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VARIFLEX LS
ANNUITY VIII
1996 ANNUAL REPORT
[SBL LOGO]
Security Benefit Life Insurance Company
A Member of The Security Benefit
Group of Companies
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A LETTER FROM THE PRESIDENT
Security Benefit is one company dedicated to the successful mastery of our
mission: MAINTAINING A STRONG FINANCIAL POSITION AND CONSISTENT GROWTH FOR THE
PROTECTION AND SECURITY OF ALL OF OUR POLICYHOLDERS AND CUSTOMERS. All of us at
Security Benefit renew our commitment to this mission every day. We want to be
the best and do our best for you. As a member of the Security Benefit team, I am
especially proud that mastering successful growth is an achievement we have come
to expect as a team.
It is my pleasure to report that 1996 was again a record year of outstanding
achievements for Security Benefit.
* Sales surpassed 1995 results by 48%
* Profits are up 18% over last year
* Revenues and deposit funds exceeded 1995 results by 28%
* Company assets rose 17% over 1995 figures
These accomplishments would just be facts on paper without the efforts of the
people who work at Security Benefit. They are the heart of our company, and I am
proud to be part of their team.
My wish for 1997 is to have another record year for our company. Last year's
accomplishments will be difficult to top but all of us at Security Benefit have
our sights and goals set high. We are well positioned with new, creative
products designed in response to our customers' changing investment goals and
lifestyle requirements. We know true mastery does not come easily. With
perseverance and attention to constantly improving what we do best, I know we
can do it.
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
CHAIRMAN OF THE BOARD, PRESIDENT & CEO
Security Benefit Life Insurance Company
Topeka, Kansas
THOMAS R. CLEVENGER
Wichita, Kansas
SISTER LORETTO MARIE COLWELL
PRESIDENT
St. Francis Hospital and Medical Center
Topeka, Kansas
JOHN C. DICUS
CHAIRMAN OF THE BOARD
Capitol Federal Savings & Loan Association
Topeka, Kansas
MELANIE S. FANNIN
PRESIDENT
Kansas - Southwestern Bell Telephone
Topeka, Kansas
WILLIAM W. HANNA
PRESIDENT & CHIEF OPERATING OFFICER
Koch Industries
Wichita, Kansas
JOHN E. HAYES, JR.
CHAIRMAN OF THE BOARD, PRESIDENT & CEO
Western Resources, Inc.
Topeka, Kansas
LAIRD G. NOLLER
PRESIDENT
Noller Enterprises
Topeka, Kansas
FRANK SABATINI
CHAIRMAN OF THE BOARD AND PRESIDENT
Capital City Bank
Topeka, Kansas
ROBERT C. WHEELER
PRESIDENT
Hill's Pet Nutrition, Inc.
Topeka, Kansas
NOTICE OF POLICYOWNERS' MEETING
We encourage you to attend the annual meeting of policyowners to be held on
Tuesday, June 3, 1997 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
www.securitybenefit.com
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REPORT OF INDEPENDENT AUDITORS
The Contractowners of SBL Variable Annuity Account VIII and
The Board of Directors of Security Benefit Life Insurance Company
We have audited the accompanying balance sheet of SBL Variable Annuity Account
VIII (the Company) as of December 31, 1996, and the related statement of
operations and 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 investments owned as of December 31, 1996, 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 Variable Annuity Account VIII
at December 31, 1996, and the results of its operations and changes in its net
assets for the year then ended in conformity with generally accepted accounting
principles.
Ernst & Young LLP
February 7, 1997
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SBL VARIABLE ANNUITY ACCOUNT VIII (VARIFLEX LS)
Balance Sheet
December 31, 1996
(DOLLARS IN THOUSANDS)
ASSETS
Investments:
SBL Fund:
Series A (Growth Series) - 1,304,751 shares at net asset value
of $24.31 per share (cost, $30,692).......................... $ 31,719
Series B (Growth-Income Series) - 580,561 shares at net asset
value of $35.40 per share (cost, $20,771).................... 20,552
Series C (Money Market Series) - 1,297,710 shares at net asset
value of $12.56 per share (cost, $16,204).................... 16,299
Series D (Worldwide Equity Series) - 2,545,572 shares at net
asset value of $6.14 per share (cost, $15,488)............... 15,630
Series E (High Grade Income Series) - 1,538,241 shares at net
asset value of $12.00 per share (cost, $18,684).............. 18,459
Series J (Emerging Growth Series) - 585,572 shares at net
asset value of $18.25 per share (cost, $10,498).............. 10,687
Series K (Global Aggressive Bond Series) - 366,144 shares at net
asset value of $10.72 per share (cost, $4,032)............... 3,925
Series M (Specialized Asset Allocation Series) - 1,351,411 shares
at net asset value of $12.05 per share (cost, $15,180)....... 16,285
Series N (Managed Asset Allocation Series) - 704,076 shares at net
asset value of $12.02 per share (cost, $7,861)................ 8,463
Series O (Equity Income Series) - 1,728,336 shares at net
asset value of $14.01 per share (cost, $21,854)............... 24,214
Series S (Social Awareness Series) - 169,763 shares at net
asset value of $19.08 per share (cost, $3,169)................ 3,239
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Total assets......................................................... $169,472
==============
See accompanying notes.
