As filed with the Securities and Exchange Commission on
February 28, 1997
Registration No. 33-86500
======================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Post-Effective Amendment No. 3
to
Form S-6
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FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933 OF
SECURITIES OF UNIT INVESTMENT TRUSTS REGISTERED ON
FORM N-8B-2
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AMERITAS LIFE INSURANCE CORP.
SEPARATE ACCOUNT LLVL
(EXACT NAME OF REGISTRANT)
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AMERITAS LIFE INSURANCE CORP.
5900 "O" Street
Lincoln, Nebraska 68510
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NORMAN M. KRIVOSHA
Secretary
Ameritas Variable Life Insurance Company
5900 "O" Street
Lincoln, Nebraska 68510
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It is proposed that this filing will become effective:
[ ] immediate upon filing pursuant to paragraph b
[x] on May 1, 1997 pursuant to paragraph a of Rule 485
[ ] on ___________ pursuant to paragraph b of Rule 485
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, the Registrant
has registered an indefinite amount of securities under the Securities Act of
1933. A notice pursuant to Rule 24f-2 for the fiscal year ending December 31,
1996 was filed on February 12, 1997.
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RECONCILIATION AND TIE BETWEEN ITEMS IN FORM N-8B-2
AND THE PROSPECTUS
ITEM NO. OF
FORM N-8B-2 CAPTION IN PROSPECTUS
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1 Cover Page
2 Cover Page
3 Ameritas Life Insurance Corp. - Separate Account LLVL;
Voting Rights
4 Distribution of the Policies
5 Ameritas Life Insurance Corp. - Separate Account LLVL
6 Ameritas Life Insurance Corp. - Separate Account LLVL
7 Not Required
8 Not Required
9 Legal Proceedings
10 Summary; Addition, Deletion or Substitution of
Investments; Policy Benefits; Policy Rights; Payment and
Allocation of Premiums; General Provisions; Additional
Insurance Benefits (Riders); Voting Rights
11 Summary; The Funds
12 Summary; The Funds
13 Summary; The Funds; Charges and Deductions
14 Summary; Payment and Allocation of Premiums
15 Summary; Payment and Allocation of Premiums
16 Summary; The Funds
17 Summary, Policy Rights
18 Vanguard Variable Insurance Fund; Neuberger & Berman
Advisers Management Trust; Fixed Account
19 General Provisions; Voting Rights
20 Not Applicable
21 Summary; Policy Rights; General Provisions
22 Not Applicable
23 Safekeeping of the Account's Assets
24 General Provisions
25 Ameritas Life Insurance Corp.
26 Not Applicable
27 Ameritas Life Insurance Corp.
28 Executive Officers and Directors of ALIC
29 Not Applicable
30 Not Applicable
31 Not Applicable
32 Not Applicable
33 Not Applicable
34 Not Applicable
35 Not Applicable
36 Not Required
37 Not Applicable
38 Distribution of the Policies
39 Distribution of the Policies
40 Not Applicable
41 Distribution of Policies
42 Not Applicable
43 Not Applicable
44 The Funds; Accumulation Value
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ITEM NO. OF
FORM N-8B-2 CAPTION IN PROSPECTUS
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45 Not Applicable
46 The Funds; Accumulation Value; Surrender Charge
47 Not Applicable
48 State Regulation of ALIC
49 Not Applicable
50 Ameritas Life Insurance Corp. Separate Account LLVL
51 Cover Page; Summary; Policy Benefits; Charges and
Deductions
52 Addition, Deletion or Substitution of Investments
53 Summary; Federal Tax Matters
54 Not Applicable
55 Not Applicable
56 Not Required
57 Not Required
58 Not Required
59 Financial Statements
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Ameritas Life Insurance Corp. Logo
PROSPECTUS
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 generally $100,000,
lower specified amounts may be requested. 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 20). 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 22),
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 Vanguard Variable Insurance Fund ("Vanguard"), Neuberger & Berman
Advisers Management Trust ("Neuberger & Berman AMT") or Berger Institutional
Products Trust ("Berger IPT") (collectively the "Funds"). In this Separate
Account, Vanguard offers nine portfolios: Money Market, High-Grade Bond, High
Yield Bond, Balanced, Equity Income, Equity Index, Growth, Small Company Growth
and International; Neuberger & Berman AMT offers four portfolios: Limited
Maturity Bond, Growth, Partners, and Balanced; Berger IPT offers two portfolios:
Berger IPT-100 Fund and Berger IPT - Small Company Growth Fund. 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
Vanguard, Neuberger & Berman AMT and Berger IPT.
These securities are not deposits with, or obligations of, or guaranteed or
endorsed by, any financial institution; and the securities are not insured by
the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any
other agency.
These securities involve investment risk, including the possible loss of
principal.
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 May 1, 1997.
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LLVL 1
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TABLE OF CONTENTS
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 .............................................. 14
Addition, Deletion or Substitution of Investments.................. 15
Fixed Account...................................................... 16
Policy Benefits............................................................. 16
Purposes of the Policy............................................. 16
Death Benefit Proceeds............................................. 17
Death Benefit Options.............................................. 17
Methods of Affecting Insurance Protection.......................... 18
Duration of Policy................................................. 19
Accumulation Value................................................. 19
Benefits at Maturity............................................... 19
Payment of Policy Benefits......................................... 20
Policy Rights............................................................... 20
Loan Benefits...................................................... 20
Surrenders......................................................... 21
Partial Withdrawals................................................ 21
Transfers.......................................................... 22
Systematic Programs................................................ 22
Refund Privilege................................................... 23
Exchange Privilege................................................. 23
Payment and Allocation of Premiums.......................................... 23
Issuance of a Policy............................................... 23
Premiums........................................................... 24
Allocation of Premiums and Accumulation Value...................... 25
Policy Lapse and Reinstatement..................................... 25
Charges and Deductions...................................................... 26
Deductions From Premium Payment.................................... 26
Charges Deducted from Accumulation Value........................... 26
Surrender Charge................................................... 27
Transfer Charge.................................................... 27
Partial Withdrawal Charge.......................................... 27
Daily Charges Against the Account.................................. 27
General Provisions.......................................................... 28
Additional Insurance Benefits (Riders)...................................... 29
Distribution of the Policies................................................ 30
Federal Tax Matters......................................................... 30
Safekeeping of the Account's Assets......................................... 32
Third Party Services........................................................ 33
Voting Rights............................................................... 33
State Regulation of ALIC.................................................... 33
Executive Officers and Directors of ALIC.................................... 33
Legal Matters............................................................... 37
Legal Proceedings........................................................... 37
Experts..................................................................... 37
Additional Information...................................................... 37
Financial Statements........................................................ 38
Ameritas Life Insurance Corp. Separate Account LLVL......................... 40
Ameritas Life Insurance Corp................................................ 46
Appendices.................................................................. 66
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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2 LLVL
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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 25) 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 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.
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 21;
Charges and Deductions, page 23).
OUTSTANDING POLICY DEBT - The sum of all unpaid policy loans and accrued
interest on policy loans.
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LLVL 3
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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 19 and 24).
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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4 LLVL
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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 fifteen different Subaccounts. The fifteen
Subaccounts invest in the corresponding portfolios (Funds) of the Vanguard
Variable Insurance Fund the Neuberger & Berman Advisers Management Trust or
the Berger Institutional Products 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 18).
to 50% of the lowest Payments can be taken under
scheduled death benefit is one or more of five different
available under certain payment options.
conditions for Insureds
suffering from terminal
illness.
The policy may be surren-
dered at any time for its
Net Cash Surrender Value.
The policy has no sur-
render charge. However,
there is a charge for
Partial Withdrawals.
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LLVL 5
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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 fifteen 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 9). The financial statements for ALIC
can be found beginning on page 39.
THE POLICY
The policy is available for individuals and for corporations and other
institutions who wish to provide coverage and benefits for key employees.
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 unless the Extended
Maturity Rider is in effect.
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 Vanguard. 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 22).
The various Subaccounts available invest in a corresponding portfolio of the
Funds.
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6 LLVL
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In this Separate Account, Vanguard offers nine portfolios: Money Market,
High-Grade Bond, High Yield Bond, Balanced, Equity Income, Equity Index, Growth,
Small Company Growth and International; Neuberger & Berman AMT offers four
portfolios: Limited Maturity Bond, Growth, Partners, and Balanced; and Berger
IPT offers two portfolios: Berger IPT-100 Fund and Berger IPT-Small Company
Growth Fund. 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 unless the Extended Maturity
Rider is in effect. 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 14).
If the Extended Maturity Rider is in effect, the Death Benefit will be the
Accumulation Value.
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 16). 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 19). A charge will be deducted from the amount paid
upon Partial Withdrawal. (See Partial Withdrawal Charge, page 24).
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.
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 18).
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LLVL 7
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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
28).
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 23).
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 23).
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 24).
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 24).
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 25).
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 25).
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 9).
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 28), 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 28).
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8 LLVL
<PAGE>
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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 20).
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 20).
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 "O" Street, Lincoln, Nebraska 68501.
ALIC and subsidiaries had total assets at December 31, 1996 of over $2.9
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, portfolio
rebalancing, earnings sweep, tax-deference, diversification, asset allocation,
and other investment methods. ALIC may also publish information about Veritas,
ALIC's wholly-owned, direct-to-consumer subsidiary. 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 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.
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LLVL 9
<PAGE>
- --------------------------------------------------------------------------------
THE FUNDS
There are currently fifteen 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 Vanguard, Neuberger &
Berman AMT, or Berger IPT (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.
All underlying fund information, including Fund prospectuses, has been provided
to ALIC by the underlying Funds. ALIC has not independently verified this
information.
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 Vanguard, Neuberger & Berman AMT and Berger IPT 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
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10 LLVL
<PAGE>
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LLVL 11
<PAGE>
- --------------------------------------------------------------------------------
MONEY MARKET PORTFOLIO seeks to provide a current income and a stable net asset
value of $1.00 per share. The Portfolio invests primarily in high-quality money
market instruments issued by financial institutions, nonfinancial corporations,
and the U.S. Government, state and municipal governments and their agencies or
instrumentalities, as well as repurchase agreements collateralized by such
securities.
HIGH-GRADE BOND PORTFOLIO seeks to parallel the investment results (income plus
capital change) of publicly-traded investment graded fixed-income securities in
the aggregate by attempting to duplicate the investment performance of a broad
investment grade bond index. The Portfolio invests primarily in a diversified
portfolio of U.S. Government, corporate and foreign dollar-denominated bonds and
mortgage-backed securities.
HIGH YIELD BOND PORTFOLIO seeks to provide a high level of current income by
investing in a diversified portfolio of lower quality, high-yielding corporate
debt securities (commonly referred to as "junk bonds").
BALANCED PORTFOLIO seeks to provide capital growth and a reasonable level of
current income by investing in a diversified portfolio of common stocks and
bonds.
EQUITY INCOME PORTFOLIO seeks to provide a high level of current income by
investing principally in dividend-paying equity securities.
EQUITY INDEX PORTFOLIO seeks to parallel the investment results of the Standard
& Poor's 500 Composite Stock Price Index (the "S & P 500"). The Portfolio
invests primarily in common stocks included in the S & P 500.
GROWTH PORTFOLIO seeks to provide long-term capital appreciation by investing
primarily in equity securities of seasoned U.S. companies with above-average
prospects for growth.
SMALL COMPANY GROWTH PORTFOLIO seeks to provide long-term growth in capital by
investing primarily in equity securities of small companies deemed to have
favorable prospects for growth.
INTERNATIONAL PORTFOLIO seeks to provide long-term capital appreciation by
investing primarily in equity securities of seasoned companies located outside
the United States.
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12 LLVL
<PAGE>
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NEUBERGER & BERMAN AMT
LIMITED MATURITY BOND PORTFOLIO seeks the highest current income consistent with
low risk to principal and liquidity; and secondarily, total return. Principal
series investments are short-to-intermediate term debt securities, primarily
investment grade.
GROWTH PORTFOLIO seeks capital appreciation, without regard to income. Principal
series investments are common stocks.
PARTNERS PORTFOLIO seeks capital growth. Principal series investments are common
stocks and other equity securities of established companies.
BALANCED PORTFOLIO seeks long-term capital growth and reasonable current income
without undue risk to principal. Principal series investments are common stocks
and short-to-intermediate term debt securities, primarily investment grade.
BERGER IPT
BERGER IPT-100 FUND seeks long-term capital appreciation. Current income is not
an investment objective. The Fund places primary emphasis on established
companies which it believes to have favorable growth prospects, regardless of
the company's size. Common stock usually constitutes all or most of the Fund's
investment portfolio, but the Fund remains free to invest in securities other
than common stocks.
BERGER IPT-SMALL COMPANY GROWTH FUND seeks capital appreciation. It invests
principally in a diversified group of equity securities of small growth
companies with market capitalization of less than $1 billion at the time of
initial purchase.
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LLVL 13
<PAGE>
- --------------------------------------------------------------------------------
FUND MANAGEMENT FEES
Fee information relating to the underlying funds was provided to ALIC by the
underlying funds. ALIC has not independently verified the information received
from the underlying funds.
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. Newell Associates, Lincoln Capital
Management, and Granahan Investment Management, Inc. serve as independent
investment advisors to the Equity Income, Growth, and Small Company Growth
portfolios, respectively. Wellington Management Company serves as investment
advisor to the Balanced and High Yield Bond portfolios. The International
portfolio employs Schroder Capital Management International, Inc. as the
adviser. Vanguard charges a fee to each portfolio for providing corporate
management, administrative, distribution and shareholder accounting services.
