AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 5, 1998
REGISTRATION NO. 333-35587
811-08336
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
PRE-EFFECTIVE AMENDMENT NO. 1
FORM S-6
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS
REGISTERED ON FORM N-8B-2
UNITED OF OMAHA SEPARATE ACCOUNT B
(EXACT NAME OF TRUST)
UNITED OF OMAHA LIFE INSURANCE COMPANY
(NAME OF DEPOSITOR)
Mutual of Omaha Plaza, Omaha, Nebraska 68175
NAME AND ADDRESS OF
AGENT FOR SERVICE:
Kenneth W. Reitz, Esquire
Mutual of Omaha Companies
Mutual of Omaha Plaza, 3-Law
Omaha, Nebraska 68175-1008
Telephone: (402) 351-5087
Fax: (402) 351-5906
(TITLE OF SECURITIES BEING REGISTERED)
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
Approximate date of proposed public offering:
As soon as practicable after effectiveness of the Registration Statement
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, the Registrant
declares that an indefinite amount of securities are being registered under the
Securities Act of 1933.
-------
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
shall determine.
<PAGE>
UNITED OF OMAHA SEPARATE ACCOUNT B
Registration Statement on Form S-6
Cross-Reference Sheet
FORM N-8B-2
ITEM NO. CAPTION IN PROSPECTUS
1 Cover Page
2 Cover Page
3 Inapplicable
4 Distribution of the Policies
5 About Us
6 The Variable Account
9 Inapplicable
10(a) Policy Application and Issuance
10(b) Distributions
10(c),(d),(e) Distributions; Lapse and Grace Period; Reinstatement
10(f),(g),(h) Voting Rights; Other Policy Owner Tax Matters
10(i) Other Policy Provisions
11 The Variable Account
12 The Variable Account; Distribution of the Policies
13 Charges and Fees; Tax Matters; Tax Treatment of Loans and
Other Distributions; Distribution of the
Policies; Appendix A
14 Premium Payments
15 Premium Payments
16 The Variable Account
17 Captions referenced under Items 10(c),
(d), (e) and (i) above
18 The Variable Account
19 Reports to You;
Voting Rights; Distribution of the Policies
20 Captions referenced under Items 6 and 10(g) above
21 Policy Loans
22 Inapplicable
23 Distribution of the Policies
24 Other Policy Provisions
25 About Us
26 Distribution of the Policies
27 About Us
28 Management
29 About Us
30 Inapplicable
31 Inapplicable
32 Inapplicable
33 Inapplicable
34 Inapplicable
35 About Us
36 Inapplicable
37 Inapplicable
38 Distribution of the Policies
39 Distribution of the Policies
40 Inapplicable
41(a) Distribution of the Policies
42 Inapplicable
43 Inapplicable
44(a) The Variable Account; Premium Payments
44(b) Charges and Fees; Distribution of the Policies
<PAGE>
44(c) Mortality and Expense Risk Charge
45 Inapplicable
46 The Variable Account; Captions
referenced under Items 10(c), (d) and (e) above
47 Inapplicable
48 About Us
49 Inapplicable
50 The Variable Account
51 Cover Page, Definitions (Beneficiary), Summary, The
Policy, Payment of Proceeds, Payment Options, Tax Matter,
Distribution of the Policies
52 Other Policy Owner Tax Matters
53 Tax Matters
54 Inapplicable
55 Inapplicable
59 Financial Statements
<PAGE>
[GRAPHIC OMITTED] PROSPECTUS: Dated February _______, 1998
UNITED OF OMAHA
ULTRA VARIABLE LIFE
Individual Flexible Premium
Variable Universal Life Insurance Policy
This prospectus describes ULTRA VARIABLE LIFE, an individual flexible premium
variable universal life insurance policy ("Policy") offered by United of Omaha
Life Insurance Company ("we, us, our, United of Omaha") to applicants age 90 and
under.
The Policy provides for the payment of a Death Benefit upon the death of the
Insured, and for a Cash Surrender Value that can be obtained by surrendering the
Policy. The Policy is designed to provide insurance protection on the life of
the Insured, and at the same time provide the Policy Owner with the flexibility
to vary the amount and timing of premium payments and, within certain limits, to
change the amount of Death Benefits payable under the Policy. This flexibility
permits the Owner to provide for changing insurance needs with a single
insurance policy. The Policy is a variable policy because the Death Benefit may,
and the Accumulation Value will, vary up or down to reflect the investment
experience of amounts allocated to UNITED OF OMAHA SEPARATE ACCOUNT B (the
"Variable Account"). The Policy Owner ("you, your") bears the investment risk
for all amounts so allocated; there is no guaranteed minimum Accumulation Value.
The minimum initial Specified Amount is $100,000. The Policy provides premium
flexibility so long as the Accumulation Value is sufficient for Policy insurance
coverage to remain in force.
You may, within limits, allocate premiums (net of any charges) to one or more of
the twenty-four eligible investments, which are the twenty-three Subaccounts of
the Variable Account and the Fixed Account. Assets of each Subaccount of the
Variable Account are invested in a corresponding mutual fund Portfolio. The
Portfolios are described in separate prospectuses that accompany this
Prospectus. The Policy's available investment options are:
ALGER AMERICAN GROWTH PORTFOLIO
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
FEDERATED PRIME MONEY FUND II ("MONEY MARKET") PORTFOLIO
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES PORTFOLIO
FIDELITY ASSET MANAGER: GROWTH PORTFOLIO
FIDELITY EQUITY INCOME PORTFOLIO
FIDELITY CONTRAFUND PORTFOLIO
FIDELITY INDEX 500 PORTFOLIO
MFS EMERGING GROWTH PORTFOLIO
MFS HIGH INCOME FUND PORTFOLIO
MFS RESEARCH PORTFOLIO
MFS WORLD GOVERNMENT PORTFOLIO
MFS VALUE SERIES PORTFOLIO
PIONEER CAPITAL GROWTH PORTFOLIO
PIONEER REAL ESTATE PORTFOLIO
SCUDDER GLOBAL DISCOVERY PORTFOLIO
SCUDDER GROWTH & INCOME PORTFOLIO
SCUDDER INTERNATIONAL PORTFOLIO
T. ROWE PRICE EQUITY INCOME PORTFOLIO
T. ROWE PRICE INTERNATIONAL PORTFOLIO
T. ROWE PRICE LIMITED TERM BOND PORTFOLIO
T. ROWE PRICE NEW AMERICA GROWTH PORTFOLIO
T. ROWE PRICE PERSONAL STRATEGY BALANCED PORTFOLIO
FIXED ACCOUNT
Partial withdrawals and Policy loans may be taken from time to time, subject to
certain restrictions. ANY POLICY LOAN, PARTIAL WITHDRAWAL OR SURRENDER MAY
RESULT IN ADVERSE TAX CONSEQUENCES AND/OR PENALTIES. WITHDRAWALS AND SURRENDERS
MAY BE SUBJECT TO A SURRENDER CHARGE.
IT MAY NOT BE ADVANTAGEOUS TO REPLACE EXISTING LIFE INSURANCE WITH THE POLICY
DESCRIBED IN THIS PROSPECTUS.
AN INTEREST IN THE POLICY IS NOT A DEPOSIT OR OBLIGATION OF, OR GUARANTEED OR
ENDORSED BY ANY BANK, NOR IS THE POLICY FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION ("SEC") OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SEC
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
1
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THIS PROSPECTUS MUST BE ACCOMPANIED BY A CURRENT PROSPECTUS FOR EACH PORTFOLIO.
ALL PROSPECTUSES SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE.
UNITED OF OMAHA LIFE INSURANCE COMPANY, P. O. Box 8430, Omaha, Nebraska
68103-0430 (800) 238-9354
2
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TABLE OF CONTENTS
PAGE
DEFINITIONS
SUMMARY
O BASIC FEATURES OF YOUR POLICY
O COMPARISON TO OTHER POLICIES AND OTHER INVESTMENTS
O POLICY FLOW CHART
ABOUT US
ALLOCATION OF PREMIUMS
O THE VARIABLE ACCOUNT
O THE FIXED ACCOUNT
O TRANSFERS
O DOLLAR COST AVERAGING
O ASSET ALLOCATION PROGRAM
THE POLICY
O POLICY APPLICATION AND ISSUANCE
O PREMIUM PAYMENTS
O ACCUMULATION VALUE
O LAPSE AND GRACE PERIOD
O REINSTATEMENT
O TELEPHONE TRANSACTIONS
O MATURITY DATE
DISTRIBUTIONS
O POLICY LOANS
O SURRENDER
O PARTIAL WITHDRAWALS
O DEATH BENEFIT
O PAYMENT OF PROCEEDS
O PAYMENT OPTIONS
CHARGES AND FEES
O CHARGES DEDUCTED FROM THE POLICY
DEDUCTIONS FROM INITIAL PREMIUM; MONTHLY DEDUCTIONS; CHARGES
DEDUCTED ON SURRENDER OR PARTIAL
WITHDRAWAL
O MORE INFORMATION ABOUT THE ABOVE CHARGES
SURRENDER CHARGE; WAIVER OF SURRENDER CHARGE; RISK CHARGE;
ADMINISTRATIVE CHARGE;
PREMIUM CHARGES; COST OF INSURANCE CHARGE; TRANSFER CHARGE
O SERIES FUND CHARGES
OTHER POLICY PROVISIONS
O NOTICE TO US; ENTIRE CONTRACT; RIGHT TO EXAMINE; DELAY OF PAYMENTS;
CHANGE OF OWNERSHIP AND ASSIGNMENT; BENEFICIARY; BENEFICIARY CHANGE;
MISSTATEMENT OF AGE OR SEX; SUICIDE; INCONTESTABILITY; COVERAGE BEYOND
MATURITY; REINSTATEMENT; NONPARTICIPATING
TAX MATTERS
MANAGEMENT
OTHER INFORMATION
O REPORTS TO YOU; VOTING RIGHTS;
DISTRIBUTION OF THE POLICIES; STATE REGULATION;
LEGAL MATTERS; INDEPENDENT AUDITORS; REGISTRATION STATEMENT
ILLUSTRATIONS
O DEATH BENEFIT, CASH SURRENDER VALUE AND ACCUMULATED PREMIUMS
FINANCIAL STATEMENTS
3
<PAGE>
THIS PROSPECTUS IS NOT AN OFFERING ANYWHERE WHERE SUCH AN OFFERING CANNOT BE
LAWFULLY MADE. NO ONE IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE
REPRESENTATIONS ABOUT THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF THEY DO, YOU SHOULD NOT RELY UPON SUCH REPRESENTATIONS.
4
<PAGE>
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DEFINITIONS
ACCUMULATION UNITS means an accounting unit of measure used to calculate the
accumulation value of the Variable Account.
ACCUMULATION VALUE means the dollar value as of any Valuation Date of all
amounts accumulated under the Policy.
ALLOCATION DATE means the first business day following the completion of the
RIGHT TO EXAMINE THIS POLICY period.
BENEFICIARY refers to the person(s) or entity you name to receive the Death
Benefit of the Policy.
CASH SURRENDER VALUE means the Accumulation Value, less any outstanding Policy
loans and unpaid loan interest, and less any applicable Surrender Charge.
CORRIDOR AMOUNT means the Accumulation Value multiplied by the corridor
percentage for the Insured's attained age.
FIXED ACCOUNT means the account which consists of general account assets of
United of Omaha Life Insurance Company.
INSURED refers to the individual named on the application whose life is the
basis for the death benefit protection provided by the Policy.
LOAN ACCOUNT means an account established for any amounts transferred from the
Fixed Account and Subaccounts as a result of loans. The Loan Account is credited
with interest and is not based on the investment experience of the Variable
Account.
MONTHLY DEDUCTION DATE means the date of issue and the same date each month
thereafter.
MONTHLY DEDUCTION means the amount deducted from the Policy's Accumulation Value
on each Monthly Deduction Date.
NET AMOUNT AT RISK means the death benefit less the Accumulation Value on the
Monthly Deduction Date after deducting the rider charges, if any, the risk
charge for the current month, and the administrative charge.
PAYEE refers to the person who receives payments under the Policy.
POLICY means the individual flexible premium variable life insurance contract
issued to you pursuant to our acceptance of your application for it.
POLICY OWNER refers to you, the person that applied for the Policy.
POLICY YEAR/MONTH/ANNIVERSARY means respective anniversary dates from the Date
of Issue.
PORTFOLIO means a separate mutual fund investment portfolio that is available
under the Policy.
PREMIUM means an amount paid by you to us as consideration for the benefits
provided by the Policy.
PROCEEDS means the Death Benefit, Cash Surrender Value, or Proceeds payable upon
the Maturity Date.
SPECIFIED AMOUNT means the amount of insurance selected, as shown on the
Policy's Data page.
SUBACCOUNT means that portion of the Variable Account which invests in shares of
a specific mutual fund portfolio or any other investment portfolios that we make
available Policy.
VALUATION DATE means each day that the New York Stock Exchange is open for
trading.
VARIABLE ACCOUNT means United of Omaha Separate Account B, a separate account
maintained by us in which a portion of our assets has been allocated for the
Policy and certain other policies.
WE, US, OUR, UNITED OF OMAHA refers to United of Omaha Life Insurance Company,
Omaha, Nebraska.
YOU, YOUR refers to the Policy Owner.
5
<PAGE>
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SUMMARY
O BASIC FEATURES OF YOUR POLICY
The individual flexible premium variable life insurance Policy offered
by this prospectus is designed to provide lifetime insurance coverage for the
Insured named in the Policy. It is not offered primarily as an investment. This
is a brief description of the basic features of the Policy. Policy features are
explained in more detail throughout the prospectus.
o Right to Examine. You have the right to return the Policy within 10 days (or
more where required by applicable State insurance law) after you receive it
or 45 days after you signed the application, whichever is later. We will
return to you the premiums paid. (SEE "OTHER POLICY PROVISIONS: RIGHT TO
EXAMINE.")
o Premium Payments. You must pay an initial premium at least sufficient to
purchase the minimum initial Specified Amount of life insurance coverage
($100,000). Unless the Accumulation Value is sufficient to maintain this
Specified Amount, you must pay additional premiums sufficient to maintain a
Specified Amount of $100,000 coverage for the first five Policy Years;
thereafter you must maintain a Specified Amount of at least $50,000. You may
also make payments in addition to planned premiums. (SEE "THE POLICY: PREMIUM
PAYMENTS.")
o No Lapse Guarantee. If either the minimum monthly premium or the lifetime
monthly premium requirement has been met, and the Policy has never been
reinstated, and no Additional Insured Term Insurance Rider covering the
Insured is attached to the Policy, the Policy is guaranteed to not lapse for
a certain period of time. (SEE "POLICY NO-LAPSE PERIOD")
o Investment of Premiums. Your initial premium and any additional payments will
be held in the Money Market Subaccount until the end of the Right to Examine
period, when your initial premium is invested according to your instructions
in one or more of the Subaccounts of the Variable Account corresponding to
mutual fund portfolios or the Fixed Account. Allocations must be in whole
percentages. (SEE "ALLOCATION OF PREMIUMS.")
o Transfers. Once we mail the confirmation for the initial premium payment,
and after the Right to Examine period, you may transfer portions of the
Policy's Accumulation Value without charge among the Subaccounts and Fixed
Account up to twelve times each Policy Year. Subsequent transfers may have
charges. (SEE "ALLOCATION OF PREMIUMS: TRANSFERS.")
o Fluctuating Accumulation Value. The Accumulation Value of the Policy will
vary daily based on, among other things, the net investment experience of the
Subaccounts to which you have allocated amounts. The Accumulation Value is
not guaranteed. You bear the investment risk with respect to the Accumulation
Value that is invested in the Subaccounts, and we bear the investment risk
with respect to the Accumulation Value that is invested in the Fixed Account.
o Death Benefit. You select one of two Death Benefit options. Death benefit
option 1 equals the greater of (a) the Specified Amount on the date of death,
less any loans and unpaid loan interest; or (b) the Policy's Accumulation
Value on the date of death plus a corridor amount for the Insured's attained
age, less any loans and unpaid loan interest. Death benefit option 2 equals
the accumulation value plus the greater of (a) specified amount, or (b)
corridor amount, less any loans and unpaid loan interest. (SEE
"DISTRIBUTIONS: DEATH BENEFIT.")
o Policy Loans and Partial Withdrawals. After the first Policy Year (from Date
of Issue in Indiana), a loan privilege is available under the Policy. After
the first Policy Year partial withdrawals also are allowed. Partial
withdrawals are subject to a Surrender Charge and withdrawals and loans may
be taxable and subject to a penalty tax. (SEE "DISTRIBUTIONS: POLICY LOANS,
AND SURRENDER AND PARTIAL WITHDRAWALS.")
o Surrenders. The Policy permits full surrender for the Cash Surrender Value.
A Surrender Charge may be deducted upon full surrenders, partial
withdrawals, and the amount of any reductions in Specified Amount of
coverage. A Surrender Charge is applied for 12 Policy Years from the Policy
Date of issue through the Insured's issue age 52, 11 years for issue age 53,
10 years at issue age 54, and 9 Policy Years from issue age 55 and higher.
The Surrender Charge may be waived upon the occurrence of certain events.
Once the Policy is surrendered, all coverage and other benefits under it
cease and cannot be reinstated. (SEE "CHARGES AND FEES.") SURRENDERS MAY BE
TAXABLE AND SUBJECT TO A PENALTY TAX.
o Federal Income Tax Consequences. Death benefits paid to the Beneficiary under
a life insurance policy generally are not subject to Federal income tax.
Under current law, undistributed increases in cash value of a life insurance
contract generally are not taxable. Pre-death distributions (including
partial withdrawals and loans) from a modified endowment contract are
included in income on an income first basis, and a 10% penalty tax may be
imposed on income distributed before the Policy Owner attains age 59 1/2.
(SEE "TAX MATTERS.")
6
<PAGE>
O COMPARISON TO OTHER POLICIES AND OTHER INVESTMENTS
In many respects the Policy is similar to fixed-benefit life insurance.
Like fixed-benefit life insurance, the Policy offers a death benefit and
provides a cash value, loan privileges and surrender values. The Policy is
different from fixed-benefit life insurance in that the death benefit will in
most cases, and the cash value ("Accumulation Value") will always, vary to
reflect the investment experience of the selected Subaccounts of the Variable
Account.
The Policy is designed to provide insurance protection. Although the
underlying mutual fund portfolios to which Accumulation Value may be allocated
invest in securities similar to those in which mutual funds available directly
to the public invest, in many ways the Policy differs from mutual fund
investments. The main differences are:
o The Policy provides a death benefit based on our assumption of an actuarially
calculated risk. o If the Policy's Accumulation Value (absent a Policy Loan) or
Cash Surrender Value (if there is a
Policy Loan) are not enough to pay a Monthly Deduction Amount, and any unpaid
loan interest, and a grace period expires without a sufficient premium
payment, the Policy will lapse with no value. (SEE "THE POLICY: LAPSE.") If
the Policy lapses when Policy loans are outstanding, adverse tax consequences
may result. (SEE "TAX MATTERS: TAX TREATMENT OF LOANS AND OTHER
DISTRIBUTIONS.")
o In addition to sales charges, insurance-related charges not associated with
mutual fund investments are deducted from values of the Policy. These
charges include various insurance, risk, and expense charges. (SEE "CHARGES
AND FEES.")
o United of Omaha, not the Policy Owner, owns the mutual fund shares. (SEE
"OTHER INFORMATION: VOTING RIGHTS.")
o Federal income tax liability on any earnings on the mutual fund investment is
deferred until you receive a distribution from the Policy. Transfers from one
underlying fund portfolio to another are accomplished without tax liability
under current law. (SEE "TAX MATTERS: LIFE INSURANCE QUALIFICATION.")
o Dividends and capital gains distributed by the underlying mutual funds are
automatically reinvested and not currently taxable.
o Premature withdrawals may be taxable and subject to a 10% federal tax
penalty. Also, Policy earnings that would be treated as capital gains in a
mutual fund are treated as ordinary income,although such earnings are exempt
from taxation if received as a death benefit or taxation is deferred until
such earnings are ditributed during the insured's lifetime.(SEE "TAX MATTERS:
TAX TREATMENT OF LOANS AND OTHER DISTRIBUTIONS.")
HOW THE POLICY OPERATES
The following chart shows how the Policy operates. For more information,
refer to specific sections of this prospectus.
O POLICY PREMIUM FLOW CHART
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PREMIUM PAYMENTS
o Minimum initial premium required is a planned
premium to maintain the initial Specified Amount of
coverage until the next planned premium is due.
Additional premium may be required to maintain the
minimum required Specified Amount.
o Payments in addition to planned premiums may be
made, within limits. (SEE "PREMIUM PAYMENTS.")
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DEDUCTIONS FROM PREMIUMS BEFORE ALLOCATION o
Premium Charges per premium payment:
o 3.75% for state and federal tax expenses.
o $2 for premium processing expenses.
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INVESTMENT OF PREMIUMS
You direct the allocation of initial premiums and any additional payments
among 23 Subaccounts of the Variable Account and the Fixed Account after
the "Right to Examine" period. The Subaccounts invest in corresponding
mutual funds. For information about premium allocation options, rules and
limits, SEE "ALLOCATION OF PREMIUMS."
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7
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DEDUCTIONS FROM ASSETS
o Monthly Deduction on the Monthly Deduction Date from Accumulation Value for:
o 0.70% (annual rate calculated as a percentage of Accumulation Value)
mortality and expense
risk charge during Policy Years 1 through 10; 0.55% after Policy Year
10.
o $7 administrative charge.
A Cost of Insurance charge multiplied by the Net Amount at Risk.
Rider Charges
o $10 transfer fee (first 12 transfers per Policy Year free).
o Investment advisory fees and fund expenses are deducted
from the assets of each Fund.
(SEE "CHARGES AND FEES.")
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ACCUMULATION VALUE
o Accumulation Value is equal to the initial premium and any additional
premiums, as adjusted each day the New York Stock Exchange is open to
reflect Subaccounts' investment experience, charges deducted and other
Policy transactions (such as transfers and partial surrenders). The
maximum loan amount is 100% of the Cash Surrender Values less interest to
the end of the year, less one monthly deduction.
o Accumulation Value may vary from day to day. There is no minimum
guaranteed Accumulation Value. The Policy may lapse, subject to the No
Lapse Period, even if there is no Policy loan. (SEE "THE POLICY: LAPSE AND
GRACE PERIOD," "THE POLICY: NO LAPSE PERIOD," AND "DISTRIBUTIONS: POLICY
LOANS.")
o Accumulation Value can be transferred among the Subaccounts and the Fixed
Account. SEE "ALLOCATION OF PREMIUM" for rules and limits. Policy loans
reduce the amount available for allocations and transfers.
o Dollar cost averaging and asset rebalancing programs are available. (SEE
"ALLOCATION OF PREMIUM.")
o Accumulation Value is the starting point for calculating certain values
under a Policy, such as the Cash Surrender Value and the Death Benefit.
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<TABLE>
<CAPTION>
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ACCUMULATION VALUE BENEFITS DEATH BENEFITS
<S> <C> <C>
o After the first Policy Year (Date of o Received income tax free to
Issue in Indiana), loans may be taken Beneficiary. (SEE "TAX MATTERS: LIFE
for amounts up to 100% of Cash Surrender INSURANCE QUALIFICATION.")
Value less interest to the end of the
year less one monthly deduction at a net o Available as lump sum or under a
annual interest rate charge of 2%. variety of payment options.
Preferred loans are available beginning
in the tenth year and later (with a net o Two Death Benefit Options are
interest rate charge of 0%). SEE available:
"DISTRIBUTIONS: POLICY LOANS" for rules
and limits. o Option 1: Greater of (a) current
Specified Amount; or (b)
o The Policy may be surrendered in full at Accumulation Value plus Corridor
any time for its Cash Surrender Value, Amount.
or part of the Accumulation Value may be
withdrawn (after the first Policy o Option 2: Accumulation Value plus
Year). (SEE "DISTRIBUTIONS; SURRENDER greater of (a) Specified Amount, or
AND PARTIAL WITHDRAWALS.") A Surrender (b) Corridor Amount.
Charge, based upon age, sex, risk
classes, and the amount of time you have o Flexibility to change Death Benefit
had your Policy may apply to any Option and Specified Amount.
surrender, or reduction in Specified
Amount for the first 12 Policy years. o Rider benefits are available.
(SEE "CHARGES AND FEES: SURRENDER
CHARGE.") Federal taxes and tax PROCEEDS PAID WOULD BE REDUCED BY ANY
penalties may also apply. (SEE "TAX POLICY LOAN BALANCE. (SEE
MATTERS: TAX TREATMENT OF LOANS AND "DISTRIBUTIONS: DEATH BENEFIT.")
OTHER DISTRIBUTIONS.")
o Fixed and variable payment options are
available. (SEE "DISTRIBUTIONS: PAYMENT
OPTIONS.")
--------------------------------------------- -------------------------------------------
</TABLE>
8
<PAGE>
For more detailed information about the Policy, please read the rest of
this prospectus.
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ABOUT US
We are United of Omaha Life Insurance Company, a stock life insurance
company organized under the laws of the State of Nebraska in 1926 as United
Benefit Life Insurance Company. We changed to our current name in 1981. United
of Omaha is a wholly owned subsidiary of Mutual of Omaha Insurance Company. We
are principally engaged in the business of issuing life insurance policies,
accident and health insurance, and annuity contracts in all States of the United
States except New York, the District of Columbia, and in several foreign
countries. As of December 31, 1996, United of Omaha had assets of over $7
billion.
We may from time to time publish (in advertisements, sales literature and
reports to Owners) the ratings and other information assigned to us by one or
more independent rating organizations such as A.M. Best Company, Moody's,
Standard & Poor's, and Duff & Phelps. The purpose of the ratings is to reflect
our financial strength and/or claims-paying ability, and the ratings should not
be considered as bearing on the investment performance of assets held in the
Variable Account. Each year the A.M. Best Company reviews the financial status
of thousands of insurers, culminating in the assignment of Best's Ratings. These
ratings reflect A.M. Best Company's current opinion of the relative financial
strength and operating performance of an insurance company in comparison to the
norms of the life/health insurance industry. In addition, our claims-paying
ability, as measured by Moody's Insurance Credit Report, Standard and Poor's
Insurance Ratings Services, or Duff & Phelps may be referred to in such
advertisements, sales literature, or reports. These ratings are opinions
regarding an operating insurance company's financial capacity to meet the
obligations of its insurance and annuity policies in accordance with their
terms. Such ratings do not reflect the investment performance of the Variable
Account or the degree of risk associated with an investment in the Variable
Account.
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ALLOCATION OF PREMIUMS
You may allocate all or a part of your Policy premium to one of the
twenty-three Series Fund Portfolios currently available through the Variable
Account, to the Fixed Account, or to a combination of these. Allocations must be
in whole percentages and total 100%. The investment results of each Portfolio,
whose investment objectives are described below, are likely to differ
significantly. You should consider carefully, and on a continuing basis, which
Portfolio or combination of Portfolios and the Fixed Account is best suited to
your long-term investment objectives.
THE VARIABLE ACCOUNT
The Variable Account established for the purpose of providing variable
options to fund the Policy is United of Omaha Separate Account B. Amounts
allocated to the Variable Account are invested exclusively in shares of a
Portfolio of one of the Series Funds. Each Series Fund is an open-end management
investment company whose shares are purchased by the Variable Account to fund
the benefits provided by the Policy. The Series Fund Portfolios currently
available under the Variable Account, including their investment objectives and
their investment advisers, are described briefly in this Prospectus. Complete
descriptions of each Portfolio's investment objectives, restrictions, and risks
and other material information relating to an investment in the Portfolio are
contained in the prospectuses for each of the Series Funds which accompany this
Prospectus.
United of Omaha Separate Account B was established pursuant to an August
27, 1996, resolution of our Board of Directors. Under Nebraska Insurance Law,
the income, gains or losses, realized or unrealized, from assets allocated to
the Variable Account are credited to or charged against the Variable Account,
without regard to other income, gains, or losses of United of Omaha. These
assets are held by us for our variable life insurance policies. Any and all
distributions made by the Series Funds with respect to the shares held by the
Variable Account will be reinvested in additional shares at net asset value. The
assets maintained in the Variable Account will not be charged with any
liabilities arising out of any other business conducted by us. We are, however,
responsible for meeting the obligations under the Policy to you.
No stock certificates are issued to the Variable Account for shares of the
Series Funds held in the Variable Account. We own the Series Funds shares for
the Variable Account.
The Variable Account is registered with the Securities and Exchange
Commission ("SEC") as a unit investment trust under the Investment Company Act
of 1940 and meets the definition of separate account under federal securities
laws. However, the SEC does not supervise the management or the investment
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practices or policies of the Variable Account. We do not guarantee the Variable
Account's investment performance.
VARIABLE ACCOUNT PORTFOLIOS
ALGER AMERICAN FUND - ALGER AMERICAN GROWTH PORTFOLIO -- seeks long-term
capital appreciation by investing in a diversified portfolio of equity
securities, primarily of companies with total market capitalization of $1
billion or greater. (1)
ALGER AMERICAN FUND - ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO --
seeks long-term capital appreciation by investing in a diversified portfolio
of equity securities, primarily of smaller, newer companies with total
market capitalization of less than $1 billion. The securities of such
companies may have limited marketability and may be subject to more abrupt
or erratic price changes than securities of larger, more established
companies or the market averages in general.(1) (*)
INSURANCE MANAGEMENT SERIES - FEDERATED PRIME MONEY FUND II PORTFOLIO --
invests in money market instruments maturing in thirteen months or less to
achieve current income consistent with stability of principal and liquidity.
The Portfolio attempts to maintain a stable net asset value of $1.00 per
share, but there can be no assurance the Portfolio will be able to do so.
(2)
INSURANCE MANAGEMENT SERIES - FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES
II PORTFOLIO -- seeks current income by investing in a diversified
portfolio limited to U.S. government securities. (2)
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II - FIDELITY VIP II ASSET
MANAGER: GROWTH PORTFOLIO -- seeks to obtain high total return with reduced
risk over the long-term by allocating its assets among stocks, bonds, and
short-term fixed-income instruments. Although the Portfolio seeks to reduce
its overall risk by diversifying among different types of investments, the
fund aggressively invests in a wide variety of security types, including
stocks and bonds issued in developing countries and derivative transactions.
The Portfolio spreads investment risk by limiting its holdings in any one
company or industry.(3, 4) (*)
FIDELITY VARIABLE INSURANCE PRODUCTS FUND - FIDELITY VIP EQUITY-INCOME
PORTFOLIO -- seeks reasonable income by investing mainly in income-producing
equity securities. In selecting investments, the Portfolio also considers
the potential for capital appreciation. The Portfolio seeks to achieve a
return that surpasses that of the S&P 500. The Portfolio does not expect to
invest in debt securities of companies that do not have proven earnings or
credit.(3)
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II - FIDELITY CONTRAFUND
PORTFOLIO -- seeks to increase the value of the Portfolio over the long term
by investing in securities of companies that are undervalued or
out-of-favor. This strategy can lead to investments in domestic or foreign
companies, many of which may not be well known. The stocks of small
companies often involve more risk than those of larger companies. The
Portfolio may use various investment techniques to hedge the Portfolio's
risk, but there is no guarantee that these strategies will work as
intended.(3) (*)
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II - FIDELITY INDEX 500 PORTFOLIO
-- seeks to match the total return of the S&P 500 while keeping expenses
low. The Portfolio utilizes a "passive" or "indexing" approach and tries to
allocate its assets similarly to those of the index. Normally 80% (65% if
fund assets are below $20 million) of the fund's assets are invested in
equity securities of companies that compose the S&P 500. The Standard &
Poor's Corporation is neither an affiliate nor a sponsor of the fund.
MFS VARIABLE INSURANCE TRUST - MFS EMERGING GROWTH PORTFOLIO -- seeks to
provide long-term growth of capital through investing primarily in common
stocks of emerging growth companies, which involves greater risk than is
customarily associated with investments in more established companies. The
Portfolio may invest to a limited extent in lower rated fixed income
securities or comparable unrated securities.(5) (*)
MFS VARIABLE INSURANCE TRUST - MFS HIGH INCOME PORTFOLIO -- seeks high
current income by investing primarily in a diversified portfolio of fixed
income securities, some of which may involve equity features. The Portfolio
may invest in lower rated fixed income securities or comparable unrated
securities.(5) (*)
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MFS VARIABLE INSURANCE TRUST - MFS RESEARCH PORTFOLIO -- seeks to provide
long-term growth of capital and future income by investing a substantial
portion of its assets in the common stocks or securities convertible into
common stocks of companies believed to possess better than average prospects
for long-term growth. No more than 5% of the Portfolio's convertible
securities, if any, will consist of securities in lower rated categories or
securities believed to be of similar quality to lower rated securities. The
Portfolio may invest to a limited extent in lower rated fixed income
securities or comparable unrated securities.(5) (*)
MFS VARIABLE INSURANCE TRUST - MFS VALUE SERIES PORTFOLIO -- seeks capital
appreciation by investing primarily in common stocks, including to a limited
extent foreign securities which are not traded on a U.S. exchange. The
Portfolio may invest to a limited extent in lower rated fixed income
securities or comparable unrated securities. (5) (*)
MFS VARIABLE INSURANCE TRUST - MFS WORLD GOVERNMENT PORTFOLIO -- seeks
preservation and growth of capital, together with moderate current income by
investing its assets in an internationally diversified portfolio consisting
primarily of debt securities and, to a lesser extent, equity securities. The
Portfolio investments are expected to consist primarily of securities which
are of relatively high quality and minimal credit risk. However, an error of
judgment in selecting a currency or an interest rate environment could
result in a loss of capital, and a held security whose quality deteriorates
significantly will be sold only if the Portfolio investment adviser believes
it is advantageous to do so. (5)
PIONEER VARIABLE CONTRACTS TRUST - PIONEER CAPITAL GROWTH PORTFOLIO -- seeks
capital appreciation by investing in a diversified portfolio of securities
consisting primarily of common stocks.(6)
PIONEER VARIABLE CONTRACTS TRUST - PIONEER REAL ESTATE PORTFOLIO -- seeks
long-term growth of capital by investing primarily in securities of real
estate investment trusts (REITs) and other real estate industry companies.
Current income is the Portfolio's secondary investment objective.(6)
SCUDDER VARIABLE LIFE INVESTMENT FUND - SCUDDER GLOBAL DISCOVERY PORTFOLIO
-- seeks above-average capital appreciation over the long term by investing
primarily in the equity securities of small companies located throughout the
world, including to a limited extent in lower rated fixed income securities
or comparable unrated securities. Since the Portfolio normally will invest
in both U.S. and foreign securities markets, changes in the Portfolio's unit
value may have a low correlation with movements in the U.S. markets. (7)(*)
SCUDDER VARIABLE LIFE INVESTMENT FUND - SCUDDER GROWTH & INCOME PORTFOLIO --
seeks long term growth of capital, current income and growth of income by
investing primarily in common stocks, preferred stocks, and securities
convertible into common stocks of companies which offer the prospect for
growth of earnings while paying higher than average current dividends. (7)
SCUDDER VARIABLE LIFE INVESTMENT FUND - SCUDDER INTERNATIONAL PORTFOLIO --
seeks long-term growth of capital primarily through diversified holdings of
marketable foreign equity investments. The Portfolio invests in companies,
wherever organized, which do business primarily outside the United States.
The Portfolio intends to diversify investments among several countries, and
does not intend to concentrate investments in any particular industry.
(7)
T. ROWE PRICE EQUITY SERIES, INC. - T. ROWE PRICE EQUITY INCOME PORTFOLIO
-- Seeks to provide substantial dividend income and also capital
appreciation by investing primarily in dividend-paying common stocks of
established companies.(9)
T. ROWE PRICE INTERNATIONAL SERIES, INC. - T. ROWE PRICE INTERNATIONAL
STOCK PORTFOLIO -- seeks a total return on its assets from long-term growth
of capital and income, by investing substantially all of its assets in
common stocks of established non-U.S. companies. (8)
T. ROWE PRICE FIXED INCOME SERIES, INC. - T. ROWE PRICE LIMITED-TERM BOND
PORTFOLIO -- seeks a high level of income consistent with modest price
fluctuation by investing primarily in investment grade debt securities. (9)
T. ROWE PRICE EQUITY SERIES, INC. - T. ROWE PRICE NEW AMERICA GROWTH
PORTFOLIO -- seeks long-term growth of capital through investments primarily
in common stocks of U.S. growth companies which operate in service
industries believed to be above-average performers in their fields. Total
return will consist primarily of capital appreciation or depreciation. (9)
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T. ROWE PRICE EQUITY SERIES, INC. - T. ROWE PRICE PERSONAL STRATEGY
BALANCED PORTFOLIO -seeks the highest total return over time consistent with
an emphasis on both capital appreciation and income. There are no
limitations on market capitalization or types of stock the Portfolio can
hold. While bond holdings are primarily investment grade, the Portfolio can
also invest in more volatile below-investment grade bonds.(9) (*)
INVESTMENT ADVISERS AND SUBADVISERS OF THE SERIES FUNDS:
(1) Fred Alger Management, Inc.
(2) Federated Advisors.
(3) Fidelity Management & Research Company.
(4) Fidelity Investment Management and Research (U.K.) Inc., and
Fidelity Management and Research Far East Inc., regarding
research and investment recommendations with respect to companies
based outside the United States.
(5) Massachusetts Financial Services Company.
(6) Pioneer Fund Group.
(7) Scudder, Stevens & Clark, Inc.
(8) Rowe Price-Fleming International, Inc., a joint venture
between T. Rowe Price Associates, Inc. and Robert Fleming
Holdings Limited.
(9) T. Rowe Price Associates, Inc.
- -----------------
(*) THESE PORTFOLIOS' INVESTMENT STRATEGIES MAY PROVIDE THE OPPORTUNITY FOR
HIGHER THAN AVERAGE RETURNS BY INVESTING IN SECURITIES WITH HIGHER THAN
AVERAGE RISK, SUCH AS LOWER RATED AND UNRATED DEBT AND COMPARABLE EQUITY
INSTRUMENTS. PLEASE CONSULT EACH PORTFOLIO'S PROSPECTUS ACCOMPANYING THIS
PROSPECTUS FOR MORE INFORMATION ABOUT THE RISK ASSOCIATED WITH SUCH
INVESTMENTS.
