PAGE>
The date on which the Company believes it will complete
the Year 2000 modifications is based on management's best
estimates, which were derived utilizing numerous
assumptions of future events. The Company also recognizes
there are outside influences and dependencies relative to
its Year 2000 effort, over which it has little or no
control. However, the Company is putting effort into
ensuring these considerations will have minimal impact.
These would include the continued availability of certain
resources, third-party modification plans and many other
factors. However, there can be no guarantee that these
estimates will be achieved and actual results could
differ from those anticipated.
- --------------------------------------------------------------------------------
OTHER INFORMATION
A registration statement has been filed with the
Securities and Exchange Commission under the Securities
Act of 1933, as amended, with respect to the Policy
offered hereby. This Prospectus does not contain all the
information set forth in the registration statement and
the amendments and exhibits to the registration
statement, to all of which reference is made for further
information concerning the Variable Account, the Company
and the Policy offered hereby. Statements contained in
this Prospectus as to the contents of the Policy and
other legal instruments are summaries. For a complete
statement of the terms thereof, reference is made to such
instruments as filed.
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The Variable Account's statement of net assets as of
December 31, 1997 and the related statements of
operations and changes in net assets for each of the
three years in the period ended December 31, 1997, and
the consolidated balance sheets of the Company at
December 31, 1997 and 1996 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, 1997, appearing herein, have been
audited by Ernst & Young LLP, independent auditors, as
set forth in their respective reports thereon appearing
elsewhere herein.
47
<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
Variable Account (comprising, respectively, the Value Growth, High Grade Bond,
High Yield Bond, Managed, Money Market, and Blue Chip Subaccounts) as of
December 31, 1997, and the related statements of operations and changes in net
assets for each of the three 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, 1997, 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 Variable Account at December 31,
1997, and the results of their operations and changes in their net assets for
each of the three years in the period then ended, in conformity with generally
accepted accounting principles.
/s/ Ernst & Young LLP
Des Moines, Iowa
March 18, 1998
48
<PAGE>
FARM BUREAU LIFE VARIABLE ACCOUNT
STATEMENT OF NET ASSETS
DECEMBER 31, 1997
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Investments in FBL Variable Insurance Series Fund:
Value Growth Subaccount:
Value Growth Portfolio, 1,766,885 shares at net asset value of $12.58 per share
(cost $21,907,297) $22,227,412
High Grade Bond Subaccount:
High Grade Bond Portfolio, 223,127 shares at net asset value of $10.11 per share
(cost $2,212,091) 2,255,818
High Yield Bond Subaccount:
High Yield Bond Portfolio, 401,719 shares at net asset value of $10.21 per share
(cost $3,986,133) 4,101,554
Managed Subaccount:
Managed Portfolio, 1,707,906 shares at net asset value of $12.55 per share
(cost $20,704,288) 21,434,217
Money Market Subaccount:
Money Market Portfolio, 3,120,361 shares at net asset value of $1.00 per share
(cost $3,120,361) 3,120,361
Blue Chip Subaccount:
Blue Chip Portfolio, 479,414 shares at net asset value of $31.01 per share
(cost $10,641,249) 14,866,630
-----------
Total investments (cost $62,571,419) 68,005,992
LIABILITIES --
-----------
NET ASSETS $68,005,992
-----------
-----------
</TABLE>
<TABLE>
<CAPTION>
UNITS UNIT VALUE EXTENDED VALUE
<S> <C> <C> <C>
-------------------------------------------------
Net assets are represented by:
Value Growth Subaccount 937,913.707887 $ 23.698781 $ 22,227,412
High Grade Bond Subaccount 120,660.679917 18.695553 2,255,818
High Yield Bond Subaccount 177,719.443930 23.078815 4,101,554
Managed Subaccount 855,587.195708 25.052054 21,434,217
Money Market Subaccount 232,885.191525 13.398709 3,120,361
Blue Chip Subaccount 425,539.866736 34.935927 14,866,630
--------------
Total net assets $ 68,005,992
--------------
--------------
</TABLE>
SEE ACCOMPANYING NOTES.
49
<PAGE>
FARM BUREAU LIFE VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
COMBINED VALUE GROWTH SUBACCOUNT
----------------------------------- ------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31 DECEMBER 31
1997 1996 1995 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------
Net investment income:
Dividend income $ 4,694,698 $3,350,569 $1,470,294 $ 2,195,812 $1,468,287 $ 600,695
Mortality and expense risk charges (481,341) (307,070) (194,849) (169,085) (112,696) (73,171)
-------------------------------------------------------------------------
Net investment income 4,213,357 3,043,499 1,275,445 2,026,727 1,355,591 527,524
Net realized and unrealized gain (loss) on
investments:
Net realized gain (loss) from investment
transactions 107,131 101,081 36,576 20,814 38,673 10,200
Change in unrealized appreciation/depreciation
of investments 1,153,688 2,136,480 3,442,425 (1,124,051) 661,242 1,319,331
-------------------------------------------------------------------------
Net gain (loss) on investments 1,260,819 2,237,561 3,479,001 (1,103,237) 699,915 1,329,531
-------------------------------------------------------------------------
Net increase in net assets resulting from
operations $ 5,474,176 $5,281,060 $4,754,446 $ 923,490 $2,055,506 $1,857,055
-------------------------------------------------------------------------
-------------------------------------------------------------------------
<CAPTION>
HIGH GRADE BOND SUBACCOUNT HIGH YIELD BOND SUBACCOUNT
----------------------------------- ------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31 DECEMBER 31
1997 1996 1995 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------
Net investment income:
Dividend income $ 134,181 $ 109,132 $ 87,448 $ 284,128 $ 209,673 $ 148,611
Mortality and expense risk charges (17,176) (13,511) (10,003) (29,807) (19,103) (12,752)
-------------------------------------------------------------------------
Net investment income 117,005 95,621 77,445 254,321 190,570 135,859
Net realized and unrealized gain (loss) on
investments:
Net realized gain (loss) from investment
transactions (207) (988) (884) 2,527 (445) (2,644)
Change in unrealized appreciation/depreciation
of investments 59,144 (18,165) 59,549 102,518 46,768 46,925
-------------------------------------------------------------------------
Net gain (loss) on investments 58,937 (19,153) 58,665 105,045 46,323 44,281
-------------------------------------------------------------------------
Net increase in net assets resulting from
operations $ 175,942 $ 76,468 $ 136,110 $ 359,366 $ 236,893 $ 180,140
-------------------------------------------------------------------------
-------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES.
50
<PAGE>
<TABLE>
<CAPTION>
MANAGED SUBACCOUNT MONEY MARKET SUBACCOUNT BLUE CHIP SUBACCOUNT
------------------------------------- ----------------------------- ----------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31 DECEMBER 31 DECEMBER 31
1997 1996 1995 1997 1996 1995 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
----------------------------------------------------------------------------------------------------------
Net investment
income:
Dividend income $1,831,509 $1,393,489 $ 556,379 $44,031 $ 23,870 $ 10,664 $ 205,037 $ 146,118 $ 66,497
Mortality and
expense risk
charges (155,911) (102,690) (66,386) (7,758) (4,490) (1,788) (101,604) (54,580) (30,749)
----------------------------------------------------------------------------------------------------------
NET INVESTMENT
INCOME 1,675,598 1,290,799 489,993 36,273 19,380 8,876 103,433 91,538 35,748
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain
(loss) from
investment
transactions 18,600 24,883 (1,192) -- -- -- 65,397 38,958 31,096
Change in
unrealized
appreciation/depreciation
of investments (107,837) 458,029 1,155,520 -- -- -- 2,223,914 988,606 861,100
----------------------------------------------------------------------------------------------------------
NET GAIN (LOSS) ON
INVESTMENTS (89,237) 482,912 1,154,328 -- -- -- 2,289,311 1,027,564 892,196
----------------------------------------------------------------------------------------------------------
NET INCREASE
(DECREASE) IN NET
ASSETS RESULTING
FROM OPERATIONS $1,586,361 $1,773,711 $ 1,644,321 $36,273 $ 19,380 $ 8,876 $2,392,744 $1,119,102 $927,944
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
</TABLE>
51
<PAGE>
FARM BUREAU LIFE VARIABLE ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
COMBINED VALUE GROWTH SUBACCOUNT
----------------------------------------- -----------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31 DECEMBER 31
1997 1996 1995 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------------
Operations:
Net investment income $ 4,213,357 $3,043,499 $ 1,275,445 $ 2,026,727 $ 1,355,591 $ 527,524
Net realized gain
(loss) from investment
transactions 107,131 101,081 36,576 20,814 38,673 10,200
Change in unrealized
appreciation/
depreciation of
investments 1,153,688 2,136,480 3,442,425 (1,124,051) 661,242 1,319,331
-------------------------------------------------------------------------------------
Net increase in net
assets resulting from
operations 5,474,176 5,281,060 4,754,446 923,490 2,055,506 1,857,055
Capital share
transactions:
Transfers of net
premiums 27,046,928 16,143,306 10,027,479 6,216,376 4,673,744 3,373,068
Transfers of death
benefits (95,119) (50,801) (76,039) (14,407) (24,621) (20,773)
Transfers of surrenders (882,403) (734,432) (640,433) (313,217) (228,419) (260,324)
Transfers of policy
loans (1,110,979) (701,757) (420,627) (385,548) (260,923) (173,175)
Transfers of cost of
insurance and transfer
charges (6,964,921) (4,854,913) (3,764,873) (2,190,816) (1,591,999) (1,307,686)
Transfers between
subaccounts 1,500,575 769,812 170,949 2,316,346 838,861 226,020
-------------------------------------------------------------------------------------
Net increase in net
assets resulting from
capital share
transactions 19,494,081 10,571,215 5,296,456 5,628,734 3,406,643 1,837,130
-------------------------------------------------------------------------------------
Total increase in net
assets 24,968,257 15,852,275 10,050,902 6,552,224 5,462,149 3,694,185
Net assets at beginning
of year 43,037,735 27,185,460 17,134,558 15,675,188 10,213,039 6,518,854
-------------------------------------------------------------------------------------
Net assets at end of year $ 68,005,992 $43,037,735 $27,185,460 $ 22,227,412 $15,675,188 $10,213,039
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
</TABLE>
52
<PAGE>
<TABLE>
<CAPTION>
HIGH GRADE BOND SUBACCOUNT HIGH YIELD BOND SUBACCOUNT
------------------------------------- ---------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31 DECEMBER 31
1997 1996 1995 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------
Operations:
Net investment income $ 117,005 $ 95,621 $ 77,445 $ 254,321 $ 190,570 $ 135,859
Net realized gain
(loss) from investment
transactions (207) (988) (884) 2,527 (445) (2,644)
Change in unrealized
appreciation/
depreciation of
investments 59,144 (18,165) 59,549 102,518 46,768 46,925
-------------------------------------------------------------------------------
Net increase in net
assets resulting from
operations 175,942 76,468 136,110 359,366 236,893 180,140
Capital share
transactions:
Transfers of net
premiums 425,444 466,620 374,188 1,099,120 875,412 636,472
Transfers of death
benefits (5,313) (4,420) (12,573) (6,269) (4,411) (2,339)
Transfers of surrenders (17,527) (29,704) (5,473) (81,747) (70,714) (27,257)
Transfers of policy
loans (28,370) (29,714) (11,630) (76,196) (54,879) (28,014)
Transfers of cost of
insurance and transfer
charges (196,916) (177,675) (163,615) (363,359) (276,886) (240,083)
Transfers between
subaccounts 191,456 134,027 17,031 617,797 167,619 (1,383)
-------------------------------------------------------------------------------
Net increase in net
assets resulting from
capital share
transactions 368,774 359,134 197,928 1,189,346 636,141 337,396
-------------------------------------------------------------------------------
Total increase in net
assets 544,716 435,602 334,038 1,548,712 873,034 517,536
Net assets at beginning
of year 1,711,102 1,275,500 941,462 2,552,842 1,679,808 1,162,272
-------------------------------------------------------------------------------
Net assets at end of year $2,255,818 $1,711,102 $1,275,500 $ 4,101,554 $ 2,552,842 $1,679,808
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
<CAPTION>
MANAGED SUBACCOUNT
-----------------------------------------
YEAR ENDED
DECEMBER 31
1997 1996 1995
<S> <C> <C> <C>
Operations:
Net investment income $ 1,675,598 $ 1,290,799 $ 489,993
Net realized gain
(loss) from investment
transactions 18,600 24,883 (1,192)
Change in unrealized
appreciation/
depreciation of
investments (107,837) 458,029 1,155,520
-----------------------------------------
Net increase in net
assets resulting from
operations 1,586,361 1,773,711 1,644,321
Capital share
transactions:
Transfers of net
premiums 6,018,771 4,298,411 2,880,711
Transfers of death
benefits (54,373) (12,239) (21,898)
Transfers of surrenders (228,184) (279,779) (273,471)
Transfers of policy
loans (353,388) (225,813) (134,744)
Transfers of cost of
insurance and transfer
charges (2,041,923) (1,418,517) (1,178,595)
Transfers between
subaccounts 2,315,574 1,055,783 80,167
-----------------------------------------
Net increase in net
assets resulting from
capital share
transactions 5,656,477 3,417,846 1,352,170
-----------------------------------------
Total increase in net
assets 7,242,838 5,191,557 2,996,491
Net assets at beginning
of year 14,191,379 8,999,822 6,003,331
-----------------------------------------
Net assets at end of year $ 21,434,217 $14,191,379 $ 8,999,822
-----------------------------------------
-----------------------------------------
</TABLE>
53
<PAGE>
FARM BUREAU LIFE VARIABLE ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
MONEY MARKET SUBACCOUNT BLUE CHIP SUBACCOUNT
---------------------------------------- ----------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31 DECEMBER 31
1997 1996 1995 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------
Operations:
Net investment income $ 36,273 $ 19,380 $ 8,876 $ 103,433 $ 91,538 $ 35,748
Net realized gain (loss)
from investment
transactions -- -- -- 65,397 38,958 31,096
Change in unrealized
appreciation/depreciation
of investments -- -- -- 2,223,914 988,606 861,100
-----------------------------------------------------------------------------------
Net increase in net assets
resulting from operations 36,273 19,380 8,876 2,392,744 1,119,102 927,944
Capital share transactions:
Transfers of net premiums 8,680,125 2,945,406 1,129,049 4,607,092 2,883,713 1,633,991
Transfers of death benefits (188) -- -- (14,569) (5,110) (18,456)
Transfers of surrenders (1,582) (6,116) (2,924) (240,146) (119,700) (70,984)
Transfers of policy loans (16,477) (1,728) (172) (251,000) (128,700) (72,892)
Transfers of cost of
insurance and transfer
charges (645,950) (469,674) (253,153) (1,525,957) (920,162) (621,741)
Transfers between
subaccounts (5,898,862) (2,037,433) (400,420) 1,958,264 610,955 249,534
-----------------------------------------------------------------------------------
Net increase in net assets
resulting from capital share
transactions 2,117,066 430,455 472,380 4,533,684 2,320,996 1,099,452
-----------------------------------------------------------------------------------
Total increase in net assets 2,153,339 449,835 481,256 6,926,428 3,440,098 2,027,396
Net assets at beginning of
year 967,022 517,187 35,931 7,940,202 4,500,104 2,472,708
-----------------------------------------------------------------------------------
Net assets at end of year $ 3,120,361 $ 967,022 $ 517,187 $ 14,866,630 $7,940,202 $ 4,500,104
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES.
54
<PAGE>
FARM BUREAU LIFE VARIABLE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
1.SIGNIFICANT ACCOUNTING POLICIES
Farm Bureau Life Variable 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 variable life insurance policies.
The Account has six separate subaccounts, each of which invests solely, as
directed by contract owners, in a different portfolio of FBL Variable Insurance
Series Fund (the Fund), an open-end, diversified management investment company
sponsored by the Company. Contract owners also may direct investments to a fixed
interest subaccount held in the general assets of the Company.
Investments in shares of the Fund are stated at market value, which is the
closing net asset value per share as determined by the Fund. The average cost
basis has been used in determining the net realized gain or loss from investment
transactions and unrealized appreciation or depreciation on investments.
Dividends paid to the Account are automatically reinvested in shares of the Fund
on the payable date.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of the Account's financial statements and accompanying notes
requires management to make estimates and assumptions that affect the amounts
reported and disclosed. These estimates and assumptions could change in the
future as more information becomes known, which could impact the amounts
reported and disclosed in the financial statements and accompanying notes.
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.
PREMIUM EXPENSE CHARGE: Premiums paid by the contractholders are reduced by a
5% sales charge (used to compensate the Company for expenses incurred in
connection with the distribution of the policies) and a 2% premium tax charge
(used to compensate the Company for premium taxes imposed by various states and
political subdivisions).
COST OF INSURANCE: The Company assumes the responsibility for providing
insurance benefits included in the policy. The cost of insurance is determined
each month based upon the applicable insurance rate and current net amount at
risk. Also, the cost of insurance includes a flat monthly administration charge
of $3.00 and a first year monthly charge based on age and amount of insurance
inforce. The aggregate cost of insurance can vary from month to month since the
determination of both the insurance rate and the current net amount at risk
depends on a number of variables as described in the Account's prospectus.
MORTALITY AND EXPENSE RISK CHARGES: The Company deducts a daily mortality and
expense risk charge from the Account at an effective annual rate of .90% 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.
OTHER CHARGES: A transfer charge of $25 will be imposed for the second and each
subsequent transfer between subaccounts in any one policy year. A surrender
charge equal to the lesser of $25 or 2.0% of the amount surrendered will be
imposed in the event of a partial or full contract surrender or lapse.
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.
55
<PAGE>
FARM BUREAU LIFE VARIABLE ACCOUNT
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4.INVESTMENT TRANSACTIONS
The aggregate cost of investment securities purchased and proceeds from
investment securities sold by subaccount are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------------------------------------------------
1997 1996 1995
------------------------- ----------------------- ----------------------
PURCHASES SALES PURCHASES SALES PURCHASES SALES
<S> <C> <C> <C> <C> <C> <C>
--------------------------------------------------------------------------
Value Growth Subaccount $ 7,979,469 $ 324,008 $ 5,113,277 $ 351,043 $2,688,930 $ 324,276
High Grade Bond Subaccount 605,583 119,804 540,232 85,477 340,165 64,792
High Yield Bond Subaccount 1,587,252 143,585 925,422 98,711 590,219 116,964
Managed Subaccount 7,610,376 278,301 5,015,366 306,721 2,251,170 409,007
Money Market Subaccount 6,441,811 4,288,472 2,681,085 2,231,250 1,170,205 688,949
Blue Chip Subaccount 4,852,347 215,230 2,563,886 151,352 1,286,359 151,159
--------------------------------------------------------------------------
Combined $ 29,076,838 $ 5,369,400 $16,839,268 $3,224,554 $8,327,048 $1,755,147
--------------------------------------------------------------------------
--------------------------------------------------------------------------
</TABLE>
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, 1997
Value Growth Subaccount 247,934 $ 5,783,657 6,581 $ 154,923 241,353 $ 5,628,734
High Grade Bond Subaccount 26,411 471,444 5,817 102,670 20,594 368,774
High Yield Bond Subaccount 60,047 1,303,107 5,241 113,761 54,806 1,189,346
Managed Subaccount 239,036 5,778,867 5,041 122,390 233,995 5,656,477
Money Market Subaccount 484,513 6,412,846 326,799 4,295,780 157,714 2,117,066
Blue Chip Subaccount 141,757 4,647,311 3,391 113,627 138,366 4,533,684
--------------------------------------------------------------------------
Combined 1,199,698 $ 24,397,232 352,870 $ 4,903,151 846,828 $ 19,494,081
--------------------------------------------------------------------------
--------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1996
Value Growth Subaccount 179,005 $ 3,644,990 11,662 $ 238,347 167,343 $ 3,406,643
High Grade Bond Subaccount 26,068 431,101 4,336 71,967 21,732 359,134
High Yield Bond Subaccount 36,666 715,749 4,082 79,608 32,584 636,141
Managed Subaccount 172,450 3,621,877 9,748 204,031 162,702 3,417,846
Money Market Subaccount 209,942 2,657,215 176,569 2,226,760 33,373 430,455
Blue Chip Subaccount 94,956 2,417,768 3,772 96,772 91,184 2,320,996
--------------------------------------------------------------------------
Combined 719,087 $ 13,488,700 210,169 $ 2,917,485 508,918 $ 10,571,215
--------------------------------------------------------------------------
--------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1995
Value Growth Subaccount 122,230 $ 2,088,235 14,829 $ 251,105 107,401 $ 1,837,130
High Grade Bond Subaccount 16,369 252,717 3,538 54,789 12,831 197,928
High Yield Bond Subaccount 24,846 441,608 5,868 104,212 18,978 337,396
Managed Subaccount 96,919 1,694,791 19,696 342,621 77,223 1,352,170
Money Market Subaccount 94,936 1,159,542 56,176 687,162 38,760 472,380
Blue Chip Subaccount 59,767 1,219,862 5,679 120,410 54,088 1,099,452
--------------------------------------------------------------------------
Combined 415,067 $ 6,856,755 105,786 $ 1,560,299 309,281 $ 5,296,456
--------------------------------------------------------------------------
--------------------------------------------------------------------------
</TABLE>
56
<PAGE>
FARM BUREAU LIFE VARIABLE ACCOUNT
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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, 1997 consisted of:
<TABLE>
<CAPTION>
HIGH GRADE HIGH YIELD
VALUE GROWTH BOND BOND MANAGED MONEY MARKET BLUE CHIP
COMBINED SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
<S> <C> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------
Paid-in capital $ 52,088,141 $ 17,238,383 $1,824,917 $3,256,700 $ 16,521,305 $3,053,628 $ 10,193,208
Accumulated undistributed
net investment income 10,376,147 4,648,100 387,381 726,906 4,164,383 66,733 382,644
Accumulated undistributed
net realized gain (loss)
from investment
transactions 107,131 20,814 (207) 2,527 18,600 -- 65,397
Net unrealized appreciation
(depreciation) of
investments 5,434,573 320,115 43,727 115,421 729,929 -- 4,225,381
------------------------------------------------------------------------------------------------
Net assets $ 68,005,992 $ 22,227,412 $2,255,818 $4,101,554 $ 21,434,217 $3,120,361 $ 14,866,630
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
</TABLE>
7.IMPACT OF YEAR 2000 (UNAUDITED)
Like other investment funds, financial and business organizations and
individuals around the world, the Account could be adversely affected if the
computer systems used by the Company and other service providers do not properly
process and calculate date-related information and data from and after January
1, 2000. In 1997, the Company completed a comprehensive assessment of the Year
2000 issue and developed a plan to address the issue in a timely manner. The
Company has and will utilize both internal and external resources to reprogram,
or replace, and test the software for Year 2000 modifications. The Company
anticipates completing the Year 2000 project no later than December 31, 1998,
and prior to any anticipated impact on its operating systems.
The date on which the Company believes it will complete the Year 2000
modifications is based on management's best estimates, which were derived
utilizing numerous assumptions of future events. The Company also recognizes
there are outside influences and dependencies relative to its Year 2000 effort,
over which it has little or no control. However, the Company is putting effort
into ensuring these considerations will have minimal impact. These would include
the continued availability of certain resources, third-party modification plans
and many other factors. However, there can be no guarantee that these estimates
will be achieved and actual results could differ from those anticipated.
57
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
58
<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, 1997 and 1996, and the related consolidated
statements of income, changes in stockholder's equity, and cash flows for each
of the three years in the period ended December 31, 1997. 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, 1997 and 1996, and the
consolidated results of its operations and its cash flows for each of the three
years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles.
/s/ Ernst & Young LLP
Des Moines, Iowa
February 16, 1998
59
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1997 1996
-------------- -------------
<S> <C> <C>
ASSETS
Investments:
Fixed maturities:
Held for investment, at amortized cost (market: 1997--$541,332;
1996--$574,338) $ 522,411 $ 562,283
Available for sale, at market (amortized cost: 1997--$1,218,469;
1996--$1,096,179) 1,286,169 1,128,587
Equity securities, at market (cost: 1997--$54,861; 1996--$69,915) 51,268 79,786
Mortgage loans on real estate 253,093 235,331
Investment real estate, less allowances for depreciation of $2,507 in 1997 and $1,741 in 1996 38,774 26,384
Policy loans 90,052 88,940
Other long-term investments 9,989 22,157
Short-term investments 23,853 62,025
-------------- -------------
Total investments 2,275,609 2,205,493
Cash and cash equivalents 1,678 1,802
Securities and indebtedness of related parties 63,394 39,244
Accrued investment income 25,340 24,298
Accounts and notes receivable 703 1,526
Amounts receivable from affiliates 6,686 7,095
Reinsurance recoverable 3,934 5,552
Deferred policy acquisition costs 157,096 145,614
Property and equipment, less allowances for depreciation of $18,330 in 1997 and $17,313 in 1996 32,518 36,182
Current income taxes recoverable 10,349 --
Goodwill, less accumulated amortization of $2,792 in 1997 and $2,172 in 1996 10,640 9,726
Other assets 7,443 5,388
Assets held in separate accounts 138,409 79,043
-------------- -------------
Total assets $ 2,733,799 $ 2,560,963
-------------- -------------
-------------- -------------
</TABLE>
60
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1997 1996
-------------- -------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Policy liabilities and accruals:
Future policy benefits:
Interest sensitive products $ 1,172,881 $ 1,132,491
Traditional life insurance and accident and health products 576,405 555,664
Unearned revenue reserve 23,341 22,182
Other policy claims and benefits 7,091 7,313
-------------- -------------
1,779,718 1,717,650
Other policyholders' funds:
Supplementary contracts without life contingencies 129,389 120,649
Advance premiums and other deposits 66,626 66,572
Accrued dividends 12,107 12,796
-------------- -------------
208,122 200,017
Long-term debt 77 81
Amounts payable to affiliates -- 1,700
Current income taxes payable -- 56
Deferred income taxes 45,123 43,810
Other liabilities 29,639 27,602
Liabilities related to separate accounts 138,409 79,043
-------------- -------------
Total liabilities 2,201,088 2,069,959
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 55,285
Net unrealized investment gains 38,719 26,327
Retained earnings 436,207 406,892
-------------- -------------
Total stockholder's equity 532,711 491,004
-------------- -------------
Total liabilities and stockholder's equity $ 2,733,799 $ 2,560,963
-------------- -------------
-------------- -------------
</TABLE>
SEE ACCOMPANYING NOTES.
61
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1997 1996 1995
----------------- ---------------- ----------------
<S> <C> <C> <C>
Revenues:
Interest sensitive product charges $ 37,802 $ 33,755 $ 33,343
Traditional life insurance and accident and health premiums 61,675 61,611 57,907
Property-casualty premiums -- -- 18,709
Net investment income 174,763 166,422 184,348
Realized gains on investments 38,639 54,454 5,902
Other income 4,968 11,887 28,011
----------------- ---------------- ----------------
Total revenues 317,847 328,129 328,220
Benefits and expenses:
Interest sensitive product benefits 95,052 90,720 88,147
Traditional life insurance and accident and health benefits 42,121 42,370 37,710
Increase in traditional life and accident and health future policy
benefits 15,107 13,679 15,310
Distributions to participating policyholders 22,784 23,725 23,838
Property-casualty losses and loss adjustment expenses -- -- 13,621
Underwriting, acquisition and insurance expenses 48,380 45,714 54,336
Interest expense 9 425 1,007
Other expenses 1,149 7,814 17,776
----------------- ---------------- ----------------
Total benefits and expenses 224,602 224,447 251,745
----------------- ---------------- ----------------
93,245 103,682 76,475
Income taxes (31,579) (34,156) (27,291)
Minority interest in earnings of subsidiaries -- -- (12)
Equity income, net of related income taxes 1,908 4,138 1,488
----------------- ---------------- ----------------
Net income $ 63,574 $ 73,664 $ 50,660
----------------- ---------------- ----------------
----------------- ---------------- ----------------
</TABLE>
SEE ACCOMPANYING NOTES.
62
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NET
UNREALIZED
ADDITIONAL INVESTMENT TOTAL
COMMON PAID-IN GAINS RETAINED STOCKHOLDER'S
STOCK CAPITAL (LOSSES) EARNINGS EQUITY
------- ------------ ------------ ------------- --------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1995 $1,194 $ 51,732 $(10,768) $ 313,314 $ 355,472
Issuance of 26,119.72 shares
pursuant to stock dividend 1,306 (1,306) -- -- --
Net income for 1995 -- -- -- 50,660 50,660
Change in net unrealized investment
gains/losses -- -- 45,375 -- 45,375
Dividend of Utah Farm Bureau
Insurance Company to parent -- -- (461) (10,650) (11,111)
------- ------------ ------------ ------------- --------------
Balance at December 31, 1995 2,500 50,426 34,146 353,324 440,396
Net income for 1996 -- -- -- 73,664 73,664
Change in net unrealized investment
gains/losses -- -- (7,819) -- (7,819)
Adjustment resulting from capital
transaction of equity investee -- 4,859 -- -- 4,859
Dividend of FBL Financial Services,
Inc. to parent -- -- -- (15,096) (15,096)
Cash dividend paid to parent -- -- -- (5,000) (5,000)
------- ------------ ------------ ------------- --------------
Balance at December 31, 1996 2,500 55,285 26,327 406,892 491,004
Net income for 1997 -- -- -- 63,574 63,574
Change in net unrealized investment
gains/losses -- -- 12,392 -- 12,392
Cash dividends paid to parent -- -- -- (33,000) (33,000)
Other -- -- -- (1,259) (1,259)
------- ------------ ------------ ------------- --------------
Balance at December 31, 1997 $2,500 $ 55,285 $ 38,719 $ 436,207 $ 532,711
------- ------------ ------------ ------------- --------------
------- ------------ ------------ ------------- --------------
</TABLE>
SEE ACCOMPANYING NOTES.
63
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1997 1996 1995
<S> <C> <C> <C>
-----------------------------------------
OPERATING ACTIVITIES
Net income $ 63,574 $ 73,664 $ 50,660
Adjustments to reconcile net income to net cash provided by operating activities:
Adjustments related to interest sensitive products:
Interest credited to account balances 82,821 80,867 80,132
Charges for mortality and administration (38,134) (35,050) (34,083)
Deferral of unearned revenues 2,266 1,825 1,696
Amortization of unearned revenue reserve (779) (530) (956)
Provision for depreciation and amortization 3,088 5,906 10,034
Net gains and losses related to investments held by broker-dealer and investment
company subsidiaries (1,223) (3,125) (25,801)
Realized gains on investments (38,639) (54,454) (5,902)
Increase in traditional life, accident and health and property-casualty benefit
accruals 15,198 13,646 16,144
Policy acquisition costs deferred (22,334) (18,561) (18,995)
Amortization of deferred policy acquisition costs 7,760 7,271 10,181
Provision for deferred income taxes (5,172) 6,310 15,026
Other (12,545) 8,635 (19,895)
-----------------------------------------
Net cash provided by operating activities 55,881 86,404 78,241
INVESTING ACTIVITIES
Sale, maturity or repayment of investments:
Fixed maturities--held for investment 40,460 33,212 16,529
Fixed maturities--available for sale 250,842 222,093 208,189
Equity securities 109,641 101,937 29,766
Mortgage loans on real estate 38,725 21,977 18,646
Investment real estate 6 4,829 927
Policy loans 21,002 20,092 19,701
Other long-term investments 52 10,404 11,609
Short-term investments--net 41,061 -- 68,799
-----------------------------------------
501,789 414,544 374,166
</TABLE>
64
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1997 1996 1995
<S> <C> <C> <C>
-----------------------------------------
Acquisition of investments:
Fixed maturities--held for investment $ -- $ (38,472) $ (120,885)
Fixed maturities--available for sale (363,560) (374,808) (282,657)
Equity securities (45,520) (28,824) (30,380)
Mortgage loans on real estate (56,571) (40,601) (17,110)
Investment real estate (10,142) (4,988) (8,034)
Policy loans (22,114) (20,506) (20,275)
Other long-term investments (1,936) (535) (13,632)
Short-term investments--net -- (30,249) --
-----------------------------------------
(499,843) (538,983) (492,973)
Proceeds from disposal, repayments of advances and other distributions from equity
investees 16,084 36,265 31,986
Investments in and advances to equity investees (41,018) (10,396) (21,463)
Net cash paid for acquisitions (9,694) -- --
Net purchases of property and equipment and other (28) (7,062) (7,664)
-----------------------------------------
Net cash used in investing activities (32,710) (105,632) (115,948)
FINANCING ACTIVITIES
Receipts from interest sensitive products credited to policyholder account balances 220,437 181,148 169,207
Return of policyholder account balances on interest sensitive products (210,728) (153,784) (124,802)
Proceeds from short-term borrowings -- -- 8
Repayments of short-term borrowings -- -- (6,396)
Repayments of long-term debt (4) (1,199) (5,915)
Dividends paid (33,000) (5,135) (248)
-----------------------------------------
Net cash provided by (used in) financing activities (23,295) 21,030 31,854
-----------------------------------------
Increase (decrease) in cash and cash equivalents (124) 1,802 (5,853)
Cash and cash equivalents at beginning of year 1,802 -- 5,853
-----------------------------------------
Cash and cash equivalents at end of year $ 1,678 $ 1,802 $ --
-----------------------------------------
-----------------------------------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest $ 8 $ 415 $ 1,086
Income taxes 48,876 17,694 16,833
</TABLE>
SEE ACCOMPANYING NOTES.
65
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 life insurance
industry. The Company currently markets its products, which consist primarily of
individual life insurance policies and annuity contracts, 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 stockholder's equity,
net of certain adjustments (see Note 2). 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 prepayment assumptions 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 stockholder's equity, net of any
related deferred income taxes.
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. Interest income on
impaired loans is recorded on a cash basis.
OTHER INVESTMENTS
Investment real estate is reported at cost less allowances for depreciation.
Policy loans are reported at unpaid principal balance. Short-term investments
are reported at cost adjusted for amortization of premiums and accrual of
discounts.
Other long-term investments include certain nontraditional investments and
securities held by a subsidiary engaged in the venture capital investment
company industry. Nontraditional investments include a debt-related instrument
and
66
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
investment deposits which are reported at cost. In accordance with accounting
practices for the investment company industry, marketable securities held by
subsidiaries in this industry are valued at market value if readily marketable
or at fair value, as determined by the Board of Directors of the subsidiary
holding the security, if not readily marketable. The resulting difference
between cost and market is included in the statements of income as net
investment income. Realized gains and losses are also reported as a component of
net investment income. The Company recorded transfers from its venture capital
subsidiary, which was dissolved during 1997, at fair value on the date of
transfer, re-establishing a new cost basis for the security.
Securities and indebtedness of related parties include investments in
partnerships and corporations over which the Company may exercise significant
influence. Such investments are accounted for using the equity method. 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 stockholder's equity. Securities and indebtedness of
related parties also includes advances and loans to the partnerships and
corporations which are principally reported at cost.
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 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 fixed maturity securities are reported based on quoted market
prices, where available. Market values of fixed maturity securities not actively
traded in a liquid market are estimated using a matrix calculation assuming 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, generally at values which are representative of the market
values of comparable issues.
CASH AND CASH EQUIVALENTS
For purposes of the consolidated statements 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
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. For
participating traditional life insurance and interest sensitive products
(principally universal life insurance policies and annuity contracts), 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. For nonparticipating traditional life and
accident and health insurance products, these costs are amortized over the
premium paying period of the related policies, in proportion to the ratio of
annual premium revenues to total anticipated premium revenues. Such anticipated
premium revenues are estimated using the same assumptions used for computing
liabilities for future policy benefits. 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.
67
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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, 1997, 1996 and 1995 was $2.3 million, $5.1 million and $9.3
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, 1997, 1996 or 1995.
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
8.15% in 1997, 8.34% in 1996 and 8.14% in 1995. Accrued dividends for
participating business are established for anticipated amounts earned to date
for the period through the policy's next anniversary and are provided for as a
separate liability. The declaration of future dividends for participating
business is at the discretion of the Board of Directors. Participating life
insurance business accounted for 42% of receipts from policyholders during the
year ended December 31, 1997 and represented 19% of life insurance inforce at
December 31, 1997.
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 interest sensitive 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 interest sensitive products ranged from 5.25% to
6.90% in 1997, 5.75% to 7.50% in 1996 and 5.50% to 7.50% in 1995.
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 interest sensitive 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
estimated using statistical analysis.
Property-casualty insurance unearned premiums were calculated on a pro rata
basis.
GUARANTEE FUND ASSESSMENTS
From time to time assessments are levied on the Company by guaranty associations
in most states in which the Company is licensed. These assessments are 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. During 1997, the Company adopted Statement of Position (SOP)
97-3, "Accounting by Insurance and Other Enterprises for Insurance-Related
Assessments", which requires the accrual of such assessments. Prior to 1997, the
Company
68
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
recognized its obligation for guarantee fund assessments when such assessments
were received and an asset was recorded for future premium tax offsets on
assessments paid. The impact of adopting SOP 97-3 was not separately reported as
a change in accounting principle because the impact of adoption was not material
to the Company.
At December 31, 1997, the Company had an undiscounted reserve of $1.8 million to
cover estimated future assessments on known insolvencies and had an asset
totaling $2.3 million representing estimated premium tax offsets on paid and
future assessments. Expenses incurred for guaranty fund assessments, net of
related premium tax offsets, totaled $1.1 million (including $0.9 million
related to the adoption of SOP 97-3) during the year ended December 31, 1997,
and $0.1 million during each of the years ended December 31, 1996 and 1995. It
is estimated future guarantee fund assessments on known insolvencies will be
paid during the three year period ended December 31, 2000 and substantially all
the related future premium tax offsets will be realized during the six year
period ended December 31, 2003. The Company believes the reserve for guarantee
fund assessments is sufficient to provide for future assessments based upon
known insolvencies and projected premium levels.
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 interest sensitive 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. 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.
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.
