PROSPECTUS
Individual Flexible Premium Variable Universal Life
Insurance Policies
THE UNION CENTRAL LIFE INSURANCE COMPANY
CARILLON LIFE ACCOUNT
Home Office:
1876 Waycross Road
P.O. Box 40888
Cincinnati, Ohio 45240-4088
Telephone: 1-800-999-1840
This prospectus describes an individual flexible premium
variable universal life insurance policy offered by The Union
Central Life Insurance Company. Under this policy, we insure
the life of the person you specify, and give you flexibility in
the death benefit, and amount and timing of your premium
payments. With this flexibility, you can provide for your
changing insurance needs under a single policy.
You can allocate net premiums to one or more subdivisions of the
variable account, to the guaranteed account, or to both. If you
allocate net premiums to the variable account, we will deposit
them in subaccounts of the Carillon Life Account in proportions
that you specify. We invest the assets of each subaccount in a
corresponding portfolio of Carillon Fund, Inc., Scudder Variable
Life Investment Fund, AIM Variable Insurance Funds, Inc., MFS
Variable Insurance Trust, or Templeton Variable Products Series
Fund. To learn more about the portfolios, see their
accompanying prospectuses.
<TABLE>
<C> <C> <C>
Carillon Balanced Index Scudder Capital Growth MFS Total Return Series
Portfolio Portfolio Class A MFS Growth With Income
Carillon Equity Portfolio Scudder International MFS High Income Series
Carillon Bond Portfolio Portfolio Class A MFS Emerging Growth
Carillon S&P 500 Index Scudder Money Market Series
Portfolio Portfolio Templeton International
Carillon S&P MidCap 400 Fund Class 2
Index Portfolio AIM V.I. Capital
Appreciation Portfolio
</TABLE>
Each of these portfolios is available through a subaccount.
This prospectus generally describes the variable account. For a
brief summary of the guaranteed account, see "The Guaranteed
Account," page 16. THERE ARE LIMITS ON TRANSFERS FROM THE
GUARANTEED ACCOUNT.
You can select from two death benefit options available under
the policy: a level death benefit ("Option A"), or a death
benefit that includes the account value ("Option B"). We
guarantee to keep the policy in force as long as you meet the
minimum monthly premium requirement and other conditions. We
also allow policy loans and partial cash surrenders, within
limits.
The policy provides for a cash surrender value that we will pay
to you if you surrender your policy. If you allocate net
premiums to the variable account, the cash surrender value will
depend on the investment performance of the portfolios. We do
not guarantee a minimum cash surrender value.
If you already have life insurance, it might not be to your
advantage to replace it with this policy. Within certain
limits, you may return the policy, or convert it to a policy
that provides benefits that do not depend on investment results.
AN INVESTMENT IN THE POLICY IS NOT A DEPOSIT OR OBLIGATION OF,
OR GUARANTEED OR ENDORSED BY, ANY BANK, NOR IS THE POLICY
FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION
OR ANY OTHER GOVERNMENT AGENCY. AN INVESTMENT IN THE POLICY
INVOLVES CERTAIN RISKS, INCLUDING THE RISK THAT YOU COULD LOSE
YOUR PREMIUM PAYMENTS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THESE
SECURITIES, OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. IT IS A CRIMINAL OFFENSE TO STATE OTHERWISE.
The Date of this Prospectus is May 1, 1999 and Revised October
21, 1999.
<PAGE>
PROSPECTUS CONTENTS
Page
SPECIAL TERMS........................................... 4
SUMMARY AND DIAGRAM OF THE POLICY....................... 4
GENERAL INFORMATION ABOUT UNION CENTRAL,
THE SEPARATE ACCOUNT AND THE PORTFOLIOS............... 9
The Union Central Life Insurance Company.............. 9
Carillon Life Account................................. 9
The Portfolios........................................ 9
PREMIUM PAYMENTS AND ALLOCATIONS........................12
Applying for a Policy.................................12
Purchase of the Policy for Specialized Purposes.......12
Free Look Right to Cancel the Policy..................13
Premiums..............................................13
Net Premium Allocations...............................14
Crediting Net Premiums................................14
Transfer Privilege....................................15
Dollar Cost Averaging Plan............................15
Portfolio Rebalancing Plan............................16
Earnings Sweep Plan...................................16
GUARANTEED ACCOUNT......................................16
Minimum Guaranteed and Current Interest Rates........ 16
Calculation of Guaranteed Account Value...............17
Transfers from the Guaranteed Account.................17
Payment Deferral from the Guaranteed Account..........17
CHARGES AND DEDUCTIONS..................................17
Premium Expense Charge................................17
Monthly Deduction.....................................18
Daily Mortality and Expense Risk Charge...............19
Transfer Charge.......................................19
Surrender Charge......................................19
Fund Expenses.........................................20
Cost of Additional Benefits Provided by Riders........21
Income Tax Charge.....................................21
Special Arrangements..................................21
HOW YOUR ACCOUNT VALUES VARY............................21
Determining the Account Value.........................22
Cash Value............................................23
Cash Surrender Value..................................23
DEATH BENEFIT AND CHANGES IN SPECIFIED AMOUNT...........23
Amount of Death Benefit Proceeds......................23
Death Benefit Options.................................23
Initial Specified Amount and Death Benefit Option.....24
Changes in Death Benefit Option.......................24
Changes in Specified Amount...........................24
Selecting and Changing the Beneficiary................24
CASH BENEFITS...........................................25
Loans.................................................25
Surrendering the Policy for Cash Surrender Value......26
Partial Cash Surrenders...............................26
Maturity Benefit......................................26
Payment Options.......................................26
ILLUSTRATIONS OF ACCOUNT VALUES, CASH SURRENDER VALUES,
DEATH BENEFITS AND ACCUMULATED PREMIUM PAYMENTS......27
OTHER POLICY BENEFITS AND PROVISIONS....................36
Limits on Rights to Contest the Policy................36
Changes in the Policy or Benefits.....................36
When Proceeds Are Paid................................36
Reports to Policy Owners..............................36
Assignment............................................36
Reinstatement.........................................37
Supplemental and/or Rider Benefits....................37
Additions, Deletion or Substitution of Investments....38
Voting Rights.........................................38
Participating.........................................38
State Variations......................................38
TAX CONSIDERATIONS......................................39
Tax Status of Policy..................................39
Treatment of Policy Benefits..........................40
Possible Charge for Union Central's Taxes.............41
OTHER INFORMATION ABOUT THE POLICIES AND UNION
CENTRAL.................................................41
Sale of the Policies..................................41
Union Central Directors and Executive Officers........41
State Regulation......................................41
Preparing for Year 2000...............................42
Additional Information................................42
Experts...............................................42
Actuarial Matters.....................................42
Litigation............................................42
Legal Matters.........................................42
Financial Statements..................................42
APPENDIX A..............................................93
APPENDIX B..............................................94
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY PLACE
WHERE IT WOULD BE ILLEGAL TO MAKE IT. WE HAVE NOT AUTHORIZED ANY
PERSON TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE
OFFERING OTHER THAN THOSE IN THIS PROSPECTUS, THE PROSPECTUSES
FOR THE PORTFOLIOS, OR THEIR STATEMENTS OF ADDITIONAL
INFORMATION.
<PAGE>
DEFINITIONS OF TERMS
- ----------------------------------------------------------------
account value - The sum of the variable account, the guaranteed
account, and the loan account. Calculation of the account value
is described on page 21.
age - The insured's age on his or her nearest birthday.
initial specified amount - The specified amount on the policy
date.
loan account - A part of the guaranteed account. When you take
out a policy loan, we transfer some of your account value to
this account to hold as collateral for the loans.
net premium - A premium payment minus the applicable premium
expense charge. See page 14.
owner, you - The person(s) who owns a policy.
policy debt - The sum of all outstanding policy loans plus
accrued interest.
portfolio - An investment company or its series, in which we
invest premiums allocated to a subaccount of the separate
account.
risk amount - On each monthly date, the death benefit under the
policy less the account value (after deduction of the monthly
deduction on that day, except for the cost of insurance charge).
See page 12 for a definition of monthly date.
specified amount - A dollar amount used to determine the death
benefit under a policy. See page 23.
Union Central, we, our, us - The Union Central Life Insurance
Company.
unscheduled premium - Any premium other than a planned periodic
premium.
valuation date - Each day on which the New York Stock Exchange
is open for business.
valuation period - The interval of time commencing at the close
of business on one valuation date and ending at the close of
business on the next succeeding valuation date.
SUMMARY AND DIAGRAM OF THE POLICY
- -----------------------------------------------------------------
PLEASE READ THIS SUMMARY AND THE DIAGRAM THAT FOLLOWS TOGETHER
WITH THE DETAILED INFORMATION BELOW. UNLESS WE INDICATE
OTHERWISE, IN DESCRIBING THE POLICY IN THIS PROSPECTUS, WE
ASSUME THAT THE POLICY IS IN FORCE AND THAT THERE IS NO
OUTSTANDING POLICY DEBT.
The policy is similar in many ways to fixed-benefit life
insurance. As with fixed-benefit life insurance, you pay
premiums for insurance coverage on a person's life. Also like
fixed-benefit life insurance, the policy provides for
accumulation of net premiums and a cash surrender value that we
will pay if you surrender your policy before the insured person
dies. As with fixed-benefit life insurance, the cash surrender
value during the early policy years is likely to be
substantially lower than the premiums you pay.
However, the policy is different from fixed-benefit life
insurance in several important ways. Unlike fixed-benefit life
insurance, the death benefit may, and the account value will,
increase or decrease to reflect the investment performance of
the subdivisions where you invest your net premiums. Also, we
do not guarantee any minimum cash surrender value. However, we
do guarantee to keep the policy in force during the first three
policy years as long as you meet the minimum monthly premium
requirement. See "Minimum Guaranteed Period," page 13
Otherwise, if the cash surrender value is not enough to pay
charges due, the policy will lapse without value after a grace
period. See "Premium Payments to Prevent Lapse," page 14. If a
policy lapses while loans are outstanding, adverse tax
consequences may result. See "Tax Considerations," page 39.
Purpose of the Policy. We designed the policy to be a long-term
investment that provides insurance benefits. You should
evaluate the policy based on your need for insurance, and the
policy's long-term investment potential. It might not be to
your advantage to replace your existing insurance coverage with
the policy. You should be particularly careful about replacing
your insurance if you base your decision to replace existing
coverage primarily on a comparison of policy illustrations (see
below).
Illustrations. Illustrations that we use in this prospectus or
that are used in connection with the purchase of a policy are
based on hypothetical rates of return. We do not guarantee
these rates. They are illustrative only and you should not
consider them as representing past or future performance.
Actual rates of return may be higher or lower than those
reflected in any illustrations, and therefore, your actual
values will be different from those illustrated.
Tax Considerations. We intend for the policy to satisfy the
definition of a life insurance contract under Section 7702 of
the Internal Revenue Code. Certain policy transactions,
including the payment of premiums, may cause a policy to be
considered a modified endowment contract under the Internal
Revenue Code. For further discussion of the tax status of the
policy and the tax consequences of being treated as a life
insurance contract or a modified endowment contract, see page
39.
Free Look Right to Cancel and Conversion Right. For a limited
time after we issue a policy, you have the right to cancel your
policy and receive a refund. See "Free Look Right to Cancel the
Policy," page 13. Until this "free look" period ends, we will
allocate net premiums to the subaccount investing in the Money
Market Portfolio of the Scudder Variable Life Investment Fund.
(See "Net Premium Allocations," page 14.)
At any time within the first 24 months after the issue date, you
may transfer all or a portion of the variable account to the
guaranteed account without paying any transfer fee. This
transfer effectively "converts" the policy into a contract that
provides fixed (non-variable) benefits. See "Conversion Right,"
page 15.
Owner Inquiries. If you have any questions, you may write or
call our home office at 1876 Waycross Road, P.O. Box 40888,
Cincinnati, Ohio 45240-4088; telephone 1-800-219-8525.
<PAGE>
DIAGRAM OF POLICY
- -----------------------------------------------------------------
(DESCRIPTION OF DIAGRAM: Each heading with the information
following is encased in a block. A down arrow appears at the
bottom of each block pointing to the next block)
PREMIUM PAYMENTS
*You select a plan for making planned periodic premiums, but
you do not have to pay them according to the plan. You can
change the amount and frequency of premiums, and you can skip
planned periodic premiums. See page 13 for rules and limits.
*There is no minimum initial payment or planned periodic
premium.
*You may make unplanned premium payments, within limits. See
page 13.
*If you pay minimum required premiums, we guarantee to keep the
policy in force for a minimum guaranteed period, the first
three policy years. See page 14.
*Under certain circumstances, which include excessive policy
debt, you may have to pay extra premiums to prevent lapse.
See page 14.
(a down arrow is centered here between blocks)
DEDUCTIONS FROM PREMIUM PAYMENTS
*We deduct sales charges equal to 2% of premium payments.
See page 17.
*We deduct 2.0% of all premiums for state and local premium
taxes. See page 17.
(a down arrow is centered here between blocks)
NET PREMIUMS
*You direct the allocation of net premiums among fourteen
subdivisions of the variable account and the guaranteed
account.
See page 14 for rules and limits on net premium allocations.
*The subdivisions are invested in corresponding portfolios of
Carillon Fund, Inc., Scudder Variable Life Investment Fund, AIM
Variable Insurance Funds, Inc., MFS Variable Insurance Trust
and
Templeton Variable Products Series Fund. See page 9.
Portfolios
available are:
*We credit interest on amounts allocated to the guaranteed
account
at a guaranteed minimum interest rate of 4%. See page 16 for
rules
and limits on guaranteed account allocations.
(a down arrow is centered here between blocks)
(the following TWO items are encased in one block)
DEDUCTIONS FROM YOUR ACCOUNT VALUE
*Monthly deduction for cost of insurance, administrative
charge, and charges for any supplemental and/or rider benefits.
The administrative charge is currently $5.00 per month. See
page 17.
DEDUCTIONS FROM VARIABLE SUBDIVISIONS
*We deduct a daily charge at a guaranteed annual rate of 0.75%
during the first ten policy years, and 0.25% thereafter, from
the subaccounts for mortality and expense risks. See page 19.
*The portfolios deduct the following investment advisory fees
and operating expenses from the their assets.
<TABLE>
<CAPTION>
Management Other Total
Portfolio Fees Expenses Expenses
- --------- ---- -------- --------
<S> <C> <C> <C>
CARILLON FUND, INC.<F1>
Balanced Index Portfolio 0.30% 0.30% 0.60%
Equity Portfolio 0.56% 0.06% 0.62%
Bond Portfolio 0.47% 0.11% 0.58%
S&P 500 Index Portfolio 0.30% 0.13% 0.43%
S&P MidCap 400 Index Portfolio 0.30% 0.30% 0.60%
SCUDDER VARIABLE LIFE INVESTMENT FUND<F1>
Capital Growth Portfolio Class A 0.47% 0.03% 0.50%
International Portfolio Class A 0.87% 0.17% 1.04%
Money Market Portfolio 0.37% 0.07% 0.44%
MFS VARIABLE INSURANCE TRUST<F1><F2>
Growth With Income Series 0.75% 0.13% 0.88%
High Income Series<F1> 0.75% 0.28% 1.03%
Emerging Growth Series 0.75% 0.10% 0.85%
Total Return Series 0.75% 0.16% 0.91%
AIM Variable Insurance Funds, Inc.
V.I. Capital Appreciation Portfolio 1.62% 0.05% 0.67%
<CAPTION>
Management Other Total
Portfolio 12b-1 Fees Fees Expenses Expenses
- --------- ---------- ---- -------- --------
<S> <C> <C> <C> <C>
TEMPLETON VARIABLE PRODUCTS
SERIES FUND<F3>
Templeton International Fund
Class 2<F1> 0.25% 0.69% 0.17% 1.11%
<FN>
<F1> Figures are based on the actual expenses incurred by the Portfolio for
the year ended December 31, 1998. Actual Portfolio expenses may vary.
<F2> Each Series has an expense offset arrangement which reduces the Series'
custodian fee based upon the amount of cash maintained by the Series with its
custodian and dividend disbursing agent, and may enter into other such
arrangements and directed brokerage arrangements (which would also have the
effect of reducing the Series' expense). Any such fee reductions are not
reflected under "Other Expenses."
<F3> Class 2 of the Fund has a distribution plan or "Rule 12b-1 plan" which is
described in the Fund's prospectus.
</FN>
</TABLE>
(a down arrow is centered here between blocks)
ACCOUNT VALUE
*Is the amount credited to your policy. It is equal to net
premiums, as adjusted each valuation date to reflect
subdivision investment experience, interest credited on the
guaranteed account, charges deducted and other policy
transactions (such as transfers and partial cash surrenders).
See page 23.
*Varies from day to day. There is no minimum guaranteed
account value. The policy may lapse if the cash surrender
value is insufficient to cover a monthly deduction due. See
page 23.
*Can be transferred among the subdivisions and the guaranteed
account. Currently, a transfer fee of $10 applies to each
transfer in excess of the first 12 transfers in a policy year.
See page 15 for rules and limits. Policy loans reduce the
amount available for allocations and transfers.
*Is the starting point for calculating certain values under a
policy, such as the cash value, cash surrender value, and the
death benefit used to determine death benefit proceeds.
(the above item has two down arrows under it, each pointing to
one of the next two items which are blocked side by side)
CASH BENEFITS
*Loans may be taken for amounts up to 90% of the variable
account, plus 100% of the guaranteed account, LESS loan
interest due on the next annual date and any surrender
charges. See page 25 for rules and limits.
*Partial cash surrenders generally can be made provided there is
sufficient remaining cash surrender value. See page 27 for
rules and limits.
*The policy may be surrendered in full at any time for its cash
surrender value. A surrender charge will apply during the
first fifteen policy years after issue and after any increase
in specified amount. See page 19.
*Payment options are available. See page 27.
*Loans, partial cash surrenders, and surrenders in full may have
adverse tax consequences. See page 39.
DEATH BENEFITS
*Are income tax free to beneficiary.
*Are available as lump sum or under a variety of payment
options.
*For all policies, the minimum initial specified amount is
$50,000.
*There are two death benefit options available:
Option A, equal to the specified amount, and
Option B, equal to the specified amount plus account value.
See page 24.
*You have the flexibility to change the death benefit option
and specified amount. See page 24 for rules and limits.
*Supplemental and/or rider benefits may be available. See page
38.
(end of graphic material)
<PAGE>
GENERAL INFORMATION ABOUT UNION CENTRAL,
THE SEPARATE ACCOUNT AND THE PORTFOLIOS
- --------------------------------------------------------------
The Union Central Life Insurance Company
Union Central, a mutual life insurance company organized under
the laws of the State of Ohio in 1867, issues the Policies.
Union Central is primarily engaged in the sale of life and
disability insurance and annuities and is currently licensed to
transact life insurance business in all states and the District
of Columbia.
We are subject to regulation by the Department of Insurance of
the State of Ohio as well as by the insurance departments of all
other states and jurisdictions in which we do business. We
submit annual statements on our operations and finances to
insurance officials in such states and jurisdictions.
Carillon Life Account
We established Carillon Life Account (the "separate account") as
a separate investment account under Ohio law on July 10, 1995.
It supports the policies and may be used to support other
variable life insurance policies, and for other purposes
permitted by law. The separate account is registered with the
Securities and Exchange Commission ("SEC") as a unit investment
trust under the Investment Company Act of 1940 (the "1940 Act")
and is a "separate account" within the meaning of the federal
securities laws. Union Central has established other separate
investment accounts that may also be registered with the SEC.
We own the assets in the separate account. The separate account
is divided into subaccounts which correspond to subdivisions of
the variable account. Subaccounts of the separate account
invest in shares of the portfolios. The separate account may
include other subaccounts that are not available through the
policies and are not otherwise discussed in this Prospectus.
Income, gains and losses, realized or unrealized, of a
subaccount are credited to or charged against the subaccount
without regard to any other income, gains or losses of Union
Central. Applicable insurance law provides that assets equal to
the reserves and other contract liabilities of the separate
account shall not be chargeable with liabilities arising out of
any other business of Union Central. Union Central is obligated
to pay all benefits provided under the policies.
The Portfolios
Subaccounts of the separate account currently invest in fourteen
designated portfolios of five series-type mutual funds:
Carillon Fund, Inc. ("Carillon Fund"); Scudder Variable Life
Investment Fund ("Scudder Fund"); AIM Variable Insurance Funds,
Inc. ("AIM Fund"); MFS Variable Insurance Trust ("MFS Fund");
and Templeton Variable Products Series Fund ("Templeton Fund").
The investment experience of each subaccount of the separate
account depends on the investment performance of its
corresponding portfolio. Each of these portfolios is registered
with the SEC under the 1940 Act as a series of an open-end
diversified investment company. The SEC does not, however,
supervise the management or the investment practices and
policies of the portfolios.
The investment adviser to Carillon Fund is Carillon Advisers,
Inc. (a wholly-owned subsidiary of Union Central). Scudder
Kemper Investments, Inc. is the investment adviser to the
Scudder Fund. The investment adviser to the AIM Fund is AIM
Advisors, Inc. The investment adviser to the MFS Fund is
Massachusetts Financial Services Company. The investment
adviser to the Templeton Fund is Templeton Investment Counsel,
Inc.
The separate account invests in five portfolios of Carillon
Fund: the Equity Portfolio, the Bond Portfolio, the Balanced
Index Portfolio, the S&P MidCap 400 Index Portfolio, and the S&P
500 Index Portfolio. The separate account invests in three
portfolios of the Scudder Fund: the Capital Growth Portfolio
Class A, the International Portfolio Class A, and the Money
Market Portfolio. The separate account invests in one portfolio
of the AIM Fund: AIM V.I. Capital Appreciation Portfolio. The
separate account invests in four portfolios of the MFS Fund: MFS
Growth With Income Series, MFS High Income Series, MFS Total
Return Series and MFS Emerging Growth Series. The separate
account invests in one Portfolio of the Templeton Fund:
Templeton International Fund Class 2. The assets of each
portfolio are separate from assets of the others, and each
portfolio has different investment objectives and policies. As
a result, each portfolio operates as a separate investment fund
and the investment performance of one portfolio has no effect on
the investment performance of any other portfolio. The
investment objective of each portfolio is set forth below.
The Carillon Equity Portfolio seeks primarily long-term
appreciation of capital by investing primarily in common stocks
and other equity securities.
The Carillon Bond Portfolio seeks as high a level of current
income as is consistent with reasonable investment risk by
investing primarily in investment-grade corporate bonds.
The Carillon Balanced Index Portfolio seeks investment results,
with respect to 60% of its assets, that correspond to the total
return performance of U.S. common stocks, as represented by the
S&P 500 Index and, with respect to 40% of its assets, that
correspond to the total return performance of investment grade
bonds, as represented by the Lehman Brothers Aggregate Bond
Index.
The Carillon S&P MidCap 400 Index Portfolio seeks investment
results that correspond to the total return performance of U.S.
common stocks, as represented by the S&P MidCap 400 Index.
The Carillon S&P 500 Index Portfolio seeks investment results
that correspond to the total return performance of U.S. common
stocks, as represented by the Standard & Poor's 500 Composite
Stock Index (the "S&P 500"*) The S&P 500 is a well-known stock
market index that includes common stocks of companies
representing approximately 70% of the market value of all common
stocks publicly traded in the United States. The investment
adviser of the portfolio believes that the performance of the
S&P 500 is representative of the performance of publicly traded
common stocks in general.
The Scudder Capital Growth Portfolio Class A seeks to maximize
long-term capital growth through a broad and flexible investment
program. The Portfolio invests in marketable securities,
principally common stocks and, consistent with its objective of
long-term capital growth, preferred stocks.
The Scudder International Portfolio Class A seeks long-term
growth of capital principally from a diversified portfolio of
foreign equity securities.
The Scudder Money Market Portfolio seeks stability and current
income from a portfolio of money market instruments. Money
market funds are neither insured nor guaranteed by the U.S.
Government, and there can be no assurance that this portfolio
will maintain a stable net asset value per share.
The MFS Total Return Series seeks primarily to provide above-
average income (compared to a portfolio invested entirely in
equity securities) consistent with the prudent employment of
capital, and secondarily to provide a reasonable opportunity for
growth of capital and income.
The MFS Growth With Income Series seeks to provide reasonable
current income and long-term growth of capital and income.
__________
*The S&P 500 is an unmanaged index of common stocks comprised of
500 industrial, financial, utility and transportation companies.
"Standard & Poor's(R)", "S&P(R)", "S&P 500(R)", "Standard &
Poor's 500(R)", and "500" are trademarks of The McGraw-Hill
Companies, Inc. and have been licensed for use by Carillon Fund.
The Portfolio is not sponsored, endorsed, sold or promoted by
Standard & Poor's ("S&P"). S&P makes no representation or
warranty, express or implied, to the beneficial owners of the
Portfolio or any member of the public regarding the advisability
of investing in securities generally or in the Portfolio
particularly or the ability of the S&P 500 Index to track
general stock market performance. S&P's only relationship to
Carillon Fund is the licensing of certain trademarks and trade
names of S&P and of the S&P 500 Index which is determined,
composed and calculated by S&P without regard to Carillon Fund
or the Portfolio. S&P has no obligation to take the needs of
Carillon Fund or the beneficial owners of the Portfolio into
consideration in determining, composing or calculating the S&P
500 Index. S&P is not responsible for and has not participated
in the determination of the prices and amount of the Portfolio
or the timing of the issuance or sale of the Portfolio or in the
determination or calculation of the equation by which the
Portfolio is to be converted into cash. S&P has no obligation or
liability in connection with the administration, marketing or
trading of the Portfolio.
S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF
THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN AND S&P SHALL
HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS
THEREIN. S&P MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO
RESULTS TO BE OBTAINED BY CARILLON FUND, BENEFICIAL OWNERS OF
THE PORTFOLIO, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE
S&P 500 INDEX OR ANY DATA INCLUDED THEREIN. S&P MAKES NO EXPRESS
OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH
RESPECT TO THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN.
WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL S&P
HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR
CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED
OF THE POSSIBILITY OF SUCH DAMAGES.
The MFS High Income Series seeks high current income by
investing primarily in a professionally managed diversified
portfolio of fixed income securities, some of which may involve
equity features. The MFS High Income Portfolio may invest up to
100% of its assets in lower-rated bonds commonly known as junk
bonds. BEFORE ALLOCATING ANY PORTION OF NET PREMIUMS TO THE
SUBDIVISION CORRESPONDING TO THIS PORTFOLIO, OWNERS SHOULD READ
THE RISK DISCLOSURE IN THE ACCOMPANYING PROSPECTUS FOR THE MFS
HIGH INCOME SERIES.
The MFS Emerging Growth Series seeks to provide long-term growth
of capital.
The Templeton International Fund Class 2 seeks long-term capital
growth by investing in stocks of companies located outside the
United States, including emerging markets.
The AIM V.I. Capital Appreciation Fund seeks growth of capital
through investment in common stocks, with emphasis on medium and
small-sized growth companies.
THERE IS NO ASSURANCE THAT ANY OF THE PORTFOLIOS WILL ACHIEVE
THEIR RESPECTIVE STATED OBJECTIVES. Additional information
concerning the investment objectives and policies of the
portfolios, as well as risks, can be found in the current
portfolio prospectuses that accompany this Prospectus. The
prospectuses for the portfolios should be read carefully before
any decision is made concerning the allocation of net premiums
to a particular subdivision. Certain subdivisions invest in
portfolios that have similar investment objectives and/or
policies. Therefore, you should carefully read the individual
prospectuses for the portfolios along with this Prospectus.
The investment objectives and policies of certain portfolios are
similar to the investment objectives and policies of other funds
that may be managed by the same investment adviser. The
investment results of the portfolios, however, may be higher or
lower than the results of such other funds. There can be no
assurance, and no representation is made, that the investment
results of any of the portfolios will be comparable to the
investment results of any other fund, even if the other fund has
the same investment adviser.
Please note that all of the portfolios described in the
Prospectuses for the portfolios may not be available under the
policy. Moreover, Union Central cannot guarantee that each fund
will always be available for its variable life contracts, but in
the unlikely event that a Fund is not available, Union Central
will take reasonable steps to secure the availability of a
comparable fund. Shares of each portfolio are purchased and
redeemed at net asset value, without a sales charge.
The portfolios presently serve as the investment media for the
policies. In addition, the portfolios may sell shares to
separate accounts of other insurance companies to fund variable
annuity contracts and/or variable life insurance policies,
and/or to certain retirement plans qualifying under Section 401
of the Code. Union Central currently does not foresee any
disadvantages to owners that would arise from the possible sale
of shares to support the variable contracts of other insurance
companies, or from the possible sale of shares to such
retirement plans. However, the board of directors of each fund
will monitor events in order to identify any material
irreconcilable conflicts that might possibly arise if the shares
of that fund were also offered to support variable contracts
other than the policies or to support retirement plans. In
event of such a conflict, the board of directors of that fund
would determine what action, if any, should be taken in response
to the conflict. In addition, if Union Central believes that
the fund's response to any such conflicts insufficiently
protects owners, it will take appropriate action on its own,
which may include withdrawing the separate account's investment
in that fund. (See the prospectuses for the portfolios for more
detail.)
Scudder Kemper Investments, Inc., the investment adviser to the
Scudder Fund; AIM Advisors, Inc., the investment adviser to the
AIM Fund; Massachusetts Financial Services Company, the
investment adviser to the MFS Fund; and Franklin Templeton
Distributors, Inc., the principal underwriter for the Templeton
Fund, have agreed to compensate Union Central for the
performance of certain administrative and other services. This
compensation is based on the assets of the Scudder Fund, the AIM
Fund, the MFS Fund and the Templeton Fund, respectively, that
are attributable to the policies.
PREMIUM PAYMENTS AND ALLOCATIONS
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(the following is encased in a box)
In the sections that follow, we use the following special terms:
policy date - the date from which policy months, years and
anniversaries are measured
issue date - the date from which the suicide and contestable
periods start.
annual date - the same day in each policy year as the policy
date.
monthly date - the same day as the policy date for each
succeeding month.
policy month - Each one-month period beginning with a monthly
date and ending the day before the next monthly date.
policy year - Each period of twelve months starting on the
policy date and ending the day before the first annual date, or
any following year starting on an annual date and ending the day
before the next annual date.
(end of boxed material)
Applying for a Policy
To purchase a policy, you must complete an application and
submit it through an authorized Union Central agent. There is
no minimum initial premium payment. Your policy coverage will
become effective on the policy date. If an initial premium
payment is submitted with the application, then the policy date
is generally the date of approval of your application. If the
application is not accompanied by an initial premium payment,
then the policy date will generally be two weeks after the date
that your application is approved.
As provided for under state insurance law, the owner, to
preserve insurance age, may be permitted to backdate the policy.