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NET ASSETS
Net assets are represented by (Note 3):
NUMBER UNIT
OF UNITS VALUE AMOUNT
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Growth Series:
Accumulation units...................... 1,987,463 $15.96 $31,719
Growth-Income Series:
Accumulation units...................... 1,388,519 14.80 20,552
Money Market Series:
Accumulation units...................... 1,520,180 10.72 16,299
Worldwide Equity Series:
Accumulation units...................... 1,183,160 13.21 15,630
High Grade Income Series:
Accumulation units...................... 1,631,708 11.31 18,459
Emerging Growth Series:
Accumulation units...................... 772,390 13.84 10,687
Global Aggressive Bond Series:
Accumulation units...................... 328,077 11.96 3,925
Specialized Asset Allocation Series:
Accumulation units...................... 1,361,078 11.96 16,285
Managed Asset Allocation Series:
Accumulation units...................... 715,033 11.84 8,463
Equity Income Series:
Accumulation units...................... 1,764,015 13.73 24,214
Social Awareness Series:
Accumulation units...................... 220,549 14.69 3,239
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Total net assets............................. $169,472
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See accompanying notes.
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SBL VARIABLE ANNUITY ACCOUNT VIII (VARIFLEX LS)
STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
HIGH
GROWTH- MONEY WORLDWIDE GRADE EMERGING
GROWTH INCOME MARKET EQUITY INCOME GROWTH
SERIES SERIES SERIES SERIES SERIES SERIES
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<S> <C> <C> <C> <C> <C> <C>
Dividend distributions.......................... $167 $299 $619 $328 $651 $13
Expenses (Note 2):
Mortality and expense risk fee............... (202) (144) (198) (100) (110) (76)
Administrative fee........................... (24) (17) (23) (12) (13) (9)
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Net investment income (loss).................... (59) 138 398 216 528 (72)
Capital gains distributions..................... 1,038 1,447 - 309 - 297
Realized gain (loss) on investments............. 861 338 62 270 (215) 138
Unrealized appreciation (depreciation) on 899 (325) 117 105 (298) 182
investments..................................
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Net realized and unrealized gain (loss) on 2,798 1,460 179 684 (513) 617
investments..................................
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Net increase in net assets resulting from 2,739 1,598 577 900 15 545
operations...................................
Net assets at beginning of year................. 3,825 3,162 2,991 1,441 2,777 1,589
Variable annuity deposits (Notes 2 and 3)....... 36,931 19,038 52,927 16,001 20,763 13,962
Terminations and withdrawals (Notes 2 and 3).... (11,776) (3,246) (40,196) (2,712) (5,096) (5,409)
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Net assets at end of year....................... $31,719 $20,552 $16,299 $15,630 $18,459 $10,687
================================================================
</TABLE>
SEE ACCOMPANYING NOTES.
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<TABLE>
<CAPTION>
SPECIALIZED MANAGED
GLOBAL ASSET ASSET EQUITY SOCIAL
AGGRESSIVE ALLOCATION ALLOCATION INCOME AWARENESS
OND SERIES SERIES SERIES SERIES SERIES
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<S> <C> <C> <C> <C> <C>
Dividend distributions.......................... $260 $144 $39 $42 $8
Expenses (Note 2):
Mortality and expense risk fee............... (30) (145) (72) (189) (20)
Administrative fee........................... (4) (18) (8) (22) (3)
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Net investment income (loss).................... 226 (19) (41) (169) (15)
Capital gains distributions..................... 44 67 8 3 41
Realized gain (loss) on investments............. 156 285 155 622 78
Unrealized appreciation (depreciation) on (114) 998 536 2,141 53
investments..................................