69
<PAGE>
Farm Bureau Life Insurance Company
Notes to Consolidated Financial Statements (continued)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
OTHER INCOME AND OTHER EXPENSES
Other income and other expenses include revenue and expenses generated by the
Company's various non-insurance subsidiaries for investment advisory, marketing
and distribution, and leasing services. 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, 1997, 1996 and 1995, revenues of the
insurance companies included as other income aggregated $3.7 million, $2.7
million and $8.4 million, respectively.
RECLASSIFICATIONS
Certain amounts in the 1996 and 1995 consolidated financial statements have been
reclassified to conform to the 1997 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.
PENDING ACCOUNTING CHANGE
In June 1997, the Financial Accounting Standards Board issued Statement No. 130,
"Reporting Comprehensive Income". Statement No. 130 establishes standards for
reporting comprehensive income and its components which include net income and
items currently recorded directly in stockholder's equity such as unrealized
gains and losses on fixed maturity securities classified as available for sale.
The impact of Statement No. 130 is not expected to be material to the Company as
the Statement does not change the computation or disclosure of net income or
stockholder's equity. Statement No. 130 is effective for and will be adopted in
1998.
2. INVESTMENT OPERATIONS
FIXED MATURITIES AND EQUITY SECURITIES
The following tables contain amortized cost and market value information on
fixed maturities and equity securities at December 31, 1997 and 1996:
<TABLE>
<CAPTION>
HELD FOR INVESTMENT
-----------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES MARKET VALUE
-----------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
DECEMBER 31, 1997
Bonds:
Corporate securities $ 5,008 $ 814 $ (8) $ 5,814
Mortgage-backed securities 517,403 19,575 (1,460) 535,518
-----------------------------------------------------
Total fixed maturities $ 522,411 $ 20,389 $ (1,468) $ 541,332
-----------------------------------------------------
-----------------------------------------------------
</TABLE>
70
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. INVESTMENT OPERATIONS (CONTINUED)
<TABLE>
<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, 1997
Bonds:
United States Government and agencies $ 14,406 $ 18 $ (19) $ 14,405
State, municipal and other governments 37,986 1,012 (126) 38,872
Public utilities 80,071 4,637 (390) 84,318
Corporate securities 688,362 55,095 (6,089) 737,368
Mortgage and asset-backed securities 372,482 13,418 (1,283) 384,617
Redeemable preferred stock 25,162 1,533 (106) 26,589
-----------------------------------------------------
Total fixed maturities $ 1,218,469 $ 75,713 $ (8,013) $ 1,286,169
-----------------------------------------------------
-----------------------------------------------------
Equity securities $ 54,861 $ 3,635 $ (7,228) $ 51,268
-----------------------------------------------------
-----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
HELD FOR INVESTMENT
------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES MARKET VALUE
------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
DECEMBER 31, 1996
Bonds:
Corporate securities $ 5,009 $ 649 $ (9) $ 5,649
Mortgage-backed securities 557,274 16,577 (5,162) 568,689
------------------------------------------------------
Total fixed maturities $ 562,283 $ 17,226 $ (5,171) $ 574,338
------------------------------------------------------
------------------------------------------------------
<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, 1996
Bonds:
United States Government and agencies $ 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
Corporate securities 611,021 32,078 (9,989) 633,110
Mortgage and asset-backed securities 278,308 7,391 (2,793) 282,906
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>
71
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. INVESTMENT OPERATIONS (CONTINUED)
Amortized cost of securities held by a subsidiary engaged in the investment
company industry was $8.7 million at December 31, 1996. Gross unrealized
appreciation and depreciation on these securities totaled $5.4 million and $0.3
million, respectively. 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, 1997, 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
----------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Due in one year or less $ -- $ -- $ 19,224 $ 19,274
Due after one year through five years -- -- 133,569 139,424
Due after five years through ten years 5,008 5,814 207,167 222,249
Due after ten years -- -- 460,865 494,016
----------------------------------------------------------
5,008 5,814 820,825 874,963
Mortgage and asset-backed securities 517,403 535,518 372,482 384,617
Redeemable preferred stocks -- -- 25,162 26,589
----------------------------------------------------------
$ 522,411 $ 541,332 $ 1,218,469 $ 1,286,169
----------------------------------------------------------
----------------------------------------------------------
</TABLE>
The unrealized appreciation or depreciation on fixed maturity and equity
securities available for sale is reported as a separate component of
stockholder's 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,
-----------------------
1997 1996
-----------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Unrealized appreciation on fixed maturity and equity securities available for sale $ 64,107 $ 42,279
Adjustments for assumed changes in amortization pattern of:
Deferred policy acquisition costs (5,251) (2,159)
Unearned revenue reserve 711 383
Provision for deferred income taxes (20,848) (14,176)
-----------------------
Net unrealized investment gains $ 38,719 $ 26,327
-----------------------
-----------------------
</TABLE>
MORTGAGE LOANS ON REAL ESTATE
The Company's mortgage loan portfolio consists principally of commercial
mortgage loans. The Company's lending policies require that the loans be
collateralized by the value of the related property, 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 (26% in 1997 and 28% in 1996), which includes California,
Oregon and Washington; West South Central (22% in 1997 and 12% in 1996), which
includes Oklahoma and Texas; and Mountain (15% in 1997 and 20% in 1996), 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 (44% in 1997 and 46% in 1996) and retail facilities
(36% in 1997 and 34% in 1996), representing the largest holdings.
72
<PAGE>
Farm Bureau Life Insurance Company
Notes to Consolidated Financial Statements (continued)
2. 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,
-------------------------------
1997 1996 1995
-------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Balance at beginning of year $ 600 $ 600 $ 600
Realized losses -- 2,527 --
Uncollectible amounts written off, net of recoveries (77) (2,527) --
-------------------------------
Balance at end of year $ 523 $ 600 $ 600
-------------------------------
-------------------------------
</TABLE>
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. There were no
impaired loans at December 31, 1997. No valuation allowance was established on
the impaired loans at December 31, 1996.
NET INVESTMENT INCOME
Components of net investment income are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------
1997 1996 1995
--------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Fixed maturities:
Held for investment $ 43,648 $ 45,744 $ 42,016
Available for sale 97,044 85,722 83,490
Equity securities 1,259 1,345 1,098
Mortgage loans on real estate 21,027 20,297 19,544
Investment real estate 4,457 4,495 4,191
Policy loans 5,692 5,653 5,567
Other long-term investments 2,921 3,698 26,249
Short-term investments 3,691 3,166 2,671
Other 4,105 3,485 5,581
--------------------------------------
183,844 173,605 190,407
Less investment expenses (9,081) (7,183) (6,059)
--------------------------------------
Net investment income $ 174,763 $ 166,422 $ 184,348
--------------------------------------
--------------------------------------
</TABLE>
Investment income from other long-term investments, which includes investments
held by subsidiaries engaged in the broker-dealer and investment company
industries, is comprised of:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1997 1996 1995
--------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Dividends, interest and other income $ 1,698 $ 613 $ 519
Net realized gain (loss) from investment transactions 6,288 (1,811) 25,810
Change in unrealized appreciation/depreciation of investments (5,065) 4,896 (80)
--------------------------------
$ 2,921 $ 3,698 $ 26,249
--------------------------------
--------------------------------
</TABLE>
During the year ended December 31, 1997, 13 securities with a total fair value
of $15.0 million were transferred to the Company from its venture capital
subsidiary, upon its dissolution. During the year ended December 31, 1995, two
securities with a total fair value of $27.6 million were transferred out of the
subsidiary. Realized gains (recognized in net investment income) of $6.3 million
and $24.6 million were recognized on the 1997 and 1995 transfers, respectively,
although neither transfer had an impact on net income (as unrealized
appreciation had been reported prior to the transfer).
73
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. INVESTMENT OPERATIONS (CONTINUED)
REALIZED AND UNREALIZED GAINS AND LOSSES
Realized gains (losses) and the change in unrealized appreciation/depreciation
on investments, excluding amounts attributed to investments held by subsidiaries
engaged in the broker-dealer and investment company industries discussed above,
are summarized below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1997 1996 1995
-------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
REALIZED
Fixed maturities--available for sale $ 4,300 $ 2,199 $ 5,526
Equity securities 35,120 56,522 (763)
Mortgage loans on real estate -- (2,527) --
Investment real estate 6 619 123
Other long-term investments (300) (154) (158)
Securities and indebtedness of related parties (487) (1,438) 1,182
Notes receivable and other -- (767) (8)
-------------------------------------
Realized gains on investments $ 38,639 $ 54,454 $ 5,902
-------------------------------------
-------------------------------------
UNREALIZED
Fixed maturities:
Held for investment $ 6,866 $ (12,225) $ 50,905
Available for sale 35,292 (25,675) 75,590
Equity securities (13,464) 4,429 9,209
-------------------------------------
Change in unrealized appreciation/depreciation of investments $ 28,694 $ (33,471) $ 135,704
-------------------------------------
-------------------------------------
</TABLE>
An analysis of sales, maturities and principal repayments of the Company's fixed
maturities portfolio for the years ended December 31, 1997, 1996, and 1995 is as
follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED REALIZED REALIZED
COST GAINS LOSSES PROCEEDS
-------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1997
Scheduled principal repayments and calls:
Available for sale $ 154,939 $ -- $ -- $ 154,939
Held for investment 40,460 -- -- 40,460
Sales--available for sale 91,603 6,313 (2,013) 95,903
-------------------------------------------------
Total $ 287,002 $ 6,313 $ (2,013) $ 291,302
-------------------------------------------------
-------------------------------------------------
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
-------------------------------------------------
-------------------------------------------------
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
-------------------------------------------------
-------------------------------------------------
</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 recorded during the year ended December 31, 1997.
74
<PAGE>
Farm Bureau Life Insurance Company
Notes to Consolidated Financial Statements (continued)
2. INVESTMENT OPERATIONS (CONTINUED)
OTHER
In December 1997, the Company acquired a 35% interest (with 20% voting control)
in an unaffiliated life insurance company for $25.0 million. The excess
(approximately $5.1 million) of the carrying amount of the investment, which is
classified as securities and indebtedness of related parties on the consolidated
balance sheet, over the amount of underlying equity in net assets is
attributable to goodwill and is being amortized over a 20 year period. The
investment is being accounted for using the equity method. The insurance company
underwrites and markets life insurance and annuity products throughout the
United States.
Also in December 1997, the Company acquired all of the common stock of EquiTrust
Life Insurance Company for $9.7 million. EquiTrust Life Insurance Company is a
shell life insurance company licensed in 38 states. Goodwill totaling $1.5
million was recorded in connection with the acquisition and is being amortized
over 20 years.
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. Subsequent to the
public offering, the Company reclassified the investment to equity securities.
The Company has sold the majority of its holdings in this investment and
realized gains of $24.3 million during the year ended December 31, 1997 and
$50.4 million during the year ended December 31, 1996.
At December 31, 1997, affidavits of deposits covering investments with a
carrying value totaling $2,081.4 million were on deposit with state agencies to
meet regulatory requirements.
At December 31, 1997, the Company had committed to provide additional funding
for mortgage loans on real estate aggregating $6.5 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, 1997, include fixed maturities of $3.2
million and other long-term investments of $1.6 million.
No investment in any person or its affiliates (other than bonds issued by
agencies of the United States Government) exceeded ten percent of stockholder's
equity at December 31, 1997.
3. FAIR VALUES OF FINANCIAL INSTRUMENTS
Statement 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. Statement 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 a matrix calculation assuming a
spread (based on interest rates and a risk assessment of the bonds) over U. S.
Treasury bonds.
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 comparable issues.
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.
75
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)
OTHER LONG-TERM INVESTMENTS: The fair values for nontraditional debt
instruments and investment deposits are estimated by discounting expected cash
flows using interest rates currently being offered for similar investments. The
fair values for investments held by a subsidiary in the investment company
industry 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.
CASH AND SHORT-TERM INVESTMENTS: The carrying amounts reported in the
consolidated balance sheet for these instruments approximate their fair values.
SECURITIES AND INDEBTEDNESS OF RELATED PARTIES: Fair values for loans and
advances are estimated by discounting expected cash flows using interest rates
currently being offered for similar investments. As allowed by Statement No.
107, fair values are not assigned to investments accounted for using the equity
method.
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, deposit administration funds
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.
The following sets forth a comparison of the fair values and carrying values of
the Company's financial instruments subject to the provisions of Statement No.
107:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------------------
1997 1996
------------------------------ ----------------------------
CARRYING FAIR CARRYING
VALUE VALUE VALUE FAIR VALUE
------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Fixed maturities:
Held for investment $ 522,411 $ 541,332 $ 562,283 $ 574,338
Available for sale 1,286,169 1,286,169 1,128,587 1,128,587
Equity securities 51,268 51,268 79,786 79,786
Mortgage loans on real estate 253,093 265,059 235,331 245,125
Policy loans 90,052 97,712 88,940 88,940
Other long-term investments 9,989 9,587 22,157 21,671
Cash and short-term investments 25,531 25,531 63,827 63,827
Securities and indebtedness of related parties 5,451 5,829 11,658 12,292
Assets held in separate accounts 138,409 138,409 79,043 79,043
LIABILITIES
Future policy benefits $ 782,933 $ 767,030 $ 744,369 $ 730,272
Other policyholders' funds 195,330 195,330 186,535 186,535
Liabilities related to separate accounts 138,409 138,409 79,043 79,043
</TABLE>
4. 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. Life insurance in force ceded totaled $663.4 million (5.1% of total
life insurance in force) at December 31, 1997 and $594.9 million (4.9% of total
life insurance in force) at December 31, 1996.
76
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. REINSURANCE AND POLICY PROVISIONS (CONTINUED)
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's life insurance
subsidiaries 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 $3.7 million, $3.4 million and $3.3 million and insurance benefits
have been reduced by $2.9 million, $4.0 million and $1.7 million during the
years ended December 31, 1997, 1996 and 1995, respectively, as a result of
cession agreements. The amount of reinsurance assumed is not significant.
Unpaid claims on accident and health policies (entirely disability income
products) 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,
--------------------------------
1997 1996 1995
--------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Unpaid claims liability, net of related
reinsurance, at beginning of year $ 13,812 $ 13,899 $ 10,494
Add:
Provision for claims occurring in the current
year 5,829 4,737 5,011
Increase (decrease) in estimated expense for
claims occurring in the prior years 2,236 (371) 2,357
--------------------------------
Incurred claim expense during the current year 8,065 4,366 7,368
Deduct expense payments for claims occurring
during:
Current year 1,692 1,681 2,109
Prior years 2,564 2,772 1,854
--------------------------------
4,256 4,453 3,963
--------------------------------
Unpaid claims liability, net of related
reinsurance, at end of year 17,621 13,812 13,899
Active life reserve 15,832 15,376 14,614
--------------------------------
Net accident and health reserves 33,453 29,188 28,513
Reinsurance ceded 1,721 1,483 934
--------------------------------
Gross accident and health reserves $ 35,174 $ 30,671 $ 29,447
--------------------------------
--------------------------------
</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 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 year ended December 31, 1995, Utah Insurance's participation
in the reinsurance pool was 8%.
77
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. REINSURANCE AND POLICY PROVISIONS (CONTINUED)
Property-casualty premiums earned and losses and loss adjustment expenses
incurred, reflect the following reinsurance amounts during the year ended
December 31, 1995 (dollars in thousands):
<TABLE>
<S> <C>
PREMIUMS EARNED
Direct premiums written $ 26,244
Assumed from non-affiliates 5
Ceded to non-affiliates (615)
Assumed from Farm Bureau Mutual pool 18,851
Ceded to Farm Bureau Mutual pool (25,634)
---------
Net premiums written 18,851
Increase in reserve for unearned premiums, net of
reinsurance (150)
Increase in accrued retrospective premiums 8
---------
Total premiums earned $ 18,709
---------
---------
LOSSES AND LOSS ADJUSTMENT EXPENSES INCURRED
Direct losses and loss adjustment expenses paid $ 18,532
Net ceded to non-affiliates 91
Assumed from Farm Bureau Mutual pool 13,030
Ceded to Farm Bureau Mutual pool (18,623)
---------
Net losses and loss adjustment expenses paid 13,030
Increase in losses and loss adjustment expense
reserves, net of reinsurance 591
---------
Total losses and loss adjustment expenses incurred $ 13,621
---------
---------
</TABLE>
The difference between premiums on a written and on an earned basis is not
significant.
The activity in the reserves on property-casualty policies, net of reinsurance
and salvage and subrogation recoverables, is summarized as follows during the
year ended December 31, 1995 (dollars in thousands):
<TABLE>
<S> <C>
Reserves on property-casualty policies (gross),
beginning of year $ 28,828
Less reinsurance recoverable on unpaid losses and
loss adjustment expenses, beginning of year (16,646)
---------
Reserve for losses and loss adjustment expenses,
net of related reinsurance, beginning of year 12,182
Add:
Provision for losses and loss adjustment
expenses for claims occurring in the current
year 14,529
Decrease in estimated losses and loss adjustment
expenses for claims occurring in the prior
years (908)
---------
Incurred losses and loss adjustment expenses
during the current year 13,621
Deduct loss and loss adjustment expense payments
for claims occurring during:
Current year (7,678)
Prior years (5,351)
---------
(13,029)
---------
Reserve for losses and loss adjustment expenses,
net of related reinsurance, end of year 12,774
Reinsurance recoverables on unpaid losses and loss
adjustment expenses, end of year 17,210
Transfer to parent as part of dividend of Utah
Farm Bureau Insurance Company (29,984)
---------
Reserves on property-casualty policies (gross),
end of year $ --
---------
---------
</TABLE>
5. INCOME TAXES
The Company files a consolidated federal income tax return with FBL Financial
Group, Inc. and a majority of its subsidiaries. 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.
78
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. INCOME TAXES (CONTINUED)
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. The companies file separate state income tax returns.
Deferred income taxes have been established based upon the temporary differences
between the financial statement and income tax bases of assets and liabilities
within each entity. The reversal of the temporary differences will result in
taxable or deductible amounts in future years when the related asset or
liability is recovered or settled.
Income tax expenses (credits) are included in the consolidated financial
statements as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1997 1996 1995
--------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Taxes provided in consolidated statements of
income on:
Income before minority interest in earnings of
subsidiaries and equity income:
Current $ 36,828 $ 28,400 $ 13,278
Deferred (5,249) 5,756 14,013
--------------------------------
31,579 34,156 27,291
Equity income:
Current 951 1,674 (212)
Deferred 77 554 1,013
--------------------------------
1,028 2,228 801
Taxes provided in consolidated statement of
changes in stockholder's equity:
Change in net unrealized investment
gains/losses--deferred 6,672 (4,211) 24,435
Adjustment resulting from capital transaction of
equity investee-- deferred -- 2,617 --
--------------------------------
6,672 (1,594) 24,435
--------------------------------
$ 39,279 $ 34,790 $ 52,527
--------------------------------
--------------------------------
</TABLE>
The effective tax rate on income before income taxes, minority interest in
earnings of subsidiaries and equity income is different from the prevailing
federal income tax rate as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1997 1996 1995
----------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Income before income taxes, minority interest in
earnings of subsidiaries and equity income $ 93,245 $ 103,682 $ 76,475
----------------------------------
----------------------------------
Income tax at federal statutory rate (35%) $ 32,636 $ 36,289 $ 26,766
Tax effect (decrease) of:
Tax-exempt interest income (323) (383) (574)
Tax-exempt dividend income (1,148) (1,246) (798)
State income taxes 39 242 1,337
Other items 375 (746) 560
----------------------------------
Income tax expense $ 31,579 $ 34,156 $ 27,291
----------------------------------
----------------------------------
</TABLE>
The Internal Revenue Service (IRS) has examined the federal income tax returns
of FBL Financial Group, Inc. for the tax years through 1994 and FBL Financial
Group, Inc. has reached a tentative settlement with the IRS's Appeals Division
for tax years 1988 through 1994. The settlement is subject to approval of the
Joint Committee on Taxation. Management believes that any settlement will not
have a material impact on the Company's financial statements.
79
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. INCOME TAXES (CONTINUED)
The tax effect of temporary differences giving rise to the Company's deferred
income tax assets and liabilities at December 31, 1997 and 1996, is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1997 1996
-----------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Deferred income tax liabilities:
Fixed maturity and equity securities $ 25,247 $ 17,265
Deferred policy acquisition costs 46,944 44,307
Deferred investment gains -- 10,551
Other 14,236 13,437
-----------------------
86,427 85,560
Deferred income tax assets:
Future policy benefits (21,320) (22,304)
Accrued dividends (3,273) (2,997)
Accrued pension costs (9,092) (10,082)
Other (7,619) (6,367)
-----------------------
(41,304) (41,750)
-----------------------
Deferred income tax liability $ 45,123 $ 43,810
-----------------------
-----------------------
</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, 1997 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
stockholder in excess of $445.3 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. These taxes arise
from the recognition of income and losses differently for purposes of filing
federal income tax returns than for financial reporting purposes.
6. CREDIT ARRANGEMENT
As an investor in the Federal Home Loan Bank (FHLB), the Company has the right
to borrow up to $43.9 million from the FHLB as of December 31, 1997. As of
December 31, 1997 and 1996, the Company had no outstanding debt under this
credit arrangement.
7. RETIREMENT AND COMPENSATION PLANS
The Company participates with several 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 $4.2 million, $5.9 million and $7.9 million for the
years ended December 31, 1997, 1996 and 1995, 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 year ended December 31, 1995 were $1.4 million. During 1996, in
conjunction with a restructuring of the agents' compensation program,
contributions to this plan were discontinued.
80
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. RETIREMENT AND COMPENSATION PLANS (CONTINUED)
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 policy liabilities for interest
sensitive products 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 each of the
years ended December 31, 1997, 1996 and 1995, respectively.
8. STATUTORY INFORMATION
STATUTORY LIMITATIONS ON 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 1998 the Company could pay dividends to the parent company of
approximately $37.8 million without prior approval of insurance regulatory
authorities.
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) and
available-for-sale (carried at fair value) classifications rather than generally
being carried at amortized cost; (b) 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; (c) future policy benefit reserves on certain interest sensitive
products are based on full account values, rather than discounting methodologies
utilizing statutory interest rates; (d) deferred income taxes are provided for
the difference between the financial statement and income tax bases of assets
and liabilities; (e) 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; (f) declines in the estimated realizable value of investments are charged
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; (g) agents' balances and certain other assets
designated as "non-admitted assets" for statutory purposes are reported as
assets rather than being charged to surplus; (h) revenues for interest sensitive
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; (i) pension income or expense is
recognized in accordance with Statement No. 87, "Employers' Accounting for
Pensions" rather than in accordance with rules and regulations permitted by the
Employee Retirement Income Security Act of 1974; (j) the financial statements of
subsidiaries are consolidated with those of the Company; and (k) 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 $291.3 million at
December 31, 1997 and $280.6 million at December 31, 1996. Net income for the
Company determined in accordance with statutory accounting practices was $73.5
million in 1997, $75.0 million in 1996 and $47.4 million in 1995.
81
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. STATUTORY INFORMATION (CONTINUED)
The Company's insurance subsidiaries reported the following statutory amounts to
regulatory agencies, after appropriate elimination of intercompany accounts:
<TABLE>
<CAPTION>
CAPITAL AND NET INCOME
SURPLUS YEAR ENDED DECEMBER
DECEMBER 31, 31,
-------------- ----------------------
1997 1996 1997 1996 1995
--------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Life insurance companies $13,111 $3,352 $ 56 $ 151 $ 92
Property-casualty insurance subsidiary -- -- -- -- 1,454
--------------------------------------
Total $13,111 $3,352 $ 56 $ 151 $1,546
--------------------------------------
--------------------------------------
</TABLE>
The National Association of Insurance Commissioners (NAIC) is in the process of
codifying statutory accounting practices (Codification). Codification will
likely change, to some extent, prescribed statutory accounting practices and may
result in changes to the accounting practices that the Company's insurance
subsidiaries use to prepare their statutory-basis financial statements.
Codification, which is expected to be approved by the NAIC in 1998, will require
adoption by the various state insurance departments before it becomes the
prescribed statutory basis of accounting for insurance companies domesticated
within those states. Accordingly, before Codification becomes effective the
state of domicile must adopt Codification as the prescribed basis of accounting
on which domestic insurers must report their statutory-basis results. At this
time it is unclear whether the state of Iowa will adopt Codification.
9. MANAGEMENT AND OTHER 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,
1997, 1996 and 1995, the Company incurred expenses under these contracts of $0.8
million, $2.4 million and $3.7 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 $1.7 million during 1997 and $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.
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 $4.1 million
during 1997 and $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. During the years ended December 31, 1997 and 1996, the Company paid
$3.3 million and $2.8 million, respectively, to the property-casualty companies
under these arrangements.
The Company is licensed by the Iowa Farm Bureau Federation to use the "Farm
Bureau" and "FB" designations in Iowa. In connection with this license,
royalties of $0.5 million, $0.4 million and $0.3 million were paid to the Iowa
Farm Bureau Federation for the years ended December 31, 1997, 1996 and 1995,
respectively. The Company has
82
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. MANAGEMENT AND OTHER AGREEMENTS (CONTINUED)
similar arrangements with Farm Bureau organizations in other states in its
market territory. Total royalties paid to Farm Bureau organizations other than
the Iowa Farm Bureau Federation were $0.4 million in 1997 and $0.3 million in
1996 and 1995.
10. COMMITMENTS AND CONTINGENCIES
IMPACT OF YEAR 2000 (UNAUDITED)
Many of the Company's computer programs were originally written using two digits
rather than four to define a particular year. As a result, these computer
programs have time-sensitive software that may recognize a date using "00" as
the year 1900 rather than the year 2000. This could cause a system failure or
miscalculations causing disruptions to operations, including, but not limited
to, a temporary inability to process transactions, send premium notices and
calculate policy reserves and accruals.
During 1997, the Company completed a comprehensive assessment of the Year 2000
issue and developed a plan to address the issue in a timely manner. The Company
is currently in the process of modifying or replacing portions of its software
to help ensure that its computer systems will function properly when using
date-sensitive information. The testing of these modifications is also currently
being performed. Furthermore, the Company has initiated formal communications
with all of its significant vendors to determine the extent to which the
Company's interface systems are vulnerable to those third parties' failure to
remediate their own Year 2000 issues.
The Company has and will utilize both internal and external resources to
reprogram, or replace, and test the software for Year 2000 modifications. The
Company anticipates completing the Year 2000 project no later than December 31,
1998, and prior to any anticipated impact on its operating systems. The total
incremental cost of the Year 2000 project (those costs which the Company would
not have incurred had the Year 2000 issue not existed) is estimated to be $1.4
million and is being funded through operating cash flows. Year 2000 modification
costs incurred and charged to expense during 1997 totaled $0.6 million. It is
anticipated the project costs to be charged to expense during 1998 will total
approximately $0.8 million and that these expenses will primarily be incurred
during the first three quarters of the year.
The costs of the project and the date on which the Company believes it will
complete the Year 2000 modifications are based on management's best estimates,
which were derived utilizing numerous assumptions of future events, including
the continued availability of certain resources, third party modification plans
and other factors. However, there can be no guarantees that these estimates will
be achieved and actual results could differ materially from those anticipated.
Specific factors that might cause such material differences include, but are not
limited to, the availability and cost of personnel trained in this area, the
ability to locate and correct all relevant computer codes and similar
uncertainties.
OTHER
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, 1997, management is not
aware of any claims for which a material loss is reasonably possible.
The Company has extended a line of credit in the amount of $15.0 million to FBL
Leasing Services, Inc., a wholly-owned subsidiary of FBL Financial Group, Inc.
Interest on this agreement is equal to the prime rate of a national bank and
payable monthly. At December 31, 1997, there was $4.8 million outstanding on the
line of credit. No amounts were outstanding at December 31, 1996.
The Company has extended a line of credit in the amount of $0.5 million to
Western Computer Services, Inc., an affiliate. Interest on this agreement is
equal to the prime rate of a national bank and payable monthly. At December 31,
1997, there was $0.1 million outstanding on the line of credit. No amounts were
outstanding at December 31, 1996.
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 collateralized by lease agreements primarily
with affiliates. The Company believes no losses will be recognized in connection
with this guarantee due to the credit worthiness of the lessees and the value of
the underlying collateral.
83
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. COMMITMENTS AND CONTINGENCIES (CONTINUED)
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, 1997, the Company assessed the probability and amount of future cash flows
from the property and determined that no accrual was necessary. At December 31,
1997 and 1996, the limited partnership had a $5.4 million mortgage loan, secured
by the shopping center, with Farm Bureau Mutual Insurance Company.
11. SUBSEQUENT EVENT (UNAUDITED)
During the first quarter of 1998, the Company's Board of Directors approved a
transaction whereby the Company will transfer its home office properties to its
parent in the form of a dividend. The fair value of the building is $45.7
million and will serve as the basis of the transaction. The Company will lease a
portion of the properties back from its parent under a sublease arrangement. A
majority of the gain on the dividend (approximately $21.0 million) will be
deferred by the Company and amortized over the term of the operating lease. The
transaction is structured as a tax-free exchange of a real estate subsidiary and
is expected to close in March 1998. The dividend has been approved by the
Insurance Division, Department of Commerce, of the State of Iowa.
84
<PAGE>
- --------------------------------------------------------------------------------
APPENDIX A
- --------------------------------------------------------------------------------
ILLUSTRATIONS OF
DEATH BENEFITS AND
CASH VALUES
The following tables illustrate how the death benefits
and Cash Values of a Policy may vary over an extended
period of time for both males and females at certain
ages, assuming hypothetical rates of investment return
for the Variable Account equivalent to constant gross
annual rates of 0%, 4%, 8% and 12%.
The amounts shown are as of the end of each Policy Year.
The tables assume that the guaranteed (maximum) cost of
insurance rates will be charged for the entire period
illustrated. The amounts shown for the death benefits and
Cash Values reflect the deduction of the premium expense
charge and the monthly and first year monthly
administrative charges. The amounts shown for the death
benefits and Cash Values also reflect the fact that the
net investment return of the Variable Account is lower
than the gross, after-tax return on the assets held in
the Fund as a result of expenses paid by the Fund and
charges levied against the Variable Account. The values
shown take into account expenses paid by the Fund which
are assumed to be equivalent to 0.65% of the aggregate
average daily net assets of the Fund. Actual fees and
expenses of the Portfolios associated with a policy may
be more or less than 0.65%, will vary from year to year,
and will vary with the Subaccount selected. Nonetheless
the Company expects the actual expenses to average 0.65%
over the six portfolios. This is because the Adviser has
agreed to reimburse any Portfolio to the extent that
annual operating expenses, including the investment
advisory fee, exceed 0.65%. There can be no assurance
that the Adviser will continue to limit expenses beyond
December 31, 1998. Absent the agreement to limit
expenses, actual fees and expenses of the Fund would be
more than 0.65%. The amounts shown also take into account
the daily charge by the Company to the Variable Account
for assuming mortality and expense risks, which is
equivalent to a charge at an effective annual rate of
.90% of the net assets of the Variable Account. After
deduction of these amounts, the illustrated gross annual
investment rates of return of 0%, 4%, 8% and 12%
correspond to approximate net annual investment rates of
-1.55%, 2.45%, 6.45% and 10.45%, respectively.
The hypothetical values shown in the tables do not
reflect any charges for federal income taxes against the
Variable Account since the Company is not currently
making such charges. However, such charges may be made in
the future and, in that event, the gross annual
investment rate of return would have to exceed 0%, 4%, 8%
or 12% by an amount sufficient to cover tax charges in
order to produce the death benefits and Cash Values
illustrated. (See "FEDERAL TAX MATTERS--Taxation of the
Company.")
The tables illustrate the Policy values that would result
based upon the hypothetical investment rates of return if
premiums are paid as indicated, if all Net Premiums are
allocated to the Variable Account and if no Policy Loans
have been made. The tables are also based on the
assumptions that the Policyowner has not requested an
increase or decrease in Specified Amount, and that no
partial surrenders or transfers have been made.
For comparative purposes, the second column of each table
shows the amount to which the premiums would accumulate
if an amount equal to those premiums were invested to
earn interest at 5% compounded annually.
* * *
Upon request, the Company will provide a comparable
illustration based upon the proposed insured's age, sex
and premium class, the Specified Amount or premium
requested, and the proposed frequency of premium
payments.
A-1
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
FEMALE AGE 35 AT LAST BIRTHDAY
DEATH BENEFIT OPTION A
INITIAL SPECIFIED AMOUNT $100,000--ANNUAL PREMIUM $516
NON-TOBACCO PREMIUM CLASS
<TABLE>
<CAPTION>
0% ASSUMED HYPOTHETICAL 4% ASSUMED HYPOTHETICAL 8% ASSUMED HYPOTHETICAL
GROSS RETURN GROSS RETURN GROSS RETURN
GUARANTEED COST GUARANTEED COST GUARANTEED COST
PREMIUMS OF INSURANCE OF INSURANCE OF INSURANCE
END OF ACCUMULATED ------------------------- ------------------------- -------------------------
POLICY AT 5% CASH DEATH CASH DEATH CASH DEATH
YEAR PER YEAR VALUE BENEFIT VALUE BENEFIT VALUE BENEFIT
----------- ---------------- ---------- ------------- ---------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
1....................... $ 541.80 $ 54 $ 100,054 $ 64 $ 100,064 $ 74 $ 100,074
2....................... 1,110.69 355 100,355 363 100,363 391 100,391
3....................... 1,708.02 602 100,602 658 100,658 718 100,718
4....................... 2,335.23 852 100,852 949 100,949 1,053 101,053
5....................... 2,993.79 1,085 101,085 1,232 101,232 1,396 101,396
6....................... 3,685.28 1,300 101,300 1,508 101,508 1,745 101,745
7....................... 4,411.34 1,493 101,493 1,772 101,772 2,098 102,098
8....................... 5,173.71 1,665 101,665 2,024 102,024 2,455 102,455
9....................... 5,974.19 1,817 101,817 2,264 102,264 2,817 102,817
10....................... 6,814.70 1,949 101,949 2,492 102,492 3,184 103,184
15....................... 11,691.27 2,274 102,274 3,391 103,391 5,052 105,052
20....................... 17,915.13 1,869 101,869 3,630 103,630 6,754 106,754
25....................... 25,858.54 464 100,464 2,763 102,763 7,827 107,827
30....................... 35,996.57 * * 132 100,132 7,487 107,487
35....................... 48,935.54 * * * * 3,383 103,383
Age 65....................... 35,996.57 * * * * 7,046 107,046
<CAPTION>
12% ASSUMED HYPOTHETICAL
GROSS RETURN
GUARANTEED COST
OF INSURANCE
END OF ---------------------------
POLICY CASH DEATH
YEAR VALUE BENEFIT
----------- ------------ -------------
<S> <C> <C>
1....................... $ 84 $ 100,084
2....................... 421 100,421
3....................... 781 100,781
4....................... 1,166 101,166
5....................... 1,577 101,577
6....................... 2,015 102,015
7....................... 2,480 102,480
8....................... 2,974 102,974
9....................... 3,502 103,502
10....................... 4,065 104,065
15....................... 7,520 107,520
20....................... 12,266 112,266
25....................... 18,684 118,684
30....................... 27,259 127,259
35....................... 37,358 137,358
Age 65....................... 29,173 129,173
</TABLE>
- --------------------------
* In the absence of an additional premium, the Policy would lapse.
The values illustrated assume the premium is paid at the beginning of the Policy
Year. Values would be different if premiums are paid with a different frequency
or in different amounts.
The values and benefits are as of the Policy Year shown. They assume that no
Policy Loan or surrenders have been made. Excessive Policy Loans or surrenders
may cause this Policy to lapse because of insufficient Cash Value.
THE HYPOTHETICAL GROSS ANNUAL INVESTMENT RATES OF RETURN SHOWN ABOVE ARE
ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST, OR A
PREDICTION OF FUTURE, INVESTMENT RATES OF RETURN. THE ACTUAL INVESTMENT RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING PREVAILING INTEREST RATES, RATES OF INFLATION, AND THE
ALLOCATIONS MADE BY A POLICYOWNER AMONG THE SUBACCOUNTS. THE GROSS HYPOTHETICAL
ANNUAL INVESTMENT RATES OF RETURN OF 0%, 4%, 8% AND 12% SHOWN ABOVE CORRESPOND
TO NET ANNUAL RATES OF RETURN OF -1.55%, 2.45%, 6.45% AND 10.45%, RESPECTIVELY.
THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE
SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 0%, 4%, 8% AND 12% OVER
A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE FUND THAT
THESE HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR
OR SUSTAINED FOR ANY PERIOD OF TIME.
A-2
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
FEMALE AGE 55 AT LAST BIRTHDAY
DEATH BENEFIT OPTION A
INITIAL SPECIFIED AMOUNT $100,000--ANNUAL PREMIUM $1,566
NON-TOBACCO PREMIUM CLASS
<TABLE>
<CAPTION>
0% ASSUMED HYPOTHETICAL 4% ASSUMED HYPOTHETICAL 8% ASSUMED HYPOTHETICAL
GROSS RETURN GROSS RETURN GROSS RETURN
GUARANTEED COST GUARANTEED COST GUARANTEED COST
PREMIUMS OF INSURANCE OF INSURANCE OF INSURANCE
END OF ACCUMULATED ------------------------- ------------------------- -------------------------
POLICY AT 5% CASH DEATH CASH DEATH CASH DEATH
YEAR PER YEAR VALUE BENEFIT VALUE BENEFIT VALUE BENEFIT
----------- ------------------ ---------- ------------- ---------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
1...................... $ 1,644.30 $ 316 $ 100,316 $ 350 $ 100,350 $ 384 $ 100,384
2...................... 3,370.82 1,058 101,058 1,149 101,149 1,242 101,242
3...................... 5,183.66 1,743 101,743 1,920 101,920 2,108 102,108
4...................... 7,087.14 2,373 102,373 2,666 102,666 2,985 102,985
5...................... 9,085.80 2,948 102,948 3,383 103,383 3,870 103,870
6...................... 11,184.39 3,459 103,459 4,062 104,062 4,754 104,754
7...................... 13,387.90 3,898 103,898 4,692 104,692 5,629 105,629
8...................... 15,701.60 4,249 104,249 5,254 105,254 6,476 106,476
9...................... 18,130.98 4,492 104,492 5,726 105,726 7,270 107,270
10...................... 20,681.83 4,611 104,611 6,085 106,085 7,990 107,990
15...................... 35,481.63 3,136 103,136 5,822 105,822 9,983 109,983
20...................... 54,370.35 * * 182 100,182 6,863 106,863
25...................... 78,477.67 * * * * * *
30...................... 109,245.40 * * * * * *
35...................... 148,513.68 * * * * * *
Age 65...................... 20,681.83 4,598 104,598 6,321 106,321 8,621 108,621
<CAPTION>
12% ASSUMED HYPOTHETICAL
GROSS RETURN
GUARANTEED COST
OF INSURANCE
END OF ---------------------------
POLICY CASH DEATH
YEAR VALUE BENEFIT
----------- ------------ -------------
<S> <C> <C>
1...................... $ 419 $ 100,419
2...................... 1,339 101,339
3...................... 2,308 102,308
4...................... 3,331 103,331
5...................... 4,412 104,412
6...................... 5,548 105,548
7...................... 6,734 106,734
8...................... 7,958 107,958
9...................... 9,201 109,201
10...................... 10,445 110,445
15...................... 16,364 116,364
20...................... 19,705 119,705
25...................... 11,769 111,769
30...................... * *
35...................... * *
Age 65...................... 11,680 111,680
</TABLE>
- --------------------------
* In the absence of an additional premium, the Policy would lapse.
