AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 30, 1999
FILE NO. 33-77496
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 7
TO
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT
TRUSTS REGISTERED ON FORM N-8B-2
------------------
A. EXACT NAME OF TRUST:
JPF SEPARATE ACCOUNT B
B. NAME OF DEPOSITOR:
JEFFERSON PILOT LIFEAMERICA INSURANCE COMPANY
C. COMPLETE ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES:
ONE GRANITE PLACE
CONCORD, NH 03301
D. NAME AND COMPLETE ADDRESS OF AGENT FOR SERVICE:
RONALD R. ANGARELLA
PRESIDENT
JEFFERSON PILOT SECURITIES CORPORATION
ONE GRANITE PLACE
CONCORD, NH 03301
COPIES TO:
<TABLE>
<S> <C>
CHARLENE GRANT, ESQ. JOAN E. BOROS, ESQ.
JEFFERSON PILOT LIFEAMERICA JORDEN, BURT, BOROS, CICCHETTI,
INSURANCE COMPANY BERENSON & JOHNSON LLP
ONE GRANITE PLACE 1025 THOMAS JEFFERSON STREET, N.W.
CONCORD, NH 03301 SUITE 400 EAST
WASHINGTON, D.C. 20007-0805
</TABLE>
------------------
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)
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
E. TITLE AND AMOUNT OF SECURITIES BEING REGISTERED:
UNITS OF INTEREST IN THE SEPARATE ACCOUNT UNDER INDIVIDUAL FLEXIBLE PREMIUM
VARIABLE LIFE INSURANCE POLICIES.
F. PROPOSED MAXIMUM AGGREGATE OFFERING PRICE TO THE PUBLIC OF THE SECURITIES
BEING REGISTERED:
REGISTRATION OF INDEFINITE AMOUNT OF SECURITIES UNDER THE SECURITIES ACT OF
1933 PURSUANT TO RULE 24F-2 UNDER THE INVESTMENT COMPANY ACT OF 1940.
G. AMOUNT OF FILING FEE:
AN INDEFINITE AMOUNT OF THE REGISTRANT'S SECURITIES HAS BEEN REGISTERED
PURSUANT TO A DECLARATION, UNDER RULE 24F-2 UNDER THE INVESTMENT COMPANY ACT
OF 1940, SET OUT IN THE REGISTRANT'S INITIAL FORM S-6 REGISTRATION STATEMENT.
REGISTRANT FILED A RULE 24F-2 NOTICE FOR THE FISCAL YEAR ENDING DECEMBER 31,
1998 ON FEBRUARY 26, 1999.
H. APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after the effective date.
Registrant elects to be governed by Rule 6e-3(T)(b)(13)(i)(A) under the
Investment Company Act of 1940, with respect to the policy described in the
Prospectus.
================================================================================
<PAGE>
Ensemble II
JPF Separate Account B
Flexible Premium Variable Life Insurance Policy
JEFFERSON PILOT LIFEAMERICA INSURANCE COMPANY
One Granite Place, Concord, New Hampshire 03301 800-258-3648
- --------------------------------------------------------------------------------
This Prospectus describes the Ensemble II variable life insurance policy
("Ensemble II" or "the Policy"), a flexible premium variable life insurance
policy issued and underwritten by Jefferson Pilot LifeAmerica Insurance Company
("We" or "JP LifeAmerica" or "the Company"). The Policy is intended to provide
life insurance and pay a benefit, as described in this Prospectus, upon
surrender or death. The Policy allows flexible premium payments, Policy Loans,
Partial Surrenders, and a choice of two Death Benefit Options. Your account
values may be invested on either a fixed or variable or combination of fixed
and variable basis. You may allocate Your Net Premiums to JPF Separate Account
B ("Separate Account B" or "the Separate Account"), and/or the General Account,
or both Accounts. The Divisions of the Separate Account support the benefits
provided by the variable portion of the Policy. The Accumulation Value
allocated to each Division is not guaranteed and will vary with the investment
performance of the associated Fund. Net Premiums allocated to the General
Account will accumulate at rates of interest We determine; such rates will not
be less than 4.5% per year. Your Policy may lapse if the Cash Value is
insufficient to pay a Monthly Deduction. We will send premium reminder notices
for Planned Premiums and for premiums required to continue the Policy in force.
If the Policy lapses, You may reinstate it.
The Policy has a free look period during which You may return the Policy. We
will refund Your Premium (See "Right of Policy Examination").
This Prospectus also describes the Divisions used to fund the Policy through
Separate Account B. Each Division invests exclusively in one of the following
Portfolios:
JPVF International Equity Portfolio
JPVF World Growth Stock Portfolio
JPVF Emerging Growth Portfolio
JPVF Capital Growth Portfolio
JPVF Small Company Portfolio JPVF Growth Portfolio
JPVF Growth & Income Portfolio
JPVF Balanced Portfolio
JPVF High Yield Bond Portfolio
JPVF Money Market Portfolio
Fidelity VIP Growth Portfolio
Fidelity VIP Equity Income Portfolio
Fidelity VIP II Contrafund Portfolio
Fidelity VIP II Index 500 Portfolio
MFS Research Series
MFS Utilities Series
Oppenheimer Strategic Bond Fund/VA
Oppenheimer Bond Fund/VA
Templeton International Fund: Class 1
Not all Divisions may be available under all Policies or in all jurisdictions.
The current Prospectus and Statement of Additional Information ("SAI") for any
of the Portfolios may be obtained by calling (800) 258-3648 x7719.
Replacing existing insurance or supplementing an existing flexible premium
variable life insurance policy with the Policy may not be to your advantage.
THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY THE CURRENT PROSPECTUSES FOR
THE FUNDS. BOTH THIS PROSPECTUS AND THE UNDERLYING FUND PROSPECTUSES SHOULD BE
READ AND RETAINED FOR FUTURE REFERENCE.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
Ensemble II insurance policies and shares of the funds are not deposits or
obligations of or guaranteed by any bank. They are not federally insured by the
FDIC or any other government agency. Investing in the contracts involves
certain investment risks, including possible loss of principal invested.
THIS PROSPECTUS AND OTHER INFORMATION ABOUT JPF SEPARATE ACCOUNT B REQUIRED TO
BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION CAN BE FOUND IN THE SEC'S
WEB SITE AT http://www.sec.gov.
<PAGE>
table of contents
- --------------------------------------------------------------------
<TABLE>
<CAPTION>
Page
-----
<S> <C>
DEFINITIONS ....................................... 3
POLICY SUMMARY .................................... 4
THE SEPARATE ACCOUNT .............................. 5
CHARGES & FEES .................................... 6
Charges & Fees Assessed Against
Premium ......................................... 6
Charges & Fees Assessed Against the
Accumulation Value .............................. 6
Charges & Fees Assessed Against the
Separate Account ................................ 7
Charges Assessed Against the Underlying
Funds ........................................... 7
Charges Deducted Upon Surrender .................. 8
ALLOCATION OF PREMIUMS ............................ 9
The Portfolios ................................... 9
Investment Advisers for the Funds ................ 11
Mixed and Shared Funding; Conflicts of
Interest ........................................ 11
Fund Additions, Deletions or
Substitutions ................................... 11
General Account .................................. 12
POLICY CHOICES .................................... 12
General .......................................... 12
Premium Payments ................................. 13
Death Benefit Options ............................ 14
Transfers and Allocations to Funding
Options ......................................... 14
Telephone Transfers, Loans and
Reallocations ................................... 15
Automated Transfers (Dollar Cost
Averaging and Portfolio Rebalancing) ............ 15
POLICY VALUES ..................................... 16
Accumulation Value ............................... 16
Unit Value ....................................... 16
Net Investment Factor ............................ 16
Surrender Value .................................. 17
POLICY RIGHTS ..................................... 17
Surrenders ....................................... 17
Withdrawals ...................................... 17
Grace Period ..................................... 18
Reinstatement of a Lapsed Policy ................. 18
Right to Defer Payment ........................... 18
Policy Loans ..................................... 18
<CAPTION>
Page
-----
<S> <C>
Policy Changes ................................... 20
Right of Policy Examination ...................... 20
Supplemental Benefits ............................ 20
DEATH BENEFIT ..................................... 21
POLICY SETTLEMENT ................................. 21
Settlement Options ............................... 21
THE COMPANY ....................................... 22
DIRECTORS & OFFICERS .............................. 23
ADDITIONAL INFORMATION ............................ 24
Reports to Policyowners .......................... 24
Right to Instruct Voting of Fund Shares .......... 24
Disregard of Voting Instructions ................. 25
State Regulation ................................. 25
Legal Matters .................................... 25
The Registration Statement ....................... 25
Financial Statements ............................. 25
Employee Benefit Plans ........................... 25
Distribution of the Policy ....................... 26
Independent Auditors ............................. 26
YEAR 2000 ......................................... 26
Group or Sponsored Arrangements .................. 27
TAX MATTERS ....................................... 27
General .......................................... 27
Federal Tax Status of the Company ................ 27
Life Insurance Qualification ..................... 28
Charges for JP Financial Income Taxes ............ 31
MISCELLANEOUS POLICY PROVISIONS ................... 31
The Policy ....................................... 31
Payment of Benefits .............................. 31
Suicide and Incontestability ..................... 31
Protection of Proceeds ........................... 32
Nonparticipation ................................. 32
Changes in Owner and Beneficiary;
Assignment ..................................... 32
Misstatements .................................... 32
ILLUSTRATIONS OF DEATH BENEFIT,
TOTAL ACCOUNT VALUES AND
SURRENDER VALUES ................................. A-1
FINANCIAL STATEMENTS OF THE
COMPANY .......................................... F-1
FINANCIAL STATEMENTS OF THE
SEPARATE ACCOUNT ................................. F-18
</TABLE>
This prospectus does not constitute an offer in any jurisdiction in which such
offering may not be lawfully made. No dealer, salesman or other person is
authorized to give any information or make any representations in connection
with this offering other than those contained in this prospectus, and, if
given or made, such other information or representations must not be relied
upon. The purpose of this variable life insurance policy is to provide
insurance protection. Life insurance is a long-term investment. Policyowners
should consider their need for insurance coverage and the policy's long-term
investment potential. No claim is made that the policy is any way similar or
comparable to an investment in a mutual fund.
2
<PAGE>
definitions
- --------------------------------------------------------------------
Accumulation Value: The total amount that a Policy provides for investment plus
the amount held as collateral for Policy Debt.
Age: The Insured's age at his/her nearest birthday.
Allocation Date: The date when the initial Net Premium is placed in the
Divisions and the General Account as instructed by the Policyowner in the
application. The Allocation Date is 25 days from the date the Company mails the
Policy to the agent for delivery to the Policyowner. However, if the insured is
in a substandard risk class, the Allocation Date will be the date the Company
receives from You all administrative items needed to activate the Policy.
Attained Age: The Insured's age at the last Policy Anniversary.
Beneficiary: The person you designate in the application to receive the Death
Benefit proceeds. If changed, the Beneficiary is as shown in the latest change
filed with the Company. If no Beneficiary survives the Insured, You or Your
estate will be the Beneficiary. The Beneficiary's interest may be subject to
that of any assignee.
Cash Value: The Accumulation Value less any Surrender Charge. This amount less
any Policy Debt is payable to the Policyowner on surrender of the Policy.
Code: The Internal Revenue Code of 1986, as amended.
Company: Jefferson Pilot LifeAmerica Insurance Company.
Cost of Insurance: A charge related to the Company's expected mortality cost
for Your basic insurance coverage under the Policy, not including any
supplemental benefit provision that You may elect through a Policy rider.
Date of Receipt: Any Company business day, prior to 4:00 p.m. Eastern time, on
which a notice or premium payment is received at the Company's home office.
Death Benefit: The amount which is payable to the Beneficiary on the death of
the Insured, adjusted as provided in the Policy.
Death Benefit Options: Either of the two methods for determining the Death
Benefit.
Division: A separate division of Separate Account B which invests only in the
shares of a specified Portfolio of a Fund.
Fund: An open-end management investment company (mutual fund) whose shares are
purchased by the Separate Account to fund the benefits provided by the Policy.
General Account: A non-variable funding option available in the Policy that
guarantees a minimum interest rate of 4.5% per year.
Grace Period: The 61-day period beginning on the Monthly Anniversary Day on
which the Policy's Cash Value less any Policy Debt is insufficient to cover the
current Monthly Deduction, unless the cumulative minimum premium requirement
has been met. The Policy will lapse without value at the end of the 61-day
period unless a sufficient payment is received by the Company.
Home Office: The Company's principal executive offices at One Granite Place,
Concord, New Hampshire 03301.
Insured: The person on whose life the Policy is issued.
Issue Age: The Age of the Insured on the Policy's Issue Date.
Issue Date: The effective date on which coverage begins under the Policy.
Loan Value: Generally, 9O% of the Policy's Cash Value on the date of a loan.
Minimum Initial Premium: The amount of premium due on the Policy Date, which is
an amount sufficient to cover Monthly Deductions and keep the Policy in force
for at least three months.
Monthly Anniversary Date: The same day in each month as the Policy Date.
Net Premium: The gross premium less a 2.0% State Premium Tax Charge.
Policy: The life insurance contract described in this Prospectus.
3
<PAGE>
Policy Date: The date set forth in the Policy and from which policy years,
policy months and policy anniversaries will be determined. If the Policy Date
should fall on the 29th, 30th or 31st of a month, the Policy Date will be the
28th of such month. You may request the Policy Date. If You do not request a
date, it is the date the Policy is issued.
Policy Debt: The sum of all unpaid policy loans and accrued interest thereon.
Portfolio: A separate investment series of one of the Funds.
Proof of Death: One or more of: a) a copy of a certified death certificate; b)
a copy of a certified decree of a court of competent jurisdiction as to the
finding of death; c) a written statement by a medical doctor who attended the
Insured; or d) any other proof satisfactory to the Company.
SEC: Securities and Exchange Commission.
Separate Account B: JPF Separate Account B, a separate investment account
established by the Company for the purpose of funding the Policy.
Specified Amount: The amount chosen by the Policyowner at application, which
may subsequently be increased or decreased, and used in determining the Death
Benefit.
State: Any State of the United States, the District of Columbia, Puerto Rico,
Guam, the Virgin Islands or any other possession of the United States.
Surrender Charge: An amount retained by the Company upon the Surrender of the
Policy, a Withdrawal or a decrease in Specified Amount.
Surrender Value: Cash Value less any Policy Debt.
Target Premium: The premium from which first year commissions will be
determined and which varies by sex, Issue Age, rating class of the Insured and
Specified Amount.
Valuation Date: The date and time at which the Accumulation Value of a variable
investment option is calculated. Currently, this calculation occurs after the
close of business of the New York Stock Exchange on any normal business day,
Monday through Friday, that the New York Stock Exchange and the Company are
open. In addition to being closed on all federal holidays, the Company will
also be closed on Good Friday, the Friday following Thanksgiving and the day
before or following Christmas.
Valuation Period: The period of time from between two successive Valuation
Dates, beginning at the close of regular trading on the New York Stock Exchange
on each Valuation Date, and ending at the close of regular trading on the New
York Stock Exchange on the next succeeding Valuation Date.
We, Our, Us, Company: Jefferson Pilot LifeAmerica Insurance Company, its
successors or assigns.
You, Your: Policyowner.
policy summary
- --------------------------------------------------------------------------------
The Policy described in this Prospectus is a flexible premium variable life
insurance policy. The Policy is intended to provide life insurance and pay a
benefit (subject to adjustment under the Policy's Age and/or Sex, Suicide and
Incontestability, and Grace Period provisions) upon surrender of the Policy or
death of the Insured. The Policy allows flexible premium payments, Policy
Loans, Withdrawals and a choice of two Death Benefit Options. Account values
may be either fixed or variable or a combination of fixed and variable.
As described within, charges and fees will be assessed against premium
payments, Accumulation Value, the Separate Account, the underlying Funds and
upon surrender.
You must purchase Your variable life insurance policy from a registered
representative. The Policy, the initial application on the Insured, any
subsequent applications and any riders constitute the entire contract.
At the time of application, You must choose a Death Benefit Option, decide on
the amount of premium and determine how to allocate Net Premiums. You may elect
to supplement the benefits afforded by the Policy through the addition of
riders We make available.
The proceeds payable upon the death of the Insured depend on the Death Benefit
Option chosen. Under Option 1 the Death Benefit equals the current Specified
Amount. Under Option 2, the
4
<PAGE>
Death Benefit equals the current Specified Amount plus the Accumulation Value
on the date of death. The Death Benefit proceeds will be reduced by repayment
of any outstanding Policy Debt.
Although the Policy is designed to allow flexible premiums, You must pay
sufficient premiums to continue the Policy in force. An initial premium, based
on Issue Age, underwriting class and Specified Amount must be paid at issue. No
premium payment may be less than $25. Premium reminder notices will be sent for
Planned Premiums and for premiums required to continue the Policy in force.
Should Your Policy lapse, it may be reinstated.
You may allocate Your Net Premiums to the Separate Account, the General Account
or both Accounts. Net Premiums allocated to the Separate Account must be
allocated to one or more of the Divisions of the Separate Account in whole
percentages. The variable portion of the Policy is supported by the Divisions
you choose and will vary with the investment performance of the associated
Portfolios. Net Premiums allocated to the General Account will accumulate at
rates of interest We determine. The effective rate of interest will not be less
than 4.5% per year.
the separate account
- --------------------------------------------------------------------------------
The Separate Account underlying the Policy is JPF Separate Account B. Amounts
allocated to the Separate Account are invested in the Portfolios. Each
Portfolio is a series of an open-end management investment company whose shares
are purchased by the Separate Account to fund the benefits provided by the
Policy. The Portfolios, including their investment objectives and their
investment advisers, are described in this Prospectus. Complete descriptions of
the Portfolios' investment objectives and restrictions and other material
information relating to the Portfolios are contained in the prospectuses for
each of the Portfolios which are delivered with this Prospectus.
Separate Account B was established under New Jersey law on March 2, 1994. Under
New Jersey Insurance Law, the income, gains or losses of the Separate Account
are credited without regard to the other income, gains or losses of the
Company. These assets are held for Our variable life insurance policies. Any
and all distributions made by the Portfolios with respect to shares held by the
Separate Account will be reinvested in additional shares at net asset value.
The assets maintained in the Separate Account will not be charged with any
liabilities arising out of any other business We conduct. We are, however,
responsible for meeting the obligations of the Policy to the Policyowner.
No stock certificates are issued to the Separate Account for shares of the
Portfolios held in the Separate Account. Ownership of Portfolio shares is
documented on the books and records of the Portfolios and of the Company for
the Separate Account.
The Separate Account is registered with the SEC as a unit investment trust
under the Investment Company Act of 1940 and meets the definition of separate
account under the federal securities laws. Such registration does not involve
any approval or disapproval by the Commission of the Separate Account or the
Company's management or investment practices or policies. We do not guarantee
the Separate Account's investment performance.
Divisions. The Policy presently offers nineteen Divisions but may add or delete
Divisions. You may invest in a total of 17 Divisions over the life of the
Policy. Each Division will invest exclusively in shares of a single Portfolio.
5
<PAGE>
charges & fees
- --------------------------------------------------------------------
[arrow] CHARGES & FEES ASSESSED AGAINST PREMIUM
Premium Charges
Before We allocate a premium to any of the Divisions of Separate Account B and
the General Account, We will deduct a state premium tax charge of 2.0% to
compensate Us for state premium taxes, franchise taxes and other local taxes
imposed on premiums by New York State and local jurisdictions. The actual tax
assessed falls between 1.7% and 2.5% of premiums received. Therefore, the 2.0%
charge may be higher or lower than the actual tax We incur. We reserve the right
to increase this charge to a maximum of 2.5%, and We do not expect to realize a
profit as a result of this charge.
[arrow] CHARGES & FEES ASSESSED AGAINST
ACCUMULATION VALUE
Charges and fees assessed against the Policy's Accumulation Value can be
deducted from any one of the Divisions of the Separate Account or pro rata from
each of the Divisions and the General Account. If You do not designate one
Division, the charges will be deducted pro rata from each of the Divisions and
the General Account.
Monthly Deduction
On each Monthly Anniversary Date and on the Policy Date, We will deduct from
the Policy's Accumulation Value an amount to cover certain expenses associated
with start-up and maintenance of the Policy, administrative expenses, the cost
of insurance for the Policy and any optional benefits added by rider.
The Monthly Deduction equals:
(i) the Cost of Insurance for the Policy (as described below), and the cost of
additional benefits provided by rider, plus
(ii) a Monthly Administrative Fee of $6.
Cost of Insurance. The Cost of Insurance charge is related to Our expected
mortality cost for Your basic insurance coverage under the Policy, not
including any supplemental benefit provisions You may elect through a Policy
rider.
The Cost of Insurance charge equals (i) multiplied by the result of (ii) minus
(iii) where
(i) is the current Cost of Insurance Rate as described in the Policy;
(ii) is the death benefit at the beginning of the policy month divided by
1.0036748 (to arrive at the proper values for the beginning of the month
assuming the guaranteed interest rate of 4.5%); and
(iii) is the Accumulation Value at the beginning of the policy month.
If the corridor percentage applies, it will be reflected in the Death Benefit
used in the calculation.
The current Cost of Insurance Rate is variable and is based on the Insured's
issue age, sex (where permitted by law), Policy Year, rating class and
Specified Amount. Because the Accumulation Value and the Death Benefit of the
Policy may vary from month to month, the Cost of Insurance charge may also vary
on each day a Monthly Deduction is taken. In addition, You should note that the
Cost of Insurance charge is related to the difference between the Death Benefit
payable under the Policy and the Accumulation Value of the Policy. An increase
in the Accumulation Value or a decrease in the Death Benefit may result in a
smaller Cost of Insurance charge while a decrease in the Accumulation Value or
an increase in the Death Benefit may result in a larger cost of insurance
charge.
The Cost of Insurance rate for standard risks will not exceed those based on
the 1980 Commissioners Standard Ordinary Mortality Tables Male or Female (1980
Tables). Substandard risks will have monthly deductions based on Cost of
Insurance rates which may be higher than those set forth in the 1980 Tables. A
table of guaranteed maximum Cost of Insurance rates per $1,000 of the Amount at
Risk will be included in each Policy. We may adjust the Monthly Cost of
Insurance rates from time to time. Adjustments will be on a class basis and
will be based on Our estimates for future factors such as mortality, investment
income, expenses, reinsurance costs and the length of time Policies stay in
force. Any adjustments will be made on a nondiscriminatory basis.
6
<PAGE>
Monthly Administrative Expense Charge. The Monthly Deduction amount also
includes a monthly administration fee of $6.00. This fee may not be increased.
Charges for Optional Benefits. If You elect any optional benefits by adding
riders to the Policy, an optional benefits charge will be included in the
Monthly Deduction amount. The amount of the charge will vary depending upon the
actual optional benefits selected and is described on each applicable Policy
rider.
[arrow] CHARGES & FEES ASSESSED AGAINST
THE SEPARATE ACCOUNT
Risk Charge
We will assess a charge against each Division of the Separate Account, not to
exceed .0024657% on a daily basis (.90% on an annual basis) in policy years 1
through 10, and .0017808% on a daily basis (.65% on an annual basis) in policy
years 11 and thereafter, to compensate Us for mortality and expense risks We
assume in connection with the Policy. The mortality risk assumed by the Company
is that Insureds, as a group, may live for a shorter period of time than
estimated and that the Company will, therefore, pay a Death Benefit before
collecting a sufficient Cost of Insurance charge. The expense risk assumed is
that expenses incurred in issuing and administering the Policies and operating
the Separate Account will be greater than the administrative charges assessed
for such expenses.
The Separate Account is not subject to any taxes. However, if taxes are
assessed against the Separate Account, We reserve the right to assess taxes
against the Separate Account Value.
Administrative Charge for Transfers
or Withdrawal
We will impose an Administrative Fee equal to the lesser of $25 or 10% of the
amount of the transfer for each transfer among the Divisions of the Separate
Account or the General Account, after the first 12 transfers in a Policy Year
and except for the transfer of the initial net premium plus interest, and any
other premiums received, from the Gen-eral Account on the Allocation Date and
loan repayments. We will also assess an Administrative Fee for withdrawals
equal to the lesser of $25 or 2% of the amount withdrawn.
[arrow] CHARGES ASSESSED AGAINST
THE UNDERLYING FUNDS
Following are the investment advisory and sub-investment management fees, paid
by each of the Funds as a percentage of average net assets.
Jefferson Pilot Variable Fund
<TABLE>
<CAPTION>
World Growth Stock,
Small Company,
Average Daily Money Growth and Income, Capital
Net Assets Market and Balanced Growth
- -------------------- -------- -------------------- ----------
<S> <C> <C> <C>
First $200 million .50% .75% 1.00%
Next $1.1 billion .45% .70% .95%
Over $1.3 billion .40% .65% .90%
</TABLE>
<TABLE>
<CAPTION>
Average Daily Emerging High Yield International
Net Assets Growth Bond and Growth Equity
- -------------------- ---------- ----------------- --------------
<S> <C> <C> <C>
First $200 million .80% .75% 1.00%
Next $1.1 billion .75% .75% 1.00%
Over $1.3 billion .70% .75% 1.00%
</TABLE>
The compensation of the Sub-Investment Managers is paid directly from the
investment management fees of JP Investment Advisory and is set forth in the
table below as an annual percentage of the average daily net assets of the
Portfolio managed:
<TABLE>
<CAPTION>
Sub-Investment Manager Fees
----------------------------------
Templeton Lord
Janus World Abbett
Average Daily Capital Growth Small
Net Assets Growth Stock Company
- -------------------- --------- ----------- --------
<S> <C> <C> <C>
First $200 million .70% .50% .50%
Next $1.1 billion .65% .45% .45%
Over $1.3 billion .60% .40% .40%
</TABLE>
<TABLE>
<CAPTION>
Warburg MFS MFS MFS
Growth Emerging Money High Janus
Net Assets & Income Growth Market Yield Balanced
- -------------------- ---------- ---------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
First $100 million .50% .40% .30% .40% .55%
Next $100 million .50% .40% .30% .40% .50%
Next $200 million .50% .40% .25% .40% .50%
Over $400 million .50% .40% .25% .40% .50%
</TABLE>
<TABLE>
<CAPTION>
Lombard Odier
Strong International
Net Assets Growth Equity
- ------------------- -------- --------------
<S> <C> <C>
First $25 million .60% .50%
Next $75 million .50% .50%
Next $50 million .40% .50%
Over $150 million .30% .50%
</TABLE>
Templeton International Fund: Class 1
<TABLE>
<CAPTION>
Total
Management Other Annual
Fee Expenses Expenses
- ------------ ---------- ---------
<S> <C> <C>
.69% .17% .86%
</TABLE>
7
<PAGE>
Fidelity VIP and VIP II
<TABLE>
<CAPTION>
Total
Management Other Annual
Fee Expenses Expenses
Fidelity VIP ------------ ---------- ---------
<S> <C> <C> <C>
Equity Income .49% .08% .57%
Growth .59% .07% .66%
Fidelity VIP II
Contrafund .59% .07% .66%
Index 500 .24% .04% .28%
</TABLE>
MFS Research Series and MFS Utilities Series
0.75% of average daily net assets.
Oppenheimer Bond Fund/VA
0.74% of average daily net assets.
Oppenheimer Strategic Bond Fund/VA
0.80% of average daily net assets.
Certain of the unaffiliated Portfolio advisers reimburse the Company for
administrative costs incurred in connection with administering the Funds as
variable funding options under the Policy (MFS--0.15%, Oppenheimer--0.10% for
the Bond Fund and 0.15% for the Strategic Bond Fund). These reimbursements are
paid out of the investment advisory fees and are not charged to the Portfolios.
