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VARIFLEX LS
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VARIABLE
ANNUITY
1995
ANNUAL
REPORT
[SBLIC LOGO]
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A LETTER FROM THE PRESIDENT
The key to Security Benefit's record-setting year was our ability to focus
on building value for our policyholders and customers by offering an array of
competitive and innovative products backed by service that we believe is
second-to-none.
We have grown into a diverse financial services organization with $5.7
billion in assets under management and statutory equity exceeding $200 million.
Security Benefit is a leader in the variable annuity and 403(b) market, and
is ranked among the top 25 variable annuity providers in the country, according
to Variable Annuity Research and Data Services (September 30, 1995).
SERVICE, STRENGTH and STABILITY are fundamental to our success, and
distinguish us from our competitors in the financial field.
SERVICE. We use the power of advanced technology to provide our associates
with the necessary tools to deliver fast, accurate, personalized service to our
customers.
STRENGTH. Security Benefit's financial strength is reflected in the
consistently strong ratings we receive from the financial analysts who study our
industry.
STABILITY. Investment strategies have risen and fallen. Products have come
into vogue and gone out just as fast. But we haven't varied from our original
purpose -- to care for and protect others.
In the coming year our focus will continue to be on equity-oriented
products -- variable annuities, mutual funds and variable life insurance. As we
go forward, we will continue to build financial strength and provide service
that exceeds the expectations of our customers.
HOWARD R. FRICKE
Howard R. Fricke
Chairman of the Board,
President and Chief Executive Officer
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BOARD OF DIRECTORS
HOWARD R. FRICKE WILLIAM W. HANNA
Chairman of the Board, President & Chief
President & CEO Operating Officer
The Security Benefit Koch Industries
Group of Companies Wichita, Kansas
Topeka, Kansas
JOHN E. HAYES, JR.
THOMAS R. CLEVENGER Chairman of the Board,
Wichita, Kansas President & CEO
Western Resources, Inc.
SISTER LORETTO MARIE COLWELL Topeka, Kansas
President
St. Francis Hospital and LAIRD G. NOLLER
Medical Center President
Topeka, Kansas Noller Enterprises
Topeka, Kansas
JOHN C. DICUS
Chairman of the Board FRANK SABATINI
Capitol Federal Savings Chairman of the Board
& Loan Association and President
Topeka, Kansas Capital City Bank
Topeka, Kansas
MELANIE S. FRANNIN
President ROBERT C. WHEELER
Kansas - Southwestern President
Bell Telephone Hill's Pet Nutrition, Inc.
Topeka, Kansas Topeka, Kansas
NOTICE OF POLICYOWNERS' MEETING
We encourage you to attend the annual meeting of policyowners to be held on
Tuesday, June 4, 1996 at Security Benefit Life, 700 SW Harrison St., Topeka,
Kansas at 2:00 p.m. Each policyowner is entitled to vote, either in person or by
proxy, on all matters coming before the meeting. Proxies are available from the
corporate secretary and must be returned at least 30 days prior to the annual
meeting.
This report is submitted only for the general information of Security Benefit
Life Variable Annuity contractowners and participants and is not authorized for
distribution to the public.
For More Information Call
1-800-888-2461
[SBLIC LOGO]
700 SW Harrison St., Topeka, Kansas 66636-0001
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Report of Independent Auditors
The Contractowners of Variflex LS
Variable Annuity and The Board of Directors
Security Benefit Life Insurance Company
We have audited the accompanying balance sheet of Variflex LS Variable Annuity
(the Company) as of December 31, 1995, and the related statement of operations
and changes in net assets for the period from April 1, 1995 (inception) to
December 31, 1995. 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 investments owned as of December 31, 1995, by correspondence
with the custodian. 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 Variflex LS Variable Annuity at
December 31, 1995, and the results of its operations and changes in its net
assets for the period from April 1, 1995 (inception) to December 31, 1995, in
conformity with generally accepted accounting principles.
