AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 16, 1998
1933 Act REGISTRATION NO. 333-18881
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-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
(ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES)
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
Approximate date of proposed public offering:
On May 1, 1998 pursuant to paragraph (b) of Rule 485
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE POLICY
(TITLE, AMOUNT, AND PROPOSED MAXIMUM OFFERING PRICE OF
SECURITIES BEING REGISTERED)
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, the Registrant
previously registered an indefinite amount of UltraLife Individual Single
Premium Variable Universal Life policies under the Securities Act of 1933. The
Registrant filed a Rule 24f-2 notice on February 27, 1998 for its most recent
fiscal year ended December 31, 1997.
-------
i
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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
ii
<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
iii
<PAGE>
[GRAPHIC OMITTED] PROSPECTUS: Dated May 1, 1998
UNITED OF OMAHA
ULTRA VARIABLE LIFE
Individual Modified Single Premium
Variable Universal Life Insurance Policy
This prospectus describes ULTRA VARIABLE LIFE, an individual modified single
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 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
Policy continues in effect while the Accumulation Value is sufficient to pay the
Monthly Deduction Amount or until the end of the Death Benefit guarantee period
(assuming no Policy loans are taken), whichever is later.
The minimum initial premium is $20,000. Additional payments may be made once
each Policy Year, subject to certain restrictions.
You may, within limits, allocate premiums (net of any charges) to one or more of
the 27 eligible investments, which are the 25 Subaccounts of the Variable
Account, the Fixed Account and the Systematic Transfer Account. Assets of each
Subaccount of the Variable Account are invested in a corresponding mutual fund
Portfolio. The mutual funds offered through the Policy, while they may have the
same or similar names of retail mutual funds, are not the same as those funds.
By law, the Policy may not offer those retail mutual funds, so it offers funds
whose names and characteristics may be similar to them but whose performance may
differ from the retail funds. 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
MORGAN STANLEY EMERGING MARKETS EQUITY PORTFOLIO
MORGAN STANLEY FIXED INCOME 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
SYSTEMATIC TRANSFER ACCOUNT
Partial withdrawals and Policy loans may be taken from time to time, subject to
certain restrictions. In almost all cases, the Policy will be a modified
endowment contract for federal income tax purposes. ANY POLICY LOAN, PARTIAL
WITHDRAWAL OR SURRENDER MAY RESULT IN ADVERSE TAX CONSEQUENCES AND/OR PENALTIES.
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.
1
<PAGE>
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.
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
<PAGE>
- -----------------------------------------------------------
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
U THE FIXED ACCOUNT AND THE SYSTEMATIC TRANSFER ACCOUNT
O TRANSFERS
U DOLLAR COST AVERAGING
U SYSTEMATIC TRANSFER ENROLLMENT PROGRAM ("STEP PROGRAM")
O ASSET ALLOCATION PROGRAM
THE POLICY.................................................................
O POLICY APPLICATION AND ISSUANCE
O PREMIUM PAYMENTS
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 GUARANTEED 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; EXPENSE CHARGE; COST OF
INSURANCE CHARGE; TRANSFER CHARGES
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; PREPARING FOR THE YEAR 2000,
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.
5
<PAGE>
- -----------------------------------------------------------
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 or our approval of an additional premium
payment.
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 at the end of the applicable
Valuation Date, less any outstanding Policy loans and unpaid loan interest, and
less any applicable Surrender Charge.
FIXED ACCOUNT means an 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.
PAYEE refers to the person who receives payments under the Policy.
POLICY means the modified single 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 Series Fund's separate investment series that is available
under the Policy.
PREMIUM means an amount paid 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.
SERIES FUNDS means those open-ended management companies in which the Variable
Account invests, which are listed in the ALLOCATION OF PREMIUMS section of this
Prospectus.
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 mutual funds or any other investment portfolios that we
determine to be suitable for the Policy's purposes.
SYSTEMATIC TRANSFER ACCOUNT means an account which consists of general account
assets of United of Omaha Life Insurance Company and used exclusively to
participate in the Systematic Transfer Enrollment Program.
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.
6
<PAGE>
WE, US, OUR, UNITED OF OMAHA refers to United of Omaha Life Insurance Company,
Omaha, Nebraska.
YOU, YOUR refers to the Policy Owner.
- -----------------------------------------------------------
SUMMARY
O BASIC FEATURES OF YOUR POLICY
The individual modified single premium variable life insurance Policy
offered by this prospectus is designed to provide life 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 equal to our
minimum single premium requirements. Once each Policy Year, you may make
additional payments, subject to certain restrictions and limitations. (SEE
"THE POLICY: PREMIUM PAYMENTS.")
o Investment of Premiums. Your initial premium and any additional payments will
be held in the Money Market Subaccount until the Allocation Date. On the
Allocation Date, 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, the Fixed Account or the Systematic
Transfer 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 amounts have been allocated. 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
and the Systematic Transfer Account.
o Death Benefit. The Policy's Death Benefit equals the greater of (a) the
initial Specified Amount plus any later increase and less any later decrease,
less any loans and unpaid loan interest; or (b) the Policy's Accumulation
Value on the date of death multiplied by a corridor percentage for the
Insured's attained age, less any loans and unpaid loan interest. (SEE "THE
POLICY: DEATH BENEFIT.")
o Death Benefit Guarantee Period. If no Policy loans are taken, coverage is
guaranteed until the 15th policy anniversary (or the maximum lesser duration
your state allows) or until the Policy anniversary next following the
Insured's 75th (70th in Texas) birthday, whichever is earlier.
(SEE "THE POLICY: 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; the greater of
earnings or 15% of the Accumulation Value may be withdrawn each Policy year
free of Surrender Charges. Other partial withdrawals may be subject to a
Surrender Charge. (SEE "DISTRIBUTIONS: POLICY LOANS, AND SURRENDER AND
PARTIAL WITHDRAWALS.")
o Surrenders. The Policy permits full surrender for the Cash Surrender Value.
The maximum Surrender Charge is 9.50%. As to each premium payment, the
Surrender Charge ends after the ninth Policy Year after the premium payment
was made. The Surrender Charge may be waived upon the occurrence of certain
events. (SEE "CHARGES AND FEES.")
7
<PAGE>
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. In almost all situations, the Policies
are expected to be treated as modified endowment contracts. 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.")
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 Cash Surrender Value is not sufficient to pay a
Monthly Deduction Amount, the Policy will lapse with no value unless a
payment is made, subject to the Guaranteed Death Benefit. (SEE "THE POLICY:
GUARANTEED DEATH BENEFIT.") 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.
o Premature withdrawals are 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
distributed 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
----------------------------------------------------------
PREMIUM PAYMENTS
o Minimum initial premium required is $20,000.
o Additional payments may be paid once each Policy
Year, within limits. (SEE "PREMIUM PAYMENTS.")
----------------------------------------------------------
------------------------------------------------------------------------
DEDUCTIONS FROM PREMIUMS BEFORE ALLOCATION
o None
------------------------------------------------------------------------
-------------------------------------------------------------------------------
INVESTMENT OF PREMIUMS
You direct the allocation of initial premiums and any additional payments
among 25 Subaccounts of the Variable Account, the Fixed Account and the
Systematic Transfer Account. The Subaccounts invest in corresponding
mutual funds. For information about premium allocation options, rules and
limits, SEE "ALLOCATION OF PREMIUMS."
-----------------------------------------------------------------------------
8
<PAGE>
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DEDUCTIONS FROM ASSETS
o Monthly Deduction on the Monthly Deduction Date from Accumulation Value
(annual rate calculated as a percentage of Accumulation Value) for:
o 0.50% to 0.70% for preferred rate class and 0.84% to 1.30% for
standard rate class for cost of insurance (depending on the rate
class of the Insured and Policy accumulation value and duration)
o 1.53% expense charge during Policy years 1 through 10; 1.14% after
Policy Year 10.
o $10 transfer fee (first 12 transfers per Policy free).
o Investment advisory fees and fund expenses are deducted from the assets of
each Fund.
(SEE "CHARGES AND FEES.")
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
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).
o Accumulation Value may vary from day to day. There is no minimum
guaranteed Accumulation Value. The Policy may lapse, even if there is no
Policy loan. (SEE "THE POLICY: LAPSE AND GRACE 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.
----------------------------------------------------------------------------
9
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<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
--------------------------------------------- -------------------------------------------
ACCUMULATION VALUE BENEFITS DEATH BENEFITS
<S> <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 90% of Cash Surrender INSURANCE QUALIFICATION.")
Value (100% in Florida) at a net
interest rate charge of 1.5%. Preferred o Available as lump sum or under a
loans are currently available (with a variety of payment options.
net interest rate charge of 0%). SEE
"DISTRIBUTIONS: POLICY LOANS" for rules o Greater of:
and limits.
o initial Specified Amount plus any
o The Policy may be surrendered in full at later increase and less any later
any time for its Cash Surrender Value, decrease; or
or part of the Accumulation Value may be
withdrawn. After the first Policy year, o Policy's Accumulation Value on the
up to 15% of the Accumulation Value as date of the Insured's death
of the first withdrawal that Policy Year multiplied by a corridor percentage
may be withdrawn each Policy year for the Insured's attained age.
without charge. (SEE "DISTRIBUTIONS;
SURRENDER AND PARTIAL WITHDRAWALS.") A PROCEEDS PAID WOULD BE REDUCED BY ANY
nine year declining surrender charge of POLICY LOAN BALANCE AND UNPAID LOAN
up to 9.5% of each premium paid will INTEREST. (SEE "DISTRIBUTIONS: DEATH
apply to a full surrender and all other BENEFIT.")
partial withdrawals. (SEE "CHARGES AND
FEES: SURRENDER CHARGE.") Federal taxes
and tax penalties may also apply. (SEE
"TAX MATTERS: TAX TREATMENT OF LOANS AND
OTHER DISTRIBUTIONS.")
o Fixed and variable payment options are
available. (SEE "DISTRIBUTIONS: PAYMENT
OPTIONS.")
--------------------------------------------- -------------------------------------------
</TABLE>
For more detailed information about the Policy, please read the rest of this
prospectus.
- -----------------------------------------------------------
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, 1997, United of Omaha had assets of over $9.2
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.
10
<PAGE>
- -----------------------------------------------------------
ALLOCATION OF PREMIUMS
You may allocate all or a part of your Policy premium to one of the Series
Fund Portfolios currently available through the Variable Account, to the Fixed
Account, to the Systematic Transfer Account (initial premium and rollovers only)
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.
O 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 and restrictions 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 of the Policy to you.
The Variable Account Portfolios, while they may have the same or similar
names of retail mutual funds, are not the same as those funds. By law, insurance
product variable account portfolios and retail mutual funds must be separate
investment pools. A variable account portfolio and a retail mutual fund may have
similar names, the same or similar investment objective and strategy, and the
same investment manager. Even when these similarities exist, however, the
investment manager is under no obligation to ensure that the Variable Account
Portfolio and the retail mutual fund have duplicate holdings, trading activity
or performance. Any similarities in this regard are coincidental, and the
performance of the Variable Account Portfolio and retail mutual fund may differ
substantially in these areas. The investment manager's obligation is to attempt
to achieve the investment objective stated in the prospectus. For information
about the performance history of any Variable Account Portfolio, please refer to
further disclosure in this Prospectus or in the Series Fund prospectus for that
particular Variable Account Portfolio. ....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 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 in such
companies may have limited marketability and may be subject to more abrupt
or erratic market movements than securities of larger, more established
companies or the market averages in general.(1) (*)
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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) (*)
MFS VARIABLE INSURANCE TRUST - MFS RESEARCH PORTFOLIO -- seeks to provide
long-term growth of capital and future income by investing a substantial
proportion 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)
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MORGAN STANLEY UNIVERSAL FUNDS, INC.- MORGAN STANLEY EMERGING MARKETS EQUITY
PORTFOLIO. . --seeks long-term capital appreciation by investing primarily
in common and preferred stocks and other equity securities of emerging
market country issuers. The Adviser's approach is to focus the portfolio's
investments on those emerging market countries in which it believes the
economies are developing strongly and in which the markets are becoming more
sophisticated. Investing in many such countries is not feasible or may
involve unacceptable political risks. Emerging market country securities
pose greater liquidity risks and other risks than securities of companies
located in developed countries and traded in more established markets. (6)
MORGAN STANLEY UNIVERSAL FUNDS, INC. - MORGAN STANLEY FIXED INCOME
PORTFOLIO. - seeks to achieve above-average total return over a market
cycle of three to five years by investing in a diversified portfolio of
U.S. Governments and Agencies, corporate bonds, foreign bonds, mortgage
backed securities of primarily domestic issuers, and other fixed income
securities and derivatives. (7)
PIONEER VARIABLE CONTRACTS TRUST - PIONEER CAPITAL GROWTH PORTFOLIO -- seeks
capital appreciation by investing in a diversified portfolio of securities
consisting primarily of common stocks.(8)
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.(8)
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. (9)(*)
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. (9)
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.
(9)
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.(11)
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. (10)
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.
(11)
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. (11)
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.(11) (*)
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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) Morgan Stanley Asset Management, Inc.
(7) Miller Anderson & Sherrerd, LLP.
(8) Pioneer Fund Group.
(9) Scudder Kemper Investments, Inc.
(10) Rowe Price-Fleming International, Inc., a joint venture between T. Rowe
Price Associates, Inc. and Robert Fleming Holdings Limited.
(11) 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 AND UNRATED DEBT AND COMPARABLE EQUITY
INSTRUMENTS. PLEASE CONSULT EACH PORTFOLIO'S SERIES FUND 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 PROSPECTUSES FOR THE SERIES FUNDS, CURRENT COPIES OF WHICH
ACCOMPANY THIS PROSPECTUS. INFORMATION CONTAINED IN THE SERIES FUNDS'
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 Series Funds 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 of a Series Fund, 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 AND SYSTEMATIC TRANSFER 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 and the Systematic Transfer Account, see the Policy itself.
The Systematic Transfer Account is the fixed account option used if you
elect at the time of application to participate in the Systematic Transfer
Enrollment Program ("STEP program"), which is used to automatically transfer a
predetermined dollar amount on a monthly basis to any of the subaccounts which
are chosen at the time of application. The allocation and the predetermined
dollar amount may not be changed. You must make a minimum allocation of $5,000
to the Systematic Transfer Account in order to participate in the STEP program.
No additional funds (other than funds designated in the application to be
transferred into the Policy pursuant to an Internal Revenue Code Section 1035
transfer) may be allocated to the Systematic Transfer Account after the date of
policy issue. PREMIUM ALLOCATED TO THE SYSTEMATIC TRANSFER ACCOUNT AND 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 and the Systematic Transfer 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 and the
Systematic Transfer Account at an effective rate of at least 4.5% per year.