THERE IS NO ASSURANCE THAT ANY PORTFOLIO WILL ACHIEVE ITS STATED
OBJECTIVE. MORE DETAILED INFORMATION, INCLUDING A DESCRIPTION OF EACH
PORTFOLIO'S INVESTMENT OBJECTIVE AND POLICIES AND A DESCRIPTION OF RISKS
INVOLVED IN INVESTING IN EACH OF THE PORTFOLIOS AND OF EACH PORTFOLIO'S FEES AND
EXPENSES, IS CONTAINED IN THE PROSPECTUS FOR THE PORTFOLIO, CURRENT COPIES OF
WHICH ACCOMPANY THIS PROSPECTUS. INFORMATION CONTAINED IN THE PROSPECTUSES
SHOULD BE READ CAREFULLY BEFORE INVESTING IN A PORTFOLIO OF THE VARIABLE
ACCOUNT.
An investment in the Variable Account, or in any Portfolio, including
the Money Market Portfolio, is not insured or guaranteed by the U.S. Government,
and there is no assurance that the Money Market Portfolio will be able to
maintain a stable net asset value per share.
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS
We do not control the Portfolios and cannot and do not guarantee that
any of the Portfolios will always be available for Premium allocations or
Accumulation Value transfers. We retain the right, subject to any applicable
law, to make certain changes in the Variable Account and its investments. We
reserve the right to eliminate the shares of any Portfolio held by a Subaccount
and to substitute shares of another Portfolio, or of another registered open-end
management investment company for the shares of any Portfolio, if the shares of
the Portfolio are no longer available for investment or if, in our judgment,
investment in any Portfolio would be inappropriate in view of the purposes of
the Variable Account. To the extent required by the 1940 Act, substitutions of
shares attributable to your interest in a Subaccount will not be made without
prior notice to you and the prior approval of the SEC. If required, approval of
or change of any investment policy will be filed with the Insurance Department
of any State in which the Policy is sold.
New Subaccounts may be established, or existing Subaccounts eliminated,
when, in our sole discretion, marketing, tax, investment or other conditions
warrant such a change. If a Subaccount is eliminated, we will notify you and
request a reallocation of the amounts invested in the eliminated Subaccount. If
you do not reallocate these amounts, we will reinvest them in the Subaccount
that invests in the Money Market Portfolio (or in a similar portfolio of money
market instruments).
In the event of any such substitution or change, we may make changes in
the Policy as may be necessary or appropriate to reflect such substitution or
change. Furthermore, the Variable Account may be (i) operated as a management
company under the 1940 Act or any other form permitted by law, (ii) deregistered
under the 1940 Act in the event such registration is no longer required or (iii)
combined with one or more other separate accounts. To the extent permitted by
applicable law, we also may transfer the assets of the Variable Account
associated with the Policies to another account or accounts.
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O THE FIXED ACCOUNT
This Prospectus is intended to serve as a disclosure document only for
the Policy and the Variable Account. For complete details regarding the Fixed
Account, see the Policy itself.
PREMIUM ALLOCATED AND AMOUNTS TRANSFERRED TO THE FIXED ACCOUNT BECOME
PART OF THE GENERAL ACCOUNT ASSETS OF UNITED OF OMAHA. INTERESTS IN THE GENERAL
ACCOUNT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "1933
ACT"), NOR IS THE GENERAL ACCOUNT REGISTERED AS AN INVESTMENT COMPANY UNDER THE
1940 ACT. ACCORDINGLY, NEITHER THE GENERAL ACCOUNT NOR ANY INTERESTS THEREIN IS
GENERALLY SUBJECT TO THE PROVISIONS OF THE 1933 OR 1940 ACTS, AND WE HAVE BEEN
ADVISED THAT THE STAFF OF THE SECURITIES AND EXCHANGE COMMISSION HAS NOT
REVIEWED THE DISCLOSURES IN THIS PROSPECTUS WHICH RELATE TO THE FIXED ACCOUNT.
The Fixed Account includes all our assets except those segregated in the
Variable Account or in any other separate investment account. You may allocate
Premium to the Fixed Account or transfer amounts from the Variable Account to
the Fixed Account. Instead of you bearing the investment risk, as is the case
for Accumulation Value in the Variable Account, we bear the full investment risk
for all Accumulation Value in the Fixed Account. We have sole discretion to
invest the assets of our general account, including the Fixed Account, subject
to applicable law.
We guarantee to credit interest to amounts in the Fixed Account at an
effective rate of at least 4% per year. (After the expense charge is applied,
the net effective rate is 3.3% for Policy years 1-10, and 3.45% for Policy years
11 and subsequent. We may, in our sole discretion, credit amounts in the Fixed
Account with interest at a current interest rate in excess of 4%.) Only one
transfer out of the Fixed Account is allowed each Policy Year. (This limit does
not apply under the Dollar Cost Averaging or Asset Allocation programs).
Moreover, the maximum amount that can be transferred out of the Fixed Account
during any Policy Year is 10% of Fixed Accumulation Value on the date of the
transfer. No charge is imposed on such transfers. We reserve the right to modify
transfer privileges at any time. (SEE "ALLOCATION OF PREMIUM: TRANSFERS.")
Partial withdrawals from the Fixed Account are limited to a pro rata amount
(with withdrawals from the Variable Account). Withdrawals and transfers from the
Fixed Account may be delayed for up to six months, and withdrawals may be
subject to a Surrender Charge. (SEE "CHARGES AND FEES: SURRENDER CHARGES.")
For purposes of crediting interest, the most recent payment or transfer into
the Fixed Account, plus interest allocable to that payment or transfer, is
considered to be withdrawn or transferred out last; the next most recent payment
plus interest is considered to be transferred out next, and so on (this is a
"last-in, first-out" procedure).
We guarantee that, upon Death or the Policy Maturity Date, the amount in
your Fixed Account will be not be less than the amount of Premium allocated or
Accumulation Value transferred to the Fixed Account, plus interest at an
effective rate of 4% per year, plus any excess interest credited to amounts in
the Fixed Account, less that part of the Monthly Deduction allocable to the
Fixed Account and less any amounts deducted from the Fixed Account in connection
with partial withdrawals (including any Surrender Charges) or transfers to the
Variable Account or to the Loan Account.
WE HAVE COMPLETE AND SOLE DISCRETION TO DETERMINE THE CURRENT INTEREST
RATES OF THE FIXED ACCOUNT. WE CANNOT PREDICT OR GUARANTEE THE LEVEL OF FUTURE
CURRENT INTEREST RATES OF THE FIXED ACCOUNT, EXCEPT TO GUARANTEE THAT FUTURE
CURRENT INTEREST RATES WILL NOT BE BELOW AN EFFECTIVE RATE OF 3.3% PER YEAR
COMPOUNDED ANNUALLY. YOU BEAR THE RISK THAT CURRENT INTEREST RATES OF THE FIXED
ACCOUNT WILL NOT EXCEED AN EFFECTIVE RATE OF 3.3% PER YEAR.
O TRANSFERS
Subject to the limitations and restrictions described below, transfers
out of a Subaccount of the Variable Account may be made any time after the Right
to Examine period and prior to death or the Policy Maturity Date, by sending
written notice, signed by you, to us. Transfers also may be requested by
telephone, subject to the provisions described below under "THE POLICY:
TELEPHONE TRANSACTIONS." We reserve the right, at any time and without notice to
any party, to modify the transfer privileges under the Policy. Transfers are
effective on the date we receive your request.
After the Right to Examine period, you can transfer Accumulation Value
from one Subaccount of the Variable Account to another, or from the Variable
Account to the Fixed Account or from the Fixed Account to any Subaccount of the
Variable Account within certain limits. Transfers out of a Subaccount currently
may be made as often as you wish (we reserve the right to limit or restrict
transfers in the future or to eliminate the transfer privilege). We reserve the
right to restrict transfers from the Variable Account to the Fixed Account of
amounts previously transferred from the Fixed Account for up to six months.
A transfer fee of $10 may be imposed for any transfer in excess of 12
per Policy Year. The transfer fee is deducted from the amount transferred. The
first 12 transfers each Policy year are free.
Transfers from the Fixed Account currently may be made only once each
Policy Year. Transfers from the Fixed Account do not count toward the 12 free
transfer limit described above, and no transfer charge will be imposed on
transfers from the Fixed Account. Moreover, the maximum amount that can be
transferred out of the Fixed Account during any Policy Year is 10% of the Fixed
Accumulation Value on the date of the transfer.
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The Policy is designed as a long-term investment to provide death
benefit protection, and may also be used as a part of your retirement or other
financial planning. The Policy is not intended for active trading or "market
timing." Excessive transfers could harm other Policy Owners by having a
detrimental effect on portfolio management (which could occur, for example, if
it caused excessive commission expense or caused the manager to keep higher cash
reserves than otherwise). Therefore, we reserve the right to limit the number of
transfers from the Subaccounts of the Variable Account and the Fixed Account if:
(a) we believe that excessive trading by the Policy Owner or a specific transfer
request would have a detrimental effect on Accumulation Value or the share
prices of the Portfolios; or (b) we are informed by one or more of the
Portfolios that the purchase or redemption of shares is to be restricted because
of excessive trading or a transfer or group of transfers is deemed to have a
detrimental effect on share prices of one or more Portfolios or the Variable
Account.
Where permitted by law, we may accept your authorization of third party
transfers on your behalf, subject to our rules. We may suspend or cancel such
acceptance at any time. For example, third party transfers on by "market timers"
could be suspended if they cause harm to other Policy Owners. We will notify you
of any such suspension or cancellation. We may restrict the availability of
Subaccounts and the Fixed Account for Transfers during any period in which you
authorize such third party to act on your behalf. We will give you prior
notification of any such restrictions. However, we will not enforce such
restrictions if we are provided with satisfactory evidence that: (a) such third
party has been appointed by a court of competent jurisdiction to act on your
behalf; or (b) such third party has been appointed by you to act on your behalf
for all your financial affairs.
O DOLLAR COST AVERAGING
Dollar cost averaging is a process whose objective is to shield
investments from short term price fluctuations. Since the same dollar amount is
transferred to selected Subaccounts each month, over time more purchases of
Portfolio shares are made when the value of those shares is low, and fewer
shares are purchased when the value is high. As a result, a lower than average
cost of purchases may be achieved over the long term. While this process allows
you to take advantage of investment price fluctuations, it does not assure a
profit or protect against a loss in declining markets.
Our dollar cost averaging program allows you to automatically transfer,
on a periodic basis, a predetermined amount or percentage specified by you from
any one Subaccount or the Fixed Account to any Subaccount(s) of the Variable
Account. The automatic transfers can occur monthly, quarterly, semi-annually, or
annually, and the amount transferred each time must be at least $100 and must be
$50 per Subaccount. At the time the program begins, there must be at least
$5,000 of Accumulation Value in the applicable Subaccount or the Fixed Account
being transferred from. If transfers are made from the Fixed Account, the
maximum periodic transfer amount is 10% of that account's value at the time of
election, or a sufficient amount to provide transfers for 10 months. There is no
maximum transfer amount requirement out of the Subaccounts of the Variable
Account.
You can request participation in the Dollar Cost Averaging program when
purchasing the Policy or at a later date. Transfers will begin on the first or
15th day (or, if not a Valuation Date, the next following Valuation Date) of the
month, as specified by you, during which the request is processed. You can
specify that only a certain number of transfers will be made, in which case the
program will terminate when that number of transfers has been made. Otherwise,
the program will terminate when the amount remaining in the applicable
Subaccount or, if applicable, the Fixed Account, is less than $500.
You can increase or decrease the amount or percentage of the transfers
or discontinue the program by notifying us of the change. There is no charge for
participation in this program.
O ASSET ALLOCATION PROGRAM
Under the Asset Allocation Program, you can instruct us to allocate
premium and Accumulation Value among the Subaccounts of the Variable Account and
the Fixed Account pursuant to allocation instructions you specify or recommended
by us and approved by you. We will rebalance your Policy's assets on a
quarterly, semi-annual or annual basis, as specified by you, to ensure
conformity with your allocation instructions. Such asset rebalancing is intended
to transfer cash value from Subaccounts that have increased in value to those
that have declined, or not increased as much, in value. Over time, this method
of investing may help you to "buy low and sell high," although there can be no
assurance this objective will be achieved.
Transfers of Accumulation Value made pursuant to this program will not
be counted in determining whether the Transfer Fee applies. At the time the
program begins, there must be at least $10,000 of Accumulation Value under the
Policy.
You can request participation in the Asset Allocation Program when
purchasing the Policy or at a later date. You can change your allocation
percentage or discontinue the program by notifying us of the change. There is no
charge for participation in this program.
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THE POLICY
O POLICY APPLICATION AND ISSUANCE
To purchase a Policy, you must submit an application and provide
evidence of insurability of the proposed Insured. The initial premium also must
be paid before we will issue the Policy. We will not issue a Policy if the
Insured is older than age 90. Before accepting an application, we conduct
underwriting to determine insurability. We reserve the right to reject an
application or premium for any reason. If a Policy is not issued, we will return
any premium payment you submitted. If a Policy is issued, it will be effective
on the date of issue.
O PREMIUM PAYMENTS
The Policy is designed to provide you with life insurance protection and
flexibility with the amount and frequency of premium payments and the level of
life insurance proceeds payable under the Policy. The minimum initial premium
required is a planned premium to maintain an initial Specified Amount of
coverage until the next planned premium is due. Your initial premium will be
credited to the Policy on the date the Policy is issued. Premiums will be
allocated to the Money Market portfolio until the end of the Right to Examine
period. You may purchase a Policy with the proceeds of another life insurance
policy, provided that the applicable application forms are completed. IT MAY NOT
BE ADVANTAGEOUS TO REPLACE EXISTING INSURANCE WITH A POLICY.
After the first premium payment, you must only make premium payments as
necessary to maintain the Specified Amount of coverage that you purchased.
Planned premiums may be paid annually, semiannually, or at other intervals we
offer. Beginning with the second Policy Year, you may change the planned premium
once each year, subject to our approval. The planned premium is flexible.
Additional payments that increase the Specified Amount may be made until
the Insured attains age 90, subject to our underwriting requirements and our
approval.
We reserve the right to limit premiums or refund any values in order to
qualify this policy as life insurance under the Internal Revenue Code of 1986,
as amended. If additional Premium is accepted, we will credit it to your
Policy's Accumulation Value pursuant to your current accumulation instructions,
unless you provide other instructions as of the date underwriting was completed.
O ACCUMULATION VALUE
On the date of issue the Accumulation Value equals the initial net
premium less the Monthly Deduction for the first month. The net premium is the
premium less the premium charges for tax and premium processing expenses. On any
Monthly Deduction Date after the date of issue the Accumulation Value equals:
(a) the total of the values in each Subaccount; plus
(b) the accumulation value of the Fixed Account; plus
(c) the accumulation value of the loan Account; less
(d) the Monthly Deduction for the current month.
The value for each Subaccount equals:
(a) the current number of Accumulation Units; multiplied by
(b) the current unit value.
Each net premium allocated to the Variable Account is converted into
Accumulation Units. This is done by dividing the net premium by the Accumulation
Unit value for the Valuation Period during which the net premium is allocated to
the Variable Account. The initial Accumulation Unit value for each Subaccount
was set when the Subaccount was established. The unit value may increase or
decrease from one Valuation Date to the next.
The Accumulation Unit value for a Subaccount on any Valuation Date is
calculated as follows:
(a) the Net Asset Value Per Share of the Portfolio multiplied by the number
of shares held in the Subaccount, before the purchase or redemption of
any shares on that date; divided by
(b) the total number of Accumulation Units held in the Subaccount on the
Valuation Date, before the purchase or redemption of any shares on that date.
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The Accumulation Value of the Fixed Account on any Monthly Deduction
Date before deducting the Monthly Deduction equals:
(a) the value as of the last Monthly Deduction Date; plus
(b) any net premiums credited since the last Monthly Deduction Date;
plus
(c) any transfers from the Subaccounts to the Fixed Account since
the last Monthly Deduction Date; plus
(d) any transfers from the Loan Account to the Fixed Account since the
last Monthly Deduction Date; less
(e) any transfers from the Fixed Account to the Subaccounts since the
last Monthly Deduction Date; less
(f) any transfers from the Fixed Account to the Loan Account since the
last Monthly Deduction Date; less
(g) any partial withdrawals and surrender charge taken from the Fixed
Account since the last Monthly Deduction Date; plus
(h) interest credited on the balance.
The Cash Surrender Value is the Accumulation Value less any outstanding
Policy loans and unpaid loan interest and less any applicable Surrender Charge.
O LAPSE
If there is no outstanding Policy loan, the Policy will lapse if, on a
Monthly Deduction Date, the Accumulation Value is not enough to cover the
Monthly Deduction due on that date (subject to the No-Lapse Provision), and a
grace period expires without a sufficient premium payment. If there is an
outstanding loan, the Policy will lapse on any Monthly Deduction Date when the
Cash Surrender Value is insufficient to cover the Monthly Deduction and any loan
interest due on that date (subject to the No-Lapse Provision), and a grace
period expires without a sufficient premium payment. A lapse of the Policy may
result in adverse tax consequences.
O GRACE PERIOD
If there is no outstanding policy loan, the grace period will begin on
any Monthly Deduction Date when the Accumulation Value is not enough to pay the
Monthly Deduction, subject to the NO-LAPSE PERIOD provision. If there is an
outstanding policy loan, the grace period will begin on any Monthly Deduction
Date when the cash surrender value is not enough to pay the Monthly Deduction
and any loan interest due, subject to the NO-LAPSE PERIOD provision.
We will allow 61 days from the start of the grace period for the payment
of an amount large enough to pay all unpaid Monthly Deductions and unpaid loan
interest. This policy will remain in force during the grace period. If the
payment is not received by the end of the grace period, this policy will lapse
as of the first day of the grace period. If the death of the Insured occurs on
the Monthly Deduction Date or during the grace period, any past due Monthly
Deductions and unpaid loan interest will be deducted in determining the death
benefit.
Insurance coverage continues during the grace period, but the Policy
will be deemed to have no Accumulation Value for purposes of Policy loans,
surrender and withdrawals.
O NO-LAPSE PERIOD
The Policy contains a provision that can prevent it from lapsing, even
if the cash surrender value is insufficient to pay the monthly deduction, if
certain conditions are met. This provision applies only if:
(a) either the minimum monthly premium or the lifetime monthly premium
requirement has been met; and
(b) the policy has never been reinstated; and
(c) no Additional Insured Term Insurance Rider covering the Insured is
attached.
The minimum monthly premium per $1,000 of Specified Amount and the minimum
No-Lapse Period are shown on the policy data pages. If you meet the minimum
monthly premium requirement, then the policy will not lapse during the minimum
No-Lapse Period, if applicable.
The minimum monthly premium requirement is met on any Monthly Deduction Date
when the total premiums paid since the policy's date of issue, less any partial
withdrawals accumulated at 4% interest and less any outstanding policy loan,
equals or exceeds the minimum monthly premium accumulated at 4% interest.
The lifetime monthly premium per $1,000 of Specified Amount and the lifetime
No-Lapse Period are shown on the policy data pages. If you meet the lifetime
monthly premium requirement, then the policy will not lapse during the lifetime
No-Lapse Period, if applicable.
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The lifetime monthly premium requirement is met on any Monthly Deduction Date
when the sum of premiums paid since the policy's date of issue, less any partial
withdrawals accumulated at 4% interest and less any outstanding policy loans,
equals or exceeds the lifetime monthly premium accumulated at 4% interest.
O TELEPHONE TRANSACTIONS
You may make transfers, partial withdrawals, and/or change the allocation
of subsequent Premium payments, by telephone if you previously authorized
telephone transactions in writing to us. We will not be liable for following
instructions communicated by telephone that we believe to be genuine. However,
we will employ reasonable procedures to confirm that instructions communicated
by telephone are genuine. If we fail to do so, we may be liable for any losses
due to unauthorized or fraudulent instructions. All telephone requests will be
recorded on voice recorder equipment for your protection. When making telephone
requests, you will be required to provide your social security number and/or
other information for identification purposes.
Telephone requests must be received by us no later than the close of the
New York Stock Exchange ("NYSE")(usually 3:00 p.m. Central time) in order to be
processed that day. Telephone transfer requests received later will be processed
the next day the NYSE is open. The telephone transaction privilege may be
discontinued at any time as to some or all Policy Owners.
O MATURITY DATE
The Policy's maturity date is the Policy Anniversary next following the
Insured's 100th birthday. On the maturity date we will pay you the Policy's
Accumulation Value (less any outstanding Policy loans and unpaid loan interest),
if (a) the Insured is then living; (b) this Policy is in force; and (c) coverage
beyond maturity is not elected. There may be little or no cash surrender value
at that time. The Policy may terminate prior to the maturity date if the
premiums paid and Accumulation Value are insufficient to continue this Policy in
force.
O COVERAGE BEYOND MATURITY
Within thirty days of the maturity date of this policy, you may elect to
continue the policy in force beyond the maturity date. The election must be made
by written request. The following will apply:
(a) The allocation of the Accumulation Value to the Subaccounts and the
Fixed Account will be maintained according to your instructions;
(b) The cost of insurance charge will be zero;
(c) The risk charge will be zero;
(d) The administrative charge will be zero;
(e) The corridor percentage will be fixed at 1% ;
(f) The death benefit option will be fixed at Option 1;
(g) Any riders attached to the policy that are then in force will end;
(h) The Insured's date of death will be considered this policy's maturity
date.
All other rights and benefits as described in the policy will be available
during the lifetime of the Insured, except that we will not accept any
additional premium payments after coverage beyond maturity has been elected. The
tax consequences associated with extending coverage beyond maturity are unclear
and a tax advisor should be consulted before mailing such an elections.
- -----------------------------------------------------------
DISTRIBUTIONS
O POLICY LOANS
After the first Policy Year (from the Date of Issue in Indiana), you
may obtain a loan for up to 100% of the Cash Surrender Value less loan interest
to the end of the Year and less one monthly deduction. This Policy must be
assigned to us as sole security for the loan. We will transfer all loan amounts
from the Fixed Account and the Subaccounts to the Loan Account. The amounts will
be transferred on a pro rata basis.
Loan interest is payable at a rate of 5.7% in advance (6.0% effective
annual rate). Interest is due on each Policy Anniversary. If the interest is not
paid when due, we will transfer an amount equal to the unpaid loan interest from
the Fixed Account and the Subaccounts, to the Loan Account on a pro rata basis.
We will credit 4% interest to any amounts in the Loan Account, except amounts
equal to a Preferred Loan as described below, for a net annual Loan interest
rate of 2%.
The death benefit will be reduced by the amount of any loan outstanding
on the date of the Insured's death. We may defer making a loan for six months
unless the loan is to pay premiums to us.
A Preferred Loan is available on existing and new loans beginning in the
10th Policy Year. A Preferred Loan will be credited with 6% interest, for a net
annual Preferred Loan interest rate of 0%. It is unclear whether a Preferred
Loan will be respected for tax purposes, and a tax advisor should be consulted
before effecting such a Preferred Loan.
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<PAGE>
All or part of a loan may be repaid at any time while the Policy is in
force. The amount of a loan repayment will be deducted from the Loan Account and
will be allocated among the Fixed Account and the Subaccounts in the same
percentages as the Accumulation Value on the date repayment. You should identify
any payment intended to reduce a loan as a loan repayment; otherwise, it will be
added to the Accumulation Value (i.e., treated as a premium).
O SURRENDER
While the Insured is alive, you may terminate this Policy for its Cash
Surrender Value. If you request a cash surrender, the Policy must be returned to
us to receive the Cash Surrender Value
With regard to amounts allocated to the Fixed Account, the Cash
Surrender Value will be equal to or greater than the minimum Cash Surrender
Values required by the State in which this Policy was delivered. The value is
based on the Commissioners 1980 Standard Mortality Table, the insured's age at
last birthday, with interest at 4%. Also, Surrenders are taxable and a 10%
federal tax penalty may apply. (SEE "TAX MATTERS.") A SURRENDER CHARGE MAY BE
DEDUCTED FROM THE ACCUMULATION VALUE. We may defer payment of a cash surrender
from the Fixed Account for up to six months.
o PARTIAL WITHDRAWALS
After the first Policy Year, you may withdraw part of the Accumulation
Value. A surrender charge may be deducted from the accumulation value.
Withdrawals from the Fixed Account are made beginning with the most recent
Premium payment. (SEE "ALLOCATION OF PREMIUMS: THE FIXED ACCOUNT.") The minimum
partial withdrawal amount is $250. The maximum partial withdrawal amount is an
amount such that the remaining cash surrender value is not less than $500 and
the Specified Amount is not less than $100,000 in Policy years one through five
or not less than $50,000 thereafter.
If Death Benefit Option 1 is in effect, the following will apply for each
partial withdrawal:
(a) the current Specified Amount will be reduced by the amount of the
withdrawal; and
(b) the Accumulation Value will be reduced by:
(1) the amount of the withdrawal; and
(2) the surrender charge applicable to the decrease in current
Specified Amount, as described in the SURRENDER CHARGE provision.
We will send you an amendment showing the current Specified Amount after the
withdrawal.
If Death Benefit Option 2 is in effect, the Accumulation Value will be
reduced by the amount of the withdrawal.
The amount of cash withdrawal requested and any surrender charge will be
deducted from the Accumulation Value on the date we receive your written
request. Partial withdrawals will result in cancellation of Accumulation Units
from each applicable Subaccount. In the absence of instructions from you,
amounts will be deducted from the Subaccounts and the Fixed Account on a pro
rata basis. No more than a pro rata amount may be withdrawn from the Fixed
Account for any partial withdrawal. We reserve the right to defer withdrawals
from the Fixed Account for up to six months from the date we receive your
written request.
Partial withdrawals may change the minimum and lifetime monthly premium
requirements applicable to the NO-LAPSE PERIOD provision. Partial withdrawals
may be taxable and subject to a 10% federal tax penalty.
O DEATH BENEFIT
CHANGE IN SPECIFIED AMOUNT
After the first year, you may change the current Specified Amount once each
year.
You must apply for any increase in current Specified Amount with a new
application and provide evidence of insurability satisfactory to us. The
Specified Amount may not be increased after the Insured attains age 90.
Any decrease in current Specified Amount will be subject to the applicable
surrender charge as described in the SURRENDER CHARGE provision. A decrease will
be subject to a minimum Specified Amount of $100,000 remaining in force during
policy years one through five and $50,000 remaining in force thereafter.
An increase or decrease will go into effect on the Monthly Deduction Date
following the date we approve the change. We will send you an amendment showing
the current Specified Amount after the change.
An increase or decrease in current Specified Amount will change the minimum
monthly premium and lifetime monthly premium requirements applicable to the
NO-LAPSE PERIOD provision.
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DEATH BENEFIT OPTIONS
The death benefit equals either death benefit Option 1 less any loan or death
benefit Option 2 less any loan. We will pay the death benefit according to the
death benefit option in effect at the time of the Insured's death. Unless
otherwise requested, Option 1 is in effect.
The Option 1 Death Benefit is the greater of:
(a) the current Specified Amount (i.e., on the date of death); or
(b) the policy's Accumulation Value on the date of death plus the corridor
amount.
The Option 2 Death Benefit is the policy's Accumulation Value on the date of
death plus the greater of:
(a) the current Specified Amount (i.e., on the date of death); or
(b) the corridor amount.
The corridor amount is the Accumulation Value on the date of death multiplied by
the corridor percentage from the table shown below for the Insured's attained
age.
- ---------------------------------------------------------
Attained Corridor AttainedCorridor Attained Corridor
Age Percentage Age Percentage Age Percentage
- ---------------------------------------------------------
0-40 150% 54 57% 68 17%
41 143% 55 50% 69 16%
42 136% 56 46% 70 15%
43 129% 57 42% 71 13%
44 122% 58 38% 72 11%
45 115% 59 34% 73 9%
46 109% 60 30% 74 7%
47 103% 61 28% 75-90 5%
48 97% 62 26% 91 4%
49 91% 63 24% 92 3%
50 85% 64 22% 93 2%
51 78% 65 20% 94 1%
52 71% 66 19% 95-100 0%
53 64% 67 18% 100+ 1%
- ---------------------------------------------------------
After the first year, you may change the death benefit option once each year.
The change will take effect on the Monthly Deduction Date after we receive a
written request for change, at which time the death benefit will reflect the
change in option.
Changes in the death benefit option may result in a change in the current
Specified Amount. We will increase or decrease the current Specified Amount to
maintain the death benefit that was in effect before the death benefit option
change. Any decrease resulting from a change in death benefit option will be
subject to the applicable surrender charge as described in the SURRENDER CHARGE
provision.
We will send you an amendment showing the death benefit option in effect and the
current Specified Amount after the change.
An increase or decrease in current Specified Amount resulting from a death
benefit option change will change the minimum monthly premium and lifetime
monthly premium requirements applicable to the NO-LAPSE PERIOD provision.
O PAYMENT OF PROCEEDS
While the Insured is alive, you may choose to have Proceeds that become
payable paid under any combination of the fixed and variable payout options
shown in this Policy. A Beneficiary may also have the Death Benefit applied to a
payout option. If another option is not chosen within 60 days of the date we
receive due proof of death, we will make payment in a lump sum.
We reserve the right to pay the Proceeds in one sum when it is less than
$2,000, or when the option of payment chosen would result in periodic payments
of less than $20. Payees must be individuals who receive payments in their own
behalf unless otherwise agreed to by us. Any option chosen will be effective
when we acknowledge it.
We may require proof of your age or survival or the age or survival of
the Payee.
The guaranteed minimum interest rate used in the fixed payout options
is 3%. We may pay or credit additional interest annually in our sole discretion.
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When the last Payee dies, we will pay to the estate of that Payee any
amount on deposit, or the then present value of any remaining guaranteed
payments under a fixed option.
FIXED PAYMENTS
Fixed payments are available under all six Payout Options below. The
Proceeds will be transferred to our general account, and the Payments will be
fixed in amount by the provisions selected and the age and sex (if consideration
of sex is allowed) of the Payee. The guaranteed effective annual interest rate
used in the Payout Options is 3%. We may, at our sole discretion, declare
additional interest to be paid or credited annually for Payout Options 1, 2, 3,
or 6. The guaranteed amounts are based on the 1983a Mortality Table, and 3%
guaranteed interest rate. Current amounts may be obtained from us.
VARIABLE PAYMENTS
Only Payout Options 2, 4, and 6 are available for variable payments. The
dollar amount of the first monthly payment will be determined by applying the
Proceeds allocated to variable Subaccounts to the Variable Payout Options table
shown in the Policy applicable to the Payout Option chosen. The tables are
determined from the 1983a Mortality Table with an assumed investment rate of 4%.
If more than one Subaccount has been selected, the accumulation value of each
Subaccount is applied separately to the applicable table to determine the amount
of the first payment attributable to that particular Subaccount.
All variable payments other than the first will vary in amount according
to the investment performance of the applicable Subaccounts. The amount of each
subsequent payment equals the number of Variable Payment Units for each
Subaccount as determined for the first payment, multiplied by the value of a
Variable Payment Unit for that Subaccount 10 days prior to the date the variable
payment is due. This amount may increase or decrease from month to month.
If the net investment return of a Subaccount for a payment period is
equal to the pro-rated portion of the 4% annual assumed investment rate, the
variable payment attributable to that Subaccount for that period will equal the
payment for the prior period. To the extent that such net investment return
exceeds an annualized rate of 4% for a payment period, the payment for that
period will be greater than the payment for the prior period and to the extent
that such return for a period falls short of an annualized rate of 4%, the
payment for that period will be less than the payment for the prior period. A
charge equal on an annual basis to 1.20% of the daily net asset value of the
Variable Account is applied in calculating variable payouts.
More details about variable payments are included I Appendix A.
TRANSFERS BETWEEN FIXED AND VARIABLE SUBACCOUNTS
The Payee may exchange the value of a designated number of Variable
Payment Units of a particular Subaccount into other Variable Payment Units, the
value of which would be such that the dollar amount of a payment made on the
date of the exchange would be unaffected by the fact of the exchange. No more
than four (4) exchanges may be made within each Policy year.
Transfers may be made between Subaccounts and from a Subaccount to the
Fixed Account. No exchanges may be made from the Fixed Account to the variable
Subaccounts. Transfers will be made using the variable payment unit values for
the Valuation Period during which any request is received by us.
O PAYMENT OPTIONS
OPTION 1 -- PROCEEDS HELD ON DEPOSIT AT INTEREST. While the Proceeds
are held by us, we will annually:
(a) pay interest to the Payee; or
(b) add interest to the Proceeds.
OPTION 2 -- INCOME OF A SPECIFIED AMOUNT. We will pay the Proceeds in
monthly installments of a specified amount until the Proceeds, with
interest, have been fully paid.
OPTION 3 -- INCOME FOR A SPECIFIED PERIOD. We will pay the Proceeds in
installments for the number of years you choose. The monthly incomes for
each $1,000 of Proceeds, shown in the table set forth in the Policy, include
interest. We will provide the income amounts for payments other than monthly
upon request.
OPTION 4 -- LIFETIME INCOME. We will pay the Proceeds as a monthly income
for as long as the Payee lives. The following guarantees are available:
GUARANTEED PERIOD - The monthly income will be paid for a certain
number of years and as long thereafter as the Payee lives; or
GUARANTEED AMOUNT (INSTALLMENT REFUND) - The monthly income will be
paid until the sum of all payments equals the Proceeds placed under this
option and as long thereafter as the Payee lives.
If a fixed Payment Option is chosen, the monthly income will be
the amount computed using either the Lifetime Monthly Income Table set
forth in the Policy (which is based on the 1983a Mortality Table and
interest at 3% or, if more favorable to the Payee, our then current
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lifetime monthly income rates for payment of Proceeds. If a variable
Payout Option is chosen, all variable payments, other than the first
variable payment, will vary in amount according to the investment
performance of the applicable Subaccounts.
NOTE CAREFULLY. If no guarantee is elected and the life only
option has been chosen, then IT WOULD BE POSSIBLE FOR ONLY ONE PAYMENT
TO BE MADE if the Payee(s) were to die before the due date of the second
payment; only two Payments if the Payee(s) were to die before the due
date of the third payment; and so forth. When the last Payee dies, we
will pay to the estate of that Payee any remaining guaranteed Payments
under a fixed payout option.
OPTION 5 -- LUMP SUM. The Proceeds will be paid in one sum.
OPTION 6 -- ALTERNATIVE SCHEDULE. Upon request and if available, we will
provide payments for other options, including joint and survivor periods.
Certain options may not be available in some States.
If payments are being made under Option 2 or 3 and do not involve life
contingencies, then you may surrender the Policy and receive the commuted value
of any unpaid payments.
Additional information about any Payout Option may be obtained by
contacting us.
- -----------------------------------------------------------
CHARGES AND FEES
O CHARGES DEDUCTED UNDER THE POLICY
DEDUCTIONS FROM PREMIUM
Many states and municipalities impose a premium tax. The range of taxes
is from 0.75% to 5.0%. We also incur federal income tax liability under Internal
Revenue Code Section 848 (a Deferred Acquisition Cost tax) upon Policy premium
collected. We deduct 3.75% of each Policy premium payment we receive to cover
these expenses. (In Oregon, this deduction does not include state and
municipality premium tax expenses.) We also deduct $2 from each Policy premium
payment we receive to cover our premium processing expenses.
MONTHLY DEDUCTION
On each Monthly Deduction Date, we deduct a MONTHLY DEDUCTION from the
entire Accumulation Value equal to: (a) the COST OF INSURANCE for the current
month; plus (b) the COST OF ANY RIDERS for the current month; plus (c) the RISK
CHARGE; plus (d) the ADMINISTRATIVE CHARGE (except no monthly deduction is
deducted on or after the Policy Anniversary when the age of the Insured is equal
to 100). (These charges are described below.) The Monthly Deduction will be
deducted from the Subaccounts and the Fixed Account on a pro rata basis on each
Monthly Deduction Date. No Monthly Deduction is deducted from the Accumulation
Value after coverage beyond maturity is elected.
Each charge is deducted in the following manner: first, all charges are
calculated, based on the Accumulation Value on the Monthly Deduction Date
(before monthly charges are deducted, but reflecting charges deducted from
Subaccount assets), and then deducted. The Monthly Deduction is deducted pro
rata from the Accumulation Value in the Subaccounts and the Fixed Account.
COST OF INSURANCE CHARGE.
The guaranteed cost of insurance each month used in calculating the
Monthly Deduction equals:
(a) the net amount at risk for the month; multiplied by
(b) the guaranteed cost of insurance charge per $1,000
of Specified Amount; divided by
(c) 1,000.
The guaranteed monthly cost of insurance charge for each $1,000 is shown on
the Policy data pages. The charge is based on the Insured's attained age,
duration, sex (except in Montana), and risk and rate classes.
The net amount at risk in any month equals:
(a) The death benefit; less
(b) the Accumulation Value on the Monthly Deduction Date after
deducting the rider charge, if any, the risk charge for
the current month, and the administrative charge.
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We may use current cost of insurance charges less than those shown.
Current cost of insurance charges are based on the Insured's issue age, sex,
risk and rate classes, the current Specified Amount, and the length of time the
policy has been in force. We reserve the right to change current cost of
insurance charges. Changes in cost of insurance rates will be by class and will
be based on changes in future expectations of factors such as:
(a) investment earnings;
(b) mortality;
(c) persistency; and
(d) expenses.
RISK CHARGE. We deduct a charge from your Accumulation Value (including
amounts of Accumulation Value moved to the Loan Account as collateral for Policy
loans), before monthly charges are deducted, but reflecting charges deducted
from Subaccount assets, on each Monthly Deduction Date for the mortality risks
that we assume. In Policy Years 1 through 10, this Risk Charge is equivalent to
an annual charge of 0.70% of the Accumulation Value, deducted on each Monthly
Deduction Date. In Policy Years 11 and later, this Risk Charge is equivalent to
an annual charge of 0.55% of the Accumulation Value, deducted on each Monthly
Deduction Date. The charge is deducted as 0.05833% of the Accumulation Value,
deducted on each Monthly Deduction Date, for the first 10 Policy Years, and
0.04583% of the Accumulation Value, deducted on each Monthly Deduction Date, for
Policy Years 11 and thereafter. The mortality risk we assume is that Insureds
may live for shorter periods of time than we estimated, or the Accumulation
Value is not enough to keep the Policy in force during the No-Lapse Period. If
all the money we collect from this charge is not needed to cover death benefits
and expenses, the money is contributed to our general account. Conversely, even
if the money we collect is insufficient, we will provide for all death benefits
and expenses.