In no case may the policy date be more than six months prior to
the date the application was completed. We deduct charges for
the monthly deduction for the backdated period on the issue
date. Temporary life insurance coverage may be provided prior
to the policy date under the terms of a temporary insurance
agreement. In accordance with Union Central's underwriting
rules, temporary life insurance coverage may not exceed $500,000
and will not remain in effect for more than sixty (60) days.
We require satisfactory evidence of the insured's insurability,
which may include a medical examination of the insured. The
available issue ages are 0 through 75. Age is determined on the
insured's age as of the birthday nearest the policy date. The
minimum specified amount is $50,000. Acceptance of an
application depends on Union Central's underwriting rules, and
we reserve the right to reject an application for any reason.
As the owner of the policy, you exercise all rights provided
under the policy. The insured is the owner, unless a different
owner is named in the application. The owner may by notice name
a contingent owner or a new owner while the insured is living.
If more than one person is named as owner, they are joint
owners. Any transaction under the policy except for telephone
transactions will require the authorization of all owners.
Unless provided otherwise, in the event of a joint owner's
death, ownership passes to the surviving joint owner. Unless a
contingent owner has been named, on the death of the last
surviving owner, ownership of the policy passes to the estate of
the last surviving owner, who will become the owner if the
owner(s) die. You may change the owner before the insured's
death by notice satisfactory to us. A change in owner may have
tax consequences. See "Tax Considerations," page 39.
Purchase of the Policy for Specialized Purposes
The policy provides a death benefit and an accumulation of
account value. It can be used for various individual and
business planning purposes. Purchasing the policy for such
purposes entails certain risks. For example, if the investment
performance of the subaccounts to which account value is
allocated is poorer than anticipated, or if sufficient premiums
are not paid or account value maintained, the policy may lapse
or may not accumulate sufficient account value to fund the
purpose for which the policy was purchased. Loans and partial
cash surrenders may significantly affect current and future
account value, cash surrender value, and death benefit proceeds.
Depending upon subaccount investment performance and the amount
of loans and partial cash surrenders, the policy may lapse.
Because the policy is designed to provide benefits on a long-
term basis, before purchasing a policy for a specialized
purpose, you should consider whether the long-term nature of the
policy and the impact of loans and partial cash surrenders is
consistent with the purpose for which it is being considered.
Using a policy for a specialized purpose may have tax
consequences. (See "Tax Considerations.")
Free Look Right to Cancel the Policy
You may cancel your policy for a refund during your "free-look"
period. This period expires 20 days after you receive your
policy, 45 days after your application is signed, or 10 days
after Union Central mails or delivers a cancellation notice,
whichever is latest. (A longer period may apply to policies
issued in certain states.) If you decide to cancel the policy,
you must return it by mail or delivery to the home office or to
the authorized Union Central agent who sold it. Immediately
after mailing or delivery, the policy will be deemed void from
the beginning. Within seven calendar days after Union Central
receives the returned policy, Union Central will refund the
greater of any premiums paid, less any partial cash surrenders,
or account value unless otherwise required by state law.
Premiums
Planned periodic premiums. When applying for a policy, you
select a plan for paying level premium payments at specified
intervals, e.g., quarterly, semi-annually or annually, for the
duration of the policy. If you elect, Union Central will also
arrange for payment of planned period premiums on a monthly
basis under a pre-authorized payment arrangement. You are not
required to pay premium payments in accordance with these plans;
rather, you can pay more or less than planned or skip a planned
periodic premium entirely. (See, however, "Premium Payments to
Prevent Lapse," page 14.) Currently, there is no minimum amount
for each premium. Union Central may establish a minimum amount
90 days after we send the owner a written notice of such
increase. Subject to the limits described below, you can change
the amount and frequency of planned periodic premiums whenever
you want by sending notice to the home office. However, Union
Central reserves the right to limit the amount of a premium
payment or the total premium payments paid.
Unless otherwise requested, you will be sent reminder notices
for planned periodic premiums. Reminder notices will not be
sent if you have arranged to pay planned periodic premiums by
pre-authorized payment arrangement.
Additional Unscheduled Premiums. Additional unscheduled premium
payments can be made at any time while the policy is in force.
Union Central has the right to limit the number and amount of
such premium payments.
Limitations on Premium Payments. Total premium payments paid in
a policy year may not exceed guideline premium payment
limitations for life insurance set forth in the Internal Revenue
Code. Union Central will promptly refund any portion of any
premium payment that is determined to be in excess of the
premium payment limit established by law to qualify a policy as
a contract for life insurance.
The payment of premiums may cause a policy to be a modified
endowment contract under the Internal Revenue Code. We have
established procedures for monitoring premium payments and
making efforts to notify you on a timely basis if your policy is
in jeopardy of becoming a modified endowment contract as a
result of premium payments. See "Tax Considerations," page 39.
Union Central reserves the right to reject any requested
increase in planned periodic premiums, or any unscheduled
premium. We also reserve the right to require satisfactory
evidence of insurability prior to accepting any premium which
increases the risk amount of the policy. See "Net Premium
Allocations," page 14.
No premium payment will be accepted after the insured's 100th
birthday (the "maturity date").
Premium payments must be made by check payable to The Union
Central Insurance Company or by any other method that Union
Central deems acceptable. The owner may specify that a specific
unscheduled premium payment is to be applied as a repayment of
policy debt, if any.
Premium payments after the initial premium payment must be made
to the home office.
Minimum Guaranteed Period. Union Central guarantees that a
policy will remain in force during the minimum guaranteed
period, regardless of the sufficiency of the cash surrender
value, if the sum of the premiums paid to date, less any partial
cash surrenders and policy debt, equals or exceeds the minimum
monthly premium (shown in the policy) multiplied by the number
of complete policy months since the policy date, including the
current policy month. The minimum guaranteed period is three
years following the policy date.
The minimum monthly premium is calculated for each policy based
on the age, sex and rate class of the insured, the requested
specified amount and any supplemental and/or rider benefits.
The minimum monthly premium may change due to changes made
during a minimum guaranteed period to the specified amount, the
death benefit option, ratings, and supplemental and/or rider
benefits. Union Central will notify you of any increase in the
minimum monthly premium.
An extended minimum guaranteed period may be available under a
Guaranteed Death Benefit Rider. See "Supplemental Benefits
and/or Riders," page 37.
Premium Payments Upon Increase in Specified Amount. Depending
on the account value at the time of an increase in the specified
amount and the amount of the increase requested, an additional
premium payment may be necessary or a change in the amount of
planned periodic premiums may be advisable. See "Changes in
Specified Amount," page 24. In the event that you increase the
specified amount, you should contact your Union Central agent to
assist you in determining if additional premium payments are
necessary or appropriate.
Premium Payments to Prevent Lapse. Failure to pay planned
periodic premiums will not necessarily cause a policy to lapse.
Conversely, paying all planned periodic premiums will not
necessarily guarantee that a policy will not lapse (except when
the minimum guaranteed period is in effect). Rather, whether a
policy lapses depends on whether its cash surrender value is
sufficient to cover the monthly deduction (see page 18) when
due.
If the cash surrender value on a monthly date is less than the
amount of the monthly deduction to be deducted on that date and
the minimum guaranteed period is not in effect, the policy will
be in default and a grace period will begin. This could happen
if investment experience has been sufficiently unfavorable that
it has resulted in a decrease in cash surrender value or the
cash surrender value has decreased because you have not paid
sufficient premium payments to offset the monthly deduction.
Grace Period. If your policy goes into default, you will be
allowed a 61-day grace period to pay a premium payment
sufficient to cover the monthly deductions due during the grace
period. Union Central will send notice of the amount required
to be paid during the grace period ("grace period premium
payment") to your last known address and the address of any
assignee of record. The grace period will begin when the notice
is sent. Your policy will remain in effect during the grace
period. If the insured should die during the grace period and
before the grace period premium payment is paid, the death
benefit proceeds will still be payable to the beneficiary,
although the amount paid will reflect a reduction for the
monthly deductions due on or before the date of the insured's
death (and for any policy debt). See "Amount of Death Benefit
Proceeds," page 23. If the grace period premium payment has not
been paid before the grace period ends, your policy will lapse.
It will have no value and no benefits will be payable. See
"Reinstatement," page 37.
A grace period also may begin if policy debt becomes excessive.
See "Loan Repayment; Effect if Not Repaid," page 25.
Net Premium Allocations
In the application, you specify the percentage of a net premium
to be allocated to each subdivision and to the guaranteed
account. This allocation must comply with the allocation rules
described below. Net premiums will generally be allocated to
the subdivisions and to the guaranteed account on the valuation
date that Union Central receives them in accordance with the
allocations specified in the application or subsequent notice.
Union Central will allocate all net premiums received before the
end of the "free look" period (including the initial net
premium) to the subdivision invested in the Scudder Money Market
Portfolio. After the end of the "free look" period, the account
value will be allocated to the subdivisions and to the
guaranteed account based on the premium payment allocation
percentages in the application. See "Determining the Account
Value," page 22. For this purpose, the end of the "free look"
period is deemed to be 25 days after the date the policy is
issued and mailed to your agent for delivery.
The net premium allocation percentages specified in the
application will apply to subsequent premium payments until you
change the percentages. You can change the allocation
percentages at any time, subject to the rules below, by
providing notice to the home office, in a form acceptable to
Union Central. The change will apply to all premium payments
received with or after receipt of your notice.
Allocation Rules. The minimum allocation percentage you may
specify for a subdivision or the guaranteed account is 5%, and
your allocation percentages must be whole numbers. The sum of
your allocations must equal 100%. Union Central reserves the
right to limit the number of subdivisions to which account value
may be allocated.
Crediting Net Premiums
The initial net premium will be credited to the policy on the
policy date, or, if later, the date we receive the initial
premium payment. For backdated policies, the initial net
premium will be credited on the issue date. Planned periodic
premiums and unscheduled premiums that are not underwritten will
be credited to the policy and the net premiums will be invested
as requested on the valuation date they are received by the home
office. However, any premium payment that is underwritten will
be allocated to the subdivision corresponding to the Scudder
Money Market Portfolio until underwriting has been completed and
the premium payment has been accepted. When accepted, the
account value allocated to the subdivision 2
policy and allocated in accordance with your instructions. If
an additional premium payment is rejected, Union Central will
return the premium payment promptly, without any adjustment for
investment experience.
Transfer Privilege
After the free-look period and prior to the maturity date, you
may transfer all or part of your account value from subdivisions
investing in one portfolio to other subdivision(s) or to the
guaranteed account, or transfer a part of an amount in the
guaranteed account to the subdivision(s), subject to the
following restrictions. The minimum transfer amount is the
lesser of $100 or the entire amount in that subdivision or the
guaranteed account. A transfer request that would reduce the
amount in a subdivision or the guaranteed account below $25 will
be treated as a transfer request for the entire amount in that
subdivision or the guaranteed account. With the exception of
the Conversion Right described below, we reserve the right to
limit the number or frequency of transfers permitted in the
future.
We will make the transfer as of the end of the valuation period
during which we receive notice requesting such transfer.
Currently, there is no limit on the number of transfers that can
be made between subdivisions or to the guaranteed account.
However, transfers from the guaranteed account during any policy
year are limited to an amount equal to 20% of the account value
in the guaranteed account on the annual date at the beginning of
such policy year. (See "Transfers from Guaranteed Account,"
page 17 for restrictions). Currently, we assess a transfer
charge equal to $10 for each transfer during a policy year in
excess of the first twelve transfers. (We reserve the right to
decrease or eliminate the number of free transfers; in addition,
the transfer charge may be increased, but is guaranteed not to
exceed $15 per transfer.) The transfer charge will be deducted
from the subdivisions or the guaranteed account from which the
requested transfer is being made, on a pro-rata basis.
Telephone Transfers. Owners are eligible to effect transfers
pursuant to telephone instructions unless they elect out of the
option by writing us. We reserve the right to suspend telephone
transfer privileges at any time, for any reason, if we deem such
suspension to be in the best interests of owners.
We will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine, and if we
follow those procedures we will not be liable for any losses due
to unauthorized or fraudulent instructions. We may be liable
for such losses if we do not follow those reasonable procedures.
The procedures we will follow for telephone transfers include
requiring some form of personal identification prior to acting
on instructions received by telephone, providing written
confirmation of the transaction, and making a tape recording of
the instructions given by telephone.
Conversion Right. During the first twenty-four policy months
following the issue date, and within sixty days of the later of
notification of a change in the investment policy of the
separate account or the effective date of such change, the owner
may exercise a one-time Conversion Right by requesting that all
or a portion of the variable account be transferred to the
guaranteed account. Exercise of the Conversion Right is not
subject to the transfer charge. Following the exercise of the
Conversion Right, net premiums may not be allocated to the
subdivisions of the variable account, and transfers of account
value to the subdivisions will not be permitted. The other
terms and conditions of the policy will continue to apply.
Dollar Cost Averaging Plan
The Dollar Cost Averaging Plan, if elected, enables you to
transfer systematically and automatically, on a monthly,
quarterly, semi-annual, or annual basis, specified dollar
amounts from a subdivision you specify to other subdivisions or
to the guaranteed account. (Dollar Cost Averaging Plan
transfers may not be made from the guaranteed account.) By
allocating on a regularly scheduled basis, as opposed to
allocating the total amount at one particular time, you may be
less susceptible to the impact of market fluctuations. However,
we make no guarantee that the Dollar Cost Averaging Plan will
result in a profit.
You specify the amount to be transferred automatically; you can
specify either a fixed dollar amount, or a percentage of the
account value in the subdivision from which transfers will be
made. At the time that you elect the Dollar Cost Averaging
Plan, the account value in the subdivision from which transfers
will be made must be at least $2,000. The required amounts may
be allocated to the subdivision through initial or subsequent
net premiums or by transferring amounts into the subdivision
from the other subdivisions or from the guaranteed account
(which may be subject to certain restrictions).
You may elect this plan at the time of application by completing
the authorization on the application or at any time after the
policy is issued by properly completing the election form and
returning it to us. Dollar Cost Averaging Plan transfers may
not commence until the end of the free-look period.
Once elected, transfers from the subdivision will be processed
until the number of designated transfers have been completed, or
the value of the subdivision is completely depleted, or you send
us notice instructing us to cancel the transfers.
Currently, transfers made under the Dollar Cost Averaging Plan
will not be subject to any transfer charge and will not count
against the number of free transfers permitted in a policy year.
We reserve the right to impose a $15 transfer charge for each
transfer effected under a Dollar Cost Averaging Plan. We also
reserve the right to alter the terms or suspend or eliminate the
availability of the Dollar Cost Averaging Plan at any time.
Portfolio Rebalancing Plan
You may elect to have the accumulated balance of each
subdivision periodically redistributed (or "rebalanced") to
equal the allocation percentages you have specified in the
election form. This rebalancing may be done on a quarterly,
semi-annual, or annual basis.
You may elect the Portfolio Rebalancing Plan at the time of
application by completing the authorization on the application
or at any time after the policy is issued by properly completing
the election form and returning it to us. Portfolio Rebalancing
Plan transfers may not commence until the end of the free-look
period. Transfers pursuant to the Portfolio Rebalancing Plan
will continue until you send us notice terminating the plan, or
the policy terminates. THE PORTFOLIO REBALANCING PLAN CANNOT BE
ELECTED IF EITHER A DOLLAR COST AVERAGING PLAN OR AN EARNINGS
SWEEP PLAN IS IN EFFECT.
Currently, transfers made under the Portfolio Rebalancing Plan
will not be subject to any transfer charge and will not count
against the number of free transfers permitted in a policy year.
We reserve the right to impose a $15 transfer charge for each
transfer effected under the plan. We also reserve the right to
alter the terms or suspend or eliminate the availability of the
Portfolio Rebalancing Plan at any time.
Earnings Sweep
You may elect to have the accumulated earnings of one or more
specified subdivisions or the interest credited to the
guaranteed account periodically transferred (or "swept") into
specified subdivisions or the guaranteed account. The sweep
may be done on a quarterly, semi-annual, or annual basis.
You may elect the Earnings Sweep Plan at the time of application
by completing the authorization on the application or at any
time after the policy is issued by properly completing the
election form and returning it to us. Earnings Sweep Plan
transfers may not commence until the end of the free-look
period. Transfers pursuant to the Earnings Sweep Plan will
continue until you send us notice terminating the plan, or the
policy terminates.
Currently, transfers made under the Earnings Sweep Plan will not
be subject to any transfer charge and will not count against the
number of free transfers permitted in a policy year. We reserve
the right to impose a $15 transfer charge for each transfer
effected under the plan. We also reserve the right to alter the
terms or suspend or eliminate the availability of the Earnings
Sweep Plan at any time.
GUARANTEED ACCOUNT
- ----------------------------------------------------------------
BECAUSE OF EXEMPTIVE AND EXCLUSIONARY PROVISIONS, INTERESTS IN
THE GUARANTEED ACCOUNT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 NOR HAS THE GUARANTEED ACCOUNT BEEN
REGISTERED AS AN INVESTMENT COMPANY UNDER THE INVESTMENT COMPANY
ACT OF 1940. ACCORDINGLY, NEITHER THE GUARANTEED ACCOUNT NOR
ANY INTERESTS THEREIN ARE SUBJECT TO THE PROVISIONS OF THESE
ACTS AND, AS A RESULT, THE STAFF OF THE SECURITIES AND EXCHANGE
COMMISSION HAS NOT REVIEWED THE DISCLOSURE IN THIS PROSPECTUS
RELATING TO THE GUARANTEED ACCOUNT. THE DISCLOSURE REGARDING
THE GUARANTEED ACCOUNT MAY, HOWEVER, BE SUBJECT TO CERTAIN
GENERALLY APPLICABLE PROVISIONS OF THE FEDERAL SECURITIES LAWS
RELATING TO THE ACCURACY AND COMPLETENESS OF STATEMENTS MADE IN
PROSPECTUSES.
You may allocate some or all of your net premiums and transfer
some or all of the variable account to the guaranteed account,
which is part of our general account and pays interest at
declared rates (subject to a minimum interest rate we guarantee
to be at least 4%). The principal, after deductions, is also
guaranteed. Our general account assets support our insurance
and annuity obligations.
The portion of the account value allocated to the guaranteed
account will be credited with interest, as described below.
Since the guaranteed account is part of our general account, we
assume the risk of investment gain or loss on this amount. All
assets in the general account are subject to our general
liabilities from business operations.
Minimum Guaranteed and Current Interest Rates
The guaranteed account is guaranteed to accumulate at a minimum
effective annual interest rate of 4%. We may credit the
guaranteed account with current rates in excess of the minimum
guarantee, but we are not obligated to do so. These current
interest rates are influenced by, but do not necessarily
correspond to, prevailing general market interest rates. Since
we, in our sole discretion, anticipate changing the current
interest rate from time to time, different allocations to and
from the guaranteed account will be credited with different
current interest rates, based upon the date amounts are
allocated into the guaranteed account. We may change the
interest rate credited to new deposits at any time. Any
interest credited on the amounts in the guaranteed account in
excess of the minimum guaranteed rate of 4% per year will be
determined in our sole discretion. You assume the risk that
interest credited may not exceed the guaranteed rate.
Amounts deducted from the guaranteed account for the monthly
deduction, partial cash surrenders, transfers to the
subdivisions, or charges are currently, for the purpose of
crediting interest, accounted for on a last-in, first-out
("LIFO") method. We reserve the right to change the method of
crediting from time to time, provided that such changes do not
have the effect of reducing the guaranteed rate of interest
below 4% per annum.
Calculation of Guaranteed Account Value
The guaranteed account at any time is equal to net premiums
allocated or account value transferred to it, plus interest
credited to it, minus amounts deducted, transferred, or
surrendered from it.
Transfers from the Guaranteed Account
The amount transferred from the guaranteed account may not
exceed 20% of the guaranteed account on the annual date
immediately preceding the date of the transfer, unless the
balance after the transfer is less than $25, in which case we
will transfer the entire amount.
Payment Deferral from the Guaranteed Account
We reserve the right to defer payment of any partial cash
surrender, full surrender, or transfer from the guaranteed
account for up to six months from the date of receipt of the
notice for the partial or full surrender or transfer. However,
we will not defer payment of any amounts needed to pay premiums
on other policies in force with us.
CHARGES AND DEDUCTIONS
- ---------------------------------------------------------------
Union Central deducts the charges described below to cover costs
and expenses, services provided, and risks assumed under the
policies. The amount of a charge may not necessarily correspond
to the costs associated with providing the services or benefits
indicated by the designation of the charge or associated with
the particular policy. For example, the sales charge and sales
surrender charge may not fully cover all of the sales and
distribution expenses actually incurred by Union Central, and
proceeds from other charges, including the mortality and expense
risk charge, may be used in part to cover such expenses.
Premium Expense Charge
A sales charge is deducted from each premium payment. This
charge is equal to 2% of premiums paid. We reserve the right to
increase the sales charge up to an amount equal to 4% of
premiums paid during the first ten policy years; the charge is
guaranteed to be no more than 2% thereafter. The sales charge is
intended to partially reimburse Union Central for some of the
expenses incurred in the distribution of the policies. See
"Daily Mortality and Expense Risk Charge," page 19, and "Cost of
Insurance Charge," shown below.
A 2.00% charge for state and local premium taxes and expenses is
also deducted from each premium payment. We reserve the right
to increase the premium tax charge to 2.50% per year. The state
and local premium tax charge reimburses Union Central for
premium taxes associated with the policies and related
administrative costs. The stated premium tax rates in the
jurisdictions in which Union Central does business range from
0.75% to 4.00%, and the jurisdiction in which a policy is issued
may impose no premium tax, or a premium tax higher or lower than
the charge deducted under the policies.
If you make premium payments, either planned or unscheduled,
equal to or greater than one million dollars during the first
policy year, your policy may qualify for reduced premium expense
charges. If during the first policy year, you actually make
less than one million dollars in premium payments, or you make
withdrawals or surrenders from the policy to the extent that
less than one million dollars of premium remains in the policy
on its first policy anniversary, we reserve the right to
increase the first year's premium expense charges to the
standard premium expense charge on all premium received during
the first policy year, as though those standard charges were
made at the time the premium payments were made. This
chargeback will not occur if the reduction below one million
dollars at the first policy anniversary is due to unfavorable
investment performance. Before you deposit premium payments
into your policy in order to qualify for the reduced premium
expense charges, please read "Tax Considerations", page 39,
concerning the treatment of heavily-funded life insurance
policies.
Monthly Deduction
On each monthly date, Union Central will deduct from the account
value the monthly deductions due, commencing as of the policy
date. Your policy date is the date used to determine your
monthly date. The monthly deduction consists of (1) cost of
insurance charges ("cost of insurance charge"), (2) the monthly
administrative charge (the "administrative charge"), and (3) any
charges for supplemental and/or rider benefits ("supplemental
and/or rider benefit charges"), as described below. The monthly
deduction is deducted from the subdivisions and from the
guaranteed account pro rata on the basis of the portion of
account value in each.
Cost of Insurance Charge. This charge compensates Union Central
for the expense of providing insurance coverage. The charge
depends on a number of variables and therefore will vary from
policy to policy and from monthly date to monthly date. For any
policy, the cost of insurance on a monthly date is calculated by
multiplying the current cost of insurance rate for the insured
by the risk amount under the policy for that monthly date.
The risk amount for a monthly date is the difference between the
death benefit (see page 23) for a policy (as adjusted to take
into account assumed monthly earnings at an annual rate of 4%)
and the account value, as calculated on that monthly date less
any monthly deduction due on that date (except the cost of
insurance).
The current cost of insurance rate for a policy is based on the
age at issue, sex and rate class of the insured and on the
policy year, and therefore varies from time to time. Different
current cost of insurance rates apply to policies with a
specified amount under $250,000 than to policies with a
specified amount of $250,000 or more and, in general, policies
with a specified amount of $250,000 or more may have lower
current cost of insurance rates. Union Central currently places
insureds in the following rate classes, based on underwriting:
Standard Tobacco (ages 0-75), Standard Nontobacco (ages 20-75),
or Preferred (ages 20-70). The Preferred rate class is only
available under policies with specified amounts of $100,000 or
more. We also may place an insured in a substandard rate class,
which involves a higher mortality risk than the standard tobacco
or standard nontobacco classes.
Union Central will determine a cost of insurance rate for
increases in coverage based on the age of the insured at the
time of the increase. The following rules will apply for
purposes of determining the risk amount for each rate.
Union Central places the insured in a rate class when the policy
is issued, based on Union Central's underwriting of the
application. This original rate class applies to the initial
specified amount. When an increase in specified amount is
requested, Union Central conducts underwriting before approving
the increase (except as noted below) to determine whether a
different rate class will apply to the increase. If the rate
class for the increase has lower cost of insurance rates than
the original rate class, then the rate class for the increase
will also be applied to the initial specified amount. If the
rate class for the increase has higher cost of insurance rates
than the original rate class, the rate class for the increase
will apply only to the increase in specified amount, and the
original rate class will continue to apply to the initial
specified amount.
Union Central does not conduct underwriting for an increase in
specified amount if the increase is requested by exercising an
option to increase the specified amount automatically, without
underwriting. See "Supplemental and/or Rider Benefits," page
37. In such case, the insured's rate class for an increase will
be the class in effect when the guaranteed option rider was
issued.
For purposes of determining the risk amount associated with a
specified amount, we will attribute the account value solely to
the initial specified amount unless the account value exceeds
the initial specified amount. If the account value exceeds the
initial specified amount, the excess will be considered
attributable to the increases in specified amount in the order
of the increases. If there is a decrease in specified amount
after an increase, a decrease is applied first to decrease any
prior increases in specified amount, starting with the most
recent increase and then each prior increase.
Union Central guarantees that the cost of insurance rates used
to calculate the monthly cost of insurance charge will not
exceed the maximum cost of insurance rates set forth in the
policies. The guaranteed rates for standard classes are based
on the 1980 Commissioners' Standard Ordinary Mortality Tables,
Male or Female, Smoker or Nonsmoker Mortality Rates ("1980 CSO
Tables"). The guaranteed rates for substandard classes are
based on multiples of or additives to the 1980 CSO Tables.
Union Central's current cost of insurance rates may be less than
the guaranteed rates that are set forth in the policy. Current
cost of insurance rates will be determined based on Union
Central's expectations as to future mortality, investment
earnings, expenses, taxes, and persistency experience. These
rates may change from time to time.
Cost of insurance rates (whether guaranteed or current) for an
insured in a standard nontobacco class are equal to or lower
than guaranteed rates for an insured of the same age and sex in
a standard tobacco class. Cost of insurance rates (whether
guaranteed or current) for an insured in a standard nontobacco
or tobacco class are generally lower than guaranteed rates for
an insured of the same age and sex and tobacco status in a
substandard class.
Legal Considerations Relating to Sex-Distinct Premium
Payments and Benefits. Mortality tables for the policies
generally distinguish between males and females. Thus,
premium payments and benefits under policies covering
males and females of the same age will generally differ.
Union Central does, however, also offer policies based on
unisex mortality tables if required by state law. Employers
and employee organizations considering purchase of a policy
should consult with their legal advisors to determine whether
purchase of a policy based on sex-distinct actuarial tables
is consistent with Title VII of the Civil Rights Act of 1964
or other applicable law. Upon request, Union Central may
offer policies with unisex mortality tables to such
prospective purchasers.
Monthly Administrative Charge. Union Central deducts a monthly
administrative charge from the account value on each monthly
date. The administrative charge is currently equal to $5 per
month. We reserve the right to increase the administrative
charge during the first policy year up to $25 per month, and
after the first policy year up to $10 per month. The
administrative charge is guaranteed not to exceed $25 per month
during the first policy year and $10 per month thereafter.
The monthly administrative charge reimburses Union Central for
expenses incurred in the administration of the policies and the
separate account. Such expenses include but are not limited to:
confirmations, annual reports and account statements,
maintenance of policy records, maintenance of separate account
records, administrative personnel costs, mailing costs, data
processing costs, legal fees, accounting fees, filing fees, the
costs of other services necessary for owner servicing and
accounting, valuation, regulatory and updating requirements.
Should the guaranteed charges prove to be insufficient, we will
not increase the charges above such guaranteed levels.
Supplemental and/or Rider Benefit Charges. See "Supplemental
and/or Rider Benefits," page 37.
Daily Mortality and Expense Risk Charge
Union Central deducts a daily charge from assets in the separate
account attributable to the policies. This charge does not
apply to guaranteed account assets attributable to the policies.
During the first ten policy years, the charge is equal on an
annual basis to 0.75% of assets. Thereafter, the charge is
equal on an annual basis to 0.25% of assets. These rates are
guaranteed not to increase for the duration of a policy. Union
Central may realize a profit from this charge. Although Union
Central does not believe that it is possible to allocate this
charge to different risks, Union Central feels that a reasonable
estimate is that during the first ten policy years, 0.30% of
this charge is allocable to mortality risk, and 0.45% to expense
risk; and thereafter, 0.10% of this charge is allocable to
mortality risk, and 0.15% to expense risk.
The mortality risk Union Central assumes is that the insureds on
the policies may die sooner than anticipated and therefore Union
Central will pay an aggregate amount of death benefits greater
than anticipated. The expense risk Union Central assumes is
that expenses incurred in issuing and administering the policies
and the separate account will exceed the amounts realized from
the administrative charges assessed against the policies.
Transfer Charge
We currently assess a transfer charge of $10 for each transfer
made during a policy year after the first twelve transfers. We
reserve the right to decrease or eliminate the number of free
transfers; in addition the transfer charge may be increased, but
is guaranteed not to exceed $15 per transfer. We will deduct
the transfer charge from the remaining account value in the
subdivisions or the guaranteed account from which the transfer
is being made on a pro rata basis. We do not expect a profit
from this charge.
Surrender Charge
If a policy is completely surrendered or lapses, Union Central
may deduct a surrender charge from the account value. The
surrender charge includes a sales surrender charge and an
administrative surrender charge. The maximum surrender charge
is set forth in your policy. There is no additional sales
surrender charge applicable to increases in specified amount.
However, if the policy is completely surrendered following an
increase in specified amount, an additional administrative
surrender charge may apply, as described below.
Any surrender charge deducted upon lapse is credited back to the
policy's account value upon reinstatement. The surrender charge
on the date of reinstatement will be the same as it was on the
date of lapse. For purposes of determining the surrender charge
on any date after reinstatement, the period the policy was
lapsed will not count.
Sales Surrender Charge. A sales surrender charge is deducted if
the policy is surrendered or lapses during the first fifteen
policy years following the policy date. The maximum sales
surrender charge is 26% of the premiums paid up to a sales
surrender premium shown in the policy. The maximum amount shown
in the policy is based on the age at issue, sex, specified
amount, death benefit option, and rate class applicable to the
insured. Increases in the policy's specified amount will not
affect the amount of the sales surrender premium, or the amount
of the maximum sales surrender charge. Decreases in the
policy's specified amount may reduce the sales surrender premium
if the decrease is effective prior to the payment of cumulative
premiums in an amount equal to the initial sales surrender
premium shown in the policy. We will notify you of any
reduction in the sales surrender premium, and the amount of the
maximum sales surrender charge, at the time of any decrease in
specified amount that causes such reductions.