For further details on each Portfolio's expenses please refer to that
Portfolio's prospectus. Additional copies of each Portfolio's prospectus and
the Statement of Additional Information for each Portfolio may be obtained free
of charge by calling (800)-258-3648 x7719.
[arrow] CHARGES DEDUCTED UPON SURRENDER
If You surrender the Policy, make a withdrawal, or the Policy lapses during the
first ten Policy Years, We will assess a surrender charge, which will be
deducted from the Policy's Accumulation Value. This charge is imposed in part
to recover distribution expenses and in part to recover certain first year
administrative costs. The initial Surrender Charges will be specified in Your
Policy and will be in compliance with each state's nonforfeiture law.
The initial Surrender Charge, as specified in the Policy, is based on the
Specified Amount. It also depends on the Issue Age, risk classification and, in
most states, sex of the Insured. It is determined by multiplying a surrender
factor by the lesser of (1) the premiums actually received in policy year one;
or (2) the "Guideline Annual Premiums" as defined in the rules and regulations
under the 1940 Act. The surrender factor depends on the length of time the
Policy has been in force, as follows:
<TABLE>
<CAPTION>
Policy Year Surrender Factor
- -------------- -----------------
<S> <C>
1-5 .30
6 .25
7 .20
8 .15
9 .10
10 .05
11 and after 0
</TABLE>
We will assess an additional Surrender Charge for any increase in the Specified
Amount, other than an increase caused by a change from Death Benefit Option I
to Death Benefit Option II. The additional Surrender Charge is determined by
multiplying a surrender factor by the lesser of (1) or (2), where:
(1) is A time B divided by C, where:
A is the amount of the increase in the Specified Amount;
B is the sum of the cash value just prior to the increase in the
Specified Amount and the total premiums received in the 12 months just
following the increase in the Specified Amount; and
C is the Specified Amount in effect after the increase in the Specified
Amount.
(2) is the "Guideline Annual Premium" for the increase at the attained age of
the Insured on the effective date of the increase in the Specified Amount.
The surrender factor depends on the length of time the increase has been in
force, as follows:
<TABLE>
<CAPTION>
Increase Year Surrender Factor
- --------------- -----------------
<S> <C>
1-5 .15
6 .125
7 .10
8 .075
9 .05
10 .025
11 and after 0
</TABLE>
The Surrender Charge in effect at any time is the sum of the Surrender Charge
for the initial Specified Amount plus the Surrender Charge for any increase in
the Specified Amount. If the Specified Amount is decreased, the Surrender
Charge will not decrease. We will not assess a Surrender Charge after the tenth
Policy Year.
8
<PAGE>
Surrender Charges on Surrenders and Withdrawals
All applicable Surrender Charges are imposed on Surrenders.
We will impose a pro rata Surrender Charge on Withdrawals. The pro rata
Surrender Charge is calculated by dividing the amount of the net Withdrawal by
the Cash Value and multiplying the result by the amount of the Surrender Charge
on a surrender.
OTHER CHARGES
We reserve the right to charge the assets of each Division to provide for any
income taxes or other taxes payable by Us on the assets attributable to that
Division. Although We currently make no charge, we reserve the right to charge
You an administrative fee, not to exceed $25, to cover the cost of preparing
any additional illustrations of current Cash Values and current mortality
assumptions which you may request after the Policy Date.
allocation of premiums
- --------------------------------------------------------------------------------
You may allocate all or a part of Your Net Premiums to the Divisions currently
available under Your Policy or You may allocate all or a part of Your Net
Premiums to the General Account.
[arrow] THE PORTFOLIOS
The Separate Account currently invests in shares of the Portfolios listed
below. Net Premiums applied to the Separate Account will be invested in the
Portfolios in accordance with Your selection. Portfolios may be added or
withdrawn as permitted by applicable law. We reserve the right to limit the
total number of Portfolios You may elect to 17 over the lifetime of the Policy
or to increase the total number of Portfolios You may elect. Shares of the
Portfolios are not sold directly to the general public. Each of the Portfolios
is available only through the purchase of variable annuities or variable life
insurance policies. (See Mixed and Shared Funding)
The investment results of the Portfolios, whose investment objectives are
described below, are likely to differ significantly. There is no assurance that
any of the Portfolios will achieve their respective investment objectives.
Investment in some of the Portfolios involves special risks, which are
described in their respective prospectuses. You should read the prospectuses
for the Portfolios and consider carefully, and on a continuing basis, which
Portfolio or combination of Portfolios is best suited to Your long-term
investment objectives. Except where otherwise noted, all of the Portfolios are
diversified, as defined in the Investment Company Act of 1940.
[diamond] JPVF International Equity Portfolio seeks long-term capital
appreciation through investments in securities whose primary trading
markets are outside the United States.
[diamond] JPVF World Growth Stock Portfolio seeks to achieve long-term capital
growth through a policy of investing primarily in stocks of companies
organized in the United States or in any foreign nation. A portion of
the Portfolio may also be invested in debt obligations of companies
and governments of any nation. Any income realized will be incidental.
[diamond] JPVF Emerging Growth Portfolio seeks to provide long-term growth of
capital. Dividend and interest income from portfolio securities, if
any, is incidental to the Portfolio's investment objective of
long-term growth.
[diamond] JPVF Capital Growth Portfolio seeks capital growth. Realization of
income is not a significant investment consideration and any income
realized will be incidental.
[diamond] JPVF Small Company Portfolio seeks to achieve growth of capital. The
Portfolio pursues its objective by investing primarily in a
diversified portfolio of equity securities issued by small companies.
[diamond] JPVF Growth Portfolio seeks capital growth by investing primarily in
equity securities that the Sub-Investment Manager believes have
above-average growth prospects.
[diamond] JPVF Growth and Income Portfolio seeks long-term growth of capital by
investing primarily in a wide range of equity issues that may offer
capital appreciation and, secondarily, seeks a reasonable level of
current income.
[diamond] JPVF Balanced Portfolio seeks reasonable current income and long-term
capital growth, consistent with conservation of capital, by
9
<PAGE>
investing primarily in common stocks and fixed income securities.
[diamond] JPVF High Yield Bond Portfolio seeks a high level of current income by
investing primarily in corporate obligations with emphasis on higher
yielding, higher risk, lower-rated or unrated securities. These
securities may be considered speculative and involve greater risks,
including risk of default, than higher rated securities.
[diamond] JPVF Money Market Portfolio seeks to achieve as high a level of
current income as is consistent with preservation of capital and
liquidity. An investment in the Money Market Portfolio is neither
insured nor guaranteed by the U.S. Government.
[diamond] Fidelity Variable Insurance Products Fund-- Growth Portfolio seeks
capital appreciation by investing primarily in common stocks.
[diamond] Fidelity Variable Insurance Products Fund-- Equity-Income Portfolio
seeks reasonable income by investing primarily in income-producing
equity securities. In choosing these securities, the Fund will also
consider the potential for capital appreciation.
[diamond] Fidelity Investments' Variable Insurance Products Fund Il--Contrafund
Portfolio seeks maximum total return over the long term by investing
its assets mainly in equity securities of companies that are
undervalued or out-of-favor.
[diamond] Fidelity Variable Insurance Products Fund II--Index 500 Portfolio
seeks investment results that correspond to the total return of common
stocks publicly traded in the United States, as represented by the S&P
500.
[diamond] MFS Variable Insurance Trust--Research Series seeks to provide
long-term growth of capital and future income by investing a
substantial proportion of its assets in equity securities of companies
believed to possess better-than-average prospects for long-term
growth.
[diamond] MFS Variable Insurance Trust--Utilities Series seeks capital growth
and current income (incomes above that available from a portfolio
invested entirely in equity securities) by investing, under normal
circumstances, at least 65% (but up to 100% at the discretion of the
Adviser) of its assets in equity and debt securities of both domestic
and foreign companies in the utilities industry.
[diamond] Oppenheimer Variable Account Funds-- Strategic Bond Fund/VA seeks a
high level of current income principally derived from interest on debt
securities and seeks to enhance such income by writing covered call
options on debt securities. The Portfolio intends to invest
principally in: (i) foreign government and corporate debt securities,
(ii) U.S. Government securities, and (iii) lower-rated high yield
domestic debt securities, commonly known as "junk bonds", which are
subject to a greater risk of loss of principal and nonpayment of
interest than higher-rated securities. These securities may be
considered to be speculative.
[diamond] Oppenheimer Variable Account Funds-- Bond Fund/VA primarily seeks a
high level of current income from investment in high yield,
fixed-income securities rated "Baa" or better by Moody's or "BBB" or
better by Standard & Poor's. Secondarily, this Portfolio seeks capital
growth when consistent with its primary objective.
[diamond] Templeton Variable Product Series Fund-- Templeton International Fund
seeks long-term capital growth through a flexible policy of investing
in stocks and debt obligations of companies and governments outside
the United States. Any income realized will be incidental. Although
the Templeton International Fund generally invests in common stock, it
may also invest in preferred stocks and certain debt securities such
as convertible bonds which are rated in any category by Standard &
Poor's Corporation or Moody's Investors Service, Inc. or which are
unrated by any rating agency.
Some of the above Portfolios may use instruments known as derivatives as part
of their investment strategies, as described in their respective prospectuses.
The use of certain derivatives such as inverse floaters and principal on debt
instruments may involve higher risk of volatility to a Portfolio. The use of
leverage in connection with derivatives can also increase risk of losses. See
the prospectus for the Portfolio for a discussion of the risks associated with
an investment in those Portfolios. You should refer to the accompanying
prospectuses of the Portfolios for more complete information about their
investment policies and restrictions.
10
<PAGE>
[arrow] INVESTMENT ADVISERS FOR EACH OF THE FUNDS:
Jefferson Pilot Variable Fund, Inc. ("JPVF") The investment manager to JPVF is
Jefferson Pilot Investment Advisory Corporation ("JP Investment Advisory"), an
affiliate of the Company. JP Investment Advisory and JPVF have contracted with
eight unaffiliated companies to act as sub-investment managers to the Funds.
They are:
[diamond] JPVF International Equity Portfolio: Lombard Odier International
Portfolio Management Limited ("Lombard Odier")
[diamond] JPVF World Growth Stock Portfolio: Templeton Global Advisors Limited
("Templeton")
[diamond] JPVF Emerging Growth Portfolio: Massachusetts Financial Services
Company ("MFS")
[diamond] JPVF Capital Growth Portfolio: Janus Capital Corporation ("Janus")
[diamond] JPVF Small Company Portfolio: Lord, Abbett & Co. ("Lord Abbett")
[diamond] JPVF Growth Portfolio: Strong Capital Management, Inc. ("Strong")
[diamond] JPVF Growth and Income Portfolio: Warburg Pincus Asset Management,
Inc. ("Warburg")
[diamond] JPVF Balanced Portfolio: Janus
[diamond] JPVF High Yield Bond: MFS
[diamond] JPVF Money Market Portfolio: MFS
Fidelity Variable Insurance Products Fund - Fidelity Management & Research
Company ("FMR")
Fidelity Variable Insurance Products Fund II - FMR
MFS Variable Insurance Trust - Massachusetts Financial Services Company ("MFS")
Oppenheimer Variable Account Funds - OppenheimerFunds, Inc. ("Oppenheimer")
Templeton Variable Products Series Fund - Templeton Investment Counsel, Inc.
("TICI")
[arrow] MIXED AND SHARED FUNDING; CONFLICTS
OF INTEREST
Shares of the Funds are available to insurance company separate accounts which
fund variable annuity contracts and variable life insurance policies, including
the Policy described in this Prospectus. Because Fund shares are offered to
separate accounts of both affiliated and unaffiliated insurance companies, it
is conceivable that, in the future, it may not be advantageous for variable
life insurance separate accounts and variable annuity separate accounts to
invest in these Funds simultaneously, since the interests of such Policyowners
or contractholders may differ. Although neither the Company nor the Funds
currently foresees any such disadvantages either to variable life insurance or
to variable annuity Policyowners, each Fund's Board of Trustees/
Directors has agreed to monitor events in order to identify any material
irreconcilable conflicts which may possibly arise and to determine what action,
if any, should be taken in response thereto. If such a conflict were to occur,
one of the separate accounts might withdraw its investment in a Fund. This
might force that Fund to sell portfolio securities at disadvantageous prices.
[diamond] FUND ADDITIONS, DELETIONS OR
SUBSTITUTIONS
We reserve the right, subject to compliance with appropriate state and federal
laws, to add, delete or substitute shares of another Portfolio or Fund for
Portfolio share already purchased or to be purchased in the future for the
Division in connection with the Policy. We may substitute shares of one
Portfolio for shares of another Portfolio if, among other things, (a) it is
determined that a Portfolio no longer suits the purpose of the Policy due to a
change in its investment objectives or restrictions; (b) the shares of a
Portfolio are no longer available for investment; or (c) in Our view, it has
become inappropriate to continue investing in the shares of the Portfolio.
Substitution may be made with respect to both existing investments and the
investment of any future premium payments. However, no substitution of
securities will be made without prior notice to Policyowners, and without prior
approval of the SEC or such other regulatory authorities as may be necessary,
all to the extent required and permitted by the Investment Company Act of 1940
or other applicable law.
We also reserve the right to make the following changes in the operation of the
Separate Account and the Divisions;
(a) to operate the Separate Account in any form permitted by law;
(b) to take any action necessary to comply with applicable law or obtain and
continue any exemption from applicable laws;
(c) to transfer assets from one Division to another, or from any Division to
our general account;
11
<PAGE>
(d) to add, combine, or remove Divisions in the Separate Account;
(e) to assess a charge for taxes attributable to the operation of the Separate
Account or for other taxes, described in "Charges and Fees--Other Charges"; and
(f) to change the way We assess other charges, as long as the total other
charges do not exceed the amount currently charged the Separate Account and the
Portfolios in connection with the Policies.
Portfolio shares are subject to certain investment restrictions which may not
be changed without the approval of the majority of the Portfolios'
shareholders. See accompanying Prospectus for the Portfolios.
[arrow] GENERAL ACCOUNT
Interests in the General Account have not been registered with the SEC in
reliance upon exemptions under the Securities Act of 1933, as amended and the
General Account has not been registered as an investment company under the 1940
Act. However, disclosure in this Prospectus regarding the General Account may
be subject to certain generally applicable provisions of the federal securities
laws relating to the accuracy and completeness of the statements. Disclosure in
this Prospectus relating to the Fixed Account has not been reviewed by the SEC.
The General Account is a fixed funding option available under the Policy. The
Company guarantees a minimum interest rate of 4.5% on amounts in the General
Account and assumes the risk of investment gain or loss. The investment gain or
loss of the Separate Account or any of the Funds does not affect the General
Account Value.
The General Account is secured by Our general assets. Our general assets
include all assets of the Company other than those held in separate accounts
sponsored by the Company or its affiliates. The Company will invest the assets
of the General Account in those assets chosen by the Company, as allowed by
applicable law. Investment income of such General Account assets will be
allocated by the Company between itself and those policies participating in the
General Account.
We guarantee that, at any time, the General Account Value of Your Policy will
not be less than the amount of the Net Premiums allocated to the General
Account, plus interest at an annual rate of not less than 4.5%, less the amount
of any Withdrawals, Policy Loans or Monthly Deductions.
If You do not accept the Policy issued as applied for or you exercise Your
"free look" option, no interest will be credited and We will retain any
interest earned on the Initial Net Premium.
policy choices
- --------------------------------------------------------------------------------
[arrow] GENERAL
The Policy is designed to provide the Insured with lifetime insurance
protection and to provide the Policyowner with flexibility in amount and
frequency of premium payments and level of life insurance proceeds payable
under the Policy. It provides life insurance coverage with a Death Benefit
payable to a named beneficiary or contingent beneficiary. You are not required
to pay scheduled premiums to keep the Policy in force and You may, subject to
certain limitations, vary the frequency and amount of premium payments. You may
also adjust the level of life insurance payable under the Policy without having
to purchase a new Policy by increasing or decreasing the Specified Amount.
To purchase a Policy, You must complete an application and submit it to Us
through the agent selling the Policy. You must furnish satisfactory evidence of
insurability. We will generally not issue Policies to insure persons older than
age 80. For ages 15 and over, each Insured's smoking status is reflected in the
current cost of insurance rates. Policies issued in certain States will not
directly reflect the Insured's sex in either the premium rates or the charges
or values under the Policy. We may reject an application or premium or contest
a Policy for any good reason.
The minimum Specified Amount at issue is $25,000. We reserve the right to
revise Our rules to specify different minimum Specified Amounts at issue. We
may reinsure all or a portion of the Policy.
12
<PAGE>
[arrow] PREMIUM PAYMENTS
The Policy is a flexible premium life insurance policy. This means that You may
decide when to make premium payments and in what amounts. You must pay your
premiums to Us at our home office or through one of Our authorized agents for
forwarding to Us. There is no fixed schedule of premium payments on the Policy
either as to amount or frequency. You may determine, within certain limits,
Your own premium payment schedule. We will set forth the limits, which will
include a minimum initial premium payment sufficient to keep the Policy in
force for three months; they may also include limits on the total amount and
frequency of payments in each policy year. No payment may be less than $25. In
order to help You get the insurance benefits You desire, We will state a
Planned Periodic Premium and Premium Frequency in the Policy. This premium will
generally be based on Your insurance needs and financial ability, the current
financial climate, the Specified Amount of the Policy and the Insured's age,
sex and risk class. You are not required to pay such premiums and failure to
make any premium payment will not necessarily result in lapse of the Policy, so
long as the Policy's Surrender Value is sufficient to pay the Monthly
Deduction. Payment of the Planned Periodic Premiums will not guarantee that
Your Policy will remain in force. (See "Policy Lapse")
Premiums paid in excess of the Planned Periodic Premium or an increase in Your
Planned Periodic Premium may cause the Policy to be classified as a "Modified
Endowment Contract" for federal income tax purposes. If at any time We receive
a premium payment which would result in Your Policy being deemed a modified
endowment contract, We will refund the excess premium to You with interest
within 60 days after the end of the Policy Year in which the premium was
received. If, for any reason, We do not refund the excess premium within 60
days after the end of such Policy Year, the excess premium will be held in a
separate deposit fund and credited with interest until refunded to you. The
interest rate used on any refund, or credited to the separate deposit fund
created by this provision, will be the excess premium's pro rata rate of return
on the Contract until the date We notify You that the excess premium and the
earnings on such excess premium have been removed from the Policy. After the
date of such notice, the interest rate paid on the separate deposit fund will
be such rate as We may declare from time to time on advance premium deposit
funds. You may be notified of other options available to You. You also may
choose to have the Policy be deemed a modified endowment contract and, if so,
We will not refund the excess premium. (See--"Tax Matters").
Section 7702 of the Code includes a definition of life insurance for tax
purposes. These rules place limits on premiums and on the relationship between
the Death Benefit and the Accumulation Value. If You pay a premium which would
result in total premiums exceeding the current maximum premium limitations, We
will refund the premium to You with interest within 60 days after the end of
the Policy Year in which the premium was received. If, for any reason, We do
not refund the excess premium within such 60-day period, the excess premium
will be held in a separate deposit fund and credited with interest until We
refund it to You. The interest rate used on any refund, or credited to the
separate deposit fund created by this provision, will be the excess premium's
pro rata rate of return on the Contract until the date We notify You that the
excess premium and the earnings on such excess premium have been removed from
the Policy. After the date of such notice, the interest rate paid on the
separate deposit fund will be such rate as We may declare from time to time on
advance premium deposit funds. We will accept no further premium payments until
allowed by the current maximum premium limitations required by the Code. We
also reserve the right to refuse to make any change in the Specified Amount or
the Death Benefit Option or any other change if such change would cause the
Policy to fail to qualify as life insurance under the Code.
Under limited circumstances, We may backdate a Policy, upon request, by
assigning an Issue Date earlier than the date the application is signed but no
earlier than six months prior to state approval of the Policy. Backdating may
be desirable, for example, so that You can purchase a particular Policy
Specified Amount for lower Cost of Insurance Rate based on a younger insurance
age. For a backdated Policy, You must pay the premium for the period between
the Issue Date and the date the application is received at the Home Office.
Backdating of Your Policy will not affect the date on which Your premium
payments are credited to the Separate Account.
We will allocate premium payments, net of the premium tax charge, plus interest
earned prior to
13
<PAGE>
the Allocation Date, among the General Account and the divisions of the
Separate Account in accordance with Your directions to Us. The minimum
percentage of any net premium payment allocated to any division or the General
Account is 5% and allocation percentages must be in whole numbers only. Your
initial premium (including any interest) will be allocated, as You instructed,
on the Allocation Date. Your subsequent premiums will be allocated as of the
date they are received in Our Home Office. Prior to the Allocation Date, the
initial net premium, and any other premiums received, will be allocated to the
General Account. (See "Right of Policy Examination")
You may change Your premium allocation instructions at any time. Your request
may be written or by telephone, so long as the proper telephone authorization
is on file with Us. Allocations must be changed in whole percentages. The
change will be effective as of the date of the next premium payment after You
notify Us. We will send You confirmation of the change. (See "Transfers and
Allocations to Funding Options")
[arrow] DEATH BENEFIT OPTIONS
At the time of purchase, You must choose between the two available Death
Benefit Options. The amount payable under the Policy will depend upon which
Death Benefit Option You choose.
Under Option 1 the Death Benefit will be the greater of the current Specified
Amount or the Accumulation Value on the date of death multiplied by the
corridor percentage, as described below.
Under Option 2 the Death Benefit will be the current Specified Amount plus the
Accumulation Value on the date of death.
The corridor percentage depends upon the Insured's attained age on the date of
death and is used to determine a minimum ratio of Death Benefit to Accumulation
Value. This is required to qualify the Policy as life insurance under the
federal tax laws.
Under both Option 1 and Option 2, the Death Benefit will be reduced by a
Withdrawal. (See "Withdrawals") The Death Benefit payable under either Option
will also be reduced by the amount necessary to repay the Policy Debt in full
and, if the Policy is within the Grace Period, any payment required to keep the
Policy in force.
After We issue the Policy, You may, subject to certain restrictions, change the
Death Benefit selection from Option 1 to Option 2, or vice versa, by sending Us
a request in writing. If you change the Death Benefit option from Option 2 to
Option 1, the Specified Amount will be increased by the Policy's Accumulation
Value on the effective date of the change. If you change the Death Benefit
option from Option 1 to Option 2, the Specified Amount will be decreased by the
Policy's Accumulation Value on the effective date of the change. We will
require evidence of insurability on a request for a change from Option 1 to
Option 2. We will not permit a change in the Death Benefit Option if the change
would result in a Specified Amount which is less than the minimum Specified
Amount of $25,000.
[arrow] TRANSFERS AND ALLOCATIONS TO
FUNDING OPTIONS
You may transfer all or part of the Accumulation Value to any other Portfolio
or to the General Account at any time. You must transfer a minimum of $250 each
time. We currently permit 12 transfers per year without imposing any transfer
charge. For transfers over 12 in any Policy Year, We will impose a transfer
charge of the lesser of $25 or 10% of the amount transferred, which We will
deduct on a pro rata basis from the Division or Divisions or the General
Account into which the amount is transferred, unless You specify otherwise. We
will not impose a Transfer Charge on the transfer of the initial Net Premium
payments, plus interest earned, from the General Account to the Divisions on
the Allocation Date, or on loan repayments. We will not impose a Transfer
Charge for transfers under the Dollar Cost Averaging or Portfolio Rebalancing
features. You may currently make up to 20 transfers per Policy Year. We reserve
the right to modify transfer privileges and charges.
You may at any time transfer 100% of the Policy's Accumulation Value to the
General Account and choose to have all future premium payments allocated to the
General Account. While You are doing this, the minimum period the Policy will
be in force will be fixed and guaranteed. The minimum period will depend on the
amount of Accumulation Value, the Specified Amount, the sex, Attained Age and
rating class of the Insured at the time of transfer. The minimum period will
decrease if You choose to increase the Specified Amount, surrender the Policy
or make a withdrawal. The minimum period will increase if You choose to
decrease the Specified Amount, make additional premium
14
<PAGE>
payments, or We credit a higher interest rate than that guaranteed for the
General Account, or charge.
We will not impose a transfer charge for a transfer of all Accumulation Value
in the Separate Account to the General Account. Transfers from the General
Account to the Divisions of the Separate Account will be subject to the
transfer charge unless they are one of the first 12 transfers in a Policy Year
and except for the transfer of initial net premium payments, plus interest
earned, from the General Account, loan repayments or transfers in connection
with the Dollar Cost Averaging or Portfolio Rebalancing programs.
We reserve the right to refuse or restrict transfers made by third-party agents
on behalf of Policyowners or pursuant to market timing services when We
determine that such transfers will be detrimental to the Portfolios,
Policyowners or You.
[arrow] TELEPHONE TRANSFERS, LOANS AND
REALLOCATIONS
You, your authorized representative or a member of his/her administrative staff
may request a transfer of Accumulation Value or reallocation of premiums
(including allocation changes relating to existing Dollar Cost Averaging and
Automatic Portfolio Rebalancing programs) either in writing or by telephone. In
order to make telephone transfers, You must complete a written telephone
transfer authorization form and return it to Us at our Home Office. All
transfers must be in accordance with the terms of the Policy. If the transfer
instructions are not in good order, We will not execute the transfer and You
will be notified.
We may also permit loans to be made by telephone, provided that Your
authorization form is on file with Us. Only You may request loans by telephone.
We will use reasonable procedures, such as requiring identifying information
from callers, recording telephone instructions, and providing written
confirmation of transactions, in order to confirm that telephone instructions
are genuine. Any telephone instructions which We reasonably believe to be
genuine will be Your responsibility, including losses arising from any errors
in the communication of instructions. As a result of this procedure, You will
bear the risk of loss. If We do not use reasonable procedures, as described
above, We may be liable for losses due to unauthorized instructions.
[arrow] AUTOMATED TRANSFERS (DOLLAR COST
AVERAGING AND PORTFOLIO
REBALANCING)
Dollar Cost Averaging describes a system of investing a uniform sum of money at
regular intervals over an extended period of time. Dollar Cost Averaging is
based on the economic fact that buying a security with a constant sum of money
at fixed intervals results in acquiring more of the item when prices are low
and less of it when prices are high.
You may establish automated transfers of a specific dollar amount (the
"Periodic Transfer Amount") on a monthly, quarterly or semi-annual basis from
the Money Market Division or the General Account to any other Portfolio or to
the General Account. You must have a minimum of $3,000 allocated to either the
Money Market Division or the General Account in order to enroll in the Dollar
Cost Averaging program. The minimum Periodic Transfer Amount is $250. A minimum
of 5% of the Periodic Transfer Amount must be transferred to any specified
Division. There is no additional charge for the program. You may start or stop
participation in the Dollar Cost Averaging program at any time, but You must
give the Us at least 30 days' notice to change any automated transfer
instructions that are currently in place. We reserve the right to suspend or
modify automated transfer privileges at any time.
You may elect an Automatic Portfolio Rebalancing feature which provides a
method for reestablishing fixed proportions between various types of
investments on a systematic basis. Under this feature, We will automatically
readjust the allocation between the Divisions and the General Account to the
desired allocation, subject to a minimum of 5% per Division or General Account,
on a quarterly, semi-annual or annual basis.
You may not elect Dollar Cost Averaging and Automatic Portfolio Rebalancing at
the same time. We will make transfers and adjustments pursuant to these
features on the Policy's Monthly Anniversary Date in the month when the
transaction is to take place, or the next succeeding business day if the
Monthly Anniversary Date falls on a holiday or weekend. We must have an
authorization form on file before either feature may begin. Transfers under
these features and not subject to the transfer fee and do not count toward the
12 free transfers or the 20 transfer maximum currently allowed per year.