ADMINISTRATIVE CHARGE. We deduct a charge of $7 from your Accumulation
Value on each Monthly Deduction Date for the costs of issuing and administering
the Policy and operating the Variable Account..
COST OF RIDERS.
ADDITIONAL INSURED RIDER. The rider cost of term insurance equals
the rider benefit amount, multiplied by the rider's cost of insurance charge for
each $1,000 of benefit amount, divided by 1,000. This charge is based on the
Additional Insured's attained age, sex (except in Montana) and rate class.
ACCIDENTAL DEATH BENEFIT RIDER. The cost is determined by the
Insured's attained age and sex (just age in Montana) per each $1,000 of rider
coverage elected, multiplied by the rider benefit amount, divided by $1,000.
DISABILITY RIDER. The cost is a fixed rate determined by the
Insured's attained age and sex (just age in Montana) per each $1.00 of rider
monthly deduction amount elected, multiplied by the amount of the monthly
deduction amount.
WAIVER OF SURRENDER CHARGE RIDER. No cost.
ACCELERATED DEATH BENEFIT RIDER
4% (8% in Vermont and Oklahoma) of the death benefits otherwise payable
is deducted at the time the election is made to receive the accelerated death
benefits provided by this rider.
TRANSFER CHARGES
A transfer fee of $10 may be imposed for any transfer in excess of 12
per Policy Year. The transfer fee is deducted from the amount transferred. The
first 12 transfers each Policy Year are free.
SURRENDER CHARGE
If a Policy is totally surrendered, or a Partial Withdrawal is taken, or
upon a requested reduction in the Policy's Specified Amount, we may deduct a
Surrender Charge from the amount requested to be surrendered. If the Policy's
current Specified Amount is decreased, we may deduct a Surrender Charge from the
Accumulation Value based on the amount of the decrease. The Surrender charge
varies by issue age, sex (except in Montana), risk class, the length of time
your Policy has been in force and the Specified Amount. For example, a male age
35 at issue, in the nontobacco risk class and the preferred rate class, for
22
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surrender charge is $13.00 for each $1,000.00 of specified amount in the first
five years, declining to $1.00 per $1,000.00 in the twelfth year and zero
thereafter. The length of the Surrender Charge period varies depending upon the
Policy Owner's issue age: the period is 12 years through age 52, 11 years at age
53, 10 years at age 54, and 9 years at age 55 and thereafter.
The purpose of the Surrender Charge is to reimburse us for some of our
expenses incurred in distributing the Policies. The Surrender Charge and
Administrative charge may not be enough to cover all sales and administrative
expenses which we will incur in selling the Policies. Any shortfall, including
but not limited to payment of sales and distribution expenses, would be charge
to and paid by us.
WAIVER OF SURRENDER CHARGE
We will waive the Surrender Charge upon partial withdrawals and surrenders
in the event you become confined to a hospital or nursing home, disabled,
diagnosed with a terminal illness or unemployed, become an organ transplant
donor or recipient, experience significant damage to your residence, or upon the
death of your spouse or minor dependent. Those waivers and any restrictions
associated with such waivers are summarized below (see the Policy and Rider for
complete details):
NURSING HOME WAIVER. The Surrender Charge will not be imposed as a result
of any withdrawal made pursuant to your confinement, upon the recommendation of
a licensed physician for medically necessary reasons, to the following
facilities for 30 or more consecutive days: (a) a hospital licensed or
recognized as a general hospital by the state in which it is located; (b) a
hospital recognized as a general hospital by the Joint Commission on the
Accreditation of Hospitals; (c) a Medicare certified hospital; (d) a state
licensed nursing home with a registered nurse on duty 24 hours a day; and (e) a
Medicare certified long term care facility. This waiver only applies to partial
withdrawals and surrenders requested no later than 91 days after the last day of
confinement to such facility. Proof of confinement must be provided. This waiver
is not available if you are confined to a hospital or nursing home on date of
issue of the Policy.
We will not accept any additional premium payments under the Policy once
the Nursing Home Waiver has been elected. The Nursing Home Waiver may not be
available in all States.
DISABILITY WAIVER. The Surrender Charge will not be imposed upon any
withdrawal where you are physically disabled. We may require proof of such
disability including, in most States, written confirmation of receipt and
approval of your claim for Social Security Disability Benefits. Proof of
continued disability may be required through the date of any partial withdrawal
or surrender. We reserve the right to have you examined by a licensed physician
to verify such disability.
We will not accept any additional premium payments under a Policy once the
Disability Waiver has been elected. The Disability Waiver is not available if
you are receiving Social Security Disability Benefits on the date of issue or
are age 65 or older. The Disability Waiver may not be available in all States.
TERMINAL ILLNESS WAIVER. We will waive the Surrender Charge for any
withdrawal where you have and are diagnosed with a terminal illness and death is
reasonably expected within 12 months. We may require proof of such illness
including written confirmation from a licensed physician (not the Owner or
Insured). We reserve the right to have you examined by a licensed physician to
confirm such a diagnosis.
We will not accept any additional premium payments under a Policy once the
Terminal Illness Waiver has been elected. The Terminal Illness Waiver is not
available if you are diagnosed with a terminal illness prior to or on the date
of issue. The Terminal Illness Waiver may not be available in all States.
UNEMPLOYMENT WAIVER. We will waive the Surrender Charge for any partial
withdrawal or surrender in the event you become unemployed. The Unemployment
Waiver is available upon submission of a determination letter from a State
Department of Labor indicating you received unemployment benefits for at least
60 consecutive days prior to the election of such waiver. The Unemployment
Waiver may be exercised only once and is not available if you are receiving
unemployment benefits on the date of issue. The Unemployment Waiver may not be
available in all States.
TRANSPLANT WAIVER. We will waive surrender charges if you undergo
transplant surgery as an organ donor or recipient for the following body organs:
heart, liver, lung, kidney, pancreas; or as a recipient of a bone marrow
transplant. Within 91 days of surgery, you must submit a letter from a licensed
physician (who is not the Owner of or Insured under this policy) stating that
you underwent transplant surgery for any of these organs. We reserve the right
to have you examined by a physician of our choice and at our expense. This
waiver may be exercised only once per transplant surgery.
RESIDENCE DAMAGE WAIVER. We will waiver surrender charges if your primary
residence suffers physical damage in the amount of $50,000 or more after the
policy issue date. To claim this waiver, submit to us a certified copy of a
licensed appraiser's report stating the amount of the damage. This certified
copy must be submitted with 91 days of the date of the appraiser's report. We
reserve the right to obtain a second opinion by having the affected residence
inspected by a licensed appraiser of our choice and at our expense, and to rely
upon our appraiser's opinion.
This waiver may be exercised only once.
DEATH OF SPOUSE OR MINOR DEPENDENT WAIVER. We will waive surrender charges
for one partial withdrawal made within six months of your spouse's or minor
dependent(s)' death. Proof of death must be submitted to us. This waiver may be
exercised once for a spouse and once for each minor dependent. Subsequent
withdrawals are subject to the Surrender Charge.
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PORTFOLIO CHARGES
Each Portfolio is responsible for all of its expenses. The net assets of each
Portfolio will reflect deductions in connection with the investment advisory fee
and other expenses. Here is a table of Portfolio annual expenses:
24
<PAGE>
<TABLE>
<CAPTION>
================= ----------------- ===================
Management Other Total Series
Series Fund Annual Expenses1 Fees Expenses Fund Annual
(as a percentage of average net assets) ((a) after fee ((b) after Expenses
waiver) expense ((c) after fee
reimbursement) waiver and
expense
reimbursement)
----------------------------------------------- ----------------- ----------------- ===================
Portfolio:
<S> <C> <C> <C>
Alger American Growth 0.75% 0.10% 0.85%
Alger American Small Capitalization 0.85% 0.07% 0.92%
Federated Prime Money Fund II * 0.00% 0.80% 0.80%
Federated Fund for U.S. Government Securities 0.00% 0.80% 0.80%
II * 0.65% 0.22% 0.87%**
Fidelity VIP II Asset Manager: Growth *** 0.61% 0.13% 0.74%**
Fidelity VIP II Contrafund *** 0.51% 0.07% 0.58%**
Fidelity VIP Equity Income *** 0.13% 0.15% 0.28%
Fidelity VIP II Index 500 ** 0.75% 0.25% 1.00%
MFS Emerging Growth ** 0.75% 0.25% 1.00%
MFS High Income Fund ** 0.75% 0.25% 1.00%
MFS Research ** 0.75% 0.25% 1.00%
MFS Value Series ** 0.75% 0.25% 1.00%
MFS World Government ** 0.65% 0.60% 1.25%
Pioneer Capital Growth 1.00% 0.25% 1.25%
Pioneer Real Estate ** 0.16% 1.59%**** 1.75%
Scudder Global Discovery ** 0.48% 0.43%**** 0.91%**
Scudder Growth & Income *** 0.86% 0.44%**** 1.30%
Scudder International 0.00% 0.85% 0.85%
T. Rowe Price Equity Income **** 0.00% 1.05% 1.05%
T. Rowe Price International **** 0.00% 0.70% 0.70%
T. Rowe Price Limited-Term Bond **** 0.00% 0.85% 0.85%
T. Rowe Price New America Growth **** 0.00% 0.90% 0.90%
T. Rowe Price Personal Strategy Balanced ****
</TABLE>
===============================================================================
* Both Federated Prime Money Fund II and Federated Fund for U.S. Government
Securities II currently bundle their fees and expenses and limit the total
charge. Absent any fee waiver or expense reimbursement, the total fees and
expenses for each fund would have been 1.37% and 1.81%, respectively.
** Without fee waiver or expense reimbursement limits the following funds
would have had the charges set forth below:
MANAGEMENT OTHER TOTAL
FEES EXPENSES EXPENSES
--------------------------------------------------------------
Fidelity VIP II Index 500 0.28% 0.15% 0.43%
MFS Emerging Growth 0.75% 0.41% 1.16%
MFS High Income Fund 0.75% 3.08% 3.83%
MFS Research 0.75% 0.73% 1.48%
MFS Value Series 0.75% 0.87% 1.62%
MFS World Government 0.75% 1.28% 2.03%
Pioneer Real Estate 1.00% 0.34% 1.34%
Scudder Global Discovery 0.98% 1.59% **** 2.57%
*** These funds have voluntarily agreed to limit their total annual expenses to
the limits shown below:
Fidelity VIP II Asset Manager: Growth and Fidelity VIP II Contrafund - 1.00%
Fidelity VIP Equity Income and Scudder Growth & Income - 1.50%
**** T. Rowe Price Funds do not itemize management fees and other expenses.
***** Includes 0.25% 12b-1 fee assessed for payment of distribution
administration expenses.
===============================================================================
- --------
1 The fee and expense data regarding each Series Fund, which are fees and
expenses for 1996, was provided to United of Omaha by the Series Fund. The
Series Funds are not affiliated with United of Omaha.
25
<PAGE>
For more information concerning the investment advisory fee and other charges
against the Portfolios, see the prospectuses for the Portfolios, current copies
of which accompany this Prospectus.
- -----------------------------------------------------------
OTHER POLICY PROVISIONS
O NOTICE TO US
All notices or requests under the Policy must be sent to us by written
notice, unless you have authorized us in writing to acknowledge Telephone
Transactions from you. Written notices to us are not effective until our receipt
at this address: United of Omaha Life Insurance Company, Variable Product
Services Department, P.O. Box 8430, Omaha, Nebraska 68103-0430. Our toll-free
telephone number is 800-238-9354.
O ENTIRE CONTRACT
The entire contract is the Policy, any riders, endorsements and
amendments, and the signed application. All statements made in the application
will, in the absence of fraud, be deemed representations and not warranties. We
will not use any statement to contest the Policy or deny a claim unless it is in
the application. Any change of the Policy requires the written consent of an
executive officer. No agent has the authority to change the Policy or waive any
of its terms.
O RIGHT TO EXAMINE
If you are not satisfied with your Policy, you may return it to us or
our agent within 10 days (or more where required by applicable State insurance
law) after you receive the Policy or 45 days after you signed the application,
whichever is later. We will cancel your Policy as of the date any insurance
became effective and refund the premiums paid within seven days after we receive
the returned policy.
O DELAY OF PAYMENTS
We will usually pay any amounts payable from the Variable Account as a
Policy loan, partial withdrawal or Cash Surrender within 7 days after we receive
your written request in a form satisfactory to us. We can postpone such payments
or any transfers of amounts between Subaccounts or into the Fixed Account or the
Loan Account if: (i) the New York Stock Exchange ("NYSE") is closed for other
than customary weekend and holiday closings; (ii) trading on the NYSE is
restricted; (iii) an emergency exists as determined by the SEC, as a result of
which it is not reasonably practical to dispose of securities, or not reasonably
practical to determine the value of the Net Assets of the Variable Account; or
(iv) the SEC permits delay for the protection of security holders. The
applicable rules of the SEC will govern as to whether the conditions in (iii) or
(iv) exist. We may defer payment of Policy loans, partial withdrawals or a Cash
Surrender from the Fixed Account for up to six months from the date we receive
your written request.
O CHANGE OF OWNERSHIP AND ASSIGNMENT
You may name a new owner of the Policy by an absolute assignment or
pledge it as collateral by assigning it. The assignment must be in writing. No
assignment will be binding on us until we record and acknowledge it. We are not
responsible for the validity or effect of an assignment of this Policy. The
rights of any Beneficiary will be subject to a collateral assignment. If the
Beneficiary of this Policy is irrevocable, a change of ownership or a collateral
assignment may be made only by joint written request from you and the
irrevocable Beneficiary. A change of owner may have tax consequences.
O BENEFICIARY
The Beneficiary is named in the Policy application and may be changed,
unless the Beneficiary is irrevocable. (SEE "BENEFICIARY CHANGE.")
O BENEFICIARY CHANGE
To change a Beneficiary, send us a written request. When recorded and
acknowledged by us, the change will be effective as of the date you signed the
26
<PAGE>
request. The change will not apply to any payments made or other action taken by
us before recording. If the Beneficiary is irrevocable, you may change the
Beneficiary only by joint written request from you and the irrevocable
Beneficiary.
O MISSTATEMENT OF AGE OR SEX
If the age or sex of the Insured has been misstated, the Death Benefit
will be the amount which would be purchased by the most recent cost of insurance
charge at the correct age and sex.
O SUICIDE
We will not pay the Death Benefit if the Insured's death results from
suicide, while sane or insane, within two years (one year in Colorado and North
Dakota) from the date of issue. Instead we will pay the sum of the premiums paid
since issue less any loans and unpaid loan interest and less any partial
withdrawals.
We will not pay that portion of the Death Benefit resulting from an
increase in Specified Amount if the Insured's death results from suicide, while
sane or insane, within two years (one year in Colorado and North Dakota) from
the effective date of the increase. Instead we will pay the sum of the premiums
paid for the increase.
O INCONTESTABILITY
We will not contest the validity of the Policy after it has been in
force during the lifetime of the Insured for two years from the date of issue.
We will not contest the validity of an increase in Specified Amount
after the Policy has been in force during the lifetime of the Insured for two
years from the effective date of the increase. Any contest of an increase in
Specified Amount will be based on the application for that increase.
O COVERAGE BEYOND MATURITY
Within thirty days of the maturity date of the Policy, you may elect to
continue the Policy in force beyond the maturity date. The election must be made
by written request.
The following will apply:
The allocation of the Accumulation Value to the Subaccounts and the Fixed
Account will be maintained according to your instructions;
The cost of insurance charge will be zero;
The expense charge will be zero;
The corridor percentage will be fixed at 101% ;
Any riders attached to the Policy that are then in force will terminate;
The Insured's date of death will be considered this Policy's maturity date.
All other rights and benefits as described in the Policy will be available
during the lifetime of the Insured.
The tax consequences associated with extending coverage beyoud maturity are
unclear. A tax adviser should be consulted before making such an election.
O REINSTATEMENT
If this policy lapses and has not been surrendered for cash, you may
reinstate it within five years of the date of lapse and prior to the maturity
date, subject to the following: (i) we receive a written application signed by
you and the Insured; (ii) we receive evidence of insurability satisfactory to
us; (iii) we receive payment of an amount large enough to continue this Policy
in force for three months; and (iv) re-establishment of surrender charges, if
any, measured from the original date of issue. The effective date of
reinstatement will be the date we approve the application for reinstatement.
The Specified Amount of the reinstated Policy may not exceed the Specified
Amount at the time of lapse. The Accumulation Value on the effective date of
reinstatement will equal (i) the amount required in (iii) above, plus any
applicable surrender charge(s) measured from the original date of issue to the
date of reinstatement, and less (ii) the Monthly Deduction for the current
month.
O NONPARTICIPATING
The Policy does not share in our surplus earnings or profits. No
dividends are paid by us on this Policy.
O OPTIONAL POLICY BENEFITS
27
<PAGE>
ACCELERATED BENEFITS RIDER. This rider allows the Policy owner to make a
one time election for payment in advance of 96% of the death benefit of the
Policy, subject to a maximum of $500,000, if the Insured is diagnosed as having
a terminal illness.
ACCIDENTAL DEATH BENEFIT RIDER. This rider provides an accidental death
benefit, in an amount selected by the Policy Owner, in addition to all other
benefits provided by the Policy.
DISABILITY RIDER. Upon due proof of that the Insured's disability began
while the rider was in force and continued for at least six months, we will
waive payments of the Policy's Monthly Deduction amount during the time the
Insured is disabled until the maturity date of the Policy.
TERM INSURANCE RIDER ON ADDITIONAL INSURED. This rider provides
renewable annual term insurance coverage on a person named by the Policy owner
as an additional insured under the Policy. Such coverage may be converted to a
new whole life policy on the Additional Insured, subject to Rider terms.
- -----------------------------------------------------------
TAX MATTERS
O GENERAL
The following is a discussion of federal income tax considerations
relating to the Policy. It is based upon our understanding of laws as they now
exist and are currently interpreted by the Internal Revenue Service ("IRS").
These laws are complex, and tax results may vary among individuals. If you
contemplate the purchase of or exercise of elections under the Policy, you are
encouraged to seek independent competent tax advice.
O LIFE INSURANCE QUALIFICATION
Section 7702 of the Internal Revenue Code of 1986, as amended ("Code")
defines a life insurance contract for Federal income tax purposes. The Section
7702 definition can be met if a life insurance contract satisfies either one of
two tests set forth in that section. The manner in which these tests should be
applied to certain features of the Policy is not directly addressed by Section
7702 or proposed regulations issued under that section. The presence of these
Policy features, the absence of final regulations, and the lack of other
pertinent interpretations of Section 7702, thus creates some uncertainty about
the application of Section 7702 to the Policy.
Nevertheless, we believe the Policy qualifies as a life insurance contract
for federal tax purposes, so that:
o the death benefit should be fully excludable from the gross income of
the Beneficiary under Section 101(a)(1) of the Code; and
o you should not be considered in constructive receipt of the cash surrender
value, including any increases, unless and until it is distributed from the
Policy.
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 contract. We thus reserve the
right to make changes in the Policy if such changes are deemed necessary to
attempt to assure its qualification as a life insurance contract for tax
purposes.
MODIFIED ENDOWMENT CONTRACTS. Section 7702A establishes a class of life
insurance contracts designated as modified endowment contracts. The rules
governing whether a Policy will be treated as a modified endowment contract are
extremely complex and cannot be completely described in this summary. In
general, a Policy will be a modified endowment contract if the accumulated
premium payments made at any time during the first seven Policy years exceed the
sum of the net level premium payments 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. A Policy may also become a modified endowment
contract after a material change. The determination of whether a Policy will be
a modified endowment contract after a material change generally depends upon the
relationship of the Policy's death benefit and Accumulation Value at the time of
such change and the additional premium payments made in the seven years
following the material change. A Policy may also become a modified endowment
contract in the event of a reduction in the Policy's death benefit.
Due to the Policy's flexibility, classification as a modified endowment
contract will depend on the individual circumstances of each Policy. You should
consult with a tax adviser to determine whether a Policy transaction will cause
28
<PAGE>
the Policy to be treated as a modified endowment contract. However, at the time
a premium payment is credited which, in our view, would cause the Policy to
become a modified endowment contract, we will notify you that unless a refund of
the excess premium is requested by you, the Policy will become a modified
endowment contract. You will have 30 days after receiving such notice to request
the refund.
O TAX TREATMENT OF LOANS AND OTHER DISTRIBUTIONS
IN GENERAL. Depending on the circumstances, the exchange of a Policy, a
change in the Policy's death benefit Option, a policy loan, a withdrawal, a
surrender, a change in Ownership, or an assignment of the Policy may have
federal income tax consequences. In addition, federal, state and local transfer,
and other tax consequences of Ownership or receipt of distributions from a
Policy depends on the circumstances of each Owner or Beneficiary.
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
surrender or lapse of the Policy or when benefits are paid at the Policy's
maturity date, if the amount received plus any loan amount exceeds the total
investment in the Policy, the excess will generally be treated as ordinary
income subject to tax.
DISTRIBUTIONS FROM POLICIES CLASSIFIED AS MODIFIED ENDOWMENT CONTRACTS.
Policies classified as modified endowment contracts will be subject to the
following tax rules:
(1) All distributions, including upon surrender and partial surrender,
are treated as ordinary income subject to tax up to the amount equal to the
excess (if any) of the Accumulation Value immediately before the distribution
over the investment in the Policy (described below) at such time.
(2) Loans from or secured by the Policy are treated as distributions and
taxed accordingly.
(3) A 10% additional income tax is imposed on the portion of any
distribution from, or loan taken from or secured by, the Policy that is included
in income except where the distribution or loan is made on or after the Owner
attains age 59 1/2, is attributable to the Owner's becoming disabled, or is
part of a series of substantially equal periodic payments for the life (or life
expectancy) of the Owner or the joint lives (or joint life expectancies) of the
Owner and the Owner's beneficiary.
DISTRIBUTIONS FROM POLICIES NOT CLASSIFIED AS MODIFIED ENDOWMENT CONTRACTS.
Distributions from a Policy that is not a modified endowment contract are
generally treated as first recovering the investment in the Policy (defined
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 decrease in the Policy's death benefit 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 Owner in order for the
Policy to continue complying with the Section 7702 definitional limits. Such a
cash 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. However, it is possible that loans in
effect after the eleventh Policy Year could be treated as distributions rather
than loans.
Finally, neither distributions (including distributions upon surrender) nor
loans from, or secured by, a Policy that is not a modified endowment contract
are subject to the 10% additional income tax rule. If a Policy which is not a
modified endowment contract becomes a modified endowment contract, then any
distributions made from the Policy within two years prior to the change in such
status will become taxable in accordance with the modified endowment contract
rules discussed above.
INVESTMENT IN THE POLICY. Investment in the Policy means: (1) the aggregate
amount of any premium payments or other consideration paid for the Policy, minus
(2) the aggregate amount received under the Policy which is excluded from gross
income of the Owner (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 income, will be disregarded), plus (3) 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 Owner.
O SPECIAL TREATMENT OF POLICY LOAN INTEREST
If there is any borrowing against the Policy, the interest paid on loans
generally is not be tax deductible.
29
<PAGE>
O AGGREGATION OF MODIFIED ENDOWMENT CONTRACTS
In the case of a pre-death distribution (including a loan, partial
withdrawal, collateral assignment or full surrender) from a Policy that is
treated as a modified endowment contract, a special aggregation requirement may
apply for purposes of determining the amount of the income on the Policy.
Specifically, if we or any of our affiliates issue to the same Policy Owner more
than one modified endowment contract within a calendar year, then for purposes
of measuring the income on the Policy with respect to a distribution from any of
those policies, the income for all those policies will be aggregated and
attributed to that distribution.
O OTHER POLICY OWNER TAX MATTERS
Federal and state estate, inheritance and other tax consequences of
ownership or receipt of proceeds under the Policy depend upon you or the
beneficiary's individual circumstances.
The Policy may continue after the Insured attains age 100. The tax
consequences associated with continuing a Policy beyond age 100 are unclear. A
tax advisor should be consulted on this issue.
Section 817(h) of the Code requires the investments of the Variable Account
to be "adequately diversified" in accordance with Treasury Regulations for the
Policy to qualify as a life insurance contract under Section 7702 of the Code.
Failure to comply with the diversification requirements may result in the Policy
not qualifying as life insurance under the Code, which may subject you to
immediate taxation on the incremental increases in Accumulation Value of the
Policy plus the cost of insurance protection for the year. Regulations
specifying the diversification requirements have been issued by the Department
of Treasury, and we believe the Policy complies fully with such requirements.
In connection with the issuance of the diversification regulations, the
Treasury Department stated that it anticipates the issuance of regulations or
rulings prescribing the circumstances in which your control of the investments
of the Variable Account may cause you, rather than us, to be treated as the
owner of the assets in the Variable Account. To date, no such regulations or
guidance has been issued. If you are considered the owner of the assets of the
Variable Account, income and gains from the Account would be included in your
gross income.
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
determined that the owners were not owners of separate account assets. For
example, you have additional flexibility in allocating Policy Premium and
Accumulation Values. These differences could result in you being treated as the
owner of a pro rata share of the assets of the Variable Account. In addition, we
do not know what standards will be set forth in the regulations or rulings which
the Treasury may issue. We therefore reserve the right to modify the Policy as
necessary to attempt to prevent you from being considered the owner of the
assets of the Variable Account.
The Policy may be used in various arrangements, including non-qualified
deferred compensation or salary continuance plans, split dollar insurance plans,
executive bonus plans, tax exempt and nonexempt welfare benefit 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 you are contemplating the use of the Policy in any
arrangement the value of which depends in part on its tax consequences, you
should be sure to consult a qualified tax advisor regarding the tax attributes
of the particular arrangement and the suitability of this product for the
arrangement. Moreover, in recent years, Congress has adopted new rules relating
to corporate owned life insurance. Any business contemplating the purchase of a
new life insurance contract or a change in an existing contract should consult a
tax advisor.
Legislation has been proposed in 1998 that, if enacted, would adversely
affect the federal taxation of certain insurance and annuity contracts. For
example, one proposal would tax transfers among investment options and tax
exchanges involving variable insurance contracts. A second proposal would reduce
the "investment in the contract" under Cash Value Life insurance and certain
annuity contracts by certain amounts, thereby increasing the amount of income
for purposes of computing gain. although the likelihood of there being any
changes is uncertain, there is always the possibility that the tax treatment of
the Policies could change by legislation or other means. Moreover, it is also
possible that any change could be retroactive (that is, effective prior to the
date of the change). You should consult a tax advisor with respect to
legislative developments and their effect on the Policy.
- -----------------------------------------------------------
MANAGEMENT
Our Directors and senior officers are:
DIRECTORS*
Foggie, Samuel L. Banking and Finance Industry Executive
Plunkett III, Hugh V. Attorney (Plunkett, Schwartz & Petersen)
Sampson, Richard J. Retired Group Insurance Executive (United of Omaha Life
Insurance Company)
Skutt, Thomas J. Chairman of the Board (United of Omaha Life Insurance
Company)
Straus, Oscar S. Investments; President, The Daniel and Florence
Guggenheim Foundation
Sturgeon, John A. President (United of Omaha Life Insurance Company)
30
<PAGE>
Wayne, Michael A. Foundation and Cancer Institute Executive
Weekly, John W. Vice Chairman of the Board and Chief Executive Officer
(United of Omaha Life Insurance Company)
OFFICERS*
Thomas J. Skutt Chairman of the Board
John W. Weekly Vice Chairman of the Board, Chief Executive
Officer
John A. Sturgeon President
G. Ronald Ames Executive Vice President (Small Group and Information
Services)
Robert B. Bogart Executive Vice President (Human Resources)
Stephen R. Booma Executive Vice President (Managed Care)
Cecil D. Bykerk Executive Vice President (Chief Actuary)
James L. Hanson Executive Vice President (Information Services)
Kim Harm Executive Vice President (Customer Services)
Lawrence F. Harr Executive Vice President (Executive Counsel)
Randall C. Horn Executive Vice President (Group Insurance)
M. Jane Huerter Executive Vice President (Corporate Secretary; Corporate
Administration)
John L. Maginn Executive Vice President (Treasurer; Chief
Investment Officer)
William C. Mattox Executive Vice President (Federal Affairs)
Thomas J. McCusker Executive Vice President (General Counsel)
Tommie D. Thompson Executive Vice President (Corporate Comptroller)
*Business address for all directors and officers is Mutual of Omaha
Plaza, Omaha, Nebraska 68175.
- -----------------------------------------------------------
OTHER INFORMATION
O REPORTS TO YOU
We will send you a statement at least annually showing your Policy's
death benefit, Accumulation Value and any outstanding Policy loan balance. We
will also confirm Policy loans, Subaccount transfers, lapses, surrenders and
other Policy transactions as they occur. If you have Accumulation Value in the
Variable Account you will receive such additional periodic reports as may be
required by the SEC.
O VOTING RIGHTS
We own the Portfolio shares held in the Variable Account and have the right
to vote those shares. However, to the extent required by applicable Federal
securities law, we will give you, as Policy Owner, the right to instruct us how
to vote the shares that are attributable to your Policy.
The Policy Owners who are entitled to give voting instructions and the
number of shares attributable to their Policies will be determined as of the
record date for the meeting. All Portfolio shares held in any Subaccount of the
Variable Account, or in any other separate account of ours or an affiliate, the
policyholders of which have rights of instruction with respect to the Portfolio
shares, and for which timely instructions are not received, will be voted in the
same proportion as (i) the aggregate cash value of policies giving instructions,
respectively, to vote, for, against, or withhold votes on a proposition, bears
to (ii) the total Accumulation Value in that Subaccount for all policies for
which voting instructions are received. No voting privileges apply with respect
to Accumulation Value removed from the Variable Account as a result of a Policy
loan.
31
<PAGE>
If required by State insurance authorities, we may disregard voting
instructions if they would require that shares be voted to cause a change in the
investment objectives of the portfolios or to approve or disapprove an
investment advisory or underwriting contract for a portfolio. In addition, we
may disregard voting instructions in favor of changes, initiated by a Policy
Owner or an Eligible Fund's Board of Trustees, in the investment policy,
investment adviser or principal underwriter of the portfolio if we (i)
reasonably disapprove of the changes and (ii) in the case of a change in
investment policy or investment adviser, make a good faith determination that
the proposed change is contrary to State law or is prohibited by State
regulatory authorities or that the change would be inconsistent with a
Subaccount's investment objectives or would result in the purchase of securities
which vary from the general quality and nature of investments and investment
techniques utilized by other separate accounts of ours or of an affiliated life
insurance company, which separate accounts have investment objectives similar to
those of the Subaccount. If we do disregard voting instructions, a summary of
that action and the reasons for it will be included in the next semi-annual
report to Policy Owners.
O DISTRIBUTION OF THE POLICIES
Mutual of Omaha Investor Services ("MOIS"), Mutual of Omaha Plaza,
Omaha, Nebraska 68175, is the principal underwriter of the Policy. Like us, MOIS
is a 100% owned subsidiary of Mutual of Omaha Insurance Company. MOIS is
registered as a broker-dealer with the SEC and is a member of the National
Association of Securities Dealers, Inc. ("NASD"). MOIS contracts with one or
more registered broker-dealers ("Distributors") to offer and sell the Policy.
All persons selling the Policy will be registered representatives of the
Distributors, and will also be licensed as insurance agents to sell variable
life insurance. Commissions paid to Distributors may be up to 8 1/4% of the
Premium paid.
O STATE REGULATION
We are subject to regulation and supervision by the Insurance Department
of the State of Nebraska, which periodically examines our affairs. We are also
subject to the insurance laws and regulations of all jurisdictions where we are
authorized to do business. The Policy has been approved by the Insurance
Department of the State of Nebraska and other jurisdictions.
We submit annual statements of our operations, including financial
statements, to the insurance departments of the various jurisdictions in which
we do business, for the purpose of determining solvency and compliance with
local insurance laws and regulations.
O LEGAL MATTERS
We know of no material legal proceedings pending to which the Variable
Account is a party or which would materially affect the Variable Account. We are
not involved in any litigation of material importance to our total assets or to
the Variable Account.
Legal matters in connection with the Policy have been passed upon by our
Law Staff.
O INDEPENDENT AUDITORS
The Financial Statements of United of Omaha Life Insurance Company as of
and for the year ended December 31, 1996, and of United of Omaha Separate
Account B for the year ended December 31, 1997 for the period from August 13,
1997 (inception) to December 31, 1997, included in this Registration Statement
have been audited by independent auditors Deloitte & Touche LLP, Omaha,
Nebraska, as stated in their report appearing herein. The financial statements
of United of Omaha Life Insurance Company as of December 31, 1995, and for the
two years then ended was audited by independent auditors Coopers & Lybrand, LLP,
Omaha, Nebraska, as stated in their report appearing herein. The financial
statements of United of Omaha Life Insurance Company should be considered only
as bearing on the ability of United of Omaha to meet its obligations under the
Policies. They should not be considered as bearing on the investment performance
of the assets held in the Variable Account.
O REGISTRATION STATEMENT
This prospectus omits certain information contained in the Registration
Statement filed with the SEC. Copies of such additional information may be
obtained from the SEC upon payment of the prescribed fee.
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<PAGE>
- -----------------------------------------------------------
ILLUSTRATIONS
DEATH BENEFITS, CASH SURRENDER VALUE AND ACCUMULATED PREMIUMS
The tables in this Section illustrate how the Policy operates. They show
how the Death Benefit, Cash Surrender Value, and Accumulation Value could vary
over an extended period of time assuming hypothetical gross rates of return
(i.e. investment income and capital gains and losses, realized or unrealized)
for the Variable Account equal to constant after tax annual rates of 0%, 6%, and
12%. The tables are illustrated for this Policy based on Specified Amount of
life insurance coverage of $250,000 and $500,000 for a male age 35, 45 and 55.
The Insureds are assumed to be preferred rate class. The tables reflect the
0.70% mortality and expense risk charge deducted from Variable Account assets,
the monthly $7 administrative charge, the $2.00 premium processing charge, the
deduction of 3.75% of premium payments for state (where permitted) and federal
taxes and the current cost of insurance charge. The tables also include
Accumulation Values, Cash Surrender Values and Death Benefit amounts that
reflect a 0.90% mortality and expense risk charge, the maximum mortality and
expense charge the company is contractually entitled to assess under the Policy
as well as a cost of insurance charge based upon the guaranteed cost of
insurance charge.. These tables may assist in comparison of Death Benefits, Cash
Surrender Values and Accumulation Values with those under other variable life
insurance policies that may be issued by United of Omaha or other companies. It
is also assumed that no riders are attached to the base policy illustrated.
Death Benefits, Cash Surrender Values, and Accumulation Values for a
Policy would be different from the amounts shown if the actual gross rates of
return averaged 0%, 6% or 12%, but varied above and below that average for the
period, if the initial premium was paid in another amount, if additional
payments were made, or if any Policy loan or partial withdrawal was made during
the period of time illustrated. They would also be different depending on the
allocation of Accumulation Value among the Variable Account's Subaccounts, if
the actual gross rates of return averaged 0%, 6% or 12%, but varied above and
below that average for the period.
The amounts for the Death Benefit, Cash Surrender Value, and
Accumulation Value shown in the tables reflect the fact that an expense charge
and a charge for the cost of insurance are deducted from the Accumulation Value
on each Monthly Deduction Date. The Cash Surrender Values shown in the tables
reflect the fact that a Surrender Charge is deducted from the Accumulation Value
upon surrender or lapse during the first 12 years following each premium
payment. The amounts shown in the tables also take into account an average daily
charge equal to an annual charge of 0.89% of the average daily net assets of the
Portfolios for the investment advisory fees and operating expenses. The gross
annual investment return rates of 0%, 6%, and 12% on the Portfolio's assets are
equal to net annual investment return rates of -0.89%, 5.11%, 11.11%,
respectively.
The hypothetical rates of return shown in the tables do not reflect any
tax charges attributable to the Variable Account, since no such charges are
currently made. If any such charges are imposed in the future, the gross annual
rate of return would have to exceed the rates shown by an amount sufficient to
cover the tax charges, in order to produce the Death Benefits, Cash Surrender
Values and Accumulation Values illustrated.
The second column of each table shows the amount which would accumulate
if an amount equal to the annual premium required to keep the Policy in force
were invested to earn interest of 5% per year, compounded annually.
Upon request, United of Omaha will provide a comparable illustration
based upon the proposed Insured's actual age, sex and underwriting
classification, the specified amount, the proposed amount and frequency of
premium payments and any available riders requested.
33
<PAGE>
<TABLE>
<CAPTION>
UNITED OF OMAHA LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
HYPOTHETICAL ILLUSTRATION
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0% (-0.93NET)
Male issue age 45
Preferred Nontobacco Class
Initial Specified Amount $250,000
Annual Planned Premium $3,120
CURRENT CHARGES * GUARANTEED CHARGES **
--------- ------------ -------- ------------ ----------- --------
PREMIUMS
END OF ACCUMULATD ACCUMU- CASH ACCUMU- CASH
CONTRACT AT 5% INTEREST LATION SURRENDER DEATH LATION SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 3,276 2,281 0 250,000 2,022 0 250,000
2 6,716 4,482 0 250,000 3,951 0 250,000
3 10,328 6,604 604 250,000 5,782 0 250,000
4 14,120 8,642 2,642 250,000 7,512 1,512 250,000
5 18,102 10,593 4,593 250,000 9,135 3,135 250,000
6 22,283 12,461 7,211 250,000 10,642 5,392 250,000
7 26,673 14,230 9,730 250,000 12,022 7,522 250,000
8 31,283 15,890 12,140 250,000 13,260 9,510 250,000
9 36,123 17,433 14,433 250,000 14,341 11,341 250,000
10 41,205 18,848 16,598 250,000 15,251 13,001 250,000
11 46,541 20,638 19,138 250,000 16,001 14,501 250,000
12 52,145 22,325 21,575 250,000 16,551 15,801 250,000
13 58,028 23,928 23,928 250,000 16,893 16,893 250,000
14 64,205 25,421 25,421 250,000 17,004 17,004 250,000
15 70,691 26,795 26,795 250,000 16,859 16,859 250,000
16 77,502 28,041 28,041 250,000 16,427 16,427 250,000
17 84,653 29,147 29,147 250,000 15,676 15,676 250,000
18 92,162 30,065 30,065 250,000 14,555 14,555 250,000
19 100,046 30,807 30,807 250,000 13,010 13,010 250,000
20 108,324 31,358 31,358 250,000 10,987 10,987 250,000
25 156,354 31,158 31,158 250,000 0 0 250,000
35 295,889 5,171 5,171 250,000 0 0 250,000
</TABLE>
* These values reflect investment results using current cost of insurance rates
and expense charges. ** These values reflect investment results using guaranteed
cost of insurance rates and expense charges.