(After the expense charge is applied, the net effective rate is 2.97% for Policy
years 1-10, and 3.36% for Policy years 11 and subsequent. We may, IN OUR SOLE
DISCRETION, credit amounts in the Fixed Account and the Systematic Transfer
Account with interest at a current interest rate in excess of 4.5%. Different
amounts of interest may be credited to the Systematic Transfer Account and the
Fixed Account. 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 Account value on the
date of the transfer. No charge is imposed on such transfers. Funds allocated to
the Systematic Transfer Account must be completely transferred to subaccounts or
the Fixed Account within 13 months of deposit. Such transfers from the
Systematic Transfer Account do not count toward the 12 free transfers between
subaccounts or to the Fixed Account allowed each Policy year. You may not
transfer funds to the Systematic Transfer Account. 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 and the Systematic Transfer 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 first; the next oldest payment plus interest is considered to be
transferred out next, and so on (this is a "first-in, first-out" procedure).
We guarantee that, upon Death or the Policy Maturity Date, the amount in
your Fixed Account or Systematic Transfer Account will be not be less than the
amount of Premium allocated or Accumulation Value transferred to the Fixed
Account or Systematic Transfer Account, plus interest at an effective rate of
4.5% per year, plus any excess interest credited to amounts in the Fixed Account
or Systematic Transfer Account, less any applicable premium or other taxes
allocable to the Fixed Account or Systematic Transfer Account, less that part of
the Monthly Deduction allocable to the Fixed Account or Systematic Transfer
Account and less any amounts deducted from the Fixed Account or Systematic
Transfer 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 AND THE SYSTEMATIC TRANSFER ACCOUNT. THE RATE OF INTEREST
CREDITED TO EACH DEPOSIT INTO THE SYSTEMATIC TRANSFER ACCOUNT IS FIXED ON THE
DATE OF EACH DEPOSIT. WE CANNOT PREDICT OR GUARANTEE THE LEVEL OF FUTURE CURRENT
INTEREST RATES OF THE FIXED ACCOUNT AND THE SYSTEMATIC TRANSFER ACCOUNT, EXCEPT
TO GUARANTEE THAT FUTURE CURRENT INTEREST RATES WILL NOT BE BELOW AN EFFECTIVE
RATE OF 4.5% PER YEAR COMPOUNDED ANNUALLY. YOU BEAR THE RISK THAT CURRENT
INTEREST RATES OF THE FIXED ACCOUNT AND THE SYSTEMATIC TRANSFER ACCOUNT WILL NOT
EXCEED AN EFFECTIVE RATE OF 4.5% PER YEAR.
15
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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 or the Systematic Transfer
Account to any Subaccount of the Variable Account within certain limits. The
minimum amount which may be transferred is the lesser of $500 or the entire
Subaccount Value. If the Subaccount Value remaining after a transfer is less
than $500, we will include that amount as part of the transfer. Transfers out of
a Subaccount currently may be made as often as you wish, subject to the minimum
amount specified above (we reserve the right to otherwise 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 Account Value on
the date of the transfer.
All funds allocated to the Systematic Transfer Account will be automatically
transferred to subaccounts or the Fixed Account within 13 months of deposit
pursuant to your allocation instructions but at a monthly rate of not less than
1/12th of the amount allocated to the Systematic Transfer Account. Transfers
from the Systematic Transfer Account do not count toward the 12 free transfer
limit described above, and no transfer charge will be imposed on transfers from
the Systematic Transfer Account. 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 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, we may accept your authorization of third party
reallocation on your behalf, subject to our rules. We 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. 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.
16
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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
the first Dollar Cost Averaging Transfer. There is no maximum transfer amount
requirement out of the Subaccounts of the Variable Account.
If a percentage is specified for Dollar Cost Averaging transfers, the
percentage is calculated on the date each transfer is processed. This means the
amount of the transfer may vary with each transaction, and is dependent upon the
Accumulation Value of the Subaccount(s) or Fixed Account from which the transfer
is to be made. If a predetermined dollar amount is specified for Dollar Cost
Averaging transfers, the amount of the transfer will not vary with each
transaction regardless of changes in the Accumulation Value of the Subaccount(s)
or Fixed Account from which transfers are made. The predetermined dollar amount
may be changed by providing written notice to us.
You can request participation in the Dollar Cost Averaging program when
purchasing the Policy or at a later date. Dollar Cost Averaging program
transfers cannot begin before the end of a Policy's free look (a/k/a "right to
examine") period. Transfers will begin on the 1st through the 28th day (or, if
not a Valuation Date, the next following Valuation Date), as specified by you,
following the Policy's free look period. If no date is selected, the Dollar Cost
Averaging program will begin on the next Policy monthly anniversary following
the date the Policy's free look period ends. 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.
SYSTEMATIC TRANSFER ENROLLMENT PROGRAM ("STEP PROGRAM")
At the time of application you may elect to participate in the Systematic
Transfer Enrollment Program to automatically transfer funds on a monthly basis
from the Systematic Transfer Account to any of the Subaccounts of the Variable
Account or to the Fixed Account which you chose at the time of application. At
the time the program begins, there must be at least $5,000 of Accumulation Value
in the Systematic Transfer Account, and the monthly dollar amount to be
transferred must be no less than 1/12th of the amount sufficient to transfer the
entire amount in the Systematic Transfer Account within 13 months of deposit,
and must allocate at least $50 per Subaccount. The allocation and the dollar
amount to be transferred each month may not be changed. No new purchase payments
(other than funds designated in the application to be transferred into the
Policy pursuant to an Internal Revenue Code Section 1035 transfer) may be
allocated to this account after the Policy Date of Issue. No transfers may be
made into the Systematic Transfer Account. There is no charge for participation
in this program.
Like the Dollar Cost Averaging program, the STEP program results in the
purchase of more Accumulation Units when the Accumulation Unit value is low, and
fewer units when the Accumulation Unit value is high. However, there is no
guarantee that the STEP program will result in higher Accumulation Value or
otherwise be successful. The STEP program is designed for the Policy Owner who
desires to have most of the Owner's Policy funds allocated to Subaccounts of the
Variable Account within a 13 month period by using dollar cost averaging
concepts; if your desire is to move Policy funds from a guaranteed interest
fixed account into subaccounts of the Variable Account over a longer time period
using the same concepts, you should use the Dollar Cost Averaging program. Under
the STEP program, all funds remaining in the Systematic Transfer Account on the
date of the 13th monthly transfer date will be transferred to the Subaccounts
designated by you in a pro rata amount consistent with your allocation
instructions.
STEP program transfers cannot begin before the end of the Policy's free look
(a/k/a "right to examine") period. Transfers will begin on the 1st through the
28th day (or, if not a Valuation Date, the next following Valuation Date), as
specified by you, following the free look period. If no date is selected, the
STEP program will begin on the next Policy monthly anniversary following the
date the Policy's free look period ends. The program will terminate the earlier
of the date when the amount in the Systematic Transfer Account have been fully
transferred or the date of the 13th monthly STEP program transfer.
17
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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. We will rebalance
your Policy's assets on a quarterly, semi-annual or annual basis (measured from
the Policy Date), 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 $20,000 of Accumulation Value under the Policy.
The asset allocations are divided into 5 asset allocation models, with
subaccount allocations in each. The 5 models are: Principal Preserver
(conservative), Portfolio Protector (moderately conservative), Income Builder
(moderate), Capital Accumulator (moderately aggressive), and Equity Maximizer
(aggressive). We use the services of Ibbotson Associates to develop subaccount
allocations for each model. Ibbotson Associates is a Chicago-based investment
consulting firm specializing in applying investment theories and empirical
findings (such as historical return data collected on the subaccount portfolios)
to quantify the benefits of diversification for particular investment profiles.
The current subaccount allocations for each asset allocation model are as
follows:
<TABLE>
<CAPTION>
- ------------------------------ ------------------------------------------------------------------------
ASSET ALLOCATION MODEL
ALLOCATIONS
- ------------------------------ ------------------------------------------------------------------------
- ------------------------------ -------------- -------------- ------------- -------------- -------------
PORTFOLIO PRINCIPAL PORTFOLIO INCOME CAPITAL EQUITY
(LISTED AGGRESSIVE CONSERVER PROTECTOR BUILDER ACCUMULATOR MAXIMIZER
(CONSERVATIVE) (MODERATELY (MODERATE) (MODERATELY (AGGRESSIVE)
TO CONSERVATIVE CONSERVATIVE) AGGRESSIVE)
% % % % %
- ------------------------------ -------------- -------------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Alger American Small
Capitalization 5 4 10 12
Pioneer Real Estate Growth 4 5 6
T.Rowe Price International 6 13 22 25
Scudder International 16
MFS High Income 4 5 5
T.Rowe Price New America
Growth 10
MFS Value Series 5 10 15 10
Fidelity VIP II Index 500 5 10 15 12 16
T.Rowe Price Equity Income 10 20
Fidelity VIP Equity Income 8 16 16
MFS World Government 3 5 5
Federated Fund for U.S.
Government Securities 5
T.Rowe Price Limited-Term
Bond 50 37 20 16
Morgan Stanley Fixed Income
Bond 5
Federated Prime Money Fund II 19 10 5
- ------------------------------ -------------- -------------- ------------- -------------- -------------
</TABLE>
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.
18
<PAGE>
- -----------------------------------------------------------
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 minimum initial premium for a Policy is $20,000. 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 Allocation Date. You may
purchase a Policy with the proceeds of another life insurance policy, provided
that the following conditions are met. First, the applicable application forms
are completed. IT MAY NOT BE ADVANTAGEOUS TO REPLACE EXISTING INSURANCE WITH A
POLICY.
Additional payments may be made until the Insured attains age 90, subject to
our underwriting requirements and the following rules. Except with respect to
additional payments required in a grace period, an additional payment must be at
least $5,000, and only one additional payment may be made each Policy Year. A
payment received after issuance of the Policy while a loan is outstanding
generally is treated first as repayment of Policy loan interest, second as
repayment of a Policy loan, and last as additional Premium, unless you designate
otherwise in writing when submitting the payment to us.
No additional Premium payments may be made on or after age 90 of the
Insured, except as may be required in a grace period. The tax consequences
associated with continuing a Policy beyond age 90 of the Insured are unclear. A
tax advisor should be consulted on this issue.
Because any additional premium payment will result in an increase in the
Policy's Specified Amount, 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 your Policy's Accumulation Value
pursuant to your current accumulation instructions, unless you provide other
instructions as of the date underwriting was completed.
O LAPSE AND GRACE PERIOD
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 Guaranteed Death Benefit
provision; SEE "DISTRIBUTIONS: GUARANTEED DEATH BENEFIT"), 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 Grace Period provision. We allow you 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 we mail notice to you 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 to repay Policy
debt before the remaining amount of the payment is applied as additional Premium
to keep the Policy in force.
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.
O REINSTATEMENT
If the Policy is terminated during the Insured's life because a grace period
ended without a sufficient payment being made, the Policy may be reinstated.
Reinstatement must occur within five years of the expiration of the grace period
and prior to the Maturity Date. To reinstate, we must receive: (a) a written
application signed by you and the Insured; (b) satisfactory evidence that the
Insured is insurable; (c) payment of an amount sufficient to continue the Policy
in force for three months; and (d) repayment or reinstatement of any outstanding
Policy loan along with unpaid loan interest from the date of lapse. Upon
reinstatement, Surrender Charges, if any, will be re-established as of the
original date of issue.
19
<PAGE>
O TELEPHONE TRANSACTIONS
You may make transfers, partial withdrawals of $10,000 or less, and/or
change the allocation of subsequent Premium payments, by telephone if you
previously authorized telephone transactions in writing to us. (Requests to
withdraw amounts exceeding $10,000 must be made in writing, signed by you.) 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 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 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.
- -----------------------------------------------------------
DISTRIBUTIONS
O POLICY LOANS
After the first Policy Year (from the Date of Issue in Indiana), you may
obtain a loan for up to 90% of the Cash Surrender Value (100% in Florida) 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 us as sole security for the loan. We will transfer all loan
amounts from the Fixed Account, the Systematic Transfer 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, the Systematic Transfer Account and the Subaccounts, to the Loan
Account on a pro rata basis. We will credit 4.5% 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 1.5%.
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 any date when the sum of the Cash Surrender
Value plus any outstanding non-preferred loans exceeds the total of all premiums
paid since issue. The amount available for a Preferred Loan is the amount of
such excess. 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 effective such a Preferred Loan.
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.
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 and the Systematic
Transfer 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 4.5%. The maximum
applicable Surrender Charge is 9.50% (SEE "CHARGES AND FEES.") Also, Surrenders
are taxable and a 10% federal tax penalty may apply. (SEE "TAX MATTERS.") We may
defer payment of a cash surrender from the Fixed Account or the Systematic
Transfer Account for up to six months.
20
<PAGE>
o PARTIAL WITHDRAWALS
After the first Policy Year, you may withdraw part of the Accumulation
Value. Withdrawals are made first from earnings and then from Premiums paid,
beginning with the earliest Premium payment. The minimum partial withdrawal
amount is $500. The maximum partial withdrawal amount is an amount such that the
remaining Accumulation Value is not less than $20,000.
Each Policy year you may withdraw, without a surrender charge, the greater
of:
(a) 15% of the Accumulation Value as of the first withdrawal that Policy
year; or
(b) that portion of the Accumulation Value which is in excess of
total premiums paid.
Partial withdrawals in excess of this amount may be subject to a Surrender
Charge of up to 9.5%. The Surrender Charge is a percentage of the premiums
withdrawn. The applicable percentage varies according to the length of time
since the premium was paid. The percentages are shown on the data pages.
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, the Fixed Account and the
Systematic Transfer Account on a pro rata basis. No more than a pro rata amount
may be withdrawn from the Fixed Account and the Systematic Transfer Account for
a partial withdrawal. Withdrawals from the Systematic Transfer Account will not
affect the minimum monthly transfer amount from that Account, so will cause the
total amount to be transferred to be completed in less time than originally
anticipated. We reserve the right to defer withdrawals from the Fixed Account
and the Systematic Transfer Account for up to six months from the date we
receive your written request.
The Specified Amount will be reduced in the same proportion as the
Accumulation Value is reduced as a result of any partial withdrawal.
O DEATH BENEFIT
The death benefit equals the greater of:
(a) the initial Specified Amount plus any later increase and less any later
decrease; or
(b) the policy's Accumulation Value on the date of death
multiplied by the corridor percentage from the table shown below for
the Insured's attained age;
less any outstanding loans and unpaid loan interest. To determine the initial
specified amount, multiply the single premium amount by the corresponding issue
age premium factor; deposits after issue will increase the specified amount by
the amount of the additional deposit multiplied by the attained age premium
factor.
- ---------------------------------------------------------
Attained Corridor Attained Corridor Attained Corridor
Age Percentage Age Percentage Age Percentage
0-40 250% 54 157% 68 117%
41 243% 55 150% 69 116%
42 236% 56 146% 70 115%
43 229% 57 142% 71 113%
44 222% 58 138% 72 111%
45 215% 59 134% 73 109%
46 209% 60 130% 74 107%
47 203% 61 128% 75-90 105%
48 197% 62 126% 91 104%
49 191% 63 124% 92 103%
50 185% 64 122% 93 102%
51 178% 65 120% 94 101%
52 171% 66 119% 95-100 100%
53 164% 67 118% 100+ 101%
- ---------------------------------------------------------
O GUARANTEED DEATH BENEFIT
If no Policy loans are taken, we guarantee coverage will remain in force
until the 15th policy anniversary (or the maximum lesser duration your State
allows) or the policy anniversary next following the Insured's 75th (70th in
Texas) birthday, whichever is earlier.
