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PROSPECTUS Ameritas Life Insurance Corp. Logo
FLEXIBLE PREMIUM 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 stock
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. During the first three years, ALIC agrees to keep the Policy
in force 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 ("Separate 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.
The Securities and Exchange Commission maintains a web site (http://www.sec.gov)
that contains other information regarding registrants that file electronically
with the Securities and Exchange Commission.
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, 1998, as revised May 1, 1998.
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TABLE OF CONTENTS PAGE
Definitions................................................................ 3
Summary.................................................................... 5
Ameritas Life Insurance Corp. and the Separate 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 ............................................. 11
Addition, Deletion or Substitution of Investments................. 13
Fixed Account..................................................... 13
Policy Benefits............................................................ 14
Purposes of the Policy............................................ 14
Death Benefit Proceeds............................................ 14
Death Benefit Options............................................. 14
Methods of Affecting Insurance Protection......................... 16
Duration of Policy................................................ 16
Accumulation Value................................................ 16
Benefits at Maturity.............................................. 17
Payment of Policy Benefits........................................ 17
Policy Rights.............................................................. 18
Loan Benefits..................................................... 18
Surrenders........................................................ 18
Partial Withdrawals............................................... 19
Transfers......................................................... 19
Systematic Programs............................................... 20
Refund Privilege.................................................. 20
Exchange Privilege................................................ 20
Payment and Allocation of Premiums......................................... 21
Issuance of a Policy.............................................. 21
Premiums.......................................................... 21
Allocation of Premiums and Accumulation Value..................... 22
Policy Lapse and Reinstatement.................................... 22
Charges and Deductions..................................................... 23
Deductions From Premium Payment................................... 23
Charges Deducted from Accumulation Value.......................... 23
Surrender Charge.................................................. 24
Transfer Charge................................................... 24
Partial Withdrawal Charge......................................... 25
Daily Charges Against the Separate Account........................ 25
General Provisions......................................................... 25
Additional Insurance Benefits (Riders)..................................... 26
Distribution of the Policies............................................... 27
Federal Tax Matters........................................................ 28
Safekeeping of the Separate Account's Assets............................... 30
Third Party Services....................................................... 30
Voting Rights.............................................................. 30
State Regulation of ALIC................................................... 31
Executive Officers and Directors of ALIC................................... 31
Legal Matters.............................................................. 33
Legal Proceedings.......................................................... 33
Experts.................................................................... 34
Additional Information..................................................... 34
Financial Statements....................................................... 34
Ameritas Life Insurance Corp. Separate Account LLVL........................ 35
Ameritas Life Insurance Corp............................................... 51
Appendices................................................................. 71
The Policy, certain funds, and/or certain riders are not available in all
Sates.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT BE LAWFULLY MADE. NO DEALER, SALESMAN, OR OTHER PERSON IS
AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS IN CONNECTION
WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON.
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DEFINITIONS
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
Separate Account, the Fixed Account, and any Accumulation Value held in the
general account which secures policy loans.
ALIC - Ameritas Life Insurance Corp., a stock 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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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 25).
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.
SEPARATE 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 Separate
Account.
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 Separate Account. Each Subaccount invests
exclusively in the shares of a specified portfolio of the Funds.
SURRENDER - Occurs when the policy is terminated before the maturity date during
the Insured's life for its net cash surrender value. Coverage under the policy
will terminate as of the date of a surrender.
VALUATION DATE - Any day on which the New York Stock Exchange is open for
trading.
VALUATION PERIOD - The period between two successive Valuation Dates, commencing
at the close of the New York Stock Exchange ("NYSE") on one Valuation Date and
ending at the close of the NYSE on the next succeeding Valuation Date.
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SUMMARY
The following summary of Prospectus information and diagram of the Policy should
be read in conjunction with the detailed information appearing elsewhere in this
Prospectus. Unless otherwise indicated, the description of the Policy contained
in this Prospectus assumes that the Policy is in force, current charges were
used, and there is no outstanding indebtedness.
Diagram of Policy
PREMIUM PAYMENTS
You can vary amount and frequency.
DEDUCTIONS FROM PREMIUMS
Premium taxes and the expense of deferring the
tax deduction of policy acquisition costs - 3.5%
This charge is guaranteed not to exceed 5%
There is no premium load to cover sales and distribution expenses.
NET PREMIUM
You direct the net premium to be invested in the Fixed Account or to the
Separate Account which offers 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.
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LIVING BENEFITS RETIREMENT BENEFITS DEATH BENEFITS
Partial Withdrawals may be made (subject to Loans may be taken at a Income tax free to
certain restrictions). The death benefit will be net zero interest rate after beneficiary.
reduced by the amount of the Partial Withdrawal. ten years or when the Available as lump
Up to fifteen free transfers may be made each year Insured reaches 55 sum or under the
between the investment portfolios. (whichever occurs later). five payment meth-
Accelerated payment of up to 50% of the lowest Should the policy lapse ods available as
scheduled death benefit is available under certain while loans are outstanding retirement benefits.
conditions for Insureds suffering from terminal the portion of the loan
illness. attributable to earnings will
The policy may be surrendered at any time for its become taxable distributions.
Net Cash Surrender Value. The policy has no (See page 18).
surrender charge. However, there is a charge for Payments can be taken
Partial Withdrawals. under one or more of five
different payment options.
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The Date of this Prospectus Supplement is May 1, 1998 LLVL 5
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THE ISSUER
The Policy is issued by Ameritas Life Insurance Corp. ("ALIC"), a Nebraska stock
life insurance company. A separate account of ALIC, Separate Account LLVL
("Separate Account"), has been established to hold the assets supporting the
Policy. The Separate Account has fifteen Subaccounts which correspond to, and
are invested in, the portfolios of the Funds discussed herein. (See ALIC and the
Separate Account, page 9, and The Funds, page 10). The financial statements for
ALIC can be found beginning on page 51.
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 Policyowner's 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).
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The various Subaccounts available invest in a corresponding portfolio of 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; 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 Separate
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 Separate Account is borne by the
Policyowner. ALIC does not guarantee a minimum Accumulation Value in the
Separate 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 25).
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 Insured's 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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The date of this Prospectus Supplement is May 1, 1998 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 25).
DAILY CHARGES AGAINST THE SEPARATE 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 Separate Account, page 25).
No additional charges are currently made against the Separate 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 Separate Account to pay those taxes. (See Taxes, page
25).
In addition, because the Separate Account purchases shares of the Funds, the
value of the units in each Subaccount will reflect the net asset value of shares
of the various Funds held therein, and therefore, the investment advisory fee
and other expenses incurred by the Funds. (See The Funds, page 10).
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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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).
YEAR 2000
Like other insurance companies and their separate accounts, ALIC and the
Separate Account could be adversely affected if the computer systems they rely
upon do not properly process date-related information and data involving the
years 2000 and after. ALIC has taken steps it believes are reasonable to timely
address this issue in its own computer system, and to obtain assurance that its
major service providers are taking comparable steps. At this time, however,
there can be no assurance that these steps will be sufficient to avoid any
adverse impact on ALIC and the Separate Account.
ALIC AND THE SEPARATE ACCOUNT
AMERITAS LIFE INSURANCE CORP.
Ameritas Life Insurance Corp. ("ALIC") is a stock 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 5900 "O" Street, Lincoln, Nebraska 68501.
ALIC and subsidiaries had total assets at December 31, 1997 of over $3.4
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.
Effective January 1, 1998, ALIC converted from a mutual insurance company
structure to a mutual insurance holding company structure pursuant to the
Nebraska Mutual Insurance Holding Company Act. The conversion was approved by
the Nebraska State Department of Insurance and the policy owners of the mutual
company. As a result of the conversion, ALIC is wholly owned by Ameritas Holding
Company, which is wholly owned by Ameritas Mutual Insurance Holding Company.
There are no other owners of 5% or more of the outstanding voting securities of
ALIC.
Ameritas Investment Corp. ("AIC"), 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,
long term market trends, index performance, 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 Separate Account") was
established under Nebraska law on August 24, 1994. The assets of the Separate
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 Separate 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
Separate Account of a total market value at least equal to the reserve and other
contract liabilities of the Separate Account. Nevertheless, to the extent assets
in the Separate Account exceed ALIC's liabilities in the Separate 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 Separate 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
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The date of this Prospectus Supplement is May 1, 1998 LLVL 9
<PAGE>
- --------------------------------------------------------------------------------
is a type of investment company. This does not involve any SEC supervision of
the management or investment policies or practices of the Separate Account. For
state law purposes, the Separate Account is treated as a Division of ALIC.
THE FUNDS
There are currently fifteen Subaccounts within the Separate Account available to
Policyowners for new allocations. Each Subaccount of the Separate 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 Separate Account will purchase and redeem shares from the Portfolios at the
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 is automatically reinvested in 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
Separate 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
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").
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LLVL 10
<PAGE>
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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.
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.
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
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LLVL 11
<PAGE>
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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.
Neuberger & Berman Management, Inc. ("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.
The effect of any expense limitation by NBMI is to reduce operating expenses of
a portfolio and its corresponding Series and thereby increase total return.
Berger Associates provides investment advisory services to the Berger IPT Funds
available in the Separate Account. Berger Associates has voluntarily agreed to
waive its advisory fee and has voluntarily reimbursed the Funds for additional
expenses 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.
<TABLE>
<CAPTION>
EXPENSES
INVESTMENT ADVISORY
PORTFOLIO & MANAGEMENT OTHER EXPENSES TOTAL
VANGUARD(1)
<S> <C> <C> <C>
Money Market .17% .04% .21%
High-Grade Bond .23% .06% .29%
High Yield Bond .27% .04% .31%
Balanced .29% .03% .32%
Equity Income .33% .04% .37%
Equity Index .20% .03% .23%
Growth .35% .03% .38%
Small Company Growth .35% .04% .39%
International .38% .08% .46%
NEUBERGER & BERMAN(2)
INVESTMENT MANAGEMENT
PORTFOLIO & ADMINISTRATION FEES OTHER EXPENSES TOTAL
<S> <C> <C> <C>
Limited Maturity .65% .12% .77%
Balanced .85% .19% 1.04%
Partners .80% .06% .86%
Growth .83% .07% .90%
</TABLE>
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LLVL 12
<PAGE>
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<TABLE>
<CAPTION>
BERGER IPT
INVESTMENT MANAGEMENT
PORTFOLIO & ADMINISTRATION FEES OTHER EXPENSES TOTAL
(reflect reimbursement) (reflect reimbursement)
<S> <C> <C> <C>
100 Fund .00% 1.00%(3) 1.00%(3)
Small Company Growth .00% 1.15%(4)) 1.15%(4)
</TABLE>
(1) 9/30/97 fiscal year end.
(2) 12/31/97 fiscal year end.
(3) Expenses reflect fee waiver and expense reimbursement. Absent such waiver
and reimbursement, "Other" Expenses would have been 8.43%; and "Total"
Expenses would have been 9.18%.
(4) Expenses reflect fee waiver and expense reimbursement. Absent such waiver
and reimbursement, "Other" Expenses would have been 4.91%; and "Total"
Expenses would have been 5.81%.
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 Separate Account or that the Separate Account may purchase. The Separate
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
Separate 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 Separate 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 Separate 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 Separate Account.
The Policyowner will be notified of any material change in the investment policy
of any portfolio in which the Policyowner has an interest.
FIXED ACCOUNT
Policyowners may elect to allocate all or a portion of their premium payments to
the Fixed Account, and they may also transfer monies from the Separate Account
to the Fixed Account or from the Fixed Account to the Separate Account. (See
Transfers, page 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 Act 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)").