The greatest sales surrender charge applicable to a portion of
account value is paid if you lapse or surrender in policy years
one through five. The maximum sales surrender charge in these
years equals 26% of actual premiums paid up to the sales
surrender premium shown in the policy. After the fifth policy
year, the maximum sales surrender charge percentage declines on
a monthly basis in level increments until it reaches 0% at the
end of the fifteenth policy year, as shown in the following
table.
<TABLE>
<CAPTION>
END OF SALES SURRENDER
POLICY YEAR CHARGE PERCENTAGE
----------- -----------------
<S> <C>
1-5 26%
6 23.4%
7 20.8%
8 18.2%
9 15.6%
10 13.0%
11 10.4%
12 7.8%
13 5.2%
14 2.6%
15 0%
</TABLE>
The purpose of the sales surrender charge is to reimburse Union
Central for some of the expenses incurred in the distribution of
the policies. The sales surrender charge may be insufficient to
recover distribution expenses related to the sale of the
policies. See "Daily Mortality and Expense Risk Charge," page
19, and "Cost of Insurance Charge," page 18.
Administrative Surrender Charge. An administrative surrender
charge is deducted if the policy is surrendered or lapses during
the first fifteen policy years following the policy date or any
increase in specified amount (see "Surrender Charge" above).
The administrative surrender charge is equal to an amount per
$1000 of specified amount, and depends upon the age of the
insured at the time that the specified amount to which it
applies was issued, and the policy year in which the charge is
imposed. For issue ages 30 to 39, the amount per $1000 is $3.50
during policy years 1 through 5; for issue ages 40 to 49, the
amount per $1000 is $4.50 during policy years 1 through 5; for
issue ages 50 to 59, the amount per $1000 is $5.50 during policy
years 1 through 5; and for issue ages 60 to 69, the amount per
$1000 is $6.50 during policy years 1 through 5. The charge
declines monthly after the end of the fifth policy year to zero
at the end of policy year fifteen. Applicable administrative
surrender charge rates, which increase with issue age, are set
forth in full in the policy.
If the specified amount is increased, the increase is subject to
a new administrative surrender charge. This charge is imposed
if the policy is surrendered or lapses within fifteen policy
years from the effective date of the increase, and is in
addition to any sales surrender charge or administrative
surrender charge that may be applicable if the policy is
surrendered or lapses within fifteen policy years after the
policy date.
The administrative surrender charge partially covers the
administrative costs of processing surrenders, lapses, and
increases and reductions in specified amount, as well as legal,
actuarial, systems, mailing, and other overhead costs connected
with Union Central's variable life insurance operations.
Fund Expenses
The value of the net assets of each subaccount reflects the
management fees and other expenses incurred by the corresponding
portfolio in which the subaccount invests. The investment
advisers earn management fees for the services they provide in
managing the portfolios. See the prospectuses for the
portfolios. The fee table appears on page 7.
Cost of Additional Benefits Provided by Riders
The cost of additional benefits provided by riders is part of
the monthly deduction and is charged to the account value on the
monthly date.
Income Tax Charge
Union Central does not currently assess any charge for income
taxes incurred as a result of the operations of the subaccounts
of the separate account. We reserve the right, however, to
assess a charge for such taxes against the subaccounts if we
determine that such taxes will be incurred.
Special Arrangements
Where permitted by state regulation, Union Central may reduce or
waive the sales charge component of the premium expense charge;
the monthly administrative charge; and/or the surrender charge,
under policies purchased by (i) directors, officers, current or
retired employees ("employees"), or agents of Union Central, or
affiliates thereof, or their spouses or dependents; (ii)
directors, officers, employees, or agents of broker-dealers that
have entered into selling agreements with Carillon Investments,
Inc. relating to the policies, or their spouses or dependents;
or (iii) directors, officers, employees, or affiliates of the
portfolios or investment advisers or sub-advisers or
distributors thereof, or their spouses or dependents. In
addition, in the future, Union Central may reduce or waive the
sales charge component of the premium expense charge, and/or the
surrender charge if a policy is purchased by the owner of
another policy issued by Union Central, and/or through transfer
or exchange from a life insurance policy issued by Union
Central, each in accordance with rules established by Union
Central and applied on a uniform basis. Reductions or waivers
of the sales charge component of the premium expense charge, the
monthly administrative charge, and the surrender charge reflect
the reduced sales and administrative effort associated with
policies sold to the owners specified. The home office can
provide advice regarding the availability of reduced or waived
charges to such owners.
The Policies may be issued to group or sponsored arrangements,
as well as on an individual basis. A "group arrangement"
includes a program under which a trustee, employer or similar
entity purchases policies covering a group of individuals. An
example of such an arrangement is a non-qualified deferred
compensation plan. A "sponsored arrangement" includes a program
under which an employer permits group solicitation of its
employees or an association permits group solicitation of its
members for the purchase of policies on an individual basis.
The policies may not be available in connection with group or
sponsored arrangements in all states.
For policies issued in connection with group or sponsored
arrangements, Union Central may reduce or waive one or more of
the following charges: the sales charge component of the premium
expense charge; the surrender charge; the monthly charge for the
cost of insurance; rider charges; monthly administrative
charges; daily mortality and expense risk charges; and/or the
transfer charge. In addition, the interest rate credited on
amounts taken from the subdivisions as a result of a loan may be
increased for these policies. Union Central will waive or
reduce these charges as described below and according to its
rules in effect when the policy application is approved.
To qualify for a waiver or reduction, a group or sponsored
arrangement must satisfy certain criteria, for example, size of
the group, or number of years in existence. Generally, the
sales contacts and effort, administrative costs, and insurance
cost and mortality expense risk per policy may vary based on
such factors as the size of the group or sponsored arrangement,
its stability, the purposes for which the policies are
purchased, and certain characteristics of its members (including
underwriting-related factors that are determined by Union
Central to result in lower anticipated expenses of providing
insurance coverage, and/or lower mortality expense risk, under
policies sold to members of the group or through the sponsored
arrangement). The amount of any reduction and the criteria for
qualification will reflect the reduced sales and administrative
effort resulting from sales to qualifying group or sponsored
arrangements, and/or the reduced anticipated cost of insurance
or mortality expense risk under such policies. Union Central
may modify from time to time the amount or availability of any
charge reduction or waiver, or the criteria for qualification.
Charge reductions or waivers will not be unfairly discriminatory
against any person, including the affected owners and all other
owners of policies funded by the separate account.
HOW YOUR ACCOUNT VALUES VARY
- ---------------------------------------------------------------
There is no minimum guaranteed account value or cash surrender
value. These values will vary with the investment experience of
the subaccounts and/or the daily crediting of interest in the
guaranteed account, and will depend on the allocation of account
value. If the cash surrender value on a monthly date is less
than the amount of the monthly deduction to be deducted on that
date (see page 18) and the minimum guaranteed period is not then
in effect, the policy will be in default and a grace period will
begin. See "Minimum Guaranteed Period," page 13, and "Grace
Period," page 14.
Determining the Account Value
On the policy date, the account value is equal to the initial
net premium credited, less the monthly deduction made as of the
policy date. On each valuation date thereafter, the account
value is the sum of the variable account, the guaranteed
account, and the loan account. The account value will vary to
reflect the performance of the subdivisions to which amounts
have been allocated, interest credited on amounts allocated to
the guaranteed account, interest credited on amounts in the loan
account, charges, transfers, partial cash surrenders, loans and
loan repayments.
Subaccount Values. When you allocate an amount to a
subdivision, either by net premium allocation or transfer, your
policy is credited with accumulation units in the subaccount
corresponding to that subdivision. The number of accumulation
units is determined by dividing the amount allocated to the
subdivision by the subaccount's accumulation unit value for the
valuation date when the allocation is effected.
The number of accumulation units credited to your policy will
increase when net premiums are allocated to the subdivision,
amounts are transferred to the subdivision, and loan repayments
are credited to the subdivision. The number of accumulation
units credited to a policy will decrease when the allocated
portion of the monthly deduction is taken from the subdivision,
a loan is made, an amount is transferred from the subdivision,
or a partial surrender is taken from the subdivision.
Determination of Unit Value. The unit value for each subaccount
other than AIM V.I. Capital Appreciation Portfolio and Carillon
S&P MidCap 400 Index Portfolio, was arbitrarily set at $10 when
the subaccount began operations. The initial unit values for
the AIM V.I. Capital Appreciation Portfolio and the Carillon S&P
MidCap 400 Index Portfolio will be set based on closing values
of the American Century V.P. Capital Appreciation Portfolio and
the Carillon Capital Portfolio, respectively, on the date on
which the AIM V.I. Capital Appreciation Portfolio and the
Carillon S&P 400 MidCap 400 Index Portfolio replace the other
two portfolios, which date is expected to be on or about October
24, 1999. Thereafter, the unit value at the end of every
valuation date is the unit value at the end of the previous
valuation date times the net investment factor, as described
below. The variable account for a policy is determined on any
day by multiplying the number of units attributable to each
subaccount corresponding to subdivisions in which account value
is invested by the unit value for that subaccount on that day,
and aggregating the resulting subaccount values.
Net Investment Factor. The net investment factor is an index
applied to measure the investment performance of a subaccount
from one valuation period to the next. Each subaccount has a
net investment factor for each valuation period which may be
greater or less than one. Therefore, the value of a unit may
increase or decrease. The net investment factor for any
subaccount for any valuation period is determined by dividing
(1) by (2) and subtracting (3) from the result, where:
(1) is the net result of:
a. the net asset value per share of the portfolio held in
the subaccount, determined at the end of the current valuation
period; plus
b. the per share amount of any dividend or capital gain
distributions made by the portfolio to the subaccount, if the
"ex-dividend" date occurs during the current valuation period;
plus or minus
c. a per share charge or credit for any taxes incurred by
or reserved for in the subaccount, which is determined by us to
have resulted from the operations of the subaccount.
(2) is the net result of:
a. the net asset value per share of the portfolio held in
the subaccount, determined at the end of the last prior
valuation period (adjusted for an "ex-dividend"); plus or minus
b. the per share charge or credit for any taxes reserved
for the immediately preceding valuation period.
(3) is a daily factor representing the mortality and expense
risk charge deducted from the subaccount for the policy adjusted
for the number of days in the valuation period.
Guaranteed Account. On any valuation date, the guaranteed
account of a policy is the total of all net premiums allocated
to the guaranteed account, plus any amounts transferred to the
guaranteed account, plus interest credited on such net premiums
and amounts, less the amount of any transfers, including
transfer charges, taken from the guaranteed account, less the
amount of any partial cash surrenders taken from the guaranteed
account, less any amounts transferred from the guaranteed
account in connection with loans, and less the pro-rata portion
of the monthly deduction deducted from the guaranteed account.
Loan Account. On any valuation date, if there have been any
loans, the loan account is equal to amounts transferred to the
loan account from the subaccounts and from the guaranteed
account as collateral for loans and for due and unpaid loan
interest, amounts transferred from the loan account to the
subaccounts and the guaranteed account as policy debt is repaid,
and interest credited on the loan account.
Cash Value
The cash value on a valuation date is the account value less the
surrender charge that would be applicable on that valuation
date.
Cash Surrender Value
The cash surrender value on a valuation date is the cash value
reduced by any policy debt. Cash surrender value is used to
determine whether a partial cash surrender may be taken, and
whether policy debt is excessive (see page 25). It is also the
amount that is available upon full surrender of the policy (see
page 26).
DEATH BENEFIT AND CHANGES IN SPECIFIED AMOUNT
- ---------------------------------------------------------------
As long as the policy remains in force, Union Central will pay
the death benefit proceeds upon receipt at the home office of
proof of the insured's death that Union Central deems
satisfactory. Union Central may require return of the policy.
The death benefit proceeds will be paid in a lump sum generally
within seven calendar days of receipt of satisfactory proof (see
"When Proceeds Are Paid," page 36 or, if elected, under a
payment option (see "Payment Options," page 26). The death
benefit will be paid to the beneficiary. See "Selecting and
Changing the Beneficiary," page 24.
Amount of Death Benefit Proceeds
The death benefit proceeds are equal to the sum of the death
benefit under the death benefit option selected calculated on
the date of the insured's death, plus any supplemental and/or
rider benefits, minus any policy debt on that date. If the date
of death occurred during a grace period, the death benefit
proceeds are the death benefit immediately prior to the start of
the grace period, minus policy debt and minus any past due
monthly deductions. Under certain circumstances, the amount of
the death benefit may be further adjusted. See "Limits on
Rights to Contest the Policy" and "Misstatement of Age or Sex,"
page 36.
If part or all of the death benefit is paid in one sum, Union
Central will pay interest on this sum as required by applicable
state law from the date of receipt of due proof of the insured's
death to the date of payment.
Death Benefit Options
You may choose one of two death benefit options, which will be
used to determine the death benefit. Under Option A, the death
benefit is the greater of the specified amount or the Applicable
Percentage of account value on the date of the insured's death.
Under Option B, the death benefit is the greater of the
specified amount plus the account value on the date of death, or
the Applicable Percentage of the account value on the date of
the insured's death.
If investment performance is favorable, the amount of the death
benefit may increase. However, under Option A, the death
benefit ordinarily will not change for several years to reflect
any favorable investment performance and may not change at all.
Under Option B, the death benefit will vary directly with
account value, which reflects the investment performance of the
subaccounts as well as interest credited to the guaranteed
account. For an illustration of the impact that investment
performance may have on the death benefit, see the illustrations
beginning on page 27.
The "Applicable Percentage" is 250% when the insured has
attained age 40 or less, and decreases each year thereafter to
100% when the insured has attained age 95. A table showing the
Applicable Percentages for Attained Ages 0 to 95 is included in
Appendix A.
Initial Specified Amount and Death Benefit Option
The initial specified amount is set at the time the policy is
issued. You may change the specified amount from time to time,
as discussed below. You select the death benefit option when
you apply for the policy. You also may change the death benefit
option, as discussed below.
Changes in Death Benefit Option
You may change the death benefit option on your policy, by
notice to us, subject to the following rules. After any change,
the specified amount must be at least $50,000. The effective
date of the change will be the monthly date next following the
day that Union Central receives and accepts notice of the
request for change. Union Central may require satisfactory
evidence of insurability. A change in the death benefit option
may have adverse tax consequences. See "Tax Considerations,"
page 39.
When a change from Option A to Option B is made, the specified
amount after the change is effected will be equal to the
specified amount before the change less the account value on the
effective date of the change. When a change from Option B to
Option A is made, unless requested by notice to us, the
specified amount after the change will be equal to the specified
amount before the change is effected and the death benefit will
be reduced by the account value on the effective date of the
change.
Changes in Specified Amount
You may request a change in the specified amount, by notice to
us, subject to the following rules. If a change in the
specified amount would result in total premiums paid exceeding
the premium limitations prescribed under current tax law to
qualify your policy as a life insurance contract, Union Central
will refund promptly to the owner the amount of such excess
above the premium limitations.
The minimum amount of any decrease in specified amount is
$5,000, and any decrease in specified amount will become
effective on the monthly date next following the date that
notice requesting the decrease is received and approved by us.
Union Central reserves the right to decline a requested decrease
in the specified amount if compliance with the guideline premium
limitations under current tax law resulting from this decrease
would result in immediate termination of the policy, or if to
effect the requested decrease, payments to the owner would have
to be made from the accumulated value for compliance with the
guideline premium limitations, and the amount of such payments
would exceed the cash surrender value under the policy.
Decreasing the specified amount of the policy may have the
effect of decreasing monthly cost of insurance charges.
Decreasing the specified amount of the policy may have adverse
tax consequences. See "Tax Considerations," page 39.
Any increase in the specified amount must be at least $5,000
(unless the increase is effected pursuant to a rider providing
for automatic increases in specified amount), and an application
must be submitted. Any increase that is not guaranteed by rider
will require satisfactory evidence of insurability and must meet
Union Central's underwriting rules. A change in planned
periodic premiums may be advisable. See "Premium Payments Upon
Increase in Specified Amount," page 14. The increase in
specified amount will become effective on the monthly date next
following the date the request for the increase is received and
approved, and the account value will be adjusted to the extent
necessary to reflect a monthly deduction as of the effective
date based on the increase in specified amount.
A new administrative surrender charge period will apply to each
portion of the policy resulting from an increase in specified
amount, starting with the effective date of the increase. (See
"Surrender Charge," page 19).
Selecting and Changing the Beneficiary
You select one or more beneficiary(ies) in your application.
You may later change the beneficiary(ies) in accordance with the
terms of the policy. The primary beneficiary, or, if the
primary beneficiary is not living, the contingent beneficiary,
is the person entitled to receive the death benefit proceeds
under the policy. If the insured dies and there is no surviving
beneficiary, the owner or the estate of the owner will be the
beneficiary. If a beneficiary is designated as irrevocable,
then the beneficiary's consent must be obtained to change the
beneficiary.
CASH BENEFITS
- ----------------------------------------------------------------
Loans
After the first policy year and while the insured is living, and
provided the policy is not in the grace period, you may borrow
against your policy at any time by submitting notice to the home
office. (In certain states, loans may also be available during
the first policy year.) The minimum amount of any loan request
is $500 (subject to state regulation). The maximum loan amount
is equal to the sum of 90% of the variable account, plus 100% of
the guaranteed account, less any surrender charges that would be
applicable on the effective date of the loan, less loan interest
to the annual date. Outstanding loans reduce the amount
available for new loans. Loans will be processed as of the date
your notice is received and approved. Loan proceeds generally
will be sent to you within seven calendar days. See "When
Proceeds Are Paid," page 36, and "Transfers from the Guaranteed
Account," page 17
Interest. Each year Union Central will set the annual loan
interest rate. The rate will never be more than the maximum
permitted by law, and will not be changed more frequently than
once per year. The rate for a policy year may not exceed the
greater of (i) the Published Monthly Average for the calendar
month ending two months before the annual date at the beginning
of the policy year; or (ii) the guaranteed minimum interest rate
applicable to the guaranteed account, plus 1.0%. The Published
Monthly Average means Moody's Corporate Bond Yield Average -
Monthly Average Corporates, as published by Moody's Investor
Service, Inc., or any successor to that service; or if the
average is no longer published, a substantially similar average,
established by regulation issued by the insurance supervisory
official of the state in which the policy is delivered.
If the maximum annual loan interest rate for a policy year is at
least 0.5% higher than the rate set for the previous policy
year, we may increase the rate to no more than that limit. If
the maximum limit for a policy year is at least 0.5% lower than
the rate set for the previous policy year, we will reduce the
rate to at least that limit.
Union Central will notify owners of the initial rate of interest
when a loan is made. We will notify the owner at least thirty
days in advance of any increase in the annual loan interest rate
applicable to any outstanding loan.
Interest is due and payable at the end of each policy year while
a loan is outstanding. If interest is not paid when due, the
amount of the interest is added to the loan and becomes part of
the outstanding loan.
Policy Debt. Outstanding loans (including unpaid interest added
to the loan) plus accrued interest not yet due equals the policy
debt.
Loan Collateral. When a policy loan is made, an amount
sufficient to secure the loan is transferred out of the variable
account and the guaranteed account and into the policy's loan
account. Thus, a loan will have no immediate effect on the
account value, but other policy values, such as the cash
surrender value and the death benefit proceeds, will be reduced
immediately by the amount transferred to the loan account. This
transfer is made against the account value in each subdivision
and the guaranteed account in proportion to the account value in
each on the effective date of the loan, unless the owner
specifies that transfers be made from specific subdivisions. An
amount of account value equal to any due and unpaid loan
interest which exceeds interest credited to the loan account
will also be transferred to the loan account on each annual
date. Such interest will be transferred from each subdivision
and the guaranteed account in the same proportion that account
value in each subdivision and the guaranteed account bears to
the total unloaned account value.
The loan account will be credited with interest at an effective
annual rate of not less than the annual loan interest rate, less
1.5% during the first ten policy years, and 0.50% thereafter.
Thus, the maximum net cost of a loan per year is 1.5% during the
first ten policy years, and 0.25% thereafter (the net cost of a
loan is the difference between the rate of interest charged on
policy loans and the amount credited on the equivalent amount
held in the loan account). Union Central will determine the
rate of interest to be credited to the loan account in its sole
discretion, and the rate may change from time to time.
Loan Repayment; Effect if Not Repaid. You may repay all or part
of your policy debt at any time while the insured is living and
the policy is in force. Loan repayments must be sent to the
home office and will be credited as of the date received. The
owner may give us notice that a specific unscheduled premium
made while a loan is outstanding is to be applied as a loan
repayment. (Loan repayments, unlike unscheduled premiums, are
not subject to premium expense charges.) We will apply any
planned periodic premiums, and any unscheduled premiums without
notice, as premium payments. When a loan repayment is made,
account value in the loan account in an amount equivalent to the
repayment is transferred from the loan account to the
subdivisions and the guaranteed account. Thus, a loan repayment
will have no immediate effect on the account value, but other
policy values, such as the cash surrender value, will be
increased immediately by the amount of the loan repayment.
Amounts will be transferred to the subdivisions and the
guaranteed account in accordance with the owner's current net
premium allocation instructions.
If the death benefit becomes payable while a loan is
outstanding, the policy debt will be deducted in calculating the
death benefit proceeds.
If on a monthly date the cash value less any policy debt (the
cash surrender value) is less than the amount of the monthly
deduction due for the following policy month, the policy will be
in default. You, and any assignee of record, will be sent
notice of the default. You will have a 61-day grace period to
submit a sufficient payment to avoid termination of coverage
under the policy. The notice will specify the amount that must
be repaid to prevent termination.
Effect of Policy Loan. A loan, whether or not repaid, will have
a permanent effect on the death benefit and policy values
because the investment results of the subaccounts of the
separate account and current interest rates credited on account
value in the guaranteed account will apply only to the
non-loaned portion of the account value. The longer the loan is
outstanding, the greater the effect is likely to be. Depending
on the investment results of the subaccounts or credited
interest rates for the guaranteed account while the loan is
outstanding, the effect could be favorable or unfavorable.
Loans may increase the potential for lapse if investment results
of the subaccounts are less than anticipated. Also, loans
could, particularly if not repaid, make it more likely than
otherwise for a policy to terminate. Please consult your tax
adviser concerning the tax treatment of policy loans, and the
adverse tax consequences if a policy lapses with loans
outstanding. In addition, if your policy is a modified
endowment contract, loans may be currently taxable and subject
to a 10% penalty tax.
Surrendering the Policy for Cash Surrender Value
You may surrender your policy at any time for its cash surrender
value by submitting notice to the home office. Union Central
may require return of the policy. A surrender charge may apply.
See "Surrender Charge," page 19. A surrender request will be
processed as of the date your notice and all required documents
are received. Payment will generally be made within seven
calendar days. See "When Proceeds are Paid," page 36, and
"Transfers from the Guaranteed Account," page 17 The cash
surrender value may be taken in one lump sum or it may be
applied to a payment option acceptable to you and to us. See
"Payment Options," shown below. Your policy will terminate and
cease to be in force if it is surrendered. It cannot later be
reinstated. A surrender may result in adverse tax consequences,
and if your policy is a modified endowment contract, may also
trigger a 10% penalty tax. See "Tax Considerations," page 39.
Partial Cash Surrenders
You may make partial cash surrenders under your policy at any
time subject to the conditions below. You must submit notice to
the home office. Each partial cash surrender must be at least
$500. The partial surrender amount may not exceed the cash
surrender value. There is no fee or charge imposed on a partial
cash surrender. As of the date Union Central receives notice of
a partial cash surrender request, the cash value will be reduced
by the partial cash surrender amount.
Unless the owner requests that a partial cash surrender be
deducted from specified subdivisions, the partial cash surrender
amount will be deducted from your account value in the
subdivisions and in the guaranteed account pro-rata in
proportion to the account value in each.
If death benefit Option A is in effect, Union Central will
reduce the specified amount by the partial cash surrender
amount. Union Central may reject a partial cash surrender
request if the partial cash surrender would reduce the specified
amount below $50,000, or if the partial cash surrender would
cause the policy to fail to qualify as a life insurance contract
under applicable tax laws, as interpreted by Union Central.
Partial cash surrender requests will be processed as of the date
notice is received by us, and generally will be paid within
seven calendar days. See "When Proceeds Are Paid," page 36, and
"Transfers from the Guaranteed Account," page 17
A partial cash surrender may result in adverse tax consequences,
and if your policy is a modified endowment contract, may also
trigger a 10% penalty tax. See "Tax Considerations," page 39.
Maturity Benefit
The maturity date is the insured's age 100. If the policy is
still in force on the maturity date, the maturity benefit will
be paid to you. The maturity benefit is equal to the cash
surrender value on the maturity date. The maturity date can be
extended. See "Maturity Extension Endorsement," page 38.
Payment Options
Surrender proceeds and death benefit proceeds under the policy
are generally payable in a lump sum. We may offer alternative
payment options. Owners or beneficiaries should contact Union
Central or their Union Central agent for information regarding
payment options that may be available at the time of payment.
ILLUSTRATIONS OF ACCOUNT VALUES, CASH SURRENDER VALUES,
DEATH BENEFITS AND ACCUMULATED PREMIUM PAYMENTS
- ----------------------------------------------------------------
We prepared the following tables to illustrate hypothetically
how certain values under a policy may change with investment
performance over an extended period of time. The tables
illustrate how account values, cash surrender values and death
benefits under a policy covering an insured of a given age on
the issue date, would vary over time if planned periodic
premiums were paid annually and the return on the assets in the
each of the portfolios were an assumed uniform gross annual rate
of 0%, 6% and 12%. The values would be different from those
shown if the returns averaged 0%, 6% or 12% but fluctuated over
and under those averages throughout the years shown. The tables
also show planned periodic premiums accumulated at 5% interest
compounded annually. THE HYPOTHETICAL INVESTMENT RATES OF
RETURN ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A
REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN.
Actual rates of return for a particular policy may be more or
less than the hypothetical investment rates of return and will
depend on a number of factors, including the investment
allocations made by an owner and prevailing rates. These
illustrations assume that net premiums are allocated equally
among the subdivisions available under the policy, and that no
amounts are allocated to the guaranteed account.
The illustrations reflect the fact that the net investment
return on the assets held in the subaccounts is lower than the
gross after-tax return of the selected portfolios. The tables
assume an average annual expense ratio of 0.778% of the average
daily net assets of the portfolios available under the policies.
This average annual expense ratio is based on a simple
arithmetic average of the actual expense ratios of each of the
portfolios for the last fiscal year. For information on the
portfolios' expenses, see the prospectuses for the portfolios
accompanying this Prospectus.
In addition, the illustrations reflect the daily charge to the
separate account for assuming mortality and expense risks, which
is equal on an annual basis to 0.75% during the first ten policy
years, and 0.25% thereafter. After deduction of portfolio
expenses and the mortality and expense risk charge, the
illustrated gross annual investment rates of return of 0%, 6%
and 12% would correspond to approximate net annual rates of
- -1.516%, 4.393%, and 10.302%, respectively, during the first ten
policy years, and -1.023%, 4.916%, and 10.855%, respectively,
thereafter.
The illustrations also reflect the deduction of the applicable
premium expense charge, and the monthly deduction, including the
monthly cost of insurance charge for the hypothetical insured.
Union Central's current cost of insurance charges, and the
higher guaranteed maximum cost of insurance charges that Union
Central has the contractual right to charge, are reflected in
separate illustrations on each of the following pages. All the
illustrations reflect the fact that no charges for federal or
state income taxes are currently made against the separate
account and assume no policy debt or charges for supplemental
and/or rider benefits.
The illustrations are based on Union Central's sex distinct
preferred rates. Upon request, owner(s) will be furnished with
a comparable illustration based upon the proposed insured's
individual circumstances. Such illustrations may assume
different hypothetical rates of return than those illustrated in
the following tables.
<PAGE>
<TABLE>
<CAPTION>
THE UNION CENTRAL LIFE INSURANCE COMPANY
VARIABLE UNIVERSAL LIFE INSURANCE
MALE ISSUE AGE: 40 EXCEL CHOICE $400,000 SPECIFIED AMOUNT
PREFERRED DEATH BENEFIT OPTION A
VARIABLE INVESTMENT
$5,000 ANNUAL PREMIUM USING CURRENT CHARGES
CASH
DEATH BENEFIT ACCOUNT VALUE SURRENDER VALUE
-------------------- -------------------- --------------------
PREMIUMS Assuming Hypothetical Assuming Hypothetical Assuming Hypothetical
ACCUM. Gross Annual Gross Annual Gross Annual
AT 5% Investment Return of Investment Return of Investment Return of
END INTEREST -------------------- -------------------- --------------------
OF PER 0% 6% 12% 0% 6% 12% 0% 6% 12%
YEAR YEAR Gross Gross Gross Gross Gross Gross Gross Gross Gross
- ---- ---- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 5250 400000 400000 400000 3849 4104 4361 749 1004 1261
2 10762 400000 400000 400000 7590 8339 9120 4420 5170 5950
3 16551 400000 400000 400000 11228 12713 14323 8058 9544 11153
4 22628 400000 400000 400000 14754 17224 20008 11585 14055 16838
5 29010 400000 400000 400000 18175 21882 26230 15005 18713 23060
6 35710 400000 400000 400000 21491 26695 33048 18638 23842 30195
7 42746 400000 400000 400000 24711 31678 40533 22175 29142 37997
8 50133 400000 400000 400000 27836 36839 48758 25617 34620 46539
9 57889 400000 400000 400000 30867 42187 57802 28965 40285 55901
10 66034 400000 400000 400000 33799 47726 67751 32214 46141 66166
11 74586 400000 400000 400000 36821 53738 79101 35553 52470 77833
12 83565 400000 400000 400000 39747 59995 91659 38797 59044 90709
13 92993 400000 400000 400000 42569 66502 105558 41935 65868 104924
14 102893 400000 400000 400000 45280 73267 120950 44963 72950 120633
15 113287 400000 400000 400000 47870 80296 138001 47870 80296 138001
20 173596 400000 400000 400000 60163 121254 257070 60163 121254 257070
25 250567 400000 400000 559035 68108 171092 458226 68108 171092 458226
30 348804 400000 400000 918851 70038 232772 792113 70038 232772 792113
</TABLE>
(1) Assumes that no policy loans have been made.
(2) Current values reflect applicable Premium Expense Charges,
current cost of insurance rates, a monthly administrative charge
of $5.00 per month, and a mortality and expense risk charge of
0.75% of assets during the first ten policy years, and 0.25%
thereafter.
(3) Net investment returns are calculated as the hypothetical
gross investment returns less all charges and deductions shown
in the prospectus.