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Net realized and unrealized gain on
investments.................................. 86 1,350 699 2,766 172
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Net increase in net assets resulting from 312 1,331 658 2,597 157
operations...................................
Net assets at beginning of year................. 923 5,004 2,468 3,102 467
Variable annuity deposits (Notes 2 and 3)....... 4,266 12,169 6,890 21,963 3,033
Terminations and withdrawals (Notes 2 and 3).... (1,576) (2,219) (1,553) (3,448) (418)
==========================================================
Net assets at end of year....................... $3,925 $16,285 $8,463 $24,214 $3,239
==========================================================
</TABLE>
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SBL VARIABLE ANNUITY ACCOUNT VIII
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION - Variable Annuity Account VIII (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.
Deposits received by the Account are 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 J
(Emerging Growth Series - emphasis on capital appreciation), Series K (Global
Aggressive Bond Series - emphasis on high current income with secondary emphasis
on capital appreciation), Series M (Specialized Asset Allocation Series -
emphasis on high total return consisting of capital appreciation and current
income), Series N (Managed Asset Allocation Series - emphasis on high level of
total return), Series O (Equity Income Series - emphasis on substantial dividend
income and capital appreciation) and Series S (Social Awareness Series -
emphasis on high total return).
Under the terms of the investment advisory contracts, portfolio investments of
the underlying mutual fund are made by Security Management Company, LLC (SMC),
which is owned 50% by SBL and 50% by 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.
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.
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1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The cost of investments purchased and proceeds from investments sold during 1996
were as follows (In Thousands):
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COST OF PROCEEDS
PURCHASES FROM SALES
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Growth Series.................................. $40,767 $14,633
Growth-Income Series........................... 22,294 4,917
Money Market Series............................ 57,357 44,228
Worldwide Equity Series........................ 17,845 4,031
High Grade Income Series....................... 23,119 6,924
Emerging Growth Series......................... 15,884 7,106
Global Aggressive Bond Series.................. 5,138 2,178
Specialized Asset Allocation Series............ 13,727 3,729
Managed Asset Allocation Series................ 7,768 2,464
Equity Income Series........................... 23,567 5,218
Social Awareness Series........................ 3,333 692
SBG's investment in the subaccounts represented the following number of units
and contract value of SBL Variable Annuity Account VIII contracts owned at
December 31, 1996 (DOLLARS IN THOUSANDS):
NUMBER CONTRACT
OF UNITS VALUE
------------------------
Global Aggressive Bond Series................ 50,000 $598
Managed Asset Allocation Series.............. 40,000 474
ANNUITY RESERVES - As of December 31, 1996 annuity reserves have not been
established because there are no contracts that 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.
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.
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SBL VARIABLE ANNUITY ACCOUNT VIII
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
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 (In Thousands)
UNITS
---------
Growth Series:
Variable annuity deposits...................... 2,499
Terminations and withdrawals................... 802
Growth-Income Series:
Variable annuity deposits...................... 1,372
Terminations and withdrawals................... 232
Money Market Series:
Variable annuity deposits...................... 5,023
Terminations and withdrawals................... 3,792
Worldwide Equity Series:
Variable annuity deposits...................... 1,273
Terminations and withdrawals................... 216
High Grade Income Series:
Variable annuity deposits...................... 1,846
Terminations and withdrawals................... 454
Emerging Growth Series:
Variable annuity deposits...................... 1,048
Terminations and withdrawals................... 410
Global Aggressive Bond Series:
Variable annuity deposits...................... 380
Terminations and withdrawals................... 138
Specialized Asset Allocation Series:
Variable annuity deposits...................... 1,089
Terminations and withdrawals................... 199
Managed Asset Allocation Series:
Variable annuity deposits...................... 625
Terminations and withdrawals................... 142
Equity Income Series:
Variable annuity deposits...................... 1,772
Terminations and withdrawals................... 275
Social Awareness Series:
Variable annuity deposits...................... 215
Terminations and withdrawals................... 32
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[SBG LOGO] BULK RATE
The Security Benefit Group of Companies U.S. POSTAGE PAID
700 SW Harrison St., TOPEKA, KS
Topeka, Kansas 66636-0001 PERMIT NO. 428
