PROSPECTUS Company Logo
Ameritas Life Insurance Corp.
FLEXIBLE PREMIUM One Ameritas Way/5900 "O" Street
VARIABLE UNIVERSAL LIFE P.O. Box 81889/Lincoln, NE 68501
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This Prospectus describes a flexible premium variable universal life insurance
policy ("Policy") offered by Ameritas Life Insurance Corp. ("ALIC"), a mutual
life insurance company. The Policy is designed to provide insurance protection
until the Policy Anniversary nearest the Insured's 100th birthday and at the
same time provide flexibility to vary the frequency and amount of premium
payments and to increase or decrease the level of death benefits payable under
the Policy. This flexibility allows a Policyowner to provide for changing
insurance needs under a single insurance policy.
The Policy guarantees the Death Benefit as long as the Policy remains in force.
The Policyowner may choose death benefit Option A (generally, a level benefit
that equals the Specified Amount of the Policy) or Option B (a variable benefit
that generally equals the Specified Amount plus the Policy's Accumulation
Value). The minimum initial Specified Amount for a policy is $100,000. The
Policy provides for an Accumulation Value that can be obtained through Partial
Withdrawals, surrender of the Policy, or through policy loans. There is no
minimum guaranteed Accumulation Value. ALIC agrees to keep the Policy in force
during the first three years and provide a Guaranteed Death Benefit during that
time, so long as the cumulative monthly minimum Guaranteed Death Benefit Premium
is paid.
The Policyowner has the right to examine the Policy and return it for a refund
for a limited time (see page 21). The initial premium payment will be allocated
to the Money Market portfolio of the Vanguard Variable Insurance Fund, as of the
Issue Date, for 13 days, after deducting premium charges of no greater than 5%
(currently, 3.5%) to pay for premium taxes and the expense of deferring the tax
deduction of policy acquisition costs. After the 13-day period (see page 23),
the Accumulation Value will be allocated to the Subaccounts of ALIC Separate
Account LLVL ("Account") or the Fixed Account as selected by the Policyowner.
The Accumulation Value, the duration of the death benefit and, if Option B is
selected, the amount of the death benefit above the Specified Amount, will vary
with the investment experience of the selected Subaccounts or the Fixed Account.
The Accumulation Value will also be adjusted for other factors, including the
amount of charges imposed and the premium payments made. The Policy will
continue in force so long as the Net Cash Surrender Value is sufficient to pay
certain monthly charges imposed in connection with the Policy.
The assets of each Subaccount are invested in shares of a corresponding
portfolio of the Vanguard Variable Insurance Fund or the Neuberger & Berman
Advisers Management Trust (collectively the "Funds"). The Vanguard Variable
Insurance Fund is a mutual fund with seven portfolios: Money Market, High-Grade
Bond, Balanced, Equity Index, Equity Income, Growth and International. The
Neuberger & Berman Advisers Management Trust is a mutual fund with seven
portfolios of which: Limited Maturity Bond, Balanced, Growth, and Partners are
offered. The accompanying prospectuses for the various funds describe the
investment objectives and policies and the risks of each of the portfolios of
the Funds. The investment gains or losses of the monies placed in the various
portfolio Subaccounts will be experienced by the Policyowner.
Replacing existing insurance with a Policy or purchasing a Policy as a means to
obtain additional insurance protection if the purchaser already owns another
flexible premium variable life insurance policy may not be advantageous.
This Prospectus Must Be Accompanied or Preceded By Current Prospectuses For The
Vanguard Variable Insurance Fund, and the Neuberger & Berman Advisers Management
Trust.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, OR BY ANY STATE SECURITIES REGULATORY AUTHORITY, NOR HAS
THE COMMISSION, OR ANY STATE SECURITIES REGULATORY AUTHORITY, PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Please Read This Prospectus Carefully And Retain It For Future Reference.
The Date of This Prospectus is November 6, 1995, as revised December 19, 1995.
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TABLE OF CONTENTS
<S> <C>
Definitions................................................................ 3
Summary.................................................................... 5
Ameritas Life Insurance Corp. and the Account.............................. 9
Ameritas Life Insurance Corp......................................... 9
Ameritas Life Insurance Corp. Separate Account LLVL.................. 9
The Funds............................................................ 10
Investment Objectives and Policies Of The Funds' Portfolios.......... 10
Fund Management Fees ................................................ 12
Addition, Deletion or Substitution of Investments.................... 13
Fixed Account........................................................ 13
Policy Benefits............................................................ 14
Purposes of the Policy............................................... 14
Death Benefit Proceeds............................................... 14
Death Benefit Options................................................ 15
Methods of Affecting Insurance Protection............................ 17
Duration of Policy................................................... 17
Accumulation Value................................................... 17
Benefits at Maturity................................................. 18
Payment of Policy Benefits........................................... 18
Policy Rights.............................................................. 19
Loan Benefits........................................................ 19
Surrenders........................................................... 20
Partial Withdrawals.................................................. 20
Transfers............................................................ 20
Refund Privilege..................................................... 21
Exchange Privilege................................................... 21
Payment and Allocation of Premiums......................................... 21
Issuance of a Policy................................................. 21
Premiums............................................................. 22
Allocation of Premiums and Accumulation Value........................ 23
Policy Lapse and Reinstatement....................................... 23
Charges and Deductions..................................................... 24
Deductions From Premium Payment...................................... 24
Charges Deducted from Accumulation Value............................. 24
Surrender Charge..................................................... 25
Transfer Charge...................................................... 25
Partial Withdrawal Charge............................................ 26
Daily Charges Against the Account.................................... 26
General Provisions......................................................... 26
Additional Insurance Benefits (Riders)..................................... 28
Distribution of the Policies............................................... 28
Federal Tax Matters........................................................ 29
Safekeeping of the Account's Assets........................................ 31
Voting Rights.............................................................. 31
State Regulation of ALIC................................................... 32
Executive Officers and Directors of ALIC................................... 32
Legal Matters.............................................................. 35
Legal Proceedings.......................................................... 35
Experts.................................................................... 35
Additional Information..................................................... 35
Financial Statements....................................................... 35
Ameritas Life Insurance Corp. Separate Account LLVL........................ 36
Ameritas Life Insurance Corp............................................... 37
Appendices................................................................. 53
The Policy, certain funds, and/or certain riders are not available in all
States.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING 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.
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DEFINITIONS
ACCOUNT - Ameritas Life Insurance Corp. Separate Account LLVL, a separate
investment account established by ALIC to receive and invest the net premiums
paid under the Policy and allocated by the Policyowner to the Account.
ACCUMULATION VALUE - The total amount that a Policy provides for investment at
any time. It is equal to the total of the Accumulation Value held in the
Account, the Fixed Account, and any Accumulation Value held in the general
account which secures policy loans.
ALIC - Ameritas Life Insurance Corp., a mutual life insurance company.
ATTAINED AGE - The Issue Age of the Insured plus the number of complete Policy
Years that the policy has been in force.
BENEFICIARY - The person or persons designated in the application, unless later
changed, to receive the Death Benefit (see page 26 and 27) for "Beneficiary" and
"Change of Beneficiary").
DECLARED RATES - The interest rate declared by ALIC to be earned on amounts in
the Fixed Account, which ALIC guarantees to be no less than 3.5%.
DEATH BENEFITS - The amount of insurance coverage provided under the selected
death benefit option of the Policy.
DEATH BENEFIT PROCEEDS - The proceeds payable to the beneficiary upon receipt by
ALIC of Satisfactory Proof of Death of the Insured while the Policy is in force.
It is equal to: (l) the Death Benefit; plus (2) additional life insurance
proceeds provided by any riders; minus (3) any outstanding policy debt; minus
(4) any overdue monthly deduction, including the deduction for the month of
death.
FIXED ACCOUNT - An account that is a part of ALIC's General Account to which all
or a portion of net premiums and transfers may be allocated for accumulation at
fixed rates of interest.
GENERAL ACCOUNT - The General Account of ALIC includes all of ALIC assets except
those assets segregated into separate accounts.
GUARANTEED DEATH BENEFIT PREMIUM - A specified optional premium amount for the
first three policy years which, if paid in advance on a monthly or yearly
cumulative basis, after adjustment for policy loans or Partial Withdrawals, will
keep the Policy in force during the first three policy years, so long as other
policy provisions are met, even if the Net Cash Surrender Value is insufficient
to cover monthly deductions. This benefit is provided without an additional
policy charge.
INSURED - The person whose life is insured under the Policy.
ISSUE AGE - The age of the Insured at the Insured's birthday nearest the Policy
Date.
ISSUE DATE - The date that all financial, contractual and administrative
requirements have been met and processed for the Policy.
MATURITY DATE - The date ALIC pays any net cash surrender value, if the Insured
is still living.
MONTHLY ACTIVITY DATE - The same date in each succeeding month as the Policy
Date except should such monthly activity date fall on a date other than a
valuation date, the monthly activity date will be the next valuation date.
NET AMOUNT AT RISK - The amount by which the death benefit that would be payable
on a Monthly Activity Date exceeds the Accumulation Value on that date.
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NET CASH SURRENDER VALUE - The Accumulation Value on the date of surrender less
any outstanding policy debt.
NET PREMIUM - Premium paid less the premium charges (See Premiums, page 22
Charges and Deductions, page 24).
OUTSTANDING POLICY DEBT - The sum of all unpaid policy loans and accrued
interest on policy loans.
PARTIAL WITHDRAWAL - A Policyowner's means of accessing a portion of the
Accumulation Value without terminating coverage under the Policy. A Partial
Withdrawal has limitations, is irrevocable, and has several policy cost and
coverage implications (See pages 20 and 26).
PLANNED PERIODIC PREMIUMS - A selected schedule of equal premiums payable at
fixed intervals. The Policyowner is not required to follow this schedule, nor
does following this schedule ensure that the Policy will remain in force unless
the payments meet the requirements of the Guaranteed Death Benefit Premium.
POLICY - The Flexible Premium Variable Universal Life Insurance Policy offered
by ALIC and described in this Prospectus.
POLICYOWNER - The owner of the Policy, as designated in the application or as
subsequently changed. If a Policy has been absolutely assigned, the assignee is
the Policyowner. A collateral assignee is not the Policyowner.
POLICY ANNIVERSARY DATE - The same day as the Policy Date for each year the
Policy remains in force.
POLICY DATE - As set forth in the Policy, the effective date for all coverage
provided in the application. The Policy Date is used to determine policy
anniversary dates, policy years and monthly activity dates. Policy anniversaries
are measured from the Policy Date. The Policy Date and the Issue Date will be
the same unless: 1) an earlier Policy Date is specifically requested, or 2) the
Issue Date is later because additional premiums or application amendments are
required at time of delivery. (See Issuance of a Policy, page 21.)
POLICY YEAR - The period from one Policy Anniversary Date until the next Policy
Anniversary Date.
SATISFACTORY PROOF OF DEATH - Means all of the following must be submitted: (1)
A certified copy of the death certificate; (2) A Claimant Statement; (3) The
Policy; and (4) Any other information that ALIC may reasonably require to
establish the validity of the claim.
SPECIFIED AMOUNT - The minimum death benefit under the Policy, as selected by
the Policyowner, which must be $100,000 or more at the Issue Date.
SUBACCOUNT - A subdivision of the Account. Each Subaccount invests exclusively
in the shares of a specified portfolio of the Funds.
SURRENDER - Occurs when the policy is terminated before the maturity date during
the Insured's life for its net cash surrender value. Coverage under the policy
will terminate as of the date of a surrender.
VALUATION DATE - Any day on which the New York Stock Exchange is open for
trading.
VALUATION PERIOD - The period between two successive Valuation Dates, commencing
at the close of the New York Stock Exchange ("NYSE") on one Valuation Date and
ending at the close of the NYSE on the next succeeding Valuation Date.
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SUMMARY
The following summary of Prospectus information and diagram of the Policy should
be read in conjunction with the detailed information appearing elsewhere in this
Prospectus. Unless otherwise indicated, the description of the Policy contained
in this Prospectus assumes that the Policy is in force, current charges were
used, and there is no outstanding indebtedness.
DIAGRAM OF POLICY
PREMIUM PAYMENTS
You can vary amount and frequency.
DEDUCTIONS FROM PREMIUMS
Premium taxes and the expense of deferring the
tax deduction of policy acquisition costs - 3.5%
This charge is guaranteed not to exceed 5%
There is no premium load to cover sales and distribution expenses.
NET PREMIUM
You direct the net premium to be invested in the Fixed Account or to the
Separate Account which offers eleven different Subaccounts. The eleven
Subaccounts invest in the corresponding portfolios (Funds) of the Vanguard
Variable Insurance Fund or the Neuberger & Berman Advisers Management Trust.
DEDUCTIONS FROM ASSETS
Monthly charge for cost of insurance and cost of any riders.
Monthly charge for administrative expenses ($9.00 per month the first policy
year and the 12-month period following an increase in specified amount, $4.50
per month currently thereafter). This charge is guaranteed not to exceed
$9.00 per month.
Daily charge, at an annual rate of 0.75%, from the Subaccounts for mortality
and expense risks. This charge is guaranteed not to exceed .90%. This charge
is not deducted from Fixed Account assets.
LIVING BENEFITS RETIREMENT BENEFITS DEATH BENEFITS
Partial Withdrawals may Loans may be taken at a Income tax free to
be made(subject to certain net zero interest rate after beneficiary.
restrictions). The death ten years or when the policy- Available as lump
benefit will be reduced by holder reaches 55 (whichever sum or under the
the amount of the Partial occurs later). five payment methods
Withdrawal. Should the policy lapse available as retire-
Up to fifteen free trans- while loans are outstanding ment benefits.
fers may be made each year the portion of the loan att-
between the investment ributable to earnings will
portfolios. become taxable distributions.
Accelerated payment of up (See page 19).
to 50% of the lowest
scheduled death benefit is
available under certain
conditions for Insureds
suffering from terminal
illness.
The policy may be surren-
der at any time for its
Net Cash Surrender Value.
The policy has no sur-
render charge. However,
there is a charge for
Partial Withdrawals.
<PAGE>
THE ISSUER
The Policy is issued by Ameritas Life Insurance Corp. ("ALIC"), a Nebraska
mutual life insurance company. A separate account of ALIC, Separate Account LLVL
("Account"), has been established to hold the assets supporting the Policy. The
Account has eleven Subaccounts which correspond to, and are invested in, the
portfolios of the Funds discussed herein. (See Ameritas Life Insurance Corp. and
the Account, page 9, and The Funds, page 10.) The financial statements for ALIC
can be found beginning on page 37.
THE POLICY
This flexible premium variable universal life insurance policy ("Policy") allows
the Policyowner, within limitations, to choose: (a) the amount and frequency of
premium payments; (b) the manner in which the Policyowners Accumulation Values
are invested; and (c) a choice of two death benefit options.
As long as the Policy remains in force, it will provide for: (1) life insurance
coverage on the Insured up to age 100; (2) an Accumulation Value; (3) surrender
rights (including Partial Withdrawals and Surrender); (4) policy loan
privileges; and (5) a variety of optional benefits and riders that may be added
to the Policy for an additional charge or without charge if certain minimum
premiums are paid.
PREMIUMS
This Policy differs in two important respects from a conventional life insurance
policy. First, the failure to pay a Planned Periodic Premium will not in itself
cause the Policy to lapse.
Second, a Policy can lapse even if Planned Periodic Premiums have been paid
unless the Guaranteed Death Benefit Premium requirements have been met. (See
Payment and Allocation of Premiums, page 21.)
AMOUNTS. A minimum initial premium of at least 25% of the total first year
monthly deductions including charges for riders, and any substandard risk
adjustments must be paid in order to put the Policy in force. The minimum
initial premium is less than the Guaranteed Death Benefit Premium. After the
minimum initial premium is paid, unscheduled premiums may be paid in any amount
and at any frequency, subject only to the maximum and minimum limitations set by
ALIC and the maximum limitations set by Federal Income Tax Law. A Policyowner
may also choose a Planned Periodic Premium which may include the minimum
cumulative premiums necessary to keep in force the Guaranteed Death Benefit
Provision.
A Policy will lapse when the Net Cash Surrender Value is insufficient to pay the
monthly deduction unless the Guaranteed Death Benefit Provision is in effect. A
period of 61 days from the date written notice of lapse is mailed to the
Policyowner's last known address will be allowed for the Policyowner to make
sufficient payment to keep the Policy in force for the Policyowner (grace
period).
ALLOCATION OF NET PREMIUMS
The Policyowner may select the manner in which the new premiums are allocated
between the Fixed Account (See Fixed Account, page 13) and to one or more of the
Subaccounts.
Net premiums, which equal the premiums paid less the premium charges, are first
allocated for 13 days, as of the Issue Date, to the Subaccount for the Money
Market Portfolio of the Vanguard Variable Insurance Fund. After the 13-day
period the Accumulation Value will be allocated as selected by the Policyowner.
The Policyowner may change the allocation instructions for premiums and may also
make a special designation for unscheduled premiums. Subject to certain charges
and restrictions, a Policyowner may also transfer amounts among the Subaccounts
and the Fixed Account. (See Allocation of Premiums and Accumulation Value, page
23.)
<PAGE>
The various Subaccounts available invest in a corresponding portfolio of the
Funds. The Vanguard Variable Insurance Fund is a mutual fund with seven
portfolios: Money Market, High-Grade Bond, Balanced, Equity Index, Equity
Income, Growth and International. The Neuberger & Berman Advisers Management
Trust is a mutual fund with seven portfolios of which: Limited Maturity,
Balanced, Growth, and Partners are offered. A summary of the investment
objectives for these portfolios is set forth at page 10 of this Prospectus, and
detailed objectives of these portfolios are described in the accompanying
prospectuses for the Funds. There is no assurance that these objectives will be
met. The Policyowner bears the entire investment risk for amounts allocated to
the Subaccounts.
POLICY BENEFITS
DEATH BENEFIT PROCEEDS AND DEATH BENEFIT OPTIONS. While the Policy remains in
force, ALIC will pay the Death Benefit Proceeds to the Beneficiary upon receipt
of Satisfactory Proof of Death of the Insured. These proceeds may be paid in a
lump sum or in accordance with an optional payment plan.
The Policy provides for two death benefit options. Under either option, so long
as the Policy remains in force, the death benefit will not be less than the
current Specified Amount of the Policy adjusted for any policy indebtedness and
any overdue monthly deductions. The death benefit may, however, exceed the
Specified Amount, depending upon the investment experience of the Policy. Death
Benefit Option A provides for a level benefit equal to the current Specified
Amount of the Policy, unless the Accumulation Value of the Policy on the date of
the Insured's death multiplied by the applicable percentage set forth in the
Policy is greater, in which case the death benefit is equal to that larger
amount. Death Benefit Option B provides for a variable benefit equal to the
current Specified Amount of the Policy plus the Policy's Accumulation Value on
the date of the Insured's death, or if greater, the Accumulation Value of the
Policy on the date of the Insured's death multiplied by the applicable
percentage set forth in the Policy. (See Death Benefit Options, page 15)
Optional insurance benefits offered under the Policy include: Guaranteed Death
Benefit provision; Children's Protection Rider; Cost Recovery Rider; Guaranteed
Insurability Rider; Payor Waiver of Monthly Deductions on Disability;
Accelerated Benefit Rider for Terminal Illness, Waiver of Monthly Deductions on
Disability. These riders are not available in every state. The cost, if any, of
these additional insurance benefits will be deducted from the Policy's
Accumulation Value as a part of the monthly deduction. The Guaranteed Death
Benefit provision is provided without cost but requires the described premium
payments.
BENEFITS AT MATURITY. On the Maturity Date of the Policy, if the Insured is
still living, the Policyowner will be paid the Net Cash Surrender Value of the
Policy.
ACCUMULATION VALUE BENEFITS. The Policy's Accumulation Value in the Account will
reflect the amount and frequency of premium payments, the investment experience
of the chosen Subaccounts and the Fixed Account, policy loans, any Partial
Withdrawals, and any charges imposed in connection with the Policy. The entire
investment risk of the Account is borne by the Policyowner. ALIC does not
guarantee a minimum Accumulation Value in the Account. (See Accumulation Value,
page 17.) It does guarantee the Fixed Account.
The Policyowner may surrender the Policy at any time and receive its Net Cash
Surrender Value. Subject to certain limitations, the Policyowner may also make a
Partial Withdrawal from the Policy and obtain a portion of the Accumulation
Value at any time prior to the maturity date. Partial Withdrawals will reduce
both the Accumulation Value and the Death Benefit payable under the Policy. (See
Partial Withdrawals, page 20) A charge will be deducted from the amount paid
upon Partial Withdrawal. (See Partial Withdrawal Charge, page 26.)
POLICY LOANS. Policy loans, secured by the Accumulation Value of the Policy, are
available. After the first policy anniversary, the Policyowner may obtain a loan
at "regular" loan interest rates, which shall not exceed 6% annually.
<PAGE>
After the later of age 55 or the tenth policy anniversary, the Policyowner can
borrow against a limited amount of the Accumulation Value of the Policy at a
"reduced" interest rate, which reduced rate is currently 3.5% and shall not
exceed 4% annually ("reduced rate loan"). While the loan is outstanding, the
Policyowner earns 3.5% interest on the Accumulation Values securing the loans.
(For details concerning policy loan provisions, see page 19.)
Policy loans may have tax consequences and will affect earnings and Policy
Accumulation Values. Should the policy lapse while loans are outstanding the
portion of the loans attributable to earnings will become taxable distributions.