Amounts allocated to the Fixed Account receive an interest rate declared
effective for the month of issue. The declared interest rate is guaranteed for
the remainder of the Policy Year. During subsequent Policy Years, all amounts in
the Fixed Account will
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LLVL 13
<PAGE>
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earn the interest rate that was declared in the month of the last Policy
anniversary. Declared interest rates may be lower or higher than the previous
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 Separate 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 Separate Account. ALIC agrees to keep the Policy in
force during the first three years and provide a Guaranteed Death Benefit during
that period so long as the cumulative monthly Guaranteed Death Benefit Premium
is paid even though the Guaranteed Death Benefit Premium allowed by contract may
not, after the payment of monthly insurance and administrative charges, generate
positive Net Cash Surrender Values.
DEATH BENEFIT PROCEEDS
As long as the Policy remains in force, ALIC will, upon satisfactory proof of
the Insured's death, pay the Death Benefit Proceeds of a Policy in accordance
with the death benefit option in effect at the time of the Insured's death. The
amount of the death benefits payable will be determined at the end of the
Valuation Period during which the Insured's death occurred. The Death Benefit
Proceeds may be paid in a lump sum or under one or more of the payment options
set forth in the Policy. (See Payment Options, page 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 relationship over time, between the Specified Amount and the
Accumulation Value.)
Death Benefit Option A. Pays a Face Amount of Death Benefit equal to
the Specified Amount or the Aaccumulation 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.
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LLVL 14
<PAGE>
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OPTION B.
(Omitted graph illustrates payout under Death Benefit Option B, specifically by
showing the relationships over time, between the Specified Amount and the
Accumulated 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.
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
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LLVL 15
<PAGE>
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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.
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 Separate Account or the Fixed Account
will reflect the investment performance of the chosen Subaccounts of the
Separate 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 18). 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.
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LLVL 16
<PAGE>
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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 Separate 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.
PAYMENT OF POLICY BENEFITS
Death Benefit Proceeds under the Policy will usually be paid within seven days
after ALIC receives Satisfactory Proof of Death. Accumulation Value benefits
will ordinarily be paid within seven days of receipt of a written request.
Payments may be postponed in certain circumstances. (See Postponement of
Payments, page 26). 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).
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LLVL 17
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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 Insured's 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 Insured's age 55 or the 10th policy anniversary (the
start date) times the number of years since the start date, increased by the
accrued interest charges on the reduced loan amount.
EFFECT OF POLICY LOANS. When a loan is made, Accumulation Value equal to the
amount of the loan will be transferred from the Separate 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 Separate 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.
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18 LLVL The date of this Prospectus Supplement is May 1, 1998
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The amount paid will be deducted from the Subaccounts or the Fixed Account
according to the instructions of the Policyowner when the Partial Withdrawal is
requested, provided that the minimum amount remaining in a Subaccount as a
result of the allocation is $100. If no instructions are given, the amounts will
be withdrawn in proportion to the various Accumulation Values in the Subaccounts
and/or Fixed Account.
The Death Benefit will be reduced by the amount of any Partial Withdrawal and
may affect the way in which the cost of insurance charge is calculated and the
Net Amount at Risk under the Policy. (See Monthly Deduction - Cost of Insurance,
page 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 25).
TRANSFERS
Accumulation Value may be transferred among the Subaccounts of the Separate
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. This provision is not available while dollar
cost averaging from the Fixed Account. 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 and
will not be counted towards the fifteen free transfers per policy year. 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 Separate Account and increase transaction costs, the Separate
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. Lower minimum amounts may be allowed to transfer as part
of a systematic program. There is no separate charge for participation in these
programs at this time. All other normal transfer restrictions, as described
above, apply.
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LLVL 19
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PORTFOLIO REBALANCING. Under the Portfolio Rebalancing program, the Owner can
instruct ALIC to allocate Accumulation Value among the Subaccounts of the
Separate 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 the Fixed Account or the Money
Market Subaccount to any other Subaccount(s). Dollar cost averaging is permitted
from the Fixed Account, if no more than 1/36th of the value of the Fixed Account
at the time dollar cost averaging is established is 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 the selling agent, or to ALIC at the Home Office. 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
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LLVL 20
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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 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).
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LLVL 21
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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.
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 Separate 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,
page 23).
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.
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LLVL 22
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Reinstatement is subject to the following:
a. Evidence of insurability of the Insured satisfactory to ALIC (including
evidence of insurability of any person covered by a rider to reinstate the
rider);
b. Any policy debt will be reinstated with interest due and accrued;
c. The Policy cannot be reinstated if it has been surrendered for its full
surrender value;
d. The payment of a premium sufficient to pay monthly and other policy
deductions for the three months following reinstatement and to pay premium
charges on the premiums paid; and
e. If the reinstatement occurs during the first three Policy Years, you may pay
premiums in the amount necessary to meet the cumulative monthly requirements
of the Guaranteed Death Benefit Premium as of the date of reinstatement.
The amount of Accumulation Value on the date of reinstatement will be equal to
the amount of the Net Cash Surrender Value on the date of lapse, increased by
the premium paid at reinstatement, less the premium charges and the amounts
stated above. If any policy debt was reinstated, that debt will be held in
ALIC's General Account. Accumulation Value calculations will then proceed as
described under "Accumulation Value" on page 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.
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LLVL 23
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COST OF INSURANCE. Because the cost of insurance depends upon several variables,
the cost for each policy month can vary from month to month. ALIC will determine
the monthly cost of insurance charges by multiplying the applicable cost of
insurance rate by the Net Amount at Risk for each policy month. The Net Amount
at Risk on any Monthly Activity Date is the amount by which the Death Benefit
which would have been payable on that Monthly Activity Date exceeds the
Accumulation Value on that date.
COST OF INSURANCE RATE. The annual cost of insurance rate is based on the
Insured's sex, attained age, policy duration, Specified Amount, and risk class.
The rate will vary if the Insured is a smoker, non-smoker, a preferred
non-smoker or is considered a substandard risk and rated with a tabular extra
rating. For the initial Specified Amount, the cost of insurance rate will not
exceed those shown in the Table of Policy Charges shown in the schedule pages of
the Policy. These guaranteed rates are based on the Insured's age nearest
birthday and are equal to the 1980 Commissioners Standard Ordinary Smoker and
Non-Smoker, Male and Female Mortality Tables. The current rates range between
40% and 100% of the rates based on the 1980 Commissioners Standard Ordinary
Tables, based on ALIC's own mortality experience. Policies issued on a unisex
basis are based upon the 1980 Commissioners Standard Ordinary Table B assuming
80% male and 20% female lives. The cost of insurance rates, and payment options
for policies issued in Montana and certain other states, 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, page 25).
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.
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DAILY CHARGES AGAINST THE SEPARATE ACCOUNT
A daily charge will be deducted from the value of the net assets of the Separate
Account to compensate ALIC for mortality and expense risks assumed in connection
with the Policy. This daily charge from the Separate 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 Separate Account. The daily charge will be deducted from the net asset
value of the Separate Account, and therefore the Subaccounts, on each Valuation
Date. Where the previous day or days was not a Valuation Date, the deduction on
the Valuation Date will be 0.002049% (or 0.002459%, if applicable) multiplied by
the number of days since the last Valuation Date. No mortality and expense
charges will be deducted from the amounts in the Fixed Account.
ALIC believes that this level of charge is within the range of industry practice
for comparable flexible premium variable universal life policies.
The mortality risk assumed by ALIC is that Insureds may live for a shorter time
than assumed, and that an aggregate amount of death benefits greater than that
assumed accordingly will be paid. The expense risk assumed is that expenses
incurred in issuing and administering the policies will exceed the
administrative charges provided in the policies.
In addition to the charges against the Separate 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 Separate Account
for federal, state or local income taxes. ALIC may, however, make such a charge
in the future if income or gains within the Separate 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 Separate 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.
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PAYMENT OF PROCEEDS. The proceeds are subject first to any indebtedness to ALIC
and then to the interest of any assignee of record. The balance of any Death
Benefit Proceeds shall be paid in one sum to the designated beneficiary unless
an Optional Method of Payment is selected. If no beneficiary survives the
Insured, the proceeds shall be paid in one sum to the Policyowner, if living;
otherwise to any successor-owner, if living; otherwise to the Policyowner's
estate. Any proceeds payable on the Maturity Date or upon full surrender shall
be paid in one sum unless an Optional Method of Payment is elected.
INCONTESTABILITY. The Policy or reinstated Policy is incontestable after it has
been in force for two years from the policy date (or reinstatement effective
date) during the lifetime of the Insured. An increase in the Specified Amount or
addition of a rider after the Policy Date shall be incontestable after such
increase or addition has been in force for two years from its effective date
during the lifetime of the Insured. However, this two year provision shall not
apply to riders that provide disability or accidental death benefits.
MISSTATEMENT OF AGE OR SEX. If the age or sex of the Insured or any person
insured by rider has been misstated, the amount of the death benefit will be
adjusted. The Death Benefit will be adjusted to the amount that would be
purchased by the most recent cost of insurance deductions using the correct cost
of insurance rate.
SUICIDE. Suicide within two years of the Policy Date is not covered by the
Policy unless otherwise provided by a state's Insurance law. If the Insured,
while sane or insane, commits suicide within two years after the policy date,
ALIC will pay only the premiums received less any Partial Withdrawals, the cost
for riders and any outstanding policy debt. If the Insured, while sane or
insane, commits suicide within two years after the effective date of any
increase in the Specified Amount, ALIC's liability with respect to such increase
will only be its total cost of insurance applied to the increase. The laws of
Missouri provide that death by suicide at any time is covered by the Policy, and
further that suicide by an insane person may be considered an accidental death.
POSTPONEMENT OF PAYMENTS. Payment of any amount upon Surrender, Partial
Withdrawals, policy loans, benefits payable at death or maturity, and transfers
may be postponed whenever: (i) the New York Stock Exchange is closed other than
customary weekend and holiday closings, or trading on the New York Stock
Exchange is restricted as determined by the Securities and Exchange Commission;
(ii) the Commission by order permits postponement for the protection of
Policyowners; (iii) an emergency exists, as determined by the Commission, as a
result of which disposal of securities is not reasonably practicable or it is
not reasonably practicable to determine the value of the Separate 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 Separate
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. Quarterly statements are
also mailed detailing Policy activity during the calendar quarter. Instead of
receiving an immediate confirmation of transactions made pursuant to some types
of periodic payment plan (such as a dollar cost averaging program, or payment
made by automatic bank draft or salary reduction arrangement), the Policyowner
may receive confirmation of such transactions in their quarterly statements. The
Policyowner should review the information in these statements carefully. All
errors or corrections must be reported to ALIC immediately to assure proper
crediting to the Policy. ALIC will assume all transactions are accurately
reported on quarterly statements unless ALIC is otherwise notified within 30
days after receipt of the statement. 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.
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Future premium allocations after the payment of the benefit must be allocated to
the Fixed Account. Payment will not be made for amounts less than $4,000 or more
than $250,000 on all policies issued by ALIC or its affiliates. ALIC may charge
the lesser of 2% of the benefit or $50 as a Partial Withdrawal charge to cover
the costs of administration.
Satisfactory proof of terminal illness must include a written statement from a
licensed physician who is not related to the Insured or the Policyowner stating
that the Insured has a non-correctable medical condition that, with a reasonable
degree of medical certainty, will result in the death of the Insured in less
than 12 months (6 months in certain states) from the physician's statement.