Ernst & Young LLP
February 2, 1996
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VARIFLEX LS VARIABLE ANNUITY
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BALANCE SHEET DECEMBER 31, 1995
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ASSETS (DOLLARS IN THOUSANDS)
Investments:
SBL Fund:
Series A (Growth Series) - 181,865 shares at net asset value of
$21.03 per share (cost, $3,697) $ 3,825
Series B (Growth-Income Series) - 93,134 shares at net asset
value of $33.95 per share (cost, $3,056) 3,162
Series C (Money Market Series) - 242,408 shares at net asset
value of $12.34 per share (cost, $3,013) 2,991
Series D (Worldwide Equity Series) - 259,251 shares at net
asset value of $5.56 per share (cost, $1,404) 1,441
Series E (High Grade Income Series) - 215,945 shares at net
asset value of $12.86 per share (cost, $2,704) 2,777
Series S (Social Awareness Series) - 28,299 shares at net asset
value of $16.49 per share (cost, $450) 467
Series J (Emerging Growth Series) - 98,934 shares at net asset
value of $16.06 per share (cost, $1,582) 1,589
Series K (Global Aggressive Bond Series) - 90,321 shares at
net asset value of $10.22 per share (cost, $916) 923
Series M (Specialized Asset Allocation Series) - 467,214 shares
at net asset value of $10.71 per share (cost, $4,897) 5,004
Series N (Managed Asset Allocation Series) - 229,963 shares
at net asset value of $10.73 per share (cost, $2,402) 2,468
Series O (Equity Income Series) - 265,164 shares at net asset
value of $11.70 per share (cost, $2,883) 3,102
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Total assets $27,749
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NET ASSETS
Net assets are represented by (NOTE 3):
NUMBER
OF UNITS UNIT VALUE
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Growth Series:
Accumulation units 289,693 $13.20 $ 3,825
Growth-Income Series:
Accumulation units 248,974 12.70 3,162
Money Market Series:
Accumulation units 288,907 10.35 2,991
Worldwide Equity Series:
Accumulation units 126,206 11.42 1,441
High Grade Income Series:
Accumulation units 240,306 11.56 2,777
Social Awareness Series:
Accumulation units 37,149 12.56 467
Emerging Growth Series:
Accumulation units 133,581 11.89 1,589
Global Aggressive Bond Series:
Accumulation units 86,477 10.67 923
Specialized Asset Allocation Series:
Accumulation units 471,091 10.62 5,004
Managed Asset Allocation Series:
Accumulation units 231,852 10.64 2,468
Equity Income Series
Accumulation units 267,317 11.61 3,102
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Total net assets $27,749
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SEE ACCOMPANYING NOTES.
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<TABLE>
VARIFLEX LS VARIABLE ANNUITY
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STATEMENT OF OPERATIONS AND
CHANGES IN NET ASSETS PERIOD FROM APRIL 1, 1995 (INCEPTION) TO DECEMBER 31, 1995
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(IN THOUSANDS)
<CAPTION>
HIGH GLOBAL SPECIALIZED MANAGED
GROWTH- MONEY WORLDWIDE GRADE SOCIAL EMERGING AGGRESSIVE ASSET ASSET EQUITY
GROWTH INCOME MARKET EQUITY INCOME AWARENESS GROWTH BOND ALLOCATION ALLOCATION INCOME
SERIES SERIES SERIES SERIES SERIES SERIES SERIES SERIES SERIES SERIES SERIES
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Dividend distributions $ 8 $ 18 $ 55 $ - $ 35 $ 1 $ - $ 42 $ - $ - $ -
Expenses (NOTE 2):
Mortality and expense risk fee (10) (10) (10) (4) (7) (2) (5) (4) (20) (7) (11)
Administrative fee (1) (1) (1) (1) (1) - (1) (1) (2) (1) (1)
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Net investment income (loss) (3) 7 44 (5) 27 (1) (6) 37 (22) (8) (12)
Capital gains distributions 34 - - 6 - - - 4 - - -
Realized gain (loss) on investments 49 55 (33) 15 (4) 16 35 1 92 14 48
Unrealized appreciation
(depreciation) on investments 128 106 (22) 37 73 17 7 7 107 66 219
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Net realized and unrealized
gain (loss) on investments 211 161 (55) 58 69 33 42 12 199 80 267
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Net increase (decrease) in net
assets resulting from operations 208 168 (11) 53 96 32 36 49 177 72 255
Net assets at beginning of - - - - - - - - - - -
period
Variable annuity deposits 3,949 3,079 5,045 1,419 2,894 436 1,769 887 5,116 2,556 2,966
(NOTES 2 AND 3)
Terminations and withdrawals
(NOTES 2 AND 3) (332) (85) (2,043) (31) (213) (1) (216) (13) (289) (160) (119)
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Net assets at end of period $3,825 $3,162 $2,991 $1,441 $2,777 $467 $1,589 $923 $5,004 $2,468 $3,102
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SEE ACCOMPANYING NOTES.