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. (In Maryland only fixed payout options are available.) 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.
21
<PAGE>
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.
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
deducted to compensate us for the administrative costs associated with the
variable payment options.
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
22
<PAGE>
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, we 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 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 INITIAL PREMIUM
We deduct no charges from Premium before allocation to the Variable Account,
although the Monthly Deduction includes deductions for cost of insurance charges
and for expense charges, and a Surrender Charge based on Premium may apply to
surrenders or partial withdrawals during the Surrender Charge period.
MONTHLY DEDUCTION
We deduct a charge from the entire Accumulation Value on each Monthly
Deduction Date. This Monthly Deduction equals the cost of insurance charge* for
the current month, plus the expense charge (annualized charge is 1.53% for the
first ten Policy Years and 1.14% for Policy Years thereafter).
- -----------------
* No cost of insurance charge is deducted on or after the Policy Anniversary
when the age of the Insured is equal to 100.
Each charge is calculated as a percentage of Accumulation Value (including
amounts of Accumulation Value moved to the Loan Account as collateral for Policy
loans) 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, the Fixed Account, the Systematic Transfer Account and the
Loan Account.
CHARGES DEDUCTED ON SURRENDER OR PARTIAL WITHDRAWAL
If the Policy is surrendered or lapses or a partial withdrawal is taken
during the Surrender Charge period (which is the first nine Years after each
premium payment), a Surrender Charge may be deducted. This charge declines over
the course of the Surrender Charge period. Any Surrender Charge deduction is
deducted pro rata from the Accumulation Value in the Subaccounts, the Fixed
Account and the Systematic Transfer Account.
O MORE INFORMATION ABOUT THE ABOVE CHARGES
SURRENDER CHARGE
If a Policy is totally surrendered or lapses or a partial withdrawal is
made, we may deduct a Surrender Charge from the amount requested to be
surrendered. The percentage varies according to the length of time since each
premium was paid. Any applicable Surrender Charge will be deducted on a full
surrender or a partial withdrawal. The Surrender Charge period and the amount of
the Surrender Charge are shown in the following table:
23
<PAGE>
YEARS SINCE
PREMIUM PAYMENT SURRENDER CHARGE
- --------------- ----------------
1 9.50%
2 9.50
3 9.50
4 9.00
5 7.50
6 6.00
7 4.50
8 3.00
9 1.50
10 & later 0
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. Not all waivers are available in all
States. Those waivers and any restrictions associated with such waivers are set
forth below:
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, 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 of the last day of confinement to such facility. Proof of confinement must
be provided.
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 any 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 are diagnosed with a terminal illness. We may require proof
of such illness including written confirmation from a licensed physician. 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 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. 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 per occurrence.
24
<PAGE>
DEATH OF SPOUSE OR MINOR DEPENDENT WAIVER. We will waive surrender charges
for withdrawals of the following percentage of Accumulation Value made within
six months of your spouse's or minor dependent(s)' death: death of spouse, 50%;
death of minor dependent(s), 25%. Proof of death must be submitted to us. This
waiver may be exercised once for a spouse and once for each minor dependent,
subject to no more than 50% of the Accumulation Value being withdrawn pursuant
to this waiver each year. Subsequent withdrawals, or withdrawals above the
waiver limit, are subject to the Surrender Charge.
EXPENSE CHARGE
The expense charge consists of charges for administrative, tax (first ten
Policy Years only) and mortality and expense risk charges. This charge is no
longer deducted beginning on the Policy anniversary next following the insured's
100th birthday if coverage beyond maturity is elected.
ADMINISTRATIVE CHARGE. This charge is deducted from your Policy's
Accumulation Value on each Monthly Deduction Date, as part of the Monthly
Deduction. This charge is currently set at an annual rate of 0.24% of the
Accumulation Value on each Monthly Deduction Date. This charge is for the cost
of administering the Policies (such as the cost of processing Policy
transactions, issuing Policy Owner statements and reports, and record keeping),
as well as legal, actuarial, systems, mailing and other overhead costs connected
with our variable life insurance operations.
TAX EXPENSE CHARGE. We will deduct this charge as part of the Monthly
Deduction from your 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 and is to reimburse us for State premium taxes (except in
Oregon), federal deferred acquisition cost taxes, and related administrative
expenses.
MORTALITY AND EXPENSE RISK CHARGE. We deduct a charge from your Accumulation
Value on each Monthly Deduction Date for the mortality and expense risks that we
assume. This charge is currently set at an annual rate of 0.90% of the
Accumulation Value on each Monthly Deduction Date. The mortality risk we assume
is that Insureds may live for shorter periods of time than we estimated. The
expense risk is that our costs of issuing and administering the Policies may be
more than we estimated.
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.
COST OF INSURANCE CHARGE
This charge is deducted from the Policy's Accumulation Value on each Monthly
Deduction Date, as part of the Monthly Deduction. This charge is no longer
deducted beginning on the Policy anniversary next following the Insured's 100th
birthday if coverage beyond maturity is elected.
The cost of insurance charge covers the cost of providing insurance
protection under your Policy. Currently, the amount of this charge is based on
the rate class of the Insured and Policy Accumulation Value and duration. We
assign Insureds to rate classes based on underwriting conducted when we receive
a Policy application. Currently, we assign Insureds to the following rate
classes: preferred and standard. Once a Policy is issued, an Insured's rate
class does not change except if an additional premium is submitted and the
underwriting review determines that the Insured qualifies for a better rate
class. If the Insured qualifies for a better rate class, the rate class for the
additional premium will be used for cost of insurance charges under the entire
Policy.
Currently, the cost of insurance charge for a Policy is calculated as a
percentage of the Accumulation Value on the Monthly Deduction Date. The charge
is based on the duration of the Policy, and the Insured's rate class. The
current monthly rates for these classes are equivalent to the annual percentage
rates shown in the following table:
POLICY YEAR(S) ACCUMULATION VALUE ACCUMULATION VALUE
OF LESS THAN OF $45,000 OR MORE.
$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%
We reserve the right to change the cost of insurance charges upon appropriate
regulatory approval.
For purposes of determining the current cost of insurance charge on a
Monthly Deduction Date, the applicable cost of insurance percentage is applied
to the remaining Accumulation Value.
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The cost of insurance charge deducted on a Monthly Deduction Date is
guaranteed not to exceed the amount calculated using the guaranteed cost of
insurance rates set forth in the Policy for that date. The maximum cost of
insurance charge for a Monthly Deduction Date determined is equal to the "net
amount at risk" under the Policy, multiplied by the guaranteed cost of insurance
rate for that date. The net amount at risk is determined on the last day of the
Policy Month. The amount at risk at any point in time is just the death benefit
at that point in time, less the Accumulation Value at that point in time after
deducting the Expense Charge and the cost of any Policy riders.
The guaranteed cost of insurance rate for a Monthly Deduction Date under a
Policy depends on the Insured's sex and age on the first day of a Policy Year.
Current cost of insurance rates are more favorable for preferred rate class
than for standard rate class Insureds. Within a given class, guaranteed cost of
insurance rates are generally more favorable for Insureds of lower ages than for
Insureds of higher ages, and are generally more favorable for female Insureds
than for male Insureds.
If a Policy loan is outstanding, and the Cash Surrender Value on a Monthly
Deduction Date is not enough to cover the entire Monthly Deduction and any loan
interest due for the Policy Month, we will notify you that the Policy is going
to terminate unless a sufficient payment is made within the 61-day grace period.
(SEE "THE POLICY: LAPSE AND GRACE PERIOD.")
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; transfers from the Systematic Transfer
Account do not count toward these 12 and are also free.
o SERIES FUND CHARGES
Each Portfolio of the Series Funds is responsible for all of its expenses.
The net assets of each Portfolio of the Series Funds will reflect deductions in
connection with the investment advisory fee and other expenses. Here is a table
of Series Fund annual expenses:
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SERIES FUND ANNUAL EXPENSES 1/ MANAGEMENT OTHER TOTAL SERIES
(as a percentage of average net assets) FEES EXPENSES FUND ANNUAL
EXPENSES
==============================================---------- ---------- ===========
Portfolio:
Alger American Growth 0.75% 0.10% 0.85%
Alger American Small Capitalization 0.85% 0.07% 0.92%
Federated Prime Money Fund II * 0.30% 0.50% 0.80%
Federated Fund for U.S. Government Securities 0.15% 0.65% 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 1.25% 0.50% 1.75%
Morgan Stanley Emerging Markets Equity ** 0.40% 0.30% 0.70%
Morgan Stanley Fixed Income ** 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 ****
---------------------------------------------- ---------------------===========
===============================================================================
* 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 1.00% and 1.25% 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%
Morgan Stanley Emerging
Markets Equity 1.25% 2.87% 4.12%
Morgan Stanley Fixed Income 0.40% 1.31% 1.71%
Pioneer Real Estate 0.88% 0.48% 1.36%
Scudder Global Discovery 0.98% 2.00%***** 2.98%
*** 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 .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 1997, was provided to United of Omaha by the Series Fund. The
Series Funds are not affiliated with United of Omaha.
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<PAGE>
For more information concerning the investment advisory fee and other charges
against the Portfolios, see the prospectuses for the Series Funds, 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 this contract 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 Securities and Exchange Commission 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 this Policy 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.
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
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, all payments and
benefits under the policy will be those which the premiums paid would have
purchased at the correct age and sex.
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<PAGE>
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
Prior to thirty days before 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:
o The allocation of the Accumulation Value to the Subaccounts and the Fixed
Account will be maintained according to your instructions;
o The cost of insurance charge will be zero;
o The expense charge will be zero;
o The corridor percentage will be fixed at 101%;
o Any riders attached to the Policy that are then in force will terminate;
o The Insured's date of death will be considered this Policy's maturity date.
o 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 beyond maturity are
unclear. A tax advisor should be consulted before making such an election.
O REINSTATEMENT
If this policy lapses, 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; (iv) re-establishment
of surrender charges, if any, measured from the original date of issue; and (iv)
repayment or reinstatement of any outstanding Policy loan along with unpaid loan
interest from the date of lapse. 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 reflect (I) the Accumulation Value at the time of lapse,
except that the value in the Loan Account may be repaid prior to reinstatement;
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.
- -----------------------------------------------------------
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
29
<PAGE>
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.
In almost all cases, this Policy will be a modified endowment contract. Any
Policy issued in exchange for a modified endowment contract will be subject to
the tax treatment accorded to modified endowment contracts. However, we believe
that any Policy issued in exchange for a life insurance policy that is not a
modified endowment contract will generally not be treated as a modified
endowment contract if the death benefit of the Policy is greater than or equal
to the death benefit of the policy being exchanged. The payment of any premiums
at the time of or after the exchange may, however, cause the Policy to become a
modified endowment contract. You may, of course, choose to not make additional
payments in order to prevent a Policy from being treated as a modified endowment
contract.
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. In almost all cases, this Policy will be 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, regardless of whether a Policy is or is not a
modified endowment contract.
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 9 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.
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<PAGE>
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 tax deductible.
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.
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<PAGE>
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 (Mutual of Omaha
Insurance Company)
Straus, Oscar S. Investments; President, The Daniel and Florence'
Guggenheim Foundation
Sturgeon, John A. President, Chief Operating Officer (Mutual of Omaha
Insurance Company)
Thompson, Tommie Executive Vice President and Corporate Comptroller
(United of Omaha Life Insurance Company)
Wayne, Michael A. Foundation and Cancer Institute Executive
Weekly, John W. Chairman of the Board and Chief Executive Officer
(United of Omaha Life Insurance Company)
OFFICERS*
John W. Weekly Chairman of the Board, Chief Executive Officer
John A. Sturgeon President, Chief Operating Officer
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)
Kimberly S. 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)
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 Series Fund 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.
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<PAGE>
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 Series Fund 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 Series
Fund 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.
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 of the Series Funds 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 Series Fund 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, Inc. ("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. We may also pay other distribution expenses such as production
incentive bonuses, including non-cash awards. These distribution expenses do not
result in any additional charges under the Policies that are not described under
the "Charges and Fees" section of this prospectus.
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 PREPARING FOR THE YEAR 2000
Like all financial services providers, we utilize systems that may be
affected by Year 2000 transition issues and relies upon service providers,
including investment managers, whose own systems may also be affected. We have
developed, and are in the process of implementing, a Year 2000 transition plan,
and are confirming that our service providers are also so engaged. The resources
that are being devoted to this effort are substantial. It is difficult to
predict with precision whether the amount of resources ultimately devoted, or
the outcome of these efforts, will have any negative impact on us. However, as
of the date of this prospectus, we do not anticipate that you will experience
negative effects on your investment, or on the services we provide in connection
with your Policy, as a result of Year 20000 transition implementation.
O INDEPENDENT AUDITORS
The Financial Statements of United of Omaha Life Insurance Company for the
years ended December 31, 1997 and 1996, and of United of Omaha Separate Account
B as of December 31, 1997 and for the period from August 13, 1997 (inception) to
December 31, 1997 included in this Registration Statement have been audited by
Deloitte & Touche LLP, independent auditors, Omaha, Nebraska, as stated in their
reports 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.
33
<PAGE>
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.
- -----------------------------------------------------------
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 based on an initial premium of $20,000. A male age 55, 65 and 75
with specified amounts of $52,000, $36,867, and $29,134, respectively, are
illustrated for this Policy. The Insureds are assumed to be preferred rate
class. The tables also include Accumulation Values, Cash Surrender Values and
Death Benefit amounts that reflect the 0.90% mortality and expense risk charge
deducted from Variable Account assets, the 0.24% monthly administrative charge,
the deduction of 0.39% of premium payments for state and federal taxes, and the
current and guaranteed cost of insurance charge. (In Oregon, this deduction does
not include state and municipality premium tax expenses.) 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.
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 nine years following each premium payment.
The amounts shown in the tables also take into account an average daily charge
equal to an annual charge 0.93% of the average daily net assets of the Series
Funds for the investment advisory fees and operating expenses incurred by the
Series Funds The gross annual investment return rates of 0%, 6%, and 12% on the
Fund's assets are equal to net annual investment return rates of -0.93%, 5.07%,
11.07%, 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
the initial premium of $20,000 were invested to earn interest, after taxes, 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.