The values illustrated assume the premium is paid at the beginning of the Policy
Year. Values would be different if premiums are paid with a different frequency
or in different amounts.
The values and benefits are as of the Policy Year shown. They assume that no
Policy Loan or surrenders have been made. Excessive Policy Loans or surrenders
may cause this Policy to lapse because of insufficient Cash Value.
THE HYPOTHETICAL GROSS ANNUAL INVESTMENT RATES OF RETURN SHOWN ABOVE ARE
ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST, OR A
PREDICTION OF FUTURE, INVESTMENT RATES OF RETURN. THE ACTUAL INVESTMENT RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING PREVAILING INTEREST RATES, RATES OF INFLATION, AND THE
ALLOCATIONS MADE BY A POLICYOWNER AMONG THE SUBACCOUNTS. THE GROSS HYPOTHETICAL
ANNUAL INVESTMENT RATES OF RETURN OF 0%, 4%, 8% AND 12% SHOWN ABOVE CORRESPOND
TO NET ANNUAL RATES OF RETURN OF -1.55%, 2.45%, 6.45% AND 10.45%, RESPECTIVELY.
THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE
SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 0%, 4%, 8% AND 12% OVER
A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE FUND THAT
THESE HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR
OR SUSTAINED FOR ANY PERIOD OF TIME.
A-3
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
FEMALE AGE 35 AT LAST BIRTHDAY
DEATH BENEFIT OPTION B
INITIAL SPECIFIED AMOUNT $100,000--ANNUAL PREMIUM $516
NON-TOBACCO PREMIUM CLASS
<TABLE>
<CAPTION>
0% ASSUMED HYPOTHETICAL 4% ASSUMED HYPOTHETICAL 8% ASSUMED HYPOTHETICAL
GROSS RETURN GROSS RETURN GROSS RETURN
GUARANTEED COST GUARANTEED COST GUARANTEED COST
PREMIUMS OF INSURANCE OF INSURANCE OF INSURANCE
END OF ACCUMULATED ------------------------- ------------------------- -------------------------
POLICY AT 5% CASH DEATH CASH DEATH CASH DEATH
YEAR PER YEAR VALUE BENEFIT VALUE BENEFIT VALUE BENEFIT
----------- ---------------- ---------- ------------- ---------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
1....................... $ 541.80 $ 54 $ 100,000 $ 64 $ 100,000 $ 74 $ 100,000
2....................... 1,110.69 336 100,000 364 100,000 393 100,000
3....................... 1,708.02 604 100,000 661 100,000 721 100,000
4....................... 2,335.23 856 100,000 953 100,000 1,058 100,000
5....................... 2,993.79 1,091 100,000 1,240 100,000 1,404 100,000
6....................... 3,685.28 1,309 100,000 1,518 100,000 1,758 100,000
7....................... 4,411.34 1,506 100,000 1,787 100,000 2,117 100,000
8....................... 5,173.71 1,682 100,000 2,045 100,000 2,482 100,000
9....................... 5,974.19 1,839 100,000 2,292 100,000 2,853 100,000
10....................... 6,814.70 1,977 100,000 2,528 100,000 3,232 100,000
15....................... 11,691.27 2,341 100,000 3,492 100,000 5,206 100,000
20....................... 17,915.13 1,989 100,000 3,848 100,000 7,150 100,000
25....................... 25,858.54 630 100,000 3,153 100,000 8,706 100,000
30....................... 35,996.57 * * 700 100,000 9,245 100,000
35....................... 48,935.54 * * * * 6,603 100,000
Age 65....................... 35,996.57 * * * * 9,049 100,000
<CAPTION>
12% ASSUMED HYPOTHETICAL
GROSS RETURN
GUARANTEED COST
OF INSURANCE
END OF ---------------------------
POLICY CASH DEATH
YEAR VALUE BENEFIT
----------- ------------ -------------
<S> <C> <C>
1....................... $ 84 $ 100,000
2....................... 422 100,000
3....................... 784 100,000
4....................... 1,172 100,000
5....................... 1,587 100,000
6....................... 2,030 100,000
7....................... 2,503 100,000
8....................... 3,007 100,000
9....................... 3,547 100,000
10....................... 4,128 100,000
15....................... 7,755 100,000
20....................... 12,978 100,000
25....................... 20,606 100,000
30....................... 32,117 100,000
35....................... 49,572 100,000
Age 65....................... 35,020 100,000
</TABLE>
- --------------------------
* In the absence of an additional premium, the Policy would lapse.
The values illustrated assume the premium is paid at the beginning of the Policy
Year. Values would be different if premiums are paid with a different frequency
or in different amounts.
The values and benefits are as of the Policy Year shown. They assume that no
Policy Loan or surrenders have been made. Excessive Policy Loans or surrenders
may cause this Policy to lapse because of insufficient Cash Value.
THE HYPOTHETICAL GROSS ANNUAL INVESTMENT RATES OF RETURN SHOWN ABOVE ARE
ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST, OR A
PREDICTION OF FUTURE, INVESTMENT RATES OF RETURN. THE ACTUAL INVESTMENT RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING PREVAILING INTEREST RATES, RATES OF INFLATION, AND THE
ALLOCATIONS MADE BY A POLICYOWNER AMONG THE SUBACCOUNTS. THE GROSS HYPOTHETICAL
ANNUAL INVESTMENT RATES OF RETURN OF 0%, 4%, 8% AND 12% SHOWN ABOVE CORRESPOND
TO NET ANNUAL RATES OF RETURN OF -1.55%, 2.45%, 6.45% AND 10.45%, RESPECTIVELY.
THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE
SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 0%, 4%, 8% AND 12% OVER
A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE FUND THAT
THESE HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR
OR SUSTAINED FOR ANY PERIOD OF TIME.
A-4
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
FEMALE AGE 55 AT LAST BIRTHDAY
DEATH BENEFIT OPTION B
INITIAL SPECIFIED AMOUNT $100,000--ANNUAL PREMIUM $1,566
NON-TOBACCO PREMIUM CLASS
<TABLE>
<CAPTION>
0% ASSUMED 4% ASSUMED 8% ASSUMED
HYPOTHETICAL HYPOTHETICAL HYPOTHETICAL
GROSS RETURN GROSS RETURN GROSS RETURN
GUARANTEED COST GUARANTEED COST GUARANTEED COST
PREMIUMS OF INSURANCE OF INSURANCE OF INSURANCE
END OF ACCUMULATED ------------------------- ------------------------- ---------------------------
POLICY AT 5% CASH DEATH CASH DEATH CASH DEATH
YEAR PER YEAR VALUE BENEFIT VALUE BENEFIT VALUE BENEFIT
----------- ------------------ ---------- ------------- ---------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
1.................... $ 1,644.30 $ 322 $ 100,000 $ 356 $ 100,000 $ 390 $ 100,000
2.................... 3,370.82 1,073 100,000 1,165 100,000 1,260 100,000
3.................... 5,183.66 1,773 100,000 1,953 100,000 2,145 100,000
4.................... 7,087.14 2,424 100,000 2,724 100,000 3,050 100,000
5.................... 9,085.80 3,026 100,000 3,473 100,000 3,974 100,000
6.................... 11,184.39 3,570 100,000 4,194 100,000 4,911 100,000
7.................... 13,387.90 4,048 100,000 4,876 100,000 5,854 100,000
8.................... 15,701.60 4,447 100,000 5,503 100,000 6,788 100,000
9.................... 18,130.98 4,746 100,000 6,054 100,000 7,694 100,000
10.................... 20,681.83 4,929 100,000 6,509 100,000 8,554 100,000
15.................... 35,481.63 3,860 100,000 6,982 100,000 11,822 100,000
20.................... 54,370.35 * * 2,335 100,000 11,374 100,000
25.................... 78,477.67 * * * * * *
30.................... 109,245.40 * * * * * *
35.................... 148,513.68 * * * * * *
Age 65.................... 20,681.83 4,988 100,000 6,858 100,000 9,357 100,000
<CAPTION>
12% ASSUMED
HYPOTHETICAL
GROSS RETURN
GUARANTEED COST
OF INSURANCE
END OF ---------------------------
POLICY CASH DEATH
YEAR VALUE BENEFIT
----------- ------------ -------------
<S> <C> <C>
1.................... $ 425 $ 100,000
2.................... 1,358 100,000
3.................... 2,348 100,000
4.................... 3,404 100,000
5.................... 4,532 100,000
6.................... 5,734 100,000
7.................... 7,008 100,000
8.................... 8,349 100,000
9.................... 9,746 100,000
10.................... 11,193 100,000
15.................... 19,253 100,000
20.................... 28,628 100,000
25.................... 36,655 100,000
30.................... 37,834 100,000
35.................... 5,656 100,000
Age 65.................... 12,687 100,000
</TABLE>
- --------------------------
* In the absence of an additional premium, the Policy would lapse.
The values illustrated assume the premium is paid at the beginning of the Policy
Year. Values would be different if premiums are paid with a different frequency
or in different amounts.
The values and benefits are as of the Policy Year shown. They assume that no
Policy Loan or surrenders have been made. Excessive Policy Loans or surrenders
may cause this Policy to lapse because of insufficient Cash Value.
THE HYPOTHETICAL GROSS ANNUAL INVESTMENT RATES OF RETURN SHOWN ABOVE ARE
ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST, OR A
PREDICTION OF FUTURE, INVESTMENT RATES OF RETURN. THE ACTUAL INVESTMENT RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING PREVAILING INTEREST RATES, RATES OF INFLATION, AND THE
ALLOCATIONS MADE BY A POLICYOWNER AMONG THE SUBACCOUNTS. THE GROSS HYPOTHETICAL
ANNUAL INVESTMENT RATES OF RETURN OF 0%, 4%, 8% AND 12% SHOWN ABOVE CORRESPOND
TO NET ANNUAL RATES OF RETURN OF -1.55%, 2.45%, 6.45% AND 10.45%, RESPECTIVELY.
THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE
SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 0%, 4%, 8% AND 12% OVER
A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE FUND THAT
THESE HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR
OR SUSTAINED FOR ANY PERIOD OF TIME.
A-5
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE AGE 35 AT LAST BIRTHDAY
DEATH BENEFIT OPTION A
INITIAL SPECIFIED AMOUNT $100,000--ANNUAL PREMIUM $667
NON-TOBACCO PREMIUM CLASS
<TABLE>
<CAPTION>
0% ASSUMED 4% ASSUMED 8% ASSUMED
HYPOTHETICAL HYPOTHETICAL HYPOTHETICAL
GROSS RETURN GROSS RETURN GROSS RETURN
GUARANTEED COST GUARANTEED COST GUARANTEED COST
PREMIUMS OF INSURANCE OF INSURANCE OF INSURANCE
END OF ACCUMULATED ------------------------- ------------------------- ---------------------------
POLICY AT 5% CASH DEATH CASH DEATH CASH DEATH
YEAR PER YEAR VALUE BENEFIT VALUE BENEFIT VALUE BENEFIT
----------- ---------------- ---------- ------------- ---------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
1...................... $ 700.35 $ 170 $ 100,170 $ 185 $ 100,185 $ 201 $ 100,201
2...................... 1,435.72 568 100,568 610 100,610 654 100,654
3...................... 2,207.85 948 100,948 1,034 101,034 1,126 101,126
4...................... 3,018.60 1,311 101,311 1,457 101,457 1,615 101,615
5...................... 3,869.88 1,654 101,654 1,875 101,875 2,122 102,122
6...................... 4,763.72 1,977 101,977 2,289 102,289 2,645 102,645
7...................... 5,702.26 2,277 102,277 2,695 102,695 3,184 103,184
8...................... 6,687.72 2,555 102,555 3,092 103,092 3,740 103,740
9...................... 7,722.45 2,814 102,814 3,484 103,484 4,315 104,315
10...................... 8,808.93 3,042 103,042 3,859 103,859 4,900 104,900
15...................... 15,112.55 3,726 103,726 5,438 105,438 7,974 107,974
20...................... 23,157.74 3,384 103,384 6,153 106,153 11,006 111,006
25...................... 33,425.67 1,319 101,319 5,039 105,039 13,041 113,041
30...................... 46,530.45 * * 579 100,579 12,312 112,312
35...................... 63,255.83 * * * * 5,227 105,227
Age 65...................... 46,530.45 * * * * 11,529 111,529
<CAPTION>
12% ASSUMED
HYPOTHETICAL
GROSS RETURN
GUARANTEED COST
OF INSURANCE
END OF ---------------------------
POLICY CASH DEATH
YEAR VALUE BENEFIT
----------- ------------ -------------
<S> <C> <C>
1...................... $ 216 $ 100,216
2...................... 699 100,699
3...................... 1,222 101,222
4...................... 1,786 101,786
5...................... 2,395 102,395
6...................... 3,051 103,051
7...................... 3,758 103,758
8...................... 4,519 104,519
9...................... 5,343 105,343
10...................... 6,226 106,226
15...................... 11,728 111,728
20...................... 19,490 119,490
25...................... 29,936 129,936
30...................... 43,259 143,259
35...................... 58,473 158,473
Age 65...................... 46,181 146,181
</TABLE>
- --------------------------
* In the absence of an additional premium, the Policy would lapse.
The values illustrated assume the premium is paid at the beginning of the Policy
Year. Values would be different if premiums are paid with a different frequency
or in different amounts.
The values and benefits are as of the Policy Year shown. They assume that no
Policy Loan or surrenders have been made. Excessive Policy Loans or surrenders
may cause this Policy to lapse because of insufficient Cash Value.
THE HYPOTHETICAL GROSS ANNUAL INVESTMENT RATES OF RETURN SHOWN ABOVE ARE
ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST, OR A
PREDICTION OF FUTURE, INVESTMENT RATES OF RETURN. THE ACTUAL INVESTMENT RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING PREVAILING INTEREST RATES, RATES OF INFLATION, AND THE
ALLOCATIONS MADE BY A POLICYOWNER AMONG THE SUBACCOUNTS. THE GROSS HYPOTHETICAL
ANNUAL INVESTMENT RATES OF RETURN OF 0%, 4%, 8% AND 12% SHOWN ABOVE CORRESPOND
TO NET ANNUAL RATES OF RETURN OF -1.55%, 2.45%, 6.45% AND 10.45%, RESPECTIVELY.
THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE
SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 0%, 4%, 8% AND 12% OVER
A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE FUND THAT
THESE HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR
OR SUSTAINED FOR ANY PERIOD OF TIME.
A-6
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE AGE 55 AT LAST BIRTHDAY
DEATH BENEFIT OPTION A
INITIAL SPECIFIED AMOUNT $100,000--ANNUAL PREMIUM $2,183
NON-TOBACCO PREMIUM CLASS
<TABLE>
<CAPTION>
0% ASSUMED 4% ASSUMED 8% ASSUMED
HYPOTHETICAL HYPOTHETICAL HYPOTHETICAL
GROSS RETURN GROSS RETURN GROSS RETURN
GUARANTEED COST GUARANTEED COST GUARANTEED COST
PREMIUMS OF INSURANCE OF INSURANCE OF INSURANCE
END OF ACCUMULATED ------------------------- ------------------------- ---------------------------
POLICY AT 5% CASH DEATH CASH DEATH CASH DEATH
YEAR PER YEAR VALUE BENEFIT VALUE BENEFIT VALUE BENEFIT
----------- ------------------ ---------- ------------- ---------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
1.................... $ 2,292.15 $ 714 $ 100,714 $ 767 $ 100,767 $ 821 $ 100,821
2.................... 4,698.91 1,813 101,813 1,958 101,958 2,107 102,107
3.................... 7,226.00 2,809 102,809 3,090 103,090 3,388 103,388
4.................... 9,879.45 3,698 103,698 4,157 104,157 4,655 104,655
5.................... 12,665.58 4,470 104,470 5,143 105,143 5,896 105,896
6.................... 15,591.00 5,114 105,114 6,035 106,035 7,096 107,096
7.................... 18,662.70 5,619 105,619 6,817 106,817 8,239 108,239
8.................... 21,887.99 5,969 105,969 7,469 107,469 9,303 109,303
9.................... 25,274.54 6,147 106,147 7,966 107,966 10,260 110,260
10.................... 28,830.42 6,132 106,132 8,281 108,281 11,082 111,082
15.................... 49,461.30 2,627 102,627 6,281 106,281 12,083 112,083
20.................... 75,792.13 * * * * 3,451 103,451
25.................... 109,397.67 * * * * * *
30.................... 152,287.80 * * * * * *
35.................... 207,027.69 * * * * * *
Age 65.................... 28,830.42 5,891 105,891 8,373 108,373 11,720 111,720
<CAPTION>
12% ASSUMED
HYPOTHETICAL
GROSS RETURN
GUARANTEED COST
OF INSURANCE
END OF ---------------------------
POLICY CASH DEATH
YEAR VALUE BENEFIT
----------- ------------ -------------
<S> <C> <C>
1.................... $ 874 $ 100,874
2.................... 2,262 102,262
3.................... 3,703 103,703
4.................... 5,198 105,198
5.................... 6,738 106,738
6.................... 8,315 108,315
7.................... 9,920 109,920
8.................... 11,537 111,537
9.................... 13,145 113,145
10.................... 14,719 114,719
15.................... 21,154 121,154
20.................... 20,775 120,775
25.................... 1,697 101,697
30.................... * *
35.................... * *
Age 65.................... 16,216 116,216
</TABLE>
- --------------------------
* In the absence of an additional premium, the Policy would lapse.
The values illustrated assume the premium is paid at the beginning of the Policy
Year. Values would be different if premiums are paid with a different frequency
or in different amounts.
The values and benefits are as of the Policy Year shown. They assume that no
Policy Loans or surrenders have been made. Excessive Policy Loans or surrenders
may cause this Policy to lapse because of insufficient Cash Value.
THE HYPOTHETICAL GROSS ANNUAL INVESTMENT RATES OF RETURN SHOWN ABOVE ARE
ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST, OR A
PREDICTION OF FUTURE, INVESTMENT RATES OF RETURN. THE ACTUAL INVESTMENT RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING PREVAILING INTEREST RATES, RATES OF INFLATION, AND THE
ALLOCATIONS MADE BY A POLICYOWNER AMONG THE SUBACCOUNTS. THE GROSS HYPOTHETICAL
ANNUAL INVESTMENT RATES OF RETURN OF 0%, 4%, 8% AND 12% SHOWN ABOVE CORRESPOND
TO NET ANNUAL RATES OF RETURN OF -1.55%, 2.45%, 6.45% AND 10.45%, RESPECTIVELY.
THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE
SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 0%, 4%, 8% AND 12% OVER
A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE FUND THAT
THESE HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR
OR SUSTAINED FOR ANY PERIOD OF TIME.
A-7
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE AGE 35 AT LAST BIRTHDAY
DEATH BENEFIT OPTION B
INITIAL SPECIFIED AMOUNT $100,000--ANNUAL PREMIUM $667
NON-TOBACCO PREMIUM CLASS
<TABLE>
<CAPTION>
0% ASSUMED 4% ASSUMED 8% ASSUMED
HYPOTHETICAL HYPOTHETICAL HYPOTHETICAL
GROSS RETURN GROSS RETURN GROSS RETURN
GUARANTEED COST GUARANTEED COST GUARANTEED COST
PREMIUMS OF INSURANCE OF INSURANCE OF INSURANCE
END OF ACCUMULATED ------------------------- ------------------------- ---------------------------
POLICY AT 5% CASH DEATH CASH DEATH CASH DEATH
YEAR PER YEAR VALUE BENEFIT VALUE BENEFIT VALUE BENEFIT
----------- ---------------- ---------- ------------- ---------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
1...................... $ 700.35 $ 171 $ 100,000 $ 186 $ 100,000 $ 201 $ 100,000
2...................... 1,435.72 569 100,000 612 100,000 656 100,000
3...................... 2,207.85 952 100,000 1,039 100,000 1,130 100,000
4...................... 3,018.60 1,317 100,000 1,464 100,000 1,623 100,000
5...................... 3,869.88 1,664 100,000 1,887 100,000 2,135 100,000
6...................... 4,763.72 1,992 100,000 2,307 100,000 2,667 100,000
7...................... 5,702.26 2,298 100,000 2,720 100,000 3,215 100,000
8...................... 6,687.72 2,583 100,000 3,127 100,000 3,783 100,000
9...................... 7,722.45 2,850 100,000 3,530 100,000 4,374 100,000
10...................... 8,808.93 3,087 100,000 3,918 100,000 4,979 100,000
15...................... 15,112.55 3,841 100,000 5,613 100,000 8,239 100,000
20...................... 23,157.74 3,610 100,000 6,555 100,000 11,724 100,000
25...................... 33,425.67 1,669 100,000 5,832 100,000 14,784 100,000
30...................... 46,530.45 * * 1,844 100,000 16,153 100,000
35...................... 63,255.83 * * * * 12,812 100,000
Age 65...................... 46,530.45 * * 366 100,000 15,980 100,000
<CAPTION>
12% ASSUMED
HYPOTHETICAL
GROSS RETURN
GUARANTEED COST
OF INSURANCE
END OF ---------------------------
POLICY CASH DEATH
YEAR VALUE BENEFIT
----------- ------------ -------------
<S> <C> <C>
1...................... $ 217 $ 100,000
2...................... 702 100,000
3...................... 1,227 100,000
4...................... 1,796 100,000
5...................... 2,411 100,000
6...................... 3,076 100,000
7...................... 3,795 100,000
8...................... 4,572 100,000
9...................... 5,418 100,000
10...................... 6,329 100,000
15...................... 12,129 100,000
20...................... 20,771 100,000
25...................... 33,689 100,000
30...................... 53,724 100,000
35...................... 87,157 101,102
Age 65...................... 59,011 100,000
</TABLE>
- --------------------------
* In the absence of an additional premium, the Policy would lapse.
The values illustrated assume the premium is paid at the beginning of the Policy
Year. Values would be different if premiums are paid with a different frequency
or in different amounts.
The values and benefits are as of the Policy Year shown. They assume that no
Policy Loan or surrenders have been made. Excessive Policy Loans or surrenders
may cause this Policy to lapse because of insufficient Cash Value.
THE HYPOTHETICAL GROSS ANNUAL INVESTMENT RATES OF RETURN SHOWN ABOVE ARE
ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST, OR A
PREDICTION OF FUTURE, INVESTMENT RATES OF RETURN. THE ACTUAL INVESTMENT RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING PREVAILING INTEREST RATES, RATES OF INFLATION, AND THE
ALLOCATIONS MADE BY A POLICYOWNER AMONG THE SUBACCOUNTS. THE GROSS HYPOTHETICAL
ANNUAL INVESTMENT RATES OF RETURN OF 0%, 4%, 8% AND 12% SHOWN ABOVE CORRESPOND
TO NET ANNUAL RATES OF RETURN OF -1.55%, 2.45%, 6.45% AND 10.45%, RESPECTIVELY.
THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE
SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 0%, 4%, 8% AND 12% OVER
A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE FUND THAT
THESE HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR
OR SUSTAINED FOR ANY PERIOD OF TIME.
A-8
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE AGE 55 AT LAST BIRTHDAY
DEATH BENEFIT OPTION B
INITIAL SPECIFIED AMOUNT $100,000--ANNUAL PREMIUM $2,183
NON-TOBACCO PREMIUM CLASS
<TABLE>
<CAPTION>
0% ASSUMED 4% ASSUMED 8% ASSUMED
HYPOTHETICAL HYPOTHETICAL HYPOTHETICAL
GROSS RETURN GROSS RETURN GROSS RETURN
GUARANTEED COST GUARANTEED COST GUARANTEED COST
PREMIUMS OF INSURANCE OF INSURANCE OF INSURANCE
END OF ACCUMULATED ------------------------- ------------------------- ---------------------------
POLICY AT 5% CASH DEATH CASH DEATH CASH DEATH
YEAR PER YEAR VALUE BENEFIT VALUE BENEFIT VALUE BENEFIT
----------- ------------------ ---------- ------------- ---------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
1.................. $ 2,292.15 $ 725 $ 100,000 $ 779 $ 100,000 $ 833 $ 100,000
2.................. 4,698.91 1,844 100,000 1,991 100,000 2,143 100,000
3.................. 7,226.00 2,782 100,000 3,159 100,000 3,464 100,000
4.................. 9,879.45 3,806 100,000 4,278 100,000 4,792 100,000
5.................. 12,665.58 4,635 100,000 5,335 100,000 6,119 100,000
6.................. 15,591.00 5,353 100,000 6,320 100,000 7,435 100,000
7.................. 18,662.70 5,947 100,000 7,221 100,000 8,732 100,000
8.................. 21,887.99 6,403 100,000 8,018 100,000 9,994 100,000
9.................. 25,274.54 6,704 100,000 8,692 100,000 11,203 100,000
10.................. 28,830.42 6,830 100,000 9,219 100,000 12,339 100,000
15.................. 49,461.30 4,151 100,000 8,804 100,000 16,185 100,000
20.................. 75,792.13 * * * * 13,278 100,000
25.................. 109,397.67 * * * * * *
30.................. 152,287.80 * * * * * *
35.................. 207,027.69 * * * * * *
Age 65.................. 28,830.42 6,745 100,000 9,560 100,000 13,366 100,000
<CAPTION>
12% ASSUMED
HYPOTHETICAL
GROSS RETURN
GUARANTEED COST
OF INSURANCE
END OF ----------------------------
POLICY CASH DEATH
YEAR VALUE BENEFIT
----------- ------------- -------------
<S> <C> <C>
1.................. $ 887 $ 100,000
2.................. 2,300 100,000
3.................. 3,786 100,000
4.................. 5,351 100,000
5.................. 6,995 100,000
6.................. 8,718 100,000
7.................. 10,522 100,000
8.................. 12,405 100,000
9.................. 14,364 100,000
10.................. 16,395 100,000
15.................. 27,724 100,000
20.................. 41,359 100,000
25.................. 58,845 100,000
30.................. 91,107 100,000
35.................. 156,309 164,124
Age 65.................. 18,483 100,000
</TABLE>
- --------------------------
* In the absence of an additional premium, the Policy would lapse.
The values illustrated assume the premium is paid at the beginning of the Policy
Year. Values would be different if premiums are paid with a different frequency
or in different amounts.
The values and benefits are as of the Policy Year shown. They assume that no
Policy Loans or surrenders have been made. Excessive Policy Loans or surrenders
may cause this Policy to lapse because of insufficient Cash Value.
THE HYPOTHETICAL GROSS ANNUAL INVESTMENT RATES OF RETURN SHOWN ABOVE ARE
ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST, OR A
PREDICTION OF FUTURE, INVESTMENT RATES OF RETURN. THE ACTUAL INVESTMENT RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING PREVAILING INTEREST RATES, RATES OF INFLATION, AND THE
ALLOCATIONS MADE BY A POLICYOWNER AMONG THE SUBACCOUNTS. THE GROSS HYPOTHETICAL
ANNUAL INVESTMENT RATES OF RETURN OF 0%, 4%, 8% AND 12% SHOWN ABOVE CORRESPOND
TO NET ANNUAL RATES OF RETURN OF -1.55%, 2.45%, 6.45% AND 10.45%, RESPECTIVELY.
THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE
SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 0%, 4%, 8% AND 12% OVER
A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE FUND THAT
THESE HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR
OR SUSTAINED FOR ANY PERIOD OF TIME.
A-9
<PAGE>
- --------------------------------------------------------------------------------
APPENDIX B
- --------------------------------------------------------------------------------
DEATH BENEFIT OPTIONS
OPTION A EXAMPLE. For purposes of this example, assume
that the Insured's Attained Age is between 0 and 40 and
that there is no outstanding Policy Debt. Under Option A,
a Policy with a Specified Amount of $50,000 will
generally provide a death benefit of $50,000 plus Cash
Value. Thus, for example, a Policy with a Cash Value of
$5,000 will have a death benefit of $55,000 ($50,000 +
$5,000); a Cash Value of $10,000 will provide a death
benefit of $60,000 ($50,000 + $10,000). The death
benefit, however, must be at least 2.50 multiplied by the
Cash Value. As a result, if the Cash Value of the Policy
exceeds $33,333, the death benefit will be greater than
the Specified Amount plus Cash Value. Each additional
dollar of Cash Value above $33,333 will increase the
death benefit by $2.50. A Policy with a Specified Amount
of $50,000 and a Cash Value of $40,000 will provide a
death benefit of $100,000 ($40,000 x 2.50); a Cash Value
of $60,000 will provide a death benefit of $150,000
($60,000 x 2.50).
Similarly, any time Cash Value exceeds $33,333, each
dollar taken out of Cash Value will reduce the death
benefit by $2.50. If, for example, the Cash Value is
reduced from $40,000 to $35,000 because of partial
surrenders, charges, or negative investment performance,
the death benefit will be reduced from $100,000 to
$87,500. If at any time, however, Cash Value multiplied
by the specified amount factor is less than the Specified
Amount plus the Cash Value, then the death benefit will
be the current Specified Amount plus Cash Value of the
Policy.
The specified amount factor becomes lower as the
Insured's Attained Age increases. If the Attained Age of
the Insured in the example above were, for example, 50
(rather than under 40), the specified amount factor would
be 1.85. The amount of the death benefit would be the sum
of the Cash Value plus $50,000 unless the Cash Value
exceeded $58,824 (rather than $33,333), and each dollar
then added to or taken from the Cash Value would change
the death benefit by $1.85 (rather than $2.50).
OPTION B EXAMPLE. For purposes of this example, assume
that the Insured's Attained Age is between 0 and 40 and
that there is no outstanding Policy Debt. Under Option B,
a Policy with a $50,000 Specified Amount will generally
pay $50,000 in death benefits. However, because the death
benefit must be equal to or be greater than 2.50
multiplied by the Cash Value, any time the Cash Value of
the Policy exceeds $20,000, the death benefit will exceed
the $50,000 Specified Amount. Each additional dollar
added to Cash Value above $20,000 will increase the death
benefit by $2.50. A Policy with a $50,000 Specified
Amount and a Cash Value of $30,000 will provide death
proceeds of $75,000 ($30,000 x 2.50); a Cash Value of
$40,000 will provide a death benefit of $100,000 ($40,000
x 2.50); a Cash Value of $50,000 will provide a death
benefit of $125,000 ($50,000 x 2.50).
Similarly, so long as Cash Value exceeds $20,000, each
dollar taken out of Cash Value will reduce the death
benefit by $2.50. If, for example, the Cash Value is
reduced from $25,000 to $20,000 because of partial
surrenders, charges, or negative investment performance,
the death benefit will be reduced from $62,500 to
$50,000. If at any time, however, the Cash Value
multiplied by the specified amount factor is less than
the Specified Amount, the death benefit will equal the
current Specified Amount of the Policy.
The specified amount factor becomes lower as the
Insured's Attained Age increases. If the Attained Age of
the Insured in the example above were, for example, 50
(rather than between 0 and 40), the specified amount
factor would be 1.85. The death proceeds would not exceed
the $50,000 Specified Amount unless the Cash Value
exceeded approximately $27,028 (rather than $20,000), and
each dollar then added to or taken from the Cash Value
would change the life insurance proceeds by $1.85 (rather
than $2.50).
B-1
<PAGE>
<TABLE>
<CAPTION>
SPECIFIED AMOUNT FACTOR TABLE
- -----------------------------------------------------
ATTAINED AGE SPECIFIED AMOUNT FACTOR
- ------------------------ ---------------------------
<S> <C>
40 or younger 2.50
41 2.43
42 2.36
43 2.29
44 2.22
45 2.15
46 2.09
47 2.03
48 1.97
49 1.91
50 1.85
51 1.78
52 1.71
53 1.64
54 1.57
55 1.50
56 1.46
57 1.42
58 1.38
59 1.34
60 1.30
61 1.28
62 1.26
63 1.24
64 1.22
65 1.20
66 1.19
67 1.18
68 1.17
69 1.16
70 1.15
71 1.13
72 1.11
73 1.09
74 1.07
75 to 90 1.05
91 1.04
92 1.03
93 1.02
94 1.01
95 or older 1.00
</TABLE>
B-2
<PAGE>
[LOGO]
[LOGO]
FARM BUREAU LIFE INSURANCE COMPANY
FARM BUREAU MUTUAL FUNDS
5400 UNIVERSITY AVENUE
[LOGO]
WEST DES MOINES, IOWA 50266
737-523 (5-98)
<PAGE>
PART II
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities Exchange
Act of 1934, the undersigned Registrant hereby undertakes to file with the
Securities and Exchange Commission such supplementary and periodic information,
documents and reports as may be prescribed by any rule or regulation of the
Commission heretofore, or hereafter duly adopted pursuant to authority conferred
in that section.
RULE 484 UNDERTAKING
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 factor 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,
offer, 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.
REPRESENTATION PURSUANT TO SECTION 26(e)(2)A
The Company represents that the aggregate charges under the Contracts are
reasonable in relation to the services rendered, the expenses to be incurred and
the risks assumed by the Company.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet.
A reconciliation and tie-in of information shown in the Prospectus with the
items of Form N-8B-2.
The Prospectus consisting of 95 pages.
The undertaking to file reports.
1
<PAGE>
The undertaking pursuant to Rule 484.
Representation pursuant to Section 26(e)(2)(A).
The signatures.
Written consents of the following persons:
Stephen M. Morain, Esquire
Messrs. Sutherland, Asbill & Brennan LLP
Ernst & Young LLP, Independent Auditors
Christopher G. Daniels, FSA, MSAA, Life Product Development and Pricing
Vice President
The following exhibits:
<TABLE>
<S> <C> <C> <C>
1.A. 1. *Certified Resolution of the Board of Directors of the Company
establishing the Variable Account.
2. None.
3. *(a) Form of Principal Underwriting Agreement.
*(b) Forms of Career Agent's Contract.
*(c) Commission schedules. (See Exhibit 3(b)(I) above.)
4. None.
5. (a) Form of Policy. (1)
(b) State variation of Form of Policy. (1)
(c) Form of Application. (1)
(d) Revised Policy Form. (2)
(e) 1995 Revised Policy Form. (3)
(f) Accelerated Death Benefit Rider. (3)
(g) 1996 Revised Policy Form (4)
(h) 1996 Revised Application Form (4)
6. *(a) Certificate of Incorporation of the Company.
*(b) By-Laws of the Company.
7. None.
8. None.
9. *Form of Participation Agreement.
10. *Form of Application (see Exhibit 1.A.(5)(b) above.)
2. *See Exhibit 1.A.(5) above.
3. *(a) Opinion and Consent of Stephen M. Morain, Esquire.
*(b) Consent of Messrs. Sutherland, Asbill & Brennan LLP.
4. None.
5. Not applicable.
6. *Opinion and Consent of Christopher G. Daniels, FSA, MSAA, Life Product
Development and Pricing Vice President.
7. *Consent of Ernst & Young LLP.
8. *Memorandum describing the Company's conversion procedure (included in
Exhibit 9 hereto).
9. *Memorandum describing the Company's issuance, transfer and redemption
procedures for the Policy.
</TABLE>
*Attached as an exhibit.
(1) Incorporated herein by reference to Pre-Effective Amendment No. 1 to the
Registration Statement on Form S-6 (File No. 33-12789) filed with the
Securities and Exchange Commission on September 4, 1987.
(2) Incorporated herein by reference to Post-Effective Amendment No. 6 to the
Registration Statement on Form S-6 (File No. 33-12789) filed with the
Securities and Exchange Commission on April 6, 1993.
(3) Incorporated herein by reference to Post-Effective Amendment No. 9 to the
Registration Statement on Form S-6 (File No. 33-12789) filed with the
Securities and Exchange Commission on May 1, 1995.
(4) Incorporated herein by reference to Post-Effective Amendment No. 11 to the
Registration Statement on Form S-6 (File No. 33-12789) filed with the
Securities and Exchange Commission on May 1, 1997.
2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Farm Bureau Life
Insurance Company certifies that this amendment has met all the requirements for
effectiveness pursuant to Paragraph (b) of Rule 485 and has duly caused this
Post-Effective Amendment No. 12 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 27th day of April, 1998.
