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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 25, 2000
FILE NO. 333-31944
FILE NO. 811-7337
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-6
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / /
PRE-EFFECTIVE AMENDMENT NO. 1 /X/
/ /
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / /
AMENDMENT NO. 21 /X/
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PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT
(Exact Name of Trust)
PROTECTIVE LIFE INSURANCE COMPANY
(Name of Depositor)
2801 HIGHWAY 280 SOUTH
BIRMINGHAM, ALABAMA 35223
(ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES)
COPY TO:
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NANCY KANE, ESQUIRE STEPHEN E. ROTH, ESQUIRE
2801 Highway 280 South Sutherland Asbill & Brennan LLP
Birmingham, Alabama 35223 1275 Pennsylvania Avenue, N.W.
(Name and Address of Agent Washington, D.C. 20004-2404
for Service of Process)
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APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after the effective date of the registration statement.
TITLE OF SECURITIES BEING REGISTERED:
Interests in a separate account issued through variable life insurance policies.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(a), SHALL
DETERMINE.
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PROSPECTUS
[LOGO]
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Issued by: PROTECTIVE LIFE INSURANCE COMPANY
2801 Highway 280 South
Birmingham, Alabama 35223
Telephone (800) 866-3555
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This prospectus describes the Premiere Survivor, a last survivor flexible
premium variable and fixed life insurance policy offered by Protective Life
Insurance Company ("Protective Life"). Please read it carefully before you
invest.
The Policy is designed to provide insurance protection on the lives of two
individuals and to pay a death benefit after the death of the last surviving
Joint Insured.
You have the flexibility to vary the amount and timing of premium payments
and your coverage will stay in force as long as sufficient Policy Value is
maintained.
The Policy Value and, in certain circumstances, the Death Benefit of the
life insurance policy will fluctuate with the investment performance of the
investment options you select. A Fixed Account is also available.
The Owner may, within limits, allocate Net Premiums and Policy Value to one
or more Sub-Accounts of the Protective Variable Life Separate Account (the
"Variable Account") and Protective Life's general account (the "Fixed Account").
The prospectuses for the investment funds describe the investment objective(s)
and risks of investing in the Sub-Account corresponding to each. You bear the
entire investment risk for Policy Value allocated to a Sub-Account. The Policy
has no guaranteed minimum Surrender Value except for amounts allocated to the
Fixed Account. The assets of each Sub-Account will be invested solely in a
corresponding Fund of Protective Investment Company, Van Kampen Life Investment
Trust, MFS-Registered Trademark- Variable Insurance Trust-SM-, Oppenheimer
Variable Account Funds, Calvert Variable Series, Inc. and Van Eck Worldwide
Insurance Trust.
It may not be advantageous to replace existing insurance with this Policy.
Within certain limits, you may return the Policy.
POLICIES (EXCEPT FOR POLICIES ISSUED IN CERTAIN STATES) INCLUDE AN
ARBITRATION PROVISION THAT MANDATES RESOLUTION OF ALL DISPUTES ARISING UNDER THE
POLICY THROUGH BINDING ARBITRATION. THIS PROVISION IS INTENDED TO RESTRICT AN
OWNER'S ABILITY TO LITIGATE SUCH DISPUTES. SEE "ARBITRATION".
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
This policy may not be available for sale in all states.
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 LOSS OF PREMIUMS PAID
(PRINCIPAL).
The date of this prospectus is
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PROSPECTUS CONTENTS
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DEFINITIONS........................................................... 5
SUMMARY AND DIAGRAM OF THE POLICY..................................... 6
EXPENSE TABLE......................................................... 9
GENERAL INFORMATION ABOUT PROTECTIVE LIFE, THE VARIABLE ACCOUNT AND
THE FUNDS............................................................ 11
Protective Life Insurance Company................................... 11
Protective Variable Life Separate Account........................... 11
The Funds........................................................... 12
- The PIC Funds................................................... 12
- The Van Kampen Funds............................................ 13
- The MFS Funds................................................... 13
- The Oppenheimer Funds........................................... 13
- The Calvert Funds............................................... 14
- The Van Eck Funds............................................... 14
Other Information about the Funds................................... 15
Other Investors in the Funds........................................ 15
Addition, Deletion or Substitution of Investments................... 16
Voting Rights....................................................... 16
THE POLICY............................................................ 17
Parties to the Policy............................................... 17
- Owner........................................................... 17
- Joint Insureds.................................................. 17
- Beneficiary..................................................... 17
Purchasing a Policy................................................. 17
Cancellation Privilege.............................................. 17
Premiums............................................................ 18
- Minimum Initial Premium......................................... 18
- Planned Periodic Premiums....................................... 18
- Unscheduled Premiums............................................ 18
- Premium Limitations............................................. 18
- No-Lapse Guarantee.............................................. 18
- Premium Payments Upon Increase in Face Amount................... 19
Net Premium Allocations............................................. 19
Policy Lapse and Reinstatement...................................... 19
- Lapse........................................................... 19
- Reinstatement................................................... 20
CALCULATION OF POLICY VALUES.......................................... 20
Variable Account Value.............................................. 20
- Determination of Units.......................................... 20
- Determination of Unit Value..................................... 20
- Net Investment Factor........................................... 20
Fixed Account Value................................................. 21
POLICY BENEFITS....................................................... 21
Transfers of Policy Values.......................................... 21
- General......................................................... 21
- Telephone Transfers............................................. 21
- Reservation of Rights........................................... 22
- Dollar Cost Averaging........................................... 22
- Portfolio Rebalancing........................................... 22
Surrender Privilege................................................. 23
Withdrawal Privilege................................................ 23
Policy Loans........................................................ 23
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2
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- General......................................................... 23
- Loan Collateral................................................. 23
- Loan Repayment.................................................. 24
- Interest........................................................ 24
- Non-Payment of Policy Loan...................................... 24
- Effect of a Policy Loan......................................... 24
Death Benefit Proceeds.............................................. 25
- Calculation of Death Benefit Proceeds........................... 25
- Death Benefit Options........................................... 25
- Changing the Death Benefit Option............................... 25
Face Amounts........................................................ 26
- Basic Face Amount............................................... 26
- Supplemental Face Amount........................................ 26
- Changing the Face Amount........................................ 26
- Increasing the Face Amount...................................... 26
- Decreasing the Face Amount...................................... 27
Special Endorsements................................................ 27
- Estate Protection Endorsement................................... 27
- Policy Split Option Endorsement................................. 27
Settlement Options.................................................. 28
- Minimum Amounts................................................. 29
- Death of Payee.................................................. 29
- Other Requirements.............................................. 29
THE FIXED ACCOUNT..................................................... 29
The Fixed Account................................................... 29
Interest Credited on Fixed Account Value............................ 29
Payments from the Fixed Account..................................... 30
CHARGES AND DEDUCTIONS................................................ 30
Premium Expense Charge.............................................. 30
Monthly Deduction................................................... 30
- Cost of Insurance Charge........................................ 30
- Cost of Insurance Rates......................................... 31
- Legal Considerations Relating to Sex -- Distinct Premium
Payments and Benefits............................................ 31
- Monthly Administration Fee...................................... 32
- Supplemental Rider Charges...................................... 32
- Mortality and Expense Risk Charge............................... 32
Transfer Fee........................................................ 32
Surrender Charge (Contingent Deferred Sales Charge)................. 32
Withdrawal Charge................................................... 33
Fund Expenses....................................................... 34
EXCHANGE PRIVILEGE.................................................... 34
Effect of the Exchange Offer........................................ 35
- Tax Matters..................................................... 36
- Sales Commissions............................................... 36
ILLUSTRATIONS OF POLICY VALUES, SURRENDER VALUES, DEATH BENEFITS AND
ACCUMULATED
PREMIUMS............................................................. 36
OTHER POLICY BENEFITS AND PROVISIONS.................................. 42
Limits on Rights to Contest the Policy.............................. 42
- Incontestability................................................ 42
- Suicide Exclusion............................................... 42
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3
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Changes in the Policy or Benefits................................... 42
- Misstatement of Age or Sex...................................... 42
- Other Changes................................................... 42
Suspension or Delay of Payments..................................... 42
Reports to Policy Owners............................................ 42
Assignment.......................................................... 43
Arbitration......................................................... 43
Supplemental Riders................................................. 43
Reinsurance......................................................... 43
USES OF THE POLICY.................................................... 43
TAX CONSIDERATIONS.................................................... 44
Introduction........................................................ 44
Tax Status of Protective Life....................................... 44
Taxation of Life Insurance Policies................................. 44
- Tax Status of the Policy........................................ 44
-- Diversification Requirements................................... 45
-- Ownership Treatment............................................ 45
- Tax Treatment of Life Insurance Death Benefit Proceeds.......... 45
- Tax Deferral During Accumulation Period......................... 45
Policies Not Owned by Individuals................................... 46
Policies Which Are Not MEC's........................................ 46
-- Tax Treatment of Withdrawals Generally......................... 46
-- Certain Distributions Required by the Tax Law in the First
15 Policy Years.................................................. 46
-- Tax Treatment of Loans......................................... 46
Policies Which Are MEC's............................................ 47
-- Characterization of a Policy as a MEC.......................... 47
-- Tax Treatment of Withdrawals, Loans, Assignments and Pledges
under MECs....................................................... 47
-- Penalty Tax.................................................... 47
-- Aggregation of Policies........................................ 47
- Actions to Ensure Compliance with the Tax Law................... 47
- Other Considerations............................................ 48
Federal Income Tax Withholding...................................... 48
OTHER INFORMATION ABOUT THE POLICIES AND PROTECTIVE LIFE.............. 48
Sale of the Policies................................................ 48
Corporate Purchasers................................................ 49
Protective Life Directors and Executive Officers.................... 49
State Regulation.................................................... 50
Additional Information.............................................. 50
Year 2000 Computer Compliance Issues................................ 50
Independent Accountants............................................. 51
Experts............................................................. 51
IMSA................................................................ 51
Legal Matters....................................................... 51
Financial Statements................................................ 51
INDEX TO FINANCIAL STATEMENTS......................................... F-1
APPENDICES
A-Examples of Death Benefit Options................................. A-1
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THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT BE LAWFULLY MADE.
4
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DEFINITIONS
"We", "us", "our", "Protective Life", and "Company" refer to Protective Life
Insurance Company. "You" and "your" refer to the Owner(s).
ATTAINED AGE -- A Joint Insured's age as shown in the Policy's specifications
page, plus the number of complete Policy Years since the Policy Effective Date.
BASIC FACE AMOUNT -- The dollar amount selected by the Owner and shown in the
Policy equal to the Face Amount less any Supplemental Face Amount.
CANCELLATION PERIOD -- Period shown in the Policy during which the Owner may
exercise the cancellation privilege and return the Policy for a refund.
CASH VALUE -- Policy Value minus any applicable Surrender Charge.
DEATH BENEFIT -- The amount of insurance provided under the Policy as determined
by the Death Benefit Option selected.
DEATH BENEFIT OPTION -- One of two options that an Owner may select for the
computation of Death Benefit Proceeds. Face Amount (Option A), or Face Amount
Plus Policy Value (Option B).
DEATH BENEFIT PROCEEDS -- The amount payable to the Beneficiary if both Joint
Insureds die while the Policy is in force. It is equal to the Death Benefit plus
any death benefit under any endorsement or rider to the Policy less any Policy
Debt and less unpaid Monthly Deductions if the Last Survivor of the Joint
Insureds dies during a grace period.
FACE AMOUNT -- The dollar amount selected by the Owner and shown in the Policy
used to compute the death benefit. It is the sum of the Basic Face Amount plus
any Supplemental Face Amount.
FIXED ACCOUNT -- Part of Protective Life's General Account to or from which
Policy Value may be transferred or into which Net Premiums may be allocated
under a Policy.
FIXED ACCOUNT VALUE -- The Policy Value in the Fixed Account.
FUND -- A separate investment portfolio of an open-end management investment
company or unit investment trust in which a Sub-Account invests.
HOME OFFICE -- 2801 Highway 280 South, Birmingham, Alabama 35223.
INITIAL FACE AMOUNT -- The Face Amount on the Policy Effective Date.
ISSUE DATE -- The date the Policy is issued.
JOINT INSUREDS -- The two persons whose lives are covered by the Policy.
LAPSE -- Termination of the Policy at the expiration of the grace period while
at least one of the Joint Insureds is still living.
LAST SURVIVOR OF THE JOINT INSUREDS -- The last living Joint Insured.
LOAN ACCOUNT -- An account within Protective Life's general account to which
Fixed Account Value and/or Variable Account Value is transferred as collateral
for Policy loans.
MONTHLY ANNIVERSARY DAY -- The same day in each month as the Policy Effective
Date.
MONTHLY DEDUCTION -- The fees and charges deducted monthly from the Fixed
Account Value and/or Variable Account Value as described on the Policy
Specifications Pages of the Policy.
NET PREMIUM -- A premium payment minus the applicable premium expense charges.
OWNER -- The person or persons who own and are entitled to exercise all rights
provided under the Policy.
POLICY ANNIVERSARY -- The same day and month in each Policy Year as the Policy
Effective Date.
POLICY DEBT -- The sum of all outstanding policy loans plus accrued interest.
POLICY EFFECTIVE DATE -- The date shown in the Policy as of which coverage under
the Policy begins.
POLICY VALUE -- The sum of the Variable Account Value, the Fixed Account Value,
and the Loan Account Value.
POLICY YEAR -- Each period of twelve months commencing with the Policy Effective
Date and each Policy Anniversary thereafter.
SUB-ACCOUNT -- A separate division of the Variable Account established to invest
in a particular Fund.
SUB-ACCOUNT VALUE -- The Policy Value in a Sub-Account.
SUPPLEMENTAL FACE AMOUNT -- The dollar amount selected by the Owner and shown in
the Policy as Face Amount purchased in addition to the Basic Face Amount.
SURRENDER VALUE -- The Cash Value minus any outstanding Policy Debt.
VALUATION DAY -- Each day the New York Stock Exchange and the Home Office are
open for business except for a day that a Sub-Account's corresponding Fund does
not value its shares.
VALUATION PERIOD -- The period commencing with the close of regular trading on
the New York Stock Exchange on any Valuation Day and ending at the close of
regular trading on the New York Stock Exchange on the next succeeding Valuation
Day.
VARIABLE ACCOUNT -- Protective Variable Life Separate Account, a separate
investment account of Protective Life to or from which Policy Value may be
transferred and into which Net Premiums may be allocated.
VARIABLE ACCOUNT VALUE -- The sum of all Sub-Account Values.
5
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SUMMARY AND DIAGRAM OF THE POLICY
THE FOLLOWING SUMMARY OF PROSPECTUS INFORMATION AND DIAGRAM OF THE POLICY
SHOULD BE READ IN CONJUNCTION WITH THE DETAILED INFORMATION APPEARING ELSEWHERE
IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, THE DESCRIPTION OF THE POLICY IN
THIS PROSPECTUS ASSUMES THAT THE POLICY IS IN FORCE AND THERE IS NO OUTSTANDING
POLICY DEBT.
PURPOSE OF THE POLICY. The Policy is designed to be a long-term investment
providing insurance benefits. A prospective Owner should consider the Policy in
conjunction with other insurance policies he or she may own, as well as their
need for insurance and the Policy's long-term investment potential. It may not
be advantageous to replace existing insurance coverage with the Policy. In
particular, replacement should be carefully considered if the decision to
replace existing coverage is based solely on a comparison of Policy
illustrations (see below).
COMPARISON WITH UNIVERSAL LIFE INSURANCE. The Policy is similar in many
ways to fixed-benefit life insurance. As with fixed-benefit life insurance: the
Owner of a Policy pays premiums for insurance coverage on the persons insured;
the Policy provides for accumulation of Net Premiums and a Surrender Value which
is payable if the Policy is surrendered during the lifetime of either of the
Joint Insureds; and the Surrender Value during the early Policy Years is likely
to be substantially lower than the aggregate premiums paid. However, the Policy
differs from fixed-benefit life insurance in several important respects. Unlike
fixed-benefit life insurance, the Death Benefit may and the Policy Value will
increase or decrease to reflect the investment performance of any Sub-Accounts
to which Policy Value is allocated. There is no guaranteed minimum Surrender
Value except with respect to Policy Value that is allocated to the Fixed
Account. If Policy Value is insufficient to pay charges due, then, after a grace
period, the Policy will lapse without value. See "Policy Lapse and
Reinstatement". However, Protective Life guarantees that the Policy will remain
in force during the first 5 Policy Years, as long as certain requirements
related to the Minimum Monthly Premium have been met. (See "Premiums -- No-Lapse
Guarantee".) If a Policy lapses while loans are outstanding, certain amounts may
become subject to income tax and a 10% penalty tax. (See "Tax Considerations".)
DEATH BENEFIT OPTIONS. Two Death Benefit options are available under the
Policy: a level death benefit ("Option A") and an variable death benefit
("Option B"). Protective Life guarantees that the Death Benefit Proceeds will
never be less than the Face Amount of insurance (less any outstanding Policy
Debt and past due charges) as long as sufficient premiums are paid to keep the
Policy in force. The Policy provides for a Surrender Value that can be obtained
by surrendering the Policy. The Policy also permits loans and withdrawals,
within limits.
ILLUSTRATIONS. Illustrations in this prospectus or illustrations used in
connection with the purchase of a Policy are based on HYPOTHETICAL rates of
return. THESE RATES ARE NOT GUARANTEED. They are illustrative only and SHOULD
NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE PERFORMANCE. Actual rates
of return may be higher or lower than those reflected in Policy illustrations,
and therefore, actual Policy values will be different from those illustrated.
TAX CONSIDERATIONS. Protective Life intends for the Policy to satisfy the
definition of a life insurance contract under Section 7702 of the Internal
Revenue Code of 1986, as amended. A Policy may be a "modified endowment
contract" under federal tax law depending upon the amount of premiums paid in
relation to the Death Benefit provided under the Policy. Protective Life will
monitor Policies and will attempt to notify you on a timely basis if your Policy
is in jeopardy of becoming a modified endowment contract. For further discussion
of the tax status of a Policy and the tax consequences of being treated as a
life insurance contract or a modified endowment contract, see "Tax
Considerations".
CANCELLATION PRIVILEGE. For a limited time after the Policy is issued, you
have the right to cancel your Policy and receive a refund. (See "Cancellation
Privilege".) In certain states, until the end of this "Cancellation Period,"
Protective Life reserves the right to allocate Net Premium to the Sub-Account
investing in the Oppenheimer Money Fund Sub-Account or to the Fixed Account.
(See "Net Premium Allocations".)
6
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OWNER INQUIRIES. If you have any questions, you may write or call
Protective Life's Home Office at 2801 Highway 280 South, Birmingham, Alabama
35223, 1-800-265-1545.
DIAGRAM OF POLICY
PREMIUM PAYMENTS
- You select a payment plan but are not required to pay premiums according to
the plan. You can vary the amount and frequency and can skip planned premium
payments. See "Premiums" pages 18 through 19 for rules and limits.
- The Policy's minimum initial premium and planned premium payments depend on
each Joint Insured's age, sex and underwriting class, Face Amount selected,
and any supplemental riders.
- Unscheduled premium payments may be made, within limits. See page 18.
- Under certain circumstances, extra premiums may be required to prevent
lapse. See "Policy Lapse and Reinstatement" pages 19 through 20.
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DEDUCTIONS FROM PREMIUM PAYMENTS
- - A premium expense charge will be deducted
from each premium before allocation
resulting in a "Net Premium". See
page 30.
POLICY YEAR CURRENT CHARGE MAXIMUM CHARGE
- ----------- -------------- --------------
1-5 10% 12.5%
6-10 5% 6%
11+ 2% 2.5%
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ALLOCATION OF NET PREMIUM
- You direct the allocation of Net Premium among 30 Sub-Accounts and the Fixed
Account. See page 19 for rules and limits on Net Premium allocations.
- The Sub-Accounts invest in corresponding Funds. See pages 12 through 14.
Funds available are the PIC Funds, the Van Kampen Funds, the Oppenheimer
Funds, the MFS Funds, the Calvert Funds and the Van Eck Funds.
- Interest is credited on amounts allocated to the Fixed Account at a rate
determined by Protective Life, but not less than an annual effective rate of
4%. See page 29 for rules and limits on Fixed Account allocations.
7
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DEDUCTIONS FROM POLICY VALUE
- Monthly Deduction includes charges for cost of insurance, administration
fees, mortality and expense risk charges and charges for any supplemental
rider. Monthly administration fees are currently $.06 per $1,000 of Basic
Face Amount (guaranteed not to exceed $0.075 per $1,000) during Policy Years
1 through 9. This charge is not assessed after the ninth Policy Year. In
addition, for the 12-month period following an increase in the Supplemental
Face Amount, there is a charge based on the increase. Monthly mortality and
expense risk charges are equal to .075% multiplied by the value of the
assets in the Variable Account (which is equivalent to an annual rate of
0.90% of such amount) during Policy Years 1 through 10. In Policy Years 11
and thereafter the monthly mortality and expense risk charge is currently
equal to .021% multiplied by the value of the assets in the Variable Account
(which is equivalent to an annual rate of 0.25% of such amount) and is
guaranteed not to exceed .075%. The mortality and expense risk charge is not
deducted from the Fixed Account. See "Monthly Deduction" pages 30 through
32.
DEDUCTIONS FROM ASSETS
- Investment advisory fees and Fund operating expenses are also deducted from
the assets of each Fund.
POLICY VALUE
- Is the amount in the Sub-Accounts and in the Fixed Account credited to your
Policy plus the value held in the general account to secure the Policy Debt.
- Varies from day to day to reflect Sub-Account investment experience,
interest credited on any Fixed Account allocations, charges deducted and any
other Policy transactions (such as Policy loans, transfers and withdrawals).
See "Calculation of Policy Value" pages 20 and 21. There is no minimum
guaranteed Policy Value except with respect to amounts allocated to the
Fixed Account. The Policy may lapse if the Policy Value is insufficient to
cover a Monthly Deduction due. See pages 19 and 20.
- Can be transferred between and among the Sub-Accounts and the Fixed Account.
A transfer fee of $25 may apply if more than 12 transfers are made in a
Policy Year. See pages 21 and 22 for rules and limits. Policy loans reduce
the amount available for transfers.
- Is the starting point for calculating certain values under a Policy, such as
the Cash Value, Surrender Value, and the Death Benefit used to determine
Death Benefit Proceeds.
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CASH BENEFITS DEATH BENEFITS
- - After the first Policy Year loans may be - Available as lump sum or under a variety
taken for amounts up to 90% of Surrender of settlement options.
Value, at an effective annual interest - The minimum Face Amount is $250,000 (Basic
rate of 6.0% during the Policy Years 2 plus Supplemental) of which at least
through 10 and currently 4.00% thereafter $100,000 must be Basic. The minimum
(4.25% guaranteed). See "Policy Loans" Supplemental Face Amount, if any, is
pages 23 and 24 for rules and limits. $25,000.
- - After the first policy year withdrawals - Two Death Benefit Options are available:
generally can be made provided there is Option A, Level (which is equal to the
sufficient remaining Surrender Value. A Face Amount), and Option B, Increasing
withdrawal charge of the lesser of $25 or (which is equal to the Face Amount plus
2% of the withdrawal amount requested will Policy Value). See page 25.
apply to each withdrawal. See "Withdrawal - Flexibility to change the Death Benefit
Privilege" on page 23 for rules and Option and Face Amount. See pages 25 through
limits. 27 for rules and limits.
- - The Policy may be surrendered in full at - The No-Lapse Guarantee keeps the Policy in
any time for its Surrender Value. A force for a 5-year period regardless of
declining deferred sales charge is the sufficiency of Policy Value so long as
assessed on surrenders during the first 12 for each month the cumulative premiums
Policy Years. See "Surrender Charge paid on the Policy, less any withdrawals
(Contingent Deferred Sales Charge)" and Policy Debt, are at least equal to the
pages 32 and 33. As a result of the cumulative Minimum Monthly Premium. See
surrender charge, the Surrender Value "No-Lapse Guarantee" page 19.
during the early Policy Years is likely to - Supplemental riders may be available. See
be substantially lower than the aggregate page 43.
premiums paid.
- - A variety of settlement options are
available. See page 28.
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EXPENSE TABLE
The Sub-Accounts invest in corresponding Funds. (See "The Funds"
pages 12-15.) The current Funds available and the investment advisory fees and
other expenses are as follows:
ANNUAL FUND EXPENSES
(AFTER REIMBURSEMENT AND AS PERCENTAGE OF AVERAGE NET ASSETS)
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MANAGEMENT OTHER TOTAL ANNUAL
(ADVISORY) EXPENSES AFTER FUND EXPENSES
FEES REIMBURSEMENT (AFTER REIMBURSEMENTS)
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PROTECTIVE INVESTMENT COMPANY (PIC) (1)
International Equity Fund..................... 1.10% 0.00% 1.10%
Small Cap Value Fund.......................... 0.80% 0.00% 0.80%
Capital Growth Fund........................... 0.80% 0.00% 0.80%
CORE-SM- U.S. Equity Fund..................... 0.80% 0.00% 0.80%
Growth & Income Fund.......................... 0.80% 0.00% 0.80%
Global Income Fund............................ 1.10% 0.00% 1.10%
VAN KAMPEN LIFE INVESTMENT TRUST
Emerging Growth Portfolio..................... 0.67% 0.18% 0.85%
Enterprise Portfolio.......................... 0.48% 0.12% 0.60%
Comstock Portfolio............................ 0.00% 0.95% 0.95%
Growth and Income Portfolio................... 0.43% 0.32% 0.75%
Strategic Stock Portfolio..................... 0.24% 0.41% 0.65%
Asset Allocation Portfolio.................... 0.33% 0.27% 0.60%
MFS-REGISTERED TRADEMARK- VARIABLE INSURANCE
TRUST-SM- (2)(3)
New Discovery Series.......................... 0.90% 0.17% 1.07%
Emerging Growth Series........................ 0.75% 0.09% 0.84%
Research Series............................... 0.75% 0.11% 0.86%
Growth Series................................. 0.75% 0.16% 0.91%
Growth With Income Series..................... 0.75% 0.13% 0.88%
Utilities Series.............................. 0.75% 0.16% 0.91%
Total Return Series........................... 0.75% 0.15% 0.90%
OPPENHEIMER VARIABLE ACCOUNT FUNDS
Aggressive Growth Fund/VA..................... 0.66% 0.01% 0.67%
Global Securities Fund/VA..................... 0.67% 0.02% 0.69%
Capital Appreciation Fund/VA.................. 0.68% 0.02% 0.70%
Main Street Growth & Income Fund/VA........... 0.73% 0.05% 0.78%
High Income Fund/VA........................... 0.74% 0.01% 0.75%
Strategic Bond Fund/VA........................ 0.74% 0.04% 0.78%
Money Fund/VA................................. 0.45% 0.03% 0.48%
CALVERT VARIABLE SERIES, INC. (4)
Social Small Cap Growth Portfolio............. 1.00% 0.58% 1.58%
Social Balanced Portfolio..................... 0.70% 0.19% 0.89%
VAN ECK WORLDWIDE INSURANCE TRUST
Worldwide Hard Assets Fund.................... 1.00% 0.26% 1.26%
Worldwide Real Estate Fund (5)................ 1.00% 2.23% 3.23%
</TABLE>
- ------------------------
(1) The annual expenses listed for all of the PIC Funds are net of certain
reimbursements by PIC's investment manager. (See "The Funds".) Absent the
reimbursements, total expenses for the period ended December 31, 1999 were:
CORE-SM- U.S. Equity Fund 0.85%, Small Cap Value Fund 0.90%, International
Equity Fund 1.33%, Growth and Income Fund 0.86%, Capital Growth Fund 0.85%,
and Global Income Fund 1.29%. PIC's investment manager has voluntarily
agreed to reimburse certain of
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each Fund's expenses in excess of its management fees. Although this
reimbursement may be ended on 120 days notice to PIC, the investment manager
has no present intention of doing so.
(2) MFS has agreed to bear expenses for these series, subject to reimbursement
by these series, such that each series' "Other Expenses" shall not exceed
0.15% of the average daily net assets of these series during the current
fiscal year. This waiver and reimbursement was in effect for the period
ending December 31, 1999. The payments made by MFS on behalf of each series
under this arrangement are subject to reimbursement by the series to MFS,
which will be accomplished by the payment of an expense reimbursement fee by
the series to MFS computed and paid monthly at a percentage of the series'
average daily net assets for its then current fiscal year, with a limitation
that immediately after such payment the series' "Other Expenses" will not
exceed the percentage set forth above for that series. The obligation of MFS
to bear a series "Other Expenses" pursuant to this arrangement, and the
series' obligation to pay the reimbursement fee to MFS, terminates on the
earlier of the date on which payments made by the series equal the prior
payment of such reimbursable expenses by MFS, or December 31, 2004 (May 1,
2001 in the case of the New Discovery Series). MFS may, in its discretion,
terminate this arrangement at an earlier date, provided that the arrangement
will continue for each series until at least May 1, 2001, unless terminated
with the consent of the board of trustees which oversees the series. Absent
the reimbursements, total expenses for the New Discovery Series for the
period ended December 31, 1999 were 2.49% reflecting "Other Expenses"
of 1.59% and total expenses for the Growth Series were 1.46% reflecting
"Other Expenses" of 0.71%.
(3) Each Series has an expense offset arrangement which reduces the Series'
custodian based fee based on the amount of cash maintained by the Series
with its custodian and dividend disbursing agent. Each Series may enter into
other such arrangements and directed brokerage arrangements which would also
have the effect of reducing the Series' expenses. Expenses do not take into
account these expense reductions and are therefore higher than the actual
expenses of the Series. Had this offset been incorporated into the reported
expenses, the "Other Expenses" for the New Discovery Series would appear on
the Expenses table as 0.15% and in footnote (2) as 2.47%; the "Other
Expenses" for the Emerging Growth Series would appear on the Expense Table
as 0.08%; the "Other Expenses" for the Research Series would appear on the
Expense Table as 0.10%; the "Other Expenses" for the Growth Series would
appear on the Expense Table as 0.15% and in footnote (2) as 0.70%; the
"Other Expenses" for the Growth with Income Series would appear on the
Expense Table as 0.12%; the "Other Expenses" for the Utilities Series would
appear on the Expense Table as 0.15%; and the "Other Expenses" for the Total
Return Series would appear on the Expense Table as 0.14%.
(4) The figures have been restated to reflect an increase in transfer agency
expenses expected to be incurred in 2000. "Other Expenses" reflect an
indirect fee. Net fund operating expenses after reductions for fees paid
indirectly would be 0.86% for Social Balanced and 1.15% for Social Small Cap
Growth.
(5) Van Eck Associates Corporation (the "Adviser") earned fees for investment
management and advisory services. The fee is based on an annual rate of 1%
of the average daily net assets. The Adviser also agreed to assume expenses
exceeding 1% of average daily net assets except interest, taxes, brokerage
commissions and extraordinary expenses for the period January 1, 1999 to
February 28, 1999.
Beginning March 1, 1999 through February 29, 2000, the Adviser agreed to
assume expenses exceeding 1.5% of average daily net assets except interest,
taxes, brokerage commissions and extraordinary expenses. For the year ended
December 31, 1999 the Adviser assumed expenses in the amount of $40,036.
Certain of the officers and trustees of the Trust are officers, directors or
stockholders of the Adviser and Van Eck Securities Corporation. As of
December 31, 1999, the Adviser owned 18.6% of the outstanding shares of
beneficial interest of the Fund.
(6) The Advisor has voluntarily agreed to reimburse the Portfolios for all
advisory fees in excess of certain thresholds. This agreement was in effect
for the period January 1, 1999 to December 31, 1999 and will continue
through the period of January 1, 2000 to December 31, 2000. There is no
guarantee that the Adviser will continue the reimbursement beyond
December 31, 2000. Absent these reimbursements,
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the advisory fees would have been 0.70% for the Emerging Growth Portfolio, 0.50%
for the Enterprise Portfolio, 0.60% for the Comstock Portfolio, 0.60% for the
Growth and Income Portfolio, 0.50% for the Strategic Stock Portfolio and 0.50%
for the Asset Allocation Portfolio; the "Other Expenses" would have been 0.18%
for the Emerging Growth Portfolio, 0.12% for the Enterprise Portfolio, 9.76% for
the Comstock Portfolio, 0.32% for the Growth and Income Portfolio, 0.41% for the
Strategic Stock Portfolio and 0.27% for the Asset Allocation Portfolio.
The above table is intended to assist the owner in understanding the costs
and expenses that he or she will bear directly or indirectly. The table reflects
the investment management fees and other expenses and total expenses for each
Fund for the period January 1, 1999 to December 31, 1999. For a more complete
description of the various costs and expenses in the Policies see "Charges and
Deductions". For more information regarding management fees please see the
prospectus for each of the Funds, which accompany this prospectus.
GENERAL INFORMATION ABOUT PROTECTIVE LIFE,
THE VARIABLE ACCOUNT AND THE FUNDS
PROTECTIVE LIFE INSURANCE COMPANY
Protective Life is a Tennessee stock life insurance company. Founded in
1907, Protective Life offers individual life and health insurance, annuities,
group life and health insurance, and guaranteed investment contracts. Protective
Life is currently licensed to transact life insurance business in 49 states and
the District of Columbia. As of December 31, 1999, Protective Life had total
assets of approximately $12.6 billion. Protective Life is the principal
operating subsidiary of Protective Life Corporation ("PLC"), an insurance
holding company whose stock is traded on the New York Stock Exchange. PLC, a
Delaware corporation, had consolidated assets of approximately $13.0 billion at
December 31, 1999.
PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT
Protective Variable Life Separate Account is a separate investment account
of Protective Life established under Tennessee law by the board of directors of
Protective Life on February 22, 1995. The Variable 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. This registration does not
involve supervision by the SEC of the management or investment policies of
practices or the Variable Account.
Protective Life owns the assets of the Variable Account. These assets are
held separate from other assets and are not part of Protective Life's general
account. Assets of the Variable Account equal to the reserves or other contract
liabilities of the Variable Account will not be charged with liabilities that
arise from any other business that Protective Life conducts. Protective Life may
transfer to its general account any assets of the Variable Account which exceed
the reserves and other contract liabilities of the Variable Account (which
always are at least equal to the aggregate Surrender Values under the Policies).
Protective Life may accumulate in the Variable Account the charge for mortality
and expense risks and investment results applicable to those assets that are in
excess of the reserves and other contract liabilities related to the Policies.
Protective Life is obligated to pay all benefits provided under the Policies.
The Variable Account is divided into Sub-Accounts. The income, gains or
losses, whether or not realized, from the assets of each Sub-Account are
credited to or charged against that Sub-Account without regard to any other
income, gains or losses of Protective Life. Each Sub-Account invests exclusively
in shares of a corresponding Fund. Therefore, the investment experience of your
Policy depends on the experience of the Sub-Accounts you select. In the future,
the Variable Account may include other Sub-Accounts that are not available under
the Policies and are not otherwise discussed in this prospectus.
Currently, thirty Sub-Accounts of the Variable Account are available under
the Policies: PIC International Equity; PIC Small Cap Value; PIC Capital Growth;
PIC CORE-SM- U.S. Equity; PIC Growth and
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Income; PIC Global Income; Van Kampen Emerging Growth; Van Kampen Enterprise;
Van Kampen Comstock; Van Kampen Growth and Income; Van Kampen Strategic Stock;
Van Kampen Asset Allocation; MFS New Discovery; MFS Emerging Growth; MFS
Research; MFS Growth; MFS Growth With Income; MFS Utilities; MFS Total Return;
Oppenheimer Aggressive Growth; Oppenheimer Global Securities: Oppenheimer
Capital Appreciation; Oppenheimer Main Street Growth & Income; Oppenheimer High
Income; Oppenheimer Strategic Bond; Oppenheimer Money Fund; Calvert Social Small
Cap Growth; Calvert Social Balanced; Van Eck Worldwide Hard Assets; and Van Eck
Worldwide Real Estate.
THE FUNDS
Each Sub-Account invests in a corresponding Fund. Each Fund is an investment
portfolio of one of the following investment companies: Protective Investment
Company (the "PIC Funds") managed by Protective Investment Advisors, Inc. and
subadvised by Goldman Sachs Asset Management or Goldman Sachs Asset Management
International; Van Kampen Life Investment Trust managed by Van Kampen Asset
Management, Inc. (the "Van Kampen Funds"); Oppenheimer Variable Account Funds
(the "Oppenheimer Funds") managed by OppenheimerFunds, Inc.;
MFS-Registered Trademark- Variable Insurance Trust-SM- (the "MFS Funds") managed
by MFS Investment Management; Calvert Variable Series, Inc. (the "Calvert
Funds") managed by Calvert Asset Management Company, Inc.; or Van Eck Worldwide
Insurance Trust (the "Van Eck Funds") managed by Van Eck Associates Corporation.
Shares of these Funds are offered only to: (1) the Variable Account, (2) other
separate accounts of Protective Life supporting variable annuity contracts or
variable life insurance policies, (3) separate accounts of other life insurance
companies supporting variable annuity contracts or variable life insurance
policies, and (4) certain qualified retirement plans. Such shares are not
offered directly to investors but are available only through the purchase of
such contracts or policies or through such plans. See the prospectus for each
Fund for details about that Fund.
There is no guarantee that any Fund will meet its investment objectives.
Please refer to the prospectus for each of the Funds you are considering for
more information.
PROTECTIVE INVESTMENT COMPANY (PIC)
INTERNATIONAL EQUITY FUND. This Fund seeks long-term capital appreciation.
This Fund will pursue its objectives by investing substantially all, and at
least 65% of total assets in equity and equity-related securities of companies
that are organized outside the United States or whose securities are primarily
traded outside the United States.
SMALL CAP VALUE FUND. This Fund seeks long-term capital growth. This Fund
will pursue its objectives by investing, under normal circumstances, at least
65% of its total assets in equity securities of companies with public stock
market capitalizations of $1 billion or less at the time of investment.
CAPITAL GROWTH FUND. This Fund seeks long-term capital growth. The Fund
will pursue its objective by investing, under normal circumstances, at least 90%
of its total assets in a diversified portfolio of equity securities having
long-term capital appreciation potential.
CORE-SM- U.S. EQUITY FUND. This Fund seeks long-term growth of capital and
dividend income. This Fund will pursue its objective by investing, under normal
circumstances, at least 90% of its total assets in equity securities of
U.S. issuers, including foreign issuers that are traded in the United States.
The Fund's investments are selected using a variety of quantitative techniques
and fundamental research in seeking to maximize the Fund's expected return,
while maintaining risk, style, capitalization and industry characteristics
similar to the S&P 500 Index.
GROWTH AND INCOME FUND. This Fund seeks long-term growth of capital and
growth of income. This Fund will pursue its objectives by investing, under
normal circumstances, at least 65% of its total assets in
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equity securities that the investment advisor considers to have favorable
prospects of capital appreciation and/or dividend paying ability.
GLOBAL INCOME FUND. This Fund seeks high total return, emphasizing current
income and, to a lesser extent, providing opportunities for capital
appreciation. This Fund will pursue its objectives by investing primarily in
high quality fixed-income securities of U.S. and foreign issuers and through
foreign currency transactions.
VAN KAMPEN LIFE INVESTMENT TRUST
EMERGING GROWTH PORTFOLIO This Fund seeks capital appreciation.
ENTERPRISE PORTFOLIO This Fund seeks capital appreciation through
investment in securities believed by the investment adviser to have above
average potential for capital appreciation.
COMSTOCK PORTFOLIO This Fund seeks capital growth and income through
investments in equity securities, including common stocks, preferred stocks and
securities convertible into common and preferred stocks.
GROWTH AND INCOME This Fund seeks income and long-term growth of capital
and income.
STRATEGIC STOCK PORTFOLIO This Fund seeks above average total return
through a combination of potential capital appreciation and dividend income
consistent with the preservation of invested capital.
ASSET ALLOCATION PORTFOLIO This Fund seeks high total investment return
consistent with prudent investment risk through a fully managed investment
policy utilizing equity securities as well as investment grade intermediate and
long-term debt securities and money market securities. Total investment return
consists of current income (including dividends, interest and discount accruals)
and capital appreciation or depreciation.
MFS-REGISTERED TRADEMARK- VARIABLE INSURANCE TRUST-SM-
NEW DISCOVERY SERIES. This Fund seeks to provide capital appreciation.
EMERGING GROWTH SERIES. This Fund seeks to provide long-term growth of
capital.
RESEARCH SERIES. This Fund seeks to provide long-term growth of capital and
future income.
GROWTH SERIES. This Fund seeks long-term growth of capital and future
income rather than current income by investing primarily in common stocks and
related securities, such as preferred stocks, convertible securities and
depositary receipts for those securities of companies the Fund's investment
advisor believes offer better than average prospects for long-term growth.
GROWTH WITH INCOME SERIES. This Fund seeks to provide reasonable current
income and long-term growth of capital and income.
UTILITIES SERIES. This Fund seeks to provide capital growth and current
income above that available from a portfolio invested entirely in equity
securities.
TOTAL RETURN SERIES. This Fund 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.
OPPENHEIMER VARIABLE ACCOUNT FUNDS
AGGRESSIVE GROWTH FUND/VA. This Fund seeks capital appreciation.
GLOBAL SECURITIES FUND/VA. This Fund seeks long-term capital appreciation
by investing in securities of foreign issuers, "growth-type" companies and
cyclical industries.
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CAPITAL APPRECIATION FUND/VA. This Fund seeks to achieve long-term capital
appreciation by investing in securities of well-known established companies.
MAIN STREET GROWTH & INCOME FUND/VA. This Fund seeks a high total return
(which includes growth in the value of its shares as well as current income)
from equity and debt securities. The Fund invests mainly in common stocks of
U.S. companies.
HIGH INCOME FUND/VA. This Fund seeks a high level of current income from
investment in high yield fixed-income securities.
MONEY FUND/VA. This Fund seeks maximum current income from investments in
"money market" securities consistent with low capital risk and the maintenance
of liquidity. AN INVESTMENT IN THE MONEY FUND IS NOT INSURED OR GUARANTEED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
ALTHOUGH THE FUND SEEKS TO PRESERVE THE VALUE OF YOUR INVESTMENT AT $1.00 PER
SHARE, IT IS POSSIBLE TO LOSE MONEY BY INVESTING IN THE FUND.
STRATEGIC BOND FUND/VA. This Fund seeks a high level of current income
principally derived from interest on debt securities and seeks to enhance such
income by writing covered call options on debt securities.
CALVERT VARIABLE SERIES, INC.
SOCIAL SMALL CAP GROWTH PORTFOLIO. This Fund seeks to provide long-term
capital appreciation by investing in the equity securities of companies that
have small market capitalization.
SOCIAL BALANCED PORTFOLIO. This Fund seeks to achieve a competitive total
return on an actively managed, non-diversified portfolio of stocks, bonds, and
money market instruments that offer income and capital growth opportunity and
that satisfy the social criteria.
VAN ECK WORLDWIDE INSURANCE TRUST
WORLDWIDE HARD ASSETS FUND. This Fund seeks long-term capital appreciation
by investing primarily in "Hard Asset Securities". Hard Asset Securities are the
stocks, bonds and other securities of companies that derive at least 50% of
gross revenue or profit from the exploration, development, production or
distribution of (together "Hard Assets"):
(i) precious metals,
(ii) natural resources,
(iii) real estate; and
(iv) commodities.
WORLDWIDE REAL ESTATE FUND. This Fund seeks a high return by investing in
equity securities of companies that own real estate or that principally do
business in real estate.
THERE IS NO ASSURANCE THAT THE STATED OBJECTIVES AND POLICIES OF ANY OF THE
FUNDS WILL BE ACHIEVED.
MORE DETAILED INFORMATION CONCERNING THE INVESTMENT OBJECTIVES, POLICIES AND
RESTRICTIONS OF THE FUNDS, THE EXPENSES OF THE FUNDS, THE RISKS OF INVESTING IN
THE FUNDS AND OTHER ASPECTS OF THEIR OPERATIONS CAN BE FOUND IN THE CURRENT
PROSPECTUSES FOR THE FUNDS, WHICH ACCOMPANY THIS PROSPECTUS, AND THE CURRENT
STATEMENT OF ADDITIONAL INFORMATION FOR EACH OF THE FUNDS. THE FUNDS'
PROSPECTUSES SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE CONCERNING THE
ALLOCATION OF NET PREMIUMS OR TRANSFERS AMONG THE SUB-ACCOUNTS.
Certain Funds may have investment objectives and policies similar to other
mutual funds (sometimes having similar names) that are managed by the same
investment adviser or manager. The investment results of the Funds, however, may
be more or less favorable than the results of such other mutual funds.
14
<PAGE>
Protective Life does not guarantee or make any representation that the
investment results of any Fund is, or will be, comparable to any other mutual
fund, even one with the same investment adviser or manager.
OTHER INFORMATION ABOUT THE FUNDS
Each Fund sells its shares to the Variable Account under a participation
agreement between the appropriate investment company and Protective Life. The
termination provisions of these agreements vary. The Variable Account would not
be able to purchase additional shares of a Fund if the participation agreement
relating to the Fund terminates. Owners would not be able to allocate assets in
the Variable Account or premiums to Sub-Accounts investing in that Fund. In
certain circumstances, it is also possible that a Fund may refuse to sell its
shares to the Variable Account despite the fact that the participation agreement
relating to that Fund has not been terminated. Should a Fund decide to
discontinue selling its shares to the Variable Account, Protective Life would
not be able to honor requests from Owners to allocate premiums or transfer
Account Value to the Sub-Account investing in shares of that Fund.
Protective Life has entered into agreements with the investment managers or
advisers of the Funds pursuant to which each such investment manager or adviser
pays Protective Life a servicing fee based upon an annual percentage of the
average daily net assets invested by the Variable Account (and other separate
accounts of Protective Life and its affiliates) in the Funds managed by that
manager or adviser. These fees are in consideration for the administrative
services provided to the Funds by Protective Life and its affiliates. Payments
of fees by managers or advisers under these agreements do not increase the fees
or expenses the Funds or their shareholders pay.
OTHER INVESTORS IN THE FUNDS
PIC currently sells shares of its Funds only to Protective Life as the
underlying investment for the Variable Account as well as for variable annuity
contracts issued through Protective Life and its subsidiary Protective Life and
Annuity Insurance Company. PIC may in the future sell shares of its Funds to
other separate accounts of Protective Life or its life insurance company
affiliates supporting other variable annuity contracts or variable life
insurance policies. In addition, upon obtaining regulatory approval, PIC may
sell shares to certain retirement plans qualifying under Section 401 of the
Code. Protective Life currently does not forsee any disadvantages to Owners that
would arise from the possible sale of shares to support its variable annuity
contracts or those of its affiliates or from the possible sale of shares to such
retirement plans. However, the board of directors of PIC will monitor events in
order to identify any material irreconcilable conflicts that might possibly
arise if such shares were also offered to support variable life insurance
policies other than the Policies or variable annuity contracts or to retirement
plans. In event of such a conflict, the board of directors would determine what
action, if any, should be taken in response to the conflict. In addition, if
Protective Life believes that PIC's response to any such conflicts does not
provide enough protection for Owners, it will take appropriate action on its
own, including withdrawing the Variable Account's investment in the Fund. (See
the PIC prospectus for more detail.)
Shares of the Van Kampen Funds, Oppenheimer Funds, MFS Funds, Calvert Funds
and Van Eck Funds are sold to separate accounts of insurance companies, which
may or may not be affiliated with Protective Life or each other, a practice
known as "shared funding." They may also be sold to separate accounts to serve
as the underlying investment for both variable annuity contracts and variable
life insurance policies, a practice known as "mixed funding." Shares of some of
these Funds may also be sold to certain qualified pension and retirement plans.
As a result, there is a possibility that a material conflict may arise among and
between the interests of Policy Owners and other of the Fund's various
investors. In the event of any such material conflicts, Protective Life will
consider what action may be appropriate, including removing the Fund from the
Variable Account or replacing the Fund with another fund. As is the case with
PIC, the board of directors (or trustees) of each of the Van Kampen Funds,
Oppenheimer Funds, MFS Funds, Calvert Funds and Van Eck Funds monitors events
related to their Funds to identify possible material irreconcilable conflicts
among and between the interests of the Fund's various investors. There
15
<PAGE>
are certain risks associated with mixed and shared funding and with the sale of
shares to qualified pension and retirement plans, as disclosed in each Fund's
prospectus.
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS
Protective Life may make additions to, deletions from, or substitutions for
the shares that are held in or purchased by the Variable Account. If the shares
of a Fund are no longer available for investment or further investment in any
Fund should become inappropriate in view of the purposes of the Variable
Account, Protective Life may redeem the shares of that Fund and substitute
shares of another Fund. Protective Life will not substitute any shares without
notice and any necessary approval of the SEC and state insurance authorities.
Protective Life also reserves the right to establish additional Sub-Accounts
of the Variable Account, which would each invest in shares corresponding to a
new Fund. Subject to applicable law and any required SEC approval, Protective
Life may establish new Sub-Accounts or eliminate one or more Sub-Accounts if
marketing needs, tax considerations or investment conditions warrant. Any new
Sub-Accounts may be made available to existing Owner(s).
If any of these substitutions or changes are made, Protective Life may by
appropriate endorsement change the Policy to reflect the substitution or other
change. If Protective Life deems it to be in the best interest of Owner(s), the
Variable Account may be operated as a management investment 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 Protective Life separate accounts.
Protective Life may make any changes to the Variable Account required by the
1940 Act or other applicable law or regulation.
VOTING RIGHTS
Protective Life is the legal owner of Fund shares held by the Sub-Accounts
and has the right to vote on all matters submitted to shareholders of the Funds.
However, in accordance with applicable law, Protective Life will vote shares
held in the Sub-Accounts at meetings of shareholders of the Funds in accordance
with instructions received from Owners with Policy Value in the Sub-Accounts.
Should Protective Life determine that it is permitted to vote such shares in its
own right, it may elect to do so.
Protective Life will send Owners voting instruction forms and other voting
materials (such as Fund proxy statements, reports and other proxy materials)
prior to shareholders meetings. The number of votes as to which an Owner may
give instructions is calculated separately for each Sub-Account and may include
fractional votes.
An Owner holds a voting interest in each Sub-Account to which Variable
Policy Value is allocated under his or her Policy. Owners only have voting
interests while a Joint Insured is alive. The number of votes for which an Owner
may give instructions is based on the Owner's percentage interest of a Sub-
Account determined as of the date established by the Fund for determining
shareholders eligible to vote at the relevant meeting of that Fund.
Shares as to which no timely instructions are received and shares held
directly by Protective Life are voted by Protective Life in proportion to the
voting instructions that are received with respect to all Policies participating
in a Sub-Account. Voting instructions to abstain on any item are applied to
reduce the votes eligible to be cast on that item.
Protective Life 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 Funds, or to approve or disapprove the investment management
agreement or an investment advisory agreement. In addition, Protective Life may
under certain circumstances disregard voting instructions that would require
changes in the investment management agreement, investment manager, an
investment advisory agreement or an investment adviser of one or more of
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the Funds, provided that Protective Life reasonably disapproves of such changes
in accordance with applicable regulations under the 1940 Act. If Protective Life
ever disregards voting instructions, Owners will be advised of that action and
of the reasons for such action in the next semiannual report.
THE POLICY
PARTIES TO THE POLICY
OWNER The Owner is the person or persons who own the Policy and are
entitled to exercise all rights provided under the Policy. Joint Insureds are
the Owners unless a different person or persons are named as Owner in the
application. All Owners must authorize the exercise of any right under the
Policy. A change in the Owner(s) may have adverse tax consequences. (See "Tax
Considerations".)
JOINT INSUREDS The Joint Insureds are the two persons whose lives are
covered by the Policy.
BENEFICIARY The Beneficiary is the person or persons who may receive the
benefits of this Policy upon the death of the Last Survivor of the Joint
Insureds.
If no Beneficiary designation is in effect or if no Beneficiary is living at
the time of the Last Survivor of the Joint Insureds' death, the Owner will be
the Beneficiary or, if the Owner is no longer living, the estate of the Owner
will be the Beneficiary.
PURCHASING A POLICY
To purchase a Policy, a prospective Owner must submit a completed
application and at least the minimum initial premium payment through a licensed
representative of Protective Life who is also a registered representative of a
broker-dealer having a distribution agreement with Investment
Distributors, Inc. ("IDI"). (See "Premiums".) Protective Life requires
satisfactory evidence of the insurability, which may include a medical
examination of the Joint Insureds. Generally, Protective Life will issue a
Policy covering Insureds up to age 85 if evidence of insurability satisfies
Protective Life's underwriting rules. Acceptance of an application depends on
Protective Life's underwriting rules, and Protective Life may reject an
application for any reason. With the consent of the Owner, a Policy may be
issued on a basis other than that applied for (I.E., on a higher premium class
basis due to increased risk factors). A POLICY IS ISSUED AFTER PROTECTIVE LIFE
APPROVES THE APPLICATION. PREMIUM IS NOT A REQUIREMENT TO ISSUE A POLICY.
PREMIUM MAY BE COLLECTED AT THE TIME OF POLICY DELIVERY.
Insurance coverage under a Policy begins on the Policy Effective Date.
Temporary life insurance coverage also may be provided under the terms of a
temporary insurance agreement. Under such agreements, the total amount of
insurance which may become effective prior to delivery of the Policy may not
exceed $500,000 (including the amount of any life insurance and accidental death
benefits then in force or applied for with the Company) and may not be in effect
for more than 90 days.
In order to obtain a more favorable Issue Age, Protective Life may permit
the Owner to "backdate" a Policy by electing a Policy Effective Date up to six
months prior to the date of the original application. Charges for the Monthly
Deduction for the backdated period are deducted as of the Policy Effective Date
and the calculation of the No-Lapse Guarantee will include the Minimum Monthly
Premium for the backdated period.
CANCELLATION PRIVILEGE
You may cancel your Policy for a refund during the Cancellation Period by
returning it to Protective Life's Home Office or to the sales representative who
sold it along with a written cancellation request. The Cancellation Period is
determined by the law of the state in which the application is signed and is
shown in your Policy. In most states it expires at the latest of
(1) 10 days after you receive your Policy,
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(2) 45 days after you sign your application, or
(3) 10 days after Protective Life mails or delivers a Notice of Right of
Withdrawal.
Return of the Policy by mail is effective upon receipt by Protective Life.
We will treat the Policy as if it had never been issued. Within seven calendar
days after receiving the returned Policy, Protective Life will refund the sum of
(1) the difference between premiums paid and amounts allocated to the Fixed
Account or the Variable Account,
(2) Fixed Account Value determined as of the date the returned Policy is
received, and
(3) Variable Account Value determined as of the date the returned Policy is
received.
This amount may be more or less than the aggregate premiums paid. In states
where required, Protective Life will refund premiums paid.
PREMIUMS
MINIMUM INITIAL PREMIUM. The minimum initial premium required depends on a
number of factors, including the age, sex and rate class of each proposed Joint
Insured, the Initial Face Amount requested by the applicant, any supplemental
riders requested by the applicant and the planned periodic premiums that the
applicant selects. See "Planned Periodic Premiums," below. Consult your sales
representative for information about the initial premium required for the
coverage you desire.
PLANNED PERIODIC PREMIUMS. In the application the Owner selects a plan for
paying level premiums at specified intervals (e.g., quarterly, semi-annually or
annually). At the Owner's election, we will also arrange for payment of planned
periodic premiums on a monthly basis (on any day except the 29th, 30th, or 31st
of a month) under a pre-authorized payment arrangement. You are not required to
pay premiums in accordance with these plans. You can pay more or less than
planned or skip a planned periodic premium entirely. (See, however, "Policy
Lapse and Reinstatement".) Subject to the limits described below, you can change
the amount and frequency of planned periodic premiums at any time by written
notice to Protective Life at the Home Office.
Unless you have arranged to pay planned periodic premiums by pre-authorized
payment arrangement or have otherwise requested, you will be sent reminder
notices for planned periodic premiums.
UNSCHEDULED PREMIUMS. Subject to the limitations described below,
additional unscheduled premiums may be paid in any amount and at any time. By
written notice to Protective Life at the Home Office, the Owner may specify that
all unscheduled premiums are to be applied as repayments of Policy Debt, if any.
PREMIUM LIMITATIONS. Premiums may be paid by any method acceptable to
Protective Life. If by check, the check must be from an Owner (or the Owner's
designee other than a sales representative), payable to Protective Life
Insurance Company, and be dated prior to its receipt at the Home Office.
Additional limitations apply to premiums. Premium payments must be at least
$150 ($50 if paid monthly by a pre-authorized payment arrangement) and must be
remitted to the Home Office. (See "Net Premium Allocations".) Protective Life
also reserves the right to limit the amount of any premium payment. In addition,
at any point in time aggregate premiums paid under a Policy may not exceed
guideline premium payment limitations for life insurance policies set forth in
the Internal Revenue Code. Protective Life will immediately refund any portion
of any premium payment that is determined to be in excess of the limits
established by law to qualify a Policy as a contract for life insurance.
Protective Life will monitor Policies and will attempt to notify the Owner on a
timely basis if his or her Policy is in jeopardy of becoming a modified
endowment contract under the Internal Revenue Code. (See "Tax Considerations".)
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NO-LAPSE GUARANTEE. In return for paying the Minimum Monthly Premium
specified in the Policy or an amount equivalent thereto by the Monthly
Anniversary Day, Protective Life guarantees that a Policy and its associated
riders and endorsements will remain in force. This provision remains in effect
during the first 5 Policy Years regardless of the Policy Value, if, for each
month that the Policy has been in force since the Policy Effective Date, the
total premiums paid less any withdrawals and Policy Debt is greater than or
equal to the Minimum Monthly Premium (shown in the Policy) multiplied by the
number of complete policy months since the Policy Effective Date, including the
current policy month. The Minimum Monthly Premium is calculated for each Policy
based on the age, sex and rate class of each Joint Insured, the requested Face
Amount and any supplemental riders. We will NOT notify you in the event the
No-Lapse Guarantee is no longer in effect.
If you increase your Policy's Face Amount or change benefits while the
No-Lapse Guarantee is in effect, Protective Life will NOT EXTEND the period of
this guarantee. The guarantee period is based on the Policy Effective Date.
However, upon an increase in Face Amount, Protective Life will recalculate the
Minimum Monthly Premium, which will generally also increase. Any other change in
the benefits provided under this Policy or its riders which is made after the
Policy Effective Date and during the period of the No-Lapse Guarantee also may
result in a change to the Minimum Monthly Premium. Protective Life will notify
you of any change in the Minimum Monthly Premium and will amend your Policy to
reflect the change.
PREMIUM PAYMENTS UPON INCREASE IN FACE AMOUNT. Depending on the Policy
Value at the time of an increase in the Face 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 "Death Benefit
Proceeds".) You will be notified if a premium payment is necessary or a change
appropriate.
NET PREMIUM ALLOCATIONS
Owners must indicate in the application how Net Premiums are to be allocated
to the Sub-Accounts and/or to the Fixed Account. These allocation instructions
apply to both initial and subsequent Net Premiums. Owners may change the
allocation instructions in effect at any time by written notice to Protective
Life at the Home Office. Whole percentages must be used. The sum of allocations
to the Sub-Accounts and the Fixed Account must be equal to 100% of any Net
Premiums. Protective Life reserves the right to establish (i) a limitation on
the number of Sub-Accounts to which Net Premiums may be allocated and/or (ii) a
minimum allocation requirement for the Sub-Accounts and the Fixed Account.
For Policies issued in states where, upon cancellation during the
Cancellation Period, Protective Life returns at least your premiums, Protective
Life reserves the right to allocate your initial Net Premium (and any subsequent
Net Premiums paid during the Cancellation Period) to the Oppenheimer Money Fund
Sub-Account or the Fixed Account until the expiration of the number of days in
the Cancellation Period plus 6 days starting from the date that the Policy is
mailed from the Home Office. Thereafter, the Policy Value in the Oppenheimer
Money Fund Sub-Account or the Fixed Account and all Net Premiums will be
allocated according to your allocation instructions then in effect.
Planned periodic premiums and unscheduled premiums not requiring additional
underwriting 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 paid in connection with an increase in Face Amount
will be allocated to the Fixed Account until underwriting has been completed.
When approved, the Policy Value in the Fixed Account attributable to the
resulting Net Premium will be reallocated in accordance to your allocation
instructions then in effect. If an additional premium payment is rejected,
Protective Life will return the premium immediately, without any adjustment for
investment experience.
Unless designated by the Owner as a loan repayment, premiums received from
Owners (other than planned periodic premiums) are treated as unscheduled
premiums.
POLICY LAPSE AND REINSTATEMENT
LAPSE. Unlike a conventional life insurance policy, failure to pay planned
periodic premiums will not necessarily cause a Policy to lapse. Conversely,
paying all planned periodic premiums will not necessarily
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prevent a Policy from lapsing. Except when the No-Lapse Guarantee is in effect,
a Policy will lapse if its Surrender Value is insufficient to cover the Monthly
Deduction on the Monthly Anniversary Day. (See "Monthly Deduction".)
If the Surrender Value on a Monthly Anniversary Day is less than the amount
of the Monthly Deduction due on that date and the No-Lapse Guarantee 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 Surrender Value or the Surrender Value has decreased
because you have not paid sufficient Net Premiums to offset prior Monthly
Deductions.
In the event of a Policy default, the Owner has a 61-day grace period to
make a payment of Net Premium at least sufficient to cover the current and
past-due Monthly Deductions. Protective Life will send to the Owner, at the last
known address and the last known address of any assignee of record, notice of
the premium required to prevent lapse. The grace period will begin when the
notice is sent. A Policy will remain in effect during the grace period. If the
Last Survivor of the Joint Insureds should die during the grace period, the
Death Benefit Proceeds payable to the beneficiary will reflect a reduction for
the Monthly Deductions due on or before the date of the Last Survivor of the
Joint Insureds' death as well as any unpaid Policy Debt. (See "Death Benefit
Proceeds".) Unless the premium stated in the notice is paid before the grace
period ends, the Policy will lapse.
REINSTATEMENT. An Owner may reinstate a Policy within 5 years of its lapse
provided that: (1) a request for reinstatement is made by written notice
received by Protective Life at the Home Office, (2) one of the Joint Insureds is
still living, (3) the Owner pays Net Premiums equal to (a) all Monthly
Deductions that were due but unpaid during the grace period, and (b) which are
at least sufficient to keep the reinstated Policy in force for three months,
(4) Protective Life is provided with satisfactory evidence of insurability,
(5) the Owner repays or reinstates any Policy Debt which existed at the end of
the grace period and (6) the Policy has not been surrendered. The "Approval
Date" of a reinstated Policy is the date that Protective Life approves the
Owner's request for reinstatement and requirements 1-6 above have been met.
CALCULATION OF POLICY VALUES
VARIABLE ACCOUNT VALUE
THE VARIABLE ACCOUNT VALUE REFLECTS THE INVESTMENT EXPERIENCE OF THE
SUB-ACCOUNTS TO WHICH IT IS ALLOCATED, ANY PREMIUMS ALLOCATED TO THE
SUB-ACCOUNTS, TRANSFERS IN OR OUT OF THE SUB-ACCOUNTS, ANY WITHDRAWALS OF
VARIABLE ACCOUNT VALUE, ANY SURRENDER CHARGES DEDUCTED AND MONTHLY DEDUCTIONS.
THERE IS NO GUARANTEED MINIMUM VARIABLE ACCOUNT VALUE. A POLICY'S VARIABLE
ACCOUNT VALUE THEREFORE DEPENDS UPON A NUMBER OF FACTORS. THE VARIABLE ACCOUNT
VALUE FOR A POLICY AT ANY TIME IS THE SUM OF THE SUB-ACCOUNT VALUES FOR THE
POLICY ON THE VALUATION DAY MOST RECENTLY COMPLETED.
DETERMINATION OF UNITS. For each Sub-Account, the Net Premium(s) or Policy
Value transferred are converted into units. The number of units credited is
determined by dividing the dollar amount directed to each Sub-Account by the
value of the unit for that Sub-Account for the Valuation Day on which the Net
Premium(s) or transferred amount is invested in the Sub-Account. Therefore, Net
Premiums allocated to or amounts transferred to a Sub-Account under a Policy
increase the number of units of that Sub-Account credited to the Policy.
DETERMINATION OF UNIT VALUE. The unit value at the end of every Valuation
Day is the unit value at the end of the previous Valuation Day times the net
investment factor, as described below. The Sub-Account Value for a Policy is
determined on any day by multiplying the number of units attributable to the
Policy in that Sub-Account by the unit value for that Sub-Account on that day.
NET INVESTMENT FACTOR. The net investment factor is an index applied to
measure the investment performance of a Sub-Account from one Valuation Period to
the next. Each Sub-Account has a net
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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 Sub-Account for any Valuation Period is determined by dividing
(1) by (2), where:
(1) is the result of:
a. the net asset value per share of the Fund held in the Sub-Account,
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 Fund to the Sub-Account, if the "ex-dividend" date occurs during
the current Valuation Period; plus or minus
c. a per share charge or credit for any taxes reserved for, which is
determined by Protective Life to have resulted from the operations of the
Sub-Account.
(2) is the net asset value per share of the Fund held in the Sub-Account,
determined at the end of the last prior Valuation Period.
FIXED ACCOUNT VALUE
The Fixed Account Value under a Policy at any time is equal to: (1) the Net
Premium(s) allocated to the Fixed Account, plus (2) amounts transferred to the
Fixed Account, plus (3) interest credited to the Fixed Account, less
(4) transfers from the Fixed Account (including any transfer fees deducted),
less (5) withdrawals from the Fixed Account (including any withdrawal charges
deducted), less (6) surrender charges deducted in the event of a decrease in
Face Amount, less (7) Monthly Deductions. See "The Fixed Account," for a
discussion of how interest is credited to the Fixed Account.
POLICY BENEFITS
TRANSFERS OF POLICY VALUES
GENERAL. Upon receipt of written notice to Protective Life at the Home
Office at any time on or after the later of the following: (1) thirty days after
the Policy Effective Date, or (2) six days after the expiration of the
Cancellation Period, you may transfer the Fixed Account Value or any Policy
Value in a Sub-Account to other Sub-Accounts or the Fixed Account, subject to
certain restrictions. Transfers (including telephone transfers -- described
below) are processed as of the date a request is received at the Home Office.
Protective Life may, however defer transfers under the same conditions that
payment of Death Benefit Proceeds, withdrawals and surrenders may be delayed.
See "Suspension or Delay of Payments". The minimum amount that may be
transferred is the lesser of $100 or the entire amount in any Sub-Account or the
Fixed Account from which the transfer is made. If, after the transfer, the
amount remaining in a Sub-Account(s) or the Fixed Account would be less than
$100, Protective Life reserves the right to transfer the entire amount instead
of the requested amount. Protective Life reserves the right to limit the maximum
amount which may be transferred from the Fixed Account in any Policy Year. This
maximum is currently the greater of $2,500 or 25% of the Fixed Account Value.
Protective Life reserves the right to limit transfers to 12 per Policy Year.
For each additional transfer over 12 in any Policy Year, Protective Life
reserves the right to charge a transfer fee. The transfer fee, if any, is
deducted from the amount being transferred. (See "Transfer Fee".)
TELEPHONE TRANSFERS. Transfers may be made upon instructions given by
telephone, provided the appropriate election has been made on the application or
written authorization is provided.
Protective Life will confirm all transfer instructions communicated by
telephone. For telephone transfers we require a form of personal identification
prior to acting on instructions received by telephone. We also make a
tape-recording of the instructions given by telephone. If we follow these
procedures we are
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not liable for any losses due to unauthorized or fraudulent instructions.
Protective Life reserves the right to suspend telephone transfer privileges at
any time for any class of Policies.
RESERVATION OF RIGHTS. Protective Life reserves the right without prior
notice to modify, restrict, suspend or eliminate the transfer privileges
(including telephone transfers) at any time, for any class of Policies, for any
reason. In particular, we reserve the right not to honor transfer requests by a
third party holding a power of attorney from an Owner where that third party
requests simultaneous transfers on behalf of the Owners of two or more Policies.
DOLLAR-COST AVERAGING. If you elect at the time of application or at any
time thereafter by written notice to Protective Life at the Home Office, you may
systematically and automatically transfer, on a monthly or quarterly basis,
specified dollar amounts from or to the Fixed Account or any of the
Sub-Account(s). This is known as the dollar-cost averaging method of investment.
By transferring on a regularly scheduled basis as opposed to allocating the
total amount at one particular time, an Owner may be less susceptible to the
impact of market fluctuations in Sub-Account unit values. Protective Life,
however, makes no guarantee that the dollar-cost averaging method will result in
a profit or protect against loss.
To elect dollar-cost averaging, Policy Value in the source Sub-Account or
the Fixed Account Value must be at least $5,000 at the time of election.
Automatic transfers for dollar-cost averaging are subject to all transfer
restrictions other than the maximum transfer amount from the Fixed Account
restriction. You may elect dollar cost averaging for periods of at least 12
months but no longer than 48 months. At least $100 must be transferred each
month or $300 each quarter. Dollar-cost averaging transfers may commence on any
day of the month that you request following six days after the end of the
Cancellation Period, except the 29th, 30th, or 31st. If no day is selected,
transfers will occur on the Monthly Anniversary Day.
Once elected, Protective Life will continue to process dollar-cost averaging
transfers until the earlier of the following: (1) the number of designated
transfers has been completed, or (2) the Policy Value in the source Sub-Account
or the Fixed Account is depleted, (3) the Owner, by written notice received by
Protective Life at the Home Office, instructs Protective Life to cease the
automatic transfers, (4) a grace period begins under the Policy, or (5) the
maximum amount of Policy Value has been transferred under a dollar-cost
averaging election.
Automatic transfers made to facilitate dollar-cost averaging will not count
toward the 12 transfers permitted each Policy Year if Protective Life elects to
limit the number of transfers or impose the transfer fee. Protective Life
reserves the right to discontinue offering automatic dollar-cost averaging
transfers upon 30 days' written notice to the Owner.
PORTFOLIO REBALANCING. At the time of application or at any time thereafter
by written notice to Protective Life, you may instruct Protective Life to
automatically transfer, on a quarterly, semi-annual or annual basis, your
Variable Account Value among specified Sub-Accounts to achieve a particular
percentage allocation of Variable Account Value among such Sub-Accounts
("Portfolio Rebalancing"). Such percentage allocations must be in whole numbers
and must allocate amounts only among the Sub-Accounts. No amounts will be
transferred to the Fixed Account as part of Portfolio Rebalancing. A minimum
Variable Account Value of $100 is required for Portfolio Rebalancing. Unless you
instruct otherwise when electing rebalancing, the percentage allocation of your
Variable Account Value for Portfolio Rebalancing will be based on your premium
allocation instructions in effect at the time of rebalancing. Any allocation
instructions that you give us that differ from your then current Net Premium
allocation instructions will be deemed to be a request to change your Net
Premium allocation. Portfolio Rebalancing may commence on any day of the month
that you request following six days after the end of the Cancellation Period
except the 29th, 30th or 31st. If no day is selected, rebalancing will occur on
each applicable Monthly Anniversary Day.