Should the Policy become a modified endowment contract, loans (including loans
to pay loan interest) will be taxable to the extent of any gain under the
Policy. Further, a 10% penalty tax also applies to the taxable portion of any
distribution prior to the Insured's age 59 1/2. (See Federal Tax Matters, page
29).
CHARGES
SALES CHARGE. There is no premium load to cover sales and distribution expenses.
PREMIUM CHARGES. Generally, a charge of no greater than 5% (currently 3.5%) of
each premium will be deducted to compensate ALIC for premium tax charges
(currently 2.5%) and the expenses of deferring the tax deduction of policy
acquisition costs (currently 1.0%) before placing any amount in a Subaccount or
the Fixed Account. ALIC does not expect to derive a profit from the premium
charges. (See Deductions From Premium Payment, page 24).
MONTHLY CHARGES AGAINST THE ACCUMULATION VALUE.
a) A monthly maintenance charge of up to $9.00 [currently ALIC is charging $9.00
per month ($108.00 per year) during the first Policy Year and during the
12-month period after an increase in specified amount, and $4.50 per month
($54.00 per year) thereafter] to compensate ALIC for the continuing
administrative costs of the Policy; plus
b) A monthly charge for the cost of insurance including the cost for any riders.
(See Charges Deducted from Accumulation Value, page 24.)
SURRENDER CHARGE. This policy has no surrender charge. However, there is a
charge for Partial Withdrawals. (See below).
TRANSFER CHARGE. Fifteen transfers of Accumulation Value per policy year will be
permitted free of charge. A $10 administrative charge may be assessed for each
additional transfer. The transfer charge will be deducted from the amount
transferred. (See Transfer Charge, page 25.)
PARTIAL WITHDRAWAL CHARGE. A maximum charge, not to exceed the lesser of $50 or
2% of the amount withdrawn may be deducted for each Partial Withdrawal.
(Currently, the charge is the lesser of $25 or 2%.) The charge will be deducted
from the amount paid as a result of the Partial Withdrawal and will compensate
ALIC for the administrative costs of Partial Withdrawals. A Partial Withdrawal
charge is not assessed when a Policy is surrendered. (See Partial Withdrawal
Charge, page 26.)
DAILY CHARGES AGAINST THE ACCOUNT. A daily charge at an annual rate not to
exceed .90% (currently .75%) of the average daily net assets of each Subaccount,
but not the Fixed Account. This charge compensates ALIC for mortality and
expense risks assumed in connection with the Policy. (See Daily Charges Against
the Account, page 26.)
No additional charges are currently made against the Account for federal, state
or local taxes. If there is a material change from the expected treatment of
ALIC under federal, state or local tax laws, ALIC may determine to make
deductions from the Account to pay those taxes. (See Taxes, page 26.)
In addition, because the Account purchases shares of the Funds, the value of the
units in each Subaccount will reflect the net asset value of shares of the
various Funds held therein, and therefore, the investment advisory fee and other
expenses incurred by the Funds. (See The Funds, page 10.)
<PAGE>
TAX TREATMENT OF THE POLICY
Like death benefits payable under conventional life insurance policies, life
insurance proceeds payable under the Policy are excludable from the taxable
income of the Beneficiary. Should the Policy be deemed a modified endowment
contract (see Federal Tax Matters-Tax Status of the Policy, page 29), Partial
Withdrawals or Surrenders, assignments, policy pledges, and loans under the
Policy will be taxable to the Policyowner to the extent of any gain under the
Policy. Generally, a 10% penalty tax also applies to the taxable portion of any
distribution prior to the Insured reaching age 59 1/2. (For further detail
regarding taxation, see Federal Tax Matters, page 29.)
REFUND PRIVILEGE
The Policyowner is granted a period of time (a "free look period") to examine a
Policy and return it for a refund. The Policyowner may cancel the Policy within
45 days after Part I of the application is signed, within 10 days after the
Policyowner receives the Policy, or 10 days after ALIC delivers a notice
concerning cancellation, whichever is later. The amount of the refund is the
greater of the premium paid or the premium paid adjusted by investment gains and
losses. (See Refund Privilege, page 21.)
EXCHANGE PRIVILEGE
During the first 24 months after the policy date of the Policy, subject to
certain restrictions, the Policyowner may exchange the Policy for a flexible
premium adjustable life insurance policy issued and made available for exchange
by ALIC. The policy provisions and applicable charges for the new Policy will be
based on the same Policy Date and Issue Age as under the Policy. (See Exchange
Privilege, page 21.)
ALIC AND THE ACCOUNT
AMERITAS LIFE INSURANCE CORP.
Ameritas Life Insurance Corp. ("ALIC") is a mutual life insurance company
domiciled in Nebraska since 1887. ALIC is currently licensed to sell life
insurance in 49 states, and the District of Columbia. The Home Office of ALIC is
at One Ameritas Way, 5900 "0" Street, Lincoln, Nebraska 68501.
ALIC and subsidiaries had total assets at December 31, 1994 of over $2.0
billion. ALIC enjoys a long standing A+ (Superior) rating from A.M. Best, an
independent firm that analyzes insurance carriers. ALIC also has been rated A
("Excellent") by Weiss Research, Inc., and has an AA ("Excellent") rating from
Standard & Poor's for claims-paying ability.
Ameritas Investment Corp., the principal underwriter of the policies, may
publish in advertisements and reports to Policyowners, the ratings and other
information assigned to ALIC by one or more independent rating services and
charts and other information concerning dollar cost averaging, tax-deference,
diversification, asset allocation, and other investment methods. ALIC may also
publish information about Veritas, the direct-to-the- consumer Division of ALIC.
The purpose of the ratings is to reflect the financial strength and/or
claims-paying ability of ALIC. The ratings do not relate to the performance of
the separate account.
AMERITAS LIFE INSURANCE CORP.
SEPARATE ACCOUNT LLVL
Ameritas Life Insurance Corp. Separate Account LLVL ("the Account") was
established under Nebraska law on August 24, 1994. The assets of the Account are
held by ALIC and are segregated from all of ALIC's other assets. These assets
are not chargeable with liabilities arising out of any other business which ALIC
may conduct, including any income, gains, or losses of ALIC. Although the assets
maintained in the Account will not be charged with any liabilities arising out
of ALIC's other business, all obligations arising under the Policies are
liabilities of ALIC who will maintain assets in the Account of a total market
value at least equal to the reserve and other contract liabilities of the
Account. Nevertheless, to the extent assets in the Account exceed ALIC's
liabilities in the Account, the assets are available to cover the liabilities of
ALIC's General
<PAGE>
Account. ALIC may, from time to time, withdraw assets available to cover the
General Account obligations. The Account is registered with the Securities and
Exchange Commission ("SEC") under the Investment Company Act of 1940 ("1940
Act") as a unit investment trust, which is a type of investment company. This
does not involve any SEC supervision of the management or investment policies or
practices of the Account.
For state law purposes, the Account is treated as a Division of ALIC.
THE FUNDS
There are currently eleven Subaccounts within the Account available to
Policyowners for new allocations. Each Subaccount of the Account will invest
only in the shares of a corresponding portfolio of the Vanguard Variable
Insurance Fund or the Neuberger & Berman Advisers Management Trust (collectively
the "Funds"). Each fund is registered with the SEC under the 1940 Act as an
open-end diversified management investment company.
The assets of each portfolio of the Funds are held separate from the assets of
the other portfolios. Thus, each portfolio operates as a separate investment
portfolio, and the income or losses of one portfolio generally have no effect on
the investment performance of any other portfolio.
The investment objectives and policies of each portfolio are summarized below.
There is no assurance that any of the portfolios will achieve their stated
objectives. More detailed information, including a description of investment
objectives, policies, restrictions, expenses and risks, is in the prospectuses
for each of the Funds, which must accompany or precede this Prospectus. These
Prospectuses should be read carefully together with this Prospectus and
retained.
Each Policyowner should periodically consider the allocation among the
Subaccounts in light of current market conditions and the investment risks
attendant to investing in the Funds' various portfolios.
The Account will purchase and redeem shares from the Funds at net asset value.
Shares will be redeemed to the extent necessary for ALIC to collect charges, pay
the surrender values, Partial Withdrawals, and make policy loans or to transfer
assets from one Subaccount to another, or to the Fixed Account, as requested by
Policyowners. Any dividend or capital gain distribution received from a
portfolio of the Funds will be invested immediately at net asset value in shares
of that portfolio and retained as assets of the corresponding Subaccount.
Since the Vanguard Variable Insurance Fund and the Neuberger & Berman Advisers
Management Trust are each designed to provide investment vehicles for variable
annuity or variable life insurance contracts of various insurance companies and
will be sold to separate accounts of other insurance companies as investment
vehicles for various types of variable life insurance policies or variable
annuity contracts, there is a possibility that a material conflict may arise
between the interests of the Account and one or more of the separate accounts of
another participating insurance company. In the event of a material conflict,
the affected insurance companies agree to take any necessary steps, including
removing its separate accounts from the Funds, to resolve the matter. The risks
of such mixed and shared funding are described further in the prospectuses of
the Funds.
INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS' PORTFOLIOS
VANGUARD VARIABLE
INSURANCE FUND
PORTFOLIO INVESTMENT POLICY OBJECTIVES
Money Market Invests in high-quality money Seeks to provide current
market obligations issued by income consistent with the
financial institutions, non- preservation of capital
financial corporations, and and liquidity. Also seeks
the U.S. Government, its to maintain a stable net
agencies and instrumental- asset value of $1.00 per
ities. This policy includes share.
possible investment in seven
specific classifications of
securities. This portfolio
will only invest in securities
that mature in 13 months or
less, and will maintain an
average weighted maturity of
90 days or less.
<PAGE>
High-Grade Bond Will invest in a statistically Seeks to duplicate the
selected sample of fixed total return of publicly-
income and mortgage-backed traded investment grade
securities included in the fixed income securities
Lehman Brothers Aggregate Bond in the aggregate by at-
Index (the "Lehman Bond Index"). tempting to duplicate the
The portfolio will invest 80% investment performance of
or more of its assets in a broad investment grade
securities included in the bond index.
Lehman Bond Index, including
not less than 65% of its
assets in U.S. Government or
corporate bonds.
Balanced It is expected that common Seeks to provide capital
stocks will represent 60% to growth and a resonable
70% of the portfolio's total level of current income.
assets. The remaining 30% to
40% of the portfolio's assets
will be invested in high-
quality fixed income securi-
ties. The portfolio may invest
up to 10% of its assets in
foreign securities.
Equity Index Expects to invest in all 500 Seeks parallel the invest-
stocks in the Standard & Poor's ment results of the
500 Composite Stock Index Standard & Poor's 500
("S&P 500 Index") in approxi- Composite Stock Price
mately the same proportions as Index (the "S&P 500").
they are represented in the
Index.
Equity Income Under normal circumstances, at Seeks to provide a high
least 80% of portfolio assets level of current income.
will be invested in income-
producing equity securities,
including divided-paying com-
mon stocks. The portfolio may
invest up to 20% of its assets
in certain cash investments
and investment grade fixed
income securities.
Growth Portfolio Invests primarily in equity Seeks to provide long-
securities of seasoned U.S. term capital appreciation.
companies with above-average
prospects for growth.
International Invests primarily in appreci- Seeks to provide long-
ation-oriented equity securi- term capital appreciation.
ties of seasoned companies
located outside the United
States. The portfolio seeks
to diversify its assets among
as many as thirty foreign
stock markets. May also enter
into forward foreign currency
exchange contracts to protect
against fluctuations in ex-
change rates.
NEUBERGER &
BERMAN ADVISERS
MANAGEMENT
TRUST
PORTFOLIO INVESTMENT POLICY OBJECTIVES
Limited Will invest in a diversified Seeks the highest current
Maturity Bond portfolio of limited maturity income inconsistent with
debt securities. Under normal low risk to principal and
circumstances at least 65% of liquidity. As a secondary
total assets are invested in objective, seeks to
debt securities. Does not enhance its total return
intend to concentrate 25% or through capital appreci-
more of its total assets in ation when market factors
debt securities of issuers in indicate this may be
any single industry. Average available without sig-
portfolio maturity may range nificant risk to principal.
up to five years.
<PAGE>
Growth Invests in common stocks the Seeks to provide capital
investment adviser believes growth.
will have above average
earnings or otherwise provide
investors with above average
potential for capital appreci-
ation.
Partners Invests primarily in common Seeks to provide capital
stocks of established growth.
companies using the value-
oriented investment approach.
Its investment program seeks
securities believed to be
undervalued based on strong
fundamentals such as low
price-to-earnings ratios, con-
sistent cash flow and support
from asset values.
Balanced The investment adviser anti- Seeks to provide long-term
cipates that investments will capital growth and reason-
normally be managed so that able current income with-
approximately 60% of the out undue risk to
portfolio's total assets will principal.
be invested in common stocks
and the remaining assets will
be invested in debt securities.
Depending upon the investment
adviser's views on current
market trends, the common
stock portion of the port-
folio's investments may be
adjusted downward as low as
50% or upward to as high as 70%.
At least 25% of assets will be
invested in fixed income senior
securities.
FUND MANAGEMENT FEES
Vanguard's Fixed Income Group provides advisory services to the Money Market and
High-Grade Bond portfolios. Vanguard's Core Management Group provides advisory
services to the Equity Index portfolio. Wellington Management Company, Newell
Associates and Lincoln Capital Management serve as independent investment
advisors to the Balanced, Equity Income, and Growth portfolios, respectively.
The International portfolio employs Schroder Capital Management International,
Inc. as the adviser. Vanguard charges a fee to each portfolio for providing
management, distribution and marketing services.
Neuberger & Berman Management Incorporated is paid a fee to serve as investment
adviser to the Neuberger & Berman Advisers Management Trust (the "Trust")
portfolios.
In addition to the advisory fee, the Trust incurs the following expenses: legal,
auditing or accounting expenses, trustee's fees and expenses, insurance
premiums, brokers' commissions, taxes and governmental fees, expenses of issue
or redemption of shares, expenses of registering or qualifying shares for sale,
reports and notices to shareholders and variable contract owners, and fees and
disbursements of custodians, transfer agents, registrars, shareholder servicing
agents and dividend disbursing agents, and certain expenses with respect to
membership fees of industry associations. These expenses are paid by Neuberger &
Berman Management, Incorporated, which charges a fee for this service.
The amount of expenses borne by each portfolio for the most recent fiscal year
was as follows:
<TABLE>
<CAPTION>
INVESTMENT ADVISORY
PORTFOLIO & MANAGEMENT Other Expense Total
<S> <C> <C> <C>
VANGUARD*
Money Market .18% .05% .23%
High-Grade Bond .17% .07% .24%
Balanced .30% .04% .34%
Equity Index .20% .04% .24%
Equity Income .27% .07% .34%
Growth .33% .05% .38%
International .23% .07% .30%
<PAGE>
NEUBERGER & BERMAN**
Limited Maturity .60% .13% .73%
Growth .79% .12% .91%
Partners .80% .50% 1.30%
Balanced .80% .17% .97%
* 9/30/94 fiscal year end.
** 12/31/94 fiscal year end - all figures are actual expenses, except Partners
Portfolio's Other Expense, which is an estimate for 1995.
</TABLE>
The Advisers Management Trust has agreed to reimburse each Neuberger & Berman
Portfolio to the extent that the aggregate operating expenses and its pro rata
share of its corresponding series operating expenses, excluding the compensation
of Neuberger & Berman Management from the portfolio, taxes, interest,
extraordinary expenses, brokerage commission, and transaction costs that exceed
1% of the portfolio's average daily net asset value are in excess of an annual
rate of 1.00%. This agreement is expected to continue in future years. In the
absence of reimbursement, the portfolio's expenses may increase.
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS
ALIC reserves the right, subject to applicable law, and, if necessary, after
notice to and prior approval from the SEC and/or state insurance authorities to
make additions to, deletions from, or substitutions for the shares that are held
in the Account or that the Account may purchase. The Account may, to the extent
permitted by law, purchase other securities for other contracts or permit a
conversion between contracts upon request by the Policyowners.
ALIC may, in its sole discretion, also establish additional Subaccounts of the
Account, each of which would invest in shares corresponding to a new portfolio
of the Funds or in shares of another investment company having a specified
investment objective. ALIC may, in its sole discretion, establish new
Subaccounts or eliminate one or more Subaccounts if marketing needs, tax
considerations or investment conditions warrant. Any new Subaccounts may be made
available to existing Policyowners on a basis to be determined by ALIC.
If any of these substitutions or changes are made, ALIC may by appropriate
endorsement change the Policy to reflect the substitution or change. If ALIC
deems it to be in the best interest of Policyowners, and subject to any
approvals that may be required under applicable law, the Account may be operated
as a management company under the 1940 Act, it may be deregistered under that
Act if registration is no longer required, or it may be combined with other ALIC
separate accounts. To the extent permitted by applicable law, ALIC may also
transfer the assets of the Account associated with the Policies to another
separate account. In addition, ALIC may, when permitted by law, restrict or
eliminate any voting rights of Policyowners or other persons who have voting
rights as to the Account.
The Policyowner will be notified of any material change in the investment policy
of any portfolio in which the policyowner has an interest.
FIXED ACCOUNT
Policyowners may elect to allocate all or a portion of their premium payments to
the Fixed Account, and they may also transfer monies from the Separate Account
to the Fixed Account or from the Fixed Account to the Separate Account. (See
Transfers, page 20.)
Payments allocated to the Fixed Account and transferred from the Separate
Account to the Fixed Account are placed in the General Account of ALIC, which
supports insurance and annuity obligations. The General Account includes all of
ALIC's assets, except those assets segregated in the separate accounts. ALIC has
the sole discretion to invest the assets of the General Account, subject to
applicable law. ALIC bears an investment risk for all amounts allocated or
transferred to the Fixed Account and interest credited thereto,
<PAGE>
less any deduction for charges and expenses, whereas the Policyowner bears the
investment risk that the declared rate described below, may fall to a lower rate
after the expiration of a declared rate period. Because of exemptive and
exclusionary provisions, interests in the General Account have not been
registered under the Securities Act of 1933 (the "1933 Act") nor is the General
Account registered as an investment company under the Investment Company Act of
1940 (the "1940" Act"). Accordingly neither the General Account nor any interest
therein is generally subject to the provisions of the 1933 or 1940 Act.
We understand that the staff of the SEC has not reviewed the disclosures in this
Prospectus relating to the Fixed Account portion of the Contract; however,
disclosures regarding the Fixed Account portion of the Contract may be subject
to generally applicable provisions of the Federal Securities Laws regarding the
accuracy and completeness of statements made in prospectuses.
ALIC guarantees that it will credit interest at an effective annual rate of at
least 3.5%. ALIC may, at its discretion, declare higher interest rate(s) for
amounts allocated or transferred to the General Account ("Declared Rate(s)").
Each month ALIC will establish the declared rate for the monies transferred or
allocated to the Fixed Account that month. The Policyowner will earn interest
for a 12-month period on the amount transferred or allocated at the rate
declared effective the month of transfer or allocation. During subsequent
12-month periods, the Policyowner will earn interest on the monies transferred
and the increase thereon at the rate declared for each month for each such
12-month period.
POLICY BENEFITS
PURPOSES OF THE POLICY
The Policy is designed to provide the Policyowner with both lifetime insurance
protection to the policy anniversary nearest the Insured's 100th birthday and
flexibility in connection with the amount and frequency of premium payments and
with the level of life insurance proceeds payable under the Policy.
The Policyowner is not required to pay scheduled premiums to keep a Policy in
force, but may, subject to certain limitations, vary the frequency and amount of
premium payments. Moreover, the Policy allows a Policyowner to adjust the level
of death benefits payable under the Policy without having to purchase a new
Policy by increasing (with evidence of insurability) or decreasing the Specified
Amount. An increase in the Specified Amount will increase the optional
Guaranteed Death Benefit Premium required. Thus, as insurance needs or financial
conditions change, the Policyowner has the flexibility to adjust life insurance
benefits and vary premium payments.
The Death Benefit may, and the Accumulation Value will, vary with the investment
experience of the chosen Subaccounts of the Account. Thus the Policyowner
benefits from any appreciation in value of the underlying assets, but bears the
investment risk of any depreciation in value. As a result, whether or not a
Policy continues in force may depend in part upon the investment experience of
the chosen Subaccounts. The failure to pay a planned periodic premium will not
necessarily cause the Policy to lapse, but the Policy could lapse even if
planned periodic premiums have been paid, depending upon the investment
experience of the Account. ALIC agrees to keep the Policy in force during the
first three years and provide a Guaranteed Death Benefit during that period so
long as the cumulative monthly Guaranteed Death Benefit Premium is paid even
though the Guaranteed Death Benefit Premium allowed by contract may not, after
the payment of monthly insurance and administrative charges, generate positive
Net Cash Surrender Values.
DEATH BENEFIT PROCEEDS
As long as the Policy remains in force, ALIC will, upon satisfactory proof of
the Insured's death, pay the Death Benefit Proceeds of a Policy in accordance
with the death benefit option in effect at the time of the Insured's death. The
amount of the death benefits payable will be determined at the end of the
Valuation Period during which the Insured's death occurred. The Death Benefit
Proceeds may be paid in a lump sum or under one or more of the payment options
set forth in the Policy. (See Payment Options, page 18.)
<PAGE>
Death Benefit Proceeds will be paid to the surviving beneficiary or
beneficiaries specified in the application or as subsequently changed. If no
beneficiary is chosen, the proceeds will be paid to the Policyowner's estate.