15
<PAGE>
Before participating in the Dollar Cost Averaging or Automatic Portfolio
Rebalancing programs, You should consider the risks involved in switching
between investments available under the Policy. Dollar Cost Averaging requires
regular investments regardless of fluctuating price levels, and does not
guarantee profits or prevent losses. Automatic Portfolio Rebalancing is
consistent with maintaining your allocation of investments among market
segments, although it is accomplished by reducing your Accumulation Value
allocated to the better performing segments. Therefore, You should carefully
consider market conditions and each Fund's investment policies and related
risks before electing to participate in the Dollar Cost Averaging Program.
policy values
- --------------------------------------------------------------------------------
[arrow] ACCUMULATION VALUE
The Accumulation Value of Your Policy is determined on a daily basis.
Accumulation Value is the sum of the values in the Divisions plus the value in
the General Account. We calculate Your Policy's Accumulation Value in the
Divisions by units and unit values under the Policies. Your Policy's
Accumulation Value will reflect the investment experience of the Divisions
investing in the Portfolios, any additional net premiums paid, any withdrawals,
any policy loans, and any charges assessed in connection with the Policy. We do
not guarantee Accumulation Values in the Separate Account as to dollar amount.
On the Allocation Date, the Accumulation Value in the Separate Account (the
"Separate Account Value") equals the initial premium payments, less the State
Premium Tax Charge, plus interest earned prior to the Allocation Date, and less
the Monthly Deduction for the first policy month. We will establish the initial
number of units credited to the Separate Account for Your Policy on the
Allocation Date. At the end of each Valuation Period thereafter, the
Accumulation Value in a Division is:
(i) the Accumulation Value in the Division on the preceding Valuation Date
multiplied by the net investment factor, described below, for the current
Valuation Period, plus
(ii) any Net Premium We receive during the current Valuation Period which is
allocated to the Division, plus
(iii) all Accumulation Value transferred to the Division from another Division
or the General Account during the current Valuation Period, minus
(iv) the Accumulation Value transferred from the Division to another Division
or the General Account and Accumulation Value transferred to secure a Policy
Debt during the current Valuation Period, minus
(v) all withdrawals from the Division during the current Valuation Period.
Whenever a Valuation Period includes the Monthly Anniversary Date, the Separate
Account Value at the end of such period is reduced by the portion of the
monthly deduction allocated to the Divisions.
[arrow] UNIT VALUES
We credit Units to You upon allocation of Net Premiums to a Division. Each Net
Premium payment you allocate to a Division will increase the number of units in
that Division. We credit both full and fractional units. We determine the
number of units and fractional units by dividing the Net Premium payment by the
unit value of the Division to which You have allocated the payment. We
determine each Division's unit value on each Valuation Date. The number of
units credited to Your Policy will not change because of subsequent changes in
unit value. The number is increased by subsequent contributions or transfers
allocated to a Division, and decreased by charges and withdrawals from that
Division. The dollar value of each Division's units will vary depending on the
investment performance of the corresponding Portfolio, as well as any expenses
charged directly to the Separate Account.
The initial Unit Value of each Division's units was $10.00. Thereafter, the
Unit Value of a Division on any Valuation Date is calculated by multiplying the
Division's Unit Value on the previous Valuation Date by the Net Investment
Factor for the Valuation Period then ended.
[arrow] NET INVESTMENT FACTOR
The Net Investment Factor measures each Division's investment experience and is
used to determine
16
<PAGE>
changes in Unit Value from one Valuation Period to the next. We calculate the
Net Investment Factor by dividing (1) by (2) and subtracting (3) from the
result, where:
(1) is the sum of:
(a) the Net Asset Value of a Fund share held in the Separate Account for
that Division determined at the end of the current Valuation Period; plus
(b) the per share amount of any dividend or capital gain distributions made
for shares held in the Separate Account for that Division if the ex-dividend
date occurs during the Valuation Period;
(2) is the Net Asset Value of a Fund share held in the Separate Account for
that Division determined as of the end of the preceding Valuation Period; and
(3) is the daily charge no greater than .0024657% for policy years 1 through 10
and .0017808% for policy years 11 and thereafter, representing the Mortality &
Expense Risk Charge. This charge is equal, on an annual basis, to .90% (Policy
Years 1 through 10) and .65% (Policy Years 11 and thereafter) of the daily Net
Asset Value of Fund shares held in the Separate Account for that Division.
Because the Net Investment Factor may be greater than, less than or equal to 1,
values in a Division may increase or decrease from Valuation Period to
Valuation Period.
The General Account Value reflects amounts allocated to the General Account
through payment of premiums or transfers from the Separate Account, plus
interest credited to those amounts. Amounts allocated to the General Account,
and interest thereon, are guaranteed; however there is no assurance that the
Separate Account Value of the Policy will equal or exceed the Net Premiums paid
and allocated to the Separate Account.
We will advise you at least annually as to the number of Units which remain
credited to the Policy, the current Unit Values, the Separate Account Value,
the General Account Value, and the Accumulation Value.
[arrow] SURRENDER VALUE
The Surrender Value of the Policy is the amount You can receive in cash by
surrendering the Policy. The Surrender Value will equal (a) the Accumulation
Value on the date of surrender; less (b) the Surrender Charge; less (c) the
Policy Debt. (See Charges Deducted Upon Surrender)
policy rights
- --------------------------------------------------------------------------------
[arrow] SURRENDERS
By Written Request, You may surrender the Policy for its Surrender Value at any
time while the Insured is alive. All insurance coverage under the Policy will
end on the date of the Surrender. All or part of the Surrender Value may be
applied to one or more of the Settlement Options described in this Prospectus
or in any manner to which We agree and that We make available. (See Right to
Defer Payment, Policy Settlement and Payment of Benefits)
[arrow] WITHDRAWALS
By Written Request, You may, at any time after the expiration of the Free Look
Period, make withdrawals from the Policy. We will deduct a charge equal to the
lesser or $25 or 2% of the amount of the withdrawal from the amount of the Cash
Value which You withdraw. The minimum amount of any withdrawal after the charge
is applied is $500. The amount You withdraw cannot exceed the Cash Value less
any Policy Debt. We will also deduct a pro rata Surrender Charge unless the
withdrawal is combined with a request to maintain or increase the Specified
Amount.
Withdrawals will generally affect the Policy's Accumulation Value, Cash Value
and the life insurance proceeds payable under the Policy as follows.
[diamond] The Policy's Cash Value will be reduced by the amount of the
withdrawal;
[diamond] The Policy's Accumulation Value will be reduced by the amount of the
withdrawal plus any applicable pro rata Surrender Charge;
[diamond] Life insurance proceeds payable under the Policy will generally be
reduced by the amount of the withdrawal plus any applicable pro rata
Surrender Charge, unless the withdrawal is
17
<PAGE>
combined with a request to maintain the Specified Amount.
The withdrawal will reduce the Policy's values as described in the "Charges
Deducted Upon Surrender" section.
If the Death Benefit Option for the Policy is Option 1, a withdrawal will
reduce the Specified Amount. However, We will not allow a withdrawal if the
Specified Amount will be reduced below the $10,000.
If the Death Benefit Option for the Policy is Option 2, a withdrawal will
reduce the Accumulation Value, usually resulting in a dollar-for-dollar
reduction in the life insurance proceeds payable under the Policy.
You may allocate a withdrawal among the Divisions and the General Account. If
you do not make such an allocation, We will allocate the withdrawal among the
Divisions and the General Account in the same proportion that the Accumulation
Value in each Division and the General Account Value, less any Policy Debt,
bears to the total Accumulation Value of the Policy, less any Policy Debt. (See
Right to Defer Payment, Policy Changes and Payment of Benefits)
[arrow] GRACE PERIOD
If Your Policy's Surrender Value is insufficient to satisfy the Monthly
Deduction, Your Policy will go into lapse pending status. We will allow you 61
days of grace for payment of an amount sufficient to continue coverage. This
amount must be sufficient in amount, after the deduction of the premium tax
charge, to cover the monthly deductions for at least three policy months.
Written notice will be mailed to Your last known address, according to Our
records, not less than 61 days before termination of the Policy. This notice
will also be mailed to the last known address of any assignee of record.
The Policy will stay in force during the Grace Period. If the Insured dies
during the Grace Period, we will reduce the Death Benefit by the amount of any
Monthly Deduction due and the amount of any outstanding Policy Debt.
If payment is not made within 61 days after the Monthly Anniversary Day, the
Policy will terminate without value at the end of the Grace Period.
[arrow] REINSTATEMENT OF A LAPSED POLICY
If the Policy terminates as provided in its Grace Period, it may be reinstated.
To reinstate the Policy, the following conditions must be met:
[diamond] The Policy has not been fully surrendered.
[diamond] You must apply for reinstatement within 5 years after the date of
termination.
[diamond] We must receive evidence of insurability satisfactory to Us.
[diamond] The premium payment You make must be sufficient, after deduction of
the premium tax charge, to cover the monthly deductions for three
policy months after the reinstatement date.
[diamond] If a loan was outstanding at the time of lapse, We will require that
either You repay or reinstate the loan before We reinstate the Policy.
Supplemental Benefits will be reinstated only with Our consent. (See Grace
Period and Premium Payments)
[arrow] RIGHT TO DEFER PAYMENT
Payments of any Separate Account Value will be made within 7 days after Our
receipt of Your Written Request. However, We reserve the right to suspend or
postpone the date of any payment of any benefit or values for any Valuation
Period (1) when the New York Stock Exchange is closed (except holidays or
weekends); (2) when trading on the Exchange is restricted; (3) when an
emergency exists as determined by the SEC so that disposal of the securities
held in the Funds is not reasonably practicable or it is not reasonably
practicable to determine the value of the Funds' net assets; or (4) during any
other period when the SEC, by order, so permits for the protection of security
holders. For payment from the Separate Account in such instances, We may defer
payment of Full Surrender and Withdrawal Values, any Death Benefit in excess of
the current Specified Amount, transfers and any portion of the Loan Value.
Payment of any General Account Value may be deferred for up to six months,
except when used to pay amounts due Us.
[arrow] POLICY LOANS
We will grant loans at any time after the first policy anniversary using the
Policy as security for the loan. The amount of the loan will not be more than
the Loan Value. Unless otherwise required by state law, the Loan Value for this
Policy is 90% of Cash Value at the end of the Valuation Period during which the
loan request is received. The maximum amount You can borrow at any time is the
Loan Value reduced by any outstanding Policy Debt. Loans have priority over the
claims of any assignee or any other person.
18
<PAGE>
We will usually disburse loan proceeds within seven days from the Date of
Receipt of a loan request, although we reserve the right to postpone payments
under certain circumstances. See "Right to Defer Payment". We may, in our sole
discretion, allow You to make loans by telephone if You have filed a proper
telephone authorization form with Us. So long as Your Policy is in force and an
Insured is living, You may repay your loan in whole or in part at any time
without penalty.
Accumulation Value equal to the loan amount will be maintained in the General
Account to secure the loan. You may allocate a policy loan among the Divisions
of the Separate Account and the existing General Account value that is not
already allocated to secure a Policy Loan, and We will transfer Separate
Account Value as You have indicated. If you do not make this allocation, the
loan will be allocated among the Divisions and the General Account in the same
proportion that the Accumulation Value in each Division and the Accumulation
Value in the General Account less Policy Debt bears to the total Accumulation
Value of the Policy, less Policy Debt, on the date of the loan. We will make a
similar allocation for unpaid loan interest due. A policy loan removes
Accumulation Value from the investment experience of the Separate Account,
which will have a permanent effect on the Accumulation Value and Death Benefit
even if the loan is repaid. General Account Value equal to Policy Debt will
accrue interest daily at the lesser of an annual rate of 6% or the interest
rate currently credited to the General Account.
We will charge interest on any outstanding Policy Debt. The maximum interest
rate is 8% compounded annually. There are two types of loans available. A Type
A loan is charged the same interest rate as the interest credited to the amount
of the Accumulation Value held in the General Account to secure loans. The
amount available at any time for a Type A loan is the maximum loan amount, less
the Guideline Single Premium at issue, as set forth in the Code, less any
outstanding Type A loans. Any other loans are Type B loans. A Type B loan is
charged the prevailing interest rate, but not more than the maximum. One loan
request can result in both a Type A and a Type B loan. A loan request will
first be granted as a Type A loan, to the extent available, and then as a Type
B loan. Once a loan is granted, it remains a Type A or Type B loan until it is
repaid. Interest is due and payable at the end of each Policy Year and any
unpaid interest due becomes loan principal. Increases in the Specified Amount
will affect the amount available for a Type A loan; however, decreases in the
Specified Amount will have no effect on the amount available.
In the future, We may charge lower interest rates on policy loans. If the loan
interest rate is less than 8%, We can increase the rate once each policy year
by a maximum of 1%. We will notify You and any assignee of record of any change
in the interest rate at least 30 days before the effective date of the
increase.
If Policy Debt exceeds Cash Value, We will notify You and any assignee of
record. You must make a payment within 61 days from the date Policy Debt
exceeds Cash Value or the Policy will lapse and terminate without value (See
"Grace Period"). If this happens, You may be taxed on the total appreciation
under the Policy. However, You may reinstate the Policy, subject to proof of
insurability and payment of a reinstatement premium. See "Reinstatement of a
Lapsed Policy".
You may repay the Policy Debt, in whole or in part, at any time during an
Insured's life, so long as the Policy is in force. The amount necessary to
repay all Policy Debt in full will include any accrued interest. If there is
any Policy Debt, We will apply payments received from you as follows: We will
apply premium payments in the amount of the Planned Periodic Premium, received
at the Premium Frequency, as premium unless You specifically designate the
payment as a loan repayment. We will apply premium payments in excess of the
Planned Periodic Premium or premium payments received other than at the Premium
Frequency, first as policy loan repayments, then as premium when you have
repaid the Policy Debt. If You have both a Type A and a Type B loan, we will
apply repayments first to the Type B loan and then to the Type A loan. Upon
repayment of all or part of the Policy Debt, We will transfer the Policy's
Accumulation Value securing the repaid portion of the debt in the General
Account to the Divisions and the General Account in the same proportion in
which the loan was taken.
An outstanding loan amount will decrease the Surrender Value available under
the Policy. For example, if a Policy has a Surrender Value of $10,000, You may
take a loan of 90% or $9,000, leaving a new Surrender Value of $1,000. If a
loan is not repaid, the decrease in the Surrender Value could cause the Policy
to lapse. In addition, the
19
<PAGE>
Death Benefit will be decreased because of an outstanding Policy Loan.
Furthermore, even if You repay the loan, the amount of the Death Benefit and
the Policy's Surrender Value may be permanently affected since the Loan Value
is not credited with the investment experience of the Funds.
[arrow] POLICY CHANGES
You may make changes to Your Policy, as described below, by submitting a
Written Request to Our Home Office. Supplemental Policy Specification pages
and/or a notice confirming the change will be sent to You once the change is
completed.
Increase or Decrease in Specified Amount
You may increase the Specified Amount at any time after the Policy has
been issued or You may decrease the Specified Amount after the first Policy
Year, so long as You are under attained age 85, and You send Us a written
request along with the Policy. However:
[diamond] Any increase or decrease must be at least $25,000
[diamond] Any increase or decrease will affect Your cost of insurance charge
[diamond] Any increase or decrease may affect the monthly deduction adjustment
[diamond] Any increase will affect the amount available for a Type A loan, but a
decrease will not have any such effect
[diamond] Any increase will require a supplemental application and satisfactory
evidence of insurability
[diamond] Any increase will be effective on the Monthly Anniversary Date after
the Date of Receipt of the request
[diamond] Any decrease will first apply to coverage provided by the most recent
increase, then to the next most recent, and so on, and finally to the
coverage under the original application
[diamond] Any decrease may result in federal tax implications under DEFRA/TAMRA
(See "Federal Tax Matters")
[arrow] CHANGE IN DEATH BENEFIT OPTION
Any change in the Death Benefit Option is subject to the following conditions:
[diamond] The change will take effect on the Monthly Deduction Day on or next
following the date on which Your Written Request is received.
[diamond] There will be no change in the Surrender Charge.
[diamond] Evidence of insurability may be required.
[diamond] Changes from Option 1 to 2 will be allowed at any time while this
Policy is in force, subject to evidence of insurability satisfactory
to Us.. The Specified Amount will be reduced to equal the Specified
Amount less the Accumulation Value at the time of the change.
[diamond] Changes from Option 2 to 1 will be allowed at any time while this
Policy is in force. The new Specified Amount will be increased to
equal the Specified Amount plus the Accumulation Value as of the date
of the change.
(See Surrender Charge and Right of Policy Examination)
[arrow] RIGHT OF POLICY EXAMINATION
("FREE LOOK PERIOD")
The Policy has a free look period during which You may examine the Policy. If
for any reason You are dissatisfied, You may return the Policy to Us at Our
Home Office or to Our representative within 10 days of delivery of the Policy
to You (or within a different period if required by State law), within 45 days
of the date You signed the application for insurance, or with 10 days after
mailing or personal delivery of the Right of Withdrawal, whichever is later.
Return the Policy to Jefferson Pilot Financial Insurance Company at One Granite
Place, Concord, New Hampshire 03301. Upon its return, the Policy will be deemed
void from its beginning. We will return to You within seven days all payments
We received on the Policy. Prior to the Allocation Date, We will hold the
initial Net Premium in Our General Account. We will retain any interest earned
if the Free Look right is exercised, unless otherwise required by State law.
[arrow] SUPPLEMENTAL BENEFITS
The supplemental benefits currently available as riders to the Policy include
the following:
[diamond] Children's Term Insurance Rider - provides increments of level term
insurance on the Insured's children, subject to the terms in the
rider.
[diamond] Guaranteed Insurability Rider - provides that the Insured can purchase
additional insurance at certain future dates, or increase the
Specified Amount, without evidence of insurability, subject to the
terms of the rider.
20
<PAGE>
[diamond] Accidental Death Benefit Rider - provides additional insurance if the
Insured's death results from an accident, as defined in the rider.
[diamond] Guaranteed Death Benefit Rider - guarantees that the Policy will stay
in force during the guarantee period specified in the rider with a
Death Benefit equal to the Specified Amount, subject to the terms of
the rider.
[diamond] Waiver of Specified Premium Rider--provides for payment by Us of a
specified monthly premium into the Policy while You are disabled, as
defined in the rider.
[diamond] Exchange of Insured Rider--allows You to exchange the Policy for a
reissued policy on the life of a substitute insured, subject to the
terms of the rider.
[diamond] Terminal Illness Accelerated Benefit Rider-- provides for an advance
of up to 50% of a policy's eligible death benefit subject to a maximum
of $250,000 per insured with a medical determination of terminal
illness, subject to the terms of the rider.
[diamond] Other Insured Term Rider--provides increments of level terms insurance
on the life of an insured other than the Insured under the Policy,
subject to the terms of the rider.
[diamond] Primary Insured Term Rider--provides increments of level term
insurance on the Insured's life, subject to the terms of the rider.
Other riders for supplemental benefits may become available under the Policy
from time to time. The charges for each of these riders are illustrated in Your
Policy.
death benefit
- --------------------------------------------------------------------------------
The Death Benefit under the Policy will be paid in a lump sum unless You or the
beneficiary have elected that they be paid under one or more of the available
Settlement Options.
Payment of the Death Benefit may be delayed if the Policy is being contested.
You may elect a Settlement Option for the beneficiary and deem it irrevocable.
You may revoke or change a prior election. The beneficiary may make or change
an election within 90 days of the Insured's death, unless You have made an
irrevocable election.
All or part of the Death Benefit may be applied under one of the Settlement
Options, or such options as We may choose to make available in the future.
If the Policy is assigned as collateral security, We will pay any amount due
the assignee in a lump sum. Any excess Death Benefit due will be paid as
elected.
(See "Right to Defer Payment" and "Policy Settlement")
policy settlement
- --------------------------------------------------------------------------------
We will pay proceeds in whole or in part in the form of a lump sum of the
Settlement Options available under the Policy upon the death of the Insured or
upon Surrender or upon maturity.
You may make a Written Request may be made to elect, change or revoke a
Settlement Option before payments begin under any Settlement Option. This
request will take effect upon its filing at our Home Office. If You have not
elected a Settlement Option when the Death Benefit becomes payable to the
beneficiary, that beneficiary may make the election.
[arrow] SETTLEMENT OPTIONS
The following Settlement Options are available under the Policy:
Option A --Installments of a specified amount. Payments of an agreed amount to
be made monthly until the proceeds and interest are exhausted.
Option B--Installments for a specified period. Payments to be made monthly for
an agreed number of years.
Option C--Life Income. Payments to be made each month for the lifetime of the
payee. We guarantee
21
<PAGE>
that payments will be made for a minimum of 10, 15 or 20 years, as agreed upon.
Option D--Interest. We will pay interest on the proceeds We hold, calculated at
the compound rate of 3% per year. We will make interest payments at 12, 6, 3 or
1 month intervals.
Option E--Interest: Retained Asset Account (Performance Plus Account). We will
pay interest on the proceeds We hold, based on the floating 13 week U.S.
Treasury Bill rate fixed quarterly. The payee can write checks against such
account at any time and in any amount up to the total in the account. The
checks must be for a minimum of $250.
The interest rate for Options A, B and D will not be less than 3% per year. The
interest rate for Option C will not be less that 2.5% per year. The interest
rate for Option E will not be less than 2% per year.
Unless otherwise stated in the election of any option, the payee of the policy
benefits shall have the right to receive the withdrawal value under that
option. For Options A, D and E, the withdrawal value shall be any unpaid
balance of proceeds plus accrued interest. For Option B, the withdrawal value
shall be the commuted value of the remaining payments. We will calculate this
withdrawal value on the same basis as the original payments. For Option C, the
withdrawal value will be the commuted value of any remaining guaranteed
payments. If the payee is alive at the end of the guarantee period, We will
resume the payment on that date. The payment will then continue for the
lifetime of the payee.
If the payee of policy benefits dies before the proceeds are exhausted or the
prescribed payments made, a final payment will be made in one sum to the estate
of the last surviving payee. The amount to be paid will be calculated as
described for the applicable option in the Withdrawal Value provision of the
Policy.
An option may be made only if proceeds are $25,000 or more. We reserve the
right to change payment intervals to increase payments to $250 each.
Calculation of Settlement Option Values
The value of the Settlement Options will be calculated as set forth in the
Policy.
the company
- --------------------------------------------------------------------------------
Jefferson Pilot LifeAmerica Insurance Company ("JP LifeAmerica" or "the
Company") is a stock life insurance company chartered in 1897 in New Jersey.
Prior to May 1, 1998, JP LifeAmerica was known as Chubb Colonial Life Insurance
Company. JP LifeAmerica is a wholly-owned subsidiary of Jefferson Pilot
Financial Insurance Company ("JP Financial"), a New Hampshire life insurance
company. Effective April 30, 1997, JP Financial, formerly a wholly-owned
subsidiary of The Chubb Corporation, became a wholly-owned subsidiary of
Jefferson-Pilot Corporation, a North Carolina corporation. The principal
offices of Jefferson-Pilot Corporation are located at 100 North Greene Street,
Greensboro, North Carolina 27401; its telephone number is 336-691-3000. JP
LifeAmerica's service center is located at One Granite Place, Concord, New
Hampshire 03301; its telephone number is 800-258-3648.
The Company is licensed to do life insurance business in forty-nine states of
the United States, Puerto Rico, the U.S. Virgin Islands, Guam and in the
District of Columbia.
At December 31, 1998, JP LifeAmerica had total assets of $544,639,000 and had
over $2,960,600,000 of insurance in force, while total assets of
Jefferson-Pilot Corporation and its subsidiaries (including JP LifeAmerica)
were approximately $24.4 billion.
The Company writes individual life insurance and annuities. It is subject to
New Hampshire law governing insurance.
The Company is currently rated AAA (Superior) by Duff & Phelps, AAA (Superior)
by Standard & Poor's Corporation and A by A.M. Best and Company. These ratings
do not apply to JPF Separate Account B, but reflect the opinion of the rating
companies as to the Company's relative financial strength and ability to meet
its contractual obligations to its policyowners.
22
<PAGE>
directors and officers
- --------------------------------------------------------------------
MANAGEMENT OF JP FINANCIAL
Executive Officers and Directors of JP Financial
Directors
<TABLE>
<CAPTION>
Principal Occupation and
Name Business Address
- ------------------------------ ------------------------------------------------------------
<S> <C>
Ronald R. Angarella .......... Senior Vice President (also serves as Senior Vice President
of Jefferson Pilot Financial Insurance Company and
Chairman and President of Jefferson Pilot Securities
Corporation)
Charles C. Cornelio .......... Executive Vice President (also serves as Executive Vice
President of Jefferson Pilot Financial Insurance Company
and Jefferson-Pilot Life Insurance Company
Dennis R. Glass .............. Executive Vice President (also serves as Executive Vice
President, Chief Financial Officer and Treasurer of
Jefferson Pilot Financial Insurance Company and
Jefferson-Pilot Life Insurance Company)
100 North Greene Street
Greensboro, North Carolina 27401
Kenneth C. Mlekush ........... President (also serves as President of Jefferson Pilot
Financial Insurance Company and Executive Vice
President of Jefferson-Pilot Life Insurance Company)
100 North Greene Street
Greensboro, North Carolina 27401
David A. Stonecipher ......... Chairman and Chief Executive Officer (also serves as
Chairman and Chief Executive Officer of Jefferson Pilot
Financial Insurance and President and Chief Executive
Officer of Jefferson-Pilot Life Insurance Company)
100 North Greene Street
Greensboro, North Carolina 27401
E. Jay Yelton ................ Executive Vice President (also serves as Executive Vice
President of Jefferson-Pilot Life Insurance Company and
Jefferson Pilot Financial Insurance Company)
100 North Greene Street
Greensboro, North Carolina 27401
</TABLE>
Executive Officers (Other Than Directors)
<TABLE>
<CAPTION>
Name Position
- ------------------------------ ----------------------------------------------
<S> <C>
Leslie L. Durland ............ Executive Vice President
John D. Hopkins .............. Executive Vice President, General Counsel
Reggie D. Adamson ............ Senior Vice President
John C. Ingram ............... Senior Vice President
Hal B. Phillips, Jr .......... Senior Vice President, Chief Life Actuary
Richard T. Stange ............ Senior Vice President, Deputy General Counsel
Paul J. Strong ............... Senior Vice President
John W. Wells ................ Senior Vice President
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
Name Position
- ------------------------------------ ---------------------------------
<S> <C>
James R. Abernathy ................. Vice President
Margaret O. Cain ................... Vice President
Rebecca M. Clark ................... Vice President
Richard C. Dielensnyder ............ Vice President
Kenneth S. Dwyer ................... Vice President
Ronald H. Emery .................... Vice President
Donald M. Kane ..................... Vice President
Patrick A. Lang .................... Vice President
Shari J. Lease ..................... Vice President
Donna L. Metcalf ................... Vice President
Thomas E. Murphy, Jr. M.D. ......... Vice President, Medical Director
Robert A. Reed ..................... Vice President, Secretary
James M. Sandelli .................. Vice President
Russell C. Simpson ................. Vice President, Treasurer
William A. Spencer ................. Vice President
Francis A. Sutherland, Jr. ......... Vice President
John A. Thomas ..................... Vice President
John A. Weston ..................... Vice President
</TABLE>
The officers and employees of JP Financial who have access to the assets of
Separate Account B are covered by a fidelity bond issued by American
International Group in the amount of $20,000,000.
additional information
- --------------------------------------------------------------------------------
[arrow] REPORTS TO POLICYOWNERS
We will maintain all records relating to the Separate Account. At least once in
each Policy Year, We will send You an Annual Summary containing the following
information:
1. A statement of the current Accumulation Value and Cash Value since the prior
report or since the Issue Date, if there has been no prior report;
2. A statement of all premiums paid and all charges incurred;
3. The balance of outstanding Policy Loans for the previous calendar year;
4. Any reports required by the 1940 Act.
We will promptly mail confirmation notices at the time of the following
transactions:
1. policy issue;
2. receipt of premium payments;
3. initial allocation among Divisions on the Allocation Date;
4. transfers among Divisions;
5. change of premium allocation;
6. change between Death Benefit Option 1 and Option 2;
7. increases or decreases in Specified Amount;
8. withdrawals, surrenders or loans;
9. receipt of loan repayments;
10. reinstatements; and
11. redemptions due to insufficient funds.