34
<PAGE>
<TABLE>
<CAPTION>
UNITED OF OMAHA LIFE INSURANCE COMPANY
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
HYPOTHETICAL ILLUSTRATION
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12% (11.07% NET)
Male issue age 55 Initial Premium $20,000
Preferred Class Face Amount $52,000
CURRENT CHARGES * GUARANTEED CHARGES **
------------------------------------------- -----------------------------------
PREMIUMS
END OF ACCUMULATED CASH CASH
CONTRACT AT 5% ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
YEAR INTEREST VALUE VALUE BENEFIT VALUE VALUE BENEFIT
---- PER YEAR ----- ----- ------- ----- ----- -------
--------
<S> <C> <C> <C> <C> <C> <C> <C>
1 21,000 21,732 19,832 52,000 21,515 19,615 52,000
2 22,505 23,613 21,713 52,000 23,159 21,259 52,000
3 23,153 25,658 23,758 52,000 24,947 23,047 52,000
4 24,310 27,879 26,079 52,000 26,896 25,096 52,000
5 25,526 30,293 28,793 52,000 29,028 27,528 52,000
6 26,802 32,916 31,716 52,000 31,363 30,163 52,000
7 28,142 35,766 34,866 52,000 33,928 33,028 52,000
8 29,549 38,863 38,263 52,000 36,755 36,155 52,000
9 31,027 42,256 41,956 52,398 39,880 39,580 52,000
10 32,578 45,988 45,988 56,106 43,349 43,349 52,886
11 34,207 50,266 50,266 60,319 47,347 47,347 56,817
12 35,917 54,941 54,941 65,380 51,704 51,704 61,527
13 37,713 60,052 60,052 70,861 56,450 56,450 66,611
14 39,599 65,637 65,637 76,796 61,621 61,621 72,097
15 41,579 71,743 71,743 83,221 67,256 67,256 78,017
16 43,657 78,416 78,416 90,178 73,393 73,393 84,402
17 45,840 85,709 85,709 96,852 80,115 80,115 90,530
18 48,132 93,682 93,682 103,987 87,486 87,486 97,110
19 50,539 102,395 102,395 111,611 95,586 95,586 104,189
20 53,066 111,994 111,994 119,834 104,509 104,509 111,825
25 67,727 175,493 175,493 184,267 163,469 163,469 171,643
35 110,320 427,088 427,088 448,442 385,108 385,108 404,364
</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
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
HYPOTHETICAL ILLUSTRATION
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6% (5.07% NET)
Male issue age 55 Initial Premium $20,000
Preferred Class Face Amount $52,000
CURRENT CHARGES * GUARANTEED CHARGES **
------------------------------------------- -----------------------------------
PREMIUMS
END OF ACCUMULATED CASH CASH
CONTRACT AT 5% ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
YEAR INTEREST VALUE VALUE BENEFIT VALUE VALUE BENEFIT
---- PER YEAR ----- ----- ------- ----- ----- -------
--------
<S> <C> <C> <C> <C> <C> <C> <C>
1 21,000 20,550 18,650 52,000 20,338 18,438 52,000
2 22,505 21,116 19,216 52,000 20,660 18,760 52,000
3 23,153 21,697 19,797 52,000 20,962 19,062 52,000
4 24,310 22,294 20,494 52,000 21,243 19,443 52,000
5 25,526 22,907 21,407 52,000 21,498 19,998 52,000
6 26,802 23,538 22,338 52,000 21,724 20,524 52,000
7 28,142 24,185 23,285 52,000 21,912 21,012 52,000
8 29,549 24,851 24,251 52,000 22,057 21,457 52,000
9 31,027 25,535 25,235 52,000 22,148 21,848 52,000
10 32,578 26,237 26,237 52,000 22,178 22,178 52,000
11 34,207 27,092 27,092 52,000 22,227 22,227 52,000
12 35,917 27,974 27,974 52,000 22,202 22,202 52,000
13 37,713 28,885 28,885 52,000 22,093 22,093 52,000
14 39,599 29,825 29,825 52,000 21,887 21,887 52,000
15 41,579 30,796 30,796 52,000 21,566 21,566 52,000
16 43,657 31,799 31,799 52,000 21,106 21,106 52,000
17 45,840 32,835 32,835 52,000 20,477 20,477 52,000
18 48,132 33,904 33,904 52,000 19,638 19,638 52,000
19 50,539 35,008 35,008 52,000 18,540 18,540 52,000
20 53,066 36,148 36,148 52,000 17,130 17,130 52,000
25 67,727 42,429 42,429 52,000 2,562 2,562 52,000
35 110,320 58,931 58,931 61,878 *** *** ***
</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 Policy is lapsed.
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
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
HYPOTHETICAL ILLUSTRATION
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0% (-0.93% NET)
Male issue age 55 Initial Premium $20,000
Preferred Class Face Amount $52,000
CURRENT CHARGES * GUARANTEED CHARGES **
PREMIUMS
END OF ACCUMULATED CASH CASH
CONTRACT AT 5% ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
YEAR INTEREST VALUE VALUE BENEFIT VALUE VALUE BENEFIT
---- PER YEAR ----- ----- ------- ----- ----- -------
--------
<S> <C> <C> <C> <C> <C> <C> <C>
1 21,000 19,377 17,477 52,000 19,162 17,262 52,000
2 22,505 18,773 16,873 52,000 18,302 16,402 52,000
3 23,153 18,188 16,288 52,000 17,417 15,517 52,000
4 24,310 17,621 15,821 52,000 16,502 14,702 52,000
5 25,526 17,072 15,572 52,000 15,552 14,052 52,000
6 26,802 16,540 15,340 52,000 14,560 13,360 52,000
7 28,142 16,025 15,125 52,000 13,518 12,618 52,000
8 29,549 15,526 14,926 52,000 12,413 11,813 52,000
9 31,027 15,042 14,742 52,000 11,235 10,935 52,000
10 32,578 14,573 14,573 52,000 9,969 9,969 52,000
11 34,207 14,188 14,188 52,000 8,641 8,641 52,000
12 35,917 13,814 13,814 52,000 7,194 7,194 52,000
13 37,713 13,449 13,449 52,000 5,613 5,613 52,000
14 39,599 13,094 13,094 52,000 3,880 3,880 52,000
15 41,579 12,748 12,748 52,000 1,966 1,966 52,000
16 43,657 12,412 12,412 52,000 *** *** ***
17 45,840 12,084 12,084 52,000 *** *** ***
18 48,132 11,765 11,765 52,000 *** *** ***
19 50,539 11,454 11,454 52,000 *** *** ***
20 53,066 11,152 11,152 52,000 *** *** ***
25 67,727 9,756 9,756 52,000 *** *** ***
35 110,320 7,465 7,465 52,000 *** *** ***
</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 Policy is lapsed.
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
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
HYPOTHETICAL ILLUSTRATION
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12% (11.07% NET)
Male issue age 65 Initial Premium $20,000
Preferred Class Face Amount $36,867
CURRENT CHARGES * GUARANTEED CHARGES **
------------------------------------------- -----------------------------------
PREMIUMS
END OF ACCUMULATED CASH CASH
CONTRACT AT 5% ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
YEAR INTEREST VALUE VALUE BENEFIT VALUE VALUE BENEFIT
---- PER YEAR ----- ----- ------- ----- ----- -------
--------
<S> <C> <C> <C> <C> <C> <C> <C>
1 21,000 21,732 19,832 36,867 21,421 19,521 36,867
2 22,505 23,613 21,713 36,867 22,978 21,078 36,867
3 23,153 25,658 23,758 36,867 24,694 22,794 36,867
4 24,310 27,879 26,079 36,867 26,597 24,797 36,867
5 25,526 30,293 28,793 36,867 28,720 27,220 36,867
6 26,802 32,925 31,725 37,864 31,104 29,904 36,867
7 28,142 35,813 34,913 40,468 33,792 32,892 38,184
8 29,549 38,969 38,369 43,255 36,756 36,156 40,800
9 31,027 42,425 42,125 46,244 40,002 39,702 43,602
10 32,578 46,220 46,220 49,456 43,565 43,565 46,614
11 34,207 50,599 50,599 53,129 47,675 47,675 50,059
12 35,917 55,375 55,375 58,143 52,156 52,156 54,763
13 37,713 60,580 60,580 63,609 57,038 57,038 59,890
14 39,599 66,252 66,252 69,564 62,355 62,355 65,473
15 41,579 72,426 72,426 76,048 68,143 68,143 71,550
16 43,657 79,163 79,163 83,121 74,436 74,436 78,157
17 45,840 86,526 86,526 90,853 81,272 81,272 85,336
18 48,132 94,575 94,575 99,303 88,690 88,690 93,124
19 50,539 103,371 103,371 108,540 96,728 96,728 101,564
20 53,066 112,986 112,986 118,636 105,428 105,428 110,700
25 67,727 176,261 176,261 185,074 160,533 160,533 168,560
35 110,320 433,749 433,749 433,749 392,431 392,431 392,431
</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
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
HYPOTHETICAL ILLUSTRATION
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6% (5.07% NET)
Male issue age 65 Initial Premium $20,000
Preferred Class Face Amount $36,867
CURRENT CHARGES * GUARANTEED CHARGES **
------------------------------------------- -----------------------------------
PREMIUMS
END OF ACCUMULATED CASH CASH
CONTRACT AT 5% ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
YEAR INTEREST VALUE VALUE BENEFIT VALUE VALUE BENEFIT
---- PER YEAR ----- ----- ------- ----- ----- -------
--------
<S> <C> <C> <C> <C> <C> <C> <C>
1 21,000 20,550 18,650 36,867 20,239 18,339 36,867
2 22,505 21,116 19,216 36,867 20,450 18,550 36,867
3 23,153 21,697 19,797 36,867 20,630 18,730 36,867
4 24,310 22,294 20,494 36,867 20,774 18,974 36,867
5 25,526 22,907 21,407 36,867 20,876 19,376 36,867
6 26,802 23,538 22,338 36,867 20,926 19,726 36,867
7 28,142 24,185 23,285 36,867 20,912 20,012 36,867
8 29,549 24,851 24,251 36,867 20,820 20,220 36,867
9 31,027 25,535 25,235 36,867 20,632 20,332 36,867
10 32,578 26,237 26,237 36,867 20,326 20,326 36,867
11 34,207 27,092 27,092 36,867 19,965 19,965 36,867
12 35,917 27,974 27,974 36,867 19,448 19,448 36,867
13 37,713 28,885 28,885 36,867 18,745 18,745 36,867
14 39,599 29,825 29,825 36,867 17,816 17,816 36,867
15 41,579 30,796 30,796 36,867 16,609 16,609 36,867
16 43,657 31,799 31,799 36,867 15,048 15,048 36,867
17 45,840 32,835 32,835 36,867 13,028 13,028 36,867
18 48,132 33,904 33,904 36,867 10,405 10,405 36,867
19 50,539 35,008 35,008 36,867 6,982 6,982 36,867
20 53,066 36,148 36,148 37,955 2,495 2,495 36,867
25 67,727 42,429 42,429 44,551 *** *** ***
35 110,320 60,346 60,346 60,346 *** *** ***
</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 Policy is lapsed.
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
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
HYPOTHETICAL ILLUSTRATION
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0% (-.93% NET)
Male issue age 65 Initial Premium $20,000
Preferred Class Face Amount $36,867
CURRENT CHARGES * GUARANTEED CHARGES **
------------------------------------------- -----------------------------------
PREMIUMS
END OF ACCUMULATED CASH CASH
CONTRACT AT 5% ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
YEAR INTEREST VALUE VALUE BENEFIT VALUE VALUE BENEFIT
---- PER YEAR ----- ----- ------- ----- ----- -------
--------
<S> <C> <C> <C> <C> <C> <C> <C>
1 21,000 19,377 17,477 36,867 19,057 17,157 36,867
2 22,505 18,773 16,873 36,867 18,067 16,167 36,867
3 23,153 18,188 16,288 36,867 17,021 15,121 36,867
4 24,310 17,621 15,821 36,867 15,908 14,108 36,867
5 25,526 17,072 15,572 36,867 14,717 13,217 36,867
6 26,802 16,540 15,340 36,867 13,428 12,228 36,867
7 28,142 16,025 15,125 36,867 12,019 11,119 36,867
8 29,549 15,526 14,926 36,867 10,461 9,861 36,867
9 31,027 15,042 14,742 36,867 8,718 8,418 36,867
10 32,578 14,573 14,573 36,867 6,752 6,752 36,867
11 34,207 14,188 14,188 36,867 4,541 4,541 36,867
12 35,917 13,814 13,814 36,867 2,005 2,005 36,867
13 37,713 13,449 13,449 36,867 *** *** ***
14 39,599 13,094 13,094 36,867 *** *** ***
15 41,579 12,748 12,748 36,867 *** *** ***
16 43,657 12,412 12,412 36,867 *** *** ***
17 45,840 12,084 12,084 36,867 *** *** ***
18 48,132 11,765 11,765 36,867 *** *** ***
19 50,539 11,454 11,454 36,867 *** *** ***
20 53,066 11,152 11,152 36,867 *** *** ***
25 67,727 9,756 9,756 36,867 *** *** ***
35 110,320 7,465 7,465 36,867 *** *** ***
</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 Policy is lapsed.
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
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
HYPOTHETICAL ILLUSTRATION
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12% (11.07% NET)
Male issue age 75 Initial Premium $20,000
Preferred Class Face Amount $29,134
CURRENT CHARGES * GUARANTEED CHARGES **
------------------------------------------- -----------------------------------
PREMIUMS
END OF ACCUMULATED CASH CASH
CONTRACT AT 5% ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
YEAR INTEREST VALUE VALUE BENEFIT VALUE VALUE BENEFIT
---- PER YEAR ----- ----- ------- ----- ----- -------
--------
<S> <C> <C> <C> <C> <C> <C> <C>
1 21,000 21,724 19,824 29,134 21,268 19,368 29,134
2 22,505 23,596 21,696 29,134 22,700 20,800 29,134
3 23,153 25,630 23,730 29,134 24,345 22,445 29,134
4 24,310 27,851 26,051 29,243 26,263 24,463 29,134
5 25,526 30,316 28,816 31,832 28,527 27,027 29,953
6 26,802 32,986 31,786 34,635 31,039 29,839 32,591
7 28,142 35,873 34,973 37,667 33,756 32,856 35,444
8 29,549 38,993 38,393 40,943 36,692 36,092 38,526
9 31,027 42,360 42,060 44,478 39,860 39,560 41,853
10 32,578 46,022 46,022 48,323 43,273 43,273 45,437
11 34,207 50,285 50,285 52,799 47,135 47,135 49,492
12 35,917 54,942 54,942 57,689 51,306 51,306 53,872
13 37,713 60,031 60,031 63,033 55,808 55,808 58,599
14 39,599 65,591 65,591 68,871 60,663 60,663 63,696
15 41,579 71,666 71,666 75,250 65,891 65,891 69,186
16 43,657 78,304 78,304 82,219 71,517 71,517 75,093
17 45,840 85,557 85,557 88,979 77,751 77,751 80,861
18 48,132 93,481 93,481 96,285 84,690 84,690 87,231
19 50,539 102,139 102,139 104,182 92,450 92,450 94,299
20 53,066 111,779 111,779 112,897 101,175 101,175 102,187
25 67,727 177,957 177,957 177,957 161,075 161,075 161,075
</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
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
HYPOTHETICAL ILLUSTRATION
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6% (5.07% NET)
Male issue age 75 Initial Premium $20,000
Preferred Class Face Amount $29,134
CURRENT CHARGES * GUARANTEED CHARGES **
------------------------------------------- -----------------------------------
PREMIUMS
END OF ACCUMULATED CASH CASH
CONTRACT AT 5% ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
YEAR INTEREST VALUE VALUE BENEFIT VALUE VALUE BENEFIT
---- PER YEAR ----- ----- ------- ----- ----- -------
--------
<S> <C> <C> <C> <C> <C> <C> <C>
1 21,000 20,550 18,650 29,134 20,069 18,169 29,134
2 22,505 21,116 19,216 29,134 20,083 18,183 29,134
3 23,153 21,697 19,797 29,134 20,034 18,134 29,134
4 24,310 22,294 20,494 29,134 19,913 18,113 29,134
5 25,526 22,907 21,407 29,134 19,702 18,202 29,134
6 26,802 23,538 22,338 29,134 19,378 18,178 29,134
7 28,142 24,185 23,285 29,134 18,909 18,009 29,134
8 29,549 24,851 24,251 29,134 18,250 17,650 29,134
9 31,027 25,535 25,235 29,134 17,340 17,040 29,134
10 32,578 26,237 26,237 29,134 16,100 16,100 29,134
11 34,207 27,092 27,092 29,134 14,489 14,489 29,134
12 35,917 27,974 27,974 29,372 12,303 12,303 29,134
13 37,713 28,885 28,885 30,329 9,338 9,338 29,134
14 39,599 29,825 29,825 31,317 5,305 5,305 29,134
15 41,579 30,796 30,796 32,336 *** *** ***
16 43,657 31,799 31,799 33,389 *** *** ***
17 45,840 32,835 32,835 34,148 *** *** ***
18 48,132 33,904 33,904 34,921 *** *** ***
19 50,539 35,011 35,011 35,711 *** *** ***
20 53,066 36,246 36,246 36,608 *** *** ***
25 67,727 43,714 43,714 43,714 *** *** ***
</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 Policy is lapsed.
