As filed with the Securities and Exchange Commission on April 26, 1999
1933 Act Registration No. 333-18881
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 3
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
Internet: [email protected]
Individual Modified Single Premium Variable Universal Life Insurance Policy
(Title, amount, and proposed maximum offering price of securities being
registered)
It is proposed that this filing will become effective (check appropriate box):
[ ] immediately upon filing pursuant to paragraph (b)
[x] on May 1, 1999 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on the 80th day after filing pursuant to paragraph (a)(i)
If appropriate, check the following box:
[x] This Post-Effective Amendment designates a new effective date for a
previously filed Post-Effective Amendment.
-------
<PAGE>
UNITED OF OMAHA SEPARATE ACCOUNT B
Registration Statement on Form S-6
Cross-Reference Sheet
Form N-8B-2
Item No. Caption in Prospectus
1 Cover Page
2 Cover Page
3 Inapplicable
4 Policy Distributions
5 About Us
6 Variable Investment Options
9 Inapplicable
10(a) Policy Application and Issuance
10(b) Policy Distributions
10(c), (d), (e) Policy Distributions; Lapse and Grace Period; Reinstatement
10(f), (g), (h) Voting Rights; Tax Matters
10(i) Important Policy Provisions
11 Variable Investment Options
12 Variable Investment Options; Policy Distributions
13 Expenses; Tax Matters; Policy Distributions; Appendix A
14 Policy Application and Issuance
15 Policy Application and Issuance
16 Variable Investment Options
17 Captions referenced under Items 10(c), (d), (e) and (i) above
18 Variable Investment Options
19 Reports to You; Voting Rights; Policy Distributions
20 Captions referenced under Items 6 and 10(g) above
21 Policy Loans
22 Inapplicable
23 Policy Distributions
24 Important Policy Provisions
25 About Us
26 Policy Distributions
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 Policy Distributions
39 Policy Distributions
40 Inapplicable
41(a) Policy Distributions
42 Inapplicable
43 Inapplicable
44(a) Variable Investment Options; Policy Application and Issuance
44(b) Expenses; Policy Distributions
44(c) Expenses
ii
<PAGE>
45 Inapplicable
46 Variable Investment Options; Captions referenced under Items
10(c), (d), and (e) above
47 Inapplicable
48 About Us
49 Inapplicable
50 Variable Investment Options
51 Cover Page, Summary, Important Policy Provisions, Tax Matters,
Policy Distributions
52 Tax Matters
53 Tax Matters
54 Inapplicable
55 Inapplicable
59 Financial Statements
iii
<PAGE>
United of Omaha
A Mutual of Omaha Companies PROSPECTUS: May 1, 1999
ULTRA VARIABLE LIFE
Individual Modified Single Premium
Variable Universal Life Insurance
This prospectus describes the ULTRA VARIABLE LIFE, a variable universal life
insurance policy offered by United of Omaha Life Insurance Company. The minimum
initial premium is $20,000.
<TABLE>
<CAPTION>
<S> <C> <C>
The investment portfolios offered The Policy includes 25 variable options
through the Policy may have names that (where you have the investment risk)
are nearly the same or similar to the with investment portfolios from:
names of retail mutual funds. However,
these investment portfolios are not the ss. Alger American Fund
same as those retail mutual funds, even ss. Federated's Insurance Management Series
though they have similar names and ss. Fidelity's VIP Fund and VIP Fund II
characteristics and the same managers. ss. MFS Variable Insurance Trust
The investment performance of these ss. Morgan Stanley Dean Witter Universal Funds
investment portfolios is not necessarily ss. Pioneer Variable Contracts Trust
related to the performance of the retail ss. Scudder Variable Life Investment Fund
mutual funds. The investment portfolios ss. T. Rowe Price Equity Series, Fixed Income
are described in separate prospectuses Series and International Series
that accompany this prospectus.
and two fixed rate options (where we have the
investment risk).
</TABLE>
The variable options are not direct investments in mutual fund shares, but
are offered through Subaccounts of United of Omaha Separate Account B. The value
of your Policy will go up or down based on the investment performance of the
variable options that you choose. There is no minimum guaranteed Cash Surrender
Value for any amounts you allocate to the variable options. The amount of the
death benefit can also vary to reflect investment performance.
In almost all cases, the Policy will be a modified endowment contract for
federal income tax purposes.
Please Read this Prospectus Carefully. It provides
information you should consider before investing in a
Policy. Keep this prospectus and the other prospectuses for
the investment portfolios for future reference.
The Securities and Exchange Commission ("SEC") maintains an
Internet Web site (http://www.sec.gov) that contains more
information about us and the Policy. You may also review and
copy our SEC registration of the Policy at the SEC's Public
Reference Room in Washington, D.C. (call the SEC at
1-800-SEC-0330 for details and public hours).
The SEC does not pass upon the accuracy or adequacy of this prospectus, and has
not approved or disapproved the Policy. Any representation to the contrary is a
criminal offense.
Remember that the Policy and the investment portfolios:
o are subject to risk, including possible loss of principal
o are not bank deposits
o are not government insured
o are not endorsed by any bank or government agency
o may not achieve their goals
<PAGE>
- -----------------------------------------------------------
CONTENTS
Page(s)
--------
DEFINITIONS 3
---------------------------------------------------------- --------
INTRODUCTION AND SUMMARY 4-6
Comparison to Other Policies and Investments
How the Policy Operates
---------------------------------------------------------- --------
ABOUT US 7
---------------------------------------------------------- --------
INVESTMENT OPTIONS 7-14
Variable Investment Options
Fixed Rate Options
Systematic Transfer Account
Fixed Account
Transfers
Dollar Cost Averaging
STEP Program
Asset Allocation Program
Rebalancing Program
---------------------------------------------------------- --------
IMPORTANT POLICY PROVISIONS 15-18
Policy Application and
Issuance Reinstatement
Lapse and Grace Period Maturity Date
Misstatement of Age or Coverage Beyond
Sex Maturity
Suicide Delay of Payments
Incontestability Minor Owner or
Telephone Transactions Beneficiary
------------------------------ --------------------------- --------
EXPENSES 18-22
Monthly Deduction Surrender Charge
Cost of Insurance Charge (with Waivers)
Expense Charge Transfer Charge
Series Fund Charges
------------------------------ --------------------------- --------
POLICY DISTRIBUTIONS 23-26
Policy Loans Death Benefit
Surrender Payment of Proceeds
Partial Withdrawals
------------------------------ --------------------------- --------
TAX MATTERS 26-29
Life Insurance Other Policy Owner
Qualification Tax Matters
Tax Treatment of Loans
and Other Distributions
------------------------------ --------------------------- --------
MISCELLANEOUS 29-30
Our Management Legal Proceedings
Distribution of the Independent Auditors
Policies Reports to You
Voting Rights Do You Have Questions?
Year 2000 Issues
State Regulation
------------------------------ --------------------------- --------
ILLUSTRATIONS 31-43
---------------------------------------------------------- --------
FINANCIAL STATEMENTS 44-83
<PAGE>
- -----------------------------------------------------------
DEFINITIONS
Accumulation Value is the dollar value of all amounts accumulated under the
Policy (in both the variable investment options and the fixed investment
options).
Beneficiary is the person(s) or other legal entity who receives Policy benefits,
if any, upon the insured's death.
Business Day is each day that the New York Stock Exchange is open for trading.
Cash Surrender Value is the Accumulation Value, less any Policy loans, unpaid
loan interest, and any applicable Surrender Charge.
Loan Account is an account we maintain for your Policy if you have a Policy loan
outstanding. The Loan Account is part of our general account.
Owner is you -- the person(s) who may exercise all rights and privileges under
the Policy.
Policy Year/Month/Anniversary are measured from respective anniversary dates of
the Date of Issue.
Series Funds are diversified, open-end investment management companies in which
the Variable Account invests. Each Series Fund has a number of different
investment portfolios.
Subaccount is a segregated account within the Variable Account investing in a
specified investment portfolio of one of the Series Funds.
Us, We, Our is United of Omaha Life Insurance Company.
Valuation Period is the period commencing at the close of business of the New
York Stock Exchange on each Business Day and ending at the close of business for
the next succeeding Business Day.
Variable Account -- United of Omaha Separate Account B, a separate account
maintained by us.
Written Notice or Request -- Written Notice, signed by you, that gives us the
information we require and is received at United of Omaha, Variable Product
Service, P.O. Box 8430, Omaha, Nebraska 68108-0430.
- -----------------------------------------------------------
This prospectus may only be used to offer the Policy where the Policy
may lawfully be sold. No one is authorized to give information or make
representations about the Policy that isn't in the prospectus; if anyone does
so, you should not rely upon it as being accurate or adequate.
This prospectus generally describes only the variable investment
options, except when the fixed rate options are specifically mentioned.
3
<PAGE>
- -----------------------------------------------------------
INTRODUCTION AND SUMMARY
This Introduction and Summary briefly notes some of the important things
about the Policy, but it is not a complete description of the Policy. The rest
of this prospectus contains more complete information, and you should read the
entire prospectus carefully.
The ULTRA VARIABLE LIFE Policy described in this prospectus is a life
insurance Policy issued by United of Omaha Life Insurance Company. The Policy
pays a death benefit upon the insured's death, and a Cash Surrender Value is
available if you surrender the Policy. The insured person cannot be over 90 when
we issue the Policy. You have flexibility under the Policy; within certain
limits, you can make additional premium payments beyond the required single
premium and you can transfer amounts among the investment options. The minimum
initial premium is $20,000.
The Policy is a variable life Policy, which means that you can allocate your
premium to up to 25 different variable investment portfolios, where you can gain
or lose money on your investment, and up to two fixed rate options, where we
guarantee you will earn a fixed rate of interest. The death benefit can also
vary up or down to reflect that investment experience.
There is no guaranteed minimum Accumulation Value. Regardless of whether you
pay the required minimum premium or more, the Policy could lapse if the
Accumulation Value is not sufficient to pay the Monthly Deduction Amount.
However, generally the Policy will not lapse during the Death Benefit guarantee
period, if you do not take out any Policy loan.
The variable investment options are not direct investments in mutual funds,
but are Subaccounts of the Variable Account. Each Subaccount in turn invests in
a particular investment portfolio. You may transfer your Accumulation Value
among the Subaccounts and between the Subaccounts and the fixed rate options,
subject to certain restrictions (especially on transfers out of the fixed rate
options).
You can surrender the Policy completely, make a partial cash withdrawal, and
take out a Policy loan, subject to certain restrictions. However, surrenders,
withdrawals and loans may be taxable and subject to a penalty tax.
Buying the Ultra Variable Life Policy might not be a good way of replacing
existing life insurance or adding more insurance, especially if you already own
a single premium variable life insurance policy.
o COMPARISON TO OTHER POLICIES AND INVESTMENTS
The Policy offered by this prospectus is designed to provide life insurance
coverage for the insured. It is not offered primarily as an investment.
Compared to other life insurance policies. 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 loan privileges and surrender values.
The Policy is different from fixed-benefit life insurance in that the death
benefit may vary to reflect the investment experience of the variable investment
options that you select. The Accumulation Value will always vary in accordance
with that investment experience.
In almost all situations, the Policy is expected to be treated for federal
income tax purposes as a modified endowment contract. This means pre-death
distributions (including partial withdrawals and loans) from the Policy would be
included in income on an income-first basis, and a 10% penalty tax may be
imposed on income distributed before you attain age 59 1/2.
Compared to mutual funds. The Policy is designed to provide life insurance
protection. Although the underlying investment portfolios operate like mutual
funds and have the same investment risks, in many ways the Policy differs from
mutual fund investments. The main differences are:
o
<PAGE>
o The Policy provides a death benefit based on the life of the insured.
o The Policy can lapse with no value unless you pay enough additional premium,
if your Accumulation Value is not enough to pay a Monthly Deduction Amount.
o Insurance-related charges not associated with mutual fund investments are
deducted from values of the Policy.
o We, not you, own the shares of the underlying investment portfolios. You
have interests in our Subaccounts that invest in the investment portfolios
that you select.
o Premiums paid are held in the Federated Prime Money Fund II portfolio until
the allocation date. Only then is premium invested in the other variable
investment options that you elected.
o Federal income tax liability on any earnings is deferred until you receive a
distribution from the Policy.
o Transfers from one underlying investment portfolio to another are
accomplished without tax liability.
o Premature withdrawals may be subject to a 10% federal tax penalty. Policy
earnings that would be
treated as capital gains in a mutual fund are treated as ordinary income,
although (a) such earnings are exempt from taxation if received as a death
benefit, and (b) taxation is deferred until such earnings are distributed.
4
<PAGE>
o The Policy probably is a "modified endowment contract." If it is, then (a)
there will be a 10% penalty tax on withdrawals before age 59 1/2; (b)
withdrawals would be deemed to come from earnings first (taxable),
then from your investment; and (c) loans will be treated as withdrawals.
o Most states grant you a time period to review your Policy and cancel it for
a return of premium paid. The terms of this "right to examine" period vary
by state, and are stated on the cover of your Policy.
o HOW THE POLICY OPERATES
The following chart shows how the Policy operates and includes a summary of
expenses. For more information, refer to specific sections of this prospectus.
----------------------------------------------------------------
POLICY FLOW CHART
----------------------------------------------------------------
PREMIUM
o The minimum initial premium required is $20,000.
o Payments in addition to the required initial premium may be
made, within limits.
o Additional premiums may be required to prevent the
Policy from lapsing. Payment of the initial premium may
not be enough to keep the Policy from lapsing, except in
some circumstances during the Death Benefit Guaranty
period.
----------------------------------------------------------------
------------------------------------------------------------------
DEDUCTIONS BEFORE ALLOCATING PREMIUM
None.
------------------------------------------------------------------
--------------------------------------------------------------------------
INVESTMENT OF PREMIUM
o You direct the allocation of all premiums among the 25
Subaccounts of the Variable Account, the Fixed Account and the
Systematic Transfer Account. Each Subaccount invests in a
corresponding investment portfolio.
--------------------------------------------------------------------------
-----------------------------------------------------------------------------
CHARGES DEDUCTED FROM ASSETS
o We take a Monthly Deduction out of your Accumulation Value (annual rate
calculated as a percentage of Accumulation Value) composed of:
- 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); and
- 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 Year free).
o Investment advisory fees and operating expenses are deducted from the
assets of each investment portfolio.
-----------------------------------------------------------------------------
5
<PAGE>
--------------------------------------------------------------------------
ACCUMULATION VALUE
Your Accumulation Value is equal to your premiums, as adjusted up or down
each Business Day to reflect the Subaccounts' investment experience,
charges deducted, and other Policy transactions (such as transfers and
partial withdrawals).
o Accumulation Value may vary daily. There is no minimum guaranteed
Accumulation Value. The Policy may lapse, even if there is no Policy
loan.
o Accumulation Value can be transferred among the Subaccounts and the
Fixed Account. Policy loans reduce the amount available for
allocations and transfers.
o Dollar cost averaging and asset rebalancing programs are available.
o Accumulation Value is the starting point for calculating certain
values under a Policy, such as the Cash Surrender Value and the death
benefit.
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------- -----------------------------------------
ACCUMULATION VALUE BENEFITS DEATH BENEFIT
<S> <C>
o After the first Policy Year (at any time in Indiana), o Received income tax free to
you can take loans for amounts up to 100% of Cash Beneficiary.
Surrender Value (less interest to the end of the year less o Available as lump sum or under
one monthly deduction) at a net annual interest rate a variety of Payout Options.
charge of 1.5%. o Greater of:
o Under certain situations, preferred loans are - Initial specified amount of
currently available with a net interest rate charge of 0%. insurance coverage plus any
o You can surrender the Policy in full at any time for later increase and less any
its Cash Surrender Value, or withdraw part of the later decrease; or
Accumulation Value. After the first Policy Year, up to - Policy's Accumulation Value on
15% of the Accumulation Value as of the first withdrawal the date of the insured's death
that Policy Year may be withdrawn each Policy Year without multiplied by a corridor
charge. A nine-year declining surrender charge of up to percentage for the insured's
9.5% of each premium paid will apply to a full surrender attained age.
and all other partial withdrawals. Federal taxes and tax
penalties may also apply.
o The Cash Surrender Value is the Accumulation Value Death benefit proceeds
paid are reduced less any applicable Surrender Charge and less any by any
Policy loan balance and unpaid outstanding Policy loans and unpaid loan
interest. loan interest.
o If the Policy is a modified endowment contract, then loans will be treated
as withdrawals for tax purposes.
o Fixed and variable Payout Options are available.
- ---------------------------------------------------------------- -----------------------------------------
</TABLE>
The ILLUSTRATIONS section at the end of this prospectus has illustration tables
demonstrating how the Policy operates, given the Policy's expenses and several
assumed rates of return. These tables may assist you in comparing the Policy's
death benefit, Cash Surrender Values and Accumulation Values with those of other
variable life insurance policies. Please review these tables to better
understand the effect of expenses upon the Policy. You may also ask us to
provide a comparable illustration based upon your specific situation.
For more detailed information about the Policy,
Please read the rest of this prospectus and the Policy.
6
<PAGE>
- -----------------------------------------------------------
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. We are a
wholly-owned subsidiary of Mutual of Omaha Insurance Company. The Mutual of
Omaha family of companies provide life, health, disability, home and auto
insurance, trust services, and investment sales and brokerage services. The
Mutual of Omaha Companies have a proud tradition of supporting environmental
education, made popular through its long-running Mutual of Omaha's Wild Kingdom
television program, and continued through its Wildlife Heritage Trust. United of
Omaha is principally engaged in the business of issuing group and individual
life insurance and annuity policies, and group accident and health insurance in
all states (except New York), and the District of Columbia. As of December 31,
1998, United of Omaha had assets of over $10 billion.
We may from time to time publish (in advertisements, sales literature and
reports to Policy Owners) the ratings and other information assigned to us by
one or more independent rating organizations such as A.M. Best, Moody's
Investors Service, Standard & Poor's Corporation, and Duff & Phelps, Inc. The
purpose of the ratings is to reflect our financial strength and/or claims-paying
ability. The ratings do not bear on the investment performance of assets held in
the Variable Account or on the safety or the degree of risk associated with an
investment in the Variable Account.
- -----------------------------------------------------------
INVESTMENT OPTIONS
The investment results of each investment portfolio, whose
investment objectives are described below, are likely to differ
significantly. You should consider carefully, and on a continuing
basis, which portfolios or combination of investment portfolios
and fixed rate options best suits your long-term investment
objectives.
We recognize you have very personal goals and investment strategies. The
Policy allows you to choose from a wide array of investment options -- each
chosen for its potential to meet specific investment objectives. You may
allocate all or a part of your premiums to one or a combination of the variable
investment options or the fixed rate options. (Allocations to the Systematic
Transfer Account are limited to initial premium and rollovers only.) Allocations
must be in whole percentages and total 100%.
You can choose among 25 variable investment options and two fixed rate
options.
o VARIABLE INVESTMENT OPTIONS
The investment portfolios are not available for purchase
directly by the general public, and are not the same as
other mutual fund portfolios with very similar or nearly
identical names that are sold directly to the public.
However, the investment objectives and policies of certain
portfolios available under the Policy are very similar to
the investment objectives and policies of other portfolios
that are or may be managed by the same investment adviser or
manager. Nevertheless, the investment performance and
results of the portfolios available under the Policy may be
lower, or higher, than the investment results of such other
(publicly available) portfolios. There can be no assurance,
and no representation is made, that the investment results
of any of the portfolios available under the Policy will be
comparable to the investment results of any other mutual
fund portfolio, even if the other portfolio has the same
investment adviser or manager and the same investment
objectives and policies, and a very similar name.
For detailed information about any portfolio, including its
performance history, refer to the prospectus for that
portfolio.
With the Policy's variable investment options, you bear the investment
risk, not us. You control the amount of money you invest in each of the
investment portfolios, and you bear the risk those portfolios will perform worse
than you expect.
The Variable Account, United of Omaha Separate Account B, provides you
with 25 variable investment options in the form of Series Fund investment
portfolios. Each Series Fund is an open-end investment management company. When
you allocate Policy funds to a Series Fund portfolio, those funds are placed in
a Subaccount of the Variable Account corresponding to that portfolio, and the
Subaccount in turn invests in the portfolio. The Accumulation Value of your
Policy depends directly on the investment performance of the portfolios that you
select.