Once elected, Portfolio Rebalancing begins on the first quarterly,
semi-annual or annual anniversary following election. You may change or
terminate Portfolio Rebalancing by written instruction received by Protective
Life at the Home Office, or by telephone if you have previously authorized us to
take telephone
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instructions. If Protective Life elects to limit the number of transfers or
impose the transfer fee, Portfolio Rebalancing transfers will not count as one
of the 12 free transfers available during any Policy Year. Protective Life
reserves the right to assess a processing fee for this service or to discontinue
Portfolio Rebalancing upon 30 days' written notice to the Owner.
SURRENDER PRIVILEGE
At any time while the Policy is still in force and while either of the Joint
Insureds is still living and the Policy is still in force, you may surrender
your Policy for its Surrender Value. Surrender Value is determined as of the end
of the Valuation Period during which the written notice requesting the
surrender, the Policy and any other required documents are received by
Protective Life at the Home Office. A Surrender Charge may apply. (See
"Surrender Charges".) The Surrender Value is paid in a lump sum unless the Owner
requests payment under a settlement option. (See "Settlement Options".) Payment
is generally made within seven calendar days. (See "Suspension or Delay of
Payments" and "Payments from the Fixed Account".) A Policy which terminates upon
surrender cannot later be reinstated.
WITHDRAWAL PRIVILEGE
At any time after the first Policy Year, an Owner, by written notice
received at the Home Office, may make a withdrawal of Surrender Value of not
less than $500. Protective Life will withdraw the amount requested, plus a
withdrawal charge, from Policy Value as of the end of the Valuation Period
during which the written request is received. (See "Withdrawal Charge".)
The Owner may specify the amount of the withdrawal to be made from any
Sub-Account or the Fixed Account. If the Owner does not so specify, or if the
Sub-Account Value or Fixed Account Value is insufficient to carry out the
request, the withdrawal from each Sub-Account and the Fixed Account is based on
the proportion that such Sub-Account Value(s) and Fixed Account Value bears to
the total unloaned Policy Value on the Valuation Day immediately prior to the
Withdrawal. Payment is generally made within seven calendar days. (See
"Suspension or Delay of Payments" and "Payments from the Fixed Account".)
If Death Benefit Option A is in effect, Protective Life reserves the right
to reduce the Face Amount by the withdrawn amount. Protective Life may reject a
withdrawal request if the withdrawal would reduce the Face Amount below the
minimum amount for which the Policy would be issued under Protective Life's
then-current rules, or if the withdrawal would cause the Policy to fail to
qualify as a life insurance contract under applicable tax laws, as interpreted
by Protective Life. If the Face Amount at the time of the withdrawal includes
increases from the Initial Face Amount and the withdrawal requires a decrease of
Face Amount, the reduction is made first from the most recent increase, then
from prior increases, if any, in reverse order of their being made and finally
from the Initial Face Amount.
POLICY LOANS
GENERAL. After the first Policy Anniversary and while either of the Joint
Insureds is still living, an Owner may borrow from Protective Life using the
Policy as the security for the loan. Policy loans must be requested by written
notice received at the Home Office. The minimum amount of any loan is $500. The
maximum amount that an Owner may borrow is an amount equal to 90% of the
Policy's Surrender Value on the date that the loan request is received.
Outstanding Policy loans therefore reduce the amount available for new Policy
loans. Loan proceeds generally are mailed within seven calendar days of the loan
being approved. (See "Suspension or Delay of Payments" and "Payments from the
Fixed Account".)
LOAN COLLATERAL. When a Policy loan is made, an amount equal to the loan is
transferred out of the Sub-Accounts and the Fixed Account and into a Loan
Account established for the Policy. Like the Fixed Account, a Policy's Loan
Account is part of Protective Life's General Account and amounts therein earn
interest as credited by Protective Life from time to time. Because Loan Account
values are part of Policy
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Value, a loan will have no immediate effect on the Policy Value. In contrast,
Surrender Value (including, as applicable, Variable Account Value and Fixed
Account Value) under a Policy is reduced immediately by the amount transferred
to the Loan Account. The Owner can specify the Sub-Accounts and the Fixed
Account from which collateral is transferred to the Loan Account. If no
allocation is specified, collateral is transferred from each Sub-Account and
from the Fixed Account in the same proportion that the value in each Sub-Account
and the Fixed Account bears to the total unloaned Policy Value on the date that
the loan is made.
On each Policy Anniversary, an amount of Policy Value equal to any due and
unpaid loan interest (explained below), is also transferred to the Loan Account.
Such interest is transferred from each Sub-Account and the Fixed Account in the
same proportion that each Sub-Account Value and the Fixed Account Value bears to
the total unloaned Policy Value.
LOAN REPAYMENT. You may repay all or part of your Policy Debt (the amount
borrowed plus unpaid interest) at any time while either of the Joint Insureds is
living and the Policy is in force. Loan repayments must be sent to the Home
Office and are credited as of the date received. The Owner may specify in
writing that any unscheduled premiums paid while a loan is outstanding be
applied as loan repayments. (Loan repayments, unlike unscheduled premium
payments, are not subject to the premium expense charge.) When a loan repayment
is made, Policy Value in the Loan Account in an amount equal to the repayment is
transferred from the Loan Account to the Sub-Accounts and the Fixed Account.
Thus, a loan repayment will have no immediate effect on the Policy Value, but
the Surrender Value (including, as applicable, Variable Account Value and Fixed
Account Value) under a Policy is increased immediately by the amount transferred
from the Loan Account. Unless specified otherwise by the Owner(s), amounts are
transferred to the Sub-Accounts and the Fixed Account in the same proportion
that Net Premiums are allocated.
INTEREST. During Policy Years 2 through 10, Protective Life will charge
interest daily on any outstanding loan at an effective annual rate of 6.0%.
During Policy Years 11 and thereafter, Protective Life currently charges
interest daily on any outstanding loan at an effective annual rate of 4.0% (with
a maximum guaranteed rate of 4.25%). Interest is due and payable at the end of
each Policy Year while a loan is outstanding. We will notify you of the amount
due. If interest is not paid when due, the amount of the interest is added to
the loan and becomes part of the Policy Debt.
The Loan Account is credited with interest at an effective annual rate of
not less than 4%. Thus, the net cost of a loan is 2.0% per year during Policy
Years 2 through 10, and currently 0.00% thereafter (the difference between the
rate of interest charged on Policy loans and the amount credited on the
equivalent amount held in the Loan Account). Protective Life determines the rate
of interest to be credited to the Loan Account in advance of each calendar year.
The rate, once determined, is applied to the calendar year which follows the
date of determination. On each Policy Anniversary, the interest earned on the
Loan Account since the previous Policy Anniversary is transferred to the
Sub-Accounts and to the Fixed Account. The interest is transferred and allocated
to the Sub-Accounts and the Fixed Account in the same proportion that Net
Premiums are allocated.
NON-PAYMENT OF POLICY LOAN. If the Last Survivor of the Joint Insureds dies
while a loan is outstanding, the Policy Debt is deducted from the Death Benefit
in calculating the Death Benefit Proceeds.
If the Loan Account Value exceeds the Cash Value (I.E., the Surrender Value
becomes zero) on any Valuation Date, the Policy may be in default. If this
occurs, you, and any assignee of record, will be sent notice of the default. You
will have a 31-day grace period to submit a sufficient payment to avoid a lapse
(I.E., termination) of the Policy. The notice will specify the amount that must
be repaid to prevent lapse.
EFFECT OF A POLICY LOAN. A loan, whether or not repaid, has a permanent
effect on the Death Benefit and Policy Values because the investment results of
the Sub-Accounts and current interest rates credited on Fixed Account Value do
not apply to Policy Value in the Loan Account. The larger the loan and longer
the loan is outstanding, the greater will be the effect of Policy Value held as
collateral in the Loan Account.
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(See "No Lapse Guarantee".) Depending on the investment results of the
Sub-Accounts or credited interest rates for the Fixed Account while the loan is
outstanding, the effect could be favorable or unfavorable. Policy loans also may
increase the potential for Lapse if investment results of the Sub-Accounts to
which Surrender Value is allocated is unfavorable. If a Policy lapses with loans
outstanding, certain amounts may be subject to income tax. In addition, if your
Policy is a "modified endowment contract," loans may be currently taxable and
subject to a 10% penalty tax. See "Tax Considerations," for a discussion of the
tax treatment of Policy loans.
DEATH BENEFIT PROCEEDS
As long as the Policy remains in force, Protective Life will pay the Death
Benefit Proceeds upon receipt at the Home Office of satisfactory proof of both
Joint Insureds' deaths. Protective Life may require return of the Policy. The
Death Benefit Proceeds are paid to the primary beneficiary or a contingent
beneficiary. The Owner may name one or more primary or contingent beneficiaries
and change such beneficiaries, as provided for in the Policy. If no beneficiary
survives the Joint Insureds, the Death Benefit Proceeds are paid to the Owner or
the Owner's estate. Death Benefit Proceeds are paid in a lump sum or under a
settlement option. (See "Settlement Options".)
CALCULATION OF DEATH BENEFIT PROCEEDS. The Death Benefit Proceeds are equal
to the Death Benefit under the Death Benefit Option selected calculated as of
the date of death of the Last Survivor of the Joint Insureds, plus any benefits
under any supplemental riders or endorsements, minus any Policy Debt on that
date and, if the Last Survivor of the Joint Insureds died during a grace period,
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".)
If part or all of the Death Benefit is paid in one sum, Protective Life will
pay interest on this sum as required by applicable state law from the date of
receipt of due proof of the death of the Last Survivor of the Joint Insureds to
the date of payment.
DEATH BENEFIT OPTIONS. At the time of application, the Owner may choose one
of two Death Benefit Options for use in determining the Death Benefit. Under
Death Benefit Option A, the Death Benefit is the greater of: (1) the Face Amount
under the Policy on the date of death of the Last Survivor of the Joint
Insureds, or (2) a specified percentage of the Policy Value as of such date.
Under Death Benefit Option B, the Death Benefit is the greater of: (1) the Face
Amount under the Policy plus the Policy Value on the date of death of the Last
Survivor of the Joint Insureds, or (2) a specified percentage of the Policy
Value as of such date. The specified percentage varies with the Attained Age of
the younger Joint Insured on the Policy Anniversary on or prior to the date of
death. A table showing these percentages for Attained Ages 0 to 95 and examples
of Death Benefit calculations for both Death Benefit Options are found in
Appendix A.
Under Death Benefit Option A, the Death Benefit remains level at the Face
Amount unless the Policy Value multiplied by the specified percentage of Policy
Value exceeds that Face Amount, in which event the Death Benefit will vary as
the Policy Value varies. Owners who are satisfied with the amount of their
insurance coverage under the Policy and who prefer to have favorable investment
performance and additional premiums reflected in higher Policy Value, rather
than increased Death Benefits, generally should select Option A. Under Death
Benefit Option B, the Death Benefit always varies as the Policy Value varies
(although it is never less than the Face Amount). Owners who prefer to have
favorable investment performance and additional premiums reflected in increased
Death Benefits generally should select Option B.
CHANGING THE DEATH BENEFIT OPTION. On or after the first Policy
Anniversary, the Owner may change the Death Benefit option on the Policy subject
to the following rules. After any change, the Face Amount must be at least equal
to the minimum specified in the Policy. The effective date of the change will be
the Monthly Anniversary Day that coincides with or next follows the day that
Protective Life approves the
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request. Protective Life may require satisfactory evidence of insurability. All
changes must be approved by Protective Life at the Home Office before they will
be effective.
When a change from Option A to Option B is made during the lifetime of both
Joint Insureds, the Face Amount after the change is effected will be equal to
the Face Amount before the change less the Policy Value on the effective date of
the change. When a change from Option B to Option A is made, the Face Amount
after the change will be equal to the Face Amount before the change is effected
plus the Policy Value on the effective date of the change. The increase in the
Face Amount will be deemed an increase in the Supplemental Face Amount.
FACE AMOUNTS
BASIC FACE AMOUNT. All Policies must have a Basic Face Amount. The minimum
Basic Face Amount at all times under a Policy is $100,000. Basic Face Amount can
only be purchased as part of the Initial Face Amount and cannot be increased
thereafter. Purchasing coverage under the Policy in the form of Basic Face
Amount is generally more expensive during the first nine Policy Years than
purchasing it in the form of a Supplemental Face Amount because the monthly
administration fee is based on the amount of Basic Face Amount. Similarly,
purchasing coverage under a Policy in the form of Basic Face Amount can be more
expensive than purchasing Supplemental Face Amount because surrender charge is
only assessed when Basic Face Amount is decreased, but not when Supplemental
Face Amount is decreased. Also, depending upon how much Policy Value is in a
Policy and whether current or guaranteed cost of insurance rates are being
applied, the cost of insurance associated with Basic Face Amount is usually
greater than that associated with an equal Supplemental Face Amount that is part
of the Initial Face Amount. (See "Cost of Insurance" and "Cost of Insurance
Rates".) Consistent with the foregoing, sales representatives are compensated
primarily on the amount of Basic Face Amount under a Policy.
SUPPLEMENTAL FACE AMOUNT. Although a Supplemental Face Amount is not
required under a Policy, if purchased, the minimum Supplemental Face Amount is
$25,000. No more than 90% of the Initial Face Amount may consist of Supplemental
Face Amount. Coverage in the form of Supplemental Face Amount may be purchased
as part of the Initial Face Amount or may be added or increased at a later time
if the Policy is in force.
CHANGING THE FACE AMOUNT. On or after the first Policy Anniversary, the
Owner may request a change in the Face Amount. The request must be received in
writing at the Home Office.
INCREASING THE FACE AMOUNT. The Basic Face Amount cannot be increased; the
Owner can only request an increase of the Face Amount by submitting an
application for an increase in the Supplemental Face Amount during the lifetime
of both of the Joint Insureds.
Any increase in the Face Amount must be at least $25,000 and Protective Life
reserves the right to require satisfactory evidence of insurability. In
addition, the attained age of the older Joint Insured must be less than the
current maximum issue age for the Policies, as determined by Protective Life
from time to time. A change in planned periodic premiums may be advisable. (See
"Premiums Upon Increase in Face Amount".) The increase in Face Amount will
become effective as of the date shown on the supplemental Policy Specifications
Page (which will be sent to you), and the Policy Value will be adjusted to the
extent necessary to reflect a Monthly Deduction as of the effective date based
on the increase in Face Amount. When the No-Lapse Guarantee is in effect, the
Policy's Minimum Monthly Premium amount will also generally be increased. (See
"No-Lapse Guarantee" and "Premiums Upon Increase in Face Amount".)
The Cancellation Period under the Policy's cancellation privilege applies to
increases in Face Amount. Therefore, Owners may exercise the privilege by
cancelling any increase in Face Amount within the period. In such case, the
amount refunded will be calculated in accordance with such provisions described
above, except that if no additional premiums are required in connection with the
Face Amount increase, then the amount credited back to Policy Value is limited
to that portion of the first Monthly Deduction following
26
<PAGE>
the increase that is attributable to cost of insurance charges for the increase
and the monthly administration fee for the increase. (See "Cancellation
Privilege".)
DECREASING THE FACE AMOUNT. If a decrease in the Face Amount would result
in total premiums paid exceeding the premium limitation prescribed under current
tax law to qualify your Policy as a life insurance contract, Protective Life
will immediately return to you the amount of such excess above the premium
limitation. Protective Life reserves the right to decline a request to decrease
the Face Amount if compliance with the guideline premium limitation under
current tax law resulting from such a 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 Policy Value for compliance with the
guideline premium limitation, and the amount of such payments would exceed the
Surrender Value under the Policy.
Any decrease in Face Amount will first be applied against any Supplementary
Face Amount, until the minimum Supplemental Face Amount (as specified in the
Policy specification pages) has been reached. If the Supplemental Face Amount of
the Policy has been increased prior to the requested decrease, then a decrease
will first be applied against any previous increases in Supplemental Face Amount
in the reverse order in which they occurred. Any remaining decrease in Face
Amount will be applied against the Basic Face Amount. The Basic Face Amount
however, may not be reduced below the minimum Basic Face Amount specifed in the
Policy. Protective Life reserves the right to prohibit any decrease in Face
Amount (i) for 3 years following an increase in Face Amount; and (ii) for one
Policy Year following the last decrease in Face Amount. A decrease in Face
Amount will become effective on the Monthly Anniversary Day that coincides with
or next follows receipt and acceptance of a request at the Home Office.
Decreasing the Face Amount of the Policy may have the effect of decreasing
monthly cost of insurance charges. Decreasing the Face Amount also may have
adverse tax consequences. (See "Tax Considerations".) In addition, if the Basic
Face Amount is decreased during the first 12 Policy Years, a Surrender Charge
will apply. (See "Surrender Charge".)
SPECIAL ENDORSEMENTS (AVAILABILITY SUBJECT TO STATE APPROVAL AND VARIATIONS.)
ESTATE PROTECTION ENDORSEMENT. During the first four Policy Years, the
estate protection endorsement provides additional coverage in the form of
non-participating, non-convertable, renewable term life insurance. Under this
endorsement an additional death benefit is payable if the death of the Last
Survivor of the Joint Insureds occurs prior to the termination of the
endorsement. This additional death benefit will be available and will
automatically be issued if underwriting requirements are met and the older of
the Joint Insureds is under age 76. There is no additional charge for this
endorsement. If the Policy lapses, this endorsement cannot be reinstated. This
endorsement will terminate on the earlier of (1) the fourth Policy Anniversary,
(2) the date the Policy terminates or (3) the date any option under the Policy
Split Option Endorsement is exercised.
POLICY SPLIT OPTION ENDORSEMENT. Under this endorsement, the Owner(s) may
exchange the Policy for two individual permanent life insurance policies, one on
the life of each of the Joint Insureds by making a written request to the Home
Office within 90 days of one of the following events:
1. a court of competent jurisdiction issues a final divorce decree with
respect to the marriage of the Joint Insureds;
2. federal law with regard to estate taxes is changed so as to remove the
unlimited marital deduction or reduce by 50% or more, the estate taxes
payable on death; and
3. dissolution of a corporate or business partnership of which the Joint
Insureds are partners.
There is no charge for this endorsement. This endorsement will be issued
automatically if underwriting requirements are met. The two individual policies
each shall have a face amount equal to at least one-half of the Policy's Face
Amount, a Policy Value equal to one-half of the Policy's Policy Value, and a
policy
27
<PAGE>
debt equal to one-half of the Policy's Policy Debt. The individual policies must
have the same Beneficiaries as the Policy.
If the Policy is owned jointly by two Owners, both must agree to exercise
the endorsement and each will become the sole owner of his or her individual
policy. Protective Life requires satisfactory evidence of insurability as to
both Joint Insureds before issuing the individual policies. In the event that
one of the Insureds cannot provide satisfactory evidence of insurability, an
individual policy may be issued on the other Insured and one-half of the
Surrender Value of the Policy may be distributed to the Owner(s) in lieu of a
second individual policy. Similarly, if two joint Owners are the Insureds and
one of them does not agree to exercise the exchange provided by this
endorsement, then he or she may take one-half (or other appropriate portion
based on relative ownership) of the Surrender Value of the Policy in lieu of a
second individual policy. If the surrender charge on either individual policy is
less than that policy's pro-rata share of the surrender charge under the Policy,
then a charge may be assessed under the individual policy for the difference. If
the surrender charge under an individual policy is greater than that policy's
pro-rata share of the surrender charge under the Policy, no adjustment will be
made.
If the endorsement is exercised, the Policy will terminate and the
individual policies will become effective as of the Valuation Day following the
later of the date that: (1) a written request for the exchange is received at
the Home Office, or (2) Protective Life approves the request.
The endorsement terminates at the earliest of: (1) the date as of which the
Policy terminates due to the (a) exercise of the endorsement, (b) surrender of
the Policy or, (c) lapse of the Policy; (2) the date of death of a Joint
Insured; or (3) the date that the older Joint Insured reaches Attained Age 90.
The exercise of this endorsement may have significant federal or state tax
consequences. (See "Tax Considerations".)
SETTLEMENT OPTIONS
The Policy offers a variety of ways of receiving proceeds payable under the
Policy, such as on surrender or death, other than in a lump sum. These
alternative settlement options are summarized below. Any sales representative
authorized to sell this Policy can further explain these settlement options upon
request. All of these settlement options are forms of fixed-benefit annuities
(except Option 3) which do not vary with the investment performance of a
separate account. Under each settlement option (other than Option 3), no
surrender or withdrawal may be made once payments have begun.
The following settlement options may be elected.
OPTION 1 -- PAYMENT FOR A FIXED PERIOD. Equal monthly payments will be made
for any period of up to 30 years. The amount of each payment depends on the
total amount applied, the period selected and the monthly payment rates
Protective Life is using when the first payment is due.
OPTION 2 -- LIFE INCOME WITH PAYMENTS FOR A GUARANTEED PERIOD. Equal
monthly payments are based on the life of the named annuitant. Payments will
continue for the lifetime of the annuitant with payments guaranteed for 10 or 20
years. Payments stop at the end of the selected guaranteed period or when the
named person dies, whichever is later.
OPTION 3 -- INTEREST INCOME. Protective Life will hold any amount applied
under this option. Interest on the unpaid balance will be paid each month at a
rate determined by Protective Life. This rate will not be less than the
equivalent of 3% per year.
OPTION 4 -- PAYMENTS FOR A FIXED AMOUNT. Equal monthly payments will be
made of an agreed fixed amount. The amount of each payment may not be less than
$10 for each $1,000 applied. Interest will be credited each month on the unpaid
balance and added to it. This interest will be at a rate set by us, but not less
than an effective rate of 3% per year. Payments continue until the amount
Protective Life holds runs out. The last payment will be for the balance only.
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<PAGE>
MINIMUM AMOUNTS. Protective Life reserves the right to pay the total amount
of the Policy in one lump sum, if less than $5,000. If monthly payments are less
than $50, payments may be made quarterly, semi-annually, or annually at
Protective Life's option.
DEATH OF PAYEE. If a payee dies while there are unpaid installments under
Option 1 or before the end of the guaranteed period under Option 2, Protective
Life will pay the commuted value of the remaining payments in a lump sum. The
commuted value of any balance held under Option 3 or Option 4 will be paid to
the payee's executors or administrators unless the written election of the
Option directed Protective Life differently. Any commuted value will be
calculated using 3% interest per year.
OTHER REQUIREMENTS. Settlement options must be elected by written notice
received by Protective Life at the Home Office. The Owner may elect settlement
options during the lifetime of either of the Joint Insureds; beneficiaries may
elect settlement options thereafter if Death Benefit Proceeds are payable in a
lump sum. The effective date of an option applied to Death Benefit Proceeds is
the date the due proof of the death of each of the Joint Insureds is received at
the Home Office. The effective date of an option applied to Surrender Value is
the effective date of the surrender.
If Protective Life has available, at the time a settlement option is
elected, options or rates on a more favorable basis than those guaranteed, the
higher benefits will apply.
THE FIXED ACCOUNT
BECAUSE OF EXEMPTIVE AND EXCLUSIONARY PROVISIONS, INTERESTS IN THE FIXED
ACCOUNT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 NOR HAS THE
FIXED ACCOUNT BEEN REGISTERED AS AN INVESTMENT COMPANY UNDER THE INVESTMENT
COMPANY ACT OF 1940. ACCORDINGLY, NEITHER THE FIXED 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 FIXED ACCOUNT. THE DISCLOSURE REGARDING THE
FIXED 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.
THE FIXED ACCOUNT
The Fixed Account consists of assets owned by Protective Life with respect
to the Policies, other than those in the Variable Account. It is part of
Protective Life's general account assets. Protective Life's general account
assets are used to support its insurance and annuity obligations other than
those funded by separate accounts, and are subject to the claims of Protective
Life's general creditors. Subject to applicable law, Protective Life has sole
discretion over the investment of the assets of the Fixed Account. The Loan
Account is part of the Fixed Account. Guarantees of Net Premiums allocated to
the Fixed Account, and interest credited thereto, are backed by Protective Life.
The Fixed Account Value is calculated daily. (See "Fixed Account Value".)
INTEREST CREDITED ON FIXED ACCOUNT VALUE
Protective Life guarantees that the interest credited during the first
Policy Year to the initial Net Premiums allocated to the Fixed Account will not
be less than the initial annual effective interest rate shown in the Policy. The
interest rate credited to subsequent Net Premiums allocated to or amounts
transferred to the Fixed Account will be the annual effective interest rate in
effect on the date that the Net Premium(s) is received by Protective Life or the
date that the transfer is made. The interest rate is guaranteed to apply to such
amounts for a twelve month period which begins on the date that the Net
Premium(s) is allocated or the date that the transfer is made.
After an interest rate guarantee expires as to a Net Premium or amount
transferred, (I.E., 12 months after the Net Premium or transfer is placed in the
Fixed Account) Protective Life will credit interest on the Fixed Account Value
attributable to such Net Premium or transferred amount at the current interest
rate in effect. New current interest rates are effective for such Fixed Account
Value for 12 months from the time that they are first applied. Protective Life,
in its sole discretion, may declare a new current interest rate from time to
time. The initial annual effective interest rate and the current interest rates
that Protective Life will credit are annual effective interest rates of not less
than 4.00%. For purposes of
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<PAGE>
crediting interest, amounts deducted, transferred or withdrawn from the Fixed
Account are accounted for on a "first-in-first-out" (FIFO) basis.
PAYMENTS FROM THE FIXED ACCOUNT
Payments from the Fixed Account for a withdrawal, surrender or loan request
may be deferred for up to six months from the date Protective Life receives the
written request. If a payment from the Fixed Account is deferred for 30 days or
more, it will bear interest at a rate of 4% per year (or an alternative rate if
required by applicable state insurance law), compounded annually while payment
is deferred.
CHARGES AND DEDUCTIONS
PREMIUM EXPENSE CHARGE
The premium expense charge compensates Protective Life for certain sales and
tax expenses associated with the Policies and the Variable Account. The premium
expense charge is equal to a percentage of each premium as set out in the
following table.
<TABLE>
<CAPTION>
POLICY YEAR CURRENT CHARGE MAXIMUM CHARGE
- ----------- -------------- --------------
<S> <C> <C>
1-5 10% 12.5%
6-10 5% 6%
11+ 2% 2.5%
</TABLE>
MONTHLY DEDUCTION
As of the Policy Effective Date, Protective Life will deduct the first
Monthly Deduction from the Policy Value. Subsequent Monthly Deductions will be
made on each Monthly Anniversary Day thereafter. The Monthly Deduction consists
of (1) cost of insurance charges ("cost of insurance charge"), (2)
administration charges (the "monthly administration fee"), (3) mortality and
expense risk charge (the "mortality and expense risk charge") and (4) any
charges for supplemental riders ("supplemental rider charges"), as described
below. Except for the mortality and expense risk charge, the Monthly Deduction
is deducted from the Sub-Accounts and the Fixed Account pro-rata on the basis of
the relative Policy Value. The mortality and expense risk charge will reduce
only the Sub-Account Values.
COST OF INSURANCE CHARGE. This monthly charge compensates Protective Life
for the expense of assuming the risk of the Death Benefit. This charge can vary
among Policies, and from one Monthly Anniversary Day to the next within the same
Policy, depending on differences in the cost of insurance rates, and the net
amount at risk (as calculated below) associated with the Basic Face Amount and,
if applicable, Supplemental Face Amount. The monthly cost of insurance charge is
equal to the sum of the cost of insurance charges for the Basic Face Amount and
each increment of Supplemental Face Amount, which are calculated separately
based on the net amount at risk under each coverage.
The cost of insurance charge for each increment of Face Amount is computed
at the beginning of each Policy month by subtracting 2 from 1 and multiplying
the result by 3, where:
1. is the Death Benefit attributable to that increment on the first day of
the Policy month divided by 1 plus the monthly equivalent of 4.0%;
2. is the Policy Value attributable to that increment before the Monthly
Deduction (and, when Death Benefit B is in effect, divided by 1 plus the
monthly equivalent of 4.0%); and
3. is the cost of insurance rate for that increment as described below.
For the purpose of computing the net amount at risk (the result of
subtracting 2 from 1) for an Increment of Face Amount, Policy Value is first
apportioned to the Basic Face Amount and then apportioned to any Supplemental
Face Amount that is part of the Initial Face. If Policy Value exceeds the
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<PAGE>
Initial Face Amount, it is apportioned to each increase in Supplemental Face
Amount in the order that such Supplemental Face Amount was added to the Policy.
COST OF INSURANCE RATES. The monthly cost of insurance rates for the Basic
Face Amount and, if applicable, the cost of insurance rates for a Supplemental
Face Amount can vary from one month to another. The rates are a function of each
Joint Insured's age at nearest birthday, sex and rate class, type of Face Amount
(Basic or Supplemental), and the number of years that a Policy has been in force
since the Policy Effective Date or the effective date of a Face Amount increase.
In general, current cost of insurance rates are greater for the Basic Face
Amount than for Supplemental Face Amount purchased at the same time, whereas
guaranteed rates for the Basic Face Amount are the same as for Supplemental Face
Amount purchased at the same time.
Protective Life currently places each Joint Insured in the following rate
classes, based on underwriting: Preferred Nonsmoker (ages 20-75), Nonsmoker
(ages 20-85), Tobacco (ages 20-85), and Smoker (ages 20-85) and substandard rate
classes which involve a higher mortality risk than the Nonsmoker or Smoker,
Tobacco classes. The guaranteed rates for standard classes are based on the 1980
Commissioner's Standard Ordinary Mortality Tables, Male and Female, Smoker or
Nonsmoker Mortality Rates ("1980 CSO Table"). The guaranteed rates for
substandard classes are based on multiples of, or additions to, the 1980 CSO
Tables.
Protective Life'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 Protective Life's expectations as to future
mortality, investment earnings, expenses, taxes, and persistency experience.
Cost of insurance rates (whether guaranteed or current) for Joint Insureds
in a nonsmoker standard class are generally lower than guaranteed rates for
Joint Insureds of the same age and sex in a smoker standard class. Cost of
insurance rates (whether guaranteed or current) for Joint Insureds in a
nonsmoker or smoker standard class are generally lower than guaranteed rates for
Joint Insureds of the same age and sex and smoking status in a substandard
class.
Any change in monthly cost of insurance rates will be on a uniform basis for
Joint Insured's of the same class (with respect to age, sex, rate class, and
policy year), but the cost of insurance rates for a Policy will never be greater
than the limit set forth in the Policy.
Protective Life will also determine a separate cost of insurance rate for
each increment of Face Amount above the Initial Face Amount based on the Policy
duration and the Issue Age, sex and rate class of each Joint Insured at the time
of the request for an increase. The following rules will apply for purposes of
determining the rates.
Protective Life places each Joint Insured in a rate class when the Policy is
issued, based on Protective Life's underwriting of the application. This
original rate class applies to both the Basic and Supplemental portions of the
Initial Face Amount. When an increase in Face Amount is requested, Protective
Life 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 (or the rate class of a previous increase), the rate class for the
increase also will be applied to the Initial Face Amount and any previous
increases in Face Amount beginning as of the effective date of the increase. If
the rate class for the increase has a higher cost of insurance rate than the
original rate class (or the rate class of a previous increase), the rate class
for the increase will apply only to the increase in Face Amount.
LEGAL CONSIDERATIONS RELATING TO SEX -- DISTINCT PREMIUM PAYMENTS AND
BENEFITS. Mortality tables for the Policies generally distinguish between males
and females. Thus, premiums and benefits under Policies covering males and
females of the same age will generally differ.
Protective Life 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
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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, Protective Life may offer Policies with
unisex mortality tables to such prospective purchasers.
MONTHLY ADMINISTRATION FEE. This charge compensates Protective Life for
administration expenses associated with the Policies and the Variable Account.
These expenses relate to premium billing and collection, recordkeeping,
processing death benefit claims, Policy loans, Policy changes, financial
reporting and overhead costs, processing applications and establishing Policy
records. The monthly administration fee is currently equal to $.06 per $1,000 of
Basic Face Amount in Policy Years 1 through 9 (guaranteed not to exceed $.075
per $1,000). This fee is no longer assessed after the ninth Policy Year.
For 12 months following every increase in the Supplemental Face Amount, a
monthly administration fee will be assessed. This fee will be equal to the
lesser of (1) $23.50 plus $0.06 per thousand of increase in the Supplemental
Face Amount or (2) $250.
SUPPLEMENTAL RIDER CHARGES. Protective Life deducts a monthly charge for
any riders as part of the Monthly Deduction. (See "Supplemental Riders".)
MORTALITY AND EXPENSE RISK CHARGE. This charge compensates Protective Life
for the mortality risk it assumes which is that the cost of insurance charges
are insufficient to meet actual death benefit claims. The expense risk
Protective Life assumes is that expenses incurred in issuing and administering
the Policies and the Variable Account will exceed the amounts realized from the
administrative charges assessed against the Policies.
Protective Life deducts a monthly charge from assets in the Sub-Accounts
attributable to the Policies. This charge does not apply to Fixed Account assets
attributable to the Policies. The monthly mortality and expense risk charge to
be deducted is currently equal to .075% multiplied by the Variable Account
Value, which is equivalent to an annual rate of 0.90% of such amount, in Policy
Years 1 through 10 and .021% multiplied by the Variable Account Value, which is
equivalent to an annual rate of .25% of such amount, in Policy Year 11 and
thereafter. Protective Life guarantees the maximum monthly mortality and expense
risk charge for any Policy Year will not exceed .075% multiplied by the Variable
Account Value.
TRANSFER FEE
Protective Life reserves the right to impose a $25 transfer fee on any
transfer of Policy Value between or among the Sub-Accounts or the Fixed Account
in excess of the 12 free transfers permitted each Policy Year. If the fee is
imposed, it will be deducted from the amount requested to be transferred. If an
amount is being transferred from more than one Sub-Account or the Fixed Account,
the transfer fee will be deducted proportionately from the amount being
transferred from each. This fee, if imposed, will reimburse Protective Life for
administrative expenses incurred in effecting transfers.
SURRENDER CHARGE (CONTINGENT DEFERRED SALES CHARGE)
A surrender charge, which is a contingent deferred sales charge, is deducted
from the Policy Value if, during the first 12 Policy Years: (1) the Policy is
surrendered; (2) the Policy lapses at the end of a grace period; or (3) the
Basic Face Amount is reduced. There will be no surrender charge for a requested
decrease in the Supplemental Face Amount or a reduction in the Basic Face Amount
resulting from a Death Benefit Option change or from a withdrawal. The surrender
charge is deducted before any Surrender Value is paid.
The surrender charge varies depending on a number of factors including Basic
and Supplemental Face Amounts, Issue Ages, sex and rate classification of the
Joint Insureds and is set forth in your Policy. The surrender charge decreases
over the twelve-year period.
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<PAGE>
Assuming a Policy with an initial Basic Face Amount of $1,000,000 and no
Supplemental Face Amount, the range of surrender charges for the expected
representative issue ages for this product are:
1. Joint Insureds: 1 Age 55 Male Non-smoker
2 Age 55 Female Non-smoker
<TABLE>
<CAPTION>
SURRENDER SURRENDER
YEAR CHARGE YEAR CHARGE
- ---- --------- -------- ---------
<S> <C> <C> <C>
1 8,075.99 7 5,191.71
2 8,075.99 8 4,614.85
3 7,499.13 9 4,038.00
4 6,922.28 10 3,461.14
5 6,345.42 11 2,884.28
6 5,768.57 12 2,307.43
</TABLE>
2. Joint Insureds: 1 Age 70 Male Smoker
2 Age 70 Female Smoker
<TABLE>
<CAPTION>
SURRENDER SURRENDER
YEAR CHARGE YEAR CHARGE
- ---- --------- -------- ---------
<S> <C> <C> <C>
1 21,874.85 7 14,062.40
2 21,874.85 8 12,499.91
3 20,312.36 9 10,937.42
4 18,749.87 10 9,374.93
5 17,187.38 11 7,812.45
6 15,624.89 12 6,249.96
</TABLE>
Individualized illustrations of the type included on pages 38 through 41
herein will be provided to each prospective Owner based on the Face Amounts,
Death Benefit option, and anticipated pattern and amount of premium payments
suggested by the Owner.
In the event of a decrease in the Basic Face Amount, a pro rata surrender
charge will be imposed equal to the portion of the total surrender charge that
corresponds to the percentage by which the Basic Face Amount is reduced. This
surrender charge will be allocated to each Sub-Account and to the Fixed Account
based on the proportion of Policy Value in each Sub-Account and in the Fixed
Account. A surrender charge imposed in connection with a reduction in the Basic
Face Amount reduces the remaining surrender charge that may be imposed in
connection with a surrender of the Policy.
There are no surrender charges assessed on surrender, lapse or reduction in
Basic Face Amount after the 12th Policy Year.
The purpose of the surrender charge is to reimburse Protective Life for some
of the expenses incurred in the distribution of the Policies. Protective Life
also deducts a premium expense charge for this purpose from each premium paid.
(See "Premium Expense Charge".)
Protective Life reserves the right to charge less than the Maximum Surrender
Charge.
WITHDRAWAL CHARGE
Protective Life will deduct an administrative charge upon a withdrawal. This
charge is the lesser of 2% of the amount withdrawn or $25. This charge will be
deducted from the Policy Value. See "Withdrawal Privilege" for rules for
allocating the deduction.
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<PAGE>
FUND EXPENSES
The value of the net assets of each Sub-Account reflects the investment
advisory fees and other expenses incurred by the corresponding Fund in which the
Sub-Account invests. See the prospectus for each of the Funds.
EXCHANGE PRIVILEGE
The Company is offering, where allowed by law, to owners of certain existing
fixed life policies (the "Existing Life Policy" and/or "Existing Life Policies")
issued by it the opportunity to exchange such a life policy for this Policy. The
Company reserves the right to modify, amend, terminate or suspend the Exchange
Privilege at any time or from time to time. Owners of Existing Life Policies
may, exchange their Existing Life Policies for this Policy. Owners of Existing
Life Policies may also make a partial or full surrender from their Existing Life
Policies and use the proceeds to purchase this Policy. All charges and
deductions described in this prospectus are equally applicable to Policies
purchased in an exchange. All charges and deductions may not be assessed under
an Existing Life Policy in connection with an exchange, surrender, or partial
surrender of an Existing Life Policy.
The Policy differs from the Existing Life Policies in many significant
respects. Most importantly, the Policy Value under this Policy may consist,
entirely or in part, of Variable Account Value which fluctuates in response to
the net investment return of the Variable Account. In contrast, the policy
values under the Existing Life Policies always reflect interest credited by
Protective Life. While a minimum rate of interest (typically 4 or 4.5%) is
guaranteed, Protective Life in the past has credited interest at higher rates.
Accordingly, policy values under the Existing Life Policies reflect changing
current interest rates and do not vary with the investment performance of a
Variable Account.
Other significant differences between the Policy and the Existing Life
Policies include: (1) additional charges applicable under the Policy not found
in the Existing Life Policies; (2) different surrender charges; (3) different
death benefits; and (4) differences in federal and state laws and regulations
applicable to each of the types of policies.
34
<PAGE>
A table which generally summarizes the different charges under the
respective policies is as follows. For more complete details owners of Existing
Life Policies should refer to their policy forms for a complete description.
<TABLE>
EXISTING LIFE POLICY POLICY
<S> <C> <C>
Sales Charges/Premium Ranges from 0% to 12% of premium Percentage of each premium
Expense Charge payments in all policy years. payment as follows:
The premium expense charge can 12.5% in Policy Years 1-5
vary by age. 6% in Policy Years 6-10
2.5% in Policy Years 11+
Administrative Fees Ranges from $4 to $5 monthly. A maximum monthly charge equal
to .075% per $1,000 of the
Basic Face Amount in Policy
Years 1 through 9. Additional
charge for the first 12 months
after an increase in the
Supplemental Face Amount based
on the amount of increase.
Mortality and Expense None A maximum monthly charge equal
Charges to .075% multiplied by the
Variable Account Value, which
is equivalent to annual rate of
.90% of such amount.
Withdrawal Charges $25 The lesser of $25 or 2% of the
withdrawal amount requested.
Monthly Deductions A monthly deduction consisting A monthly deduction consisting
of: (1) cost of insurance of: (1) cost of insurance
charges (2) administrative fees charges (2) administrative fees
(see above) (3) any charges for (see above) (3) monthly
supplemental riders. (Applies mortality and expense charges
to Existing Life Policies which (see above) and (4) any
are universal life plans) charges for supplemental
riders.
Surrender Charges Surrender charges vary by policy A declining deferred sales
type and are incurred during a charge based on Basic Face
surrender charge period which Amount only and assessed during
ranges from 0 years up to the first 12 Policy Years.
19 years.
Guaranteed Interest Rate Ranges from 4% to 5%. Only Fixed Account : 4%.
</TABLE>
EFFECT OF THE EXCHANGE OFFER
1. This Policy will be issued to Existing Life Policy Owners. Evidence of
insurability may be required.
2. If an Existing Life Policy owner is within current issue age limits, the
Owner may carry over existing riders if available with the Policy. Evidence of
insurability may be required. An increase or addition of riders or any type of a
rate reduction request will require full evidence of insurability.
35
<PAGE>
3. The Contestable and Suicide provisions in the Policy will begin again as
of the effective date of the exchange, if evidence of insurability is required.
If evidence of insurability is not required on the exchange, the Contestable and
Suicide provisions will not begin again.
TAX MATTERS. Owners of Existing Life Policies should carefully consider
whether it will be advantageous to replace an Existing Life Policy with a
Policy. IT MAY NOT BE ADVANTAGEOUS TO EXCHANGE AN EXISTING LIFE POLICY FOR A
POLICY (OR TO SURRENDER IN FULL OR IN PART AN EXISTING LIFE POLICY AND USE THE
SURRENDER OR PARTIAL SURRENDER PROCEEDS TO PURCHASE A POLICY.)
The Company believes that an exchange of an Existing Life Policy for a
Policy generally should be treated as a nontaxable exchange within the meaning
of Section 1035 of the Internal Revenue Code if the Existing Life Policy covered
the same Joint Insureds. The Internal Revenue Service has taken the position
that Section 1035 will not apply if an Existing Life Policy covering only one
insured is exchanged for another life insurance contract covering more than one
insured. A Policy purchased in exchange will generally be treated as a newly
issued contract as of the effective date of the Policy. This could have various
tax consequences. (See "Tax Considerations".)
IF YOU SURRENDER YOUR EXISTING LIFE POLICY IN WHOLE OR IN PART AND AFTER
RECEIPT OF THE PROCEEDS YOU USE THE SURRENDER PROCEEDS OR PARTIAL SURRENDER
PROCEEDS TO PURCHASE A POLICY IT WILL BE TREATED AS A TAXABLE EVENT. THE
SURRENDER PROCEEDS WILL GENERALLY BE INCLUDIBLE IN INCOME.
Owners of Existing Life Policies should consult their tax advisers before
exchanging an Existing Life Policy for this Policy, or before surrendering in
whole or in part their Existing Life Policy and using the proceeds to purchase
this Policy.
SALES COMMISSIONS. Sales representatives offering the Policies to Existing
Life Policies Owners will receive a sales commission. In most cases, this sales
commission will be somewhat less than that paid in connection with sales of the
Policies to other purchasers. A standard sales commission will be paid. (See
"Sale of Policies".)
ILLUSTRATIONS OF POLICY VALUES, SURRENDER VALUES,
DEATH BENEFITS AND ACCUMULATED PREMIUM PAYMENTS
The following tables have been prepared to illustrate hypothetically how
certain values under a Policy change with investment performance over an
extended period of time. The tables illustrate how Policy Values, Surrender
Values and Death Benefits under a Policy covering Joint Insureds of the given
ages on the Issue Date, would vary over time if planned premium payments were
paid annually and the return on the assets in each of the Funds 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
Sub-Accounts available under the Policy, and that no amounts are allocated to
the Fixed Account.
The illustrations reflect the fact that the net investment return on the
assets held in the Sub-Accounts is lower than the gross after tax return of the
selected Funds. The tables assume an average annual expense ratio of 0.93% of
the average daily net assets of the Funds available under the Policies. This
average annual expense ratio is based on the expense ratios of each of the Funds
for the last fiscal year, adjusted, as appropriate, for any material changes in
expenses effective for the current fiscal year of a Fund. For information on
Fund expenses, see the prospectus for each of the Funds accompanying this
prospectus.
36
<PAGE>
In addition, the illustrations reflect the monthly charge to the Variable
Account for assuming mortality and expense risks, which is equal to 0.075%
multiplied by the Variable Account Value, which is equivalent to a effective
annual charge of 0.90% of such amount during Policy Years 1-10; and in Policy
Years 11 and thereafter is equal to 0.021% multiplied by the Variable Account
Value, which is equivalent to an annual rate of 0.25% of such amount. After
deduction of Fund expenses, 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 for Policy Years 1-10 of -1.83%,
4.17% and 10.17%, respectively, and for Policy Years 11 and thereafter -1.18%,
4.82% and 10.82%, respectively.
The illustrations also reflect the deduction of the monthly cost of
insurance charge for the hypothetical Joint Insureds. The surrender charge is
reflected in the column "Surrender Value". Protective Life's current cost of
insurance charges, and the guaranteed maximum cost of insurance charges that
Protective Life 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 Variable Account and assume no Policy Debt or charges for
supplemental riders.
The illustrations are based on Protective Life's sex distinct rates for
nonsmokers. Upon request, Owner(s) will be furnished with a comparable
illustration based upon the proposed Joint Insured's individual circumstances.
Such illustrations may assume different hypothetical rates of return in addition
to those illustrated in the following tables.
37
<PAGE>
ILLUSTRATION OF POLICY VALUES
PROTECTIVE LIFE INSURANCE COMPANY
INSURED 1: MALE ISSUE AGE 55; NON-SMOKER
INSURED 2: FEMALE ISSUE AGE 55; NON-SMOKER
$11,537.15 ANNUAL PLANNED PREMIUM
$1,000,000 BASIC FACE AMOUNT
DEATH BENEFIT OPTION A
USING CURRENT COST OF INSURANCE RATES
<TABLE>
<CAPTION>
PREMIUM 0% HYPOTHETICAL 6% HYPOTHETICAL
ACCUMULATED GROSS INVESTMENT RETURNS GROSS INVESTMENT RETURNS
END OF AT ---------------------------------- -----------------------------------
POLICY 5% INTEREST POLICY SURRENDER DEATH POLICY SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- --------------------- -------------- -------- ----------- --------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 12,114 9,434 1,358 2,220,000 10,027 1,951 2,220,000
2 24,834 18,683 10,607 2,220,000 20,454 12,378 2,220,000
3 38,189 27,732 20,233 2,220,000 31,278 23,779 2,220,000
4 52,213 36,578 29,656 2,220,000 42,510 35,588 2,220,000
5 66,938 45,217 38,872 1,000,000 54,160 47,814 1,000,000
6 82,398 54,211 48,443 1,000,000 66,835 61,067 1,000,000
7 98,632 62,975 57,783 1,000,000 79,967 74,775 1,000,000
8 115,678 71,496 66,881 1,000,000 93,559 88,944 1,000,000
9 133,576 79,759 75,721 1,000,000 107,611 103,573 1,000,000
10 152,369 88,456 84,995 1,000,000 122,853 119,392 1,000,000
11 172,101 97,813 94,929 1,000,000 139,843 136,958 1,000,000
12 192,820 106,872 104,565 1,000,000 157,472 155,165 1,000,000
13 214,575 115,604 115,604 1,000,000 175,746 175,746 1,000,000
14 237,418 123,978 123,978 1,000,000 194,670 194,670 1,000,000
15 261,403 131,954 131,954 1,000,000 214,241 214,241 1,000,000
16 286,587 139,477 139,477 1,000,000 234,447 234,447 1,000,000
17 313,030 146,452 146,452 1,000,000 255,242 255,242 1,000,000
18 340,796 152,819 152,819 1,000,000 276,615 276,615 1,000,000
19 369,950 158,431 158,431 1,000,000 298,486 298,486 1,000,000
20 400,561 163,138 163,138 1,000,000 320,780 320,780 1,000,000
21 432,703 166,782 166,782 1,000,000 343,423 343,423 1,000,000
22 466,453 169,184 169,184 1,000,000 366,339 366,339 1,000,000
23 501,889 170,159 170,159 1,000,000 389,462 389,462 1,000,000
24 539,098 169,503 169,503 1,000,000 412,730 412,730 1,000,000
25 578,167 166,960 166,960 1,000,000 436,067 436,067 1,000,000
26 619,189 160,963 160,963 1,000,000 458,535 458,535 1,000,000
27 662,262 151,963 151,963 1,000,000 480,606 480,606 1,000,000
28 707,489 139,315 139,315 1,000,000 502,077 502,077 1,000,000
29 754,978 122,205 122,205 1,000,000 522,714 522,714 1,000,000
30 804,841 99,716 99,716 1,000,000 542,305 542,305 1,000,000
31 857,197 70,780 70,780 1,000,000 560,654 560,654 1,000,000
32 912,171 34,179 34,179 1,000,000 577,595 577,595 1,000,000
33 969,893 0 0 0 592,957 592,957 1,000,000
34 1,030,502 0 0 0 606,589 606,589 1,000,000
35 1,094,141 0 0 0 618,282 618,282 1,000,000
36 1,160,962 0 0 0 627,774 627,774 1,000,000
37 1,231,124 0 0 0 634,678 634,678 1,000,000
38 1,304,795 0 0 0 638,406 638,406 1,000,000
39 1,382,148 0 0 0 638,022 638,022 1,000,000
40 1,463,370 0 0 0 631,779 631,779 1,000,000
41 1,548,652 0 0 0 618,670 618,670 1,000,000
42 1,638,199 0 0 0 598,023 598,023 1,000,000
43 1,732,223 0 0 0 563,045 563,045 1,000,000
44 1,830,948 0 0 0 515,168 515,168 1,000,000
45 1,934,609 0 0 0 452,060 452,060 1,000,000
46 2,043,454 0 0 0 487,101 487,101 1,000,000
47 2,157,741 0 0 0 523,920 523,920 1,000,000
48 2,277,742 0 0 0 562,604 562,604 1,000,000
49 2,403,743 0 0 0 603,250 603,250 1,000,000
50 2,536,044 0 0 0 645,957 645,957 1,000,000
51 2,674,960 0 0 0 690,829 690,829 1,000,000
52 2,820,822 0 0 0 737,977 737,977 1,000,000
53 2,973,977 0 0 0 787,514 787,514 1,000,000
54 3,134,790 0 0 0 839,563 839,563 1,000,000
55 3,303,643 0 0 0 894,251 894,251 1,000,000
<CAPTION>
12% HYPOTHETICAL
GROSS INVESTMENT RETURNS
END OF -------------------------------------
POLICY POLICY SURRENDER DEATH
YEAR VALUE VALUE BENEFIT
- --------------------- ---------- ----------- ----------
<S> <C> <C> <C>
1 10,620 2,544 2,220,000
2 22,296 14,220 2,220,000
3 35,114 27,615 2,220,000
4 49,184 42,262 2,220,000
5 64,624 58,279 1,000,000
6 82,199 76,431 1,000,000
7 101,479 96,287 1,000,000
8 122,621 118,006 1,000,000
9 145,796 141,758 1,000,000
10 171,949 168,487 1,000,000
11 202,292 199,407 1,000,000
12 235,756 233,449 1,000,000
13 272,667 272,667 1,000,000
14 313,388 313,388 1,000,000
15 358,324 358,324 1,000,000
16 407,925 407,925 1,000,000
17 462,679 462,679 1,000,000
18 523,179 523,179 1,000,000
19 590,062 590,062 1,000,000
20 664,091 664,091 1,000,000
21 746,179 746,179 1,000,000
22 837,426 837,426 1,000,000
23 939,164 939,164 1,000,000
24 1,052,437 1,052,437 1,105,059
25 1,177,739 1,177,739 1,236,626
26 1,316,213 1,316,213 1,382,024
27 1,469,255 1,469,255 1,542,717
28 1,638,315 1,638,315 1,720,231
29 1,824,968 1,824,968 1,916,216
30 2,030,922 2,030,922 2,132,468
31 2,258,031 2,258,031 2,370,933
32 2,508,308 2,508,308 2,633,723
33 2,783,934 2,783,934 2,923,130
34 3,087,277 3,087,277 3,241,641
35 3,420,891 3,420,891 3,591,936
36 3,787,527 3,787,527 3,939,028
37 4,194,103 4,194,103 4,319,926
38 4,646,011 4,646,011 4,738,932
39 5,149,654 5,149,654 5,201,150
40 5,712,722 5,712,722 5,712,722
41 6,341,675 6,341,675 6,341,675
42 7,038,495 7,038,495 7,038,495
43 7,810,505 7,810,505 7,810,505
44 8,665,819 8,665,819 8,665,819
45 9,613,424 9,613,424 9,613,424
46 10,690,444 10,690,444 10,690,444
47 11,886,690 11,886,690 11,886,690
48 13,215,361 13,215,361 13,215,361
49 14,691,116 14,691,116 14,691,116
50 16,330,237 16,330,237 16,330,237
51 18,150,809 18,150,809 18,150,809
52 20,172,917 20,172,917 20,172,917
53 22,418,874 22,418,874 22,418,874
54 24,913,457 24,913,457 24,913,457
55 27,684,191 27,684,191 27,684,191
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
* In the absence of an additional premium, the Policy would lapse.
The illustration above is based on the following assumptions:
(1) Assumes that no Policy loans have been made.
(2) Current values reflect applicable premium expense charge, current cost of
insurance rates, a monthly administration fee of $.06 per $1,000 of Basic
Face Amount per month in Policy Years 1 through 9, and a monthly mortality
and expense risk charge equal to 0.075% multiplied by the Variable Account
Value, (which is equivalent to an annual rate of 0.90% of such amount)
during Policy Years 1 through 10 and 0.021% multiplied by the Variable
Account Value, (which is equivalent to an annual rate of 0.25% of such
amount) during Policy Years 11 and 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 premium payment is made at the beginning of the
Policy Year. Values would be different if the premiums are paid with a
different frequency or in different amounts.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN
THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION
OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE
OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND POLICY 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 FUNDS THAT
THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
38
<PAGE>
ILLUSTRATION OF POLICY VALUES
PROTECTIVE LIFE INSURANCE COMPANY
INSURED 1: MALE ISSUE AGE 55; NON-SMOKER
INSURED 2: FEMALE ISSUE AGE 55; NON-SMOKER
$11,537.15 ANNUAL PLANNED PREMIUM
$1,000,000 BASIC FACE AMOUNT
DEATH BENEFIT OPTION A
USING GUARANTEED COST OF INSURANCE RATES
<TABLE>
<CAPTION>
PREMIUM 0% HYPOTHETICAL 6% HYPOTHETICAL
ACCUMULATED GROSS INVESTMENT RETURNS GROSS INVESTMENT RETURNS
END OF AT ---------------------------------- ----------------------------------
POLICY 5% INTEREST POLICY SURRENDER DEATH POLICY SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- --------------------- -------------- -------- ----------- --------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 12,114 8,973 897 2,220,000 9,543 1,467 2,220,000
2 24,834 17,675 9,599 2,220,000 19,368 11,292 2,220,000
3 38,189 26,087 18,588 2,220,000 29,464 21,965 2,220,000
4 52,213 34,191 27,269 2,220,000 39,818 32,896 2,220,000
5 66,938 41,964 35,618 1,000,000 50,412 44,066 1,000,000
6 82,398 50,110 44,341 1,000,000 62,000 56,231 1,000,000
7 98,632 57,842 52,650 1,000,000 73,799 68,607 1,000,000
8 115,678 65,106 60,491 1,000,000 85,759 81,144 1,000,000
9 133,576 71,830 67,792 1,000,000 97,811 93,773 1,000,000
10 152,369 78,818 75,357 1,000,000 110,788 107,327 1,000,000
11 172,101 85,469 82,585 1,000,000 124,136 121,252 1,000,000
12 192,820 91,278 88,971 1,000,000 137,350 135,043 1,000,000
13 214,575 96,141 96,141 1,000,000 150,324 150,324 1,000,000
14 237,418 99,947 99,947 1,000,000 162,944 162,944 1,000,000
15 261,403 102,558 102,558 1,000,000 175,071 175,071 1,000,000
16 286,587 103,776 103,776 1,000,000 186,506 186,506 1,000,000
17 313,030 103,258 103,258 1,000,000 196,918 196,918 1,000,000
18 340,796 100,792 100,792 1,000,000 206,089 206,089 1,000,000
19 369,950 95,839 95,839 1,000,000 213,506 213,506 1,000,000
20 400,561 87,848 87,848 1,000,000 218,638 218,638 1,000,000
21 432,703 76,219 76,219 1,000,000 220,907 220,907 1,000,000
22 466,453 60,278 60,278 1,000,000 219,656 219,656 1,000,000
23 501,889 39,270 39,270 1,000,000 214,143 214,143 1,000,000
24 539,098 12,326 12,326 1,000,000 203,504 203,504 1,000,000
25 578,167 * * * 186,606 186,606 1,000,000
26 619,189 * * * 161,890 161,890 1,000,000
27 662,262 * * * 127,234 127,234 1,000,000
28 707,489 * * * 79,706 79,706 1,000,000
29 754,978 * * * 15,294 15,294 1,000,000
30 804,841 * * * * * *
31 857,197 * * * * * *
32 912,171 * * * * * *
33 969,893 * * * * * *
34 1,030,502 * * * * * *
35 1,094,141 * * * * * *
36 1,160,962 * * * * * *
37 1,231,124 * * * * * *
38 1,304,795 * * * * * *
39 1,382,148 * * * * * *
40 1,463,370 * * * * * *
41 1,548,652 * * * * * *
42 1,638,199 * * * * * *
43 1,732,223 * * * * * *
44 1,830,948 * * * * * *
45 1,934,609 * * * * * *
46 2,043,454 * * * * * *
47 2,157,741 * * * * * *
48 2,277,742 * * * * * *
49 2,403,743 * * * * * *
50 2,536,044 * * * * * *
51 2,674,960 * * * * * *
52 2,820,822 * * * * * *
53 2,973,977 * * * * * *
54 3,134,790 * * * * * *
55 3,303,643 * * * * * *
<CAPTION>
12% HYPOTHETICAL
GROSS INVESTMENT RETURNS
END OF -------------------------------------
POLICY POLICY SURRENDER DEATH
YEAR VALUE VALUE BENEFIT
- --------------------- ---------- ----------- ----------
<S> <C> <C> <C>
1 10,113 2,037 2,220,000
2 21,130 13,054 2,220,000
3 33,119 25,620 2,220,000
4 46,154 39,232 2,220,000
5 60,311 53,965 1,000,000
6 76,495 70,726 1,000,000
7 94,044 88,852 1,000,000
8 113,042 108,427 1,000,000
9 133,567 129,529 1,000,000
10 156,645 153,184 1,000,000
11 181,956 179,072 1,000,000
12 209,212 206,904 1,000,000
13 238,549 238,549 1,000,000
14 270,134 270,134 1,000,000
15 304,147 304,147 1,000,000
16 340,772 340,772 1,000,000
17 380,145 380,145 1,000,000
18 422,583 422,583 1,000,000
19 468,283 468,283 1,000,000
20 517,591 517,591 1,000,000
21 571,019 571,019 1,000,000
22 629,290 629,290 1,000,000
23 693,400 693,400 1,000,000
24 764,700 764,700 1,000,000
25 844,974 844,974 1,000,000
26 936,605 936,605 1,000,000
27 1,040,335 1,040,335 1,092,352
28 1,153,686 1,153,686 1,211,370
29 1,277,365 1,277,365 1,341,234
30 1,412,144 1,412,144 1,482,751
31 1,558,825 1,558,825 1,636,766
32 1,718,259 1,718,259 1,804,172
33 1,891,329 1,891,329 1,985,896
34 2,078,972 2,078,972 2,182,921
35 2,282,140 2,282,140 2,396,247
36 2,501,809 2,501,809 2,601,882
37 2,744,759 2,744,759 2,827,102
38 3,014,796 3,014,796 3,075,092
39 3,316,607 3,316,607 3,349,773
40 3,656,076 3,656,076 3,656,076
41 4,036,789 4,036,789 4,036,789
42 4,455,856 4,455,856 4,455,856
43 4,917,143 4,917,143 4,917,143
44 5,424,901 5,424,901 5,424,901
45 5,983,814 5,983,814 5,983,814
46 6,659,037 6,659,037 6,659,037
47 7,409,006 7,409,006 7,409,006
48 8,241,998 8,241,998 8,241,998
49 9,167,201 9,167,201 9,167,201
50 10,194,824 10,194,824 10,194,824
51 11,336,206 11,336,206 11,336,206
52 12,603,938 12,603,938 12,603,938
53 14,012,008 14,012,008 14,012,008
54 15,575,952 15,575,952 15,575,952
55 17,313,024 17,313,024 17,313,024
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
* In the absence of an additional premium, the Policy would lapse.
The illustration above is based on the following assumptions:
(1) Assumes that no Policy loans have been made.
(2) Guaranteed values reflect applicable premium expense charge, guaranteed cost
of insurance rates, a monthly administration fee of $.075 per $1,000 of
Basic Face Amount per month in Policy Years 1 through 9, and a monthly
mortality and expense risk charge equal to 0.075% multiplied by the Variable
Account Value, (which is equivalent to an annual rate of 0.90% of such
amount) during all Policy Years.
(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 premium payment is made at the beginning of the
Policy Year. Values would be different if the premiums are paid with a
different frequency or in different amounts.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN
THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION
OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE
OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND POLICY 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 FUNDS THAT
THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
39
<PAGE>
ILLUSTRATION OF POLICY VALUES
PROTECTIVE LIFE INSURANCE COMPANY
INSURED 1: MALE ISSUE AGE 55; NON-SMOKER
INSURED 2: FEMALE ISSUE AGE 55; NON-SMOKER
$11,537.15 ANNUAL PLANNED PREMIUM
$1,000,000 BASIC FACE AMOUNT
DEATH BENEFIT OPTION B
USING CURRENT COST OF INSURANCE RATES
<TABLE>
<CAPTION>
PREMIUM 0% HYPOTHETICAL 6% HYPOTHETICAL
ACCUMULATED GROSS INVESTMENT RETURNS GROSS INVESTMENT RETURNS
END OF AT ---------------------------------- ----------------------------------
POLICY 5% INTEREST POLICY SURRENDER DEATH POLICY SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- --------------------- -------------- -------- ----------- --------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 12,114 9,434 1,358 2,229,434 10,027 1,951 2,230,027
2 24,834 18,682 10,606 2,238,682 20,452 12,376 2,240,452
3 38,189 27,728 20,229 2,247,728 31,273 23,774 2,251,273
4 52,213 36,569 29,646 2,256,569 42,499 35,577 2,262,499
5 66,938 45,200 38,854 1,045,200 54,138 47,792 1,054,138
6 82,398 54,180 48,412 1,054,180 66,796 61,027 1,066,796
7 98,632 62,924 57,732 1,062,924 79,900 74,708 1,079,900
8 115,678 71,416 66,801 1,071,416 93,450 88,835 1,093,450
9 133,576 79,638 75,600 1,079,638 107,439 103,401 1,107,439
10 152,369 88,276 84,815 1,088,276 122,590 119,129 1,122,590
11 172,101 97,550 94,666 1,097,550 139,446 136,561 1,139,446
12 192,820 106,495 104,188 1,106,495 156,884 154,577 1,156,884
13 214,575 115,075 115,075 1,115,075 174,892 174,892 1,174,892
14 237,418 123,248 123,248 1,123,248 193,450 193,450 1,193,450
15 261,403 130,964 130,964 1,130,964 212,528 212,528 1,212,528
16 286,587 138,152 138,152 1,138,152 232,070 232,070 1,232,070
17 313,030 144,695 144,695 1,144,695 251,974 251,974 1,251,974
18 340,796 150,513 150,513 1,150,513 272,166 272,166 1,272,166
19 369,950 155,425 155,425 1,155,425 292,463 292,463 1,292,463
20 400,561 159,245 159,245 1,159,245 312,668 312,668 1,312,668
21 432,703 161,774 161,774 1,161,774 332,558 332,558 1,332,558
22 466,453 162,797 162,797 1,162,797 351,879 351,879 1,351,879
23 501,889 162,091 162,091 1,162,091 370,357 370,357 1,370,357
24 539,098 159,425 159,425 1,159,425 387,689 387,689 1,387,689
25 578,167 154,514 154,514 1,154,514 403,505 403,505 1,403,505
26 619,189 145,531 145,531 1,145,531 415,816 415,816 1,415,816
27 662,262 133,141 133,141 1,133,141 425,093 425,093 1,425,093
28 707,489 116,742 116,742 1,116,742 430,525 430,525 1,430,525
29 754,978 95,631 95,631 1,095,631 431,153 431,153 1,431,153
30 804,841 69,127 69,127 1,069,127 425,986 425,986 1,425,986
31 857,197 36,562 36,562 1,036,562 413,992 413,992 1,413,992
32 912,171 0 0 0 394,156 394,156 1,394,156
33 969,893 0 0 0 365,432 365,432 1,365,432
34 1,030,502 0 0 0 326,824 326,824 1,326,824
35 1,094,141 0 0 0 277,239 277,239 1,277,239
36 1,160,962 0 0 0 215,539 215,539 1,215,539
37 1,231,124 0 0 0 140,421 140,421 1,140,421
38 1,304,795 0 0 0 50,305 50,305 1,050,305
39 1,382,148 0 0 0 0 0 0
40 1,463,370 0 0 0 0 0 0
41 1,548,652 0 0 0 0 0 0
42 1,638,199 0 0 0 0 0 0
43 1,732,223 0 0 0 0 0 0
44 1,830,948 0 0 0 0 0 0
45 1,934,609 0 0 0 0 0 0
46 2,043,454 0 0 0 0 0 0
47 2,157,741 0 0 0 0 0 0
48 2,277,742 0 0 0 0 0 0
49 2,403,743 0 0 0 0 0 0
50 2,536,044 0 0 0 0 0 0
51 2,674,960 0 0 0 0 0 0
52 2,820,822 0 0 0 0 0 0
53 2,973,977 0 0 0 0 0 0
54 3,134,790 0 0 0 0 0 0
55 3,303,643 0 0 0 0 0 0
<CAPTION>
12% HYPOTHETICAL
GROSS INVESTMENT RETURNS
END OF -------------------------------------
POLICY POLICY SURRENDER DEATH
YEAR VALUE VALUE BENEFIT
- --------------------- ---------- ----------- ----------
<S> <C> <C> <C>
1 10,620 2,544 2,230,620
2 22,294 14,218 2,242,294
3 35,109 27,609 2,255,109
4 49,171 42,249 2,269,171
5 64,597 58,252 1,064,597
6 82,149 76,381 1,082,149
7 101,391 96,199 1,101,391
8 122,473 117,858 1,122,473
9 145,555 141,517 1,145,555
10 171,565 168,104 1,171,565
11 201,691 198,807 1,201,691
12 234,834 232,527 1,234,834
13 271,276 271,276 1,271,276
14 311,326 311,326 1,311,326
15 355,314 355,314 1,355,314
16 403,582 403,582 1,403,582
17 456,463 456,463 1,456,463
18 514,361 514,361 1,514,361
19 577,614 577,614 1,577,614
20 646,592 646,592 1,646,592
21 721,688 721,688 1,721,688
22 803,314 803,314 1,803,314
23 891,923 891,923 1,891,923
24 987,996 987,996 1,987,996
25 1,092,014 1,092,014 2,092,014
26 1,202,860 1,202,860 2,202,860
27 1,321,928 1,321,928 2,321,928
28 1,449,421 1,449,421 2,449,421
29 1,585,450 1,585,450 2,585,450
30 1,730,151 1,730,151 2,730,151
31 1,883,684 1,883,684 2,883,684
32 2,046,295 2,046,295 3,046,295
33 2,218,272 2,218,272 3,218,272
34 2,400,039 2,400,039 3,400,039
35 2,592,016 2,592,016 3,592,016
36 2,794,677 2,794,677 3,794,677
37 3,008,429 3,008,429 4,008,429
38 3,233,505 3,233,505 4,233,505
39 3,469,738 3,469,738 4,469,738
40 3,715,598 3,715,598 4,715,598
41 3,973,047 3,973,047 4,973,047
42 4,246,348 4,246,348 5,246,348
43 4,526,565 4,526,565 5,526,565
44 4,828,543 4,828,543 5,828,543
45 5,158,237 5,158,237 6,158,237
46 5,742,068 5,742,068 6,742,068
47 6,390,529 6,390,529 7,390,529
48 7,110,775 7,110,775 8,110,775
49 7,910,752 7,910,752 8,910,752
50 8,799,286 8,799,286 9,799,286
51 9,786,182 9,786,182 10,786,182
52 10,882,326 10,882,326 11,882,326
53 12,099,814 12,099,814 13,099,814
54 13,452,078 13,452,078 14,452,078
55 14,954,037 14,954,037 15,954,037
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
* In the absence of an additional premium, the Policy would lapse.
The illustration above is based on the following assumptions:
(1) Assumes that no Policy loans have been made.