<TABLE>
<S> <C> <C>
Farm Bureau Life Insurance Company
Farm Bureau Life Variable Account
By: /s/ EDWARD M. WIEDERSTEIN
-----------------------------------------
Edward M. Wiederstein
President
Farm Bureau Life Insurance Company
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment No. 12 to the Registration Statement has been signed below by the
following Directors and Officers of Farm Bureau Life Insurance Company on the
date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
/s/ EDWARD M. WIEDERSTEIN President and Director
- ------------------------------ [Principal Executive April 27, 1998
Edward M. Wiederstein Officer]
Senior Vice President and
/s/ RICHARD D. HARRIS Secretary-Treasurer
- ------------------------------ [Principal Financial April 27, 1998
Richard D. Harris Officer]
/s/ JAMES W. NOYCE Chief Financial Officer
- ------------------------------ [Principal Accounting April 27, 1998
James W. Noyce Officer]
- ------------------------------ Vice President and
Craig A. Lang* Director April 27, 1998
- ------------------------------
Kenneth R. Ashby* Director April 27, 1998
- ------------------------------
Al Christopherson* Director April 27, 1998
- ------------------------------
Ernest A. Glienke* Director April 27, 1998
- ------------------------------
Philip A. Hemesath* Director April 27, 1998
- ------------------------------
Craig D. Hill* Director April 27, 1998
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
- ------------------------------
Daniel L. Johnson* Director April 27, 1998
- ------------------------------
Richard G. Kjerstad* Director April 27, 1998
- ------------------------------
Lindsey D. Larsen* Director April 27, 1998
- ------------------------------
David R. Machacek* Director April 27, 1998
- ------------------------------
Donald O. Narigon* Director April 27, 1998
- ------------------------------
Bryce P. Neidig* Director April 27, 1998
- ------------------------------
Charles E. Norris* Director April 27, 1998
- ------------------------------
Keith R. Olsen* Director April 27, 1998
- ------------------------------
Bennett M. Osmonson* Director April 27, 1998
- ------------------------------
Howard D. Poulson* Director April 27, 1998
- ------------------------------
Sally A. Puttmann* Director April 27, 1998
- ------------------------------
Beverly L. Schnepel* Director April 27, 1998
- ------------------------------
F. Gary Steiner* Director April 27, 1998
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant, Farm
Bureau Life Variable Account, has duly caused this Post-Effective Amendment No.
12 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
27th day of April, 1998.
<TABLE>
<S> <C> <C>
Farm Bureau Life Variable Account
(Registrant)
By: Farm Bureau Life Insurance Company
(Depositor)
By: /s/ EDWARD M. WIEDERSTEIN
-----------------------------------------
Edward M. Wiederstein
PRESIDENT
Farm Bureau Life Insurance Company
</TABLE>
*By /s/ STEPHEN M. MORAIN
-------------------------
Stephen M. Morain
ATTORNEY-IN-FACT,
PURSUANT TO POWER OF
ATTORNEY.
<PAGE>
RESOLUTIONS ADOPTED BY THE BOARD OF DIRECTORS
FARM BUREAU LIFE INSURANCE COMPANY
March 3, 1987
BE IT RESOLVED, That the Board of Directors of Farm Bureau Life Insurance
Company ("Company"), hereby establishes a separate account, pursuant to Iowa
Code Section 508A.1 (1985), designated "Farm Bureau Life Variable Account"
(hereinafter "Variable Account") for the following use and purposes, and subject
to such conditions as hereinafter set forth; and
FURTHER RESOLVED, That the Variable Account is established for the purpose of
providing for the issuance by the Company of flexible premium variable life
insurance policies ("Policies"), or other insurance Policies, and shall
constitute a separate account into which are all allocated amounts paid to or
held by the Company under such Policies; the form of such Policies shall be kept
on file in the Secretary's Office; and
FURTHER RESOLVED, That the income, gains and losses, whether or not
realized, from assets allocated to the Variable Account shall, in accordance
with the Policies, be credited to or charged against such account without regard
to other income, gains, or losses of the Company; and
FURTHER RESOLVED, That the Variable Account shall be divided into
investment subaccounts, each investment subaccount in the Variable Account shall
invest in the shares of a designated mutual fund portfolio and net premiums
under the Policies shall be allocated to the eligible portfolios in accordance
with instructions received from owners of the Policies; and
FURTHER RESOLVED, That the Board of Directors expressly reserves the right
to add or remove any investment subaccount of the Variable Account as it may
hereafter deem necessary or appropriate; and
FURTHER RESOLVED, That the President, the Senior Vice President and
Secretary-Treasurer, or the Vice President-Controller and Financial Planning
Officer, and each of them, with full power to act without the others, be, and
they hereby are, severally authorized to invest such amount or amounts of the
Company's cash in the Variable Account or in any investment subaccount thereof
as may be deemed necessary or appropriate to facilitate the commencement of the
Variable Account's operations and/or to meet any minimum capital requirements
under the Investment Company Act of 1940; and
FURTHER RESOLVED, That the President, the Senior Vice President and
Secretary-Treasurer, or the Vice President-Controller and Financial Planning
Officer, and each of them, with full power to act without the others, be, and
they hereby are, severally authorized to transfer cash from time to time between
the Company's general account and the Variable Account as deemed necessary or
appropriate and consistent with the terms of the Policies; and
FURTHER RESOLVED, That the Board of Directors of the Company reserves the
right to change the designation of the Variable Account hereafter to such other
designation as it may deem necessary or appropriate; and
<PAGE>
FURTHER RESOLVED, That the President, the Senior Vice President and
Secretary-Treasurer, or the Vice-President-Controller and Financial Planning
Officer, and each of them, with full power to act without the others, with such
assistance from the Company's independent certified public accountants, legal
counsel and independent consultants or others as they may require, be, and they
hereby are, severally authorized and directed to take all action necessary to:
(a) Register the Variable Account as a unit investment trust under the
Investment Company Act of 1940, as amended; (b) Register the Policies in such
amounts, which may be an indefinite amount, as the said officers of the Company
shall from time deem appropriate under the Securities Act of 1933; and (c)
Take all other actions which are necessary in connection with the offering of
said Policies for sale and the operation of the Variable Account in order to
comply with the Investment Company Act of 1940, the Securities Exchange Act of
1934, the Securities Act of 1933, and other applicable federal laws, including
the filing of any amendments to registration statements, any undertakings, and
any applications for exemptions from the Investment Company Act of 1940 or other
applicable federal laws as the officers of the Company shall deem necessary or
appropriate; and
FURTHER RESOLVED, That the President, the Senior Vice President and
Secretary-Treasurer, or the Vice President-Controller and Financial Planning
Officer, and each of them, with full power to act without the others, hereby are
severally authorized and empowered to prepare, execute and cause to be filed
with the Securities and Exchange Commission on behalf of the Variable Account,
and by the Company as sponsor and depositor a Form of Notification of
Registration Statement under the Securities Act of 1933 registering the
Policies, and any and all amendments to the foregoing on behalf of the Variable
Account and the Company and on behalf of and as attorneys-in-fact for the
principal executive officer and/ or the principal financial officer and/ or the
principal accounting officer and/ or any other officer of the Company; and
FURTHER RESOLVED, That Stephen M. Morain, Senior Vice President and General
Counsel, is duly appointed as agent for service under any such registration
statement, duly authorized to receive communications and notices from the
Securities and Exchange Commission with respect thereto; and
FURTHER RESOLVED, That the President, the Senior Vice President and
Secretary-Treasurer, or the Vice President-Controller and Financial Planning
Officer, and each of them, with full power to act without the others hereby are
severally authorized on behalf of the Variable Account and on behalf of the
Company to take any and all action that each of them may deem necessary or
advisable in order to offer and sell the Policies, including any registrations,
filings and qualifications both of the Company, its officers, agents and
employees, and of the Policies, under the insurance and securities laws of any
of the states of the United States of America or other jurisdictions, and in
connection therewith to prepare, execute, deliver and file all such
applications, reports, covenants, resolutions, applications for exemptions,
consents to service of process and other papers and instruments as may be
required under such laws, and to take any and all further action which the said
officers or legal counsel of the Company may deem necessary or desirable
(including entering into whatever agreements and contracts may be necessary) in
order to maintain such registrations or qualifications for as long as the
officers or legal counsel deem it to be in the best interests of the Variable
Account and the Company; and
<PAGE>
FURTHER RESOLVED, That the President, the Senior Vice President and
Secretary-Treasurer, or the Vice President-Controller and Financial Planning
Officer, and each of them, with full power to act without the others, be, and
they hereby are, severally authorized in the names and on behalf of the Variable
Account and the Company to execute and file irrevocable written consents on the
part of the Variable Account and of the Company to be used in such states
wherein such consents to service of process may be requisite under the insurance
or securities laws therein in connection with said registration or qualification
of the Policies and to appoint the appropriate state official, or such other
person as may be allowed by said insurance or securities laws, agent of the
Variable Account and of the Company for the purpose of receiving and accepting
process; and
FURTHER RESOLVED, That the President, the Senior Vice President and
Secretary-Treasurer, or the Vice President-Controller and Financial Planning
Officer, and each of them, with full power to act without the others, be, and
hereby are, severally authorized to establish procedures under which the Company
will institute procedures for providing voting rights for owners of the Policies
with respect to securities owned by the Variable Account; and
FURTHER RESOLVED, That the President, the Senior Vice President and
Secretary-Treasurer, or the Vice President-Controller and Financial Planning
Officer, and each of them, with full power to act without the others, are hereby
severally authorized to execute such agreement or agreements as deemed necessary
and appropriate (i) with FBL Investment Advisory Services, Inc. ("FBL") or other
qualified entity under which FBL or such other entity will be appointed
principal underwriter and distributor for the Policies, (ii) with one or more
qualified banks or other qualified entities to provide administrative and/ or
custodial services in connection with the establishment and maintenance of the
Variable Account and the design, issuance, and administration of the Policies.
FURTHER RESOLVED, That the President, the Senior Vice President and
Secretary-Treasurer, or the Vice President-Controller and Financial Planning
Officer, and each of them, with full power to act without the others, are hereby
severally authorized to execute and deliver such agreements and other documents
and do such acts and things as each of them may deem necessary or desirable to
carry out the foregoing resolutions and the intent and purposes thereof.
<PAGE>
UNDERWRITING AGREEMENT
AGREEMENT made this 12th day of August, 1987, by and between FBL VARIABLE
INSURANCE SERIES FUND, an unincorporated business trust organized under the laws
of the Commonwealth of Massachusetts (the "Fund"), and FBL INVESTMENT ADVISORY
SERVICES, INC., a Delaware corporation (the "Underwriter").
WITNESSETH:
WHEREAS, the Fund is registered under the Investment Company Act of 1940,
as amended (the "1940 Act"), as a diversified open-end investment company and
proposes to offer its shares continuously, pursuant to a prospectus (as now
constituted or hereafter amended or supplemented, the, the "Prospectus"), to the
separate accounts ("Accounts") of Farm Bureau Life Insurance Company and Utah
Farm Bureau Life Insurance Company, and of other affiliated and non-affiliated
insurance companies (collectively, the "Participating Insurance Companies"), to
fund the benefits under Variable Life Insurance Policies and Variable Annuity
Contracts issued by the Participating Insurance Companies; and
WHEREAS, the Fund currently is comprised of six separate portfolios
(together with and additional portfolios which may from time to time be
established by the Fund, herein referred to as the "Portfolios"), each of which
pursues its investment objectives through separate investment policies; and
WHEREAS, the Underwriter is a broker-dealer registered under the Securities
Exchange Act of 1934 and is a member of the National Association of Securities
Dealers, Inc.; and
WHEREAS, the Fund and the Underwriter wish to enter into an agreement with
each other with respect to the continuous offering to the Accounts of the Fund's
transferable shares of beneficial interest, without par value ("Shares"), in
order to promote the growth of the Fund and to facilitate the distribution of
the Shares.
NOW, THEREFORE, is consideration of the premises and mutual covenants
herein continued the parties hereto agree as follows:
1. APPOINTMENT OF THE UNDERWRITER
The Fund hereby appoints the Underwriter as the principal underwriter and
distributor of the Fund to sell its shares to the Accounts, and the Underwriter
hereby accepts such appointment. The Fund during, the term of this Agreement
shall sell its Shares to the Accounts pursuant to orders obtained by the
Underwriter, at the net asset value for each Portfolio determined in the manner
set forth in the Prospectus, and upon the terms and conditions set forth below.
No commission or other fee shall be charged or paid to any person or entity in
connection with the sale of the Shares hereunder,
2. EXCLUSIVE NATURE OF DUTIES
<PAGE>
The Underwriter shall be the exclusive representative of the Fund to act as
principal underwriter and distributor.
3. SALE AND REDEMPTION OF SHARES OF THE FUND
(a) Orders for the purchase and redemption of Shares (and payment for
Shares, in the case of a purchase) shall be transmitted directly from the
Accounts to the Fund or its agent.
(b) The Fund shall sell and redeem Shares of each Portfolio at the net
asset value per share of such Portfolio, determined in accordance with the
method set forth in the prospectus.
(c) The Fund shall have the right to suspend the redemption of Shares of
any of its Portfolios pursuant to the conditions set forth in the prospectus.
The Fund shall also have the right to suspend the sale of Shares of any or all
of its Portfolios at any time when it is authorized to suspend redemption of
such Shares, or at any other time when there shall have occurred an
extraordinary event or circumstance which, in the reasonable judgment of the
Fund, make it impracticable or inadvisable to continue to sell any such shares.
(d) The Fund shall give the Underwriter prompt notice of any such
suspension and shall promptly furnish such other information in connection with
the sale and redemption of Shares as the Underwriter may reasonably request.
(e) The Fund (or its agent) will make appropriate book entries upon
receipt by the Fund (or its Agent) of orders and payments for Shares or requests
for redemption thereof, and will issue and redeem Shares and confirm such
transactions in accordance with applicable laws and regulations.
4. INTERESTS IN AND OF THE UNDERWRITER
It is understood that any of the shareholders, trustees, officers,
employees, and agents of the Fund may be a shareholder, director, trustee,
officer, employee, or agent of, or be otherwise interested in, the Underwriter,
any affiliated person of the Underwriter, any organization in which the
Underwriter may have an interest in the Underwriter; that the Underwriter, any
such affiliated person, or any such organization may have an interest in the
Fund; and that the existence of any such dual interest shall not affect the
validity hereof or any transaction hereunder except as otherwise provided in the
Declaration of Trust or By-Laws of the Fund, or in the Articles of Incorporation
or By-Laws of the Underwriter, or by specific provisions of applicable law.
5. DUTIES OF THE FUND
(a) The Fund shall furnish the Underwriter copies of all information,
financial statements, and other papers which the Underwriter may reasonable
request for use in connection with the distribution of the Shares.
<PAGE>
(b) The Fund shall take, from time to time, subject to the necessary
approval of its shareholders, all necessary action to register Shares under the
Securities Act of 1933 in order that there will be available for sale such
number of Shares of each Portfolio as may reasonably be expected to be sold and
issued.
(c) The Fund shall use its best efforts to qualify and maintain the
qualification of an appropriate number of Shares of each of its Portfolios for
sale under the securities laws of such states as the Underwriter and the Fund
may approve, if such qualification is required by such securities laws. Any
such qualification may be withheld, terminated, or withdrawn by the Fund at any
time in its discretion.
(d) The Fund will furnish to the Underwriter, in reasonable quantities
upon request by the Underwriter, copies of annual and interim reports of the
Fund.
(e) The Fund shall promptly notify the Underwriter if the registration or
qualification of any Shares under any state or federal securities laws, or the
Fund's registration under the 1940 Act, is suspended or terminated, or if any
governmental body or agency institutes proceedings to terminate the offer and
sale of any Shares in any jurisdiction.
6. DUTIES OF THE UNDERWRITER
(a) The Underwriter shall be subject to the direction and control of the
Fund in the sale of the Shares and shall not be obligated to sell any specific
number of Shares of any Portfolios. In selling the Shares of the Fund, the
Underwriter shall use its best efforts in all respects to conform with the
requirements of all federal and state laws and regulations, and the regulations
of the National Association of Securities Dealers, Inc., relating to the sale of
such securities. The Underwriter is not authorized by the Fund to give any
information or make any representations, other than those contained in the
Registration Statement for the Fund and its Shares, the Prospectus, and any
sales literature specifically approved by the Fund.
(b) The Underwriter shall act as an independent contractor and nothing
herein shall constitute the Underwriter, its agents or representatives, or
employees thereof, as employees of the Fund in connection with the sale of
Shares. The Underwriter is responsible for its own conduct and the employment,
control, and conduct of its agents and employees and for injury to such agents
or employees or to others through its agents or employees. The Underwriter
assumes full responsibility for its agents and employees under applicable
statutes and agrees to pay all employer taxes thereunder. Nothing contained in
this Agreement shall prevent the Underwriter from entering into underwriting
arrangements with other investment companies.
(c) The Underwriter will indemnify and save harmless the Fund from any
damage or expense on account of any wrongful act by the Underwriter or any
employee, representative, or agent of the Underwriter.
(d) The Underwriter will observe and be bound by all the provisions of the
Declaration of Trust and By-Laws of the Fund, the Prospectus, and any
fundamental policies adopted by the Fund pursuant to the 1940 Act, notice of
which shall have been given by the Fund to the
<PAGE>
Underwriter, which at the time in any way require, limit, restrict, or prohibit,
or otherwise regulate, any action on the part of the Underwriter.
7. PAYMENT OF EXPENSES
(a) The Fund shall bear all costs and expenses of the Fund incurred in
connection with (i) the registration of the Shares under federal and state
securities laws; (ii) the preparation (including typesetting), printing, and
mailing of annual Prospectuses to existing shareholders; (iii) the preparation,
printing, and mailing of any notice, proxy statement, report, supplemental
Prospectus, or other communications to shareholders; and (iv) the printing and
mailing of confirmations of purchases of Shares. The Fund will also pay all
expenses incident to the issuance of Shares.
(b) The Underwriter will pay all expenses incident to the sale and
distribution of the Shares issued or sold hereunder, including, without limiting
the generality of the foregoing, all expenses incurred in connection with: (i)
the printing (but not typesetting) and distribution of Prospectuses and
Statements of Additional Information to other existing shareholders; and (ii)
the preparation, printing, and distribution or dissemination of any reports or
other literature, advertising, and selling aids in connection with the offering
of the Shares for sale (except that such expenses do not include expenses
incurred by the Fund in connection with the preparation, printing, and
distribution of any report or other communication to shareholders in their
capacity as such).
8. DURATION AND TERMINATION OF THIS AGREEMENT
This Agreement shall become effective as of the date first written above
and, unless terminated earlier as described in the following paragraph, shall
remain in force thereafter so long as its continuance is approved at least
annually by (a) the vote of a majority of the Trustees who are not parties to
this Agreement or "interested persons" of any such party cast in person at a
meeting called for the purpose of voting on such approval, and (b) either (i)
the vote of a majority of the Trustees, or (ii) the vote of a majority of the
outstanding voting securities of the Fund.
This Agreement may be terminated by either party upon six months' advance
written notice to the other party. This Agreement shall terminate automatically
in the event of its assignment.
The terms "vote of a majority of the outstanding voting securities,"
"assignment," and "interested person," when used in the Agreement, shall have
the respective meanings specified in the 1940 Act.
9. NOTICES
Any notice under this Agreement shall be in writing, addressed and
delivered or mailed, postage prepaid, to the other party at such address as such
other party may designate for the receipt of such notice.
<PAGE>
10. GOVERNING LAW
This Agreement shall be construed in accordance with the laws of the State
of Iowa and the applicable provisions of the 1940 Act. To the extent the
applicable law of the State of Iowa, or any of the provisions herein, conflict
with the applicable provisions of the 1940 Act, the latter shall control.
11. PERSONAL LIABILITY
The Underwriter understands that the obligations of the Fund under this
Agreement are not binding upon any shareholders or trustees of the Fund
personally, but bind only the Fund and the Fund's property. The Underwriter
represents that it has notice of the provisions of the Declaration of Trust of
the Fund disclaiming shareholder and trustee liability for acts or obligations
of the Fund.
IN WITNESS WHEREOF, the Fund and the Underwriter have each caused this
Agreement to be executed on its behalf by an officer thereunto duly authorized
and its corporate and trust seals to be affixed on the day and year first above
written.
FBL VARIABLE INSURANCE SERIES FUND
By [signature of William J. Oddy]
By [signature of Dennis M. Marker]
FBL INVESTMENT ADVISORY SERVICES, INC.
By [signature of William J. Oddy]
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
CAREER AGENT CONTRACT
THIS CONTRACT, made and entered into by and
between ___________________ of___________________________________________,
hereinafter referred to as "Career Agent," and FARM BUREAU LIFE INSURANCE
COMPANY, an Iowa corporation with its principal place of business at 5400
University Avenue, West Des Moines, Polk County, Iowa, hereinafter referred to
as "Company."
NOW, THEREFORE, in consideration of the mutual obligations, covenants and
agreements contained herein, to be kept and performed by the parties hereto, it
is agreed as follows:
1. EFFECTIVE DATE OF CONTRACT. This Contract will become effective on the
first day of ________________________ and will remain in full force and effect
until canceled or terminated as provided herein.
2. AGENCY. The Agency will be comprised of the Agency Manager, an
Assistant Agency Manager, if one has been assigned, together with all Career
Agents for whom the Agency Manager has approved appointment as evidenced by
Agency Manager's endorsement on the Career Agent's Contracts.
3. CAREER AGENT'S AUTHORITY. Company hereby authorizes Career Agent to
solicit applications on behalf of Company for any and all insurance policies,
insurance contracts, and annuities, written or sold by or through Company,
provided that Agent is at all times properly licensed as required by any federal
or state law or governmental authority.
Career Agent shall not make, alter, or discharge any contracts for the
Company; waive any forfeitures; name special rates; guarantee dividends in
excess of those provided for in a policy; waive payment in cash; extend the time
of payment of any premium; accept payment of any past-due premium; extend any
credit; or approve evidence of good health.
All applications for insurance and annuities are subject to acceptance or
rejection by the Company. Career Agent shall not incur any indebtedness or
liability on behalf of the Company in any manner whatsoever.
Career Agent shall exercise the authority given him under this Contract
within the territory of the Agency designated in paragraph 17. This territory is
not assigned exclusively to Career Agent.
Applications for the purchase of flexible or fixed premium variable life
insurance policies or annuities shall be solicited only within the territory in
which such policies or annuities are qualified for sale and in which the Company
and the Career Agent are authorized to do business in accordance with licensing
requirements and other applicable laws and regulations. Applications for the
purchase of flexible or fixed premium variable life insurance policies or
annuities will be accepted only by the Company at its Home Office in West Des
Moines, Iowa.
4. INDEPENDENT CONTRACTOR. It is the intent of the parties hereto that
for all purposes and in all situations governed by the provisions of this
agreement, Career Agent will be, and is hereby declared to be, an independent
contractor and not an employee, and that the relationship between Career Agent
and Company created by this agreement, will be governed by those rules of law
governing the status of and relationships with independent contractors and not
those rules of law governing employer-employee relations. Accordingly, Career
Agent has the right to control the activities and means by which the provisions
of this agreement are carried out, the right to exercise independent judgment as
to the persons from whom applications for insurance policies will be solicited,
and the right to determine the time, place, and manner of soliciting and
servicing policyholders of the Company.
If training courses, sales methods and material or similar aids and
services are extended or made available to the Agent, it is agreed that the
purpose and effect thereof will not be to give the Company control over the
Agent's time or direction or control over the manner or means by which he will
conduct his business, but only to assist the Agent in his business.
5. EXCLUSIVE AGENT. Career Agent agrees not to solicit or to contract to
solicit applications for life or disability income insurance, or annuities on
behalf of any insurance company other than Farm Bureau Life Insurance Company
and its affiliates. Career Agent may solicit applications to be placed through
FBL Insurance Brokerage, Inc. or as otherwise specifically agreed to in writing
by Company.
6. CAREER AGENT'S RESPONSIBILITIES. Career Agent agrees to comply with
the Company's rules and regulations pertaining to the policies and products
covered by this Contract, provided, however, that such rules and regulations
will not interfere with Career Agent's status as an independent contractor as
described in paragraph 4 above.
(a) SERVICE. Career Agent agrees to use Career Agent's best efforts
to provide service to Company's policyholders and Farm Bureau members consistent
with Company's "Service to members" philosophy and to maintain in force
<PAGE>
any business placed with Company. Career Agent further agrees to become fully
informed as to the provisions and benefits of each product offered by Company
for which Career Agent is authorized to solicit applications and to represent
such products adequately and fairly to policyholders and prospective
policyholders.
(b) ACCOUNTS AND RECORDS. Career Agent shall keep accurate accounts and
records of all business transactions including, without limitation, account
service records, which will be open at all times to inspection and examination
by authorized representatives of Company. Career Agent agrees (1) that he shall
be considered a bailee as to all accounts, account records, policyholder files,
policyholder lists, rate books or manuals, applications and other forms, and all
other records in Career Agent's possession pertaining to Company's business, (2)
that these materials are the property of Company and (3) that these materials
will be returned to Company upon demand.
(c) PREMIUM TRANSMITTAL. Career Agent agrees that all cash, checks, or
funds in any form, received by Career Agent for or on behalf of Company, will be
held in trust for Company, and Career Agent shall transmit to Company
immediately upon receipt all applications solicited and all money received in
connection therewith.
(d) EXPENSES. Career Agent agrees to pay all expenses incurred by Career
Agent in the performance of this Contract including, but not limited to,
expenses for office space, secretarial help, and telephone facilities.
(e) ASSIGNMENT OF COMMISSIONS. Career Agent agrees not to assign this
Contract or any commission or other compensation payable under it without the
prior written consent of Company, and no such assignment will be effective
without such consent.
(f) BOND. Career Agent shall apply for and be accepted as a participant in
the Blanket Position Bond furnished by the Company.
(g) ERROR AND OMISSION INSURANCE. Career Agent shall apply for and
maintain error and omission insurance coverage with limits satisfactory to
Company while this contract is in effect.
7. LIFE, DISABILITY INCOME AND ANNUITY COMMISSIONS.
(a) LIFE, DISABILITY INCOME, AND ANNUITY, FIRST-YEAR COMMISSIONS.
First-year commissions will be paid to Career Agent on all first-year life
insurance, disability income insurance and annuity premium received and retained
by the Company on issued and paid-for business produced personally by the Career
Agent in accordance with the Career Agent Life, Disability Income, and Annuity
Commission Schedule in effect on the effective date of the policies to which
they relate.
(b) MINIMUM POLICY. No first-year commissions will be paid or premium
credit allowed on any new life insurance policy with a face amount of less than
$5,000 except new life insurance on the Childrens Term Policy.
(c) SERVICE FEES. Service fees on life insurance, disability income,
and annuity premium (other than first-year premium) received and retained by the
Company on all accounts assigned and personally produced by Career Agent will be
paid according to the rules and at the rates set forth in the Career Agent Life,
Disability Income, and Annuity Commission Schedule in effect on the effective
date of the policy to which they relate. Service fees for the first 48 months of
this contract will be determined based on the Career Agent Production Standards
Schedule in effect in the month for which the service fee is payable. Whether a
production standard is met is determined by comparing the production standard
with the Career Agent's total production for the twelve-month period ending on
the last day of the contract month for which the commission is payable. After
the first 48 months of this contract, the commission schedule to be used to
determine the commission rate for accounts not personally produced will be the
same as the schedule for personally produced accounts.
Service fees will be paid to the Career Agent who personally produced
the policy until (1) that Career Agent's contract with the Company is
terminated, or (2) the policy on which the service fee is payable is assigned to
another Career Agent, whichever occurs first.
(d) PRODUCTIVITY/PERSISTENCY COMMISSION BONUS. A monthly commission
bonus will be paid to qualifying Career Agents in accordance with the terms of
the Life Production and Persistency Bonus Schedule in effect from time to time
hereafter.
(e) DEVELOPMENTAL BONUS: A monthly Developmental Bonus may be earned
by Career Agent during the first 24 months of this contract according to the
Career Agent Developmental Bonus Schedule.
(f) COMMISSIONS. Commissions on flexible or fixed premium variable
life insurance policies or annuities can only be paid or credited to a Career
Agent who is supervised by, and a registered representative of, a broker/dealer
affiliated with Company or a registered representative of a broker/dealer who
has a sales agreement with a broker/dealer affiliated with Company, and who
holds any required state licenses when the sale is made and when each premium is
paid.
(g) LIFE PREMIUMS. For the purpose of all commission payments,
"Premiums" shall not include premiums collected for Temporary Flat Extra
Premiums.
(h) MATCHING/SAVINGS PROGRAM. Career Agent shall be entitled to
participate in the Matching/Savings Program after two years of service with
Company. If Career Agent elects to participate in this program, Company will pay
Career Agent an additional commission each month. The amount of the additional
commission shall be selected by Career
<PAGE>
Agent and shall be a percentage of Career Agent's first-year life, disability
income and annuity commissions. The maximum percentage Company will pay Career
Agent as an additional commission is seven percent (7%). Career Agent must
deposit this commission, plus an equal amount, into an individual Farm Bureau
mutual fund, variable annuity or flexible premium deferred annuity. Funds
deposited into this account may be withdrawn by Career Agent at any time,
however, the withdrawal of any amount deposited pursuant to the Matching/Savings
Program by Career Agent, or the withdrawal of any earnings on such deposits,
will terminate Career Agent's right to further participation in the
Matching/Savings Program. Career Agent's right to further participation in the
Matching/Savings Program will also end upon the termination of this contract.
8. ASSIGNMENT OF ACCOUNTS. Upon cancellation of this Contract, or
termination or transfer of the Career Agent to another agency, or in any case to
better serve an account, credit for service fees and the responsibility for
servicing the account may be assigned to another agent. It will be the
responsibility of the Career Agent to maintain service records as required by
the Company on each of Career Agent's assigned accounts. The Company reserves
the right to review at least annually the account service records maintained by
the Career Agent. If the Company in its sole discretion determines that
satisfactory service has not been given to an account, Company reserves the
right to withdraw the account from the Career Agent for purposes of service fees
and service responsibility.
9. REFUNDS AND CREDITS. Commissions will be earned and production credit
given when premium is received and retained by the Company and when credited on
Company's books. Commissions will be recovered and production credit reversed
should Company for any reason fail to retain any premium or consideration on any
policy or contract.
10. RESERVED RIGHT. Company reserves the right to amend existing rules and
procedures and to adopt new rules and procedures relating to the solicitation
and sale by Career Agent of any of Company's existing or future products or
policies and to change the production credit given and the commissions, bonuses,
and other compensation payable to Career Agent with respect to any or all such
products or policies.
11. TERMINATION. This Contract may be terminated by Company or Career
Agent at any time, with or without cause, by giving notice of termination, in
writing, to the other party. Notice of Termination need not include the reason
or reasons, if any, for such termination.
Career Agent acknowledges that Company has not, either expressly or
otherwise, agreed to continue the term of this Contract for any definite
period of time.
This Contract will terminate automatically, without Notice of
Termination, upon Career Agent's death.
12. LIEN PROVISION. Company will be entitled to a first lien on any
payment due or hereafter becoming due Career Agent under this Contract in an
amount equal to any current or future indebtedness of Career Agent to
Company, its subsidiaries or affiliates. Career Agent authorizes Company to
deduct the amount of any such indebtedness from any payment otherwise due
Career Agent and to pay such amount on behalf of Career Agent to the Company
entitled thereto.
13. SOLE AGREEMENT. This Contract constitutes the sole agreement and
supersedes all prior contracts between the parties hereto, but this Contract
will not impair the Agent's right to commissions or fees, if any, earned
under a prior contract or contracts with the Company.
14. MODIFICATION OR AMENDMENT. Any modification or amendment of this
Contract must be in writing and duly executed by the parties hereto;
provided, however, that the Company may by written notice unilaterally amend
any Schedule or Supplement referred to in this Contract to affect policies to
be issued or commissions earned after the date of the amendment.
15. WAIVERS. No act of forbearance on the part of the Company to enforce
any of the provisions of this Contract will be construed as a modification of
this Contract, nor will the failure of either party to exercise any right or
privilege herein granted be considered as a waiver of such right or privilege.
16. GENDER AND NUMBER. Any reference in this Contract to the masculine
gender will include the feminine gender as applicable. References to the
singular will include the plural where appropriate, and vice versa.
17. AGENCY WILL BE DESIGNATED as_________________________________
<PAGE>
IN WITNESS WHEREOF, the parties hereto have affixed their signatures on the date
set opposite their signatures.
Date of Signing Signature of Career Agent Agent No.
The undersigned, as Agency Manager, hereby approves the
appointment of Career Agent and subscribes to the provisions of the foregoing
agreement affecting the undersigned.
Date of Signing Agency Manager
Date of Signing By Authorized Representative of
Farm Bureau Life Insurance Company
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
CAREER AGENT
LIFE, DISABILITY INCOME, AND ANNUITY
PRODUCTION CREDIT SCHEDULE
PLAN PRODUCTION CREDIT *
---- -------------------
LIFE
Universal Life (minimum initial premium) $1 prem. = $1 credit
Universal Life increases (minimum initial premium) $1 prem. = $1 credit
Universal Life increases (no payments) $1 prem. = $1 credit
Universal Life (premium received in $1 prem. = $.04 credit
Excess of minimum initial premium)
Last Survivor Universal Life (minimum
initial premium) $1 prem. = $1 credit
Last Survivor Universal Life increases (minimum
initial premium $1 prem. = $1 credit
Last Survivor Universal Life increases (no payments) $1 prem. = $1 credit
Last Survivor Universal Life (premium received in $1 prem. = $.04 credit
Excess of minimum initial premium)
Variable Universal Life $1 prem. = $1 credit
(minimum initial premium)
Variable Universal Life increases $1 prem. = $1 credit
(minimum initial premium)
Variable Universal Life increases $1 prem. = $1 credit
(no payments)
Variable Universal Life $1 prem. = $.04 credit
(premium received in excess of minimum
initial premium)
Traditional Life $1 prem. = $1 credit
Traditional Last Survivor Life $1 prem. = $1 credit
15-Pay Traditional Life $1 prem. = $1 credit
3-Year Term $1 prem. = $1 credit
Custom Term II $1 prem. = $1 credit
Executive Term $1 prem. = $1 credit
Supplemental coverages Same as base policy
DISABILITY INCOME
Flexible Disability Income $1 prem. = $1 credit
Fixed Disability Income $1 prem. = $1 credit
Business Overhead Expense $1 prem. = $1 credit
ANNUITY
Single Premium Deferred Annuity $1 prem. = $.04 credit
Single Premium Immediate Annuity $1 prem. = $.04 credit
Flexible Premium Deferred Annuity $1 prem. = $.04 credit
Flexible Premium Deferred Variable Annuity $1 prem. = $.04 credit
Annuitization of Commissionable In Force
Annuity or Life Policy $1 prem. = $.04 credit
*PRODUCTION CREDIT APPLICABLE TO FIRST-YEAR PREMIUM, ONLY.
The effective date of this schedule is as noted below.
955-015 (8-97)
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
CAREER AGENT
LIFE, DISABILITY INCOME, AND ANNUITY
COMMISSION SCHEDULE
<TABLE>
<CAPTION>
ACCOUNTS PERSONALLY PRODUCED ACCOUNTS NOT PERSONALLY PRODUCED
BASE ONE TWO THREE
SERVICE SERVICE PRODUCTION PRODUCTION PRODUCTION
PLAN NEW FEE FEE STANDARDS STANDARDS STANDARDS
---- --- --- --- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
LIFE
- ----
* Universal Life (minimum initial premium) 50% 5% 3.50% 4.00% 4.50% 5.00%
* Universal Life increases (minimum initial premium) 50% 5% 3.50% 4.00% 4.50% 5.00%
Universal Life increases (no payments) 30%
Universal Life (premium received in excess of 4% 4% 2.80% 3.20% 3.60% 4.00%
Minimum initial premium)
* Last Survivor Universal Life (minimum initial premium) 5% 5% 3.50% 4.00% 4.50% 5.00%
* Last Survivor Universal Life increases
(min. initial prem.) 50% 5% 3.50% 4.00% 4.50% 5.00%
Last Survivor Universal Life increases (no payments) 50% 5% 3.50% 4.00% 4.50% 5.00%
Last Survivor Universal Life (premium received in excess 4% 4% 2.80% 3.20% 3.60% 4.00%
Minimum initial premium)
* Variable Universal Life (minimum initial premium) 5% 5% 3.50% 4.00% 4.50% 5.00%
* Variable Universal Life increases (min initial prem) 5% 5% 3.50% 4.00% 4.50% 5.00%
Variable Universal Life increases (no payments) 30%
Variable Universal Life 4% 4% 2.80% 3.20% 3.60% 4.00%
(premium received in excess of minimum initial premium)
* Traditional Life 50% 5% 3.50% 4.00% 4.50% 5.00%
* Traditional Last Survivor Life 50% 5% 3.50% 4.00% 4.50% 5.00%
* 15-Pay Traditional Life 50% 5% 3.50% 4.00% 4.50% 5.00%
3-Year Term 30% 5% 3.50% 4.00% 4.50% 5.00%
Custom Term II 30% 5% 3.50% 4.00% 4.50% 5.00%
Executive Term 30% 5% 3.50% 4.00% 4.50% 5.00%
Supplemental coverage Same as as base policy Same as as base policy
* Graded commission schedule - ages 71-80, Last Survivor products use joint equal age
</TABLE>
AGE COMMISSION RATE
----- ---------------
Through Age 70 see above
71-75 40%
76-80 30%
<TABLE>
<CAPTION>
DISABILITY INCOME
<S> <C> <C> <C> <C> <C> <C>
Flexible Disability Income 50% 5% 3.50% 4.00% 4.50% 5.00%
Fixed Disability Income 50% 5% 3.50% 4.00% 4.50% 5.00%
Business Overhead Expense 50% 5% 3.50% 4.00% 4.50% 5.00%
</TABLE>
ANNUITY
Single Premium Deferred Annuity, Single Premium Immediate Annuity and Flexible
Premium Deferred Annuity - Policy Years 1-10
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
ISSUE AGE
---------
0-75 4% 4% 2.80% 3.20% 3.60% 4.00%
76-80 3% 3% 2.10% 2.40% 2.70% 3.00%
81-85 2% 2% 1.40% 1.60% 1.80% 2.00%
86+ 0% 0% 0.00% 0.00% 0.00% 0.00%
</TABLE>
1% COMMISSION WILL BE PAID ON FLEXIBLE PREMIUM DEFERRED ANNUITIES IN FORCE
OVER TEN YEARS, THROUGH INSURING AGE 85. SERVICE FEES DO NOT APPLY TO
SINGLE PREMIUM DEFERRED ANNUITIES AND SINGLE PREMIUM IMMEDIATE ANNUITIES.