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VARIFLEX LS VARIABLE ANNUITY
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NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION - Variflex LS Variable Annuity (the Account) is a separate
account of Security Benefit Life Insurance Company (SBL). The Account is
registered as a unit investment trust under the Investment Company Act of
1940, as amended. All deposits received by the Account have been invested in
the SBL Fund, a mutual fund not otherwise available to the public. As
directed by the owners, amounts deposited may be invested in shares of
Series A (Growth Series - emphasis on capital appreciation), Series B
(Growth-Income Series - emphasis on capital appreciation with secondary
emphasis on income), Series C (Money Market Series - emphasis on capital
preservation while generating interest income), Series D (Worldwide Equity
Series - emphasis on long-term capital growth through investment in foreign
and domestic common stocks and equivalents), Series E (High Grade Income
Series - emphasis on current income with security of principal), Series S
(Social Awareness Series - emphasis on high total return), Series J
(Emerging Growth Series - emphasis on capital appreciation), and the
following new series introduced on June 1, 1995:
Series K (Global Aggressive Bond Series), with emphasis on high current
income and secondary emphasis on capital appreciation by investing in a
combination of foreign and domestic high yield securities.
Series M (Specialized Asset Allocation Series), with emphasis on high
total return consisting of capital appreciation and current income through
investment in a wide range of investment categories and market sectors,
both domestic and foreign.
Series N (Managed Asset Allocation Series), with emphasis on high level of
total return by investing primarily in a diversified portfolio of debt and
equity securities.
Series O (Equity Income Series), with emphasis on substantial dividend
income and capital appreciation by investing primarily in dividend-paying
common stocks of established companies.
Under the terms of the investment advisory contracts, portfolio investments
of the underlying mutual fund are made by Security Management Company (SMC),
a wholly-owned subsidiary of Security Benefit Group, Inc. (SBG), a
wholly-owned subsidiary of SBL. SMC has engaged Lexington Management
Corporation to provide sub-advisory services for the Worldwide Equity Series
and Global Aggressive Bond Series and has engaged T. Rowe Price Associates,
Inc. to provide sub-advisory services for the Managed Asset Allocation
Series and the Equity Income Series. SMC has also entered into agreements
with Templeton Quantitative Advisors, Inc. and Meridian Investment
Management Corporation to provide certain quantitative research services
with respect to the Specialized Asset Allocation Series.
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VARIFLEX LS VARIABLE ANNUITY
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NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INVESTMENT VALUATION - Investments in mutual fund shares are carried in the
balance sheet at market value (net asset value of the underlying mutual
fund). The first-in, first-out cost method is used to determine gains and
losses. Security transactions are accounted for on the trade date.