(4) Assumes that the planned periodic premium is paid at the
beginning of each policy year. Values would be different if the
premiums are paid with a different frequency or in different
amounts.
(5) The illustrated gross annual investment rates of return of
0%, 6%, and 12% would correspond to approximate net annual rates
of -1.516%, 4.393%, and 10.302% respectively, during the first
ten policy years, and -1.023%, 4.916%, and 10.855% thereafter.
<PAGE>
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 SHOWN AND WILL DEPEND ON A NUMBER
OF FACTORS INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER
AND PREVAILING RATES. THE DEATH BENEFIT AND ACCOUNT VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES
OF RETURN AVERAGED 0%, 6%, OR 12% OVER A PERIOD OF YEARS BUT
ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATION CAN BE MADE BY THE COMPANY OR
THE PORTFOLIOS THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE>
<TABLE>
<CAPTION>
THE UNION CENTRAL LIFE INSURANCE COMPANY
VARIABLE UNIVERSAL LIFE INSURANCE
MALE ISSUE AGE: 40 EXCEL CHOICE $400,000 SPECIFIED AMOUNT
PREFERRED DEATH BENEFIT OPTION A
VARIABLE INVESTMENT
$5,000 ANNUAL PREMIUM USING GUARANTEED CHARGES
CASH
DEATH BENEFIT ACCOUNT VALUE SURRENDER VALUE
-------------------- -------------------- --------------------
PREMIUMS Assuming Hypothetical Assuming Hypothetical Assuming Hypothetical
ACCUM. Gross Annual Gross Annual Gross Annual
AT 5% Investment Return of Investment Return of Investment Return of
END INTEREST -------------------- -------------------- --------------------
OF PER 0% 6% 12% 0% 6% 12% 0% 6% 12%
YEAR YEAR Gross Gross Gross Gross Gross Gross Gross Gross Gross
- ---- ---- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 5250 400000 400000 400000 3409 3647 3886 309 547 786
2 10762 400000 400000 400000 6883 7576 8298 3714 4406 5129
3 16551 400000 400000 400000 10244 11616 13104 7074 8446 9934
4 22628 400000 400000 400000 13481 15762 18333 10312 12592 15163
5 29010 400000 400000 400000 16599 20020 24034 13429 16851 20865
6 35710 400000 400000 400000 19585 24383 30244 16732 21531 27392
7 42746 400000 400000 400000 22434 28850 37013 19899 26315 34477
8 50133 400000 400000 400000 25143 33422 44396 22924 31203 42177
9 57889 400000 400000 400000 27706 38097 52457 25805 36195 50555
10 66034 400000 400000 400000 30113 42870 61259 28529 41285 59675
11 74586 400000 400000 400000 32626 48091 71355 31359 46823 70087
12 83565 400000 400000 400000 34966 53439 82451 34015 52488 81500
13 92993 400000 400000 400000 37110 58900 94651 36477 58266 94017
14 102893 400000 400000 400000 39041 64466 108074 38724 64149 107757
15 113287 400000 400000 400000 40727 70119 122852 40727 70119 122852
20 173596 400000 400000 400000 44714 99307 223595 44714 99307 223595
25 250567 400000 400000 482131 37840 128321 395189 37840 128321 395189
30 348804 400000 400000 786601 10788 152367 678104 10788 152367 678104
</TABLE>
(1) Assumes that no policy loans have been made.
(2) Guaranteed values reflect applicable Premium Expense
Charges, guaranteed cost of insurance rates, a monthly
administrative charge of $25.00 per month in year 1 and $10.00
per month thereafter, and a mortality and expense risk charge of
0.75% of assets during the first ten policy years, and 0.25%
thereafter.
(3) Net investment returns are calculated as the hypothetical
gross investment returns less all charges and deductions shown
in the prospectus.
(4) Assumes that the planned periodic premium is paid at the
beginning of each policy year. Values would be different if the
premiums are paid with a different frequency or in different
amounts.
(5) The illustrated gross annual investment rates of return of
0%, 6%, and 12% would correspond to approximate net annual rates
of -1.516%, 4.393%, and 10.302% respectively, during the first
ten policy years, and -1.023%, 4.916%, and 10.855% thereafter.
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 SHOWN AND WILL DEPEND ON A NUMBER
OF FACTORS INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER
AND PREVAILING RATES. THE DEATH BENEFIT AND ACCOUNT VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES
OF RETURN AVERAGED 0%, 6%, OR 12% OVER A PERIOD OF YEARS BUT
ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATION CAN BE MADE BY THE COMPANY OR
THE PORTFOLIOS THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE>
<TABLE>
<CAPTION>
THE UNION CENTRAL LIFE INSURANCE COMPANY
VARIABLE UNIVERSAL LIFE INSURANCE
MALE ISSUE AGE: 40 EXCEL CHOICE $400,000 SPECIFIED AMOUNT
PREFERRED DEATH BENEFIT OPTION B
VARIABLE INVESTMENT
$5,000 ANNUAL PREMIUM USING CURRENT CHARGES
CASH
DEATH BENEFIT ACCOUNT VALUE SURRENDER VALUE
-------------------- -------------------- --------------------
PREMIUMS Assuming Hypothetical Assuming Hypothetical Assuming Hypothetical
ACCUM. Gross Annual Gross Annual Gross Annual
AT 5% Investment Return of Investment Return of Investment Return of
END INTEREST -------------------- -------------------- --------------------
OF PER 0% 6% 12% 0% 6% 12% 0% 6% 12%
YEAR YEAR Gross Gross Gross Gross Gross Gross Gross Gross Gross
- ---- ---- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 5250 403840 404095 404350 3840 4095 4350 740 995 1250
2 10762 407563 408310 409087 7563 8310 9087 4394 5140 5918
3 16551 411173 412651 414252 11173 12651 14252 8004 9481 11082
4 22628 414662 417114 419877 14662 17114 19877 11492 13944 16707
5 29010 418033 421706 426013 18033 21706 26013 14863 18536 22843
6 35710 421287 426432 432711 21287 26432 32711 18435 23580 29858
7 42746 424434 431306 440038 24434 31306 40038 21898 28770 37502
8 50133 427473 436332 448054 27473 36332 48054 25254 34113 45836
9 57889 430404 441515 456832 30404 41515 56832 28502 39613 54930
10 66034 433222 446855 466441 33222 46855 66441 31637 45270 64856
11 74586 436112 452624 477356 36112 52624 77356 34844 51356 76088
12 83565 438889 458591 489366 38889 58591 89366 37938 57640 88415
13 92993 441540 464750 502577 41540 64750 102577 40906 64116 101943
14 102893 444059 471104 517111 44059 71104 117111 43742 70787 116794
15 113287 446432 477646 533093 46432 77646 133093 46432 77646 133093
20 173596 457409 515015 642675 57409 115015 242675 57409 115015 242675
25 250567 463060 556996 819755 63060 156996 419755 63060 156996 419755
30 348804 461349 602224 1106886 61349 202224 706886 61349 202224 706886
</TABLE>
(1) Assumes that no policy loans have been made.
(2) Current values reflect applicable Premium Expense Charges,
current cost of insurance rates, a monthly administrative charge
of $5.00 per month, and a mortality and expense risk charge of
0.75% of assets during the first ten policy years, and 0.25%
thereafter.
(3) Net investment returns are calculated as the hypothetical
gross investment returns less all charges and deductions shown
in the prospectus.
(4) Assumes that the planned periodic premium is paid at the
beginning of each policy year. Values would be different if the
premiums are paid with a different frequency or in different
amounts.
(5) The illustrated gross annual investment rates of return of
0%, 6%, and 12% would correspond to approximate net annual rates
of -1.516%, 4.393%, and 10.302% respectively, during the first
ten policy years, and -1.023%, 4.916%, and 10.855% thereafter.
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 SHOWN AND WILL DEPEND ON A NUMBER
OF FACTORS INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER
AND PREVAILING RATES. THE DEATH BENEFIT AND ACCOUNT VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES
OF RETURN AVERAGED 0%, 6%, OR 12% OVER A PERIOD OF YEARS BUT
ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATION CAN BE MADE BY THE COMPANY OR
THE PORTFOLIOS THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE>
<TABLE>
<CAPTION>
THE UNION CENTRAL LIFE INSURANCE COMPANY
VARIABLE UNIVERSAL LIFE INSURANCE
MALE ISSUE AGE: 40 EXCEL CHOICE $400,000 SPECIFIED AMOUNT
PREFERRED DEATH BENEFIT OPTION B
VARIABLE INVESTMENT
$5,000 ANNUAL PREMIUM USING GUARANTEED CHARGES
CASH
DEATH BENEFIT ACCOUNT VALUE SURRENDER VALUE
-------------------- -------------------- --------------------
PREMIUMS Assuming Hypothetical Assuming Hypothetical Assuming Hypothetical
ACCUM. Gross Annual Gross Annual Gross Annual
AT 5% Investment Return of Investment Return of Investment Return of
END INTEREST -------------------- -------------------- --------------------
OF PER 0% 6% 12% 0% 6% 12% 0% 6% 12%
YEAR YEAR Gross Gross Gross Gross Gross Gross Gross Gross Gross
- ---- ---- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 5250 403400 403638 403876 3400 3638 3876 300 538 776
2 10762 406856 407546 408265 6856 7546 8265 3686 4376 5095
3 16551 410188 411552 413030 10188 11552 13030 7018 8382 9861
4 22628 413386 415648 418198 13386 15648 18198 10216 12478 15028
5 29010 416452 419838 423810 16452 19838 23810 13283 16668 20640
6 35710 419373 424110 429894 19373 24110 29894 16520 21257 27041
7 42746 422143 428459 436491 22143 28459 36491 19607 25923 33955
8 50133 424755 432880 443645 24755 32880 43645 22536 30661 41426
9 57889 427205 437368 451405 27205 37368 51405 25303 35467 49504
10 66034 429478 441911 459818 29478 41911 59818 27893 40326 58233
11 74586 431833 446844 469402 31833 46844 69402 30565 45576 68134
12 83565 433988 451839 479840 33988 51839 79840 33037 50888 78889
13 92993 435918 456870 491195 35918 56870 91195 35284 56236 90561
14 102893 437601 461914 503541 37601 61914 103541 37284 61597 103224
15 113287 439003 466934 516948 39003 66934 116948 39003 66934 116948
20 173596 440921 490556 603204 40921 90556 203204 40921 90556 203204
25 250567 430808 506906 731961 30808 106906 331961 30808 106906 331961
30 348804 400504 503921 920326 504 103921 520326 504 103921 520326
</TABLE>
(1) Assumes that no policy loans have been made.
(2) Guaranteed values reflect applicable Premium Expense
Charges, guaranteed cost of insurance rates, a monthly
administrative charge of $25.00 per month in year 1 and $10.00
per month thereafter, and a mortality and expense risk charge of
0.75% of assets during the first ten policy years, and 0.25%
thereafter.
(3) Net investment returns are calculated as the hypothetical
gross investment returns less all charges and deductions shown
in the prospectus.
(4) Assumes that the planned periodic premium is paid at the
beginning of each policy year. Values would be different if the
premiums are paid with a different frequency or in different
amounts.
(5) The illustrated gross annual investment rates of return of
0%, 6%, and 12% would correspond to approximate net annual rates
of -1.516%, 4.393%, and 10.302% respectively, during the first
ten policy years, and -1.023%, 4.916%, and 10.855% thereafter.
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 SHOWN AND WILL DEPEND ON A NUMBER
OF FACTORS INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER
AND PREVAILING RATES. THE DEATH BENEFIT AND ACCOUNT VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES
OF RETURN AVERAGED 0%, 6%, OR 12% OVER A PERIOD OF YEARS BUT
ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATION CAN BE MADE BY THE COMPANY OR
THE PORTFOLIOS THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE>
<TABLE>
<CAPTION>
THE UNION CENTRAL LIFE INSURANCE COMPANY
VARIABLE UNIVERSAL LIFE INSURANCE
MALE ISSUE AGE: 50 EXCEL CHOICE $250,000 SPECIFIED AMOUNT
PREFERRED DEATH BENEFIT OPTION A
VARIABLE INVESTMENT
$5,300 ANNUAL PREMIUM USING CURRENT CHARGES
CASH
DEATH BENEFIT ACCOUNT VALUE SURRENDER VALUE
-------------------- -------------------- --------------------
PREMIUMS Assuming Hypothetical Assuming Hypothetical Assuming Hypothetical
ACCUM. Gross Annual Gross Annual Gross Annual
AT 5% Investment Return of Investment Return of Investment Return of
END INTEREST -------------------- -------------------- --------------------
OF PER 0% 6% 12% 0% 6% 12% 0% 6% 12%
YEAR YEAR Gross Gross Gross Gross Gross Gross Gross Gross Gross
- ---- ---- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 5565 250000 250000 250000 3989 4258 4527 1236 1505 1774
2 11408 250000 250000 250000 7867 8652 9469 5042 5826 6643
3 17544 250000 250000 250000 11625 13178 14862 8799 10353 12036
4 23986 250000 250000 250000 15263 17844 20755 12438 15018 17929
5 30750 250000 250000 250000 18776 22650 27196 15951 19824 24370
6 37853 250000 250000 250000 22163 27600 34245 19620 25057 31702
7 45310 250000 250000 250000 25432 32712 41980 23171 230451 39719
8 53141 250000 250000 250000 28599 38009 50493 26621 36031 48515
9 61363 250000 250000 250000 31674 43512 59884 29978 41817 58189
10 69996 250000 250000 250000 34664 49238 70258 33251 47826 68846
11 79061 250000 250000 250000 37764 55485 82147 36634 54354 81016
12 88579 250000 250000 250000 40798 62032 95375 39950 61185 94527
13 98573 250000 250000 250000 43760 68895 110102 43195 68330 109536
14 109066 250000 250000 250000 46644 76089 126507 46361 75806 126225
15 120085 250000 250000 250000 49452 83637 144802 49452 83637 144802
20 184012 250000 250000 316484 61053 126583 272831 61053 126583 272831
25 265601 250000 250000 521429 67828 181406 487317 67828 181406 487317
30 369732 250000 257391 886641 61836 254232 844420 61836 254232 844420
</TABLE>
(1) Assumes that no policy loans have been made.
(2) Current values reflect applicable Premium Expense Charges,
current cost of insurance rates, a monthly administrative charge
of $5.00 per month, and a mortality and expense risk charge of
0.75% of assets during the first ten policy years, and 0.25%
thereafter.
(3) Net investment returns are calculated as the hypothetical
gross investment returns less all charges and deductions shown
in the prospectus.
(4) Assumes that the planned periodic premium is paid at the
beginning of each policy year. Values would be different if the
premiums are paid with a different frequency or in different
amounts.
(5) The illustrated gross annual investment rates of return of
0%, 6%, and 12% would correspond to approximate net annual rates
of -1.516%, 4.393%, and 10.302% respectively, during the first
ten policy years, and -1.023%, 4.916%, and 10.855% thereafter.
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 SHOWN AND WILL DEPEND ON A NUMBER
OF FACTORS INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER
AND PREVAILING RATES. THE DEATH BENEFIT AND ACCOUNT VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES
OF RETURN AVERAGED 0%, 6%, OR 12% OVER A PERIOD OF YEARS BUT
ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATION CAN BE MADE BY THE COMPANY OR
THE PORTFOLIOS THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE>
<TABLE>
<CAPTION>
THE UNION CENTRAL LIFE INSURANCE COMPANY
VARIABLE UNIVERSAL LIFE INSURANCE
MALE ISSUE AGE: 50 EXCEL CHOICE $250,000 SPECIFIED AMOUNT
PREFERRED DEATH BENEFIT OPTION A
VARIABLE INVESTMENT
$5,300 ANNUAL PREMIUM USING GUARANTEED CHARGES
CASH
DEATH BENEFIT ACCOUNT VALUE SURRENDER VALUE
-------------------- -------------------- --------------------
PREMIUMS Assuming Hypothetical Assuming Hypothetical Assuming Hypothetical
ACCUM. Gross Annual Gross Annual Gross Annual
AT 5% Investment Return of Investment Return of Investment Return of
END INTEREST -------------------- -------------------- --------------------
OF PER 0% 6% 12% 0% 6% 12% 0% 6% 12%
YEAR YEAR Gross Gross Gross Gross Gross Gross Gross Gross Gross
- ---- ---- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 5565 250000 250000 250000 3387 3633 3879 634 880 1126
2 11408 250000 250000 250000 6812 7519 8256 3986 4693 5431
3 17544 250000 250000 250000 10082 11473 12983 7256 8647 10157
4 23986 250000 250000 250000 13187 15487 18086 10361 12662 15261
5 30750 250000 250000 250000 16112 19549 23593 13286 16723 20768
6 37853 250000 250000 250000 18845 23650 29540 16302 21107 26996
7 45310 250000 250000 250000 21374 27779 35965 19113 25518 33704
8 53141 250000 250000 250000 23692 31933 42923 21714 29955 40945
9 61363 250000 250000 250000 25790 36107 50473 24095 34411 48777
10 69996 250000 250000 250000 27646 40282 58671 26233 38869 57258
11 79061 250000 250000 250000 29497 44785 68054 28367 43655 66924
12 88579 250000 250000 250000 31069 49299 78345 30221 48451 77497
13 98573 250000 250000 250000 32323 53799 89654 31758 53234 89088
14 109066 250000 250000 250000 33218 58257 102109 32935 57974 101826
15 120085 250000 250000 250000 33703 62640 115870 33703 62640 115870
20 184012 250000 250000 250000 28358 82608 213127 28358 82608 213127
25 265601 250000 250000 409157 1236 94858 382390 1236 94858 382390
30 369732 0 250000 695889 0 84903 662752 0 84903 662752
</TABLE>
(1) Assumes that no policy loans have been made.
(2) Guaranteed values reflect applicable Premium Expense
Charges, guaranteed cost of insurance rates, a monthly
administrative charge of $25.00 per month in year 1 and $10.00
per month thereafter, and a mortality and expense risk charge of
0.75% of assets during the first ten policy years, and 0.25%
thereafter.
(3) Net investment returns are calculated as the hypothetical
gross investment returns less all charges and deductions shown
in the prospectus.
(4) Assumes that the planned periodic premium is paid at the
beginning of each policy year. Values would be different if the
premiums are paid with a different frequency or in different
amounts.
(5) The illustrated gross annual investment rates of return of
0%, 6%, and 12% would correspond to approximate net annual rates
of -1.516%, 4.393%, and 10.302% respectively, during the first
ten policy years, and -1.023%, 4.916%, and 10.855% thereafter.
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 SHOWN AND WILL DEPEND ON A NUMBER
OF FACTORS INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER
AND PREVAILING RATES. THE DEATH BENEFIT AND ACCOUNT VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES
OF RETURN AVERAGED 0%, 6%, OR 12% OVER A PERIOD OF YEARS BUT
ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATION CAN BE MADE BY THE COMPANY OR
THE PORTFOLIOS THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE>
<TABLE>
<CAPTION>
THE UNION CENTRAL LIFE INSURANCE COMPANY
VARIABLE UNIVERSAL LIFE INSURANCE
MALE ISSUE AGE: 50 EXCEL CHOICE $250,000 SPECIFIED AMOUNT
PREFERRED DEATH BENEFIT OPTION B
VARIABLE INVESTMENT
$5,300 ANNUAL PREMIUM USING CURRENT CHARGES
CASH
DEATH BENEFIT ACCOUNT VALUE SURRENDER VALUE
-------------------- -------------------- --------------------
PREMIUMS Assuming Hypothetical Assuming Hypothetical Assuming Hypothetical
ACCUM. Gross Annual Gross Annual Gross Annual
AT 5% Investment Return of Investment Return of Investment Return of
END INTEREST -------------------- -------------------- --------------------
OF PER 0% 6% 12% 0% 6% 12% 0% 6% 12%
YEAR YEAR Gross Gross Gross Gross Gross Gross Gross Gross Gross
- ---- ---- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 5565 253972 254239 254507 3972 4239 4507 1219 1486 1754
2 11408 257814 258593 259404 7814 8593 9404 4988 5767 6578
3 17544 261517 263054 264720 11517 13054 14720 8691 10228 11894
4 23986 265079 267624 270493 15079 17624 20493 12253 14798 17667
5 30750 268492 272296 276760 18492 22296 26760 15666 19470 23934
6 37853 271752 277070 283565 21752 27070 33565 19209 24527 31022
7 45310 274868 281955 290970 24868 31955 40970 22608 29695 38710
8 53141 277856 286971 299052 27856 36971 49052 25878 34993 47074
9 61363 280724 292132 307888 30724 42132 57888 29029 40436 56193
10 69996 283481 297448 317562 33481 47448 67562 32068 46035 66149
11 79061 286314 303199 328557 36314 53199 78557 35184 52068 77427
12 88579 289049 309161 340673 39049 59161 90673 38202 58313 89825
13 98573 291679 315336 354021 41679 65336 104021 41114 64771 103456
14 109066 294195 321726 368726 44195 71726 118726 43912 71443 118444
15 120085 296598 328339 384935 46598 78339 134935 46598 78339 134935
20 184012 305184 363196 492709 55184 113196 242709 55184 113196 242709
25 265601 306821 400037 664606 56821 150037 414606 56821 150037 414606
30 369732 291165 427199 930027 41165 177199 680027 41165 177199 680027
</TABLE>
(1) Assumes that no policy loans have been made.
(2) Current values reflect applicable Premium Expense Charges,
current cost of insurance rates, a monthly administrative charge
of $5.00 per month, and a mortality and expense risk charge of
0.75% of assets during the first ten policy years, and 0.25%
thereafter.
(3) Net investment returns are calculated as the hypothetical
gross investment returns less all charges and deductions shown
in the prospectus.
(4) Assumes that the planned periodic premium is paid at the
beginning of each policy year. Values would be different if the
premiums are paid with a different frequency or in different
amounts.
(5) The illustrated gross annual investment rates of return of
0%, 6%, and 12% would correspond to approximate net annual rates
of -1.516%, 4.393%, and 10.302% respectively, during the first
ten policy years, and -1.023%, 4.916%, and 10.855% thereafter.
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 SHOWN AND WILL DEPEND ON A NUMBER
OF FACTORS INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER
AND PREVAILING RATES. THE DEATH BENEFIT AND ACCOUNT VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES
OF RETURN AVERAGED 0%, 6%, OR 12% OVER A PERIOD OF YEARS BUT
ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATION CAN BE MADE BY THE COMPANY OR
THE PORTFOLIOS THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE>
<TABLE>
<CAPTION>
THE UNION CENTRAL LIFE INSURANCE COMPANY
VARIABLE UNIVERSAL LIFE INSURANCE
MALE ISSUE AGE: 50 EXCEL CHOICE $250,000 SPECIFIED AMOUNT
PREFERRED DEATH BENEFIT OPTION B
VARIABLE INVESTMENT
$5,300 ANNUAL PREMIUM USING GUARANTEED CHARGES
CASH
DEATH BENEFIT ACCOUNT VALUE SURRENDER VALUE
-------------------- -------------------- --------------------
PREMIUMS Assuming Hypothetical Assuming Hypothetical Assuming Hypothetical
ACCUM. Gross Annual Gross Annual Gross Annual
AT 5% Investment Return of Investment Return of Investment Return of
END INTEREST -------------------- -------------------- --------------------
OF PER 0% 6% 12% 0% 6% 12% 0% 6% 12%
YEAR YEAR Gross Gross Gross Gross Gross Gross Gross Gross Gross
- ---- ---- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 5565 253367 253611 253856 3367 3611 3856 614 858 1103
2 11408 256752 257452 258183 6752 7452 8183 3926 4626 5357
3 17544 259958 261331 262820 9958 11331 12820 7133 8505 9995
4 23986 262975 265234 267785 12975 15234 17785 10149 12408 14960
5 30750 265782 269139 273087 15782 19139 23087 12956 16313 20261
6 37853 268365 273029 278742 18365 23029 28742 15822 20486 26199
7 45310 270707 276881 284765 20707 26881 34765 18446 24620 32505
8 53141 272799 280681 291181 22799 30681 41181 20821 28703 39203
9 61363 274628 284410 298012 24628 34410 48012 22932 32714 46316
10 69996 276166 288031 305267 26166 38031 55267 24754 36618 53854
11 79061 277640 291837 313401 27640 41837 63401 26509 40707 62270
12 88579 278772 295494 322071 28772 45494 72071 27924 44647 71223
13 98573 279521 298948 331287 29521 48948 81287 28956 48383 80722
14 109066 279837 302133 341053 29837 52133 91053 29555 51850 90770
15 120085 279669 304978 351367 29669 54978 101367 29669 54978 101367
20 184012 270066 311666 411514 20066 61666 161514 20066 61666 161514
25 265601 0 295325 483832 0 45325 233832 0 45325 233832
30 369732 0 0 556416 0 0 306416 0 0 306416
</TABLE>
(1) Assumes that no policy loans have been made.
(2) Guaranteed values reflect applicable Premium Expense
Charges, guaranteed cost of insurance rates, a monthly
administrative charge of $25.00 per month in year 1 and $10.00
per month thereafter, and a mortality and expense risk charge of
0.75% of assets during the first ten policy years, and 0.25%
thereafter.
(3) Net investment returns are calculated as the hypothetical
gross investment returns less all charges and deductions shown
in the prospectus.
(4) Assumes that the planned periodic premium is paid at the
beginning of each policy year. Values would be different if the
premiums are paid with a different frequency or in different
amounts.
(5) The illustrated gross annual investment rates of return of
0%, 6%, and 12% would correspond to approximate net annual rates
of -1.516%, 4.393%, and 10.302% espectively, during the first
ten policy years, and -1.023%, 4.916%, and 10.855% thereafter.
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 SHOWN AND WILL DEPEND ON A NUMBER
OF FACTORS INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER
AND PREVAILING RATES. THE DEATH BENEFIT AND ACCOUNT VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES
OF RETURN AVERAGED 0%, 6%, OR 12% OVER A PERIOD OF YEARS BUT
ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATION CAN BE MADE BY THE COMPANY OR
THE PORTFOLIOS THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE>
OTHER POLICY BENEFITS AND PROVISIONS
- --------------------------------------------------------------
Limits on Rights to Contest the Policy
Incontestability. Subject to state regulation, Union Central
will not contest the policy, or any supplemental and/or rider
benefits (except accidental death and/or disability benefits),
after the policy or rider has been in force during the insured's
lifetime for two years from the issue date or the effective date
of the rider, unless fraud is involved. Any increase in the
specified amount will be incontestable with respect to
statements made in the evidence of insurability for that
increase after the increase has been in force during the life of
the insured for two years after the effective date of the
increase.
Suicide Exclusion. Subject to state regulation, if the insured
dies by suicide within two years after the issue date, we will
not pay a death benefit. The policy will be terminated, and we
will return the premium payments made before death, less any
policy debt and any partial cash surrenders. If the insured
dies by suicide within two years after an increase in specified
amount that is subject to evidence of insurability, we will not
pay any death benefit attributable to the increase. In such
case, prior to calculating the death benefit, Union Central will
restore to the cash value the sum of the monthly cost of
insurance charges made for that increase.
Changes in the Policy or Benefits
Misstatement of Age or Sex. If the insured's age or sex has
been misstated in the application for the policy or in any
application for supplemental and/or rider benefits:
if the misstatement becomes known after the death of the
insured, then the death benefit under the policy or such
supplemental and/or rider benefits will be adjusted to the
correct amount (reflecting the correct age or sex) for the
monthly deduction made for the month in which death
occurred;
if the misstatement becomes known during the lifetime of the
insured, policy values will be adjusted to those based on
the correct monthly deductions (reflecting the correct age
or sex) since the policy date. If the policy's values are
insufficient to cover the monthly deduction on the prior
monthly date, the grace period will be deemed to have begun
on such date, and notification will be sent to the owner at
least 61 days prior to the end of the grace period.
Other Changes. At any time Union Central may make such changes
in the policy as are necessary to assure compliance at all times
with the definition of life insurance prescribed by the Internal
Revenue Code or to make the policy conform with any law or
regulation issued by any government agency to which it is
subject.
When Proceeds Are Paid
Union Central will ordinarily pay any death benefit proceeds,
loan proceeds, partial cash surrender proceeds, or full
surrender proceeds within seven calendar days after receipt at
the home office of all the documents required for such a
payment. Other than the death benefit, which is determined as
of the date of death, the amount will be determined as of the
date of receipt of required documents. However, Union Central
may delay making a payment or processing a transfer request if
(1) the New York Stock Exchange is closed for other than a
regular holiday or weekend, trading on the New York Stock
Exchange is restricted by the SEC, or the SEC declares that an
emergency exists as a result of which the disposal or valuation
of separate account assets is not reasonably practicable; or (2)
the SEC by order permits postponement of payment to protect
Union Central's policy owners. See also "Payment Deferral from
the Guaranteed Account," page 17.
Reports to Policy Owners
Each year you will be sent a report at your last known address
showing, as of the end of the current report period: account
value; cash value; death benefit; amount of interest credited to
the guaranteed account; change in value of the variable account;
premiums paid since the last report; loans; partial cash
surrenders; expense charges; and cost of insurance charges since
the prior report; and any other information required by law.
You will also be sent an annual and a semi-annual report for
each portfolio underlying a subdivision to which you have
allocated account value, including a list of the securities held
in each portfolio, as required by the 1940 Act. In addition,
when you pay premium payments, or if you take out a loan,
transfer amounts or make partial cash surrenders, you will
receive a written confirmation of these transactions.
Assignment
The policy may be assigned in accordance with its terms. In
order for any assignment to be binding upon Union Central, it
must be in writing and filed at the home office. Once Union
Central has received a signed copy of the assignment, the
owner's rights and the interest of any beneficiary (or any other
person) will be subject to the assignment. Union Central
assumes no responsibility for the validity or sufficiency of any
assignment. An assignment is subject to any policy debt.
Reinstatement
The policy may be reinstated within five years after lapse and
before the maturity date, subject to compliance with certain
conditions, including the payment of a necessary premium payment
and submission of satisfactory evidence of insurability. See
your policy for further information.
Supplemental and/or Rider Benefits
The following supplemental and/or rider benefits may be
available and added to your policy. Any monthly charges for
these benefits and/or riders will be deducted from your account
value as part of the monthly deduction (see page 18). The
supplemental and/or rider benefits available with the policies
provide fixed benefits that do not vary with the investment
experience of the separate account.
Term Insurance Rider for Other Insured Persons. Provides a
death benefit amount payable on the death of other insured
persons specified. The other insured death benefit amount
may be changed, subject to certain conditions. In addition,
the rider coverage may be converted to a new policy on the
other insured, subject to certain conditions.
Scheduled Increase Option Rider for the Insured. Provides
for automatic increases in the specified amount on each
annual date, subject to the terms of the rider; the amount of
the increase is specified in the rider. The rate class
applicable to the scheduled increases will be the rate class
of the insured on the issue date of the rider. There is no
cost for this rider.