DEATH BENEFIT OPTIONS
The Policy provides two Death Benefit options and the Policyowner selects one of
the options in the application. The Death Benefit under either option will never
be less than the current Specified Amount of the Policy as long as the Policy
remains in force (see Policy Lapse and Reinstatement, page 23). The minimum
initial Specified Amount is currently $100,000. Defined differences, assisted by
graphic illustrations are as follows:
OPTION A.
[GRAPHIC OMITTED] (OMITTED GRAPH ILLUSTRATES PAYOUT UNDER DEATH BENEFIT OPTION
A, SPECIFICALLY BY SHOWING THE RELATIONSHIP, OVER TIME, BETWEEN THE SPECIFIED
AMOUNT AND THE ACCUMULATION VALUE.)
Death Benefit Option A. Pays a Face Amount of Death Benefit equal to the
Specified Amount or the Accumulation Value multiplied by the Death Benefit Ratio
(as illustrated at Point A) whichever is greater.
Under Option A, the Death Benefit is the current Specified Amount of the Policy
or, if greater, the applicable percentage of Accumulation Value on the date of
death. The applicable percentage is 250% for Insureds with an attained age 40 or
younger on the policy anniversary prior to the date of death. For Insureds with
an attained age over 40 on that policy anniversary, the percentage declines. For
example, the percentage at age 40 is 250%, at age 50 is 185%, at age 60 is 130%,
at age 70 is 115%, at age 80 is 105%, and at age 95 is 100%. Accordingly, under
Option A the Death Benefit will remain level at the Specified Amount unless the
applicable percentage of Accumulation Value exceeds the current Specified
Amount, in which case the amount of the Death Benefit will vary as the
Accumulation Value varies. Policyowners who prefer to have favorable investment
performance, if any, reflected in higher Accumulation Value, rather than
increased insurance coverage, generally should select Option A.
OPTION B.
[GRAPHIC OMITTED] (OMITTED GRAPH ILLUSTRATES PAYOUT UNDER DEATH BENEFIT OPTION
B, SPECIFICALLY BY SHOWING THE RELATIONSHIP, OVER TIME, BETWEEN THE SPECIFIED
AMOUNT AND THE ACCUMULATION VALUE.)
Death Benefit Option B. Pays a Face Amount of Death Benefit equal to the
Specified Amount plus the Policy's Accumulation Value or the Accumulation Value
multiplied by the Death Benefit Ratio, whichever is greater.
<PAGE>
Under Option B, the death benefit is equal to the current Specified Amount plus
the Accumulation Value of the Policy or, if greater, the applicable percentage
of the Accumulation Value on the date of death. The applicable percentage is the
same as under Option A: 250% for Insureds with an attained age 40 or younger on
the policy anniversary prior to the date of death, and for Insureds with an
attained age over 40 on that policy anniversary the percentage declines.
Accordingly, under Option B the amount of the death benefit will always vary as
the Accumulation Value varies (but will never be less than the Specified
Amount). Policyowners who prefer to have favorable investment performance, if
any, reflected in increased insurance coverage, rather than higher Accumulation
Values, generally should select Option B.
CHANGE IN DEATH BENEFIT OPTION. The Death Benefit option may be changed once per
year after the first policy year by sending ALIC a written request. The
effective date of such a change will be the monthly activity date on or
following the date the change is approved by ALIC. A change may have Federal Tax
consequences.
If the Death Benefit option is changed from Option A to Option B, the Death
Benefit after the change will equal the Specified Amount before the change plus
the Accumulation Value on the effective date of the change and will require
evidence of insurability before the change is made. If the death benefit option
is changed from Option B to Option A, the Specified Amount under Option A after
the change will equal the death benefit under Option B on the effective date of
change.
No charges will be imposed upon a change in Death Benefit option, nor will such
a change in and of itself result in an immediate change in the amount of a
Policy's Accumulation Value. However, a change in the Death Benefit option may
affect the monthly cost of insurance charge since this charge varies with the
Net Amount at Risk, which is the amount by which the Death Benefit that would be
payable on a monthly activity date exceeds the Accumulation Value on that date.
Changing from Option B to Option A will generally decrease, in the future, the
Net Amount at Risk, and therefore the cost of insurance charges. Changing from
Option A to Option B will increase the Net Amount at Risk. Such a change will
result in an immediate increase in the cost of insurance charges because of the
increased coverage. (See Charges and Deductions, page 24 and Federal Tax
Matters, page 29.)
CHANGE IN SPECIFIED AMOUNT. Subject to certain limitations, after the first
policy year, a Policyowner may increase or decrease the Specified Amount of a
Policy. A change in Specified Amount may affect the cost of insurance rate and
the Net Amount at Risk, both of which may affect a Policyowner's cost of
insurance charge and have Federal Tax consequences. (See Charges and Deductions,
page 24 and Federal Tax Matters, page 29.)
Any increase or decrease in the Specified Amount will become effective on the
Monthly Activity Date on or next following the date a written request is
approved by ALIC. The Specified Amount of a Policy may be changed only once per
year and ALIC may limit the size of a change in a policy year. The Specified
Amount remaining in force after any requested decrease may not be less than
$100,000 in the first three policy years and $75,000 thereafter. In addition, if
following the decrease in Specified Amount, the Policy would not comply with the
maximum premium limitations required by Federal Tax Law (See Premiums, page 22),
the decrease may be limited or Accumulation Value may be returned to the
Policyowner at the Policyowner's election, to the extent necessary to meet these
requirements.
Increases in the Specified Amount will be allowed after the first policy year.
For an increase in the Specified Amount, a written supplemental application must
be submitted. ALIC may also require additional evidence of insurability.
Although an increase need not necessarily be accompanied by an additional
premium, in certain cases an additional premium will be required to effect the
requested increase. (See Premiums upon Increases in Specified Amount, page 23).
The minimum amount of any increase is $25,000, and an increase cannot be made if
the Insured's attained age is over 80. An increase in the Specified Amount will
result in certain increased charges, which will be deducted from the
Accumulation Value of the Policy on each Monthly Activity Date. An increase in
the Specified Amount during the time the Guaranteed Death Benefit provision is
in effect will increase the premium requirements for that provision. (See
Charges and Deductions, page 24.)
<PAGE>
METHODS OF AFFECTING INSURANCE PROTECTION
A Policyowner may increase or decrease the pure insurance protection (Net Amount
at Risk) provided by a Policy - the difference between the Death Benefit and the
Accumulation Value - in several ways as insurance needs change. These ways
include increasing or decreasing the Specified Amount of insurance, changing the
level of premium payments, and making a Partial Withdrawal of the Policy's
Accumulation Value. Certain of these changes may have Federal Tax consequences.
The consequences of each of these methods will depend upon the individual
circumstances.
DURATION OF THE POLICY
The duration of the Policy generally depends upon the Accumulation Value. The
Policy will remain in force so long as the Net Cash Surrender Value is
sufficient to pay the monthly deduction. (See Charges Deducted from Accumulation
Value, page 24.) Where, however, the Net Cash Surrender Value is insufficient to
pay the monthly deduction and the grace period expires without an adequate
payment by the Policyowner, the Policy will lapse and terminate without value.
(See Policy Lapse and Reinstatement, page 23.) ALIC agrees to keep the policy in
force during the first three years and provide a Guaranteed Death Benefit so
long as the cumulative Guaranteed Death Benefit premium is paid. (See Additional
Insurance Benefits, page 28)
ACCUMULATION VALUE
The Policy's Accumulation Value in the Account or the Fixed Account will reflect
the investment performance of the chosen Subaccounts of the Account or the Fixed
Account, the net premiums paid, any Partial Withdrawals, and the charges
assessed in connection with the Policy. A Policyowner may at any time surrender
the Policy and receive the Policy's Net Cash Surrender Value. (See Surrenders,
page 20.) There is no guaranteed minimum Accumulation Value.
DETERMINATION OF ACCUMULATION VALUE. Accumulation Value is determined on each
Valuation Date. On the policy Issue Date, the Accumulation Value in a Subaccount
will equal the portion of any net premium allocated to the Subaccount, reduced
by the portion of the first monthly deductions allocated to that Subaccount.
(See Allocation of Premiums and Accumulation Value, page 23.) Thereafter, on
each Valuation Date, the Accumulation Value of a Policy will equal:
(a) The aggregate of the values attributable to the Policy in each of the
Subaccounts on the Valuation Date, determined for each Subaccount by
multiplying the Subaccount's unit value by the number of Subaccount units
allocated to the Policy; plus
(b) The value of the Fixed Account; plus
(c) Any Accumulation Value impaired by policy debt held in the General Account;
plus
(d) Any net premiums received on that Valuation Date; less
(e) Any Partial Withdrawal, and its charge, made on that Valuation Date; less
(f) Any monthly deduction to be made on that Valuation Date; less
(g) Any federal or state income taxes charged against the Accumulation Value.
In computing the Policy's Accumulation Value, the number of Subaccount units
allocated to the Policy is determined after any transfers among Subaccounts, or
the Fixed Account, (and deduction of transfer charges) but before any other
Policy transactions, such as receipt of net premiums and Partial Withdrawals, on
the Valuation Date. Because the Accumulation Value is dependent upon a number of
variables, a Policy's Accumulation Value cannot be predetermined.
<PAGE>
THE UNIT VALUE. The unit value of each Subaccount reflects the investment
performance of that Subaccount. The unit value of each Subaccount shall be
calculated by (i) multiplying the per share net asset value of the corresponding
Fund portfolio on the Valuation Date times the number of shares held by the
Subaccount, before the purchase or redemption of any shares on that date; minus
(ii) a charge not exceeding an annual rate of .90% for mortality and expense
risk; and (iii) dividing the result by the total number of units held in the
Subaccount on the Valuation Date, before the purchase or redemption of any units
on that date. (See Daily Charges Against the Account, page 26.)
BENEFITS AT MATURITY
If the Insured is living, ALIC will pay the Net Cash Surrender Value of the
Policy on the Maturity Date to the Policyowner. The Policy will mature on the
policy anniversary nearest the Insured's 100th birthday, if living.
PAYMENT OF POLICY BENEFITS
Death Benefit Proceeds under the Policy will usually be paid within seven days
after ALIC receives Satisfactory Proof of Death. Accumulation Value benefits
will ordinarily be paid within seven days of receipt of a written request.
Payments may be postponed in certain circumstances. (See Postponement of
Payments, page 27.) The Policyowner may decide the form in which the benefits
will be paid. During the Insured's lifetime, the Policyowner may arrange for the
Death Benefit Proceeds to be paid in a lump sum or under one or more of the
optional methods of payment described below. Changes must be in writing and will
revoke all prior elections. These choices are also available if the Policy is
surrendered or matures. If no election is made, ALIC will pay the benefits in a
lump sum. When death benefits are payable in a lump sum and no election for an
optional method of payment is in force at the death of the Insured, the
beneficiary may select one or more of the optional methods of payment. Further,
if the Policy is assigned, any amounts due to the assignee will first be paid in
one sum. The balance, if any, may be applied under any payment option. Once
payments have begun, the payment option may not be changed.
PAYMENT OPTIONS. The minimum amount of each payment is $100. If a payment would
be less than $100 ALIC has the right to make payments less often so that the
amount of each payment is at least $100. Once a payment option is in effect, the
proceeds will be transferred to ALIC's general account. ALIC may make other
payment options available in the future. For additional information concerning
these options, see the Policy itself. The following payment options are
currently available:
OPTION AI--INTEREST PAYMENT OPTION. ALIC will hold any amount applied under this
option. Interest on the unpaid balance will be paid or credited each month at a
rate determined by ALIC.
OPTION AII--FIXED AMOUNT PAYABLE OPTION. Each payment will be for an agreed
fixed amount. Payments continue until the amount ALIC holds runs out.
OPTION B--FIXED PERIOD PAYMENT OPTION. Equal payments will be made for any
period selected up to 20 years.
OPTION C--LIFETIME PAYMENT OPTION. Equal monthly payments are based on the life
of a named person. Payments will continue for the lifetime of that person.
Variations provide for guaranteed payments for a period of time.
OPTION D--JOINT LIFETIME PAYMENT OPTION. Equal monthly payments are based on the
lives of two named persons. While both are living, one payment will be made each
month. When one dies, the same payment will continue for the lifetime of the
other.
As an alternative to the above payment options, the proceeds may be paid in any
other manner approved by ALIC.
<PAGE>
POLICY RIGHTS
LOAN BENEFITS
LOAN PRIVILEGES. After the first policy anniversary, the Policyowner may borrow
up to 100% of the Net Cash Surrender Value after adjustment for loan interest
and guaranteed monthly deductions for the remainder of the policy year. The
loans will be made at regular and, as described below, reduced loan interest
rates. Loans usually are funded within seven days after receipt of a written
request. The loan may be repaid at any time while the Insured is living, prior
to the Maturity Date. Loans may have a tax consequence. (See Federal Tax
Matters, page 29).
LOAN INTEREST. ALIC charges interest to Policyowners at regular and reduced
rates. Regular loans will accrue interest on a daily basis at a rate of up to 6%
per year. ALIC is currently charging 5.5% on regular loans. If unpaid when due,
interest will be added to the amount of the loan and bear interest at the same
rate. After the later of age 55 or the tenth policy anniversary, the Policyowner
may borrow each year a limited amount of the Accumulation Value of the Policy at
a reduced interest rate. Interest will accrue on a daily basis at a rate of up
to 4% per year. ALIC is currently charging 3.5% interest on reduced rate loans.
The amount available at the reduced rate is 10% of the Accumulation Value as of
the later of age 55 or the 10th policy anniversary (the start date) times the
number of years since the start date, increased by the accrued interest charges
on the reduced loan amount.
EFFECT OF POLICY LOANS. When a loan is made, Accumulation Value equal to the
amount of the loan will be transferred from the Account and/or the Fixed Account
to the General Account of ALIC as security for the indebtedness. The Policyowner
earns 3.5% interest on the Accumulation Values securing the loans. The
Accumulation Value transferred out of the Account will be allocated among the
Subaccounts or the Fixed Account in accordance with the instructions given when
the loan is requested. The minimum amount which can remain in a Subaccount or
the Fixed Account as a result of a loan is $100. If no instructions are given
the amounts will be withdrawn in proportion to the various Accumulation Values
in the Subaccounts or the Fixed Account. If loan interest is not paid when due
in any Policy Year, on the Policy Anniversary thereafter, ALIC will loan the
interest and allocate the amount transferred to secure the excess indebtedness
among the Subaccounts and the Fixed Account as set out just above. No charge
will be imposed for these transfers. A policy loan will permanently affect the
Accumulation Value of a Policy, and may permanently affect the amount of the
Death Benefits Proceeds, even if the loan is repaid.
Interest earned on amounts held in the general account will be allocated to the
Subaccounts and the Fixed Account on each policy anniversary in the same
proportion that net premiums are being allocated to those Subaccounts and the
Fixed Account at the time. Upon repayment of indebtedness, the portion of the
repayment allocated in accordance with the repayment of indebtedness provision
(see below) will be transferred to increase the Accumulation Value in that
Subaccount or the Fixed Account.
OUTSTANDING POLICY DEBT. The outstanding policy debt equals the total of all
policy loans and accrued interest on policy loans. If the policy debt exceeds
the Accumulation Value, and any accrued expenses, the Policyowner must pay the
excess. ALIC will send a notice of the amount which must be paid. If the
Policyowner does not make the required payment within the 61 days after ALIC
sends the notice, the Policy will terminate without value. Should the policy
lapse while policy loans are outstanding the portion of the loans attributable
to earnings will become taxable. A Policyowner may lower the risk of a policy
lapsing while loans are outstanding as a result of a reduction in the market
value of investments in the various Subaccounts by investing in a diversified
group of lower risk investment portfolios and/or transferring the funds to the
Fixed Account and receiving a guaranteed rate of return. Should a substantial
reduction be experienced, the Policyowner may need to lower anticipated Partial
Withdrawals and loans, repay loans, make additional premium payments, or take
other action to avoid policy lapse. A lapsed Policy may later be reinstated.
(See Policy Lapse and Reinstatement, page 23.)
REPAYMENT OF INDEBTEDNESS. Unscheduled premiums paid while a policy loan is
outstanding are treated as repayment of indebtedness only if the Policyowner so
requests. As indebtedness is repaid, the Accumulation Value in the general
account securing the indebtedness repaid will be allocated among the Subaccounts
and the Fixed Account in the same proportion that net premiums are being
allocated at the time of repayment.
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SURRENDERS
At any time during the lifetime of the Insured and prior to the Maturity Date,
the Policyowner may Surrender the Policy by sending a written request to ALIC.
The amount available for Surrender is the Net Cash Surrender Value at the end of
the Valuation Period during which the Surrender request is received at ALIC's
Home Office. Surrenders will generally be paid within seven days of receipt of
the written request. (See Postponement of Payments, page 27.) Surrenders may
have tax consequences. (See Tax Treatment of Policy Proceeds, page 30.)
If the Policy is being surrendered, the Policy itself must be returned to ALIC
along with the request. ALIC will pay the Net Cash Surrender Value. Coverage
under the Policy will terminate as of the date of a Surrender. A Policyowner may
elect to have the amount paid in a lump sum or under a payment option. (See
Payment Options, page 18.)
PARTIAL WITHDRAWALS
Partial withdrawals are irrevocable. The amount of a Partial Withdrawal may
not exceed the Net Cash Surrender Value on the date the request is received
and may not be less than $500. The Net Cash Surrender Value after a Partial
Withdrawal must be the greater of $1,000 or an amount sufficient to maintain
the policy in force for the remainder of the policy year.
The amount paid will be deducted from the Subaccounts or the Fixed Account
according to the instructions of the Policyowner when the Partial Withdrawal is
requested, provided that the minimum amount remaining in a Subaccount as a
result of the allocation is $100. If no instructions are given, the amounts will
be withdrawn in proportion to the various Accumulation Values in the Subaccounts
and/or Fixed Account.
The Death Benefit will be reduced by the amount of any Partial Withdrawal and
may affect the way in which the cost of insurance charge is calculated and the
Net Amount at Risk under the Policy. (See Monthly Deduction - Cost of Insurance,
page 25; Death Benefit Options--Methods of Affecting Insurance Protection, page
17.) If Option B is in effect, the Specified Amount will not change, but the
Accumulation Value will be reduced.
The Specified Amount remaining in force after a Partial Withdrawal may not be
less than $100,000 during the first three policy years and $75,000 thereafter.
Any request for a Partial Withdrawal that would reduce the Specified Amount
below this amount will not be implemented. A Partial Withdrawal charge not to
exceed the lesser of $50 or 2% of the amount withdrawn is deducted from each
Partial Withdrawal amount paid. Currently, the charge is the lesser of $25 or 2%
of the amount withdrawn. (See Partial Withdrawal Charge, page 26.)
TRANSFERS
Accumulation Value may be transferred among the Subaccounts of the Account and
to the Fixed Account as often as desired. The transfers may be ordered in
person, by mail or by telephone. The total amount transferred each time must be
at least $250, or the balance of the Subaccount, if less. During the 30-day
period following the Policy Anniversary Date, transfers may be made from the
Fixed Account to various Subaccounts. The amount that may be transferred is
limited to the greater of: 25% of the Accumulation Value of the Fixed Account;
the amount of any transfer from the Fixed Account during the prior thirteen
months; or $1,000. The minimum amount that may remain in a Subaccount or the
Fixed Account after a transfer is $100.
The privilege to initiate transactions by telephone will be made available to
Policyowners automatically. ALIC will employ reasonable procedures to confirm
that instructions communicated by telephone are genuine, and if it does not,
ALIC may be liable for any losses due to unauthorized or fraudulent
instructions. The procedures ALIC follows for transactions initiated by
telephone include requiring the Policyowner to provide the policy number at the
time of giving transfer instructions; ALIC's tape recording of all telephone
transfer instructions; and the provision, by ALIC, of written confirmation of
telephone transactions.
The first fifteen transfers per policy year will be permitted free of charge.
Thereafter, a transfer charge of $10 may be imposed each additional time amounts
are transferred and will be deducted from the amount transferred. (See Transfer
Charge, page 25.) Transfers resulting from policy loans or exercise of the
exchange privilege will not be subject to a transfer charge. ALIC may at any
time revoke or modify the transfer privilege, including the minimum amount
transferable.
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The Policy's transfer privilege is not intended to afford Policyowners a way to
speculate on short-term movements in the market. Accordingly, in order to
prevent excessive use of the transfer privilege that may potentially disrupt the
management of the Account and increase transaction costs, the Account has
established a policy of limiting excessive transfer activity.
You may make two substantive transfers from each Portfolio (at least 30 days
part) during any calendar year. A substantive transfer is a transfer from a
Subaccount for the lesser of: i) 51% of the Accumulation Value or ii) $100,000.
This restriction does not limit non-substantive transfers and does not apply to
transfers from the Money Market portfolio. All transfers must be for at least
$250, or, if less, the balance of the Subaccount.
Transfers may be subject to additional restrictions at the fund level.
REFUND PRIVILEGE
The Policyowner may cancel the Policy within 10 days after the Policyowner
receives it, within 10 days after ALIC delivers a notice of the Policyowner's
right of cancellation, or within 45 days of completing Part I of the
application, whichever is later. If a Policy is cancelled within this time
period the refund will be the greater of the premium paid or the premium paid
adjusted by investment gains or losses.
To cancel the Policy, the Policyowner must mail or deliver the policy and the
notice of cancellation to ALIC at the Home Office. Delivery to an agent is not
sufficient. A refund of premiums paid by check may be delayed until the check
has cleared the Policyowner's bank. (See Postponement of Payments, page 27.)