7
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- ---------------- ---------------------------------------------------- ------------------------------------
Variable Investment Options
Asset Under United of Omaha Separate Account B Objective
Category * (Series Fund - Portfolio)
- ---------------- -----------------------------------------------------------------------------------------
Investments
- ---------------- ---------------------------------------------------- ------------------------------------
MFS Variable Insurance Trust -
MFS Emerging Growth Series Portfolio (5) Long-term capital appreciation.
Aggressive
Growth
- ---------------- ---------------------------------------------------- ------------------------------------
Common stocks of small- and medium-sized companies
with growth potential.
May make limited investments in lower-rated bonds or
comparable unrated securities.
- ---------------- -----------------------------------------------------------------------------------------
Alger American Fund -
Alger American Small Capitalization Portfolio (1) Long-term capital appreciation
- ---------------- ---------------------------------------------------- ------------------------------------
Common stocks of companies with total market
capitalization of less than $1 billion. Such
securities may have limited marketability and be
subject to more abrupt or erratic market movements
than the general equity market.
- ---------------- -----------------------------------------------------------------------------------------
Pioneer Variable Contracts Trust - Long-term capital appreciation
Real Estate Pioneer Real Estate Growth Portfolio (8) with current income.
- ---------------- ---------------------------------------------------- ------------------------------------
Real estate investment trusts (REITs) and other real
estate industry companies.
- ---------------- -----------------------------------------------------------------------------------------
T. Rowe Price International Series, Inc. -
T. Rowe Price International Stock Portfolio (10) Long-term capital appreciation.
International
- ---------------- ---------------------------------------------------- ------------------------------------
Common stock of foreign companies.
- ---------------- -----------------------------------------------------------------------------------------
Scudder Variable Life Investment Fund -
Scudder VLIF International Portfolio (9) Long-term capital appreciation.
- ---------------- ---------------------------------------------------- ------------------------------------
Common stock of foreign companies, diversified among
several countries and industries.
- ---------------- -----------------------------------------------------------------------------------------
Scudder Variable Life Investment Fund - Long-term capital
appreciation Scudder VLIF Global Discovery Portfolio (9) with
current income.
- ---------------- -----------------------------------------------------------------------------------------
Common stocks of small foreign and domestic
companies, and to a limited extent lower rated bonds
or comparable unrated securities.
- ---------------- -----------------------------------------------------------------------------------------
Morgan Stanley Dean Witter Universal Funds, Inc. -
MSDW Emerging Markets Equity Portfolio (6) Long-term capital appreciation.
- ---------------- ---------------------------------------------------- ------------------------------------
Securities of "emerging" foreign countries (countries whose economies are
developing strongly and where equity markets are becoming sophisticated).
Such investments may not be feasible or may involve unacceptable political
risks in some countries, and may involve greater
risk than securities in more developed countries and
markets.
- ---------------- -----------------------------------------------------------------------------------------
MFS Variable Insurance Trust - High current income
Bond - MFS High Income Series Portfolio (5) and capital appreciation.
High Yield
- ---------------- ---------------------------------------------------- ------------------------------------
Diversified bond portfolios, some of which may
involve equity features, lower-rated bonds or
comparable unrated securities.
- ---------------- -----------------------------------------------------------------------------------------
T. Rowe Price Equity Series, Inc. -
T. Rowe Price New American Growth Portfolio (11) Long-term capital appreciation.
Growth
- ---------------- -----------------------------------------------------------------------------------------
Common stocks of companies in the service sector of
the economy.
- ---------------- -----------------------------------------------------------------------------------------
MFS Variable Insurance Trust -
- ---------------- ---------------------------------------------------- ------------------------------------
Long-term capital appreciation.
- ---------------- ---------------------------------------------------- ------------------------------------
Common stocks or securities convertible into common stocks of companies
expected to possess better-than-average prospects for long-term growth. May
invest to a limited extent in lower-rated securities or comparable unrated
securities.
- ---------------- -----------------------------------------------------------------------------------------
Fidelity Variable Insurance Products Fund II -
Fidelity VIP II Contrafund Portfolio (3) Long-term capital appreciation.
- ---------------- ---------------------------------------------------- ------------------------------------
Securities of companies, foreign and domestic, that
are currently undervalued, unpopular or overlooked,
but analysts believe show potential for growth. May
use techniques to hedge risk.
- ---------------- -----------------------------------------------------------------------------------------
Alger American Fund -
Alger American Growth Portfolio (1) Long-term capital appreciation.
- ---------------- ---------------------------------------------------- ------------------------------------
Common stocks of companies with total market
capitalization of $1 billion or more.
- ---------------- -----------------------------------------------------------------------------------------
Pioneer Variable Contracts Trust -
Pioneer Capital Growth Portfolio (8) Long-term capital appreciation.
- ---------------- ---------------------------------------------------- ------------------------------------
8
<PAGE>
Securities of companies, foreign and domestic, that are currently
undervalued, unpopular or overlooked, but analysts believe show potential
for growth.
- ---------------- ---------------------------------------------------- ------------------------------------
MFS Variable Insurance Trust -
MFS Capital Opportunities Series Portfolio (5) Long-term capital appreciation.
- ---------------- ---------------------------------------------------- ------------------------------------
Common stocks of foreign and domestic companies. May
make limited investments in lower rated bonds or
comparable unrated securities.
- ---------------- -----------------------------------------------------------------------------------------
Fidelity Variable Insurance Products Fund II - Long-term
capital appreciation Fidelity VIP II Index 500 Portfolio (3)
with current income.
Growth &
Income
- ---------------- ---------------------------------------------------- ------------------------------------
Common stocks of companies that comprise the
Standard & Poor's 500 index.
- ---------------- -----------------------------------------------------------------------------------------
Scudder Variable Life Investment Fund - Long-term capital
appreciation Scudder VLIF Growth & Income Portfolio (9) with
current income.
- ---------------- ---------------------------------------------------- ------------------------------------
Common and preferred stocks, and securities
convertible into common stocks, of large established
companies.
- ---------------- -----------------------------------------------------------------------------------------
T. Rowe Price Equity Series, Inc. -
T. Rowe Price Equity Income Portfolio (11) Dividend income and capital
Equity appreciation.
Income
- ---------------- ---------------------------------------------------- ------------------------------------
Common stocks of established companies that pay
dividends.
- ---------------- -----------------------------------------------------------------------------------------
Fidelity Variable Insurance Products Fund - Dividend income and
capital Fidelity VIP Equity Income Portfolio (3) appreciation
surpassing the S&P
500 average.
- ---------------- ---------------------------------------------------- ------------------------------------
Securities of established companies that produce
income and capital appreciation.
- ---------------- -----------------------------------------------------------------------------------------
T. Rowe Price Equity Series, Inc. - (11)
T. Rowe Price Personal Strategy Balanced Portfolio Dividend income and capital
appreciation.
Balanced
- ---------------- ---------------------------------------------------- ------------------------------------
Diversified portfolio of stocks, bonds and money market securities. Bond
holdings are primarily investment grade, but can include more volatile
unrated bonds.
- ---------------- -----------------------------------------------------------------------------------------
Fidelity Variable Insurance Products Fund II -
Fidelity VIP II Asset Manager Growth Portfolio Long term capital appreciation.
(3,4)
- ---------------- ---------------------------------------------------- ------------------------------------
Diversified portfolio of domestic and foreign
stocks, bonds, money market securities, and
derivative transactions.
- ---------------- -----------------------------------------------------------------------------------------
MFS Variable Insurance Trust - Capital appreciation and growth
Bond - MFS Global Governments Series Portfolio (5) with moderate current income.
International
- ---------------- ---------------------------------------------------- ------------------------------------
Foreign and U.S. government bonds.
- ---------------- -----------------------------------------------------------------------------------------
Insurance Management Series -
Federated Fund for U.S. Government Securities II Current income.
Portfolio (2)
Bond -
Domestic
- ---------------- -----------------------------------------------------------------------------------------
U.S. government bonds.
- ---------------- -----------------------------------------------------------------------------------------
T. Rowe Price Fixed Income Series, Inc. - High level of current income
T. Rowe Price Limited Term Bond Portfolio (11) consistent with modest price
fluctuations.
- ---------------- ---------------------------------------------------- ------------------------------------
Short- and intermediate-term investment grade debt
securities.
- ---------------- -----------------------------------------------------------------------------------------
Above-average return from a
Morgan Stanley Dean Witter Universal Funds, Inc. - diversified portfolio of fixed
MSDW Fixed Income Portfolio (7) income securities and derivatives.
- ---------------- ---------------------------------------------------- ------------------------------------
Medium-to-high quality fixed income investments of
intermediate maturity.
- ---------------- ---------------------------------------------------- ------------------------------------
Insurance Management Series - Current income consistent with the
Money Market Federated Prime Money Fund II Portfolio (2) stability of principal.
- ---------------- -----------------------------------------------------------------------------------------
Money market instruments maturing in 13 months or
less. This portfolio is not insured by the U.S.
government, and there is no guarantee it will be
able to maintain a stable net asset value per share.
- ---------------- -----------------------------------------------------------------------------------------
</TABLE>
(*) Asset Category designations are our own to help you gain insight into each
portfolio's intended objectives, but do not assure any portfolio will perform
consistent with the categorization. Information contained in the Series Funds'
prospectuses should be read carefully before investing in any Subaccount of the
Variable Account.
9
<PAGE>
We do not assure that any portfolio will achieve its stated
objective. Detailed information, including a description of
each portfolio's investment objective and policies, a
description of risks involved in investing in each of the
portfolios, and each portfolio's fees and expenses, is
contained in the prospectuses for the Series Funds, current
copies of which accompany this Prospectus. None of these
portfolios are insured or guaranteed by the U.S. Government.
Investment advisers 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 Dean Witter Asset Management, Inc.
(7) Miller Anderson & Sherrerd, LLP.
(8) Pioneer Investment Management.
(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.
The investment advisers of the Series Funds and the investment portfolios
are described in the prospectuses for the Series Funds.
Each investment portfolio is designed to provide an investment vehicle for
variable annuity and variable life insurance contracts issued by various
insurance companies. For more information about the risks associated with the
use of the same funding vehicle for both variable annuity and variable life
insurance contracts of various insurance companies, see the prospectuses of the
Series Funds which accompany this prospectus.
We may receive revenues from the investment portfolios or their investment
advisers. These revenues may depend on the amount our Variable Account invests
in the Series Fund and/or any portfolio thereof.
The Variable Account is registered with the SEC as a unit investment trust.
However, the SEC does not supervise the management or the investment practices
or policies of the Variable Account or United of Omaha. The Variable Account was
established as a separate investment account of United of Omaha under Nebraska
law on August 27, 1996. Under Nebraska law, we own the Variable Account assets,
but they are held separately from our other assets and are not charged with any
liability or credited with any gain of other separate investment accounts or
other business unrelated to the Variable Account. 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. We are responsible to you
for meeting the obligations of the Policy, but we do not guarantee the
investment performance of any of the portfolios. We do not make any
representations about their future performance. The portfolios may fail to meet
their objectives, and they could go down in value. Each portfolio operates as a
separate investment fund, and the income or losses of one portfolio generally
have no effect on the investment performance of any other portfolio. Complete
descriptions of each portfolio's investment objectives and restrictions and
other material information related to an investment in the portfolio are
contained in the prospectuses for each of the Series Funds which accompany this
prospectus.
o Adding, Deleting, or Substituting Variable Options
We do not control the Series Funds, so we cannot guarantee that any of the
investment portfolios will always be available. We retain the right to change
the Variable Account and its investments. This means we may eliminate the shares
of any investment portfolio held in our Variable Account and to substitute
shares of another 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. We will first notify you and
receive any necessary SEC and state approval before making such a change.
New portfolios may be added, or existing portfolios eliminated, when, in our
sole discretion, conditions warrant such a change. If a portfolio is eliminated,
we will ask you to reallocate any amount in the eliminated portfolio. If you do
not reallocate these amounts, we will automatically reinvest them in the
Federated Prime Money Fund II portfolio.
If we make a portfolio substitution or change, we may change the Policy to
reflect the substitution or change. Our Variable Account may be (i) operated as
an investment management company or any other form permitted by law, (ii)
deregistered with the SEC if registration is no longer required or (iii)
combined with one or more other separate accounts. To the extent permitted by
law, we also may transfer assets of the Variable Account to other accounts.
10
<PAGE>
o FIXED RATE OPTIONS
The actual net effective guaranteed minimum interest rate,
after deduction of the mortality and expense risk charge, is
2.97% per year (compounded annually) for the first 10 Policy
Years and 3.36% per year thereafter (except in Maryland,
where the minimum net rates are -1.53% per year for the
first ten Policy Years and -1.14% per year thereafter).
There are two fixed rate options: a Systematic Transfer Account and a Fixed
Account. With fixed rate options, we bear the investment risk. This means we
guarantee that you will earn a minimum interest rate. This guaranteed minimum
interest rate is 4.5% per year, compounded annually, in all states except
Maryland (the guaranteed minimum rate is 0.0% for Policies issued in Maryland).
We may declare a higher current interest rate. Whatever interest rate we declare
will be guaranteed for at least one year. However, you bear the risk that we
will not credit more than 4.5% interest per year (or more than 0.0% in Maryland)
for the life of the Policy. We have full control over how assets allocated to
fixed rate options are invested, and we bear the risk that those assets will
perform better or worse than the amount of interest we have declared. The focus
of this prospectus is to disclose the Variable Account aspects of the Policy.
For details regarding the fixed investment options, see the Policy.
o Systematic Transfer Account (may not be available in all states)
The Systematic Transfer Account is the fixed rate option used if you elect
to participate in the Systematic Transfer Enrollment Program ("STEP program")
when you buy the Policy. The STEP program is used to automatically transfer a
predetermined dollar amount on a monthly basis to any of the Subaccounts you
choose. The allocation and the predetermined dollar amount may not be changed.
You must have a minimum of $5,000 in the Systematic Transfer Account in order to
participate in the STEP program. No additional funds may be allocated to a
Systematic Transfer Account after you purchase the Policy (except for funds
designated in the application to be transferred into the Policy pursuant to an
Internal Revenue Code Section 1035 exchange.
Funds allocated to the Systematic Transfer Account must be completely
transferred to the Variable Account in 12 months. Transfers from the Systematic
Transfer Accounts do not count toward the 12 free transfers allowed each Policy
Year. You may not transfer funds into any Systematic Transfer Account.
All amounts allocated to the fixed rate options become part
of the general account assets of United of Omaha. Interests
in the general account have not been registered with the SEC
and are not subject to the SEC's regulation, nor is the
general account registered as an investment company with the
SEC. Therefore, SEC staff have not reviewed the general
account disclosures in this prospectus.
o Fixed Account
One transfer out of the Fixed Account is allowed each Policy Year. (This
limit does not apply to the Dollar Cost Averaging or Asset Allocation programs.)
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. We reserve the right to modify transfer privileges
at any time. Partial withdrawals from the Fixed Account are limited to a pro
rata amount (with withdrawals from the Variable Account). Withdrawals and
transfers from the Fixed Account may be delayed for up to six months (30 days in
West Virginia), and withdrawals may be subject to a Surrender Charge. 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 most recent
payment plus interest is considered to be transferred out next, and so on (a
"last-in, first-out" procedure).
o Fixed Account and Systematic Transfer Account
The Fixed Account and the Systematic Transfer Account are part of our
general account assets. Our general account includes all our assets except those
segregated in the Variable Account or in any other separate investment account.
You may allocate premiums to the Fixed Account or transfer amounts from the
Variable Account to the Fixed Account. Instead of you bearing the investment
risk, as you do with investments allocated to the Variable Account, we bear the
full investment risk for investments in the fixed rate options. We have sole
discretion to invest the assets of our general account, subject to applicable
law.
We have sole discretion to set current interest rates of
fixed rate options. We do not guarantee the level of future
interest rates of fixed rate options, except that they will
not be less than the guaranteed minimum interest rate.
We have complete discretion to declare interest in excess of the guaranteed
minimum rate, or not to declare any excess interest. However, once declared, we
guarantee that any rate will last for at least one year. Different rates of
interest may be credited to the Systematic Transfer Account and the Fixed
Account.
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<PAGE>
We guarantee that, on payment of the death benefit or at the Policy Maturity
Date, the amount in your Fixed Account or Systematic Transfer Account will be
not be less than the amount of premiums allocated or Accumulation Value
transferred to the Fixed Account or Systematic Transfer Account, plus interest
at the guaranteed minimum interest rate, plus excess interest (if any) credited
to amounts in the Fixed Account or Systematic Transfer Account, less that part
of the Monthly Deduction allocated to the Fixed Account or Systematic Transfer
Account, less any premium or other taxes 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.
o TRANSFERS
The Policy is designed for long-term investment, not for active trading or
"market timing." Excessive transfers could harm other Policy Owners by having a
detrimental effect on portfolio management. After the "right to examine" Policy
period, you may transfer Policy value from one Subaccount to another, from the
Variable Account to the Fixed Account, or from the Fixed Account to any
Subaccount, as often as you like, subject to these rules:
Transfer Rules:
o We must receive notice of the transfer -- either Written Notice or an
authorized Telephone Transaction.
o The transferred amount must be at least $500, or the entire Subaccount
value if it is less. (If the Subaccount value remaining after a transfer
will be less than $500, we will include that amount as part of the
transfer.)
o The first 12 transfers each Policy Year from Variable Account Subaccounts
are free. The rest cost $10 each. This fee is deducted from the amount
transferred.
o A transfer from the Fixed Account:
- currently may be made only once each Policy Year;
- is free;
- does not count toward the 12 free transfer limit; and
- is limited during any Policy Year to 10% of the Fixed Account value on
the date of the transfer.
o We reserve the right to limit transfers, or to modify transfer privileges,
for any permissible reason.
o If the Accumulation Value in any Subaccount falls below $500, we may
transfer the remaining balance, without charge, to the Federated Prime
Money Fund II portfolio.
o Transfers made pursuant to participation in the Dollar Cost Averaging,
Asset Allocation or Rebalancing programs are not subject to the amount or
timing limitations of these rules, nor are they subject to a Transfer
Charge. See the sections of this prospectus describing those programs for
the rules of each program.
o If you transfer amounts from the Fixed Account to the Variable Account, we
can restrict or limit any transfer of those amounts back to the Fixed
Account.
Third-party Transfers. Where permitted and subject to our rules, we may
accept your authorization to have a third party exercise transfers on your
behalf. We can suspend or cancel our acceptance any time upon notice to you. An
example of a reason might be if the third party is practicing "market timing."
We can also limit the availability of Subaccounts and the Fixed Account for
transfers by the third party, upon notice to you. We would not impose such
limits where we have Written Notice that the third party has been duly appointed
by a court or by you to act on your behalf for all your financial affairs.
o DOLLAR COST AVERAGING
The Dollar Cost Averaging and the STEP program are intended
to result 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 either program will result in higher
Accumulation Value or otherwise be successful.
Our Dollar Cost Averaging program allows you to automatically transfer, on a
periodic basis, a set dollar amount or percentage from one Subaccount or the
Fixed Account to any Subaccount(s). You can begin Dollar Cost Averaging when you
purchase the Policy or later. You can increase or decrease the amount or
percentage of transfers or discontinue the program at any time. Rules of the
Dollar Cost Averaging program are:
Dollar Cost Averaging Rules:
o The Dollar Cost Averaging program is free.
o We must receive notice of your election and any changed instruction --
either Written Notice or an authorized Telephone Transaction.
o Automatic transfers can occur monthly, quarterly, semi-annually, or annually.
o There must be at least $5,000 of Accumulation Value in the applicable
Subaccount or Fixed Account.
o Amount of each transfer must be at least $100, and must be $50 per
Subaccount.
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<PAGE>
o If transfers are made from the Fixed Account, the maximum annual 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 limitation out of
the Subaccounts of the Variable Account.
o Dollar Cost Averaging program transfers cannot begin before the end of a
Policy's free look ("right to examine") period. You may specify that
transfers be made on the 1st through the 28th day of the month. Transfers
will be made on the date you specify (or if that is not a Business Day, then
on the next Business Day). If you do not select a date, the program will
begin on the next Policy Monthly Anniversary following the date the Policy's
free look period ends.
o You can limit the number of transfers to be made, in which case the
program will end when that number has been made. Otherwise, the program will
terminate when the amount remaining in the applicable Subaccount or the
Fixed Account is less than $500.
o SYSTEMATIC TRANSFER ENROLLMENT
PROGRAM ("STEP program")
The STEP program allows you to automatically transfer funds on a monthly
basis from the Systematic Transfer Account to any other investment option. It
allows you to use a dollar cost averaging concept to move your initial premium
from a fixed interest rate account into variable investment options within a
12-month period. If you want to move funds from a fixed interest rate account
into variable investment options over a longer time period using the same
concept, then you should use the Dollar Cost Averaging program. (However, we
anticipate crediting a higher interest rate on amounts in the Systematic
Transfer Account than on amounts in the regular Fixed Account.)