Neuberger & Berman Advisers Management Trust (the "Trust") is divided into
portfolios ("Portfolios"), each of which invests all of its net investable
assets in a corresponding series ("Series") of Advisers Managers Trust. The
figures reported under "Investment Management and Administration Fees" include
the aggregate of the administration fees paid by the Portfolio and the
management fees paid by its corresponding Series. Similarly, "Other Expenses"
includes all other expenses of the Portfolio and its corresponding Series.
NBMI provides investment management services to each Series that include, among
other things, making and implementing investment decisions and providing
facilities and personnel necessary to operate the Series. NBMI provides
administrative services to each Portfolio that include furnishing similar
facilities and personnel to the Portfolio. With the Portfolio's consent, NBMI is
authorized to subcontract some of its responsibilities under its administration
agreement with the Portfolio to third parties.
Each Portfolio bears all expenses of its operations other than those borne by
NBMI as administrator of the Portfolio and as distributor of its shares. Each
Series bears all expenses of its operations other than those borne by NBMI as
investment manager of the Series. These expenses include, but are not limited
to, for the Portfolios and the Series, legal and accounting fees and
compensation for trustees who are not affiliated with NBMI; for the Portfolios,
transfer agent fees and the cost of printing and sending reports and proxy
materials to shareholders; and for the Series, custodial fees for securities.
Any expenses which are not directly attributable to a specific Series are
allocated on the basis of the net assets of the respective Series.
NBMI has voluntarily undertaken to limit the listed Portfolio's expenses by
reimbursing each Portfolio for its operating expenses and its pro rata share of
its corresponding Series' operating expenses, excluding the compensation of
NBMI, taxes, interest, extraordinary expenses, brokerage commissions and
transaction costs, that exceed, in the aggregate, 1% per annum of the
Portfolio's average daily net asset value. This undertaking is subject to
termination on 60 days' prior written notice to the Portfolio.
Berger Associates provides investment advisory services to the Berger IPT Funds
available in the Separate Account. Berger Associates has agreed to waive its
advisory fee to the extent that normal operating expenses in any fiscal year,
including the management fee but excluding brokerage commissions, interest,
taxes and extraordinary expenses, of Berger IPT-100 Fund exceed 1.00%, and the
normal operating expenses in any fiscal year of the Berger IPT-Small Company
Growth Fund exceed 1.15%, of the respective Fund's average daily net assets.
EXPENSES
<TABLE>
<CAPTION>
INVESTMENT ADVISORY
PORTFOLIO & MANAGEMENT OTHER EXPENSE TOTAL
VANGUARD(1)
<S> <C> <C> <C>
Money Market .14% .05% .19%
High-Grade Bond .19% .06% .25%
High Yield Bond(2) .26% .06% .32%
Balanced .28% .03% .31%
</TABLE>
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14 LLVL
<PAGE>
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<TABLE>
<CAPTION>
<S> <C> <C> <C>
Equity Income .30% .05% .35%
Equity Index .19% .03% .22%
Growth .35% .04% .39%
Small Company Growth(2) .39% .06% .45%
International .38% .11% .49%
</TABLE>
<TABLE>
<CAPTION>
NEUBERGER & BERMAN(3)
INVESTMENT MANAGEMENT
PORTFOLIO & ADMINISTRATION FEES OTHER EXPENSES TOTAL
<S> <C> <C> <C>
Limited Maturity .65% .13% .78%
Balanced .85% .24% 1.09%
Partners .84% .11% .95%
Growth .83% .09% .92%
BERGER IPT
INVESTMENT MANAGEMENT
PORTFOLIO & ADMINISTRATION FEES OTHER EXPENSES TOTAL
(reflect reimbursement) (reflect reimbursement)
100 Fund .00% 1.00%(4) 1.00%(4)
Small Company Growth .00% 1.15%(5) 1.15%(5)
</TABLE>
(1) 9/30/96 fiscal year end.
(2) Annualized
(3) 12/31/96 fiscal year end.
(4) Expenses reflect fee waiver and expense reimbursement. Absent such
waiver and reimbursement, "Other" Expenses would have been 6.94%; and
"Total" Expenses would have been 7.69%.
(5) Expenses reflect fee waiver and expense reimbursement. Absent such
waiver and reimbursement, "Other" Expenses would have been 7.67%; and
"Total" Expenses would have been 8.57%.
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.
- --------------------------------------------------------------------------------
LLVL 15
<PAGE>
- --------------------------------------------------------------------------------
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 19).
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, 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.
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16 LLVL
<PAGE>
- --------------------------------------------------------------------------------
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 17).
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, unless the Extended Maturity
Rider is in effect, 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 22). The minimum initial Specified
Amount is generally $100,000, lower Specified Amounts may be requested. Defined
differences, assisted by graphic illustrations are as follows:
OPTION A.
(Omitted graph illustrates payout under Death Benefit Option A, specifically by
showing the relationships over time, between the Specified Amunt 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.
(Omitted graph illustrates payout under Death Benefit Option B, specifically by
showing the relationships 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.
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LLVL 17
<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.
EXTENDED MATURITY. If the Extended Maturity Rider is in effect, the Death
Benefit will be the Accumulation Value.
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 23 and Federal Tax
Matters, page 28).
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 23 and Federal Tax Matters, page 28).
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 21),
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 22).
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 23).
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.
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18 LLVL
<PAGE>
- --------------------------------------------------------------------------------
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 23). 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 22). 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 26).
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 19). 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 22). 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.
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 25).
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, unless the
maturity has been extended by election of the Extended Maturity Rider.
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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, page26). 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.
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 28).
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.
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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 Benefit 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 22).
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.
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 26). Surrenders may
have tax consequences. (See Tax Treatment of Policy Proceeds, page 29).
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 17).
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.
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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 23-24; Death Benefit Options--Methods of Affecting Insurance Protection,
page 16). 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 24).
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. This charge will be deducted pro rata from each Subaccount
(and, if applicable, the Fixed Account) in which the Policyowner is invested.
(See Transfer Charge, page 24). 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.
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
apart) during any calendar year. A substantive transfer is a transfer from a
Subaccount which exceeds 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.
SYSTEMATIC PROGRAMS
ALIC may offer systematic programs as discussed below. Transfers of Accumulation
Value made pursuant to these programs will be counted in determining whether the
transfer fee applies. There is no separate charge for participation in these
programs at this time. All other normal transfer restrictions, as described
above, apply.
PORTFOLIO REBALANCING. Under the Portfolio Rebalancing program, the Owner can
instruct ALIC to allocate Accumulation Value among the Subaccounts of the
Account, on a systematic basis, in accordance with allocation instructions
specified by the Owner. The Fixed Account can not be used in this program.
DOLLAR COST AVERAGING. Under the Dollar Cost Averaging program, the Owner can
instruct ALIC to automatically transfer, on a systematic basis, a predetermined
amount or percentage specified by the Owner from
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the Fixed Account or the Money Market Subaccount to any other Subaccount(s).
When dollar cost averaging is permitted from the Fixed Account, no more than
1/36th of the value of the Fixed Account at the time dollar cost averaging is
established may be transferred each month.
EARNING SWEEP. Permits systematic redistribution of earnings among Subaccounts.
The Owner can request participation in the available programs when purchasing
the Policy or at a later date. The Owner can change the allocation percentage or
discontinue any program by sending written notice or calling the Home Office.
Other scheduled programs may be made available. ALIC reserves the right to
modify, suspend or terminate such programs at any time. Use of Systematic
Programs may not be advantageous, and does not guarantee success.
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 canceled 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 26).
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
The policy is available for individuals and for corporations and other
institutions who wish to provide coverage and benefits for key employees.
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 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
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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.
Subject to approval, a Policy may be backdated, but the Policy Date may not be
more than six months prior to the date of the application. Backdating can be
advantageous if the Insured's lower Issue Age results in lower cost of insurance
rates. If a Policy is backdated, the minimum initial premium required will
include sufficient premium to cover the backdating period. Monthly deductions
will be made for the period the Policy Date is backdated.
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 26).
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 16). 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, below).
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.
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.
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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. Allocations must be whole number percentages and 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,
below).
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
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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 16.
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.
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
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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, or issued in
connection with certain employer sponsored arrangements 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, below).
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
pro rata from each Subaccount (and, if applicable, the Fixed Account) in which
the Policyowner is invested. The transfer charge will not be imposed on
transfers that occur as a result of policy loans or the exercise of exchange
rights.
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.
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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,
Neuberger & Berman Advisers Management Trust, and Berger Institutional Products
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 28).
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.
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.
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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.
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 23).
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.
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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.
EXTENDED MATURITY RIDER. This rider may be elected by submitting a written
request to ALIC during the 90 days prior to Maturity Date. If elected, as long
as the Surrender Value is greater than zero, the policy will remain in force for
purposes of providing a benefit at the time of the Insured's death. Once this
rider becomes effective, no further premium payments will be accepted, and no
monthly charges will be made for cost of insurance, riders or flat extra rating.
All other policy provisions not specifically noted herein will remain in effect
while the policy continues in force. Interest on policy loans will continue to
accrue and become part of the policy debt. This rider does not extend the
Maturity Date for purposes of determining benefits under any other riders. Death
Benefit Proceeds are payable to the beneficiary.
There is no extra premium for this rider. This rider is not available in all
states.
The Internal Revenue Service has not issued a ruling regarding the tax
consequences of this rider.
DISTRIBUTION OF THE POLICIES
Ameritas Investment Corp. ("Investment Corp."), a wholly-owned subsidiary of
AMAL Corporation 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.
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, ALIC's
wholly-owned, direct-to-consumer subsidiary, 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, and does not purport to be
complete or cover all situations. This discussion is not intended as tax advice.
No attempt has
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been made to consider in detail any applicable state or other tax (except
premium taxes, see discussion "Premium Charges," page 23) laws. This discussion
is based upon ALIC's understanding of the relevant laws at the time of filing.
Counsel and other competent advisors should be consulted for more complete
information before a Policy is purchased. ALIC makes no representation as to the
likelihood of the continuation of present federal income tax laws nor of the
interpretations by the Internal Revenue Service. Federal tax laws are subject to
change and thus tax consequences to the Insured, Policyowner or Beneficiary may
be altered.
(a) TAXATION OF ALIC. ALIC is taxed as a life insurance company under Part I of
Subchapter L of the Internal Revenue Code of 1986 (the "Code"). At this
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 changed, the applicable
definitional limitations may change. In the case of a decrease in the
death benefit, a Partial Withdrawal, a change in Death Benfit option, 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.
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. A
Policyowner should contact a competent tax professional before paying
additional premiums or making other changes to the Policy to determine
whether such payments or changes would cause the Policy to become 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 March 2, 1989, which affect how the Fund's
assets may be invested.
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ALIC does not have control over the Funds or their investments. However,
ALIC believes that the Funds will be operated in compliance with the
diversification requirements of the Internal Revenue Code. 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 may be issued in the 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 or otherwise to qualify the Policy for favorable tax treatment.
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 prior to the original maturity date 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.
Except for Policies with respect to a limited number of key persons of an
employer (both as defined in the Internal Revenue Code), and subject to
applicable interest rate caps, the Health Insurance Portability and
Accountability Act of 1996 (the "Health Insurance Act") generally repeals
the deduction for interest paid or accrued after October 13, 1995 on loans
from corporate owned life insurance Policies. Certain transitional rules
for existing indebtedness are included in the Health Insurance Act. The
transitional rules include a phase-out of the deduction for indebtedness
incurred (1) before January 1, 1996, (or) (2) before January 1, 1997, for
Policies entered into in 1994 or 1995. The phase-out of the interest
expense deduction occurs over a transition period between October 13, 1995
and January 1, 1999. There is also a special rule for pre-June 21, 1986
Policies. Policyowners should consult a competent tax advisor concerning
the tax implications of these changes for their Policies.
The right to exchange the Policy for a flexible premium adjustable life
insurance policy (See Exchange Privilege, page 20), the right to change
owners (See General Provisions, page 25), and the provision for Partial
Withdrawals (See Surrenders, page 19) 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.
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THIRD PARTY SERVICES
ALIC is aware that certain third parties are offering investment advisory
services in connection with the contracts. ALIC does not engage any such third
parties to offer such services of any type as part of the contract. Firms or
persons offering such services do so independently from any agency relationship
they may have with ALIC for the sale of contracts. ALIC takes no responsibility
for the investment allocations and transfers transacted on a contract owner's
behalf by such third parties or any investment allocation recommendations made
by such parties. Contract owners should be aware that fees paid for such
services are separate and in addition to fees paid under the contracts.
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.
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, & CHIEF EXECUTIVE OFFICER*
Director, Chairman of the Board, President, Chief Executive Officer: Ameritas
Variable Life Insurance Company;
- --------------------------------------------------------------------------------
LLVL 33
<PAGE>
- --------------------------------------------------------------------------------
also serves as officer and/or director of other subsidiaries and/or affiliates
of Ameritas Life Insurance Corp.
KENNETH C. LOUIS, DIRECTOR, PRESIDENT AND CHIEF OPERATING OFFICER*
Director, Executive Vice President: Ameritas Variable Life Insurance Company;
also serves as officer and/or director of other subsidiaries and/or affiliates
of Ameritas Life Insurance Corp.
NORMAN M. KRIVOSHA, EXECUTIVE VICE PRESIDENT, SECRETARY AND CORPORATE GENERAL
COUNSEL*
Secretary and General Counsel: Ameritas Variable Life Insurance Company; also
serves as officer and/or director of other subsidiaries and/or affiliates of
Ameritas Life Insurance Corp.