EXCHANGE PRIVILEGE
During the first 24 policy months after the Policy Date of the Policy, the
Policyowner may exchange the Policy for a flexible premium adjustable life
insurance policy approved for exchange and issued by ALIC. No new evidence of
insurability will be required.
The Policy Date, Issue Age and risk classification for the Insured will be the
same under the new Policy as under the old. In addition, the policy provisions
and applicable charges for the new Policy and its riders will be based on the
same Policy Date and Issue Age as under the Policy. Accumulation Values for the
exchange and payments will be established after making adjustments for
investment gains or losses and after recognizing variance, if any, between
payment or charges, dividends or Accumulation Values under the flexible contract
and under the new Policy. The Policyowner may elect either the same Specified
Amount or the same net amount at risk for the new Policy as under the old.
To make the change, the Policy, a completed application for exchange and any
required payment must be received by ALIC. The exchange will be effective on the
Valuation Date when all financial and contractual arrangements for the new
Policy have been completed.
PAYMENT AND ALLOCATION OF PREMIUMS
ISSUANCE OF A POLICY
Individuals wishing to purchase a Policy must complete an application and submit
it to ALIC. A Policy will generally be issued only to individuals 80 years of
age or less on their nearest birthday who supply satisfactory evidence of
insurability to ALIC. ALIC may, at its sole discretion, issue a Policy to an
individual above the age of 80. Acceptance is subject to ALIC's underwriting
rules, and ALIC reserves the right to reject an application for any reason.
The Policy Date is the effective date of coverage for all coverage applied for
in the original application. The Policy Date is used to determine policy
anniversary dates, policy years and policy months. The Policy Date and the Issue
Date will be the same unless: 1) an earlier Policy Date is specifically
requested, or 2) the Issue Date is later because additional premiums or
application amendments were needed. When there are additional
<PAGE>
requirements before issue (see below) the Policy Date will be the date it is
sent for delivery and the Issue Date will be the date the requirements are met.
The Issue Date is the date that all financial, contractual and administrative
requirements have been met and processed for the Policy. When all required
premiums and application amendments have been received by ALIC in its Home
Office, the Issue Date will be the date the Policy is mailed to the Policyowner
or sent to the agent for delivery to the Policyowner. When application
amendments or additional premiums need to be obtained upon delivery of the
Policy, the Issue Date will be when the policy receipt and Federal Funds are
received; and the application amendments are received and reviewed in ALIC's
Home Office. The initial premium payment will be allocated to the Money Market
Portfolio of the Vanguard Variable Insurance Fund as of the issue date, for 13
days. After the expiration of the refund period, the Accumulation Value will be
allocated to the Subaccounts or the Fixed Account as selected by the
Policyowner.
Interim conditional insurance coverage may be issued prior to the policy date,
provided that certain conditions are met. Upon the completion of an application
and the payment of the required amount at the time of the application, the
amount of the interim coverage is limited to the smaller of: (a) the amount of
insurance applied for, (b) $100,000, or (c) $25,000 if the proposed Insured is
under age 10 or over age 60 at nearest birthday.
PREMIUMS
No insurance will take effect before an amount equal to or greater than the
minimum initial premium is received by ALIC in Federal Funds. The minimum
initial premium is 25% of the total first year charges and deductions including
charges for riders and any substandard risk adjustments. The minimum initial
premium is less than the Guaranteed Death Benefit Premium. Subsequent premiums
are payable at ALIC's Home Office.
Subject to certain limitations, a Policyowner has flexibility in determining the
frequency and amount of premiums. However, unless the Policyowner has paid
sufficient premiums to pay the cost of insurance, the monthly maintenance and
mortality and expense risk charges, the Policy may have a zero Net Cash
Surrender Value and lapse. ALIC agrees to keep the Policy in force during the
first three years and provide a Guaranteed Death Benefit so long as the
cumulative monthly Guaranteed Death Benefit Premium is paid even though, in
certain instances, these premiums may not, after the payment of monthly
insurance and administrative charges, generate positive Net Cash Surrender
Values. (See Additional Insurance Benefits (Riders), page 28.)
PLANNED PERIODIC PREMIUMS. At the time the Policy is issued each Policyowner may
determine a Planned Periodic Premium schedule that provides for the payment of
level premiums at selected intervals. The Planned Periodic Premium schedule may
include the Guaranteed Death Benefit Premium. The Policyowner is not required to
pay premiums in accordance with this schedule. The Policyowner has considerable
flexibility to alter the amount and frequency of premiums paid. ALIC does
reserve the right to limit the number and amount of additional or unscheduled
premium payments.
Policyowners can also change the frequency and amount of Planned Periodic
Premiums by sending a written request to the Home Office, although ALIC reserves
the right to limit any increase. Premium payment notices will be sent annually,
semi-annually or quarterly, depending upon the frequency of the Planned Periodic
Premiums. Payment of the Planned Periodic Premiums does not guarantee that the
Policy remains in force unless the Guaranteed Death Benefit provision is in
effect. Instead, the duration of the Policy depends upon the Policy's Net Cash
Surrender Value. (See Duration of the Policy, page 17.) Unless the Guaranteed
Death Benefit provision is in effect, even if Planned Periodic Premiums are paid
by the Policyowner, the Policy will lapse any time the Net Cash Surrender Value
is insufficient to pay certain monthly charges, and a grace period expires
without a sufficient payment. (See Policy Lapse and Reinstatement, page 23.)
PREMIUM LIMITATIONS. In no event may the total of all premiums paid, both
planned and unscheduled, exceed the current maximum premium limitations
established by federal tax laws.
<PAGE>
If at any time a premium is paid which would result in total premiums exceeding
the current maximum premium limitation, ALIC will only accept that portion of
the premium which will make total premiums equal the maximum. Any part of the
premium in excess of that amount will be returned or applied as otherwise agreed
and no further premiums will be accepted until allowed by the current maximum
premium limitations prescribed by law. ALIC may require additional evidence of
insurability if any premium payment would result in an increase in the Policy's
net amount at risk on the date the premium is received.
PREMIUMS UPON INCREASES IN SPECIFIED AMOUNT. Depending upon the Accumulation
Value of the Policy at the time of an increase in the Specified Amount of the
Policy and the amount of the increase requested by Policyowner, an additional
premium payment may be required. ALIC will notify the Policyowner of any premium
required to fund the increase. This required premium must be made as a single
payment. The Accumulation Value of the Policy will immediately be increased by
the amount of the payment, less the applicable premium charge.
ALLOCATION OF PREMIUMS AND ACCUMULATION VALUE
ALLOCATION OF NET PREMIUMS. In the application for a Policy, the Policyowner
allocates net premiums to one or more Subaccounts of the Account or to the Fixed
Account. The minimum percentage that may be allocated to any one Subaccount or
to the Fixed Account is 10% of the net premium, and fractional percentages may
not be used. The allocations must total 100%. The allocation for future net
premiums may be changed without charge by providing proper notification to the
Home Office. If there is any outstanding policy debt at the time of a payment,
ALIC will treat the payment as a premium payment unless otherwise instructed in
proper written notice.
The initial premium payment will be allocated to the Money Market portfolio of
the Vanguard Variable Insurance Fund as of the Issue Date, for 13 days.
Thereafter, the Accumulation Value will be allocated to the Subaccounts or the
Fixed Account as selected by the Policyowner. Premium payments received by ALIC
prior to the Issue Date are held in the general account until the Issue Date and
are credited with interest at a rate determined by ALIC for the period from the
date the payment has been converted into Federal Funds (monies of member banks
within the Federal Reserve System which are held on deposit at a Federal Reserve
Bank) that are available to ALIC. In no event will interest be credited prior to
the Policy Date.
ACCUMULATION VALUE. The value of the Subaccounts of the Separate Account will
vary with the investment performance of these Subaccounts and the Policyowner
bears the entire investment risk. This will affect the Policy's Accumulation
Value, and may affect the Death Benefit as well. Policyowners should
periodically review their allocations of premiums and values in light of market
conditions and overall financial planning requirements.
POLICY LAPSE AND REINSTATEMENT
LAPSE. Unlike conventional life insurance policies, the failure to make a
Planned Periodic Premium payment will not itself cause the Policy to lapse.
Lapse will occur when the Net Cash Surrender Value is insufficient to cover the
monthly deduction and a grace period expires without a sufficient payment unless
the Guaranteed Death Benefit provision is in effect. The grace period is 61 days
from the date ALIC mails a notice that the grace period has begun. ALIC will
notify the Policyowner at the beginning of the grace period by mail addressed to
the last known address on file with ALIC. The notice will specify the premium
required to keep the Policy in force. Failure to pay the required amount within
the grace period will result in lapse of the Policy. If the Insured dies during
the grace period, any overdue monthly deductions and outstanding policy debt
will be deducted from the proceeds.
If the Net Cash Surrender Value is insufficient to cover the monthly deduction,
the Policyowner must pay a premium during the grace period sufficient to cover
the monthly deductions and premium charges for the three policy months after
commencement of the grace period to avoid lapse. (See Charges and Deductions,
page 24).
<PAGE>
REINSTATEMENT. A lapsed Policy may be reinstated any time within three years
(five years in Missouri) from the beginning of the grace period, but before the
Maturity Date. Reinstatement will be effected based on the Insured's
underwriting classification at the time of the reinstatement.
Reinstatement is subject to the following:
a. Evidence of insurability of the Insured satisfactory to ALIC (including
evidence of insurability of any person covered by a rider to reinstate the
rider);
b. Any policy debt will be reinstated with interest due and accrued;
c. The Policy cannot be reinstated if it has been surrendered for its full
surrender value;
d. The payment of a premium sufficient to pay monthly and other policy
deductions for the three months following reinstatement and to pay premium
charges on the premiums paid; and
e. If the reinstatement occurs during the first three Policy Years, you may pay
premiums in the amount necessary to meet the cumulative monthly requirements
of the Guaranteed Death Benefit Premium as of the date of reinstatement.
The amount of Accumulation Value on the date of reinstatement will be equal to
the amount of the Net Cash Surrender Value on the date of lapse, increased by
the premium paid at reinstatement, less the premium charges and the amounts
stated above. If any policy debt was reinstated, that debt will be held in
ALIC's General Account. Accumulation Value calculations will then proceed as
described under "Accumulation Value" on page 17.
The effective date of reinstatement will be the first Monthly Activity Date on
or next following the date of approval by ALIC of the application for
reinstatement.
CHARGES AND DEDUCTIONS
Charges will be deducted in connection with the Policy to compensate ALIC for:
(1) providing the insurance benefits set forth in the Policy and any optional
insurance benefits added by rider; (2) administering the Policy; (3) assuming
certain risks in connection with the Policy; and (4) incurring expenses in
distributing the Policy. The nature and amount of these charges are described
more fully below.
DEDUCTIONS FROM PREMIUM PAYMENT
SALES CHARGE. There is no premium load to cover sales and distribution expenses.
PREMIUM CHARGES. A deduction of up to 5% (currently 3.5%) of the premium will be
made from each premium payment to pay state premium taxes (currently 2.5%) and
the expense of deferring the tax deduction of policy acquisition costs
(currently 1.0%). The deduction represents an amount ALIC considers necessary to
pay all premium taxes imposed by the states and their subdivisions and to defray
the cost of capitalizing certain policy acquisition expenses as required by
Internal Revenue Code Section 848. ALIC does not expect to derive a profit from
the premium charges.
As to state premium taxes, these vary from state to state and currently range
from .75 percent to 3.5 percent. Therefore, the deduction ALIC makes from each
premium payment may be higher or lower than the actual premium tax imposed by a
particular jurisdiction. The rate of tax imposed is subject to change by
governmental entity.
CHARGES DEDUCTED FROM ACCUMULATION VALUE
MONTHLY DEDUCTION. Charges will be deducted as of the Policy Date and on each
Monthly Activity Date thereafter from the Accumulation Value of the Policy to
compensate ALIC for administrative expenses and insurance provided. These
charges will be allocated among the Subaccounts, and the Fixed Account on a pro
rata basis. Each of these charges is described in more detail below.
<PAGE>
MAINTENANCE CHARGE. To compensate ALIC for the ordinary administrative expenses
expected to be incurred in connection with a Policy, the monthly deduction
includes a $9.00 per policy charge (currently $9.00 the first policy year and
the first 12 months following an increase in Specified Amount and $4.50 during
all other months). This maintenance charge is levied throughout the life of the
Policy and is guaranteed not to increase above $9.00 per month. ALIC does not
expect to make any profit from the monthly maintenance charge.
COST OF INSURANCE. Because the cost of insurance depends upon several variables,
the cost for each policy month can vary from month to month. ALIC will determine
the monthly cost of insurance charges by multiplying the applicable cost of
insurance rate by the Net Amount at Risk for each policy month. The Net Amount
at Risk on any Monthly Activity Date is the amount by which the Death Benefit
which would have been payable on that Monthly Activity Date exceeds the
Accumulation Value on that date.
COST OF INSURANCE RATE. The annual cost of insurance rate is based on the
Insured's sex, attained age, policy duration, Specified Amount, and risk class.
The rate will vary if the Insured is a smoker, non-smoker, a preferred
non-smoker or is considered a substandard risk and rated with a tabular extra
rating. For the initial Specified Amount, the cost of insurance rate will not
exceed those shown in the Table of Policy Charges shown in the schedule pages of
the Policy. These guaranteed rates are based on the Insured's age nearest
birthday and are equal to the 1980 Commissioners Standard Ordinary Smoker and
Non-Smoker, Male and Female Mortality Tables. The current rates range between
40% and 100% of the rates based on the 1980 Commissioners Standard Ordinary
Tables, based on ALIC's own mortality experience. Policies issued on a unisex
basis are based upon the 1980 Commissioners Standard Ordinary Table B assuming
80% male and 20% female lives. The cost of insurance rates, and payment options
for policies issued in Montana and certain other states are on a sex-neutral
(unisex) basis. Any change in the cost of insurance rates will apply to all
persons of the same age, sex, Specified Amount and risk class and whose policies
have been in effect for the same length of time.
If the underwriting class for any increase in the Specified Amount or for any
increase in Death Benefit resulting from a change in Death Benefit option from A
to B is not the same as the underwriting class at issue, the cost of insurance
rate for the increase will reflect the underwriting class which would apply for
such increase. Decreases will also be reflected in the cost of insurance rate as
discussed earlier.
The actual charges made during the policy year will be shown in the annual
report delivered to Policyowners.
RATE CLASS. The rate class of an Insured may affect the cost of insurance rate.
ALIC currently places Insureds into both standard rate classes and substandard
classes that involve a higher mortality risk. In an otherwise identical policy,
an Insured in the standard rate class will have a lower cost of insurance than
an Insured in a rate class with higher mortality risks. If a Policy is rated at
issue with a tabular extra rating, the guaranteed rate is a multiple of the
guaranteed rate for a standard issue. This multiple factor is shown in the
Schedule of Benefits in the Policy, and may be from 1.37 to 4 times the
guaranteed rate for a standard issue.
Insureds may also be assigned a flat extra rating to reflect certain additional
risks. The cost of insurance rate will be increased by the flat extra rating.
SURRENDER CHARGE
The policy has no surrender charge and may be surrendered at any time during the
Insured's lifetime for the policy's Net Cash Surrender Value. There is a charge,
however, for Partial Withdrawals. (See Partial Withdrawal Charge, page 26).
TRANSFER CHARGE
A transfer charge of $10.00 (guaranteed not to increase) may be imposed for each
additional transfer among the Subaccounts after fifteen per policy year to
compensate ALIC for the costs of effecting the transfer. Since the charge
reimburses ALIC for the cost of effecting the transfer only, ALIC does not
expect to make any profit from the transfer charge. This charge will be deducted
from the amount transferred. The transfer charge will not be imposed on
transfers that occur as a result of policy loans or the exercise of exchange
rights.
<PAGE>
PARTIAL WITHDRAWAL CHARGE
A charge currently not greater than the lesser of $25 or 2% of the amount
withdrawn (guaranteed not to be greater than the lesser of $50 or 2% of the
amount withdrawn) will be imposed for each Partial Withdrawal to compensate ALIC
for the administrative costs in effecting the requested payment and in making
necessary calculations for any reductions in Specified Amount which may be
required by reason of the Partial Withdrawal. A Partial Withdrawal charge is not
assessed when a Policy is surrendered.
DAILY CHARGES AGAINST THE ACCOUNT
A daily charge will be deducted from the value of the net assets of the Account
to compensate ALIC for mortality and expense risks assumed in connection with
the Policy. This daily charge from the Account is currently at the rate of
0.002049% (equivalent to an annual rate of 0.75%) and will not exceed 0.002459%
(equivalent to an annual rate of .90%) of the average daily net assets of the
Account. The daily charge will be deducted from the net asset value of the
Account, and therefore the Subaccounts, on each Valuation Date. Where the
previous day or days was not a Valuation Date, the deduction on the Valuation
Date will be 0.002049% (or 0.002459%, if applicable) multiplied by the number of
days since the last Valuation Date. No mortality and expense charges will be
deducted from the amounts in the Fixed Account.
ALIC believes that this level of charge is within the range of industry practice
for comparable flexible premium variable universal life policies.
The mortality risk assumed by ALIC is that Insureds may live for a shorter time
than assumed, and that an aggregate amount of death benefits greater than that
assumed accordingly will be paid. The expense risk assumed is that expenses
incurred in issuing and administering the policies will exceed the
administrative charges provided in the policies.
In addition to the charges against the account described just above, management
fees and expenses will be assessed by the Vanguard Variable Insurance Fund and
Neuberger & Berman Advisers Management Trust against the amounts invested in the
various portfolios. No portfolio fees will be assessed against amounts placed in
the Fixed Account.
TAXES. Currently, no additional charges are made against the Account for
federal, state or local income taxes. ALIC may, however, make such a charge in
the future if income or gains within the Account will incur any federal, or any
significant state or local income tax liability, or if the federal, state or
local tax treatment of ALIC changes. Charges for such taxes, if any, would be
deducted from the Account and/or the Fixed Account.
(See Federal Tax Matters, page 29.)
GENERAL PROVISIONS
THE CONTRACT. The Policy, the application, any supplemental applications, and
any riders, amendments or endorsements make up the entire contract. Only the
President, Vice President, Secretary or Assistant Secretary can modify the
Policy. Any changes must be made in writing, and approved by ALIC. No agent has
the authority to alter or modify any of the terms, conditions or agreements of
the Policy or to waive any of its provisions.
CONTROL OF POLICY. The Policyowner is as shown in the application or subsequent
written endorsement. Subject to the rights of any irrevocable beneficiary and
any assignee of record, all rights, options, and privileges belong to the
Policyowner, if living; otherwise to any successor-owner or owners, if living;
otherwise to the estate of the last owner to die.
BENEFICIARY. The Policyowner may name both primary and contingent beneficiaries
in the application. Payments will be shared equally among beneficiaries of the
same class unless otherwise stated. If a beneficiary dies before the Insured,
payments will be made to any surviving beneficiaries of the same class;
otherwise to any beneficiary(ies) of the next class; otherwise to the owner;
otherwise to the estate of the owner.
<PAGE>
CHANGE OF BENEFICIARY. The Policyowner may change the beneficiary by written
request at any time during the Insured's lifetime unless otherwise provided in
the previous designation of beneficiary. The change will take effect as of the
date the change is recorded at the Home Office. ALIC will not be liable for any
payment made or action taken before the change is recorded.
CHANGE OF OWNER OR ASSIGNMENT. In order to change the owner of the Policy or
assign Policy rights, an assignment of the Policy must be made in writing and
filed with ALIC at its Home Office. The change will take effect as of the date
the change is recorded at the Home Office, and ALIC will not be liable for any
payment made or action taken before the change is recorded. Payment of proceeds
is subject to the rights of any assignee of record. A collateral assignment is
not a change of ownership.
PAYMENT OF PROCEEDS. The proceeds are subject first to any indebtedness to ALIC
and then to the interest of any assignee of record. The balance of any Death
Benefit Proceeds shall be paid in one sum to the designated beneficiary unless
an Optional Method of Payment is selected. If no beneficiary survives the
Insured, the proceeds shall be paid in one sum to the Policyowner, if living;
otherwise to any successor-owner, if living; otherwise to the Policyowner's
estate. Any proceeds payable on the Maturity Date or upon full surrender shall
be paid in one sum unless an Optional Method of Payment is elected.
INCONTESTABILITY. The Policy or reinstated Policy is incontestable after it has
been in force for two years from the policy date (or reinstatement effective
date) during the lifetime of the Insured. An increase in the Specified Amount or
addition of a rider after the Policy Date shall be incontestable after such
increase or addition has been in force for two years from its effective date
during the lifetime of the Insured. However, this two year provision shall not
apply to riders that provide disability or accidental death benefits.
MISSTATEMENT OF AGE OR SEX. If the age or sex of the Insured or any person
insured by rider has been misstated, the amount of the death benefit will be
adjusted. The Death Benefit will be adjusted to the amount that would be
purchased by the most recent cost of insurance deductions using the correct cost
of insurance rate.
SUICIDE. Suicide within two years of the Policy Date is not covered by the
Policy unless otherwise provided by a state's Insurance law. If the Insured,
while sane or insane, commits suicide within two years after the policy date,
ALIC will pay only the premiums received less any Partial Withdrawals, the cost
for riders and any outstanding policy debt. If the Insured, while sane or
insane, commits suicide within two years after the effective date of any
increase in the Specified Amount, ALIC's liability with respect to such increase
will only be its total cost of insurance applied to the increase. The laws of
Missouri provide that death by suicide at any time is covered by the Policy, and
further that suicide by an insane person may be considered an accidental death.