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
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
HYPOTHETICAL ILLUSTRATION
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0% (-0.93% NET)
Male issue age 75 Initial Premium $20,000
Preferred Class Face Amount $29,134
CURRENT CHARGES * GUARANTEED CHARGES **
------------------------------------------- -----------------------------------
PREMIUMS
END OF ACCUMULATED CASH CASH
CONTRACT AT 5% ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
YEAR INTEREST VALUE VALUE BENEFIT VALUE VALUE BENEFIT
---- PER YEAR ----- ----- ------- ----- ----- -------
--------
<S> <C> <C> <C> <C> <C> <C> <C>
1 21,000 19,377 17,477 29,134 18,870 16,970 29,134
2 22,505 18,773 16,873 29,134 17,620 15,720 29,134
3 23,153 18,188 16,288 29,134 16,224 14,324 29,134
4 24,310 17,621 15,821 29,134 14,652 12,852 29,134
5 25,526 17,072 15,572 29,134 12,861 11,361 29,134
6 26,802 16,540 15,340 29,134 10,796 9,596 29,134
7 28,142 16,025 15,125 29,134 8,380 7,480 29,134
8 29,549 15,526 14,926 29,134 5,508 4,908 29,134
9 31,027 15,042 14,742 29,134 2,042 1,742 29,134
10 32,578 14,573 14,573 29,134 *** *** ***
11 34,207 14,188 14,188 29,134 *** *** ***
12 35,917 13,814 13,814 29,134 *** *** ***
13 37,713 13,449 13,449 29,134 *** *** ***
14 39,599 13,094 13,094 29,134 *** *** ***
15 41,579 12,748 12,748 29,134 *** *** ***
16 43,657 12,412 12,412 29,134 *** *** ***
17 45,840 12,084 12,084 29,134 *** *** ***
18 48,132 11,765 11,765 29,134 *** *** ***
19 50,539 11,454 11,454 29,134 *** *** ***
20 53,066 11,152 11,152 29,134 *** *** ***
25 67,727 9,756 9,756 29,134 *** *** ***
</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 Policy is lapsed.
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
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
HYPOTHETICAL ILLUSTRATION
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12% (11.07% NET)
Male issue age 65 Initial Premium $20,000 Standard Class
Specified Amount $36,867
CURRENT CHARGES * GUARANTEED CHARGES **
----------------------------- ----------------------------------
PREMIUMS
END OF ACCUMULATED CASH CASH
POLICY AT 5% INTEREST ACCUMU SURRENDER DEATH ACCUMU SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
---- -------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $21,000 21,594 19,694 36,867 21,421 19,521 36,867
2 22,505 23,315 21,415 36,867 22,978 21,078 36,867
3 23,153 25,173 23,273 36,867 24,694 22,794 36,867
4 24,310 27,179 25,379 36,867 26,597 24,797 36,867
5 25,526 29,383 27,883 36,867 28,720 27,220 36,867
6 26,802 31,860 30,660 36,867 31,104 29,904 36,867
7 28,142 34,634 33,734 39,136 33,792 32,892 38,184
8 29,549 37,673 37,073 41,817 36,756 36,156 40,800
9 31,027 40,999 40,699 44,689 40,002 39,702 43,602
10 32,578 44,651 44,651 47,777 43,565 43,565 46,614
11 34,207 48,864 48,864 51,307 47,675 47,675 50,059
12 35,917 53,456 53,456 56,129 52,156 52,156 54,763
13 37,713 58,460 58,460 61,383 57,038 57,038 59,890
14 39,599 63,910 63,910 67,105 62,355 62,355 65,473
15 41,579 69,841 69,841 73,333 68,143 68,143 71,550
16 43,657 76,291 76,291 80,106 74,436 74,436 78,157
17 45,840 83,298 83,298 87,463 81,272 81,272 85,336
18 48,132 90,901 90,901 95,446 88,690 88,690 93,124
19 50,539 99,139 99,139 104,096 96,728 96,728 101,564
20 53,066 108,057 108,057 113,459 105,428 105,428 110,700
25 67,727 165,476 165,476 173,750 160,533 160,533 168,560
35 110,320 406,477 406,477 406,477 392,431 392,431 392,431
</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. These 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
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
HYPOTHETICAL ILLUSTRATION
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6% (5.07% NET)
Male issue age 65 Initial Premium $20,000 Standard Class
Specified Amount $36,867
CURRENT CHARGES * GUARANTEED CHARGES **
----------------------------- -----------------------------------
PREMIUMS
END OF ACCUMULATED CASH CASH
POLICY AT 5% ACCUMU SURRENDER DEATH ACCUMU SURRENDER DEATH
YEAR INTEREST VALUE VALUE BENEFIT VALUE VALUE BENEFIT
---- PER YEAR ----- ----- ------- ----- ----- -------
--------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $21,000 20,427 18,527 36,867 20,239 18,339 36,867
2 22,505 20,864 18,964 36,867 20,450 18,550 36,867
3 23,153 21,309 19,409 36,867 20,630 18,730 36,867
4 24,310 21,765 19,965 36,867 20,774 18,974 36,867
5 25,526 22,230 20,730 36,867 20,876 19,376 36,867
6 26,802 22,705 21,505 36,867 20,926 19,726 36,867
7 28,142 23,190 22,290 36,867 20,912 20,012 36,867
8 29,549 23,685 23,085 36,867 20,820 20,220 36,867
9 31,027 24,191 23,891 36,867 20,632 20,332 36,867
10 32,578 24,708 24,708 36,867 20,326 20,326 36,867
11 34,207 25,426 25,426 36,867 19,965 19,965 36,867
12 35,917 26,165 26,165 36,867 19,448 19,448 36,867
13 37,713 26,925 26,925 36,867 18,745 18,745 36,867
14 39,599 27,707 27,707 36,867 17,816 17,816 36,867
15 41,579 28,512 28,512 36,867 16,609 16,609 36,867
16 43,657 29,340 29,340 36,867 15,048 15,048 36,867
17 45,840 30,193 30,193 36,867 13,028 13,028 36,867
18 48,132 31,070 31,070 36,867 10,405 10,405 36,867
19 50,539 31,973 31,973 36,867 6,982 6,982 36,867
20 53,066 32,901 32,901 36,867 2,495 2,495 36,867
25 67,727 37,967 37,967 39,865 *** *** ***
35 110,320 53,414 53,414 53,414 *** *** ***
</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 Policy is lapsed.
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. These 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>
<TABLE>
<CAPTION>
UNITED OF OMAHA LIFE INSURANCE COMPANY
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
HYPOTHETICAL ILLUSTRATION
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0% (-.93% NET)
Male issue age 65 Initial Premium $20,000
Standard Class Specified Amount $36,867
CURRENT CHARGES * GUARANTEED CHARGES **
----------------------------- -----------------------------------
PREMIUMS
END OF ACCUMULATED CASH CASH
POLICY AT 5% ACCUMU SURRENDER DEATH ACCUMU SURRENDER DEATH
YEAR INTEREST VALUE VALUE BENEFIT VALUE VALUE BENEFIT
---- PER YEAR ----- ----- ------- ----- ----- -------
--------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $21,000 19,261 17,361 36,867 19,057 17,157 36,867
2 22,505 18,549 16,649 36,867 18,067 16,167 36,867
3 23,153 17,863 15,963 36,867 17,021 15,121 36,867
4 24,310 17,203 15,403 36,867 15,908 14,108 36,867
5 25,526 16,567 15,067 36,867 14,717 13,217 36,867
6 26,802 15,955 14,755 36,867 13,428 12,228 36,867
7 28,142 15,365 14,465 36,867 12,019 11,119 36,867
8 29,549 14,797 14,197 36,867 10,461 9,861 36,867
9 31,027 14,250 13,950 36,867 8,718 8,418 36,867
10 32,578 13,724 13,724 36,867 6,752 6,752 36,867
11 34,207 13,316 13,316 36,867 4,541 4,541 36,867
12 35,917 12,920 12,920 36,867 2,005 2,005 36,867
13 37,713 12,536 12,536 36,867 *** *** ***
14 39,599 12,164 12,164 36,867 *** *** ***
15 41,579 11,803 11,803 36,867 *** *** ***
16 43,657 11,452 11,452 36,867 *** *** ***
17 45,840 11,112 11,112 36,867 *** *** ***
18 48,132 10,782 10,782 36,867 *** *** ***
19 50,539 10,461 10,461 36,867 *** *** ***
20 53,066 10,150 10,150 36,867 *** *** ***
25 67,727 8,729 8,729 36,867 *** *** ***
35 110,320 6,457 6,457 36,867 *** *** ***
</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 Policy is lapsed.
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. These 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.
46
<PAGE>
UNITED OF OMAHA
LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF MUTUAL
OF OMAHA INSURANCE COMPANY)
STATUTORY FINANCIAL STATEMENTS AND INDEPENDENT AUDITORS'
REPORT
DECEMBER 31, 1997 AND 1996
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
United of Omaha Life Insurance Company
Omaha, Nebraska
We have audited the accompanying statutory statements of admitted assets,
liabilities and surplus of United of Omaha Life Insurance Company (a
wholly-owned subsidiary of Mutual of Omaha Insurance Company) as of December 31,
1997 and 1996, and the related statutory statements of income, changes in
surplus, and cash flows for the years then ended. Our responsibility is to
express an opinion on these financial statements based on our audits. These
financial statements are the responsibility of the Company's management.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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.
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 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, 1997 and 1996, or
the results of its operations or its cash flows for the years then ended.
<PAGE>
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, 1997 and 1996, and
the results of its operations and its cash flows for the years then ended, on
the basis of accounting described in Note 1.
Our audits were conducted for the purpose of forming an opinion on the
above-referenced basic financial statements taken as a whole. Schedule 1 -
Selected Financial Data is presented to comply with the National Association of
Insurance Commissioners Annual Statement Instructions and is not a required part
of the basic financial statements. This schedule is the responsibility of the
Company's management. This schedule has been subjected to the auditing
procedures applied in our audit of the basic financial statements and, in our
opinion, is fairly stated in all material respects when considered in relation
to the basic financial statements taken as a whole.
February 17, 1998
UNITED OF OMAHA LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF MUTUAL OF OMAHA INSURANCE COMPANY)
<TABLE>
<CAPTION>
STATUTORY STATEMENTS OF ADMITTED ASSETS, LIABILITIES AND SURPLUS
DECEMBER 31, 1997 AND 1996
- ---------------------------------------------------------------------------------------------------
ADMITTED ASSETS 1997 1996
<S> <C> <C>
Cash and invested assets:
Bonds $6,921,761,607 $6,194,032,670
Preferred stocks 3,954,659 2,966,816
Common stocks 96,599,064 206,792,033
Mortgage loans 587,412,649 914,876,920
Real estate occupied by the Company,
net of accumulated depreciation of $55,634,377
in 1997 and $51,913,097 in 1996 82,535,703 85,957,594
Real estate acquired in satisfaction of debt,
net of accumulated depreciation of $2,808,829
in 1997 and $3,417,883 in 1996 24,103,876 47,288,342
Investment in real estate,
net of accumulated depreciation of $3,835,517 in 1997
and $14,576,279 in 1996 2,426,251 9,930,367
Policy loans 125,623,575 118,149,994
Cash and short-term investments 115,195,235 117,502,239
Other invested assets 75,603,178 70,027,256
----------- ----------
Total cash and invested assets 8,035,215,797 7,767,524,231
Premiums deferred and uncollected 105,486,687 94,801,896
Investment income due and accrued 81,723,329 75,193,337
Electronic data processing equipment, net of accumulated depreciation
of $70,130,119 in 1997 and $56,352,138 in 1996 43,989,272 44,970,654
Receivable from parent, subsidiaries and affiliates 36,856,289 8,074,896
Other assets 55,382,777 47,050,316
Separate accounts assets 927,949,578 499,423,143
------------ -----------
Total admitted assets $ 9,286,603,729 8,537,038,473
============================
LIABILITIES
Policy reserves:
Aggregate reserve for policies and contracts $5,880,531,953 $5,427,996,121
Liability for premium and other deposit funds 1,527,069,085 1,670,294,443
Policy and contract claims 68,225,897 49,316,597
Other 75,725,381 74,171,234
----------- ----------
Total policy reserves 7,551,552,316 7,221,778,395
Interest maintenance reserve 18,902,412 26,871,627
Asset valuation reserve 94,143,580 114,495,587
General expenses and taxes due or accrued 30,843,096 35,147,383
Federal income taxes due or accrued 17,739,011 20,240,657
Other liabilities 77,148,144 84,293,404
Separate accounts liabilities 908,200,305 499,391,604
------------ -----------
Total liabilities 8,698,528,864 8,002,218,657
SURPLUS
Capital stock, $10 par value, 900,000
shares authorized, issued and outstanding 9,000,000 9,000,000
Gross paid-in and contributed surplus 62,723,580 62,723,580
Unassigned surplus 516,351,285 463,096,236
Total surplus 588,074,865 534,819,816
------------ -----------
Total liabilities and surplus $9,286,603,729 $8,537,038,473
============================
The accompanying notes are an integral part of these statutory financial statements.
</TABLE>
<PAGE>
UNITED OF OMAHA LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF MUTUAL OF OMAHA INSURANCE COMPANY)
STATUTORY STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1997 AND 1996
- --------------------------------------------------------------------------------
1997 1996
Income:
Net premiums and annuity considerations $1,187,103,621 $1,285,506,938
Other considerations and fund deposits 293,227,972 260,507,951
Net investment income 587,480,573 546,634,120
Other income 25,019,350 20,603,502
----------- ----------
Total income 2,092,831,516 2,113,252,511
---------------------------
Benefits and expenses:
Policyholder and beneficiary benefits 1,030,686,286 890,667,960
Increase in reserves for policyholder and beneficiary
benefits 365,393,381 561,184,660
Commissions 130,342,914 126,691,679
Operating expenses 203,683,834 175,722,457
Expense realignment costs 4,442,186 9,099,138
Net transfers to separate accounts 278,479,918 277,638,332
------------ -----------
Total benefits and expenses 2,013,028,519 2,041,004,226
---------------------------
Net gain from operations before federal income
taxes and net realized capital gains 79,802,997 72,248,285
Federal income taxes 37,918,000 41,101,000
----------- ----------
Net gain from operations before net realized
capital gains 41,884,997 31,147,285
Net realized capital gains 51,537,439 23,461,344
----------- ----------
Net income $ 93,422,436 $ 54,608,629
============= ============
The accompanying notes are an integral part of these statutory financial
statements.