(2) Current values reflect applicable premium expense charge, current cost of
insurance rates, a monthly administration fee of $.06 per $1,000 of Basic
Face Amount per month in Policy Years 1 through 9, and a monthly mortality
and expense risk charge equal to 0.075% multiplied by the Variable Account
Value, (which is equivalent to an annual rate of 0.90% of such amount)
during Policy Years 1 through 10 and 0.021% multiplied by the Variable
Account Value, (which is equivalent to an annual rate of 0.25% of such
amount) during Policy Years 11 and 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 premium payment is made at the beginning of the
Policy Year. Values would be different if the premiums are paid with a
different frequency or in different amounts.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN
THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION
OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE
OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND POLICY 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 FUNDS THAT
THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
40
<PAGE>
ILLUSTRATION OF POLICY VALUES
PROTECTIVE LIFE INSURANCE COMPANY
INSURED 1: MALE ISSUE AGE 55; NON-SMOKER
INSURED 2: FEMALE ISSUE AGE 55; NON-SMOKER
$11,537.15 ANNUAL PLANNED PREMIUM
$1,000,000 BASIC FACE AMOUNT
DEATH BENEFIT OPTION B
USING GUARANTEED COST OF INSURANCE RATES
<TABLE>
<CAPTION>
PREMIUM 0% HYPOTHETICAL 6% HYPOTHETICAL
ACCUMULATED GROSS INVESTMENT RETURNS GROSS INVESTMENT RETURNS
END OF AT ---------------------------------- ----------------------------------
POLICY 5% INTEREST POLICY SURRENDER DEATH POLICY SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- --------------------- -------------- -------- ----------- --------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 12,114 8,972 896 2,228,972 9,542 1,466 2,229,542
2 24,834 17,671 9,595 2,237,671 19,364 11,288 2,239,364
3 38,189 26,076 18,577 2,246,076 29,451 21,952 2,249,451
4 52,213 34,164 27,242 2,254,164 39,786 32,864 2,259,786
5 66,938 41,909 35,563 1,041,909 50,344 43,999 1,050,344
6 82,398 50,009 44,241 1,050,009 61,872 56,104 1,061,872
7 98,632 57,673 52,481 1,057,673 73,577 68,385 1,073,577
8 115,678 64,836 60,221 1,064,836 85,392 80,777 1,085,392
9 133,576 71,416 67,378 1,071,416 97,227 93,189 1,097,227
10 152,369 78,204 74,743 1,078,204 109,889 106,428 1,109,889
11 172,101 84,580 81,696 1,084,580 122,787 119,903 1,122,787
12 192,820 90,021 87,714 1,090,021 135,371 133,064 1,135,371
13 214,575 94,404 94,404 1,094,404 147,486 147,486 1,147,486
14 237,418 97,603 97,603 1,097,603 158,959 158,959 1,158,959
15 261,403 99,459 99,459 1,099,459 169,581 169,581 1,169,581
16 286,587 99,753 99,753 1,099,753 179,063 179,063 1,179,063
17 313,030 98,113 98,113 1,098,113 186,945 186,945 1,186,945
18 340,796 94,325 94,325 1,094,325 192,904 192,904 1,192,904
19 369,950 87,829 87,829 1,087,829 196,242 196,242 1,196,242
20 400,561 78,092 78,092 1,078,092 196,250 196,250 1,196,250
21 432,703 64,584 64,584 1,064,584 192,183 192,183 1,192,183
22 466,453 46,773 46,773 1,046,773 183,250 183,250 1,183,250
23 501,889 24,142 24,142 1,024,142 168,640 168,640 1,168,640
24 539,098 * * * 147,514 147,514 1,147,514
25 578,167 * * * 118,888 118,888 1,118,888
26 619,189 * * * 81,534 81,534 1,081,534
27 662,262 * * * 33,967 33,967 1,033,967
28 707,489 * * * * * *
29 754,978 * * * * * *
30 804,841 * * * * * *
31 857,197 * * * * * *
32 912,171 * * * * * *
33 969,893 * * * * * *
34 1,030,502 * * * * * *
35 1,094,141 * * * * * *
36 1,160,962 * * * * * *
37 1,231,124 * * * * * *
38 1,304,795 * * * * * *
39 1,382,148 * * * * * *
40 1,463,370 * * * * * *
41 1,548,652 * * * * * *
42 1,638,199 * * * * * *
43 1,732,223 * * * * * *
44 1,830,948 * * * * * *
45 1,934,609 * * * * * *
46 2,043,454 * * * * * *
47 2,157,741 * * * * * *
48 2,277,742 * * * * * *
49 2,403,743 * * * * * *
50 2,536,044 * * * * * *
51 2,674,960 * * * * * *
52 2,820,822 * * * * * *
53 2,973,977 * * * * * *
54 3,134,790 * * * * * *
55 3,303,643 * * * * * *
<CAPTION>
12% HYPOTHETICAL
GROSS INVESTMENT RETURNS
END OF ----------------------------------
POLICY POLICY SURRENDER DEATH
YEAR VALUE VALUE BENEFIT
- --------------------- -------- ----------- ---------
<S> <C> <C> <C>
1 10,113 2,037 2,230,113
2 21,126 13,050 2,241,126
3 33,105 25,606 2,253,105
4 46,116 39,194 2,266,116
5 60,229 53,883 1,060,229
6 76,334 70,566 1,076,334
7 93,753 88,562 1,093,753
8 112,543 107,929 1,112,543
9 132,745 128,707 1,132,745
10 155,330 151,868 1,155,330
11 179,905 177,021 1,179,905
12 206,084 203,777 1,206,084
13 233,881 233,881 1,233,881
14 263,302 263,302 1,263,302
15 294,320 294,320 1,294,320
16 326,836 326,836 1,326,836
17 360,576 360,576 1,360,576
18 395,396 395,396 1,395,396
19 430,769 430,769 1,430,769
20 466,132 466,132 1,466,132
21 500,855 500,855 1,500,855
22 534,234 534,234 1,534,234
23 565,503 565,503 1,565,503
24 593,827 593,827 1,593,827
25 618,173 618,173 1,618,173
26 637,192 637,192 1,637,192
27 649,188 649,188 1,649,188
28 652,048 652,048 1,652,048
29 643,261 643,261 1,643,261
30 620,216 620,216 1,620,216
31 580,140 580,140 1,580,140
32 520,240 520,240 1,520,240
33 437,496 437,496 1,437,496
34 328,849 328,849 1,328,849
35 190,780 190,780 1,190,780
36 19,410 19,410 1,019,410
37 * * *
38 * * *
39 * * *
40 * * *
41 * * *
42 * * *
43 * * *
44 * * *
45 * * *
46 * * *
47 * * *
48 * * *
49 * * *
50 * * *
51 * * *
52 * * *
53 * * *
54 * * *
55 * * *
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
* In the absence of an additional premium, the Policy would lapse.
The illustration above is based on the following assumptions:
(1) Assumes that no Policy loans have been made.
(2) Guaranteed values reflect applicable premium expense charge, guaranteed cost
of insurance rates, a monthly administration fee of $.075 per $1,000 of
Basic Face Amount per month in Policy Years 1 through 9, and a monthly
mortality and expense risk charge equal to 0.075% multiplied by the Variable
Account Value, (which is equivalent to an annual rate of 0.90% of such
amount) during all Policy Years.
(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 premium payment is made at the beginning of the
Policy Year. Values would be different if the premiums are paid with a
different frequency or in different amounts.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN
THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION
OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE
OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND POLICY 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 FUNDS THAT
THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
41
<PAGE>
OTHER POLICY BENEFITS AND PROVISIONS
LIMITS ON RIGHTS TO CONTEST THE POLICY
INCONTESTABILITY. Unless fraud is involved, Protective Life will not
contest the Policy, or any supplemental rider, after the Policy or rider has
been in force during the Joint Insureds' lifetime for two years from the Policy
Effective Date or the effective date of the rider. Protective Life will not
contest an increase in the Face Amount 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 Joint Insureds for two years after the effective date of
the increase.
SUICIDE EXCLUSION. If either of the Joint Insureds commits suicide, while
sane or insane, within two years from the Policy Effective Date and while the
Policy is in force, Protective Life's total liability will be limited to the
premium payments made before death, less any Policy Debt and any withdrawals and
the Policy will be terminated as of the date of such suicide. If either of the
Joint Insureds commits suicide while sane or insane within two years from the
effective date of any increase in Face Amount, Protective Life's total liability
with respect to the increase will be limited to 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 age or sex of either Joint Insured has
been misstated in the application for the Policy, increases in Supplemental Face
Amount or in any application for supplemental riders, the Death Benefit under
the Policy or such supplemental riders is the amount which would have been
provided by the most recent cost of insurance charge, and the cost of such
supplemental riders, at the correct age and sex.
OTHER CHANGES. At any time Protective Life may make such changes in the
Policy as are necessary to assure compliance with any applicable laws,
regulations or rulings issued by a government agency. This includes, but is not
limited to, changes necessary to comply at all times with the definition of life
insurance prescribed by the Internal Revenue Code. Any such changes will apply
uniformly to all affected Policies and Owners will receive notification of such
changes.
SUSPENSION OR DELAY IN PAYMENTS
Protective Life will ordinarily pay any Death Benefit proceeds, Policy
loans, withdrawals, or surrenders 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 all required documents. However,
Protective Life 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 Exchange is restricted by the SEC, or the SEC declares
that an emergency exists as a result of which the disposal or valuation of
Variable Account assets is not reasonably practicable; or (2) the SEC by order
permits postponement of payment to protect Owners. (See also "Payments from the
Fixed Account".)
When applied to distributions from the Fixed Account, Protective Life may
defer payment of Death Benefit proceeds for up to two months and defer payment
of withdrawals, surrenders and policy loans (unless the loan is for the payment
of a premium to Protective Life) for up to six months after we receive your
written request. If Protective Life delays payment on a surrender, you will be
paid interest at the rate state law sets (if any) beginning at the time of the
surrender request.
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: the Death Benefit; Policy Value; Fixed
Account Value; Variable Account Value; Loan Account Value; Sub-Account Values;
premiums paid since the last report; withdrawals since the last report;
42
<PAGE>
any Policy loans and accrued interest; Surrender Value; current Net Premium
allocations; charges deducted since the last report; and any other information
required by law. You will also be sent an annual and a semi-annual report for
each Fund underlying a Sub-Account to which you have allocated Policy Value,
including a list of the securities held in each Fund, as required by the 1940
Act. In addition, when you pay premiums or request any other financial
transaction under your Policy 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 Protective Life, it must be in writing and filed
at the Home Office. Once Protective Life 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. Protective Life assumes no
responsibility for the validity or sufficiency of any assignment. An assignment
is subject to any Policy Debt. An assignment may result in certain amounts being
subject to income tax and a 10% penalty tax. (See "Tax Considerations".)
ARBITRATION
The Policy provides that any controversy, dispute or claim by any Owner(s),
Joint Insureds, or beneficiary (a "claimant") arising out of insurance provided
under the Policy will be submitted to binding arbitration pursuant to the
Federal Arbitration Act. Arbitration will be binding upon any claimant as well
as Protective Life and may not be set aside in later litigation except upon the
limited circumstances set forth in the Federal Arbitration Act. Arbitration
expenses will be borne by the losing party or in such proportion as the
arbitrator(s) shall decide. Consult the Policy for additional information. This
provision does not apply to Policies issued in certain states. The application
for the Policy will indicate whether your Policy will be subject to an
arbitration provision.
SUPPLEMENTAL RIDERS
Supplemental riders may be available in connection with your Policy. Monthly
charges for any such riders will be deducted from your Policy Value as part of
the Monthly Deduction. (See "Monthly Deduction".) Any available supplemental
riders will provide fixed benefits that do not vary with the investment
experience of the Variable Account.
REINSURANCE
The Company may reinsure a portion of the risks assumed under the Policies.
USES OF THE POLICY
Life insurance, including variable life insurance, can be used to provide
for many individual and business needs, in addition to providing a death
benefit. Possible applications of a variable life insurance policy, such as this
Policy include: (1) serving as vehicle for accumulating funds for a college
education, (2) estate planning, (3) serving as an investment vehicle on various
types of deferred compensation arrangements, (4) buy-sell arrangements,
(5) split dollar arrangements, and (6) a supplement to other retirement plans.
As with any investment, using this Policy under these or other applications
entails certain risks. For example, if investment performance of Sub-Accounts to
which Policy Value is allocated is poorer than expected or if sufficient
premiums are not paid, the Policy may lapse or may not accumulate Cash Value or
Surrender Value sufficient to adequately fund the application for which the
Policy was purchased. Similarly, certain transactions under a Policy entail
risks in connection with the application for which the Policy is purchased.
Withdrawals, policy loans and interest paid on policy loans may significantly
affect current and future Policy Value, Cash Value, Surrender Value or Death
Benefit Proceeds. If, for example, a policy loan is taken but not repaid prior
to the death of the Last Survivor of the Joint Insureds, the Policy
43
<PAGE>
Debt is subtracted from the Death Benefit in computing the Death Benefit
Proceeds to be paid to a beneficiary.
Prior to utilizing this Policy for the above applications you should
consider whether the anticipated duration of the Policy is appropriate for the
application for which you intend to purchase it.
In addition, you need to consider the tax implications of using the Policy
with these applications. (The tax implications of using this Policy with these
applications can be complex and generally are not addressed in the discussion of
"Tax Considerations" below.) Loans and withdrawals will affect the Policy Value
and Death Benefit. There may be penalties and taxes if the policy is
surrendered, lapses, matures or if a withdrawal is made. BECAUSE OF THESE RISKS,
YOU NEED TO CAREFULLY CONSIDER HOW YOU USE THIS POLICY. THIS POLICY MAY NOT BE
SUITABLE FOR ALL PERSONS, UNDER ANY OF THESE APPLICATIONS.
TAX CONSIDERATIONS
INTRODUCTION
The following discussion of the federal income tax treatment of the Policy
is not exhaustive, does not purport to cover all situations, and is not intended
as tax advice. The federal income tax treatment of the Policy is unclear in
certain circumstances, and a qualified tax adviser should always be consulted
with regard to the application of law to individual circumstances. This
discussion is based on the Internal Revenue Code of 1986, as amended (the
"Code"), Treasury Department regulations, and interpretations existing on the
date of this Prospectus. These authorities, however, are subject to change by
Congress, the Treasury Department, and judicial decisions.
This discussion does not address state or local tax consequences or federal
estate or gift tax consequences associated with the purchase of the Policy. In
addition, PROTECTIVE LIFE MAKES NO GUARANTEE REGARDING ANY TAX TREATMENT --
FEDERAL, STATE OR LOCAL -- OF ANY POLICY OR OF ANY TRANSACTION INVOLVING A
POLICY.
TAX STATUS OF PROTECTIVE LIFE
Protective Life is taxed as a life insurance company under the Code. Since
the operations of the Variable Account are a part of, and are taxed with, the
operations of Protective Life, the Variable Account is not separately taxed as a
"regulated investment company" under the Code. Under existing federal income tax
laws, Protective Life is not taxed on investment income and realized capital
gains of the Variable Account, although Protective Life's federal taxes are
increased in respect of the Policies because of the federal tax law's treatment
of deferred acquisition costs. Currently, a charge for federal income taxes is
not deducted from the Sub-Accounts or the Policy's Cash Value. However,
Protective Life does deduct a premium expense charge from each premium payment
in all Policy Years in part to compensate it for the federal tax treatment of
deferred acquisition costs. Protective Life reserves the right in the future to
make a charge against the Variable Account or the Cash Values of a Policy for
any federal, state, or local income taxes that it incurs and determines to be
properly attributable to the Variable Account or the Policy. Protective Life
will promptly notify the Owner of any such charge.
TAXATION OF LIFE INSURANCE POLICIES
TAX STATUS OF THE POLICY. Section 7702 of the Code establishes a statutory
definition of life insurance for federal tax purposes. Protective Life believes
that the Policy will meet the current statutory definition of life insurance,
which places limitations on the amount of premiums that may be paid and the
Policy Values that can accumulate relative to the Death Benefit. As a result,
the Death Benefit payable under the Policy will generally be excludable from the
Beneficiary's gross income, and interest and other income credited under the
Policy will not be taxable unless certain withdrawals are made (or are deemed to
be made) from the Policy prior to the Insured's death, as discussed below. This
tax treatment will only apply, however, if (1) the investments of the Variable
Account are "adequately diversified" in accordance with Treasury
44
<PAGE>
Department regulations, and (2) Protective Life, rather than the Owner, is
considered the owner of the assets of the Variable Account for federal income
tax purposes.
DIVERSIFICATION REQUIREMENTS. The Code and Treasury Department
regulations prescribe the manner in which the investments of a segregated
asset account, such as the Variable Account, are to be "adequately
diversified". If the Variable Account fails to comply with these
diversification standards, the Policy will not be treated as a life
insurance contract for federal income tax purposes and the Owner would
generally be taxable currently on the income on the contract (as defined in
the tax law). Protective Life expects that the Variable Account, through the
Funds, will comply with the diversification requirements prescribed by the
Code and Treasury Department regulations.
OWNERSHIP TREATMENT. In certain circumstances, variable life insurance
contract owners may be considered the owners, for federal income tax
purposes, of the assets of a segregated asset account, such as the Variable
Account, used to support their contracts. In those circumstances, income and
gains from the segregated asset account would be includible in the contract
owners' gross income. The Internal Revenue Service (the "IRS") has stated in
published rulings that a variable contract owner will be considered the
owner of the assets of a segregated asset account if the owner possesses
incidents of ownership in those assets, such as the ability to exercise
investment control over the assets. In addition, the Treasury Department
announced, in connection with the issuance of regulations concerning
investment diversification, that those regulations "do not provide guidance
concerning the circumstances in which investor control of the investments of
a segregated asset account may cause the investor, rather than the insurance
company, to be treated as the owner of the assets in the account". This
announcement also stated that guidance would be issued by way of regulations
or rulings on the "extent to which policyholders may direct their
investments to particular sub-accounts [of a segregated asset account]
without being treated as owners of the underlying assets". As of the date of
this prospectus, no such guidance has been issued.
The ownership rights under the Policy are similar to, but different in
certain respects from, those described by the IRS in rulings in which it was
determined that contract owners were not owners of the assets of a
segregated asset account. For example, the Owner of this Policy has the
choice of more investment options to which to allocate Premium Payments and
Variable Account Values, and may be able to transfer among investment
options more frequently, than in such rulings. These differences could
result in the Policy Owner being treated as the owner of a portion of the
assets of the Variable Account and thus subject to current taxation on the
income and gains from those assets. In addition, Protective Life does not
know what standards will be set forth in the regulations or rulings which
the Treasury Department has stated it expects to issue. Protective Life
therefore reserves the right to modify the Policy as necessary to attempt to
prevent Owners from being considered the owners of the assets of the
Variable Account. However, there is no assurance that such efforts would be
successful.
The remainder of this discussion assumes that the Policy will be treated as
a life insurance contract for federal tax purposes.
TAX TREATMENT OF LIFE INSURANCE DEATH BENEFIT PROCEEDS. In general, the
amount of the Death Benefit Proceeds payable from a Policy by reason of the
death of the Insured is excludable from gross income under Section 101 of the
Code. Certain transfers of the Policy for valuable consideration, however, may
result in a portion of the Death Benefit Proceeds being taxable.
If the Death Benefit Proceeds are not received in a lump sum and are,
instead, applied under either Settlement Options 1, 2, or 4, generally payments
will be prorated between amounts attributable to the Death Benefit which will be
excludable from the beneficiary's income and amounts attributable to interest
(accruing after the Insured's death) which will be includible in the
beneficiary's income. If the Death Benefit Proceeds are applied under Option 3
(Interest Income), the interest payments will be includible in the beneficiary's
income.
TAX DEFERRAL DURING ACCUMULATION PERIOD. Under existing provisions of the
Code, except as described below, any increase in an Owner's Policy Value is
generally not taxable to the Owner unless amounts are
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<PAGE>
received (or are deemed to be received) from the Policy prior to the Insured's
death. If there is a surrender of the Policy, an amount equal to the excess of
the Cash Value over the "investment in the contract" will be includible in the
Owner's income. The "investment in the contract" generally is the aggregate
premiums paid less the aggregate amount received under the Policy previously to
the extent such amounts received were excludable from gross income. Whether
withdrawals (or other amounts deemed to be distributed) from the Policy
constitute income to the Owner depends, in part, upon whether the Policy is
considered a "modified endowment contract" ("MEC") for federal income tax
purposes.
POLICIES NOT OWNED BY INDIVIDUALS. In the case of Policies issued to a
nonnatural taxpayer such as a corporation, or held for the benefit of such an
entity, a portion of the taxpayer's otherwise deductible interest expenses may
not be deductible as a result of ownership of a Policy even if no loans are
taken under the Policy. An exception to the latter rule is provided for certain
life insurance contracts which cover the life of only one individual who is a
20-percent owner, or an officer, director, or employee, of a trade or business.
An additional exception is provided for a Policy owned by an entity engaged in a
trade or business which covers the joint lives of a 20% owner of the entity and
the owner's spouse at the time first covered by the Policy. Entities that are
considering purchasing the Policy, or entities that will be beneficiaries under
a Policy, should consult a tax advisor.
POLICIES WHICH ARE NOT MECS
TAX TREATMENT OF WITHDRAWALS GENERALLY. If the Policy is not a MEC
(described below), the amount of any withdrawal from the Policy generally will
be treated first as non-taxable recovery of premium and then as income from the
Policy. Thus, a withdrawal from a Policy that is not a MEC generally will not be
includible in income except to the extent it exceeds the investment in the
contract immediately before the withdrawal.
CERTAIN DISTRIBUTIONS REQUIRED BY THE TAX LAW IN THE FIRST 15 POLICY
YEARS. As indicated above, Section 7702 places limitations on the amount of
premiums that may be paid and the Policy Values that can accumulate relative to
the Death Benefit. Where cash distributions are required under Section 7702 in
connection with a reduction in benefits during the first 15 years after the
Policy is issued (or if withdrawals are made in anticipation of a reduction in
benefits, within the meaning of the tax law, during this period), some or all of
such amounts may be includible in income notwithstanding the general
rule described in the preceding paragraph. A reduction in benefits may result
upon a decrease in the Face Amount, a change from one Death Benefit Option to
the other, if withdrawals are made, and in certain other instances.
TAX TREATMENT OF LOANS. If a Policy is not classified as a MEC, a loan
received under the Policy generally will be treated as indebtedness of the
Owner. As a result, no part of any loan under a Policy will constitute income to
the Owner so long as the Policy remains in force. If a Policy lapses when a loan
is outstanding, the amount of the loan outstanding will be treated as the
proceeds of a surrender for purposes of determining whether any amounts are
includable in the Owner's income.
Generally, interest paid on any loans under this Policy will not be tax
deductible. The non-deductibility of interest includes interest paid or accrued
on indebtedness with respect to one or more life insurance policies owned by a
taxpayer covering any individual who is or has been an officer or employee of,
or financially interested in, any trade or business carried on by the taxpayer.
A limited exception to this rule exists for certain interest paid in connection
with certain "key person" insurance. In the case of interest paid in connection
with a loan with respect to a Policy covering the life of any key person,
interest is deductible only to the extent that the aggregate amount of loans
under one or more life insurance policies does not exceed $50,000. Further, even
as to such loans up to $50,000, interest would not be deductible if the Policy
were deemed for federal tax purposes to be a single premium life insurance
policy or, in certain circumstances, if the loans were treated as "systematic
borrowing" within the meaning of the tax law. A "key person" is an individual
who is either an officer or a twenty percent owner of the taxpayer. The maximum
number of individuals who can be treated as key persons may not exceed the
greater of (1) 5 individuals or (2) the lesser of 5 percent of the total number
of officers and employees of the taxpayer or
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20 individuals. Owners should consult a tax advisor regarding the deductibility
of interest incurred in connection with this Policy.
POLICIES WHICH ARE MECS
CHARACTERIZATION OF A POLICY AS A MEC. In general, a Policy will be
considered a MEC for federal income tax purposes if (1) the Policy is received
in exchange for a life insurance contract that was a MEC, or (2) the Policy is
entered into after June 21, 1988 and premiums are paid into the Policy more
rapidly than the rate defined by a "7-Pay Test". This test generally provides
that a Policy will fail this test (and thus be considered a MEC) if the
accumulated amount paid under the Policy at any time during the 1st 7 Policy
Years exceeds the cumulative sum of the net level premiums which would have been
paid to that time if the Policy provided for paid-up future benefits after the
payment of 7 level annual premiums. A material change of the Policy (as defined
in the tax law) will generally result in a re-application of the 7-Pay Test. Due
to the coverage of Joint Insureds under the Policy, there is some uncertainty
about how to apply the 7-Pay Test to the Policy. There are also special
considerations regarding the application of the 7-Pay Test to the Policy. For
example, a reduction in the Death Benefit at any time, such as may occur upon a
partial surrender, may cause a Policy to be a MEC, resulting in the tax
treatment described below applying.
Protective Life will monitor the Policies and will attempt to notify Owners
on a timely basis if a Policy is in jeopardy of becoming a MEC. The Policy Owner
may then request that Protective Life take whatever steps are available to avoid
treating the Policy as a MEC, if that is desired.
TAX TREATMENT OF WITHDRAWALS, LOANS, ASSIGNMENTS AND PLEDGES UNDER MECS. If
the Policy is a MEC, withdrawals from the Policy will be treated first as
withdrawals of income and then as a recovery of premiums paid. Thus, withdrawals
will be includible in income to the extent the Policy Value exceeds the
investment in the contract. The amount of any Policy Debt will be treated as a
withdrawal for tax purposes. In addition, the discussion of interest on loans
and of lapses while loans are outstanding under the caption "Policies Which Are
Not MECs" also applies to Policies which are MECs.
If the Owner assigns or pledges any portion of the Policy Value (or agrees
to assign or pledge any portion), such portion will be treated as a withdrawal
for tax purposes. The Owner's investment in the contract is increased by the
amount includible in income with respect to any assignment, pledge, or loan,
though it is not affected by any other aspect of the assignment, pledge, or loan
(including its release or repayment). Before assigning, pledging, or requesting
a loan under a Policy treated as a MEC, an Owner should consult a qualified tax
advisor.
PENALTY TAX. Generally, proceeds of a surrender or a withdrawal (or the
amount of any deemed withdrawal) from a MEC are subject to a penalty tax equal
to 10% of the portion of the proceeds that is includible in income, unless the
surrender or withdrawal is made (1) after the Owner attains age 59 1/2,
(2) because the Owner has become disabled (as defined in the tax law), or
(3) as substantially equal periodic payments over the life or life expectancy of
the Owner (or the joint lives or life expectancies of the Owner and his or her
beneficiary, as defined in the tax law).
AGGREGATION OF POLICIES. All life insurance contracts which are treated as
MECs and which are purchased by the same person from Protective Life or any of
its affiliates within the same calendar year will be aggregated and treated as
one contract for purposes of determining the tax on withdrawals (including
deemed withdrawals). The effects of such aggregation are not clear; however, it
could affect the amount of a withdrawal (or a deemed withdrawal) that is taxable
and the amount which might be subject to the 10% penalty tax described above.
ACTIONS TO ENSURE COMPLIANCE WITH THE TAX LAW. -- Protective Life believes that
the maximum amount of premiums it has determined for the Policies will comply
with the federal tax definition of life insurance. However, there is some
uncertainty with respect to this definition, and in particular regarding how it
applies to a life insurance contract that covers more than one insured.
Protective Life will monitor the amount of premiums paid, and, if the premiums
paid exceed those permitted by the tax definition of life
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<PAGE>
insurance, Protective Life will immediately refund the excess premiums.
Protective Life also reserves the right to increase the Death Benefit (which may
result in larger charges under a Policy) or to take any other action deemed
necessary to ensure the compliance of the Policy with the federal tax definition
of life insurance.
OTHER CONSIDERATIONS. -- Changing the Owner, exchanging the Policy, changing
from one Death Benefit Option to another, and other changes under the Policy may
have tax consequences (other than those discussed herein) depending on the
circumstances of such change or withdrawal. Federal estate and state and local
estate, inheritance and other tax consequences of ownership or receipt of Policy
proceeds depend on the circumstances of each Policy Owner or beneficiary.
The exchange of one life insurance contract for another life insurance
contract generally is not taxed if the insured lives are the same under both
contracts (unless cash is distributed or a loan is reduced or forgiven). Thus,
in the case of an exchange involving the Policy, the other life insurance
contract involved in the exchange must also cover the same Joint Insureds. In
addition, the exercise of the Policy Split Option Endorsement may result in the
taxation of the Policy as if there were a full surrender.
FEDERAL INCOME TAX WITHHOLDING
Protective Life will withhold and remit to the federal government a part of
the taxable portion of a surrender and withdrawal made under a Policy unless the
Owner notifies Protective Life in writing at the Home Office and such notice is
received at or before the time of the surrender or withdrawal that he or she
elects not to have any amounts withheld. Regardless of whether the Owner
requests that no taxes be withheld or whether Protective Life withholds a
sufficient amount of taxes, the Owner will be responsible for the payment of any
taxes including any penalty tax that may be due on the amounts received. The
Owner may also be required to pay penalties under the estimated tax rules, if
the Owner's withholding and estimated tax payments are insufficient to satisfy
the Owner's total tax liability.
OTHER INFORMATION ABOUT THE POLICIES AND PROTECTIVE LIFE
SALE OF THE POLICIES
Investment Distributors, Inc. ("IDI"), a wholly-owned subsidiary of
Protective Life Corporation, acts as a principal underwriter of the Policies.
IDI also acts as principal underwriter of variable annuity contracts issued
through Protective Variable Annuity Separate Account and separate accounts of
certain affiliates of Protective Life. IDI is a registered broker-dealer under
the Securities Exchange Act of 1934 and a member of the National Association of
Securities Dealers, Inc. The Policies are sold by certain registered
representatives of broker-dealers (including ProEquities, Inc., an affiliate of
Protective Life and IDI) that have entered into selling agreements with IDI, who
are also appointed and licensed as insurance agents of Protective Life.
Registered representatives may be paid commissions on Policies they sell based
on premiums paid in amounts up to 115% of a targeted first year premium payment.
A targeted first year premium payment is approximately equal to your minimum
initial premium on an annual basis. For premiums paid in the first Policy Year
which exceed this targeted amount, registered representatives may receive up to
4.5% on premiums in excess of target. For premiums received during Policy Years
two through ten, the registered representatives may be paid up to 5.0% on
premiums. After the first ten Policy Years registered representatives may be
paid up to 1.00% on premiums received and .25% on unloaned Policy Value. Other
allowances and overrides, and non-cash compensation, also may be paid.
Registered representatives who meet certain productivity and profitability
standards may be eligible for additional compensation.
Protective Life may reduce or waive the sales charge, administrative fees
and/or any other charges on any Policy sold to (i) directors, officers or
employees of Protective Life or any of its affiliates, (ii) employees and
registered representatives of any broker-dealer that has entered into a selling
agreement with Protective Life or IDI, as well as employees of such registered
representatives and (iii) the immediate family of the above persons, due to the
generally lower sales and administrative expenses
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attributable to such individuals. No such reduction or waiver will be permitted
where it would be unfairly discriminatory against any person.
CORPORATE PURCHASERS
The Policy may be available for individuals and for corporations and other
institutions. For corporate or other group or sponsored arrangements, fee-only
arrangements or clients of registered investment advisors purchasing one or more
Policies, Protective Life may reduce the amount of the premium expense charge,
monthly administration fee, or other charges where the expenses associated with
the sale of the Policy or Policies or the underwriting or other administrative
costs associated with the Policy or Policies are reduced. Sales, underwriting or
other administrative expenses may be reduced for reasons such as expected
economies resulting from a corporate purchase, a group or sponsored arrangement
or arrangements, fee-only arrangements or clients of registered investment
advisors.
PROTECTIVE LIFE DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the name, age, address and principal
occupations during the past five years of each of Protective Life's directors
and executive officers. The address for each of these individuals is c/o
Protective Life Insurance Company 2801 Highway 280 South, Birmingham, Alabama
35223.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH PROTECTIVE LIFE
- -------------------- --- -------------------------------------------------------------------
<S> <C> <C>
Drayton Nabers, Jr. 59 Chairman of the Board and Director
John D. Johns 48 President and Director
R. Stephen Briggs 50 Executive Vice President and Director
Jim E. Massengale 58 Executive Vice President, Acquisitions and Director
A.S. Williams III 63 Executive Vice President, Investments, Treasurer and Director
Richard J. Bielen 39 Senior Vice President, Investments and Director
T. Davis Keyes 47 Senior Vice President, Information Services, and Director
Carolyn King 49 Senior Vice President, Investment Products and Director
Deborah J. Long 46 Senior Vice President, General Counsel, Secretary and Director
Steven A. Schultz 46 Senior Vice President, Financial Institutions and Director
Wayne E. Stuenkel 46 Senior Vice President and Chief Actuary and Director
Judy Wilson 42 Senior Vice President, Guaranteed Investment Contracts
Jerry W. DeFoor 47 Vice President and Controller, and Chief Accounting Officer
</TABLE>
Mr. Nabers has been Chairman of the Board and a Director of Protective Life
since August 1996. Mr. Nabers has been Chairman of the Board and Chief Executive
Officer of PLC and a Director since August 1996. From May 1994 to August 1996,
Mr. Nabers was Chairman of the Board, President and Chief Executive Officer and
a Director of PLC. Mr. Nabers has served in various capacities with PLC and its
subsidiaries since 1979. He is also a director of Energen Corporation, National
Bank of Commerce of Birmingham, and Alabama National Bancorporation.
Mr. Johns has been President of Protective Life and President and Chief
Operating Officer of PLC since August 1996. He was Executive Vice President and
Chief Financial Officer of Protective Life and PLC from October 1993 to August
1996. He is a director of National Bank of Commerce of Birmingham and Alabama
National Bancorporation and John H. Harland Company.
Mr. Briggs has been Executive Vice President of Protective Life and PLC
since October 1993 and has responsibility for the Individual Life Division. Mr.
Briggs has been associated with PLC and its subsidiaries since 1977.
Mr. Massengale has been Executive Vice President, Acquisitions of Protective
Life and PLC since August 1996. From May 1992 to August 1996 he served as Senior
Vice President of Protective Life and PLC. Mr. Massengale has been employed by
PLC and its subsidaries since 1983.
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<PAGE>
Mr. Williams has been Executive Vice President, Investments and Treasurer of
Protective Life and PLC since August 1996. From July 1981 to August 1996 he was
Senior Vice President, Investments and Treasurer of Protective Life and PLC. Mr.
Williams has been employed by the PLC and its subsidiaries since 1964.
Mr. Bielen has been Senior Vice President, Investments of Protective Life
and PLC since August 1996. From August 1991 to August 1996, he was Vice
President, Investments of Protective Life.
Mr. Keyes has been Senior Vice President, Information Services of PLC since
April, 1999. He was Vice President, Information Services of PLC from May 1993 to
April 1999. He has been employed by Protective Life and PLC in various
capacities since 1982.
Ms. King has been Senior Vice President, Investment Products Division of
Protective Life and PLC since April 1995.
Ms. Long has been Senior Vice President, Secretary and General Counsel of
Protective Life since September 1996 and of PLC since November 1996. Ms. Long
was Senior Vice President and General Counsel of Protective Life from February
1994 to September 1996 and of PLC from February 1994 to November 1996.
Mr. Schultz has been Senior Vice President, Financial Institutions of
Protective Life and PLC since March 1993. Mr. Schultz has been employed by PLC
and its subsidiaries since 1989.
Mr. Stuenkel has been Senior Vice President and Chief Actuary of Protective
Life and PLC since March 1987. Mr. Stuenkel is a Fellow in the Society of
Actuaries and has been employed by PLC and its subsidiaries since 1978.
Ms. Wilson has been Senior Vice President, Stable Value Products of
Protective Life and PLC since January 1995. Ms. Wilson has been employed by PLC
and its subsidiaries since 1991.
Mr. DeFoor has been Vice President and Controller, and Chief Accounting
Officer of Protective Life and PLC since April 1989, Mr. DeFoor is a certified
public accountant and has been employed by PLC and its subsidiaries since 1982.
STATE REGULATION
Protective Life is subject to regulation by the Department of Insurance of
the State of Tennessee, which periodically examines the financial condition and
operations of Protective Life. Protective Life 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.
Protective Life 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.
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.
YEAR 2000 COMPUTER COMPLIANCE ISSUES
As of February 29, 2000, Protective Life has had no Year 2000 issues which
have impaired its operations. Although Protective believes it has made all of
the modifications necessary for its systems to process transactions dated beyond
1999, it is possible that Year 2000 issues involving Protective Life or its
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service providers may emerge during 2000. Therefore, there can be no assurances
that the Year 2000 issue will not otherwise adversely affect Protective.
Should some of Protective Life's systems become unavailable due to Year 2000
problems, in a reasonably likely worst case scenario, Protective could
experience delays in its ability to perform certain functions, but we do not
expect an inability to perform critical functions or to otherwise conduct
business. However, other worst case scenarios could have an adverse effect on
Protective and its operations.
INDEPENDENT ACCOUNTANTS
The audited statement of assets and liabilites of the Protective Variable
Life Separate Account as of December 31, 1999 and December 31, 1998 and the
related statements of operations and changes in net assets for each of the three
years in the period ended December 31, 1999 and included in this prospectus,
have been included herein in reliance on the report of PricewaterhouseCoopers
LLP, independent accountants, given on the authority of that firm as experts in
accounting and auditing.
The consolidated balance sheets of Protective Life as of December 31, 1999,
and 1998 and the consolidated statements of income, stockholder's equity and
cash flows for each of the three years in the period ended December 31, 1999 and
the related financial statement schedules included in this prospectus, have been
included herein in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of that firm as experts in
accounting and auditing. With respect to the unaudited interim financial
information for the periods ended March 31, 2000 and 1999, the independent
accountants have reported that they have applied limited procedures in
accordance with professional standards for a review of such information.
However, their separate report included in the Company's quarterly report on
Form 10-Q for the quarter ended March 31, 2000, and included herein, states that
they did not audit and they do not express an opinion on that interim financial
information. Accordingly, the degree of reliance on their report on such
information should be restricted in light of the limited nature of the review
procedures applied. The accountants are not subject to the liability provisions
of Section 11 of the Securities Act of 1933 for their report on the unaudited
interim financial information because that report is not a "report" or a "part"
of the registration statement prepared or certified by the accountants within
the meaning of Sections 7 and 11 of the Act.
EXPERTS
Actuarial matters included in this prospectus have been examined by Stephen
Peeples, F.S.A, M.A.A.A., whose opinion is filed as an exhibit to the
registration statement.
IMSA
Protective Life is a member of the Insurance Marketplace Standards
Association ("IMSA"), and as such may include the IMSA logo and information
about IMSA membership in Protective advertisements. Companies that belong to
IMSA subscribe to a set of ethical standards covering the various aspects of
sales and service for individually sold life insurance and annuities.
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 audited statement of assets and liabilities of the Protective Variable
Life Separate Account as of December 31, 1999 and December 31, 1998 and the
related statements of operations and changes in net assets for each of the three
years in the period ended December 31, 1999 as well as the Report of Independent
Accountants are contained herein. The unaudited statement of assets and
liabilities of the Protective Variable Life Separate Account as of March 31,
2000 and 1999 (unaudited) and the related
51
<PAGE>
statements of operations and changes in net assets for the three months ended
March 31, 2000 and 1999 (unaudited) are contained herein.
The audited consolidated balance sheets for Protective Life as of December
31, 1999, and 1998 and the related consolidated statements of income,
stockholder's equity, and cash flows for the years ended December 31, 1999, 1998
and 1997 as well as the Report of Independent Accountants are contained herein.
The consolidated condensed balance sheets of Protective Life as of March 31,
2000 (unaudited) and December 31, 1999 and the related consolidated condensed
statements of income and cash flows for the three months ended March 31, 2000
and 1999 (unaudited) as well as the Report of Independent Accountants are
contained herein.
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<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT
Statement of Assets and Liabilities as of March 31, 2000.... F-2
Statement of Operations for the three months ended March 31,
2000....................................................... F-5
Statement of Changes in Net Assets for the three months
ended March 31, 2000....................................... F-8
Statement of Assets and Liabilities as of March 31, 1999.... F-11
Statement of Operations for the three months ended March 31,
1999....................................................... F-14
Statement of Changes in Net Assets for the three months
ended March 31, 1999....................................... F-17
Notes to Financial Statements............................... F-20
Report of Independent Accountants........................... F-27
Statement of Assets and Liabilities as of December 31,
1999....................................................... F-28
Statement of Assets and Liabilities as of December 31,
1998....................................................... F-32
Statement of Operations for the year ended December 31,
1999....................................................... F-34
Statement of Operations for the year ended December 31,
1998....................................................... F-38
Statement of Operations for the year ended December 31,
1997....................................................... F-40
Statement of Changes in Net Assets for the year ended
December 31, 1999.......................................... F-42
Statement of Changes in Net Assets for the year ended
December 31, 1998.......................................... F-46
Statement of Changes in Net Assets for the year ended
December 31, 1997.......................................... F-48
Notes to Financial Statements............................... F-50
PROTECTIVE LIFE INSURANCE COMPANY
Report of Independent Accountants........................... F-57
Consolidated Condensed Statements of Income for the three
months ended
March 31, 2000 and 1999.................................... F-58
Consolidated Condensed Balance Sheets as of March 31, 2000
and 1999................................................... F-59
Consolidated Condensed Statements of Cash Flows for the
three months ended
March 31, 2000 and 1999.................................... F-60
Notes to Consolidated Condensed Financial Statements........ F-61
Report of Independent Accountants........................... F-68
Consolidated Statements of Income for the years ended
December 31, 1999, 1998 and 1997........................... F-69
Consolidated Balance Sheets as of December 31, 1999 and
1998....................................................... F-70
Consolidated Statements of Share-Owner's Equity for the
years ended
December 31, 1999, 1998 and 1997........................... F-71
Consolidated Statements of Cash Flows for the years ended
December 31, 1999, 1998 and 1997........................... F-72
Notes to Consolidated Financial Statements.................. F-73
Financial Statement Schedules:
Schedule III -- Supplementary Insurance Information......... S-1
Schedule IV -- Reinsurance.................................. S-2
</TABLE>
All other schedules to the consolidated financial statements required by
Article 7 of Regulation S-X are not required under the related instructions or
are inapplicable and therefore have been omitted.
F-1
<PAGE>
THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 2000
UNAUDITED
<TABLE>
<CAPTION>
PIC PIC PIC PIC PIC OPPENHEIMER
GROWTH & INTERNAT'L GLOBAL CORE SMALL MONEY
INCOME EQUITY INCOME US EQUITY CAP VALUE FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investment in Sub-accounts at market
value................................... $3,063,270 $4,238,975 $868,823 $5,324,179 $1,359,239 $1,223,959
Receivable from Protective Life
Insurance Company....................... 0 3,606 0 0 7,557 0
---------- ---------- -------- ---------- ---------- ----------
TOTAL ASSETS.............................. $3,063,270 $4,242,581 $868,823 $5,324,179 $1,366,796 $1,223,959
========== ========== ======== ========== ========== ==========
LIABILITIES
Payable to Protective Life Insurance
Company................................. 2,990 0 2,313 5,431 0 12,267
---------- ---------- -------- ---------- ---------- ----------
NET ASSETS................................ $3,060,280 $4,242,581 $866,510 $5,318,748 $1,366,796 $1,211,692
========== ========== ======== ========== ========== ==========
<CAPTION>
CALVERT
SOCIAL
PIC SMALL
CAPITAL CAP
GROWTH GROWTH
SUB-ACCOUNT SUB-ACCOUNT
----------- -----------
<S> <C> <C>
ASSETS
Investment in Sub-accounts at market
value................................... $8,063,995 $105,118
Receivable from Protective Life
Insurance Company....................... 15,696 0
---------- --------
TOTAL ASSETS.............................. $8,079,691 $105,118
========== ========
LIABILITIES
Payable to Protective Life Insurance
Company................................. 0 0
---------- --------
NET ASSETS................................ $8,079,691 $105,118
========== ========
</TABLE>
See accompanying notes to financial statements.
F-2
<PAGE>
THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED
MARCH 31, 2000
UNAUDITED
<TABLE>
<CAPTION>
CALVERT MFS MFS MFS OPPENHEIMER
SOCIAL EMERGING MFS GROWTH TOTAL AGGRESSIVE
BALANCED GROWTH RESEARCH W/ INCOME RETURN GRTH
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investment in Sub-accounts at market
value................................. $373,917 $5,080,197 $4,777,749 $2,362,253 $836,571 $3,770,041
Receivable from Protective Life
Insurance Company..................... 1 4,151 11,875 0 0 6,093
-------- ---------- ---------- ---------- -------- ----------
TOTAL ASSETS............................ $373,918 $5,084,348 $4,789,624 $2,362,253 $836,571 $3,776,134
======== ========== ========== ========== ======== ==========
LIABILITIES
Payable to Protective Life Insurance
Company............................... 0 0 0 6,434 6,176 0
-------- ---------- ---------- ---------- -------- ----------
NET ASSETS.............................. $373,918 $5,084,348 $4,789,624 $2,355,819 $830,395 $3,776,134
======== ========== ========== ========== ======== ==========
<CAPTION>
OPPENHEIMER OPPENHEIMER
CAPITAL MAIN ST
APPR GRTH & INC
SUB-ACCOUNT SUB-ACCOUNT
------------ ------------
<S> <C> <C>
ASSETS
Investment in Sub-accounts at market
value................................. $4,456,590 $2,839,082
Receivable from Protective Life
Insurance Company..................... 10,479 976
---------- ----------
TOTAL ASSETS............................ $4,467,069 $2,840,058
========== ==========
LIABILITIES
Payable to Protective Life Insurance
Company............................... 0 0
---------- ----------
NET ASSETS.............................. $4,467,069 $2,840,058
========== ==========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED
MARCH 31, 2000
UNAUDITED
<TABLE>
<CAPTION>
OPPENHEIMER OPPENHEIMER VAN ECK
STRATEGIC MFS NEW MFS GLOBAL OPPENHEIMER WW HARD
BOND DISCOVERY UTILITIES SECURITIES HIGH INCOME ASSET
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ----------- ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investment in Sub-accounts at market
value................................. $662,142 $425,693 $329,300 $686,927 $58,253 $5,824
Receivable from Protective Life
Insurance Company..................... 1,298 2,755 0 4,891 1 1
-------- -------- -------- -------- ------- ------
TOTAL ASSETS............................ $663,440 $428,448 $329,300 $691,818 $58,254 $5,825
======== ======== ======== ======== ======= ======
LIABILITIES
Payable to Protective Life Insurance
Company............................... 0 0 3,540 0 0 0
-------- -------- -------- -------- ------- ------
NET ASSETS.............................. $663,440 $428,448 $325,760 $691,818 $58,254 $5,825
======== ======== ======== ======== ======= ======
<CAPTION>
VAN ECK
WW REAL
ESTATE
SUB-ACCOUNT TOTAL
----------- -----------
<S> <C> <C>
ASSETS
Investment in Sub-accounts at market
value................................. $875 $50,912,972
Receivable from Protective Life
Insurance Company..................... 0 69,380
---- -----------
TOTAL ASSETS............................ $875 $50,982,352
==== ===========
LIABILITIES
Payable to Protective Life Insurance
Company............................... 1 39,152
---- -----------
NET ASSETS.............................. $874 $50,943,200
==== ===========
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2000
UNAUDITED
<TABLE>
<CAPTION>
PIC PIC PIC PIC PIC
GROWTH & INTERNAT'L GLOBAL CORE US SMALL CAP
INCOME EQUITY INCOME EQUITY VALUE
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends............................... $ 0 $ 0 $ 0 $ 0 $ 0
---------- ---------- ---------- ---------- ----------
NET REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Net realized gain from redemption of
investment shares..................... 112 400 15 (2,543) 0
Capital gain distribution............... 0 0 0 0 0
---------- ---------- ---------- ---------- ----------
Net realized gain on investments........ 112 400 15 (2,543) 0
Net unrealized appreciation
(depreciation) on investments during
the period............................ 45,203 106,630 16,244 156,567 110,389
---------- ---------- ---------- ---------- ----------
Net realized and unrealized gain (loss)
on investments........................ 45,315 107,030 16,259 154,024 110,389
---------- ---------- ---------- ---------- ----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS............. $ 45,315 $ 107,030 $ 16,259 $ 154,024 $ 110,389
========== ========== ========== ========== ==========
<CAPTION>
CALVERT
PIC SOCIAL
OPPENHEIMER CAPITAL SMALL CAP
MONEY FUND GROWTH GROWTH
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- -----------
<S> <C> <C> <C>
INVESTMENT INCOME
Dividends............................... $ 24,003 $ 0 $ 0
---------- ---------- ------
NET REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Net realized gain from redemption of
investment shares..................... 0 (2,409) 266
Capital gain distribution............... 0 0 0
---------- ---------- ------
Net realized gain on investments........ 0 (2,409) 266
Net unrealized appreciation
(depreciation) on investments during
the period............................ 0 230,420 8,878
---------- ---------- ------
Net realized and unrealized gain (loss)
on investments........................ 0 228,011 9,144
---------- ---------- ------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS............. $ 24,003 $ 228,011 $9,144
========== ========== ======
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT
STATEMENT OF OPERATIONS, CONTINUED
FOR THE THREE MONTHS ENDED MARCH 31, 2000
UNAUDITED
<TABLE>
<CAPTION>
CALVERT MFS MFS MFS
SOCIAL EMERGING MFS GROWTH W/ TOTAL
BALANCED GROWTH RESEARCH INCOME RETURN
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends............................... $ 0 $ 0 $ 0 $ 0 $ 0
---------- ---------- ---------- ---------- ----------
NET REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Net realized gain from redemption of
investment shares..................... 124 505 (406) 751 (590)
Capital gain distribution............... 0 0 0 0 0
---------- ---------- ---------- ---------- ----------
Net realized gain on investments........ 124 505 (406) 751 (590)
Net unrealized appreciation
(depreciation) on investments during
the period............................ 17,142 375,191 412,045 59,699 22,060
---------- ---------- ---------- ---------- ----------
Net realized and unrealized gain (loss)
on investments........................ 17,266 375,696 411,639 60,450 21,470
---------- ---------- ---------- ---------- ----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS............. $ 17,266 $ 375,696 $ 411,639 $ 60,450 $ 21,470
========== ========== ========== ========== ==========
<CAPTION>
OPPENHEIMER OPPENHEIMER
AGGRESSIVE OPPENHEIMER MAIN SI
GRTH CAPITAL APPR GRTH & INC
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ------------ -----------
<S> <C> <C> <C>
INVESTMENT INCOME
Dividends............................... $ 0 $ 4,864 $ 10,033
---------- ---------- --------
NET REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Net realized gain from redemption of
investment shares..................... 1,662 180 (462)
Capital gain distribution............... 124,225 259,544 132,465
---------- ---------- --------
Net realized gain on investments........ 125,887 259,724 132,003
Net unrealized appreciation
(depreciation) on investments during
the period............................ 472,693 269,332 (31,736)
---------- ---------- --------
Net realized and unrealized gain (loss)
on investments........................ 598,580 529,056 100,267
---------- ---------- --------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS............. $ 598,580 $ 533,920 $110,300
========== ========== ========
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE>
THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT
STATEMENT OF OPERATIONS, CONTINUED
FOR THE THREE MONTHS ENDED MARCH 31, 2000
UNAUDITED
<TABLE>
<CAPTION>
OPPENHEIMER MFS OPPENHEIMER
STRATEGIC NEW MFS GLOBAL OPPENHEIMER
BOND DISCOVERY UTILITIES SECURITIES HIGH INCOME
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends............................... $ 52,494 $ 0 $ 0 $ 1,577 $ 5,911
---------- ---------- ---------- ---------- ----------
NET REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Net realized gain from redemption of
investment shares..................... 24 196 992 182 (111)
Capital gain distribution............... 0 0 0 88,156 0
---------- ---------- ---------- ---------- ----------
Net realized gain on investments........ 24 196 992 88,338 (111)
Net unrealized appreciation
(depreciation) on investments during
the period............................ (45,375) 22,856 27,601 (26,670) (6,693)
---------- ---------- ---------- ---------- ----------
Net realized and unrealized gain (loss)
on investments........................ (45,351) 23,052 28,593 61,668 (6,804)
---------- ---------- ---------- ---------- ----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS............. $ 7,143 $ 23,052 $ 28,593 $ 63,245 $ (893)
========== ========== ========== ========== ==========
<CAPTION>
VAN ECK VAN ECK
WW HARD WW REAL
ASSET ESTATE
SUB-ACCOUNT SUB-ACCOUNT TOTAL
----------- ----------- -----------
<S> <C> <C> <C>
INVESTMENT INCOME
Dividends............................... $ 137 $ 19 $ 99,038
---------- ---------- ----------
NET REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Net realized gain from redemption of
investment shares..................... (172) 11 (1,273)
Capital gain distribution............... 0 0 604,390
---------- ---------- ----------
Net realized gain on investments........ (172) 11 603,117
Net unrealized appreciation
(depreciation) on investments during
the period............................ (196) (22) 2,242,258
---------- ---------- ----------
Net realized and unrealized gain (loss)
on investments........................ (368) (11) 2,845,375
---------- ---------- ----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS............. $ (231) $ 8 $2,944,413
========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
F-7
<PAGE>
THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS
FOR THE THREE MONTHS ENDED MARCH 31, 2000
UNAUDITED
<TABLE>
<CAPTION>
PIC PIC PIC PIC PIC
GROWTH & INTERNAT'L GLOBAL CORE SMALL CAP OPPENHEIMER
INCOME EQUITY INCOME US EQUITY VALUE MONEY FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Investment income....................... $ 0 $ 0 $ 0 $ 0 $ 0 $ 24,003
Net realized gain on investments........ 112 400 15 (2,543) 0 0
Net unrealized appreciation
(depreciation) of investments during
the period............................ 45,203 106,630 16,244 156,567 110,389 0
---------- ---------- -------- ---------- ---------- -----------
Net increase (decrease) in net assets
resulting from operations............. 45,315 107,030 16,259 154,024 110,389 24,003
---------- ---------- -------- ---------- ---------- -----------
FROM VARIABLE LIFE POLICY TRANSACTIONS
Contractowners' net payments............ 181,911 242,031 45,114 237,813 128,836 (2,590)
Mortality and expense risk charges...... (6,515) (8,518) (1,850) (10,301) (2,699) (3,166)
Cost of insurance and administrative
charges............................... (58,632) (71,766) (15,149) (81,640) (28,125) (18,726)
Surrenders.............................. (7,060) (10,348) 0 338 (7,046) (19)
Death benefits.......................... 0 0 0 0 0 0
Net policy loan repayments
(withdrawals)......................... (951) (3,224) 2,031 (14,413) (715) (8)
Transfer from other portfolios.......... (9,901) 609,053 50,078 644,236 40,811 (1,183,902)
---------- ---------- -------- ---------- ---------- -----------
Net increase in net assets resulting
from variable life policy
transactions.......................... 98,852 757,228 80,224 776,033 131,062 (1,208,411)
---------- ---------- -------- ---------- ---------- -----------
Total increase in net assets............ 144,167 864,258 96,483 930,057 241,451 (1,184,408)
---------- ---------- -------- ---------- ---------- -----------
NET ASSETS
Beginning of Year....................... 2,916,113 3,378,323 770,027 4,388,691 1,125,345 2,396,100
---------- ---------- -------- ---------- ---------- -----------
End of Year............................. $3,060,280 $4,242,581 $866,510 $5,318,748 $1,366,796 $ 1,211,692
========== ========== ======== ========== ========== ===========
<CAPTION>
PIC CALVERT SOCIAL
CAPITAL SMALL CAP
GROWTH GROWTH
SUB-ACCOUNT SUB-ACCOUNT
----------- --------------
<S> <C> <C>
FROM OPERATIONS
Investment income....................... $ 0 $ 0
Net realized gain on investments........ (2,409) 266
Net unrealized appreciation
(depreciation) of investments during
the period............................ 230,420 8,878
---------- --------
Net increase (decrease) in net assets
resulting from operations............. 228,011 9,144
---------- --------
FROM VARIABLE LIFE POLICY TRANSACTIONS
Contractowners' net payments............ 366,514 17,999
Mortality and expense risk charges...... (16,091) (151)
Cost of insurance and administrative
charges............................... (124,386) (1,577)
Surrenders.............................. (16,932) 0
Death benefits.......................... 0 0
Net policy loan repayments
(withdrawals)......................... (16,364) (19)
Transfer from other portfolios.......... 940,905 40,752
---------- --------
Net increase in net assets resulting
from variable life policy
transactions.......................... 1,133,646 57,004
---------- --------
Total increase in net assets............ 1,361,657 66,148
---------- --------
NET ASSETS
Beginning of Year....................... 6,718,033 38,970
---------- --------
End of Year............................. $8,079,690 $105,118
========== ========
</TABLE>
See accompanying notes to financial statements.
F-8
<PAGE>
THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS, CONTINUED
FOR THE THREE MONTHS ENDED MARCH 31, 2000
UNAUDITED
<TABLE>
<CAPTION>
MFS MFS MFS OPPENHEIMER
CALVERT SOCIAL EMERGING MFS GROWTH W/ TOTAL AGGRESSIVE
BALANCED GROWTH RESEARCH INCOME RETURN GRTH
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
-------------- ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Investment income...................... $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Net realized gain on investments....... 124 505 (406) 751 (590) 125,887
Net unrealized appreciation
(depreciation) of investments during
the period........................... 17,142 375,191 412,045 59,699 22,060 472,693
-------- ---------- ---------- ---------- -------- ----------
Net increase (decrease) in net assets
resulting from operations............ 17,266 375,696 411,639 60,450 21,470 598,580
-------- ---------- ---------- ---------- -------- ----------
FROM VARIABLE LIFE POLICY TRANSACTIONS
Contractowners' net payments........... 73,772 271,951 174,817 120,213 27,865 207,105
Mortality and expense risk charges..... (505) (9,773) (9,564) (4,557) (1,475) (7,476)
Cost of insurance and administrative
charges.............................. (7,192) (84,552) (73,997) (37,444) (13,161) (62,951)
Surrenders............................. (1,938) (19,813) (14,699) (322) (1,823) (15,778)
Death benefits......................... 0 0 0 0 0 0
Net policy loan repayments
(withdrawals)........................ 0 (10,061) (13,071) (16,724) (3,061) 5,783
Transfer from other portfolios......... 171,587 1,060,276 540,755 301,105 194,642 866,596
-------- ---------- ---------- ---------- -------- ----------
Net increase in net assets resulting
from variable life policy
transactions......................... 235,724 1,208,028 604,241 362,271 202,987 993,279
-------- ---------- ---------- ---------- -------- ----------
Total increase in net assets........... 252,990 1,583,724 1,015,880 422,721 224,457 1,591,859
-------- ---------- ---------- ---------- -------- ----------
NET ASSETS
Beginning of Year...................... 120,928 3,500,624 3,773,744 1,933,098 605,938 2,184,275
-------- ---------- ---------- ---------- -------- ----------
End of Year............................ $373,918 $5,084,348 $4,789,624 $2,355,819 $830,395 $3,776,134
======== ========== ========== ========== ======== ==========
<CAPTION>
OPPENHEIMER OPPENHEIMER
CAPITAL MAIN ST
APPR GRTH & INC
SUB-ACCOUNT SUB-ACCOUNT
------------ ------------
<S> <C> <C>
FROM OPERATIONS
Investment income...................... $ 4,864 $ 10,033
Net realized gain on investments....... 259,724 132,003
Net unrealized appreciation
(depreciation) of investments during
the period........................... 269,332 (31,736)
---------- ----------
Net increase (decrease) in net assets
resulting from operations............ 533,920 110,300
---------- ----------
FROM VARIABLE LIFE POLICY TRANSACTIONS
Contractowners' net payments........... 200,406 92,673
Mortality and expense risk charges..... (8,308) (5,271)
Cost of insurance and administrative
charges.............................. (72,733) (33,855)
Surrenders............................. (7,902) (5,809)
Death benefits......................... 0 0
Net policy loan repayments
(withdrawals)........................ 6,112 (3,379)
Transfer from other portfolios......... 539,297 773,153
---------- ----------
Net increase in net assets resulting
from variable life policy
transactions......................... 656,872 817,512
---------- ----------
Total increase in net assets........... 1,190,792 927,812
---------- ----------
NET ASSETS
Beginning of Year...................... 3,276,277 1,912,246
---------- ----------
End of Year............................ $4,467,069 $2,840,058
========== ==========
</TABLE>
See accompanying notes to financial statements.
F-9
<PAGE>
THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS, CONTINUED
FOR THE THREE MONTHS ENDED MARCH 31, 2000
UNAUDITED
<TABLE>
<CAPTION>
OPPENHEIMER MFS OPPENHEIMER OPPENHEIMER VAN ECK
STRATEGIC NEW MFS GLOBAL HIGH WW HARD
BOND DISCOVERY UTILITIES SECURITIES INCOME ASSET
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ----------- ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Investment income........................ $ 52,494 $ 0 $ 0 $ 1,577 $ 5,911 $ 137
Net realized gain on investments......... 24 196 992 88,338 (111) (172)
Net unrealized appreciation
(depreciation) of investments during
the period............................. (45,375) 22,856 27,601 (26,670) (6,693) (196)
-------- -------- -------- -------- ------- -------
Net increase (decrease) in net assets
resulting from operations.............. 7,143 23,052 28,593 63,245 (893) (231)
-------- -------- -------- -------- ------- -------
FROM VARIABLE LIFE POLICY TRANSACTIONS
Contractowners' net payments............. 44,587 30,157 4,779 21,171 50 (40)
Mortality and expense risk charges....... (1,434) (727) (596) (1,164) (119) (24)
Cost of insurance and administrative
charges................................ (13,209) (7,534) (2,504) (11,223) (209) (150)
Surrenders............................... (34) (2,649) 2,100 (2,596) 0 0
Death benefits........................... 0 0 0 0 0 0
Net policy loan repayments
(withdrawals).......................... 0 6,584 (1,050) (1,664) 0 0
Transfer from other portfolios........... 30,703 174,789 117,913 260,152 (4,743) (4,874)
-------- -------- -------- -------- ------- -------
Net increase in net assets resulting from
variable life policy transactions...... 60,613 200,620 120,642 264,676 (5,021) (5,088)
-------- -------- -------- -------- ------- -------
Total increase in net assets............. 67,756 223,672 149,235 327,921 (5,914) (5,319)
-------- -------- -------- -------- ------- -------
NET ASSETS
Beginning of Year........................ 595,684 204,776 176,525 363,897 64,168 11,144
-------- -------- -------- -------- ------- -------
End of Year.............................. $663,440 $428,448 $325,760 $691,818 $58,254 $ 5,825
======== ======== ======== ======== ======= =======
<CAPTION>
VAN ECK
WW REAL
ESTATE
SUB-ACCOUNT TOTAL
----------- -----------
<S> <C> <C>
FROM OPERATIONS
Investment income........................ $ 19 $ 99,038
Net realized gain on investments......... 11 603,117
Net unrealized appreciation
(depreciation) of investments during
the period............................. (22) 2,242,258
------ -----------
Net increase (decrease) in net assets
resulting from operations.............. 8 2,944,413
------ -----------
FROM VARIABLE LIFE POLICY TRANSACTIONS
Contractowners' net payments............. 128 2,487,262
Mortality and expense risk charges....... (2) (100,286)
Cost of insurance and administrative
charges................................ (37) (820,752)
Surrenders............................... 0 (112,330)
Death benefits........................... 0 0
Net policy loan repayments
(withdrawals).......................... 0 (64,194)
Transfer from other portfolios........... (319) 6,153,064
------ -----------
Net increase in net assets resulting from
variable life policy transactions...... (230) 7,542,764
------ -----------
Total increase in net assets............. (222) 10,487,177
------ -----------
NET ASSETS
Beginning of Year........................ 1,096 40,456,022
------ -----------
End of Year.............................. $ 874 $50,943,199
====== ===========
</TABLE>
See accompanying notes to financial statements.
F-10
<PAGE>
THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1999
UNAUDITED
<TABLE>
<CAPTION>
PIC PIC PIC PIC PIC
GROWTH & INTERNAT'L GLOBAL CORE US SMALL CAP
INCOME EQUITY INCOME EQUITY VALUE
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS
Investment in Sub-accounts at market
value................................. $2,185,708 $1,772,816 $ 487,230 $2,067,636 $ 787,913
Receivable from Protective Life
Insurance Company..................... 82,164 32,231 2,561 74,617 39,120
---------- ---------- ---------- ---------- ----------
TOTAL ASSETS............................ $2,267,872 $1,805,047 $ 489,791 $2,142,253 $ 827,033
========== ========== ========== ========== ==========
LIABILITIES
Payable to Protective Life Insurance
Company............................... 0 0 0 0 0
---------- ---------- ---------- ---------- ----------
NET ASSETS.............................. $2,267,872 $1,805,047 $ 489,791 $2,142,253 $ 827,033
========== ========== ========== ========== ==========
<CAPTION>
CALVERT
PIC PIC SOCIAL
MONEY CAPITAL SMALL CAP
MARKET GROWTH GROWTH
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS
Investment in Sub-accounts at market
value................................. $ 369,315 $3,481,543 $11,878
Receivable from Protective Life
Insurance Company..................... 0 105,190 0
---------- ---------- -------
TOTAL ASSETS............................ $ 369,315 $3,586,733 $11,878
========== ========== =======
LIABILITIES
Payable to Protective Life Insurance
Company............................... 1 0 8
---------- ---------- -------
NET ASSETS.............................. $ 369,314 $3,586,733 $11,870
========== ========== =======
</TABLE>
See accompanying notes to financial statements.
F-11
<PAGE>
THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED
MARCH 31, 1999
UNAUDITED
<TABLE>
<CAPTION>
CALVERT MFS MFS MFS
SOCIAL EMERGING MFS GROWTH TOTAL
BALANCED GROWTH RESEARCH W/ INCOME RETURN
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS
Investment in Sub-accounts at market
value................................. $ 30,760 $ 967,609 $1,739,736 $ 874,034 $ 239,477
Receivable from Protective Life
Insurance Company..................... 0 0 0 16,561 3
---------- ---------- ---------- ---------- ----------
TOTAL ASSETS............................ $ 30,760 $ 967,609 $1,739,736 $ 890,595 $ 239,480
========== ========== ========== ========== ==========
LIABILITIES
Payable to Protective Life Insurance
Company............................... 13 1,477 16,856 0 0
---------- ---------- ---------- ---------- ----------
NET ASSETS.............................. $ 30,747 $ 966,132 $1,722,880 $ 890,595 $ 239,480
========== ========== ========== ========== ==========
<CAPTION>
OPPENHEIMER OPPENHEIMER
CAP OPPENHEIMER GROWTH &
APPRECIATION GROWTH INCOME
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ----------- -----------
<S> <C> <C> <C>
ASSETS
Investment in Sub-accounts at market
value................................. $ 782,243 $1,239,588 $595,313
Receivable from Protective Life
Insurance Company..................... 0 0 763
---------- ---------- --------
TOTAL ASSETS............................ $ 782,243 $1,239,588 $596,076
========== ========== ========
LIABILITIES
Payable to Protective Life Insurance
Company............................... 1,539 2,213 0
---------- ---------- --------
NET ASSETS.............................. $ 780,704 $1,237,375 $596,076
========== ========== ========
</TABLE>
See accompanying notes to financial statements.
F-12
<PAGE>
THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED
MARCH 31, 1999
UNAUDITED
<TABLE>
<CAPTION>
OPPENHEIMER MFS OPPENHEIMER
STRATEGIC NEW MFS GLOBAL OPPENHEIMER
BOND DISCOVERY UTILITIES SECURITIES HIGH INCOME
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS
Investment in Sub-accounts at market
value................................. $ 266,860 $ 0 $ 0 $ 0 $ 0
Receivable from Protective Life
Insurance Company..................... 746 0 0 0 0
---------- ---------- ---------- ---------- ----------
TOTAL ASSETS............................ $ 267,606
========== ========== ========== ========== ==========
LIABILITIES
Payable to Protective Life Insurance
Company............................... 0 0 0 0 0
---------- ---------- ---------- ---------- ----------
NET ASSETS.............................. $ 267,606
========== ========== ========== ========== ==========
<CAPTION>
VAN ECK VAN ECK
WW HARD WW REAL
ASSET ESTATE
SUB-ACCOUNT SUB-ACCOUNT TOTAL
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS
Investment in Sub-accounts at market
value................................. $ 0 $ 0 $17,899,659
Receivable from Protective Life
Insurance Company..................... 0 0 353,956
---------- ---------- -----------
TOTAL ASSETS............................ $18,253,615
========== ========== ===========
LIABILITIES
Payable to Protective Life Insurance
Company............................... 0 0 22,107
---------- ---------- -----------
NET ASSETS.............................. $18,231,508
========== ========== ===========
</TABLE>
See accompanying notes to financial statements.
F-13
<PAGE>
PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1999
UNAUDITED
<TABLE>
<CAPTION>
PIC PIC PIC PIC PIC
GROWTH & INTERNAT'L GLOBAL CORE US SMALL CAP
INCOME EQUITY INCOME EQUITY VALUE
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends............................... $ 0 $ 0 $ 0 $ 0 $ 0
NET REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Net realized gain from redemption of
investment shares..................... (1,616) (11) 6 269 (313)
Capital gain distribution............... 0 0 0 0 0
---------- ---------- ---------- ---------- ----------
Net realized gain on investments........ (1,616) (11) 6 269 (313)
Net unrealized appreciation
(depreciation) on investments during
the period............................ 32,067 20,482 562 114,183 (102,774)
---------- ---------- ---------- ---------- ----------
Net realized and unrealized gain (loss)
on investments........................ 30,451 20,471 568 114,452 (103,087)
---------- ---------- ---------- ---------- ----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS............. $ 30,451 $ 20,471 $ 568 $ 114,452 $ (103,087)
========== ========== ========== ========== ==========
<CAPTION>
CALVERT
PIC SOCIAL
OPPENHEIMER CAPITAL SMALL CAP
MONEY FUND GROWTH GROWTH
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- -----------
<S> <C> <C> <C>
INVESTMENT INCOME
Dividends............................... $ 3,470 $ 0 $ 0
NET REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Net realized gain from redemption of
investment shares..................... 0 (1,752) (1)
Capital gain distribution............... 0 0 0
---------- ---------- -------
Net realized gain on investments........ 0 (1,752) (1)
Net unrealized appreciation
(depreciation) on investments during
the period............................ (1) 155,109 (1,006)
---------- ---------- -------
Net realized and unrealized gain (loss)
on investments........................ (1) 153,357 (1,007)
---------- ---------- -------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS............. $ 3,469 $ 153,357 $(1,007)
========== ========== =======
</TABLE>
See accompanying notes to financial statements.
F-14
<PAGE>
THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT
STATEMENT OF OPERATIONS, CONTINUED
FOR THE THREE MONTHS ENDED MARCH 31, 1999
UNAUDITED
<TABLE>
<CAPTION>
CALVERT MFS MFS MFS
SOCIAL EMERGING MFS GROWTH W/ TOTAL
BALANCED GROWTH RESEARCH INCOME RETURN
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends............................... $ 0 $ 0 $ 0 $ 0 $ 0
NET REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Net realized gain from redemption of
investment shares..................... 128 (974) 135 (1,192) (60)
Capital gain distribution............... 0 0 0 0 0
---------- ---------- ---------- ---------- ----------
Net realized gain on investments........ 128 (974) 135 (1,192) (60)
Net unrealized appreciation
(depreciation) on investments during
the period............................ 959 25,624 24,143 9,915 115
---------- ---------- ---------- ---------- ----------
Net realized and unrealized gain (loss)
on investments........................ 1,087 24,650 24,278 8,723 55
---------- ---------- ---------- ---------- ----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS............. $ 1,087 $ 24,650 $ 24,278 $ 8,723 $ 55
========== ========== ========== ========== ==========
<CAPTION>
OPPENHEIMER OPPENHEIMER
AGGRESSIVE OPPENHEIMER MAIN ST
GRTH CAPITAL APPR GRTH & INC
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ------------ -----------
<S> <C> <C> <C>
INVESTMENT INCOME
Dividends............................... $ 0 $ 3,922 $ 2,538
NET REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Net realized gain from redemption of
investment shares..................... 464 875 (761)
Capital gain distribution............... 0 43,078 4,275
---------- ---------- -------
Net realized gain on investments........ 464 43,953 3,514
Net unrealized appreciation
(depreciation) on investments during
the period............................ 65,254 22,528 14,060
---------- ---------- -------
Net realized and unrealized gain (loss)
on investments........................ 65,718 66,481 17,574
---------- ---------- -------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS............. $ 65,718 $ 70,403 $20,112
========== ========== =======
</TABLE>
See accompanying notes to financial statements.