STEP Program Rules:
o The STEP program is free.
o Can only be selected on the initial application.
o Must have at least $5,000 in the Systematic Transfer Account to begin.
o Amount transferred each month must be at least an amount sufficient to
transfer the entire amount out of the Systematic Transfer Account in 12
equal monthly payments.
o Transfers must be at least $50 per Subaccount.
o No new premiums may be allocated to this account after the Policy Issue
Date, except for funds designated in the application to be transferred into
the Policy pursuant to an Internal Revenue Code Section 1035 exchange. Upon
receipt of funds by Section 1035 exchange, the 12 monthly payment
requirement is restarted and the minimum monthly transfer amount is
recalculated.
o Cannot begin before the end of the Policy's free look period.
You may specify that transfers be made on the 1st through the 28th day of
the month. If that is not a Business Day, transfers will be made on the next
Business Day. If you do not select a start date, the STEP program will begin
on the next Policy Monthly anniversary following the date the Policy's free
look period ends.
o No transfers may be made into the Systematic Transfer Account.
o All funds remaining in the Systematic Transfer Account on the date of the
last monthly transfer will be transferred to the Subaccounts in a pro rata
amount consistent with your allocation instructions.
o The STEP program ends the earlier of the date when all amounts in the
Systematic Transfer Account have been transferred or the date of the last
monthly STEP program transfer.
o ASSET ALLOCATION PROGRAM
The Asset Allocation program allows you to allocate premiums and Policy
value among the variable investment options. You can specify your own desired
allocation instructions, or you can choose to use one of the five Asset
Allocation Models outlined below. The fixed rate options are not included in
this program.
Asset Allocation Program Rules:
o The Asset Allocation program is free.
o You must request the Asset Allocation program in the Policy application or
by Written Notice or authorized Telephone Transaction.
o Changed instructions, or a request to end this program, must also be by
Written Notice or authorized Telephone Transaction.
o You must have at least $10,000 of Accumulation Value to begin the Asset
Allocation program.
o Transfers made pursuant to this program do not count in determining whether
a Transfer Fee applies.
o Asset allocation and STEP programs cannot run at the same time.
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<PAGE>
The Asset Allocation program does not protect against a loss, and otherwise is
not guaranteed to achieve your goal.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
ASSET ALLOCATION MODELS
CURRENT 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 3 5 12 18
Pioneer Real Estate Growth 4 5 6
T.Rowe Price International Stock 6 15 27 31
Scudder VLIF International 19
MFS High Income Series 4 5 5
T.Rowe Price New American Growth 6
MFS Capital Opportunities Series 3 8 12 16 10
Fidelity VIP II Index 500 5 10 10 13 13
T.Rowe Price Equity Income 10 15
Fidelity VIP Equity Income 8 15 16
MFS Global Governments Series 4 5 5
T.Rowe Price Limited Term Bond 43 31 20 12
MSDW Fixed Income 3
Federated Prime Money Fund II 24 13 5
- --------------------------------------------------------------------------------------------------------
* We retain the right to change allocation model allocations or to substitute
portfolio options therein in future updated prospectuses. Amounts you allocate
to a model portfolio will be invested pursuant to the then current portfolio
allocations for that model.
- --------------------------------------------------------------------------------------------------------
</TABLE>
We use Ibbotson Associates to develop the Asset Allocation Model
allocations. They are an investment consulting firm specializing in applying
investment theories and empirical findings (such as historical return data
collected on the investment portfolios) to quantify the benefits of
diversification for particular investment profiles.
o REBALANCING PROGRAM
....The rebalancing program allows you to rebalance your Accumulation Value
among the variable investment options and the Fixed Account pursuant to your
initial allocation percentage instructions on a quarterly, semi-annual, or
annual basis. Rebalancing utilizes your allocation instructions in effect at the
end of the STEP program period (so it never rebalances any assets to the
Systematic Transfer Account). You may change your rebalancing allocation
instructions at any time. Any change will not be effective until the next
rebalancing occurs.
Rebalancing Program Rules:
o The rebalancing program is free.
o You must request the rebalancing program and give us your rebalancing
instructions by Written Notice. Changed instructions or a request to end
this program must also be by Written Notice.
o You must have at least $10,000 of Policy Accumulation Value to begin the
rebalancing program.
o You may have rebalancing occur quarterly, semi-annually or annually.
o Transfers made pursuant to this program do not count in determining whether
a Transfer Fee applies.
The rebalancing program does not protect against a loss and may not achieve your
goal.
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<PAGE>
- -----------------------------------------------------------------------
IMPORTANT POLICY PROVISIONS
The Ultra Variable Life Policy is a modified single premium variable
universal life insurance policy. The Policy provides a death benefit and, as a
variable insurance policy, allows you to invest your Accumulation Value in
variable or fixed investment options where any gain accumulates on a
tax-deferred basis. Some key rights and benefits under the Policy are summarized
in this prospectus; however, you must refer to the Policy for the actual terms
of the Policy. You may obtain a copy of the Policy from us. The Policy remains
in force until surrendered for its Cash Surrender Value, or until all proceeds
have been paid as a death benefit, or it lapses because its Cash Surrender Value
is insufficient to continue to pay for the expenses to maintain its life
insurance protection.
o POLICY APPLICATION AND ISSUANCE
Replacing an existing life insurance Policy is not always
your best choice. Evaluate any replacement carefully.
To purchase a Policy, you must submit an application with the minimum
initial premium and provide evidence of the proposed insured's insurability. 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 any application or premium for any reason. If your application
is in good order upon receipt, we will credit your initial premium on the date
the Policy is issued. All premiums are allocated to the Federated Prime Money
Fund II portfolio until the end of the free look (or "right to examine") period,
and only then to your selected variable investment allocations. If a Policy is
not issued, we will return your premium. If we issue a Policy, it will be
effective on the date of issue.
o Application in Good Order. All application questions must be answered, but
particularly note these requirements:
- - Your full name, Social Security number, and date of birth must be included.
- - The Beneficiary's full name, Social Security number, and other information
must be included.
- - Your premium allocations must be completed, be in whole percentages, and
total 100%.
- - Initial premium must meet minimum initial premium requirements.
- - Your signature and your agent's signature must be on the application.
- - City, state, and date application was signed must be completed.
- - You must provide all information required for us to underwrite your
application (including health and medical information about the insured,
and other information we deem relevant), and we must accept your
application after underwriting.
o Premium Payments. Your premium checks should be made payable to "United
of Omaha Life Insurance Company" and sent to us. We may postpone crediting any
payment made by check to your Policy until it has been honored by your bank.
Payment by certified check, banker's draft, or cashier's check will be promptly
applied. You may change your premium allocation instructions by sending us
Written Notice or through an authorized Telephone Transaction. The change will
apply to payments received on or after the date we receive your Notice or
authorization.
Initial Premium Payment:
- - The only premium payment required. All others are optional.
- - Must be at least $20,000.
Additional Premium Payments:
- - Additional premiums can only be made until the insured's age 90 (except
as may be required in a grace period).
- - If a premium increases the specified amount of coverage, it is subject
to the insured's continued insurability and our underwriting
requirements.
- - Must be at least $5,000; may be less if it is an additional payment
required during a grace period.
- - If there is a Policy loan, additional premium is generally first treated as
repayment of Policy loan interest, second as repayment of the loan,
and last as additional premium, unless you designate otherwise in a
Written Notice when you send the premium payment to us.
- - Additional premiums are applied pursuant to your current investment
allocation instructions, unless you give us different instructions by
Written Notice or authorized Telephone Transaction at the time you make
an additional premium payment.
- - We reserve the right to limit premiums or refund any values so this
Policy qualifies as life insurance under the Internal Revenue Code.
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<PAGE>
LAPSE AND GRACE PERIOD
o Lapse
Because the Policy's Accumulation Value can fluctuate depending upon the
performance of your selected variable investment options, your Policy can
lapse, even if you pay all planned premiums on time.
No Policy Loan exists: The Policy will lapse if, on a Monthly Deduction
Date, the Accumulation Value is not enough to cover the Monthly Deduction
(subject to the Guaranteed Death Benefit), and a grace period expires without a
sufficient premium payment.
A Policy Loan exists: The Policy will lapse on any Monthly Deduction
Date when the Cash Surrender Value is not enough to cover the Monthly Deduction
and any loan interest due (subject to the No-Lapse Period provision), and a
grace period expires without a sufficient premium payment.
A lapse of the Policy may result in adverse tax consequences.
Grace Period
The Policy can lapse, under certain circumstances, if there is insufficient
value to pay the Monthly Deduction. However, 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.
- - If the necessary additional premium payment is not received, the Policy
terminates as of the first day of the grace period.
- - Payment received during a grace period is first applied to repay Policy
debt before the remaining amount is applied as additional premium to
keep the Policy in force.
- - Insurance coverage continues during the grace period, but the Policy is
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 equal the amount of death benefit in effect immediately prior to
the date the grace period began less any due and unpaid Monthly
Deduction and unpaid loan interest.
o MISSTATEMENT OF AGE OR SEX
If the insured's age or sex is misstated, all Policy payments and benefits
will be those which the premiums paid would have purchased at the correct age
and sex.
o SUICIDE
We will not pay the death benefit if the insured's death results from
suicide, while sane or insane, within two years (one year in Colorado and North
Dakota) from the date of issue (and, in Missouri, if the insured intended
suicide at the time coverage was applied for). 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 the specified amount of coverage 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 (and in Missouri, if the insured
intended suicide at the time coverage was applied for). 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 the specified amount of
coverage 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 the specified amount of coverage will be based on the application
for that increase.
16
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
o TELEPHONE TRANSACTIONS
Telephone Transactions Permitted: Telephone Transaction Rules:
o Transfers. o Only you may elect. Do so on the Policy application
o Partial Withdrawals of $10,000 or by prior Written Notice authorization to us.
or less by you (may be restricted o Must be received by close of the New York Stock
in community property states). Exchange ("NYSE") (usually 3 p.m. Central Time); if later,
o Change of Premium Allocations. the transaction will be processed the next day the NYSE is
open.
o Will be recorded for your protection.
o For security, you must provide your Social Security
number and/or other identification information.
o May be discontinued at any time as to some or all
Owners.
</TABLE>
We are not liable for following authorized Telephone Transaction
instructions we reasonably believe to be genuine.
o REINSTATEMENT
If the Policy lapses because a grace period ended without a sufficient
payment being made, you may reinstate it within five years of the date of lapse
and prior to the maturity date. To reinstate, we must receive:
- - written application signed by you and the insured;
- - evidence of the insured's insurability satisfactory to us;
- - enough payment to continue this Policy in force for three months; and
- - repayment or reinstatement of any outstanding Policy loan, together with
unpaid loan interest from the date of lapse.
On a reinstated Policy, there will be a re-establishment of Surrender
Charges, if any, measured from the original date of issue to the date of
reinstatement.
The effective date of reinstatement will be the date we approve the
application for reinstatement.
The specified amount of insurance coverage of the reinstated Policy may not
exceed the specified amount of insurance coverage at the time of lapse. The
Accumulation Value on the effective date of reinstatement will reflect (a) the
Accumulation Value at the time of lapse, except that the value in the Loan
Account may be repaid prior to reinstatement; less (b) the Monthly Deduction for
the current month.
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 as described
above under the Lapse and Grace Period provision. 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.
o COVERAGE BEYOND MATURITY
At least 30 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:
The tax consequences of continuing a Policy beyond the
Insured's age 100 are unclear. Please consult a tax advisor.
- - We will maintain your allocation of Accumulation Value to the investment
options according to your instructions.
- - The cost of insurance charge will be zero.
- - The expense charge will be zero.
- - The corridor percentage will be fixed at 101%.
- - Any riders attached to the Policy that are then in force will terminate.
- - The insured's date of death will be considered this Policy's maturity
date.
- - You cannot pay any more premiums.
- - All other rights and benefits as described in the Policy will be
available during the insured's lifetime.
The tax consequences associated with extending coverage beyond maturity are
unclear. A tax advisor should be consulted before making such an election.
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<PAGE>
o DELAY OF PAYMENTS
We will usually pay any amounts from the Variable Account requested as a
Policy loan, partial withdrawal or cash surrender within seven days after we
receive your Written Notice. We can postpone such payments or any transfers out
of a Subaccount 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 (30 days in West Virginia).
o MINOR OWNER OR BENEFICIARY
A minor may not own the Policy solely in the minor's name and cannot receive
payments directly as a Policy Beneficiary. Contrary to common belief, in most
states parental status does not automatically give parents the power to provide
an adequate release to us to make Beneficiary payments to the parent for the
minor's benefit. A minor can "own" a Policy through the Trustee of a Trust
established for the minor's benefit, or through the minor's named and court
appointed guardian who own the Policy in their capacity as Trustee or Guardian.
Where a minor is a named Beneficiary, we are able to pay the minor's Beneficiary
share to a minor's Trustee or Guardian. Some states allow us to make such
payments up to a limited amount directly to parents. Parents seeking to have a
minor's interest made payable to them for the minor's benefit are encouraged to
check with their local court to determine the process to be appointed as the
minor's guardian; it is often a very simple process. If there is no adult
representative able to give us an adequate release for payment of the minor's
Beneficiary interest, we retain the minor's interest on deposit until the minor
attains the age of majority.
- -----------------------------------------------------------
EXPENSES
The charges and fees described below compensate us for our expenses in
distributing the Policy, bearing mortality and expense risks under the Policy,
and administering the investment options and the Policy. Except where stated
otherwise, charges and fees shown are the maximum we will charge, and some
actual expenses may be less.
Each Series Fund also deducts expenses from each investment portfolio; those
expenses are described in each Series Fund prospectus.
o MONTHLY DEDUCTION
We make a Monthly Deduction from the entire Accumulation Value on each
monthly anniversary of the Date of Issue (the "Monthly Deduction Date"),
consisting of: (1) the Cost of Insurance Charge; and (2) the Expense Charge.
Charges based on the Accumulation Value are calculated before monthly
charges are deducted, but reflecting charges deducted from Subaccount assets.
The Monthly Deduction is deducted pro rata from the Accumulation Value in the
Subaccounts, the Fixed Account and the Systematic Transfer Account. There is no
Monthly Deduction after the Policy Anniversary next following the insured's
100th birthday if coverage beyond maturity is elected.
o Cost of Insurance Charge
The Cost of Insurance Charge is for providing insurance protection under the
Policy. Currently, the amount of this charge is based on the rate class of the
insured, Policy Accumulation Value and duration. 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 unless an additional premium is
submitted and our underwriting review determines the insured qualifies for a
better rate class; this new rate class will then 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, Policy
Accumulation Value, 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:
18
<PAGE>
Accumulation Value Accumulation Value
Policy Year(s) 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.
When 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.
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 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 "net 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.
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 exists, 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.
o Expense Charge.
The expense charge consists of charges for administrative, tax (first ten
Policy Years only) and mortality and expense risk charges.
Administrative Charge. This charge is currently 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 deduct this charge for the first ten Policy Years
only. 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 this charge 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.
<TABLE>
<CAPTION>
<S> <C>
o SURRENDER CHARGE (ALSO APPLIES TO PARTIAL WITHDRAWALS)
- -------------------------------------------------------------------------------------------
Years Since Receipt of Premium 1 2 3 4 5 6 7 8 9 10+
Payment
- -------------------------------------------------------------------------------------------
Applicable Surrender Charge 9 1/2% 9 1/2% 9 1/2% 9% 7 1/2% 6% 4 1/2% 3% 1 1/2 0%
Percentage
- -------------------------------------------------------------------------------------------
</TABLE>
We will apply a Surrender Withdrawal Charge, expressed as a percentage of
any premium surrendered or withdrawn, upon a full surrender or partial
withdrawal. This charge partially covers our distribution expenses, including
commissions and other promotional expenses. The Surrender Charge Percentage
varies depending upon the number of years elapsed since the date the premium was
made. The amount of a partial withdrawal plus the Surrender Charge is deducted
from the Accumulation Value on the date we receive your withdrawal request.
Partial withdrawals (including any charge) are deducted from the Subaccounts and
the Fixed Account or the Systematic Transfer Account on a pro rata basis, unless
you instruct us otherwise.
The Withdrawal Charge will not cover our cost of distributing the Policies.
Any deficiency is met from our general funds, including amounts derived from the
Mortality and Expense Risk Charge (described above).
19
<PAGE>
o Free Partial Withdrawals
Each Policy Year, subject to limits on transfers from the Fixed Account,
you can withdraw, without a Surrender Charge, the greater of (i) up to 15% of
Accumulation Value at the time of the first withdrawal each year without
incurring a Surrender Charge or (ii) that portion of the Accumulation Value
exceeding the total premium paid. No Surrender Charge is charged upon death
benefit payments. Our rules for partial withdrawals are discussed in the POLICY
DISTRIBUTIONS section of this prospectus.
o Surrender Charge Waivers
We will waive the Surrender Charge upon partial withdrawals and surrenders
in the following situations. Each waiver may not be available in all states.
Nursing Home Waiver. 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 after the last day of confinement to such
facility. Proof of confinement must be provided. The Nursing Home Waiver is not
available if any Owner is confined to a nursing home or hospital facility on the
Date of Issue (except in Pennsylvania).
We will not accept any additional Purchase Payments under your Policy once
you elect this waiver.
Disability Waiver. Any withdrawal where you are physically disabled. We may
require proof of such disability, including 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 any Owner claiming such disability
examined by a licensed physician of our choice and at our expense.
We will not accept any additional purchase payments under your Policy once
you elect this waiver.
The Disability Waiver is not available if any Owner is receiving Social
Security Disability Benefits on the Date of Issue (except in Pennsylvania) or is
age 65 or older.
Terminal Illness Waiver. Any withdrawal after you are diagnosed with a
terminal illness. A terminal illness is a medical condition that, with a
reasonable degree of medical certainty, will result in your death within 12
months or less. 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 of our choice and at our expense.
We will not accept any additional purchase payments under your Policy once
you elect this waiver.
The Terminal Illness Waiver is not available if you are diagnosed with a
terminal illness prior to or on the Date of Issue (except in Pennsylvania).
Unemployment Waiver. Any withdrawal 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 (except in Pennsylvania).
Transplant Waiver. Any withdrawal 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. Any withdrawal if your primary residence suffers
physical damage in the amount of $50,000 or more. To claim this waiver, send us
a certified copy of a licensed appraiser's report stating the amount of the
damage. This certified copy must be submitted within 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.
Death of Spouse or Minor Dependent Waiver. 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%. We must receive proof of death. 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.
20
<PAGE>
TRANSFER CHARGE - $10 (FIRST 12 ARE FREE).
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 Series Fund investment portfolio is responsible for its own expenses.