POSTPONEMENT OF PAYMENTS. Payment of any amount upon Surrender, Partial
Withdrawals, policy loans, benefits payable at death or maturity, and transfers
may be postponed whenever: (i) the New York Stock Exchange is closed other than
customary weekend and holiday closings, or trading on the New York Stock
Exchange is restricted as determined by the Securities and Exchange Commission;
(ii) the Commission by order permits postponement for the protection of
Policyowners; (iii) an emergency exists, as determined by the Commission, as a
result of which disposal of securities is not reasonably practicable or it is
not reasonably practicable to determine the value of the Account's net assets;
or (iv) Surrender, loans or Partial Withdrawals from the Fixed Account may be
deferred for up to 6 months from the date of written request. Payments under the
Policy of any amounts derived from premiums paid by check may be delayed until
such time as the check has cleared the Policyowner's bank.
REPORTS AND RECORDS. ALIC will maintain all records relating to the Account and
will mail to the Policyowner, at the last known address of record, within 30
days after each Policy Anniversary, an annual report which shows the current
Accumulation Value, Net Cash Surrender Value, Death Benefit, premiums paid,
outstanding policy debt and other information. The Policyowner will also be sent
a periodic report for the Funds and a list of the portfolio securities held in
each portfolio of the Funds.
<PAGE>
ADDITIONAL INSURANCE BENEFITS (RIDERS)
Subject to certain requirements, one or more of the following additional
insurance benefits may be added to a Policy by rider. All riders are not
available in all states. The cost, if any, of additional insurance benefits will
be deducted as part of the monthly deduction. (See Charges Deducted From
Accumulation Value-Monthly Deduction, page 24.)
Accelerated Benefit Rider for Terminal Illness (Living Benefit Rider). Upon
satisfactory proof of terminal illness after the two-year contestable period (no
waiting period in certain states) ALIC will accelerate the payment of up to 50%
of the lowest scheduled Death Benefit as provided by eligible coverages, less an
amount up to two guideline level premiums.
Future premium allocations after the payment of the benefit must be allocated to
the Fixed Account. Payment will not be made for amounts less than $4,000 or more
than $250,000 on all policies issued by ALIC or its affiliates. ALIC may charge
the lesser of 2% of the benefit or $50 as a Partial Withdrawal charge to cover
the costs of administration.
Satisfactory proof of terminal illness must include a written statement from a
licensed physician who is not related to the Insured or the Policyowner stating
that the Insured has a non-correctable medical condition that, with a reasonable
degree of medical certainty, will result in the death of the Insured in less
than 12 months (6 months in certain states) from the physician's statement.
Further, the condition must first be diagnosed while the Policy was in force.
The accelerated benefit first will be used to repay any outstanding policy loans
and unpaid loan interest, and will also affect future loans, Partial
Withdrawals, and Surrender. The accelerated benefit will be treated as a lien
against the policy Death Benefit and will thus reduce the proceeds payable on
the death of the Insured. There is no extra premium for this rider.
CHILDREN'S PROTECTION RIDER. Provides for term insurance on the Insured's
children, as defined in the rider. Under the terms of the rider, the Death
Benefit will be payable to the named beneficiary upon the death of any insured
child. Upon receipt of proof of the Insured's death before the rider terminates,
the rider will be considered paid up for the term of the rider.
GUARANTEED INSURABILITY RIDER. Provides that the Policyowner can purchase
additional insurance for the Insured by increasing the Specified Amount of the
Policy at certain future dates without evidence of insurability.
WAIVER OF MONTHLY DEDUCTIONS ON DISABILITY. Provides, while the Insured is
disabled, for the waiver of monthly deduction for expense charges and the cost
of insurance charges including table ratings and flat extras for the policy and
all riders.
PAYOR WAIVER OF MONTHLY DEDUCTIONS ON DISABILITY. Provides, while the covered
person is disabled, for the waiver of monthly deductions for expense charges and
the cost of insurance charges including table ratings and flat extras for the
policy and all riders. This rider is available for Insureds ages 0 to 14.
COST RECOVERY RIDER. This rider allows a one time special Partial Withdrawal
without reducing the Specified Amount. There is no charge for this rider.
DISTRIBUTION OF THE POLICIES
Ameritas Investment Corp. ("Investment Corp."), a wholly-owned subsidiary of
ALIC will act as the principal underwriter of the Policies, pursuant to an
Underwriting Agreement between itself and ALIC. Investment Corp. was organized
under the laws of the State of Nebraska on December 29, 1983 and is a registered
broker/dealer pursuant to the Securities Exchange Act of 1934 and a member of
the National Association of Securities Dealers.
<PAGE>
There is no premium load to cover sales and distribution expenses. To the extent
that sales and distribution expenses are paid, if at all, ALIC will pay them
from its other assets or surplus in its general account, which include amounts
derived from mortality and expense risk charges and other charges made under the
Policy. Policies can be purchased directly from ALIC through Veritas, a
direct-to-consumer Division of ALIC, with salaried employees who are Registered
Representatives of Investment Corp. and who will not receive compensation
related to the purchase.
Policies can be purchased from field representatives who are Registered
Representatives of Investment Corp., or from Registered Representatives of other
registered broker-dealers authorized to sell the policies subject to applicable
law. In these situations, Investment Corp. or the other broker-dealer may
receive compensation in an amount no greater than 9% of the target first year
premium paid plus the first year cost of any riders, and 2% of excess first year
premium. In years thereafter, Investment Corp. or the other broker-dealer may
receive asset based compensation at an annualized rate of .1% per policy year of
the Net Cash Surrender Value. Investment Corp. or the other broker-dealer may
pass a portion of this compensation on to the Registered Representative or the
manager of the Registered Representative.
Upon any subsequent increase in Specified Amount or any subsequent increase in
riders, marketing allowances will also be paid based on the amount of the
increase in Specified Amount or increase in rider.
FEDERAL TAX MATTERS
The following discussion provides a general description of the federal income
tax considerations associated with the Policy. This discussion is not intended
as tax advice. No attempt has been made to consider in detail any applicable
state or other tax (except premium taxes, see discussion "Premium Charges," page
24) laws. Counsel and other competent advisors should be consulted for more
complete information before a Policy is purchased.
(a) TAXATION OF ALIC. After ALIC issues the Policies, ALIC believes it will be
taxed as a life insurance company under Part I of Subchapter L of the
Internal Revenue Code of 1986, (the "Code"). At that time, since the Account
is not an entity separate from ALIC, and its operations form a part of ALIC,
it will not be taxed separately as a "regulated investment company" under
Subchapter M of the Code. Net investment income and realized net capital
gains on the assets of the Account are reinvested and automatically retained
as a part of the reserves of the Policy and are taken into account in
determining the Death Benefit and Accumulation Value of the Policy. ALIC
believes that Account net investment income and realized net capital gains
will not be taxable to the extent that such income and gains are retained as
reserves under Policy.
ALIC does not currently expect to incur any additional federal income tax
liability attributable to the Account with respect to the sale of the
Policies. Accordingly, no charge is being made currently to the Account for
federal income taxes. If, however, ALIC determines that it may incur such
taxes attributable to the Account, it may assess a charge for such taxes
against the Account.
ALIC may also incur state and local taxes (in addition to premium taxes for
which a deduction from premiums is currently made). At present, they are not
charges against the Account. If there is a material change in state or local
tax laws, charges for such taxes attributable to the Account, if any, may be
assessed against the Account.
(b) TAX STATUS OF THE POLICY. The Code (section 7702) includes a definition of a
life insurance contract for federal tax purposes, which places limitations
on the amount of premiums that may be paid for the Policy and the
relationship of the Accumulation Value to the Death Benefit. ALIC believes
that the Policy meets the statutory definition of a life insurance contract.
If the Death Benefit of a Policy is increased or decreased, the applicable
definitional limitations may change. In the case of a decrease in the death
benefit, a Partial Withdrawal, a change from Option B to Option A, or any
other such change that reduces future benefits under the Policy during the
first 15 years after a Policy is issued and that results in a cash
distribution to the Policyowners in order for the Policy to continue
complying with the section 7702 definitional limitations on premiums and
Accumulation Values, such distributions will be taxable as ordinary income
to the Policyowner (to the extent of any gain in the Policy) as prescribed
in section 7702.
<PAGE>
The Code (section 7702A) also defines a "modified endowment contract" for
federal tax purposes which causes distributions to be taxed as ordinary
income to the extent of any gain. This Policy will become a "modified
endowment contract" if the premiums paid into the Policy fail to meet a
7-pay premium test as outlined in Section 7702A of the Code.
Certain benefits the Insured may elect under this Policy may be material
changes affecting the 7-pay premium test. These include changes in Death
Benefits and changes in the Specified Amount. Should the Policy become a
"modified endowment contract", Partial Withdrawal or Surrenders,
assignments, pledges, and loans (including loans to pay loan interest) under
the Policy will be taxable to the extent of any gain under the Policy. A 10%
penalty tax also applies to the taxable portion of any distribution prior to
the Insured's age 59 1/2 . The 10% penalty tax does not apply if the Insured
is disabled as defined under the Code or if the distribution is paid out in
the form of a life annuity on the life of the Insured or the joint lives of
the Insured and beneficiary. One may avoid a Policy becoming a modified
endowment contract by, among other things, not making excessive payments or
reducing benefits. Should one deposit excessive premiums during a policy
year, that portion that is returned by ALIC within 60 days after the Policy
Anniversary will reduce the premiums paid to avoid the Policy becoming a
modified endowment contract.
The Code (Section 817(h)) also authorizes the Secretary of the Treasury (the
"Treasury") to set standards by regulation or otherwise for the investments
of the Account to be "adequately diversified" in order for the Policy to be
treated as a life insurance contract for federal tax purposes. The Account,
through the Funds, intends to comply with the diversification requirements
prescribed by the Treasury in temporary regulations published in the Federal
Register on September 15, 1986, which affect how the Fund's assets may be
invested.
However, ALIC believes that the Funds will meet the diversification
requirements and ALIC will monitor compliance with this requirement. Thus,
ALIC believes that the Policy will be treated as a life insurance contract
for federal tax purposes.
In connection with the issuance of temporary regulations relating to the
diversification requirements, the Treasury announced that such regulations
do not provide guidance concerning the extent to which owners may direct
their investments to particular divisions of a separate account. Regulations
in this regard are expected in the near future. It is not clear what these
regulations will provide nor whether they will be prospective only. It is
possible that when regulations are issued, the Policy may need to be
modified to comply with such regulations. For these reasons, the Company
reserves the right to modify the Policy as necessary to prevent the
Policyowner from being considered the owner of the assets of the Separate
Account.
The following discussion assumes that the Policy will qualify as a life
insurance contract for federal tax purposes.
(c) TAX TREATMENT OF POLICY PROCEEDS. ALIC believes that the Policy will be
treated in a manner consistent with a fixed benefit life insurance policy
for federal income tax purposes. Thus, ALIC believes that the death benefit
payable will be excludable from the gross income of the beneficiary under
Section 101(a)(1) of the Code and the Policyowner will not be deemed to be
in constructive receipt of the Accumulation Value under the Policy until its
actual Surrender. However, in the event of certain cash distributions under
the Policy resulting from any change which reduces future benefits under the
Policy, the distribution will be taxed in whole or in part as ordinary
income (to the extent of gain in the Policy). See discussion above, "Tax
Status of the Policy."
ALIC also believes that loans received under a Policy will be treated as
indebtedness of the Policyowner and that no part of any loan under a Policy
will constitute income to the Policyowner so long as the Policy remains in
force, unless the Policy becomes a Modified Endowment Contract. Should the
policy lapse while policy loans are outstanding, the portion of the loans
attributable to earnings will become taxable. Generally, interest paid on
any loan under a Policy owned by an individual will not be tax-deductible.
In addition, interest on any loan under a Policy owned by a taxpayer and
covering the life of any individual who is an officer or is financially
interested in the business carried on by that taxpayer will not be tax
<PAGE>
deductible to the extent the aggregate amount of such loans with respect to
Policies covering such individual exceeds $50,000. Further, even as to
interest on loans up to $50,000 per such individual, such interest would not
be deductible if the Policy were deemed for federal tax purposes to be a
single premium life insurance contract. Policyowners should consult a
competent tax advisor as to whether the Policy would be so deemed.
The right to exchange the Policy for a flexible premium adjustable life
insurance policy (See Exchange Privilege, page 21), the right to change
owners (See General Provisions, page 26), and the provision for Partial
Withdrawals (See Surrenders, page 20) may have tax consequences depending on
the circumstances of such exchange, change, or Partial Withdrawal. Upon
Surrender or when maturity benefits are paid, if the amount received plus
any outstanding policy debt exceeds the total premiums paid, (the "basis"),
that are not treated as previously withdrawn by the Policyowner, the excess
generally will be taxed as ordinary income.
Federal estate and state and local estate, inheritance, and other tax
consequences of ownership or receipt of Policy proceeds depend on applicable
law and the circumstances of each Policyowner or beneficiary. In addition,
if the Policy is used in connection with tax-qualified retirement plans,
certain limitations prescribed by the Internal Revenue Service on, and rules
with respect to the taxation of, life insurance protection provided through
such plans may apply.
SAFEKEEPING OF THE ACCOUNT'S ASSETS
ALIC holds the assets of the Account. The assets are kept physically segregated
and held separate and apart from the General Account assets, except for the
Fixed Account. ALIC maintains records of all purchases and redemptions of Funds
shares by each of the Subaccounts.
VOTING RIGHTS
ALIC is the legal holder of the shares held in the Subaccounts of the Account
and as such has the right to vote the shares; to elect Directors of the Funds,
to vote on matters that are required by the 1940 Act and upon any other matter
that may be voted upon at a shareholders's meeting. To the extent required by
law, ALIC will vote all shares of the Funds held in the Account at regular and
special shareholder meetings of the Funds in accordance with instructions
received from Policyowners based on the number of shares held as of the record
date declared by the Fund's Board of Directors.
The number of Fund shares in a Subaccount for which instructions may be given by
a Policyowner is determined by dividing the Policy's Accumulation Value held in
that Subaccount by the net asset value of one share in the corresponding
portfolio of the Fund. Fractional shares will be counted. Fund shares held in
each Subaccount for which no timely instructions from Policyowners are received
and Fund shares held in each Subaccount which do not support Policyowner
interests will be voted by ALIC in the same proportion as those shares in that
Subaccount for which timely instructions are received. Voting instructions to
abstain on any item to be voted will be applied on a pro rata basis to reduce
the votes eligible to be cast. Should applicable federal securities laws or
regulations permit, ALIC may elect to vote shares of the Fund in its own right.
DISREGARD OF VOTING INSTRUCTION. ALIC may, if required by state insurance
officials, disregard voting instructions if those instructions would require
shares to be voted to cause a change in the subclassification or investment
objectives or policies of one or more of the Funds' Portfolios, or to approve or
disapprove an investment adviser or principal underwriter for the Funds. In
addition, ALIC itself may disregard voting instructions that would require
changes in the investment objectives or policies of any portfolio or in an
investment adviser or principal underwriter for the Funds, if ALIC reasonably
disapproves those changes in accordance with applicable federal regulations. If
ALIC does disregard voting instructions, it will advise Policyowners of that
action and its reasons for the action in the next annual report or proxy
statement to Policyowners.
<PAGE>
STATE REGULATION OF ALIC
ALIC, a mutual life insurance company organized under the laws of Nebraska, is
subject to regulation by the Nebraska Department of Insurance. On or before
March 1 of each year an NAIC convention blank covering the operations and
reporting on the financial condition of ALIC and the Account as of December 31
of the preceding year must be filed with the Nebraska Department of Insurance.
Periodically, the Nebraska Department of Insurance examines the liabilities and
reserves of ALIC and the Account and certifies their adequacy.
In addition, ALIC is subject to the insurance laws and regulations of other
states within which it is licensed or may become licensed to operate. The
policies offered by the Prospectus are available in the various states as
approved. Generally, the Insurance Department of any other state applies the
laws of the state of domicile in determining permissible investments.
EXECUTIVE OFFICERS AND DIRECTORS OF ALIC
Shows name and position(s) with ALIC followed by the principal occupations for
the last five years.***
LAWRENCE J. ARTH, DIRECTOR, CHAIRMAN OF THE BOARD, & CHEIF EXECUTIVE OFFICER*
Director, Chairman of the Board, President, Chief Executive Officer: Pathmark
Assurance Company, Bankers Life Nebraska Company, BLN Financial Services, Inc.;
Director, Chairman of the Board: Veritas Corp., Ameritas Investment Corp., FMA
Realty Inc., Ameritas Investment Advisors, Inc.; Director, Chairman of the
Board, Chief Executive Officer: Ameritas Variable Life Insurance Company;
Chairman, President, Chief Executive Officer: Lincoln Gateway Shopping Center,
Inc.; Director, Chairman of the Board, Chief Executive Officer: First Ameritas
Life Insurance Corp. of New York; Director: Ameritas Bankers Assurance Company,
Ameritas Managed Dental Plan, Inc.
KENNETH C. LOUIS, PRESIDENT AND CHIEF OPERATING OFFICER*
Director, President, Chief Operating Officer: Ameritas Variable Life Insurance
Company; Director: First Ameritas Life Insurance Corp. of New York, Ameritas
Investment Advisors, Inc., Ameritas Investment Corp., Veritas Corp., Ameritas
Bankers Assurance Company, Bankers Life Nebraska Company, BLN Financial
Services, Inc., FMA Realty, Inc., Lincoln Gateway Shopping Center, Inc.,
Pathmark Assurance Company, Ameritas Managed Dental Plan, Inc.
NORMAN M. KRIVOSHA, EXECUTIVE VICE PRESIDENT, SECRETARY AND CORPORATE GENERAL
COUNSEL*
Director, Secretary: Ameritas Investment Advisors Inc., Ameritas Investment
Corp., BLN Financial Services Inc., Ameritas Bankers Assurance Company,
Veritas Corp., Pathmark Assurance Company, Bankers Life Nebraska Company;
FMA Realty, Inc., Ameritas Variable Life Insurance Company, Ameritas Managed
Dental Plan, Inc.; Vice President, Secretary and General Counsel: First
Ameritas Life Insurance Corp. of New York; Secretary: Lincoln Gateway Shopping
Center, Inc.
JON C. HEADRICK, EXECUTIVE VICE PRESIDENT-INVESTMENTS AND TREASURER*
Treasurer to: Veritas Corp., Ameritas Bankers Assurance Company, Bankers
Life Nebraska Company, Pathmark Assurance Company, Ameritas Variable Life
Insurance Company, First Ameritas Life Insurance Corp. of New York, Ameritas
Managed Dental Plan, Inc.; Director, Vice President and Treasurer to: BLN
Financial Services Inc.; Director, President and Treasurer: FMA Realty Inc.;
Director, President, Chief Executive Officer and Treasurer: Ameritas Investment
Corp.; Director, President, Chief Executive Officer: Ameritas Investment
Advisors Inc.
JAMES P. ABEL, DIRECTOR**
President: NEBCO, Inc.
DUANE W. ACKLIE, DIRECTOR**
Chairman: Crete Carrier Corporation
ROBERT C. BARTH, SECOND VICE PRESIDENT AND ASSISTANT CONTROLLER*
<PAGE>
ROXANN BRENNFOERDER, VICE PRESIDENT-PENSIONS*
WAYNE E. BREWSTER, VICE PRESIDENT-VARIABLE SALES*
Vice President-Variable Sales: Ameritas Variable Life Insurance Company.
ROBERT W. BUSH, EXECUTIVE VICE PRESIDENT-INDIVIDUAL INSURANCE*
Chairman, President, CEO: CUNA Mutual Financial Services Corporation; CUNA
Brokerage Services, Inc.; Century Financial Services Corp.; CUNA Mutual General
Agency of Texas, Inc.; CM Field Services, Inc.; Plan America Program, Inc.;
Director: CU Financial and Insurance Services, Inc.; CUNA Mutual Insurance
Agency of Alabama, Inc.; CUNA Mutual Insurance Agency of Massachusetts, Inc.;
CUNA Mutual Life Insurance Agency of Mississippi, Ltd.; CUNA Mutual Casualty
Insurance Agency of Mississippi, Inc.; CUNA Mutual Insurance Agency of New
Mexico, Inc; CUNA Mutual Insurance Agency of Ohio, Inc.; Vice President: CUNA
Mutual Funds Management Company, L.L.C.; Senior Vice President: CUNA Mutual
Insurance Society; CUNA Mutual Investment Corporation; CUMIS Insurance Society,
Inc.; League General Insurance Company; Members Life Insurance Company; CUNA
Mutual Insurance Agency, Inc.; Century Life of America; Century Life Insurance
Co.
JAN M. CONNOLLY, VICE PRESIDENT-CORPORATE OPERATIONS, PLANNING AND QUALITY*
WILLIAM W. COOK, JR., DIRECTOR**
Chairman, President, Chief Executive Officer: The Beatrice National Bank and
Trust Co.