JON C. HEADRICK, EXECUTIVE VICE PRESIDENT-INVESTMENTS AND TREASURER*
Treasurer: Ameritas Variable Life Insurance Company; also serves as officer
and/or director of other subsidiaries and/or affiliates of Ameritas Life
Insurance Corp.
JAMES P. ABEL, DIRECTOR**
President: NEBCO, Inc.
DUANE W. ACKLIE, DIRECTOR**
Chairman: Crete Carrier Corporation; Director: AMAL Corporation
ROBERT C. BARTH, SECOND VICE PRESIDENT AND ASSISTANT CONTROLLER*
ROXANN BRENNFOERDER, VICE PRESIDENT-PENSIONS*
WAYNE E. BREWSTER, VICE PRESIDENT-VARIABLE SALES*
Senior Vice President-Variable Sales: Ameritas Variable Life Insurance Company.
ROBERT W. BUSH, EXECUTIVE VICE PRESIDENT-INDIVIDUAL INSURANCE*
Director, Senior Vice President Variable Operations and Administration: Ameritas
Variable Life Insurance Company;also serves as officer and/or director of other
subsidiaries and/or affiliates of Ameritas Life Insurance Corp.; Senior Vice
President, CUNA Mutual Insurance Group; also served as officer and/or director
of other subsidiaries and/or affiliates of CUNA.
- --------------------------------------------------------------------------------
34 LLVL
<PAGE>
- --------------------------------------------------------------------------------
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
WILLIAM R. GIOVANNI, SENIOR VICE PRESIDENT AND CHIEF EXECUTIVE OFFICER-AIC*
Also serves as officer and director of an affiliate of Ameritas Life Insurance
Corp.; President: FirsTier Securities
JAMES R. HAIRE, VICE PRESIDENT-CORPORATE ACTUARY*
Vice President and Actuary: Ameritas Variable Life Insurance Company; also
serves as officer and/or director of other subsidiaries and/or affiliates of
Ameritas Life Insurance Corp.
THOMAS D. HIGLEY, VICE PRESIDENT - INDIVIDUAL FINANCIAL OPERATIONS AND ACTUARY*
Also serves as an officer of a subsidiary of Ameritas Life Insurance Corp.
LESLIE D. INMAN, VICE PRESIDENT - GROUP MARKETING AND PLANNING*
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, VICE PRESIDENT - INFORMATION SERVICES*
MARTY L. JOHNSON, SECOND VICE PRESIDENT - INDIVIDUAL UNDERWRITING*
KENNETH R. JONES, VICE PRESIDENT, CORPORATE COMPLIANCE AND ASSISTANT SECRETARY*
Vice President-Corporate Compliance and Assistant Secretary: Ameritas Variable
Life Insurance Company, also serves as officer of other subsidiaries and/
or affiliates of Ameritas Life Insurance Corp.
JAMES R. KNAPP, DIRECTOR**
President: The Brookhollow Group; General Partner: Windsor Associates
ROBERT F. KROHN, DIRECTOR**
Vice Chairman and Chief Executive Officer: PSI Group, Inc. President: Krohn
Corporation; Chairman of the Board: Commercial Federal Corporation
WILLIAM W. LESTER, VICE PRESIDENT-SECURITIES*
Also serves as an officer of a subsidiary of Ameritas Life Insurance Corp.
WILFRED J. MADDUX, DIRECTOR**
President, Manager: Maddux Cattle Company
- --------------------------------------------------------------------------------
LLVL 35
<PAGE>
- --------------------------------------------------------------------------------
JOANN M. MARTIN, SENIOR VICE PRESIDENT - CONTROLLER AND CHIEF FINANCIAL OFFICER*
Controller: Ameritas Variable Life Insurance Company; also serves as an officer
and/or director of other subsidiaries and/or affiliates of Ameritas Life
Insurance Corp.
ANTHONY MAZZARELLI, JR., VICE PRESIDENT - INDIVIDUAL FIELD SALES*
BRUCE R. MCMULLEN, M.D., VICE PRESIDENT AND MEDICAL DIRECTOR*
DAVID C. MOORE, EXECUTIVE VICE PRESIDENT - GROUP AND PENSIONS*
Also serves as officer and/or director of other subsidiaries and/or affiliates
of Ameritas Life Insurance Corp.
WILLIAM W. NELSON, VICE PRESIDENT - GROUP CLAIMS AND ADMINISTRATION*
Also serves as an officer of a subsidiary of Ameritas Life Insurance Corp.
DALE NIEBUHR, SECOND VICE PRESIDENT - AUDIT SERVICES*
GARY R. RAYMOND, VICE PRESIDENT - GROUP ACTUARY*
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**
Director: AMAL Corporation; 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*
Also serves as officer and director of an affiliate of Ameritas Life Insurance
Corp.
NEAL E. TYNER, DIRECTOR, CHAIRMAN EMERITUS**
NET Consultants, Formerly Chairman of the Board and CEO of ALIC;
KENNETH L. VANCLEAVE, VICE PRESIDENT - GROUP MANAGED CARE AND PARTNERING*
Also serves as officer and director of an affiliate of Ameritas Life Insurance
Corp.
WINSTON J. WADE, DIRECTOR**
Vice President-Network Infrastructure: U.S. West Communications; Vice
President-Technical Services: U.S. West Communication, Inc.
JON B. WEINBERG, VICE PRESIDENT-MORTGAGE LOANS AND REAL ESTATE*
Also serves as an officer of a subsidiary of Ameritas Life Insurance Corp.
STEVEN L. WELTON, VICE PRESIDENT-INDIVIDUAL MARKETING*
Assistant Vice President-Marketing Services: Northwestern National Life
Insurance Co.
- --------------------------------------------------------------------------------
36 LLVL
<PAGE>
- --------------------------------------------------------------------------------
* 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, PSI Group Inc., 10011 J Street, Omaha
Nebraska 68127; Wilfred Maddux, Maddux Cattle Company, P.O. Box 217,
Wauneta, Nebraska 69045; 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, c/o PMI Jockey
Hollow Professional Park, P.O. Box 311, Mendham, New Jersey 07945-0311.
*** 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.
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, Executive Vice President, Secretary
and Corporate General Counsel.
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
The consolidated financial statements of ALIC as of December 31, 1996 and 1995
and for each of the three years in the period ended December 31, 1996 (which
report expresses an unqualified opinion and includes an explanatory paragraph
referring to a change in method of accounting for securities effective January
1, 1994), and the financial statements of the Account as of December 31, 1996,
included in this Prospectus have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports appearing herein, and are
included in reliance upon the reports 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.
- --------------------------------------------------------------------------------
LLVL 37
<PAGE>
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
38 LLVL
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
LLVL 39
Independent Auditors' Report
Board of Directors
Ameritas Life Insurance Corp.
Lincoln, Nebraska
We have audited the accompanying statement of net assets of Ameritas Life
Insurance Corp. Separate Account LLVL as of December 31, 1996, and the related
statement of operations and changes in net assets for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned at December 31, 1996. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Ameritas Life Insurance Corp. Separate
Account LLVL as of December 31, 1996, and the results of its operations and
changes in its net assets for the year then ended, in conformity with generally
accepted accounting principles.
/s/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
February 1, 1997
- --------------------------------------------------------------------------------
40 LLVL
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERITAS LIFE INSURANCE CORP.
SEPARATE ACCOUNT LLVL
STATEMENT OF NET ASSETS
December 31, 1996
<S> <C>
ASSETS
INVESTMENTS AT NET ASSET VALUE:
Vanguard Variable Insurance Fund:
Money Market Portfolio - 1,274,985.810 shares at
$1.00 per share (cost $1,274,986) $ 1,274,986
Equity Index Portfolio - 68,977.369 shares at
$19.55 per share (cost $1,276,121) 1,348,508
Equity Income - 21,723.303 shares at
$14.60 per share (cost $295,821) 317,160
Growth Portfolio - 39,921.198 shares at
$17.69 per share (cost $683,887) 706,206
Balanced Portfolio - 26,356.946 shares at
$15.01 per share (cost $386,976) 395,618
High-Grade Bond Portfolio - 10,402.808 shares at
$10.43 per share (cost $107,459) 108,501
International Portfolio - 45,478.330 shares at
$12.74 per share (cost $566,690) 579,394
Advisers Management Trust:
AMT Balanced Portfolio - 5,554.279 shares at 88,424
$15.92 per share (cost $85,112)
AMT Growth Portfolio - 12,586.203 shares at 324,472
$25.78 per share (cost $303,975)
AMT Partners Portfolio - 34,240.606 shares at 564,285
$16.48 per share (cost $497,964)
AMT Limited Maturity Bond Portfolio - 1,843.518 shares at 25,902
$14.05 per share (cost $25,454)
-----------------------
NET ASSETS REPRESENTING EQUITY OF POLICYOWNERS $ 5,733,456
=======================
The accompanying notes are an integral part of these financial statements.
</TABLE>
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LLVL 41
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERITAS LIFE INSURANCE CORP.
SEPARATE ACCOUNT LLVL
STATEMENT OF NET ASSETS (cont'd.)
December 31, 1996
Number of Units Unit Value
--------------------- ---------------------
<S> <C> <C> <C>
Vanguard Variable Insurance Fund:
Money Market Portfolio 1,219,733.672 1.045298 $ 1,274,986
Equity Index Portfolio 68,007.591 19.828780 1,348,508
Equity Income Portfolio 21,018.098 15.089863 317,160
Growth Portfolio 38,200.151 18.486994 706,206
Balanced Portfolio 24,764.749 15.975036 395,618
High-Grade Bond Portfolio 9,884.731 10.976654 108,501
International Portfolio 44,126.357 13.130336 579,394
Advisers Management Trust:
Balanced Portfolio 4,754.585 18.597649 88,424
Growth Portfolio 11,580.323 28.019282 324,472
Partners Portfolio 33,138.465 17.028102 564,285
Limited Maturity Bond Portfolio 1,699.501 15.240601 25,902
-------------------
$ 5,733,456
===================
The accompanying notes are an integral part of these financial statements.
</TABLE>
- --------------------------------------------------------------------------------
42 LLVL
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERITAS LIFE INSURANCE CORP.
SEPARATE ACCOUNT LLVL
STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1996
<S> <C>
INVESTMENT INCOME
Dividend distributions received $ 34,810
EXPENSE
Charges to policyowners for assuming
mortality and expense risk 14,813
-----------------------
INVESTMENT INCOME - NET 19,997
-----------------------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS - NET
Capital gain distributions received 73,977
Unrealized increase 229,011
-----------------------
NET GAIN ON INVESTMENTS 302,988
-----------------------
NET INCREASE IN NET
ASSETS RESULTING FROM OPERATIONS 322,985
NET INCREASE IN NET ASSETS RESULTING
FROM PREMIUM PAYMENTS AND OTHER
OPERATING TRANSFERS 5,410,471
-----------------------
TOTAL INCREASE IN NET ASSETS 5,733,456
NET ASSETS
Beginning of period ---
-----------------------
End of period $ 5,733,456
=======================
The accompanying notes are an integral part of these financial statements.
</TABLE>
- --------------------------------------------------------------------------------
LLVL 43
<PAGE>
- --------------------------------------------------------------------------------
AMERITAS LIFE INSURANCE CORP.
SEPARATE ACCOUNT LLVL
NOTES TO FINANCIAL STATEMENTS
A. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
---------------------------------------------------------------------
Ameritas Life Insurance Corp. Separate Account LLVL (the Account) was
established under Nebraska law on August 24, 1994 with business
commencing in 1996. The assets of the Account are held by Ameritas Life
Insurance Corp. (ALIC) and are segregated from all of ALIC's other assets
and are used to support variable life products issued by ALIC.
The Account is registered under the Investment Company Act of 1940, as
amended, as a unit investment trust. At December 31, 1996, there are
eleven subaccounts within the Account. Seven of the subaccounts invest
only in a corresponding Portfolio of the Vanguard Variable Insurance Fund
which is a diversified open-end management investment company managed by
The Vanguard Group. Four of the subaccounts invest only in a
corresponding Portfolio of the Neuberger&Berman Advisers Management Trust
which is a diversifed open-end management investment company managed by
Neuberger&Berman Management Incorporated. Both funds are registered under
the Investment Company Act of 1940, as amended. Each Portfolio pays the
manager a monthly fee for managing its investments and business affairs.
The assets of the Account are carried at the net asset value of the
underlying Portfolios of the Funds. The value of the policyowners' units
corresponds to the Account's investment in the underlying subaccounts.
The availability of investment portfolio and subaccount options may vary
between products. Share transactions and security transactions are
accounted for on a trade date basis.
ALIC currently does not expect to incur any federal income tax liability
attributable to the Account with respect to the sale of the variable life
insurance policies. 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.
B. POLICYHOLDER CHARGES:
---------------------
ALIC charges the Account for mortality and expense risks assumed. A daily
charge is made on the average daily value of the net assets representing
equity of policyowners held in each subaccount per each product's current
policy provisions. Additional charges are made at intervals and in
amounts per each product's current policy provisions. These charges are
prorated against the balance in each investment option of the
policyholder, including the Fixed Account option which is not reflected
in this separate account. The withdrawal of these charges are included as
other operating transfers.
- --------------------------------------------------------------------------------
44 LLVL
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERITAS LIFE INSURANCE CORP.