[arrow] RIGHT TO INSTRUCT VOTING OF FUND
SHARES
In accordance with our view of present applicable law, We will vote the shares
of the Funds held in the Separate Account in accordance with instructions
received from Policyowners having a voting interest in the Funds. Policyowners
having such an interest will receive periodic reports relating to the Fund,
proxy material and a form for giving voting instructions. The number of shares
You have a right to vote will be determined as of a record date established by
the Fund. The number of votes that You are entitled to direct with respect to a
Fund will be determined by dividing Your Policy's Accumulation Value in a
Division by the net asset value per share of the corresponding Portfolio in
24
<PAGE>
which the Division invests. We will solicit Your voting instructions by mail at
least 14 days before any shareholders meeting.
We will cast the votes at meetings of the shareholders of the Fund and will be
based on instructions received from Policyowners. However, if the Investment
Company Act of 1940 or any regulations thereunder should be amended or if the
present interpretation should change, and as a result We determine that We are
permitted to vote the shares of the Fund in our right, We may elect to do so.
We will vote Fund shares for which We do not receive timely instructions and
Fund shares which are not otherwise attributable to Policyowners in the same
proportion as the voting instruction which We receive for all Policies
participating in each Fund through the Separate Account.
[arrow] DISREGARD OF VOTING INSTRUCTIONS
When required by state insurance regulatory authorities, We may disregard
voting instructions if the instructions require that the shares be voted so as
to cause a change in the sub-classification or investment objectives of a Fund
or to approve or disapprove an investment advisory contract for a Fund. We may
also disregard voting instructions initiated by a Policyowner in favor of
changes in the investment policy or the investment adviser of the Fund if We
reasonably disapprove of such changes.
We only disapprove a change if the proposed change is contrary to state law or
prohibited by state regulatory authorities or if We determine that the change
would have an adverse effect on the Separate Account if the proposed investment
policy for a fund would result in overly speculative or unsound investments. In
the event that We do disregard voting instructions, a summary of that action
and the reasons for such action will be included in the next annual report to
Policyowners.
[arrow] STATE REGULATION
Jefferson Pilot LifeAmerica Insurance Company is governed under the laws of the
state of New Jersey and is regulated and supervised by the New Jersey Insurance
Commissioner. Periodically, the Commissioner examines the assets and
liabilities of JP LifeAmerica and Separate Account B and verifies their
adequacy. JP LifeAmerica is also subject to the New York insurance laws.
In addition, JP Financial is subject to the insurance laws and regulations of
other states within which it is licensed to operate. Generally, the insurance
department of any other state applies the laws of the state of domicile in
determining permissible investments.
We will offer the Policy for sale in all jurisdictions where We are authorized
to do business and where the Policy has been approved by the appropriate
Insurance Department or regulatory authorities. Any significant variations from
the information appearing in this Prospectus which are required due to
individual state requirements are contained in endorsements to the Policy.
[arrow] LEGAL MATTERS
We know or no material legal proceedings pending to which either the Separate
Account or the Company is a party or which would materially affect the Separate
Account. The legal validity of the securities described in the prospectus has
been passed on by Our Counsel. The law firm of Jorden Burt Boros Cicchetti
Berenson & Johnson, 1025 Thomas Jefferson Street, Suite 400, East Lobby,
Washington, DC 20007-5201, serve as Our Special Counsel with regard to the
federal securities laws.
[arrow] THE REGISTRATION STATEMENT
We have filed a Registration Statement under the Securities Act of 1933
relating to the offering described in this Prospectus. This Prospectus does not
include all of the information set forth in the Registration Statement, certain
portions of which have been omitted pursuant to SEC rules and regulations. You
should refer to the instrument as filed to obtain any omitted information.
[arrow] FINANCIAL STATEMENTS
Our financial statements which are included in the Prospectus should be
considered only as bearing on Our ability to meet Our obligations under the
Policy. They should not be considered as bearing on the investment experience
of the assets held in the Separate Account.
There has been no material adverse change in Our financial position since the
dates of the audited financial statements.
[arrow] EMPLOYMENT BENEFIT PLANS
Employers and employee organizations should consider, in connection with
counsel, the impact of Title VII of the Civil Rights Act of 1964 on the
25
<PAGE>
purchase of policy in connection with an employment-related insurance or
benefit plan. The U.S. Supreme Court held, in a 1983 decision, that, under
Title VII, optional annuity benefits under a deferred compensation plan could
not vary on the basis of sex.
[arrow] DISTRIBUTION OF THE POLICY
Jefferson Pilot Variable Corporation (JPVC), a North Carolina corporation
incorporated on January 13, 1970, will serve as principal underwriter of the
securities offered under the Policy as defined by the federal securities laws.
The Policy will be sold by individuals who, in addition to being licensed as
life insurance agents for Us, are also registered representatives of
broker-dealers who have entered into written sales agreements with JPVC. Any
such broker-dealers will be registered with the SEC and will be members of the
National Association of Securities Dealers, Inc. We may also offer and sell
policies directly.
We will pay commissions under various schedules and accordingly commissions
will vary with the form of schedule selected. In any event, commissions to
registered representatives are not expected to exceed 90% of first year target
premium and 4% of first year excess premium, and 4% of target premium for the
second through fifteenth policy years for both renewals and excess premium.
Compensation arrangements vary among broker-dealers. Override payments, expense
allowances and bonuses based on specific production levels may be paid.
Alternative Commission Schedules will reflect differences in up-front
commissions versus ongoing asset-based compensation. Except as previously
described in this prospectus, no separate deductions from premiums are made to
pay sales commissions or sales expenses.
[arrow] INDEPENDENT AUDITORS
Ernst & Young LLP, 200 Clarendon Street, Boston, Massachusetts, are the
independent auditors for the Separate Account and Ernst & Young LLP, 100 North
Greene Street, Greensboro, North Carolina, are the independent auditors for the
Company. The services provided to the Separate Account include primarily the
examinations of the Separate Account's financial statements.
year 2000
- --------------------------------------------------------------------------------
The year 2000 issue relates to the way computer systems and programs define
calendar dates. By using only two digit dates, they could fail or make
miscalculations due to the inability to distinguish between dates in the 1900's
and in the 2000's. The potential problem also exists in some systems and
equipment not typically thought of as "computer-related" (referred to as
"non-IT") which contain hardware or software that must handle dates.
In 1995, Our parent, Jefferson-Pilot Corporation (the "Company"), began work on
a project to ensure the Year 2000 compliance of all systems, non-IT embedded
software equipment, and all Company key vendors and service providers. The
target completion date for the project is September 30, 1999.
The Company has completed the assessment and strategy phases for mainframe
applications, operating systems and hardware. The Company's new business and
policyholder administration systems and the general ledger are on the
mainframe. Currently, the majority of all mainframe systems have been tested to
confirm that their performance will not be affected by dates extending after
1999 and are compliant. With respect to significant policyholder systems, the
majority of the testing has been completed. For other mainframe systems the
project is on schedule.
For the majority of its non-IT related systems and equipment, the Company has
been advised by vendors that systems and equipment are currently Year 2000
compliant. The Company is obtaining written documentation regarding compliance.
Completion for non-IT systems and equipment is scheduled for September 1999.
The most significant category of key business partners is financial
institutions. Their critical functions include safeguarding and managing
investment portfolios, processing of the Company's operating bank accounts, and
sales/distribution. Other partner categories include insurance agents and
marketing organizations, suppliers of communication services, utilities,
materials and supplies. The Company has conducted surveys of all its software
and hardware vendors and testing
26
<PAGE>
is underway. Critical business partners have been identified and surveys
initiated. Results of these surveys are being analyzed and appropriate testing
or other due diligence conducted in the second and third quarters of 1999.
The Company expects its critical policyholder systems to be compliant by the
end of the second quarter of 1999.
From Year 2000 problems, the Company could experience an interruption in its
ability to collect and process premiums, process claim payments, safeguard and
manage its invested assets and operating cash accounts, accurately maintain
policyholder information, accurately maintain accounting records, issue new
policies and/or perform adequate customer service. While the Company believes
the occurrence of such a situation is unlikely, a possible worst case scenario
might include one or more of the Company's significant policyholder systems
being non-compliant, resulting in a material disruption to the Company's
operations.
Although the Company plans completion of certification of all internal systems
and non-IT equipment well in advance of 2000, the Company recognizes the need
to plan for unanticipated problems resulting from failure of internal systems
or equipment or from failures of the Company's business partners, providers,
suppliers or other critical third parties. The Company began work on
contingency plans for all mission critical functions in the first quarter of
1999.
Group or Sponsored Arrangements
Policies may be purchased under group or sponsored arrangements. A group
arrangement includes a program under which a trustee, employer or similar
entity purchases individual Policies covering a group of individuals on a group
basis. A sponsored arrangement includes a program under which an employer
permits group solicitation of its employees or an association permits group
solicitation of its members for the purchase of Policies on an individual
basis.
We may reduce the following types of charges for Policies issued in connection
with group or sponsored arrangement: the cost of insurance charge, surrender or
withdrawal charges, administrative charges, charges for withdrawal or transfer,
the guaranteed death benefit charge and charges for optional rider benefits. We
may also issue Policies in connection with group or sponsored arrangements on a
"non-medical" or guaranteed issue basis; actual monthly cost of insurance
charges may be higher than the current cost of insurance charges under
otherwise identical Policies that are medically underwritten. We may also
specify different minimum Specified Amounts at issue for Policies issued in
connection with group or sponsored arrangements.
We may also reduce or eliminate certain charges or underwriting requirements
for Policies issued in connection with n exchange of another JP Financial
policy or a policy of any JP Financial affiliate.
The amounts of any reduction, the charges to be reduced, the elimination or
modification of underwriting requirements and the criteria for applying a
reduction or modification will generally reflect the reduced sales and
administrative effort, costs and differing mortality experience appropriate to
the circumstances giving rise to the reduction or modification. Reductions and
modifications will not be made where prohibited by law and will not be unfairly
discriminatory.
tax matters
- --------------------------------------------------------------------------------
[arrow] GENERAL
Following is a discussion of the federal income tax considerations relating to
the Policy. This discussion is based on Our understanding of federal income tax
laws as they not exist and are currently interpreted by the Internal Revenue
Service. These laws are complex and tax results may vary among individuals.
Anyone contemplating the purchase of or the exercise of elections under the
Policy should seek competent tax advice.
[arrow] FEDERAL TAX STATUS OF THE COMPANY
We are taxed as a life insurance company in accordance with the Internal
Revenue Code of 1986 as amended ("Code"). For federal income tax purposes, the
operations of each Separate Account form a part of the Company's total
operations and are not taxed separately, although operations of
27
<PAGE>
each Separate Account are treated separately for accounting and financial
statement purposes.
Both investment income and realized capital gains of the Separate Account are
reinvested without tax since the Code does not impose a tax on the Separate
Account for these amounts. However, we reserve the right to make a deduction
for such tax should they be imposed in the future.
[arrow] LIFE INSURANCE QUALIFICATION
The Policy contains provisions not found in traditional life insurance
policies. However, we believe that it should qualify under the Code as a life
insurance contract for federal income tax purposes, with the result that all
Death Benefits paid under the Policy will generally be excludable from the
gross income of the Policy's Beneficiary. If at any time the premium paid under
the policy exceeds the amount allowable for such qualification, We will refund
the premium to You with interest within 60 days after the end of the Policy
Year in which the premium was received. If, for any reason, We do not refund
the excess premium within that 60 day period, We will hold the excess premium
in a separate deposit fund and credit it with interest until We refund it to
You. The interest rate used on any refund, or credited to the separate deposit
fund created by this provision, will be the excess premium's pro rata rate of
return on the Contract until the date We notify You that the excess premium and
the earnings on such excess premium have been removed from the Policy. After
the date of such notice, the interest rate paid on the separate deposit fund
will be such rate as We may declare from time to time on advance premium
deposit funds. We may also notify you of other options available to You to keep
your policy in compliance with the Code. We also reserve the right to make any
change in the Specified Amount or the Death Benefit Option or any other change
if such change would cause the Policy to fail to qualify as life insurance
under the Code.
We also reserve the right to refuse to make any change in the Specified Amount,
the Death Benefit Option or any other change, if such change would cause the
Policy to fail to qualify as life insurance under the Code.
Section 7702 of the Code includes a definition of life insurance for tax
purposes. The definition provides limitations on the relationship between the
death benefit and the account value. If necessary, we will increase your death
benefit to maintain compliance with Section 7702.
The federal income tax treatment of a distribution from the Policy will depend
on whether a Policy is a life insurance policy and also if it is determined to
be a "modified endowment contract", as defined by the Code. We will notify You
if the amount of premiums paid would cause Your Policy to be a modified
endowment contract and will allow a refund of the excess premium. Thus, We will
allow the Policy to become a modified endowment contract only with your
consent. Otherwise, if at any time the premiums paid under the policy exceed
the limit for avoiding modified contract status, We will refund the excess
premium to You with interest within 60 days after the end of the Policy Year in
which We received the premium. If, for any reason, We do not refund the excess
premium with that 60 day period, We will hold the excess premium in a separate
deposit fund and credit it with interest until We refund it to You. The
interest rate used on any refund, or credited to the separate deposit fund
created by this provision, will be the excess premium's pro rata rate of return
on the Contract until the date We notify You that the excess premium and the
earnings on such excess premium have been removed from the Policy. After the
date of such notice, the interest rate paid on the separate deposit fund will
be such rate as We may declare from time to time on advance premium deposit
funds. We may also notify You of other options available to You.
A modified endowment contract is a life insurance policy which fails to meet a
"seven-pay" test. In general, a policy will fail the seven-pay test if the
cumulative amount of premiums paid under the policy at any time during the
first seven policy years exceeds a calculated premium level. The calculated
seven-pay premium level is based on a hypothetical policy issued on the same
insured persons and for the same initial death benefit which, under specified
conditions (which include the absence of expense and administrative charges),
would be fully paid for after seven years. Your policy will be treated as a
modified endowment unless the cumulative premiums paid under Your policy, at
all times during the first seven policy years, are less than or equal to the
cumulative seven-pay premiums which would have been paid under the hypothetical
policy on or before such times.
28
<PAGE>
Whenever there is a "material change" under a policy, it will generally be
treated as a new contract for purposes of determining whether the policy is a
modified endowment, and subject to a new seven-pay premium period and a new
seven-pay limit. The new seven-pay limit would be determined taking into
account, under a prospective adjustment formula, the Policy Account Value of
the policy at the time of such change. A materially changed policy would be
considered a modified endowment if it failed to satisfy the new seven-pay
limit. A material change could occur as a result of a change in death benefit
option, the selection of additional benefits, the restoration of a terminated
policy and certain other changes.
If the benefits under your policy are reduced, for example, by requesting a
decrease in Face Amount, or in some cases by making withdrawals, terminating
additional benefits under a rider, changing the death benefit option, or as a
result of policy termination, the calculated seven-pay premium level will be
redetermined based on the reduced level of benefits and applied retroactively
for purposes of the seven-pay test. If the premiums previously paid are greater
than the recalculated seven-pay premium level limit, the policy will become a
modified endowment unless You request a refund of the excess premium, as
outlined above. Generally, a life insurance policy which is received in
exchange for a modified endowment or a modified endowment which terminates and
is restored, will also be considered a modified endowment.
If a Policy is deemed to be a modified endowment contract, any distribution
from the Policy will be taxed in a manner comparable to distributions from
annuities (i.e., on an "income first") basis; distributions for this purpose
include a loan, pledge, assignment or partial withdrawal. Any such
distributions will be considered taxable income to the extent Accumulation
Value under the Policy exceeds investment in the Policy.
A 10% penalty tax will apply to the taxable portion of such a distribution. No
penalty will apply to distributions (i) to taxpayers 59 1/2 years of age or
older, (ii) in the case of a disability which can be expected to result in
death or to be of indefinite duration or (iii) received as part of a series of
substantially equal periodic annuity payment for the life (or life expectancy)
of the taxpayer or the joint lives (or joint life expectancies) of the taxpayer
and his beneficiary.
To the extent a Policy becomes a modified endowment contract, any distribution,
as defined above, which occurs in the policy year it becomes a modified
endowment contract and in any year thereafter, will be taxable income to You.
Also, any distributions within two years before a Policy becomes a modified
endowment contract will also be income taxable to You to the extent that
accumulation value exceeds investment in the Policy, as described above. The
Secretary of the Treasury has been authorized to prescribe rules which would
similarly treat other distributions made in anticipation of a policy becoming a
modified endowment contract. For purposes of determining the amount of any
distribution includable in income, all modified endowment contract policies
that fail the above-described tests which are issued by the same insurer, or
its affiliates, to the same policyowner during any calendar year are treated as
one contract. The Secretary of the Treasury is also authorized to issue
regulations in this connection.
In addition to the distribution rules for modified endowment contracts, the
Code and proposed regulations thereunder require that reasonable mortality and
other charges be used in satisfying the definition of life insurance. The death
benefit under a policy which meets this definition will continue to be excluded
from the beneficiary's gross income. We believe that the Policy meets this
definition. As long as a policy does not violate the tests described above, it
will not fail to meet the tests of the Code and the general tax provisions
described herein still apply.
The foregoing summary does not purport to be complete or to cover all
situations, and, as always, there is some degree of uncertainty with respect to
the application of the current tax laws. In addition to the provisions
discussed above, the United States Congress may consider other legislation
which, if enacted, could adversely affect the tax treatment of life insurance
policies. Also, the Treasury Department may amend current regulations or adopt
new regulations with respect to this and other Code provisions. Therefore, You
are advised to consult a tax adviser or attorney for more complete tax
information, specifically regarding the applicability of the Code provisions to
Your situation.
Under normal circumstances, if the Policy is not a modified endowment contract,
loans received under the Policy will be construed as Your indebtedness. You are
advised to consult a tax adviser or attorney regarding the deduction of
interest paid on loans.
29
<PAGE>
Even if the Policy is not a modified endowment contract, a partial together
with a reduction in death benefits during the first 15 Policy Years may create
taxable income for You. The amount of that taxable income is determined under a
complex formula and it may be equal to part or all of, but not greater than,
the income on the contract. A withdrawal made after the first 15 Policy Years
will be taxed on a recovery of premium-first basis, and will only be subject to
federal income tax to the extent such proceeds exceed the total amount of
premiums You have paid that have not been previously withdrawn.
If You make a withdrawal, surrender, loan or exchange of the Policy, We may be
required to withhold federal income tax from the portion of the money You
receive that is includable in Your federal gross income. A Policyowner who is
not a corporation may elect not to have such tax withheld; however, such
election must be made before We make the payment. In addition, if You fail to
provide us with a correct taxpayer identification number (usually a social
security number) or if the Treasury notifies Us that the taxpayer
identification number which has been provided is not correct, the election not
to have such taxes withheld will not be effective. In any case, You are liable
for payment of the federal income tax on the taxable portion of money received,
whether or not an election to have federal income tax withheld is made. If You
elect not to have federal income tax withheld, or if the amount withheld is
insufficient, then You may be responsible for payment of estimated tax. You may
also incur penalties under the estimated tax rules if the withholding and
estimated tax payments are insufficient. We suggest that You consult with a tax
adviser or attorney as to the tax implications of these matters.
In the event that a Policy owned by the trustee under a pension or profit
sharing plan, or similar deferred compensation arrangement, tax consequences of
ownership or receipt of proceeds under the Policy could differ from those
stated herein. However, if ownership of such a Policy is transferred from the
plan to a plan participant (upon termination of employment, for example), the
Policy will be subject to all of the federal tax rules described above. A
Policy owned by a trustee under such a plan may be subject to restrictions
under ERISA and tax adviser should be consulted regarding any applicable ERISA
requirements.
The Policy may also be used in various arrangements, including nonqualified
deferred compensation or salary continuation plans, split dollar insurance
plans, executive bonus plans and others, where the tax consequences may vary
depending on the particular facts and circumstances of each individual
arrangement. A tax adviser should be consulted regarding the tax attributes of
any particular arrangement where the value of it depends in part on its tax
consequences.
Federal estate and local estate, inheritance and other tax consequences of
ownership or receipt of policy proceeds depend upon the circumstances of each
Policyowner and Beneficiary.
Current Treasury regulation set standards for diversification of the
investments underlying variable life insurance policies in order for such
policies to be treated as life insurance. We believe We presently are and
intend to remain in compliance with the diversification requirements as set
forth in the regulations. If the diversification requirements are not
satisfied, the Policy would not be treated as a life insurance contract. As a
consequence to You, income earned on a Policy would be taxable to You in the
calendar quarter in which the diversification requirements were not satisfied,
and for all subsequent calendar quarters.
The Secretary of the Treasury may issue a regulation or a ruling which will
prescribe the circumstances in which a Policyowner's control of the investments
of a segregated account may cause the Policyowner, rather than the insurance
company, to be treated as the owner of the assets of the account. The
regulation or ruling could impose requirements that are not reflected in the
Policy, relating, for example, to such elements of Policyowner control as
premium allocation, investment selection, transfer privileges and investment in
a division focusing on a particular investment sector. Failure to comply with
any such regulation or ruling presumably would cause earnings on a
Policyowner's interest in Separate Account B to be includable in the
Policyowner's gross income in the year earned. However, We have reserved
certain rights to alter the Policy and investment alternatives so as to comply
with such regulation or ruling. We believe that any such regulation or ruling
would apply prospectively. Since the regulation or ruling has not been issued,
there can be no assurance as to the content of such regulation or ruling or
even whether application of the regulation or ruling will be
30
<PAGE>
prospective. For these reasons, Policyowners are urged to consult with their
own tax advisers.
The Code provides that accelerated death benefits may be excluded from gross
income provided that certain conditions are met. We believe that the Terminal
Illness Accelerated Benefit Rider meets those conditions.
There is some uncertainty as to whether the Primary Insured Term Rider will be
treated as a "Qualified Additional Benefit" under Section 7702(f)(5)(A)(iii) of
the Code. We believe that the rider would be considered as part of the death
benefit under the Policy and therefore will not give rise to any adverse tax
consequences. You should consult a tax adviser before adding this Rider to Your
Policy.
The foregoing summary does not purport to be complete or to cover all
situations, including the possible tax consequences of changes in ownership.
Counsel and other competent advisers should be consulted for more complete
information.
[arrow] CHARGES FOR JP FINANCIAL INCOME TAXES
We are presently taxed as a life insurance company under the provisions of the
Code. The Code specifically provides for adjustments in reserves for variable
policies, and We will include flexible premium life insurance operations in Our
tax return in accordance with these rules.
Currently no charge is made against the Separate Account for Our federal income
taxes, or provisions for such taxes, that may be attributable to the Separate
Account. We may charge each Division for its portion of any income tax charged
to Us on the Division or its assets. Under present laws, We may incur state and
local taxes (in addition to premium taxes) in several states. At present these
taxes are not significant. However, if they increase, We may decide to make
charges for such taxes or provisions for such taxes against the Separate
Account. We would retain any investment earnings on any tax charges accumulated
in a Division. Any such charges against the Separate Account or its Divisions
could have an adverse effect on the investment experience of such Division.
miscellaneous policy provisions
- --------------------------------------------------------------------------------
[arrow] THE POLICY
The Policy which You receive, the application You make when You purchase the
Policy, any applications for any changes approved by Us and any riders
constitute the whole contract. Copies of all applications are attached to and
made a part of the Policy.
Application forms are completed by the applicants and forwarded to Us for
acceptance. Upon acceptance, the Policy is prepared, executed by duly
authorized officers of the Company and forward to You.
We reserve the right to make a change in the Policy; however, we will not
change any terms of the Policy beneficial to You.
[arrow] PAYMENT OF BENEFITS
All benefits are payable at Our Home Office. We may require submissions of the
Policy before We grant Policy Loans, make changes or pay benefits.
[arrow] SUICIDE AND INCONTESTABILITY
Suicide Exclusion--In most states, if the Insured dies by suicide, while sane
or insane, within 2 years from the Issue Date of this Policy, this Policy will
end and We will refund premiums paid, without interest, less any Policy Debt
and less any withdrawal.
Incontestability--We will not contest or revoke the insurance coverage provided
under the Policy, except for any subsequent increases in Specified Amount,
after the Policy has been in force during the lifetime of the Insured for two
years from the date of issue or reinstatement. We will not contest or revoke
any increase in the Specified Amount after such increase has been in force
during the lifetime of the Insured for two years following the effective date
of the increase. Any increase will be contestable within the two year period
only with regard to statements concerning this increase.
31
<PAGE>
[arrow] PROTECTION OF PROCEEDS
To the extent provided by law, the proceeds of the Policy are not subject to
claims by a Beneficiary's creditors or to any legal process against any
Beneficiary.
[arrow] NONPARTICIPATION
The Policy is not entitled to share in the divisible surplus of the Company. No
dividends are payable.
Additions, Deletions of Substitutions of Investments
We reserve the right, subject to compliance with applicable law, to make
additions to, deletions from, or substitutions for the shares held by any
Division or which any Division may purchase. If shares of a Portfolio should no
longer be available for investment or if, in the judgment of Our management,
further investment in shares of a Portfolio should become inappropriate in view
of the purposes of the Policy, We may substitute shares of any other investment
company for shares already purchased, or to be purchased in the future under
the Policies. No substitution of securities will take place without notice to
and consent of Policyowners and without prior approval of the SEC, all to the
extent required by the 1940 Act. Any surrender by a Policyowner due to a change
in a Portfolio's investment policy will incur any applicable Surrender Charges.
Portfolio shares are subject to certain investment restrictions which may not
be changed without the approval of the majority of the holders of such shares.
See the accompanying Prospectuses for the Funds.
Premium Deposit Fund
As a convenience to You, We will allow You to deposit funds in a premium
deposit fund ("PDF"), subject to the terms and conditions of the appropriate
agreement. Funds deposited in the PDF earn interest at a minimum annual rate of
4%, with interest credited on each monthly anniversary date. Interest on these
funds is not tax deferred and will be reported annually on Form 1099. An amount
equal to the Planned Periodic Premium will be transferred on the Policy Date to
pay premiums on the Policy. You may withdraw all or part of the funds from the
PDF at any time. Commissions are not earned or paid until premium payments are
made pursuant to transfer from the PDF.
[arrow] CHANGES IN OWNER AND BENEFICIARY;
ASSIGNMENT
Unless otherwise stated in the Policy, You may change the Policyowner and the
Beneficiary, or both, at any time while the Policy is in force. A request for
such change must be made in writing and sent to Us at Our Home Office. After We
have agreed, in writing, to the change, it will take effect as of the date on
which Your Written Request was signed.
The Policy may also be assigned. We must be notified in writing if the Policy
has been assigned. Each assignment will be subject to any payments made or
action taken by Us prior to Our notification of such assignment. We are not
responsible for the validity of any assignment. Your rights and the
Beneficiary's interest will be subject to the rights of any assignee of record.
Illustration of Benefits and Values
You may request illustrations of Death Benefits, Accumulation Values and Cash
Values at any time after the Policy Date. Illustrations will be based on the
existing Accumulation Value and Cash Value at the time of the request and both
the maximum and the then-current costs of insurance rates. Although We do not
currently charge a fee for such illustrations, We reserve the right to charge
an administrative fee, not to exceed $25, to cover the cost of preparing the
illustrations.
[arrow] MISSTATEMENTS
If the age or sex of the Insured has been misstated in an application,
including a reinstatement application, We will adjust the benefits payable to
reflect the correct age or sex.