F-15
<PAGE>
THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT
STATEMENT OF OPERATIONS, CONTINUED
FOR THE THREE MONTHS ENDED MARCH 31, 1999
UNAUDITED
<TABLE>
<CAPTION>
OPPENHEIMER MFS OPPENHEIMER
STRATEGIC NEW MFS GLOBAL OPPENHEIMER
BOND DISCOVERY UTILITIES SECURITIES HIGH INCOME
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends............................... $ 15,456 $ 0 $ 0 $ 0 $ 0
NET REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Net realized gain from redemption of
investment shares..................... (64) 0 0 0 0
Capital gain distribution............... 0 0 0 0 0
---------- ---------- ---------- ---------- ----------
Net realized gain on investments........ (64) 0 0 0 0
Net unrealized appreciation
(depreciation) on investments during
the period............................ (14,291) 0 0 0 0
---------- ---------- ---------- ---------- ----------
Net realized and unrealized gain (loss)
on investments........................ (14,355) 0 0 0 0
---------- ---------- ---------- ---------- ----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS............. $ 1,101 $ 0 $ 0 $ 0 $ 0
========== ========== ========== ========== ==========
<CAPTION>
VAN ECK VAN ECK
WW HARD WW REAL
ASSET ESTATE
SUB-ACCOUNT SUB-ACCOUNT TOTAL
----------- ----------- -----------
<S> <C> <C> <C>
INVESTMENT INCOME
Dividends............................... $ 0 $ 0 $ 25,386
NET REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Net realized gain from redemption of
investment shares..................... 0 0 (4,867)
Capital gain distribution............... 0 0 47,353
---------- ---------- --------
Net realized gain on investments........ 0 0 42,486
Net unrealized appreciation
(depreciation) on investments during
the period............................ 0 0 366,929
---------- ---------- --------
Net realized and unrealized gain (loss)
on investments........................ 0 0 409,415
---------- ---------- --------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS............. $ 0 $ 0 $434,801
========== ========== ========
</TABLE>
See accompanying notes to financial statements.
F-16
<PAGE>
THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT
STATEMENT OF CHANGES IN ASSETS
FOR THE THREE MONTHS ENDED MARCH 31, 1999
UNAUDITED
<TABLE>
<CAPTION>
PIC
PIC PIC PIC CORE PIC PIC
GROWTH & INTERNAT'L GLOBAL US SMALL MONEY
INCOME EQUITY INCOME EQUITY CAP VALUE MARKET
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Investment income.................. $ 0 $ 0 $ 0 $ 0 $ 0 $ 3,470
Net realized gain on investments... (1,616) (11) 6 269 (313) 0
Net unrealized appreciation
(depreciation) of investments
during the period................ 32,067 20,482 562 114,183 (102,774) (1)
---------- ---------- -------- ---------- --------- --------
Net increase (decrease) in net
assets resulting from
operations....................... 30,451 20,471 568 114,452 (103,087) 3,469
---------- ---------- -------- ---------- --------- --------
FROM VARIABLE LIFE POLICY
TRANSACTIONS
Contractowners' net payments....... 290,307 169,444 17,950 145,554 131,196 10,131
Mortality and expense risk
charges.......................... (4,558) (3,586) (860) (3,866) (1,838) (698)
Cost of insurance and
administrative charges........... (65,019) (49,409) (8,980) (41,413) (27,158) (5,671)
Surrenders......................... (49,670) (16,666) (5,693) (34,183) (19,814) 0
Death benefits..................... 0 0 0 0 0 0
Net policy loan repayments
(withdrawals).................... (22,480) (10,884) (5,048) (422) (8,467) 0
Transfer from other portfolios..... 149,908 231,798 180,972 440,994 75,257 58,447
---------- ---------- -------- ---------- --------- --------
Net increase in net assets
resulting from variable life
policy transactions.............. 298,488 320,697 178,341 506,664 149,176 62,209
---------- ---------- -------- ---------- --------- --------
Total increase in net assets....... 328,939 341,168 178,909 621,116 46,089 65,678
---------- ---------- -------- ---------- --------- --------
NET ASSETS
Beginning of Year.................. 1,938,933 1,463,879 310,882 1,521,137 780,944 303,636
---------- ---------- -------- ---------- --------- --------
End of Year........................ $2,267,872 $1,805,047 $489,791 $2,142,253 $ 827,033 $369,314
========== ========== ======== ========== ========= ========
<CAPTION>
CALVERT
PIC SOCIAL
CAPITAL SMALL CAP
GROWTH GROWTH
SUB-ACCOUNT SUB-ACCOUNT
----------- -----------
<S> <C> <C>
FROM OPERATIONS
Investment income.................. $ 0 $ 0
Net realized gain on investments... (1,752) (1)
Net unrealized appreciation
(depreciation) of investments
during the period................ 155,109 (1,006)
---------- -------
Net increase (decrease) in net
assets resulting from
operations....................... 153,357 (1,007)
---------- -------
FROM VARIABLE LIFE POLICY
TRANSACTIONS
Contractowners' net payments....... 286,077 129
Mortality and expense risk
charges.......................... (6,725) (21)
Cost of insurance and
administrative charges........... (78,859) (147)
Surrenders......................... (32,405) 0
Death benefits..................... 0 0
Net policy loan repayments
(withdrawals).................... (16,333) 0
Transfer from other portfolios..... 623,793 9,334
---------- -------
Net increase in net assets
resulting from variable life
policy transactions.............. 775,548 9,295
---------- -------
Total increase in net assets....... 928,905 8,288
---------- -------
NET ASSETS
Beginning of Year.................. 2,657,828 3,582
---------- -------
End of Year........................ $3,586,733 $11,870
========== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-17
<PAGE>
THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS, CONTINUED
FOR THE THREE MONTHS ENDED MARCH 31, 1999
UNAUDITED
<TABLE>
<CAPTION>
MFS
CALVERT MFS GROWTH MFS OPPENHEIMER
SOCIAL EMERGING MFS WITH TOTAL CAP
BALANCED GROWTH RESEARCH INCOME RETURN APPRECIATION
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Investment income.................. $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Net realized gain on investments... 128 (974) 135 (1,192) (60) 464
Net unrealized appreciation
(depreciation) of investments
during the period................ 959 25,624 24,143 9,915 115 65,254
------- -------- ---------- -------- -------- --------
Net increase (decrease) in net
assets resulting from
operations....................... 1,087 24,650 24,278 8,723 55 65,718
------- -------- ---------- -------- -------- --------
FROM VARIABLE LIFE POLICY
TRANSACTIONS
Contractowners' net payments....... 910 67,651 83,394 22,376 9,968 56,002
Mortality and expense risk
charges.......................... (63) (1,930) (3,489) (1,521) (367) (1,560)
Cost of insurance and
administrative charges........... (737) (25,538) (43,000) (12,647) (5,928) (22,520)
Surrenders......................... (5,070) (3,863) (14,429) 0 (2,396) (6,292)
Death benefits..................... 0 0 0 0 0 0
Net policy loan repayments
(withdrawals).................... (4,028) (5,419) (18,491) (864) (2,805) (8,007)
Transfer from other portfolios..... 9,612 212,157 280,410 381,954 107,985 99,631
------- -------- ---------- -------- -------- --------
Net increase in net assets
resulting from variable life
policy transactions.............. 624 243,058 284,395 389,298 106,457 117,254
------- -------- ---------- -------- -------- --------
Total increase in net assets....... 1,711 267,708 308,673 398,021 106,512 182,972
------- -------- ---------- -------- -------- --------
NET ASSETS
Beginning of Year.................. 29,036 698,424 1,414,207 492,574 132,968 597,732
------- -------- ---------- -------- -------- --------
End of Year........................ $30,747 $966,132 $1,722,880 $890,595 $239,480 $780,704
======= ======== ========== ======== ======== ========
<CAPTION>
OPPENHEIMER
OPPENHEIMER GROWTH &
GROWTH INCOME
SUB-ACCOUNT SUB-ACCOUNT
------------ ------------
<S> <C> <C>
FROM OPERATIONS
Investment income.................. $ 3,922 $ 2,538
Net realized gain on investments... 43,953 3,514
Net unrealized appreciation
(depreciation) of investments
during the period................ 22,528 14,060
---------- --------
Net increase (decrease) in net
assets resulting from
operations....................... 70,403 20,112
---------- --------
FROM VARIABLE LIFE POLICY
TRANSACTIONS
Contractowners' net payments....... 60,179 37,248
Mortality and expense risk
charges.......................... (2,439) (1,081)
Cost of insurance and
administrative charges........... (30,168) (10,822)
Surrenders......................... (21,861) 0
Death benefits..................... 0 0
Net policy loan repayments
(withdrawals).................... (11,190) 0
Transfer from other portfolios..... 160,457 190,918
---------- --------
Net increase in net assets
resulting from variable life
policy transactions.............. 154,978 216,263
---------- --------
Total increase in net assets....... 225,381 236,375
---------- --------
NET ASSETS
Beginning of Year.................. 1,011,994 359,701
---------- --------
End of Year........................ $1,237,375 $596,076
========== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-18
<PAGE>
THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS, CONTINUED
FOR THE THREE MONTHS ENDED MARCH 31, 1999
UNAUDITED
<TABLE>
<CAPTION>
OPPENHEIMER MFS OPPENHEIMER OPPENHEIMER VAN ECK
STRATEGIC NEW MFS GLOBAL HIGH WW HARD
BOND DISCOVERY UTILITIES SECURITIES INCOME ASSET
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ----------- ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Investment income.................. $ 15,456 $0 $0 $0 $0 $0
Net realized gain on investments... (64) 0 0 0 0 0
Net unrealized appreciation
(depreciation) of investments
during the period................ (14,291) 0 0 0 0 0
-------- -- -- -- -- --
Net increase (decrease) in net
assets resulting from
operations....................... 1,101
-------- -- -- -- -- --
FROM VARIABLE LIFE POLICY
TRANSACTIONS
Contractowners' net payments....... 9,313 0 0 0 0 0
Mortality and expense risk
charges.......................... (476) 0 0 0 0 0
Cost of insurance and
administrative charges........... (5,279) 0 0 0 0 0
Surrenders......................... 0 0 0 0 0 0
Death benefits..................... 0 0 0 0 0 0
Net policy loan repayments
(withdrawals).................... 0 0 0 0 0 0
Transfer from other portfolios..... 121,967 0 0 0 0 0
-------- -- -- -- -- --
Net increase in net assets
resulting from variable life
policy transactions.............. 125,525 0 0 0 0 0
-------- -- -- -- -- --
Total increase in net assets....... 126,626 0 0 0 0 0
-------- -- -- -- -- --
NET ASSETS
Beginning of Year.................. 140,980 0 0 0 0 0
-------- -- -- -- -- --
End of Year........................ $267,606 $0 $0 $0 $0 $0
======== == == == == ==
<CAPTION>
VAN ECK
WW REAL
ESTATE
SUB-ACCOUNT TOTAL
----------- -----------
<S> <C> <C>
FROM OPERATIONS
Investment income.................. $0 $ 25,386
Net realized gain on investments... 0 42,486
Net unrealized appreciation
(depreciation) of investments
during the period................ 0 366,929
-- -----------
Net increase (decrease) in net
assets resulting from
operations....................... 434,801
-- -----------
FROM VARIABLE LIFE POLICY
TRANSACTIONS
Contractowners' net payments....... 0 1,397,829
Mortality and expense risk
charges.......................... 0 (35,078)
Cost of insurance and
administrative charges........... 0 (433,295)
Surrenders......................... 0 (212,342)
Death benefits..................... 0 0
Net policy loan repayments
(withdrawals).................... 0 (114,438)
Transfer from other portfolios..... 0 3,335,594
-- -----------
Net increase in net assets
resulting from variable life
policy transactions.............. 0 3,938,270
-- -----------
Total increase in net assets....... 0 4,373,071
-- -----------
NET ASSETS
Beginning of Year.................. 0 13,858,437
-- -----------
End of Year........................ $0 $18,231,508
== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-19
<PAGE>
THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
Protective Variable Life Separate Account (Separate Account) was established
by Protective Life Insurance Company (Protective Life) under the provisions of
Tennessee law and commenced operations on June 19, 1996. The Separate Account is
a separate investment account to which assets are allocated to support the
benefits payable under flexible premium variable life insurance polices.
Protective Life has structured the Separate Account into a unit investment
trust form registered with the U.S. Securities and Exchange Commission under the
Investment Company Act of 1940, as amended.
At December 31, 1998 and 1997, the Separate Account was comprised of seven
proprietary sub-accounts and ten independent sub-accounts. The seven proprietary
sub-accounts were the PIC Money Market, PIC Growth and Income, PIC International
Equity, PIC Global Income, PIC Small Cap Value, PIC Core US Equity, and PIC
Capital Growth sub-accounts. Funds are transferred to Protective Investment
Company (the Fund) in exchange for shares of the corresponding portfolio of the
Fund. The ten independent sub-accounts were the Calvert Social Small Cap Growth,
Calvert Social Balanced, MFS Emerging Growth, MFS Research, MFS Growth with
Income, MFS Total Return, Oppenheimer Aggressive Growth, Oppenheimer Growth,
Oppenheimer Growth and Income, and Oppenheimer Strategic Bond, sub-accounts.
These ten independent sub-accounts were added July 1, 1997 with sales beginning
on that date. The Fund invests contract owners' funds in exchange for shares in
the independent funds. The Fund then holds the shares for the contract owners.
During the year ended December 31, 1999, the Separate Account added six
additional sub-accounts. The additional sub-accounts are the MFS New Discovery,
MFS Utilities, Oppenheimer Global Securities, Oppenheimer High Income, Van Eck
Hard Asset, and Van Eck Real Estate sub-accounts. These six sub-accounts were
added April 1, 1999, with sales beginning on that date. Additionally, the
Oppenheimer Growth Fund changed its name to the Oppenheimer Capital Appreciation
Fund, and the PIC Money Market account was replaced with the Oppenheimer Money
Fund.
Gross premiums from the contracts are allocated to the sub-accounts in
accordance with contract owner instructions and are recorded as life policy
contract transactions in the statement of changes in net assets. Such amounts
are used to provide money to pay contract values under the contracts (Note 4).
The Separate Account's assets are the property of Protective Life.
Contract owners may allocate some or all of gross premiums or transfer some
or all of the contract value to the Guaranteed Account, which is part of
Protective Life's General Account. The assets of Protective Life's General
Account support its insurance and annuity obligations and are subject to
Protective Life's general liabilities from business operations. The Guaranteed
Account's value at March 31, 2000 was $4.4 million.
Transfers to/from other portfolios, included in the statement of changes in
net assets, are transfers between the individual sub-accounts and the
sub-accounts and the Guaranteed Account.
2. SIGNIFICANT ACCOUNTING POLICIES
INVESTMENT VALUATION: Investments are made in shares and are valued at the
net asset values of the respective portfolios. Transactions with the Funds are
recorded on the trade date. Dividend income is recorded on the ex-dividend date.
F-20
<PAGE>
THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
REALIZED GAINS AND LOSSES: Realized gains and losses on investments include
gains and losses on redemptions of the Fund's shares (determined on the
last-in-first-out (LIFO) basis) and capital gain distributions from the Fund.
DIVIDEND INCOME AND CAPITAL GAIN DISTRIBUTIONS: Dividend income and capital
gain distributions are recorded on the ex-dividend date. Distributions are from
net investment income and net realized gains recorded in the Investment Company
financials.
USE OF ESTIMATES: The preparation of financial statements in conformity
with accounting principles generally accepted in the United States requires
management to make various estimates that affect the reported amounts of assets
and liabilities, at the date of the financial statements, as well as the
reported amounts of income and expenses, during the reporting period. Actual
results could differ from those estimates.
FEDERAL INCOME TAXES: The result of operations of the Separate Account is
included in the federal income tax return of Protective Life. Under the
provisions of the contracts, Protective Life has the right to charge the
Separate Account for federal income tax attributable to the Separate Account. No
charge is currently being made against the Separate Account for such tax.
F-21
<PAGE>
THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. INVESTMENTS
At March 31, 2000, the investments by the respective sub-accounts were as
follows (in thousands, except share data):
<TABLE>
<CAPTION>
SHARES COST MARKET VALUE
--------- -------- ------------
<S> <C> <C> <C>
PIC Growth and Income........................ 205,140 $ 3,177 $ 3,063
PIC International Equity..................... 221,068 3,331 4,239
PIC Global Income............................ 81,333 864 869
PIC Small Cap Value.......................... 143,783 1,439 1,359
PIC Core US Equity........................... 191,544 4,386 5,324
PIC Capital Growth........................... 299,712 6,182 8,064
Calvert Social Small Cap Growth.............. 6,980 88 105
Calvert Social Balanced...................... 167,226 359 374
MFS Emerging Growth.......................... 122,238 3,255 5,080
MFS Research................................. 187,510 3,586 4,778
MFS Growth with Income....................... 108,809 2,169 2,362
MFS Total Return............................. 46,554 816 837
MFS New Discovery............................ 22,368 361 427
MFS Utilities................................ 12,230 274 327
Oppenheimer Aggressive Growth................ 37,633 2,386 3,770
Oppenheimer Capital Appreciation............. 83,207 3,338 4,457
Oppenheimer Growth and Income................ 118,197 2,634 2,839
Oppenheimer Money Fund....................... 1,223,959 1,224 1,224
Oppenheimer Strategic Bond................... 143,321 707 662
Oppenheimer Global Securities................ 20,866 650 689
Oppenheimer High Income...................... 6,132 65 58
Van Eck Hard Asset........................... 529 6 6
Van Eck Real Estate.......................... 97 1 1
--------- ------- -------
3,450,436 $41,298 $50,914
========= ======= =======
</TABLE>
F-22
<PAGE>
THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. INVESTMENTS (CONTINUED)
At March 31, 1999, the investments by the respective sub-accounts were as
follows (in thousands, except share data):
<TABLE>
<CAPTION>
SHARES COST MARKET VALUE
--------- ----------- ------------
<S> <C> <C> <C>
PIC Money Market........................ 369,315 $ 369 $ 369
PIC Growth and Income................... 153,049 2,412 2,186
PIC International Equity................ 121,621 1,660 1,763
PIC Global Income....................... 45,717 491 487
PIC Small Cap Value..................... 103,176 1,074 788
PIC Core US Equity...................... 86,652 1,765 2,068
PIC Capital Growth...................... 158,099 2,833 3,481
Calvert Social Small Cap Growth......... 1,253 13 12
Calvert Social Balanced................. 13,825 30 31
MFS Emerging Growth..................... 43,409 826 968
MFS Research............................ 89,040 1,534 1,740
MFS Growth With Income.................. 43,095 828 874
MFS Total Return........................ 13,239 232 239
Oppenheimer Aggressive Growth........... 15,869 654 782
Oppenheimer Growth...................... 32,989 1,102 1,240
Oppenheimer Growth and Income........... 28,322 554 595
Oppenheimer Strategic Bond.............. 55,142 280 267
--------- ----------- -----------
1,373,812 $ 16,657 $ 17,900
========= =========== ===========
</TABLE>
During the quarter ended March 31, 2000, transactions in shares were as
follows (in thousands, except share data):
<TABLE>
<CAPTION>
CALVERT
PIC PIC PIC SOCIAL
GROWTH PIC PIC SMALL CORE PIC SMALL CALVERT
AND INTERNATIONAL GLOBAL CAP US CAPITAL CAP SOCIAL
INCOME EQUITY INCOME VALUE EQUITY GROWTH GROWTH BALANCED
-------- ------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares purchased..................... 14,784 43,836 6,933 18,102 38,469 53,174 4,795 117,572
Shares received from reinvestment of
dividends.......................... 0 0 0 0 0 0 0 0
-------- -------- ------- -------- -------- -------- ------ --------
Total shares acquired................ 14,784 43,835 6,933 18,102 38,468 53,173 4,795 117,572
Shares redeemed...................... (9,517) (4,076) (1,099) (4,617) (9,629) (8,323) (752) (6,156)
-------- -------- ------- -------- -------- -------- ------ --------
Net increase in shares owned......... 5,267 39,759 5,834 13,485 28,839 44,850 4,043 111,416
Shares owned, beginning of period.... 199,873 181,309 75,499 130,298 162,705 254,862 2,937 55,810
-------- -------- ------- -------- -------- -------- ------ --------
Shares owned, end of period.......... 205,140 221,068 81,333 143,783 191,544 299,712 6,980 167,226
======== ======== ======= ======== ======== ======== ====== ========
Cost of shares acquired.............. $ 209 $ 820 $ 73 $ 158 $ 1,006 $ 1,347 $ 68 $ 249
======== ======== ======= ======== ======== ======== ====== ========
Cost of shares redeemed.............. $ (132) $ (74) $ (12) $ (40) $ (254) $ (215) $ (11) $ (13)
======== ======== ======= ======== ======== ======== ====== ========
</TABLE>
F-23
<PAGE>
THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
MFS
MFS GROWTH MFS MFS OPPENHEIMER OPPENHEIMER
EMERGING MFS WITH TOTAL NEW MFS AGGRESSIVE CAPITAL
GROWTH RESEARCH INCOME RETURN DISCOVERY UTILITIES GROWTH APPRECIATION
--------- -------- -------- -------- --------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares purchased............... 30,548 28,860 27,460 22,847 11,630 7,971 10,324 13,129
Shares received from
reinvestment of dividends.... 0 0 0 0 0 0 1,154 5,012
-------- -------- ------- ------- ------- ------- ------- -------
Total shares acquired.......... 30,548 28,860 27,460 22,847 11,630 7,971 11,478 18,141
Shares redeemed................ (688) (2,564) (10,326) (10,427) (1,044) (3,047) (455) (465)
-------- -------- ------- ------- ------- ------- ------- -------
Net increase in shares owned... 29,860 26,296 17,134 12,420 10,586 4,924 11,023 17,676
Shares owned, beginning of
period....................... 92,378 161,214 91,675 34,134 11,782 7,306 26,610 65,531
-------- -------- ------- ------- ------- ------- ------- -------
Shares owned, end of period.... 122,238 187,510 108,809 46,554 22,368 12,230 37,633 83,207
======== ======== ======= ======= ======= ======= ======= =======
Cost of shares acquired........ $ 1,227 $ 662 $ 562 $ 390 $ 220 $ 198 $ 1,152 $ 945
======== ======== ======= ======= ======= ======= ======= =======
Cost of shares redeemed........ $ (27) $ (59) $ (213) $ (182) $ (20) $ (75) $ (45) $ (24)
======== ======== ======= ======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
OPPENHEIMER OPPENHEIMER OPPENHEIMER VAN ECK VAN ECK
GROWTH AND OPPENHEIMER STRATEGIC GLOBAL OPPENHEIMER HARD REAL
INCOME MONEY FUND BOND SECURITIES HIGH INCOME ASSET ESTATE
------------ ------------ ------------ ------------ ------------ -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Shares purchased................. 40,606 1,227,587 10,116 7,997 1,090 341 15
Shares received from reinvestment
of dividends................... 6,087 24,003 11,313 2,737 612 13 2
------- ---------- ------- ------ ------ ----- ---
Total shares acquired............ 46,693 1,251,590 21,429 10,734 1,702 354 17
Shares redeemed.................. (7,224) (2,411,673) (2,412) (692) (1,556) (842) (40)
------- ---------- ------- ------ ------ ----- ---
Net increase in shares owned..... 39,469 (1,160,083) 19,017 10,042 146 (488) (23)
Shares owned, beginning of
period......................... 78,728 2,384,042 124,304 10,824 5,986 1,017 120
------- ---------- ------- ------ ------ ----- ---
Shares owned, end of period...... 118,197 1,223,959 143,321 20,866 6,132 529 97
======= ========== ======= ====== ====== ===== ===
Cost of shares acquired.......... $ 1,107 $ 1,252 $ 102 $ 380 $ 17 $ 4 $ 0
======= ========== ======= ====== ====== ===== ===
Cost of shares redeemed.......... $ (175) $ (2,412) $ (12) $ (26) $ (17) $ (9) $ 0
======= ========== ======= ====== ====== ===== ===
</TABLE>
F-24
<PAGE>
THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. INVESTMENTS (CONTINUED)
During the quarter ended March 31, 1999, transactions in shares were as
follows (in thousands, except share data):
<TABLE>
<CAPTION>
CALVERT
PIC PIC PIC PIC SOCIAL
PIC GROWTH INTER- PIC SMALL CORE PIC SMALL CALVERT
MONEY AND NATIONAL GLOBAL CAP US CAPITAL CAP SOCIAL
MARKET INCOME EQUITY INCOME VALUE EQUITY GROWTH GROWTH BALANCED
-------- --------- -------- -------- -------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Shares purchased............ 133,112 34,508 24,235 20,652 20,081 23,420 36,269 945 4,753
Shares received from
reinvestment of
dividends................. 3,470 0 0 0 0 0 0 0 0
-------- --------- -------- ------- -------- --------- --------- ------ ------
Total shares acquired....... 136,582 34,508 24,235 20,652 20,081 23,420 36,269 945 4,753
Shares redeemed............. (70,903) (18,050) (3,440) (3,886) (5,737) (4,574) (4,096) (14) (4,515)
-------- --------- -------- ------- -------- --------- --------- ------ ------
Net increase in shares
owned..................... 65,679 16,458 20,795 16,766 14,344 18,846 32,173 931 238
Shares owned, beginning of
period.................... 303,636 136,591 100,826 28,951 88,832 67,806 125,926 322 13,587
-------- --------- -------- ------- -------- --------- --------- ------ ------
Shares owned, end of
period.................... 369,315 153,049 121,621 45,717 103,176 86,652 158,099 1,253 13,825
======== ========= ======== ======= ======== ========= ========= ====== ======
Cost of shares acquired..... $ 137 $ 488 $ 350 $ 220 $ 168 $ 539 $ 768 $ 9 $ 10
======== ========= ======== ======= ======== ========= ========= ====== ======
Cost of shares redeemed..... $ (71) $ (256) $ (49) $ (42) $ (47) $ (103) $ (87) $ 0 $ (10)
======== ========= ======== ======= ======== ========= ========= ====== ======
</TABLE>
<TABLE>
<CAPTION>
MFS
MFS GROWTH MFS OPPENHEIMER OPPENHEIMER
EMERGING MFS WITH TOTAL AGGRESSIVE OPPENHEIMER GROWTH AND
GROWTH RESEARCH INCOME RETURN GROWTH GROWTH INCOME
--------- -------- -------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Shares purchased.............. 12,199 16,042 21,613 6,358 2,923 6,064 12,654
Shares received from
reinvestment of dividends... 0 0 0 0 0 1,264 331
------ ------ ------ ------ ------ ------ ------
Total shares acquired......... 12,199 16,042 21,613 6,358 2,923 7,328 12,985
Shares redeemed............... (1,324) (1,247) (2,208) (457) (389) (1,940) (2,193)
------ ------ ------ ------ ------ ------ ------
Net increase in shares
owned....................... 10,875 14,795 19,405 5,901 2,534 5,388 10,792
Shares owned, beginning of
period...................... 32,534 74,245 23,690 7,338 13,335 27,601 17,530
------ ------ ------ ------ ------ ------ ------
Shares owned, end of period... 43,409 89,040 43,095 13,239 15,869 32,989 28,322
====== ====== ====== ====== ====== ====== ======
Cost of shares acquired....... $ 271 $ 307 $ 432 $ 115 $ 135 $ 275 $ 268
====== ====== ====== ====== ====== ====== ======
Cost of shares redeemed....... $ (30) $ (24) $ (44) $ (8) $ (18) $ (73) $ (45)
====== ====== ====== ====== ====== ====== ======
<CAPTION>
OPPENHEIMER
STRATEGIC
BOND
------------
<S> <C>
Shares purchased.............. 31,993
Shares received from
reinvestment of dividends... 3,193
------
Total shares acquired......... 35,186
Shares redeemed............... (7,453)
------
Net increase in shares
owned....................... 27,733
Shares owned, beginning of
period...................... 27,409
------
Shares owned, end of period... 55,142
======
Cost of shares acquired....... $ 178
======
Cost of shares redeemed....... $ (37)
======
</TABLE>
4. RELATED PARTY TRANSACTIONS
Contract owners' net payments represent premiums received from policyholders
less certain deductions made by Protective Life in accordance with policy terms.
These deductions include, where appropriate, sales, tax, surrender, cost of
insurance protection and administrative charges. These deductions are made to
the individual policies in accordance with the terms governing each policy as
set forth in the policy.
The net assets of each sub-account of the Separate Account reflect the
investment management fees and other operating expenses incurred by the Funds.
F-25
<PAGE>
THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. RELATED PARTY TRANSACTIONS (CONTINUED)
Protective Life offers a loan privilege to contract owners. Contract owners
may obtain loans using the contract as the only security for the loan. Loans may
be subject to provisions of the Internal Revenue Code of 1986, as amended. Loans
outstanding approximated $0.8 million at March 31, 2000.
F-26
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Contract Owners and Board of Directors
of Protective Life Insurance Company
In our opinion, the accompanying statements of assets and liabilities and
the related statements of operations and changes in net assets as listed in the
accompanying index on page F-1 of this Form S-6 present fairly, in all material
respects, the financial position of The Protective Variable Life Separate
Account (the Separate Account) at December 31, 1999 and 1998, and the results of
its operations and changes in net assets for each of the three years in the
period ended December 31, 1999, in conformity with accounting principles
generally accepted in the United States. These financial statements are the
responsibility of the Separate Account's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States, which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
March 22, 2000
Birmingham, Alabama
F-27
<PAGE>
THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
PIC
GROWTH PIC PIC PIC
AND INTERNATIONAL GLOBAL SMALL
INCOME EQUITY INCOME CAP VALUE
----------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS
Investment in sub-accounts at market
value............................. $ 2,916 $ 3,396 $ 791 $ 1,130
Receivable from Protective Life
Insurance Company................. 0 0 0 0
---------- ---------- ---------- ----------
TOTAL ASSETS........................ 2,916 3,396 791 1,130
========== ========== ========== ==========
LIABILITIES
Payable to Protective Life Insurance
Company........................... 0 18 21 5
---------- ---------- ---------- ----------
NET ASSETS.......................... $ 2,916 $ 3,378 $ 770 $ 1,125
========== ========== ========== ==========
<CAPTION>
CALVERT
SOCIAL
PIC PIC SMALL
CORE CAPITAL CAP
US EQUITY GROWTH GROWTH
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS
Investment in sub-accounts at market
value............................. $ 4,430 $ 6,719 $ 39
Receivable from Protective Life
Insurance Company................. 0 0 0
---------- ---------- ----
TOTAL ASSETS........................ 4,430 6,719 39
========== ========== ====
LIABILITIES
Payable to Protective Life Insurance
Company........................... 43 1 0
---------- ---------- ----
NET ASSETS.......................... $ 4,387 $ 6,718 $ 39
========== ========== ====
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-28
<PAGE>
THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED
DECEMBER 31, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
MFS
CALVERT MFS GROWTH MFS
SOCIAL EMERGING MFS WITH TOTAL
BALANCED GROWTH RESEARCH INCOME RETURN
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS
Investment in
sub-accounts at
market value...... $ 121 $ 3,506 $ 3,781 $ 1,954 $ 606
Receivable from
Protective Life
Insurance
Company........... 0 0 0 0 0
---------- ---------- ---------- ---------- ----------
TOTAL ASSETS........ 121 3,506 3,781 1,954 606
========== ========== ========== ========== ==========
LIABILITIES
Payable to
Protective Life
Insurance
Company........... 0 6 7 21 0
---------- ---------- ---------- ---------- ----------
Net assets.......... $ 121 $ 3,500 $ 3,774 $ 1,933 $ 606
========== ========== ========== ========== ==========
<CAPTION>
MFS
NEW MFS
DISCOVERY UTILITIES
----------- -----------
<S> <C> <C>
ASSETS
Investment in
sub-accounts at
market value...... $ 203 $ 177
Receivable from
Protective Life
Insurance
Company........... 2 0
---------- ----------
TOTAL ASSETS........ 205 177
========== ==========
LIABILITIES
Payable to
Protective Life
Insurance
Company........... 0 0
---------- ----------
Net assets.......... $ 205 $ 177
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-29
<PAGE>
THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED
DECEMBER 31, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
OPPENHEIMER
OPPENHEIMER OPPENHEIMER GROWTH OPPENHEIMER OPPENHEIMER
AGGRESSIVE CAPITAL AND MONEY STRATEGIC
GROWTH APPRECIATION INCOME FUND BOND
----------- ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS
Investment in
sub-accounts at
market value...... $ 2,192 $ 3,269 $ 1,939 $ 2,385 $ 618
Receivable from
Protective Life
Insurance
Company........... 0 7 0 11 0
---------- ---------- ---------- ---------- ----------
TOTAL ASSETS........ 2,192 3,276 1,939 2,396 618
========== ========== ========== ========== ==========
LIABILITIES
Payable to
Protective Life
Insurance
Company........... 8 0 27 0 22
---------- ---------- ---------- ---------- ----------
Net assets.......... $ 2,184 $ 3,276 $ 1,912 $ 2,396 $ 596
========== ========== ========== ========== ==========
<CAPTION>
OPPENHEIMER OPPENHEIMER
GLOBAL HIGH
SECURITIES INCOME
----------- -----------
<S> <C> <C>
ASSETS
Investment in
sub-accounts at
market value...... $ 362 $ 64
Receivable from
Protective Life
Insurance
Company........... 2 0
---------- ----------
TOTAL ASSETS........ 364 64
========== ==========
LIABILITIES
Payable to
Protective Life
Insurance
Company........... 0 0
---------- ----------
Net assets.......... $ 364 $ 64
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-30
<PAGE>
THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED
DECEMBER 31, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
VAN ECK VAN ECK
HARD REAL
ASSET ESTATE TOTAL
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS
Investment in
sub-accounts at
market value...... $ 11 $ 1 $ 40,610
Receivable from
Protective Life
Insurance
Company........... 0 0 22
---------- ---------- ----------
TOTAL ASSETS........ 11 1 40,632
========== ========== ==========
LIABILITIES
Payable to
Protective Life
Insurance
Company........... 0 0 179
---------- ---------- ----------
NET ASSETS.......... $ 11 $ 1 $ 40,453
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-31
<PAGE>
THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
PIC
PIC GROWTH PIC PIC PIC
MONEY AND INTERNATIONAL GLOBAL SMALL
MARKET INCOME EQUITY INCOME CAP VALUE
----------- ----------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS
Investment in sub-accounts at market
value................................. $ 304 $ 1,922 $ 1,442 $ 308 $ 769
Receivable from Protective Life
Insurance Company..................... 0 17 23 4 13
---------- ---------- ---------- ---------- ----------
TOTAL ASSETS............................ 304 1,939 1,465 312 782
========== ========== ========== ========== ==========
LIABILITIES
Payable to Protective Life Insurance
Company............................... 1 0 0 0 0
---------- ---------- ---------- ---------- ----------
NET ASSETS.............................. $ 303 $ 1,939 $ 1,465 $ 312 $ 782
========== ========== ========== ========== ==========
<CAPTION>
CALVERT
SOCIAL
PIC PIC SMALL CALVERT
CORE CAPITAL CAP SOCIAL
US EQUITY GROWTH GROWTH BALANCED
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS
Investment in sub-accounts at market
value................................. $ 1,502 $ 2,627 $ 4 $ 29
Receivable from Protective Life
Insurance Company..................... 20 31 0 0
---------- ---------- ---- ----
TOTAL ASSETS............................ 1,522 2,658 4 29
========== ========== ==== ====
LIABILITIES
Payable to Protective Life Insurance
Company............................... 0 0 0 0
---------- ---------- ---- ----
NET ASSETS.............................. $ 1,522 $ 2,658 $ 4 $ 29
========== ========== ==== ====
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-32
<PAGE>
PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED
DECEMBER 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
MFS
MFS GROWTH MFS OPPENHEIMER
EMERGING MFS WITH TOTAL AGGRESSIVE
GROWTH RESEARCH INCOME RETURN GROWTH
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS
Investment in
sub-accounts at
market value...... $ 699 $ 1,414 $ 477 $ 133 $ 598
Receivable from
Protective Life
Insurance
Company........... 0 1 15 0 0
---------- ---------- ---------- ---------- ----------
TOTAL ASSETS........ 699 1,415 492 133 598
========== ========== ========== ========== ==========
LIABILITIES
Payable to
Protective Life
Insurance
Company........... 3 0 0 1 0
---------- ---------- ---------- ---------- ----------
Net assets.......... $ 696 $ 1,415 $ 492 $ 132 $ 598
========== ========== ========== ========== ==========
<CAPTION>
OPPENHEIMER
GROWTH OPPENHEIMER
OPPENHEIMER AND STRATEGIC
GROWTH INCOME BOND TOTAL
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS
Investment in
sub-accounts at
market value...... $ 1,012 $ 359 $140 $13,739
Receivable from
Protective Life
Insurance
Company........... 0 0 2 126
---------- ---------- ---- -------
TOTAL ASSETS........ 1,012 359 142 13,865
========== ========== ==== =======
LIABILITIES
Payable to
Protective Life
Insurance
Company........... 1 0 0 6
---------- ---------- ---- -------
Net assets.......... $ 1,011 $ 359 $142 $13,859
========== ========== ==== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-33
<PAGE>
THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
PIC
GROWTH PIC PIC PIC
AND INTERNATIONAL GLOBAL SMALL
INCOME EQUITY INCOME CAP VALUE
----------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends........................... $ 2 $ 8 $ 0 $ 0
---------- ---------- ---------- ----------
NET REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Net realized gain (loss) from
redemption of investment shares... 1 0 0 0
Capital gain distribution........... 32 37 3 0
---------- ---------- ---------- ----------
Net realized gain (loss) on
investments....................... 33 37 3 0
Net unrealized appreciation
(depreciation) on investments
during the period................. 98 718 (7) (7)
---------- ---------- ---------- ----------
Net realized and unrealized gain
(loss) on investments............. 131 755 (4) (7)
---------- ---------- ---------- ----------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS........................ $ 133 $ 763 $ (4) $ (7)
========== ========== ========== ==========
<CAPTION>
CALVERT
SOCIAL
PIC PIC SMALL
CORE CAPITAL CAP
US EQUITY GROWTH GROWTH
----------- ----------- -----------
<S> <C> <C> <C>
INVESTMENT INCOME
Dividends........................... $ 0 $ 0 $ 0
---------- ---------- ----
NET REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Net realized gain (loss) from
redemption of investment shares... (1) (1) 0
Capital gain distribution........... 13 65 0
---------- ---------- ----
Net realized gain (loss) on
investments....................... 12 64 0
Net unrealized appreciation
(depreciation) on investments
during the period................. 608 1,176 7
---------- ---------- ----
Net realized and unrealized gain
(loss) on investments............. 620 1,240 7
---------- ---------- ----
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS........................ $ 620 $ 1,240 $ 7
========== ========== ====
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-34
<PAGE>
THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT
STATEMENT OF OPERATIONS, CONTINUED
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
MFS
CALVERT MFS GROWTH MFS
SOCIAL EMERGING MFS WITH TOTAL
BALANCED GROWTH RESEARCH INCOME RETURN
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends........... $ 3 $ 0 $ 4 $ 3 $ 5
---------- ---------- ---------- ---------- ----------
NET REALIZED AND
UNREALIZED GAINS
(LOSSES) ON
INVESTMENTS
Net realized gain
(loss) from
redemption of
investment
shares............ 0 (1) (1) (1) (1)
Capital gain
distribution...... 9 0 19 4 9
---------- ---------- ---------- ---------- ----------
Net realized gain
(loss) on
investments....... 9 (1) 18 3 8
Net unrealized
appreciation
(depreciation) on
investments during
the period........ (2) 1,336 616 99 (9)
---------- ---------- ---------- ---------- ----------
Net realized and
unrealized gain
(loss) on
investments....... 7 1,335 634 102 (1)
---------- ---------- ---------- ---------- ----------
NET INCREASE
(DECREASE) IN NET
ASSETS RESULTING
FROM OPERATIONS... $ 10 $ 1,335 $ 638 $ 105 $ 4
========== ========== ========== ========== ==========
<CAPTION>
MFS
NEW MFS
DISCOVERY UTILITIES
----------- -----------
<S> <C> <C>
INVESTMENT INCOME
Dividends........... $ 0 $ 0
---------- ----------
NET REALIZED AND
UNREALIZED GAINS
(LOSSES) ON
INVESTMENTS
Net realized gain
(loss) from
redemption of
investment
shares............ 0 1
Capital gain
distribution...... 3 0
---------- ----------
Net realized gain
(loss) on
investments....... 3 1
Net unrealized
appreciation
(depreciation) on
investments during
the period........ 43 26
---------- ----------
Net realized and
unrealized gain
(loss) on
investments....... 46 27
---------- ----------
NET INCREASE
(DECREASE) IN NET
ASSETS RESULTING
FROM OPERATIONS... $ 46 $ 27
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-35
<PAGE>
THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT
STATEMENT OF OPERATIONS, CONTINUED
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
OPPENHEIMER
OPPENHEIMER OPPENHEIMER GROWTH OPPENHEIMER OPPENHEIMER
AGGRESSIVE CAPITAL AND MONEY STRATEGIC
GROWTH APPRECIATION INCOME FUND BOND
----------- ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends........... $ 0 $ 4 $ 3 $ 60 $ 15
---------- ---------- ---------- ---------- ----------
NET REALIZED AND
UNREALIZED GAINS
(LOSSES) ON
INVESTMENTS
Net realized gain
(loss) from
redemption of
investment
shares............ 0 1 0 1 0
Capital gain
distribution...... 0 43 4 0 0
---------- ---------- ---------- ---------- ----------
Net realized gain
(loss) on
investments....... 0 44 4 1 0
Net unrealized
appreciation
(depreciation) on
investments during
the period........ 850 736 210 0 0
---------- ---------- ---------- ---------- ----------
Net realized and
unrealized gain
(loss) on
investments....... 850 780 214 1 0
---------- ---------- ---------- ---------- ----------
NET INCREASE
(DECREASE) IN NET
ASSETS RESULTING
FROM OPERATIONS... $ 850 $ 784 $ 217 $ 61 $ 15
========== ========== ========== ========== ==========
<CAPTION>
OPPENHEIMER OPPENHEIMER
GLOBAL HIGH
SECURITIES INCOME
----------- -----------
<S> <C> <C>
INVESTMENT INCOME
Dividends........... $ 0 $ 0
---------- ----------
NET REALIZED AND
UNREALIZED GAINS
(LOSSES) ON
INVESTMENTS
Net realized gain
(loss) from
redemption of
investment
shares............ 0 0
Capital gain
distribution...... 0 0
---------- ----------
Net realized gain
(loss) on
investments....... 0 0
Net unrealized
appreciation
(depreciation) on
investments during
the period........ 66 1
---------- ----------
Net realized and
unrealized gain
(loss) on
investments....... 66 1
---------- ----------
NET INCREASE
(DECREASE) IN NET
ASSETS RESULTING
FROM OPERATIONS... $ 66 $ 1
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-36
<PAGE>
THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT
STATEMENT OF OPERATIONS, CONTINUED
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
VAN ECK VAN ECK
HARD REAL
ASSET ESTATE TOTAL
----------- ----------- -----------
<S> <C> <C> <C>
INVESTMENT INCOME
Dividends........... $ 0 $ 0 $ 107
NET REALIZED AND
UNREALIZED GAINS
(LOSSES) ON
INVESTMENTS
Net realized gain
(loss) from
redemption of
investment
shares............ 0 0 (2)
Capital gain
distribution...... 0 0 241
---------- ---------- ----------
Net realized gain
(loss) on
investments....... 0 0 239
Net unrealized
appreciation
(depreciation) on
investments during
the period........ 1 0 6,566
---------- ---------- ----------
Net realized and
unrealized gain
(loss) on
investments....... 1 0 6,805
---------- ---------- ----------
NET INCREASE
(DECREASE) IN NET
ASSETS RESULTING
FROM OPERATIONS... $ 1 $ 0 $ 6,912
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-37
<PAGE>
THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
PIC
PIC GROWTH PIC PIC PIC
MONEY AND INTERNATIONAL GLOBAL SMALL
MARKET INCOME EQUITY INCOME CAP VALUE
----------- ----------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends............................... $ 4 $ 24 $ 1 $ 6 $ 4
---------- ---------- ---------- ---------- ----------
NET REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Net realized gain (loss) from redemption
of investment shares.................. 0 (4) 0 0 (9)
Capital gain distribution............... 0 140 67 7 90
---------- ---------- ---------- ---------- ----------
Net realized gain (loss) on
investments........................... 0 136 67 7 81
Net unrealized appreciation
(depreciation) on investments during
the period............................ 0 (239) 112 1 (208)
---------- ---------- ---------- ---------- ----------
Net realized and unrealized gain (loss)
on investments........................ 0 (103) 179 8 (127)
---------- ---------- ---------- ---------- ----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS............. $ 4 $ (79) $ 180 $ 14 $ (123)
========== ========== ========== ========== ==========
<CAPTION>
CALVERT
SOCIAL
PIC PIC SMALL CALVERT
CORE CAPITAL CAP SOCIAL
US EQUITY GROWTH GROWTH BALANCED
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends............................... $ 8 $ 10 $ 0 $ 1
---------- ---------- ---- ----
NET REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Net realized gain (loss) from redemption
of investment shares.................. (5) (1) 0 0
Capital gain distribution............... 14 45 0 1
---------- ---------- ---- ----
Net realized gain (loss) on
investments........................... 9 44 0 1
Net unrealized appreciation
(depreciation) on investments during
the period............................ 153 417 0 0
---------- ---------- ---- ----
Net realized and unrealized gain (loss)
on investments........................ 162 461 0 1
---------- ---------- ---- ----
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS............. $ 170 $ 471 $ 0 $ 2
========== ========== ==== ====
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-38
<PAGE>
THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT
STATEMENT OF OPERATIONS, CONTINUED
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
MFS
MFS GROWTH MFS OPPENHEIMER
EMERGING MFS WITH TOTAL AGGRESSIVE
GROWTH RESEARCH INCOME RETURN GROWTH
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends........... $ 0 $ 1 $ 0 $ 0 $ 1
---------- ---------- ---------- ---------- ----------
NET REALIZED AND
UNREALIZED GAINS
(LOSSES) ON
INVESTMENTS
Net realized gain
(loss) from
redemption of
investment
shares............ (10) (6) 0 0 (1)
Capital gain
distribution...... 2 11 0 0 5
---------- ---------- ---------- ---------- ----------
Net realized gain
(loss) on
investments....... (8) 5 0 0 4
Net unrealized
appreciation
(depreciation) on
investments during
the period........ 114 163 35 7 61
---------- ---------- ---------- ---------- ----------
Net realized and
unrealized gain
(loss) on
investments....... 106 168 35 7 65
---------- ---------- ---------- ---------- ----------
NET INCREASE
(DECREASE) IN NET
ASSETS RESULTING
FROM OPERATIONS... $ 106 $ 169 $ 35 $ 7 $ 66
========== ========== ========== ========== ==========
<CAPTION>
OPPENHEIMER
GROWTH OPPENHEIMER
OPPENHEIMER AND STRATEGIC
GROWTH INCOME BOND TOTAL
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends........... $ 2 $ 0 $ 0 $ 62
---------- ---------- ---- ------
NET REALIZED AND
UNREALIZED GAINS
(LOSSES) ON
INVESTMENTS
Net realized gain
(loss) from
redemption of
investment
shares............ 0 0 0 (36)
Capital gain
distribution...... 21 1 0 404
---------- ---------- ---- ------
Net realized gain
(loss) on
investments....... 21 1 0 368
Net unrealized
appreciation
(depreciation) on
investments during
the period........ 113 27 1 757
---------- ---------- ---- ------
Net realized and
unrealized gain
(loss) on
investments....... 134 28 1 1,125
---------- ---------- ---- ------
NET INCREASE
(DECREASE) IN NET
ASSETS RESULTING
FROM OPERATIONS... $ 136 $ 28 $ 1 $1,187
========== ========== ==== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-39
<PAGE>
THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
PIC
PIC GROWTH PIC PIC PIC
MONEY AND INTERNATIONAL GLOBAL SMALL
MARKET INCOME EQUITY INCOME CAP VALUE
----------- ----------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends............................... $ 1 $ 7 $ 9 $ 9 $ 2
---------- ---------- ---------- ---------- ----------
NET REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Net realized gain (loss) from redemption
of investment shares.................. 0 1 0 0 0
Capital gain distribution............... 0 132 30 1 62
---------- ---------- ---------- ---------- ----------
Net realized gain (loss) on
investments........................... 0 133 30 1 62
Net unrealized appreciation
(depreciation) on investments during
the period............................ 0 (19) (31) (4) 38
---------- ---------- ---------- ---------- ----------
Net realized and unrealized gain (loss)
on investments........................ 0 114 (1) (3) 100
---------- ---------- ---------- ---------- ----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS............. $ 1 $ 121 $ 8 $ 6 $ 102
========== ========== ========== ========== ==========
<CAPTION>
CALVERT
SOCIAL
PIC PIC SMALL CALVERT
CORE CAPITAL CAP SOCIAL
US EQUITY GROWTH GROWTH BALANCED
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends............................... $ 3 $ 4 $ 0 $ 0
---------- ---------- ---- ----
NET REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Net realized gain (loss) from redemption
of investment shares.................. 0 0 0 0
Capital gain distribution............... 33 39 0 0
---------- ---------- ---- ----
Net realized gain (loss) on
investments........................... 33 39 0 0
Net unrealized appreciation
(depreciation) on investments during
the period............................ 21 54 0 0
---------- ---------- ---- ----
Net realized and unrealized gain (loss)
on investments........................ 54 93 0 0
---------- ---------- ---- ----
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS............. $ 57 $ 97 $ 0 $ 0
========== ========== ==== ====
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-40
<PAGE>
THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT
STATEMENT OF OPERATIONS, CONTINUED
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
MFS
MFS GROWTH MFS OPPENHEIMER
EMERGING MFS WITH TOTAL AGGRESSIVE
GROWTH RESEARCH INCOME RETURN GROWTH
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends........... $ 0 $ 0 $ 0 $ 0 $ 0
---------- ---------- ---------- ---------- ----------
NET REALIZED AND
UNREALIZED GAINS
(LOSSES) ON
INVESTMENTS
Net realized gain
(loss) from
redemption of
investment
shares............ (1) 0 0 0 0
Capital gain
distribution...... 0 0 0 0 0
---------- ---------- ---------- ---------- ----------
Net realized gain
(loss) on
investments....... (1) 0 0 0 0
Net unrealized
appreciation
(depreciation) on
investments during
the period........ (1) 1 0 0 0
---------- ---------- ---------- ---------- ----------
Net realized and
unrealized gain
(loss) on
investments....... (2) 1 0 0 0
---------- ---------- ---------- ---------- ----------
NET INCREASE
(DECREASE) IN NET
ASSETS RESULTING
FROM OPERATIONS... $ (2) $ 1 $ 0 $ 0 $ 0
========== ========== ========== ========== ==========
<CAPTION>
OPPENHEIMER
GROWTH OPPENHEIMER
OPPENHEIMER AND STRATEGIC
GROWTH INCOME BOND TOTAL
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends........... $ 0 $ 0 $ 1 $ 36
---------- ---------- ---- ----
NET REALIZED AND
UNREALIZED GAINS
(LOSSES) ON
INVESTMENTS
Net realized gain
(loss) from
redemption of
investment
shares............ 0 0 0 0
Capital gain
distribution...... 0 0 0 297
---------- ---------- ---- ----
Net realized gain
(loss) on
investments....... 0 0 0 297
Net unrealized
appreciation
(depreciation) on
investments during
the period........ 0 0 0 59
---------- ---------- ---- ----
Net realized and
unrealized gain
(loss) on
investments....... 0 0 0 356
---------- ---------- ---- ----
NET INCREASE
(DECREASE) IN NET
ASSETS RESULTING
FROM OPERATIONS... $ 0 $ 0 $ 1 $392
========== ========== ==== ====
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-41
<PAGE>
THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
PIC
GROWTH PIC PIC PIC
AND INTERNATIONAL GLOBAL SMALL
INCOME EQUITY INCOME CAP VALUE
----------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss)........ $ 2 $ 8 $ 0 $ 0
Net realized gain (loss) on
investments....................... 33 37 3 0
Net unrealized appreciation
(depreciation) of investments
during the period................. 98 718 (7) (7)
---------- ---------- ---------- ----------
Net increase (decrease) in net
assets resulting from
operations........................ 133 763 (4) (7)
---------- ---------- ---------- ----------
FROM VARIABLE LIFE POLICY
TRANSACTIONS
Contract owners' net payments....... 591 546 67 327
Mortality and expense risk
charges........................... (22) (19) (5) (9)
Cost of insurance and administrative
charges........................... (254) (223) (46) (114)
Surrenders.......................... (133) (74) (16) (53)
Death benefits...................... 0 0 0 0
Net policy loan repayments
(withdrawals)..................... (29) (37) (11) (14)
Transfers from other portfolios..... 691 957 473 213
---------- ---------- ---------- ----------
Net increase in net assets resulting
from variable life policy
transactions...................... 844 1,150 462 350
---------- ---------- ---------- ----------
Net increase in net assets.......... 977 1,913 458 343
---------- ---------- ---------- ----------
Net assets, beginning of year....... 1,939 1,465 312 782
---------- ---------- ---------- ----------
Net assets, end of year............. $ 2,916 $ 3,378 $ 770 $ 1,125
========== ========== ========== ==========
<CAPTION>
CALVERT
SOCIAL
PIC PIC SMALL
CORE CAPITAL CAP
US EQUITY GROWTH GROWTH
----------- ----------- -----------
<S> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss)........ $ 0 $ 0 $ 0
Net realized gain (loss) on
investments....................... 12 64 0
Net unrealized appreciation
(depreciation) of investments
during the period................. 608 1,176 7
---------- ---------- ----
Net increase (decrease) in net
assets resulting from
operations........................ 620 1,240 7
---------- ---------- ----
FROM VARIABLE LIFE POLICY
TRANSACTIONS
Contract owners' net payments....... 432 837 4
Mortality and expense risk
charges........................... (25) (39) 0
Cost of insurance and administrative
charges........................... (222) (396) (1)
Surrenders.......................... (127) (182) 0
Death benefits...................... 0 0 0
Net policy loan repayments
(withdrawals)..................... (30) (65) 0
Transfers from other portfolios..... 2,217 2,665 25
---------- ---------- ----
Net increase in net assets resulting
from variable life policy
transactions...................... 2,245 2,820 28
---------- ---------- ----
Net increase in net assets.......... 2,865 4,060 35
---------- ---------- ----
Net assets, beginning of year....... 1,522 2,658 4
---------- ---------- ----
Net assets, end of year............. $ 4,387 $ 6,718 $ 39
========== ========== ====
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-42
<PAGE>
THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS, CONTINUED
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
MFS
CALVERT MFS GROWTH MFS
SOCIAL EMERGING MFS WITH TOTAL
BALANCED GROWTH RESEARCH INCOME RETURN
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment
income (loss)..... $ 3 $ 0 $ 4 $ 3 $ 5
Net realized gain
(loss) on
investments....... 9 (1) 18 3 8
Net unrealized
appreciation
(depreciation) of
investments during
the period........ (2) 1,336 616 99 (9)
---------- ---------- ---------- ---------- ----------
Net increase
(decrease) in net
assets resulting
from operations... 10 1,335 638 105 4
---------- ---------- ---------- ---------- ----------
FROM VARIABLE LIFE
POLICY
TRANSACTIONS
Contract owners' net
payments.......... 37 361 553 144 89
Mortality and
expense risk
charges........... (1) (14) (21) (11) (3)
Cost of insurance
and administrative
charges........... (7) (167) (224) (97) (41)
Surrenders.......... (13) (78) (99) (44) (3)
Death benefits...... 0 0 0 0 0
Net policy loan
repayments
(withdrawals)..... (4) (11) (36) (14) (8)
Transfers from other
portfolios........ 70 1,378 1,548 1,358 436
---------- ---------- ---------- ---------- ----------
Net increase in net
assets resulting
from variable life
policy
transactions...... 82 1,469 1,721 1,336 470
---------- ---------- ---------- ---------- ----------
Net increase in net
assets............ 92 2,804 2,359 1,441 474
---------- ---------- ---------- ---------- ----------
Net assets,
beginning of
year.............. 29 696 1,415 492 132
---------- ---------- ---------- ---------- ----------
Net assets, end of
year.............. $ 121 $ 3,500 $ 3,774 $ 1,933 $ 606
========== ========== ========== ========== ==========
<CAPTION>
MFS
NEW MFS
DISCOVERY UTILITIES
----------- -----------
<S> <C> <C>
FROM OPERATIONS
Net investment
income (loss)..... $ 0 $ 0
Net realized gain
(loss) on
investments....... 3 1
Net unrealized
appreciation
(depreciation) of
investments during
the period........ 43 26
---------- ----------
Net increase
(decrease) in net
assets resulting
from operations... 46 27
---------- ----------
FROM VARIABLE LIFE
POLICY
TRANSACTIONS
Contract owners' net
payments.......... 11 5
Mortality and
expense risk
charges........... 0 (1)
Cost of insurance
and administrative
charges........... (3) (2)
Surrenders.......... 0 (1)
Death benefits...... 0 0
Net policy loan
repayments
(withdrawals)..... 0 0
Transfers from other
portfolios........ 151 149
---------- ----------
Net increase in net
assets resulting
from variable life
policy
transactions...... 159 150
---------- ----------
Net increase in net
assets............ 205 177
---------- ----------
Net assets,
beginning of
year.............. 0 0
---------- ----------
Net assets, end of
year.............. $ 205 $ 177
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-43
<PAGE>
THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS, CONTINUED
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
OPPENHEIMER
OPPENHEIMER OPPENHEIMER GROWTH OPPENHEIMER OPPENHEIMER
AGGRESSIVE CAPITAL AND MONEY STRATEGIC
GROWTH APPRECIATION INCOME FUND BOND
----------- ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment
income (loss)..... $ 0 $ 4 $ 3 $ 60 $ 15
Net realized gain
(loss) on
investments....... 0 44 4 1 0
Net unrealized
appreciation
(depreciation) of
investments during
the period........ 850 736 210 0 0
---------- ---------- ---------- ---------- ----------
Net increase
(decrease) in net
assets resulting
from operations... 850 784 217 61 15
---------- ---------- ---------- ---------- ----------
FROM VARIABLE LIFE
POLICY
TRANSACTIONS
Contract owners' net
payments.......... 279 457 147 78 41
Mortality and
expense risk
charges........... (10) (16) (10) (10) (3)
Cost of insurance
and administrative
charges........... (122) (176) (77) (55) (36)
Surrenders.......... (29) (71) (4) (17) (4)
Death benefits...... 0 0 0 0 0
Net policy loan
repayments
(withdrawals)..... (13) (37) (8) 0 0
Transfers from other
portfolios........ 631 1,324 1,288 2,036 441
---------- ---------- ---------- ---------- ----------
Net increase in net
assets resulting
from variable life
policy
transactions...... 736 1,481 1,336 2,032 439
---------- ---------- ---------- ---------- ----------
Net increase in net
assets............ 1,586 2,265 1,553 2,093 454
---------- ---------- ---------- ---------- ----------
Net assets,
beginning of
year.............. 598 1,011 359 303 142
---------- ---------- ---------- ---------- ----------
Net assets, end of
year.............. $ 2,184 $ 3,276 $ 1,912 $ 2,396 $ 596
========== ========== ========== ========== ==========
<CAPTION>
OPPENHEIMER OPPENHEIMER
GLOBAL HIGH
SECURITIES INCOME
----------- -----------
<S> <C> <C>
FROM OPERATIONS
Net investment
income (loss)..... $ 0 $ 0
Net realized gain
(loss) on
investments....... 0 0
Net unrealized
appreciation
(depreciation) of
investments during
the period........ 66 1
---------- ----------
Net increase
(decrease) in net
assets resulting
from operations... 66 1
---------- ----------
FROM VARIABLE LIFE
POLICY
TRANSACTIONS
Contract owners' net
payments.......... 23 3
Mortality and
expense risk
charges........... 0 0
Cost of insurance
and administrative
charges........... (6) 0
Surrenders.......... (2) 0
Death benefits...... 0 0
Net policy loan
repayments
(withdrawals)..... (2) 0
Transfers from other
portfolios........ 285 60
---------- ----------
Net increase in net
assets resulting
from variable life
policy
transactions...... 298 63
---------- ----------
Net increase in net
assets............ 364 64
---------- ----------
Net assets,
beginning of
year.............. 0 0
---------- ----------
Net assets, end of
year.............. $ 364 $ 64
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-44
<PAGE>
THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS, CONTINUED
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
VAN ECK VAN ECK
HARD REAL
ASSET ESTATE TOTAL
----------- ----------- -----------
<S> <C> <C> <C>
FROM OPERATIONS
Net investment
income (loss)..... $ 0 $ 0 $ 107
Net realized gain
(loss) on
investments....... 0 0 239
Net unrealized
appreciation
(depreciation) of
investments during
the period........ 1 0 6,566
---------- ---------- ----------
Net increase
(decrease) in net
assets resulting
from operations... 1 0 6,912
---------- ---------- ----------
FROM VARIABLE LIFE
POLICY
TRANSACTIONS
Contract owners' net
payments.......... 0 1 5,033
Mortality and
expense risk
charges........... 0 0 (219)
Cost of insurance
and administrative
charges........... 0 0 (2,269)
Surrenders.......... 0 0 (950)
Death benefits...... 0 0 0
Net policy loan
repayments
(withdrawals)..... 0 0 (319)
Transfers from other
portfolios........ 10 0 18,406
---------- ---------- ----------
Net increase in net
assets resulting
from variable life
policy
transactions...... 10 1 19,682
---------- ---------- ----------
Net increase in net
assets............ 11 1 26,594
---------- ---------- ----------
Net assets,
beginning of
year.............. 0 0 13,859
---------- ---------- ----------
Net assets, end of
year.............. $ 11 $ 1 $ 40,453
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-45
<PAGE>
THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
PIC
PIC GROWTH PIC PIC PIC
MONEY AND INTERNATIONAL GLOBAL SMALL
MARKET INCOME EQUITY INCOME CAP VALUE
----------- ----------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss)............ $ 4 $ 24 $ 1 $ 6 $ 4
Net realized gain (loss) on
investments........................... 0 136 67 7 81
Net unrealized appreciation
(depreciation) of investments during
the period............................ 0 (239) 112 1 (208)
---------- ---------- ---------- ---------- ----------
Net increase (decrease) in net assets
resulting from operations............. 4 (79) 180 14 (123)
---------- ---------- ---------- ---------- ----------
FROM VARIABLE LIFE POLICY TRANSACTIONS
Contract owners' net payments........... 196 654 467 75 326
Mortality and expense risk charges...... (1) (14) (9) (1) (6)
Cost of insurance and administrative
charges............................... (7) (262) (154) (25) (107)
Surrenders.............................. (18) (205) (59) (5) (48)
Death benefits.......................... (2) (3) (5) (2)
Net policy loan repayments
(withdrawals)......................... 0 (29) (10) (6) 7
Transfers from other portfolios......... 78 872 504 153 166
---------- ---------- ---------- ---------- ----------
Net increase in net assets resulting
from variable life policy
transactions.......................... 248 1,014 736 186 336
---------- ---------- ---------- ---------- ----------
Net increase in net assets.............. 252 935 916 200 213
---------- ---------- ---------- ---------- ----------
Net assets, beginning of year........... 51 1,004 549 112 569
---------- ---------- ---------- ---------- ----------
Net assets, end of year................. $ 303 $ 1,939 $ 1,465 $ 312 $ 782
========== ========== ========== ========== ==========
<CAPTION>
CALVERT
SOCIAL
PIC PIC SMALL CALVERT
CORE CAPITAL CAP SOCIAL
US EQUITY GROWTH GROWTH BALANCED
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss)............ $ 8 $ 10 $ 0 $ 1
Net realized gain (loss) on
investments........................... 9 44 0 1
Net unrealized appreciation
(depreciation) of investments during
the period............................ 153 417 0 0
---------- ---------- ---- ----
Net increase (decrease) in net assets
resulting from operations............. 170 471 0 2
---------- ---------- ---- ----
FROM VARIABLE LIFE POLICY TRANSACTIONS
Contract owners' net payments........... 265 585 1 12
Mortality and expense risk charges...... (7) (12) 0 0
Cost of insurance and administrative
charges............................... (112) (209) 0 (2)
Surrenders.............................. (22) (35) 0 0
Death benefits.......................... (3) (5) 0 0
Net policy loan repayments
(withdrawals)......................... 2 (20) 0 0
Transfers from other portfolios......... 810 1,247 3 17
---------- ---------- ---- ----
Net increase in net assets resulting
from variable life policy
transactions.......................... 933 1,551 4 27
---------- ---------- ---- ----
Net increase in net assets.............. 1,103 2,022 4 29
---------- ---------- ---- ----
Net assets, beginning of year........... 419 636 0 0
---------- ---------- ---- ----
Net assets, end of year................. $ 1,522 $ 2,658 $ 4 $ 29
========== ========== ==== ====
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-46
<PAGE>
THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS, CONTINUED
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
MFS
MFS GROWTH MFS OPPENHEIMER
EMERGING MFS WITH TOTAL AGGRESSIVE
GROWTH RESEARCH INCOME RETURN GROWTH
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment
income (loss)..... $ 0 $ 1 $ 0 $ 0 $ 1
Net realized gain
(loss) on
investments....... (8) 5 0 0 4
Net unrealized
appreciation
(depreciation) of
investments during
the period........ 114 163 35 7 61
---------- ---------- ---------- ---------- ----------
Net increase
(decrease) in net
assets resulting
from operations... 106 169 35 7 66
---------- ---------- ---------- ---------- ----------
FROM VARIABLE LIFE
POLICY
TRANSACTIONS
Contract owners' net
payments.......... 150 341 58 20 147
Mortality and
expense risk
charges........... (3) (6) (1) (1) (3)
Cost of insurance
and administrative
charges........... (54) (94) (15) (4) (50)
Surrenders.......... (8) (6) 0 0 (7)
Death benefits...... (2) (5) 0 0 (1)
Net policy loan
repayments
(withdrawals)..... 17 17 0 0 0
Transfers from other
portfolios........ 431 878 408 107 390
---------- ---------- ---------- ---------- ----------
Net increase in net
assets resulting
from variable life
policy
transactions...... 531 1,125 450 122 476
---------- ---------- ---------- ---------- ----------
Net increase in net
assets............ 637 1,294 485 129 542
---------- ---------- ---------- ---------- ----------
Net assets,
beginning of
year.............. 59 121 7 3 56
---------- ---------- ---------- ---------- ----------
Net assets, end of
year.............. $ 696 $ 1,415 $ 492 $ 132 $ 598
========== ========== ========== ========== ==========
<CAPTION>
OPPENHEIMER
GROWTH OPPENHEIMER
OPPENHEIMER AND STRATEGIC
GROWTH INCOME BOND TOTAL
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
FROM OPERATIONS
Net investment
income (loss)..... $ 2 $ 0 $ 0 $ 62
Net realized gain
(loss) on
investments....... 21 1 0 368
Net unrealized
appreciation
(depreciation) of
investments during
the period........ 113 27 1 757
---------- ---------- ---- -------
Net increase
(decrease) in net
assets resulting
from operations... 136 28 1 1,187
---------- ---------- ---- -------
FROM VARIABLE LIFE
POLICY
TRANSACTIONS
Contract owners' net
payments.......... 231 45 36 3,609
Mortality and
expense risk
charges........... (4) (1) 0 (69)
Cost of insurance
and administrative
charges........... (70) (14) (10) (1,189)
Surrenders.......... (4) (1) 0 (418)
Death benefits...... (3) 0 0 (31)
Net policy loan
repayments
(withdrawals)..... (1) 0 0 (23)
Transfers from other
portfolios........ 651 291 104 7,110
---------- ---------- ---- -------
Net increase in net
assets resulting
from variable life
policy
transactions...... 800 320 130 8,989
---------- ---------- ---- -------
Net increase in net
assets............ 936 348 131 10,176
---------- ---------- ---- -------
Net assets,
beginning of
year.............. 75 11 11 3,683
---------- ---------- ---- -------
Net assets, end of
year.............. $ 1,011 $ 359 $142 $13,859
========== ========== ==== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-47
<PAGE>
THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
PIC
PIC GROWTH PIC PIC PIC
MONEY AND INTERNATIONAL GLOBAL SMALL
MARKET INCOME EQUITY INCOME CAP VALUE
----------- ----------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss)............ $ 1 $ 7 $ 9 $ 9 $ 2
Net realized gain (loss) on
investments........................... 0 133 30 1 62
Net unrealized appreciation
(depreciation) of investments during
the period............................ 0 (19) (31) (4) 38
---------- ---------- ---------- ---------- ----------
Net increase (decrease) in net assets
resulting from operations............. 1 121 8 6 102
---------- ---------- ---------- ---------- ----------
FROM VARIABLE LIFE POLICY TRANSACTIONS
Contract owners' net payments........... 35 321 216 31 188
Mortality and expense risk charges...... 0 (5) (3) (1) (3)
Cost of insurance and administrative
charges............................... (1) (113) (76) (10) (77)
Surrenders.............................. 0 (7) (2) 0 (6)
Death benefits.......................... 0 0 0 0 0
Net policy loan repayments
(withdrawals)......................... 0 0 0 0 (19)
Transfers from other portfolios......... 2 537 284 65 255
---------- ---------- ---------- ---------- ----------
Net increase in net assets resulting
from variable life policy
transactions.......................... 36 733 419 85 338
---------- ---------- ---------- ---------- ----------
Net increase in net assets.............. 37 854 427 91 440
---------- ---------- ---------- ---------- ----------
Net assets, beginning of year........... 14 150 122 21 129
---------- ---------- ---------- ---------- ----------
Net assets, end of year................. $ 51 $ 1,004 $ 549 $ 112 $ 569
========== ========== ========== ========== ==========
<CAPTION>
CALVERT
SOCIAL
PIC PIC SMALL CALVERT
CORE CAPITAL CAP SOCIAL
US EQUITY GROWTH GROWTH BALANCED
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss)............ $ 3 $ 4 $ 0 $ 0
Net realized gain (loss) on
investments........................... 33 39 0 0
Net unrealized appreciation
(depreciation) of investments during
the period............................ 21 54 0 0
---------- ---------- ---- ----
Net increase (decrease) in net assets
resulting from operations............. 57 97 0 0
---------- ---------- ---- ----
FROM VARIABLE LIFE POLICY TRANSACTIONS
Contract owners' net payments........... 137 216 0 0
Mortality and expense risk charges...... (2) (3) 0 0
Cost of insurance and administrative
charges............................... (47) (79) 0 0
Surrenders.............................. (5) (2) 0 0
Death benefits.......................... 0 0 0 0
Net policy loan repayments
(withdrawals)......................... (18) 0 0 0
Transfers from other portfolios......... 221 302 0 0
---------- ---------- ---- ----
Net increase in net assets resulting
from variable life policy
transactions.......................... 286 434 0 0
---------- ---------- ---- ----
Net increase in net assets.............. 343 531 0 0
---------- ---------- ---- ----
Net assets, beginning of year........... 76 105 0 0
---------- ---------- ---- ----
Net assets, end of year................. $ 419 $ 636 $ 0 $ 0
========== ========== ==== ====
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-48
<PAGE>
THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS, CONTINUED
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
MFS
MFS GROWTH MFS OPPENHEIMER
EMERGING MFS WITH TOTAL AGGRESSIVE
GROWTH RESEARCH INCOME RETURN GROWTH
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment
income (loss)..... $ 0 $ 0 $ 0 $ 0 $ 0
Net realized gain
(loss) on
investments....... (1) 0 0 0 0
Net unrealized
appreciation
(depreciation) of
investments during
the period........ (1) 1 0 0 0
---------- ---------- ---------- ---------- ----------
Net increase
(decrease) in net
assets resulting
from operations... (2) 1 0 0 0
---------- ---------- ---------- ---------- ----------
FROM VARIABLE LIFE
POLICY
TRANSACTIONS
Contract owners' net
payments.......... 18 32 0 1 17
Mortality and
expense risk
charges........... 0 (1) 0 0 0
Cost of insurance
and administrative
charges........... (4) (6) 0 0 (4)
Surrenders.......... (4) (1) 0 0 (4)
Death benefits...... 0 0 0 0 0
Net policy loan
repayments
(withdrawals)..... (16) (17) 0 0 0
Transfers from other
portfolios........ 67 113 7 2 47
---------- ---------- ---------- ---------- ----------
Net increase in net
assets resulting
from variable life
policy
transactions...... 61 120 7 3 56
---------- ---------- ---------- ---------- ----------
Net increase in net
assets............ 59 121 7 3 56
---------- ---------- ---------- ---------- ----------
Net assets,
beginning of
year.............. 0 0 0 0 0
---------- ---------- ---------- ---------- ----------
Net assets, end of
year.............. $ 59 $ 121 $ 7 $ 3 $ 56
========== ========== ========== ========== ==========
<CAPTION>
OPPENHEIMER
GROWTH OPPENHEIMER
OPPENHEIMER AND STRATEGIC
GROWTH INCOME BOND TOTAL
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
FROM OPERATIONS
Net investment
income (loss)..... $ 0 $ 0 $ 1 $ 36
Net realized gain
(loss) on
investments....... 0 0 0 297
Net unrealized
appreciation
(depreciation) of
investments during
the period........ 0 0 0 59
---------- ---------- ---- ------
Net increase
(decrease) in net
assets resulting
from operations... 0 0 1 392
---------- ---------- ---- ------
FROM VARIABLE LIFE
POLICY
TRANSACTIONS
Contract owners' net
payments.......... 22 2 1 1,237
Mortality and
expense risk
charges........... 0 0 0 (18)
Cost of insurance
and administrative
charges........... (4) (1) (1) (423)
Surrenders.......... 0 0 0 (31)
Death benefits...... 0 0 0 0
Net policy loan
repayments
(withdrawals)..... 0 0 0 (70)
Transfers from other
portfolios........ 57 10 10 1,979
---------- ---------- ---- ------
Net increase in net
assets resulting
from variable life
policy
transactions...... 75 11 10 2,674
---------- ---------- ---- ------
Net increase in net
assets............ 75 11 11 3,066
---------- ---------- ---- ------
Net assets,
beginning of
year.............. 0 0 0 617
---------- ---------- ---- ------
Net assets, end of
year.............. $ 75 $ 11 $ 11 $3,683
========== ========== ==== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-49
<PAGE>
THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998, AND 1997
(IN THOUSANDS)
1. ORGANIZATION
Protective Variable Life Separate Account (Separate Account) was established
by Protective Life Insurance Company (Protective Life) under the provisions of
Tennessee law and commenced operations on June 19, 1996. The Separate Account is
a separate investment account to which assets are allocated to support the
benefits payable under flexible premium variable life insurance polices.