The hypothetical investment results shown above and elsewhere in this prospectus
are illustrative only and should not be deemed a representation of past or
future investment results. Actual investment results may be more or less than
those shown and will depend on a number of different factors, including the
investment allocations by the owner and different investment rates of return for
the Portfolios. The Death Benefit, Accumulation Value and Cash Surrender Value
for a Policy would be different from those shown if the actual investment rates
of return averaged the rates shown above over a period of years, but fluctuated
above or below those averages from individual Policy years. Theses values would
also be different if any Policy loan or partial withdrawal were made during the
period. No representation can be made that these assumed investment rates of
return can be achieved for any one year or sustained over any period of time.
34
<PAGE>
<TABLE>
<CAPTION>
UNITED OF OMAHA LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
HYPOTHETICAL ILLUSTRATION
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6% (5.07% NET)
Male issue age 45
Preferred Nontobacco Class
Initial Specified Amount $250,000
Annual Planned Premium $3,120
CURRENT CHARGES * GUARANTEED CHARGES **
--------- ------------ -------- ------------ ----------- --------
PREMIUMS
END OF ACCUMULATD ACCUMU- CASH ACCUMU- CASH
CONTRACT AT 5% INTEREST LATION SURRENDER DEATH LATION SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 3,276 2,438 0 250,000 2,171 0 250,000
2 6,716 4,939 0 250,000 4,374 0 250,000
3 10,328 7,503 1,503 250,000 6,606 606 250,000
4 14,120 10,130 4,130 250,000 8,863 2,863 250,000
5 18,102 12,818 6,818 250,000 11,141 5,141 250,000
6 22,283 15,572 10,322 250,000 13,428 8,178 250,000
7 26,673 18,379 13,879 250,000 15,714 11,214 250,000
8 31,283 21,232 17,482 250,000 17,985 14,235 250,000
9 36,123 24,123 21,123 250,000 20,222 17,222 250,000
10 41,205 27,044 24,794 250,000 22,411 20,161 250,000
11 46,541 30,509 29,009 250,000 24,573 23,073 250,000
12 52,145 34,063 33,313 250,000 26,658 25,908 250,000
13 58,028 37,726 37,726 250,000 28,655 28,655 250,000
14 64,205 41,480 41,480 250,000 30,539 30,539 250,000
15 70,691 45,322 45,322 250,000 32,281 32,281 250,000
16 77,502 49,249 49,249 250,000 33,848 33,848 250,000
17 84,653 53,257 53,257 250,000 35,203 35,203 250,000
18 92,162 57,309 57,309 250,000 36,292 36,292 250,000
19 100,046 61,421 61,421 250,000 37,054 37,054 250,000
20 108,324 65,587 65,587 250,000 37,429 37,429 250,000
25 156,354 87,489 87,489 250,000 30,905 30,905 250,000
35 295,889 135,917 135,917 250,000 0 0 250,000
</TABLE>
* These values reflect investment results using current cost of insurance rates
and expense charges. ** These values reflect investment results using guaranteed
cost of insurance rates and expense charges.
The hypothetical investment results shown above and elsewhere in this prospectus
are illustrative only and should not be deemed a representation of past or
future investment results. Actual investment results may be more or less than
those shown and will depend on a number of different factors, including the
investment allocations by the owner and different investment rates of return for
the Portfolios. The Death Benefit, Accumulation Value and Cash Surrender Value
for a Policy would be different from those shown if the actual investment rates
of return averaged the rates shown above over a period of years, but fluctuated
above or below those averages from individual Policy years. Theses values would
also be different if any Policy loan or partial withdrawal were made during the
period. No representation can be made that these assumed investment rates of
return can be achieved for any one year or sustained over any period of time.
35
<PAGE>
<TABLE>
<CAPTION>
UNITED OF OMAHA LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
HYPOTHETICAL ILLUSTRATION
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12% (11.07% NET)
Male issue age 45
Preferred Nontobacco Class
Initial Specified Amount $250,000
Annual Planned Premium $3,120
CURRENT CHARGES * GUARANTEED CHARGES **
--------- ------------ -------- ------------ ----------- --------
PREMIUMS
END OF ACCUMULATD ACCUMU- CASH ACCUMU- CASH
CONTRACT AT 5% INTEREST LATION SURRENDER DEATH LATION SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 3,276 2,595 0 250,000 2,321 0 250,000
2 6,716 5,415 0 250,000 4,817 0 250,000
3 10,328 8,479 2,479 250,000 7,503 1,503 250,000
4 14,120 11,811 5,811 250,000 10,395 4,395 250,000
5 18,102 15,434 9,434 250,000 13,507 7,507 250,000
6 22,283 19,383 14,133 250,000 16,856 11,606 250,000
7 26,673 23,677 19,177 250,000 20,453 15,953 250,000
8 31,283 28,343 24,593 250,000 24,314 20,564 250,000
9 36,123 33,413 30,413 250,000 28,453 25,453 250,000
10 41,205 38,924 36,674 250,000 32,890 30,640 250,000
11 46,541 45,447 43,947 250,000 37,704 36,204 250,000
12 52,145 52,602 51,852 250,000 42,881 42,131 250,000
13 58,028 60,476 60,476 250,000 48,459 48,459 250,000
14 64,205 69,128 69,128 250,000 54,475 54,475 250,000
15 70,691 78,643 78,643 250,000 60,968 60,968 250,000
16 77,502 89,116 89,116 250,000 67,984 67,984 250,000
17 84,653 100,653 100,653 250,000 75,579 75,579 250,000
18 92,162 113,354 113,354 250,000 83,806 83,806 250,000
19 100,046 127,376 127,376 250,000 92,734 92,734 250,000
20 108,324 142,881 142,881 250,000 102,454 102,454 250,000
25 156,354 250,171 250,171 290,198 167,969 167,969 250,000
35 295,889 717,756 717,756 753,644 479,028 479,028 502,979
</TABLE>
* These values reflect investment results using current cost of insurance rates
and expense charges. ** These values reflect investment results using guaranteed
cost of insurance rates and expense charges.
The hypothetical investment results shown above and elsewhere in this prospectus
are illustrative only and should not be deemed a representation of past or
future investment results. Actual investment results may be more or less than
those shown and will depend on a number of different factors, including the
investment allocations by the owner and different investment rates of return for
the Portfolios. The Death Benefit, Accumulation Value and Cash Surrender Value
for a Policy would be different from those shown if the actual investment rates
of return averaged the rates shown above over a period of years, but fluctuated
above or below those averages from individual Policy years. Theses values would
also be different if any Policy loan or partial withdrawal were made during the
period. No representation can be made that these assumed investment rates of
return can be achieved for any one year or sustained over any period of time.
36
<PAGE>
<TABLE>
<CAPTION>
UNITED OF OMAHA LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
HYPOTHETICAL ILLUSTRATION
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0% (-0.93% NET)
Male issue age 55
Preferred Nontobacco Class
Initial Specified Amount $250,000
Annual Planned Premium $5,220
CURRENT CHARGES * GUARANTEED CHARGES **
--------- ------------ -------- ------------ ----------- --------
PREMIUMS
END OF ACCUMULATD ACCUMU- CASH ACCUMU- CASH
CONTRACT AT 5% INTEREST LATION SURRENDER DEATH LATION SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 5,481 3,688 0 250,000 2,852 0 250,000
2 11,236 7,216 0 250,000 5,478 0 250,000
3 17,279 10,601 351 250,000 7,871 0 250,000
4 23,624 13,816 3,566 250,000 10,014 0 250,000
5 30,286 16,852 6,602 250,000 11,883 1,633 250,000
6 37,281 19,697 11,697 250,000 13,455 5,455 250,000
7 44,626 22,338 16,338 250,000 14,700 8,700 250,000
8 52,339 24,724 20,724 250,000 15,575 11,575 250,000
9 60,437 26,863 24,863 250,000 16,033 14,033 250,000
10 68,939 28,734 28,734 250,000 16,029 16,029 250,000
11 77,867 31,057 31,057 250,000 15,546 15,546 250,000
12 87,242 33,192 33,192 250,000 14,507 14,507 250,000
13 97,085 35,188 35,188 250,000 12,863 12,863 250,000
14 107,420 36,994 36,994 250,000 10,546 10,546 250,000
15 118,272 38,597 38,597 250,000 7,460 7,460 250,000
16 129,667 39,981 39,981 250,000 3,476 3,476 250,000
17 141,631 41,047 41,047 250,000 0 0 250,000
18 154,194 41,752 41,752 250,000 0 0 250,000
19 167,384 42,048 42,048 250,000 0 0 250,000
20 181,234 41,894 41,894 250,000 0 0 250,000
25 261,592 34,674 34,674 250,000 0 0 250,000
35 495,046 0 0 0 0 0 0
</TABLE>
* These values reflect investment results using current cost of insurance rates
and expense charges. ** These values reflect investment results using guaranteed
cost of insurance rates and expense charges.
The hypothetical investment results shown above and elsewhere in this prospectus
are illustrative only and should not be deemed a representation of past or
future investment results. Actual investment results may be more or less than
those shown and will depend on a number of different factors, including the
investment allocations by the owner and different investment rates of return for
the Portfolios. The Death Benefit, Accumulation Value and Cash Surrender Value
for a Policy would be different from those shown if the actual investment rates
of return averaged the rates shown above over a period of years, but fluctuated
above or below those averages from individual Policy years. Theses values would
also be different if any Policy loan or partial withdrawal were made during the
period. No representation can be made that these assumed investment rates of
return can be achieved for any one year or sustained over any period of time.
37
<PAGE>
<TABLE>
<CAPTION>
UNITED OF OMAHA LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
HYPOTHETICAL ILLUSTRATION
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6% (5.07% NET)
Male issue age 55
Preferred Nontobacco Class
Initial Specified Amount $250,000
Annual Planned Premium $5,220
CURRENT CHARGES * GUARANTEED CHARGES **
--------- ------------ -------- ------------ ----------- --------
PREMIUMS
END OF ACCUMULATD ACCUMU- CASH ACCUMU- CASH
CONTRACT AT 5% INTEREST LATION SURRENDER DEATH LATION SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 5,481 3,947 0 250,000 3,085 0 250,000
2 11,236 7,964 0 250,000 6,120 0 250,000
3 17,279 12,070 1,820 250,000 9,096 0 250,000
4 23,624 16,243 5,993 250,000 11,992 1,742 250,000
5 30,286 20,473 10,223 250,000 14,778 4,528 250,000
6 37,281 24,752 16,752 250,000 17,426 9,426 250,000
7 44,626 29,071 23,071 250,000 19,900 13,900 250,000
8 52,339 33,383 29,383 250,000 22,149 18,149 250,000
9 60,437 37,696 35,696 250,000 24,117 22,117 250,000
10 68,939 41,994 41,994 250,000 25,749 25,749 250,000
11 77,867 47,002 47,002 250,000 27,030 27,030 250,000
12 87,242 52,118 52,118 250,000 27,861 27,861 250,000
13 97,085 57,401 57,401 250,000 28,173 28,173 250,000
14 107,420 62,815 62,815 250,000 27,880 27,880 250,000
15 118,272 68,365 68,365 250,000 26,867 26,867 250,000
16 129,667 74,050 74,050 250,000 24,976 24,976 250,000
17 141,631 79,806 79,806 250,000 22,006 22,006 250,000
18 154,194 85,616 85,616 250,000 17,694 17,694 250,000
19 167,384 91,465 91,465 250,000 11,728 11,728 250,000
20 181,234 97,348 97,348 250,000 3,754 3,754 250,000
25 261,592 128,870 128,870 250,000 0 0 250,000
35 495,046 209,785 209,785 250,000 0 0 0
</TABLE>
* These values reflect investment results using current cost of insurance rates
and expense charges. ** These values reflect investment results using guaranteed
cost of insurance rates and expense charges.
The hypothetical investment results shown above and elsewhere in this prospectus
are illustrative only and should not be deemed a representation of past or
future investment results. Actual investment results may be more or less than
those shown and will depend on a number of different factors, including the
investment allocations by the owner and different investment rates of return for
the Portfolios. The Death Benefit, Accumulation Value and Cash Surrender Value
for a Policy would be different from those shown if the actual investment rates
of return averaged the rates shown above over a period of years, but fluctuated
above or below those averages from individual Policy years. Theses values would
also be different if any Policy loan or partial withdrawal were made during the
period. No representation can be made that these assumed investment rates of
return can be achieved for any one year or sustained over any period of time.
38
<PAGE>
<TABLE>
<CAPTION>
UNITED OF OMAHA LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
HYPOTHETICAL ILLUSTRATION
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12% (11.07% NET)
Male issue age 55
Preferred Nontobacco Class
Initial Specified Amount $250,000
Annual Planned Premium $5,220
CURRENT CHARGES * GUARANTEED CHARGES **
--------- ------------ --------- ------------- ---------- --------
PREMIUMS
END OF ACCUMULATD ACCUMU- CASH ACCUMU- CASH
CONTRACT AT 5% INTEREST LATION SURRENDER DEATH LATION SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C>
1 5,481 4,207 0 250,000 3,318 0 250,000
2 11,236 8,745 0 250,000 6,793 0 250,000
3 17,279 13,667 3,417 250,000 10,435 185 250,000
4 23,624 18,986 8,736 250,000 14,245 3,995 250,000
5 30,286 24,738 14,488 250,000 18,221 7,971 250,000
6 37,281 30,960 22,960 250,000 22,361 14,361 250,000
7 44,626 37,696 31,696 250,000 26,661 20,661 250,000
8 52,339 44,959 40,959 250,000 31,104 27,104 250,000
9 60,437 52,825 50,825 250,000 35,676 33,676 250,000
10 68,939 61,356 61,356 250,000 40,364 40,364 250,000
11 77,867 71,353 71,353 250,000 45,233 45,233 250,000
12 87,242 82,354 82,354 250,000 50,228 50,228 250,000
13 97,085 94,533 94,533 250,000 55,355 55,355 250,000
14 107,420 108,002 108,002 250,000 60,614 60,614 250,000
15 118,272 122,928 122,928 250,000 65,995 65,995 250,000
16 129,667 139,503 139,503 250,000 71,474 71,474 250,000
17 141,631 157,909 157,909 250,000 77,015 77,015 250,000
18 154,194 178,410 178,410 250,000 82,565 82,565 250,000
19 167,384 201,328 201,328 250,000 88,073 88,073 250,000
20 181,234 227,057 227,057 250,000 93,507 93,507 250,000
25 261,592 404,297 404,297 424,512 119,586 119,586 250,000
35 495,046 1,150,764 1,150,764 1,208,302 150,413 150,413 250,000
</TABLE>
* These values reflect investment results using current cost of insurance rates
and expense charges. ** These values reflect investment results using guaranteed
cost of insurance rates and expense charges.
The hypothetical investment results shown above and elsewhere in this prospectus
are illustrative only and should not be deemed a representation of past or
future investment results. Actual investment results may be more or less than
those shown and will depend on a number of different factors, including the
investment allocations by the owner and different investment rates of return for
the Portfolios. The Death Benefit, Accumulation Value and Cash Surrender Value
for a Policy would be different from those shown if the actual investment rates
of return averaged the rates shown above over a period of years, but fluctuated
above or below those averages from individual Policy years. Theses values would
also be different if any Policy loan or partial withdrawal were made during the
period. No representation can be made that these assumed investment rates of
return can be achieved for any one year or sustained over any period of time.
39
<PAGE>
<TABLE>
<CAPTION>
UNITED OF OMAHA LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
HYPOTHETICAL ILLUSTRATION
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0% (-0.93% NET)
Female issue age 45
Preferred Nontobacco Class
Initial Specified Amount $250,000
Annual Planned Premium $2,500
CURRENT CHARGES * GUARANTEED CHARGES **
--------- ------------ -------- ------------ ----------- --------
PREMIUMS
END OF ACCUMULATD ACCUMU- CASH ACCUMU- CASH
CONTRACT AT 5% INTEREST LATION SURRENDER DEATH LATION SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 2,625 1,748 0 250,000 1,522 0 250,000
2 5,381 3,436 0 250,000 2,972 0 250,000
3 8,275 5,060 60 250,000 4,348 0 250,000
4 11,314 6,621 1,621 250,000 5,648 648 250,000
5 14,505 8,115 3,115 250,000 6,866 1,866 250,000
6 17,855 9,547 5,297 250,000 7,998 3,748 250,000
7 21,373 10,903 7,153 250,000 9,038 5,288 250,000
8 25,066 12,177 9,177 250,000 9,975 6,975 250,000
9 28,945 13,366 10,866 250,000 10,802 8,302 250,000
10 33,017 14,463 12,713 250,000 11,519 9,769 250,000
11 37,293 15,894 14,644 250,000 12,139 10,889 250,000
12 41,782 17,253 16,753 250,000 12,646 12,146 250,000
13 46,497 18,541 18,541 250,000 13,043 13,043 250,000
14 51,446 19,754 19,754 250,000 13,332 13,332 250,000
15 56,644 20,888 20,888 250,000 13,499 13,499 250,000
16 62,101 21,939 21,939 250,000 13,525 13,525 250,000
17 67,831 22,885 22,885 250,000 13,376 13,376 250,000
18 73,848 23,715 23,715 250,000 13,013 13,013 250,000
19 80,165 24,418 24,418 250,000 12,385 12,385 250,000
20 86,798 24,983 24,983 250,000 11,459 11,459 250,000
25 125,284 25,825 25,825 250,000 1,649 1,649 250,000
35 237,091 10,137 10,137 250,000 0 0 250,000
</TABLE>
* These values reflect investment results using current cost of insurance rates
and expense charges. ** These values reflect investment results using guaranteed
cost of insurance rates and expense charges.
The hypothetical investment results shown above and elsewhere in this prospectus
are illustrative only and should not be deemed a representation of past or
future investment results. Actual investment results may be more or less than
those shown and will depend on a number of different factors, including the
investment allocations by the owner and different investment rates of return for
the Portfolios. The Death Benefit, Accumulation Value and Cash Surrender Value
for a Policy would be different from those shown if the actual investment rates
of return averaged the rates shown above over a period of years, but fluctuated
above or below those averages from individual Policy years. Theses values would
also be different if any Policy loan or partial withdrawal were made during the
period. No representation can be made that these assumed investment rates of
return can be achieved for any one year or sustained over any period of time.
40
<PAGE>
<TABLE>
<CAPTION>
UNITED OF OMAHA LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
HYPOTHETICAL ILLUSTRATION
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6% (5.07% NET)
Female issue age 45
Preferred Nontobacco Class
Initial Specified Amount $250,000
Annual Planned Premium $2,500
CURRENT CHARGES * GUARANTEED CHARGES **
--------- ------------ -------- ------------ ----------- --------
PREMIUMS
END OF ACCUMULATD ACCUMU- CASH ACCUMU- CASH
CONTRACT AT 5% INTEREST LATION SURRENDER DEATH LATION SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 2,625 1,872 0 250,000 1,638 0 250,000
2 5,381 3,791 0 250,000 3,299 0 250,000
3 8,275 5,759 759 250,000 4,981 0 250,000
4 11,314 7,773 2,773 250,000 6,681 1,681 250,000
5 14,505 9,835 4,835 250,000 8,395 3,395 250,000
6 17,855 11,948 7,698 250,000 10,117 5,867 250,000
7 21,373 14,101 10,351 250,000 11,842 8,092 250,000
8 25,066 16,290 13,290 250,000 13,557 10,557 250,000
9 28,945 18,513 16,013 250,000 15,255 12,755 250,000
10 33,017 20,763 19,013 250,000 16,933 15,183 250,000
11 37,293 23,479 22,229 250,000 18,615 17,365 250,000
12 41,782 26,271 25,771 250,000 20,275 19,775 250,000
13 46,497 29,143 29,143 250,000 21,916 21,916 250,000
14 51,446 32,095 32,095 250,000 23,539 23,539 250,000
15 56,644 35,126 35,126 250,000 25,131 25,131 250,000
16 62,101 38,237 38,237 250,000 26,670 26,670 250,000
17 67,831 41,413 41,413 250,000 28,124 28,124 250,000
18 73,848 44,647 44,647 250,000 29,449 29,449 250,000
19 80,165 47,931 47,931 250,000 30,595 30,595 250,000
20 86,798 51,262 51,262 250,000 31,520 31,520 250,000
25 125,284 68,867 68,867 250,000 31,840 31,840 250,000
35 237,091 106,430 106,430 250,000 0 0 250,000
</TABLE>
* These values reflect investment results using current cost of insurance rates
and expense charges. ** These values reflect investment results using guaranteed
cost of insurance rates and expense charges.
The hypothetical investment results shown above and elsewhere in this prospectus
are illustrative only and should not be deemed a representation of past or
future investment results. Actual investment results may be more or less than
those shown and will depend on a number of different factors, including the
investment allocations by the owner and different investment rates of return for
the Portfolios. The Death Benefit, Accumulation Value and Cash Surrender Value
for a Policy would be different from those shown if the actual investment rates
of return averaged the rates shown above over a period of years, but fluctuated
above or below those averages from individual Policy years. Theses values would
also be different if any Policy loan or partial withdrawal were made during the
period. No representation can be made that these assumed investment rates of
return can be achieved for any one year or sustained over any period of time.
41
<PAGE>
<TABLE>
<CAPTION>
UNITED OF OMAHA LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
HYPOTHETICAL ILLUSTRATION
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12% (11.07% NET)
Female issue age 45
Preferred Nontobacco Class
Initial Specified Amount $250,000
Annual Planned Premium $2,500
CURRENT CHARGES * GUARANTEED CHARGES **
--------- ------------ -------- ------------ ----------- --------
PREMIUMS
END OF ACCUMULATD ACCUMU- CASH ACCUMU- CASH
CONTRACT AT 5% INTEREST LATION SURRENDER DEATH LATION SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 2,625 1,996 0 250,000 1,755 0 250,000
2 5,381 4,163 0 250,000 3,641 0 250,000
3 8,275 6,517 1,517 250,000 5,669 669 250,000
4 11,314 9,076 4,076 250,000 7,853 2,853 250,000
5 14,505 11,858 6,858 250,000 10,202 5,202 250,000
6 17,855 14,891 10,641 250,000 12,728 8,478 250,000
7 21,373 18,188 14,438 250,000 15,444 11,694 250,000
8 25,066 21,770 18,770 250,000 18,361 15,361 250,000
9 28,945 25,665 23,165 250,000 21,492 18,992 250,000
10 33,017 29,900 28,150 250,000 24,862 23,112 250,000
11 37,293 34,961 33,711 250,000 28,537 27,287 250,000
12 41,782 40,515 40,015 250,000 32,516 32,016 250,000
13 46,497 46,616 46,616 250,000 36,840 36,840 250,000
14 51,446 53,322 53,322 250,000 41,550 41,550 250,000
15 56,644 60,697 60,697 250,000 46,683 46,683 250,000
16 62,101 68,813 68,813 250,000 52,272 52,272 250,000
17 67,831 77,738 77,738 250,000 58,348 58,348 250,000
18 73,848 87,558 87,558 250,000 64,942 64,942 250,000
19 80,165 98,370 98,370 250,000 72,086 72,086 250,000
20 86,798 110,290 110,290 250,000 79,835 79,835 250,000
25 125,284 192,004 192,004 250,000 131,039 131,039 250,000
35 237,091 554,625 554,625 582,357 367,786 367,786 386,175
</TABLE>
* These values reflect investment results using current cost of insurance rates
and expense charges. ** These values reflect investment results using guaranteed
cost of insurance rates and expense charges.
The hypothetical investment results shown above and elsewhere in this prospectus
are illustrative only and should not be deemed a representation of past or
future investment results. Actual investment results may be more or less than
those shown and will depend on a number of different factors, including the
investment allocations by the owner and different investment rates of return for
the Portfolios. The Death Benefit, Accumulation Value and Cash Surrender Value
for a Policy would be different from those shown if the actual investment rates
of return averaged the rates shown above over a period of years, but fluctuated
above or below those averages from individual Policy years. Theses values would
also be different if any Policy loan or partial withdrawal were made during the
period. No representation can be made that these assumed investment rates of
return can be achieved for any one year or sustained over any period of time.
42
<PAGE>
<TABLE>
<CAPTION>
UNITED OF OMAHA LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
HYPOTHETICAL ILLUSTRATION
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0% (-0.93% NET)
Male issue age 45
Nonpreferred Nontobacco Class
Initial Specified Amount $250,000
Annual Planned Premium $3,120
CURRENT CHARGES * GUARANTEED CHARGES **
--------- ------------ -------- ------------ ----------- --------
PREMIUMS
END OF ACCUMULATD ACCUMU- CASH ACCUMU- CASH
CONTRACT AT 5% INTEREST LATION SURRENDER DEATH LATION SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 3,276 2,202 0 250,000 2,022 0 250,000
2 6,716 4,322 0 250,000 3,951 0 250,000
3 10,328 6,355 355 250,000 5,782 0 250,000
4 14,120 8,300 2,300 250,000 7,512 1,512 250,000
5 18,102 10,153 4,153 250,000 9,135 3,135 250,000
6 22,283 11,906 6,656 250,000 10,642 5,392 250,000
7 26,673 13,549 9,049 250,000 12,022 7,522 250,000
8 31,283 15,072 11,322 250,000 13,260 9,510 250,000
9 36,123 16,468 13,468 250,000 14,341 11,341 250,000
10 41,205 17,719 15,469 250,000 15,251 13,001 250,000
11 46,541 19,240 17,740 250,000 16,001 14,501 250,000
12 52,145 20,639 19,889 250,000 16,551 15,801 250,000
13 58,028 21,915 21,915 250,000 16,893 16,893 250,000
14 64,205 23,059 23,059 250,000 17,004 17,004 250,000
15 70,691 24,058 24,058 250,000 16,859 16,859 250,000
16 77,502 24,902 24,902 250,000 16,427 16,427 250,000
17 84,653 25,548 25,548 250,000 15,676 15,676 250,000
18 92,162 25,968 25,968 250,000 14,555 14,555 250,000
19 100,046 26,133 26,133 250,000 13,010 13,010 250,000
20 108,324 26,016 26,016 250,000 10,987 10,987 250,000
25 156,354 21,449 21,449 250,000 0 0 250,000
35 295,889 0 0 250,000 0 0 250,000
</TABLE>
* These values reflect investment results using current cost of insurance rates
and expense charges. ** These values reflect investment results using guaranteed
cost of insurance rates and expense charges.
The hypothetical investment results shown above and elsewhere in this prospectus
are illustrative only and should not be deemed a representation of past or
future investment results. Actual investment results may be more or less than
those shown and will depend on a number of different factors, including the
investment allocations by the owner and different investment rates of return for
the Portfolios. The Death Benefit, Accumulation Value and Cash Surrender Value
for a Policy would be different from those shown if the actual investment rates
of return averaged the rates shown above over a period of years, but fluctuated
above or below those averages from individual Policy years. Theses values would
also be different if any Policy loan or partial withdrawal were made during the
period. No representation can be made that these assumed investment rates of
return can be achieved for any one year or sustained over any period of time.
43
<PAGE>
<TABLE>
<CAPTION>
UNITED OF OMAHA LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
HYPOTHETICAL ILLUSTRATION
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6% (5.07% NET)
Male issue age 45
Nonpreferred Nontobacco Class
Initial Specified Amount $250,000
Annual Planned Premium $3,120
CURRENT CHARGES * GUARANTEED CHARGES **
--------- ------------ -------- ------------ ----------- --------
PREMIUMS
END OF ACCUMULATD ACCUMU- CASH ACCUMU- CASH
CONTRACT AT 5% INTEREST LATION SURRENDER DEATH LATION SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 3,276 2,357 0 250,000 2,171 0 250,000
2 6,716 4,768 0 250,000 4,374 0 250,000
3 10,328 7,232 1,232 250,000 6,606 606 250,000
4 14,120 9,747 3,747 250,000 8,863 2,863 250,000
5 18,102 12,311 6,311 250,000 11,141 5,141 250,000
6 22,283 14,919 9,669 250,000 13,428 8,178 250,000
7 26,673 17,560 13,060 250,000 15,714 11,214 250,000
8 31,283 20,227 16,477 250,000 17,985 14,235 250,000
9 36,123 22,911 19,911 250,000 20,222 17,222 250,000
10 41,205 25,599 23,349 250,000 22,411 20,161 250,000
11 46,541 28,714 27,214 250,000 24,573 23,073 250,000
12 52,145 31,880 31,130 250,000 26,658 25,908 250,000
13 58,028 35,099 35,099 250,000 28,655 28,655 250,000
14 64,205 38,364 38,364 250,000 30,539 30,539 250,000
15 70,691 41,669 41,669 250,000 32,281 32,281 250,000
16 77,502 45,006 45,006 250,000 33,848 33,848 250,000
17 84,653 48,341 48,341 250,000 35,203 35,203 250,000
18 92,162 51,650 51,650 250,000 36,292 36,292 250,000
19 100,046 54,913 54,913 250,000 37,054 37,054 250,000
20 108,324 58,107 58,107 250,000 37,429 37,429 250,000
25 156,354 73,434 73,434 250,000 30,905 30,905 250,000
35 295,889 89,180 89,180 250,000 0 0 250,000
</TABLE>
* These values reflect investment results using current cost of insurance rates
and expense charges. ** These values reflect investment results using guaranteed
cost of insurance rates and expense charges.
The hypothetical investment results shown above and elsewhere in this prospectus
are illustrative only and should not be deemed a representation of past or
future investment results. Actual investment results may be more or less than
those shown and will depend on a number of different factors, including the
investment allocations by the owner and different investment rates of return for
the Portfolios. The Death Benefit, Accumulation Value and Cash Surrender Value
for a Policy would be different from those shown if the actual investment rates
of return averaged the rates shown above over a period of years, but fluctuated
above or below those averages from individual Policy years. Theses values would
also be different if any Policy loan or partial withdrawal were made during the
period. No representation can be made that these assumed investment rates of
return can be achieved for any one year or sustained over any period of time.
44
<PAGE>
<TABLE>
<CAPTION>
UNITED OF OMAHA LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
HYPOTHETICAL ILLUSTRATION
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12% (11.07% NET)
Male issue age 45
Nonpreferred Nontobacco Class
Initial Specified Amount $250,000
Annual Planned Premium $3,120
CURRENT CHARGES * GUARANTEED CHARGES **
--------- ------------ -------- ------------ ----------- --------
PREMIUMS
END OF ACCUMULATD ACCUMU- CASH ACCUMU- CASH
CONTRACT AT 5% INTEREST LATION SURRENDER DEATH LATION SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 3,276 2,512 0 250,000 2,321 0 250,000
2 6,716 5,234 0 250,000 4,817 0 250,000
3 10,328 8,184 2,184 250,000 7,503 1,503 250,000
4 14,120 11,383 5,383 250,000 10,395 4,395 250,000
5 18,102 14,852 8,852 250,000 13,507 7,507 250,000
6 22,283 18,614 13,364 250,000 16,856 11,606 250,000
7 26,673 22,689 18,189 250,000 20,453 15,953 250,000
8 31,283 27,101 23,351 250,000 24,314 20,564 250,000
9 36,123 31,880 28,880 250,000 28,453 25,453 250,000
10 41,205 37,052 34,802 250,000 32,890 30,640 250,000
11 46,541 43,100 41,600 250,000 37,704 36,204 250,000
12 52,145 49,713 48,963 250,000 42,881 42,131 250,000
13 58,028 56,956 56,956 250,000 48,459 48,459 250,000
14 64,205 64,895 64,895 250,000 54,475 54,475 250,000
15 70,691 73,605 73,605 250,000 60,968 60,968 250,000
16 77,502 83,173 83,173 250,000 67,984 67,984 250,000
17 84,653 93,675 93,675 250,000 75,579 75,579 250,000
18 92,162 105,215 105,215 250,000 83,806 83,806 250,000
19 100,046 117,916 117,916 250,000 92,734 92,734 250,000
20 108,324 131,927 131,927 250,000 102,454 102,454 250,000
25 156,354 229,428 229,428 266,136 167,969 167,969 250,000
35 295,889 658,691 658,691 691,625 479,028 479,028 502,979
</TABLE>
* These values reflect investment results using current cost of insurance rates
and expense charges. ** These values reflect investment results using guaranteed
cost of insurance rates and expense charges.
The hypothetical investment results shown above and elsewhere in this prospectus
are illustrative only and should not be deemed a representation of past or
future investment results. Actual investment results may be more or less than
those shown and will depend on a number of different factors, including the
investment allocations by the owner and different investment rates of return for
the Portfolios. The Death Benefit, Accumulation Value and Cash Surrender Value
for a Policy would be different from those shown if the actual investment rates
of return averaged the rates shown above over a period of years, but fluctuated
above or below those averages from individual Policy years. Theses values would
also be different if any Policy loan or partial withdrawal were made during the
period. No representation can be made that these assumed investment rates of
return can be achieved for any one year or sustained over any period of time.
45
<PAGE>
<PAGE>
- -----------------------------------------------------------
FINANCIAL STATEMENTS
UNITED OF OMAHA
LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF MUTUAL
OF OMAHA INSURANCE COMPANY)
STATUTORY FINANCIAL STATEMENTS AND INDEPENDENT AUDITORS' REPORTS
DECEMBER 31, 1996, 1995 AND 1994
47
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
United of Omaha Life Insurance Company
Omaha, Nebraska
We have audited the accompanying statutory statement of admitted assets,
liabilities, and surplus of United of Omaha Life Insurance Company as of
December 31, 1996, and the related statutory statements of income and changes in
surplus, and cash flows for the year then ended. Our responsibility is to
express an opinion on these financial statements based on our audit. The
financial statements of United of Omaha Life Insurance Company for the years
ended December 31, 1995 and 1994 were audited by other auditors whose report,
dated April 9, 1997, expressed an unqualified opinion on the presentation of
those financial statements in conformity with accounting practices prescribed or
permitted by the Insurance Department of the State of Nebraska and also
expressed an opinion that the financial statements were not presented in
conformity with generally accepted accounting principles. The financial
statements are the responsibility of the Company's management.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
As more fully described in Note 1 to the financial statements, the Company has
prepared these financial statements in conformity with accounting practices
prescribed or permitted by the Insurance Department of the State of Nebraska.
Those practices differ from generally accepted accounting principles. The
effects on the financial statements of the differences between the statutory
basis of accounting and generally accepted accounting principles are not
reasonably determinable, but are presumed to be material.
In our opinion, because of the effects of the matter discussed in the preceding
paragraph, the 1996 financial statements referred to above do not present fairly
the financial position of United of Omaha Life Insurance Company as of December
31, 1996, and the results of its operations and its cash flows for the year then
ended, in conformity with generally accepted accounting principles.
However, in our opinion, the statutory financial statements referred to above
present fairly, in all material respects, the admitted assets, liabilities, and
surplus of United of Omaha Life Insurance Company as of December 31, 1996, and
the results of its operations and its cash flows for the year then ended, on the
basis of accounting described in Note 1 to the financial statements.
DELOITTE & TOUCHE LLP
Omaha, Nebraska
April 21, 1997
48
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
United of Omaha Life Insurance Company
Omaha, Nebraska
We have audited the accompanying balance sheet of United of Omaha Life Insurance
Company (a Nebraska corporation and wholly-owned subsidiary of Mutual of Omaha
Insurance Company), as of December 31, 1995, and the related statements of
operations, capital and surplus, and cash flows for each of the two years in the
period ended December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to report 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 originally issued report dated February 23, 1996, we expressed an opinion
that the 1995 financial statements, prepared using accounting practices
prescribed or permitted by the Insurance Department of the State of Nebraska,
presented fairly, in all material respects, the financial position of United of
Omaha Life Insurance Company as of December 31, 1995, and the results of its
operations and its cash flow for each of the two years in the period ended
December 31, 1995 in conformity with generally accepted accounting principles.
As described in Note 1 to the financial statements, pursuant to the provisions
of Statement of Financial Accounting Standards Board Interpretation 40,
APPLICABILITY OF GENERALLY ACCEPTED ACCOUNTING PRINCIPLES TO MUTUAL LIFE
INSURANCE AND OTHER ENTERPRISES, as amended ("FIN 40"), financial statements of
mutual life insurance enterprises for periods ending on or before December 15,
1996, prepared using accounting practices prescribed or permitted by insurance
regulators (statutory financial statements) are no longer considered
presentations in conformity with generally accepted accounting principles.
Accordingly, our present opinion on the presentation of the 1995 financial
statements in accordance with generally accepted accounting principles, as
presented herein, is different from that expressed in our previous report.
In our opinion, because of the effects of the matter discussed in the preceding
paragraph, the financial statements referred to above do not present fairly, in
conformity with generally accepted accounting principles, the financial position
of United of Omaha Life Insurance Company as of December 31, 1995, or the
results of its operations and its cash flows for each of the two years in the
period ended December 31, 1995.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of United of Omaha Life Insurance
Company as of December 31, 1995, and the results of its operations and its cash
flows for the each of the two years in the period ended December 31, 1995, in
conformity with accounting practices prescribed or permitted by the Insurance
Department of the State of Nebraska.
Coopers & Lybrand L.L.P.