The cost of investments purchased and proceeds from investments sold during
the period from April 1, 1995 (inception) to December 31, 1995 were as
follows:
COST OF PROCEEDS COST OF PROCEEDS
PURCHASES FROM SALES PURCHASES FROM SALES
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(IN THOUSANDS) (IN THOUSANDS)
Series A $4,914 $1,266 Series J 2,237 690
Series B 3,964 963 Series K 936 21
Series C 5,704 2,658 Series M 8,733 3,928
Series D 1,854 465 Series N 2,963 575
Series E 3,733 1,025 Series O 3,264 429
Series S 549 115
SBG's investment in the subaccounts represented the following number of
units and contract value of Variflex LS Variable Annuity contracts owned at
December 31, 1995 (DOLLARS IN THOUSANDS):
NUMBER CONTRACT
OF UNITS VALUE
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Growth Series 11,726 $ 155
Growth-Income Series 11,893 151
Money Market Series 12,425 128
Worldwide Equity Series 12,136 139
High Grade Income Series 12,054 139
Social Awareness Series 11,939 150
Emerging Growth Series 12,112 144
Global Aggressive Bond Series 50,000 534
Specialized Asset Allocation Series 50,000 531
Managed Asset Allocation Series 40,000 426
Equity Income Series 100,000 1,161
ANNUITY RESERVES - As of December 31, 1995, annuity reserves have not been
established because there are no contracts which have matured and are in the
payout stage. Such reserves would be computed on the basis of published
mortality tables, using assumed interest rates that will provide reserves as
prescribed by law. In cases where the payout option selected is life
contingent, SBL periodically recalculates the required annuity reserves, and
any resulting adjustment is either charged or credited to SBL and not to the
Account.
REINVESTMENT OF DIVIDENDS - Dividend and capital gains distributions paid by
the mutual fund to the Account are reinvested in additional shares of each
respective Series. Dividend income and capital gains distributions are
recorded as income on the ex-dividend date.
FEDERAL INCOME TAXES - Under current law, no federal income taxes are
payable with respect to the Account.
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VARIFLEX LS VARIABLE ANNUITY
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NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
2. VARIABLE ANNUITY CONTRACT CHARGES
SBL deducts an administrative fee equivalent to an annual rate of 0.15% of
the average daily net asset value of each account. Mortality and expense
risks assumed by SBL are compensated for by a fee equivalent to an annual
rate of 1.25% of the asset value of each contract, of which 0.7% is for
assuming mortality risks and the remainder is for assuming expense risks.
When applicable, an amount for state premium taxes is deducted as provided
by pertinent state law, either from the purchase payments or from the amount
applied to effect an annuity at the time annuity payments commence.
3. SUMMARY OF UNIT TRANSACTIONS
Unit transactions during the period from April 1, 1995 (inception) to
December 31, 1995 were as follows:
UNITS
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(IN THOUSANDS)
Growth Series:
Variable annuity deposits 316
Terminations, withdrawals and annuity payments 26
Growth-Income Series:
Variable annuity deposits 256
Terminations, withdrawals and annuity payments 7
Money Market Series:
Variable annuity deposits 491
Terminations, withdrawals and annuity payments 202
Worldwide Equity Series:
Variable annuity deposits 129
Terminations, withdrawals and annuity payments 3
High Grade Income Series:
Variable annuity deposits 259
Terminations, withdrawals and annuity payments 19
Social Awareness Series:
Variable annuity deposits 37
Emerging Growth Series:
Variable annuity deposits 151
Terminations, withdrawals and annuity payments 18
Global Aggressive Bond Series:
Variable annuity deposits 88
Terminations, withdrawals and annuity payments 1
Specialized Asset Allocation Series:
Variable annuity deposits 782
Terminations, withdrawals and annuity payments 310
Managed Asset Allocation Series:
Variable annuity deposits 247
Terminations, withdrawals and annuity payments 16
Equity Income Series:
Variable annuity deposits 278
Terminations, withdrawals and annuity payments 11
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[THE SECURITY BENEFIT GROUP OF COMPANIES LOGO] BULK RATE
700 SW Harrison St., Topeka, Kansas 66636-0001 U.S. POSTAGE PAID
TOPEKA, KS
PERMIT NO. 428