Protective Life has structured the Separate Account into a unit investment
trust form registered with the U.S. Securities and Exchange Commission under the
Investment Company Act of 1940, as amended.
At December 31, 1998 and 1997, the Separate Account was comprised of seven
proprietary sub-accounts and ten independent sub-accounts. The seven proprietary
sub-accounts were the PIC Money Market, PIC Growth and Income, PIC International
Equity, PIC Global Income, PIC Small Cap Value, PIC Core US Equity, and PIC
Capital Growth sub-accounts. Funds are transferred to Protective Investment
Company in exchange for shares of the corresponding portfolio. The ten
independent sub-accounts were the Calvert Social Small Cap Growth, Calvert
Social Balanced, MFS Emerging Growth, MFS Research, MFS Growth with Income, MFS
Total Return, Oppenheimer Aggressive Growth, Oppenheimer Growth, Oppenheimer
Growth and Income, and Oppenheimer Strategic Bond, sub-accounts. These ten
independent sub-accounts were added July 1, 1997 with sales beginning on that
date. The Separate Account invests contract owners' funds in exchange for shares
in the independent funds. The and then holds the shares for the contract owners.
During the year ended December 31, 1999, the Separate Account added six
additional sub-accounts. The additional sub-accounts are the MFS New Discovery,
MFS Utilities, Oppenheimer Global Securities, Oppenheimer High Income, Van Eck
Hard Asset, and Van Eck Real Estate sub-accounts. These six sub-accounts were
added May 1, 1999, with sales beginning in 1999. Additionally, the Oppenheimer
Growth Fund changed its name to the Oppenheimer Capital Appreciation Fund, and
the PIC Money Market account was replaced with the Oppenheimer Money Fund.
Results of operations and changes in net assets for the PIC Money Market
sub-account and the Oppenheimer Money Fund are combined for the year ended
December 31, 1999.
Gross premiums from the contracts are allocated to the sub-accounts in
accordance with contract owner instructions and are recorded as life policy
contract transactions in the statement of changes in net assets. Such amounts
are used to provide money to pay contract values under the contracts (Note 4).
The Separate Account's assets are the property of Protective Life.
Contract owners may allocate some or all of gross premiums or transfer some
or all of the contract value to the Guaranteed Account, which is part of
Protective Life's General Account. The assets of Protective Life's General
Account support its insurance and annuity obligations and are subject to
Protective Life's general liabilities from business operations. The Guaranteed
Account's value for the years ended December 31, 1999 and 1998 was $4.6 million
and $0.7 million, respectively.
Transfers to/from other portfolios, included in the statement of changes in
net assets, are transfers between the individual sub-accounts and the
sub-accounts and the Guaranteed Account.
F-50
<PAGE>
THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998, AND 1997
(IN THOUSANDS)
2. SIGNIFICANT ACCOUNTING POLICIES
INVESTMENT VALUATION: Investments are made in shares and are valued at the
net asset values of the respective portfolios. Transactions with the Funds are
recorded on the trade date. Dividend income is recorded on the ex-dividend date.
REALIZED GAINS AND LOSSES: Realized gains and losses on investments include
gains and losses on redemptions of the Fund's shares (determined on the
last-in-first-out (LIFO) basis) and capital gain distributions from the Fund.
DIVIDEND INCOME AND CAPITAL GAIN DISTRIBUTIONS: Dividend income and capital
gain distributions are recorded on the ex-dividend date. Distributions are from
net investment income and net realized gains recorded in the Investment Company
financials.
USE OF ESTIMATES: The preparation of financial statements in conformity
with accounting principles generally accepted in the United States requires
management to make various estimates that affect the reported amounts of assets
and liabilities, at the date of the financial statements, as well as the
reported amounts of income and expenses, during the reporting period. Actual
results could differ from those estimates.
FEDERAL INCOME TAXES: The result of operations of the Separate Account is
included in the federal income tax return of Protective Life. Under the
provisions of the contracts, Protective Life has the right to charge the
Separate Account for federal income tax attributable to the Separate Account. No
charge is currently being made against the Separate Account for such tax.
F-51
<PAGE>
THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998, AND 1997
(IN THOUSANDS)
3. INVESTMENTS
At December 31, 1999 and 1998, the investments by the respective
sub-accounts were as follows (in thousands, except share data):
<TABLE>
<CAPTION>
1999
-----------------------------------
SHARES COST MARKET VALUE
--------- -------- ------------
<S> <C> <C> <C>
PIC Growth and Income........................ 199,873 $ 3,101 $ 2,916
PIC International Equity..................... 181,309 2,585 3,396
PIC Global Income............................ 75,499 803 791
PIC Small Cap Value.......................... 130,298 1,321 1,130
PIC Core US Equity........................... 162,705 3,634 4,430
PIC Capital Growth........................... 254,862 5,049 6,719
Calvert Social Small Cap Growth.............. 2,937 31 39
Calvert Social Balanced...................... 55,810 123 121
MFS Emerging Growth.......................... 92,378 2,055 3,506
MFS Research................................. 161,214 2,983 3,781
MFS Growth with Income....................... 91,675 1,820 1,954
MFS Total Return............................. 34,134 607 606
MFS New Discovery............................ 11,782 161 203
MFS Utilities................................ 7,306 151 177
Oppenheimer Aggressive Growth................ 26,609 1,279 2,192
Oppenheimer Capital Appreciation............. 65,531 2,417 3,269
Oppenheimer Growth and Income................ 78,728 1,702 1,939
Oppenheimer Money Fund....................... 2,384,042 2,384 2,385
Oppenheimer Strategic Bond................... 124,304 617 618
Oppenheimer Global Securities................ 10,824 295 362
Oppenheimer High Income...................... 5,986 64 64
Van Eck Hard Asset........................... 1,017 11 11
Van Eck Real Estate.......................... 120 1 1
--------- ------- -------
4,158,943 $33,194 $40,610
========= ======= =======
</TABLE>
F-52
<PAGE>
THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998, AND 1997
(IN THOUSANDS)
3. INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
1998
-----------------------------------
SHARES COST MARKET VALUE
--------- -------- ------------
<S> <C> <C> <C>
PIC Money Market............................. 303,636 $ 304 $ 304
PIC Growth and Income........................ 136,591 2,179 1,922
PIC International Equity..................... 100,826 1,360 1,442
PIC Global Income............................ 28,951 313 308
PIC Small Cap Value.......................... 88,832 952 769
PIC Core US Equity........................... 67,806 1,329 1,502
PIC Capital Growth........................... 125,926 2,152 2,627
Calvert Social Small Cap Growth.............. 322 3 4
Calvert Social Balanced...................... 13,587 29 29
MFS Emerging Growth.......................... 32,534 585 699
MFS Research................................. 74,245 1,250 1,414
MFS Growth With Income....................... 23,690 441 477
MFS Total Return............................. 7,338 126 133
Oppenheimer Aggressive Growth................ 13,335 537 598
Oppenheimer Growth........................... 27,601 899 1,012
Oppenheimer Growth and Income................ 17,530 332 359
Oppenheimer Strategic Bond................... 27,409 139 140
--------- ------- -------
1,090,159 $12,930 $13,739
========= ======= =======
</TABLE>
During the year ended December 31, 1999, transactions in shares were as
follows (in thousands, except share data):
<TABLE>
<CAPTION>
PIC
GROWTH PIC PIC PIC
AND INTERNATIONAL GLOBAL SMALL
INCOME EQUITY INCOME CAP VALUE
----------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
Shares purchased.................... 98,819 86,028 63,125 63,864
Shares received from reinvestment of
dividends......................... 2,383 2,972 280 24
---------- ---------- ---------- ----------
Total shares acquired............... 101,202 89,000 63,405 63,888
Shares redeemed..................... (37,920) (8,517) (16,857) (22,422)
---------- ---------- ---------- ----------
Net increase in shares owned........ 63,282 80,483 46,548 41,466
Shares owned, beginning of period... 136,591 100,826 28,951 88,832
---------- ---------- ---------- ----------
Shares owned, end of period......... 199,873 181,309 75,499 130,298
========== ========== ========== ==========
Cost of shares acquired............. $ 1,473 $ 1,356 $ 668 $ 560
========== ========== ========== ==========
Cost of shares redeemed............. $ (552) $ (130) $ (178) $ (192)
========== ========== ========== ==========
<CAPTION>
CALVERT
SOCIAL
PIC PIC SMALL
CORE CAPITAL CAP
US EQUITY GROWTH GROWTH
----------- ----------- -----------
<S> <C> <C> <C>
Shares purchased.................... 111,639 138,272 3,805
Shares received from reinvestment of
dividends......................... 568 2,946 1
---------- ---------- -------
Total shares acquired............... 112,207 141,218 3,806
Shares redeemed..................... (17,308) (12,282) (1,191)
---------- ---------- -------
Net increase in shares owned........ 94,899 128,936 2,615
Shares owned, beginning of period... 67,806 125,926 322
---------- ---------- -------
Shares owned, end of period......... 162,705 254,862 2,937
========== ========== =======
Cost of shares acquired............. $ 2,731 $ 3,173 $ 42
========== ========== =======
Cost of shares redeemed............. $ (425) $ (276) $ (14)
========== ========== =======
</TABLE>
F-53
<PAGE>
THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998, AND 1997
(IN THOUSANDS)
3. INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
MFS
CALVERT MFS GROWTH MFS
SOCIAL EMERGING MFS WITH TOTAL
BALANCED GROWTH RESEARCH INCOME RETURN
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Shares purchased.... 47,305 66,347 98,758 77,155 30,678
Shares received from
reinvestment of
dividends......... 5,331 0 1,167 334 781
---------- ---------- ---------- ---------- ----------
Total shares
acquired.......... 52,636 66,347 99,925 77,489 31,459
Shares redeemed..... (10,413) (6,503) (12,956) (9,504) (4,663)
---------- ---------- ---------- ---------- ----------
Net increase in
shares owned...... 42,223 59,844 86,969 67,985 26,796
Shares owned,
beginning of
period............ 13,587 32,534 74,245 23,690 7,338
---------- ---------- ---------- ---------- ----------
Shares owned, end of
period............ 55,810 92,378 161,214 91,675 34,134
========== ========== ========== ========== ==========
Cost of shares
acquired.......... $ 117 $ 1,627 $ 1,992 $ 1,573 $ 565
========== ========== ========== ========== ==========
Cost of shares
redeemed.......... $ (23) $ (157) $ (260) $ (194) $ (84)
========== ========== ========== ========== ==========
<CAPTION>
MFS
NEW MFS
DISCOVERY UTILITIES
----------- -----------
<S> <C> <C>
Shares purchased.... 14,365 12,178
Shares received from
reinvestment of
dividends......... 186 0
---------- ----------
Total shares
acquired.......... 14,551 12,178
Shares redeemed..... (2,769) (4,872)
---------- ----------
Net increase in
shares owned...... 11,782 7,306
Shares owned,
beginning of
period............ 0 0
---------- ----------
Shares owned, end of
period............ 11,782 7,306
========== ==========
Cost of shares
acquired.......... $ 194 $ 254
========== ==========
Cost of shares
redeemed.......... $ (34) $ (103)
========== ==========
</TABLE>
<TABLE>
<CAPTION>
OPPENHEIMER
OPPENHEIMER OPPENHEIMER GROWTH OPPENHEIMER OPPENHEIMER
AGGRESSIVE CAPITAL AND MONEY STRATEGIC
GROWTH APPRECIATION INCOME FUND BOND
----------- ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Shares purchased.... 15,443 40,681 71,164 2,999,557 114,011
Shares received from
reinvestment of
dividends......... 0 1,264 331 59,899 3,193
---------- ---------- ---------- ---------- ----------
Total shares
acquired.......... 15,443 41,945 71,495 3,059,456 117,204
Shares redeemed..... (2,169) (4,015) (10,297) (979,050) (20,309)
---------- ---------- ---------- ---------- ----------
Net increase in
shares owned...... 13,274 37,930 61,198 2,080,406 96,895
Shares owned,
beginning of
period............ 13,335 27,601 17,530 303,636 27,409
---------- ---------- ---------- ---------- ----------
Shares owned, end of
period............ 26,609 65,531 78,728 2,384,042 124,304
========== ========== ========== ========== ==========
Cost of shares
acquired.......... $ 861 $ 1,676 $ 1,599 $ 3,060 $ 578
========== ========== ========== ========== ==========
Cost of shares
redeemed.......... $ (119) $ (159) $ (229) $ (979) $ (100)
========== ========== ========== ========== ==========
<CAPTION>
OPPENHEIMER OPPENHEIMER
GLOBAL HIGH
SECURITIES INCOME
----------- -----------
<S> <C> <C>
Shares purchased.... 11,509 5,994
Shares received from
reinvestment of
dividends......... 0 0
---------- ----------
Total shares
acquired.......... 11,509 5,994
Shares redeemed..... (685) (8)
---------- ----------
Net increase in
shares owned...... 10,824 5,986
Shares owned,
beginning of
period............ 0 0
---------- ----------
Shares owned, end of
period............ 10,824 5,986
========== ==========
Cost of shares
acquired.......... $ 313 $ 64
========== ==========
Cost of shares
redeemed.......... $ (17) $ 0
========== ==========
</TABLE>
F-54
<PAGE>
THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998, AND 1997
(IN THOUSANDS)
3. INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
VAN ECK VAN ECK
HARD REAL
ASSET ESTATE
----------- -----------
<S> <C> <C>
Shares purchased.... 1,019 155
Shares received from
reinvestment of
dividends......... 0 0
---------- ----------
Total shares
acquired.......... 1,019 155
Shares redeemed..... (2) (35)
========== ==========
Net increase in
shares owned...... 1,017 120
Shares owned,
beginning of
period............ 0 0
---------- ----------
Shares owned, end of
period............ 1,017 120
========== ==========
Cost of shares
acquired.......... $ 11 $ 1
========== ==========
Cost of shares
redeemed.......... $ 0 $ 0
========== ==========
</TABLE>
During the year ended December 31, 1998, transactions in shares were as
follows (in thousands, except share data):
<TABLE>
<CAPTION>
PIC
PIC GROWTH PIC PIC PIC
MONEY AND INTERNATIONAL GLOBAL SMALL
MARKET INCOME EQUITY INCOME CAP VALUE
----------- ----------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Shares purchased........................ 390,313 86,003 60,450 21,423 42,559
Shares received from reinvestment of
dividends............................. 4,328 11,648 4,758 1,268 11,171
---------- ---------- ---------- ---------- ----------
Total shares acquired................... 394,641 97,651 65,208 22,691 53,730
Shares redeemed......................... (141,893) (24,351) (7,919) (4,855) (12,859)
---------- ---------- ---------- ---------- ----------
Net increase in shares owned............ 252,748 73,300 57,289 17,836 40,871
Shares owned, beginning of period....... 50,888 63,291 43,537 11,115 47,961
---------- ---------- ---------- ---------- ----------
Shares owned, end of period............. 303,636 136,591 100,826 28,951 88,832
========== ========== ========== ========== ==========
Cost of shares acquired................. $ 395 $ 1,532 $ 897 $ 246 $ 553
========== ========== ========== ========== ==========
Cost of shares redeemed................. $ (142) $ (369) $ (108) $ (51) $ (137)
========== ========== ========== ========== ==========
<CAPTION>
CALVERT
SOCIAL
PIC PIC SMALL CALVERT
CORE CAPITAL CAP SOCIAL
US EQUITY GROWTH GROWTH BALANCED
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Shares purchased........................ 49,631 89,176 326 13,318
Shares received from reinvestment of
dividends............................. 1,000 2,619 4 988
---------- ---------- ---- -------
Total shares acquired................... 50,631 91,795 330 14,306
Shares redeemed......................... (5,556) (5,774) (14) (762)
---------- ---------- ---- -------
Net increase in shares owned............ 45,075 86,021 316 13,544
Shares owned, beginning of period....... 22,731 39,905 6 43
---------- ---------- ---- -------
Shares owned, end of period............. 67,806 125,926 322 13,587
========== ========== ==== =======
Cost of shares acquired................. $ 1,045 $ 1,689 $ 3 $ 31
========== ========== ==== =======
Cost of shares redeemed................. $ (114) $ (110) $ 0 $ (2)
========== ========== ==== =======
</TABLE>
F-55
<PAGE>
THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998, AND 1997
(IN THOUSANDS)
3. INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
MFS
MFS GROWTH MFS OPPENHEIMER
EMERGING MFS WITH TOTAL AGGRESSIVE
GROWTH RESEARCH INCOME RETURN GROWTH
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Shares purchased.... 34,078 73,609 23,570 7,302 12,591
Shares received from
reinvestment of
dividends......... 123 660 0 20 115
---------- ---------- ---------- ---------- ----------
Total shares
acquired.......... 34,201 74,269 23,570 7,322 12,706
Shares redeemed..... (5,378) (7,698) (306) (158) (744)
---------- ---------- ---------- ---------- ----------
Net increase in
shares owned...... 28,823 66,571 23,264 7,164 11,962
Shares owned,
beginning of
period............ 3,711 7,674 426 174 1,373
---------- ---------- ---------- ---------- ----------
Shares owned, end of
period............ 32,534 74,245 23,690 7,338 13,335
========== ========== ========== ========== ==========
Cost of shares
acquired.......... $ 623 $ 1,263 $ 439 $ 126 $ 511
========== ========== ========== ========== ==========
Cost of shares
redeemed.......... $ (98) $ (133) $ (6) $ (3) $ (31)
========== ========== ========== ========== ==========
<CAPTION>
OPPENHEIMER
GROWTH OPPENHEIMER
OPPENHEIMER AND STRATEGIC
GROWTH INCOME BOND
----------- ----------- -----------
<S> <C> <C> <C>
Shares purchased.... 25,217 17,480 26,918
Shares received from
reinvestment of
dividends......... 698 45 67
---------- ---------- -------
Total shares
acquired.......... 25,915 17,525 26,985
Shares redeemed..... (610) (576) (1,575)
---------- ---------- -------
Net increase in
shares owned...... 25,305 16,949 25,410
Shares owned,
beginning of
period............ 2,296 581 1,999
---------- ---------- -------
Shares owned, end of
period............ 27,601 17,530 27,409
========== ========== =======
Cost of shares
acquired.......... $ 846 $ 331 $ 137
========== ========== =======
Cost of shares
redeemed.......... $ (21) $ (11) $ (8)
========== ========== =======
</TABLE>
4. RELATED PARTY TRANSACTIONS
Contract owners' net payments represent premiums received from policyholders
less certain deductions made by Protective Life in accordance with policy terms.
These deductions include, where appropriate, sales, tax, surrender, cost of
insurance protection and administrative charges. These deductions are made to
the individual policies in accordance with the terms governing each policy as
set forth in the policy.
The net assets of each sub-account of the Separate Account reflect the
investment management fees and other operating expenses incurred by the Funds.
Protective Life offers a loan privilege to contract owners. Contract owners
may obtain loans using the contract as the only security for the loan. Loans may
be subject to provisions of the Internal Revenue Code of 1986, as amended. Loans
outstanding approximated $0.4 million and $0.1 million at December 31, 1999 and
1998, respectively.
F-56
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Directors and Share Owner
Protective Life Insurance Company
Birmingham, Alabama
We have reviewed the accompanying consolidated condensed balance sheet of
Protective Life Insurance Company and subsidiaries as of March 31, 2000, and the
related consolidated condensed statements of income for the three-month periods
ended March 31, 2000 and 1999, and consolidated condensed statements of cash
flows for the three-month periods ended March 31, 2000 and 1999. These financial
statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with auditing standards generally accepted in the United States, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the consolidated condensed interim financial statements
referred to above for them to be in conformity with accounting principles
generally accepted in the United States.
We previously audited in accordance with auditing standards generally
accepted in the United States, the consolidated balance sheet as of
December 31, 1999, and the related consolidated statements of income, share-
owner's equity, and cash flows for the year then ended (not presented herein),
and in our report dated February 23, 2000, we expressed an unqualified opinion
on those consolidated financial statements. In our opinion, the information set
forth in the accompanying consolidated condensed balance sheet as of
December 31, 1999, is fairly stated in all material respects in relation to the
consolidated balance sheet from which it has been derived.
/s/ PRICEWATERHOUSECOOPERS LLP
Birmingham, Alabama
April 26, 2000
F-57
<PAGE>
PROTECTIVE LIFE INSURANCE COMPANY
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
---------------------
2000 1999
--------- ---------
<S> <C> <C>
REVENUES
Premiums and policy fees.................................. $ 323,645 $ 269,738
Reinsurance ceded......................................... (145,487) (117,952)
--------- ---------
Premiums and policy fees, net of reinsurance ceded...... 178,158 151,786
Net investment income..................................... 163,821 149,454
Realized investment gains................................. 2,446 1,449
Other income.............................................. 10,985 3,371
--------- ---------
355,410 306,060
--------- ---------
BENEFITS AND EXPENSES
Benefits and settlement expenses (net of reinsurance
ceded: 2000-$96,754; 1999-$63,686)...................... 234,419 185,436
Amortization of deferred policy acquisition costs......... 37,518 30,952
Other operating expenses (net of reinsurance ceded:
2000-$48,662; 1999-$30,404)............................. 44,464 43,288
--------- ---------
316,401 259,676
--------- ---------
INCOME BEFORE INCOME TAX.................................... 39,009 46,384
INCOME TAX EXPENSE.......................................... 13,133 16,499
--------- ---------
NET INCOME.................................................. $ 25,876 $ 29,885
========= =========
</TABLE>
See notes to consolidated condensed financial statements
F-58
<PAGE>
PROTECTIVE LIFE INSURANCE COMPANY
CONSOLIDATED CONDENSED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
2000 1999
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Investments:
Fixed maturities.......................................... $ 6,774,435 $ 6,275,607
Equity securities......................................... 18,205 30,696
Mortgage loans on real estate............................. 1,968,703 1,946,690
Investment in real estate, net of accumulated
depreciation............................................ 15,643 15,582
Policy loans.............................................. 230,160 232,126
Other long-term investments............................... 82,291 68,890
Short-term investments.................................... 118,262 81,171
----------- -----------
Total investments....................................... 9,207,699 8,650,762
Cash........................................................ 25,085
Accrued investment income................................... 108,202 101,120
Accounts and premiums receivable, net of allowance for
uncollectible amounts..................................... 54,366 45,852
Reinsurance receivables..................................... 979,001 859,684
Deferred policy acquisition costs........................... 1,107,127 1,011,524
Property and equipment, net................................. 50,194 49,002
Other assets................................................ 62,573 27,712
Receivable from related parties............................. 9,204 13,059
Assets related to separate accounts
Variable Annuity.......................................... 1,910,097 1,778,618
Variable Universal Life................................... 50,720 40,293
Other..................................................... 3,573 3,517
----------- -----------
$13,567,841 $12,581,143
=========== ===========
LIABILITIES
Policy liabilities and accruals $ 5,508,989 $ 5,074,085
Stable value investment contract deposits................... 2,907,050 2,680,009
Annuity deposits............................................ 1,694,932 1,639,231
Other policyholders' funds.................................. 116,357 116,815
Other liabilities........................................... 329,014 293,862
Accrued income taxes........................................ (23,364) (25,833)
Deferred income taxes....................................... (25,910) (32,335)
Notes payable............................................... 2,332 2,338
Indebtedness to related parties............................. 14,000 14,000
Liabilities related to separate accounts
Variable Annuity.......................................... 1,910,097 1,778,618
Variable Universal Life................................... 50,720 40,293
Other..................................................... 3,573 3,517
----------- -----------
12,487,790 11,584,600
----------- -----------
COMMITMENTS AND CONTINGENT LIABILITIES -- NOTE B
SHARE-OWNER'S EQUITY
Preferred Stock, $1.00 par value, shares authorized and
issued: 2,000, liquidation preference $2,000.............. 2 2
Common Stock, $1 par value.................................. 5,000 5,000
Shares authorized and issued: 5,000,000
Additional paid-in capital.................................. 386,992 327,992
Note receivable from PLC Employee Stock Ownership Plan...... (4,841) (5,148)
Retained earnings........................................... 840,653 814,777
Accumulated other comprehensive income
Net unrealized gains (losses) on investments (net of
income tax (benefit): 2000-$(79,560); 1999-$(78,658))... (147,755) (146,080)
----------- -----------
1,080,051 996,543
----------- -----------
$13,567,841 $12,581,143
=========== ===========
</TABLE>
See notes to consolidated condensed financial statements
F-59
<PAGE>
PROTECTIVE LIFE INSURANCE COMPANY
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
-------------------------
2000 1999
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income................................................ $ 25,876 $ 29,885
Adjustments to reconcile net income to net cash provided
by operating activities:
Realized investment gains............................... (2,446) (1,449)
Amortization of deferred policy acquisition costs....... 37,517 30,952
Capitalization of deferred policy acquisition costs..... (94,812) (48,557)
Depreciation expense.................................... 1,934 1,739
Deferred income tax..................................... 7,534 (534)
Accrued income tax...................................... 2,835 15,204
Interest credited to universal life and investment
products............................................... 92,818 85,361
Policy fees assessed on universal life and investment
products............................................... (48,498) (36,243)
Change in accrued investment income and other
receivables............................................ (11,185) (24,999)
Change in policy liabilities and other policyholders'
funds of traditional life and health products.......... 99,007 36,010
Change in other liabilities............................. 12,048 (20,396)
Other (net)............................................. 27,036 2,298
----------- -----------
Net cash provided by operating activities................... 149,664 69,271
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Maturities and principal reductions of investments
Investments available for sale.......................... 2,358,438 3,682,197
Other................................................... 14,873 59,209
Sale of investments
Investments available for sale.......................... 260,445 214,724
Other................................................... 17,096 47,959
Cost of investments acquired
Investments available for sale.......................... (2,873,722) (3,947,000)
Other................................................... (59,275) (163,781)
Acquisition and bulk reinsurance assumptions, net of
cash received.......................................... (150,903)
Purchase of property and equipment........................ (1,928) (5,544)
----------- -----------
Net cash used in investing activities....................... (434,976) (112,236)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings under line of credit arrangements
and debt................................................ 959,200 270,100
Principal payments on line of credit arrangements and
debt.................................................... (959,200) (270,100)
Capital contribution from PLC............................. 59,000
Investment product deposits and change in universal life
deposits................................................ 564,747 401,145
Investment product withdrawals............................ (313,350) (358,180)
----------- -----------
Net cash provided by financing activities................... 310,397 42,965
----------- -----------
INCREASE IN CASH............................................ 25,085 0
CASH AT BEGINNING OF PERIOD................................. 0 0
----------- -----------
CASH AT END OF PERIOD....................................... $ 25,085 $ 0
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period:
Interest on debt........................................ $ 1,526 $ 517
Income taxes............................................ $ 1,986 $
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING
ACTIVITIES
Reduction of principal on note from ESOP.................. $ 307 $ 183
Acquisitions and bulk reinsurance assumptions
Assets acquired........................................... $ 496,221
Liabilities assumed....................................... (345,318)
----------- -----------
Net....................................................... $ 150,903
=========== ===========
</TABLE>
See notes to consolidated condensed financial statements
F-60
<PAGE>
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements of
Protective Life Insurance Company and subsidiaries ("Protective Life") have been
prepared in accordance with accounting principles generally accepted in the
United States for interim financial information and with the instructions to
Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all
of the disclosures required by accounting principles generally accepted in the
United States for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals) necessary for a fair
presentation have been included. Operating results for the three month period
ended March 31, 2000, are not necessarily indicative of the results that may be
expected for the year ending December 31, 2000. The year-end consolidated
condensed balance sheet data was derived from audited financial statements, but
does not include all disclosures required by accounting principles generally
accepted in the United States . For further information, refer to the
consolidated financial statements and notes thereto included in Protective
Life's annual report on Form 10-K for the year ended December 31, 1999.
Protective Life is a wholly-owned subsidiary of Protective Life Corporation
("PLC").
NOTE B -- COMMITMENTS AND CONTINGENT LIABILITIES
Under insurance guaranty fund laws in most states, insurance companies doing
business therein can be assessed up to prescribed limits for policyholder losses
incurred by insolvent companies. Protective Life does not believe such
assessments will be materially different from amounts already provided for in
the financial statements. Most of these laws do provide, however, that an
assessment may be excused or deferred if it would threaten an insurer's own
financial strength.
A number of civil jury verdicts have been returned against insurers in the
jurisdictions in which Protective Life does business involving the insurers'
sales practices, alleged agent misconduct, failure to properly supervise agents,
and other matters. Increasingly these lawsuits have resulted in the award of
substantial judgments against the insurers that are disproportionate to the
actual damages, including material amounts of punitive damages. In addition, in
some class action and other lawsuits involving insurers' sales practices,
insurers have made material settlement payments. In some states, including
Alabama (where Protective Life maintains its headquarters), juries have
substantial discretion in awarding punitive damages, which creates the potential
for unpredictable material adverse judgments in any given lawsuit. Protective
Life, like other insurers, in the ordinary course of business, is involved in
such litigation or alternatively in arbitration. Although the outcome of any
such litigation or arbitration cannot be predicted with certainty, Protective
Life believes that at the present time there are no pending or threatened
lawsuits that are reasonably likely to have a material adverse effect on the
financial position, results of operations, or liquidity of Protective Life.
NOTE C -- OPERATING SEGMENTS
Protective Life operates seven divisions whose principal strategic focuses
can be grouped into three general categories: life insurance, specialty
insurance products, and retirement savings and investment products. The
following table sets forth operating segment income and assets for the periods
shown. Adjustments represent the inclusion of unallocated realized investment
gains (losses) and the recognition of income tax expense. There are no asset
adjustments.
F-61
<PAGE>
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE C -- OPERATING SEGMENTS (CONTINUED)
In the 2000 first quarter, certain health insurance lines were transferred
from the Dental and Consumer Benefits Division to the Corporate and Other
segment in order to reflect management's current focus. Prior period results
have been restated to reflect the change.
<TABLE>
<CAPTION>
OPERATING SEGMENT INCOME FOR THE
THREE MONTHS ENDED MARCH 31, 2000
(IN THOUSANDS)
------------------------------------------------------------------
SPECIALTY INSURANCE
PRODUCTS
LIFE INSURANCE -------------------------
-------------------------------------- DENTAL AND
INDIVIDUAL CONSUMER FINANCIAL
LIFE WEST COAST ACQUISITIONS BENEFITS INSTITUTIONS
---------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C>
Premiums and policy fees.......................... $ 81,854 $ 23,270 $34,790 $ 72,252 $ 87,085
Reinsurance ceded................................. (56,081) (16,005) (7,942) (27,410) (38,049)
-------- -------- ------- -------- --------
Net of reinsurance ceded........................ 25,773 7,265 26,848 44,842 49,036
Net investment income............................. 14,328 21,795 28,915 2,485 11,121
Realized investment gains (losses)................
Other income...................................... (672) 2,947 6,766
-------- -------- ------- -------- --------
Total revenues................................ 39,429 29,060 55,763 50,274 66,923
-------- -------- ------- -------- --------
Benefits and settlement expenses 23,233 20,143 33,363 33,892 31,270
Amortization of deferred policy acquisition
costs........................................... 7,216 3,102 3,930 2,712 13,290
Other operating expenses.......................... (922) (2,805) 6,706 10,520 15,507
-------- -------- ------- -------- --------
Total benefits and expenses................... 29,527 20,440 43,999 47,124 60,067
-------- -------- ------- -------- --------
Income before income tax.......................... 9,902 8,620 11,764 3,150 6,856
</TABLE>
<TABLE>
<CAPTION>
RETIREMENT SAVINGS AND
INVESTMENT PRODUCTS
--------------------------------------------------------------
STABLE CORPORATE
VALUE INVESTMENT AND TOTAL
PRODUCTS PRODUCTS OTHER ADJUSTMENTS CONSOLIDATED
-------- ---------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Premiums and policy fees........................... $ 7,291 $ 17,103 $323,645
Reinsurance ceded.................................. (145,487)
------- -------- --------
Net of reinsurance ceded......................... 7,291 17,103 178,158
Net investment income.............................. $58,996 29,094 (2,913) 163,821
Realized investment gains (losses)................. (58) 429 $ 2,075 2,446
Other income....................................... 526 1,418 10,985
------- ------- -------- --------
Total revenues................................. 58,938 37,340 15,608 2,075 355,410
------- ------- -------- --------
Benefits and settlement expenses................... 49,058 23,624 19,836 234,419
Amortization of deferred acquisition costs......... 207 6,539 522 37,518
Other operating expenses........................... 1,076 4,162 10,220 44,464
------- ------- -------- --------
Total benefits and expenses.................... 50,341 34,325 30,578 316,401
------- ------- -------- --------
Income (loss) before income tax.................... 8,597 3,015 (14,970) 39,009
Income tax expense................................. 13,133 13,133
------- --------
Net income......................................... $ 25,876
========
</TABLE>
F-62
<PAGE>
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE C -- OPERATING SEGMENTS (CONTINUED)
<TABLE>
<CAPTION>
OPERATING SEGMENT INCOME FOR THE
THREE MONTHS ENDED MARCH 31, 1999
(IN THOUSANDS)
------------------------------------------------------------------
SPECIALTY INSURANCE
PRODUCTS
LIFE INSURANCE ---------------------------
------------------------------------ DENTAL AND
INDIVIDUAL CONSUMER FINANCIAL
WEST COAST ACQUISITIONS BENEFITS INSTITUTIONS INSTITUTIONS
---------- ------------ -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Premiums and policy fees............................ $ 64,420 $ 18,328 $41,105 $ 55,789 $ 66,753
Reinsurance ceded................................... (37,469) (12,788) (8,597) (17,535) (41,563)
-------- -------- ------- -------- --------
Net of reinsurance ceded............................ 26,951 5,540 32,508 38,254 25,190
Net investment income............................. 15,553 18,042 33,316 2,647 5,795
Realized investment gains (losses)..................
Other income........................................ (1,029) (6) (9) 1,126 2,833
-------- -------- ------- -------- --------
Total revenues.................................. 41,475 23,576 65,815 42,027 33,818
-------- -------- ------- -------- --------
Benefits and settlement expenses.................... 18,922 14,589 35,523 28,550 11,310
Amortization of deferred policy acquisition costs... 8,826 1,405 6,094 1,732 6,515
Other operating expense............................. 5,082 2,000 6,426 8,766 11,023
-------- -------- ------- -------- --------
Total benefits and expenses..................... 32,830 17,994 48,043 39,048 28,848
-------- -------- ------- -------- --------
Income before income tax............................ 8,645 5,582 17,772 2,979 4,970
</TABLE>
<TABLE>
<CAPTION>
RETIREMENT SAVINGS AND
INVESTMENT PRODUCTS
--------------------------------------------------------------
STABLE CORPORATE
VALUE INVESTMENT AND TOTAL
PRODUCTS PRODUCTS OTHER ADJUSTMENTS CONSOLIDATED
-------- ---------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Premiums and policy fees........................... $ 5,382 $ 17,961 $ 269,738
Reinsurance ceded.................................. (117,952)
------- -------- ---------
Net of reinsurance ceded......................... 5,382 17,961 151,786
Net investment income.............................. $51,650 25,566 (3,115) 149,454
Realized investment gains (losses)................. 3,070 648 $(2,269) 1,449
Other income....................................... 748 (292) 3,371
------- ------- -------- ------- ---------
Total revenues................................. 54,720 32,344 14,554 (2,269) 306,060
------- ------- -------- ------- ---------
Benefits and settlement expenses................... 43,927 20,859 11,756 185,436
Amortization of deferred policy acquisition
costs............................................ 192 5,379 809 30,952
Other operating expenses........................... 741 3,159 6,091 43,288
------- ------- -------- ---------
Total benefits and expenses.................... 44,860 29,397 18,656 259,676
------- ------- -------- ---------
Income (loss) before income tax.................... 9,860 2,947 (4,102) 46,384
Income tax expense................................. 16,499 16,499
------- ---------
Net income......................................... $ 29,885
=========
</TABLE>
F-63
<PAGE>
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE C -- OPERATING SEGMENTS (CONTINUED)
<TABLE>
<CAPTION>
OPERATING SEGMENT ASSETS
MARCH 31, 2000
(IN THOUSANDS)
------------------------------------------------------------------
SPECIALTY INSURANCE
PRODUCTS
LIFE INSURANCE -------------------------
-------------------------------------- DENTAL AND
INDIVIDUAL WEST CONSUMER FINANCIAL
LIFE COAST ACQUISITIONS BENEFITS INSTITUTIONS
---------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C>
Investments and other assets....................... $1,272,873 $1,374,304 $1,557,194 $208,704 $1,229,957
Deferred policy acquisition costs.................. 366,412 221,477 231,973 29,083 130,203
---------- ---------- ---------- -------- ----------
Total assets................................... $1,639,285 $1,595,781 $1,789,167 $237,787 $1,360,160
========== ========== ========== ======== ==========
</TABLE>
<TABLE>
<CAPTION>
RETIREMENT SAVINGS AND
INVESTMENT PRODUCTS
-----------------------
STABLE CORPORATE
VALUE INVESTMENT AND TOTAL
PRODUCTS PRODUCTS OTHER CONSOLIDATED
---------- ---------- --------- ------------
<S> <C> <C> <C> <C>
Investments and other assets................................ $2,998,370 $3,569,139 $250,173 $12,460,714
Deferred policy acquisition costs........................... 1,933 120,776 5,270 1,107,127
---------- ---------- -------- -----------
Total assets............................................ $3,000,303 $3,689,915 $255,443 $13,567,841
========== ========== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
OPERATING SEGMENT ASSETS
DECEMBER 31, 1999
(IN THOUSANDS)
------------------------------------------------------------------
SPECIALTY INSURANCE
PRODUCTS
LIFE INSURANCE -------------------------
-------------------------------------- DENTAL AND
INDIVIDUAL WEST CONSUMER FINANCIAL
LIFE COAST ACQUISITIONS BENEFITS INSTITUTIONS
---------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C>
Investments and other assets....................... $1,205,968 $1,343,517 $1,553,954 $197,673 $ 727,857
Deferred policy acquisition costs.................. 379,117 200,605 235,903 25,819 51,339
---------- ---------- ---------- -------- -----------
Total assets................................... $1,585,085 $1,544,122 $1,789,857 $223,492 $ 779,196
========== ========== ========== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
RETIREMENT SAVINGS AND
INVESTMENT PRODUCTS
-----------------------
STABLE CORPORATE
VALUE INVESTMENT AND TOTAL
PRODUCTS PRODUCTS OTHER CONSOLIDATED
---------- ---------- --------- ------------
<S> <C> <C> <C> <C>
Investments and other assets................................ $2,766,178 $3,355,863 $418,609 $11,569,619
Deferred policy acquisition costs........................... 1,156 117,577 8 1,011,524
---------- ---------- -------- -----------
Total assets............................................ $2,767,334 $3,473,440 $418,617 $12,581,143
========== ========== ======== ===========
</TABLE>
F-64
<PAGE>
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE D -- STATUTORY REPORTING PRACTICES
Financial statements prepared in conformity with generally accepted
accounting principles (i.e., GAAP) differ in some respects from the statutory
accounting practices prescribed or permitted by insurance regulatory
authorities. At March 31, 2000, and for the three months then ended, Protective
Life and its life insurance subsidiaries had consolidated share-owner's equity
and net income prepared in conformity with statutory reporting practices of
$582.3 million and $17.7 million, respectively.
NOTE E -- INVESTMENTS
As prescribed by Statement of Financial Accounting Standards ("SFAS")
No. 115, certain investments are recorded at their market values with the
resulting net unrealized gains and losses reduced by a related adjustment to
deferred policy acquisition costs, net of income tax, recorded as a component of
share-owner's equity. The market values of fixed maturities increase or decrease
as interest rates fall or rise. Therefore, although the application of SFAS No.
115 does not affect Protective Life's operations, its reported share-owner's
equity will fluctuate significantly as interest rates change.
Protective Life's balance sheets at March 31, 2000 and December 31, 1999,
prepared on the basis of reporting investments at amortized cost rather than at
market values, are as follows:
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Total investments........................................... $ 9,453,458 $ 8,894,426
Deferred policy acquisition costs........................... 1,088,683 992,518
All other assets............................................ 3,253,015 2,918,857
----------- -----------
$13,795,156 $12,805,801
=========== ===========
Deferred income taxes....................................... $ 53,650 $ 46,243
All other liabilities....................................... 12,513,700 11,616,935
----------- -----------
12,567,350 11,663,178
Share-owner's equity........................................ 1,227,806 1,142,623
----------- -----------
$13,795,156 $12,805,801
=========== ===========
</TABLE>
NOTE F -- DERIVATIVE FINANCIAL INSTRUMENTS
Protective Life has not used derivative financial instruments for trading
purposes. Combinations of interest rate swap contracts, options and futures
contracts are sometimes used as hedges against changes in interest rates for
certain investments, primarily outstanding mortgage loan commitments, mortgage
loans, and mortgage-backed securities, and liabilities arising from
interest-sensitive products. Realized investment gains and losses on such
contracts are deferred and amortized over the life of the hedged asset or
liability. No realized investment gains or losses were deferred in the first
three months of 2000 or the full year of 1999. At March 31, 2000, contracts with
a notional amount of $1.5 billion were in a $0.1 million net unrealized gain
position. During the three months ended March 31, 2000, the Company recognized
$0.5 million in realized investment gains related to derivative financial
instruments.
F-65
<PAGE>
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE G -- COMPREHENSIVE INCOME (LOSS)
The following table sets forth Protective Life's comprehensive income (loss)
for the three-month periods ended March 31, 2000 and 1999:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
-------------------
2000 1999
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Net income.................................................. $25,876 $ 29,885
Increase (decrease) in net unrealized gains on investments
(net of income tax: 2000 - $(856); 1999 - $(29,120))...... (1,590) (52,195)
Reclassification adjustment for amounts included in net
income (net of income tax: 2000 - $2,719; 1999 -
$(507))................................................... 5,050 (942)
------- --------
Comprehensive income (loss)................................. $29,336 $(23,252)
======= ========
</TABLE>
NOTE H -- ACQUISITIONS
In January, 2000, Protective Life acquired the Lyndon Insurance Group
("Lyndon"). The transaction has been accounted for as a purchase, and the
results of the transaction have been included in the accompanying financial
statements since its effective date.
Summarized below are the consolidated results of operations for the three
months ended March 31, 1999, on an unaudited pro forma basis, as if the Lyndon
acquisition had occurred as of January 1, 1999. The pro forma information is
based on the Protective Life's consolidated results of operations for the three
months ended March 30, 1999, and on data provided by Lyndon, after giving effect
to certain pro forma adjustments. The pro forma financial information does not
purport to be indicative of results of operations that would have occurred had
the transaction occurred on the basis assumed above nor are they indicative of
results of the future operations of the combined enterprises.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, 1999
------------------
(IN THOUSANDS)
(UNAUDITED)
<S> <C>
Total revenues.............................................. $330,539
Net income.................................................. $ 32,726
</TABLE>
NOTE I -- RECLASSIFICATIONS
Certain reclassifications have been made in the previously reported
financial statements and accompanying notes to make the prior year amounts
comparable to those of the current year. Such reclassifications had no effect on
previously reported net income, total assets, or share-owner's equity.
NOTE J -- RECENTLY ISSUED ACCOUNTING STANDARDS
In 1999, Protective Life adopted Statement of Financial Accounting Standards
("SFAS") No. 134, "Accounting for Mortgage-Backed Securities Retained after the
Securitization of Mortgage Loans Held for Sale by a Mortgage Banking
Enterprise," and Statement of Position 98-1, "Accounting for the Costs of
F-66
<PAGE>
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE J -- RECENTLY ISSUED ACCOUNTING STANDARDS (CONTINUED)
Computer Software Developed or Obtained for Internal Use," and Statement of
Position 97-3, "Accounting by Insurance and Other Enterprises for Insurance
Related Assessments" issued by the American Institute of Certified Public
Accountants. The adoption of these accounting standards did not have a material
effect on Protective Life's financial statements.
The Financial Accounting Standards Board has issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." Effective
January 1, 2001, SFAS No. 133 will require Protective Life to report derivative
financial instruments on the balance sheet and to carry such derivatives at fair
value. The fair values of derivatives increase or decrease as interest rates
change. Under SFAS No. 133, changes in fair value are reported as a component of
net income or as a change to share-owner's equity, depending upon the nature of
the derivative. Although the adoption of SFAS No. 133 will not affect Protective
Life's operations, adoption will introduce volatility into Protective Life's
reported net income and share-owner's equity as interest rates change. The
effects of adoption will depend upon the nature, purpose and volume of
derivatives held by Protective Life at the date of adoption.
F-67
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Directors and Share Owner
Protective Life Insurance Company
Birmingham, Alabama
In our opinion, the consolidated financial statements listed in the index on
page F-1 of this Form S-6 present fairly, in all material respects, the
consolidated financial position of Protective Life Insurance Company and
Subsidiaries at December 31, 1999 and 1998, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1999, in conformity with accounting principles generally accepted in the
United States. In addition, in our opinion, the financial statement schedules
listed in the index on page F-1 present fairly, in all material respects, the
information set forth therein when read in conjunction with the related
consolidated financial statements. These financial statements and financial
statement schedules are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements and
financial statement schedules based on our audits. We conducted our audits of
these statements in accordance with auditing standards generally accepted in the
United States which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
February 23, 2000
Birmingham, Alabama
F-68
<PAGE>
PROTECTIVE LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------------
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
REVENUES
Premiums and policy fees......... $1,137,256 $1,027,340 $ 814,420
Reinsurance ceded................ (538,033) (459,215) (334,214)
---------- ---------- ----------
Net of reinsurance ceded....... 599,223 568,125 480,206
Net investment income............ 623,231 603,795 557,488
Realized investment gains........ 4,760 2,136 1,824
Other income..................... 27,102 20,201 6,149
---------- ---------- ----------
1,254,316 1,194,257 1,045,667
---------- ---------- ----------
BENEFITS AND EXPENSES
Benefits and settlement expenses
(net of reinsurance ceded:
1999-$344,474; 1998-$330,494;
1997-$180,605)................. 771,527 730,496 658,872
Amortization of deferred policy
acquisition costs.............. 104,913 111,188 107,175
Other operating expenses (net of
reinsurance ceded:
1999-$150,570; 1998-$166,375;
1997-$90,045).................. 176,439 172,228 129,870
---------- ---------- ----------
1,052,879 1,013,912 895,917
---------- ---------- ----------
INCOME BEFORE INCOME TAX........... 201,437 180,345 149,750
INCOME TAX EXPENSE (BENEFIT)
Current........................ 47,504 48,237 66,283
Deferred....................... 25,675 14,925 (13,981)
---------- ---------- ----------
73,179 63,162 52,302
---------- ---------- ----------
NET INCOME......................... $ 128,258 $ 117,183 $ 97,448
========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
F-69
<PAGE>
PROTECTIVE LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31
------------------------
1999 1998
----------- -----------
<S> <C> <C>
ASSETS
Investments:
Fixed maturities, at market (amortized
cost: 1999-$6,517,851;
1998-$6,307,274)................... $ 6,275,607 $ 6,400,262
Equity securities, at market (cost:
1999-$32,092; 1998-$15,151)........ 30,696 12,258
Mortgage loans on real estate......... 1,946,690 1,623,603
Investment real estate, net of
accumulated depreciation
(1999-$1,014; 1998-$782)........... 15,582 14,868
Policy loans.......................... 232,126 232,670
Other long-term investments........... 68,890 70,078
Short-term investments................ 81,171 159,655
----------- -----------
Total investments................... 8,650,762 8,513,394
Accrued investment income............... 101,120 100,395
Accounts and premiums receivable, net of
allowance for uncollectible amounts
(1999-$2,540; 1998-$4,304)........... 45,852 31,265
Reinsurance receivables................. 859,684 756,370
Deferred policy acquisition costs....... 1,011,524 841,425
Property and equipment, net............. 49,002 42,374
Other assets............................ 27,712 34,632
Receivable from related parties......... 13,059
Assets related to separate accounts
Variable Annuity...................... 1,778,618 1,285,952
Variable Universal Life............... 40,293 13,606
Other................................. 3,517 3,482
----------- -----------
$12,581,143 $11,622,895
=========== ===========
LIABILITIES
Policy liabilities and accruals:
Future policy benefits and claims..... $ 4,566,426 $ 4,140,003
Unearned premiums..................... 507,659 389,294
----------- -----------
5,074,085 4,529,297
Stable value investment contract
deposits............................. 2,680,009 2,691,697
Annuity deposits........................ 1,639,231 1,519,820
Other policyholders' funds.............. 116,815 219,356
Other liabilities....................... 293,862 226,310
Accrued income taxes.................... (25,833) (10,992)
Deferred income taxes................... (32,335) 51,735
Note payable............................ 2,338 2,363
Indebtedness to related parties......... 14,000 20,898
Liabilities related to separate accounts
Variable Annuity...................... 1,778,618 1,285,952
Variable Universal Life............... 40,293 13,606
Other................................. 3,517 3,482
----------- -----------
Total liabilities................... 11,584,600 10,553,524
----------- -----------
COMMITMENTS AND CONTINGENT
LIABILITIES -- NOTE G
SHARE-OWNER'S EQUITY
Preferred Stock, $1.00 par value, shares
authorized and issued: 2,000,
liquidation preference $2,000........ 2 2
Common Stock, $1.00 par value........... 5,000 5,000
Shares authorized and issued:
5,000,000
Additional paid-in capital.............. 327,992 327,992
Note receivable from PLC Employee Stock
Ownership Plan....................... (5,148) (5,199)
Retained earnings....................... 814,777 686,519
Accumulated other comprehensive income
Net unrealized gains on investments
(net of income tax: 1999-$(78,658);
1998-$29,646)...................... (146,080) 55,057
----------- -----------
Total share-owner's equity.......... 996,543 1,069,371
----------- -----------
$12,581,143 $11,622,895
=========== ===========
</TABLE>
See notes to consolidated financial statements.
F-70
<PAGE>
PROTECTIVE LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF SHARE-OWNER'S EQUITY
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
NOTE
RECEIVABLE NET
ADDITIONAL FROM UNREALIZED TOTAL
PREFERRED COMMON PAID-IN PLC RETAINED GAINS (LOSSES) SHARE-OWNER'S
STOCK STOCK CAPITAL ESOP EARNINGS ON INVESTMENTS EQUITY
--------- --------- ---------- ---------- --------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1996................... $2 $5,000 $237,992 $(5,579) $532,088 $ 6,688 $ 776,191
----------
Net income for 1997.... 97,448 97,448
Increase in net
unrealized gains on
investments (net of
income tax-
$30,275)............. 56,225 56,225
Reclassification
adjustment for
amounts included in
net income (net of
income tax:
$(638)).............. (1,186) (1,186)
----------
Comprehensive income
for 1997............. 152,487
----------
Preferred dividends
($50 per share)...... (100) (100)
Capital contribution
from PLC............. 90,000 90,000
Decrease in note
receivable from PLC
ESOP................. 201 201
-- ------ -------- ------- -------- --------- ----------
Balance, December 31,
1997................... 2 5,000 327,992 (5,378) 629,436 61,727 1,018,779
----------
Net income for 1998.... 117,183 117,183
Decrease in net
unrealized gains on
investments (net of
income tax --
$(2,844))............ (5,281) (5,281)
Reclassification
adjustment for
amounts included in
net income (net of
income tax:
$(747)).............. (1,389) (1,389)
----------
Comprehensive income
for 1998............. 110,513
----------
Common dividends ($12
per share)........... (60,000) (60,000)
Preferred dividends
($50 per share)...... (100) (100)
Decrease in note
receivable from PLC
ESOP................. 179 179
-- ------ -------- ------- -------- --------- ----------
Balance, December 31,
1998................... 2 5,000 327,992 (5,199) 686,519 55,057 1,069,371
---------
Net income for 1999.... 128,258 128,258
Decrease in net
unrealized gains on
investments (net of
income tax --
$(106,638)).......... (198,043) (198,043)
Reclassification
adjustment for
amounts included In
net income (net of
income tax --
$(1,666))............ (3,094) (3,094)
----------
Comprehensive loss for
1999................. (72,879)
----------
Decrease in note
receivable from PLC
ESOP................. 51 51
-- ------ -------- ------- -------- --------- ----------
Balance, December 31,
1999................... $2 $5,000 $327,992 $(5,148) $814,777 $(146,080) $ 996,543
== ====== ======== ======= ======== ========= ==========
</TABLE>
See notes to consolidated financial statements.
F-71
<PAGE>
PROTECTIVE LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31
---------------------------------------
1999 1998 1997
------------ ------------ -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income....................... $ 128,258 $ 117,183 $ 97,448
Adjustments to reconcile net
income to net cash provided by
operating activities:
Realized investment gains...... (4,760) (2,136) (1,824)
Amortization of deferred policy
acquisition costs........... 104,913 111,188 107,175
Capitalization of deferred
policy acquisition costs.... (239,483) (192,838) (135,211)
Depreciation expense........... 10,513 7,110 5,124
Deferred income taxes.......... 24,234 14,925 (17,918)
Accrued income taxes........... (14,841) (11,933) (5,558)
Interest credited to universal
life and investment
products.................... 331,746 352,721 299,004
Policy fees assessed on
universal life and
investment products......... (165,818) (139,689) (131,582)
Change in accrued investment
income and other
receivables................. (119,183) (159,362) (158,798)
Change in policy liabilities
and other policyholder funds
of traditional life and
health products............. 215,201 322,464 279,522
Change in other liabilities.... 67,552 (19,771) 65,393
Other (net).................... (5,526) (22,634) (1,133)
------------ ------------ -----------
Net cash provided by operating
activities...................... 332,806 377,228 401,642
------------ ------------ -----------
CASH FLOWS FROM INVESTING
ACTIVITIES
Maturities and principal
reduction of investments:
Investments available for
sale........................ 9,973,742 10,445,407 6,462,663
Other.......................... 243,280 198,559 324,242
Sale of investments:
Investment available for
sale........................ 537,343 1,080,265 1,108,058
Other.......................... 267,892 155,906 695,270
Cost of investments acquired:
Investments available for
sale........................ (10,625,354) (11,505,098) (8,426,980)
Other.......................... (864,100) (662,350) (718,335)
Acquisitions and bulk reinsurance
assumptions................... 46,508 (169,124)
Purchase of property and
equipment..................... (18,075) (13,077) (6,087)
Sale of property and equipment... 151 2,681
------------ ------------ -----------
Net cash used in investing
activities...................... (438,613) (300,388) (727,612)
------------ ------------ -----------
CASH FLOWS FROM FINANCING
ACTIVITIES
Borrowings under line of credit
arrangements and long-term
debt.......................... 4,351,177 1,975,800 1,159,538
Capital contribution from PLC.... 90,000
Principal payments on line of
credit arrangements and
long-term debt................ (4,351,203) (1,973,437) (1,159,538)
Principal payment on surplus note
to PLC........................ (4,000) (2,000) (4,693)
Dividends to share owner......... (60,100) (100)
Investment product deposits and
change in universal life
deposits...................... 1,300,736 981,124 910,659
Investment product withdrawals... (1,190,903) (1,037,424) (745,083)
------------ ------------ -----------
Net cash provided by (used in)
financing activities............ 105,807 (116,037) 250,783
============ ============ ===========
INCREASE(DECREASE) IN CASH......... 0 (39,197) (75,187)
CASH AT BEGINNING OF YEAR.......... 0 39,197 114,384
------------ ------------ -----------
CASH AT END OF YEAR................ $ 0 $ 0 $ 39,197
============ ============ ===========
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION
Cash paid during the year:
Interest on debt............... $ 5,611 $ 8,338 $ 4,343
Income taxes................... $ 56,192 $ 57,429 $ 70,133
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING
ACTIVITIES
Reduction of principal on note
from ESOP................... $ 51 $ 179 $ 201
Acquisitions and bulk
reinsurance assumptions
Assets acquired.............. $ 12,502 $ 247,894 $ 1,114,832
Liabilities assumed.......... (12,502) (380,405) (902,267)
------------ ------------ -----------
Net.......................... $ 0 $ (132,511) $ 212,565
============ ============ ===========
</TABLE>
See notes to consolidated financial statements.
F-72
<PAGE>
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(ALL DOLLAR AMOUNTS IN TABLES ARE IN THOUSANDS)
NOTE A -- SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying consolidated financial statements of Protective Life
Insurance Company and subsidiaries ("Protective") are prepared on the basis of
accounting principles generally accepted in the United Sates. Such accounting
principles differ from statutory reporting practices used by insurance companies
in reporting to state regulatory authorities. (See also Note B.)
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
various estimates that affect the reported amounts of assets and liabilities,
disclosures of contingent assets and liabilities, as well as the reported
amounts of revenues and expenses.
ENTITIES INCLUDED
The consolidated financial statements include the accounts, after
intercompany eliminations, of Protective Life Insurance Company and its
wholly-owned subsidiaries. Protective is a wholly-owned subsidiary of Protective
Life Corporation ("PLC"), an insurance holding company.
NATURE OF OPERATIONS
Protective provides financial services through the production, distribution,
and administration of insurance and investment products. Protective markets
individual life insurance, dental insurance and managed care services, credit
life and disability insurance, guaranteed investment contracts, guaranteed
funding agreements, and fixed and variable annuities throughout the United
States. Protective also maintains a separate division devoted exclusively to the
acquisition of insurance policies from other companies.
The operating results of companies in the insurance industry have
historically been subject to significant fluctuations due to competition,
economic conditions, interest rates, investment performance, maintenance of
insurance ratings, and other factors.
RECENTLY ISSUED ACCOUNTING STANDARDS
In 1997 Protective adopted Statement of Financial Accounting Standards
("SFAS") No. 125, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities"; SFAS No. 130, "Reporting Comprehensive
Income"; and SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information".
In 1998 PLC adopted SFAS No. 132, "Employers' Disclosures About Pensions and
Other Postretirement Benefits."
In 1999, Protective adopted SFAS No. 134, "Accounting for Mortgage-Backed
Securities Retained after the Securitization of Mortgage Loans Held for Sale by
a Mortgage Banking Enterprise," and Statement of Position 98-1, "Accounting for
the Costs of Computer Software Developed or Obtained for Internal Use," and
Statement of Position 97-3, "Accounting by Insurance and Other Enterprises for
Insurance Related Assessments" issued by the American Institute of Certified
Public Accountants.
The adoption of these accounting standards did not have a material effect on
PLC's or Protective's financial statements.
The Financial Accounting Standards Board has issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." Effective
January 1, 2001, SFAS No. 133 will require Protective to report
F-73
<PAGE>
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(ALL DOLLAR AMOUNTS IN TABLES ARE IN THOUSANDS)
NOTE A -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
derivative financial instruments on the balance sheet and to carry such
derivatives at fair value. The fair values of derivatives increase or decrease
as interest rates change. Under SFAS No. 133, changes in fair value are reported
as a component of net income or as a change to share-owner's equity, depending
upon the nature of the derivative. Although the adoption of SFAS No. 133 will
not affect Protective's operations, adoption will introduce volatility into
Protective's reported net income and share-owner's equity as interest rates
change. Protective has not estimated the potential effect SFAS No. 133 will have
on its net income and share-owner's equity.
INVESTMENTS
Protective has classified all of its investments in fixed maturities, equity
securities, and short-term investments as "available for sale".
Investments are reported on the following bases less allowances for
uncollectible amounts on investments, if applicable:
- Fixed maturities (bonds, and redeemable preferred stocks) -- at current
market value. Where market values are unavailable, Protective obtains
estimates from independent pricing services or estimates market value
based upon a comparison to quoted issues of the same issuer or issues of
other issuers with similar terms and risk characteristics.
- Equity securities (common and nonredeemable preferred stocks) -- at
current market value.
- Mortgage loans -- at unpaid balances, adjusted for loan origination costs,
net of fees, and amortization of premium or discount.
- Investment real estate -- at cost, less allowances for depreciation
computed on the straight-line method. With respect to real estate acquired
through foreclosure, cost is the lesser of the loan balance plus
foreclosure costs or appraised value.
- Policy loans -- at unpaid balances.
- Other long-term investments -- at a variety of methods similar to those
listed above, as deemed appropriate for the specific investment.
- Short-term investments -- at cost, which approximates current market
value.
Substantially all short-term investments have maturities of three months or
less at the time of acquisition and include approximately $0.8 million in bank
deposits voluntarily restricted as to withdrawal.
As prescribed by SFAS No. 115, "Accounting for Certain Investments in Debt
and Equity Securities," certain investments are recorded at their market values
with the resulting unrealized gains and losses reduced by a related adjustment
to deferred policy acquisition costs, net of income tax reported as a component
of share-owner's equity. The market values of fixed maturities increase or
decrease as interest rates fall or rise. Therefore, although the adoption of
SFAS No. 115 does not affect Protective's operations, its reported share-
owner's equity will fluctuate significantly as interest rates change.
F-74
<PAGE>
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(ALL DOLLAR AMOUNTS IN TABLES ARE IN THOUSANDS)
NOTE A -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Protective's balance sheets at December 31, prepared on the basis of
reporting investments at amortized cost rather than at market values, are as
follows:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Total investments....................... $ 8,894,426 $ 8,412,167
Deferred policy acquisition costs....... 992,518 857,949
All other assets........................ 2,918,857 2,268,076
----------- -----------
$12,805,801 $11,538,192
=========== ===========
Deferred income taxes................... $ 46,243 $ 22,089
All other liabilities................... 11,616,935 10,501,789
----------- -----------
11,663,178 10,523,878
Share-owner's equity.................... 1,142,623 1,014,314
----------- -----------
$12,805,801 $11,538,192
=========== ===========
</TABLE>
Realized gains and losses on sales of investments are recognized in net
income using the specific identification basis.
DERIVATIVE FINANCIAL INSTRUMENTS
Protective has not used derivative financial instruments for trading
purposes. Combinations of interest rate swap contracts, options, and futures
contracts are sometimes used as hedges against changes in interest rates for
certain investments, primarily outstanding mortgage loan commitments, mortgage
loans, and mortgage-backed securities, and liabilities arising from
interest-sensitive products. Realized gains and losses on certain contracts are
deferred and amortized over the life of the hedged asset or liability, and such
amortization is recorded in investment income or interest expense. Any
unamortized gain or loss is recorded as a realized investment gain or loss upon
the early termination of a hedged asset or liability, or when the anticipated
transaction is no longer likely to occur. No realized gains or losses were
deferred in 1999 and 1998.
Protective uses interest rate swap contracts to convert certain investments
from a variable to a fixed rate of interest and from a fixed rate to a variable
rate of interest. Swap contracts are also used to alter the effective durations
of assets and liabilities. Amounts paid or received related to the initiation of
certain interest rate swap contracts are deferred and amortized over the life of
the related financial instrument, and subsequent periodic settlements are
recorded in investment income or interest expense. Gains or losses on contracts
terminated upon the early termination of the related financial instrument are
recorded as realized investment gains or losses. Amounts paid related to the
initiation of interest rate swap contracts were $1.4 million and $1.0 million in
1999 and 1998 respectively. No amounts were received in 1999 and 1998.
At December 31, 1999, contracts with a notional amount of $1,328.9 million
were in a $2.1 million net unrealized gain position. At December 31, 1998,
contracts with a notional amount of $1,623.1 million were in a $5.4 million net
unrealized gain position. Protective recognized $3.8 million in realized
investment gains related to derivative financial instruments in 1999.
Protective's derivative financial instruments are with highly rated
counterparties.
F-75
<PAGE>
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(ALL DOLLAR AMOUNTS IN TABLES ARE IN THOUSANDS)
NOTE A -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CASH
Cash includes all demand deposits reduced by the amount of outstanding
checks and drafts. Protective has deposits with certain financial institutions
which exceed federally insured limits. Protective has reviewed the credit
worthiness of these financial institutions and believes there is minimal risk of
a material loss.
PROPERTY AND EQUIPMENT
Property and equipment are reported at cost. Protective primarily uses the
straight-line method of depreciation based upon the estimated useful lives of
the assets. Major repairs or improvements are capitalized and depreciated over
the estimated useful lives of the assets. Other repairs are expensed as
incurred. The cost and related accumulated depreciation of property and
equipment sold or retired are removed from the accounts, and resulting gains or
losses are included in income.
Property and equipment consisted of the following at December 31:
<TABLE>
<CAPTION>
1999 1998
------- -------
<S> <C> <C>
Home office building.................... $40,524 $37,959
Other, principally furniture and
equipment............................. 54,412 58,958
------- -------
94,936 96,917
Accumulated depreciation................ 45,934 54,543
------- -------
$49,002 $42,374
======= =======
</TABLE>
SEPARATE ACCOUNTS
The assets and liabilities related to separate accounts in which Protective
does not bear the investment risk are valued at market and reported separately
as assets and liabilities related to separate accounts in the accompanying
consolidated financial statements.
REVENUES AND BENEFITS EXPENSE
- Traditional Life, Health, and Credit Insurance Products -- Traditional
life insurance products consist principally of those products with fixed
and guaranteed premiums and benefits and include whole life insurance
policies, term and term-like life insurance policies, limited-payment life
insurance policies, and certain annuities with life contingencies. Life
insurance and immediate annuity premiums are recognized as revenue when
due. Health and credit insurance premiums are recognized as revenue over
the terms of the policies. Benefits and expenses are associated with
earned premiums so that profits are recognized over the life of the
contracts. This is accomplished by means of the provision for liabilities
for future policy benefits and the amortization of deferred policy
acquisition costs.
Liabilities for future policy benefits on traditional life insurance
products have been computed using a net level method including assumptions
as to investment yields, mortality, persistency, and other assumptions
based on Protective's experience, modified as necessary to reflect
anticipated trends and to include provisions for possible adverse
deviation. Reserve investment yield assumptions are graded and range from
2.5% to 7.0%. The liability for future policy benefits and claims on
traditional life, health, and credit insurance products includes estimated
unpaid claims that have been reported to Protective and claims incurred
but not yet reported. Policy claims are charged to expense in the period
that the claims are incurred.
F-76
<PAGE>
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(ALL DOLLAR AMOUNTS IN TABLES ARE IN THOUSANDS)
NOTE A -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Activity in the liability for unpaid claims is summarized as follows:
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Balance beginning of year.......... $ 90,332 $106,121 $108,159
Less reinsurance................. 20,019 18,673 6,423
-------- -------- --------
Net balance beginning of year...... 70,313 87,448 101,736
-------- -------- --------
Incurred related to:
Current year....................... 311,002 288,015 258,322
Prior year......................... (5,574) (10,198) (14,540)
-------- -------- --------
Total incurred................... 305,428 277,817 243,782
-------- -------- --------
Paid related to:
Current year....................... 264,298 236,001 203,381
Prior year......................... 40,197 58,951 58,104
-------- -------- --------
Total paid....................... 304,495 294,952 261,485
-------- -------- --------
Other changes:
Acquisitions and reserve
transfers...................... 1,668 0 3,415
-------- -------- --------
Net balance end of year............ 72,914 70,313 87,448
Plus reinsurance................. 47,661 20,019 18,673
-------- -------- --------
Balance end of year................ $120,575 $ 90,332 $106,121
======== ======== ========
</TABLE>
- Universal Life and Investment Products -- Universal life and investment
products include universal life insurance, guaranteed investment
contracts, deferred annuities, and annuities without life contingencies.
Revenues for universal life and investment products consist of policy fees
that have been assessed against policy account balances for the costs of
insurance, policy administration, and surrenders. Benefit reserves for
universal life and investment products represent policy account balances
before applicable surrender charges plus certain deferred policy
initiation fees that are recognized in income over the term of the
policies. Policy benefits and claims that are charged to expense include
benefit claims incurred in the period in excess of related policy account
balances and interest credited to policy account balances. Interest credit
rates for universal life and investment products ranged from 3.4% to 9.4%
in 1999.