Guaranteed Death Benefit Rider. Provides that the policy
will remain in force and will not lapse before the expiration
date of the guaranteed death benefit rider shown on the
schedule page of your contract, provided that the sum of
premium payments to date, less any partial cash surrenders
and any policy debt, equals or exceeds the minimum monthly
premium for the rider times the number of policy months
since the policy date. The rider extends the minimum
guaranteed period under your policy from three years to
thirty years or until you are 65 years old, whichever occurs
earlier. This rider terminates on any monthly date when the
sum of premium payments, less any partial cash surrenders and
any policy debt, is less than the Guaranteed Death Benefit
Premium multiplied by the number of policy months since the
policy date. Once terminated, this rider will not be
reinstated. This rider is not available for all ages and rate
classes, in all states, or under certain circumstances where
the Term Insurance Rider for Other Insured Persons is also
added to the policy.
Cost of Living Rider for the Insured. Provides for automatic
increases in the specified amount on each annual date,
subject to the terms of the rider; the amount of the increase
will be based on increases in the Consumer Price Index, as
specified in the rider. The rate class applicable to the
cost of living increases will be the rate class of the
insured on the issue date of the rider. There is no cost for
this rider.
Guaranteed Insurability Option Rider. Provides the right to
increase the specified amount on each option date by the
benefit amount shown in the rider. No evidence of
insurability will be required. Option dates are the annual
dates nearest the insured's 25th, 28th, 31st, 34th, 37th, and
40th birthdays. Option dates may be advanced in the event of
the insured's marriage or adoption of a child.
Accidental Death Benefit Rider. Provides an additional death
benefit payable if the insured's death results from certain
accidental causes. There is no cash value for this benefit.
Total Disability Benefit Rider - Waiver of Monthly Deduction.
Provides for waiver of the monthly deduction during the total
disability of the insured.
Total Disability Benefit Rider - Policy Continuation to
Maturity Date Not Guaranteed. Provides for the crediting to
the policy as premium payments the monthly total disability
benefit set forth in the rider during the total disability of
the insured.
Children's Insurance Rider. Provides a death benefit payable
on the death of a child of the insured. More than one child
can be covered. There is no cash value for this benefit.
Insurance Exchange Rider. Provides the right to exchange the
policy for a new policy on the life of a substitute insured.
Exercise of the right is subject to satisfactory evidence of
insurability of the substitute insured, and may result in a
cost or credit to the owner. The new policy can be any
adjustable life insurance policy issued by Union Central at
the time the exchange privilege is exercised. The policy
date for the new policy will generally be the same as the
policy date of the exchanged policy; the issue date for the
new policy will be the date of exchange. The initial cash
value under the new policy will be the same as the cash value
of the policy on the date of the exchange. There is no cost
for this rider, and there are no charges or other fees
imposed under the policy or the new policy at the time of the
exchange. For purposes of calculating any surrender charges
subsequently imposed on the policy acquired by exchange, we
will take into account the number of policy years that this
policy, AND the policy acquired by exchange, have been in
force. Exercise of this rider will result in a taxable
exchange.
Accelerated Benefits Rider. Provides for an accelerated
payment of up to 50% of the policy's death benefit (up to a
maximum benefit of $500,000). This advance payment of the
death benefit will be available if you are diagnosed as
terminally ill, as defined in the rider. Certain charges
will apply. Payment will be subject to evidence satisfactory
to Union Central. You should consult your tax adviser before
you request accelerated payment.
Maturity Extension Endorsement. Provides the right, within
two years of the maturity date defined in your policy, to
extend the maturity date to either the date of the insured's
death or the date you request full surrender of the policy,
whichever occurs first. If you exercise this extension
option, the following will occur: all other riders attached
to your policy will terminate on the original maturity date;
after the maturity date has been extended, the account value
will continue to vary based on investment experience and we
will continue to charge interest on policy loans, but we will
no longer accept new premium payments or deduct charges for
cost of insurance or monthly expenses. There is no cost for
this endorsement.
ADDITIONAL RULES AND LIMITS APPLY TO THESE SUPPLEMENTAL AND/OR
RIDER BENEFITS. NOT ALL SUCH BENEFITS MAY BE AVAILABLE AT ANY
TIME AND IN ANY GIVEN STATE, AND SUPPLEMENTAL AND/OR RIDER
BENEFITS IN ADDITION TO THOSE LISTED ABOVE MAY BE MADE
AVAILABLE. PLEASE ASK YOUR UNION CENTRAL AGENT FOR FURTHER
INFORMATION, OR CONTACT THE HOME OFFICE.
Addition, Deletion or Substitution of Investments
Union Central reserves the right, subject to applicable law, 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. If the shares of a portfolio are
no longer available for investment or if in Union Central's
judgment further investment in any portfolio should become
inappropriate in view of the purposes of the separate account,
Union Central may redeem the shares, if any, of that portfolio
and substitute shares of another registered open-end management
company or unit investment trust. Union Central will not
substitute any shares attributable to a policy's interest in the
separate account without notice and prior approval of the SEC
and state insurance authorities, to the extent required by the
1940 Act or other applicable law.
Union Central also reserves the right to establish additional
subaccounts of the separate account, each of which would invest
in shares corresponding to a new portfolio or in shares of
another investment company having a specific investment
objective. Subject to applicable law and any required SEC
approval, Union Central 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 subaccount may be made available to existing owner(s) on a
basis to be determined by Union Central.
If any of these substitutions or changes are made, Union Central
may by appropriate endorsement change the policy to reflect the
substitution or other change. If Union Central deems it to be
in the best interests of owner(s), 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 Union Central
separate accounts. Union Central reserves the right to make any
changes to the separate account required by the 1940 Act or
other applicable law or regulation.
Voting Rights
Union Central is the legal owner of shares held by the
subaccounts and as such has the right to vote on all matters
submitted to shareholders of the portfolios. However, as
required by law, Union Central will vote shares held in the
subaccounts at regular and special meetings of shareholders of
the portfolios in accordance with instructions received from
owners with account value in the subdivisions. Should the
applicable federal securities laws, regulations or
interpretations thereof change, Union Central may be permitted
to vote shares of the portfolios in its own right, and if so,
Union Central may elect to do so.
To obtain voting instructions from owners, before a meeting
owners will be sent voting instruction material, a voting
instruction form and any other related material. The number of
shares held by each subaccount for which an owner may give
voting instructions is currently determined by dividing the
portion of the owner's account value in the subdivision
corresponding to the subaccount by the net asset value of one
share of the applicable portfolio. Fractional votes will be
counted. The number of votes for which an owner may give
instructions will be determined as of the date coincident with
the date established by the fund for determining shareholders
eligible to vote at the relevant meeting of the fund. Shares
held by a subaccount for which no timely instructions are
received will be voted by Union Central in the same proportion
as those shares for which voting instructions are received.
Union Central may, if required by state insurance officials,
disregard owner voting instructions if such instructions would
require shares to be voted so as to cause a change in
sub-classification or investment objectives of one or more of
the portfolios, or to approve or disapprove an investment
advisory agreement. In addition, Union Central may under
certain circumstances disregard voting instructions that would
require changes in the investment advisory agreement or
investment adviser of one or more of the portfolios, provided
that Union Central reasonably disapproves of such changes in
accordance with applicable federal regulations. If Union
Central ever disregards voting instructions, owners will be
advised of that action and of the reasons for such action in the
next semiannual report. Finally, Union Central reserves the
right to modify the manner in which the weight to be given to
pass-through voting instructions is calculated when such a
change is necessary to comply with current federal regulations
or the current interpretation thereof.
Participating
The policy is issued on a participating basis, and as such is
eligible to share in Union Central's profits and surplus to the
extent determined by our Board of Directors in its sole
discretion. Union Central does not currently anticipate that
the policies will participate in profits or surplus in the
foreseeable future.
State Variations
Certain policy features, including the "free look,"
incontestability, and suicide provisions, are subject to state
variation. The owner should read his or her policy carefully to
determine whether any variations apply in the state in which the
policy is issued.
TAX CONSIDERATIONS
- ------------------------------------------------------------
Introduction
The following summary provides a general description of the
Federal income tax considerations associated with the policy and
does not purport to be complete or to cover all tax situations.
This discussion is not intended as tax advice. Counsel or other
competent tax advisors should be consulted for more complete
information. This discussion is based upon our understanding of
the present Federal income tax laws. No representation is made
as to the likelihood of continuation of the present Federal
income tax laws or as to how they may be interpreted by the
Internal Revenue Service.
Tax Status of the Policy
In order to qualify as a life insurance contract for Federal
income tax purposes and to receive the tax treatment normally
accorded life insurance contracts under Federal tax law, a life
insurance policy must satisfy certain requirements which are set
forth in the Internal Revenue Code. Guidance as to how these
requirements are to be applied is limited. Nevertheless, we
believe that a policy issued on a standard basis should satisfy
the applicable requirements. There is less guidance, however,
with respect to a policy issued on a substandard basis (i.e., a
premium class with extra rating involving higher than standard
mortality risk) and it is not clear whether such a policy will
in all cases satisfy the applicable requirements. If it is
subsequently determined that a policy does not satisfy the
applicable requirements, we may take appropriate steps to bring
the policy into compliance with such requirements and we reserve
the right to modify the policy as necessary in order to do so.
In certain circumstances, owners of variable life insurance
policies have been considered for Federal income tax purposes to
be the owners of the assets of the variable account supporting
their contracts due to their ability to exercise investment
control over those assets. Where this is the case, the
policyowners have been currently taxed on income and gains
attributable to variable account assets. There is little
guidance in this area, and some features of the policy, such as
the flexibility of the owner to allocate premium payments and
account value, have not been explicitly addressed in published
rulings. While we believe that the policy does not give the
owner investment control over variable account assets, we
reserve the right to modify the policy as necessary to prevent
the owner from being treated as the owner of the variable
account assets supporting the policy.
In addition, the Code requires that the investments of the
subaccounts be "adequately diversified" in order for the policy
to be treated as a life insurance contract for Federal income
tax purposes. It is intended that the subaccounts, through the
portfolios, will satisfy these diversification requirements.
The following discussion assumes that the policy will qualify as
a life insurance contract for Federal income tax purposes.
Tax Treatment of Policy Benefits
In General. We believe that the death benefit under a policy
should be excludible from the gross income of the beneficiary.
Federal, state and local estate, inheritance, transfer, and
other tax consequences of ownership or receipt of policy
proceeds depend on the circumstances of each owner or
beneficiary. A tax adviser should be consulted on these
consequences.
Generally, the owner of a policy will not be deemed to be in
constructive receipt of the account value until there is a
distribution. When distributions from a policy occur, or when
loans are taken out from or secured by a policy, the tax
consequences depend on whether the policy is classified as a
"Modified Endowment Contract."
Modified Endowment Contracts. Under the Internal Revenue Code,
certain life insurance contracts are classified as "Modified
Endowment Contracts," with less favorable tax treatment than
other life insurance contracts. Due to the flexibility of the
policy as to premium payments and benefits, the individual
circumstances of each policy will determine whether it is
classified as a Modified Endowment Contract. The rules are too
complex to be summarized here, but generally depend on the
amount of premium payments made during the first seven policy
years. Certain changes in a policy after it is issued could
also cause it to be classified as a Modified Endowment Contract.
A current or prospective owner should consult with a competent
adviser to determine whether a policy transaction will cause the
policy to be classified as a Modified Endowment Contract.
Distributions Other Than Death Benefits from Modified Endowment
Contracts. Policies classified as Modified Endowment Contracts
are subject to the following tax rules:
(1) All distributions other than death benefits from a Modified
Endowment Contract, including distributions upon surrender
and withdrawals, will be treated first as distributions of
gain taxable as ordinary income and as tax-free recovery of
the owner's investment in the policy only after all gain
has been distributed.
(2) Loans taken from or secured by a policy classified as a
Modified Endowment Contract are treated as distributions
and taxed accordingly.
(3) A 10 percent additional income tax is imposed on the amount
subject to tax except where the distribution or loan is
made when the owner has attained age 59-1/2 or is disabled, or
where the distribution is part of a series of substantially
equal periodic payments for the life (or life expectancy)
of the owner or the joint lives (or joint life
expectancies) of the owner and the owner's beneficiary or
designated beneficiary.
Distributions Other Than Death Benefits from Policies that are
not Modified Endowment Contracts. Distributions other than death
benefits from a policy that is not classified as a modified
endowment contract are generally treated first as a recovery of
the owner's investment in the policy and only after the recovery
of all investment in the policy as taxable income. However,
certain distributions which must be made in order to enable the
policy to continue to qualify as a life insurance contract for
Federal income tax purposes if policy benefits are reduced
during the first 15 policy years may be treated in whole or in
part as ordinary income subject to tax.
Loans from or secured by a policy that is not a Modified
Endowment Contract are generally not treated as distributions.
Finally, neither distributions from nor loans from or secured by
a policy that is not a Modified Endowment Contract are subject
to the 10 percent additional income tax.
Investment in the Policy. Your investment in the policy is
generally your aggregate premiums. When a distribution is taken
from the policy, your investment in the policy is reduced by the
amount of the distribution that is tax-free.
Policy Loans. In general, interest on a policy loan will not be
deductible. Before taking out a policy loan, you should consult
a tax adviser as to the tax consequences.
Multiple Policies. All Modified Endowment Contracts that are
issued by us (or our affiliates) to the same owner during any
calendar year are treated as one Modified Endowment Contract for
purposes of determining the amount includible in the owner's
income when a taxable distribution occurs.
Other Policy Owner Tax Matters. Businesses can use the policy
in various arrangements, including nonqualified deferred
compensation or salary continuance plans, split dollar insurance
plans, executive bonus plans, tax exempt and nonexempt welfare
benefit plans, retiree medical benefit plans and others. The
tax consequences of such plans may vary depending on the
particular facts and circumstances. If you are purchasing the
policy for any arrangement the value of which depends in part on
its tax consequences, you should consult a qualified tax
adviser. In recent years, moreover, Congress has adopted new
rules relating to life insurance owned by businesses. Any
business contemplating the purchase of a new policy or a change
in an existing policy should consult a tax adviser.
Possible Tax Law Changes. Although the likelihood of
legislative changes is uncertain, there is always the
possibility that the tax treatment of the policy could change by
legislation or otherwise. Consult a tax adviser with respect to
legislative developments and their effect on the policy.
Possible Charges for Union Central's Taxes
At the present time, Union Central makes no charge for any
Federal, state or local taxes (other than the charge for state
premium taxes) that may be attributable to the subaccounts or to
the policies. We reserve the right to charge the subaccounts
for any future taxes or economic burden we may incur.
OTHER INFORMATION ABOUT THE POLICIES AND UNION CENTRAL
- --------------------------------------------------------------
Sale of the Policies
The policies will be offered to the public on a continuous
basis, but we reserve the right to discontinue the offering.
Applications for policies are solicited by agents who are
licensed by applicable state insurance authorities and appointed
by us to sell our variable life contracts and who are also
registered representatives of Carillon Investments, Inc.
("Carillon Investments") or of a broker-dealer that has entered
into a selling agreement with Carillon Investments. The address
of Carillon Investments, one of our wholly-owned subsidiaries,
is 1876 Waycross Road, Cincinnati, Ohio 45240. Carillon
Investments is an Ohio corporation, formed on November 9, 1983,
and qualified to do business in all fifty states. Carillon
Investments is registered with the SEC under the Securities
Exchange Act of 1934 as a broker-dealer and is a member of the
National Association of Securities Dealers, Inc.
Carillon Investments acts as the principal underwriter (as
defined in the 1940 Act) for the separate account, pursuant to
an underwriting agreement between Union Central and Carillon
Investments. Carillon Investments is not obligated to sell any
specific number of policies. Selling agents may be paid a
maximum of 50% of planned periodic premiums paid up to an amount
equal to one "target premium," plus 2% of any other first-year
premiums. A "target premium" is an amount of premium based on
the insured's age at issue, sex, rate class, specified amount,
and supplemental and/or rider benefits. Selling agents may also
receive service fees in policy years after the first, additional
compensation based on persistency or other policy-related
factors, as well as non-cash compensation. We may also
compensate sales managers.
Union Central Directors and Executive Officers
See Appendix B for a list of the names, ages, addresses and
principal occupations of Union Central's directors and executive officers.
State Regulation
Union Central is subject to regulation by the Department of
Insurance of the State of Ohio, which periodically examines the
financial condition and operations of Union Central. Union
Central is also subject to the insurance laws and regulations of
all jurisdictions where it does business. The policy described
in this prospectus has been filed with and, where required,
approved by, insurance officials in those jurisdictions where it
is sold.
Union Central is required to submit annual statements of
operations, including financial statements, to the insurance
departments of the various jurisdictions where it does business
to determine solvency and compliance with applicable insurance
laws and regulations.
Preparing for Year 2000
Like all financial services providers, we utilize systems that
may be affected by Year 2000 transition issues and we rely on
service providers, including banks, custodians, and investment
managers that also may be affected. We and our affiliates have
developed, and are in the process of implementing, a Year 2000
transition plan, and are confirming that our service providers
are also so engaged. We and our affiliates are devoting
substantial resources to this effort. It is difficult to
predict with precision whether the amount of resources
ultimately devoted, or the outcome of these efforts, will have
any negative impact on us. However, as of the date of this
prospectus, it is not anticipated that you will experience
negative effects on your investment, or on the services we
provide, as a result of Year 2000 transition implementation. We
currently anticipate that our systems will be Year 2000
compliant on or about June 30, 1999, but there can be no
assurance that we will be successful. Our failure, or the
failure of one of our service providers to achieve timely and
complete compliance could materially impair our ability to
conduct business, including our ability to accurately and timely
value interests in the policies.
Additional Information
A registration statement under the Securities Act of 1933 has
been filed with the SEC relating to the offering described in
this prospectus. This prospectus does not include all the
information set forth in the registration statement. The
omitted information may be obtained at the SEC's principal
office in Washington, D.C. by paying the SEC's prescribed fees.
Experts
The financial statements of Carillon Life Account at December
31, 1998 and 1997 and for the years then ended, and of The Union
Central Life Insurance Company at December 31, 1998 and 1997 and
for the years then ended, appearing in this Prospectus and
Registration Statement, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their reports thereon
appearing elsewhere herein and in the Registration Statement,
and are included in reliance upon such reports given upon the
authority of such firm as experts in accounting and auditing.
Actuarial Matters
Actuarial matters included in this prospectus have been examined
by Kristal E. Hambrick, FSA, MAAA, of Union Central, whose
opinion is filed as an exhibit to the Registration Statement.
Litigation
No litigation is pending that would have a material effect upon
the separate account.
Legal Matters
Sutherland Asbill & Brennan LLP of Washington, D.C. has provided
advice on certain matters relating to the federal securities
laws.
Financial Statements
The financial statements of the separate account and of Union
Central appear on the following pages. The financial statements
of Union Central should be distinguished from financial
statements of the separate account and should be considered only
as bearing upon Union Central's ability to meet its obligations
under the policies.
<PAGE>
Financial Statements
Carillon Life Account
December 31, 1998
<PAGE>
Report of Independent Auditors
============================================================
To the Contractholders of Carillon Life
Account and the Board of Directors of
The Union Central Life Insurance Company
We have audited the accompanying statement of assets and
liabilities of the Carillon Life Account (comprised of the
Carillon Fund, Inc.'s Equity, Capital, Bond, and S & P 500 Index
Subaccounts, the Scudder Variable Life Investment Fund's Money
Market, Capital Growth, and International Subaccounts, MFS
Variable Insurance Trust's Growth with Income, High Income, and
Emerging Growth Subaccounts, The American Century Variable
Portfolios, Inc.'s Capital Appreciation Subaccount, and the
Templeton Variable Products Series Fund's International
Subaccount) as of December 31, 1998, the related statement of
operations for the year then ended and the statements of 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 the number of shares owned
as of December 31, 1998, by correspondence with the transfer
agents for Carillon Fund, Inc., Scudder Variable Life
Investment Fund, MFS Variable Insurance Trust, American Century
Variable Portfolios, Inc., and Templeton Variable Products
Series Fund. 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, the financial statements referred to above
present fairly, in all material respects, the financial position
of each of the respective subaccounts constituting the Carillon
Life Account at December 31, 1998, the results of their
operations for the year then ended and changes in net assets for
each of the two years in the period then ended in conformity
with generally accepted accounting principles.
/s/ Ernst & Young LLP
Cincinnati, Ohio
March 5, 1999
<PAGE>
<TABLE>
<CAPTION>
CARILLON LIFE ACCOUNT
STATEMENT OF ASSETS AND LIABILITIES
=============================================================================
DECEMBER 31, 1998
Carillon Fund, Inc.
(affiliated issuers)
---------------------------------------------
S&P 500
Equity Capital Bond Index
Subaccount Subaccount Subaccount Subaccount
<S> <C> <C> <C> <C>
ASSETS
Investments in securities of
unaffiliated issuers, at fair
value (cost $568,881;
$1,516,235; $1,092,325;
$2,015,429; $394,697; $893,712;
$882,814; $478,435) -- -- -- --
Investments in shares of
Carillon Fund, Inc.,
at fair value (cost $2,125,885;
$240,373; $458,780; $4,493,368) $1,729,630 $212,282 $449,424 $5,470,490
Total Invested Assets 1,729,630 212,282 449,424 5,470,490
OTHER ASSETS & (LIABILITIES) (13,622) (15,305) (3) 6,761
NET ASSETS
(Contract Owners' Equity) $1,716,008 $196,977 $449,421 $5,477,251
Accumulation units 143,131.22 19,310.85 36,346.01 278,881.06
Net asset value $11.98906 $10.20032 $12.36507 $19.64010
<CAPTION>
Scudder Variable Life
Investment Fund
(unaffiliated issuers)
---------------------------------------
Money Capital
Market Growth International
Subaccount Subaccount Subaccount
<S> <C> <C> <C>
ASSETS
Investments in securities of
unaffiliated issuers, at fair
value (cost $568,881;
$1,516,235; $1,092,325;
$2,015,429; $394,697; $893,712;
$882,814; $478,435) $568,881 $1,793,567 $1,155,038
Investments in shares of
Carillon Fund, Inc.,
at fair value (cost $2,125,885;
$240,373; $458,780; $4,493,368) -- -- --
Total Invested Assets 568,881 1,793,567 1,155,038
OTHER ASSETS & (LIABILITIES) 29,738 15,350 5,378
NET ASSETS
(Contract Owners' Equity) $598,619 $1,808,917 $1,160,416
Accumulation units 52,611.47 97,127.10 81,705.84
Net asset value $11.37810 $18.62422 $14.20235
<CAPTION>
MFS Variable
Insurance Trust
(unaffiliated issuer)
----------------------------------
Growth High Emerging
with Income Income Growth
Subaccount Subaccount Subaccount
<S> <C> <C> <C>
ASSETS
Investments in securities of
unaffiliated issuers, at fair
value (cost $568,881;
$1,516,235; $1,092,325;
$2,015,429; $394,697; $893,712;
$882,814; $478,435) $2,411,089 $377,221 $1,072,226
Investments in shares of
Carillon Fund, Inc.,
at fair value (cost $2,125,885;
$240,373; $458,780; $4,493,368)
2,411,089 377,221 1,072,226 -- -- --
Total Invested Assets $2,411,089 $377,221 $1,072,226
OTHER ASSETS & (LIABILITIES) (31,653) 2,233 283
NET ASSETS
(Contract Owners' Equity) $2,379,436 $379,454 $1,072,509
Accumulation units 132,107.17 33,045.13 64,598.75
Net asset value $18.01140 $11.48288 $16.60263
<CAPTION>
American Century Templeton Variable
Variable Portfolios, Inc. Products Series Fund
(unaffiliated issuers) (unaffiliated issuer)
------------------------ --------------------
Capital
Appreciation International
Subaccount Subaccount
<S> <C> <C>
ASSETS
Investments in securities of
unaffiliated issuers, at fair
value (cost $568,881;
$1,516,235; $1,092,325;
$2,015,429; $394,697; $893,712;
$882,814; $478,435) $839,018 $480,591
Investments in shares of
Carillon Fund, Inc.,
at fair value (cost $2,125,885;
$240,373; $458,780; $4,493,368) -- --
Total Invested Assets 839,018 480,591
OTHER ASSETS & (LIABILITIES) 1,888 4,467
NET ASSETS
(Contract Owners' Equity) $840,906 $485,058
Accumulation units 95,634.66 40,939.08
Net asset value $8.79291 $11.84828
</TABLE>
The accompanying notes are an integral part of
the financial statements.
<PAGE>
<TABLE>
<CAPTION>
CARILLON LIFE ACCOUNT
STATEMENT OF OPERATIONS
============================================================================
YEAR ENDED DECEMBER 31, 1998
Carillon Fund, Inc.
(affiliated issuers)
---------------------------------------------
S&P 500
Equity Capital Bond Index
Subaccount Subaccount Subaccount Subaccount
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend income $219,212 $14,439 $29,328 $127,074
EXPENSES
Mortality and expense
risk charge 10,886 1,182 2,502 26,751
-------- -------- -------- --------
NET INVESTMENT INCOME (LOSS) 208,326 13,257 26,826 100,323
-------- -------- -------- --------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on
investments (7,857) (11,122) 1,508 187,721
Net unrealized appreciation
(depreciation)of investments (475,951) (26,223) (11,968) 733,968
-------- -------- -------- --------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (483,808) (37,345) (10,460) 921,689
-------- -------- -------- --------
NET INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS ($275,482) ($24,088) $16,366 $1,022,012
======== ======== ======== ==========
<CAPTION>
Scudder Variable Life
Investment Fund
(unaffiliated issuers)
---------------------------------------
Money Capital
Market Growth International
Subaccount Subaccount Subaccount
<S> <C> <C> <C>
INVESTMENT INCOME
Dividend income $18,267 $56,839 $97,946
EXPENSES
Mortality and expense
risk charge 2,302 8,836 6,494
------- -------- --------
NET INVESTMENT INCOME (LOSS) 15,965 48,003 91,452
------- -------- --------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on
investments --- 28,543 4,157
Net unrealized appreciation
(depreciation)of investments --- 185,265 38,361
------- -------- --------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS --- 213,808 42,518
------- -------- --------
NET INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $15,965 $261,811 $133,970
======= ======== ========
<CAPTION>
MFS Variable
Insurance Trust
(unaffiliated issuer)
----------------------------------
Growth High Emerging
with Income Income Growth
Subaccount Subaccount Subaccount
<S> <C> <C> <C>
INVESTMENT INCOME
Dividend income --- $19,000 $ 4,008
EXPENSES
Mortality and expense
risk charge 11,388 2,056 4,154
-------- -------- --------
NET INVESTMENT INCOME (LOSS) (11,388) 16,944 (146)
-------- -------- --------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on
investments 7,164 910 2,607
Net unrealized appreciation
(depreciation)of investments 318,080 (25,221) 183,496
-------- -------- --------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS 325,244 (24,311) 186,103
-------- -------- --------
NET INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $313,856 ($7,367) $185,957
======== ======== ========
<CAPTION>
American Century Templeton Variable
Variable Portfolios, Inc. Products Series Fund
(unaffiliated issuers) (unaffiliated issuer)
------------------------ --------------------
Capital
Appreciation International
Subaccount Subaccount
<S> <C> <C>
INVESTMENT INCOME
Dividend income $35,184 $12,080
EXPENSES
Mortality and expense
risk charge 5,038 2,216
--------- --------
NET INVESTMENT INCOME (LOSS) 30,146 9,864
--------- --------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on
investments (26,995) 538
Net unrealized appreciation
(depreciation)of investments (17,722) 3,770
--------- --------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (44,717) 4,308
--------- --------
NET INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS ($14,571) $14,172
========= ========
</TABLE>
The accompanying notes are an integral part of
the financial statements.
<PAGE>CARILLON LIFE ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
===================================
<TABLE>
<CAPTION>
Carillon Fund, Inc.
Equity Subaccount
-----------------------
Year Ended December 31,
1998 1997
-------- --------
<S> <C> <C>
OPERATIONS
Net investment income $ 208,326 $ 57,482
Net realized gain (loss) on investments (7,857) 5,374
Net unrealized appreciation
(depreciation) of investments (475,951) 54,454
---------- ----------
Net increase (decrease) in net assets
resulting from operations (275,482) 117,310
---------- ----------
EQUITY TRANSACTIONS
Contract purchase payments 757,917 541,015
Transfers from other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company 527,933 476,305
Transfers to other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company (463,174) (237,426)
Surrenders (18,068) (24,127)
---------- ----------
Net proceeds from equity transactions 804,608 755,767
---------- ----------
NET INCREASE IN NET ASSETS 529,126 873,077
NET ASSETS (Beginning of year) 1,186,882 313,805
---------- ----------
NET ASSETS (End of year) $1,716,008 $1,186,882
========== ==========
</TABLE>
The accompanying notes are an integral part of
the financial statements.
<PAGE>
CARILLON LIFE ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
===================================
<TABLE>
<CAPTION>
Carillon Fund, Inc.
Capital Subaccount
-----------------------
Year Ended December 31,
1998 1997
-------- --------
<S> <C> <C>
OPERATIONS
Net investment income $ 13,257 $ 7,418
Net realized gain (loss) on investments (11,122) 68
Net unrealized depreciation of investments (26,223) (3,436)
-------- --------
Net increase (decrease) in net assets
resulting from operations (24,088) 4,050
-------- --------
EQUITY TRANSACTIONS
Contract purchase payments 97,128 77,042
Transfers from other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company 54,755 54,466
Transfers to other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company (59,011) (40,555)
Surrenders (5,145) (294)
-------- --------
Net proceeds from equity transactions 87,727 90,659
-------- --------
NET INCREASE IN NET ASSETS 63,639 94,709
NET ASSETS (Beginning of year) 133,338 38,629
-------- --------
NET ASSETS (End of year) $196,977 $133,338
======== ========
</TABLE>
The accompanying notes are an integral part of
the financial statements.
<PAGE>
CARILLON LIFE ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
===================================
<TABLE>
<CAPTION>
Carillon Fund, Inc.
Bond Subaccount
-----------------------
Year Ended December 31,
1998 1997
-------- --------
<S> <C> <C>
OPERATIONS
Net investment income $ 26,826 $ 5,771
Net realized gain on investments 1,508 275
Net unrealized appreciation (depreciation)
of investments (11,968) 2,461
-------- --------
Net increase in net assets
resulting from operations 16,366 8,507
-------- --------
EQUITY TRANSACTIONS
Contract purchase payments 117,035 75,946
Transfers from other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company 330,813 65,499
Transfers to other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company (145,201) (49,957)
Surrenders (6,653) (4,477)
-------- --------
Net proceeds from equity transactions 295,994 87,011
-------- --------
NET INCREASE IN NET ASSETS 312,360 95,518
NET ASSETS (Beginning of year) 137,061 41,543
-------- --------
NET ASSETS (End of year) $449,421 $137,061
======== ========
</TABLE>
The accompanying notes are an integral part of
the financial statements.