Further, the condition must first be diagnosed while the Policy was in force.
The accelerated benefit first will be used to repay any outstanding policy loans
and unpaid loan interest, and will also affect future loans, Partial
Withdrawals, and Surrender. The accelerated benefit will be treated as a lien
against the policy Death Benefit and will thus reduce the proceeds payable on
the death of the Insured. There is no extra premium for this rider.
CHILDREN'S PROTECTION RIDER. Provides for term insurance on the Insured's
children, as defined in the rider. Under the terms of the rider, the Death
Benefit will be payable to the named beneficiary upon the death of any insured
child. Upon receipt of proof of the Insured's death before the rider terminates,
the rider will be considered paid up for the term of the rider.
GUARANTEED INSURABILITY RIDER. Provides that the Policyowner can purchase
additional insurance for the Insured by increasing the Specified Amount of the
Policy at certain future dates without evidence of insurability.
WAIVER OF MONTHLY DEDUCTIONS ON DISABILITY. Provides, while the Insured is
disabled, for the waiver of monthly deduction for expense charges and the cost
of insurance charges including table ratings and flat extras for the policy and
all riders.
PAYOR WAIVER OF MONTHLY DEDUCTIONS ON DISABILITY. Provides, while the covered
person is disabled, for the waiver of monthly deductions for expense charges and
the cost of insurance charges including table ratings and flat extras for the
policy and all riders. This rider is available for Insureds ages 0 to 14.
COST RECOVERY RIDER. This rider allows a one time special Partial Withdrawal
without reducing the Specified Amount. There is no charge for this rider.
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. ("AIC"), 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. AIC 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. In 1997, AIC received gross
variable universal life compensation of $320,059, and retained $57,129 in
underwriting fees, and $23 in brokerage commissions on ALIC's variable universal
life policies.
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.
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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 AIC and who will not receive compensation related to the
purchase.
Policies can be purchased from field representatives who are Registered
Representatives of AIC, or from Registered Representatives of other registered
broker-dealers authorized to sell the policies subject to applicable law. In
these situations, AIC 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, AIC 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.
AIC 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 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 Separate 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
Separate 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
Separate 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 Separate Account with respect to the sale of
the Policies. Accordingly, no charge is being made currently to the
Separate Account for federal income taxes. If, however, ALIC determines
that it may incur such taxes attributable to the Separate Account, it may
assess a charge for such taxes against the Separate 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 Separate Account. If there is a material change in
state or local tax laws, charges for such taxes attributable to the
Separate Account, if any, may be assessed against the Separate 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 Benefit 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. If a life insurance policy is classified as a
modified endowment contract, distributions from it (including loans) are
taxed as ordinary
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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 (but are not
limited to) 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 taxpayer's age 59 1/2 . The 10%
penalty tax does not apply if the taxpayer 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 taxpayer 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. All modified endowment policies issued by ALIC to the same
Policyowner in any 12 month period are treated as one modified endowment
contract for purposes of determining taxable gain under Section 72(e) of
the Code. Any life insurance policy received in exchange for a modified
endowment contract will also be treated as 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 Separate Account to be "adequately diversified" in order
for the Policy to be treated as a life insurance contract for federal tax
purposes. The Separate 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.
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 exten 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 generally 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 page 28, "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 on the lives of individuals
who are or were officers, employees or persons financially interested in
the taxpayer's trade or business. 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
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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. The Taxpayer Relief Act
of 1997 ("TRA '97"), further expanded the interest deduction disallowance
for businesses by providing, with respect to policies issued after June
8, 1997, that no deduction is allowed for interest paid or accrued on
any indebtedness with respect to life insurance covering the life of any
individual (except as noted above under pre-'97 law with respect to key
persons and pre-June 21, 1986 policies). TRA '97 also provides that no
deduction is permissible for premiums paid on a life insurance policy if
the taxpayer is directly or indirectly a beneficiary under the policy. Also
under TRA '97 and subject to certain exceptions, for contracts issued
after June 8, 1997, no deduction is allowed for that portion of a
taxpayer's interest expense that's allocable to unborrowed policy cash
values. This disallowance generally does not apply to policies owned by
natural persons. 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 18) 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. The advice of competent tax counsel
should be sought in connection with the use of life insurance in a
qualified plan.
SAFEKEEPING OF THE SEPARATE ACCOUNT'S ASSETS
ALIC holds the assets of the Separate 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.
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 Separate
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' meeting. To the extent required
by law, ALIC will vote all shares of the Funds held in the Separate 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
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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 stock 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 Separate 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 Separate Account.
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, Chief Executive Officer: Ameritas Variable Life
Insurance Company; 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*
ELDON BOHMONT, SECOND VICE PRESIDENT-INDIVIDUAL CLIENT SERVICES*
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.
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.
- --------------------------------------------------------------------------------
LLVL 31
<PAGE>
- --------------------------------------------------------------------------------
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
LORI S. GOHDE, VICE PRESIDENT-GROUP UNDERWRITING AND PLANNING*
Vice President-Group: Woodmen Accident & Life Co.
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
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
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.
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 ADMINISTRATION AND CLAIMS*
Also serves as an officer of a subsidiary of Ameritas Life Insurance Corp.
DALE K. NIEBUHR, SECOND VICE PRESIDENT - AUDIT SERVICES*
GARY R. RAYMOND, VICE PRESIDENT - GROUP ACTUARY*
BARRY C. RITTER, SENIOR VICE PRESIDENT - INFORMATION SERVICES*
- --------------------------------------------------------------------------------
LLVL 32
<PAGE>
- --------------------------------------------------------------------------------
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 Ameritas Life
Insurance Corp.
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.
* Principal business address: Ameritas Life Insurance Corp, 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, Scottsdale Spectrum, 6730 N. Scottsdale Road, Suite 250,
Scottsdale, Arizona 85253; 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-USW 843-1, P.O. Box 311, Mendham,
New Jersey 07945-0311.
*** Where an individual as 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 Separate Account is a party or to
which the assets of the Separate Account are subject. ALIC is not involved in
any litigation that is of material importance in relation to its ability to meet
its obligations under the Policies, or that relates to the Separate Account. AIC
is not involved in any litigation that is of material importance in relation to
its ability to perform under its underwriting agreement.
- --------------------------------------------------------------------------------
LLVL 33
<PAGE>
- --------------------------------------------------------------------------------
EXPERTS
The consolidated financial statements of ALIC as of December 31, 1997 and 1996,
and for each of the three years in the period ended December 31, 1997, and the
financial statements of Separate Account LLVL as of December 31, 1997, and for
the two years then ended, 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 Separate Account, ALIC and the Policy offered hereby.
Statements contained in this Prospectus as to the contents of the Policy and
other legal instruments are summaries. For a complete statement of the terms
thereof reference is made to such instruments as filed.
FINANCIAL STATEMENTS
The financial statements of ALIC which are included in this Prospectus should be
considered only as bearing on the ability of ALIC to meet its obligations under
the Policies. They should not be considered as bearing on the investment
performance of the assets held in the Separate Account.
- --------------------------------------------------------------------------------
LLVL 34
<PAGE>
- --------------------------------------------------------------------------------
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, 1997, and the related
statements of operations and changes in net assets for each of the two years in
the period 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 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. Our procedures included
confirmation of securities owned at December 31, 1997. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Ameritas Life Insurance Corp. Separate
Account LLVL as of December 31, 1997, and the results of its operations and
changes in its net assets for each of the two years in the period then ended, in
conformity with generally accepted accounting principles.
/s/Deloite & Touche LLP
Lincoln, Nebraska
February 2, 1998
- --------------------------------------------------------------------------------
LLVL 35
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This page left blank intentionally.
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36 LLVL
<PAGE>
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<TABLE>
<CAPTION>
AMERITAS LIFE INSURANCE CORP.
-----------------------------
SEPARATE ACCOUNT LLVL
---------------------
STATEMENT OF NET ASSETS
-----------------------
DECEMBER 31, 1997
-----------------
ASSETS
INVESTMENTS AT NET ASSET VALUE:
<S> <C>
VANGUARD VARIABLE INSURANCE FUND:
---------------------------------
Money Market Portfolio - 7,218,268.940 shares at
$1.0000 per share (cost $7,218,269) $ 7,218,269
Equity Index Portfolio - 160,571.157 shares at
$25.4215 per share (cost $3,376,563) 4,081,960
Equity Income Portfolio - 81,200.304 shares at
$18.7780 per share (cost $1,321,458) 1,524,779
Growth Portfolio - 148,714.710 shares at
$21.5954 per share (cost $2,919,979) 3,211,554
Balanced Portfolio - 119,858.700 shares at
$17.0016 per share (cost $1,955,975) 2,037,790
High-Grade Bond Portfolio - 46,139.367 shares at
$10.7030 per share (cost $480,683) 493,830
International Portfolio - 159,524.666 shares at
$12.8538 per share (cost $2,125,629) 2,050,498
High Yield Bond Portfolio - 21,777.881 shares at
$10.5909 per share (cost $227,636) 230,647
Small Company Growth Portfolio - 34,377.906 shares at
$10.9626 per share (cost $364,647) 376,871
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST:
---------------------------------------------
Balanced Portfolio - 10,448.294 shares at
$17.80 per share (cost $166,271) 185,980
Growth Portfolio - 21,832.699 shares at
$30.54 per share (cost $563,170) 666,771
Partners Portfolio - 95,195.374 shares at
$20.60 per share (cost $1,627,667) 1,961,025
Limited Maturity Bond Portfolio - 4,291.165 shares at
$14.12 per share (cost $59,021) 60,591
BERGER INSTITUTIONAL PRODUCTS TRUST:
------------------------------------
100 Fund Portfolio - 1,781.412 shares at
$11.11 per share (cost $21,607) 19,791
Small Company Growth Portfolio - 17,219.256 shares at
$12.06 per share (cost $203,772) 207,664
----------------
NET ASSETS REPRESENTING EQUITY OF POLICYOWNERS $ 24,328,020
================
The accompanying notes are an integral part of these financial statements.
</TABLE>
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LLVL 37
<PAGE>
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<TABLE>
<CAPTION>
AMERITAS LIFE INSURANCE CORP.