Protective's accounting policies with respect to variable universal life
and variable annuities are identical except that policy account balances
(excluding account balances that earn a fixed rate) are valued at market
and reported as components of assets and liabilities related to separate
accounts.
DEFERRED POLICY ACQUISITION COSTS
Commissions and other costs of acquiring traditional life and health
insurance, credit insurance, universal life insurance, and investment products
that vary with and are primarily related to the production of new business have
been deferred. Traditional life and health insurance acquisition costs are
amortized over the premium-payment period of the related policies in proportion
to the ratio of annual premium income to total anticipated premium income.
Credit insurance acquisition costs are being amortized in proportion to earned
premium. Acquisition costs for universal life and investment products are
amortized over the lives of the policies in relation to the present value of
estimated gross profits before amortization. Under SFAS No. 97, "Accounting and
Reporting by Insurance Enterprises for Certain Long-Duration Contracts and for
Realized
F-77
<PAGE>
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(ALL DOLLAR AMOUNTS IN TABLES ARE IN THOUSANDS)
NOTE A -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Gains and Losses from the Sale of Investments," Protective makes certain
assumptions regarding the mortality, persistency, expenses, and interest rates
it expects to experience in future periods. These assumptions are to be best
estimates and are to be periodically updated whenever actual experience and/or
expectations for the future change from that assumed. Additionally, relating to
SFAS No. 115, these costs have been adjusted by an amount equal to the
amortization that would have been recorded if unrealized gains or losses on
investments associated with Protective's universal life and investment products
had been realized.
The cost to acquire blocks of insurance representing the present value of
future profits from such blocks of insurance is also included in deferred policy
acquisition costs. Protective amortizes the present value of future profits over
the premium payment period, including accrued interest of up to approximately
8%. The unamortized present value of future profits for all acquisitions was
approximately $340.6 million and $370.3 million at December 31, 1999 and 1998,
respectively. During 1999 $13.3 million of present value of future profits was
capitalized (relating to acquisitions made during the year) and $43.0 million
was amortized. During 1998 $132.5 million of present value of future profits was
capitalized, and $37.1 million was amortized.
INCOME TAXES
Protective uses the asset and liability method of accounting for income
taxes. Income tax provisions are generally based on income reported for
financial statement purposes. Deferred federal income taxes arise from the
recognition of temporary differences between the bases of assets and liabilities
determined for financial reporting purposes and the bases determined for income
tax purposes. Such temporary differences are principally related to the deferral
of policy acquisition costs and the provision for future policy benefits and
expenses.
RECLASSIFICATIONS
Certain reclassifications have been made in the previously reported
financial statements and accompanying notes to make the prior year amounts
comparable to those of the current year. Such reclassifications had no effect on
previously reported net income, total assets, or share-owner's equity.
NOTE B -- RECONCILIATION WITH STATUTORY REPORTING PRACTICES
Financial statements prepared in conformity with accounting principals
generally accepted in the United States (GAAP) differ in some respects from the
statutory accounting practices prescribed or permitted by insurance regulatory
authorities. The most significant differences are as follows: (a) acquisition
costs of obtaining new business are deferred and amortized over the approximate
life of the policies rather than charged to operations as incurred, (b) benefit
liabilities are computed using a net level method and are based on realistic
estimates of expected mortality, interest, and withdrawals as adjusted to
provide for possible unfavorable deviation from such assumptions, (c) deferred
income taxes are provided for temporary differences between financial and
taxable earnings, (d) the Asset Valuation Reserve and Interest Maintenance
Reserve are restored to stock-owner's equity, (e) furniture and equipment,
agents' debit balances, and prepaid expenses are reported as assets rather than
being charged directly to surplus (referred to as nonadmitted items), (f)
certain items of interest income, principally accrual of mortgage and bond
discounts are amortized differently, and (g) bonds are stated at market instead
of amortized cost.
F-78
<PAGE>
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(ALL DOLLAR AMOUNTS IN TABLES ARE IN THOUSANDS)
NOTE B -- RECONCILIATION WITH STATUTORY REPORTING PRACTICES (CONTINUED)
The reconciliations of net income and share-owner's equity prepared in
conformity with statutory reporting practices to that reported in the
accompanying consolidated financial statements are as follows:
<TABLE>
<CAPTION>
NET INCOME SHARE-OWNERS' EQUITY
----------------------------- ----------------------------------
1999 1998 1997 1999 1998 1997
--------- -------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
In conformity with
statutory reporting
practices:(1).......... $ 75,114 $147,077 $134,417 $ 567,634 $ 531,956 $ 579,111
Additions (deductions)
by adjustment:
Deferred policy
acquisition costs,
net of
amortization....... 120,644 68,155 10,310 1,011,524 841,425 632,605
Deferred income
tax................ (25,675) (14,925) 13,981 32,335 (51,735) (49,417)
Asset Valuation
Reserve............ 41,104 66,922 67,369
Interest Maintenance
Reserve............ (226) (1,355) (1,434) 19,328 15,507 9,809
Nonadmitted items.... 51,350 42,835 30,500
Other timing and
valuation
adjustments........ 72,527 (76,214) (54,494) (467,130) (282,480) (215,448)
Noninsurance
affiliates......... 20,698 18,171 17,530 (4)
Consolidation
elimination........ (134,824) (23,726) (22,862) (259,602) (95,059) (35,746)
--------- -------- -------- ---------- ---------- ----------
In conformity with
generally accepted
accounting
principles............. $ 128,258 $117,183 $ 97,448 $ 996,543 $1,069,371 $1,018,779
========= ======== ======== ========== ========== ==========
</TABLE>
- --------------------------
(1) Consolidated
As of December 31, 1999, Protective and its insurance subsidiaries had on
deposit with regulatory authorities, fixed maturity and short-term investments
with a market value of approximately $53.6 million.
The National Association of Insurance Commissioners has adopted the
Codification of Statutory Accounting Principles ("Codification"). The
Codification changes current statutory accounting rules in several areas.
Protective has not estimated the potential effect the Codification may have on
the statutory capital of Protective and its insurance subsidiaries. The
Codification will become effective January 1, 2001.
NOTE C -- INVESTMENT OPERATIONS
Major categories of net investment income for the years ended December 31
are summarized as follows:
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Fixed maturities................... $466,957 $463,416 $396,255
Equity securities.................. 775 905 1,186
Mortgage loans on real estate...... 172,027 158,461 161,604
Investment real estate............. 1,949 1,224 2,004
Policy loans....................... 15,994 12,346 11,370
Other, principally short-term
investments...................... 20,244 16,536 21,876
-------- -------- --------
677,946 652,888 594,295
Investment expenses................ 54,715 49,093 36,807
-------- -------- --------
$623,231 $603,795 $557,488
======== ======== ========
</TABLE>
F-79
<PAGE>
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(ALL DOLLAR AMOUNTS IN TABLES ARE IN THOUSANDS)
NOTE C -- INVESTMENT OPERATIONS (CONTINUED)
Realized investment gains (losses) for the years ended December 31 are
summarized as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Fixed maturities................... $13,049 $ 4,374 $(8,355)
Equity securities.................. (3,371) (4,465) 5,975
Mortgage loans and other
investments...................... (4,918) 2,227 4,204
------- ------- -------
$ 4,760 $ 2,136 $ 1,824
======= ======= =======
</TABLE>
Protective recognizes permanent impairments through changes to an allowance
for uncollectible amounts on investments. The allowance totaled $20.4 million at
December 31, 1999 and $24.1 million at December 31, 1998. Additions and
reductions to the allowance are included in realized investment gains (losses).
Without such additions/reductions, Protective had net realized investment gains
of $1.0 million in 1999, net realized investment gains of $3.2 million in 1998,
and net realized investment losses of $6.1 million in 1997.
In 1999, gross gains on the sale of investments available for sale (fixed
maturities, equity securities and short-term investments) were $48.8 million and
gross losses were $33.6 million. In 1998, gross gains were $32.3 million and
gross losses were $32.5 million. In 1997, gross gains were $21.3 million and
gross losses were $23.5 million.
The amortized cost and estimated market values of Protective's investments
classified as available for sale at December 31 are as follows:
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
1999 COST GAINS LOSSES VALUES
- ------------------------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Fixed maturities:
Bonds:
Mortgage-backed........... $2,619,918 $ 18,491 $101,150 $2,537,259
United States Government
and authorities......... 154,954 138 1,257 153,835
States, municipalities,
and political
subdivisions............ 27,254 7 295 26,966
Public utilities.......... 537,834 301 14,690 523,445
Convertibles and bonds
with warrants........... 693 0 155 538
All other corporate
bonds................... 3,176,016 5,938 149,591 3,032,363
Redeemable preferred
stocks.................... 1,182 19 0 1,201
---------- -------- -------- ----------
6,517,851 24,894 267,138 6,275,607
Equity securities............. 32,092 644 2,040 30,696
Short-term investments........ 81,171 0 0 81,171
---------- -------- -------- ----------
$6,631,114 $ 25,538 $269,178 $6,387,474
========== ======== ======== ==========
</TABLE>
F-80
<PAGE>
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(ALL DOLLAR AMOUNTS IN TABLES ARE IN THOUSANDS)
NOTE C -- INVESTMENT OPERATIONS (CONTINUED)
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
1998 COST GAINS LOSSES VALUES
- ------------------------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Fixed maturities:
Bonds:
Mortgage-backed........... $2,581,561 $ 41,626 $ 33,939 $2,589,248
United States Government
and authorities......... 72,697 2,812 0 75,509
States, municipalities,
and political
subdivisions............ 29,521 1,131 0 30,652
Public utilities.......... 533,082 15,066 0 548,148
Convertibles and bonds
with warrants........... 694 0 179 515
All other corporate
bonds................... 3,083,782 98,992 32,629 3,150,145
Redeemable preferred
stocks.................... 5,937 108 0 6,045
---------- -------- -------- ----------
6,307,274 159,735 66,747 6,400,262
Equity securities............. 15,151 456 3,349 12,258
Short-term investments........ 159,655 0 0 159,655
---------- -------- -------- ----------
$6,482,080 $160,191 $ 70,096 $6,572,175
========== ======== ======== ==========
</TABLE>
The amortized cost and estimated market values of fixed maturities at
December 31, by expected maturity, are shown below. Expected maturities are
derived from rates of prepayment that may differ from actual rates of
prepayment.
<TABLE>
<CAPTION>
ESTIMATED
AMORTIZED MARKET
1999 COST VALUES
- ---------------------------------------- ---------- ----------
<S> <C> <C>
Due in one year or less................. $ 321,155 $ 320,601
Due after one year through five years... 2,913,620 2,863,873
Due after five years through ten
years................................. 2,152,116 2,049,482
Due after ten years..................... 1,130,960 1,041,651
---------- ----------
$6,517,851 $6,275,607
========== ==========
</TABLE>
<TABLE>
<CAPTION>
ESTIMATED
AMORTIZED MARKET
1998 COST VALUES
- ---------------------------------------- ---------- ----------
<S> <C> <C>
Due in one year or less................. $ 705,859 $ 709,686
Due after one year through five years... 3,255,973 3,325,078
Due after five years through ten
years................................. 1,655,055 1,690,581
Due after ten years..................... 690,387 674,917
---------- ----------
$6,307,274 $6,400,262
========== ==========
</TABLE>
F-81
<PAGE>
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(ALL DOLLAR AMOUNTS IN TABLES ARE IN THOUSANDS)
NOTE C -- INVESTMENT OPERATIONS
The approximate percentage distribution of Protective's fixed maturity
investments by quality rating at December 31 is as follows:
<TABLE>
<CAPTION>
RATING 1999 1998
- ---------------------------------------- ------ ------
<S> <C> <C>
AAA..................................... 37.5% 34.3%
AA...................................... 6.3 6.2
A....................................... 26.6 29.4
BBB..................................... 25.7 26.5
BB or less.............................. 3.8 3.5
Redeemable preferred stocks............. 0.1 0.1
----- -----
100.0% 100.0%
===== =====
</TABLE>
At December 31, 1999 and 1998, Protective had bonds which were rated less
than investment grade of $243.6 million and $222.9 million, respectively, having
an amortized cost of $293.1 million and $252.0 million, respectively. At
December 31, 1999, approximately $81.5 million of the bonds rated less than
investment grade were securities issued in company-sponsored commercial mortgage
loan securitizations. Approximately $910.4 million of bonds are not publicly
traded.
The change in unrealized gains (losses), net of income tax on fixed maturity
and equity securities for the years ended December 31 is summarized as follows:
<TABLE>
<CAPTION>
1999 1998 1997
--------- -------- -------
<S> <C> <C> <C>
Fixed maturities................... $(217,901) $(21,705) $72,741
Equity securities.................. 973 4,605 (8,813)
</TABLE>
At December 31, 1999, all of Protective's mortgage loans were commercial
loans of which 79% were retail, 8% were apartments, 6% were office buildings,
and 6% were warehouses. Protective specializes in making mortgage loans on
either credit-oriented or credit-anchored commercial properties, most of which
are strip shopping centers in smaller towns and cities. No single tenant's
leased space represents more than 5% of mortgage loans. Approximately 74% of the
mortgage loans are on properties located in the following states listed in
decreasing order of significance: Florida, Texas, Georgia, Tennessee, North
Carolina, Virginia, Alabama, South Carolina, Washington, Kentucky, Ohio, and
Mississippi.
Many of the mortgage loans have call provisions after 3 to 10 years.
Assuming the loans are called at their next call dates, approximately $109.6
million would become due in 2001, $408.8 million in 2002 to 2005, and $333.6
million in 2006 to 2010.
At December 31, 1999, the average mortgage loan was approximately $2.0
million, and the weighted average interest rate was 7.8%. The largest single
mortgage loan was $17.0 million.
At December 31, 1999 and 1998, Protective's problem mortgage loans (over
ninety days past due) and foreclosed properties totaled $22.9 million and $11.7
million, respectively. Since Protective's mortgage loans are collateralized by
real estate, any assessment of impairment is based upon the estimated fair value
of the real estate. Based on Protective's evaluation of its mortgage loan
portfolio, Protective does not expect any material losses on its mortgage loans.
Certain investments, principally real estate, with a carrying value of $36.3
million were non-income producing for the twelve months ended December 31, 1999.
Policy loan interest rates generally range from 4.5% to 8.0%.
F-82
<PAGE>
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(ALL DOLLAR AMOUNTS IN TABLES ARE IN THOUSANDS)
NOTE D -- FEDERAL INCOME TAXES
Protective's effective income tax rate varied from the maximum federal
income tax rate as follows:
<TABLE>
<CAPTION>
1999 1998 1997
----- ----- -----
<S> <C> <C> <C>
Statutory federal income tax rate
applied to pretax income......... 35.0% 35.0% 35.0%
Dividends received deduction and
tax-exempt interest.............. (0.1) (0.1) (0.2)
Low-income housing credit.......... (0.5) (0.5) (0.6)
Tax benefits arising from prior
acquisitions and other
adjustments...................... 0.3 0.1 0.7
State income taxes................. 1.6 0.5
----- ----- -----
Effective income tax rate.......... 36.3% 35.0% 34.9%
===== ===== =====
</TABLE>
The provision for federal income tax differs from amounts currently payable
due to certain items reported for financial statement purposes in periods which
differ from those in which they are reported for income tax purposes.
Details of the deferred income tax provision for the years ended
December 31 are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------- ------- --------
<S> <C> <C> <C>
Deferred policy acquisition
costs............................ $46,175 $60,746 $ 7,054
Benefit and other policy liability
changes.......................... (27,158) (41,268) (23,564)
Temporary differences of investment
income........................... 6,655 (3,491) 2,516
Other items........................ 3 (1,062) 13
------- ------- --------
$25,675 $14,925 $(13,981)
======= ======= ========
</TABLE>
The components of Protective's net deferred income tax liability as of
December 31 were as follows:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Deferred income tax assets:
Policy and policyholder liability
reserves.............................. $217,642 $190,328
Unrealized loss on investments.......... 70,421
Other................................... 2,088 2,091
-------- --------
290,151 192,419
======== ========
Deferred income tax liabilities:
Deferred policy acquisition costs....... 257,816 211,641
Unrealized gain on investments.......... 32,513
-------- --------
257,816 244,154
-------- --------
Net deferred income tax liability....... $(32,335) $ 51,735
======== ========
</TABLE>
Under pre-1984 life insurance company income tax laws, a portion of
Protective's gain from operations which was not subject to current income
taxation was accumulated for income tax purposes in a memorandum account
designated as Policyholders' Surplus. The aggregate accumulation in this account
at December 31, 1999 was approximately $70.5 million. Should the accumulation in
the Policyholders' Surplus account exceed certain stated maximums, or should
distributions including cash dividends be made to PLC in excess of approximately
$840.3 million, such excess would be subject to federal income taxes at rates
then effective. Deferred income taxes have not been provided on amounts
designated as Policyholders' Surplus. Under current income tax laws, Protective
does not anticipate paying income tax on amounts in the Policyholders' Surplus
accounts.
F-83
<PAGE>
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(ALL DOLLAR AMOUNTS IN TABLES ARE IN THOUSANDS)
NOTE D -- FEDERAL INCOME TAXES (CONTINUED)
Protective's income tax returns are included in the consolidated income tax
returns of PLC. The allocation of income tax liabilities among affiliates is
based upon separate income tax return calculations.
NOTE E -- DEBT
At December 31, 1999, PLC had borrowed $55.0 million at a rate of 6.7%. PLC
had also borrowed $59.0 million at a rate of 6.6% under a term note that
contains, among other provisions, requirements for maintaining certain financial
ratios, and restrictions on indebtedness incurred by PLC's subsidiaries
including Protective. Additionally, PLC, on a consolidated basis, cannot incur
debt in excess of 50% of its total capital.
Protective has arranged sources of credit to temporarily fund scheduled
investment commitments. Protective expects that the rate received on its
investments will equal or exceed its borrowing rate. Protective had no such
temporary borrowings outstanding at December 31, 1999 and 1998. Also, Protective
has a mortgage note on investment real estate amounting to approximately $2.3
million that matures in 2003.
Included in indebtedness to related parties is a surplus debenture issued by
Protective to PLC. At December 31, 1999, the balance of the surplus debenture
was $14.0 million. The debenture matures in 2003.
Protective routinely receives from or pays to affiliates under the control
of PLC reimbursements for expenses incurred on one another's behalf. Receivables
and payables among affiliates are generally settled monthly.
Interest expense on borrowed money totaled $5.1 million, $8.3 million, and
$4.3 million, in 1999, 1998, and 1997, respectively.
NOTE F -- RECENT ACQUISITIONS
In June 1997, Protective acquired West Coast Life Insurance Company ("West
Coast"). In September 1997, Protective acquired the Western Diversified Group.
In October 1997, Protective coinsured a block of credit policies.
In October 1998 Protective coinsured a block of life insurance policies from
Lincoln National Corporation. The policies represent the payroll deduction
business originally marketed and underwritten by Aetna.
In September 1999, Protective recaptured a block of credit life and
disability policies which it had previously ceded.
These transactions have been accounted for as purchases, and the results of
the transactions have been included in the accompanying financial statements
since their respective effective dates.
NOTE G -- COMMITMENTS AND CONTINGENT LIABILITIES
Under insurance guaranty fund laws, in most states, insurance companies
doing business therein can be assessed up to prescribed limits for policyholder
losses incurred by insolvent companies. Protective does not believe such
assessments will be materially different from amounts already provided for in
the financial statements. Most of these laws do provide, however, that an
assessment may be excused or deferred if it would threaten an insurer's own
financial strength.
A number of civil jury verdicts have been returned against insurers in the
jurisdictions in which Protective does business involving the insurers' sales
practices, alleged agent misconduct, failure to properly supervise agents, and
other matters. Increasingly these lawsuits have resulted in the award of
substantial judgments
F-84
<PAGE>
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(ALL DOLLAR AMOUNTS IN TABLES ARE IN THOUSANDS)
NOTE G -- COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED)
against the insurer that are disproportionate to the actual damages, including
material amounts of punitive damages. In some states including Alabama, (where
Protective maintains its headquarters) juries have substantial discretion in
awarding punitive and non-economic compensatory damages which creates the
potential for unpredictable material adverse judgments in any given lawsuit. In
addition, in some class action and other lawsuits involving insurers' sales
practices, insurers have made material settlement payments. Protective and its
subsidiaries, like other financial service companies, in the ordinary course of
business, are involved in such litigation or alternatively in arbitration.
Although the outcome of any litigation or arbitration cannot be predicted,
Protective believes that at the present time there are no pending or threatened
lawsuits that are reasonably likely to have a material adverse effect on the
financial position, results of operations, or liquidity of Protective.
NOTE H -- SHARE-OWNER'S EQUITY AND RESTRICTIONS
At December 31, 1999, approximately $736.0 million of consolidated
share-owner's equity excluding net unrealized gains on investments, represented
net assets of Protective and its subsidiaries that cannot be transferred to PLC.
In general, dividends up to specified levels are considered ordinary and may be
paid thirty days after written notice to the insurance commissioner of the state
of domicile unless such commissioner objects to the dividend prior to the
expiration of such period. Dividends in larger amounts are considered
extraordinary and are subject to affirmative prior approval by such
commissioner. The maximum amount that would qualify as ordinary dividends to PLC
by Protective in 2000 is estimated to be $175.5 million.
NOTE I -- PREFERRED STOCK
PLC owns all of the 2,000 shares of preferred stock issued by Protective's
subsidiary, Protective Life and Annuity Insurance Company ("PL&A"). Prior to
November 1998, the stock paid, when and if declared, annual minimum cumulative
dividends of $50 per share, and noncumulative participating dividends to the
extent PL&A's statutory earnings for the immediately preceding fiscal year
exceeded $1 million. PL&A paid no preferred dividends during 1999. Dividends of
$0.1 million were paid to PLC in 1998, and 1997. Effective November 3, 1998,
PL&A's articles of incorporation were amended such that the provision for an
annual minimum cumulative dividend was removed.
NOTE J -- RELATED PARTY MATTERS
On August 6, 1990, PLC announced that its Board of Directors approved the
formation of an Employee Stock Ownership Plan ("ESOP"). On December 1, 1990,
Protective transferred to the ESOP 520,000 shares of PLC's common stock held by
it in exchange for a note. The outstanding balance of the note, $5.1 million at
December 31, 1999, is accounted for as a reduction to share-owner's equity. The
stock will be used to match employee contributions to PLC's existing 401(k)
Plan. The ESOP shares are dividend paying. Dividends on the shares are used to
pay the ESOP's note to Protective.
Protective leases furnished office space and computers to affiliates. Lease
revenues were $3.7 million in 1999, $3.0 million in 1998, and $3.1 million in
1997. Protective purchases data processing, legal, investment and management
services from affiliates. The costs of such services were $69.2 million, $56.2
million, and $51.6 million in 1999, 1998, and 1997, respectively. Commissions
paid to affiliated marketing organizations of $11.4 million, $8.4 million, and
$5.2 million in 1999, 1998, and 1997, respectively, were included in deferred
policy acquisition costs.
Certain corporations with which PLC's directors were affiliated paid
Protective premiums, policy fees, or deposits for various types of insurance and
investment products. Such premiums, policy fees, and deposits
F-85
<PAGE>
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(ALL DOLLAR AMOUNTS IN TABLES ARE IN THOUSANDS)
NOTE J -- RELATED PARTY MATTERS (CONTINUED)
amounted to $56.4 million, $28.6 million and $21.4 million in 1999, 1998, and
1997, respectively. Protective and/or PLC paid commissions, interest on debt and
investment products, and fees to these same corporations totaling $16.9 million,
$7.3 million and $5.4 million in 1999, 1998, and 1997, respectively.
For a discussion of indebtedness to related parties, see Note E.
NOTE K -- OPERATING SEGMENTS
Protective operates seven divisions whose principal strategic focuses can be
grouped into three general categories: Life Insurance, Specialty Insurance
Products, and Retirement Savings and Investment Products. Each division has a
senior officer of Protective responsible for its operations. A division is
generally distinguished by products and/or channels of distribution. A brief
description of each division follows.
LIFE INSURANCE
INDIVIDUAL LIFE DIVISION. The Individual Life Division markets level premium
term and term-like insurance products, universal life, and variable universal
life on a national basis primarily through networks of independent insurance
agents.
WEST COAST DIVISION. The West Coast Division sells universal life and level
premium term-like insurance products in the life insurance brokerage market and
in the "bank owned life insurance" market.
ACQUISITIONS DIVISION. The Acquisitions Division focuses on acquiring,
converting, and servicing policies acquired from other companies. The Division's
primary focus is on life insurance policies sold to individuals.
SPECIALTY INSURANCE PRODUCTS
DENTAL AND CONSUMER BENEFITS DIVISION. The Division's primary focus is on
indemnity and prepaid dental products. In 1997, the Division exited from the
traditional group major medical business, fulfilling the Division's strategy to
focus primarily on dental and related products.
FINANCIAL INSTITUTIONS DIVISION. The Financial Institutions Division
specializes in marketing credit life and disability insurance products through
banks, consumer finance companies and automobile dealers. The Division also
includes a small property casualty insurer that sells automobile service
contracts.
RETIREMENT SAVINGS AND INVESTMENT PRODUCTS
STABLE VALUE PRODUCTS DIVISION. The Stable Value Products Division markets
guaranteed investment contracts to 401(k) and other qualified retirement savings
plans. The Division also offers related products, including fixed and floating
rate funding agreements offered to the trustees of municipal bond proceeds, bank
trust departments, and money market funds, and long-term annuity contracts
offered to fund certain state obligations.
INVESTMENT PRODUCTS DIVISION. The Investment Products Division manufactures,
sells, and supports fixed and variable annuity products. These products are
primarily sold through stockbrokers, but are also sold through financial
institutions and the Individual Life Division's sales force.
F-86
<PAGE>
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(ALL DOLLAR AMOUNTS IN TABLES ARE IN THOUSANDS)
NOTE K -- OPERATING SEGMENTS (CONTINUED)
CORPORATE AND OTHER
Protective has an additional business segment herein referred to as
Corporate and Other. The Corporate and Other segment primarily consists of net
investment income and expenses not attributable to the Divisions above
(including net investment income on capital and interest on substantially all
debt).
Protective uses the same accounting policies and procedures to measure
operating segment income and assets as it uses to measure its consolidated net
income and assets. Operating segment income is generally income before income
tax. Premiums and policy fees, other income, benefits and settlement expenses,
and amortization of deferred policy acquisition costs are attributed directly to
each operating segment. Net investment income is allocated based on directly
related assets required for transacting the business of that segment. Realized
investment gains (losses) and other operating expenses are allocated to the
segments in a manner which most appropriately reflects the operations of that
segment. Unallocated realized investment gains (losses) are deemed not to be
associated with any specific segment.
Assets are allocated based on policy liabilities and deferred policy
acquisition costs directly attributable to each segment.
There are no significant intersegment transactions.
F-87
<PAGE>
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(ALL DOLLAR AMOUNTS IN TABLES ARE IN THOUSANDS)
NOTE K -- OPERATING SEGMENTS -- (CONTINUED)
Operating segment income and assets for the years ended December 31 are as
follows:
<TABLE>
<CAPTION>
LIFE INSURANCE
------------------------------------
INDIVIDUAL
LIFE WEST COAST ACQUISITIONS
OPERATING SEGMENT INCOME ---------- ---------- ------------
<S> <C> <C> <C>
1999
Premiums and policy
fees................... $ 274,598 $ 87,226 $ 148,620
Reinsurance ceded........ (182,092) (64,019) (33,754)
---------- ---------- ----------
Net of reinsurance
ceded................ 92,506 23,207 114,866
Net investment income.... 59,916 78,128 129,806
Realized investment gains
(losses)...............
Other income............. (2,250) 1,302 (9)
---------- ---------- ----------
Total revenues......... 150,172 102,637 244,663
---------- ---------- ----------
Benefits and settlement
expenses............... 74,455 73,176 129,581
Amortization of deferred
policy acquisition
costs.................. 23,434 6,047 19,444
Other operating
expenses............... 20,850 (2,649) 31,178
---------- ---------- ----------
Total benefits and
expenses............. 118,739 76,574 180,203
---------- ---------- ----------
Income before income
tax.................... 31,433 26,063 64,460
Income tax expense.......
---------- ---------- ----------
Net income
---------- ---------- ----------
1998
Premiums and policy
fees................... $ 228,701 $ 75,757 $ 125,329
Reinsurance ceded........ (102,533) (53,377) (28,594)
---------- ---------- ----------
Net of reinsurance
ceded................ 126,168 22,380 96,735
Net investment income.... 55,779 63,492 112,154
Realized investment gains
(losses)
Other income............. 70 6 1,713
---------- ---------- ----------
Total revenues......... 182,017 85,878 210,602
---------- ---------- ----------
Benefits and settlement
expenses............... 106,308 54,617 112,051
Amortization of deferred
policy acquisition
costs.................. 30,543 4,924 18,894
Other operating
expenses............... 14,983 5,354 26,717
---------- ---------- ----------
Total benefits and
expenses............. 151,834 64,895 157,662
---------- ---------- ----------
Income before income
tax.................... 30,183 20,983 52,940
Income tax expense
---------- ---------- ----------
Net income
---------- ---------- ----------
1997
Premiums and policy
fees................... $ 182,746 $ 41,290 $ 120,504
Reinsurance ceded........ (55,266) (27,168) (17,869)
---------- ---------- ----------
Net of reinsurance
ceded................ 127,480 14,122 102,635
Net investment income.... 54,593 30,194 110,155
Realized investment gains
(losses)
Other income............. 617 10
---------- ---------- ----------
Total revenues......... 182,690 44,316 212,800
---------- ---------- ----------
Benefits and settlement
expenses............... 114,678 28,304 116,506
Amortization of deferred
policy acquisition
costs.................. 27,354 961 16,606
Other operating
expenses............... 18,178 6,849 23,016
---------- ---------- ----------
Total benefits and
expenses............. 160,210 36,114 156,128
---------- ---------- ----------
Income before income
tax.................... 22,480 8,202 56,672
Income tax expense
---------- ---------- ----------
Net income
---------- ---------- ----------
OPERATING SEGMENT ASSETS
1999
Investments and other
assets................. $1,205,968 $1,343,517 $1,553,954
Deferred policy
acquisition costs...... 379,117 200,605 235,903
---------- ---------- ----------
Total assets............. $1,585,085 $1,544,122 $1,789,857
---------- ---------- ----------
Operating Segment Assets
1998
Investments and other
assets................. $1,076,202 $1,149,642 $1,600,123
Deferred policy
acquisition costs...... 301,941 144,455 255,347
---------- ---------- ----------
Total assets............. $1,378,143 $1,294,097 $1,855,470
---------- ---------- ----------
1997
Investments and other
assets................. $ 960,316 $ 910,030 $1,401,294
Deferred policy
acquisition costs...... 252,321 108,126 138,052
---------- ---------- ----------
Total assets............. $1,212,637 $1,018,156 $1,539,346
---------- ---------- ----------
</TABLE>
- ----------------------------------
(1) Adjustments represent the inclusion of unallocated realized investment
gains (losses) and the recognition of income tax expense. There are no
asset adjustments.
F-88
<PAGE>
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(ALL DOLLAR AMOUNTS IN TABLES ARE IN THOUSANDS)
NOTE K -- OPERATING SEGMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
SPECIALTY INSURANCE RETIREMENT SAVINGS AND
PRODUCTS INVESTMENT PRODUCTS
----------------------- ------------------------
DENTAL
AND STABLE CORPORATE
CONSUMER FINANCIAL VALUE INVESTMENT AND TOTAL
OPERATING SEGMENT INCOME BENEFITS INSTITUTIONS PRODUCTS PRODUCTS OTHER ADJUSTMENTS(1) CONSOLIDATED
- ------------------------- --------- ------------ ----------- ----------- --------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
1999
Premiums and policy
fees................... $317,360 $ 284,891 $ 24,248 $ 313 $ 1,137,256
Reinsurance ceded........ (81,240) (176,928) (538,033)
--------- --------- ---------- ---------- -------- ------- -----------
Net of reinsurance
ceded................ 236,120 107,963 24,248 313 599,223
Net investment income.... 14,915 24,121 $ 210,208 106,599 (462) 623,231
Realized investment gains
(losses)............... (549) 1,446 $ 3,863 4,760
Other income............. 6,277 15,831 2,146 3,805 27,102
--------- --------- ---------- ---------- -------- ------- -----------
Total revenues......... 257,312 147,915 209,659 134,439 3,656 1,254,316
--------- --------- ---------- ---------- -------- ------- -----------
Benefits and settlement
expenses............... 172,166 55,899 175,290 88,642 2,318 771,527
Amortization of deferred
policy acquisition
costs.................. 10,705 24,718 744 19,820 1 104,913
Other operating
expenses............... 56,396 44,728 4,709 14,617 6,610 176,439
--------- --------- ---------- ---------- -------- ------- -----------
Total benefits and
expenses............. 239,267 125,345 180,743 123,079 8,929 1,052,879
--------- --------- ---------- ---------- -------- ------- -----------
Income before income
tax.................... 18,045 22,570 28,916 11,360 (5,273) 201,437
Income tax expense....... 73,179 73,179
--------- --------- ---------- ---------- -------- ------- -----------
Net income............... $ 128,258
--------- --------- ---------- ---------- -------- ------- -----------
1998
Premiums and policy
fees................... $277,316 $ 301,230 $ 18,809 $ 198 $ 1,027,340
Reinsurance ceded........ (85,753) (188,958) (459,215)
--------- --------- ---------- ---------- -------- ------- -----------
Net of reinsurance
ceded................ 191,563 112,272 18,809 198 568,125
Net investment income.... 15,245 25,068 $ 213,136 105,827 13,094 603,795
Realized investment gains
(losses)............... 1,609 1,318 $ (791) 2,136
Other income............. 4,295 10,302 1,799 2,016 20,201
--------- --------- ---------- ---------- -------- ------- -----------
Total revenues......... 211,103 147,642 214,745 127,753 15,308 1,194,257
--------- --------- ---------- ---------- -------- ------- -----------
Benefits and settlement
expenses............... 140,632 52,629 178,745 85,045 469 730,496
Amortization of deferred
policy acquisition
costs.................. 10,352 28,526 735 17,213 1 111,188
Other operating
expenses............... 49,913 48,837 2,876 14,428 9,120 172,228
--------- --------- ---------- ---------- -------- ------- -----------
Total benefits and
expenses............. 200,897 129,992 182,356 116,686 9,590 1,013,912
--------- --------- ---------- ---------- -------- ------- -----------
Income before income
tax.................... 10,206 17,650 32,389 11,067 5,718 180,345
Income tax expense....... 63,162 63,162
--------- --------- ---------- ---------- -------- ------- -----------
Net income............... $ 117,183
--------- --------- ---------- ---------- -------- ------- -----------
1997
Premiums and policy
fees................... $260,590 $ 196,694 $ 12,367 $ 229 $ 814,420
Reinsurance ceded........ (109,480) (124,431) (334,214)
--------- --------- ---------- ---------- -------- ------- -----------
Net of reinsurance
ceded................ 151,110 72,263 12,367 229 480,206
Net investment income.... 23,810 16,341 $ 211,915 105,196 5,284 557,488
Realized investment gains
(losses)............... (3,180) 589 $ 4,415 1,824
Other income............. 1,278 3,033 (192) 1,403 6,149
--------- --------- ---------- ---------- -------- ------- -----------
Total revenues......... 176,198 91,637 208,735 117,960 6,916 1,045,667
--------- --------- ---------- ---------- -------- ------- -----------
Benefits and settlement
expenses............... 110,148 27,643 179,235 82,019 339 658,872
Amortization of deferred
policy acquisition
costs.................. 15,711 30,812 618 15,110 3 107,175
Other operating
expenses............... 38,572 20,165 3,945 12,312 6,833 129,870
--------- --------- ---------- ---------- -------- ------- -----------
Total benefits and
expenses............. 164,431 78,620 183,798 109,441 7,175 895,917
--------- --------- ---------- ---------- -------- ------- -----------
Income before income
tax.................... 11,767 13,017 24,937 8,519 (259) 149,750
Income tax expense....... 52,302 52,302
--------- --------- ---------- ---------- -------- ------- -----------
Net income............... $ 97,448
--------- --------- ---------- ---------- -------- ------- -----------
OPERATING SEGMENT ASSETS
1999
Investments and other
assets................. $197,673 $ 727,857 $2,766,178 $3,355,863 $418,609 $11,569,619
Deferred policy
acquisition costs...... 25,819 51,339 1,156 117,577 8 1,011,524
--------- --------- ---------- ---------- -------- ------- -----------
Total assets............. $223,492 $ 779,196 $2,767,334 $3,473,440 $418,617 $12,581,143
--------- --------- ---------- ---------- -------- ------- -----------
Operating Segment Assets
1998
Investments and other
assets................. $197,337 $ 645,909 $2,869,304 $2,542,536 $700,417 $10,781,470
Deferred policy
acquisition costs...... 23,836 39,212 1,448 75,177 9 841,425
--------- --------- ---------- ---------- -------- ------- -----------
Total assets............. $221,173 $ 685,121 $2,870,752 $2,617,713 $700,426 $11,622,895
--------- --------- ---------- ---------- -------- ------- -----------
1997
Investments and other
assets................. $208,071 $ 536,058 $2,887,732 $2,313,279 $525,896 $ 9,742,676
Deferred policy
acquisition costs...... 22,459 52,836 1,785 56,074 952 632,605
--------- --------- ---------- ---------- -------- ------- -----------
Total assets............. $230,530 $ 588,894 $2,889,517 $2,369,353 $526,848 $10,375,281
--------- --------- ---------- ---------- -------- ------- -----------
</TABLE>
- ----------------------------------
(1) Adjustments represent the inclusion of unallocated realized investment
gains (losses) and the recognition of income tax expense. There are no
asset adjustments.
F-89
<PAGE>
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(ALL DOLLAR AMOUNTS IN TABLES ARE IN THOUSANDS)
NOTE L -- EMPLOYEE BENEFIT PLANS
PLC has a defined benefit pension plan covering substantially all of its
employees. The plan is not separable by affiliates participating in the plan.
However, approximately 81% of the participants in the plan are employees of
Protective. The benefits are based on years of service and the employee's
highest thirty-six consecutive months of compensation. PLC's funding policy is
to contribute amounts to the plan sufficient to meet the minimum finding
requirements of ERISA plus such additional amounts as PLC may determine to be
appropriate from time to time. Contributions are intended to provide not only
for benefits attributed to service to date but also for those expected to be
earned in the future.
The actuarial present value of benefit obligations and the funded status of
the plan taken as a whole at December 31 are as follows:
<TABLE>
<CAPTION>
1999 1998
------- --------
<S> <C> <C>
Projected benefit obligation, beginning
of the year........................... $36,547 $ 30,612
Service cost - benefits earned during
the year.............................. 3,270 2,585
Interest cost - on projected benefit
obligation............................ 2,779 2,203
Actuarial gain (loss)................... (5,729) 2,115
Plan amendment.......................... 32 160
Benefits paid........................... (369) (1,128)
------- --------
Projected benefit obligation, end of the
year.................................. 36,530 36,547
------- --------
Fair value of plan assets beginning of
the year.............................. $25,147 $ 21,763
Actual return on plan assets............ 2,594 1,689
Employer contribution................... 7,048 2,823
Benefits paid........................... (369) (1,128)
------- --------
Fair value of plan assets end of the
year.................................. $34,420 25,147
------- --------
Plan assets less than the projected
benefit obligation.................... $(2,110) $(11,400)
Unrecognized net actuarial loss from
past experience different from that
assumed............................... 2,601 9,069
Unrecognized prior service cost......... 569 652
Unrecognized net transition asset....... (17) (34)
------- --------
Net pension liability recognized in
balance sheet......................... $ 1,043 $ (1,713)
======= ========
</TABLE>
Net pension cost of the defined benefit pension plan includes the following
components for the years ended December 31:
<TABLE>
<CAPTION>
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Service cost....................... $3,270 $2,585 $2,112
Interest cost...................... 2,779 2,203 2,036
Expected return on plan assets..... (2,348) (1,950) (1,793)
Amortization of prior service
cost............................. 115 112 100
Amortization of transition asset... (17) (17) (17)
Recognized net actuarial loss...... 494 305 152
------ ------ ------
Net pension cost................... $4,293 $3,238 $2,590
====== ====== ======
</TABLE>
Protective's share of the net pension cost was $3.6 million, $2.6 million,
and $1.8 million, in 1999, 1998, and 1997, respectively.
F-90
<PAGE>
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(ALL DOLLAR AMOUNTS IN TABLES ARE IN THOUSANDS)
NOTE L -- EMPLOYEE BENEFIT PLANS (CONTINUED)
Assumptions used to determine the benefit obligations as of December 31 were
as follows:
<TABLE>
<CAPTION>
1999 1998 1997
----- ----- -----
<S> <C> <C> <C>
Weighted average discount rate..... 8.00% 6.75% 7.25%
Rates of increase in compensation
level............................ 5.75% 4.75% 5.25%
Expected long-term rate of return
on assets........................ 8.50% 8.50% 8.50%
</TABLE>
Assets of the pension plan are included in the general assets of Protective.
Until recently, upon retirement, the amount of pension plan assets vested in the
retiree were used to purchase a single premium annuity from Protective in the
retiree's name. Therefore, amounts presented above as plan assets exclude assets
relating to retirees. Beginning July 1, 1999, retiree obligations are being
fulfilled from pension plan assets.
PLC also sponsors an unfunded excess benefits plan, which is a nonqualified
plan that provides defined pension benefits in excess of limits imposed by
federal income tax law. At December 31, 1999 and 1998, the projected benefit
obligation of this plan totaled $13.1 million and $11.7 million, respectively,
of which $8.3 million and $7.8 million, respectively, have been recognized in
PLC's financial statements.
Net pension cost of the excess benefits plan includes the following
components for the years ended December 31:
<TABLE>
<CAPTION>
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Service cost....................... $ 695 $ 611 $ 544
Interest cost...................... 887 722 651
Plan amendment..................... 351
Amortization of prior service
cost............................. 113 112 112
Amortization of transition asset... 37 37 37
Recognized net actuarial loss...... 265 173 180
------ ------ ------
Net pension cost................... $1,997 $1,655 $1,875
====== ====== ======
</TABLE>
In addition to pension benefits, PLC provides limited healthcare benefits to
eligible retired employees until age 65. The postretirement benefit is provided
by an unfunded plan. At December 31, 1999 and 1998, the liability for such
benefits totaled $1.2 million. The expense recorded by PLC was $0.1 million in
1999, 1998 and 1997. PLC's obligation is not materially affected by a 1% change
in the healthcare cost trend assumptions used in the calculation of the
obligation.
Life insurance benefits for retirees are provided through the purchase of
life insurance policies upon retirement equal to the employees' annual
compensation up to a maximum of $75,000. This plan is partially funded at a
maximum of $50,000 face amount of insurance.
PLC sponsors a defined contribution plan which covers substantially all
employees. Employee contributions are made on a before-tax basis as provided by
Section 401(k) of the Internal Revenue Code. PLC established an Employee Stock
Ownership Plan ("ESOP") to match voluntary employee contributions to PLC's
401(k) Plan. In 1994, a stock bonus was added to the 401(k) Plan for employees
who are not otherwise under a bonus plan. Expense related to the ESOP consists
of the cost of the shares allocated to participating employees plus the interest
expense on the ESOP's note payable to Protective less dividends on shares held
by the ESOP. At December 31, 1999, PLC had committed up to 120,812 shares to be
released to fund employee benefits. The expense recorded by PLC for these
employee benefits was less than $0.1 million in 1999, 1998, and 1997.
F-91
<PAGE>
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(ALL DOLLAR AMOUNTS IN TABLES ARE IN THOUSANDS)
NOTE L -- EMPLOYEE BENEFIT PLANS (CONTINUED)
PLC sponsors a deferred compensation plan for certain directors, officers,
agents, and others. Compensation deferred is credited to the participants in
cash, PLC Common Stock, or as a combination thereof.
NOTE M -- STOCK BASED COMPENSATION
Certain Protective employees participate in PLC's Long-Term Incentive Plan
(previously known as the Performance Share Plan) and receive stock appreciation
rights (SARs) from PLC.
Since 1973 PLC has had a Long-Term Incentive Plan (previously known as the
Performance Share Plan) to motivate senior management to focus on PLC's
long-range earnings performance through the awarding of performance shares. The
criterion for payment of performance share awards is based upon a comparison of
PLC's average return on average equity and total rate of return over a four year
award period (earlier upon the death, disability or retirement of the executive,
or in certain circumstances, of a change in control of PLC) to that of a
comparison group of publicly held life and multiline insurance companies. If
PLC's results are below the median of the comparison group, no portion of the
award is earned. If PLC's results are at or above the 90th percentile, the award
maximum is earned. Under the plan approved by share owners in 1992 and 1997, up
to 6,400,000 shares may be issued in payment of awards. The number of shares
granted in 1999, 1998, and 1997 were 99,380, 71,340 and 98,780, respectively,
having an approximate market value on the grant date of $3.4 million, $2.3
million, and $2.0 million, respectively. At December 31, 1999, outstanding
awards measured at target and maximum payouts were 424,960 and 571,396 shares,
respectively. The expense recorded by PLC for the Long-Term Incentive Plan was
$3.4 million, $2.7 million, and $2.7 million in 1999, 1998, and 1997,
respectively.
During 1996, stock appreciation rights (SARs) were granted to certain
executives of PLC to provide long-term incentive compensation based on the
performance of PLC's Common Stock. Under this arrangement PLC will pay (in
shares of PLC Common Stock) an amount equal to the difference between the
specified base price of PLC's Common Stock and the market value at the exercise
date. The SARs are exercisable after five years (earlier upon the death,
disability or retirement of the executive, or in certain circumstances, of a
change in control of PLC) and expire in 2006 or upon termination of employment.
The number of SARs granted during 1996 and outstanding at December 31, 1999 was
675,000. The SARs have a base price of $17.4375 per share of PLC Common Stock
(the market price on the grant date was $17.50 per share). The estimated fair
value of the SARs on the grant date was $3.0 million. This estimate was derived
using the Roll-Geske variation of the Black-Sholes option pricing model.
Assumptions used in the pricing model are as follows: expected volatility rate
of 15% (approximately equal to that of the S & P Life Insurance Index), a risk
free interest rate of 6.35%, a dividend yield rate of 1.97%, and an expected
exercise date of August 15, 2002. The expense recorded by PLC for the SARs was
$0.6 million in 1999, 1998 and 1997.
NOTE N -- REINSURANCE
Protective assumes risks from, and reinsures certain of its risks with other
insurers under yearly renewable term, coinsurance, and modified coinsurance
agreements. Yearly renewable term and coinsurance agreements are accounted for
by passing a portion of the risk to the reinsurer. Generally, the reinsurer
receives a proportionate part of the premiums less commissions and is liable for
a corresponding part of all benefit payments. Modified coinsurance is accounted
for similarly to coinsurance except that the liability for future policy
benefits is held by the original company, and settlements are made on a net
basis between the companies. A substantial portion of Protective's new life
insurance and credit insurance sales are being reinsured. Protective reviews the
financial condition of its reinsurers and monitors the amount of reinsurance it
has with its reinsurers.
F-92
<PAGE>
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(ALL DOLLAR AMOUNTS IN TABLES ARE IN THOUSANDS)
NOTE N -- REINSURANCE (CONTINUED)
Protective has reinsured approximately $93.5 billion, $64.8 billion, and
$34.1 billion in face amount of life insurance risks with other insurers
representing $364.7 million, $294.4 million, and $147.2 million of premium
income for 1999, 1998, and 1997, respectively. Protective has also reinsured
accident and health risks representing $172.8 million, $164.8 million, and
$187.7 million of premium income for 1999, 1998, and 1997, respectively. In 1999
and 1998, policy and claim reserves relating to insurance ceded of $739.3
million and $658.7 million respectively are included in reinsurance receivables.
Should any of the reinsurers be unable to meet its obligation at the time of the
claim, obligation to pay such claim would remain with Protective. At
December 31, 1999 and 1998, Protective had paid $46.8 million and $22.8 million,
respectively, of ceded benefits which are recoverable from reinsurers. In
addition, at December 31, 1999, Protective had receivables of $74.0 million
related to insurance assumed.
NOTE O -- ESTIMATED FAIR VALUES OF FINANCIAL INSTRUMENTS
The carrying amount and estimated fair values of Protective's financial
instruments at December 31 are as follows:
<TABLE>
<CAPTION>
1999 1998
---------------------- ----------------------
ESTIMATED ESTIMATED
CARRYING FAIR CARRYING FAIR
AMOUNT VALUES AMOUNT VALUES
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Assets (see Notes A and C):
Investments:
Fixed maturities............ $6,275,607 $6,275,607 $6,400,262 $6,400,262
Equity securities........... 30,696 30,696 12,258 12,258
Mortgage loans on real
estate.................... 1,946,690 1,909,026 1,623,603 1,774,379
Short-term investments...... 81,171 81,171 159,655 159,655
LIABILITIES (SEE NOTES A AND
E):
Guaranteed investment
contract deposits......... 2,680,009 2,649,616 2,691,697 2,751,007
Annuity deposits............ 1,639,231 1,598,993 1,519,820 1,513,148
Notes payable............... 2,338 2,338 2,363 2,363
OTHER (SEE NOTE A):
Derivative Financial
Instruments............... 5,273 3,564 986 6,426
</TABLE>
Except as noted below, fair values were estimated using quoted market prices.
Protective estimates the fair value of its mortgage loans using discounted cash
flows from the next call date. Protective believes the fair value of its
short-term investments and notes payable to banks approximates book value due to
either being short-term or having a variable rate of interest. Protective
estimates the fair value of its guaranteed investment contracts and annuities
using discounted cash flows and surrender values, respectively. Protective
believes it is not practicable to determine the fair value of its policy loans
since there is no stated maturity, and policy loans are often repaid by
reductions to policy benefits.
Protective estimates the fair value of its derivative financial instruments
using market quotes or derivative pricing models. The fair value represents the
net amount of cash Protective would have received (or paid) had the contracts
been terminated on December 31.
NOTE P -- SUBSEQUENT EVENT
On January 20, 2000, Protective acquired the Lyndon Insurance Group
("Lyndon"). Lyndon manufactures and markets a variety of specialty insurance
products including credit insurance, and vehicle and marine service agreements.
F-93
<PAGE>
SCHEDULE III -- SUPPLEMENTARY INSURANCE INFORMATION
PROTECTIVE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(IN THOUSANDS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D COL. E COL. F COL. G COL. H COL. I
- ------------------------- ----------- ---------- -------- -------------- --------- ---------- ---------- ------------
STABLE VALUE
FUTURE AND ANNUITY AMORTIZATION
DEFERRED POLICY DEPOSITS PREMIUMS BENEFITS OF DEFERRED
POLICY BENEFITS AND OTHER AND NET AND POLICY
ACQUISITION AND UNEARNED POLICYHOLDERS' POLICY INVESTMENT SETTLEMENT ACQUISITION
SEGMENT COSTS CLAIMS PREMIUMS FUNDS FEES INCOME(1) EXPENSES COSTS
- ------------------------- ----------- ---------- -------- -------------- --------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Year Ended
December 31, 1999:
Life Insurance
Individual Life........ $ 379,117 $1,210,188 $ 338 $ 17,159 $ 92,506 $ 59,916 $ 74,455 $ 23,434
West Coast............. 200,605 1,279,554 0 74,831 23,208 78,126 73,176 6,047
Acquisitions........... 235,903 1,374,445 558 260,267 114,866 129,806 129,581 19,444
Specialty Insurance
Products
Dental and Consumer
Benefits............. 25,819 126,592 2,994 74,204 236,120 14,915 172,165 10,705
Financial
Institutions......... 51,339 150,888 503,735 9,044 107,962 24,122 55,899 24,718
Retirement Savings and
Investment Products
Stable Value
Products............. 1,156 167,415 0 2,680,009 0 210,209 175,291 744
Investment Products.... 117,577 254,492 0 1,320,453 24,248 106,599 88,642 19,820
Corporate and Other...... 8 2,852 34 88 313 (462) 2,318 1
---------- ---------- -------- ---------- -------- -------- -------- --------
TOTAL.............. $1,011,524 $4,566,426 $507,659 $4,436,055 $599,223 $623,231 $771,527 $104,913
========== ========== ======== ========== ======== ======== ======== ========
Year Ended
December 31, 1998:
Life Insurance
Individual Life........ $ 301,941 $1,054,253 $ 355 $ 10,802 $126,168 $ 55,779 $106,308 $ 30,543
West Coast............. 144,455 1,006,280 0 77,254 22,380 63,492 54,617 4,924
Acquisitions........... 255,347 1,383,759 553 233,846 96,735 112,154 112,051 18,894
Specialty Insurance
Products
Dental and Consumer
Benefits............. 23,836 111,916 3,341 78,224 191,563 15,245 140,632 10,352
Financial
Institutions......... 39,212 215,451 385,006 105,434 112,272 25,068 52,629 28,526
Retirement Savings and
Investment Products
Stable Value
Contracts............ 1,448 172,674 0 2,691,697 0 213,136 178,745 735
Investment Products.... 75,177 194,726 0 1,233,528 18,809 105,827 85,045 17,213
Corporate and Other...... 9 944 39 88 198 13,094 469 1
---------- ---------- -------- ---------- -------- -------- -------- --------
TOTAL.............. $ 841,425 $4,140,003 $389,294 $4,430,873 $568,125 $603,795 $730,496 $111,188
========== ========== ======== ========== ======== ======== ======== ========
Year Ended
December 31, 1997:
Life Insurance
Individual Life........ $ 252,321 $ 920,924 $ 356 $ 16,334 $127,480 $ 54,593 $114,678 $ 27,354
West Coast............. 108,126 739,463 0 95,495 14,122 30,194 28,304 961
Acquisitions........... 138,052 1,025,340 1,437 311,150 102,635 110,155 116,506 16,606
Specialty Insurance
Products
Dental and Consumer
Benefits............. 22,459 120,925 2,536 80,654 151,110 23,810 110,148 15,711
Financial
Institutions......... 52,836 159,422 391,085 6,791 72,263 16,341 27,643 30,812
Retirement Savings and
Investment Products
Stable Value
Products............. 1,785 180,690 0 2,684,676 0 211,915 179,235 618
Investment Products.... 56,074 177,150 0 1,184,268 12,367 105,196 82,019 15,110
Corporate and Other...... 952 380 1,282 185 229 5,284 339 3
---------- ---------- -------- ---------- -------- -------- -------- --------
TOTAL.............. $ 632,605 $3,324,294 $396,696 $4,379,553 $480,206 $557,488 $658,872 $107,175
========== ========== ======== ========== ======== ======== ======== ========
<CAPTION>
- ------------------------- -----------
COL. A COL. J
- ------------------------- -----------
OTHER
OPERATING
SEGMENT EXPENSES(1)
- ------------------------- -----------
<S> <C>
Year Ended
December 31, 1999:
Life Insurance
Individual Life........ $ 20,851
West Coast............. (2,649)
Acquisitions........... 31,178
Specialty Insurance
Products
Dental and Consumer
Benefits............. 56,396
Financial
Institutions......... 44,728
Retirement Savings and
Investment Products
Stable Value
Products............. 4,708
Investment Products.... 14,617
Corporate and Other...... 6,610
--------
TOTAL.............. $176,439
========
Year Ended
December 31, 1998:
Life Insurance
Individual Life........ $ 14,983
West Coast............. 5,354
Acquisitions........... 26,717
Specialty Insurance
Products
Dental and Consumer
Benefits............. 49,913
Financial
Institutions......... 48,837
Retirement Savings and
Investment Products
Stable Value
Contracts............ 2,876
Investment Products.... 14,428
Corporate and Other...... 9,120
--------
TOTAL.............. $172,228
========
Year Ended
December 31, 1997:
Life Insurance
Individual Life........ $ 18,178
West Coast............. 6,849
Acquisitions........... 23,016
Specialty Insurance
Products
Dental and Consumer
Benefits............. 38,572
Financial
Institutions......... 20,165
Retirement Savings and
Investment Products
Stable Value
Products............. 3,945
Investment Products.... 12,312
Corporate and Other...... 6,833
--------
TOTAL.............. $129,870
========
</TABLE>
- ----------------------------------
(1) Allocations of Net Investment Income and Other Operating Expenses are based
on a number of assumptions and estimates and results would change if
different methods were applied.
S-1
<PAGE>
SCHEDULE IV -- REINSURANCE
PROTECTIVE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E COL. F
- ------------------------- ------------ ----------- ----------- ----------- ----------
PERCENTAGE
CEDED TO ASSUMED OF AMOUNT
GROSS OTHER FROM OTHER NET ASSUMED
AMOUNT COMPANIES COMPANIES AMOUNT TO NET
------------ ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Year Ended
December 31,1999:
Life insurance in
force................ $120,577,512 $92,566,755 $ 9,239,074 $37,249,831 24.8%
============ =========== =========== =========== ========
Premiums and policy fees:
Life insurance......... $ 540,430 $ 364,680 $ 131,855 $ 307,605 42.9%
Accident and health
insurance............ 403,491 172,852 27,266 257,905 10.6%
Property and liability
insurance............ 34,104 501 110 33,713 0.3%
------------ ----------- ----------- -----------
TOTAL................ $ 978,025 $ 538,033 $ 159,231 $ 599,223
============ =========== =========== ===========
Year Ended
December 31,1998:
Life insurance in
force................ $ 91,980,657 $64,846,246 $18,010,434 $45,144,845 39.9%
============ =========== =========== =========== ========
Premiums and policy fees:
Life insurance......... $ 537,002 $ 294,363 $ 87,965 $ 330,604 26.6%
Accident and health
insurance............ 361,705 164,852 14,279 211,132 6.8%
Property and liability
insurance............ 26,389 26,389 0.0%
------------ ----------- ----------- -----------
TOTAL................ $ 925,096 $ 459,215 $ 102,244 $ 568,125
============ =========== =========== ===========
Year Ended
December 31,1997:
Life insurance in
force................ $ 78,240,282 $34,139,554 $11,013,202 $55,113,930 20.0%
============ =========== =========== =========== ========
Premiums and policy fees:
Life insurance......... $ 387,108 $ 147,184 $ 74,738 $ 314,662 23.8%
Accident and health
insurance............ 336,575 187,539 10,510 159,546 6.7%
Property and liability
insurance............ 6,139 176 35 5,998 0.6%
------------ ----------- ----------- -----------
TOTAL................ $ 729,822 $ 334,899 $ 85,283 $ 480,206
============ =========== =========== ===========
</TABLE>
S-2
<PAGE>
APPENDIX A
EXAMPLES OF DEATH BENEFIT COMPUTATION UNDER OPTIONS A AND B
OPTION A EXAMPLE. For purposes of this example, assume that the younger of
Joint Insureds is between age 0 and 40 and that there is no outstanding Policy
Debt. Under Option A, a policy with a $250,000 Face Amount will generally pay
$250,000 in Death Benefits. However, because the Death Benefit must be greater
than or equal to 250% of the Policy Value, any time that the Policy Value
exceeds $100,000, the Death Benefit will exceed the $250,000 Face Amount. Each
additional dollar added to Policy Value above $100,000 will increase the Death
Benefit by $2.50. A policy with a $250,000 Face Amount and a Policy Value of
$125,000 will provide a Death Benefit of $312,500 ($125,000 X 250%); a Policy
Value of $150,000 will provide a Death Benefit of $375,000 ($150,000 X 250%).
Similarly, so long as Policy Value exceeds $100,000, each dollar taken out
of Policy Value will reduce the Death Benefit by $2.50. If, for example, the
Policy Value is reduced from $150,000 to $100,000 because of partial surrenders,
charges, or negative investment performance, the Death Benefit will be reduced
from $375,000 to $250,000. If at any time, however, the Policy Value multiplied
by the Face Amount percentage is less than the Face Amount, the Death Benefit
will equal the current Face Amount of the policy. Thus, if the Policy Value is
reduced from $150,000 to $75,000 because of partial surrenders, charges, or
negative investment performance, the Death Benefit will be reduced from $375,000
to $250,000, not to $187,500.
The Face Amount percentage becomes lower as the age of the younger Joint
Insured increases. If the Attained Age of the younger Joint Insured in the
example above was, for example 50 (rather than between 0 and 40), the percentage
by which Policy Value is multiplied would be 185%. The Death Benefit would not
exceed the $250,000 Face Amount unless the Policy Value exceeded approximately
$135,135 (rather than $100,000), and each dollar then added to or taken from the
Policy Value would change the Death Benefit by $1.85 (rather than $2.50).
OPTION B EXAMPLE. For purposes of this example, assume that the younger
Joint Insured's Attained age is between 0 and 40 and that there is no
outstanding Policy Debt. Under Option B, a Policy with a Face Amount of $250,000
will generally provide a Death Benefit of $250,000 plus Policy Value. Thus, for
example, a Policy with a Policy Value of $25,000 will have a Death Benefit of
$275,000 ($250,000+$25,000); a Policy Value of $50,000 will provide a Death
Benefit of $300,000 (250,000+$50,000). The Death Benefit, however must be at
least 250% of the Policy Value. As a result, if the Policy Value exceeds
$166,667, the Death Benefit will be greater than the Face Amount plus Policy
Value. Each additional dollar of Policy value above $166,667 will increase the
Death Benefit by $2.50. A policy with a Face Amount of $250,000 and a Policy
Value of $175,000 will provide a Death Benefit of $437,500 ($175,000 X 250%); a
Policy Value of $200,000 will provide a Death Benefit of $500,000 ($200,000 X
250%).
Similarly, any time Policy Value exceeds $166,667, each dollar taken out of
Policy Value will reduce the Death Benefit by $2.50. If, for example, the Policy
Value is reduced from $200,000 to $175,000 because of partial surrenders,
charges or negative investment performance, the Death Benefit will be reduced
from $500,000 to $437,500. If at any time, however, Policy Value multiplied by
the Face Amount percentage is less than the Face Amount plus the Policy Value,
then the Death Benefit will be the current Face Amount plus Policy Value of the
Policy. Thus, if the Policy Value decreased from $175,000 to $150,000 because of
partial surrenders, charges or negative investment performance, the Death
Benefit will be reduced from $437,500 to $400,000, not to $375,000.
The Face Amount percentage becomes lower as the age of the younger Joint
Insured increases. If the Attained Age of the younger Joint Insured in the
example above was, for example 50 (rather than between 0 and 40), the percentage
by which Policy Value is multiplied would be 185%. The Death Benefit would be
the sum of the Policy Value plus $250,000 unless the Policy Value exceeded
$294,118 (rather than $166,667), and each dollar then added to or taken from the
Policy Value would change the Death Benefit by $1.85 (rather than $2.50).
A-1
<PAGE>
TABLE OF FACE AMOUNT PERCENTAGES
<TABLE>
<CAPTION>
ATTAINED ATTAINED ATTAINED ATTAINED
AGE PERCENTAGE AGE PERCENTAGE AGE PERCENTAGE AGE PERCENTAGE
<S> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
0-40 250% 50 185% 60 130% 70 115%
41 243% 51 178% 61 128% 71 113%
42 236% 52 171% 62 126% 72 111%
43 229% 53 164% 63 124% 73 109%
44 222% 54 157% 64 122% 74 107%
45 215% 55 150% 65 120% 75-90 105%
46 209% 56 146% 66 119% 91 104%
47 203% 57 142% 67 118% 92 103%
48 197% 58 138% 68 117% 93 102%
49 191% 59 134% 69 116% 94 101%
95+ 100%
</TABLE>
A-2
<PAGE>
PART II -- OTHER INFORMATION
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
RULE 484 UNDERTAKING
Article XI of the By-laws of Protective Life provides, in substance, that
any of Protective Life's directors and officers, who is a party or is threatened
to be made a party to any action, suit or proceeding, other than an action by or
in the right of Protective Life, by reason of the fact that he is or was an
officer or director, shall be indemnified by Protective Life against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such claim,
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of Protective
Life and, with respect to any criminal action or proceeding, had no reasonable
cause to believe his conduct was unlawful. If the claim, action or suit is or
was by or in the right of Protective Life to procure a judgment in its favor,
such person shall be indemnified by Protective Life against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection with the
defense or settlement of such action or suit if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
Protective Life, except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his duty to Protective
Life unless and only to the extent that the court in which such action or suit
was brought shall determine upon application that, despite the adjudication of
liability but in view of all circumstances of the case, such person is fairly
and reasonably entitled to indemnity for such expenses which such court shall
deem proper. To the extent that a director or officer has been successful on the
merits or otherwise in defense of any such action, suit or proceeding, or in
defense of any claim, issue or matter therein, he shall be indemnified by
Protective Life against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith, not withstanding that he has
not been successful on any other claim issue or matter in any such action, suit
or proceeding. Unless ordered by a court, indemnification shall be made by
Protective Life only as authorized in the specific case upon a determination
that indemnification of the officer or director is proper in the circumstances
because he has met the applicable standard of conduct. Such determination shall
be made (a) by the Board of Directors by a majority vote of a quorum consisting
of directors who were not parties to, or who have been successful on the merits
or otherwise with respect to, such claim action, suit or proceeding, or (b) if
such a quorum is not obtainable, or, even if obtainable a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion or (c) by the shareholders.
In addition, the executive officers and directors are insured by PLC's
Directors' and Officers' Liability Insurance Policy including Company
Reimbursement and are indemnified by a written contract with PLC which
supplements such coverage.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification may be against public policy as expressed in the Act and
may be, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than payment by the Registrant of expenses
incurred or paid by a director, officer, or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its
II-1
<PAGE>
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
REPRESENTATIONS PURSUANT TO RULE SECTION 26(e) OF THE INVESTMENT COMPANY ACT OF
1940
Protective Life hereby represents that the fees and charges deducted under
the variable life insurance policies described herein are, in the aggregate,
reasonable in relation to the services rendered, the expenses expected to be
incurred and the risks assumed by it under such policies.
CONTENTS OF REGISTRATION STATEMENT
This registration statement consists of the following papers and documents:
The facing sheet.
The prospectus consisting of 52 pages.
The undertaking to file reports.
The Rule 484 undertaking.
Representations pursuant to Section 26(e) of the Investment Company Act of
1940.
The signatures.
Written consents of the following persons:
Nancy Kane, Esq.
Stephen Peeples, F.S.A., M.A.A.A.
Sutherland Asbill & Brennan LLP
PricewaterhouseCoopers, LLP
The following exhibits:
<TABLE>
<S> <C> <C>
1.A. (1) Certified resolutions of the board of directors of Protective Life Insurance Company establishing
Protective Variable Life Separate Account.*
(2) None.
(3)(a) Form of Underwriting Agreement among Protective Life Insurance Company, Investment Distributors,
Inc. and Protective Variable Life Separate Account.**
(a)(1) Amendment I to the Underwriting Agreement+++
(b) Form of Distribution Agreement between Investment Distributors, Inc. and selling broker-dealers.**
(4) None.
</TABLE>
- ------------------------
*Incorporated herein by reference to the initial filing of the Form S-6
Registration Statement, (File No. 33-61599) as filed with the Commission on
August 4, 1995.
**Incorporated herein by reference to Pre-Effective Amendment No. 1 to the
Form S-6 Registration Statement, (File No. 33-61599) as filed with the
Commission on December 22, 1995.
***Incorporated herein by reference to Post-Effective Amendment No. 5 to the
Form N-4 Registration Statement (File No. 33-70984) as filed with the
Commission on April 30, 1997.
****Incorporated herein by reference to the initial filing of the Form S-6
Registration Statement (File No. 333-52215) as filed with the Commission on
May 8, 1998.
*****Incorporated herein by reference to Post-Effective Amendment No. 3 to the
Form S-6 Registration Statement (File No. 33-61599) as filed with the
Commission on April 30, 1998.
+Incorporated herein by reference to Pre-Effective Amendment No. 2 to the
Form S-6 Registration Statement (File No. 333-45963) as filed with the
Commission on June 19, 1998.
++Incorporated herein by reference to Pre-Effective Amendment Number 1 to the
Form N-4 Registration Statement (File No. 333-60149) as filed with the
Commission on October 26, 1998.
+++Incorporated herein by reference to Pre-Effective Amendment Number 1 to the
Form S-6 Registration Statement (File No. 333-45963) as filed with the
Commission on June 3, 1998.
++++Incorporated herein by reference to Post-Effective Amendment No. 5 to the
Form S-6 Registration Statement (File No. 33-61599) filed with the
Commission on April 25, 2000.
+++++Incorporated herein by reference to the initial filing of the Form S-6
Registration Statement (File No. 333-31944) as filed with the Commission on
March 8, 2000.
II-2
<PAGE>
<TABLE>
<S> <C> <C>
(5)(a) Form of Contract.
(b) Form of Estate Protection Endorsement.
(c) Form of Policy Split Option Endorsement.
(6)(a) Charter of Protective Life Insurance Company.*
(b) By-Laws of Protective Life Insurance Company.*
(7) None
(8) None
(9)(a) Participation/Distribution Agreement.**
(a)(1) Amendment I to the Participation/Distribution Agreement+++
(b) Participation Agreement (Oppenheimer Variable Account Funds).***
(c) Participation Agreement (MFS Variable Insurance Trust).***
(d) Participation Agreement (Acacia Capital Corporation).***
(e) Participation Agreement (Van Eck Worldwide Insurance Trust).++
(f) Participation Agreement (Van Kampen Life Investment Trust).++++
(10) Contract Application.
2. Opinion and consent of Nancy Kane, Esq.
3. Not applicable.
4. Not applicable.
5. Not applicable.
6. Not Applicable
7. Opinion and consent of Stephen Peeples, F.S.A., M.A.A.A.
8. Consent of Sutherland Asbill & Brennan LLP
9. Consent of PricewaterhouseCoopers, LLP
10. Memorandum pursuant to Rule 6e-3(T)(b)(12)(iii) describing issue, transfer and redemption
procedures.
11. Power of Attorney.+++++
15. Awareness Letter of PricewaterhouseCoopers, LLP.
</TABLE>
- ------------------------
*Incorporated herein by reference to the initial filing of the Form S-6
Registration Statement, (File No. 33-61599) as filed with the Commission on
August 4, 1995.
**Incorporated herein by reference to Pre-Effective Amendment No. 1 to the
Form S-6 Registration Statement, (File No. 33-61599) as filed with the
Commission on December 22, 1995.
***Incorporated herein by reference to Post-Effective Amendment No. 5 to the
Form N-4 Registration Statement (File No. 33-70984) as filed with the
Commission on April 30, 1997.
****Incorporated herein by reference to the initial filing of the Form S-6
Registration Statement (File No. 333-52215) as filed with the Commission on
May 8, 1998.
*****Incorporated herein by reference to Post-Effective Amendment No. 3 to the
Form S-6 Registration Statement (File No. 33-61599) as filed with the
Commission on April 30, 1998.
+Incorporated herein by reference to Pre-Effective Amendment No. 2 to the
Form S-6 Registration Statement (File No. 333-45963) as filed with the
Commission on June 19, 1998.