Flexible Premium Deferred Variable Annuity - Policy Years 1-6
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
ISSUE AGE
---------
0-75 4% 4% 2.80% 3.20% 3.60% 4.00%
76-80 3% 3% 2.10% 2.40% 2.70% 3.00%
81-85 2% 2% 1.40% 1.60% 1.80% 2.00%
86+ 0% 0% 0.00% 0.00% 0.00% 0.00%
</TABLE>
1% COMMISSION WILL BE PAID ON FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITIES
IN FORCE OVER SIX YEARS, THROUGH INSURING AGE 85
Annuitization of Annuity or Life Policy in force for a minimum of two years.
Fixed period certain minimum 5 years. (Interest only option does not qualify)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
ISSUE AGE
---------
0-75 4% 4% 2.80% 3.20% 3.60% 4.00%
76-80 3% 3% 2.10% 2.40% 2.70% 3.00%
81-85 2% 2% 1.40% 1.60% 1.80% 2.00%
86+ 0% 0% 0.00% 0.00% 0.00% 0.00%
</TABLE>
Standards are defined as one life standard, one property standard, and one
casualty standard.
Service fees on products not listed on this schedule will be subject to
production standards.
The effective date of this schedule is as noted below.
Ia,Mn,Sd,Ut (8-97)
955-015
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
CAREER AGENT
LIFE PRODUCTION AND PERSISTENCY BONUS SCHEDULE
A Production/Persistency Bonus equal to a percentage of new business commissions
payable to the Career Agent for the previous month will be paid each month to a
Career Agent meeting the following requirements:
1. Net Annualized Production Credit for the previous twelve (12) months
meets or exceeds the minimum Net Annualized Production Credit listed
in Table 1 below.
2. Persistency of business produced during the previous thirty-six (36)
months meets or exceeds the minimum Three-Year Persistency Average
listed in Table II below.
(Net Annualized Production credit and a Three-Year Persistency Average shall be
calculated each month for each agent based on Company records and pursuant to
the Company's rules and regulations. For purposes of this Bonus new business
commissions shall include all new business commissions listed on the Career
Agent's Life, Disability Income, and Annuity Commission Schedule, with the
exception of commissions on Flexible Premium Deferred Annuities, Flexible
Premium Deferred Variable Annuities, and excess premium on Universal Life and
Flexible Premium Variable Life.) The amount of the bonus, if any, shall be
calculated as follows:
1. Based on the Career Agent's Net Annualized Production Credit,
determine the Career Agent's Productivity Factor from Table I below.
2. Based on the Career Agent's Three-Year Persistency Average, determine
the Career Agent's Persistency Factor from Table II below.
3. Multiply the Career Agent's Productivity Factor by the Career Agent's
Persistency Factor to obtain the Bonus Rate.
4. Multiply the new business commissions payable to Career Agent for the
previous month by the Bonus Rate to obtain the Production/Persistency
Bonus payable.
<TABLE>
<CAPTION>
TABLE I TABLE II
THREE-YEAR THREE-YEAR
* NET ANNUALIZED PRODUCTIVITY PERSISTENCY PERSISTENCY PERSISTENCY PERSISTENCY
PRODUCTION CREDIT FACTOR AVERAGE FACTOR AVERAGE FACTOR
- ----------------- ------ ------- ------ ------- ------
<S> <C> <C> <C> <C> <C>
0 - $11,999 .00 60% or less 0.00 80% 0.90
$12,000-$14,999 .20 61% .01 81% 0.92
$15,000-$17,999 .25 62% .03 82% 0.94
$18,000-$20,999 .30 63% .05 83% 0.96
$21,000-$23,999 .35 64% .08 84% 0.98
$24,000-$27,999 .40 65% .11 85% 1.00
$28,000-$31,999 .45 66% .15 86% 1.05
$32,000-$35,999 .50 67% .19 87% 1.10
$36,000-$39,999 .55 68% .23 88% 1.15
$40,000-$43,999 .60 69% .27 89% 1.20
$44,000-$47,999 .65 70% .32 90% 1.25
$48,000-$53,999 .70 71% .37 91% 1.30
$54,000-$59,999 .75 72% .42 92% 1.35
$60,000-or more .80 73% .47 93% 1.40
74% .53 94% 1.45
75% .58 95% 1.50
76% .64 96% 1.50
77% .71 97% 1.50
78% .77 98% 1.50
79% .83 99% 1.50
100% 1.50
</TABLE>
* For the purpose of this calculation, annuity production credit is excluded.
955-010 FBL (1/96)
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
DEVELOPMENTAL BONUS SCHEDULE
SUPPLEMENT TO CAREER AGENT CONTRACT
During your first twenty-four months as a Career Agent of Farm Bureau Life
Insurance Company you may earn a Developmental Bonus according to the following:
DEVELOPMENTAL BONUS PAYMENT CRITERIA
PROGRAM MONTH 1
Submit 4 Life/DI applications and receive $1,000 Developmental Bonus.
PROGRAM MONTH 2
Submit 4 Life/DI applications or issue 4 Life/DI policies and receive $900
Developmental Bonus. Satisfy both validation criteria and earn an additional
$100 Developmental Bonus.
PROGRAM MONTH 3
Submit 4 Life/DI applications or issue 4 Life/DI policies and receive $800
Developmental Bonus. Satisfy both validation criteria and earn an additional
$200 Developmental Bonus.
PROGRAM MONTHS 4-12
To earn a Developmental Bonus for Program Months 4-12, you must first satisfy
the Validation Criteria which are a part of the schedule for Program Months 4-12
shown below. The Validation Criteria on the schedule represents the minimum
CUMULATIVE net annualized Life & Dl production credit beginning with Program
Month #1. To calculate the monthly Developmental Bonus for Program Months 4-12,
multiply your rolling-3 net annualized Life & Dl production credit by the Bonus
Percentage of the corresponding Program Month. The monthly Developmental Bonus
cannot exceed the amount shown in the maximum Developmental Bonus column.
Rolling-3 Net Annualized Production Credit is the total net Life & Disability
income production credit for the previous three-month period ending on the last
day of the month for which the Developmental Bonus is payable.
SCHEDULE FOR PROGRAM MONTHS 4-12
<TABLE>
<CAPTION>
MAXIMUM DEVELOPMENTAL
PROGRAM MONTH BONUS PERCENTAGE BONUS VALIDATION CRITERIA
<S> <C> <C> <C>
4 35.0% $1,000 $2,400
5 30.0% $950 $3,400
6 25.0% $925 $4,400
7 20.0% $875 $5,400
8 18.0% $800 $6,600
9 16.0% $750 $7,800
10 15.0% $725 $9,000
11 14.0% $700 $10,200
12 13.0% $650 $11,400
</TABLE>
Ia, Mn, Ut, Sd, Wi (1/97)
<PAGE>
Program Months 13-24
If your CUMULATIVE net annualized Life & Dl production credit equals or exceeds
$11,400 at the end of the 12th Program Month, you will be eligible to earn a
Developmental Bonus for Program Months 13-24. If your CUMULATIVE net annualized
Life/DI production credit is less than $11,400 at the end of the twelfth Program
Month, you will NOT be eligible to earn any Developmental Bonus payments for
Program Months 13-24. To calculate the monthly Developmental Bonus payment for
Program Months 13-24, multiply your rolling-3 Life & Dl net annualized
production credit by the Bonus Percentage of the corresponding Program Month.
The monthly Developmental Bonus cannot exceed the amount shown in the maximum
Developmental Bonus column.
SCHEDULE FOR PROGRAM MONTHS 13-24
<TABLE>
<CAPTION>
MAXIMUM DEVELOPMENTAL
PROGRAM MONTH BONUS PERCENTAGE BONUS
<S> <C> <C>
13 12.00% $375
14 10.00% $325
15 8.00% $300
16 6.00% $300
17 4.00% $300
18 4.00% $300
19 4.00% $300
20 4.00% $300
21 4.00% $300
22 4.00% $300
23 4.00% $300
24 4.00% $300
</TABLE>
- -------------------- ----------------------------------- ---------
Date Signed Career Agent Signature Agent #
- -------------------- -----------------------------------
Date Signed Agency Manager Signature
- -------------------- -----------------------------------
Date Signed Authorized Representative of
Farm Bureau Life Insurance Company
955-105
<PAGE>
Exhibit 6(a)
Certificate of Incorporation of the Company
STATE OF IOWA
OFFICE OF SECRETARY OF STATE
This is to Certify that the IOWA LIFE INSURANCE COMPANY of Des Moines, Iowa
has filed in this office Articles of Incorporation, and paid the fees as by law
provided.
Therefore, this Certificate is issued, thereby authorizing it to transact
business as a corporation, under and Subject to the laws of the State of Iowa,
PERPETUALLY from October 30th, 1944.
In testimony whereof, I have hereunto set my hand and caused to be affixed
the seal of the office.
Done at Des Moines, the Capital, this Thirtieth day of October, 1944.
/s/ Wayne M. Ropes
Wayne M. Ropes
Secretary of State
by [left blank] Deputy Secretary of State
Expires PERPETUAL
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ARTICLES OF INCORPORATION
OF
IOWA LIFE INSURANCE COMPANY
We, the undersigned, for the purpose of transacting the business
hereinafter set forth, do hereby associate ourselves together and under the
following Articles of Incorporation unite ourselves into a body corporate under
the provisions of Chapter 384 and Chapter 398 of the Code of Iowa, 1939, and all
acts amendatory thereto, and assume all powers and obligations granted bodies
corporate under said chapters, and do hereby adopt the following Articles of
Incorporation, to-wit:
ARTICLE I.
NAME
The name of this Corporation shall be IOWA LIFE INSURANCE COMPANY.
ARTICLE II.
PRINCIPAL PLACE OF BUSINESS
The principal place of business of this Corporation shall be in the city of
Des Moines, County of Polk, State of Iowa. It may establish and maintain branch
offices, depositories and agencies elsewhere.
ARTICLE III.
POWERS, OBJECTS AND PURPOSES
The purposes and objects for which this Corporation is formed, and the
powers which it shall have and exercise, are:
1. To make insurance on the lives of persons and every insurance
appertaining thereto or connected therewith, and granting, purchasing or
disposing of annuities, and to make insurance against bodily injury, disablement
or death by accident, and against disablement resulting from sickness or old age
and every insurance appertaining thereto, on a level premium plan and as a legal
reserve company with all the rights and privileges granted or permitted by
Chapter 384 and Chapter 398 of the Code of Iowa, 1939, and all acts amendatory
thereto.
2. To assume and exercise all the rights, powers and privileges that are
now or may hereafter be conferred by law upon similar corporations, and to have
the right of perpetual succession, sue and be sued, make contracts, acquire,
own, and transfer property, real and personal, and have a common seal.
<PAGE>
3. To issue all forms of insurance contracts pertaining to or connected
with the business of life insurance as it now or may hereafter be carried on in
this state or elsewhere.
4. To cede to and reinsure its excess risks wherever they may be in other
companies or associations, and to accept and reinsure the excess risks of other
companies or associations ceded to it.
5. To buy, sell, invest and reinvest its funds in any of the securities or
property in which a life insurance company may now or hereafter lawfully invest.
6. To have and exercise all of the rights and powers necessary and
incident to carrying into effect the purposes for which this Corporation is
formed.
7. The objects, powers and purposes specified above shall, except where
otherwise expressed, be in no way limited or restricted by inference to or
inference from the terms of any clause or paragraph of these Articles of
Incorporation, and the foregoing shall be construed both as powers and objects
and the enumeration thereof shall not be held to limit or restrict in any manner
the general powers conferred upon this Corporation by the laws of the State of
Iowa, or any acts amendatory thereto, all of which are hereby expressly claimed.
ARTICLE IV.
CAPITAL STOCK
The authorized capital stock of this Corporation is Five Hundred Thousand
($500,000.00) Dollars, divided into Two Hundred Six Thousand (206,000) shares,
of which amount Two Hundred Thousand (200,000) shares of the par value of One
($1.00) Dollar per share, amounting to Two Hundred Thousand ($200,000.00)
Dollars is "Common Stock," and Six Thousand (6,000) shares of the par value of
Fifty ($50.00) Dollars per share, amounting to Three Hundred Thousand
($300,000.00) Dollars, is 6% cumulative "First Preferred Stock."
The nature and definitive extent and preferences and privileges granted
each class is, as follows:
1. STOCK ISSUE CONDITIONS. No stock of this Corporation shall be issued
until this Corporation has received payment in full therefor the selling price
as fixed by the board of directors, which shall be not less than par, in cash or
property, providing, however, that when it is issued for anything other than
money it must be done in accordance with the statutes in force at the time said
stock shall be issued.
2. COMMON STOCK. The Common Stock shall be issued to and owned only by
the Iowa Farm Bureau Foundation, its assigns, or a member in good standing of
the
<PAGE>
Iowa Farm Bureau Federation as defined in the By-Laws of this Corporation, and
no one else shall be eligible to own the same.
The Common stockholders shall be entitled to receive, when and as
declared by the board of directors, subject to any limitations in these
Articles contained, dividends from the net earnings of this Corporation on
such equitable basis as the board of directors shall determine, and shall be
payable annually when and as determined by the board of directors, provided,
however, that no dividends shall be declared or paid on the Common Stock
issued to and owned by the Iowa Farm Bureau Federation or its assigns in
excess of six (6%) per cent per annum on the par value thereof. No dividends
shall be declared or paid on the Common Stock until the board of directors
has first declared dividends on the First Preferred Stock and paid or set
apart the same to or for the account of said First Preferred stockholders.
Dividends to the Common stockholders shall be non-cumulative. No person
shall be entitled to dividends unless he is a Common stockholder of record at
the time of the declaration of the same.
The holders of Common Stock shall be entitled to one vote for each and
every share of stock issued and owned at all meetings of the stockholders, and
shall not have the privilege of voting by proxy but a corporate stockholder
shall have the privilege of voting by an authorized representative or
representatives, and no one other than the Iowa Farm Bureau Federation shall be
entitled to own more than one share.
The Common Stock of any holder thereof, other than the Iowa Farm Bureau
Federation or its assigns, may be called, redeemed or retired at the election of
the board of directors at such time or times as it shall determine, and shall be
called, redeemed or retired by the board of directors whenever the holder
thereof shall cease to be eligible to own the same by ceasing to be a member in
good standing of a County Farm Bureau and the Iowa Farm Bureau Federation, as
herein provided and as defined in the By-Laws, or any amendment thereto, upon
the payment of the purchase price paid per share with accrued dividends, if any;
provided, however, that not less than thirty (30) days' prior notice of such
intention to retire or redeem such stock shall be given the holder of such stock
called for retirement or redemption by written notice postpaid to the last known
address of each stockholder as shown by the books of this Corporation.
From and after the date fixed for such redemption all dividends on the
Common Stock thereby called for redemption shall, unless the Corporation shall
default in the payment of the redemption price, cease and all rights of the
holders thereof as stockholders of the Corporation, except the right to receive
the redemption price and accrued dividends, if any, shall cease and terminate.
The eligibility of a person, other than the Iowa Farm Bureau Federation or
its assigns, to own and hold Common Stock in this Corporation shall be
determined by the records of the Iowa Farm Bureau Federation of which the owner
thereof or the one under which he is eligible to own the same is or was a member
at the time of issue of said stock, and said books and records shall be
conclusive of his or their said eligibility.
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In the event of the dissolution and winding up of the business of this
Corporation, whether voluntary or involuntary, or in the event of the sale of
all of the assets of the Corporation and the distribution of the proceeds
thereof, the Common stockholder shall receive nothing until the First Preferred
Stock has been paid in full the purchase price paid per share to this
Corporation, together with all unpaid accrued dividends on such shares of stock.
3. FIRST PREFERRED STOCK. The First Preferred Stock shall be issued to
and owned only by members in good standing of a County Farm Bureau of this state
and of the Iowa Farm Bureau Federation and shall have no voting privileges, and
the holder of First Preferred Stock shall be entitled to receive, when and as
declared by the board of directors, dividends from the net earnings of the
Corporation at the rate of six (6%) per cent per annum, payable annually, when
and as determined by the board of directors. Such dividends shall be payable
before any dividends shall be paid on or set apart for the Common stockholders,
and such dividends on the First Preferred Stock shall be cumulative so that if
at any time at the dividend period dividends at the rate of six (6%) per annum
should not have been paid upon or set apart for the First Preferred Stock, the
deficiency shall be fully paid or set apart without interest before any
dividends shall be paid or declared upon the Common Stock.
The First Preferred Stock may be redeemed or retired in whole or in part,
at the election of the board of directors at such time or times as it shall
determine at the purchase price paid per share with accrued dividends, if any,
provided, however, that not less than thirty (30) days' prior notice of such
intention to retire or redeem such stock shall be given the holders of such
stock so called for retirement or redemption by written notice postpaid to the
last known address of such stockholders as shown by the books of the
Corporation.
No First Preferred stockholders shall have any preferential right
respecting the retirement or redemption of the shares of First Preferred Stock
owned by him, but in the event less than all of the outstanding shares of First
Preferred Stock are to be redeemed such redemption may be made by lot or
pro-rata in such manner as may be determined by the board of directors of this
Corporation.
From and after the date fixed for such redemption all dividends on the
First Preferred Stock thereby called for redemption shall, unless the
Corporation shall default in the payment of the redemption price, cease and all
rights of the holders thereof as stockholders of the Corporation, except the
right to receive the redemption price and accrued dividends, if any, shall cease
and terminate.
In the event of the dissolution and winding up of the business of the
Corporation, whether voluntary or involuntary, or in the event of the sale of
all of the assets of the Corporation and the distribution of the proceeds
thereof, the holder of the First Preferred Stock shall be entitled to be paid in
full the purchase price paid per share, together with all unpaid dividends
accrued on such shares, before any sum whatsoever shall be paid
<PAGE>
in liquidation on account of the Common Stock, and thereafter the Common Stock
shall be entitled to the remaining assets.
4. LIMITATION ON STOCKHOLDERS' DIVIDENDS. No cash dividend on the capital
stock of the Corporation in excess of the amount required to pay dividends at
the rate of six (6%) per annum on the par value on the issued and outstanding
First Preferred Stock, shall be paid in any calendar year prior to January 1,
1946, unless the capital of the Corporation, its surplus and contingency
reserves shall aggregate ten (10%) per cent or more of all other liabilities of
the Corporation, and no cash dividend in excess of the amount required to pay
dividends at the rate of six (6%) per cent per annum on the par value of the
issued and outstanding First Preferred Stock shall be paid in any calendar year
between January 1, 1946 and January 1, 1951, unless the capital, surplus and
contingency reserves shall equal or exceed eight and one-half (8 1/2%) per cent
of all other liabilities; nor shall any cash dividends in excess of the amount
required to pay dividends at the rate of six (6%) per cent per annum on the par
value of the issued and outstanding First Preferred Stock be paid on the capital
stock in any calendar year after January 1, 1951, unless the capital, surplus
and contingency reserves shall equal or exceed seven (7%) per cent of all other
liabilities.
No cash dividend in any one calendar year in excess of the amount required
to pay dividends at the rate of six (6%) per cent per annum, on the issued and
outstanding First Preferred Stock, shall be paid on the capital stock unless the
policyholders dividend scale of the Corporation in effect for said calendar year
results in an average net cost equal to or less than the average net cost to the
ten legal reserve companies operating in the United States each having more than
$250,000,000 insurance in force and showing the lowest average net cost.
For the purpose of this comparison the average net cost shall be computed
on the Whole Life Plan for ages at issue 25, 35, and 45, and for a policy issued
in the amount of One Thousand ($1,000) Dollars. Cost for above ages shall be
determined for each year of issue since organization of the Corporation, except
that the cost on policies in force for twenty (20) years or more shall not be
used. The actual dividends payable for the year in question shall be used and
not a net cost based on dividend history. Companies doing primarily a mail
order business or operating through lodges or as fraternal organizations, as
well as United States Government Insurance, shall not be included in the
comparison.
5. REGISTERED OWNER. This Corporation shall be entitled to treat the
person or corporation in whose name any share of stock is registered as the
owner thereof for all purposes, and shall not be bound to recognize any
equitable right or claim to any interest in such share on the part of any other
person or corporation, whether or not the corporation shall have notice thereof,
save as expressly provided by the laws of the State of Iowa or as may hereafter
be provided.
6. TRANSFER OF STOCK. The shares of First Preferred Stock in this
Corporation shall be transferable only to a member in good standing of a County
Farm Bureau of
<PAGE>
this state and of the Iowa Farm Bureau Federation, and the shares of Common
Stock shall not be transferable in any manner except the shares owned by the
Iowa Farm Bureau Federation, and no transfer except as herein provided shall be
of any validity or cognizable by the Corporation, and no transfer of any stock
of this Corporation shall be of any validity until duly entered on the books of
the Corporation.
7. INCREASE OR DECREASE OF STOCK. From time to time any class of stock
may be increased or decreased as may be determined by vote of the stockholders
present at any annual or special meeting possessing voting rights to the extent
and in the manner provided by the statutes of the State of Iowa and these
Articles of Incorporation, and in the event it is determined to increase the
amount of First Preferred Stock it shall not be necessary to secure the consent
of the holders of the First Preferred Stock; provided, however, that no other
class of stock shall be created having preference over the First Preferred Stock
as now authorized or as may hereafter be authorized in respect of payment of
dividends out of the earnings or upon liquidation or dissolution unless the
amendment authorizing such change shall receive the affirmative vote of the
holders of not less than two-thirds of the outstanding First Preferred Stock
voting as a class.
8. All persons and/or corporations or associations who shall acquire stock
in this Corporation shall acquire the same subject to the provisions of these
Articles of Incorporation, and shall, by their subscription therefor and
acceptance thereof, be bound by the said Articles of Incorporation, and any
amendments thereto, and the By-Laws duly adopted thereunder.
ARTICLE V.
OFFICERS AND DIRECTORS
1. The business and affairs of this Corporation shall be managed by a
board of twelve (12) directors who shall be members in good standing of the Iowa
Farm Bureau Federation, and shall be elected by the stockholders of this
Corporation as hereinafter provided, and said directors shall hold office until
their successors are elected and qualified.
2. The term of office of the directors of this Corporation shall be two
(2) years and until their successors are elected and qualified.
3. At the first annual meeting of the stockholders of this Corporation to
be held in 1946, as provided in these Articles, seven (7) directors shall be
elected for a term which shall expire at the next annual meeting of the
stockholders and until their successors are elected and qualified; five (5)
directors for a term of two years, and then at each annual meeting thereafter
there shall be elected for a term of two years each as many directors as there
are directors whose terms expire.
4. Until the first annual meeting of the stockholders of this Corporation
to be held in 1946, the following persons shall constitute the directors of this
Corporation.
<PAGE>
Name Address
---- -------
Allan E. Kline Vinton, Iowa
E. Howard Hill Minburn, Iowa
Mrs. Raymond Sayre Ackworth, Iowa
A. Fletcher Aitchison Cascade, Iowa
J. S. Van Wort Hampton, Iowa
H. J. Shoemaker Hawarden, Iowa
J. Otto Gidel Lake City, Iowa
Russell Hayes Prairie City, Iowa
W. C. Molison Grinnell, Iowa
Lee Stephenson Eldon, Iowa
W. G. Lodwick Sedan, Iowa
F. A. Klopping Underwood, Iowa
5. Until the first annual meeting of the stockholders of this Corporation
and until their successors are elected and qualified the officers of this
Corporation shall be:
Office Name Address
------ ---- -------
President: Allan B. Kline Vinton, Iowa
Vice-President: E. Howard Hill Minburn, Iowa
Secretary: Donald B. Groves Des Moines, Iowa
Treasurer: Donald B. Groves Des Moines, Iowa
6. The officers of this Corporation shall be elected by the board of
directors immediately following the first annual meeting of the stockholders,
and thereafter immediately following each annual meeting, and shall hold office
for the term of one year or until their successors are elected and qualified.
7. The officers of this Corporation shall be a president, vice-president,
secretary, treasurer, and such other officers as the board of directors may from
time to time create, and the offices of secretary and treasurer may be held by
the same person.
8. The board of directors may fill all vacancies occurring in its
membership, and a director elected to fill a vacancy shall serve for the
unexpired term of the director whose vacancy he was elected to fill and/ or
until his successor is elected and qualified.
9. A majority of the board of directors shall constitute a quorum for the
transaction of all business of the Corporation.
10. The board of directors shall have full authority to adopt and enact
regulations and rules and by-laws for the proper government of the Corporation,
classify risks, promulgate rates therefor, adopt policy forms and riders,
appoint agents, officers,
<PAGE>
employees or others, require bonds for such officers and employees as they may
determine, issue such information as the welfare of the Corporation may require,
designate depositories, hold meetings at such times and places as the business
may require, and shall make a full and complete report of its doings at each
annual meeting of the Corporation.
11. The board of directors may appoint an executive committee, consisting
of five (5) members, and designate a chairman thereof; the members thereof shall
hold office for the term of one year or until their successors are appointed and
qualified; said term, however, being subject to the will and pleasure of the
board of directors. The executive committee shall have such powers and possess
such authority as the board of directors shall, from time to time, by by-law or
resolution vest in it.
12. The board of directors shall have power to appoint such other
committees as it may deem necessary for the efficient conduct of the business,
and every such committee so created by the board shall report its doings to the
meeting of the board of directors next ensuing.
13. All conveyances of real property, releases of mortgages, liens and
judgments, and all other instruments affecting real property, made by the
Corporation or required by law to be made a matter of record, shall be executed
by the president or vice-president and the secretary or assistant secretary and
attested to by the corporate seal.
ARTICLE VI.
MEETINGS OF STOCKHOLDERS
1. REGULAR ANNUAL MEETING. The first regular annual meeting of the
stockholders of this Corporation shall be held in the year 1946 and all
subsequent annual meetings of the stockholders of this Corporation shall be held
annually, at such time and place and upon such notice as the board of directors
shall, from time to time, fix and determine, provided such notice is not less
than ten days and such meeting shall be held at Des Moines, Iowa.
2. SPECIAL MEETINGS. Special Meetings of the stockholders may be called
at any time by the president upon the giving of five (5) days' notice in writing
by mail to the stockholders as shown by the records of this Corporation, and
such meetings shall be called at any time upon the request of stockholders
representing twenty-five (25%) per cent of the stock issued.
In case the president neglects or refuses to call a meeting at the request
of the stockholders, as herein provided, the stockholders may join in a call of
the stockholders at a special meeting upon giving to each stockholder of record
having voting privileges the same notice and in the same manner as hereinbefore
provided in this section.
<PAGE>
3. VOTING PRIVILEGE. At all meetings of the stockholders each Common
stockholder shall be entitled to one vote for each share of stock owned and held
by him or it.
ARTICLE VII.
CORPORATE PERIOD
This Corporation shall commence business under these Articles of
Incorporation as soon as it secures certificate of incorporation from the
Secretary of State of the State of Iowa, and certificate authorizing it to
transact an insurance business from the Commissioner of Insurance of the State
of Iowa, as by law provided, and shall have perpetual existence unless changed
as by law and these Articles of Incorporation required.
ARTICLE VIII.
PRIVATE PROPERTY EXEMPT
The private property of the stockholders of this Corporation shall be
exempt from the debts of the Corporation and from all liability therefor.
ARTICLE IX.
This Corporation shall have a corporate seal and shall have inscribed
thereon "Iowa Life Insurance Company, Des Moines, Iowa, Corporate Seal, " which
words may be changed at any time by resolution of the board of directors.
ARTICLE X.
BY-LAWS
The Board of Directors may at its pleasure make and adopt By-Laws which do
not conflict with the law or these Articles of Incorporation or By-Laws adopted
or ratified by the stockholders and alter or amend the same.
ARTICLE XI.
AMENDMENTS
These Articles of Incorporation may be amended at any annual meeting of the
stockholders or at any special meeting called for that purpose by a two-thirds
vote of the stockholders having voting privileges present at such meeting,
provided that no amendment shall be made or enacted unless the proposed
amendment or alteration has been filed in writing with the president and with
the secretary of this Corporation not less than sixty (60) days before the
meeting at which the same is offered. Notice of
<PAGE>
special meeting and the proposed amendment or alteration to these Articles of
Incorporation coming before such special meeting shall be given the stockholders
in the same manner and for the same period of time as is required for special
meetings of stockholders.
<PAGE>
STATE OF IOWA
[GRAPHIC]
OFFICE OF
THE SECRETARY OF STATE
TO ALL TO WHOM THESE PRESENTS SHALL COME, GREETING:
I, MELVIN D. LYNHORST, SECRETARY OF STATE OF THE STATE OF IOWA, DO HEREBY
CERTIFY THAT THE FOLLOWING AND HERETO ATTACHED IS A TRUE PHOTOSTATIC COPY OF
Amendment to Articles of Incorporation for IOWA LIFE INSURANCE COMPANY, of
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Des Moines, Iowa, changing the corporate title to FARM BUREAU LIFE INSURANCE
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COMPANY.
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AS THE SAME APPEAR OF RECORD IN THIS OFFICE.
-----------------------------------
IN TESTIMONY WHEREOF, I HAVE HEREUNTO
SET MY HAND AND AFFIXED THE OFFICIAL SEAL
OF THE SECRETARY OF STATE AT THE CAPITOL, IN
DES MOINES, THIS 4th DAY OF August,
A.D. NINETEEN HUNDRED AND FIFTY-EIGHT.
/s/ Melvin D. Lynhorst
--------------------------------------------
SECRETARY OF STATE
--------------------------------------------
DEPUTY
<PAGE>
AMENDMENT TO ARTICLES OF INCORPORATION,
AS AMENDED, OF
IOWA LIFE INSURANCE COMPANY
KNOW ALL MEN BY THESE PRESENTS:
That at the annual meeting of the stockholders of the Iowa Life Insurance
Company, held at the Fort Des Moines Hotel, Des Moines, Iowa, on the 1st day
of August, 1958, pursuant to notice in writing, stating the time, place and
purpose of said meeting mailed in accordance with the provisions of the Articles
of Incorporation and the laws of the State of Iowa, the following Amendment to
the Articles of Incorporation, a copy of which amendment was duly filed with the
president and secretary of this corporation more than sixty (60) days prior to
August 1, 1958, was adopted by a UNANIMOUS vote of all of the stockholders
present in person or represented by an authorized representative at said
meeting:
Amend Article I, entitled "Name," by striking all of said article, and
substituting in lieu thereof the following:
"The name of this corporation shall be 'FARM BUREAU LIFE INSURANCE
COMPANY'."
Amend Article IV, entitled "Capital Stock," by striking all of said
article, and substituting in lieu thereof the following:
"The authorized capital stock of this corporation is Five Hundred Thousand
($500,000.00) Dollars, divided into ten thousand (10,000) shares, of which
amount four thousand (4,000) shares of the par value of Fifty ($50.00)
Dollars per share, amounting to Two Hundred Thousand ($200,000.00) Dollars,
is Common Stock, and six thousand (6,000) shares of the par value of Fifty
($50.00) Dollars per share, amounting to Three Hundred Thousand
($300,000.00) Dollars, is six (6%) per cent cumulative First Preferred
Stock.
The nature and definite extent and preferences and privileges granted each
class is, as follows:
Section 1. STOCK ISSUE CONDITIONS. No stock of this corporation shall be
issued until this corporation has received payment in full therefor the
selling price as fixed by the board of directors, which shall be not less
than par, in cash or property, providing, however, that when it is issued
for anything other than money it must be done in accordance with the
statutes in force at the time said stock shall be issued.
Sec. 2. COMMON STOCK. The Common Stock shall have a par value of Fifty
($50.00) Dollars per share, and the holders of record thereof shall be
entitled to one vote per share at all
<PAGE>
-2-
meetings of the stockholders. The Common Stock shall be issued to and
owned only by the Iowa Farm Bureau Federation and shall be issued from time
to time upon application by it and upon tender and payment of the purchase
price as fixed by the board of directors, which shall be not less than par.
The holders of record of the Common Stock shall be entitled to vote at all
meetings of the stockholders by a duly authorized representative or
representatives.
If, after providing for the payment of full dividends for any fiscal year
on the First Preferred Stock and for any balance that remains due on the
cumulative dividends of such First Preferred Stock, there shall remain any
surplus net earnings or profits not in the opinion of the board of
directors required for the operation of the business of this corporation or
for the payment of its liabilities, it shall be applicable to dividends
upon the Common Stock for such fiscal year when and as from time to time
the same shall be declared by the board of directors, which dividend shall
not be cumulative but shall only be paid as surplus net earnings or profits
are available and dividends are declared. Such dividends shall be ratable
in proportion to the number of shares of Common Stock issued and
outstanding until dividends have been declared and set apart for the Common
Stock to the extent of, but not in excess of, six (6%) per cent for any one
fiscal year.
No common stockholder shall be entitled to dividends unless it is a
stockholder of record at the time of the declaration of the same.
The Common Stock or any part thereof may be called, redeemed or retired at
the option and election of the board of directors at such time or times and
in such manner as it shall determine upon the payment of the purchase price
paid this corporation for each share, with accrued dividends, if any,
provided, however, that not less than thirty (30) days' prior notice of
such intention to retire or redeem such stock shall be given the holder of
such stock called for retirement or redemption in writing, post-paid, to
the last known address of such stockholder as shown by the books of this
corporation.
From and after the date fixed for such retirement or redemption all
dividends on the Common Stock thereby called for retirement or redemption
shall, unless this corporation shall default in the payment of the
redemption price, cease, and all rights of the holders thereof as Common
stockholders of this corporation, except the right to receive the
redemption price and accrued dividends, if any, shall cease and terminate.
In the event of the dissolution or winding up of the business and affairs
of this corporation, whether voluntary or involuntary, or in the event of
the sale of all of the assets of this corporation and the distribution of
the proceeds thereof, the Common stockholders of record shall, after the
First Preferred stockholders have received distribution and payment of the
full purchase price paid per share to this corporation, together with all
unpaid accrued dividends, for their shares,
<PAGE>
-3-
as provided in Section 4 of this Article, be entitled to receive
distribution of all of the remaining assets of this corporation in
proportion to the purchase price paid per share to this corporation by said
Common stockholder.
Sec. 3. EXCHANGE OF ISSUED AND OUTSTANDING COMMON STOCK. Within a
reasonable time after the adoption of this amended and substituted Article
IV of the Articles of Incorporation of this corporation, the board of
directors shall call the present issued and outstanding Common Stock of
this corporation as permitted in the Articles of Incorporation, as amended,
and give the thirty (30) days' notice to the holders of record of the
Common Stock owned by the Iowa Farm Bureau Federation as provided in
Section 3 of Article IV of this corporation's Articles of Incorporation, as
amended, and all of the shares of the Class A Common Stock issued and of
record in the name of the Iowa Farm Bureau Federation, as of the date of
the adoption of this amendment, shall be surrendered up to this corporation
and exchanged for such number of shares or fractional part thereof of the
Common Stock authorized by this amendment as the total amount paid by the
Iowa Farm Bureau Federation, at the purchase price of One and 50/100
($1.50) Dollars per share will pay for, at the rate of Seventy-five
($75.00) Dollars per share for said Common Stock.
Sec. 4. FIRST PREFERRED STOCK. The First Preferred Stock shall have a par
value of Fifty ($50.00) Dollars per share and shall have no voting
privileges, and the holders of record of the First Preferred Stock shall be
entitled to receive, when and as declared by the board of directors,
dividends from the net earnings of this corporation at the rate of six (6%)
per cent per annum, payable annually, when and as determined by the board
of directors. Such dividends shall be payable before any dividends shall
be paid on or set apart for the Common stockholders, and such dividends on
the First Preferred Stock shall be cumulative so that if at any dividend
period dividends at the rate of six (6%) per cent per annum should not have
been paid upon or set apart for the First Preferred Stock the deficiency
shall be fully paid on or set apart without interest before any dividends
shall be paid or declared upon the Common Stock. No first preferred
stockholder shall be entitled to dividends unless he is a stockholder of
record at the time of the declaration of the same.
The First Preferred Stock may be redeemed or retired in whole or in part,
at the election and option of the board of directors, at such time or times
as it shall determine at the purchase price paid per share with accrued
dividends, if any, provided, however, that not less than thirty (30) days'
prior notice of such intention to retire or redeem such stock shall be
given the holders of such stock so called for retirement or redemption by a
written notice post-paid to the last known address of such stockholders as
shown by the books of the corporation.
Except as provided in the preceding paragraph, no First Preferred
stockholders shall have any preferential right respecting the
<PAGE>
-4-
retirement or redemption of the shares of First Preferred Stock owned by
him, but in the event less than all of the outstanding shares of First
Preferred Stock are to be redeemed, such redemption may be made by lot or
pro rata or by designation of stockholder or holders in such manner and
basis as may be determined by the board of directors of this corporation.
From and after the date fixed for such redemption all dividends on the
First Preferred Stock thereby called for redemption shall, unless the
corporation shall default in the payment of the redemption price, cease,
and all rights of the holders thereof as stockholders of the corporation,
except the right to receive the redemption price and accrued dividends, if
any, shall cease and terminate.
In the event of the dissolution and winding up of the business of the
corporation, whether voluntary or involuntary, or in the event of the sale
of all of the assets of the corporation and the distribution of the
proceeds thereof, the holder of the First Preferred Stock shall be entitled
to be paid in full the purchase price paid per share to this corporation,
together with all unpaid dividends accrued on such shares, before any sum
whatsoever shall be paid in liquidation on account of the Common Stock, and
thereafter the holders of the Common Stock shall be entitled to the entire
remaining assets ratably in proportion to the shares issued and
outstanding.