The net assets of each portfolio reflects deductions for investment advisory
fees and other expenses. These charges are disclosed in each Series Fund's
prospectus which accompany this prospectus. Here is a table of portfolio annual
expenses:
21
<PAGE>
<TABLE>
<CAPTION>
Series Fund Annual Expenses1 Management Other Expenses Total Portfolio
(as a percentage of average net assets) Fees ( after Annual Expenses
(after fee expense (after fee waiver
Portfolio: waiver)(a) reimbursement)(a) and expense
reimbursement)(a)
- ------------------------------------------------- ---------------- ---------------- ===================
<S> <C> <C> <C>
Alger American Growth 0.75% 0.04% 0.79%
Alger American Small Capitalization 0.85% 0.04% 0.89%
Federated Prime Money Fund II (a) 0.49% 0.31% 0.80%
Federated Fund for U.S. Government Securities 0.52% 0.33% 0.85%
II (a)
Fidelity VIP II Asset Manager: Growth (a), (b) 0.59% 0.13% 0.72%
Fidelity VIP II Contrafund (a), (b) 0.59% 0.07% 0.66%
Fidelity VIP Equity Income (a), (c) 0.49% 0.08% 0.57%
Fidelity VIP II Index 500 0.24% 0.04% 0.28%
(a)
MFS Capital Opportunities Series (a) 0.75% 0.25% 1.00%
MFS Emerging Growth Series 0.75% 0.10% 0.85%
MFS Global Governments Series (a) 0.75% 0.25% 1.00%
MFS High Income Series 0.75% 0.25% 1.00%
(a) 0.75% 0.11% 0.86%
MFS Research Series
MSDW Emerging Markets Equity (a) 0.00% 1.95% 1.95%
MSDW Fixed Income (a) 0.06% 0.64% 0.70%
Pioneer Capital Growth 0.65% 0.09% 0.74%
Pioneer Real Estate Growth (a) 1.00% 0.19% 1.19%
Scudder VLIF Global Discovery (a), (d) 0.91% 1.06% 1.97%
Scudder VLIF Growth & Income (e) 0.47% 0.32% 0.79%
Scudder VLIF International 0.87% 0.18% 1.05%
T. Rowe Price Equity Income (f) 0.00% 0.85% 0.85%
T. Rowe Price International Stock (f) 0.00% 1.05% 1.05%
T. Rowe Price Limited-Term Bond (f) 0.00% 0.70% 0.70%
T. Rowe Price New America Growth (f) 0.00% 0.85% 0.85%
T. Rowe Price Personal Strategy Balanced (f) 0.00% 0.90% 0.90%
=======================================================================================================
(a) Without fee waiver or expense reimbursement limits, the following funds
would have had the charges set forth below:
Total Portfolio
Portfolio Management Fees Other Expenses Annual Expenses
-------------------------------------- ------------------ --------------- ===================
Federated Prime Money Fund II 0.50% 0.31% 0.81%
Federated Fund for U.S. Government 0.60% 0.33% 0.93%
Securities II 0.59% 0.14% 0.73%
Fidelity VIP II Asset Manager: Growth 0.59% 0.11% 0.70%
Fidelity VIP II Contrafund 0.49% 0.09% 0.58%
Fidelity VIP Equity Income 0.24% 0.11% 0.35%
Fidelity VIP II Index 500 0.75% 0.36% 1.11%
MFS Capital Opportunities Series 0.75% 0.36% 1.11%
MFS Global Governments Series 0.75% 0.21% 0.96%
MFS High Income Series 1.25% 2.20% 3.45%
MSDW Emerging Markets Equity 0.40% 0.64% 1.04%
MSDW Fixed Income 1.00% 0.20% 1.20%
Pioneer Real Estate Growth 0.97% 1.06% 2.03%
Scudder VLIF Global Discovery
-------------------------------------- ------------------ --------------- ===================
(b) This portfolio limits its total annual expense to 1.00%. (c) This portfolio
limits its total annual expense to 1.50%.
(d) Other Expenses includes a 0.25% 12b-1 fee assessed for payment of
distribution administration expenses.
(e) Other Expenses includes a 0.23% 12b-1 fee assessed for payment of
distribution administration expenses.
(f) T. Rowe Price Funds do not itemize management fees and other expenses.
===========================================================================
</TABLE>
- --------
1 The fee and expense data regarding each Series Fund, which are fees and
expenses for 1998, was provided to United of Omaha by the Series Fund. The
Series Funds are not affiliated with United of Omaha. We have not independently
verified these figures.
22
<PAGE>
- -----------------------------------------------------------
POLICY DISTRIBUTIONS
The principle purpose of the Policy is to provide a death benefit upon the
insured's death, but before then you may also borrow against the Policy's Cash
Surrender Value, take a partial withdrawal, or surrender it for its Cash
Surrender Value. Tax penalties and Surrender Charges may apply to amounts taken
out of your Policy. The Cash Surrender Value is the Accumulation Value less any
applicable Surrender Charge and less any outstanding Policy loan and unpaid loan
interest.
o POLICY LOANS
<TABLE>
<CAPTION>
<S> <C> <C>
Amount You Can Borrow Loan Interest Rate
- -------------------------------------------------------------- ------------------------------------------
Standard Policy Loan. After the first Policy Year (at any Standard Policy Loan. Net annual loan
time in Indiana), you may borrow up to 100% of the Cash interest rate of 1.5%: we charge 5.7%
Surrender Value, less loan interest to the end of the Policy interest in advance (6% effective annual
Year, and less one Monthly Deduction amount. rate), but we also credit 4.5% interest
to any amounts in the Loan Account.
- -------------------------------------------------------------- ------------------------------------------
A Preferred Policy Loan is available on the date when the Preferred Policy Loan. Net annual loan
sum of the Cash Surrender Value plus any outstanding interest rate of 0%: we charge 5.7%
standard loans exceeds the total of all premiums paid since interest in advance (6% effective annual
issue. The amount available for a Preferred Policy Loan is rate), but we also credit 6% interest to
the amount of such excess. any amounts in the Loan Account.
- ---------------------------------------------------------------------------------------------------------
We believe a Preferred Policy Loan will not affect tax treatment of the Policy, but tax law is unclear
on this point and we do not warrant its tax effect.
You may wish to consult your tax advisor before taking a Preferred Policy Loan.
- ---------------------------------------------------------------------------------------------------------
</TABLE>
Loan Rules
o The Policy must be assigned to us as sole security for the loan.
o We will transfer all loan amounts from the investment options to the Loan
Account. The amounts will be transferred on a pro rata basis.
o Loan 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 investment options to the Loan Account on a pro rata basis.
o All or part of a loan may be repaid at any time while the Policy is in
force. We will deduct the amount of a loan repayment from the Loan
Account and allocate that amount pursuant to your current allocation
instructions. We will treat any amounts you pay us as a premium unless you
specify that it is a loan repayment.
o The death benefit will be reduced by the amount of any loan outstanding and
unpaid loan interest on the date of the insured's death.
o We may defer making a loan for six months unless the loan is to pay premiums
to us.
o SURRENDER
For amounts allocated to the Fixed Account and the
Systematic Transfer Account, the Cash Surrender Value is
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%.
While the insured is alive, you may surrender the Policy for its Cash
Surrender Value. Following a surrender, all your rights in the Policy end.
Surrender Rules
o The Policy must be returned to us to receive the Cash Surrender Value.
o The maximum applicable Surrender Charge is 9.5%.
o Surrenders are taxable, and a 10% federal tax penalty may apply prior to
age 59 1/2.
o We may defer payment from the Fixed Account or the Systematic Transfer
Account for up to six months (30 days in West Virginia).
23
<PAGE>
PARTIAL WITHDRAWALS
After the first Policy Year, you may withdraw part of the Accumulation
Value. The amount requested and any Surrender Charge will be deducted from the
Accumulation Value on the date we receive your request (either by Written Notice
or, for amounts of $10,000 or less, also by authorized Telephone Transaction).
Amounts withdrawn except for "Free" withdrawals described below, may be subject
to a Surrender Charge of up to 9.5% unless one of the Surrender Charge waiver
provisions is applicable. The Surrender Charge is a percentage of the Policy
premium withdrawn. The applicable percentage varies according to the length of
time since each affected premium was paid, and are shown in the EXPENSES section
of this prospectus.
"Free" Withdrawals
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 in excess of total premiums
paid.
Partial Withdrawal Rules
o Partial withdrawals are made first from earnings and then from premiums
paid, beginning with the earliest premium payment (a "first-in, first-out"
procedure).
o The minimum partial withdrawal amount is $500; the maximum is an amount such
that the remaining Accumulation Value is not less than $20,000.
o Partial withdrawals result in cancellation of Accumulation Units from each
applicable Subaccount. Unless you instruct us otherwise, we will deduct
withdrawal amounts 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.
o The specified amount of insurance coverage will be reduced in the same
proportion as the Accumulation Value is reduced as a result of any partial
withdrawal.
o Withdrawals from the Systematic Transfer Account will not affect the minimum
monthly transfer amount from that Account, so they will cause the total
amount to be transferred to be completed in less time than originally
anticipated.
o 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 request.
o Partial withdrawals may be taxable and subject to a 10% federal tax penalty.
o DEATH BENEFIT
We will pay a death benefit after we receive necessary documentation of the
insured's death, or as soon thereafter as we have sufficient information about
the Beneficiary to make the payment. Death benefits may be paid pursuant to a
Payment Option (including a lump-sum payment) selected by the Beneficiary to the
extent allowed by applicable law and any settlement agreement in effect at the
insured's death. (See the Payment of Proceeds section below.) If neither you nor
the Beneficiary makes a Payment Option election within 60 days of our receipt of
Due Proof of the insured's death, we will issue a lump-sum payment to the
Beneficiary.
o Guaranty
If no Policy loans are taken, we guarantee Policy 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 Amount
The death benefit is the greater of:
(a) the initial specified amount of coverage 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 of coverage, multiply the single premium amount by the
corresponding issue age premium factor; deposits after issue will increase the
specified mount by the amount of the additional deposit multiplied by the
attained age premium factor (not the "corridor percentage" shown below).
24
<PAGE>
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 PAYMENT OF PROCEEDS
You may elect (or the Beneficiary may elect if you do not) to have proceeds paid
as annuity payments under any combination of the fixed and variable payout
options shown in the Policy. (In Maryland only fixed payout options are
available.) 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.
Rules for Payment of Proceeds
o Payees must be individuals who receive payments in their own behalf
unless otherwise agreed to by us.
o Any option chosen will be effective when we acknowledge it.
o We may require proof of your age or survival or the age or survival of the
payee.
o 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.
o 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 Proceeds 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 Proceeds 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, 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. The number of units for each
Subaccount is determined by dividing the amount of the first payment
attributable to that Subaccount by the value of a unit in that Subaccount when
the first payment is determined.
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 and other costs and risks
associated with the variable payment options (so a gross return of 5.2% is
necessary for a net return of 4.0%).
25
<PAGE>
4 transfers are allowed each Policy Year.
o Transfers between Fixed and Variable Payout Options
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 exchange.
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 Payout Options
The longer the guaranteed or projected proceeds Payment
Option period, the lower the amount of each payment.
NOTE: Unless you elect a Payout Option with a guaranteed period or Option 1,
it is possible only one payment would be made under the Payout Option if the
payee died before the due date of the second annuity payment, only two annuity
payments would be made if the payee died before the due date of the third
annuity payment, etc. If the continuation of variable payments being made under
Option 2 or 6 does not depend upon the payee's remaining alive, you may
surrender your Policy and receive the commuted value of any unpaid payments.
However, if your payment under Option 2 or 6 depends upon the payee's continued
life, you cannot surrender your Policy for cash. In this case, once Option
payments commence, payments will end upon the payee's death.
1) Proceeds Held on Deposit at Interest. While proceeds remain on deposit,
we annually credit interest to the proceeds. The interest may be paid
to the payee or added to the amount on deposit.
2) Income of a Specified Amount. Proceeds are paid in monthly installments
of a specified amount over at least a five-year period until proceeds,
with interest, have been fully paid.
3) Income for a Specified Period. Periodic payments of proceeds are paid
for the number of years chosen. If no other frequency is selected,
payments will be made monthly. Monthly incomes for each $1,000 of
Proceeds, which include interest, are shown in a table in the Policy.
4) Lifetime Income. Proceeds are paid as monthly income for as long as the
payee lives. The amount of the monthly income annuity payment will be
the amount computed using either the Lifetime Monthly Income Table set
forth in the Policy (based on the 1983a Mortality Table and interest at
3%, adjusted to age last birthday) 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 proceeds payments,
other than the first variable payment, will vary in amount according to
the investment performance of the applicable variable investment
options.
Guarantees available:
Guaranteed Period - An amount of monthly income annuity payments is
determined that we guarantee to pay for a specified number of years, and
thereafter during the payee's life. Guaranteed Amount - An amount of
monthly income annuity payment is determined that we guarantee to pay
until the sum of payments equals the proceeds placed under the Option
and as long after that as the payee lives.
5) Lump Sum. Proceeds are paid in one sum.
6) Alternative Schedule. We may be able to accommodate making proceeds
payments under other options, including joint and survivor periods.
Contact us for more information.
- -----------------------------------------------------------
TAX MATTERS
This discussion of federal income tax considerations relating to the Policy
is based upon our understanding of laws as they now exist and are currently
interpreted by the Internal Revenue Service ("IRS").
o LIFE INSURANCE QUALIFICATION
Tax laws affecting the Policy are complex. Tax results may
vary among individual uses of a Policy. You are encouraged
to seek independent tax advice in purchasing or making
elections under the Policy.
The Internal Revenue Code of 1986, as amended ("Code") defines a life
insurance contract for federal income tax purposes. This definition can be met
if a life insurance contract satisfies either one of two tests set forth in that
section. The Code and proposed regulations do not directly address the manner in
which these tests should be applied to certain features of the Policy. Thus,
there is some uncertainty about the application of those tests to the Policy.
26
<PAGE>
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 Beneficiary's
gross income; 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.
We reserve the right to make such changes in the Policy as we deem
necessary to assure it qualifies as a life insurance contract under the Code and
continues to provide the tax benefits of such qualification.
Modified Endowment Contracts. The Code establishes a class of life
insurance contracts designated as modified endowment contracts. The Code rules
governing whether a Policy will be treated as a modified endowment contract are
extremely complex. In general, a Policy is 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 because of a material change. The determination of
whether a Policy is 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 if the death benefit is reduced.
In almost all cases, this Policy will be a modified
endowment contract. We recommend you consult with a tax
adviser regarding your use of this Policy. When a premium
payment is credited which we believe causes the Policy to
become a modified endowment contract, we will notify you and
offer you the opportunity to request a refund of that
premium in order to avoid such treatment. You have 30 days
after receiving such a notice to request the refund.
A Policy issued in exchange for a modified endowment contract is subject
to tax treatment as a modified endowment contract. However, we believe that a
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
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. However, 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.
"Investment in the Policy" means:
o the aggregate amount of any premium payments or other consideration
paid for the Policy, minus
o 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
o 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 Owner's gross income.
Distributions from Policies Classified as Modified Endowment Contracts are
subject to the following tax rules:
(1) All distributions, including surrenders and partial withdrawals, 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 (see box 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.
27
<PAGE>
Distributions from Policies Not Classified as Modified Endowment Contracts are
generally treated as first recovering the investment in the Policy 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 nine 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 Code's definition of life insurance. 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 of the Code.
Loans from, or secured by, a Policy that is not a modified endowment
contract are not treated as distributions. However, it is possible that
preferred loans in effect beginning in the tenth Policy Year (or thereafter)
could be treated as distributions rather than loans.
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.
o OTHER POLICY OWNER TAX MATTERS
Depending on the circumstances, the exchange of a Policy, a Policy loan, a
withdrawal, a surrender or lapse, 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.
Interest Paid on Policy Loans generally is not tax deductible.
Aggregation of Modified Endowment Contracts. Pre-death distributions
(including a loan, partial withdrawal, collateral assignment or full surrender)
from a Policy that is treated as a modified endowment contract may require a
special aggregation to determine the amount of income on the Policy. If we or
any of our affiliates issue more than one modified endowment contract to the
same Policy Owner 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.
Federal and state estate, inheritance and other tax consequences of
ownership or receipt of proceeds under the Policy depend upon your 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.
Diversification Requirements. Code Section 817(h) requires 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 the
Code. Any failure to comply with the diversification requirements could subject
you to immediate taxation on the incremental increases in Accumulation Value of
the Policy plus the cost of insurance protection for the year. However, we
believe the Policy, through the underlying investment portfolios, complies fully
with such requirements.
Owner control. 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.
Tax-advantaged arrangements. 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.
Possible Tax Law Changes. There is always a possibility that the tax
treatment of the Policy could change, by legislation or otherwise. You should
consult a tax advisor with respect to possible tax law changes and their effect
on your intended use of the Policy.
28
<PAGE>
- -----------------------------------------------------------
MISCELLANEOUS
o OUR MANAGEMENT
Directors*
Foggie, Samuel L. Banking and Finance Industry Executive
Hallett, Carol B. President, Air Transport Association of America
Heller, Jeffrey M. President & CEO, Electronic Data Systems
Osborne, Thomas W. University of Nebraska Foundation
Sampson, Richard J. Retired Group Insurance Executive of our Company
Straus, Oscar S. Investments; President, The Daniel and Florence Guggenheim
Foundation
Sturgeon, John A. President, Chief Operating Officer of our Company
Wayne, Michael A. Foundation and Cancer Institute Executive
Weekly, John W. Chairman of the Board and Chief Executive Officer of our
Company
Senior 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)
Randall C. Horn Executive Vice President (Group Insurance)
M. Jane Huerter Executive Vice President (Corporate Secretary; Corporate
Administration)
John L. Maginn Executive Vice President (Treasurer; Chief Investment
Officer)
William C. Mattox Executive Vice President (Federal Government Affairs)
Thomas J. McCusker Executive Vice President (General Counsel)
Tommie D. Thompson Executive Vice President (Corporate Comptroller)
*Business address for all directors and officers is Mutual of Omaha
Plaza, Omaha, Nebraska 68175.
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 an affiliate 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 Expenses
section of this prospectus.
29
<PAGE>
VOTING RIGHTS
As required by law, we will vote Series Fund shares held by the Variable
Account at regular and special shareholder meetings of the Series Funds pursuant
to instructions received from persons having voting interests in the portfolios.
If, however, applicable law or regulation or interpretation of them is amended,
and as a result we may vote Series Fund shares in our own right, we may do so.
The Series Funds may not hold routine annual Shareholder meetings.
As a Policy Owner, you have a voting interest in the portfolios you are
invested in. The number of votes that you may instruct for a particular
Subaccount is determined by dividing your Accumulation Value in the Subaccount
by the net asset value per share of the corresponding Series Fund portfolio.
Fractional shares are counted. You will receive proxy material, reports, and
other materials relating to the appropriate portfolio in which you have voting
interests.
o YEAR 2000 ISSUES
Like all financial services providers, we use systems affected by Year 2000
transition issues and rely upon service providers, including investment
managers, whose own systems may also be affected. We are implementing a Year
2000 transition plan, and are confirming that our service providers are also
doing so. 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 believe Year
2000 transition implementation will harm purchasers of Policies, or our Policy
administration efforts.
o STATE REGULATION
We are 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 PROCEEDINGS
As of the date of this prospectus, there are no legal proceedings affecting
the Variable Account, or that is material in relation to our total assets.
o INDEPENDENT AUDITORS
Our Financial Statements as of December 31, 1998 and 1997 and for each of
the three years ended December 31, 1998, and of United of Omaha Separate Account
B as of December 31, 1998, and for the year ended December 31, 1998 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.
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.
DO YOU HAVE QUESTIONS?
If you have questions about your Policy or this prospectus,
you may contact your agent or broker who gave this
prospectus to you, or you may contact us at: United of
Omaha, Variable Product Service, P.O. Box 8430, Omaha,
Nebraska 68103-0430. Telephone 1-800-238-9354.
30
<PAGE>
- -----------------------------------------------------------
ILLUSTRATIONS
DEATH BENEFITS, CASH SURRENDER VALUE AND ACCUMULATED PREMIUMS
The tables in this Section illustrate how the Policy operates: 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 us or other companies. These tables assume no riders are attached to
the base Policy illustrated.
Death benefits, Cash Surrender Values, and Accumulation Values for a Policy
would be different from the amounts shown if the actual gross rates of return
averaged 0%, 6% or 12%, but varied above and below that average for the period,
if the initial premium was paid in another amount, if additional payments were
made, or if any Policy loan or partial withdrawal was made during the period of
time illustrated. They would also be different depending on the allocation of
Accumulation Value among the Variable Account's Subaccounts, if the actual gross
rates of return averaged 0%, 6% or 12%, but varied above and below that average
for the period.
The amounts for the death benefit, Cash Surrender Value, and Accumulation
Value shown in the tables reflect the fact that an expense 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 Policy Years following each premium payment,
depending on issue age. The amounts shown in the tables also take into account
an average daily charge equal to an annual charge 0.92% 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 -0.92%, 5.08%, 11.08%, 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, we will provide a comparable illustration based upon the
proposed insured's actual age, sex and underwriting classification, the
specified amount of insurance coverage, the proposed amount and frequency of
premium payments and any available riders requested.