-----------------------------
SEPARATE ACCOUNT LLVL
---------------------
STATEMENTS OF OPERATIONS
------------------------
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
----------------------------------------------
VANGUARD VARIABLE INSURANCE FUND
----------------------------------------------------
MONEY MARKET EQUITY INDEX EQUITY INCOME
TOTAL PORTFOLIO (1) PORTFOLIO (2) PORTFOLIO (3)
---------------- --------------- ---------------- ---------------
1997
----
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividend distributions received $ 462,801 $ 245,562 $ 47,557 $ 24,444
Mortality and expense risk charge 110,634 33,383 20,371 5,918
---------------- --------------- ---------------- ---------------
NET INVESTMENT INCOME(LOSS) 352,167 212,179 27,186 18,526
---------------- --------------- ---------------- ---------------
REALIZED AND UNREALIZED GAIN(LOSS) ON INVESTMENTS:
Net realized gain(loss) on investments 303,704 ----- 33,570 22,916
Net change in unrealized appreciation(depreciation) 1,466,662 ----- 633,010 181,981
---------------- --------------- ---------------- ---------------
NET GAIN(LOSS) ON INVESTMENTS 1,770,366 ----- 666,580 204,897
---------------- --------------- ---------------- ---------------
NET INCREASE(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 2,122,533 $ 212,179 $ 693,766 $ 223,423
================ =============== ================ ===============
1996
----
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividend distributions received $ 34,810 $ 32,053 $ ----- $ -----
Mortality and expense risk charge 14,813 4,536 2,639 867
---------------- --------------- ---------------- ---------------
NET INVESTMENT INCOME(LOSS) 19,997 27,517 (2,639) (867)
---------------- --------------- ---------------- ---------------
REALIZED AND UNREALIZED GAIN(LOSS) ON INVESTMENTS:
Net realized gain(loss) on investments 73,977 ----- 12,616 6,453
Net change in unrealized appreciation(depreciation) 229,011 ----- 72,387 21,339
---------------- --------------- ---------------- ---------------
NET GAIN(LOSS) ON INVESTMENTS 302,988 ----- 85,003 27,792
---------------- --------------- ---------------- ---------------
NET INCREASE(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 322,985 $ 27,517 $ 82,364 $ 26,925
================ =============== ================ ===============
(1) Commenced business 01/09/96 (6) Commenced business 02/12/96
(2) Commenced business 01/31/96 (7) Commenced business 01/22/96
(3) Commenced business 02/06/96 (8) Commenced business 03/10/97
(4) Commenced business 01/22/96 (9) Commenced business 01/29/97
(5) Commenced business 02/12/96
The accompanying notes are an integral part of these financial statements.
</TABLE>
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LLVL 38
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(CONTINUED)
VANGUARD VARIABLE INSURANCE FUND
- -----------------------------------------------------------------------------------------------------------
SMALL
HIGH-GRADE HIGH YIELD COMPANY
GROWTH BALANCED BOND INTERNATIONAL BOND GROWTH
PORTFOLIO (4) PORTFOLIO (5) PORTFOLIO (6) PORTFOLIO (7) PORTFOLIO (8) PORTFOLIO (9)
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
$ 24,821 $ 62,554 $ 17,945 $ 24,884 $ 7,800 $ 1,148
13,622 8,857 2,094 10,213 670 1,158
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
11,199 53,697 15,851 14,671 7,130 (10)
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
70,741 86,534 ----- 19,354 254 -----
269,256 73,173 12,105 (87,836) 3,011 12,224
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
339,997 159,707 12,105 (68,482) 3,265 12,224
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
$ 351,196 $ 213,404 $ 27,956 $ (53,811) $ 10,395 $ 12,214
================ ================ ================ ================ ================ ================
$ ----- $ ----- $ 2,757 $ ----- $ ----- $ -----
1,524 964 316 1,479 ----- -----
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
(1,524) (964) 2,441 (1,479) ----- -----
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
22,375 17,899 ----- 14,166 ----- -----
22,319 8,642 1,042 12,704 ----- -----
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
44,694 26,541 1,042 26,870 ----- -----
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
$ 43,170 $ 25,577 $ 3,483 $ 25,391 $ ----- $ -----
================ ================ ================ ================ ================ ================
</TABLE>
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LLVL 39
<PAGE>
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<TABLE>
<CAPTION>
AMERITAS LIFE INSURANCE CORP.
-----------------------------
SEPARATE ACCOUNT LLVL
---------------------
STATEMENTS OF OPERATIONS
------------------------
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
----------------------------------------------
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST
-------------------------------------------------------------------
LIMITED
MATURITY
BALANCED GROWTH PARTNERS BOND
PORTFOLIO (1) PORTFOLIO (2) PORTFOLIO (3) PORTFOLIO (4)
---------------- ---------------- ---------------- ---------------
1997
----
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividend distributions received $ 2,227 $ ----- $ 1,903 $ 1,514
Mortality and expense risk charge 1,062 3,818 8,694 289
---------------- ---------------- ---------------- ---------------
NET INVESTMENT INCOME(LOSS) 1,165 (3,818) (6,791) 1,225
---------------- ---------------- ---------------- ---------------
REALIZED AND UNREALIZED GAIN(LOSS) ON INVESTMENTS:
Net realized gain(loss) on investments 5,717 34,617 29,308 ----
Net change in unrealized appreciation(depreciation) 16,398 83,104 267,038 1,122
---------------- ---------------- ---------------- ---------------
NET GAIN(LOSS) ON INVESTMENTS 22,115 117,721 296,346 1,122
---------------- ---------------- ---------------- ---------------
NET INCREASE(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 23,280 $ 113,903 $ 289,555 $ 2,347
================ ================ ================ ===============
1996
----
INVESTMENT INCOME:
Dividend distributions received $ ----- $ ----- $ ----- $ ----
Mortality and expense risk charge 294 814 1,338 42
---------------- ---------------- ---------------- ---------------
NET INVESTMENT INCOME(LOSS) (294) (814) (1,338) (42)
---------------- ---------------- ---------------- ---------------
REALIZED AND UNREALIZED GAIN(LOSS) ON INVESTMENTS:
Net realized gain(loss) on investments 92 253 115 8
Net change in unrealized appreciation(depreciation) 3,312 20,498 66,320 448
---------------- ---------------- ---------------- ---------------
NET GAIN(LOSS) ON INVESTMENTS 3,404 20,751 66,435 456
---------------- ---------------- ---------------- ---------------
NET INCREASE(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 3,110 $ 19,937 $ 65,097 $ 414
================ ================ ================ ===============
(1) Commenced business 01/31/96 (4) Commenced business 01/31/96
(2) Commenced business 01/22/96 (5) Commenced business 06/11/97
(3) Commenced business 02/06/96 (6) Commenced business 05/21/97
The accompanying notes are an integral part of these financial statements.
</TABLE>
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LLVL 40
<PAGE>
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<TABLE>
<CAPTION>
(CONTINUED)
BERGER INSTITUTIONAL PRODUCTS TRUST
----------------------------------
SMALL
COMPANY
100 FUND GROWTH
PORTFOLIO (5) PORTFOLIO (6)
---------------- ----------------
<S> <C>
$ 442 $ -----
54 431
---------------- ----------------
388 (431)
---------------- ----------------
693 -----
(1,816) 3,892
---------------- ----------------
(1,123) 3,892
---------------- ----------------
$ (735) $ 3,461
================ ================
$ ----- $ -----
----- -----
---------------- ----------------
----- -----
---------------- ----------------
----- -----
----- -----
---------------- ----------------
----- -----
---------------- ----------------
$ ----- $ -----
================ ================
</TABLE>
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LLVL 41
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERITAS LIFE INSURANCE CORP.
-----------------------------
SEPARATE ACCOUNT LLVL
---------------------
STATEMENTS OF CHANGES IN NET ASSETS
-----------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
----------------------------------------------
VANGUARD VARIABLE INSURANCE FUND
---------------------------------------------------
MONEY MARKET EQUITY INDEX EQUITY INCOME
TOTAL PORTFOLIO (1) PORTFOLIO (2) PORTFOLIO (3)
---------------- ---------------- ---------------- ----------------
1997
<S> <C> <C> <C> <C>
INCREASE(DECREASE) IN NET ASSETS FROM OPERATIONS:
Net Investment income(loss) $ 352,167 $ 212,179 $ 27,186 $ 18,526
Net realized gain(loss) on investments 303,704 ----- 33,570 22,916
Net change in unrealized appreciation(depreciation) 1,466,662 ----- 633,010 181,981
---------------- ---------------- ---------------- ----------------
NET INCREASE(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 2,122,533 212,179 693,766 223,423
NET INCREASE(DECREASE) FROM POLICYHOLDER TRANSACTIONS 16,472,031 5,731,104 2,039,686 984,196
---------------- ---------------- ---------------- ----------------
TOTAL INCREASE(DECREASE) IN NET ASSETS 18,594,564 5,943,283 2,733,452 1,207,619
---------------- ---------------- ---------------- ----------------
NET ASSETS AT JANUARY 1, 1997 5,733,456 1,274,986 1,348,508 317,160
---------------- ---------------- ---------------- ----------------
NET ASSETS AT DECEMBER 31, 1997 $ 24,328,020 $ 7,218,269 $ 4,081,960 $ 1,524,779
================ ================ ================ ================
1996
INCREASE(DECREASE) IN NET ASSETS FROM OPERATIONS:
Net Investment income(loss) $ 19,997 $ 27,517 $ (2,639)$ (867)
Net realized gain(loss) on investments 73,977 ----- 12,616 6,453
Net change in unrealized appreciation(depreciation) 229,011 ----- 72,387 21,339
---------------- ---------------- ---------------- ----------------
NET INCREASE(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 322,984 27,517 82,364 26,925
NET INCREASE(DECREASE) FROM POLICYHOLDER TRANSACTIONS 5,410,471 1,247,469 1,266,144 290,235
---------------- ---------------- ---------------- ----------------
TOTAL INCREASE(DECREASE) IN NET ASSETS 5,733,456 1,274,986 1,348,508 317,160
---------------- ---------------- ---------------- ----------------
NET ASSETS AT JANUARY 1, 1996 ----- ----- ----- -----
---------------- ---------------- ---------------- ----------------
NET ASSETS AT DECEMBER 31, 1996 $ 5,733,456 $ 1,274,986 $ 1,348,508 $ 317,160
================ ================ ================ ================
(1) Commenced business 01/09/96 (6) Commenced business 02/12/96
(2) Commenced business 01/31/96 (7) Commenced business 01/22/96
(3) Commenced business 02/06/96 (8) Commenced business 03/10/97
(4) Commenced business 01/22/96 (9) Commenced business 01/29/97
(5) Commenced business 02/12/96
The accompanying notes are an integral part of these financial statements.
</TABLE>
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LLVL 42
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(CONTINUED)
VANGUARD VARIABLE INSURANCE FUND
--------------------------------------------------------------------------------------------------------
SMALL
HIGH-GRADE HIGH YIELD COMPANY
GROWTH BALANCED BOND INTERNATIONAL BOND GROWTH
PORTFOLIO (4) PORTFOLIO (5) PORTFOLIO (6) PORTFOLIO (7) PORTFOLIO (8) PORTFOLIO (9)
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
$ 11,199 $ 53,697 $ 15,851 $ 14,671 $ 7,130 $ (10)
70,741 86,534 ----- 19,354 254 -----
269,256 73,173 12,105 (87,836) 3,011 12,224
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
351,196 213,404 27,956 (53,811) 10,395 12,214
2,154,152 1,428,768 357,373 1,524,915 220,252 364,657
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
2,505,348 1,642,172 385,329 1,471,104 230,647 376,871
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
706,206 395,618 108,501 579,394 ----- -----
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
$ 3,211,554 $ 2,037,790 $ 493,830 $ 2,050,498 $ 230,647 $ 376,871
================ ================ ================ ================ ================ ================
$ (1,524)$ (964)$ 2,441 $ (1,479)$ ----- $ -----
22,375 17,899 ----- 14,166 ----- -----
22,319 8,642 1,042 12,704 ----- -----
---------------- ---------------- ---------------- ---------------------------------------------------
43,170 25,577 3,483 25,391 ----- -----
663,036 370,041 105,018 554,003 ----- -----
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
706,206 395,618 108,501 579,394 ----- -----
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
----- ----- ----- ----- ----- -----
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
$ 706,206 $ 395,618 $ 108,501 $ 579,394 $ ----- $ -----
================ ================ ================ ================ ================ ================
</TABLE>
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LLVL 43
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERITAS LIFE INSURANCE CORP.