<PAGE>
UNITED OF OMAHA LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF MUTUAL OF OMAHA INSURANCE COMPANY)
STATUTORY STATEMENTS OF CHANGES IN SURPLUS
YEARS ENDED DECEMBER 31, 1997 AND 1996
- --------------------------------------------------------------------------------
1997 1996
Capital stock:
Balance at beginning and end of year $ 9,000,000 $ 9,000,000
------------ -----------
Gross paid-in and contributed surplus:
Balance at beginning and end of year 62,723,580 62,723,580
----------- ----------
Unassigned surplus:
Balance at beginning of year 463,096,236 440,889,365
Net income 93,422,436 54,608,629
Decrease in net unrealized capital gains and losses (45,543,494) (23,064,189)
(Increase) decrease in:
Non-admitted assets (15,448,463) 2,560,620
Asset valuation reserve 20,352,007 (8,149,843)
Additional pension plan contribution - (3,599,016)
Change in group pension reserve valuation basis 17,437,454 -
Adoption of actuarial guidelines (17,235,000) -
Surplus contributed to separate account (20,000,000) -
Change in surplus in separate account 20,000,000 -
Other, net 270,109 (149,330)
-------- ---------
Balance at end of year 516,351,285 463,096,236
------------ -----------
Total surplus $ 588,074,865$ 534,819,816
==========================
The accompanying notes are an integral part of these statutory financial
statements.
<PAGE>
UNITED OF OMAHA LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF MUTUAL OF OMAHA INSURANCE COMPANY)
STATUTORY STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997 AND 1996
- --------------------------------------------------------------------------------
1997 1996
Cash from operations:
Premiums, annuity considerations
and other fund deposits $1,467,305,934 $1,539,502,489
Net investment income 572,888,599 537,288,008
Other income 24,599,736 20,642,625
Benefits (1,015,334,974)(888,661,344)
Commissions and general expenses (358,217,599) (314,100,203)
Federal income taxes (50,033,368) (42,235,076)
Net transfers to separate accounts (291,034,340) (292,935,143)
----------- ------------
Net cash from operations 350,173,988 559,501,356
------------ -----------
Cash from investments:
Proceeds from investments sold, redeemed or matured:
Bonds 1,061,409,895 992,064,963
Mortgage loans 335,103,045 132,405,745
Stocks 143,363,377 52,061,954
Real estate 37,927,500 18,601,115
Other invested assets 40,376,307 32,150,428
Tax on capital gains (15,797,771) (9,665,308)
Cost of investments acquired:
Bonds (1,774,643,429(1,818,632,295)
Mortgage loans (19,862,952) (22,606,512)
Stocks (23,479,436) (25,848,321)
Other invested assets (27,563,717) (53,150,380)
Real estate (3,082,524) (4,205,008)
Net increase in policy loans (7,474,627) (6,814,849)
------------ -----------
Net cash from investments (253,724,332) (713,638,468)
---------------------------
Cash from financing and other sources:
Other cash provided 18,880,708 102,622,951
Other cash used (117,637,368) (6,983,417)
-------------- -----------
Net cash from financing and other sources (98,756,660) 95,639,534
Net change in cash and short-term investments (2,307,004) (58,497,578)
Cash and short-term investments:
Beginning of year 117,502,239 175,999,817
------------ -----------
End of year $ 115,195,235 $ 117,502,239
===========================
The accompanying notes are an integral part of these statutory financial
statements.
<PAGE>
UNITED OF OMAHA LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF MUTUAL OF OMAHA INSURANCE COMPANY)
NOTES TO STATUTORY FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997 AND 1996
- --------------------------------------------------------------------------------
1. NATURE OF OPERATIONS AND 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 health and accident and life insurance company
domiciled in the State of Nebraska. At December 31, 1997, the Company owned
100% of the outstanding common stock of the following entities: Companion
Life Insurance Company (Companion), United World Life Insurance Company,
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 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 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; (g) changes in certain assets designated as
"non-admitted" have been charged to unassigned surplus; and (h) the change
in the underlying book value of wholly-owned subsidiaries is reported as a
change in net unrealized capital gains (losses), a component of unassigned
surplus, rather than as a component of the Company's net income/loss. The
effects of the foregoing differences on the accompanying statutory
financial statements are not reasonably determinable but are presumed to be
material.
USE OF ESTIMATES - The preparation of financial statements in accordance
with statutory accounting practices requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses
during the reporting period. Actual results could differ significantly from
those estimates.
<PAGE>
INVESTMENTS - Bonds are generally stated at amortized cost. Premiums and
discounts on bonds not backed by other loans are amortized using the
scientific method. Premiums and discounts on 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 at cost. Common stocks of
unaffiliated companies are stated at estimated fair value and stocks of
affiliated companies (principally insurance companies) are valued at the
Company's equity in the underlying book value. The change in the stated
value is recorded as a change in net 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 estimated fair 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" is excluded from the statutory statements of admitted
assets, liabilities and surplus.
ASSET VALUATION AND INTEREST MAINTENANCE RESERVES - The Company establishes
certain reserves as promulgated by the 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 (CRVM) or the Net Level
Premium Method with assumed interest rates (2.5% to 6%) and mortality
(American Experience, 1941 CSO, 1958 CSO, 1960 CSG 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.
During 1997, the Company adopted two actuarial guidelines. The total impact
of the adoption of these guidelines was a $17,235,000 decrease in
unassigned surplus. The Company also recorded a reduction in group pension
reserves based on a change in the calculation of these reserves. The impact
of this change was a $17,437,454 increase in unassigned surplus.
PREMIUMS AND RELATED COMMISSIONS - Premiums are recognized as income over
the premium paying period of the policies. Commissions and other expenses
related to the acquisition of policies are charged to operations as
incurred.
<PAGE>
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
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 loss, foreign tax and
general business credit carryforwards when realized.
NON-ADMITTED ASSETS - Certain assets designated as "non-admitted",
principally receivables greater than ninety days due 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 for these instruments 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.
AFFILIATED COMMON STOCKS - The fair values of affiliated common stocks
are based on the Company's equity in the underlying book value.
PREFERRED STOCKS - The fair values for preferred stocks are based on
quoted market prices.
MORTGAGE LOANS - The fair values for mortgage loans are estimated using
discounted cash flow calculations which are based on 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 fair value of interest-rate swaps, foreign currency
swaps and interest-rate caps represents the amount at which the contracts
could be settled based upon estimates obtained from issuing brokers. The
fair value of equity linked notes represents the appreciation of the
underlying debt security based upon the accumulative return of the
designated index.
DERIVATIVES - The Company utilizes derivative financial instruments as part
of an overall interest rate risk management strategy. Derivative financial
instruments utilized by the Company include interest-rate swaps,
interest-rate caps, foreign currency swaps and equity linked notes. The
Company does not engage in trading of these instruments.
<PAGE>
These derivative financial instruments involve, to varying degrees,
elements of credit and market risk which are not recognized on the
statutory statement of admitted assets, liabilities and surplus. Credit
risk is defined as the possibility that a loss may occur from the failure
of another party to perform in accordance with the terms of the contract
which exceeds the value of existing collateral, if any. Market risk is the
possibility that future changes in market conditions may make the
derivative financial instrument less valuable. The Company evaluates the
risk associated with derivatives in much the same way as the risks with
on-balance sheet financial instruments. The derivative's risk of credit
loss is generally a small fraction of the notional value of the instrument
and is represented by the fair value of the derivative financial
instrument. The Company attempts to limit its credit risk by dealing with
creditworthy counterparties and obtaining collateral where appropriate.
Interest-rate swap transactions generally involve the exchange of fixed and
floating rate interest payment obligations without the exchange of the
underlying principal amount. Net settlement amounts are reported as
adjustments to interest income on an accrual basis over the life of the
swap agreement.
Interest-rate caps represent a right to receive the excess of a referenced
interest rate over a given rate. 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.
Foreign currency swaps are stated at market value. The differences between
the amounts paid or received on foreign currency swaps are reflected in the
statutory statements of income. The change in estimated fair value is
recorded as a change in net unrealized gains (losses).
The Company also invests in equity linked notes that are stated at
amortized cost. 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 designated index is typically linked to
the performance of a known stock index or basket of indices. Interest
income is accrued at the coupon rate while "contingent" interest is
recognized upon maturity.
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
year amounts to conform with current year presentation with no changes to
unassigned surplus or net income.
<PAGE>
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:
COST OR GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
AT DECEMBER 31, 1997:
U.S. Government $ 58,738,150 $ 1,010,535 $ 43,252 $ 59,705,433
States, territories and
possessions 130,034 2,732 - 132,766
Political subdivisions 11,067,966 118,466 967 11,185,465
Mortgage backed securit281,613,864 7,452,415 258,452 288,807,827
Special revenue 60,517,693 3,453,018 3,984 63,966,727
Public utilities 428,968,240 25,627,124 151,188 454,444,176
Industrial and
miscellaneous 4,392,543,109 161,012,950 26,560,285 4,526,995,774
Collateralized mortgage
obligations 1,563,786,457 48,340,724 4,981,712 1,607,145,469
Credit-tenant loans 248,796,094 17,542,545 358,824 265,979,815
------------ ----------- -------- -----------
Total $7,046,161,607 $264,560,509 $32,358,664 $7,278,363,452
======================================================
Bonds $ 6,921,761,607
Short-term investments 124,400,000
-------------
$ 7,046,161,607
Preferred stocks $ 3,954,659 $ 1,936,634 $ - $ 5,891,293
=========== ============= ==== ===========
Common stocks:
Affiliated $ 66,086,000 $ 14,609,465 $ - $ 80,695,465
Unaffiliated 435,067 15,546,292 77,760 15,903,599
-------- ----------- ------- ----------
$ 66,521,067 $ 30,155,757 $ 77,760 $ 96,599,064
========================== =====================
<PAGE>
COST OR GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
AT DECEMBER 31, 1996:
U.S. Government $ 53,505,907 $ 302,666 $ 975,456 $ 52,833,117
States, territories and
possessions 1,186,868 46,669 - 1,233,537
Political subdivisions 11,579,149 20,989 232,386 11,367,752
Mortgage backed securit170,462,579 2,683,632 807,629 172,338,582
Special revenue 73,681,347 3,138,758 308 76,819,797
Public utilities 416,189,073 21,892,417 994,712 437,086,778
Industrial and
miscellaneous 3,787,554,434 106,623,118 46,452,059 3,847,725,493
Collateralized mortgage
obligations 1,541,892,632 29,372,408 16,816,221 1,554,448,819
Credit-tenant loans 277,024,683 10,185,995 2,556,896 284,653,782
------------ ----------- ---------- -----------
Total $6,333,076,672 $174,266,652 $68,835,667 $6,438,507,657
======================================================
Bonds $ 6,194,032,670
Short-term investments 139,044,002
$ 6,333,076,672
Preferred stocks $ 2,966,816 $ 1,899,159 $ - $ 4,865,975
=========== ============= ==== ===========
Common stocks:
Affiliated $ 66,086,000 $ 7,514,377 $ - $ 73,600,377
Unaffiliated 61,054,236 74,539,550 2,402,130 133,191,656
----------- ----------- ---------- -----------
$ 127,140,236 $ 82,053,927 $ 2,402,130 $ 206,792,033
The amortized cost and estimated fair value of debt securities at December
31, 1997, by contractual maturity, are shown below. Expected maturities
will differ from contractual maturities because borrowers may have the
right to call or prepay obligations with or without call or prepayment
penalties.
AMORTIZED ESTIMATED
COST FAIR VALUE
Due in one year or less $ 231,132,383 $ 231,737,841
Due after one year through five years 1,431,803,609 1,457,094,090
Due after five years through ten years 1,300,235,802 1,339,305,608
Due after ten years 2,237,589,492 2,354,272,617
-------------- -------------
5,200,761,286 5,382,410,156
Collateralized mortgage obligations and mortgage
backed securities 1,845,400,321 1,895,953,296
-------------- -------------
Total $ 7,046,161,607 $ 7,278,363,452
===============================
<PAGE>
The sources of net investment income were as follows:
1997 1996
Bonds $ 501,101,332 $ 439,884,083
Preferred stocks 398,794 398,794
Common stocks 448,589 1,789,507
Mortgage loans 70,469,627 87,034,775
Real estate 25,531,545 29,859,520
Policy loans 7,454,749 6,855,137
Short-term investments 4,657,874 7,339,362
Other (1,239,823) (2,731,636)
------------ -----------
608,822,687 570,429,542
Investment expense (25,194,958) (28,270,465)
Amortization of interest maintenance reserve 3,852,844 4,475,043
$ 587,480,573 $ 546,634,120
Gross realized gains and losses from investment securities consist of the
following:
NET
GROSS GROSS REALIZED
REALIZED REALIZED GAINS
GAINS LOSSES (LOSSES)
YEAR ENDED DECEMBER 31, 1997:
Bonds $ 8,303,767 $ 5,237,203 $ 3,066,564
Common stocks 64,382,938 4,130,324 60,252,614
Mortgage loans 1,519,891 5,317,698 (3,797,807)
Real estate 2,799,542 5,108,653 (2,309,111)
Derivative instruments 7,544 8,910,996 (8,903,452)
Other 24,572,499 48,747 24,523,752
----------- -----------------
$ 101,586,181 $28,753,621 72,832,560
Capital gains tax (25,411,492)
Net IMR capital losses 4,116,371
Net realized capital gains $ 51,537,439
============
YEAR ENDED DECEMBER 31, 1996:
Bonds $ 9,290,573 $ 1,488,558 $ 7,802,015
Common stocks 41,197,830 350,598 40,847,232
Mortgage loans 660,188 7,618,449 (6,958,261)
Real estate 2,689,916 2,949,265 (259,349)
Other 3,829,829 33,919 3,795,910
---------- ------- ---------
$ 57,668,336 $ 12,440,789 45,227,547
Capital gains tax (15,797,771)
Net IMR capital gains (5,968,432)
Net realized capital gains $ 23,461,344
============
Proceeds from the sale of bonds were $265,701,061 and $197,362,463 during
1997 and 1996, respectively.
<PAGE>
The Company invests in mortgage loans collateralized principally by
commercial real estate. The maximum and minimum lending rates for mortgage
loans during 1997 ranged from 7.57% to 8.15%. The maximum percentage of any
one loan to the value of security at the time the loan was originated,
exclusive of insured, guaranteed or purchase money mortgages, was 75%. The
estimated fair value of the mortgage loan portfolio was $625,176,943 and
$928,621,187 at December 31, 1997 and 1996, respectively.