31
<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% (11.08% 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 21,726 19,826 52,000 21,517 19,617 52,000
2 22,505 23,600 21,700 52,000 23,163 21,263 52,000
3 23,153 25,637 23,737 52,000 24,954 23,054 52,000
4 24,310 27,849 26,049 52,000 26,906 25,106 52,000
5 25,526 30,252 28,752 52,000 29,041 27,541 52,000
6 26,802 32,863 31,663 52,000 31,381 30,181 52,000
7 28,142 35,698 34,798 52,000 33,951 33,051 52,000
8 29,549 38,779 38,179 52,000 36,784 36,184 52,000
9 31,027 42,151 41,851 52,267 39,916 39,616 52,000
10 32,578 45,862 45,862 55,952 43,393 43,393 52,940
11 34,207 50,115 50,115 60,138 47,402 47,402 56,882
12 35,917 54,761 54,761 65,166 51,769 51,769 61,605
13 37,713 59,839 59,839 70,610 56,528 56,528 66,704
14 39,599 65,387 65,387 76,503 61,715 61,715 72,206
15 41,579 71,450 71,450 82,882 67,366 67,366 78,145
16 43,657 78,075 78,075 89,787 73,524 73,524 84,553
17 45,840 85,315 85,315 96,406 80,269 80,269 90,704
18 48,132 93,225 93,225 103,480 87,667 87,667 97,310
19 50,539 101,871 101,871 111,040 95,797 95,797 104,419
20 53,066 111,397 111,397 119,195 104,755 104,755 112,088
25 67,727 174,391 174,391 200,088 163,992 163,992 172,192
35 110,320 423,273 423,273 444,437 387,280 387,280 406,644
</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.
32
<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% (5.08% 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 20,552 18,652 52,000 20,340 18,440 52,000
2 22,505 21,120 19,220 52,000 20,664 18,764 52,000
3 23,153 21,703 19,803 52,000 20,968 19,068 52,000
4 24,310 22,303 20,503 52,000 21,252 19,452 52,000
5 25,526 22,918 21,418 52,000 21,510 20,010 52,000
6 26,802 23,551 22,351 52,000 21,738 20,538 52,000
7 28,142 24,202 23,302 52,000 21,929 21,029 52,000
8 29,549 24,870 24,270 52,000 22,077 21,477 52,000
9 31,027 25,557 25,257 52,000 22,172 21,872 52,000
10 32,578 26,263 26,263 52,000 22,206 22,206 52,000
11 34,207 27,121 27,121 52,000 22,259 22,259 52,000
12 35,917 28,007 28,007 52,000 22,238 22,238 52,000
13 37,713 28,922 28,922 52,000 22,133 22,133 52,000
14 39,599 29,866 29,866 52,000 21,933 21,933 52,000
15 41,579 30,842 30,842 52,000 21,617 21,617 52,000
16 43,657 31,850 31,850 52,000 21,164 21,164 52,000
17 45,840 32,890 32,890 52,000 20,542 20,542 52,000
18 48,132 33,965 33,965 52,000 19,710 19,710 52,000
19 50,539 35,074 35,074 52,000 18,622 18,622 52,000
20 53,066 36,220 36,220 52,000 17,222 17,222 52,000
25 67,727 42,536 42,536 52,000 2,736 2,736 52,000
35 110,320 59,145 59,145 62,102 *** *** ***
</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.
33
<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% (-0.92% 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 19,379 17,538 52,000 19,164 17,343 52,000
2 22,505 18,777 16,993 52,000 18,306 16,567 52,000
3 23,153 18,194 16,465 52,000 17,422 15,767 52,000
4 24,310 17,628 16,042 52,000 16,509 15,023 52,000
5 25,526 17,081 15,800 52,000 15,561 14,394 52,000
6 26,802 16,550 15,557 52,000 14,571 13,696 52,000
7 28,142 16,036 15,315 52,000 13,529 12,920 52,000
8 29,549 15,538 15,072 52,000 12,426 12,053 52,000
9 31,027 15,055 14,830 52,000 11,248 11,080 52,000
10 32,578 14,588 14,588 52,000 9,984 9,984 52,000
11 34,207 14,204 14,204 52,000 8,657 8,657 52,000
12 35,917 13,831 13,831 52,000 7,211 7,211 52,000
13 37,713 13,467 13,467 52,000 5,631 5,631 52,000
14 39,599 13,113 13,113 52,000 3,898 3,898 52,000
15 41,579 12,768 12,768 52,000 1,985 1,985 52,000
16 43,657 12,432 12,432 52,000 *** *** ***
17 45,840 12,105 12,105 52,000 *** *** ***
18 48,132 11,787 11,787 52,000 *** *** ***
19 50,539 11,477 11,477 52,000 *** *** ***
20 53,066 11,175 11,175 52,000 *** *** ***
25 67,727 9,781 9,781 52,000 *** *** ***
35 110,320 7,493 7,493 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.
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% (11.08% NET)
Male issue age 65 Initial Premium $20,000
Preferred Class Face Amount $36,868
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 21,726 19,826 36,868 21,423 19,523 36,868
2 22,505 23,600 21,700 36,868 22,982 21,082 36,868
3 23,153 25,637 23,737 36,868 24,701 22,801 36,868
4 24,310 27,849 26,049 36,868 26,607 24,807 36,868
5 25,526 30,252 28,752 36,868 28,734 27,234 36,868
6 26,802 32,871 31,671 37,802 31,123 29,923 36,868
7 28,142 35,747 34,847 40,394 33,817 32,917 38,213
8 29,549 38,890 38,290 43,167 36,789 36,189 40,836
9 31,027 42,331 42,031 46,140 40,045 39,745 43,649
10 32,578 46,109 46,109 49,336 43,619 43,619 46,672
11 34,207 50,467 50,467 52,990 47,741 47,741 50,128
12 35,917 55,219 55,219 57,980 52,237 52,237 54,849
13 37,713 60,398 60,398 63,418 57,136 57,136 59,993
14 39,599 66,040 66,040 69,342 62,474 62,474 65,597
15 41,579 72,182 72,182 75,792 68,284 68,284 71,699
16 43,657 78,875 78,875 82,819 74,605 74,605 78,335
17 45,840 86,189 86,189 90,498 81,473 81,473 85,547
18 48,132 94,180 94,180 98,889 88,928 88,928 93,374
19 50,539 102,913 102,913 108,059 97,009 97,009 101,859
20 53,066 112,455 112,455 118,078 105,760 105,760 111,048
25 67,727 175,198 175,198 183,958 161,259 161,259 169,321
35 110,320 436,830 436,830 436,830 396,215 396,215 396,215
</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% (5.08% NET)
Male issue age 65 Initial Premium $20,000
Preferred Class Face Amount $36,868
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 20,552 18,652 36,868 20,241 18,341 36,868
2 22,505 21,120 19,220 36,868 20,454 18,554 36,868
3 23,153 21,703 19,803 36,868 20,636 18,736 36,868
4 24,310 22,303 20,503 36,868 20,783 18,983 36,868
5 25,526 22,918 21,418 36,868 20,887 19,387 36,868
6 26,802 23,551 22,351 36,868 20,940 19,740 36,868
7 28,142 24,202 23,302 36,868 20,930 20,030 36,868
8 29,549 24,870 24,270 36,868 20,842 20,242 36,868
9 31,027 25,557 25,257 36,868 20,657 20,357 36,868
10 32,578 26,263 26,263 36,868 20,356 20,356 36,868
11 34,207 27,121 27,121 36,868 20,001 20,001 36,868
12 35,917 28,007 28,007 36,868 19,490 19,490 36,868
13 37,713 28,922 28,922 36,868 18,793 18,793 36,868
14 39,599 29,866 29,866 36,868 17,873 17,873 36,868
15 41,579 30,842 30,842 36,868 16,675 16,675 36,868
16 43,657 31,850 31,850 36,868 15,126 15,126 36,868
17 45,840 32,890 32,890 36,868 13,120 13,120 36,868
18 48,132 33,965 33,965 36,868 10,514 10,514 36,868
19 50,539 35,074 35,074 36,868 7,112 7,112 36,868
20 53,066 36,220 36,220 38,031 2,652 2,652 36,868
25 67,727 42,536 42,536 44,663 *** *** ***
35 110,320 60,757 60,757 60,757 *** *** ***
</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% (-0.92% NET)
Male issue age 65 Initial Premium $20,000
Preferred Class Face Amount $36,868
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 19,379 17,538 36,868 19,059 17,249 36,868
2 22,505 18,777 16,993 36,868 18,071 16,354 36,868
3 23,153 18,194 16,465 36,868 17,026 15,409 36,868
4 24,310 17,628 16,042 36,868 15,916 14,483 36,868
5 25,526 17,081 15,800 36,868 14,726 13,621 36,868
6 26,802 16,550 15,557 36,868 13,438 12,632 36,868
7 28,142 16,036 15,315 36,868 12,031 11,490 36,868
8 29,549 15,538 15,072 36,868 10,474 10,160 36,868
9 31,027 15,055 14,830 36,868 8,733 8,602 36,868
10 32,578 14,588 14,588 36,868 6,768 6,768 36,868
11 34,207 14,204 14,204 36,868 4,558 4,558 36,868
12 35,917 13,831 13,831 36,868 2,023 2,023 36,868
13 37,713 13,467 13,467 36,868 *** *** ***
14 39,599 13,113 13,113 36,868 *** *** ***
15 41,579 12,768 12,768 36,868 *** *** ***
16 43,657 12,432 12,432 36,868 *** *** ***
17 45,840 12,105 12,105 36,868 *** *** ***
18 48,132 11,787 11,787 36,868 *** *** ***
19 50,539 11,477 11,477 36,868 *** *** ***
20 53,066 11,175 11,175 36,868 *** *** ***
25 67,727 9,781 9,781 36,868 *** *** ***
35 110,320 7,493 7,493 36,868 *** *** ***
</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% (11.08% 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 21,726 19,826 29,134 21,270 19,370 29,134
2 22,505 23,600 21,700 29,134 22,705 20,805 29,134
3 23,153 25,637 23,737 29,134 24,352 22,452 29,134
4 24,310 27,861 26,061 29,254 26,274 24,474 29,134
5 25,526 30,334 28,834 31,850 28,543 27,043 29,971
6 26,802 33,012 31,812 34,663 31,064 29,864 32,617
7 28,142 35,911 35,011 37,706 33,792 32,892 35,481
8 29,549 39,044 38,444 40,996 36,740 36,140 38,577
9 31,027 42,426 42,126 44,547 39,922 39,622 41,918
10 32,578 46,098 46,098 48,403 43,354 43,354 45,522
11 34,207 50,373 50,373 52,891 47,234 47,234 49,596
12 35,917 55,043 55,043 57,795 51,428 51,428 53,999
13 37,713 60,147 60,147 63,154 55,956 55,956 58,753
14 39,599 65,724 65,724 69,010 60,840 60,840 63,882
15 41,579 71,818 71,818 75,409 66,104 66,104 69,410
16 43,657 78,477 78,477 82,401 71,771 71,771 75,360
17 45,840 85,754 85,754 89,184 78,053 78,053 81,175
18 48,132 93,705 93,705 96,516 85,048 85,048 87,599
19 50,539 102,394 102,394 104,442 92,874 92,874 94,731
20 53,066 112,101 112,101 113,222 101,679 101,679 102,695
25 67,727 179,068 179,068 179,068 162,419 162,419 162,419
</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% (5.08% 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 20,552 18,652 29,134 20,071 18,171 29,134
2 22,505 21,120 19,220 29,134 20,087 18,187 29,134
3 23,153 21,703 19,803 29,134 20,041 18,141 29,134
4 24,310 22,303 20,503 29,134 19,923 18,130 29,134
5 25,526 22,918 21,418 29,134 19,715 18,236 29,134
6 26,802 23,551 22,351 29,134 19,395 18,231 29,134
7 28,142 24,202 23,302 29,134 18,931 18,079 29,134
8 29,549 24,870 24,270 29,134 18,277 17,729 29,134
9 31,027 25,557 25,257 29,134 17,374 17,113 29,134
10 32,578 26,263 26,263 29,134 16,142 16,142 29,134
11 34,207 27,121 27,121 29,134 14,543 14,543 29,134
12 35,917 28,007 28,007 29,407 12,371 12,371 29,134
13 37,713 28,922 28,922 30,368 9,424 9,424 29,134
14 39,599 29,866 29,866 31,360 5,414 5,414 29,134
15 41,579 30,842 30,842 32,384 *** *** ***
16 43,657 31,850 31,850 33,442 *** *** ***
17 45,840 32,890 32,890 34,206 *** *** ***
18 48,132 33,965 33,965 34,984 *** *** ***
19 50,539 35,087 35,087 35,789 *** *** ***
20 53,066 36,338 36,338 36,702 *** *** ***
25 67,727 43,975 43,975 43,975 *** *** ***
</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% (-0.92% 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 19,379 17,538 29,134 18,872 17,079 29,134
2 22,505 18,777 16,993 29,134 17,624 15,950 29,134
3 23,153 18,194 16,465 29,134 16,230 14,688 29,134
4 24,310 17,628 16,042 29,134 14,660 13,340 29,134
5 25,526 17,081 15,800 29,134 12,871 11,906 29,134
6 26,802 16,550 15,557 29,134 10,808 10,160 29,134
7 28,142 16,036 15,315 29,134 8,394 8,016 29,134
8 29,549 15,538 15,072 29,134 5,524 5,358 29,134
9 31,027 15,055 14,830 29,134 2,060 2,029 29,134
10 32,578 14,588 14,588 29,134 *** *** ***
11 34,207 14,204 14,204 29,134 *** *** ***
12 35,917 13,831 13,831 29,134 *** *** ***
13 37,713 13,467 13,467 29,134 *** *** ***
14 39,599 13,113 13,113 29,134 *** *** ***
15 41,579 12,768 12,768 29,134 *** *** ***
16 43,657 12,432 12,432 29,134 *** *** ***
17 45,840 12,105 12,105 29,134 *** *** ***
18 48,132 11,787 11,787 29,134 *** *** ***
19 50,539 11,477 11,477 29,134 *** *** ***
20 53,066 11,175 11,175 29,134 *** *** ***
25 67,727 9,781 9,781 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.
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% (11.08% NET)
Male issue age 65 Initial Premium $20,000
Standard Class Face Amount $36,868
Current Charges * Guaranteed Charges **
----------------------------- -----------------------------------
Premiums
End of Accumulated Cash Cash
Policy at 5% Interest Accum. Surrender Death Accum. Surrender Death
Year Per Year Value Value Benefit Value Value Benefit
---- -------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $21,000 21,596 19,696 36,868 21,423 19,523 36,868
2 22,505 23,319 21,419 36,868 22,982 21,082 36,868
3 23,153 25,179 23,279 36,868 24,701 22,801 36,868
4 24,310 27,189 25,389 36,868 26,607 24,807 36,868
5 25,526 29,397 27,897 36,868 28,734 27,234 36,868
6 26,802 31,878 30,678 36,868 31,123 29,923 36,868
7 28,142 34,659 33,759 39,164 33,817 32,917 38,213
8 29,549 37,705 37,105 41,853 36,789 36,189 40,836
9 31,027 41,042 40,742 44,736 40,045 39,745 43,649
10 32,578 44,705 44,705 47,834 43,619 43,619 46,672
11 34,207 48,930 48,930 51,377 47,741 47,741 50,128
12 35,917 53,537 53,537 56,214 52,237 52,237 54,849
13 37,713 58,559 58,559 61,487 57,136 57,136 59,993
14 39,599 64,029 64,029 67,231 62,474 62,474 65,597
15 41,579 69,985 69,985 73,484 68,284 68,284 71,699
16 43,657 76,463 76,463 80,286 74,605 74,605 78,335
17 45,840 83,502 83,502 87,677 81,473 81,473 85,547
18 48,132 91,142 91,142 95,699 88,928 88,928 93,374
19 50,539 99,425 99,425 104,396 97,009 97,009 101,859
20 53,066 108,393 108,393 113,813 105,760 105,760 111,048
25 67,727 166,096 166,096 174,401 161,259 161,259 169,321
35 110,320 409,896 409,896 409,896 396,215 396,215 396,215
</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.
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% (5.08% NET)
Male issue age 65 Initial Premium $20,000
Standard Class Face Amount $36,868
Current Charges * Guaranteed Charges **
----------------------------- -----------------------------------
Premiums
End of Accumulated Cash Cash
Policy at 5% Accum. Surrender Death Accum. Surrender Death
Year Interest Value Value Benefit Value Value Benefit
Per Year
---- -------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $21,000 20,429 18,529 36,868 20,241 18,341 36,868
2 22,505 20,868 18,968 36,868 20,454 18,554 36,868
3 23,153 21,316 19,416 36,868 20,636 18,736 36,868
4 24,310 21,773 19,973 36,868 20,783 18,983 36,868
5 25,526 22,240 20,740 36,868 20,887 19,387 36,868
6 26,802 22,718 21,518 36,868 20,940 19,740 36,868
7 28,142 23,205 22,305 36,868 20,930 20,030 36,868
8 29,549 23,704 23,104 36,868 20,842 20,242 36,868
9 31,027 24,212 23,912 36,868 20,657 20,357 36,868
10 32,578 24,732 24,732 36,868 20,356 20,356 36,868
11 34,207 25,453 25,453 36,868 20,001 20,001 36,868
12 35,917 26,195 26,195 36,868 19,490 19,490 36,868
13 37,713 26,959 26,959 36,868 18,793 18,793 36,868
14 39,599 27,745 27,745 36,868 17,873 17,873 36,868
15 41,579 28,555 28,555 36,868 16,675 16,675 36,868
16 43,657 29,387 29,387 36,868 15,126 15,126 36,868
17 45,840 30,244 30,244 36,868 13,120 13,120 36,868
18 48,132 31,126 31,126 36,868 10,514 10,514 36,868
19 50,539 32,034 32,034 36,868 7,112 7,112 36,868
20 53,066 32,968 32,968 36,868 2,652 2,652 36,868
25 67,727 38,067 38,067 39,970 *** *** ***
35 110,320 53,808 53,808 53,808 *** *** ***
</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.
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% (-0.92% NET)
Male issue age 65 Initial Premium $20,000
Standard Class Face Amount $36,868
Current Charges * Guaranteed Charges **
----------------------------- -----------------------------------
Premiums
End of Accumulated Cash Cash
Policy at 5% Accum. Surrender Death Accum. Surrender Death
Year Interest Value Value Benefit Value Value Benefit
Per Year
---- -------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $21,000 19,263 17,433 36,868 19,059 17,249 36,868
2 22,505 18,553 16,790 36,868 18,071 16,354 36,868
3 23,153 17,869 16,171 36,868 17,026 15,409 36,868
4 24,310 17,210 15,661 36,868 15,916 14,483 36,868
5 25,526 16,576 15,332 36,868 14,726 13,621 36,868
6 26,802 15,965 15,007 36,868 13,438 12,632 36,868
7 28,142 15,376 14,684 36,868 12,031 11,490 36,868
8 29,549 14,809 14,365 36,868 10,474 10,160 36,868
9 31,027 14,263 14,049 36,868 8,733 8,602 36,868
10 32,578 13,738 13,738 36,868 6,768 6,768 36,868
11 34,207 13,331 13,331 36,868 4,558 4,558 36,868
12 35,917 12,936 12,936 36,868 2,023 2,023 36,868
13 37,713 12,553 12,553 36,868 *** *** ***
14 39,599 12,181 12,181 36,868 *** *** ***
15 41,579 11,821 11,821 36,868 *** *** ***
16 43,657 11,471 11,471 36,868 *** *** ***
17 45,840 11,131 11,131 36,868 *** *** ***
18 48,132 10,802 10,802 36,868 *** *** ***
19 50,539 10,482 10,482 36,868 *** *** ***
20 53,066 10,172 10,172 36,868 *** *** ***
25 67,727 8,752 8,752 36,868 *** *** ***
35 110,320 6,481 6,481 36,868 *** *** ***
</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.
43
<PAGE>
- -----------------------------------------------------------
FINANCIAL STATEMENTS
- -----------------------------------------------------------
UNITED OF OMAHA
LIFE INSURANCE COMPANY
(a WHOLLY-OWNED SUBSIDIARY OF MUTUAL
OF OMAHA INSURANCE COMPANY)
STATUTORY BASIS FINANCIAL STATEMENTS
AND INDEPENDENT AUDITORS' REPORT
DECEMBER 31, 1998, 1997 AND 1996
44
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
United of Omaha Life Insurance Company
Omaha, Nebraska
We have audited the accompanying statutory basis 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,
1998 and 1997, and the related statutory basis statements of income, changes in
surplus, and cash flows for each of the three years in the period ended December
31, 1998. The financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
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, 1998 and 1997, or
the results of its operations or its cash flows for each of the three years in
the period ended December 31, 1998.