-----------------------------
SEPARATE ACCOUNT LLVL
---------------------
STATEMENTS OF CHANGES IN NET ASSETS
-----------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
----------------------------------------------
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST
---------------------------------------------------------------------
LIMITED
MATURITY
BALANCED GROWTH PARTNERS BOND
PORTFOLIO (1) PORTFOLIO (2) PORTFOLIO (3) PORTFOLIO (4)
-------------- ---------------- ---------------- ----------------
1997
INCREASE(DECREASE) IN NET ASSETS FROM OPERATIONS:
<S> <C> <C> <C> <C>
Net Investment income(loss) $ 1,165 $ (3,818)$ (6,791)$ 1,225
Net realized gain(loss) on investments 5,717 34,617 29,308 -----
Net change in unrealized appreciation(depreciation) 16,398 83,104 267,038 1,122
-------------- ---------------- ---------------- ----------------
NET INCREASE(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 23,280 113,903 289,555 2,347
NET INCREASE(DECREASE) FROM POLICYHOLDER TRANSACTIONS 74,276 228,396 1,107,185 32,342
-------------- ---------------- ---------------- ----------------
TOTAL INCREASE(DECREASE) IN NET ASSETS 97,556 342,299 1,396,740 34,689
-------------- ---------------- ---------------- ----------------
NET ASSETS AT JANUARY 1, 1997 88,424 324,472 564,285 25,902
-------------- ---------------- ---------------- ----------------
NET ASSETS AT DECEMBER 31, 1997 $ 185,980 $ 666,771 $ 1,961,025 $ 60,591
============== ================ ================ ================
1996
INCREASE(DECREASE) IN NET ASSETS FROM OPERATIONS:
Net Investment income(loss) $ (294)$ (814)$ (1,338)$ (42)
Net realized gain(loss) on investments 92 253 115 8
Net change in unrealized appreciation(depreciation) 3,312 20,498 66,320 448
-------------- ---------------- ---------------- ----------------
NET INCREASE(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 3,110 19,937 65,097 414
NET INCREASE(DECREASE) FROM POLICYHOLDER TRANSACTIONS 85,314 304,535 499,188 25,488
-------------- ---------------- ---------------- ----------------
TOTAL INCREASE(DECREASE) IN NET ASSETS 88,424 324,472 564,285 25,901
-------------- ---------------- ---------------- ----------------
NET ASSETS AT JANUARY 1, 1996 ----- ----- ----- -----
-------------- ---------------- ---------------- ----------------
NET ASSETS AT DECEMBER 31, 1996 $ 88,424 $ 324,472 $ 564,285 $ 25,901
============== ================ ================ ================
(1) Commenced business 01/31/96 (4) Commenced business on 01/31/96
(2) Commenced business 01/22/96 (5) Commenced business on 06/11/97
(3) Commenced business 02/06/96 (6) Commenced business on 05/21/97
The accompanying notes are an integral part of these financial statements.
</TABLE>
- --------------------------------------------------------------------------------
LLVL 44
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(CONTINUED)
BERGER INSTITUTIONAL PRODUCTS TRUST
- -------------------------------------
SMALL
COMPANY
100 FUND GROWTH
PORTFOLIO (5) PORTFOLIO (6)
---------------- ----------------
<S> <C>
$ 388 $ (431)
693 -----
(1,816) 3,892
---------------- ----------------
(735) 3,461
20,526 204,203
---------------- ----------------
19,791 207,664
---------------- ----------------
----- -----
================ ================
$ 19,791 $ 207,664
================ ================
$ -----$ -----
----- -----
----- -----
---------------- ----------------
----- -----
----- -----
---------------- ----------------
----- -----
---------------- ----------------
----- -----
---------------- ----------------
$ -----$ -----
================ ================
</TABLE>
- --------------------------------------------------------------------------------
LLVL 45
<PAGE>
- --------------------------------------------------------------------------------
This page left blank intentionally
- --------------------------------------------------------------------------------
46 LLVL
<PAGE>
- --------------------------------------------------------------------------------
AMERITAS LIFE INSURANCE CORP.
-----------------------------
SEPARATE ACCOUNT LLVL
---------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
1. 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. The assets of the Account are
held by Ameritas Life Insurance Corp. (ALIC) and are segregated from all of
ALIC's other assets.
The Account is registered under the Investment Company Act of 1940, as amended,
as a unit investment trust. At December 31, 1997, there are fifteen subaccounts
within the Account. Nine 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 diversified open-end management
investment company managed by Neuberger & Berman Management Incorporated. Two of
the subaccounts invest only in a corresponding Portfolio of the Berger
Institutional Products Trust which is a diversified open-end management
investment company managed by Berger Associates. 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, and the value of the policyowners' units corresponds to the Account's
investment in the underlying subaccounts.
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.
VALUATION OF INVESTMENTS
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.
FEDERAL AND STATE TAXES
The operations of the Account are included in the federal income tax return of
ALIC, which is taxed as a life insurance company under the Internal Revenue
Code. ALIC has the right to charge the Account any federal income taxes, or
provision for federal income taxes, attributable to the operations of the
Account or to the policies funded in the Account. Currently, ALIC does not make
a charge for income or other taxes. Charges for state and local taxes, if any,
attributable to the Account may also be made.
2. 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 policyowner, including the Fixed
Account option which is not reflected in this separate account.
- --------------------------------------------------------------------------------
LLVL 47
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERITAS LIFE INSURANCE CORP.
-----------------------------
SEPARATE ACCOUNT LLVL
---------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
3. SHARES OWNED
- ----------------
The Account invests in shares of mutual funds. Share activity and total shares
owned are as follows:
VANGUARD VARIABLE INSURANCE FUND
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MONEY MARKET EQUITY INDEX EQUITY INCOME GROWTH BALANCED
PORTFOLIO (1) PORTFOLIO (2) PORTFOLIO (3) PORTFOLIO (4) PORTFOLIO (5)
---------------- --------------- ---------------- ---------------- ----------------
Shares owned at January 1, 1997 1,274,985.810 68,977.369 21,723.303 39,921.198 26,356.946
Shares acquired 33,061,438.440 132,217.038 71,066.379 135,646.593 103,263.991
Shares disposed 27,118,155.310 40,623.250 11,589.378 26,853.081 9,762.237
---------------- --------------- ---------------- ---------------- ----------------
Shares owned at December 31, 1997 7,218,268.940 160,571.157 81,200.304 148,714.710 119,858.700
================ =============== ================ ================ ================
Shares owned at January 1, 1996 ----- ----- ----- ----- -----
Shares acquired 6,549,300.150 81,127.644 25,593.798 43,455.725 27,155.684
Shares disposed 5,274,314.340 12,150.275 3,870.495 3,534.527 798.738
---------------- --------------- ---------------- ---------------- ----------------
Shares owned at December 31, 1996 1,274,985.810 68,977.369 21,723.303 39,921.198 26,356.946
================ =============== ================ ================ ================
(1) Commenced business 01/09/96 (8) Commenced business 03/10/97
(2) Commenced business 01/31/96 (9) Commenced business 01/29/97
(3) Commenced business 02/06/96 (10) Commenced business 01/31/96
(4) Commenced business 01/22/96 (11) Commenced business 01/22/96
(5) Commenced business 02/12/96 (12) Commenced business 02/06/96
(6) Commenced business 02/12/96 (13) Commenced business 01/31/96
(7) Commenced business 01/22/96
</TABLE>
- --------------------------------------------------------------------------------
LLVL 48
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(CONTINUED)
VANGUARD VARIABLE INSURANCE FUND NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST
- --------------------------------------------------------------- ------------------------------------------------------------------
SMALL LIMITED
HIGH-GRADE HIGH-YIELD COMPANY MATURITY
BOND INTERNATIONAL BOND GROWTH BALANCED GROWTH PARTNERS BOND
PORTFOLIO (6) PORTFOLIO (7) PORTFOLIO (8) PORTFOLIO (9) PORTFOLIO (10) PORTFOLIO (11) PORTFOLIO (12) PORTFOLIO (13)
- ------------- ------------- --------------- ---------------- -------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
10,402.808 45,478.330 ----- ----- 5,554.279 12,586.203 34,240.606 1,843.518
48,976.148 175,097.691 57,152.830 58,091.174 7,945.804 20,902.519 87,117.912 7,782.264
13,239.589 61,051.355 35,374.949 23,713.268 3,051.789 11,656.023 26,163.144 5,334.617
- ------------- ------------- --------------- ---------------- -------------- ---------------- ---------------- ----------------
46,139.367 159,524.666 21,777.881 34,377.906 10,448.294 21,832.699 95,195.374 4,291.165
============= ============= =============== ================ ============== ================ ================ ================
----- ----- ----- ----- ----- ----- ----- -----
16,079.128 54,688.548 ----- ----- 5,783.296 13,583.830 40,372.867 2,210.932
5,676.320 9,210.218 ----- ----- 229.017 997.627 6,132.261 367.414
- ------------- ------------- --------------- ---------------- -------------- ---------------- ---------------- ----------------
10,402.808 45,478.330 ----- ----- 5,554.279 12,586.203 34,240.606 1,843.518
============= ============= =============== ================ ============== ================ ================ ================
</TABLE>
- --------------------------------------------------------------------------------
LLVL 49
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERITAS LIFE INSURANCE CORP.
-----------------------------
SEPARATE ACCOUNT LLVL
---------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
3. SHARES OWNED (CONTINUED)
- ----------------------------
The Account invests in shares of mutual funds. Share activity and total shares
owned are as follows:
BERGER INSTITUTIONAL PRODUCTS TRUST
-------------------------------------
SMALL
COMPANY
100 FUND GROWTH
PORTFOLIO (1) PORTFOLIO (2)
---------------- -------------------
<S> <C> <C>
Shares owned at January 1, 1997 ----- -----
Shares acquired 2,859.270 38,912.582
Shares disposed 1,077.858 21,693.326
---------------- -------------------
Shares owned at December 31, 1997 1,781.412 17,219.256
================ ===================
Shares owned at January 1, 1996 ----- -----
Shares acquired ----- -----
Shares disposed ----- -----
---------------- -------------------
Shares owned at December 31, 1996 ----- -----
================ ===================
(1) Commenced business 06/11/97
(2) Commenced business 05/21/97
</TABLE>
- --------------------------------------------------------------------------------
LLVL 50
<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, 1997 and 1996, and the
related statements of operations, equity, and cash flows for each of the three
years in the period ended December 31, 1997. 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, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1997, in conformity with generally accepted accounting principles.
/s/Deloitte & Touche LLP
Lincoln, Nebraska
February 2, 1998
- --------------------------------------------------------------------------------
LLVL 51
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERITAS LIFE INSURANCE CORP.