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, 1997 and 1996:
1997 1996
California $ 51,109,152 $ 87,777,944
Nebraska 34,435,161 53,117,745
Washington 31,425,881 44,615,418
Missouri 26,734,059 49,422,118
Indiana 23,144,887 49,003,672
All other states 420,563,509 630,940,023
------------ -----------
$ 587,412,649 $ 914,876,920
The following table summarizes the non-performing and restructured mortgage
loans at December 31, 1997 and 1996:
1997 1996
Non-performing $ 7,145,553 $ 8,917,293
Restructured - 13,500,429
-- ----------
$ 7,145,553 $ 22,417,722
============ ============
At December 31, 1997, securities with an amortized cost of $5,468,910 were
on deposit with government agencies as required by law in various
jurisdictions in which the Company conducts business.
The Company has a securities lending program whereby securities are loaned
to third parties, primarily major brokerage firms. Company policy requires
a minimum of 102% of the fair value of the loaned securities to be
separately maintained as collateral for the loans. The collateral is
recorded in memorandum records and is not reflected in the accompanying
statutory statements of admitted assets, liabilities and surplus. To
further minimize the credit risks related to this lending program, the
Company regularly monitors the financial condition of counterparties to
these agreements and also receives an indemnification from the financial
intermediary who structures the transactions.
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.
The Company also uses interest-rate caps to more effectively manage
interest-rate risk associated with single premium deferred annuity
contracts. 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 simultaneously 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
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.
During 1997 the Company terminated two interest-rate swap transactions with
a combined notional amount of $200,000,000 at a cost of approximately
$8,900,000. This amount was charged to IMR in accordance with statutory
accounting principles. These swaps were replaced with four other
interest-rate swap agreements with a combined notional amount of
$200,000,000. Terms of the new interest-rate swaps allow for more frequent
repricing of the variable rate paid by the Company thereby reducing their
exposure.
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.
ESTIMATED
NOTIONAL STATEMENT FAIR YEAR(S) OF INTEREST RATE
AMOUNT VALUE VALUE MATURITY PAID RECEIVED
At December 31, 1997:
Interest-rate
swaps $202,500,000 $ - $ (5,399,427)2002 - 2003 6.97 % 6.50%
============ ==== =============
Interest-rate
caps $470,000,000 $ 3,269,119 $ 14,091 2000 - 2002- -
============ ========== =========
Foreign currency
swaps $ 6,500,000 $ (268,954) $ (268,954) 1998 - -
============ ============ ============
Equity linked
notes $101,000,000 $4,721,600 $ 41,226,347 2001 - 2016- -
============= ======================
At December 31, 1996:
Interest-rate
swaps $202,500,000 $ - $ (9,259,200) 1999 - 2003 8.45% .24%
============ ==== =============
Interest-rate
caps 320,000,000 $ 2,739,125 $ 1,882,640 2000 - 2001- -
============ ========== ============
Foreign currency
swaps $ 21,503,126 $(10,400,836)(10,400,836) 1997 - 1998- -
============= ============== ==========
Equity linked
notes $109,925,000 $ 5,902,000 $ 41,289,216 1997 - 2016- -
============ ============ ============
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.
<PAGE>
The Company has commitments to fund bond investments of approximately
$60,900,000 and mortgage loans of approximately $1,900,000 as of December
31, 1997. These commitments are legally binding and have fixed expiration
dates or other termination clauses that may require the 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 policy acquisition amounts for tax purposes,
different methods for determining statutory and tax insurance reserves,
timing of the recognition of market discounts 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.
Under federal income tax law in effect prior to 1984, the Company
accumulated approximately $31,615,000 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 the
terms of a group annuity contract and in domestic equity and international
common stock funds.
Information regarding accrued benefits and net assets has not been
determined on an individual company basis. The Company's allocation of
salary expense was approximately 30% of the total Companies' salary expense
in 1997 and approximately 28% in 1996. The Companies expensed contributions
of $7,972,335 and $12,152,156 in 1997 and 1996, respectively. During 1996,
the Companies changed mortality tables from the 1971 group annuity
mortality table to the 1983 group annuity mortality table. As a result of
the table change, the actuarial present value of accrued benefits as of
January 1, 1996, increased by $21,637,154. The Companies made an additional
contribution of $21,637,154 and recorded it net of federal income taxes of
$7,573,004 as a direct charge to surplus.
The plan was amended effective January 1, 1997 to include a Postretirement
Medical 401(h) Account for the funding of certain postretirement medical
benefits provided by the Companies. In September 1997, Mutual of Omaha and
the Company contributed approximately $2,600,000 to this account.
<PAGE>
A comparison of accrued benefits and net assets for the entire plan as of
January 1, 1997 and 1996 follows:
1997 1996
Actuarial present value of accrued benefits:
Vested $ 380,495,581 $ 352,736,411
Nonvested 2,203,724 4,036,059
---------- ---------
$ 382,699,305 $ 356,772,470
Net assets available for benefits $ 369,871,820 $ 324,925,491
===========================
Assumptions:
Annual investment return 9.00 % 9.00 %
Mortality table 1983 GAM 1983 GAM
Discount rate 7.37 % 7.62 %
The Companies also provide 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 $8,428,515 and $5,600,402 in 1997 and
1996, 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. Employees retiring on or before
December 31, 1997, were eligible for the full subsidy if they were at least
age 55 with at least 10 years of service and 10 years of continuous
coverage under one of the Companies' health plans. Employees retiring after
December 31, 1997, must be at least age 60 with at least 15 years of
service and 15 years of continuous coverage under one of the Companies'
health plans. Employees hired on or after January 1, 1995, are not eligible
for a subsidy. The cost of these postretirement benefits is allocated to
the Companies based on an actuarial valuation. The Companies use the
accrual method of accounting for postretirement benefits and elected to
amortize the original transition obligation over 20 years. During the year
ended December 31, 1997, liabilities of $7,027,078 that were previously
recorded by the Company and certain affiliates for postretirement benefits
were paid to Mutual of Omaha.
<PAGE>
The following table compares the accumulated benefit obligation and the
accrued liability for the Companies' postretirement benefits at December
31, 1997 and 1996:
1997 1996
Accumulated postretirement benefits obligation:
Fully eligible actives $ 9,694,945 $ 8,008,428
Retirees 76,208,522 76,135,759
----------- ----------
85,903,467 84,144,187
Plan assets in Postretirement Medical 401(h) Account (2,713,304) -
Unrecognized transition obligation (60,275,474) (64,293,839)
Unrecognized gain 9,460,055 7,928,001
---------- ---------
Total accrued postretirement benefit
liability $l32,374,744 $ 27,778,349
Assumptions:
Discount rate 7.25 % 7.50 %
Health care cost trend rate:
First year 5.00 % 8.50 %
Ultimate 5.00 % 5.00 %
Grading period - 8 years
The Companies' net periodic postretirement benefit costs include the
following components:
1997 1996
Eligibility costs $ 1,597,970 $ 1,384,687
Interest costs 5,985,721 5,908,779
Deferral of gain on plan assets 55,859 -
Amortization of transition obligation 4,018,365 4,018,365
Return on assets (55,859) -
--------- -
Total benefit costs $ 11,602,056 $ 11,311,831
============= ============
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, 1997 by approximately $6,200,000 and the estimated eligibility and
interest cost components of the net periodic postretirement benefit costs
for 1997 by approximately $800,000.
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 from
MOSSCO-NY and MOSSCO-CT of $106,480 for the year ended December 31, 1997
and $349,540 from MOSSCO-NE, MOSSCO-NY and MOSSCO-CT for the year ended
December 31, 1996.
The Company paid $427,447 and $444,296 during 1997 and 1996, respectively,
to Kirkpatrick, Pettis, Smith, Polian Inc., an affiliate, for equity
investment management services. In addition, the Company paid assignment
fees of $165,000 to MOSSCO-NY and MOSSCO-CT for the year ended December 31,
1997 and $439,725 to MOSSCO-NE, MOSSCO-NY and MOSSCO-CT for the year ended
December 31, 1996.
<PAGE>
On January 2, 1996, the Company sold 7,580 shares of First National of
Nebraska, Inc. common stock to Mutual of Omaha for $27,667,000. 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
$27,631,766, and related federal income taxes were $9,671,118.
Under the terms of a reinsurance treaty effective 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 were as follows:
1997 1996
Aggregate reserve for policies and contracts $ 92,275,916 $ 88,332,124
============= ============
Policy and contract claims $ 92,555,033 $ 104,873,996
============= =============
Premium considerations $ 378,854,027 $ 368,125,642
============== =============
Policyholder and beneficiary benefits $ 286,033,083 $ 273,576,207
============= ==============
Group reinsurance settlement expense $ (10,405,717) $ (2,818,163)
============== ==============
The Company also assumes group and individual life insurance from
Companion. In 1997, the Company entered into a coinsurance treaty with
Companion relating to bank annuity business in which Companion cedes 75% of
the related premiums to the Company and the Company pays 75% of the related
benefits. The total amounts assumed by the Company relating to the treaties
with Companion were as follows:
1997 1996
Aggregate reserve for policies and contracts $ 30,498,349 $ 3,749,309
============= ===========
Policy and contract claims $ 2,370,450 $ 2,125,153
============ ===========
Premium considerations $ 31,343,629 $ 2,667,948
============= ===========
Policyholder and beneficiary benefits $ 3,151,526 $ 2,390,429
============ ===========
7. REINSURANCE
In the normal course of business, the Company assumes and cedes insurance
business. The ceding of insurance business 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:
1997 1996
Direct $ 1,541,126,581 $ 1,641,294,796
Assumed 54,891,990 26,580,893
Ceded (408,914,950) (382,368,751)
-------------- -------------
Net $ 1,187,103,621 $ 1,285,506,938
=============== ================
<PAGE>
8. CREDIT ARRANGEMENTS
The Company and Mutual of Omaha are authorized by their Boards of Directors
to borrow a maximum of $75,000,000 on a joint basis under certain lines of
credit. At December 31, 1997, the Company had no outstanding borrowings
against its uncommitted, uncollateralized revolving lines of credit.
Interest rates applicable to borrowings under these lines of credit 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.
10. DEPOSIT FUNDS
The estimated fair value and statement value of guaranteed investment and
select maturity contracts were:
1997 1996
Estimated fair value $ 1,118,746,000 $ 1,200,031,000
=============== ================
Statement value $ 1,119,540,000 $ 1,247,546,000
=============== ===============
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, 1997 and 1996, the Company held annuity reserves and
deposit fund liabilities of $1,256,277,353 and $1,092,555,243,
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 $57,907,487 in 1998.
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.
<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 Companies announced the elimination of approximately
1,000 positions as a part of an initiative to reduce operating costs 15% by
the end of 1997. The Companies incurred approximately $13,400,000 and
$27,300,000 of severance and related costs, consulting fees and other
one-time costs associated with expense realignment activities during 1997
and 1996, respectively.
UNITED OF OMAHA LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF MUTUAL OF OMAHA INSURANCE COMPANY)
ANNUAL STATEMENT FOR THE YEAR ENDED DECEMBER 31, 1997
SCHEDULE 1 - SELECTED FINANCIAL DATA
- --------------------------------------------------------------------------------
Investment income earned:
U.S. Government bonds $ 93,133,034
Other bonds (unaffiliated) 407,968,298
Bonds (affiliated) -
Preferred stocks (unaffiliated) 398,794
Preferred stocks (affiliated) -
Common stocks (unaffiliated) 448,589
Common stocks (affiliated) -
Mortgage loans 70,469,627
Real estate 25,531,545
Premium notes, policy loans and liens 7,454,749
Collateral loans -
Cash on hand and on deposit -
Short-term investments 4,657,874
Other invested assets 880,167
Derivative instruments (2,984,645)
Aggregate write-ins for investment income 864,655
-------
Gross investment income $ 608,822,687
=============
Real estate owned - book value less encumbrances $ 109,065,830
=============
Mortgage loans - book value:
Farm mortgages $ -
Residential mortgages -
Commercial mortgages 587,412,649
-----------
Total mortgage loans $ 587,412,649
=============
Mortgage loans by standing - book value:
Good standing $ 580,267,096
=============
Good standing with restructured terms $ -
===
Interest overdue more than three months, not in foreclosure $ 5,626,326
===========
Foreclosure in process $ 1,519,227
===========
<PAGE>
UNITED OF OMAHA LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF MUTUAL OF OMAHA INSURANCE COMPANY)
ANNUAL STATEMENT FOR THE YEAR ENDED DECEMBER 31, 1997
SCHEDULE 1 - SELECTED FINANCIAL DATA (CONTINUED)
- --------------------------------------------------------------------------------
Other long-term assets - statement value $ 67,612,458
============
Collateral loans $ -
===
Bonds and stocks of parent, subsidiaries and affiliates - book value:
Bonds $ -
===
Preferred stocks $ -
===
Common stocks $ 66,086,000
============
Bonds and short-term investment by class and expected maturity; Bonds by
expected maturity - statement value:
Due within one year or less $ 480,783,361
Over 1 year and through 5 years 2,884,425,713
Over 5 years through 10 years 1,972,188,695
Over 10 years through 20 years 1,378,437,745
Over 20 years 330,326,093
-----------
Total by maturity $ 7,046,161,607
===============
Bonds by class - statement value:
Class 1 $ 4,867,147,719
Class 2 1,927,561,829
Class 3 206,893,255
Class 4 37,800,111
Class 5 4,559,843
Class 6 2,198,850
---------
Total by class $ 7,046,161,607
===============
Total bonds publicly traded $ 3,801,877,467
===============
Total bonds privately placed $ 3,244,284,140
===============
Preferred stocks - statement value $ 3,954,659
===========
Common stocks - market value $ 96,599,064
============
Short-term investments - book value $ 124,400,000
=============
Options, caps and floors owned - statement value $ 7,990,719
===========
Options, caps and floors written and in force - statement value $ -
===
Collar, swap and forward agreements open - statement value $ (268,954)
===========
<PAGE>
UNITED OF OMAHA LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF MUTUAL OF OMAHA INSURANCE COMPANY)
ANNUAL STATEMENT FOR THE YEAR ENDED DECEMBER 31, 1997
SCHEDULE 1 - SELECTED FINANCIAL DATA (CONTINUED)
- --------------------------------------------------------------------------------
Futures contracts open - current value $ -
===
Cash on deposit $ (9,204,765)
=============
Life insurance in force (in thousands):
Industrial $ -
===
Ordinary $ 45,670,998
============
Credit life $ 1,422
=======
Group life $ 58,382,980
============
Amount of accidental death insurance in force under ordinary policies
(in thousands $ 2,476,618
===========
Life insurance policies with disability provisions in force (in thousands):
Industrial $ -
Ordinary $ 9,735,875
===========
Credit life $ -
===
Group life $ 31,145,919
============
Supplementary contracts in force: Ordinary - not involving life contingencies:
Amount on deposit $ 15,475,727
============
Income payable $ 3,034,836
===========
Ordinary - involving life contingencies - income payable $ 1,411,747
===========
Group - not involving life contingencies:
Amount of deposit $ -
===
Income payable $ -
===
Group - involving life contingencies - income payable $ -
===
<PAGE>
UNITED OF OMAHA LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF MUTUAL OF OMAHA INSURANCE COMPANY)
ANNUAL STATEMENT FOR YEAR ENDED DECEMBER 31, 1997
SCHEDULE 1 - SELECTED FINANCIAL DATA (CONTINUED)
- --------------------------------------------------------------------------------
Annuities:
Ordinary:
Immediate - amount of income payable $ 33,658,771
============
Deferred - fully paid - account balance $ 2,436,309,725
===============
Deferred - not fully paid - account balance $ 450,301,640
=============
Group:
Amount of income payable $ 143,887,206
=============
Fully paid - account balance $ 93,399,584
============
Not fully paid - account balance $ -
===
Accident and health insurance - premiums in force:
Ordinary $ 179,644
=========
Group $ 545,799,138
=============
Credit $ -
===
Deposit funds and dividend accumulations:
Deposit funds - account balance $ 2,156,414,084
===============
Dividend accumulations - account balance $ 47,457
========
Claim payments 1997:
Group accident and health - year ended December 31, 1997:
1997 $ -
===
1996 $ -
===
1995 $ -
===
Other accident and health:
1997 $ -
===
1996 $ -
===
1995 $ -
===
Other coverages that use developmental methods to calculate claims reserves:
1997 $ -
1996 $ -
===
1995 $ -
===
<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
<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
April 15, 1998
<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.