Determination of Charges
The portion of the monthly deduction attributable to the General Account will
be determined as of the actual Monthly Anniversary Date, even if the Monthly
Anniversary Date does not fall on a Valuation Date.
32
<PAGE>
APPENDIX A
ILLUSTRATIONS OF ACCUMULATION VALUES
CASH VALUES AND DEATH BENEFITS
Following are a series of tables that illustrate how the accumulation values,
cash values and death benefits of a policy change with the investment
performance of the Portfolios. The tables show how the accumulation values,
cash values and death benefits of a Policy issued to an insured of a given age
and given premium would vary over time if the return on the assets held in each
Portfolio were a constant gross, after tax annual rate of 0%, 6%, and 12%. The
tables on pages A-3 through A-8 illustrate a Policy issed to a male, age 40,
under a standard rate non-smoker underwriting risk classification. The
accumulation values, cash values and death benefits would be different from
those shown if the returns averaged 0%, 6%, and 12% over a period of years, but
fluctuated above and below those averages for individual policy years.
The amount of the accumulation value exceeds the cash value during the first
ten policy years due to the surrender charge. For policy years eleven and
after, the accumulation value and cash value are equal, since the surrender
charge has been reduced to zero.
The second column shows the accumulation value of the premiums paid at the
stated interest rate. The third and sixth columns illustrate the accumulation
values and the fourth and seventh columns illustrate the cash values of the
Policy over the designated period. The accumulation values shown in the third
column and the cash values shown in the fourth column assume the monthly charge
for cost of insurance is based upon the current cost of insurance rates as
discounted. The current cost of insurance rates are based on the sex, issue
age, policy year, rating class of the Insured, and the Specified Amount of the
Policy. The accumulation values shown in the sixth column and the cash values
shown in the seventh column assume the monthly charge for cost of insurance is
based upon the maximum cost of insurance rates allowable, which are based on
the Commissioner's 1980 Standard Ordinary Mortality Table. The current cost of
insurance rates are different for Specified Amounts below $100,000 and above
$249,999; therefore, the values shown would change for Specified Amounts below
$100,000 and above $249,999. The fifth and eighth columns illustrate the death
benefit of a Policy over the designated period. The illustrations of death
benefits reflect the same assumptions as the accumulation values and cash
values. The death benefit values also vary between tables, depending upon
whether Option I or Option II death benefits are illustrated.
The amounts shown for the death benefit, accumulation values, and cash values
reflect the fact that the net investment return of the divisions of Separate
Account B is lower than the gross return on the assets in the Portfolios, as a
result of expenses paid by the Portfolios and charge levied against the
divisions of Separate Account B.
The policy values shown take into account a daily investment advisory fee
equivalent to the maximum annual rate of .71% of the aggregate average daily
net assets of the Portfolios, plus a charge of .12% of the aggregate average
daily net assets to cover expenses incurred by the Portfolios for the twelve
months ended December 31, 1998. The .71% investment advisory fee is the average
of the individual investment advisory fees of the nineteen Portfolios. The .12%
expense figure is based on a weighted average utilizing average net assets for
the nine available Jefferson Pilot Variable Fund Portfolios, the Templeton
International Fund, the Fidelity VIP and VIP II Portfolios, the Oppenheimer
Portfolios and the MFS Portfolios. Expenses for the Templeton International
Fund: Class 1, the Fidelity Equity Income, Growth, Contrafund and Index 500
Portfolios, the MFS Research and Utilities Series, and the Oppenheimer Bond and
Strategic Bond Portfolios were provided by the investment managers for these
portfolios and JP LifeAmerica has not independently verified such information.
The policy values also take into account a daily charge to each division of
Separate Account B for assuming mortality and expense risks which is equivalent
to a charge at an annual rate of .90% of the average net assets of the
divisions of Separate Account B for policy year one through ten, and .65% of
the average net assets of the divisions of Separate Account B for policy years
eleven and thereafter. After deduction of these amounts, the illustrated gross
investment rates of 0%, 6%, and 12% correspond to approximate net annual rates
of -1.73%, 4.27% and 10.27%, respectively.
The hypothetical values shown in the tables do not reflect any charges for
federal income taxes or other taxes against Separate Account B since JP
LifeAmerica is not currently making such charges. However, if, in the
A-1
<PAGE>
future, such charges are made, the gross annual investment rate of return would
have to exceed the stated investment rates by a sufficient amount to cover the
tax charges in order to produce the accumulation values, cash values and death
benefits illustrated.
The tables illustrate the policy values that would result based on hypothetical
investment rates of return if premiums are paid in full at the beginning of
each year, if all net premiums are allocated to Separate Account B, and if no
policy loans have been made. The values would vary from those shown if the
assumed premium payments were paid in installments during a year. The values
would also vary if the policyowner varied the amount or frequency of premium
payments. The tables also assume that the policyowner has not requested an
increase or decrease in Specified Amount, that no withdrawals have been made
and no surrender charges imposed, and that no transfers have been made and no
transfer charges imposed.
Upon request, JP LifeAmerica will provide, without charge, a comparable
illustration based upon the proposed insured's age, sex and rating class, the
face amount requested, the proposed frequency and amount of premium payments
and any available riders requested. Existing policyowners may request
illustrations based on existing cash value at the time of request. JP
LifeAmerica has reserved the right to charge an administrative fee up to $25
for such illustrations.
A-2
<PAGE>
JEFFERSON PILOT LIFEAMERICA INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
DEATH BENEFIT OPTION I ASSUMED HYPOTHETICAL GROSS
MALE NON-SMOKER ISSUE AGE 40 ANNUAL RATE OF RETURN:(1) 12% (10.27% net)
$100,000 INITIAL SPECIFIED AMOUNT ASSUMED ANNUAL PREMIUM(2): $1,425
<TABLE>
<CAPTION>
PREMIUMS ASSUMING CURRENT COSTS ASSUMING GUARANTEED COSTS
END ACCUMULATED --------------------------------------- ---------------------------------------
OF AT 4% INTEREST ACCUMULATION CASH DEATH ACCUMULATION CASH DEATH
YEAR PER YEAR VALUE(3) VALUE(3) BENEFIT(3) VALUE(3) VALUE(3) BENEFIT(3)
- ------ ---------------- -------------- ---------- ------------- -------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 1,482 1,228 851 100,000 1,219 842 100,000
2 3,023 2,566 2,189 100,000 2,547 2,170 100,000
3 4,626 4,027 3,650 100,000 3,997 3,621 100,000
4 6,293 5,630 5,254 100,000 5,580 5,203 100,000
5 8,027 7,403 7,027 100,000 7,309 6,933 100,000
6 9,830 9,364 9,050 100,000 9,198 8,884 100,000
7 11,705 11,532 11,281 100,000 11,263 11,012 100,000
8 13,655 13,918 13,730 100,000 13,521 13,333 100,000
9 15,684 16,557 16,432 100,000 15,993 15,868 100,000
10 17,793 19,475 19,413 100,000 18,700 18,638 100,000
11 19,987 22,772 22,772 100,000 21,718 21,718 100,000
12 22,268 26,401 26,401 100,000 25,035 25,035 100,000
13 24,641 30,398 30,398 100,000 28,681 28,681 100,000
14 27,109 34,803 34,803 100,000 32,692 32,692 100,000
15 29,675 39,660 39,660 100,000 37,110 37,110 100,000
16 32,344 45,023 45,023 100,000 41,981 41,981 100,000
17 35,120 50,947 50,947 100,000 47,360 47,360 100,000
18 38,007 57,499 57,499 100,000 53,311 53,311 100,000
19 41,009 64,754 64,754 100,000 59,909 59,909 100,000
20 44,131 72,798 72,798 100,000 67,238 67,238 100,000
21 47,378 81,717 81,717 106,232(4) 75,396 75,396 100,000
22 50,755 91,548 91,548 117,181(4) 84,459 84,459 108,107(4)
23 54,268 102,374 102,374 128,991(4) 94,430 94,430 118,982(4)
24 57,920 114,296 114,296 141,727(4) 105,397 105,397 130,692(4)
25 61,719 127,428 127,428 155,463(4) 117,461 117,461 143,302(4)
30 83,118 215,744 215,744 250,263(4) 198,211 198,211 229,925(4)
35 109,153 359,058 359,058 384,192(4) 328,571 328,571 351,571(4)
40 140,828 593,965 593,965 623,663(4) 541,721 541,721 568,807(4)
</TABLE>
- -------
(1) For policy years 11 and thereafter, the illustrated net annual rate of
return equals 10.52%.
(2) Assumes a $1,425 premium is paid at the beginning of each policy year.
Values would be different if premiums are paid with a different frequency or
in different amounts.
(3) Assumes that no policy loans or withdrawals have been made. Zero values
indicate lapse in the absence of an additional premium payment.
(4) Increase due to adjustment by the corridor percentage. See "Death Benefits".
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT RATES OF RETURN
MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS,
INCLUDING THE INVESTMENT ALLOCATIONS BY THE OWNER AND DIFFERENT INVESTMENT
RATES OF RETURN FOR THE FUNDS' SERIES. THE ACCUMULATION VALUE, CASH VALUE AND
DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL
INVESTMENT RATES OF RETURN AVERAGED 12% OVER A PERIOD OF YEARS, BUT FLUCTUATED
ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATION
CAN BE MADE BY JP LIFEAMERICA, THE SEPARATE ACCOUNT, OR THE FUNDS THAT THIS
ASSUMED INVESTMENT RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-3
<PAGE>
JEFFERSON PILOT LIFEAMERICA INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
DEATH BENEFIT OPTION I ASSUMED HYPOTHETICAL GROSS
MALE NON-SMOKER ISSUE AGE 40 ANNUAL RATE OF RETURN:(1) 6% (4.27% net)
$100,000 INITIAL SPECIFIED AMOUNT ASSUMED ANNUAL PREMIUM(2): $1,425
<TABLE>
<CAPTION>
PREMIUMS ASSUMING CURRENT COSTS ASSUMING GUARANTEED COSTS
END ACCUMULATED --------------------------------------- --------------------------------------
OF AT 4% INTEREST ACCUMULATION CASH DEATH ACCUMULATION CASH DEATH
YEAR PER YEAR VALUE(3) VALUE(3) BENEFIT(3) VALUE(3) VALUE(3) BENEFIT(3)
- ------ ---------------- -------------- ---------- ------------- -------------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 1,482 1,153 777 100,000 1,145 768 100,000
2 3,023 2,340 1,964 100,000 2,323 1,946 100,000
3 4,626 3,563 3,187 100,000 3,537 3,160 100,000
4 6,293 4,831 4,454 100,000 4,785 4,409 100,000
5 8,027 6,155 5,779 100,000 6,071 5,695 100,000
6 9,830 7,541 7,227 100,000 7,392 7,078 100,000
7 11,705 8,989 8,738 100,000 8,749 8,498 100,000
8 13,655 10,493 10,304 100,000 10,142 9,954 100,000
9 15,684 12,065 11,939 100,000 11,573 11,447 100,000
10 17,793 13,709 13,646 100,000 13,039 12,977 100,000
11 19,987 15,484 15,484 100,000 14,579 14,579 100,000
12 22,268 17,318 17,318 100,000 16,158 16,158 100,000
13 24,641 19,212 19,212 100,000 17,774 17,774 100,000
14 27,109 21,167 21,167 100,000 19,426 19,426 100,000
15 29,675 23,184 23,184 100,000 21,111 21,111 100,000
16 32,344 25,264 25,264 100,000 22,827 22,827 100,000
17 35,120 27,407 27,407 100,000 24,571 24,571 100,000
18 38,007 29,614 29,614 100,000 26,345 26,345 100,000
19 41,009 31,886 31,886 100,000 28,148 28,148 100,000
20 44,131 34,220 34,220 100,000 29,977 29,977 100,000
21 47,378 36,617 36,617 100,000 31,828 31,828 100,000
22 50,755 39,078 39,078 100,000 33,698 33,698 100,000
23 54,268 41,606 41,606 100,000 35,583 35,583 100,000
24 57,920 44,202 44,202 100,000 37,473 37,473 100,000
25 61,719 46,871 46,871 100,000 39,364 39,364 100,000
30 83,118 61,483 61,483 100,000 48,707 48,707 100,000
35 109,153 79,277 79,277 100,000 57,284 57,284 100,000
40 140,828 103,746 103,746 108,934(4) 63,665 63,665 100,000
</TABLE>
- -------
(1) For policy years 11 and thereafter, the illustrated net annual rate of
return equals 4.52%.
(2) Assumes a $1,425 premium is paid at the beginning of each policy year.
Values would be different if premiums are paid with a different frequency or
in different amounts.
(3) Assumes that no policy loans or withdrawals have been made. Zero values
indicate lapse in the absence of an additional premium payment.
(4) Increase due to adjustment by the corridor percentage. See "Death Benefits".
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT RATES OF RETURN
MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS,
INCLUDING THE INVESTMENT ALLOCATIONS BY THE OWNER AND DIFFERENT INVESTMENT
RATES OF RETURN FOR THE FUNDS' SERIES. THE ACCUMULATION VALUE, CASH VALUE AND
DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL
INVESTMENT RATES OF RETURN AVERAGED 6% OVER A PERIOD OF YEARS, BUT FLUCTUATED
ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATION
CAN BE MADE BY JP LIFEAMERICA, THE SEPARATE ACCOUNT, OR THE FUNDS THAT THIS
ASSUMED INVESTMENT RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-4
<PAGE>
JEFFERSON PILOT LIFEAMERICA INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
DEATH BENEFIT OPTION I ASSUMED HYPOTHETICAL GROSS
MALE NON-SMOKER ISSUE AGE 40 ANNUAL RATE OF RETURN:(1) 0% (-1.73% net)
$100,000 INITIAL SPECIFIED AMOUNT ASSUMED ANNUAL PREMIUM(2): $1,425
<TABLE>
<CAPTION>
PREMIUMS ASSUMING CURRENT COSTS ASSUMING GUARANTEED COSTS
END ACCUMULATED -------------------------------------- --------------------------------------
OF AT 5% INTEREST ACCUMULATION CASH DEATH ACCUMULATION CASH DEATH
YEAR PER YEAR VALUE(3) VALUE(3) BENEFIT(3) VALUE(3) VALUE(3) BENEFIT(3)
- ------ ---------------- -------------- ---------- ------------ -------------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 1,496 1,079 702 100,000 1,071 694 100,000
2 3,067 2,124 1,747 100,000 2,108 1,732 100,000
3 4,717 3,136 2,760 100,000 3,113 2,736 100,000
4 6,449 4,123 3,746 100,000 4,083 3,706 100,000
5 8,268 5,094 4,718 100,000 5,019 4,642 100,000
6 10,177 6,052 5,738 100,000 5,919 5,605 100,000
7 12,182 6,996 6,745 100,000 6,781 6,530 100,000
8 14,288 7,915 7,727 100,000 7,605 7,417 100,000
9 16,498 8,821 8,695 100,000 8,390 8,264 100,000
10 18,820 9,713 9,650 100,000 9,133 9,070 100,000
11 21,257 10,639 10,639 100,000 9,860 9,860 100,000
12 23,816 11,527 11,527 100,000 10,540 10,540 100,000
13 26,503 12,374 12,374 100,000 11,169 11,169 100,000
14 29,324 13,178 13,178 100,000 11,743 11,743 100,000
15 32,287 13,937 13,937 100,000 12,255 12,255 100,000
16 35,398 14,648 14,648 100,000 12,700 12,700 100,000
17 38,664 15,305 15,305 100,000 13,073 13,073 100,000
18 42,093 15,905 15,905 100,000 13,370 13,370 100,000
19 45,694 16,442 16,442 100,000 13,586 13,586 100,000
20 49,475 16,908 16,908 100,000 13,711 13,711 100,000
21 53,445 17,294 17,294 100,000 13,736 13,736 100,000
22 57,613 17,595 17,595 100,000 13,651 13,651 100,000
23 61,990 17,802 17,802 100,000 13,440 13,440 100,000
24 66,586 17,905 17,905 100,000 13,083 13,083 100,000
25 71,412 17,896 17,896 100,000 12,561 12,561 100,000
30 99,409 15,652 15,652 100,000 6,737 6,737 100,000
35 135,142 7,654 7,654 100,000 0 0 0
40 0 0 0 0 0 0 0
</TABLE>
- -------
(1) For policy years 11 and thereafter, the illustrated net annual rate of
return equals -1.48%.
(2) Assumes a $1,425 premium is paid at the beginning of each policy year.
Values would be different if premiums are paid with a different frequency or
in different amounts.
(3) Assumes that no policy loans or withdrawals have been made. Zero values
indicate lapse in the absence of an additional premium payment.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT RATES OF RETURN
MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS,
INCLUDING THE INVESTMENT ALLOCATIONS BY THE OWNER AND DIFFERENT INVESTMENT
RATES OF RETURN FOR THE FUNDS' SERIES. THE ACCUMULATION VALUE, CASH VALUE AND
DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL
INVESTMENT RATES OF RETURN AVERAGED 0% OVER A PERIOD OF YEARS, BUT FLUCTUATED
ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATION
CAN BE MADE BY JP LIFEAMERICA, THE SEPARATE ACCOUNT, OR THE FUNDS THAT THIS
ASSUMED INVESTMENT RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-5
<PAGE>
JEFFERSON PILOT LIFEAMERICA INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
DEATH BENEFIT OPTION II ASSUMED HYPOTHETICAL GROSS
MALE NON-SMOKER ISSUE AGE 40 ANNUAL RATE OF RETURN:(1) 12% (10.27% net)
$100,000 INITIAL SPECIFIED AMOUNT ASSUMED ANNUAL PREMIUM(2): $1,425
<TABLE>
<CAPTION>
PREMIUMS ASSUMING CURRENT COSTS ASSUMING GUARANTEED COSTS
END ACCUMULATED -------------------------------------- --------------------------------------
OF AT 4% INTEREST ACCUMULATION CASH DEATH ACCUMULATION CASH DEATH
YEAR PER YEAR VALUE(3) VALUE(3) BENEFIT(3) VALUE(3) VALUE(3) BENEFIT(2)
- ------ ---------------- -------------- ---------- ------------ -------------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 1,482 1,224 848 101,224 1,215 839 101,215
2 3,023 2,556 2,179 102,556 2,537 2,160 102,537
3 4,626 4,005 3,628 104,005 3,975 3,598 103,975
4 6,293 5,590 5,213 105,590 5,539 5,162 105,539
5 8,027 7,338 6,961 107,338 7,241 6,864 107,241
6 9,830 9,266 8,952 109,266 9,092 8,778 109,092
7 11,705 11,391 11,140 111,391 11,104 10,853 111,104
8 13,655 13,722 13,534 113,722 13,293 13,105 113,293
9 15,684 16,293 16,168 116,293 15,674 15,549 115,674
10 17,793 19,128 19,065 119,128 18,263 18,200 118,263
11 19,987 22,328 22,328 122,328 21,127 21,127 121,127
12 22,268 25,831 25,831 125,831 24,247 24,247 124,247
13 24,641 29,666 29,666 129,666 27,641 27,641 127,641
14 27,109 33,865 33,865 133,865 31,332 31,332 131,332
15 29,675 38,460 38,460 138,460 35,342 35,342 135,342
16 32,344 43,488 43,488 143,488 39,697 39,697 139,697
17 35,120 48,987 48,987 148,987 44,426 44,426 144,426
18 38,007 55,000 55,000 155,000 49,561 49,561 149,561
19 41,009 61,573 61,573 161,573 55,139 55,139 155,139
20 44,131 68,752 68,752 168,752 61,194 61,194 161,194
21 47,378 76,588 76,588 176,588 67,762 67,762 167,762
22 50,755 85,142 85,142 185,142 74,886 74,886 174,886
23 54,268 94,477 94,477 194,477 82,603 82,603 182,603
24 57,920 104,660 104,660 204,660 90,956 90,956 190,956
25 61,719 115,770 115,770 215,770 99,986 99,986 199,986
30 83,118 188,309 188,309 288,309 157,334 157,334 257,334
35 109,153 299,737 299,737 399,737 241,018 241,018 341,018
40 140,828 470,609 470,609 570,609 360,836 360,836 460,836
</TABLE>
- -------
(1) For policy years 11 and thereafter, the illustrated net annual rate of
return equals 10.52%.
(2) Assumes a $1,425 premium is paid at the beginning of each policy year.
Values would be different if premiums are paid with a different frequency or
in different amounts.
(3) Assumes that no policy loans or withdrawals have been made. Zero values
indicate lapse in the absence of an additional premium payment.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT RATES OF RETURN
MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS,
INCLUDING THE INVESTMENT ALLOCATIONS BY THE OWNER AND DIFFERENT INVESTMENT
RATES OF RETURN FOR THE FUNDS' SERIES. THE ACCUMULATION VALUE, CASH VALUE AND
DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL
INVESTMENT RATES OF RETURN AVERAGED 12% OVER A PERIOD OF YEARS, BUT FLUCTUATED
ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATION
CAN BE MADE BY JP LIFEAMERICA, THE SEPARATE ACCOUNT, OR THE FUNDS THAT THIS
ASSUMED INVESTMENT RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-6
<PAGE>
JEFFERSON PILOT LIFEAMERICA INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
DEATH BENEFIT OPTION II ASSUMED HYPOTHETICAL GROSS
MALE NON-SMOKER ISSUE AGE 40 ANNUAL RATE OF RETURN:(1) 6% (4.27% net)
$100,000 INITIAL SPECIFIED AMOUNT ASSUMED ANNUAL PREMIUM(2): $1,425
<TABLE>
<CAPTION>
PREMIUMS ASSUMING CURRENT COSTS ASSUMING GUARANTEED COSTS
END ACCUMULATED -------------------------------------- --------------------------------------
OF AT 4% INTEREST ACCUMULATION CASH DEATH ACCUMULATION CASH DEATH
YEAR PER YEAR VALUE(3) VALUE(3) BENEFIT(3) VALUE(3) VALUE(3) BENEFIT(3)
- ------ ---------------- -------------- ---------- ------------ -------------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 1,482 1,150 774 101,150 1,142 765 101,142
2 3,023 2,331 1,954 102,331 2,314 1,937 102,314
3 4,626 3,544 3,167 103,544 3,517 3,141 103,517
4 6,293 4,796 4,420 104,796 4,751 4,375 104,751
5 8,027 6,103 5,726 106,103 6,016 5,640 106,016
6 9,830 7,464 7,151 107,464 7,310 6,996 107,310
7 11,705 8,884 8,633 108,884 8,631 8,380 108,631
8 13,655 10,353 10,164 110,353 9,979 9,791 109,979
9 15,684 11,884 11,758 111,884 11,353 11,228 111,353
10 17,793 13,480 13,418 113,480 12,750 12,687 112,750
11 19,987 15,204 15,204 115,204 14,204 14,204 114,204
12 22,268 16,973 16,973 116,973 15,678 15,678 115,678
13 24,641 18,787 18,787 118,787 17,168 17,168 117,168
14 27,109 20,644 20,644 120,644 18,666 18,666 118,666
15 29,675 22,541 22,541 122,541 20,164 20,164 120,164
16 32,344 24,475 24,475 124,475 21,656 21,656 121,656
17 35,120 26,440 26,440 126,440 23,133 23,133 123,133
18 38,007 28,431 28,431 128,431 24,589 24,589 124,589
19 41,009 30,441 30,441 130,441 26,015 26,015 126,015
20 44,131 32,459 32,459 132,459 27,399 27,399 127,399
21 47,378 34,473 34,473 134,473 28,726 28,726 128,726
22 50,755 36,474 36,474 136,474 29,980 29,980 129,980
23 54,268 38,450 38,450 138,450 31,139 31,139 131,139
24 57,920 40,385 40,385 140,385 32,179 32,179 132,179
25 61,719 42,266 42,266 142,266 33,070 33,070 133,070
30 83,118 50,128 50,128 150,128 34,355 34,355 134,355
35 109,153 52,737 52,737 152,737 26,380 26,380 126,380
40 140,828 44,574 44,574 144,574 388 388 100,388
</TABLE>
- -------
(1) For policy years 11 and thereafter, the illustrated net annual rate of
return equals 4.52%.
(2) Assumes a $1,425 premium is paid at the beginning of each policy year.
Values would be different if premiums are paid with a different frequency or
in different amounts.
(3) Assumes that no policy loans or withdrawals have been made. Zero values
indicate lapse in the absence of an additional premium payment.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT RATES OF RETURN
MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS,
INCLUDING THE INVESTMENT ALLOCATIONS BY THE OWNER AND DIFFERENT INVESTMENT
RATES OF RETURN FOR THE FUNDS' SERIES. THE ACCUMULATION VALUE, CASH VALUE AND
DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL
INVESTMENT RATES OF RETURN AVERAGED 6% OVER A PERIOD OF YEARS, BUT FLUCTUATED
ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATION
CAN BE MADE BY JP LIFEAMERICA, THE SEPARATE ACCOUNT, OR THE FUNDS THAT THIS
ASSUMED INVESTMENT RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-7
<PAGE>
JEFFERSON PILOT LIFEAMERICA INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
DEATH BENEFIT OPTION II ASSUMED HYPOTHETICAL GROSS
MALE NON-SMOKER ISSUE AGE 40 ANNUAL RATE OF RETURN:(1) 0% (-1.73% net)
$100,000 INITIAL SPECIFIED AMOUNT ASSUMED ANNUAL PREMIUM(2): $1,425
<TABLE>
<CAPTION>
PREMIUMS ASSUMING CURRENT COSTS ASSUMING GUARANTEED COSTS
END ACCUMULATED -------------------------------------- --------------------------------------
OF AT 5% INTEREST ACCUMULATION CASH DEATH ACCUMULATION CASH DEATH
YEAR PER YEAR VALUE(3) VALUE(3) BENEFIT(3) VALUE(3) VALUE(3) BENEFIT(3)
- ------ ---------------- -------------- ---------- ------------ -------------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 1,496 1,076 699 101,076 1,068 691 101,068
2 3,067 2,116 1,739 102,116 2,100 1,723 102,100
3 4,717 3,120 2,743 103,120 3,096 2,719 103,096
4 6,449 4,094 3,718 104,094 4,054 3,677 104,054
5 8,268 5,052 4,676 105,052 4,975 4,598 104,975
6 10,177 5,993 5,680 105,993 5,855 5,541 105,855
7 12,182 6,918 6,667 106,918 6,693 6,442 106,693
8 14,288 7,815 7,627 107,815 7,489 7,300 107,489
9 16,498 8,697 8,572 108,697 8,240 8,114 108,240
10 18,820 9,564 9,501 109,564 8,943 8,880 108,943
11 21,257 10,463 10,463 110,463 9,623 9,623 109,623
12 23,816 11,319 11,319 111,319 10,249 10,249 110,249
13 26,503 12,127 12,127 112,127 11,815 10,815 110,815
14 29,324 12,886 12,886 112,886 11,317 11,317 111,317
15 32,287 13,591 13,591 113,591 11,746 11,746 111,746
16 35,398 14,238 14,238 114,238 12,097 12,097 112,097
17 38,664 14,820 14,820 114,820 12,362 12,362 112,362
18 42,093 15,334 15,334 115,334 12,538 12,538 112,538
19 45,694 15,772 15,772 115,772 12,620 12,620 112,620
20 49,475 16,122 16,122 116,122 12,596 12,596 112,596
21 53,445 16,375 16,375 116,375 12,457 12,457 112,457
22 57,613 16,523 16,523 116,523 12,192 12,192 112,192
23 61,990 16,556 16,556 116,556 11,783 11,783 111,783
24 66,586 16,464 16,464 116,464 11,214 11,214 111,214
25 71,412 16,235 16,235 116,235 10,463 10,463 110,463
30 99,409 12,534 12,534 112,534 3,449 3,449 103,449
35 135,142 2,833 2,833 102,833 0 0 0
40 0 0 0 0 0 0 0
</TABLE>
- -------
(1) For policy years 11 and thereafter, the illustrated net annual rate of
return equals -1.48%.