GERALD B. DIMON, VICE PRESIDENT-HUMAN RESOURCES*
BERT A. GETZ, DIRECTOR**
President, Director: Globe Corporation; Director: Security Pacific Bank Arizona,
Security Pacific Bancorp Southwest, Bancwest Mortgage Corp., Security Pacific
Corporation, Security Pacific National Bank, Ellsworth Financial Corp., Iliff,
Thorn & Co., CalMat Co., Dean Foods Company, Continental Bank, Continental Bank
Corp.; Advisory Director: Myers Craig Vallone Co.; Trustee: Mayo Foundation
JAMES R. HAIRE, SENIOR VICE PRESIDENT-CORPORATE ACTUARY AND STRATEGIC
DEVELOPMENT*
Director: Pathmark Assurance Co.; Director and Vice President: Ameritas
Variable Life Insurance Company, First Ameritas Life Insurance Corp.of New York
THOMAS D. HIGLEY, VICE PRESIDENT - INDIVIDUAL FINANCIAL OPERATIONS AND ACTUARY*
Vice President and Actuary: Ameritas Variable Life Insurance Company, First
Ameritas Life Insurance Corp. of New York; Director, Vice President and Actuary:
Ameritas Bankers Assurance Company
LESLIE D. INMAN, VICE PRESIDENT - GROUP STRATEGIC ALLIANCES*
National Sales Director, VP and National Marketing Manager: American Bankers
Insurance
STEVEN K. ISAACS, VICE PRESIDENT-GROUP FIELD SALES*
District Director-Sales; Regional Vice President-Sales: Fortis Benefits
MIKE JASKOLKA, SECOND VICE PRESIDENT - INFORMATION SERVICES*
MARTY L. JOHNSON, SECOND VICE PRESIDENT - INDIVIDUAL UNDERWRITING*
Reinsurance Underwriting Consultant: TransAmerica Occidental Life; Senior
Underwriter: Amaco Life Insurance Company
KENNETH R. JONES, VICE PRESIDENT, CORPORATE COMPLIANCE AND ASSISTANT SECRETARY*
Assistant Vice President and Assistant Secretary: Bankers Life Nebraska Company,
Pathmark Assurance Company; Vice President-Corporate Compliance and Assistant
Secretary: Ameritas Investment Advisors, Inc., Ameritas Investment Corp.,
Ameritas Variable Life Insurance Company, First Ameritas Life Insurance Corp.
of New York
JAMES R. KNAPP, DIRECTOR**
President: The Brookhollow Group; General Partner: Windsor Associates
ROBERT F. KROHN, DIRECTOR**
President: Krohn Corporation; Chairman of the Board: Commercial Federal Corpor-
ation
WILLIAM W. LESTER, VICE PRESIDENT-SECURITIES*
WILFRED J. MADDUX, DIRECTOR**
President, Manager: Maddux Cattle Company
JOANN M. MARTIN, SENIOR VICE PRESIDENT-CONTROLLER AND CHIEF FINANCIAL OFFICER*
Director: Ameritas Managed Dental Plan, Inc.; Comptroller to: Veritas Corp.
Bankers Life Nebraska Company, Pathmark Assurance Company; Director,
Treasurer: Lincoln Gateway Shopping Center Inc.; Director, Comptroller: Ameritas
Variable Life Insurance Company; Director, Comptroller, Assistant Secretary:
Ameritas Bankers Assurance Company; Vice President, Comptroller: First Ameritas
Life Insurance Corp. of New York; Director: Ameritas Investment Advisors, Inc.,
Ameritas Investment Corp., BLN Financial Services, Inc., FMA Realty, Inc.
(The Date of this Prospectus Supplement is December 19, 1995.)
<PAGE>
BRUCE R. MCMULLEN, M.D., VICE PRESIDENT AND MEDICAL DIRECTOR*
DAVID C. MOORE, EXECUTIVE VICE PRESIDENT-GROUP AND PENSIONS*
Director: Bankers Life Nebraska Company, Pathmark Assurance Company; Director,
Chairman of the Board: Ameritas Bankers Assurance Company; Director, Chairman
of the Board: Ameritas Managed Dental Plan, Inc.; Vice President-Product
Manager: Central Life
WILLIAM W. NELSON, VICE PRESIDENT-GROUP ADMINISTRATION*
Director: Ameritas Bankers Assurance Company; Vice President: Ameritas
Managed Dental Plan, Inc.
DALE NIEBUHR, SECOND VICE PRESIDENT - INTERNAL AUDIT*
JOHN E. OLSSON, DIRECTOR**
Chairman Emeritus; Formerly Chairman of the Board and Treasurer: Olsson
Associates
GARY R. RAYMOND, VICE PRESIDENT - GROUP ACTUARY*
Director: Ameritas Bankers Assurance Company
BARRY C. RITTER, SENIOR VICE PRESIDENT - INFORMATION SERVICES*
PAUL C. SCHORR, III, DIRECTOR**
President and CEO: ComCor Holding, Inc.; Chairman: Ebco/Commonwealth, Inc.;
President, Chief Executive Officer: Fishbach Corp., Commonwealth Companies, Inc.
WILLIAM C. SMITH, DIRECTOR**
President: William C. Smith & Co.; President, Chairman, Chief Executive Officer:
FirsTier Bank, N.A.; President, Chief Operating Officer, Chairman, Chief
Executive Officer: FirsTier Financial, Inc.
DONALD R. STADING, VICE PRESIDENT AND GENERAL COUNSEL - INSURANCE AND
ASSISTANT SECRETARY*
Director, Assistant Secretary: Ameritas Bankers Assurance Company; Director,
Assistant Secretary: Ameritas Managed Dental Plan, Inc.; Corporate Counsel/
Lending Group: National Bank of Commerce
JERRY B. STILLWELL, VICE PRESIDENT - INDIVIDUAL FIELD SALES*
Director Training: Principal Financial Group
NEAL E. TYNER, DIRECTOR, CHAIRMAN EMERITUS**
NET Consultants, Formerly Chairman of the Board and CEO of ALIC;
KENNETH L. VANCLEAVE, VICE PRESIDENT - GROUP MARKETING AND MANAGED CARE*
Director, Vice President: Ameritas Managed Dental Plan, Inc.; Assistant Vice
President-Group Operation: Amerisure Companies
RICHARD W. VAUTRAVERS, VICE PRESIDENT - AMERITAS LOW-LOAD*
Director, President: Veritas Corp., First Ameritas Life Insurance Corp. of New
York
WINSTON J. WADE, DIRECTOR**
Vice President-Network Infrastructure: U.S. West Communications; Vice President-
Technical Services: U.S. West Communication, Inc.
STEVEN L. WELTON, VICE PRESIDENT-INDIVIDUAL MARKETING*
* Principal business address: Ameritas Life Insurance Corp, One Ameritas Way,
5900 "O" Street, P.O. Box 81889, Lincoln, Nebraska 68501.
** Principal address for: James P. Abel, NEBCO, Inc., P.O. Box 80268,
Lincoln, Nebraska 68501; Duane W. Acklie, Crete Carrier Corporation, P.O.
Box 81228, Lincoln, Nebraska 68501; William W. Cook, Jr., The Beatrice
National Bank and Trust Company, P.O. Box 100, Beatrice, Nebraska 68310;
Bert A. Getz, Globe Corporation, 3634 Civic Center Blvd., Scottsdale,
Arizona 85251; James R. Knapp, Brookhollow Group, One Brookhollow Drive,
Santa Ana, California 92705; Robert F. Krohn, Krohn Corporation 1427 South
85th Ave., Omaha, Nebraska 68124; Wilfred Maddux, Maddux Cattle Company,
P.O. Box 217, Wauneta, Nebraska 69045; John E. Olsson, Olsson Associates,
1111 Lincoln Mall, P.O. Box 84608, Lincoln, Nebraska 68501; Paul C. Schorr,
III, ComCor Holding, Inc., 6940 "O" Street, Suite 336, P.O. Box 57310,
Lincoln, Nebraska 68505, William C. Smith, William C. Smith & Co.,
Cornhusker Plaza, Suite 401, 301 So. 13th Street, Lincoln, Nebraska 68508;
Neal E. Tyner, NET Consultants, 6940 O Street, Suite 324, Lincoln, Nebraska
68510; Winston J. Wade, US West Communications, 700 W Mineral Avenue, Room
SD, A15.02, Littleton, Colorado 80120
*** Where an individual has held more than one position with an
organization during the last 5-year period, the last position held
has been given.
(The Date of this Prospectus Supplement is December 19, 1995.)
<PAGE>
LEGAL MATTERS
All matters of Nebraska law pertaining to the Policy, including the validity of
the Policy and ALIC's right to issue the Policy under Nebraska Insurance Law,
have been passed upon by Norman M. Krivosha, Director and Secretary.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Account is a party or to which the
assets of the Account are subject. ALIC is not involved in any litigation that
is of material importance in relation to its total assets or that relates to its
total assets or that related to the Account.
EXPERTS
Financial statements for the Account are not being provided for the period ended
December 31, 1994, because the Policies underlying the Separate Account were not
offered for sale until December 19, 1995. The financial statements of ALIC as of
December 31, 1994 and 1993 and for each of the three years in the period ended
December 31, 1994, included in this Prospectus have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their report appearing herein,
and are included in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
Actuarial matters included in this Prospectus have been examined by Thomas P.
McArdle, Assistant Vice President- Associate Actuary of Ameritas Life Insurance
Corp., as stated in the opinion filed as an exhibit to the registration
statement.
ADDITIONAL INFORMATION
A registration statement has been filed with the Securities and Exchange
Commission, under the Securities Act of 1933, as amended, with respect to the
Policy offered hereby. This Prospectus does not contain all the information set
forth in the registration statement and the amendments and exhibits to the
registration statement, to all of which reference is made for further
information concerning the Account, ALIC and the Policy offered hereby.
Statements contained in this Prospectus as to the contents of the Policy and
other legal instruments are summaries. For a complete statement of the terms
thereof reference is made to such instruments as filed.
FINANCIAL STATEMENTS
The financial statements of ALIC which are included in this Prospectus should be
considered only as bearing on the ability of ALIC to meet its obligations under
the Policies. They should not be considered as bearing on the investment
performance of the assets held in the Account.
(The Date of this Prospectus is December 19, 1995.)
<PAGE>
AMERITAS LIFE INSURANCE CORP.
SEPARATE ACCOUNT LLVL
Ameritas Life Insurance Corp. Separate Account LLVL ("the Account") was
established on August 24, 1994 under Nebraska Law by Ameritas Life Insurance
Corp. ("ALIC") a mutual life insurance company to receive and invest premium
payment and variable life insurance policies invested by ALIC. The account is
registered under the Investment Company Act of 1940, as amended, as a unit
investment trust.
There are eleven subaccounts in the separate account each of which invests only
in the corresponding portfolio of the Vanguard Variable Insurance Fund or the
Neuberger & Berman Advisers Management Trust. The assets of the account are
segregated from the assets and liabilities of ALIC.
Prior to the effective date of the prospectus the account has had no business
activities, has no assets or liabilities and has no financial statement.
<PAGE>
INDEPENDENT AUDITORS' REPORT
BOARD OF DIRECTORS
AMERITAS LIFE INSURANCE CORP.
LINCOLN, NEBRASKA
WE HAVE AUDITED THE ACCOMPANYING PARENT COMPANY ONLY BALANCE SHEETS OF
AMERITAS LIFE INSURANCE CORP., A MUTUAL LIFE INSURANCE COMPANY, AS OF DECEMBER
31, 1994 AND 1993, AND THE RELATED PARENT COMPANY ONLY STATEMENTS OF OPERATIONS
AND POLICYOWNERS' CONTINGENCY RESERVES, AND CASH FLOWS FOR EACH OF THE THREE
YEARS IN THE PERIOD ENDED DECEMBER 31, 1994. THESE FINANCIAL STATEMENTS ARE THE
RESPONSIBILITY OF THE COMPANY'S MANAGEMENT. OUR RESPONSIBILITY IS TO EXPRESS AN
OPINION ON THESE FINANCIAL STATEMENTS BASED ON OUR AUDITS.
WE CONDUCTED OUR AUDITS IN ACCORDANCE WITH GENERALLY ACCEPTED AUDITING
STANDARDS. THOSE STANDARDS REQUIRE THAT WE PLAN AND PERFORM THE AUDITS TO OBTAIN
REASONABLE ASSURANCE ABOUT WHETHER THE FINANCIAL STATEMENTS ARE FREE OF MATERIAL
MISSTATEMENT. AN AUDIT INCLUDES EXAMINING, ON A TEST BASIS, EVIDENCE SUPPORTING
THE AMOUNTS AND DISCLOSURES IN THE FINANCIAL STATEMENTS. AN AUDIT ALSO INCLUDES
ASSESSING THE ACCOUNTING PRINCIPLES USED AND SIGNIFICANT ESTIMATES MADE BY
MANAGEMENT, AS WELL AS EVALUATING THE OVERALL FINANCIAL STATEMENT PRESENTATION.
WE BELIEVE THAT OUR AUDITS PROVIDE A REASONABLE BASIS FOR OUR OPINION.
IN OUR OPINION, SUCH FINANCIAL STATEMENTS PRESENT FAIRLY, IN ALL MATERIAL
RESPECTS, THE FINANCIAL POSITION OF AMERITAS LIFE INSURANCE CORP. AS OF DECEMBER
31, 1994 AND 1993, AND THE RESULTS OF ITS OPERATIONS AND ITS CASH FLOWS FOR EACH
OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1994, IN CONFORMITY WITH
STATUTORY ACCOUNTING PRACTICES WHICH ARE CONSIDERED GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES FOR MUTUAL LIFE INSURANCE COMPANIES.
DELOITTE & TOUCHE LLP
LINCOLN, NEBRASKA
FEBRUARY 1, 1995
<PAGE>
<TABLE>
<CAPTION>
AMERITAS LIFE INSURANCE CORP.
PARENT COMPANY ONLY
BALANCE SHEETS
(in thousands)
December 31,
ASSETS 1994 1993
-------------- ------------
<S> <C> <C>
Investments:
Bonds $ 1,063,297 $ 1,005,764
Short-term investments 35,999 99,245
Mortgage loans 196,070 185,929
Real estate 43,129 37,059
Stock - other than affiliates (cost: 1994 $29,599 and 1993 $24,700) 46,717 49,500
- affiliates (cost: 1994 $50,143 and 1993 $37,343) 28,559 19,868
Partnerships - real estate 23,603 24,027
- joint venture 19,929 17,662
Other investments 2,084 1,612
------------- -------------
1,459,387 1,440,666
Loans on life insurance policies 67,883 70,959
------------ ------------
Total investments 1,527,270 1,511,625
Cash 3,142 1,952
Accrued investment income 24,192 23,361
Other current accounts receivable 1,154 1,511
Deferred and uncollected premiums 8,724 8,792
Data processing and other admitted assets 1,412 1,987
Separate Accounts 30,887 26,826
----------- ------------
$ 1,596,781 $ 1,576,054
=========== ============
LIABILITIES AND POLICYOWNERS' CONTINGENCY RESERVES
Policy reserves $ 642,512 $ 619,298
Funds left on deposit 626,877 639,542
Reserves for unpaid claims 17,451 17,332
Dividends payable to policyowners in following year 10,452 11,115
Interest maintenance reserve 12,059 11,477
Postretirement benefit obligation 2,769 2,991
Accrued taxes
Federal income - current 14,280 9,832
- deferred 18,260 21,973
Other 469 309
Other liabilities 19,666 20,399
Asset valuation reserve 30,178 33,231
Separate Accounts 30,887 26,826
---------- ----------
1,425,860 1,414,325
Policyowners' contingency reserves 170,921 161,729
---------- ----------
$ 1,596,781 $ 1,576,054
=========== ===========
The accompanying notes to financial statements are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMERITAS LIFE INSURANCE CORP.
PARENT COMPANY ONLY
STATEMENTS OF OPERATIONS
AND POLICYOWNERS' CONTINGENCY RESERVE
(in thousands)
Years Ended December 31,
----------------------------------------------
1994 1993 1992
-------------- --------------- -------------
<S> <C> <C> <C>
INCOME:
Premiums from policyowners for life insurance, health
insurance and annuities $ 216,269 $ 198,585 $ 199,384
Deposit administration funds, dividend accumulations
and other funds left on deposit 46,244 50,160 42,690
Other income 7,008 6,312 5,399
Net investment income 116,581 119,639 119,525
------------- ------------- ------------
Total income 386,102 374,696 366,998
------------- ------------- ------------
DEDUCTIONS:
Benefits to policyowners and beneficiaries 264,364 241,890 242,833
Additions to policy reserves and deposit funds 16,168 37,728 31,814
Commissions 11,549 7,622 7,647
Cost of insurance operations 43,479 38,616 40,137
Taxes, licenses and fees 6,754 6,676 6,498
------------ ------------ -----------
Total deductions 342,314 332,532 328,929
------------ ------------ -----------
Income before dividends, income taxes, and realized gains 43,788 42,164 38,069
Dividends appropriated for policyowners 10,337 11,009 12,338
------------ ------------ -----------
Income before income taxes and realized gains 33,451 31,155 25,731
Provision for federal income taxes 20,500 11,360 9,000
------------ ------------ -----------
Net income from operations 12,951 19,795 16,731
Realized gains on investments, net of tax of $1,001 and $10,070
and transfers to the interest maintenance reserve of $985
and $6,628 in 1994 and 1993 1,872 12,077 2,094
------------ ----------- ----------
Net income transferred to policyowners' contingency reserves 14,823 31,872 18,825
Decrease in net unrealized gains on investments (8,184) (4,561) 1,360
Transfers (to)/from asset valuation reserve 3,053 (2,673) (6,308)
Other - net (500) (4,566) (338)
------------ ----------- -----------
Net change in Policyowners' contingency reserves 9,192 20,072 13,539
Policyowners' contingency reserves at January 1 161,729 141,657 128,118
------------ ---------- -----------
Policyowners' contingency reserves at December 31 $ 170,921 $ 161,729 $ 141,657
============ ============ ===========
The accompanying notes to financial statements are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMERITAS LIFE INSURANCE CORP.
PARENT COMPANY ONLY
STATEMENTS OF CASH FLOWS
(in thousands)
Years Ended December 31,
1994 1993 1992
-------------- ------------- -------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Premium and deposit income $ 253,795 $ 247,156 $ 243,607
Investment income received, net 114,686 115,440 118,791
Benefits to policyowners and beneficiaries (178,101) (170,788) (164,042)
Transfer to Separate Accounts (4,416) -- --
Withdrawals of deposit administration funds (78,394) (68,597) (52,431)
Expenses and taxes, other than federal income tax (60,705) (52,489) (54,588)
Dividends paid to policyowners (10,976) (12,229) (12,343)
Federal income tax paid (17,569) (6,388) (11,962)
Net decrease in loans on life insurance policies 3,093 1,462 1,906
Other operating income and disbursements, net 6,276 6,719 2,970
------------ ------------- -------------
Net cash flow from operating activities 27,689 60,286 71,908
------------ ------------- -------------
INVESTING ACTIVITIES
Proceeds from long-term investments sold, matured or repaid 174,903 342,266 195,433
Cost of long-term investments acquired (264,648) (384,347) (277,123)
------------- ------------- ------------
Net cash flow used in investing activities (89,745) (42,081) (81,690)
------------- ------------- ------------
Net cash flow (62,056) 18,205 (9,782)
Cash and short-term investments at January 1 101,197 82,992 92,774
------------- ------------- ------------
Cash and short-term investments at December 31 $ 39,141 $ 101,197 $ 82,992
============= ============ ============
The accompanying notes to financial statements are an integral part of these statements.
</TABLE>
<PAGE>
AMERITAS LIFE INSURANCE CORP.
PARENT COMPANY ONLY
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993, AND 1992
(continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION
Ameritas Life Insurance Corp. is a mutual life insurance company chartered by
the State of Nebraska. Its operations consist of life and health insurance and
annuity and pension contracts. Wholly-owned insurance subsidiaries include
Ameritas Variable Life Insurance Company, First Ameritas Life Insurance Corp. of
New York, Pathmark Assurance Company, and Bankers Life Nebraska Company, a
holding company, which owns 100% of Ameritas Bankers Assurance Company. In
addition to the insurance subsidiaries the Company conducts other diversified
financial service-related operations through the following wholly-owned
subsidiaries: Veritas Corp. (a marketing organization for low-load insurance
products); BLN Financial Services, Inc., which owns 100% of Ameritas Investment
Corp. (a broker/ dealer), Ameritas Investment Advisors, Inc. (an advisor
providing investment management services to the Company and other insurance
companies); FMA Realty Inc. (a real estate management firm); and Ameritas
Managed Dental Plan, Inc. (a prepaid dental organization).
BASIS OF PRESENTATION
The accompanying financial statements have been prepared in accordance with
life insurance accounting practices prescribed or permitted by the Insurance
Department of the State of Nebraska. While appropriate for mutual life insurance
companies, such accounting practices differ in certain respects from generally
accepted accounting principles followed by other business enterprises. The
Financial Accounting Standards Board (FASB) has undertaken consideration of
changing those methods constituting generally accepted accounting principles
applicable to mutual life insurance companies. In accordance with pronouncements
issued by the FASB in 1993 and 1994, financial statements prepared on the basis
of statutory accounting practices can no longer be described as prepared in
conformity with generally accepted accounting principles for fiscal years
beginning after December 15, 1995.
The Company is permitted by the Insurance Department of the State of Nebraska
to establish a deferred income tax liability to account for future taxes
expected to be paid although such a liability is not required (see Note 5,
Federal Income Taxes).
The principal prescribed accounting and reporting practices followed are:
INVESTMENTS
Investments are reported according to valuation procedures prescribed by the
National Association of Insurance Commissioners (NAIC), and generally: bonds and
mortgage loans are valued at amortized cost; real estate at cost less
accumulated depreciation when an operating investment, on the equity method when
operated as a partnership, or at amortized cost when a purchase lease; preferred
stock at cost; common stock of unaffiliated companies at market value; and
investments in subsidiaries and investments in limited partnerships are valued
on the equity basis.