++Incorporated herein by reference to Pre-Effective Amendment Number 1 to the
Form N-4 Registration Statement (File No. 333-60149) filed with the
Commission on October 26, 1998.
+++Incorporated herein by reference to Pre-Effective Amendment Number 1 to the
Form S-6 Registration Statement (File No. 333-45963) filed with the
Commission on June 3, 1998.
++++Incorporated herein by reference to Post-Effective Amendment No. 5 to the
Form S-6 Registration Statement (File No. 333-61599) filed with the
Commission on April 25, 2000.
+++++Incorporated herein by reference to the initial filing of the Form S-6
Registration Statement (File No. 333-31944) as filed with the Commission on
March 8, 2000.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, Protective Variable Life
Separate Account has duly caused this Pre-Effective Amendment to the
Registration Statement on Form S-6 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Birmingham, State of
Alabama on May 24, 2000.
PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT
(Registrant)
By: /s/ JOHN D. JOHNS
-------------------------------------------
John D. Johns, President
PROTECTIVE LIFE INSURANCE COMPANY
PROTECTIVE LIFE INSURANCE COMPANY
(Depositor)
By: /s/ JOHN D. JOHNS
-------------------------------------------
John D. Johns, President
PROTECTIVE LIFE INSURANCE COMPANY
As required by the Securities Act of 1933, this Pre-Effective Amendment to
the Registration Statement on Form S-6 has been signed by the following persons
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
*
------------------------------------------- Chairman of the Board and Director May 24, 2000
Drayton Nabers, Jr. (Principal Executive Officer)
/s/ JOHN D. JOHNS
------------------------------------------- President and Director (Principal May 24, 2000
John D. Johns Financial Officer)
/s/ JERRY W. DEFOOR Vice President, Controller and
------------------------------------------- Chief Accounting Officer May 24, 2000
Jerry W. DeFoor (Principal Accounting Officer)
*
------------------------------------------- Director May 24, 2000
R. Stephen Briggs
*
------------------------------------------- Director May 24, 2000
Jim E. Massengale
*
------------------------------------------- Director May 24, 2000
A.S. Williams III
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
*
------------------------------------------- Director May 24, 2000
Danny L. Bentley
*
------------------------------------------- Director May 24, 2000
Richard J. Bielen
*
------------------------------------------- Director May 24, 2000
T. Davis Keyes
*
------------------------------------------- Director May 24, 2000
Carolyn King
*
------------------------------------------- Director May 24, 2000
Deborah J. Long
*
------------------------------------------- Director May 24, 2000
Steven A. Schultz
*
------------------------------------------- Director May 24, 2000
Wayne E. Stuenkel
*By: /s/ NANCY KANE
--------------------------------------
Nancy Kane
Attorney-in-Fact May 24, 2000
</TABLE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<S> <C> <C>
1.A. (5)(a) Form of Contract.
(b) Form of Estate Protection Endorsement.
(c) Form of Policy Split Option Endorsement.
(10) Contract Application.
2. Opinion and consent of Nancy Kane, Esq.
7. Opinion and consent of Stephen Peeples, F.S.A., M.A.A.A.
8. Consent of Sutherland Asbill & Brennan LLP
9. Consent of PricewaterhouseCoopers, LLP
10. Memorandum pursuant to Rule 6e-3(T)(b)(12)(iii) describing issue, transfer and redemption
procedures.
15. Awareness Letter of PricewaterhouseCoopers, LLP.
</TABLE>
<PAGE>
EXHIBIT 1.A.(5)(a)
<PAGE>
[LOGO TO COME]
PROTECTIVE LIFE INSURANCE COMPANY / P. O. BOX 2606 / BIRMINGHAM, ALABAMA 35202
A STOCK COMPANY (205-879-9230)
- --------------------------------------------------------------------------------
VARIABLE LIFE INSURANCE POLICY
POLICY NUMBER:
This is a Last Survivor Flexible Premium Variable and Fixed Life Insurance
Policy ("Policy") which has been issued to the Owner. This Policy provides a
death benefit.
THE OWNER HAS THE RIGHT TO RETURN THIS POLICY. The Owner may cancel this
Policy after receipt by returning the Policy to the Company's Home Office, or to
any Agent of the Company, with a written request for cancellation within (a) 10
days after receipt; or (b) 45 days after the Application was signed; or (c) 10
days after the Company mails or delivers a Notice of Right of Withdrawal,
whichever is later. Return of this Policy by mail is effective on receipt by the
Company. The returned Policy will be treated as if the Company had never issued
it. In states where permitted, the Company will promptly refund an amount equal
to the sum of: (a) the difference between the premiums paid (after deduction of
any policy fees and other charges) and the amounts allocated to the Fixed
Account or the Sub-Accounts, plus (b) the value of the amounts allocated to the
Fixed Account, including any interest credited on such amounts accumulated to
the date that this Policy is returned to the Company, plus (c) the value of the
amounts allocated to the Sub-Accounts, adjusted to reflect the net investment
experience of such Sub-Accounts, to the date that this Policy is returned to the
Company. This amount may be more or less than the premium payment(s). In states
where required, the Company will promptly refund the premium payment(s).
<TABLE>
<S> <C>
[Signature to come] [Signature to come]
PRESIDENT SECRETARY
</TABLE>
THE POLICY VALUES, THE AMOUNT OF THE DEATH BENEFIT PROVIDED IN THIS
CONTRACT, OR THE DURATION OF THE INSURANCE COVERAGE, MAY BE FIXED OR VARIABLE
WHEN BASED ON THE INVESTMENT EXPERIENCE OF THE VARIABLE ACCOUNT, MAY INCREASE OR
DECREASE IN ACCORDANCE WITH THE FLUCTUATIONS IN THE NET INVESTMENT FACTOR, AND
ARE NOT GUARANTEED AS TO DOLLAR AMOUNTS. THERE IS NO GUARANTEED MINIMUM FOR THE
PORTION OF THE POLICY VALUE IN THE SUB-ACCOUNTS. PLEASE REFER TO THE VARIABLE
ACCOUNT SECTION OF THIS POLICY FOR MORE INFORMATION REGARDING THE VARIABLE
ACCOUNT. PLEASE REFER TO THE DEATH BENEFIT SECTION OF THIS POLICY FOR A
DESCRIPTION OF THE DEATH BENEFIT.
READ THE CONTRACT CAREFULLY
THIS POLICY IS A LEGAL CONTRACT BETWEEN THE OWNER AND THE COMPANY
LAST SURVIVOR FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
Death Benefit Payable at the Death of the Last Survivor of the Joint
Insureds
No Death Benefit Payable on the Death of the First to Die of the Joint
Insureds
NON-DIVIDEND PAYING
VUL-07 1-00 Page 1
<PAGE>
INDEX
<TABLE>
<S> <C>
POLICY SPECIFICATIONS PAGES............. 3
DEFINITIONS............................. 4
GENERAL PROVISIONS...................... 6
Entire Contract....................... 6
Modification of the Contract.......... 6
Misstatement of Age or Sex............ 6
Non-Participating..................... 7
Notification of First Death........... 7
Suicide Exclusion..................... 7
Termination........................... 7
Representations and Contestability.... 7
Reports............................... 7
Arbitration........................... 8
CONTROL PROVISIONS...................... 8
The Parties Involved.................. 8
Rights of Owner....................... 8
Contingent Owner...................... 8
Beneficiary........................... 9
Changing the Owner.................... 9
Assignment............................ 9
Protection of Proceeds................ 9
Suspension or Delay in Payment........ 9
Tax Considerations.................... 9
Changes in Policy Cost Factors........ 10
Coverage Limitations.................. 10
PREMIUMS................................ 10
Premium Payments...................... 10
Planned Premium Payments.............. 10
Unscheduled Premium Payments.......... 10
Minimum Monthly Premium Guarantee..... 10
Allocation of Net Premiums............ 11
Grace Period.......................... 11
Reinstatement......................... 11
Minimum Values........................ 12
DEDUCTIONS FROM POLICY VALUE............ 12
COST OF INSURANCE....................... 12
Cost of Insurance Charge.............. 12
Cost of Insurance Rates............... 12
Method of Computing Cost of Insurance
Rates............................... 12
BASIS OF COMPUTATION.................... 12
FIXED ACCOUNT........................... 12
Calculation of the Fixed Account
Value............................... 12
Interest Credited..................... 13
VARIABLE ACCOUNT........................ 13
General Description................... 13
Sub-Accounts of the Variable
Account............................. 13
Valuation of Assets................... 14
Calculation of Sub-Account Values..... 14
Net Investment Factor................. 14
Transfers............................. 15
DEATH BENEFIT........................... 15
Death Benefit Proceeds................ 15
Amount of Death Benefit Proceeds...... 15
Payment of Death Benefit Proceeds..... 16
Suspension of Payment................. 16
Creditor Claims....................... 16
SURRENDERS AND WITHDRAWALS.............. 16
Surrenders............................ 16
Withdrawals........................... 17
POLICY LOANS............................ 17
Right to Make Loans, Policy Debt...... 17
Maximum Loan.......................... 17
Interest.............................. 17
Collateral............................ 17
Repaying Policy Debt.................. 18
CHANGING THIS POLICY.................... 18
Increasing The Face Amount............ 18
Premium Payments Required for a Face
Amount Increase..................... 18
Cancellation of a Face Amount
Increase............................ 18
Decreasing the Face Amount............ 18
Changing the Death Benefit Option..... 19
Change Approval....................... 19
SETTLEMENT OPTIONS...................... 19
Availability of Options............... 19
Minimum Amounts....................... 19
Electing A Settlement Option.......... 19
Effective Date and Payment Date....... 19
Description of Options................ 20
</TABLE>
VUL-07 1-00 Page 2
<PAGE>
POLICY SPECIFICATIONS
<TABLE>
<S> <C>
POLICY NUMBER: SPECIMEN POLICY EFFECTIVE DATE: MAY 1, 2000
POLICY ISSUE DATE: MAY 1, 2000 MONTHLY ANNIVERSARY DAY: 1
JOINT INSURED 1: JOHN Q. DOE JOINT INSURED 2: MARY Q. DOE
AGE: 35 SEX: MALE AGE: 35 SEX: FEMALE
RATE CLASS: STANDARD NON-SMOKER RATE CLASS: STANDARD NON-SMOKER
INITIAL FACE AMOUNT: $250,000 MINIMUM BASIC FACE AMOUNT: $250,000
INITIAL BASIC FACE AMOUNT: $250,000 MINIMUM SUPPLEMENTAL FACE
INITIAL SUPPLEMENTAL FACE AMOUNT: NONE
AMOUNT: NONE
MINIMUM MONTHLY PREMIUM PAYMENT: $39.30 INITIAL PREMIUM PAYMENT: $471.60
MINIMUM MONTHLY PREMIUM GUARANTEE PERIOD: 5 YEARS
PLANNED PREMIUM PAYMENT: $471.60 PAYABLE ANNUALLY
DEATH BENEFIT OPTION: LEVEL
OWNER: JOHN Q. DOE
MARY Q. DOE
</TABLE>
<TABLE>
<S> <C> <C>
MONTHLY CHARGE
FORM DURING FIRST
NUMBER SCHEDULE OF ADDITIONAL BENEFITS YEAR
- --------------------- ------------------------------------------------------------ ----------------
</TABLE>
- ------------------------
GUARANTEED INTEREST RATE FOR FIXED ACCOUNT [4% ANNUALLY (.3274% MONTHLY)]
INITIAL ANNUAL EFFECTIVE INTEREST RATE FOR FIXED ACCOUNT [5.75%]
MAXIMUM LOAN INTEREST RATE 6% YEARS 1-10 - 4.25% YEARS 11+
THIS POLICY PROVIDES LIFE INSURANCE COVERAGE ON THE JOINT INSUREDS UNTIL
TERMINATION, SUBJECT TO THE TERMS OF THIS POLICY. THERE MAY BE LITTLE OR NO
SURRENDER VALUE PAYABLE ON CONTRACT TERMINATION.
VUL-07 1-00 Page 3
<PAGE>
POLICY SPECIFICATIONS (CONTINUED)
DEDUCTION FROM PREMIUM PAYMENTS
PREMIUM EXPENSE CHARGE. A Premium Expense Charge will be deducted from each
Premium Payment. The maximum Premium Expense Charge is 12.5% in Policy Years 1
though 5, 6% in Policy Years 6 through 10, and 2.5% thereafter. The Company
reserves the right to charge less than the maximum charge. [Accordingly, the
Premium Expense Charge is currently 10% in Policy Years 1 through 5, 5% in
Policy Years 6 through 10, and 2% thereafter (subject to the maximum charges
outlined above).]
MONTHLY DEDUCTIONS
Beginning as of the Policy Effective Date and continuing on each Monthly
Anniversary Day thereafter, the Company will deduct the charges listed below.
With the exception of the Mortality and Expense Risk Charge, each charge will
reduce the Sub-Account Value(s) and Fixed Account Value in the proportion that
each Sub-Account Value and the Fixed Account Value bears to the Unloaned Policy
Value. The Mortality and Expense Risk Charge will reduce only the Sub-Account
Value(s).
ADMINISTRATION CHARGE FOR INITIAL BASIC FACE AMOUNT. The maximum monthly
Administration Charge for Initial Basic Face Amount is equal to $.075 per every
$1,000 of Initial Basic Face Amount in Policy Years 1 through 9. This charge is
not assessed after the ninth Policy Year.
THE COMPANY RESERVES THE RIGHT TO CHARGE LESS THAN THE MAXIMUM
CHARGE. [Accordingly, the monthly charge is currently equal to $.06 per every
$1,000 of Initial Basic Face Amount in Policy Years 1 through 9 (subject to the
maximum charge outlined above).]
ADMINISTRATION CHARGE FOR INCREASE IN SUPPLEMENTAL FACE AMOUNT. The monthly
Administration Charge for Increase in Supplemental Face Amount is equal to the
lesser of $250 or the sum of (a) plus (b) where:
(a) is $23.50; and
(b) is $.06 per every $1,000 of increase in Supplemental Face Amount.
This monthly charge applies during the twelve month period following the
effective date of each increase in Supplemental Face Amount.
CHARGE FOR BENEFITS UNDER RIDERS. The Company will deduct a monthly charge
for any riders.
COST OF INSURANCE CHARGE. The Company will deduct a monthly Cost of
Insurance Charge for the Basic Face Amount and any Supplemental Face Amount.
This charge varies and is calculated in accordance with the policy provisions.
See the Cost of Insurance section of this Policy for details. The Maximum
Monthly Cost of Insurance Rates are set forth in the table on the following
page.
MORTALITY AND EXPENSE RISK CHARGE. The maximum monthly Mortality and
Expense Risk Charge is equal to .075% multiplied by the Variable Account Value,
which is equivalent to an annual rate of .90% of such amount. The Company
reserves the right to charge less than the maximum charge. [Accordingly, in
Policy Years 11 and thereafter, the monthly Mortality and Expense Risk Charge is
currently .021% multiplied by the Variable Account Value, which is equivalent to
an annual rate of .25% of such amount (subject to the maximum charge outlined
above).] This charge compensates the Company for assuming the mortality and
expense risks under this Policy.
OTHER DEDUCTIONS
WITHDRAWAL CHARGE. A Withdrawal Charge equal to the lesser of: (a) 2% of
the amount withdrawn; or (b) $25 is deducted from the Fixed Account and Variable
Account Value(s) whenever the Owner makes a withdrawal. See the Surrenders and
Withdrawals section of this Policy for additional details.
TRANSFER FEE. A $25 charge may be deducted from the Fixed Account and
Variable Account Value(s) being transferred for each transfer request in excess
of 12 during a Policy Year. See the Variable Account section of this Policy for
additional details.
VUL-07 1-00 Page 3A
<PAGE>
SURRENDER CHARGES
If this Policy is surrendered, lapses at the end of a Grace Period or the
Owner reduces the Basic Face Amount during the first twelve Policy Years, the
Company will deduct a Surrender Charge from the Fixed Account and Variable
Account Value(s). The Maximum Surrender Charge on surrender or lapse of this
Policy is shown in the table below.
If the Basic Face Amount of this Policy is decreased during the first twelve
Policy Years, the partial Surrender Charge imposed will equal the portion of the
Surrender Charge (shown in the table below and reduced by any previous partial
Surrender Charge(s)) that corresponds to the percentage by which the Basic Face
Amount is reduced. In the event of such a reduction in the Basic Face Amount,
the Company will allocate the partial Surrender Charge to each Sub-Account and
the Fixed Account based on the proportion that the value of the Fixed Account
and the value of the Sub-Account(s) bear to the total Unloaned Policy Value.
<TABLE>
<CAPTION>
POLICY SURRENDER POLICY SURRENDER
YEARS CHARGE YEARS CHARGE
- ----- --------- -------- ---------
<S> <C> <C> <C>
1 $792.43 8 $452.82
2 792.43 9 396.21
3 735.83 10 339.61
4 679.22 11 283.01
5 622.62 12 226.41
6 566.02 13+ 0
7 509.42
</TABLE>
GUARANTEED MAXIMUM MONTHLY COST OF INSURANCE RATES
PER $1,000 OF BASIC AND SUPPLEMENTAL NET AMOUNT AT RISK
<TABLE>
<CAPTION>
POLICY POLICY POLICY POLICY
YEAR RATE YEAR RATE YEAR RATE YEAR RATE
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
1 .00021 21 .07386 41 2.13509 61 27.23936
2 .00067 22 .08791 42 2.52034 62 32.36967
3 .00121 23 .10399 43 2.95311 63 41.22764
4 .00186 24 .12222 44 3.43292 64 57.81227
5 .00266 25 .14354 45 3.96928 65 83.33333
6 .00360 26 .16880 46 4.57967 66+ 0
7 .00476 27 .19886 47 5.28097
8 .00613 28 .23566 48 6.09291
9 .00775 29 .28112 49 7.03013
10 .00962 30 .33660 50 8.07993
11 .01184 31 .40218 51 9.23437
12 .01443 32 .47863 52 10.47303
13 .01748 33 .56607 53 11.79230
14 .02104 34 .66492 54 13.17161
15 .02522 35 .77835 55 14.62345
16 .03014 36 .91240 56 16.14868
17 .03602 37 1.08192 57 17.77017
18 .04311 38 1.26981 58 19.53103
19 .05167 39 1.50994 59 21.50762
20 .06184 40 1.79853 60 23.92732
</TABLE>
VUL-07 1-00 Page 3B
<PAGE>
POLICY SPECIFICATIONS (CONTINUED)
ALLOCATION OF PREMIUM PAYMENTS:
Protective Variable Life Separate Account
Sub-Accounts:
<TABLE>
<S> <C>
Goldman Sachs/PIC Growth & Income 20.00%
Goldman Sachs/CORE U.S. Equity 10.00%
Calvert Social Small Cap Growth 10.00%
Calvert Social Balanced 10.00%
MFS Emerging Growth 10.00%
MFS Growth with Income 10.00%
Oppenheimer Aggresive Growth/VA 10.00%
Oppenheimer Strategic Bond/VA 10.00%
Protective Life General Account:
Fixed Account 10.00%
</TABLE>
VUL-07 1-00 Page 3C
<PAGE>
DEFINITIONS
APPLICATION. The paperwork completed to apply for this Policy.
ATTAINED AGE. The Age of Joint Insured 1 or Joint Insured 2 as shown on the
Policy Specifications Page plus the number of complete Policy Years since the
Policy Effective Date.
BENEFICIARY. The Beneficiary is the person entitled to receive the Death
Benefit Proceeds upon receipt of due proof of both Joint Insureds' deaths. If
more than one beneficiary is named in the Application, the Company will use the
beneficiary percentages shown in the Application to calculate each beneficiary's
portion of the Death Benefit Proceeds.
PRIMARY. Where a Primary Beneficiary is living, such person is the
Beneficiary. The Primary Beneficiary is the person named as the "Primary
Beneficiary" in the Application, unless changed.
CONTINGENT. Where no Primary Beneficiary is living, the "Contingent
Beneficiary", as named in the Application, is the Beneficiary, unless
changed.
IRREVOCABLE. An Irrevocable Beneficiary is one whose consent is
necessary to change the Beneficiary or exercise certain other rights.
CASH VALUE. The Cash Value is equal to the Policy Value minus any
applicable Surrender Charge.
COMPANY. Protective Life Insurance Company, also referred to herein as "it"
or "its".
DEATH BENEFIT. The amount of insurance provided under the Policy as
determined by the Death Benefit Option selected.
DEATH BENEFIT OPTION. One of two options (Level Death Benefit or Increasing
Death Benefit) that an Owner may select for the computation of Death Benefit
Proceeds.
DEATH BENEFIT PROCEEDS. The amount payable to the Beneficiary if both Joint
Insureds die while the Policy is in force. The amount is equal to the Death
Benefit, plus any death benefit under any rider or endorsement to the Policy,
less any Policy Debt, less unpaid Monthly Deductions if the Last Survivor of the
Joint Insureds dies during a Grace Period.
FACE AMOUNT. The Face Amount is the Basic Face Amount, plus any
Supplemental Face Amounts. The Initial Face Amount is shown on the Policy
Specifications Page. Thereafter, the Face Amount may be increased or decreased
in accordance with the terms of this Policy.
FIXED ACCOUNT. Part of the Company's General Account to which Policy Value
may be transferred or Net Premiums allocated under a Policy.
FIXED ACCOUNT VALUE. The Policy Value in the Fixed Account.
FUND. An investment portfolio of Protective Investment Company or any other
open-end management investment company or unit investment trust in which a
Sub-Account invests.
GENERAL ACCOUNT. The assets of the Company other than those allocated to
the Variable Account or another separate account.
HOME OFFICE. 2801 Highway 280 South, Birmingham, Alabama, 35223.
ISSUE DATE. The date the Policy is issued. The Issue Date may be a later
date than the Policy Effective Date if the initial premium payment is received
at the Home Office before the Issue Date.
JOINT INSUREDS. The two persons whose lives are covered by the Policy.
LAPSE. Termination of the Policy at the expiration of the Grace Period
while at least one of the Joint Insureds is still living.
VUL-07 1-00 Page 4
<PAGE>
LAST SURVIVOR OF THE JOINT INSUREDS. The Joint Insured who survives after
the death of the other Joint Insured.
LOAN ACCOUNT. An account within the Company's General Account to which the
Fixed Account Value and/or Variable Account Value is transferred as collateral
for policy loans.
LOAN ACCOUNT VALUE. The Policy Value in the Loan Account.
MINIMUM MONTHLY PREMIUM. The Minimum Monthly Premium is used in a
calculation that is described under the Minimum Monthly Premium Guarantee
section of this Policy.
MONTHLY ANNIVERSARY DAY. The same day of the month as the Policy Effective
Date. The Monthly Anniversary Day is shown on the Policy Specifications Page.
MONTHLY DEDUCTIONS. The charges deducted monthly from the Sub-Account
value(s) and/or Fixed Account value as described on the Policy Specifications
Page.
NET AMOUNT AT RISK. The Net Amount at Risk as of any Monthly Anniversary
Day is (a) minus (b) where:
(a) is the Death Benefit discounted at one plus the monthly guaranteed
interest rate; and
(b) is the Policy Value (prior to deducting the Cost of Insurance), if the
Death Benefit Option is Level, or Policy Value (discounted at one plus
the monthly guaranteed interest rate and prior to deducting the Cost of
Insurance), if the Death Benefit Option is Increasing.
The Net Amount at Risk is allocated between the Basic Net Amount at Risk and
any Supplemental Net Amount at Risk as follows:
BASIC NET AMOUNT AT RISK. The Basic Net Amount at Risk is equal to the
greater of zero or the Death Benefit discounted at one plus the monthly
guaranteed interest rate, minus the sum of (c) and (d) where:
(c) is the Policy Value (prior to deducting the Cost of Insurance), if
the Death Benefit Option is Level, or Policy Value (discounted at one
plus the monthly guaranteed interest rate and prior to deducting the
Cost of Insurance), if the Death Benefit Option is Increasing.
(d) is the sum of all Supplemental Face Amounts.
SUPPLEMENTAL NET AMOUNT AT RISK. The Supplemental Net Amount at Risk is
equal to the Net Amount at Risk minus the Basic Net Amount at Risk. The
Supplemental Net Amount at Risk is computed separately for the Supplemental
Initial Face Amount and for each increase in Supplemental Face Amount, in the
order such supplemental coverage is issued.
NET ASSET VALUE PER SHARE. The value per share of any Fund as computed on
any Valuation Day as described in the Fund prospectus.
NET PREMIUM. The premium payment after deduction of the Premium Expense
Charge.
OWNER. The person(s) who own the Policy.
POLICY ANNIVERSARY. The same day in each Policy Year as the Policy
Effective Date.
POLICY DEBT. The sum of all outstanding policy loans plus accrued interest.
POLICY EFFECTIVE DATE. The date shown on the Policy Specifications
Page and on which coverage takes effect. Policy Years are measured from the
Policy Effective Date. For any increase, decrease, additions, or changes to
coverage, the effective date shall be the Monthly Anniversary Day on or next
following the date the supplemental application is approved by the Company. The
Policy Effective Date will never be the 29th, 30th or the 31st of a month.
VUL-07 1-00 Page 5
<PAGE>
POLICY VALUE. The sum of the Variable Account Value, the Fixed Account
Value and the Loan Account Value.
POLICY YEAR. Each period of 12 months commencing with the Policy Effective
Date.
SETTLEMENT OPTIONS. Alternatives to a lump sum payment by the Company. See
the Settlement Options section of this Policy for details.
SIMULTANEOUS DEATH. If both Joint Insureds die simultaneously, the Company
shall consider the Last Survivor of the Joint Insureds to be the Joint Insured 1
shown on the Policy Specifications Page. When the Last Survivor of the Joint
Insureds and a named Beneficiary die within a period of 120 hours of each other
and the order of death is unknown, the Company shall assume that the Beneficiary
died before the Last Survivor of the Joint Insureds.
SUB-ACCOUNT. A separate division of the Variable Account. Each Sub-Account
invests in a corresponding Fund.
SUB-ACCOUNT VALUE. The Policy Value in a Sub-Account as defined in the
Variable Account section of this Policy.
SURRENDER VALUE. The Cash Value minus any outstanding Policy Debt.
UNIT. A unit of measurement used to calculate the Sub-Account Values.
UNLOANED POLICY VALUE. The sum of the Variable Account Value and the Fixed
Account Value, minus any policy debt.
VALUATION DAY. Each day the New York Stock Exchange and the Home Office are
open for business except for a day that a Sub-Account's corresponding Fund does
not value its shares.
VALUATION PERIOD. The period commencing at the close of regular trading on
the New York Stock Exchange on any Valuation Day and ending at the close of
regular trading on the New York Stock Exchange on the next succeeding Valuation
Day.
VARIABLE ACCOUNT. The Protective Variable Life Separate Account, a separate
investment account of the Company to which Policy Value may be transferred or
into which Net Premiums may be allocated.
VARIABLE ACCOUNT VALUE. The sum of all Sub-Account Values.
WITHDRAWAL. A Withdrawal by the Owner of an amount of Cash Value that is
less than the Surrender Value.
WRITTEN NOTICE. A written notice or request that is received by the Company
at the Home Office.
GENERAL PROVISIONS
ENTIRE CONTRACT. This Policy, any riders and/or endorsements attached
hereto, and the Application, a copy of which is attached, and all subsequent
applications, copies of which are attached, constitute the entire contract. Any
application for reinstatement becomes part of this Policy if the reinstatement
is approved by the Company. The Policy is issued in consideration of payment of
the Initial Premium Payment shown on the Policy Specifications Page.
MODIFICATION OF THE CONTRACT. No change or waiver of the terms of this
Policy is valid unless made by the Company, in writing, and approved by the
President, Secretary or a Vice President of the Company. The Company reserves
the right to change the provisions of this Policy to conform to any applicable
laws, or applicable regulations or rulings issued by a government agency.
MISSTATEMENT OF AGE OR SEX. Questions in the Application concern the Joint
Insureds' dates of birth and sex. If the date of birth or sex given in the
Application or any Application for riders is not correct for either
VUL-07 1-00 Page 6
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Joint Insured, the Death Benefit and any benefits provided under any riders to
this Policy will be adjusted to those which would be purchased by the most
recent deduction for the cost of insurance and the cost of any benefits provided
by such riders, at the correct ages or sex.
NON-PARTICIPATING. This Policy does not share in the Company's surplus or
profits and does not pay dividends.
NOTIFICATION OF FIRST DEATH. The Company must be provided due proof of the
first death of the Joint Insureds within a reasonable time, but in no event
later than one year after the date of the first death.
SUICIDE EXCLUSION. If either of the Joint Insureds commits suicide, while
sane or insane, within two years from the Policy Effective Date and while this
Policy is in force, the Company's total liability shall be limited to the
premium payments made before death, less any Policy Debt and less any
Withdrawals and this Policy will be terminated as of the date of such suicide.
If either of the Joint Insureds commits suicide, while sane or insane, within
two years from the effective date of any increase in the Face Amount, the
Company's total liability with respect to such increase shall be limited to the
sum of the monthly Cost of Insurance Charges deducted for such increase.
TERMINATION. All coverage under this Policy shall terminate when any one of
the following events occurs:
(1) The Owner requests a full surrender. A surrender will require a return
of this Policy.
(2) The Last Survivor of the Joint Insureds dies.
(3) Suicide of either of the Joint Insureds within two years from the Date
of Issue.
(4) The Policy lapses, as described in the sub-section entitled "Grace
Period" under "Premiums" and the sub-section entitled "Collateral" under
"Policy Loans".
REPRESENTATIONS AND CONTESTABILITY. In issuing this Policy, the Company
relies on all statements made by or for the Joint Insureds in the Application or
in a supplemental application. Legally, these statements are considered to be
representations and not warranties, unless fraud is involved. The Company can
contest the validity of this Policy or resist a claim for any material
misrepresentation of a fact made on the Application or in a supplemental
application for this Policy. The Company also has the right to contest the
validity of any policy change based on material misstatements made in any
application for that change. To do so, however, the representation must have
been made in the Application, or in a supplemental application. Also, a copy of
such application must have been attached to this Policy when issued or made a
part of the Policy when changes in coverage became effective.
The Company cannot bring any legal action to contest the validity of this
Policy after it has been in force during the lifetime of both Joint Insureds for
two years from the Policy Effective Date unless fraud is involved.
If there was a rider or endorsement added to this Policy after the Issue
Date, or benefits added by a supplemental Policy Specifications Page, the
Company cannot contest the validity of any benefits so added after the benefits
have been in force during the lifetime of both Joint Insureds for two years from
the effective date of the addition of the benefits unless fraud is involved.
The Company cannot contest the validity of any reinstated benefits after the
reinstated benefits have been in force during the lifetime of both Joint
Insureds for two years from the date the Company approves the reinstatement
application unless fraud is involved.
REPORTS. At least once a year the Company will send to the Owner at the
Owner's last known address, a report for this Policy. The report will show as of
the end of the report period: (1) the current Death Benefit; (2) the current
Policy Value; (3) the current Fixed Account Value; (4) the current Variable
Account Value; (5) the current Loan Account Value; (6) the current Sub-Account
Values; (7) premium payments made since the last report; (8) any Withdrawals
since the last report; (9) any policy loans and
VUL-07 1-00 Page 7
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accrued interest; (10) the current Surrender Value; (11) the Owner's current
premium allocations; (12) charges deducted since the last report; and (13) any
other information required by law.
In addition, the Company will provide a Report for this Policy at any time
upon the Owner's written request. If the Owner requests this information more
frequently than annually, the Company may charge a fee which shall not exceed
$50.
ARBITRATION. The parties hereby acknowledge that the provision of insurance
pursuant to this Policy takes place in and substantially affects interstate
commerce and that the Federal Arbitration Act permits and promotes the use of
arbitration as a means of dispute resolution in matters arising from interstate
commerce.
Any controversy, dispute or claim by any Owner, Joint Insureds or
Beneficiary, or their respective assigns (each referred to herein as
"Claimant"), arising out of or relating in any way to this Policy or the
solicitation or sale thereof shall be submitted to binding arbitration pursuant
to the provisions of the Federal Arbitration Act, 9 U.S.C. Section 1, et seq.
Absent consolidation of arbitration as provided for below, such arbitration
shall be governed by the rules and provisions of the Dispute Resolution Program
for Insurance Claims of the American Arbitration Association ("AAA"). The
arbitration panel shall consist of three (3) arbitrators, one (1) selected by
the Company, one (1) selected by the Claimant and one (1) selected by the
arbitrators previously selected.
If a Claimant, the Company or a third-party have any dispute between or
among them or any of them that is directly or indirectly related to any dispute
governed by this arbitration provision, the Claimant and the Company consent to
the consolidation of the dispute governed by this arbitration provision with
such other dispute; if such other dispute is governed by an arbitration
agreement that selects the forum and rules of the National Association of
Securities Dealers, Inc. or the New York Stock Exchange, Inc., the Claimant and
the Company shall be deemed to have consented to the jurisdiction of such other
forum to the extent allowed by law and will abide by the rules, provisions and
interpretations thereof, including those for selection of arbitrators.
It is understood and agreed that the arbitration shall be binding upon the
parties, that the parties are waiving their right to seek remedies in court,
including the right to jury trial; and that an arbitration award may not be set
aside in later litigation except upon the limited circumstances set forth in the
Federal Arbitration Act.
Judgment upon the award rendered by the arbitrator(s) may be entered in any
Court having jurisdiction thereof. The arbitration expenses shall be borne by
the losing party or in such proportion as the arbitrator(s) shall decide.
CONTROL PROVISIONS
THE PARTIES INVOLVED. The Owner is the person(s) who owns this Policy as
shown on the Policy Specifications Page, on an endorsement or on an amendment to
the Application. The Owner is the Joint Insureds unless someone else is named as
the Owner.
RIGHTS OF OWNER. While either of the Joint Insureds are living, the Owner
may exercise all rights and benefits contained in the Policy or allowed by the
Company. These rights include assigning this Policy, changing Beneficiaries,
changing ownership, enjoying all benefits and exercising all policy provisions.
The use of these rights may be subject to the consent of any Assignee or
Irrevocable Beneficiary.
If a Partnership has any rights under this Policy, such rights shall belong
to the Partnership as it exists when the right is exercised.
CONTINGENT OWNER. If the Owner is not the Joint Insureds, the Owner may
name a Contingent Owner provided such request is made in writing on a form
acceptable to the Company. The Contingent Owner
VUL-07 1-00 Page 8
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will become the Owner if the Owner dies. If there is not a Contingent Owner
named when the Owner dies, the estate of the last Owner to die will become the
Owner.
BENEFICIARY. A Beneficiary is any person named by the Owner on the
Company's records to receive the Death Benefit Proceeds on the death of the Last
Survivor of the Joint Insureds. There may be different classes of Beneficiaries
such as primary and contingent. These classes set the order of payment of the
Death Benefit. The Owner may change the Beneficiary at any time prior to the
death of the Last Survivor of the Joint Insureds. To make a change, a written
request satisfactory to the Company must be received at the Company's Home
Office. If an Irrevocable Beneficiary has been designated however, such
designation cannot be changed or revoked without the Irrevocable Beneficiary's
written consent. Any change of Beneficiaries is effective on the date the
request was signed, provided, however, the Company will not be liable for any
payment made before such request has been received and acknowledged at the
Company's Home Office.
CHANGING THE OWNER. The Owner may be changed at any time prior to the death
of the Last Survivor of the Joint Insureds. To make a change, the Company must
receive from the Owner a written request satisfactory to the Company at the Home
Office. Any such change will be effective on the date the request was signed,
provided, however, the Company will not be liable for any payment made before
such request has been received and acknowledged at the Company's Home Office.
ASSIGNMENT. Upon notice to the Company, the Owner may assign his or her
rights under this Policy. However, for this assignment to be binding on the
Company, it must be in writing and filed at the Home Office. The Company assumes
no responsibility for the validity of any assignment. Any claim under any
assignment shall be subject to proof of interest and the extent of assignment.
Once the Company receives 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. An assignment is subject to any Policy Debt.
PROTECTION OF PROCEEDS. To the extent permitted by law, any payment of
Death Benefit Proceeds, Surrender Value or any Withdrawal shall be free from
legal process from the claim of any creditor of the person entitled to them.
SUSPENSION OR DELAY IN PAYMENT. The Company has the right to suspend or
delay the date of payment of a Withdrawal, Loan, Surrender, or the Death Benefit
Proceeds for any period:
(1) when the New York Stock Exchange is closed; or
(2) when trading on the New York Stock Exchange is restricted; or
(3) when an emergency exists (as determined by the Securities & Exchange
Commission) as a result of which (a) the disposal of securities in the
Variable Account is not reasonably practicable; or (b) it is not
reasonably practicable to determine fairly the value of the net assets of
the Variable Account; or
(4) when the Securities & Exchange Commission, by order, so permits for the
protection of security holders.
As to amounts allocated to the Fixed Account, the Company may defer payment
of Death Benefit proceeds for up to two months and any Withdrawal, Surrender or
the making of a Policy Loan (unless the amount of the loan is for payment of a
premium to the Company) for up to six months after the Company receives a
written request.
If the Company delays payment of surrender benefits under this Policy, the
Owner will be paid interest at the rate specified under applicable state law as
required, if any, at the time of the surrender request.
TAX CONSIDERATIONS. In order to receive the tax treatment afforded to life
insurance contracts under federal tax laws, this Policy must qualify and
continue to qualify as a life insurance contract under the
VUL-07 1-00 Page 9
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Internal Revenue Code of 1986, as amended. The Company reserves the right to
decline to: (a) accept a premium payment; or (b) change the Death Benefit
Option; or (c) process a Withdrawal. The Company also reserves the right to
refund a premium payment, including any earnings thereon, if such refund is
necessary to prevent this Policy from failing to qualify as a life insurance
contract.
The Company also reserves the right to make changes to this Policy or to any
endorsements or to any riders or to make distributions from this Policy to the
extent the Company considers necessary for this Policy to continue to qualify as
a life insurance contract. Such changes will apply uniformly to all affected
policies. The Owner will receive advance written notification of such changes.
CHANGES IN POLICY COST FACTORS. Changes in non-guaranteed credited rates,
cost of insurance charge rates, mortality and expense risk charge rates,
administration charge rates, or expense charge rates, if any, will be by class
and will be based upon changes in future expectations of such factors as
investment earnings, mortality, persistency, expenses, and taxes.
COVERAGE LIMITATIONS. Unless the health and other conditions of the Joint
Insureds on the date that the Policy is delivered to the Owner is the same as
that indicated in the Application, the Company reserves the right to cancel the
Policy or re-underwrite the Policy and make appropriate adjustments to the
monthly Cost of Insurance Charge.
PREMIUMS
PREMIUM PAYMENT(S). Premium payment(s) are payable at the Company's Home
Office or to any Agent of the Company. Premium payment(s) must be made by check
payable to Protective Life Insurance Company or by any other method which the
Company deems acceptable. The minimum premium payment(s) that the Company will
accept is: (1) $50 if paid by a monthly pre-authorized payment arrangement; or
(2) $150 for any other mode of payment accepted by the Company.
The Company has the right not to accept any premium payment in the event
that it is determined in the Company's discretion that the premium payment will
cause the Policy to fail to qualify as a life insurance contract under federal
tax laws.
No insurance will take effect until the initial premium payment is paid and
the health and other conditions of the Joint Insureds is determined to be the
same as that described in the Application on the date the Policy is delivered.
PLANNED PREMIUM PAYMENTS. The amounts and frequency of the planned premium
payments in effect on the Policy Effective Date are shown on the Policy
Specifications Page. The Owner does not have to make the planned premium
payment. Subject to the limits described above, the Owner may change the
frequency and amount of the planned premium payments at any time.
The Company will send planned premium payment reminder notices to the Owner
unless otherwise requested. The Owner can choose to have them sent at 12, 6, or
3 month intervals. If desired, the Company will also arrange for planned premium
payments to be made on a monthly basis under a pre-authorized payment
arrangement.
UNSCHEDULED PREMIUM PAYMENTS. Subject to the limits described above, while
this Policy is in force, premium payment(s) other than the planned premium
payments will be accepted by the Company at any time. The Owner may specify in
writing that all unscheduled premium payments are to be applied against Policy
Debt, if any, as a loan repayment.
MINIMUM MONTHLY PREMIUM GUARANTEE. In return for paying the Minimum Monthly
Premium shown on the Policy Specifications Page or an amount equivalent thereto
by the Monthly Anniversary Day, the Company guarantees, to the extent outlined
herein, that the Policy and any riders or endorsements attached hereto will not
Lapse during the Minimum Monthly Premium Guarantee Period, which is shown
VUL-07 1-00 Page 10
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on the Policy Specifications Page, if for each month that the policy has been in
force (a) equals or exceeds (b), where:
(a) is the total premiums paid less any Withdrawals and Policy Debt; and
(b) is the Minimum Monthly Premium as shown on the Policy Specifications
Page multiplied by the number of complete policy months since the Policy
Effective Date, including the current month.
Any change in the benefits provided by this Policy or any riders attached
hereto, made subsequent to the Policy Effective Date and during the Minimum
Monthly Premium Guarantee Period, may result in a change to the Minimum Monthly
Premium. However, the changes will not extend the time period for the guarantee.
The new Minimum Monthly Premium and its effective date will be shown in a
supplemental Policy Specifications Page.
ALLOCATION OF NET PREMIUMS. Net Premiums will be allocated to the
Sub-Accounts and the Fixed Account on the date the Company receives them
according to the instructions of the Owner in the Application or subsequent
Written Notice. The Owner may change the allocations in effect at any time by
Written Notice. Allocations must be made in whole percentages. The sum of
allocations must add up to 100%. The Company reserves the right to establish
(a) a limitation on the number of Sub-Accounts to which Net Premiums may be
allocated and/or (b) a minimum allocation requirement for the Sub-Accounts and
the Fixed Account.
If the Contract is issued in a state where, upon cancellation and within the
cancellation period, the Company returns the premium payment(s) made, the
Company reserves the right to allocate the initial premium payment and any
additional premium payments made during the cancellation period to the Fixed
Account or Money Market Sub-Account. Thereafter, allocations will be made as
shown in the Policy Specifications Page in accordance with the selections made
by the Owner.
GRACE PERIOD. Unless this Policy is otherwise continued under the Minimum
Monthly Premium Guarantee, if the Surrender Value on a Monthly Anniversary Day
is insufficient to cover the Monthly Deductions due on that Monthly Anniversary
Day, this Policy will stay in force for 61 days. This 61 day period is called
the Grace Period.
If the Owner does not pay sufficient Net Premiums to cover the current and
past due Monthly Deductions by the end of the Grace Period, this Policy will
terminate without value and all coverage under this Policy will terminate. At
the beginning of the Grace Period, the Company will mail a notice of such
premiums due to the Owner's last known address and to the address of any
assignee of record. Coverage continues during the Grace Period. The Company will
deduct unpaid Monthly Deductions and Policy Debt from any Death Benefit payable
if death occurs during the Grace Period.
REINSTATEMENT. Prior to the death of the Last Survivor of the Joint
Insureds and any Surrender of this Policy, if this Policy has Lapsed, it can be
reinstated. Reinstatement means to restore the Policy when the Policy has
terminated at the end of the Grace Period. The Company will reinstate the Policy
if the Company receives:
(1) the Owner's written request within five years after the end of the Grace
Period,
(2) evidence of insurability satisfactory to the Company,
(3) payment of Net Premium equal to all Monthly Deductions that were due and
unpaid during the Grace Period with interest at a rate not to exceed 6%
per annum compounded annually, if required by the Company, and payment of
premium payments at least sufficient to keep this Policy in force for
three months (The Company may accept premium payments larger than this
amount), and
(4) payment of or reinstatement of any Policy Debt which existed at the end
of the Grace Period.
VUL-07 1-00 Page 11
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The effective date of a reinstated policy will be the day the Company
approves the reinstatement and all of the above requirements have been received.
MINIMUM VALUES. The values and benefits of this Policy shall not be less
than the minimum benefits required by the statutes of the state in which this
Policy was delivered.
DEDUCTIONS FROM POLICY VALUE
Monthly Deductions, Other Deductions and Surrender Charges are described on
the Policy Specifications Page.
COST OF INSURANCE
COST OF INSURANCE CHARGE. The monthly Cost of Insurance Charge for the
Basic Face Amount is computed at the beginning of each policy month by
multiplying the Basic Net Amount at Risk (divided by $1,000) by the cost of
insurance rate as described in the Cost of Insurance Rate section. The monthly
Cost of Insurance Charge for any Supplemental Face Amount is computed at the
beginning of each policy month by multiplying the Supplemental Net Amount at
Risk (divided by $1,000) by the cost of insurance rate as described in the Cost
of Insurance Rate section. The monthly Cost of Insurance Charge for any
Supplemental Face Amount is computed separately for the Initial Supplemental
Face Amount and for each increase in Supplemental Face Amount.
COST OF INSURANCE RATES. The monthly cost of insurance rate is based on the
age nearest birthday, sex and rate class of each Joint Insured on the Policy
Effective Date or effective date of a Face Amount increase, type of Face Amount
(Basic or Supplemental), Method of Computing Cost of Insurance Rates described
below and on the number of years that a Policy has been in force since the
Policy Effective Date or effective date of a Face Amount increase. Monthly cost
of insurance rates will be determined by the Company, based on its expectations
as to future mortality experience, investment earnings, persistency, expenses
and taxes.
Any change in the monthly cost of insurance rates will be on a uniform basis
for Joint Insureds of the same class such as age, sex, rate class, and policy
year. However, the cost of insurance rates will never be greater than those
shown in the Guaranteed Maximum Monthly Cost of Insurance Rates Table on the
Policy Specifications Page or Supplemental Policy Specification Page.
METHOD OF COMPUTING COST OF INSURANCE RATES. The Company has filed a
detailed statement of the method the Company uses to compute cost of insurance
rates with the State where this Policy was delivered.
BASIS OF COMPUTATIONS
Minimum Surrender Values and Maximum Cost of Insurance Rates are based on
the 1980 Commissioners Standard Ordinary Smoker or Non-Smoker, Male or Female,
Mortality Table (age nearest birthday), and the age, sex and rate class of each
Joint Insured. Surrender Values are at least equal to those required by law.
Reserves are computed by the Commissioner's Reserve Valuation Method.
FIXED ACCOUNT
CALCULATION OF THE FIXED ACCOUNT VALUE. The value of the Fixed Account at
any time is equal to:
(a) the Net Premiums allocated to the Fixed Account; plus
(b) Policy Value transferred to the Fixed Account; plus
(c) interest credited to the Fixed Account; less
VUL-07 1-00 Page 12
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(d) any Withdrawals including any Withdrawal Charges deducted or transfers
from the Fixed Account including any transfer fees deducted from the
Fixed Account; less
(e) any Surrender Charges deducted in the event of a decrease of Face
Amount; less
(f) Monthly Deductions.
INTEREST CREDITED. The Company guarantees that the interest credited during
the first Policy Year to the initial Net Premiums allocated to the Fixed Account
will be at a rate not less than the Initial Annual Effective Interest Rate for
the Fixed Account shown on the Policy Specifications Page.
For subsequent Net Premiums allocated to the Fixed Account or Policy Value
transferred to the Fixed Account, the guaranteed interest rate applicable will
be the annual effective interest rate in effect on the date the subsequent Net
Premium is received by the Company or the date the transfer is made. Such
guaranteed interest rate will apply to such amounts for a twelve month period
which begins on the date the Net Premium is allocated or the date the transfer
is made.
After the guaranteed interest rate expires, (i.e., 12 months after the Net
Premium or transfer is placed in the Fixed Account) the Company will credit
interest on the Fixed Account Value attributable to such Net Premiums and
transfers at the current interest rate in effect. New current interest rates are
effective for such Fixed Account Value for 12 months from the time they are
first applied. The Initial Annual Effective Interest Rate and the current
interest rates the Company will credit are annual effective interest rates of
not less than the annual Guaranteed Interest Rate for Fixed Account shown on the
Policy Specifications Page. For purposes of crediting interest, amounts
deducted, transferred or withdrawn from the Fixed Account will be accounted for
on a "first-in, first-out" (FIFO) basis.
The Company reserves the right to apply different interest rate guarantees
to certain amounts credited to the Fixed Account.
VARIABLE ACCOUNT
GENERAL DESCRIPTION. The variable benefits under the Policy are provided
through the Variable Account. The Variable Account is registered with the
Securities and Exchange Commission as a unit investment trust under the
Investment Company Act of 1940.
The portion of the assets of the Variable Account equal to the reserves and
other contract liabilities of the Variable Account are not chargeable with the
liabilities arising out of any other business the Company may conduct. The
Company has the right to transfer to its General Account any assets of the
Variable Account which are in excess of such reserves and other liabilities. The
assets of the Variable Account are available to cover the liabilities of the
General Account of the Company only to the extent that the assets of the
Variable Account exceed the liabilities of the Variable Account arising under
the policies supported by the Variable Account.
SUB-ACCOUNTS OF THE VARIABLE ACCOUNT. The assets of the Variable Account
are divided into a series of Sub-Accounts that are listed on the Policy
Specifications Page and in the current Prospectus the Owner received. Each
Sub-Account invests exclusively in shares of a corresponding Fund. Any amounts
of income, dividends, and gains distributed from the shares of a Fund will be
reinvested in additional shares of that Fund at its Net Asset Value Per Share.
When permitted by law, the Company may:
(1) create new variable accounts;
(2) combine variable accounts, including the Variable Account;
(3) add new Sub-Accounts to or remove existing Sub-Accounts from the
Variable Account or combine Sub-Accounts;
VUL-07 1-00 Page 13
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(4) make new Sub-Accounts or other Sub-Accounts available to such classes of
the Policies as the Company may determine;
(5) add new Funds or remove existing Funds;
(6) if shares of a Fund are no longer available for investment or if the
Company determines that investment in a Fund is no longer appropriate in
light of the purposes of the Variable Account, substitute a different
Fund for any existing Fund;
(7) deregister the Variable Account under the Investment Company Act of 1940
if such registration is no longer required;
(8) operate the Variable Account as a management investment company under
the Investment Company Act of 1940 or in any other form permitted by law;
and
(9) make any changes to the Variable Account or its operations as may be
required by the Investment Company Act of 1940 or other applicable law or
regulations.
The investment policy of the Variable Account will not be changed without
approval pursuant to the insurance laws of the State of Tennessee. If required,
approval of or change of investment policy will be filed with the insurance
department of the state where this Policy is delivered.
The values and benefits of this Policy provided by the Variable Account
depend on the investment performance of the Funds in which the Owner's selected
Sub-Accounts are invested. The Company does not guarantee the investment
performance of the Funds. The Owner bears the full investment risk for Net
Premiums allocated or Policy Value transferred to the Sub-Accounts.
VALUATION OF ASSETS. Assets of Funds held by each Sub-Account will be
valued at their Net Asset Value per share on each Valuation Day. The Prospectus
the Owners received for the Funds defines the Net Asset Value per share of the
Funds and describes each Fund.
CALCULATION OF SUB-ACCOUNT VALUES. The Sub-Account Value for any
Sub-Account is equal to the number of Units this Policy then has in that
Sub-Account multiplied by the value of such units at that time. Amounts
allocated, transferred or added to a Sub-Account are used to purchase Units of
that Sub-Account. Units are redeemed when amounts are deducted, transferred, or
withdrawn. The number of Units in a Sub-Account at any time is equal to the
number of Units purchased minus the number of Units redeemed up to such time.
For each Sub-Account, the Net Premiums allocated to the Sub-Account or
Policy Value transferred to the Sub-Account are converted into Units. The number
of Units credited is determined by dividing the dollar amount directed to each
Sub-Account by the value of the Unit for that Sub-Account for the Valuation Day
on which the Net Premiums allocated to or Policy Value transferred are credited
to the Sub-Account. The Unit value at the end of every Valuation Day is the Unit
value at the end of the previous Valuation Day times the Net Investment Factor,
as described below.
NET INVESTMENT FACTOR. The Unit value for each Sub-Account for any
Valuation Period is determined by the Net Investment Factor. The Net Investment
Factor is an index applied to measure the investment performance of a
Sub-Account from one Valuation Period to the next. The Net Investment Factor for
a Sub-Account for any Valuation Period is determined by dividing (1) by
(2) where
(1) is the result of:
a. the Net Asset Value per share of the Fund held in the Sub-Account,
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 Fund to the Sub-Account, if the "ex-dividend" date occurs
during the current Valuation Period; plus or minus
VUL-07 1-00 Page 14
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c. a per share charge or credit for any taxes reserved for, which is
determined by the Company to have resulted from the operations of the
Sub-Account.
(2) is the Net Asset Value per share of the Fund held in the Sub-Account,
determined at the end of the last prior Valuation Period.
TRANSFERS. On or after the later of thirty days after the Policy Effective
Date or six days after the ten-day cancellation period, or such other period as
required by law, upon receipt of Written Notice, the Owner may transfer the
Fixed Account Value or any Sub-Account Value to other Sub-Accounts and/or the
Fixed Account. The transfer will be effected as of the date the Company receives
Written Notice from the Owner.
The amount transferred must be at least $100 or, if less, the entire amount
in the Fixed Account or the Sub-Account(s) each time a transfer is made. If,
after the transfer, the amount remaining in the Fixed Account or Sub-Account(s)
from which the transfer is made is less than $100, the Company reserves the
right to transfer the entire amount instead of the requested amount. The Company
reserves the right to limit the maximum amount which may be transferred from the
Fixed Account in any Policy Year. This maximum is currently the greater of
$2,500 or 25% of the Fixed Account Value.
The Policy Value on the effective date of the transfer will not be affected
except to the extent of the transfer fee. The Company reserves the right to
limit transfer requests to no more than 12 per year. For each additional
transfer request over 12 during each Policy Year, the Company reserves the right
to charge a Transfer Fee which is indicated on the Policy Specifications Page.
The Transfer Fee, if any, will be deducted from the amount being transferred.
The Company reserves the right, at any time and without prior notice, to
terminate, suspend or modify the transfer privileges described above.
DEATH BENEFIT
DEATH BENEFIT PROCEEDS. The Company will, subject to the terms of this
Policy, pay the Death Benefit Proceeds to the Beneficiary after receipt of due
proof of death of both Joint Insureds.
AMOUNT OF DEATH BENEFIT PROCEEDS. The Death Benefit Proceeds will be
determined as of the date of the death of the Last Survivor of the Joint
Insureds and will be equal to: (1), plus (2), minus (3), minus (4), where:
(1) is the Death Benefit under the Death Benefit option selected;
(2) is any additional death benefits due under any riders or endorsements
attached to this Policy;
(3) is any Policy Debt; and
(4) is any unpaid Monthly Deductions if the Last Survivor of the Joint
Insureds dies during the Grace Period.
The Death Benefit Proceeds shall be determined under the Level Death Benefit
Option or Increasing Death Benefit Option, whichever is chosen by the Owner and
indicated on the Policy Specifications Page, or any supplemental Policy
Specifications Page.
LEVEL DEATH BENEFIT OPTION -- The Death Benefit will be the greater of:
(a) the Face Amount of insurance on the date of death of the Last Survivor
of the Joint Insureds; or
(b) the Policy Value on the date of death of the Last Survivor of the Joint
Insureds, plus a specified percentage of the Policy Value on the date of
death of the Last Survivor of the Joint Insureds. The percentage, as
indicated on the Table of Percentages below, varies with the Attained Age
of
VUL-07 1-00 Page 15
<PAGE>
the younger Joint Insured on the Policy Anniversary on or prior to the
date of death of the Last Survivor of the Joint Insureds.
INCREASING DEATH BENEFIT OPTION -- The Death Benefit will be the greater of:
(a) the Face Amount of insurance on the date of death of the Last Survivor
of the Joint Insureds plus the Policy Value on the Last Surviving Joint
Insured's date of death; or
(b) the Policy Value on the date of death of the Last Survivor of the Joint
Insureds, plus a specified percentage of the Policy Value on the date of
death of the Last Survivor of the Joint Insureds. The percentage, as
indicated on the Table of Percentages below, varies with the Attained Age
of the younger Joint Insured on the Policy Anniversary on or prior to the
date of death of the Last Survivor of the Joint Insureds.
TABLE OF PERCENTAGES
<TABLE>
<CAPTION>
ATTAINED CORRIDOR ATTAINED CORRIDOR ATTAINED CORRIDOR
AGE* PERCENTAGE AGE* PERCENTAGE AGE* PERCENTAGE
- -------- ---------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C>
0-40 150% 54 57% 68 17%
41 143% 55 50% 69 16%
42 136% 56 46% 70 15%
43 129% 57 42% 71 13%
44 122% 58 38% 72 11%
45 115% 59 34% 73 9%
46 109% 60 30% 74 7%
47 103% 61 28% 75-90 5%
48 97% 62 26% 91 4%
49 91% 63 24% 92 3%
50 85% 64 22% 93 2%
51 78% 65 20% 94 1%
52 71% 66 19% 95+ 0%
53 64% 67 18%
</TABLE>
- ------------------------
*Attained Age of younger Joint Insured
PAYMENT OF DEATH BENEFIT PROCEEDS. The Company will pay the Death Benefit
Proceeds to the Beneficiary in a lump sum, unless a Settlement Option has been
selected. If the Primary or Contingent Beneficiary is not living, or if no
Beneficiary has been designated, the Company will pay the Owner or Owner's
estate.
SUSPENSION OF PAYMENT. Payment of the Death Benefit Proceeds may be
suspended or delayed under the circumstances described herein for suspension or
delay of payment of surrenders or Withdrawals.
CREDITOR CLAIMS. To the extent permitted by applicable laws, no right or
benefit under this Policy shall be subject to claims of creditors, except as may
be provided by an assignment.
SURRENDERS AND WITHDRAWALS
SURRENDERS. Prior to the death of the Last Survivor of the Joint Insureds,
and while the Policy is in force, this Policy may be surrendered for its
Surrender Value. The surrender will be effective as of the Valuation Day on
which the Company receives a Written Notice requesting surrender of the Policy.
If the Policy is surrendered, any applicable Surrender Charge as described on
the Policy Specifications Page will be imposed. Once the surrender is effective,
all benefits provided by the Policy cease and the Policy cannot be reinstated.
VUL-07 1-00 Page 16
<PAGE>
WITHDRAWALS. After the first Policy Year, the Owner may make a written
request for a Withdrawal, subject to certain restrictions. The minimum
Withdrawal request is $500. The maximum Withdrawal request may be for an amount
less than the Surrender Value. As of the date the Company receives Written
Notice from the Owner, the Sub-Account Value(s) and Fixed Account Value will be
reduced by the amount withdrawn (including the Withdrawal Charge as described on
the Policy Specifications Page). The Owner may specify how the Withdrawal and
Withdrawal Charge are to be deducted from the Sub-Account Value(s) and Fixed
Account Value. In the event an allocation is not specified, the Company will
allocate the Withdrawal and Withdrawal Charge based on the proportion that the
value in the Fixed Account and the value in the Sub-Accounts bear to the
Unloaned Policy Value.
If a Level Death Benefit Option is in effect, the Company reserves the right
to reduce the Face Amount of the Policy by the amount of the Withdrawal
(exclusive of the Withdrawal Charge). Face Amount reductions will be effective
on the Monthly Anniversary Day that falls on or next following the date the
Company receives and accepts a written request for a Withdrawal. The order of
Face Amount reductions will be as provided in the provision "Decreasing the Face
Amount". There will be no Surrender Charge for a Face Amount reduction resulting
from a Withdrawal.
The Company reserves the right to decline a Withdrawal request if the
remaining Basic or Supplemental Face Amount would be below the minimum amount
for which the Company would then issue the Policy under its rules; or the
Company determines that the Withdrawal would cause this Policy to fail to
qualify as a life insurance contract under applicable tax laws, as interpreted
by the Company.
POLICY LOANS
RIGHT TO MAKE LOANS, POLICY DEBT. After the first Policy Anniversary and
prior to the death of the Last Survivor of the Joint Insureds and while this
Policy is in force, loans can be made on this Policy provided it has Surrender
Value greater than zero. However, the Policy must be properly assigned to the
Company before any policy loan is made. No other collateral is needed. Any
policy loan must be for at least a minimum loan amount of $500. The Company may
delay making any policy loan from the Fixed Account for up to six months (unless
the amount of the loan is for payment of a premium to the Company).
MAXIMUM LOAN. The most the Owner can borrow is an amount that equals 90% of
the Cash Value of the Policy minus any Policy Debt on the date the policy loan
request is received.
INTEREST. The interest charged on any policy loan is at an effective annual
rate, shown on the Policy Specifications Page, compounded yearly on the Policy
Anniversary. Interest payments are due for the prior Policy Year on each Policy
Anniversary. If interest is not paid when due, it will be added to the amount of
the policy loan and will bear interest at the rate payable on the policy loan.
Interest is charged in arrears from the date of the policy loan. Interest, as it
accrues from day to day, is considered part of the Policy Debt.
COLLATERAL. When a policy loan is made, an amount sufficient to secure the
policy loan is transferred out of the Sub-Account(s) and the Fixed Account and
into the Policy's Loan Account. The Owner can specify how to allocate the amount
to be transferred to the Loan Account as collateral from among the
Sub-Account(s) and the Fixed Account. If an allocation is not specified, the
amount will be allocated in the same proportion that the value of the Owner's
Fixed Account and the value of the Owner's Sub-Account(s) bear to the total
Unloaned Policy Value on the date the Company makes the policy loan. An amount
equal to any unpaid policy loan interest will also be transferred on each Policy
Anniversary to the Loan Account. The Company will allocate the unpaid interest
based on the proportion that the value of the Owner's Fixed Account and the
value of the Owner's Sub-Account(s) bear to the total Unloaned Policy Value. The
Loan Account Value will be recalculated (1) when policy interest is added to the
amount of the loan, (2) when a loan repayment is made or (3) when a new policy
loan is made.
VUL-07 1-00 Page 17
<PAGE>
The Company will credit the Loan Account with interest at an effective
annual rate of not less than the Guaranteed Interest Rate for the Fixed Accounts
shown on the Policy Specifications Page. On each Policy Anniversary, the
interest earned on the Loan Account since the preceding Policy Anniversary will
be transferred to the Sub-Account(s) and the Fixed Account. The interest will be
transferred to the Sub-Account(s) and the Fixed Account in the same proportion
that premium payments are allocated.
If the Loan Account Value exceeds the Cash Value, the Owner must pay the
excess. The Company will send the Owner a notice of the amount the Owner must
pay. This amount must be paid within 31 days after the Company sends the notice,
or the Policy will Lapse. The Company will send the notice to the Owner and to
any assignee of record at their last known address.
REPAYING POLICY DEBT. Policy Debt can be repaid in part or in full any time
during the lifetime of both Joint Insureds while this Policy is in force. When a
loan repayment is made, Policy Value in the Loan Account in an amount equal to
that payment will be transferred to the Sub-Account(s) and the Fixed Account.
The Owner may tell the Company how to allocate this transfer among the
Sub-Account(s) and the Fixed Account. If no allocation is specified, the Company
will allocate that amount among the Sub-Account(s) and the Fixed Account in the
same proportion that premium payments are allocated.
CHANGING THIS POLICY
The Owner can request any one of the following changes subject to certain
conditions. The Owner's request must be received in writing at the Company's
Home Office.
INCREASING THE FACE AMOUNT. On or after the first Policy Anniversary during
the lifetime of both Joint Insureds, the Owner may submit an application for an
increase in Supplemental Face Amount. The Company reserves the right to require
proof of insurability, satisfactory to the Company, in connection with
evaluating any requested increase in Supplemental Face Amount. The Attained Age
of the older Joint Insured must be less than the maximum issue age. The amount
of any increase must be at least $25,000. Any increase approved by the Company
will be effective on the effective date shown on the supplemental Policy
Specifications Page which will be issued and attached to the Policy and will be
subject to monthly cost of insurance deductions for the increase from the Policy
Value of this Policy. The Basic Face Amount cannot be increased.
PREMIUM PAYMENTS REQUIRED FOR A FACE AMOUNT INCREASE. Additional premium
payments may be required in connection with an increase in Supplemental Face
Amount. The Company will notify the Owner if additional premium payments are
required and specify the premium payments required on the supplemental Policy
Specifications Page.
CANCELLATION OF A FACE AMOUNT INCREASE. The cancellation provision on the
cover of the Policy applies equally to any increase in Supplemental Face Amount
except that where no additional premium payments are required in order to
increase the Supplemental Face Amount, the cost of insurance and administration
charge deductions for increases in Supplemental Face Amount will be credited
back to the sub-accounts and fixed account in the proportion that each
Sub-Account Value and the Fixed Account Value bears to the Unloaned Policy Value
if the increase is canceled.
DECREASING THE FACE AMOUNT. On or after the first Policy Anniversary, the
Owner can request in writing a decrease in Face Amount subject to the following
rules. Any decrease will go into effect on the Monthly Anniversary Day that
falls on or next following the date the Company receives and accepts the request
for change. The decrease will first be applied against any Supplemental FACE
AMOUNT IN THE REVERSE ORDER IN WHICH Supplemental Face Amount increases
occurred, if any. It will then be applied against the Basic Face Amount of the
Policy. The Company reserves the right to prohibit any decrease: (1) for the
three Policy Years following an increase in Supplemental Face Amount; and
(2) for one Policy Year following the last decrease in the Basic or Supplemental
Face Amount of the Policy.
VUL-07 1-00 Page 18
<PAGE>
The Supplemental Face Amount remaining in effect after any decrease cannot
be less than the Minimum Supplemental Face Amount shown on the Policy
Specifications Page or supplemental Policy Specifications Page. The Basic Face
Amount remaining in effect after any decrease cannot be less than the Minimum
Basic Face Amount shown on the Policy Specifications Page. Decreasing the Face
Amount may result in lower Monthly Deductions or a refund in premiums and
earnings thereon. Decreasing the Basic Face Amount may result in a partial
Surrender Charge. The Company reserves the right to refuse a decrease in Face
Amount if such decrease would cause this Policy to fail to qualify as a life
insurance contract under applicable tax laws, as interpreted by the Company.
CHANGING THE DEATH BENEFIT OPTION. On or after the first Policy
Anniversary, the Owner may request in writing a change in the Death Benefit
Option. The change will go into effect on the Monthly Anniversary Day that falls
on or next following the date the Company receives and accepts the request for
change. If the Owner requests a change from Increasing Death Benefit Option to
Level Death Benefit Option, the Face Amount will be increased to equal the Death
Benefit on the effective date of change. The increase in the Face Amount will be
deemed an increase in the Supplemental Face Amount. There will be no
administration charge for a Face Amount increase resulting from a Death Benefit
Option change. If the Owner requests, during the lifetime of both Joint
Insureds, a change from Level Death Benefit Option to Increasing Death Benefit
Option, the Face Amount will be decreased so that it equals the Death Benefit
less the Policy Value on the effective date of the change. There will be no
Surrender Charge for a Face Amount reduction resulting from a Death Benefit
Option change. The Company reserves the right to require satisfactory proof of
insurability before permitting a change in Death Benefit options.
CHANGE APPROVAL. All changes must be approved by the Company at the Home
Office. No agent has the authority to make any changes or waive any of the terms
of this Policy.
SETTLEMENT OPTIONS
Settlement Options provide alternative ways in which payment can be made.
Payment under these Settlement Options will not be affected by the investment
experience of any Sub-Account after the proceeds are applied under such option.
AVAILABILITY OF OPTIONS. Upon written request, all or part of the Death
Benefit Proceeds or Surrender Value may be applied under any Settlement Option
the Company offers on the option date. The option date is any date this Policy
terminates under the termination provision. If this Policy is assigned, either
before or after the choice of an option, any amount due to the assignee will be
paid in one sum. The balance, if any, may be applied under any Settlement
Option.
MINIMUM AMOUNTS. If the amount to be applied under any Settlement Option
for any one person is less than $5,000, the Company may pay that amount in one
sum instead. If the payments under any option come to less than $50 each, the
Company has the right to make payments at less frequent intervals.
ELECTING A SETTLEMENT OPTION. To elect any Settlement Option, the Company
requires that a Written Request, satisfactory to it. The Owner may elect a
Settlement Option during the lifetime of either of the Joint Insureds. If the
Death Benefit Proceeds are payable in a single sum when the Last Survivor of the
Joint Insureds dies, the Beneficiary may elect a Settlement Option with the
Company's consent.
EFFECTIVE DATE AND PAYMENT DATE. The effective date of a Settlement Option
is the date the amount is applied under that option. For Death Benefit Proceeds,
this is the date that due proof of the death of both Joint Insureds is received
at the Company's Home Office. For the Surrender Value, it is the effective date
of surrender.
A later date for the first payment may be requested in the Settlement Option
election. All payment dates will fall on the same day of the month as the first
one. No payment will become due until a payment date. No partial payment will be
made for any period shorter than the time between payment dates.
VUL-07 1-00 Page 19
<PAGE>
If the Surrender Value is applied under any option, the Company may delay
payment for up to six months. Interest at the rate in effect for Option 3 during
this period will be paid on the Surrender Value.
DESCRIPTION OF OPTIONS. The Company's Settlement Options are described
below. Any other Settlement Option agreed to by the Company may be elected. The
Settlement Options are described in terms of monthly payments.
OPTION 1 -- PAYMENT FOR A FIXED PERIOD. Equal monthly payments will be made
for any period selected up to 30 years. The amount of each payment depends on
the total amount applied, the period selected and the monthly payment rates the
Company is using when the first payment is due. The rate of any payment for each
$1,000 of proceeds applied will not be less than shown in the Option 1 Table.
The payments shown in this table are based on an interest rate of 3% per year.
OPTION 1 TABLE
<TABLE>
<CAPTION>
MINIMUM MONTHLY PAYMENT RATES FOR EACH $1,000 APPLIED
- ---------------------------------------------------------------
MONTHLY MONTHLY MONTHLY
YEARS PAYMENT YEARS PAYMENT YEARS PAYMENT
- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
1 $84.47 11 $8.86 21 $5.32
2 42.86 12 8.24 22 5.15
3 28.99 13 7.71 23 4.99
4 22.06 14 7.26 24 4.84
5 17.91 15 6.87 25 4.71
6 15.14 16 6.53 26 4.59
7 13.16 17 6.23 27 4.47
8 11.68 18 5.96 28 4.37
9 10.53 19 5.73 29 4.27
10 9.61 20 5.51 30 4.18
</TABLE>
OPTION 2 -- LIFE INCOME WITH PAYMENTS FOR A GUARANTEED PERIOD. Equal
monthly payments are based on the life of the named person. Payments will
continue for the lifetime of that person with payments guaranteed for 10 or 20
years. Payments stop at the end of the selected guaranteed period or when the
named person dies, whichever is later.
VUL-07 1-00 Page 20
<PAGE>
The Option 2 Table shows the minimum monthly payment for each $1,000
applied. The actual payments will be based on the monthly payment rates the
Company is using when the first payment is due. They will not be less than shown
in the Table, which is based on the 1983 Individual Annuity Mortality Table A
projected 13 years with interest at 3% per annum. One year will be deducted from
the Attained Age of the named person for every completed three years beyond the
year 1996. The Age of the payee is the age at the birthday nearest to the
effective date of the option.