In our opinion, the statutory basis 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, 1998 and
1997, and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 1998, on the basis of accounting
described in Note 1.
DELOITTE & TOUCHE LLP
March 4, 1999
45
<PAGE>
UNITED OF OMAHA LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF MUTUAL OF OMAHA INSURANCE COMPANY)
<TABLE>
<CAPTION>
STATUTORY BASIS STATEMENTS OF ADMITTED ASSETS, LIABILITIES AND SURPLUS
DECEMBER 31, 1998 AND 1997
(in thousands)
- ---------------------------------------------------------------------------------------------------
ADMITTED ASSETS 1998 1997
Cash and invested assets:
<S> <C> <C>
Bonds $ 7,253,217 $6,921,762
Preferred stocks 3,955 3,955
Common stocks 104,108 96,599
Mortgage loans 599,396 587,413
Real estate occupied by the Company, net of accumulated depreciation
of $59,319 in 1998 and $55,634 in 1997 79,262 82,536
Real estate acquired in satisfaction of debt, net of
accumulated depreciation of $180 in 1998 and $2,809 in 1997 8,049 24,103
Investment in real estate, net of accumulated depreciation
of $4,001 in 1998 and $3,836 in 1997 2,261 2,426
Policy loans 133,474 125,623
Cash and short-term investments 208,351 115,195
Other invested assets 90,478 75,603
--------- ---------
Total cash and invested assets 8,482,551 8,035,215
Premiums deferred and uncollected 112,870 105,487
Investment income due and accrued 83,742 81,723
Electronic data processing equipment, net of accumulated depreciation
of $83,573 in 1998 and $70,130 in 1997 40,003 43,989
Receivable from parent, subsidiaries and affiliates 114,882 36,856
Other assets 60,210 55,383
Separate accounts assets 1,128,411 927,950
--------- ---------
Total admitted assets $10,022,669 $9,286,603
========== =========
LIABILITIES
Policy reserves:
Aggregate reserve for policies and contracts $ 6,115,601 $5,880,532
Liability for premium and other deposit funds 1,767,288 1,527,069
Policy and contract claims 69,436 68,226
Other 73,861 75,725
--------- ---------
Total policy reserves 8,026,186 7,551,552
Interest maintenance reserve 28,297 18,902
Asset valuation reserve 99,409 94,144
General expenses and taxes due or accrued 28,696 30,843
Federal income taxes due or accrued 30,644 17,739
Other liabilities 83,682 77,148
Separate accounts liabilities 1,106,149 908,200
--------- ---------
Total liabilities 9,403,063 8,698,528
--------- ---------
SURPLUS
Capital stock, $10 par value, 900,000 shares authorized issued and outstanding 9,000 9,000
Gross paid-in and contributed surplus 62,724 62,724
Unassigned surplus 547,882 516,351
--------- ---------
Total surplus 619,606 588,075
--------- ---------
Total liabilities and surplus $10,022,669 $9,286,603
========== =========
The accompanying notes are an integral part of these statutory basis financial
statements.
</TABLE>
46
<PAGE>
UNITED OF OMAHA LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF MUTUAL OF OMAHA INSURANCE COMPANY)
<TABLE>
<CAPTION>
STATUTORY BASIS STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(in thousands)
- ----------------------------------------------------------------------------------------------------
1998 1997 1996
Income:
<S> <C> <C> <C>
Net premiums and annuity considerations $ 1,084,976 $ 1,187,104 $ 1,285,507
Other considerations and fund deposits 236,638 293,228 260,508
Net investment income 579,276 587,480 546,634
Other income 44,798 25,019 20,604
--------- --------- ---------
Total income 1,945,688 2,092,831 2,113,253
--------- --------- ---------
Benefits and expenses:
Policyholder and beneficiary benefits 1,163,585 1,030,686 890,668
Increase in reserves for policyholder and beneficiary benefits 262,888 365,393 561,185
Commissions 118,499 130,343 126,692
Operating expenses 225,067 203,684 175,723
Expense realignment costs - 4,442 9,099
Net transfers to separate accounts 87,759 278,480 277,638
--------- --------- ---------
Total benefits and expenses 1,857,798 2,013,028 2,041,005
--------- --------- ---------
Net gain from operations before federal income taxes and
net realized capital gains 87,890 79,803 72,248
Federal income taxes 47,032 37,918 41,101
--------- --------- ---------
Net gain from operations before net
realized capital gains 40,858 41,885 31,147
Net realized capital gains 8,692 51,537 23,461
--------- --------- ---------
Net income $ 49,550 $ 93,422 $ 54,608
========= ========= =========
The accompanying notes are an integral part of these statutory basis financial
statements.
</TABLE>
47
<PAGE>
UNITED OF OMAHA LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF MUTUAL OF OMAHA INSURANCE COMPANY)
<TABLE>
<CAPTION>
STATUTORY BASIS STATEMENTS OF CHANGES IN SURPLUS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(in thousands)
- --------------------------------------------------------------------------------------------------
1998 1997 1996
Capital stock:
<S> <C> <C> <C>
Balance at beginning and end of year $ 9,000 $ 9,000 $ 9,000
------ ------ ------
Gross paid-in and contributed surplus:
Balance at beginning of year 62,724 62,724 62,724
------ ------ ------
Unassigned surplus:
Balance at beginning of year 516,351 463,096 440,889
Net income 49,550 93,422 54,608
Change in net unrealized capital gains and losses (1,876) (45,543) (23,064)
(Increase) decrease in:
Non-admitted assets 3,154 (15,448) 2,561
Asset valuation reserve (5,265) 20,352 (8,150)
Additional pension plan contribution (9,732) - (3,599)
Change in group pension reserve valuation basis - 17,437 -
Adoption of actuarial guidelines - (17,235) -
Surplus contributed to separate account - (20,000) -
Change in surplus in separate account - 20,000 -
Other, net (4,300) 270 (149)
------ ------ ------
Balance at end of year 547,882 516,351 463,096
------- ------- -------
Total surplus $ 619,606 $ 588,075 $ 534,820
======= ======= =======
The accompanying notes are an integral part of these statutory basis financial
statements.
</TABLE>
48
<PAGE>
UNITED OF OMAHA LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF MUTUAL OF OMAHA INSURANCE COMPANY)
<TABLE>
<CAPTION>
STATUTORY BASIS STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(in thousands)
- ----------------------------------------------------------------------------------------------------
1998 1997 1996
Cash from operations:
<S> <C> <C> <C>
Premiums, annuity considerations and other fund deposits $ 1,318,298 $ 1,467,305 $ 1,539,502
Net investment income 568,917 572,888 537,288
Other income 38,789 24,599 20,642
Benefits (1,167,244) (1,015,334) (888,661)
Commissions and general expenses (364,713) (358,217) (314,100)
Federal income taxes (6,096) (50,033) (42,235)
Net transfers to separate accounts (88,584) (291,034) (292,935)
------- ------- -------
Net cash from operations 299,367 350,174 559,501
------- ------- ------
Cash from investments:
Proceeds from investments sold, redeemed or matured:
Bonds 1,193,524 1,061,409 992,065
Mortgage loans 146,104 335,103 132,406
Stocks 9,347 143,363 52,062
Real estate 26,750 37,927 18,601
Other invested assets 25,276 40,376 32,150
Tax on capital gains (34,197) (15,797) (9,665)
Cost of investments acquired:
Bonds (1,502,417) (1,774,643) (1,818,632)
Mortgage loans (152,355) (19,863) (22,607)
Stocks (8,358) (23,479) (25,848)
Other invested assets (38,745) (27,564) (53,150)
Real estate (7,991) (3,083) (4,205)
Net increase in policy loans (7,849) (7,474) (6,815)
------- ------- ------
Net cash from investments (350,911) (253,725) (713,638)
------- ------- ------
Cash from financing and other sources:
Decrease (increase) in receivable from parent,
subsidiaries and affiliates (78,026) (28,781) 20,009
Increase (decrease) in other nonqualified deposits 213,068 (49,216) 70,102
Other cash provided 18,349 18,881 12,512
Other cash used (8,691) (39,640) (6,984)
------- ------- ------
Net cash from financing and other sources 144,700 (98,756) 95,639
------- ------- ------
Net change in cash and short-term investments 93,156 (2,307) (58,498)
Cash and short-term investments:
Beginning of year 115,195 117,502 176,000
------- ------- ------
End of year $ 208,351 $ 115,195 $ 117,502
======= ======= ======
The accompanying notes are an integral part of these statutory basis financial
statements.
</TABLE>
49
<PAGE>
UNITED OF OMAHA LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF MUTUAL OF OMAHA INSURANCE COMPANY)
NOTES TO STATUTORY BASIS FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(dollar amounts in thousands)
- --------------------------------------------------------------------------------
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, 1998, the Company owned
100% of the outstanding common stock of the following entities: Companion
Life Insurance Company (Companion), United World Life Insurance Company
(United World), Mutual of Omaha Structured Settlement Company-Nebraska
(MOSSCO-NE), Mutual of Omaha Structured Settlement Company-Connecticut
(MOSSCO-CT), and Mutual of Omaha Structured Settlement Company of New York,
Inc. (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; (h) comprehensive
income and its components are not presented in the financial statements;
and (i) 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. 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 revenues and expenses
during the reporting period. Actual results could differ significantly from
those estimates.
50
<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.
The home office properties, investment real estate, and electronic data
processing equipment are valued at cost, less accumulated 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 basis 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 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 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.
51
<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 basis statements of admitted
assets, liabilities, and surplus. The net change in such assets is charged
or credited 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 Stock - 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.
52
<PAGE>
Derivatives - The Company invests in certain derivative financial
instruments to reduce exposure to interest-rate and foreign-currency risks
associated with assets held or liabilities incurred. 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.
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 net investment income on an accrual basis over the life of
the swap agreement. Gains and losses resulting from early termination of
interest-rate swaps used for hedging are deferred and amortized over the
remaining period originally covered by the swap. The Company enters into
interest-rate swap agreements to manage interest-rate exposure. The primary
purpose for the interest-rate swap agreements is to modify the
interest-rate sensitivities of certain investments so that they are highly
correlated with the interest-rate sensitivities of certain insurance
liabilities.
Interest-rate caps represent a right to receive the excess of a referenced
interest rate over a given rate in exchange for the payment of a premium.
Premiums are amortized and recorded as an adjustment to net investment
income over the life of the investment using the effective interest method.
The Company 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.
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 basis statements of income. The change in estimated fair value is
recorded as a change in net unrealized gains (losses). The Company has
purchased 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.
Equity-linked notes 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. 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.
Separate Accounts - The assets of the separate accounts shown in the
statutory basis 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
basis statements of income, but are offset by transfers from the separate
accounts. Deposits, net investment income and realized and unrealized
capital gains and losses on the separate accounts are not reflected in the
statutory basis statements of income. Mortality, policy administration and
surrender charges to all separate accounts are included in revenue.
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.
53
<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:
<TABLE>
<CAPTION>
Cost or Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
At December 31, 1998:
<S> <C> <C> <C> <C>
U.S. Government $ 30,199 $ 2,300 $ 63 $ 32,436
Political subdivisions 10,549 302 - 10,851
Mortgage-backed securities 380,824 15,037 2,221 393,640
Special revenue 52,399 3,220 - 55,619
Public utilities 419,753 21,077 1,270 439,560
Industrial and miscellaneous 4,984,347 186,244 28,243 5,142,348
Collateralized mortgage obligations 1,370,460 38,428 3,698 1,405,190
Credit-tenant loans 219,091 20,303 180 239,214
--------- ------- ------ ---------
Total $ 7,467,622 $ 286,911 $ 35,675 $ 7,718,858
========= ======= ====== =========
Bonds $ 7,253,217
Short-term investments 214,405
---------
$ 7,467,622
=========
Preferred stocks $ 3,955 $ 2,036 $ - $ 5,991
========= ======= ====== =========
Common stocks:
Affiliated $ 66,086 $ 24,184 $ - $ 90,270
Unaffiliated 165 13,723 50 13,838
--------- ------- ------ ---------
$ 66,251 $ 37,907 $ 50 $ 104,108
========= ======= ====== =========
</TABLE>
54
<PAGE>
<TABLE>
<CAPTION>
Cost or Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
At December 31, 1997:
<S> <C> <C> <C> <C>
U.S. Governments $ 58,738 $ 1,010 $ 43 $ 59,705
States, territories and possessions 130 3 - 133
Political subdivisions 11,068 118 1 11,185
Mortgage-backed securities 281,614 7,452 258 288,808
Special revenue 60,518 3,453 4 63,967
Public utilities 428,968 25,627 151 454,444
Industrial and miscellaneous 4,392,543 161,013 26,560 4,526,996
Collateralized mortgage obligations 1,563,787 48,341 4,982 1,607,146
Credit-tenant loans 248,796 17,543 359 265,980
-------- ------- ---- -------
Total $ 7,046,162 $ 264,560 $ 32,358 $ 7,278,364
============ ========== ========= ===========
Bonds $ 6,921,762
Short-term investments 124,400
-------
$ 7,046,162
Preferred stocks $ 3,955 $ 1,937 $ - $ 5,892
======== ======== ==== =======
Common stocks:
Affiliated $ 66,086 $ 14,609 $ - $ 80,695
Unaffiliated 435 15,546 77 15,904
---- ------- --- ------
$ 66,521 $ 30,155 $ 77 $ 96,599
========= ========= ===== ========
</TABLE>
The amortized cost and estimated fair value of debt securities at December
31, 1998, 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 $ 464,039 $ 465,511
Due after one year through five years 1,541,941 1,570,052
Due after five years through ten years 1,420,471 1,474,675
Due after ten years 2,289,887 2,409,791
--------- ---------
5,716,338 5,920,029
Collateralized mortgage obligations and
mortgage backed securities 1,751,284 1,798,829
--------- ---------
$7,467,622 $7,718,858
========= =========
55
<PAGE>
The sources of net investment income were as follows:
1998 1997 1996
Bonds $515,152 $501,101 $439,884
Preferred stocks 299 399 399
Common stocks 146 449 1,789
Mortgage loans 52,305 70,469 87,035
Real estate 19,833 25,531 29,860
Policy loans 7,324 7,454 6,855
Short-term investments 4,962 4,658 7,339
Other (1,970) (1,239) (2,732)
------- ------- -------
598,051 608,822 570,429
Investment expense (22,067) (25,194) (28,270)
Amortization of interest maintenance reserve 3,292 3,852 4,475
------- ------- -------
$579,276 $587,480 $546,634
======= ======= ========
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, 1998:
Bonds $ 13,939 $ 240 $ 13,699
Common stocks 376 55 321
Mortgage loans 5,819 181 5,638
Real estate 4,248 697 3,551
Other 9,711 77 9,634
------- ----- -------
$ 34,093 $ 1,250 32,843
======= =====
Capital gains tax (11,465)
Transfer to IMR (12,686)
------
Net realized capital gains $ 8,692
======
56
<PAGE>
Net
Gross Gross Realized
Realized Realized Gains
Gains Losses (Losses)
Year ended December 31, 1997:
Bonds $ 8,304 $ 5,237 $ 3,067
Common stocks 64,382 4,130 60,252
Mortgage loans 1,520 5,318 (3,798)
Real estate 2,800 5,109 (2,309)
Derivative instruments 8 8,911 (8,903)
Other 24,572 48 24,524
------- ------ ------
$101,586 $28,753 72,833
======= ====== =======
Capital gains tax (25,412)
Transfer to IMR 4,116
------
Net realized capital gains $51,537
======
Year ended December 31, 1996:
Bonds $ 9,290 $ 1,489 $ 7,801
Common stocks 41,198 351 40,847
Mortgage loans 660 7,618 (6,958)
Real estate 2,690 2,949 (259)
Other 3,830 34 3,796
------- ------ ------
$ 57,668 $12,441 45,227
====== ======
Capital gains tax (15,798)
Transfer to IMR (5,968)
-------
Net realized capital gains $23,461
======
Proceeds from the sale of bonds were $141,015, $265,701 and $197,362 during
1998, 1997 and 1996, respectively.
The Company invests in mortgage loans collateralized principally by
commercial real estate. The maximum and minimum lending rates for mortgage
loans during 1998 ranged from 6.4% to 9.6%. 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 $645,962 and
$625,176 at December 31, 1998 and 1997, respectively.
57
<PAGE>
The Company's mortgage loans finance various types of commercial properties
throughout the United States. The geographic distributions of the mortgage
loans at December 31, 1998 and 1997 were as follows:
1998 1997
Texas $ 43,616 $ 21,146
California 39,923 51,109
Alabama 34,493 13,020
Nebraska 34,079 34,435
Louisiana 31,037 22,036
Washington 25,053 31,426
All other states 391,195 414,241
------- -------
$599,396 $587,413
======= =======
There were no non-performing or restructured mortgage loans at December 31,
1998. At December 31, 1997, the Company held non-performing loans of
$7,146. There were no restructured mortgage loans at December 31, 1997.
Securities with an amortized cost of $5,493 and $5,469 were on deposit with
government agencies at December 31, 1998 and 1997, respectively, 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 basis 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.
The Company has commitments to fund bond investments of approximately
$45,372 and $60,900 as of December 31, 1998 and 1997, respectively. The
Company also has commitments to fund mortgage loans of approximately
$21,231 and $1,900 as of December 31, 1998 and 1997, respectively. These
commitments are legally binding and have fixed expiration dates or other
termination clauses that may require a payment of a fee. In the event that
the financial condition of a borrower deteriorates materially, the
commitment may be terminated. Since some of the commitments may expire or
terminate, the total commitments do not necessarily represent future
liquidity requirements.
58
<PAGE>
3. DERIVATIVE FINANCIAL INSTRUMENTS
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.
<TABLE>
<CAPTION>
Estimated
Notional Statement Fair Year(s) of Interest Rate
Amount Value Value Maturity Paid Received
At December 31, 1998:
<S> <C> <C> <C> <C> <C> <C> <C>
Interest-rate swaps $202,500 $ - $ (9,713)2002 - 2003 6.97 % 6.50 %
========= ==== =========
Interest-rate caps $600,000 $ 2,924 $ 633 2000 - 2003 - -
========= ======== ======
Equity-linked notes $101,000 $ 3,541 $ 62,671 2001 - 2016 - -
========= ======== =========
At December 31, 1997:
Interest-rate swaps $202,500 $ - $ (5,399)2002 - 2003 6.97 % 6.50 %
========= ==== =========
Interest-rate caps $470,000 $ 3,269 $ 14 2000 - 2002 - -
========= ======== =====
Foreign currency swaps $ 6,500 $ (268) $ (268) 1998 - -
======== ======== ========
Equity-linked notes $101,000 $ 4,721 $ 41,226 2001 - 2016 - -
========= ======== =========
</TABLE>
These derivative financial instruments involve, to varying degrees,
elements of credit and market risk which are not recognized in the
statutory basis statements 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.
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.
During 1997, the Company terminated two interest-rate swap transactions
with a combined notional amount of $200,000 at a cost of approximately
$8,900. This amount was charged to IMR in accordance with statutory
accounting practices. These swaps were replaced with four other
interest-rate swap agreements with a combined notional amount of $200,000.
Terms of the new interest-rate swaps allow for more frequent repricing of
the variable rate paid by the Company thereby reducing its exposure.
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.
59
<PAGE>
The Company's tax returns have been examined by the Internal Revenue
Service (IRS) through 1992. The Company is currently contesting certain
adjustments proposed by the IRS for tax years 1990 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 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 not
likely.
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 28% and 30% of the total Companies' salary
expense in 1998 and 1997, respectively, and approximately 28% in 1996. The
Companies expensed contributions of $10,254, $7,972 and $12,152 in 1998,
1997 and 1996, respectively. During 1996, the Companies changed mortality
tables from 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. The
Companies made an additional contribution of $21,637 and recorded it net of
federal income taxes of $7,573 as a direct charge to surplus. In 1998, the
Companies changed the plan's assumed annual investment return and in order
to improve the funding status of the plan, increased the amount that will
be contributed for 1998. At December 31, 1998, the Companies recorded a
direct charge to surplus of $37,541, which represents an additional
contribution of $57,815, net of tax. The Company's share of this
contribution was $9,732, net of tax.