<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.
<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.
<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.
<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 -
<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>
<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.
<PAGE>
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.
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 Installment 20 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
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
<PAGE>
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 Installment 20 10 Year Life Installment Age
Certain Year Only Refund Year Certain Only Refund
& Life Certain Certain & Life
& Life & Life
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
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
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
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
<PAGE>
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 Installment 20 10 Year Life Installment Age
Certain Year Only Refund Year Certain Only Refund
& Life Certain Certain & Life
& Life & Life
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
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
- --------- --------- -------- -------- -------- -------- ---------- --------- ---------- -------
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>
II-
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.
II-1
<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:
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 ULTRA VARIABLE LIFE modified single premium
variable life insurance policy. ***
(b) Form of Riders to the Policy. *
(c) Systematic Transfer Enrollment Program Endorsement 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. **
II-2
<PAGE>
(h) Participation Agreement by and between United of Omaha Life Insurance
Company and Morgan Stanley Universal Funds, et. al. ****
(9) None.
(10) Form of Application for the United of Omaha Life Insurance Company
ULTRA VARIABLE LIFE Modified Single 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. Consent of Independent Auditor.
8. 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 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 C filed on April 16, 1998 (File No. 33-89848).
II-3
<PAGE>
SIGNATURES
As required by the Securities Act of 1933, the Registrant has caused this
Registration Statement to be signed on its behalf, in the City of Omaha and
State of Nebraska, on April 16, 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, April 16, 1998
John W. Weekly Chief Executive Officer
_____*____________________ Director, President, April 16, 1998
John A. Sturgeon Chief Operating Officer
_____*____________________ General Comptroller April 16, 1998
Tommie Thompson (Principal Financial Officer, and
Principal Accounting Officer)
_____*____________________ Director April 16, 1998
Samuel L. Foggie
_____*___________________ Director April 16, 1998
John D. Minton
_____*__________________ Director April 16, 1998
Hugh V. Plunkett, III
_____*___________________ Director
Richard J. Sampson April 16, 1998
_____*___________________ Director
Oscar S. Straus
______*__________________ Director April 16, 1998
Michael A. Wayne
By: /s/ Kenneth W. Reitz Date: April 16, 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.
II-4
<PAGE>
- --------------------------------------------------------------------------------
REGISTRATION NO. 333 -18881
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 POST-EFFECTIVE AMENDMENT NO. 1 TO THE
REGISTRATION STATEMENT ON FORM S-6
UNDER
THE SECURITIES ACT OF 1933
April 16, 1998
<PAGE>
EXHIBIT INDEX
1.A.(5)(c) Systematic Transfer Enrollment Program Endorsement to the Policy
2. Opinion and Consent of Counsel
6. Opinion and Consent of Actuary
7. Consents of Independent Auditors
Exhibit 1.A.(5)(c) Systematic Transfer Enrollment Program Endorsement to the
Policy
UNITED OF OMAHA LIFE INSURANCE COMPANY
SYSTEMATIC TRANSFER ENROLLMENT PROGRAM ENDORSEMENT
The policy is amended as follows:
THE FOLLOWING IS ADDED TO THE DEFINITIONS SECTION OF THE POLICY:
SYSTEMATIC TRANSFER ACCOUNT - A fixed account used for the Systematic Transfer
Program.
THE FOLLOWING IS ADDED TO THE PURCHASE PAYMENTS SECTION OF THE POLICY:
SYSTEMATIC TRANSFER ENROLLMENT PROGRAM
At the time of application you may elect to participate in the Systematic
Transfer Enrollment Program which is used to automatically transfer a
predetermined dollar amount on a monthly basis to any of the Subaccounts which
are chosen at the time of application. The allocation and the predetermined
dollar amount may not be changed. All funds within the Systematic Transfer
Account must be transferred within 13 months of deposit. No new purchase
payments may be allocated to this account after the issue date of the policy. No
transfers may be made into the Systematic Transfer Account.
There is no charge for participation in this program.
THE FOLLOWING SECTION IS ADDED TO THE POLICY:
SYSTEMATIC TRANSFER ACCOUNT
GENERAL DESCRIPTION
Any portion of the purchase payments allocated to the Systematic Transfer
Account become part of the general account assets of United of Omaha Life
Insurance Company. The Systematic Transfer Account includes all of our assets
except those assets segregated in separate accounts. We maintain sole discretion
to invest the assets of the Systematic Transfer Account, subject to applicable
law.
TRANSFERS FROM THE SYSTEMATIC TRANSFER ACCOUNT
You must transfer all of the funds from the Systematic Transfer Account to the
subaccounts within 13 months of deposit. These transfers do not count toward the
12 free transfers allowed each policy year.
You may not transfer funds to the Systematic Transfer Account. No additional
funds may be allocated to the Systematic Transfer Account after the date of
policy issue.
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THE FOLLOWING IS ADDED TO THE VALUES SECTION OF THE POLICY:
SYSTEMATIC TRANSFER ACCOUNT
The accumulation value of the Systematic Transfer Account on any valuation date
is equal to:
(a) the value at the end of the preceding policy month; plus (b) any net
purchase payments credited since the end of the previous policy month; minus (c)
any transfers from the Systematic Transfer Account to the subaccounts since the
end of
the previous policy month; plus
(d) interest credited on the balance.
We guarantee the accumulation value in the Systematic Transfer Account will be
credited with an effective interest rate of at least 3% and is set at the date
of issue.
All other policy provisions apply.
Exhibit 2 Consent of Counsel
UNITED OF OMAHA LIFE INSURANCE COMPANY
Mutual of Omaha Plaza, 3-Law
Omaha, Nebraska 68175-1008
April 16, 1998
United of Omaha Life Insurance Company
Mutual of Omaha Plaza
Omaha, NE 68175-1008
Re: Post-Effective Amendment #1 to the Registration Statement
File No. 333-18881
Filed April 16, 1998
Modified Single Premium Variable Universal Life Policy
To Whom It May Concern:
With reference to the above-referenced Post-Effective Amendment to the
Registration Statement on Form S-6, filed by United of Omaha Life Insurance
Company and United of Omaha Separate Account B with the Securities and Exchange
Commission and covering modified single premium variable life insurance
contracts, I have examined such documents and such laws I considered necessary
and appropriate and on the basis of such examination, it is my opinion that:
1. United of Omaha Life Insurance Company is duly organized and validly
existing under the laws of the State of Nebraska and has been duly
authorized to issue flexible premium variable life insurance contracts
by the Insurance Department of the State of Nebraska.
2. United of Omaha Separate Account B is a duly authorized and existing
separate account to establish pursuant to the provision of Nebraska
Revised Statutes ss.ss.44-2221 and 44-402.01(1991).
3. The modified single premium variable life insurance contracts, when
issued as contemplated by said Form S-6 Registration Statement, will
constitute legal, validly issued and binding obligations of United of
Omaha Life Insurance Company.
I hereby consent to the filing of this opinion as an Exhibit to said Form S-6
Registration Statement and to the use of my name under the caption "Legal
Matters" in the Registration Statement.
Sincerely,
/s/ Kenneth W. Reitz
Kenneth W. Reitz
First Vice President & Counsel
United of Omaha Life Insurance Company
Exhibit 6 Consent of Actuary
April 16, 1998
TO: UNITED OF OMAHA LIFE INSURANCE COMPANY
FROM: Robert Hupf, FSA, MAAA
Vice President and Actuary
RE: ACTUARIAL OPINION
Post-Effective Amendment #1 to the Registration Statement
File No. 333-18881
Filed April 16, 1998
Single Premium Variable Universal Life Policy
This opinion is furnished in connection with the registration by United of Omaha
Life Insurance Company of a Single Premium Variable Universal Life Insurance
policy ("Policy") under the Securities Act of 1933 (File No. 333-18881). The
prospectus included in the Registration Statement on Form S-6 describes the
Policy. I have reviewed the Policy form and I have participated in the
preparation and review of the Registration Statement Exhibits thereto.
In my opinion, the illustration of death benefit, surrender value, and premium
shown in the Illustration section of the Policy prospectus included in the
Registration Statement, based on the assumptions stated in the illustrations,
are consistent with the provisions of the Policy. Such assumptions, including
the current cost of insurance rates and other charges, are reasonable. The ages
selected in the illustrations are representative of the manner in which the
Policy operates. The Policy has not been designed so as to make the relationship
between premiums and benefits, as shown in the illustrations, appear to be more
favorable to prospective purchasers of Policies at the ages and in the rate
classes illustrated than to prospective purchasers of Policies, for males or
females, at other ages.
I hereby consent to the filing of this opinion as an exhibit to the Registration
Statement and to the use of my name under the heading Experts in the prospectus
as to actuarial matters.
/s/ Robert Hupf, FSA, MAAA
ROBERT HUPF, FSA, MAAA
Vice President and Actuary
United of Omaha Life Insurance Company
Exhibit 7. Consent of Independent Auditor
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 1 to Registration
Statement No. 333-18881 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 February 17, 1998, 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
April 15, 1998
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Mutual of Omaha Companies
Mutual of Omaha Plaza, 3-Law
Omaha, Nebraska 68175-1008
April 16, 1998
Re: Depositor: UNITED OF OMAHA LIFE INSURANCE COMPANY
Registrant: UNITED OF OMAHA SEPARATE ACCOUNT C
Form: N-4
File No. 33-89848
811-8190
Commissioners:
On behalf of the Registrant and Depositor identified above, we are transmitting
for filing under Rule 485 (b) of the Securities Act of 1933 a copy of
Post-effective Amendment No. 4 to the Registration Statement under the
Investment Company Act of 1940.
The Amendment brings financial statements and other information up to date
pursuant to Section 10(a)(3) of the 1933 Act. As counsel who reviewed the
Amendment, I represent that the Amendment does not contain disclosures which
would render it ineligible to become effective pursuant to paragraph (b) or Rule
485.
If you have any questions or comments on the Amendment, please contact the
undersigned at (402) 351-5087.
If you have any questions or problems relating to the EDGAR transmission of this
Amendment, please contact Jean Norris at (402) 423-9583.
Sincerely,
/s/ Kenneth W. Reitz
Kenneth W. Reitz
First V.P. & Counsel
United of Omaha Life Insurance Company
<PAGE>
Mutual of Omaha Companies
Mutual of Omaha Plaza, 3-Law
Omaha, Nebraska 68175-1008
April 16, 1998
Re: Depositor: UNITED OF OMAHA LIFE INSURANCE COMPANY
Registrant: UNITED OF OMAHA SEPARATE ACCOUNT B
Form: S-6
File No. 333-18881
811-08336
Commissioners:
On behalf of the Registrant and Depositor identified above, we are transmitting
for filing under Rule 485 (b) of the Securities Act of 1933 a copy of
Post-effective Amendment No. 1 to the Registration Statement under the
Investment Company Act of 1940.
The Amendment brings financial statements and other information up to date
pursuant to Section 10(a)(3) of the 1933 Act. As counsel who reviewed the
Amendment, I represent that the Amendment does not contain disclosures which
would render it ineligible to become effective pursuant to paragraph (b) or Rule
485.
If you have any questions or comments on the Amendment, please contact the
undersigned at (402) 351-5087.
If you have any questions or problems relating to the EDGAR transmission of this
Amendment, please contact Jean Norris at (402) 423-9583.
Sincerely,
/s/ Kenneth W. Reitz
Kenneth W. Reitz
First V.P. & Counsel
United of Omaha Life Insurance Company
<PAGE>
Mutual of Omaha Companies
Mutual of Omaha Plaza, 3-Law
Omaha, Nebraska 68175-1008
April 16, 1998
Re: Depositor: UNITED OF OMAHA LIFE INSURANCE COMPANY
Registrant: UNITED OF OMAHA SEPARATE ACCOUNT B
Form: S-6
File No. 333-35587
811-08336
Commissioners:
On behalf of the Registrant and Depositor identified above, we are transmitting
for filing under Rule 485 (b) of the Securities Act of 1933 a copy of
Post-effective Amendment No. 1 to the Registration Statement under the
Investment Company Act of 1940.
The Amendment brings financial statements and other information up to date
pursuant to Section 10(a)(3) of the 1933 Act. As counsel who reviewed the
Amendment, I represent that the Amendment does not contain disclosures which
would render it ineligible to become effective pursuant to paragraph (b) or Rule
485.
If you have any questions or comments on the Amendment, please contact the
undersigned at (402) 351-5087.
If you have any questions or problems relating to the EDGAR transmission of this
Amendment, please contact Jean Norris at (402) 423-9583.
Sincerely,
/s/ Kenneth W. Reitz
Kenneth W. Reitz
First V.P. & Counsel
United of Omaha Life Insurance Company
<PAGE>
Mutual of Omaha Companies
Mutual of Omaha Plaza, 3-Law
Omaha, Nebraska 68175-1008
April 16, 1998
Re: Depositor: COMPANION LIFE INSURANCE COMPANY
Registrant: COMPANION LIFE SEPARATE ACCOUNT C
Form: N-4
File No. 33-98062
811-8814
Commissioners:
On behalf of the Registrant and Depositor identified above, we are transmitting
for filing under Rule 485 (b) of the Securities Act of 1933 a copy of
Post-effective Amendment No. 2 to the Registration Statement under the
Investment Company Act of 1940.
The Amendment brings financial statements and other information up to date
pursuant to Section 10(a)(3) of the 1933 Act. As counsel who reviewed the
Amendment, I represent that the Amendment does not contain disclosures which
would render it ineligible to become effective pursuant to paragraph (b) or Rule
485.
If you have any questions or comments on the Amendment, please contact the
undersigned at (402) 351-5087.
If you have any questions or problems relating to the EDGAR transmission of this
Amendment, please contact Jean Norris at (402) 423-9583.
Sincerely,
/s/ Kenneth W. Reitz
Kenneth W. Reitz
Assistant Secretary
Companion Life Insurance Company