OPTION 2 TABLE
<TABLE>
<CAPTION>
AGE MALE GUARANTEED FEMALE GUARANTEED AGE MALE GUARANTEED FEMALE GUARANTEED
OF PERIOD PERIOD OF PERIOD PERIOD
PAYEE 10 YRS 20 YRS 10 YRS 20 YRS PAYEE 10 YRS 20 YRS 10 YRS 20 YRS
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0-30 3.08 3.07 2.95 2.95 56 4.33 4.16 3.93 3.86
31 3.10 3.09 2.97 2.96 57 4.42 4.22 4.00 3.92
32 3.13 3.12 2.99 2.98 58 4.51 4.29 4.08 3.98
33 3.16 3.15 3.01 3.00 59 4.61 4.36 4.16 4.04
34 3.19 3.17 3.03 3.03 60 4.71 4.43 4.24 4.11
35 3.22 3.20 3.06 3.05 61 4.82 4.49 4.33 4.18
36 3.25 3.23 3.08 3.07 62 4.94 4.57 4.42 4.25
37 3.28 3.26 3.11 3.10 63 5.06 4.64 4.52 4.32
38 3.32 3.29 3.13 3.12 64 5.19 4.71 4.63 4.40
39 3.35 3.33 3.16 3.15 65 5.32 4.77 4.74 4.47
40 3.39 3.36 3.19 3.18 66 5.46 4.84 4.86 4.55
41 3.43 3.40 3.22 3.21 67 5.61 4.91 4.98 4.63
42 3.48 3.44 3.25 3.24 68 5.76 4.97 5.12 4.70
43 3.52 3.48 3.29 3.27 69 5.91 5.03 5.26 4.78
44 3.57 3.52 3.32 3.31 70 6.08 5.09 5.41 4.86
45 3.61 3.56 3.36 3.34 71 6.25 5.15 5.56 4.93
46 3.67 3.61 3.40 3.38 72 6.42 5.20 5.73 5.00
47 3.72 3.66 3.44 3.42 73 6.59 5.24 5.90 5.06
48 3.77 3.70 3.49 3.46 74 6.77 5.29 6.08 5.13
49 3.83 3.75 3.53 3.50 75 6.96 5.33 6.27 5.18
50 3.89 3.81 3.58 3.55 76 7.14 5.36 6.46 5.23
51 3.96 3.86 3.63 3.59 77 7.32 5.39 6.66 5.28
52 4.02 3.92 3.69 3.64 78 7.51 5.42 6.87 5.32
53 4.10 3.97 3.74 3.69 79 7.69 5.44 7.08 5.36
54 4.17 4.03 3.80 3.74 80 & 7.87 5.46 7.29 5.39
55 4.25 4.10 3.87 3.80 Over
</TABLE>
OPTION 3 -- INTEREST INCOME. The Company will hold any amount applied under
this option. Interest on the unpaid balance will be paid each month at a rate
determined by it. This rate will be not less than the equivalent of 3% per year.
OPTION 4 -- PAYMENTS OF A FIXED AMOUNT. Equal monthly payments will be for
an agreed fixed amount. The amount of each payment may not be less than $10 for
each $1,000 applied. Interest will be credited each month on the unpaid balance
and added to it. This interest will be at a rate set by the Company, but not
less than an effective interest rate of 3% per year. Payments continue until the
amount the Company holds runs out. The last payment will be for the balance
only.
DEATH OF PAYEE. If the payee dies while there are any unpaid installments
under Option 1 or before the end of the guaranteed period under Option 2, the
Company will pay the commuted value of the remaining payments in a lump sum. The
commuted value or any balance held under Option 3 or Option 4 will be paid to
the payee's executors or administrators unless the written election of the
Option directed the Company differently. Any commuted value will be calculated
using 3% interest per year.
VUL-07 1-00 Page 21
<PAGE>
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VUL-07 1-00 Page 22
<PAGE>
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VUL-07 1-00
<PAGE>
LAST SURVIVOR FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
Death Benefit Payable at the Death of the Last Survivor of the Joint Insureds
No Death Benefit Payable on the Death of the First to Die of the Joint Insureds
NON-DIVIDEND PAYING
VUL-07 1-00
<PAGE>
EXHIBIT 1.A.(5)(b)
<PAGE>
[LOGO TO COME]
PROTECTIVE LIFE INSURANCE COMPANY / P. O. BOX 2606 / BIRMINGHAM, ALABAMA 35202
ESTATE PROTECTION ENDORSEMENT
The Company has issued this endorsement as a part of the Policy to which it
is attached. All terms of the Policy apply to this endorsement except those that
disagree with this endorsement.
This endorsement provides non-participating, non-convertible, renewable one
year term insurance. The Company discusses the rules that apply in the
provisions below.
EXPIRY DATE. The Expiry Date is the fourth policy anniversary.
DEATH BENEFIT. The amount of term insurance in force under this endorsement
will be added to and become part of the Policy Death Benefit Proceeds if the
date of death of the Last Survivor of the Joint Insureds occurs prior to the
termination date of this endorsement.
The initial amount of term insurance provided by this endorsement will be
the amount shown on the Policy Specifications Page.
The amount of term insurance provided by this endorsement will not increase
but will decrease if the Face Amount of the Policy is reduced.
The amount of term insurance will be reduced by the same proportion as the
face amount reduction of the Policy.
Any addition of or increase in any extra benefit riders after the Date of
Issue of the policy will not increase the term insurance under this endorsement.
REINSTATEMENT. This endorsement cannot be reinstated.
TERMINATION. This endorsement may be terminated upon the Owner's written
request. This endorsement and any term insurance under it will automatically
terminate on the earlier of:
(1) the Expiry Date;
(2) the date the Policy terminates; or
(3) the date any option is exercised under the Policy Split Option
Endorsement.
Signed for the Company as of the Policy Effective Date.
PROTECTIVE LIFE INSURANCE COMPANY
[Signature to come]
SECRETARY
L586 1-00 Page 1
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK
L586 1-00 Page 2
<PAGE>
EXHIBIT 1.A.(5)(c)
<PAGE>
[LOGO TO COME]
PROTECTIVE LIFE INSURANCE COMPANY / P. O. BOX 2606 / BIRMINGHAM, ALABAMA 35202
POLICY SPLIT OPTION ENDORSEMENT
The Company has issued this endorsement as a part of the Policy to which it
is attached. All terms of the Policy apply to this endorsement except those that
disagree with this endorsement.
BENEFIT. Subject to the conditions and restrictions of this endorsement,
this benefit provides the Owner with an option to exchange the Policy to which
this endorsement is attached (the original policy) for two individual policies
(the Option), one on each of the Joint Insureds, upon the occurrence of one of
the Contingent Events listed below. Each new policy will be for one-half of the
Face Amount of the original policy. Full evidence of insurability, satisfactory
to the Company, will be required on both Joint Insureds to exercise the Option
except when the Option is exercised due to Item 2(a) or 2(b) below.
If the Owner chooses to have a new policy on the life of only one of the
Joint Insureds, the Company will refund one-half of the Surrender Value of the
original policy. If the Joint Insureds are the Owners of the original policy,
one-half of the Surrender Value of the original policy will be paid to the Owner
whose life is not insured by the new policy. If the Owner is someone other than
the Joint Insureds, one-half of the Surrender Value of the original policy will
go to the Owner.
CONTINGENT EVENTS. The Option may be exercised upon the occurrence of any
of the following Contingent Events.
1. A final divorce decree has been issued with respect to the marriage of
the Joint Insureds. The Joint Insureds must have been married to each
other when the original policy was issued.
2. A change to federal estate tax provisions of the Internal Revenue Code
of 1986 ("IRC") which results in either (a) or (b):
(a) IRC Section 2056(a), or its successor, is amended so as to eliminate
or reduce the federal estate tax unlimited marital deduction.
(b) IRC Section 2001, or its successor, is amended so that the federal
estate tax rates are reduced. The reduction must be such that the
amount of federal estate tax that would be due at the death of the
survivor is 50% or less of the tax that would have been due before
the change to the IRC.
3. Dissolution of a corporate/business partnership, of which the Joint
Insureds are partners.
EFFECTIVE DATE. If the Option is elected, the effective date of the
exchange will be the date the Option is exercised. Election. To elect the
Option, the Owner must notify the Home Office of the Company in writing within
90 days of the date that any of the Contingent Events occur. In the case of
events involving changes to the IRC as stated in Items 2(a) and 2(b) above, the
90 days will be counted from the date the change is signed into law. The older
Joint Insured must be Attained Age 90 or younger when the Option is exercised.
The Company must also receive all of the following in order to process the
exchange:
1. The release of any lien against or assignment of the original policy.
However, the Owner may instead submit written approval by the lienholders
or assignees of the exchange of policies in a form satisfactory to the
Company with such other documents as the Company may require.
2. The original policy.
3. Payment of any amounts due to the Company for the exchange as described
in the Exchange Adjustments.
4. A policy change application containing the request to exercise the
Option, a request to surrender the original policy, and written consent
of the Owner to the exchange.
5. A copy of the final divorce decree, if applicable.
<PAGE>
6. Proof of the dissolution of the corporate/business partnership, if
applicable.
In addition to the items required above, the Company will require evidence
of each Joint Insured's continued good health, satisfactory to the Company, at
the time the Option is exercised. This item is not applicable for changes in
federal estate tax provisions of the IRC as listed in Items 2(a) and 2(b).
NEW POLICY. The exchange must be to a single life policy on a form
designated by the Company for such purpose. The new policies will be issued
based on the Attained Age, rate class and sex of each Joint Insured at the time
the Option is exercised. The new policies will only take effect once the
original policy has terminated and will not provide any insurance until such
time.
POLICY VALUE ADJUSTMENT. To effect the exchange, the Policy Value of the
original policy will be divided and allocated equally to each new policy on the
effective date of the exchange.
LOANS AND ASSIGNMENT. Any Policy Debt will be divided and transferred
equally to each new policy. If there is an assignment on the original policy and
the Owner wants to carry over that assignment to the new policy(ies), the Owner
will need to execute new assignment(s).
EXCHANGE ADJUSTMENTS. The following adjustments may be made at the time of
the exchange.
1. An administrative fee, payable in cash.
2. If one of the Joint Insureds does not receive a new policy and the
original policy is still in the surrender penalty period, a pro-rata
surrender penalty will be deducted from the portion of the Policy Value,
less any pro-rata Policy Debt, attributable to that Joint Insured.
3. If the Policy Value transferred into each of the new policies is less
than the Company's minimum premium requirements, the Company will require
that a premium be paid at issue of the new policies.
4. If the surrender charge of a new policy is less than the pro-rata
surrender charge of the original policy on the effective date of the
exchange, a partial surrender charge equal to the difference in surrender
charge will be assessed by the Company.
OWNERSHIP. If the Joint Insureds are the Owner of the original policy, each
will be the Owner of his or her new policy. If the Owner of the original policy
is someone other than the Joint Insureds, the Owner of the original policy will
be the Owner of each new policy.
BENEFICIARY. The beneficiary of the new policies will be the same as the
beneficiary of the original policy.
TERMINATION OF ENDORSEMENT. This endorsement terminates on the earliest of
the following dates:
1. The date of the First Death of the Joint Insureds.
2. The date the Owner elects to exchange the original policy under this
endorsement.
3. The date the Owner surrenders the original policy for its Surrender Value.
4. The date the older Joint Insured reaches Attained Age 90.
5. The date the original policy lapses.
Signed for the Company as of the Policy Effective Date.
PROTECTIVE LIFE INSURANCE COMPANY
[Signature to come]
SECRETARY
<PAGE>
EXHIBIT 1.A.(10).
<PAGE>
- -------------------------------------------------------------------------------
PROTECTIVE LIFE'S SURVIVOR
VARIABLE UNIVERSAL LIFE
APPLICATION PACKET
- -------------------------------------------------------------------------------
INCLUDES:
DESCRIPTION OF INFORMATION PRACTICES
(MUST BE GIVEN TO PROPOSED INSUREDS)
APPLICATION
CONDITIONAL RECEIPT
<PAGE>
DESCRIPTION OF INFORMATION PRACTICES
(Including Medical Information Bureau Notice and Fair Credit Reporting Act
Notice)
- -------------------------------------------------------------------------------
In considering the Proposed Insureds' application for insurance,
information from various sources must be considered. These include the results
of the Proposed Insureds' physical examination, if required, and any reports
Protective Life may receive from doctors and hospitals who have attended the
Proposed Insureds.
CONFIDENTIALITY
Information regarding the Proposed Insureds' insurability will be treated as
confidential. Protective Life, or its reinsurers, may, however, make a brief
report thereon to the Medical Information Bureau, a non-profit membership
organization of life insurance companies, which operates an information exchange
on behalf of its members. If the Proposed Insureds apply to another Bureau
member company for life or health insurance coverage, or a claim for benefits is
submitted to such company, the Bureau, upon request, will supply such company
with the information it may have in its file.
DISCLOSURE OF INFORMATION TO THIRD PARTIES
Upon receipt of a request from the Proposed Insureds, the Bureau will arrange
disclosure of any information it may have in the Proposed Insureds' file.
Medical information will be disclosed only to the Proposed Insureds' attending
physician. If the Proposed Insureds question the accuracy of information in the
Bureau's file, the Proposed Insureds may contact the Bureau and seek a
correction in accordance with the procedures set forth in the Federal Fair
Credit Reporting Act. The address of the Bureau's information office is: P.O.
Box 105, Essex Station, Boston, MA 02112. Their telephone number is
617-426-3660.
Protective Life or its reinsurers may also release information in its file to
other life insurance companies to whom the Proposed Insureds may apply for life
and health insurance, or to whom a claim for benefits may be submitted.
INVESTIGATIVE REPORT
As part of our procedures for processing the Proposed Insureds' insurance
application, an investigative consumer report may be prepared by one or more of
the commercial agencies offering this service whereby information is obtained
through personal interviews with the Proposed Insureds' neighbors, friends, or
others with whom the Proposed Insureds are acquainted. This inquiry includes
information as to character, general reputation, personal characteristics, and
mode of living except as may be related directly or indirectly to the Proposed
Insureds' sexual orientation. The Proposed Insureds have the right to be
personally interviewed if we order an investigative consumer report. The
Proposed Insureds also have the right to receive a copy of the report by making
a written request to Protective Life within a reasonable period of time to
receive additional, detailed information about the nature and scope of the
investigation.
PRIVILEGED INFORMATION
As a general practice, we will not disclose personal or privileged information
about the Proposed Insureds to anyone else without the Proposed Insureds'
consent, unless a legitimate business need exists or disclosure is required or
permitted by law. The Proposed Insureds are entitled, upon request, to receive a
more detailed statement of our information practices. The Proposed Insureds also
have the right to ask about personal information which we may have in our files
and the right to seek a correction of information the Proposed Insureds think is
wrong.
FOR MORE INFORMATION
Ask your Registered Representative for assistance, or call or write us at:
Protective Life Insurance Co., Variable Life Services, P.O. Box 830771,
Birmingham, AL 35283-0771, Telephone (800) 265-1545
THIS NOTICE MUST BE GIVEN TO PROPOSED INSUREDS
- -------------------------------------------------------------------------------
<PAGE>
PROTECTIVE LIFE'S SURVIVOR
VARIABLE UNIVERSAL LIFE APPLICATION
- -------------------------------------------------------------------------------
1. NAME OF PROPOSED JOINT INSURED 1
- -------------------------------------------------------------------------------
First Middle Last
- -------------------------------------------------------------------------------
Birthdate State of Birth Driver's License # and State
- -------------------------------------------------------------------------------
Sex Marital Status Social Security #
- -------------------------------------------------------------------------------
Residence Address
- -------------------------------------------------------------------------------
City State Zip
- -------------------------------------------------------------------------------
Home Phone # Occupation
- -------------------------------------------------------------------------------
Years Employed Employer Name/Phone #
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
3. BENEFICIARIES
Primary Beneficiary: Full Name, Relationship & Percentage
Contingent Beneficiary: Full Name, Relationship & Percentage
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
4. / / OWNER IF OTHER THAN A PROPOSED INSURED (Owner must sign Page 4)
/ / Payor (if other than Owner - furnish information in Remarks on Page 3)
- -------------------------------------------------------------------------------
Name Relationship Soc. Sec. # or Tax I.D. #
- -------------------------------------------------------------------------------
Address (Street Address - City, State, Zip)
- --------------------------------------------------------------------------------
Phone #
ALL NOTICES AND REPORTS WILL BE SENT TO THE OWNER UNLESS OTHERWISE SPECIFIED
IN REMARKS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
5. PLAN INFORMATION Initial Premium $________ Plan of Insurance ____________
Basic Face Amount $_____________ Supplemental Face Amount $____________
Premium Mode: / / Annual / / Semi-Annual / / Quarterly / / PAC
/ / Level Death Benefit / / Increasing Death Benefit
Issue best available Underwriting Class? /X/ Yes
Planned Periodic Premium $____________ Cash With Application $________
PLEASE MAKE CHECK PAYABLE TO:
PROTECTIVE LIFE INSURANCE COMPANY
VARIABLE LIFE SERVICES
P.O. BOX 830771
BIRMINGHAM, AL 35283-0771
- -------------------------------------------------------------------------------
2. NAME OF PROPOSED JOINT INSURED 2
- -------------------------------------------------------------------------------
First Middle Last
- -------------------------------------------------------------------------------
Birthdate State of Birth Driver's License # and State
- -------------------------------------------------------------------------------
Sex Marital Status Social Security #
- -------------------------------------------------------------------------------
Residence Address
- -------------------------------------------------------------------------------
City State Zip
- -------------------------------------------------------------------------------
Home Phone # Occupation
- -------------------------------------------------------------------------------
Years Employed Employer Name/Phone #
- -------------------------------------------------------------------------------
1
<PAGE>
<TABLE>
<S><C>
6. REGARDING ALL PERSONS PROPOSED FOR INSURANCE:
PLEASE ANSWER ALL QUESTIONS. IF QUESTION #6a IS ANSWERED "YES" DO NOT ACCEPT CASH OR GIVE A CONDITIONAL
RECEIPT WITH THIS APPLICATION. IF ANY QUESTION BELOW IS ANSWERED "YES", GIVE DETAILS UNDER QUESTION 7.
- -----------------------------------------------------------------------------------------------------------------------------------
INSURED 1 INSURED 2
YES NO YES NO
a. Within the past 5 years have you been treated for cancer, diabetes,
cardiovascular disease, stroke, central nervous system disorders, muscular
disorders or respiratory disorders?....................................................................../ / / / / / / /
b. During the past 5 years have you consulted a physician or visited a clinic or
hospital as a patient?.................................................................................../ / / / / / / /
c. Will the policy applied for replace or change any life insurance or annuity in
force?.................................................................................................../ / / / / / / /
d. Do you have an application pending in another company? (If yes, give company and
amount in Remarks)......................................................................................./ / / / / / / /
e. Has any life or health insurance applied for ever been declined, postponed or
offered other than applied for?........................................................................../ / / / / / / /
f. Have you piloted or been a crew member aboard an aircraft within the past 2 years
or have any intention of becoming a pilot?.............................................................../ / / / / / / /
g. Have you ever participated in a sport or avocation such as racing, hang gliding,
scuba, sky or skin diving?.............................................................................../ / / / / / / /
h. Have you used tobacco or nicotine of any kind over the last 12 months?.................................../ / / / / / / /
i. Within the last 5 years have you had a DUI conviction, had your driver's license
restricted or revoked, or been cited for more than two moving violations?................................/ / / / / / / /
j. Within the last 10 years, have you been convicted of a felony?.........................................../ / / / / / / /
k. Do you have any intention of traveling or residing outside the U.S. or Canada
within the next two years?.............................................................................../ / / / / / / /
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
7. DETAILS OF ALL "YES" ANSWERS
Insured No. Details, Diagnosis, Names & Address of Doctors, Hospitals
Item (1 or 2) Date/Duration Treatment, Medication, Results & Medical Facilities Consulted
- -------- ------------- ---------------- ------------------------------------- ------------------------------------------------
- -------- ------------- ---------------- ------------------------------------- ------------------------------------------------
- -------- ------------- ---------------- ------------------------------------- ------------------------------------------------
- -------- ------------- ---------------- ------------------------------------- ------------------------------------------------
- -------- ------------- ---------------- ------------------------------------- ------------------------------------------------
- -------- ------------- ---------------- ------------------------------------- ------------------------------------------------
- -------- ------------- ---------------- ------------------------------------- ------------------------------------------------
- -------- ------------- ---------------- ------------------------------------- ------------------------------------------------
- -------- ------------- ---------------- ------------------------------------- ------------------------------------------------
- -------- ------------- ---------------- ------------------------------------- ------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
8. LIFE INSURANCE IN FORCE (INCLUDING BUSINESS INSURANCE): (If none, insert "none")
Insured No. Year Life Accidental Death Existing Loan? To Be
(1 or 2) Company Issued Amount Amount State Amount Replaced?
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SVUL-1040A 1/00 2
<PAGE>
- --------------------------------------------------------------------------------
9. TOTAL PREMIUM PAYMENT: $____________
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
10. PREMIUM PAYMENT ALLOCATION: Select the allocation for your premium
payments. (MAXIMUM OF 10 FUND SELECTIONS. IF NO ALLOCATION IS SPECIFIED, ALL
PROCEEDS WILL BE ALLOCATED TO THE OPPENHEIMER MONEY FUND/VA.)
-------------------------------------------------------------------------
MODEL PORTFOLIOS (CHECK BELOW)
___ Aggressive Growth ___ Growth and Income
___ Growth ___ Balanced
-------------------------------------------------------------------------
TOTAL ALLOCATION MUST EQUAL 100%
GOLDMAN SACHS/PIC VAN KAMPEN LIFE INVESTMENT TRUST
___% International Equity ___% Emerging Growth
___% Small Cap Value ___% Enterprise
___% Capital Growth ___% Comstock
___% CORE-SM- U.S. Equity ___% Growth and Income
___% Growth and Income ___% Strategic Stock
___% Global Income ___% Asset Allocation
MFS OPPENHEIMER FUNDS
___% New Discovery ___% Global Securities/VA
___% Emerging Growth ___% Aggressive Growth/VA
___% Research ___% Capital Appreciation/VA
___% Utilities ___% Main Street Growth &
___% Growth Income/VA
___% Growth with Income ___% Strategic Bond/VA
___% Total Return ___% High Income/VA
___% Money Fund/VA
VAN ECK
___% Worldwide Hard Assets
___% Worldwide Real Estate CALVERT
___% Social Small Cap Growth
___% Social Balanced
OTHER
___% __________________
___% __________________
___% __________________ PROTECTIVE LIFE
___% __________________ GENERAL ACCOUNT
___% __________________ ___% Fixed Account
___% __________________
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
11. PORTFOLIO REBALANCING
Rebalancing to begin on ____day of ______month (1ST - 28TH)
Rebalancing should occur: / / Quarterly / / Semi-Annually / / Annually
THE VARIABLE CONTRACT VALUE WILL BE AUTOMATICALLY REBALANCED TO THE CURRENT
ALLOCATIONS. THEREFORE, AMOUNTS PREVIOUSLY ALLOCATED TO SPECIFIC FUNDS WILL
ALSO BE REBALANCED.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
12. DOLLAR COST AVERAGING (Restrictions may apply)
Transfer the amount indicated below (MINIMUM $100)
/ / Monthly / / Quarterly ______ Months (MINIMUM 12 MONTHS)
Day of Month________________ (1ST - 28TH)
From Source Fund: _____________ Amt. $___________
To Destination Fund Amount
------------------------------ $---------------
------------------------------ $---------------
------------------------------ $---------------
------------------------------ $---------------
------------------------------ $---------------
-------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
13. ADDITIONAL BENEFITS/RIDERS
--------------------------------------------------------------
--------------------------------------------------------------
--------------------------------------------------------------
--------------------------------------------------------------
--------------------------------------------------------------
--------------------------------------------------------------
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
14. TELEPHONE TRANSFERS PROTECTIVE LIFE WILL NOT BE HELD LIABLE FOR ANY LOSS,
LIABILITY, COST OR EXPENSE FOR ACTING ON TELEPHONE INSTRUCTIONS.
/ / By checking this box, I/we authorize the Company to honor telephone
instructions to transfer account values among Sub-Accounts, subject to
the conditions of the prospectus.
/ / By checking this box, I/we authorize the Registered Representative who
signs this application to transfer account values among Sub-Accounts,
subject to the conditions of the prospectus.
MAIDEN NAME OF MOTHER OF PROPOSED INSURED 1 (IN QUESTION #1) __________
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
REMARKS:
- --------------------------------------------------------------------------------
HOME OFFICE ENDORSEMENT: (NOT TO BE USED IN KY, MD, MN, OR, PA, WV OR WI.)
- --------------------------------------------------------------------------------
SVUL-1040A 1/00 3
<PAGE>
- --------------------------------------------------------------------------------
PROCESSING PROCEDURES: Depending on the amount of insurance, Protective Life
will contact you to collect answers to pertinent medical information or a
paramedical organization will handle these requirements by a medical exam and/or
tests. Protective Life may call you regarding an investigative consumer report.
THE MOST CONVENIENT PLACE TO CALL: / / Home / / Business
BEST DAYS: / / Mon. / / Tue. / / Wed. / / Thur. / / Fri.
BEST TIME: / / Morning / / Afternoon / / Evening
- --------------------------------------------------------------------------------
DECLARATIONS: Each of the undersigned declares that all statements and answers
made in all parts of this application are full, complete, and true to the best
of each person's knowledge and belief. It is agreed that:
(a) All such statements and answers shall be the basis of any insurance
issued.
(b) No agent or medical examiner can make, alter or discharge any
contract, accept risks, or waive the Company's rights or requirements.
(c) No insurance shall take effect unless: (1) a policy is delivered to
the Owner; (2) the full first premium is paid while the Proposed
Insureds are alive; and (3) there has been no change in health and
insurability from that described in this application. However, if the
premium is paid as set forth in the attached Conditional Receipt
Agreement and that Agreement is delivered to the Owner, the terms of
the Conditional Receipt Agreement shall apply.
(d) Acceptance of a policy by the Owner shall constitute ratification of
any changes made by the Company under "Home Office Endorsements." In
those states where it is required, changes as to plan, amount, age at
issue, classification or benefits will be made only with the Owner's
written consent.
AUTHORIZATION: The Proposed Insureds hereby authorize any licensed physician,
medical practitioner, hospital, clinic, or other medically related facility,
insurance company, the Medical Information Bureau (MIB), consumer reporting
agencies (CRA) or other organization, institution or person, that has any
records or knowledge of their health, to give to Protective Life Insurance
Company (Protective Life), its CRA or its reinsurer any such information. A
photographic copy of this authorization shall be as valid as the original.
Protective Life can give information to its affiliates, the MIB, consumer
reporting agencies, and its reinsurers. Protective Life can also give it to
persons doing services for it, or to other insurers. This is true only if it is
in connection with my/our application. Protective Life can disclose
non-sensitive information to the agent representing me/us on this application
only when it is necessary to provide an explanation of the reasons for the
Company's decision to require special underwriting requirements or whenever
my/our application cannot be approved as applied.
We also hereby authorize Protective Life to draw and test our blood and urine as
may be necessary to underwrite our application for insurance coverage. The tests
to be performed may include, but are not limited to, tests for cholesterol and
related blood lipids, diabetes, liver or kidney disorders, and the presence of
antibodies to the Human Immunodeficiency Virus (HIV) that has been associated
with Acquired Immune Deficiency Syndrome (AIDS). Without a court order, state or
federal law to the contrary, or a written authorization by us, these blood and
urine test results will be held in the strictest confidence and made known only
to Protective Life, its reinsurers, MIB. Protective Life can also give these
tests results to other insurers. This is true only if it is in connection with
my/our application. This authorization shall be valid for 30 months from the
date shown below, or, in the event of a claim for benefits, the duration of such
claim. Upon request, I/we or my/our authorized representative will be given a
copy of this authorization. Protective Life may, but is not obligated to,
release these results directly to me/us or my/our spouse(s). Where state and
federal regulations exist governing release of these tests, those regulations
will apply.
<TABLE>
<S><C>
INSURED 1 INSURED 2
YES NO YES NO
DO YOU WANT TO BE INTERVIEWED IF AN INVESTIGATIVE CONSUMER REPORT WILL BE MADE? / / / / / / / /
DO YOU BELIEVE THAT THIS POLICY WILL MEET YOUR INSURANCE NEEDS AND FINANCIAL OBJECTIVES? / / / / / / / /
DID YOU RECEIVE THE PROSPECTUS FOR THE POLICY APPLIED FOR AND THE PROSPECTUS FOR EACH OF
THE FUNDS? / / / / / / / /
DO YOU UNDERSTAND THAT THE AMOUNT AND DURATION OF THE DEATH BENEFIT AND THE AMOUNT OF
POLICY VALUES MAY VARY, DEPENDING ON THE INVESTMENT EXPERIENCE OF THE VARIABLE ACCOUNTS? / / / / / / / /
DO YOU UNDERSTAND THAT THE DEATH BENEFIT WILL BE PAID UPON THE DEATH OF THE LAST SURVIVOR
OF THE JOINT INSUREDS? / / / / / / / /
ANY PERSON WHO KNOWINGLY WITH INTENT TO DEFRAUD ANY INSURANCE COMPANY OR OTHER PERSON, FILES AN APPLICATION FOR INSURANCE OR
STATEMENT OF CLAIM CONTAINING ANY MATERIALLY FALSE INFORMATION OR CONCEALS FOR THE PURPOSE OF MISLEADING, INFORMATION CONCERNING
ANY FACT MATERIAL THERETO COMMITS A FRAUDULENT INSURANCE ACT, WHICH IS A CRIME AND SUBJECTS SUCH PERSON TO CRIMINAL AND CIVIL
PENALTIES.
- ------------------------------------------------------------------------------------------------------------------------------------
YOUR POLICY IS SUBJECT TO A BINDING ARBITRATION PROVISION. SEE YOUR POLICY FOR COMPLETE DETAILS.
Signed At ___________________________________________________ Date ___________________________________________________________
(City and State)
_____________________________________________________________ (X) ___________________________________________________________
Witness to: / /All Signatures / /Signature of Insured 1 Proposed Insured 1 (Sign Name in Full)
/ /Insured 2
(X) ___________________________________________________________
Proposed Insured 2 (Sign Name in Full)
_____________________________________________________________ (X) ___________________________________________________________
Witness to: / /Signature of Insured 1 / / Insured 2 / /Owner *Owner (LISTED ON PAGE 1, QUESTION 4)
PLEASE BE SURE QUESTION 4 IS COMPLETE
*If Owner is Corporation, Partnership or Trust, a Corporate Officer, Partner or the Trustee must sign and state title
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SVUL-1040A 1/00
4
<PAGE>
REGISTERED REPRESENTATIVE REPORT
COMPLETE FOR ALL APPLICATIONS AND SEND TO HOME OFFICE
<TABLE>
<CAPTION>
<S><C>
- ----------------------------------------------------------------------------------------------------------------
1. ANSWER THE FOLLOWING QUESTIONS:
a. Will this policy replace or change any existing life insurance
policy(s) or annuity(s) or will the premium for this policy be funded
by withdrawal(s) from an existing life insurance policy or annuity?
/ / Yes / / No
b. I have explained to the Proposed Insureds that this policy is not
effective until a policy is issued and all of the terms of the
Conditional Receipt are satisfied. / / Yes / / No
c. Have you complied with all relevant state requirements, including any
"disclosure and comparison statements"? / / Yes / / No
d. On the basis of the Proposed Insureds' circumstances (including annual
income, net worth, marital and dependent status, long-term objectives
and current life insurance program) and their purpose for acquiring
this insurance, is the purchase of this insurance suitable?
/ / Yes / / No
e. Estimate of Proposed Insureds' combined income and net worth.
Financial Information: Proposed Insured #1 Proposed Insured #2
i. Annual income from occupation $________________ $_________________
ii. Annual income from other sources $________________ $_________________
iii. Estimated Net Worth $________________ $_________________
iv. Tax Bracket _______% _______%
f. Did you give an illustration to the Proposed Insureds? / / Yes / / No
(Protective Life requires a signed copy of an illustration in order to
issue the policy.)
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
2. PRINT REGISTERED REPRESENTATIVE INFORMATION
Registered Representative #1 Registered Representative #2
Name
- ----------------------------------------------------------------------------------------------------------------
Signature
- ----------------------------------------------------------------------------------------------------------------
Percentage
- ----------------------------------------------------------------------------------------------------------------
Street Address
- ----------------------------------------------------------------------------------------------------------------
City / State / Zip
- ----------------------------------------------------------------------------------------------------------------
Phone Number
- ----------------------------------------------------------------------------------------------------------------
Broker / Dealer
- ----------------------------------------------------------------------------------------------------------------
Agent Number
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
3. PROCESSING INSTRUCTIONS
a. Each Proposed Insured must be given the Description of Information
Practices.
b. If cash is submitted with the application, complete and sign the
Conditional Receipt Agreement on the last page of this application and
give to the Proposed Insureds.
c. Complete and sign any additional forms (e.g. 1035 exchange or state
replacement forms, if applicable).
d. Advise the Proposed Insureds that they will be contacted by a Company
Representative to collect medical information and/or arrange a time
for a paramedical exam.
e. Please have your Broker Dealer send the complete paperwork to the
following address:
REGULAR MAIL OVERNIGHT MAIL
------------ --------------
Protective Life Insurance Co. Protective Life Insurance Co.
Variable Life Services Variable Life Services
P.O. Box 830771 2801 Highway 280 South
Birmingham, Alabama 35283-0771 Birmingham, Alabama 35223
FAX (205) 803-7079 Telephone (205) 879-9230
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
SVUL-1040A 1/00 5
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK.
<PAGE>
[LOGO]
PROTECTIVE LIFE INSURANCE COMPANY
P.O. BOX 830771
BIRMINGHAM, AL 35283-0771
CONDITIONAL RECEIPT AGREEMENT
- -------------------------------------------------------------------------------
THIS AGREEMENT PROVIDES ONLY A LIMITED AMOUNT OF INSURANCE, FOR A LIMITED PERIOD
OF TIME, AND THEN ONLY IF ALL THE TERMS AND CONDITIONS OF THIS AGREEMENT ARE
MET. NO AGENT OF THE COMPANY CAN ALTER OR WAIVE ANY OF THE PROVISIONS OF THIS
AGREEMENT.
RECEIVED: / / Check in the amount of $_____________________________________,
/ / Pre-Authorized Check (PAC) or / / Payroll Deduction Authorization or
/ / Assignment/Transfer of Ownership for Section 1035 Exchange (1035) from
________________________ as conditional payment of the first premium for an
insurance policy on the life of Proposed Insureds _______________________.
An application for the policy is being made today to Protective Life Insurance
Company. This conditional payment is received under and is subject to the exact
conditions set out below, all of which are a part of this Agreement.
ALL PREMIUM CHECKS MUST BE MADE PAYABLE TO PROTECTIVE LIFE INSURANCE COMPANY, DO
NOT MAKE CHECKS PAYABLE TO THE AGENT OR LEAVE THE PAYEE BLANK. CASH AND MONEY
ORDERS WILL NOT BE ACCEPTED.
---------------------------------------------------------------------------
NOTE: Premium may not be collected where the face amount applied for on
this application plus any other in force life insurance and
accidental death benefits, including those applied for, with this
Company on either Insured exceeds $500,000.
---------------------------------------------------------------------------
CONDITIONS UNDER WHICH INSURANCE MAY BECOME EFFECTIVE PRIOR TO POLICY DELIVERY
Unless each and every condition below has been fulfilled exactly, no insurance
will become effective prior to policy delivery to the Owner:
(A) on the Effective Date the Proposed Insureds are insurable exactly
as applied for under the Company's printed underwriting rules for
the plan amount and premium rate class applied for;
(B) that the amount paid with the application and shown above is equal
to the first full premium for the premium rate class applied for;
and
(C) the Proposed Insureds have completed all examinations and/or tests
requested by the Company.
EFFECTIVE DATE OF COVERAGE
Insurance issued based on the application will take effect on the latest of:
(A) the date of the application;
(B) the date requested in the application; or
(C) the date of the last of any medical examinations or tests required
under the rules and practices of the Company.
AMOUNT OF COVERAGE - $500,000 MAXIMUM
The total amount of insurance which may become effective prior to delivery of
the policy to the Owner shall not exceed $500,000. This amount includes other
life insurance and accidental death benefits then in force or applied for with
this Company.
TERMINATION AND REFUND OF PREMIUM
There shall be no insurance coverage under this Agreement and this Agreement
shall be void if:
(A) premium payment is
(1) by check, and it is not honored by the drawee bank upon
presentation;
(2) by PAC, and the deduction is not honored by the drawee bank;
(3) by PDA and the Employer does not make payroll deductions as
authorized by the Employee; or
(4) by 1035 and the cash surrender value received from the
assigned policy(s) is not equal to the first full premium for
the premium rate class applied for.
(B) if the application to which the Agreement was attached is not
approved as applied for by the Company within sixty business days
from its date, the Company's only liability in such event(s) will
be to return any money received.
NOTICE TO THE PROPOSED INSUREDS: You should retain a copy of this Agreement.
The Original will be retained by Protective Life.
Date: ______________________________ Agent: ____________________________
Date: ______________________________ Owner: ____________________________
- -------------------------------------------------------------------------------
WHITE - HOME OFFICE YELLOW - OWNER
SVUL-1040A 1/00 6
<PAGE>
EXHIBIT 2
<PAGE>
[PROTECTIVE LIFE INSURANCE COMPANY LETTERHEAD]
Nancy Kane
Senior Associate Counsel
May 24, 2000
Protective Life Insurance Company
2801 Highway 280 South
Birmingham, Alabama 35223
Gentlemen:
With respect to the registration statement on Form S-6 to be filed by
Protective Life Insurance Company (the "Company") and Protective Variable Life
Separate Account (the "Account") with the Securities and Exchange Commission for
the purpose of registering under the Securities Act of 1933, as amended,
flexible premium fixed and variable life insurance policies (the "Policies"), I
have examined such documents and such law as I considered necessary and
appropriate, and on the basis of such examination, it is my opinion that:
1. The Company is a corporation duly organized and validly existing as a
stock life insurance company under the laws of the State of Tennessee and
is duly authorized by the Department of Commerce and Insurance of the
State of Tennessee to issue the Policies.
2. The Account is a duly authorized and existing separate account
established pursuant to the provisions of Section 56-3-501 of the
Tennessee Code.
3. To the extent so provided under the Policies, that portion of the assets
of the Account equal to the reserves and other contract liabilities with
respect to the Account will not be chargeable with liabilities arising
out of any other business that the Company may conduct.
4. The Policies, when issued as contemplated by the Form S-6 registration
statement, will constitute legal, validly issued and binding obligations
of the Company.
I hereby consent to the filing of this opinion as an exhibit to the
Form S-6 registration statement for the Policies and the Account.
Sincerely,
/s/ Nancy Kane
--------------------------------------
Nancy Kane, Esq.
<PAGE>
EXHIBIT 7
<PAGE>
[PROTECTIVE LIFE INSURANCE COMPANY LETTERHEAD]
STATEMENT OF OPINION REGARDING ASPECTS OF
PROTECTIVE LIFE INSURANCE COMPANY FILING OF A LAST SURVIVOR
FLEXIBLE PREMIUM VARIABLE AND FIXED LIFE INSURANCE POLICY
(FILE NUMBERS 333-31944 AND 811-7337)
In my capacity as Actuary for Protective Life Insurance Company, I have provided
actuarial advice concerning (a) the Registration Statement describing the offer
and sale of the above captioned flexible premium variable life insurance
policies ("Policies") and (b) policy forms for the Policies.
It is my professional opinion that:
(1) The illustrations of policy values, surrender values, death benefits and
accumulated premiums in the prospectus contained in the Registration
Statement are based on the assumptions stated in the illustrations, and
are consistent with the provisions of the Policies. The rate structure of
the policies have not been designed so as to make the relationship
between premiums and benefits, as shown in the illustrations, appear to
be more favorable to prospective non-smoker purchasers of Policies at age
45 than to prospective purchasers of Policies, for males or females,
smokers or non-smokers, at other issue ages.
(2) The information contained in the examples set forth in Appendix A of the
prospectus covering death benefit calculations is based on the
assumptions stated in the examples, and is consistent with the provisions
of the Policies.
I hereby consent to the filing of this opinion as an exhibit to Pre-Effective
Amendment No. 1 to the Registration Statement and to the use of my name under
the heading "Experts" in the prospectus.
<TABLE>
<S> <C>
/s/ STEPHEN PEEPLES
-------------------------------------------
Stephen Peeples, F.S.A., M.A.A.A.
Protective Life Insurance Company Actuary
and 2nd Vice President
</TABLE>
May 24, 2000
<PAGE>
EXHIBIT 8
<PAGE>
[SUTHERLAND ASBILL & BRENNAN LETTERHEAD]
May 23, 2000
Board of Directors
Protective Life Insurance Company
2801 Highway 280 South
Birmingham, Alabama 35223
Directors:
We hereby consent to the reference to our name under the caption "Legal
Matters" in the prospectus filed as part of pre-effective amendment number 1 to
the Registration Statement on Form S-6 filed (File No. 333-31944) by Protective
Life Insurance Company and Protective Variable Life Separate Account with the
Securities and Exchange Commission. In giving this consent, we do not admit that
we are in the category of persons whose consent is required under Section 7 of
the Securities Act of 1933.
Very truly yours,
SUTHERLAND ASBILL & BRENNAN LLP
By: /s/ DAVID S. GOLDSTEIN
--------------------------------------
David S. Goldstein
<PAGE>
EXHIBIT 9
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use, in this Registration Statement on Form S-6 (File
No. 333-31944) of our report dated February 23, 2000 relating to the
consolidated financial statements and financial statement schedules of
Protective Life Insurance Company and Subsidiaries, which appear in such
Registration Statement. We also consent to the use in this Registration
Statement of our report dated March 22, 2000 on our audits of the financial
statements of the Protective Variable Life Separate Account, which appears in
such Registration Statement. We also consent to the reference to our Firm under
the heading "Independent Accountants."
PRICEWATERHOUSECOOPERS, LLP
Birmingham, Alabama
May 25, 2000
<PAGE>
EXHIBIT 10
<PAGE>
PROTECTIVE LIFE INSURANCE COMPANY
DESCRIPTION OF ISSUANCE, TRANSFER, AND REDEMPTION PROCEDURES FOR FLEXIBLE
PREMIUM VARIABLE AND FIXED LIFE INSURANCE POLICIES
PURSUANT TO RULE *6e-3(T)(b)(12)(iii)
This document sets forth the administrative procedures that will be followed by
Protective Life Insurance Company ("Protective Life" or the "Company")
concerning the issuance of last survivor Flexible Premium Variable and Fixed
Life Insurance Policy (the "Policy"), the transfer of assets held thereunder,
and the redemption by Owners of their interests in such Policy.
I. PROCEDURES RELATING TO ISSUANCE AND PURCHASE OF POLICIES
A. APPLICATION AND UNDERWRITING
Upon receipt of a completed application, the Company will follow
underwriting (e.g., evaluation of risks) procedures designed to determine
whether the applicants are insurable. The underwriting policies of the Company
are established by management. The Company uses information from the application
and, in some cases, inspection reports, attending physician statements, or
medical examinations to determine whether a Policy should be issued as applied
for, rated, or rejected. Medical examinations of applicants are required for
Policies in excess of certain prescribed amounts and for most insurance applied
for by applicants over age 50. Medical examinations are requested of any
applicant, regardless of age and amount of requested coverage, if an examination
is deemed necessary to underwrite the risk. Substandard risks may be referred to
reinsurers for full or partial reinsurance of the substandard risk.
The Company requires blood samples to be drawn with applications for
coverage over $100,000 (ages 16-50) or $150,000 (age 51 and over). Blood samples
are tested for a wide range of chemical values and are screened for antibodies
to the HIV virus. Applications also contain questions permitted by law regarding
the HIV virus which must be answered by the proposed insureds. The Company will
not issue a Policy until the underwriting procedures have been completed.
Insurance coverage under a Policy will begin as of the Policy Effective
Date, which is generally the Issue Date. If, an initial minimum premium is
received with an application, the Policy Effective Date will be the later of the
date that the application is signed or any required medical examination is
completed. Temporary life insurance coverage (including various types of
conditional receipt) may be provided under the terms of the temporary life
insurance (or conditional receipt) agreement. In accordance with the terms of
the such agreements, temporary life insurance coverage may not exceed $500,000
and may not be in effect for more than 90 days.
In order to obtain a more favorable Issue Age, the Company may permit Owners
to "backdate" a Policy by electing a Policy Effective Date which is up to six
months prior to the date of the original application. Charges will be deducted
as of the new Policy Effective Date for the backdated period for Monthly
Deductions. Calculation of the No-Lapse Guarantee will include the Minimum
Monthly Premium for the backdated period.
B. INITIAL PREMIUM PROCESSING AND PREMIUM PAYMENTS
Premiums for the Policies will not be the same for all Owners. The Company
requires that the initial premium payment for a Policy be at least equal to the
minimum required for the mode of premium selected. For example, the initial
premium payment can never be less than $150 quarterly. Owners who request to pay
premiums on a preauthorized checking withdrawal basis are required to pay an
amount equal to two months premiums upon issuance of their Policy. Premiums paid
on a preauthorized checking withdrawal basis can never be less than $50 per
month.
For Policies issued in states where, upon cancellation during the
Cancellation Period, the Company returns at least the Owner's premium payments,
the Company reserves the right to allocate the initial Net Premium Payment (and
any subsequent Net Premium Payments made during the Cancellation Period) to the
Oppenheimer Money Fund Sub-Account or the Fixed Account until the expiration of
the number of days in the Cancellation Period plus six days starting from the
date the Policy is mailed from the Home
<PAGE>
Office. Upon expiration of this period, the Policy Value in the Oppenheimer
Money Fund Sub-Account or the Fixed Account and all Net Premium Payments will be
allocated according to the Owner's allocation instructions then in effect. In
all other states, the Company will allocate the initial Net Premium Payment (and
any subsequent Net Premium Payments made during the Cancellation Period) in
accordance with the Owner's instructions.
Following the initial premium, the Owner may pay planned premiums in any
amount on a quarterly, semi-annual, and annual basis. For the first Policy Year,
the amount of the planned premiums can be no less than the minimum initial
premium payment calculated on an annual basis. The minimum initial premium
payment required depends on a number of factors, including the age, sex and rate
class of each of the proposed insured, the initial basic and supplemental face
amounts, any supplemental benefits and/or riders and the planned, periodic
premiums selected. If the Owner fails to pay the planned premiums, this will not
necessarily cause the Policy to lapse.
An Owner may make unscheduled premium payments, at any time, in any amount.
A Policy will remain in force while the surrender value is sufficient to pay the
monthly deduction unless the Policy is otherwise protected by the No-Lapse
Guarantee provision. The amount of premium, if any, which must be paid to keep
the Policy in force depends upon the surrender value of the Policy, which in
turn depends on such factors as the investment experience and the amount of
monthly deductions which includes cost of insurance. While not every insured is
subject to the same cost of insurance rate, there will be a single "rate" for
Joint Insureds in a given actuarial category.
The cost of insurance rate can vary among Policies, and from one Monthly
Anniversary Day to the next within the same Policy, depending on differences in
the cost of insurance rates, the Net Amount at Risk associated with the Basic
Face Amount and, if applicable, the Supplemental Face Amount. The monthly cost
of insurance charge is equal to the sum of the cost of insurance charges for the
Basic Face Amount and each increment of Supplemental Face Amount, which are
calculated separately based on the net amount at risk under each coverage.
For the purpose of computing the Net Amount at Risk for an Increment of Face
Amount, Policy Value is first apportioned to the Basic Face Amount and then
apportioned to any Supplemental Face Amount that is part of the Initial Face. If
Policy Value exceeds the Initial Face Amount, it is apportioned to each increase
in Supplemental Face Amount in the order that such Supplemental Face Amount was
added to the Policy.
The monthly cost of insurance rates for the Basic Face Amount and, if
applicable, the cost of insurance rates for a Supplemental Face Amount can vary
from one month to another. The rates are a function of each Joint Insured's age
at nearest birthday, sex and rate class, type of Face Amount (Basic or
Supplemental), and the number of years that a Policy has been in force since the
Policy Effective Date or the effective date of a Face Amount increase. In
general, current cost of insurance rates are greater for the Basic Face Amount
than for Supplemental Face Amount purchased at the same time, whereas guaranteed
rates for the Basic Face Amount are the same as for Supplemental Face Amount
purchased at the same time.
Protective Life currently places each Joint Insured in the following rate
classes, based on underwriting: Preferred Nonsmoker (ages 20-75), Nonsmoker
(ages 20-85), Tobacco (ages 20-85), and Smoker (ages 20-85) and substandard rate
classes which involve a higher mortality risk than the Nonsmoker or Smoker,
Tobacco classes.
Protective Life will also determine a separate cost of insurance rate for
each increment of Face Amount above the Initial Face Amount based on the Policy
duration and the Issue Age, sex and rate class of each Joint Insured at the time
of the request for an increase. The following rules will apply for purposes of
determining the rates.
Protective Life places each Joint Insured in a rate class when the Policy is
issued, based on Protective Life's underwriting of the application. This
original rate class applies to both the Basic and Supplemental portions of the
Initial Face Amount. When an increase in Face Amount is requested, Protective
Life conducts underwriting before approving the increase (except as noted below)
to determine whether a
<PAGE>
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 (or the
rate class of a previous increase), the rate class for the increase also will be
applied to the Initial Face Amount and any previous increases in Face Amount
beginning as of the effective date of the increase. If the rate class for the
increase has a higher cost of insurance rate than the original rate class (or
the rate class of a previous increase), the rate class for the increase will
apply only to the increase in Face Amount.
Protective Life does not conduct underwriting for an increase in Face Amount
if the increase is requested as part of an exercise of any available guaranteed
option to increase the Face Amount without underwriting.
In no event may the total of all premiums paid in any Policy year exceed the
current maximum premium limitations for that year established by Federal tax
laws or by the Company. If the Owner pays a premium that would result in total
premiums exceeding the current maximum premium limitations, the Company will
only accept that portion of the premium that will make total premiums equal the
maximum. Any premium in excess of that amount will be returned or applied as
otherwise agreed and no further premiums will be accepted until allowed by the
current maximum premium limitations prescribed by Federal tax law.
C. LAPSE AND REINSTATEMENT PROCEDURES
The Company offers a "No Lapse Guarantee" to all Owners of Policies for a
specified period of time from the policy effective date. This guarantee offers
continued life insurance coverage for the requested initial face amount provided
the Owner of the Policy continues to pay minimum monthly premiums equivalent to
one twelfth of the minimum first year annual premium, and after that, pays
premiums equivalent to a minimum monthly guarantee premium throughout the
Guarantee period. The minimum monthly guarantee premium in the second year and
later is equal to the minimum renewal annual premium divided by 12 and
multiplied by the number of months left in the Guarantee period.
The Policy's No Lapse Guarantee Provision will be threatened if the Company
does not receive an amount equal to the minimum monthly guarantee premium
specified in the Policy.
During the first 12 Policy Years, a surrender charge will be deducted if the
Policy lapses.
The Policy may be reinstated within five years after lapse and while the
Insured is still living unless the Policy has been surrendered. A Policy will be
reinstated by the Company provided that: (1) a written application for
reinstatement is received at the Home Office; (2) one of the insureds is still
living, (3) evidence of insurability satisfactory to the Company is provided;
(4) the Owner pays net premiums equal to (a) all monthly deductions due upon
lapse and (b) which are at least sufficient to keep the Reinstated Policy in
force for three months; (5) the Owner repays or reinstates any outstanding
policy debt or liens as of the date of lapse and (6) the Policy has not been
surrendered.
The amount of cash value in the Policy on the date the Policy is approved
for reinstatement will be equal to the amount of any Policy Debt reinstated or
repaid at the time of reinstatement plus the Net Premiums paid at reinstatement.
The effective date of reinstatement will be the date the Company approves the
application for reinstatement. A full monthly deduction will be charged for the
month of reinstatement.
II. REDEMPTION PROCEDURES: SURRENDER AND RELATED TRANSACTIONS
The principal policy provisions and administrative procedures regarding
"redemption" transactions are summarized below. Due to the insurance nature of
the Policies, the procedures that will be followed may be different from the
redemption procedures for mutual funds and contractual plans.
A. SURRENDERS AND PARTIAL WITHDRAWALS
An Owner of a Policy may submit a written request to the Company to
surrender the Policy at any time prior while either one of the joint insureds
are living and while the Policy is in effect. The amount available for surrender
is the surrender value as of the valuation day on or next following the date the
written surrender request, the Policy and any other required documents are
submitted and received by the
<PAGE>
Company. If the Policy itself isn't returned to the Company the request must be
accompanied by completed affidavit of lost policy. Amounts payable from the
Variable Account upon surrender or a partial withdrawal will be paid within
seven calendar days of receipt of the written request.
Upon surrender, the Company will pay in a lump sum the surrender value that
is equal to the cash value as of the valuation day less any outstanding Policy
Debt which includes accrued interest less any applicable surrender charges.
Coverage under a Policy will end as of the date of surrender.
If the Policy is surrendered, if the Policy lapses, or if the initial Basic
face amount is reduced, through the first 12 Policy Years, a surrender charge
will be deducted from the Policy Value. The surrender charge, which is a
contingent/deferred sales charge, will be deducted before any surrender value is
paid.
The surrender charge varies depending on a number of factors including Basic
and Supplemental face amounts, issue-ages, sex and rate-classification of the
Insureds and is set forth in the Policy. The surrender charge decreases over the
twelve-year period.
Individualized illustrations will be provided to each prospective Owner
based on the Face Amounts, Death Benefit option, and anticipated pattern and
amount of premium payments suggested by the Owner. Such illustrations will be
accompanied by a sample schedule of the actual surrender charges for Policy
being illustrated.
There are no surrender charges assessed after the 12th Policy Year.
In the event of a decrease in the Basic Face Amount, a pro rata surrender
charge will be imposed equal to the portion of the total surrender charge that
corresponds to the percentage by which the Basic Face Amount is reduced. This
surrender charge will be allocated to each Sub-Account and to the Fixed Account
based on the proportion of Policy Value in each Sub-Account and in the Fixed
Account. A surrender charge imposed in connection with a reduction in the Basic
Face Amount reduces the remaining surrender charge that may be imposed in
connection with a surrender of the Policy.
After the first Policy Year, the Owner may also request a partial withdrawal
by sending a written request to the Company. An Owner may make a partial
withdrawal of an amount equal to or greater than $500. The request must be
submitted in writing to the Company. The Company will withdraw the amount
requested, plus a withdrawal charge, as of the date the request is received in
the Home Office. The Owner may elect to deduct the amount of the withdrawal from
any Sub-Account or the Fixed Account. If the Owner does not specify an
allocation, or if the Sub-Account value or Fixed Account value is insufficient
to carry out the request, the withdrawal will be based on the proportion that
such Sub-Account value(s) and Fixed Account value, bear to the total unloaned
Policy Value on the valuation day immediately prior to the withdrawal. No
withdrawal amounts will be processed if the withdrawal would result in there
being insufficient surrender value to pay any surrender charges applicable upon
a full surrender.
The Company will deduct an administrative charge upon a withdrawal. This
charge is the lesser of 2% of the amount withdrawn or $25. This withdrawal
charge will be deducted from the Policy Value in addition to the amount
requested to be withdrawn and will be considered to be part of the withdrawal
amount. The withdrawal charge will be allocated in the manner described above
for the requested amount.
The death benefit will be affected by withdrawals. If death benefit option A
is in effect, then the Company reserves the right to reduce the face amount by
the amount withdrawn (inclusive of withdrawal charge). If the Owner requests
that the initial face amount be retained, the Company will honor this request
provided the amount of withdrawal does not exceed $2,000. If the request for
withdrawal exceeds $2,000, then the Company will request that satisfactory
evidence of insurability be provided with the withdrawal request. If death
benefit option B is in effect, then the Company will not reduce the face amount.
The face amount after a partial withdrawal may not be less than the minimum
amount for which the Policy would be issued under the Company's current rules.
If the withdrawal causes the Policy to fail to qualify as a life insurance
contract under applicable tax laws, as interpreted by the Company, it will not
be processed. If the Face Amount at the time of withdrawal requires a decrease
of Face Amount, the
<PAGE>
reduction is made first from the most recent increase, then from prior
increases, if any in reverse order of their being made and finally from the
initial Face Amount.
B. CHANGES IN FACE AMOUNT
An Owner may increase or decrease the amount of Supplemental face amount of
the Policy after the first Policy Anniversary by submitting a written request to
the Company during the lifetime of both of the insureds. A supplemental
application is required for an increase in face amount. The Company reserves the
right to require satisfactory evidence of insurability for the requested
increase portion. The Basic face amount can not be increased. Face Amount
increases and decreases are subject to the following rules:
1. For increases in face amount, the attained age of the older insured must
be less than the maximum current issue age for the Policies, as
determined by the Company from time to time.
2. The amount of the requested increase must be at least $25,000.
3. Any increase in face amount will be effective on the date indicated on
the Supplemental policy specifications page, which will be sent to the
Owner.
4. If the No-Lapse Guarantee provision is in effect, the minimum monthly
premium amount required to keep the Policy in force will generally
increase and additional premium payments may be required.
5. The monthly cost of insurance charge will be adjusted as of the next
monthly anniversary day following the date of the written request.
6. There will be an administrative charge assessed based on a rate per
$1,000 of increased coverage. This administrative charge will be deducted
from the Policy Value monthly during the twelve month period following
the effective date of the increase. The fee will be equal to the lesser
of $23.50 plus $0.06 per thousand of increase in Supplemental face amount
or $250.
7. A decrease in face amount will first be applied against any
Supplementary face amount, until the minimum Supplemental face amount has
been reached. Any remaining decrease will be applied against the Basic
face amount. A decrease request will not be accepted by the Company, if
the amount requested would decrease the Basic face amount below $100,000.
8. A proportionate Contingent Deferred Sales Charge will be imposed for
decreases in the Basic face amount (please note previous section on
"Surrenders and Partial Withdrawals").
The Company reserves the right to not process any decrease in Face Amount if
compliance with guideline premium limitations under current tax law resulting
from such a 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 Policy Value for compliance with the guideline premium limitations, and the
amount of such payments would exceed the Surrender Value of the Policy. In
addition, the Company reserves the right to prohibit any decrease in Face Amount
(i) for three years following an increase in Face Amount and (ii) for one Policy
Year following the last decrease in Face Amount.
C. CHANGE IN DEATH BENEFIT OPTION
On or after the first Policy Anniversary, the Owner may request in writing a
change in the death benefit option. Any change will go into effect on the
monthly anniversary day that coincides with or next follows the date the Company
receives and accepts the request for change. If the Owner requests a change from
the Option A to Option B, the face amount will be increased to equal the face
amount on the effective date of change. If the Owner requests a change from a
Option B to Option A, the face amount will be decreased so that it equals the
death benefit less the policy value on the date of the change. The Company
reserves the right to require satisfactory proof of insurability before allowing
a change in death benefit options.
D. DEATH BENEFIT CLAIMS
While the Policy remains in force, the Company will pay a death benefit to
the named beneficiary in accordance with the death benefit option elected by the
Owner. The Company will pay the death benefit
<PAGE>
within seven calendar days after receipt in its home office of all necessary
proof of death of both of the insureds. Payment of a death benefit may be
postponed under certain circumstances, such as the New York Stock Exchange being
closed for reasons other than customary weekend and holiday closings. The death
benefit proceeds will be determined as of the date of the insured's death and
will be equal to:
1. the death benefit under the option elected; plus
2. any additional benefits due under any supplemental and/or riders
benefits attached to this Policy; less
3. any policy debt; less
4. any liens for payments made under an accelerated death benefit rider or
endorsement plus accrued interest; less
5. any unpaid monthly deductions if the insured dies during the grace
period.
The death benefit proceeds will be determined based on the death benefit
option elected by the Owner on the application for insurance or any request for
change in death benefits. If Death Benefit Option A is chosen, the death benefit
will be the greater of (a) the face amount of insurance on the insured's date of
death; or (b) a specified percentage of the policy value on the date of the
insured's death as indicated on the table of percentages included in the Policy.
If Death Benefit Option B is chosen, the death benefit will be the greater of
(a) the face amount of insurance on the insured's date of death plus the policy
value on the insured's date of death: or (b) a specified percentage of the
policy value on the insured's date of death as indicated on the Table of
Percentages included in the Policy. The specified percentage is 250% when the
Insured has reached an "Attained Age" of 40 or less by date of death, and
decreases each year thereafter to 100% when the Insured has reached an "Attained
Age" of 95 at death.
E. POLICY LOANS
After the first Policy Anniversary and while either of the insureds are
still living, an Owner may borrow from the Company no less than $500 and not
more than 90% of the Surrender Value on the date the loan request is received.
The Owner must submit a written request for a Policy loan. Any amount due an
Owner under a loan will generally be paid within seven calendar days after the
Company receives a loan request.
When a Policy loan is made, an amount equal to the loan is transferred out
of the Sub-Account(s) and the Fixed Account and into the Policy's loan account.
The Owner can specify the Sub-Accounts and Fixed Account from which collateral
is transferred to the loan account. If no allocation is specified, collateral is
transferred from each Sub-Account and from the Fixed Account in the same
proportion that each Sub-Account value and the Fixed Account value bears to the
total unloaned Policy value on the date that the loan is made.
Like the Fixed Account, a Policy's loan account is part of Protective Life's
General Account. During the first ten Policy years, the Company will charge
interest daily on any outstanding loan at an effective annual rate of 6.0%.
During Policy Years 11 and after, the Company will charge interest daily on any
outstanding loan at an effective annual rate not to exceed 4.25%. 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 Policy Debt.
The loan account is credited with interest at an effective annual rate of
not less than 4.0%. The maximum net cost of a loan is 2.0% per year during
Policy Years 1 through 10, and .25% thereafter. During the first ten Policy
years and on each Policy anniversary, the net difference between interest earned
and interest charged will be transferred to the loan account and deducted from
the Sub-Account(s) and the Fixed Account in the same proportion that each
Sub-Account value and the Fixed Account value bears to the total unloaned Policy
value. The Company determines the rate of interest to be credited to the loan
account in advance of each calendar year. The rate, once determined, is applied
to the calendar year that follows the date of determination.
If both of the insureds dies while a loan is outstanding, the Policy debt is
deducted from the death benefit in calculating the death benefit proceeds.
<PAGE>
A Policy loan may be repaid in whole or in part at any time while one of the
insureds is living and the Policy is in force. Loan repayments will be credited
as of the date they are received in the Home Office. When a loan repayment is
made, Policy Value in the loan account in an amount equal to the repayment will
be transferred from the loan account to the Sub-Accounts and/or the Fixed
Account in the same proportion that premium payments are allocated. Amounts paid
while a Policy loan is outstanding will be treated as premiums unless the Owner
requests in writing that these payments be treated as repayment of indebtedness.
III. TRANSFERS
A Policy's Policy Value, except amounts credited to the loan account, may be
transferred among the Sub-Accounts and between the Fixed Account which is a part
of the Company's General Account and the Sub-Accounts.
Upon receipt of written notice or a telephone request from the Owner, the
Company will accept transfer requests subject to the limitations described
below. Transfer requests will be accepted at any time on or after the later of
the following: (1) thirty days after the Policy effective date, or (2) six days
after the expiration of the cancellation period. Transfers (including telephone
transfers) are processed as of the date the request is received by the Company.
The minimum amount of Policy value that may be transferred is the lesser of:
(1) $100; or (2) the entire amount in any Sub-Account or the Fixed Account from
which the transfer is made. If, after the transfer, the amount remaining in a
Sub-Account(s) or the Fixed Account is less than $100, the Company reserves the
right to transfer the entire amount instead of the requested amount. The Company
also reserves the right to limit transfers to 12 per Policy year and to charge a
transfer fee for each additional transfer over 12 in any Policy year. If the fee
is imposed, it will be deducted from the amount requested to be transferred. If
an amount is being transferred from more than one Sub-Account or the Fixed
Account, the transfer fee will be deducted proportionately from the amount be
transferred from each.
Protective Life reserves the right to restrict the maximum amount which may
be transferred from the Fixed Account in any Policy Year. The maximum is
currently the greater of: (1) $2,500; or (2) 25% of the Fixed Account value.
Telephone transfers may be made upon instructions given by telephone,
provided the appropriate election has been made on the application or written
authorization is provided. We require a form of personal identification before
acting on these telephone instructions. All transfer requests made by telephone
instruction will be recorded as a method of documenting authenticity. A
confirmation of all instructions received by telephone will be mailed to the
Owner.
The Company currently intends to allow transfers for the foreseeable future,
Although the Prospectus provides that the Company may at any time, for any class
of Policies, modify, restrict, suspend, or eliminate the transfer privilege
(including telephone transfers). In particular, we reserve the right not to
honor transfer requests by a third party holding a power of attorney from an
Owner where that third party requests simultaneous transfers on behalf of the
Owners of two or more Policies.
The Owner may direct the Company to systematically and automatically
transfer, on a monthly or quarterly basis, specified dollar amounts from or to
the Fixed Account or from or to any Sub-Account(s). This is known as the dollar
cost averaging method of investment. By transferring on a regularly scheduled
basis as opposed to allocating the total amount at one time, an Owner may be
less susceptible to the impact of market fluctuations in Sub-Account unit
values. The Company makes no guarantee that the dollar cost averaging method
will result in a profit or protect against loss. The Company reserves the right
to assess a processing fee for this service. The Company reserves the right to
stop offering dollar cost averaging upon 30 days' written notice.
To elect dollar-cost averaging, the fixed account value must be at least
$5,000 at the time of election. The Owner may elect dollar cost averaging for
periods of at least 12 months but no longer than 48 months. At least $100 must
be transferred on a monthly basis and a minimum of $300 on a quarterly basis.
<PAGE>
Dollar-cost averaging transfers may commence on any day of the month that the
Owner requests, except the 29th, 30th, or 31st.
The Company will continue to process dollar cost averaging transfers until
the earlier of the following:
(1) the designated number of transfers has been completed;
(2) the Fixed Account value is depleted;
(3) the Owner, by written notice, instructs the Company to cease the
automatic transfers;
(4) a grace period begins under the Policy; or
(5) the maximum amount of Policy value has been transferred under a dollar
cost averaging election.
The owner may direct the Company to systematically and automatically
transfer on a quarterly, semiannual, or annual basis, contract value among
specified Variable Sub-Accounts. This is known as the portfolio rebalancing
method of investment and is done to achieve a particular percentage allocation
among such Sub-Accounts. By transferring on a regularly scheduled basis as
opposed to allocating the total amount at one time, an Owner may be less
susceptible to the impact of market fluctuations in Variable Sub-Account unit
values. The Fixed Account value will not be considered in the automatic transfer
process. The Company makes no guarantee that the portfolio rebalancing method
will result in a profit or protect against loss. The Company reserves the right
to assess a processing fee for this service. The Company reserves the right to
stop offering portfolio rebalancing upon 30 days' written notice.
The Applicant/Owner can elect portfolio rebalancing at the time of
application or any time thereafter by submitting a written request to the
Company. This feature is available on a quarterly, semiannual, and annual basis
and may commence on any day of the month that the Owner requests, except the
29th, 30th or 31st. Once elected, portfolio rebalancing will begin on the first
modal anniversary following the election.
The Company will continue to process these automatic transfers until the
earlier of the following:
(1) Variable Sub-Account values are depleted;
(2) the Owner requests the company to cease the automatic transfers, by
written notice. This can also be requested by telephone if the owner
previously authorized us to take telephone instructions.
IV. REFUNDS
The right to examine and cancel the Policy is as defined in the Policy. The
Owner may cancel a Policy for a refund during the Cancellation Period by
returning it to the Company's home office or to the sales representative who
sold it along with a written request. The Cancellation Period is determined by
the law of the state in which the application is signed and is shown in the
Policy. In most states, it expires at the latest of: (1) 10 days after the Owner
receives the Policy; (2) 45 days after the Owner signs the application; or
(3) 10 days after the Company mails or delivers a Notice of Right of Withdrawal.
Return of the Policy by mail is effective when it is received at the home
office.
Within seven calendar days after receiving the returned Policy, the Company
will refund (i) the difference between premiums paid and amounts allocated to
the fixed account or the variable account (after deduction of any policy fees
and/or other charges), plus (ii) fixed account value determined as of the date
the returned Policy is received, plus (iii) variable account value determined as
of the date the returned Policy is received. This amount may be more or less
than the aggregate Premium Payments. In states where required, the Company will
refund premiums paid to the Owner of the Policy.
An increase in Face Amount may also be cancelled by the Owner in accordance
with the Policy's cancellation period provisions. The amount refunded will be
calculated in accordance with the provisions described above. If no additional
premium payments are required in connection with the Face Amount increase, the
amount refunded is limited to that portion of the first monthly deduction
following the increase and will be reallocated to the Sub-Account(s) and the
Fixed Account in the same proportion that each Sub-Account Value and the Fixed
Account value bears to the total unloaned Policy Value as of the effective date
of the cancellation. The effective date of this cancellation will be equal to
the effective date of the face increase.
<PAGE>
V. GENERAL PROVISIONS
A. SUICIDE
If either of the joint insureds commits suicide, while sane or insane,
within two years from the Policy Effective Date, the death benefit will be
limited to the premiums paid before death, less any Policy debt and less any
withdrawals. If either of the joint insureds commits suicide, while sane or
insane, within two years after an increase in face amount, the death benefit
with respect to such increase shall be limited to the sum of the monthly cost of
insurance charges deducted for such increase.
B. REPRESENTATIONS AND CONTESTABILITY
The Company can not contest the Policy or any supplemental benefit and/or
rider after the Policy or rider has been in force during the insureds' lifetime
for two years from the Policy Effective Date or the effective date of the rider,
unless fraud is involved. The Company also has the right to contest the validity
of any policy change based on material misstatements made in any application for
that change and any reinstatement of benefits within two years during the
lifetime of the insureds after the reinstatement has been approved.
C. MISSTATEMENT OF AGE OR SEX
Questions in the application concern the insureds' dates of birth and sex.
If either of the dates of birth or sex given in the application or any
application for supplemental benefits and/or riders is not correct, the death
benefit and any benefits provided under any riders to this Policy will be
adjusted to those that would have been purchased by the most recent cost of
insurance change and the cost of any such supplemental benefits provided by such
riders, at the correct age and sex.
<PAGE>
EXHIBIT 15
<PAGE>
EXHIBIT 15
Securities and Exchange Commission
450 Fifth Street NW
Washington, D.C. 20549
Re: Protective Life Insurance Company
We are aware that our report dated April 26, 2000 on our review of interim
consolidated financial information of Protective Life Insurance Company and
Subsidiaries for the period ended March 31, 2000, and included in the Company's
quarterly report on Form 10-Q for the quarter then ended, is included in this
registration statement on Form S-6. Pursuant to Rule 436 under the Securities
Act of 1933, this report should not be considered a part of the registration
statements prepared or certified by us within the meaning of Sections 7 and 11
of that Act.
PRICEWATERHOUSECOOPERS, LLP
Birmingham, Alabama
May 25, 2000