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 1998 and 1997, Mutual of Omaha and
the Company contributed approximately $2,700 and $2,600, respectively, to
this account.
A comparison of accrued benefits and net assets for the entire plan as of
January 1, 1998 and 1997 follows:
1998 1997
Actuarial present value of accrued benefits:
Vested $442,595 $380,495
Nonvested 3,302 2,204
-------- --------
$445,897 $382,699
======= =======
Net assets available for benefits $389,956 $369,871
======= =======
Assumptions:
Annual investment return 8.00 % 9.00 %
Mortality table 1983 GAM 1983 GAM
Discount rate 6.73 % 7.37 %
60
<PAGE>
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 expensed by the Companies were $3,054, $8,428 and $5,600 in
1998, 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, prior to retirement, to be eligible for a subsidy. 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 in
accordance with an intercompany cost-sharing agreement. 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 $6,418 that were previously
recorded by the Company for postretirement benefits, were paid to Mutual of
Omaha.
The following table compares the accumulated benefit obligation and the
accrued liability for the Companies' postretirement benefits at December
31, 1998 and 1997:
1998 1997
Accumulated postretirement benefits obligation:
Fully eligible actives $ 4,905 $ 9,695
Retirees 83,322 76,208
------ ------
88,227 85,903
Plan assets in Postretirement Medical 401(h) Account (5,642) (2,713)
Unrecognized transition obligation (56,257) (60,275)
Unrecognized gain 7,555 9,460
------ ------
Total accrued postretirement benefit liability $33,883 $ 32,375
====== ======
Assumptions:
Discount rate 7.00 % 7.25 %
Health care cost trend rate:
First year 5.00 % 5.00 %
The Companies' net periodic postretirement benefit costs include the
following components:
1998 1997 1996
Eligibility costs $ - $ 1,598 $ 1,385
Interest costs 6,118 5,986 5,909
Deferral of gain on plan assets 36 55 -
Amortization of transition obligation 4,018 4,018 4,018
Amortization of gain (99) - -
Return on assets (220) (55) -
----- ------ ------
Total benefit costs $9,853 $11,602 $11,312
===== ====== ======
61
<PAGE>
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, 1998, by approximately $6,200 and the estimated eligibility and
interest cost components of the net periodic postretirement benefit costs
for 1998 by approximately $800.
The Company has deferred compensation plans for certain officers and key
employees. The plans were adopted upon approval by the board of directors.
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-CT of $5 for the year ended December 31, 1998 and $106 from
MOSSCO-NY and MOSS-CT for the year ended December 31, 1997 and $349 from
MOSSCO-NE, MOSSCO-NY and MOSSCO-CT for the year ended December 31, 1996.
The Company paid $410, $427 and $444 during 1998, 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 $8 to MOSSCO-CT for the year ended December 31, 1998 and
$165 to MOSSCO-NY and MOSSCO-CT for the year ended December 31, 1997 and
$439 to MOSSCO-NE, MOSSCO-NY and MOSSCO-CT for the year ended December 31,
1996.
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. The share price
was determined by the stock's publicly traded market value at the date of
the transaction. The Company recognized a realized gain of $27,632 and
related federal income taxes were $9,671.
Under the terms of a reinsurance treaty effected June 1, 1955, all health
and accident insurance written by the Company is ceded to Mutual of Omaha.
The operating results of certain lines of group health and accident and
life insurance are shared equally by the Company and Mutual of Omaha. The
amounts ceded were as follows:
1998 1997
Aggregate reserve for policies and contracts $ 84,042 $92,276
======= ======
Policy and contract claims $100,213 $92,555
======= ======
1998 1997 1996
Premium considerations $387,139 $378,854 $368,126
======= ======= =======
Policyholder and beneficiary benefits $337,101 $286,033 $273,576
======= ======= =======
Group reinsurance settlement expense (included
in operating expenses) $ 18,777 $ 10,405 $ 2,818
======= ======= =======
62
<PAGE>
The Company also assumes group and individual life insurance from
Companion. The Company entered into a coinsurance treaty with Companion
relating to bank annuity business in which Companion cedes 90% of the 1998
and 75% of the 1997 related premiums to the Company and the Company pays
90% and 75% of the related benefits, in 1998 and 1997, respectively. The
total amounts assumed by the Company relating to the treaties with
Companion were as follows:
1998 1997
Aggregate reserve for policies and contracts $47,634 $30,498
======== =======
Policy and contract claims $ 2,917 $ 2,370
======== =======
The amounts ceded by the Company and included in the statutory statements
of income were as follows:
1998 1997 1996
Premium considerations $19,790 $31,343 $2,668
======== ======== ======
Policyholder and beneficiary benefits $ 5,507 $ 3,151 $2,390
======== ======== ======
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:
1998 1997 1996
Direct $1,460,516 $1,541,127 $1,641,295
Assumed:
Affiliated 19,790 31,344 2,668
Nonaffiliates 26,438 23,548 23,913
Ceded:
Affiliated (387,139) (378,854) (367,598)
Nonaffiliated (34,629) (30,061) (14,771)
--------- --------- --------
Net $1,084,976 $1,187,104 $1,285,507
=========== =========== ==========
8. CREDIT ARRANGEMENTS
The Company and Mutual of Omaha are authorized by their Boards of Directors
to borrow a maximum of $75,000 on a joint basis under certain lines of
credit. At December 31, 1998, 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. COMMITMENTS AND CONTINGENCIES
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.
63
<PAGE>
Leases - The Company leases certain property to house Home Office
operations in Omaha, Nebraska, from its parent, Mutual of Omaha. The
current lease expires December 31, 2035.
The Company and Mutual of Omaha rent office space, equipment and computer
software under noncancellable operating leases. Future required minimum
rental payments under those leases as of December 31, 1998 were
approximately:
1999 $17,080,000
2000 14,168,000
2001 8,550,000
2002 4,948,000
2003 2,392,000
Thereafter 2,291,000
----------
Total $49,429,000
0. DEPOSIT FUNDS
The estimated fair value and statement value of guaranteed investment and
select maturity contracts were:
1998 1997
Estimated fair value $1,346,065 $1,118,746
=========== ==========
Statement value $1,353,266 $1,119,540
=========== ==========
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, 1998 and 1997, the Company held annuity reserves and
deposit fund liabilities of $1,877,117 and $1,256,277, 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 $61,061 in 1999.
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.
64
<PAGE>
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.
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 the initiative to reduce operating costs 15%
by the end of 1997. The Company incurred approximately $4,442 and $9,099 of
severance and related costs, consulting fees and other one-time costs
associated with expense realignment activities during 1997 and 1996,
respectively.
14. CODIFICATION OF STATUTORY ACCOUNTING PRINCIPLES
In March 1998, the National Association of Insurance Commissioners adopted
the Codification of Statutory Accounting Principles (Codification). The
Codification, which is intended to standardize regulatory accounting and
reporting for the insurance industry, is proposed to be effective January
1, 2001. During 1999, the State of Nebraska adopted the Codification. The
Company has not finalized the quantification of the effects of Codification
on its statutory financial statements.
65
<PAGE>
UNITED OF OMAHA
SEPARATE ACCOUNT B
FINANCIAL STATEMENTS AND INDEPENDENT AUDITORS' REPORT AS OF DECEMBER 31, 1998
AND FOR THE YEAR ENDED DECEMBER 31, 1998 AND FOR THE PERIOD FROM AUGUST 13, 1997
(INCEPTION) TO DECEMBER 31, 1997
66
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
United of Omaha Life Insurance Company
We have audited the accompanying statements of net assets, including the
schedules of investments, of United of Omaha Separate Account B (comprised of
the American Small Capitalization, American Growth, Prime Money Fund II, U.S.
Government Securities II, Contrafund, Asset Manager: Growth, Equity Income
(Fidelity), Index 500, Emerging Growth, Research, High Income, Global
Governments, Capital Opportunities, Emerging Markets Equity, Fixed Income, Real
Estate Growth, Capital Growth, International, Global Discovery, Growth & Income,
New America Growth, Personal Strategy Balanced, Equity Income (T. Rowe Price),
International Stock and Limited-Term Bond portfolios) as of December 31, 1998,
and the related statements of operations and changes in net assets for the year
ended December 31, 1998 and for the period from August 13, 1997 (Inception) to
December 31, 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the 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. Our audit procedures
included confirmations of investments owned, by correspondence with the transfer
agents. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of each of the respective
portfolios constituting United of Omaha Separate Account B as of December 31,
1998, and the results of their operations and changes in their net assets for
the year ended December 31, 1998 and for the period from August 13, 1997
(Inception) to December 31, 1997 in conformity with generally accepted
accounting principles.
April 23, 1999
67
<PAGE>
<TABLE>
<CAPTION>
UNITED OF OMAHA SEPARATE ACCOUNT B
STATEMENTS OF NET ASSETS
DECEMBER 31, 1998
- ------------------------------------------------------------------------------------------------------------------------------------
Alger Federated Fidelity
--------------------- ------------------------- ---------------------------------------
American Prime U.S. Asset
Small American Money Government Manager: Equity Index
ASSETS Capitalization Growth Fund II Securities II Contrafund Growth Income 500
Investments in portfolio shares,
<S> <C> <C> <C> <C> <C> <C> <C> <C>
at cost $ 235,718 $ 266,019 $ 487,258 $ 134,582 $ 200,889 $ 126,833 $ 398,812 $ 551,270
========== ========== ========= ========== ========== ========== ========= =========
Investments in portfolio shares,
at market value $ 262,846 $ 308,971 $ 487,258 $ 138,624 $ 233,885 $ 139,985 $ 431,177 $ 625,642
---------- ---------- --------- ---------- ---------- ---------- --------- ---------
Net assets $ 262,846 $ 308,971 $ 487,258 $ 138,624 $ 233,885 $ 139,985 $ 431,177 $ 625,642
========== ========== ========= ========== ========== ========== ========= =========
Accumulation units outstanding 22,377 20,827 455,700 12,374 17,227 11,375 36,638 46,099
======= ======= ======= ======= ======= ======= ====== ======
Net asset value per unit $ 11.75 $ 14.83 $ 1.07 $ 11.20 $ 13.58 $ 12.31 $ 11.77 $ 13.57
======== ======== ====== ======== ======== ======== ======= =======
The accompanying notes are an integral part of these financial statements.
</TABLE>
68
<PAGE>
<TABLE>
<CAPTION>
UNITED OF OMAHA SEPARATE ACCOUNT B
STATEMENTS OF NET ASSETS
DECEMBER 31, 1998 (continued)
Morgan Stanley
MFS Dean Witter Pioneer
---------------------------------------------------------- ------------------ ---------------------
Emerging Real
Emerging High Global Capital Markets Fixed Estate Capital
ASSETS Growth Research Income Governments Opportunities Equity Income Growth Growth
Investments in portfolio
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
shares, at cost $ 241,284 $ 195,615 $ 179,720 $ 120,185 $ 302,026 $ 294 $ 12,701 $ 176,259 $ 136,039
========== ========== ========== ========== ========== ====== ========= ========== =========
Investments in portfolio
shares, at market value $ 294,070 $ 215,373 $ 179,731 $ 126,049 $ 344,559 $ 305 $ 12,334 $ 158,052 $ 125,393
---------- ---------- ---------- ---------- ---------- ------ --------- ---------- ---------
Net assets $ 294,070 $ 215,373 $ 179,731 $ 126,049 $ 344,559 $ 305 $ 12,334 $ 158,052 $ 125,393
========== ========== ========== ========== ========== ====== ========= ========== =========
Accumulation units
outstanding 21,199 17,245 17,261 11,488 25,115 43 1,169 17,642 12,878
======= ======= ======= ======= ======= === ====== ======= ======
Net asset value per unit $ 13.87 $ 12.49 $ 10.41 $ 10.97 $ 13.72 $ 7.06 $ 10.55 $ 8.96 $ 9.74
======== ======== ======== ======== ======== ======= ======== ======= ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
69
<PAGE>
<TABLE>
<CAPTION>
UNITED OF OMAHA SEPARATE ACCOUNT B
STATEMENTS OF NET ASSETS
DECEMBER 31, 1998 (continued)
Scudder T. Rowe Price
------------------------------ --------------------------------------------------------
New Personal Inter- Limited-
Inter- Global Growth & America Strategy Equity national Term
ASSETS national Discovery Income Growth Balanced Income Stock Bond
Investments in portfolio shares,
<S> <C> <C> <C> <C> <C> <C> <C> <C>
at cost $ 247,657 $ 38,030 $ 180,453 $ 135,689 $ 254,051 $ 391,633 $ 243,214 $ 422,073
========== ========= ========= ========== ========== ========== ========== =========
Investments in portfolio shares,
at market value $ 263,115 $ 40,908 $ 183,859 $ 149,366 $ 259,868 $ 396,899 $ 256,718 $ 423,336
---------- --------- --------- ---------- ---------- ---------- ---------- ---------
Net assets $ 263,115 $ 40,908 $ 183,859 $ 149,366 $ 259,868 $ 396,899 $ 256,718 $ 423,336
========== ========= ========= ========== ========== ========== ========== =========
Accumulation units outstanding 23,544 3,486 16,277 11,661 21,673 33,771 23,891 38,343
======= ====== ====== ======= ======= ======= ======= ======
Net asset value per unit $ 11.18 $ 11.73 $ 11.30 $ 12.81 $ 11.99 $ 11.75 $ 10.75 $ 11.04
======== ======== ======= ======== ======== ======== ======== =======
The accompanying notes are an integral part of these financial statements.
</TABLE>
70
<PAGE>
<TABLE>
<CAPTION>
UNITED OF OMAHA SEPARATE ACCOUNT B
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998 AND FOR THE PERIOD AUGUST 13, 1997 (INCEPTION) TO DECEMBER 31, 1997
Alger Federated Fidelity
-------------------- ---------------------- -----------------------------------------
American Prime U.S. Asset
Small American Money Government Manager: Equity Index
1998 CapitalizatioGrowth Fund II Securities I Contrafund Growth Income 500
Investment income:
Reinvested dividends and capital gain
<S> <C> <C> <C> <C> <C> <C> <C> <C>
distributions $ 8,650 $ 11,366 $ 18,881 $ 392 $ - $ 594 $ 2,077 $ -
Mortality risk charges and expenses
(Note 4) (8,039) (2,765) (58,274) (2,601) (7,274) (3,976) (10,583) (17,250)
-------- ------- --------- -------- -------- -------- --------- --------
Net investment income (expense) 611 8,601 (39,393) (2,209) (7,274) (3,382) (8,506) (17,250)
---- ------ --------- -------- -------- -------- -------- --------
Gains (losses) on investments:
Net realized gains (losses) 502 153 - 60 295 103 328 1,117
Net change in unrealized gains (losses) 28,003 42,952 - 4,042 32,996 13,152 31,982 74,372
------- ------- -- ------ ------- ------- ------- ------
Net gains (losses) on investments 28,505 43,105 - 4,102 33,291 13,255 32,310 75,489
------- ------- -- ------ ------- ------- ------- ------
Increase (decrease) in net assets
from operations $ 29,116 $ 51,706 $(39,393) $ 1,893 $ 26,017 $ 9,873 $ 23,804 $ 58,239
========= ========= ========== ======== ========= ======== ========= ========
The accompanying notes are an integral part of these financial statements.
</TABLE>
71
<PAGE>
<TABLE>
<CAPTION>
UNITED OF OMAHA SEPARATE ACCOUNT B
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998 AND FOR THE PERIOD AUGUST 13, 1997 (INCEPTION)
TO DECEMBER 31, 1997 (Continued)
Morgan Stanley
MFS Dean Witter Pioneer
---------------------------------------------- ------------------ ------------------
Global Capital Emerging Real
Emerging High Govern- Oppor- Markets Fixed Estate Capital
1998 Growth Research Income ments tunities Equity Income Growth Growth
Investment income:
Reinvested dividends and capital gain
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
distributions $ 417 $ 676 $ 1,839 $ 358 $ 695 $ 1 $ 540 $ 4,653 $ 4,826
Mortality risk charges and expenses
(Note 4) (6,901) (4,486) (2,938) (3,728) (8,096) (78) (184) (5,437) (4,248)
-------- -------- -------- -------- -------- ----- ------ -------- -------
Net investment income (expense) (6,484) (3,810) (1,099) (3,370) (7,401) (77) 356 (784) 578
-------- -------- -------- -------- -------- ----- ---- ------ ---
Gains (losses) on investments:
Net realized gains (losses) 311 1,427 (17) 92 (4,935) (21) 3 (1,844) 189
Net change in unrealized gains (losses) 52,786 19,758 11 5,864 42,533 11 (367) (18,207) (10,107)
------- ------- --- ------ ------- --- ------ --------- --------
Net gains (losses) on investments53,097 21,185 (6) 5,956 37,598 (10) (364) (20,051) (9,918)
------- ------- ---- ------ ------- ----- ------ --------- -------
Increase (decrease) in net assets
from operations $ 46,613 $ 17,375 $ (1,105) $ 2,586 $ 30,197 $ (87) $ (8) $(20,835) $ (9,340)
========= ======== ========= ======= ========= ======= ====== ========== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
72
<PAGE>
<TABLE>
<CAPTION>
UNITED OF OMAHA SEPARATE ACCOUNT B
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998 AND FOR THE PERIOD AUGUST 13, 1997 (INCEPTION)
TO DECEMBER 31, 1997 (Continued)
Scudder T. Rowe Price
-------------------------------- ----------------------------------------------
New Personal Inter- Limited-
Inter- Global Growth & America Strategy Equity national Term
1998 national Discovery Income Growth Balanced Income Stock Bond
Investment income:
Reinvested dividends and capital gain
<S> <C> <C> <C> <C> <C> <C> <C> <C>
distributions $ 3,562 $ 243 $ 3,390 $ 2,872 $ 12,330 $ 15,662 $ 3,891 $ 9,298
Mortality risk charges and expenses
(Note 4) (4,976) (1,538) (5,114) (6,841) (3,936) (11,208) (11,236) (8,955)
-------- -------- -------- -------- ----------------- --------- -------
Net investment income (expense) (1,414) (1,295) (1,724) (3,969) 8,394 4,454 (7,345) 343
Gains (losses) on investments:
Net realized gains (losses) (56) 52 (5,981) 105 351 (2,088) - 42
Net change in unrealized gains (losses) 15,741 2,878 3,406 13,677 5,817 5,180 13,504 1,263
------- ------ ------ ------- ------ ------ ------- -----
Net gains (losses) on investments 15,685 2,930 (2,575) 13,782 6,168 3,092 13,504 1,305
------- ------ -------- ------- ------ ------ ------- -----
Increase (decrease) in net assets
from operations $ 14,271 $ 1,635 $ (4,299) $ 9,813 $ 14,562 $ 7,546 $ 6,159 $ 1,648
========= ======== ========== ======== ========= ======== ======== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
73
<PAGE>
<TABLE>
<CAPTION>
UNITED OF OMAHA SEPARATE ACCOUNT B
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998 AND FOR THE PERIOD AUGUST 13, 1997 (INCEPTION) TO DECEMBER 31, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
T. Rowe
Fidelity Scudder Price Pioneer Federated Alger
--------- --------- --------- --------- --------- ---------
Prime American
Equity- Inter- Equity Capital Money Small
1997 Income national Income Growth Fund II Capitalization
Investment income:
<S> <C> <C> <C> <C> <C> <C>
Reinvested dividends and capital gain distributions $ - $ - $ 575 $ - $ 181 $ -
Mortality risk charges and expenses (Note 4) (60) (61) (60) (58) (151) (58)
----- ----- ----- ----- ------ ----
Net investment income (expense) (60) (61) 515 (58) 30 (58)
----- ----- ---- ----- --- ----
Gains (losses) on investments:
Net realized gains (losses) 1 (3) 2 - - 2
Net change in unrealized gains (losses) 383 (279) 86 (539) - (875)
---- ------ --- ------ -- -----
Net gains (losses) on investments 384 (282) 88 (539) - (873)
---- ------ --- ------ -- -----
Increase (decrease) in net assets from operations $ 324 $ (343) $ 603 $ (597) $ 30 $ (931)
====== ======= ====== ======== ===== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
74
<PAGE>
<TABLE>
<CAPTION>
UNITED OF OMAHA SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998 AND FOR THE PERIOD AUGUST 13, 1997 (INCEPTION) TO DECEMBER 31, 1997
Alger Federated Fidelity
--------------------- ---------------------------- -------------------------------------------
American Prime U.S. Asset
Small American Money Government Manager: Equity Index
1998 Capitalization Growth Fund II Securities II Contrafund Growth Income 500
From operations:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net investment income (expense) $ 611 $ 8,601 $ (39,393) $ (2,209) $ (7,274) $ (3,382) $ (8,506) $(17,250)
Net realized gains (losses) 502 153 - 60 295 103 328 1,117
Net change in unrealized
gains (losses) 28,003 42,952 - 4,042 32,996 13,152 31,982 74,372
------- ------- -- ------ ------- ------- ------- ------
29,116 51,706 (39,393) 1,893 26,017 9,873 23,804 58,239
From policyowner transactions:
Purchases 231,254 263,465 4,625,960 150,477 207,868 141,710 400,198 567,403
Withdrawals (13,549) (6,200) (4,099,309) (13,746) - (11,598) (10,106) -
-------- -------- ----------- --------- -- --------- --------- -------
217,705 257,265 526,651 136,731 207,868 130,112 390,092 567,403
-------- -------- -------- -------- -------- -------- -------- -------
Increase in net assets 246,821 308,971 487,258 138,624 233,885 139,985 413,896 625,642
Net assets, beginning of year 16,025 - - - - - 17,281 -
------- -- -- -- -- -- ------- -
Net assets, end of year $262,846 $308,971 $ 487,258 $138,624 $233,885 $139,985 $431,177 $625,642
========= ========= ========== ========= ========= ========= ========= ========
Accumulation unit purchases 22,730 21,484 4,387,914 13,924 17,646 12,686 36,847 47,021
Accumulation unit withdrawals (1,929) (657) (3,932,214) (1,550) (419) (1,311) (1,848) (922)
-------- ------ ----------- -------- ------ -------- -------- -----
Net increase in units outstanding 20,801 20,827 455,700 12,374 17,227 11,375 34,999 46,099
Units outstanding, beginning of year 1,576 - - - - - 1,639 -
------ -- -- -- -- -- ------ -
Units outstanding, end of year 22,377 20,827 455,700 12,374 17,227 11,375 36,638 46,099
======= ======= ======== ======= ======= ======= ======= ======
The accompanying notes are an integral part of these financial statements.