(2) Assumes a $1,425 premium is paid at the beginning of each policy year.
Values would be different if premiums are paid with a different frequency or
in different amounts.
(3) Assumes that no policy loans or withdrawals have been made. Zero values
indicate lapse in the absence of an additional premium payment.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT RATES OF RETURN
MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS,
INCLUDING THE INVESTMENT ALLOCATIONS BY THE OWNER AND DIFFERENT INVESTMENT
RATES OF RETURN FOR THE FUNDS' SERIES. THE ACCUMULATION VALUE, CASH VALUE AND
DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL
INVESTMENT RATES OF RETURN AVERAGED 0% OVER A PERIOD OF YEARS, BUT FLUCTUATED
ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATION
CAN BE MADE BY JP LIFEAMERICA, THE SEPARATE ACCOUNT, OR THE FUNDS THAT THIS
ASSUMED INVESTMENT RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-8
<PAGE>
Jefferson Pilot LifeAmerica Insurance Company
Audited Financial Statements
As of December 31, 1998 and for the year then ended
Contents
<TABLE>
<S> <C>
Report of Independent Auditors ............. F-1
Balance Sheet .............................. F-2
Statement of Income ........................ F-3
Statement of Stockholder's Equity .......... F-4
Statement of Cash Flows .................... F-5
Notes to Financial Statements .............. F-6
</TABLE>
<PAGE>
This Page Intentionally Left Blank
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Jefferson Pilot LifeAmerica Insurance Company
We have audited the accompanying balance sheet of Jefferson Pilot LifeAmerica
Insurance Company (formerly known as Chubb Colonial Life Insurance Company, a
wholly-owned subsidiary of Jefferson Pilot Financial Insurance Company, which is
a wholly-owned subsidiary of Jefferson-Pilot Corporation) as of December 31,
1998, and the related statements of income, stockholder's equity, and cash flows
for the year then ended. 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Jefferson Pilot LifeAmerica
Insurance Company at December 31, 1998, and the results of its operations and
its cash flows for the year then ended, in conformity with generally accepted
accounting principles.
/s/ Ernst & Young LLP
Greensboro, North Carolina
February 8, 1999
F-1
<PAGE>
JEFFERSON PILOT LIFEAMERICA INSURANCE COMPANY
Balance Sheet
December 31, 1998
(In Thousands, except for Share Amounts)
<TABLE>
<S> <C>
Assets
Invested assets:
Debt securities available-for-sale, at fair value (amortized cost--$429,442) ............ $452,344
Equity securities, available for sale, at fair value (cost--$1,144) ..................... 1,364
Policy loans ............................................................................ 24,762
Mortgage loans on real estate ........................................................... 7,097
--------
Total investments ........................................................................ 485,567
Cash and cash equivalents ................................................................ 5,232
Accrued investment income ................................................................ 8,140
Uncollected premiums ..................................................................... 10,950
Due from reinsurers ...................................................................... 25,964
Deferred policy acquisition costs ........................................................ 436
Value of business acquired ............................................................... 2,349
Cost in excess of net assets acquired, net of accumulated amortization of $1,048 ......... 21,257
Federal income taxes recoverable ......................................................... 9,932
Deferred income taxes .................................................................... 1,858
Assets held in separate accounts ......................................................... 203
Other assets ............................................................................. 2,428
--------
$574,316
========
Liabilities
Policy liabilities:
Policyholder contract deposits .......................................................... $130,118
Future policy benefits .................................................................. 217,520
Policy and contract claims .............................................................. 20,761
Premiums paid in advance ................................................................ 166
Other policyholders' funds .............................................................. 23,584
--------
Total policy liabilities ................................................................. 392,149
Liabilities related to separate accounts ................................................. 203
Accrued expenses and other liabilities ................................................... 28,659
--------
421,011
--------
Commitments and contingent liabilities ................................................... --
Stockholder's equity
Common stock par value $20 per share, 132,000 shares authorized, issued and outstanding .. 2,640
Paid in capital .......................................................................... 137,911
Retained earnings ........................................................................ 5,224
Accumulated other comprehensive income--net unrealized gains on securities ............... 7,530
--------
153,305
--------
$574,316
========
</TABLE>
See accompanying notes.
F-2
<PAGE>
JEFFERSON PILOT LIFEAMERICA INSURANCE COMPANY
Statement of Income
Year Ended December 31, 1998
(In Thousands)
<TABLE>
<S> <C>
Revenues
Premiums and policy charges ........................................ $ 37,977
Net investment income .............................................. 35,915
Realized investment gains .......................................... 3,728
Recapture fee on treaty termination with parent .................... 48,407
--------
Total revenues ..................................................... 126,027
Benefits and expenses
Policy benefits and claims ......................................... 9,813
Commissions and other operating expenses, net of deferrals ......... 3,849
Amortization of intangibles ........................................ 2,216
--------
Total benefits and expenses ........................................ 15,878
--------
Income before federal income tax ................................... 110,149
Federal income tax expense (benefit)
Current ........................................................... 41,392
Deferred .......................................................... (2,964)
--------
38,428
--------
Net income ......................................................... $ 71,721
========
</TABLE>
See accompanying notes.
F-3
<PAGE>
JEFFERSON PILOT LIFEAMERICA INSURANCE COMPANY
Statement of Stockholder's Equity
(In Thousands)
<TABLE>
<CAPTION>
Accumulated Other
Comprehensive Income-- Total
Common Paid in Retained Net Unrealized Gains Stockholder's
Stock Capital Earnings on Securities Equity
-------- ----------- ------------ ------------------------ --------------
<S> <C> <C> <C> <C> <C>
Balances, December 31, 1997 ......... $2,640 $137,911 $ 1,897 $6,261 $ 148,709
Net income .......................... -- -- 71,721 -- 71,721
Other comprehensive income .......... -- -- -- 1,269 1,269
---------
Comprehensive income ............... 72,990
Dividends declared .................. -- -- (68,394) -- (68,394)
------ -------- --------- ------ ---------
Balances, December 31, 1998 ......... $2,640 $137,911 $ 5,224 $7,530 $ 153,305
====== ======== ========= ====== =========
</TABLE>
See accompanying notes.
F-4
<PAGE>
JEFFERSON PILOT LIFEAMERICA INSURANCE COMPANY
Statement of Cash Flows
Year Ended December 31, 1998
(In Thousands)
<TABLE>
<S> <C>
Operating Activities
Net income ............................................................................... $ 71,721
Adjustments to reconcile net income to net cash provided by operating activities:
Decrease in future policy benefits, policy and contract claims and premiums paid in
advance, net ........................................................................... (10,083)
Credits to policyholder accounts, net ................................................... (1,089)
Increase in uncollected premiums ........................................................ (9,066)
Policy acquisition costs deferred, net of amortization .................................. (53)
Net amortization of value of business acquired .......................................... 701
Decrease in accrued investment income ................................................... 340
Realized investment gains ............................................................... (3,728)
Amortization of investment premiums ..................................................... 1,185
Provision for deferred income tax ....................................................... (2,964)
Decrease in federal income tax payable .................................................. (4,006)
Increase in reinsurance receivable ...................................................... (20,494)
Change in receivables and asset accruals ................................................ 14,120
Change in payables and expense accruals ................................................. (7,233)
Amortization of cost in excess of net assets acquired.................................... 1,048
---------
Net cash provided by operating activities ................................................ 30,399
Investing Activities
Proceeds from sales of debt securities ................................................... 34,059
Proceeds from maturities of debt securities .............................................. 23,707
Proceeds from sales of equity securities ................................................. 9,177
Purchases of debt securities ............................................................. (34,645)
Purchases of equity securities ........................................................... (1,394)
Policy loans issued, net of repayments ................................................... (397)
Mortgage loans, net of repayments ........................................................ 961
---------
Net cash provided by investing activities ................................................ 31,468
Financing Activities
Deposits credited to policyholders' funds ................................................ 17,865
Withdrawals from policyholders' funds .................................................... (8,951)
Dividends paid ........................................................................... (68,394)
---------
Net cash used in financing activities .................................................... (59,480)
Net increase in cash and cash equivalents ................................................ 2,387
Cash and cash equivalents, beginning of period ........................................... 2,845
---------
Cash and cash equivalents, end of period ................................................. $ 5,232
=========
</TABLE>
See accompanying notes.
F-5
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Jefferson Pilot LifeAmerica Insurance Company
December 31, 1998
1. Basis of Presentation
Nature of Operations
Jefferson Pilot LifeAmerica Insurance Company (formerly known as Chubb Colonial
Life Insurance Company), is wholly-owned by Jefferson Pilot Financial Insurance
Company (formerly known as Chubb Life Insurance Company of America). Jefferson
Pilot Financial Insurance Company is a wholly-owned subsidiary of
Jefferson-Pilot Corporation. The Company is principally engaged in the sale of
individual life insurance and investment products. These products are marketed
primarily through personal producing general agents throughout the United
States.
Acquisition
Jefferson-Pilot Corporation (JP) acquired Jefferson Pilot Financial Insurance
Company on May 13, 1997, with an effective date of April 30, 1997. The
acquisition was accounted for as a purchase, utilizing "push-down" accounting,
and the assets and liabilities were recorded at fair value as of April 30, 1997.
The initial purchase price was adjusted in the first quarter of 1998 by mutual
agreement between JP and the seller, primarily to reflect tax strategies not
anticipated at the original acquisition date. The adjustment to the purchase
price allocation resulted in changes to the balances of deferred income taxes,
value of business acquired and reserves, but did not affect equity. Also, the
cost in excess of net assets acquired was increased by $831 thousand in 1998 as
a result of this adjustment. Amortization expense relating to the cost in excess
of net assets acquired amounted to $1,048 thousand in 1998.
2. Summary of Significant Accounting Policies
Use of Estimates
The preparation of financial statements requires management to make estimates
and assumptions affecting the reported amounts of assets and liabilities, the
disclosures of contingent assets and liabilities as of the date of the
financial statements and the reported amounts of revenue and expenses for the
reporting period. Those estimates are inherently subject to change and actual
results could differ from those estimates. Included among the material (or
potentially material) reported amounts and disclosures that require extensive
use of estimates are asset valuation allowances, policy liabilities, deferred
policy acquisition costs, value of business acquired and the potential effects
of resolving litigated matters.
Cash and Cash Equivalents
The Company includes with cash and cash equivalents its holdings of short-term
investments which are highly liquid investments that mature within three months
of the date of acquisition.
Invested Assets
Debt and equity securities are classified as securities available-for-sale,
stated at fair value with net unrealized gains and losses included in
accumulated other comprehensive income, net of deferred income taxes and
adjustments to deferred policy acquisition costs and value of business
acquired.
Policy loans are carried at the unpaid balances.
Mortgage loans on real estate are stated at the unpaid balances, net of
allowances for unrecoverable amounts. Mortgage loan underwriting standards
emphasize the credit status of a prospective borrower, quality of the
underlying collateral and conservative loan-to-value relationships.
Amortization of premiums and accrual of discounts on investments in debt
securities are reflected in earnings over the contractual terms of the
investments in a manner that produces a constant effective yield. Realized
gains and losses on dispositions of securities are determined by the specific
identification method.
Recognition of Revenues, Benefits, Claims and Expenses
Universal Life Products
Universal life products include universal life insurance and other
interest-sensitive life insurance policies. Revenues for universal life
products consist of policy charges for the cost of insurance, policy
administration and surrenders that have been assessed against policy account
balances during the period.
F-6
<PAGE>
NOTES TO FINANCIAL STATEMENTS--Continued
Jefferson Pilot LifeAmerica Insurance Company
December 31, 1998
2. Summary of Significant Accounting Policies--continued
Policy fund liabilities for universal life and other interest-sensitive life
insurance policies are computed in accordance with the retrospective deposit
method and represent policy account balances before surrender charges.
Policy claims that are charged to expense include claims incurred in the period
in excess of related policy account balances. Other policy benefits include
interest credited to universal life and other interest-sensitive life insurance
policies. Interest crediting rates ranged from 4.2% to 6.5% during 1998.
Investment Products
Investment products include structured settlement annuities and other
supplementary contracts without life contingencies. Revenues for investment
products consist of policy charges for the cost of insurance, policy
administration and surrenders that have been assessed against policy account
balances during the period. Deposits for these products are recorded as policy
fund liabilities, which are increased by interest credited to the liabilities
and decreased by withdrawals and administrative charges assessed against the
contract holders. Interest crediting rates ranged from 3.5% to 6.75% during
1998.
Traditional Life Insurance Products
Traditional life insurance products include those products with fixed and
guaranteed premiums and benefits. Premium revenues for traditional life
insurance are recognized as revenues when due. The liabilities for future policy
benefits are computed by the net level premium method based on estimated future
investment yield, mortality and withdrawal experience. Interest rate assumptions
ranged from 2% to 6% at December 31, 1998. Mortality is calculated principally
on an experience multiple applied to select and ultimate tables in common usage
in the industry. Estimated withdrawals are determined principally based on
industry tables. Policy benefits and claims are charged to expense as incurred.
Policy and Contract Claims
The liability for policy and contract claims consists of the estimated amount
payable for claims reported but not yet settled, and an estimate of claims
incurred but not reported, which is based on historical experience, adjusted
for trends and circumstances. Management believes that the recorded liability
is sufficient to provide for the associated claims adjustment expenses.
Reinsurance
Reinsurance receivables include amounts recoverable from reinsurers related to
paid benefits and estimated amounts related to unpaid policy and contract
claims, future policy benefits and policyholder contract deposits. The cost of
reinsurance is accounted for over the terms of the underlying reinsured
policies using assumptions consistent with those used to account for the
policies.
Deferred Policy Acquisition Costs
Costs related to obtaining new business, including commissions, certain costs
of underwriting and issuing policies and certain agency office expenses, all of
which vary with and are primarily related to the production of new business,
have been deferred.
Deferred policy acquisition costs for traditional life insurance polices are
amortized over the premium paying periods of the related contracts using the
same assumptions for anticipated premium revenue that are used to compute
liabilities for future policy benefits. For universal life and investment
products, these costs are amortized at a constant rate based on the present
value of the estimated future gross profits to be realized over the terms of
the contracts, not to exceed 25 years.
F-7
<PAGE>
NOTES TO FINANCIAL STATEMENTS--Continued
Jefferson Pilot LifeAmerica Insurance Company
December 31, 1998
2. Summary of Significant Accounting Policies--continued
The carrying amount of deferred policy acquisition costs is adjusted for the
effect of realized gains and losses and the effects of unrealized gains or
losses on debt securities classified as available-for-sale.
Deferred policy acquisition costs are reviewed periodically to determine that
the unamortized portion does not exceed expected recoverable amounts. No
impairment adjustments have been reflected in earnings for any period
presented.
Value of Business Acquired
Value of business acquired represents the actuarially determined present value
of anticipated profits to be realized from life insurance and annuity business
purchased, using the same assumptions used to value the related liabilities.
Amortization of the value of business acquired occurs over the related contract
periods, using current crediting rates to accrete and a constant amortization
rate based on the present value of expected future profits.
Value of business acquired related to universal life and investment contracts
also is adjusted to reflect the effects that the unrealized gains or losses on
investments classified as available-for-sale would have had on the present
value of estimated gross profits had such gains or losses actually been
realized. This adjustment is excluded from income and charged or credited
directly to accumulated other comprehensive income, net of applicable deferred
income tax.
Cost in Excess of Assets Acquired
The excess of Jefferson-Pilot's purchase price over the fair value of assets
acquired, which has been "pushed down" to the Company level for financial
reporting purposes, is being amortized on a straight-line basis over 35 years.
Separate Accounts
Separate account assets and liabilities represent funds segregated by the
Company for the benefit of certain policyholders who bear the investment risk.
The separate account assets and liabilities, which are equal, are recorded at
fair value. Policyholder account deposits and withdrawals, investment income and
realized investment gains and losses are excluded from the amounts reported in
the Statement of Income. Fees charged on policyholders' deposits are included
in premiums and policy charges.
Property and Equipment
Property and equipment used in operations are carried at cost, less accumulated
depreciation. Depreciation is calculated using the straight-line method over
the estimated remaining useful lives of the assets.
Federal Income Taxes
The Company participates in the filing of a consolidated federal income tax
return with Jefferson Pilot Financial Insurance Company. Federal income tax is
allocated as if the Company and Jefferson Pilot Financial Insurance Company
filed separate income tax returns.
Deferred income tax assets are recorded on the difference between the tax bases
of assets and liabilities and the amounts at which they are reported in the
financial statements. Recorded amounts are adjusted to reflect changes in
income tax rates and other tax law provisions as they become enacted.
New Accounting Pronouncements
As of January 1, 1998, the Company adopted SFAS 130, "Reporting Comprehensive
Income", which sets standards for the reporting and display of comprehensive
income and its components in financial statements. Adoption had no impact on
the Company's net income or stockholders' equity. Comprehensive income consists
of net income plus other comprehensive income.
During 1998, the Company adopted SOP 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use", which requires
capitalization of certain costs incurred in connection with developing or
obtaining internal use software. The impact of adoption was not material.
F-8
<PAGE>
NOTES TO FINANCIAL STATEMENTS--Continued
Jefferson Pilot LifeAmerica Insurance Company
December 31, 1998
2. Summary of Significant Accounting Policies--continued
In June 1998, the FASB issued SFAS 133, "Accounting for Derivative Instruments
and for Hedging Activities". This pronouncement is effective for annual periods
beginning after June 15, 1999. SFAS 133 requires all derivatives to be recorded
on the balance sheet and establishes accounting rules for hedging activities.
The effect of the hedge accounting rules is to offset changes in value or cash
flows of both the hedge and hedged item in earnings in the same period. Changes
in the fair value of derivatives that do not qualify for hedge accounting are
reported in earnings in the period of the change. Based on the limited nature
of the Company's use of derivatives and hedging activities, adoption of this
pronouncement is not expected to have a material impact on the Company's
financial position or results of operations.
3. Invested Assets
Aggregate amortized cost, aggregate fair value and gross unrealized gains and
losses of debt securities available-for-sale at December 31, 1998 were as
follows (in thousands):
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ------------ ------------ -----------
<S> <C> <C> <C> <C>
U.S. Treasury obligations and direct obligations
of U.S. government agencies ................... $111,771 $ 4,867 $ -- $116,638
Corporate bonds ................................ 269,203 17,138 (1,505) 284,836
Mortgage-backed securities ..................... 47,626 2,394 -- 50,020
Redeemable preferred stocks .................... 842 8 -- 850
-------- ------- -------- --------
Total debt securities .......................... $429,442 $24,407 $ (1,505) $452,344
======== ======= ======== ========
</TABLE>
The amortized cost and aggregate fair value of debt securities at December 31,
1998 by contractual maturity were as follows (in thousands):
<TABLE>
<CAPTION>
Amortized Fair
Cost Value
----------- -----------
<S> <C> <C>
Due in one year or less ........................... $ 4,825 $ 4,846
Due after one year through five years ............. 29,705 31,067
Due after five years through ten years ............ 103,171 110,015
Due after ten years ............................... 58,037 61,362
Amounts not due at a single maturity date ......... 232,862 244,204
-------- --------
428,600 451,494
Redeemable preferred stocks ....................... 842 850
-------- --------
$429,442 $452,344
======== ========
</TABLE>
Actual future maturities will differ from the contractual maturities shown
because the issuers of certain debt securities have the right to call or prepay
the amounts due to the Company, with or without penalty.
The sources of net investment income for the year ended December 31, 1998 were
as follows (in thousands):
<TABLE>
<S> <C>
Debt securities ................. $33,148
Equity securities ............... 157
Policy loans .................... 1,664
Mortgage loans .................. 683
Other ........................... 734
-------
Gross investment income ......... 36,386
Investment expenses ............. 471
-------
Net investment income ........... $35,915
=======
</TABLE>
F-9
<PAGE>
NOTES TO FINANCIAL STATEMENTS--Continued
Jefferson Pilot LifeAmerica Insurance Company
December 31, 1998
3. Invested Assets--continued
Realized investment gains and (losses) for the year ended December 31, 1998
were as follows (in thousands):
<TABLE>
<S> <C>
Debt securities ....................................... $ 427
Equity securities ..................................... 2,706
Real estate ........................................... 908
Increase in mortgage loan valuation allowance ......... (100)
Amortization of value of business acquired ............ (213)
------
$3,728
======
</TABLE>
Gross realized gains and (losses) on available-for-sale securities were $3.3
million and ($209) thousand, respectively, for the year ended December 31, 1998.
The changes in amounts affecting net unrealized gains included in other
comprehensive income, reduced by deferred income taxes, for the year ended
December 31, 1998 are as follows (in thousands):
<TABLE>
<S> <C>
Decrease in unrealized appreciation of equity securities ......... $ (2,105)
Increase in unrealized appreciation of debt securities ........... 6,001
Decrease in value of business acquired ........................... (1,944)
--------
1,952
Decrease in deferred income taxes ................................ (683)
--------
Increase in net unrealized gains ................................. $ 1,269
========
</TABLE>
The Company participates in a securities lending program. The Company generally
receives cash collateral in an amount that is in excess of the market value of
the securities loaned. Market values of securities loaned and collateral are
monitored daily and additional collateral is obtained as necessary. At December
31, 1998 the market value of securities loaned and collateral received amounted
to $289 thousand and $292 thousand, respectively.
The allowance for credit losses on mortgage loans increased from $0 at December
31, 1997 to $140 thousand at December 31, 1998.
4. Derivatives
Use of Derivatives
The Company's investment policy permits the use of derivative financial
instruments such as interest rate swaps in certain circumstances. At December
31, 1998, such interest rate swaps are held to modify specific floating-rate
direct investments. The notional amount is $6 million, with the Company
receiving an average fixed rate of 7.35% and paying an average floating rate
of 5.27% based primarily on the 3 month and 6 month LIBOR rates.
The interest rate swaps are used to reduce the impact of interest rate
fluctuations on specific floating-rate direct investments. Interest is exchanged
periodically on the notional value, with the Company receiving a fixed rate and
paying a short-term LIBOR rate on a net exchange basis. The net amount received
or paid under the swaps is reflected as an adjustment to investment income. All
of the hedges are of investments classified as available-for-sale, and net
unrealized gains and losses, net of the effects of income taxes and the impact
on deferred policy acquisition costs and the value of business acquired, are not
significant and are included in accumulated other comprehensive income in
stockholder's equity as of December 31, 1998.
Credit and Market Risk
The Company is exposed to credit risk in the event of non-performance by
counterparties to swap agreements. The Company limits this exposure by entering
into swap agreements with counterparties having high credit ratings and by
regularly monitoring the ratings.
F-10
<PAGE>
NOTES TO FINANCIAL STATEMENTS--Continued
Jefferson Pilot LifeAmerica Insurance Company
December 31, 1998
4. Derivatives--continued
The Company's credit exposure on swaps is limited to the fair value of swap
agreements that are favorable to the Company. The Company does not expect any
counterparty to fail to meet its obligation; however, non-performance would not
have a material adverse effect on the Company's financial position or results
of operations.
The Company's exposure to market risk is mitigated by the offsetting effects of
changes in the value of swap agreements and the related direct investments. The
Company routinely monitors correlation between hedged item and hedging
instruments. In the event a hedge relationship is terminated or loses
correlation, any related hedging instrument that remained would be
marked-to-market through income. If the hedging instrument is terminated, any
gain or loss is deferred and amortized over the remaining life of the hedged
asset.
5. Deferred Policy Acquisition Costs and Value of Business Acquired
Policy acquisition costs deferred and the related amortization charged to
income for the year ended December 31, 1998 were as follows (in thousands):
<TABLE>
<S> <C>
Beginning balance ......... $383
Deferrals ................. 56
Amortization .............. (3)
----
Ending balance ............ $436
====
</TABLE>
Changes in the value of business acquired for the year ended December 31, 1998
were as follows (in thousands):
<TABLE>
<S> <C>
Beginning balance ........................................................ $ 3,567
Adjustment related to purchase accounting ................................ 1,640
Deferrals of commissions and accretion of interest ....................... 464
Amortization ............................................................. (1,165)
--------
Net amortization reflected in expenses ................................... (701)
--------
Adjustment related to realized gains on debt securities .................. (213)
Adjustment to unrealized gains on debt securities available-for-sale ..... (1,944)
--------
Ending balance ........................................................... $ 2,349
========
</TABLE>
Expected approximate amortization percentages of the value of business acquired
as of December 31, 1998 over the next five years were as follows:
<TABLE>
<S> <C>
Year Ending December 31:
1999 ...................... 9.7%
2000 ...................... 8.5%
2001 ...................... 7.4%
2002 ...................... 6.7%
2003 ...................... 6.2%
</TABLE>
F-11
<PAGE>
NOTES TO FINANCIAL STATEMENTS--Continued
Jefferson Pilot LifeAmerica Insurance Company
December 31, 1998
6. Federal Income Taxes
The tax effects of temporary differences that gave rise to deferred income tax
liabilities and assets at December 31, 1998 were as follows (in thousands):
<TABLE>
<S> <C>
Deferred income tax liabilities:
Value of business acquired .............................. $ 4,773
Net unrealized gains on securities ...................... 4,055
Other ................................................... 3,420
-------
Total ........................................................ 12,248
Deferred income tax assets:
Future policy benefits and policy fund balances ......... 5,795
Deferred policy acquisition costs ....................... 3,278
Due and deferred premiums ............................... 1,604
Other ................................................... 3,429
-------
Total ...................................................... 14,106
-------
Net deferred income tax asset .............................. $ 1,858
=======
</TABLE>
Under prior federal income tax law, one-half of the excess of a life insurance
company's income from operations over its taxable investment income was not
taxed, but was set aside in a special tax account designated as "Policyholders'
Surplus". The Company has approximately $4.7 million of untaxed "Policyholders'
Surplus" on which no payment of federal income taxes will be required unless it
is distributed as a dividend, or under other specified conditions. The current
administration has proposed to tax, as part of its 1999 budget initiative, the
"Policyholders' Surplus" over a ten year period. No related deferred tax
liability has been recognized for the potential tax which would approximate
$1.6 million under current proposed rates.
Federal income taxes paid in 1998 were $16.3 million.
7. Related-Party Transactions
During 1998, the Company entered into service agreements with JP and other
subsidiaries of JP for personnel and facilities usage, general management
services, and investment management services. The Company expensed $6.3 million
for general management and investment services provided by Jefferson-Pilot Life
Insurance Company, another wholly-owned subsidiary of JP. At December 31, 1998,
$2.7 million remained payable to Jefferson-Pilot Life Insurance Company related
to these service contracts. The Company had $15.0 million of other payables due
to related parties at December 31, 1998. The total related party payable of
$17.7 million is included in accrued expenses and other liabilities on the
balance sheet.
During 1998, the Company assumed from Jefferson Pilot Financial Insurance
Company, under a modified-coinsurance agreement that had been in place for
thirteen years, premiums and benefits related to interest-sensitive whole life
and single premium whole life contracts. Effective September 30, 1998, both
parties agreed to terminate the treaty. The treaty required a recalculation upon
termination of both a recapture fee based upon the negative cash flow since
inception of the treaty and the reserve adjustment assumed. As a result of the
termination, the Company recorded recapture fee income of $48.4 million and an
additional reserve adjustment on reinsurance assumed of $35.2 million. This was
in addition to the reserve adjustment on reinsurance assumed during the nine
months the treaty was in effect of $28.6 million. The total reserve adjustment
of $63.8 million is reflected as a reduction of policy benefits and claims on
the Statement of Income.
The Company is party to an agreement, whereby it guarantees a first mortgage
obtained by Jefferson Pilot Financial Insurance Company in 1985. The first
mortgage loan is secured by a home office building in Concord, NH. The
outstanding balance of the loan at December 31, 1998 was $2.4 million.