Sec. 5. LIMITATION ON STOCKHOLDER DIVIDENDS. No cash dividend on the
capital stock of this corporation in excess of the amount required to
pay dividends at the rate of six (6%) per cent per annum on the par
value of the issued and outstanding First Preferred Stock shall be paid
in any calendar year prior to January 1, 1946, unless the capital of the
corporation, its surplus and contingency reserves shall aggregate ten
(10%) per cent or more of all other liabilities of the corporation, and
no cash dividend in excess of the amount required to pay dividends at
the rate of six (6%) per cent per annum on the par value of the issued
and outstanding First Preferred Stock shall be paid in any calendar year
between January 1, 1946 and January 1, 1951, unless the capital, surplus
and contingency reserves shall equal or exceed eight and one-half (8
1/2%) per cent of all other liabilities; nor shall any cash dividends in
excess of the amount required to pay dividends at the rate of six (6%)
per cent per annum on the par value of the issued and outstanding First
Preferred Stock to be paid on the capital stock in any calendar year
after January 1, 1951, unless the capital, surplus and contingency
reserves shall equal or exceed seven (7%) per cent of all other
liabilities.
No cash dividend in any one calendar year in excess of the amount required
to pay dividends at the rate of six (6%) per cent per annum, on the issued
and outstanding First Preferred Stock, shall be paid on the capital stock
unless the policyholders dividend scale of the corporation in effect for
said calendar year results in an average net cost equal to or less than the
average net cost to the ten legal reserve companies, other than
<PAGE>
-5-
the Farm Bureau Life Insurance Company, having the most insurance in force
in the State of Iowa as of the preceding December 31st.
For the purpose of this comparison the average net cost shall be
computed on the Whole Life Plan for ages at issue at 25, 35 and 45, and
for a policy issued in the amount of One Thousand ($1,000.00) Dollars, cost
for above ages shall be determined from the information provided annually
by recognized life insurance publications. Companies doing primarily a
mail order business or operating through lodges or as fraternal
organizations, as well as United States Government insurance, shall not be
included in the comparison.
Sec. 6. REGISTERED OWNER. This corporation shall be entitled to treat the
person or corporation in whose name any share of stock is registered as the
owner thereof for all purposes, and shall not be bound to recognize any
equitable right or claim to any interest in such share on the part of any
other person or corporation, whether or not the corporation shall have
notice thereof, save as expressly provided by the laws of the State of Iowa
or as may hereafter be provided.
Sec. 7. TRANSFER OF STOCK. The shares of First Preferred Stock and Common
Stock shall not be transferable.
Sec. 8. INCREASE OR DECREASE OF STOCK. From time to time any class of
stock may be increased or decreased as may be determined by vote of the
stockholders present at any annual or special meeting possessing voting
rights to the extent and in the manner provided by the statutes of the
State of Iowa and these Articles of Incorporation, and in event it is
determined to increase the amount of First Preferred Stock it shall not be
necessary to secure the consent of the holders of the First Preferred
Stock; provided, however, that no other class of stock shall be created
having preference over the First Preferred Stock as now authorized or as
may hereafter be authorized in respect to payment of dividends out of the
earnings or upon liquidation or dissolution unless the amendment
authorizing such change shall receive the affirmative vote of the holders
of not less than two-thirds (2/3) of the outstanding First Preferred Stock
voting as a class.
Sec. 9. All persons and/or corporations or associations who shall acquire
stock in this corporation shall acquire the same subject to the provisions
of these Articles of Incorporation, and shall, by their subscription
therefor and acceptance thereof, be bound by the said Articles of
Incorporation and any amendments thereto, and the By-Laws duly adopted
thereunder."
Amend Article V, by striking all of Section 1 thereof, and substituting
in lieu thereof the following:
"Section 1. The business and affairs of this corporation shall be managed
by a board of directors of not less than twelve (12)
<PAGE>
-6-
nor more than twenty-one (21), the exact number to be fixed and defined by
a by-law adopted by a two-thirds (2/3) vote of the stockholders entitled to
vote and present in person or represented by an authorized representative
at any regular or special meeting of the stockholders of this corporation,
and said by-law shall only be amended in the same manner as is provided
herein for its adoption."
Amend Article V, by striking all of Section 2 thereof, and substituting in
lieu thereof the following:
"Sec. 2. The board of directors shall be divided into two classes,
district directors and directors at large, and the district directors shall
be elected to serve for terms of three (3) years and until their successors
are elected and have qualified, and the directors at large shall be elected
to serve for terms of two (2) years and until their successors are elected
and have qualified. The terms of the directors shall be on a staggered
basis so that approximately one-half of the directors at large shall be
elected each year and approximately one-third of the district directors
shall be elected each year. The manner, method and procedure for the
nomination and election of directors shall be as defined and provided in a
by-law duly adopted by a two-thirds (2/3) vote of the stockholders entitled
to vote and present in person or represented by an authorized
representative at any regular or special meeting of the stockholders of
this corporation, and said by-law shall only be amended in the same manner
as is provided herein for its adoption."
Amend Article V, by striking all of Section 3 thereof, and substituting in
lieu thereof the following:
"Sec. 3. The following named persons shall, from and after the date of the
adoption of this Amendment to the Articles of Incorporation, as amended,
constitute the board of directors of this corporation, and shall serve for
a term expiring as of the date set opposite their names and until their
successors are elected and qualified, in accordance with the terms and
provisions of the By-Laws. At the annual meeting of the stockholders of
this corporation held in the year of 1959, and at each annual meeting
thereafter, there shall be elected such number of directors as terms expire
as of the date of such annual meeting, and such additional directors, if
any, as provided for in the By-Laws, to serve for the terms fixed in the
By-Laws of this corporation and until their successors are elected and
qualified.
Expiration Date
Name Address of Term
---- ------- ---------------
K. Howard Hill Minburn, Iowa November, 1959
Howard Waters Danville, Iowa November 21, 1958
Mrs. H. L. Witmer Tipton, Iowa November 21, 1958
Clarence Myers Blue Earth, Minn. November, 1959
Charles Marshall Avoca, Nebraska November, 1959
John Ingels Maynard, Iowa November 21, 1958
<PAGE>
-7-
Expiration Date
Name Address of Term
---- ------- ---------------
Wayne Keith Burt, Iowa November, 1960
LeRoy Getting Sanborn, Iowa November 21, 1958
Wesley Seymour Lakeview, Iowa November, 1959
Harvey Moeckly Polk City, Iowa November 21, 1958
Wayne J. Farmer Van Horne, Iowa November, 1959
James B. Helmick Rte. #2, Columbus
Junction, Iowa November, 1960
R. Edwin Allen Lucas, Iowa November, 1959
John Kenagy Rte. #3, Clarinda,
Iowa November, 1960
Amend Article V, by striking all of Section 4 thereof.
Amend Article V, by striking all of Section 5 thereof, and substituting in
lieu thereof as Section 4 the following:
"Sec. 4. Until the first annual meeting of the stockholders of this
corporation held after the adoption of this Amendment, and until their
successors are elected and qualified, the officers of this corporation
shall be:
Office Name Address
------ ---- -------
President: E. Howard Hill Minburn, Iowa
Vice-President: Howard Waters Danville, Iowa
Secretary: Kenneth Thatcher Des Moines, Iowa
Treasurer: D. B. Groves Des Moines, Iowa."
Amend Article V, by striking all of Section 6 thereof, and substituting in
lieu thereof as Section 5 the following:
"Sec. 5. The officers of this corporation shall be elected by the board of
directors immediately following each annual meeting and shall hold office
for such term or until their successors are elected and qualified, as shall
be provided for in the By-Laws."
Amend Article V, by striking the numbers of Sections 7, 8, 9, 10, 11, 12
and 13, and re-numbering as "Sections 6, 7, 8, 9, 10, 11 and 12,"
respectively.
Amend Article V, by striking all of Section 14 thereof, and substituting in
lieu thereof as Section 13 the following:
"Sec. 13. PROPORTIONATE REPRESENTATION. The holder or holders jointly or
severally, of not less than one-fifth (1/5) of the aggregate vote of the
Common Stock, but less than a majority of the vote represented by the
shares of such stock, shall be entitled to nominate to be elected directors
in accordance with these Articles of Incorporation. In the event such
nomination shall be made, there shall be elected, to the extent that the
total number to be elected is divisible, such proportionate
<PAGE>
-8-
number from the persons so nominated as the aggregate vote of the shares of
stock held by persons making such nominations bear to the whole of Common
shares issued; provided the holders of the minority shares of such stock
shall only be entitled to one-fifth (1/5) of the total number of directors
to be elected for each one-fifth of the entire voting capital stock of such
corporation so held by them. This section shall not be construed to
prevent the holders of a majority of the votes represented by said Common
Stock from electing a majority of the directors. Vacancies occurring from
time to time shall be filled so as to preserve and secure to such minority
and majority stockholders proportionate representation as herein provided."
Amend Article VI, by striking all of said Article and substituting in lieu
thereof as Article VI the following:
"Section 1. REGULAR ANNUAL MEETING. The first regular annual meeting of
the stockholders of this corporation shall be held in the year 1946 and all
subsequent annual meetings of the stockholders of this corporation shall be
held annually at such time and place and upon such notice as the board of
directors shall from time to time, fix and determine, provided such notice
is not less than ten days and such meeting shall be held at Des Moines,
Iowa.
Sec. 2. SPECIAL MEETINGS. Special meetings of the stockholders, except for
the election of directors, may be called at any time by the president, and
shall be called by the president or secretary of this corporation upon the
call of the board of directors by a resolution duly adopted so providing
and directing and notice thereof shall be given the stockholders by written
or printed notice stating the object, time and place of such meeting, and
shall be mailed to the last known address of each stockholder as shown by
the books and records of this corporation at least fifteen (15) days prior
to such meeting."
Sec. 3. VOTING PRIVILEGE. At all meetings of the stockholders each Common
stockholder shall be entitled to one vote for each share of stock owned and
held by him or it."
Amend Article IX, by striking all of said Article and substituting in lieu
thereof as Article IX the following:
"This corporation shall have a corporate seal and shall have inscribed
thereon 'Farm Bureau Life Insurance Company, Des Moines, Iowa, Corporate
Seal.'"
Amend Article X, by striking all of said Article and substituting in lieu
thereof as Article X the following:
"The board of directors may, at its pleasure, make and adopt By-Laws and
amend the same which do not conflict with the law of the Articles of
Incorporation, as amended from time to time,
<PAGE>
-9-
or the By-Laws adopted by the stockholders. No amendment shall be made to
any By-Law which has been adopted by the stockholders unless the proposed
amendment or alteration has been filed in writing with the president and
with the secretary of the corporation not less than sixty (60) days prior
to the meeting at which the amendment is to be offered and voted upon."
CERTIFICATE
The President and Secretary of this corporation were duly authorized and
directed to sign, acknowledge, record, and do all things which are by law
required to execute, complete and carry into effect the within and foregoing
amendment to the Articles of Incorporation. We, E. Howard Hill and Kenneth
Thatcher, Chairman and Secretary, respectively, of said meeting, do hereby
certify the above to be a true and correct statement of the proceedings of the
stockholders at the above named meeting.
/s/ E. Howard Hill
---------------------------------
Chairman
/s/ Kenneth Thatcher
---------------------------------
Secretary
In conformity with the above resolution we, the President and Secretary,
respectively, of said corporation, have executed this instrument, and do hereby
sign and acknowledge the same for and on behalf of the said corporation this 1st
day of August, A. D., 1958.
/s/ E. Howard Hill
---------------------------------
President
/s/ Kenneth Thatcher
---------------------------------
Secretary
[STAMP]
[STAMP]
<PAGE>
-10-
STATE OF IOWA
SS.
COUNTY OF POLK
BE IT REMEMBERED, that on this 1st day of August, A. D., 1958, before me, a
Notary Public in and for said county and state, personally appeared E. Howard
Hill and Kenneth Thatcher, each being to me personally known, who being by me
duly sworn did say, that they are the President and Secretary, respectively, of
the Iowa Life Insurance Company, and that the foregoing instrument was signed
and sealed on behalf of said corporation by authority of its stockholders, and
that they acknowledge said instrument to be the voluntary act and deed of said
corporation, by them voluntarily executed.
/s/
---------------------------------
Notary Public in and for
POLK COUNTY, IOWA
[SEAL]
<PAGE>
Adopted ANNUAL MEETING
May 28, 1969
AMENDED AND SUBSTITUTED BY-LAWS
OF
FARM BUREAU LIFE INSURANCE COMPANY
ARTICLE I
CORPORATE NAME, LOCATION AND PURPOSE
Section 1. NAME. The name of this corporation shall be FARM BUREAU LIFE
INSURANCE COMPANY.
Section 2. LOCATION. The location of its principal or home office shall
be in Des Moines, Iowa.
Section 3. POWERS, OBJECTS AND PURPOSES. The corporate powers, objects
and purposes of this corporation are such as are provided in Article III of the
Articles of Incorporation of this corporation.
ARTICLE II
CORPORATE PERIOD
Section 1. CORPORATE PERIOD. The corporate period of this corporation
commenced on the 30th day of October, 1944, and shall have perpetual existence
thereafter unless changed as by law and the Articles of Incorporation required.
ARTICLE III
STOCK AND STOCKHOLDERS
(Authorized Capital- Eligibility to own stock- Conditions, etc.)
Section 1. AUTHORIZED CAPITAL. The authorized capital stock of this
corporation is Five Hundred Thousand Dollars ($500,000), divided into ten
thousand (10,000) shares, of which amount four thousand (4,000) shares of the
par value of Fifty Dollars ($50) per share, amounting to Two Hundred Thousand
Dollars ($200,000), is Common Stock, and six thousand (6,000) shares of the par
value of Fifty Dollars ($50) per share, amounting to Three Hundred Thousand
Dollars ($300,000), is seven and one-half per cent (7 1/2%) cumulative First
Preferred Stock.
Section 2. COMMON STOCK. The Common Stock shall have a par value of Fifty
Dollars ($50) per share, and the holders of record shall be entitled to one vote
per share at all meetings of
<PAGE>
the stockholders. The Common Stock shall be issued to and owned only by the
Iowa Farm Bureau Federation and shall be issued from time to time upon
application by it and upon tender of the purchase price as fixed by the Board of
Directors, which shall be not less than par. The holders of record of the
Common Stock shall be entitled to vote at all meetings of the stockholders by a
duly authorized representative or representatives.
If, after providing for the payment of full dividends for any fiscal year
on the First Preferred Stock and for any balance that remains due on the
cumulative dividends of such First Preferred Stock, there shall remain any
surplus net earnings or profits not in the opinion of the Board of Directors
required for the operation of the business of this corporation or for the
payment of its liabilities, it shall be applicable to dividends upon the Common
Stock for such fiscal year when and as from time to time the same shall be
declared by the Board of Directors, which dividends shall not be cumulative but
shall only be paid as surplus net earnings or profits are available and
dividends are declared. Such dividends shall be ratable in proportion to the
number of shares of Common Stock issued and outstanding until dividends have
been declared and set apart for the Common Stock to the extent of, but not in
excess of, seven and one-half (7 1/2 %) for any one fiscal year.
No Common stockholder shall be entitled to dividends unless it is a
stockholder of record at the time of the declaration of the same.
It is callable at the option of the Board of Directors at the selling
price, together with accrued dividends, if any, on thirty (30) days' prior
notice as provided in the Articles of Incorporation.
(b) FIRST PREFERRED STOCK. The holders of the First Preferred Stock shall
be entitled to receive when and as declared by the Board of Directors, dividends
from the net earnings of this corporation at the rate of seven and one-half per
cent (7 1/2 %) per annum on the par value, payable annually when and as
determined by the Board of Directors. Such dividends shall be payable before
any dividends shall be paid on or set apart for the common stockholders, and
shall be fully paid or set apart before any dividends shall be paid or declared
upon the Common Stock. It is to be sold at par and one-half per share,
one-third of which selling price shall be contributed surplus. It is callable
at the option of the Board of Directors at the selling price, together with any
accrued dividends, if any, on a thirty (30) day's prior notice, as provided in
the Articles of Incorporation. No first preferred stockholder shall be entitled
to dividends unless he or it is a stockholder of record at the time of the
declaration of the same.
Section 3. LIMITATION ON DIVIDENDS. No cash dividends on the capital
stock of the corporation in excess of the amount required to pay dividends at
the rate of six per cent (6%) per annum on the par value of the issued and
outstanding First Preferred Stock shall be paid in any calendar year prior to
January 1, 1946, unless the capital of the corporation, its surplus and
contingency reserves, shall aggregate ten per cent (10%) or more of all other
liabilities of the corporation, and no cash dividend in excess of the amount
required to pay dividends at the rate of six per cent (6%) per annum on the par
value of the issued and outstanding First Preferred Stock, shall be paid in any
calendar year between January 1, 1946 and January 1, 1951, unless the capital
surplus and contingency reserves shall equal or exceed eight and one-half
(8 1/2%) of all
<PAGE>
other liabilities, nor shall any cash dividends in excess of the amount required
to pay dividends at the rate of seven and one-half per cent (7 1/2%) per annum
on the par value of the issued and outstanding First Preferred Stock be paid on
the capital stock in any calendar year after January 1, 1951, unless the capital
surplus and contingency reserves shall equal or exceed seven per cent (7%) of
all other liabilities.
No cash dividend in any one calendar year in excess of the amount required
to pay dividends at the rate of seven and one-half per cent (7 1/2%) per annum,
on the issued and outstanding First Preferred Stock, shall be paid on the
capital stock unless the policyholders' dividend scale of the corporation in
effect for said calendar year results in an average net cost equal to or less
than the average net cost to the ten legal reserve companies other than the Farm
Bureau Life Insurance Company, having the most insurance in force in the State
of Iowa as of the preceding December 31st.
For the purpose of this comparison the average net cost shall be computed
on the Whole Life Plan for ages at issued 25, 35, and 45, and for a policy
issued in the amount of One Thousand Dollars ($1,000). Cost for the above ages
shall be determined from the information provided annually by recognized life
insurance publications. Companies doing primarily a mail order business or
operating through lodges or as fraternal organizations, as well as United States
Government Insurance, shall not be included in the comparison.
Section 4. REGISTERED OWNER. This corporation shall be entitled to treat
the person or corporation in whose name any share of stock is registered as the
owner thereof for all purposes, and shall not be bound to recognize any
equitable right or claim to any interest in such share on the part of any other
person or corporation, whether or not the corporation shall have notice thereof,
save as expressly provided by the laws of the State of Iowa or as may hereafter
be provided.
Section 5. TRANSFER OF STOCK. The shares of First Preferred Stock and
Common Stock shall be transferable.
Section 6. STOCKHOLDERS' CONTRACTS. All persons who shall acquire stock
in this corporation shall acquire the same subject to the provisions of the
Articles of Incorporation and these By-Laws, and by the acceptance of a
certificate or certificates of stock in said corporation, agree to be bound by
the Articles of Incorporation and By-Laws and all amendments thereto.
Section 7. ISSUANCE OF STOCK. So long as Chapter 492, Code of Iowa, 1966,
is the law of the State of Iowa, no stock of this corporation shall be issued
until this corporation has first received payment in full therefor at par, in
cash or property, provided, however, that when stock is issued for anything
other than money, it must be in accordance with the statutes of the State of
Iowa in force at the time said stock is issued.
ARTICLE IV
MEETINGS OF STOCKHOLDERS
<PAGE>
Section 1. ANNUAL MEETING. The first regular annual meeting of the
stockholders of this corporation shall be held in the year of 1946 and all
subsequent annual meetings of the stockholders of this corporation shall be held
annually at Des Moines, Iowa, at such time and place as the Board of Directors
shall fix and determine, provided not less than ten (10) days' notice in
writing is given each stockholder entitled to vote, by mailing the same to his
last known address.
Section 2. SPECIAL MEETINGS. Special meetings of the stockholders, except
for the election of directors, may be called at any time by the president, and
shall be called by the president or secretary of this corporation upon the call
of the Board of Directors by a resolution duly adopted so providing and
directing and notice thereof shall be given the stockholders by written or
printed notice stating the object, time and place of such meeting, and shall be
mailed to the last known address of each stockholder, as shown by the books and
records of this corporation at least fifteen (15) days prior to such meeting.
Section 3. VOTING PRIVILEGE. At all meetings of the stockholders each
Common stockholder shall be entitled to one vote for each share of stock owned
and held by him or it.
Section 4. QUORUM. At annual and special meetings of the stockholders,
the stockholders of this corporation represented in person or by duly authorized
representative shall constitute a quorum at all meetings of the stockholders.
Section 5. ORDER OF BUSINESS. The order of business at all stockholders'
meetings insofar as possible and appropriate shall be as follows:
a. Call of Roll.
b. Reading and disposing of any unapproved minutes.
c. Reports of officers and committees.
d. Unfinished business.
e. New business.
f. Election of directors.
g. Adjournment.
ARTICLE V
(Stockholders' By-Law)
BOARD OF DIRECTORS
(Classification - Qualification - Nomination - Terms and Election)
Section 1. MANAGEMENT. The business and affairs of this corporation shall
be managed by a Board of Directors of not less than twelve (12) nor more than
twenty-one (21), divided into two classes, district directors and directors at
large, and the district directors shall be elected to serve for terms of three
(3) years and until their successors are elected and qualified, and the
<PAGE>
directors at large shall be elected to serve for terms of two (2) years and
until their successors are elected and qualified.
Section 2. NUMBER, QUALIFICATION AND ELECTION OF DIRECTORS. The board of
directors shall be constituted, as follows: There shall be twelve (12)
directors who shall be residents of the State of Iowa and active members of the
board of directors of the Iowa Farm Bureau Federation, nine (9) of whom shall be
district directors, and three (3) of whom shall be directors at large elected to
serve for a term of two (2) years and until their successors are elected and
qualified; plus one (1) director at large elected to serve for a term of two (2)
years and until his successor is elected and qualified from each state, other
than the state of the domicile of the corporation, in which this corporation is
licensed and authorized to transact and conduct its insurance business, other
than for the purpose of investments or reinsurance, who shall be an active
member of the board of directors of the Farm Bureau corporation of each such
state; at such time as the premium volume in any state other than the state of
domicile equals or exceeds one-sixth (1/6) of the premium volume in Iowa, such
other state shall be entitled to one (1) district director and shall be further
entitled to an additional district director each time such state attains an
additional premium volume equal to one-twelfth (1/12) of the premium volume in
Iowa. The number of district directors in each such state, if any, shall be
reduced whenever the premium volume in such state is less than the premium
volume required above to attain such director and the difference is greater than
one twenty-fourth (1/24) of the premium volume in Iowa. Adjustments in the
number of district directors shall be made at the time of the regular annual
meeting of this corporation based upon premium volume defined as the
direct-business premiums and annuity considerations received less dividends
allowed in the preceding fiscal year. In the event there is to be a downward
adjustment in board representation, as provided for above, then and in that
event the board of directors' nominating committee for such state, as
hereinafter provided for, shall determine and designate which district director
or directors are to be continued in office and the board of directors upon
receiving such determination and designation shall forthwith accept the
resignation of the board member who is not continuing, said resignation to be
effective as of the date of the board meeting held in connection with the annual
meeting of the company, and in the event said board of directors' nominating
committee for said state fails to act and so designate then and in that event
the board of directors shall accept the resignation of the district director
from said state whose term has the least number of years to run, and if there be
more than one such district director, then said terminating director shall be
chosen by lot among them. All district directors shall be elected to serve for
a term of three (3) years and until their successors are elected and qualified
from districts and in the manner hereinafter in these ByLaws provided, except
that a district director newly qualified from a state, other than the state of
domicile of this corporation, may at the discretion of the nominating committee
of his state, be elected for a term of one (1) or two (2) years in order to
provide for staggered terms of district directors from said state.
Each district director must be an active member of the board of directors
of the Farm Bureau corporation of his state of residence and whenever he ceases
to be a director of the board of directors of such state Farm Bureau
corporation, there shall be a vacancy in the office of director of this
corporation.
Section 3. DISTRICTS DEFINED.
<PAGE>
(a) The State of Iowa shall be divided into nine (9) districts numbered
from one (1) to nine (9), which districts shall be defined, as
follows:
DISTRICT 1- Alameda, Black Hawk, Bremer, Buchanan, Chickasaw, Clayton,
Delaware, Dubuque, Fayette, Howard, Winneshiek;
DISTRICT 2- Butler, Cerro Gordo, Floyd, Franklin, Hancock, Humboldt,
Kossuth, Mitchell, Winnebago, Worth, Wright;
DISTRICT 3- Cherokee, Clay, Buena Vista, Dickinson, Emmet, Lyon, O'Brien,
Osceola, Palo Alto, Plymouth, Pocahontas, Sioux;
DISTRICT 4- Audubon, Calhoun, Carroll, Crawford, Guthrie, Harrison, Ida,
Monona, Sac, Woodbury, Shelby;
DISTRICT 5- Boone, Dallas, Greene, Grundy, Hamilton, Hardin, Jasper,
Marshall, Polk, Story, Webster;
DISTRICT 6- Benton, Cedar, Clinton, Iowa, Jackson, Johnson, Jones, Linn,
Poweshiek, Scott, Tama;
DISTRICT 7- Davis, Des Moines, Henry, Jefferson, Lee, Louisa, Keokuk,
Muscatine, Van Buren, Wapello, Washington;
DISTRICT 8- Appanoose, Clarke, Decatur, Lucas, Mahaska, Marion, Monroe,
Madison, Warren, Wayne;
DISTRICT 9- Adams, Adair, Cass, Fremont, Mills, Montgomery, Pottawattamie,
Page, Ringgold, Taylor, Union.
(b) DISTRICTS DEFINED IN STATES OTHER THAN THE STATE OF THE DOMICILE OF
THIS CORPORATION. On and after the date any state, other than the
state of the domicile of this corporation, is entitled to one (1)
district director, said state shall constitute one (1) district, and
when such state is entitled to more than one district director as
herein provided said state may, if its nominating committee so
determines, divide itself into such number of districts as there are
district directors, or, in the alternative, said state may elect its
district directors on a state-wide basis and said directors shall
serve for the same terms as all other district directors. When a
state, other than the state of domicile of this corporation, is
entitled to an additional director, as hereinbefore provided, the
secretary of this corporation shall in writing so advise the
nominating committee of said state (the board of directors of the
state Farm Bureau corporation) and said committee shall then nominate
an eligible person, as defined in this Article, and file in writing
with the secretary of this corporation the name of such nominee
properly certified in the manner and in accordance with the terms of
Section 4 of this Article. The Board of Directors of this corporation
shall at its next meeting elect said nominee
<PAGE>
as a district director of this corporation to serve until the next
regular annual meeting of this corporation and until his successor is
elected and qualified.
SECTION 4. NOMINATION OF DIRECTORS- NOMINATING COMMITTEES. The Board of
Directors of the state Farm Bureau corporation of the state of the domicile of
this corporation and of any other state in which this corporation is licensed
and is authorized to transact its insurance business shall each, respectively,
constitute and be a stockholders' nominating committee for each state. Each
such state's nominating committee shall nominate the person or persons who are
eligible and qualified to be elected as directors of this corporation from such
state, as hereinbefore provided, and shall submit and file in writing with the
secretary of this corporation the names of such nominees, including the name of
the nominee, if any, who has been nominated and elected by the Board of
Directors as a district director since the date of the last annual meeting of
the stockholders of this corporation, not less than thirty (30) days prior to
the date of the meeting of the stockholders of this corporation at which they
are to be elected, and the secretary of this corporation shall submit the names
of such nominees to a nominating committee appointed by the president of this
corporation which said committee shall report and submit to the stockholders for
election only the names of those so nominated, if eligible, and no one else
shall be eligible for election to the Board of Directors of this corporation.
Section 5. MEMBERS OF BOARD OF DIRECTORS. The following named persons
shall constitute the Board of Directors of this corporation and shall serve for
the terms set opposite their names and until their successors are elected and
qualified. At the annual meeting of the stockholders of this corporation to be
held in the year 1970, and at each annual meeting thereafter, there shall be
elected such number of district directors as terms expire as of the date of such
annual meeting for a term of three (3) years and until their successors are
elected and qualified, and such number of directors at large as terms expire as
of the date of such annual meeting for a term of two (2) years and until their
successors are elected and qualified.
<TABLE>
<CAPTION>
(Directors at Large)
NAME ADDRESS EXPIRATION DATE OF TERM
---- ------- -----------------------
<S> <C> <C>
J. Merrill Anderson RFD #1, Newton, Iowa 1970
Dean Kleckner Rudd, Iowa 1971
Mrs. Herbert Johnson RFD #1, Charles City, Iowa 1971
P. Dillon Hempstead Houston, Minnesota 1970
Roland G. Nelson Mead, Nebraska 1970
Kenneth McIntyre Harwood, North Dakota 1971
</TABLE>
<TABLE>
<CAPTION>
(District Directors)
DISTRICT NAME ADDRESS EXPIRATION DATE OF TERM
- -------- ---- ------- -----------------------
<S> <C> <C> <C>
1 K. H. Hoppenworth RFD #1, Tripoli, Iowa 1971
2 Edward Engstrom RFD #1, Kanawha, Iowa 1970
3 Lyle R. Stephens LeMars, Iowa 1971
<PAGE>
4 T. Selmer Hodne Box 103, Manilla, Iowa 1972
5 R. N. Burt RFD #1, Marshalltown, Iowa 1971
6 Robert Joslin RFD #2, Clarence, Iowa 1972
7 Fred Holsteen RFD #1, West Point, Iowa 1970
8 Lawrence W. Everett RFD, New Sharon, Iowa 1972
9 William E. McGrew Emerson, Iowa 1970
</TABLE>
Section 6. ELIGIBILITY OF OFFICERS. No person shall be eligible to be
elected by the Board of Directors of this corporation to the offices of
president and vice-president of this corporation unless he is a resident of the
State of Iowa, an active member of the board of directors of the Iowa Farm
Bureau Federation. No person shall be eligible to be elected by the Board of
Directors of this corporation to the offices of secretary and treasurer of this
corporation unless he is a resident of the State of Iowa and the active
secretary and active treasurer of the Iowa Farm Bureau Federation.
Section 7. MEETINGS. The regular organization meeting of the Board of
Directors shall be held immediately after each annual meeting of the
stockholders, or as soon thereafter as a quorum of the Board of Directors can
be obtained for the election of officers and the transaction of any other
business which may properly be brought before the meeting and no notice of said
organization meeting shall be required.
Regular meetings of the Board of Directors shall be held quarterly at such
time and place and upon such notice as the directors may fix by resolution.
Special meetings may be called upon the order of the president. Notice of the
time, place and purpose of special meetings shall be given at least two (2) days
previous thereto by oral or written notice delivered personally or mailed to the
several directors at their last known address. Any director may waive notice of
any meeting of the Board of Directors. The attendance of a director at any
meeting shall constitute a waiver of notice of such meeting.
Section 8. QUORUM. A majority of the entire number of the Board of
Directors shall constitute a quorum of the board for the transaction of business
at any meeting of the Board of Directors. A majority vote of the members
present in quorum shall determine any matters not herein or in the Articles and
ByLaws requiring a different vote. If less than a majority of the directors may
be present at any meeting, a majority of the members present may adjourn the
meeting from time to time without further notice.
Section 9. VACANCIES. The Board of Directors shall fill all vacancies
occurring in its membership and that of the officers of this corporation by the
election of a person eligible to serve as such, as in these ByLaws authorized
and provided, and a director or officer so elected to fill a vacancy shall serve
for the unexpired term of the director or officer whose vacancy he was elected
to fill and/ or until his successor is elected and qualified. Whenever a member
of the Board of Directors of this corporation ceases to be eligible by reason of
the termination of his membership as an active member of the Board of Directors
of the Iowa Farm Bureau Federation , or of a state Farm Bureau corporation of a
state in which this corporation is licensed and authorized to transact its
insurance business, there shall be a vacancy in the office of said director as a
member of the Board of Directors of this corporation, and the Board of Directors
of this
<PAGE>
corporation shall fill such vacancy by electing the person nominated and
eligible to be elected as a director of this corporation, as in these ByLaws
provided, to serve until the next regular annual meeting of the stockholders of
this corporation and until his successor is elected and qualified, and his name
shall be placed in nomination for election as a director of this corporation by
the nominating committee and elected to serve for the remainder of a two-year
term if a director at large, and a three-year term if a district director, and
until his successor is elected and qualified.
Section 10. This Article V of the ByLaws of this corporation is a bylaw
adopted by the stockholders of this corporation in accordance with the laws of
this state and the Articles of Incorporation, as amended, of this corporation,
and may be amended only as authorized and provided in Article XI of these
ByLaws.
ARTICLE V-A
BOARD OF DIRECTORS- GENERAL PROVISIONS
Section 1. RULES AND REGULATIONS. The Board of Directors may from time
to time adopt rules and regulations and such rules and regulations shall
constitute by reference a part of these ByLaws, and shall be binding upon the
stockholders of this corporation and upon anyone doing business with this
corporation.
Section 2. COMMITTEES.
(a) AUDIT AND BUDGET. The audit and budget committee shall consist of
three (3) members who shall be members of the Board of Directors and shall be
appointed by the president and approved by the Board of Directors. The chairman
thereof shall be designated by the president. This committee shall review at
periodic intervals, all receipts received and all disbursements made from the
funds of the corporation and perform such other duties as may be delegated to it
by the Board of Directors.
(b) INVESTMENT. The investment policy of the corporation shall be
determined by the Board of Directors, which shall have the power to determine
the classes of investments and the percentage of investment to be made within
each of said classifications, subject to and in accordance with the provisions
of Section 515.35, Code of Iowa, 1966. The investment committee shall consist
of the president, secretary, treasurer, general counsel and the general manager
of the corporation, all of whom shall serve by virtue of their office. The
president shall serve as chairman of said committee and in the absence of the
president, those present shall designate an acting chairman. The committee
shall elect its secretary. The secretary of the committee shall keep a complete
record of the proceedings thereof. The investment committee shall make a report
to the Board of Directors each month, which report shall show the investments
purchased, sold or retired during the month immediately preceding, and in
addition, said committee shall, annually, make a full report to the Board of
Directors, covering all investment activities with particular reference to
purchases and sales during the preceding fiscal year. The Board of Directors
may call for special reports on investments at any time they so desire.
<PAGE>
The investment committee shall have the duty and the power to authorize and
direct the mode, manner and time of making and calling in investments, and the
sale or transfer of investments and the reinvestment of the proceeds thereof,
and to examine all funds and securities as often as they deem necessary or when
required to do so by the Board of Directors. The investment committee shall
have the duty and authority from time to time and whenever necessary to
authorize the execution of all contracts, deeds, conveyances and any other
instruments of the corporation necessary for the assignment, transfer and sale
of investments of the corporation requiring corporate signature. A majority of
the members of the committee shall constitute a quorum. There shall also be a
purchasing committee, which said committee shall consist of this corporation,
all of whom shall serve by virtue of their office. The treasurer shall serve as
chairman of said committee and in the absence of the treasurer, those present
shall designate an acting chairman. The purchasing committee shall select its
secretary who shall keep a complete record of the proceedings thereof. The
purchasing committee shall have the same power and authority, relative to the
handling, acquisition and disposition of investments of every kind and nature,
coextensive with the investment committee. A majority of the members of the
committee shall constitute a quorum. The purchasing committee shall make a
detailed report to the investment committee quarterly, covering the activities
of the purchasing committee for the preceding three months' period.
The investment of the funds of the corporation and the deposit of the
reserve on all policies and contracts issued by the corporation shall comply
with the laws of the State of Iowa.
Section 3. FIDELITY BONDS. The Board of Directors shall require the
officers, agents and employees having custody of any of its funds or property to
give the corporation a bond conditioned for the faithful discharge of the duties
of such person and in such amount and with such company as surety as the Board
of Directors shall require or approve. The cost of such bond shall be borne by
the corporation.
Section 4. AUDITS. The Board of Directors shall have an annual audit made
of the records of the corporation for submission to the members at the annual
meeting. The Board of Directors may have other audits made from time to time
whenever they shall deem such additional audits necessary.
ARTICLE VI
OFFICERS
(Officers - Election - Term - Duties)
Section 1. OFFICERS. The officers of this corporation shall be a
president, vice president, secretary and treasurer, and the office of secretary
and treasurer may be held by the same person. The Board of Directors may also
elect or appoint a general manager, an assistant general manager, assistant
secretaries, an assistant treasurer, a general counsel, an assistant general
counsel, an underwriting secretary, a medical director, an actuary and such
other officers as the interests of the company may require. The Board of
Directors shall have power to prescribe
<PAGE>
additional powers and duties for the officers and employees herein provided for,
and to change such powers and duties whenever the board may deem best.
Section 2. ELECTION AND TERM OF OFFICE. The president, vice president,
treasurer, and secretary shall be elected at the organization meeting of the
Board of Directors and all other officers shall be appointed or elected at such
time as the Board of Directors in its discretion shall determine. The term of
office of the president, vice president, treasurer and secretary shall be for
one (1) year, or until their successors are elected and qualified. The term of
office of all other elected or appointed officers shall be at the will and
pleasure of the Board of Directors.
Section 3. DUTIES OF OFFICERS.
(a) PRESIDENT. The president shall preside over all meetings of the Board
of Directors and meetings of the stockholders; shall execute personally or
through an agent duly authorized by the Board of Directors, in behalf of the
corporation, all contracts, deeds or other instruments which have been approved
by the Board of Directors; shall be a member ex-officio of all committees of the
Board of Directors; and shall have general supervision and administrative
control over all of the affairs of the corporation.
(b) VICE PRESIDENT. In the absence or the inability or disability of the
president, or his refusal to act, his duties shall devolve upon and be
discharged by the vice president.
(c) SECRETARY. The secretary shall be the custodian of all books, papers,
records, documents, official seal and property of the corporation, except as
otherwise authorized by the Board of Directors. He shall conduct by himself or
through such assistant secretaries and other subordinates such business as shall
be authorized by the Board of Directors; he shall serve or cause to be served,
printed and published, such notice as shall be required by law, by these ByLaws
and by resolutions of the Board of Directors; he shall keep the corporate
records, carry on all proper correspondence and shall act as secretary in the
meetings of the stockholders and the Board of Directors, and shall perform such
other administrative duties as shall be assigned to him from time to time by the
Board of Directors.
(d) TREASURER. The treasurer shall have charge of the funds of the
corporation and shall pay them out as ordered by the Board of Directors. He
shall keep an accurate account of receipts and disbursements and submit a
monthly report thereof to the Board of Directors at their regular meeting and
oftener as required; he shall also give a full and complete report at the annual
meeting of the stockholders.