SEPARATE ACCOUNT LLVL
NOTES TO FINANCIAL STATEMENTS
C: INFORMATION BY FUND:
Vanguard Variable Insurance Fund
--------------------------------------------------------------
Money Equity Equity Growth
Market (1) Index (2) Income (3) (4)
------------ -------------- ------------ ------------------
<S> <C> <C> <C> <C>
Balance 01-01-96 $ --- $ --- $ --- $ ---
Distributed earnings 32,053 12,616 6,453 22,375
Mortality risk charge (4,536) (2,639) (867) (1,524)
Unrealized increase/(decrease) --- 72,387 21,339 22,319
Net premium transferred 1,247,469 1,266,144 290,235 663,036
------------ -------------- ------------ ------------------
Balance 12-31-96 $ 1,274,986 $ 1,348,508 $ 317,160 $ 706,206
============ ============== ============ ==================
</TABLE>
<TABLE>
<CAPTION>
Vanguard Variable Insurance Fund
------------------------------------------
Balanced High Grade International
(5) Bond (6) (7)
------------ -------------- ------------
<S> <C> <C> <C>
Balance 01-01-96 $ --- $ --- $ ---
Distributed earnings 17,899 2,757 14,166
Mortality risk charge (964) (316) (1,479)
Unrealized increase/(decrease) 8,642 1,042 12,704
Net premium transferred 370,041 105,018 554,003
------------ -------------- ------------
Balance 12-31-96 $ 395,618 $ 108,501 $ 579,394
============ ============== ============
</TABLE>
<TABLE>
<CAPTION>
Advisers Management Trust
--------------------------------------------------------------
Balanced Growth Partners Limited Maturity
(8) (9) (10) Bond (11) TOTAL
------------ -------------- ------------ ------------------ ----------------
<S> <C> <C> <C> <C> <C>
Balance 01-01-96 $ --- $ --- $ --- $ --- $ ---
Distributed earnings 92 253 115 8 108,787
Mortality risk charge (294) (814) (1,338) (42) (14,813)
Unrealized increase/(decrease) 3,312 20,498 66,320 448 229,011
Net premium transferred 85,314 304,535 499,188 25,488 5,410,471
------------ -------------- ------------ ------------------ ----------------
Balance 12-31-96 $ 88,424 $ 324,472 $ 564,285 $ 25,902 $ 5,733,456
============ ============== ============ ================== ================
(1) Commenced business 01/09/96 (7) Commenced business 01/22/96
(2) Commenced business 01/31/96 (8) Commenced business 01/31/96
(3) Commenced business 02/06/96 (9) Commenced business 01/22/96
(4) Commenced business 01/22/96 (10) Commenced business 02/06/96
(5) Commenced business 02/12/96 (11) Commenced business 01/31/96
(6) Commenced business 02/12/96
</TABLE>
- --------------------------------------------------------------------------------
LLVL 45
<PAGE>
- --------------------------------------------------------------------------------
Independent Auditors' Report
Board of Directors
Ameritas Life Insurance Corp.
Lincoln, Nebraska
We have audited the accompanying consolidated balance sheets of Ameritas
Life Insurance Corp. and subsidiaries as of December 31, 1996 and 1995, and the
related statements of operations, policyowners' contingency reserves, and cash
flows for each of the three years in the period ended December 31, 1996. 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 audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Ameritas Life Insurance Corp.
and subsidiaries as of December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
As discussed in Note 1 to the financial statements, effective January 1,
1994, the Company changed its method of accounting for securities.
/s/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
February 1, 1997
- --------------------------------------------------------------------------------
46 LLVL
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERITAS LIFE INSURANCE CORP.
-----------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
(in thousands)
DECEMBER 31,
-----------------------------------
ASSETS 1996 1995
---------------- ----------------
<S> <C> <C>
Investments:
Fixed maturity securities held to maturity (fair value $798,991 - 1996, $ 775,875 $ 724,851
$777,068 - 1995)
Fixed maturity securities available for sale (amortized cost $408,467 -
1996, $406,955 - 1995) 415,705 428,387
Equity securities available for sale (cost $43,079 - 1996, $30,580 - 1995) 75,215 60,761
Mortgage loans on real estate 226,776 205,131
Real estate, less accumulated depreciation ($11,589 - 1996, $10,198 - 33,636 34,599
1995)
Other investments 45,499 45,331
Short-term investments 2,337 12,917
---------------- ----------------
1,575,043 1,511,977
Loans on insurance policies 68,017 69,268
---------------- ----------------
Total investments 1,643,060 1,581,245
Cash and cash equivalents 77,142 81,764
Accrued investment income 25,176 24,105
Deferred policy acquisition costs 146,405 130,420
Other current accounts receivable 2,772 3,260
Property and equipment, less accumulated depreciation ($29,910 - 1996,
$28,287 - 1995) 17,532 16,300
Other assets 10,681 8,952
Separate Accounts 1,037,359 733,156
---------------- ----------------
$ 2,960,127 $ 2,579,202
================ ================
LIABILITIES AND POLICYOWNERS' CONTINGENCY RESERVES
Policy and contract reserves $ 367,614 $ 365,348
Policy and contract claims 21,420 18,882
Accumulated contract values 1,007,734 989,426
Unearned policy charges 13,492 15,633
Unearned reinsurance ceded allowance 1,252 879
Federal income taxes--
Current 9,351 7,625
Deferred 36,083 41,717
Dividends payable 10,317 10,428
Other 35,532 27,650
Separate Accounts 1,037,359 733,156
---------------- ----------------
2,540,154 2,210,744
---------------- ----------------
Commitments and contingencies
Minority interest in subsidiary 20,809 -
Policyowners' contingency reserves 373,923 336,798
Net unrealized investment gain 25,241 31,660
---------------- ----------------
399,164 368,458
---------------- ----------------
$ 2,960,127 $ 2,579,202
================ ================
The accompanying notes to consolidated financial statements are an integral part
of these statements.
</TABLE>
- --------------------------------------------------------------------------------
LLVL 47
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERITAS LIFE INSURANCE CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
DECEMBER 31,
------------------------------------------------------
1996 1995 1994
--------------- ---------------- ----------------
<S> <C> <C> <C>
INCOME:
Insurance revenues:
Premiums:
Life insurance $ 26,855 $ 30,857 $ 27,900
Accident and health insurance 163,557 163,659 158,855
Contract charges 49,667 38,629 34,220
Reinsurance, net (6,205) (5,559) (3,829)
Reinsurance ceded allowance 1,746 1,446 1,283
Investment revenues:
Investment income, net 126,862 124,549 119,687
Realized gains, net 13,103 4,471 3,877
Other 8,961 6,936 4,975
--------------- ---------------- ----------------
384,546 364,988 346,968
--------------- ---------------- ----------------
BENEFITS AND EXPENSES:
Policy benefits:
Death benefits 18,402 17,072 16,536
Surrender benefits 10,708 9,401 10,999
Accident and health benefits 112,005 112,935 113,988
Interest credited 65,494 64,598 65,547
Increase (decrease) in policy and contract reserves (5,060) 959 (1,815)
Other 12,849 13,265 13,050
Sales and operating expenses 77,086 70,414 67,345
Amortization of deferred policy acquisition costs 16,790 9,405 11,755
--------------- ---------------- ----------------
308,274 298,049 297,405
--------------- ---------------- ----------------
INCOME BEFORE DIVIDENDS, FEDERAL INCOME TAXES AND MINORITY
INTEREST IN EARNINGS OF SUBSIDIARY 76,272 66,939 49,563
Dividends appropriated for policyowners 10,367 10,543 10,215
--------------- ---------------- ----------------
INCOME BEFORE FEDERAL INCOME TAXES AND MINORITY INTEREST IN
EARNINGS OF SUBSIDIARY 65,905 56,396 39,348
Income taxes - current 29,081 16,954 21,497
Income taxes - deferred (1,560) 694 1,668
--------------- ---------------- ----------------
Total federal income taxes 27,521 17,648 23,165
--------------- ---------------- ----------------
INCOME BEFORE MINORITY INTEREST IN EARNINGS OF SUBSIDIARY 38,384 38,748 16,183
Minority interest in earnings of subsidiary (1,259) - -
--------------- ---------------- ----------------
NET INCOME $ 37,125 $ 38,748 $ 16,183
=============== ================ ================
The accompanying notes to consolidated financial statements are an integral part
of these statements.
</TABLE>
- --------------------------------------------------------------------------------
48 LLVL
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERITAS LIFE INSURANCE CORP.
CONSOLIDATED STATEMENTS OF POLICYOWNERS' CONTINGENCY RESERVES
(IN THOUSANDS)
TOTAL
POLICYOWNERS' NET UNREALIZED POLICYOWNERS'
CONTINGENCY INVESTMENT CONTINGENCY
RESERVES GAIN/(LOSS) RESERVES
------------------- ------------------- --------------------
<S> <C> <C> <C>
BALANCE, January 1, 1994 $ 281,867 $ 15,180 $ 297,047
Cumulative effect of adoption of SFAS No. 115 - 10,831 10,831
Net unrealized investment losses, net - (25,034) (25,034)
Net income 16,183 - 16,183
------------------- ------------------- --------------------
BALANCE, December 31, 1994 298,050 977 299,027
Net unrealized investment gains, net - 30,683 30,683
Net income 38,748 - 38,748
------------------- ------------------- --------------------
BALANCE, December 31, 1995 336,798 31,660 368,458
Net unrealized investment losses, net - (6,446) (6,446)
Minority interest in net unrealized investment
losses, net 27 27
Net income 37,125 - 37,125
------------------- ------------------- --------------------
BALANCE, December 31, 1996 $ 373,923 $ 25,241 $ 399,164
=================== =================== ====================
The accompanying notes to consolidated financial statements are an integral part
of these statements.
</TABLE>
- --------------------------------------------------------------------------------
LLVL 49
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERITAS LIFE INSURANCE CORP.
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
DECEMBER 31,
-------------------------------------------
1996 1995 1994
------------ ------------- ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net Income $ 37,124 $ 38,748 $ 16,183
Adjustments to reconcile net income to net cash
from operating activities:
Depreciation and amortization 4,232 4,346 3,670
Amortization of deferred policy acquisition costs 16,790 9,405 11,755
Policy acquisition costs deferred (30,611) (20,954) (22,852)
Interest credited to contract values 65,494 64,598 65,547
Amortization of discounts or premiums (1,513) (1,630) (2,522)
Net realized gains on investment transactions (13,103) (4,471) (3,877)
Deferred income taxes (1,560) 694 1,668
Minority interest in earnings of subs 1,259 - -
Other - 4 (63)
Change in assets and liabilities:
Accrued investment income (1,071) 1,088 (1,020)
Other current accounts receivable 488 (1,493) 566
Other assets (1,860) (94) (1,068)
Policy and contract reserves 2,266 1,001 (1,652)
Policy and contract claims 2,538 (506) (173)
Unearned policy charges (2,141) (657) (1,563)
Unearned reinsurance ceded allowance 373 103 121
Federal income taxes payable - current 1,300 (1,698) 2,989
Dividends payable (111) 100 (620)
Other liabilities 5,445 (911) (1,085)
------------ ------------- ------------
Net cash from operating activities 85,339 87,673 66,004
------------ ------------- ------------
INVESTING ACTIVITIES
Purchase of investments:
Fixed maturity securities held to maturity (122,182) (105,019) (148,413)
Fixed maturity securities available for sale (40,572) (40,468) (54,762)
Equity securities (19,925) (13,017) (14,055)
Mortgage loans (57,248) (28,841) (37,135)
Real estate (642) (589) (8,543)
Short-term investments (5,844) (14,884) (4,789)
Other investments (23,073) (12,569) (12,281)
Proceeds from sale of investments:
Fixed maturity securities available for sale 4,774 2,919 -
Equity securities - unaffiliated 18,676 13,167 13,488
Equity securites - affiliated 190 - -
Real estate 951 737 500
Other investments 7,949 7,828 4,942
The accompanying notes to consolidated financial statements are an integral part
of these financial statements.
</TABLE>
- --------------------------------------------------------------------------------
50 LLVL
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERITAS LIFE INSURANCE CORP.
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
December 31,
----------------------------------------------
1996 1995 1994
-------------- ------------- --------------
<S> <C> <C> <C>
INVESTING ACTIVITIES (CONTINUED)
Proceeds from maturities or repayment of investments:
Fixed maturity securities held to maturity $ 71,317 $ 102,794 $ 111,649
Fixed maturity securities available for sale 36,519 15,868 17,541
Mortgage loans 34,594 25,120 28,863
Real estate - 219 209
Other investments 15,106 4,955 4,806
Short-term investments 16,571 4,022 5,834
Distributions from limited partnerships - - 11
Purchase of furniture and equipment (3,711) (1,803) (2,053)
Proceeds from sale of furniture and equipment 78 99 528
Net change in loans on insurance policies 1,252 310 2,516
------------ ------------- ------------
Net cash from investing activities (65,220) (39,152) (91,144)
------------ ------------- ------------
FINANCING ACTIVITIES
Contribution for minority interest in subsidiary 22,445 - -
Net change in accumulated contract values (47,186) (17,286) (48,285)
------------ ------------- ------------
Net cash from financing activities (24,741) (17,286) (48,285)
------------ ------------- ------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (4,622) 31,235 (73,425)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 81,764 50,529 123,954
============ ============= ============
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 77,142 $ 81,764 $ 50,529
============ ============= ============
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for income taxes $ 27,748 $ 18,652 $ 19,250
The accompanying notes to consolidated financial statements are an integral part
of these financial statements.