-----------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
(in thousands)
DECEMBER 31
----------------------------
ASSETS 1997 1996
----------- -----------
Investments:
<S> <C> <C>
Fixed maturity securities held to maturity (fair value $792,856 - 1997, $ 754,581 $ 775,875
$798,991 - 1996)
Fixed maturity securities available for sale (amortized cost $462,831 -
1997, $408,467 - 1996) 479,990 415,705
Equity securities (cost $59,383 - 1997, $43,079 - 1996) 108,744 75,215
Mortgage loans on real estate 228,709 226,776
Loans on insurance policies 70,638 68,017
Real estate, less accumulated depreciation ($18,324 - 1997, $11,589 - 43,085 33,636
1996)
Other investments 33,971 46,295
Short-term investments 655 1,541
------------ ------------
Total investments 1,720,373 1,643,060
Cash and cash equivalents 83,139 77,142
Accrued investment income 25,186 25,176
Deferred policy acquisition costs 164,564 146,405
Property and equipment, less accumulated depreciation ($29,199 - 1997,
$29,910 - 1996) 20,191 17,532
Other assets 16,668 13,453
Separate accounts 1,437,165 1,037,359
------------ ------------
Total $ 3,467,286 $ 2,960,127
============ ============
LIABILITIES AND EQUITY
Policy and contract reserves $ 364,168 $ 367,614
Policy and contract claims 27,467 21,420
Accumulated contract values 1,039,938 1,007,734
Unearned policy charges 13,177 13,492
Unearned reinsurance ceded allowance 1,763 1,252
Federal income taxes--
Current 339 9,351
Deferred 46,236 36,083
Dividends payable 10,134 10,317
Other liabilities 41,467 35,532
Separate accounts 1,436,677 1,037,359
------------ ------------
Total Liabilities 2,981,366 2,540,154
------------ ------------
Commitments and contingencies
Minority interest in subsidiary 24,483 20,809
Policyowners' contingency reserves 419,797 373,923
Net unrealized investment gain 41,640 25,241
------------ ------------
Total Equity 461,437 399,164
------------ ------------
Total $ 3,467,286 $ 2,960,127
============ ============
The accompanying notes to consolidated financial statements are an integral part of these statements.
</TABLE>
- --------------------------------------------------------------------------------
52 LLVL
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERITAS LIFE INSURANCE CORP.
-----------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
(in thousands)
YEARS ENDED DECEMBER 31
-----------------------------------------------
1997 1996 1995
---------------- --------------- ------------
INCOME:
Insurance revenues:
Premiums:
<S> <C> <C> <C>
Life insurance $ 26,794 $ 26,855 $ 30,857
Accident and health insurance 181,952 163,557 163,659
Contract charges 57,199 49,667 38,629
Reinsurance, net (1,037) (6,205) (5,559)
Reinsurance ceded allowance 2,475 1,746 1,446
Investment revenues:
Investment income, net 137,744 126,862 124,549
Realized gains, net 10,295 13,103 4,471
Other 14,987 8,961 6,936
---------------- --------------- ------------
430,409 384,546 364,988
---------------- --------------- ------------
BENEFITS AND EXPENSES:
Policy benefits:
Death benefits 20,710 18,402 17,072
Surrender benefits 10,084 10,708 9,401
Accident and health benefits 130,908 112,005 112,935
Interest credited 66,788 65,494 64,598
Increase (decrease) in policy and contract reserves (3,307) (5,060) 959
Other 13,589 12,849 13,265
Sales and operating expenses 90,737 77,086 70,414
Amortization of deferred policy acquisition costs 16,441 16,790 9,405
---------------- -------------- ------------
345,950 308,274 298,049
---------------- -------------- ------------
INCOME BEFORE DIVIDENDS, FEDERAL INCOME TAXES AND MINORITY
INTEREST IN EARNINGS OF SUBSIDIARY 84,459 76,272 66,939
Dividends appropriated for policyowners 10,158 10,367 10,543
---------------- -------------- ------------
INCOME BEFORE FEDERAL INCOME TAXES AND MINORITY INTEREST IN
EARNINGS OF SUBSIDIARY 74,301 65,905 56,396
Income taxes - current 26,401 29,081 16,954
Income taxes - deferred 39 (1,560) 694
Total federal income taxes ---------------- -------------- ------------
26,440 27,521 17,648
---------------- -------------- ------------
INCOME BEFORE MINORITY INTEREST IN EARNINGS OF SUBSIDIARY 47,861 38,384 38,748
Minority interest in earnings of subsidiary (1,987) (1,259) -
---------------- -------------- ------------
NET INCOME $ 45,874 $ 37,125 $ 38,748
================ ============== ============
The accompanying notes to consolidated financial statements are an integral part of these statements.
</TABLE>
- --------------------------------------------------------------------------------
LLVL 53
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERITAS LIFE INSURANCE CORP.
-----------------------------
CONSOLIDATED STATEMENTS OF EQUITY
---------------------------------
(IN THOUSANDS)
POLICYOWNERS' NET UNREALIZED
CONTINGENCY INVESTMENT TOTAL
RESERVES GAIN/(LOSS) EQUITY
---------------- ---------------- ---------------
<S> <C> <C> <C>
BALANCE, January 1, 1995 $ 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
Net unrealized investment gains, net - 16,557 16,557
Minority interest in net unrealized investment
gains, net - (158) (158)
Net income 45,874 - 45,874
---------------- ---------------- ---------------
BALANCE, December 31, 1997 $ 419,797 $ 41,640 $ 461,437
================ ================ ===============
The accompanying notes to consolidated financial statements are an integral part of these statements.
</TABLE>
- --------------------------------------------------------------------------------
54 LLVL
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERITAS LIFE INSURANCE CORP.
-----------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(in thousands)
YEARS ENDED DECEMBER 31
-------------------------------------------------
1997 1996 1995
-------------- -------------- --------------
OPERATING ACTIVITIES
- --------------------
<S> <C> <C> <C>
Net income $ 45,874 $ 37,125 $ 38,748
Adjustments to reconcile net income to net cash
from operating activities:
Depreciation and amortization 5,275 4,231 4,346
Amortization of deferred policy acquisition costs 16,441 16,790 9,405
Policy acquisition costs deferred (36,117) (30,611) (20,954)
Interest credited to contract values 66,788 65,494 64,598
Amortization of discounts or premiums (1,747) (1,513) (1,630)
Net realized gains on investment transactions (10,295) (13,103) (4,471)
Deferred income taxes 39 (1,560) 694
Minority interest in earnings of subsidiary 1,987 1,259 -
Change in assets and liabilities:
Accrued investment income (10) (1,071) 1,088
Other assets (3,239) (1,372) (1,583)
Policy and contract reserves (3,446) 2,266 1,001
Policy and contract claims 6,047 2,538 (506)
Unearned policy charges (315) (2,141) (657)
Unearned reinsurance ceded allowance 511 373 103
Federal income taxes payable - current (7,977) 1,300 (1,698)
Dividends payable (183) (111) 100
Other liabilities 6,509 5,445 (911)
-------------- -------------- --------------
Net cash from operating activities 86,142 85,339 87,673
-------------- -------------- --------------
INVESTING ACTIVITIES
- --------------------
Purchase of investments:
Fixed maturity securities held to maturity (39,522) (122,182) (105,019)
Fixed maturity securities available for sale (115,864) (40,572) (40,468)
Equity securities (29,432) (19,925) (13,017)
Mortgage loans on real estate (56,251) (57,248) (28,841)
Real estate (1,676) (642) (589)
Short-term investments (2,124) (5,844) (14,884)
Other investments (6,026) (23,073) (12,569)
Proceeds from sale of investments:
Fixed maturity securities available for sale 16,419 4,774 2,919
Equity securities - unaffiliated 19,914 18,676 13,167
Equity securities - affiliated - 190 -
Real estate 1,723 951 737
Other investments 649 7,949 7,828
The accompanying notes to consolidated financial statements are an integral part of these statements.
</TABLE>
- --------------------------------------------------------------------------------
LLVL 55
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERITAS LIFE INSURANCE CORP.
-----------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(in thousands)
YEARS ENDED DECEMBER 31
-----------------------------------------------
1997 1996 1995
-------------- -------------- ------------
INVESTING ACTIVITIES (CONTINUED)
- --------------------------------
Proceeds from maturities or repayment of investments:
<S> <C> <C> <C>
Fixed maturity securities held to maturity $ 68,069 $ 71,317 $ 102,794
Fixed maturity securities available for sale 45,942 36,519 15,868
Mortgage loans on real estate 49,750 34,594 25,120
Real estate - - 219
Other investments 6,278 15,106 4,955
Short-term investments 3,050 16,571 4,022
Purchase of property and equipment (5,413) (3,711) (1,803)
Proceeds from sale of property and equipment 45 78 99
Net change in loans on insurance policies (2,622) 1,252 310
-------------- -------------- ------------
Net cash from investing activities (47,091) (65,220) (39,152)
-------------- -------------- ------------
FINANCING ACTIVITIES
- --------------------
Contribution for minority interest in subsidiary 1,530 22,445 -
Net change in accumulated contract values (34,584) (47,186) (17,286)
-------------- -------------- ------------
Net cash from financing activities (33,054) (24,741) (17,286)
-------------- -------------- ------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 5,997 (4,622) 31,235
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 77,142 81,764 50,529
-------------- -------------- ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 83,139 $ 77,142 $ 81,764
============== ============== ============
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for income taxes $ 34,397 $ 27,748 $ 18,652
The accompanying notes to consolidated financial statements are an integral part of these statements.
</TABLE>
- --------------------------------------------------------------------------------
56 LLVL
<PAGE>
- --------------------------------------------------------------------------------
AMERITAS LIFE INSURANCE CORP.
-----------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
----------------------------------------------------
(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 and Pathmark Assurance Company. The
Company is also a 66% owner of AMAL Corporation (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, includes 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 equity 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.
Equity securities (common stock and nonredeemable preferred stock) are valued at
fair value.
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.
- --------------------------------------------------------------------------------
LLVL 57
<PAGE>
- --------------------------------------------------------------------------------
AMERITAS LIFE INSURANCE CORP.
-----------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
----------------------------------------------------
(IN THOUSANDS)
(continued)
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- -----------------------------------------------------------------------
(CONTINUED)
- -----------
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 primarily include investments in venture capital partnerships
and real estate joint ventures accounted for using the equity method, and
securities owned by the broker dealer subsidiary valued at fair value. Changes
in the fair value of the securities owned by the broker dealer are included in
investment income.
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 an
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 a
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 alternative 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.
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.
- --------------------------------------------------------------------------------
58 LLVL
<PAGE>
- --------------------------------------------------------------------------------
AMERITAS LIFE INSURANCE CORP.
-----------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
----------------------------------------------------
(IN THOUSANDS)
(continued)
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- -------------------------------------------------------------------------
(CONTINUED)
- -----------
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 policy acquisition costs is as follows:
<TABLE>
<CAPTION>
DECEMBER 31
-------------------------------------------
1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Beginning balance $ 146,405 $ 130,420 $ 126,619
Acquisition costs deferred 36,117 30,611 20,954
Amortization of deferred policy acquisition costs (16,441) (16,790) (9,405)
Adjustment for unrealized investment (gain)/loss (1,517) 2,164 (7,748)
- ------------------------------------------------------------------------------------------------------------------
Ending balance $ 164,564 $ 146,405 $ 130,420
- ------------------------------------------------------------------------------------------------------------------
</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.
- --------------------------------------------------------------------------------
LLVL 59
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERITAS LIFE INSURANCE CORP.
-----------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
----------------------------------------------------
(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:
YEARS ENDED DECEMBER 31
----------------------------------------
1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fixed maturity securities held to maturity $ 59,700 $ 59,366 $ 58,937
Fixed maturity securities available for sale 32,605 30,039 30,160
Equity securities 1,899 1,571 1,508
Mortgage loans on real estate 19,866 19,376 17,948
Real estate 12,317 9,699 9,644
Loans on insurance policies 4,341 4,265 4,290
Other investments 15,494 8,572 6,906
Short-term investments and cash and cash equivalents 4,266 5,069 5,083
- -------------------------------------------------------------------------------------------------------------------------
Gross investment income 150,488 137,957 134,476
Investment expenses 12,744 11,095 9,927
- -------------------------------------------------------------------------------------------------------------------------
Net investment income $ 137,744 $ 126,862 $ 124,549
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
60 LLVL
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERITAS LIFE INSURANCE CORP.