(e) GENERAL MANAGER. Subject to the business and administrative policies
adopted by the Board of Directors from time to time and under the supervision
and direction of the Iowa Farm Administrative Board, the corporate manager, the
general manager shall be responsible for the supervision and direction of the
business and affairs of this corporation and its employees and agents.
(f) ASSISTANT GENERAL MANAGER. The assistant general manager shall, in
the absence of the general manager, perform the duties of the general manager;
he shall at other times have such
<PAGE>
duties and authority as shall be delegated to him and shall assist the general
manager and be subject to the supervision and direction of the general manager.
(g) ASSISTANT SECRETARY. The assistant secretary or secretaries shall
perform the duties of the secretary in the absence of the secretary and shall
perform such other duties as may from time to time be required by the Board of
Directors.
(h) ASSISTANT TREASURER. Such of the powers and duties vested in the
treasurer may be delegated by the Board of Directors to an assistant treasurer
or assistant treasurers as the Board of Directors in its discretion may deem
necessary or desirable. The assistant treasurer or assistant treasurers shall
be vested only such powers and duties as are so delegated. Assistant treasurers
shall, in the performance of their duties as delegated, be subject to the
direction, supervision and control of the treasurer.
(i) GENERAL COUNSEL. The general counsel, subject to the supervision of
the Board of Directors, shall be responsible for all matters of legal import
concerning the company.
(j) ASSISTANT GENERAL COUNSEL. The assistant general counsel shall, in
the absence of the general counsel, perform the duties of the general counsel;
he shall at other times have such duties and authority as shall be delegated to
him and shall assist the general counsel and be subject to the supervision and
direction of the general counsel.
(k) UNDERWRITING SECRETARY. It shall be the duty of the underwriting
secretary to have general supervision of the underwriting and acceptance of
risks and applications for insurance. No policy shall be issued unless the
application shall have first been approved by either the Underwriting Secretary
or an underwriter designated by him.
(l) MEDICAL DIRECTOR. It shall be the duty of the medical director to
have general supervision of medical underwriting and he shall be under the
general supervision of the underwriting secretary. He shall have supervision
over all medical examiners and cause to be kept such records as may be required
by the business of the company, and perform such other duties relating to the
underwriting of the company as shall from time to time be delegated to him.
(m) ACTUARY. The actuary shall be directly responsible to the general
manager and through him to the Iowa Farm Administrative Board, and through it to
the Board of Directors of this corporation for the performance and carrying out
of his responsibilities. It shall be the duty of the actuary to supervise the
compilation of all statistics and calculation of premium rates and the
allocation and distribution of surplus, and the performance of such other duties
as shall be assigned to him from time to time by the general manager.
ARTICLE VII
Section 1. KINDS OF INSURANCE. The Board of Directors shall determine the
kinds of insurance and the nature of the risks to be covered, subject and
pursuant to the provisions of the Articles of Incorporation, as amended, and the
applicable laws of the State of Iowa.
<PAGE>
Section 2. FORM OF POLICIES. The policies of insurance issued by the
company shall be in such form and upon such terms and conditions as may be
determined and authorized by the Board of Directors.
Section 3. PREMIUM. The Board of Directors shall fix the amount of the
premium and valuations for each policy and contract of insurance, with said
premiums to be paid monthly, quarterly, semi-annually or annually.
Section 4. REINSURANCE. The company may contract for reinsurance on its
own risks and may make and issue reinsurance contracts on the risks of others.
Such contracts may be on a participating or on a non-participating basis and may
be with or without contingent liability.
ARTICLE VIII
FISCAL YEAR
Section 1. FISCAL YEAR. The fiscal year of the company shall commence
with the first day of January of each year and terminate with the 31st day of
December each year.
ARTICLE IX
CORPORATE SEAL
Section 1. CORPORATE SEAL. The corporate seal of the corporation shall be
in the form of a circle and shall have inscribed therein the name of the
corporation and the words "Corporate Seal, Iowa."
ARTICLE X
EMPLOYEES
Section 1. EMPLOYEES. No person who is a member of the Board of
Directors, other than the president, and no person who is a relative of any
member of the Board of Directors or any officer of this corporation shall be
eligible for employment by the corporation.
ARTICLE XI
(Stockholders' By-Law)
AMENDMENTS TO BY-LAWS
Section 1. AMENDMENTS TO BYLAWS. The Board of Directors may, at its
pleasure, make and adopt ByLaws and amend the same which do not conflict with
the law or the Articles of Incorporation, as amended from time to time, or the
ByLaws adopted by the stockholders. No amendment shall be made to any ByLaw
which has been adopted by the stockholders unless the proposed amendment or
alteration has been filed in writing with the president and with the
<PAGE>
secretary of the corporation not less than sixty (60) days prior to the meeting
at which the amendment is to be offered and voted upon.
<PAGE>
AMENDMENTS TO THE
AMENDED AND SUBSTITUTED BY-LAWS
OF
FARM BUREAU LIFE INSURANCE COMPANY
Adopted August 26, 1975
AMEND ARTICLE I of the By-Laws, entitled CORPORATE NAME, LOCATION AND
PURPOSES, by striking Section 2 thereof in its entirety and by substituting in
lieu thereof the following:
"Section 2. LOCATION. The location of its principal or home office shall
be in West Des Moines, Polk County, Iowa."
AMEND ARTICLE IV, entitled MEETINGS OF STOCKHOLDERS, by striking Section 1
in its entirety and by substituting in lieu thereof the following:
"Section 1. REGULAR ANNUAL MEETING. The regular annual meeting of the
stockholders and of this corporation held in the year 1975, and all subsequent
annual meetings of the stockholders of this corporation shall be held annually
at such time and place and upon such notice as the Board of Directors shall from
time to time fix and determine. Such notice shall be given in writing and
mailed to the stockholders' last known address as shown by the books and records
of the corporation not less than ten (10) days prior to such meeting, informing
the stockholders of the place, date and hour of said stockholders' meeting, and
said meeting shall be held in West Des Moines, Iowa, or at such other place in
Polk County, Iowa, as the Board of Directors may fix and determine, providing
notice of any such meeting at a place other than West Des Moines, Iowa, shall be
given to the stockholders in writing and mailed to the stockholders' last known
address as shown by the books and records of the corporation at least twenty
(20) days prior to such meeting, informing the stockholders of the place, date
and hour of said stockholders' meeting."
AMEND ARTICLE V-A, entitled BOARD OF DIRECTORS - GENERAL PROVISIONS, by
striking Section 2(a) in its entirety and by substituting in lieu thereof the
following:
"(a) BUDGET AND FINANCE. The budget and finance committee shall consist
of three (3) members who shall be members of the Board of Directors and shall be
appointed by the president and approved by the Board of Directors. The chairman
thereof shall be designated by the president. This committee shall review at
periodic intervals, all receipts and all disbursements made from the funds of
the corporation and perform such other duties as may be delegated to it by the
Board of Directors."
FURTHER AMEND ARTICLE V-A, by striking from Section 2(b), entitled
INVESTMENT, the figures and words "515.35, Code of Iowa, 1966" appearing in line
five thereof and by substituting in lieu thereof the figures and words "511.8,
Code of Iowa, 1975."
AMEND ARTICLE IX, entitled CORPORATE SEAL, by striking said Article in its
entirety and by substituting in lieu thereof the following:
<PAGE>
"ARTICLE IX
CORPORATE SEAL
Section 1. CORPORATE SEAL. The corporation shall have a corporate seal
and shall have inscribed thereon, 'Farm Bureau Life Insurance Company, Corporate
Seal, Iowa.'"
<PAGE>
AMENDMENT TO
AMENDED AND SUBSTITUTED BY-LAWS
FARM BUREAU LIFE INSURANCE COMPANY
26 November, 1975
ARTICLE XII
INDEMNIFICATION - OFFICERS, DIRECTORS AND EMPLOYEES
This corporation shall make indemnification to the following extent and
under the following circumstances:
a. To indemnify any person who was or is a party or 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 or the corporation) by reason of the fact that
he is or was a director, officer, employee, or agent of the corporation, or is
or was serving at the request of the corporation 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 interest of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit, or proceeding by judgment, order, settlement, conviction, or upon
a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
b. To indemnify 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 corporation to procure a judgment in its favor by reason of
the fact that he is or was a director, officer, employee, or agent of the
corporation, or is or was serving at the request of the corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorney's 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 corporation and except that no indemnification shall 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 this duty to the corporation unless and only to the extent that the court in
which such action or suit was brought shall determine 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.
<PAGE>
c. To the extent that a director, officer, employee, or agent of the
corporation has been successful on the merits or otherwise in defense of any
action, suit, or proceeding referred to in paragraphs "a" and "b," or in defense
of any claim, issue, or matter herein, he shall be indemnified against expenses
(including attorney's fees) actually and reasonably incurred by him in
connection therewith.
d. Any indemnification under paragraphs "a" and "b" (unless ordered by a
court) shall be made by the corporation only as authorized in the specific case
upon a determination that the indemnification of the director, officer,
employee, or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in paragraphs "a" and "b." Such
determination shall be made (1) by the board of directors by a majority vote of
a quorum consisting of directors who were not parties to such action, suit, or
proceeding, or (2) if such a quorum is not obtainable, or, even if obtainable, a
quorum of disinterested directors so directs, by independent legal counsel in a
written opinion, or (3) by the shareholders.
e. Expenses, including attorney fees, incurred in defending a civil or
criminal action, suit, or proceeding may be paid by the corporation in advance
of the final disposition of such action, suit, or proceeding as authorized in
the manner provided in paragraph "d" upon receipt of an undertaking by or on
behalf of the director, officer, employee, or agent to repay such amount unless
it shall ultimately be determined that he is entitled to be indemnified by the
corporation as authorized in this section.
f. The indemnification provided by this section shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any bylaw, agreement, vote of shareholders or disinterested directors, or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who ceased to be a director, officer, employee, or agent and shall inure to the
benefit of the heirs, executors, and administrators of such person.
g. The corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee, or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee, or agent of another corporation, partnership, joint
venture, trust, or other enterprise against any liability asserted against him
and incurred by him in any such capacity or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under the provisions of this section.
<PAGE>
Section 9. VACANCIES. The Board of Directors shall fill all vacancies
occurring in its membership and that of the officers of this corporation by the
election of a person eligible to serve as such, as in these ByLaws authorized
and provided, and a director or officer so elected to fill a vacancy shall serve
for the unexpired term of the director or officer whose vacancy he was elected
to fill and/ or until his successor is elected and qualified.
Whenever a member of the Board of Directors of this corporation ceases to
be eligible by reason of the termination of his membership as an active member
of the Board of Directors of the Iowa Farm Bureau Federation, or of a state Farm
Bureau corporation of a state in which this corporation is licensed and
authorized to transact its insurance business, there shall be a vacancy in the
office of said director as a member of the Board of Directors of this
corporation, and the Board of Directors of this corporation shall fill such
vacancy by electing the person nominated and eligible to be elected as a
director of this corporation, as in these ByLaws provided, to serve for the
unexpired term of the director whose vacancy he was elected to fill and/ or
until his successor is elected and qualified.
<PAGE>
Adopted: September 30, 1980
AMENDMENTS TO THE
AMENDED AND SUBSTITUTED BY-LAWS
OF
FARM BUREAU LIFE INSURANCE COMPANY
AMEND ARTICLE V-A, Section 2(b), entitled "Investment," by striking it in
its entirety and substituting in lieu thereof the following:
"(b) INVESTMENT AND PURCHASE COMMITTEE. The investment policy of the
Corporation shall be determined by the Board of Directors, which shall have the
power to determine the classes of investments and the percentage of investment
to be made within each of said classifications, subject to and in accordance
with the provisions of Section 511.8 of the 1979 Code of Iowa. The Investment
and Purchase Committee shall consist of the secretary, treasurer and general
counsel and the general manager of the Corporation and the head of the
Investment Department shall be an ex officio member of this Committee without
portfolio, all of whom shall serve by virtue of their office. The treasurer
shall serve as chairman of said Committee and in his absence the general counsel
shall act as chairman; the Committee shall elect its secretary. The secretary
of the Committee shall keep a complete record of the proceedings thereof. The
Investment and Purchase Committee shall make a report to the Board of Directors
each month, which report shall show the investments purchased, sold, or retired
during the month immediately preceding, and in addition, said Committee shall,
annually, make a full report to the Board of Directors, covering all investment
activities with particular reference to purchases and sales during the preceding
fiscal year. The Board of Directors may call for special reports on investments
at any time they so desire.
The Investment and Purchase Committee shall have the duty and the power to
authorize and direct the mode, manner and time of making and calling in
investments, and the sale or transfer of investments and the reinvestment of the
proceeds thereof, and to examine all funds and securities as often as they deem
necessary or when required to do so by the Board of Directors. The Investment
and Purchase Committee shall have the duty and authority from time to time and
whenever necessary to authorize the execution of all contracts, deeds,
conveyances and any other instruments of the Corporation necessary for the
assignment, transfer and sale of investments of the Corporation requiring
corporate signature. A majority of the members of the Committee shall
constitute a quorum.
The investment of the funds of the Corporation and the deposit of the
reserve on all policies and contracts issued by the Corporation shall comply
with the laws of the State of Iowa."
<PAGE>
AMENDMENTS
TO THE
AMENDED AND SUBSTITUTED BY-LAWS
OF
FARM BUREAU LIFE INSURANCE COMPANY
West Des Moines, Iowa
AMEND ARTICLE III, Section 1, entitled "AUTHORIZED CAPITAL", by striking
the first paragraph in its entirety and by substituting in lieu thereof the
following:
"Section 1. AUTHORIZED CAPITAL. The authorized capital stock of this
corporation is One Million Five Hundred Fifty Thousand Dollars ($1,550,000.00),
divided into thirty one thousand (31,000) shares, of which amount twenty-five
thousand (25,000) shares of the par value of Fifty Dollars ($50.00) per share,
amounting to One Million Two Hundred Fifty Thousand Dollars ($1,250,000) is
Common Stock, and six thousand (6,000) shares of the par value of Fifty Dollars
($50.00) per share, amounting to Three Hundred Thousand Dollars ($300,000) is
seven and one-half per cent (7 1/2%) cumulative First Preferred Stock."
AMEND ARTICLE III, Section 2 (a)., entitled "COMMON STOCK", by striking the
second paragraph in its entirety and substituting in lieu thereof the following:
"If, after providing for the payment of full dividends for any fiscal year
on the First Preferred Stock and for any balance that remains due on the
cumulative dividends of such First Preferred Stock, there shall remain any
surplus net earnings or profits not in the opinion of the board of directors
required for the operation of the business of this corporation or for the
payment of its liabilities, it shall be applicable to dividends upon the Common
Stock for such fiscal year when and as from time to time the same shall be
declared by the board of directors, which dividend shall not be cumulative but
shall only be paid as surplus net earnings or profits are available and
dividends are declared. Such dividends shall be ratable in proportion to the
number of shares of Common stock issued and outstanding."
AMEND ARTICLE III, Section 3, entitled "LIMITATION ON DIVIDENDS" by
striking the Section in its entirety.
<PAGE>
Adopted March 1, 1984
AMENDMENTS TO THE
AMENDED AND SUBSTITUTED BY-LAWS
OF
FARM BUREAU LIFE INSURANCE COMPANY
AMEND ARTICLE V-A, Section 2(b), entitled "Investment," by striking it in
its entirety and substituting in lieu thereof the following:
(b) INVESTMENT COMMITTEE. The investment policy of the Corporation shall
be determined by the Board of Directors, which shall have the power to determine
the classes of investments and the percentage of investment to be made within
each of said classifications, subject to and in accordance with the provisions
of Section 511.8 of the Code of Iowa, as amended. The Investment Committee
shall consist of the Secretary, Treasurer, General Counsel, General Manager,
Assistant General Manager, Controller and Financial Planning Officer, Vice
President Life and Health Insurance, and Vice President Investments of the
Corporation, all of whom shall serve by virtue of their office. The Treasurer
shall serve as chairman of said Committee and in his absence the General Counsel
shall act as chairman; the Committee shall elect its Secretary. The secretary
of the Committee shall keep a complete record of the proceedings thereof. The
Investment Committee shall make a report to the Board of Directors each month,
which report shall show the investments purchase, sold or retired during the
month immediately preceding, and in addition, said Committee shall, annually,
make a full report to the Board of Directors, covering all investment activities
with particular reference to purchases and sales during the preceding fiscal
year. The Board of Directors may call for special reports on investments at any
time they so desire.
The Investment Committee shall have the duty and the power to authorize
and direct the mode, manner and time of making and calling in investments, and
the sale or transfer of investments and the reinvestment of the proceeds
thereof, and to examine all funds and securities as often as they deem necessary
or when required to do so by the Board of Directors. The Investment Committee
shall have the duty and authority from time to time and whenever necessary to
authorize the execution of all contracts, deeds, conveyances and any other
instruments of the Corporation necessary for the assignment, transfer and sale
of investments of the Corporation requiring corporate signature. A majority of
the members of the Committee shall constitute a quorum.
The investment of the funds of the Corporation and the deposit of the
reserve on all policies and contracts issued by the Corporation shall comply
with the laws of the State of Iowa.
AMEND ARTICLE III, Section 4., entitled "REGISTERED OWNER" by renumbering
as Section 3.
AMEND ARTICLE III, Section 5., entitled "TRANSFER OF STOCK" by renumbering
as Section 4.
<PAGE>
AMEND ARTICLE III, Section 6., entitled "STOCKHOLDERS' CONTRACTS" by
renumbering as Section 5.
AMEND ARTICLE III, Section 7., entitled "ISSUANCE OF STOCK" by renumbering
as Section 6.
<PAGE>
PARTICIPATION AGREEMENT
Among
FBL VARIABLE INSURANCE SERIES FUND,
FBL INVESTMENT ADVISORY SERVICES, INC.,
And
FARM BUREAU LIFE INSURANCE COMPANY
THIS AGREEMENT, made and entered into this 1st day of March, 1990, by and
between FARM BUREAU LIFE INSURANCE COMPANY, hereinafter the "Company") on its
own behalf and on behalf of FARM BUREAU LIFE VARIABLE ACCOUNT (hereinafter the
"Account"), a segregated asset account of the Company, and the FBL VARIABLE
INSURANCE SERIES FUND, an unincorporated business trust organized under the laws
of the Commonwealth of Massachusetts (hereinafter the "Fund") and FBL INVESTMENT
ADVISORY SERVICES, INC. (hereinafter the "Underwriter").
WHEREAS, the Fund engages in business as an open-end management investment
company and is available to act as the investment vehicle for separate accounts
established for variable life insurance policies and variable annuity contracts
(collectively referred to herein as "Variable Insurance Products") to be offered
by insurance companies which have entered into participation agreements
substantially identical to this Agreement (hereinafter "Participating Insurance
Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into several series
of shares, each designated a "Portfolio" and representing the interest in a
particular managed portfolio of securities and other assets; and
WHEREAS, the Fund has obtained an order from the Securities and Exchange
Commission, dated November 2, 1987, (File No. 812-6855), granting Participating
Insurance Companies and variable life insurance separate accounts exemptions
from the provisions of sections 9(a), 13(a), 15(a), and 15(b) of the Investment
Company Act of 1940, as amended (hereinafter the "1940 Act"), and Rules
6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent necessary to permit
shares of the Fund to be sold to and held by variable annuity and variable life
insurance separate accounts of both affiliated and unaffiliated life insurance
companies (hereinafter the "Shared Funding Exemptive Order"); and
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, the Company has registered or will register under the 1933 Act
certain variable life insurance policies and/ or variable annuity contracts with
the form number(s) which are listed on Schedule A attached hereto and
incorporated herein by this reference, as such Schedule A may be amended from
time to time hereafter by mutual written agreement of all the parties hereto
(hereinafter the "Contracts"); and
<PAGE>
WHEREAS, the Account is a duly organized, validly existing segregated asset
account, established by resolution of the Board of Directors of the Company on
March 3, 1987, to set aside and invest assets attributable to the Contracts; and
WHEREAS, the Company has registered or will register the Account as a unit
investment trust under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker-dealer with the
Securities and Exchange Commission (hereinafter the "Commission") under the
Securities Exchange Act of 1934, and is a member in good standing of the
National Association of Securities Dealers, Inc. (hereinafter "NASD"); and
WHEREAS, the Underwriter is also registered as an investment adviser with
the Securities and Exchange Commission under the Investment Advisers Act of 1940
and serves as an investment adviser to the Fund pursuant to an agreement dated
as of April 6, 1987 (the Underwriter when serving in such capacity is referred
to herein as the "Adviser");
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on behalf
of the Account to fund the Contracts and the Underwriter is authorized to sell
such shares at net asset value to unit investment trusts such as the Account;
NOW, THEREFORE, in consideration of the premises and of the mutual promises
and covenants hereinafter set forth, the Company, the Fund, and the Underwriter
agree as follows:
ARTICLE I. SALE OF FUND SHARES
1.1. The Underwriter agrees to sell to the Company those shares of the
Fund which the Account orders, executing such orders on a daily basis at the net
asset value next computed after receipt by the Fund or its designee of the order
for the shares of the Fund. For purposes of this Section 1.1, the Company shall
be the designee of the Fund for receipt of such orders from the Account and
receipt by such designee shall constitute receipt by the Fund, provided that the
Fund receives notice of such order from the Company by 10:30 a.m. central time
on the next following Business Day. "Business Day" shall mean any day on which
the New York Stock Exchange is open for trading and on which the Fund calculates
its net asset value pursuant to the rules of the Commission.
1.2. The Fund agrees to make its shares available indefinitely for
purchase at the applicable net asset value per share by the Company and its
Account on those days on which the Fund calculates its net asset value pursuant
to rules of the Commission; provided, however, that the Board of Trustees of the
Fund (hereinafter the "Trustees") may refuse to sell shares of any Portfolio to
any person, or suspend or terminate the offering of shares of any Portfolio, if
such action is required by law or by regulatory authorities having jurisdiction
or is, in the sole discretion of the Trustees acting in good faith and in light
of their fiduciary duties under Federal and any applicable state laws, necessary
in the best interests of the shareholders of any Portfolio.
<PAGE>
1.3. The Fund and the Underwriter agree that shares of the Fund will be
sold only to Participating Insurance Companies and their separate accounts. No
shares of any Portfolio will be sold to the general public.
1.4. The Fund and the Underwriter will not sell Fund shares to any
insurance company or separate account unless an agreement containing provisions
substantially the same as Articles I, III, V, and VII of this Agreement is in
effect to govern such sales.
1.5. The Fund agrees to redeem for cash, on the Company's request, any
full or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt by
the Fund or its designee of the request for redemption. For purposes of this
Section 1.5, the Company shall be the designee of the Fund for receipt of
requests for redemption from the Account and receipt by such designee shall
constitute receipt by the Fund, provided that the Fund receives notice of such
notice of such request for redemption from the Company by 10:30 a.m. central
time on the next following Business Day.
1.6. The Company agrees to purchase and redeem the shares of each
Portfolio offered by the then current prospectus of the Fund in accordance with
the provisions of such prospectus. The Company agrees that all net amounts
available under the Contracts shall be invested in the Fund, in such other Funds
advised by the Adviser as may be mutually agreed to in writing by the parties
hereto, or in the Company's general account, provided that such amounts may also
be invested in an investment company other than the Fund or such other Funds
advised by the Adviser as may be mutually agreed to in writing by the parties
hereto if (a) such other investment company, or series thereof, has investment
objectives or policies that are substantially different from the investment
objectives and policies of all the Portfolios of the Fund; or (b) the Company
gives the Fund and the Underwriter 45 days' written notice of its intention to
make such other investment company available as a funding vehicle for the
Contracts; or (c) such other investment company was available as a funding
vehicle for the Contracts prior to the date of this Agreement and the Company so
informs the Fund and the Underwriter prior to their signing this Agreement; or
(d) the Fund or Underwriter consents to the use of such other investment
company.
1.7. The Company shall pay for Fund shares on the next Business Day after
an order to purchase Fund shares is made in accordance with the provisions of
Section 1.1 hereof. The Fund shall pay redemption proceeds on the next Business
Day after a request to redeem shares is made in accordance with the provisions
of Section 1.5 hereof. Payment shall be in federal funds transmitted by wire.
1.8. Issuance and transfer of the Funds' shares will be by book entry
only. Stock certificates will not be issued to the Company or the Account.
Shares ordered from the Fund will be recorded in an appropriate title for the
Account or the appropriate subaccount of the Account.
1.9. The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of any income dividends or
capital gain distributions payable on the Fund's shares. The Company hereby
elects to receive all such dividends and distributions as are payable on the
Portfolio shares in additional shares of that Portfolio. The Company reserves
<PAGE>
the right to revoke this election and to receive all such dividends and
distributions in cash. The Fund shall notify the Company of the number of
shares so issued as payment of such dividends and distributions.
1.10. The Fund shall make the net asset value per share for each Portfolio
available to the Company on a daily basis as soon as reasonable practicable
after the net asset value per share is calculated and shall use its best efforts
to make such net asset value per share available by 4:30 p.m. central time.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1. The Company represents and warrants that the Contracts are or will be
registered under the 1933 Act and that the Contracts will be issued and sold in
compliance in all material respects with all applicable federal and state laws
and that each Contract owner shall be duly qualified and suitable under
applicable state insurance laws to purchase such Contract. The Company further
represents and warrants that it is an insurance company duly organized and in
good standing under applicable law and that it has legally and validly
established the Account as a segregated asset account under Section 508A.1 of
the Iowa Code (1985) and has registered the Account as a unit investment trust
in accordance with the provisions of the 1940 Act to serve as a segregated asset
account for the Contracts.
2.2. The Fund represents and warrants that Fund shares sold pursuant to
this Agreement shall be registered under the 1933 Act and duly authorized for
issuance in accordance with applicable law and that the Fund is and shall remain
registered under the 1940 Act. The Fund shall amend the Registration Statement
for its shares under the 1933 Act and the 1940 Act from time to time as required
in order to effect the continuous offering of its shares. The Fund shall
register and qualify the shares for sale in accordance with the laws of the
various states only if and to the extent deemed advisable by the Fund or the
Underwriter.
2.3. The Fund represents that it believes, in good faith, that it is
currently qualified as a Regulated Investment Company under Subchapter M of the
Internal Revenue Code of 1986 (hereinafter the "Code"), and that it will make
every effort to maintain such qualification (under Subchapter M or any successor
or similar provision) and that it will notify the Company immediately upon
having reasonable basis for believing that it has ceased to so qualify or that
it might not so qualify in the future.
2.4. The Company represents that it believes, in good faith, that the
Contracts are currently treated as annuity contracts or life insurance policies,
whichever is appropriate, under applicable provisions of the Code, and that it
will make every effort to maintain such treatment and that it will notify the
Fund and the Underwriter immediately upon having a reasonable basis for
believing the Contracts have ceased to be so treated or that they might not be
so treated in the future.
2.5. The Fund currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act or otherwise,
although it may make such payments in the future. To the extent that it decides
to finance distribution expenses pursuant to
<PAGE>
Rule 12b-1, the Fund undertakes to have a board of trustees, a majority of
whom are not interested persons of the Fund, formulate and approve any plan
under Rule 12b-1 to finance distribution expenses.
2.6. The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states
except that the Fund represents that the Fund's investment policies, fees and
expenses are and shall at all times remain in compliance with the insurance laws
of the State of Iowa and the Fund and the Underwriter represent that their
respective operations are and shall at all times remain in material compliance
with the insurance laws of the State of Iowa to the extent required to perform
this Agreement.
2.7. The Underwriter represents and warrants that it is a member in good
standing of the NASD and is registered as a broker-dealer with the Commission.
The Underwriter further represents that it will sell and distribute the Fund
shares in accordance with all applicable state and federal securities laws,
including without limitation the 1933 Act, the 1934 Act, and the 1940 Act.
2.8. The Fund represents that it is lawfully organized and validly
existing under the laws of the Commonwealth of Massachusetts and that it does
and will comply in all material respects with the 1940 Act.
2.9. The Underwriter represents and warrants that the Adviser is and shall
remain duly registered under all applicable federal and state securities laws
and that the Adviser shall perform its obligations for the Fund in compliance in
all material respects with applicable state and federal securities laws.
2.10. The Fund and Underwriter represent and warrant that all of their
respective directors, trustees, officers, employees, investment advisers, and
other individuals/ entities dealing with the money and/ or securities of the
Fund are and shall continue to be at all times covered by a blanket fidelity
bond or similar coverage for the benefit of the Fund in an amount not less than
$500,000. The aforesaid Bond shall include coverage for larceny and
embezzlement and shall be issued by a reputable bonding company.
ARTICLE III. PROSPECTUSES AND PROXY STATEMENTS; VOTING
3.1. The Underwriter shall provide the Company (at the Company's expense)
with as many copies of the Fund's current prospectus as the Company may
reasonably request. If requested by the Company in lieu thereof, the Fund shall
provide such documentation (including a final copy of the new prospectus as set
in type at the Fund's expense) and other assistance as is reasonably necessary
in order for the Company once each year (or more frequently if the prospectus
for the Fund is amended) to have the new prospectus for the Contracts and the
Fund's new prospectus printed together in one document (such printing to be at
the Company's expense).
<PAGE>
3.2. The Fund's prospectus shall state that the Statement of Additional
Information for the Fund is available from the Underwriter (or, in the Fund's
discretion, the Prospectus shall state that such Statement is available from the
Fund), and the Underwriter (or the Fund ), at its expense, shall provide such
Statement free of charge to the Company and to any owner of or participant under
a Contract or prospective owner or participant who requests such Statement.
3.3. The Fund shall provide the Company with one copy of its proxy
material, reports to shareholders and other communications to shareholders.
3.4. If and to the extent required by law the Company shall:
(i) solicit voting instructions from Contract owners or participants;
(ii) vote the Fund shares in accordance with instructions received from
Contract owners or participants; and
(iii) vote Fund shares for which no instructions have been received in the
same proportion as Fund shares of such Portfolio for which instructions have
been received;
so long as and to the extent that the Commission continues to interpret the 1940
Act to require pass-through voting privileges for variable contract owners. The
Company reserves the right to vote Fund shares held in any segregated asset
account or in its general account in its own right, to the extent permitted by
law. Participating Insurance Companies shall be responsible for assuring that
each of their separate accounts participating in the Fund calculates voting
privileges in a manner consistent with other Participating Insurance Companies.
3.5. The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular the Fund will either provide for
annual meetings or comply with Section 16(c) of the 1940 Act (although the Fund
is not one of the trusts described in Section 16(c) of that Act) as well as with
Sections 16(a) and, if and when applicable, 16(b). Further, the Fund will act
in accordance with the Commission's interpretation of the requirements of
Section 16(a) with respect to periodic elections of trustees and with whatever
rules the Commission may promulgate with respect thereto.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee, each piece of sales literature or other promotional
material in which the Fund, Adviser, or the Underwriter is named, at least
fifteen business days prior to its use. No such material shall be used if the
Fund or its designee object to such use within fifteen business days after
receipt of such material.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
<PAGE>
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund, or in
sales literature or other promotional material approved by the Fund or its
designee or by the Underwriter, except with the permission of the Fund or the
Underwriter or the designee of either.
4.3. The Fund, Underwriter, or its designee shall furnish, or shall cause
to be furnished, to the Company or its designee, each piece of sales literature
or other promotional material in which the Company or its separate account(s) is
named, at least fifteen business days prior to its use. No such material shall
be used if the Company or its designee object to such use within fifteen
business days after receipt of such material.
4.4. The Fund and the Underwriter shall not give any information or make
any representations on behalf of the Company or concerning the Company, the
Account, or the Contracts other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports for the Account which are in the public domain
or approved by the Company for distribution to Contract owners or participants,
or in sales literature or other promotional material approved by the Company or
its designee, except with the permission of the Company.
4.5. The Fund will provide to the Company at least one complete copy of
all registration statements, prospectuses, Statements of Additional Information,
reports, proxy statements, sales literature and other promotional materials,
applications for exemptions, requests for no-action letters, and all amendments
to any of the above, that relate to the Fund or its shares, promptly after the
filing of such document with the Commission or other regulatory authorities.
4.6. The Company will provide to the Fund at least one complete copy of
all registration statements, prospectuses, Statements of Additional Information,
reports, solicitations for voting instructions, sales literature and other
promotional materials, applications for exemptions, requests for no-action
letters, and all amendments to any of the above, that relate to the Contracts or
the or the Account, promptly after the filing of any document with the
Commission.
4.7. For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media), sales
literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, and registration statements,
prospectuses, Statements of Additional Information, shareholder reports, and
proxy materials.
ARTICLE V. FEES AND EXPENSES
<PAGE>
5.1. The Fund and the Underwriter shall pay no fee or other compensation
to the Company under this agreement, except that if the Fund or any Portfolio
adopts and implements a plan pursuant to Rule 12b-1 to finance distribution
expenses, then the Underwriter may make payments to the Company or to the
underwriter for the Contracts if and in amounts agreed to by the Underwriter in
writing. Currently, no such payments are contemplated.
5.2. All expenses incident to performance by the Fund under this Agreement
shall be paid by the Fund. The Fund shall see to it that all its shares are
registered and authorized for issuance in accordance with applicable federal law
and, if and to the extent deemed advisable by the Fund, in accordance with
applicable state laws prior to their sale. The Fund shall bear the expenses for
the cost of registration and qualification of the Fund's shares, preparation and
filing of the Fund's prospectus and registration statement, proxy materials and
reports, setting the prospectus in type, setting in type and printing the proxy
materials and reports to shareholders (including the costs of printing a
prospectus that constitutes an annual report), the preparation of all statements
and notices required by any federal or state law, all taxes on the issuance or
transfer of the Fund's shares, and any expenses permitted to be paid or assumed
by the Fund pursuant to a plan, if any, under Rule 12b-1.
5.3. The Company shall bear the expenses of printing and distributing the
Fund's prospectus to owners and participants of Contracts issued by the Company
and of distributing the Fund's proxy materials and reports to such Contract
owners or participants.
ARTICLE VI. DIVERSIFICATION
6.1. The Fund at all times will invest its assets in such a manner as to
ensure that the Contracts will be treated as variable contracts under the Code
and the regulations issued thereunder. Without limiting the scope of the
foregoing, the Fund will comply with Section 817(h) of the Code and the
regulations issued thereunder (Temporary Reg. Section 1.817-5T, September 12,
1986) relating to the diversification requirements for variable annuity,
endowment, and life insurance contracts, and with any amendments or other
modifications to such Section or regulations.
ARTICLE VII. POTENTIAL CONFLICTS
7.1. The Board of Trustees of the Fund (the "Board") will monitor the Fund
for the existence of any material irreconcilable conflict between the interests
of the contract owners of all separate accounts investing in the Fund. An
irreconcilable material conflict may arise for a variety of reasons, including:
(a) an action by any state insurance regulatory authority; (b) a change in
applicable federal or state insurance, tax, or securities laws or regulations,
or a public ruling, private letter ruling, no-action or interpretive letter, or
any similar action by insurance, tax, or securities regulatory authorities; (c)
an administrative or judicial decision in any relevant proceeding; (d) the
manner in which the investments of any Portfolio are being managed; (e) a
difference in voting instructions given by variable annuity contract and
variable life insurance contract owners; or (f) a decision by an insurer to
disregard the voting instructions of contract owners. The Board shall promptly
inform the Company if it determines that an irreconcilable material conflict
exists and the implications thereof.
<PAGE>
7.2. The Company will report any potential or existing conflicts of which
it is aware to the Board. The Company will assist the Board in carrying out its
responsibilities under the Shared Funding Exemptive Order, by providing the
Board with all information reasonably necessary for the Board to consider any
issues raised. This includes, but is not limited to, an obligation by the
Company to inform the Board whenever Contract owner voting instructions are
disregarded.
7.3. If it is determined by a majority of the Board, or a majority of its
disinterested Trustees, that a material irreconcilable conflict exists, the
Company and other Participating Insurance Companies shall, at their expense and
to the extent reasonably practicable (as determined by a majority of the
disinterested Trustees), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (a)
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to ) another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a vote
of all affected contract owners and, as appropriate, segregating the assets of
any appropriate group (i.e., annuity contract owners, life insurance contract
owners, or variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the affected
contract owners the option of making such a change; and (b) establishing a new
registered management investment company or managed separate account. A
majority of the disinterested members of the Board shall determine whether any
action proposed by the Participating Insurance Companies adequately remedies any
irreconcilable material conflict, but in no event will the Fund be required to
establish a new funding medium for the Contracts. The Company shall not be
required by this Section 7.2 to establish a new funding medium for the Contracts
if an offer to do so has been declined by vote of a majority of Contract owners
materially adversely affected by the irreconcilable material conflict. In the
event that the Board determines that any proposed action does not adequately
remedy any irreconcilable material conflict, then the Company will withdraw the
Account's investment in the Fund and terminate this Agreement within six (6)
months after the Board informs the Company in writing of the foregoing
determination; provided, however, that such withdrawal and termination may, at
the Company's option, be limited to the extent required by any such material
irreconcilable conflict as determined by a majority of the disinterested members
of the Board.
7.4. If a material irreconcilable conflict arises because of a decision by
the Company to disregard Contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Fund's election, to withdraw the Account's investment in
the Fund and terminate this Agreement; provided, however, that such withdrawal
and termination may, at the Company's election, be limited to the extent
required by the foregoing material irreconcilable conflict as determined by a
majority of the disinterested members of the Board. any such withdrawal and
termination must take place within six months after the Fund gives written
notice that this provision is being implemented, and, until the end of that
six-month period, the Underwriter and Fund shall continue to accept and
implement orders by the Company for the purchase (and redemption) of shares of
the Fund.