Omaha, Nebraska
February 23, 1996 [except for the change in our opinion as required by FIN 40,
for which the date is April 9, 1997]
49
<PAGE>
UNITED OF OMAHA LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF MUTUAL OF OMAHA INSURANCE COMPANY)
STATUTORY STATEMENTS OF ADMITTED ASSETS, LIABILITIES AND SURPLUS
DECEMBER 31, 1996 AND 1995
(IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ADMITTED ASSETS 1996 1995
Cash and invested assets (Notes 2 and 3):
<S> <C> <C>
Bonds $ 6,194,033 $5,348,682
Preferred stocks 2,967 2,967
Common stocks 206,792 215,614
Mortgage loans 914,877 1,039,336
Real estate occupied by the Company, net of accumulated
depreciation of $51,913 in 1996 and $48,176 in 1995 85,958 89,366
Real estate acquired in satisfaction of debt, net of
accumulated depreciation of $3,418 in 1996 and $4,007 in 1995 47,288 53,812
Investment in real estate, net of accumulated depreciation of $14,576
in 1996 and$14,052 1995 9,930 13,234
Policy loans 118,150 111,335
Cash and short-term investments 117,502 176,000
Other invested assets 70,027 46,272
-------- -------
Total cash and invested assets 7,767,524 7,096,618
Premiums deferred and uncollected 94,802 85,015
Investment income due and accrued 75,193 73,470
Electronic data processing equipment, net 44,971 53,474
Receivable from parent, subsidiaries and affiliates (Note 6) 8,075 7,671
Other assets (Note 3) 47,050 70,443
Separate accounts assets 499,423 156,212
-------- -------
Total admitted assets $ 8,537,038$ 7,542,903
======================
LIABILITIES
Policy reserves (Notes 6 and 10):
Aggregate reserve for policies and contracts $ 5,427,996$ 4,724,703
Liability for premium and other deposit funds 1,670,294 1,746,619
Policy and contract claims 49,317 48,022
Other 74,171 71,293
------- ------
Total policy reserves 7,221,778 6,590,637
Interest maintenance reserve 26,872 25,378
Asset valuation reserve 114,495 106,346
General expenses and taxes due or accrued (Note 5) 35,147 32,866
Federal income taxes due or accrued (Note 4) 20,241 17,342
Other liabilities (Note 3) 84,293 101,537
Separate accounts liabilities 499,392 156,184
-------- -------
Total liabilities 8,002,218 7,030,290
---------- ---------
SURPLUS
Capital stock, $10 par value, 900,000 shares authorized and outstanding 9,000 9,000
Gross paid-in and contributed surplus 62,724 62,724
Unassigned surplus (Note 11) 463,096 440,889
-------- -------
Total surplus 534,820 512,613
-------- -------
Total liabilities and surplus $ 8,537,038 $7,542,903
=========== ==========
</TABLE>
The accompanying notes are an integral part of these statutory financial
statements.
50
<PAGE>
UNITED OF OMAHA LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF MUTUAL OF OMAHA INSURANCE COMPANY)
STATUTORY STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995 1994
Income:
<S> <C> <C> <C>
Net premiums and annuity considerations (Notes 6 and 7) $ 1,285,507 $ 1,278,389 $ 1,198,989
Other considerations and fund deposits 260,508 81,818 51,580
Net investment income (Notes 2 and 6) 546,634 526,246 444,160
Other income 20,604 25,233 32,075
------- ------- ------
Total income 2,113,253 1,911,686 1,726,804
---------- ---------- ---------
Benefits and expenses:
Policyholder and beneficiary benefits (Note 6) 890,668 728,340 668,542
Increase in reserves for policyholder and beneficiary benefits 561,185 781,059 718,113
Commissions 126,692 98,132 97,436
Operating expenses (Notes 5 and 6) 175,723 186,158 175,988
Expense realignment costs (Note 13) 9,099 - -
Net transfers to separate accounts 277,638 41,074 23,453
-------- ------- ------
Total benefits and expenses 2,041,005 1,834,763 1,683,532
---------- ---------- ---------
Net gain from operations before federal income taxes and
net realized capital gains 72,248 76,923 43,272
Federal income taxes (Note 4) 41,101 30,227 25,500
------- ------- ------
Net gain from operations before net realized
capital gains 31,147 46,696 17,772
Net realized capital gains (Notes 2 and 6) 23,461 14,476 4,826
------- ------- -----
Net income $ 54,608 $ 61,172 $ 22,598
========= ========= ========
</TABLE>
The accompanying notes are an integral part of these statutory financial
statements.
51
<PAGE>
UNITED OF OMAHA LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF MUTUAL OF OMAHA INSURANCE COMPANY)
STATUTORY STATEMENTS OF CHANGES IN SURPLUS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995 1994
Capital stock:
<S> <C> <C> <C>
Balance at beginning and end of year $ 9,000 $ 9,000 $ 9,000
-------- -------- -------
Gross paid-in and contributed surplus:
Balance at beginning of year 62,724 62,724 12,724
Paid-in by Mutual of Omaha Insurance Company (Note 6) - - 50,000
------- ------- ------
Balance at end of year 62,724 62,724 62,724
------- ------- ------
Unassigned surplus:
Balance at beginning of year 440,889 378,242 354,608
Net income 54,608 61,172 22,598
Change in net unrealized capital gains (losses) (Note 2) (23,064) 6,299 12,348
(Increase) decrease in:
Non-admitted assets 2,561 1,593 (4,670)
Asset valuation reserve (8,150) (6,483) (6,619)
Pension plan contribution (Note 5) (3,599) - -
Other, net (149) 66 (23)
-------- ------- -------
Balance at end of year 463,096 440,889 378,242
-------- -------- -------
Total surplus $ 534,820 $ 512,613 $ 449,966
========== ========== =========
</TABLE>
The accompanying notes are an integral part of these statutory financial
statements.
52
<PAGE>
UNITED OF OMAHA LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF MUTUAL OF OMAHA INSURANCE COMPANY)
STATUTORY STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995 1994
Cash from operations:
<S> <C> <C> <C>
Premiums, considerations and other fund deposits $ 1,539,502 $ 1,343,041 $ 1,240,212
Net investment income 537,288 512,992 434,840
Other income 20,642 21,771 53,829
Benefits (888,661) (728,025) (665,575)
Commissions and general expenses (314,100) (276,574) (262,282)
Federal income taxes (42,235) (23,796) (30,496)
Net transfers to separate accounts (292,935) (41,112) (23,453)
---------- --------- --------
Net cash from operations 559,501 808,297 747,075
-------- -------- -------
Cash from investments:
Proceeds from investments sold, redeemed or matured:
Bonds 992,065 582,788 606,001
Mortgage loans 132,406 131,975 135,034
Stocks 52,062 73,863 365,849
Real estate 18,601 15,353 26,537
Other invested assets 32,150 4,391 7,781
Tax on capital gains (9,665) (2,525) (12,993)
Cost of investments acquired:
Bonds (1,818,632) (1,460,824) (1,441,532)
Mortgage loans (22,607) (56,781) (32,909)
Stocks (25,848) (28,873) (386,130)
Other invested assets (53,150) (22,321) (3,744)
Real estate (4,205) (4,897) (6,256)
Net increase in policy loans (6,815) (6,494) (3,771)
-------- -------- -------
Net cash from investments (713,638) (774,345) (746,133)
---------- ---------- ---------
Cash from financing and other sources:
Other cash provided 102,623 38,420 8,067
Other cash used (6,984) (5,434) (38,888)
Capital and surplus paid-in (Note 6) - - 50,000
-- -- ------
Net cash from financing and other sources 95,639 32,986 19,179
------- ------- ------
Net change in cash and short-term investments (58,498) 66,938 20,121
Cash and short-term investments:
Beginning of year 176,000 109,062 88,941
-------- -------- ------
End of year $ 117,502 $ 176,000 $ 109,062
========== ========== =========
</TABLE>
The accompanying notes are an integral part of these statutory financial
statements.
53
<PAGE>
UNITED OF OMAHA LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF MUTUAL OF OMAHA INSURANCE COMPANY)
NOTES TO STATUTORY FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(DOLLAR AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS - United of Omaha Life Insurance Company (the Company)
is a wholly-owned subsidiary of Mutual of Omaha Insurance Company (Mutual
of Omaha), a mutual life and health and accident insurance company
domiciled in the State of Nebraska. At December 31, 1996, the Company owned
100% of the outstanding common stock of the following entities: Companion
Life Insurance Company (Companion), United World Life Insurance Company
(United World), Mutual of Omaha Structured Settlement Company - Nebraska
(MOSSCO-NE), Mutual of Omaha Structured Settlement Company-Connecticut
(MOSSCO-CT), and Mutual of Omaha Structured Settlement Company-New York
(MOSSCO-NY). The Company has insurance licenses to operate in 49 states,
the District of Columbia, Guam, Puerto Rico, and the U.S. Virgin Islands.
Individual life insurance and annuity products are sold primarily through a
network of career agents, direct mail, brokers, financial planners and
banks. Group business is produced by representatives located in Mutual of
Omaha group offices throughout the country.
BASIS OF PRESENTATION - The accompanying financial statements have been
prepared in conformity with accounting practices prescribed or permitted by
the Insurance Department of the State of Nebraska. Prescribed statutory
accounting practices are contained in a variety of publications of the
National Association of Insurance Commissioners (NAIC), as well as state
laws, regulations, and general administrative rules. Permitted statutory
accounting practices encompass all accounting practices which may not
necessarily be prescribed but are not prohibited.
The 1995 and 1994 financial statements, presented for comparative purposes,
were previously described as also being prepared in accordance with
generally accepted accounting principles (GAAP) for mutual life insurance
companies and their wholly-owned life insurance company subsidiaries.
Pursuant to Financial Accounting Standards Board Interpretation 40,
APPLICABILITY OF GENERALLY ACCEPTED ACCOUNTING PRINCIPLES TO MUTUAL LIFE
INSURANCE AND OTHER ENTERPRISES ("FIN 40"), as amended, which is effective
for 1996 annual financial statements, financial statements based on
statutory accounting practices can no longer be described as prepared in
conformity with GAAP. Furthermore, financial statements prepared in
conformity with statutory accounting practices for periods prior to the
effective date of FIN 40 are no longer considered GAAP presentations when
presented in comparative form with financial statements for periods
subsequent to the effective date. Accordingly, the prior independent
auditors' reports have been reissued in accordance with FIN 40.
The accompanying statutory financial statements vary in some respects from
those that would be presented in conformity with GAAP. The most significant
differences include: (a) bonds are generally carried at amortized cost
rather than being valued at either amortized cost or fair value based on
their classification according to the Company's ability and intent to hold
or trade the securities; (b) acquisition costs, such as commissions and
other costs related to acquiring new business, are charged to operations as
incurred and not deferred, whereas premiums are taken into income on a pro
rata basis over the respective term of the policies; (c) deferred federal
income taxes are not provided for temporary differences between tax and
financial reporting; (d) no provision has been made for federal income
taxes on unrealized appreciation of investments which are carried at market
value; (e) asset valuation reserves (AVR) and interest maintenance reserves
(IMR) are established; (f) different actuarial assumptions are used for
calculating certain policy reserves; and (g) changes in certain assets
54
<PAGE>
designated as "non-admitted" assets have been charged to unassigned
surplus. The aggregate effect of the foregoing differences on the
accompanying statutory financial statements has not been determined, but
was presumed to be material.
Management is required to make estimates and assumptions that affect the
reported amounts in the statutory financial statements. Actual results
could differ significantly from those estimates.
INVESTMENTS - Bonds are generally stated at amortized cost. Bonds not
backed by other loans are amortized using the scientific method.
Loan-backed bonds and structured securities are amortized using the
interest method based on anticipated prepayments at the date of purchase.
Changes in estimated cash flows from the original purchase assumptions are
accounted for using the retrospective method. Preferred stocks are stated
primarily at cost. Common stocks of unaffiliated companies are stated at
market value and affiliated companies (principally insurance companies) are
valued at underlying statutory book value. The change in the stated value
is recorded as a change in unrealized capital gains (losses), a component
of unassigned surplus, ignoring the effect of income taxes.
Mortgage loans and policy loans are stated at the aggregate unpaid balance.
In accordance with statutory accounting practices, the Company records a
general reserve for losses on mortgage loans as part of the asset valuation
reserve.
Home office and investment real estate are valued at cost, less allowance
for depreciation. Property acquired in satisfaction of debt is initially
valued at the lower of cost or fair market value. Depreciation is provided
on the straight-line basis over the estimated useful lives of the related
assets.
Short-term investments include all investments whose maturities, at the
time of acquisition, are one year or less and are stated at cost which
approximates market.
Investment income is recorded when earned. Realized gains and losses on
sale or maturity of investments are determined on the specific
identification basis. Any portion of invested assets designated as
"non-admitted" was excluded from the statutory statements of admitted
assets, liabilities and surplus and recorded as a change in unrealized
capital gains (losses).
ASSET VALUATION AND INTEREST MAINTENANCE RESERVES - The Company establishes
certain reserves as promulgated by the National Association of Insurance
Commissioners (NAIC). The AVR is established for the specific risk
characteristics of invested assets of the Company. The IMR is established
for the realized gains and losses on the redemption of fixed income
securities resulting from changes in interest rates, net of tax. Gains and
losses pertaining to the IMR are subsequently amortized into investment
income over the expected remaining period to maturity of the investments
sold or called.
POLICY RESERVES - Policy reserves provide amounts adequate to discharge
estimated future obligations in excess of estimated future premiums on
policies in force. Reserves for life policies are computed principally by
using the Commissioners' Reserve Valuation Method basis or the net level
premium basis with assumed interest rates (2.5% to 6%) and mortality
(American Experience, 1941, 1958, 1960 and 1980 CSO tables) as prescribed
by regulatory authorities. Reserves for annuities and deposit
administration contracts are computed on the basis of interest rates
ranging from 2.5% to 12.75%. Policy and contract claim liabilities include
provisions for reported claims and estimates for claims incurred but not
reported. To the extent the ultimate liability differs from the amounts
recorded, such differences are reflected in operations when additional
information becomes known.
PREMIUMS AND RELATED COMMISSIONS - Premiums are recognized as income over
the premium paying period. Commissions and other expenses related to the
acquisition of policies are charged to operations as incurred.
FEDERAL INCOME TAXES - The Company files a consolidated federal income tax
return with its parent and other eligible subsidiaries. The method of
allocating taxes among the companies is subject to a written agreement
55
<PAGE>
approved by the Board of Directors. Each company's provision for federal
income taxes is based on a separate return calculation with each company
recognizing tax benefits of net operating loss carryforwards and tax
credits on a separate return basis.
The provision for federal income taxes is based on income which is
currently taxable. Deferred federal income taxes are not provided for
temporary differences between income tax and statutory reporting. The
Company recognizes the benefits of net operating losses, foreign tax
credit, and general business credit carryforwards when realized.
NON-ADMITTED ASSETS - Certain assets designated as "non-admitted" assets,
principally receivables and office furniture and equipment, are excluded
from the statutory statements of admitted assets, liabilities, and surplus.
The net change in such assets is charged or credited directly to unassigned
surplus.
FAIR VALUES OF FINANCIAL INSTRUMENTS - The following methods and
assumptions were used by the Company in estimating its fair value
disclosures for financial instruments:
CASH, SHORT-TERM INVESTMENTS AND OTHER INVESTED ASSETS - The carrying
amounts reported in the statutory statements of admitted assets,
liabilities, and surplus approximate their fair values.
BONDS - The fair values for bonds are based on quoted market prices,
where available. For bonds not actively traded, fair values are
estimated using values obtained from independent pricing services or
based on expected future cash flows using a current market rate
applicable to the yield, credit quality and maturity of the
investments.
UNAFFILIATED COMMON STOCKS - The fair values for unaffiliated common
stocks are based on quoted market prices and are reported in the
statutory statements of admitted assets, liabilities, and surplus.
MORTGAGE LOANS - The fair values for mortgage loans are estimated
using discounted cash flow analyses, using interest rates currently
being offered for similar loans to borrowers with similar credit
ratings, credit quality, and maturity of the investments.
POLICY LOANS - The Company does not believe an estimate of the fair
value of policy loans can be made without incurring excessive cost.
Policy loans have no stated maturities and are usually repaid by
reductions to benefits and surrenders. Because of the numerous
assumptions which would have to be made to estimate fair value, the
Company believes that such information would not be meaningful.
INVESTMENT CONTRACTS - The fair values for liabilities under
investment-type insurance contracts are estimated using discounted
cash flow calculations, which are based on interest rates currently
being offered for similar contracts with maturities consistent with
those remaining for the contracts being valued.
DERIVATIVES - The Company utilizes swap and cap arrangements, for purposes
other than trading, to hedge risk, to manage investment returns, and to
align currency rates with its insurance obligations. The foreign currency
swap arrangements are stated at market value. The differences between the
amounts paid or received on foreign currency and interest-rate swaps are
reflected in the statutory statements of income. Interest-rate cap
arrangements are stated at amortized cost. Interest-rate caps are amortized
and recorded as an adjustment to net investment income over the life of the
investment using the effective interest method.
The Company also invests in equity linked notes that are stated at
amortized cost and intends to hold them to maturity. These instruments pay
interest based on a very modest (or no) semi-annual or annual coupon rate
and pay at maturity all principal plus "contingent" interest based on a
coupon rate equal to the percentage increase in a designated index. If the
index has declined over the term of the note, no contingent interest is
payable, but at maturity all principal would nevertheless be payable. The
56
<PAGE>
designated index is typically linked to the performance of a known stock
index or basket of indices.
Interest income is recognized when earned.
SEPARATE ACCOUNTS - The assets of the separate accounts shown in the
statutory statements of admitted assets, liabilities, and surplus are
carried at fair value and consist primarily of common stocks, mutual funds
and commercial paper held by the Company for the benefit of certificate
holders under specific individual and group annuity contracts. Benefits
paid to separate account certificate holders are reflected in the statutory
statements of income, but are offset by transfers from the separate
accounts. The payment of such benefits and the earning of investment income
constitute the only significant activities in the separate accounts.
RECLASSIFICATIONS - Certain reclassifications have been made to the prior
years amounts to conform with current year presentation with no changes to
unassigned surplus or net income.
2. INVESTMENTS
The cost or amortized cost, gross unrealized gains, gross unrealized losses
and estimated fair value of the Company's investment securities were as
follows:
<TABLE>
<CAPTION>
COST OR GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
AT DECEMBER 31, 1996:
<S> <C> <C> <C> <C>
Governments $ 67,058 $ 447 $ 1,077 $ 66,428
States, territories and possessions 1,187 47 - 1,234
Political subdivisions 20,104 327 232 20,199
Special revenue 1,210,844 18,600 13,724 1,215,720
Public utilities 416,189 21,892 995 437,086
Industrial and miscellaneous 4,340,670 122,767 50,250 4,413,187
Credit-tenant loans 277,025 10,186 2,557 284,654
-------- ------- ------ -------
Total $ 6,333,077 $ 174,266 $ 68,835 $ 6,438,508
============ ========== ========= ===========
Bonds $ 6,194,033
Short-term investments 139,044
-------
$ 6,333,077
Preferred stocks $ 3,365 $ 1,899 $ 398 $ 4,866
======== ======== ====== =======
Common stocks:
Affiliated $ 66,086 $ 7,514 $ - $ 73,600
Unaffiliated 61,054 74,540 2,402 133,192
------- ------- ------ -------
$ 127,140 $ 82,054 $ 2,402 $ 206,792
========== ========= ======== =========
57
<PAGE>
COST OR GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
AT DECEMBER 31, 1995:
Governments $ 68,814 $ 3,600 $ 74 $ 72,340
States, territories and possessions 6,354 164 - 6,518
Political subdivisions 23,300 703 6 23,997
Special revenue 1,243,137 39,397 4,179 1,278,355
Public utilities 433,579 36,389 450 469,518
Industrial and miscellaneous 3,527,698 197,605 21,205 3,704,098
Credit-tenant loans 231,739 19,304 540 250,503
-------- ------- ---- -------
Total $ 5,534,621 $ 297,162 $ 26,454 $ 5,805,329
============ ========== ========= ===========
Bonds $ 5,348,682
Short-term investments 185,939
-------
$ 5,534,621
Preferred stocks $ 3,365 $ 1,860 $ 398 $ 4,827
======== ======== ====== =======
Common stocks:
Affiliated $ 66,085 $ 3,374 $ 763 $ 68,696
Unaffiliated 46,422 101,917 1,421 146,918
------- -------- ------ -------
$ 112,507 $ 105,291 $ 2,184 $ 215,614
========== ========== ======== =========
</TABLE>
The amortized cost and estimated fair value of debt securities at December
31, 1996, by contractual maturity, are shown below. Expected maturities
will differ from contractual maturities because borrowers may have the
right to call or prepay obligations with or without call or prepayment
penalties.
AMORTIZED ESTIMATED
COST FAIR VALUE
Due in one year or less $ 328,043 $ 329,148
Due after one year through five years 1,363,244 1,374,351
Due after five years through ten years 1,511,490 1,527,455
Due after ten years 3,130,300 3,207,554
---------- ---------
$ 6,333,077 $ 6,438,508
============ ===========
The sources of net investment income were as follows:
1996 1995 1994
Bonds $ 439,884 $ 388,690 $ 320,299
Preferred stocks 399 399 400
Common stocks (Note 6) 1,789 27,756 3,651
Mortgage loans 87,035 96,891 109,279
Real estate 29,860 26,860 27,978
Policy loans 6,855 6,348 5,914
Short-term investments 7,339 6,665 4,047
Other (2,732) (1,858) 497
-------- -------- ---
570,429 551,751 472,065
Investment expense (28,270) (29,424) (31,414)
Amortization of IMR 4,475 3,919 3,509
------ ------ -----
$ 546,634 $ 526,246 $ 444,160
========== ========== =========
58
<PAGE>
Realized capital gains and losses on invested assets consist of the
following:
NET
GROSS GROSS REALIZED
REALIZED REALIZED GAINS
GAINS LOSSES (LOSSES)
Year ended December 31, 1996:
Bonds $ 9,290 $ 1,489 $ 7,801
Common stocks (Note 6) 41,198 351 40,847
Mortgage loans 660 7,618 (6,958)
Real estate 2,690 2,949 (259)
Other 3,830 34 3,796
------ --- -----
$ 57,668 $ 12,441 45,227
========= =========
Less: Capital gains tax (Note 6) (15,798)
Transfer to IMR (5,968)
-------
Net realized capital gains $ 23,461
========
Year ended December 31, 1995:
Bonds $ 4,830 $ 158 $ 4,672
Common stocks (Note 6) 36,564 663 35,901
Mortgage loans 977 8,894 (7,917)
Real estate 1,804 8,041 (6,237)
Other 1,479 185 1,294
------ ---- -----
$ 45,654 $ 17,941 27,713
========= =========
Less: Capital gains tax (Note 6) (9,665)
Transfer to IMR (3,572)
-------
Net realized capital gains $ 14,476
========
Year ended December 31, 1994:
Bonds $ 5,764 $ 145 $ 5,619
Common stocks 6,608 1,478 5,130
Mortgage loans 2,270 7,011 (4,741)
Real estate 6,540 1,922 4,618
Other 3,985 20 3,965
------ --- -----
$ 25,167 $ 10,576 14,591
========= =========
Less: Capital gains tax (5,075)
Transfer to IMR (4,690)
Net realized capital gains $ 4,826
=======
The maximum and minimum lending rates for mortgage loans during 1996 ranged
from 6.86% to 7.88%. The maximum percentage of any one loan to the value of
security at the time of the loan, exclusive of insured or guaranteed or
purchase money mortgages, was 75%. The estimated fair value of the mortgage
loan portfolio was approximately $928,621 and $1,072,501 at December 31,
1996 and 1995, respectively.
59
<PAGE>
The Company's mortgage loans finance various types of commercial properties
throughout the United States. The geographic distributions of the mortgage
loans were as follows at December 31, 1996 and 1995:
1996 1995
California $ 87,778 $ 98,299
Nebraska 53,118 59,210
Missouri 49,422 61,494
Indiana 49,004 47,693
Washington 44,615 47,189
All other states 630,940 725,451
-------- -------
$ 914,877 $ 1,039,336
========== ===========
The following table summarizes the non-performing and restructured mortgage
loans at December 31, 1996 and 1995:
1996 1995
Non-performing $ 8,917 $ 2,013
Restructured 13,501 24,184
------- ------
$ 22,418 $ 26,197
========= ========
At December 31, 1996, securities with an amortized cost of $5,487 were on
deposit with government agencies as required by law in various
jurisdictions in which the Company conducts business.
3. DERIVATIVE FINANCIAL INSTRUMENTS
The Company enters into interest-rate swap agreements to manage
interest-rate exposure. The primary reason for the interest-rate swap
agreements is to modify the interest-rate sensitivities of certain
investments so that they are highly correlated with the interest-rate
sensitivities of certain insurance liabilities. Interest-rate swap
transactions generally involve the exchange of fixed or floating rate
interest payment obligations without the exchange of the underlying
principal amount.
The Company also uses interest-rate caps to more effectively manage
interest-rate risk associated with single premium deferred annuity
contracts. An interest-rate cap is a right to receive the excess of a
reference interest rate over a given rate. This allows the Company to limit
the risk associated with an increase in interest rates.
The Company purchases corporate bonds in the foreign bond markets. These
bonds are typically issued by U.S. corporations and denominated in a
variety of currencies. These bonds, on occasion, are available for purchase
in the secondary market at attractive yields. The Company enters into
currency swaps simultaneous with its foreign currency bond purchases so
that all future foreign currency-denominated interest and principal
payments on such bonds are swapped with high quality counterparties at the
time of purchase for known amounts of U.S. dollars.
The Company uses equity linked notes to more cost effectively diversify its
exposure to equity markets and as an asset replication instrument to match
the liabilities of certain group annuity contracts where the customer seeks
60
<PAGE>
equity market participation. Equity linked notes help reduce the Company's
exposure to fluctuations in equity instruments by linking a substantial
portion of their expected total return to certain market indices while
preserving the invested principal.
The following table summarizes the Company's derivative financial
instruments. Notional amounts are used on certain instruments to express
the volume of these transactions, but do not represent the much smaller
amounts potentially subject to credit risk.
NOTIONAL STATEMENT FAIR YEAR(S) OF
AMOUNT VALUE VALUE MATURITY
At December 31, 1996:
Interest-rate swaps $ 202,500 $ - $ (9,259) 1999 - 2003
========== ==== ==========
Interest-rate caps $ 320,000 $ 2,739 $ 1,883 2000 - 2001
========== ======== ========
Foreign currency swaps $ 21,503 $ (10,401) $ (10,401) 1997 - 1998
========= =========== ===========
Equity linked notes $ 109,925 $ 5,902 $ 41,289 1997 - 2016
========== ======== =========
At December 31, 1995:
Interest-rate swaps $ 202,500 $ - $ (17,210) 1999 - 2003
========== ==== ===========
Interest-rate caps $ 165,000 $ 1,343 $ 608 2000
========== ======== ======
Foreign currency swaps $ 80,729 $ (32,796) $ (32,796) 1996 - 1998
========= =========== ===========
Equity linked notes $ 48,925 $ - $ 15,741 1997 - 2015
========= ==== =========
The Company has considerable experience in evaluating and managing credit
risk. Each issuer or counterparty is extensively reviewed to evaluate its
financial stability before entering into each agreement and throughout the
period that the financial instrument is owned.
The Company has commitments to fund bond investments of approximately
$42,200 and mortgage loans of approximately $7,200 as of December 31, 1996.
These commitments are legally binding and have fixed expiration dates or
other termination clauses that may require a payment of a fee. In the event
that the financial condition of a borrower deteriorates materially, the
commitment may be terminated. Since some of the commitments may expire or
terminate, the total commitments do not necessarily represent future
liquidity requirements.
4. FEDERAL INCOME TAXES
The provision for federal income taxes reflects an effective income tax
rate which differs from the prevailing federal income tax rate primarily as
a result of income and expense recognition differences between statutory
and income tax reporting. The major differences include capitalization and
amortization of certain acquisition amounts for tax purposes, different
methods for determining statutory and tax insurance reserves, timing of the
recognition of market discount on bonds and certain accrued expenses, and
the acceleration of depreciation for tax purposes.
The Company's tax returns have been examined by the Internal Revenue
Service (IRS) through 1992. The Company is currently appealing certain
adjustments proposed by the IRS for tax years 1987 through 1992. The tax
returns for 1993 through 1995 are currently under examination. Management
believes the results of these examinations will have no material impact on
the Company's statutory financial statements.
61
<PAGE>
Under federal income tax law prior to 1984, the Company accumulated
approximately $31,615 of deferred taxable income which could become subject
to income taxes in the future under certain conditions. Management believes
the chance that those conditions will exist is remote.
5. RETIREMENT BENEFITS
The Company participates with affiliated companies in a noncontributory
defined benefit plan covering all United States employees meeting certain
minimum requirements. Mutual of Omaha and certain subsidiaries
(collectively referred to as the Companies) generally make annual
contributions to the plan in an amount between the minimum ERISA required
contribution and the maximum tax deductible contribution. Funds for the
plan are held in the general and separate accounts of the Company under a
group annuity contract.
Information regarding accrued benefits and net assets has not been
determined on an individual company basis. The Company's employees
comprised approximately 28% of the total employee group in 1996, 1995 and
1994. The Companies expensed contributions of $12,152, $9,115 and $8,746 in
1996, 1995 and 1994, respectively. During 1996, the Companies changed
mortality tables from 1971 GAM to the 1983 GAM. As a result of the table
change, the actuarial present value of accrued benefits as of January 1,
1996, increased by $21,637. The Companies made an additional contribution
of $21,637 and recorded it as a direct charge to surplus, net of federal
income taxes of $7,573. A comparison of accrued benefits and net assets for
the entire plan as of January 1, 1996 and 1995 follows:
1996 1995
Actuarial present value of accrued benefits:
Vested $ 352,736 $ 280,516
Nonvested 4,036 1,263
------ -----
$ 356,772 $ 281,779
========== =========
Net assets available for benefits $ 324,925 $ 301,773
========== =========
Assumptions:
Annual investment return 9.00 % 9.16 %
Mortality table 1983 GAM 1971 GAM
Discount rate 7.62 % 7.93 %
The Companies also have the Mutual of Omaha 401(k) Long-Term Savings Plan
covering all United States employees who have completed one year of service
and have reached their 21st birthday. Participants may elect to contribute
1% to 16% of their salary annually subject to plan and IRS limitations. The
Companies match at least 25% of the first 6% of the contributions made by
each participant. The Companies match up to an additional 75% of the first
6% of the contributions made by each participant if certain company-wide
performance measures are met. Contributions by the Companies were $5,600,
$5,775 and $5,477 in 1996, 1995 and 1994, respectively.
The Companies provide certain postretirement medical and life insurance
benefits. The Companies subsidize these benefits with certain limitations
to retirees and eligible employee groups. Associates retiring on or before
December 31, 1997, are eligible for the full subsidy if they are at least
age 55 with at least 10 years of service and continuously covered by one of
the Companies' health plans for 10 years prior to retirement. Associates
retiring after December 31, 1997, must be at least age 60 with at least 15
years of service and continuously covered for 15 years by one of the
Companies' health plans prior to retirement to be eligible for a subsidy.
Associates hired on or after January 1, 1995, are not eligible for a
62
<PAGE>
Company subsidy. The cost of these postretirement benefits is allocated to
the Companies in accordance with an intercompany cost-sharing arrangement.
The Companies use the accrual method of accounting for postretirement
benefits and elected to amortize the original transition obligation over 20
years.
The following table sets forth the Plan's funded status at December 31,
1996 and 1995:
1996 1995
Accumulated postretirement benefits obligation:
Fully eligible actives $ 8,008 $ 9,071
Retirees 76,136 72,688
------- ------
84,144 81,759
Unrecognized transition obligation (64,294) (69,716)
Unrecognized gain 7,928 9,951
------ -----
Total accrued $ 27,778 $ 21,994
========= ========
Assumptions:
Discount rate 7.50 % 7.25 %
Health care cost trend rate:
First year 8.50 % 8.50 %
Ultimate 5.00 % 5.00 %
Grading period 8 years 10 years
The Companies' net periodic postretirement benefit costs include the
following components:
1996 1995 1994
Eligibility costs $ 1,385 $ 1,654 $ 1,839
Interest costs 5,909 5,567 5,761
Net amortization and deferral - (683) -
Amortization of transition obligation 4,018 4,101 4,101
------ ------ -----
Total benefit costs $ 11,312 $ 10,639 $ 11,701
========= ========= ========
The health care cost trend rate assumption has a significant effect on the
amounts reported. To illustrate, increasing the assumed health care cost
trend rate by one percentage point in each year would increase the
Companies' accumulated postretirement benefits obligation as of December
31, 1996 by approximately $6,130 and the estimated eligibility cost and
interest cost components of the net periodic postretirement benefit costs
for 1996 by approximately $799.
6. RELATED PARTY TRANSACTIONS
The home office properties are occupied jointly by the Company, Mutual of
Omaha and certain affiliates. Because of this relationship, the Companies
incur joint operating expenses subject to allocation. Management believes
the method of allocating such expenses is fair and reasonable.
The Company received management and administrative service fees for
MOSSCO-NE, MOSSCO-NY and MOSSCO-CT of $350 and $151 and for the years ended
December 31, 1996 and 1995, respectively.
63
<PAGE>
The Company paid Kirkpatrick, Pettis, Smith, Polian, Inc., an affiliate,
for equity investment management services of $444, $543 and $431 during
1996, 1995 and 1994, respectively, and MOSSCO-NE, MOSSCO-NY and MOSSCO-CT
for assignment fees of $440 and $361 during 1996 and 1995, respectively.
On January 2, 1996, the Company sold 7,580 shares of First National of
Nebraska, Inc. common stock for $27,667 to Mutual. The share price was
determined by the stock's publicly traded market value at the date of the
transaction. The Company recognized a realized gain of $27,632 and related
federal income taxes were $9,671.
In July 1995, the Company received a $25,000 extraordinary dividend from
United World. Assets distributed to the Company included cash of $1,744,
bonds with a market value of $23,113 and accrued interest on the
transferred bonds of $143. The transfer of bonds and accrued interest
occurred July 1, 1995 and the cash was transferred July 3, 1995, the first
banking day after July 1. The bonds transferred to the Company consisted of
corporate bonds, agency mortgage-backed bonds and agency asset-backed
bonds.
On August 31, 1995, the Company received $23,250 in cash from Mutual of
Omaha, for 600,000 shares of FirsTier, Inc. common stock. The gross
realized capital gain on the common stock transferred was $22,852, and
related federal income taxes were $7,998.
In 1994, the Company received a $50,000 contribution to its capital and
surplus from Mutual of Omaha and the Company contributed $20,000 to the
capital and surplus of Companion.
Under the terms of a reinsurance treaty effected June 1, 1955, all health
and accident insurance written by the Company is ceded to Mutual of Omaha.
The operating results of certain lines of group health and accident and
life insurance are shared equally by the Company and Mutual of Omaha. The
amounts ceded by the Company and included in the statutory statements of
admitted assets, liabilities and surplus were as follows:
1996 1995
Aggregate reserve for policies and contracts $ 88,332 $ 89,012
========= ========
Policy and contract claims $ 104,874 $ 127,625
========== =========
The amounts ceded by the Company and included in the statutory statements
of income were as follows:
1996 1995 1994
Premium considerations $ 368,126 $ 395,014 $ 439,361
========== ========= =========
Policyholder and beneficiary benefits $ 273,576 $ 309,876 $ 324,846
========== ========= =========
Group reinsurance settlement income (expense) $ (2,818) $ 5,354 $11,324
========== ======== ========
64
<PAGE>
The Company also assumes group and individual life insurance from
Companion. The amounts assumed by the Company and included in the statutory
statements of admitted assets, liabilities and surplus were as follows:
1996 1995
Aggregate reserve for policies and contracts $ 3,749 $ 3,736
======== =======
Policy and contract claims $ 2,125 $ 2,430
======== =======
The amounts assumed by the Company and included in the statutory statements
of income were as follows:
1996 1995 1994
Premium considerations $ 2,668 $ 4,268 $5,018
======== ======= =======
Policyholder and beneficiary benefits $ 2,390 $ 3,061 $4,413
======== ======= =======
7. REINSURANCE
In the normal course of business, the Company assumes and cedes
reinsurance. The ceding of reinsurance does not discharge an insurer from
its primary legal liability to a policyholder. The Company remains liable
to the extent that a reinsurer is unable to meet its obligations.
The reconciliation of total premiums to net premiums is as follows:
1996 1995 1994
Direct $ 1,641,295 $ 1,658,506 $ 1,622,903
Assumed 26,581 27,496 25,317
Ceded (382,369) (407,613) (449,231)
---------- ---------- ---------
Net $ 1,285,507 $ 1,278,389 $ 1,198,989
============ ============ ===========
8. CREDIT ARRANGEMENTS
The Company and Mutual of Omaha are authorized by their Boards of Directors
to borrow a maximum of $50,000 on a joint basis under lines of credit. At
December 31, 1996, the Company had no outstanding borrowings against its
uncommitted, uncollateralized revolving lines of credit. Interest rates
applicable to borrowings under the Companies' lines of credit arrangements
are negotiated with the lender at the time of borrowing.
9. CONTINGENT LIABILITIES
Various lawsuits have arisen in the ordinary course of the Company's
business. The Company believes that its defenses are meritorious and the
eventual outcome of those lawsuits will not have a material effect on the
Company's financial position.
65
<PAGE>
10. DEPOSIT FUNDS
The estimated fair value and statement value of guaranteed investment and
select maturity contracts were:
1996 1995
Estimated fair value $ 1,200,031 $ 1,355,355
============ ===========
Statement value $ 1,247,546 $ 1,315,730
============ ===========
Fair values for the Company's insurance liabilities other than those for
investment-type insurance contracts are not required to be disclosed.
However, the fair values of liabilities under all insurance contracts are
taken into consideration in the Company's overall management of
interest-rate risk, which minimizes exposure to changing interest rates
through the matching of investment maturities with amounts due under
insurance contracts.
At December 31, 1996 and 1995, the Company held annuity reserves and
deposit fund liabilities of $1,092,555 and $954,862, respectively, that
were subject to discretionary withdrawal at book value with a surrender
charge of less than 5%.
11. STOCKHOLDER DIVIDENDS
Regulatory restrictions limit the amount of dividends available for
distribution without prior approval of regulatory authorities. The maximum
amount of dividends which can be paid to the stockholder without prior
approval of the Director of Insurance of the State of Nebraska is the
greater of 10% of the insurer's surplus as of the previous December 31 or
net gain from operations for the previous twelve month period ending
December 31. Based upon these restrictions, the Company is permitted a
maximum dividend distribution of $52,582 in 1997.
12. BUSINESS RISKS
The Company is subject to regulation by state insurance departments and
undergoes periodic examinations by those departments. The following is a
description of the most significant risks facing life and health insurers
and how the Company manages those risks:
LEGAL/REGULATORY RISK is the risk that changes in the legal or
regulatory environment in which an insurer operates will occur and
create additional costs or expenses not anticipated by the insurer in
pricing its products. The Company mitigates this risk by operating
throughout the United States, thus reducing its exposure to any single
jurisdiction, and by diversifying its products.
CREDIT RISK is the risk that issuers of securities owned by the Company
will default, or that other parties, including reinsurers which owe the
Company money, will not pay. The Company minimizes this risk by
adhering to a conservative investment strategy and by maintaining sound
reinsurance, credit and collection policies.