8. Pensions
The Company's employees participate in the Jefferson-Pilot Corporation defined
benefit pension plans covering substantially all Company employees. The plans
are noncontributory and are funded through group annuity contracts issued by
Jefferson-Pilot Life Insurance Company, an affiliate. The assets of the plans
are those of
F-12
<PAGE>
NOTES TO FINANCIAL STATEMENTS--Continued
Jefferson Pilot LifeAmerica Insurance Company
December 31, 1998
8. Pensions--continued
the related contracts, and are primarily held in the separate accounts of
Jefferson-Pilot Life Insurance Company. The plans provide benefits based on
annual compensation and years of service. The funding policy is to contribute
annually no more than the maximum amount deductible for federal income tax
purposes. The plans are administered by JP. Pension costs allocated to the
Company were not significant for the year ended December 31, 1998.
9. Other Postretirement Benefits
The Company provides certain other postretirement benefits, principally health
care and life insurance, to retired employees and their beneficiaries and
covered dependents. Postretirement costs of the Company that were allocated
from JP were not significant for the year ended December 31, 1998.
10. Reinsurance
The Company attempts to reduce its exposure to significant individual claims by
reinsuring portions of certain life insurance contracts written. The Company's
assumed reinsurance activity is primarily with Jefferson Pilot Financial
Insurance Company. The treaty with Jefferson Pilot Financial Insurance Company
was terminated on September 30, 1998 (see note 7.) The maximum amount of
individual life insurance retained on any one life, including accidental death
benefits, is $1.5 million.
The effect of reinsurance on the premiums and policy charges in the statement
of income for the year ended December 31, 1998 was as follows (in thousands):
<TABLE>
<CAPTION>
Ceded to Assumed
Direct Other from Other
Amount Companies Companies Net Amount
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Total premiums and policy charges ......... $18,678 $1,710 $21,009 $37,977
======= ====== ======= =======
</TABLE>
Reinsurance recoveries which have been deducted from benefits and expenses in
the statement of income for the Company were $2.8 million.
Reinsurance contracts do not relieve the Company from its primary obligation to
policyholders. Therefore, the failure of a reinsurer to discharge its
reinsurance obligations could result in a loss to the Company. The Company
regularly evaluates the financial condition of its reinsurers and monitors
concentrations of credit risk related to reinsurance activities. No significant
credit losses resulted from the Company's reinsurance activities during the
year ended December 31, 1998.
11. Statutory Financial Information
The Company prepares financial statements on the basis of statutory accounting
practices (SAP) prescribed or permitted by the New Jersey Department of
Insurance. Prescribed SAP include a variety of publications of the National
Association of Insurance Commissioners (NAIC) as well as state laws,
regulations and administrative rules. Permitted SAP encompass all accounting
practices not so prescribed. The impact of permitted accounting practices on
statutory capital and surplus is not significant for the Company.
The principal differences between SAP and generally accepted accounting
principles (GAAP) as they relate to the financial statements of the Company are
(1) policy acquisition costs are expensed as incurred under SAP, whereas they
are deferred and amortized under GAAP, (2) amounts collected from holders of
universal life-type and investment products are recognized as premiums when
collected under SAP, but are initially recorded as contract deposits under
GAAP, with cost of insurance recognized as revenue when assessed and other
contract charges recognized over the periods for which services are provided,
(3) the classification and carrying amounts of investments in certain
securities are different under SAP than under GAAP, (4) the criteria for
providing asset valuation allowances, and the methodologies used to determine
the amounts thereof, are
F-13
<PAGE>
NOTES TO FINANCIAL STATEMENTS--Continued
Jefferson Pilot LifeAmerica Insurance Company
December 31, 1998
11. Statutory Financial Information--continued
different under SAP than under GAAP, (5) the timing of establishing certain
reserves, and the methodologies used to determine the amounts thereof, are
different under SAP than under GAAP, (6) no provision is made for deferred
income taxes under SAP, and (7) certain assets are not admitted for purposes of
determining surplus under SAP.
Reported capital and surplus on a statutory basis at December 31, 1998 was
$92.4 million. Reported statutory net income for the year ended December 31,
1998 was $62.4 million. Purchase accounting adjustments are not made for
statutory purposes.
The amount of GAAP equity in excess of statutory surplus is unavailable for
distribution. In addition, various state insurance laws restrict the Company as
to the amount of dividends from statutory surplus it may pay without the prior
approval of regulatory authorities. The restrictions generally are based on net
gains from operations and on certain levels of surplus as determined in
accordance with statutory accounting practices. Dividends in excess of such
thresholds are considered "extraordinary" and require prior regulatory approval.
Risk-Based Capital ("RBC") requirements promulgated by the NAIC require life
insurers to maintain minimum capitalization levels that are determined based on
formulas incorporating credit risk pertaining to its investments, insurance
risk, interest rate risk and general business risk. As of December 31, 1998,
the Company's adjusted capital and surplus exceeded its authorized control
level RBC.
The NAIC Codification of Statutory Accounting Principles (Codification) has
been completed. The purpose of Codification is to create uniformity in
statutory financial reporting across states. Codification must be adopted by
individual states before it will have any bearing on the statutory reporting
requirements of companies domiciled in a particular state. The NAIC is
encouraging the states to adopt Codification as soon as possible, with an
implementation date of January 1, 2001. The Company does not expect
implementation to have a material impact on its statutory surplus; however,
implementation is expected to result in a net reduction of statutory surplus
and RBC throughout the insurance industry.
12. Fair Values of Financial Instruments
Fair values of financial instruments are based on quoted market prices where
available. Fair values of financial instruments for which quoted market prices
are not available are based on estimates using present value or other valuation
techniques. Those techniques are significantly affected by the assumptions
used, including the discount rates and the estimates of future cash flows.
Certain financial instruments, particularly insurance contracts, are excluded
from fair value disclosure requirements.
The methods and assumptions used to estimate the fair value of certain
financial instruments are as follows:
[diamond] Fair values of debt securities with active markets are based on quoted
market prices. For debt securities that trade in less active markets,
fair values are obtained from independent pricing services. Fair
values of debt securities are principally a function of current
interest rates.
[diamond] Fair values of equity securities are based on quoted market prices.
[diamond] The carrying value of cash and cash equivalents approximates fair
value due to the short maturities of these assets.
[diamond] Fair values of policy loans and mortgage loans are estimated using
discounted cash flow analyses and approximate carrying values.
[diamond] Fair values of separate account assets and liabilities are reflected
in the balance sheet.
F-14
<PAGE>
NOTES TO FINANCIAL STATEMENTS--Continued
Jefferson Pilot LifeAmerica Insurance Company
December 31, 1998
12. Fair Values of Financial Instruments--continued
The carrying value and fair value of financial instruments at December 31,
1998, were as follows:
<TABLE>
<CAPTION>
Carrying Fair
Value Value
---------- -----------
(In thousands)
<S> <C> <C>
Financial Assets
Debt securities available-for-sale ........... $452,344 $452,344
Equity securities available-for-sale ......... 1,364 1,364
Cash and cash equivalents .................... 5,232 5,232
Policy loans ................................. 24,762 29,899
Mortgage loans on real estate ................ 7,097 7,359
</TABLE>
13. Commitments and Contingent Liabilities
The Company leases electronic data processing equipment and field office space
under noncancelable operating lease agreements. The lease terms generally range
from three to five years. Neither annual rent nor future rental commitments are
significant.
In the normal course of business, the Company is party to various lawsuits.
Because of the considerable uncertainties that exist, the Company cannot predict
the outcome of pending or future litigation. However, management believes that
the resolution of pending legal proceedings will not have a material adverse
effect on the Company's financial position or results of operation.
14. Other Comprehensive Income
Comprehensive income and its components are displayed in the accompanying
Statement of Stockholder's Equity. Currently, the only element of other
comprehensive income applicable to the Company is changes in unrealized gains
and losses on securities classified as available for sale, which are displayed
in the following table, along with related tax effects. See Note 3 for further
detail of changes in unrealized gains on securities available-for-sale, for the
year ended December 31, 1998 (in thousands):
<TABLE>
<S> <C>
Unrealized holding gains arising during period, before taxes ......... $ 4,872
Income taxes ......................................................... (1,705)
--------
Unrealized holding gains arising during period, net of taxes ......... 3,167
--------
Less: reclassification adjustment:
Gains realized in net income, before taxes .......................... 2,920
Income taxes ......................................................... (1,022)
--------
Reclassification adjustment for gains realized in net income ......... 1,898
--------
Other comprehensive income--net unrealized gains on securities ....... $ 1,269
========
</TABLE>
15. Year 2000 Conversion Costs (Unaudited)
The Company's administrative and financial reporting systems are shared among
numerous insurance affiliates within the consolidated Jefferson-Pilot
Corporation group (JP).
Like most if not all companies, JP faces certain risks associated with the
coming of the year 2000. The Year 2000 issue relates to the way computer
systems and programs define calendar dates. By using only two digit dates, they
could fail or make miscalculations due to the inability to distinguish between
dates in the 1900's and in the 2000's. Also, many systems and equipment that
are not typically thought of as "computer-related"(referred to as "non-IT")
contain embedded hardware or software that must handle dates and may not
properly perform with dates after 1999.
JP began work on the Year 2000 compliance issue in 1995. The scope of the
project includes: ensuring the compliance of all applications, operating systems
and hardware on mainframe, PC and LAN
F-15
<PAGE>
NOTES TO FINANCIAL STATEMENTS--Continued
Jefferson Pilot LifeAmerica Insurance Company
December 31, 1998
15. Year 2000 Conversion Costs (Unaudited) (continued)
platforms; addressing issues related to non-IT embedded software and equipment;
and addressing the compliance of key vendors and service providers to JP
(business partners).
The project has four phases: assessment of systems and equipment affected by
the Year 2000 issue; definition of strategies to address affected systems and
equipment; remediation of affected systems and equipment; and certification
that each is Year 2000 compliant. To certify that all IT systems (internally
developed or purchased) are Year 2000 compliant, each system is tested using a
standard testing methodology which includes regression testing, millennium
testing, millennium leap year testing and cross over year testing.
Certification testing is performed on each system as soon as remediation is
completed.
The target for completion of all phases and categories is September 30, 1999.
JP has completed the assessment and strategy phases for mainframe applications,
operating systems and hardware and is executing the remediation and
certification phases. JP's new business and policyholder administration systems
and the general ledger are on the mainframe. JP has determined that
approximately 62% of all mainframe systems are compliant. JP does not deem a
system to be compliant until the completion of remediation and certification to
confirm that its performance will not be affected by dates extending after
1999. With respect to significant policyholder systems, all required
remediation has been completed on all systems. The majority of these systems,
including all systems which support products JP is currently marketing, have
been certified as Year 2000 compliant. Completion of certification of remaining
systems for some closed blocks of business is expected by April 1999. Other
non-policyholder mainframe systems have either been certified or are on
schedule. For PC and LAN systems, JP has completed the strategy phases and is
executing the assessment, remediation and certification phases concurrently and
intends to complete these phases during the third quarter of 1999.
For the majority of JP's non-IT related systems and equipment, JP has been
advised by vendors that the systems and equipment are currently Year 2000
compliant. Written documentation regarding compliance is being obtained. Where
feasible, certification testing will be conducted for systems and equipment
that are material to operations. Some systems and equipment, such as electrical
power supply, are not feasible for JP to certify. Completion for non-IT systems
and equipment is scheduled for September 1999.
The most significant category of key business partners is financial
institutions. Their critical functions include safeguarding and managing
investment portfolios, processing of JP's operating bank accounts, and sales/
distribution. All of JP's business partner financial institutions that have
responded to JP's inquiries have indicated they are on schedule for Year 2000
compliance. JP continues to follow up with business partner financial
institutions that have not yet responded. Other partner categories include
insurance agents and marketing organizations, and suppliers of communication
services, utilities, materials and supplies. JP has conducted surveys of all
its software and hardware vendors, and certification is underway. In addition
to financial institutions, other critical business partners have been
identified and surveys initiated. Results of these surveys are being analyzed
in the first quarter of 1999 and appropriate testing or other due diligence
will be conducted in the second and third quarters of 1999.
JP has not had an independent review of its Year 2000 risks or estimates.
However, experts have been engaged to assist in developing estimates and to
complete remediation work on specific portions of the project.
Since inception of the project, JP has incurred external costs of $7 million
and internal costs of $7 million. The current estimate, based on actual
experience to date, of total project expense is $24 million, with remaining
external costs of $5 million and internal costs of $5 million. Costs are
included in various budgets and expensed as incurred. Expected total costs are
less than earlier estimates due in part to refinements in estimates as more
projects near completion. In addition, remediation/certification costs on
projects completed to
F-16
<PAGE>
NOTES TO FINANCIAL STATEMENTS--Continued
Jefferson Pilot LifeAmerica Insurance Company
December 31, 1998
15. Year 2000 Conversion Costs (Unaudited) (continued)
date have been lower than originally estimated. Total 1998 costs were $8
million. There has not been a material adverse impact on JP's operations as a
result of IT projects being deferred due to resource constraints caused by the
Year 2000 project.
JP has investments in publicly and privately placed securities and loans. JP
may be exposed to credit risk to the extent that related borrowers are
materially adversely impacted by the Year 2000 issue. Portfolio diversification
reduces the overall risk. JP is in compliance with the NAIC Securities
Valuation Office's Due Diligence Guidelines for analyzing these risks.
Although JP expects to certify that its critical policyholder systems are
compliant by the end of April 1999, there is no guarantee that these results
will be achieved. Specific factors that give rise to this uncertainty include a
possible loss of technical resources to perform the work (not yet encountered),
failure to identify all susceptible systems, non-compliance by third parties
whose systems and operations impact JP, and other similar uncertainties.
Specifically, from Year 2000 problems, JP could experience an interruption in
its ability to collect and process premiums, process claim payments, safeguard
and manage its invested assets and operating cash accounts, accurately maintain
policyholder information, accurately maintain accounting records, issue new
policies and/or perform adequate customer service.
While JP believes the occurrence of such a situation is unlikely, a possible
worst case scenario might include one or more of JP's significant policyholder
systems being non-compliant. Such an event could result in a material disruption
to JP's operations. Should the worst case scenario occur it could, depending on
its duration, have a material impact on JP's results of operations and liquidity
and ultimately on its financial position. Although JP is on schedule to complete
certification of all internal systems and non-IT equipment well in advance of
January 1, 2000, JP recognizes the need to plan for unanticipated problems
resulting from failure of internal systems or equipment or from failures by JP's
business partners, providers, suppliers or other critical third parties. JP has
begun work on contingency plans for all mission critical functions.
F-17
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Contractholders of JPF Separate Account B
JPF Separate Account B
The Board of Directors, JPF Separate Account B
We have audited the accompanying statement of assets and liabilities of JPF
Separate Account B as of December 31, 1998, and the related statement of
operations and the statement of changes in net assets for the year then ended.
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 audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1998, by correspondence with
the fund managers. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statments referred to above present fairly, in all
material respects, the financial position of JPF Separate Account B at December
31, 1998, and the results of its operations and the changes in its net assets
for the year then ended, in conformity with generally accepted accounting
principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
April 9, 1999
F-18
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
JPF SEPARATE ACCOUNT B
December 31, 1998
<TABLE>
<CAPTION>
World
Growth Emerging Templeton International
Stock Growth International Equity
Division Division Division Division
------------ ------------ --------------- ---------------
<S> <C> <C> <C> <C>
ASSETS
Investments at cost .............. $ 8,072 $ 13,635 $ 2,345 $ 8,777
======== ======== ======== ========
Investments at market value ...... $ 7,587 $ 15,000 $ 2,440 $ 9,044
Accrued investment income ........ 643 73 -- 31
-------- -------- -------- --------
TOTAL NET ASSETS ............. $ 8,230 $ 15,073 $ 2,440 $ 9,075
======== ======== ======== ========
UNITS OUTSTANDING ................ 737 1,297 217 793
NET ASSET VALUE PER UNIT ......... $ 11.165 $ 11.625 $ 11.268 $ 11.443
<CAPTION>
High Yield Small Oppenheimer MFS
Growth Bond Company Bond Research
Division Division Division Division Division
------------ ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments at cost .............. $ 520 $ 14,978 $ 8,437 $ 251 $ 4,115
======== ======== ======== ======== ========
Investments at market value ...... $ 640 $ 14,884 $ 7,862 $ 258 $ 4,183
Accrued investment income ........ -- 944 776 -- --
-------- -------- -------- -------- --------
TOTAL NET ASSETS ............. $ 640 $ 15,828 $ 8,638 $ 258 $ 4,183
======== ======== ======== ======== ========
UNITS OUTSTANDING ................ 52 1,496 769 25 368
NET ASSET VALUE PER UNIT ......... $ 12.311 $ 10.578 $ 11.236 $ 10.208 $ 11.368
</TABLE>
See notes to financial statements.
F-19
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES--(Continued)
JPF SEPARATE ACCOUNT B
December 31, 1998
<TABLE>
<CAPTION>
Oppenheimer
MFS Growth & Strategic Capital
Utilities Income Bond Growth
Division Division Division Division
----------- --------------- --------------- ------------
<S> <C> <C> <C> <C>
ASSETS
Investments at cost ............. $ 4,212 $ 6,614 $ 6,176 $ 8,611
======== =========== =========== ========
Investments at market value ..... $ 4,256 $ 6,899 $ 6,265 $ 8,827
Accrued investment income ....... -- 54 -- 454
-------- ----------- ----------- --------
TOTAL NET ASSETS ............ $ 4,256 $ 6,953 $ 6,265 $ 9,281
======== =========== =========== ========
UNITS OUTSTANDING ............... 413 612 614 810
NET ASSET VALUE PER UNIT ........ $ 10.312 $ 11.362 $ 10.198 $ 11.458
<CAPTION>
Fidelity
Fidelity VIP Equity Fidelity Fideltiy
VIP Growth Income Balanced Contrafund Index 500
Division Division Division Division Division
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments at cost ............. $ 22,363 $ 14,961 $ 3,025 $ 842 $ 60,739
======== ======== ======== ======== ========
Investments at market value ..... $ 25,325 $ 16,501 $ 2,874 $ 941 $ 66,332
Accrued investment income ....... -- -- 253 -- --
-------- -------- -------- -------- --------
TOTAL NET ASSETS ............ $ 25,325 $ 16,501 $ 3,127 $ 941 $ 66,332
======== ======== ======== ======== ========
UNITS OUTSTANDING ............... 2,182 1,415 268 78 5,641
NET ASSET VALUE PER UNIT ........ $ 11.606 $ 11.666 $ 11.666 $ 12.045 $ 11.758
</TABLE>
See notes to financial statements.
F-20
<PAGE>
STATEMENTS OF OPERATIONS
JPF SEPARATE ACCOUNT B
December 31, 1998
<TABLE>
<CAPTION>
World
Growth Emerging Templeton International
Stock Growth International Equity
Division Division Division Division
-------------- ------------- --------------- ---------------
For For For For
the period the period the period the period
September 10 August 10 September 30 October 23
through through through through
December 31 December 31 December 31 December 31
1998 1998 1998 1998
-------------- ------------- --------------- ---------------
<S> <C> <C> <C> <C>
Investment Income:
Dividend income ..................... $ 163 $ -- $ -- $ --
Distributions of realized gains ..... 480 73 -- 31
------- ------ ---- ----
Net Investment Income ............. 643 73 -- 31
Gain (loss) on investments:
Net realized gain on investments..... 3 6 504 1
Change in net unrealized gain
(loss) on investments .............. (485) 1,365 95 266
------- ------ ---- ----
Net gain (loss) on investments ...... (482) 1,371 599 267
------- ------ ---- ----
Increase in Net Assets from
Operations ....................... $ 161 $1,444 $599 $298
------- ------ ---- ----
<CAPTION>
High Yield Small Oppenheimer MFS
Growth Bond Company Bond Research
Division Division Division Division Division
-------------- ------------- -------------- ------------- ------------
For For For For For
the period the period the period the period the period
September 30 October 7 September 10 November 3 November 3
through through through through through
December 31 December 31 December 31 December 31 December 31
1998 1998 1998 1998 1998
-------------- ------------- -------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Investment Income:
Dividend income ..................... $ -- $ 944 $ 91 $-- $--
Distributions of realized gains ..... -- -- 685 -- --
---- ----- ------- --- ---
Net Investment Income ............. -- 944 776 -- --
Gain (loss) on investments:
Net realized gain on investments..... 3 2 5 -- 1
Change in net unrealized gain
(loss) on investments .............. 120 (96) (575) 5 68
---- ----- ------- --- ---
Net gain (loss) on investments ...... 123 (94) (570) 5 69
---- ----- ------- --- ---
Increase in Net Assets from
Operations ....................... $123 $ 850 $ 206 $ 5 $69
---- ----- ------- --- ---
</TABLE>
See notes to financial statements.
F-21
<PAGE>
STATEMENTS OF OPERATIONS--(Continued)
JPF SEPARATE ACCOUNT B
December 31, 1998
<TABLE>
<CAPTION>
Oppenheimer
MFS Growth & Strategic Capital
Utilities Income Bond Growth
Division Division Division Division
------------- -------------- -------------- -------------
For For For For
the period the period the period the period
December 9 September 29 September 30 August 10
through through through through
December 31 December 31 December 31 December 31
1998 1998 1998 1998
------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
Investment Income:
Dividend income ..................... $-- $ 54 $-- $ --
Distributions of realized gains ..... -- -- -- 454
--- ---- --- ----
Net Investment Income ............. -- 54 -- 454
Gain (loss) on investments:
Net realized gain on investments..... -- 15 -- 12
Change in net unrealized gain
(loss) on investments .............. 44 285 89 216
--- ---- --- ----
Net gain (loss) on investments ...... 44 300 89 228
--- ---- --- ----
Increase in Net Assets from
Operations ....................... $44 $354 $89 $682
=== ==== === ====
<CAPTION>
Fidelity
Fidelity VIP Equity Fidelity Fideltiy
VIP Growth Income Balanced Contrafund Index 500
Division Division Division Division Division
------------- -------------- -------------- -------------- -------------
For For For For For
the period the period the period the period the period
August 10 September 10 September 10 September 29 September 29
through through through through through
December 31 December 31 December 31 December 31 December 31
1998 1998 1998 1998 1998
------------- -------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Investment Income:
Dividend income ..................... $ -- $ -- $ 53 $ -- $ --
Distributions of realized gains ..... -- -- 200 -- --
------ ------ ------- ---- ------
Net Investment Income ............. -- -- 253 -- --
Gain (loss) on investments:
Net realized gain on investments..... 13 44 3 2 56
Change in net unrealized gain
(loss) on investments .............. 2,962 1,540 (151) 99 5,593
------ ------ ------- ---- ------
Net gain (loss) on investments ...... 2,975 1,584 (148) 101 5,649
------ ------ ------- ---- ------
Increase in Net Assets from
Operations ....................... $2,975 $1,584 $ 105 $101 $5,649
====== ====== ======= ==== ======
</TABLE>
See notes to financial statements.
F-22
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
JPF SEPARATE ACCOUNT B
December 31, 1998
<TABLE>
<CAPTION>
World
Growth Emerging Templeton International
Stock Growth International Equity
Division Division Division Division
-------------- ------------- --------------- ---------------
For For For For
the period the period the period the period
September 10 August 10 September 30 October 23
through through through through
December 31 December 31 December 31 December 31
1998 1998 1998 1998
-------------- ------------- --------------- ---------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS
Operations:
Net investment income ................... $ 643 $ 73 $ -- $ 31
Net realized gain on investments......... 3 6 504 1
Change in net unrealized gain
(loss) on investments .................. (485) 1,365 95 266
------ ------- ---------- ------
Increase in net assets from operations..... 161 1,444 599 298
Contractholder transactions--Note F:
Transfers of net premiums ............... 225 182 13,281 304
Transfers from/to General
Account and within Separate
Account, net ........................... 7,978 13,671 (12,085) 8,530
Transfers of cost of insurance .......... (154) (216) (477) (99)
Transfers on account of other
terminations ........................... 20 (8) 1,122 42
------ --------- ---------- ------
Net increase in net assets derived
from contractholder transactions ......... 8,069 13,629 1,841 8,777
Net increase in net assets ................ 8,230 15,073 2,440 9,075
------ -------- ---------- ------
Balance at beginning of year .............. -- -- -- --
------ -------- ---------- ------
Balance at end of year .................... $8,230 $15,073 $ 2,440 $9,075
====== ======== ========== ======
<CAPTION>
High Yield Small Oppenheimer MFS
Growth Bond Company Bond Research
Division Division Division Division Division
-------------- ------------- -------------- ------------- ------------
For For For For For
the period the period the period the period the period
September 30 October 7 September 10 November 3 November 3
through through through through through
December 31 December 31 December 31 December 31 December 31
1998 1998 1998 1998 1998
-------------- ------------- -------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
INCREASE IN NET ASSETS
Operations:
Net investment income ................... $ -- $ 944 $ 776 $ -- $ --
Net realized gain on investments......... 3 2 5 -- 1
Change in net unrealized gain
(loss) on investments .................. 120 (96) (575) 5 68
----- ------- ------ ----- ------
Increase in net assets from operations..... 123 850 206 5 69
Contractholder transactions--Note F:
Transfers of net premiums ............... -- 147 225 314 304
Transfers from/to General
Account and within Separate
Account, net ........................... 558 14,929 8,258 -- 3,818
Transfers of cost of insurance .......... (41) (80) (88) (61) (48)
Transfers on account of other
terminations ........................... -- (18) 37 -- 40
----- ------- ------ ----- ------
Net increase in net assets derived
from contractholder transactions ......... 517 14,978 8,432 253 4,114
Net increase in net assets ................ 640 15,828 8,638 258 4,183
----- ------- ------ ----- ------
Balance at beginning of year .............. -- -- -- -- --
----- ------- ------ ----- ------
Balance at end of year .................... $ 640 $15,828 $8,638 $ 258 $4,183
===== ======= ====== ===== ======
</TABLE>
See notes to financial statements.
F-23
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS--(Continued)
JPF SEPARATE ACCOUNT B
December 31, 1998
<TABLE>
<CAPTION>
Oppenheimer
MFS Growth & Strategic Capital
Utilities Income Bond Growth
Division Division Division Division
------------- -------------- -------------- -------------
For For For For
the period the period the period the period
December 9 September 29 September 30 August 10
through through through through
December 31 December 31 December 31 December 31
1998 1998 1998 1998
------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE)
IN NET ASSETS
Operations:
Net investment income ................... $ -- $ 54 $ -- $ 454
Net realized gain on investments......... -- 15 -- 12
Change in net unrealized gain
(loss) on investments .................. 44 285 89 216
------ ------ ------ ------
Increase in net assets from operations..... 44 354 89 682
Contractholder transactions--Note F:
Transfers of net premiums ............... 270 299 -- 729
Transfers from/to General
Account and within Separate
Account, net ........................... 3,993 6,603 6,262 8,146
Transfers of cost of insurance .......... (72) (326) (75) (335)
Transfers on account of other
terminations ........................... 21 23 (11) 59
------ ------ ------ ------
Net increase in net assets derived
from contractholder transactions ......... 4,212 6,599 6,176 8,599
Net increase in net assets ................ 4,256 6,953 6,265 9,281
------ ------ ------ ------
Balance at beginning of year .............. -- -- -- --
------ ------ ------ ------
Balance at end of year .................... $4,256 $6,953 $6,265 $9,281
====== ====== ====== ======
<CAPTION>
Fidelity
Fidelity VIP Equity Fidelity Fideltiy
VIP Growth Income Balanced Contrafund Index 500
Division Division Division Division Division
------------- -------------- -------------- -------------- -------------
For For For For For
the period the period the period the period the period
August 10 September 10 September 10 September 29 September 29
through through through through through
December 31 December 31 December 31 December 31 December 31
1998 1998 1998 1998 1998
------------- -------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
INCREASE (DECREASE)
IN NET ASSETS
Operations:
Net investment income ................... $ -- $ -- $ 253 $ -- $ --
Net realized gain on investments......... 13 44 3 2 56
Change in net unrealized gain
(loss) on investments .................. 2,962 1,540 (151) 99 5,593
------- ------- ------ ------- -------
Increase in net assets from operations..... 2,975 1,584 105 101 5,649
Contractholder transactions--Note F:
Transfers of net premiums ............... 13,429 299 -- 267 786
Transfers from/to General
Account and within Separate
Account, net ........................... 7,906 15,107 3,062 667 60,402
Transfers of cost of insurance .......... (485) (527) (40) (141) (993)
Transfers on account of other
terminations ........................... 1,500 38 -- 47 488
------- ------- ------ ------- -------
Net increase in net assets derived
from contractholder transactions ......... 22,350 14,917 3,022 840 60,683
Net increase in net assets ................ 25,325 16,501 3,127 941 66,332
------- ------- ------ ------- -------
Balance at beginning of year .............. -- -- -- -- --
------- ------- ------ ------- -------
Balance at end of year .................... $25,325 $16,501 $3,127 $ 941 $66,332
======= ======= ====== ======= =======
</TABLE>
- -----
(a) Commencement of operations.