<PAGE>
CARILLON LIFE ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
===================================
<TABLE>
<CAPTION>
Carillon Fund, Inc.
S&P 500 Index Subaccount
------------------------
Year Ended December 31,
1998 1997
-------- --------
<S> <C> <C>
OPERATIONS
Net investment income $ 100,323 $ 25,114
Net realized gain on investments 187,721 171,324
Net unrealized appreciation of investments 733,968 205,312
---------- ----------
Net increase in net assets resulting
from operations 1,022,012 401,750
---------- ----------
EQUITY TRANSACTIONS
Contract purchase payments 2,070,371 1,526,494
Transfers from other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company 1,058,473 1,500,209
Transfers to other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company (1,568,399) (1,053,114)
Surrenders (41,604) (31,866)
---------- ----------
Net proceeds from equity transactions 1,518,841 1,941,723
---------- ----------
NET INCREASE IN NET ASSETS 2,540,853 2,343,473
NET ASSETS (Beginning of year) 2,936,398 592,925
---------- ----------
NET ASSETS (End of year) $5,477,251 $2,936,398
========== ==========
</TABLE>
The accompanying notes are an integral part of
the financial statements.
<PAGE>
CARILLON LIFE ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
===================================
<TABLE>
<CAPTION>
Scudder Variable Life Investment Fund
Money Market Subaccount
-----------------------
Year Ended December 31,
1998 1997
-------- --------
<S> <C> <C>
OPERATIONS
Net investment income $ 15,965 $ 12,068
---------- --------
Net increase in net assets resulting
from operations 15,965 12,068
---------- --------
EQUITY TRANSACTIONS
Contract purchase payments 3,170,692 2,943,446
Transfers from other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company 248,631 255,367
Transfers to other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company (3,354,918) (2,884,504)
Surrenders (17,624) (9,586)
---------- --------
Net proceeds from equity transactions 46,781 304,723
---------- --------
NET INCREASE IN NET ASSETS 62,746 316,791
NET ASSETS (Beginning of year) 535,873 219,082
---------- --------
NET ASSETS (End of year) $598,619 $535,873
========== ==========
</TABLE>
The accompanying notes are an integral part of
the financial statements.
<PAGE>
CARILLON LIFE ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
===================================
<TABLE>
<CAPTION>
Scudder Variable Life Investment Fund
Capital Growth Subaccount
-----------------------
Year Ended December 31,
1998 1997
-------- --------
<S> <C> <C>
OPERATIONS
Net investment income $ 48,003 $ 16,718
Net realized gain on investments 28,543 4,194
Net unrealized appreciation of investments 185,265 77,571
---------- --------
Net increase in net assets resulting
from operations 261,811 98,483
---------- --------
EQUITY TRANSACTIONS
Contract purchase payments 758,565 300,623
Transfers from other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company 572,746 241,177
Transfers to other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company (434,241) (149,666)
Surrenders (25,144) (6,173)
---------- --------
Net proceeds from equity transactions 871,926 385,961
---------- --------
NET INCREASE IN NET ASSETS 1,133,737 484,444
NET ASSETS (Beginning of year) 675,180 190,736
---------- --------
NET ASSETS (End of year) $1,808,917 $675,180
========== ========
</TABLE>
The accompanying notes are an integral part of
the financial statements.
<PAGE>
CARILLON LIFE ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
===================================
<TABLE>
<CAPTION>
Scudder Variable Life Investment Fund
International Subaccount
-----------------------
Year Ended December 31,
1998 1997
-------- --------
<S> <C> <C>
OPERATIONS
Net investment income $ 91,452 $ 3,211
Net realized gain on investments 4,157 3,099
Net unrealized appreciation of investments 38,361 14,756
---------- --------
Net increase in net assets resulting
from operations 133,970 21,066
---------- --------
EQUITY TRANSACTIONS
Contract purchase payments 495,334 402,988
Transfers from other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company 207,840 214,864
Transfers to other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company (314,317) (178,811)
Surrenders (16,592) (9,661)
---------- --------
Net proceeds from equity transactions 372,265 429,380
---------- --------
NET INCREASE IN NET ASSETS 506,235 450,446
NET ASSETS (Beginning of year) 654,181 203,735
---------- --------
NET ASSETS (End of year) $1,160,416 $654,181
========== ========
</TABLE>
The accompanying notes are an integral part of
the financial statements.
<PAGE>
CARILLON LIFE ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
===================================
<TABLE>
<CAPTION>
MFS Variable Insurance Trust
Growth with Income Subaccount
-----------------------------
Year Ended December 31,
1998 1997
---------- --------
<S> <C> <C>
OPERATIONS
Net investment income (loss) ($11,388) $ 16,756
Net realized gain on investments 7,164 3,633
Net unrealized appreciation of investments 318,080 70,494
---------- --------
Net increase in net assets
resulting from operations 313,856 90,883
---------- --------
EQUITY TRANSACTIONS
Contract purchase payments 828,591 363,999
Transfers from other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company 850,023 427,622
Transfers to other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company (454,281) (158,180)
Surrenders (19,193) (6,427)
---------- --------
Net proceeds from equity transactions 1,205,140 627,014
---------- --------
NET INCREASE IN NET ASSETS 1,518,996 717,897
NET ASSETS (Beginning of year) 860,440 142,543
---------- --------
NET ASSETS (End of year) $2,379,436 $860,440
========== ========
</TABLE>
The accompanying notes are an integral part of
the financial statements.
<PAGE>
CARILLON LIFE ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
===================================
<TABLE>
<CAPTION>
MFS Variable Insurance Trust
High Income Subaccount
-----------------------------
Year Ended December 31,
1998 1997
-------- --------
<S> <C> <C>
OPERATIONS
Net investment income (loss) $ 16,944 ($ 1,092)
Net realized gain on investments 910 2,033
Net unrealized appreciation
(depreciation) of investments (25,221) 7,859
------- --------
Net increase (decrease) in net assets
resulting from operations (7,367) 8,800
------- --------
EQUITY TRANSACTIONS
Contract purchase payments 140,444 74,122
Transfers from other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company 202,109 64,425
Transfers to other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company (82,593) (51,927)
Surrenders (4,684) (1,952)
-------- --------
Net proceeds from equity transactions 255,276 84,668
-------- --------
NET INCREASE IN NET ASSETS 247,909 93,468
NET ASSETS (Beginning of year) 131,545 38,077
-------- --------
NET ASSETS (End of year) $379,454 $131,545
======== ========
</TABLE>
The accompanying notes are an integral part of
the financial statements.
<PAGE>
CARILLON LIFE ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
===================================
<TABLE>
<CAPTION>
MFS Variable Insurance Trust
Emerging Growth Subaccount
-----------------------------
Year Ended December 31,
1998 1997
---------- --------
<S> <C> <C>
OPERATIONS
Net investment loss ($146) ($11)
Net realized gain on investments 2,607 146
Net unrealized appreciation
(depreciation) of investments 183,496 (4,982)
---------- --------
Net increase (decrease) in net assets
resulting from operations 185,957 (4,847)
---------- --------
EQUITY TRANSACTIONS
Contract purchase payments 309,922 36,456
Transfers from other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company 526,772 185,734
Transfers to other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company (150,046) (11,470)
Surrenders (5,969) ---
---------- --------
Net proceeds from equity transactions 680,679 210,720
---------- --------
NET INCREASE IN NET ASSETS 866,636 205,873
NET ASSETS (Beginning of year) 205,873 ---
---------- --------
NET ASSETS (End of year) $1,072,509 $205,873
========== ========
</TABLE>
The accompanying notes are an integral part of
the financial statements.
<PAGE>
CARILLON LIFE ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
===================================
<TABLE>
<CAPTION>
American Century Variable Portfolios, Inc.
Capital Appreciation Subaccount
-----------------------------
Year Ended December 31,
1998 1997
-------- --------
<S> <C> <C>
OPERATIONS
Net investment income $ 30,146 $3,304
Net realized loss on investments (26,995) (4,996)
Net unrealized depreciation on investments (17,722) (14,910)
-------- --------
Net decrease in net assets
resulting from operations (14,571) (16,602)
-------- --------
EQUITY TRANSACTIONS
Contract purchase payments 458,643 508,141
Transfers from other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company 99,739 154,646
Transfers to other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company (370,976) (214,444)
Surrenders (14,434) (10,480)
-------- --------
Net proceeds from equity transactions 172,972 437,863
-------- --------
NET INCREASE IN NET ASSETS 158,401 421,261
NET ASSETS (Beginning of year) 682,505 261,244
-------- --------
NET ASSETS (End of year) $840,906 $682,505
======== ========
</TABLE>
The accompanying notes are an integral part of
the financial statements.
<PAGE>
CARILLON LIFE ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
===================================
<TABLE>
<CAPTION>
Templeton Variable Products Series Fund
International Subaccount
-----------------------------
Year Ended December 31,
1998 1997
-------- --------
<S> <C> <C>
OPERATIONS
Net investment income (loss) $9,864 ($7)
Net realized gain on investments 538 43
Net unrealized appreciation
(depreciation) on investments 3,770 (1,615)
-------- --------
Net increase (decrease) in net assets
resulting from operations 14,172 (1,579)
-------- --------
EQUITY TRANSACTIONS
Contract purchase payments 254,306 56,373
Transfers from other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company 188,403 89,306
Transfers to other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company (99,573) (14,309)
Surrenders (2,041) ---
-------- --------
Net proceeds from equity transactions 341,095 131,370
-------- --------
NET INCREASE IN NET ASSETS 355,267 129,791
NET ASSETS (Beginning of year) 129,791 ---
-------- --------
NET ASSETS (End of year) $485,058 $129,791
======== ========
</TABLE>
The accompanying notes are an integral part of
the financial statements.
<PAGE>
CARILLON LIFE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
=============================================================
DECEMBER 31, 1998
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
Carillon Life Account of The Union Central Life Insurance
Company (the Life Account) is a separate account registered
under the Investment Company Act of 1940, as amended, as a unit
investment trust. The Life Account was established on July 10,
1995 under Ohio law and by resolution of the Board of Directors
of The Union Central life Insurance Company (Union Central) and
commenced operations on December 29, 1995. Carillon Life
Account is comprised of twelve subaccounts, each of which
invests in a corresponding Portfolio of Carillon Fund, Inc.,
Scudder Variable Life Investment Fund, MFS Variable Insurance
Trust, American Century Variable Portfolios, Inc., or Templeton
Variable Products Series Fund (the Funds). The Funds are no-
load, diversified, open-end management investment companies
registered under the Investment Company Act of 1940, as amended.
The shares of Carillon Fund, Inc. are sold only to Union Central
and its separate accounts to fund the benefits under certain
variable life policies and variable annuity contracts. Carillon
Investments, Inc. (the Distributor), a broker-dealer registered
under the Securities Exchange Act of 1934 and a wholly-owned
subsidiary of Union Central, serves as the distributor of
variable life policies and variable annuity contracts issued by
Carillon Fund, Inc. The shares of Scudder Variable Life
Investment Fund, MFS Variable Insurance Trust, American Century
Variable Portfolios, Inc., and Templeton Variable Products
Series Fund, are available and are being marketed exclusively as
a pooled funding vehicle for life insurance companies writing
all types of variable life insurance policies and variable
annuity contracts. Scudder Investor Services, Inc., a wholly-
owned subsidiary of Scudder Stevens & Clark Inc., serves as
distributor of variable life insurance policies and variable
annuity contracts issued by Scudder Variable Life Investment
Fund. MFS Fund Distributors, Inc., a wholly-owned subsidiary
of Massachusetts Financial Services Company, serves as
distributor of shares issued by the MFS Variable Insurance
Trust. American Century Investment Services, Inc., an affiliate
of the fund's investment manager, serves as the distributor of
variable life insurance contracts issued by American Century
Variable Portfolios, Inc. Franklin Templeton Distributors, Inc.
serves as the distributor of variable annuity and variable life
insurance contracts issued by Templeton Variable Products
Series Fund.
The assets of the Life Account are segregated from the other
assets of Union Central and the investment performance of the
Life Account is independent of the investment performance of
both Union Central's general assets and other separate accounts.
Investment valuation - Assets of the Life Account are invested
in shares of the Funds at the net asset value of the Funds'
shares. Investments in the Funds' shares are subsequently
valued at the net asset value of the Funds' shares held.
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. Estimates also affect the reported
amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Securities transactions and investment income - Securities
transactions are recorded on the trade date (the date the order
to buy or sell is executed), and dividend income is recorded on
the ex-dividend date. Gains and losses on sales of the Funds'
shares are calculated on the first-in, first-out basis for
financial reporting and tax purposes. All dividends and
distributions from the Subaccount are reinvested in additional
shares of the respective Subaccount at the net asset value per
share.
Federal income taxes - The operations of the Life Account form a
part of and are taxed with the operations of Union Central.
Union Central is taxed as a life insurance company under
Subchapter L of the Internal Revenue Code. Under existing
federal income tax law, separate account investment income and
capital gains are not taxed to the extent they are applied to
increase reserves under a contract issued in connection with the
Life Account. Investment income and realized capital gains and
losses on assets of the Life Account are automatically applied
to increase or decrease reserves under the contract.
Accordingly, no provision for federal income taxes has been made
in these financial statements.
NOTE 2 - INVESTMENT IN AFFILIATED & NON-AFFILIATED FUNDS
The subaccounts of the Life Account held the following
investment in the corresponding Portfolios of Carillon Fund,
Inc., Scudder Variable Life Investment Fund, MFS Variable
Insurance Trust, American Century Variable Portfolios, Inc., and
Templeton Variable Products Series Fund as of December 31,
1998:
<TABLE>
<CAPTION>
Carillon Fund, Inc.
-----------------------------------------------
Equity Capital Bond S&P 500 Index
Subaccount Subaccount Subaccount Subaccount
<S> <C> <C> <C> <C>
Net asset value per share $ 14.89 $ 11.20 $ 11.13 $ 19.49
Number of shares 116,161 18,954 40,380 280,682
<CAPTION>
Scudder Variable Life
Investment Fund
---------------------
Money Capital
Market Growth International
Subaccount Subaccount Subaccount
<S> <C> <C> <C>
Net asset value per share $ 1.00 $ 23.95 $ 14.56
Number of shares 568,881 74,888 79,330
<CAPTION>
MFS Variable Insurance Trust
----------------------------
Growth with Income High Income Emerging Growth
Subaccount Subaccount Subaccount
<S> <C> <C> <C>
Net asset value per share $ 20.11 $ 11.53 $ 21.47
Number of shares 119,895 32,716 49,941
<CAPTION>
American Century Variable Portfolios, Inc.
------------------------------------------
Capital
Appreciation
Subaccount
<S> <C>
Net asset value per share $ 9.02
Number of shares 93,018
<CAPTION>
Templeton Variable Products Series Fund
---------------------------------------
International
Subaccount
<S> <C>
Net asset value per share $ 20.61
Number of shares 23,318
</TABLE>
NOTE 3 - ACCOUNT CHARGE
Mortality and expense risk charge - A mortality and expense risk
charge for Union Central at an annual rate of .75% of the net
assets during the first ten policy years and .25% of net assets
thereafter of the Life Account is determined daily. The
mortality risk Union Central assumes is that the insureds on the
policies may die sooner than anticipated and therefore Union
Central will pay an aggregate amount of death benefits greater
than anticipated. The expense risk assumed by Union Central is
that expenses incurred in assuming and administering the
policies and the separate account will exceed the amounts
realized from the administrative charges assessed against the
policies.
NOTE 4 - IMPACT OF YEAR 2000 (UNAUDITED)
Some of Union Central's computer programs were written using two
digits rather than four to define the applicable year. As a
result, those computer programs have software that may recognize
a date using "00" as the year 1900 rather than the year 2000.
Computer software incorrectly recognizing a date would cause
Union Central's computing environment to not function as
expected. Among the results could be miscalculations causing
disruptions of operations.
Union Central is addressing the Year 2000 issue through four
steps: assessment, remediation, testing and implementation.
Union Central began addressing the Year 2000 issue in 1996 with
a complete inventory and assessment of its mainframe systems.
As a result of the assessment, Union Central divided its
mainframe systems into the following groups based on the steps
required to address the Year 2000 issue: systems needing
remediation, systems needing rewriting, systems needing to be
replaced, systems needing to be tested only, and systems needing
to be retired. Union Central has also performed as assessment
of its personal computer (PC)/LAN based systems and analyzed its
non-information technology systems such as heating, cooling,
lighting, elevators, building security, alarms and phones for
Year 2000 compliance.
Remediation of Union Central's mainframe systems is complete.
Work on those systems needing replacing are in progress and near
completion. The remediation of PC/LAN based systems is also in
progress and near completion. Remediation of systems support
software is in progress and is near completion. Completion will
occur as Year 2000 compliant releases are made available by
Union Central's vendors.
Regression testing of all remediated and rewritten mainframe
systems is complete. Future date testing of all critical
systems is underway and is expected to be completed by May 31,
1999. Testing with significant business partners is planned
with completion dates no later than June 30, 1999. Testing of
PC/LAN based systems is in progress with an expected completion
date of June 30, 1999.
Union Central's mainframe systems have been regression tested
and are in production mode. Full implementation of all systems
is scheduled to occur no later than June 30, 1999.
In addition to internal systems, Union Central has many
relationships with external vendors, suppliers and business
partners. Union Central has initiated formal communications,
including a definition of Year 2000 compliance, with all
significant vendors, suppliers and business partners to
determine their Year 2000 status. All are either compliant or
in the process of becoming compliant. Union Central is not
aware of any external entity that based on their Year 2000
status would materially impact our ability to provide continuing
service to our customers or impact us financially. This is an
ongoing process and we will continue to monitor the progress of
our important outside vendors and service providers.
Based on the remediation, upgrades, and testing that has been
completed so far, management believes that the primary risks are
possible individual program failures, not major outages or
inability to conduct business. Considerable progress has been
made toward total Year 2000 compliance and the major effort
remaining is to ensure this by thorough future-date testing. In
the unlikely event Union Central does not complete any further
work, we would expect no major disruption to our ability to
conduct business, but would anticipate sporadic errors and
system interruptions to occur. However, it is not possible to
anticipate all future outcomes, particularly where third parties
are involved, and as a result there could be circumstances in
which Union Central may experience unexpected difficulties
relating to the Year 2000.
The internal risk being managed is that there are date problems
in systems that have not been found and corrected. The overall
contingency plan is to have sufficient time to find and correct
any errors. The future date testing that is underway will allow
us six to nine months to correct errors found through the
testing. Additionally, specific contingent plans are being
written for major functions such as financial reporting.
Externally we are continuing to monitor the progress of our
critical third party vendors and service providers. Our
contingency plan is to replace any such relationships should
they not achieve and demonstrate Year 2000 compliance by
June 30, 1999.
NOTE 5 - RELATED PARTY TRANSACTIONS
Investment advisory fees - Each Portfolio within Carillon Fund,
Inc. (the CFI Funds) pay investment advisory fees to Carillon
Advisers, Inc. (the Adviser), under terms of an Investment
Advisory Agreement (the Agreement). Certain officers and
directors of the Adviser are affiliated with the CFI Funds. The
CFI Funds pay the Adviser, as full compensation for all services
and facilities furnished, a monthly fee computed separately for
each Portfolio on a daily basis, at an annual rate, as follows:
(a) for the Equity Portfolio - .65% of the first
$50,000,000, .60% of the next $100,000,000, and .50% of
all over $150,000,000 of the current net asset value:
(b) for the Capital Portfolio - .75% of the first
$50,000,000, .65% of the next $100,000,000, and .50% of
all over $150,000,000 of the current net asset value.
(c) for the Bond Portfolio - .50% of the first $50,000,000,
.45% of the next $100,000,000, and .40% of
all over $150,000,000 of the current net asset value.
(d) for the S&P 500 Index Portfolio - .30% of the current
net asset value.
The Agreement provides that if the total operating expenses of
the CFI Funds, exclusive of the advisory fee and certain other
expenses as described in the Agreement, for any fiscal quarter
exceed an annual rate of 1% of the average daily net assets of
the Equity, Capital, or Bond Portfolios, the Adviser will
reimburse the CFI Funds for such excess, up to the amount of the
advisory fee for that year. The Adviser has agreed to waive its
advisory fee and pay any other expenses of the S&P 500 Index
Portfolio to the extent that such expenses exceed 0.60% of its
average annual net assets.
In addition to providing investment advisory services, the
Adviser is responsible for providing certain administrative
functions to the CFI Funds. The Adviser has entered into an
Administration Agreement with the Distributor under which the
Distributor furnishes substantially all of such services for an
annual fee of .20% of the CFI Funds' average net assets for the
Equity, Capital, and Bond Portfolios, and .05% of the CFI Funds'
average net assets for the S&P 500 Index Portfolio. The fee is
borne by the Adviser, not the CFI Funds.
Carillon Advisers, Inc. is a wholly-owned subsidiary of Union
Central.
<PAGE>
NOTE 6 - SELECTED PER UNIT DATA
The following selected per unit data is computed on the basis of
an accumulation unit outstanding at December 31 (ratio of
expenses and total return are of the underlying funds):
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
CARILLON FUND, INC.
EQUITY SUBACCOUNT
Accumulation unit value $11.99 $14.26 $11.92
Number of accumulation units outstanding,
end of period 143,131.22 83,212.46 26,326.12
Ratio of expenses to average net assets 0.62% 0.62% 0.64%
Total return -15.31% 20.56% 24.52%
CAPITAL SUBACCOUNT
Accumulation unit value $10.20 $11.85 $11.11
Number of accumulation units outstanding,
end of period 19,310.85 11,255.09 3,475.76
Ratio of expenses to average net assets 0.79% 0.77% 0.77%
Total return -13.25% 7.40% 14.94%
BOND SUBACCOUNT
Accumulation unit value $12.37 $11.70 $10.61
Number of accumulation units outstanding,
end of period 36,346.01 11,719.47 3,914.14
Ratio of expenses to average net assets 0.58% 0.60% 0.62%
Total return 6.52% 11.02% 7.19%
S&P 500 INDEX SUBACCOUNT
Accumulation unit value $19.64 $15.39 $11.69
Number of accumulation units outstanding,
end of period 278,881.06 190,744.45 50,735.13
Ratio of expenses to average net assets 0.43% 0.50% 0.59%
Total return 28.54% 32.72% 23.37%
SCUDDER VARIABLE LIFE INVESTMENT FUND
MONEY MARKET SUBACCOUNT
Accumulation unit value $11.38 $10.89 $10.42
Number of accumulation units outstanding,
end of period 52,611.47 49,222.39 21,025.06
Ratio of expenses to average net assets 0.44% 0.46% 0.46%
Total return 5.29% 5.25% 5.09%
CAPITAL GROWTH SUBACCOUNT
Accumulation unit value $18.62 $15.23 $11.30
Number of accumulation units outstanding,
end of period 97,127.10 44,339.15 16,877.42
Ratio of expenses to average net assets 0.50% 0.51% 0.53%
Total return 23.23% 35.76% 20.13%
INTERNATIONAL SUBACCOUNT
Accumulation unit value $14.20 $12.08 $11.16
Number of accumulation units outstanding,
end of period 81,705.84 54,168.43 18,261.97
Ratio of expenses to average net assets 1.04% 1.00% 1.05%
Total return 18.49% 9.07% 14.78%
MFS VARIABLE INSURANCE TRUST
GROWTH WITH INCOME SUBACCOUNT
Accumulation unit value $18.01 $14.84 $11.52
Number of accumulation units outstanding,
end of period 132,107.17 58,000.19 12,377.12
Ratio of expenses to average net assets 0.95% 1.00% 1.01%
Total return 22.32% 29.78% 24.46%
HIGH INCOME SUBACCOUNT
Accumulation unit value $11.48 $11.59 $10.28
Number of accumulation units outstanding,
end of period 33,045.13 11,350.02 3,704.87
Ratio of expenses to average net assets 1.03% 1.01% 1.01%
Total return -0.18% 13.52% 11.80%
EMERGING GROWTH SUBACCOUNT
Accumulation unit value 16.60 12.47<F1>
Number of accumulation units outstanding,
end of period 64,598.75 16,511.82
Ratio of expenses to average net assets 0.85% 0.90%
Total return 34.16% 21.90%
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
CAPITAL APPRECIATION
Accumulation unit value $8.79 $9.05 $9.43
Number of accumulation units outstanding,
end of period 95,634.66 75,378.70 27,704.30
Ratio of expenses to average net assets 1.00% 1.00% 1.00%
Total return -2.16% -3.26% -4.32%
TEMPLETON VARIABLE PRODUCTS SERIES FUND
INTERNATIONAL SUBACCOUNT
Accumulation unit value $11.85 $10.94<F1>
Number of accumulation units outstanding,
end of period 40,939.08 11,859.30
Ratio of expenses to average net assets 1.11% 1.13%
Total return 9.08% 9.46%
<FN>
<F1> Commencement of operations was May 1, 1997, with a beginning accumulation
unit value of $10.00.
</FN>
</TABLE>
<PAGE>
Consolidated Financial Statements
The Union Central Life Insurance Company
and Subsidiaries
Years ended December 31, 1998 and 1997
with Report of Independent Auditors
<PAGE>
THE UNION CENTRAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 1998 and 1997
CONTENTS
Page
Report of Independent Auditors ....................... 1
Consolidated Balance Sheets .......................... 2
Consolidated Statements of Income .................... 3
Consolidated Statements of Equity .................... 4
Consolidated Statements of Cash Flows ................ 5
Notes to Consolidated Financial Statements ........... 6
<PAGE>
Report of Independent Auditors
To the Board of Directors of
The Union Central Life Insurance Company
We have audited the accompanying consolidated balance sheets of
The Union Central Life Insurance Company and subsidiaries as of
December 31, 1998 and 1997, and the related consolidated
statements of income, equity, and cash flows for the years 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. 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, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of The Union Central Life Insurance Company
and subsidiaries at December 31, 1998, and 1997, and the
consolidated results of their operations and their cash flows
for the years then ended in conformity with generally accepted
accounting principles.
March 19, 1999
<PAGE>
THE UNION CENTRAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
December 31,
1998 1997
<S> <C> <C>
ASSETS
Investments:
Fixed maturities available-for-sale
at fair value (amortized cost: $2,674,832 $2,758,113
1998 - $2,637,815; and 1997 - $2,697,869)
Equity securities available-for-sale
at fair value (cost: 1998 - $100,429
and 1997 - $59,675) 82,269 63,138
Cash and short-term investments 57,376 4,872
Other invested assets 49,810 54,342
Mortgage loans 790,337 744,395
Real estate 43,205 50,409
Policy loans 201,958 203,481
---------- ----------
Total investments 3,899,787 3,878,750
Accrued investment income 46,857 48,846
Deferred policy acquisition costs 382,971 371,295
Property, plant and equipment,
at cost, less accumulated
depreciation (1998 - $60,201
and 1997 - $59,096) 25,272 24,205
Federal income tax recoverable 6,415 6,595
Other assets 101,735 91,758
Separate account assets 1,530,755 1,288,349
---------- ----------
Total assets $5,993,792 $5,709,798
---------- ----------
LIABILITIES AND EQUITY
Policy liabilities:
Future policy benefits $2,003,308 $1,933,823
Deposit funds 1,539,075 1,549,965
Policy and contract claims 34,499 31,869
Policyholders' dividends 37,192 37,624
Total policy liabilities 3,614,074 3,553,281
Deferred revenue 101,823 110,130
Other liabilities 84,792 76,053
Deferred federal income taxes 15,744 33,341
Surplus notes payable 49,758 49,749
Separate account liabilities 1,524,810 1,288,349
---------- ----------
Total liabilities 5,391,001 5,110,903
MINORITY INTEREST IN SUBSIDIARY'S EQUITY 36,320 42,391
EQUITY
Policyholders' equity 571,895 532,404
Accumulated other comprehensive income (5,424) 24,100
---------- ----------
Total equity 566,471 556,504
Total liabilities and equity $5,993,792 $5,709,798
========== ==========
</TABLE>
The accompanying notes are an integral part of
the financial statements.
<PAGE>
THE UNION CENTRAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands)
<TABLE>
<CAPTION>
Year ended December 31
1998 1997
---------- ----------
<S> <C> <C>
REVENUE
Insurance revenue:
Traditional insurance premiums $ 138,358 $ 131,974
Universal life policy charges 84,662 88,645
Annuities 43,778 37,569
Net investment income 307,839 298,509
Net realized gains (losses) on investments (7,679) 20,617
Other 8,999 8,059
---------- ----------
Total revenue 575,957 585,373
BENEFITS AND EXPENSES
Benefits 188,217 181,587
Increase (decrease) in reserves
for future policy benefits 1,791 (7,912)
Interest expense:
Universal life 57,364 53,756
Investment products 89,150 91,239
Underwriting, acquisition
and insurance expense 165,676 168,504
Policyholders' dividends 20,626 20,304
---------- ----------
Total benefits and expenses 522,824 507,478
Income before federal income tax and
minority interest in subsidiary income 53,133 77,895
Federal income tax expense 16,687 27,175
---------- ----------
Income before minority interest in
subsidiary income 36,446 50,720
Minority interest in subsidiary (income) loss 3,045 (2,034)
---------- ----------
Net Income $ 39,491 $ 48,686
========== ==========
</TABLE>
The accompanying notes are an integral part of
the financial statements.
<PAGE>
UNION CENTRAL LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF EQUITY
(in thousands)
<TABLE>
<CAPTION>
Accumulated
Other
Comprehensive Policyholders'
Income Equity Total
------ ------ -----
<S> <C> <C> <C>
Balance at January 1, 1996 $13,002 $481,799 $494,801
Net income 48,686 48,686
Unrealized gains on securities,
net of tax and reclassification
adjustment 12,338 12,338
Minimum pension liability
adjustment (1,240) (1,240)
-------
Comprehensive income 59,784
Other 1,919 1,919
-------- --------
Balance at December 31, 1997 24,100 532,404 556,504
------- -------- --------
Net income 39,491 39,491
Unrealized losses on securities,
net of tax and reclassification
adjustment (23,393) (23,393)
Minimum pension liability
adjustment (6,131) (6,131)
------- --------
Comprehensive income 9,967
--------
Balance at December 31, 1998 $(5,424) $571,895 $566,471
======= ======== ========
</TABLE>
The accompanying notes are an integral part of the
financial statements.