66
<PAGE>
INTEREST-RATE RISK is the risk that interest rates will change and
cause a decrease in the value of an insurer's investments. The Company
mitigates this risk by attempting to match the maturity schedule of its
assets with the expected payouts of its liabilities. To the extent that
liabilities come due more quickly than assets mature, the Company may
have to sell assets prior to maturity and recognize a gain or loss.
13. EXPENSE REALIGNMENT COSTS
In March 1996, the Company and its affiliates (the Companies) announced the
elimination of approximately 1,000 positions as a part of the initiative to
reduce operating costs 15% by the end of 1997. The Companies incurred
approximately $27,300 of severance and related costs, consulting fees and
other one-time costs associated with expense realignment activities during
1996.
67
<PAGE>
UNITED OF OMAHA
LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF MUTUAL
OF OMAHA INSURANCE COMPANY)
STATUTORY FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
AND FOR THE NINE MONTH PERIODS ENDED
SEPTEMBER 30, 1997 AND 1996
68
<PAGE>
UNITED OF OMAHA LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF MUTUAL OF OMAHA INSURANCE COMPANY)
STATUTORY STATEMENTS OF ADMITTED ASSETS, LIABILITIES AND SURPLUS
SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
(IN THOUSANDS)
- -----------------------------------------------------------------------------
UNAUDITED)
PTEMBER 30, DECEMBER 31,
ADMITTED ASSETS 1997 1996
Cash and invested assets :
Bonds $ 6,777,460 $ 6,194,033
Preferred stocks 2,967 2,967
Common stocks 99,403 206,792
Mortgage loans 763,884 914,877
Real estate occupied by the Company 83,459 85,958
Real estate acquired in satisfaction of debt 25,178 47,288
Investment in real estate 2,468 9,930
Policy loans 123,766 118,150
Cash and short-term investments 26,977 117,502
Other invested assets 78,609 70,027
------- ------
Total cash and invested assets 7,984,171 7,767,524
Premiums deferred and uncollected 100,575 94,802
Investment income due and accrued 80,794 75,193
Electronic data processing equipment, net 41,745 44,971
Receivable from parent, subsidiaries and affiliates 26,932 8,075
Other assets 50,631 47,050
Separate accounts assets 849,326 499,423
-------- -------
Total admitted assets $ 9,134,174 $ 8,537,038
=========== ===========
LIABILITIES
Policy reserves:
Aggregate reserve for policies and contracts $ 5,798,953 $ 5,427,996
Liability for premium and other deposit funds 1,549,044 1,670,294
Policy and contract claims 59,789 49,317
Other 74,080 74,171
------- ------
Total policy reserves 7,481,866 7,221,778
Interest maintenance reserve 21,358 26,872
Asset valuation reserve 97,862 114,495
General expenses and taxes due or accrued 39,676 35,147
Federal income taxes due or accrued 15,774 20,241
Other liabilities 62,006 84,293
Separate accounts liabilities 849,289 499,392
-------- -------
Total liabilities 8,567,831 8,002,218
---------- ---------
SURPLUS
Capital stock, $10 par value, 900,000 shares
authorized and outstanding 9,000 9,000
Gross paid-in and contributed surplus 62,724 62,724
Unassigned surplus 494,619 463,096
-------- -------
Total surplus 566,343 534,820
-------- -------
Total liabilities and surplus $ 9,134,174 $ 8,537,038
============ ===========
The accompanying note is an integral part of these statutory financial
statements.
69
<PAGE>
UNITED OF OMAHA LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF MUTUAL OF OMAHA INSURANCE COMPANY)
STATUTORY STATEMENTS OF INCOME
FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 1997 AND 1996
(IN THOUSANDS)
- --------------------------------------------------------------------------------
(UNAUDITED)
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
--------------------------
1997 1996
Income:
Net premiums and annuity considerations $ 898,698 $ 984,046
Other considerations and fund deposits 227,122 197,722
Net investment income 428,725 405,857
Other income 19,010 15,072
------- ------
Total income 1,573,555 1,602,697
---------- ---------
Benefits and expenses:
Policyholder and beneficiary benefits 763,190 680,353
Increase in reserves for policyholder and
beneficiary benefits 297,068 439,956
Commissions 100,381 94,304
Operating expenses 147,853 117,639
Expense realignment costs 2,511 5,848
Net transfers to separate accounts 207,049 217,440
-------- -------
Total benefits and expenses 1,518,052 1,555,540
---------- ---------
Net gain from operations before federal income taxes and
net realized capital gains 55,503 47,157
Federal income taxes 30,027 27,300
------- ------
Net gain from operations before net
realized capital gains 25,476 19,857
Net realized capital gains 43,798 24,310
------- ------
Net income $ 69,274 $ 44,167
========= ========
The accompanying note is an integral part of these statutory financial
statements.
70
<PAGE>
UNITED OF OMAHA LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF MUTUAL OF OMAHA INSURANCE COMPANY)
STATUTORY STATEMENTS OF CHANGES IN SURPLUS
FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1997 AND FOR
THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)
- --------------------------------------------------------------------------------
(UNAUDITED)
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
------------------------------
1997 1996
Capital stock:
Balance at beginning and end of year $ 9,000 $ 9,000
-------- -------
Gross paid-in and contributed surplus:
Balance at beginning and end of year 62,724 62,724
------- ------
Unassigned surplus:
Balance at beginning of year 463,096 440,889
Net income 69,274 54,608
Change in net unrealized capital gains (losses) (49,203) (23,064)
(Increase) decrease in:
Non-admitted assets (5,481) 2,561
Asset valuation reserve 16,633 (8,150)
Other, net 300 (3,748)
---- -------
Balance at end of year 494,619 463,096
-------- -------
Total surplus $ 566,343 $ 534,820
========== =========
The accompanying note is an integral part of these statutory financial
statements.
70
<PAGE>
UNITED OF OMAHA LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF MUTUAL OF OMAHA INSURANCE COMPANY)
STATUTORY STATEMENTS OF CASH FLOWS
FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 1997 AND 1996
(IN THOUSANDS)
- --------------------------------------------------------------------------------
(UNAUDITED)
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
----------------------------
1997 1996
Cash from operations:
Premiums, considerations and other fund deposits $ 1,120,022 $ 1,194,843
Net investment income 417,623 393,799
Other income 18,544 26,491
Benefits (756,983) (675,729)
Commissions and general expenses (245,446) (228,267)
Federal income taxes (52,147) (32,700)
Net transfers to separate accounts (218,176) (217,413)
---------- ---------
Net cash from operations 283,437 461,024
-------- -------
Cash from investments:
Proceeds from investments sold,
redeemed or matured:
Bonds 751,560 623,438
Mortgage loans 169,254 97,754
Stocks 130,358 45,191
Real estate 37,061 13,355
Other invested assets 16,956 4,681
Tax on capital gains (4,472) (9,665)
Cost of investments acquired:
Bonds (1,325,408) (1,242,383)
Mortgage loans (18,454) (17,044)
Stocks (11,902) (19,689)
Other invested assets (22,826) (31,971)
Real estate (11,536) (3,699)
Net increase in policy loans (5,619) (5,430)
-------- -------
Net cash from investments (295,028) (545,462)
---------- ---------
Cash from financing and other sources:
Other cash provided 10,796 24,447
Other cash used (89,730) (10,341)
--------- --------
Net cash from financing and other sources (78,934) 14,106
--------- ------
Net change in cash and short-term investments (90,525) (70,332)
Cash and short-term investments:
Beginning of year 117,502 176,000
-------- -------
End of period $ 26,977 $ 105,668
========= =========
The accompanying note is an integral part of these statutory financial
statements.
72
<PAGE>
UNITED OF OMAHA LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF MUTUAL OF OMAHA INSURANCE COMPANY)
NOTE TO STATUTORY FINANCIAL STATEMENTS
FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 1997 AND 1996
- --------------------------------------------------------------------------------
1. BASIS OF PRESENTATION
United of Omaha Life Insurance Company (the Company) is a wholly-owned
subsidiary of Mutual of Omaha Insurance Company, a mutual life and health
and accident insurance company domiciled in the State of Nebraska.
The accompanying interim statutory financial statements have been prepared
in conformity with accounting practices prescribed or permitted by the
Insurance Department of the State of Nebraska. Prescribed statutory
accounting practices are contained in a variety of publications of the
National Association of Insurance Commissioners (NAIC), as well as state
laws, regulations, and general administrative rules. Permitted statutory
accounting practices encompass all accounting practices which may not
necessarily be prescribed but are not prohibited. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for fair presentation have been included. The results
of operations for the nine months ended September 30, 1997, are not
necessarily indicative of the results that may be expected for further
periods. For future information, refer to the audited financial statements
and footnotes hereto of United of Omaha Life Insurance Company for the year
ended December 31, 1996.
The accompanying statutory financial statements vary in some respects from
those that would be presented in conformity with generally accepted
accounting principles. The most significant differences include: (a) bonds
are generally carried at amortized cost rather than being valued at either
amortized cost or fair value based on their classification according to the
Company's ability and intent to hold or trade the securities; (b)
acquisition costs, such as commissions and other costs related to acquiring
new business, are charged to operations as incurred and not deferred,
whereas premiums are taken into income on a pro rata basis over the
respective term of the policies; (c) deferred federal income taxes are not
provided for temporary differences between tax and financial reporting; (d)
no provision has been made for federal income taxes on unrealized
appreciation of investments which are carried at market value; (e) asset
valuation reserves (AVR) and interest maintenance reserves (IMR) are
established; (f) different actuarial assumptions are used for calculating
certain policy reserves; and (g) changes in certain assets designated as
"non-admitted" assets have been charged to unassigned surplus. The
aggregate effect of the foregoing differences on the accompanying statutory
financial statements has not been determined, but are presumed to be
material.
73
<PAGE>
- -----------------------------------------------------------
FINANCIAL STATEMENTS
UNITED OF OMAHA
SEPARATE ACCOUNT B
FINANCIAL STATEMENTS AND INDEPENDENT AUDITORS' REPORT
AS OF DECEMBER 31, 1997 AND FOR
THE PERIOD FROM AUGUST 13, 1997
(INCEPTION) TO DECEMBER 31, 1997
74
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
United of Omaha Life Insurance Company
We have audited the accompanying statement of net assets of United of Omaha
Separate Account B as of December 31, 1997, and the related statements of
operations and changes in net assets for the period from August 13, 1997
(inception) to December 31, 1997. Our responsibility is to express an opinion on
these financial statements based on our audit. The financial statements are the
responsibility of the Company's management.
We conducted our audit 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 audit provides 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 United of Omaha Separate
Account B as of December 31, 1997, and the results of its operations and changes
in its net assets for the period from August 13, 1997 (inception) to December
31, 1997 in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
February 2, 1998
75
<PAGE>
UNITED OF OMAHA SEPARATE ACCOUNT B
STATEMENT OF NET ASSETS
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
T. ROWE
FIDELITY SCUDDER PRICE PIONEER FEDERATED ALGER
------------ --------------- ----------- ----------------------- ----------------
PRIME AMERICAN
EQUITY - EQUITY CAPITAL MONEY SMALL
ASSETS INCOME INTERNATIONAL INCOME GROWTH FUND II CAPITALIZATION TOTAL
Investments in portfolio shares,
<S> <C> <C> <C> <C> <C> <C> <C>
at cost $ 16,898 $ 16,894 $ 17,474 $ 16,899 $ - $ 16,900 $ 85,065
========= ========= ========= ======== ==== ========= ========
Investments in portfolio shares,
at market value $ 17,281 $ 16,614 $ 17,560 $ 16,359 $ - $ 16,025 $ 83,839
--------- --------- --------- -------- ---- --------- --------
Net assets $ 17,281 $ 16,614 $ 17,560 $ 16,359 $ - $ 16,025 $ 83,839
========= ========= ========= ======== ==== ========= ========
Accumulation units outstanding 1,639 1,762 1,629 1,613 - 1,576 -
====== ====== ====== ===== == ====== =
Net asset value per unit $ 10.54 $ 9.43 $ 10.78 $ 10.14 $ - $ 10.17 $ -
======== ======= ======== ======= ==== ======== ===
</TABLE>
The accompanying notes are an integral part of these financial statements.
76
<PAGE>
UNITED OF OMAHA SEPARATE ACCOUNT B
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM AUGUST 13, 1997 (INCEPTION) TO DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
------------------------------------
T. ROWE
FIDELITY SCUDDER PRICE PIONEER FEDERATED ALGER
------------- ------------- ----------- ---------- ----------- ------------
PRIME AMERICAN
EQUITY - EQUITY CAPITAL MONEY SMALL
INCOME INTERNATIONAL INCOME GROWTH FUND II CAPITALIZATION TOTAL
Investment income:
<S> <C> <C> <C> <C> <C> <C> <C>
Reinvested dividends $ - $ - $ 575 $ - $ 181 $ - $ 756
Account charges (Note 2) (60) (61) (60) (58) (151) (58) (448)
----- ----- ----- ----- ------ ----- -----
Net investment income (expense) (60) (61) 515 (58) 30 (58) 308
----- ----- ---- ----- --- -----
Gains (losses) on investments:
Net realized gains (losses) 1 (3) 2 - - 2 2
Net change in unrealized gains (losses) 383 (279) 86 (539) - (875) (1,224)
---- ------ --- ------ -- ------ -------
Net gains (losses) on investments 384 (282) 88 (539) - (873) (1,222)
---- ------ --- ------ -- ------ -------
Increase (decrease) in net assets
for operations 324 (343) 603 (597) 30 (931) (914)
=== ===== === ==== === ===== =====
</TABLE>
The accompanying notes are an integral part of these financial statements.
77
<PAGE>
UNITED OF OMAHA SEPARATE ACCOUNT B
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD FROM AUGUST 13, 1997 (INCEPTION) TO DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
---------------------------------------
T. ROWE
FIDELITY SCUDDER PRICE PIONEER FEDERATED ALGER
--------- ---------- --------- -------------------- ----------
PRIME AMERICAN
EQUITY - EQUITY CAPITAL MONEY SMALL
INCOME INTERNATIONAL INCOME GROWTH FUND II CAPITALIZATION TOTAL
From operations:
<S> <C> <C> <C> <C> <C> <C> <C>
Net investment income (expense) $ (60) $ (61) $ 515 $ (58) $ 30 $ (58) $ 308
Net realized gains (losses) 1 (3) 2 - - 2 2
Net change in unrealized gains (losses) 383 (279) 86 (539) - (875) (1,224)
---- ------ --- ------ -- ------ -------
324 (343) 603 (597) 30 (931) (914)
---- ------ ---- ------ --- ------ -----
From policyowner transactions:
Policy purchases 84,753 84,753
Policy transfers 16,957 16,957 16,957 16,956 (84,753) 16,956 -
-------- --------
16,957 16,957 16,957 16,956 (30) 16,956 84,783
------- ------- ------- ------- ------- -------- --------
Increase in net assets 17,281 16,614 17,560 16,359 - 16,025 83,839
Net assets, beginning of year - - - - - - -
-- -- -- -- -- -- -
Net assets, end of year $ 17,281 $ 16,614 $ 17,560 $ 16,359 $ - $ 16,025 $ 83,839
========= ========= ========= ========= ==== ========= ========
Accumulation unit purchases 1,645 1,768 1,635 1,619 84,783 1,582 -
Accumulation unit withdrawals 6 6 6 6 84,783 6 -
-- -- -- -- ------- -- -
Net increase in units outstanding 1,639 1,762 1,629 1,613 - 1,576 -
Units outstanding, beginning of year - - - - - - -
-- -- -- -- -- -- -
Units outstanding, end of year 1,639 1,762 1,629 1,613 - 1,576 -
====== ====== ====== ====== == ====== =
</TABLE>
The accompanying notes are an integral part of these financial statements.
78
<PAGE>
UNITED OF OMAHA SEPARATE ACCOUNT B
NOTES TO FINANCIAL STATEMENTS AS OF DECEMBER 31, 1997 AND
FOR THE PERIOD FROM AUGUST 13, 1997 (INCEPTION) TO DECEMBER 31, 1997
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
United of Omaha Separate Account B (Separate Account) was established by
United of Omaha Life Insurance Company on August 13, 1997, under procedures
established by Nebraska law, and is registered as a unit investment trust
under the Investment Company Act of 1940, as amended. The Separate Account
is a segregated investment account of United of Omaha Life Insurance
Company (United of Omaha). It is divided into sub-accounts, each of which
invests exclusively in shares of a corresponding mutual fund portfolio.
The available portfolios are:
ALGER FEDERATED
American Growth Prime Money Fund II
American Small Capitalization U.S. Government Securities
FIDELITY MFS
Asset Manager: Growth Emerging Growth
Equity Income High Income Fund
Contrafund Research
Index 500 World Government
Value Series
PIONEER SCUDDER
Capital Growth Global Discovery
Real Estate Growth & Income
International
T. ROWE PRICE
Equity Income
International
Limited Term Bond
New America Growth
Personal Strategy Balanced
The following significant accounting policies, which are in conformity with
generally accepted accounting principles for unit investment trust, are
consistently used in the preparation of its financial statements.
SECURITY VALUATION TRANSACTIONS AND RELATED INVESTMENT INCOME: Investments
in mutual funds are recorded at their net asset value. Investment
transactions are accounted for on the trade date (date the order to buy or
sell is executed) and dividend income is recorded on the ex-dividend
date.
FEDERAL INCOME TAXES: Operations of the Separate Account are part of, and
are taxed with, the operations of United of Omaha, which is taxed as a
"life insurance company" under the Internal Revenue Code.
2. ACCOUNT CHARGES
United of Omaha deducts an administrative charge on each monthly deduction
date. This charge is set at an annual rate of 0.24% of the accumulation
value on each monthly deduction date.
A tax expense charge will be deducted as part of the monthly deduction from
the accumulation value on each monthly deduction date for the first ten
policy years. The annual rate of this charge is 0.39% of the accumulation
value to reimburse United of Omaha for state premium taxes, federal
deferred acquisition cost taxes, and related administrative expenses.
79
<PAGE>
United of Omaha deducts a monthly charge as compensation for the mortality
and expense risks assumed by United of Omaha. The charge is equal to an
annual rate of 0.90% of the accumulation value on each monthly deduction
date.
United of Omaha deducts a monthly charge from the entire accumulation
value. This deduction includes an expense charge of 1.53% annualized for
the first ten policy years and 1.14% for policy years thereafter, plus the
cost of insurance charge. The cost of insurance charge is based on the
duration of the policy and the insured's rate class as follows:
Policy Year Accumulation Accumulation
VALUE VALUE
OF $45,000 GREATER THAN
OR LESS $45,000
PREFERRED RATE CLASS
1-10 0.70 % 0.60 %
11 and later 0.60 % 0.50 %
STANDARD RATE CLASS
1-10 1.30 % 1.20 %
11 and later 0.94 % 0.84 %
United of Omaha may charge a $10 fee for any transfer in excess of 12
transfers per policy year. This charge is deducted from the amount transferred.
A surrender charge will be deducted on a full surrender or a partial
withdrawal from the amount requested to be surrendered.
The amount of the charge will depend upon the period of time since the
premium was paid, calculated as follows:
SURRENDER
YEARS SINCE PREMIUM PAYMENT CHARGE
1 9.5 %
2 9.5 %
3 9.5 %
4 9.0 %
5 7.5 %
6 6.0 %
7 4.5 %
8 3.0 %
9 1.5 %
10 & later -
80
<PAGE>
3. NET ASSETS
Total net assets (policyowners' cumulative investment accounts) consist of
the following at December 31, 1997:
<TABLE>
<CAPTION>
T. ROWE
FIDELITY SCUDDER PRICE PIONEER FEDERATED ALGER
------------ --------------- -------------- ------------- ----------- --------------
AMERICAN
EQUITY EQUITY CAPITAL MONEY SMALL
INCOME INTERNATIONAL INCOME GROWTH MARKET CAPITALIZATION TOTAL
<S> <C> <C> <C> <C> <C> <C> <C>
Shares purchased $ 16,957 $ 16,957 $ 16,957 $ 16,956 $ 84,753 $ 16,956 $ 169,536
Shares sold - - - - (84,783) - (84,783)
Investment income (expense) (60) (61) 515 (58) 30 (58) 308
Net realized gains (losses) 1 (3) 2 - - 2 2
Unrealized gains (losses) on
investments 383 (279) 86 (539) - (875) (1,224)
---- ------ --- ------ -- ------ -------
Net assets at December 31, 1997 $ 17,281 $ 16,614 $ 17,560 $ 16,359 $ - $ 16,025 $ 83,839
========= ========= ========= ========= ==== ========= ========
</TABLE>
81
<PAGE>
APPENDIX A
VARIABLE PAYOUT OPTIONS
You may choose payout Options 2, 4 or 6 to be paid as variable payments.
Variable payments vary according to the net investment return of the Subaccounts
chosen. If variable payments are being made under Option 2 or 6 and do not
involve life contingencies, then you may surrender the policy and receive the
commuted value of any unpaid payments.
FIRST VARIABLE PAYMENT
We will compute the dollar amount of the first monthly variable payment by
applying all or part of the Proceeds to the Variable Payout Options table shown
in the policy for the payout option you choose. The table shows the dollar
amount of monthly payment that you can buy with each $1000 of Proceeds.
If you have chosen more than one Subaccount, we will apply the accumulation
value of each Subaccount separately to the Variable Payout Options table. The
total amount of the first variable payment equals the sum of the payment amounts
payable for each Subaccount.
SECOND AND LATER VARIABLE PAYMENTS
The dollar amount of the second and later variable payments is not set. It may
change from month to month. We will compute the payment on the 10th Valuation
Date before the payment is due.
The amount of each variable payment after the first equals:
(a) the sum of the number of variable payment units under each Subaccount;
multiplied by
(b) the current variable payment unit value for each Subaccount as of
the date we compute the payment.
A variable payment unit is a measuring unit used in computing the amount of the
variable payments. The value of a variable payment unit for each Subaccount will
vary with the net investment return of the Subaccount.
VARIABLE PAYMENT UNIT VALUE
The current value of a variable payment unit for each Subaccount is:
(a) the value as of the date we computed the last payment; multiplied by
(b) the Net Investment Factor for the Subaccount as of the date on which
we are computing the current payment.
The Net Investment Factor is figured by dividing (a) by (b), then subtracting
(c) from the result, then multiplying by the offset factor described below. The
values of (a), (b) and (c) are defined as follows:
(a) is the net result of
(1) the Net Asset Value of a Portfolio share held in a Subaccount as of
the end of the current payment period; plus or minus
(2) a per share credit or charge for any taxes we incurred since the
last computation date that were charged to the operation of the subaccount.
(b) is the Net Asset Value of a Portfolio share held in the Subaccount as
of the beginning of the current payment period.
(c) is the asset charge factor that reflects the expense charges deducted
from the Variable Account. This factor is equal, on an annual basis, to
1.20% of the daily net asset value of the Variable Account.
The result of the calculation described above is then multiplied by a factor
that offsets the assumed investment rate upon which the Variable Payout Options
table is based. This allows the actual investment rate to be credited. For a
one-day Valuation Period the factor is 0.99989255, using an assumed investment
rate of 4% per year.
<PAGE>
NUMBER OF VARIABLE PAYMENT UNITS
The number of variable payment units payable for each Subaccount equals:
(a) the amount of the first monthly variable payment payable for that
Subaccount; divided by
(b) the variable payment unit value for that Subaccount as of the 10th
Valuation Date before the first variable payment is made.
The number of variable payment units payable for each Subaccount is fixed when
we compute the first variable payment. The number remains fixed unless you
exchange variable payment units between Subaccounts. The number of variable
payment units will not change as a result of investment experience.
We guarantee that the dollar amount of each variable payment after the first
will not be affected by actual expenses or changes in mortality experience.
EXCHANGE OF VARIABLE PAYMENT UNITS
After the first variable payment is made, you may exchange the value of a
specified number of variable payment units of one Subaccount for variable
payment units of another Subaccount or the Fixed Account. You may not exchange
variable payment units of the Fixed Account for variable payment units of the
Subaccounts.
The value of the variable payment units being exchanged will be the value for
the Valuation Period during which we receive your request for the exchange. The
value of the new variable payment units will be such that the dollar amount of a
payment made on the date of the exchange would not change as a result of the
exchange.
No more than four exchanges may be made each year.
<TABLE>
<CAPTION>
VARIABLE PAYOUT OPTIONS TABLE
MONTHLY PAYOUTS PER $1,000 BASED ON 4.00% INTEREST AND 1983A
MORTALITY TABLE ALB PROJECTED 20 YEARS WITH PROJECTION SCALE 'G'
- -----------------------------------------------------------------------------------------------
FEMALE RATES MALE RATES
- ---------------------------------------------- ------------------------------------------------
Age 20 Year 10 Life Installme20 10 Year Life Installment Age
Certain Year Only Refund Year Certain Only Refund
& Life Certain Certain & Life
& Life & Life
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
0 3.44 3.44 3.44 3.44 3.49 3.49 3.50 3.49 0
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
1 3.44 3.44 3.44 3.44 3.49 3.49 3.50 3.49 1
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
2 3.44 3.44 3.44 3.44 3.49 3.49 3.50 3.49 2
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
3 3.44 3.44 3.44 3.44 3.49 3.49 3.50 3.49 3
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
4 3.44 3.44 3.44 3.44 3.49 3.49 3.50 3.49 4
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
5 3.44 3.44 3.44 3.44 3.49 3.49 3.50 3.49 5
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
6 3.44 3.44 3.44 3.44 3.49 3.49 3.50 3.49 6
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
7 3.44 3.44 3.44 3.44 3.49 3.49 3.50 3.49 7
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
8 3.44 3.45 3.45 3.44 3.50 3.50 3.51 3.50 8
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
9 3.45 3.45 3.45 3.45 3.51 3.51 3.51 3.50 9
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
10 3.46 3.46 3.46 3.46 3.52 3.52 3.53 3.51 10
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
11 3.47 3.47 3.47 3.47 3.53 3.53 3.53 3.52 11
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
12 3.48 3.48 3.48 3.47 3.54 3.54 3.54 3.53 12
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
13 3.48 3.49 3.49 3.48 3.55 3.55 3.56 3.54 13
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
14 3.49 3.50 3.50 3.49 3.56 3.57 3.57 3.56 14
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
15 3.50 3.51 3.51 3.50 3.57 3.58 3.58 3.57 15
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
16 3.51 3.51 3.52 3.51 3.58 3.59 3.59 3.58 16
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
17 3.52 3.53 3.53 3.52 3.60 3.60 3.60 3.59 17
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
18 3.53 3.54 3.54 3.53 3.61 3.62 3.62 3.60 18
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
19 3.54 3.55 3.55 3.54 3.62 3.63 3.63 3.62 19
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
20 3.55 3.56 3.56 3.55 3.64 3.64 3.65 3.63 20
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
21 3.57 357 3.57 3.56 3.65 3.66 3.66 3.65 21
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
22 3.58 3.58 3.58 3.58 3.67 3.67 3.68 3.66 22
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
23 3.59 3.60 3.60 3.59 3.68 3.69 3.70 3.68 23
<PAGE>
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
24 3.61 3.61 3.61 3.60 3.70 3.71 3.71 3.70 24
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
25 3.62 3.62 3.63 3.62 3.72 3.73 3.73 3.71 25
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
26 3.63 3.64 3.64 3.63 3.74 3.75 3.75 3.73 26
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
27 3.65 3.65 3.66 3.65 3.76 3.77 3.77 3.75 27
- --------- --------- -------- -------- -------- ---------- --------- ---------- -------
28 3.67 3.67 3.67 3.66 3.78 3.79 3.79 3.77 28
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
29 3.68 3.69 3.69 3.68 3.80 3.81 3.81 3.79 29
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
30 3.70 3.71 3.71 3.70 3.82 3.83 3.84 3.81 30
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
31 3.72 3.73 3.73 3.72 3.84 3.86 3.86 3.84 31
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
32 3.74 3.75 3.75 3.74 3.87 3.88 3.89 3.86 32
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
33 3.76 3.77 3.77 3.76 3.89 3.91 3.91 3.89 33
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
34 3.78 3.79 3.79 3.78 3.92 3.94 3.94 3.92 34
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
35 3.80 3.81 3.81 3.80 3.95 3.97 3.97 3.94 35
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
36 3.82 3.84 3.84 3.82 3.97 4.00 4.00 3.97 36
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
37 3.85 3.86 3.86 3.85 4.00 4.03 4.04 4.00 37
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
38 3.87 3.89 3.89 3.87 4.04 4.07 4.07 4.03 38
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
39 3.90 3.92 3.92 3.90 4.07 4.10 4.11 4.06 39
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
40 3.93 3.95 3.95 3.93 4.10 4.14 4.15 4.10 40
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
41 3.96 3.98 3.98 3.96 4.14 4.18 4.19 4.14 41
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
42 3.99 4.01 4.01 3.99 4.18 4.22 4.24 4.18 42
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
43 4.02 4.04 4.05 4.02 4.22 4.27 4.28 4.21 43
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
44 4.05 4.08 4.09 4.05 4.25 4.32 4.33 4.25 44
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
45 4.09 4.12 4.13 4.09 4.30 4.36 4.38 4.30 45
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
46 4.13 4.16 4.17 4.13 4.34 4.41 4.43 4.35 46
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
47 4.16 4.20 4.21 4.16 4.38 4.47 4.49 4.39 47
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
48 4.20 4.24 4.25 4.20 4.43 4.52 4.55 4.44 48
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
49 4.24 4.29 4.30 4.24 4.48 4.58 4.61 4.49 49
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
50 4.29 4.34 4.35 4.29 4.53 4.64 4.68 4.55 50
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
51 4.33 4.39 4.40 4.34 4.58 4.70 4.74 4.61 51
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
52 4.38 4.44 4.46 4.39 4.63 4.77 4.81 4.67 52
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
53 4.43 4.50 4.52 4.44 4.69 4.84 4.89 4.73 53
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
54 4.48 4.56 4.58 4.49 4.74 4.91 4.97 4.80 54
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
55 4.53 4.62 4.65 4.56 4.80 4.99 5.06 4.87 55
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
56 4.59 4.69 4.72 4.62 4.86 5.08 5.14 4.94 56
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
57 4.65 4.76 4.79 4.68 4.92 5.16 5.24 5.02 57
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
58 4.71 4.83 4.87 4.74 4.98 5.25 5.34 5.10 58
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
59 4.77 4.91 4.96 4.82 5.04 5.35 5.45 5.19 59
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
60 4.83 5.00 5.05 4.89 5.01 5.45 5.57 5.28 60
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
61 4.89 5.08 5.14 4.97 5.17 5.56 5.69 5.37 61
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
62 4.96 5.18 5.24 5.06 5.23 5.67 5.82 5.47 62
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
63 5.03 5.28 5.35 5.14 5.29 5.79 5.97 5.58 63
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
64 5.09 5.38 5.47 5.24 5.35 5.92 6.11 5.69 64
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
65 5.16 5.49 5.59 5.34 5.41 6.05 6.28 5.81 65
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
66 5.23 5.61 5.72 5.45 5.47 6.19 6.45 5.93 66
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
67 5.30 5.74 5.86 5.56 5.52 6.32 6.63 6.06 67
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
68 5.37 5.86 6.02 5.68 5.58 6.47 6.84 6.20 68
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
69 5.43 6.00 6.18 5.80 5.63 6.62 7.05 6.35 69
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
70 5.50 6.15 6.36 5.93 5.67 6.78 7.28 6.50 70
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
71 5.56 6.30 6.55 6.07 5.72 6.94 7.51 6.64 71
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
72 5.61 6.46 6.76 6.22 5.76 7.10 7.77 6.82 72
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
73 5.67 6.63 6.99 6.37 5.80 7.27 8.04 6.99 73
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
74 5.72 6.80 7.23 6.55 5.83 7.43 8.33 7.17 74
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
75 5.76 6.99 7.49 6.72 5.86 7.60 8.64 7.37 75
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
76 5.80 7.17 7.77 6.91 5.89 7.77 8.97 7.57 76
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
77 5.83 7.36 8.07 7.11 5.91 7.94 9.32 7.78 77
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
78 5.86 7.55 8.40 7.33 5.93 8.11 9.70 8.01 78
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
79 5.89 7.74 8.75 7.55 5.94 8.28 10.10 8.25 79
<PAGE>
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
80 5.91 7.93 9.14 7.78 5.96 8.44 10.54 8.50 80
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
81 5.93 8.12 9.55 8.03 5.97 8.60 10.99 8.76 81
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
82 5.95 8.31 9.99 8.30 5.98 8.75 11.49 9.03 82
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
83 5.96 8.49 10.47 8.57 5.98 8.89 12.01 9.33 83
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
84 5.97 8.66 10.99 8.86 5.99 9.03 12.57 9.62 84
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
85 5.98 8.82 11.56 9.18 6.00 9.16 13.14 9.94 85
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
86 5.99 8.97 12.17 9.49 6.00 9.28 13.77 10.28 86
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
87 5.99 9.11 12.80 9.82 6.00 9.38 14.44 10.62 87
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
88 6.00 9.24 13.51 10.17 6.00 9.48 15.18 11.00 88
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
89 6.00 9.35 14.25 10.53 6.00 9.58 16.96 11.38 89
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
90 6.00 9.46 15.04 10.90 6.00 9.66 15.80 11.81 90
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
91 6.00 9.56 15.81 11.29 6.00 9.74 17.62 12.22 91
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
92 6.00 9.63 16.60 11.69 6.00 9.79 18.52 12.65 92
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
93 6.00 9.71 17.43 12.10 6.00 9.85 19.47 13.15 93
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
94 6.00 9.78 18.32 12.53 6.00 9.90 20.48 13.66 94
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
95 6.00 9.84 19.20 12.99 6.00 9.94 21.59 14.21 95
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
</TABLE>
<PAGE>
PART II - OTHER INFORMATION
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
By a Resolution adopted May 21, 1996, United's Board of Directors
provides for indemnification of a director, officer or employee to the full
extent of the law. Generally, the Nebraska Business Corporation Act permits
indemnification against expenses, judgments, fines and amounts paid in
settlement actually and reasonably incurred if the indemnitee acted in good
faith and in a manner reasonably believed to be in or not opposed to the best
interests of the corporation. However, no indemnification shall be made in any
type of action by or in the right of United if the proposed indemnitee is
adjudged to be liable for negligence or misconduct in the performance of his or
her duty to United, unless a court determines otherwise.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
United pursuant to the foregoing provisions, or otherwise, United has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification may be against public policy as expressed in the Act and may be,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than payment by United of expenses incurred or paid by a
director, officer, or controlling person of United in the successful defense of
any action, suite or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, United
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)
United of Omaha Life Insurance Company represents that the fees and
charges 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 United of Omaha Life Insurance Company.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement consists of the following papers and documents:
The facing sheet.
A reconciliation and tie of the information shown in the prospectus with
the items of Form N-8B-2.
The prospectus.
The undertaking to file reports.
The Rule 484 Undertaking.
The Section 26(e) Representation.
The signatures.
<PAGE>
Written consents of the following persons:
Independent Auditors (included in Exhibit 7)
Kenneth W. Reitz, Esquire (included in Exhibit 2)
Robert E. Hupf, F.S.A., M.A.A.A. (included in Exhibit 6)
The following exhibits:
EXHIBIT INDEX
Exhibit No. Description of Exhibit
1.A. (1) Resolution of the Board of Directors of United of Omaha Life
Insurance Company establishing the Variable Account. *
(2) None.
(3)(a) Principal Underwriter Agreement by and between United of
Omaha Life Insurance Company, on its own behalf and on behalf
of the Variable Account, and Mutual of Omaha Investor Services.*
(b) Form of Broker/Dealer Supervision and Sales Agreement by and
between Mutual of Omaha Investor Services, Inc. and the Broker/
Dealer. **
(c) Commission Schedule for Policies.
(4) None.
(5)(a) Form of Policy for the ULTRALIFE flexible premium variable
life insurance policy. ****
(b) Forms of Riders to the Policy. ****
(6)(a) Articles of Incorporation of United of Omaha Life Insurance
Company. **
(b) Bylaws of United of Omaha Life Insurance Company. *
(7) None.
(8)(a) Participation Agreement by and between United of Omaha Life
Insurance Company and the Alger American Fund. **
(b) Participation Agreement by and between United of Omaha Life
Insurance Company and the Insurance Management Series. **
(c) Participation Agreement by and between United of Omaha Life
Insurance Company and the Fidelity VIP Fund and Fidelity VIP
Fund II. **
(d) Participation Agreement by and between United of Omaha Life
Insurance Company and MFS Variable Insurance Trust. **
(e) Participation Agreement by and between United of Omaha Life
Insurance Company and Pioneer Variable Contracts Trust. **
(f) Participation Agreement by and between United of Omaha Life
Insurance Company and the Scudder Variable Life Investment
Fund. **
(g) Participation Agreement by and between United of Omaha Life
Insurance Company and T. Rowe Price International Series, T.
Rowe Price Fixed Income Series, and T. Rowe Price Equity
Series. **
<PAGE>
(9) None.
(10) Form of Application for the United of Omaha Life Insurance
Company ULTRALIFE Flexible Premium Variable Life Insurance
Policy.
(11) Issuance, Transfer and Redemption Memorandum
2. Opinion and Consent of Counsel.****
3. Not Applicable.
4. Not Applicable.
5. Not Applicable.
6. Opinion and Consent of Actuary.****
7. Consents of Independent Auditors.
8. None
9. Powers of Attorney. ***
* Incorporated by Reference to the Registration Statement for United of
Omaha Separate Account B filed on December 27, 1996 (File No. 333-18881).
** Incorporated by Reference to the Registration Statement for United of
Omaha Separate Account C filed on April 24, 1997 (File No. 33-89848).
*** Incorporated by Reference to the Pre-Effective Amendment No. 1 to the
Registration Statement for United of Omaha Separate Account B filed on June
20, 1997 (File No. 333-18881).
**** Incorporated by Reference to the Registration Statement for United of
Omaha Separate Account B filed on September 15, 1997 (File No. 333-35587).
<PAGE>
SIGNATURES
As required by the Securities Act of 1933, the Registrant has caused this
Pre-Effective Amendment to the Registration Statement to be signed on its
behalf, in the City of Omaha and State of Nebraska, on February 5, 1998.