</TABLE>
- --------------------------------------------------------------------------------
LLVL 51
<PAGE>
- --------------------------------------------------------------------------------
AMERITAS LIFE INSURANCE CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN THOUSANDS)
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
--------------------------------------------------------------------
NATURE OF OPERATIONS
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. The Company operates in the United States and,
including its subsidiaries, is authorized to do business in all 50 states and
the District of Columbia. Wholly-owned insurance subsidiaries include 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. The Company is also a 66% owner of AMAL Corp.
(incorporated March 8, 1996), which owns 100% of Ameritas Variable Life
Insurance Company and Ameritas Investment Corp. 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); Ameritas Investment
Advisors, Inc. (an advisor providing investment management services to the
Company and other insurance companies); and Ameritas Managed Dental Plan, Inc.
(a prepaid dental organization).
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Ameritas Life
Insurance Corp. (Ameritas or the Company) and its majority owned subsidiaries.
References to the Company relate to Ameritas and all subsidiaries. These
consolidated financial statements exclude the effects of all material
intercompany transactions.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
The principal accounting and reporting practices followed are:
INVESTMENTS
The Company classifies its securities into categories based upon the Company's
intent relative to the eventual disposition of the securities. The first
category, held to maturity securities, is comprised of fixed maturity securities
which the Company has the positive intent and ability to hold to maturity. These
securities are carried at amortized cost. The second category, available for
sale securities, may be sold to address the liquidity and other needs of the
Company. Securities classified as available for sale are carried at fair value
on the balance sheet with unrealized gains and losses excluded from income and
reported as a separate component of policyowners' contingency reserves net of
related deferred acquisition costs and income tax effects. The third category,
trading securities, is for debt and equity securities acquired for the purpose
of selling them in the near term. The Company has not classified any of its
securities as trading securities.
The cumulative impact of adopting Statement of Financial Accounting Standards
(SFAS) No. 115 "Accounting for Certain Investments in Debt and Equity
Securities" and designating certain securities as available for sale resulted in
an increase to policyowners' contingency reserves at January 1, 1994 of $10,831
(comprised of an increase in the carrying value of securities of $24,592,
reduced by $7,929 of related adjustments to deferred acquisition costs and
$5,832 in deferred income taxes).
Equity securities (common stock and nonredeemable preferred stocks) are valued
at fair value.
- --------------------------------------------------------------------------------
52 LLVL
<PAGE>
- --------------------------------------------------------------------------------
AMERITAS LIFE INSURANCE CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN THOUSANDS)
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
--------------------------------------------------------------------
(CONTINUED)
-----------
Mortgage loans on real estate are carried at amortized cost less an allowance
for estimated uncollectible amounts. SFAS No. 114, "Accounting by Creditors for
Impairment of a Loan," which was amended by SFAS No. 118, "Accounting by
Creditors for Impairment of a Loan-Income Recognition and Disclosures," requires
that an impaired loan be measured at the present value of expected future cash
flows, or alternatively, the observable market price or the fair value of the
collateral. The Company adopted these standards as of January 1, 1995, with no
material impact on its financial position or results of operations.
Investment real estate owned directly by the Company is carried at cost less
accumulated depreciation and allowances for estimated losses. Real estate
acquired through foreclosure is carried at the lower of cost or fair value minus
estimated costs to sell.
Other investments includes investments in real estate joint ventures accounted
for using the equity method.
Short-term investments are carried at amortized cost, which approximates fair
value.
Realized investment gains and losses on sales of securities are determined on
the specific identification method. Write-offs of investments that decline in
value below cost on other than a temporary basis and the change in the
allowances for mortgage loans and wholly owned real estate are included with
realized investment gains and losses in the consolidated statements of
operations.
The Company records write-offs or allowances for its investments based upon a
evaluation of specific problem investments. The Company reviews, on a continual
basis, all invested assets to identify investments where the Company may have
credit concerns. Investments with credit concerns include those the Company has
identified as experiencing a deterioration in financial condition.
CASH EQUIVALENTS
The Company considers all highly liquid debt securities purchased with remaining
maturity of less than three months to be cash equivalents.
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost less accumulated depreciation. The
Company provides for depreciation of property and equipment using straight-line
and accelerated methods over the estimated useful lives of the assets.
SEPARATE ACCOUNTS
The Company operates separate accounts on which the earnings or losses accrue
exclusively to contractholders. The assets (principally investments) and
liabilities of each account are clearly identifiable and distinguishable from
other assets and liabilities of the Company. The separate accounts are an
investment option for pension, variable life, and variable annuity products
which the Company markets. Amounts are reported at fair value.
PREMIUM REVENUE AND BENEFITS TO POLICYOWNERS
RECOGNITION OF PARTICIPATING AND TERM LIFE, ACCIDENT AND HEALTH AND ANNUITY
PREMIUM REVENUE AND BENEFITS TO POLICYOWNERS
Participating life insurance products include those products with fixed and
guaranteed premiums and benefits on which dividends are paid by the Company.
Premiums on participating and term life products and certain annuities with life
contingencies (immediate annuities) are recognized as premium revenue when due.
Accident and health insurance premiums are recognized as premium revenue over
the time period to which the premiums relate. Benefits and expenses are
associated with earned premiums so as to result in recognition of profits over
the premium paying period of the contracts. This association is accomplished by
means of the provision for liabilities for future policy benefits and the
amortization of deferred policy acquisition costs.
- --------------------------------------------------------------------------------
LLVL 53
<PAGE>
- --------------------------------------------------------------------------------
AMERITAS LIFE INSURANCE CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN THOUSANDS)
(continued)
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
--------------------------------------------------------------------
(CONTINUED)
-----------
RECOGNITION OF UNIVERSAL LIFE-TYPE CONTRACTS REVENUE AND BENEFITS TO
POLICYOWNERS
Universal life-type policies are insurance contracts with terms that are not
fixed and guaranteed. The terms that may be changed could include one or more of
the amounts assessed the policyowner, premiums paid by the policyowner or
interest accrued to policyowners balances. Amounts received as payments for such
contracts are reflected as deposits and are not reported as premium revenues.
Revenues for universal life-type policies consist of charges assessed against
policy account values for deferred policy loading, mortality risk expense, the
cost of insurance and policy administration. Policy benefits and claims that are
charged to expense include interest credited to contracts and benefit claims
incurred in the period in excess of related policy account balances.
RECOGNITION OF INVESTMENT CONTRACT REVENUE AND BENEFITS TO POLICYOWNERS
Contracts that do not subject the Company to risks arising from policyowner
mortality or morbidity are referred to as investment contracts. Deposit
administration plans and certain deferred annuities are considered investment
contracts. Amounts received as payments for such contracts are reflected as
deposits and are not reported as premium revenues.
Revenues for investment products consist of investment income and policy
administration charges. Contract benefits that are charged to expense include
benefit claims incurred in the period in excess of related contract balances,
and interest credited to contract balances.
POLICY ACQUISITION COSTS
Those costs of acquiring new business, which vary with and are directly related
to the production of new business, have been deferred to the extent that such
costs are deemed recoverable from future premiums. Such costs include
commissions, certain costs of policy issuance and underwriting, and certain
agency expenses.
Costs deferred related to term life insurance are amortized over the premium
paying period of the related policies, in proportion to the ratio of annual
premium revenues to total anticipated premium revenues. Such anticipated premium
revenues are estimated using the same assumptions used for computing liabilities
for future policy benefits.
Costs deferred related to participating life, universal life-type policies and
investment-type contracts are amortized generally over the lives of the
policies, in relation to the present value of estimated gross profits from
mortality, investment and expense margins. The estimated gross profits are
reviewed periodically based on actual experience and changes in assumptions.
A roll-forward of the amounts reflected in the consolidated balance sheets as
deferred acquisition costs is as follows:
<TABLE>
<CAPTION>
December 31
----------------------------------------------------------
1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Beginning balance $ 130,420 $ 126,619 $ 110,316
Acquisition costs deferred 30,611 20,954 22,852
Amortization of deferred policy acquisition costs (16,790) (9,405) (11,755)
Adjustment for unrealized investment (gain)/loss 2,164 (7,748) 5,206
- ---------------------------------------------------------------------------------------------------------------------------------
Ending balance $ 146,405 $ 130,420 $ 126,619
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
To the extent that unrealized gains or losses on available for sale securities
would result in an adjustment of deferred policy acquisition costs had those
gains or losses actually been realized, the related unamortized deferred policy
acquisition costs are recorded as an adjustment of the unrealized investment
gains or losses included in policyowners' contingency reserves.
- --------------------------------------------------------------------------------
54 LLVL
<PAGE>
- --------------------------------------------------------------------------------
AMERITAS LIFE INSURANCE CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN THOUSANDS)
(continued)
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
--------------------------------------------------------------------
(CONTINUED)
-----------
FUTURE POLICY AND CONTRACT BENEFITS
Liabilities for future policy benefits for participating and term life contracts
and additional coverages offered under policy riders are calculated using the
net level premium method and assumptions as to investment yields, mortality,
withdrawals and dividends. The assumptions are based on projections of past
experience and include provisions for possible unfavorable deviation. These
assumptions are made at the time the contract is issued. These liabilities are
shown as policy and contract reserves.
Liabilities for future policy and contract benefits on universal life-type and
investment-type contracts are based on the policy account balance, and are shown
as accumulated contract values.
The liabilities for future policy and contract benefits for group disabled life
reserves and long-term disability reserves are based upon interest rate
assumptions and morbidity and termination rates from published tables, modified
for Company experience.
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, with the exception of AMAL and its subsidiaries, files a
consolidated life/non-life tax return. 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 provision for income taxes includes
amounts currently payable and deferred income taxes resulting from the
cumulative differences in assets and liabilities determined on a tax return and
financial statement basis at the current enacted tax rates.
RECLASSIFICATIONS
Certain items on the prior year financial statements have been restated to
conform to current year presentation.
2. INVESTMENTS
- ---------------
Investment income summarized by type of investment was as follows:
<TABLE>
<CAPTION>
Years Ended December 31
-----------------------------------------------------
1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fixed maturity securities $ 89,405 $ 89,097 $ 87,187
Equity securities 1,571 1,508 1,554
Mortgage loans on real estate 19,376 17,948 18,327
Real estate 9,699 9,644 8,177
Policy loans 4,265 4,290 4,315
Other invested assets 8,424 6,826 5,220
Short-term investments and cash and cash equivalents 5,217 5,163 3,887
- ------------------------------------------------------------------------------------------------------------------------------------
Gross investment income 137,957 134,476 128,667
Investment expenses 11,095 9,927 8,980
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 126,862 $ 124,549 $ 119,687
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
LLVL 55
<PAGE>
- --------------------------------------------------------------------------------
AMERITAS LIFE INSURANCE CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN THOUSANDS)
(continued)
2. INVESTMENTS (CONTINUED)
- --------------------------
Net pretax realized investment gains (losses) were as follows:
<TABLE>
<CAPTION>
Years Ended December 31
-----------------------------------------------------
1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net gains (losses) on disposals, including calls, of investments
Fixed maturity securities $ 1,039 $ 3,119 $ 1,519
Equity securities 11,439 1,131 2,920
Mortgage loans 66 138 (361)
Real estate 136 224 (103)
Other 503 (91) (98)
- ------------------------------------------------------------------------------------------------------------------------------------
13,183 4,521 3,877
- ------------------------------------------------------------------------------------------------------------------------------------
Provisions for losses on investments
Mortgage loans (80) (50) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net pretax realized investment gains $ 13,103 $ 4,471 $ 3,877
- ------------------------------------------------------------------------------------------------------------------------------------
Proceeds from sales of securities and gross gains and losses realized on those
sales were as follows:
Year Ended December 31, 1996
-------------------------------------------------------
Proceeds Gains Losses
- ------------------------------------------------------------------------------------------------------------------------------------
Fixed maturity securities $ 4,774 $ 30 $ 247
Equity securities 18,676 11,796 357
- ------------------------------------------------------------------------------------------------------------------------------------
$ 23,450 $ 11,826 $ 604
- ------------------------------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1995
-------------------------------------------------------
Proceeds Gains Losses
-------------------------------------------------------
Fixed maturity securities $ 2,919 $ -- $ 66
Equity securities 13,167 2,601 1,470
- ------------------------------------------------------------------------------------------------------------------------------------
$ 16,086 $ 2,601 $ 1,536
- ------------------------------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1994
-------------------------------------------------------
Proceeds Gains Losses
- ------------------------------------------------------------------------------------------------------------------------------------
Equity securities $ 13,488 $ 3,588 $ 668
There were no sales of fixed maturity securities during 1994.
</TABLE>
- --------------------------------------------------------------------------------
56 LLVL
<PAGE>
- --------------------------------------------------------------------------------
AMERITAS LIFE INSURANCE CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN THOUSANDS)
(continued)
2. INVESTMENTS (CONTINUED)
- ----------------------------
The amortized cost and fair value of investments in securities by type of
investment were as follows:
<TABLE>
<CAPTION>
December 31, 1996
-----------------------------------------------------------------------
Amortized Gross Unrealized Fair
---------------------------
Cost Gains Losses Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fixed maturity securities held to maturity
U. S. Corporate $ 457,030 $ 17,953 $ 3,001 $ 471,982
Mortgage-backed 165,847 5,087 847 170,087
U.S. Treasury securities and obligations of
U.S. government agencies 84,418 3,611 249 87,780
Foreign 68,580 1,380 818 69,142
- ------------------------------------------------------------------------------------------------------------------------------------
Total fixed maturity securities held to maturity 775,875 28,031 4,915 798,991
- ------------------------------------------------------------------------------------------------------------------------------------
Fixed maturity securities available for sale
U.S. Corporate 241,022 7,944 2,780 246,186
Mortgage-backed 77,964 969 875 78,058
U.S. Treasury securities and obligations of
U.S. government agencies 70,627 2,765 1,023 72,369
Foreign 18,854 410 172 19,092
- ------------------------------------------------------------------------------------------------------------------------------------
Total fixed maturity securities available for sale 408,467 12,088 4,850 415,705
- ------------------------------------------------------------------------------------------------------------------------------------
Equity securities 43,079 33,236 1,100 75,215
Short-term investment 2,337 -- -- 2,337
- ------------------------------------------------------------------------------------------------------------------------------------
Total available for sale securities 453,883 45,324 5,950 493,257
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 1,229,758 $ 73,355 $ 10,865 $ 1,292,248
- ------------------------------------------------------------------------------------------------------------------------------------
The December 31, 1996 balance of policyowners' contingency reserves was
decreased by $6,446 (comprised of a decrease in the carrying value of the
securities of $12,246, increased by $2,164 of related adjustments to deferred
acquisition costs and $3,636 in deferred income taxes) to reflect the net 1996
unrealized gain on securities classified as available for sale previously
carried at amortized cost.