-----------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
----------------------------------------------------
(IN THOUSANDS)
(continued)
2. INVESTMENTS (CONTINUED)
- ---------------------------
Net pretax realized investment gains (losses) were as follows:
YEARS ENDED DECEMBER 31
---------------------------------------
1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net gains (losses) on disposals, including calls, of investments
Fixed maturity securities held to maturity $ 1,059 $ 237 $ 2,944
Fixed maturity securities available for sale 494 802 175
Equity securities 6,787 11,439 1,131
Mortgage loans on real estate 959 66 138
Real estate 502 136 224
Other 564 503 (91)
- ------------------------------------------------------------------------------------------------------------------------
10,365 13,183 4,521
- ------------------------------------------------------------------------------------------------------------------------
Provisions for losses on investments
Mortgage loans on real estate (20) (80) (50)
Real estate (50) -- --
- ------------------------------------------------------------------------------------------------------------------------
Net pretax realized investment gains $ 10,295 $ 13,103 $ 4,471
- ------------------------------------------------------------------------------------------------------------------------
Proceeds from sales of securities and gross gains and losses realized on those sales were as follows:
YEAR ENDED DECEMBER 31, 1997
--------------------------------------
Proceeds Gains Losses
- ------------------------------------------------------------------------------------------------------------------------
Fixed maturity securities available for sale $ 16,419 $ 161 $ 8
Equity securities 19,914 7,725 938
- ------------------------------------------------------------------------------------------------------------------------
$ 36,333 $ 7,886 $ 946
- ------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1996
-------------------------------------
Proceeds Gains Losses
- ------------------------------------------------------------------------------------------------------------------------
Fixed maturity securities available for sale $ 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 available for sale $ 2,919 $ -- $ 66
Equity securities 13,167 2,601 1,470
- ------------------------------------------------------------------------------------------------------------------------
$ 16,086 $ 2,601 $ 1,536
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
LLVL 61
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERITAS LIFE INSURANCE CORP.
-----------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
----------------------------------------------------
(IN THOUSANDS)
(continued)
2. INVESTMENTS (CONTINUED)
- ---------------------------
The amortized cost and fair value of investments in securities by type of investment were as follows:
DECEMBER 31, 1997
------------------------------------------------------
GROSS UNREALIZED
AMORTIZED -------------------------- FAIR
COST GAINS LOSSES VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fixed maturity securities held to maturity
U.S. Corporate $ 448,344 $ 23,764 $ 423 $ 471,685
Mortgage-backed 147,741 6,523 14 154,250
U.S. Treasury securities and obligations of
U.S. government agencies 82,107 5,764 -- 87,871
Foreign 76,389 2,769 108 79,050
- -------------------------------------------------------------------------------------------------------------------------
Total fixed maturity securities held to maturity 754,581 38,820 545 792,856
- -------------------------------------------------------------------------------------------------------------------------
Fixed maturity securities available for sale
U.S. Corporate 282,265 11,742 280 293,727
Mortgage-backed 86,370 1,957 165 88,162
Asset-backed 7,997 169 -- 8,166
U.S. Treasury securities and obligations of
U.S. government agencies 67,342 3,455 242 70,555
Foreign 18,857 524 1 19,380
- -------------------------------------------------------------------------------------------------------------------------
Total fixed maturity securities available for sale 462,831 17,847 688 479,990
- -------------------------------------------------------------------------------------------------------------------------
Equity securities 59,383 49,893 532 108,744
Short-term investments 655 -- -- 655
- -------------------------------------------------------------------------------------------------------------------------
Total available for sale securities 522,869 67,740 1,220 589,389
- -------------------------------------------------------------------------------------------------------------------------
Total $ 1,277,450 $ 106,560 $ 1,765 $ 1,382,245
- -------------------------------------------------------------------------------------------------------------------------
The December 31, 1997, equity balance was increased by $16,557 (including an
increase in the carrying value of the securities of $27,152, decreased by $1,517
of related adjustments to deferred acquisition costs and $9,078 in deferred
income taxes) to reflect the net 1997 unrealized gain on securities classified
as available for sale previously carried at amortized cost.
</TABLE>
- --------------------------------------------------------------------------------
62 LLVL
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERITAS LIFE INSURANCE CORP.
-----------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
----------------------------------------------------
(IN THOUSANDS)
(continued)
2. INVESTMENTS (CONTINUED)
- ---------------------------
DECEMBER 31, 1996
----------------------------------------------------
GROSS UNREALIZED
AMORTIZED -------------------------- FAIR
COST GAINS LOSSES VALUE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <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 investments 1,541 -- -- 1,541
- ------------------------------------------------------------------------------------------------------------------------
Total available for sale securities 453,087 45,324 5,950 492,461
- ------------------------------------------------------------------------------------------------------------------------
Total $ 1,228,962 $ 73,355 $ 10,865 $ 1,291,452
- ------------------------------------------------------------------------------------------------------------------------
The December 31, 1996, equity balance was decreased by $6,446 (including 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.
The amortized cost and fair value of fixed maturity securities by contractual
maturity at December 31, 1997, 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.
AVAILABLE FOR SALE HELD TO MATURITY
---------------------------------------------------------------------
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
Due in one year or less $ 22,495 $ 22,560 $ 15,437 $ 15,620
Due after one year through five years 122,517 127,006 122,983 128,111
Due after five years through ten years 169,090 174,075 327,442 343,013
Due after ten years 54,362 68,018 140,978 151,862
Mortgage-backed and asset-backed securities 94,367 88,331 147,741 154,250
- -----------------------------------------------------------------------------------------------------------------------------------
Total $ 462,831 $ 479,990 $ 754,581 $ 792,856
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
LLVL 63
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERITAS LIFE INSURANCE CORP.
-----------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
----------------------------------------------------
(IN THOUSANDS)
(continued)
3. INCOME TAXES
- ----------------
The items that give rise to deferred tax assets and liabilities relate to the following:
YEARS ENDED DECEMBER 31
-----------------------------
1997 1996
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net unrealized investment gains $ 29,569 $ 20,116
Equity in subsidiaries 9,992 7,905
Deferred policy acquisition costs 47,713 43,247
Prepaid expenses 3,246 2,373
Other 2,327 2,234
- -------------------------------------------------------------------------------------------------------------------------
Gross deferred tax liability 92,847 75,875
- -------------------------------------------------------------------------------------------------------------------------
Future policy and contract benefits 30,593 24,386
Deferred future revenues 6,091 6,126
Policyowner dividends 3,547 3,610
Pension and postretirement benefits 2,715 2,643
Other 3,665 3,027
- -------------------------------------------------------------------------------------------------------------------------
Gross deferred tax asset 46,611 39,792
- -------------------------------------------------------------------------------------------------------------------------
Net deferred tax liability $ 46,236 $ 36,083
- -------------------------------------------------------------------------------------------------------------------------
The difference between the U.S. federal income tax rate and the consolidated tax provision rate is summarized as
follows:
YEARS ENDED DECEMBER 31
------------------------------------------
1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
Federal statutory tax rate 35.0 % 35.0 % 35.0 %
Equity in subsidiaries 2.4 1.2 1.0
Surplus tax (2.7) 7.1 (5.2)
Other 0.9 (1.5) 0.5
- -------------------------------------------------------------------------------------------------------------------------
Effective tax rate 35.6 % 41.8 % 31.3 %
- -------------------------------------------------------------------------------------------------------------------------
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.
</TABLE>
- --------------------------------------------------------------------------------
64 LLVL
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERITAS LIFE INSURANCE CORP.
-----------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
----------------------------------------------------
(IN THOUSANDS)
(continued)
4. EMPLOYEE AND AGENT BENEFIT PLANS (CONTINUED)
- ------------------------------------------------
Periodic pension expense for the Company included the following components:
YEARS ENDED DECEMBER 31
---------------------------------------------
1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost - benefits earned during the year $ 1,408 $ 1,223 $ 1,349
Interest cost on projected benefit obligation 1,496 1,866 1,894
Actual return on plan assets (3,329) (2,817) (2,844)
Net amortization and deferral 1,836 932 1,148
- ---------------------------------------------------------------------------------------------------------------------------
Net periodic pension expense $ 1,411 $ 1,204 $ 1,547
- ---------------------------------------------------------------------------------------------------------------------------
The following table sets forth the funded status of the Company's plans:
DECEMBER 31
--------------------------------
1997 1996
- ---------------------------------------------------------------------------------------------------------------------------
Accumulated benefit obligation
Vested $ 15,184 $ 13,173
Nonvested 1,099 323
Effect of projected future compensation increases 6,949 5,761
- ---------------------------------------------------------------------------------------------------------------------------
Projected benefit obligation 23,232 19,257
Plan assets at fair value 24,271 20,153
- ---------------------------------------------------------------------------------------------------------------------------
Plan assets in excess of projected benefit obligation 1,039 896
Unrecognized net loss (875) (1,159)
Unrecognized transition obligation 1,236 1,331
- ---------------------------------------------------------------------------------------------------------------------------
Net pension asset $ 1,400 $ 1,068
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
The projected benefit obligation was determined using an assumed discount rate
of 7.25% and 7.5% for 1997 and 1996, respectively, and a weighted-average
assumed long-term rate of compensation increase of 4.5% for 1997 and 1996. The
assumed long-term rate of return on plan assets was 8.0% for 1997 and 1996.
The Company has generally funded annually the maximum allowed under IRS
regulations. The Company made contributions totaling $1,744 in 1997, $1,600 in
1996, and $1,500 in 1995.
The Company's employees and agents also participate in defined contribution
plans that cover substantially all full-time employees and agents. Company
contributions were $868 in 1997 and $800 in both 1996 and 1995.
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.
- --------------------------------------------------------------------------------
LLVL 65
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERITAS LIFE INSURANCE CORP.
-----------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
----------------------------------------------------
(IN THOUSANDS)
(continued)
4. EMPLOYEE AND AGENT BENEFIT PLANS (CONTINUED)
- ------------------------------------------------
The Company has adopted a 401(h) plan to fund its postretirement benefit
obligation. Funding of $425, $440 and $300 was made in 1997, 1996 and 1995,
respectively. The accumulated postretirement benefit obligation and the accrued
postretirement benefit liability were as follows:
DECEMBER 31
---------------------------
1997 1996
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Retirees $ 2,145 $ 2,451
Fully eligible active plan participants 462 396
Other active plan participants 1,891 1,899
- ------------------------------------------------------------------------------------------------------------------------
Accumulated postretirement benefit obligation 4,498 4,746
Plan assets (1,767) (1,252)
Unrecognized gain 1,516 1,040
- ------------------------------------------------------------------------------------------------------------------------
Accrued postretirement benefit liability $ 4,247 $ 4,534
- ------------------------------------------------------------------------------------------------------------------------
Net periodic postretirement benefit costs consisted of the following components:
YEARS ENDED DECEMBER 31
--------------------------------------------
1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------
Service costs $ 158 $ 177 $ 200
Interest cost on accumulated postretirement benefit plan 304 315 310
Net amortization and deferral (77) (35) (10)
Expected return on assets (89) (57) (34)
- -------------------------------------------------------------------------------------------------------------------------
Net periodic postretirement benefit costs $ 296 $ 400 $ 466
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
The assumed health care cost trend line rate used in measuring the accumulated
postretirement benefit obligation, for pre-65 employees, was 9.5% in 1995
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 3%, the current service cost by 7%, and
interest costs by 3%. The assumed discount rate used in determining the
accumulated postretirement benefit obligation was 7.25% and 7.5% in 1997 and
1996, respectively.