<PAGE>
THE UNION CENTRAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Year ended December 31
1998 1997
---------- ----------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 39,491 $ 48,686
Adjustments to net income not affecting cash:
Interest credited to universal life policies 57,364 53,756
Interest credited to interest sensitive
products 89,150 91,239
Accrual of discounts on investments, net 628 (2,610)
Net realized (gains) and losses on investments 7,679 (20,617)
Depreciation 5,081 4,355
Amortization of deferred policy
acquisition costs 41,348 60,979
Amortization of deferred revenue (12,200) (17,633)
Deferred federal income tax benefit (71) (9,452)
Change in operating assets and liabilities:
Accrued investment income 1,989 (1,355)
Policy cost deferred (43,382) (41,608)
Revenue deferred 1,959 2,340
Policy liabilities (27,465) (53,705)
Federal income tax recoverable (payable) (100) 294
Change in other liabilities (21,515) (15,786)
Other items, net (3,212) 10,630
---------- ----------
Cash Provided by Operating Activities 136,744 109,513
---------- ----------
INVESTING ACTIVITIES
Costs of investments acquired (2,421,256) (3,295,204)
Proceeds from sale, maturity or repayment of
investments 2,399,096 3,264,331
Decrease in policy loans 1,523 3,408
Purchases of property and equipment, net (5,780) (5,627)
---------- ----------
Cash Used in Investing Activities (26,417) (33,092)
FINANCING ACTIVITIES
Receipts from universal life and
investment contracts 733,489 607,809
Withdrawals from universal life
and investment contracts (791,312) (673,586)
Purchase of stock from minority shareholders 0 (6,812)
---------- ----------
Cash Used by Financing Activities (57,823) (72,589)
---------- ----------
Increase in cash and short term investments 52,504 3,832
---------- ----------
Cash and short term investments
at beginning of year 4,872 1,040
---------- ----------
Cash and short term investments at end of year $ 57,376 $ 4,872
========== ==========
Supplemental disclosure
of cash flow information:
Cash paid during the year
for federal income taxes $ 24,277 $ 36,297
Cash paid during the year
for interest on surplus notes $ 4,100 $ 4,066
</TABLE>
NOTE 1 - NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING
POLICIES
Basis of Presentation and Organization
The accompanying consolidated financial statements have been
prepared in accordance with generally accepted accounting
principles (GAAP) and include the accounts of The Union Central
Life Insurance Company (Union Central) and the following
subsidiaries: The Manhattan Life Insurance Company (Manhattan
Life), a mixed charter life insurance company of which Union
Central owns 100% of the outstanding guarantee capital shares,
Carillon Advisers, Inc. (CAI), a registered investment advisor
company, wholly-owned and Carillon Investments, Inc. (CII) a
registered broker dealer, wholly-owned. The consolidated entity
will be referred to as "the Company". All significant
intercompany accounts and transactions have been eliminated in
the accompanying consolidated financial statements. Union
Central also has the following unconsolidated investment
affiliates: Carillon Fund, Inc., a variable products mutual
fund consisting of five investment portfolios (equity, bond,
asset allocation, S&P 500 indexed and micro-cap); Summit
Investment Trust, consisting of two mutual funds (Summit
Emerging Markets Bond Fund, an emerging markets corporate and
government bond mutual fund and Summit High Yield Fund, a high-
yield bond mutual fund).
The Company provides a wide spectrum of financial products and
related services for the benefit of individual, group and
pension policyholders. Such products and services include
insurance to provide for financial needs resulting from loss of
life or income and management of funds accumulated for
preretirement and retirement needs.
The Company is licensed to do business in all 50 states of the
United States.
The preparation of financial statements requires management to
make estimates and assumptions that affect amounts reported in
the financial statements and accompanying notes. Such estimates
and assumptions could change in the future as more information
becomes known, which could impact the amounts reported and
disclosed herein.
At December 31, 1996, Union Central owned approximately 73% of
Manhattan Life's guarantee capital shares. On January 28, 1997,
the guarantee capital shareholders constituting at least two-
thirds of the outstanding guarantee capital shares of Manhattan
Life (including the shares owned by Union Central) approved
Union Central's plan to eliminate the minority interests in
Manhattan Life's guarantee capital shares by effecting a reverse
stock split (the "Plan") that had previously been approved by
the New York Insurance Department. Under the Plan, each holder
of guarantee capital shares received a cash payment in lieu of
the issuance of any resulting fractional guarantee capital
shares, with Union Central becoming sole remaining holder of
Manhattan Life's guarantee capital shares. The cost of
redeeming the fractional shares, $6,812,000, was funded by
Manhattan Life; however, as part of the Plan, Union Central made
a cash contribution of $1,823,000 to Manhattan Life's guarantee
capital share account. As a result of effecting the reverse
stock split, Union Central's policyholders equity increased by
$1,919,000. This represents the cumulative prior years' amount
of the minority shareholders' share of Manhattan Life's
shareholders equity of $8,731,000, less the cost of redeeming
the fractional shares. The increase in policyholders' equity is
included in "Other" in the Statements of Equity. In connection
with effecting the reverse stock split, the Company incurred and
capitalized $2,782,000 of issuance cost. This cost was recorded
in "Other assets" in the Balance Sheets, and will be amortized
under the straight-line method to expense over 15 years.
Capitalized expenses amortized to "Underwriting, acquisition and
insurance expense" in the Statements of Income, was $185,000 for
the years ended December 31, 1998 and 1997.
In 1998, Manhattan Life was restructured so that the majority of
its operating activities were merged with Union Central's. To
facilitate the restructuring, Manhattan Life temporarily
suspended its sales of new business in early 1998. In
connection with the restructuring, substantially all of the
employees of Manhattan Life were terminated, resulting in the
recognition of $3.5 million in severance expense for the year
ended December 31, 1998. This expense is included in
"Underwriting, acquisition and insurance expense" in the
accompanying Statements of Income. Also, Manhattan Life has
maintained the lease of its home office space (see Note 6) as it
is required for its current business needs. In addition,
Manhattan Life partially terminated its pension and
postretirement benefit plans as a result of this restructuring.
(See Note 8 for a complete description of the effect of the
partial termination.)
<PAGE>
Investments
Fixed maturity and equity securities classified as available-
for-sale are carried at fair value with net unrealized gains and
losses reported as a separate component of equity.
Other investments are reported on the following bases:
- Mortgage loans on real estate are carried at their
aggregate unpaid balance less unamortized discount and
less an allowance for possible losses.
- Real estate acquired through foreclosure is carried at
the lower of cost or its net realizable value.
- Policy loans are reported at unpaid balances.
- Cash and short-term investments presented on the Balance
Sheets consist of cash-in-bank, cash-in-transit and
commercial paper that has a maturity date of 90 days or
less from the date acquired.
The Company's carrying value of investments in limited
partnerships are adjusted to reflect the GAAP earnings of the
investments underlying the limited partnership portfolios.
During 1998, the company declared two of its hedge fund limited
partnerships permanently impaired and recorded a realized loss
of $15.8 million.
The fair values of fixed maturity and equity securities
represent quoted market values from published sources or
calculated market values using the "yield method" if no quoted
market values are obtainable.
Realized gains and losses on sales of investments, net of
related deferred policy acquisition cost and unearned revenue
amortization, are recognized on a first-in, first-out basis.
Declines in the value of investments judged to be other-than-
temporary are recognized on a specific identification basis.
Interest is not accrued on mortgage loans or bonds for which
principal or interest payments are determined to be
uncollectible.
The Company purchases call options to hedge insurance contracts
whose credited interest is linked to returns in Standard &
Poor's 500 Stock Index (Index) based on a formula which applies
participation rates to the returns in the Index. Call options
are contracts which give the option purchaser the right, but not
the obligation, to buy securities at a specified price during a
specified period. The Company holds call options which expire
quarterly until December 1, 1999. The Company paid initial fees
(the option premium) to enter the option contracts. The Index
call options give the Company the right to receive cash at
settlement if the closing Index value is above the strike price.
These proceeds do not result in income to the Company because
the hedged insurance contracts would be credited interest for an
equivalent amount.
The Company is exposed to credit-related losses in the event of
nonperformance by counterparties to the call options. To
minimize this risk, the Company only enters into private options
contracts with counterparties having Standard & Poor's credit
ratings of AA- or above or listed contracts guaranteed by the
Chicago Board Options Exchange. The credit exposure is limited
to the value of the call options at a particular point in time.
The value of the call options was $4,900,000 at December 31,
1998.
The call options were carried at their fair value of $4,900,000
at December 31, 1998, and were reflected in "Other invested
assets" in the Balance Sheets. The liabilities for the hedged
insurance contracts were adjusted based on the returns in
Standard & Poor's 500 Stock Index, and were reflected in
"Deposit funds" in the Balance Sheets.
Deferred Policy Acquisition Costs
The costs of acquiring new business, principally commissions,
certain expenses of the policy issue and underwriting department
and certain variable agency expenses have been deferred.
Deferred policy acquisition costs are amortized consistent with
the methods described in "Policy Liabilities, Revenues, Benefits
and Expenses," and the effect of realized gains and losses on
deferred policy acquisition cost amortization is restored or
amortized and is netted against "Net realized gains (losses) on
investments". Amortization of deferred policy acquisition costs
totalled $41,348,000 and $60,979,000, net of the effect of
realized gains and (losses) on amortization of $(3,489,000) and
$13,309,000 for the years ended December 31, 1998 and 1997,
respectively, and were included in "Underwriting, acquisition
and insurance expense" in the Statements of Income. Deferred
policy acquisition costs are adjusted to reflect the impact of
unrealized gains on available-for-sale securities. Adjustments
reducing deferred policy acquisition costs related to unrealized
gains totalled $11,474,000 and $17,627,000 at 1998 and 1997,
respectively.
In 1998 and 1997, the Company revised its estimates of future
gross profits, and as a result amortization of deferred policy
acquisition costs included in "Underwriting, acquisition and
insurance expense" in the Statements of Income decreased
$(2,991,000) and increased $16,988,000 for the years ended 1998
and 1997, respectively.
Property, Plant and Equipment
Property, plant and equipment is valued at historical cost less
accumulated depreciation in the Balance Sheets. It consists
primarily of Union Central's home office, capital leases for
furniture and equipment, furniture and fixtures and electronic
data processing equipment.
Depreciation is computed with the straight-line method over the
estimated useful lives of the respective assets, not to exceed
10 years for office furniture and 5 years for electronic data
processing equipment. Depreciation is computed for leasehold
improvements with the straight-line method over the shorter of
the remaining lease term or useful life of the improvements.
Deposit Funds
The liability for deposit funds is generally established at the
policyholders' accumulated cash values plus amounts provided for
guaranteed interest.
Policy Claims
Policy claim reserves represent the estimated ultimate net cost
of all reported and unreported claims incurred. In addition, a
claim adjustment expense reserve is held to account for the
expenses associated with administering these claims. The
reserves for unpaid claims are estimated using individual case
basis valuations and statistical analyses. The claim adjustment
expense reserve is estimated using statistical analyses. These
estimates are subject to the effects of trends in claim severity
and frequency. Although some variability is inherent in such
estimates, management believes that the reserves for claims and
claim related expenses are adequate. The estimates are
continually reviewed and adjusted as necessary as experience
develops or new information becomes known and such adjustments
are included in current operations.
Dividends to Policyholders
Union Central's dividend liability is the amount estimated to
have accrued to policyholders' as of each year end. Manhattan
Life's dividend liability is based on the dividend scale in
effect at the time the policy was issued.
Separate Accounts
Separate account assets and liabilities reported in the
accompanying financial statements represent funds that are
separately administered for our individual annuity, group
annuity and variable universal life lines of business, and for
which the contract holders rather than the Company bear the
investment risk. Separate account contract holders have no
claim against the assets of the general account of the Company.
Separate account investments are carried at market value.
Investment income and gains and losses from these accounts
accrue directly to contract holders and are not included in the
accompanying financial statements. Union Central derives
certain fees for maintaining and managing the separate accounts,
but bears no investment risk on these assets, except to the
extent that it participates in a particular separate account.
Policy Liabilities, Revenues, Benefits and Expenses
Traditional Insurance Products
Traditional insurance products include those products with fixed
and guaranteed premiums and benefits and consist primarily of
whole life insurance policies, term insurance policies and
disability income policies. Premiums for traditional products
are recognized as revenue when due.
The liability for future policy benefits for participating
traditional life is computed using a net level premium method
and the guaranteed mortality and dividend fund interest. The
mortality and interest assumptions are equivalent to statutory
assumptions. The liabilities for future policy benefits and
expenses for nonparticipating traditional life policies and
disability income policies are generally computed using a net
level premium method and assumptions for investment yields,
morbidity, and withdrawals based principally on company
experience projected at the time of policy issue, with provision
for possible adverse deviations. Interest assumptions for
participating traditional life reserves for all policies ranged
from 2.25% to 5.00% for the years ended 1998 and 1997.
The costs of acquiring new traditional business, principally
commissions, certain policy issue and underwriting expenses
(such as medical examination and inspection report fees) and
certain agency expenses, all of which vary with and are
primarily related to the production of new and renewal business,
are deferred to the extent that such costs are deemed
recoverable through future gross premiums. Such non-
participating deferred acquisition costs are amortized over the
anticipated premium paying period of the related policies,
generally not to exceed the premium paying lifetime of the
policies using assumptions consistent with those used to develop
policy benefit reserves. For participating life insurance
products, deferred policy acquisition costs are being amortized
in proportion to estimated gross margins of the related
policies. Gross margins are determined for each issue year and
are equal to premiums plus investment income less death claims,
surrender benefits, administrative costs, policyholder
dividends, and the increase in reserves for future policy
benefits. The future investment yields are assumed to range
from 5.65% to 8.82% and from 5.91% to 8.62% for the years ended
1998 and 1997, respectively. Changes in dividend payouts are
assumed with changes in yields.
Universal Life and Other Interest Sensitive Products
Interest sensitive products include universal life and single
premium whole life products. They are distinguished by the
existence of a separately definable fund that is credited with
interest and from which any policy charges are taken. Revenues
for these products consist of policy charges for the cost of
insurance, policy administration charges, and surrender charges
that have been assessed against policyholder account balances
during the period.
Benefit reserves for universal life and other interest sensitive
products are computed in accordance with the retrospective
deposit method and represent policy account balances before
applicable surrender charges. Policy benefits that are charged
to expense include benefit claims incurred in the period in
excess of related policy account balances and interest credited
to account balances. Interest crediting rates ranged from 4.50%
to 7.50% and from 4.50% to 7.60% for the years ended 1998 and
1997, respectively.
The cost of acquiring universal life and other interest
sensitive products, principally commissions, certain policy
issue and underwriting expenses (such as medical examination and
inspection report fees) and certain agency expenses, all of
which vary with and are primarily related to the production of
new and renewal business, are deferred to the extent that such
costs are deemed recoverable through future estimated gross
profits. Acquisition costs for universal life and other
interest sensitive products are amortized over the life of the
policies in proportion to the present value of expected gross
profits from surrender charges and investment, mortality and
expense margins. The amortization is adjusted retrospectively
when estimates of current or future gross profits (including the
impact of investment gains and losses) to be realized from a
group of products are revised.
Amounts assessed policyholders that represent revenue for
services to be provided in future periods are reported as
unearned revenue and recognized in income over the life of the
policies, using the same assumptions and factors as are used to
amortize deferred acquisition costs. These charges consist of
policy fees and premium loads that are larger in the initial
policy years than they are in the later policy years.
Amortization of unearned revenue totalled $12,200,000 and
$17,633,000, net of the effect of realized gains (losses) on
amortization of $(1,933,000) and $4,752,000 for the years ended
December 31, 1998 and 1997, respectively, and was included in
"Universal life policy charges" in the Statements of Income.
In 1997, the Company revised its estimates of future gross
profits, and as a result amortization of unearned revenue
included in "Universal life policy charges" in the Statements of
Income was increased by $545,000 and $5,999,000 for the years
ended 1998 and 1997, respectively.
Group Products
Group products consist primarily of group life insurance, and
group long and short term disability income products. Premiums
for group insurance products are recognized as revenue when due.
The liabilities for future policy benefits and expenses for
group life and disability income products are computed using
statutory methods and assumptions, which approximate net level
premium reserves using assumptions for investment yields,
mortality, and withdrawals based principally on company
experience projected at the time of policy issue, with
provisions for possible adverse deviations. Interest
assumptions are based on assumed investment yields that range
from 8.29% to 8.80% for the years ended 1998 and 1997.
The costs of acquiring new group life and disability income
business, principally commissions, certain policy issue and
underwriting expenses (such as medical examination and
inspection report fees) and certain agency expenses, all of
which vary with and are primarily related to the production of
new and renewal business, are deferred to the extent that such
costs are deemed recoverable through future gross premiums.
Such deferred acquisition costs are amortized over the
anticipated premium paying period of the related policies,
generally not to exceed ten years.
Pension Products
Pension products include deferred annuities and payout
annuities. Revenues for the deferred annuity products consist
of investment income on policy funds, mortality and expense
charges, contract administration fees, and surrender charges
that have been assessed against policyholder account balances.
Expenses for deferred annuity products include the interest
credited on policy funds and expenses incurred in the
administration and maintenance of the contracts. For payout
annuities, premiums are recognized as revenue when due while
expenses exclude the interest credited on policy funds.
Benefit reserves for the deferred annuity contracts represent
the policy account balances before applicable surrender charges.
Interest assumptions on payout annuities are based on assumed
investment yields that ranged from 2% to 8% for the years ended
1998 and 1997, respectively.
Commissions and other related costs of acquiring annuity
contracts that vary with and are primarily related to the
production of new and renewal business are deferred to the
extent that such costs are deemed recoverable through future
estimated gross profits. Acquisition costs are amortized over
the life of the contracts in direct proportion to the present
value of expected gross profits from surrender charges and
investment and expense margins. The amortization is adjusted
retrospectively when estimates of current or future gross
profits (including the impact of investment gains or losses) to
be realized on a group of contracts are revised.
Reinsurance
Reinsurance premiums and claims are accounted for on bases
consistent with those used in accounting for the original
policies issued and the terms of the reinsurance contracts.
Premiums and benefits are reported net of reinsured amounts.
Allocation of Manhattan Life's Income and Equity
Manhattan Life's charter provides for the allocation of its
profits between its shareholders and its policyholders on a one-
eighth/seven-eighths basis. The profits allocated are equal to
income after taxes and interest on the Guaranteed Capital
Reserve ((GCR) see Note 5 for further discussion) but before
policyholders' dividends.
Federal Income Taxes
The Company accounts for income taxes using the liability method
for financial accounting and reporting of income taxes. Under
this method, deferred income taxes are recognized for the tax
consequences of "temporary differences" by applying the
applicable tax rate to differences between the financial
statement carrying amounts and the tax bases of existing assets
and liabilities.
Reclassifications
Previously reported amounts for 1997 have in some instances been
reclassified to conform to the 1998 presentation.
NOTE 2 - INVESTMENTS
Available-for-sale securities are summarized as follows:
<TABLE>
<CAPTION>
Cost or Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
---- ----- ------ -----
(in thousands)
<S> <C> <C> <C> <C>
December 31, 1998:
U.S. treasury securities
and obligations of U.S.
government corporations
and agencies $ 19,737 $ 1,897 $ -- $ 21,634
Corporate securities and other 1,542,363 51,352 (21,912) 1,571,803
Mortgage-backed securities,
collateralized mortgage
obligations and other structured
securities 1,068,084 19,811 (14,566) 1,073,329
Debt securities issued by foreign
governments 7,631 436 (1) 8,066
---------- ------- -------- ----------
Subtotal 2,637,815 73,496 (36,479) 2,674,832
Equity securities 100,429 2,063 (20,223) 82,269
---------- ------- -------- ----------
Total $2,738,244 75,559 $(56,702) $2,757,101
========== ======= ======== ==========
<CAPTION>
Cost or Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
---- ----- ------ -----
(in thousands)
<S> <C> <C> <C> <C>
December 31, 1997:
U.S. treasury securities
and obligations of U.S.
government corporations
and agencies $ 213,411 $ 1,891 $ (238) $ 215,064
Corporate securities and other 1,447,640 50,318 (5,320) 1,492,638
Mortgage-backed securities,
collateralized mortgage
obligations and other
structured securities 1,028,745 20,386 (7,169) 1,041,962
Debt securities issued by foreign
governments 8,073 376 -- 8,449
---------- ------- -------- ----------
Subtotal 2,697,869 72,971 (12,727) 2,758,113
Equity securities 59,675 4,142 (679) 63,138
---------- ------- -------- ----------
Total $2,757,544 $77,113 $(13,406) $2,821,251
========== ======= ======== ==========
</TABLE>
Fixed maturity available-for-sale securities,
at December 31, 1998, are summarized by stated
maturity as follows:
<TABLE>
<CAPTION>
Amortized Fair
Cost Value
---------- ----------
(in thousands)
<S> <C> <C>
Due in one year or less $ 19,860 $ 19,977
Due after one year through five years 389,207 400,687
Due after five years through ten years 578,395 570,720
Due after ten years 213,260 220,437
---------- ----------
Subtotal 1,200,722 1,211,821
Mortgage-backed securities 1,068,084 1,073,329
Other securities with multiple repayment dates 369,009 390,174
---------- ----------
Total $2,637,815 $2,674,832
========== ==========
</TABLE>
<PAGE>
Significant components of the unrealized gain on available-for-
sale securities included in "Accumulated other comprehensive
income" in the accompanying Balance Sheets are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
1998 1997
-------- --------
(in thousands)
<S> <C> <C>
Gross unrealized gain on available-
for-sale securities $ 18,857 $ 63,707
Amortization of deferred policy acquisition costs (11,474) (17,627)
Minority interests (2,853) (4,607)
Deferred taxes (2,583) (16,133)
-------- --------
Net unrealized gains on available-for-
sale securities $ 1,947 $ 25,340
======== ========
</TABLE>
See Note 10 for discussion of the methods and assumptions
used by the Company in estimating the fair values of available-
for-sale securities.
At December 31, 1998 and 1997, the Company held unrated or less-
than-investment grade (investment grade is defined as "Baa3" and
higher on Moody's ratings and "BBB" and higher on Standard and
Poor's bond ratings) corporate bonds of $198,696,000 and
$198,255,000. Those holdings amounted to 7.4% and 7.2%,
respectively, of the Company's investments in fixed maturities
and 3.3% and 3.5%, respectively, of the Company's total assets.
The holdings of less-than-investment grade bonds are widely
diversified and of satisfactory quality based on the Company's
investment policies and credit standards.
At December 31, 1998 and 1997, the Company invested $62,588,000
and $45,031,000 in affiliated mutual funds. The Company's
holdings in affiliated mutual funds were included in "Equity
securities available-for-sale at fair value" in the Balance
Sheets.
Proceeds, gross realized gains, and gross realized losses from
the sales and maturities of available-for-sale securities
follows:
<TABLE>
<CAPTION>
Year Ended December 31,
1998 1997
-------- --------
(in thousands)
<S> <C> <C>
Proceeds $2,220,765 $3,148,909
Gross realized gains 33,774 52,460
Gross realized losses 26,564 28,173
</TABLE>
At December 31, 1998 and 1997, investments in fixed maturities
with an amortized cost of $6,437,000 and $6,450,000,
respectively, were on deposit with state insurance departments
to satisfy regulatory requirements.
Mortgage loans are stated at their aggregate unpaid balances in
the Balance Sheets, less unamortized discounts.
Activity in the allowance for mortgage loss is summarized as
follows:
<TABLE>
<CAPTION>
Year Ended December 31,
1998 1997
------- -------
(in thousands)
<S> <C> <C>
Balances at the beginning of the year $ 1,438 $ 2,224
Provisions for potential
mortgage loan loss 934 1,307
Losses charged against the mortgage
loan loss reserve 0 (2,093)
------- -------
Balance at the end of the year $ 2,372 $ 1,438
======= =======
</TABLE>
The provision for mortgage losses has fluctuated between
periods. The Company establishes the mortgage reserve based
upon its continuing review of the mortgage portfolio and
individual problem mortgages. The allowance for potential loan
losses is affected to a significant degree by general economic
conditions. While the Company believes it has provided adequate
mortgage reserves, subsequent economic and market conditions may
require establishing additional reserves.
The Company's mortgage portfolio is monitored closely through
the review of loan and property information such as debt service
coverage, annual operating statements and property inspection
reports. This information is evaluated in light of current
economic conditions and other factors such as geographic and
property-type loan concentrations. This evaluation is part of
the regular review to determine whether adjustments to the
allowance for potential loan losses are warranted. Management
believes the mortgage loss reserve is sufficient to provide for
potential loan losses. However, management cannot predict with
assurance where the economy is headed or how the mortgage and
real estate portfolios would be affected by various economic
circumstances.
A summary of the characteristics of the Company's mortgage
portfolio (before deducting valuation reserves of $2,372,000 and
$1,438,000 at December 31, 1998 and 1997, respectively) follows:
<TABLE>
<CAPTION>
December 31, 1998
-----------------
Principal Percent of
Balance Principal
------- ---------
(in thousands)
<S> <C> <C>
REGION
New England and Mid-Atlantic $ 61,616 7.8%
South Atlantic 130,361 16.4
North Central 188,870 23.8
South Central 90,802 11.5
Mountain 128,136 16.2
Pacific 192,924 24.3
-------- -----
Total $792,709 100.0%
PROPERTY TYPE
Apartment and residential $111,040 14.0%
Warehouses and industrial 143,910 18.2
Retail and shopping center 256,406 32.3
Offices 245,514 31.0
Other 35,839 4.5
-------- -----
Total $792,709 100.0%
======== =====
<CAPTION>
December 31, 1997
-----------------
Principal Percent of
Balance Principal
------- ---------
(in thousands)
<S> <C> <C>
REGION
New England and Mid-Atlantic $ 52,400 7.0%
South Atlantic 122,648 16.4
North Central 190,928 25.6
South Central 80,335 10.8
Mountain 111,684 15.0
Pacific 187,838 25.2
-------- -----
Total $745,833 100.0%
======== =====
PROPERTY TYPE
Apartment and residential $106,190 14.2%
Warehouses and industrial 127,960 17.2
Retail and shopping center 243,152 32.6
Offices 238,970 32.0
Other 29,561 4.0
-------- -----
Total $745,833 100.0%
======== =====
</TABLE>
Real estate consists of investment real estate under lease and
foreclosed real estate. The investment real estate under lease
is depreciated over 40 years. The cost of the property totalled
$17,521,000 and $17,481,000 at December 31, 1998 and 1997,
respectively, and accumulated depreciation totalled $4,960,000
and $4,586,000 at December 31, 1998 and 1997, respectively. The
book value of foreclosed real estate was $30,644,000 and
$37,514,000 at December 31, 1998 and 1997, respectively. The
decrease in foreclosed real estate is a result of the sale of
three properties and the writedown of two properties which
resulted in a net realized capital loss of $1,656,000.
NOTE 3 - 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 or hazardous
risks. Reinsurance ceded contracts do not relieve the Company
from its obligations to policyholders. Reinsurance ceded is
recorded as an asset and is recorded in "Other assets" in the
Balance Sheets. The Company remains liable to its policyholders
for the portion reinsured to the extent that any reinsurer does
not meet its obligations for reinsurance ceded to it under the
reinsurance agreements. Failure of reinsurers to honor their
obligations could result in losses to the Company; consequently,
allowances are established for amounts deemed or estimated to be
uncollectible. To minimize its exposure to significant losses
from reinsurance insolvencies, the Company evaluates the
financial condition of its reinsurers and monitors
concentrations of credit risk arising from similar geographic
regions, activities, or economic characteristics of the
reinsurers. No losses are anticipated, and, based on
management's evaluation, there are no concentrations of credit
risk at December 31, 1998 and 1997. The Company retains the
risk for varying amounts of individual or group insurance
written up to a maximum of $1,000,000 on any one life or $4,000
per month disability risk and reinsures the balance.
Reinsurance transactions with other insurance companies for the
years ended December 31, 1998 and 1997 are summarized as
follows:
<TABLE>
<CAPTION>
December 31, 1998
----------------------------------------------
Direct Assumed Ceded Net
----------- -------- ---------- -----------
(in thousands)
<S> <C> <C> <C> <C>
Life insurance in force $30,400,267 $502,058 $5,627,695 $25,274,630
=========== ======== ========== ===========
Premiums and
other considerations:
Traditional insurance premiums
and universal life $ 245,220 $ 10,056 $ 32,256 $ 223,020
Annuity 43,778 -- -- 43,778
----------- -------- ---------- -----------
Total $ 288,998 $ 10,056 $ 32,256 $ 266,798
=========== ======== ========== ===========
<CAPTION>
December 31, 1997
----------------------------------------------
Direct Assumed Ceded Net
----------- -------- ---------- -----------
(in thousands)
<S> <C> <C> <C> <C>
Life insurance in force $30,333,849 $556,694 $5,066,377 $25,824,166
=========== ======== ========== ===========
Premiums and
other considerations:
Traditional insurance premiums
and universal life $ 240,155 $ 10,154 $ 29,690 $ 220,619
Annuity 37,569 -- -- 37,569
----------- -------- ---------- -----------
Total $ 277,724 $ 10,154 $ 29,690 $ 258,188
=========== ======== ========== ===========
</TABLE>
Benefits paid or provided were reduced by $21,912,000 and
$14,779,000 at December 31, 1998 and 1997, respectively, for
estimated recoveries under reinsurance treaties.
The Company nor any of its related parties control, either
directly or indirectly, any reinsurers in which the Company
conducts business. No policies issued by the Company have been
reinsured with a foreign company which is controlled, either
directly or indirectly, by a party not primarily engaged in the
business of insurance. The Company has not entered into any
reinsurance agreements in which the reinsurer may unilaterally
cancel any reinsurance for reasons other than nonpayment of
premiums or other similar credits.
NOTE 4 - FEDERAL INCOME TAX
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts
used for income tax purposes. Significant components of the
Company's deferred tax liabilities and assets are as follows:
<TABLE>
<CAPTION>
December 31,
1998 1997
-------- --------
(in thousands)
<S> <C> <C>
Deferred tax liabilities:
Deferred policy acquisition costs $139,593 $137,637
Basis differences on bonds 26 1,382
Unrealized gains - SFAS 115 2,583 16,133
Partnership income differences 5,132 0
Other 3,145 3,835
-------- --------
Total deferred tax liabilities 150,479 158,987
-------- --------
Deferred tax assets:
Policyholders' dividends 11,295 11,393
Future policy benefits 74,506 74,225
Premium - based DAC adjustment 28,175 25,780
Investment valuation reserves 826 1,006
Retirement plan accruals 15,229 10,722
Investment income differences 1,343 499
Basis differences on bonds and mortgages 0 266
Other 3,361 1,755
-------- --------
Total deferred tax assets 134,735 125,646
-------- --------
Net deferred tax liabilities $ 15,744 $ 33,341
======== ========
</TABLE>
Significant components of the provision for income taxes
attributable to continuing operations are as follows:
<TABLE>
<CAPTION>
Year ended December 31,
1998 1997
-------- --------
(in thousands)
<S> <C> <C>
Current $ 16,759 $ 36,603
Deferred (72) (9,428)
-------- --------
Total $ 16,687 $ 27,175
======== ========
</TABLE>
Federal income tax expense is calculated based on applying the
statutory corporate tax rate to taxable income, and adjusting
this amount for permanent differences between deductions allowed
for financial statement purposes versus federal income tax
purposes. Significant differences would include the surplus tax
adjustment applicable to Union Central.