</TABLE>
- --------------------------------------------------------------------------------
57 LLVL
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERITAS LIFE INSURANCE CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN THOUSANDS)
(continued)
2. INVESTMENTS (CONTINUED)
- ---------------------------
December 31, 1995
--------------------------------------------------------------------------
Amortized Gross Unrealized Fair
-----------------------------
Cost Gains Losses Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fixed maturity securities held to maturity
U. S. Corporate $ 406,202 $ 32,621 $ 290 $ 438,533
Mortgage-backed 175,512 9,088 23 184,577
U.S. Treasury securities and obligations of
U.S. government agencies 90,753 7,834 -- 98,587
Foreign 52,384 3,022 35 55,371
- ------------------------------------------------------------------------------------------------------------------------------------
Total fixed maturity securities held to maturity 724,851 52,565 348 777,068
- ------------------------------------------------------------------------------------------------------------------------------------
Fixed maturity securities available for sale
U.S. Corporate 235,243 15,323 1,446 249,120
Mortgage-backed 72,158 1,946 212 73,892
U.S. Treasury securities and obligations of
U.S. government agencies 77,704 4,798 100 82,402
Foreign 21,850 1,123 -- 22,973
- ------------------------------------------------------------------------------------------------------------------------------------
Total fixed maturity securities available for sale 406,955 23,190 1,758 428,387
- ------------------------------------------------------------------------------------------------------------------------------------
Equity securities 30,580 30,633 452 60,761
Short-term investment 12,917 -- -- 12,917
- ------------------------------------------------------------------------------------------------------------------------------------
Total available for sale securities 450,452 53,823 2,210 502,065
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 1,175,303 $ 106,388 $ 2,558 $1,279,133
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The December 31, 1995 balance of policyowners' contingency reserves was
increased by $30,683 (comprised of an increase in the carrying value of the
securities of $55,283, reduced by $7,750 of related adjustments to deferred
acquisition costs and $16,850 in deferred income taxes) to reflect the net 1995
unrealized gain on securities classified as available for sale previously
carried at amortized cost.
The amortized cost and fair value of fixed maturity securities by contractual
maturity at December 31, 1996 are shown below. Expected maturities will differ
from contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Available for Sale Held to Maturity Total
------------------------------------------------------------------------------------------
Amortized Fair Amortized Fair Amortized Fair
Cost Value Cost Value Cost Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Due in one year or less $ 16,002 $ 16,203 $ 17,077 $ 17,297 $ 33,079 $ 33,500
Due after one year through five years 109,115 111,763 77,972 80,454 187,087 192,217
Due after five years through ten years 168,694 169,702 356,025 365,229 524,719 534,931
Due after ten years 36,692 39,979 158,954 165,924 195,646 205,903
Mortgage-backed securities 77,964 78,058 165,847 170,087 243,811 248,145
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 408,467 $ 415,705 $ 775,875 $ 798,991 $ 1,184,342 $ 1,214,696
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
58 LLVL
<PAGE>
- --------------------------------------------------------------------------------
AMERITAS LIFE INSURANCE CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN THOUSANDS)
(continued)
2. INVESTMENTS (CONTINUED)
- --------------------------
Invested assets which were nonincome producing (no income received for the 12
months preceding the balance sheet date) were as follows:
<TABLE>
<CAPTION>
December 31
---------------------------------
1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Mortgage loans on real estate $ -- $ 1,000
Real estate 791 791
- ------------------------------------------------------------------------------------------------------------------------------
Total $ 791 $ 1,791
- ------------------------------------------------------------------------------------------ ------------------ ---------------
</TABLE>
Allowances for losses on investments are reflected in the consolidated balance
sheets as a reduction of the related assets and were as follows:
<TABLE>
<CAPTION>
December 31
-----------------------------------------------------
1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Mortgage loans on real estate $ 680 $ 600 $ 550
Real estate 600 600 600
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Changes in the allowance for losses relate entirely to additional provisions for
losses.
3. INCOME TAXES
- ----------------
The items that give rise to deferred tax assets and liabilities relate to the
following:
<TABLE>
<CAPTION>
Years Ended December 31
-------------------------------------
1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net unrealized investment gains $ 20,116 $ 24,715
Equity in subsidiaries 7,905 7,078
Deferred policy acquisition costs 43,247 38,992
Prepaid expenses 2,373 1,701
Other 2,234 2,522
- ---------------------------------------------------------------------------------------------------------------------------------
Gross deferred tax liability 75,875 75,008
- ---------------------------------------------------------------------------------------------------------------------------------
Future policy and contract benefits 24,386 15,799
Deferred future revenues 6,126 6,997
Policyowner dividends 3,610 3,640
Pension and postretirement benefits 2,643 2,499
Other 3,027 4,356
- ---------------------------------------------------------------------------------------------------------------------------------
Gross deferred tax asset 39,792 33,291
- ---------------------------------------------------------------------------------------------------------------------------------
Net deferred tax liability $ 36,083 $ 41,717
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
LLVL 59
<PAGE>
- --------------------------------------------------------------------------------
AMERITAS LIFE INSURANCE CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN THOUSANDS)
(continued)
3. INCOME TAXES (CONTINUED)
- -----------------------------
The difference between the U.S. federal income tax rate and the consolidated tax
provision rate is summarized as follows:
<TABLE>
<CAPTION>
Years Ended December 31
-------------------------------------------------
1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal statutory tax rate 35.0 % 35.0 % 35.0 %
Equity in subsidiaries 1.2 1.0 3.6
Surplus tax 7.1 (5.2) 21.1
Other (1.5) 0.5 (0.8)
- ---------------------------------------------------------------------------------------------------------------------------------
Effective tax rate 41.8 % 31.3 % 58.9 %
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The "surplus tax," IRC Section 809, is an imputation of income to mutual life
insurance companies according to a formula based on a comparison of the returns
of equity of the mutual and stock segments of the life insurance industry. The
Company's provision for its surplus tax is based on the Company's best estimate
of what its final surplus tax will be.
4. EMPLOYEE AND AGENT BENEFIT PLANS
- ------------------------------------
PENSION PLANS
The Company has a noncontributory defined benefit retirement plan covering
substantially all employees. Plan benefits are based on years of credited
service and the employee's compensation during the last five years of
employment. The Company's funding policy is to make contributions each year at
least equal to the minimum funding requirements for tax-qualified retirement
plans. Pension costs include current service costs, which are accrued and funded
on a current year 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.
Periodic pension expense for the Company included the following components:
<TABLE>
<CAPTION>
Years Ended December 31
-------------------------------------------------------
1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost - benefits earned during the year $ 1,223 $ 1,349 $ 1,212
Interest cost on projected benefit obligation 1,866 1,894 1,745
Actual return on plan assets (2,817) (2,844) (892)
Net amortization and deferral 932 1,148 (777)
- ----------------------------------------------------------------------------------------------------------------------------------
Net periodic pension expense $ 1,204 $ 1,547 $ 1,288
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
60 LLVL
<PAGE>
- --------------------------------------------------------------------------------
AMERITAS LIFE INSURANCE CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN THOUSANDS)
(continued)
4. EMPLOYEE AND AGENT BENEFIT PLANS (CONTINUED)
- ------------------------------------------------
The following table sets forth the funded status of the Company's plans:
<TABLE>
<CAPTION>
December 31
----------------------------------------
1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Accumulated benefit obligation
Vested $ 13,173 $ 18,371
Nonvested 323 320
Effect of projected future compensation increases 5,761 8,057
- ------------------------------------------------------------------------------------------------------------------------------------
Projected benefit obligation 19,257 26,748
Plan assets at fair value 20,153 25,462
- ------------------------------------------------------------------------------------------------------------------------------------
Plan assets in excess of (less than) projected benefit obligation 896 (1,286)
Unrecognized net loss (1,159) 456
Unrecognized transition obligation 1,331 1,414
- ------------------------------------------------------------------------------------------------------------------------------------
Net pension asset $ 1,068 $ 584
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The projected benefit obligation was determined using an assumed discount rate
of 7.5% and a weighted-average assumed long-term rate of compensation increase
of 4.5% for 1996 and 1995. The assumed long-term rate of return on plan assets
was 8.0% for 1996 and 1995.
The Company has generally funded annually the maximum allowed under IRS
regulations. The Company made contributions totaling $1,600 in 1996 and $1,500
in both 1995 and 1994.
The Company's employees and agents also participate in defined contribution
plans that cover substantially all full-time employees and agents. Company
contributions were $800 in 1996, 1995 and 1994.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company provides certain health care and life insurance benefits to retired
employees. These benefits are a specified percentage of premium until age 65 and
a flat dollar amount thereafter. Employees become eligible for these benefits
upon the attainment of age 55, 15 years of service and participation in the
Company medical plan for the immediately preceding five years.
The Company has adopted a 401(h) plan to fund its postretirement benefit
obligation. Funding of $440, $300 and $400 was made in 1996, 1995 and 1994,
respectively. The accumulated postretirement benefit obligation and the accrued
postretirement benefit liability were as follows:
<TABLE>
<CAPTION>
December 31
-----------------------------------------
1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Retirees $ 2,451 $ 2,634
Fully eligible active plan participants 396 312
Other active plan participants 1,899 1,740
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulated postretirement benefit obligation 4,746 4,686
Plan assets (1,252) (755)
Unrecognized gain 1,040 757
- ------------------------------------------------------------------------------------------------------------------------------------
Accrued postretirement benefit liability $ 4,534 $ 4,688
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
LLVL 61
<PAGE>
- --------------------------------------------------------------------------------
AMERITAS LIFE INSURANCE CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN THOUSANDS)
4. EMPLOYEE AND AGENT BENEFIT PLANS (CONTINUED)
- ------------------------------------------------
Net periodic postretirement benefit costs consisted of the following components:
<TABLE>
<CAPTION>
Years Ended December 31
--------------------------------------------------------
1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service costs $ 177 $ 200 $ 184
Interest cost on accumulated postretirement benefit plan 315 310 321
Net amortization and deferral (35) (10) 4
Expected return on assets (57) (34) (7)
- ------------------------------------------------------------------------------------------------------------------------------------
Net periodic postretirement benefit costs $ 400 $ 466 $ 502
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The assumed health care cost trend line rate used in measuring the accumulated
postretirement benefit obligation, for pre-65 employees, was 10.5% in 1994
decreasing linearly each successive year until it reaches 5.5% after 1999, after
which it remains constant. A one-percentage point increase in the assumed health
care cost trend rate for each year would increase the accumulated postretirement
health care cost by approximately .5%. The assumed discount rate used in
determining the accumulated postretirement benefit obligation was 7.5%.
5. POLICYOWNERS' CONTINGENCY RESERVES
- --------------------------------------
STATUTORY SURPLUS AND NET INCOME
Net income of Ameritas and its insurance subsidiaries, as determined in
accordance with statutory accounting practices, was $44,100, $29,700 and $11,400
for 1996, 1995 and 1994, respectively. The Company's statutory surplus was
$257,300, $204,700 and $170,900 at December 31, 1996, 1995 and 1994,
respectively.
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.
The effect of reinsurance on premiums earned is as follows:
<TABLE>
<CAPTION>
Years Ended December 31
--------------------------------------------------------
1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assumed $ 6,344 $ 2,725 $ 1,877
Ceded (12,549) (8,284) (5,706)
- ------------------------------------------------------------------------------------------------------------------------------------
$ (6,205) $ (5,559) $ (3,829)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Company remains contingently liable in the event that a reinsurer is unable
to meet the obligations ceded under the reinsurance agreement.
- --------------------------------------------------------------------------------
62 LLVL
<PAGE>
- --------------------------------------------------------------------------------
AMERITAS LIFE INSURANCE CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN THOUSANDS)
(continued)
7. RESERVE FOR UNPAID CLAIMS
- -----------------------------
The change in the liability for unpaid accident and health claims and claim
adjustment expenses is summarized as follows:
<TABLE>
<CAPTION>
1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at January 1 $ 14,925 $ 15,383 $ 15,775
Reinsurance reserves (net) 121 (86) (10)
- ------------------------------------------------------------------------------------------------------------------------------------
15,046 15,297 15,765
- ------------------------------------------------------------------------------------------------------------------------------------
Incurred related to:
Current year 117,610 119,116 119,703
Prior year (2,051) (2,030) (848)
- ------------------------------------------------------------------------------------------------------------------------------------
Total incurred 115,559 117,086 118,855
- ------------------------------------------------------------------------------------------------------------------------------------
Paid related to:
Current year 99,742 104,492 104,785
Prior year 12,995 12,845 14,538
- ------------------------------------------------------------------------------------------------------------------------------------
Total paid 112,737 117,337 119,323
- ------------------------------------------------------------------------------------------------------------------------------------
17,868 15,046 15,297
Reinsurance reserves (net) 89 (121) 86
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31 $ 17,957 $ 14,925 $ 15,383
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The liability for unpaid accident and health claims and claim adjustment
expenses is included in policy and contract claims on the consolidated balance
sheets.