75
<PAGE>
UNITED OF OMAHA SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998 AND FOR THE PERIOD AUGUST 13, 1997 (INCEPTION) TO DECEMBER 31, 1997 (Continued)
Morgan Stanley
MFS Dean Witter Pioneer
--------------------------------------------------------- ------------------ ----------------
Emerging Real
Emerging High Global Capital Markets Fixed Estate Capital
1998 Growth Research Income Governments Opportunities Equity Income Growth Growth
From operations:
Net investment income (expense) $ (6,484) $ (3,810) $ (1,099) $ (3,370) $ (7,401) $ (77) $ 356 $ (784) $ 578
Net realized gains (losses) 311 1,427 (17) 92 (4,935) (21) 3 (1,844) 189
Net change in unrealized
gains (losses) 52,786 19,758 11 5,864 42,533 11 (367) (18,207) (10,107)
------- ------- --- ------ ------- --- ------ --------- --------
46,613 17,375 (1,105) 2,586 30,197 (87) (8) (20,835) (9,340)
From policyowner transactions:
Purchases 248,045 213,047 180,836 123,463 340,877 1,414 13,258 180,129 123,638
Withdrawals (588) (15,049) - - (26,515) 1,022) (916) (1,242) (5,264)
------ --------- -- -- --------- ------ ------ -------- -------
247,457 197,998 180,836 123,463 314,362 392 12,342 178,887 118,374
-------- -------- -------- -------- -------- ---- ------- -------- -------
Increase in net assets 294,070 215,373 179,731 126,049 344,559 305 12,334 158,052 109,034
Net assets, beginning of year - - - - - - - - 16,359
-- -- -- -- -- -- -- -- ------
Net assets, end of year $294,070 $215,373 $179,731 $126,049 $344,559 $ 305 $ 12,334 $158,052 $125,393
========= ======== ========= ========= ========= ===== ========= ======== ========
Accumulation unit purchases 21,836 18,902 17,354 11,719 28,154 58 1,179 18,400 12,123
Accumulation unit withdrawals (637) (1,657) (93) (231) (3,039) (15) (10) (758) (858)
------ -------- ----- ------ -------- ----- ----- ------ -----
Net increase in units outstanding 21,199 17,245 17,261 11,488 25,115 43 1,169 17,642 11,265
Units outstanding, beginning of year - - - - - - - - 1,613
-- -- -- -- -- -- -- -- -----
Units outstanding, end of year 21,199 17,245 17,261 11,488 25,115 43 1,169 17,642 12,878
======= ======= ======= ======= ======= === ====== ======= ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
76
<PAGE>
<TABLE>
<CAPTION>
UNITED OF OMAHA SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998 AND FOR THE PERIOD AUGUST 13, 1997 (INCEPTION) TO DECEMBER 31, 1997 (Continued)
Scudder T. Rowe Price
------------------------------- ----------------------------------------------------
New Personal Inter- Limited-
Inter- Global Growth & America Strategy Equity national Term
1998 national Discovery Income Growth Balanced Income Stock Bond
From operations:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net investment income (expense) $ (1,414) $ (1,295) $ (1,724) $ (3,969) $ 8,394 $ 4,454 $ (7,345) $ 343
Net realized gains (losses) (56) 52 (5,981) 105 351 (2,088) - 42
Net change in unrealized gains
(losses) 15,741 2,878 3,406 13,677 5,817 5,180 13,504 1,263
------- ------ ------ ------- ------ ------ ------- -----
14,271 1,635 (4,299) 9,813 14,562 7,546 6,159 1,648
From policyowner transactions:
Purchases 232,230 39,273 223,762 139,553 256,715 408,975 250,559 443,927
Withdrawals - - (35,604) - (11,409) (37,182) - (22,239)
-- -- --------- -- --------- --------- -- --------
232,230 39,273 188,158 139,553 245,306 371,793 250,559 421,688
-------- ------- -------- -------- -------- -------- -------- -------
Increase in net assets 246,501 40,908 183,859 149,366 259,868 379,339 256,718 423,336
Net assets, beginning of year 16,614 - - - - 17,560 - -
------- -- -- -- -- ------- -- -
- -Net assets, end of year $263,115 $ 40,908 $183,859 $149,366 $259,868 $396,899 $256,718 $423,336
========= ========= ========= ========= ========= ========= ========= ========
Accumulation unit purchases 22,142 3,569 20,246 11,817 23,054 36,648 24,075 41,291
Accumulation unit withdrawals (360) (83) (3,969) (156) (1,381) (4,506) (184) (2,948)
------ ----- -------- ------ -------- -------- ------ -------
Net increase in units outstanding 21,782 3,486 16,277 11,661 21,673 32,142 23,891 38,343
Units outstanding, beginning of year 1,762 - - - - 1,629 - -
------ -- -- -- -- ------ -- -
Units outstanding, end of year 23,544 3,486 16,277 11,661 21,673 33,771 23,891 38,343
======= ====== ======= ======= ======= ======= ======= ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
77
<PAGE>
<TABLE>
<CAPTION>
UNITED OF OMAHA SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998 AND FOR THE PERIOD AUGUST 13, 1997 (INCEPTION) TO DECEMBER 31, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
T. Rowe
Fidelity Scudder Price Pioneer Federated Alger
---------- ---------- ---------- ---------- ---------- ----------
Prime American
Equity- Inter- Equity Capital Money Small
1997 Income national Income Growth Fund II Capitalization
From operations:
<S> <C> <C> <C> <C> <C> <C>
Net investment income (expense) $ (60) $ (61) $ 515 $ (58) $ 30 $ (58)
Net realized gains (losses) 1 (3) 2 - - 2
Net change in unrealized gains (losses) 383 (279) 86 (539) - (875)
---- ------ --- ------ -- -----
324 (343) 603 (597) 30 (931)
From policyowner transactions:
Purchases 16,957 16,957 16,957 16,956 84,753 16,956
Withdrawals - - - - (84,783) -
-- -- -- -- --------- -
16,957 16,957 16,957 16,956 (30) 16,956
------- ------- ------- ------- ----- ------
Increase in net assets 17,281 16,614 17,560 16,359 - 16,025
Net assets, beginning of year - - - - - -
-- -- -- -- -- -
Net assets, end of year $ 17,281 $ 16,614 $ 17,560 $ 16,359 $ - $ 16,025
========= ========= ========= ========= ==== ========
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
====== ====== ====== ====== == =====
The accompanying notes are an integral part of these financial statements.
</TABLE>
78
<PAGE>
UNITED OF OMAHA SEPARATE ACCOUNT B
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1998 AND FOR THE PERIOD FROM
AUGUST 13, 1997 (INCEPTION) TO DECEMBER 31, 1997
- --------------------------------------------------------------------------------
1. NATURE OF OPERATIONS
United of Omaha Separate Account B (Separate Account) was established by
United of Omaha Life Insurance Company (United of Omaha) 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 assets of the Separate Account are owned by United of Omaha. The net
assets of the Separate Account are restricted from use in the ordinary
business of United of Omaha.
2. SUB-ACCOUNTS
The Separate Account 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 Small Capitalization Prime Money Fund II
American Growth U.S. Government Securities II
Fidelity MFS
Contrafund Emerging Growth
Asset Manager: Growth Research
Equity Income High Income
Index 500 Global Governments
Capital Opportunities
Pioneer Scudder
Real Estate Growth International
Capital Growth Global Discovery
Growth & Income
T. Rowe Price Morgan Stanley Dean Witter
New America Growth Emerging Markets Equity
Personal Strategy Balanced Fixed Income
Equity Income
International Stock
Limited-Term Bond
79
<PAGE>
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period.
Actual results could differ from those estimates.
Security Valuation Transactions and Related Investment Income - Investments
in mutual funds are recorded at their net asset value. The market value of
investments is based on the closing bid prices as of the respective year
end. Investment transactions are accounted for on the trade date (date the
order to buy or sell is executed) and dividend income and capital gain
distributions are recorded on the ex-dividend date. Charges for investment
advisory fees and other expenses are reflected in the net asset values of
the mutual fund portfolios.
Federal Income Taxes - Operations of the Separate Account are included in
the federal income tax return of United of Omaha, which is taxed as a life
insurance company under the Internal Revenue Code. Under existing federal
income tax law, no taxes are payable on the investment income or on the
capital gains of the Separate Account.
4. ACCOUNT CHARGES
Administrative Charges - For single premium variable life policies, 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. The administrative charge for flexible premium
variable life policies is $84 per year.
Tax Expense Charge - For single premium variable life policies 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 to reimburse United of Omaha for state premium taxes, federal
deferred acquisition cost taxes, and related administrative expenses. The
annual rate of this charge is 0.39% of the accumulation value. This charge
is equal to 3.75% of each premium payment for flexible premium variable
life policies.
Mortality and Expense Risk Charge - 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 for single premium
variable life policies. Risk charges for flexible premium variable life
policies are equal to .70% of the accumulation value decreasing to .55%
after ten years.
Cost of Insurance Charge - The cost of insurance charge on single premium
variable life policies is based on the duration of the policy and the
insured's rate class as follows:
80
<PAGE>
Accumulation Accumulation
Value Value
of $45,000 greater than
Policy Year 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 %
The cost of insurance for flexible premium variable life policies is based
upon the age, sex, risk and rate class of the insured, the specified amount
of insurance coverage and the length of time the policy has been in force.
Transfer Charge - 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.
Surrender Charge - 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 for single premium variable life policies 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 -
The surrender charge for flexible premium variable life policies is
dependent upon the policyholders age, sex, risk and rate class, the length
of time the policy has been in force and the specified amount of coverage.
The highest aggregate surrender charge is $53 for each $1,000 of specified
amount of insurance coverage in the first year declining to $10 per $1,000
in the ninth year. The length of the surrender charge period varies
depending upon the policyholders issue age and varies between 9 and 12
years.
81
<PAGE>
5. NET ASSETS
Total net assets (policyowners' cumulative investment accounts) consist of
the following at December 31, 1998:
<TABLE>
<CAPTION>
Alger Federated Fidelity
------------------------ ----------------------- ------------------------------------------------
American Prime U.S. Asset
Small American Money Government Manager: Equity Index
Capitalization Growth Fund II Securities II Contrafund Growth Income 500
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Purchases $ 248,210 $ 263,465 $ 4,710,713 $ 150,477 $ 207,868 $ 141,710 $ 417,155 $ 567,403
Withdrawals (13,549) (6,200) (4,184,092) (13,746) - (11,598) (10,106) -
Net investment income
(expense) 553 8,601 (39,363) (2,209) (7,274) (3,382) (8,566) (17,250)
Net realized gains (losses) 504 153 - 60 295 103 329 1,117
Unrealized gains (losses) 27,128 42,952 - 4,042 32,996 13,152 32,365 74,372
------- ------- -- ------ ------- ------- ------- ------
Net assets at December 31,
1998 $ 262,846 $ 308,971 $ 487,258 $ 138,624 $ 233,885 $ 139,985 $ 431,177 $ 625,642
========== ========== ========== ========== ========== ========== ========== =========
- ------------------------------------------------------------------------------------------------------------------------------------
Morgan Stanely
MFS Dean Witter Pioneer
----------------------------------------------------- ------------------- ----------------------
Global Capital Emerging Real
Emerging High Govern- Oppor- Markets Fixed Estate Capital
Growth Research Income ments tunities Equity Income Growth Growth
Purchases $ 248,045 $ 213,047 $ 180,836 $ 123,463 $ 340,877 $ 1,414 $ 13,258 $ 180,129 $ 140,594
Withdrawals (588) (15,049) - - (26,515) (1,022) (916) (1,242) (5,264)
Net investment income
(expense) (6,484) (3,810) (1,099) (3,370) (7,401) (77) 356 (784) 520
Net realized gains (losses) 311 1,427 (17) 92 (4,935) (21) 3 (1,844) 189
Unrealized gains (losses) 52,786 19,758 11 5,864 42,533 11 (367) (18,207) (10,646)
------- ------- --- ------ ------- --- ------ --------- --------
Net assets at December 31,
1998 $ 294,070 $ 215,373 $ 179,731 $ 126,049 $ 344,559 $ 305 $ 12,334 $ 158,052 $ 125,393
========== ========== ========== ========== ========== ====== ========= ========== =========
</TABLE>
82
<PAGE>
5. NET ASSETS (continued)
<TABLE>
<CAPTION>
Scudder T. Rowe Price
-------------------------------- --------------------------------------------------------
New Personal Inter- Limited-
Inter- Global Growth & America Strategy Equity national Term
national Discovery Income Growth Balanced Income Stock Bond
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Purchases $ 249,188 $ 39,273 $ 223,762 $ 139,553 $ 256,715 $ 425,932 $ 250,559 $ 443,927
Withdrawals - - (35,604) - (11,409) (37,182) - (22,239)
Net investment income (expense) (1,476) (1,295) (1,724) (3,969) 8,394 4,969 (7,345) 343
Net realized gains (losses) (59) 52 (5,981) 105 351 (2,086) - 42
Unrealized gains (losses) 15,462 2,878 3,406 13,677 5,817 5,266 13,504 1,263
------- ------ ------ ------- ------ ------ ------- -----
Net assets at December 31,
1998 $ 263,115 $ 40,908 $ 183,859 $ 149,366 $ 259,868 $ 396,899 $ 256,718 $ 423,336
========== ========= ========== ========== ========== ========== ========== =========
</TABLE>
83
<PAGE>
PART II - OTHER INFORMATION
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned Registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
RULE 484 UNDERTAKING
By a Resolution adopted May 21, 1996, United's Board of Directors provides
for indemnification of a director, officer or employee to the full extent of the
law. Generally, the Nebraska Business Corporation Act permits indemnification
against expenses, judgments, fines and amounts paid in settlement actually and
reasonably incurred if the indemnitee acted in good faith and in a manner
reasonably believed to be in or not opposed to the best interests of the
corporation. However, no indemnification shall be made in any type of action by
or in the right of United if the proposed indemnitee is adjudged to be liable
for negligence or misconduct in the performance of his or her duty to United,
unless a court determines otherwise.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of United
pursuant to the foregoing provisions, or otherwise, United has been advised that
in the opinion of the Securities and Exchange Commission such indemnification
may be against public policy as expressed in the Act and may be, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than payment by United of expenses incurred or paid by a
director, officer, or controlling person of United in the successful defense of
any action, suite or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, United
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
REPRESENTATION PURSUANT TO SECTION 26(e)
United of Omaha Life Insurance Company represents that the fees and charges
under the Policy, in the aggregate, are reasonable in relation to the services
rendered, the expenses expected to be incurred, and the risks assumed by United
of Omaha Life Insurance Company.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement consists of the following papers and documents:
The facing sheet.
A reconciliation and tie of the information shown in the prospectus with the
items of Form N-8B-2.
The prospectus.
The undertaking to file reports.
The Rule 484 Undertaking.
The Section 26(e) Representation.
The signatures.
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. Independent Auditor's Consent.
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 B filed on April 16, 1998 (File No. 333-18881).
***** Incorporated by Reference to the Registration Statement for United of
Omaha Separate Account C filed on April 26, 1999 (File No. 33-89848).
II-3
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act
of 1940, the Registrant certifies that it meets all of the requirements for the
effectiveness of this Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1993 and has caused this Post-effective Amendment No. 3 to the
Registration Statement to be signed on its behalf, in the City of Omaha and
State of Nebraska, on April 26, 1999.
UNITED OF OMAHA SEPARATE ACCOUNT B
Registrant
UNITED OF OMAHA LIFE INSURANCE COMPANY
Depositor
/s/ Kenneth W. Reitz
---------------------------------------
By: Kenneth W. Reitz
First Vice President & Counsel
As required by the Securities Act of 1933, this Post-effective Amendment
No. 3 to the Registration Statement has been signed by the following persons on
April 26, 1999 in the capacities and on the duties indicated.
Signatures Title
/s/ John W. Weekly
by__________________________* Chairman of the Board,
John W. Weekly Chief Executive Officer
/s/ John A. Sturgeon
by__________________________* President, Chief Operation Officer, Director
John A. Sturgeon
/s/ Tommie D. Thompson
By__________________________* Executive V.P., Corporate Comptroller
(Principal Financial Officer and Principal
Accounting Officer)
/s/ Kenneth W. Reitz
by__________________________, for and on behalf of
Kenneth W. Reitz
Samuel L. Foggie* Director
Carol B. Hallett* Director
Jeffrey M. Heller* Director
Thomas W. Osborn* Director
Richard J. Sampson* Director
Oscar S. Straus* Director
Michael A. Wayne* Director
* Signed by Kenneth W. Reitz under Powers of Attorney effective January 1, 1999.
<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. 3 TO THE
REGISTRATION STATEMENT ON FORM S-6
UNDER
THE SECURITIES ACT OF 1933
April 26, 1999
<PAGE>
EXHIBIT INDEX
2. Opinion and Consent of Counsel
6. Opinion and Consent of Actuary
7. Consents of Independent Auditor
Exhibit 2 Consent of Counsel
UNITED OF OMAHA LIFE INSURANCE COMPANY
Mutual of Omaha Plaza, 3-Law
Omaha, Nebraska 68175-1008
April 26, 1999
United of Omaha Life Insurance Company
Mutual of Omaha Plaza
Omaha, NE 68175-1008
Re: Post-Effective Amendment #3 to the Registration Statement
File No. 333-18881
Filed April 26, 1999
Individual 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 26, 1999
TO: UNITED OF OMAHA LIFE INSURANCE COMPANY
FROM: Robert Hupf, FSA, MAAA
Vice President and Actuary
RE: ACTUARIAL OPINION
Post-Effective Amendment #3 to the Registration Statement
File No. 333-18881
Filed April 26, 1999
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. 3 to Registration
Statement No. 333-18881 of United of Omaha Separate Account B of our report
dated April 23, 1999, on the financial statements of United of Omaha Separate
Account B and our report dated March 4, 1998, on the financial statements of
United of Omaha Life Insurance Company appearing in the Prospectus, which is a
part of such Registration Statement, and to the related reference to us under
the heading "Independent Auditors" in such Prospectus.
DELOITTE & TOUCHE LLP
Omaha, Nebraska
April 23, 1999