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 $47,200, $44,100 and $29,700
for 1997, 1996 and 1995, respectively. The Company's statutory surplus was
$311,300, $257,300 and $204,700 at December 31, 1997, 1996 and 1995,
respectively. The Company is required to maintain a certain level of
policyowners' contingency reserves to be in compliance with state laws and
regulations. Company policyowners' contingency reserves are monitored by state
regulators to ensure compliance with risk based capital requirements.
- --------------------------------------------------------------------------------
66 LLVL
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERITAS LIFE INSURANCE CORP.
-----------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
----------------------------------------------------
(IN THOUSANDS)
(continued)
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:
YEARS ENDED DECEMBER 31
-----------------------------------------------
1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assumed $ 9,740 $ 6,344 $ 2,725
Ceded (10,777) (12,549) (8,284)
- ---------------------------------------------------------------------------------------------------------------------------------
$ (1,037) $ (6,205) $ (5,559)
- ---------------------------------------------------------------------------------------------------------------------------------
The Company remains contingently liable in the event that a reinsurer is unable
to meet the obligations ceded under the reinsurance agreement.
7. RESERVE FOR UNPAID CLAIMS
- -----------------------------
The change in the liability for unpaid accident and health claims and claim
adjustment expenses is summarized as follows:
1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
Balance at January 1 $ 17,957 $ 14,925 $ 15,383
Reinsurance reserves (net) (89) 121 (86)
- --------------------------------------------------------------------------------------------------------------------------------
17,868 15,046 15,297
- --------------------------------------------------------------------------------------------------------------------------------
Incurred related to:
Current year 132,940 117,610 119,116
Prior year (4,675) (2,051) (2,030)
- --------------------------------------------------------------------------------------------------------------------------------
Total incurred 128,265 115,559 117,086
- --------------------------------------------------------------------------------------------------------------------------------
Paid related to:
Current year 112,255 99,742 104,492
Prior year 13,193 12,995 12,845
- --------------------------------------------------------------------------------------------------------------------------------
Total paid 125,448 112,737 117,337
- --------------------------------------------------------------------------------------------------------------------------------
20,685 17,868 15,046
Reinsurance reserves (net) 1,748 89 (121)
- --------------------------------------------------------------------------------------------------------------------------------
Balance at December 31 $ 22,433 $ 17,957 $ 14,925
- ---------------------------------------------------------------------------------------------------------------------------------
The liability for unpaid accident and health claims and claim adjustment
expenses is included in policy and contract claims on the consolidated balance
sheets.
</TABLE>
- --------------------------------------------------------------------------------
LLVL 67
<PAGE>
- --------------------------------------------------------------------------------
AMERITAS LIFE INSURANCE CORP.
-----------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
----------------------------------------------------
(IN THOUSANDS)
(continued)
8. COMMITMENTS AND CONTINGENCIES
- ---------------------------------
INVESTMENTS
Securities commitments of $25,848 and $16,935, and mortgage loan and real estate
commitments of $17,742 and $14,247 were outstanding for investments to be
purchased in subsequent years as of December 31, 1997 and 1996, respectively.
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 $2,325
and $2,250 as of December 31, 1997 and 1996, respectively.
LITIGATION
From time to time, the Company and its subsidiaries is subject to litigation in
the normal course of business. Management does not believe that the Company is
party to any such pending litigation which would have a material adverse effect
on its financial statements or future operations.
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.
The fair value estimates presented herein are based on pertinent information
available to management as of December 31, 1997 and 1996. 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.
- --------------------------------------------------------------------------------
68 LLVL
<PAGE>
- --------------------------------------------------------------------------------
AMERITAS LIFE INSURANCE CORP.
-----------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
----------------------------------------------------
(IN THOUSANDS)
(continued)
9. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
- ---------------------------------------------------
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.
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.
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.
CASH AND CASH EQUIVALENTS -- The carrying amounts equal fair value.
ACCRUED INVESTMENT INCOME -- 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 approximates
carrying value because the fees currently charged for these
arrangements and the underlying interest rates approximate market.
<TABLE>
<CAPTION>
Estimated fair values are as follows:
DECEMBER 31
----------------------------------------------------------------
1997 1996
----------------------------- ---------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Financial assets:
Fixed maturity securities
Held to maturity $ 754,581 $ 792,856 $ 775,875 $ 798,991
Available for sale 479,990 479,990 415,705 415,705
Equity securities 108,744 108,744 75,215 75,215
Loans on insurance policies 70,638 63,356 68,017 60,743
Mortgage Loans on real estate 228,709 240,583 226,776 234,750
Other investments 22,717 32,466 24,143 33,301
Short-term investments 655 655 1,541 1,541
Cash and cash equivalents 83,139 83,139 77,142 77,142
Accrued investment income 25,186 25,186 25,176 25,176
Financial liabilities:
Accumulated contract values excluding amounts
held under insurance contracts 764,505 764,998 756,029 756,194
</TABLE>
- --------------------------------------------------------------------------------
LLVL 69
<PAGE>
- --------------------------------------------------------------------------------
AMERITAS LIFE INSURANCE CORP.
-----------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
----------------------------------------------------
(IN THOUSANDS)
(continued)
10. SUBSEQUENT EVENT
- --------------------
Effective January 1, 1998, the Company converted from a mutual insurance company
structure to a mutual insurance holding company structure pursuant to the
Nebraksa Mutual Insurance Holding Company Act. The conversion was approved by
the Nebraska State Department of Insurance and the policyowners of the mutual
company.
- --------------------------------------------------------------------------------
70 LLVL
<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 72
through 75 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 72 and 74 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 73 and 75 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 expenses paid by each portfolio
available for investment (the equivalent to an annual rate of .58% of the
aggregate average daily net assets of the Fund), 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 72 and 74 and at an annual rate of
.90% on pages 73 and 75 of the average net assets of the Subaccounts). Berger
Associates has voluntarily agreed to waive its advisory fee and has voluntarily
reimbursed the Funds for additional expenses 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. NBMI 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 -1.33%, 4.67%, and 10.67% on page 72 and 74 and -1.48%, 4.52%,
and 10.52% respectively, on pages 73 and 75.
The hypothetical values shown in the tables do not reflect any additional
charges for Federal Income tax burden attributable to the Separate 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 Separate 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.
- --------------------------------------------------------------------------------
LLVL 71
<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: $4800
INITIAL SPECIFIED AMOUNT: $250000
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
(-1.33% Net) ( 4.67% Net) ( 10.67% 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 4162 250000 4426 250000 4691 250000
2 10332 8231 250000 9022 250000 9846 250000
3 15888 12154 250000 13739 250000 15455 250000
4 21723 15952 250000 18603 250000 21561 250000
5 27849 19631 250000 23628 250000 28318 250000
6 34281 23202 250000 28832 250000 35713 250000
7 41035 26665 250000 34225 250000 43852 250000
8 48127 30076 250000 39872 250000 52873 250000
9 55573 33441 250000 45790 250000 62879 250000
10 63392 36761 250000 51994 250000 73981 250000
15 108755 52273 250000 87475 250000 150429 250000
20 166652 63934 250000 130372 250000 277997 339156
Ages
70 240544 70042 250000 183313 250000 487121 565060
75 334851 67753 250000 252318 269980 830058 888162
80 455213 51003 250000 340157 357165 1396196 1466006
85 608830 2036 250000 446649 468982 2312360 2427978
</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 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, DEATH BENEFIT OPTION SELECTED,
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 FUNDS THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
- --------------------------------------------------------------------------------
LLVL 72
<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: $4800
INITIAL SPECIFIED AMOUNT: $250000
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
(-1.48% Net) ( 4.52% Net) ( 10.52% 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 4162 250000 4426 250000 4691 250000
2 10332 7627 250000 8397 250000 9200 250000
3 15888 10985 250000 12492 250000 14129 250000
4 21723 14234 250000 16715 250000 19523 250000
5 27849 17367 250000 21065 250000 25425 250000
6 34281 20385 250000 25548 250000 31893 250000
7 41035 23274 250000 30157 250000 38977 250000
8 48127 26022 250000 34888 250000 46739 250000
9 55573 28622 250000 39739 250000 55248 250000
10 63392 31057 250000 44704 250000 64583 250000
15 108755 40396 250000 71202 250000 127459 250000
20 166652 43372 250000 100334 250000 232932 284177
Ages
70 240544 35554 250000 131723 250000 405232 470069
75 334851 7577 250000 166402 250000 683141 730960
80 455213 0* 0* 209133 250000 1136522 1193348
85 608830 0* 0* 275018 288768 1851843 1944435
</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 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, DEATH BENEFIT OPTION SELECTED,
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 FUNDS THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
- --------------------------------------------------------------------------------
LLVL 73
<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: $14500
INITIAL SPECIFED AMOUNT: $250000
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
(-1.33% Net) ( 4.67% Net) ( 10.67% 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 13392 263392 14218 264218 15045 265045
2 31211 26561 276561 29054 279054 31646 281646
3 47996 39451 289451 44475 294475 49909 299909
4 65621 52083 302083 60528 310528 70028 320028
5 84127 64463 314463 77243 327243 92205 342205
6 103559 76602 326602 94659 344659 116667 366667
7 123962 88500 338500 112808 362808 143654 393654
8 145385 100221 350221 131784 381784 173501 423501
9 167879 111771 361771 151631 401631 206516 456516
10 191498 123152 373152 172389 422389 243039 493039
15 328533 177079 427079 290848 540848 492241 742241
20 503428 223371 473371 434966 684966 900627 1150627
Ages
70 726644 259561 509561 607882 857882 1569356 1820453
75 1011530 282014 532014 812107 1062107 2664810 2914810
80 1375125 284930 534930 1048101 1298101 4461152 4711152
85 1839174 256380 506380 1309239 1559239 7383420 7752591
</TABLE>
1) Assumes an annual $14500 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 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, DEATH BENEFIT OPTION SELECTED,
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 FUNDS THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
- --------------------------------------------------------------------------------
LLVL 74
<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: $14500
INITIAL SPECIFED AMOUNT: $250000
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
(-1.48% Net) ( 4.52% Net) ( 10.52% 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 13392 263392 14218 264218 15045 265045
2 31211 25771 275771 28232 278232 30793 280793
3 47996 37894 287894 42805 292805 48121 298121
4 65621 49762 299762 57957 307957 67191 317191
5 84127 61368 311368 73706 323706 88176 338176
6 103559 72710 322710 90072 340072 111271 361271
7 123962 83776 333776 107065 357065 136680 386680
8 145385 94553 344553 124698 374698 164629 414629
9 167879 105030 355030 142982 392982 195369 445369
10 191498 115188 365188 161924 411924 229170 479170
15 328533 160774 410774 266949 516949 455912 705912
20 503428 195807 445807 389620 639620 820295 1070295
Ages
70 726644 215809 465809 528292 778292 1404857 1654857
75 1011530 213810 463810 677821 927821 2342539 2592539
80 1375125 177419 427419 824857 1074857 3845234 4095234
85 1839174 93371 343371 951110 1201110 6248110 6560515
</TABLE>
1) Assumes an annual $14500 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 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, DEATH BENEFIT OPTION SELECTED,
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 FUNDS THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
- --------------------------------------------------------------------------------
LLVL 75
<PAGE>
- --------------------------------------------------------------------------------