<PAGE>
7.5. If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw the
Account's investment in the Fund and terminate this Agreement within six months
after the Board gives written notice to the Company that it has determined that
such decision has created an irreconcilable material conflict; provided,
however, that such withdrawal and termination may, at the Company's option, be
limited to the extent required by the foregoing material irreconcilable conflict
as determined by a majority of the disinterested members of the Board. Until
the end of that six-month period, the Underwriter and Fund shall continue to
accept and implement orders by the Company for the purchase (and redemption) of
shares of the Fund.
7.6. If and to the extent that Rule 6e-2 and Rule 6e-3(T) under the 1940
Act are amended, or Rule 6e-3 is adopted, to provide exemptive relief from any
provision of the 1940 Act or the rules promulgated thereunder with respect to
mixed or shared funding (as defined in the Shared Funding Exemptive Order) on
terms and conditions materially different from those contained in the Shared
Funding Exemptive Order, then (a) the Fund and/ or the Participating Insurance
Companies, as appropriate, shall take such steps as may be necessary to comply
with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the
extent such rules are applicable; and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4,
and 7.5 of this Agreement shall continue in effect only to the extent that terms
and conditions substantially identical to such Sections are contained in such
rule(s) as so amended or adopted.
ARTICLE VIII. INDEMNIFICATION
8.1. INDEMNIFICATION BY THE COMPANY
8.1.(a). The Company agrees to indemnify and hold harmless the Fund and
each of its Trustees and officers and each person, if any, who controls the Fund
within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" for purposes of this Section 8.1) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with the written
consent of the Company) or litigation (including legal and other expenses), to
which the Indemnified Parties may become subject under any statute, regulation,
at common law or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) or settlements are related to the
sale or acquisition of the Fund's shares and:
(i) arise out of or are based upon any untrue statements or alleged untrue
statements of any material fact contained in the Registration Statement or
prospectus for the Contracts or contained in the Contracts or sales
literature for the Contracts (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, provided that this
agreement to indemnify shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission was made in
reliance upon and in conformity with information furnished to the Company
by or on behalf of the Fund for use in the Registration Statement or
prospectus for the Contracts or in the Contracts or sales literature (or
any
<PAGE>
amendment or supplement) or otherwise for use in connection with the sale
of the Contracts or Fund Shares; or
(ii) arise out of or as a result of statements or representations (other
than statements or representations contained in the registration statement,
prospectus or sales literature of the Fund not supplied by the Company or
persons under its control) or wrongful conduct of the Company or persons
under its control, with respect to the sale or distribution of the
Contracts or Fund Shares; or
(iii) arise out of any untrue statement or alleged untrue statement of a
material fact contained in a registration statement, prospectus, or sales
literature of the Fund or any amendment thereof or supplement thereto or
the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading if such a statement or omission was made in reliance upon
information furnished to the Fund by or on behalf of the Company; or
(iv) arise as a result of any failure by the Company to provide the
services and furnish the materials under the terms of this Agreement; or
(v) arise out of or result from any material breach of any representation
and/ or warranty made by the Company in this Agreement or arise out of or
result from any other material breach of this Agreement by the Company;
as limited by and in accordance with the provisions of Sections 8.1(b) and
8.1(c) hereof.
8.1 (b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's duties or by reason of such Indemnified Party's reckless
disregard of obligations or duties under this Agreement or to the Fund.
8.1(c). The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Company in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Company of any
such claim shall not relieve the Company from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Company shall be entitled to participate,
at its own expense, in the defense of such action. The Company also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from the Company to such party of the
Company's election to assume the defense thereof, the Indemnified Party shall
bear the fees and expenses of any additional counsel retained by it, and the
Company will not be liable to such party under this Agreement for any legal or
other
<PAGE>
expenses subsequently incurred by such party independently in connection with
the defense thereof other than reasonable costs of investigation.
8.1.(d). The Indemnified Parties will promptly notify the Company of the
commencement of any litigation or proceedings against them in connection with
the issuance or sale of the Fund Shares or the Contracts or the operation of the
Fund.
8.2. INDEMNIFICATION BY THE UNDERWRITER
8.2(a). The Underwriter agrees to indemnify and hold harmless the Company
and each of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.2) against any and all
losses, claims, damages, liabilities (including amount paid in settlement with
the written consent of the Underwriter) or litigation (including legal and other
expenses) to which the Indemnified Parties may become subject under any statute,
at common law or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) or settlements are related to the
sale or acquisition of the Fund's shares and:
(i) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement or
prospectus or sales literature of the Fund (or any amendment or supplement
to any of the foregoing), or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading,
provided that this agreement to indemnify shall not apply as to any
Indemnified Party if such statement or omission was made in reliance upon
and in conformity with information furnished to the Underwriter by the Fund
by or on behalf of the Company for use in the Registration Statement or
prospectus for the Fund or in sales literature (or any amenment or
supplement) or otherwise for use in connection with the sale of the
Contracts or Fund Shares; or
(ii) arise out of or as a result of statements or representations (other
than statements or representations contained in the registration statement,
prospectus or sales literature for the Contracts not supplied by the
Underwriter or persons under its control) or wrongful conduct of the Fund
or Underwriter or persons under their control, with respect to the sale or
distribution of the contracts of Fund shares; or
(iii) arise out of any untrue statement or alleged untrue statement of a
material fact contained in a registration statement, prospectus, or sales
literature covering the Contracts, or any amendment thereof or supplement
thereto, or the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, if such statement or omission was made in reliance
upon information furnished to the Company by or on behalf of the Fund; or
(iv) arise as a result of any failure by the Fund to provide the services
and furnish the materials under the terms of this Agreement (including a
failure, whether unintentional or
<PAGE>
in good faith or otherwise, to comply with the diversification requirements
specified in Article VI hereof or the representations of the Fund set forth
in Section 2.3 hereof);
(v) arise out of or result from any material breach of any representation
and/ or warranty made by the Underwriter in this Agreement or arise out or
result from any other material breach of this Agreement by the Underwriter;
as limited by and in accordance with the provisions of Sections 8.2(b) and
8.2(c) hereof.
8.2(b). The Underwriter shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
the Company or the Account.
8.2(c). The Underwriter shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Underwriter in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party against (or after such Indemnified Party shall have received
notice of such service on any designated agent), but failure to notify the
Underwriter of any such claim shall not relieve the Underwriter from any
liability which it may have to the Indemnified Party against whom such action is
brought otherwise than on account of this Indemnification Provision. In case
any such action is brought against the Indemnified Parties, the Underwriter will
be entitled to participate, at its own expense, in the defense thereof. The
Underwriter also shall be entitled to assume the defense thereof, with counsel
satisfactory to the party named in the action. After notice from the
Underwriter to such party of the Underwriter's election to assume the defense
thereof, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and the Underwriter will not be liable to
such party under this Agreement for any legal or other expenses subsequently
incurred by such party independently in connection with the defense thereof
other than reasonable costs of investigation.
8.2(d). The Company agrees promptly to notify the Underwriter of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of the Account.
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of Iowa.
9.2 This Agreement shall be subject to the provisions of the 1933, 1934,
and 1940 Acts, and the rules and regulations and rulings thereunder, including
such exemptions from those statutes, rules and regulations as the Commission may
grant (including, but not limited to, the
<PAGE>
Shared Funding Exemptive Order) and the terms hereof shall be interpreted and
construed in accordance therewith.
ARTICLE X. TERMINATION
10.1. This Agreement shall terminate:
(a) at the option of any party upon one year's advance written notice to
the other parties; provided, however, that such notice shall not be given
earlier than one year following the date that the Company first purchases shares
of the Fund pursuant to this Agreement; or
(b) at the option of the Company to the extent that shares of one or more
Portfolios are not reasonably available to meet the requirements of the
Contracts as determined by the Company; provided, however, that such termination
shall apply only to the Portfolio(s) the shares of which are not reasonably
available. Prompt notice of the election to terminate for such cause shall be
furnished by the Company; or
(c) at the option of the Fund upon 90 days' advance written notice to the
Company in the event that formal administrative proceedings are instituted
against the Company by the NASD, the Commission, any insurance department or any
other regulatory body regarding the Company's duties under this Agreement or
related to the sale of the Contracts, the operation of the Account, or the
purchase of the Fund shares, but only if the Fund determines, in its sole
judgment exercised in good faith, that any such administrative proceedings will
have a material adverse effect upon the ability of the Company to perform its
obligations under this Agreement; or
(d) at the option of the Company upon 90 days' advance written notice to
the Fund in the event formal administrative proceedings are instituted against
the Fund or the Underwriter by the NASD, the Commission, or any state securities
or insurance department or any other regulatory body, but only if the Company
determines, in its sole judgment exercised in good faith, that any such
administration proceedings will have a material adverse effect upon the ability
of the Fund or the Underwriter to perform its obligations under this Agreement;
or
(e) upon requisite vote of the Contract owners having an interest in the
Account (or any subaccount) to substitute the shares of another investment
company for the corresponding Portfolio shares of the Fund in accordance with
the terms of the Contracts for which those Portfolio shares had been selected to
serve as the underlying investment media. The Company will give 30 days' prior
written notice to the Fund of the date of any proposed vote to replace the
Fund's shares; or
(f) at the option of the Company upon written notice to the Fund in the
event any of the Fund's shares are not registered, issued or sold in accordance
with applicable state and/ or federal law or such law precludes the use of such
shares as the underlying investment media of the Contracts issued or to be
issued by the Company; or
<PAGE>
(g) by either the Fund or the Company pursuant to the termination
provisions set forth in Article VII hereto; or
(h) at the option of the Company upon written notice to the Fund if the
Fund ceases to qualify as a Regulated Investment Company under Subchapter M of
the Code, or under any successor or similar provision, or if the Company
reasonably believes that the Fund may fail to so qualify ; or
(i) at the option of the Company upon written notice to the Fund if the
Fund fails to meet the diversification requirements specified in Article VI
hereof; or
(j) at the option of either the Fund or the Underwriter if (1) the Fund or
the Underwriter, respectively, shall determine, in its sole judgment reasonably
exercised in good faith, that the Company shall have suffered a material adverse
change in its business or financial condition or is the subject of material
adverse publicity and such material adverse publicity will have a material
adverse impact upon the business and operations of either the Fund or the
Underwriter, (2) the Fund or the Underwriter shall notify the Company in writing
of such determination and its intent to terminate this Agreement, and (3) after
considering the actions taken by the Company and any other changes in
circumstances since the giving of such notice, such determination of the Fund or
the Underwriter shall continue to apply on the sixtieth (60th) day following the
giving of such notice, which sixtieth day shall be the effective date of
termination; or
(k) at the option of the Company, if (1) the Company shall determine, in
its sole judgment reasonably exercised in good faith, that either the Fund or
the Underwriter has suffered a material adverse change in its business or
financial condition or is the subject of material adverse publicity and such
material adverse change or material adverse publicity will have a material
adverse impact upon the business and operations of the Company, (2) the Company
shall notify the Fund and the Underwriter in writing of such determination and
its intent to terminate this Agreement, and (3) after considering the actions
taken by the Fund and/ or the Underwriter and any other changes in circumstances
since the giving of such notice such determination shall continue to apply on
the sixtieth (60th) day following the giving of such notice, which sixtieth day
shall be the effective date of termination; or
(l) at the option of either the Fund or the Underwriter upon 60 days'
written notice to the Company if the Company gives the Fund and the Underwriter
the written notice specified in Section 1.6(b) hereof.
10.2. It is understood and agreed that the right of any party hereto to
terminate this Agreement pursuant to Section 10.1(a) may be exercised for any
reason or for no reason. In particular, and without limiting the generality of
the foregoing, it is further specifically understood and agreed that, while the
Company is not required to sell any particular number of Contracts and while a
specific number or dollar value of Fund shares need not be purchased pursuant to
this Agreement, the Fund may terminate this Agreement pursuant to Section
10.1(a) if the Company does not purchase a dollar value of shares satisfactory
to the Fund and the Underwriter.
<PAGE>
10.3. Except as necessary to implement Contract owner initiated
transactions, or as required by state insurance laws or regulations, the Company
shall not redeem Fund shares attributable to the Contracts (as opposed to Fund
shares attributable to the Company's assets held in the Account), and the
Company shall not prevent Contract owners from allocating payments to a
Portfolio that was otherwise available under the Contracts, until 90 days after
the Company shall have notified the Fund or the Underwriter of its intention to
do so.
10.4. NOTICE REQUIREMENT. No termination of this Agreement shall be
effective unless and until the party terminating this Agreement gives prior
written notice of its intent to terminate specified in the applicable subsection
of Section 10.1 or Section or Article VII, which notice shall set forth the
subsection of Section 10.1 or the Section of Article VII, respectively, which is
the basis for such termination.
10.5. EFFECT OF TERMINATION. Notwithstanding any termination of this
Agreement pursuant to Section 10.1 hereof, the Fund and the Underwriter shall,
at the option of the Company, continue to make available additional shares of
the Fund pursuant to the terms and conditions of this Agreement, for all
Contracts in effect on the effective date of termination of this Agreement
(hereinafter referred to as "Existing Contracts"). Specifically, without
limitation, the owners of the Existing Contracts shall be permitted to
reallocate investments in the Fund, redeem investments in the Fund, and/ or
invest in the Fund upon the making of additional purchase payments under the
Existing Contracts. The effect of any termination pursuant to Article VII
hereof shall be governed by such Article. The agreements with respect to
indemnification set forth in Article VIII hereof shall survive the termination
of this Agreement.
ARTICLE XI. NOTICES
Any notice shall be sufficiently given when sent by registered or certified
mail to the other parties at the addresses of such parties set forth below or at
such other addresses as such parties may from time to time specify in writing to
the other parties.
If to the Fund:
FBL Variable Insurance Series Fund
5400 University Avenue
West Des Moines, Iowa 50265
If to the Company:
Farm Bureau Life Insurance Company
5400 University Avenue
West Des Moines, Iowa 50265
If to the Underwriter:
FBL Investment Advisory Services, Inc.
<PAGE>
5400 University Avenue
West Des Moines, Iowa 50265
ARTICLE XII. MISCELLANEOUS
12.1. All persons dealing with the Fund must look solely to the property
of the Fund for the enforcement of any claims against the Fund as neither the
Trustees, officers, agents or shareholders assume any personal liability for
obligations entered into on behalf of the Fund.
12.2. Subject to law and regulatory authority, each party hereto shall
treat as confidential all information reasonably identified as such in writing
by any other party hereto (including without limitation the names and addresses
of the owners of the Contracts) and, except as contemplated by this Agreement,
shall not disclose, disseminate or utilize such confidential information until
such time as it may come into the public domain without the express prior
written consent of the affected party.
12.3. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
12.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5. If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
12.6. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the
Commission, the NASD and state insurance regulators) and shall permit such
authorities reasonable access to its books and records in connection with any
investigation or inquiry relating to this Agreement or the transactions
contemplated hereby.
12.7 . The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to under
state and federal laws.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed hereto as of the date specified below.
Company:
FARM BUREAU LIFE INSURANCE COMPANY SEAL
By: [signature of Merlin D. Plagge]
Title: President
<PAGE>
Date: March 1, 1990
Fund:
FBL VARIABLE INSURANCE SERIES FUND
By: [signature of Dennis M. Marker]
Title: Variable Products Vice President
Date: March 1, 1990
Underwriter:
FBL INVESSTMENT ADVISORY SERVICES, INC.
By: [signature of Dennis M. Marker]
Title: Variable Products Vice President
Date: March 1, 1990
<PAGE>
[LETTERHEAD]
April 27,1998
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 Prospectus filed as part of Post-Effective Amendment Number 12 to Form
S-6 for Farm Bureau Life Variable Account (File No. 33-12789).
Very truly yours,
/s/ Stephen M. Morain
Stephen M. Morain
Senior Vice President & General Counsel
5400 UNIVERSITY AVENUE - WEST DES MOINES, IOWA 50266-5997 - PH (516)225-5400
<PAGE>
Sutherland, Asbill & Brennan LLP
1275 Pennsylvania Avenue, NW
Washington, DC 20004-2415
Tel: (202) 383-0100
Fax: (202) 637-3593
April 28, 1998
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 prospectus filed as part of Post-Effective Amendment No. 12 to
the Registration Statement on Form S-6 for Farm Bureau Life Variable Account.
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 LLP
By: /s/ Stephen E. Roth
--------------------------
Stephen E. Roth
<PAGE>
[LETTERHEAD]
April 27, 1998
Farm Bureau Life Insurance Company
5400 University Avenue
West Des Moines, Iowa 50266
Gentlemen:
This opinion is furnished in connection with the registration by Farm Bureau
Life Insurance Company of a flexible premium variable life insurance policy
("Policy") under the Securities Act of 1933, as amended. The prospectus
included in Post-Effective Amendment No. 12 to the Registration Statement on
Form S-6 (File No. 33-12789) describes the Policy. I have provided actuarial
advice concerning the preparation of the policy form described in the
Registration Statement, and I am familiar with the Registration Statement and
exhibits thereto.
It is my professional opinion that:
(1) The illustrations of death benefits and cash values included in Appendix A
of the Prospectus, based on the assumptions stated in the illustrations,
are consistent with the provisions of the Policy. The rate structure of the
Policy has not been designed so as to make the relationship between
premiums and benefits, as shown in the illustrations, appear more favorable
for policyowners at the ages illustrated than for policyowners at other
ages.
(2) The information contained in the examples set forth in Appendix B of the
Prospectus, based on the assumptions stated in the examples, is consistent
with the provisions of the Policy.
(3) The fees and charges deducted under the Policy, in the aggregate, are
reasonable in relation to the services rendered, the expenses expected to
be incurred and the risks assumed by the insurance company.
I hereby consent to the use of this opinion as an exhibit to Post-Effective
Amendment No. 12 to the Registration Statement and to the reference to my name
under the heading "Experts" in the Prospectus.
Sincerely,
/s/ Christopher G. Daniels
Christopher G. Daniels, FSA, MSAA
Life Product Development and Pricing
Vice President
Farm Bureau Life Insurance Company
5400 UNIVERSITY AVENUE - WEST DES MOINES, IOWA 50266-5997 - PH (515)225-5400
<PAGE>
Ernst & Young LLP Suite 3400 Phone: 515 243 2727
801 Grand Avenue
Des Moines, Iowa 50309-2764
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 18, 1998
with respect to Farm Bureau Life Variable Account and February 16, 1998 with
respect to Farm Bureau Life Insurance Company, in Post-Effective Amendment No.
12 to the Registration Statement (Form S-6 No. 33-12789) and related Prospectus
of Farm Bureau Life Variable Account dated May 1, 1998.
/s/ Ernst & Young LLP
Des Moines, Iowa
April 28, 1998
<PAGE>
MEMORANDUM DESCRIBING FARM BUREAU LIFE
INSURANCE COMPANY'S ISSUANCE, TRANSFER AND REDEMPTION
PROCEDURES FOR ITS INDIVIDUAL FLEXIBLE PREMIUM
VARIABLE LIFE INSURANCE POLICIES
This memorandum sets forth the administrative procedures that will be
followed by Farm Bureau Life Insurance Company (the "Company") in connection
with the issuance of its individual flexible premium variable life insurance
policy (the "Policy"), the transfer of assets held thereunder and the
redemption by policyowners of their interests in the Policies.
1. PURCHASE AND RELATED TRANSACTIONS.
Set forth below is a summary of the principal Policy provisions and
administrative procedures which might be deemed to constitute, either directly
or indirectly, a "purchase" transaction. The summary shows that, because of the
insurance nature of the Policies, the procedures involved necessarily differ in
certain significant respects from the purchase procedures for mutual funds and
annuity plans.
(a) PREMIUM PAYMENTS. Premiums for the Policies will not be the same for
all policyowners. An initial premium, together with a completed application,
must be received by the Company before a Policy will be issued. The minimum
amount of an initial premium is equal to the greater of (1) $100, or (2) an
amount that, when reduced by the premium expense charge, will be sufficient to
pay the monthly deduction for the first three policy months. Other than the
initial premium, the Company does not require the payment of an additional
premium, and failure to pay an additional premium will not of itself cause a
Policy to lapse. The Company expects that most policyowners will choose to pay
planned periodic premiums -- that is, level premiums at regular intervals. The
Policy provides, however, that a policyowner may pay premiums in addition to
planned periodic premiums (i.e., unscheduled premiums) if (i) the insured is
then living; (ii) the additional premium is at least $100; and (iii) the premium
does not cause total premiums paid to exceed the maximum premium limitation for
the Policy established by federal tax law. The Company reserves the right to
limit the number and amount of unscheduled premium payments. In the event that
a tendered premium causes total premiums paid to exceed the maximum premium
limitation for the Policies established by federal tax law, the Company will
return the portion of such premium which causes total premiums to exceed such
limitation.
The Policy will remain in force so long as the net cash value (the cash
value reduced by any policy debt and increased by any unearned loan interest) is
sufficient to pay the monthly deduction which consists of charges for the cost
of insurance, additional insurance benefits and administrative expenses. Thus,
the amount of the premium, if any, that must be paid to keep the Policy in force
depends upon the amount of the monthly deduction and the net cash value of the
Policy, which in turn depends upon the investment experience of the Subaccounts
of the Variable Account (see page 4, "Premium Allocation").
1
<PAGE>
The cost of insurance rate utilized in computing the cost of insurance
charge will not be the same for each policyowner. The chief reason is that the
principle of pooling and distribution of mortality risks is based upon the
assumption that the cost of insuring each insured is commensurate with his or
her mortality risk, which is actuarially determined based upon factors such as
attained age, sex and premium class. Accordingly, while not all insureds will
be subject to the same cost of insurance rate, there will be a single rate for
all insureds in a given actuarial category.
The Policies will be offered and sold pursuant to established underwriting
standards in accordance with state insurance laws. State insurance laws
prohibit unfair discrimination, but recognize that premiums and charges must be
based upon factors such as age, sex, health and occupation.
(b) INITIAL PREMIUM PROCESSING. Upon receipt of a completed application
for a Policy, the Company will follow certain insurance underwriting (i.e.,
evaluation of risk) procedures designed to determine whether the proposed
insured is insurable. This process may involve medical examinations or other
verification procedures and may require that certain further information be
provided by the applicant before a determination can be made. A Policy will not
be issued until this underwriting procedure has been completed. The effective
date of insurance coverage under the Policy will be the latest of (i) the policy
date, (ii) if an amendment to the initial application is required pursuant to
the Company's underwriting rules, the date the insured signs the last such
amendment, or (iii) the date on which the full initial premium is received by
the Company at its Home Office. The policy date will be the later of (i) the
date of the initial application, or (ii) if additional medical or other
information is required pursuant to the Company's underwriting rules, the date
such information is received by the Company at its Home Office. The policy date
may also be any other date mutually agreed to by the Company and the
policyowner. If the policy date would fall on the 29th, 30th or 31st of any
month, the policy date will instead be the 28th of such month. Applicants who
pay the initial premium at the time of submission of the application will be
issued a conditional receipt which provides that if the applicant dies during
the underwriting period, he or she will receive the death benefit provided for
in such conditional receipt if he or she would have been found to be insurable
under the Company's normal underwriting procedures. The initial net premium
(the initial premium reduced by a premium expense charge consisting of a 2%
premium tax charge and a 5% sales charge) will be allocated automatically to the
Money Market Subaccount as of the policy date. The initial net premium will
remain in the Money Market Subaccount until the Company receives, at its Home
Office, a notice signed by the policyowner that the Policy has been received and
accepted. At that time, the cash value in the Money Market Subaccount
automatically will be allocated among the Subaccounts and Declared Interest
Option pursuant to the allocation instructions set forth in the application for
the Policy. No charge is imposed in connection with this initial allocation.
(c) PREMIUM ALLOCATION. The policyowner may allocate net premiums among
the Subaccounts or the Declared Interest Option. The Variable Account currently
has six Subaccounts, each of which invests exclusively in shares of one of six
corresponding portfolios of the FBL Variable Insurance
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Series Fund (the "Fund"). The Fund is a series-type mutual fund and is
registered with the Securities and Exchange Commission as an open-end
diversified management investment company.
The policyowner must indicate the initial allocation of premiums in the
application for the Policy. Net premiums will continue to be allocated in
accordance with the policyowner's allocation instructions in the application
unless contrary written instructions are received by the Company. The change
will take effect on the date the written notice is received at the Home Office.
Once a change in allocation is made, all future net premiums will be allocated
in accordance with the new allocation instructions, unless contrary written
instructions are provided by the policyowner. The minimum percentage of each
premium that may be allocated to any Subaccount or the Declared Interest Option
is 10%; fractional percentages are not permitted. No charge is imposed for any
change in net premium allocation.
(d) EXCHANGE PRIVILEGE. The Company will permit the owner of a flexible
premium fixed-benefit life insurance policy issued by the Company
("fixed-benefit policy"), within 12 months of the policy date shown in such
policy, to exchange his or her policy for a Policy on the life of the insured.
The policy date will be the date the application for the Policy is signed.
The Policy will have a specified amount equal to the specified amount of the
fixed-benefit policy. No evidence of insurability is required to exercise this
privilege. The insured will be placed in the premium class applicable to the
initial specified amount under the fixed-benefit policy, unless there has been
an underwritten increase in specified amount, in which event the insured will be
placed, with respect to the entire specified amount under the Policy, in the
premium class applicable to such increase in specified amount.
The net cash value of the fixed-benefit policy will initially be allocated
to the Money Market Subaccount. When the Company receives, at its Home Office,
a notice signed by the policyowner that the Policy has been received and
accepted, the amount initially allocated to the Money Market Subaccount
automatically will be transferred among the Subaccounts and the Declared
Interest Option pursuant to the allocation instructions set forth in the
application for the Policy.
The Company will waive the sales charge and premium taxes on the net cash
value of the fixed-benefit policy applied to the Policy pursuant to the
exchange. In addition, the Company will assess the first year monthly
administrative charge only to the extent that 12 monthly per $1,000 charges
under the fixed-benefit policy have not been assessed. Otherwise, charges and
deductions will be made in the usual manner.
An exchanging owner will not be permitted to carry over any outstanding
loans under his fixed-benefit policy. Any outstanding loan and loan interest
may be repaid prior to the date of exchange. If not repaid prior to the date of
exchange, the amount of the outstanding loan and interest thereon will be
reflected in the net cash value of the fixed-benefit policy.
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(e) REINSTATEMENT. Prior to the maturity date, a terminated policy (other
than a surrendered Policy) may be reinstated at any time within five years of
the monthly deduction day immediately preceding the grace period which expired
without payment of the required premium (see page 13, "Policy Termination"). In
order to reinstate a Policy, a policyowner must submit: (i) a written
application for reinstatement signed by the insured and the policyowner; (ii)
evidence of insurability satisfactory to the Company; (iii) payment of a premium
that, after deduction of the premium expense charge, is at least sufficient to
keep the Policy in force for three months; and (iv) an amount equal to the
monthly cost of insurance charge for the two policy months prior to lapse. The
effective date of reinstatement will be the monthly deduction day coinciding
with or next following the date of approval by the Company of the application
for reinstatement.
(f) REPAYMENT OF POLICY DEBT. A loan made under the Policy will be
subject to interest charges at the-loan interest rate stated in the Policy from
the date that the loan is made. The loan interest rate is an effective annual
rate of 8%. Outstanding policy debt may be repaid in whole or in part prior to
the maturity date at any time during the insured's life so long as the Policy is
in force. Any payments made by the policyowner while there is outstanding
policy debt are treated first as repayment of policy debt, unless the owner
indicates otherwise. When a repayment of the debt is made, the portion of the
cash value in the Declared Interest Option securing the repaid portion of the
policy debt will no longer be segregated within the Declared Interest Option as
security for policy debt, but will remain in the Declared Interest Option unless
and until transferred to the Variable Account by the Policyowner.
(g) CORRECTION OF MISSTATEMENT OF AGE OR SEX. If the insured's age or sex
was misstated in an application, the Company will recalculate the cash value to
be the amount it would have been had the cost of insurance been based on the
correct age and sex of the insured. If the insured has died, the Company will
pay the death proceeds that would have been payable at the insured's correct age
and sex.
2. TRANSFERS AMONG SUBACCOUNTS.
Amounts may be transferred among the Subaccounts an unlimited number of
times per year. Only one transfer per policy year may be made between the
Declared Interest Option and the Variable Account. The amount of this transfer
must be at least $100 or the total cash value in the Subaccount, or the total
cash value in the Declared Interest Option reduced by any outstanding policy
debt, if less than $100. The Company may, at its discretion, waive the $100
minimum requirement. The transfer will be effective as of the end of the
valuation period during which the request is received at the Home Office. The
first transfer in each policy year will be made without charge; each time
amounts are subsequently transferred in that policy year, a transfer charge of
$25 will be assessed. Transfers resulting from the making of policy loans will
not be considered transfers for the purposes of these limitations and charges.
All transfers effected on the same day will be considered a single transfer for
purposes of these limitations and charges. Transfers are made by written
request to the Home Office.
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3. REDEMPTION PROCEDURES - SURRENDER AND RELATED TRANSACTIONS
This section outlines those procedures which might be deemed to constitute
redemptions under the Policy. These procedures differ in certain significant
respects from the redemption procedures for mutual funds and annuity plans.
(a) SURRENDER FOR CASH VALUE. At any time prior to the maturity date
while the Policy is in force, a policyowner may surrender the Policy in whole or
in part by sending a written request to the Company at its Home Office. A
surrender charge equal to the lesser of $25 or 2.0% of the amount requested will
be payable upon complete surrender and upon each partial surrender.
The amount payable on complete surrender of the Policy is the net cash
value at the end of the valuation period during which the surrender request is
received, less the surrender charge, if not paid in cash. If the entire net
cash value is surrendered, all insurance in force will terminate. A partial
surrender must be at least $500 and cannot exceed the lesser of (i) the net cash
value less $500, or (2) 90% of the net cash value. If not paid in cash, the
surrender charge will be deducted from the amount surrendered. The Policyowner
may request that the proceeds of a complete or partial surrender be paid in a
lump sum or under one of the payment options (see page 10, "Payment of Death
Proceeds") specified in the Policy.
A partial surrender will be allocated among the Subaccounts and Declared
Interest Option in accordance with the written instructions of the policyowner.
If no such instructions are received with the request for partial surrender, the
partial surrender will be allocated among the Subaccounts and Declared Interest
Option in the same proportion that the cash value in each of the Subaccounts and
the cash value in the Declared Interest Option, reduced by any outstanding
Policy Debt, bears to the total cash value, reduced by any outstanding Policy
Debt, on the date the request is received at the Home Office.
Surrender proceeds ordinarily will be mailed to the policyowner within
seven days after the Company receives a signed request for a surrender at its
Home Office, although payments may be postponed whenever: (i) the New York
Stock Exchange is closed other than customary weekend and holiday closing, or
trading on the New York Stock Exchange is restricted as determined by the
Securities and Exchange Commission ("Commission"); (ii) the Commission by order
permits postponement for the protection of policyowners; or (iii) an emergency
exists, as determined by the Commission, as a result of which disposal of
securities is not reasonably practicable, or it is not reasonably practicable to
determine the value of the net assets of the Variable Account. Payments under
the Policy which are derived from any amount paid to the Company by check or
draft may be postponed until such time as the Company is satisfied that the
check or draft has cleared the bank upon which it is drawn.
(b) PAYMENT OF DEATH PROCEEDS. So long as the Policy remains in force,
the Company will,
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upon due proof of the insured's death, pay the death proceeds to the primary or
a contingent beneficiary (or if no beneficiary survives the insured, to the
policyowner or his estate). In determining the amount of the death proceeds,
the death benefit will be reduced by any outstanding policy debt and increased
by any unearned loan interest and any premiums paid after the date of death.
The amount of the death benefit payable under a Policy will depend upon the
death benefit option in effect at the time of the Insured's death. Under Option
A, the death benefit will be equal to the greater of (i) the sum of the current
specified amount and the cash value, or (ii) the cash value multiplied by the
specified amount factor. Under Option B, the death benefit will be equal to the
greater of (i) the current specified amount, or (ii) the cash value multiplied
by the specified amount factor. Cash value will be determined as of the end of
the Business Day coinciding with or immediately following the date of death.
The specified amount factors referred to above are determined by the "cash value
corridor" mandated by Section 7702 of the Internal Revenue Code. The factor is
2.50 for those under 40 years of age and declines as the insured's attained age
increases until it becomes 1.0 at age 95.
The death proceeds will be paid to the beneficiary in one lump sum or under
any of the payment options set forth in the Policy, which include payments of
interest only, payments for a fixed period, payments for life with a term
certain, payments of a fixed amount, and a joint and two-thirds survivor monthly
life income. The Company may also provide other payment options in the future.
If the insured is still alive and the Policy is in force on the maturity
date (i.e., the insured's 95th birthday), the Company will pay the policyowner
the cash value of the Policy reduced by an outstanding policy debt.
All payments of death benefits and maturity proceeds are ordinarily mailed
within seven days after the Company receives due proof of the insured's death or
within seven days of the maturity date, unless a payment option is chosen.
However, payment may be delayed for more than seven days under the same
circumstances described above with respect to surrender payments.
(c) POLICY LOANS. So long as the Policy remains in force and has a
positive net cash value, a policyowner may borrow money from the Company at any
time using the Policy as the sole security for the policy loan. The maximum
amount that may be borrowed at any time is 90% of the cash value as of the end
of the valuation period during which the request for the policy loan is received
at the Home Office, less any previously outstanding policy debt. Policy debt
equals the sum of all unpaid policy loans and any due and unpaid policy loan
interest. Policy debt may be repaid in whole or in part any time during the
insured's life and before the maturity date so long as the Policy is in force.
When a policy loan is made, an amount equal to the policy loan will be
segregated within the Declared Interest Option as security for the policy loan.
If, immediately prior to the policy loan, the cash value in the Declared
Interest Option less policy debt outstanding immediately prior to such policy
loan is less than the amount of such policy loan, the difference will be
transferred from the Subaccounts which have cash value in the same proportions
that the Policy's cash value in each Subaccount bears to
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the Policy's total Cash Value in the Variable Account. No charge will be made
for those transfers. Cash values will be determined as of the end of the
valuation period during which the request for the policy loan is received at the
home office.
Policy loan proceeds normally will be mailed to the policyowner within
seven days after receipt of a written request. Postponement of a policy loan may
take place under the same circumstances described above with respect to
surrender payments.
Amounts segregated within the Declared Interest Option as security for
policy debt will bear interest at an effective annual rate of between 4.5% and
6%, as determined and declared by the Company. The interest credited will
remain in the Declared Interest Option unless and until transferred by the
policyowner to the Variable Account, but will not be segregated within the
Declared Interest Option as security for policy debt.
The interest rate charged on policy loans is not fixed. Initially, it will
be the rate shown in the Policy on the policy data page. The Company may at any
time elect to change the interest rate, subject to the following conditions:
(i) the rate may not exceed 7.4% per year in advance (which is equal to an
effective rate of 8.0%); (ii) any increase in the interest rate may not exceed
1.0% per calendar year; and (iii) changes in interest rate may not occur more
often than once in any twelve-month period. The Company will send notice of any
change in rate to the policyowner. The new rate will take effect on the policy
anniversary coinciding with or next following the date the rate is changed.
Interest is payable in advance at the time any policy loan is made (for the
remainder of the policy year) and on each policy anniversary thereafter (for the
entire policy year) so long as there is policy debt outstanding. Interest
payable at the time a policy loan is made will be subtracted from the loan
proceeds. Thereafter, interest not paid when due will be added to the existing
policy debt and bear interest at the same rate charged for policy loans. An
amount equal to unpaid interest will be segregated within the Declared Interest
Option in the same manner that amounts for policy loans are segregated within
the Declared Interest Option.
Because interest is charged in advance, any interest that has not been
earned will be added to the death benefit payable at the insured's death and to
the cash value upon complete surrender, and will be credited to the cash value
in the Declared Interest Option upon repayment of policy debt.
(d) POLICY TERMINATION. The Policy will terminate and lapse only when net
cash value is insufficient on a monthly deduction day to cover the monthly
deduction and a grace period expires without payment of a sufficient premium. A
grace period of 61 days begins on the date on which the Company sends written
notice of any insufficiency to the policyowner. The notice will be sent to the
policyowner's last known address on file with the Company. The notice will
specify the premium payment that, if received during the grace period, will be
sufficient to keep the Policy in force. If the Company does not receive the
premium payment on or before the last day of the grace period, the
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Policy will terminate and insurance coverage and all rights thereunder will
cease. Insurance coverage will continue during the grace period. The amount of
the premium sufficient to keep the Policy in force beyond the grace period is an
amount equal to three times the monthly deduction due on the monthly deduction
day immediately preceding the grace period. A terminated Policy (other than a
surrendered Policy) may be reinstated prior to the maturity date at any time
within five years of the monthly deduction day immediately preceding the grace
period which expired without payment of the required premium (see page 6,
"Reinstatement").
(e) CANCELLATION PRIVILEGE. The policyowner may cancel the Policy by
delivering or mailing written notice or sending a telegram to the Company at its
Home Office, and returning the Policy to the Company at its Home Office before
midnight of the twentieth day after receipt of the Policy. With respect to all
Policies except those issued in Minnesota, the Company will refund, within seven
days after receipt of the notice of cancellation and the returned Policy at its
Home Office, an amount equal to the sum of (a) the cash value of the Policy on
the business day on or next following the date the Policy is received by the
Company at its Home Office, (b) any premium expense charges which were deducted
from premiums, (c) monthly deductions made on the policy date and any monthly
deduction day, and (d) amounts approximating daily charges against the Variable
Account. With respect to Policies issued in Minnesota, the Company will refund
within seven days after receipt of the notice of cancellation and the returned
Policy at its Home Office, any premium paid for the Policy.
(f) SPECIAL TRANSFER PRIVILEGE. A policyowner may, at any time prior to
the maturity date while the Policy is in force, convert the Policy to a flexible
premium fixed-benefit life insurance policy by requesting that all of the cash
value in the Variable Account be transferred to the Declared Interest Option.
The policyowner may exercise this special transfer privilege once each policy
year. Once a policyowner exercises the special transfer privilege, all future
premium payments will automatically be credited to the Declared Interest Option,
until such time as the policyowner requests a change in allocation. No charge
will be imposed for any transfers resulting from the exercise of this special
transfer privilege.
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