Prior to 1984, a portion of Manhattan Life's income was not
subject to income tax, but was accumulated for income tax
purposes in a special memorandum tax account designated
"policyholders' surplus account" (PSA). Under provisions of the
Tax Reform Act of 1984, the PSA was frozen at its December 31,
1983 balance. The PSA will become subject to tax at current
rates if these amounts are distributed or if the balance of the
account exceeds certain limitations under the Internal Revenue
Code. The balance in the PSA at December 31, 1998 and 1997 was
$1,348,000, and the maximum tax at current rates would be
$472,000.
NOTE 5 - SHAREHOLDER DIVIDENDS AND RESTRICTION ON TRANSFER OF
FUNDS FROM SUBSIDIARY
As stated in Note 1, Manhattan Life's charter provides for the
allocation of its profits between its shareholders and its
policyholders on a one-eighth/seven-eighths basis. The profits
allocated are equal to income after taxes and interest on the
GCR but before policyholder dividends.
In administering Manhattan Life's charter's profit-sharing
provision, Manhattan Life and the New York Insurance Department
(the Department) have deemed the shareholders' portion of
Manhattan Life's profits to be equal to $1 for every $7 of
policyholder dividends paid on traditional, participating
contracts. Manhattan Life's charter provides for three types of
shareholder distributions, including distribution based on
profits:
a) Interest at a specified rate on the par value of the
guarantee capital shares issued and outstanding
($195,000 annually),
b) A distribution of the shareholders' portion of Manhattan
Life's profits. Such amounts may, at the discretion of
the Company's Board of Directors, be distributed as a
stock dividend of additional guarantee capital shares,
paid in cash subject to certain limits and prior
regulatory approval, or reserved for the benefit of the
shareholders in the GCR, and
c Interest, at the Company's portfolio earnings rate on
invested assets, on the accumulated balance in the GCR.
Manhattan Life's cash distributions to shareholders are subject
to prior approval by the Department. Further, Manhattan Life
and the Department have agreed to the following guidelines under
which shareholder distributions from the GCR would be permitted,
subject to prior approval by the Department:
If Manhattan Life's statutory-basis surplus is less than
or equal to 9% of its statutory policy reserves, then
principal and interest distributions are limited to the
lesser of the prior year statutory gain from operations
(after policyholders' dividends and federal income taxes
and before realized gains and losses), or the prior year's
increase in statutory surplus or,
If its statutory-basis surplus exceeds 9% of statutory
policy reserves, the principal and interest distributions
are limited to the greater of the prior year statutory gain
from operations (after policyholders' dividends and federal
income taxes and before realized gains and losses), or the
prior year increase in statutory surplus.
The foregoing limits are subject to adjustment, by the
Department, for unusually large realized gains or the effects of
surplus relief reinsurance transactions. As part of the reverse
stock split described in Note 1, no shareholders' dividend
payouts will be made from the GCR until it is restored to its
balance immediately preceding the reverse stock split of
$15,526,000. Therefore, based on the balance in the GCR at
December 31, 1998 and 1997, no shareholders' dividend payouts
were made in either year.
The GCR represents a restricted segment of statutory unassigned
surplus, and as such, does not represent a commitment or
liability to pay shareholder dividends. In Manhattan Life's
stand-alone financial statements prepared in accordance with
generally accepted accounting principles, the GCR is included in
shareholders' equity. The balance in the GCR of $14,383,000 and
$12,750,000 was included in "Policyholders' equity" in the
Consolidated Balance Sheets at December 31, 1998 and 1997,
respectively. Interest added to the GCR amounted to $988,000
and $919,000, for the years ended December 31, 1998 and 1997,
respectively.
Manhattan Life is the only existing life insurance company
domiciled in New York which has authorized and outstanding
guarantee capital shares. Neither applicable New York state law
nor Manhattan Life's charter contain express provisions
establishing the extent of the interest of the holders of the
guarantee capital shares in the statutory unassigned surplus
(total surplus less guarantee capital shares and GCR) of
Manhattan Life and there has never been a judicial determination
of the extent of such interest. Further, the laws applicable to
Manhattan Life do not provide for its voluntary liquidation or
dissolution; the Company may only be liquidated under the
supervision of the New York Superintendent of Insurance in the
event of insolvency. In such a liquidation or dissolution, all
of the assets of Manhattan Life would be used to satisfy claims
of creditors and policyholders and there would be no statutory
unassigned surplus for distribution to the holders of the
guarantee capital shares. Accordingly, in the opinion of
counsel to Manhattan Life, no unqualified legal opinion can be
rendered as to the degree, if any, to which the holders of the
guarantee capital shares would be entitled to participate in any
current or liquidating distribution of unassigned surplus.
However, in the view of such counsel, if there should occur a
liquidation or other winding-up of Manhattan Life's business in
which assets exceeded liabilities on policies and the claims of
other creditors, or if there should occur a partial distribution
of surplus in the absence of such a liquidation or winding-up,
although there are reasonable arguments which could be made to
the effect that the entire unassigned surplus would be
distributable solely to the policyholders or solely to the
shareholders, the more likely outcome if the question should be
litigated is that it would be held that one-eighth of the
unassigned surplus would be distributable to the shareholders
and seven-eighths to the policyholders.
NOTE 6 - COMMITMENTS AND CONTINGENT LIABILITIES
Leases
The leases for office space for Manhattan Life and various field
agency offices vary in duration from 1 to 15 years. Some of
these leases include escalation clauses which vary with levels
of operating expense. Rental expense under these operating
leases totalled $3,498,000 and $3,972,000 in 1998 and 1997,
respectively. The Company also leases furniture and equipment
under operating leases which expire in 2001. Rental expense
under these leases included in "Underwriting, acquisition and
insurance expense" in the Statements of Income totalled $116,000
and $154,000 in 1998 and 1997, respectively.
At December 31, 1998, the future minimum lease payments for all
noncancelable operating leases are as follows:
<TABLE>
<CAPTION>
Year Amount
---- ------
(in thousands)
<C> <C>
1999 $ 3,193
2000 2,889
2001 2,627
2002 1,972
2003 479
After 2003 727
--------
Total $ 11,887
========
</TABLE>
The Company also has capital leases for office furniture. Lease
expense under these leases was $434,000 and $437,000 in 1998 and
1997, respectively.
At December 31, 1998 the future minimum lease payments for all
noncancelable capital leases are as follows:
<TABLE>
<CAPTION>
Year Amount
---- ------
(in thousands)
<C> <C>
1999 $ 470
2000 470
2001 39
-------
Total $ 979
=======
</TABLE>
Other Commitments
At December 31, 1998, the Company had outstanding agreements to
fund mortgages totalling $32,199,000 in early 1999. In
addition, the Company has committed to invest $10,300,000 in
equity-type limited partnerships during the years 1999 to 2001.
These transactions are in the normal course of business for the
Company.
Litigation
In the normal course of business, the Company is party to
various claims and litigation primarily arising from claims made
under insurance policies and contracts. Those actions are
considered by the Company in estimating the policy and contract
liabilities. The Company's management believes that the
resolution of those actions will not have a material adverse
effect on the Company's financial position or results of
operations.
Guaranty Fund Assessments
The economy and other factors have caused an increase in the
number of insurance companies that are under regulatory
supervision. This circumstance is expected to result in an
increase in assessments by state guaranty funds, or voluntary
payments by solvent insurance companies, to fund policyholder
losses or liabilities of insurance companies that become
insolvent. These assessments may be deferred or forgiven under
most guaranty laws if they would threaten an insurers financial
strength and, in certain instances, may be offset against future
premium taxes. For 1998 and 1997, the charge to operations
related to these assessments was not significant. The estimated
liability of $1,149,000 and $1,411,000 December 31, 1998 and
1997 respectively, was based on data provided by the National
Organization of Life and Health Insurance Guaranty Associations
and is included in "Other liabilities" in the Balance Sheets.
NOTE 7 - STATUTORY SURPLUS AS REPORTED TO REGULATORY AUTHORITIES
Union Central and Manhattan Life file statutory-basis financial
statements with regulatory authorities. Union Central's
statutory-basis financial statements are prepared in conformity
with accounting practices prescribed or permitted by the
Department of Insurance of Ohio, Union Central's state of
domicile. Manhattan Life's statutory-basis financial
statements are prepared in conformity with accounting practices
prescribed or permitted by the Department of Insurance of New
York, Manhattan Life's state of domicile. Surplus as reflected
in the statutory-basis financial statements are as follows:
<TABLE>
<CAPTION>
Year ended December 31,
1998 1997
(in thousands)
<S> <C> <C>
Capital and surplus
Union Central $ 343,896 $ 317,952
========== ==========
Manhattan Life $ 22,823 $ 22,327
========== ==========
</TABLE>
In 1998, the National Association of Insurance Commissioners
adopted codified statutory accounting practices (Codification).
Codification must be adopted by the various states before it
becomes the prescribed statutory basis of accounting for
insurance companies domiciled in those states. For Codification
to be effective for Union Central, Ohio must adopt Codification
as the prescribed basis of accounting on which Ohio insurers
must report their statutory basis results. For Codification to
be effective for Manhattan Life, New York must adopt
Codification as the prescribed basis of accounting on which New
York insurers must report their statutory basis results. At
this time it is anticipated that Ohio will adopt Codification,
while it is unclear if New York will adopt Codification.
Codification will likely change prescribed accounting practices
and may result in changes to the accounting practices that Union
Central and Manhattan Life use to prepare their statutory basis
financial statements.
NOTE 8 - EMPLOYEE BENEFITS
The Company has pension plans covering substantially all of its
employees (The Plans). Benefits are based on years of service
and the employee's highest five consecutive years of
compensation out of the last ten years. The Company's funding
policy is determined according to regulations as specified by
ERISA and subsequent amendments. The contributions totalled
$3,994,000 and $3,492,000 in 1998 and 1997, respectively. The
Company's net periodic pension expense was calculated in
accordance with FAS 87 and was $3,869,000 and $4,328,000 for the
years ended December 31, 1998 and 1997, respectively. Benefits
paid in 1998 and 1997 were $3,811,000 and $3,549,000,
respectively. Plan assets are primarily composed of mutual
funds, unallocated insurance funds, and guaranteed interest
contracts. At December 31, 1998 and 1997, $42,468,000 and
$44,391,000, respectively, was invested in affiliated mutual
funds.
In accordance with the restructuring of Manhattan Life
operations as described in Note 1 which resulted in the
termination of the majority of the employees of Manhattan Life,
Manhattan Life's pension plans and postretirement benefit plans
(Note 9) were curtailed in 1998. The effect of the curtailment
resulted in no additional recognition of benefit cost and no
future fundings to the pension plans. The effect of curtailment
on Manhattan Life's postretirement plan was an increase to the
postretirement benefit obligation of $333,000.
A table setting forth the funded status and the pension
liability included in the Company's Balance Sheets follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
(000's Omitted)
<S> <C> <C>
Actuarial present value
of benefits obligations:
Accumulated benefit obligation,
including vested benefits of
$72,321 and $63,284 for 1998
and 1997, respectively $81,244 $72,935
======= =======
Projected benefit obligation $92,376 $84,764
Plan assets at fair value 63,066 65,653
------- -------
Projected benefit obligation
higher than plan assets $29,310 $19,111
======= =======
Pension liability included in
"Other liabilities"
at end of year $18,178 $ 6,614
</TABLE>
Also, $6,131,000 and $1,240,000 (net of tax) was charged
directly to policyholders' equity in 1998 and 1997,
respectively, as a result of recognizing an additional minimum
pension liability adjustment under Statement of Financial
Accounting Standard (SFAS-87) "Employers' Accounting for
Pensions", and is included in "Minimum pension liability
adjustment" in the Statements of Equity.
The unfunded accumulated benefit obligation (ABO) will vary from
year to year as changes in the market value of the plans' assets
differs from changes in the ABO. The ABO varies from year to
year as the rate used to discount future pension benefits
related to the past service of plan participants changes. The
discount rate at each valuation date reflects available rates on
high quality fixed income investments. The investment strategy
for the plans' assets is designed to achieve somewhat higher
yields over the long term than would be achieved by investing
entirely in high quality fixed income investments. Therefore,
the market value of the plans' assets and the ABO do not change
in the same amount from year to year. The Company believes that
its current funding policy will be adequate to meet all future
plan obligations over the long term.
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Assumptions used to determine
the status of the plans were:
Discount rate 7.00% 7.25%
Rate of increase in future
compensation levels 4.00% 4.25%
Expected long-term rate of
return on assets 8.50% 8.50%
</TABLE>
The Company has contributory savings plans for employees meeting
certain service requirements which qualify under Section 401(k)
of the Internal Revenue Code. These plans allow eligible
employees to contribute up to certain prescribed limits of
their pre-tax compensation, with the Company matching 50% of
the first 6% of participants' contributions. The Company's
matching contributions to these Plans were $1,472,000 and
$1,280,000 for 1998 and 1997, respectively. The value of the
Plans' assets were $59,649,000 and $52,519,000 at December 31,
1998 and 1997, respectively. The assets are held in the
Company's deposit fund or under the variable accounts of a group
annuity policy sponsored by the Company. At December 31, 1998
and 1997, $18,660,000 and $20,435,000, respectively, was
invested in affiliated mutual funds.
NOTE 9 - POSTRETIREMENT BENEFITS
The Company provides certain health care and life insurance
benefits for its eligible retired employees. Substantially all
of the Company's employees may become eligible for these
benefits if they reach normal retirement age while working for
the Company.
Information related to the postretirement benefits follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
(000's Omitted)
<S> <C> <C>
Postretirement costs $1,143 $1,079
Cash benefits paid 1,494 995
Employer contributions 1,231 844
Participant contributions 140 81
</TABLE>
A summary of the accrued postretirement liability included in
"Other liabilities" in the Consolidated Balance Sheet as
determined by the Plan's actuaries follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
(000's Omitted)
<S> <C> <C>
Postretirement benefit obligation $20,443 $19,607
Fair value of plan assets 5,866 6,836
------- -------
Unfunded status 14,577 12,771
Unrecognized net gain 1,949 3,996
Other (346) (336)
------- -------
Accrued postretirement liability $16,180 $16,431
======= =======
</TABLE>
A one percentage point increase in the health care cost trend
rate in each year would not materially impact the postretirement
benefit obligation, the interest cost and estimated eligibility
cost components of the net periodic postretirement benefit cost
as of and for the year ended December 31, 1998.
NOTE 10 - FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company
in estimating its fair value disclosures for financial
instruments:
CASH AND SHORT-TERM INVESTMENTS: The carrying amounts reported
in the Balance Sheets for these instruments approximate their
fair values.
INVESTMENT SECURITIES: Fair values for bonds and preferred
stock are based on quoted market prices, where available. If
quoted market prices are not available, fair values are
estimated using values obtained from independent securities
broker dealers or quoted market prices of comparable
instruments. The fair values of common stock in Company
sponsored mutual funds are based on quoted market prices and are
recognized in "Equity securities available-for-sale at fair
value" in the Balance Sheets. The fair values for limited
partnerships are based on the quoted market prices of the
investments underlying the limited partnership portfolios.
MORTGAGE LOANS: The fair values for commercial and residential
mortgages in good standing are estimated using discounted cash
flow analysis using interest rates currently being offered for
similar loans to borrowers with similar credit ratings in
comparison with actual interest rates and maturity dates. Fair
values for mortgages with potential loan losses are based on
discounted cash flow analysis of the underlying properties.
POLICY LOANS: Management is unable to ascertain the estimated
life of the policy loan portfolio. Due to the excessive costs
which would be incurred to determine this information,
management considers the estimation of its fair value to be
impracticable. The nature of a policy loan insures that the
outstanding loan balance will be fully recoverable because the
balance owed to the Company is always equal to or lower than the
cash value of the insurance policy owed to the policyholder.
Policy loans are stated at their aggregate unpaid balance in the
Balance Sheets.
INVESTMENT CONTRACTS: Fair values for the Company's liabilities
under investment-type insurance contracts are estimated using
discounted cash flow calculations, based on interest rates
currently being offered for similar contracts with maturities
consistent with those remaining for the contracts being valued.
The carrying amounts and fair values of the Company's mortgage
loans are as follows:
<TABLE>
<CAPTION>
December 31, 1998 December 31, 1997
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- -------- -------- --------
(in thousands)
<S> <C> <C> <C> <C>
Mortgage loans $792,709 $876,287 $745,833 $783,165
======== ======== ======== ========
</TABLE>
The carrying amounts and fair values of the Company's
liabilities for investment-type insurance contracts are as
follows:
<TABLE>
<CAPTION>
December 31, 1998 December 31, 1997
Carrying Fair Carrying Fair
Amount Value Amount Value
---------- ---------- ---------- ----------
(in thousands)
<S> <C> <C> <C> <C>
Group annuities $ 761,561 $ 758,344 $ 809,990 $ 807,137
Single premium
deferred annuities 348,094 345,122 354,318 351,494
Single premium
immediate annuities 20,401 23,480 25,864 27,576
Variable annuities 169,574 167,972 175,197 172,917
Supplementary contracts 58,983 55,561 56,472 58,157
Guaranteed interest contracts 17,277 17,293 17,199 17,077
Flexible annuities 76,553 71,718 32,891 31,592
Other 5,780 5,780 7,193 7,193
---------- ---------- ---------- ----------
Total $1,484,484 $1,472,622 $1,503,305 $1,497,608
========== ========== ========== ==========
</TABLE>
The Company's other insurance contracts are excluded from
Statement of Financial Accounting Standard (SFAS-107)
"Disclosures about Fair Value of Financial Instruments"
disclosure requirements. However, the fair values of
liabilities under all insurance contracts are taken into
consideration in the Company's overall management of interest
rate risk, which minimizes exposure to changing interest rates
through the matching of investment maturities with amounts due
under insurance contracts. Additional data with respect to the
carrying value and fair value of the Company's investments is
disclosed in Note 2.
NOTE 12 - LIABILITY FOR UNPAID CLAIMS AND CLAIM ADJUSTMENT
EXPENSES
Activity in the liability for unpaid claims and claim adjustment
expense is summarized as follows:
<TABLE>
<CAPTION>
December 31,
1998 1997
-------- --------
(in thousands)
<S> <C> <C>
Balance as of January 1 $130,687 $121,478
Incurred related to:
Current year 119,586 114,706
Prior years (3,931) (1,185)
-------- --------
Total incurred 115,655 113,521
-------- --------
Paid related to :
Current year 78,748 72,278
Prior years 35,265 32,034
-------- --------
Total paid 114,013 104,312
-------- --------
Balance as of December 31 $132,329 $130,687
======== ========
</TABLE>
The balance in the liability for unpaid claims and claim
adjustment expenses is included in "Future policy benefits" and
"Policy and contract claims" in the Balance Sheets.
As a result of changes in estimates of insured events in prior
years, the provision of claims and claim adjustment expenses
decreased by $3,931,000 and $1,185,000 in 1998 and 1997,
respectively, due to higher than expected rates of claim
terminations. Included in the above balances are reinsurance
recoverables of $2,454,000 and $986,000 at 1998 and 1997,
respectively.
NOTE 13 - SURPLUS NOTES
On November 1, 1996, Union Central issued $50,000,000 of 8.20%
Surplus Notes (Notes). These Notes mature on November 1, 2026
and may not be redeemed prior to maturity. The Notes are
unsecured and subordinated to all present and future policy
claims, prior claims and senior indebtedness. Subject to prior
written approval of the Superintendent of the Ohio Insurance
Department, these Notes will pay interest semi-annually on May 1
and November 1. Interest expense of $4,100,000 was incurred in
1998 and 1997, and was recorded as a reduction of "Net
investment income" in the Statements of Income. In connection
with issuing the Notes, Union Central incurred and capitalized
$765,000 of issuance cost. This cost is recorded in "Other
assets" in the Balance Sheets. Issuance cost of $25,000 was
amortized in 1998 and 1997, and recorded to "Underwriting,
acquisition and insurance expense" in the Statements of Income.
Additionally, the Notes have an original issue discount of
$260,000, which is deducted from the balance of the Notes.
Issuance costs and original issue discount will be amortized
under the straight-line method over the term of the Notes.
Amortization relating to original issue discount of $9,000 was
recorded in 1998 and 1997, in "Underwriting, acquisition and
insurance expense" in the Statements of Income.
NOTE 14 - IMPACT OF YEAR 2000 (UNAUDITED)
Some of the Company's computer programs were written using two
digits rather than four to define the applicable year. As a
result, those computer programs have software that may recognize
a date using "00" as the year 1900 rather than the year 2000.
Computer software incorrectly recognizing a date would cause the
Company's computing environment to not function as expected.
Among the results could be miscalculations causing disruptions
of operations.
The Company is addressing the Year 2000 issue through four
steps: assessment, remediation, testing and implementation.
The Company began addressing the Year 2000 issue in 1996 with a
complete inventory and assessment of its mainframe systems. As
a result of the assessment, the Company divided its mainframe
systems into the following groups based on the steps required to
address the Year 2000 issue: systems needing remediation,
systems needing rewriting, systems needing to be replaced,
systems needing to be tested only, and systems needing to be
retired. The Company has also performed an assessment of its
personal computer (PC)/LAN based systems and analyzed its non-
information technology systems such as heating, cooling,
lighting, elevators, building security, alarms and phones for
Year 2000 compliance.
Remediation of the Company's mainframe systems is complete.
Work on those systems needing replacing are in progress and near
completion. The remediation of PC/LAN based systems is also in
progress and near completion. Remediation of systems support
software is in progress and is near completion. Completion will
occur as Year 2000 compliant releases are made available by the
Company's vendors.
Regression testing of all remediated and rewritten mainframe
systems is complete. Future date testing of all critical
systems is underway and is expected to be completed by May 31,
1999. Testing with significant business partners is planned
with completion dates no later than June 30, 1999. Testing of
PC/LAN based systems is in progress with an expected completion
date of June 30, 1999.
The Company's mainframe systems have been regression tested and
are in production mode. Full implementation of all systems is
scheduled to occur no later than June 30, 1999.
In addition to internal systems, the Company has many
relationships with external vendors, suppliers and business
partners. The Company has initiated formal communications,
including a definition of Year 2000 compliance, with all
significant vendors, suppliers and business partners to
determine their Year 2000 status. All have stated they are
compliant or in the process of becoming compliant. The Company
is not aware of any external entity that based on their Year
2000 status would materially impact our ability to provide
continuing service to our customers or impact us financially.
This is an ongoing process and we will continue to monitor the
progress of our important outside vendors and service providers.
Based on the remediation, upgrades, and testing that has been
completed so far, management believes that the primary risks are
possible individual program failures, not major outages or
inability to conduct business. Considerable progress has been
made toward total Year 2000 compliance and the major effort
remaining is to ensure this by thorough future-date testing. In
the unlikely event the Company does not complete any further
work, we would expect no major disruption to our ability to
conduct business, but would anticipate sporadic errors and
system interruptions to occur. However, it is not possible to
anticipate all future outcomes, particularly where third parties
are involved, and as a result there could be circumstances in
which the Company may experience unexpected difficulties
relating to the Year 2000.
The internal risk being managed is that there are date problems
in systems that have not been found and corrected. The overall
contingency plan is to have sufficient time to find and correct
any errors. The future date testing that is underway will allow
us six to nine months to correct errors found through the
testing. Additionally, specific contingent plans are being
written for major functions such as financial reporting.
Externally we are continuing to monitor the progress of our
critical third party vendors and service providers. Our
contingency plan is to replace any such relationships should
they not achieve and demonstrate Year 2000 compliance by
June 30, 1999.
NOTE 15 - COMPREHENSIVE INCOME
FAS 130 establishes the requirement for the reporting and
display of comprehensive income and its components in the
financial statements. Comprehensive income is defined by the
FASB as all changes in an enterprise's equity during a period
other than those resulting from investments by owners and
distributions to owners. Comprehensive income includes net
income and other comprehensive income, which includes all other
non-owner related changes to equity and includes unrealized
gains and losses on available-for-sale debt and equity
securities and minimum pension liability adjustments. FAS 130
also requires separate presentation of the accumulated balance
of other comprehensive income within the equity section of a
statement of financial position. The Company has presented the
required displays of total comprehensive income and its
components, along with the separate presentation of the
accumulated balance of other comprehensive income within the
Consolidated Statements of Equity.
Following are the FAS 130 disclosures of the related tax effects
allocated to each component of other comprehensive income and
the accumulated other comprehensive income balances required by
FAS 130.
The related federal income tax effects allocated to each
component of other comprehensive income are as follows:
<TABLE>
<CAPTION>
Year Ended December 31, 1998
----------------------------
Before-Tax Tax Net-of-Tax
Amount Benefit Amount
--------- --------- ---------
<S> <C> <C> <C>
Unrealized losses on securities:
Unrealized losses arising during 1998 $(30,429) $ 10,650 $(19,779)
Less: reclassification adjustments
for gains realized in net income (5,560) 1,946 (3,614)
--------- --------- ---------
Net unrealized losses (35,989) 12,596 (23,393)
--------- --------- ---------
Minimum pension liability adjustment (9,432) 3,301 (6,131)
--------- --------- ---------
Other comprehensive income $(45,421) $ 15,897 $(29,524)
========= ========= =========
<CAPTION>
Year Ended December 31, 1997
----------------------------
Before-Tax Tax(Expense) Net-of-Tax
Amount Benefit Amount
--------- --------- ---------
<S> <C> <C> <C>
Unrealized gains on securities:
Net unrealized gains $ 18,982 $ (6,644) $ 12,338
--------- --------- ---------
Minimum pension liability adjustment (1,908) 668 (1,240)
--------- --------- ---------
Other comprehensive income $ 17,074 $ (5,976) $ 11,098
========= ========= =========
</TABLE>
<PAGE>
APPENDIX A
- -------------------------------------------------------------
<TABLE>
<CAPTION>
TABLE OF APPLICABLE PERCENTAGES
Attained
Age Percentage
<S> <C>
0-40 250%
41 243%
42 236%
43 229%
44 222%
45 215%
46 209%
47 203%
48 197%
49 191%
50 185%
51 178%
52 171%
53 164%
54 157%
55 150%
56 146%
57 142%
58 138%
59 134%
60 130%
61 128%
62 126%
63 124%
64 122%
65 120%
66 119%
67 118%
68 117%
69 116%
70 115%
71 113%
72 111%
73 109%
74 107%
75-90 105%
91 104%
92 103%
93 102%
94 101%
95+ 100%
</TABLE>
<PAGE>
APPENDIX B
UNION CENTRAL DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the name, age, address and principal occupations
during the past five years of each of Union Central's directors and executive
officers.
<TABLE>
<CAPTION>
Name and Principal Positions with Depositor
Business Address* and Background
- ------------------ ------------------------
<C> <C>
James M. Anderson Director, Union Central; President and CEO,
3333 Burnet Avenue Children's Hospital Medical Center; prior to
Cincinnati, Ohio 45219 1996, Secretary, Access Corporation
Philip G. Barach Director, Union Central; prior to 1994,
9403 Kenwood Road Chairman of the Board, U.S. Shoe Corporation
Suite D100
Cincinnati, Ohio 45242
V. Anderson Coombe Director, Union Central; Chairman of the Board,
2503 Spring Grove Avenue The Wm. Powell Company
Cincinnati, Ohio 45214
William A. Friedlander Director, Union Central; Chairman, Bartlett &
36 East Fourth Street Co.
Cincinnati, Ohio 45202
John H. Jacobs* Director, President and Chief Operating Officer,
Union Central
William G. Kagler Director, Union Central; former Chairman of the
18 Hampton Court Board, Swallen's, Inc.; prior to November, 1995,
Cincinnati, Ohio 45208 various executive positions with Skyline Chili,
Inc.
Lawrence A. Leser Director, Union Central; Chairman,
312 Walnut Street The E. W. Scripps Company; prior to August,
Cincinnati, Ohio 45202 1994, President and CEO, The E.W. Scripps
Company
Francis V. Mastrianna, Ph.D. Director, Union Central; Dean, College of
Slippery Rock University Information Science and Business Administration,
Slippery Rock, PA 16057 Slippery Rock University of Pennsylvania
Mary D. Nelson, FSA Director, Union Central; President, Nelson and
105 West Fourth Street Company
Cincinnati, Ohio 45202
Paul G. Pearson, Ph.D. Director, Union Central; President Emeritus,
5110 Bonham Road Miami University; prior to 1993, President,
Oxford, Ohio 45056 Miami University
Thomas E. Petry Director, Union Central; Former Chairman of the
250 East Fifth Street Board and CEO, Eagle-Picher Industries, Inc.
Suite 500
Cincinnati, Ohio 45202
Larry R. Pike* Chairman and Chief Executive Officer, Union
Central
Myrtis H. Powell, Ph.D. Director, Union Central; Vice President of
Miami University Student Affairs, Miami University
113 Warfield Hall
Oxford, Ohio 45056
Dudley S. Taft Director, Union Central; President, Taft
312 Walnut Street Broadcasting Company
Suite 3550
Cincinnati, Ohio 45202
John M. Tew, Jr., M.D. Director, Union Central; Professor and Chairman,
506 Oak Street Department of Neurosurgery, University of
Cincinnati, Ohio 45219 Cincinnati Medical Center, and Member, Mayfield
Clinic
Stephen R. Hatcher* Executive Vice President and Chief Financial
Officer, Union Central
John H. Jacobs* President and Chief Operating Officer, Union
Central
Dale D. Johnson* Senior Vice President, Union Central
Gerald A. Lockwood* Senior Vice President and Corporate Actuary,
Union Central
David F. Westerbeck* Senior Vice President, General Counsel and
Secretary, Union Central
</TABLE>
__________
* The principal business address of the person designated is
1876 Waycross Road, Cincinnati, Ohio 45240.
<PAGE>
<PAGE>
SUPPLEMENT DATED OCTOBER 21, 1999
TO THE PROSPECTUS DATED MAY 1, 1999 AND REVISED OCTOBER 21, 1999
of
CARILLON LIFE ACCOUNT
Effective October 21, 1999, the prospectus for Carillon Life
Account dated May 1, 1999 and Revised October 21, 1999 (the
"Prospectus") is amended by including as a part thereof the
following information regarding policies issued in the States of
California and New York:
1. Four Portfolios - the MFS Total Return Series, Carillon
Balanced Index Portfolio, Carillon S&P MidCap 400 Portfolio,
and AIM V.I. Capital Appreciation Portfolio - are currently
not available.
The foregoing provision is only applicable to policies issued in
the States of California and New York.
CA/NY
October 21, 1999