UNITED OF OMAHA SEPARATE ACCOUNT B
(Registrant)
UNITED OF OMAHA LIFE INSURANCE COMPANY
(Depositor)
/s/Kenneth W. Reitz
By: Kenneth W. Reitz
As required by the Securities Act of 1933, this Registration Statement has been
signed by the following persons in the capacities and on the duties indicated:
Signatures Title Date
_____*____________________ Chairman of the Board 2/5/98
Thomas J. Skutt
_____*____________________ Vice-Chairman of the Board, 2/5/98
John W. Weekly Chief Executive Officer
_____*____________________ Director, President 2/5/98
John A. Sturgeon
_____*____________________ Executive V.P., 2/5/98
Tommie D. Thompson Corporate Comptroller
(Principal Financial Officer, and
Principal Accounting Officer)
_____*____________________ 2/5/98
-
Samuel L. Foggie Director
_____*__________________ 2/5/98
-
Hugh V. Plunkett, III Director
_____*___________________ 2/5/98
-
Richard J. Sampson Director
_____*___________________ 2/5/98
-
Oscar S. Straus Director
________________________ 2/5/98
Michael A. Wayne Director
By: /s/ Kenneth W. Reitz Date: February 5, 1998
-------------------------- ----------------
Kenneth W. Reitz
* Signed by Kenneth W. Reitz under Powers of Attorney executed on May 20, 1997,
filed as exhibits incorporated by reference in this registration statement.
<PAGE>
EXHIBITS
1.A(3)(c) Commission Schedule for the Policy.
1.A(10) Form of Application for the United of Omaha Life Insurance
Company ULTRA LIFE Flexible Premium Variable Life Insurance
Policy.
1.A(11) Issuance, Transfer and Redemption Memorandum
7. Consents of Independent Auditors
(a) Deloitte & Touche LLP
(b) Coopers & Lybrand L.L.P.
<PAGE>
REGISTRATION NO. 333-35587
811-08336
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------
UNITED OF OMAHA SEPARATE ACCOUNT B
OF
UNITED OF OMAHA LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
EXHIBITS
- --------------------------------------------------------------------------------
TO
THE PRE-EFFECTIVE AMENDMENT NO. 1 TO THE
REGISTRATION STATEMENT ON FORM S-6
UNDER
THE SECURITIES ACT OF 1933
February 5, 1998
<PAGE>
EXHIBIT INDEX
Exhibit No. Description of
Exhibit
1.A. (1) Resolution of the Board of Directors of United Life Insurance
Company establishing the Variable Account. *
(2) None.
(3)(a) Principal Underwriter Agreement by and between United, on
its own behalf and on behalf of the Variable Account, and
Mutual of Omaha Investor Services. *
(b) Form of Broker/Dealer Supervision and Sales Agreement by and
between Mutual of Omaha Investor Services, Inc. and the Broker/
Dealer. **
(c) Commission Schedule for Policies.
(4) None.
(5)(a) Form of Policy for the ULTRALIFE flexible premium variable
life insurance policy. ****
(b) Forms of Riders to the Policy. ****
(6)(a) Articles of Incorporation of United of Omaha Life Insurance
Company. **
(b) Bylaws of United of Omaha Life Insurance Company. *
(7) None.
(8)(a)Participation Agreement by and between United of Omaha Life
Insurance Company and the Alger American Fund. **
(b)Participation Agreement by and between United of Omaha Life
Insurance Company and the Insurance Management Series. **
(c)Participation Agreement by and between United of Omaha Life
Insurance Company and the Fidelity VIP Fund and Fidelity VIP
Fund II. **
(d)Participation Agreement by and between United of Omaha Life
Insurance Company and MFS Variable Insurance Trust. **
(e)Participation Agreement by and between United of Omaha Life
Insurance Company and Pioneer Variable Contracts Trust. **
(f)Participation Agreement by and between United of Omaha Life
Insurance Company and the Scudder Variable Life Investment
Fund. **
(g)Participation Agreement by and between United of Omaha Life
Insurance Company and T. Rowe Price International Series,
T. Rowe Price Fixed Income Series, and T. Rowe Price Equity
Series. **
(9) None.
(10) Form of Application for the United of Omaha Life Insurance
Company ULTRALIFE Flexible Premium Variable Life Insurance
Policy.
(11) Issuance, Transfer and Redemption Memorandum
2. Opinion and Consent of Counsel. ****
3. Not Applicable.
4. Not Applicable.
5. Not Applicable.
6. Opinion and Consent of Actuary. ****
7. Independent Auditor's Consent.
8. None
9. Powers of Attorney. ***
* Incorporated by Reference to the Registration Statement for United of
Omaha Separate Account B filed on December 27, 1996 (File No. 333-18881).
** Incorporated by Reference to the Registration Statement for United of
Omaha Separate Account C filed on April 24, 1997 (File No. 33-89848).
*** Incorporated by Reference to the Pre-Effective Amendment No. 1 to the
Registration Statement for United of Omaha Separate Account B filed on June 20,
1997 (File No. 333-18881).
**** Incorporated by Reference to the Registration Statement for United of
Omaha Separate Account B filed on September 15, 1997 (File No. 333-35587).
Exhibit 1.A(3)(c) Commission Schedule for the Policy
ULTRA VARIABLE LIFE - FLEXIBLE PREMIUM
COMPENSATION SCHEDULE
BROKERAGE DISTRIBUTION
Total Commission
Year 1 Premiums (up to target premium) 115%
Years 2 - 10 6%
Years 11+ 1.5%
Commission on Excess Premiums (Years 1-10) 6%
CAREER AGENCY DISTRIBUTION
Agents Commission
Year 1 Premiums (up to target or planned premium) 45%
Years 2 & 3 6%
Years 4+ 4%
Commission on Excess Premium 4%
Managers Commission
Year 1 Premiums (up to target or planned premium) 9%
Commission on Excess Premium .8%
Exhibit 1.A(10) Form of Application for the United of Omaha Life Insurance
Company ULTRA LIFE Flexible Premium Variable Life Insurance Policy
APPLICATION TO:
UNITED OF OMAHA LIFE INSURANCE COMPANY
[ ] ATTN: Life Agency: Mutual of Omaha Plaza, Omaha, NE 68175
[ ] ATTN: Life Brokerage: P.O. Box 2476, Omaha, NE 68103-2476
FOR
[ ] LIFE INSURANCE [ ] FLEXIBLE PREMIUM VARIABLE
[ ] ADULT LIFE [ ] UNIVERSAL LIFE INSURANCE
[ ] JUVENILE LIFE [ ] ADDITIONAL INSURED RIDER (AIR)
[ ] SPECIFIED AMOUNT INCREASE
TO THE AGENT/BROKER:
0 Tear off the Notice of Exchange of Information and the Summary of Rights
Under the Fair Credit Reporting Act and give it to the Applicant.
0 Have Authorization To Release Information on reverse side of this page
signed and dated.
0 Assure that all applicable questions in Part I and Part II are answered in
clear printed fashion.
0 Complete Nonmedical Supplement in all cases.
0 Be sure the application is signed by the Proposed Insured(s) and the
Applicant if other than Proposed Insured(s).
0 Any changes should be initialed by the Proposed Insured(s) and, if
applicable, the Applicant.
0 Use age last birthday.
0 Always provide the attached Temporary Life Insurance Agreement and Receipt
when you accept a premium.
PREMIUM ACCEPTANCE GUIDELINES:
Premium should only be accepted if:
(a) Questions 1, 2 and 3 on the Temporary Life Insurance Agreement and
Receipt form are answered "No."
(b) The Temporary Life Insurance Agreement and Receipt form is signed,
dated and witnessed by all parties indicated on the form on the day the
application is taken.
(c) A full modal premium is collected at the time of application unless the
Bank Service Plan (BSP) is used, in which case two BSP premiums should be
collected.
(d) The total amount of insurance applied for does not exceed $250,000 if
term insurance is requested or $1,500,000 if permanent (Whole Life, Universal
Life or Variable Universal Life) insurance is requested.
United of Omaha Life Insurance Company
Instructions to Agent/Broker: Give this Notice to the
Applicant before filling out the application.
NOTICE OF EXCHANGE OF INFORMATION
MEDICAL INFORMATION BUREAU, INC. (MIB) The information regarding your
insurability will be treated as confidential.
However, the Company or its reinsurers may make a brief report to
the Medical Information Bureau, a nonprofit membership organization of life
insurance companies which operates an information exchange for its members. If
you apply for life or health insurance to another company which is also a member
of the Bureau or if a claim for benefits is submitted to such a company, the
Bureau will, upon request, supply the information in its file to that company.
Florida residents: However, no information obtained from the Medical Information
Bureau pertaining to Human Immunodeficiency Virus (HIV) or Acquired Immune
Deficiency Syndrome (AIDS) will affect the issuance or the underwriting of the
policy, except upon written consent to be medically tested for HIV or AIDS and
the results of such testing proved positive.
Upon receipt of a request from you, the Medical Information Bureau will arrange
disclosure of any information it may have in your file. If you question the
accuracy of the information in the Bureau's file, you may contact the Bureau and
seek a correction in accordance with the procedures set forth in the federal
Fair Credit Reporting Act. The address of the Bureau's information office is
P.O. Box 105, Essex Station, Boston, MA 02112, phone (617) 426-3660.
The Company or its reinsurers may also release information in its file,
including information given in your application, to other insurance companies to
which you apply for life or health insurance or to which a claim is submitted.
(See reverse side for other important notices.)
<PAGE>
AUTHORIZATION TO RELEASE INFORMATION (FOR ALL STATES, EXCEPT ARIZONA, HAWAII AND
MICHIGAN)
To
United of Omaha Life Insurance Company
To all physicians, medical or dental practitioners, hospitals, clinics, other
medical care facilities or other providers of medical or dental care services,
insurers, employers and consumer reporting agencies:
I authorize you to release all medical and nonmedical information about me
(the undersigned) or my children to United of Omaha Life Insurance Company, its
reinsurers and any consumer reporting agency acting for them. This authorization
includes information about medical history, mental and physical condition, drug
and alcohol use, and other personal information such as finances, occupation and
general reputation.
To the Medical Information Bureau, Inc. (MIB):
I authorize you to release all medical and nonmedical information about me
(the undersigned) to United of Omaha Life Insurance Company and its reinsurers.
This authorization includes information about medical history, mental and
physical condition, drug and alcohol use, and other personal information.
Information received will be used to determine insurability. This authorization
is valid for 30 months from the date below. A photocopy of this authorization is
as valid as the original. I have received the Notice of Information Gathering
Practices, the Notice of Exchange of Information, including MIB, and Fair Credit
Reporting Act Notice. I, or my authorized representative, will receive a copy of
this authorization and any investigative consumer report upon request.
If an investigative consumer report is prepared, I may request to be
interviewed. (Check if an interview is desired.)
Name used for medical records_____________________________________
__________________________________________________________________________
Date Signature of Proposed Insured(s) (Age 15 or older)
__________________________________________________________________________
Date Signature of Proposed Insured(s) (Age 15 or older)
__________________________________________________________________________
Date Signature of Parent or Guardian
(if Proposed Insured is under Age 15)
UNITED OF OMAHA LIFE INSURANCE COMPANY
FAIR CREDIT REPORTING ACT DISCLOSURE STATEMENT
Mutual of Omaha Insurance Company and/or United of Omaha Life Insurance Company,
or its/their duly authorized representative(s), may request and obtain an
investigative consumer report for the purpose of serving as a factor in the
underwriting of your insurance application.
An investigative consumer report means any written, oral or other communication
of any information by a consumer reporting agency bearing on your character,
general reputation, personal characteristics or mode of living obtained through
personal interviews with your neighbors, friends, acquaintances, associates, or
those who may have knowledge concerning such items of information.
Upon written request we will provide you with additional disclosures relating to
the nature and scope of the investigative consumer report. Following this
Disclosure Statement is a written Summary of Your Rights Under Section 606 (a)
of the Fair Credit Reporting Act, as amended.
If you request the additional disclosures and/or summary of rights from either
United of Omaha Life Insurance Company or Mutual of Omaha Insurance Company,
please send your request to the following address: Attention: Individual
Underwriting Department, Mutual of Omaha Plaza, Omaha, Nebraska 68175
NOTICE OF INFORMATION PRACTICES
In the course of properly underwriting and administering your insurance
coverage, United of Omaha Life Insurance Company will rely heavily on
information provided by you. The Company may also collect information from
others, such as medical professionals who have treated you.
In certain circumstances, and in compliance with applicable law, our Company may
disclose personal or privileged information to third parties without your
specific authorization.
You have the right to be told about and to see a copy, if you wish, of items of
personal information about you which appear in our files, including information
contained in investigative consumer reports. You also have the right to seek
correction of personal information you believe to be inaccurate.
THE ABOVE IS A GENERAL DESCRIPTION OF THE COMPANY'S AND YOUR AGENT'S/BROKER'S
INFORMATION PRACTICES. IF YOU WOULD LIKE TO RECEIVE A MORE DETAILED EXPLANATION
OF THESE PRACTICES, PLEASE SEND YOUR REQUEST TO: UNITED OF OMAHA LIFE INSURANCE
COMPANY, UNDERWRITING DEPARTMENT, MUTUAL OF OMAHA PLAZA, OMAHA, NE 68175.
<PAGE>
RECEIPT (Agent/Broker -- See Premium Acceptance Guidelines -- Page 1)
ALL CHECKS MUST BE MADE PAYABLE TO UNITED OF OMAHA. UNITED WILL NOT
ACCEPT CASH PREMIUMS. DO NOT MAKE CHECKS PAYABLE TO THE AGENT/BROKER OR LEAVE
THE PAYEE BLANK.
TEMPORARY LIFE INSURANCE AGREEMENT AND RECEIPT ("Agreement")
United of Omaha Life Insurance Company ("United"), Mutual of Omaha Plaza, Omaha,
NE 68175
The following questions must be answered either "Yes" or "No." YES NO
1. Within the past 90 days, has any Proposed Insured been admitted to a hospital
or other medical facility, been advised to be admitted, had surgery performed or
recommended, or been advised to have a diagnostic test other than an HIV test?
2. Within the past three years, has any Proposed Insured been treated for
heart trouble, stroke, cancer, drug or alcohol use, or had such treatment
recommended by a physician or other licensed medical professional?
3. Has any Proposed Insured ever been diagnosed as having Acquired Immune
Deficiency Syndrome or AIDS Related Complex (ARC) caused by the HIV infection,
or been treated for or had treatment recommended for AIDS or ARC by a physician
or other licensed medical professional? (Wisconsin Residents: any AIDS test
result received at an anonymous counseling and testing site need not be
disclosed.)
4. Is any Proposed Insured under 15 days old or over 70 years of age?
If any of the above questions are answered "Yes" or not answered, no
Agent/Broker of United is authorized to accept money with the application and no
coverage will take effect under this Agreement. In consideration of the
application and payment of $ _______________ by the Applicant, receipt of which
is hereby acknowledged, United agrees to provide temporary life insurance for
the Proposed Insured(s) effective on the date of the application, for a limited
period of time, subject to the following conditions and limitations.
A. If the answer to any of the above questions is "No" and the answer is
incorrect or misleading, or if any of the answers to the questions on the
application are incorrect or misleading, then this Agreement is void and never
went into effect.
B. Temporary life insurance under this Agreement will automatically terminate on
the earliest of the following dates:
(1) 90 days from the date of this Agreement, except in Connecticut; or
(2) The date that insurance takes effect under the policy applied for; or
(3) The date of the letter offering to the Applicant a policy, other than
applied for; or
(4) The date a policy, other than as applied for, is offered by an Agent/Broker
to the Applicant; or
(5) The date the premium refund is mailed; or
(6) The date any check or draft submitted as payment is not honored by the bank
on which it is drawn; or
(7) The date United mails notice of termination of coverage.
C. If the policy applied for is either (a) pursuant to a conversion privilege in
(an) existing United Life policy(ies), or (b) to replace (an) existing United
life policy(ies) with another United life policy, then in the event of the death
of the Proposed Insured before the termination of this Agreement, United will
pay only the greater of:
(1) the benefits due under the terms of the existing policy(ies) which is/are
being converted or replaced, or
(2) the benefits due under the terms of the policy for which application is
being made (subject to the further limitation on the maximum amount of benefits
payable under this Agreement which is set forth below); and Applicant
acknowledges and agrees that benefits shall not be payable under both.
D. The temporary life insurance provided by this Agreement is subject to the
provisions of the policy form applied for; however, no benefits will be paid
for:
(1)disability; or
(2) death from suicide while sane or insane (in Missouri, only if suicide was
intended at the time of this application and we can prove it was intended); or
(3) the same loss under both this Agreement and any life policy issued from the
application.
This Agreement does not limit United in applying its underwriting standards to
the application nor does this Agreement limit or waive any rights under any life
insurance policy issued. If the application is rejected by United, the amount
paid with the application will be refunded to the Applicant regardless of
whether a claim has been filed or benefits have been paid under this Agreement.
No change may be made to the terms and conditions of this Agreement by anyone,
including the Agent/Broker.
If any Proposed Insured dies prior to the termination of this Agreement, United
will pay the beneficiary the face amount applied for (unless otherwise required
by C above), not to exceed $250,000 if the policy requested is term insurance,
or not to exceed $1,500,000 if the policy requested is permanent (Whole Life,
Universal Life or Variable Life) insurance.
I have read and received a copy of this Agreement and understand and agree to
all of its terms. I verify the above answers are true to the best of my
knowledge and belief.
Signed this __________ day of ______________ , _____ , at City State ZIP Code
_____________________________________ ___________________________________
Signature of Proposed Insured Printed Name of Proposed Insured
_____________________________________ ___________________________________
Signature of Applicant
(if other than Proposed Insured) Printed Name of Applicant
_____________________________________ ___________________________________
Signature of Spouse
(if a Proposed Insured) Printed Name of Spouse
_____________________________________ ___________________________________
Signature of Agent(s)/Broker(s) Printed Name of Agent(s)/Broker(s)
SUBMIT THIS COPY TO THE COMPANY RECEIPT
<PAGE>
(Agent/Broker --- See Premium Acceptance Guidelines -- Page 1)
ALL CHECKS MUST BE MADE PAYABLE TO UNITED OF OMAHA. UNITED WILL NOT ACCEPT CASH
PREMIUMS. DO NOT MAKE CHECKS PAYABLE TO THE AGENT/BROKER OR LEAVE THE PAYEE
BLANK.
TEMPORARY LIFE INSURANCE AGREEMENT AND RECEIPT ("Agreement")
United of Omaha Life Insurance Company ("United"), Mutual of Omaha Plaza, Omaha,
NE 68175
The following questions must be answered either "Yes" or "No." YES NO
1. Within the past 90 days, has any Proposed Insured been admitted to a hospital
or other medical facility, been advised to be admitted, had surgery performed or
recommended, or been advised to have a diagnostic test other than an HIV test?
2. Within the past three years, has any Proposed Insured been treated for heart
trouble, stroke, cancer, drug or alcohol use, or had such treatment recommended
by a physician or other licensed medical professional?
3. Has any Proposed Insured ever been diagnosed as having Acquired Immune
Deficiency Syndrome or AIDS Related Complex (ARC) caused by the HIV infection,
or been treated for or had treatment recommended for AIDS or ARC by a physician
or other licensed medical professional? (Wisconsin Residents: any AIDS test
result received at an anonymous counseling and testing site need not be
disclosed.)
4. Is any Proposed Insured under 15 days old or over 70 years of age?
If any of the above questions are answered "Yes" or not answered, no
Agent/Broker of United is authorized to accept money with the application and no
coverage will take effect under this Agreement.
In consideration of the application and payment of $ _______________ by the
Applicant, receipt of which is hereby acknowledged, United agrees to provide
temporary life insurance for the Proposed Insured(s) effective on the date of
the application, for a limited period of time, subject to the following
conditions and limitations.
A. If the answer to any of the above questions is "No" and the answer is
incorrect or misleading, or if any of the answers to the questions on the
application are incorrect or misleading, then this Agreement is void and never
went into effect.
B. Temporary life insurance under this Agreement will automatically terminate on
the earliest of the following dates:
(1) 90 days from the date of this Agreement, except in Connecticut; or
(2) The date that insurance takes effect under the policy applied for; or
(3) The date of the letter offering to the Applicant a policy, other than
applied for; or
(4) The date a policy, other than as applied for, is offered by an Agent/Broker
to the Applicant; or
(5) The date the premium refund is mailed; or
(6) The date any check or draft submitted as payment is not honored by the bank
on which it is drawn; or
(7) The date United mails notice of termination of coverage.
C. If the policy applied for is either (a) pursuant to a conversion privilege in
(an) existing United Life policy(ies), or (b) to replace (an) existing United
life policy(ies) with another United life policy, then in the event of the death
of the Proposed Insured before the termination of this Agreement, United will
pay only the greater of:
(1) the benefits due under the terms of the existing policy(ies) which is/are
being converted or replaced, or
(2) the benefits due under the terms of the policy for which application is
being made (subject to the further limitation on the maximum amount of benefits
payable under this Agreement which is set forth below); and Applicant
acknowledges and agrees that benefits shall not be payable under both.
D. The temporary life insurance provided by this Agreement is subject to the
provisions of the policy form applied for; however, no benefits will be paid
for:
(1) disability; or
(2) death from suicide while sane or insane (in Missouri, only if suicide was
intended at the time of this application and we can prove it was intended); or
(3) the same loss under both this Agreement and any life policy issued from the
application.
This Agreement does not limit United in applying its underwriting standards to
the application nor does this Agreement limit or waive any rights under any life
insurance policy issued. If the application is rejected by United, the amount
paid with the application will be refunded to the Applicant regardless of
whether a claim has been filed or benefits have been paid under this Agreement.
No change may be made to the terms and conditions of this Agreement by anyone,
including the Agent/Broker.
If any Proposed Insured dies prior to the termination of this Agreement, United
will pay the beneficiary the face amount applied for (unless otherwise required
by C above), not to exceed $250,000 if the policy requested is term insurance,
or not to exceed $1,500,000 if the policy requested is permanent (Whole Life,
Universal Life or Variable Life) insurance.
I have read and received a copy of this Agreement and understand and agree to
all of its terms. I verify the above answers are true to the best of my
knowledge and belief.
Signed this __________ day of ______________ , _____ , at City State ZIP Code
_____________________________________ ___________________________________
Signature of Proposed Insured Printed Name of Proposed Insured
_____________________________________ ___________________________________
Signature of Applicant
(if other than Proposed Insured) Printed Name of Applicant
_____________________________________ ___________________________________
Signature of Spouse
(if a Proposed Insured) Printed Name of Spouse
_____________________________________ ___________________________________
Signature of Agent(s)/Broker(s) Printed Name of Agent(s)/Broker(s)
GIVE THIS COPY TO THE APPLICANT
<PAGE>
A. GENERAL QUESTIONS:
1. Proposed Insured's Name: Former Name (if applicable):
2. Home Phone Number: ( ) Best Time to Call: a.m. p.m.
3. Legal Residence Address:
Street No., Apt. No. City, State Zip
4. Mailing Address:
Street No., Apt. No. City, State Zip
5. Mail Premium Notices to: [ ] Residence [ ] Owner [ ] Business
Address:
Street No., Apt. No. City, State Zip
6. Sex: [ ] M [ ] F Age: Birth Date:____/____/____
Birthplace (state):
7. Social Security Number: Driver's License Number:
State of Issue:
8. Are you a U.S. citizen? [ ] Yes [ ] No If "No," date of arrival
in U.S._____________________________________
Do you have an alien registration receipt "Permanent Visa"? [ ] Yes
[ ] No If "Yes," Permanent Visa No.:________
9. Occupation:____________________ Duties:_____________________________
Businessowner? [ ] Yes [ ] No Retired Military? [ ] Yes [ ] No
Active Duty? [ ] Yes [ ] No
If "Yes," are you on flying status or receiving hazardous duty pay?
[ ] Yes [ ] No
If "Yes," explain type of duty or type of aircraft:
10. Name of your firm or employer:
11. Business Phone Number: ( ) Best Time to Call: a.m. p.m.
12. Local Business Address:
Street No., Apt. No. City, State Zip
13. Do you use tobacco in any form? [ ] Yes. What form?____________________
No. per day:__________
[ ] No. [ ] Never Used. [ ] Stopped on _____/_____/_____
14. Applicant/Owner Name (if different from Proposed Insured or if Proposed
Insured is under Age 15):
Address:
Street No., Apt. No. City, State Zip
Relationship to Proposed Insured: Social Security No.
(or Taxpayer ID No.):
15. Complete only if Spouse/Children (must be full time student if over
age 19) are Proposed for Insurance:
First Name, Middle Relationship to Birth
Initial and Last Name SSN No. Proposed Insured
Birth
Date Age Sex Ht. Wt.
16. Spouse's Occupation:_____________________________________ Birthplace
(state):___________________________ Income: $_________________ If
self-employed, income after expenses and before taxes:
$_________________ Driver's License Number: State of Issue:
17. Is spouse a U.S. citizen? [ ] Yes [ ] No If "No," date of
arrival in the U.S. ______________________________
Does spouse have an alien registration receipt "Permanent Visa"?
[ ] Yes [ ] No
If "Yes," Permanent Visa Number:____________________________________
18. Does spouse use tobacco in any form? [ ] Yes.
What form?__________________________ No. per day:_______
[ ]No. [ ] Never Used. [ ] Stopped on _____/_____/_____
<PAGE>
19. Do all family members proposed for insurance live with the Proposed
Insured? [ ] Yes [ ] No If "No," explain and give name and phone
number where family member can be contacted _________________________
20. Plan Information
a. Plan of Insurance: ____________________________________ Premium
Amount:________________ $_______
b. [ ] Addition to Existing Policy No.: ___________________ $_______
Amount:________________ $
c. Death Benefit Option:
[ ] Option 1: Accumulation Value included in Specified Amount
[ ] Option 2: Accumulation Value in addition to Specified Amount
d. I elect the Automatic Premium Deduction Option.
(Not available with all plans) [ ]Yes [ ] No
Amount or No.
e. Riders: of Units (if applicable)
(Please Note: Not all
riders are available
with all plans)
Premium
[ ]Waiver of Premium or Disability __________________ $
[ ]Accidental Death Benefit __________________ $
[ ]Guaranteed Issue Benefit __________________ $
[ ]Children's Rider __________________ $
[ ]Spouse (indicate type of coverage) __________________ $
[ ]Additional Insured Rider (Self, Spouse) __________________ $
[ ]Other Insured Rider __________________ $
[ ]Other __________________ $
f. Amount Collected Explanation of Amount Collected Mode Total Premium
(Cash with App):
$ $
THIS BOX FOR ADMINISTRATIVE PURPOSES ONLY
21. List all Life Insurance now in force or pending on any Proposed
Insured(s). If none, write "None." Have you had or do you intend to have
any life insurance policy replaced, converted, reduced, reissued,
subjected to borrowing, or otherwise discontinued because of this
application? If "Yes," so indicate below.
Policy Face ADB To Be 1035
Company Number Amount Pending Amount Replaced, etc. Exchange?
_____________________________________________ [ ]Yes [ ]No [ ] Yes [ ] No
_____________________________________________ [ ]Yes [ ]No [ ] Yes [ ] No
_____________________________________________ [ ]Yes [ ]No [ ] Yes [ ] No
_____________________________________________ [ ]Yes [ ]No [ ] Yes [ ] No
_____________________________________________ [ ]Yes [ ]No [ ] Yes [ ] No
22. Life Insurance Beneficiary (Give full names and relationship).
Note: Unless you specify otherwise, payments will be shared equally by
all primary beneficiaries who survive the Insured or, if none, by all
contingent beneficiaries who survive the Insured. The right to change
the beneficiary is reserved unless otherwise stated.
[ ] attached Beneficiary Designation
Primary Beneficiary(ies)
Name Relationship SSN No.
Name Relationship SSN No.
Contingent Beneficiary(ies):
Name Relationship SSN No.
Name Relationship SSN No.
23. Complete only for PRD or Association Group or Franchise Coverage:
Full Name of Group/Organization_________________ Date Joined_________
Group/Membership No.: ____________Relationship to above:
[ ] Shareholding Member [ ] Dues-paying Member [ ] Other ______
<PAGE>
PART II OF APPLICATION FOR LIFE INSURANCE - NONMEDICAL SUPPLEMENT
PLEASE PRINT. ALL QUESTIONS RELATE TO ANYONE PROPOSED FOR INSURANCE.
Wisconsin Residents: AIDS (HIV) test results received at an anonymous
counseling and testing site need not be disclosed.
1. Name, address and telephone number of personal physician of each person
proposed for insurance:
(a) Date last seen:
(b) State reason, findings and treatment:
2. Name and address of physician most recently consulted by each person
proposed for insurance: _______________
(a) Date:___________ (b) State reason, findings and treatment
3. Have you, or any person proposed for insurance, ever been told that you had,
or have you consulted or been treated by a physician or licensed practitioner
for any of the following:
YES NO
(a) Any disease or abnormal condition of the heart, circulatory system or
blood vessels, high blood pressure, rapid pulse, rheumatic fever, murmur,
coronary artery disease, chest pain, angina or stroke?
(b) Any disease of the lungs or respiratory system, including tuberculosis,
asthma, bronchitis, emphysema or shortness of breath?
(c) Any digestive system disease, including stomach or duodenal ulcer,
indigestion, stomach pain, liver or gallbladder disease, colon or rectal
disorder?
(d) Any genitourinary system disease including albumin, blood or sugar in
urine, kidney infection or stones, tumor or disease of the prostate,
testis, breasts, uterus or ovaries?
(e) Any nervous, brain or mental disorder, convulsions, dizziness,
headaches, epilepsy, nervous breakdown or paralysis?
(f) Any bone or joint disorder, arthritis or rheumatism, bodily deformity,
back or spinal disorder?
(g) Any disease or impairment of vision or hearing?
(h) Gout, diabetes, thyroid or other glandular disorder, cancer, tumor or
blood disorder other than AIDS or AIDS Related Complex (ARC).
4. Have you, or any person proposed for insurance, ever been diagnosed as
having Acquired Immune Deficiency Syndrome (AIDS) or AIDS Related Complex (ARC),
caused by the HIV infection, or been treated for AIDS or ARC by a physician or
licensed practitioner?
5. During the past 10 years, have you, or any person
proposed for insurance: (a) had any illness, injury, surgery, hospitalization,
medical examination or care not listed above? (b) had or received treatment
for any unexplained fever, fatigue or chronic cough? (c) had any X-rays,
electrocardiograms, blood or other studies, except for an HIV test? (d) been
advised by a physician to have a surgical operation? (e) been advised by a
physician to limit your use of alcohol?
6. Are you, or any person proposed for insurance, now taking any medication
prescribed by a physician?
7. During the last 10 years, have you, or any person proposed for insurance:
(a) used alcohol or other drugs to a degree that required treatment or advice
from a physician or other licensed practitioner?
If "Yes," has use been discontinued?
(b) been or are currently a member of Alcoholics Anonymous or Narcotics
Anonymous?
8. If pregnant, enter approximate delivery date:________________________
9. Height: _______________ft.______________ins. Weight: _________________lbs.
Weight change during last 12 months: Lbs. Gained:___________ Lost:__________
<PAGE>
10. Family Age if If Living, If Deceased, Age at
History Living Present Health Cause of Death Death
Father
Mother
Sibling
Sibling
Sibling
Sibling
11. Have you, or any person proposed for insurance: YES NO
(a) ever been declined, postponed, limited, denied reinstatement or
asked to pay an extra premium by any insurance company?
(b) engaged in any hazardous sports or activities such as motor vehicle
racing, boat racing, parachuting, hang gliding, skydiving, skin diving
or scuba diving within the last three years, or plan such activity in
the next six months?
(c) any intention of traveling or living outside the USA or Canada in
the next two years?
(If "Yes," complete foreign travel questionnaire.)
(d) flown as a civilian pilot, student pilot or crew member within the
last three years, or plan such activity in the next 12 months?
(If "Yes," complete Aviation Supplement).
(e) within the last 5 years: (1) been convicted of two or more
moving violations or driving under the influence of alcohol or drugs or
(2) had a driver's license suspended or revoked?
(f) been convicted of a felony within the last 10 years?
IF ANY OF THE ABOVE QUESTIONS ARE ANSWERED "YES," GIVE COMPLETE DETAILS IN
PART III
PART III OF APPLICATION FOR LIFE INSURANCE -
ADDITIONAL DETAILS AND EXPLANATIONS
(Use for any explanation where space is insufficient)
# Ques. Condition, Injury,
No. Name Symptom of Ill Health Mo. Degree of Name,
or Findings of and Yr. Duration Recovery Address,
Examination Zip of
(If Operation Hospital
Performed, State Type) and Attending
Physician
________________________________________________________________________________
_________ _________ _____________________ __________________ ________ ________
_________ _________ _____________________ __________________ ________ ________
_________ _________ _____________________ __________________ ________ ________
_________ _________ _____________________ __________________ ________ ________
_________ _________ _____________________ __________________ ________ ________
_________ _________ _____________________ __________________ ________ ________
_________ _________ _____________________ __________________ ________ ________
<PAGE>
ACKNOWLEDGEMENT. I received a Notice of Exchange of Information, a Fair Credit
Reporting Act Notice, a Notice of Information Practices, a Summary of Rights
Under the Fair Credit Reporting Act, and a Life Insurance Buyer's Guide before
completing this application.
AGREEMENTS. I, the undersigned, and the undersigned Agent(s)/Broker(s) certify
that we have read the completed application or have had it read to us and agree
to the following:
1. (This statement is only applicable to Variable Universal Life products.) I
understand that the policy's accumulation value in the Variable Account is based
on the investment experience in that account and will increase or decrease
daily. I understand that the amount of the death benefit may be fixed or
variable, depending on the investment experience of the Variable Account.
2. All answers in this application: (a) are true and complete to the best of my
knowledge and belief, (b) will be relied on to determine insurability and (c)
which are incorrect or misleading, may void the application effective the issue
date.
3. If the full initial premium is paid on the date of the completed life
insurance application and I am eligible for the policy applied for in accordance
with the underwriting standards of United of Omaha in effect on the date of the
application, the life policy will be in effect from the date of the application.
4. If any Proposed Insured for insurance is not eligible for the insurance
applied for, or if there has been any change in either my health or habits or
the answers to any of the questions in the application prior to policy delivery,
I agree that no policy of any kind will be in effect, except for coverage
provided by the Temporary Life Insurance Agreement and Receipt.
5. In no event will any benefits be paid for the same loss under both the
Temporary Life Insurance Agreement and Receipt and any policy issued from this
application.
6. If the Applicant is other than the Proposed Insured, the policy will be owned
by the Applicant.
7. No Agent/Broker can: (a) waive or change any receipt or policy provision or
(b) agree to issue a policy.
I have: (a) read the Agreements section and the receipt(s) and (b) read and
approved the answers as recorded.
Signed at____________ Date _________________________
City, State Signature of Proposed Insured(s) (Age 15 and Over)
____________________________________________________________________________
Signature of Parent or Guardian (if insured under age 15)
____________________________________________________________________________
Signature of Applicant/Owner/Trustee (if other than Proposed Insured)
___________________________________ ________ _________________________________
Signature of Agent/Broker Date Print or Stamp Agent/Broker Name
___________________________________ _________ ________________________________
Signature of Agent/Broker Date Print or Stamp Agent/Broker Name
AGENT/BROKER STATEMENT:
1. Do you have any reason to believe the policy applied for has replaced or
will replace any life insurance policy? (If "Yes," fulfill all state
requirements.) [ ] Yes [ ] No
2. In the presence of the Proposed Insured/Spouse have you asked each
question exactly as written and recorded the answers completely and
accurately? (If "No," explain.) [ ] Yes [ ] No
___________________________________ ________
Signature of Agent/Broker Date
___________________________________ ________
Signature of Agent/Broker Date
<PAGE>
AGENT'S/BROKER'S REPORT
(MUST be completed by the agent/broker who obtained the application on the
Proposed Insured named below.)
1. Is Proposed Insured self-supporting? [ ] Yes [ ] No If "No," provide
the following information about the person on whom Proposed Insured is
dependent:
Full Name _______________________________ Address ____________________________
Birth Date Amount of insurance carried with all companies $ ____________ If
none, state why
2. If Proposed Insured used different name in past, give
previous full name
3. (a) Are you related to Proposed Insured or Owner?
[ ]Yes [ ] No
If "Yes," state relationship
(b) How long have you known Proposed Insured?
(c) How long have you known Proposed Owner?
4. When did you last see Proposed Insured?
5. Did you ask Proposed Insured or Owner every
question as printed (if "No," explain below)?
[ ] Yes [ ] No
6. Do you have any information not presented in this application which might in
any way affect this risk (if "Yes," explain below)?[ ] Yes[ ] No
7. Proposed Insured's Annual Income $ [ ]Exact [ ] Estimated
8. What is the purpose of this insurance? Give details including financial
information (for amounts of $500,000 or more, financial statements may be
requested)
9. (a) Is a medical exam to be completed? [ ] Yes [ ] No
(b) Name of examiner or paramedical facility
10. Previous residence and business addresses of Proposed Insured for past five
years.
Address From To
_____________________ ______________ ___________________
_____________________ ______________ ___________________
_____________________ ______________ ___________________
11. Is another policy requested based on this application? [ ] Additional
policy Plan[ ] Alternate policy Amount $ Owner (if different)
Beneficiary (if different)
12. Is Proposed Insured applying for insurance with any other company (if "Yes,"
give details)? [ ] Yes[ ]No
13. To the best of your knowledge will this policy replace any existing life
insurance or annuity (if "Yes," give details and fulfill all state
requirements)? [ ] Yes [ ] No
Details:
AGENT(S)/BROKER(S) TO RECEIVE COMMISSION AND VOLUME CREDIT FOR THIS APPLICATION
Agent's/Broker's Full Name Agent's/Broker's Production No. % Credit
1._________________________________________________________________________
2._________________________________________________________________________
I hereby certify that I have truly and accurately recorded the information
furnished by the Owner and/or Proposed Insured.
___________ ________________________________ ______________________________
Date Signature of Agent(s)/Broker(s) Agent('s)/Broker('s) Name
(Please Print)
_________________________________________________________________________
Name of Division Office/Wholesaler
_________________________________________________________________________
Name of Assistant Wholesaler (Brokerage Only)
<PAGE>
Bank Service Plan Request Form
Complete the following information:
Insured's Name
Address
City
State ZIP
Coverage ID Number(s):
________________ _______
________________ _______
Specify Preferred Date of Withdrawals
Please indicate when you prefer the monthly premiums to be withdrawn from your
checking account:
Withdraw on the ________________ (1st through 28th) of the month
Bank Service Plan Authorization
As a convenience to me, I authorize Mutual of Omaha Insurance Company and/or its
affiliated Companies* to withdraw funds from my account.