Realized capital gains and losses, including valuation allowances on specific
investments, are recorded in the Statements of Operations and unrealized gains
and losses are credited or changed to Policyowners' Contingency Reserves.
AFFILIATES
Investments in subsidiaries are reported in the balance sheets at equity in
net assets. Dividends from these subsidiaries are included in investment income.
The equity in undistributed net earnings or loss is credited or charged to
Policyowners' Contingency Reserves.
<PAGE>
AMERITAS LIFE INSURANCE CORP.
PARENT COMPANY ONLY
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993, AND 1992
(continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
AFFILIATES (continued):
The following amounts report totals for subsidiaries at December 31 and for
the years then ended:
<TABLE>
<CAPTION>
1994 1993
--------------- --------------
(000's omitted)
<S> <C> <C>
Total assets $ 526,280 $ 382,158
Equity in net assets 28,559 19,868
Dividends received 500 850
Equity in undistributed net loss (3,055) (3,993)
</TABLE>
Services are provided and received by and between the Company and its
subsidiaries under administrative service agreements. The costs/recoveries
associated with these agreements are reflected in operations.
The Company has entered into guarantee agreements with two of its life
insurance subsidiaries, Ameritas Variable Life Insurance Company and Ameritas
Bankers Assurance Company. Under the agreements the Company guarantees the
full, complete and absolute performance of all duties and obligations of
these affiliates. Most of the affiliate amounts shown above relate to these
subsidiaries.
The Company subsequent to year end, entered into a guarantee agreement with
its subsidiary, Ameritas Managed Dental Plan, Inc. Under the agreement, the
Company guarantees to maintain surplus of the affiliate at the required minimum
level.
NON-ADMITTED ASSETS
Certain assets (primarily furniture and equipment and software) are designated
as "non-admitted" under Insurance Department accounting requirements. These
assets are excluded from the balance sheets by adjustments to policyowners'
contingency reserves. As of December 31, 1994 and 1993, "non-admitted assets"
were $11.7 million and $12.0 million, respectively.
SEPARATE ACCOUNT BUSINESS
Separate account assets and liabilities are segregated and are exclusively for
the benefit of certain pension contract holders. Assets in separate accounts are
held at market value.
RESERVES
Policy reserves for life and annuity policies are established and maintained
on the basis of published mortality tables using assumed interest rates and
valuation methods established by the insurance Department of the State of
Nebraska.
The liability for funds left on deposit with the Company includes deposit
administration funds deposited on behalf of employer-employee or trustee groups
to provide immediate and future retirement benefits. These funds are part of the
general funds of the Company. The Company is not responsible for the adequacy of
these funds to meet specified fund benefits.
Reserves for unpaid claims include claims reported and unpaid and claims not
yet reported, the latter estimated on the basis of historical experience. As
such amounts are necessarily estimates, the ultimate liability will differ from
the amount recorded and will be reflected in operations when additional
information becomes known.
The interest maintenance reserve is calculated based on the prescribed method
developed by the NAIC. Realized gains and losses, net of tax, resulting from
interest rate changes on fixed income investments are deferred and credited to
this reserve. These gains and losses are then amortize into investment income
over what would have been the remaining years to maturity of the underlying
investment. Amortization included in investment income, was $1.2 million, $0.6
million, and $0.2 million for 1994, 1993, and 1992.
<PAGE>
AMERITAS LIFE INSURANCE CORP.
PARENT COMPANY ONLY
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993, AND 1992
(continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
The asset valuation reserve is a required appropriation of surplus to provide
for possible losses that may occur on certain investments held by the Company.
The reserve is computed based on holdings of bonds, stocks, mortgages, real
estate and short-term investments and realized and unrealized gains and losses,
other than those resulting from interest rate changes. Changes in the reserve
are charged or credited to policyowners' contingency reserves.
RECOGNITION OF PREMIUM INCOME AND RELATED EXPENSES
Premiums are credited to revenue over the premium paying periods of the
related policy. Annuity and pension fund deposits are recognized as income when
received. Policy acquisition costs, such as commissions and other marketing and
issuance expenses incurred in connection with acquiring new business, are
charged to operations as incurred.
Premium income for the year ended December 31 consists of the following:
<TABLE>
<CAPTION>
1994 1993 1992
------------- --------------- -------------
000's omitted)
<S> <C> <C> <C>
Individual life and annuity $ 64,716 $ 61,582 $ 65,549
Group life and health 150,301 136,761 132,553
Group annuity 1,252 242 1,282
------------- --------------- ------------
Total $ 216,269 $ 198,585 $ 199,384
============= ================ ============
</TABLE>
DIVIDENDS TO POLICYOWNERS
A portion of the Company's business has been issued on a participating basis.
The amount of policyowners dividends to be paid is determined annually by the
Board of Directors.
INCOME TAXES
The Company files a consolidated life/non-life return with its subsidiaries.
An agreement among the members of the consolidated group provides for
distribution of consolidated tax results as if filed on a separate return
basis. The current income tax expense or benefit (including effects of capital
gains and losses and net operating losses) is apportioned generally on a
sub-group (life/non-life) basis.
2. FINANCIAL INSTRUMENTS:
The following methods and assumptions were used to estimate the fair value of
each class of financial instrument for which it is practicable to estimate a
value:
Bonds
For publicly traded securities, fair value is determined using an independent
pricing source. For securities without a readily ascertainable fair value, the
value has been determined using an interest rate spread matrix based upon
quality, weighted average maturity and Treasury yields.
Short-term investments
The carrying amount approximates fair value because of the short maturity of
these instruments.
Mortgage loans
Mortgage loans in good standing are valued on the basis of discounted cash
flow. The interest rate that is assumed is based upon the weighted average term
of the mortgage and appropriate spread over Treasuries. Mortgage loans in
default totaling $3.9 million and $4.4 million at December 31, 1994 and 1993 are
not included in the fair value calculation or carrying amount.
<PAGE>
AMERITAS LIFE INSURANCE CORP.
PARENT COMPANY ONLY
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993, AND 1992
(continued)
2. FINANCIAL INSTRUMENTS (continued):
Real estate
Because real estate purchase leases include renewal options and residual
interests in real estate, a fair value was not practicably determinable. All
other real estate is excluded from the fair value calculation.
Stocks
For publicly traded securities, fair value is determined using prices provided
by the NAIC. Stocks in affiliates are carried on the equity method and therefore
not included as part of the fair value disclosure.
Partnerships
Fair values for venture capital partnerships are estimated based on values as
last reported by the partnership and discounted for their lack of marketability.
Real estate partnerships are carried on the equity method and are excluded from
the fair value disclosure.
Other assets
The fair value of these assets approximates book value.
Loans on life insurance policies
Fair values for policy loans are estimated using a discounted cash flow
analysis at interest rates currently offered for similar loans. Policy loans
with similar characteristics are aggregated for purposes of the calculations.
Cash
The carrying amounts reported in the balance sheet equals fair value.
Accrued investment income
Fair value of accrued investment income equals stated value.
Funds left on deposit
Funds left on deposit with a fixed maturity are valued at discounted present
value using market interest rates. Funds on deposit which do not have fixed
maturities are carried at the amount payable on demand at the reporting date.
Estimated fair values presented below, as of December 31, do not necessarily
represent the value for which the financial instrument could have been sold:
<TABLE>
<CAPTION>
1994 1993
------------------------------ -------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------------- ------------- -------------- --------------
(000's omitted)
<S> <C> <C> <C> <C>
Financial Assets:
Bonds $ 1,063,297 $ 1,023,489 $ 1,005,764 $ 1,081,351
Short-term investments 35,999 35,999 99,245 99,245
Mortgage loans 192,179 192,294 181,516 200,003
Stocks - other than affiliates 46,717 46,462 49,500 49,629
Partnerships - joint ventures 19,929 26,971 17,662 18,450
Other assets 2,084 2,084 1,612 1,612
Loans on life insurance policies 67,883 51,035 70,959 61,893
Cash 3,142 3,142 1,952 1,952
Accrued investment income 24,192 24,192 23,361 23,361
Financial Liabilities:
Funds left on deposit 626,877 599,413 639,542 643,391
</TABLE>
<PAGE>
AMERITAS LIFE INSURANCE CORP.
PARENT COMPANY ONLY
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993, AND 1992
(continued)
3. INVESTMENTS IN BONDS AND STOCKS-OTHER THAN AFFILIATES:
The table below provides additional information relating to bonds and
stocks-other than affiliates held by the general account at December 31, 1994:
<TABLE>
<CAPTION>
Gross Gross
Amortized Fair Unrealize Unrealize Carrying
Cost Value Gains Losses Value
-------------- ------------- ----------- -------------- ------------
(000's omitted)
<S> <C> <C> <C> <C> <C>
Bonds:
U.S. Corporate $ 605,096 $ 584,873 $ 9,827 $ 30,050 $ 605,096
Mortgage-backed 249,851 235,935 3,029 16,945 249,851
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies 146,610 144,592 4,979 6,997 146,610
States and political subdivisions 80 79 1 80
Foreign 61,660 58,010 302 3,952 61,660
------------ ----------- ---------- ------------ -----------
Total Bonds $ 1,063,297 $ 1,023,489 $ 18,137 $ 57,945 $ 1,063,297
============ =========== ========== ============ ===========
Stocks-other than affiliates $ 29,599 $ 46,462 $ 18,924 $ 2,061 $ 46,717
============ =========== ========== ============ ===========
The comparative data as of December 31, 1993 was as follows:
Gross Gross
Amortized Fair Unrealize Unrealize Carrying
Cost Value Gains Losses Value
-------------- ------------- ----------- ------------- ------------
(000's omitted)
<S> <C> <C> <C> <C> <C>
Bonds:
Corporate $ 588,271 $ 637,933 $ 51,723 $ 2,061 $ 588,271
Mortgage-backed 278,588 291,213 12,927 302 278,588
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies 130,557 143,267 12,781 71 130,557
States and political subdivisions 78 74 4 78
Other 8,270 8,864 622 28 8,270
------------ ------------ --------- ------------ -----------
Total Bonds $ 1,005,764 $ 1,081,351 $ 78,053 $ 2,466 $ 1,005,764
============ ============ ========= ============ ===========
Stocks-other than affiliates $ 26,112 $ 49,629 $ 23,703 $ 186 $ 49,500
============ ============ ========= ============ ===========
</TABLE>
The carrying value and fair value of bonds at December 31, 1994 by contractual
maturity are shown below. Maturity is determined based on call date, if any.
Expected maturities may differ from contractual maturities because borrowers may
have the right to call or prepay obligations with or without call or prepayment
penalties.
<TABLE>
<CAPTION>
Fair Carrying
Value Value
-------------- -------------
(000's omitted)
<S> <C> <C>
Due in one year or less $ 15,588 $ 15,629
Due after one year through five years 135,550 135,957
Due after five years through ten years 422,818 440,006
Due after ten years 213,598 221,854
Mortgage-backed securities 235,935 249,851
------------- -----------
Total Bonds $ 1,023,489 $ 1,063,297
============= ===========
</TABLE>
<PAGE>
AMERITAS LIFE INSURANCE CORP.
PARENT COMPANY ONLY
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993, AND 1992
(continued)
3. INVESTMENTS IN BONDS AND STOCKS-OTHER THAN AFFILIATES(continued):
Bonds not due at a single maturity date have been included in the above table
in the year of final maturity.
There were no sales of investments in bonds in 1994 or 1992, while sales in
1993 resulted in proceeds of $7.4 million and gross gains of $0.6 million.
4. RESERVE FOR UNPAID CLAIMS:
Activity in the accident and health reserve for unpaid claims and claim
adjustment expense is summarized as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
------------- ------------- -------------
(000's omitted)
<S> <C> <C> <C>
Balance January 1, $ 14,510 $ 13,128 $ 14,344
Incurred related to:
Current year 114,292 109,888 105,808
Prior year (729) (1,193) (2,863)
------------- -------------- --------------
Total incurred 113,563 108,695 102,945
------------- -------------- --------------
Paid related to:
Current year 100,474 95,822 93,128
Prior year 13,349 11,491 11,033
------------- -------------- --------------
Total paid 113,823 107,313 104,161
------------- -------------- --------------
Balance December 31, 14,250 14,510 13,128
Life and Annuity reserves 3,201 2,822 3,003
------------- -------------- --------------
Total Reserves for
Unpaid Claims $ 17,451 $ 17,332 $ 16,131
============= ============== ==============
</TABLE>
5. FEDERAL INCOME TAXES:
The provisions for federal income taxes is based on the current law. Current
law requires companies to defer policy acquisition costs and amortize those
costs in future periods. A second requirement, which effectively taxes surplus
as defined under the law, remains in place. As a result of the deferred
acquisition costs and "surplus tax" requirements the provision for federal
income taxes exceeds the statutory corporate rate.
The tax returns for the years through 1990 have been examined and settled.
The Company provides deferred taxes for temporary differences resulting from
certain transactions, including those related to investments in tax benefit
leases, unrealized gains and losses and other investment transactions.
6. REINSURANCE:
In the ordinary course of business, the Company assumes and cedes reinsurance
with other insurers and reinsurers. These arrangements provide greater
diversification of business and limit the maximum net loss potential on large
risks.
<PAGE>
AMERITAS LIFE INSURANCE CORP.
PARENT COMPANY ONLY
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993, AND 1992
(continued)
6. REINSURANCE(continued):
Following is a summary of the transactions through reinsurance operations:
<TABLE>
<CAPTION>
1994 1993 1992
--------------- --------------- -------------
(000's omitted)
<S> <C> <C> <C>
Premiums:
Assumed $ 2,790 $ 1,823 $ 4,902
Ceded 5,834 5,157 4,351
Claims:
Assumed 2,174 784 27,638
Ceded 2,516 15,859 4,712
Reserves:
Assumed 1,028 698 537
Ceded 7,345 6,609 4,756
</TABLE>
The Company remains contingently liable in the event that a reinsurer is
unable to meet the obligations ceded under the reinsurance agreement.
7. EMPLOYEE AND AGENT BENEFIT PLANS:
The Company's non-contributory defined benefit pension plan covers
substantially all full-time employees. Pension costs include current service
costs, which are accrued and funded on a current basis, and past service costs,
which are amortized over the average remaining service life of all employees on
the adoption date. The assets of this plan are not segregated.
Following is a summary of plan benefit and asset information using a January
1st valuation date:
<TABLE>
<CAPTION>
1994 1993 1992
-------------- --------------- --------------
(000's omitted)
<S> <C> <C> <C>
Actuarial present value of
accumulated plan benefits:
Vested $ 16,071 $ 20,977 $ 15,331
Non-Vested 327 337 406
-------------- --------------- -------------
$ 16,398 $ 21,314 $ 15,737
============== =============== =============
Net assets available $ 21,803 $ 26,075 $ 23,827
============== =============== =============
</TABLE>
The Company has generally funded annually the maximum allowed under IRS
regulations. The Company made contributions totaling $ 1.5 million, $1.6
million, and $1.3 million in 1994, 1993, and 1992 respectively.
The Company's employees and agents also participate in defined contribution
plans that cover substantially all full-time employees and agents. Total Company
contributions were $.8 million in 1994, 1993, and 1992.
The Company's also provides certain health care and life insurance benefits for
retired employees on a self. funded basis. Substantially all of the Company's
employees may, in accordance with the plans applicable to such benefits, become
eligible for these benefits if they attain retirement age, with sufficient
service and participation in the plan prior to retirement while working for the
Company. In 1993, a $3.2 million reserve was established through a charge to
policyowners' contigency reserve as required by the NAIC. Prior to January 1,
1993 the costs of this plan was recorded on a pay as incurred basis.
<PAGE>
AMERITAS LIFE INSURANCE CORP.
PARENT COMPANY ONLY
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993, AND 1992
(continued)
8. PLAN FOR MERGER:
In December 1994 the Board of Directors for Ameritas Variable Life Insurance
Company (AVLIC) and the Company approved a plan of statutory merger of the
companies. The merger, which will combine the assets and liabilities of the
companies, has an effective date of May 1, 1995, or at such later date as all
required regulatory approvals can be obtained. The plan of merger has been
approved by the Insurance Department of the State of Nebraska. Selected
financial information for AVLIC as of and for the year ended December 31, is as
follows:
<TABLE>
<CAPTION>
1994 1993 1992
--------------- --------------- ---------------
(000's omitted)
<S> <C> <C> <C>
Separate accounts $ 462,886 $ 325,088 $ 151,964
Total assets 508,605 371,290 195,635
Equity 12,615 10,605 10,407
Premium income 174,085 155,166 84,181
Net loss (3,925) (5,240) (5,328)
</TABLE>
9. COMMITMENTS:
Investment: As of December 31, 1994, commitments were outstanding for
investments to be made in 1995 and after, totaling approximately $26.0 million.
Securities commitments represented $24.2 million, and mortgage loan and real
estate commitments approximated $1.8 million. These commitments have been made
in the normal course of investment operations.
State life and health guaranty funds: As a condition of doing business, all
states and jurisdictions have adopted laws requiring membership in life and
health insurance guaranty funds. Member companies are subject to assessments
each year based on life, health or annuity premiums collected in the state. In
some states these assessments may be applied against premium taxes. The Company
has estimated its costs related to past insolvencies and has provided a reserve
included in other liabilities of $1.6 million and $1.2 million as of December
31, 1994 and 1993, respectively.
<PAGE>
<TABLE>
<CAPTION>
AMERITAS LIFE INSURANCE CORP.
PARENT COMPANY ONLY
BALANCE SHEETS
(in thousands)
(UNAUDITED)
September 30, 1995
ASSETS ------------------
<S> <C>
Investments:
Bonds $ 1,077,951
Short-term investments 71,923
Mortgage loans 193,040
Real estate 42,037
Stock - other than affiliates 55,252
- affiliates 30,011
Partnerships - real estate 22,179
- joint venture 20,436
Other investments 2,031
-----------------
1,514,860
Loans on life insurance policies 67,115
----------------
Total investments 1,581,975
Cash (6,920)
Accrued investment income 22,860
Other current accounts receivable 1,816
Deferred and uncollected premiums 9,292
Data processing and other admitted assets 1,440
Separate Accounts 44,778
-----------------
$ 1,655,241
LIABILITIES AND POLICYOWNERS' CONTINGENCY RESERVES
Policy reserves $ 664,772
Funds left on deposit 622,024
Reserves for unpaid claims 14,708
Dividends payable to policyowners in followowing year 10,317
Interest maintenance reserve 12,550
Postretirement benefit obligation 2,922
Accrued taxes
Federal income - current 17,697
- deferred 20,135
Other 742
Other liabilities 16,264
Asset valuation reserve 35,806
Separate Accounts 44,778
-----------------
1,462,715
-----------------
Policyowners' contingency reserves 192,526
-----------------
$ 1,655,241
The accompanying notes to financial statements are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMERITAS LIFE INSURANCE CORP.
PARENT COMPANY ONLY
STATEMENTS OF OPERATIONS
AND POLICYOWNERS' CONTINGENCY RESERVE
(in thousands)
(UNAUDITED)
Nine Months Ended September 30,
--------------------------------------
1995 1994
------------------ -----------------
<S> <C> <C>
INCOME:
Premiums from policyowners for life insurance, health
insurance and annuities $ 171,263 $ 152,793
Deposit administration funds, dividend accumulations
and other funds left on deposit 74,368 33,983
Other income 5,947 5,229
Net investment income 88,603 87,084
----------------- ----------------
Total income 340,181 279,089
----------------- ----------------
DEDUCTIONS:
Benefits to policyowners and beneficiaries 224,643 195,746
Additions to policy reserves and deposit funds 27,698 12,259
Commissions 10,598 5,771
Cost of insurance operations 32,414 27,785
Taxes, licenses and fees 5,259 4,901
----------------- ----------------
Total deductions 300,612 246,462
----------------- ----------------
Income before dividends, income taxes, and realized gains 39,569 32,627
Dividends appropriated for policyowners 7,783 7,969
----------------- ----------------
Income before income taxes and realized gains 31,786 24,658
Provision for federal income taxes 13,305 14,300
----------------- ---------------
Net income from operations 18,481 10,358
Realized gains on investments, net of tax of $3,232 and $1,261 and
transfers to the interest maintenance reserve of $1,642
and $1,367 in 1995 and 1994, respectively 938 1,458
----------------- ---------------
Net income transferred to policyowners' contingency reserves 19,419 11,816
Decrease in net unrealized gains on investments 7,100 (5,369)
Transfers (to)/from asset valuation reserve (5,628) 192
Other - net 713 436
----------------- ---------------
Net change in Policyowners' contingency reserves 21,604 7,075
Policyowners' contingency reserves at beginning of period 170,922 161,729
----------------- ---------------
Policyowners' contingency reserves at end of period $ 192,526 $ 168,804
================= ===============
The accompanying notes to financial statements are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMERITAS LIFE INSURANCE CORP.