8. COMMITMENTS AND CONTINGENCIES
- ---------------------------------
INVESTMENTS
Commitments were outstanding for investments to be purchased in subsequent years
totaling $31,182 and $11,000 as of December 31, 1996 and 1995, respectively.
Securities commitments represented $16,935 and $1,000, and mortgage loan and
real estate commitments represented $14,247 and $10,000. These commitments have
been made in the normal course of investment operations and are not reflected in
the accompanying financial statements. The Company's exposure to credit loss is
represented by the contractual notional amount of those instruments. The Company
uses the same credit policies and collateral requirements in making commitments
and conditional obligations as it does for on-balance sheet instruments.
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 $2,250
as of December 31, 1996 and 1995.
9. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosures are made regarding fair value information about
certain financial instruments for which it is practicable to estimate that
value. In cases where quoted market prices are not available, fair values are
based on estimates using present value or other valuation techniques. Those
techniques are significantly affected by the assumptions used, including the
discount rate and estimates of future cash flows. In that regard, the derived
fair value estimates, in many cases, could not be realized in immediate
settlement of the instrument. All nonfinancial instruments are excluded from
disclosure requirements. Accordingly, the aggregate fair value amounts presented
do not represent the underlying value of the Company.
- --------------------------------------------------------------------------------
LLVL 63
<PAGE>
- --------------------------------------------------------------------------------
AMERITAS LIFE INSURANCE CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN THOUSANDS)
(continued)
9. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
- ---------------------------------------------------
The fair value estimates presented herein are based on pertinent information
available to management as of December 31, 1996 and 1995. Although management is
not aware of any factors that would significantly affect the estimated fair
value amounts, such amounts have not been comprehensively revalued for purposes
of these financial statements since that date; therefore, current estimates of
fair value may differ significantly from the amounts presented herein.
The following methods and assumptions were used by the Company in estimating its
fair value disclosures for each class of financial instrument for which it is
practicable to estimate a value:
FIXED MATURITY SECURITIES -- 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.
EQUITY SECURITIES -- For publicly traded securities, fair value is
determined using prices from an independent pricing source.
MORTGAGE LOANS ON REAL ESTATE -- 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
$1,000 at December 31, 1995 are not included in the fair value
calculation or carrying amount as it is not practicable to reasonably
assess the credit adjustment that would be applied in the marketplace
for such loans. There were no mortgage loans in default as of December
31, 1996.
OTHER INVESTMENTS -- 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.
SHORT-TERM INVESTMENTS -- The carrying amount approximates fair value
because of the short maturity of these instruments.
LOANS ON INSURANCE POLICIES -- Fair values for loans on insurance
policies are estimated using a discounted cash flow analysis at
interest rates currently offered for similar loans. Loans on insurance
policies with similar characteristics are aggregated for purposes of
the calculations.
CASH AND CASH EQUIVALENTS -- The carrying amounts equal fair value.
ACCRUED INVESTMENT INCOME AND OTHER CURRENT ACCOUNTS RECEIVABLE -- Fair
value equals book value.
ACCUMULATED CONTRACT VALUES -- Funds 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, which approximates fair
value.
COMMITMENTS -- The estimated fair value of commitments approximate
carrying value because the fees currently charged for these
arrangements and the underlying interest rates approximate market.
- --------------------------------------------------------------------------------
64 LLVL
<PAGE>
- --------------------------------------------------------------------------------
AMERITAS LIFE INSURANCE CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN THOUSANDS)
(continued)
9. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
---------------------------------------------------
Estimated fair values are as follows:
<TABLE>
<CAPTION>
December 31
-----------------------------------------------------------------------
1996 1995
------------------------------- -------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Financial assets:
Fixed maturity securities
Held to maturity $ 775,875 $ 798,991 $ 724,851 $ 777,068
Available for sale 415,705 415,705 428,387 428,387
Equity securities 75,215 75,215 60,761 60,761
Mortgage loans on real estate 226,776 234,750 204,131 221,813
Other investments 23,347 32,505 22,381 28,149
Short-term investments 2,337 2,337 12,917 12,917
Loans on insurance policies 68,017 60,743 69,268 61,373
Cash and cash equivalents 77,142 77,142 81,764 81,764
Accrued investment income 25,176 25,176 24,105 24,105
Other current accounts receivable 2,772 2,772 3,260 3,260
Financial liabilities:
Accumulated contract values excluding amounts
held under insurance contracts 756,029 756,194 757,417 760,487
</TABLE>
- --------------------------------------------------------------------------------
LLVL 65
<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
57 through 60 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 57 and 59 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 58 and 60 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 and management fee
paid by each portfolio available for investment (the equivalent to an annual
rate of .49% of the aggregate average daily net assets of the Fund), the other
expenses incurred by the Fund ( .10%), 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 57 and 59 and at an annual rate of
.90% on page 58 and 60 of the average net assets of the Subaccounts). Berger
Associates has agreed to waive its advisory fee to the extent that normal
operating expenses in any fiscal year, including the mangement fee but excluding
brokerage commissions, interest, taxes, and extraordinary expenses, of Berger
IPT-100 Fund exceed 1.00%, and the normal operating expenses in any fiscal year
of the Berger IPT-Small Company Growth Fund exceed 1.15%, of the respective
Fund's average daily net assets. NMBI has agreed to reimburse each Neuberger &
Berman Portfolio for its operating expenses and its pro rata share of its
corresponding series' operating expenses, excluding the compensation of NBMI,
taxes, interest, extraordinary expenses, brokerage commissions, and transaction
costs that exceed 1% of the portfolio's average daily net asset value. These
agreements are expected to continue in future years but may be terminated at any
time. 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 -1.34%, 4.66% and 10.66% on pages 57 and 59 and -1.49%, 4.51%
and 10.51% respectively, on pages 58 and 60.
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 28).
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. In addition, upon client request, illustrations may
be furnished reflecting allocation of premiums to specified Subaccounts. Such
illustrations will reflect the expenses of the portfolio in which the Subaccount
invests.
- --------------------------------------------------------------------------------
66 LLVL
<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
(-1.34% net) (4.66% net) (10.66% 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 4161 250000 4426 250000 4691 250000
2 10332 8230 250000 9021 250000 9844 250000
3 15888 12152 250000 13736 250000 15452 250000
4 21723 15948 250000 18599 250000 21586 250000
5 27849 19625 250000 23621 250000 28310 250000
6 34281 23193 250000 28822 250000 35701 250000
7 41035 26654 250000 34211 250000 43834 250000
8 48127 30062 250000 39853 250000 52848 250000
9 55573 33424 250000 45766 250000 62846 250000
10 63392 36740 250000 59163 250000 73937 250000
15 108755 52230 250000 87397 250000 150291 250000
20 166652 63862 250000 130212 250000 277645 338727
Ages
70 240544 69934 250000 183009 250000 486329 564141
75 334851 67603 250000 251793 269418 828389 886377
80 455214 50799 250000 339346 356314 1392828 1462469
85 608830 1754 250000 445438 467710 2305818 2421109
</TABLE>
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.
- --------------------------------------------------------------------------------
67 LLVL
<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 ALLOWABLE SCHEDULE OF COST OF INSURANCE RATES
0% Hypothetical Gross 6% Hypothetical Gross 12% Hypothetical Gross
Annual Investment Return Annual Investment Return Annual Investment Return
(-1.49% net) (4.51% net) (10.51% 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 4161 250000 4426 250000 4691 250000
2 10332 7626 250000 8396 250000 9199 250000
3 15888 10982 250000 12490 250000 14127 250000
4 21723 14230 250000 16711 250000 19518 250000
5 27849 17362 250000 21059 250000 25417 250000
6 34281 20377 250000 25538 250000 31881 250000
7 41035 23264 250000 30144 250000 38961 250000
8 48127 26010 250000 34871 250000 46716 250000
9 55573 28606 250000 39717 250000 55218 250000
10 63392 31038 250000 44676 250000 64543 250000
15 108755 40358 250000 71134 250000 127335 250000
20 166652 43311 250000 100193 250000 232613 283787
Ages
70 240544 35468 250000 131456 250000 404539 469265
75 334851 7463 250000 165899 250000 681720 729440
80 455214 0* 0* 208112 250000 1133713 1190398
85 608830 0* 0* 273333 286999 1846509 1938834
</TABLE>
* In the absence of an additional premium, the Policy would lapse.
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.
- --------------------------------------------------------------------------------
68 LLVL
<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
(-1.34% net) (4.66% net) (10.66% 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 13391 263391 14217 264217 15043 265043
2 31211 26557 276557 29050 279050 31642 281642
3 47996 39443 289443 44467 294467 49900 299900
4 65621 52070 302070 60513 310513 70012 320012
5 84127 64444 314444 77220 327220 92178 342178
6 103559 76575 326575 94626 344626 116626 366626
7 123962 88465 338465 112762 362762 143597 393597
8 145385 100175 350175 131723 381723 173421 423421
9 167879 111714 361714 151553 401553 206410 456410
10 191498 123084 373084 172291 422291 242899 492899
15 328533 176938 426938 290599 540599 491800 741800
20 503429 223138 473138 434458 684458 899502 1149502
Ages
70 726645 259220 509220 606964 856964 1566791 1817478
75 1011531 281559 531559 810573 1060573 2659367 2909367
80 1375126 284361 534361 1045674 1295674 4450102 4700102
85 1839176 255711 505711 1305555 1555555 7362023 7730124
</TABLE>
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.
- --------------------------------------------------------------------------------
69 LLVL
<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 ALLOWABLE SCHEDULE OF COST OF INSURANCE RATES
0% Hypothetical Gross 6% Hypothetical Gross 12% Hypothetical Gross
Annual Investment Return Annual Investment Return Annual Investment Return
(-1.49% net) (4.51% net) (10.51% 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 13391 263391 14217 264217 15043 265043
2 31211 25767 275767 28228 278228 30788 280788
3 47996 37886 287886 42796 292796 48112 298112
4 65621 49749 299749 57943 207943 67175 317175
5 84127 61349 311349 73683 323683 88150 338150
6 103559 72684 322684 90040 340040 111232 361232
7 123962 83742 333742 107022 357022 136625 386625
8 145385 94510 344510 124640 374640 164553 414553
9 167879 104976 354976 142908 392908 195267 445267
10 191498 115124 365124 161831 411831 229036 479036
15 328533 160643 410643 266717 516717 455498 705498
20 503429 195595 445595 389152 639152 819250 1069250
Ages
70 726645 215507 465507 527462 777462 1402505 1652505
75 1011531 213421 463421 676461 926461 2337600 2587600
80 1375126 176957 426957 822755 1072755 3835336 4085336
85 1839176 92870 342870 948005 1198005 6229246 6540708
</TABLE>
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.
- --------------------------------------------------------------------------------
70 LLVL
<PAGE>
- --------------------------------------------------------------------------------
APPENDIX B
LONG TERM MARKET TRENDS
The information below covering the period of 1926-1996 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. 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 1996. 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 71-year period: investments of one dollar would have grown to $1,370.95
and $4,495.99 respectively, by year-end 1995. 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 $33.73. Note that the return and principal value of an investment in
stocks will fluctuate with changes in market conditions. Prices of small
company stocks are generally more volatile than those of large company stocks.
Government bonds and Treasury Bills are guaranteed by the U.S. Government and,
if held to maturity, offer a fixed rate of return and a fixed principal value.
The lowest risk strategy over the past 71 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 1926-1995 period.
(Omitted graph illustrates long term market trends as described in the narrative
above).
Year End 1925 = $1.00
Source: Stocks, Bonds, Bills, and Inflation 1997 Yearbook
(C)Ibbotson Associates, Chicago. All Rights Reserved.
- --------------------------------------------------------------------------------
LLVL 71
<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 TOTAL RETURN
STANDARD & POOR'S 500 INDEX
%
Year Change
- ----------------------------------
<S> <C> <C>
1 1972 18.90 Omitted graph depicts the activity
2 1973 -14.77 of the S&P 500 Index for the years
3 1974 -26.39 1970-1996).
4 1975 37.16
5 1976 23.57
6 1977 -7.42
7 1978 6.38
8 1979 18.20
9 1980 32.27
10 1981 -5.01
11 1982 21.44
12 1983 22.38
13 1984 6.10
14 1985 31.57
15 1986 18.56
16 1987 5.10
17 1988 16.61
18 1989 31.69
19 1990 -3.14
20 1991 30.45
21 1992 7.61
22 1993 10.08
23 1994 1.32
24 1995 37.58
25 1996 22.96
</TABLE>
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.
INDEX PERFORMANCE IS NOT ILLUSTRATIVE OF POLICY SUBACCOUNT PERFORMANCE, AND
INVESTMENTS ARE NOT MADE IN THE INDEX. THE POLICY IS NOT SPONSORED, ENDORSED,
SOLD OR PROMOTED BY STANDARD & POOR'S.