See notes to financial statements.
F-24
<PAGE>
NOTES TO FINANCIAL STATEMENTS
JPF SEPARATE ACCOUNT B
December 31, 1998
NOTE A--ORGANIZATION OF ACCOUNT
JPF Separate Account B (the "Separate Account") is a separate account of
Jefferson Pilot LifeAmerica Insurance Company ("JP LifeAmerica"). The Separate
Account is organized as a unit investment trust registered under the Investment
Company Act of 1940 as amended. It was established for the purpose of funding
flexible premium variable life insurance policies issued by JP LifeAmerica. As
of December 31, 1998, the Separate Account is comprised of eighteen investment
divisions, nine of which invest exclusively in corresponding portfolios of the
Jefferson Pilot Variable Fund, Inc., one of which invests in the Templeton
International Fund, four of which invest in certain Fidelity Portfolios, two of
which invest in certain MFS portfolios, and two of which invest in certain
Opppenheimer Portfolios, all diversified Series Investment Companies.
NOTE B--SIGNIFICANT ACCOUNTING POLICIES
Valuation of Investments: Investments in shares of the Fund are valued at the
net asset value per share which is calculated each day the New York Stock
Exchange is open for trading.
Investment Income: Dividend income and distributions of realized gains are
recorded on the ex-dividend date.
Investment Transactions: Purchases and sales of shares of the Fund are recorded
as of the trade date, the date the transaction is executed.
Federal Income Taxes: The operations of the Separate Account are included in
the federal income tax return of JP Financial which is taxed as a life
insurance company under the Internal Revenue Code. Under current law, no
federal income taxes are payable with respect to the Separate Account.
Expenses: A mortality and expense risk charge payable to JP LifeAmerica is
accrued daily which will not exceed .9% of the average net asset value of each
division of the Separate Account on an annual basis
Use of Estimates: The accompanying financial statements of the Separate Account
have been prepared in accordance with generally accepted accounting principles.
The preparation of financial statements requires management to make estimates
that affect amounts reported in the financial statements and accompanying
notes. Such estimates could change in the future as more information becomes
known, which could impact the amounts reported and disclosed herein.
NOTE C--AFFILIATED COMPANY TRANSACTIONS
Administrative services necessary for the operation of the Separate Account are
provided by Jefferson Pilot Service Corporation, an affiliate of JP
LifeAmerica. JP Financial and JP LifeAmerica are the principal underwriters of
the variable insurance contracts that utilize the Separate Account. Jefferson
Pilot Securities Corporation, an affiliate of the Company, is the distributor.
NOTE D--DIVERSIFICATION REQUIREMENTS
Under the provisions of Section 817(h) of the Internal Revenue Code, a variable
life insurance contract will be subject to federal income taxes on the income
earned for any period for which the investments of the segregated assets
account, on which the contract is based, are not adequately diversified. The
Code provides that the "adequately diversified" requirement may be met if the
underlying investments satisfy either a statutory safe harbor test or
diversification requirements set forth in regulations issued by the Secretary
of Treasury.
The Internal Revenue Service has issued regulations under Section 817(h) of the
Code. The Company believes that the segregated asset account satisfies the
current requirements of the regulations, and it intends that the segregated
asset account will continue to meet such requirements.
F-25
<PAGE>
NOTES TO FINANCIAL STATEMENTS--Continued
JPF SEPARATE ACCOUNT B
December 31, 1998
NOTE E--INVESTMENTS
In determining the net realized gain or loss on sales of shares of the Fund,
the cost of shares sold has been determined on an average cost basis. For
federal income tax purposes, the cost of shares owned at December 31, 1998 is
the same as the financial reporting purposes.
Following is a summary of shares of each portfolio of the Fund owned by the
respective divisions of the Separate Account and the related net asset values
at December 31, 1998.
<TABLE>
<CAPTION>
Net Asset
Value
Shares Per Share
-------- ---------------
<S> <C> <C>
World Growth Stock Portfolio 346 $ 21.901634
Emerging Growth Portfolio 651 23.044337
Templeton International Portfolio 118 20.690000
International Equity Portfolio 746 12.124627
Growth Portfolio 49 13.113809
High Yield Bond Portfolio 1,569 9.487880
Small Company Portfolio 485 16.211009
Bond Portfolio 21 12.320000
MFS Research Portfolio 220 19.050000
MFS Utilities Portfolio 215 19.820000
Growth & Income Portfolio 361 19.118335
Oppenheimer Strategic Bond Portfolio 1,224 5.123000
Capital Growth Portfolio 316 27.895088
Fidelity VIP Growth Portfolio 564 44.870000
Fidelity VIP Equity Income Portfolio 649 25.420000
Balanced Portfolio 226 12.714488
Fidelity Contrafund Portfolio 39 24.440000
Fidelity Index 500 Portfolio 470 141.250000
</TABLE>
F-26
<PAGE>
NOTES TO FINANCIAL STATEMENTS--Continued
JPF SEPARATE ACCOUNT B
December 31, 1998
NOTE F--CONTRACTHOLDER TRANSACTIONS
<TABLE>
For the period
September 10 through
December 31, 1998
----------------------
<S> <C> <C>
World Growth Division Units Amount
- --------------------- ----- -------
Issuance of units 755 $ 8,265
Redemptions of units 18 196
----- -------
Net Increase 737 $ 8,069
===== =======
For the period
August 10 through
December 31, 1998
----------------------
Emerging Growth Division Units Amount
----- -------
Issuance of units 1,322 $13,883
Redemptions of units 25 254
----- -------
Net Increase 1,297 $13,629
===== =======
For the period
September 30 through
December 31, 1998
----------------------
Templeton International Division Units Amount
----- -------
Issuance of units 1,547 $16,673
Redemptions of units 1,330 14,832
----- -------
Net Increase (decrease) 217 $ 1,841
===== =======
For the period
October 23 through
December 31, 1998
----------------------
International Equity Division Units Amount
----- -------
Issuance of units 803 $ 8,887
Redemptions of units 10 110
----- -------
Net Increase 793 $ 8,777
===== =======
For the period
September 30 through
December 31, 1998
----------------------
Growth Division Units Amount
----- -------
Issuance of units 56 $ 558
Redemptions of units 4 41
----- -------
Net Increase 52 $ 517
===== =======
For the period
October 7 through
December 31, 1998
----------------------
High Yield Bond Division Units Amount
----- -------
Issuance of units 1,505 $15,068
Redemptions of units 9 90
----- -------
Net Increase 1,496 $14,978
===== =======
</TABLE>
<TABLE>
For the period
September 10 through
December 31, 1998
----------------------
<S> <C> <C>
Small Company Division Units Amount
----- -------
Issuance of units 792 $ 8,670
Redemptions of units 23 238
----- -------
Net Increase 769 $ 8,432
===== =======
For the period
November 3 through
December 31, 1998
----------------------
Oppenheimer Bond Division Units Amount
----- -------
Issuance of units 31 $ 314
Redemptions of units 6 61
----- -------
Net Increase 25 $ 253
===== =======
For the period
November 3 through
December 31, 1998
----------------------
MFS Research Division Units Amount
----- -------
Issuance of units 374 $ 4,173
Redemptions of units 6 59
----- -------
Net Increase (decrease) 368 $ 4,114
===== =======
For the period
December 9 through
December 31, 1998
----------------------
MFS Utilities Division Units Amount
----- -------
Issuance of units 421 $ 4,293
Redemptions of units 8 81
----- -------
Net Increase 413 $ 4,212
===== =======
For the period
September 29 through
December 31, 1998
----------------------
Growth & Income Division Units Amount
----- -------
Issuance of units 654 $ 7,051
Redemptions of units 42 452
----- -------
Net Increase 612 $ 6,599
===== =======
For the period
September 30 through
December 31, 1998
----------------------
Oppenheimer Strategic Bond Units Amount
----- -------
Issuance of units 622 $ 6,251
Redemptions of units 8 75
----- -------
Net Increase 614 $ 6,176
===== =======
</TABLE>
F-27
<PAGE>
NOTES TO FINANCIAL STATEMENTS--Continued
JPF SEPARATE ACCOUNT B
December 31, 1998
NOTE F--CONTRACTHOLDER TRANSACTIONS
<TABLE>
For the period
August 10 through
December 31, 1998
----------------------
<S> <C> <C>
Capital Growth Division Units Amount
----- -------
Issuance of units 855 $ 9,062
Redemptions of units 45 463
------ -------
Net Increase 810 $ 8,599
====== =======
For the period
August 10 through
December 31, 1998
----------------------
Fidelity VIP Growth Division Units Amount
------ -------
Issuance of units 2,245 $23,019
Redemptions of units 63 669
------ -------
Net Increase 2,182 $22,350
====== =======
For the period
September 10 through
December 31, 1998
----------------------
Fidelity VIP Equity Income Division Units Amount
------ -------
Issuance of units 1,475 $15,591
Redemptions of units 60 674
------ -------
Net Increase (decrease) 1,415 $14,917
====== =======
</TABLE>
<TABLE>
<S> <C> <C>
For the period
September 10 through
December 31, 1998
----------------------
Balanced Division Units Amount
------ -------
Issuance of units 278 $ 3,136
Redemptions of units 10 114
------ -------
Net Increase 268 $ 3,022
====== =======
For the period
September 29 through
December 31, 1998
----------------------
Fidelity Contrafund Divison Units Amount
------ -------
Issuance of units 102 $ 1,144
Redemptions of units 24 304
------ -------
Net Increase 78 $ 840
====== =======
For the period
September 29 through
December 31, 1998
----------------------
Fideltiy Index 500 Division Units Amount
------ -------
Issuance of units 5,746 $61,857
Redemptions of units 105 1,174
------ -------
Net Increase 5,641 $60,683
====== =======
</TABLE>
NOTE G--YEAR 2000 ASSESSMENT (UNAUDITED)
The Company recognizes the need to ensure that its operations will not be
adversely impacted by the Year 2000 systems failures. Year 2000 issues arise
because some computer software and hardware (systems) were designed to handle
only a two digit year, not a four digit year. By using two digits, they could
fail or make miscalculations due to the inability to distinguish between dates
in the 1900's and in the 2000's.
In order to minimize the impact of the year 2000 on the Company,
Jefferson-Pilot Corporation developed a centralized oversight and project
management process to facilitate the planning and conversion of all information
systems on behalf of the Company and its affiliates. The scope of the project
includes an assessment of the Company's material systems currently in place,
modification, testing and implementation of such systems as required, inquiry
to third-party providers with whom the Company has material business
relationships as to the state of their readiness, and the development of a
contingency plan in the event that material Year 2000 issues arise.
The target for completing all phases is September 30, 1999. The Company has
completed its assessment and modification phases of its plan and is actively
testing its systems and communicating with its business partners to assess
these companies' readiness. Although management does not anticipate a material
effect on its business operation as a result of the Year 2000 computer systems
issues, the Company is in the process of developing a contingency plan in the
event that material Year 2000 issues arise in the Company or third-party
computer systems.
F-28
<PAGE>
This Page Intentionally Left Blank
<PAGE>
This Page Intentionally Left Blank
<PAGE>
PART II
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore, or hereafter duly adopted pursuant to
authority conferred in that section.
UNDERTAKING REGARDING INDEMNIFICATION
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expense incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer of controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
REPRESENTATIONS REGARDING FEES AND CHARGES
The fees and charges deducted under the contract, in the aggregate, are
reasonable in relation to the services rendered, the expenses expected to be
incurred, and the risks assumed by Jefferson Pilot LifeAmerica Insurance
Company.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The cover sheet.
The Prospectus consisting of 62 pages.
The undertaking to file reports.
The undertaking pursuant to Rule 485(b)(1) under the Securities Act of
1933.
The representations regarding fees and charges.
The signatures.
Written consent
Ernst & Young LLP, contained in Exhibit 7 below.
The following exhibits:
<PAGE>
1. The following exhibits correspond to those required by paragraph A of
the instructions as to exhibits in Form N-8B-2:
(a) Certified Copy of Resolution of Board of Directors of Chubb Colonial
Life Insurance Company, adopted at a meeting held on March 2, 1994 (in lieu of
indenture or trust creating unit investment trust), (incorporated by reference
to Exhibit 1(a) of Effective Amendment No. 2 of the Registration Statement on
Form S-6 of Colonial Separate Account B, filed on April 22, 1996, Registration
No. 33-77496).
(b) Not applicable.
(c)(i) Form of Underwriting Agreement among Chubb Colonial Life Insurance
Company, Chubb Colonial Separate Account B and Chubb Securities Corporation
(incorporated by reference to Exhibit 1(c)(i) of Post-Effective Amendment No. 2
to the Registration Statement on Form S-6 of Colonial Separate Account B, filed
April 22, 1996, Registration No. 33-77496).
(ii) Specimen District Manager's Agreement between Chubb Securities
Corporation (incorporated by reference to Exhibit 1(c)(ii) of Post-Effective
Amendment No. 2 of the Registration Statement on Form S-6 of Colonial Separate
Account B, filed on April 22, 1996, Registration No. 33-77496).
(iii) Specimen Sales Representative's Agreement of Chubb Securities
Corporation (incorporated by reference to Exhibit 1(c)(iii) of Post-Effective
Amendment No. 2 of the Registration Statement on Form S-6 of Colonial Separate
Account B, filed on April 22, 1996, Registration No. 33-77496).
(iv) Schedule of Commissions (incorporated by reference to Exhibit 1(c)(iv)
of Post-Effective Amendment No. 2 of the Registration Statement on Form S-6 of
Colonial Separate Account B, filed on April 22, 1996, Registration No.
33-77496).
(d) Not applicable.
(e) (i) Specimen Policy (incorporated by reference to Exhibit 1(e)(i) of
Post-Effective Amendment No. 2 of the Registration Statement on Form S-6 of
Colonial Separate Account B, filed on April 22, 1996, Registration No.
33-77496).
(ii) Form of Riders (incorporated by reference to Exhibit 1(e)(ii) of
Post-Effective Amendment No. 2 of the Registration Statement on Form S-6 of
Colonial Separate Account B, filed April 22, 1996, Registration No. 33-77496).
(f)(i) Amended and Restated Charter (with all amendments) of Chubb Colonial
Life Insurance Company (incorporated by reference to Exhibit 1(f)(i) of
Post-Effective Amendment No. 2 of the Registration Statement on Form S-6 of
Colonial Separate Account B, filed on April 22, 1996, Registration No.
33-77496).
(ii) By-Laws of Chubb Colonial Life Insurance Company (incorporated by
reference to Exhibit 1(f)(ii) of Post Effective Amendment No. 2 of the
Registration Statement on Form S-6 of Colonial Separate Account B, filed on
April 22, 1996, Registration No. 33-77496).
(g) Not applicable.
<PAGE>
(h)(i) Fund Distribution Agreement between Chubb America Fund, Inc., and
Chubb Securities Corporation (incorporated by reference to Exhibit 6(b) of
Post-Effective Amendment No. 7 to Form N-1A of Chubb America Fund, Inc., filed
on April 11, 1990, Registration No. 2-94479).
(ii) Amendment to Fund Distribution Agreement between Chubb America Fund,
Inc. and Shubb Securities Corporation (incorporated by reference to Exhibit 6(a)
of Post-Effective Amendment No. 7 to Form N-1A of Chubb America Fund, Inc.,
filed on April 11, 1990, Registration No. 2-94479).
(iii) Amended and Restated Investment Management Agreement between Chubb
America Fund, Inc., and Chubb Investment Advisory Corporation (incorporated by
reference to Exhibit 5(a) of Post-Effective Amendment No. 7 to Form N-1A of
Chubb America Fund, Inc., filed on April 11, 1990, Registration No. 2-94479).
(iv) Sub-Investment Management Agreement by, between and among Chubb
America Fund, Inc., Chubb Investment Advisory Corporation and Templeton,
Galbraith & Hansberger Ltd. (incorporated by reference to Exhibit 5(e) of
Post-Effective Amendment No. 11 to Form N-1A of Chubb America Fund, Inc., filed
April 14, 1993, Registration No. 2-94479).
(vii) Sub-Investment Management Agreement by, between and among Chubb
America Fund, Inc., Chubb Investment Advisory Corporation and Van Eck Associates
Corporation (incorporated by reference to Exhibit 5(f) of Post-Effective
Amendment No. 7 to Form N-1A of Chubb America Fund, Inc., filed on April 11,
1990, Registration No. 2-94479).
(viii) Sub-Investment Management Agreement by, between and among Chubb
America Fund, Inc., Chubb Investment Advisory Corporation and Chubb Asset
Managers, Inc. (incorporated by reference to Exhibit 5(e) of Post-Effective
Amendment No. 7 to Form N-1A of Chubb America Fund, Inc., filed on April 11,
1990, Registration No. 2-94479).
(ix) Sub-Investment Management Agreement among Chubb America Fund, Inc.,
Chubb Investment Advisory Corporation and Pioneering Management Corporation
(incorporated by reference to Exhibit 5(g) of Post-Effective Amendment No. 7 to
Form N-1A of Chubb America Fund, Inc., filed on April 11, 1990, Registration No.
2-94479).
(x) Sub-Investment Management Agreement by, between and among Chubb America
Fund, Inc., Chubb Investment Advisory Corporation and Chubb Asset Managers, Inc.
(incorporated by reference to Exhibit 5(h) of Post-Effective Amendment No. 9 to
Form N-1A of Chubb America Fund, Inc., filed February 28, 1992, Registration No.
2-94479).
(xi) Custodian Agreement between Chubb America Fund, Inc., and Citibank,
N.A. (incorporated by reference to Exhibit 8 of Post-Effective Amendment No. 8
to Form N-1A of Chubb America Fund, Inc., filed on February 21, 1991,
Registration No. 2-94479).
(xii) Amendment to the Custodial Services Agreement between Chubb America
Fund, Inc. and Citibank, N.A. (incorporated by reference to Exhibit 8(b) of
Post-Effective Amendment No. 11 to Form N-1A of Chubb America Fund, Inc. filed
on April 14, 1993, Registration No. 2-94479).
<PAGE>
(xiii) Amendment No. 2 to Custodial Services Agreement between Chubb
America Fund, Inc. and Citibank, N.A. (incorporated by reference to Exhibit 8(c)
of Post-Effective Amendment No. 11 to Form N-1A of Chubb America Fund, Inc.
filed on April 14, 1993, Registration No. 2-94479).
(xiv) Investment Management Agreement between Chubb America Fund, Inc. and
Chubb Investment Advisory Corporation for the Growth and Income Portfolio
(incorporated by reference to Exhibit 5(i) of Post-Effective Amendment No. 9 to
Form N-1A of Chubb America Fund, Inc. filed on February 28, 1992, Registration
No. 2-94479).
(xv) Investment Management Agreement between Chubb America Fund, Inc. and
Chubb Investment Advisory Corporation for the Capital Growth Portfolio
(incorporated by reference to Exhibit 5(j) of Post-Effective Amendment No. 9 to
Form N-1A of Chubb America Fund, Inc. filed on February 28, 1992, Registration
No. 2-94479).
(xvi) Investment Management Agreement between Chubb America Fund, Inc. and
Chubb Investment Advisory Corporation for the Balanced Portfolio (incorporated
by reference to Exhibit 5(k) of Post-Effective Amendment No. 9 to Form N-1A of
Chubb America Fund, Inc. filed on February 28, 1992, Registration No. 2-94479).
(xvii) Sub-Investment Management Agreement by, between and among Chubb
America Fund, Inc., Chubb Investment Advisory Corporation and Chubb Asset
Managers, Inc. (incorporated by reference to Exhibit 5(l) of Post-Effective
Amendment No. 11 to Form N-1A of Chubb America Fund, Inc. filed on April 14,
1993, Registration No. 2-94479).
(xviii) Sub-Investment Management Agreement by, between and among Chubb
America Fund, Inc., Chubb Investment Advisory Corporation and Janus Capital
Corporation (incorporated by reference to Exhibit 5(m) of Post-Effective
Amendment No. 11 to Form N-1A of Chubb America Fund, Inc. filed on April 14,
1993, Registration No. 2-94479).
(xix) Sub-Investment Management Agreement by, between and among Chubb
America Fund, Inc., Chubb Investment Advisory Corporation and Phoenix Investment
Counsel, Inc. (incorporated by reference to Exhibit 5(n) of Post-Effective
Amendment No. 11 to Form N-1A of Chubb America Fund, Inc. filed on April 14,
1993, Registration No. 2-94479).
(xix) Form of Investment Management Agreement between Chubb America Fund,
Inc. and Chubb Investment Advisory Corporation with respect to the Emerging
Growth Portfolio (incorporated by reference to Exhibit 5(p) of Post-Effective
Amendment No. 12 to Form N-1A of Chubb America Fund, Inc. filed on February 14,
1995, Registration No. 2-94479).
(xxi) Form of Sub-Investment Management Agreement between Chubb America
Fund, Inc., Chubb Investment Advisory Corporation and Massachusetts Financial
Services Company with respect to the Emerging Growth Portfolio (Incorporated by
reference to Exhibit 5(q) of Post-Effective Amendment No. 12 to Form N-1A of
Chubb America Fund, Inc. filed on February 14, 1995, Registration No. 2-94479).
(i) Not Applicable.
(j) Application (to be filed by Amendment).
2. Specimen Policy (Same as 1(e)).
3. Opinion and Consent of counsel as to securities being registered.
Incorporated by reference to Exhibit 3 of Post-Effective Amendment No.
3 to the Registration Statement on Form S-6 of Colonial Separate
Account B, filed on December 17, 1996, Registration No. 33-77496.
4. Not applicable.
5. Not applicable.
6. Actuarial opinion and consent of Richard C. Dielensnyder, FSA, MAAA.
(Incorporated by reference to Exhibit 6 of Post-Effective Amendment No.
5 to the Registration Statement on Form S-6 of Colonial Separate
Account B, filed on December 23, 1997, Registration No. 33-77496).
7. Consent of Ernst & Young LLP.
8. Procedures Memorandum, as amended, pursuant to Rule 6e-3(T)(b)(12)(iii)
under the 1940 Act. To be filed by Amendment.
9. Specimen Notice of Right of Withdrawal, pursuant to Rule
6e-3(T)(b)(13)(viii) (Incorporated by reference to Exhibit 9 of
Post-Effective Amendment No. 2 of the Registration Statement on Form
S-6 of Colonial Separate Account B, filed on April 22, 1996,
Registration No. 33-77496.
10. Representations, description and undertakings regarding mortality and
expense risk charge, pursuant to Rule 6e-3(T)(b)(13)(iii)(F)
(Incorporated by reference to Exhibit 10 of Post-Effective Amendment
No. 2 of the Registration Statement on Form S-6 of Colonial Separate
Account B, filed on April 22, 1996, Registration No. 33-77496.
11. (a) Undertaking to Guarantee Obligations of Principal Underwriters,
pursuant to Rule 6e-3(T)(b)(13)(vi) (Incorporated by reference to
Exhibit 11(a) of Post-Effective Amendment No. 2 of the Registration
Statement on Form S-6 of Colonial Separate Account B, filed on April
22, 1996, Registration No. 33-77496.
(b) Statement of Chubb Colonial Life Insurance Company pursuant to Rule
27d-2 under the Investment Company Act of 1940 (Incorporated by
reference to Exhibit 11(b) of Post-Effective Amendment No. 2 of the
Registration Statement on Form S-6 of Colonial Separate Account B,
filed on April 22, 1996, Registration No. 33-77496.
12. Form of Reinsurance Agreement (Incorporated by reference to Exhibit 12
of Post-Effective Amendment No. 2 of the Registration Statement on Form
S-6 of Colonial Separate Account B, filed on April 22, 1996,
Registration No. 33-77496.
13. Not Applicable.
14. Not Applicable.
- ---------------
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant,
JPF Separate Account B, certifies that it meets the requirements of Securities
Act Rule 485(b) for effectiveness of this Post-Effective Amendment No. 7 to the
Registration Statement and, has duly caused this Post-Effective Amendment No.
to the Registration Statement to be signed on its behalf by the undersigned
thereunto duly authorized, and its seal to the hereunto affixed and attested,
all in Concord, New Hampshire on the 29th day of April, 1999.
(SEAL) JPF SEPARATE ACCOUNT B
(Registrant)
JEFFERSON PILOT LIFEAMERICA INSURANCE COMPANY
AMERICA (Depositor)
By: /s/ Charles C. Cornelio
-------------------------------------------
Charles C. Cornelio
Title: Executive Vice President,
-------------------------------------------
ATTEST:
/s/ Ronald Angarella
- -------------------------------
Ronald Angarella
Senior Vice President
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Jefferson Pilot
Financial Insurance Company certifies that it meets the requirements of the
Securities Act Rule 485(b) for effectiveness of this Post-Effective Amendment
No. 7 to the Registration Statement and has duly caused this Post-Effective
Amendment No. 7 to the Registration Statement to be signed on its behalf by the
undersigned thereunto duly authorized, and its seal to be hereunto affixed and
attested, all in Concord, New Hampshire on the 29th day of April, 1999.
[SEAL APPEARS HERE] JEFFERSON PILOT LIFEAMERICA INSURANCE COMPANY
By: /s/ Charles C. Cornelio
--------------------------------------
Charles C. Cornelio
Title: Executive Vice President
------------------------------------
ATTEST:
/s/ Ronald R. Angarella
- --------------------------------
Ronald R. Angarella
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the Registration Statement has been signed below by the following persons in
the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signatures Title Date
<S> <C> <C>
/s/ Dennis R. Glass
- ----------------------------------- Director April 29, 1999
Dennis R. Glass
/s/ Kenneth C. Mlekush
- ----------------------------------- Director April 29, 1999
Kenneth C. Mlekush
/s/ David A. Stonecipher
- ----------------------------------- Director April 29, 1999
David A. Stonecipher
/s/ E. Jay Yelton
- ----------------------------------- Director April 29, 1999
E. Jay Yelton
</TABLE>
<PAGE>
EXHIBIT INDEX
7. Consent of Ernst & Young LLP
Independent Auditors ..........................................
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Independent
Auditors" and to the use of our reports dated February 8, 1999 with respect to
the financial statements of Jefferson Pilot LifeAmerica Insurance Company and
April 9, 1999 with respect to the financial statements of JPF Separate Account B
in Post-Effective Amendment No. 7 to the Registration Statement (Form S-6 No.
33-77496) and related Prospectus for the registration of units of interest in
the JPF Separate Account B under individual flexible premium variable life
insurance policies offered by Jefferson Pilot LifeAmerica Insurance Company.
/s/ ERNST & YOUNG LLP
Greensboro, North Carolina
April 28, 1999