PARENT COMPANY ONLY
STATEMENTS OF CASH FLOWS
(in thousands)
(UNAUDITED)
Nine Months Ended September 30,
-----------------------------------
1995 1994
---------------- -----------------
<S> <C> <C>
OPERATING ACTIVITIES
Premium and deposit income $ 245,108 $ 182,068
Investment income received, net 89,488 86,573
Benefits to policyowners and beneficiaries (138,656) (134,745)
Transfer to Separate Accounts (7,609) (4,663)
Withdrawals of deposit administration funds (92,320) (63,375)
Expenses and taxes, other than federal income tax (47,849) (38,331)
Dividends paid to policyowners (7,946) (8,326)
Federal income tax paid (9,428) (13,447)
Net decrease in loans on life insurance policies 766 1,797
Other operating income and disbursements, net 3,282 8,414
--------------- ---------------
Net cash flow from operating activities 34,836 15,965
--------------- ---------------
INVESTING ACTIVITIES
Proceeds from long-term investments sold, matured or repaid 126,971 142,411
Cost of long-term investments acquired (135,945) (221,480)
Net cash flow used in investing activities (8,974) (79,069)
--------------- ---------------
Net cash flow 25,862 (63,104)
Cash and short-term investments at beginning of period 39,141 101,197
--------------- ---------------
Cash and short-term investments at end of period $ 65,003 $ 38,093
=============== ===============
The accompanying notes to financial statements are an integral part of these statements.
</TABLE>
<PAGE>
AMERITAS LIFE INSURANCE CORP.
PARENT COMPANY ONLY
NOTES TO FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
(UNAUDITED)
A. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Ameritas Life Insurance Corp. is a mutual life insurance company chartered by
the State of Nebraska. Its operations consist of life and health insurance and
annuity and pension contracts. Wholly-owned insurance subsidiaries include
Ameritas Variable Life Insurance Company, First Ameritas Life Insurance Corp. of
New York, Pathmark Assurance Company, and Bankers Life Nebraska Company, a
holding company, which owns 100% of Ameritas Bankers Assurance Company. In
addition to the insurance subsidiaries the Company conducts other diversified
financial service-related operations through the following wholly-owned
subsidiaries: Veritas Corp. (a marketing organization for low-load insurance
products); BLN Financial Services, Inc., which owns 100% of Ameritas Investment
Corp. (a broker/ dealer), Ameritas Investment Advisors, Inc. (an advisor
providing investment management services to the Company and other insurance
companies); FMA Realty Inc. (a real estate management firm); and Ameritas
Managed Dental Plan, Inc. (a prepaid dental organization).
The accompanying financial statements have been prepared in accordance with
life insurance accounting practices prescribed or permitted by the Insurance
Department of the State of Nebraska. While appropriate for mutual life insurance
companies, such accounting practices differ in certain respects from generally
accepted accounting principles followed by other business enterprises. The
Financial Accounting Standards Board (FASB) has undertaken consideration of
changing those methods constituting generally accepted accounting principles
applicable to mutual life insurance companies. In accordance with pronouncements
issued by the FASB in 1993 and 1994, financial statements prepared on the basis
of statutory accounting practices can no longer be described as prepared in
conformity with generally accepted accounting principles for fiscal years
beginning after December 15, 1995.
B. BASIS OF PRESENTATION OF UNAUDITED INTERIM FINANCIAL STATEMENTS:
Management believes that all adjustments, consisting of only normal recurring
accruals, considered necessary for a fair presentation of the unaudited interim
financial statements have been included. The results of operations for any
interim period are not necessarily indicative of results for the full year. The
unaudited interim financial statements should be read in conjunction with the
audited financial statements and notes thereto for the years ended December 31,
1994, 1993 and 1992.
C. PLAN FOR MERGER:
In December, 1994 the Board of Directors for the Company and Ameritas Variable
Life Insurance Company approved a plan of statutory merger of the companies. The
merger, which will combine the assets and liabilities of the companies, had an
effective date of May 1, 1995, or at such later date as all required regulatory
approvals can be obtained. The plan of merger has been approved by the Insurance
Department of the State of Nebraska. The merger was subsequently postponed until
May 1, 1996.
<PAGE>
APPENDIX A
ILLUSTRATIONS OF DEATH BENEFITS AND NET CASH SURRENDER VALUES
The following tables illustrate how the Net Cash Surrender Values and Death
Benefits of a Policy may change with the investment experience of the Fund. The
tables show how the Net Cash Surrender Values and Death Benefits of a Policy
issued to an Insured of a given age and specified underwriting risk
classification who pays the given premium at issue would vary over time if the
investment return on the assets held in each portfolio of the Funds were a
uniform, gross, after-tax annual rate of 0%, 6%, or 12%. The tables on pages 54
through 57 illustrate a Policy issued to a male, age 45, under a Preferred rate
non-smoker underwriting risk classification. This policy provides for a standard
smoker and non-smoker, and preferred non-smoker classification and different
rates for certain Specified Amounts. The Net Cash Surrender Values and Death
Benefits would be different from those shown if the gross annual investment
rates of return averaged 0%, 6%, and 12% over a period of years, but fluctuated
above and below those averages for individual policy years, or if the Insured
were assigned to a different underwriting risk classification.
The second column of the tables shows the accumulated value of the premiums paid
at 5%. The following columns show the Net Cash Surrender Values and the Death
Benefits for uniform hypothetical rates of return shown in these tables. The
tables on pages 54 and 56 are based on the current cost of insurance rates,
current expense deductions and the current percent of premium loads. These
reflect the basis on which ALIC currently sells its Policies. The maximum cost
of insurance rates allowable under the Policy are based upon the 1980
Commissioner's Standard Ordinary Smoker and Non-Smoker, Male and Female
Mortality Tables. ALIC anticipates reflecting future improvements in actual
mortality experience through adjustments in the current cost of insurance rates
actually applied. ALIC also anticipates reflecting any future improvements in
expenses incurred by applying lower percent of premiums of loads and other
expense deductions. The death benefits and cash values shown in the tables on
pages 55 and 57 are based on the assumption that the maximum allowable cost of
insurance rates as described above ("guaranteed cost") and maximum allowable
expense deductions are made throughout the life of the Policy.
The amounts shown for the Net Cash Surrender Values and Death Benefits reflect
the fact that the net investment return of the Subaccounts is lower than the
gross, after-tax return of the assets held in the Funds as a result of expenses
paid by the Fund and charges levied against the Subaccounts. The values shown
take into account an average of the daily investment advisory fee paid by each
portfolio available for investment (the equivalent to an annual rate of .32% of
the aggregate average daily net assets of the Fund), the expenses incurred by
the Fund (.22%), and the daily charge by ALIC to each Subaccount for assuming
mortality and expense risks (which is equivalent to a charge at an annual rate
of 0.75% on pages 54 and 56 and at an annual rate of .90% on page 55 and 57 of
the average net assets of the Subaccounts). The Advisers Management Trust has
agreed to reimburse each Neuberger & Berman Portfolio to the extent that the
aggregate operating expenses and its pro rata share of its corresponding series
operating expenses, excluding the compensation of Neuberger & Berman Management
from the portfolio, taxes, interest, extraordinary expenses, brokerage
commission, and transaction costs that exceed 1% of the portfolio's average
daily net asset value are in excess of an annual rate of 1.00%. This agreement
is expected to continue in future years. The illustrated gross annual investment
rates of return of 0%, 6%, and 12% were computed after deducting these amounts
and correspond to approximate net annual rates of -1.29%, 4.71% and 10.71% on
pages 54and 56 and -1.44%, 4.56% and 10.56% respectively, on pages 55 and 57.
The hypothetical values shown in the tables do not reflect any additional
charges for Federal Income tax burden attributable to the Account, since ALIC is
not currently making such charges. However, such charges may be made in the
future and, in that event, the gross annual investment rate of return would have
to exceed 0 percent, 6 percent, or 12 percent by an amount sufficient to cover
the tax charges in order to produce the Death Benefits and values illustrated.
(See Federal Tax Matters, page 30).
The tables illustrate the policy values that would result based upon the
hypothetical investment rates of return if premiums are paid as indicated, if
all net premiums are allocated to the Account, and if no policy loans have been
made. The tables are also based on the assumptions that the policyowner has not
requested an increase or decrease in the initial Specified Amount, that no
Partial Withdrawals have been made, and that no more than fifteen transfers have
been made in any policy year so that no transfer charges have been incurred.
Illustrated values would be different if the proposed Insured were female, a
smoker, in substandard risk classification, or were another age, or if a higher
or lower premium was illustrated.
Upon request, ALIC will provide comparable illustration based upon the proposed
Insured's age, sex and underwriting classification, the Specified Amount, the
Death Benefit option, and Planned Periodic Premium schedule requested, and any
available riders requested.
<PAGE>
<TABLE>
<CAPTION>
ILLUSTRATION OF POLICY VALUES
AMERITAS LIFE INSURANCE CORP.
ENDOWMENT AT AGE 100
Male Issue Age: 45 Non-Smoker Preferred Underwriting Class
PLANNED PERIODIC ANNUAL PREMIUM: $4,800
INITIAL SPECIFIED AMOUNT: $250,000
DEATH BENEFIT OPTION: A
USING CURRENT SCHEDULE OF COST OF INSURANCE RATES
0% Hypothetical Gross 6% Hypothetical Gross 12% Hypothetical Gross
Annual Investment Return Annual Investment Return Annual Investment Return
(-1.29% net) (4.71% net) (10.71% net)
-------------------------------- -------------------------------- --------------------------
Accumulated
End Of Premiums At Net Cash Net Cash Net Cash
Policy 5% Interest Surrender Death Surrender Death Surrender Death
Year Per Year Value Benefit Value Benefit Value Benefit
- ------ -------------- ----------- -------- ----------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 5040 4163 250000 4428 250000 4693 250000
2 10332 8236 250000 9028 250000 9851 250000
3 15888 12164 250000 13750 250000 15467 250000
4 21723 15969 250000 18622 250000 21612 250000
5 27849 19656 250000 23657 250000 28352 250000
6 34281 23236 250000 28874 250000 35764 250000
7 41035 26710 250000 34282 250000 43925 250000
8 48127 30133 250000 39947 250000 52973 250000
9 55573 33511 250000 45886 250000 63013 250000
10 63392 36845 250000 52115 250000 74156 250000
15 108755 52447 250000 87784 250000 150984 250000
20 166652 64225 250000 131018 250000 279410 340880
Ages
70 240544 70475 250000 184532 250000 490303 568752
75 334851 68359 250000 254425 272235 836767 895341
80 455214 51827 250000 343416 360587 1409755 1480242
85 608830 3175 250000 451521 474097 2338715 2455651
1) Assumes an annual $4800 premium is paid at the beginning of each policy year. Values would be different if premiums with a
different frequency or in different amounts.
2) Assumes that no policy loan has been made. Excessive loans or Partial Withdrawals may cause this policy to lapse because
of insufficient cash value.
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 RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN
AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING INTEREST RATES AND RATES
OF INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN
AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL CONTRACT
YEARS. NO REPRESENTATIONS CAN BE MADE BY ALIC OR THE FUND THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ILLUSTRATION OF POLICY VALUES
AMERITAS LIFE INSURANCE CORP.
ENDOWMENT AT AGE 100
Male Issue Age: 45 Non-Smoker Preferred Underwriting Class
PLANNED PERIODIC ANNUAL PREMIUM: $4,800
INITIAL SPECIFIED AMOUNT: $250,000
DEATH BENEFIT OPTION: A
USING MAXIMUM GUARANTEED SCHEDULE OF COST OF INSURANCE RATES
0% Hypothetical Gross 6% Hypothetical Gross 12% Hypothetical Gross
Annual Investment Return Annual Investment Return Annual Investment Return
(-1.44% net) (4.56% net) (10.56% net)
-------------------------------- -------------------------------- -----------------------------
Accumulated
End Of Premiums At Net Cash Net Cash Net Cash
Policy 5% Interest Surrender Death Surrender Death Surrender Death
Year Per Year Value Benefit Value Benefit Value Benefit
- -------- ------------ ----------- ------- ----------- -------- ----------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
1 5040 4163 250000 4428 250000 4693 250000
2 10332 7632 250000 8403 250000 9206 250000
3 15888 10994 250000 12503 250000 14141 250000
4 21723 14249 250000 16733 250000 19543 250000
5 27849 17390 250000 21092 250000 25457 250000
6 34281 20416 250000 25586 250000 31940 250000
7 41035 23314 250000 30209 250000 39044 250000
8 48127 26073 250000 34956 250000 46830 250000
9 55573 28684 250000 39827 250000 55370 250000
10 63392 31132 250000 44813 250000 64742 250000
15 108755 40546 250000 71476 250000 127959 250000
20 166652 43614 250000 100899 250000 234214 285740
Ages
70 240544 35900 250000 132797 250000 408014 473297
75 334851 8033 250000 168429 250000 688851 737071
80 455214 0 0 213248 250000 1147827 1205218
85 608830 0 0 281692 295777 1873334 1967000
1) Assumes an annual $4800 premium is paid at the beginning of each policy year. Values would be different if premiums with a
different frequency or in different amounts.
2) Assumes that no policy loan has been made. Excessive loans or Partial Withdrawals may cause this policy to lapse because
of insufficient cash value.
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 RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN
AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING INTEREST RATES AND RATES
OF INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN
AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL CONTRACT
YEARS. NO REPRESENTATIONS CAN BE MADE BY ALIC OR THE FUND THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ILLUSTRATION OF POLICY VALUES
AMERITAS LIFE INSURANCE CORP.
ENDOWMENT AT AGE 100
Male Issue Age: 45 Non-Smoker Preferred Underwriting Class
PLANNED PERIODIC ANNUAL PREMIUM: $14,500
INITIAL SPECIFIED AMOUNT: $250,000
DEATH BENEFIT OPTION: B
USING CURRENT SCHEDULE OF COST OF INSURANCE RATES
0% Hypothetical Gross 6% Hypothetical Gross 12% Hypothetical Gross
Annual Investment Return Annual Investment Return Annual Investment Return
(-1.29% net) (4.71% net) (10.71% net)
-------------------------------- -------------------------------- ----------------------
Accumulated
End Of Premiums At Net Cash Net Cash Net Cash
Policy 5% Interest Surrender Death Surrender Death Surrender Death
Year Per Year Value Benefit Value Benefit Value Benefit
- -------- -------------- ----------- -------- ----------- ------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
1 15225 13398 263398 14224 264224 15050 265050
2 31211 26578 276578 29071 279071 31664 281664
3 47996 39483 289483 44510 294510 49947 299947
4 65621 52136 302136 60587 310587 70096 320096
5 84127 64542 314542 77335 327335 92313 342313
6 103559 76711 326711 94792 344792 116828 366828
7 123962 88644 338644 112990 362990 143885 393885
8 145385 100403 350403 132025 382025 173819 423819
9 167879 111996 361996 151942 401942 206944 456944
10 191498 123425 373425 172781 422781 243601 493601
15 328533 177644 427644 291844 541844 494008 744008
20 503429 224309 474309 437004 687004 905145 1155145
Ages
70 726645 260929 510929 611571 861571 1579661 1832407
75 1011531 283845 533845 818278 1068278 2686693 2936693
80 1375126 287219 537219 1057871 1307871 4505626 4755626
85 1839176 259078 509078 1324080 1574080 7469622 7843103
1) Assumes an annual $14,500 premium is paid at the beginning of each policy year. Values would be different if premiums with a
different frequency or in different amounts.
2) Assumes that no policy loan has been made. Excessive loans or Partial Withdrawals may cause this policy to lapse because
of insufficient cash value.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
DEEMED A REPRESENTATION OFPAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN
AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING INTEREST RATES AND RATES
OF INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN
AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL CONTRACT
YEARS. NO REPRESENTATIONS CAN BE MADE BY ALIC OR THE FUND THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ILLUSTRATION OF POLICY VALUES
AMERITAS LIFE INSURANCE CORP.
ENDOWMENT AT AGE 100
Male Issue Age: 45 Non-Smoker Preferred Underwriting Class
PLANNED PERIODIC ANNUAL PREMIUM: $14,500
INITIAL SPECIFIED AMOUNT: $250,000
DEATH BENEFIT OPTION: B
USING MAXIMUM GUARANTEED SCHEDULE OF COST OF INSURANCE RATES
0% Hypothetical Gross 6% Hypothetical Gross 12% Hypothetical Gross
Annual Investment Return Annual Investment Return Annual Investment Return
(-1.44% net) (4.56% net) (10.56% net)
-------------------------------- -------------------------------- ----------------------------
Accumulated
End Of Premiums At Net Cash Net Cash Net Cash
Policy 5% Interest Surrender Death Surrender Death Surrender Death
Year Per Year Value Benefit Value Benefit Value Benefit
- -------- -------------- ------------ ------- ---------- ------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
1 15225 13398 263398 14224 264224 15050 265050
2 31211 25787 275787 28249 278249 30810 280810
3 47996 37926 287926 42839 292839 48158 298158
4 65621 49813 299813 58015 308015 67257 317257
5 84127 61443 311443 73795 323795 88280 338280
6 103559 72815 322815 90199 340199 111427 361427
7 123962 83914 333914 107240 357240 136902 386902
8 145385 94727 344727 124928 374928 164934 414934
9 167879 105244 355244 143278 393278 195778 445778
10 191498 115447 365447 162297 412297 229705 479705
15 328533 161300 411300 267882 517882 457575 707575
20 503429 196661 446661 391495 641495 824488 1074488
Ages
70 726645 217022 467022 531627 781627 1414307 1664307
75 1011531 215377 465377 683292 933292 2362402 2612402
80 1375126 179278 429278 833321 1083321 3885084 4135084
85 1839176 95388 345388 963623 1213623 6324108 6640314
1) Assumes an annual $14,500 premium is paid at the beginning of each policy year. Values would be different if premiums with a
different frequency or in different amounts.
2) Assumes that no policy loan has been made. Excessive loans or Partial Withdrawals may cause this policy to lapse because
of insufficient cash value.
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 RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN
AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING INTEREST RATES AND RATES
OF INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN
AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL CONTRACT
YEARS. NO REPRESENTATIONS CAN BE MADE BY ALIC OR THE FUND THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
</TABLE>
<PAGE>
APPENDIX B
LONG TERM MARKET TRENDS
The information below covering the period of 1926-1994 is an examination of the
basic relationship between risk and return among the different asset classes,
and between nominal and real (inflation adjusted) returns. The information is
provided because the Policyowners have varied investment portfolios available
which have different investment objectives and policies. The chart generally
demonstrates how different classes of investments have performed during the
period. The study of asset returns provides a period long enough to include most
of the major types of events that investors have experienced in the past and may
experience in the future. This is a historical record and is not intended as a
projection of future performance.
The graph depicts the growth of a dollar invested in common stocks, small
company stocks, long-term government bonds, Treasury bills, and a hypothetical
asset returning the inflation rate over the period from the end of 1925 to the
end of 1994. All results assume reinvestment of dividends on stocks or coupons
on bonds and no taxes. Transaction costs are not included, except in the small
stock index starting in 1982. Charges associated with a variable insurance
policy are not reflected in the chart.
Each of the cumulative index values is initiated at $1.00 at year-end 1925. The
graph illustrates that common stocks and small stocks gained the most over the
entire 69-year period: investments of one dollar would have grown to $810.54 and
$2,842.77, respectively, by year-end 1994. This growth, however, was earned by
taking substantial risk. In contrast, long-term government bonds (with an
approximate 20-year maturity), which exposed the holder to less risk, grew to
only $25.86.
The lowest risk strategy over the past 68 years was to buy U.S. Treasury bills.
Since Treasury bills tended to track inflation, the resulting real
(inflation-adjusted) returns were near zero for the entire 1926-1994 period.
(GRAPHIC OMITTED)(OMITTED GRAPH ILLUSTRATES LONG TERM MARKET TRENDS AS
DESCRIBED IN THE NARRATIVE ABOVE.)
Year End 1925 = $1.00
Source: Stocks, Bonds, Bills, and Inflation 1995 Yearbook
(C)Ibbotson Associates, Chicago. All Rights Reserved.
<PAGE>
APPENDIX C
STANDARD & POOR'S 500
The Standard and Poor's (S & P 500) is a weighted index of 500 widely held
stocks: 400 Industrials, 40 Financial Company Stocks, 40 Public Utilities, and
20 Transportation stocks, most of which are traded on the New York Stock
Exchange. This information is provided because the policyowners have varied
investment options available. The investment options, except the Fixed Account
and the Money Market Account, involve investments in the stock market. The S & P
500 is generally regarded as an accurate composite of the overall stock market.
<TABLE>
<CAPTION>
PERCENT CHANGE OF
STANDARD & POOR'S 500 INDEX
%
YEAR CHANGE
- -------------------------------------
<S> <C> <C>
1 1970 3.93 (GRAPHIC OMITTED) (OMITTED GRAPH
2 1971 14.56 DEPICTS THE ACTIVITY OF THE S&P 500
3 1972 18.90 INDEX FOR THE YEARS 1970-1974.)
4 1973 -14.77
5 1974 -26.39
6 1975 37.16
7 1976 23.57
8 1977 -7.42
9 1978 6.38
10 1979 18.20
11 1980 32.27
12 1981 -5.01
13 1982 21.44
14 1983 22.38
15 1984 6.10
16 1985 31.57
17 1986 18.56
18 1987 5.10
19 1988 16.61
20 1989 31.69
21 1990 -3.14
22 1991 30.45
23 1992 7.61
24 1993 10.08
25 1994 -1.32
THE CHART ASSUMES THE RETURN EXPERIENCED BY THE STANDARD & POOR'S 500 INDEX FOR
THE LAST 25 YEARS. FUTURE RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN
AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS
MADE BY AN OWNER. THE INFORMATION IN THE CHART IS NOT NECESSARILY INDICATIVE OF
FUTURE PERFORMANCE.
</TABLE>
<PAGE>