I also authorize you, my financial institution, to pay from my account any
checks, drafts or preauthorized electronic fund transfers from my account to the
appropriate Company(ies) below. Your rights with each such charge will be the
same as if personally paid by me. This authorization will be effective until I
give you at least three business days' notice to cancel it. If notice is given
verbally, you may require written confirmation from me within 14 days after my
verbal notice.
__________________ ______________________________________
Date Authorized Signature as Shown on Account
______________________________________
Joint Account or Other Authorized Signature
*Mutual of Omaha Insurance Company - United of Omaha Life Insurance Company
United World Life Insurance Company - Mutual of Omaha Plaza - Omaha, Nebraska
68175 In New York, Companion Life Insurance Company - 401 Theodore Fremd Avenue
- - Rye, New York 10580-1493
Exhibit 1.A(11) Issuance, Transfer and Redemption Memorandum
February 1998
DESCRIPTION OF ISSUANCE,
TRANSFER, AND REDEMPTION PROCEDURES FOR CONTRACTS
PURSUANT TO RULE 6E-3(T)(B)(12)(III)
FOR FLEXIBLE PREMIUM
VARIABLE LIFE INSURANCE POLICIES
ISSUED BY
UNITED OF OMAHA LIFE INSURANCE COMPANY
This document sets forth the current administrative procedures that will be
followed by United of Omaha Life Insurance Company (the "Company", "we", "us",
"our") in connection with its issuance of individual flexible premium variable
life insurance policies (the "Policies"), the transfer of assets held
thereunder, and the redemption by Policyowners ("Owners") of their interests in
those Policies. Capitalized terms used herein have the same meaning as in the
prospectus for the Policy that is included in the current registration statement
on Form S-6 for the Policy as filed with the Securities and Exchange Commission
("Commission").
I. PROCEDURES RELATING TO PURCHASE AND ISSUANCE OF THE POLICIES AND
ACCEPTANCE OF PREMIUMS
A. OFFER OF THE POLICIES, APPLICATIONS, INITIAL PREMIUMS,
UNDERWRITING REQUIREMENTS, AND ISSUANCE OF THE POLICIES
1. OFFER OF THE POLICIES. The Policies will be offered and sold
for premiums pursuant to established premium schedules and
underwriting standards in accordance with state insurance laws.
Initial premium payments for the Policies and related insurance
charges will not be the same for all Owners whose Policies have
the same Specified Amount. Insurance is based on the principle of
pooling and distribution of mortality risks, which assumes that
each Owner pays a premium and related insurance charges
commensurate with the Insured's mortality risk as actuarially
determined utilizing factors such as age, sex, health and
occupation. A uniform premium and insurance charge for all
Insureds would discriminate unfairly in favor of those Insureds
representing greater risk. Although there will be no uniform
insurance charges for all Insureds, there will be a uniform
insurance rate for all Insureds of the same risk class. A
description of the Expense Charges under the Policy, which
includes a cost of insurance charge and Expense Charges.
1
<PAGE>
2. APPLICATION.To purchase a Policy, an individual must submit an
application and provide evidence of insurability of the Company.
The initial premium also must be paid before the Company will
issue the Policy. The Company will not issue a Policy if the
Insured is older than age 90. Before accepting an application,
the Company conducts underwriting to determine insurability. The
Company reserves the right to reject an application or premium
for any reason. If a Policy is not issued, the Company will
return any premium payment the Owner submitted. If a Policy is
issued, it will be effective on the date of issue.
3. PAYMENT OF INITIAL PREMIUM. The minimum initial premium for a
Policy is an amount at least sufficient to purchase the minimum
initial Specific Amount of life insurance coverage ($100,000).
The initial premium will be credited to the Policy on the date
the Policy is issued. Premiums will be allocated to the Money
Market portfolio until the Allocation Date. The Policy Owner may
purchase a Policy with the proceeds of another life insurance
policy, provided a new application is completed. It may not be
advantageous to replace existing insurance with a Policy.
4. UNDERWRITING REQUIREMENT. Full underwriting standards will
apply to all proposed Insureds.
5. ISSUANCE OF THE POLICY AND DETERMINATION OF DATE OF ISSUE.
Once the Company has received the initial premium and
underwriting has been approved, the Policy will be issued on the
date the Company has received the final requirement for issue. In
addition to determining when coverage begins, the Date of Issue
determines Monthly Deduction Dates, Policy
years/months/anniversaries.
B. DETERMINATION OF OWNER OF THE POLICY. The Policy Owner possesses the
rights to benefits under the Policy during the lifetime of the Insured;
the Policy Owner may or may not be the Insured.
2
<PAGE>
C. PAYMENT OF PREMIUMS.
1. PROCEDURES FOR PREMIUM PAYMENTS. Planned premiums may be paid
annually, semiannually, or at other intervals we offer.
Beginning in the second policy year, the Policy Owner may change
the planned premium once each year. The planned premium is
flexible.
Total premium paid on a cumulative basis may not exceed
guideline premium limitations for life insurance set forth in
the Internal Revenue Code. We will monitor Policies and will
attempt to notify a Policy Owner on a timely basis if the
Owner's Policy is in jeopardy of becoming a modified endowment
contract under the Internal Revenue Code. If at any time a
premium is paid that would result in total premiums exceeding
limits established by law to qualify a Policy as a life
insurance policy, we will only accept that portion of the
premium that would make total premiums equal the maximum amount
that may be paid under the Policy. The excess will be promptly
refunded.
When any additional premium payment will result in an increase in
the Policy's Death Benefit, we will require satisfactory evidence
of insurability before accepting additional premiums after the
date of issue. However, we reserve the right to reject an
additional payment for any reason. If additional Premium is
accepted, we will credit it to the Policy's Accumulation Value
pursuant to the current accumulation instructions, unless the
Policy Owner provides other instructions as of the date
underwriting was completed.
2. GRACE PERIOD. LAPSE. AND REINSTATEMENT. If there is no
outstanding Policy loan, the Policy will lapse if, on a Monthly
Deduction Date, the Accumulation Value is insufficient to cover
the Monthly Deduction due on that date (subject to the No Lapse
Period provision); and a grace period expires without a
sufficient premium payment. If there is an outstanding loan, the
Policy will lapse on any Monthly Deduction Date when the Cash
Surrender Value is insufficient to cover the Monthly Deduction
and any loan interest due, subject to the No Lapse Period
provision. The Company allows a 61 day grace period to make a
premium payment sufficient to cover the Monthly Deduction and any
loan interest due. The grace period begins the day the Company
mails notice to the Policy Owner of the insufficiency. The Policy
will terminate as of the first day of the grace period if
necessary additional premium is not paid. Payment received during
the grace period is first applied as premium to be added to the
Accumulation Value. An Insured would need to specify if they
wanted the premium to be used to repay a loan.
Insurance coverage continues during the grace period, but the
Policy will be deemed to have no Accumulation Value for purposes
of Policy loans, surrender and withdrawals. If the Insured dies
during the grace period, the Death Benefit proceeds payable
during the grace period will equal the amount of the Death
Benefit in effect immediately prior to the commencement of the
grace period less any due and unpaid Monthly Deduction. A lapse
of the Policy may result in adverse tax consequences.
3
<PAGE>
D. ALLOCATION AND CREDITING OF INITIAL AND ADDITIONAL PREMIUMS
1. THE VARIABLE ACCOUNT. The variable benefits under the Policies
are supported by the United of Omaha Life Insurance Company's
Separate Account B (the "Variable Account"). The Variable Account
will invest in shares of one or more managed investment companies
("Funds"), each of which will have multiple investment
portfolios.
2. ALLOCATIONS AMONG THE SUB-ACCOUNTS. The Variable Account
consists of sub-accounts (the "Sub-Accounts"), each of which
invests in a portfolio of a Fund. Premiums and Policy Value are
allocated to the Sub-Accounts in accordance with the following
procedures.
A. ALLOCATION OF INITIAL PREMIUM. Upon completion of
underwriting, the Company will either issue a Policy, or
deny coverage and return all premiums. If a Policy is
issued, the initial premium payment will be allocated on
the date the Policy is issued according to the initial
premium allocation instructions specified on the
application; if a state free look requirement requires the
Company to return premiums paid if the Owner seeks to
cancel the Policy during the free look period, then the
initial premium will be allocated to the money market
subaccount until the end of the free look period, then
allocated according to the initial premium allocation
instructions specified on the application.
B. ALLOCATION OF ADDITIONAL PREMIUMS. The number of
Accumulation Units to be credited to a Policy with each
premium, other than the initial premium and additional
premiums requiring underwriting, will be determined on the
date the request or payment is received in good order by
the Company if such date is a Valuation Day; otherwise
such determination will be made on the next succeeding
date which is a Valuation Day.
C. CALCULATION OF ACCUMULATION UNIT VALUE On the date of
issue the Accumulation Value equals the initial net
premium less the Monthly Deduction for the first month.
The net premium is the premium less the premium charges
for tax and premium processing expenses. On any Monthly
Deduction Date after the date of issue the Accumulation
Value equals:
(a) the total of the values in each Subaccount; plus
(b) the accumulation value of the Fixed Account; plus
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<PAGE>
(c) the accumulation value of the loan Account; less
(d) the Monthly Deduction for the current month.
The value for each Subaccount equals:
(a) the current number of Accumulation Units; multiplied
by (b) the current unit value.
Each net premium allocated to the Variable Account is
converted into Accumulation Units. This is done by
dividing the net premium by the Accumulation Unit value
for the Valuation Period during which the net premium is
allocated to the Variable Account. The initial
Accumulation Unit value for each Subaccount was set when
the Subaccount was established. The unit value may
increase or decrease from one Valuation Date to the next.
The Accumulation Unit value for a Subaccount on any
Valuation Date is calculated as follows:
(a) the Net Asset Value Per Share of the Portfolio
multiplied by the number of shares held in the
Subaccount, before the purchase or redemption of
any shares on that date; divided by
(b) the total number of Accumulation Units held in the
Subaccount on the Valuation Date, before the
purchase or redemption of any shares on that date.
The Accumulation Value of the Fixed Account on any Monthly
Deduction Date before deducting the Monthly Deduction
equals:
(a) the value as of the last Monthly Deduction Date;
plus
(b) any net premiums credited since the last
Monthly Deduction Date; plus
(c) any transfers from the Subaccounts to the Fixed
Account since the last Monthly Deduction Date; plus
(d) any transfers from the Loan Account to the Fixed
Account since the last Monthly Deduction Date; less
(e) any transfers from the Fixed Account to the
Subaccounts since the last Monthly Deduction Date;
less
(f) any transfers from the Fixed Account to the Loan
Account since the last Monthly Deduction Date; less
(g) any partial withdrawals and surrender charge taken
from the Fixed Account since the last Monthly
Deduction Date; plus
(h) interest credited on the balance.
5
<PAGE>
The Cash Surrender Value is the Accumulation Value less
any outstanding Policy loans and unpaid loan interest and
less any applicable Surrender Charge.
II. TRANSFERS AMONG ACCOUNTS
A. TRANSFER PRIVILEGE
Subject to the limitations and restrictions described below, transfers
out of a Subaccount of the Variable Account may be made any time after
the Right to Examine period and prior to death or the Policy Maturity
Date, by sending written notice, signed by the Policy Owner, to the
Company. The Policy Owner may make transfers, partial withdrawals,
and/or change the allocation of subsequent Premium payments, by
telephone if the Policy Owner previously authorized telephone
transactions in writing to us. We will not be liable for following
instructions communicated by telephone that we believe to be genuine.
However, we will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine. If we fail to do so,
we may be liable for any losses due to unauthorized or fraudulent
instructions. All telephone requests will be recorded on voice recorder
equipment for the Policy Owner's protection. When making telephone
requests, the Policy Owner will be required to provide his/her social
security number and/or other information for identification purposes.
The Company reserves the right, at any time and without notice to any
party, to modify the transfer privileges under the Policy. Transfers are
effective on the date we receive the Policy Owner's request.
After the Right to Examine period, the Policy Owner can transfer
Accumulation Value from one Subaccount of the Variable Account to
another, or from the Variable Account to the Fixed Account or from the
Fixed Account to any Subaccount of the Variable Account within certain
limits. Transfers out of a Subaccount currently may be made as often as
the Policy Owner wishes, subject to the minimum amount specified above
(the Company reserves the right to otherwise limit or restrict transfers
in the future or to eliminate the transfer privilege). The Company
reserves the right to restrict transfers from the Variable Account to
the Fixed Account of amounts previously transferred from the Fixed
Account for up to six months.
Transfers from the Fixed Account currently may be made once each Policy
Year. Transfers from the Fixed Account do not count toward the 12 free
transfer limit described above, and no transfer charge will be imposed
on transfers from the Fixed Account. Moreover, the maximum amount that
can be transferred out of the Fixed Account during any Policy Year is
10% of the Fixed Account Value on the date of the transfer.
The Policy is designed as a long-term investment to provide death
benefit protection, and may also be used as a part of the Policy Owner's
other financial planning. The Policy is not intended for active trading
or "market timing." Excessive transfers could harm other Policy Owners
by having a detrimental effect on portfolio management (which could
occur, for example, if it caused excessive commission expense or caused
the manager to keep higher cash reserves than otherwise). Therefore, the
6
<PAGE>
Company reserves the right to limit the number of transfers from the
Subaccounts of the Variable Account and the Fixed Account if: (a) the
Company believes that excessive trading by the Policy Owner or a
specific transfer request would have a detrimental effect on
Accumulation Value or the share prices of the Portfolios; or (b) the
Company is informed by one or more of the Series Funds that the purchase
or redemption of shares is to be restricted because of excessive trading
or a transfer or group of transfers is deemed to have a detrimental
effect on share prices of one or more Portfolios or the Variable
Account.
Where permitted by law, the Company may accept the Policy Owners'
authorization of third party reallocation on the Policy Owner's behalf,
subject to the Company's rules. The Company may suspend or cancel such
acceptance at any time. For example, third party reallocation by "market
timers" could be suspended if they cause harm to other Policy Owners.
The Company will notify the Policy Owner of any such suspension or
cancellation. The Company may restrict the availability of Subaccounts
and the Fixed Account for Transfers during any period in which the
Policy Owner authorize such third party to act on the Policy Owner's
behalf. The Company will give the Policy Owner prior notification of any
such restrictions. However, the Company will not enforce such
restrictions if the Company is provided with satisfactory evidence that:
(a) such third party has been appointed by a court of competent
jurisdiction to act on the Policy Owner's behalf; or (b) such third
party has been appointed by the third-party to act on the third-party's
behalf for all the Policy Owner's financial affairs.
B. TRANSFER CHARGES
A transfer fee of $10 may be imposed for any transfer in excess of 12
per Policy Year. The transfer fee is deducted from the amount
transferred. The first 12 transfers each Policy Year are free.
7
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C. DOLLAR COST AVERAGING PLAN
Dollar cost averaging is a process whose objective is to shield
investments from short term price fluctuations. Since the same dollar
amount is transferred to selected Subaccounts each month, over time more
purchases of Portfolio shares are made when the value of those shares is
low, and fewer shares are purchased when the value is high. As a result,
a lower than average cost of purchases may be achieved over the long
term. While this process allows the Policy Owner to take advantage of
investment price fluctuations, it does not assure a profit or protect
against a loss in declining markets.
The Company's dollar cost averaging program allows the Policy Owner to
automatically transfer, on a periodic basis, a predetermined amount or
percentage specified by the Policy Owner from any one Subaccount or the
Fixed Account to any Subaccount(s) of the Variable Account. The
automatic transfers can occur monthly, quarterly, semi-annually, or
annually, and the amount transferred each time must be at least $100 and
must be $50 per Subaccount. At the time the program begins, there must
be at least $5,000 of Accumulation Value in the applicable Subaccount or
the Fixed Account being transferred from. If transfers are made from the
Fixed Account, the maximum periodic transfer amount is 10% of that
account's value at the time of election, or a sufficient amount to
provide transfers for 10 months. There is no maximum transfer amount
requirement out of the Subaccounts of the Variable Account.
The Policy Owner can request participation in the Dollar Cost Averaging
program when purchasing the Policy or at a later date. Transfers will
begin on the first or 15th day (or, if not a Valuation Date, the next
following Valuation Date) of the month, as specified by the Policy
Owner, during which the request is processed. The Policy Owner can
specify that only a certain number of transfers will be made, in which
case the program will terminate when that number of transfers has been
made. Otherwise, the program will terminate when the amount remaining in
the applicable Subaccount or, if applicable, the Fixed Account, is less
than $500.
The Policy Owner can increase or decrease the amount or percentage of
the transfers or discontinue the program by notifying the Company of the
change. There is no charge for participation in this program.
D. ASSET ALLOCATION PROGRAM
Under the Asset Allocation Program, the Policy Owner can instruct us to
allocate premium and Accumulation Value among the Subaccounts of the
Variable Account and the Fixed Account pursuant to allocation
instructions you specify or recommended by us and approved by the Policy
Owner. We will rebalance the Policy Owner's Policy's assets on a
quarterly, semi-annual or annual basis, as specified by the Policy
Owner, to ensure conformity with the Policy Owner's allocation
instructions. Such asset rebalancing is intended to transfer cash value
from Subaccounts that have increased in value to those that have
declined, or not increased as much, in value. Over time, this method of
investing may help the Policy Owner to "buy low and sell high," although
there can be no assurance this objective will be achieved.
8
<PAGE>
Transfers of Accumulation Value made pursuant to this program will not
be counted in determining whether the Transfer Fee applies. At the time
the program begins, there must be at least $10,000 of Accumulation Value
under the Policy.
The Policy Owner can request participation in the Asset Allocation
Program when purchasing the Policy or at a later date. The Policy Owner
can change the Policy Owner's allocation percentage or discontinue the
program by notifying us of the change. There is no charge for
participation in this program.
III. "REDEMPTION" PROCEDURES: RIGHT TO EXAMINE. DEATH BENEFIT. NO-LAPSE
PERIOD BENEFIT. POLICY LOANS. SURRENDERS. PARTIAL WITHDRAWALS.
SURRENDER CHARGE. WAIVER OF SURRENDER CHARGE. REDEMPTION'S FOR CHARGES
DEDUCTED UNDER THE POLICY. PAYMENT OPTIONS. SUSPENSION OF VALUATION.
PAYMENTS. AND TRANSFERS. AND MATURITY DATE.
A. RIGHT TO EXAMINE
If the Policy Owner is not satisfied with the Policy, the Policy Owner
may return it to us or our agent within 10 days (or more where required
by applicable State insurance law) after the Policy Owner receives the
Policy or 45 days after the Policy Owner signed the application,
whichever is later. We will cancel the Policy as of the date any
insurance became effective and refund the premiums paid within seven
days after we receive the returned policy.
B. DEATH BENEFIT
The Option 1 Death Benefit is the greater of:
The death benefit equals either death benefit Option 1 less any loan or
death benefit Option 2 less any loan.
(a) the current Specified Amount (i.e., on the date of death);
or
(b) the policy's Accumulation Value on the date of death plus
the corridor amount.
We will pay the death benefit according to the death benefit option in
effect at the time of the Insured's death. Unless otherwise requested,
Option 1 is in effect.
The Option 2 Death Benefit is the policy's Accumulation Value on the
date of death plus the greater of:
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(a) the current Specified Amount (i.e., on the date of death); or
(b) the corridor amount.
The corridor amount is the Accumulation Value on the date of death
multiplied by the corridor percentage from the table shown below for the
Insured's attained age.
- ---------------------------------------------------------
Attained Corridor AttainedCorridor Attained Corridor
Age Percentage Age Percentage Age Percentage
0-40 150% 54 57% 68 17%
41 143% 55 50% 69 16%
42 136% 56 46% 70 15%
43 129% 57 42% 71 13%
44 122% 58 38% 72 11%
45 115% 59 34% 73 9%
46 109% 60 30% 74 7%
47 103% 61 28% 75-90 5%
48 97% 62 26% 91 4%
49 91% 63 24% 92 3%
50 85% 64 22% 93 2%
51 78% 65 20% 94 1%
52 71% 66 19% 95-100 0%
53 64% 67 18% 100+ 1%
- ---------------------------------------------------------
After the first year, the Owner may change the death benefit option once
each year. The change will take effect on the Monthly Deduction Date
after we receive a written request for change, at which time the death
benefit will reflect the change in option. Any change from Death Benefit
Option 1 to Option 2 may require underwriting. The death benefit option
may not be changed from Option 1 to Option 2 after the Insured attains
age 90.
Changes in the death benefit option may result in a change in the
current Specified Amount. We will increase or decrease the current
Specified Amount to maintain the death benefit that was in effect before
the death benefit option change. Any decrease resulting from a change in
death benefit option will be subject to the applicable surrender charge.
We will send the Owner an amendment showing the death benefit option in
effect and the current Specified Amount after the change.
An increase or decrease in current Specified Amount resulting from a
death benefit option change will change the minimum monthly premium and
lifetime monthly premium requirements applicable to the NO-LAPSE PERIOD
provision.
C. NO-LAPSE PERIOD
The Policy contains a provision that can prevent it from lapsing, even
if the cash surrender value is insufficient to pay the monthly
deduction, if certain conditions are met. This provision applies only
if:
(a) either the minimum monthly premium or the lifetime monthly
premium requirement has been met; and
(b) the policy has never been reinstated; and
(c) no Additional Insured Term Insurance Rider covering the
Insured is attached.
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The minimum monthly premium per $1,000 of Specified Amount and the
minimum No-Lapse Period are shown on the policy data pages. If you meet
the minimum monthly premium requirement, then the policy will not lapse
during the minimum No-Lapse Period, if applicable.
The minimum monthly premium requirement is met on any Monthly Deduction
Date when the total premiums paid since the policy's date of issue, less
any partial withdrawals accumulated at 4% interest and less any
outstanding policy loan, equals or exceeds the minimum monthly premium
accumulated at 4% interest.
The lifetime monthly premium per $1,000 of Specified Amount and the
lifetime No-Lapse Period are shown on the policy data pages. If you meet
the lifetime monthly premium requirement, then the policy will not lapse
during the lifetime No-Lapse Period, if applicable.
The lifetime monthly premium requirement is met on any Monthly Deduction
Date when the sum of premiums paid since the policy's date of issue,
less any partial withdrawals accumulated at 4% interest and less any
outstanding policy loans, equals or exceeds the lifetime monthly premium
accumulated at 4% interest.
D. POLICY LOANS
After the first Policy Year (from the Date of Issue in Indiana), the
Policy Owner may obtain a loan for all or part of the Cash Surrender
Value less loan interest to the end of the Policy Year, and less the
Monthly Deduction amount sufficient to continue this Policy in force for
one month. This Policy must be assigned to the Company as sole security
for the loan. The Company will transfer all loan amounts from the Fixed
Account and the Subaccounts to the Loan Account. The amounts will be
transferred on a pro rata basis.
Loan interest is payable at a rate of 5.7% in advance (6.0% effective
annual rate). Interest is due on each Policy Anniversary. If the
interest is not paid when due, the Company will transfer an amount equal
to the unpaid loan interest from the Fixed Account and the Subaccounts,
to the Loan Account on a pro rata basis. The Company will credit 4%
interest to any amounts in the Loan Account, except amounts equal to a
Preferred Loan as described below, for a net annual Loan interest rate
of 2%.
The death benefit will be reduced by the amount of any loan outstanding
on the date of the Insured's death. The Company may defer making a loan
for six months unless the loan is to pay premiums to the Company.
Beginning in the 10th policy year, Preferred Loans are available. A
Preferred Loan will be credited with 6% interest, for a net annual
Preferred Loan interest rate of 0%. Any loan outstanding at the
beginning of the 10th policy year will become a Preferred Loan from that
point forward.
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All or part of a loan may be repaid at any time while the Policy is in
force. The amount of a loan repayment will be deducted from the Loan
Account and will be allocated among the Fixed Account and the
Subaccounts in the same percentages as premiums are currently allocated.
E. SURRENDERING THE POLICY FOR CASH SURRENDER VALUE
While the Insured is alive, the Policy Owner may terminate this Policy
for its Cash Surrender Value. If the Policy Owner requests a cash
surrender, the Policy must be returned to the Company to receive the
Cash Surrender Value
With regard to amounts allocated to the Fixed Account, the Cash
Surrender Value will be equal to or greater than the minimum Cash
Surrender Values required by the State in which this Policy was
delivered. The value is based on the Commissioners 1980 Standard
Mortality Table, the insured's age at last birthday, with interest at
4%. Also, Surrenders are taxable and a 10% federal tax penalty may
apply. A surrender charge may be deducted from the Accumulation Value.
The Company may defer payment of a cash surrender from the Fixed Account
for up to six months.
F. PARTIAL WITHDRAWALS
After the first Policy Year, the Owner may withdraw part of the
Accumulation Value. A surrender charge may be deducted from the
accumulation value. Withdrawals from the Fixed Account are made
beginning with the most recent Premium payment. The significance of
which payment the withdrawal is made from is pertinent for the fixed
account. Current interest for the fixed account is credited according to
an investment year method whereby the rates of interest at which premium
inflows are invested and reinvested are recognized. The current credited
rate for the upcoming month is to be applied only to premiums received
during the upcoming month. The declared current rate is expected to
apply for twelve months from the date of each deposit. Each time the
current rate is changed a new deposit grouping or "Bucket" is formed. A
new rate is set for each bucket prior to its anniversary. This rate is
expected to apply to each deposit made during the original bucket period
for the following policy year. Thus, it is imperative that we determine
up front which buckets the premium payment are being distributed from
for withdrawals so we can determine which buckets are still in existence
for crediting interest. The minimum partial withdrawal amount is $250.
The maximum partial withdrawal amount is an amount such that the
remaining cash surrender value is not less than $500 and the Specified
Amount is not less than $100,000 in Policy years one through five or not
less than $50,000 thereafter. If Death Benefit Option 1 is in effect,
the following will apply for each partial withdrawal:
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(a) the current Specified Amount will be reduced by the
amount of the withdrawal; and
(b) the Accumulation Value will be reduced by:
(1) the amount of the withdrawal; and
(2) the surrender charge applicable to the decrease in
current Specified Amount, as described in the
Policy's SURRENDER CHARGE provision.
We will send the Owner an amendment showing the current Specified
Amount after the withdrawal.
If Death Benefit Option 2 is in effect, the Accumulation Value will be
reduced by the amount of the withdrawal.
The amount of cash withdrawal requested and any surrender charge will be
deducted from the Accumulation Value on the date we receive the Owner's
written request. Partial withdrawals will result in cancellation of
Accumulation Units from each applicable Subaccount. In the absence of
instructions from the Owner, amounts will be deducted from the
Subaccounts and the Fixed Account on a pro rata basis. No more than a
pro rata amount may be withdrawn from the Fixed Account for any partial
withdrawal. We reserve the right to defer withdrawals from the Fixed
Account for up to six months from the date we receive the Owner's
written request.
Partial withdrawals may change the minimum and lifetime monthly premium
requirements applicable to the Policy's NO-LAPSE PERIOD provision.
Partial withdrawals may be taxable and subject to a 10% federal tax
penalty.
G. SURRENDER CHARGE
If a Policy is totally surrendered, or a Partial Withdrawal under Death
Benefit Option 1 is taken, or upon a requested reduction in the Policy's
Specified Amount, we may deduct a Surrender Charge from the amount
requested to be surrendered. If the Policy's current Specified Amount is
decreased, we may deduct a Surrender Charge from the Accumulation Value
based on the amount of the decrease. The Surrender charge varies by
issue age, sex (except in Montana), risk class, the length of time your
Policy has been in force and the Specified Amount. For example, a male
age 35 at issue, in the nontobacco risk class and the preferred rate
class, for surrender charge is $13.00 for each $1,000.00 of specified
amount in the first five years, declining to $1.00 per $1,000.00 in the
twelfth year and zero thereafter. The length of the Surrender Charge
period varies depending upon the Policy Owner's issue age: the period is
12 years through age 52, 11 years at age 53, 10 years at age 54, and 9
years at age 55 and thereafter. The Surrender Charge for each Owner's
Policy is stated on the Policy's data page.
The purpose of the Surrender Charge is to reimburse us for some of our
expenses incurred in distributing the Policies. The Surrender Charge and
Administrative charge may not be enough to cover all sales and
administrative expenses which we will incur in selling the Policies. Any
shortfall, including but not limited to payment of sales and
distribution expenses, would be charge to and paid by us.
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H. WAIVER OF SURRENDER CHARGE
The Company will waive the Surrender Charge upon partial withdrawals and
surrenders in the event the Policy Owner become confined to a hospital
or nursing home, disabled, diagnosed with a terminal illness or
unemployed, become an organ transplant donor or recipient, experience
significant damage to the Policy Owner's residence, or upon the death of
the Policy Owner's spouse or minor dependent.
I. REDEMPTIONS FOR CHARGES DEDUCTED UNDER THE POLICY
1. DEDUCTIONS FROM PREMIUM. Many states and municipalities charge
a premium tax. The range of charges is from 0.75% to 5.0%. We
also incur federal income tax liability under Internal Revenue
Code Section 848 (a Deferred Acquisition Cost tax) upon Policy
premium collected. We deduct 3.75% of each Policy premium payment
we receive to cover these state tax expenses (where permitted),
federal tax expenses and other general expenses. We also deduct
$2 from each Policy premium payment we receive to cover our
premium processing expenses.
2. MONTHLY DEDUCTION.
On each Monthly Deduction Date, we deduct a MONTHLY DEDUCTION
from the entire Accumulation Value equal to: (a) the COST OF
INSURANCE for the current month; plus (b) the COST OF ANY RIDERS
for the current month; plus (c) the RISK CHARGE; plus (d) the
ADMINISTRATIVE CHARGE (except no monthly deduction is deducted on
or after the Policy Anniversary when the age of the Insured is
equal to 100). (These charges are described below.) The Monthly
Deduction will be deducted from the Subaccounts and the Fixed
Account on a pro rata basis on each Monthly Deduction Date. No
Monthly Deduction is deducted from the Accumulation Value after
coverage beyond maturity is elected.
Each charge is deducted in the following manner: first, all
charges are calculated, based on the Accumulation Value on the
Monthly Deduction Date (before monthly charges are deducted, but
reflecting charges deducted from Subaccount assets), and then
deducted. The Monthly Deduction is deducted pro rata from the
Accumulation Value in the Subaccounts and the Fixed Account.
COST OF INSURANCE CHARGE.
The guaranteed cost of insurance each month used in
calculating the Monthly Deduction equals:
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(a) the net amount at risk for the month;
multiplied by
(b) the guaranteed cost of insurance charge
per $1,000 of Specified Amount; divided by
(c) 1,000.
The guaranteed monthly cost of insurance charge for each
$1,000 is shown on the Policy data pages. The charge is based on
the Insured's attained age, duration, sex (except in Montana),
and risk and rate classes.
The net amount at risk in any month equals:
(a) The death benefit; less
(b) the Accumulation Value on the Monthly
Deduction Date after deducting the rider
charge, if any, the risk charge for the
current month, and the administrative
charge.
We may use current cost of insurance charges less than
those shown. Current cost of insurance charges are based on the
Insured's issue age, sex (except in Montana), risk and rate
classes. We reserve the right to change current cost of insurance
charges. Changes in cost of insurance rates will be by class and
will be based on changes in future expectations of factors such
as:
(a) investment earnings;
(b) mortality;
(c) persistency; and
(d) expenses.
RISK CHARGE. We deduct a charge from the Policy's
Accumulation Value (including amounts of Accumulation Value moved
to the Loan Account as collateral for Policy loans), before
monthly charges are deducted, but reflecting charges deducted
from Subaccount assets, on each Monthly Deduction Date for the
mortality risks that we assume. In Policy Years 1 through 10,
this Risk Charge is equivalent to an annual charge of 0.70% of
the Accumulation Value, deducted on each Monthly Deduction Date.
In Policy Years 11 and later, this Risk Charge is equivalent to
an annual charge of 0.55% of the Accumulation Value, deducted on
each Monthly Deduction Date. The charge is deducted as 0.05833%
of the Accumulation Value, deducted on each Monthly Deduction
Date, for the first 10 Policy Years, and 0.04583% of the
Accumulation Value, deducted on each Monthly Deduction Date, for
Policy Years 11 and thereafter. The mortality risk we assume is
that Insureds may live for shorter periods of time than we
estimated, or the Accumulation Value is not enough to keep the
Policy in force during the No-Lapse Period. If all the money we
collect from this charge is not needed to cover death benefits
and expenses, the money is contributed to our general account.
Conversely, even if the money we collect is insufficient, we will
provide for all death benefits and expenses.
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ADMINISTRATIVE CHARGE. We deduct a charge of $7 from your
Accumulation Value on each Monthly Deduction Date for the costs
of issuing and administering the Policy and operating the
Variable Account.
COST OF RIDERS.
ADDITIONAL INSURED RIDER. The rider cost of term
insurance equals the rider benefit amount, multiplied by the
rider's cost of insurance charge for each $1,000 of benefit
amount, divided by 1,000. This charge is based on the Additional
Insured's attained age, sex (except in Montana) and rate class.
ACCIDENTAL DEATH BENEFIT RIDER. The cost is
determined by the Insured's attained age and sex (just age in
Montana) per each $1,000 of rider coverage elected, multiplied by
the rider benefit amount, divided by $1,000.
DISABILITY RIDER. The cost is a fixed rate
determined by the Insured's attained age and sex (just age in
Montana) per each $1.00 of rider monthly deduction amount
multiplied by the amount of the monthly deduction amount.
3. ACCELERATED DEATH BENEFIT RIDER
4% (7.4% in Vermont and Oklahoma) of the elected amount is
imposed at the time the election is made to receive the
accelerated death benefits provided by this rider.
J. PAYMENT OPTIONS
OPTION 1 -- PROCEEDS HELD ON DEPOSIT AT INTEREST. While the
Proceeds are held by the Company, the company will annually:
(a) pay interest to the Payee; or
(b) add interest to the Proceeds.
OPTION 2 -- INCOME OF A SPECIFIED AMOUNT. The Company will pay
the Proceeds in monthly installments of a specified amount until
the Proceeds, with interest, have been fully paid.
OPTION 3 -- INCOME FOR A SPECIFIED PERIOD. The Company will pay
the Proceeds in installments for the number of years the Policy
Owner chooses. The monthly incomes for each $1,000 of Proceeds,
shown in the table set forth in the Policy, include interest. The
Company will provide the income amounts for payments other than
monthly upon request.
OPTION 4 -- LIFETIME INCOME. The Company will pay the Proceeds
as a monthly income for as long as the Payee lives. The following
guarantees are available:
GUARANTEED PERIOD - The monthly income will be paid for a
certain number of years and as long thereafter as the
Payee lives; or
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GUARANTEED AMOUNT (INSTALLMENT REFUND) -
The monthly income will be paid until the sum of all
payments equals the Proceeds placed under this option and
as long thereafter as the Payee lives.
If a fixed Payment Option is chosen, the monthly income will be
the amount computed using either the Lifetime Monthly Income
Table set forth in the Policy (which is based on the 1983a
Mortality Table and interest at 3% or, if more favorable to the
Payee, our then current lifetime monthly income rates for payment
of Proceeds. If a variable Payout Option is chosen, all variable
payments, other than the first variable payment, will vary in
amount according to the investment performance of the applicable
Subaccounts.
NOTE CAREFULLY. If no guarantee is elected, then IT WOULD BE
POSSIBLE FOR ONLY ONE PAYMENT TO BE MADE if the Payee(s) were to
die before the due date of the second payment; only two Payments
if the Payee(s) were to die before the due date of the third
payment; and so forth. When the last Payee dies, we will pay to
the estate of that Payee any remaining guaranteed Payments under
a fixed payout option.
OPTION 5 -- LUMP SUM. The Proceeds will be paid in one sum.
OPTION 6 -- ALTERNATIVE SCHEDULE. Upon request and if available,
the Company will provide payments for other options, including
joint and survivor periods. Certain options may not be available
in some States.
If variable payments are being made under Option 2 or 6 and do
not involve life contingencies, then the Policy Owner may
surrender the Policy and receive the commuted value of any unpaid
payments.
Additional information about any Payout Option may be obtained by
contacting us.
K. SUSPENSION OF VALUATION, PAYMENTS, AND TRANSFERS
The Company will suspend all procedures requiring valuation of the
Variable Account (including transfers, surrenders and loans) on any day
the New York Stock Exchange is closed or trading is restricted due to an
existing emergency as defined by the Securities and Exchange Commission,
or on any day the Commission has ordered that the right of surrender of
the Policies be suspended for the protection of Policy Owners, until
such condition has ended.
L. MATURITY DATE.
The Policy's maturity date is the Policy Anniversary next following the
Insured's 100th birthday. On the maturity date we will pay the Policy
Owner the Policy's Accumulation Value, less any loan and unpaid loan
interest, if (a) the Insured is then living; (b) this Policy is in
force; and (c) coverage beyond maturity is not elected. The Policy may
terminate prior to the maturity date if the premiums paid are
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insufficient to continue this Policy in force. If the Policy does
continue in force to the maturity date, it is possible there will be
little or no Cash Surrender Value at that time. Policy values will be
affected by the investment experience of the Variable Account and to the
extent cost of insurance charges are more favorable than guaranteed
charges.
- END -
18
Exhibit 7. Consents of Independent Auditors
(a) Deloitte & Touche LLP
(b) Coopers & Lybrand L.L.P.
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Pre-Effective Amendment No. 1 to Registration
Statement No. 333-35587 of United of Omaha Separate Account B of our report
dated February 2, 1998, on the financial statements of United of Omaha Separate
Account B and our report dated April 21, 1997, on the financial statements of
United of Omaha Life Insurance Company appearing in the Registration Statement,
and to the related reference to us under the heading "Independent Auditors".
DELOITTE & TOUCHE LLP
Omaha, Nebraska
February 2, 1998
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-6 (File No.
333-35587) of our report, which includes an explanatory paragraph regarding the
change in opinion as required by Financial Accounting Standards Board
Interpretation 40, APPLICABILITY OF GENERALLY ACCEPTED ACCOUNTING PRINCIPLES TO
MUTUAL LIFE INSURANCE AND OTHER ENTERPRISES, as amended (FIN 40), dated February
23, 1996 [except for the change in our opinion as required by FIN 40, for which
the date is April 9, 1997], on our audits of the financial statements of United
of Omaha Life Insurance Company (United) as of and for the two years in the
period ended December 31, 1995.
We also consent to the reference to our firm as independent auditors for United.
Coopers & Lybrand L.L.P.
Omaha, Nebraska
February 2, 1998