- --------------------------------------------------------------------------------
72 LLVL
<PAGE>
- --------------------------------------------------------------------------------
INCORPORATION BY REFERENCE
The Registrant, ALIC Separate Account LLVL, Registration 33-86500 purchases or
will purchase units from the portfolios of two funds at the direction of its
policyholders. The prospectuses of these funds will be distributed with this
prospectus and are hereby incorporated by reference. The prospectuses
incorporated by reference are as follows:
The Vanguard Variable Insurance Fund
Registration No. 33-32216
Neuberger & Berman Advisers Management Trust
Registration No. 2-88566
Berger Institutional Products Trust
Registration NO. 33-63493
<PAGE>
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities Exchange
Act of 1934, the undersigned registrant hereby undertakes to file with the
Securities and Exchange Commission such supplementary and periodic information,
documents, and reports as may be prescribed by any rule or regulation of the
Commission heretofore, or hereafter duly adopted pursuant to authority conferred
in that section.
Registrant makes the following representation pursuant to the National
Securities Markets Improvements Act of 1996:
Ameritas Life Insurance Corp. represents that the fees and charges deducted
under the contract, in the aggregate, are reasonable in relation to the services
rendered, the expenses expected to be incurred, and the risks assumed by the
insurance company.
RULE 484 UNDERTAKING
ALIC's By-laws provide as follows:
The Company shall indemnify any person who was, or is a party, or is threatened
to be made a party, to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative by reason
of the fact that such person is or was a director, officer or employee of the
Company or is or was serving at the request of the Company as a director,
officer, or employee or agent of another corporation, partnership, joint
venture, trust, or other enterprise, against expenses including attorney's fees,
judgments, fines and amounts paid in settlement actually and reasonably incurred
in connection with such action, suit or proceeding to the full extent authorized
by the laws of Nebraska.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers, and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer, or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
REPRESENTATIONS PURSUANT TO RULE 6E-3(T) AND THE NATIONAL
SECURITIES MARKETS IMPROVEMENTS ACT OF 1996
This filing is made pursuant to Rules 6c-3 and 6e-3(T) under the Investment
Company Act of 1940.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
Ameritas Life Insurance Corp. Separate Account LLVL, certifies that it meets all
the requirements for effectiveness of this Post-Effective Amendment No. 3 to the
Registration Statement pursuant to Rule 485(a) under the Securties Act of 1933
and has duly caused this Amendment to the Registration Statement to be signed on
its behalf by the undersigned thereunto duly authorized in the City of Lincoln,
County of Lancaster, State of Nebraska on this 21st day of February, 1997.
AMERITAS LIFE INSURANCE CORP.
SEPARATE ACCOUNT LLVL, Registrant
AMERITAS LIFE INSURANCE CORP., Depositor
Attest: Norman M. Krivosha By: Lawrence J. Arth
-------------------- -----------------------
Secretary Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the Directors and Principal Officers of Ameritas
Life Insurance Corp. on the dates indicated.
SIGNATURE TITLE DATE
/s/ Lawrence J. Arth Director, Chairman of the Board February 21, 1997
--------------------- and Chief Executive Officer
Lawrence J. Arth
/s/ Kenneth C. Louis Director, President and February 21, 1997
--------------------- Chief Operating Officer
Kenneth C. Louis
/s/ Norman M. Krivosha Executive Vice President, February 21, 1997
--------------------- Secretary and Corporate
Norman M. Krivosha General Counsel
/s/ Jon C. Headrick Executive Vice President- February 21, 1997
--------------------- Investments and Treasurer
Jon C. Headrick
/s/ JoAnn M. Martin Senior Vice President - Controller February 21, 1997
--------------------- and Chief Financial Officer
JoAnn M. Martin
/s/ James P. Abel Director February 21, 1997
-------------------
James P. Abel
/s/ Duane W. Acklie Director February 21, 1997
-------------------
Duane W. Acklie
/s/ William W. Cook, Jr. Director February 21, 1997
---------------------
William W. Cook, Jr.
<PAGE>
/s/ Bert A. Getz Director February 21, 1997
---------------------
Bert A. Getz
/s/ James R. Knapp Director February 21, 1997
---------------------
James R. Knapp
/s/ Robert F. Krohn Director February 21, 1997
---------------------
Robert F. Krohn
/s/ Wilfred J. Maddux Director February 21, 1997
---------------------
Wilfred J. Maddux
/s/ Paul C. Schorr, III Director February 21, 1997
---------------------
Paul C. Schorr, III
/s/ William C. Smith Director February 21, 1997
---------------------
William C. Smith
/s/ Neal E. Tyner Director February 21, 1997
---------------------
Neal E. Tyner
/s/ Winton J. Wade Director February 21, 1997
---------------------
Winston J. Wade
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following Papers and Documents:
The facing sheet.
The prospectus consisting of 72 pages.
The undertaking to file reports.
The undertaking pursuant to Rule 484.
Representations pursuant to Rule 6e-3(T).
The signatures.
Written consents of the following:
(a) Thomas P. McArdle
(b) Norman M. Krivosha
(c) Deloitte & Touche LLP Independent Auditors
The following exhibits:
1. The following exhibits correspond to those required by paragraph A of the
instructions as to exhibits in Form N-8B-2.
(1) Resolution of the Board of Directors of ALIC authorizing establishment
of the Account.*
(2) Not applicable.
(3) (a) Proposed form of Principal Underwriting Agreement.*
(b) Proposed form of Selling Agreement.****
(c) Commission schedule.****
(4) Not applicable.
(5) (a) Proposed form of Policy.***
(b) Proposed form of Policy rider.*
(6) (a) Articles of Incorporation of ALIC.****
(b) Bylaws of ALIC.****
(7) Not applicable.
(8) (a) Participation Agreement in the Vanguard Variable Insurance
Fund.****
(b) Participation Agreement in the Neuberger & Berman Advisers
Management Trust.****
(c) Participation Agreement (Berger IPT)*****
(9) Not applicable.
(10) Application for Policy.***
(11) Memorandum describing ALIC's exchange procedure.*
(12) Memorandum describing ALIC's issuance, transfer, and redemption
procedures for the Policy.***
2. See Exhibit 1(5)
3. (a)(b) Opinion and Consent of Norman M. Krivosha, Executive Vice
President, Secretary and Corporate General Counsel of Ameritas
Life Insurance Corp.
4. No financial statements are omitted from the Prospectus pursuant to
Instruction 1(b) or (c) of Part I.
5. Not applicable.
6. (a)(b) Opinion and Consent of Thomas P. McArdle.
7. Not applicable.
8. Consent of Deloitte & Touche LLP.
9. Form of Notice of Withdrawal Right and Refund pursuant to
Rule 6e-3(T)(b)(13)(viii) under the Investment Company Act of 1940.*
10. Actuary Opinion in Support of Exemptive Application*
* Incorporated by reference to the initial Registration Statement for
Ameritas Life Insurance Corp. Separate Account LLVL, File No. 33-86500,
filed on November 14, 1994.
*** Incorporated by reference to the Pre-Effective Amendment No. 2 for
Ameritas Life Insurance Corp. Separate Account LLVL, File No. 33-86500,
filed September 12, 1995.
**** Incorporated by reference to the initial registration statement for
Ameritas Life Insurance Corp. Separate Account LLVA (File No. 333-5529,
filed on June 7, 1996.
***** Incorporated by reference to the Pre-Effective Amendment No. 1 for the
Ameritas Life Insurance Corp. Separate Account LLVA (File No. 333-5529),
filed on October 3, 1996.
<PAGE>
Exhibit Index
Exhibit Page
99.3(a)(b) Opinion and Consent of Norman M. Krivosha, Executive
Vice President, Secretary and Corporate General
Counsel of Ameritas Life Insurance Corp.
99.6(a)(b) Opinion and Consent of Thomas P. McArdle.
99.8 Consent of Deloitte & Touche LLP.
Exhibit 99.3(a)(b)
Opinion and Consent of Norman M. Krivosha, Executive Vice President,
Secretary and Corporate General Counsel of Ameritas Life Insurance Corp.
<PAGE>
Ameritas Life Insurance Corp. Logo
5900 "O" Street, Lincoln, Nebraska 68510
February 24, 1997
Ameritas Life Insurance Corp.
5900 "O" Street
P.O. Box 81998
Lincoln, Nebraska 68501
Gentlemen:
With reference to the Post-Effective Amendment No. 3 to Registration Statement
No. 33-86500 on Form S-6 filed by Ameritas Life Insurance Corp. and Ameritas
Life Insurance Corp. Separate Account LLVL with the Securities & Exchange
Commission covering flexible premium life insurance policies, I have examined
such documents and such laws as I considered necessary and appropriate, and on
the basis of such examination, it is my opinion that:
1. Ameritas Life Insurance Corp. is duly organized and validly existing
under the laws of the State of Nebraska and has been duly authorized to
issue individual flexible premium variable life policies by the
Insurance Department of the State of Nebraska.
2. Ameritas Life Insurance Corp. Separate Account LLVL is a duly
authorized and existing separate account established pursuant to the
provisions of Section 44-402.01 of the Statutes of the State of
Nebraska.
3. The flexible premium variable life policies, when issued as
contemplated by said Form S-6 Registration Statement, will constitute
legal, validly issued and binding obligations of Ameritas Life
Insurance Corp.
I hereby consent to the filing of this opinion as an exhibit to said Form S-6
Registration Statement and to the use of my name under the caption "Legal
Matters" in the Prospectus contained in the Registration Statement.
Sincerely,
/s/ Norman Krivosha
Norman Krivosha
Executive Vice President,
Secretary and Corporate General Counsel
Exhibit 99.6(a)(b)
Opinion and Consent of Thomas P. McArdle.
<PAGE>
Ameritas Life Insurance Corp. Logo
5900 "O" Street, Lincoln, Nebraska 68510
February 24, 1997
Ameritas Life Insurance Corp.
5900 "O" Street
P.O. Box 81889
Lincoln, Nebraska 68501
Gentlemen:
This opinion is furnished in connection with the registration by Ameritas Life
Insurance Corp., of a flexible premium variable life insurance policy
("Contract") under the Securities Act of 1933. With reference to Post- Effective
Amendment No. 3 to Registration Statement No. 33-86500 on Form S-6 describes the
Contract. The form of Contract was prepared under my direction and I am familiar
with the Registration Statement and Exhibits thereto. This contract was
developed and filed under Securities and Exchange Commission Rule 6E- 3(T), as
interpreted at this time by the SEC staff. In my opinion:
The illustrations of death benefits and cash values included in the section
entitled "Illustrations of Death Benefits and Cash Values" in the Appendices of
the prospectus, based on the assumptions stated in the illustrations, are
consistent with the provisions of the Contract. The rate structure of the
Contract has not been designed so as to make the relationship between premiums
and benefits, as shown in the illustrations, appear more favorable to
prospective purchasers of the Contract for male age 45, than to prospective
purchasers of the Contract for other ages or for females.
I hereby consent to the use of this opinion as an exhibit to the Registration
Statement and to the reference to my name under the heading "Experts" in the
prospectus.
Very truly yours,
/s/ Thomas P. McArdle
Thomas P. McArdle, F.A.A., M.A.A.A.
Assistant Vice President and Associate Actuary
Exhibit 99.8
Consent of Deloitte & Touche LLP
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post Effective Amendment No. 3 to Registration
Statement No. 33-86500 of Ameritas Life Insurance Corp. Separate Account LLVL of
our reports dated February 1, 1997, on the consolidated financial statements of
Ameritas Life Insurance Corp. (which expresses an unqualified opinion and
includes an explanatory paragraph relating to a change in method of accounting
for securities effective January 1, 1994) and the financial statements of
Ameritas Life Insurance Corp. Separate Account LLVL appearing in the Prospectus,
which is a part of such Registration Statement, and to the reference to us under
the heading "Experts" in such Prospectus.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Lincoln, Nebraska
February 27, 1997
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> LLVL VANGUARD MONEY MARKET
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 1,274,986
<INVESTMENTS-AT-VALUE> 1,274,986
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 0
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 1,274,986
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,274,986
<DIVIDEND-INCOME> 32,053
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 4,536
<NET-INVESTMENT-INCOME> 27,517
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 27,517
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6,549,300
<NUMBER-OF-SHARES-REDEEMED> 5,274,314
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,274,986
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 2
<NAME> LLVL VANGUARD EQUITY INDEX
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 1,276,121
<INVESTMENTS-AT-VALUE> 1,348,508
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 0
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 68,977
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 72,387
<NET-ASSETS> 1,348,508
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 2,639
<NET-INVESTMENT-INCOME> (2,639)
<REALIZED-GAINS-CURRENT> 12,616
<APPREC-INCREASE-CURRENT> 72,387
<NET-CHANGE-FROM-OPS> 82,364
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 81,128
<NUMBER-OF-SHARES-REDEEMED> 12,150
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 68,977
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 3
<NAME> LLVL VANGUARD EQUITY INCOME
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 295,820
<INVESTMENTS-AT-VALUE> 317,160
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 0
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 4
<NAME> LLVL - VANGUARD GROWTH
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 5
<NAME> LLVL - VANGUARD BALANCED
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
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<NET-INVESTMENT-INCOME> (964)
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 6
<NAME> LLVL - VANGUARD HIGH GRADE BOND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 7
<NAME> LLVL - VANGUARD INTERNATIONAL
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 10
<NAME> LLVL - NEUBERGER & BERMAN BALANCED
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 11
<NAME> LLVL - NEUBERGER & BERMAN GROWTH
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
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<NET-INVESTMENT-INCOME> (814)
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 12
<NAME> LLVL - NEUBERGER & BERMAN PARTNERS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 13
<NAME> LLVL - NEUBERGER & BERMAN LIMITED MATURITY BOND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
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<NET-INVESTMENT-INCOME> (42)
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</TABLE>
